Creative Destruction – Page 15

Entrepreneur Gutenberg’s Press Creatively Destroyed the Jobs of Scribes

(p. 32) Poggio possessed . . . [a] gift that set him apart from virtually all the other book-hunting humanists. He was a superbly well-trained scribe, with exceptionally fine handwriting, great powers of concentration, and a high degree of accuracy. It is difficult for us, at this distance, to take in the significance of such qualities: our technologies for producing transcriptions, facsimiles, and copies have almost entirely erased what was once an important personal achievement. That importance began to decline, though not at all precipitously, even in Poggio’s own lifetime, for by the 1430s a German entrepreneur, Johann Gutenberg, began experimenting with a new invention, movable type, which would revolutionize the reproduction and transmission of texts. By the century’s end printers, especially the great Aldus in Venice, would print Latin texts in a typeface whose clarity and elegance remain unrivalled after five centuries. That typeface was based on the beautiful handwriting of Poggio and his humanist friends. What Poggio did by hand to produce a single copy would soon be done mechanically to produce hundreds.

Source:
Greenblatt, Stephen. The Swerve: How the World Became Modern. New York: W. W. Norton & Company, 2011.
(Note: ellipsis, and bracketed word, added.)

How Sega Came Out of Nowhere to Leapfrog Near-Monopolist Nintendo

Source of book image: http://images.eurogamer.net/2014/usgamer/original.jpg/EG11/resize/958x-1/format/jpg

(p. C10) “Console Wars” tells how Sega, an unremarkable Japanese manufacturer of games played in arcades, came out of nowhere to challenge Nintendo for dominance of the videogame world in the first half of the 1990s. Nintendo, which had revived the stagnant home videogame category a few years earlier, had something close to a monopoly in 1990 and behaved accordingly, dictating terms to game developers and treating retailers as peons. Sega, in Mr. Harris’s telling, was a disruptive force in a highly concentrated market, introducing more advanced gaming technology, toppling Nintendo from its perch and becoming the largest seller of home videogame hardware in the U.S. by late 1993.

Mr. Harris’s hero is a former Mattel executive named Tom Kalinske, who became president of Sega of America, then a small subsidiary, in 1990. Mr. Kalinske assembled a team of crack marketers who would not have gone near Sega but for his reputation and persuasiveness. Within a year and a half, according to Mr. Harris, Mr. Kalinske’s leadership, along with a new gaming system called Genesis and a marketing assist from a mascot named Sonic the Hedgehog, made Sega the U.S. market leader in videogames.
And then, after only three years at the top, Sega fell from its pedestal. Sega’s management in Japan, suffering mightily from not-invented-here syndrome, rejected Mr. Kalinske’s proposals to collaborate with Sony and Silicon Graphics on new gaming systems. Instead, over his objections, Sega pushed out its ill-conceived Saturn game console in 1995. While Saturn flopped, Sony struck gold with its PlayStation; Silicon Graphics sold its chip with amazing graphics capabilities to Nintendo; and the game, so to speak, was over.
. . .
The author admits he has taken liberties: “I have re-created the scenes in this book using the information uncovered from my interviews, facts gathered from supporting documents, and my best judgment as to what version most closely fits the historical record,” he writes. The result is more a 558-page screenplay than a credible work of nonfiction.

For the full review, see:
MARC LEVINSON. “Sonic Boom; How a no-name company took on Nintendo, tied its fate to a hyperactive hedgehog, and–briefly–won.” The Wall Street Journal (Sat., May 24, 2014): C10.
(Note: ellipsis added.)
(Note: the online version of the review has the date May 23, 2014, an has the title “Book Review: ‘Console Wars’ by Blake J. Harris; How a no-name company took on Nintendo, tied its fate to a hyperactive hedgehog, and–briefly–won.”)

The book under review is:
J., Harris Blake. Console Wars: Sega, Nintendo, and the Battle That Defined a Generation. New York: HarperCollins Publishers, 2014.

Harvard Rejects Christensen’s Advice to Try Disruptive MOOCs

“Harvard Business School faced a choice between different models of online instruction. Prof. Michael Porter favored the development of online courses that would reflect the school’s existing strategy.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) Universities across the country are wrestling with the same question — call it the educator’s quandary — of whether to plunge into the rapidly growing realm of online teaching, at the risk of devaluing the on-campus education for which students pay tens of thousands of dollars, or to stand pat at the risk of being left behind.

At Harvard Business School, the pros and cons of the argument were personified by two of its most famous faculty members. For Michael Porter, widely considered the father of modern business strategy, the answer is yes — create online courses, but not in a way that undermines the school’s existing strategy. “A company must stay the course,” Professor Porter has written, “even in times of upheaval, while constantly improving and extending its distinctive positioning.”
For Clayton Christensen, whose 1997 book, “The Innovator’s Dilemma,” propelled him to academic stardom, the only way that market leaders like Harvard (p. 4) Business School survive “disruptive innovation” is by disrupting their existing businesses themselves. This is arguably what rival business schools like Stanford and the Wharton School have been doing by having professors stand in front of cameras and teach MOOCs, or massive open online courses, free of charge to anyone, anywhere in the world. For a modest investment by the school — about $20,000 to $30,000 a course — a professor can reach a million students, says Karl Ulrich, vice dean for innovation at Wharton, part of the University of Pennsylvania.
“Do it cheap and simple,” Professor Christensen says. “Get it out there.”
But Harvard Business School’s online education program is not cheap, simple, or open. It could be said that the school opted for the Porter theory.
. . .
“Harvard is going to make a lot of money,” Mr. Ulrich predicted. “They will sell a lot of seats at those courses. But those seats are very carefully designed to be off to the side. It’s designed to be not at all threatening to what they’re doing at the core of the business school.”
Exactly, warned Professor Christensen, who said he was not consulted about the project. “What they’re doing is, in my language, a sustaining innovation,” akin to Kodak introducing better film, circa 2005. “It’s not truly disruptive.”
. . .
One morning, [Harvard Business School Dean Nitin Nohria] sat down for one of his regular breakfasts with students. “Three of them had just been in Clay’s course,” which had included a case study on the future of Harvard Business School, Mr. Nohria said. “So I asked them, ‘What was the debate like, and how would you think about this?’ They, too, split very deeply.”
Some took Professor Christensen’s view that the school was a potential Blockbuster Video: a high-cost incumbent — students put the total cost of the two-year M.B.A. at around $100,0000 — that would be upended by cheaper technology if it didn’t act quickly to make its own model obsolete. At least one suggested putting the entire first-year curriculum online.
Others weren’t so sure. ” ‘This disruption is going to happen,’ ” is how Mr. Nohria described their thinking, ” ‘but it’s going to happen to a very different segment of business education, not to us.’ ” The power of Harvard’s brand, networking opportunities and classroom experience would protect it from the fate of second- and third-tier schools, a view that even Professor Christensen endorses — up to a point.
“We’re at the very high end of the market, and disruption always hits the high end last,” said Professor Christensen, who recently predicted that half of the United States’ universities could face bankruptcy within 15 years.

For the full story, see:
JERRY USEEM. “B-School, Disrupted.” The New York Times, SundayBusiness Section (Sun., June 1, 2014): 1 & 4.
(Note: ellipses, and bracketed name, added.)
(Note: the online version of the story has the date MAY 31, 2014, and has the title “Business School, Disrupted.”)

Some of Christensen’s thoughts on higher education can be found in:
Christensen, Clayton M., and Henry J. Eyring. The Innovative University: Changing the DNA of Higher Education from the inside Out. San Francisco, CA: Jossey-Bass, 2011.

“On the topic of online instruction, Prof. Clayton Christensen said: ‘Do it cheap and simple. Get it out there.”” Source of caption and photo: online version of the NYT article quoted and cited above.

Board Games Are Not Creatively Destroyed by Video Games

“Dan Shapiro playing Robot Turtles with his children. He designed the game to be a stealth lesson in basic computer programming.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) MERCER ISLAND, Wash. — Dan Shapiro sold a company to Google and worked at Microsoft. His name is on nearly a dozen technology-related patents.

But when it came time for his latest venture, Mr. Shapiro turned to technology to produce something decidedly low-tech: a board game for children.
Technology, by all rights, should have killed old-fashioned games, which can never equal the eye-popping graphics, visceral action and immense online communities of today’s video games. Yet the opposite has occurred. Largely because of new technologies, there has been a creative outpouring of games by independent designers like Mr. Shapiro.
“It has unlocked a whole generation of innovative gameplay experimentation that just wasn’t feasible before,” he said.
New tools now power the creation of tabletop games — many in the strategy or fantasy genres — from idea to delivery. Crowdfunding sites provide the seed money and offer an early gauge of demand. Machines like 3-D printers can rapidly create figurines, dice and other prototype game pieces. And Amazon, the online retail giant, can handle shipping and distribution, cutting out the need for middlemen.
Sales have followed. While the video game business long ago (p. B4) eclipsed its low-tech cousin, sales of tabletop games have continued to grow. Sales at hobby stores in the United States rose 15 to 20 percent in each of the last three years, according to ICv2, a trade publication that tracks the business. Amazon says board game sales increased by a double-digit percentage from 2012 to 2013.
On Kickstarter, the crowdfunding service, in which users can pledge money to finance projects, the amount raised last year for tabletop games exceeded the amount for video games, $52.1 million to $45.3 million.

For the full story, see:
NICK WINGFIELD. “High-Tech Push Has Board Games Rolling Again.” The New YorkTimes (Tues., MAY 6, 2014): A1 & B4 (sic).
(Note: the online version of the story has the date MAY 5, 2014.)

Phonograph Allowed Middle Class to Bring the Show to Their “Castle,” Like Kings Already Could

(p. 218) Once Edison’s marketers squarely addressed the urban middle class, they devised advertising that made prospective customers feel as entitled to enjoy the pleasures of recorded music as anyone. “When the (p. 219) King of England wants to see a show, they bring the show to the castle and he hears it alone in his private theater.” So said an advertisement in 1906 for the Edison phonograph. It continued: “If you are a king, why don’t you exercise your kingly privilege and have a show of your own in your own house.”

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

Edison Failed to Stop Film Projectors from Disrupting His Kinetoscope

Edison tried to kill film projection because he thought the whole country would only need 10 projectors, while they could sell a great many of the single-view kinetoscopes. But the wonderful twist to the story is that it DID NOT WORK because Edison could not stop the Lathams and others from coming forward and disrupting the kinetoscope.

(p. 205) The Lathams were not the only exhibitors frustrated with Edison’s kinetoscope, and the others urged Edison to introduce a projection machine. Edison was adamant: no. He reasoned that the peephole machines (p. 206) were selling well and at a good profit. The problem with projection was that it would work all too well–if he replaced the inefficient kinetoscope with projection systems that could serve up the show to everyone, “there will be a use for maybe about ten of them in the whole United States.” He concluded, “Let’s not kill the goose that lays the golden egg.”

At Edison’s lab in Orange, without his boss’s approval, W. K. L. Dickson carried out research on film projection on his own and shared his findings with a friend who was a keen listener: Otway Latham. And when Dickson accepted an invitation to try a projection experiment in a physics laboratory at Columbia, who should show up but Otway’s father, Professor Latham. The Lathams made an offer to Dickson–come join us and we’ll give you a quarter-share interest in the business–but Dickson was unwilling to make the leap. When Edison got word of his fraternizing with the Lathams, however, and failed to reassure Dickson that he believed Dickson’s dealings had been perfectly honorable, Dickson felt he had no choice but to resign. The exact chronology of what he did and what he knew at various points preceding his resignation would be the subject of much litigation that followed. But regardless of intellectual-property issues, Edison lost the one person on his staff who would have been most valuable to him in developing a projection system.
The Lathams and Dickson had discovered that sending a bright light through a moving strip of film did not project satisfactorily because any given image did not absorb enough light before it sped on. The Lathams came up with a partial solution, which was to make the film wider, providing more area for the light to catch as each image went by. The projected images were about the size of a window and good enough to unveil publicly. Professor Latham gave a demonstration of his newly christened Pantoptikon to reporters in April 1895.

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

In Bringing Us Electricity, Westinghouse Rejected the Precautionary Principle

(p. 180) The defensive position that Westinghouse found himself in is illustrated by the way he contradicted himself as he tried to defend overhead wires. The wires that were supposedly safe were also the same wires that he had to admit, yes, posed dangers, yes, but dangers of various kinds had to be accepted throughout the modern city. Westinghouse said, “If all things involving the use of power were to be prohibited because of the danger to life, then the cable cars, which have already killed and maimed a number of people, would have to be abolished.” Say good-bye to trains, too, he added, because of accidents at road crossings.

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

Entrepreneurial Consumer J.P. Morgan “Handled Setbacks with Equanimity”

Schumpeter wrote that the entrepreneur is the one who overcomes obstacles to get the job done (1950, p. 132). Obstacles come in many forms. One of them is consumer resistance to change. So one key contributor to the technological progress is the “entrepreneurial consumer” who is willing to invest in new, buggy, possibly dangerous technologies at an early stage. (Paul Nodskov, a student in my spring 2014 Economics of Technology seminar suggested using the phrase “entrepreneurial consumer.”)
Alexis de Tocqueville observed that in contrast to Europeans, Americans were “restless in the midst of their prosperity” (2000 [first published 1835], Ch. 13). Perhaps even that early, America had more entrepreneurial consumers?

(p. 131) Morgan prized being ahead of everyone else, and the next year was concerned that his plant was already less than state of the art, a suspicion that was confirmed when he persuaded Edison to send Edward Johnson to the house for an evaluation. Johnson was instructed to upgrade the equipment and also to devise a way to provide an electric light that would sit on Morgan’s desk in his library. At a time when the very concept of an electrical outlet and detachable electrical appliances had yet to appear, this posed a significant challenge. Johnson’s solution was to run wires beneath the floor to metal plates that were installed in different places beneath the rugs. One of the legs of the desk was equipped with sharp metal prongs, designed to make contact with one of the plates when moved about the room.

In conception, it was clever; in implementation, it fell short of ideal. On the first evening when the light was turned on, there was a flash, followed by a fire that quickly engulfed the desk and spread across the rug before being put out. When Johnson was summoned to the house the next morning, he was shown into the library, where charred debris was piled in a heap. He expected that when Morgan appeared, he would angrily announce that the services of Edison Electric were no longer needed.
(p. 132) “Well?” Morgan stood in the doorway, with Mrs. Morgan standing behind him, signaling Johnson with a finger across her lips not to launch into elaborate explanations. Johnson cast a doleful eye at the disaster in the room and remained silent.
“Well, what are you going to do about it?” Morgan asked. Johnson said the fault was his own and that he would personally reinstall everything, ensuring that it would be done properly.
“All right. See that you do.” Morgan turned and left. The eager purchaser of first-generation technology handled setbacks with equanimity. “I hope that the Edison Company appreciates the value of my house as an experimental station,” he would later say. A new installation with second-generation equipment worked well, and Morgan held a reception for four hundred guests to show off his electric lights. The event led some guests to place their own orders for similar installations. Morgan also donated entire systems to St. George’s Church and to a private school, dispatching Johnson to oversee the installation as a surprise to the headmistress. The family biographer compared Morgan’s gifts of electrical power plants to his sending friends baskets of choice fruit.

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

Schumpeter’s book is:
Schumpeter, Joseph A. Capitalism, Socialism and Democracy. 3rd ed. New York: Harper and Row, 1950.

The other book I mention, is:
de Tocqueville, Alexis. Democracy in America. Chicago: University of Chicago Press, 2000 [first published in two volumes in 1835 and 1840].

Russia and China Redistributed Wealth “to Disastrous Effect”

Shane Smith, entrepreneur behind VICE media company. Source of photo: online version of the NYT article quoted and cited below.

(p. 10) You believe that young people worldwide are disenfranchised. Do you think popular uprisings will fix things? No. I’m actually worried, because I believe that it’s going to get worse. Look, economic disparity is bad. But we’ve already tried having governments redistribute wealth. We tried it in Russia and China to disastrous effect.

News Corp. bought a 5 percent stake in Vice, and now James Murdoch is on the board. Why did you sell to them? I’ve said that I want to be the next MTV, the next CNN, the next ESPN. Cue everyone rolling their eyes. MTV went to Viacom, ESPN went to Disney and Hearst, CNN went to Time Warner. Why? Because to build a global media brand, it’s almost impossible to do it alone. James has been involved in one of the largest media companies in the world since he was in short pants.
Do you ever fear that Vice will become legacy media itself? It’s our time now. Then, I don’t know, it’ll be holograms next, and some kid will come up and eat our lunch.

For the full interview, see:
Staley, Willy, interviewer. ” ‘Have We Unleashed a Monster?’: The Vice C.E.O. Shane Smith on His New Kind of News.” The New York Times Magazine (Sun., MARCH 23, 2014): 12.
(Note: ellipsis added; bold in original.)
(Note: the online version of the interview has the date MARCH 21, 2014, and has the title “Vice’s Shane Smith: ‘Have We Unleashed a Monster?’.”)

“The Experts Keep Getting It Wrong and the Oddballs Keep Getting It Right”

“A worker at a hydraulic fracturing and extraction operation in western Colorado on March 29[, 2014].” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. C3) The experts keep getting it wrong. And the oddballs keep getting it right.

Over the past five years of business history, two events have shocked and transformed the nation. In 2007 and 2008, the housing market crumbled and the financial system collapsed, causing trillions of dollars of losses. Around the same time, a few little-known wildcatters began pumping meaningful amounts of oil and gas from U.S. shale formations. A country that once was running out of energy now is on track to become the world’s leading producer.
What’s most surprising about both events is how few experts saw them coming–and that a group of unlikely outsiders somehow did.
. . .
Less well known, but no less dramatic, is the story of America’s energy transformation, which took the industry’s giants almost completely by surprise. In the early 1990s, an ambitious Chevron executive named Ray Galvin started a group to drill compressed, challenging formations of shale in the U.S. His team was mocked and undermined by dubious colleagues. Eventually, Chevron pulled the plug on the effort and shifted its resources abroad.
Exxon Mobil also failed to focus on this rock–even though its corporate headquarters in Irving, Texas, were directly above a huge shale formation that eventually would flow with gas. Later, it would pay $31 billion to buy a smaller shale pioneer.
“I would be less than honest if I were to say to you [that] we saw it all coming, because we did not, quite frankly,” Rex Tillerson, Exxon Mobil’s chairman and CEO said last year in an interview at the Council on Foreign Relations.
. . .
The resurgence in U.S. energy came from a group of brash wildcatters who discovered techniques to hydraulically fracture–or frack–and horizontally drill shale and other rock. Many of these men operated on the fringes of the oil industry, some without college degrees or much background in drilling, geology or engineering.

For the full commentary, see:
GREGORY ZUCKERMAN. “ESSAY; The Little Guys Who Saw Our Economic Future; Corporate Caution and Complacency Come at a Cost.” The Wall Street Journal (Sat., Nov. 2, 2013): C3.
(Note: ellipsis, and bracketed year in caption, added.)
(Note: the online version of the commentary was updated Nov. 3, 2013, and has the title “ESSAY; The Outsiders Who Saw Our Economic Future; In both America’s energy transformation and the financial crisis, it took a group of amateurs to see what was coming.” )

Zuckerman’s commentary, quoted above, is partly based on his book:
Zuckerman, Gregory. The Frackers: The Outrageous inside Story of the New Billionaire Wildcatters. New York: Portfolio/Penguin, 2013.

Television Improved Test Scores

“Economist Matthew Gentzkow found media slant to be a function of audience preference.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A2) An economist known for pioneering work on slanted coverage in the news media won the John Bates Clark Medal, one of the profession’s most prestigious honors.

Matthew Gentzkow, a professor at the University of Chicago’s Booth School of Business, on Thursday was awarded the Clark medal by the American Economic Association, which every year honors the nation’s most promising economist under age 40.
. . .
A big theme in Mr. Gentzkow’s work is finding innovative ways to tackle questions that expand economists’ tool kits.
. . . , in 2008, he and Mr. Shapiro examined the fact that different parts of the U.S. got access to television at different times to gauge TV’s effects on high-school students in the 1960s.
The economists found that children who lived in cities that gave them more exposure to TV in early childhood performed better on tests than those with less exposure. The work also suggested TV helped American children in non-English-speaking households do better in school.

For the full story, see:
NEIL SHAH. “Economist Honored for Work on Media Slant.” The Wall Street Journal (Fri., April 18, 2014): 12.
(Note: ellipses added.)
(Note: the online version of the story has the date April 17, 2014.)

The Gentzkow and Shapiro paper on the effects of television, is:
Gentzkow, Matthew, and Jesse M. Shapiro. “Preschool Television Viewing and Adolescent Test Scores: Historical Evidence from the Coleman Study.” Quarterly Journal of Economics 123, no. 1 (Feb. 2008): 279-323.