Road Opens a Year Early: Contract Included Incentives


OmahaExpresswaySmall.jpg With monetary incentives to finish early, Hawkins Construction Company finishes westbound lanes a year ahead of schedule.   Source of photo:
http://www.omaha.com/index.php?u_pg=1636&u_sid=2214442&u_rnd=7720251

 

The long delays, and lack of visible progress in expanding 132nd, near our house, became a running joke—but the wasted travel time was not funny.  Similar road construction delays were occuring all over town, to the point where it looked as though the issue might threaten the mayor’s re-election.  So he got serious, and in new road contracts, included substantial monetary incentives for finishing the job ontime, and even more incentives to finish it early.  The expressway pictured above is one of those built under the new contract.  Maybe incentives really do matter?

 

(p. 1A)  An electronic sign above West Dodge lured drivers with a simple message:  "Expressway Open."

The real draw was the quicker commute drivers encountered Thursday evening during the first rush hour after the opening of the West Dodge Road Expressway.

After two years of construction, the expressway’s westbound bridge opened to traffic at 10:35 a.m. Thursday, more than a year ahead of schedule.

A steady flow of traffic streamed across the bridge Thursday evening.

"It was wonderful," said commuter Jean Crouchley.

 

For the full article, see:

MICHAEL O’CONNOR AND RICK RUGGLES.  "A Concrete Example of Progress; Motorists Expect Daily Drives to be Quicker with New Route."  Omaha World-Herald (Friday, July 28, 2006):  1-2.

(Note: The online version of the article had the title: "Making quick work of commute on Expressway.")


Tom Peters: Over-the-Top Schumpeterian


Source of book image:  http://www.amazon.com/gp/product/customer-reviews/078949647X/ref=cm_cr_dp_2_1/104-2835260-2878345?ie=UTF8&customer-reviews.sort%5Fby=-SubmissionDate&n=283155

 

Tom Peters became famous as the co-author of the business classic In Search of Excellence (1982).  His Re-imagine! is exuberant, optimistic, exaggerated, and stylistically over-the-top.  I find it fun, bracing, entertaining, and sometimes edifying.  If you like the prose of The Cluetrain Manifesto and Gilder’s Telecosm, then you may also like Re-imagine!

Here is an early, very brief passage: 


(p. 9)  My overall vision, in brief:  Business is cool. It’s about Creativity and Invention and Growth and Service.  It’s about Adam Smith’s "hidden hand."  And Nobel laureate Frederick Hayek’s "spontaneous discovery process."  And economist Joseph Schumpeter’s "gales of creative destruction."  At its best, it’s about building things that make life less burdensome than it was in medieval times.  About getting us beyond—far, far, far beyond—the quasi-slavery of the Middle Ages, the indentured servitude of the first 150 years of the Industrial Revolution, and the cubicle slavery of the last three-quarters of a century. 

Yes, business is cool.

(Or at least it can be.)

 

The citation to the book is:

Peters, Tom. Re-Imagine! London: DK, 2003.

(Note:  the italics in the above passage appears that way in the original.)


Job Hopping May Aid Technological Experimentation

When employees jump from company to company, they take their knowledge with them.  ”The innovation from one firm will tend to bleed over into other firms,” Professor Rebitzer explained.  For a given company, ”it’s hard to capture the returns on your innovation,” he went on.  ”From an economics perspective, that should hamper innovation.”

He found a possible answer to the puzzle in the work of two management scholars, Carliss Y. Baldwin and Kim B. Clark.  In their book ”Design Rules:  The Power of Modularity” (MIT Press, 2000), they argued that when there is a lot of technological uncertainty, the fastest way to find the best solution is to permit lots of independent experiments.  That requires modular designs rather than tightly integrated systems.

”By having a lot of modular experimenters, you can take the best, which will be a lot better than the average,” Professor Rebitzer said.  Employee mobility may encourage productive innovation, as people quickly move to whichever company comes up with the best new technology.

. . .

To Professor Rebitzer’s surprise (though not his co-authors’), it turns out that Silicon Valley employees really do move around more often than other people.  The researchers looked at job changes by male college graduates from 1994 to 2001.  During that period, an average of 2.41 percent of respondents changed jobs in any given month.

But, they write, ”living in Silicon Valley increases the rate of employer-to-employer job change by 0.8 percentage point.”

”This effect is both statistically and behaviorally significant — suggesting employer-to-employer mobility rates are 40 percent higher than the sample average.”

 

For the full commentary, see: 

VIRGINIA POSTREL.  "ECONOMIC SCENE; In Silicon Valley, Job Hopping Contributes to Innovation."  The New York Times  (Thursday, December 1, 2005):  C4.

 

A PDF of the paper by Rebitzer and colleagues is downloadable at:    http://www.federalreserve.gov/Pubs/feds/2005/200511/200511abs.html

 

The book Postrel praises, is:

Source of book image:  http://www.amazon.com/gp/product/customer-reviews/0262024667/104-2835260-2878345?redirect=true

Entrepreneurial Philanthropy

  Some major donors who want to make a difference during their lives.  Source of graphic:  online version of WSJ article cited below.

 

(p. A1)  "If we give it away now, we’re going to do a good job with it, instead of leaving it to future generations of foundation folks," says Herbert M. Sandler, 74 years old.  He and his wife, Marion, intend to donate the $2 billion they expect from the sale of the California savings and loan Golden West Financial Corp. before "we shuffle off this mortal coil."

The Sandlers’ plan, like Mr. Buffett’s $30 billion gift to the Gates foundation announced last month, exemplifies the changing pattern of U.S. philanthropy — and the (p. A8) Gates organization’s increasing influence over it.  The charitable titans of today are unlike many of the old-school business bluebloods who sought to immortalize their names by setting up foundations that parceled out small gifts forever.  Instead, some of America’s wealthiest moguls-turned-philanthropists — Eli Broad, Charles Bronfman, Lawrence Ellison, Michael Milken and Sanford Weill, among others — favor spending money faster, while retaining a high degree of control and demanding more accountability from the programs they fund.

. . .

By contrast, some of today’s tycoons increasingly limit the time frame, leaving tomorrow’s magnates to handle tomorrow’s problems.  Mr. Bronfman, an heir to the Canadian liquor fortune, says he plans to exhaust the money in his $120 million foundation by 2020.  He is spending at a $12 million to $14 million a year clip.  "Why should I saddle the next generation with something I’m passionate about?" he says.  "Let them have their own passions and do their own things."  Mr. Bronfman, 75, believes in narrowly targeted goals — in his case, they include helping pay for young Jews to visit Israel.  So far, his organization has had a hand in sending 112,000 people on such trips.

Mr. Milken, a financier who served two years in jail for securities fraud in the 1990s, funds medical research and K-12 education; he founded the Prostate Cancer Foundation in 1993 after being diagnosed with the disease himself.  He said the six foundations he and his brother Lowell have established  — which have funds of about $350 million — spend an average of 15% of their assets each year.  Three of the six have attracted a total of $300 million in gifts from outside donors who, like Mr. Buffett, preferred supporting existing ventures to starting their own.

Mr. Milken said he negotiates with medical centers to make sure gifts go to research and clinical trials rather than overhead.  In return,  his foundations waive patent rights to any discoveries made as a result of their funding.  "You can’t just write checks," he said.  "You have to be actively involved.  You have to introduce new management, marketing, other types of activities to empower medical research."

Mr. Sandler and his wife, Marion, have no patience for big foundations that spend 5% annually.  "They are never going to give it [all] away," he says.  Many foundations, he adds, "become bureaucratic."

He and his wife built their Oakland S&L, Golden West, from a small thrift into the nation’s second largest savings and loan by emphasizing lean operations and a laser-like focus on home lending.  The couple, who are co-chief executives, recently agreed to sell the company to Wachovia Corp.

The Sandlers have already given heavily to start the Center for Basic Research in Parasitic Diseases at University of California at San Franciso’s medical school.  The center focuses on Third World diseases neglected by major drug companies.  Along with malaria, the family’s philanthropy has focused on finding treatment for the millions in South America afflicted by Chagas disease, a deadly insect-born ailment.  A donor to the Democratic Party, Mr. Sandler has also backed progressive causes, including Human Rights Watch, the American Civil Liberties Union, and Association of Community Organizations for Reform Now, Acorn.

Mr. Sandler patterns his giving after the Gates foundation.  He admires the Gates foundation’s program in Zambia, fighting malaria, and hopes to work together to replicate its methods in other countries.  Like Mr. Gates, Mr. Sandler is looking for "gaps" in giving that he can fill, such as basic scientific research shunned by most big drug companies.  Another interest:  fighting asthma,  which disproportionately afflicts the poor in inner-city America.

Mr. Sandler says he’s not afraid to take risks with his money, the same way he did in business.  And he doesn’t want a foundation that, after his death, would spend frugally just to stay in business, or support causes far from his heart.  "One prays that when we are going down the tubes, we will be giving that last million dollars," he says.

 

For the full story, see: 

JOHN HECHINGER and DANIEL GOLDEN. "The Great Giveaway; Like Warren Buffett, a new wave of philanthropists are rushing to spend their money before they die." The Wall Street Journal (Sat., July 8, 2006): A1 & A8.

 

  Source of graphic:  online version of the WSJ article cited above.

Entrepreneurs Saluted in Orange Business Services Ad

Source of screen captures:  the downloaded Orange Business Services BBC World ad cited below.

 

Last month (June 2006) when I was in France, I saw a fun Orange Business Services ad on BBC World.  Two entrepreneurs open their fast food truck in the middle of an empty desert.  Something like a comet strikes the desert and a crowd of cars appears and a line forms at the truck.  The entrepreneurs smile.  Tag line:  "here’s to the entrepreneur in all of us."

Orange Business Services let’s you watch, or download, the ad at:  http://www.francetelecom.com/sirius/obs/en/index.html?cmp=BAC-van-bbcworld

(I saw the ad in Sophia Antipolis, France on BBC World, at about 7:10 AM, French time, on 6/23/06.)

Free International Labor Markets

 

As a fellow-signer of the Open Letter, I second Professor Armentano’s response to Rep. Rohrabacher: 

 

So according to Rep. Dana Rohrabacher (Letters, July 5), economists who advocate relatively free international labor markets must be "lefty academics."  Oh, yeah?  I thought that "lefties" took the opposite position, that government (and not the market) should control resource availability in the so-called "national interest."  And I also thought that advocating the removal of restrictions and penalties on the free movement of labor and other resources was the essence of a free-market position.

The economists (such as myself) who signed the Independent Institute’s Open Letter to the President on immigration were taking a consistent free-market position.  We hardly need to be slandered with a label that implies the exact opposite

 

Source:

Dominick T. Armentano.  "Open Letter to President Was a Free-Market Stance."  The Wall Street Journal (Sat., July 8, 2006):  A11.

 

The text of the Open Letter can be found at:   http://www.independent.org/newsroom/article.asp?id=1727

 

Or access the Open Letter by clicking the link below:

Continue reading “Free International Labor Markets”

Russians Try to Steal Rocker’s Vacuum Tube Factory

Mike Matthews holding one of the vacuum tubes produced in the Russian factory he owns.  Source of photo:  online version of the NYT article cited below.

 

(p. C1)  SARATOV, Russia — Mike Matthews, a sound-effects designer and one-time promoter of Jimi Hendrix, bought an unusual Russian factory making vacuum tubes for guitar amplifiers.  Now he has encountered a problem increasingly common here: someone is trying to steal his company.

Sharp-elbowed personalities in Russia’s business world are threatening this factory in a case that features accusations of bribery and dark hints of involvement by the agency that used to be the K.G.B.

Though similar to hundreds of such disputes across Russia, this one is resonating around the world, particularly in circles of musicians and fans of high-end audio equipment.

Russia is one of only three countries still making vacuum tubes for use in reproducing music, an aging technology that nonetheless "warms up" the sound of electronic music in audio equipment.

"It’s rock ‘n’ roll versus the mob," Mr. Matthews, 64, said in a telephone interview from New York, where he manages his business distributing the Russian vacuum tubes.  "I will not give in to racketeers."

Yet the hostile takeover under way here is not strictly mob-related.  It is a dispute peculiar to a country where property rights — whether for large oil companies, car dealerships or this midsize factory — seem always open to renegotiation.  It provides a view of the wobbly understanding of ownership that still prevails.

. . .

(p. C4)  If the tube factory dies, so will the future of a rock ‘n’ roll sound dating back half a century, the rich grumble of a guitar tube amplifier — think of Jimi Hendrix’s version of "The Star-Spangled Banner" — that musicians say cannot be replicated with modern technology.

"It’s nice and sweet and just pleasing sounding," Peter Stroud, the guitarist for Sheryl Crow, said in a telephone interview from Atlanta.  "It’s a smooth, crunchy distortion that just sounds good.  It just feels good to play on a tube amp."

He added:  "It would be a catastrophe for the music industry if something happened to that plant."

 

For the full story, see: 

ANDREW E. KRAMER.  "From Russia, With Dread; American Faces a Truly Hostile Takeover Attempt at His Factory."  The New York Times   (Tuesday, May 16, 2006):  C1 & C4.

 

The transistor disrupted the vacuum tube, a case that would usually be described as an episode of creative destruction.  One secondary lesson from the story above is that there may be a previously unremarked symmetry to the process of disruption.  A disruptive technology typically appeals only to a niche in the market, while the incumbent technology dominates the mainstream.  But after the disruptive technology improves sufficiently to capture much of the mainstream market, maybe there often will remain a niche market that still prefers the older disruptive technology?

To use Danny DeVito’s example in "Other People’s Money," the car may have disrupted horse-and-buggies.  But for some nostalgic "jobs" the horse-and-buggy may still be the better product, so there will likely remain some demand for buggy whips.

To the extent that this phenomenon is significant, it might serve to ease the labor market transition when one technology leapfrogs another.

 

VacuumTubeBox.jpg A vacuum tube used in guitar amplifiers, that was produced in the factory that Mike Matthews owned.  Source of photo:  online version of the NYT article cited above.

Entrepreneur Risks His Money; Government Risks Yours


KaiserGeorgeB.jpg George B. Kaiser.  Source of photo: http://www.forbes.com/finance/lists/10/2003/LIR.jhtml?passListId=10&passYear=2003&passListType=Person&uniqueId=OXNB&datatype=Person

 

(p. A1)  In 2002, Kathleen Eisbrenner, then an executive at El Paso Corp., spent months trying in vain to find a buyer for the company’s novel technology for importing natural gas.

In February 2003, she left for a vacation in Cancun, convinced that El Paso would be forced to abandon the project.  As she sat on the beach one afternoon, she got a call on her cellphone.  A colleague had a message from an intermediary, who said he had an "interested buyer," identified only as a "Midwest billionaire."

"It’s Warren Buffett calling," she recalls telling her husband as they clinked pina colada glasses together in celebration.  "I was absolutely sure."

But it wasn’t Mr. Buffett.  It was another billionaire named George B. Kaiser. 

 . . .

(p. A6)  . . . , Ms. Eisbrenner called Nicolas Saverys, the chief executive of Belgium-based Exmar NV.  Exmar was building two of the new-style LNG vessels.  Ms. Eisbrenner gushed that there was a wealthy buyer.  Mr. Saverys was initially skeptical.  He changed his mind in late February 2003 after meeting Mr. Kaiser in New York.  "At last, I was talking to someone who was putting his own money at stake," he says.

Mr. Saverys sealed the relationship by presenting Mr. Kaiser with a box of pralines from Belgian chocolatier Pierre Marcolini at their second meeting.  Mr. Kaiser, an avowed chocoholic, returned the favor a couple of weeks later in Tulsa, giving Mr. Saverys a box of candy made by Christine Joseph, a Tulsa chocolatier who also was born in Belgium.

Convinced that Energy Bridge could work, Mr. Kaiser agreed to take over the business, closing the deal last December.  El Paso paid him $75 million; in return, he assumed a $120 million obligation to Exmar.  El Paso also agreed to pay to install the underwater pipeline connection that carries the gas from the ship to existing pipelines in the Gulf of Mexico.

The bulk of the $660 million Mr. Kaiser invested went to modify three specially equipped tankers and to charter them for 20 years.  If Energy Bridge opens on time in January, it will be at least two and a half years ahead of any new terminals being developed by other energy companies.  In addition, civic leaders in Massachusetts and Rhode Island, eager to keep LNG terminals and tankers far from the mainland, are encouraging Mr. Kaiser to build an offshore tanker-based project along the Atlantic coast of the U.S.

Mr. Kaiser, who declined requests for an interview but answered some questions by e-mail, concedes he doesn’t like "taking a risk on an undemonstrated technology."  But he says that the chance to import natural gas quickly was "such an obvious and alluring business opportunity" that he felt compelled to get Energy Bridge into operation.  He’s betting that new LNG-export facilities expected to come online next year in Egypt, Trinidad and Nigeria will create enough extra supply to provide him with ample LNG.

 . . .

He says he acquired Energy Bridge as a challenge.  "I don’t gain much pleasure from personal expenditure or recognition," he wrote in an e-mail.  "And any gains I make from the enterprise will accrue to charity.  But I enjoy problem solving and I want to keep my brain active to forestall (or at least diminish) atrophy."

 

For the full story, see:  

Russell Gold.   "Liquid Assets: A Billionaire Takes a Gamble To Fix Natural-Gas Shortage; Mr. Kaiser Plans to Shift Processing Onto Tankers, Avoiding Terrorism Fears; A Deal Sealed With Sweets."  The Wall Street Journal  (Fri., July 23, 2004):   A1 & A6.

(Note: ellipses added.)

Ernie Chambers Right in Supporting Parents’ Role in Education

For several months, the Omaha community has been roiled by the hostile efforts of the Omaha Public School (OPS) district to seize the schools and territory of long-established suburban school districts. Here ia an email that I sent to my representative in the Nebraska unicam on Sun., 4/9/06:

Dear Mr. Brashear:
I have appreciated your hard work as my representative in the legislature, and I have always voted for your re-election.
We believe strongly in giving our 11 year-old daughter a Montessori education. The Millard School District is the only area district that has had the entrepreneurial initiative to offer such a program, so we filled out the paperwork to option Jenny into the Millard District.
I strongly resent the implication of OPS that those who choose other school districts necessarily do so for racial reasons. We would have been very happy to stay in OPS (and it would have been more logistically convenient), but OPS does not support the diversity of educational options that Millard does.
Ernie Chambers is often wrong, but he is not always wrong. Dividing OPS into three districts would be a modest step toward increasing parental choice. Parents of all races want to be free to choose.
Tomorrow, I hope your vote will be to support freedom and competition.
Thank you for considering my views.
Sincerely,
Art Diamond

“Better Coffee Rockefeller’s Money Can’t Buy”

(p. 263) In the middle of this fierce competition, with its low quality standards and apparent market saturation, a New York nut vendor and restaurateur proved that a new brand stressing quality could triumph.

 . . .

Black understood the power of advertising.  In radio spots, which blanketed the New York metropolitan airwaves,  Black’s second wife, Jean Martin, sang a hummable jingle:

Chock full o’ Nuts is that heavenly coffee,

Heavenly coffee, heavenly coffee.

(p. 264) Chock full o’ Nuts is that heavenly coffee-

Better coffee Rockefeller’s money can’t buy.

By August 1954, less than a year after its debut, Chock full o’ Nuts had grabbed third place among vacuum-packed coffees in New York City.

 

Source: 

Pendergrast, Mark. Uncommon Grounds: The History of Coffee and How It Transformed Our World. New York: Basic Books, 2000.

(Note:  ellipsis added.)

 

Private Property Rights Would Help American Indians

(p. W11) The main problem with Indian reservations isn’t, as some argue, that they were established on worthless tracts of grassland. Consider the case of Buffalo County, S.D., which Census data reveal to be America’s poorest county. Some 2,000 people live there. More than 30% of the homes are headed by women without husbands. The median household income is less than $13,000. The unemployment rate is sky high.

Just to the east of Buffalo County lies Jerauld County, which is similar in size and population. Yet only 6% of its homes are headed by women without husbands, the median household income is more than $30,000, and the unemployment rate hovers around 3%. The fundamental difference between these two counties is that the Crow Creek Indian Reservation occupies much of Buffalo County. The place is a pocket of poverty in a land of plenty.
Maybe we should give land back to the rez-dwellers, so that they may own private property the way other Americans do. Currently, the inability to put up land as collateral for personal mortgages and loans is a major obstacle to economic development. This problem is complicated by the fact that not all reservations have adopted uniform commercial codes or created court systems that are independent branches of tribal government — the sorts of devices and institutions that give confidence to investors who might have the means to fund the small businesses that are the engines of rural economies.
. . .
. . . the real tragedy is that reservations, as collectivist enclaves within a capitalist society, have beaten down their inhabitants with brute force rather than lifting them up with opportunity. As their economies have withered, other social pathologies have taken root: Indians are distressingly prone to crime, alcoholism and suicide. Families have suffered enormously. About 60% of Indian children are born out of wedlock. Although accurate statistics are hard to come by because so many arrangements are informal, Indian kids are perhaps five times as likely as white ones to live in some form of foster care. Their schools are depressingly bad.
Even if casino revenues were able to address these soul-crushing problems — a doubtful proposition — most reservations are too isolated geographically to profit from big-dollar gambling. Yet the rise of the casinos may help point the way forward: Their ability to flourish contradicts the tenured Marxists in ethnic-studies departments who claim that communitarian Indian cultures aren’t compatible with market capitalism. After all, it takes entrepreneurship to run some of the world’s biggest casinos.
What’s more, this modern-day entrepreneurship is part of a long tradition: Meriwether Lewis (of Lewis & Clark fame) described the Chinooks as “great hagglers in trade.” I once visited Poverty Point, a 3,000-year-old set of earthen mounds in Louisiana; the museum there displayed ancient artifacts found at the site, including copper from the Great Lakes and obsidian from the Rockies. These prehistoric Americans were budding globalizers, and there’s no reason why their descendants should remain walled off from the world economy.

For the full story, see:
JOHN J. MILLER. “The Projects on the Prairie.” The Wall Street Journal (Saturday, January 27, 2006): W11.(Note: ellipses added.)