artdiamondblog.com – Page 498 – Art Diamond's web log

Porter Airlines Beats Incumbents in Serving High End Customers

“Robert Deluce set up Porter Airlines at Billy Bishop Toronto City Airport in October 2006.” Source of caption and photo: online version of the WSJ article quoted and cited below.

Clayton Christensen explains why upstart entrepreneurs who move up-market to serve under-served customers, will almost always lose to motivated incumbents.
Apparently Robert Deluce has not read Christensen.

(p. B8) TORONTO–As a teenager, Robert Deluce learned to fly at this city’s small airport just outside the downtown on a Lake Ontario island.
Lately, the 59-year-old airline entrepreneur has been giving his own brand of flying lessons there in a dogfight with larger competitors over a lucrative flying niche: the high-margin business traveler.
n 2005, Mr. Deluce bought the airport’s ramshackle terminal and later kicked out an Air Canada regional partner named Jazz Air. Then, he set up Porter Airlines, which has become a hit with business fliers for its top-notch service and convenient location, a one-minute ferry ride from the downtown waterfront. Earlier this month, closely held Porter opened the first phase of a gleaming, 150,000-square-foot terminal that eventually will house two passenger lounges and 10 aircraft gates.
. . .
The new carrier’s mascot is a raccoon. “He’s mischievous and determined and pretty much always achieves his desired goal,” said Mr. Deluce, chuckling over breakfast at a Toronto hotel. “Air Canada and Jazz probably think he’s over-mischievous.”
. . .
In recent years, Toronto’s waterfront has been revitalized, with high-rise condos and parks replacing grain elevators and industrial warehouses. Air Canada’s partner Jazz and a predecessor, which had been flying to and from the downtown airport for years, reduced service even as the redevelopment was progressing. The airport’s traffic waned to 25,000 fliers in 2005 from 400,000 a year in the late 1980s.
Smelling opportunity, Mr. Deluce pounced, acquiring the old terminal and evicting Jazz. He raised C$126 million in start-up capital and placed a US$500 million order for 20 Canadian-built turboprop aircraft. With 70 seats, they are perfectly sized for the airport’s short, 4,000-foot runway. Porter took wing in October 2006.
His aggressive tactics as CEO have earned him both criticism and grudging respect. Brian Iler, chairman of CommunityAir, a Toronto citizens advocacy group that wants the airport shut because of noise issues and other concerns, gives Mr. Deluce his due. “Everything he has done, he’s managed to turn things his way,” Mr. Iler says. “It’s an amazing run of luck.”
. . .
Porter now flies to four U.S. destinations and seven other cities in Eastern Canada, with an eighth coming this month. It had its first month of profitability in June 2007 and paid out to its employee profit-sharing plan that year and in 2008, Mr. Deluce says. He won’t say whether Porter was profitable in 2009.
The new airline has attracted a following for its downtown location, competitive fares, leather seats with generous legroom and complimentary beer, wine and snacks. Female flight attendants wear retro pillbox hats and peplum jackets.
Christopher Sears, vice president of research for Montreal-based brokerage firm MacDougall, MacDougall & MacTier Inc., said he has flown Porter 30 to 40 times between Montreal and Toronto. Once he arrives in Toronto, he grabs a free shuttle to a hotel two blocks from his firm’s Toronto office.
“Porter has built up a lot of goodwill with me,” he says, vowing to stick with the company even if rivals break into the downtown airport.

For the full story, see
SUSAN CAREY. “Tiny Airline Flies Circles Around Its Rivals; Top-Notch Service, Proximity to Downtown Toronto Make Porter a Hit With High-Margin Business Travelers.” The Wall Street Journal (Weds., MARCH 17, 2010): B8.
(Note: ellipses added.)
(Note: the online version of the article has the slightly different title “Tiny Airline Flies Circles Around Rivals; Top-Notch Service, Proximity to Downtown Toronto Makes Porter a Hit With High-Margin Business Travelers.”)

On Christensen’s theories, see:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Source of graph: online version of the WSJ article quoted and cited above.

Life is Too Short to Waste on Hypercomplex Music and Literature

(p. W14) Are certain kinds of modern art too complex for anybody to understand? Fred Lerdahl thinks so, at least as far as his chosen art form is concerned. In 1988 Mr. Lerdahl, who teaches musical composition at Columbia University, published a paper called “Cognitive Constraints on Compositional Systems,” in which he argued that the hypercomplex music of atonal composers like Messrs. Boulez and Carter betrays “a huge gap between compositional system and cognized result.” He distinguishes between pieces of modern music that are “complex” but intelligible and others that are excessively “complicated”–containing too many “non-redundant events per unit [of] time” for the brain to process. “Much contemporary music,” he says, “pursues complicatedness as compensation for a lack of complexity.” (To read his paper online, go to: http://www.bussigel.com/lerdahl/pdf/Cognitive%20Constraints%20on%20Compositional%20Systems.pdf)
. . .
Mr. Lerdahl is on to something, and it is applicable to the other arts, too. Can there be any doubt that “Finnegans Wake” is “complicated” in precisely the same way that Mr. Lerdahl has in mind when he says that a piece of hypercomplex music like Mr. Boulez’s “Le marteau sans maître” suffers from a “lack of redundancy” that “overwhelms the listener’s processing capacities”?
. . .
“You have turned your back on common men, on their elementary needs and their restricted time and intelligence,” H.G. Wells complained to Joyce after reading “Finnegans Wake.” That didn’t faze him. “The demand that I make of my reader,” Joyce said, “is that he should devote his whole life to reading my works.” To which the obvious retort is: Life’s too short.

For the full commentary, see:
TERRY TEACHOUT. “Too Complicated for Words; Are our brains big enough to untangle modern art?.” The Wall Street Journal (Sat., June 26, 2010): W14.
(Note: ellipses added.)

The research discussed above is:
Lerdahl, Fred. “Cognitive Constraints on Compositional Systems.” Contemporary Music Review 6, no. 2 (1992): 97-121.

“Our Own Peaceful Deity Keeping Watch Before the Open Gates of America”

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

I believe that a case can be made that Grover Cleveland is an under-appreciated President. (I like his comment on the Statue of Liberty quoted below.)

(p. W9) The cold rains of Oct. 28, 1886, did little to dampen the ardor of the tens of thousands of giddy New Yorkers who crowded onto the southern tip of Manhattan that afternoon to watch the festivities on Bedloe’s Island, a patch of land in New York Harbor. On cue, an enormous veil dropped, and the spectators gazed for the first time at the face of the massive statue that, until then, had been the subject not only of curiosity but also of skepticism.

Whatever doubts Americans might have had about this unsolicited, and rather costly, gift from the French seemed at once to vanish. A “thunderous cacophony of salutes from steamer whistles, brass bands, and booming guns, together with clouds of smoke from the cannonade, engulfed the statue for the next half hour,” Yasmin Sabina Khan writes in “Enlightening the World,” her account of how the Statue of Liberty came to be.
The crowd roared, then various speakers held forth, welcoming the 225-ton, 151-foot-tall Lady Liberty, as she would soon be known. President Grover Cleveland, in his remarks, tried to distinguish this colossus from others of its kind throughout human history. Where the statue-symbols of other nations might depict “a fierce and warlike god, filled with wrath and vengeance,” this one exhibited only “our own peaceful deity keeping watch before the open gates of America.”
President Cleveland’s interpretation of the statue turned out to be but one of many over the years. To Ms. Khan the Statue of Liberty’s symbolic significance is not a complicated matter and never was. The statue celebrates the “friendship” of the people of France and those of the U.S.; it represents “liberty” and “liberty” alone.

For the full review, see:

ALAN PELL CRAWFORD. “BOOKS; Lady Liberty’s Path to America.” The Wall Street Journal (Sat., MAY 8, 2010): W9.

Wozniak Spent a Lot of Time Collecting Information Before Building a Project

(p. 160) My style with projects has always been to spend a lot of time getting ready to build it. Now that I saw my own computer could be a reality, I started collecting information on all the components and chips that might apply to a computer design.

I would drive to work in the morning–sometimes as early as 6:30 a.m.–and there, alone in the early morning, I would quickly read over engineering magazines and chip manuals. I’d study the specifications and timing diagrams of the chips I was interested in, like the $40 Motorola 6800 Myron had told me about. All the while, I’d be preparing the design in my head.

Source:
Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.

Cellphones in North Korea Promote Free Speech

“Mun Seong-hwi, a North Korean defector, speaking to someone in North Korea to gather information at his office in Seoul.” Source of caption and photo: online version of the NYT article quoted and cited below.

I have long believed, but cannot prove, that on balance technology improves human freedom more than it endangers it.
The case of cellphones in North Korea supports my belief.

(p. A1) SEOUL, South Korea — North Korea, one of the world’s most impenetrable nations, is facing a new threat: networks of its own citizens feeding information about life there to South Korea and its Western allies.

The networks are the creation of a handful of North Korean defectors and South Korean human rights activists using cellphones to pierce North Korea’s near-total news blackout. To build the networks, recruiters slip into China to woo the few North Koreans allowed to travel there, provide cellphones to smuggle across the border, then post informers’ phoned and texted reports on Web sites.
The work is risky. Recruiters spend months identifying and coaxing potential informants, all the while evading agents from the North and the Chinese police bent on stopping their work. The North Koreans face even greater danger; exposure could lead to imprisonment — or death.

For the full story, see
CHOE SANG-HUN. “North Koreans Use Cellphones to Bare Secrets.” The New York Times (Mon., March 29, 2010): A1 & A10.
(Note: the online version of the article is dated March 28, 2010.)

Fed Scientist Says Oil Spill Did Not Kill Most of Dead Turtles

(p. A9) A National Oceanic and Atmospheric Administration scientist says he believes most of the dead turtles that have been examined since the Gulf of Mexico oil spill died not from the oil or the chemical dispersants put into the water after the disaster, but from being caught in shrimping nets, though further testing may show otherwise.

Dr. Brian Stacy, a veterinary pathologist who specializes in reptiles, said that more than half the turtles dissected so far, most of which were found shortly after the spill, had sediment in their lungs or airways, which indicated they might have been caught in nets and drowned.
“The only plausible scenario where you would have high numbers of animals forcibly submerged would be fishery interaction,” he said. “That is the primary consideration for this event.”
Many times the usual number of turtles have been found stranded this year, but NOAA has cautioned from the beginning that the oil spill is not necessarily to blame.

For the full story, see:
SHAILA DEWAN. “Turtle Deaths Called Result of Shrimping, Not Oil Spill.” The New York Times (Sat., June 26, 2010): A9.
(Note: the online version of the article is dated June 25, 2010.)

Swedish Town Wants Nuclear Waste Dump

“Osthammar is competing for the right to host a storage site for radioactive waste.” Source of caption and photo: online version of the NYT article quoted and cited below.

After reading Petr Beckmann’s The Health Hazards of NOT Going Nuclear, a few decades ago, I became convinced that nuclear power was being rejected in the United States due to irrational fears based on a failure to make reasonable estimates of the costs and the benefits.
Isn’t it ironic that the irrational fear of nuclear power is at long last being overcome mainly by the irrational fear of global warming?

(p. A10) . . . , in Osthammar, . . . as many as 80 percent of the 21,000 inhabitants are in favor of the nuclear waste dump. The town is now one of two finalists among the communities in Sweden that vied for the right to host the dump.

Sweden, which swore off nuclear power after less than 20 percent of Swedes approved of it in a referendum in the 1980s, would seem an unlikely place for such a competition. But it has reversed course recently and plans to begin building new nuclear reactors, adding to the 10 it already operates.
But legislation requires that before any new plants can be built, the Swedish Nuclear Fuel and Waste Management Company, better known by the initials SKB, must first create permanent storage space for the radioactive waste the reactors produce.
In most countries, of course, people would sooner allow a factory hog farm or garbage incinerator in their backyards than a nuclear waste dump. But in Sweden, SKB found 18 of 20 possible towns near proposed sites intrigued by their proposition. Then it had to whittle the list down to two, Osthammar and Oskarshamn, both already the site of nuclear plants.
SKB recently said it would ask the Swedish government later this year for permission to build the storage depot in Osthammar. If the government gives the green light to Osthammar over Oskarshamn, construction could begin some time after 2015, officials said.
Claes Thegerstrom, a nuclear physicist who is the chief executive of SKB, attributed the new attitude of Swedes toward nuclear energy to fears of global warming. “In the 1980s nobody was mentioning CO2,” or carbon dioxide, considered the major cause of global warming, he said. “Now, it’s on the top of the list of environmental issues.” Since they burn no fossil fuels, nuclear power plants do not produce carbon dioxide.

For the full story, see:
JOHN TAGLIABUE. “Osthammar Journal; A Town Says ‘Yes, in Our Backyard’ to Nuclear Site.” The New York Times (Tues., April 6, 2010): A10.
(Note: ellipses added.)
(Note: the online version of the article is dated April 5, 2010.)

Beckmann’s wonderful book was:
Beckmann, Petr. The Health Hazards of NOT Going Nuclear. Golem Press, 1976.

Wozniak: “It Was as if My Whole Life Had Been Leading Up to this Point”

(p. 155) It was as if my whole life had been leading up to this point. I’d done my minicomputer redesigns. I’d done data on–screen with Pong and Breakout., and I’d already done a TV terminal. From the Cream Soda Computer and others, I knew how to connect memory and make a working system. I realized that all I needed was this Canadian processor or another processor like it and (p. 156) some memory chips. Then I’d have the computer I’d always wanted!

Oh my god. I could build my own computer, a computer I could own and design to do any neat things I wanted to do with it for the rest of my life.
I didn’t need to spend $400 to get an Altair–which really was just a glorified bunch of chips with a metal frame around it and some lights. That was the same as my take-home salary, I mean, come on. And to make the Altair do anything interesting, I’d have to spend way, way more than that. Probably hundreds, even thousands of dollars. And besides, I’d already been there with the Cream Soda Computer. I was bored with it then. You never go back. You go forward. And now, the Cream Soda Computer could be my jumping-off point.
No way was I going to do that. I decided then and there I had the opportunity to build the complete computer I’d always wanted. I just needed any microprocessor, and I could build an extremely small computer I could write programs on. Programs like games, and the simulation programs I wrote at work. The possibilities went on and on. And I wouldn’t have to buy an Altair to do it. I would design it. all by myself.
That night, the night of that first meeting, this whole vision of a kind of personal computer just popped into my head. All at once. Just like that.

Source:
Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.

China Exports to U.S. Are Smaller than Trade Stats Imply

Source of graph: online version of the WSJ article quoted and cited below.

(p. A2) The WTO says world trade fell 12.2% in 2009. On Friday, the organization predicted that trade would bounce back sharply this year, rising 9.5%.

But these figures don’t tell the whole truth about trade.
According to some economists, trade in finished products–the things consumers actually buy, such as cars, computers and iPods–declined by much less than 12.2% last year. That is because as much as two-thirds of the value of goods that go into trade statistics represent intermediate parts, which are imported from other countries and used to make finished products that then get re-exported. Economists call this the “valued-added effect.” If the value of imported parts were stripped out, however, global trade would have declined by between 4% and around 8% last year, economists say.
By ignoring the multinational composition of goods, conventional trade data also make trade imbalances between some trading partners seem larger than they really are.
China imports a huge quantity of parts from places like Japan and South Korea, but when those components are assembled into finished goods and shipped to the U.S., all the pieces count as Chinese exports, inflating the U.S. trade imbalance with its most polarizing trade partner.
A study by the Sloan Foundation in 2007, for example, found that only $4 of an iPod that costs $150 to produce is made in China, even though the final assembly and export occurs in China. The remaining $146 represents parts imported to China. If only the value added by manufacturers in China were counted, the real U.S.-China trade deficit would be as much as 30% lower than last year’s gap of at $226.8 billion, according to a number of economists.
At the same time, the U.S. trade deficit with Japan would have been 25% higher than the $44.8 billion reported last year, because many goods that China and others export to the U.S. contain parts purchased in Japan.

For the full story, see:
JOHN W. MILLER. “THE NUMBERS GUY; Some Say Trade Numbers Don’t Deliver the Goods .” The Wall Street Journal (Sat., MARCH 27, 2010): A2.

Government Financing Is Not Best Method to Finance Creativity

(p. B4) Government financing is not the best method to prod companies to be creative, said Edmund S. Phelps Jr., a professor of economics at Columbia University who won the Nobel Prize in 2006. But he said it could work.

He spoke at the forum about dwindling innovation in the United States economy. China, India and Brazil are catching up with innovative output, he said, but not Russia.
A high-technology start-up, he said, inherently runs more risk if it can present its product to only one potential buyer — the government — rather than to a range of customers, some of whom may want the product, he said.
“If Russian politicians see that their own prosperity, and that of their people, lies in a more arms-length relationship between the government and business, that would open a lot of possibilities,” he said.

For the full story, see:
ANDREW E. KRAMER. “Russia Plans to Promote Technology Innovations.” The Wall Street Journal (Mon., February 4, 2010): B4.

Not All Entrepreneurs Believe in Property Rights

“Titan Cement’s Bob Odom in March at the site of a proposed plant near Wilmington, N.C. The company says hundreds of jobs would be created.” Source of book image: online version of the WSJ review quoted and cited below.

Is it just me, or does entrepreneur Lloyd Smith, quoted below, come across as a bit arrogant in believing the government should enforce his view of what Wilmington should be like, even if that means violating the property rights of the owner of the land on which the cement plant will be built? (And even if that means that would-be janitor Ron Givens remains unemployed.)

(p. A3) WILMINGTON, N.C.–The old economy and the new economy are squaring off in this coastal city, which is having second thoughts about revisiting its roots in heavy industry.

Titan Cement Co. of Greece wants to build one of the largest U.S. cement plants on the outskirts of the city and is promising hundreds of jobs. The factory would be on the site of a cement plant that closed in 1982 and today is populated mainly by fire ants, copperhead snakes and the occasional skateboarder.
The proposed $450 million plant by Titan America LLC, Titan’s U.S. unit, is welcome news to Ron Givens Sr., a 44-year-old unemployed Wilmington native. Mr. Givens’s father supported 12 children while working at the former Ideal Cement plant, and Mr. Givens and two brothers have now applied for jobs with Titan. “I will apply for janitor if that’s what is going to get me into that plant,” he said.
But thousands of opponents have petitioned local and state politicians to block the plan. They object to the emissions from the plant and say it will scare off tourists, retirees, entrepreneurs and others who might otherwise want to live here.
An initial state environmental review has dragged on for two years, and critics of the plant have filed a lawsuit seeking to further broaden the review. The governor, amid public pressure, has asked the State Bureau of Investigation to probe the plant’s permitting process.
“That’s their tactic: Delay, delay, and at some point Titan will leave,” said Bob Odom, Titan’s general manager in Wilmington, of opposition efforts.
Among the most vocal opponents is a fast-growing class of high-tech entrepreneurs and telecommuters who moved to Wilmington in recent years, drawn to the temperate climate, sandy beaches and good fishing. They argue the plant, by curbing the community’s appeal, will cost more jobs and tax revenue in the long run than it produces.
“I think we can be discriminating,” said Lloyd Smith, a 43-year-old entrepreneur who moved here from northern Virginia in 2001 and founded Cortech Solutions Inc., a neuroscience company with nine employees and about $5 million in annual sales.
The standoff in Wilmington reflects a broader tug-of-war across the country as communities try to kick-start employment. It is unclear how much manufacturing will power the long-term U.S. economic recovery–even in southern states that have long embraced heavy industry but have begun to feel the new economy’s pull.

For the full story, see:
MIKE ESTERL. “Clash of Old, New Economy; Cement Plant Is Resisted by Some Neighbors Who Would Rather Lure High-Tech Jobs.” The Wall Street Journal (Tues., April 6, 2010): A3.