Category: Entrepreneurship

Supply Chain Fragility During Pandemic Undermines “Just-in-Time” Business Dogma

(p. A1) TOKYO— Toyota Motor Corp. is stockpiling up to four months of some parts. Volkswagen AG is building six factories so it can get its own batteries. And, in shades of Henry Ford, Tesla Inc. is trying to lock up access to raw materials.

The hyperefficient auto supply chain symbolized by the words “just in time” is undergoing its biggest transformation in more than half a century, accelerated by the troubles car makers have suffered during the pandemic. After sudden swings in demand, freak weather and a series of accidents, they are reassessing their basic assumption that they could always get the parts they needed when they needed them.

“The just-in-time model is designed for supply-chain efficiencies and economies of scale,” said Ashwani Gupta, Nissan Motor Co.’s chief operating officer. “The repercussions of an unprecedented crisis like Covid highlight the fragility of our supply-chain model.”

. . .

(p. A10) One day in 1950, Toyota executive Taiichi Ohno visited an American supermarket and marveled how the shelves were restocked as they were emptied, as Jeffrey Liker recounts in his book “The Toyota Way.” Shoppers were kept happy even though the supermarket had only small storerooms. It was the polar opposite of the car industry where warehouses were kept full of sheet metal and tires to ensure the assembly line never shut down.

Supermarkets had little choice, since they couldn’t stockpile bananas for months. Still, Mr. Ohno reasoned, their practices eliminated waste and cut costs. Toyota would only pay for what it needed to produce cars for a day. That meant they could make do with smaller factories and warehouses.

. . .

The tide began to turn with the global financial crisis. At least 50 auto suppliers went bankrupt, catching car makers by surprise. When suppliers like Visteon Corp. , a maker of air conditioners, radios and other components, declared bankruptcy, it led to fears that car factories relying on Visteon would also be unable to operate.

A different shock prompted a rethinking of just in time at the company where it started. The 2011 earthquake in northern Japan hit Toyota suppliers including chip maker Renesas Electronics Corp.

. . .

For certain components, Toyota asked its suppliers to stockpile parts, the antithesis of just in time. The on-hand inventory held by Toyota’s largest supplier, Denso Corp., rose to around 50 days’ worth of supply in the year ended March 2020, up from 38 days in 2011, according to its financial filings. Denso declined to comment on inventory figures but said it has started keeping emergency stores of parts, especially semiconductors.

Toyota’s efforts have helped it weather this year’s shortages of semiconductors better than many of its rivals, although it wasn’t perfect.

For the full story, see:

Sean McLain. “Auto Makers Hit Brakes On Just-in-Time Manufacturing.” The Wall Street Journal (Thursday, May 04, 2021): A1 & A10.

(Note: ellipses added.)

(Note: the online version of the story has the date May 3, 2021, and has the title “Auto Makers Retreat From 50 Years of ‘Just in Time’ Manufacturing.”)

The most recent edition of the classic book on Toyota’s success, mentioned above, is:

Liker, Jeffrey. The Toyota Way, 14 Management Principles from the World’s Greatest Manufacturer. 2nd ed. New York: McGraw-Hill Education, 2021.

Founding Entrepreneurs Have Similar Brain Patterns for Their Children and Their Startups

(p. R6) A study published in the Journal of Business Venturing in March 2019 looked at the brain patterns of 21 entrepreneurs and 21 parents who weren’t entrepreneurs. The goal was to investigate why and how company founders bond with their ventures.

The result: When entrepreneurs think about their businesses, their brain patterns are very similar to the brain patterns of parents thinking about their children. Those findings shed light on why entrepreneurs run companies the way they do—and how they ought to.

. . .

In the experiment, researchers used a technique called functional magnetic resonance imaging to see which parts of the participants’ brains were activated by a series of pictures. Entrepreneurs were shown photos of their business—such as the logo and product or service—as well as of other companies. The parents saw images of their own children, and other people’s.

The results were very similar for both test groups. When looking at the images of their own businesses or children, they experienced significantly more activity in the caudate nuclei, regions of the brain associated with parenting, as well as pleasant sensations and rewards, according to Tom Lahti, an associate professor at the Hanken School of Economics, in Helsinki, who co-wrote the study.

Meanwhile, when the test subjects viewed the images of the other companies or children, parts of the brain associated with negative emotional experiences, the bilateral insula, were much more active.

. . .

. . ., the emotional ties help explain why so many entrepreneurs are prepared to delay monetary gratification and stick with a venture in hopes of long-term success, Dr. Lahti says. That’s akin to parents making years of sacrifices on behalf of their children.

. . .

“The lead entrepreneur needs to share the responsibilities and ownership with the co-founders,” Dr. Lahti says, adding, “In some entrepreneurial teams, the lead entrepreneur may perceive [himself or herself as] owning the venture, while the other members of the entrepreneurial team do not. This could ultimately be a recipe for disaster, because the other members may not persist in the face of difficulty and setback.”

For the full story, see:

Cheryl Winokur Munk. “My Company, My Child.” The Wall Street Journal (Thursday, June 3, 2021): R6.

(Note: ellipses added.)

(Note: the online version of the story has the date June 2, 2021, and has the title “Why Many Entrepreneurs Treat Their Businesses Like Their Children.”)

The research discussed above was published in:

Lahti, Tom, Marja-Liisa Halko, Necmi Karagozoglu, and Joakim Wincent. “Why and How Do Founding Entrepreneurs Bond with Their Ventures? Neural Correlates of Entrepreneurial and Parental Bonding.” Journal of Business Venturing 34, no. 2 (March 2019): 368-88.

Small Firms Nimbly Pivoted to Face Masks

(p. R3) The humble face mask has proved to be a lifesaver not just by slowing Covid-19—but by helping small businesses.

Countless companies in dire straits during the lockdown have turned to masks to generate revenue. A lot of them have gotten into the niche from very diverse backgrounds. And, for some, mask sales haven’t only helped them survive but also driven their earnings higher than they were before Covid.

Here’s a look at some businesses that took a big gamble on masks—and saw it pay off.

. . .

Before the pandemic, custom-furniture maker David Halbout had a small but stable income and a waiting list stretching about four months. Within a week of the lockdown, though, his business came to a halt because he couldn’t meet customers to discuss the job or go to their home to work on projects. Almost all of his orders were canceled within days.

. . .

Facing that situation—and seeing the need that medical workers faced for protective equipment—the couple decided to turn their Red Bank, N.J., business to making masks. “We wanted to use our talents to help, so we started making fabric face masks with ties and elastic around the head,” says Mr. Halbout.

It turns out that the design was a hit for an unexpected niche. Because his products don’t interfere with hearing aids like traditional straps do, people who use the medical devices flocked to the masks, says Mr. Halbout. He estimates that his business, French Fix LLC, has sold 20,000 masks and donated another 3,000. Mr. Halbout says that he is making substantially more money from the masks, which start at $10.99 for children and $17.99 for adults, than he did from furniture.

. . .

Even so, “the core of my business stayed the same: I am still a creative person,” says Mr. Halbout. “I still design and I still work with my hands. I now work with fabric rather than wood.”

For the full story, see:

Elizabeth Garone. “The Lucrative Pivot to Making Face Masks.” The Wall Street Journal (Thursday, June 03, 2021): R3.

(Note: ellipses added.)

(Note: the online version of the story has the date June 2, 2021, and has the title “4 Entrepreneurs Who Found Big Money in Face Masks During Covid.”)

Serendipitous Water Cooler Collaboration “Is More Fairy Tale Than Reality”

(p. B1) When Yahoo banned working from home in 2013, the reason was one often cited in corporate America: Being in the office is essential for spontaneous collaboration and innovation.

. . .

Yet people who study the issue say there is no evidence that working in person is essential for creativity and collaboration. It may even hurt innovation, they say, because the demand for doing office work at a prescribed time and place is a big reason the American workplace has been inhospitable for many people.

“That’s led to a lot of the outcomes we see in the modern office environment — long hours, burnout, the lack of representation — because that office culture is set up for the advantage of the few, not the many,” said Dan Spaulding, chief people officer at Zillow, the real estate market-(p. B7)place.

“The idea you can only be collaborative face-to-face is a bias,” he said. “And I’d ask, how much creativity and innovation have been driven out of the office because you weren’t in the insider group, you weren’t listened to, you didn’t go to the same places as the people in positions of power were gathering?”

“All of this suggests to me that the idea of random serendipity being productive is more fairy tale than reality,” he said.

. . .

“There’s credibility behind the argument that if you put people in spaces where they are likely to collide with one another, they are likely to have a conversation,” said Ethan S. Bernstein, who teaches at Harvard Business School and studies the topic. “But is that conversation likely to be helpful for innovation, creativity, useful at all for what an organization hopes people would talk about? There, there is almost no data whatsoever.”

“All of this suggests to me that the idea of random serendipity being productive is more fairy tale than reality,” he said.

. . .

. . . Professor Bernstein found that contemporary open offices led to 70 percent fewer face-to-face interactions. People didn’t find it helpful to have so many spontaneous conversations, so they wore headphones and avoided one another.

. . .

. . . some creative professionals, like architects and designers, have been surprised at how effective remote work has been during the pandemic, while scientists and academic researchers have long worked on projects with colleagues in other places.

Requiring people to be in the office can drive out innovation, some researchers and executives said, because for many people, in-person office jobs were never a great fit. They include many women, racial minorities and people with caregiving responsibilities or disabilities. Also, people who are shy; who need to live far from the office; who are productive at odd hours; or who were excluded from golf games or happy hours.

For the full commentary, see:

Claire Cain Miller. “THE UPSHOT;Returning to the Office? The Myth of Serendipity.” The New York Times, SundayBusiness Section (Sunday, July 2, 2021): B1 & B7.

(Note: the online version of the commentary was updated July 1, 2021, and has the title “THE UPSHOT; Do Chance Meetings at the Office Boost Innovation? There’s No Evidence of It.”)

The Bernstein research mentioned above is:

Bernstein, Ethan, and Ben Waber. “The Truth About Open Offices.” Harvard Business Review 97, no. 6 (Nov./Dec. 2019): 82-91.

Bezos’s Intuitions Drove Amazon’s Innovations

(p. 12) . . . Alexa, the voice coming out of my Echo, more or less is Jeff Bezos. He came up with the idea of a smart speaker in January 2011, back in the era of Google Plus and the iPod Shuffle. Bezos emailed his top deputies that month and declared, “We should build a $20 device with its brains in the cloud that’s completely controlled by our voice.”

For the next nearly four years, he obsessively micromanaged the project, pushing teams in Atlanta and Gdansk to make speech recognition seamless. He put in place a surreal testing protocol that involved hiring temps to spend days in empty apartments chattering away to silent speakers, and berated executives who told him it would take decades to develop speech recognition. He took home an early Echo prototype and when, in a moment of frustration, he told it to go “shoot yourself in the head,” it sent a wave of panic through the engineers who were listening in. He even came up with the idea for the LED ring on top, Stone writes, and with the name “Alexa” (in homage to the ancient library of Alexandria).

. . .

Amazon in the 2010s was an intensely personal venture, run by one of the wealthiest men in the world according to his own desires and reflecting his own personality.

. . .

Like Alexa, Amazon as a company seems to embody some of Bezos’ best personal qualities (his relentless drive to get you that package on time) and his worst (an “informal cruelty” that defines his company’s culture and requires that his factory workers and executives make personal sacrifices for corporate needs).

At Amazon, nearly every big decision comes down to a meeting with Bezos, at which his deputies hold their breaths, genuinely uncertain of whether he will berate them and tear up their proposals, or double their planned budgets. Some of his fixations, like his determination to create a smart speaker, are visionary.

. . .

It was, Stone writes, “a different style of innovation,” in which employees “worked backwards from Bezos’ intuition and were catering to his sometimes eclectic tastes (literally).”

For the full review, see:

Ben Smith. “Colossus.” The New York Times Book Review (Sunday, June 13, 2021): 12.

(Note: ellipses added.)

(Note: the online version of the review was updated June 17,, 2021, and has the title “To Understand Amazon, We Must Understand Jeff Bezos.”)

The book under review is:

Stone, Brad. Amazon Unbound: Jeff Bezos and the Invention of a Global Empire. New York: Simon & Schuster, 2021.

“Anti-Heroism Goes Too Far”

(p. 11) In “Extra Life,” Steven Johnson, a writer of popular books on science and technology, tells the stories behind what he calls, in an understatement, “one of the greatest achievements in the history of our species.” Starting in the second half of the 19th century, the average life span began to climb rapidly, giving humans not just extra life, but an extra life. In rich countries, life expectancy at birth hit 40 by 1880, 50 by 1900, 60 by 1930, 70 by 1960, and 80 by 2010.

. . .

It’s been a long time since the history of technology has been recounted as the triumph of plucky heroes, and Johnson’s stories reflect today’s more sophisticated understanding.

. . .

Sometimes the anti-heroism goes too far — Norman Borlaug, whose Green Revolution saved a billion lives, is unmentioned. But altogether, Johnson is a fine storyteller. Among his cast of characters are John Graunt (1620–74), the British haberdasher who studied mortality reports as a hobby and thereby invented epidemiology; Joseph Bazalgette (1819–91), the man behind “one of the 19th century’s greatest engineering achievements,” which you probably did not guess was the London sewers; “Moldy Mary” Hunt (1910–91), the Peoria bacteriologist who scoured fruit markets for the perfect rotten cantaloupe, the one with a strain of mold that enabled the mass production of penicillin; John Stapp (1910–99), who strapped himself into his invention, the rocket sled, and safely decelerated from 628 miles per hour to 0 in 1.4 seconds; and Dilip Mahalanabis, 86, the Indian pediatrician who discovered that a bit of salt and sugar dissolved in clean water could stop fatal diarrhea and thereby saved the lives of nearly 60 million people.

For the full review, see:

Steven Pinker. “Modern Miracle.” The New York Times Book Review (Sunday, June 13, 2021): 11.

(Note: ellipses added.)

(Note: the online version of the review has the date May [sic] 11, 2021, and has the title “How Humans Gained an ‘Extra Life’.”)

The book under review is:

Johnson, Steven. Extra Life: A Short History of Living Longer. New York: Riverhead Books, 2021.

Subsidies for Black Farmers Fuel Claims of “Reverse Racism” and “All Farmers Matter”

(p. 1) LaGRANGE, Mo. — Shade Lewis had just come in from feeding his cows one sunny spring afternoon when he opened a letter that could change his life: The government was offering to pay off his $200,000 farm loan, part of a new debt relief program created by Democrats to help farmers who have endured generations of racial discrimination.

It was a windfall for a 29-year-old who has spent the past decade scratching out a living as the only Black farmer in his corner of northeastern Missouri, where signposts quoting Genesis line the soybean fields and traffic signals warn drivers to go slow because it is planting season.

But the $4 billion fund has angered conservative white farmers who say they are being unfairly excluded because of their race. And it has plunged Mr. Lewis and other farmers of color into a new culture war over race, money and power in American farming.

. . .

(p. 19) The plans have drawn thousands of enraged comments on farm forums and are being fought by banks worried about losing interest income. And some rural residents have rallied around a new slogan, cribbed from the conservative response to the Black Lives Matter movement: All Farmers Matter.

. . .

“It’s a bunch of crap,” said Jeffrey Lay, who grows corn and soybeans on 2,000 acres and is president of the county farm bureau. “They talk about they want to get rid of discrimination. But they’re not even thinking about the fact that they’re discriminating against us.”

. . .

. . . rural residents upset with the repayments call them reverse racism.

White conservative farmers and ranchers from Florida, Texas and the Midwest quickly sued to block the program, arguing that the promised money amounts to illegal discrimination. America First Legal, a group run by the former Trump aide Stephen Miller, is backing the Texas lawsuit, whose plaintiff is the state’s agriculture commissioner.

“It’s anti-white,” said Jon Stevens, one of five Midwestern farmers who filed a lawsuit through the Wisconsin Institute for Law and Liberty, a conservative legal group. “Since when does Agriculture get into this kind of race politics?”

. . .

One recent afternoon, a friend, Brad Klauser, who runs his family’s large cattle and grain farm, swung by Mr. Lewis’s barn to catch up. As they talked bills, rising fuel costs and sky-high land prices, the conversation turned to the debt relief that only one of them was eligible to receive.

“Everybody should have the same option,” said Mr. Klauser, who is white, leaning on the flatbed of Mr. Lewis’s pickup. “Do you think you’re disadvantaged?”

“There’s definitely disadvantages,” Mr. Lewis replied, saying that officials scoffed when he first tried to get a federal farm loan. “They didn’t take me serious.”

After Mr. Klauser headed home, Mr. Lewis thought about how the two friends were both trying to reap a profit from the land. “Everyone should have a chance at farming,” he said.

For the full story, see:

Jack Healy. “Windfall for Black Farmers Roils Rural America.” The New York Times, First Section (Sunday, May 23, 2021): 1 & 19.

(Note: ellipses added.)

(Note: the online version of the story was updated May 24, 2021, and has the title “‘You Can Feel the Tension’: A Windfall for Minority Farmers Divides Rural America.” The online “pressreader” version showed the continuation page as p. 21. The continuation page of my “National” print version was p. 19.)

California Tech Firms Move to Texas for Its “Laissez-Faire Environment”

(p. B1) Moves by high-profile companies to Texas from California are likely to improve the personal finances of executives and offer employees more affordable housing—but make little difference to the firms’ tax bills.

Oracle Corp. and Hewlett-Packard Enterprise Co. are the latest big corporations to announce moves to the Lone Star State. Elon Musk, the chief executive of Tesla Inc., is also moving to Texas, and the electric car company is expanding there.

The announcements have highlighted the vastly different tax and regulatory systems in the country’s two most populous states. California relies more on taxing personal income, particularly of high-income households, and operates a growing regulatory structure. Texas leans on more regressive property and sales taxes and boasts a more laissez-faire environment. The biggest difference: High-paid executives who move can see their state income-tax bills go from 13.3% to nothing.

. . .

(p. B2) Changing addresses or even moving people and facilities doesn’t necessarily change a company’s tax costs on its own.

. . .

The bigger factor—outweighing any change in business taxes—is likely to be the lower cost of employing workers in the state. For most people, that calculation is more about housing costs, said Darien Shanske, a tax law professor at the University of California, Davis. Housing scarcity and land-use regulations are bigger drivers of payroll costs than taxes.

“Moving a headquarters to Austin where people can afford a place to live, that dominates whether they pay the personal income tax, for most people,” Mr. Shanske said.

For the full story, see:

Richard Rubin and Theo Francis. “Lower Costs Draw Tech Firms to Texas.” The Wall Street Journal (Thurs., Dec 17, 2020): B1-B2.

(Note: ellipses added.)

(Note: the online version of the story has the date December 16, 2020, and has the title “Texas’ Tax Advantage Is All About Individuals, Not Business Taxes.”)

“All Seasons Press” Will Publish Books Cancelled by Mainstream

(p. B4) Two veteran book-publishing executives have teamed up to launch a conservative publishing house called All Seasons Press LLC as ideological debates roil a book industry increasingly fueled by demand for political titles.

Louise Burke, the former president and publisher of Simon & Schuster’s Gallery Books Group, and Kate Hartson, whom Hachette Book Group dismissed as editorial director of its Center Street imprint earlier this year, said conservative authors are finding it harder to get published in the post-Trump era.

“I’m increasingly concerned and somewhat outraged about what’s going on in terms of free speech and free press,” said Ms. Burke, who retired in August 2017 after a 40-year career.

. . .

The company’s launch comes as some conservatives allege that much of the nation’s news media, publishers and mainstream social-media platforms are biased against them. They are looking to set up alternatives that they say better support free speech.

For the full story, see:

Jeffrey A. Trachtenberg. “Book Imprint to Serve Conservative Voices.” The Wall Street Journal (Wednesday, June 16, 2021): B4.

(Note: ellipsis added.)

(Note: the online version of the story was updated June 15, 2021, and has the title “New Book Publisher Caters to Conservative Voices.”)

David Ellison Took Flak for Hiring Cancelled Animation Innovator

(p. 1) Mr. Ellison, the son of Larry Ellison, a co-founder of Oracle, sure looked like “dumb money.” That is the Hollywood term for a gullible, affluent outsider bitten by the movie bug, the type of investor that studios have long counted on to keep their assembly lines running, despite it almost always ending poorly (for the newcomer). The young Mr. Ellison couldn’t stop talking about his love of cinema, in particular big-budget spectacles. He had just dropped out of the University of Southern California to act in a $60 million movie called “Flyboys,” a World War I aerial combat tale.

Partly financed with Ellison money, “Flyboys” arrived to a disastrous $6 million in ticket sales. But no matter: The scion was on Hollywood’s radar.

Along with his wallet.

Soon enough Mr. Ellison had given up acting and by 2010 had become a financier and producer for Paramount Pictures, pouring $350 million of equity and debt into movies like “Star Trek Into Darkness” and “Mission: Impossible — Ghost Protocol.” But Hollywood snickered at his effort to be taken seriously as a creative force, as did the news media.

. . .

(p. 10) Mr. Ellison . . . enraged half of Hollywood by abruptly announcing in January 2019 that John Lasseter, co-founder of Pixar, would join Skydance as animation chief. Mr. Lasseter (“Toy Story,” “Cars”) was radioactive at the time, having resigned seven months earlier as Disney’s chief creative officer amid #MeToo complaints about unwanted workplace hugging and imperious behavior. (Mr. Lasseter had apologized for “missteps” that made some Disney-Pixar staff members feel “disrespected or uncomfortable.”)

People like Mr. Ellison typically sulk off to some luxury hideaway at this point in the script to nurse their wounds. (Lanai, the Hawaiian island owned by his father, would do nicely.) Accustomed to floating through life, they seem unable to cope with anything less, especially if it means admitting missteps.

Instead, Mr. Ellison served up a major plot twist.

He raised $275 million by selling 10 percent of Skydance to investors like RedBird Capital, a private investment firm, and CJ Entertainment, the Korean company behind the Oscar-winning “Parasite.” He lined up $1 billion in revolving credit through JPMorgan Chase. And Skydance made a sharp turn toward streaming, selling attention-getting content to whichever service wanted to pay the most.

So far, the result has been nothing short of remarkable, in part because Mr. Ellison’s timing was fortuitous. The pandemic supercharged home entertainment.

For the full story, see:

Brooks Barnes. “Not Such ‘Dumb Money’ After All.” The New York Times, SundayBusiness Section (Sunday, June 20, 2021): 1 & 10-11.

(Note: ellipses added.)

(Note: the online version of the story has the date June 16, 2021, and has the title “Dumb Money No More: How David Ellison Became a Hollywood High Flier.”)

Government Cover Ups

(p. 230) It’s hard enough to find out about the things the universe prefers to keep hidden without our government, which somebody you know must have voted for, covering up what has already been found. Sometimes, of course, it hides things to save its own neck and sometimes seemingly just for the hell of it.

Norman Maclean’s musings, quoted above, are from his wonderful prize-winning account of the Mann Gulch fire in which Wag Dodge spontaneously invented a way to save his life from the wall of fire speeding toward him:

Maclean, Norman. Young Men and Fire. Chicago: University of Chicago Press, 2017 [first edition 1992].