After 25 Years of Government Harassment, A&P Was Finally Allowed to Lower Prices for Consumers

The two main types of creative destruction are: 1.) new products and 2.) process innovations. Much has been written about the new product type; much less about the process innovation type. Marc Levinson has written two very useful books on process innovations that are important exceptions. The first is The Box and the second is The Great A&P.

(p. A13) A prosecutor in Franklin Roosevelt’s administration called it a “giant blood sucker.” A federal judge in Woodrow Wilson’s day deemed it a “monopolist,” and another, during Harry Truman’s presidency, convicted it of violating antitrust law. The federal government investigated it almost continuously for a quarter-century, and more than half the states tried to tax it out of business. For its strategy of selling groceries cheaply, the Great Atlantic & Pacific Tea Company paid a very heavy price.
. . .
A&P was Wal-Mart long before there was Wal-Mart. Founded around the start of the Civil War, it upset the tradition-encrusted tea trade by selling teas at discount prices by mail and developing the first brand-name tea. A few years later, its tea shops began to stock spices, baking powder and canned goods, making A&P one of the first chain grocers.
Then, in 1912, John A. Hartford, one of the two brothers who had taken over the company from their father, had one of those inspirations that change the course of business. He proposed that the company test a bare-bones format at a tiny store in Jersey City, offering short hours, limited selection and no home delivery, and that it use the cost savings to lower prices. The A&P Economy Store was an instant success. The Great A&P was soon opening one and then two and then three stores per day. By 1920, it had become the largest retailer in the world.
. . .
While shoppers flocked to A&P’s 16,000 stores, small grocers and grocery wholesalers didn’t share their enthusiasm. The anti-chain-store movement dates back at least to 1913, when the American Fair-Trade League pushed for laws against retail price-cutting.
. . .
Thanks in good part to the Hartfords’ tenacity, the restraints on discount retailing began to fade away in the 1950s. Chain-store taxes were gradually repealed, and state laws limiting price competition to protect mom and pop were taken off the books. By 1962, when Wal-Mart, Target, Kmart, and other modern discount formats were born, the pendulum had swung in consumers’ favor.

For the full commentary, see:
MARC LEVINSON. “When Creative Destruction Visited the Mom-and-Pops; The A&P grocery company may be nearing its sell-by date, but a century ago it was a fresh, revolutionary business.” The Wall Street Journal (Sat., Oct. 12, 2013): A13.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Oct. 11, 2013, and had the title “Marc Levinson: When Creative Destruction Visited the Mom-and-Pops; The A&P grocery company may be nearing its sell-by date, but a century ago it was a fresh, revolutionary business.”)

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

Fed-Mandated High Sugar Prices Drive Candy Jobs Abroad

CandyJobsLostGraph2013-10-23.jpg

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

(p. A1) On Friday, [Oct. 18, 2013] the U.S. sugar contract in the futures market settled at 22.28 cents a pound, or 14% higher than the benchmark global price.

U.S. prices can’t fall much lower because of a federal government program that guarantees sugar processors a minimum price. The rest of the world also has a surfeit of sugar, but fewer price restrictions, and big growers like Brazil are expecting a record crop for the current season.
The squeeze explains why Atkinson Candy Co. has moved 80% of its peppermint-candy production to a factory in Guatemala that opened in 2010. That means it can sell bite-size Mint Twists to retailers for 10% to 20% less.
“It wasn’t like we did it for (p. A14) profit reasons. We did it for survival reasons,” said Eric Atkinson, president of the family-owned candy maker, based in Lufkin, Texas. “These are 60 jobs down there…that could be in the U.S.,” he added. “It’s a damn shame.”
Jelly Belly Candy Co. is finishing its second expansion of a factory in Thailand that was opened by the Fairfield, Calif., company in 2007. The sixth-generation family-owned firm sells about 20% of its jelly beans, made in flavors from buttered popcorn to very cherry, outside the U.S.
Sugar makes up about half of the ingredients and cost of a typical jelly bean, said Bob Simpson, Jelly Belly’s president and chief operating officer. Thailand is the world’s fourth-largest sugar producer and gives Jelly Belly access to cheaper sugar, labor and other raw materials than the candy maker has in the U.S.
“You can’t compete shipping finished U.S. goods” anymore, Mr. Simpson said. In the U.S., Jelly Belly has had to raise prices “several times” in the past 10 years due to high sugar prices.
. . .
Three candy-making jobs are lost for each sugar-growing and processing job saved by higher sugar prices, according to a Commerce Department report in 2006.
In a sign that candy makers are taking advantage of lower sugar prices elsewhere, the amount of sugar contained in imported products surged 33% from 2002 to 2012, according to the Agriculture Department.

For the full story, see:
Wexler, Alexandra. “Cheaper Sugar Sends Candy Makers Abroad.” The Wall Street Journal (Mon., Oct. 21, 2013): A1 & A14.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date Oct. 20, 2013.)

JellyBellyCaliforniaFactory2013-10-23.jpg

“Jelly Belly, whose facility in Fairfield, Calif., is shown above, is expanding its factory in Thailand.” Source of caption and photo: online version of the WSJ article quoted and cited above.

Google Had the Most “Massive Parallelized Redundant Computer Network” in the World

(p. 198) . . . by perfecting its software, owning its own fiber, and innovating in conservation techniques, Google was able to run its computers spending only a third of what its competitors paid. “Our true advantage was actually the fact that we had this massive parallelized redundant computer network, probably more than anyone in the world, including governments,” says Jim Reese. “And we realized that maybe it’s not in our best interests to let our competitors know.”

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.
(Note: ellipsis added.)

Goldman I.P.O. Led to Pressure to Grow

WhatHappenedToGoldmanSachsBK2013-10-22.jpg

Source of book image: http://s.wsj.net/public/resources/images/OB-ZF094_bkrvgo_GV_20131008133334.jpg

(p. B8) Steven G. Mandis, a Ph.D. candidate in sociology at Columbia University, takes a measured, academic approach to the question in a new book, “What Happened to Goldman Sachs,” an examination of the bank’s evolution from an elite private partnership to a vast public corporation — and the effects of that transformation on its culture.

. . .

Mr. Mandis said that the two popular explanations for what might have caused a shift in Goldman’s culture — its 1999 initial public offering and subsequent focus on proprietary trading — were only part of the explanation. Instead, Mr. Mandis deploys a sociological theory called “organizational drift” to explain the company’s evolution.
The essence of his argument is that Goldman came under a variety of pressures that resulted in slow, incremental changes to the firm’s culture and business practices, resulting in the place being much different from what it was in 1979, when the bank’s former co-head, John Whitehead, wrote its much-vaunted business principles.
These changes included the shift to a public company structure, a move that limited Goldman executives’ personal exposure to risk and shifted it to shareholders. The I.P.O. also put pressure on the bank to grow, causing trading to become a more dominant focus. And Goldman’s rapid growth led to more potential for conflicts of interest and not putting clients’ interests first, Mr. Mandis says.

For the full review, see:
PETER LATTMAN. “An Ex-Trader, Now a Sociologist, Looks at the Changes in Goldman.” The New York Times (Tues., October 1, 2013): B8.
(Note: ellipsis added.)
(Note: the online version of the review has the date SEPTEMBER 30, 2013.)

The book under review is:
Mandis, Steven G. What Happened to Goldman Sachs: An Insider’s Story of Organizational Drift and Its Unintended Consequences. Boston, MA: Harvard Business School Publishing, 2013.

MandisStevenAuthorGoldmanBook2013-10-22.jpg

“Steven G. Mandis is the author of “What Happened to Goldman Sachs.”” Source of caption and photo: online version of the NYT article quoted and cited above.

Silicon Valley Is Open to Creative Destruction, But Tired of Taxes

(p. A15) Rancho Palos Verdes, Calif.
When the howls of creative destruction blew through the auto and steel industries, their executives lobbied Washington for bailouts and tariffs. For now, Silicon Valley remains optimistic enough that its executives don’t mind having their own businesses creatively destroyed by newer technologies and smarter innovations. That’s an encouraging lesson from this newspaper’s recent All Things Digital conference, which each year attracts hundreds of technology leaders and investors.
. . .
In a 90-minute grilling by the Journal’s Walt Mossberg and Kara Swisher, Apple Chief Executive Tim Cook assured the audience that his company has “some incredible plans that we’ve been working on for a while.”
Mr. Cook’s sunny outlook was clouded only by his dealings with Washington. He was recently the main witness at hearings called by Sen. Carl Levin, a Michigan Democrat, who accused Apple of violating tax laws. In fact, Apple’s use of foreign subsidiaries is entirely legal–and Apple is the largest taxpayer in the U.S., contributing $6 billion a year to the government’s coffers.
Mr. Cook put on a brave face about the hearings, saying, “I thought it was very important to go tell our side of the story and to view that as an opportunity instead of a pain in the [expletive].” Mr. Cook’s foul language was understandable. “Just gut the [tax] code,” he told the conference. “It’s 7,500 pages long. . . . Apple’s tax return is two feet high. It’s crazy.”
When the audience applauded, Ms. Swisher quipped, “All right, Rand Paul.” A woman shouted: “No, I’m a Democrat!” One reason the technology industry remains the center of innovation may be that many technologists of all parties view trips to Washington as a pain.

For the full commentary, see:
L. GORDON CROVITZ. “INFORMATION AGE; Techies Cheer Creative Destruction.” The Wall Street Journal (Mon., June 3, 2013): A15.
(Note: ellipsis between paragraphs added; italics in original; ellipsis, and bracketed words, within next-to-last paragraph, in original.)
(Note: the online version of the commentary has the date June 2, 2013.)

Under Humble Austerity Policy China Builds $11.4 Million Giant Brass Puffer Fish

PufferFishStatueYangshong2013-10-22.jpg “A puffer fish statue in Yangzhong has raised ire in view of a government pledge to end spending on vanity projects.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 6) HONG KONG — Chinese Communist Party leaders’ vows of a new era of humble austerity in government may have met their most exotic adversary yet: an $11 million, 2,300-ton, 295-foot-long puffer fish.

The brass-clad statue, which shimmers golden in the sunlight and switches into a garish light show at night, was built by the city of Yangzhong, in Jiangsu Province in eastern China, . . .
. . .
Chinese news outlets said the brass and steel for the fish cost about $1.7 million, raising questions about where the rest of the money went. Construction of the fish tower began on a previously isolated and undeveloped river island in March, four months after Mr. Xi was appointed party leader.
. . .
. . . China is speckled with outlandish works of official art that vie with even a giant, glow-in-the-dark puffer fish for attention and outrage.
Critics berated a county in Guizhou Province for building “the world’s biggest teapot,” a 243-foot-high teapot-shaped tower, complete with spout, that was part of a $13 million project.
In Henan Province, in central China, a government-backed charity has been accused of corruption in spending about $19.6 million on a vast, unsightly sculpture of Song Qingling, the widow of Sun Yat-sen, a revered founder of modern China. Zhengzhou, the capital of Henan Province, is also home to a sculpture of two pigs in a frolicking embrace. From certain angles, the pigs might appear to be mating.

For the full story, see:
CHRIS BUCKLEY. “As China Vows Austerity, Giant Brass Fish Devours $11 Million.” The New York Times, First Section (Sun., October 13, 2013): 6.
(Note: ellipses added.)
(Note: the online version of the review has the date October 12, 2013.)

SongQinglingSculpture2013-10-23.jpg

“A sculpture of Song Qingling, the widow of Sun Yat-sen, a founder of modern China.” Source of caption and photo: online version of the NYT article quoted and cited above.

Larry Page: “At His Core He Cares about Latency”

(p. 184) Speed had always been an obsession at Google, especially for Larry Page. It was almost instinctual for him. “He’s always measuring everything,” says early Googler Megan Smith. “At his core he cares about latency.” More accurately, he despises latency and is always trying to remove it, like Lady Macbeth washing guilt from her hands. Once Smith was walking down the street with him in Morocco and he suddenly dragged her into a random Internet café with maybe three machines. Immediately, he began timing how long it took web pages to load into a browser there.
Whether due to pathological impatience or a dead-on conviction that speed is chronically underestimated as a factor in successful products, Page had been insisting on faster delivery for everything Google from the beginning. The minimalism of Google’s home page, allowing for lightning-quick (p. 185) loading, was the classic example. But early Google also innovated by storing cached versions of web pages on its own servers, for redundancy and speed.
“Speed is a feature,” says Urs Hölzle. “Speed can drive usage as much as having bells and whistles on your product. People really underappreciate it. Larry is very much on that line.”

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.