Entrepreneurship – Page 178 – artdiamondblog.com

Puzzle: Entrepreneurial Silicon Valley Donates Mainly to Democrats

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

Entrepreneurship thrives when government is small, so it puzzles me when the entrepreneurs in Silicon Valley embrace the Democrats, who generally advocate bigger government.
Of course, my Wabash professor Ben Rogge used to point out that there are always cross-currents that go in a different direction from the mainstream. And among the Democrats, there are what used to be called “new Democrats” who appreciate Schumpeter, and entrepreneurship, and dynamism.
Plus, some Democrats are more respectful of personal, lifestyle choices, and in Silicon Valley, that may be what is given the most weight.
Or, more cynically, maybe there’s a public choice explanation—that Silicon Valley donates to Democrats as a form of ‘insurance,’ in the hope that if the Democrats are elected, they will refrain from over-regulating and over-taxing Silicon Valley. (Even more cynically, compare the case of Florida’s sugar-subsidy-rich Fanjul brothers, one of whom donated huge bucks to the first Bush, while another donated huge bucks to Bill Clinton.)
(Another factor is that, alas, entrepreneurs often do not pay much attention to what conditions encourage entrepreneurship.)

(p. C4) In a flip from the primary season for the 2000 presidential election, 60 percent of the contributions so far from people in the technology field here are going to Democrats. The Democratic candidates raised $1.4 million from the industry in the first half of this year, while Republican candidates raised $890,000. That total is up from $1.2 million in the first six months of each of the last two presidential primary races.

For the full story, see:

LAURIE J. FLYNN. "In Primary, Tech’s Home Is a Magnet." The New York Times (Fri., August 24, 2007): C1 & C4.

Unhappy Italians: “More Fear than Hope”

"A priest passes an abandoned garage covered with graffiti in Milan. Italy’s malaise, an economic, political, and social funk, was summed up in a recent poll: Italians report themselves to be the least happy people in Western Europe." Source of caption and photo: online verison of the NYT article quoted and cited below.

(p. A1) ROME — All the world loves Italy because it is old but still glamorous. Because it eats and drinks well but is rarely fat or drunk. Because it is the place in a hyper-regulated Europe where people still debate with perfect intelligence what, really, the red in a stoplight might mean.

But these days, for all the outside adoration and all of its innate strengths, Italy seems not to love itself.   The word here is “malessere,” or “malaise”; it implies a collective funk — economic, political and social — summed up in a recent poll: Italians, despite their claim to have mastered the art of living, say they are the least happy people in Western Europe.

“It’s a country that has lost a little of its will for the future,” said Walter Veltroni, the mayor of Rome and a possible future center-left prime minister. “There is more fear than hope.”

. . .

. . .   In 1987, Italy celebrated its economic parity with Britain. Now Spain, which joined the European Union only a year earlier, may soon overtake it, and Italy has fallen behind Britain.

Italy’s low-tech way of life may enthrall tourists, but Internet use and commerce here are among the lowest in Europe, as are wages, foreign investment and growth. Pensions, public debt and the cost of government are among the highest.

. . .

(p. A18) . . .  entrepreneurs complain that they are alone. Politicians offered little help making Italy competitive, and this remains a major impediment to making their gains grow. Businesses want less bureaucracy, more flexible labor laws and large investments in infrastructure to make moving goods around easier.

. . .

. . .   Many worry . . . that Italy may share the same fate as the Republic of Venice, based in what many say is the most beautiful of cities, but whose domination of trade with the Near East died with no culminating event. Napoleon’s conquest in 1797 only made it official.

Now it is essentially an exquisite corpse, trampled over by millions of tourists. If Italy does not shed its comforts for change, many say, a similar fate awaits it: blocked by past greatness, with aging tourists the questionable source of life, the Florida of Europe.

. . .

. . .   “We have reached a point where hoping for some kind of white knight coming in saying, ‘We’ll sort you out,’ is over.”

“We Italians have our destiny in our hands more than ever before,” he said.

For the full story, see:

IAN FISHER "In a Funk, Italy Sings an Aria of Disappointment." The New York Times (Thurs., December 13, 2007): A1 & A18.

(Note: ellipses added.)

Marconi Matters

Source of book image: http://palmaddict.typepad.com/photos/uncategorized/big_larsonthunderstruckdrm_1.jpg

Larson’s book plays off a murder mystery against Marconi as the innovator who brought us communication through the air.

I’m most enthused about hte Marconi part. It shows how he proceeded against the theorists of the day, whose theories told them that what he was trying to do was impossible. He was more entrepreneur, than scientist. And it turned out that it was a good thing that the theoretical scientists did not rule, as they might if all decisions about technology were made by the government.

What happened here is an example of what Taleb would call a Black Swan.

Source:

Larson, Erik. Thunderstruck. New York: Crown, 2006.

“Freedom and Prosperity Are Highly Correlated”

Source of graph: http://www.heritage.org/Press/ALAChart/images/ALC_017_index_econ_freedom_3col_c.jpg

(p. A13) . . . the evidence is piling up that neither government nor multilateral spending on education and infrastructure are key to development. To move out of poverty, countries instead need fast growth; and to get that they need to unleash the animal spirits of entrepreneurs.

Empirical support for this view is presented again this year in The Heritage Foundation/The Wall Street Journal Index of Economic Freedom, released today. In its 14th edition, the annual survey grades countries on a combination of factors including property rights protection, tax rates, government intervention in the economy, monetary, fiscal and trade policy, and business freedom.

The nearby table shows the 2008 rankings but doesn’t tell the whole story. The Index also reports that the freest 20% of the world’s economies have twice the per capita income of those in the second quintile and five times that of the least-free 20%. In other words, freedom and prosperity are highly correlated.

For the full commentary, see:

MARY ANASTASIA O’GRADY. "The Real Key to Development." The Wall Street Journal (Tues., January 15, 2008): A13.

(Note: ellipsis added.)

Source of table: online version of the WSJ article quoted and cited above.

More Choice Produces More Happiness

Source of book image: http://www.cambridge.org/catalogue/catalogue.asp?isbn=0521846951

At the AEA meetings in New Orleans I heard an excellent luncheon address on entrepreneurship by R. Glenn Hubbard, the former chair of Bush’s Council of Economic Advisers, and the current Dean of the Columbia Business School.

My ears especially perked up near the end, when he mentioned some survey research that showed that people have higher job satisfaction when they have more choice. He thought that this suggested that a society with more entrepreneurs would be one with higher job satisfaction, and suggested further, that this was a topic begging for further research.

The printed version of his talk, that he graciously sent me, does not have any full references to the survey research. But I’ve done some digging, and think that it’s highly likely that he’s referring to the extensive research of Ronald Inglehart and his colleagues.

I’m going to look into this more. In the meantime, an image of one of Inglehart’s most recent books appears above, and a relevant quote from that book appears below.

(p. 288) As we demonstrated in Chapter 6, opportunities for making autonomous choices are closely linked with human happiness. This association holds true in a systematic way that operates across cultures: in all cultural zones, societies that offer their people more room for choice produce higher levels of overall life satisfaction and happiness. A society’s level of subjective well-being is a strong indicator of the human condition, and it is systematically linked with freedom of choice.

Source:

Inglehart, Ronald, and Christian Welzel. Modernization, Cultural Change, and Democracy: The Human Development Sequence. New York: Cambridge University Press, 2005.

Reference to Hubbard luncheon address:

Hubbard, R. Glenn. "Nondestructive Creation: Entrepreneurship and Management Research in the Study of Growth." Paper presented at the Joint American Economic Association/American Finance Association Luncheon, New Orleans, Jan. 4, 2008.

“At First, We Were Laughing at Him”

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

Below are some excerpts from one of the unique, sometimes funny, sometimes inspiring, front page stories that are a signature feature of the Wall Street Journal.

Rupert Murdoch, the new owner of the WSJ, is rumored in the press to dislike stories such as the one quoted below. I hope the rumors are wrong.

(p. A1) MASITALA, Malawi — On a continent woefully short of electricity, 20-year-old William Kamkwamba has a dream: to power up his country one windmill at a time.

So far, he has built three windmills in his yard here, using blue-gum trees and bicycle parts. His tallest, at 39 feet, towers over this windswept village, clattering away as it powers his family’s few electrical appliances: 10 six-watt light bulbs, a TV set and a radio. The machine draws in visitors from miles around.

. . .

(p. A13) The contraption causing all the fuss is a tower made from lashed-together blue-gum tree trunks. From a distance, it resembles an old oil derrick. For blades, Mr. Kamkwamba used flattened plastic pipes. He built a turbine from spare bicycle parts. When the wind kicks up, the blades spin so fast they rock the tower violently back and forth.

Mr. Kamkwamba’s wind obsession started six years ago. He wasn’t going to school anymore because his family couldn’t afford the $80-a-year tuition.

When he wasn’t helping his family farm groundnuts and soybeans, he was reading. He stumbled onto a photograph of a windmill in a text donated to the local library and started to build one himself. The project seemed a waste of time to his parents and the rest of Masitala.

"At first, we were laughing at him," says Agnes Kamkwamba, his mother. "We thought he was doing something useless."

The laughter ended when he hooked up his windmill to a thin copper wire, a car battery and a light bulb for each room of the family’s main house.

The family soon started enjoying the trappings of modern life: a radio and, more recently, a TV. They no longer have to buy paraffin for lantern light. Two of Mr. Kamkwamba’s six sisters stay up late studying for school.

"Our lives are much happier now," Mrs. Kamkwamba says.

The new power also attracted a swarm of admirers. Last November, Hartford Mchazime, a Malawian educator, heard about the windmill and drove out to the Kamkwamba house with some reporters. After the news hit the blogosphere, a group of entrepreneurs scouting for ideas in Africa located Mr. Kamkwamba. Called TED, the group, which invites the likes of Al Gore and Bono to share ideas at conferences, invited him to a brainstorming session earlier this year.

In June, Mr. Kamkwamba was onstage at a TED conference in Tanzania. (TED stands for Technology Entertainment Design). "I got information about a windmill, and I try and I made it," he said in halting English to a big ovation. After the conference, a group of entrepreneurs, African bloggers and venture capitalists — some teary-eyed at the speech — pledged to finance his education.

For the full story, see:

SARAH CHILDRESS. "A Young Tinkerer Builds a Windmill, Electrifying a Nation Mr. Kamkwamba’s Creation Spurs Hope in Malawi; Entrepreneurs Pay Heed." The Wall Street Journal (Weds., December 12, 2007): A1 & A13.

(Note: ellipsis added.)

Young Serial Entrepreneurs Seek New Challenges

"NAME Max Levchin. AGE 32. NET WORTH Roughly $100 million." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) SAN FRANCISCO — Max Levchin is not easily distracted from his work.

A few years ago, Mr. Levchin, one of the young princes of Silicon Valley, bought his first home, a 12-room Edwardian high atop a hill here, for $3.4 million. But Mr. Levchin, who made a fortune at age 27 selling PayPal, the online payment service he helped start in 1998, never moved in. He sold it two years later without having slept there for even one night.

. . .

Mr. Levchin, who is now 32, is typical of a new generation of junior titans in Silicon Valley who might be called the prematurely rich — techies worth tens of millions of dollars, sometimes more, at an age when many others are just starting to figure out what to do with their lives.

The Internet, a low-overhead medium with a global reach, has greatly accelerated the wealth creation phenomenon, producing a larger breed of multimillionaires even younger and richer than in the past.

They are happy to be wealthy, of course, but many of these baby-faced technology tycoons often seem indifferent to the buying power of their money, at least at this stage of their lives. Instead, nearly all of them have chosen to throw themselves back into a start-up, not so much because they want a spectacular new home or a personal jet — though many of them do — but be-(p. 16)cause they are in a competition with themselves and one another.

“For most of us, doing it again means surpassing what we’ve done previously,” said Peter A. Thiel, Mr. Levchin’s partner at PayPal, who also has started a new business, a hedge fund called Clarium Capital. “And that can be a really high bar.”

. . .

Maximillian Rafael Levchin was born and raised in Kiev, Ukraine, a Jew living under Soviet rule for 16 years. As the Soviet Union was crumbling, the family moved to the United States and settled in Chicago. But the worst year of his life, he said, was not when he was growing up but after eBay bought PayPal.

He thought he would spend the time after the sale “exploring my inner self.” Instead, he spent the better part of 12 months “feeling worthless and stupid” and baffled by what he might do with the remainder of his life. He felt too young to retire or downshift a gear or two — and too restless to become a philanthropist.

“I enjoy sitting on nice beaches and hanging out with my girlfriend and playing with my dog, but that’s three hours a day,” Mr. Levchin said. “What about the remaining 18 hours I’m awake?”

. . .

In Silicon Valley, said Robert I. Sutton, a professor of management science and engineering at Stanford and co-founder of the Stanford Technology Ventures Program, remaining relevant, if not also admired and respected, requires that an entrepreneur continue to speed along in the fast lane.

“In other parts of the country, things like a great estate are the symbols people most respect,” Mr. Sutton said. “But here, the greatest status symbol is a person’s ability,” he added, to “still bring out hot new companies” and show that you are “working on the hot new technologies.”

For the full story, see:

GARY RIVLIN. "Age of Riches; After Succeeding, Young Tycoons Try, Try Again." The New York Times, First Section (Sun., October 28, 2007): 1 & 16.

(Note: ellipses added.)

"TAKING FIVE. Max Levchin spends a moment with his dog, Uma, but usually he works 15 to 18 hours a day at his start-up company, Slide.com." Source of caption and photo: online version of the NYT article quoted and cited above.

Only Two Living Americans Are Among 30 All-Time Wealthiest

Source: screen capture of a flash animated graphic that appears in the online version of the NYT article quoted and cited below. The flash animated graphic allows you to move your cursor along the circles representing wealth, and at the top of the graphic appears the picture and a brief bio of the person who owned that amount of wealth (such as Rockefeller in the screen capture above).

(p. 18) Mr. Weill’s beginnings were . . . inauspicious. A son of immigrants from Poland, raised in Brooklyn, a so-so college student, he landed on Wall Street in a low-level job in the 1950s. Harnessing entrepreneurial energy, deftness as a deal maker and an appetite for risk, with a rising stock market pulling him along, he built a financial empire that, in his view, successfully broke through the stultifying constraints that flowed from the New Deal. They were constraints not just on what business could or could not do, but on every high earner’s take-home pay.

“I once thought how lucky the Carnegies and the Rockefellers were because they made their money before there was an income tax,” Mr. Weill said, never believing in his younger days that deregulation and tax cuts, starting in the late 1970s, would bring back many of the easier conditions of the Gilded Age. “I felt that everything of any great consequence was really all made in the past,” he said. “That turned out not to be true and it is not true today.”

The Question of Talent

Other very wealthy men in the new Gilded Age talk of themselves as having a flair for business not unlike Derek Jeter’s “unique talent” for baseball, as Leo J. Hindery Jr. put it. “I think there are people, including myself at certain times in my career,” Mr. Hindery said, “who because of their uniqueness warrant whatever the market will bear.”

He counts himself as a talented entrepreneur, having assembled from scratch a cable television sports network, the YES Network. “Jeter makes an unbelievable amount of money,” said Mr. Hindery, who now manages a private equity fund, “but you look at him and you say, ‘Wow, I cannot find another ballplayer with that same set of skills.’ ”

. . .

The New Tycoons

The new Gilded Age has created only one fortune as large as those of the Rockefellers, the Carnegies and the Vanderbilts — that of Bill Gates, according to various compilations. His net worth, measured as a share of the economy’s output, ranks him fifth among the 30 all-time wealthiest American families, just ahead of Carnegie. Only one other living billionaire makes the cut: Warren E. Buffett, in 16th place.

. . .

“I don’t think it is unreasonable,” he said, “for the C.E.O. of a company to realize 3 to 5 percent of the wealth accumulation that shareholders realize.”

That strikes Robert C. Pozen as a reasonable standard. He made a name for himself — and a fortune — overseeing the investment department at Fidelity.

Mr. Weill makes a similar point. Escorting a visitor down his hall of tributes, he lingers at framed charts with multicolored lines tracking Citigroup’s stock price. Two of the lines compare the price in the five years of Mr. Weill’s active management with that of Mr. Buffett’s Berkshire Hathaway during the same period. Citigroup went up at six times the pace of Berkshire.

“I think that the results our company had, which is where the great majority of my wealth came from, justified what I got,” Mr. Weill said.

New Technologies

Others among the very rich argue that their wealth helps them develop new technologies that benefit society. Steve Perlman, a Silicon Valley innovator, uses his fortune from breakthrough inventions to help finance his next attempt at a new technology so far out, he says, that even venture capitalists approach with caution. He and his partners, co-founders of WebTV Networks, which developed a way to surf the Web using a television set, sold that still profitable system to Microsoft in 1997 for $503 million.

Mr. Perlman’s share went into the next venture, he says, and the next. One of his goals with his latest enterprise, a private company called Rearden L.L.C., is to develop over several years a technology that will make film animation seem like real-life movies. “There was no one who would invest,” Mr. Perlman said. So he used his own money.

For the full story, see:

LOUIS UCHITELLE. "Age of Riches; The Richest of the Rich, Proud of a New Gilded Age." The New York Times, Section 1 (Sun., July 15, 2007): 1 & 18-19.

(Note: ellipses added.)

Entrepreneur Leo J. Hindery, Jr. Source of photo: online version of the NYT article quoted and cited above.

X Prize Foundation “Encourages Entrepreneurship”

"From left, Bob Weiss of the X Prize Foundation; Larry Page of Google; Peter Diamandis of X Prize; Buzz Aldrin, the astronaut." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 33) THE quests are monumental: end global warming; build a private spaceship; cure diseases; develop a car that can go 100 miles on a gallon of gas.

But the prizes are also monumental: millions and millions of dollars.

Such extreme public interest projects have been taken up by foundations, most prominently the X Prize Foundation, an 11-year-old group in Santa Monica, Calif., that rewards innovation on an entirely new scale.

“The world faces difficult problems — bigger than government, business and nonprofits can handle,” said Tom Vander Ark, president of the X Prize Foundation. The foundation encourages entrepreneurship, he said, and “competitions can create and reshape markets.”

In 1996, the foundation offered a $10 million prize, called the Ansari X, for someone to invent a private passenger rocket ship able to fly nearly 70 miles up and back again. A team led by the aerospace engineer Burt Rutan, and paid for with more than $20 million from Paul G. Allen, a founder of Microsoft, collected the $10 million in 2004.

The X Prize Foundation is not alone in its ambitious ventures: Google.org, the nearly two-year-old philanthropic arm of Google, has kicked off a $10 million competition to inspire production of plug-in hybrid vehicles so energy efficient they can sell excess electricity back to the utility.

. . .

“It’s a new kind of grant-making,” said Jonathan Greenblatt, an entrepreneur who sold his company, Ethos Water, to Starbucks and became a senior adviser to the X Prize Foundation. “It’s a mode that encourages experimentation rather than prescribing solutions. It sets the stage for innovation and dynamism that the grantor can’t anticipate.”

. . .

Cash prizes to induce innovation are not new. Peter Diamandis, the 46-year-old aeronautical engineer and physician who founded the X Prize Foundation, said he was inspired by the $25,000 aviation prize offered in 1919 by a New York hotelier, Raymond Orteig, to the first person to fly nonstop from New York to Paris. The prize went, of course, to Charles Lindbergh, whose grandson, Erik Lindbergh, is on the X Prize Foundation board.

In the same spirit, “We asked ourselves, how do we demonstrate the technology and stimulate market interest?” said Dan Reicher, director of climate and energy initiatives at Google.org. “How do we advance the technology around plug-ins? The usual way is to quietly go about looking at investment opportunities, make investments and have some impact. We decided to take a different route, a public request for investment proposals. We wanted to look beyond the usual players, bring attention to a critical area and catalyze competition and innovation.”

. . .

The X Prize Foundation announced the new competitions at the Clinton Global Initiative, a conference organized by former President Bill Clinton and held in September in New York.

“Think of this,” Mr. Clinton said at the time. “Twelve prizes in areas designed to break barriers to human health, have children live longer, solve all these education problems and do it in the most cost-effective way. This is the most amazing idea to me, trying to unleash entrepreneurship in the public interest.”

For the full story, see:

KEITH SCHNEIDER. "Win Fabulous Prizes, All in the Name of Innovation." The New York Times, Giving Special Section (Sun., November 12, 2007): 33.

(Note: ellipses added.)

Entrepreneur Bets His Wealth on a Risky, Important Project

"Alfred E. Mann, at his home in Beverly Hills, Calif., has put nearly $1 billion of his own money into developing an insulin that can be inhaled." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. C1) LOS ANGELES, Nov. 15 — Pfizer, the world’s biggest drug company, flopped miserably with a seemingly can’t-miss idea. But Alfred E. Mann is so certain he can succeed that he is betting nearly $1 billion of his own money on the effort.

Pfizer’s failure was a form of insulin that people with diabetes could inhale rather than inject. But last month, after selling only $12 million worth of inhaled insulin in the first nine months of the year, Pfizer said it would take a $2.8 billion charge and abandon the product.

Mr. Mann, the 82-year-old chief executive and controlling shareholder of the MannKind Corporation, is not deterred. He says his company’s inhalable insulin is not just a way to avoid needles but is medically superior to Pfizer’s product and to injected insulin.

If he is right, he could help change the way diabetes is treated.

“I believe this is one of the most valuable products in history in the drug industry, and I’m willing to back it up with my estate,” Mr. Mann said at his 23,000-square-foot mansion overlooking the San Fernando Valley. The interview took place on a Saturday evening, which Mr. Mann said was the only opening in his seven-day work schedule.

Despite Mr. Mann’s remarkable entrepreneurial career — he has founded more than a dozen aerospace and medical device companies — there are people who wonder whether he has so much invested in this latest effort, both financially and emotionally, that he cannot see any odds against him.

“I don’t know of an individual who has spent as much of a personal fortune on a long shot,” said Andrew Forman, an analyst with WR Hambrecht & Company. Mr. Forman said MannKind faced numerous regulatory and patent challenges, as well as possible competition from the leaders in injected insulin, Eli Lilly and Novo Nordisk, which are also developing inhalable products.

For the full story, see:

ANDREW POLLACK. "Betting an Estate on Inhaled Insulin." The New York Times (Fri., November 16, 2007): C1 & C5.

"The inhaled insulin device, about the size of a cellphone." Source of caption and photo: online version of the NYT article quoted and cited above.

Reducing Nickel Pollution is an Entrepreneurial “Business Opportunity” in Russia

Vladimir Stratyev in front of a lake containing nickel dust from the nickel factory in the background. Source of photo: online version of the NYT article quoted and cited below.

(p. A4) NORILSK, Russia — A former Siberian gulag with a population of about 210,000, this decrepit city has some of the worst air quality in the world. It is surrounded by dead trees, as far as the eye can see, poisoned by acid rain.

But to Vladimir M. Stratyev, the eye-stinging haze is an unalloyed blessing, for Mr. Stratyev is, in effect, a miner of air pollution. For him the smog of Norilsk is a mother lode.

The smelters here produce one-fifth of all the world’s nickel, a key alloy of stainless steel, while emitting 1.9 million tons of sulfur dioxide a year, more than the entire country of France. They also spew out 10,800 tons of heavy metal particulates.

. . .

Spotting a business opportunity, factory officials have brought in a contractor, Poligon, to extract the metals from one of these deposits, known euphemistically as “technogenic sources of ore.”

Mr. Stratyev, the supervisor of a mining crew, uses a dredge and bulldozer to scoop up the black sludge, rich in nickel that once fell from the sky. He gathers it in mighty piles from a large pond that lies directly downwind from the smelters and returns it to the factory from which it came.

“They should put a monument up to us,” Mr. Stratyev said, standing in front of the dredge he just used to mine air pollution from the bottom of a pond. “We’re solving an ecological problem.”

. . .

The pollution mining began five years ago, according to Aleksandr I. Korolev, a deputy chief engineer at the factory. “It’s a year-round operation,” Mr. Korolev said of the work, which has accelerated recently because of high metals prices. “The pond does not freeze,” he said, because of the chemicals and the inflow of warm effluent from the factory.

For the full story, see:

ANDREW E. KRAMER. "NORILSK JOURNAL; For One Business, Polluted Clouds Have Silvery Linings." The New York Times (Thurs., July 12, 2007): A4.

Source of map: online version of the NYT article cited above.