Category: Economics

Robots That Can Grip Donuts Cannot Grip Asparagus

Distinguished MIT labor economist David Autor, who I reference in my book Openness to Creative Destruction: Sustaining Innovative Dynamism, was a co-chair of the MIT Work of the Future Task Force that wrote the report discussed in the article quoted below.

(p. B3) L. Rafael Reif, the president of Massachusetts Institute of Technology, delivered an intellectual call to arms to the university’s faculty in November 2017: Help generate insights into how advancing technology has changed and will change the work force, and what policies would create opportunity for more Americans in the digital economy.

That issue, he wrote, is the “defining challenge of our time.”

Three years later, the task force assembled to address it is publishing its wide-ranging conclusions. The 92-page report, “The Work of the Future: Building Better Jobs in an Age of Intelligent Machines,” was released on Tuesday [November 17, 2020].

. . .

Technology has always replaced some jobs, created new ones and changed others. The question is whether things will be different this time as robots and artificial intelligence quickly take over for humans on factory floors and in offices.

The M.I.T. researchers concluded that the change would be more evolutionary than revolutionary. In fact, they wrote, “we anticipate that in the next two decades, industrialized countries will have more job openings than workers to fill them.”

That judgment is informed by field research in several industries and sectors including insurance, health care, driverless vehicles, logistics and warehouses, advanced manufacturing, and small and medium-size manufacturers.

. . .

Despite advances, robots simply don’t have the flexibility and dexterity of human workers. Today’s robots learn from data and repetition. They can be remarkably adept at a certain task, but only that one. The report cited a fine-tuned gripping robot that could pluck a glazed doughnut and carefully place it in a box, with its shiny glaze undisturbed.

“But that gripper only works on doughnuts,” the report said. “It can’t pick up a clump of asparagus or a car tire.”

The cost and operational expertise required will also slow the widespread adoption of robots.

For the full story, see:

Steve Lohr. “Don’t Fear the Robots, Says Jobs Study Group.” The New York Times (Wednesday, November 18, 2020): B3.

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

(Note: the online version of the story has the date Nov. 17, 2020, and has the title “Don’t Fear the Robots, and Other Lessons From a Study of the Digital Economy.”)

The MIT report discussed above is:

MIT Work of the Future Task Force. “The Work of the Future: Building Better Jobs in an Age of Intelligent Machines.” Cambridge, MA: Massachusetts Institute of Technology, 2020.

My book mentioned above is:

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

Expense of Clinical Trials Reduce the Incentive to Re-Purpose Old, Cheap, Off-Patent Vaccines

(p. A5) “Retrospective studies are great and they provide some hints, but there are caveats,” said Dr. Shyam Kottilil, a professor of medicine with the Institute of Human Virology at the University of Maryland School of Medicine. “It’s very difficult to establish causality.”

Interest in the cross-protective effects of vaccines has led to efforts to repurpose old vaccines that may have potential to provide at least transient protection against the coronavirus until a specific vaccine against SARS-CoV-2 is developed and proven safe and effective, he said.

“But nobody knows whether this approach will work unless we test them,” Dr. Kottilil said. “To endorse this, you need to do really good randomized clinical trials.” There is little incentive for private companies to invest in expensive trials because the old vaccines are cheap and off-patent, he added.

For the full story, see:

Roni Caryn Rabin. “Are Past Vaccinations a Shield? It’s Doubtful.” The New York Times (Thursday, July 30, 2020): A5.

(Note: the online version of the story has the date July 29, 2020, and has the title “Old Vaccines May Stop the Coronavirus, Study Hints. Scientists Are Skeptical.”)

Dolly Parton Sings and Donates with “Effective Sympathy”

The above is an “embed” from a YouTube video posted by singer (and English Professor) Ryan Cordell. The lyrics were written by Gretchen McCulloch and the tune is from Dolly Parton’s “Jolene.” The YouTube URL is: https://www.youtube.com/watch?v=cCwNQtnI64I

In my book Openness to Creative Destruction: Sustaining Innovative Dynamism, I write about “effective sympathy” which I describe as “actions taken by sympathetic observers that actually save or improve the lives of those who are suffering” (p. 110). I admire Dolly Parton for donating copies of The Little Engine That Could to poor children. I also admire Dolly Parton for donating a million dollars to help start research on the Moderna vaccine for Covid-19. Dolly Parton knows how to practice effective sympathy.

(p. 12) She wrote “I Will Always Love You” and “Jolene” on the same day and built a theme park around herself. She has given memorable onscreen performances as a wisecracking hairstylist and harassed secretary. She even helped bring about the creation of “Buffy the Vampire Slayer.”

Now, Dolly Parton’s fans are crediting her with saving the world from the coronavirus. It’s an exaggerated, tongue-in-cheek claim, to be sure. But for legions of admirers, Ms. Parton’s donation this spring to Vanderbilt University Medical Center, which worked with the drugmaker Moderna to develop a coronavirus vaccine, was another example of how her generosity and philanthropy have made her one of the world’s most beloved artists.

. . .

“Her money helped us develop the test that we used to first show that the Moderna vaccine was giving people a good immune response that might protect them,” Dr. Denison said on Tuesday.

Ms. Parton told the BBC on Tuesday [November 17, 2020] that she was excited to hear her contribution provided a “little seed money that will hopefully grow into something great and help to heal this world.”

. . .

On Monday [November 16, 2020], after Moderna announced that early trials of the vaccine showed a 94.5 percent effectiveness rate, fans reacted rapturously.

. . .

Ryan Cordell, an associate professor of English at Northeastern University in Boston, filmed himself singing a song about the vaccine to the tune of “Jolene.”

For the full story, see:

Maria Cramer. “Dolly: A Star of Country, a Songwriter, a Virus Hero.” The New York Times, First Section (Sunday, November 22, 2020): 12.

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

(Note: the online version of the story has the date Nov. 17, 2020, and has the title “Dolly Parton: Singer, Songwriter, Pandemic Savior?” The online version says that the title of the New York print version was “Dolly: Country Music Legend, Songwriter, Pandemic Hero” and its page number was 8. The title of my National print version was “Dolly: A Star of Country, a Songwriter, a Virus Hero” and its page number was 12.)

My book mentioned above is:

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

The use of The Little Engine That Could to encourage entrepreneurial perseverance is analyzed in:

Yandle, Bruce. “I Think I Can! Does the Little Engine That Could Matter?” Journal of Private Enterprise 26, no. 2 (Spring 2011): 127-42.

Beating the Market Depends “on Your Ability to Be a Reader of People”

(p. B1) The person who helped inspire the passive-investing boom, the late economist Paul Samuelson, became wealthy from his active investments.

The greatest active investor of our time, Warren Buffett, advocates investing passively.

. . .

(p. B6) Prof. Samuelson’s decisions show why investors shouldn’t become so doctrinaire about index funds that they completely cut themselves off from any chance, however rare, of doing better.

In 1970, the same year he became the first American to win the Nobel Prize in economics, Prof. Samuelson began buying stock in Mr. Buffett’s Berkshire Hathaway Inc., at a cost that eventually averaged about $44 per share. (Berkshire’s A shares traded this week at approximately $290,000 apiece.)

. . .

In an interview this week, Mr. Buffett says Prof. Samuelson believed the same thing he does: that markets are “generally very efficient but not perfectly efficient.”

Mr. Buffett adds, “I do think if you know something about finance and about people, you may be able to identify someone out there who can overperform. But for every one you identify who can, there’ll be 1,000 others who don’t turn out to be able to.”

Continues Mr. Buffett: “You’re betting enormously on your ability to be a reader of people, even more than your ability—or theirs—to select securities. They’re all promising overperformance and spending a lot of money on selling it very persuasively. Overwhelmingly this is a world of salespeople.”

For the full commentary, see:

Jason Zweig. “THE INTELLIGENT INVESTOR; From a Skeptic, a Lesson on Beating the Market.” The Wall Street Journal (Saturday, December 22, 2018): B1 & B6.

(Note: ellipses added.)

(Note: the online version of the commentary has the date December 21, 2018, and has the title “THE INTELLIGENT INVESTOR; What You Can Learn From One of Warren Buffett’s Smartest Investors.”)

Founder Re-Acquires StubHub

In my book Openness to Creative Destruction: Sustaining Innovative Dynamism, I praise project entrepreneurs for having as their main goal, not wealth or fame, but making a ding in the universe (to use Steve Jobs’s phrase). I also suggest that they are more likely to succeed, in part because they are more likely to stick with the venture they founded. But there may be exceptions to my narrative. Eric Baker sounds like a project entrepreneur who left his start-up because of conflicts with his co-founder, and who now is back in charge.

(p. B4) Eric Baker long envisioned bringing together the two ticketing companies he started.

This week eBay Inc. agreed to sell its StubHub unit, a business Mr. Baker launched nearly two decades ago, to Geneva-based Viagogo Entertainment Inc., the ticketing firm with a large European presence he has been running since 2006.

The $4.05 billion all-cash deal would create a global ticketing juggernaut in the booming business of live events. It would also put StubHub back in the hands of the person who early on saw the opportunity in the legitimate resale of tickets.

. . .

“You had to pay through the nose or find people on the street corner to purchase from,” says Mr. Baker. He felt there had to be a better, more efficient way to find tickets and imagined that could happen online.

He headed to Stanford Graduate School of Business that fall and, together with classmate Jeff Fluhr, started StubHub—then called Liquid Seats—in 2000.

. . .

Mr. Baker and Mr. Fluhr—who was chief executive and had majority ownership of the company—had their differences, and in 2004 Mr. Baker left at the board’s direction, said people familiar with the decision.

. . .

When eBay bought StubHub in 2007, Mr. Baker says he opposed the deal. “It’s rare you have the opportunity to have a business like that,” he says. “To me, you try to hold on to something that’s working.”

For the full story, see:

Anne Steele. “StubHub Acquisition Puts Co-Founder Back in Charge.” The Wall Street Journal (Monday, December 2, 2019): B4.

(Note: ellipses added.)

(Note: the online version of the story has the date November 29, 2019, and has the title “The Tale Behind StubHub’s Sale: How Eric Baker Bought Back the Ticket Seller.”)

My book, mentioned above, is:

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

Oligopolists Compete Intensely

(p. B3) The race is on between the world’s largest videogame console makers, this time during a period of heightened demand for at-home entertainment through the coronavirus pandemic.

Sony Corp. SNE 1.45% on Wednesday said two versions of the PlayStation 5 would go on sale in November, one for roughly $400 and another for $500. Both consoles will be sold in a small number of countries including the U.S. and Japan starting Nov. 12 and the rest of the world a week later.

Last week, Microsoft Corp. said it would release two new consoles as well, the Xbox Series X for $499 and the Series S for $299, on Nov. 10.

For the full story, see:

Sarah E. Needleman. “Videogame Rivalry Heats Up.” The Wall Street Journal (Thursday, September 17, 2020): B3.

(Note: bracketed year added.)

(Note: the online version of the story was updated Sep. 16, 2020, and has the title “Sony to Launch Two PlayStation 5 Models This Fall.”)

Least-Well-Off Were Gaining Before Pandemic

(p. A3) U.S. families’ income and wealth rose in the years heading into the coronavirus pandemic, with those in lower-income and lower-wealth categories reaping relatively large gains, the Federal Reserve said in a report on household finances.

. . .

The distribution of wealth between low- and high-income households narrowed slightly in the latest survey period, Fed economists said, a shift from the 2010-to-2016 period when incomes largely stagnated for all but the most well-off after the 2007-2009 recession.

Families in the lowest two income groups recorded large percentage increases in median net worth, suggesting the decadelong expansion benefited a wide swath of society. Net worth rose 37% to $9,800 for the lowest earners, and increased 40% to $44,000 for the second-lowest group. The median net worth of the highest and second-highest groups declined 8% and 9%, respectively.

For the full story, see:

Harriet Torry. “Household Wealth Rose Before Crisis.” The Wall Street Journal (Tuesday, September 29, 2020): A3.

(Note: ellipsis added.)

(Note: the online version of the story was updated Sep. 28, 2020, and has the title “Household Wealth Rose in Years Before Pandemic, Fed Says.”)

California Energy Shortage Partly Due to Government Mandated Price Ceiling on Energy Imported from Out-of-State

(p. B9) As California keeps facing electricity shortages, the discussion around its grid often veers to extremes.

. . .

Should California . . . have shut down less natural gas and nuclear power? That is definitely part of the issue, and future shutdowns might need to slow.

. . .

. . . at least some of the shortage is addressable through market rules.

For example, California has a hard import bid cap of $1,000 per megawatt hour. Christopher DaCosta, regional director of western power markets at Wood Mackenzie, says that surrounding areas have a softer cap and are able to pay more. During this summer, that meant power plants often rerouted electricity to higher bidders than California.

For the full commentary, see:

Jinjoo Lee. “To Keep Lights On, California Needs Power Play.” The Wall Street Journal (Thursday, September 17, 2020): B9.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Sep. 16, 2020, and has the title “How to Keep the Lights On in California.”)

Chinese Communists Have Failed to Reform Toward Free Markets

(p. B6) China is the only major world economy reporting any economic growth today. It went first into Covid-19 and was first out, grinding out 3.2% growth in the most recent quarter while the U.S. shrank 9.5% and other advanced economies endured double-digit declines. High-tech monitoring, comprehensive testing and aggressive top-down containment measures enabled China to get the virus under control while others struggled. The Middle Kingdom may even deliver a modest year-over-year economic expansion in 2020.

This rebound is real, but behind the short-term numbers the economic restart is dubious. China’s growth spurt isn’t the beginning of a robust recovery but an uneven bounce fueled by infrastructure construction.

. . .

An honest look at the forces behind China’s growth this year shows a doubling down on state-managed solutions, not real reform. State-owned entities, or SOEs, drove China’s investment-led recovery.

. . .

For years, the world has watched and waited for China to become more like a free-market economy, thereby reducing American security concerns. At a time of profound stress world-wide, the multiple gauges of reform we have been monitoring through the China Dashboard point in the opposite direction. China’s economic norms are diverging from, rather than converging with, the West’s. Long-promised changes detailed at the beginning of the Xi era haven’t materialized.

Though Beijing talks about “market allocation” efficiency, it isn’t guided by what mainstream economists would call market principles. The Chinese economy is instead a system of state capitalism in which the arbiter is an uncontestable political authority. That may or may not work for China, but it isn’t what liberal democracies thought they would get when they invited China to take a leading role in the world economy.

For the full commentary, see:

Daniel Rosen, and Kevin Rudd. “China Backslides on Economic Reform.” The Wall Street Journal (Wednesday, September 23, 2020): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Sep. 22, 2020, and has the same title as the print version.)

Amazon’s Culture “Asks a Lot of Questions”

(p. B2) John Mackey helped popularize organic food when he co-founded Whole Foods Market four decades ago. Over the past several months, his chain of more than 500 stores has scrambled to adapt to another major shift in how Americans buy groceries.

. . .

The pandemic has accelerated an online-grocery movement that Whole Foods was already seeking to capitalize on as part of Amazon.com Inc. Mr. Mackey sold Whole Foods to the online-retail juggernaut for $13.4 billion in 2017, one of the decisions he recounts in his new book out this month, “Conscious Leadership: Elevating Humanity Through Business.”

. . .

WSJ: What merger challenges have you’ve learned from?

Mr. Mackey: Amazon has a culture that asks a lot of questions. We took a little longer to get used to that, but that’s no big deal. That’s how you learn things. They’re trying to understand our business. They want to know everything. And I think that’s healthy.

WSJ: What’s the biggest leadership lesson you’ve adopted from Jeff Bezos?

Mr. Mackey: Amazon wants you to write up a document explaining your ideas, defending them, and then you can have discussions. That’s a practice Whole Foods has adopted. Amazon’s also very data-driven. As opposed to acting from the gut, Amazon says, “Show us the data.” That’s been a good discipline for us. We do it ourselves, even when we’re not talking to Amazon.

For the full interview, see:

Jaewon Kang, interviewer. “BOSS TALK; Rugged Individualism in the Grocery Aisle.” The Wall Street Journal (Saturday, September 12, 2020): B2.

(Note: ellipses added. In both the print and online versions, “WSJ” and “Mr. Mackey” are bolded, as are the questions asked by Jaewon Kang. The bolding is not visible in the theme used for this blog.)

(Note: the online version of the interview has the date Sep. 11, 2020, and has the title “BOSS TALK; Whole Foods CEO John Mackey Says Many People Are Done With Grocery Stores.”)

The book co-authored by Mackey and mentioned above is:

Mackey, John, Steve Mcintosh, and Carter Phipps. Conscious Capitalism: Elevating Humanity Through Business. New York: Portfolio, 2020.

Apple Is First U.S. Firm to Reach Two Trillion in Market Value

(p. B1) Apple Inc. on Wednesday [Aug. 19, 2020] became the first U.S. public company to eclipse $2 trillion in market value, a dizzying achievement that highlights the iPhone maker’s commanding role in the world economy.

Shares of Apple rose as much as 1.4% to $468.65, eclipsing the $467.77 mark needed to reach the milestone. They ended the day up 0.1% at $462.83, putting the company’s market value just below $2 trillion.

For the full story, see:

Amrith Ramkumar. “Apple’s Stock-Market Valuation Touches $2 Trillion Mark Intraday.” The Wall Street Journal (Thursday, August 20, 2020): B1-B2.

(Note: bracketed date added.)

(Note: the online version of the story was updated Aug. 19, 2020, and has the title “Apple Surges to $2 Trillion Market Value.”)