Category: Entrepreneurship

Study Claims 77% of Economic Growth is Due to Incremental Innovation

I am surprised by, and dubious of, the claim that 77% of economic growth comes from incremental innovation. That implies that leapfrog innovation, or creative destruction, is not very important. I will need to read and ponder the study that claimed that result.

(p. A15) The comparison of two potential options—known as A/B testing—is now routinely baked into the development of customer-facing software, Mr. Thomke reports. Microsoft, Amazon, Facebook and Google “each conduct more than ten thousand online experiments annually,” he writes, adding that even companies without tech roots (Nike, State Farm) run trials like this regularly. The tests might evaluate, say, the components of a website—style of font, color of background, shape of buttons, choice of words—and continuously adjust them based on user response.  . . .

As much as Mr. Thomke, a Harvard Business School professor, believes that “all businesses should be experimenters,” he wisely observes that “not all innovation decisions can be tested.” A/B testing may not be the best way to evaluate a completely new product or a radically different business model, he concedes, but the approach is the ideal driver of small changes. Though we celebrate disruption, Mr. Thomke urges companies to “tap into the power of high-velocity incrementalism,” explaining that “most progress is achieved by implementing hundreds or thousands of minor improvements.” He points to a study that attributes 77% of economic growth to improvements in existing products and notes that the structured system of incremental improvements that Lego implemented following its near-bankruptcy in 2004 drove 95% of annual sales and helped restore the company to profitability.

For the full review, see:

David A. Shaywitz. “Test, Test And Test Again.” The Wall Street Journal (Monday, March 16, 2020): A15.

(Note: ellipsis added.)

(Note: the online version of the review has the date March 15, 2020, and has the title “BOOKSHELF; ‘Experimentation Works’ and ‘The Power of Experiments’ Review: Test, Test and Test Again.”)

The book discussed in the passages quoted above, is:

Thomke, Stefan H. Experimentation Works: The Surprising Power of Business Experiments. Boston, MA: Harvard Business Press, 2020.

The “study” mentioned above that attributes 77% of economic growth to incremental innovation, is:

Garcia-Macia, Daniel, Chang-Tai Hsieh, and Peter J. Klenow. “How Destructive Is Innovation?” Econometrica 87, no. 5 (Sept. 2019): 1507-41.

Facebook’s Story, Based on Zuckerberg Interviews

(p. 15) In 2011, Levy, now the editor at large at Wired, wrote an extensive history of Google. To report the book, he secured liberal access to executives at Google and was allowed to soak up company culture by wandering around its corporate campus. He employed much the same strategy for “Facebook.” Zuckerberg granted Levy numerous interviews over a three-year period, and gave him “unprecedented access” to company executives.

The result is a work that recounts the company’s narrative mainly through the lens of its central figures.

. . .

Not for nothing is the book subtitled “The Inside Story.” Levy, who first met Zuckerberg in 2006, takes readers inside his college dorm suite; inside the late-night coding and cavorting at the company’s first home base in Palo Alto; inside meetings with the tech moguls who were the start-up’s first major investors; inside design choices that fueled the social network’s popularity; and inside Zuckerberg’s head.

For the full review, see:

Natasha Singer. “Power Trip.” The New York Times Book Review (Sunday, March 15, 2020): 15.

(Note: ellipsis added.)

(Note: the online version of the review has the date Feb. 25 [sic], 2020, and has the title “‘Facebook: The Inside Story’ Offers a Front-Row Seat on Voracious Ambition.”)

The book discussed in the passages quoted above, is:

Levy, Steven. Facebook: The Inside Story. New York: Blue Rider Press, 2020.

Dam Could Protect Northern Europe from Rising Waters Due to Global Warming

(p. A13) LONDON — One dam would stretch some 300 miles from the coast of Scotland to Norway. The other, roughly 100 miles, would rise in the waters between northern France and Southeastern England.

Together, the mammoth structures proposed by scientists would completely enclose the North Sea and offer protection for tens of millions of Europeans threatened by rising sea levels caused by climate change.

The scientists behind the proposal, outlined in a paper published on Thursday [Feb. 13, 2020] in the American Journal of Meteorology, said that the scale of the project — which exists only in the broadest outlines at this point — reflected the urgency of the crisis.

. . .

The project would be one of the largest engineering feats ever attempted on the planet and would cost anywhere from $250 billion to $550 billion, according to the proposal — a cost the authors suggest could be covered by more than a dozen Northern European countries that would be protected by the barrier.

. . .

While the depths of waters are manageable in much of the proposed area to be covered, engineers would also have to contend with the Norwegian Trench, which plunges to a depth of nearly 1,000 feet.

The authors say that technology used by fixed oil rigs could be adapted for the dam.

For the full story, see:

Claire Moses. “‘A Plan We Don’t Want’: Damming the North Sea.” The New York Times, First Section (Sunday, February 16, 2020): A13.

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

(Note: the online version of the story has the date Feb. 14, 2020, and has the title “As Sea Levels Rise, Scientists Offer a Bold Idea: Dam the North Sea.”)

The paper mentioned in the passages quoted above, is:

Groeskamp, Sjoerd, and Joakim Kjellsson. “Need the Northern European Enclosure Dam for If Climate Change Mitigation Fails.” Bulletin of the American Meteorological Society (2020) Published online in advance of print at https://doi.org/10.1175/BAMS-D-19-0145.1.

“Entrepreneur Sent Our Words Across an Ocean”

Cyrus Field is described as a “project entrepreneur” in my Openness to Creative Destruction book. In the op-ed linked-to below, I celebrate his achievement.

My book, mentioned above, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

“This Is America, Where People Most Value Their Time”

(p. A24) New York is banning the distribution of single-use plastic bags statewide on Sunday [March 1, 2020] . . . .

. . .

There, . . ., are skeptics of the plastic ban, especially in New York City, where most people do not drive to supermarkets and shops. A bedrock feature of life in the city is running errands on the spur of the moment, or making impulse buys while walking or using public transportation.

“This is going to be the worst thing to happen to this store,” said Sal Husain, who manages a C-Town grocery store in the Inwood section of Manhattan.

. . .

Across the street, Fatih Demir has been selling fruits for the past 15 years from a stand pitched below a white canopy. Most of his business comes from subway riders heading to and from the A train, he said.

“Our customers keep asking, ‘What’s going to happen?’” he said. “The woman who sells next to me keeps asking, ‘What’s going to happen?’ People don’t have the time to prepare for this stuff. This is America, where people most value their time.”

For the full story, see:

Anne Barnard. “Don’t Forget Your Tote Bag! Ban on Plastic Arrives.” The New York Times (Saturday, February 29, 2020): A24.

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

(Note: the online version of the story has the date Feb. 28, 2020, and has the title “Get Ready, New York: The Plastic Bag Ban Is Starting.”)

“Never Say Die”

In my Openness to Creative Destruction book, I discuss the fulfillment and sense of adventure from pursuing a big, intense project. In the op-ed linked-to below, I praise the big, intense project of extending human lifespans.


My book, mentioned above, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

In Past Decade Bean-to-Bar Chocolate Makers Grow from Five to 250

(p. D1) According to the Fine Chocolate Industry Association, sales of premium chocolates grew 19 percent in 2018, compared with 0.6 percent for mainstream chocolate like the classic Hershey bar. Over the past decade, the number of small American bean-to-bar chocolate producers — the kind with cacao percentages and places of origin printed on those hyper-chic labels — has jumped from about five to more than 250.

. . .

(p. D4) The cacao beans (also called cocoa beans) are the seeds that grow inside the pod, surrounded by fleshy, juicy fruit that tastes a little like a mango crossed with a pear that was carrying a lychee. After harvesting, the beans are fermented for up to a week to develop their flavors, and dried.

To make chocolate, the dried beans are roasted, then cracked to separate the outer husks from the inner nibs, which have a nutty, earthy flavor and crunchy texture — and are excellent added to baked goods. The nibs are about half cocoa solids and half cocoa butter.

Chocolate makers grind the nibs into what’s called chocolate liquor, or chocolate paste. This liquor is ground again, along with sugar and other ingredients that might include milk powder to make milk chocolate, lecithin to smooth the texture, or vanilla for flavor.

. . .

The new wave of craft chocolate began with Scharffen Berger, founded in 1996 by Mr. Scharffenberger, a winemaker, and Robert Steinberg, who had studied at the famous chocolate shop Bernachon, in Lyon, France.

“When we started, there were only nine companies grinding their own cacao in the United States and they were all huge, except for Guittard,” Mr. Scharffenberger said, referring to the Guittard Chocolate Company, also in the San Francisco area. “We were the first new chocolate maker on the scene in 150 years.”

When Gary Guittard, the company’s fourth-generation owner, sampled some of Scharffen Berger’s chocolate, it spurred him to revamp his own production, in some cases going back to the way his great-grandfather made chocolate when he started the company in 1868.

“Scharffen Berger was the disrupter,” Mr. Guittard said. “Trying their chocolate was just terrible for me. It opened my eyes to a world of flavors that had been present in our chocolates 50 years ago, but that were lost. We had to change everything to get them back.”

Scharffen Berger was sold in 2005 to the Hershey Company, which moved the operation to Illinois. But other small bean-to-bar makers quickly followed Scharffen Berger’s lead. There are now more than 250 in the United States. And even though Brooklyn, contrary to popular belief, didn’t invent the bean-to-bar craze, it has several producers, including Kahkow, Cacao Prieto, Jacques Torres, Raaka and Fine & Raw.

. . .

A bean-to-bar maker makes chocolate from cacao beans. A chocolatier buys premade chocolate, then melts it and combines it with other ingredients to make confections like truffles or pralines. And this isn’t at all a bad thing: The best chocolatiers buy superb bean-to-bar chocolate as a starting point. (Many professional chocolatiers buy from Valrhona.) It’s just that making chocolate and making chocolate confections are two different skill sets.

For the full story, see:

Melissa Clark. “From Bean To Bar And Beyond.” The New York Times (Wednesday, February 12, 2020): D1 & D4-D5.

(Note: ellipses added.)

(Note: the online version of the story was updated Feb. 13, 2020, and has the title “Everything You Don’t Know About Chocolate.”)

Street Vendor Entrepreneurs Pursue the American Dream

(p. D1) Running a street food cart is backbreaking work: schlepping around a heavy cart, then standing behind it for hours on end. Quitting the job would seem to be a gift to aching feet.

It hasn’t turned out that way for Mohamed Attia, who left his smoothie and halal-chicken-over-rice carts last year to become the new director of the Street Vendor Project. The group lobbies for the 20,000 or so vendors, most of them immigrants, who sell food, jewelry, clothing and just about everything else in New York City.

. . .

He’ll traverse the city for news conferences, protests or nearly any opportunity to talk about the issues that vendors face. One recent evening, he stood outside a Brooklyn restaurant for two hours in the bitter cold, telling strangers about the vendor — Elsa Morochoduchi, now famous as “the churro lady” — who was handcuffed and detained for selling her fried dough inside a Brooklyn subway station in November [2019].

. . .

(p. D5) Street carts are city fixtures and a source for a fast meal, but that’s just part of their role, he said. He believes in street vending as both an honorable profession and a human right — the right to work, to create one’s own extra-small business.

Ms. Morochoduchi had been stopped nearly a dozen times for illegally selling her pastries in the subway station, Mr. Attia said, yet she always goes back. “What’s that show you?” he said. “It shows you how important it is to her to make that money, to go there and to sell them.”

“Vendors do this because they need a job. It gives them the economic mobility to work, to save money, to start the American dream.”

. . .

This year [2020] the Street Vendor Project is pushing for new legislation from both the City Council and the State Legislature, where Ms. Ramos has just introduced a bill that could make New York the second state after California to eliminate a cap on the number of street vendors and clear any past records of citations or misdemeanors related to selling.

The measure would strike down city laws that limit the number of street food vending permits to about 5,000; the caps have led to decade-long waiting lists and an underground market where a two-year permit (officially issued by the city for $200) can sell for $25,000 or more.

The primary obstacle to changing laws is changing most people’s perception of street vendors, Mr. Attia said. “They don’t see them as entrepreneurs. They don’t see them as legitimate small businesses, and that’s something that we struggle with.”

For the full story, see:

Rachel Wharton. “From Vendor to Defender.” The New York Times (Wednesday, February 5, 2020): D1 & D5.

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

(Note: the online version of the story has the date Feb. 3, 2020, and has the title “A Food Cart Worker’s Biggest Job: Defending Vendor Rights.”)

“Senior Communist Party Leaders” Call Coronavirus “a Major Test of China’s System and Capacity for Governance”

(p. A1) Mr. Xi presided over a meeting of senior Communist Party leaders at which they acknowledged shortcomings in policies on public health and emergency management, according to a report by China’s official news agency. The leaders called the coronavirus epidemic “a major test of China’s system and capacity for governance.”

Xinhua quoted Mr. Xi as saying that officials who resist orders and “lack boldness” could be punished– . . .

For the full story, see:

Sui-Lee Wee. “China Foresees ‘Test’ as World Shuts Its Doors.” The New York Times (Tuesday, February 4, 2020): A1 & A6.

(Note: ellipsis added.)

(Note: the online version of the story has the date Feb. 3, 2020, and has the title “Beijing Sees ‘Major Test’ as Doors to China Close and Coronavirus Deaths Surpass SARS.”)