Entrepreneurship – Page 149 – artdiamondblog.com

In Antitrust, as in Medicine, First Do No Harm

(p. 94) Western Union’s lawyers carne up with a dusty old New York Stale law, dated 1905, that said no one could buy more than 10 percent of a telegraph company chartered in that state without the approval of Albany lawmakers. Hard to believe, but it was right there in black and white and there was no possibility of getting the New York State legislature to understand why it was vital to build digital highways.
Talk about unintended consequences!
(p. 95) Originally, the law was written to stop Western Union from monopolizing the telegram business, but the law backfired and was used by the monopolist for its own protection.

Source:
Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.

Lucasfilm Will Build Somewhere “That Sees Us as a Creative Asset, Not as an Evil Empire”

“Lucas Valley in Marin County, Calif., where residents’ objections led George Lucas to abandon a bid to expand operations at a new site near Skywalker Ranch.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A13) SAN RAFAEL, Calif. — In 1978, a year after “Star Wars” was released, George Lucas began building his movie production company far from Hollywood, in the quiet hills and valley of Marin County here just north of San Francisco. Starting with Skywalker Ranch, the various pieces of Lucasfilm came together over the decades behind the large trees on his 6,100-acre property, invisible from the single two-lane road that snakes through the area.

And even as his fame grew, Mr. Lucas earned his neighbors’ respect through his discretion. Marin, one of America’s richest counties, liked it that way.
But after spending years and millions of dollars, Mr. Lucas abruptly canceled plans recently for the third, and most likely last, major expansion, citing community opposition. An emotional statement posted online said Lucasfilm would build instead in a place “that sees us as a creative asset, not as an evil empire.”
If the announcement took Marin by surprise, it was nothing compared with what came next. Mr. Lucas said he would sell the land to a developer to bring “low income housing” here.
. . .
Whatever Mr. Lucas’s intentions, his announcement has unsettled a county whose famously liberal politics often sits uncomfortably with the issue of low-cost housing and where battles have been fought over such construction before. His proposal has pitted neighbor against neighbor, who, after failed peacemaking efforts over local artisanal cheese and wine, traded accusations in the local newspaper.
The staunchest opponents of Lucasfilm’s expansion are now being accused of driving away the filmmaker and opening the door to a low-income housing development. That has created an atmosphere that one opponent, who asked not to be identified, saying she feared for her safety, described as “sheer terror” and likened to “Syria.”
Carl Fricke, a board member of the Lucas Valley Estates Homeowners Association, which represents houses nearest to the Lucas property, said: “We got letters saying, ‘You guys are going to get what you deserve. You’re going to bring drug dealers, all this crime and lowlife in here.’ “

For the full story, see:
NORIMITSU ONISHI. “A Pyrrhic Victory for Foes of a New Lucasfilm Project; In Lieu of digital Studio, Plan for Low-Income Homes.” The New York Times (Tues., May 22, 2012): A13 & A19.
(Note: ellipsis added.)
(Note: the online version of the story is dated May 21, 2012 and has the title “Lucas and Rich Neighbors Agree to Disagree: Part II.”)

“Mr. Lucas said Marin needs affordable housing. A resident called his plan “class warfare.”” Source of caption and photo: online version of the NYT article quoted and cited above.

“Innovation” Should Be Reserved for Electricity, Printing Press, Telephone and iPhone

Source of graphic: online version of the WSJ article quoted and cited below.

(p. B1) “Most companies say they’re innovative in the hope they can somehow con investors into thinking there is growth when there isn’t,” says Clayton Christensen, a professor at Harvard Business School and the author of the 1997 book, “The Innovator’s Dilemma.”
. . .
Scott Berkun, the author of the 2007 book “The Myths of Innovation,” which warns about the dilution of the word, says that what most people call an innovation is usually just a “very good product.”
He prefers to reserve the word for civilization-changing inventions like electricity, the printing press and the telephone–and, more recently, perhaps the iPhone.
. . .
Mr. Berkun tracks innovation’s popularity as a buzzword back to the 1990s, amid the dot-com bubble and the release of James M. Utterback’s “Mastering the Dynamics of Innovation” and Mr. Christensen’s “Dilemma.”
. . .
(p. B8) Mr. Christensen classifies innovations into three types: efficiency innovations, which produce the same product more cheaply, such as automating credit checks; sustaining innovations, which turn good products into better ones, such as the hybrid car; and disruptive innovations, which transform expensive, complex products into affordable, simple ones, such as the shift from mainframe to personal computers.
A company’s biggest potential for growth lies in disruptive innovation, he says, noting that the other types could just as well be called ordinary progress and normally don’t create more jobs or business.
But the disruptive innovations can take five to eight years to bear fruit, he says, so companies lose patience.
It is far easier, he adds, for companies to just say they’re innovating. “Everybody’s innovating, because any change is innovation.”

For the full story, see:
LESLIE KWOH. “You Call That Innovation? Companies Love to Say They Innovate, but the Term Has Begun to Lose Meaning.” The Wall Street Journal (Weds., May 23, 2012): B1 & B8.
(Note: ellipses added.)

“I Can’t Explain Strategy at the Same Time that I’m Inventing It”

(p. 75) I felt deceived. I felt betrayed. Their 51 percent control could be like working for IBM or Honeywell again. I felt a threat to the most important value I was seeking: independence. I had to ask myself “Do I say no? Or do I say yes and accept their contract, even though it isn’t what we shook hands on and it makes me uncomfortable?” “This was a major difficulty for me. The 51 percent issue is at the very core of what every entrepreneur is trying to do: control his own destiny.
We were talking about my company. I dreamed it up. I put it together and I was going to run it. I was not going to hand it over to some committee of lawyers and accountants. But neither could I let anger get hold of me.
I knew that “those whom the gods would destroy, they first make angry.” That said, not getting angry does not mean not being firm. So I firmly told Jerry, “I want to run this company. I don’t have time to sit around and explain to your staff what I’m doing. No offense, but they don’t know beans about what I’m (p. 76) trying to do, and neither do you, for that matter. I’ve got to be able to run this business. I can’t explain strategy at the same time that I’m inventing it.”

Source:
Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.

Proof of Concept: “A Determined Entrepreneur Can Start a Rocket Company from Scratch”

‘The Falcon 9 rocket seen in a time-exposure photograph during liftoff.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A13) CAPE CANAVERAL, Fla. — He does not have the name recognition of some other space entrepreneurs, people like Richard Branson, the founder of the Virgin empire, or Paul Allen of Microsoft fame, or Jeff Bezos, the Amazon.com billionaire.

That will probably change if things keep going his way. Elon Musk, a computer prodigy and serial entrepreneur whose ambitions include solving the world’s energy needs and colonizing the solar system, was the man of the hour — or of 3:44 a.m. Tuesday, Eastern time — when the rocket ship built by his company, SpaceX, lifted off gracefully in a nighttime launching and arced off in a streak of light amid loud applause.
. . .
If all goes as planned, his unmanned Dragon capsule, lifted into orbit by his Falcon 9 rocket, will berth at the International Space Station on Friday bearing a modest cargo: 162 meal packets (45 of them low-sodium), a laptop computer, a change of clothes for the station astronauts and 15 student experiments.
Far more important than the supplies is the proof of concept. Mr. Musk is trying to show the world that a determined entrepreneur can start a rocket company from scratch and, a decade later, end up doing a job that has until now been the exclusive province of federal governments.
. . .
Just four years ago, SpaceX went through a near-death experience. The first three launchings of the company’s small Falcon 1 rocket failed. One more failure, Mr. Musk said, and he would have run out of money. As he went through a divorce from his first wife, with whom he has five sons, he had to borrow money from friends.
The fourth launching succeeded. Late in 2008, NASA awarded SpaceX the cargo contract. The first two Falcon 9 launchings, in 2010, also succeeded.
Early Tuesday morning, the success streak continued. As the countdown clock hit zero, the engines remained ignited. Less than 10 minutes later, the Dragon was in orbit. It then aced several other early tasks like the deployment of solar arrays and navigational sensors and the testing of GPS equipment.
“Anything could have gone wrong,” Mr. Musk said. “And everything went right, fortunately.”

For the full story, see:
KENNETH CHANG. “Big Day for Entrepreneur Who Promises More.” The New York Times (Weds., May 23, 2012): A13.
(Note: ellipses added.)
(Note: the online version of the story is dated May 22, 2012, and has the title “Big Day for a Space Entrepreneur Promising More.”)

“Elon Musk.” Source of caption and photo: online version of the NYT article quoted and cited above.

Entrepreneur Krupp Was Paternalistically “Benevolent” and Was Skeptical of Capitalism

Source of book image: online version of the WSJ review quoted and cited below.

(p. A13) Harold James, professor of history and international affairs at Princeton University, portrays a vastly different organization in “Krupp,” a painstaking chronicle of a company that traces its roots to a steel foundry in Essen in 1810. Mr. James’s Krupp is a company for which the manufacturing of war matériel was always of secondary interest to that of civilian production. The company might have preferred to concentrate on manufacturing railroad equipment and consumer goods, but in the developing and expansionist German empire of the 19th century, state requirements for the tools of power dovetailed with Krupp’s desire for regular long-term contracts. The result for Krupp was a practical, if not deliberate, focus on armaments.

From the manufacturer’s perspective, the emphasis on war matériel did not consign Krupp to the ranks of belligerent militarists; it was just smart business. “The purpose of work should be the common good,” founder Alfred Krupp once said, or at least that quote graces a statue the company erected after his death in 1887. All through the 19th century, Mr. James says, the pursuit of profit was less central to the Krupp mission than building a solid enterprise within a framework of social responsibility. As early as 1836, Krupp established a voluntary health-insurance program for its workers. By the middle of the century, life-insurance and pension plans had been instituted. Workers’ hostels and company hospitals were constructed. In exchange for this paternalistic benevolence, Krupp expected complete loyalty from its work force and vehemently opposed the slightest hint of union organization or political activity among its employees.
“Alfred Krupp perfectly fits the mold of the heroic entrepreneur,” Mr. James writes. “Profoundly skeptical of joint-stock companies, banks, and capitalism in general, but also of big-scale science and modern research methods, he was a genius at extending to its utmost limits the possibilities of the craft entrepreneur.”

For the full review, see:
JENNIFER SIEGEL. “BOOKSHELF; Heavy Industry, Burdened Past; The company’s 19th-century founder said it was devoted to the “common good.” In World War II, it worked hard for the Third Reich.” The Wall Street Journal (Tues., April 17, 2012): A13.
(Note: the online version of the interview is dated April 16, 2012.)

Texas Was a Place Where It Was OK for an Entrepreneur to Be Poco Loco

(p. 42) Today, everybody knows something about Texas, but in those days Texas was still like an undiscovered oasis of freethinking, individualistic, action-oriented, business-minded people. It was a place where gut American characteristics were concentrated and magnified. A place where you could taste the frontier spirit that is part of our national heritage. There was a feeling in the air that you could invent yourself as any character you chose, and that your neighbors would leave you alone to be whoever you wanted to be. I liked the aggressiveness of the people in pursuing their goals, and the fact that you could be poco loco, as Spanish speakers say: a little crazy. This quality is a big help when you’re an entrepreneur. I felt that, in Dallas. there was extra oxygen in the air.

Source:
Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.
(Note: italics in original.)

Asteroid-Mining Start-Up Hopes to Launch First Spacecraft within Two Years

“A computer image shows a rendering of a spacecraft preparing to capture a water-rich, near-Earth asteroid.” Source of caption: print version of the WSJ article quoted and cited below. Source of photo: online version of the WSJ article quoted and cited below.

(p. B3) SEATTLE–A start-up with high-profile backers on Tuesday unveiled its plan to send robotic spacecraft to remotely mine asteroids, a highly ambitious effort aimed at opening up a new frontier in space exploration.

At an event at the Seattle Museum of Flight, a group that included former National Aeronautics and Space Administration officials unveiled Planetary Resources Inc. and said it is developing a “low-cost” series of spacecraft to prospect and mine “near-Earth” asteroids for water and metals, and thus bring “the natural resources of space within humanity’s economic sphere of influence.”
The solar system is “full of resources, and we can bring that back to humanity,” said Planetary Resources co-founder Peter Diamandis, who helped start the X-Prize competition to spur nongovernmental space flight.
The company said it expects to launch its first spacecraft to low-Earth orbit–between 100 and 1,000 miles above the Earth’s surface–within two years, in what would be a prelude to sending spacecraft to prospect and mine asteroids.
The company, which was founded three years ago but remained secret until last week, said it could take a decade to finish prospecting, or identifying the best candidates for mining.

For the full story, see:
AMIR EFRATI. “Asteroid-Mining Strategy Is Outlined by a Start-Up.” The Wall Street Journal (Weds., April 25, 2012): B3.
(Note: the online version of the story is dated April 24, 2012, and has the title “Start-Up Outlines Asteroid-Mining Strategy.”)

“Birdseye Coaxes Readers to Re-examine Everyday Miracles”

Source of book image: http://media.miamiherald.com/smedia/2012/05/04/10/50/13z9ot.Em.56.jpg

(p. C7) Birdseye made and lost money, went west to search for the cause of Rocky Mountain spotted fever and hunted fox for furs in Labrador, where he took his wife and infant son to live 250 miles by dogsled from the nearest hospital. He harpooned whales near his home in Gloucester, Mass., and wore a necktie while doing it. And he designed the industrial processes that made it possible to fast-freeze food, thus rendering obsolete much canned, dried, salted and smoked food and the musty basement bins that once held a winter’s diet of turnips, onions and potatoes.

Food had been frozen earlier but more slowly. Crystallization turned it mushy and tasteless. It was poor man’s food. In Labrador, fishing with the Inuit, Birdseye noticed that when a fish was pulled from a hole in the ice and into minus-40-degree air, it froze instantly, staying so fresh that when it was thawed months later, it would sometimes come alive.
He spent years putting together modern mass production with what he had seen in Labrador. By the 1920s, he was fast-freezing food that was far closer to fresh than any competition. “Today’s locavore movement–the movement to shun food from afar and eat what is produced locally . . . would have perplexed him,” Mr. Kurlansky writes. After all, “consumers could go to a supermarket and buy the food of California, France and China for less money.”
. . .
The author makes a telling point about locavores: “We need to grasp that people who are accustomed only to artisanal goods long for the industrial. It is only when the usual product is industrial that the artisanal is longed for. This is why artisanal food, the dream of the food of family farms, caught on so powerfully in California, one of the early strongholds of agribusiness with little tradition of small family farms.”
Birdseye’s heroism has been forgotten, and his frozen food is taken for granted, the way all inventions are taken sooner or later. He sold his business for $23.5 million in 1929 to what would become General Foods. He stayed on as a consultant and also ran his light bulb company, which he would sell too.

For the full review, see:
HENRY ALLEN. “The American Way of Eating; Harlan Sanders and Clarence Birdseye, just like today’s locavores, saw a meal as a way to improve people’s lives.” The Wall Street Journal (Sat., May 5, 2012): C5 & C7.
(Note: ellipsis added.)
(Note: the online version of the review is dated May 4, 2012.)

(p. C6) “Birdseye” is a slight but intriguing book that raises far more questions than it answers. But it indeed coaxes readers to re-examine everyday miracles like frozen food, and to imagine where places with no indigenous produce would be without them. It emphasizes the many steps that went into developing such a simple-seeming process.

For the full review, see:
JANET MASLIN. “BOOKS OF THE TIMES; The Inventor Who Put Frozen Peas on Our Tables.” The New York Times (Thurs., April 26, 2012): C6.
(Note: the online version of the review is dated April 25, 2012.)

Book reviewed:
Kurlansky, Mark. Birdseye: The Adventures of a Curious Man. New York: Doubleday, 2012.

“Mark Kurlansky.” Source of caption and photo: online version of the NYT article quoted and cited above.

A “Boring” and “Excellent” Business Education

(p. 34) Most of what they taught us in those days was functional. This was before they added “entrepreneurship” to business courses. It was all about manufacturing, marketing, and personnel. I found that somewhat boring. I had two favorite courses. The first was Small Business. It was the only course where all the pieces carne together. The other was Computing, which was the first computer course that the Michigan Business School had ever taught. I had a feeling that this was the big new thing. But, more important, it was what IBM did. I had never seen a computer lab before. This was soon after Remington Rand made headlines with its UNIVAC I, the world’s first commercial computer.
. . .
(p. 59) The University of Michigan is an excellent school. I loved being there and I am proud to have earned an MBA. When I was there, I noticed that the fìve-and–ten-cents-store founder, Sebastian S. Kresge–the man who invented the Kmart chain–had given them Kresge Hall. When I could afford to, I figured, why not do the same? I have always been so grateful for what I learned there. In 1997 I gave the school funding for a Sam Wyly Hall. (A few years earlier, Charles and I had helped to build Louisiana Tech’s 16-story Wyly Tower of Learning.) It’s fulfilling to me that today Paton Scholars study at Sam Wyly Hall on the Ann Arbor campus.

Source of both quotes:
Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.
(Note: ellipsis added.)

Capitalism More about Creating New Markets than about Competing to Dominate Old Ones

(p. A21) As a young man, Peter Thiel competed to get into Stanford. Then he competed to get into Stanford Law School. Then he competed to become a clerk for a federal judge. Thiel won all those competitions. But then he competed to get a Supreme Court clerkship.
Thiel lost that one. So instead of being a clerk, he went out and founded PayPal. Then he became an early investor in Facebook and many other celebrated technology firms. Somebody later asked him. “So, aren’t you glad you didn’t get that Supreme Court clerkship?”
The question got Thiel thinking. His thoughts are now incorporated into a course he is teaching in the Stanford Computer Science Department. (A student named Blake Masters posted outstanding notes online, and Thiel has confirmed their accuracy.)
One of his core points is that we tend to confuse capitalism with competition. We tend to think that whoever competes best comes out ahead. In the race to be more competitive, we sometimes confuse what is hard with what is valuable. The intensity of competition becomes a proxy for value.
In fact, Thiel argues, we often shouldn’t seek to be really good competitors. We should seek to be really good monopolists. Instead of being slightly better than everybody else in a crowded and established field, it’s often more valuable to create a new market and totally dominate it. The profit margins are much bigger, and the value to society is often bigger, too.
Now to be clear: When Thiel is talking about a “monopoly,” he isn’t talking about the illegal eliminate-your-rivals kind. He’s talking about doing something so creative that you establish a distinct market, niche and identity. You’ve established a creative monopoly and everybody has to come to you if they want that service, at least for a time.

For the full commentary, see:
DAVID BROOKS. “The Creative Monopoly.” The Wall Street Journal (Tues., April 24, 2012): A21.
(Note: the online version of the article is dated April 23, 2012.)

The online Peter Thiel notes are at:
http://blakemasters.tumblr.com/post/21169325300/peter-thiels-cs183-startup-class-4-notes-essay