May 2014 – Page 2 – artdiamondblog.com

G.D.P. Is a Useful, But Biased Downward, Measure of Growth

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

(p. 6) Dr. Coyle concludes that while imperfect, the G.D.P. is good enough as a measure of how fast the economy is growing and better than any alternative. It is closely correlated with things that do contribute to happiness. (Nobody is happy in a recession.)

“We should not be in a rush to ditch G.D.P.,” Dr. Coyle writes. “Yet it is a measure of the economy best suited to an earlier era.”
For one thing, it fails to count the value of the staggering growth in consumer choice. Where once we had three television networks, we now have 1,000 channels; greater choice equals greater freedom, she declares. It does poorly in measuring the Internet economy, in which so many benefits — like Google searches — are offered free. It badly lags behind the headlong pace of innovation and creativity. It struggles with the true value of a host of products or services that didn’t exist before. To the degree that it misses those new benefits to consumers, it understates the pace of economic growth.

For the full review, see:
FRED ANDREWS. “Off the Shelf; An Economic Gauge, Imperfect but Vital.” The New York Times, SundayBusiness Section (Sun., APRIL 6, 2014): 6.
(Note: ellipsis added.)
(Note: the online version of the review has the date APRIL 5, 2014.)

The book under review is:
Coyle, Diane. GDP: A Brief but Affectionate History. Princeton, New Jersey: Princeton University Press, 2014.

Open Source Heartbleed Bug Sends Internet “into a Panic”

Opponents of patents often point to the open source movement as an alternative. The Heartbleed bug illustrates a big downside to open source:

(p. B1) The encryption flaw that punctured the heart of the Internet this week underscores a weakness in Internet security: A good chunk of it is managed by four European coders and a former military consultant in Maryland.

Most of the 11-member team are volunteers; only one works full time. Their budget is less than $1 million a year. The Heartbleed bug, revealed Monday, was the product of a fluke introduced by a young German researcher.
. . .
The OpenSSL Project was founded in 1998 to create a free set of encryption tools that has since been adopted by two-thirds of Web servers. Websites, network-equipment companies and governments use OpenSSL tools to protect personal and other sensitive information online.
So when researchers at Google Inc. and Codenomicon on Monday stated that Heartbleed could allow hackers to steal such data, the Internet went into a panic.
. . .
(p. B3) Earlier in the day, a German volunteer coder admitted that he had unintentionally introduced the bug on New Year’s Eve 2011 while working on bug fixes for OpenSSL. . . .
Errors in complex code are inevitable–Microsoft Corp., Apple Inc. and Google announce flaws monthly. But people close to OpenSSL, which relies in part on donations, say a lack of funding and manpower exacerbated the problem and allowed it to go unnoticed for two years.
. . .
The OpenSSL Project counts a sole full-time developer: Stephen Henson, a 46-year-old British cryptographer with a Ph.D. in mathematics. Two other U.K. residents and a developer in Germany fill out the project’s management team.
Associates describe Mr. Henson as brilliant but standoffish and overloaded with work.
. . .
Geoffrey Thorpe, an OpenSSL volunteer on the development team, said he has little time to spend on the project because of his day job at a hardware technology company.

For the full story, see:
DANNY YADRON. “Internet Security Relies on Very Few.” The Wall Street Journal (Sat., April 12, 2014): B1 & B3.
(Note: ellipses added.)
(Note: the online version of the story was updated April 11, 2014, and has the title “TECHNOLOGY; Heartbleed Bug’s ‘Voluntary’ Origins; Internet Security Relies on a Small Team of Coders, Most of Them Volunteers; Flaw Was a Fluke.”)

Russia and China Redistributed Wealth “to Disastrous Effect”

Shane Smith, entrepreneur behind VICE media company. Source of photo: online version of the NYT article quoted and cited below.

(p. 10) You believe that young people worldwide are disenfranchised. Do you think popular uprisings will fix things? No. I’m actually worried, because I believe that it’s going to get worse. Look, economic disparity is bad. But we’ve already tried having governments redistribute wealth. We tried it in Russia and China to disastrous effect.

News Corp. bought a 5 percent stake in Vice, and now James Murdoch is on the board. Why did you sell to them? I’ve said that I want to be the next MTV, the next CNN, the next ESPN. Cue everyone rolling their eyes. MTV went to Viacom, ESPN went to Disney and Hearst, CNN went to Time Warner. Why? Because to build a global media brand, it’s almost impossible to do it alone. James has been involved in one of the largest media companies in the world since he was in short pants.
Do you ever fear that Vice will become legacy media itself? It’s our time now. Then, I don’t know, it’ll be holograms next, and some kid will come up and eat our lunch.

For the full interview, see:
Staley, Willy, interviewer. ” ‘Have We Unleashed a Monster?’: The Vice C.E.O. Shane Smith on His New Kind of News.” The New York Times Magazine (Sun., MARCH 23, 2014): 12.
(Note: ellipsis added; bold in original.)
(Note: the online version of the interview has the date MARCH 21, 2014, and has the title “Vice’s Shane Smith: ‘Have We Unleashed a Monster?’.”)

Edison’s Magnetic Low-Grade Iron Ore Processing Inventions Might Have Succeeded

(p. 193) Edison took great pleasure in the novelty of the technical challenges and in the opportunity to redeem his reputation as a savvy businessperson, even though redemption never came. The low-grade iron ore in New Jersey did not have a competitive chance once huge reserves of high-grade ore were discovered in the Mesabi Range of northeastern Minnesota; the Mesabi ore was easily mined near the surface and close to economical shipping on Lake Superior. Well after the first Mesabi mine opened in 1890, Edison remained pitiably hopeful about his Ogden mine, even when objective facts made the future of its business appear bleak to anyone else. In 1897, when failure was inevitable, he refused to acknowledge the facts. Edison wrote a colleague, “My Wall Street friends think I cannot make another success, and that I am a back number, hence I cannot raise even $10,000 from them, but I am going to show them that they are very much mistaken. I am full of vinegar yet.”

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

“The Experts Keep Getting It Wrong and the Oddballs Keep Getting It Right”

“A worker at a hydraulic fracturing and extraction operation in western Colorado on March 29[, 2014].” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. C3) The experts keep getting it wrong. And the oddballs keep getting it right.

Over the past five years of business history, two events have shocked and transformed the nation. In 2007 and 2008, the housing market crumbled and the financial system collapsed, causing trillions of dollars of losses. Around the same time, a few little-known wildcatters began pumping meaningful amounts of oil and gas from U.S. shale formations. A country that once was running out of energy now is on track to become the world’s leading producer.
What’s most surprising about both events is how few experts saw them coming–and that a group of unlikely outsiders somehow did.
. . .
Less well known, but no less dramatic, is the story of America’s energy transformation, which took the industry’s giants almost completely by surprise. In the early 1990s, an ambitious Chevron executive named Ray Galvin started a group to drill compressed, challenging formations of shale in the U.S. His team was mocked and undermined by dubious colleagues. Eventually, Chevron pulled the plug on the effort and shifted its resources abroad.
Exxon Mobil also failed to focus on this rock–even though its corporate headquarters in Irving, Texas, were directly above a huge shale formation that eventually would flow with gas. Later, it would pay $31 billion to buy a smaller shale pioneer.
“I would be less than honest if I were to say to you [that] we saw it all coming, because we did not, quite frankly,” Rex Tillerson, Exxon Mobil’s chairman and CEO said last year in an interview at the Council on Foreign Relations.
. . .
The resurgence in U.S. energy came from a group of brash wildcatters who discovered techniques to hydraulically fracture–or frack–and horizontally drill shale and other rock. Many of these men operated on the fringes of the oil industry, some without college degrees or much background in drilling, geology or engineering.

For the full commentary, see:
GREGORY ZUCKERMAN. “ESSAY; The Little Guys Who Saw Our Economic Future; Corporate Caution and Complacency Come at a Cost.” The Wall Street Journal (Sat., Nov. 2, 2013): C3.
(Note: ellipsis, and bracketed year in caption, added.)
(Note: the online version of the commentary was updated Nov. 3, 2013, and has the title “ESSAY; The Outsiders Who Saw Our Economic Future; In both America’s energy transformation and the financial crisis, it took a group of amateurs to see what was coming.” )

Zuckerman’s commentary, quoted above, is partly based on his book:
Zuckerman, Gregory. The Frackers: The Outrageous inside Story of the New Billionaire Wildcatters. New York: Portfolio/Penguin, 2013.

Koch Industries Was Only Major Ethanol Producer to Oppose Ethanol Tax Credits

(p. A17) I have devoted most of my life to understanding the principles that enable people to improve their lives. It is those principles–the principles of a free society–that have shaped my life, my family, our company and America itself.
Unfortunately, the fundamental concepts of dignity, respect, equality before the law and personal freedom are under attack by the nation’s own government. That’s why, if we want to restore a free society and create greater well-being and opportunity for all Americans, we have no choice but to fight for those principles.
. . .
Far from trying to rig the system, I have spent decades opposing cronyism and all political favors, including mandates, subsidies and protective tariffs–even when we benefit from them. I believe that cronyism is nothing more than welfare for the rich and powerful, and should be abolished.
Koch Industries was the only major producer in the ethanol industry to argue for the demise of the ethanol tax credit in 2011. That government handout (which cost taxpayers billions) needlessly drove up food and fuel prices as well as other costs for consumers–many of whom were poor or otherwise disadvantaged. Now the mandate needs to go, so that consumers and the marketplace are the ones who decide the future of ethanol.

For the full commentary, see:
CHARLES G. KOCH. “OPINION; I’m Fighting to Restore a Free Society; Instead of welcoming free debate, collectivists engage in character assassination.” The Wall Street Journal (Thurs., April 3, 2014): A17.
(Note: ellipsis added.)
(Note: the online version of the commentary was updated April 2, 2014, and has the title “OPINION; Charles Koch: I’m Fighting to Restore a Free Society; Instead of welcoming free debate, collectivists engage in character assassination.” )

Koch’s philosophy of the free market is more fully elaborated in:
Koch, Charles G. The Science of Success: How Market-Based Management Built the World’s Largest Private Company. Hoboken, NJ: Wiley & Sons, Inc., 2007.

Delta Overcomes Obstacles that Ground Other Airlines

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

Cancellations due to mechanical failures, piliot illness and government regulations are often announced as though they were acts of God, outside the possible control of airlines, for which the airline is blameless. But airlines can take actions, and improve processes, to reduce the frequency and consequences of such cancellations. In airlines, and in other firms, there is not a sharp line between what can and what cannot be under the firm’s control.

(p. D3) Atlanta

The crew of Delta Air Lines Flight 55 last Thursday couldn’t legally fly from Lagos, Nigeria, to Atlanta unless they waited a day due to new limits on how much pilots can fly in a rolling 28-day period. The trip would have to be canceled.
Instead, Delta headquarters told the captain to fly to San Juan, Puerto Rico, which they could reach within their duty limits. There, two new pilots would be waiting to take the Boeing 767 on to Atlanta. The plane arrived in San Juan at 2:44 a.m., quickly took on fuel and pilots, and landed in Atlanta only 40 minutes late.
The episode, unorthodox in the airline industry, illustrates the fanaticism Delta now has for avoiding cancellations. Last year, Delta canceled just 0.3% of its flights, according to flight-tracking service FlightStats.com. That was twice as good as the next-best airlines, Southwest and Alaska, and five times better than the industry average of 1.7%.
. . .
Managers in Delta operations centers move planes, crews and parts around hourly trying to avoid canceling flights. How well an airline maintains its fleet and how smartly it stashes spare parts and planes at airports affect whether your flight goes or not.
Delta thinks it has come up with new analytical software and instruments that can help monitor the health of airplanes and predict which parts will soon fail. Empty planes are ferried to replace crippled jets rather than waiting for overnight repairs.
Mechanics developed a vibration monitor to install on cooling fans for cockpit instruments. A plane can’t be sent out on a new trip with a broken fan.
Now when vibration starts to increase, indicating that a bearing may be wearing down and getting close to failing, a new fan is swapped in. The wobbly fan goes to the shop for new bearings. That has reduced canceled flights.
So has spending $2 million to have spare starters for Boeing 767 engines at all 767 stations abroad. Starters last about five years. While each plane has two and both engines can be started with one, you can’t send a plane out on a long trip over oceans with only one working.

For the full story, see:
SCOTT MCCARTNEY. “THE MIDDLE SEAT; A World Where Flights Aren’t Canceled; How Smartly an Airline Stashes Spare Parts and Planes at Airports Affects Whether or Not Your Flight Takes Off.” The Wall Street Journal (Thurs., April 3, 2014): D3.
(Note: ellipsis added.)
(Note: the online version of the story was updated April 2, 2014, and has the title “THE MIDDLE SEAT; A World Where Flights Aren’t Canceled; Inside Delta’s new strategies to avoid stranding fliers.”)

In the End Edison Said “I Am Not Business Man Enough to Spend Time” in the Electricity Business

(p. 186) In early 1892, the deal was done: Edison General Electric and Thomson-Houston merged as nominal equals. The organization chart, however, reflected a different understanding among the principals. Thomson-Houston’s chief executive, Charles Coffin, became the new head and other Thomson-Houston executives filled out the other positions. Insull was the only manager from the Edison side invited to stay, which he did only briefly. From the outside, it appeared that Thomas (p. 187) Edison and his coterie had arranged the combination from a position of abject surrender. Edison did not want this to be the impression left in the public mind, however. When the press asked him about the announcement, he said he had been one of the first to urge the merger. This was not close to the truth, and is especially amusing when placed in juxtaposition to Alfred Tate’s account of the moment when Tate, hearing news of the merger first, had been the one to convey the news to Edison.

I always have regretted the abruptness with which I broke the news to Edison but I am not sure that a milder manner and less precipitate delivery would have cushioned the shock. I never before had seen him change color. His complexion naturally was pale, a clear healthy paleness, but following my announcement it turned as white as his collar.

“Send for Insull,” was all he said as he left me standing in his library.

Having collected himself before meeting with the reporters, Edison could say with sincerity that he was too busy to “waste my time” on the electric light. For the past three years, since he first realized that his direct-current system would ultimately be driven to the margins by alternating current, he had been carting his affections elsewhere. The occasion of the merger did shake him into a rare disclosure of personal shortcoming: He allowed that “I am not business man enough to spend time” in the power-and-light business.

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

Heart Pioneer Bailey Kept Moving from Hospital to Hospital Due to His Failures

Source of book image:
http://media.npr.org/assets/bakertaylor/covers/e/extreme-medicine/9781594204708_custom-14713d8588e54f066a6abf7b5a13e4c9de832ea1-s6-c30.jpg

(p. C8) In “Extreme Medicine,” physician Kevin Fong reminds us that virtually everything we take for granted in lifesaving medical intervention was once unthinkable. Over the past century, as technology has allowed man to conquer hostile environments and modernize warfare, medical pioneers have been on a parallel journey, confronting what had once been fatal in man’s boldest pursuits and making it survivable.
. . .
As Dr. Fong notes, many of today’s commonplace treatments were once dangerously experimental. One pioneer in the early postwar years, a Philadelphia surgeon named Charles Bailey, killed several patients while trying to repair problems of the mitral valve, which if damaged can cause blood to flow backward into the hear chamber, decreasing flow to the rest of the body. Bailey moved from hospital to hospital to avoid scrutiny of his successive failures.

For the full review, see:
LAURA LANDRO. “BOOKS; They Died So We Might Live; Hypothermia, which killed explorers like Scott, is now induced in heart patients to allow time for surgery.” The Wall Street Journal (Sat., Feb. 15, 2014): C8.
(Note: ellipsis added.)
(Note: the online version of the review has the date Feb. 14, 2014, and has the title “BOOKSHELF; Book Review: ‘Extreme Medicine’ by Kevin Fong; Explorers, astronauts and soldiers all pushed the limits of doctors’ abilities to heal and repair.”)

The book under review is:
Swidey, Neil. Trapped under the Sea: One Engineering Marvel, Five Men, and a Disaster Ten Miles into the Darkness. New York: Crown Publishers, 2014.

Fair Use Doctrine Allows Copying for Educational Purposes

(p. 23) I am a public-school teacher with a limited budget for supplies. Is it unethical to illegally download copyrighted instructional materials for use in my class? BEN L., BROOKLYN
It is not. In fact, it’s sometimes not even illegal. In 1976, Congress created copyright exceptions for educational purposes. Copyright law allows “face-to-face” exhibition and presentation of a copyrighted work, assuming the purpose is academic. There is also the doctrine of fair use, which states that copies “for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship or research, is not an infringement of copyright.”
Now, it’s worth acknowledging that these guidelines were implemented before downloading a textbook was even possible. And even in an educational setting, using an entire copyrighted work, and thereby diminishing its market potential, might constitute a violation of fair use. But in my opinion, the principles are the same, even if you do violate copyright law: If your sole motive for downloading material is educational (and there is no free or low-cost equivalent that serves your purposes equally well), there should be no problem.

For the full commentary, see:
Chuck Klosterman. “THE ETHICIST; Piracy 101.” The New York Times Magazine (Sun., MARCH 30, 2014): 23.
(Note: italics and bold in original.)
(Note: the online version of the commentary has the date MARCH 28, 2014.)

Television Improved Test Scores

“Economist Matthew Gentzkow found media slant to be a function of audience preference.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A2) An economist known for pioneering work on slanted coverage in the news media won the John Bates Clark Medal, one of the profession’s most prestigious honors.

Matthew Gentzkow, a professor at the University of Chicago’s Booth School of Business, on Thursday was awarded the Clark medal by the American Economic Association, which every year honors the nation’s most promising economist under age 40.
. . .
A big theme in Mr. Gentzkow’s work is finding innovative ways to tackle questions that expand economists’ tool kits.
. . . , in 2008, he and Mr. Shapiro examined the fact that different parts of the U.S. got access to television at different times to gauge TV’s effects on high-school students in the 1960s.
The economists found that children who lived in cities that gave them more exposure to TV in early childhood performed better on tests than those with less exposure. The work also suggested TV helped American children in non-English-speaking households do better in school.

For the full story, see:
NEIL SHAH. “Economist Honored for Work on Media Slant.” The Wall Street Journal (Fri., April 18, 2014): 12.
(Note: ellipses added.)
(Note: the online version of the story has the date April 17, 2014.)

The Gentzkow and Shapiro paper on the effects of television, is:
Gentzkow, Matthew, and Jesse M. Shapiro. “Preschool Television Viewing and Adolescent Test Scores: Historical Evidence from the Coleman Study.” Quarterly Journal of Economics 123, no. 1 (Feb. 2008): 279-323.