Author: Art Diamond

E.U. Consumers Benefit from Telecommunications Deregulation

(p. A23) When Thomas Philippon moved to Boston from his native France 20 years ago, he was a graduate student on a budget, and he was happy to discover how cheap American telephone use was. In those days of dial-up internet connections, going online involved long local phone calls that could cost more than $10 apiece in France. In the United States, they were virtually free.

. . .

Today, his parents pay about 90 euros (or $100) a month in the Paris suburbs for a combination of broadband access, cable television and two mobile phones. A similar package in the United States usually costs more than twice as much.

. . .

The irony is that Europe is implementing market-based ideas — like telecommunications deregulation and low-cost airlines — that Americans helped pioneer. “E.U. consumers are better off than American consumers today,” Philippon writes, “because the E.U. has adopted the U.S. playbook, which the U.S. itself has abandoned.”

For the full commentary, see:

Leonhardt, David. “Big Business Is Overcharging You.” The New York Times (Monday, November 11, 2019): A23.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Nov. 10, 2019, and has the title “Big Business Is Overcharging You $5,000 a Year.”)

Philippon’s views on competition are elaborated in his book:

Philippon, Thomas. The Great Reversal: How America Gave up on Free Markets. Cambridge, MA: Belknap Press, 2019.

At-Home Workers Are Leaving Costly Largest Cities

(p. A1) Kelly Swift grew tired of the Los Angeles area a few years ago so she decided to leave—and take her job with her.

Ms. Swift kept her role in health-care information-technology consulting, and her California salary, when she and her family settled in a suburb of Boise, Idaho. Her employer didn’t mind that she started working from home.

Ms. Swift joined a group of workers fueling a renaissance in U.S. cities that lie outside the major job hubs. People who do their jobs from home, freelance or constantly travel for work are migrating away from expensive urban centers such as Los Angeles and San Francisco toward cheaper cities including Boise; Denver; Austin, Texas; and Portland, Ore., according to economists and local residents.

For the full story, see:

Ben Eisen. “Workers Leave Largest Cities, Taking Their Jobs With Them.” The Wall Street Journal (Monday, Sept. 9, 2019): A1 & A4.

(Note: the online version of the story has the date September 7, 2019, and has the title “Workers Are Fleeing Big Cities for Smaller Ones—and Taking Their Jobs With Them.”)

Entrepreneur Hopes to Turn Jellyfish from Turtle Food into Tourist Attraction

(p. A7) In a rare marine lake on a hatchet-shaped atoll in Indonesia, four species of jellyfish have evolved in isolation and lost their ability to sting humans. There are believed to be millions of these benign jellyfish in Kakaban Lake, which has become a popular spot for tourists intrepid enough to reach the remote archipelago known as the Derawan Islands.

. . .

While the jellyfish continue to thrive on Kakaban, the island has just two human inhabitants, . . .

. . .

About 4,000 people, mostly Muslim, live on nearby Maratua, the largest of the Derawan islands.

. . .

Maratua has at least two marine lakes. One, Haji Buang, once had jellyfish to rival Kakaban Lake. But about five years ago, its owner, Hartono, thought he could make some quick cash by raising more than 30 hawksbill sea turtles in the lake.

Only after he put the turtles in the water did he discover that it would be illegal to sell their shells because the species is critically endangered.

The hawksbills, which feed on jellyfish, have nearly exterminated the lake’s population.

“Now I regret it,” said Mr. Hartono, 62. “There used to be more jellyfish than in Kakaban Lake, but we didn’t realize this could be a tourist area.”

Mr. Hartono said he was contemplating how to catch the turtles so he could return them to the sea — with the hope that the jellyfish population would recover.

For the full story, see:

Richard C. Paddock. “INDONESIA DISPATCH; A Harmless Jellyfish Fears Humanity’s Sting.” The New York Times (Monday, November 4, 2019): A7.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version, and has the title “INDONESIA DISPATCH; A Lake With Stingless Jellyfish and Hints of Hotter Seas.”)

Chinese Growth Closer to 3% than to Reported 6%

(p. A1) In the second quarter of this year, official Chinese data showed economic growth of 6.2%, close to Beijing’s target and within a percentage point of what it has reported every quarter for the past 4½ years.

A few months earlier, satellites monitoring Chinese industrial hubs suggested parts of the world’s largest trading economy were contracting. An index of Chinese industrial production created by a multinational manufacturer was pointing to lower growth than official figures. And a web-search index used to gauge how many workers return to their jobs after the Lunar New Year holidays was down sharply from a year earlier.

Beneath China’s stable headline economic numbers, there is a growing belief among economists, companies and investors around the world that the real picture is worse than the official data. That has analysts and researchers crunching an array of alternative data—from energy consumption to photos taken from space—for a more accurate reading.

Their conclusion: China’s economy isn’t tanking, but it is almost certainly weaker than advertised. Some economists who have dissected China’s GDP numbers say more accurate figures could be up to 3 percentage points lower, based on their analysis of corporate profits, tax revenue, rail freight, property sales and other measures of activity that they believe are harder for the gov-(p. A10)ernment to fudge.

For the full story, see:

Mike Bird and Lucy Craymer. “Private Data Show Sharper China Slowdown.” The Wall Street Journal (Monday, Sept. 9, 2019): A1 & A10.

(Note: the online version of the story has the date Sept. 8, 2019, and has the title “China Says Growth Is Fine. Private Data Show a Sharper Slowdown.” )

Does Musk Want to Reach Mars or Conspicuously Consume Real Estate?

In my book Openness to Creative Destruction, I describe and praise those who I call “project entrepreneurs.” These are innovative entrepreneurs, like Walt Disney and Cyrus Field, who are motivated primarily by a desire to bring their project into the world, rather than a desire for conspicuous personal consumption. I have been unsure whether to count Elon Musk as a project entrepreneur. The evidence quoted below suggests the answer is “no.”

(p. M1) Over the last seven years, Mr. Musk and limited-liability companies tied to him have amassed a cluster of six houses on two streets in the “lower” and “mid” areas of the Bel-Air neighborhood of Los Angeles, a celebrity-filled, leafy enclave near the Hotel Bel-Air.

Those buys—plus a grand, 100-year-old estate in Northern California near the headquarters of Tesla, the electric car concern he heads—means Mr. Musk or LLCs with ties to him have spent around $100 million on seven properties.

For the full story, see:

Nancy Keates. “Elon Musk’s Big Buyout.” The Wall Street Journal (Friday, December 6, 2019): M1 & M6.

(Note: the online version of the story has the date Dec. 5, 2019, and has the title “Elon Musk Buys Out the Neighbors.”)

My book, mentioned at the top, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Google Pivots Back to Search and Away from Audacious Projects

(p. B1) Sundar Pichai’s appointment this week as chief executive of Google parent Alphabet Inc. effectively shifts the focus back on the company’s advertising profit machine and away from its “moonshots” and other potential new businesses.

Mr. Pichai’s promotion late Tuesday amounted to the biggest managerial overhaul of the internet giant since 2015, when co-founders Larry Page and Sergey Brin created Alphabet as a parent company above Google. Their goal then was to make Google and its highly profitable advertising businesses just one of many subsidiaries. The stated purpose, as they said in a public letter: “We are still trying to do things other people think are crazy.”

Those goals were on-brand for the two former Stanford University graduate students. They famously celebrated a “don’t be evil” ethos and were working on driverless cars, wearable computers, beating death and a host of other money-losing projects. The idea was to free the duo from the day-to-day at Google, which remains a profit machine, to build out new, world-changing ideas.

Those now include Alphabet’s Waymo unit, which is piloting self-driving car rides, and Calico Labs, which says it’s “tackling aging.”

At least financially, those efforts have yet to amount to much. Google, which includes search, YouTube, the Chrome web browser, hardware and much else, reported $40 billion of revenue in the past quarter alone, with a 23% margin. These areas draw in more than 99% of the parent company’s staggering $155 billion in annual revenue.

The rest of Alphabet eked out $155 million in revenue, and lost $941 million while doing it.

For the full story, see:

Rob Copeland. “Alphabet Backs Off the ‘Crazy,’ Turns to Reliable Model.” The Wall Street Journal (Friday, December 6, 2019): B1 & B4.

(Note: the online version of the story has the date Dec. 5, 2019, and has the title “Google Management Shuffle Points to Retreat From Alphabet Experiment.” The online version says that the title of the print edition was “Alphabet Backs Off On Experimentation.” My copy of the print edition had the title “Alphabet Backs Off the ‘Crazy,’ Turns to Reliable Model.”)

Parrots Are Politically Incorrect Food Wasters

(p. D2) According to a study last month in Scientific Reports, wild parrots across the world . . . waste food . . .

The new study provides “a comprehensive picture of parrots’ food wasting behavior in their natural environment,” said Anastasia Krasheninnikova, a biologist at the Max Planck Comparative Cognition Research Group in Spain, an independent commenter.

For the full story, see:

Cara Giaimo. “Polly Wants to Discard Another Cracker.” The New York Times (Tuesday, November 5, 2019): D2.

(Note: ellipses added.)

(Note: the online version of the story has the date Nov. 2, 2019, and has the title “Why Do Parrots Waste So Much Food?” The online version quoted above, but not the print version, gives the name of the journal Scientific Reports.)

The Scientific Reports study mentioned above, is:

Sebastián-González, Esther, Fernando Hiraldo, Guillermo Blanco, Dailos Hernández-Brito, Pedro Romero-Vidal, Martina Carrete, Eduardo Gómez-Llanos, Erica C. Pacífico, José A. Díaz-Luque, Francisco V. Dénes, and José L. Tella. “The Extent, Frequency and Ecological Functions of Food Wasting by Parrots.” Scientific Reports 9, no. 1 (2019): 15280, DOI: https://doi.org/10.1038/s41598-019-51430-3 .

How Much Do Entrepreneurs Learn from Failure?

(p. R2) . . . , I looked at 8,400 German startups to see if the new companies launched by failed entrepreneurs did any better than first-timers.

They didn’t. In fact, they had poorer outcomes the second time around.

Failed entrepreneurs were more likely to go bankrupt or dissolve their business than first-time entrepreneurs. In fact, even if an entrepreneur had run a business successfully before, they were just as likely to see their new business fail as a first-time entrepreneur.

Other researchers have reached similar conclusions. A Harvard Business School study of venture-capital-backed firms in the U.S., published in the April 2010 Journal of Financial Economics, found that previously failed entrepreneurs were no more likely to succeed than first-time entrepreneurs.

A study of German entrepreneurs by a researcher at KfW Bankengruppe found that entrepreneurs who started a company after a failure performed poorly compared with other founders. “Their probability of survival in general as well as their risk of failure in particular is worse than that of other startups,” according to the researcher, who added: On average, “there is no indication that business failure triggers a reflection process in which entrepreneurs look back on mistakes they have made and adapt their future behavior accordingly.”

. . .

Why does this happen? Why don’t entrepreneurs learn from failure?

For one thing, learning is difficult in startup contexts.

Usually, when we think of learning, we think about gaining expertise through regular practice. In his “Outliers” book, for instance, Malcolm Gladwell calculates that it takes about 10,000 hours of practice to be a chess grandmaster.

But part of the reason practice pays off is because a chessboard is regular: It always has 64 squares and starts off with 32 pieces. You face one competitor. Likewise, in football, a consistent number of players on offense face a consistent number of defenders and try to advance by clear, regular rules.

These regularities don’t occur in startup situations. Markets evolve, customers are fickle, and opposition numbers vary. You must learn what it takes to become the equivalent of a chess grandmaster by playing with constantly evolving rules and opponents—making it much more difficult to interpret prior actions and experiences successfully.

For the full story, see:

Francis Greene. “If at First You Don’t Succeed, You Most Likely Will Fail Again.” The Wall Street Journal (Monday, December 2, 2019): R1-R2.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 1, 2019, and has the title “Why Entrepreneurs Don’t Learn From Their Mistakes.”)

The unpublished working paper, co-authored by Greene, that looked at 8,400 German startups, is:

Gottschalk, Sandra, Daniel Höwer, Francis J. Greene, and Bettina Müller. “If You Don’t Succeed, Should You Try Again? The Role of Entrepreneurial Experience in Venture Survival.” ZEW Discussion Paper, #14-009, 2014.

A related paper by three of the four co-authors, is:

Gottschalk, Sandra, Francis Greene, and Bettina Müller. “The Impact of Habitual Entrepreneurial Experience on New Firm Closure Outcomes.” Small Business Economics 48, no. 2 (Feb. 2017): 303-21.

The Harvard Business School paper, mentioned above, is:

Gompers, Paul A., Anna Kovner, Josh Lerner, and David S. Scharfstein. “Performance Persistence in Entrepreneurship.” Journal of Financial Economics 96, no. 1 (April 2010): 18–32.

Wisconsin May Have a Robustly Redundant Labor Market

From Nathan Wiese’s description, below, Wisconsin is described in as what I call a “robustly redundant labor market” in my book Openness to Creative Destruction: Sustaining Innovative Dynamism.

(p. A1) ROSENDALE, Wis.—Nathan Wiese, a third-generation dairy farmer who is struggling to get by, says even if he has to close his family’s farm, he feels confident he could hire on as a truck driver and take home more money.

“If you want a job, you can get a job,” said Mr. Wiese, who voted for Donald Trump in 2016 and plans to do so again. “I could probably get one in one day.”

. . .

. . . in an era of severe worker shortages, people losing jobs when a plant or a farm closes are quickly getting scooped up by others. This provides a safety net in the broader economy by keeping incomes and consumer spending strong.

For the full story, see:

Shayndi Raice and Jon Hilsenrath. “In Wisconsin, Demand for Workers Buffers a Slowdown.” The Wall Street Journal (Friday, November 29, 2019): A1 & A9.

(Note: ellipses added.]

(Note: the online version of the story has the date Nov. 28, 2019, and has the title “How a Strong Job Market Has Proved the Experts Wrong.”)

My book, mentioned at the top, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Anonymous Message Apps Enable Protesters to Act at “Hyperspeed”

(p. A7) In June [2019], hundreds of thousands of young protesters connected by messaging apps took to the streets of Hong Kong to protest the encroachment of China’s central authorities on life in their city.

Four months on, antigovernment demonstrations have swept more than a dozen countries. From Chile and Bolivia to Lebanon and Spain, millions have taken to the streets—sometimes peacefully, often not.

. . .

Propelling the action on the streets to a kind of hyperspeed is a new generation of encrypted-messaging software such as WhatsApp and Telegram that enable large groups of protesters who have never met each other to communicate anonymously.

Whereas platforms like Twitter and Facebook were great for broadcasting ideas, the newer technology allows any would-be activist connected to the group to build consensus for large-scale actions in real time—without fear of being identified.

Meanwhile, the internet’s global reach has helped activists learn by watching and connecting with peers in other countries.

For the full story, see:

John Lyons in Hong Kong, Nazih Osseiran in Beirut and Margherita Stancati in Barcelona. “A Wave of Protest Rattles Governments.” The Wall Street Journal (Saturday, November 23, 2019): A7.

(Note: ellipsis, and bracketed year, added.)

(Note: the online version of the story has the date November 22, 2019, and has the title “Global Wave of Protests Rattles Governments.” The penultimate sentence quoted above, appears in the online, but not in the print, version of the article.)

Opening a New “Treasure Box of Strange Phenomena”

(p. D1) In the universe of office supplies, pencil lead — a mixture of graphite and clay, which does not include any lead — appears unexceptional beyond its ability to draw dark lines.

But 15 years ago, scientists discovered that a single sheet of graphite — a one-atom-thick layer of carbon atoms laid out in a honeycomb pattern — is a wonder. This ultrathin carbon, called graphene, is flexible and lighter than paper yet 200 times stronger than steel. It is also a good conductor of heat and electrical current.

Scientists imagined all of the remarkable things that graphene might be made into: transistors, sensors, novel materials. But after studying and cataloging its properties, scientists moved on to other problems. Practical uses have been slow to come, because part of what makes graphene alluring — its strength — also makes the material difficult to cut into precise shapes.

Last year, graphene burst back on the physics research scene when physicists at the Massachusetts Institute of Technology discovered that stacking two sheets of the material, twisted at a small angle between them, opened up a treasure box of strange phenomena. It started a new field: twistronics.

For the full story, see:

Kenneth Chang. “A Physics Trick: Take 2 Sheets of Carbon and Twist.” The New York Times (Tuesday, November 5, 2019): D1 & D3.

(Note: the online version of the story has the date Oct. 30, 2019, and has the title “A Physics Magic Trick: Take 2 Sheets of Carbon and Twist.”)