Category: Economics of Technology

Facebook’s “Lord of the Rings” Defense of Free Speech

(p. B1) On Dec. 30, [2019] Andrew Bosworth, the head of Facebook’s virtual and augmented reality division, wrote on his internal Facebook page that, as a liberal, he found himself wanting to use the social network’s powerful platform against Mr. Trump. But citing the “Lord of the Rings” franchise and the philosopher John Rawls, Mr. Bosworth said that doing so would eventually backfire.

“I find myself desperately wanting to pull any lever at my disposal to avoid the same result,” he wrote. “So what stays my hand? I find myself thinking of the Lord of the Rings at this moment.

“Specifically when Frodo offers the ring to Galadrial and she imagines using the power righteously, at first, but knows it will eventually corrupt her,” he said, misspelling the name of the character Galadriel. “As tempting as it is to use the tools available to us to change the outcome, I am confident we must never do that or we will become that which we fear.”

For the full story, see:

Kevin Roose, Sheera Frenkel and Mike Isaac. “Agonizing at Facebook Over Trump.” The New York Times (Wednesday, January 8, 2020): B1 & B7.

(Note: bracketed year added.)

(Note: the online version of the story has the date Jan. 7, 2020, and has the title “Don’t Tilt Scales Against Trump, Facebook Executive Warns.”)

Entrepreneurs Dream of Transportation Breakthroughs

(p. A13) “Hop, Skip, Go” seems to be the result of an extended reporting trip, during which the authors chat with would-be game-changers from Los Angeles to Helsinki to Dubai to Guangzhou, offering futuristic punditry along the way.

. . .

The authors have tracked down entrepreneurs who are following their dreams of shaking up passenger transportation. In Shanghai, we meet Joseph Xie, whose Shanghai Quality Sensor Technology Corp. specializes in tiny semiconductors that sense light, sound and motion and have a wide application for autonomous vehicles, among other uses. In the Detroit area, R.J. Scaringe’s company, Rivian, aims to build electric cars and recently captured a $500 million investment from Ford. In Helsinki, an engineering student named Sonja Heikkilä wrote a thesis proposing a mobility app that would allow subscribers access to every sort of conveyance, from dockless scooters to rental cars. Mark Moore, a former NASA researcher now with an Uber venture called Uber Air, envisions small aircraft allowing users to fly over traffic jams within a decade.

For the full review, see:

Marc Levinson. “BOOKSHELF; Going Mobile.” The Wall Street Journal (Tuesday, December 3, 2019): A13.

(Note: ellipsis added.)

(Note: the online version of the review has the date Dec. 2, 2019, and has the title “BOOKSHELF; ‘Hop, Skip, Go’ Review: Going Mobile.”)

The book under review, is:

Rossant, John, and Stephen Baker. Hop, Skip, Go: How the Mobility Revolution Is Transforming Our Lives. New York: Harper Business, 2019.

Venture Capitalist Don Valentine Was Rare Early Backer of Apple

(p. A9) In the mid 1960s, Don Valentine had a hunch that startups using silicon semiconductors, then a new technology, would thrive. After failing to persuade his employer, Fairchild Semiconductor Corp., that it should invest in some of its more promising customers, Mr. Valentine decided to invest on his own.

His hobby became Sequoia Capital, which over the following five decades has built an unrivaled record of venture capital investing, betting early on Atari and Apple Inc. in the 1970s, Cisco Systems Inc. and Oracle Corp. in the 1980s, Yahoo! and Google in the 1990s, Airbnb Inc. and LinkedIn Corp. in the 2000s, and Stripe Inc., Square Inc. and WhatsApp this decade.

Mr. Valentine handed the reins to a new generation of investors in 1996, but the firm still operates in his image—as a team of hard-nosed investors willing to butt heads inside company boardrooms and who relentlessly question each other and those seeking their capital.

. . .

Atari founder Nolan Bushnell says Mr. Valentine was by far his best board member. “We fought like cats and dogs,” recalled Mr. Bushnell. “Steel sharpens steel. Every board meeting, he would ask me a question about my company that I didn’t know but I immediately knew that I should know it.”

Mr. Bushnell introduced Mr. Valentine to a young Atari employee named Steve Jobs, who had an idea for a personal computer but whom other investors wouldn’t back, in part because of his messy appearance.

Mr. Valentine said in the 2009 interview that one of Sequoia’s secrets was its Socratic method, in which partners constantly questioned one another. He recalled in the same interview that Mr. Jobs stood out as one of the “best interrogators” he ever saw. “Somehow or other, he knew what to focus on and how to build a sequence and series of questions that were additive to the answers.”

For the full obituary, see:

Rolfe Winkler. “Venture Capitalist Gave Entrepreneurs Tough Love.” The Wall Street Journal (Saturday, November 2, 2019): A9.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date Oct. 27, 2019, and has the title “Venture Capital Pioneer Kept Entrepreneurs’ Egos in Check.”)

Amazon Enables Flourishing of Small Diverse Entrepreneurs

(p. A24) They are a religious community known for clinging to 18th-century fashions and mores — strict rules that keep men and women apart and constraints on attire, with men favoring black suits and formal hats and women in long sleeves and long skirts.

But when it comes to doing business, Hasidic Jews have become enamored with a distinctly 21st-century company: Amazon.

The ability to sell merchandise easily and relatively anonymously on Amazon has transformed the economies of Hasidic enclaves in Brooklyn, suburban New York and central New Jersey, communities where members prefer to keep to themselves and typically do not go to college, let alone graduate from business programs.

But Amazon allows Hasidim to start selling without much experience and without making the investments required by a brick-and-mortar store. It permits Hasidic sellers to deal with the public invisibly — almost entirely by mail, by email or through package-delivery firms.

“Amazon doesn’t ask for your résumé,” said Sam Friedman, a marketer who designs trade show exhibits and works with many Amazon sellers. “And your picture is not on your business. The investment is minimal. You can work out of your bedroom.”

. . .

If Amazon is fulfilling orders, the business may effectively be running on Sabbath and Jewish holidays, though how that is carried out is the subject of vigorous debate. With a Talmudic twist of logic, some Hasidic entrepreneurs take on a non-Jew as a presumptive partner, attributing profits made on the Sabbath to that person.

. . .

Mr. Friedman is . . . organizing a business, advertising and marketing expo in Brooklyn in December [2019] to help Hasidic merchants expand their online sales by contracting with experienced copy writers, web designers, videographers and other professionals whose occupations the Talmudic Sages never even dreamed of.

“We’re not college students,” Mr. Friedman said, “but the yeshiva makes us smart enough to figure things out.”

For the full story, see:

Joseph Berger. “Insular Hasidic Communities Embrace Selling on Amazon.” The New York Times (Thursday, October 17, 2019): A24.

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

(Note: the online version of the story has the date Oct. 16, 2019, and has the title “How Amazon Has Transformed the Hasidic Economy.” The online version says that the article was on p. A26 of the New York edition. The article was on p. A24 of my National edition.)

Founding Entrepreneur Still Runs FedEx

Clayton Christensen plausibly argues that in the rare cases where an incumbent firm has been able to disrupt itself, it is almost always a firm where the founding entrepreneur is still running the firm.

(p. A1) MEMPHIS, Tenn.— Fred Smith bristles at any hint that FedEx Corp., the global delivery giant he built over four decades, could be disrupted by a player such as Amazon.com Inc.

. . .

FedEx’s 75-year-old chairman and chief executive, the man who pioneered the business of moving packages around the world at lightning speed, is confronting some of the greatest threats to the company he founded.

Global trade is slowing and tariff (p. A9) fights have companies rethinking supply chains. A key partner, the U.S. Postal Service, is struggling. Amazon has morphed from a customer into a competitor.

. . .

Mr. Smith, a former Marine officer and decorated Vietnam War veteran, started FedEx in 1971 and has been CEO for nearly its whole history. The billionaire was preparing to hand over the reins, but he extended his stay after two top executives, including his heir apparent, abruptly left.

That has left Mr. Smith, who remains one of FedEx’s biggest shareholders, to revamp the business. He started with divorcing Amazon.

For years, Amazon has been building up its logistics operations to handle more deliveries itself. The online retailing giant added tractor-trailers, hundreds of sorting centers and dozens of cargo planes to carry millions of its packages. It now delivers nearly half its orders, compared with less than 15% in 2017, according to estimates from research firm Rakuten Intelligence.

In February [2019], Amazon noted in its annual report that it views companies in “transportation and logistics services” among its rivals.

“They had never done that before that day,” Mr. Smith said. “So we took it seriously.”

For the full story, see:

Paul Ziobro. “FedEx Chief Reinvents Firm He Founded.” The Wall Street Journal (Friday, October 18, 2019): A1 & A9.

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

(Note: the online version of the story has the date Oct. 17, 2019, and has the title “Fred Smith Created FedEx. Now He Has to Reinvent It.”)

At-Home Workers Are Leaving Costly Largest Cities

(p. A1) Kelly Swift grew tired of the Los Angeles area a few years ago so she decided to leave—and take her job with her.

Ms. Swift kept her role in health-care information-technology consulting, and her California salary, when she and her family settled in a suburb of Boise, Idaho. Her employer didn’t mind that she started working from home.

Ms. Swift joined a group of workers fueling a renaissance in U.S. cities that lie outside the major job hubs. People who do their jobs from home, freelance or constantly travel for work are migrating away from expensive urban centers such as Los Angeles and San Francisco toward cheaper cities including Boise; Denver; Austin, Texas; and Portland, Ore., according to economists and local residents.

For the full story, see:

Ben Eisen. “Workers Leave Largest Cities, Taking Their Jobs With Them.” The Wall Street Journal (Monday, Sept. 9, 2019): A1 & A4.

(Note: the online version of the story has the date September 7, 2019, and has the title “Workers Are Fleeing Big Cities for Smaller Ones—and Taking Their Jobs With Them.”)

Google Pivots Back to Search and Away from Audacious Projects

(p. B1) Sundar Pichai’s appointment this week as chief executive of Google parent Alphabet Inc. effectively shifts the focus back on the company’s advertising profit machine and away from its “moonshots” and other potential new businesses.

Mr. Pichai’s promotion late Tuesday amounted to the biggest managerial overhaul of the internet giant since 2015, when co-founders Larry Page and Sergey Brin created Alphabet as a parent company above Google. Their goal then was to make Google and its highly profitable advertising businesses just one of many subsidiaries. The stated purpose, as they said in a public letter: “We are still trying to do things other people think are crazy.”

Those goals were on-brand for the two former Stanford University graduate students. They famously celebrated a “don’t be evil” ethos and were working on driverless cars, wearable computers, beating death and a host of other money-losing projects. The idea was to free the duo from the day-to-day at Google, which remains a profit machine, to build out new, world-changing ideas.

Those now include Alphabet’s Waymo unit, which is piloting self-driving car rides, and Calico Labs, which says it’s “tackling aging.”

At least financially, those efforts have yet to amount to much. Google, which includes search, YouTube, the Chrome web browser, hardware and much else, reported $40 billion of revenue in the past quarter alone, with a 23% margin. These areas draw in more than 99% of the parent company’s staggering $155 billion in annual revenue.

The rest of Alphabet eked out $155 million in revenue, and lost $941 million while doing it.

For the full story, see:

Rob Copeland. “Alphabet Backs Off the ‘Crazy,’ Turns to Reliable Model.” The Wall Street Journal (Friday, December 6, 2019): B1 & B4.

(Note: the online version of the story has the date Dec. 5, 2019, and has the title “Google Management Shuffle Points to Retreat From Alphabet Experiment.” The online version says that the title of the print edition was “Alphabet Backs Off On Experimentation.” My copy of the print edition had the title “Alphabet Backs Off the ‘Crazy,’ Turns to Reliable Model.”)

Bicycles Gave Women “Freedom and Self-Reliance”

(p. B8) The decade before the 20th century began saw an explosion in bicycle sales and cycling in general. The so-called “safety bicycle,” with wheels of equal size and a chain mechanism that allowed pedaling to drive the back wheel, along with the arrival of the pneumatic tire, had transformed cycling from an acrobatic and somewhat perilous enterprise into a pleasurable, less hazardous and even utilitarian recreation. Bicycles were mass produced as men increasingly used them to commute to work.

Especially significant was that women, for the first time, took to the activity, relishing the freedom it gave them from the restrictions of a homebound existence. Corsets and billowy skirts even gave way to bloomers so that women could ride comfortably. The bicycle was very much a part of the early women’s movement.

“Let me tell you what I think of bicycling,” the suffragist Susan B. Anthony said in an 1896 interview in The New York World with the pioneering journalist Nellie Bly. “I think it has done more to emancipate women than anything else in the world. I stand and rejoice every time I see a woman ride by on a wheel. It gives woman a feeling of freedom and self-reliance. It makes her feel as if she were independent. The moment she takes her seat she knows she can’t get into harm unless she gets off her bicycle, and away she goes, the picture of free, untrammeled womanhood.”

If ever there was an avatar of these combined social trends, “of free, untrammeled womanhood,” it was Annie Cohen Kopchovsky, a Latvian immigrant who in June 1894, at about age 23, cycled away from her Boston home, leaving a husband and three small children, for a journey around the world.

. . .

Kopchovsky’s celebrity, though it lingered through the completion of her trip, was short-lived, and her adventure would probably have remained obscure were it not for Peter Zheutlin, a journalist and cycling hobbyist who, decades after her death, became intrigued by what little he knew of Kopchovsky, his great-grandfather’s sister. For his book “Around the World on Two Wheels: Annie Londonderry’s Extraordinary Ride” (2007), he scoured newspaper archives from around the world, dug up family relics and plumbed the memory of Kopchovsky’s only survivor, a granddaughter.

For the full obituary, see:

Bruce Weber. “Annie Londonderry.” The New York Times (Monday, November 11, 2019): B8.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date Nov. 6, 2019, and has the title “Overlooked No More: Annie Londonderry, Who Traveled the World by Bicycle.”)

The book mentioned above, is:

Zheutlin, Peter. Around the World on Two Wheels: Annie Londonderry’s Extraordinary Ride. New York: Citadel Press Books, 2007.

Theil Venture Capital Firm Will Invest More in Later Stage Startups

(p. B1) Peter Thiel’s venture-capital firm is raising nearly $3 billion—and in a switch from the company’s usual script, much of the war chest will be poured into the swelling ranks of technology startups that have stayed private for years.

. . .

The venture firm, co-founded by Mr. Thiel, typically backs early-stage companies. But with its biggest winners, like Airbnb Inc., staying private longer than startups of an earlier generation, Founders needs to be able to make larger investments at later stages of a company’s lifetime to maintain comparable stakes and a say in company operations, some of the people said.

. . .

Founders Fund has told potential investors that older companies that stay private longer can prove to be more stable, if less lucrative, investments than moonshot startup bets, according to the people familiar with the matter.

. . .

Founders has produced investment returns well-above the industry average, The Wall Street Journal reported earlier this year. Its earliest funds, from 2005 and 2007, grew sixfold and more than eightfold, respectively, by the third quarter of last year.

For the full story, see:

Rob Copeland and Katie Roof. “Thiel Fund Builds War Chest in Strategy Shift.” The Wall Street Journal (Tuesday, October 22, 2019): B1.

(Note: ellipses added.)

(Note: the online version of the story has the date Oct. 21, 2019, and has the title “Peter Thiel’s Founders Fund Builds New War Chest in Strategy Shift.” In the third passage quoted above, the quote follows the print version instead of the slightly different online version.)

Tesla’s Process Innovation May Be Low-Defect, Fast-Assembly

(p. A13) Tesla became a darling of government handouts, with tax credits and public funding galore. It quickly grew into a sales phenom with high prices but low volume. Then, this year, its production numbers started to match those of the other major manufacturers. How Mr. Musk achieved this—and whether he should be considered a visionary or a charlatan—is the subject of “Ludicrous: The Unvarnished Story of Tesla Motors,” by the automotive journalist Edward Niedermeyer.

. . .

The book hits its stride when the author details Mr. Musk’s attempts to revolutionize the way cars are built. DeLorean and others faltered due to their inability to roll out large numbers of vehicles at a decent level of quality. Likewise the assembly line has been Tesla’s biggest obstacle. For a generation, automakers have cleaved to Toyota’s system of production, which emphasizes reducing waste and defects, slowing down the assembly line to achieve these goals. Mr. Musk, in contrast, feels Teslas should be assembled with a fast-moving line, deploying robots where other carmakers have employed workers.

Many observers bet that fast assembly won’t work. But this year Tesla delivered an impressive 158,000 cars to customers in the first two quarters, about the same number of Lexus models sold in the U.S. during that same period. Low-defect assembly was the major innovation of the automotive industry a generation ago; fast-line assembly may be the next. If Tesla’s fast-produced vehicles turn out to be reliable, Mr. Musk will deserve plaudits.

. . .

The portrait of Elon Musk that emerges from this book is one of a social-media obsessive who is constantly overpromising, playing the role of the self-sufficient business person while relying on government favors. Still, Tesla facilities produce lots of actual cars, which is more than what most other one-man marques have achieved. The accomplishment may not be as grand as Mr. Musk would like us to believe: He couldn’t have built his cars without subsidies from taxpayers who cannot afford Teslas and were given no choice in funding playthings for the rich. But his is an achievement, nonetheless.

For the full review, see:

Gregg Easterbrook. “BOOKSHELF; A Revolutionary Old Product.” The Wall Street Journal (Wednesday, Aug. 28, 2019): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date Aug. 27, 2019, and has the title ” BOOKSHELF; ‘Ludicrous’ Review: A Revolutionary Old Product.”)

The book under review is:

Niedermeyer, Edward. Ludicrous: The Unvarnished Story of Tesla Motors. Dallas, TX: BenBella Books, Inc., 2019.