Category: Creative Destruction

Venturesome Heroes Who Made the “Miracle” of Aviation Possible

(p. 14) Aviation has become just another boring part of modern infrastructure. Some people are afraid of it. Most people endure it. Few people bother to look out the window for a view of Earth that was unimaginable to most of our ancestors, or to reflect on the miracle of technology, engineering and organization that daily airline operations represent. Before the pandemic, roughly three million passengers took flights to or from U.S. airports each day, which averages out to more than one billion passenger journeys per year. (Traffic has nearly returned to that level.) Over the past 13 years, through more than 10 billion passenger journeys, a total of two people have died in U.S. airline accidents.

Among the many virtues of John Lancaster’s delightful “The Great Air Race” is how vividly it conveys the entirely different world of aviation at the dawn of the industry, a century ago. Many airplanes in those days were literal death traps. A biplane known as the DH-4, used as a bomber by Allied forces in World War I, had its gas tank immediately behind the pilot in the cockpit. As Lancaster explains, “Even in relatively low-speed crashes, the tank sometimes wrenched free of its wooden cage, crushing the pilot against the engine.” To get a DH-4 properly balanced for landing, a co-pilot or passenger might have to leap out of the open cockpit and climb back to hang onto the tail. And this was one of the era’s most popular and successful models.

Some planes had no gas gauge, so pilots would learn they had run out of fuel only when the engine stopped. Just a tiny portion of the country was covered by charts; pilots’ navigation tools were a magnetic compass and their own eyes. (Mapping was one of the industries that aviation’s growth fostered.)

. . .

For readers familiar with modern U.S. aerospace pre-eminence — Boeing, despite its problems; governmental and private space programs; military aviation and corporate jets — perhaps the most startling aspect of American aviation a century ago is how uncertain its future seemed.

. . .

I have read a lot about aviation and the aircraft industry over the years, but almost everything in this tale was new to me. You might take it on your next airline flight, pause to look out the window and spare a thought for those who helped make it all possible.

For the full review, see:

James Fallows. “The Wild Blue Yonder.” The New York Times Book Review (Sunday, December 4, 2022): 14.

(Note: ellipses added.)

(Note: the online version of the review has the date Nov. 15, 2022, and has the title “When Flying a Plane Was Thrilling — and Often Fatal.”)

The book under review is:

Lancaster, John. The Great Air Race: Glory, Tragedy, and the Dawn of American Aviation. New York: Liveright, 2022.

New Technology Creates More Jobs Than It Destroys

(p. 3) The pessimist’s basic mistake is to focus too much on what is lost to competition and technology, and too little on what is gained. Over the past 25 years, as McKinsey & Company, the consulting firm, has pointed out, about a third of the new jobs created in the United States were types that did not exist or barely existed 25 years ago.

. . .

In New York City the car replaced the horse carriage within the first 15 years of the 20th century, killing off the carriage trade and giving birth to the taxi trade — as well as to highly paid auto mechanics. Uber threatens the taxi trade, and the self-driving car threatens the Uber driver. But it has also brought multimillion-dollar signing bonuses for self-driving-car engineers and created new opportunities for mechanics. People tend to find a way to work with and profit from new technology.

. . .

In most cases, an industry without enough workers to meet customer demand would simply hire more, or at least raise wages to attract them.

Yet, according to the Bureau of Labor Statistics, neither of those things happened last year. The number of pharmacists employed in the United States dropped about 1 percent from 2020 to 2021. On balance, employers did not raise wages — in fact, median pay fell slightly, even without adjusting for inflation.

. . .

. . . there is no evidence so far to support forecasts of a nearly jobless future. If robots threatened human labor, human joblessness would be growing. But it’s not. In fact, since 2008, job growth has been strongest in countries like Germany and Japan, which deploy the most robots.

For the full commentary, see:

Ruchir Sharma. “No, That Robot Will Not Steal Your Job.” The New York Times, SundayReview Section (Sunday, October 8, 2017): 3.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Oct. 7, 2017, and has the same title as the print version.)

During December 2022, Kindle Version of McCloskey’s Bourgeois Equality Is Only $2.99

The long, but wonderful, third volume of Deirdre’ McClokey’s Bourgeois trilogy, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, is on offer from Amazon during the month of December 2022 in eText Kindle version for only $2.99.

Current Labor Market Seems Robustly Redundant

In Openness to Creative Destruction, I argue for the possibility and desirability of a “robustly redundant labor market” in which workers can usually quickly find an equally good or better job when they lose their current job.

(p. A6) . . . one characteristic of today’s economy is that job cuts at small startups and large companies have yet to dent the overall labor market. Labor demand is still historically strong, offering only faint signs of cooling. There are nearly two job openings for every unemployed person seeking work. That means many workers who are losing their jobs are quickly landing jobs. Some are even weighing multiple offers and accepting positions that pay more and better align with their skills.

. . .

Employers had 10.7 million unfilled jobs in June [2022], down from a record of 11.9 million in March, but still well above the 7 million job openings in February 2020 ahead of the pandemic, when the labor market was also booming.

Job-openings rates across industries are much higher than before the pandemic hit, suggesting companies still need workers even in sectors where company layoffs have been pronounced, such as technology, real estate, finance and insurance.

Longer periods of unemployment can allow job seekers more time to search for roles that match their skill sets, some economists say. But with job opportunities so abundant, many unemployed workers are finding jobs that suit them within a matter of weeks or even days.

For the full story see:

Sarah Chaney Cambon. “Laid-Off Employees Quickly Find New Jobs.” The Wall Street Journal (Thursday, Aug. 25, 2022): A1 & A6.

(Note: ellipses and bracketed year added.)

(Note: the online version of the story has the date August 24, 2022, and has the title “The Surprise in a Faltering Economy: Laid-Off Workers Are Quickly Finding Jobs.”)

My book mentioned above is:

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

Amazon Warehouse Jobs Give “Economic Boost” to English Town

(p. B4) DARLINGTON, England—Many retailers in this old market town have long held Amazon.com Inc. partially to blame for the closures of a raft of local shops in recent years.

Then, Amazon opened a warehouse here.

The facility, which opened in early 2020, employs 1,300 full-time staff, making it one of the town’s biggest employers. It hired 500 additional seasonal workers during the end-of-year holidays. Wages start at £10 (equivalent to $13.25) an hour, above the legal minimum, and benefits include private healthcare and an £8,000 education allowance available in installments over four years.

The new jobs have all delivered an economic boost for the Northern England town of 100,000, while sparking a reassessment of the U.S. e-commerce giant. Nicola Reading, a gift-shop owner, still blames Amazon for the demise of the local retail scene but now sees an upside, too.

“It feels like Amazon employs half the population of Darlington now,” she said.

Already America’s second-biggest employer, after Walmart Inc., Amazon has been advancing in Europe and the U.K., investing €78 billion ($89 billion) since 2010 in a continentwide expansion that has significantly accelerated over the past few years. Amazon employs over 55,000 full-time U.K. staff.

. . .

Local officials in Darlington have applauded Amazon’s arrival, which they say has benefited the town, chiefly by creating jobs. Amazon’s presence is also encouraging young university graduates to stay in the town and attracting other companies, said Mark Ladyman, the Darlington Borough Council’s assistant director for economic growth.

For the full story, see:

Trefor Moss. “The Small Town That Amazon Upended, Then Saved.” The Wall Street Journal (Saturday, January 22, 2022): B4.

(Note: ellipsis added.)

(Note: the online version of the story was updated Jan. 21, 2022, and has the same title as the print version.)

Technology Allows College Students to Stay Attached to Friends and Family at Home

(p. C5) I sometimes forget that my daughter has left for college. She Facetimes me on her way from the library to the gym. I see a small portion of her head, blue sky behind her, headphones dangling from an ear, part of a cup of coffee. She texts me updates on her failing quest to find the right edition of “The Waste Land” for one of her classes. I am still part of the dailiness of her life in a way that I am quite sure my mother was not in mine when I left for college in the last century.

My daughter also stays in close contact with her friends from home via group texts, Snapchat, TikTok, private Instagram stories. They are warm, vivid presences in her life that would likely have faded in a different technological moment.

While I remember high-school friends drifting, high-school boyfriends vanishing by winter break, many people she knows have romantic interests from home that endure. After all, their relationships with their new friends are also, to some degree, on the phone. With smartphones, physical presence becomes less important; it is no longer necessary to be with someone to communicate incessantly with them. The people in front of you comprise only one of many social situations you have access to.

. . .

Some part of me wonders if there aren’t benefits to this new way of being, along with the obvious downsides. My daughter is attached to her college friends and her friends from home. She is almost living in two places simultaneously; she is inhabiting more than one possible world.

For the full commentary, see:

Katie Roiphe. “Even at College, Our Children Are Home.” The Wall Street Journal (Saturday, January 29, 2022): C5.

(Note: ellipsis added.)

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

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.”)