“The New York Times Is Going to Basically Be a Monopoly”

(p. B1) The gulf between The Times and the rest of the industry is vast and keeps growing: The company now has more digital subscribers than The Wall Street Journal, The Washington Post and the 250 local Gannett papers combined, according to the most recent data. And The Times employs 1,700 journalists — a huge number in an industry where total employment nationally has fallen to somewhere between 20,000 and 38,000.

The Times so dominates the news business that it has absorbed many of the people who once threatened it: The former top editors of Gawker, Recode, and Quartz are all at The Times, as are many of the reporters who first made Politico a must-read in Washington.

I spent my whole career competing against The Times, so coming to work here feels a bit like giving in. And I worry that the success of The Times is crowding out the competition.

“The New York Times is going to basically be a monopoly,” predicted Jim VandeHei, the founder of Axios, which started in 2016 with plans to sell digital subscriptions but has yet to do so. “The Times will get bigger and the niche will get nichier, and nothing else will survive.”

For the full commentary, see:

Ben Smith. “Why the Success of The Times May Be Bad News for Journalism.” The New York Times (Monday, March 2, 2020): B1 & B5.

(Note: the online version of the commentary has the date March 1, 2020, and the title “Why the Success of The New York Times May Be Bad News for Journalism.”)

Oliver Williamson’s Subtle Attempt to Get Pablo Spiller to Turn Down the Music

Several years ago, I presented a paper in an economic methodology session at the AEA in which Williamson also presented a paper. He was a fellow pluralist in method. I think his work deserves more attention than I have given it. The profession will be worse for his absence.

(p. A9) Building on the work of Ronald Coase, Dr. Williamson developed transaction-cost economics, examining costs that go beyond the price of a good or service.

. . .

Some of Dr. Williamson’s thinking took shape when he worked for the Justice Department’s antitrust division in 1966 and 1967.

The department had accused Schwinn & Co. of restraining trade by limiting the retailing of its bicycles to authorized merchants. The conventional wisdom among antitrust enforcers was that such arrangements could be explained only as an effort to reduce competition.

Dr. Williamson found the question more complicated and argued that Schwinn’s motive might be to reduce costs. For instance, a restricted number of retailers would make it less costly to control quality and agree on how to share advertising expenses. The resulting increase in efficiency could benefit consumers.

. . .

Pablo Spiller, a friend and Berkeley colleague who lived across the street from Dr. Williamson, recalled that he spoke precisely but not always directly. One night Dr. Spiller was playing music a bit too loudly. Dr. Williamson called. Rather than mentioning the volume, he said: “You know, I actually like the current song more than all the previous ones.”

For the full obituary, see:

James R. Hagerty. “Economist Explored Inner Life of Firms.” The Wall Street Journal (Tuesday, June 6, 2020): A9.

(Note: ellipses added.)

(Note: the online version of the obituary has the date June 4, 2020, and the title “Oliver Williamson, Nobel Economics Winner, Studied Inner Life of Firms.”)

Frustration of a Non-Expert Entrepreneur Inspired the Creation of Square

(p. B6) It was 2009, and Mr. McKelvey—a glassblower, computer scientist and serial entrepreneur—had lost a sale of one of his artworks because he couldn’t accept American Express cards. Though neither he nor Mr. Dorsey, now CEO of Square and Twitter Inc., knew much about the world of credit-card transactions, his frustration inspired the creation of Square’s signature white readers, a technology that would revolutionize payments by allowing anyone to accept a card with a smartphone or tablet.

In his new book, “The Innovation Stack,” Mr. McKelvey uses the story of Square’s early days, and its success in fending off a rival product from Amazon.com Inc., to encourage other potential founders with a dearth of credentials to fix unsolved problems and start novel businesses.

“If you’re going to do something that’s never been done, by definition, you cannot be an expert,” he said. “Take it from a glassblower who started a $30 billion payment company: You don’t have to be.”

. . .

“. . . there are no experts anymore. We’re living in a world without expertise, and that’s the world of the entrepreneur, like it or not.”

For the full interview, see:

Peter Rudegeair, interviewer. “Square’s Co-Founder Sees Openings in Recessions.” The Wall Street Journal (Tuesday, May 26, 2020): B6.

(Note: ellipses, and quotation marks around last two sentences, added.)

(Note: the online version of the television review has the date May 24, 2020, and has the same title “BOSS TALK; Square’s Co-Founder: A Recession Is a Great Time to Start a Company.” The first several paragraphs quoted above are from Pter Rudegeair’s introduction to his interview of Jim McKelvey. The last couple of sentences are from McKelvey’s response to the last question in the interview.)

The book, mentioned above in the introduction to the interview, is:

McKelvey, Jim. The Innovation Stack: Building an Unbeatable Business One Crazy Idea at a Time. New York: Portfolio, 2020.

Rigid Merged Health Systems Cause Slow Covid-19 Testing

(p. A1) When a stay-at-home order in March all but closed the revered labs of the gene-editing pioneer Jennifer Doudna, her team at the University of California, Berkeley dropped everything and started testing for the coronavirus.

They expected their institute to be inundated with samples since it was offering the service for free, with support from philanthropies. But there were few takers.

Instead, the scientists learned, many local hospitals and doctors’ offices continued sending samples to national laboratory companies — like LabCorp and Quest Diagnostics — even though, early on, patients had to wait a week or more for results. The bureaucratic hurdles of quickly switching to a new lab were just too high.

. . .

(p. A5) In normal times, scientists at the Innovative Genomics Institute at Berkeley spend their time advancing the gene-editing technology called Crispr that the lab’s founder, Dr. Doudna, is known for.

But after the pandemic shut down the institute’s research in March, Dr. Doudna called for volunteers to redirect most of the labs’ work to coronavirus testing. The country was clamoring for more tests, after all, and her lab was full of researchers with the technical skills to make it happen.

Unlike many other major research institutions, Berkeley does not have a medical school or run its own hospital. So Dr. Urnov reached out to others in the area, who were still ordering from LabCorp and Quest, despite lengthy delays in processing results at the time.

“We would come to these entities and say, ‘Hi, we hear you have problems,’” Dr. Urnov recalled. “And they said, ‘Well, you have to basically work with our EHR,’” the acronym for electronic health records.

For the full story, see:

Katie Thomas. “In Testing Chaos, Some Labs Drowned While Others Sat Idle.” The New York Times (Friday, May 22, 2020): A1 & A5.

(Note: ellipsis added.)

(Note: the online version of the story has the date May 21, 2020 and has the title “These Labs Rushed to Test for Coronavirus. They Had Few Takers.”)

A Dynamic Industry, Like Wireless, Counsels “Greater Caution in Judicial Intervention”

(p. A13) Donald Trump’s administration likes living dangerously on 5G. It pulled an unlikely victory out of its hat when a judge approved the wireless merger of Sprint and T-Mobile that’s been in the works for nearly a decade. The judge gave the OK, he said, because his crystal ball (his words) was just as good or bad as those of the plaintiffs and defendants.

His most sensible and telling observation came on page 148, where he suggested that a dynamic and rapidly changing industry like wireless counseled “greater caution in judicial intervention.”

For the full commentary, see:

Holman W. Jenkins, Jr. “Trump Outswamps the 5G Swamp.” The Wall Street Journal (Wednesday, February 19, 2020): A13.

(Note: the online version of the commentary has the date Feb. 18, 2020, and has the title “YOUR HEALTH; Here’s Why Health Experts Want to Stop Daylight-Saving Time.” Where there is a difference in wording in the first quoted paragraph, the online version is used.)

In Past Decade Bean-to-Bar Chocolate Makers Grow from Five to 250

(p. D1) According to the Fine Chocolate Industry Association, sales of premium chocolates grew 19 percent in 2018, compared with 0.6 percent for mainstream chocolate like the classic Hershey bar. Over the past decade, the number of small American bean-to-bar chocolate producers — the kind with cacao percentages and places of origin printed on those hyper-chic labels — has jumped from about five to more than 250.

. . .

(p. D4) The cacao beans (also called cocoa beans) are the seeds that grow inside the pod, surrounded by fleshy, juicy fruit that tastes a little like a mango crossed with a pear that was carrying a lychee. After harvesting, the beans are fermented for up to a week to develop their flavors, and dried.

To make chocolate, the dried beans are roasted, then cracked to separate the outer husks from the inner nibs, which have a nutty, earthy flavor and crunchy texture — and are excellent added to baked goods. The nibs are about half cocoa solids and half cocoa butter.

Chocolate makers grind the nibs into what’s called chocolate liquor, or chocolate paste. This liquor is ground again, along with sugar and other ingredients that might include milk powder to make milk chocolate, lecithin to smooth the texture, or vanilla for flavor.

. . .

The new wave of craft chocolate began with Scharffen Berger, founded in 1996 by Mr. Scharffenberger, a winemaker, and Robert Steinberg, who had studied at the famous chocolate shop Bernachon, in Lyon, France.

“When we started, there were only nine companies grinding their own cacao in the United States and they were all huge, except for Guittard,” Mr. Scharffenberger said, referring to the Guittard Chocolate Company, also in the San Francisco area. “We were the first new chocolate maker on the scene in 150 years.”

When Gary Guittard, the company’s fourth-generation owner, sampled some of Scharffen Berger’s chocolate, it spurred him to revamp his own production, in some cases going back to the way his great-grandfather made chocolate when he started the company in 1868.

“Scharffen Berger was the disrupter,” Mr. Guittard said. “Trying their chocolate was just terrible for me. It opened my eyes to a world of flavors that had been present in our chocolates 50 years ago, but that were lost. We had to change everything to get them back.”

Scharffen Berger was sold in 2005 to the Hershey Company, which moved the operation to Illinois. But other small bean-to-bar makers quickly followed Scharffen Berger’s lead. There are now more than 250 in the United States. And even though Brooklyn, contrary to popular belief, didn’t invent the bean-to-bar craze, it has several producers, including Kahkow, Cacao Prieto, Jacques Torres, Raaka and Fine & Raw.

. . .

A bean-to-bar maker makes chocolate from cacao beans. A chocolatier buys premade chocolate, then melts it and combines it with other ingredients to make confections like truffles or pralines. And this isn’t at all a bad thing: The best chocolatiers buy superb bean-to-bar chocolate as a starting point. (Many professional chocolatiers buy from Valrhona.) It’s just that making chocolate and making chocolate confections are two different skill sets.

For the full story, see:

Melissa Clark. “From Bean To Bar And Beyond.” The New York Times (Wednesday, February 12, 2020): D1 & D4-D5.

(Note: ellipses added.)

(Note: the online version of the story was updated Feb. 13, 2020, and has the title “Everything You Don’t Know About Chocolate.”)

Incumbent Italian Firms Invest in Cronyism, Not Innovation

I heard an intriguing paper at the January 2020 AEA meetings in San Diego. It shows that, at least in Italy, big incumbent firms protect their position more through investment in cronyism than through investment in innovation. The abstract of the NBER working paper version of the paper appears below.

Do political connections affect firm dynamics, innovation, and creative destruction? We study Italian firms and their workers to answer this question. Our analysis uses a brand-new dataset, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national registry of local politicians; and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: When compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity – a result that we also confirm using a regression discontinuity design. We build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity.

The abstract quoted above is from:

Akcigit, Ufuk, Salome Baslandze, and Francesca Lotti. “Connecting to Power: Political Connections, Innovation, and Firm Dynamics.” NBER Working Paper #25136, National Bureau of Economic Research, Inc., Oct. 2018.