Transcript of Political Economy Podcast Interview with Arthur Diamond on Openness to Creative Destruction

The lightly edited transcript was posted on July 30, 2020 on the American Enterprise Institute web site.

Yesterday Jim Pethokoukis posted a lightly edited transcript of my conversation with him on his American Enterprise…

Posted by Arthur Diamond on Friday, July 31, 2020

More Blacks Die of Covid-19 Partly Due to Greater Use of Public Transit

(p. A7) African-Americans may be dying at higher rates than white people from Covid-19, the disease caused by the novel coronavirus, in part because of black people’s heavier reliance on public transportation for commuting, two new studies by economists suggest.

One of the studies, by University of Virginia economist John McLaren, found that the racial discrepancy remained even after controlling for income or insurance rates. Instead, Mr. McLaren found the gap was due in part to the fact that black workers are more likely to get to work via public transit, including subways and buses.

About 10.4% of black commuters take public transit, versus 3.4% of white commuters, according to the Census. After controlling for the use of public transit, Mr. McLaren finds the racial disparity in Covid-19 deaths is less pronounced.

. . .

The other study, by Christopher Knittel and Bora Ozaltun, both of the Massachusetts Institute of Technology, found that a 10% increase in the share of a county’s residents who use public transit versus those who telecommute raised Covid-19 death rates by 1.21 per 1,000 people when looking at counties around the U.S.—or by 0.48 per 1,000 people when focusing only on counties within individual states. In their analysis, the researchers controlled for race, income, age, climate and other characteristics.

For the full story, see:

David Harrison. “Virus Deaths Linked to Transit.” The Wall Street Journal (Monday, June 29, 2020): A7.

(Note: ellipsis added.)

(Note: the online version of the story has the date June 28, 2020, and has the title “Public Transit Use Is Associated With Higher Coronavirus Death Rates, Researchers Find.”)

The first academic study mentioned above, is:

McLaren, John. “Racial Disparity in Covid-19 Deaths: Seeking Economic Roots with Census Data.” National Bureau of Economic Research, NBER Working Paper #27407, June 2020.

The second academic study mentioned above, is:

Knittel, Christopher R., and Bora Ozaltun. “What Does and Does Not Correlate with Covid-19 Death Rates.” National Bureau of Economic Research, NBER Working Paper #27391, June 2020.

Covid-19 Caused Mass Transit Use to “Plummet by 80%” or More

(p. D1) Fears of being exposed to germs in cramped underground spaces have reportedly caused mass transit ridership to plummet by 80% in urban centers such as Milan and San Francisco—and by up to 96% in hot spots including New York, Washington, D.C., and Paris. When they head back to their corner offices, car-shunning members of the C-suite set might be more likely to commute in prudent solitude on electric bikes than to trudge up subway steps.

“No one wants to be in a dirty cab. We don’t want to be on a bus or subway. People want their own mode of transportation that they control,” said Michael Burtov, author of “The Evergreen Startup.” Mr. Burtov, who works with entrepreneurs as part of MIT’s Enterprise Forum, also noted a severe dip in usage of shared bikes and scooters; who yearns to spend an afternoon wiping down handlebars or riding in gloves? “For individualized modes of transportation, which are affordable and really efficient, it’s a renaissance.”

To wit, Seattle’s Rad Power Bikes recently announced that sales had leapt nearly 300% this April compared with the same period in 2019. Its Dutch competitor VanMoof claimed a similar growth of 264% for the first half of 2020 compared with the same six months last year.

For the full story, see:

Matthew Kitchen. “Wanted: A Safer Commute.” The Wall Street Journal (Saturday, June 27, 2020): D1.

(Note: the online version of the story has the same date as the print version, and has the title “Wary of Subways? 6 Electric Options for a Solo Work Commute.”)

The book by Burtov, mentioned above, is:

Burtov, Michael. The Evergreen Startup: The Entrepreneur’s Playbook for Everything from Venture Capital to Equity Crowdfunding. Hypercritical Publishing, 2020.

Capital-Intensive Toilet Paper Firms, Already Near Capacity, Unable to Quickly Fill 600% Surge in Demand

(p. 4) As the chief executive of a company that makes toilet paper, Joey Bergstein has been through an intense few months.

. . .

You’ve mentioned that you anticipated some demand, but nothing like what was about to come.

The week of March 8 [2020] we saw a surge in demand of somewhere between 600 and 750 percent. When you build a supply chain and package, you normally have about a 30 percent buffer to be able to meet a surge in demand. Nobody built a supply chain to be able to respond to that kind of surge in demand. So the team has been in a constant state of triage ever since, and we’re still in that.

. . .

What was it about toilet paper that made it so hard to come by?

First of all, nobody anticipated the level of stocking up you would see on toilet paper. That shocked everybody. But any of these paper businesses are very capital-intensive businesses. You only make money in that business if you’re running your machines pretty close to capacity. So when you have a big surge in demand, it’s hard to increase more than you’re already producing, because you’re generally producing pretty close to capacity. You don’t have the kind of flexibility that you would normally expect to have in another business.

For the full interview, see:

David Gelles, interviewer. “Selling 2-Ply in a Pandemic (It’s Harder Than You Think).” The New York Times, SundayBusiness Section (Sunday, June 7, 2020): 4.

(Note: ellipses, and bracketed year, added; bold in original.)

(Note: the online version of the interview has the date June 5, 2020, and the title “Selling Toilet Paper and Paper Towels During the Pandemic.” The first sentence and the bold questions are from the interviewer David Gelles. The answers after the bold questions are from the interviewee Joey Bergstein.)

Houghton Shifted Corning from Cookware to Fiber Optics

(p. A13) When Amory Houghton became chief executive of Corning Glass Works in 1964, the company founded by his great-great grandfather was thriving. Known to the general public for Pyrex measuring cups and Corning Ware casseroles, it dominated the U.S. market for the glass used to encase TV tubes.

But the company, now known as Corning Inc., proved too reliant on those tubes, which accounted for as much as 75% of profit. In the mid-1970s, the company faced a recession and the loss of TV-related business as Japanese imports captured the U.S. market. Profits collapsed, and Mr. Houghton had to chop costs, including at the headquarters in Corning, N.Y. The global workforce dropped by more than one-third.

. . .

“It was tough making these cuts,” he said, “particularly when you lived in a small town where you knew a lot of these people.”

Corning bounced back, unlike many other U.S. manufacturing giants. That was partly because Mr. Houghton made a long-term commitment to development of fiber optics. He correctly saw that hair-thin strands of glass would replace copper wire in transmissions of voice and data. “It’s our turf, with our patents,” he said.

By the late 1990s, optical fiber and related telecommunications products accounted for more than half of Corning’s operating profits.

For the full obituary, see:

James R. Hagerty. “Executive Lifted Corning With Bet on Fiber Optics.” The Wall Street Journal (Saturday, March 14, 2020): A13.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date March 13, 2020, and the title “Amory Houghton’s Bet on Fiber Optics Helped Save Corning.”)

California Places the Regulatory “Final Straw” on Elon Musk’s Tesla

(p. A15) Informed by Democratic Gov. Gavin Newsom’s authorities that his factory in Fremont had to remain in lockdown, Mr. Musk tweeted: “Frankly, this is the final straw. Tesla will now move its HQ and future programs to Texas/Nevada immediately.”

The keyword here is “final straw,” suggesting that Mr. Musk’s cost-of-doing-business problems with California predate this virus. Hundreds of businesses already have relocated out of California, fleeing the uncountable regulatory straws the state has laid across the backs of anyone doing business there.

For the full commentary, see:

Daniel Henninger. “WONDER LAND; Elon Musk’s ‘Final Straw’.” The Wall Street Journal (Thursday, May 21, 2020): A15.

(Note: the online version of the commentary has the date May 20, 2020 and has the same title as the print version.)

Drugs Targeting Cytokines Tried Against Covid-19

(p. A9) Doctors have used the term “cytokine storm” to describe an overactive immune response triggered by external pathogens such as bacterial and viral infections.

Proteins called cytokines are part of the immune system’s arsenal for fighting disease. When too many are released into the bloodstream too quickly, however, it can have disastrous results, including organ failure and death.

As with other diseases, it is a mystery why cytokine storms are experienced by some but not all Covid-19 patients, doctors say. Genetics may be a factor.

. . .

Drugs called corticosteroids can be used to treat patients with cytokine storms, but studies are mixed on their effectiveness, with some studies indicating that Covid-19 patients may be at a higher risk of death when treated with steroids. Some doctors are reluctant to use steroids because they broadly dampen the immune response, which is risky in patients fighting infections.

Drugs targeting specific cytokines rather than the entire immune system may be more effective, doctors say.

Among the most promising targeted treatments, doctors say, is Roche’s rheumatoid-arthritis drug tocilizumab, which is marketed under the brand name Actemra. The drug was approved in 2017 to treat cytokine storms caused by cancer treatments known as CAR-T cell therapies.

For the full story, see:

Jared S. Hopkins, Joseph Walker. “Haywire Immune Reaction Linked to Most Severe Cases.” The Wall Street Journal (Friday, April 10, 2020): A1 & A9.

(Note: ellipsis added.)

(Note: the online version of the story has the date April 9, 2020, and has the title “Haywire Immune Response Eyed in Coronavirus Deaths, Treatment.”)