Antitrust – Page 9 – artdiamondblog.com

Were Phone Phreaks Creative Incipient Entrepreneurs or Destructive “Sophomoric Savants”?

Source of book image: http://img1.imagesbn.com/p/9780802120618_p0_v2_s260x420.JPG

(p. C6) Mr. Lapsley also describes John Draper, aka Captain Crunch, who was probably the most celebrated of the phreakers; his nickname derived from the fact that whistles that used to come in Cap’n Crunch cereal boxes happened to generate the key 2600-Hz tone used in long-distance switching. . . .

The phone-phreak netherworld was introduced to a mass audience by the October 1971 issue of Esquire magazine, which included what has to be (at least indirectly) one of the most influential articles ever written: Ron Rosenbaum’s “Secrets of the Little Blue Box.” Not only did it turn phreakers into folk heroes, but it inspired two young men, Steve Wozniak (who provided the foreword for this book) and Steve Jobs, to construct and sell blue boxes. Going door to door in Berkeley dorms, they managed to sell several dozen at $170 each. The “two Steves” savored this mix of clever engineering and entrepreneurial hustle: As Mr. Lapsley quotes Jobs saying: “If we hadn’t made blue boxes, there would have been no Apple.” (Mr. Rosenbaum’s article also put the “phreak” into “phone phreak.”)
. . .: By the 1980s, computerized phone systems and fiber-optic cables rendered many of the old phreaking modes obsolete. In addition, I can’t help suspecting that the breakup of AT&T in 1984–the result of an antitrust lawsuit filed by the federal government–deeply discouraged the hard-core phreaks. Surreptitiously penetrating one of the shriveled new regional phone companies must have seemed a paltry caper compared with taking on mighty, majestic AT&T.
. . .
I must, however, take issue with one of Mr. Lapsley’s conclusions. In reflecting on the phreaks’ legacy, he writes: “The phone phreaks taught us that there is a societal benefit to tolerating, perhaps even nurturing (in the words of Apple) the crazy ones–the misfits, the rebels, the troublemakers.” Is that truly what they taught us? . . .
Wilt Chamberlain supposedly once said that “nobody roots for Goliath.” Perhaps. But the lesson to be learned from those waging guerrilla war against giants like the phone company and the Internet is that sophomoric savants who tamper with society’s indispensable systems ultimately harm all too many innocent people.

For the full review, see:
HOWARD SCHNEIDER. “BOOKSHELF; Playing Tricks on Ma Bell.” The Wall Street Journal (Sat., February 2, 2013): C6.
(Note: ellipses added.)
(Note: the online version of the review has the date February 1, 2013.)

The book under review, is:
Lapsley, Phil. Exploding the Phone: The Untold Story of the Teenagers and Outlaws Who Hacked Ma Bell. New York: Grove Press, 2013.

Google’s Eric Schmidt Saw that “Regulation Prohibits Real Innovation”

(p. A13) Eric Schmidt, executive chairman of Google, gave a remarkable interview this month to The Washington Post. So remarkable that Post editors preceded the transcript with this disclosure: “He had just come from the dentist. And he had a toothache.”
Perhaps it was the Novocain talking, but Mr. Schmidt has done us a service. He said in public what most technologists will say only in private. Whatever caused him to speak forthrightly about the disconnects between Silicon Valley and Washington, his comments deserve wider attention.
Mr. Schmidt had just given his first congressional testimony. He was called before the Senate Judiciary Antitrust Subcommittee to answer allegations that Google is a monopolist, a charge the Federal Trade Commission is also investigating.
“So we get hauled in front of the Congress for developing a product that’s free, that serves a billion people. OK? I mean, I don’t know how to say it any clearer,” Mr. Schmidt told the Post. “It’s not like we raised prices. We could lower prices from free to . . . lower than free? You see what I’m saying?”
. . .
“Regulation prohibits real innovation, because the regulation essentially defines a path to follow,” Mr. Schmidt said. This “by definition has a bias to the current outcome, because it’s a path for the current outcome.”
. . .
Washington is always slow to recognize technological change, which is why in their time IBM and Microsoft were also investigated after competing technologies had emerged.
Mr. Schmidt recounted a dinner in 1995 featuring a talk by Andy Grove, a founder of Intel: “He says, ‘This is easy to understand. High tech runs three times faster than normal businesses. And the government runs three times slower than normal businesses. So we have a nine-times gap.’ All of my experiences are consistent with Andy Grove’s observation.”
Mr. Schmidt explained there was only one way to deal with this nine-times gap, which this column hereby christens “Grove’s Law of Government.” That is “to make sure that the government does not get in the way and slow things down.”
Mr. Schmidt recounted that when Silicon Valley first started playing a large role in the economy in the 1990s, “all of a sudden the politicians showed up. We thought the politicians showed up because they loved us. It’s fair to say they loved us for our money.”
He contrasted innovation in Silicon Valley with innovation in Washington. “Now there are startups in Washington,” he said, “founded by people who were policy makers. . . . They’re very clever people, and they’ve figured out a way in regulation to discriminate, to find a new satellite spectrum or a new frequency or whatever. They immediately hired a whole bunch of lobbyists. They raised some money to do that. And they’re trying to innovate through regulation. So that’s what passes for innovation in Washington.”

For the full commentary, see:
L. GORDON CROVITZ. “INFORMATION AGE; Google Speaks Truth to Power; About the growing regulatory state, even Google’s Eric Schmidt–a big supporter of the Obama administration–now feels the need to tell it like it is.” The Wall Street Journal (Mon., October 24, 2011): A13.
(Note: ellipses between paragraphs added; ellipsis internal to Schmidt quote, in original WSJ commentary.)

The original Eric Schmidt interview with the Washington Post, can be read at:
http://articles.washingtonpost.com/2011-10-01/national/35278181_1_google-chairman-eric-schmidt-regulation-disconnects

ExxonMobil’s “Honorable If Rigid Corporate Culture”

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

(p. C12) From Indiana to Indonesia, ExxonMobil is the multinational corporation that people love to hate. John D. Rockefeller’s creation is famed and feared for its discipline, its disregard for public opinion and its ability, year after year, to pump out the largest profits of any corporation on the planet. In “Private Empire,” Steve Coll provides a rare exploration of what makes a modern corporate giant tick and shows why the world looks different to the executives in the “God Pod” at ExxonMobil’s Texas headquarters than it might to you or me.

For the full review essay, see:
Marc Levinson. “Boardroom Reading of 2012.” The Wall Street Journal (Sat., December 15, 2012): C12.
(Note: the online version of the review essay has the date December 14, 2012.)

From another review of the same book:

“Private Empire” is meticulous, multi-angled and valuable. It is also, perhaps surprisingly, despite all the dark facts I have dumped above, impartial. Mr. Coll and his phlegmatic research assistants have interviewed more than 400 people, including Exxon Mobil’s longtime chief executive Lee R. Raymond, a legendarily hard character.

It’s among this book’s achievements that it attempts to view a dysfunctional energy world, as often as not, through Exxon Mobil’s eyes. The company is portrayed here, some egregious missteps aside, as possessing an honorable if rigid corporate culture that seeks to supply a product (unlike tobacco companies, to which it is often compared) that a functioning society actually must have.

For this full review, see:
DWIGHT GARNER. “Oil’s Dark Heart Pumps Strong.” The New York Times (Sat., April 27, 2012): C25 & C32(?).
(Note: the online version of the review essay has the date April 26, 2012 and has the title “BOOKS OF THE TIMES; Oil’s Dark Heart Pumps Strong; ‘Private Empire,’ Steve Coll’s Book on Exxon Mobil.”)

The book under review, is:
Coll, Steve. Private Empire: ExxonMobil and American Power. New York: The Penguin Press, 2012.

“Richly Researched” Study of “Ironies of Antitrust Policy” in Retailing

(p. 819) Levinson’s book opens up a crucial discussion on the role of integrated retailer-distributors in shaping the twentieth-century U.S. economy. As he rightly notes in the book’s conclusion, A&P was in many ways the Walmart of its day: it used its buying power to squeeze inefficiencies out of supply chains, it was widely reviled for upending small-town business patterns and bitterly fighting union organizers, and yet it drew waves of customers who appreciated its low prices. While we have many business histories of mass-production industries, we have only a handful of richly researched studies of the mass retailers that have, in the words of historian Nelson Lichtenstein (2009), “become the key players in the worldwide marketplace of our time.” Levinson has produced a valuable book for business and economic historians interested in retailing, supply chains, and the ironies of antitrust policy. As a former editor for The Economist, furthermore, Levinson is particularly effective at translating challenging economic concepts into language that lay audiences and undergraduate students can grasp.

For the full review, see:
Hamilton, Shane. “The Great A&P and the Struggle for Small Business in America.” Journal of Economic Literature 50, no. 3 (Sept. 2012): 818-19.
(Note: italics in original.)

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

The Lichtenstein book mentioned is:
Lichtenstein, Nelson. The Retail Revolution: How Wal-Mart Created a Brave New World of Business. hb ed. New York: Metropolitan Books, 2009.

In Antitrust, as in Medicine, First Do No Harm

(p. 94) Western Union’s lawyers carne up with a dusty old New York Stale law, dated 1905, that said no one could buy more than 10 percent of a telegraph company chartered in that state without the approval of Albany lawmakers. Hard to believe, but it was right there in black and white and there was no possibility of getting the New York State legislature to understand why it was vital to build digital highways.
Talk about unintended consequences!
(p. 95) Originally, the law was written to stop Western Union from monopolizing the telegram business, but the law backfired and was used by the monopolist for its own protection.

Source:
Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.

First Principle for Trustbusters Should Be “Do No Harm”

(p. A2) In essence, Justice says that, beginning in 2008, several plankton, in the form of five publishers, conspired against a whale, Amazon, whose monopoly clout had imposed a $9.99 retail price for e-books.
The deal the publishers eventually reached with Apple unfixed the price of e-books by linking their prices to the cover price of the print version. More importantly, publishers could begin to reclaim the right to set e-book retail prices generally.
. . .
Apple, with 15% of the e-book market, is no monopolist. The five publishers, though Justice insists they dominate trade publishing, account for only about half of e-book sales. Crucially for antitrust, the barriers to entry are zilch: Amazon, with 60% market share, could create its own e-book imprint tomorrow and begin bidding for the most popular authors.
. . .
Let’s go back to “per se” vs. “rule of reason.” Because the 1890 Sherman Act is so sweeping and almost any business arrangement could be read as prohibited, courts understandably evolved a “rule of reason” to distinguish the permissible from the impermissible. Unfortunately, the result has been antitrust as we know it: wild and fluctuating discretion masquerading as law. Retail price maintenance alone has been embraced and dumped so many times by the courts that it must feel like Jennifer Aniston.
“Do no harm” would be a better principle for trustbusters.

For the full commentary, see:
HOLMAN W. JENKINS, JR. “BUSINESS WORLD; Washington vs. Books; What about piracy, low barriers to entry and the fact that literature isn’t chopped liver?” The Wall Street Journal (Sat., April 14, 2012): A15.
(Note: the online version of the commentary is dated April 13, 2012.)

A&P Sold Consumers Better and Lower-Priced Food

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

(p. A15) Mr. Levinson’s history centers on the two Hartford sons who followed their father into the business. They would spend their entire working lives at the company being known simply as “Mr. George” and “Mr. John.” Thoughtful and studious, Mr. George’s idea of excitement was a good jigsaw puzzle; Mr. John, somewhat more outgoing, liked the horses but also a daily lunch of milk and crackers. Together the brothers, neither of whom had finished high school, built what would be, for 40 years, the largest retail outlet in the world.

The brothers’ business philosophy was simple, writes Mr. Levinson: “If the company keeps its costs down and prices low, more shoppers would come through its doors, producing more profits than if it kept prices high.” The more stores they could open, the greater the take.
But the Hartfords had a public-relations problem. Since the nation’s earliest days, small family stores had served as community anchors. There were thousands across the country. Mom and pop knew every customer who came through their door; they extended credit to families down on their luck. If low-priced chains drove out such stores, what would happen to small-town America?
In fact, many mom-and-pop operations were inefficiently and incompetently run. A&P might be coldly corporate by comparison, but it offered consumers far more variety and fresher, better-quality goods at less cost to the family budget.

For the full review, see:
PATRICK COOKE. “BOOKSHELF; How a Grocer Bagged Profits; At its peak, the chain had nearly 16,000 stores. Critics charged it with competing unfairly by offering too-low prices.” The Wall Street Journal (Mon., AUGUST 29, 2011): A15.
(Note: ellipsis added.)

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

Steve Jobs on Public School System Monopoly

(p. A15) These days everyone is for education reform. The question is which approach is best. I favor the Steve Jobs model.
In 1984 Steve introduced the Mac with a Super Bowl ad. It ran only once. It ran for only one minute. And it shows a female athlete being chased by the helmeted police of some totalitarian regime.
At the climax, the woman rushes up to a large screen where Big Brother is giving a speech. Just as he announces, “We shall prevail,” she hurls her hammer through the screen.
If you ask me what we need to do in education, I would point you to that ad.
. . .
Steve Jobs knew all about competitive markets. He once likened our school system to the old phone monopoly. “I remember,” he said in a 1995 interview, “seeing a bumper sticker with the Bell Logo on it and it said ‘We don’t care. We don’t have to.’ And that’s what a monopoly is. That’s what IBM was in their day. And that’s certainly what the public school system is. They don’t have to care.”
We have to care. In this new century, good is not good enough. Put simply, we must approach education the way Steve Jobs approached every industry he touched. To be willing to blow up what doesn’t work or gets in the way. And to make our bet that if we can engage a child’s imagination, there’s no limit to what he or she can learn.

For the full commentary, see:
RUPERT MURDOCH. “OPINION; The Steve Jobs Model for Education Reform; If we can engage a child’s imagination, there’s no limit to what he or she can learn..” The Wall Street Journal (Sat., OCTOBER 15, 2011): A15.
(Note: ellipsis added.)

Mackey Reduced Role in Whole Foods after Being “Drained” by Antitrust Battle

“Higher existing-store sales powered Whole Foods earnings. Above, co-founder John Mackey juggles apples in a New York store last November.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B6) Whole Foods Market Inc. reported Wednesday that fiscal second-quarter profits had more than doubled and raised its full-year earnings forecast. The company also shook up its management team, naming a co-chief executive, though current CEO and co-founder John Mackey said he expects to work “for another decade or so.”
. . .
Mr. Mackey in December resigned as Whole Foods’ chairman after a year of controversy. Last summer, he wrote a controversial opinion article for The Wall Street Journal on his views of health care reform that led to boycotts of the natural grocer by some of his most loyal shoppers. Last spring, the Fair Trade Commission ordered the sale of 37 former Wild Oats Markets Inc. stores, a multi-year battle that Mr. Mackey says left him drained and influenced his decision to appoint Mr. Robb as co-CEO.

For the full story, see:
TIMOTHY W. MARTIN. “Profit Soars at Whole Foods; Grocery Chain Forecasts Sharply Higher Profit, Promotes Two Veteran Executives.” The Wall Street Journal (Thurs., MAY 13, 2010): B6.
(Note: ellipsis added.)
(Note: the first paragraph quoted above has slightly different wording in the online version than the print version; the second paragraph quoted is the same in both.)

Competitors Have “Incentive to Misuse the Government to Obtain an Advantage”

(p. A15) Today’s technology behemoth risks becoming tomorrow’s dinosaur, and competitors sometimes plead for government intervention to obtain what they fail to achieve in the market. As a former head of a competition agency, I offer . . . principles to guide competition policy toward successful innovators.

. . . , be wary of competitor complaints. When a competitor tells government that its rival acts unfairly, the complaint should be viewed with great suspicion. Competitor complaints are driving recent EU investigations into companies that include Qualcomm, Google, Oracle and IBM. Competitors can provide valuable information about marketplace realities, but they have every incentive to misuse the government to obtain an advantage that is otherwise unattainable.
. . .
. . . , don’t create disincentives for innovation. Complaining competitors often want innovators to be forced to share the source of their success, regardless of intellectual property rights. Nothing could be more destructive to the incentives for future innovation than rules that prevent innovators from reaping the full benefits of their work. As a unanimous U.S. Supreme Court said in its 2004 Verizon v. Trinko decision, “[f]irms may acquire monopoly power by establishing an infrastructure that renders them uniquely suited to serve their customers.”

For the full commentary, see:
TIMOTHY J. MURIS. “Antitrust in a High-Tech World; The first rule of regulators should be to be wary of complaints from competitors..” The Wall Street Journal (Tues., August 12, 2010): A15.
(Note: ellipses added.)

Doctors Seek to Regulate Retail Health Clinic Competitors

“A nurse practitioner with a patient at a retail clinic in Wilmington, Del.” Source of caption and photo: online version of the WSJ article quoted and cited below.

Clayton Christensen, in a chapter of Seeing What’s Next, and at greater length in The Innovator’s Prescription, has persuasively advocated the evolution of nurse practitioners and retail health clinics as disruptive innovations that have the potential to improve the quality and reduce the costs of health care.
An obstacle to the realization of Christensen’s vision would be government regulation demanded by health care incumbents who would rather not have to compete with nurse practitioners and retail health clinics. See below for more:

(p. B1) Retail health clinics are adding treatments for chronic diseases such as asthma to their repertoire, hoping to find steadier revenue, but putting the clinics into greater competition with doctors’ groups and hospitals.

Walgreen Co.’s Take Care retail clinic recently started a pilot program in Tampa and Orlando offering injected and infused drugs for asthma and osteoporosis to Medicare patients. At some MinuteClinics run by CVS Caremark Corp., nurse practitioners now counsel teenagers about acne, recommend over-the-counter products and sometimes prescribe antibiotics.
. . .
As part of their efforts to halt losses at the clinics, the chains are lobbying for more insurance coverage, and angling for a place in pending health-care reform legislation, while trying to temper calls for regulations.
. . .
(p. B2) But such moves are raising the ire of physicians’ groups that see the in-store clinics as inappropriate venues for treating complex illnesses. In May, the Massachusetts Medical Society urged its members to press insurance companies on co-payments to eliminate any financial incentive to use retail clinics.
. . .
The clinics are helping alter the practice of medicine. Doctors are expanding office hours to evenings and weekends. Hospitals are opening more urgent-care centers to treat relatively minor health problems.

For the full story, see:
AMY MERRICK. “Retail Health Clinics Move to Treat Complex Illnesses, Rankling Doctors.” The Wall Street Journal (Thurs., SEPTEMBER 10, 2009): B1-B2.
(Note: ellipses added.)

A brief commentary by Christensen (and Hwang) on these issues, can be found at:

CLAYTON CHRISTENSEN and JASON HWANG. “How CEOs Can Help Fix Health Care.” The Wall Street Journal (Tues., July 28, 2009).

For the full account, see:
Christensen, Clayton M., Jerome H. Grossman, and Jason Hwang. The Innovator’s Prescription: A Disruptive Solution for Health Care. New York: NY: McGraw-Hill, 2008.

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