Category: Books

Study Claims 77% of Economic Growth is Due to Incremental Innovation

I am surprised by, and dubious of, the claim that 77% of economic growth comes from incremental innovation. That implies that leapfrog innovation, or creative destruction, is not very important. I will need to read and ponder the study that claimed that result.

(p. A15) The comparison of two potential options—known as A/B testing—is now routinely baked into the development of customer-facing software, Mr. Thomke reports. Microsoft, Amazon, Facebook and Google “each conduct more than ten thousand online experiments annually,” he writes, adding that even companies without tech roots (Nike, State Farm) run trials like this regularly. The tests might evaluate, say, the components of a website—style of font, color of background, shape of buttons, choice of words—and continuously adjust them based on user response.  . . .

As much as Mr. Thomke, a Harvard Business School professor, believes that “all businesses should be experimenters,” he wisely observes that “not all innovation decisions can be tested.” A/B testing may not be the best way to evaluate a completely new product or a radically different business model, he concedes, but the approach is the ideal driver of small changes. Though we celebrate disruption, Mr. Thomke urges companies to “tap into the power of high-velocity incrementalism,” explaining that “most progress is achieved by implementing hundreds or thousands of minor improvements.” He points to a study that attributes 77% of economic growth to improvements in existing products and notes that the structured system of incremental improvements that Lego implemented following its near-bankruptcy in 2004 drove 95% of annual sales and helped restore the company to profitability.

For the full review, see:

David A. Shaywitz. “Test, Test And Test Again.” The Wall Street Journal (Monday, March 16, 2020): A15.

(Note: ellipsis added.)

(Note: the online version of the review has the date March 15, 2020, and has the title “BOOKSHELF; ‘Experimentation Works’ and ‘The Power of Experiments’ Review: Test, Test and Test Again.”)

The book discussed in the passages quoted above, is:

Thomke, Stefan H. Experimentation Works: The Surprising Power of Business Experiments. Boston, MA: Harvard Business Press, 2020.

The “study” mentioned above that attributes 77% of economic growth to incremental innovation, is:

Garcia-Macia, Daniel, Chang-Tai Hsieh, and Peter J. Klenow. “How Destructive Is Innovation?” Econometrica 87, no. 5 (Sept. 2019): 1507-41.

Facebook’s Story, Based on Zuckerberg Interviews

(p. 15) In 2011, Levy, now the editor at large at Wired, wrote an extensive history of Google. To report the book, he secured liberal access to executives at Google and was allowed to soak up company culture by wandering around its corporate campus. He employed much the same strategy for “Facebook.” Zuckerberg granted Levy numerous interviews over a three-year period, and gave him “unprecedented access” to company executives.

The result is a work that recounts the company’s narrative mainly through the lens of its central figures.

. . .

Not for nothing is the book subtitled “The Inside Story.” Levy, who first met Zuckerberg in 2006, takes readers inside his college dorm suite; inside the late-night coding and cavorting at the company’s first home base in Palo Alto; inside meetings with the tech moguls who were the start-up’s first major investors; inside design choices that fueled the social network’s popularity; and inside Zuckerberg’s head.

For the full review, see:

Natasha Singer. “Power Trip.” The New York Times Book Review (Sunday, March 15, 2020): 15.

(Note: ellipsis added.)

(Note: the online version of the review has the date Feb. 25 [sic], 2020, and has the title “‘Facebook: The Inside Story’ Offers a Front-Row Seat on Voracious Ambition.”)

The book discussed in the passages quoted above, is:

Levy, Steven. Facebook: The Inside Story. New York: Blue Rider Press, 2020.

Meaning and Pride Come “From Being Part of a Shared Enterprise”

(p. 6) . . . over the past three decades, deaths of despair among whites without a college degree–especially those under age 50–have soared.

. . .

Case and Deaton — a married couple who are both economists at Princeton — try to explain the causes in a new book, “Deaths of Despair and the Future of Capitalism.” Their basic answer is that working-class life in the United States is more difficult than it is in any other high-income country.

. . .

Many of the problems afflicting the working class span racial groups, and Case and Deaton emphasize that these problems aren’t merely financial. Life for many middle- and low-income Americans can lack structure, status and meaning. People don’t always know what days or hours they will be working the following week. They often don’t officially work for the company where they spend their days, which robs them of the pride that comes from being part of a shared enterprise.

“Many people used to associate the meaning of their life with what their corporation or institution was doing,” says Deaton, a Nobel laureate in economics. Miners and factory workers identified themselves as such. Warehouse workers, especially those whose paycheck is signed by a staffing company, rarely feel the same connection.

The result of these trends has been a “coming apart,” as Case and Deaton put it, of day-to-day life for whites without a college degree versus those with a college degree.

For the full commentary, see:

David Leonhardt and Stuart A. Thompson. “Dying of ‘Despair’ in America.” The New York Times, SundayReview Section (Sunday, MARCH 8, 2020): 6.

(Note: ellipses added.)

(Note: the online version of the commentary has the date MARCH 6, 2020, and has the title “How Working-Class Life Is Killing Americans, in Charts.”)

The book by Case and Deaton, discussed in the passages quoted above, is:

Case, Anne, and Angus Deaton. Deaths of Despair and the Future of Capitalism. Princeton, N.J.: Princeton University Press, 2020.

“Dr. Dyson’s Mind Burned Until the End”

(p. B12) Freeman J. Dyson, a mathematical prodigy who left his mark on subatomic physics before turning to messier subjects like Earth’s environmental future and the morality of war, died on Friday [February 28, 2020] at a hospital near Princeton, N.J. He was 96.

. . .

As a young graduate student at Cornell University in 1949, Dr. Dyson wrote a landmark paper — worthy, some colleagues thought, of a Nobel Prize — that deepened the understanding of how light interacts with matter to produce the palpable world. The theory the paper advanced, called quantum electrodynamics, or QED, ranks among the great achievements of modern science.

. . .

Dr. Dyson called himself a scientific heretic and warned against the temptation of confusing mathematical abstractions with ultimate truth.

. . .

Relishing the role of iconoclast, he confounded the scientific establishment by dismissing the consensus about the perils of man-made climate change as “tribal group-thinking.” He doubted the veracity of the climate models, and he exasperated experts with sanguine predictions they found rooted less in science than in wishfulness: Excess carbon in the air is good for plants, and global warming might forestall another ice age.

In a profile of Dr. Dyson in 2009 in The New York Times Magazine, his colleague Steven Weinberg, a Nobel laureate, observed, “I have the sense that when consensus is forming like ice hardening on a lake, Dyson will do his best to chip at the ice.”

Dr. Dyson’s distrust of mathematical models had earlier led him to challenge predictions that the debris from atomic warfare could blot out the sun and bring on a devastating nuclear winter. He said he wished that were true — because it would add to the psychological deterrents to nuclear war — but found the theory wanting.

For all his doubts about the ability of mortals to calculate anything so complex as the effects of climate change, he was confident enough in our toolmaking to propose a technological fix: If carbon dioxide levels became too high, forests of genetically altered trees could be planted to strip the excess molecules from the air. That would free scientists to confront problems he found more immediate, like the alleviation of poverty and the avoidance of war.

He considered himself an environmentalist. “I am a tree-hugger, in love with frogs and forests,” he wrote in 2015 in The Boston Globe. “More urgent and more real problems, such as the overfishing of the oceans and the destruction of wildlife habitat on land, are neglected, while the environmental activists waste their time and energy ranting about climate change.” That was, to say the least, a minority position.

. . .

Richard Feynman, a young professor at Cornell, had invented a novel method to describe the behavior of electrons and photons (and their antimatter equivalent, positrons). But two other physicists, Julian Schwinger and Sin-Itiro Tomonaga, had each independently devised a very different way. Each of these seemed to satisfy the requirements of both quantum mechanics and special relativity — two of nature’s acid tests. But which one was correct?

While crossing Nebraska on a Greyhound bus, Dr. Dyson was struck by an epiphany: The theories were mathematically equivalent — different ways of saying the same thing. The result was QED. Feynman called it “the jewel of physics — our proudest possession.”

. . .

Dr. Dyson’s mind burned until the end. In 2012, when he was 88, he collaborated with William H. Press on a paper about the prisoner’s dilemma, a mathematical concept important to understanding human behavior and the nature of evolution.

In his 90s, Dr. Dyson was still consulting for the government — on nuclear reactor design and the new gene-editing technology called CRISPR. In 2018, the year he turned 95, his book “Maker of Patterns: An Autobiography Through Letters” was published.

For the full obituary, see:

George Johnson. “Freeman Dyson, 96, Math Genius, Tech Visionary and Writer, Is Dead.” The New York Times (Saturday, February 29, 2020): B12.

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

(Note: the online version of the obituary has the date Feb. 28, 2020, and has the title “Freeman Dyson, Math Genius Turned Visionary Technologist, Dies at 96.”)

“Never Say Die”

In my Openness to Creative Destruction book, I discuss the fulfillment and sense of adventure from pursuing a big, intense project. In the op-ed linked-to below, I praise the big, intense project of extending human lifespans.


My book, mentioned above, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Is Jeff Bezos Still a “Project Entrepreneur”?

In my Openness to Creative Destruction: Sustaining Innovative Dynamism, I suggest that different innovative entrepreneurs have different motives. Some mainly want money for its own sake, some mainly want fame, some mainly want to win the competition. Then there are those who mainly want to bring their project into the world. These are the project entrepreneurs, who often sacrifice for their project, forgoing conspicuous consumption in order to “make a ding in the universe.” (The phrase is due to Steve Jobs.) In my book I give Walt Disney as one example, and Jeff Bezos as another. Was I wrong? Or has Bezos changed? Or is there some other way to account for what looks like Bezos’s conspicuous consumption, as described below?

(p. B4) The national housing market has cooled, but in Los Angeles the ultrarich are still shattering price records. An heiress to the Formula One racing empire sold her home for $119.75 million last July. In December, Lachlan Murdoch paid $150 million for a home in Bel Air.

The latest buyer at the top: Jeff Bezos, the Amazon chief and world’s richest person.

Setting a new high for a home sold in California, Mr. Bezos is paying $165 million for a Beverly Hills estate owned by David Geffen, the media mogul and co-founder of DreamWorks, according to two people familiar with the purchase.

That wasn’t all. In a separate transaction, Bezos Expeditions, which oversees The Washington Post and Mr. Bezos’ charitable foundation, is buying 120 undeveloped acres in Beverly Hills for $90 million, the two people said.

For the full story, see:

Candace Jackson. “Bezos Is Setting Record By Paying $165 Million To Buy Geffen’s Estate.” The New York Times (Saturday, February 15, 2020): B4.

(Note: the online version of the story has the date Feb. 14, 2020, and has the title “Jeff Bezos Buying $165 Million Estate, a California Record.”)

My book is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

In Last Decade, Extreme Poverty in World Fell from 18.2% to 8.6%

(p. A15) The 2010s have been the best decade ever. The evidence is overwhelming. Start with the United Nations Development Report. Framed as a warning about inequality, it plays down the good news: “The gap in basic living standards is narrowing, with an unprecedented number of people in the world escaping poverty, hunger and disease.”

The World Bank reports that the world-wide rate of extreme poverty fell more than half, from 18.2% to 8.6%, between 2008 and 2018. Last year the World Data Lab calculated that for the first time, more than half the world’s population can be considered “middle class.”

. . .

Rich countries use less aluminum, nickel, copper, steel, stone, cement, sand, wood, paper, fertilizer, water, crop acreage and fossil fuel every year, as Andrew McAfee documents in “More From Less.” Consumption of 66 out of 72 resources tracked by the U.S. Geological Survey is now declining.

For the full commentary, see:

Johan Norberg. “The 2010s Have Been Amazing.” The Wall Street Journal (Tuesday, December 17, 2019): A15.

(Note: ellipsis added.)

(Note: the online version of the story has the date Dec. 16, 2019, and has the same title as the print version.)

The commentary is related to the author’s book:

Norberg, Johan. Progress: Ten Reasons to Look Forward to the Future. London, UK: Oneworld Publications, 2016.

The book by McAfee, mentioned in the commentary, is:

McAfee, Andrew. More from Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources―and What Happens Next. New York: Scribner, 2019.

OUP Offers Free Download of Chap. 9: “Innovation Bound or Unbound by Culture and Institutions”

Oxford University Press (OUP) has created a list of 6 books they recommend on business innovation. If you follow the link below, you can download a free PDF of Chapter 9 (“Innovation Bound or Unbound by Culture and Institutions”) of my Openness to Creative Destruction: Sustaining Innovative Dynamism. Alas, I think the free download is only available through February 29, 2020. (Chapter 9 is not my favorite chapter, but free is free;)

My book is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

American Food Aid May Have Prevented “the Collapse of the Soviet State”

(p. A15) Between 1921 and 1923, the United States, acting through Herbert Hoover’s American Relief Administration, supplied food and other aid to more than 10 million people caught up in the famine—created by war, revolution and the Bolshevik assault on the peasantry—then raging in the former Russian empire. The ARA operated, Mr. Smith tells us, “across a million square miles of territory in what was the largest humanitarian operation in history.”

Suspicious of, and embarrassed by, assistance from such a politically inconvenient source, the Kremlin accepted the ARA’s help only grudgingly and, once the crisis was over, “began to erase the memory of American charity,” Mr. Smith writes.

. . .

Mr. Smith argues that the ARA may “quite possibly” have prevented “the collapse of the Soviet state.” Did the decades of communist atrocity that followed cast a shadow over what was a very grand American gesture?

. . .

The ARA departed after the worst was past, but famine returned to the U.S.S.R. less than a decade later, a consequence of collectivization transformed, in Ukraine, to genocide. Millions died, but there were no calls for assistance from the Kremlin—only denials.

For the full story, see:

Andrew Stuttaford. “Feeding The Enemy.” The Wall Street Journal (Tuesday, December 17, 2019): A15.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 16, 2019, and has the title “BOOKSHELF; ‘The Russian Job’ Review: Feeding the Enemy.”)

The book under review, is:

Smith, Douglas. The Russian Job: The Forgotten Story of How America Saved the Soviet Union from Ruin. New York: Farrar, Straus and Giroux, 2019.