Innovation Not Highly Correlated with R&D Spending

InnovationAndRandDGraph2011-11-11.jpg

Source of graph: online version of the WSJ article quoted and cited below.

(p. B9) Many companies say innovation is a top priority, but even those who spend the most on research and development can have little to show for it, a new study says.

A report expected to be released Monday by consulting firm Booz & Co., says that few of the biggest R&D spenders crack the top 10 in terms of being considered “innovative” by their peers.
Booz identified 1,000 companies with the biggest 2010 research-and-development budgets and invited 600 executives from those companies to rate which ones they deemed most innovative. The most frequent pick was Apple Inc.–the 70th biggest research-and-development spender–followed by Google Inc. and 3M Co., also not among the top-20 spenders.

For the full story, see:
MELISSA KORN. “Top ‘Innovators’ Rank Low in R&D Spending.” The Wall Street Journal (Mon., OCTOBER 24, 2011): B9.

When a Graph Is a Matter of Life and Death

(p. 72) In her authoritative book The Challenger Launch Decision, sociologist Diane Vaughan demolishes the myth that NASA managers ignored unassailable data and launched a mission absolutely known to be unsafe. In fact, the conversations on the evening before launch reflected the confusion and shifting views of the participants. At one point, a NASA manager blurted, “My God, Thiokol, when do you want me to launch, next April?” But at another point on the same evening, NASA managers expressed reservations about the launch; a lead NASA engineer pleaded with his people not to let him make a mistake and stated, “I will not agree to launch against the contractor’s recommendation.” The deliberations lasted for nearly three hours. If the data had been clear, would they have needed a three-hour discussion? Data analyst extraordinaire Edward Tufte shows in his book Visual Explanations that if the engineers had plotted the data points in a compelling graphic, they might have seen a clear trend line: every launch below 66 degrees showed evidence of (p. 73) O-ring damage. But no one laid out the data in a clear and convincing visual manner, and the trend toward increased danger in colder temperatures remained obscured throughout the late-night teleconference debate. Summing up, the O-Ring Task Force chair noted, “We just didn’t have enough conclusive data to convince anyone.”

Source:
Collins, Jim. How the Mighty Fall: And Why Some Companies Never Give In. New York: HarperCollins Publishers, Inc., 2009.
(Note: italics in original.)

Feds Increase Seizure of Property from Those Who Have Not Been Convicted of a Crime

CaswellMotelOwner2011-11-10.jpg“Mr. Caswell, here in the motel’s lobby, is not accused of any wrongdoing but stands to lose his business under a law that calls for the forfeiture of properties linked to crimes.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A1) TEWKSBURY, Mass.–The $57-a-night Motel Caswell, magnet for hard-luck cases, police patrol cars and the occasional drug deal, is the unlikely prize in a high-stakes tug-of-war between conservative legal activists and the government.

The motel’s owner, spurred by a recent Supreme Court decision, is trying to convince a federal court that the Constitution bars the U.S. Department of Justice from seizing his property, where guests have been found guilty of drug offenses. The owner, Russell Caswell, isn’t accused of any wrongdoing. But he stands to lose his business nonetheless under a law that calls for the forfeiture of properties linked to
Mr. Caswell’s federal court case challenges the U.S. government’s ballooning asset-forfeiture system that in more than 15,000 cases last year confiscated cash, cars, boats and real estate valued at $2.5 billion. While many asset forfeitures are tied to convictions, the federal government can seize properties stained by crime even if owners face no charges.
“People shouldn’t lose their property if they haven’t been convicted of any crime,” said Scott Bullock, a lawyer for the Institute for Justice, a libertarian public-interest law firm in Arlington, Va., that has joined in the motel’s defense. “Mr. Caswell hasn’t even been accused.”
(p. A14) Civil rights groups, libertarians and attorneys defending against seizures say the government is overstepping its bounds in a practice that has swelled in the past decade to encompass some 400 federal statutes, covering crimes from drug trafficking to racketeering to halibut poaching.

For the full story, see:
JOHN R. EMSHWILLER, GARY FIELDS and JENNIFER LEVITZ. “Motel Is Latest Stopover in Federal Forfeiture Battle.” The Wall Street Journal (Tues., OCTOBER 18, 2011): A1 & A14.

Lazear’s Popcorn Theory of Economic Destruction

(p. A15) . . . , consider two theories of economic destruction, which can be labeled the domino theory and the popcorn theory. Everyone knows the domino theory; it is the analogy that is commonly used to denote contagion. If one domino falls, it will topple the others, and conversely, if the first domino remains upright, the others will not fall. It is this logic that underlies most bailout strategies.
The popcorn theory emphasizes a different mechanism. When popcorn is made (the old fashioned way), oil and corn kernels are placed in the bottom of a pan, heat is applied and the kernels pop. Were the first kernel to pop removed from the pan, there would be no noticeable difference. The other kernels would pop anyway because of the heat. The fundamental structural cause is the heat, not the fact that one kernel popped, triggering others to follow.
Many who believe that bailouts will solve Europe’s problems cite the Sept. 15, 2008 bankruptcy of Lehman Brothers as evidence of what allowing one domino to fall can do to an economy. This is a misreading of the historical record. Our financial crisis was mostly a popcorn phenomenon.
. . .
But our financial crisis was caused by factors that affected the entire system, just as all corn kernels pop when they are warmed by the same flame. This lesson is important because interpreting our crisis as primarily a contagion event leads to the wrong strategies for dealing with potential disasters. After Lehman, Europeans seem to be so taken with worries of contagion that they are failing to emphasize remedies that actually have a chance of making things better. In their case, and in ours, the solution is primarily a reduction in the bloated size of government expenditures that come about by making promises that cannot be kept.

For the full commentary, see:
EDWARD P. LAZEAR. “OPINION; The Euro Crisis: Doubting the ‘Domino’ Effect; Preventing a Greek default will not reverse the lackluster growth that has plagued the other vulnerable countries for many years now.” The Wall Street Journal (Mon., OCTOBER 31, 2011): A15.
(Note: ellipses added.)

A&P Sold Consumers Better and Lower-Priced Food

GreatA&Pbk.jpg

Source of book image: online version of the WSJ review quoted and cited below.

(p. A15) Mr. Levinson’s history centers on the two Hartford sons who followed their father into the business. They would spend their entire working lives at the company being known simply as “Mr. George” and “Mr. John.” Thoughtful and studious, Mr. George’s idea of excitement was a good jigsaw puzzle; Mr. John, somewhat more outgoing, liked the horses but also a daily lunch of milk and crackers. Together the brothers, neither of whom had finished high school, built what would be, for 40 years, the largest retail outlet in the world.

The brothers’ business philosophy was simple, writes Mr. Levinson: “If the company keeps its costs down and prices low, more shoppers would come through its doors, producing more profits than if it kept prices high.” The more stores they could open, the greater the take.
But the Hartfords had a public-relations problem. Since the nation’s earliest days, small family stores had served as community anchors. There were thousands across the country. Mom and pop knew every customer who came through their door; they extended credit to families down on their luck. If low-priced chains drove out such stores, what would happen to small-town America?
In fact, many mom-and-pop operations were inefficiently and incompetently run. A&P might be coldly corporate by comparison, but it offered consumers far more variety and fresher, better-quality goods at less cost to the family budget.

For the full review, see:
PATRICK COOKE. “BOOKSHELF; How a Grocer Bagged Profits; At its peak, the chain had nearly 16,000 stores. Critics charged it with competing unfairly by offering too-low prices.” The Wall Street Journal (Mon., AUGUST 29, 2011): A15.
(Note: ellipsis added.)

The book under review is:
Levinson, Marc. The Great A&P and the Struggle for Small Business in America. New York: Hill and Wang, 2011.

Entrepreneur Sam Walton Sought to Learn from Others

(p. 40) So where is Ames at the time of this writing, in 2008?
Dead. Gone. Never to be heard from again. Wal-Mart is alive and well, #1 on the Fortune 500 with $379 billion in annual revenues.
What happened? What distinguished Wal-Mart from Ames?
A big part of the answer lies in Walton’s deep humility and learning orientation. In the late 1980s, a group of Brazilian investors bought a discount retail chain in South America. After purchasing the company, they figured they’d better learn more about discount retailing, so they sent off letters to about ten CEOs of American retailing companies, asking for a meeting to learn about how to run the new company better. All the (p. 41) CEOs either declined or neglected to respond, except one: Sam Walton.
When the Brazilians deplaned at Bentonville, Arkansas, a kindly, white-haired gentleman approached them, inquiring, “Can I help you?”
“Yes, we’re looking for Sam Walton.”
“That’s me,” said the man. He led them to his pickup truck, and the Brazilians piled in alongside Sam’s dog, Ol’ Roy.
Over the next few days, Walton barraged the Brazilians with question after question about their country, retailing in Latin America, and so on, often while standing at the kitchen sink washing and drying dishes after dinner. Finally, the Brazilians realized, Walton-the founder of what may well become the world’s first trillion-dollar-per-year corporation-sought first
and foremost to learn from them, not the other way around.

Source:
Collins, Jim. How the Mighty Fall: And Why Some Companies Never Give In. New York: HarperCollins Publishers, Inc., 2009.

When Christopher Hitchens Will Visit Nebraska

HitchensChristopherAfterTreatment2011-11-10.jpg

“Christopher Hitchens, after being released from the Texas hospital where he was treated for esophageal cancer.” Source of caption and photo: online version of the NYT article quoted and cited below.

A few times I have had the pleasure of seeing Christopher Hitchens interviewed. His wit is always wonderful and he skewers much that deserves skewering. I admire his perseverance at being productive, even as he battles a difficult cancer. And I admire him for sticking to his reasoned principles, even when it might be easier to accept Pascal’s Wager.
I have enjoyed the few reviews by Hitchens that I have read. I have purchased, but not yet read, two of his books—when I have read, I will write.
ADDENDUM: I wrote the above words back on November 10th, scheduled to run today. Yesterday I saw in the paper that Hitchens died on Thursday, December 15, 2011.

(p. C1) HOUSTON — Christopher Hitchens, probably the country’s most famous unbeliever, received the Freethinker of the Year Award at the annual convention of the Atheist Alliance of America here on Saturday. Mr. Hitchens was flattered by the honor, he said a few days beforehand, but also a little abashed. “I think being an atheist is something you are, not something you do,” he explained, adding: “I’m not sure we need to be honored. We don’t need positive reinforcement. On the other hand, we do need to stick up for ourselves, especially in a place like Texas, where they have laws, I think, that if you don’t believe in Jesus Christ you can’t run for sheriff.”

Mr. Hitchens, a prolific essayist and the author of “God Is Not Great: How Religion Poisons Everything,” discovered in June 2010 that he had Stage 4 esophageal cancer.
. . .
(p. C5) On balance, he reflected, the past year has been a pretty good one. He won a National Magazine Award, published “Arguably,” debated Tony Blair in front of a huge audience and added two states to the list of those he has visited. “I lack only the Dakotas and Nebraska,” he said, “though I may not get there unless someone comes up with some ethanol-based cancer treatment in Omaha.”

For the full story, see:
CHARLES McGRATH. “A Voice, Still Vibrant, Reflects on Mortality.” The New York Times (Mon., October 10, 2011): C1 & C5.
(Note: ellipsis added.)