Economics – Page 176 – artdiamondblog.com

With iTunes, Apple Leapfrogged CD Burners (a Boat Apple Had Missed)

Is the example sketched below, and in a previous entry, a case of a first mover disadvantage? Or is it simply a case of a lucky or wise bounce-back from a genuine mistake?

(p. 382) . . . [Job’s] angry insistence that the iMac get rid of its tray disk drive and use instead a more elegant slot drive meant that it could not include the first CD burners, which were initially made for the tray format. “We kind of missed the boat on that,” he recalled. “So we needed to catch up real fast.” The mark of an innovative company is not only that it comes up with new ideas first, but also that it knows how to leapfrog when it finds itself behind.

Source:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.
(Note: ellipsis and bracketed “Job’s” added.)

Solow Testifies on Irrelevance of DSGE Macro Models

In Nobel-prize-winner Robert Solow’s congressional testimony, quoted below, “DSGE” is an abbreviation for “dynamic stochastic general equilibrium.”

(p. 221) Solow argues: “It may be unusual for the Committee to focus on so abstract a question, but it is certainly natural and urgent. Here we are, still near the bottom of a deep and prolonged recession, with the immediate future uncertain, desperately short of jobs, and the approach to macroeconomics that dominates serious thinking, certainly in our elite universities and in many central banks and other influential policy circles, seems to have absolutely nothing to say about the problem. Not only does it (p. 222) offer no guidance or insight, it really seems to have nothing useful to say. . . . Especially when it comes to matters as important as macroeconomics, a mainstream economist like me insists that every proposition must pass the smell test: does this really make sense? I do not think that the currently popular DSGE models pass the smell test.”

Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 24, no. 4 (Fall 2010): 219-26.
(Note: ellipsis in original.)

Apple “Finding a Way to Leapfrog Over Its Competitors”

Isaacson says Jobs wanted two refinements in the iMac. One was new colors. The other is discussed below.
I am not sure what to make of this episode. Is Isaacson suggesting that it was good for Apple that Jobs made a mistake on the type of CD hardware to put in the iMac? That this added constraint “would then force Apple to be imaginative and bold”?
Or is the moral that good people who make a lot of quick decisions, make mistakes, sometimes big mistakes, and that Jobs found a way to bounce back from this one?

(p. 356) There was one other important refinement that Jobs wanted for the iMac: getting rid of that detested CD tray. “I’d seen a slot-load drive on a very high-end Sony stereo,” he said, “so I went to the drive manufacturers and got them to do a slot-load drive for us for the version of the iMac we did nine months later.” Rubinstein tried to argue him out of the change. He predicted that new drives would come along that could burn music onto CDs rather than merely play them, and they would be available in tray form before they were made to work in slots. “If you go to slots, you will always be behind on the technology,” Rubinstein argued.

“I don’t care, that’s what I want,” Jobs snapped back. They were having lunch at a sushi bar in San Francisco, and Jobs insisted that they continue the conversation over a walk. “I want you to do the slot-load drive for me as a personal favor,” Jobs asked. Rubinstein agreed, of course, but he turned out to be right. Panasonic came out with a CD drive that could rip and burn music, and it was available first for computers that had old-fashioned tray loaders. The effects of this (p. 357) would ripple over the next few years: It would cause Apple to be slow in catering to users who wanted to rip and burn their own music, but that would then force
Apple to be imaginative and bold in finding a way to leapfrog over its competitors when Jobs finally realized that he had to get into the music market.

Source:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

When Professors “Are Fearful, Hesitant, and Foolish” and When They “Screech, Snarl, and Spit”

(p. 243) “It is hardly possible to take very seriously any of the professoriate all of the time or most of them most of the time. They commonly are fearful, hesitant, and foolish when confronted by complex real issues and aggressive enemies, but they tend to screech, snarl, and spit when they perceive their territory, reputation, and perquisites to be threatened. They can pose as being valiant and principled, but they are inclined to disperse and camouflage themselves upon hearing the first volleys of significant battle.”

Source:
Distinguished UCLA economist William R. Allen from an interview with Daniel B. Klein as quoted in:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 25, no. 1 (Winter 2011): 239-46.

For the full article/interview, see:
Allen, William R. “A Life among the Econ, Particularly at UCLA.” Econ Journal Watch 7, no. 3 (September 2010): 205-34.

“Think Profit”

(p. 339) At the January 1998 San Francisco Macworld, Jobs took the stage where Amelio had bombed a year earlier. He sported a full beard and a leather jacket as he touted the new product strategy. And for the first time he ended the presentation with a phrase that he would make his signature coda: “Oh, and one more thing . . .” This time the “one more thing” was “Think Profit.” When he said those words, the crowd erupted in applause. After two years of staggering losses, Apple had enjoyed a profitable quarter, making $45 million. For the full fiscal year of 1998, it would turn in a $309 million profit. Jobs was back, and so was Apple.

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

Government Job Protection Regulations Reduce Youth Jobs

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

(p. A7) Socialist President François Hollande has come up with a plan to ease the problem: give €4,000 ($5,276) a year for three years to small companies that hire a young person on a permanent contract while committing to keep an employee age 57 or over.
. . .
The French government hopes as many as half a million youths will find permanent jobs over the next five years due to the measure, which could cost the government about €1 billion a year when it is in place.
Economists say the number of real new jobs is likely to be much lower because the government will be subsidizing jobs that would have been created anyway. Only around 100,000 new jobs will be created, according to OFCE, an economic-research think tank in Paris.
French companies say they are reluctant to hire young people on permanent contracts because it gives employees a level of protection the companies say they can’t afford to grant–even if they get the subsidy proposed by Mr. Hollande.
“It’s great to have €4,000, but if the new recruit isn’t good, we don’t know how long we’ll be stuck with them,” said Philippe Lehmann, who runs Lehmann Sarl, a mechanical-parts factory in Molsheim, eastern France that employs seven people.

For the full story, see:
WILLIAM HOROBIN. “France Pins Hopes on Youth Jobs Plan.” The Wall Street Journal (Mon., December 24, 2012): A7.
(Note: ellipsis added.)
(Note: the online version of the story has the date December 23, 2012.)
(Note: the online version of the last two paragraphs quoted above contains a few extra words of elaboration at the end of each paragraph, as compared to the print version. I have underlined these words in the passages quoted above.)

How Chavez Punished Those Who Opposed Him

(p. 196) In 2004, the Hugo Chávez regime in Venezuela distributed the list of several million voters who had attempted to remove him from office throughout the government bureaucracy, allegedly to identify and punish these voters. We match the list of petition signers distributed by the government to household survey respondents to measure the economic effects of being identified as a Chávez political opponent. We find that voters who were identified as Chávez opponents experienced a 5 percent drop in earnings and a 1.3 percentage point drop in employment rates after the voter list was released.

Source:
Hsieh, Chang-Tai, Edward Miguel, Daniel Ortega, and Francisco Rodriguez. “The Price of Political Opposition: Evidence from Venezuela’s Maisanta.” American Economic Journal: Applied Economics 3, no. 2 (2011): 196-214.

“People Said He Was a Fraud, But He Turned Out to Be Right”

“Willis Whitfield with a mobile clean room in the 1960s.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B16) Half a century ago, as a rapidly changing world sought increasingly smaller mechanical and electrical components and more sanitary hospital conditions, one of the biggest obstacles to progress was air, and the dust and germs it contains.
. . .
Then, in 1962, Willis Whitfield invented the clean room.
“People said he was a fraud,” recalled Gilbert V. Herrera, the director of microsystems science and technology at Sandia National Laboratories in Albuquerque. “But he turned out to be right.”
. . .
His clean rooms blew air in from the ceiling and sucked it out from the floor. Filters scrubbed the air before it entered the room. Gravity helped particles exit. It might not seem like a complicated concept, but no one had tried it before. The process could completely replace the air in the room 10 times a minute.
Particle detectors in Mr. Whitfield’s clean rooms started showing numbers so low — a thousand times lower than other methods — that some people did not believe the readings, or Mr. Whitfield. He was questioned so much that he began understating the efficiency of his method to keep from shocking people.
“I think Whitfield’s wrong,” a scientist from Bell Labs finally said at a conference where Mr. Whitfield spoke. “It’s actually 10 times better than he’s saying.”

For the full obituary, see:
WILLIAM YARDLEY. “W. Whitfield, 92, Dies; Built Clean Room.” The New York Times (Weds., December 5, 2012): B16.
(Note: ellipses added.)
(Note: the online version of the obituary has the date December 4, 2012, and has the title “Willis Whitfield, Inventor of Clean Room That Purges Tiny Particles, Dies at 92.”)

Jobs Laid Off 3,000 from Apple to Save It from Bankruptcy

(p. 339) In his first year back, Jobs laid off more than three thousand people, which salvaged the company’s balance sheet. For the fiscal year that ended when Jobs became interim CEO in September 1997, Apple lost $1.04 billion. “We were less than ninety days from being insolvent,” he recalled.

Source:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

Internet Allows Pricing Experiments

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

(p. A10) This year, researchers in Spain studied more than 200 online retailers and found a handful of examples of price differences–including at Staples within Massachusetts–that appeared to be based on location and other factors. Those findings suggest that Staples’ price adjustments have been present at least since this summer.

It is difficult for online shoppers to know why, or even if, they are being offered different deals from other people. Many sites switch prices at lightning speed in response to competitors’ offerings and other factors, a practice known as “dynamic pricing.” Other sites test different prices but do so without regard to the buyer’s characteristics.
To find differences that weren’t purely the result of dynamic pricing or randomized tests, the Journal conducted preliminary scans by simulating visits from different computers to a variety of e-commerce sites. If a website showed different prices or offers, the Journal then analyzed the site’s computer code and conducted follow-up testing.
The Journal’s tests, which were conducted in phases between August and December, indicated that some big-name retailers are experimenting with offering different prices and products to different users.
Some sites, for example, gave discounts based on whether or not a person was using a mobile device. A person searching for hotels from the Web browser of an iPhone or Android phone on travel sites Orbitz and CheapTickets would see discounts of as much as 50% off the list price, Orbitz said.
. . .
At home-improvement site Lowe’s Cos., . . . prices depend on location. For example, a refrigerator in the Journal’s tests cost $449 in Chicago, Los Angeles and Ashburn, Va., but $499 in seven other test cities. Lowe’s said online shoppers receive the lower of the online store price or the price at their local Lowe’s store as indicated by their ZIP Code.
Home Depot’s website offered price variations that appeared to be based on the nearest brick-and-mortar store as well. A 250-foot spool of electrical wiring fell into six pricing groups, including $70.80 in Ashtabula, Ohio; $72.45 in Erie, Pa.; $75.98 in Olean, N.Y and $77.87 in Monticello, N.Y.
. . .
The differences found on the Staples website presented a complex pricing scheme. The Journal simulated visits to Staples.com from all of the more than 42,000 U.S. ZIP Codes, testing the price of a Swingline stapler 20 times in each. In addition, the Journal tested more than 1,000 different products in 10 selected ZIP Codes, 10 times in each location.
The Journal saw as many as three different prices for individual items. How frequently a simulated visitor saw low and high prices appeared to be tied to the person’s ZIP Code. Testing suggested that Staples tries to deduce people’s ZIP Codes by looking at their computer’s IP address. This can be accurate, but isn’t foolproof.
In the Journal’s tests, ZIP Codes whose center was farther than 20 miles from a Staples competitor saw higher prices 67% of the time. By contrast, ZIP Codes within 20 miles of a rival saw the high price least often, only 12% of the time.

For the full story, see:
JENNIFER VALENTINO-DEVRIES, JEREMY SINGER-VINE and ASHKAN SOLTANI. “Websites Vary Prices, Deals Based on Users’ Information.” The Wall Street Journal (Mon., December 24, 2012): A1 & A10.
(Note: ellipses added.)

“The Arpanet Was Not an Internet”

“Xerox PARC headquarters.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A11) A telling moment in the presidential race came recently when Barack Obama said: “If you’ve got a business, you didn’t build that. Somebody else made that happen.” He justified elevating bureaucrats over entrepreneurs by referring to bridges and roads, adding: “The Internet didn’t get invented on its own. Government research created the Internet so that all companies could make money off the Internet.”
. . .
Robert Taylor, who ran the ARPA program in the 1960s, sent an email to fellow technologists in 2004 setting the record straight: “The creation of the Arpanet was not motivated by considerations of war. The Arpanet was not an Internet. An Internet is a connection between two or more computer networks.”
If the government didn’t invent the Internet, who did? Vinton Cerf developed the TCP/IP protocol, the Internet’s backbone, and Tim Berners-Lee gets credit for hyperlinks.
But full credit goes to the company where Mr. Taylor worked after leaving ARPA: Xerox. It was at the Xerox PARC labs in Silicon Valley in the 1970s that the Ethernet was developed to link different computer networks. Researchers there also developed the first personal computer (the Xerox Alto) and the graphical user interface that still drives computer usage today.
According to a book about Xerox PARC, “Dealers of Lightning” (by Michael Hiltzik), its top researchers realized they couldn’t wait for the government to connect different networks, so would have to do it themselves. “We have a more immediate problem than they do,” Robert Metcalfe told his colleague John Shoch in 1973. “We have more networks than they do.” Mr. Shoch later recalled that ARPA staffers “were working under government funding and university contracts. They had contract administrators . . . and all that slow, lugubrious behavior to contend with.”

For the full commentary, see:
Gordon Crovitz. “INFORMATION AGE; Who Really Invented the Internet?” The Wall Street Journal (Mon., July 23, 2012): A11.
(Note: ellipsis between paragraphs was added; ellipsis internal to last paragraph was in original.)
(Note: the online version of the commentary has the date July 22, 2012.)

I read the Hiltzik book several years ago, and my memory of it is not sharp, but I remember thinking that it was a useful book:
Hiltzik, Michael A. Dealers of Lightning: Xerox PARC and the Dawn of the Computer Age. New York: HarperBusiness, 1999.