Category: Economics

Emmanuel Macron Invokes the Spirit of Joseph Schumpeter

(p. A7) PARIS–Speaking at the annual gathering of the business and political elite in Davos earlier this year, French President Emmanuel Macron invoked the spirit of one of his favorite early-20th-century thinkers, Joseph Schumpeter.
The economist is the father of “creative destruction,” the theory that innovation sustains growth by destroying old business models. The embrace of such thinking has made Mr. Macron, an investment banker turned head-of-state, a darling of the globalist set. But this time, Mr. Macron warned that disruption was descending into a battle for the survival of the fittest.
“Schumpeter is very soon going to look like Darwin. And living in a completely Darwinian world is not good,” Mr. Macron said.
France’s president is on a mission to save globalism from itself and, lately, that has become a lonely road.

For the full story, see:
Stacy Meichtry and William Horobin. “Macron Walks a Line on Globalism.” The Wall Street Journal (Saturday, April 21, 2018): A7.
(Note: the online version of the story has the date April 20, 2018, and has the title “Macron’s Lonely Road: Saving Globalism From Itself.” In the last couple of sentences quoted, the wording follows the online version rather than the slightly different print version.)

Zuckerberg Calls Musk “Pretty Irresponsible” on A.I. “Doomsday” Fears

(p. 1) SAN FRANCISCO — Mark Zuckerberg thought his fellow Silicon Valley billionaire Elon Musk was behaving like an alarmist.
Mr. Musk, the entrepreneur behind SpaceX and the electric-car maker Tesla, had taken it upon himself to warn the world that artificial intelligence was “potentially more dangerous than nukes” in television interviews and on social media.
So, on Nov. 19, 2014, Mr. Zuckerberg, Facebook’s chief executive, invited Mr. Musk to dinner at his home in Palo Alto, Calif. Two top researchers from Facebook’s new artificial intelligence lab and two other Facebook executives joined them.
As they ate, the Facebook contingent tried to convince Mr. Musk that he was wrong. But he wasn’t budging. “I genuinely believe this is dangerous,” Mr. Musk told the table, according to one of the dinner’s attendees, Yann LeCun, the researcher who led Facebook’s A.I. lab.
Mr. Musk’s fears of A.I., distilled to their essence, were simple: If we create machines that are smarter than humans, they could turn against us. (See: “The Terminator,” “The Matrix,” and “2001: A Space Odyssey.”) Let’s for once, he was saying to the rest of the tech industry, consider the unintended consequences of what we are creating before we unleash it on the world.
. . .
(p. 6) Since their dinner three years ago, the debate between Mr. Zuckerberg and Mr. Musk has turned sour. Last summer, in a live Facebook video streamed from his backyard as he and his wife barbecued, Mr. Zuckerberg called Mr. Musk’s views on A.I. “pretty irresponsible.”
Panicking about A.I. now, so early in its development, could threaten the many benefits that come from things like self-driving cars and A.I. health care, he said.
“With A.I. especially, I’m really optimistic,” Mr. Zuckerberg said. “People who are naysayers and kind of try to drum up these doomsday scenarios — I just, I don’t understand it.”

For the full story, see:
Cade Metz. “Moguls and Killer Robots.” The New York Times, SundayBusiness Section (Sunday, June 10, 2018): 1 & 6.
(Note: ellipsis added.)
(Note: the online version of the story has the date June 9, 2018, and has the title “Mark Zuckerberg, Elon Musk and the Feud Over Killer Robots.”)

Chinese Communists Plan to Dominate Memory Chips by Stealing Micron Innovations

(p. B1) JINJIANG, China — With a dragnet closing in, engineers at a Taiwanese chip maker holding American secrets did their best to conceal a daring case of corporate espionage.
As the police raided their offices, human resources workers gave the engineers a warning to scramble and get rid of the evidence. USB drives, laptops and documents were handed to a lower-level employee, who hid them in her locker. Then she walked one engineer’s phone out the front door.
What those devices contained was more valuable than gold or jewels: designs from an American company, Micron Technology, for microchips that have helped power the global digital revolution. According to the Taiwanese authorities, the designs were bound for China, where they would help a new, $5.7 billion microchip factory the size of several airplane hangars rumble into production.
China has ambitious plans to overhaul its economy and compete head to head with the United States and other nations in the technology of tomorrow. The heist of the designs two years ago and the raids last year, which were described by Micron in court filings and the police in Taiwan, represent the dark side of that effort — and explain in part why the United States is starting a trade war with China.
A plan known as Made in China 2025 calls for the country to become a global competitor in an ar-(p. B2)ray of industries, including semiconductors, robotics and electric vehicles. China is spending heavily to both innovate and buy up technology from abroad.
Politicians in Washington and American companies accuse China of veering into intimidation and outright theft to get there. And they see Micron, an Idaho company whose memory chips give phones and computers the critical ability to store and quickly retrieve information, as a prime example of that aggression.

For the full story, see:

Paul Mozur. “Darker Side Of Tech Bid By China.” The New York Times (Saturday, June 23, 2018): B1-B2.
(Note: the online version of the story has the date June 22, 2018, and has the title “Inside a Heist of American Chip Designs, as China Bids for Tech Power.”)

How Precision Metalwork Was Required for Industrial Revolution

(p. 16) In “The Perfectionists,” Simon Winchester celebrates the unsung breed of engineers who through the ages have designed ever more creative and intricate machines. He takes us on a journey through the evolution of “precision,” which in his view is the major driver of what we experience as modern life.
. . .
This expert working of metal is traced back to James Watt and his development of the steam engine. The first prototypes leaked copious amounts of steam and weren’t very efficient. The problem was that the piston didn’t fit exactly in its cylinder — small imperfections in the surfaces of both allowed pockets of air to escape. Watt enlisted the help of John “Iron Mad” Wilkinson, so called because of his expertise (even obsession) with metal. Wilkinson had previously patented a way to bore out precise cylinders for more accurate cannons, and he suggested the same method be applied to Watt’s ill-fitting system. It worked, and the improved engine allowed the conversion of energy to movement on an unprecedented scale. The Industrial Revolution, Winchester declares, could now begin.

For the full review, see:
Roma Agrawal. “Perfect Fit.” The New York Times Book Review (Sunday, June 17, 2018): 16.
(Note: ellipsis added.)
(Note: the online version of the review has the date May [sic] 14, 2018, and has the title “Under Modernity’s Hood: Precision Engineering.”)

The book under review, is:
Winchester, Simon. The Perfectionists: How Precision Engineers Created the Modern World. New York: HarperCollins Publishers, Inc., 2018.

Widely-Used HireVue Algorithm Can Lock-In Hiring Biases

(p. A23) The products of a company called HireVue, which are used by over 600 companies including Nike, Unilever and even Atlanta Public Schools, allow employers to interview job applicants on camera, using A.I. to rate videos of each candidate according to verbal and nonverbal cues. The company’s aim is to reduce bias in hiring.
But there’s a catch: The system’s ratings, according to a Business Insider reporter who tested the software and discussed the results with HireVue’s chief technology officer, reflect the previous preferences of hiring managers. So if more white males with generally homogeneous mannerisms have been hired in the past, it’s possible that algorithms will be trained to favorably rate predominantly fair-skinned, male candidates while penalizing women and people of color who do not exhibit the same verbal and nonverbal cues.

For the full story, see:

Joy Buolamwini. “The Hidden Dangers Of Facial Analysis.” The New York Times (Friday, June 22, 2018): A23.
(Note: the online version of the story has the date June 21, 2018, and has the title “When the Robot Doesn’t See Dark Skin.”)

Drones “Stifled” by Stringent Regulations

(p. B5) The commercial drone industry is being stifled by unnecessarily stringent federal safety rules enforced by regulators who frequently pay only lip service to easing restrictions or streamlining decision-making, according to a report by the National Academies of Sciences, Engineering and Medicine.
The unusually strongly worded report released Monday [June 11, 2018] urges “top-to-bottom” changes in how the Federal Aviation Administration assesses and manages risks from drones.
. . .
. . . minimal but persistent levels of risk already are accepted by the public,according to the report. A fundamental issue is “what are we going to compare [drone] safety to?” said consultant George Ligler, who served as chairman of the committee that drafted the document.
“We do not ground airplanes because birds fly in the airspace, although we know birds can and do bring down aircraft,” the report said.

For the full story, see:
Andy Pasztor. “FAA’s Safety Rules for Commercial Drones Are Overly Strict, Report Says.” The Wall Street Journal (Tuesday, June 12, 2018): B5.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the story has the date June 11, 2018, and has the title “FAA’s Safety Rules for Commercial Drones Are Overly Strict, Report Says.”)

Obits for Gig Economy Are Premature

(p. A21) Data confirm the “gig economy” is taking off–or do they? A 2017 Upwork study found that 36% of the labor force engaged in some form of contract or freelance work in 2017. In 2015 the Mercatus Center counted 1099-MISC and W-2 tax forms, which report contractor and employee income, respectively. The number of W-2s declined 3.5% between 2000 and 2014, while the 1099-MISC count grew 22% (albeit from a much smaller base).
But then the Bureau of Labor Statistics weighed in. Its Contingent and Alternative Employment Arrangements survey, released last week, caused a flurry of clickbait headlines like “Everything we thought we knew about the gig economy is wrong” and “Gig economy jobs aren’t really taking over America’s workforce.”
. . .
A notable study by economists Lawrence Katz and Alan Krueger used the same questions as the BLS survey, but worked with a different sample population (the RAND American Life Panel) and used an internet survey. It found that alternative employment arrangements as a worker’s primary form of employment grew more than 50% between 2005 to 2015, when they collected their data.
It would at least be hasty to conclude that alternative employment arrangements declined between 2005 to 2017. And more important, the BLS data are not an accurate description or measure of gig-economy work, since they exclude most workers engaged in this type of work through supplementary income.

For the full commentary, see:
Liya Palagashvili. “Don’t Be So Sure the Gig Is Up; Contract work has fallen as a share of employment, a BLS study finds. But there are reasons to doubt it..” The Wall Street Journal (Wednesday, June 13, 2018): A21.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date June 12, 2018.)

They study by Katz and Krueger, mentioned above, is:
Katz, Lawrence F., and Alan B. Krueger. “The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015.” National Bureau of Economic Research, Inc, NBER Working Papers: 22667, 2016.
Also relevant is their:
Katz, Lawrence F., and Alan B. Krueger. “The Role of Unemployment in the Rise in Alternative Work Arrangements.” American Economic Review 107, no. 5 (May 2017): 388-92.

History of Energy Shows Power of Human Ingenuity to Solve Problems

(p. 16) In this meticulously researched work, Rhodes brings his fascination with engineers, scientists and inventors along as he presents an often underappreciated history: four centuries through the evolution of energy and how we use it. He focuses on the introduction of each new energy source, and the discovery and gradual refinement of technologies that eventually made them dominant. The result is a book that is as much about innovation and ingenuity as it is about wood, coal, kerosene or oil.

. . .

Moreover, there is a familiar pattern when one energy source supplants another: As each obstacle is cleared, a new one appears. The distillation of Pennsylvania “rock oil,” for instance, established that it offered a superior mode of lighting, a discovery that immediately presented the challenge of producing such oil — then collected from places where it bubbled to the surface — in sufficient quantities. Similarly, the invention of the petroleum-fueled internal combustion engine required Charles F. Kettering and Thomas Midgely Jr. to resolve the pressing problem of “engine knock” that resulted from small, damaging explosions in the cylinders.

. . .

. . . , by the end one gets a sense of boosted confidence about the ability of technology and human ingenuity to solve even those problems that at first seem insurmountable.

For the full review, see:

Meghan L. O’Sullivan. “Power On.” The New York Times Book Review (Sunday, June 24, 2018): 16.

(Note: ellipses added.)

(Note: the online version of the review has the date June 18, 2018, and has the title “A History of the Energy We Have Consumed.”)

The book under review, is:

Rhodes, Richard. Energy: A Human History. New York: Simon & Schuster, 2018.

Regulations Support Car Incumbents and Undermine Tesla Profitability

(p. A13) . . . governments everywhere have decided, perversely, that electric cars will not be profitable. In every major market–the U.S., Europe, China–the same political dispensation now applies: Established auto makers effectively will be required to make and sell electric cars at a loss in order to continue profiting from gas-powered vehicles.
This has rapidly become the institutional structure of the electric-car industry world-wide, for the benefit of the incumbents, whether GM in the U.S. or Daimler in Germany. Let’s face it, the political class always had a bigger investment in these incumbents than it ever did in Tesla.
Tesla has a great brand, great technology and great vehicles. To survive, it also needs to mate itself to a nonelectric pickup truck business. . . .
We’ll save for another day the relating of this phenomenon to Mr. Musk’s recently erratic behavior and pronouncements. . . . Keep your eye on the bigger picture–the bigger picture is the global regulatory capture of the electric car moment by the status quo. And note the irony that Tesla’s home state of California was the original pioneer of this insiders’ regulatory bargain with its so-called zero-emissions-vehicle mandate.
Electric cars were going to remain a niche in any case, but public policy is quickly ruling out the possibility (which Tesla needed) of them at least being a profitable niche.

For the full commentary, see:
Holman W. Jenkins, Jr. “BUSINESS WORLD; A Tesla Crackup Foretold; The real problem is that governments everywhere have ordained that electric cars will be sold at a loss.” The Wall Street Journal (Saturday, June 23, 2018): A13.
(Note: ellipses added.)
(Note: the online version of the commentary has the date June 22, 2018.)

In a Robustly Redundant Labor Market Most “Will Find New Jobs Quickly”

(p. A1) Tesla Inc. on Tuesday [June 12, 2018] said it will cut about 9% of its workforce in an effort to deliver its first profit during a make-or-break period of building a mass-market electric car.
The layoffs of about 3,500 employees come as Chief Executive Elon Musk reorganizes Tesla’s management structure to make it flatter, and as the company tries to ramp up production of the all-electric Model 3 compact sedan.
In a memo to employees, Mr. Musk said the job cuts are mostly aimed at salaried staff and won’t affect production workers assembling the company’s vehicles. “This will not affect our ability to reach Model 3 production targets in the coming months,” he wrote.
. . .
(p. A8) “What drives us is our mission to accelerate the world’s transition to sustainable, clean energy, but we will never achieve that mission unless we eventually demonstrate that we can be sustainably profitable,” Mr. Musk wrote in the email to employees Tuesday. “That is a valid and fair criticism of Tesla’s history to date.”
. . .
On Twitter, Mr. Musk acknowledged that he was losing good people. “I think they will find new jobs quickly,” he said.

For the full story, see:
Higgins, Tim. “Tesla to Cut Workforce by 9%, In Bid for Sustainable Profit.” The Wall Street Journal (Wednesday, June 13, 2018): A1 & A8.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the story has the date June 12, 2018, and has the title “Tesla Cutting About 9% of Global Workforce.”)

Libertarian Peter Thiel Predicts Communist China’s Tech Success (What?)

(p. B1) The Trump administration gave ZTE, which employs 75,000 people and is the world’s No. 4 maker of telecom gear, a stay of execution on Thursday. ZTE, which had violated American sanctions, agreed to pay a $1 billion fine and to allow monitors to set up shop in its headquarters. In return, the company — once a symbol of China’s progress and engineering know-how — will be allowed to buy the American-made microchips, software and other tools it needs to survive.
China’s technology boom, it turns out, has been largely built on top of Western technology.
The ZTE incident, as it is called in China, may be the country’s Sputnik moment. Like the United States in 1957, watching helplessly as the Soviet Union launched the first human-made satellite, many people in China now see how far the country still has to go.
“We realized,” said Dong Jielin, an adjunct professor at the Research Center for Technological Innovation at Tsinghua University in Beijing, “that China’s prosperity was built on sand.”
. . .
(p. B3) . . . many in China — and many cheerleaders of the Chinese tech scene — . . . found themselves in a feedback loop of their own making. The powerful propaganda machine flooded out rational voices, said Ms. Dong of Tsinghua University. The tech boom fits perfectly into Beijing’s grand narrative of a national rejuvenation. Innovation and entrepreneurship are top national policies, with enormous financial backing from the government. Even now, some articles critical of China’s lagging semiconductor industry have disappeared from the internet there.
And it wasn’t just Chinese people. Michael Moritz, the American venture capital investor, warned that China “is leaving Donald Trump’s America behind.” Peter Thiel, a PayPal co-founder, wondered how long it would take for China to overtake the United States. Three to four years, he concluded.
The boom kept many from asking hard questions. They promoted China’s surge in patent filings without looking at whether the patents were any good. They didn’t ask why China still imports 90 percent of its semiconductor components even though the industry became a national priority in 2000.

For the full commentary, see:
Li Yuan. “China’s Sputnik Moment.” The New York Times (Monday, June 11, 2018): B1 & B3.
(Note: ellipses added.)
(Note: the online version of the commentary has the date June 10, 2018, and has the title “THE NEW NEW WORLD; ZTE’s Near-Collapse May Be China’s Sputnik Moment.”)