artdiamondblog.com – Page 439 – Art Diamond's web log

Regulation Sunset Would Aid Entrepreneurs

John Mackey is the entrepreneur behind the Whole Foods Market.

(p. A17) The success of economic freedom in increasing human prosperity, extending our life spans and improving the quality of our lives in countless ways is the most extraordinary global story of the past 200 years.
. . .
Economic freedom is declining in the U.S. In 2000, the U.S. was ranked third in the world behind only Hong Kong and Singapore in the Index of Economic Freedom, published annually by this newspaper and the Heritage Foundation. In 2011, we fell to ninth behind such countries as Australia, New Zealand, Canada and Ireland.
The reforms we need to make are extensive.
. . .
According to the Small Business Administration, total regulatory costs amount to about $1.75 trillion annually, nearly twice as much as all individual income taxes collected last year. While some regulations create important safeguards for public health and the environment, far too many simply protect existing business interests and discourage entrepreneurship. Specifically, many government regulations in education, health care and energy prevent entrepreneurship and innovation from revolutionizing and re-energizing these very important parts of our economy.
A simple reform that would make a monumental difference would be to require all federal regulations to have a sunset provision. All regulations should automatically expire after 10 years unless a mandatory cost-benefit analysis has been completed that proves the regulations have created significantly more societal benefit than harm. Currently thousands of new regulations are added each year and virtually none ever disappear.

For the full commentary, see:
JOHN MACKEY. “OPINION; To Increase Jobs, Increase Economic Freedom; Business is not a zero-sum game struggling over a fixed pie. Instead it grows and makes the total pie larger, creating value for all of its major stakeholders, including employees and communities..” The New York Times (Fri., November 16, 2011): A15.
(Note: ellipses added.)

Libertarian Law Professor Defends Free Choice in Health Care

“Randy E. Barnett has argued against the health care law.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) WASHINGTON — When Congress passed legislation requiring nearly all Americans to obtain health insurance, Randy E. Barnett, a passionate libertarian who teaches law at Georgetown, argued that the bill was unconstitutional.
. . .
. . . over the past two years, through his prolific writings, speaking engagements and television appearances, Professor Barnett has helped drive the question of the health care law’s constitutionality from the fringes of academia into the mainstream of American legal debate and right onto the agenda of the United States Supreme Court.
. . .
. . . the challenge championed by Professor Barnett: that Congress’s power to set rules for commerce does not extend to regulating “inactivity,” like choosing not to be insured.
. . .
(p. A14) He is a fierce advocate of economic freedom who is accustomed to being a legal underdog. In 2004, in his first (and, he says, probably his last) appearance before the Supreme Court, he argued that Congress could not criminalize the production of home-grown marijuana for personal medical use. There again, critics said he would lose 8 to 1. He did lose, but took satisfaction in the actual vote, 6 to 3.
. . .
Professor Barnett’s work on the health care law fits into a much broader intellectual project, his defense of economic freedom. He has long argued that the Supreme Court went too far in upholding New Deal economic laws — a position that concerns his liberal critics.
Even a close friend and fellow Georgetown law professor, Lawrence B. Solum, says that Professor Barnett is aware of the “big divide between his views and the views of lots of other people,” and that his political philosophy is “much more radical” than his legal argument in the health care case. Professor Barnett, for his part, insists that if the health law is struck down, it will not “threaten the foundation of the New Deal.” But, he allowed, it would be “a huge symbolic victory for limited government.”

For the full story, see:
SHERYL GAY STOLBERG and CHARLIE SAVAGE. “Libertarian’s Pet Cause Reaches Supreme Court.” The New York Times (Tues., March 27, 2012): A1 & A14.
(Note: ellipses added.)
(Note: the online version of the story is dated March 26, 2012 and has the title “Vindication for Challenger of Health Care Law.”)

Myhrvold Left Work with Hawking for the Excitement of Entrepreneurship

(p. 139) Microsoft was represented ¡n the discussion by its senior vice president for advanced technology, a thirty-five-year-old Nathan Myhrvold. After finishing his Ph.D. at Princeton at age twenty-three, Myhrvold had worked for a year as a postdoctoral fellow with the physicist Stephen Hawking at Cambridge, tackling theories of (p. 140) gravitation and curved space-time, before taking a three-month leave of absence to help some friends in the Bay Area with a software project. He became caught up in the excitement of personal computer software and entrepreneurship and never went back. In Berkeley, he co-founded a company called Dynamical Systems to develop operating system for personal computers, which struggled for two years until Microsoft bought it in 1986. At Microsoft, he persuaded Bill Gates to let him establish a corporate research center, Microsoft Research, with Myhrvold himself in charge.

Source:
Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.
(Note: italics in original.)
(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)

Benefits of Driverless Cars Justify Changing Liability Laws

“The car is driven by a computer that steers, starts and stops itself. A 360 degrees laser scanner on top of the car, a GPS system and other sensors monitor the surrounding traffic.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p A13) Expect innovations that change the nature of driving more than anything since the end of the hand-crank engine–so long as the legal and regulatory systems don’t strangle new digital technologies before they can roll off the assembly line.
. . .
Mr. Ford outlined a future of what the auto industry calls “semiautonomous driving technology,” meaning increasingly self-driving cars. Over the next few years, cars will automatically be able to maintain safe distances, using networks of sensors, V-to-V (vehicle-to-vehicle) communications and real-time tracking of driving conditions fed into each car’s navigation system.
This will limit the human error that accounts for 90% of accidents. Radar-based cruise control will stop cars from hitting each other, with cars by 2025 driving themselves in tight formations Mr. Ford describes as “platoons,” cutting congestion as the space between cars is reduced safely.
. . .
Over the next decade, cars could finally become true automobiles. Our laws will have to be updated for a new relationship between people and cars, but the benefits will be significant: fewer traffic accidents and fewer gridlocked roads–and, perhaps best of all, young people will be in self-driving cars, not teenager-driven cars.

For the full commentary, see:
L. GORDON CROVITZ. “INFORMATION AGE; The Car of the Future Will Drive You; A truly auto-mobile is coming if liability laws don’t stop it.” The Wall Street Journal (Mon., March 5, 2012): A13.
(Note: ellipses added.)

“A Greek, an Italian and a Spaniard Walk into a Bar”

(p. A15) A joke making the rounds: A Greek, an Italian and a Spaniard walk into a bar. Each orders a drink. Who pays? The German.

For the full commentary, see:
DAVID WESSEL. “CAPITAL; For Europe, a Lehman Moment.” The Wall Street Journal (Thurs., December 1, 2011): A15.

James Morrison Was a “Retailing Genius”

Source of book image: online version of the WSJ review quoted and cited below.

(p. A13) Morrison was not an inventor-capitalist but a retailing genius, more Sam Walton than Steve Jobs. He catered to England’s growing consumer class by diversifying his wares and, in his ever-growing network of shops, introducing luxurious showrooms. He was a disciple of volume, seeking “high turnover, small profits, and quick returns.” He sent his traveling men not to find buyers, as was typical, but to find the best suppliers. Advantageously purchased in bulk, goods would sell themselves. Morrison’s buyers were specialists, anticipating the practices of later department stores. He kept his finger on the pulse of fashion and on “market making” events. Legendarily, he was never caught short of black crepe when a member of the royal family was ill. “The Duke of York has died most conveniently,” he once quipped while tallying profits.
The “Napoleon of shopkeepers” went on to found his own merchant bank and accumulate a prodigious investment portfolio, much of it in American bonds. Strategic lending to broke aristocrats greased Morrison’s way into Parliament, where he served as a “radical Whig,” championing political reform and free trade.
. . .
. . . Morrison conducted both his retailing and his banking business with impeccable transparency. The investments he sold were honestly structured, and the risks he ran were his own, backed by sufficient collateral. Morrison’s was an era before bailouts, an era of some moral luck but little moral hazard. Markets rose and fell with reasonably predictable effects. For him and many of his contemporaries, credit remained a personal matter of the highest consequence. In this, alas, a character such as Morrison now seems more alien than familiar.

For the full review, see:

JEFFREY COLLINS. “BOOKSHELF; King of the Shopkeepers; The lessons of a merchant prince and a brilliant retailer whose wool, linen, silk, thread and lace flew off the shelves.” The Wall Street Journal (Mon., March 5, 2012): A13.
(Note: ellipses added.)

The book under review is:
Dakers, Caroline. A Genius for Money: Business, Art and the Morrisons. New Haven, CT: Yale University Press, 2012.

Oswald the Lucky Rabbit Returned to Disney After 78 Years

Do you recognize this rabbit? Source of image: online version of the Omaha World-Herald article quoted and cited below.

The story of Oswald the Lucky Rabbit is one of entrepreneurial resilience. Walt Disney was duped out of his legal rights to Oswald. Instead of fighting it out in court, or giving in to discouragement, he shortened Oswald’s ears and transformed him into a mouse with a new name.

(p. 2E) LOS ANGELES (AP) – One of Walt Disney’s oldest drawings is seeing the light of day after being locked away for nearly 40 years.

A rough 1928 image of Oswald the Lucky Rabbit, the wacky predecessor to Mickey Mouse, was brought out of the Walt Disney Co. archive this week and showcased at an event unveiling “Disney Epic Mickey 2: The Power of Two,” an upcoming action-adventure game for the Wii, PlayStation 3 and Xbox 360 that allows players to control both Mickey and Oswald.
The mischievous Oswald was co-created by Disney before Mickey, but he was lost in a 1928 contract dispute with Universal Studios. Oswald hopped back to Disney in 2006 when CEO Bob Iger brokered a deal that sent sportscaster Al Michaels to Universal-NBC. Oswald’s first appearance since his return came in 2010’s “Epic Mickey” as the ruler of a forgotten realm.

For the full story, see:

DERRIK J. LANG. “Disney image displayed for first time in 40 years.” Omaha World-Herald (Sun., March 18, 2012): 2E.

The Project Entrepreneur Does Not Sell Out Soon

“Dropbox founders, Arash Ferdowsi, left, and Drew Houston, won Best Overall Startup at the Crunchies in San Francisco earlier this year.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B6) Arash Ferdowsi was a Massachusetts Institute of Technology student when he met fellow MIT student Drew Houston through a mutual friend.

The pair collaborated, working from a Cambridge, Mass., apartment, to solve a modern-day problem.
They created a virtual file cabinet that would make it possible for users to access piles of documents, spreadsheets, photos, music and videos from their laptops, tablets or personal devices.
After launching Dropbox Inc. in June 2007, they relocated to San Francisco. Mr. Ferdowsi dropped out of MIT.
. . .
WSJ: Before Steve Jobs of Apple Inc. died, he approached you with a buyout offer. Why did you turn it away?
Mr. Ferdowsi: The problem that we’re trying to solve is a problem that only an independent company can solve. We want to let you use a Mac, or Windows PC, or iPad, or Android, without having to think about any of the technical details. It isn’t a problem any of those larger companies is going to be as inclined to solve in the same way we are.

For the full interview, see:

ANGUS LOTEN, interviewer. “HOW I BUILT IT; Dropbox Seeks Big Solutions.” The Wall Street Journal (Thurs., March 15, 2012): B6.
(Note: ellipsis added; bold in original.)
(Note: the online version of the interview is dated March 14, 2012.)

Most Articles in Top Two Economics Journals Receive Zero Citations in First Five Years

Journal quality is often used, or suggested, as a proxy for the quality of articles. It is a very poor proxy.
Economist Robert H. Frank writes that:

(p. 3) The economist Philip Cook and I found, . . . , that in the first five years after publication, many fewer than half of all papers in the two most selective economics journals had ever been cited by other scholars.

For the full commentary, see:

ROBERT H. FRANK. “ECONOMIC VIEW; The Prestige Chase Is Raising College Costs.” The New York Times, SundayBusiness Section (Sun., March 11, 2012): 3.
(Note: ellipsis added.)
(Note: the online version of the commentary is dated March 10, 2012.)

I assume, but have not verified, that the above finding is reported in:
Frank, Robert, and Philip J. Cook. The Winner-Take-All Society: Why the Few at the Top Get So Much More Than the Rest of Us. New York: The Free Press, 1995.

Diamond to Teach Economics of Entrepreneurship in Fall 2012

Some Questions to Be Discussed:

• How can policies encouraging innovative entrepreneurship help us recover from the current economic stagnation?

• Are innovative entrepreneurs smarter, or less risk-averse, or more intuitive, or more determined, or more frugal, or nobler, or greedier, than the rest of us?

• Can economic historian John Nye defend his claim that successful entrepreneurs are “lucky fools?”

• What is the role of entrepreneurship in the process of creative destruction, and what is the role of creative destruction in making our lives longer and better?

• Would labor be better off in an economy in which innovative entrepreneurship is encouraged?

• Why does economist Will Baumol believe that too much higher education can discourage successful innovative entrepreneurship?

• What are the most promising sources of financing for successful innovative entrepreneurship?

Lasseter’s Success Came from Seeing How the Details Affected the Storytelling

(p. 138) “I had no reason to think it would be any good,” recalled Barzel, who was then a recently minted California Institute of Technology Ph.D. on the lighting team. “I knew John was absolutely brilliant as a animator of shorts. But I’ve read authors who write good short stories and crummy novels; I figured it’s a different skill. I had no reason to think John would have the skill to pull off a full-length movie.”
He expected something that animators and animation buffs might find interesting, but that probably would not have a particularly wide audience.
“I joined because I wanted the practical experience,” he said, “I thought, Well, it’s going to be the first full-length [computer-animated] movie, so it’ll be a fun thing to have been associated with, however it turns out.”
What finally made Barzel a believer was watching Lasseter at work. He found that Lasseter had an uncanny ability to shift between the macro level of the entire film and the micro level of whatever detail he was dealing with at the moment. “Looking at an individual frame — it’s meticulous work– he would always be aware of its role in the larger context of storytelling,” Barzel recalled. “He’d say something like, ‘This is the first time this character responds to that situation; it’s really important that he get the right glint in his eye.’ ” Barzel started to think, John knows what he’s doing. This movie could be really good.

Source:
Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.
(Note: italics and brackets in original.)
(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)