Category: Labor Economics

Is Jeff Bezos Still a “Project Entrepreneur”?

In my Openness to Creative Destruction: Sustaining Innovative Dynamism, I suggest that different innovative entrepreneurs have different motives. Some mainly want money for its own sake, some mainly want fame, some mainly want to win the competition. Then there are those who mainly want to bring their project into the world. These are the project entrepreneurs, who often sacrifice for their project, forgoing conspicuous consumption in order to “make a ding in the universe.” (The phrase is due to Steve Jobs.) In my book I give Walt Disney as one example, and Jeff Bezos as another. Was I wrong? Or has Bezos changed? Or is there some other way to account for what looks like Bezos’s conspicuous consumption, as described below?

(p. B4) The national housing market has cooled, but in Los Angeles the ultrarich are still shattering price records. An heiress to the Formula One racing empire sold her home for $119.75 million last July. In December, Lachlan Murdoch paid $150 million for a home in Bel Air.

The latest buyer at the top: Jeff Bezos, the Amazon chief and world’s richest person.

Setting a new high for a home sold in California, Mr. Bezos is paying $165 million for a Beverly Hills estate owned by David Geffen, the media mogul and co-founder of DreamWorks, according to two people familiar with the purchase.

That wasn’t all. In a separate transaction, Bezos Expeditions, which oversees The Washington Post and Mr. Bezos’ charitable foundation, is buying 120 undeveloped acres in Beverly Hills for $90 million, the two people said.

For the full story, see:

Candace Jackson. “Bezos Is Setting Record By Paying $165 Million To Buy Geffen’s Estate.” The New York Times (Saturday, February 15, 2020): B4.

(Note: the online version of the story has the date Feb. 14, 2020, and has the title “Jeff Bezos Buying $165 Million Estate, a California Record.”)

My book is:

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

Progressive Opposes Job-Destroying Minimum Wage Increase

(p. A15) Seattle

This city’s minimum wage is rising to $16.39 an hour on Jan. 1. Instead of receiving a bigger paycheck, I’m left without any pay at all due to the policy change. That’s because the restaurant where I’ve worked for six years is closing as a consequence of the city’s harmful minimum-wage experiment.

I work for Tom Douglas, one of the best-known restaurateurs in Seattle. Mr. Douglas is in many ways responsible for the city’s reputation as a foodie paradise, and he recently celebrated his 30th anniversary in business. He’s a great boss, and his employees tend to stay at the company for a long time.

. . .

So now, after six years working at Mr. Douglas’s restaurant Tanakasan, I need to find a new work home. My first thought was to go back to Sitka & Spruce, a restaurant where I had once worked.   . . .

As it turns out, I can’t return to Sitka & Spruce. Its James Beard Award-winning owner, Matt Dillon, is closing Sitka after 14 years, defeated by the one-two punch of rising rents and labor costs.

As a worker, you’re attracted to restaurateurs like Messrs. Douglas and Dillon because they offer job security and you know you’ll make money. That’s no longer the case here with a high minimum wage that ignores tip income.

. . .

I’m proudly progressive in my politics, but my experience shows that progressives should reconsider minimum-wage laws that hurt the very workers they’re trying to protect.

For the full story, see:

Simone Barron. “Seattle’s Wage Mandate Kills Restaurants.” The Wall Street Journal (Friday, December 13, 2019): A15.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 12, 2019, and has the same title as the print version.)

Expert Says A.I. More Likely to Complement Than Replace White-Collar Workers

(p. B3) . . . , it makes sense that A.I. — which is about planning, perceiving and so on — would hit white-collar roles.

Still, workers needn’t panic. Carl Benedikt Frey, an economist at Oxford University who specializes in technology and employment, said A.I. was “more likely to complement people in those jobs rather than replacing them.” And Mr. Muro points out that “these workers are frequently the ones that companies have already invested in” and are likely to have been consulted about their futures.

For the full story, see:

Jamie Condliffe. “White-Collar Jobs Aren’t Safe Either.” The New York Times (Monday, November 25, 2019): B3.

(Note: ellipsis added.)

(Note: the online version of the story was updated Nov. 22, 2019, and has the title “The Week in Tech: A.I.’s Threat to White-Collar Jobs.”)

For Sophisticated Tasks, Robots Cost Much More Than Humans

(p. A6) . . . , however hospitable Japanese businesses have been to robots, they have learned that robots able to perform somewhat sophisticated tasks cost much more than human workers.

So at the factory in Asahikawa, where about 60 percent of the work is automated, many tasks still require the human touch. Workers peel pumpkins, for example, because some skin enhances the flavor of stew. A robot can’t determine just how much skin to shuck off.

Other efforts to use robots or automation have hit snags, in programs ranging from self-driving buses to package-delivering drones or robots that comfort nursing home residents.

A hotel staffed by androids in southern Japan ended up laying off some of its robots after customers complained that they were not as good at hospitality as people.

During a trial of self-driving buses in Oita City, also in southern Japan, one bus crashed into a curb, and officials realized that autonomous vehicles were not quite ready to cope with situations like traffic jams, jaywalkers or cars running red lights.

For the full story, see:

Motoko Rich. “Japan Loves Robots, but Not for Preparing Fries or Driving Buses.” The New York Times (Wednesday, January 1, 2020): A6.

(Note: ellipsis added.)

(Note: the online version of the story was updated Jan. 4, 2019, and has the title “Japan Loves Robots, but Getting Them to Do Human Work Isn’t Easy.”)

A.I. Makes Surgeons More Efficient, but Does Not Replace Them

(p. B6) Brain surgeons are bringing artificial intelligence and new imaging techniques into the operating room, to diagnose tumors as accurately as pathologists, and much faster, according to a report in the journal Nature Medicine.

The new approach streamlines the standard practice of analyzing tissue samples while the patient is still on the operating table, to help guide brain surgery and later treatment.

The traditional method, which requires sending the tissue to a lab, freezing and staining it, then peering at it through a microscope, takes 20 to 30 minutes or longer. The new technique takes two and a half minutes. Like the old method, it requires that tissue be removed from the brain, but uses lasers to create images and a computer to read them in the operating room.

. . .

Some types of brain tumor are so rare that there is not enough data on them to train an A.I. system, so the system in the study was designed to essentially toss out samples it could not identify.

Over all, the system did make mistakes: It misdiagnosed 14 cases that the humans got right. And the doctors missed 17 cases that the computer got right.

“I couldn’t have hoped for a better result,” Dr. Orringer said. “It’s exciting. It says the combination of an algorithm plus human intuition improves our ability to predict diagnosis.”

In his own practice, Dr. Orringer said that he often used the system to determine quickly whether he had removed as much of a brain tumor as possible, or should keep cutting.

“If I have six questions during an operation, I can get them answered without having six times 30 or 40 minutes,” he said. “I didn’t do this before. It’s a lot of burden to the patient to be under anesthesia for that long.”

Dr. Bederson said that he had participated in a pilot study of a system similar to the one in the study and wanted to use it, and that his hospital was considering acquiring the technology.

“It won’t change brain surgery,” he said, “but it’s going to add a significant new tool, more significant than they’ve stated.”

For the full story, see:

Denise Grady. “Speedy and Unerring, A.I. Comes to the Operating Room.” The New York Times (Tuesday, January 7, 2020): B6.

(Note: ellipsis added.)

(Note: the online version of the story has the date Jan. 6, 2020, and has the title “A.I. Comes to the Operating Room.”)

Jobs Return to “Creative Destruction Parts of the Country”

(p. B5) “If you look, there are a heck of a lot of successful manufacturing parts of the country right now,” Kevin Hassett, the departing chairman of the White House Council of Economic Advisers, said in an interview. “But look at where they’re being created.”

Mr. Hassett drew a distinction between “creative destruction” parts of the country, where the Great Recession wiped out jobs but others sprung up to replace them, and “destruction-destruction” parts, where jobs have been slow to return. Recent factory job growth, he said, was “not necessarily disproportionately in the destruction-destruction places.”

For the full story, see:

Jim Tankersley. “Growth in Factory Jobs Skips Traditional Hubs.” The New York Times (Friday, June 14, 2019): B1 & B5.

(Note: the online version of the story has the date June 13, 2019, and has the title “In the Race for Factory Jobs Under Trump, the Midwest Isn’t Winning.”)

Japan Records Fewest Births Since 1874

(p. A6) Japan has 512,000 fewer people this year than last, according to an estimate released on Tuesday by the country’s welfare ministry. That’s a drop of more than the entire population of the city of Atlanta.

The numbers are the latest sign of Japan’s increasing demographic challenges.

Births in the country — which are expected to drop below 900,000 this year — are at their lowest figure since 1874, when the population was about 70 percent smaller than its current 124 million.

The total number of deaths, on the other hand, is increasing. This year, the figure is expected to reach almost 1.4 million, the highest level since the end of World War II, a rise driven by the country’s increasingly elderly population.

For the full story, see:

Ben Dooley. “Japan Shrank by 500,000 People in 2019, as Births Hit Lowest Point Since 1874.” The New York Times (Wednesday, December 25, 2019): A6.

(Note: the online version of the story has the date Dec. 24, 2019, and has the title “Japan Shrinks by 500,000 People as Births Fall to Lowest Number Since 1874.”)

French Labor Law Reduces Firm Innovation

I heard an intriguing paper at the January 2020 AEA meetings in San Diego. It shows that a French labor market regulation discourages firm innovation. The abstract of the working paper version of the paper appears below.

We study the impact of labor regulation on innovation. We exploit the threshold in labor market regulations in France which means that when a firm reaches 50 employees, costs increase substantially. We show theoretically and empirically that the prospect of these regulatory costs discourages firms just below the threshold from innovating (as measured by patent counts). This relationship emerges when looking nonparametrically at patent density around the regulatory threshold and also in a parametric exercise where we examine the heterogeneous response of firms to exogenous market size shocks (from export market growth). On average, firms innovate more when they experience a positive market size shock, but this relationship significantly weakens when a firm is just below the regulatory threshold. Using information on citations we also show suggestive evidence (consistent with our model) that regulation deters radical innovation much less than incremental innovation. This suggests that with size-dependent regulation, companies innovate less, but if they do try to innovate, they “swing for the fence.”

The source of the abstract quoted above, is:

Aghion, Philippe, Antonin Bergeaud, and John Van Reenen. “The Impact of Regulation on Innovation.” 2019.

Bay Area Californians Moving to Where Living Costs Less

(p. A1) SAN FRANCISCO — Christine Johnson, a public-finance consultant with an engineering degree, was running for a seat on the San Francisco Board of Supervisors.

She crisscrossed her downtown district talking about her plans to stimulate housing construction, improve public transit and deal with the litter of “needles and poop” that have become a common sight on the city’s sidewalks.

Today, a year after losing the race, Ms. Johnson, who had been in the Bay Area since 2004, lives in Denver with her husband and 4-year-old son. In a recent interview, she spoke for millions of Californians past and present when she described the cloud that high rent and child-care costs had cast over her family’s savings and future.

“I fully intended San Francisco to be my home and wanted to make the neighborhoods better,” she said. “But after the election we started tallying up what life could look like elsewhere, and we didn’t see friends in other parts of the country experiencing challenges the same way.”

. . .

(p. A12) Greg Biggs is adding more machines and moving jobs to cheaper locations. Mr. Biggs is the chief executive of Vander-Bend Manufacturing, a company in San Jose that makes metal products including surgical components and racks where data centers store computer servers. Vander-Bend has doubled its head count over the past five years, to about 900 employees, and pays $17 to $40 an hour for skilled technicians who need training but not a college degree.

This is precisely the sort of middle-income job needed in the Bay Area, which like many urban areas is bifurcating into an economy of high-wage knowledge jobs and low-wage service jobs.

The problem is he can’t find enough workers. The unemployment rate in San Jose is around 2 percent, and many of Vander-Bend’s employees already commute two or more hours to work. To compensate, Mr. Biggs has bought several van-size robot arms that pull metal panels from a pile then stamp them flush, bend their edges and assemble them into racks. He has opened a second location 75 miles away in Stockton, where labor and housing costs are a lot lower.

This is in most ways a success story. Vander-Bend is raising wages and training workers. The machines aren’t replacing jobs but instead make them more efficient, and the company is bringing higher-wage positions to a region that needs more of them. But for workers, even substantial income gains are being offset by rising costs.

For the full story, see:

Conor Dougherty. “True, California Is Booming. Also True: California’s a Mess.” The New York Times (Monday, December 30, 2019): A1 & A12.

(Note: ellipsis added.)

(Note: the online version of the story has the date December 29, 2019, and has the title “California Is Booming. Why Are So Many Californians Unhappy?”)

At-Home Workers Are Leaving Costly Largest Cities

(p. A1) Kelly Swift grew tired of the Los Angeles area a few years ago so she decided to leave—and take her job with her.

Ms. Swift kept her role in health-care information-technology consulting, and her California salary, when she and her family settled in a suburb of Boise, Idaho. Her employer didn’t mind that she started working from home.

Ms. Swift joined a group of workers fueling a renaissance in U.S. cities that lie outside the major job hubs. People who do their jobs from home, freelance or constantly travel for work are migrating away from expensive urban centers such as Los Angeles and San Francisco toward cheaper cities including Boise; Denver; Austin, Texas; and Portland, Ore., according to economists and local residents.

For the full story, see:

Ben Eisen. “Workers Leave Largest Cities, Taking Their Jobs With Them.” The Wall Street Journal (Monday, Sept. 9, 2019): A1 & A4.

(Note: the online version of the story has the date September 7, 2019, and has the title “Workers Are Fleeing Big Cities for Smaller Ones—and Taking Their Jobs With Them.”)