John O’Donnell interviewed me at 6 PM 11/8/19, about my book “Openness to Creative Destruction” on his weekly Friday show on Power Trading Radio. (In the screen capture above, Merlin Rothfeld is on the left and John O’Donnell is on the right.)
Category: Entrepreneurship
“Wealth Taxes Would Sap Innovation”
(p. A1) WASHINGTON — Progressive Democrats are advocating the most drastic shift in tax policy in over a century as they look to redistribute wealth and chip away at the economic power of the superrich with new taxes that could fundamentally reshape the United States economy.
As they compete for the Democratic presidential nomination, Senators Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont have proposed wealth taxes that would shrink the fortunes of the richest Americans. Their plans envision an enormous transfer of money from the wealthy to ordinary people, with revenue from the wealth tax used to finance new social programs like tuition-free college, universal child care and “Medicare for all.”
The wealth taxes under discussion would deal a major blow to the balance sheets of American plutocrats like Jeff Bezos, Bill Gates and Warren Buffett. If the tax that Ms. Warren has called for had been in place since 1982, the net worth of the 15 richest Americans in 2018 would have been half as much, according to two economists who helped develop her plan. The Sanders wealth tax, which was released last week, would have eroded their fortunes even further, to barely one-fifth of their 2018 total.
. . .
(p. A18) But redirecting such vast sums could have unintended effects on the United States economy that go beyond promulgating economic fairness. While Ms. Warren ticks off the social programs that can be funded if the richest Americans pay just 2 cents on every dollar they have above $50 million — a number that is unimaginable to most Americans — skeptics warn of economic stagnation, depressed business confidence and a legal battle that would go to the Supreme Court.
At a conference sponsored by the Brookings Institution in September, N. Gregory Mankiw, a Harvard economist, debated Mr. Saez and Mr. Zucman about the merits of taxing wealth. Mr. Mankiw, the former head of President George W. Bush’s Council of Economic Advisers, offered a searing critique, arguing that a wealth tax would skew incentives that could alter when the superrich make investments, how they give to charity and even potentially spur a wave of divorces for tax purposes. He also noted that billionaires, with their legions of lawyers and accountants, have proven to be experts at gaming the system to avoid even the most onerous taxes.
“On the one hand it’s a bad policy, and then the other thing is it’s a feckless policy,” Mr. Mankiw said.
Left-leaning economists have expressed their own doubts about a wealth tax. Earlier this year, Lawrence Summers, who was President Bill Clinton’s Treasury secretary, warned in an article with Natasha Sarin, a law professor at the University of Pennsylvania, that wealth taxes would sap innovation by putting new burdens on entrepreneurial businesses while they are starting up. In their view, a country with more millionaires is a sign of economic vibrancy.
“Turning the tax code into a vehicle for confronting what some call ‘oligarchic drift’ would undermine business confidence, reduce investment, degrade economic efficiency and punish success in ways unlikely to be good for the country or even to be appealing to most Americans,” they wrote.
For the full story, see:
(Note: ellipsis added.)
(Note: the online version of the story has the same date as the print version, and has the title “Democrats’ Plans to Tax Wealth Would Reshape U.S. Economy.”)
The “article” by Sarin and Summers, mentioned above, is:
Amazon Has 30,000 Open Permanent Jobs, and Half “Are Tech Oriented”
(p. A1) SEATTLE — Engineers in the Bay Area. Advertising managers in Chicago. Freight specialists in Arizona. The job listings keep piling up at Amazon, a company that is growing in many directions amid one of the tightest labor markets in memory.
On Monday [Sept. 9, 2019], Amazon said it had 30,000 open positions in the United States, including full- and part-time jobs at headquarters offices, technology hubs and warehouses.
Although the company has positions to fill across the country, Amazon’s job boards list many more openings in the Seattle area and California and by its new campus near Washington, D.C., than it does anywhere else.
The vacancies, which Amazon said it hoped to fill by early next year, are permanent jobs and do not include seasonal positions for the warehouse workers and drivers that the company typically hires to handle the spike in orders it gets around Christmas. More than half the jobs are tech oriented, and roughly a quarter are for warehouse work, the company said.
For the full story, see:
(Note: bracketed date added.)
(Note: the online version of the story has the date September 9, 2019, and has the title “Amazon Has 30,000 Open Jobs. Yes, You Read That Right.”)
California Anti-Gig-Worker Regulations Have “Unintended Victims”
(p. B1) SAN FRANCISCO — After months of bickering over who would be covered by a landmark bill meant to protect workers, California legislators passed legislation on Wednesday [Sept. 11, 2019] that could help hundreds of thousands of independent contractors become employees and earn a minimum wage, overtime pay and other benefits.
. . .
In California, religious groups said they feared that small churches and synagogues would not be able to afford making pastors and rabbis employees. Winemakers and franchise owners said they were worried they could be ensnared by the law, too. Even some of the contractors for the app-based businesses that have been at the center of this debate said the change could hurt them if companies like Uber, Lyft and DoorDash decided to restrict how often they could work or cut them off entirely.
. . .
(p. B4) Small vineyard owners are concerned that they could be forced to directly employ the independent truckers they use to haul their harvests and become responsible for providing insurance and workers’ compensation. Currently, truckers operate as contractors, with their own rigs and insurance, and serve several vineyards, said Michael Miiller, director of government relations at the California Association of Winegrape Growers.
“Our members are growers, not trucking companies,” Mr. Miiller said. “The target of legislators is Uber and Lyft, but the unintended victims are small, independent vineyards on the coast of California.”
Saunda Kitchen owns a Mr. Rooter plumbing business in Sonoma County that has 30 employees, for whom she pays payroll taxes and provides the various mandated benefits. But Ms. Kitchen said she believed that she herself would have to become an employee of Mr. Rooter under the new law, which could cause the parent company to pull out of the state.
“I wouldn’t have access to new technology, training, help with marketing,” said Ms. Kitchen, who planned to talk with Mr. Rooter officials on Thursday [Sept. 12, 2019] about how to proceed.
For the full story, see:
(Note: ellipses, and bracketed dates, added.)
(Note: the online version of the story has the date Sept. 11, 2019, and has the title “California’s Contractor Law Stirs Confusion Beyond the Gig Economy.”)
Start-Up Is Building Largest Greenhouse in U.S., Creating 285 Jobs in Kentucky
(p. B6) MOREHEAD, Ky. — Proximity to big markets is crucial for the fresh produce business.
So when AppHarvest, a two-year-old start-up, was looking for a site for a greenhouse, it picked a 366-acre field in Rowan County just outside Morehead, a university town in eastern Kentucky.
The greenhouse, the largest in the United States, will be just a day’s drive from almost 70 percent of American consumers, including those who love fresh tomatoes.
Next summer, when AppHarvest begins production at its $97 million building, 285 employees will start shipping 45 million pounds of fresh produce annually, primarily tomatoes, to grocery stores from Atlanta to New York, and as far west as Chicago and St. Louis.
For the greenhouse to be cost-effective, size was as important as location. The 60-acre, 2.76-million-square-foot building will be big enough to lower costs on materials, production and distribution.
“I asked the engineers, ‘How big can we possibly be to operate efficiently and effectively?’” said Jonathan Webb, AppHarvest’s 34-year-old founder and chief executive. “We have to compete with produce coming from 2,000 miles away.” Continue reading “Start-Up Is Building Largest Greenhouse in U.S., Creating 285 Jobs in Kentucky”
If Steve “Jobs Had Lived, Disney and Apple Might Have Merged”
(p. B7) Mr. Iger believes that, if Mr. Jobs had lived, Disney and Apple might have merged.
. . .
He thinks that Mr. Jobs also could have helped steer Silicon Valley in a better direction. “Steve had quite a conscience.” Mr. Iger says. “It didn’t always manifest itself in his interpersonal relationships, but he had quite a conscience. Silicon Valley needs leaders.” The two men became so close that Mr. Jobs pulled Mr. Iger aside right before the announcement of the $7 billion Disney-Pixar deal to confide that his pancreatic cancer had come back and was now in his liver. Only his wife, Laurene, knew. Mr. Iger had to think fast; he rejected Mr. Jobs’s offer to back out of the deal.
For the full interview, see:
(Note: ellipsis added.)
(Note: the online version of the interview has the same date as the print version, and has the title “The Slow-Burning Success of Disney’s Bob Iger.”)
The book discussed in the interview is:
Iger, Robert. The Ride of a Lifetime: Lessons Learned from 15 Years as CEO of the Walt Disney Company. New York: Random House, 2019.
Chapter 4 on “The Benefits–New Goods” for Free Until Nov. 8, 2019
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:
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.