Category: Entrepreneurship

“The Bad Boy of Silicon Valley” Advises We “Do Nothing and Let the Invisible Hand Fix the Problem Free of Charge”

The author of the comments quoted below was the founder and CEO of Cypress Semiconductor Corporation.

(p. A17) In the late 1970s cars became computerized. My first Silicon Valley employer, American Microsystems, once “lost the recipe” and cut off the supply of memory chips to a Lincoln Continental plant. Without our chips, cars couldn’t be started. Ford later dropped us as a vendor, the penalty for shutting down an auto plant.

Soon the automotive industry created an extensive repertoire of reliability and sourcing qualifications that prevented many such problems but also mired the industry in bureaucracy. Today, the qualification process for a new chip vendor takes 18 to 24 months or more. That’s why automotive companies can’t simply buy a scarce chip from another vendor in a crunch to keep the lines running.

. . .

Auto companies slashed their chip orders at the pandemic’s outset, and supply responded accordingly. But when auto demand surprised everybody by staying strong, and auto makers suddenly needed more chips, the semiconductor industry couldn’t respond quickly enough. Even with robotic factories, it takes 12 weeks on average to make a silicon wafer—longer if advanced processes are required—and that’s before back-end assembly and shipping around the world. President Biden says he is “studying” supply chains, but every knowledgeable person in the industry knows that politics and subsidies are irrelevant. The market players will fill this chip shortage before the Democrats and Republicans finish arguing about whose fault it is.

. . .

There is no need to give taxpayers’ money to some of the smartest and richest corporations in the world. Chip companies thrive in free markets and barely survive in controlled economies. This message shouldn’t be controversial, but in 1991 my distaste for pork-barrel spending got me labeled “The Bad Boy of Silicon Valley” on the cover of BusinessWeek. My proposed solution to the current chip problem? Do nothing and let the invisible hand fix the problem free of charge.

For the full commentary, see:

T.J. Rodgers. “Government Won’t Fix Chip Shortage.” The Wall Street Journal (Thursday, April 29, 2021): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 28, 2021, and has the title “Government Won’t Fix the Semiconductor Shortage.”)

British Entrepreneur Shattered French Wine Pretension

(p. A23) The world was paying little attention on May 24, 1976, when a small wine tasting was held in Paris at the Intercontinental Hotel. But the echoes of that tasting, later called the Judgment of Paris, have resounded for decades.

The instigator, Steven Spurrier, an Englishman who owned a wine shop and wine school in Paris, had set up a blind tasting of 20 wines — 10 white and 10 red — for nine French judges, including some of the top names in the French wine and food establishment.

. . .

It was hardly thought to be a fair fight. As has been recounted countless times, the judges were thoroughly convinced that California wines were inferior.

“Ah, back to France,” one judge sighed after tasting a Napa Valley chardonnay. Another, sniffing a Bâtard-Montrachet, declared: “This is definitely California. It has no nose.”

When all was done, a shocking consensus revealed the favorite wines to be a 1973 chardonnay from Chateau Montelena and a 1973 cabernet sauvignon from Stag’s Leap Cellars, both in Napa Valley.

The Americans celebrated, the French shrank in consternation, and everlasting fame awaited Mr. Spurrier, who went on to a long career as a wine entrepreneur.

. . .

The Paris tasting might have swiftly been forgotten had not a single reporter, George M. Taber of Time magazine, been on hand to witness the events. His article, “Judgment of Paris,” gave the California wine industry a much-needed boost, lending its vintners international credibility at a time when they were searching for critical approval and public acceptance.

. . .

Mr. Taber, the reporter, in 2005 published a book, “Judgment of Paris: California vs. France and the Historic 1976 Paris Tasting That Revolutionized Wine.” A 2008 film, “Bottle Shock,” with Alan Rickman playing Mr. Spurrier, depicted the tasting as the climax of a triumph-of-the-underdog story.

. . .

As for Mr. Spurrier, he leveraged the tasting into different careers in wine, with both triumphs and failures.

. . .

In 1987, the Spurriers bought a farm in Dorset near the south coast of England, and he decided that the chalk soil, similar to what can be found in Champagne and Chablis, was a perfect place for vines.

They did not start planting until 2009, by which time a burgeoning sparkling wine industry had taken root in southern England. Their sparkling wine, Bride Valley, had its first release in 2014.

For the full obituary, see:

Eric Asimov. “Steven Spurrier, 79, a Merchant Who Upended the Wine World With a Taste Test.” The New York Times (Thursday, March 18, 2021): A23.

(Note: ellipses added.)

(Note: the online version of the obituary was updated March 18, 2021, and has the title “Steven Spurrier, Who Upended Wine World With a Tasting, Dies at 79.”)

The Tabar book mentioned above is:

Taber, George M. Judgment of Paris: California Vs. France and the Historic 1976 Paris Tasting That Revolutionized Wine. New York: Scribner, 2005.

New Regulations Pushed by Union Allied with de Blasio Will Limit New NYC Hotels

(p. A8) Mayor Bill de Blasio and other New York City leaders are pushing a controversial plan to drastically restrict hotel development, a move that the mayor’s own experts fear could endanger the city’s post-pandemic recovery and cost billions in lost tax revenue.

. . .

The Council is expected to approve the plan in time for Mr. de Blasio to see it become law before he leaves office this year. Once it is in place, developers fear that few, if any, new hotels would be built.

. . .

“We flag that to continue with this proposal could be seen as contrary to economic recovery principles and sound planning,” Marisa Lago, the director of the planning department, wrote last year in the memo to City Hall.

But Mr. de Blasio’s views hew closer to those of another group: the hotel workers union that endorsed his 2020 presidential campaign, pouring $440,000 into ads to bolster his ill-fated candidacy.

The union, the Hotel Trades Council, has long pushed to limit the construction of new hotels, which are often nonunion. Its calculation has been that limiting the development of such hotels, which typically offer less-expensive lodging than existing full-service hotels, would tend to increase hotel room prices generally and bolster the higher-end hotels where many of its workers are employed.

. . .

In most of the city, developers are free to build hotels in areas that are zoned for such use. Under a special approval process, building hotels would become far more challenging, said Moses Gates, vice president of housing and neighborhood planning at the Regional Plan Association, an influential nonprofit planning group. No other type of routine development currently gets the kind of scrutiny that Mr. de Blasio is proposing for hotels, he said.

“Hotels would be the only common land use which would always need City Council approval to be built, no matter what,” Mr. Gates said.

. . .

The Hotel Trades Council’s support of a special permit process for new hotels may seem counterintuitive, since it is effectively opposing the growth of jobs in the industry that it represents. Union hotel jobs in New York City provide one of the few pathways to the middle class for workers with no college education.

“Labor generally is in favor of employment and of growth, but especially jobs in their own sector,” said Harry C. Katz, a professor of collective bargaining at Cornell University.

But mid-market hotels that serve middle-class tourists are hard to unionize, union and industry experts say. If citywide special permits are adopted, as is expected, the hotel union would most likely use its political leverage to pressure Council members to only accept new hotels that use union labor.

For the full story, see:

Dana Rubinstein and J. David Goodman. “A Plan to Limit New Hotels in New York Meets Resistance.” The New York Times (Wednesday, April 28, 2021): A8.

(Note: ellipses added.)

(Note: the online version of the story has the date April 27, 2021, and has the title “A $7 Billion Mistake? New York Seeks to Curb New Hotels.”)

The research co-authored by Stone and mentioned above was described in:

Stone, Brian, Jr., Evan Mallen, Mayuri Rajput, Carina J. Gronlund, Ashley M. Broadbent, E. Scott Krayenhoff, Godfried Augenbroe, Marie S. O’Neill, and Matei Georgescu. “Compound Climate and Infrastructure Events: How Electrical Grid Failure Alters Heat Wave Risk.” Environmental Science & Technology (published online in advance of print on April 30, 2021).

Maple “Sugaring Is a Sticky Business,” but Has Low Barriers to Entry and Is Highly Scalable

If you were a long-term maple sugarer, you might have expected the pandemic to boost your business. People at home under stress would be likely eat a lot of comfort food. And you would have been right about that–the average American has gained more pounds than usual over the pandemic. But as you were congratulating yourself for your foresight, you might have noticed that the supply of maple sugar was increasing because many staying at home during the pandemic decided that collecting maple sap outdoors was a safe, relaxing, and edifying way to bond during a pandemic.

Who can foresee all of the exogenous events, and the decisions of others, that will influence the success or failure of our dreams? The best we can do is to be broadly curious, to be always alert, and to make nimble adjustments. (A great relevant book is Adner’s The Wide Lens.)

(p. D4) Stress-baking and panic shopping. Vegetable regrowing and crafting. Now we can add another hobby to a year of quarantine trends: backyard maple sugaring.

Among the many indicators that it’s on the rise: a run on at-home evaporators and other syrup-making accouterments. A surge in traffic and subscriptions to maple-syrup-making websites and trade publications. And, of course, lots and lots of documentation on social media. (The Facebook group Backyard Maple Syrup Makers added some 5,000 members, almost doubling the number of people in its community, in the past year.)

Tapping maple trees and boiling the sap into syrup — known as sugaring — isn’t a new hobby. What’s unique about this year is the influx of suburban and urban backyard adventurers fueling these maple sugaring highs.

. . .

Because sugaring is a sticky business — and boiling sap indoors can mean resin all over the walls — many backyard amateurs turn to small-scale, hobby-size evaporators like the ones sold by Vermont Evaporator Company in Montpelier, Vt. The company said its number of customers had doubled in the past year.

. . .

Peter Gregg, the founder of The Maple News and the maple sugaring classifieds, The Maple Trader, isn’t surprised that sugaring supplies have been selling out. He saw his print subscription increase over 14 percent, he said, and his website traffic increase by 50 percent this year — a quite uncommon phenomenon for a maple-themed newspaper.

“The biggest sugarers in Vermont started in their backyards,” Mr. Gregg said. “Sugaring is great because you can start out doing it in your kitchen but you get the bug and you keep growing and growing, adding more and more taps, buying more and more equipment, and trying to get bigger and more efficient.”

For the full story, see:

Colman, Michelle Sinclair. “Maple Syrup Making Also Boomed as a Pandemic Hobby.” The New York Times (Thursday, April 8, 2021): D4.

(Note: ellipses added.)

(Note: the online version of the article has the date April 7, 2021, and has the same title as the print version. Where the wording in the online version differs from the wording in the print version, the passages quoted above follow the print version.)

The Adner book that I mention above is:

Adner, Ron. The Wide Lens: A New Strategy for Innovation. New York: Portfolio, 2012.

Deregulation of Hearing Aids Will Lower Cost and Increase Innovation

(p. B5) Hearing aids typically cost thousands of dollars, require multiple visits to specialists and often aren’t covered by health insurance. Untreated hearing loss is associated with cognitive decline, dementia and other harms. Overcoming barriers to hearing treatment may significantly improve Americans’ health.

The federal government is poised to help. Congress in 2017 passed legislation that would let anyone buy hearing aids approved by the Food and Drug Administration without a prescription from an audiologist. The F.D.A. has missed a deadline to release draft guidelines for this new category of over-the-counter hearing aids.

Experts told me that when the F.D.A. moves ahead, it’s likely to lead to new products and ideas to change hearing aids as we know them.

. . .

It is already possible to buy a hearing helper — they can’t legally be called hearing aids — without a prescription. These devices, called personal sound amplification products or PSAPs, vary wildly in quality from excellent to junk.

. . .

Nicholas Reed, director of audiology at the Johns Hopkins Cochlear Center for Hearing and Public Health, told me that the F.D.A. process should provide a path for the best PSAPs to be approved as official over-the-counter hearing aids. He expects new companies to hit the market, too.

You may doubt that a gadget you buy next to the toilet paper at CVS could be a serious medical device. Dr. Reed’s research, however, has found that some hearing helpers for $350 or less were almost as good as prescription hearing aids for people with mild-to-moderate hearing loss.

Dr. Reed described the best lower-cost devices as the Hyundai of hearing help. (This was a compliment.) They aren’t flashy, but they will get many people safely and effectively where they need to go. He also imagines that the F.D.A. rules will create the conditions for many more people to buy hearing aids — both over the counter and by prescription.

. . .

Health care in the United States can often feel as if it’s stuck, and technology is usually not the solution. But with hearing aids, technology and a change in government policy could bring helpful health innovation.

For the full commentary, see:

Shira Ovide. “ON TECH; Affordable and Accessible Hearing Aids.” The New York Times (Monday, April 19, 2021): B5.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 12, 2021, and has the title “ON TECH; Hearing Aids for the Masses.”)

Reed’s research mentioned above is documented in:

Reed, Nicholas S., Joshua Betz, Nicole Kendig, Margaret Korczak, and Frank R. Lin. “Personal Sound Amplification Products Vs a Conventional Hearing Aid for Speech Understanding in Noise.” JAMA 318, no. 1 (July 4, 2017): 89-90.

Always-Curious Microbiologist Found Useful Robust New Bacterium in Yellowstone Hot Spring

An enzyme in the bacterium that Brock discovered was used by Kary Mullis to create the polymerase chain reaction (PCR) that is part of Covid-19 tests.

(p. B11) Thomas Brock, a microbiologist, was driving west to a laboratory in Washington State in 1964 when he stopped off at Yellowstone National Park.

. . .

What fascinated him, on what would be the first of many trips to Yellowstone, were the blue-green algae living in a hot spring — proof that some life could tolerate temperatures above the boiling point of water.

It was the beginning of research that led to a revolutionary find in 1966: a species of bacteria that he called Thermus aquaticus, which thrived at 70 degrees Celsius (158 degrees Fahrenheit) or more.

. . .

The yellow bacteria — discovered by Dr. Brock and Hudson Freeze, his undergraduate assistant at Indiana University — survive because all their enzymes are stable at very high temperatures, including one, Taq polymerase, that replicates its own DNA. It proved essential to the invention of the process behind the gold standard in coronavirus testing.

. . .

When he arrived at Yellowstone, he did not have grandiose ambitions.

“I was just looking for a nice, simple ecosystem where I could study microbial ecology,” he said in an interview for the website of the University of Wisconsin, Madison, where he was a professor of natural sciences in the department of bacteriology from 1971 to 1990. “At higher temperatures, you don’t have the complications of having animals that eat all the microbes.”

Stephen Zinder worked with Dr. Brock as a student from 1974 to 1977, a period that included Dr. Brock’s last summer of work at Yellowstone and his research into the ecology of Wisconsin’s lakes, including Lake Mendota in Madison.

“He had an encyclopedic knowledge of microbiology and science in general,” said Dr. Zinder, now a professor of microbiology at Cornell University. “He was always learning and picking up new things.” He added, “I think his real ability was to see things simply and to figure out simple techniques to find out what the organisms were doing in their environment.”

For the full obituary, see:

Richard Sandomir. “Thomas Brock, 94, Scientist Who Shared a Nobel Prize’.” The New York Times (Saturday, May 1, 2021): B11.

(Note: ellipses added.)

(Note: the online version of the obituary was updated April 26, 2020, and has the title “Thomas Brock, Whose Discovery Paved the Way for PCR Tests, Dies at 94.”)

SpaceX Is the Wikipedia of Space: Launch Quickly and Upgrade Quickly

SpaceX has a Wikipedia approach to space. Launch quickly; correct and upgrade quickly. This is similar to Google’s approach to hard drives: buy cheap, unreliable ones, have a lot of backups, and be ready to replace a lot of hard drives. Also the ethernet’s approach to packets: be ready to lose them and re-send. I argue these examples illustrate redundancy, and that we can and should have a robustly redundant labor market.

(p. B1) The Starlink project, owned by Mr. Musk’s Space Exploration Technologies Corp. or SpaceX, is authorized to send some 12,000 satellites into orbit to beam superfast internet to every corner of the Earth. It has sought permission for another 30,000.

Now, rival companies such as Viasat Inc., OneWeb Global Ltd., Hughes Network Systems and Boeing Co. are challenging Starlink’s space race in front of regulators in the U.S. and Europe. Some complain that Mr. Musk’s satellites are blocking their own devices’ signals and have physically endangered their fleets.

. . .

The critics’ main argument is that Mr. Musk’s launch-first, upgrade-later principle, which made his Tesla Inc. TSLA +1.27% electric car company a pioneer, gives priority to speed over quality, filling Earth’s already crowded orbit with satellites that may need fixing after they launch.

“SpaceX has a gung-ho approach to space,” said Chris McLaughlin, government affairs chief for rival OneWeb. “Every one of our satellites is like a Ford Focus—it does the same thing, it gets tested, it works—while Starlink satellites are like Teslas: They launch them and then they have to upgrade and fix them, or even replace them alto-(p. B2)gether,” Mr. McLaughlin said.

For the full story, see:

Bojan Pancevski. “Rivals of SpaceX’s Satellites Cite Risk.” The Wall Street Journal (Tuesday, April 20, 2021): B1 & B2.

(Note: ellipsis added.)

(Note: the online version of the story has the date April 19, 2021, and has the title “Elon Musk’s Satellite Internet Project Is Too Risky, Rivals Say.”)

SEC Vaguely Threatens SPAC Investment Innovation

Part of the appeal of SPACs in comparison to IPOs, is that SPACs are less regulated and can act more entrepreneurially. Those who invest in SPACs tend to be very wealthy. Shouldn’t they be allowed to use their own judgement about whether the benefits of SPACs are worth the costs?

Recall that the SEC also tried to slow down the initial development of venture capital by Georges Doriot.

(p. B1) WASHINGTON—A top securities regulator warned about the surge in fundraising by blank-check companies known as special-purpose acquisition companies.

Speaking at a legal conference Wednesday [April 7, 2021], Securities and Exchange Commission official John Coates said there are “some significant and yet undiscovered issues” with SPACs, which allow private companies to go public with a structure that offers outsize potential rewards to backers while bypassing some safeguards of a traditional initial public offering.

For the full story, see:

Dave Michaels. “SEC Warns On Spread of SPAC Financing.” The Wall Street Journal (Thursday, April 8, 2021): B1 & B11.

(Note: bracketed date added.)

(Note: the online version of the story was updated April 7, 2021, and has the title “SEC Official Warns on Growth of Blank-Check Firms.”)

China’s Economic Surge Not Shared by Consumers and Small Businesses

(p. B1) Factories are whirring, new apartments are being snapped up, and more jobs are up for grabs. When China released its new economic figures on Friday, they showed a remarkable postpandemic surge.

The question is whether small businesses and Chinese consumers can fully share in the good times.

China reported on Friday that its economy grew by a jaw-dropping 18.3 percent in the first three months of the year compared with the same period last year. While the figure is steep, it is as much a reflection of the past — the country’s output shrank 6.8 percent in the first quarter of 2020 from a year earlier — as it is an indication of how China is doing now.

A year ago, entire cities were shut down, planes were grounded and highways were blocked to control the spread of a relentless virus. Today, global demand for computer screens and video consoles that China makes is soaring as people work from home and as a pandemic recovery beckons. That demand has continued as Americans with stimulus checks look to spend money on patio furniture, electronics and other goods made in Chinese factories.

China’s recovery has also been powered by big infrastructure. Cranes dot city skylines. Construction projects for highways and railroads have provided short-term jobs. Property sales have also helped strengthen economic activity.

But exports and property investment can carry China’s growth only so far.

. . .

(p. B3) A slow vaccination rollout and fresh memories of lockdowns have left many consumers in the country skittish.  . . .  When virus outbreaks occur, the Chinese authorities are quick to put new lockdowns in place, hurting small businesses and their customers.

. . .

Families continue to save at a higher rate than they did before the pandemic, something that worries economists like Louis Kuijs, who is head of Asian economics at Oxford Economics. Mr. Kuijs is looking at household savings as an indication of whether Chinese consumers are ready to start splurging after months of being stuck at home.

“More people still seem to not go all the way in terms of carefree spending,” he said. “At times there are still some lingering Covid concerns, but there is perhaps also a concern about the general economic situation.”

. . .

Mr. [Jinqiu] Li, who is recently married and has a baby at home, is still choosing to save instead of spend. He had planned to work for the family business, but it has been hit by the pandemic and he doesn’t think there is much opportunity for him if he stays.

“The whole family has some sense of crisis,” Mr. Li said. “Because of the pandemic and because of family business, I have a sense of crisis.”

For the full story, see:

Alexandra Stevenson and Cao Li. “China’s Gain Is Hardly Felt by the People.” The New York Times (Friday, April 16, 2021): B1 & B3.

(Note: ellipses, and bracketed first name, added.)

(Note: the online version of the article has the date April 15, 2021, and has the title “China’s Economy Is Booming. Shoppers Are Skittish Anyway.” The quote starting “More people” appeared in the print, but not in the online, version of the article.)

Krugman Argues Costly Universal Basic Income (UBI) Not Justified by Automation

(p. A22) [Andrew] Yang’s claim to fame is his argument that we’re facing social and economic crises because rapid automation is destroying good jobs and that the solution is universal basic income — a monthly check of $1,000 to every American adult. Many people find that argument persuasive, and one can imagine a world in which both Yang’s diagnosis and his prescription would be right.

But that’s not the world we’re living in now, and there’s little indication that it’s where we’re going any time soon.

Let’s do a fact check: Are we actually experiencing rapid automation — that is, a rapid reduction in the number of workers it takes to produce a given amount of stuff? That would imply a rapid rise in the amount of stuff produced by each worker still employed — that is, rapidly rising productivity.

But that’s not what we’re seeing. In fact, the lead article in the current issue of the Monthly Labor Review, published by the Bureau of Labor Statistics, is an attempt to understand the productivity slowdown — the historically low growth in productivity since 2005. This slowdown has been especially pronounced in manufacturing, which has seen hardly any productivity rise over the past decade.

. . .

The recently enacted American Rescue Plan gave most adults a one-time $1,400 payment, at a cost of $411 billion.

. . .

. . . the Yang proposal to pay $12,000 a year would cost more than eight times as much every year — well over $3 trillion a year, in perpetuity. Even if you aren’t much worried about either debt or inflationary overheating right now (which I’m not), you have to think that sustained spending at that rate would both cause problems and conflict with other priorities, from infrastructure to child care.

For the full commentary, see:

Paul Krugman. “Andrew Yang Hasn’t Done the Math.” The New York Times (Friday, April 16, 2021): A22.

(Note: ellipses, and bracketed first name, added.)

(Note: the online version of the commentary has the date April 15, 2021, and has the same title as the print version.)

Biden Plan “Lurches Into” the “Quagmire” of Government Picking Tech Winners and Losers

(p. A23) The Biden administration has put forward the biggest, boldest, most expensive expansion of government in at least a half-century.

. . .

The Biden plan doesn’t just tiptoe around the quagmire of the government picking winners and losers, or what has been termed “industrial policy” — it lurches into it. Hundreds of billions of dollars will be invested by government agencies, whose record of success with direct involvement in the commercial world is, at best, mixed.

A recent case in point: the 2009 American Recovery and Reinvestment Act, which, at $787 billion, was much, much smaller than the more than $4 trillion sum of the two Biden plans put forward thus far. While the 2009 stimulus did put much-needed dollars into the economy without fraud or abuse (as Mr. Biden likes to remind us), it didn’t achieve another of its goals: a swifter transition to clean energy.

As a 2015 Congressional Research Service report reviewing stimulus projects further noted, “Solyndra declared bankruptcy in late 2011 and defaulted on its $535 million loan, Abound Solar received about $70 million of its $400 million loan before shuttering its solar panel operation and filing for bankruptcy in 2012, and SoloPower never met the requirements to initiate its $197 million loan guarantee.”

None of this should be too surprising. Going all the way back to the creation of the Synthetic Fuels Corporation in 1980, which I covered as a New York Times correspondent, the federal government’s recurring efforts at directing energy transitions have mostly struggled.

. . .

No one should want the Biden plan to fall short. But given its vast sweep — I conservatively counted more than five dozen initiatives — the administration should increase its chances of success by leaning more heavily on private models for help and using tax incentives to a greater extent for efficiency.

For the full commentary, see:

Steven Rattner. “Handle Big Government With Care.” The New York Times (Tuesday, April 13, 2021): A23.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 9, 2021, and has the title “Biden’s Big Government Should Be Handled With Care.”)