Economics of Technology – Page 74

Record Companies Refused to See Efficiency of Napster Distribution System

Source of book image: online version of the WSJ review quoted and cited below.

(p. A15) . . . the central character in “Appetite for Self-Destruction” is technological change.
. . .
Record labels scrambled to negotiate with Napster and develop a legal version of the service with multiple revenue streams. The attempts all failed. In Mr. Knopper’s telling, there were unreasonable demands on all sides. But he faults music executives for “cling[ing] to the old, suddenly inefficient model of making CDs and distributing them to record stores. . . . In this world, the labels controlled — and profited from — everything.” In the new world being ushered in by Napster, he writes, control was shifting “to a snot-nosed punk and his crazy uncle.”
The labels’ inability to reach an agreement with Napster destroyed “the last chance for the record industry as we know it to stave off certain ruin,” Mr. Knopper writes in a typically overheated passage. Had a deal been consummated, he suggests, a legal version of Napster might have generated revenues of $16 billion in 2002 and saved the industry. Whether or not the author’s estimate is accurate, his larger point remains: The music industry’s big mistake was trying to protect a business model that no longer worked. Litigation would not keep music consumers offline.

For the full review, see:
JEREMY PHILIPS. “BUSINESS BOOKSHELF; Spinning Out of Control; How the record industry missed out on a chance to compete in a new digital world.” The Wall Street Journal (Weds., February 11, 2009): A15.
(Note: first two ellipses added; third ellipsis in original.)

The book under review is:
Knopper, Steve. Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age. New York: Free Press, 2009.

Project Entrepreneur Would Rather Change the World than Buy a Luxury Car

“Reid Hoffman at Greylock Partners foresees a tectonic shift coming in the Web, with data and its many uses as the new linchpin, replacing identity and relationships.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 5) As an executive vice president, it was up to Mr. Hoffman to manage external relations. “He was the firefighter in chief at PayPal,” Mr. Thiel says. “Though that diminishes his role because there were many, many fires.”

Mr. Hoffman emerged as a connector and high-level strategist. He packed his schedule with meetings, charmed credit card companies and soothed the regulators.
PayPal survived, and when the company went public, in 2002, Mr. Hoffman and many of his colleagues became multimillionaires.
Mr. Thiel splurged on a Ferrari. Mr. Hoffman wanted to buy an Audi but instead invested his newfound riches in one of the first solar panel companies to come out of Silicon Valley, Nanosolar, and bought an Acura instead.
“I started to think about the value of money,” he says. “I thought if I only had $75,000, would I rather invest in a luxury car or make a play in changing the world?”
Nanosolar became a multibillion-dollar enterprise.

For the full story, see:
EVELYN M. RUSLI. “A King of Connections; How Reid Hoffman of LinkedIn Became Tech’s Go-To Guy.” The New York Times, SundayBusiness Section (Sun., November 6, 2011): 1 & 5.
(Note: ellipsis added.)
(Note: the online version of the article has the date November 5, 2011, and has the title “A King of Connections Is Tech’s Go-To Guy.”)

Walker Says Those Who Call Him “Patent Troll” Want His Property Without Paying

Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B1) Jay Walker turned his idea for “name your own price” Internet auctions into a fortune by starting Priceline.com Inc. Now the entrepreneur is trying to cash in on his ideas by suing other companies.

Since it was founded in 1994 as a research lab, Walker Digital LLC has made much of its money by spinning out its inventions, like online travel agent Priceline and vending-machine firm Vendmore Systems LLC, as independent businesses.
. . .
Mr. Walker defends his newly aggressive tactics, which some critics compare to those of “patent trolls,” a derogatory term for firms that opportunistically enforce patents. Without the lawsuits, he said, his patents could expire while other companies exploit them. Patents have a 20-year lifespan.
“Not only are we not a troll, but the people who want to label me are often the same ones that want to use our property and not pay,” Mr. Walker said in an interview.

For the full story, see:
JOHN LETZING. “Founder of Priceline Spoiling for a Fight Over Tech Patents.” The Wall Street Journal (Mon., August 22, 2011): B1 & B10.
(Note: ellipsis added.)

Property Rights, Flexible Work Rules, Open Markets Are Keys to Economic Growth

Source of book image: online version of the WSJ review quoted and cited below.

(p. A11) Messrs. Hubbard and Kane argue, as do others, that certain policies and core principles are the key: property rights, flexible work rules, open markets. For the authors, such matters explain economic growth entirely.

To those who would cite the primacy of technological breakthroughs, Messrs. Hubbard and Kane assert that inventions only spark growth if there are systems in place (such as intellectual-property rights) that enable inventions to flourish and their value to spread. “The wheel and the windmill were invented many times,” they write, “then forgotten, until finally one society had the institutional framework to implement them widely and pass them on permanently.” In short, “institutions explain innovation.”

For the full review, see:
Matthew Rees. “BOOKSHELF; How the Mighty Fall; The Roman empire eventually lost its economic vitality thanks to price controls, heavy taxes and state-sponsored debt relief.” The Wall Street Journal (Fri., June 21, 2013): A11.
(Note: ellipses added.)
(Note: the online version of the review has the date June 20, 2013.)

The book under review, is:
Hubbard, Glenn, and Tim Kane. Balance: The Economics of Great Powers from Ancient Rome to Modern America. New York: Simon & Schuster, 2013.

iPhone: “A Gleaming World of Innovation and Opportunity, of Capitalism Behaving Well”

“The theft of electronic devices like iPhones has fueled a rise in subway crime this year, the police say. In the past, New Yorkers were mugged, sometimes killed, for bomber jackets, Cazal glasses and Air Jordan sneakers.” Source of caption: print version of the NYT article quoted and cited below. Source of photo: online version of the NYT article quoted and cited below.

(p.24) The current spate of iPhone thefts feels, if anything, more poignant than disruptive. Apple products have always read as cooler than their rivals’ because their design suggests a gleaming world of innovation and opportunity, of capitalism behaving well — a world that seems ever diminishing, ever less accessible to the struggling and young.

Unlike the sneakers and glasses that caused such a fury in the ’80s and ’90s, iPhones didn’t originate in the celebrity system. They come with a democratic ethos (if not the analogous price tag); BlackBerrys are for suits, but even a child can work an iPhone. Wasn’t everyone supposed to have a shot?

For the full story, see:
GINIA BELLAFANTE. “BIG CITY; Easy to Use and Easy to Steal, a Status Object Inches Out of Reach.” The New York Times, First Section (Sun., October 30, 2011): 24.
(Note: the first paragraph quoted above is from the print version, rather than from the somewhat different online version. The second quoted paragraph is the same in both versions.)
(Note: the online version of the story has the date October 28, 2011, and has the slightly different title “BIG CITY; Easy to Use, or Steal, but Inching Out of Reach.”)

Larry Page Makes an O.K. Decision Now, Rather than a Perfect Decision Later

“Larry Page has pushed for quicker decision-making and jettisoned more than 25 projects that were not up to snuff.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) MOUNTAIN VIEW, Calif. — Larry Page, Google’s chief executive, so hates wasting time at meetings that he once dumped his secretary to avoid being scheduled for them. He does not much like e-mail either — even his own Gmail — saying the tedious back-and-forth takes too long to solve problems.
. . .
(p. A3) Borrowing from the playbooks of executives like Steven P. Jobs and Mayor Michael R. Bloomberg, he has put his personal imprint on the corporate culture, from discouraging excessive use of e-mail to embracing quick, unilateral decision-making — by him, if need be.
“Ever since taking over as C.E.O., I have focused much of my energy on increasing Google’s velocity and execution, and we’re beginning to see results,” Mr. Page, 38, told analysts recently.
. . .
Despite the many external pressures on Google, it is dominant in its business and highly profitable. But, when asked at a recent conference about the biggest threat to his company, Mr. Page answered in one word, “Google.”
The problem was that the company had ballooned so quickly — it now has more than 31,000 employees and $27.3 billion in revenue so far this year — that it had become sclerotic. A triumvirate of Mr. Page, his co-founder, Sergey Brin, and Eric E. Schmidt, Google’s former chief and current chairman, had to agree before anything could be done. The unwieldy management and glacial pace of decision-making were particularly noticeable in the Valley, where start-ups overtake behemoths in months.
It is different now.
“It’s much more of a style like Steve Jobs than the three-headed monster that Google was,” said a former Google executive who has spoken with current executives about the changes and spoke anonymously to preserve business relationships. “When Eric was there, you’d walk into a product meeting or a senior staff meeting, and everyone got to weigh in on every decision. Larry is much more willing to make an O.K. decision and make it now, rather than a perfect decision later.”

For the full story, see:
CLAIRE CAIN MILLER. “Google’s Chief Works to Trim a Bloated Ship.” The New York Times (Thurs., November 10, 2011): A1 & A3.
(Note: ellipses added.)
(Note: the online version of the story has the date November 9, 2011.)

Patents Turned Steam from Toy to Engine

Source of book image: http://img2.imagesbn.com/p/9781400067053_p0_v1_s260x420.JPG

(p. 20) The obvious audience for Rosen’s book consists of those who hunger to know what it took to go from Heron of Alexandria’s toy engine, created in the first century A.D., to practical and brawny beasts like George and Robert Stephenson’s Rocket, which kicked off the age of steam locomotion in 1829. But Rosen is aiming for more than a fan club of steam geeks. The “most powerful idea” of his title is not an early locomotive: “The Industrial Revolution was, first and foremost, a revolution in invention,” he writes, “a radical transformation in the process of invention itself.” The road to Rocket was built with hundreds of innovations large and small that helped drain the mines, run the mills, and move coal and then people over rails.
. . .
Underlying it all, Rosen argues, was the recognition that ideas themselves have economic value, which is to say, this book isn’t just gearhead wonkery, it’s legal wonkery too. Abraham Lincoln, wondering why Heron’s steam engine languished, claimed that the patent system “added the fuel of interest to the fire of genius.” Rosen agrees, offering a forceful argument in the debate, which has gone on for centuries, over whether patents promote innovation or retard it.
Those who believe passionately, as Thomas Jefferson did, that inventions “cannot, in nature, be a subject of property,” are unlikely to be convinced. Those who agree with the inventors James Watt and Richard Arkwright, who wrote in a manuscript that “an engineer’s life without patent is not worthwhile,” will cheer. Either way, Rosen’s presentation of this highly intellectual debate will reward even those readers who never wondered how the up-and-down chugging of a piston is converted into consistent rotary motion.

For the full review, see:
JOHN SCHWARTZ. “Steam-Driven Dreams.” The New York Times (Sun., August 29, 2010): 20.
(Note: ellipsis added; italicized words in original.)
(Note: the online version of the review has the date August 26, 2010.)

The book under review, is:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

Moore’s Law: Inevitable or Intel?

I believe that Moore’s Law remained true for a long time, not because it was inevitable, but because an exemplary company worked very hard and effectively to make it true.

(p. 159) In brief, Moore’s Law predicts that computing chips will shrink by half in size and cost every 18 to 24 months. For the past 50 years it has been astoundingly correct.

It has been steady and true, but does Moore’s Law reveal an imperative in the technium? In other words is Moore’s Law in some way inevitable? The answer is pivotal for civilization for several reasons. First, Moore’s Law represents the acceleration in computer technology, which is accelerating everything else. Faster jet engines don’t lead to higher corn yields, nor do better lasers lead to faster drug discoveries, but faster computer chips lead to all of these. These days all technology follows computer technology. Second, finding inevitability in one key area of technology suggests invariance and directionality may be found in the
rest of the technium.

Source:
Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.

Knowledge Economy Migrating to Intangible Goods and Services

(p. 67) Our present economic migration from a material-based industry to a knowledge economy of intangible goods (such as software, design, and media products) is just the latest in a steady move toward the immaterial. (Not that material processing has let up, just that intangible processing is now more economically valuable.) Richard Fisher, president of the Federal Reserve Bank of Dallas, says, “Data from nearly all parts of the world show us that consumers tend to spend relatively less on goods and more on services as their incomes rise. . . . Once people have met their basic needs, they tend to want medical care, transportation and communication, information, recreation, entertainment, financial and legal advice, and the like.” The disembodiment of value (more value, less mass) is a steady trend in the technium. In six years the average weight per dollar of U.S. exports (the most valuable things the U.S. produces) (p. 68) dropped by half. Today, 40 percent of U.S. exports are services (intangibles) rather than manufactured goods (atoms). We are steadily substituting intangible design, flexibility, innovation, and smartness for rigid, heavy atoms. In a very real sense our entry into a service- and idea-based economy is a continuation of a trend that began at the big bang.

Source:
Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.
(Note: ellipsis in original; a graph is omitted that appears in the middle of the paragraph quoted above.)

New Technology Allows Maple Syrup Farms to Adapt and Thrive with Global Warming

“Tom Morse, left, and his father, Burr, at work on their maple farm in Vermont.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 11) Scientists say the tapping season — the narrow window of freezing nights and daytime temperatures over 40 degrees needed to convert starch to sugar and get sap flowing — is on average five days shorter than it was 50 years ago. But technology developed over the past decade and improved in recent years offers maple farmers like Mr. Morse a way to offset the effects of climate change with high-tech tactics that are far from natural.

Today, five miles of pressurized blue tubing spider webs down the hillside at Morse Farm, pulling sap from thousands of trees and spitting it into tubs like an immense, inverse IV machine. Modern vacuum pumps are powerful enough to suck the air out of a stainless steel dairy tank and implode it, and they help producers pull in twice as much sap as before.
“You can make it run when nature wouldn’t have it run,” Mr. Morse said.
His greatest secret weapon is a reverse-osmosis machine that concentrates the sap by pulling it through sensitive membranes, greatly increasing the sugar content before it even hits the boiler. The $8,000 instrument with buttons and dials looks like it belongs in a Jetsons-era laboratory more than in a Vermont sugarhouse. But it saves more fuel and money than every other innovation combined. With it Mr. Morse can process sap into syrup in 30 minutes, something that used to take two hours.
. . .
The biggest United States maple farmers have expanded their production acreage and are tapping more trees than ever before: the total was 5.5 million taps last year, compared with slightly over 4 million taps 10 years earlier.
As a result, United States maple syrup production hit a new high in 2011. In Vermont, the top-producing state, sap yield per tap has risen over the past decade.

For the full story, see:
JULIA SCOTT. “Maple Syrup: Old-Fashioned Product, Newfangled Means of Production.” The New York Times, First Section (Sun., March 31, 2013): 11.
(Note: ellipsis added.)
(Note: the online version of the story has the date March 30, 2013, and has the title “High-Tech Means of Production Belies Nostalgic Image of Maple Syrup.”)

Kevin Kelly Explains and Criticizes Amish Attitude toward Technology

Source of book image: http://thesocietypages.org/cyborgology/files/2012/02/kevin-kelly-book_rdax_620x349-300×285.jpg

Kevin Kelly’s book has received a lot of attention, sometimes in conjunction with Steven Johnson’s Where Good Ideas Come From, with which it shares some themes. I found the Kelly book valuable, but frustrating.
The valuable part includes the discussion of the benefits of technology, and the chapter detailing Amish attitudes and practices related to technology. On the latter, for instance, I learned that the Amish do not categorically reject new technology, but believe that it should be adopted more slowly, after long community deliberation.
What frustrated me most about the book is that it argues that technology has a life of its own and that technological progress is predetermined and inevitable. (I believe that technological progress depends on enlightened government policies and active entrepreneurial initiative, neither of which is inevitable.)
In the next several weeks, I will be quoting some of the more important or thought-provoking passages in the book.

The reference for Kelly’s book, is:
Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.

The Johnson book mentioned above, is:
Johnson, Steven. Where Good Ideas Come From: The Natural History of Innovation. New York: Riverhead Books, 2010.