Innovation Not Highly Correlated with R&D Spending

InnovationAndRandDGraph2011-11-11.jpg

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

(p. B9) Many companies say innovation is a top priority, but even those who spend the most on research and development can have little to show for it, a new study says.

A report expected to be released Monday by consulting firm Booz & Co., says that few of the biggest R&D spenders crack the top 10 in terms of being considered “innovative” by their peers.
Booz identified 1,000 companies with the biggest 2010 research-and-development budgets and invited 600 executives from those companies to rate which ones they deemed most innovative. The most frequent pick was Apple Inc.–the 70th biggest research-and-development spender–followed by Google Inc. and 3M Co., also not among the top-20 spenders.

For the full story, see:
MELISSA KORN. “Top ‘Innovators’ Rank Low in R&D Spending.” The Wall Street Journal (Mon., OCTOBER 24, 2011): B9.

Lazear’s Popcorn Theory of Economic Destruction

(p. A15) . . . , consider two theories of economic destruction, which can be labeled the domino theory and the popcorn theory. Everyone knows the domino theory; it is the analogy that is commonly used to denote contagion. If one domino falls, it will topple the others, and conversely, if the first domino remains upright, the others will not fall. It is this logic that underlies most bailout strategies.
The popcorn theory emphasizes a different mechanism. When popcorn is made (the old fashioned way), oil and corn kernels are placed in the bottom of a pan, heat is applied and the kernels pop. Were the first kernel to pop removed from the pan, there would be no noticeable difference. The other kernels would pop anyway because of the heat. The fundamental structural cause is the heat, not the fact that one kernel popped, triggering others to follow.
Many who believe that bailouts will solve Europe’s problems cite the Sept. 15, 2008 bankruptcy of Lehman Brothers as evidence of what allowing one domino to fall can do to an economy. This is a misreading of the historical record. Our financial crisis was mostly a popcorn phenomenon.
. . .
But our financial crisis was caused by factors that affected the entire system, just as all corn kernels pop when they are warmed by the same flame. This lesson is important because interpreting our crisis as primarily a contagion event leads to the wrong strategies for dealing with potential disasters. After Lehman, Europeans seem to be so taken with worries of contagion that they are failing to emphasize remedies that actually have a chance of making things better. In their case, and in ours, the solution is primarily a reduction in the bloated size of government expenditures that come about by making promises that cannot be kept.

For the full commentary, see:
EDWARD P. LAZEAR. “OPINION; The Euro Crisis: Doubting the ‘Domino’ Effect; Preventing a Greek default will not reverse the lackluster growth that has plagued the other vulnerable countries for many years now.” The Wall Street Journal (Mon., OCTOBER 31, 2011): A15.
(Note: ellipses added.)

A&P Sold Consumers Better and Lower-Priced Food

GreatA&Pbk.jpg

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

(p. A15) Mr. Levinson’s history centers on the two Hartford sons who followed their father into the business. They would spend their entire working lives at the company being known simply as “Mr. George” and “Mr. John.” Thoughtful and studious, Mr. George’s idea of excitement was a good jigsaw puzzle; Mr. John, somewhat more outgoing, liked the horses but also a daily lunch of milk and crackers. Together the brothers, neither of whom had finished high school, built what would be, for 40 years, the largest retail outlet in the world.

The brothers’ business philosophy was simple, writes Mr. Levinson: “If the company keeps its costs down and prices low, more shoppers would come through its doors, producing more profits than if it kept prices high.” The more stores they could open, the greater the take.
But the Hartfords had a public-relations problem. Since the nation’s earliest days, small family stores had served as community anchors. There were thousands across the country. Mom and pop knew every customer who came through their door; they extended credit to families down on their luck. If low-priced chains drove out such stores, what would happen to small-town America?
In fact, many mom-and-pop operations were inefficiently and incompetently run. A&P might be coldly corporate by comparison, but it offered consumers far more variety and fresher, better-quality goods at less cost to the family budget.

For the full review, see:
PATRICK COOKE. “BOOKSHELF; How a Grocer Bagged Profits; At its peak, the chain had nearly 16,000 stores. Critics charged it with competing unfairly by offering too-low prices.” The Wall Street Journal (Mon., AUGUST 29, 2011): A15.
(Note: ellipsis added.)

The book under review is:
Levinson, Marc. The Great A&P and the Struggle for Small Business in America. New York: Hill and Wang, 2011.

Haltiwanger Paper Says New Firms Create More Jobs than Old Firms

(p. A2) A recent study called into question whether size should matter at all when comparing businesses and their contribution to job creation.
The paper–co-authored by University of Maryland economist John Haltiwanger and two Census Bureau economists–confirmed that small businesses create more net new jobs, per employee, than do bigger businesses.
But the effect vanishes once each company’s age is taken into account. It is young businesses that outperform old ones, according to the paper. Size isn’t the important factor.
If you control for age, “you wipe out that effect” of small businesses creating a disproportionate share of net new jobs, says Prof. Haltiwanger. “There’s no systematic relationship. If anything it goes the opposite way of conventional wisdom.”

For the full commentary, see:
CARL BIALIK. “THE NUMBERS GUY; Sizing Up the Small-Business Jobs Machine.” The Wall Street Journal (Sat., OCTOBER 15, 2011): A2.

The Haltiwanger paper referred to in the passage above is:
Haltiwanger, John C., Ron S. Jarmin, and Javier Miranda. “Who Creates Jobs? Small Vs. Large Vs. Young.” NBER Working Paper #16300, August 2010.

Entrepreneur Julius Blank’s Greatest Pleasure Came from “Building Something from Nothing”

FairchildSemiconductorFoundersIn1988.jpg“Fairchild Semiconductor’s founders in 1988. Victor Grinich (left), Jay Last, Jean Hoerni, Julius Blank, Eugene Kleiner, Sheldon Roberts, Robert N. Noyce (seated, left,) and Gordon E. Moore.” Source of caption and photo: online version of the NYT obituary quoted and cited below.

(p. B14) Julius Blank, a mechanical engineer who helped start a computer chip company in the 1950s that became a prototype for high-tech start-ups and a training ground for a generation of Silicon Valley entrepreneurs, died on Saturday in Palo Alto, Calif.. He was 86.
. . .
Mr. Blank and his partners — who included Robert N. Noyce and Gordon E. Moore, the future founders of the Intel Corporation — began their venture as scientist-entrepreneurs in the wake of a mutiny of sorts against their common previous employer, the Nobel Prize-winning physicist William B. Shockley.
Dr. Shockley, . . . , had recruited the eight scientists from around the country in 1956 to work in his own semiconductor lab in nearby Mountain View, Calif.
The group left en masse the next year because of what its members described as Dr. Shockley’s authoritarian management style and their differences with him over his scientific approach. Dr. Shockley called it a betrayal.
Fairchild’s founders came to be branded in the lore of Silicon Valley as the “Traitorous Eight.” How that happened remains something of a mystery.
. . .
When he left Fairchild in 1969 — he was the last of the eight founding partners to depart — Mr. Blank became an investor and consultant to start-up companies and helped found the technology firm Xicor, which was sold in 2004 for $529 million to Intersil.
His former partners, in addition to founding Intel, had started Advanced Micro Devices and National Semiconductor. Mr. Kleiner had founded a venture capital firm that became an early investor in hundreds of technology companies, including Amazon.com, Google and AOL. Still, the greatest pleasure of his working life, Mr. Blank said in a 2008 interview for the archives of the Computer History Museum, a project in Silicon Valley, came with the uncertainty and camaraderie of “the early years, building something from nothing.”
Mr. Blank described a moment in the first days of Fairchild, just before production began in its factory built from nothing, when the ducts and plumbing and air-conditioning were set, and the new crystal growers and one-of-a-kind chip making machines were ready to be installed.
“I remember the day we finally got the floor tile laid,” he said. “And that night, Noyce and the rest of the guys came out and got barefoot and rolled their pants up and were swabbing the floors. I wish I had a picture of that.”

For the full obituary, see:
PAUL VITELLO. “Julius Blank, 86, Dies; Built First Chip Maker.” The New York Times (Fri., September 23, 2011): B14.
(Note: ellipses added.)
(Note: the online version of the obituary is dated September 22, 2011 and had the title “Julius Blank, Who Built First Chip Maker, Dies at 86.”)

BlankJuliusInMay2011.jpg

May 2011 photo of Julius Blank. Source of photo: online version of the NYT obituary quoted and cited above.

Steve Jobs on Public School System Monopoly

(p. A15) These days everyone is for education reform. The question is which approach is best. I favor the Steve Jobs model.
In 1984 Steve introduced the Mac with a Super Bowl ad. It ran only once. It ran for only one minute. And it shows a female athlete being chased by the helmeted police of some totalitarian regime.
At the climax, the woman rushes up to a large screen where Big Brother is giving a speech. Just as he announces, “We shall prevail,” she hurls her hammer through the screen.
If you ask me what we need to do in education, I would point you to that ad.
. . .
Steve Jobs knew all about competitive markets. He once likened our school system to the old phone monopoly. “I remember,” he said in a 1995 interview, “seeing a bumper sticker with the Bell Logo on it and it said ‘We don’t care. We don’t have to.’ And that’s what a monopoly is. That’s what IBM was in their day. And that’s certainly what the public school system is. They don’t have to care.”
We have to care. In this new century, good is not good enough. Put simply, we must approach education the way Steve Jobs approached every industry he touched. To be willing to blow up what doesn’t work or gets in the way. And to make our bet that if we can engage a child’s imagination, there’s no limit to what he or she can learn.

For the full commentary, see:
RUPERT MURDOCH. “OPINION; The Steve Jobs Model for Education Reform; If we can engage a child’s imagination, there’s no limit to what he or she can learn..” The Wall Street Journal (Sat., OCTOBER 15, 2011): A15.
(Note: ellipsis added.)

Jobs, Hope and Cash

(p. A15) ‘Ten years ago, Steve Jobs was alive, Bob Hope was alive, Johnny Cash was alive. Now we’re outta jobs, outta hope and outta cash.” I heard that from a TSA agent in New York the other day, as he eyed me for explosives. We laughed, but there was a poignant edge.
Part of the outpouring over Steve Jobs last week was that he was a huge symbol of what seems a lost world of American dynamism. The inventor in his garage changes the world. We’ll not only make the new machine powerful and fast, we’ll make it so beautiful it will make you cry. Like you’re looking at the future, like you’re looking at a baby in its crib.

For the full commentary, see:
PEGGY NOONAN. “DECLARATIONS; This Is No Time for Moderation; America can’t trim and tweak its way back to economic dynamism.” The Wall Street Journal (Sat., OCTOBER 15, 2011): A15.

Berkeley Environmentalist Sticks to Her Knitting

StofleShelbyGathersWool2011-11-10.jpg “Avid knitter Shelby Stofle, gathering wool from sheep in Vacaville Calif., hopes to set up a business making scarves and selling them at craft fairs.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A5) Shelby Stofle graduated in December from the University of California at Berkeley with $10,250 in student-loan debt–and no job offers from a dozen applications.

The 24-year-old had hoped to work in environmental conservation or sustainable agriculture but struck out even at a grocery store near her rural hometown of Suisun City, Calif.
. . .
With many employment options exhausted, she said she feels her best shot is to set up her own business, selling her hand-made scarves at craft fairs and farmers’ markets.

For the full story, see:
VAUHINI VARA. “As Jobs Vanish, Sticking to Knitting.” The Wall Street Journal (Mon., OCTOBER 31, 2011): A5.
(Note: ellipsis added.)

“Private Life Was Completely Transformed in the Nineteenth Century”

(p. 448) Private life was completely transformed in the nineteenth century – socially, intellectually, technologically, hygienically, sartorially, sexually and in almost any other respect that could be made into an adverb. Mr Marsham was born (in 1822) into a world that was still essentially medieval – a place of candlelight, medicinal leeches, travel at walking pace, news from afar that was always weeks or months old – and lived to see the introduction of one marvel after another: steamships and speeding trains, telegraphy, photography, anaesthesia, indoor plumbing, gas lighting, antisepsis in medicine, refrigeration, telephones, electric lights, recorded music, cars and planes, skyscrapers, motion pictures, radio, and literally tens of thousands of tiny things more, from mass-produced bars of soap to push-along lawnmowers.
It is almost impossible to conceive just how much radical day-to-day change people were exposed to in the nineteenth century, particularly in the second half. Even something as elemental as the weekend was brand new.

Source:
Bryson, Bill. At Home: A Short History of Private Life. New York: Doubleday, 2010.

In Greece’s Bloated Bureaucracy “It’s All about Who You Know”

GreekGovernmentWorkerProtest2011-11-10.jpg “Police officers, firefighters and coast guard officers protested austerity measures in Athens on Monday.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A5) ATHENS — Stories of eye-popping waste and abuse of power among Greece’s bureaucrats are legion, including officials who hire their wives, and managers who submit $38,000 bills for office curtains.

The work force in Greece’s Parliament is so bloated, according to a local press investigation, that some employees do not even bother to come to work because there are not enough places for all of them to sit.
. . .
Some experts believe that Greece could reap significant savings by reducing its bureaucracy, which employs one out of five workers in the country and by some estimates could be trimmed by as much as a third without materially affecting services. But though salaries have been cut, the government has yet to lay off anyone.
The main reason is also one of the very reasons that Greece got into trouble in the first place: The government is in many ways an army of patronage appointments built up over decades. When election time rolls around, state workers become campaign workers, and their reach is enormous. There are so many of them that almost every family has one.
. . .
Whether the right workers will be laid off remains an open question. “A lot of people in the government are terrified,” Mr. Hlepas said. “They don’t think any of those people over in Parliament are going to go. They think the ones that do the work will get cut.”
Thomas Tsamatsoulis, 41, who works for the Greek equivalent of the Federal Aviation Administration, said he found himself on an early list headed for the reserve pool, though he had been sent to the United States for electronics training and now has a skill that is rare in his agency. At the same time, Mr. Tsamatsoulis said, the agency, which has just two airplanes, has more than 15 pilots.
“You want to believe the government will do this right,” he said. “But it is very difficult. It’s not how it has worked in the past. It’s all about who you know.”
Greece’s bureaucracy has been growing steadily since democracy was reinstated in 1974, with each new administration adding its supporters to the payroll — and wages rising steeply in the past decade, experts say.
“There was really a party going on,” said Yannis Stournaras, an economist and the director of the Foundation for Economic and Industrial Research in Athens. “The government kept adding bonuses and benefits and pensions. At election time there was a boom cycle as they handed out jobs.”
“Now they need to cut,” he added. “But they have already lost precious time.”
Stories of excesses abound. Mr. Papandreou told Parliament that one of his ministers found a predecessor’s $38,000 bill for curtains when the Socialists returned to power in 2009. Mr. Mossialos said he found that his own ministry, for media and communication, was spending $750,000 a year for office space for just 11 people.
But some experts question whether the culture of bloat and favoritism will ever be conquered.

For the full story, see:
SUZANNE DALEY. “Bureaucracy in Greece Defies Efforts to Cut It.” The Wall Street Journal (Tues., October 18, 2011): A2.
(Note: ellipses added.)
(Note: the online version of the article is dated October 17, 2011.)

Venezuelans Flee Chávez’s Socialism

VenezuelanHomicide2011-11-10.jpg“Street crime, such as a man’s killing in Caracas last year, is high.” Note the big-brother-sized image of Chávez surveying what his socialism has wrought. Source of quoted part of caption and photo: online version of the WSJ article quoted and cited below.

Those who favor socialism should observe Venezuela carefully and ponder whether they like what they see.

(p. A13) Gerardo Urdaneta moved to Houston from Venezuela for a job in 1998, the same year Hugo Chávez was first elected president. Mr. Urdaneta, an energy-shipping specialist, planned for a temporary stop and wouldn’t even buy a house.

Thirteen years later, Mr. Chávez is still in power, Mr. Urdaneta is still here. He has been joined by thousands of other Venezuelans, and Houston shops now stock native delicacies like Pampero aged rum and guayanés cheese.
“There are Venezuelans everywhere,” Mr. Urdaneta, 50 years old, said. “Before we were passing through. That’s not the case anymore.”
Waves of white-collar Venezuelans have fled the country’s high crime rates, soaring inflation and expanding statist controls, for destinations ranging from Canada to Qatar. The top U.S. destinations are Miami, a traditional shopping mecca for Venezuelans, and Houston, which has long-standing energy ties to Venezuela, a major oil exporter.
There were some 215,000 Venezuelans in the U.S. in 2010, up from about 91,500 in 2000, according to the U.S. Census Bureau. The number of Venezuelans living in Spain has quintupled in the same period to more than 40,000, and the number of Venezuelan-born Spaniards has more than doubled to 90,000.

For the full story, see:
ÁNGEL GONZÁLEZ and EZEQUIEL MINAYA. “Venezuelan Diaspora Booms Under Chávez.” The Wall Street Journal (Mon., October 17, 2011): A13.
(Note: ellipsis added.)
(Note: the following phrase, at the end of the quoted portion above, is in the online, but not the print, version of the article: “and the number of Venezuelan-born Spaniards has more than doubled to 90,000.”

ZulianStafanoHoustonChocolateShop2011-11-10.jpg “Venezuelan exile Stefano Zullian owns a Houston chocolate shop.” Source of caption and photo: online version of the WSJ article quoted and cited above.

VenezuelanHomicideEmigrationGraph2011-11-10.jpgSource of graph: online version of the WSJ article quoted and cited above.