Books – Page 121 – artdiamondblog.com

Happiness Research Undermines European-Style Labor-Market Regulation

Bryan Caplan persuasively pans the book he is revieiwng. But along the way Caplan makes an intriguing observation of his own:

(p. A11) . . . , happiness research makes a powerful case against European-style labor-market regulation. For most economists, the effect on worker well-being is unclear. On the one hand, regulation boosts wages; on the other, it increases the probability that you will have no wages at all. From the standpoint of a happiness researcher, however, this is a no-brainer. A small increase in wages has but a small and ephemeral effect on happiness. A small increase in unemployment, by contrast, has a massive and–unlike most other factors–durable effect on happiness. Supposedly “humane” regulations to boost workers’ incomes have a dire cost in terms of human happiness.

For the full review, see:
BRYAN CAPLAN. “BOOKSHELF; Lessons From Cloud Nine; Happiness predicts higher job performance and even future health. But what predicts happiness?” The Wall Street Journal (Tues., August 16, 2011): A11.
(Note: ellipsis added.)

Michael Milken Provided “Access to Capital for Growing Companies”

(p. 163) Although [high yield] . . . bonds eventually became known as a favored tool for leveraged–buyout specialists in the 1980s, Mike’s original goal was different. He wanted to provide access to capital for growing companies that needed financing to expand and create jobs. Most of these companies lacked the investment grade” bond ratings required before the big financial institutions would back them. Mike knew that non-investment-grade (a k a “junk”) companies create virtually all new jobs, and he believed that helping these companies grow strengthened the American economy and created good jobs for American workers.
It was by studying credit history at Berkeley in the 1960s that Mike developed his first great insight. He found that while there could be significant risk in any one high-yield bond, a carefully constructed portfolio of these assets produced a consistently better return over the long run than supposedly “safe” investment-grade debt. This was proved during the two decades of the 1970s and ’80s when returns on high-yield bonds topped all other asset classes. Mike saw a great opportunity when he realized that the perception of default risk far exceeded the reality. In fact, these bonds had a surprisingly low-risk profile when adjusted for the potential returns.
After twenty years of superior gains, the high-yield bond market finally fell in 1990. Actually, it didn’t fall–it was pushed by unwise government regulation that forced institutions to sell their bonds. The dip only lasted a year, however, with the market roaring back 46 percent in 1991.
Mike’s competitors–Goldman Sachs, Morgan Stanley, and Credit Suisse First Boston, the old oligopolies of the syndication (p. 164) business–labeled them “junk bonds” to disparage Mike’s brainchild. He was not a member of their white-shoe club and they were not going to take his act lying down.

Source:
Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.
(Note: bracketed words and ellipsis added.)

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.

“Innovation” Should Be Reserved for Electricity, Printing Press, Telephone and iPhone

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

(p. B1) “Most companies say they’re innovative in the hope they can somehow con investors into thinking there is growth when there isn’t,” says Clayton Christensen, a professor at Harvard Business School and the author of the 1997 book, “The Innovator’s Dilemma.”
. . .
Scott Berkun, the author of the 2007 book “The Myths of Innovation,” which warns about the dilution of the word, says that what most people call an innovation is usually just a “very good product.”
He prefers to reserve the word for civilization-changing inventions like electricity, the printing press and the telephone–and, more recently, perhaps the iPhone.
. . .
Mr. Berkun tracks innovation’s popularity as a buzzword back to the 1990s, amid the dot-com bubble and the release of James M. Utterback’s “Mastering the Dynamics of Innovation” and Mr. Christensen’s “Dilemma.”
. . .
(p. B8) Mr. Christensen classifies innovations into three types: efficiency innovations, which produce the same product more cheaply, such as automating credit checks; sustaining innovations, which turn good products into better ones, such as the hybrid car; and disruptive innovations, which transform expensive, complex products into affordable, simple ones, such as the shift from mainframe to personal computers.
A company’s biggest potential for growth lies in disruptive innovation, he says, noting that the other types could just as well be called ordinary progress and normally don’t create more jobs or business.
But the disruptive innovations can take five to eight years to bear fruit, he says, so companies lose patience.
It is far easier, he adds, for companies to just say they’re innovating. “Everybody’s innovating, because any change is innovation.”

For the full story, see:
LESLIE KWOH. “You Call That Innovation? Companies Love to Say They Innovate, but the Term Has Begun to Lose Meaning.” The Wall Street Journal (Weds., May 23, 2012): B1 & B8.
(Note: ellipses added.)

Wise and Wyly Words on Air Conditioning

(p. 42) It was February 1958. I got myself a room, not far from the office, in a little house built in the 1920s owned by a seventy-five-year-old woman named Mrs. Thompson. I lived in her “in-law’s room,” which meant I had my own front door, but I had to share the bathroom with her and, because I did not have a kitchen, I had to eat out. My rent was $10 a week.
I had my car, which meant I could get around, and the training school was air-conditioned, which meant my second summer in Dallas was a lot more pleasant than my first.
Thank you, Willis Haviland Carrier, for inventing air-conditioning. I owe you one. And I’m not the only one. At the height of the dot-com stock market bubble of 1999, Barton Biggs–the wise, graying investments guru at Morgan Stanley–posed this question to seventy-one people: which invention is more important, the Internet or air-conditioning? Barton was on the losing side of the vote, 70-2.
Obviously, he’d found seventy people who’d never spent an August in Texas.

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.)

Entrepreneur Krupp Was Paternalistically “Benevolent” and Was Skeptical of Capitalism

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

(p. A13) Harold James, professor of history and international affairs at Princeton University, portrays a vastly different organization in “Krupp,” a painstaking chronicle of a company that traces its roots to a steel foundry in Essen in 1810. Mr. James’s Krupp is a company for which the manufacturing of war matériel was always of secondary interest to that of civilian production. The company might have preferred to concentrate on manufacturing railroad equipment and consumer goods, but in the developing and expansionist German empire of the 19th century, state requirements for the tools of power dovetailed with Krupp’s desire for regular long-term contracts. The result for Krupp was a practical, if not deliberate, focus on armaments.

From the manufacturer’s perspective, the emphasis on war matériel did not consign Krupp to the ranks of belligerent militarists; it was just smart business. “The purpose of work should be the common good,” founder Alfred Krupp once said, or at least that quote graces a statue the company erected after his death in 1887. All through the 19th century, Mr. James says, the pursuit of profit was less central to the Krupp mission than building a solid enterprise within a framework of social responsibility. As early as 1836, Krupp established a voluntary health-insurance program for its workers. By the middle of the century, life-insurance and pension plans had been instituted. Workers’ hostels and company hospitals were constructed. In exchange for this paternalistic benevolence, Krupp expected complete loyalty from its work force and vehemently opposed the slightest hint of union organization or political activity among its employees.
“Alfred Krupp perfectly fits the mold of the heroic entrepreneur,” Mr. James writes. “Profoundly skeptical of joint-stock companies, banks, and capitalism in general, but also of big-scale science and modern research methods, he was a genius at extending to its utmost limits the possibilities of the craft entrepreneur.”

For the full review, see:
JENNIFER SIEGEL. “BOOKSHELF; Heavy Industry, Burdened Past; The company’s 19th-century founder said it was devoted to the “common good.” In World War II, it worked hard for the Third Reich.” The Wall Street Journal (Tues., April 17, 2012): A13.
(Note: the online version of the interview is dated April 16, 2012.)

Texas Was a Place Where It Was OK for an Entrepreneur to Be Poco Loco

(p. 42) Today, everybody knows something about Texas, but in those days Texas was still like an undiscovered oasis of freethinking, individualistic, action-oriented, business-minded people. It was a place where gut American characteristics were concentrated and magnified. A place where you could taste the frontier spirit that is part of our national heritage. There was a feeling in the air that you could invent yourself as any character you chose, and that your neighbors would leave you alone to be whoever you wanted to be. I liked the aggressiveness of the people in pursuing their goals, and the fact that you could be poco loco, as Spanish speakers say: a little crazy. This quality is a big help when you’re an entrepreneur. I felt that, in Dallas. there was extra oxygen in the air.

Source:
Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.
(Note: italics in original.)

Quick Computing If Air Conditioning Worked

(p. 36) Using those IBM 650s was no easy feat. You had to take your turn in line with the other students, write your program, key punch it onto a big stack of cards, do your proofs to make sure it was accurate, and feed it into the computer. If you were lucky and the air-conditioning did not malfunction, you’d get your results back quickly. But there would be errors, which you had to correct, and then you had to repeat the process over and over again until the 650–working on the data with the program that you wrote–came up with the right answers.

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

“Birdseye Coaxes Readers to Re-examine Everyday Miracles”

Source of book image: http://media.miamiherald.com/smedia/2012/05/04/10/50/13z9ot.Em.56.jpg

(p. C7) Birdseye made and lost money, went west to search for the cause of Rocky Mountain spotted fever and hunted fox for furs in Labrador, where he took his wife and infant son to live 250 miles by dogsled from the nearest hospital. He harpooned whales near his home in Gloucester, Mass., and wore a necktie while doing it. And he designed the industrial processes that made it possible to fast-freeze food, thus rendering obsolete much canned, dried, salted and smoked food and the musty basement bins that once held a winter’s diet of turnips, onions and potatoes.

Food had been frozen earlier but more slowly. Crystallization turned it mushy and tasteless. It was poor man’s food. In Labrador, fishing with the Inuit, Birdseye noticed that when a fish was pulled from a hole in the ice and into minus-40-degree air, it froze instantly, staying so fresh that when it was thawed months later, it would sometimes come alive.
He spent years putting together modern mass production with what he had seen in Labrador. By the 1920s, he was fast-freezing food that was far closer to fresh than any competition. “Today’s locavore movement–the movement to shun food from afar and eat what is produced locally . . . would have perplexed him,” Mr. Kurlansky writes. After all, “consumers could go to a supermarket and buy the food of California, France and China for less money.”
. . .
The author makes a telling point about locavores: “We need to grasp that people who are accustomed only to artisanal goods long for the industrial. It is only when the usual product is industrial that the artisanal is longed for. This is why artisanal food, the dream of the food of family farms, caught on so powerfully in California, one of the early strongholds of agribusiness with little tradition of small family farms.”
Birdseye’s heroism has been forgotten, and his frozen food is taken for granted, the way all inventions are taken sooner or later. He sold his business for $23.5 million in 1929 to what would become General Foods. He stayed on as a consultant and also ran his light bulb company, which he would sell too.

For the full review, see:
HENRY ALLEN. “The American Way of Eating; Harlan Sanders and Clarence Birdseye, just like today’s locavores, saw a meal as a way to improve people’s lives.” The Wall Street Journal (Sat., May 5, 2012): C5 & C7.
(Note: ellipsis added.)
(Note: the online version of the review is dated May 4, 2012.)

(p. C6) “Birdseye” is a slight but intriguing book that raises far more questions than it answers. But it indeed coaxes readers to re-examine everyday miracles like frozen food, and to imagine where places with no indigenous produce would be without them. It emphasizes the many steps that went into developing such a simple-seeming process.

For the full review, see:
JANET MASLIN. “BOOKS OF THE TIMES; The Inventor Who Put Frozen Peas on Our Tables.” The New York Times (Thurs., April 26, 2012): C6.
(Note: the online version of the review is dated April 25, 2012.)

Book reviewed:
Kurlansky, Mark. Birdseye: The Adventures of a Curious Man. New York: Doubleday, 2012.

“Mark Kurlansky.” Source of caption and photo: online version of the NYT article quoted and cited above.

A “Boring” and “Excellent” Business Education

(p. 34) Most of what they taught us in those days was functional. This was before they added “entrepreneurship” to business courses. It was all about manufacturing, marketing, and personnel. I found that somewhat boring. I had two favorite courses. The first was Small Business. It was the only course where all the pieces carne together. The other was Computing, which was the first computer course that the Michigan Business School had ever taught. I had a feeling that this was the big new thing. But, more important, it was what IBM did. I had never seen a computer lab before. This was soon after Remington Rand made headlines with its UNIVAC I, the world’s first commercial computer.
. . .
(p. 59) The University of Michigan is an excellent school. I loved being there and I am proud to have earned an MBA. When I was there, I noticed that the fìve-and–ten-cents-store founder, Sebastian S. Kresge–the man who invented the Kmart chain–had given them Kresge Hall. When I could afford to, I figured, why not do the same? I have always been so grateful for what I learned there. In 1997 I gave the school funding for a Sam Wyly Hall. (A few years earlier, Charles and I had helped to build Louisiana Tech’s 16-story Wyly Tower of Learning.) It’s fulfilling to me that today Paton Scholars study at Sam Wyly Hall on the Ann Arbor campus.

Source of both quotes:
Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.
(Note: ellipsis added.)