Both Insourcing and Outsourcing Can Be Successful Strategies

(p. A13) n “Profit From the Source,” four Europe-based partners at Boston Consulting Group—Christian Schuh, Wolfgang Schnellbächer, Alenka Triplat and Daniel Weise—make the case for drastic change. Procurement, they assert, has been badly neglected: “When the boss offers someone a job in procurement, they know they’re on the fast track to nowhere.” Top executives, they claim, spend far too little time with suppliers, even though purchasing swallows more than half of the average company’s budget. “That’s a mismatch with potentially existential consequences,” they write. Instead, they insist, companies should put procurement at the center of corporate strategy.

. . .

Serving up familiar stories about the likes of Apple and Tesla, the authors write admiringly: “The world’s most successful companies . . . make virtually nothing themselves. They are, in effect, the consumer-facing, brand-owning centripetal force at the core of a business ecosystem.” But many companies have been moving in the opposite direction. In recent years, Facebook (now Meta) began designing chips for the servers in its data centers; Costco built a slaughterhouse to ensure its stores’ supply of chickens; and Cleveland-Cliffs bought steel mills to supply from its iron mines. Much of the business world seems to think that outsourcing has gone too far. Should the chief procurement officer help identify ways to bring parts of the supply chain back in house? The authors don’t say.

For the full review, see:

Marc Levinson. “BOOKSHELF; Consider The Supplier.” The Wall Street Journal (Saturday, July 29, 2022): A13.

(Note: ellipsis between paragraphs, added; ellipsis within paragraph, in original.)

(Note: the online version of the review has the date July 28, 2022, and has the title “BOOKSHELF; ‘Profit From the Source’ Review: Consider the Supplier.”)

The book under review is:

Schuh, Christian, Wolfgang Schnellbacher, Alenka Triplat, and Daniel Weise. Profit from the Source: Transforming Your Business by Putting Suppliers at the Core. Boston, MA: Harvard Business Review Press, 2022.

Claremont Censors Professor for Quoting Mark Twain’s Huckleberry Finn

The courageous and decent hero of Mark Twain’s Huckleberry Finn is the black slave Jim. To censor this work because of its vocabulary, spectacularly misses Mark Twain’s point. How many of those who censor Huckleberry Finn have actually read Huckleberry Finn?

(p. A15) Claremont, Calif.

I teach at Claremont McKenna College, the No. 1-ranked liberal-arts college for free speech by the Foundation for Individual Rights and Expression. FIRE may need to consider its ratings.

On Oct. 4, 2021, my class discussed Plato’s “Republic” and his views about censorship. A student objected that Plato was mistaken about its necessity. Here in the U.S., she said, there is none. Someone brought up “Huckleberry Finn.” She replied, correctly, that removing a book from curriculums doesn’t constitute censorship. I pointed out that the case was more complicated. The book had also been removed from libraries and published in expurgated editions.

An international student asked me why. I told her, quoting Mark Twain’s precise language, which meant speaking the N-word.

. . .

. . ., the dean enlisted the help of both the department chairman and a co-director of the college’s Open Academy program—a resource center that describes its purpose as “to counter the forces that are pulling us apart with educational strategies that bring us together”—to ban me from teaching any required courses in the future, seemingly into perpetuity.

. . .

The administration’s behavior toward me and two similar cases in the literature department seem to show that CMC sets the bounds of faculty speech arbitrarily. This spring, a literature adjunct read aloud and asked students to discuss a passage from “The Color Purple” that contained the N-word. They complained. Ms. Antecol summoned the adjunct, who apologized and agreed to undergo recommended counseling. The professor submitted to re-education and training in critical race theory. Despite all this—and a glowing recommendation by the faculty member who observed her course—the class the adjunct was set to teach at CMC in the fall was abruptly canceled.

When a tenured literature professor, who is also well-connected to the board of trustees and the media, committed a similar offense, he received no penalty. Last fall the professor assigned Robert Lowell’s poem “For the Union Dead,” which contains the N-word. When he played in class a recording of Lowell reading the poem, a student exploded, excoriating both author and teacher as old white men. The associate vice president for diversity and inclusion informed the professor by telephone, not in writing, that he was in the clear because he hadn’t himself read the forbidden word aloud in class.

The effects of the administration’s actions are disastrous and lasting. Students, already fearful to speak their minds, become even more so when they see that certain peers can veto the content of courses and conduct of teachers arbitrarily.

. . .

My job as a teacher is to oppose ignorance wherever it manifests itself. If a dean promotes the work of Daniele da Volterra, Pope Paul IV’s painter of fig leaves, I have no choice but to stand for the original of Michelangelo. And so must I stand for the original works of Mark Twain and Frederick Douglass, exactly as written by their authors. They deserve that, as do my students.

For the full commentary see:

Christopher Nadon. “Censorship at a Top College for Free Speech.” The Wall Street Journal (Tuesday, Aug. 23, 2022): A15.

(Note: ellipses added.)

(Note: the online version of the commentary has the date August 22, 2022, and has the same title as the print version.)

A thrifty edition of Mark Twain’s humane masterpiece is:

Twain, Mark. Adventures of Huckleberry Finn. Mineola, NY: Dover Publications, Inc., 1994 [1885].

Maverick Rickover Was Dedicated to the Project of a Nuclear Powered Navy

Several years ago, a student in my entrepreneurship seminar asked if he could do his paper on Admiral Rickover. I am glad that I finally said “yes.”

(p. C9) . . ., in “Admiral Hyman Rickover: Engineer of Power,” Marc Wortman delivers a 17-gun salute to this short, profane spitfire who pulled a reluctant Navy into the atomic era.

. . .

Though physically courageous, Rickover, according to one of his commanding officers, showed “no outward signs of qualities of leadership.” In the late 1920s, he spent a year studying electrical engineering at Columbia University.

. . .

It can be difficult for landlubbers to grasp the significance of nuclear power to a navy. Freed from the shackles of fuel tenders, a nuclear-powered submarine can “slide into the depths and maintain top speeds for weeks or even months without need for recharging fuel, air, or battery,” Mr. Wortman notes. “Atomic-powered submarines represented a seafaring and naval warfare leap as fundamental as that from sail to steam.”

. . .

[Rickover’s] experience at Columbia imbued him with an unconventional attitude toward authority when he headed the Navy’s nuclear-propulsion group. At the Atomic Energy Commission’s Division of Naval Reactors, “he abolished rank and uniform,” Mr. Wortman writes. “ ‘There is no hierarchy in matters of the mind,’ Rickover said, and he insisted that all were ‘permitted to do as they think best and to go to anyone and anywhere for help. Each person is then limited only by his own ability.’ ”

But he also demanded accountability and was a Captain Bligh to the men he selected to run his reactors. Addressing one group of newly minted engineers, Rickover “jumped his then-seventy-seven-year-old body up on a tabletop, stomped with rage like an angry djinn, and screamed at the top of his lungs, ‘I understand genetics. If you make a mistake with my nuclear plant, it’s because your mother was a street whore who trawled for tricks with a mattress on her back!’ ” His Pattonesque benediction concluded: “On penalty of all you hold dearest, do not fail to live up to my standard of perfection.”

His maverick approach threw off sparks when it rubbed against military structure. “Navy and government officials bristled at Rickover’s rebellious nature, indifference to the chain of command, and frequent workarounds,” Mr. Wortman writes. “He was obstinate, egotistical, and abrasive, a specialized engineer indifferent to and sometimes actively in rebellion against the Navy’s chain of command, protocols, and culture. By pushing the Navy into technology frontiers, his nuclear-power program proved alien to existing thinking.” Passed over for promotion twice, the ill-tempered Rickover relied on supporters in Congress and the White House to move up to admiral and remain in uniform past retirement age.

For the full review, see:

Jonathan W. Jordan. “The Navy’s Atomic Generator.” The Wall Street Journal (Saturday, Feb. 12, 2022): C9.

(Note: ellipses, and bracketed name, added.)

(Note: the online version of the review has the date February 11, 2022, and has the title “‘Admiral Hyman Rickover’ Review: The Navy’s Atomic Generator.”)

The book under review is:

Wortman, Marc. Admiral Hyman Rickover: Engineer of Power. New Haven, CT: Yale University Press, 2022.

Union Blocks Automation That Would Make Ports More Resilient and Efficient

(p. B6) The companies that transport and handle the cargo say the automation is one solution to the congestion at ports, particularly the Los Angeles and Long Beach sites at the heart of America’s supply chain woes. The spare use of robotics at U.S. ports leaves them uncompetitive with big gateways in China and Europe that are packed with automation, they say.

Jeremy Nixon, chief executive of Singapore-based container line Ocean Network Express, told the TPM22 Conference produced by The Journal of Commerce in Long Beach earlier this year that European and Asian ports can clear backlogs quickly because they have automated cargo-handling equipment that operates around the clock. “Here, we just don’t have that resilience,” he said.

. . .

A port performance index created by the World Bank and S&P Global Market Intelligence ranked the Los Angeles and Long Beach port complex dead last in efficiency among the world’s ports last year, trailing Luanda, Angola, and the Port of Ngqura, South Africa. The world’s most efficient ports were in the Middle East and Asia.

For the full story, see:

Paul Berger. “Port Union Talks Center on Automation.” The Wall Street Journal (Friday, June 10, 2022): B6.

(Note: ellipsis added.)

(Note: the online version of the story has the date June 9, 2022, and has the title “A Deep Divide on Automation Hangs Over West Coast Port Labor Talks.”)

When HR Team-Building Is on Fire

(p. B2) Walking barefoot across hot coals, an ancient religious ritual popularized in recent years as a corporate team-building exercise, has once again bonded a group of co-workers through the shared suffering of burned feet.

In the latest case of the stunt going wrong, 25 employees of a Swiss ad agency were injured Tuesday [June 14, 2022] evening while walking over hot coals in Zurich, officials said. Ten ambulances, two emergency medical teams and police officers from multiple agencies were deployed to help, according to the Zurich police. Thirteen people were briefly hospitalized.

. . .

Mr. Willey, who taught for years at the University of Pittsburgh, once shared the world record for the longest distance walked on hot coals.

The promises made by corporate retreat organizers are frequently unjustified, Mr. Willey said.

“They’re telling you that it’s all in your mind, and this will give you powers that will continue,” he said. “It’s not in your mind. Anybody can do it. And I don’t think the confidence you get from it is necessarily going to last that long.”

Mr. Willey said that coals at 1,000 degrees are safe to walk on for 20 feet or more, adding that he walked on coals at that temperature for 495 feet without getting a blister.

On his website, he writes that at a brisk walk your bare foot comes into contact with coals for just around a second, which is not enough time for heat to be transmitted painfully from coals to the human flesh. Both the coals and skin have vastly lower thermal conductivity than, for instance, metal, he said.

But mistakes can lead to injuries. These include curling your toes and trapping a coal between them; walking on coals that are too hot; choosing the wrong type of wood, since some get hotter than others; and performing a fire walk on a beach, where your feet might sink into sand, Mr. Willey said.

For the full story, see:

Alex Traub. “Company’s Team-Building Exercise Involved Hot Coals. It Ended Badly.” The New York Times (Monday, June 20, 2022): B2.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the story has the date June 17, 2022, and has the title “Walking on Hot Coals: A Company Event Goes Wrong.”)

Workers With Little Choice in the Hours They Work Are Twice as Likely to Seek a New Job

(p. A11) . . . new survey data this week shows that full-time workers have more work-related stress and anxiety than their hybrid and remote counterparts.

Overall satisfaction with their workplace declined by 1.6 times as much for those working five days in the office compared with the other groups, according to the report from Future Forum, a consortium funded by Slack Technologies Inc., Boston Consulting Group and MillerKnoll.

The survey of more than 10,800 knowledge workers across about 20 industries including financial services, consumer goods and technology, comes as companies have been calling workers back to their desks at a higher rate than at any other time during the pandemic.

The discontent reflected in the data among those working in the office every day highlights risks that companies take by giving priority to face time and in-office culture over worker preferences for flexibility coming out of the pandemic, says Brian Elliott, executive leader of Future Forum.

“We were kind of shocked that it was as bad as it was,” he says. “It’s going to impact people’s tendency to resign.”

Of the workers surveyed, about 5,000 are based in the U.S. The share of those workers who are now back in the office five days a week rose from 29% in the last quarter of 2021 to 35% in the first quarter of this year.

Workers with little to no ability to set their own hours were more than 2½ times as likely to look for a new job in the coming year as those who have some say in when they work, according to the survey.

For the full story, see:

Katherine Bindley. “For Many, the Optimal Workweek Is One or Two Days in the Office’.” The Wall Street Journal (Monday, April 25, 2022): A11.

(Note: ellipsis added.)

(Note: the online version of the story was updated April 22, 2022, and has the title “What if the Optimal Workweek Is Two Days in the Office?”)

Executive Chose “Exciting” Entrepreneurship, and Failed

We read the stories of those who choose entrepreneurship and succeed. The stories of those who choose entrepreneurship and fail, are less often told. Those who fail do not always regret their choice, nor should they.

(p. A21) Alex Mandl was a leading contender for the chief executive job at AT&T Corp. in 1996 when he defected to head a wireless-telecommunications startup that became Teligent Inc.

. . .

Heading a startup, he said, was “the most exciting thing to do.”

Teligent had ambitious plans to undercut prices of traditional phone companies by setting up a microwave network that would beam voice and data to business users via rooftop antennas. But Teligent had technical problems, losses piled up and investors fled. Mr. Mandl resigned as chief executive in April 2001, shortly before the company filed for Chapter 11 bankruptcy.

For the full obituary, see:

James R. Hagerty. “Executive Risked Career on a Startup.” The Wall Street Journal (Saturday, April 2, 2022): A21.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date April 1, 2022, and has the title “Alex Mandl, Who Gave Up a Top AT&T Job to Lead a Startup, Has Died at Age 78.”)

Silicon Valley Pioneer at Age 16 Survived on 5 Cents of Carrots a Day

(p. A23) Jay Last, a physicist who helped create the silicon chips that power the world’s computers, and who was among the eight entrepreneurs whose company laid the technical, financial and cultural foundation for Silicon Valley, died on Nov. 11 [2021] in Los Angeles.

. . .

Ultimately, he agreed to join the Shockley Semiconductor Laboratory because it sat in the Northern California valley where he had spent a summer harvesting fruit after hitchhiking there from his home in Pennsylvania steel country.

But he and seven of his collaborators at the lab clashed with Dr. Shockley, who later became infamous for his theory that Black people were genetically inferior in intelligence to white people. They quickly left the lab to create their own transistor company. They later came to be called “the traitorous eight,” and their company, Fairchild Semiconductor, is now seen as ground zero for what became known as Silicon Valley.

. . .

With the blessing of his parents — and carrying a letter from the local police chief saying he was not running away from home — he hitchhiked to San Jose, Calif., which was then a small farming town. He had planned on making a little money picking fruit, but he arrived before the harvest began.

Until it did, he lived, as he often recalled in later years, on a nickel’s worth of carrots a day. Whenever he faced a difficult situation, he said in an interview for the Chemical Heritage Foundation (now the Science History Institute) in 2004, he told himself, “I got through that when I was 16, and this is not that bad a problem.”

. . .

Using materials like silicon and germanium, Dr. Shockley and two other scientists had shown how to build the tiny transistors that would one day be used to store and move information in the form of an electrical signal. The question was how to connect them together to form a larger machine.

After using chemical compounds to etch the transistors into a sheet of silicon, Dr. Last and his colleagues could have cut each one from the sheet and connected them with individual wires, much like any other electrical device. But this was enormously difficult, inefficient and expensive.

One of the founders of Fairchild, Robert Noyce, suggested an alternative method, and this was realized by a team Dr. Last oversaw. They developed a way of building both the transistors and the wires into the same sheet of silicon.

This method is still used to build silicon chips, whose transistors are now exponentially smaller than those manufactured in the 1960s, in accordance with Moore’s Law, the famous maxim laid down by another Fairchild founder, Gordon Moore.

For the full obituary, see:

Cade Metz. “Jay Last, 92, Physicist and a Pioneer of Silicon Valley.” The New York Times (Monday, November 22, 2021): A23.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the obituary has the date Nov. 20, 2021, and has the title “Jay Last, One of the Rebels Who Founded Silicon Valley, Dies at 92.”)

Boeing Maximized Short-Term Profits Instead of Long-Term Quality (and Profits)

(p. A19) Boeing remains one of America’s leading manufacturers, but it is reduced in reputation as well as equity. The “fall” that Mr. Robison’s subtitle alludes to is the corrosion of a culture that had emphasized quality.

. . .

Mr. Robison is upset that Boeing followed the unremarkable philosophy of the Business Roundtable (recently revised under woke pressure) that the first duty of any company is to its shareholders. He says that Boeing focused on metrics that “tend to favor investors over employees and customers.” This is an easy but misworded critique. In the long term, the interests of shareholders and customers are aligned. A manufacturer that disregards either customers or employees will eventually not have profits to distribute.

In fact, Boeing forgot that its long-term success depended on its reputation for superior engineering. Executives like Alan Mulally, project leader in the 1990s for the costly but highly successful Boeing 777, were passed over for the top job. The corporate metamorphosis was accelerated by the 1997 merger with rival McDonnell Douglas. The executive suite was colonized by such figures as McDonnell’s Harry Stonecipher, a Jack Welch protégé who was explicit about changing the culture. His intent, he said, was to run Boeing “like a business rather than a great engineering firm.” Increasingly that meant doing whatever it took to hike the share price. Phil Condit, the CEO who orchestrated the merger, pushed his managers to quintuple the stock in five years, which suggested that his eye was on Wall Street and not on the planes.

. . .

Test flights showed a tendency for the MAX to pitch up. Designers corrected the problem on the cheap, with software that pushed the nose down. Somewhat perilously, a single sensor measuring the angle of the wings against oncoming air could force the plane into a downward trajectory. An optional cockpit indicator—alerting pilots that the sensor might be faulty—was not included on cheaper models. And the sensors, which sat outside the plane, were vulnerable to bird strikes or improper installation.

. . .

. . ., the FAA, as Mr. Robison shows, was compromised by years of having adapted its regulatory role to promote manufacturers. Even after the first plane went down, it kept the MAX flying—despite an agency analysis predicting more crashes.

For the full review, see:

Roger Lowenstein. “BOOKSHELF; Downward Trajectory.” The Wall Street Journal (Monday, Nov. 29, 2021): A19.

(Note: ellipses added.)

(Note: the online version of the review has the date November 28, 2021, and has the title “BOOKSHELF; ‘Flying Blind’ Review: Downward Trajectory.”)

The book under review is:

Robison, Peter. Flying Blind: The 737 MAX Tragedy and the Fall of Boeing. New York: Doubleday, 2021.

Firm Founders May Be More Innovative Than Professional Managers

(p. B11) In tech, there is often a visionary premium and it is at least somewhat justified. Tracking public companies’ performance over 25 years, Bain & Co. found the companies that best maintained profitable growth over the long term were disproportionately those at which the founder was still running the business, was still involved or where the founders’ operational focus was still in place. Based on an analysis of S&P 500 companies done in 2014, Bain found that founder-led companies generated over three times the indexed total shareholder return of other companies in the preceding 15 years. One wonders how much the study is affected by survivorship bias, though—those who flopped early aren’t in the sample.

Founders certainly are bolder. A 2016 study out of the Krannert School of Management at Purdue University found that founder CEOs are more likely to take their companies in a new technological direction, providing evidence that innovations of founder CEO-managed firms create more financial value than the innovations of professional CEO-managed firms.

Apple, which languished as a computer company in the years after its co-founder Steve Jobs was ousted, offers a twist on this phenomenon. Mr. Jobs returned as a savior. Among other things, he changed the company’s name from Apple Computer Inc. to Apple Inc., signaling an expansion of focus to a legacy that now includes the likes of the iPod, iPhone, Apple TV and more.

. . .

Mr. Dorsey’s major shortcoming at Twitter actually was a lack of such bold innovation. Activist investors who began calling for his departure years before it came have long pushed for faster product development and bigger revenue and user targets. They also took issue with the fact that Mr. Dorsey split his time as the chief of two publicly traded companies. When questioned at a shareholder meeting about his split time, Mr. Dorsey responded that it wasn’t a function of time, but of prioritization. During his second stint as chief executive over the course of more than six years, Twitter’s stock rose just one-fifth as much as the S&P 500.

Perhaps he prioritized his payments company, which is around 20 times as valuable today than it was in late 2015 when it went public. There are many current examples of tech companies still excelling with a founder or co-founder at the top. Nvidia and Shopify, which have returned more than 80,000% and nearly 6,000% to shareholders, respectively, since their public debuts, come to mind.

For the full commentary, see:

Laura Forman. “HEARD ON THE STREET; Many Tech Founders Can’t Stay Too Long.” The Wall Street Journal (Tuesday, December 7, 2021): B11.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Dec. 6, 2021, and has the title “HEARD ON THE STREET; Should Investors Ride Tech Founders to the Moon?”)

I cannot find evidence that the Krannert School of Management paper mentioned above has been published. An abstract appeared as:

Lee, Joon Mahn, Jongsoo Jays Kim, and Bae Joonhyung. “Are Founder CEOs Better Innovators? Evidence from S&P 500 Firms.” Academy of Management Annual Meeting Proceedings 2016.

Firms Nimbly Pivot to Build Innovative Products That Use Fewer Chips

(p. A1) Manufacturers struggling with a shortage of semiconductor chips are finding workarounds, executives said, redesigning products, shipping uncompleted units and focusing on older, lower-tech models.

. . .

Boss Products typically used hand-held controls with computer chips to angle snow truck blades. The company, which is owned by Toro Co., hasn’t been able to find enough chips. So employees started looking for ways to use fewer of them. Some remembered that joysticks, without computer chips, were used to control these features until electronics became affordable and commonplace.

“Let’s go back to the old design,” said Rick Rodier, a Toro executive. “It still does the job. It was done this way for 30 years. It was reliable. It was fine. It was just a little more cumbersome to build and assemble.”

. . .

(p. A6) T3 Motion, which makes electric stand-up vehicles for airport and university security officers, is redesigning its products to use fewer computer chips and electronics.

William Tsumpes, the company’s CEO, said instead of multiple components to control features like batteries, lighting and sirens, the redesigned vehicle will use a centralized, integrated board with a single processor to control all the parts of the vehicle. This move will eliminate the other five individual circuit boards, he said. Mr. Tsumpes said it was tough to quickly execute the redesign, but the moves, and an engine change, will lead to increased vehicle range.

“It’s spurring innovation,” Mr. Tsumpes said.

For the full story, see:

Austen Hufford. “Chip Shortage Leads to Redesigned Products.” The Wall Street Journal (Monday, Nov. 15, 2021): A1 & A6.

(Note: ellipses added.)

(Note: the online version of the story has the date November 14, 2021, and has the title “Chip Shortage Sees Manufacturers Pitch Lower-Tech Models.”)