Economics of Technology – Page 75

Ellison and Jobs on Money

(p. 299) . . . Jobs and his family went to Hawaii for Christmas vacation. Larry Ellison was also there, as he had been the year (p. 300) before. “You know, Larry, I think I’ve found a way for me to get back into Apple and get control of it without you having to buy it,” Jobs said as they walked along the shore. Ellison recalled, “He explained his strategy, which was getting Apple to buy NeXT, then he would go on the board and be one step away from being CEO.” Ellison thought that Jobs was missing a key point. “But Steve, there’s one thing I don’t understand,” he said. “If we don’t buy the company, how can we make any money?” It was a reminder of how different their desires were. Jobs put his hand on Ellison’s left shoulder, pulled him so close that their noses almost touched, and said, “Larry, this is why it’s really important that I’m your friend. You don’t need any more money.”
Ellison recalled that his own answer was almost a whine: “Well, I may not need the money, but why should some fund manager at Fidelity get the money? Why should someone else get it? Why shouldn’t it be us?”
“I think if I went back to Apple, and I didn’t own any of Apple, and you didn’t own any of Apple, I’d have the moral high ground,” Jobs replied.
“Steve, that’s really expensive real estate, this moral high ground,” said Ellison. “Look, Steve, you’re my best friend, and Apple is your company. I’ll do whatever you want.”

Source:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.
(Note: ellipsis added.)

Poor People Want Washing Machines

The wonderful clip above is from Hans Rosling’s TED talk entitled “The Magic Washing Machine.”
He clearly and strongly presents his central message that the washing machine has made life better.

What was the greatest invention of the industrial revolution? Hans Rosling makes the case for the washing machine. With newly designed graphics from Gapminder, Rosling shows us the magic that pops up when economic growth and electricity turn a boring wash day into an intellectual day of reading.

Source of video clip summary:
http://www.ted.com/talks/hans_rosling_and_the_magic_washing_machine.html

The version of the clip above is embedded from YouTube, where it was posted by TED: http://youtu.be/BZoKfap4g4w

It can also be viewed at the TED web site at:
http://www.ted.com/talks/hans_rosling_and_the_magic_washing_machine.html

(Note: I am grateful to Robin Kratina for telling me about Rosling’s TED talk,)
(Note: I do not agree with Rosling’s acceptance of the politically correct consensus view that the response to global warning should mainly be mitigation and green energy—to the extent that a response turns out to be necessary, I mainly support adaptation, as suggested in many previous entries on this blog.)

“Did Alexander Graham Bell Do Any Market Research Before He Invented the Telephone?”

(p. 170) After the Macintosh team returned to Bandley 3 that afternoon, a truck pulled into the parking lot and Jobs had them all gather next to it. Inside were a hundred new Macintosh computers, each personalized with a plaque. “Steve presented them one at a time to each team member, with a handshake and a smile, as the rest of us stood around cheering,” Hertzfeld recalled. It had been a grueling ride, and many egos had been bruised by Jobs’s obnoxious and rough management style. But neither Raskin nor Wozniak nor Sculley nor anyone else at the company could have pulled off the creation of the Macintosh. Nor would it likely have emerged from focus groups and committees. On the day he unveiled the Macintosh, a reporter from Popular Science asked Jobs what type of market research he had done. Jobs responded by scoffing, “Did Alexander Graham Bell do any market research before he invented the telephone?”

Source:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.
(Note: italics in original.)

Health Care Costs Can Be Lowered by Less Waste and More Cost-Reducing Innovation

(p. 234) Melinda Beeuwkes Buntin and David Cutler discuss “The Two Trillion Dollar Solution: Saving Money by Modernizing the Health Care System.” “Two sorts of savings are possible in health care. The first is eliminating waste and inefficiency. The most commonly cited estimate is that 30 percent of the money spent on medical care does not buy care worth its cost. Medicare costs per capita in Minneapolis, for example, are about half those in Miami, yet Miami does not have better health outcomes. International comparisons yield the same conclusion. . . . Second, reform might stimulate cost-reducing innovation instead of the continuous cost increases that accompany current innovation. For nearly 20 years, scholars have argued that generous reimbursement policies for medical care have led to innovations that almost always increase health care costs. Changing that dynamic by investing in research about what works and rewarding health care providers who choose efficient treatments could have a dramatic effect on cost growth. . . . Reducing costs by 30 percent will take time and effort, but it is not inconceivable over the long term. Experience in the health care sector and other industries suggests that cost reductions on the order of 1.5-to-2.0 percentage points per year are within reach.”

Buntin and Cutler as quoted in:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 24, no. 2 (Fall 2009): 231-38.
(Note: ellipses in original.)

The Buntin and Cutler report is:
Buntin, Melinda Beeuwkes, and David Cutler. “The Two Trillion Dollar Solution: Saving Money by Modernizing the Health Care System.” Washington, D.C.: Center for American Progress, 2009.

With Scorned Ideas, and Without College, Inventor and Entrepreneur “Ovshinsky Prevailed”

“Stanford R. Ovshinsky and Iris M. Ovshinsky founded Energy Conversion Laboratories in 1960.” Source of caption and photo: online version of the NYT obituary quoted and cited below.

(p. A23) Stanford R. Ovshinsky, an iconoclastic, largely self-taught and commercially successful scientist who invented the nickel-metal hydride battery and contributed to the development of a host of devices, including solar energy panels, flat-panel displays and rewritable compact discs, died on Wednesday [October 17, 2012] at his home in Bloomfield Hills, Mich. He was 89.
. . .
His ideas drew only scorn and skepticism at first. He was an unknown inventor with unconventional ideas, a man without a college education who made his living designing automation equipment for the automobile industry in Detroit, far from the hotbeds of electronics research like Silicon Valley and Boston.
But Mr. Ovshinsky prevailed. Industry eventually credited him for the principle that small quantities or thin films of amorphous materials exposed to a charge can instantly reorganize their structures into semicrystalline forms capable of carrying significant current.
. . .
In 1960, he and his second wife, the former Iris L. Miroy, founded Energy Conversion Laboratories in Rochester Hills, Mich., to develop practical products from the discovery. It was renamed Energy Conversion Devices four years later.
Energy Conversion Devices and its subsidiaries, spinoff companies and licensees began translating Mr. Ovshinsky’s insights into mechanical, electronic and energy devices, among them solar-powered calculators. His nickel-metal battery is used to power hybrid cars and portable electronics, among other things.
He holds patents relating to rewritable optical discs, flat-panel displays and electronic-memory technology. His thin-film solar cells are produced in sheets “by the mile,” as he once put it.
. . .
“His incredible curiosity and unbelievable ability to learn sets him apart,” Hellmut T. Fritzsche, a longtime friend and consultant, said in an interview in 2005.

For the full obituary, see:
BARNABY J. FEDER. “Stanford R. Ovshinsky Dies at 89, a Self-Taught Maverick in Electronics.” The New York Times (Fri., October 19, 2012): A23.
(Note: ellipses and bracketed date added.)
(Note: the online version of the article was dated October 18, 2012.)
(Note: in the first sentence of the print version, “hybrid” was used instead of the correct “hydride.”)

Isaacson’s “Steve Jobs” Tells Us Much About the Innovative Project Entrepreneur

Source of book image: http://www.internetmonk.com/wp-content/uploads/walter-isaacson-steve-jobs1.png

Steve Jobs is one of my favorite examples of what I call the “project entrepreneur.” Walter Isaacson has written a fascinating biography of Jobs, full of memorable examples for any student of the innovative entrepreneur.
During the next few weeks, I will occasionally add entries that quote some of the more important or thought-provoking passages.

The book under review is:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

Online Employers Treat Workers More Honestly and Fairly than In-person Employers

(p. 233) John J. Horton surveys “The Condition of the Turking Class: Are Online Employers Fair and Honest?” Amazon Mechanical Turk is a “marketplace for work,” as explained at <https://www.mturk.com/mturk/welcome>. Employers post “Human Intelligence Tasks,” which can be tasks like writing keywords that accompany photos or writing bogus product reviews, and workers anywhere in the world can sign up to do them. Horton used Mechanical Turk to survey 200 respondents, who were paid 12 cents apiece for responding to a survey. Of the respondents, 111 were Americans, 58 from India, and the others from other countries. When asked what percentage of employers in their home country treat workers honestly and fairly, the average answer was 64 percent; in comparison, when asked what percentage of Mechanical Turk Requestors treated them (p. 234) fairly, the median answer was 69 percent.

Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 24, no. 2 (Spring 2010): 227-34.
(Note: ellipses in original.)

The published version of the article summarized by Taylor is:
Horton, John J. “The Condition of the Turking Class: Are Online Employers Fair and Honest?” Economics Letters 111, no. 1 (April 2011): 10-12.

American Innovators Created Synergies and Interchangeable Parts

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

(p. A13) . . . the post-Civil War industrialization had an important and largely overlooked predecessor in the first decades of the 19th century, when, as Charles Morris writes in “The Dawn of Innovation,” “the American penchant for mechanized, large-scale production spread throughout industry, presaging the world’s first mass-consumption economy.” It is a story well worth telling, and Mr. Morris tells it well.
. . .
Whole industries sprang up as the country’s population boomed and spilled over into the Middle West. The rich agricultural lands there produced huge surpluses of grain and meat, especially pork. The city of Cincinnati–whose population grew to 160,000 in 1860, from 2,500 in 1810–became known as “Porkopolis” because of the number of hogs its slaughterhouses processed annually.
Mr. Morris does a particularly good job of explaining the crucial importance of synergy in economic development, how one development leads to another and to increased growth. The lard (or pig fat) from the slaughterhouses, he notes, served as the basis for the country’s first chemical industry. Lard had always been used for more than pie crust and frying. It was a principal ingredient in soap, which farm wives made themselves, a disagreeable and even dangerous task thanks to the lye used in the process.
But when lard processing was industrialized to make soap, it led to an array of byproducts such as glycerin, used in tanning and in pharmaceuticals. Stearine, another byproduct, made superior candles. Just in the decade from the mid-1840s to the mid-1850s, Cincinnati soap exports increased 20-fold, as did the export of other lard-based products. Procter & Gamble, founded in Cincinnati in 1837 by an Irish soap maker and an English candle maker who had married sisters, grew into a giant company as the fast-rising middle class sought gentility.
Mr. Morris goes into great detail on the development of interchangeable parts–the system of making the components of a manufactured product so nearly identical that they can be easily substituted and replaced.

For the full review, see:
John Steele Gordon. “BOOKSHELF; The Days Of Porkopolis.” The Wall Street Journal (Tues., November 20, 2012): A13.
(Note: ellipses added.)
(Note: the online version of the article was updated November 19, 2012.)

The book under review, is:
Morris, Charles R. The Dawn of Innovation: The First American Industrial Revolution. Philadelphia, PA: PublicAffairs, 2012.

Edison Foresaw Phonograph Music Potential

“EUROPEAN JOURNEY; Thomas Edison, seated center, sent Adelbert Theodor Edward Wangemann, standing behind him, to France in 1889. From there Wangemann traveled to Germany to record recitations and performances.” Source of caption and photo: online version of the NYT article quoted and cited below.

Edison is often ridiculed for failing to foresee that playing music would be a major use for his phonograph invention. (Nye 1991, p. 142 approvingly references Hughes 1986, p. 201 on this point.) But if Edison failed to foresee, then why did he assign Wangemann to make the phonograph “a marketable device for listening to music”?

(p. D3) Tucked away for decades in a cabinet in Thomas Edison’s laboratory, just behind the cot in which the great inventor napped, a trove of wax cylinder phonograph records has been brought back to life after more than a century of silence.

The cylinders, from 1889 and 1890, include the only known recording of the voice of the powerful chancellor Otto von Bismarck. . . . Other records found in the collection hold musical treasures — lieder and rhapsodies performed by German and Hungarian singers and pianists at the apex of the Romantic era, including what is thought to be the first recording of a work by Chopin.
. . .
The lid of the box held an important clue. It had been scratched with the words “Wangemann. Edison.”
The first name refers to Adelbert Theodor Edward Wangemann, who joined the laboratory in 1888, assigned to transform Edison’s newly perfected wax cylinder phonograph into a marketable device for listening to music. Wangemann became expert in such strategies as positioning musicians around the recording horn in a way to maximize sound quality.
In June 1889, Edison sent Wangemann to Europe, initially to ensure that the phonograph at the Paris World’s Fair remained in working order. After Paris, Wangemann toured his native Germany, recording musical artists and often visiting the homes of prominent members of society who were fascinated with the talking machine.
Until now, the only available recording from Wangemann’s European trip has been a well-known and well-worn cylinder of Brahms playing an excerpt from his first Hungarian Dance. That recording is so damaged “that many listeners can scarcely discern the sound of a piano, which has in turn tarnished the reputations of both Wangemann and the Edison phonograph of the late 1880s,” Dr. Feaster said. “These newly unearthed examples vindicate both.”

For the full story, see:
RON COWEN. “Restored Edison Records Revive Giants of 19th-Century Germany.” The New York Times (Tues., January 31, 2012): D3.
(Note: ellipses added.)
(Note: the online version of the article is dated January 30, 2012.)

“Adelbert Theodor Edward Wangemann used a phonograph to record the voice of Otto von Bismarck.” Source of caption and photo: online version of the NYT article quoted and cited above.

Health Inefficiencies Free-Ride on “Home Run Innovations”

The article quoted below is a useful antidote to those economists who sometimes seem to argue that health gains fully justify the rise in health costs.

(p. 645) In the United States, health care technology has contributed to rising survival rates, yet health care spending relative to GDP has also grown more rapidly than in any other country. We develop a model of patient demand and supplier behavior to explain these parallel trends in technology growth and cost growth. We show that health care productivity depends on the heterogeneity of treatment effects across patients, the shape of the health production function, and the cost structure of procedures such as MRIs with high fixed costs and low marginal costs. The model implies a typology of medical technology productivity: (I) highly cost-effective “home run” innovations with little chance of overuse, such as anti-retroviral therapy for HIV, (II) treatments highly effective for some but not for all (e.g., stents), and (III) “gray area” treatments with uncertain clinical value such as ICU days among chronically ill patients. Not surprisingly, countries adopting Category I and effective Category II treatments gain the greatest health improvements, while countries adopting ineffective Category II and Category III treatments experience the most rapid cost growth. Ultimately, economic and political resistance in the United States to ever-rising tax rates will likely slow cost growth, with uncertain effects on technology growth.

Source of abstract:
Chandra, Amitabh, and Jonathan Skinner. “Technology Growth and Expenditure Growth in Health Care.” Journal of Economic Literature 50, no. 3 (Sept. 2012): 645-80.

Thiel Fellows Avoid Formal Education to Pursue Entrepreneurial Projects

“Eden Full, 20, tested her rotating solar panel in Kenya in 2010.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p.1) EDEN FULL should be back at Princeton by now. She should be hustling to class, hitting the books, acing tests. In short, she should be climbing that old-school ladder toward a coveted spot among America’s future elite.

She isn’t doing any of that. Instead, Ms. Full, as bright and poised and ambitious as the next Ivy Leaguer, has done something extraordinary for a Princetonian: she has dropped out.
It wasn’t the exorbitant cost of college. (Princeton, all told, runs nearly $55,000 a year.) She says she simply received a better offer — and, perhaps, a shot at a better education.
Ms. Full, 20, is part of one of the most unusual experiments in higher education today. It rewards smart young people for not going to college and, instead, diving into the real world of science, technology and business.
The idea isn’t nuts. After all, Bill Gates and Steve Jobs dropped out, and they did O.K.
Of course, their kind of success is rare, degree or no degree. Mr. Gates and Mr. Jobs changed the world. Ms. Full wants to, as well, and she’s in a hurry. She has built a low-cost solar panel and is starting to test it in Africa.
“I was antsy to get out into the world and execute on my ideas,” she says.
At a time when the value of a college degree is being called into question, and when job prospects for many new graduates are grimmer than they’ve been in years, perhaps it’s no surprise to see a not-back-to-school movement spring up. What is surprising is where it’s springing up, and who’s behind it.
The push, which is luring a handful of select students away from the likes of Princeton, Harvard and M.I.T., is the brainchild of Peter A. Thiel, 44, a billionaire and freethinker with a remarkable record in Sil-(p. 7)icon Valley. Back in 1998, during the dot-com boom, Mr. Thiel gambled on a company that eventually became PayPal, the giant of online payments. More recently, he got in early on a little start-up called Facebook.
Since 2010, he has been bankrolling people under the age of 20 who want to find the next big thing — provided that they don’t look for it in a college classroom. His offer is this: $50,000 a year for two years, few questions asked. Just no college, unless a class is helpful for their Thiel projects.
. . .
Ms. Full is friends with another Thiel fellow, Laura Deming, 18. Ms. Deming is clearly brilliant. When she was 12, her family moved to San Francisco from New Zealand so she could work with Cynthia Kenyon, a molecular biologist who studies aging. When Ms. Deming was 14, the family moved again, this time to the Boston area, so she could study at M.I.T.
“Families of Olympic-caliber athletes make these kinds of sacrifices all the time,” says Tabitha Deming, Laura’s mother. “When we lived nearby in Boston, we were lucky to see her once a month. She never came home for weekends.”
John Deming, Laura’s father, graduated from Brandeis University at the age of 35 but says he disdains formal education at every level. His daughter was home-schooled.
“I can’t think of a worse environment than school if you want your kids to learn how to make decisions, manage risk and take responsibility for their choices,” Mr. Deming, an investor, wrote in an e-mail. “Rather than sending them to school, turn your kids loose on the world. Introduce them to the rigors of reality, the most important of which is earning your own way.” He added, “I detest American so-called ‘education.’ ”
His daughter’s quest to slow aging was spurred by her maternal grandmother, Bertie Deming, 85, who began having neuromuscular problems a decade ago. Laura, a first-year fellow, now spends her days combing medical journals, seeking a handful of researchers worth venture capital funding, which is a continuation of her earlier work.
“I’m looking for therapies that target aging damage and slow or reverse it,” she says. “I’ve already spent six years on this stuff. So far I’ve found only a few companies, two or three I’m really bullish on.”

For the full story, see:
CAITLIN KELLY. “Drop Out, Dive In, Start Up..” The New York Times, SundayBusiness (Sun., September 16, 2012): 1 & 7.
(Note: ellipsis added.)
(Note: the online version of the article is dated September 15, 2012, and had he title “Forgoing College to Pursue Dreams.”)

“Laura Deming, left, at age 6 with her grandmother, whose neuromuscular problems have now inspired Laura to work on anti-aging technology.” Source of caption and photo: online version of the NYT article quoted and cited above.