Economics of Technology – Page 92

Inventors Move from Declining Industries to New, Expanding Industries

Petra Moser’s comments (see below) about inventors applying similar ideas to different industries seem complementary to Burke’s emphasis on the importance of serendipitous “connections.” An inventor exposing herself to many industries’ problems and products, would be more likely to see additional applications for inventions originally developed for another industry.

(p. 3) By some logic, there is no earthly reason why bicycles should still exist.

They are a quaint, 19th-century invention, originally designed to get someone from point A to point B. Today there are much faster, far less labor-intensive modes of transportation. And yet hopeful children still beg for them for Christmas, healthful adults still ride them to work, and daring teenagers still vault them down courthouse steps. The bicycle industry has faced its share of disruptive technologies, and it has repeatedly risen from the ashes.
. . .
“Much of the history of the ‘American system of manufacturing’ is the story of inventors moving from a declining industry to a new expanding industry,” says Petra Moser, an economic historian at Stanford who studies innovation. “Inventors take their skills with them.”
Gun makers learned to make revolvers with interchangeable parts in the mid-19th century, Ms. Moser says. Then those companies (and some former employees, striking out on their own) applied those techniques to sewing machines when demand for guns slackened. Later, sewing machine manufacturers began making woodworking machinery, bicycles, cars and finally trucks.
. . .
Meanwhile, we’ve already seen some of the “destruction” half of Joseph Schumpeter’s famous “creative destruction” paradigm, with many newspapers cutting staff and other production costs. Unfortunately for newspapers, historians say, the survivors in previous industries facing major technological challenges were usually individual companies that adapted, rather than an entire industry. So a bigger shakeout may yet come.
But perhaps the destruction will lead to more creativity. Perhaps the people we now know as journalists — or, for that matter, autoworkers — will find ways to innovate elsewhere, just as, over a century ago, gun makers laid down their weapons and broke out the needle and thread. That is, after all, the American creative legacy: making innovation seem as easy as, well, riding a bike.

For the full commentary, see:
CATHERINE RAMPELL. “Ideas & Trends; How Industries Survive Change. If They Do.” The New York Times, Week in Review Section (Sun., November 15, 2008): 3.
(Note: ellipses added.)

“In Spite of the Economic Crisis and Unemployment . . . Civilization’s Progress is Going Faster and Faster”

The Palace of Discovery mentioned in the passage below was a part of the 1937 Paris Exposition.

(p. 206) The mastermind behind the Palace of Discovery, French Nobel Prize laureate Jean Perrin, wrote, “In spite of the wars and the revolutions, in spite of the economic crisis and unemployment, through our worries and anxieties, but also through our hopes, civilization’s progress is going faster and faster, thanks to ever-more flexible and efficient techniques, to farther- and farther-reaching lengths. . . . Almost all of them have appeared in less than a century, and have developed or applied inventions now known by all, which seem to have fulfilled or even passed the desires expressed in our old fairy tales.”

Source:
Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor’s Heroic Search for the World’s First Miracle Drug. New York: Three Rivers Press, 2007.
(Note: ellipsis in the title is added; ellipsis in the quoted passage is in the original.)

Since Wire Rope Had Not Been Tried, Entrepreneur Roebling Had to Self-Finance His Innovation

(p. 178) It was a bridge across the Niagara that would change life for the nail and wire makers. In 1831 a German engineer had emigrated from Mühlhausen in Saxony to America, where he founded the city (p. 179) of Saxonburg, Pennsylvania (having refused to settle in the American South because of his views on slavery). He then worked as a farmer, as a surveyor on the Pennsylvania Canal and finally as a railway engineer. His name was John Roebling, and he had a strange obsession with wire ropes. Since nobody in America had ever tried to make that kind of rope, the idea was not easy to promote. After failing to interest the firm of Washburn & Company, in Worcester, Massachusetts (we will return to this firm in our story), in 1848 Roebling moved to Trenton, New Jersey, and set up on his own.

After practicing his technique on a number of small bridges in Pennsylvania and Delaware, Roebling finally got a contract for the 3,640 wires into a compact, uniformly tensioned wire cable. Then, using a kite to get the cable to the other side of the river, he went on to finish the first-ever wire suspension bridge, 821 feet in length and strong enough to take the full weight of a train. The bridge opened to rail traffic on March 16, 1855.

Because of his success at Niagara, Roebling’s cable-spinning technique soon became standard on all suspension bridges. He put his name in the history books with his next job: the Brooklyn Bridge.

Source:
Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible – and Other Journeys. Boston: Back Bay Books, 1997.
(Note: ellipsis added.)

Inability to Patent Sulfa, Delayed Its Marketing

When new uses of old, unpatentable drugs are discovered, there seems to be inadequate incentive to publicize them, and bring them to market. (For example, I think I have seen research suggesting that aspirin and fish oil capsules, are as effective in fighting heart disease as some newer drugs, but are nonoptimally utilized because of perverse incentives.) Maybe a revision of the patent law should be considered that permits some patenting of new uses of old drugs and substances?

(p. 172) It was wonderful that this powerful, inexpensive medicine was now available, but for a year after the Pasteur Institute announcement, no one marketed it seriously in its pure form as a medicine. Because it was not patentable, it was difficult for major chemical or drug firms to see a way to make much of a profit from it. It was not until months after the Pasteur group’s first publication on sulfa that the president of Rhône-Poulenc, an industrial supporter of Fourneau’s laboratory, visited the Pasteur Institute to hear about it. After talking with the researchers he decided to launch Septazine, a variation on pure sulfa that he felt was different enough to allow patenting—and hence profits. Septazine reached the marketplace in May 1936.

French Entrepreneur Fourneau Was Against Law, But Used It

The existence and details of patent laws can matter for creating incentives for invention and innovation. The patent laws in Germany and France in the 1930s reduced the incentives for inventing new drugs.

(p. 141) German chemical patents were often small masterpieces of mumbo jumbo. It was a market necessity. Patents in Germany were issued to protect processes used to make a new chemical, not, as in America, the new chemical itself; German law protected the means, not the end. . . .
. . .
(p. 166) Fourneau decided that if the French were going to compete, the nation’s scientists would either have to discover their own new drugs and get them into production before the Germans could or find ways to make French versions of German compounds before the Germans had earned back their research and production costs—in other words, get French versions of new German drugs into the market before the Germans could lower their prices. French patent laws, like those in Germany, did not protect the final product. “I was always against the French law and I thought it was shocking that one could not patent one’s invention,” Fourneau said, “but the law was what it was, and there was no reasons not to use it.”

In Geology, Economic Growth Caused Scientific Progress

(p. 130) . . . , the major problem inhibiting England’s industrial development was the state of the roads. So the introduction of waterborne transportation on the new canals triggered massive economic expansion because these waterways transported coal (and other raw materials) much faster and cheaper than by packhorse or wagon. In 1793 a surveyor called William Smith was taking the first measurements in preparation for a canal that was to be built in the English county of Somerset, when he noticed something odd. (p. 131) Certain types of rock seemed to lie in levels that reappeared, from time to time, as the rock layer dipped below the surface and then re-emerged across a stretch of countryside. During a journey to the north of England (to collect more information about canal-construction techniques), Smith saw this phenomenon happening everywhere. There were obviously regular layers of rock beneath the surface which were revealed as strata where a cliff face of a valley cut into them. In 1796 Smith discovered that the same strata always had the same fossils embedded in them. In 1815, after ten years of work, he compiled all that he had learned about stratification in the first proper colored geological map, showing twenty-one sedimentary layers. Smith’s map galvanized the world of fossil-hunting.

Source:
Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible – and Other Journeys. Boston: Back Bay Books, 1997.
(Note: ellipsis added.)

Vulcanized Rubber Due to Serendipitous Entrepreneurial Alertness

(p. 46) The problem with rubber was that it wasn’t a very versatile material. Macintosh found, for example, that in very hot weather his raincoats would “sweat,” and in freezing conditions they would crack. The solution to this particular problem came, as ever with innovation, by accident. In 1839 a young American working in the Roxbury India Rubber Company in Roxbury, Massachusetts, was experimenting with his raw materials one day when he accidentally let a mixture of rubber and sulfur drop onto a hot stove. The next morning he saw that the rubber had charred, like leather, instead of melting. He correctly inferred that if he could stop the charring at the right point, he’d have rubber that might behave like waterproof leather. The sulfur had vulcanized (he coined the word) the rubber in such a way that it would retain its shape and elasticity over a wide range of temperatures. So now rubber could be hard or elastic, as required.

Source:
Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible – and Other Journeys. Boston: Back Bay Books, 1997.
(Note: italics in original.)

Industrialist Duisberg Made Domagk’s Sulfa Discovery Possible

(p. 65) . . . Domagk’s future would be determined not only by his desire to stop disease but also by his own ambition, his family needs, and the plans of a small group of businessmen he had never met. He probably had heard of their leader, however, one of the preeminent figures in German business, a man the London Times would later eulogize as “the greatest industrialist the world has yet had.” His name was Carl Duisberg.

Duisberg was a German version of Thomas Edison, Henry Ford, and John D. Rockefeller rolled into one. He had built an empire of science in Germany, leveraging the discoveries of dozens of chemists he employed into one of the most profitable businesses on earth. He knew how industrial science worked: He was himself a chemist. At least he had been long ago. Now, in the mid-1920s, in the twilight of his years, his fortunes made, his reputation assured, he often walked in his private park alone—still solidly built, with his shaved head and a bristling white mustache, still a commanding presence in his top hat and black overcoat—through acres of forest, fountains, classical statuary, around the pond in his full-scale Japanese garden by the lacquered teahouse, over his steams, and across his lawns.

Supporters of Whaling Industry Objected to Light from Gas

In the process of creative destruction, the industry that is being destroyed often seeks to protect itself from the new innovation:

(p. 45) In England, objectors to gaslight argued that it undercut the whaling industry.

Source:
Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible – and Other Journeys. Boston: Back Bay Books, 1997.

Eastman Was a Self-Financed Entrepreneur

Mark Casson has argued that the more original the entrepreneur’s innovation, the more likely he will need to finance all, or a large part, of it himself. To the extent that this is true, it represents an important argument for allowing the accumulation of wealth (and thereby an argument against substantial personal income, and inheritance, taxes.)
Here is an example, consistent with Casson’s argument, of a self-financed entrepreneur:

(p. 36) The idea of loading film into a camera, snapping the picture and then sending the film to a store to be processed was the brainchild of an American from Rochester, New York, called George Eastman. One day in 1879, at the bank where he had worked since leaving school at the age of fourteen, he didn’t get the promotion he was expecting. So he left and used his savings to set himself up as a “Maker and Dealer in Photographic Supplies.” At this time, picture taking was a messy, cumbersome and expensive business, involving glass-late negatives, buckets of chemicals an monster wooden cameras. When Eastman had finished his experiments with the process, his slogan promised, “You press the button. We do the rest.”

Source:
Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible – and Other Journeys. Boston: Back Bay Books, 1997.

James Burke (and Art Diamond) on the Importance of Serendipity

Source of book image: http://www.hachettebookgroup.com/_images/ISBNCovers/Covers_Enlarged/9780316116107_388X586.jpg

Like other James Burke books, The Pinball Effect is a good source of interesting and thought-provoking stories and examples, usually related to science and technology. One of his themes in the book is the importance of serendipity in making unanticipated connections.

My (and not Burkes’) musings on serendipity:

Serendipity might be an example of Hayek’s local knowledge, that the free market encourages the entrepreneur to take advantage of. Serendipity is an occurrence of one person in a particular time and place, with a mind prepared to be alert for it. As such it could not be planned by a central authority, and would usually be vetoed by a committee decision process. To maximally benefit from serendipity, we need a system that allows the motivated individual to pursue their discoveries.

Burke’s musings on serendipity:

(p. 3) In every case, the journeys presented here follow unexpected paths, because that’s how life happens. We strike out on a course only to find it altered by the action of another person, somewhere else in time and space. As a result, the world in which we live today is the end-product of millions of these kinds of serendipitous interactions, happening over thousands of years.

Source:
Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible – and Other Journeys. Boston: Back Bay Books, 1997.