Category: Entrepreneurship

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.”)

How Chuck Yeager Acquired the ‘Right Stuff’: “I Worked My Tail Off”

(p. A1) Chuck Yeager, the most famous test pilot of his generation, who was the first to break the sound barrier and, thanks to Tom Wolfe, came to personify the death-defying aviator who possessed the elusive yet unmistakable “right stuff,” died on Monday [December 7, 2020] in Los Angeles.

. . .

His signal achievement came on Oct. 14, 1947, when he climbed out of a B-29 bomber as it ascended over the Mojave Desert in California and entered the cockpit of an orange, bullet-shaped, rocket-powered experimental plane attached to the bomb bay.

An Air Force captain at the time, he zoomed off in the plane, a (p. A23) Bell Aircraft X-1, at an altitude of 23,000 feet, and when he reached about 43,000 feet above the desert, history’s first sonic boom reverberated across the floor of the dry lake beds. He had reached a speed of 700 miles an hour, breaking the sound barrier and dispelling the long-held fear that any plane flying at or beyond the speed of sound would be torn apart by shock waves.

. . .

Mr. Wolfe wrote about a nonchalance affected by pilots in the face of an emergency in a voice “specifically Appalachian in origin,” one that was first heard in military circles but ultimately emanated from the cockpits of commercial airliners.

“It was,” Mr. Wolfe said, “the drawl of the most righteous of all the possessors of the right stuff: Chuck Yeager.”

In his memoir, General Yeager said he was annoyed when people asked him if he had the right stuff, since he felt it implied a talent he was born with.

“All I know is I worked my tail off learning to learn how to fly, and worked hard at it all the way,” he wrote. “If there is such a thing as the right stuff in piloting, then it is experience. The secret to my success was that somehow I always managed to live to fly another day.”

. . .

At a time when the administration of President John F. Kennedy was encouraging diversity in the Air Force, a former test pilot, Edward Dwight Jr., became the only African-American astronaut candidate at the school. But he was never selected for the astronaut corps, retired from the Air Force in 1966 and became a sculptor, specializing in bronze representations of heroic figures in Black history.

In July 2019, Mr. Dwight told the New York Times that General Yeager had never given him a fair chance. “Every week, right on the dot,” Mr. Dwight said, “he’d call me into his office and say, ‘Are you ready to quit? This is too much for you, and you’re going to kill yourself, boy.’ Calling me a boy, and I’m an officer in the Air Force.”

Responding to those remarks, General Yeager said that he had never told anybody that he would get Mr. Dwight out of the program, that he had not held weekly meetings with him, and that he had never called him “boy.”

But he did question Mr. Dwight’s ability. “Isn’t it great that Ed Dwight found his true calling and became an accomplished sculptor?” he wrote in an email.

. . .

In his memoir, General Yeager wrote that through all his years as a pilot, he had made sure to “learn everything I could about my airplane and my emergency equipment.”

It may not have accorded with his image, but, as he told it: “I was always afraid of dying. Always.”

For the full obituary, see:

Richard Goldstein. “Fighter Ace and Test Pilot Embodied ‘the Right Stuff’.” The New York Times (Wednesday, December 9, 2020): A1 & A23.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the obituary was updated December 9, 2020, and has the title “Chuck Yeager, Test Pilot Who Broke the Sound Barrier, Is Dead at 97.” The paragraphs quoted above about Edward Dwight appear in the print, but not in the online, version of the obituary.)

Tom Wolfe portrayed Yeager as the exemplar of the “right stuff” in:

Wolfe, Tom. The Right Stuff. New York: Farrar, Straus & Giroux, Inc., 1979.

Yeager’s memoir is:

Yeager, Chuck, and Leo Janos. Yeager: An Autobiography. New York: Bantam Books, 1985.

Chinese Chip Central Planning Creates “Stunning Absurdities That Defy Logic and Common Sense”

(p. B1) Liu Fengfeng had more than a decade under his belt at one of the world’s most prominent technology companies before he realized where the real gold rush in China was taking place.

Computer chips are the brains and souls of all the electronics the country’s factories crank out. Yet they are mostly designed and produced overseas. China’s government is lavishing money upon anyone who can help change that.

. . .

(p. B2) In a way, China is hoping to achieve the same kind of liftoff that helped it progress from making plastic toys to crafting solar panels.

With semiconductors, though, “the model starts to break down a little bit,” said Jay Goldberg, a tech industry consultant and former Qualcomm executive. The technology is eye-wateringly expensive to develop, and established players have spent decades accumulating know-how. Europe, Mr. Goldberg noted, once had many “incredible” chip companies. Japan’s chip makers are leaders in certain specialized products, but few would call them bold innovators.

“My point is, there is a ladder — China’s moving up it,” Mr. Goldberg said. But it’s “unclear which outcome they go to.”

. . .

At a top-level meeting on the economy last week, the Communist Party’s leaders enshrined technological self-reliance as one of the country’s “Five Fundamentals” for economic development.

Complete self-sufficiency in chips, however, would mean recreating every part of the lengthy supply chains for some of the most complex technology on earth — a mission that would seem to lead, if not to madness, at least to waste.

. . .

“Up until very recently — this year — the goal had been: With state backing, move up the value chain, specialize where China has a comparative advantage, but don’t really try and fall down the rabbit hole of trying to build everything yourself,” said Jimmy Goodrich, the vice president for global policy at the Semiconductor Industry Association, a group that represents American chip companies.

Now, “it’s very clear that Xi Jinping is calling for a redundant domestic supply chain,” Mr. Goodrich said. “And so the rules of economics, comparative advantage and the supply-chain efficiencies have basically been thrown out the door.”

The government is conscious of the dangers. State-run news outlets have amply covered the recent semiconductor flameouts. The message to other upstarts: Don’t mess it up.

When the state broadcaster China Central Television visited one stalled project in the eastern city of Huai’an recently, it found dozens of giant machines idling on the factory floor, many of them still sheathed in plastic.

“There have been some stunning absurdities that defy logic and common sense,” China Economic Weekly said.

. . .

“There is definitely a bubble in China,” he said. “But you can’t overgeneralize.”

. . .

“Something is bound to accumulate, whether it’s equipment, talent or factories, right?” Mr. Liu said. “If not you or the other guy, then it will be someone else who ends up using it. I think this might be the government’s logic.”

For the full story, see:

Raymond Zhong and Cao Li. “China’s Frenzy to Master Chip Manufacturing.” The New York Times (Monday, December 28, 2020): B1-B2.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 24, 2020, and has the title “With Money, and Waste, China Fights for Chip Independence.”)

Differences in Study Results Are Seldom Due to Whether Study Design Is Observational or a Randomized Clinical Trial

(p. A17) The health system would be less burdened if more patients were treated before they require hospitalization, and there are promising therapeutic options that patients can administer themselves at home. This was the subject of a Nov. 19 [2020] hearing before the Senate Homeland Security and Governmental Affairs Committee.

Testimony from the hearing underscored an important issue: Too many doctors have interpreted the term “evidence-based medicine” to mean that the evidence for a treatment must be certain and definitive before it can be given to patients. Because accusing a physician of not being “evidence based” can be a career-damaging allegation, fear of straying from the pack has prevailed, favoring inertia and inaction amid uncertainty about Covid-19 treatments.

For diseases with established treatment options, holding out for certainty may be prudent. But when options are limited and there are safe treatments with evidence for effectiveness, holding out for certainty can be catastrophic. Requiring a high degree of certainty during a crisis may elevate the augustness of medical organizations and appease the sensibilities of medical professionals, but it does nothing for patients who need help.

The penchant for certainty is visible in the frequently updated treatment guidelines for Covid-19 from the National Institutes of Health. These guidelines were developed by scientists around the country, but because of a mentality that is biased toward virtually irrefutable evidence, no distinction is made for treatments with evidence for effectiveness that falls below the mark of certainty. This framework almost certainly has contributed to many avoidable deaths during this pandemic.

. . .

While some health officials dismiss nonrandomized studies, the Cochrane organization, an international leader in evidence-based medicine, published a review of several hundred studies showing that randomized clinical trials and nonrandomized studies of treatments generally yield similar findings. Modern epidemiologic and statistical methods can usually overcome biases inherent in nonrandomized study designs.

For the full commentary, see:

Joseph A. Ladapo. “Too Much Caution Is Killing Covid Patients.” The Wall Street Journal (Wednesday, Nov. 25, 2020): A17.

(Note: ellipsis, and bracketed year, added.)

(Note: the online version of the commentary has the date November 24, 2020, and has the same title as the print version.)

The Cochrane organization review mentioned above is:

Anglemyer, Andrew, Hacsi T. Horvath, and Lisa Bero. “Healthcare Outcomes Assessed with Observational Study Designs Compared with Those Assessed in Randomized Trials.” In Cochrane Database of Systematic Reviews, 2014.

Etsy and Shopify Platforms Enabled Many Small Businesses to Survive the Pandemic

(p. B4) While the year has been a struggle for small businesses, some companies that host their transactions have been soaring.

Shares in Etsy Inc. and Shopify Inc., whose e-commerce platforms primarily cater to small businesses, have surged during the pandemic. Etsy has more than quadrupled this year, while Shopify has tripled.

. . .

For many small-business owners, the technology platforms have served as a lifeline as their companies shift to a focus on online sales.

Matthew Cummings owns a glass-blowing company that makes custom beer glasses in Knoxville, Tenn. He has been on Etsy since 2012, but didn’t move fully online until the pandemic hit and he had to close the doors of his bricks-and-mortar store. He said his Etsy sales are about 10 times higher this year.

Mr. Cummings said that his sales on Etsy have helped him cover his business expenses and that he was able to come out of 2020 with a profit because of his online store. He plans on selling through the platform after the pandemic, with his business now reaching as far as Australia. He has seen a new wave of repeat customers seeking to complete sets of his custom beer glasses.

. . .

One type of sale that might not last beyond the pandemic is masks.

Etsy reported that masks accounted for 11% of overall gross-merchandise sales in the third quarter.

For the full story, see:

Amber Burton. “Sales Platforms Etsy, Shopify Thrive From Small Businesses.” The Wall Street Journal (Thursday, Dec 24, 2020): B4.

(Note: ellipses added.)

(Note: the online version of the story has the date December 23, 2020, and has the title “Etsy and Shopify Buoyed as Covid-19 Boosts Online Sales.”)

22% of U.S. Small Businesses Closed from February to April 2020

(p. B4) In early February [2020], things were looking good for Practice San Francisco, a center offering individual psychotherapy and classes for children and adults that promote physical and mental well-being. Business was so good that owner Nina Kaiser, a psychologist, had just renovated and moved into a bigger space with the goal of doubling revenue.

Then the coronavirus pandemic hit. In early March [2020], Ms. Kaiser moved all her classes and counseling services online. Fairly quickly, however, video fatigue set in. “After a few weeks, we saw a big downturn in attendance across all our programs, even psychotherapy,” she said. Thus began a period of “endless pivoting and troubleshooting.”

Like many other small businesses, Practice San Francisco, which has been around for three years, has essentially become a start-up again, employing a strategy similar to the “fail fast” approach well known in start-up culture: A change is made to some aspect of the business and if it works, it sticks, but if it fails, data is collected and something else is tried.

“There has been a lot of flying by the seat of your pants,” Ms. Kaiser said. “We see what doesn’t work, where we run into trouble, and we course-correct. It’s this constant, iterative process.”

That process is crucial right now for small businesses, whose numbers dropped by 22 percent — 3.3 million — between February and April [2020], according to the National Bureau of Economic Research.

For the full story, see:

Eilene Zimmerman. “Small-Business Owners Pivot and Troubleshoot In Battle to Stay Afloat.” The New York Times (Tuesday, December 1, 2020): B4.

(Note: bracketed years added.)

(Note: the online version of the story was updated Dec. 17 [sic], 2020, and has the title “Can a Start-Up Mentality Save Small Businesses?”)

The published-online-ahead-of-print version of the National Bureau of Economic Research (NBER) working paper mentioned above is:

Fairlie, Robert. “The Impact of Covid-19 on Small Business Owners: Evidence from the First 3 Months after Widespread Social-Distancing Restrictions.” Journal of Economics & Management Strategy (2020): 10.1111/jems.12400.

Pfizer Refused Federal Subsidy so They Could “Liberate” Their “Scientists From Any Bureaucracy”

In September [2020], the CEO of Pfizer, Albert Bourla, appeared on CBS News’s “Face the Nation,” where he was asked about not accepting government funding for development.

“The reason why I did it was because I wanted to liberate our scientists from any bureaucracy,” Bourla explained. “When you get money from someone that always comes with strings. They want to see how we are going to progress, what type of moves you are going to do. They want reports. I didn’t want to have any of that. I wanted them — basically I gave them an open checkbook so that they can worry only about scientific challenges, not anything else.”

“And also,” he added, “I wanted to keep Pfizer out of politics, by the way.”

For the full story, see:

Philip Bump. “No, Pfizer’s Apparent Vaccine Success Is Not a Function of Trump’s ‘Operation Warp Speed.” The Washington Post (online posted Monday, November 9, 2020).

(Note: bracketed year added.)

Are We Right to Experiment on Animals to Save Humans?

I believe that higher animals feel emotions and maybe even have souls, so we should try to treat them humanely. I am deeply conflicted on how far animal experiments are justified in the pursuit of curing human diseases. Whenever possible, animal experiments should have the potential to benefit the animals in the experiments, as well as the human experimenters.

(p. A15) The “title characters” of Brandy Schillace’s admirable biography “Mr. Humble and Dr. Butcher: A Monkey’s Head, the Pope’s Neuroscientist, and the Quest to Transplant the Soul” were one and the same person: Robert J. White, a distinguished neurosurgeon, an accomplished neuroscientist and a man dedicated to searching for the means to transplant souls by transplanting the human brain. If this makes White sound macabre, Ms. Schillace’s account of his life, work and temperament is anything but. She deftly persuades the reader to take White seriously (he wasn’t even eccentric) and to ponder profound medical-scientific-philosophical issues. Best of all, the book is fascinating.

. . .

White felt it was his religious and medical duty to devise techniques for rescuing healthy brains from otherwise diseased and dying bodies. His solution was to transplant heads (containing their brains) onto cadavers that were brain dead but otherwise physiologically viable.

Before he could attempt such surgery on people, White experimented, mostly on monkeys, dozens of times, to ascertain and refine the necessary procedures. In March 1970 he succeeded in transplanting a monkey’s head onto another monkey’s body.

. . .

During the era in which White conducted his experiments, politicians, doctors, journalists and celebrities were becoming deeply and increasingly dismayed by scientific experiments on animals. White ran afoul of the animal-rights advocacy organization People for the Ethical Treatment of Animals (PETA) and was threatened by animal-rights extremists (he remained imperturbable). White prided himself on scrupulously avoiding harm to his animal subjects. But he didn’t believe that animals had souls: For him, Ms. Schillace writes, “the human was more than animal, and equating the two was not only wrong, it was dangerous.” One of White’s rejoinders to those who would halt animal experimentation was, to paraphrase: If you were a surgeon, how would you like to tell parents that their young child is going to die because the operation that might save him or her was impossible to perform, mainly because the necessary animal-dissection research that would have permitted it was forbidden by law or the medical canon of ethics? His foes never had a good answer.

For the full review, see:

Howard Schneider. “A Heart in the Right Place.” The Wall Street Journal (Monday, February 22, 2021): A15.

(Note: ellipses added; italics in original.)

(Note: the online version of the review has the date February 21, 2021, and has the title “Mr. Humble and Dr. Butcher’ Review: A Heart in the Right Place.”)

The book under review is:

Schillace, Brandy. Mr. Humble and Dr. Butcher: A Monkey’s Head, the Pope’s Neuroscientist, and the Quest to Transplant the Soul. New York: Simon & Schuster, 2021.