Category: Entrepreneurship

Trump’s Judges Constrain the Administrative State

(p. A1) WASHINGTON — It has been practically a given that anyone nominated for a federal judgeship by a Republican president had to pass an unspoken litmus test — usually on abortion but often on any number of divisive social issues.
The Trump administration has a new litmus test: reining in what conservatives call “the administrative state.”
With surprising frankness, the White House has laid out a plan to fill the courts with judges devoted to a legal doctrine that challenges the broad power federal agencies have to interpret laws and enforce regulations, often without being subject to judicial oversight. Those not on board with this agenda, the White House has said, are unlikely to be nominated by President Trump.
. . .
(p. A13) That the concept of “the administrative state” has become so central to politics today shows how successful the Trump administration has been in elevating to the mainstream ideas that once thrived mainly on the edges of conservative and libertarian thought.
A year ago it was a term known mostly among academics to describe the vast array of federal departments and the unelected functionaries who run them. It entered the mainstream political lexicon last year after the president’s former chief strategist, Stephen K. Bannon, pledged a “deconstruction of the administrative state” under Mr. Trump.
. . .
But this thinking has been advanced by many libertarian-minded conservatives who have long doubted whether the founders envisioned the creation of many New Deal and Great Society programs and the abundance of regulations that flowed from them.
“A lot of this, if you unpack it, I think it will get back to fundamental fairness,” said Mark Holden, general counsel for Koch Industries, which is led by Charles G. and David H. Koch, two of the biggest financial backers of the effort to elect office holders committed to deregulation and free-market enterprise.
The Trump judicial selection process, Mr. Holden added, was ultimately focused on “the size and scope of government and scaling it back, to the extent that it’s counterproductive and contrary to due process.”

For the full story, see:
Jeremy W. Peters. “New Litmus Test for Trump’s Court Picks: Taming the Bureaucracy.” The New York Times (Wednesday, March 28, 2018): A1 & A13.
(Note: ellipses added.)
(Note: the online version of the story has the date March 26, 2018, and has the title “Trump’s New Judicial Litmus Test: Shrinking ‘the Administrative State’.”)

We Underestimate How Entrepreneurial the Americans Were in the 1800s

(p. C6) Jim DeFelice’s “West Like Lightning,” a history of the Pony Express, begins with an anxious young rider waiting to take the news to California that Abraham Lincoln had been elected president. The delivery service lasted only about 18 months, but its revolutionary speed left an indelible mark on the country. Many, including Mark Twain, marveled at riders’ courage and the spectacle of their switching horses every 10 miles or so for a fresh burst of speed.
. . .
In what way is the book you wrote different from the book you set out to write?
Historians, God bless them, they do a lot of debunking of legends. They can sometimes come off as schoolmarms. The reality is, those legends are fun. They’re the exciting part. I separate fact and fiction, but I love those stories — and underneath them, there’s a much deeper truth. There’s a reason we value these 19- and 20-year-old kids pushing themselves against the elements.
I knew there would be some debunking involved. What I didn’t know was how true a lot of those stories turned out to be. If I were a Pony Express rider, I’d be bragging about how fast I made it. These guys didn’t brag about that — they bragged about how far they went. They were bragging about endurance and dealing with the elements. That impressed me, the resilience.
I also think sometimes we underestimate — and I’m guilty of this — just how entrepreneurial and into technology people were in the past. We think we’re cool because we can fly somewhere and be there tomorrow. But for these guys, 10 days was huge. If you gave them something in downtown New York, it would be in San Francisco two weeks later. At the time, that would be like going from dial-up to the fastest speeds we have today.

For the full interview, see:
John Williams, interviewer, ” Making Good Time and Even Better Tales.” The New York Times (Monday, May 21, 2018): C6.
(Note: ellipses added.)
(Note: the online version of the interview has the date May 20, 2018, and has the title “Tell Us 5 Things About Your Book: Making Good Time With the Pony Express.” The first paragraph and the bold question are John Williams. The paragraphs following the bold question, are Jim DeFelice’s answer.)

The book discussed in the interview quoted above, is:
DeFelice, Jim. West Like Lightning: The Brief, Legendary Ride of the Pony Express. New York: William Morrow, 2018.

Joe Biden Identified Theranos as “the Laboratory of the Future”

(p. C1) Theranos Inc.’s 15-year quest to revolutionize the blood-testing industry met with the latest in a series of crippling blows in March when the Securities and Exchange Commission charged the Silicon Valley diagnostics firm with conducting an “elaborate, years-long fraud.” The SEC accused the firm of deceiving investors into believing that its portable device could perform a broad range of laboratory tests on drops of blood pricked from a finger, when in fact it was doing most of its tests on commercial analyzers made by others.
Much of the attention has focused on Theranos founder Elizabeth Holmes. But another character played a central role behind the scenes in the alleged fraud: Ms. Holmes’s boyfriend, Ramesh “Sunny” Balwani, according to more than three dozen former Theranos employees who interacted with Mr. Balwani extensively over a number of years. Mr. Balwani, who met Ms. Holmes when she was a teenager, jointly ran the company with her for seven years as president and chief operating officer and enforced a corporate culture of secrecy and fear until his departure in the spring of 2016, the former employees say.
. . .
(p. C2) By the summer of 2013, the Theranos machine had gone through three iterations. The first, a microfluidic device, had been abandoned in 2007. The second, a converted glue-dispensing robot called the Edison, had been shelved in 2010. The third, which Ms. Holmes had christened the miniLab, was supposed to be the one that finally turned her vision into reality. But while she and Mr. Balwani were telling Theranos’s retail partner, Walgreens, that the miniLab could perform the full range of lab tests on tiny finger-stick samples, the truth was that it remained a work in progress, according to the SEC. The list of its problems was lengthy.
. . .
Though the miniLab remained a malfunctioning prototype, Ms. Holmes was intent on launching Theranos’s fingerstick tests in Walgreens stores by September 2013. So she and Mr. Balwani dusted off the Edison and launched with that, the SEC says. But the Edison could handle just one class of blood tests; to perform the dozens of others they had promised Walgreens their technology could handle, they needed a workaround. The solution was to secretly modify third-party commercial machines to adapt them to small blood samples.
. . .
In July 2015, Ms. Holmes invited Vice President Joe Biden to come visit Theranos’s facility in Newark, Calif. It was an audacious move given that the company’s lab had been operating without a real director since the previous December.
. . .
Ms. Holmes and Mr. Balwani wanted to impress Vice President Biden with a vision of a cutting-edge, automated laboratory. Instead of showing him the actual lab with its commercial analyzers, they created a fake one, according to former employees who worked in Newark. They made the microbiology team vacate a room it occupied, had it repainted, and lined its walls with rows of miniLabs stacked up on metal shelves.
Ms. Holmes took Mr. Biden on a tour of the facility and showed him the fake automated lab. In a discussion with a half-dozen industry executives right afterward, Mr. Biden called what he had just seen “the laboratory of the future.” Through a spokeswoman, Mr. Biden declined to comment.

For the full essay, see:
John Carreyrou, “Partners in Blood.” The Wall Street Journal (Saturday, May 19, 2018): C1-C2.
(Note: ellipses added.)
(Note: the online version of the essay has the date May 18, 2018, and has the title “Theranos Inc.’s Partners in Blood.”)

Carreyrou’s essay is derived from his book:
Carreyrou, John. Bad Blood: Secrets and Lies in a Silicon Valley Startup. New York: Alfred A. Knopf, 2018.

“The Future Is Rich in Opportunity”

(p. A13) Ken Langone, 82, investor, philanthropist and founder of Home Depot, has written an autobiography that actually conveys the excitement of business–of starting an enterprise that creates a job that creates a family, of the joy of the deal and the place of imagination in the making of a career. Its hokey and ebullient name is “I Love Capitalism” which I think makes his stand clear.
. . .
Can capitalism win the future? “Yes, but we have to be more emphatic and forthright about what it is and its benefits. A rising tide does lift boats.”
Home Depot has changed lives. “We have 400,000 people who work there, and we’ve never once paid anybody minimum wage.” Three thousand employees “came to work for us fresh out of high school, didn’t go to college, pushing carts in the parking lot. All 3,000 are multimillionaires. Salary, stock, a stock savings plan.”
Mr. Langone came up in the middle of the 20th century–the golden age of American capitalism. Does his example still pertain to the 21st? Yes, he says emphatically: “The future is rich in opportunity.” To see it, look for it. For instance: “Look, people are living longer. They’re living more vibrant lives, more productive. This is an opportunity to accommodate the needs of older people. Better products, cheaper prices–help them get what they need!”
Mr. Langone grew up in blue-collar Long Island, N.Y. Neither parent finished high school. His father was a plumber who was poor at business; his mother worked in the school cafeteria. They lived paycheck to paycheck. He was a lousy student but he had one big thing going for him: “I loved making money.” He got his first job at 11 and often worked two at a time–paperboy, butcher-shop boy, caddie, lawn work, Bohack grocery clerk. He didn’t mind: “I wanted to be rich.”

For the full commentary, see:
Peggy Noonan. “DECLARATIONS; Wisdom of a Non-Idiot Billionaire.” The Wall Street Journal (Saturday, May 12, 2018): A13.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date May 10, 2018.)

The book mentioned in the commentary, is:
Langone, Ken. I Love Capitalism!: An American Story. New York: Portfolio, 2018.

Blockchain May Enable “Consent-Based Ad Models”

(p. A13) Internet advertising started simply, but over time organically evolved a mess of middle players and congealed into a surveillance economy. Today, between end users, publishers and advertisers stand a throng of agencies, trading desks, demand side platforms, network exchanges and yield optimizers. Intermediaries track users in an attempt to improve revenue.
It’s an inevitable consequence of such a system that users end up treated as a resource to be exploited. When you visit the celebrity website TMZ, for instance, you face as many as 124 trackers, according to a Crownpeak test. Your data is stored and profiled to retarget promotions that shadow you around the Internet. You become the product. Some claim your data is not “sold,” but access is certainly rented out.
. . .
For a solution, look to blockchain technology. More than a word peppering earnings calls, it can deliver the change brands, publishers and users need. Put simply, it’s an immutable database that records transactions and produces trustworthy data.
In advertising, blockchain’s reliable data can radically shrink the ad-tech blob and provide the foundation for consent-based ad models. Improved blockchain reporting and transparency would obviate much of the need for companies focused on measurement, verification and even some data suppliers. Companies like Brave are using blockchain to build software that allows for more-direct relationships between advertisers and publishers, as it was before the blob. (Earlier this month Brave announced a partnership with Dow Jones Media Group, a division of this newspaper’s parent company.) Anonymous data on the blockchain or on a device can even replace the need for the mining of individual user data. Users should be compensated for their attention and seen as customers again.
The internet need not be characterized by predation and parasitism. It can once again be a place of infinite possibility. Innovation got us into this situation; it can get us out.

For the full commentary, see:
Brendan Eichand and Brian Brown. “The Internet’s ‘Original Sin’ Endangers More Than Privacy.” The Wall Street Journal (Saturday, April 28, 2018): A13.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date April 27, 2018.)

Jeff Bezos Is “Exploring Strange New Worlds”

(p. A15) Jeff Bezos is the world’s richest person. Amazon is on a tear–sales grew 43% last quarter–and may soon pass Apple as the world’s most valuable company. Amazon has ruptured retail, floated in the cloud, and even made superhero TV shows like “The Tick.” But what makes Mr. Bezos tick?
. . .
. . . , Mr. Bezos is now channeling pioneers, be they Columbus or James T. Kirk, exploring strange new worlds. His strategy is that he doesn’t let business models get in his way while exploring on the edge.
. . .
I’m convinced the real secret to Mr. Bezos’s success is that he hates PowerPoint slides. He insists instead on six-page narratives at meetings. Stories codify exploration. Here’s one: Put Alexa in every doctor’s office to listen and correctly fill in medical records automatically from the transcripts, freeing doctors to actually care for patients! Business model to come (but pretty obvious).

For the full commentary, see:
Andy Kessler. ” INSIDE VIEW; Columbus Discovers the Amazon.” The Wall Street Journal (Monday, May 7, 2018): A15.
(Note: ellipses added.)
(Note: the online version of the commentary has the date May 6, 2018.)

China’s “Double Whammy for Prospective Entrepreneurs”

(p. B12) China’s past attempts to stoke indigenous innovation have a checkered history. A flood of cheap capital and high, state-set solar power rates in the mid-2000s secured China’s place as the world’s number one solar cell manufacturer. But it also led to enormous overcapacity, which sank prices and pushed debt burdens higher, making investment in real R&D more difficult. For investors, China’s solar champions have been a losing proposition–American depositary receipts of top firms such as JinkoSolar are worth less than half of their peak in 2010. Robotics, a key element of Beijing’s “Made in China 2025” plan to dominate high-tech manufacturing, is exhibiting similar tendencies.
The state-centric nature of China’s financial system–and its weak intellectual property protection–represents a double whammy for prospective entrepreneurs. Small private-sector firms often only have access to capital through expensive shadow banking channels, and face the risk that some better connected, state-backed firm will make off with their designs–with very little recourse.

For the full story, see:
Nour Malas and Paul Overberg. “‘Chinese Innovation Won’t Come Easily Without U.S. Tech.” The Wall Street Journal (Tuesday, March 23, 2018): B12.
(Note: the online version of the story has the date March 22, 2018, and has the title “Can China’s Red Capital Really Innovate?”)

The Diversity That Matters Most Is Diversity of Thought

(p. A15) If you want anyone to pay attention to you in meetings, don’t ever preface your opposition to a proposal by saying: “Just to play devil’s advocate . . .” If you disagree with something, just say it and hold your ground until you’re convinced otherwise. There are many such useful ideas in Charlan Nemeth’s “In Defense of Troublemakers,” her study of dissent in life and the workplace. But if this one alone takes hold, it could transform millions of meetings, doing away with all those mushy, consensus-driven hours wasted by people too scared of disagreement or power to speak truth to gibberish. Not only would better decisions get made, but the process of making them would vastly improve.
. . .
In the latter part of her book, Ms. Nemeth explores in more detail how dissent improves the way in which groups think. She is ruthless toward conventional “brainstorming,” which tends toward the uncritical accumulation of bad ideas rather than the argumentative heat that forges better ideas. It’s only through criticism that concepts receive proper scrutiny. “Repeatedly we find that dissent has value, even when it is wrong, even when we don’t like the dissenter, and even when we are not convinced of his position,” she writes. “Dissent . . . enables us to think more independently” and “also stimulates thought that is open, divergent, flexible, and original.”
. . .
Ms. Nemeth’s punchy book also has an invaluable section on diversity in groups. All too often, she writes, in pursuit of diversity we focus on everything but the way people think. We look at a group’s gender, color or experience, and once the palette looks right declare it diverse. But you can have all of that and still have a group that thinks the same and reinforces a wrong-headed consensus.
By contrast, you can have a group that is demographically homogeneous yet violently heterogeneous in the way it thinks. The kind of diversity that leads to well-informed decisions is not necessarily the kind of diversity that gives the appearance of social justice. That will be a hard message for many organizations to swallow. But as with many of the arguments that Ms. Nemeth makes in her book, it is one that she gamely delivers and that all managers interested in the quality and integrity of their decision-making would do well to heed.

For the full review, see:
Philip Delves Broughton. “BOOKSHELF; Rocking The Boat.” The Wall Street Journal (Thursday, May 9, 2018): A15.
(Note: ellipsis internal to a paragraph, in original; ellipses between paragraphs, added.)
(Note: the online version of the review has the date May 10, 2018, and has the title “BOOKSHELF; ‘In Defense of Troublemakers’ Review: Rocking the Boat.”)

The book under review, is:
Nemeth, Charlan. In Defense of Troublemakers: The Power of Dissent in Life and Business. New York: Basic Books, 2018.

Spreadsheets Created More and Better Jobs Than They Destroyed

BookkeepingVersusAnalystJobsGraph2018-05-19.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A2) Whether truck drivers or marketing executives, all workers consider intelligence intrinsic to how they do their jobs. No wonder the rise of “artificial intelligence” is uniquely terrifying. From Stephen Hawking to Elon Musk, we are told almost daily our jobs will soon be done more cheaply by AI.
. . .
Until the 1980s, manipulating large quantities of data–for example, calculating how higher interest rates changed a company’s future profits–was time-consuming and error-prone. Then along came personal computers and spreadsheet programs VisiCalc in 1979, Lotus 1-2-3 in 1983 and Microsoft Excel a few years later. Suddenly, you could change one number–say, this year’s rent–and instantly recalculate costs, revenues and profits years into the future. This simplified routine bookkeeping while making many tasks possible, such as modeling alternate scenarios.
. . .
The new technology pummeled demand for bookkeepers: their ranks have shrunk 44% from two million in 1985, according to the Bureau of Labor Statistics. Yet people who could run numbers on the new software became hot commodities. Since 1985, the ranks of accountants and auditors have grown 41%, to 1.8 million, while financial managers and management analysts, which the BLS didn’t even track before 1983, have nearly quadrupled to 2.1 million.

For the full commentary, see:
Greg Ip. “CAPITAL ACCOUNT; We Survived Spreadsheets; We’ll Survive AI.” The Wall Street Journal (Thursday, August 3, 2017): A2.
(Note: ellipses added.)
(Note: the online version of the commentary was updated Aug. 2, 2017, and has the title “CAPITAL ACCOUNT; We Survived Spreadsheets, and We’ll Survive AI.”)

Vending Machines for Cars in China

(p. B2) GUANGZHOU, China– Eric Zhou is interested in buying a Ford Kuga sport-utility vehicle. So last week, he picked up the car for a three-day test drive from a vending machine.
Mr. Zhou never visited a dealership or spoke to a salesperson. He booked the test drive online, then showed up at a service center where employees can identify would-be buyers using facial-recognition technology. His SUV was then delivered from the eight-story “vending machine”–essentially an automated parking garage.
“This is so much more efficient and convenient than traditional dealerships,” said Mr. Zhou, 38 years old.
It’s the first of several such car-vending centers that Chinese e-commerce giant Alibaba Group Holding Ltd. plans to open across China this year–part of the company’s latest effort to translate its success in online retailing to the physical shopping world.

For the full story, see:
Liza Lin. “Car-Vending Machine Is Rolled Out.” The Wall Street Journal (Friday, April 6, 2018): B2.
(Note: the online version of the story has the date April 5, 2018, and has the title “To Buy a Car in China, Hit the Vending Machine.”)

Mark Twain’s “Desperately Striving Entrepreneurship”

(p. A13) For a novelist with such a tart view of human character, Twain’s gullibility is hard to fathom. No matter his dismal track record, he always appraised the next opportunity as a sure thing. The two fields he knew about, books and newspapers, caused him more grief than any other. He had success with Charles L. Webster & Co., the publisher he founded, which issued the memoirs of Ulysses S. Grant. But after that runaway hit, he published a string of lemons.
Even worse was his decade-long investment in a typesetting machine, the Paige Compositor, which, Twain noted, would be faster than a human typesetter and “does not get drunk” and “does not join the Printer’s Union.” But its inventor proved to be a hopeless perfectionist, his machine with its thousands of parts a tribute to complexity gone mad. Ultimately, Twain invested $175,000–an immense sum. With the mogul Rogers guiding him, the author transferred his assets to his wife and put his publishing company into bankruptcy. Only by embarking on a world-wide speaking tour was he able to pay his debts.
Mr. Crawford doesn’t seem curious about whether Twain’s financial capers informed his writing. He has nothing notable to say, for instance, on “The Prince and the Pauper,” a wry commentary on the sort of class envy to which Twain himself was susceptible. Nor does Mr. Crawford attempt to reconcile the conventional view of Twain as a folksy raconteur with the evidence of his desperately striving entrepreneurship.

For the full review, see:
Roger Lowenstein. “BOOKSHELF; A Pudding Head and His Money; Given the novelist’s tart view of human character, the financial misadventures of Mark Twain are hard to fathom.” The Wall Street Journal (Friday, October 27, 2017): A13.
(Note: the online version of the review has the date Oct. 26, 2017, and has the title “BOOKSHELF; Review: A Pudding Head and His Money; Given the novelist’s tart view of human character, the financial misadventures of Mark Twain are hard to fathom.”)

The book under review, is:
Crawford, Alan Pell. How Not to Get Rich: The Financial Misadventures of Mark Twain. New York: Houghton Mifflin Harcourt, 2017.