Category: Antitrust

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.

Amazon Enables Flourishing of Small Diverse Entrepreneurs

(p. A24) They are a religious community known for clinging to 18th-century fashions and mores — strict rules that keep men and women apart and constraints on attire, with men favoring black suits and formal hats and women in long sleeves and long skirts.

But when it comes to doing business, Hasidic Jews have become enamored with a distinctly 21st-century company: Amazon.

The ability to sell merchandise easily and relatively anonymously on Amazon has transformed the economies of Hasidic enclaves in Brooklyn, suburban New York and central New Jersey, communities where members prefer to keep to themselves and typically do not go to college, let alone graduate from business programs.

But Amazon allows Hasidim to start selling without much experience and without making the investments required by a brick-and-mortar store. It permits Hasidic sellers to deal with the public invisibly — almost entirely by mail, by email or through package-delivery firms.

“Amazon doesn’t ask for your résumé,” said Sam Friedman, a marketer who designs trade show exhibits and works with many Amazon sellers. “And your picture is not on your business. The investment is minimal. You can work out of your bedroom.”

. . .

If Amazon is fulfilling orders, the business may effectively be running on Sabbath and Jewish holidays, though how that is carried out is the subject of vigorous debate. With a Talmudic twist of logic, some Hasidic entrepreneurs take on a non-Jew as a presumptive partner, attributing profits made on the Sabbath to that person.

. . .

Mr. Friedman is . . . organizing a business, advertising and marketing expo in Brooklyn in December [2019] to help Hasidic merchants expand their online sales by contracting with experienced copy writers, web designers, videographers and other professionals whose occupations the Talmudic Sages never even dreamed of.

“We’re not college students,” Mr. Friedman said, “but the yeshiva makes us smart enough to figure things out.”

For the full story, see:

Joseph Berger. “Insular Hasidic Communities Embrace Selling on Amazon.” The New York Times (Thursday, October 17, 2019): A24.

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

(Note: the online version of the story has the date Oct. 16, 2019, and has the title “How Amazon Has Transformed the Hasidic Economy.” The online version says that the article was on p. A26 of the New York edition. The article was on p. A24 of my National edition.)

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.

When Swedish Furniture Makers Boycotted Ikea, Kamprad Found Furniture Makers in Poland

(p. A9) To encourage frugality in his workers, Mr. Kamprad was happy to offer himself as an example. He was known for reusing tea bags, flying economy class and taking public transport to airports. Even as a billionaire, he dickered over vegetable prices at farmers markets.

“Wasting resources is a mortal sin at IKEA,” he wrote in a guidebook for employees. “We do not need fancy cars, posh titles, tailor-made uniforms or other status symbols.”

He knew about global supply chains long before they were the norm. Rival retailers in the 1950s pressured Swedish furniture makers into boycotting the disruptive IKEA. So Mr. Kamprad visited Poland in the early 1960s and found primitive factories that, with training and tools from the Swedes, could make wooden furniture at much lower prices. (One problem: Some trees harvested in Poland still contained bullets from World War II.) Poland and China became two of the company’s main suppliers.

. . .

He assured his employees they had a noble mission: helping the masses afford comfortably furnished homes.

For the full obituary, see:

James R. Hagerty. “IKEA Founder Built Retailer by Keeping It Simple.” The Wall Street Journal (Saturday, Feb. 3, 2018): A9.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date Feb. 2, 2018, and has the title “Ingvar Kamprad Made IKEA a Global Retailer by Keeping It Simple.”)

Amazon Will Fund Employees to Quit and Found Delivery Startups

(p. B6) First, Amazon made two-day shipping the norm. Now, as it aims to cut that to a single day, the company is encouraging its employees to quit and start their own delivery businesses.

Under a new incentive program, announced on Monday, Amazon said that it would fund up to $10,000 in start-up costs and provide three months of pay to any employee who decides to make the jump.

The new incentives build on a program the company started last June to encourage anyone, employee or not, to get into the competitive business of last-mile package delivery.

“We’ve heard from associates that they want to participate in the program but struggled with the transition,” Dave Clark, senior vice president for worldwide operations, said in a statement. “Now we have a path.”

For the full story, see:

Niraj Chokshi. “Amazon Has A Novel Idea For Delivery.” The New York Times (Tuesday, MAY 14, 2019): B6.

(Note: the online version of the story has the date MAY 13, 2019, and has the title “Amazon Will Pay Workers to Quit and Start Their Own Delivery Businesses.”)

Clayton Christensen Wrongly Predicted Bombardier Would Disrupt Boeing

Clayton Christensen and co-authors predicted in Seeing What’s Next that Bombardier was well-positioned to use disruptive innovation to leapfrog Boeing and Airbus.

(p. B8) Mitsubishi Heavy Industries Ltd. said it would acquire Bombardier Inc.’s regional-jet business for $550 million in a transaction that puts the companies on different paths in the aviation sector.

The deal unveiled Tuesday [June 25, 2019] marks the Canadian company’s exit from the commercial passenger-aircraft business following failed bets that it could compete with Airbus SE and Boeing Co. in the 100-seat single-aisle plane category.

Bombardier has restructured its aviation division over the past two years, highlighted by its joint venture with Airbus that put the European plane maker in charge of the production and sales of the 110- to 130-seat planes that the Montreal company had originally conceived as the CSeries. Those jets are now rebranded as the Airbus A220.

For the full story, see:

Vieira, Paul. “Bombardier to Sell Jet Unit.” The Wall Street Journal (Wednesday, June 26, 2019): B8.

(Note: bracketed date added.)

(Note: the online version of the story has the same date June 25, 2019, and has the title “Mitsubishi to Acquire Bombardier’s Regional Jet Unit for $550 Million.”)

The Christensen book mentioned above, is:

Christensen, Clayton M., Scott D. Anthony, and Erik A. Roth. Seeing What’s Next: Using Theories of Innovation to Predict Industry Change. Boston, MA: Harvard Business School Press, 2004.

The “Amazon Effect”: Customers Now Expect Other Sellers to Deliver Reliably Fast

(p. B4) Many Amazon.com Inc. customers have become accustomed to reliable two-day shipping, forcing other retailers to offer similar service. Businesses are making new demands of their suppliers as they trim inventories and reduce supply-chain costs. Wal-Mart Stores Inc. in July said it would penalize companies that made deliveries too late or too early.

“It’s the Amazon effect—customers are putting more pressure on their supplier to know where their product is,” said Bart De Muynck, a supply chain analyst with Gartner Inc.

For the full story, see:

Jennifer Smith. “‘Amazon Effect’ Engenders Deals for Tracking Firms.” The Wall Street Journal (Wednesday, Aug. 30, 2017): B4.

(Note: the online version of the story has the date Aug. 29, 2017, and the title “‘Amazon Effect’ Sparks Deals for Software-Tracking Firms.” Where there are minor differences in wording, the passages quoted above follow the online version.)

With G.E. Exit, Dow Index Has None of Original Firms

(p. B2) General Electric, the last original member of the Dow Jones industrial average, was dropped from the blue-chip index late Tuesday [June 19, 2019] and replaced by the Walgreens Boots Alliance drugstore chain.

. . .

The removal of G.E., which will formally occur June 26, reflects a shift in the economic composition of the United States, which long ago tilted away from heavy industry and toward services, such as technology, finance and health care.

And it also amounted to a milestone for General Electric. It was the last remaining original member of the index, when the stock market measure was introduced in 1896.

For the full story, see:

Matt Phillips. “G.E. Is Dropped From Dow; Was Last Original Member.” The New York Times (Wednesday, June 20, 2018): B2.

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

(Note: the online version of the story has the date June 19, 2018, and has the title “G.E. Dropped From the Dow After More Than a Century.”)