Category: Entrepreneurship

F.A.A. Regulations Slow Drone Innovation

(p. B2) Chinese aviation administrators, . . . , have already approved drone deliveries by the e-commerce giant JD.com and delivery giant SF Holding Co. But in the United States, it will depend on whether regulators eventually allow drone companies to have autonomous systems in which multiple aircraft are overseen by one pilot and whether they can fly beyond the vision of that pilot. Current regulations do not permit multiple drones per operator without a waiver. Operators like Wing, the drone-delivery company owned by Google parent Alphabet, have that capability.

. . .

Wing is . . .  one of several companies participating in a pilot program in Virginia. As with its testing in Finland and Australia, Wing will focus on the delivery of consumer goods, including food.

The Virginia site, in Blacksburg, near Virginia Tech, is one of 10 chosen by the Federal Aviation Administration as part of its Unmanned Aircraft Systems Integration Pilot Program.

The 10 were culled from 149 applications from “state, local and tribal governments,” agency spokesman Les Dorr said in an email. Those in the industry didn’t apply directly, but could show their interest, he said, and more than 2,800 companies responded.

. . .

While the F.A.A. has chosen the 10 pilots, the programs still need to apply for agency waivers because they will fly beyond the visual line of sight, fly at night and fly over people, fundamentals not allowed under current law. The agency is seeking comments on expanding permissible uses under current law; it is also testing to evaluate the parameters of regulation.

As a practical matter, this means that some of the pilot programs are not yet operational as they await F.A.A. approval.

That’s O.K., said James Pearce, a spokesman for the North Carolina Department of Transportation, which prefers to ensure that the drones can safely fly and that those on the ground are not exposed to any risks, including those that are self-inflicted. “We need to make sure that people know not to try to grab the drones.”

. . .

While the deliberate pace may seem slow, Mr. Levitt, like others interviewed, remains sanguine. “It’s like the red flag laws when cars began to populate the roads. You had to have someone walking ahead with a flag to warn others. That’s where we are today with drones — not being able to fly beyond the visual line of sight is like not allowing a car to drive faster than a person can walk.”

For the full story, see:

Ellen Rosen.  “No Drones at Your Doorstep, but Don’t Rule Them Out Yet.”  The New York Times (Monday, ):  B2.

(Note:  ellipses added.)

(Note:  the online version of the story has the date March 19, 2019, and has the title “Skies Aren’t Clogged With Drones Yet, but Don’t Rule Them Out.”)

Efficiency Skills Are “Profoundly Different from” Innovation Skills

(p. A15) How do you deliver performance now while developing the products you’ll need in the future? The skills required to support established franchises, he argues, are profoundly different from those required to develop new ones. Management techniques such as Six Sigma, focused on efficiency and execution, tend to be bad for innovation, which is intrinsically messy and inefficient. Companies need a different approach to nurture the radically original projects, or “loonshots,” that are essential for long-term success.
. . .
In Mr. Bahcall’s view, the principal obstacle to innovation isn’t that there are too few creative ideas–indeed, there are plenty of artists, he says. The problem is that original proposals are both discomfiting and imperfect, hence reflexively rejected before they can develop enough to prove themselves in the field.
. . .
Organizations can miss innovation opportunities by accepting the conventional wisdom, Mr. Bahcall observes, a problem he describes as “false fails.” Consider the Facebook predecessor Friendster. Mr. Bahcall explains that while most investors decided that the failure of Friendster was evidence that social-network efforts weren’t sticky enough to retain customers, Peter Thiel’s investment team wasn’t so sure. They dug into the data and were “stunned by how long users stayed with the site,” despite the irritating crashes that dogged the platform. Hence Mr. Thiel’s fund was an early investor in Facebook, confident that, with appropriate attention to the underlying technology, the platform could succeed. Eight years later, he sold most of his Facebook stake and pocketed roughly $1 billion.

For the full review, see:
David A. Shaywitz. “BOOKSHELF; In Praise of Wild Ideas; Innovative proposals can be both imperfect and discomfiting–and are often rejected before they can develop enough to prove themselves viable.” The Wall Street Journal (Tuesday, March 19, 2019): A15.
(Note: ellipses added.)
(Note: the online version of the review has the date March 18, 2019, and has the title “BOOKSHELF; ‘Loonshots’ Review: In Praise of Wild Ideas; Innovative proposals can be both imperfect and discomfiting–and are often rejected before they can develop enough to prove themselves viable.”)

The book under review, is:
Bahcall, Safi. Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries. New York: St. Martin’s Press, 2019.

Private Property Unleashed Innovation

(p. A17)  Enlightenment philosophers recognized that the crown, guild, church and village sometimes acted as rent-seekers stripping away the rewards for work, thrift and innovation, and in the process inhibiting productive effort and progress. The Enlightenment established the principle that labor and capital are private property and not communal assets subject to involuntary sharing, and thus unleashed the explosion of knowledge and production that drives human flourishing to this day.

Extraordinarily in America, the crown jewel and greatest beneficiary of the Enlightenment, political movements are afoot that seek to overturn the individual economic rights secured in the Enlightenment and return to a medieval world of subjects and subjugation.

For the full commentary, see:

Phil Gramm and Michael Solon.  “Enemies of the Economic Enlightenment.”  The Wall Street Journal  (Tuesday, 9):  A17.

(Note:  the online version of the commentary has the date 9.)

Peter Boettke Offers Advance Praise for Openness to Creative Destruction

Prometheus didn’t ask permission for Zeus to bring fire to the humans. It cost him dearly, as Zeus punished him in a rather vicious manner. But human beings were made infinitely better off with fire. Art Diamond relays this story to us precisely because he wants us to understand the great benefits that entrepreneurial innovation deliver for mankind, and yet how the true innovator is often despised and disrespected by the prevailing orthodox establishment. If Prometheus had to get permission before giving fire to man, then man would have never gotten the benefits of fire. Similarly, if our entrepreneurial innovators had to get permission prior to introducing their innovation, we would still be walking around or perhaps at best riding on the backs of beasts but I doubt we would have seen the benefits of automobiles, let alone planes, and we would very well not have modern conveniences such as indoor plumbing, let alone air travel, cell phones, and the world wide web.

Peter Boettke, Professor of Economics & Philosophy, George Mason University; Director F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center.

Boettke’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

Chinese “Entrepreneurs Were Like Famished Goats Set Free from a Pen and Allowed to Flourish”

(p. 11) YULIN, China — For months, Zhao Faqi was a folk hero for entrepreneurs in China — an investor who fought the government in court and online, and against the odds, seemed poised to win. He accused officials of stealing his rights to coal-rich land, and ignited a furor by accusing China’s most powerful judge of corruption.
Now, Mr. Zhao has dropped out of sight — and the authorities want to erase his story.
. . .
The state news media has painted him as a cunning schemer. A judge who supported his case was paraded on television. A crusading former talk show host who helped bring the case to light has fallen silent.
Mr. Zhao’s arc from self-declared victim to officially designated villain has been dramatic even for China, where the party controls the courts and businesspeople can abruptly fall from grace. Mr. Zhao’s descent — and possible disappearance — is a demonstration of the hazards that entrepreneurs face in taking on powerful Chinese officials.
“I’ve faced a lot of risks and pressure because of this lawsuit,” Mr. Zhao said in an interview in Beijing a few weeks before he disappeared. Chinese entrepreneurs, he said, yearned for the rule of law to replace arbitrary power. “You can’t say someone is protected one day, and take away protection the next day.”
Mr. Zhao drew support from liberal economists and lawyers who have been unsettled by Mr. Xi’s reverence for communist tradition and support for state-owned companies, which he has urged to grow “stronger, better and bigger.”
. . .
Mr. Zhao, 52, was among the entrepreneurs who plunged into business after Deng Xiaoping, then China’s paramount leader, unleashed market overhauls. At the time, Mr. Zhao said, entrepreneurs were like famished goats set free from a pen and allowed to flourish.
“But we’re seeing this vitality steadily shrink,” he said.
. . .
. . . , Mr. Zhao’s phone has been turned off, and he appears to have gone into hiding or official custody.

For the full story, see:
Chris Buckley. “Chinese Entrepreneur Takes On the System, and Drops Out of Sight.” The New York Times, First Section (Sunday, March 10, 2019): 11.
(Note: ellipses added.)
(Note: the online version of the story has the date March 9, 2019.)

Innovative Entrepreneurs Bring Prosperity to the Poor

(p. A17) As the economist Joseph Schumpeter observed: “The capitalist process, not by coincidence but by virtue of its mechanism, progressively raises the standard of life of the masses.”

For Schumpeter, entrepreneurs and the companies they found are the engines of wealth creation. This is what distinguishes capitalism from all previous forms of economic society and turned Marxism on its head, the parasitic capitalist becoming the innovative and beneficent entrepreneur. Since the 2008 crash, Schumpeter’s lessons have been overshadowed by Keynesian macroeconomics, in which the entrepreneurial function is reduced to a ghostly presence. As Schumpeter commented on John Maynard Keynes’s “General Theory” (1936), change–the outstanding feature of capitalism–was, in Keynes’s analysis, “assumed away.”

Progressive, ameliorative change is what poor people in poor countries need most of all. In “The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty,” Harvard Business School’s Clayton Christensen and co-authors Efosa Ojomo and Karen Dillon return the entrepreneur and innovation to the center stage of economic development and prosperity. The authors overturn the current foreign-aid development paradigm of externally imposed, predominantly government funded capital- and institution-building programs and replace it with a model of entrepreneur-led innovation. “It may sound counterintuitive,” the authors write, but “enduring prosperity for many countries will not come from fixing poverty. It will come from investing in innovations that create new markets within these countries.” This is the paradox of the book’s title.

Continue reading “Innovative Entrepreneurs Bring Prosperity to the Poor”

Private Firms Build Costly Complex Cable Infrastructure

(p. B1) Nearly 750,000 miles of cable already connect the continents to support our insatiable demand for communication and entertainment. Companies have typically pooled their resources to collaborate on undersea cable projects, like a freeway for them all to share.
But now Google is going its own way, in a first-of-its-kind project connecting the United States to Chile, home to the company’s largest data center in Latin America.
. . .
(p. B7) Inside the ship, workers spool the cable into cavernous tanks. One person walks the cable swiftly in a circle, as if laying out a massive garden hose, while others lie down to hold it in place to ensure it doesn’t snag or knot. Even with teams working around the clock, it takes about four weeks before the ship is loaded up with enough cable to hit the open sea.
The first trans-Atlantic cable was completed in 1858 to connect the United States and Britain. Queen Victoria commemorated the occasion with a message to President James Buchanan that took 16 hours to transmit.
While new wireless and satellite technologies have been invented in the decades since, cables remain the fastest, most efficient and least expensive way to send information across the ocean. And it is still far from cheap: Google would not disclose the cost of its project to Chile, but experts say subsea projects cost up to $350 million, depending on the length of the cable.
. . .
Poor weather is inevitable. Swells reach up to 20 feet, occasionally requiring the ship captain to order the subsea cable to be cut so the ship can seek safer waters. When conditions improve, the ship returns, retrieving the cut cable that has been left attached to a floating buoy, then splicing it back together before continuing.
Work on board is slow and plodding. The ship, at sea for months at a time, moves about six miles per hour, as the cables are pulled from the giant basins out through openings at the back of the ship.
. . .
“It really is management of a very complex multidimensional chess board,” said Ms. Stowell of Google, who wears an undersea cable as a necklace.
Demand for undersea cables will only grow as more businesses rely on cloud computing services. And technology expected around the corner, like more powerful artificial intelligence and driverless cars, will all require fast data speeds as well. Areas that didn’t have internet are now getting access, with the United Nations reporting that for the first time more than half the global population is now online.
“This is a huge part of the infrastructure that’s making that happen,” said Debbie Brask, the vice president at SubCom, who is managing the Google project. “All of that data is going in the undersea cables.”

For the full story, see:
ADAM SATARIANO. “Underwater Freeways for Your Puppy Posts.” The New York Times (Tuesday, MARCH 12, 2019): B1 & B6-B7.
(Note: ellipses added.)
(Note: the online version of the story has the date MARCH 10, 2019, and has the title “How the Internet Travels Across Oceans.”)

Vernon Smith Offers Advance Praise for Openness to Creative Destruction

Read this book and discover what matters most in economics–ideas and knowledge-how summarized in the word “innovation.” But to fuel innovation resources have to be released from their old incumbent uses and flow into the new. That is the destruction that creates.

Vernon Smith, Nobel Prize in Economics, received in 2002.

Vernon Smith’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

Luis Locay Offers Advance Praise for Openness to Creative Destruction

Openness to Creative Destruction is first and foremost a great read. Much of the book is devoted to skillfully chosen accounts of usually successful, but occasionally unsuccessful, entrepreneurs to illustrate the author’s arguments. At times these accounts made me feel like I was reading a series of short adventure stories. This use of examples to make the argument for the central role of the creative entrepreneur in generating innovation, and the benefits that can accrue to society from creative destruction, makes the book very accessible to the intelligent layman or beginning student, while its serious ideas will be of interest to professional economists and sophisticated policymakers. The theoretician of entrepreneurship or innovation will find it a one-stop source of real-world examples. I plan to make it required reading in my growth and industrial organization classes.

Luis Locay, Associate Professor of Economics, University of Miami.

Locay’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

“I’ll Stick with You in Failure”

(p. B13) Sidney Sheinberg, an irascible Universal Studios executive who discovered and nurtured Steven Spielberg, putting “Jaws” into production and helping to turn Hollywood into a blockbuster-focused business, died on Thursday [March 7, 2019] at his home in Beverly Hills, Calif.
. . .
Mr. Sheinberg was for much of his career the forthright top deputy to Lew Wasserman, the chairman of MCA, a conglomerate that encompassed Universal. The ultimate mogul, Mr. Wasserman defined power in Hollywood in the decades after World War II.
But Mr. Sheinberg, openly intimidating as president and chief operating officer, kept the gears turning. When the two men left MCA in 1995, Mr. Sheinberg had worked for the company for 36 years, the last 22 as president.
During that time he helped transform Universal into an international entertainment giant, complete with a sprawling theme park empire.
. . .
“Sheinberg dealt with all people like a battering ram: Do it his way or get out of the way,” Dennis McDougal wrote in the 1998 biography “The Last Mogul: Lew Wasserman, MCA, and the Hidden History of Hollywood.”
Most important, Mr. Sheinberg discovered Mr. Spielberg. It was 1968 and the director, in his early 20s, had just completed a short film, “Amblin’,” a love story about hitchhiking hippies. Based on what he saw, Mr. Sheinberg put Mr. Spielberg under contract and gave him a job directing television shows. An episode of “Marcus Welby” was one of the first. In 1971 came “Duel,” Mr. Spielberg’s thrilling TV movie about a commuter terrorized by a truck driver.
With a line that has come to epitomize loyalty in the often fickle movie business, Mr. Sheinberg told his protégé at the time: “A lot of people will stick with you in success. I’ll stick with you in failure.”
Mr. Sheinberg, who could be as tender as he was prickly, was the one who allowed Mr. Spielberg to make “Jaws,” giving him a budget of $3.5 million (about $17 million in today’s money). A problem-plagued shoot pushed the cost to more than twice as much.
But Mr. Sheinberg, developing a father-son relationship with Mr. Spielberg, continued to support the film, which went on to become the prototype for the wide-release summer blockbuster.
. . .
When he opened the first Universal theme park in Orlando, Fla., in 1990 — in a race against Disney, which was building a movie-themed park that is now called Disney’s Hollywood Studios — Mr. Sheinberg and his team incorporated one of Disney’s mouse-ear hats into the “Jaws” ride.
The ears bobbed in the bloody water.

For the full obituary, see:

Brooks Barnes. “Sidney Sheinberg, 84, Dies; Universal Studios Leader Who Discovered Spielberg.” The New York Times (Saturday, March 9, 2019): B13.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the obituary has the date March 8, 2019, and has the title “Sidney Sheinberg, a Force Behind Universal and Spielberg, Is Dead at 84.” The online version says that the page number of the New York edition was D7. I cite the page number in my National edition.)

The biography of Wasserman, mentioned above, is:
McDougal, Dennis. The Last Mogul: Lew Wasserman, MCA, and the Hidden History of Hollywood. revised ed. Boston, MA: Da Capo Press, 2001.