Category: Economics

New York Forces Entrepreneur to Subsidize His Competitor

(p. A24) Last year, the State Legislature levied a new tariff on most of the businesses in the New York City region. The metropolitan commuter transportation mobility tax requires employers to set aside 34 cents for every $100 in payroll costs, and hand the money over to a battered, barely breathing patient on the state’s fiscal operating table: the Metropolitan Transportation Authority.

The tax has not worked out so well. So far, its projected revenues are coming in about $400 million below the state’s estimates — which, in part, will mean reduced subway and bus service for New Yorkers starting this summer. It has also prompted a furious backlash from suburban officials who resent bankrolling an agency that, they say, benefits the city at the expense of its surrounding counties.
And then there is William Schoolman, 69, amateur activist, self-described ”prototypical entrepreneur,” and proprietor of the Hampton Luxury Liner bus fleet. In December, he filed a lawsuit in State Supreme Court claiming the tax is unconstitutional and demanding its repeal. The reason?
”Competition,” Mr. Schoolman said in a recent telephone interview, anger rising in his voice. ”This is the first time that I ever had to pay a subsidy directly to my competitor. That’s the thing that really bothers me.”

For the full story, see:
MICHAEL M. GRYNBAUM. “Suing Over a Transit Tax, in the Name of Competition.” The New York Times (Tues., February 16, 2010): A24.

Entrepreneur Pleases Dwarfs; Critics Are Appalled

DwarfAngels2010-03-16.JPG“Yang Jinlu, 18, left, and Zhang Yinghua, 37.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A10) KUNMING, China — Chen Mingjing’s entrepreneurial instincts vaulted him from a peasant upbringing to undreamed-of wealth, acquired in ventures ranging from making electric meters to investing in real estate. But when he was 44, the allure of making money for money’s sake began to wane. He wanted to run a business that accomplished some good.

And so last September, Mr. Chen did what any socially aware entrepreneur might do: He opened a theme park of dwarfs, charging tourists about $9 a head to watch dozens of dwarfs in pink tutus perform a slapstick version of “Swan Lake” along with other skits.
Mr. Chen has big plans for his Kingdom of the Little People. Imagine a $115 million universe in miniature, set amid 13,000 acres of rolling hills and peaceful lakes in southern China’s Yunnan Province, with tiny dogs, tiny fruit trees, a 230-foot-high performance hall that looks like the stump of a prehistoric tree and standard-size guest cabins.
Also, a black BMW modified to resemble a flying saucer, from which dwarfs will spill forth to begin their performances.
“It will be like a fairy tale,” Mr. Chen said. “Everything here I have designed myself.”
. . .
Critics say displaying dwarfs is at best misguided and at worst immoral, a throwback to times when freak shows pandered to people’s morbid curiosity.
“Are they just going there to look at curious objects?” asked Yu Haibo, who leads a volunteer organization for the disabled in Jilin Province in the northeast.
“I think it is horrible,” said Gary Arnold, the spokesman for Little People of America Inc., a dwarfism support group based in California. “What is the difference between it and a zoo?” Even the term “dwarf” is offensive to some; his organization prefers “person of short stature.”
. . .
But there is another view, and Mr. Chen and some of his short-statured workers present it forcefully. One hundred permanently employed dwarfs, they contend, is better than 100 dwarfs scrounging for odd jobs. They insist that the audiences who see the dwarfs sing, dance and perform comic routines leave impressed by their skills and courage.
Many performers said they enjoyed being part of a community where everyone shares the same challenges, like the height of a sink. “Before, when we were at home, we didn’t know anyone our size. When we hang out together with normal-size people, we can not really do the same things,” said Wu Zhihong, 20. “So I really felt lonely sometimes.”
. . .
Supporters and critics agree on one point: the fact that the park is awash in job applications shows the disturbing dearth of opportunities for the disabled in China. Cao Yu, Mr. Chen’s assistant, says she receives three or four job inquiries a week.
“Under the current social situation in China, they really will not be able to find a better employment situation,” she said.
. . .
Mr. Chen said his employees had gained self-respect and self-sufficiency. “It doesn’t really matter to me what other people say,” he said. “The question is whether meeting me has changed their lives.”

For the full story, see:

SHARON LaFRANIERE. “Kunming Journal; A Miniature World Magnifies Dwarf Life.” The New York Times (Thurs., March 4, 2010): A10.
(Note: ellipses added.)
(Note: the online version of the article is dated March 3, 2010.)

DwarfsRelax2010-03-16.JPG “Workers relaxed in the dormitories.” Source of caption and photo: online version of the NYT article quoted and cited above.

An “Entrepreneur’s Visa” to Let the Future Sergey Brin In

(p. A19) . . . , there is one way to create a lot more jobs without spending federal money. Let’s import them. More precisely, let’s import the people who create them: entrepreneurs.

A bipartisan bill that would begin to do just that was introduced on Feb. 24 by Sens. John Kerry (D., Mass.) and Richard Lugar (R., Ind.). Their “Startup Visa Act” would create a new, two-year visa for immigrant entrepreneurs whose firms attract at least $250,000 in financing from American angel investors or venture capital firms.
. . .
Here’s a way to improve on the Kerry-Lugar plan. Create a true “job creator’s visa,” one tied directly and only to job creation by new immigrant entrepreneurs. The visa could be a temporary one for immigrants already here on another visa who establish a business. It could then be extended if the firm hires at least one American non-family resident. The visa should become permanent once the enterprise crosses a certain job threshold (such as five or 10 workers). But it would not be tied to financing.
. . .
Google was founded by Sergey Brin, a Russian immigrant, and American Larry Page by borrowing funds from their own credit cards. Why on earth would we want to create an entrepreneurs’ visa that couldn’t let in the future Sergey Brin?

For the full commentary, see:
ROBERT E. LITAN. “Visas for the Next Sergey Brin; To create more jobs, let’s import more employers.” The Wall Street Journal (Mon., MARCH 8, 2010): A19.
(Note: ellipses added.)
(Note: the online version of the article is dated MARCH 7, 2010.)

United States Exports “High-Value-Added Services that Support Well-Paying Jobs”

ServiceImportsExportsGraph2010-03-16.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A23) Exports of American services have jumped by 84 percent since 2000, while the growth rate among goods was 66 percent. America trails both China and Germany in sales of goods abroad, but ranks No. 1 in global services by a wide margin. And while trade deficits in goods have been enormous — $840 billion in 2008 — the country runs a large and growing surplus in services: we exported $144 billion more in services than we imported, dwarfing the surpluses of $75 billion in 2000 and $58 billion in 1992.

Equally important, Commerce Department data show that the United States is a top-notch competitor in many of the high-value-added services that support well-paying jobs.
. . .
. . . , will Washington offer tax breaks or other export incentives? While businesses may clamor for them, these would be a setback for freer trade — after all, for years it has been America that has been hectoring other countries to end their subsidies to exporters. Will Washington try to pick winners in the global marketplace, like green energy? More often than not, this kind of industrial policy wastes money, fosters inefficiency and creates few permanent jobs.

For the full story, see:
W. MICHAEL COX. “An Order of Prosperity, to Go.” The New York Times (Weds., February 17, 2010): A23.
(Note: ellipses added.)

At Odds with Academic Culture, Wiki Programmer Adams Released Early and Released Often

(p. 67) Adams did something unexpected for the academic community, but common in open source culture–release early and release often. Within weeks of its launch, one of the biggest annoyances of Wikipedia was resolved directly by the software’s author. It was not because of monetary compensation or any formal request, but simply because the author was interested in solving it on his own time, and sharing it with others. It was the hacker ethos, and it had crossed from the domain of tech programmers into the world of encyclopedias.

Source:
Lih, Andrew. The Wikipedia Revolution: How a Bunch of Nobodies Created the World’s Greatest Encyclopedia. New York: Hyperion, 2009.

The Ultimate Complement: When Your Competitor Uses Your Product

BallmerSteveIphone2010-03-16.jpg

“. . . apparently a photo that was snapped from the iPhone as Ballmer brandished it above his head.” Source of caption and photo: http://www.gearfuse.com/ballmer-lashes-out-at-microsoft-employed-iphone-user-threatens-to-smash-iphone/

(p. A1) REDMOND, Wash.–Microsoft Corp. employees are passionate users of the latest tech toys. But there is one gadget love that many at the company dare not name: the iPhone.

The iPhone is made, of course, by Microsoft’s longtime rival, Apple Inc. The device’s success is a nagging reminder for Microsoft executives of how the company’s own efforts to compete in the mobile business have fallen short in recent years. What is especially painful is that many of Microsoft’s own employees are nuts for the device.
The perils of being an iPhone user at Microsoft were on display last September. At an all- company meeting in a Seattle sports stadium, one hapless employee used his iPhone to snap photos of Microsoft Chief Executive Steve Ballmer. Mr. Ballmer snatched the iPhone out of the employee’s hands, placed it on the ground and pretended to stomp on it in front of thousands of Microsoft workers, according to people present.
. . .
Nearly 10,000 iPhone users were accessing the Microsoft employee email system last year, say two people who heard the estimates from senior Microsoft executives. That figure equals about 10% of the company’s glo-(p. A10)bal work force.
Employees at Apple, in contrast, appear to be more devoted to the company’s own mobile phone. Several people who work at the company or deal regularly with employees there say they can’t recall seeing Apple workers with mobile phones other than the iPhone in recent memory.

For the full story, see:
NICK WINGFIELD. “Forbidden Fruit: Microsoft Workers Hide Their iPhones; Steve Ballmer Sours on Apple Product; Work for Ford, Drive a Ford.” The Wall Street Journal (Sat., MARCH 13, 2010): A1 & A10.
(Note: ellipses added.)
(Note: the online version of the article had the date MARCH 12, 2010.)

When Wales Earned “Enough”

(p. 22) By 1998, the business was good enough that Wales wanted to leave not just the world of Chicago Options Associates but the city of Chicago too. As a trader, he had made enough money to live comfortably for a while, or as he would say, “I made out OK” and earned “enough.” With no incentive to stay in the Windy City, and with the warmer weather of California calling, Wales and Shell decided they could relocate to San Diego and run the business from there. Wales and his wife, Christine, made the move in 1998.

Source:
Lih, Andrew. The Wikipedia Revolution: How a Bunch of Nobodies Created the World’s Greatest Encyclopedia. New York: Hyperion, 2009.

Brin Plays Google’s “Ethical Trump Card”

BrinSergey2010-03-16.jpg “Co-founder Sergey Brin has been active in Google’s dealings with China.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A8) As a boy growing up in the Soviet Union, Sergey Brin witnessed the consequences of censorship. Now the Google Inc. co-founder is drawing on that experience in shaping the company’s showdown with the Chinese government.

Mr. Brin has long been Google’s moral compass on China-related issues, say people familiar with the matter. He expressed the greatest concern among decision makers, they say, about the compromises Google made when it launched its Chinese-language search engine, Google.cn, in 2006. He is now the guiding force behind Google’s decision to stop filtering search results in China, say people familiar with the decision.
. . .
The move is the clearest manifestation yet of a tension that has always existed at Google.
The Internet company, on one hand, is analytical: It built its core search business on algorithms that determine the relevance of Web sites and has tried to apply quantitative analysis to traditionally subjective parts of a business, such as hiring decisions. On the other hand, Mr. Brin and co-founder Larry Page have passionately touted Google’s ability to spread democracy through access to information, and adopted the unofficial and now-famous motto, “Don’t Be Evil.”
“At its best, Google is data-driven with an ethical trump card,” said Larry Brilliant, who headed up the company’s philanthropic efforts until 2009. Always it was the founders, Messrs. Brin and Page, who could play that card, he added.

For the full story, see:

BEN WORTHEN. “Soviet-Born Brin Has Shaped Google’s Stand.” The Wall Street Journal (Sat., MARCH 13, 2010): A8.
(Note: ellipsis added.)
(Note: the online version of the article had the date MARCH 12, 2010 and has the slightly longer title “Soviet-Born Brin Has Shaped Google’s Stand on China.”)

Wikipedia Works in Practice, Not in Theory

(p. 20) Jimmy walked into the offices of Chicago Options Associates in 1994 and met the CEO Michael Davis for a job interview. Davis had looked over Wales’s academic publication about options pricing.

“It was impressive looking,” says Wales wryly about the paper. “It was a very theoretical paper but it wasn’t very practical.” But Davis was sufficiently intrigued, as he wanted someone like Wales to pore over the firm’s financial models and help improve them. So he took on young Wales, who seemed to be sharp and had acumen for numbers. Little did either of them know they would have a long road ahead together, with Wikipedia in the future.
Wales’s first job was to go over the firm’s current pricing models. “What was really fascinating was that it was truly a step beyond what I’d seen in academia,” he recalls. “It was very practical, and didn’t have a real theoretical foundation.” Wales was intrigued that the firm traded on principles that worked in practice, not in theory. (This is something he would say about his future endeavor Wikipedia.) “Basically they just knew in the marketplace that the existing models were wrong.”

Source:
Lih, Andrew. The Wikipedia Revolution: How a Bunch of Nobodies Created the World’s Greatest Encyclopedia. New York: Hyperion, 2009.
(Note: italics in original.)

Myhrvold Innovates in Financing Innovation

MyhrvoldNathanIntellectualVentures2010-03-01.jpg “Nathan Myhrvold, chief of Intellectual Ventures, says patent holders are being treated unfairly.” Source of caption and photo: online version of the NYT article quoted and cited below.

When Nathan Myhrvold was at Microsoft, he helped Bill Gates write The Road Ahead, a well-written book full of realistically optimistic speculation, forecast and analysis.
Besides his main initiative, discussed below, he has recently been in the news due to his bold and controversial suggestion for how to cheaply solve global warming.

(p. B1) BELLEVUE, Wash. — Nathan Myhrvold wants to shake up the marketplace for ideas. His mission and the activities of the company he heads, Intellectual Ventures, a secretive $5 billion investment firm that has scooped up 30,000 patents, inspire admiration and angst.

Admirers of Mr. Myhrvold, the scientist who led Microsoft’s technology development in the 1990s, see an innovator seeking to elevate the economic role and financial rewards for inventors whose patented ideas are often used without compensation by big technology companies. His detractors see a cynical operator deploying his bulging patent trove as a powerful bargaining chip, along with the implied threat of costly litigation, to prod high-tech companies to pay him lucrative fees. They call his company “Intellectual Vultures.”
White hat or black hat, Intellectual Ventures is growing rapidly and becoming a major force in the marketplace for intellectual capital. Its rise comes as Congress is considering legislation, championed by large technology companies, that would make it more difficult for patent holders to win large damage awards in court — changes that Mr. Myhrvold has opposed in Congressional testimony and that his company has lobbied against.
. . .
(p. B10) The issues surrounding Intellectual Ventures, viewed broadly, are the ground rules and incentives for innovation. “How this plays out will be crucial to the American economy,” said Josh Lerner, an economist and patent expert at the Harvard Business School.
Mr. Myhrvold certainly thinks so. He says he is trying to build a robust, efficient market for “invention capital,” much as private equity and venture capital developed in recent decades. “They started from nothing, were deeply misunderstood and were trashed by people threatened by new business models,” he said in his offices here.
Mr. Myhrvold presents his case at length in a 7,000-word article published on Thursday in the Harvard Business Review. “If we and firms like us succeed,” he writes, “the invention capital system will turbocharge technological progress, create many more new businesses, and change the world for the better.”
In the article and in conversation, Mr. Myhrvold describes the patent world as a vastly underdeveloped market, starved for private capital and too dependent on federal financing for universities and government agencies, which is mainly aimed at scientific discovery anyway. Eventually, he foresees patents being valued as a separate asset class, like real estate or securities.
His antagonists, he says, are the “cozy oligarchy” of big technology companies like I.B.M., Hewlett-Packard and others that typically reach cross-licensing agreements with each other, and then refuse to deal with or acknowledge the work of inventors or smaller companies.
. . .
Mr. Myhrvold personifies the term polymath. He is a prolific patent producer himself, with more than 100 held or applied for. He earned his Ph.D. in physics from Princeton and did postdoctorate research on quantum field theory under Stephen Hawking, before founding a start-up that Microsoft acquired.
He is an accomplished French chef, who has also won a national barbecue contest in Tennessee. He is an avid wildlife photographer, and he has dabbled in paleontology, working on research projects digging for dinosaur remains in the Rockies.

For the full story, see:
STEVE LOHR. “Turning Patents Into ‘Invention Capital’.” The New York Times (Thur., February 18, 2010): B1 & B10.
(Note: ellipses added.)
(Note: the online version of the article is dated February 17, 2010.)

The Bill Gates book is:
Gates, Bill. The Road Ahead. New York: Viking Penguin, 1995.

Myhrvold’s Harvard Business Review essay is:
Myhrvold, Nathan. “The Big Idea: Funding Eureka!” Harvard Business Review 88, no. 2 (March 2010): 40-50.

MyhrvoldNathanFreezeDryMachine2010-03-01.jpg “Nathan Myhrvold with a machine that freeze-dries food. Intellectual Ventures so far has paid $315 million to individual inventors.” Source of caption and photo: online version of the NYT article quoted and cited above.

Unlikely Tea Party Leader Protests the “Porkulus”

CarenderKeliTeaPartyLeader2010-03-01.jpg “Keli Carender resists the idea of a Tea Party leader — “there are a thousand leaders,” she says. But she has become a leader, and a celebrity. Ms. Carender at a recent rally in Olympia, Wash.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) SEATTLE — Keli Carender has a pierced nose, performs improv on weekends and lives here in a neighborhood with more Mexican grocers than coffeehouses. You might mistake her for the kind of young person whose vote powered President Obama to the White House. You probably would not think of her as a Tea Party type.

But leaders of the Tea Party movement credit her with being the first.
A year ago, frustrated that every time she called her senators to urge them to vote against the $787 billion stimulus bill their mailboxes were full, and tired of wearing out the ear of her Obama-voting fiancé, Ms. Carender decided to hold a protest against what she called the “porkulus.”
. . .

(p. 19) The daughter of Democrats who became disaffected in the Clinton years, Ms. Carender, 30, began paying attention to politics during the 2008 campaign, but none of the candidates appealed to her. She had studied math at Western Washington University before earning a teaching certificate at Oxford — she teaches basic math to adult learners — and began reading more on economics, particularly the writings of Thomas Sowell, the libertarian economist, and National Review.
Reading about the stimulus, she said, “it didn’t make any sense to me to be spending all this money when we don’t have it.”
“It seems more logical to me that we create an atmosphere where private industry can start to grow again and create jobs,” she said.

For the full story, see:
KATE ZERNIKE. “Early Arrival at the Tea Party: A Young and Unlikely Activist.” The New York Times, First Section (Sun., February 26, 2010): 1 & 19.
(Note: ellipsis added.)
(Note: the online version of the article is dated February 27, 2010 and has the title “Unlikely Activist Who Got to the Tea Party Early.”)