Until November 8, 2019, Oxford University Press is making available for free Chapter 4 of Openness for Creative Destruction: Sustaining Innovative Dynamism. The chapter is “The Benefits: New Goods.” You can download it as a PDF, and then save it or print it, from:
Category: Entrepreneurship
Netflix’s Reed Hastings Was Blunt for the Sake of the Project
(p. B1) SANTA CRUZ, Calif. — Long before binge-watching, the streaming wars and “Netflix and chill,” there were two guys barreling down Highway 17 — the California roadway that connects Santa Cruz to Silicon Valley — trying to come up with the next big thing.
One was Marc Randolph, an entrepreneur and marketing specialist who had co-founded a start-up, Integrity QA. The other was Reed Hastings, then the head of the software company Pure Atria.
It was 1997. Mr. Randolph, whose start-up had been acquired by Pure Atria, did most of the pitching. Customized dog food, customized baseball bats, customized shampoo — all sold over the internet and delivered by mail.
Mr. Hastings was the one with the cash and the ability to shoot down ideas without worrying about hurt feelings.
They flirted with the notion of challenging Blockbuster Video with a mail-order videocassette business, only to decide that mailing VHS tapes would cost too much. Finally, they thought they had something: DVDs, sold and rented online and delivered to customers by mail.
Although few people had DVD players at the time, they forged ahead, with Mr. Randolph as the chief executive and Mr. Hastings (p. B5) as the chairman backing the operation.
. . .
Mr. Randolph describes an evening in 1998 when he got a big dose of Netflix’s radical honesty. It happened after a botched investor pitch and a promotion deal with Sony that went horribly wrong. Mr. Hastings asked to see Mr. Randolph alone and subjected him to a PowerPoint presentation detailing the reasons he was no longer fit to remain chief executive.
In the book, Mr. Randolph describes what he said in reaction to the surprise presentation: “‘There is no way I’m sitting here while you pitch me on why I suck.’”
Mr. Hastings closed his Dell laptop. By the end of the talk, Mr. Randolph was bumped down to president, and Mr. Hastings was the new chief executive. As part of the demotion, Mr. Hastings persuaded Mr. Randolph to give up some 650,000 stock shares, which reduced his Netflix stake to 15 percent.
“Doing it with a PowerPoint slide show perhaps wasn’t the most empathetic gesture,” Mr. Randolph said with a laugh. “But he was right.”
The episode, as described in the book, helps form a portrait of Mr. Hastings as someone whose bluntness results more from a sure sense of what a business needs than from an inner ruthlessness.
“What I really want from the book is to paint Reed as a real person,” Mr. Randolph said. “I hope it comes through that I have this tremendous respect and affection for him, as opposed to bitterness. Most people wouldn’t have had the strength to say that. But he recognized it was the right thing for the company.”
For the full review, see:
(Note: ellipsis added.)
(Note: the online version of the review has the date Sept. 18, 2019, and has the title “Long Before ‘Netflix and Chill,’ He Was the Netflix C.E.O.”)
The book under review is:
Randolph, Marc. That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea. New York: Little, Brown and Company, 2019.
Art Diamond Interviewed on the Small Business Advocate Radio Show
Yesterday morning, Jim Blasingame, the host of his nationally syndicated “The Small Business Advocate” radio show, interviewed me on issues related to my book Openness to Creative Destruction, and “A Disney Story for Young Socialists,” my Oct. 10 op-ed piece in the Wall Street Journal. You can click on the links below to listen to each segment of the interview.
Hunter Hastings Posts “Professor Arthur Diamond on Sustaining Innovative Dynamism” Podcast to His “Economics for Entrepreneurs (E4E)”
The podcast episode “Professor Arthur Diamond on Sustaining Innovative Dynamism,” is also posted at the Mises Institute site: https://mises.org/library/professor-arthur-diamond-sustaining-innovative-dynamism
Mott Joined Sloan in Methodically Avoiding Durant’s Entrepreneurial Hunches
(p. A13) Charles Stewart Mott never had his name on an American automobile, but he was on intimate terms with most of the men who did (he was godfather to Walter Chrysler’s daughters). He was also crucial to the rise and success of General Motors.
. . .
By the time Mott, a graduate of Stevens Institute of Technology in Hoboken, had returned from the Spanish-American War, his uncle Fred had added Weston-Mott, a company that manufactured wire bicycle wheels, to the family’s cider and vinegar operations. Charles went to work at Weston-Mott, soon becoming superintendent, just as the bicycle business entered into a sudden eclipse; the automobile had begun its imperial progress. Happily for Weston-Mott, most early cars ran on wire wheels, which Charles Mott supplied—$200,000 worth in 1903—many of them to the Buick Motor Co. of Flint, Mich.
At that time, Buick was in the hands of William Durant, the future founder of General Motors. Cars were being assembled piecemeal, with parts delivered from many far-flung suppliers. Durant didn’t like that, so he asked Mott to move his wheel-building operation to Flint from Utica, N.Y. According to Alfred P. Sloan, who in 1923 became president of GM and whose fortunes would be tied with Mott’s for six decades, the move marked “the first step in the integration of the automobile industry.”
The years to come would see struggles for control of the ever-growing GM, a complex and tangy story that Mr. Renehan recounts with verve and lucidity. “I like to work with Mott,” Sloan wrote of his most valuable lieutenant in his 1941 memoir. “His training had made him methodical. When he was confronted by a problem, he tacked it as I did my own, with engineering care to get the facts. Neither of us ever took any pride in hunches. We left all the glory of that kind of thinking to such men as liked to be labeled ‘genius’ ”—by which Sloan meant Durant.
For the full review, see:
Richard Snow. “BOOKSHELF; Company Man.” The Wall Street Journal (Friday, Sept. 6, 2019): A13.
(Note: ellipsis added.)
(Note: the online version of the review has the date Sept. 5, 2019, and has the title “BOOKSHELF; ‘The Life of Charles Stewart Mott’ Review: Company Man.”)
The book under review is:
Renehan, Edward J., Jr. The Life of Charles Stewart Mott: Industrialist, Philanthropist, Mr. Flint. Ann Arbor, MI: University of Michigan, 2019.
Pilots of Delivery Robots Benefit from Video Game Skills
(p. B4) Michael Niedermayer used to fly drones for the U.S. Army and the Central Intelligence Agency, gathering real-time, life-and-death intelligence on battlefields in Iraq. Now he pilots delivery robots for a San Francisco Bay Area startup that wants to disrupt burrito delivery.
Postmates, which in mid-August received a permit to operate its Serve delivery robot in San Francisco and is already testing it for food delivery in Los Angeles, employs a growing team of “pilots” to remotely oversee, and at times steer, these four-wheeled food ferries.
“We will probably see a drastic increase in our workforce over the next five years,” says Postmates Chief Executive Bastian Lehmann.
Disrupting “last-mile” delivery—historically the domain of box trucks, bike couriers and personal vehicles—“felt like a great fit for my military background,” says Mr. Niedermayer.
His story is hardly unique. Across industries, engineers are building atop work done a generation ago by designers of military drones. Whether it’s terrestrial delivery robots, flying delivery drones, office-patrolling security robots, inventory-checking robots in grocery stores or remotely piloted cars and trucks, the machines that were supposed to revolutionize everything by operating autonomously turn out to require, at the very least, humans minding them from afar.
Until the techno-utopian dream of full automation comes into effect—and frankly, there’s no guarantee that will ever happen—there will be plenty of jobs for humans, just not ones their parents would recognize. Whether the humans in charge are in the same city or thousands of miles away, the proliferation of not-yet-autonomous technologies is driving a tiny but rapidly growing workforce.
. . .
When Postmates managers interview potential delivery-robot pilots like Diana Villalobos, they ask whether or not they played videogames in their youth.
“When I was a kid, my parents always said, ‘Stop playing videogames!’ But it came in handy,” she says.
For the full commentary, see:
(Note: ellipsis added.)
(Note: the online version of the commentary has the same date as the print version, and has the title “KEYWORDS; The Next Hot Job: Pretending to Be a Robot.”)
With Work Ethic, but Not Much Education, “You Can Come Out Here and Still Make Six Figures”
(p. B1) When Mike Wilkinson moved to Midland, Tex., in 2017, he hoped the world’s largest oil field would change his life. His marriage was in tatters. He owed tens of thousands in credit card debt. His morale was broken.
He soon began working as a “hot shot” truck driver, carrying loads for drillers who need pipes or drums in a hurry. The United States is the world’s largest producer of oil, surpassing Saudi Arabia and Russia, and demand for “hot shots” has soared.
The epicenter of the oil boom is the Permian Basin in Texas and New Mexico, a massive layer cake of shale that’s cracked open with a blasting technique known as fracking. The country’s growing energy dominance has created tens of thousands of jobs in this part of the Southwest in recent years, many for people like Wilkinson looking for fresh starts.
. . .
(p. B4) There are now 55,000 people now work in the Permian. Mr. Wilkinson says he’s found a certain camaraderie with other transplants: “They are either escaping debt or family issues or poverty.
. . .
“I have to make money, and this is the best way I can make money,” he said. “If you’re not educated and have a good work ethic, you can come out here and still make six figures.”
For the full story, see:
(Note: ellipses added.)
(Note: the online version of the story has the date Sept. 10, 2019, and has the title “‘This Is the Most Lonesome Job’: Ride With a ‘Hot Shot’ Trucker in Oil-Rich Texas.” The online version highlights photographs by Tamir Kalifa. The online and print versions have significant differences in wording and ordering. Where there are differences, the passages quoted above, follow the print version.)
45 Is Average Age of Gazelle Founders
(p. B7) It took an entrepreneur to reimagine the mundane home thermostat as an object of beauty — and then to make a fortune based on that vision.
The entrepreneur was Tony Fadell, who had that thermostat epiphany after decades in the tech industry, including at companies like Apple. Mr. Fadell embodied his idea in a new company, Nest, which he started with the help of a colleague from Apple in 2010, at age 41.
The Nest thermostat had a sleek and intuitive design, smartphone connectivity and the ability to learn its owner’s temperature-setting habits. The product was a big hit, and within a few years Google acquired Nest for $3.2 billion.
Mr. Fadell’s deep experience and relatively mature age when he started Nest are typical of superstar entrepreneurs, who are rarely fresh out of college — or freshly dropped out of college. That’s what a team of economists discovered when they analyzed high-growth companies in the United States. Their study is being published in the journal American Economic Review: Insights.
The researchers looked at start-ups established between 2007 and 2014 and analyzed the top 0.1 percent — defined as those with the fastest growth in employment and sales. The average age of those companies’ founders was 45.
For the full commentary, see:
(Note: the online version of the commentary has the date Aug. 29, 2019, and has the title “ECONOMIC VIEW; Founders of Successful Tech Companies Are Mostly Middle-Aged.”)
The forthcoming article mentioned above, is:
Azoulay, Pierre, Benjamin Jones, J. Daniel Kim, and Javier Miranda. “Age and High-Growth Entrepreneurship.” American Economic Review: Insights (forthcoming).
“A Disney Story for Young Socialists” Op-Ed in Wall Street Journal
My op-ed touches on a couple of the themes of my book Openness to Creative Destruction: Sustaining Innovative Dynamism. The URL for the online version of my op-ed piece is: https://www.wsj.com/articles/a-disney-story-for-young-socialists-11570661652
California Uber Regulation Reduces Drivers’ Freedom to Choose
(p. A27) Drivers are at the heart of the ride-share business. They’re also at the heart of the debate over a bill approved by California’s legislature, A.B. 5, which aims to solidify gig workers’ legal status as employees. Uber and Lyft have always classified drivers as independent contractors. But many lawsuits over the years, by drivers and others, have put that classification under question. A.B.5 is intended to help drivers by creating a set of criteria under which Uber or Lyft drivers could be considered employees of those companies, and therefore entitled to the benefits and protections of employees.
So why would some drivers be against it?
I spent nearly a year driving part time for Uber and Lyft, and then left my job as an engineer to cover the industry full-time through my blog “The Rideshare Guy.” After thousands of conversations with drivers, I’ve found that while they come from all walks of life, one of the main reasons they value this work is flexibility. As a driver, you can work almost as much or as little as you want, cash out your pay instantly, take a break at a moment’s notice, or even go on a six-month vacation. This flexibility and that feeling of not having a boss makes ride-hail driving stand out in the vast array of service jobs and low-wage work.
For the full commentary, see:
(Note: the online version of the commentary has the date Sept. 16, 2019, and has the same title as the print version.)
Physician-Scientists Should Be Allowed to Discover Cures
(p. A27) Time and again, physician-scientists have changed the history of medicine by identifying a problem in the clinic and taking to the lab to address it. Alexander Fleming watched men die of sepsis during World War I while serving in the Royal Army Medical Corps, then returned home to create penicillin. Sidney Farber, a young physician at Children’s Hospital in Boston, committed himself to finding treatments for childhood leukemia, and laid the foundation for modern cancer chemotherapy.
In the 1970s, the physicians Michael Brown and Joseph Goldstein set out to understand how a young child’s arteries could be as clogged as those of an overweight septuagenarian. This patient-inspired research led to the discovery of LDL-cholesterol receptors, and paved the way for the statin drugs that are taken by millions of people every year in the United States alone.
And more recently, the research efforts of two physicians, Brian Kobilka and one of us, Dr. Lefkowitz, seeking to understand how hormones conferred their biological effects, led to the discovery of a large family of receptors that have formed the basis for the development of hundreds of F.D.A.-approved medications.
. . .
Unfortunately, the career path of the physician-scientist has become longer and a lot less appealing. In the United States, about 20,000 graduates emerge from medical school each year, many with significant debt. Many physicians are well into their 30s by the time they complete their clinical training. Doctors who decide to take the research path face the daunting prospect of many more years struggling to win grants and establish a lab. According to N.I.H. statistics, researchers with medical degrees on average receive their first major N.I.H. grant only at age 45.
. . .
We need to ensure that the brightest young doctors can contribute to further advancements in their field, or we risk stalling the engine that consistently delivers better medicine, longer lives and a stronger economy for Americans and people around the world.
For the full commentary, see:
(Note: ellipses added.)
(Note: the online version of the commentary has the date Sept. 23, 2019, and has the title “We Need More Doctors Who Are Scientists.” The online version says that the commentary appeared on p. A29 of the New York print edition. The commentary appeared on p. A27 of my National print edition.)