Entrepreneurs Re-Purpose Old High-Ceiling Mills as Well-Ventilated Restaurants That Reduce Virus Spread

(p. B7) On a typical evening at the Wool Factory, a renovated textile mill in Charlottesville, Va., guests savor local wine and hors d’oeuvres in a spacious courtyard decorated with festive string lights. Between bites and sips, their eyes might gaze at the factory, a 100-year-old red brick building where as many as 200 workers once made military uniforms, but which now houses a fine-dining restaurant, a brewery and an event space.

. . .

The Wool Factory is part of a larger effort by developers to convert grain, textile and water mills that came of age during the Industrial Revolution.

. . .

“They’re incredible spaces to be in, with 15-foot-high ceilings and huge windows with great views, which makes them a desirable place to develop,” Catherine De Almeida, an assistant professor in the College of Built Environments at the University of Washington in Seattle.

. . . the ample open space makes them easy to configure and attract guests who want to socially distance during the pandemic.

. . .

Terra Nova recently transformed a 19th-century flour and cotton mill into the $25 million Whitehall Mill, which attracts diners to its 190-seat oyster farm and seafood restaurant, True Chesapeake Oyster Company. Its 200-seat food emporium, Whitehall Market, features eight tenants, including a cheese seller, Firefly Farms Market and a nationally renowned pastry vendor, Crust by Mack.

When Whitehall Mill’s events venue couldn’t open last year because of the pandemic, the developer could use that space to allocate an additional 75 seats for the restaurants, bringing in more business at a time when they were forced to operate in a limited capacity, Mr. Tufaro said. Guests cautious about indoor dining can sit in the mill’s substantial outdoor space, with 125 patio seats between the restaurant and market.

“I think it’s partly the attraction for the old that inspires people,” Mr. Tufaro said. “The other is, it turns out, they’re very adaptable to new uses.”

For the full story, see:

Julekha Dash. “Turning Old Mills Into Vibrant Destinations.” The New York Times (Wednesday, December 22, 2021): B7.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 21, 2021, and has the title “Renovated Mills Offer a Perk in the Age of Social Distancing: Space.”)

Business Formations During Pandemic Are “Off the Charts”

Source: Haltiwanger as reprinted in WSJ article cited below.
Source: Haltiwanger as reprinted in WSJ article cited below.

(p. A4) “Sixty or more years ago, most of us, including me, were altogether too willing to treat the economy as close to fully competitive. I now think that was a mistake,” Nobel Prize-winning economist Robert Solow said in a recent interview. “The economy has grown less competitive and the elements of monopoly power are probably very important for the distribution of income between work and wealth and ultimately across individuals.”

Douglas Holtz-Eakin, president of the American Action Forum, a conservative research group, said he is skeptical of the notion that corporate power has hurt consumers. He and other Republicans say the rise of big companies such as Walmart, Home Depot and Amazon has benefited U.S. consumers by helping to push down prices.

“I take all of this talk with a healthy dose of show me,” Mr. Holtz-Eakin said. While Republicans could likely get behind some of Mr. Biden’s proposals—such as pushing back against firms forcing workers to sign noncompete clauses or states imposing what some workers say are unnecessary licensing requirements on workers—other ideas may go too far.

Some research has found less cause for concern around business consolidation. “There are reasons to be cautious about concluding that market concentration has risen or is a meaningful problem for market competition and consumer welfare,” Nancy Rose, a professor in the economics department of the Massachusetts Institute of Technology, concluded in a 2019 examination of research on the issue, citing measurement challenges among reasons for skepticism.

. . .

With the rise of a few big companies, jobs also have become concentrated there. John Haltiwanger, a University of Maryland professor, finds that the share of U.S. jobs at young, small firms declined to 16% in 2018 from 26% in 1987. During the same period, the share of jobs in older, larger firms rose from 41% to more than half.

Mr. Haltiwanger’s research shows that the U.S. economy became less dynamic during this period, with fewer new jobs created by startup firms, less job-hopping by workers seeking out new opportunities and slower worker productivity growth.

. . .

Mr. Haltiwanger said the competition dynamics might now be changing due to the coronavirus pandemic. Tracking business identification data from the Internal Revenue Service, he spotted a surge in business formations in the second half of 2020, a trend that persisted into 2021.

“It is off the charts,” he said. “I think we discovered during the pandemic that our technological infrastructure is just phenomenal. We can do almost anything we want from anywhere. That leads to lots of market opportunities. I think there is going to be a surge of dynamism. The question is will it be transitory, or true innovation?”

For the full story, see:

Jon Hilsenrath. “Economic Competition Scrutinized.” The Wall Street Journal (Monday, July 12, 2021): A4.

(Note: ellipses added.)

(Note: the online version of the story has the date July 11, 2021, and has the title “Biden Stakes Out Position in Debate Over Power of Big Companies.”)

“Creatively Destructive Innovation” Is Continuous in Book Publishing Industry

(p. A13) In 2000 the RAND Corporation invited a group of historians—including me—to address a newly pressing question: Would digital media revolutionize society as profoundly as Gutenberg and movable type? Two decades later, John Thompson’s answer is yes, but not entirely as predicted. And our forecasts were often wrong because we overlooked key variables: We cannot understand the impact of technologies “without taking account of the complex social processes in which these technologies were embedded and of which they were part.”

Mr. Thompson provides that context in “Book Wars” (Polity, 511 pages, $35), an expert diagnosis of publishers and publishing, robustly illustrated with charts, graphs, tables, statistics and case studies.

. . .

My warning to the RAND corporation was to avoid succumbing to the “Two Big Bangs Theory”—the assumption that there were only two world-changing events in the history of print, in or around 1450 and 2000. With books, change is a constant. In the last two centuries the publishing trade has dealt with one creatively destructive innovation after another—mechanized printing and papermaking, railway bookstalls and distribution networks, linotype and offset printing, photomechanical reproduction, paperbacking and books-of-the-month. The movies opened up vast new possibilities (and revenues) for novelists, who increasingly wrote with the screen in mind, as Ernest Hemingway did when he insisted on casting Gary Cooper in “For Whom the Bell Tolls.” And television supercharged book publicity, climaxing (so far) with Oprah. While Mr. Thompson is entirely right to conclude that the transformation of publishing in the past 20 years has been bewildering, that’s nothing new. In a dynamic capitalist economy, the dust never settles.

For the full review, see:

Jonathan Rose. “BOOKSHELF; Publishing In a Protean Age.” The Wall Street Journal (Monday, August 9, 2021): A13.

(Note: ellipsis added.)

(Note: the online version of the review has the date August 8, 2021, and has the title “BOOKSHELF; ‘Book Wars’ Review: Publishing in a Protean Age.”)

The book under review is:

Thompson, John B. Book Wars: The Digital Revolution in Publishing. Cambridge, UK: Polity Press, 2021.

Anderson Led NCR to Disrupt Its Own Cash Register Technology

I believe that Clayton Christensen (with Raynor) in The Innovator’s Solution, used the NCR transition from mechanical cash registers to electronic cash registers as an example of creative destruction that was NOT an example of his disruptive innovation. Alternatively, should this be considered a rare case where a firm succeeds in disrupting itself, especially rare because it was not implemented by the firm founders? (The usual case of rare self-disruption is HP disrupting its laser printer by developing the ink jet printer.)

(p. A9) The same self-belief that kept Mr. Anderson alive as a POW gave him confidence he could save NCR.

“The most important message I try to get across to our managers all over the world is that we are in trouble but we will overcome it,” he told Business Week, which reported that he had the “stance and mien of a middleweight boxer.”

Founded in 1884, NCR was comfortably entrenched as a dominant supplier of mechanical cash registers and machines used in accounting and banking. It underestimated the speed at which microelectronics and computers would wipe out its legacy product line. By the early 1970s, NCR was losing sales to more nimble rivals.

A factory complex covering 55 acres in Dayton made hundreds of exceedingly complicated machines rapidly becoming obsolete. Mr. Anderson found that NCR was using about 130,000 different parts, including more than 9,000 types and sizes of screws. For 1972, his first year as president, NCR took a $70 million charge, largely to write down the value of parts and inventory and replace outdated production equipment.

Mr. Anderson slashed the payroll and invested in new products, including automated teller machines and computers. Profitability recovered, and NCR reported record revenue of $4.07 billion for 1984, the year he retired as chairman.

For the full obituary, see:

James R. Hagerty. “Former POW Revived National Cash Register.” The Wall Street Journal (Saturday, July 10, 20211): A9.

(Note: the online version of the obituary has the date July 6, 2021, and has the title “Former Prisoner of War Saved NCR From Obsolescence.”)

The Christensen co-authored book mentioned above is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Risk Averse Family Firms with Large Cash Reserves Can Last 1,000 Years

Is longevity for firms a noble goal? Or do humans usually flourish more in the churn of creative destruction?

(p. B1) KYOTO, Japan — Naomi Hasegawa’s family sells toasted mochi out of a small, cedar-timbered shop next to a rambling old shrine in Kyoto. The family started the business to provide refreshments to weary travelers coming from across Japan to pray for pandemic relief — in the year 1000.

Now, more than a millennium later, a new disease has devastated the economy in the ancient capital, as its once reliable stream of tourists has evaporated. But Ms. Hasegawa is not concerned about her enterprise’s finances.

Like many businesses in Japan, her family’s shop, Ichiwa, takes the long view — albeit longer than most. By putting tradition and stability over profit and growth, Ichiwa has weathered wars, plagues, natural disasters, and the rise and fall of empires. Through it all, its rice flour cakes have remained the same.

Such enterprises may be less dynamic than those in other countries. But their resilience offers lessons for businesses in places like the United States, where the coronavirus has forced tens of thousands into bankruptcy.

“If you look at the economics textbooks, enterprises are supposed to be maximizing profits, scaling up their size, market share and growth rate. But these companies’ operating principles are completely different,” said Kenji Matsuoka, a professor emeritus of business at Ryukoku University in Kyoto.

(p. B5) “Their No. 1 priority is carrying on,” he added. “Each generation is like a runner in a relay race. What’s important is passing the baton.”

Japan is an old-business superpower. The country is home to more than 33,000 with at least 100 years of history — over 40 percent of the world’s total, according to a study by the Tokyo-based Research Institute of Centennial Management. Over 3,100 have been running for at least two centuries. Around 140 have existed for more than 500 years. And at least 19 claim to have been continuously operating since the first millennium.

. . .

The businesses, known as “shinise,” are a source of both pride and fascination.

. . .

Most of these old businesses are, like Ichiwa, small, family-run enterprises that deal in traditional goods and services. But some are among Japan’s most famous companies, including Nintendo, which got its start making playing cards 131 years ago, and the soy sauce brand Kikkoman, which has been around since 1917.

. . .

The Japanese companies that have endured the longest have often been defined by an aversion to risk — shaped in part by past crises — and an accumulation of large cash reserves.

It is a common trait among Japanese enterprises and part of the reason that the country has so far avoided the high bankruptcy rates of the United States during the pandemic. Even when they “make some profits,” said Tomohiro Ota, an analyst at Goldman Sachs, “they do not increase their capital expenditure.”

Large enterprises in particular keep substantial reserves to ensure that they can continue issuing paychecks and meet their other financial obligations in the event of an economic downturn or a crisis. But even smaller businesses tend to have low debt levels and an average of one to two months of operating expenses on hand, Mr. Ota said.

For the full story, see:

Ben Dooley and Hisako Ueno. “A Family Business Got Its Start In a Pandemic (1,000 Years Ago).” The New York Times (Saturday, December 5, 2020): B1 & B5.

(Note: ellipses added.)

(Note: the online version of the story was updated Jan. 7, 2021, and has the title “This Japanese Shop Is 1,020 Years Old. It Knows a Bit About Surviving Crises.”)

Illuminators Were in MORE Demand AFTER the Arrival of the Printing Press

(p. C9) In “The Bookseller of Florence,” Ross King relates the fascinating story of a bookstore run by Vespasiano da Bisticci, a Florentine born in 1422, whose shop on the Via dei Librai, or Street of Booksellers, sat at the center of Florence’s golden age and its valiant recovery of ancient knowledge.

. . .

Before long, Vespasiano established a bookshop selling beautifully made manuscripts of newly fashionable Roman classics for prosperous clients. He was well placed: Florence, “the new Athens on the Arno,” was a city where an astounding seven of 10 citizens could read.

. . .

Vespasiano’s life straddled two eras. Before the dawn of movable type in Europe, readers relied on manuscripts, painstakingly copied by hand with goosequills on parchment made from animal skins. After, they flocked to buy cheaper books printed on presses. Meanwhile, scribes either became early adopters—trading their inkpots for composing sticks—or found themselves surprisingly busy rubricating and illuminating innumerable books rolling off the new presses. By the time the presses made their way south of the Alps, Vespasiano was in his early 30s and, for whatever reason, chose not to embrace the new technology.

Printing came to Florence later than elsewhere, possibly due in part to Vespasiano, who continued to sell only books copied out on parchment. Still, competition from printed books began to tell on his sales. Then, just when it seemed he might be edged out of the market, there arrived a redeeming commission by the count of Urbino, Federico da Montefeltro, for “the finest library since antiquity,” one that would keep Vespasiano’s team of dozens of scribes and illuminators busy for nearly a decade, well into the era of the printing press. Montefeltro, a wealthy mercenary—who at the age of 15 had seized a fortress long believed impregnable—was also a bookish man, like many in the Renaissance. He retained five men to read to him as he ate, and even a poet to sing his praises. Among the many books created for his library was Vespasiano’s masterpiece, the Urbino Bible, one of the most lavish illustrated books of all time.

For the full review, see:

Ernest Hilbert. “Wise Men Fished There.” The Wall Street Journal (Saturday, April 24, 2021): C9.

(Note: ellipses added.)

(Note: the online version of the review has the date April 15, 2021, and has the title “‘The Bookseller of Florence’ Review: Manuscripts and Medicis.”)

The book under review is:

King, Ross. The Bookseller of Florence: The Story of the Manuscripts That Illuminated the Renaissance. New York: Atlantic Monthly Press, 2021.

Inventor of the Cassette Tape Liked CDs Better

(p. A9) Lou Ottens was thinking about convenience and portability when he told his product development team at Philips to come up with something better than reel-to-reel tapes.

He and his colleagues produced the cassette tape, . . .

. . .

“We expected it would be a success but not a revolution,” Mr. Ottens said in the 2016 documentary “Cassette: A Documentary Mixtape.”

. . .

Mr. Ottens later was involved in development of the compact disc, introduced in the early 1980s. He was puzzled by the revival of demand for cassette tapes among young people in recent years. “People prefer a worse quality of sound, out of nostalgia,” he said. As for himself, he told Time magazine in 2013, “I like when something new comes.”

. . .

The idea came to him, he said, one night after he struggled to thread tape through a bulky reel-to-reel player. A colleague quipped that the cassette was inspired by “the clumsiness of a very clever man.”

. . .

In the documentary, Mr. Ottens insisted that he was untroubled by the demise of technology he helped create. “I don’t believe in eternity,” he said.

For the full obituary, see:

James R. Hagerty. “Dutchman Launched Cassette ‘Revolution’.” The Wall Street Journal (Saturday, March 18, 2021): A9.

(Note: ellipses added.)

(Note: the online version of the obituary has the date March 12, 2021, and has the title “Lou Ottens Led Team That Invented the Cassette Tape.”)

Sometimes Progress Requires “Tearing Things Down and Rebuilding From Scratch”

(p. B6) In 1931, glass bottles of sparkling soda began rolling off the assembly line at the Coca-Cola bottling plant in downtown Indianapolis. It’s unlikely that the factory’s architect gave much thought to the possibility that shifting consumer habits would make the glass bottle a relic within a couple of generations.

Instead of slipping into obsolescence, the factory went on to have multiple lives. After the Coke factory closed in 1971, the building was briefly used to house Indy 500 racecars, then spent decades as a school bus garage before becoming a 139-room boutique hotel anchoring a new entertainment district last year.

A century ago, developers didn’t give the future much thought, but today, they don’t have the same luxury. A combination of pandemic disruptions and constantly changing technology has brought the hazy, distant horizon much closer.

As a result, a growing number of projects are racing against the clock as profitability and utility are squeezed into the ever-shortening life of a commercial building. Statistics illustrating the acceleration of building life cycles are scarce, but experts in the industry are starting to take heed.

“The cycle of changing is becoming shorter,” said Jefferson Duarte, associate professor of real estate finance at Rice University. Projects that developers once could have collected rents on for half a century or more don’t allow that anymore.

. . .

Consumer and worker needs are changing more quickly than they used to, driven by technology, shifting supply chains and expectations of greater amenities.

. . .

The core problem is that commercial construction is an industry producing highly durable goods in a world that is asking for greater flexibility with changing tastes and economic conditions, Professor Duranton said.

. . .

“Sometimes the right thing will involve tearing things down and rebuilding from scratch,” Professor Duranton said.

For the full story, see:

Kevin Williams. “The Ever-Shrinking Shelf Life of Buildings.” The New York Times (Weds., February 24, 2021): B6.

(Note: ellipses added.)

(Note: the online version of the story has the date Feb. 23, 2021, and has the title “As Buildings’ Life Spans Shrink, Developers Try to Adjust.”)

Evolution of 5G Will Likely Not Favor China

In the passage of the commentary quoted below “RAN equipment” stands for “radio access network equipment” which is key hardware in the latest 5G broadband technology.

(p. C3) Huawei’s first generation of 5G RAN base stations is a modified version of the older 4G infrastructure that yields faster speeds. The ultimate promise of 5G is an ubiquitous network customized to user needs. Trillions of devices and applications—known as the Internet of Things—using 5G technology will offer new solutions for everything from autonomous vehicles to industrial production management to remote surgery. But the drivers of 5G’s evolution will be semiconductors, software systems and cloud computing—areas in which the U.S., not Huawei or any other Chinese company, is the world leader.

Instead of being intimidated by Huawei, U.S. foreign policy makers should recognize the Chinese company’s situation, which is akin to the dominance that IBM enjoyed during the age of mainframe computing. IBM’s massive scale and proprietary standards and software made it hard for competitors to match its offerings. Only in the 1970s and ’80s, when Japan massively subsidized new competitors like NEC, did IBM falter. But the true decline of IBM and its Japanese competitors came with the rise of the internet. The web’s transparent standards enabled many new firms to “plug and play.” Semiconductors, software and desktop computing eventually led to the apps on your smartphone at a fraction of the cost of such functions 30 years ago.

Today, 5G is at a similar moment. A new generation of technological standards for 5G would allow specialist suppliers—like the Microsofts and Intels of the internet era—to compete against Huawei, Ericsson, Nokia and Samsung. Control via the old RAN infrastructure will be diminished by control via cloud computing and software, which plays to a key U.S. strength. Introducing these standards will take concerted action from U.S. firms, along with targeted U.S. government support, such as the adoption of procurement requirements to embody these new rules.

For the full commentary, see:

Peter Cowhey and Susan Shirk. “The Danger of Exaggerating China’s Technological Prowess.” The Wall Street Journal (Saturday, Jan 9, 2021): C3.

(Note: the first ellipsis is added; the second and third are in the original.)

(Note: the online version of the commentary has the date January 8, 2021, and has the same title as the print version.)

The commentary quoted above is related to the report:

Cowhey, Peter, Chair. “Meeting the China Challenge: A New American Strategy for Technology Competition.” San Diego, CA: UC San Diego School of Global Policy and Strategy, Nov. 16, 2020.

The Duopoly of Intel and AMD Vigorously Compete

(p. B4) While Intel has struggled to move into mass production of its most advanced chips, rival chip maker Advanced Micro Devices Inc. has been challenging the company’s dominance. AMD’s market share in personal computer CPUs climbed above 17% in the first quarter, more than doubling from five years ago, according to Mercury Research. Intel holds almost all of the remaining market share.

. . .

Intel’s struggles with seven-nanometer chips mirror delays in designing and producing its earlier generation of chips based on a 10-nanometer process, an industry term tied loosely to the size of transistors that chips use to make calculations. Intel executives have told investors in the past that once the company conquered its challenges in 10-nanometer technology, sizing down to seven nanometers and beyond could happen more quickly.

. . .

There aren’t any “fundamental roadblocks” with the design of seven-nanometer chips, Chief Executive Bob Swan told analysts on a conference call, adding that Intel had found the root cause of the issue and was taking steps to avert further delays. He said Intel could turn more to external manufacturers, perhaps in combination with its own factories, to meet customers’ needs—a significant shift for a company that has mostly relied on its own manufacturing muscle.

The seven-nanometer delay could harm Intel’s competitive position because Taiwan Semiconductor Manufacturing Co., the largest contract manufacturer of chips in the world, is expected to be making processors with even smaller, more efficient transistors by the time Intel comes out with its chips.

For the full story, see:

Asa Fitch. “Intel Gets Lift From Work at Home.” The Wall Street Journal (Friday, July 24, 2020): B4.

(Note: ellipses added.)

(Note: the online version of the story was updated July 23, 2020, and has the title “Intel Reports Profit Surge but Warns of Further Delays on Advanced Chips.”)

Jim Pethokoukis Asks Art Diamond How to Increase Innovative Dynamism

Jim Pethokoukis recently posted an abbreviated transcript of our conversation on his Political Economy podcast about my Openness to Creative Destruction: Sustaining Innovative Dynamism book.

Posted by Arthur Diamond on Thursday, August 6, 2020