Category: Economics

Firm Revives Cassette Tape Production

(p. A1) SPRINGFIELD, Mo.— Steve Stepp and his team of septuagenarian engineers are using a bag of rust, a kitchen mixer larger than a man and a 62-foot-long contraption that used to make magnetic strips for credit cards to avert a disaster that no one saw coming in the digital-music era.

The world is running out of cassette tape.

National Audio Co., where Mr. Stepp is president and co-owner, has been hoarding a stockpile of music-quality, ⅛-inch-wide magnetic tape from suppliers that shut down in the past 15 years after music lovers ditched cassettes. National Audio held on. Now, many musicians are clamoring for cassettes as a way to physically distribute their music.

The company says it has less than a year’s supply of tape left. So it is building the first manufacturing line for (p. A10) high-grade ferric oxide cassette tape in the U.S. in decades. If all goes well, the machine will churn out nearly 4 miles of tape a minute by January. And not just any tape. “The best tape ever made,” boasts Mr. Stepp, 69 years old. “People will hear a whole new product.”

. . .

Cassettes are cool again, particularly with listeners raised on earbuds, MP3s and streaming music. Sales are small but rising, according to Nielsen Music data.

. . .

Nostalgia and analog chic aside, cassettes solve two dilemmas: the high cost of making vinyl records and getting fans to buy digital downloads, particularly when bands are touring. A hundred cassettes packaged with download coupons can be made in a few weeks for a few hundred dollars, compared with months and thousands of dollars for vinyl. They often sell at retail for as little as $5 each.

“Plus, tapes fit in your breast pocket, which is pretty great,” says Mr. Miranda, the “Hamilton” composer.

. . .

Mr. Stepp’s company has had to rely on repurposed equipment, including an 80-year-old machine built to seal cigarette packs with cellophane. It was modified to wrap cassettes. National Audio has a Noah’s ark of spare parts to keep what Mr. Stepp calls its “orphaned” gear running.

. . .

Mr. Stepp, who owns National Audio with his wife and adult children, hopes to ship the first cassettes made with the new tape by January [2018]. After that, he plans to start selling bulk tape to other cassette makers.

He is working the phones to promote the new product and take orders. Mr. Stepp says he treats every customer alike, whether they order 50 cassettes or 15,000, recalling that the company’s first order from Joyce Meyer Ministries brought in just $35.

“You never know who you’re dealing with or who that person will become,” he says.

For the full obituary, see:

Ryan Dezember and Anne Steele. “Global Shortage of Magnetic Tape Has Cassette Lovers Reeling.” The Wall Street Journal (Friday, November 4, 2017): A1 & A10.

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

(Note: the online version of the obituary has the date Nov. 3, 2017, and has the title “A Global Shortage of Magnetic Tape Leaves Cassette Fans Reeling.” The final sentences of the online version, which are quoted above, contain several more words, and one more sentence, than the final sentences of the print version.)

Boston Brahmins Invested in Western Industrialization

(p. A13) One of history’s ironies is that, even though New England birthed the abolition movement, many of Boston’s most prominent families offered less than total support for freeing the slaves. Their prosperity required a steady supply of cotton to feed New England’s growing textile industry. Even after slavery ended in 1865, wealthy Bostonians were reluctant to abandon their traditional business. Henry Lee Higginson, 30 years old and freshly discharged from the Union Army, bought with his partners a 5,000-acre plantation in Georgia with the goal of turning a profit by growing cotton. But the 60 former slaves living on the plantation thought the wages and terms offered to be grossly inadequate; the land they had worked in chains for generations, they believed, should belong to them. The enterprise soon collapsed.

As similar episodes played out across the South, Boston’s business elites looked for new places to invest their money. “They began to reenvision American capitalist development, not in modifying and salvaging the arrangements of earlier decades but in a far more ambitious program of continental industrialization,” Noam Maggor writes in “Brahmin Capitalism.” “They retreated from cotton and moved into a host of groundbreaking ventures in the Great American West—mining, stockyards, and railroads.”

. . .

Especially representative of the Bostonians’ transformative influence was Higginson’s next enterprise. Far removed from Georgian cotton, his interests landed on a copper mine in northern Michigan’s remote Keweenaw Peninsula. Copper had been discovered there 20 years earlier, but extraction had been small-scale and labor intensive; the high cost per unit meant that mining was profitable only for veins that contained at least 40% copper. In a short time, high-yield mines in the area began to show signs of depletion. But with Higginson’s capital—alongside investments from other Brahmins—large-scale copper extraction could take place as a continuous operation, making mining profitable on belts that contained only 2%-4% copper. In this way, Higginson’s Eastern capital transformed Western mining and launched a career that would make him one of Boston’s leading financiers.

For the full review, see:

John Steele Gordon. “BOOKSHELF; Enterprising Bostonians; Contrary to stereotype, the Brahmins of New England crisscrossed the continent and took bold risks in search of higher yields.” The Wall Street Journal (Monday, June 26, 2017): A13.

(Note: ellipsis added.)

(Note: the online version of the review has the date June 25, 2017, and has the same title as the print version.)

The book under review is:

Maggor, Noam. Brahmin Capitalism: Frontiers of Wealth and Populism in America’s First Gilded Age. Cambridge, MA: Harvard University Press, 2017.

Entrepreneurs Make Millions from Selling Cheaper Ice Cream

(p. A25) Curtis and S. Prestley Blake opened Friendly (the chain became Friendly’s in 1989) with a $547 loan from their parents in their hometown, Springfield, Mass., in the summer of 1935. With the Depression gripping the country, the brothers enticed customers by selling two scoops of ice cream for a nickel, about half the price their competitors charged (and the equivalent of about 95 cents today).

“Our customers didn’t have any money, and neither did we,” Mr. Blake told The Republican, a Springfield newspaper, in 2017.

Their shop was an instant success, with a line out the door on opening night. But it required constant labor.

. . .

Mr. Blake and his brother sold Friendly to the Hershey Foods Corporation in 1979 for about $164 million (nearly $580 million in today’s dollars).

For the full obituary, see:

Daniel E. Slotnik. “Curtis Blake Dies at 102; Built a Friendly Empire From Nickel Ice Cream.” The New York Times, First Section (Sunday, June 2, 2019): A25.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date May 30, 2019, and has the title “Hong Kong Protesters Descend on Airport, With Plans to Stay for Days.”)

When Labor Market Regulations Increase, Firms Hire Fewer Workers

(p. B5) “It’s serial stagnation,” said Nicola Borri, a finance professor at Luiss, a university in Rome. “The economy doesn’t contract, it doesn’t grow. Italy is a country that is weak, that is old, where there is no investment in new ideas.”

. . .

Thirty-five miles east of Naples, in the town of Avellino, Sabino Basso has halted plans to hire 30 more people at the olive oil bottling plant started by his great-grandfather.

Mr. Basso’s company buys olive oil from growers in Italy, Spain and Greece, exporting 80 percent of its wares to countries around the globe — especially the United States, where Walmart is a major customer. He had planned to increase marketing and online sales.

But then Five Star tightened legal requirements for companies that hire workers on temporary contracts, effectively limiting stints to one year. The change was aimed at forcing businesses to hire permanent workers.

Mr. Basso was aghast. All but five of his 100 workers are permanent, he said. The others are apprentices, a status that has allowed him to hire using temporary contracts.

“In order to understand if I want to keep people their whole lives, I have to test them,” he said. The new rules did not allow him sufficient time. “I just stopped hiring.”

For the full story, see:

Peter S. Goodman. “History, Views and ‘Serial Stagnation’.” The New York Times (Saturday, Aug. 10, 2019): B1 & B5.

(Note: ellipsis added.)

(Note: the online version of the story has the date Aug. 9, 2019, and has the title “Italy’s Biggest Economic Problem? It’s Still Italy.”)

A.I. Needs Human Beings to Collect Right Data and Write Sound Algorithms

(p. A1) SEATTLE — The company called One Concern has all the characteristics of a buzzy and promising Silicon Valley start-up: young founders from Stanford, tens of millions of dollars in venture capital and a board with prominent names.

Its particular niche is disaster response. And it markets a way to use artificial intelligence to address one of the most vexing issues facing emergency responders in disasters: figuring out where people need help in time to save them.

. . .

But when T.J. McDonald, who works for Seattle’s office of emergency management, reviewed a simulated earthquake on the company’s damage prediction platform, he spotted problems. A popular big-box store was grayed out on the web-based map, meaning there was no analysis of the conditions there, and shoppers and workers who might be in danger would not receive immediate help if rescuers relied on One Concern’s results.

“If that Costco collapses in the middle of the day, there’s going to be a lot of people who are hurt,” he said.

The error? The simulation, the company acknowledged, missed many commercial areas because damage calculations relied largely on residential census data.

For the full story, see:

Sheri Fink. “A Tech Answer To Disaster Aid Is Falling Short.” The New York Times (Saturday, Aug. 10, 2019): A1 & A14.

(Note: ellipsis added.)

(Note: the online version of the story has the date Aug. 9, 2019, and has the title “This High-Tech Solution to Disaster Response May Be Too Good to Be True.”)

Evidence That Patents Do Not Holdup Innovation

(p. A17) The trade war has highlighted the competitive advantage of reliable patent rights in driving innovation, prompting a bipartisan effort in Congress to strengthen patents.

. . .

Yet the FTC doesn’t seem to have received the message. It continues to push regulatory policies and undertake enforcement actions based on the story that bad actors licensing their patents somehow are stopping companies from making new innovative products and are harming consumers with higher prices. This idea that “patent holdup” raises prices and stifles innovation is based entirely on an academic theory first proposed in the Texas Law Review in 2007 by professors Mark Lemley and Carl Shapiro.

In contrast to the theory, extensive empirical research since 2007 has failed to find any of the predicted harms of stifled innovation or higher prices, and has in fact found the opposite. “An Empirical Examination of Patent Holdup,” published in 2015, found that industries like smartphone design with patents on foundational technologies have the fastest quality-adjusted price reductions in consumer products. A 2016 George Mason Law Review study also found consistent reductions in consumer prices, increased research-and-development spending, and incredibly fast technological innovation driven by patent licensing of key technologies in the smartphone industry.

For the full commentary, see:

Adam Mossoff. “The FTC Joins Huawei on a Misguided Troll Hunt; The commission’s lawsuit against Qualcomm threatens to undermine American innovation.” The Wall Street Journal (Saturday, Jan. 27, 2019): A17.

(Note: ellipsis added.)

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

The 2016 George Mason Law Review study, mentioned above, is:

Mallinson, Keith. “Don’t Fix What Isn’t Broken: The Extraordinary Record of Innovation and Success in the Cellular Industry under Existing Licensing Practices.” George Mason Law Review 23, no. 4 (Summer 2016): 967-1006.

The 2015 paper mentioned above, is:

Galetovic, Alexander, Stephen Haber, and Ross Levine. “An Empirical Examination of Patent Holdup.” Journal of Competition Law and Economics 11, no. 3 (Sept. 2015): 549-78.

A related 2017 paper, is:

Galetovic, Alexander, and Stephen Haber. “The Fallacies of Patent-Holdup Theory.” Journal of Competition Law and Economics 13, no. 1 (March 2017): 1-44.

A Resource Is a Weed You Have Figured Out How to Use

(p. A1) With its warts, a messy sap that can sicken livestock and a tendency to grow in tall, mangy clumps that crowd out other plants, milkweed doesn’t enjoy a history of immortalization in oil paint.

. . .

(p. A10) Some makers of winter clothing are touting the white wispy floss in milkweed pods as a plant-based insulating material. Some forecasters say milkweed could yield $800 an acre this year, which Vermont farmers say is better than they get for most commodities.

. . .

Jaunty enough for the city and practical enough for the weekend cabin, he says, the “refined Canadian parka” sells for $850, the same as Quartz’s duck-down jacket. He says down is still popular but milkweed attracts customers intrigued by a “plant-based” insulator. “We were shocked by the interest we got.”

. . .

Milkweed’s sartorial use harks at least to World War II, when overseas supplies of kapok, an insulating fiber, were cut off. As a wartime substitute, the U.S. rallied civilians to pick milkweed pods for life jackets, says Gerald Wykes, a historian at the Monroe County Museum in Michigan.

After the war, for the most part milkweed went “back to its roots” as a humble weed, he says, because the ornery plant proved challenging to tame as a crop that could be grown in rows and harvested mechanically. The handpicking that went on in the war “wasn’t terribly efficient,” he says, and the rising use of synthetics lessened interest in all natural fibers.

Recently, says Ms. Darby, farmers have improved machinery that is designed to gently pick off milkweed pods without damaging the whole plant.

And milkweed has recently sprouted back into favor in some quarters because of its role not just as a green stuffing option but also as the key source of food for caterpillars of the embattled monarch butterfly.

For the full story, see:

Jennifer Levitz. “This Winter’s Hot Fashion: Parkas Stuffed With Vermont Weeds.” The Wall Street Journal (Thursday, Sept. 28, 2017): A1 & A10.

(Note: ellipses added.)

(Note: the online version of the story has the date Sept. 27, 2017, and has the same title as the print version.)