Category: Entrepreneurship

Tesla’s Process Innovation May Be Low-Defect, Fast-Assembly

(p. A13) Tesla became a darling of government handouts, with tax credits and public funding galore. It quickly grew into a sales phenom with high prices but low volume. Then, this year, its production numbers started to match those of the other major manufacturers. How Mr. Musk achieved this—and whether he should be considered a visionary or a charlatan—is the subject of “Ludicrous: The Unvarnished Story of Tesla Motors,” by the automotive journalist Edward Niedermeyer.

. . .

The book hits its stride when the author details Mr. Musk’s attempts to revolutionize the way cars are built. DeLorean and others faltered due to their inability to roll out large numbers of vehicles at a decent level of quality. Likewise the assembly line has been Tesla’s biggest obstacle. For a generation, automakers have cleaved to Toyota’s system of production, which emphasizes reducing waste and defects, slowing down the assembly line to achieve these goals. Mr. Musk, in contrast, feels Teslas should be assembled with a fast-moving line, deploying robots where other carmakers have employed workers.

Many observers bet that fast assembly won’t work. But this year Tesla delivered an impressive 158,000 cars to customers in the first two quarters, about the same number of Lexus models sold in the U.S. during that same period. Low-defect assembly was the major innovation of the automotive industry a generation ago; fast-line assembly may be the next. If Tesla’s fast-produced vehicles turn out to be reliable, Mr. Musk will deserve plaudits.

. . .

The portrait of Elon Musk that emerges from this book is one of a social-media obsessive who is constantly overpromising, playing the role of the self-sufficient business person while relying on government favors. Still, Tesla facilities produce lots of actual cars, which is more than what most other one-man marques have achieved. The accomplishment may not be as grand as Mr. Musk would like us to believe: He couldn’t have built his cars without subsidies from taxpayers who cannot afford Teslas and were given no choice in funding playthings for the rich. But his is an achievement, nonetheless.

For the full review, see:

Gregg Easterbrook. “BOOKSHELF; A Revolutionary Old Product.” The Wall Street Journal (Wednesday, Aug. 28, 2019): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date Aug. 27, 2019, and has the title ” BOOKSHELF; ‘Ludicrous’ Review: A Revolutionary Old Product.”)

The book under review is:

Niedermeyer, Edward. Ludicrous: The Unvarnished Story of Tesla Motors. Dallas, TX: BenBella Books, Inc., 2019.

Regenerative Farming Practices “Could Soak Up Half to 100% of All the Carbon Dioxide Emitted”

(p. A2) AINSWORTH, Iowa—What if there was a way to combat climate change that didn’t require technological breakthroughs, carbon taxes or eliminating all fossil fuels?

Such a solution might lie here in an Iowa cornfield beneath the feet of Mitchell Hora, a seventh-generation farmer. Mr. Hora experiments with “regenerative growing practices” that improve soil health, boost yields, reduce water and fertilizer use, and carry a significant collateral benefit: they sequester in the soil carbon released from burning fossil fuels.

Mr. Hora could soon be rewarded for providing this social benefit. Indigo Ag Inc., a Boston-based company specializing in agricultural technology and management, is setting up a market for carbon credits. Companies and consumers with voluntary or compulsory commitments to reduce their carbon footprint can, rather than reduce emissions themselves, pay farmers to do it for them. Via the Indigo Carbon marketplace, they can pay farmers like Mr. Hora $15 to sequester one metric ton of carbon dioxide in the soil.

. . .

David Perry, Indigo’s chief executive, is almost messianic about the potential: “We could soak up half to 100% of all the carbon dioxide emitted since the industrial revolution,” or roughly one trillion tons.

The Rodale Institute, a think tank that promotes organic agriculture and has partnered with Indigo, cites trials that suggest through regenerative growing practices, an acre of agricultural land can sequester one to 2.6 tons of carbon dioxide a year. Extrapolating to the world, that equals the about 37 billion metric tons of carbon dioxide released globally through fossil fuel use each year.

For the full commentary, see:

Greg Ip. “CAPITAL ACCOUNT; Carbon Emissions Get a Fix on the Farm.” The Wall Street Journal (Saturday, Sept. 12, 2019): A2.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Sept. 11, 2019, and has the title “CAPITAL ACCOUNT; How to Get Rid of Carbon Emissions: Pay Farmers to Bury Them.”)

Netflix Flourished by “Unplanned” Leaps

(p. A17) Starting a business is tough enough. Why would any sane person choose to start a business in a dying industry?

One answer to that question can be found in “That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea,” a charming first-person account of the early days of one of the most successful tech startups ever.

. . .

Most of Netflix’s early business came from sales of DVDs, not rentals. The struggling company even considered selling to Amazon in 1998, but passed on the offer.

In desperation, Netflix tested monthly subscriptions. To its surprise, customers eagerly forked over their credit-card details. The little company turned on a dime, dropping sales and one-off rentals almost immediately. “If you had asked me on launch day to describe what Netflix would eventually look like, I never would have come up with a monthly subscription service,” Mr. Randolph claims. Netflix’s innovation with a subscription model would point many other internet-based companies to a reliable source of revenue.

Another unplanned leap soon followed: a predictive algorithm that offered to each user individualized recommendations based on reviews by customers with similar preferences. This feature helped hook customers, but it had a less obvious benefit for Netflix: By directing the user to a less popular film that happened to be in Netflix’s inventory, it allowed the company to buy fewer of the most popular DVDs. Yet profits were elusive. Video-store giant Blockbuster, unconvinced about the online business model, turned down a chance to buy the company in 2000, and the dot-com meltdown short-circuited a public offering. In September 2001, Netflix had its first layoffs, cutting costs and steadying the ship.

Mr. Randolph himself left in 2003, not long after Netflix finally went public. By then, he says, he had figured out that he loved starting companies, not running them. “I missed the late nights and early mornings, the lawn chairs and card tables. I missed the feeling of all hands on deck, and the expectation that every day you’d be working on a problem that wasn’t strictly tied to your job description,” he writes. The chaos of a startup enthralls him. A company with hundreds of employees and the demands of quarterly reports to investors is not his thing.

For the full review, see:

Marc Levinson. “BOOKSHELF; Streaming Ahead.” The Wall Street Journal (Monday, Sept. 23, 2019): A17.

(Note: ellipsis added.)

(Note: the online version of the review has the date Sept. 22, 2019, and has the title “BOOKSHELF; ‘That Will Never Work’ Review: Streaming Ahead.”)

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.

Humana Founding Entrepreneur Said Notion That Non-Profit Hospitals Are Better Than For-Profit Hospitals, Is “Baloney”

(p. 26) Mr. Jones was a genial but extremely competitive executive. During the years that Humana owned hospitals, several in Louisville, he vigorously defended the for-profit hospital model, contending that Humana’s facilities could deliver better care at lower costs.

“The notion that being nonprofit adds some weight to what you do is baloney,” he once said.

For the full obituary, see:

Richard Sandomir. “David Jones, Health Care Entrepreneur Behind Humana, Is Dead at 88.” The New York Times, First Section (Sunday, September 22, 2019): 26.

(Note: the online version of the obituary has the same date and title as the print version.)

Entrepreneur Helped Firms Lower Costs of Firing Executives

(p. A6) James Challenger had tried law, advertising and manufacturing of gas heaters before dreaming up in the mid-1960s what he called a wild idea: persuading companies to pay him to help find new jobs for executives and middle managers they were laying off.

His firm, Challenger, Gray & Christmas, offered what came to be known as outplacement services. The initial reaction from companies, he said later, was why should we help people we’re firing?

The aptly named Mr. Challenger, who died Aug. 30 [2019] at age 93, struggled for years to persuade companies it was good business to be nice to people heading involuntarily out the door.

For the full obituary, see:

Hagerty, James R. “Wild Idea Created Outplacement Services.” The Wall Street Journal (Saturday, Sept. 21, 2019): A6.

(Note: bracketed year added.)

(Note: the online version of the obituary has the date Sept. 20, 2019, and has the title “James Challenger Helped Create Market for Outplacement Services.”)

Regulators Threaten App Startups That “Give People Access to Their Pay as They Earn It”

(p. B5) WASHINGTON—A growing industry of financial apps that allow workers to access their pay early is drawing scrutiny from regulators to prove they are different from payday lenders.

. . .

Last month, regulators from New York and 10 other states said they were investigating whether some payroll-advance firms violated payday-lending laws. In California, state lawmakers are debating a law that aims to set the legal foundation for the industry and provide consumer protections, the first such attempt in the country.

The moves by state officials come as the industry is growing. Leslie Parrish, an analyst for research firm Aite Group, said the industry is “poised for exponential growth.” Aite Group estimated the app companies handled 18.6 million early U.S. payroll transactions valued at more than $3.15 billion in 2018.

. . .

Industry executives and some consumer advocates say the services offer the potential to help lower- and moderate-income workers by providing low-cost tools, though they disagree on how businesses should be structured and regulated.

“It hasn’t solved the income inequality problem,” Todd Baker, a senior fellow at Columbia Business School, said. “What it does is replace, for a nominal cost, the $30, $40 people pay today for a single overdraft or a $200 payday loan.”

. . .

“In the U.S., we have this pay cycle that holds back people’s pay,” said Ram Palaniappan, chief executive of Earnin. “What we have been able to do is to give people access to their pay as they earn it.”

Earnin tracks users’ work and pay schedules using time sheets or location services and will deposit up to $500 per pay period in their bank accounts. Rather than charging fees for its service, Earnin asks users to consider voluntary tips of up to $14.

For the full story, see:

Yuka Hayashi. “Pay-App Startups Draw Scrutiny.” The Wall Street Journal (Tuesday, Sept. 3, 2019): B5.

(Note: ellipses added.)

(Note: the online version of the story has the date Sept. 2, 2019, and has the title “Pay-Access Apps Face Regulatory Test.”)

“No One Has the Stomach to Challenge the Status Quo”

(p. B14) Before precision-scheduled railroading, or PSR, locomotives had been run the same way for more than a century. Trains waited for cargo at the rail yard, then left when customers brought their shipments and loaded them up. It was an unreliable business with plenty of inefficiencies. But that started to change early this decade, when Mr. Harrison teamed up with William Ackman’s Pershing Square Capital to take control at Canadian Pacific Railway.

“No one has the stomach to challenge the status quo,” Mr. Harrison, who started his railroad career as a 19-year-old laborer in 1963, said several years ago.

Rather than leave the departure times up to clients such as factories, farms and mines, Mr. Harrison demanded they be ready or miss their trips, much like airline passengers. This didn’t win many friends among clients, but after successfully implementing the model in Canada, Mr. Harrison moved on to take the helm of Jacksonville, Fla.-based CSX in 2017. Tragically, his tenure this time was short-lived. Mr. Harrison died just a short time after joining the company.

For the full story, see:

Lauren Silva Laughlin. “Late Railroad Guru’s Legacy Is Losing Steam.” The Wall Street Journal (Saturday, Aug. 24, 2019): B14.

(Note: the online version of the story has the date Aug. 23, 2019, and has the title “Hunter Harrison’s Train Overhaul Starts Running Out of Steam.”)

Top 0.1% Have 15% of U.S. Wealth

(p. A1) The income tax is the Swiss Army Knife of the U.S. tax system, an all-purpose policy tool for raising revenue, rewarding and punishing activities and redistributing money between rich and poor.

The system could change fundamentally if Democrats win the White House and Congress. The party’s presidential candidates, legislators and advisers share a conviction that today’s income tax is inadequate for an economy where a growing share of rewards flows to a sliver of households.

For the richest Americans, Democrats want to shift toward taxing their wealth, instead of just their salaries and the income their assets generate.

. . .

In the real world, a wealth tax would emerge from Congress riddled with gaps that the tax-planning industry would exploit, said Jason Oh, a law professor at the University of California, Los Angeles. For example, if private foundations were exempted, the wealthy might shift assets into them.

“We’ve never seen in the history of taxation a pristine tax of any form,” Mr. Oh said. “People who want to pursue a wealth tax for the revenue may be a little disappointed when we see the estimates roll in.”

European countries tried—and largely abandoned—wealth taxes. They struggled because rich people could switch countries and because some assets were exempt. Mr. Zucman said Ms. Warren’s tax would escape the latter problem by hitting every kind of asset, from artwork to stock to privately held businesses to real estate.

While he and fellow economist Emmanuel Saez assume 15% of the tax owed would be avoided, former Treasury Secretary Larry Summers and University of Pennsylvania law professor Natasha Sarin wrote a paper estimating the plan would raise less than half what Mr. Zucman projects, based on how much wealth escapes the estate tax.

A paper by economists Matthew Smith of the Treasury Department, Eric Zwick of the University of Chicago and Owen Zidar of Princeton University contends top-end wealth is overstated. Acccording to their preliminary estimate, the top 0.1% have 15% of national wealth, instead of the 20% estimated by Mr. Zucman. Their findings imply that Ms. Warren’s tax might raise about half of what’s promised.

For the full story, see:

Richard Rubin. “Democrats’ Tax Idea: Target Wealth, Not Just Income.” The Wall Street Journal (Wednesday, Aug. 28, 2019): A1 & A8.

(Note: ellipsis added.)

(Note: the online version of the story has the date Aug. 27, 2019, and has the title “Democrats’ Emerging Tax Idea: Look Beyond Income, Target Wealth.”)

The paper co-authored by Smith, and mentioned above, is:

Smith, Matthew, Owen Zidar, and Eric Zwick. “Top Wealth in the United States: New Estimates and Implications for Taxing the Rich.” Working Paper, July 19, 2019.

Lyft Driver Fears California Law Will Destroy Her Work Flexibility

(p. B4) California lawmakers have hailed the law signed by Gov. Gavin Newsom this week that could require drivers of ride-hailing companies to be labeled as employees rather than independent contractors, saying the measure could raise wages and provide new workplace benefits.

But the drivers are divided about how it will affect them.

For Rachel Hudson, a 43-year-old driver for Lyft Inc. who struggles with arthritis and an anxiety disorder, the bill’s passage is unwelcome. Ms. Hudson has driven for Lyft for about five years and fears employment status could mean having to work in scheduled shifts that would wipe out the flexibility she needs.

“Sometimes, I need a two- to three-hour break. I can’t always be relied upon to be at work at specific times,” Ms. Hudson said. Driving for Lyft “is the only way I can afford a car. It makes a huge impact on my life.”

Ms. Hudson, who lives alone in Stockton, Calif., said that besides federal disability benefits, the earnings from Lyft are her only income.

For the full story, see:

Sebastian Herrera. “Uber, Lyft Drivers Torn Over Law Meant to Protect Them.” The Wall Street Journal (Monday, Sept. 23, 2019): B4.

(Note: the online version of the story has the date Sept. 21, 2019, and has the title “Uber, Lyft Drivers Torn as California Law Could Reclassify Them.”)

Strong Job Market Allows Lower-Income Workers to Change Jobs

(p. A3) The share of lower-income Americans leaving their jobs for new ones leapt earlier this year, pointing to rising confidence in the U.S. labor market among workers who were left behind earlier in the expansion.

A New York Fed survey released Monday showed the share of lower-income heads of household, defined as earning a household income of $60,000 a year or less, who moved to new jobs in April, May, June or July was 12%, up from 8% in the same period a year earlier and the highest rate for records dating back to 2014.

Meanwhile, job changes among higher-income workers have been declining since early 2018.

The lower-income workers had more opportunities: About 4% of lower-income Americans received three job offers in the four months ended in July, up from 1.4% over the same period in 2018, according to the data in the New York Fed Survey of Consumer Expectations.

For the full story, see:

Sarah Chaney. “Lower-Income Americans Are Job Hopping.” The Wall Street Journal (Tuesday, Sept. 24, 2019): A3.

(Note: the online version of the story has the date Sept. 23, 2019, and has the title “Lower-Income Americans Are Increasingly Job Hopping.”)

Newsboys “Were American Icons–Symbols of Unflagging Industry”

(p. A17) Thomas Edison was one. So were Harry Houdini, Herbert Hoover, W.C. Fields, Walt Disney, Benjamin Franklin, Jackie Robinson, Walter Winchell, Thomas Wolfe, Jack London, Knute Rockne, Harry Truman, John Wayne, Warren Buffett and many more familiar names. Besides being illustrious Americans, these men shared a calling—growing up, they were newsboys, delivering newspapers to subscribers or, more colorfully, hawking them on the streets for a couple of pennies, real money in those days.

In their time, newsboys (girls were rare) were American icons—symbols of unflagging industry and tattered, barefoot, shivering objects of pity. They had their own argot and better news judgment than many editors, because they had to size up the appeal of every edition to determine how many copies to buy from the publisher.

For the full review, see:

Edward Kosner. “BOOKSHELF; Street-Corner Capitalists.” The Wall Street Journal (Monday, Oct. 7, 2019): A17.

(Note: the online version of the review has the date Oct. 6, 2019, and has the title “BOOKSHELF; ‘Crying the News’ Review: Street-Corner Capitalists.”)

The book under review is:

DiGirolamo, Vincent. Crying the News: A History of America’s Newsboys. New York: Oxford University Press, 2019.