Category: Entrepreneurship

Steady-State Stagnation Is Not an Option

Some environmentalists advocate an end to economic growth. Inside economics, and in the broader world, a heated debate has considered whether an economy can long stagnate in a steady-state. The idea that it can, is captured in the circular flow diagram that has been a fixture of many introductory economics textbooks for many decades. I argue that without the dynamism that is achieved by innovative entrepreneurs, long-term stagnation is not an option. Exogenous events, such as earthquakes, will always come along to disturb the steady-state. And when they do, only entrepreneurs can restore the steady-state. If there are no entrepreneurs, there will be decline. If there are entrepreneurs, they will not stop at the steady-state; they will seek progress. The choice is forward or backward. Long-term steady-state stagnation is not an option.

(p. 10) SANKHU, Nepal — As the anniversary of Nepal’s devastating earthquake came and went last week, Tilakmananda Bajracharya peered up at the mountainside temple his family has tended for 13 generations, wondering how long it would remain upright.

. . .
Many people here pin their hopes on promises of foreign aid: After the disaster, images of collapsed temples and stoic villagers in a sea of rubble were beamed around the world, and donors came forward with pledges of $4.1 billion in foreign grants and soft loans.
But those promises, so far, have not done much to speed the progress of Nepal’s reconstruction effort. Outside Kathmandu, the capital, many towns and villages remain choked with rubble, as if the earthquake had happened yesterday. The government, hampered by red tape and political turmoil, has only begun to approve projects. Nearly all of the pledged funds remain in the hands of the donors, unused.
The delay is misery for the 770,000 households awaiting a promised subsidy to rebuild their homes. Because a yearly stretch of bad weather begins in June, large-scale rebuilding is unlikely to begin before early 2017, consigning families to a second monsoon season and a second winter in leaky shelters made of zinc sheeting.
. . .
. . . , some visitors who came here to assess the reconstruction expressed shock at how little had been done.
. . .
“It has been a horrible year,” said Anju Shrestha, 36, whose shed stands on a site that once held a three-story brick house.
A neighbor, Kanchhi Shrestha, guessed her age at about 75, based on a major earthquake that occurred two years before she was born. She pulled her skirt up to show feet splotchy with raw sores.
“I will die in this shelter if they do not give me money,” she said. “I have nothing to eat.”
However, she added, it would be inappropriate for a person like her to demand assistance from Nepal’s government.
“We cannot scold the government,” she said. “If the government provides, we will fold our hands and tell them, ‘You are God.’ “

For the full story, see:
ELLEN BARRY. “A Year Later, Nepal Is Trapped in the Shambles of a Devastating Quake.” The New York Times, First Section (Sun., May 1, 2016): 10.
(Note: ellipses added.)
(Note: the online version of the story has the date APRIL 30, 2016, and has the title “A Year After Earthquake, Nepal’s Recovery Is Just Beginning.”)

Plastic Buttons Replaced Seashell Buttons, but Technology Can Be Restored

In What Technology Wants, Kevin Kelly has made the point that most obsolete technologies remain available to satisfy nostalgia, or for more practical uses, if the need arises. Below is another example.

(p. C27) In a tan outbuilding overlooking a pond in northeastern Connecticut, equipment for turning seashells into buttons has lain fallow for nearly eight decades. The building’s owner, Mark Masinda, a retired university administrator, is working to transform the site into a tourist attraction.

In the early 1900s, his grandfather William Masinda, a Czech immigrant, supervised a dozen button makers in the building, which is on a rural road in Willington. They cut, drilled and polished bits of shells imported from Africa and Australia to make “ocean pearl buttons” with two or four holes. The area’s half-dozen button factories supplemented the incomes of families struggling to farm on rocky terrain.
The Masinda operation closed in 1938, as plastic flooded the market. “The equipment he had just couldn’t make the transition,” Mr. Masinda said.
. . .
Mr. Masinda is planning to reactivate the equipment and open the site for tours by . . . spring [2016].

For the full story, see:
EVE M. KAHN. “Antiques; Restoring a Button Factory.” The New York Times (Thurs., DEC. 3, 2015): C27.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the story has the date DEC. 3, 2015, and has the title “Antiques; Yale Buys Collection of Scattered Medieval Pages; Restoring a Button Factory.”)

The Kelly book mentioned above, is:
Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.

New Fuel Cell Efficiently Both Sequesters Carbon Dioxide and Produces Energy

(p. B1) For years, FuelCell Energy has been considered a company to watch. Its technology promised to help economically reduce carbon dioxide emissions from power plants, which could help combat climate change. The Danbury, Conn., company might be able to make a difference, experts said, if only it had a partner with really deep pockets.
Now it has one.
In an agreement announced on Thursday [May 5, 2016], Exxon Mobil said it had tightened an existing relationship with FuelCell in hopes of taking the technology from the lab to the market.
. . .
The company’s fuel cells are already used to provide clean energy in about 50 locations around the world but without a connection to fossil-fuel power plants, as envisioned in the new agreement.
The fuel cells use a high-temperature molten carbonate salt mixture. Carbon dioxide flows into the fuel cell and emerges in a concentrated form that is ready for storage.
It is this idea of matching up power plants, which produce carbon dioxide, with fuel cells that are hungry for it that led to a collaboration between Exxon Mobil and FuelCell that started more than four years ago.
The result, at least so far in the laboratory, is that the fuel cells effectively isolate and compress the carbon dioxide while producing enough power to more than make up for the energy cost of capturing the carbon.

For the full story, see:
JOHN SCHWARTZ. “Exxon in Deal with Company to Advance Carbon Capture Technology.” The New York Times (Fri., MAY 6, 2016): B2.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date MAY 3, 2016, and has the title “Exxon Mobil Backs FuelCell Effort to Advance Carbon Capture Technology.”)

Neurosurgical Establishment Waited Decade to Adopt Jannetta’s Cure

(p. C6) Dr. Peter J. Jannetta, a neurosurgeon who as a medical resident half a century ago developed an innovative procedure to relieve an especially devastating type of facial pain, died on Monday [April 1?, 2016] in Pittsburgh.
. . .
“This was a condition that had been documented for a thousand years: There are references in the ancient literature to what was originally called ‘tic douloureux,’ ” Mark L. Shelton, the author of “Working in a Very Small Place: The Making of a Neurosurgeon,” a 1989 book about Dr. Jannetta, said in a telephone interview on Thursday. “People knew of this unexplained, very intense, episodic facial pain but didn’t know the cause of it.”
. . .
In the mid-1960s, Dr. Jannetta made a striking discovery while he was a neurosurgical resident at the University of California, Los Angeles. Dissecting a set of cranial nerves for a class presentation, he noticed something amiss: a tiny blood vessel pressing on the trigeminal nerve.
“It came to him as something of a flash of insight,” Mr. Shelton said. “He saw this blood vessel literally impinging on the nerve so that there was actually a groove in the nerve where the vessel pressed.”
What if, Dr. Jannetta wondered, this were the source of the nerve damage? Though his insight is universally accepted today, it was novel to the point of subversion in the 1960s.
“The idea that a very small blood vessel, the diameter of a mechanical pencil lead, could cause such outsize pain didn’t resonate with people at the time,” Mr. Shelton said.
. . .
If the vessel was a vein, it could simply be cauterized and excised. If it was an artery, however — a more essential structure — it would, Dr. Jannetta realized, have to be gently nudged out of the way.
He created a means of doing so that involved slipping a tiny pad of soft Teflon, about the size of a pencil eraser, between the artery and the nerve.
Dr. Jannetta performed the first microvascular decompression operation in 1966. The patient, a 41-year-old man, was relieved of his pain.
It took about a decade for the procedure to win acceptance from the neurosurgical establishment, owing partly to Dr. Jannetta’s youth and partly to the novelty of his idea.
“He convinced many, many skeptics — and there were a lot of skeptics in the early years — because it seemed so counterintuitive as to what caused neurological disease,” Mr. Shelton said.
. . .
His many laurels include the medal of honor from the World Federation of Neurological Societies; the Olivecrona Award, presented by the Karolinska Institute in Sweden; and the Horatio Alger Award, which honors perseverance in the face of adversity or opposition.

For the full obituary, see:
MARGALIT FOX. “Dr. Peter J. Jannetta, Neurosurgeon and Pioneer on Facial Pain, Dies at 84.” The New York Times (Fri., APRIL 15, 2016): A22.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the obituary has the date APRIL 14, 2016, and has the title “Dr. Peter J. Jannetta, Pioneering Neurosurgeon on Facial Pain, Dies at 84.”)

The book about Jannetta, mentioned above, is:
Shelton, Mark. Working in a Very Small Place: The Making of a Neurosurgeon. New York: Vintage Books, 1990.

Tesla Direct Sales Thwarted by Laws that Protect Dealers Instead of Consumers

(p. B3) Tesla Motors Inc. hopes to capture mainstream auto buyers with its Model 3, an electric car it plans to unveil this week at a price about the same as the average gasoline-powered vehicle, but it may need a federal court ruling to succeed.
The Palo Alto, Calif., auto maker’s direct-to-consumer sales are prohibited by law in six states that represent about 18% of the U.S. new-car market. Barring a change of heart by those states, Tesla is preparing to make a federal case out of the direct-sales bans.
The auto maker’s legal staff has been studying a 2013 federal appeals court ruling in New Orleans that determined St. Joseph Abbey could sell monk-made coffins to customers without having a funeral director’s license. The case emerged amid a casket shortage after Hurricane Katrina. The abbey had tried to sell coffins, only to find state laws restricted such sales to those licensed by the Louisiana Board of Funeral Directors.
For now, Tesla is banking on a combination of new legislation, pending dealer applications and other factors to open doors to selling directly in Arizona, Michigan, Texas, Connecticut, Utah and West Virginia. But the company said it is ready to argue in federal court using the coffin case if necessary.
“It is widely accepted that laws that have a protectionist motivation or effect are not proper,” Todd Maron, the auto maker’s chief counsel, said in an interview. “Tesla is committed to not being foreclosed from operating in the states it desires to operate in, and all options are on the table.”
. . .
“There is no legitimate competitive interest in having consumers purchase cars through an independent dealership,” Greg Reed, an attorney with Washington D.C.-based Institute for Justice, a libertarian-leaning law firm, said. He calls Michigan’s laws “anti-competitive protectionism.”

For the full story, see:
MIKE RAMSEY. “Tesla Weighs Legal Fight.” The Wall Street Journal (Tues., March 29, 2016): B3.
(Note: ellipsis added.)
(Note: the online version of the story has the date March 28, 2016, and has the title “Tesla Weighs New Challenge to State Direct-Sales Bans.”)

“Liberated People Are Ingenious”

(p. C1) Nothing like the Great Enrichment of the past two centuries had ever happened before. Doublings of income–mere 100% betterments in the human condition–had happened often, during the glory of Greece and the grandeur of Rome, in Song China and Mughal India. But people soon fell back to the miserable routine of Afghanistan’s income nowadays, $3 or worse. A revolutionary betterment of 10,000%, taking into account everything from canned goods to antidepressants, was out of the question. Until it happened.
. . .
(p. C2) Why did it all start at first in Holland about 1600 and then England about 1700 and then the North American colonies and England’s impoverished neighbor, Scotland, and then Belgium and northern France and the Rhineland?
The answer, in a word, is “liberty.” Liberated people, it turns out, are ingenious. Slaves, serfs, subordinated women, people frozen in a hierarchy of lords or bureaucrats are not. By certain accidents of European politics, having nothing to do with deep European virtue, more and more Europeans were liberated. From Luther’s reformation through the Dutch revolt against Spain after 1568 and England’s turmoil in the Civil War of the 1640s, down to the American and French revolutions, Europeans came to believe that common people should be liberated to have a go. You might call it: life, liberty and the pursuit of happiness.
To use another big concept, what came–slowly, imperfectly–was equality. It was not an equality of outcome, which might be labeled “French” in honor of Jean-Jacques Rousseau and Thomas Piketty. It was, so to speak, “Scottish,” in honor of David Hume and Adam Smith: equality before the law and equality of social dignity. It made people bold to pursue betterments on their own account. It was, as Smith put it, “allowing every man to pursue his own interest his own way, upon the liberal plan of equality, liberty and justice.”

For the full commentary, see:

DEIRDRE N. MCCLOSKEY. “How the West (and the Rest) Got Rich; The Great Enrichment of the past two centuries has one primary source: the liberation of ordinary people to pursue their dreams of economic betterment.” The Wall Street Journal (Sat., May 21, 2016): C1-C2.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date May 20, 2016.)

McCloskey’s commentary is based on her “bourgeois” trilogy, the final volume of which is:
McCloskey, Deirdre N. Bourgeois Equality: How Ideas, Not Capital, Transformed the World. Chicago: University of Chicago Press, 2016.

Amazon Experiments with Brick-and-Mortar

(p. A11) This week, Amazon revealed the location of its second brick-and-mortar bookstore, which will open in a few months in Southern California, at a mall near the University of California, San Diego. The online retailer seems to have big ambitions for its physical stores.
On Wednesday [March 9, 2016], Nick Wingfield, who covers Amazon for The New York Times, visited the only Amazon bookstore in existence, in the University Village mall in Seattle. From inside the store, he had an online chat with Alexandra Alter, who writes about publishing for The Times. They discussed Amazon’s strategy and how the retailer’s stores differ from other bookstores. Here’s what they had to say:
ALEXANDRA ALTER: Hi Nick! You’re reporting live from the mother ship! What’s it like?
NICK WINGFIELD: The best part is, I just tested the free Wi-Fi and it’s 114 Mbps, easily the fastest I’ve ever gotten. Thank you, Jeff Bezos!
ALEXANDRA: Great, so you can just buy stuff from the Amazon website while you’re sitting in the store. Unlike Barnes & Noble, I bet Amazon doesn’t mind if people browse in its store then go buy it online.
NICK: Exactly. Here’s the deal: At first glance, it looks like an ordinary but nice Barnes & Noble store. It’s clean and well-lit and corporate. It doesn’t have the charm of a funky used-bookstore. Once you start poking around the shelves, you notice the differences.
ALEXANDRA: How is the selection different? How are the sections organized?
NICK: They have 5,000 to 6,000 book titles, fewer than what you would find at a big Barnes & Noble. All of the books are arranged cover out, rather than spine out, in the belief that it makes browsing more friendly. I am so buying that “Boho Crochet” book.
. . .
ALEXANDRA: . . .
So, some Amazon skeptics have suggested that books are just going to be window-dressing and what Amazon really wants is a place to showcase its digital devices. Is there a prominent area for Amazon devices?
NICK: Electronics, most of them made by Amazon, like Echo and Fire TV, are the nucleus of the store. They’re spread out on tables and stands so you can fiddle with them just like you can fiddle with iPads at the Apple Store a short hop from here.
Knowledgeable people tell me that Amazon views its physical stores as an important way to introduce the public to new, unfamiliar devices. Techies might be comfortable buying a device like the Echo online — a speaker and virtual assistant for the home — but a lot of people will want to see it in the flesh first. That said, I don’t think Amazon stores would have saved the Fire Phone, the Amazon smartphone that belly-flopped. I should also say that books are not necessarily going to be the focus of all of the stores it opens in the future. Amazon intends to experiment.

For the full dialogue, see:
ALEXANDRA ALTER and NICK WINGFIELD. “Amazon, in the Material World.” The New York Times (Sat., MARCH 12, 2016): B1 & B5.
(Note: bold and italics in original print version; ellipses added.)
(Note: the online version of the dialogue has the date MARCH 10, 2016, and has the title “A Trip Through Amazon’s First Physical Store.”)

Some Entrepreneurs Support Big Government, Except When They Are the Ones Regulated

(p. A11) In October [2015], author Steven Hill will publish a book called “Raw Deal: How the ‘Uber Economy’ and Naked Capitalism Are Screwing American Workers.” At the political conventions next summer, which party’s attendees will be most likely to have read that book?
The ironies run deep. The Uber driver who ferried Jeb Bush around San Francisco said the former Florida governor was a nice chap but added that he still planned to vote for Mrs. Clinton–the candidate who regards the innovations that has led to the creation of his job as a problem that government needs to solve.
But is Uber co-founder Travis Kalanick any different? Even as he struggles with regulators taking aim at his business model, Mr. Kalanick has spoken up in favor of ObamaCare. During a visit to New York last November, he enthused that ObamaCare was “huge” for companies like his, on the grounds that the individual market has democratized benefits such as health care.
That’s true insofar as it means he doesn’t have to provide it for his drivers. But the reality is that ObamaCare is to health what taxi commissions are to transportation. And if Uber’s co-founder can’t see the difference, maybe he deserves the Bill de Blasios and Hillary Clintons coming after him.

For the full commentary, see:
WILLIAM MCGURN. “MAIN STREET; Uber Crashes the Democratic Party; The ride-share app is bringing out the inner Elizabeth Warren.” The New York Times (Tues., July 21, 2015): A11.
(Note: bracketed year added.)
(Note: the online version of the commentary has the date July 20, 2015.)

Those Who Suffer from a Problem, Can Invent to Solve It

(p. 1) Is it possible to extract blood from people without causing pain? For decades, this problem has stumped the medical industry. In an effort to replace the old-fashioned needle, companies are trying to deploy laser beams and tiny vacuums to draw blood.
In 2014, an engineer at Harvard named Ridhi Tariyal hit on a far simpler workaround. “I was trying to develop a way for women to monitor their own fertility at home,” she told me, and “those kinds of diagnostic tests require a lot of blood. So I was thinking about women and blood. When you put those words together, it becomes obvious. We have an opportunity every single month to collect blood from women, without needles.”
Together with her business partner, Stephen Gire, she has patented a method for capturing menstrual flow and transforming it into medical samples. “There’s lots of information in there,” Ms. Tariyal said, “but right now, it’s all going in the trash.”
Why did Ms. Tariyal see a possibility that had eluded so many engineers before her? You might say she has an unfair advantage: her gender.
. . .
(p. 4) Eric von Hippel, a scholar of innovation at M.I.T., has spent decades studying what seems like a truism: People who suffer from a problem are uniquely equipped to solve it. “What we find is that functionally novel innovations — those for which a market is not yet defined — tend to come from users,” he said. He pointed out that young Californians pioneered skateboards so that they could “surf” the streets. And surgeons built the first heart-and-lung machines to keep patients alive during long operations. “The reason users are so inventive is twofold. One is that they know the needs firsthand,” he said. The other is that they have skin in the game.

For the full commentary, see:
PAGAN KENNEDY. “The Tampon of the Future.” The New York Times, SundayReview Section (Sun., APRIL 3, 2016): 1 & 4-5.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date APRIL 1, 2016.)

Pagan Kennedy’s book, that is related to her commentary quoted above, is:
Kennedy, Pagan. Inventology: How We Dream up Things That Change the World. New York: Houghton Mifflin Harcourt Publishing Co., 2016.

Tesla Model 3 Excites Venturesome Consumers

America’s venturesome consumers are hungry for products exciting enough to justify enthusiasm. They are desperate for evidence that the future can continue to look bright.

(p. B2) DETROIT — Despite a steady stream of new models from a number of automakers, sales this year of electric and hybrid vehicles have failed to keep pace with the growth in the overall American market.
But if the market for electrified cars was slumbering, Tesla Motors woke it up with a jolt Thursday [March 31, 2016] with the unveiling of its coming Model 3 lineup of affordable, zero-emission vehicles.
Given that electric and hybrid vehicles account for only about 2 percent of last year’s record-setting sales in the United States, the extraordinary reaction to Tesla’s first mass-market model was a vivid demonstration of the potential demand in the segment.
“It shows that the future of electric vehicles is not necessarily bleak,” said Alec Gutierrez, an analyst with the research firm Kelley Blue Book. “Maybe we’ve been waiting for the right products that resonate with consumers.”
Tesla said on Friday that it had booked reservations — at $1,000 each — from nearly 200,000 people for the first Model 3 sedans, which will not be available until next year.
With a starting price of $35,000 and a battery range of 215 miles, the new Tesla is a big leap in the company’s expansion beyond expensive luxury models.
“The final step in the master plan is a mass-market, affordable car,” Elon Musk, Tesla’s chief executive, said at the lavish introduction of the Model 3 held at the company’s design studios in Hawthorne, Calif.

For the full story, see:
BILL VLASIC “In Clamor for new Tesla, Signs of an Electric Future.” The New York Times (Sat., APRIL 2, 2016): B2.
(Note: bracketed date added.)
(Note: the online version of the story has the date APRIL 1, 2016, and has the title “Tesla’s New Model 3 Jump-Starts Demand for Electric Cars.”)

Feds’ Regulatory Delay Supports High-Fare Trans-Atlantic Airline Oligopoly

(p. B1) In the past three years, Norwegian, one of Europe’s biggest low-cost airlines, has quietly established a beachhead in the trans-Atlantic market by offering low-fare, no-frills service on long-haul flights.
Thanks to a small but expanding fleet of fuel-efficient planes combined with deeply discounted ticket prices, Norwegian Air Shuttle has attracted a growing number of leisure travelers looking for cheap flights.
It is all part of the vision of Norwegian’s outspoken chief executive, Bjorn Kjos, who is determined to force the same kind of low-fare competition on international routes that has been so successful in domestic markets for airlines like Southwest and Spirit, and Ryanair in Europe.
. . .
But Norwegian’s expansion has been stymied by vigorous opposition. Legacy airlines on both sides of the Atlantic see a low-cost competitor on their cash-cow routes as a major threat to their long-term profitability. Labor unions object to Norwegian’s plans to hire flight crew from Thailand, a practice they have repeatedly described as “labor dumping.”
The airline has also faced lengthy delays in receiving regulatory approvals in the United States.
. . .
(p. B4) A spokeswoman for the Transportation Department did not give any reasons for the delays that have left Norwegian in bureaucratic limbo in the United States. The airline’s first request was filed more than two years ago. . . .
The long delay in approving the application “does not reflect well on the political independence of the Department of Transportation with respect to the free trade principles behind the E.U.-U.S. open skies agreement,” according to a report by analysts at the CAPA Center for Aviation. “The calculated inaction only serves to restrict competition and to deny consumer choice.”
. . .
“There is still a lot to do,” Mr. Kjos said. “We have to think about how to fly more people more cheaply. There are hundreds of millions of people that don’t have access to cheap flights.”

For the full story, see:
JAD MOUAWAD. “Norwegian Air Flies in the Face of the Trans-Atlantic Establishment.” The New York Times (Tues., FEB. 23, 2016): B1 & B4.
(Note: ellipses added.)
(Note: the online version of the story has the date FEB. 22, 2016.)