Category: Economics

Patenting a Better Vacuum Tube as Semiconductors Emerge

After his disappointing improved-vacuum-tube invention (see below), Kates did not give up. He went on to make important contributions in coordinating traffic lights to ease traffic flows.

(p. A9) When he demonstrated a computer tic-tac-toe game called Bertie the Brain in 1950, Josef Kates thought he was on the verge of making a fortune. The game, introduced at the Canadian National Exhibition, featured streamlined vacuum tubes invented by the Austrian-born Dr. Kates, who came to Canada in the 1940s as a refugee from Nazism. He hoped the tubes would revolutionize computing.

His timing was off. The rise of semiconductors was about to render vacuum tubes obsolete as computer components. “I got the patent, but the patent was useless,” he said in an oral history. “Okay, so on goes the world.”

For the full obituary, see:

James R. Hagerty. “Refugee Crunched Data to Unsnarl Traffic Jams.” The Wall Street Journal (Saturday, July 28, 2018): A9.

(Note: the online version of the obituary has the date July 27, 2018, and has the title “Josef Kates Found Ways to Unsnarl Traffic and Solve Business Problems With Computers.”)

75% “of All Wealth Is Created Anew in Each Generation”

(p. A17) Despite the liberal background of the author, however, “A Century of Wealth in America” offers comfort and support to those who favor less wealth taxation. A core element of Mr. Piketty’s indictment of contemporary wealth inequality was his claim that inheritance is the major source of wealth; he estimated that, given the slower economic growth that most economists anticipate in the future, inherited wealth would soon constitute 90% of wealth in economies such as that of the United States. But Mr. Wolff finds that, for modern America, wealth inheritance explains a much more modest share of private wealth: In 1989-2013, it was 23% on average. In other words, more than three-quarters of all wealth is created anew in each generation in the U.S. . . .

Even more surprising, inherited wealth is much more important in the lives of those who have relatively little wealth than it is in the lives of the super rich. For the top 1% of wealth holders from 1989 to 2013, inherited wealth accounted for only 17% of their assets. (The 1%, in this analysis, is an overwhelmingly self-made group.) By contrast, for those with assets of just $25,000-$50,000, inherited wealth accounted for 52% of their worth.

As a bizarre consequence of this pattern, African-Americans, who have low levels of net worth on average, are the social group for which inherited wealth represents the largest share of their net worth. Another odd implication is that inheritances tend to make overall wealth-holding more equal. Were inherited wealth to be completely abolished, the wealth of the poor would decline more than that of the rich. Inherited wealth is the great equalizer. Who knew?

. . .

. . . , Mr. Wolff calculates that the rich are not systematically generating higher returns on their assets than more modest wealth holders. The top 1% had a real return on net worth of around 3% over the 30 years from 1983 to 2013—the same return as the average wealth holder.

For the full review, see:

Gregory Clark. “BOOKSHELF; How the Richest Got That Way; In the U.S. more than three-quarters of all wealth is created anew in each generation, and the ‘1%’ is an overwhelmingly self-made group.” The Wall Street Journal (Tuesday, December 12, 2017): A17.

(Note: ellipses added.)

(Note: the online version of the review has the date Dec. 11, 2017, and has the title “BOOKSHELF; Review: How the Richest Got That Way; In the U.S. more than three-quarters of all wealth is created anew in each generation, and the ‘1%’ is an overwhelmingly self-made group.”)

The book under review is:

Wolff, Edward N. A Century of Wealth in America. Cambridge, MA: Belknap Press, 2017.

Entrepreneurs Pooled Savings to Found Garmin

(p. B16) Gary Burrell, who with a fellow engineer founded Garmin, the navigational device company whose products can direct pilots in fog, prevent hikers from getting lost and help insomniacs track their sleep, died on June 12 [2019] at his home in Spring Hill, Kan.

. . .

Mr. Burrell (pronounced burr-ELL) was vice president of engineering for King Radio, an avionics company that made navigational devices, when he recruited Dr. Min H. Kao from Magnavox, another defense contractor. Dr. Kao had been instrumental in developing a GPS receiver for aircraft.

At the time, the government was opening up its Global Positioning System for civilian use, and the two men saw possibilities. Continue reading “Entrepreneurs Pooled Savings to Found Garmin”

High Palladium Prices Incentivize More Mining and Search for Substitutes

(p. B13) Palladium prices are at their highest level in nearly two decades, as investors bet that rising global growth will buoy automobile production and stoke demand for the rare metal.

. . .

Longer term, the auto industry may consider switching to platinum in gasoline engines if the price of palladium continues to climb, some market participants said.

Shree Kargutkar, portfolio manager at Sprott Asset Management, said he thinks platinum provides a better long-term value alternative to palladium given palladium’s sharp rise.

Still, changes in the automotive industry don’t pose an immediate threat to the rally, he said. Those shifts and mining companies’ efforts to bring more areas of supply on line to capitalize on higher prices are likely to take years.

“We’re not at a point where the palladium bulls have something to worry about,” he said.

For the full story, see:

Ira Iosebashvili and Amrith Ramkumar. “Palladium Soars on Hopes for Growth.” The Wall Street Journal (Tuesday, Oct. 24, 2017): B13.

(Note: ellipsis added.)

(Note: the online version of the story has the date Oct. 23, 2017, and the title “Palladium Prices Soar in Sign of Global Growth and Auto Demand.” Where there are minor differences in wording, the passages quoted above follow the online version.)

Regulators Allowed New York City to Exploit Taxi Medallion Buyers

(p. A1) . . . The New York Times published a two-part investigation revealing that a handful of taxi industry leaders artificially inflated the price of a medallion — the coveted permit that allows a driver to own and operate a cab — and made hundreds of millions of dollars by issuing reckless loans to low-income buyers.

The investigation also found that regulators at every level of government ignored warning signs, and the city fed the frenzy by selling medallions and promoting them in ads as being “better than the stock market.”

The price of a medallion rose to more than $1 million before crashing in late 2014, which left borrowers with debt they had little hope of repaying. More than 950 medallion owners have filed for bankruptcy, (p. A20) and thousands more are struggling to stay afloat.

For the full story, see:

Niraj Chokshi. “New York’s Top Lawyer Begins Inquiry Into Reckless Taxi Loans.” The New York Times (Tuesday, MAY 21, 2019): A1 & A20.

(Note: ellipsis added.)

(Note: the online version of the story has the date MAY 20, 2019, and has the title “Inquiries Into Reckless Loans to Taxi Drivers Ordered by State Attorney General and Mayor.” Where the online version includes a few extra words, or slightly different wording, the quotes above follow the online version.)

Amazon Will Fund Employees to Quit and Found Delivery Startups

(p. B6) First, Amazon made two-day shipping the norm. Now, as it aims to cut that to a single day, the company is encouraging its employees to quit and start their own delivery businesses.

Under a new incentive program, announced on Monday, Amazon said that it would fund up to $10,000 in start-up costs and provide three months of pay to any employee who decides to make the jump.

The new incentives build on a program the company started last June to encourage anyone, employee or not, to get into the competitive business of last-mile package delivery.

“We’ve heard from associates that they want to participate in the program but struggled with the transition,” Dave Clark, senior vice president for worldwide operations, said in a statement. “Now we have a path.”

For the full story, see:

Niraj Chokshi. “Amazon Has A Novel Idea For Delivery.” The New York Times (Tuesday, MAY 14, 2019): B6.

(Note: the online version of the story has the date MAY 13, 2019, and has the title “Amazon Will Pay Workers to Quit and Start Their Own Delivery Businesses.”)

Spectrum Property Rights Allowed Wireless to Flourish

(p. A15) Economic activity is increasingly conducted wirelessly, under a regulatory regime developed nearly a century ago—one that favors well-heeled incumbents and does little to encourage efficient use of the spectrum. The difficulty that new entrants face in securing spectrum, along with a system that locks in existing technology, chills investment in next-generation infrastructure.

Given the exciting promise of today’s technology, how did we end up hamstrung by such a backward regulatory regime?

. . .

Mr. Hazlett cites as an example the 1930s-era drama surrounding FM radio. From the start, FM had much better sound fidelity than AM—and so threatened existing AM networks operated by NBC, CBS and AT&T’s wired long-distance telephone network. These companies used the Federal Communications Commission to hamper the development of FM and succeeded in having it moved to a different band after World War II. This rendered all existing FM equipment—purchased by consumers at no small expense—useless and limited stations’ transmission power such that their audiences became too small to sustain a competitive business. So distressing was the episode that the father of FM radio, Edwin Howard Armstrong, ended his own life in 1954. The sad saga was merely an early example of the FCC exhibiting the “capture theory” of regulation, according to which regulators and legislators enact rules nominally in the public interest but in fact designed to enrich specific interest groups.

. . .

Mr. Hazlett devotes a substantial portion of his book to arguments for reforms, the most promising of which rest on the Nobel Prize-winning work of British economist Ronald Coase. Coase showed that, absent transaction costs, well-defined assets will wind up in the hands of the entities that value them most. By assigning property rights to frequencies—thereby turning them into assets and enabling the pricing mechanism—immense value can be created from the more efficient employment of bandwidth. For years, the concept of treating bandwidth like property and distributing it through competitive auctions seemed like a pipe dream. In the 1970s, two FCC commissioners said that the odds that this approach would be adopted “were equal to ‘those on the Easter Bunny in the Preakness.’ ” Well, the Easter Bunny won, and in 1994 the FCC started auctioning wireless licenses.

. . .

. . . for consumers and the public, “The Political Spectrum” is a good reminder of how far we have come. Today few economists question the benefits of well-defined rights, flexible use and auctions. That we are debating how to implement these ideas, rather than whether to do so, is reason for cautious optimism about our wireless future.

For the full review, see:

Gregory L. Rosston. “BOOKSHELF; Unlocking the Airwaves; In regulating radio, the FCC enacted rules nominally in the public interest, but which actually enriched specific interest groups.” The Wall Street Journal (Monday, July 17, 2017): A15.

(Note: ellipses added.)

(Note: the online version of the review has the date July 16, 2017, and has the same title as the print version.)

The book under review is:

Hazlett, Thomas W. The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone. New Haven, CT: Yale University Press, 2017.

A.I. Researchers’ Joke: Whenever You Ask, Real A.I. Is 30 Years in Future

On February 1, 2019, at a conference at Texas A&M, I saw a demonstration of prototypes of A.I. driverless car technology. One of the lead researchers told us that it would be 30 years before we saw real driverless cars on the road.

(p. B3) While the A.C.L.U. is ringing alarm bells about the use of video analytics now, it’s anyone’s guess how quickly the technology will advance.

“The joke in A.I. is that you ask a bunch of A.I. researchers, ‘When are we going to achieve A.I.?’ and the answer always has been, ‘In 30 years,’” Mr. Vondrick said.

For the full story, see:

Niraj Chokshi. “Intelligent ‘Robot Surveillance’ Poses Threats, A.C.L.U. Warns.” The New York Times (Friday, July 14, 2019): B3.

(Note: the online version of the story has the date July 13, 2019, and has the title “How Surveillance Cameras Could Be Weaponized With A.I.”)

Facebook Hires More Humans to Do What Its AI Cannot Do

(p. B5) If telling us what to look at next is Facebook’s raison d’être, then the AI that enables that endless spoon-feeding of content is the company’s most important, and sometimes most controversial, intellectual property.

. . .

At the same time, the company’s announcement that it is hiring more humans to screen ads and filter content shows there is so much essential to Facebook’s functionality that AI alone can’t accomplish.

AI algorithms are inherently black boxes whose workings can be next to impossible to understand—even by many Facebook engineers.

For the full commentary, see:

Christopher Mims. “KEYWORDS; The Algorithm Driving Facebook.” The Wall Street Journal (Monday, October 23, 2017): B1 & B5.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Oct. 22, 2017, and the title “KEYWORDS; How Facebook’s Master Algorithm Powers the Social Network.”)

“If You Lower the Hurdles to Innovation . . . , You’ll Get More of It”

(p. A2) You’d think from the debate raging in Washington that taxes are the key to economic growth. They aren’t. In the long run, innovation matters way more, and that depends on inspiration, experimentation and luck, not tax-law changes.

Yet presidents matter for promoting innovation even if it’s less glamorous than taxes. Their support often takes the form of directing money toward basic research or favored industries such as defense or renewable energy.

Under President Donald Trump the place to look is the regulators. Two of his appointees in particular, Food and Drug Administration Commissioner Scott Gottlieb and Federal Communications Commission Chairman Ajit Pai, have prioritized reducing regulatory hurdles to private investment as a way of boosting innovation. It’s too early to gauge their success, but the efforts merit more attention at a time when the growth debate is focused on steep, deficit-financed tax cuts.

. . .

At the FCC, Mr. Pai has targeted the “digital divide,” the gap in broadband access between some communities, especially in rural areas, and others. The share of U.S. households with a fixed broadband connection has stalled at roughly a third in recent years. Mr. Pai thinks the solution is “setting rules that maximize private investment in high-speed networks.”

Controversially, that includes a proposed rollback of his predecessor’s imposition of utility-like regulation so that internet service providers (ISPs) adhere to “net neutrality”—charging all content providers the same to access their networks. Without those limitations, he reckons ISPs will have more incentive to expand capacity and thus access; critics worry this will favor rich, established content providers over innovative newcomers.

. . .

. . . , Mr. Gottlieb’s and Mr. Pai’s theory is that if you lower the hurdles to innovation in specific sectors, you’ll get more of it. It offers a potentially more tangible payoff than fiddling with the tax code.

For the full commentary, see:

Greg Ip. “CAPITAL ACCOUNT; Why Innovation Tops Tax Cuts.” The Wall Street Journal (Thursday, October 26, 2017): A2.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Oct. 25, 2017, and the title “CAPITAL ACCOUNT; Trump’s Regulators Aim to Boost Growth by Lowering Hurdles to Innovation.”)

Robots Relieve Restaurant Workers of Small, Mundane, Tedious Tasks

(p. A1) John Miller, chief executive and founder of CaliBurger LLC, finds it harder to find employees these days. His solution is Flippy, a robot that turns the burgers and cleans the hot, greasy grill.

The chain plans to install Flippy in up to ten of its 50 restaurants by year end. CaliBurger doesn’t intend to kick humans to the curb as a result. Flippy will handle the gruntwork, freeing employees to tidy the dining rooms and refill drinks, less arduous work that might make it easier to recruit and retain workers.

“We’re a long way from teaching a robot to walk the restaurant and do those things,” Mr. Miller said.

Experts have warned for years that robots will replace humans in restaurants. Instead, a twist on that prediction is unfolding. Amid the lowest unemployment in years, fast-food restaurants are turning to machines—not to get rid of workers, but because they can’t find enough.

. . .

(p. A10) Dunkin’ conducted focus groups with former employees to pinpoint the mundane tasks that made them want to leave and geared automation around that.

Workers used to create thousands of hand-written labels daily for everything from coffee to cheese expirations. Last year, Dunkin’ installed small terminals that print out expiration times.

Brewing a single pot involved grinding and weighing coffee and comparing its fineness and coarseness to a perfect sample. Now, some Dunkin’ shops use digital refractometers to determine if coffee meets specifications.

. . .

Alexandra Guajardo, the morning shift leader at a Dunkin’ Donuts shop in Corona, Calif. said she’s likely to stick with the job longer now than she otherwise would have.

“I don’t have to constantly be worried about other smaller tasks that were tedious,” she said. “I can focus on other things that need my attention in the restaurant.”

Mr. Murphy said he can’t see a time when a Dunkin’ Donuts shop is fully automated. The company experimented with a robot barista nearly two years ago at an innovation lab in Massachusetts. The robot did fine at making simple drinks, but couldn’t grasp custom orders, such as “light sugar.”

The machine also required a lot of cleaning and maintenance, and at up to $100,000 per robot, Mr. Murphy said he couldn’t see a return on the investment.

For the full story, see:

Julie Jargon and Eric Morath. “Short of Workers, Robots Man the Grill.” The Wall Street Journal (Monday, June 25, 2018): A1 & A10.

(Note: ellipses added.)

(Note: the online version of the story has the date June 24, 2018, and the title “Short of Workers, Fast-Food Restaurants Turn to Robots.”)