Category: Entrepreneurship

Planners of Megaprojects Almost Always Over-Promise and Under-Deliver

(p. B5) Bent Flyvbjerg is an expert in the planning and management of “megaprojects,” his name for huge efforts that require at least $1 billion of investment: bridges, tunnels, office towers, airports, telescopes and even the Olympics. He’s spent decades wrapping his mind around the many ways megaprojects go wrong and the few ways to get them right, and he summarizes what he’s learned from his research and real-world experience in a new book called “How Big Things Get Done.”

Spoiler alert! Big things get done very badly.

They cost too much. They take too long. They fall too short of expectations too often. This is what Dr. Flyvbjerg calls the Iron Law of Megaprojects: “over budget, over time, under benefits, over and over again.”

The Iron Law of Megaprojects might sound familiar to anyone who has survived a home renovation. But when Dr. Flyvbjerg dug into the numbers, the financial overruns and time delays were more common than he expected. And worse. Much worse.

His seminal work on big projects can be distilled into three pitiful numbers:

• 47.9% are delivered on budget.

• 8.5% are delivered on budget and on time.

• 0.5% are delivered on budget, on time and with the projected benefits.

. . .

Humans are optimistic by nature and underestimate how long it takes to complete future tasks. It doesn’t seem to matter how many times we fall prey to this cognitive bias known as the planning fallacy. We can always ignore our previous mishaps and delude ourselves into believing this time will be different. We’re also subject to the power dynamics and competitive forces that complicate reality, since megaprojects don’t take place in controlled environments, and they are plagued by politics as much as psychology. Take funding, for example. “How do you get funding?” he said. “By making it look good on paper. You underestimate the cost so it looks cheaper, and you underestimate the schedule so it looks like you can do it faster.”

For the full review, see:

Ben Cohen. “SCIENCE OF SUCCESS; 99% of Big Projects Fail. Lego Is the Fix.” The Wall Street Journal (Saturday, February 4, 2023): B5.

(Note: ellipsis added.)

(Note: the online version of the review has the date February 2, 2023, and has the title “SCIENCE OF SUCCESS; 99% of Big Projects Fail. His Fix Starts With Legos.”)

The book under review is:

Flyvbjerg, Bent, and Dan Gardner. How Big Things Get Done: The Surprising Factors That Determine the Fate of Every Project, from Home Renovations to Space Exploration and Everything in Between. New York: Currency, 2023.

As Freedom Left Hong Kong, So Did Hundreds of Billions of Dollars and 100,000 Citizens

(p. B1) This summer, when Hong Kong’s stock market rout seemed to have no end in sight, the city’s financial chief, Paul Chan, jumped into action, creating a task force to inject confidence into a market that was being pummeled by global investors wary of China.

Hong Kong cut taxes on trading, and Mr. Chan went on a roadshow to Europe and the United States, promising measures to “let investors feel optimistic about the outlook.” Investors were anything but sanguine, however, and the city’s stock exchange is among the world’s worst-performing stock markets this year.

. . .

Hundreds of billions of dollars flowed out this year as money managers and pension funds reduced their holdings in Hong Kong, which has long been a gateway for foreign investors wanting to put money into mainland China. The outflows were largely driven by an economic downturn in China and mounting pressure on American investors to sell their (p. B3) exposure to Chinese companies.

. . .

A former British colony, Hong Kong was handed back to China in 1997 with a pledge that it would maintain a high degree of self-governance under a policy called “one country, two systems.” For two decades, this allowed Hong Kong to define itself as unique and distinct from the rest of China, while offering financial access to the world’s second largest economy.

But after citywide protests in 2019, Beijing imposed the national security law, which has silenced political debate and stifled civic activity.

More than 100,000 residents have left Hong Kong over the last few years, in part because of the security law and tough pandemic restrictions. Many young Hong Kong professionals who are still there have expressed a desire to leave, making it a challenge to recruit the talent that has helped the city function as a financial center.

Once a major hub for Wall Street banks, Hong Kong had a drought of initial public offerings this year. Companies raised the lowest amount of money since 2001, resulting in layoffs at financial institutions citywide.

Many international companies have stopped hiring for new positions in Hong Kong. With less money coming into the exchange and fewer transactions, dozens of brokerages have also closed.

For the full story, see:

Alexandra Stevenson. “Hong Kong Stock Market Ends in Loss For 4th Year.” The New York Times (Saturday, December 30, 2023): B1 & B3.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 29, 2023, and has the title “Hong Kong Stocks Plunge to Losses for 4th Straight Year.”)

“To Save the World”

(p. A21) The task of improving the world may seem impossible, but it isn’t. All it takes is the proper sequence of correct discrete decisions. Decisions are just resolutions with teeth.

An editor of mine told me a story from his childhood on his grandparents’ farm in Iowa. The little boy, looking out over acres and acres of corn, asked his grandfather, “How are we going to shuck all that corn?” His grandfather said, “One row at a time.”

. . .

At an event a couple of months ago, someone asked me why I wrote something the way I did, and I found myself blurting out, “To save the world.” It was laughable, preposterous and true.

For the full commentary, see:

Roger Rosenblatt. “Resolve About Something Bigger Than Yourself.” The New York Times (Saturday, December 30, 2023): A21.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Dec. 26, 2023, and has the title “This Year, Make a Resolution About Something Bigger Than Yourself.”)

Tom Watson, Jr. Managed IBM’s Rare and Successful Self-Disruption by “Transitioning the Firm to Electronic Computing”

(p. 9) Thomas J. Watson Jr. seemed, from a young age, to be destined for failure.

. . .

“He played with fire, shot animals in the nearby swamps and pilfered things from neighbors’ houses,” Ralph Watson McElvenny and Marc Wortman write in “The Greatest Capitalist Who Ever Lived,” a compelling new biography of Watson Jr.

. . .

This is far from the first book about IBM.

. . .

But this is probably the most theatrical book about IBM ever published. McElvenny, who happens to be Watson Jr.’s eldest grandson, is privy to “personal and corporate papers” and, as the endnotes mysteriously specify, many “family sources.”

. . .

“The Greatest Capitalist Who Ever Lived” is about the challenges of corporate and family succession, an essential topic given that IBM itself was the father figure to most of the computing and tech industry. Watson Sr., “the old man,” was a type familiar to our times: the tech titan who runs a large company as an extension of himself. (The IBM machine that beat the “Jeopardy!” champion Ken Jennings bears his name.) For four decades, IBM was Watson Sr.’s fief. The company “was run entirely out of one man’s breast pocket,” McElvenny and Wortman write. Watson Sr. “made all strategic decisions and most minor ones” and “delegated almost no authority.”

To his lasting credit, he did truly take care of his employees and their families in a manner that bred a strong loyalty. That said, Watson Sr. demanded conformity and could be erratic and cruel.

. . .

IBM faced a classic version of what the Harvard Business School professor Clayton Christensen has termed the “innovator’s dilemma” and what the Nobel Prize-winning economist Kenneth Arrow described as a monopoly’s disinclination to innovate. IBM was making plenty of profit on punched cards and accounting machines, its customers were happy, so why rock the boat?

Watson Jr.’s intense antipathy toward his father ended up saving IBM. Just before the United States entered World War II, Junior gained self-confidence the old-fashioned way: by joining the Army Air Corps and flying a B-24. When he eventually returned to IBM (pushed to do so by his commanding officer, Maj. Gen. Follett Bradley, who thought Watson would be wasted as an airline pilot), he became the internal champion of transitioning the firm to electronic computing. He was perhaps the only person who could oppose his father in a company built on yes men.

While the book’s title calls him “the greatest capitalist,” it might more accurately, if less ringingly, call him “the greatest manager,” for Watson Jr. was much better at delegating and using his employees’ talents.

For the full review, see:

Tim Wu. “Next-Gen.” The New York Times Book Review (Sunday, December 17, 2023): 9.

(Note: ellipses added.)

(Note: the online version of the review was updated Dec. 15, 2023, and has the title “The Father-Son Struggle That Helped Ensure IBM’s Success.”)

The book under review is:

McElvenny, Ralph Watson, and Marc Wortman. The Greatest Capitalist Who Ever Lived: Tom Watson Jr. and the Epic Story of How IBM Created the Digital Age. New York: PublicAffairs, 2023.

Charlie Munger Had “Epistemic Humility,” Endorsing Confucius’s Claim “That Real Knowledge Is Knowing the Extent of One’s Ignorance”

Epistemic humility is honest and useful, but is often punished. We often admire the confident, whether their confidence is justified or not. But I do not agree with Confucius–we can have real knowledge beyond knowing we are very ignorant.

(p. B1) I had the extraordinary good luck to get to know Charlie Munger in the past two decades.

. . .

More than almost anyone I’ve ever known, Munger also possessed what philosophers call epistemic humility: a profound sense of how little anyone can know and how important it is to open and change your mind.

. . .

(p. B4) Munger—who graduated magna cum laude from Harvard Law School without ever earning a college degree—knew perfectly well how smart he was. And it is an understatement to say he didn’t suffer fools gladly. In an interview with The Wall Street Journal in 2019, he used the phrase “massively stupid” at least seven times to describe other people and even entire professions.

So was he a cocky, cranky old man yelling at the clouds?

No. If there was one thing Munger knew, it was himself. As he told me in 2014, “Confucius said that real knowledge is knowing the extent of one’s ignorance . . . .  Knowing what you don’t know is more useful than being brilliant.”

For the full commentary, see:

Jason Zweig. “THE INTELLIGENT INVESTOR; Charlie Munger’s Reflections on His Life, Luck and Success.” The Wall Street Journal (Saturday, Dec. 2, 2023): B1 & B4.

(Note: ellipses between paragraphs added; ellipsis internal to the penultimate quoted paragraph in original.)

(Note: the online version of the commentary has the date November 29, 2023, and has the title “THE INTELLIGENT INVESTOR; Charlie Munger’s Life Was About Way More Than Money.”)

Elon Musk Is Not Antisemitic; He Is Anti the Censorship of “a Specific Jewish Group, the Anti-Defamation League”

(p. A15) Major papers like the Journal, New York Times and Washington Post report that advertisers are again fleeing the service previously known as Twitter because, these papers explain, owner Elon Musk endorsed “an antisemitic post.”  . . .

. . .  A user @breakingbaht expressed a lack of sympathy for “Jewish communities” (emphasis added) that allegedly encouraged “the exact kind of dialectical hatred against whites that they claim to want people to stop using against them” while supporting immigration of “hordes of minorities.”

After Mr. Musk responded “You have said the actual truth,” the New York Times cited equally undefined “Jewish groups” as detecting in the original tweet a common antisemitic trope. In one Times account, the phrase “Jewish communities” was transmuted into “Jewish people.”

. . .

The Journal examined the context and suggested Mr. Musk was really exercised about a specific Jewish group, the Anti-Defamation League, which has largely adopted the identitarian and censorship agendas of the progressive left.

For the full commentary, see:

Holman W. Jenkins, Jr. “BUSINESS WORLD; How Elon Became an ‘Antisemite’.” The Wall Street Journal (Wednesday, Nov. 29, 2023): A15.

(Note: ellipses added. In the original version, the phrase “Jewish communities” (but not the rest) is emphasized by italics.)

(Note: the online version of the commentary was updated November 28, 2023, and has the title “BUSINESS WORLD; Opinion: How Elon Became an ‘Antisemite’.”)

With Repeated Experiences We Establish “a Personal Relationship” with Technological Tools

In a philosophy course that our daughter Jenny took at Notre Dame, a reading or two suggested that repeated experience with technologies make them almost extensions of our own senses, expanding what Ed Yong (quoting others) calls our “umwelt” (which I think means the scope of the sensory world we can experience). My guess is that pilot Brian Shul (who is discussed below) experienced this after many hours piloting the SR-71 Blackbird. If this is an important phenomenon, and I think it is, then it increases even further the diversity of what Hayek called “local knowledge” and what Polanyi called “tacit knowledge.”

(p. A17) Brian Shul, a retired Air Force major who modestly described himself as “a survivor” rather than a hero after he was downed in a Vietnamese jungle, suffering near-fatal injuries, before rebounding to pilot the world’s fastest spy plane, died on May 20 [2023] in Reno, Nev.

. . .

His final assignment, before he retired in 1990 after a two-decade military career, was piloting the SR-71, the world’s highest-flying jet.

The aircraft, nicknamed the Blackbird and deployed to monitor Soviet nuclear submarines and missile sites, as well as to undertake reconnaissance missions over Libya, could soar to 85,000 feet, fly at more than three times the speed of sound and survey 100,000 square miles of the Earth’s surface in a single hour.

“To fly this jet, and fly it well, meant establishing a personal relationship with a fusion of titanium, fuel, stick and throttles,” Major Shul wrote in his book “Sled Driver: Flying the World’s Fastest Jet” (1991), invoking the detractive nickname that U-2 pilots had pinned on their faster Blackbird counterparts. “It meant feeling the airplane came alive and had a personality all her own.”

Major Shul piloted the Blackbird for 2,000 hours over four years.

. . .

The Lockheed SR-71 soared so high into the mid-stratosphere that its crew was outfitted in spacesuits, and it flew so swiftly that it could outpace missiles.

“We were the fastest guys on the block and loved reminding our fellow aviators of this fact,” Major Shul wrote.

. . .

In Vietnam, he was a foreign air adviser during the war, piloting support missions in conjunction with the Central Intelligence Agency’s Air America, which flew reconnaissance, rescue and logistical support missions for the military.

When his aircraft was attacked, he crash-landed in the jungle, where he was rescued by a Special Forces team and evacuated to Okinawa, Japan. Doctors there predicted that his burns would prove fatal.

. . .

. . . one day, while lying in bed, he heard children playing soccer and, as he remembered being their age, the radio began to play Judy Garland’s “Over the Rainbow.”

“You listen to the words to that song — it’s all about daring to dream,” Major Shul said in a speech at the Lawrence Livermore National Laboratory in California in 2016.

“I heard the words of that song for the first time that day,” he continued. “They penetrated my brain sharper than any scalpel they were using, and I could look out the window and see the other side of the rainbow and those kids, and I made a choice. I made a decision right then. I am going to try to eat the food tomorrow. I want to live. I’m going to try to survive.”

For the full obituary, see:

Sam Roberts. “Brian Shul, Fighter Pilot Who Flew World’s Fastest Plane, Dies at 75.” The New York Times (Saturday, June 3, 2023): A17.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the obituary was updated June 8 [sic], 2023, and has the title “Brian Shul Dies at 75; Fighter Pilot Who Flew World’s Fastest Plane.”)

The Shul autobiography quoted in a passage above is:

Shul, Brian. Sled Driver: Flying the World’s Fastest Jet. 2nd ed. Chico, CA: MACH 1, Inc., 1991. [I am not sure the year is right in this citation. Maybe it should be 1992. I have not seen a copy of the book, and citations online are inconsistent.]

The Yong book I mention at the start is:

Yong, Ed. An Immense World: How Animal Senses Reveal the Hidden Realms around Us. New York: Random House, 2022.

Milken’s Junk Bond Innovation “Opened Up Cheaper and More Efficient Financing”

(p. A15) In “Witness to a Prosecution,” Mr. Sandler, a childhood friend who was Mr. Milken’s personal lawyer at the time, walks the reader through Mr. Milken’s 30-plus year legal odyssey, beginning in 1986 with the federal government’s investigation, followed by his indictment, plea bargain, and prison term, right through to his pardon by President Donald Trump in 2020. The author tells a convincing and concerning story of how the government targeted a largely innocent man and, when presented with proof of that innocence, refused to turn away from a bad case.

. . .

After reading Mr. Sandler’s account, I no longer believe in Mr. Milken’s guilt, and neither should you. The author argues that most of what we know about Mr. Milken’s misdeeds is grossly exaggerated, if not downright wrong. What the government was able to prove in the court of law, as opposed to the court of public opinion, were mere regulatory infractions: “aiding and abetting” a client’s failure to file an accurate stock-ownership form with the SEC, a violation of broker-dealer reporting requirements, assisting with the filing of a false tax return. There was no insider-trading charge involving Mr. Boesky or anyone else, because the feds couldn’t prove one.

. . .

When you digest the reality of the case against Mr. Milken, you find that much of it was nonsense. As Mr. Sandler puts it: “The nature of prosecution and the technicality and uniqueness of the regulatory violations . . . certainly never would have been pursued had Michael not been so successful in disrupting the traditional way business was done on Wall Street.”

. . .

The junk-bond market he helped create has opened up cheaper and more efficient financing to many more companies than it ever destroyed. What started as a $10 billion market is now standing at around $1.4 trillion.

For the full review, see:

Charles Gasparino. “The Milken Story Revisited.” The Wall Street Journal (Monday, Dec. 18, 2023): A15.

(Note: ellipses between paragraphs added, ellipsis internal to penultimate quoted paragraph in original.)

(Note: the online version of the review has the date December 17, 2023, and has the title “BOOKSHELF; ‘Witness to a Prosecution’ Review: The Milken Story Revisited.”)

The book under review is:

Sandler, Richard V. Witness to a Prosecution: The Myth of Michael Milken. ForbesBooks: Charleston, South Carolina, 2023.

Zoliflodacin Is First New Antibiotic in Decades

(p. A12) A new antibiotic, the first to be developed in decades, can cure gonorrhea infections at least as effectively as the most powerful current treatment, a large clinical trial has found. The drug, zoliflodacin, is taken as a single dose, and it has not yet been approved for use in any country.

. . .

Pharmaceutical companies have largely abandoned antibiotic development as unprofitable. The development of zoliflodacin represents a new model: G.A.R.D.P., which is funded by many Group of 20 countries and the European Union, developed the drug in collaboration with an American pharmaceutical company called Innoviva Specialty Therapeutics.

The nonprofit sponsored the Phase 3 trial of the drug. In exchange, it holds the license to sell the antibiotic in about 160 countries while Innoviva retains marketing rights for high-income countries.

“I’ll go out on a limb and say that’s probably the only way in which we develop antibiotics going forward, because the old model is simply not going to work,” said Ramanan Laxminarayan, a senior research scholar at Princeton University who chairs the G.A.R.D.P. board.

. . .

“Nobody’s making a boatload of money off treatment of gonorrhea, especially when you’re using a single dose of an oral antibiotic,” said Dr. Jeanne Marrazzo, director of the National Institute of Allergy and Infectious Diseases.

“This is a path forward to solve the dilemma of getting pathways for products that don’t guarantee profits,” Dr. Marrazzo said.

For the full story, see:

Apoorva Mandavilli. “A New Drug Is Developed To Combat Gonorrhea.” The New York Times (Friday, November 11, 2023): A12.

(Note: ellipses added.)

(Note: the online version of the story has the date Nov. 10, 2023, and has the title “Gonorrhea Is Becoming Drug Resistant. Scientists Just Found a Solution.”)

Elon Musk Wants to Go to Mars, But He Wants Freedom Even More

The video clip above is embedded through YouTube’s “share” feature. It is a clip from the annual DealBook Summit of The New York Times. Andrew Ross Sorkin interviewed Elon Musk on November 29, 2023 at the Lincoln Center in New York City.

A year earlier at the 2022 DealBook Summit, Netflix co-founder Reed Hastings said: “Elon Musk is the bravest most creative person on the planet.”

Musk’s dream is for humanity to go to Mars. He is trying to privately fund his dream with billions of dollars he hoped to earn from Tesla. His investment of 44 billion dollars to buy Twitter may end his dream. But he bought Twitter to defend free speech, and free speech is required for the fast advance of science and technology. So if we ever make it to Mars we will owe much to Elon Musk. And even if we never make it to Mars we still will owe much to Elon Musk.

Swaminathan and Borlaug Crossbred Wheat Strains to End Starvation in India

(p. B12) M.S. Swaminathan, the eminent crop geneticist who fused plant breeding science with keen administrative skills to produce bountiful harvests that ended famine and steadily transformed India into one of the world’s top growers of wheat and rice, died on Thursday [Sept. 28, 2023] in Chennai, India.

. . .

The events that set Dr. Swaminathan’s path to global renown occurred in the early 1960s. As a plant geneticist at the Indian Agricultural Research Institute, he learned about the exceptional yields from new and sturdier wheat varieties that were being tested in Mexico by the American scientist Norman E. Borlaug.

Dr. Swaminathan was soft-spoken and had exquisite manners, but he could be persistent. He prodded the research institute’s chief executive to invite Dr. Borlaug to India. He arrived in 1963, and Dr. Swaminathan accompanied him on a tour of small farms in Punjab and Haryana, northwestern states that now are among the nation’s largest grain producers.

The two developed a productive partnership, with Dr. Swaminathan crossbreeding the Borlaug strains with other strains from Mexico and Japan. That genetic mixing resulted in a wheat variety with a strong stalk that produced a golden-colored flour favored by Indians.

. . .

Dr. Borlaug earned the 1970 Nobel Peace Prize for developing the seeds that staved off mass starvation and fed the world. On receiving the prize, he commended his Indian collaborator: “To you, Dr. Swaminathan, a great deal of the credit must go for first recognizing the potential value of the Mexican dwarfs. Had this not occurred, it is quite possible that there would not have been a green revolution in Asia.”

Dr. Swaminathan delighted in rebuking the Malthusian projections that low yields and high population growth would produce mass starvation in India. In the 1960s, he recalled, “many books were published by doomsday experts. Paul and Anne Ehrlich, the very famous population experts. They said Indians had no future unless a thermonuclear bomb kills them. Another group of experts said Indians would die like sheep going to the slaughterhouse. We decided this would not happen.”

For the full obituary, see:

Keith Schneider. “M. S. Swaminathan, 98, Scientist Who Helped End Famine in India, Is Dead.” The New York Times (Friday, September 29, 2023): B12.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the obituary has the date Sept. 28, 2023, and has the title “M. S. Swaminathan, Scientist Who Helped Conquer Famine in India, Dies at 98.”)