Books – Page 178 – artdiamondblog.com

Should Netscape Be Viewed as a Failed Company, or as a Successful Project?

(p. 53) Recall the story of Netscape, once the darling of the New Economy. Netscape was formed in 1994. It went public in 1995. And by 1999, it was gone, purchased by America Online and subsumed into AOL’s operation. Life span: four years. Half-life: two years. Was Netscape a company—or was it really a project? Does the distinction even matter? What matters most is that this short-lived entity put several products on the market, prompted established companies (notably Microsoft) to shift strategies, and (p. 54) equipped a few thousand individuals with experience, wealth, and connections that they could bring to their next project.

And Netscape is not alone. A University of Texas study found that between 1970 and 1992, the half-life of Texas businesses shrank by 50 percent. Likewise, a Federal Reserve analysis of New York companies found that the type of firm that created the most new jobs (microbusineses with fewer than ten employees) often had the shortest life span. The life cycle of companies has been that jobs, too, have diminishing half-lives. Ten years ago, nobody ever heard of a Web developer. Ten years from now, nobody may remember Web developers.

Most important, at the very moment the longevity of companies is shrinking, the longevity of individuals is expanding. Unlike Americans in the twentieth century, most of us today can expect to outlive just about any organization for which we work. It’s hard to imagine a lifelong job at an organization whose lifetime will be shorter–often much shorter–than your own.

Source:

Pink, Daniel H. Free Agent Nation: How America’s New Independent Workers Are Transforming the Way We Live. New York: Warner Business Books, 2001.

“Free Agent Nation” Still Rings True

Source of book image: http://g-ec2.images-amazon.com/images/G/01/ciu/10/ae/8ca3d250fca0f5b077de4010.L.jpg

Daniel Pink’s 2001 Free Agent Nation has been on my to-read list since it first came out. It finally made it to the top—at least in the author-abridged two-cassette incarnation.

I always found the basic idea appealing: the appeal of the freedom of working for yourself—Harry Browne’s How I Found Freedom in an Unfree World, but for real.

But I also was a little anxious; fearful that the book would place too much emphasis on seeming flash-in-the-pan dot.com labor market phenomena and rhetoric.

To my relief, I can report that little in the book depends on the dot.com over-exuberance. The internet appears, as an infrastructure enabler, but the free agents are mainly doing more standard stuff, but doing it from a home office, and doing it project-by-project.

Pink is not an academic, which has pros and cons. One of the pros is that his prose is pleasant. Another is that he has an ear for a good story and a telling example. Perhaps a con is that he often hasn’t had the time, or the interest, (or maybe the data just don’t exist) to often follow-up with how widespread his examples are.

Still there’s some good stuff here. Like suggesting that free agency is what you would expect more of us to pursue, as we work our way up Abraham Maslow’s hierarchy of human needs. (In college I was enthused enough about Maslow that I was thinking of minoring in psychology, until they told me how many hours I would have to run rats through mazes before I’d be allowed to open a Maslow book.)

And there’s plausible discussion about how in some ways free agency is more secure than a regular job (multiple clients means diversification). And there is more freedom to control your own time, and be your authentic self.

There’s also some good discussion of how the government makes free agency harder through health care and taxation policies.

All-in-all, this book helps make the case that labor can thrive in a Schumpeterian world of creative destruction.

Reference to the book:

Pink, Daniel H. Free Agent Nation: How America’s New Independent Workers Are Transforming the Way We Live. New York: Warner Business Books, 2001.

“Under the Spell of a Theory”

Johnson’s wonderful book is part mystery, part history, part philosophy of science, and part musing on political philosophy. The passage below warms the heart (and stimulates the brain) of the libertarian. Against great odds, Dr. Snow persisted in presenting ever-more convincing evidence for his correct water-borne theory of cholera. Meanwhile Chadwick, the main advocate of government public health activities, continued to direct policy on the basis of the mistaken theory that cholera was spread by foul vapors in the air.

(p. 120) Herein lies the dominant irony of the state of British public health in the late 1840s. Just as Snow was concocting his theory of cholera as a waterborne agent that had to be ingested to do harm, Chadwick was building an elaborate scheme that would deliver the cholera bacteria directly to the mouths of Londoners. (A modern bioterrorist couldn’t have come up with a more ingenious and far-reaching scheme.) Sure enough, the cholera returned with a vengeance in 1848-1849, the rising death toll neatly following the Sewer Commission’s cheerful data on the growing supply of waste deposited in the river. By the end of the outbreak, nearly 15,000 Londoners would be dead. The first defining act of a modern, centralized public-health authority was to poison an entire urban population. (There is some precedent to Chadwick’s folly, however. During the plague years of 1665-1666, popular lore had it that the disease was being spread by dogs and cats. The Lord Mayor promptly called for a mass extermination of the city’s entire population of pets and strays, which was dutifully carried out by his minions. Of course, the plague turned out to be (p. 121) transmitted via the rats, whose numbers grew exponentially after the sudden, state-sponsored demise of their only predators.)

Why would the authorities go to such lengths to destroy the Thames? All the members of these various commissions were fully aware that the waste being flushed into the river was having disastrous effects on the quality of the water. And they were equally aware that a significant percentage of the population was drinking the water. Even without a waterborne theory of cholera’s origin, it seems like madness to celebrate the ever-increasing tonnage of human excrement being flushed into the water supply. And, indeed, it was a kind of madness, the madness that comes from being under the spell of a Theory. If all smell was disease, if London’s health crisis was entirely attributable to contaminated air, then any effort to rid the houses and streets of miasmatic vapors was worth the cost, even if it meant turning the Thames into a river of sewage.

Source:

Johnson, Steven. The Ghost Map: The Story of London’s Most Terrifying Epidemic – and How It Changed Science, Cities, and the Modern World. New York: Riverhead Books, 2006.

Advice from Charles Koch: A Successful Business Schumpeterian

Source of book image: http://media.wiley.com/product_data/coverImage300/89/04701398/0470139889.jpg

When Charles Koch became the chief executive of Rock Island Oil & Refining after the death of his father in 1967, the company was a moderately successful enterprise based in Wichita, Kan. He renamed it Koch Industries in honor of his father — and over the next 40 years proceeded to transform Fred Koch’s legacy into the world’s largest private company. Koch Industries — now a commodity and financial conglomerate that includes brands such as Stainmaster, Lycra and Dixie cups — has 80,000 employees in 60 countries. Its revenue last year was $90 billion. In one generation, the book value of Koch Industries has increased 2,000-fold. That’s an 18% compounded annual return — comparable with the long-term track record of Warren Buffett’s Berkshire Hathaway.

. . .

At age 71, Mr. Koch clearly feels that the time has come to pass along the business formula that has served him so well. In "The Science of Success," he describes a technique, called Market-Based Management (MBM), that he says evolved from his reading, early in his career, in history, political science, economics and other disciplines. He arrived at an understanding of what allows a free society to prosper, Mr. Koch says, and decided to apply those principles to business.

. . .

. . . He is especially fond of the "Austrian school" of economists, such as Ludwig von Mises and Joseph Schumpeter, who emphasized production processes, technology and the dynamic competitive models of "creative destruction."

For the full review, see:

MARK SKOUSEN. "BOOKS; A Short Course in Long-Term Value." The Wall Street Journal (Weds., March 7, 2007): D8.

(Note: ellipses added.)

More on Creative Destruction in Science Fiction

On April 11, 2007 I posted an entry noting a new science fiction book with the title Creative Destruction. Not having read the book, I wondered aloud whether the book contained any reference to Schumpeter.

Yesterday (4/13/07), I was delighted to receive an email from the author of the book, answering my question. With his permission, I reproduce his email below:

Dr. Diamond,

I noticed your blog entry about Creative Destruction, my computer-themed SF collection. You asked: Does Schumpeter get a mention?

Absolutely. Here are the opening lines of the foreword:

     If the Internet bubble had a patron saint, he was an obscure economist named Joseph Schumpeter.

     Schumpeter owes his posthumous celebrity to two words: creative destruction. In 1942, he wrote of the "… Process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.

     "Creative destruction," he said, "is the essential fact about capitalism." Every dotcom, of course, claimed its new technology would sweep out the old in a frenzy of creative destruction. Occasionally — think Yahoo! and Amazon — they were even correct.

The stories in the collection are most definitely science fiction — I have degrees in physics and computer science — but I also have an MBA from the University of Chicago.

Best regards,

– Ed Lerner

(Note: I have changed the format of the email, a little. The ellipsis was in the original.)

Creative Destruction in Science Fiction

Source of book image: http://ec1.images-amazon.com/images/P/0809557487.01._SS500_SCLZZZZZZZ_V38973347_.jpg

There’s a new collection of science fiction stories entitled Creative Destruction (after one of the main stories in the collection that is also entitled "Creative Destruction"). I have not read the book, but used to enjoy reading science fiction, and hope to have a look before too long.

I welcome comments from anyone who has read the book. Does Schumpeter get a mention?

The reference to the book is:

Lerner, Edward M. Creative Destruction. Rockville, MD: Wildside Press, 2006.

Woodrow Wilson: The Automobile is “a Picture of the Arrogance of Wealth”

It is the common characteristic of new products from creative destruction that new products are first so expensive that only the rich can afford them, but then fairly soon, usually within a few years at most, the price falls to the level that ordinary people can afford. At that point, what the rich gets are added features, at a high premium, but the basic product is widely available. Consider the automobile:

(p. 193) The autos of the time were a luxurious novelty. One model even offered electric curlers in the back seat for on-the-go primping. They were unreliable and expensive, costing around $1,500, twice the average annual family income. And they were enormously unpopular. Anticar activists tore up roads, ringed parked cars with barbed wire, and organized boycotts of car-driving businessmen and politicians. Public resentment of the automobile was so great that even future president Woodrow Wilson weighed in, saying, "Nothing has spread socialistic feeling more than the automobile . . . a picture of the arrogance of wealth." Literary Digest suggested, "The ordinary ‘horseless carriage’ is at present a luxury for the wealthy; and although its price will probably fall in the future, it will never, of course, come into as common use as the bicycle."

Source:

Kim, W. Chan, and Renée Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Boston: Harvard Business School Press, 2005.

(Note: ellipsis in original. Also, the book provides sources for each quote in the passage above.)

Jim Collins on How Boeing Leapfrogged McDonnell Douglas

(p. 202) Wisely, through the 1940s, Boeing had stayed away from the commercial sphere, an arena in which McDonnell Douglas had vastly superior abilities in the smaller, propeller-driven planes that composed the commercial fleet. In the early 1950s, however, Boeing saw an opportunity to leapfrog McDonnell Douglas by marrying its experience with large air-(p. 203)craft to its understanding of jet engines.

Source:

Collins, Jim. Good to Great: Why Some Companies Make the Leap. And Others Don’t. New York: HarperCollins Publishers, Inc., 2001.

“Free” Parking Has Hidden Costs

Two views of the new parking meters in Redwood, California. Source of photos: online version of the WSJ article cited below.

Economists have long made the case that the solution to the parking crunch many cities face lies not in more free or cheap parking but in higher prices. The idea is that higher prices result in a greater churn — and get more people on buses and subways — which leads to more open spaces. But this notion has often run up against city planners and retailers arguing that cheap and plentiful parking results in more commerce and, thus, higher sales taxes and a vibrant economy.

Now, in places like Redwood City, some officials are finally listening. One reason is that after decades of losing people to the suburbs, many city centers are swelling again. Many of these new residents are bringing cars with them, creating the kind of traffic that makes them yearn for the suburbs again.

One of the most influential of the parking gurus is Donald Shoup, a professor at the University of California, Los Angeles who commutes on a bicycle. Since the publication in 2005 of Mr. Shoup’s "The High Cost of Free Parking," he has become something of a celebrity at academic gatherings and parking-industry meetings. Lines form at his book signings. "He’s a parking rock star," says Paul White, of Transportation Alternatives, a New York group that advocates for pedestrians and bicycles.

. . .

Dan Zack, downtown development coordinator for Redwood City, has bought in. A few years ago, his boss presented him with a problem. "He said, ‘We’re adding a million visitors every year, but only 600 new parking spots — make it work,’ " Mr. Zack recalls. After visiting neighboring cities and reading books like "The Dimensions of Parking," Mr. Zack was handed an article by Mr. Shoup.

The city recently raised rates to 75 cents for some prime downtown spots that had been free, and ditched its one-hour time limits, so cars can prepay for as long as they’d like. The move has helped steer more cars to underutilized parking garages away from the main drag.

. . .

San Francisco, perhaps more than any other city, shows how radically some cities are rethinking their parking. The city is one of the toughest places to find a meter spot in all of America, and there have been a spate of attacks by angry drivers, against parking enforcement officers. One block near the popular Fisherman’s Wharf has average stays of four hours — even though there’s a two-hour time limit — and some spots are filled for days at a time.

Recently, the city hired a company to lay hundreds of 4-inch-by-4-inch sensors along the streets in some areas. The sensors, which resemble reflectors, have recorded some 250,000 "parking events" across 200 parking spots. City planners can now tell you which spots are occupied the longest and how traffic flow affects parking supplies.

If the sensors get a wider rollout, the city has floated a number of ideas. When there’s a Giants baseball game at AT&T Park, the city could temporarily charge about the same as private lots near the stadium. The ground sensors are also connected to the Internet wirelessly, which creates the possibility that parking enforcement officers equipped with PDAs could get real-time information on parking violations beamed to them. It also means consumers could get information on which parking spots are open.

For the full story, see:

CONOR DOUGHERTY. "The Parking Fix; Free-market economists are overhauling a frustration of American life — and erasing what may be one of the last great urban bargains." The Wall Street Journal (Sat., February 3, 2007): P1 & P5.

(Note: ellipses added.)

Sensors such as the one embedded in the San Francisco street on the left, could eventually be used to help track parking violators, as imagined in the fictional picture on the right. Source of photos: online version of the WSJ article cited above.

Many Muslim Newcomers Did Not Embrace Dutch Tolerance

Source of book image: http://images.barnesandnoble.com/images/12210000/12213853.jpg

Two key moments in Ms. Hirsi Ali’s life stand out. One is her arrival in the West, a moment she considers to be her "real birthday." On the day her husband shows up at the refugee camp in Holland to claim his rights, Ms. Hirsi Ali finds that she can say "no" to a man stronger than she is, thanks to the protection of a democratic state, a protection made visible, in this case, by the presence of Dutch policemen. She thus experienced an imperative that to most of us is a mere abstraction: Individual freedom needs the rule of law.

The second pivotal moment in her life, Ms. Hirsi Ali says, was the 9/11 terrorist attack on the U.S. She understood what drove Mohamed Atta and his co-hijackers; she once shared their values and had known people like them in the Muslim Brotherhood. "Every devout Muslim who aspired to practice genuine Islam," she writes, "even if they didn’t actively support the attacks, they must have at least approved of them." With 9/11, Ms. Hirsi Ali’s religious doubts erupted into defiance of what she had known while growing up.

From that day onward, Ms. Hirsi Ali became a public voice in the Dutch post-9/11 debates. Eloquently, she made bruising, sometimes inflammatory, arguments. Islam was backward, she said, and needed its Voltaire. She declared that, considered by modern standards, the Prophet was a "pervert" because he had married a 9-year-old girl. Elected an MP for the market-oriented VVD Party in 2003, she became a politician in the grand, passionate style, breaking with Dutch habits of consensus and accommodation.

A nation of 16 million people, with a Muslim minority of about one million (mostly Moroccan and Turkish immigrants), the Netherlands was at the time (and is still) trapped by its carefully nurtured sense of tolerance and hospitality. The trouble was that its newcomers did not necessarily embrace tolerance, women’s rights, free speech and other core Dutch values. Ms. Hirsi Ali knew that she was courting danger by openly addressing such concerns. Nonetheless, she pushed ahead and began working with director Theo van Gogh on "Submission," the film about the mistreatment of Muslim women. When van Gogh was murdered on Nov. 2, 2004, the police found a knife stuck in his body — the weapon was holding in place a letter threatening Ms. Hirsi Ali.

For the full review, see:

LUUK VAN MIDDELAAR. "BOOKS; Out of Europe How a prominent African refugee confronted Islam — then fled to the U.S." The Wall Street Journal (Sat., February 3, 2007): P12.

Reference to the book:

Ayaan Hirsi Ali. INFIDEL. Free Press, 2007. (353 pages, $26)

“Market Research Rarely Reveals New Insights”

Source of book image: http://images-eu.amazon.com/images/P/1591396190.01.LZZZZZZZ.jpg

(p. 69) Competition in an industry tends to converge not only on an accepted notion of the scope of its products and services but also on one of two possible bases of appeal. Some industries compete (p. 70) principally on price and function largely on calculations of utility; their appeal is rational. Other industries compete largely on feelings; their appeal is emotional.

Yet the appeal of most products or services is rarely intrinsically one or the other. Rather it is usually a result of the way companies have competed in the past, which has unconsciously educated consumers on what to expect. Companies’ behavior affects buyers’ expectations in a reinforcing cycle. Over time, functionally oriented industries become more functionally oriented; emotionally oriented industries become more emotionally oriented. No wonder market research rarely reveals new insights into what attracts customers. Industries have trained customers in what to expect. When surveyed, they echo back: more of the same for less.

Source:

Kim, W. Chan, and Renée Mauborgne. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Boston: Harvard Business School Press, 2005.