Category: Regulations

Uncertainty on Future Government Policies Reduces Firm Investment

(p. A6) A shoe factory owner, Rafeeque Ahmed, says he has put expansion plans on hold until he has more confidence about New Delhi’s policy plans, particularly about minimum wages. The $16 million he was going to invest to boost his production capacity by 20% may now go to setting up facilities in Myanmar or Bangladesh.
“We are afraid to invest,” because the government could suddenly change policies and thus our costs, he said.

For the full story, see:
Anant Vijay Kala. “Uncertainty Dulls India’s Business Appetite.” The Wall Street Journal (Tuesday, November 7, 2017): A6.
(Note: the online version of the story has the date November 6, 2017, and has the title “Apple’s Market Cap Hits $1 Trillion.”)

Drug Middlemen Create “Perverse Incentive” for Higher List Prices

(p. B1) The Department of Health and Human Services is scrutinizing the system of rebates and discounts paid to middlemen as medicine flows from manufacturers to patients. Those middlemen, such as drug wholesalers, pharmacies, and pharmacy-benefit managers, are often compensated as a percentage of a drug’s list price. That creates a perverse incentive for higher list prices throughout the system.
. . .
Pfizer , which made headlines earlier this month by pausing a slate of planned price increases due to White House criticism, sounds ready for reform. Chief Executive Ian Read on a conference call with analysts last week predicted that rebates are “going away” over the long term. Mr. Read added that the larger gaps between list and net prices amounted to a “subsidy” for companies in the drug supply chain and blamed those subsidies for the relatively weak sales of certain lower-priced versions of blockbuster drugs.

For the full commentary, see:
Charley Grant. ” HEARD ON THE STREET; Skies Darken for Drug Middlemen.” The Wall Street Journal (Wednesday, Aug. 8, 2018): B1.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Aug. 7, 2018.)

Natural Experiment on Consumer Effects of Net Neutrality

(p. A25) TORONTO — The Federal Communications Commission is planning to jettison its network neutrality rules, and many Americans are distraught. Such a move, the Electronic Frontier Foundation warned, “invites a future where only the largest internet, cable and telephone companies survive, while every start-up, small business and new innovator is crowded out — and the voices of nonprofits and ordinary individuals are suppressed.”
Critics worry that getting rid of neutrality regulation will lead to a “two-tier” internet: Internet service providers will start charging fees to websites and apps, and slow down or block the sites that don’t pay up. As a result, users will have unfettered access to only part of the internet, with the rest either inaccessible or slow.
Those fears are vastly overblown.
. . .
So why am I not worried? I worked for a telecommunications company for 25 years, and whatever one may think about corporate control over the internet, I know that it simply is not in service providers’ interests to throttle access to what consumers want to see. Neutral broadband access is a cash cow; why would they kill it?
. . .
The good news is that we will soon have a real-world experiment to show who is right and who is wrong. The United States will get rid of its rules, and the European Union and Canada will keep their stringent regulations. In two years, will the American internet be slower, less innovative and split into two tiers, leaving Canadians to enjoy their fast and neutral net?
Or, as I suspect, will the two markets remain very similar — proving that this whole agonized debate has been a giant waste of time? Let’s check back in 2019.

For the full commentary, see:
Ken Engelhart. “Losing Net Neutrality: Nothing to Be Afraid Of.” The New York Times (Tuesday, Dec. 5, 2017): A25.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Dec. 4, 2017, and has the title “Why Concerns About Net Neutrality Are Overblown.” The online version says that the New York edition ran the commentary on p. A27, instead of the A25 page on which it appeared in my National Edition copy.)

Wrecking Ball for Bureaucracy That “Is Killing the Country”

(p. B4) America’s big tech companies are facing some of their toughest political challenges as they flirt with or surpass trillion-dollar valuations. Before lawmakers try to rein them in, Reid Hoffman argues government officials better be careful what they wish for.
Mr. Hoffman was chief operating officer of PayPal while it was still a small payments startup before he co-founded the professional social-network LinkedIn.
. . .
WSJ: You’re vociferously opposed to President Trump and even commissioned an anti-Trump card game. Does Silicon Valley have a problem with liberal bias?
Mr. Hoffman: I do think that there is a reflexive bias to liberalism that causes discomfort. I think you have that kind of left bias within the Silicon Valley culture, too, which is, “I’m so convinced that’s idiotic, I’m not listening to anything about it.” And that’s the problem. The problem is not actively listening. But that’s human. It’s not only here. Part of the reason [for strong negative reactions] to Trump is the flat-out lies.
WSJ: When you talk politics with Peter Thiel, PayPal’s co-founder and a well-known Trump supporter, what are those conversations like?
Mr. Hoffman: He’s a friend of mine, but we’ve disagreed about politics since we were college undergraduates. One thing we argue about is how much does Trump lie? I’ve been trying to advance him the case that there’s always been some lying around politicians, but Trump is one or two orders of magnitude worse than ever before. He says Obama is a bigger liar than Trump–based on, for example, the claim that under Obamacare you’d be able to spend as much time with your primary doctor as you did before Obamacare.
Peter thinks that the bureaucracy is killing the country and that you need a wrecking ball to shake it up, and maybe Trump is the only wrecking ball you get. His pro-Trump arguments are that someone needed to stand up to China. Trump at least is, [while] everyone else gave it lip service.

For the full interview, see:
Rolfe Winkler, interviewer. “A Silicon Valley Warning.” The Wall Street Journal (Thursday, Sept. 27, 2018): B4.
(Note: ellipsis added; bolded and bracketed words in original.)
(Note: the online version of the interview has the date Sept. 26, 2018, and the title “LinkedIn’s Co-Founder Warns of Perils in Regulating Big Tech.” The last question and answer quoted above, is included in the online, but not the print, version of the interview.)

Higher Minimum Wages Increase Automation of Routine Tasks

(p. A11) Over the past few years, San Francisco in particular, and California in general, has increased the cost to hire and train employees at risk of being automated. The minimum wage will rise to $15 an hour in San Francisco in 2018. The rest of California will get there four years later. On top of San Francisco’s hourly wage mandate are requirements for health care, paid leave and employee scheduling.
These added costs give employers with already slim profit margins a strong incentive to automate or embrace self-service. In an interview with Forbes, the founder of a delivery robot company linked his product’s value proposition to a rising minimum wage: “At something like $10 per delivery, the majority of citizens will not use [human delivery]. It’s too expensive.”
The empirical evidence supports the anecdotes: An August [2017] study published by the National Bureau of Economic Research linked a rising minimum wage to an increase in unemployment for workers in jobs that require a large number of routine tasks. The authors reported that it wasn’t just service-industry jobs at risk. A rising minimum wage also had a negative effect on job opportunities for older, less-skilled employees in manufacturing.

For the full commentary, see:
Michael Saltsman. “CROSS COUNTRY; San Francisco’s Problem Isn’t Robots; It’s the $15 Wage Floor; The city fears automation will replace workers–but its own policies make low-value jobs illegal.” The Wall Street Journal (Saturday, Nov. 25, 2017): A11.
(Note: bracketed year added.)
(Note: the online version of the commentary has the date Nov. 24, 2017.)

The later published version of the National Bureau of Economic Research study mentioned above, is:
Lordan, Grace, and David Neumark. “People Versus Machines: The Impact of Minimum Wages on Automatable Jobs.” Labour Economics 52 (June 2018): 40-53.

“Regulatory Humility” Enabled 4G “Entrepreneurial Brilliance”

(p. A15) America dominated 4G because the government largely got out of the way of risk-takers. U.S. regulators, unlike their European counterparts, didn’t try to mandate technical standards or require forced sharing of their wireless networks with competitors. Regulatory humility produced one of the greatest explosions of entrepreneurial brilliance in human history, the mobile internet.
Today the FCC is helping speed 5G deployment by modernizing regulations. Last December it removed utility-style regulations placed on wireless broadband by the Obama administration. On Sept. 26, it pre-empted localities from charging outrageous fees for 5G deployment. It is also gearing up to auction more spectrum in November to help connect the Internet of Things. Tax reform and the Trump administration’s broader deregulatory agenda have also created a more business-friendly environment.
But more should be done. Antitrust officials should update their definitions of markets to give more clarity to 5G entrepreneurs. As T-Mobile and Sprint argue in their merger filings, 5G and free Wi-Fi will compete head-to-head with cable broadband for in-home use.
Regulators also need to recognize that as 5G emerges, old categories are becoming scrambled. Consumers don’t necessarily know, or care, if their content comes from an online provider, a broadcaster, a cable channel or a “tech” company, so long as they can get it on their phone or tablet. Regulations must allow companies to invest, innovate, and merge in this new ecosystem.

For the full commentary, see:
Robert M. McDowell. “To Boost 5G, Keep the Industry Free.” The Wall Street Journal (Friday, Sept. 28, 2018): A15.
(Note: the online version of the commentary has the date Sept. 27, 2018.)

Genetics Entrepreneur Compares FDA to DMV

(p. 1) MOUNTAIN VIEW, Calif. — In 2007, Anne Wojcicki, then 33, lassoed the moon.
She was getting her new company, 23andMe, a mail-order genetics testing firm, off the ground with her “Party ’til you spit” celebrity get-togethers.
She married Sergey Brin, the cute co-founder of Google, also 33 and already one of the richest men in America, at a top-secret Esther Williams extravaganza in the Bahamas. The bride in a white bathing suit and the groom in a black one, they swam to a sandbar in the Bahamas and got hitched in the middle of the sparkling aquamarine ocean.
Soon after the marriage, as Mr. Brin accumulated more power, a yacht, and a fleet of jets, Ms. Wojcicki became pregnant with the first of their two children and Google invested millions in her start-up, named after the 23 paired chromosomes that consist of our DNA.
But six years later, the Silicon Valley fairy tale was shattered by two public humiliations: Mr. Brin got involved with a beautiful young Englishwoman named Amanda Ro-(p. 12)senberg, who provided a public face for Google Glass — an attachment that broke up his marriage. And the Food and Drug Administration shut down the primary function of Ms. Wojcicki’s business, calling her D.N.A. spit vial “an unapproved medical device” and imposing stricter rules for consumer genetic testing. Her business, once so ripe with promise to tackle health issues, was curtailed to its ancestry testing division.
. . .
“In some ways, when you have that many bad things happen, it’s a sense of disbelief,” she says. “This was one of those situations where there’s two aspects. A divorce and the F.D.A. There was no workaround in either. So it was one of the first times in my life where you have to accept, you have to actually change. Like, I need to come up with a different way of approaching both of these relationships.”
. . .
(p. 13) She’s focused for now on her children, her new Bengal cats and her company, which has more than three million customers and its own drug-development program. It started selling kits in CVS and Target, got the F.D.A.’s permission to resume giving consumers health reports on 10 conditions, including Parkinson’s and Alzheimer’s, and the $99 ancestry kit won a spot as one of “Oprah’s favorite things” this year, with Oprah calling it “The Ultimate Selfie.” Fast Company portrayed Ms. Wojcicki as the Comeback Kid of tech.
She realized that she had a treasure trove of DNA data and began teaming with Genentech and Procter & Gamble, which started mining it to make breakthroughs in Parkinson’s, depression and skin care.
In many ways, her struggle with the F.D.A. was a microcosm of the increasingly tense battle between hidebound regulatory agencies and freewheeling tech companies.
Although some people thought Ms. Wojcicki would have to sell her company, she healed the breach with the F.D.A. the same way she healed the breach with Mr. Brin. She did not huff away and seethe and backbite. She “put one foot ahead of the other,” as her mother advises, hired the best regulatory experts and found a respectful new configuration for the relationship.
“We were not communicating in the right way,” she says of the period the F.D.A. felt it was being ignored. “We were not showing Silicon Valley arrogance. We just were running around with our shoes on in a Japanese house. We were not a cultural fit and we weren’t expressing what we were trying to do in the right way.
“Some companies are trying to circumvent the regulators. We weren’t. We just got caught in the cross hairs. We clearly pissed them off. It took us a long time to generate a lot of data to prove that our intentions actually were right. But I feel like we’re doing the right thing in terms of proving that the customer is capable of getting this information on their own.
“I see it from the F.D.A. perspective. It’s a new product. It’s genetics. It’s direct to consumer. It caused anxiety. So, you know, the onus was on us.”
She had to explain to her team: “Listen, when you go to the D.M.V., you don’t argue about the vision test. You don’t say, ‘Oh, I just had a vision test. I don’t need to do the vision test.’ Like, you just do it. The F.D.A. is in charge of public safety, and I have a respect for the job that they have to do. And we’re just going to do the job that they’re asking us to do.”

For the full story, see:
Maureen Dowd. “‘Adapt and Evolve.” The New York Times, SundayStyles Section (Sunday, Nov. 19, 2017): 1 & 12-13.
(Note: ellipses added.)
(Note: the online version of the story has the date Nov. 18, 2017, and has the title “‘The Doyenne of DNA Says: Just Chillax With Your Ex.”)

N.Y.C. Regulation of Uber and Lyft Hurts Poor Blacks and Hispanics

(p. A1) Jenine James no longer worries about getting stranded when the subways and buses are unreliable — a constant frustration these days — or cannot take her to where she needs to go. Her Plan B: Uber.
So Ms. James, 20, a barista in Brooklyn, sees New York’s move to restrict ride-hail services as not just a threat to her own convenience and comfort but also to the alternative transportation system that has sprung up to fill in the gaps left by the city’s failing subways and buses. She does not even want to think about going back to a time when a train was her only option, as unlikely as that might be.
“It was bad, so imagining going back, it’s terrible,” she said.
The ride-hail cars that critics say are choking New York City’s streets have also brought much-needed relief to far corners of the city where just getting to work is a daily chore requiring long rides and multiple transfers, often squeezed into packed trains and buses. The black cars that crisscross transit deserts in Brooklyn, Queens, the Bronx and Staten Island have become staples in predominantly black and Hispanic neighborhoods where residents complain that yellow taxis often refuse to pick them up. They come to the rescue in the rain, and during taxi shift changes, when rides are notoriously hard to find even (p. A19) in the heart of Manhattan.
New York became the first major American city on Wednesday [Aug. 8, 2018] to put a halt on issuing new vehicle licenses for Uber, Lyft and other ride-hail services amid growing concerns around the world about the impact they are having on cities.
The legislation calls for a one-year moratorium while the city studies the booming industry and also establishes pay rules for drivers. It was passed overwhelmingly by the City Council and is expected to be signed into law by Mayor Bill de Blasio, a Democrat, who attempted to adopt a similar cap in 2015 but abandoned the effort after Uber waged a fierce campaign against him.

For the full story, see:
Winnie Hu and Mariana Alfaro. “‘At End of Line, A Cap on Uber Causes Distress.” The New York Times (Friday, Aug. 10, 2018): A1 & A19.
(Note: bracketed date, added.)
(Note: the online version of the story has the date Aug. 9, 2018, and has the title “‘Riders Wonder: With Uber as New York’s Plan B, Is There a Plan C?”)

Alibaba’s Jack Ma Retires Early as Chinese Communists Intervene in Ventures

(p. B1) HONG KONG — Alibaba’s co-founder and executive chairman, Jack Ma, said he planned to step down from the Chinese e-commerce giant on Monday to pursue philanthropy in education, a changing of the guard for the $420 billion internet company.
A former English teacher, Mr. Ma started Alibaba in 1999 and built it into one of the world’s most consequential e-commerce and digital payments companies, transforming how Chinese people shop and pay for things. That fueled his net worth to more than $40 billion, making him China’s richest man. He is revered by many Chinese, some of whom have put his portrait in their homes to worship in the same way that they worship the God of Wealth.
Mr. Ma is retiring as China’s business environment has soured, with Beijing and state-owned enterprises increasingly playing more interventionist roles with companies. Under President Xi Jinping, China’s internet industry has grown and become more important, prompting the government to tighten its leash. The Chinese economy is also facing slowing growth and increasing debt, and the country is embroiled in an escalating trade war with the United States.
“He’s a symbol of the health of China’s private sector and how high they can fly whether he likes it or not,” Duncan Clark, author of the book “Alibaba: The House Jack Ma Built,” said of Mr. Ma. “His retirement will be interpreted as frustration or concern whether he likes it or not.”
In an interview, Mr. Ma said his retirement is not the end of an era but “the beginning of an era.” He said he would be spending more of his time and fortune focused on education. “I love education,” he said.
Mr. Ma will remain on Alibaba’s board of directors and continue to mentor the company’s management. Mr. Ma turns 54 on Monday, which is also a holiday in China known as Teacher’s Day.
The retirement makes Mr. Ma one of the first founders among a generation of prominent Chinese internet entrepreneurs to step down from their companies. Firms including Alibaba, Tencent, Baidu and JD.com have flourished in recent years, growing to nearly rival American internet behemoths like Amazon and Google in their size, scope and ambition. For Chinese tycoons to step aside in their 50s is rare; they usually remain at the top of their organizations for many years.

For the full story, see:

Li Yuan. “Founder Sees A ‘Beginning’ As He Retires From Alibaba.” The New York Times (Saturday, Sept. 8, 2018): B1 & B3.
(Note: the online version of the story has the date Sept. 7, 2018, and has the title “Alibaba’s Jack Ma, China’s Richest Man, to Retire From Company He Co-Founded.”)

The book by Duncan Clark, that is mentioned above, is:
Clark, Duncan. Alibaba: The House That Jack Ma Built. New York: Harper-Collins Publishers, 2016.

Uncredentialed Entrepreneur Innovated to Save Babies

(p. 1A) He showed up in Omaha 120 summers ago, another unknown showman hoping to make a name for himself at this city’s biggest-ever event, its world’s fair.

He gave his name as Martin Couney, or sometimes Martin Coney. It wasn’t, at least not yet.
He said he was a doctor, a European doctor, a protégé of the world’s finest doctors. He was none of these things.
And yet in Omaha, Dr. Couney set up shop in a little white building on the east midway, not far from the Wild West Show, the Middle Eastern dancers, the roaming fortune tellers and the Indian Congress starring a Native American chief named Geronimo.
The fair, officially known as the Trans-Mississippi and International (p. 2A) Exposition, showcased all manner of things seen as strange, exotic and otherworldly to the 2 million Nebraskans and visitors paying the 50-cent admission to have their minds blown in the summer of 1898.
Couney thought he had just the thing to blow their minds.

“Infant Incubators with Living Infants” read the sign above the entrance.

“A Wonderful Invention … Live Babies” said another.
. . .
Usually the experts are right. That’s why they are experts,” says Dawn Raffel, author of the “The Strange Case of Dr. Couney,” a new biography seeking to save this once-famed faux doctor from history’s trash bin. “But occasionally you get an outlier like this. Someone who is extraordinarily inventive. Who brings us something incredible.”
What Dr. Couney gave us, through decades of work and tireless promotion, was an understanding that we could save babies that since the beginning of time had died before they crawled. We could save them using a piece of equipment designed by a French engineer who realized that if an egg could be nurtured in an incubator, then so could a newborn.
. . .
Newspapers, including The World-Herald, largely ignored the exhibit, Raffel says. The public didn’t seem particularly bothered that a “doctor” had decided to house anonymous newborns on the fairgrounds and put them on public display.
They also didn’t seem particularly interested, either.
. . .
Raffel estimates that Couney and his doctors and nurses saved between 6,500 and 7,000 premature babies all on their own during decades of midway work. But they saved countless thousands more by raising the profile of premature babies. By raising the hope that they could grow into healthy, happy adults.
. . .
“I find him fascinating because he was such a complicated man,” Raffel says. “He deserves more credit.”

For the full story, see:
Hansen, Matthew. “Tech Costs Force Honda To Let Go of Engineering Legacy.” Omaha World-Herald (Friday, Aug. 3, 2018): 1A-2A.
(Note: ellipses between paragraphs, added; ellipsis internal to sentence, in original.)

The Raffel book on which the passages quoted are partially based, is:
Raffel, Dawn. The Strange Case of Dr. Couney: How a Mysterious European Showman Saved Thousands of American Babies. New York: Blue Rider Press, 2018.

Soichiro Honda Rushed Prototype Car “in Defiance of a Planned Japanese Law”

(p. A10) For many Japanese, Honda reflected the originality and self-confidence that turned the country into an industrial powerhouse after World War II.
. . .
The company was founded in 1946 by Soichiro Honda, a tinkerer who loved to battle the giants with his own innovations. He and a dozen workers took engines intended for small electric generators and attached them to bicycles, the first Honda product. Within 15 years, a Honda motorcycle was beating European rivals at the Isle of Man motorcycle race.
Around that time, Mr. Honda rushed out a prototype automobile despite having almost no experience in building them, in defiance of a planned Japanese law that would have restricted entry in the market.

For the full story, see:
Sean McLain. “Tech Costs Force Honda To Let Go of Engineering Legacy.” The Wall Street Journal (Monday, Aug. 6, 2018): A1 & A10.
(Note: ellipsis added.)
(Note: the online version of the story has the date Aug. 5, 2018, and has the title “Honda Took Pride in Doing Everything Itself. The Cost of Technology Made That Impossible.”)