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Companies Make Big Bets to Get Us What We Need

“The Molycorp Minerals rare earth mine in Mountain Pass, Calif.” Source of caption and photo: online version of the NYT article quoted and cited below.

If the government does not interfere with the price system, then the prospect of higher prices will provide private companies and entrepreneurs the incentive to take risks to provide us with what we need. In the article quoted below, the example is rare earth minerals that are used in high technology products.

(p. B1) On a high plateau where burros and jackrabbits wander an hour’s drive southwest of Las Vegas, a 400-foot-deep chasm hewn from volcanic rock sits at the center of an international policy debate.

The chasm, in Mountain Pass, Calif., used to be the world’s main mine for rare earth elements — minerals crucial to military hardware and the latest wind turbines and hybrid gasoline-electric cars. Molycorp Minerals, which owns the mine, announced on Monday that it had registered with the Securities and Exchange Commission for an initial public offering to help raise the nearly $500 million needed to reopen and expand the mine.
Molycorp is making a big bet that its mine — once the world leader in production of rare earth elements, but now a rusting relic — can be made competitive again. Global demand is surging for the minerals. And customers, particularly the American military, are seeking alternatives to China, which now mines 97 percent of the world’s rare earth elements.
As part of reopening the mine, Molycorp plans to increase its capacity to mine and refine neodymium for rare earth magnets, which are extremely lightweight and are used in many high-tech applications. It will also resume bulk production of lower-value rare earth elements like cerium, used in industrial processes like polishing glass and water filtration.

For the full story, see:
KEITH BRADSHER. “A Mine Owner’s Risky Bet on Rare Minerals.” The New York Times (Thur., April 22, 2010): B1 & B4.
(Note: italics in original; ellipses added.)
(Note: the online version of the review is dated April 21, 2010 and has the title “Challenging China in Rare Earth Mining.”)

In the Age of Vacuum Tubes, 6th Grader’s Dad Showed Him How Transistors Work

Wozniak went on to invent the personal computer.
This example would probably fit with some of what Malcolm Gladwell claims in his bestseller Outliers.

(p. 15) I have to point out here that at no time did my dad make a big deal about my progress in electronics. He taught me stuff, sure, but he always acted as if it was just normal for me. By the sixth grade, I was really advanced in math and science, everyone knew it, and I’d been tested for IQ and they told us it was 200-plus. But my dad never acted like this was something he should push me along with. He pulled out a blackboard from time to time, a tiny little blackboard we had in our house on Edmonton Avenue, and when I asked, he would answer anything and make diagrams for it. I remember how he showed me what happened if you put a plus voltage into a transistor and got a minus voltage out the other end of the transistor. There must have been an inverter, a type of logic gate. And he even physically taught me how to make an AND gate and an OR gate out of parts he got–parts called diodes and resistors. And he showed me how they needed a transistor in between to amplify the signal and connect the output of one gate to the input of the other.

(p. 16) To this very moment, that is the way every single digital device on the planet works at its most basic level.
He took the time–a lot of time–to show me those few little things. They were little things to him, even though Fairchild and Texas Instruments had just developed the transistor only a decade earlier.
It’s amazing, really, to think that my dad taught me about transistors back when almost no one saw anything but vacuum tubes. So he was at the top of the state of the art, probably because his secret job put him in touch with such advanced technology. So I ended up being at the state of the art, too.
The way my dad taught me, though, was not to rote-memorize how parts are connected to form a gate, but to learn where the electrons flowed to make the gate do its job. To truly internalize and understand what is going on, not just read stuff off some blueprint or out of some book.
Those lessons he taught me still drive my intelligence and my methods for all the computer designs I do today.

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.

The reference to the Gladwell book is:
Gladwell, Malcolm. Outliers: The Story of Success. New York, NY: Little, Brown, and Co., 2008.

Finding the Neanderthal in Us

“The Vindija cave in Croatia where three small Neanderthal bones were found.” Source of caption and photo: online version of the NYT article cited below.

(p. A3) The burly Ice Age hunters known as Neanderthals, a long-extinct species, survive today in the genes of almost everyone outside Africa, according to an international research team who offer the first molecular evidence that early humans mated and produced children in liaisons with Neanderthals.

In a significant advance, the researchers mapped most of the Neanderthal genome–the first time that the heredity of such an ancient human species has been reliably reconstructed. The researchers, able for the first time to compare the relatively complete genetic coding of modern and prehistoric human species, found the Neanderthal legacy accounts for up to 4% of the human genome among people in much of the world today.
By comparing the Neanderthal genetic information to the modern human genome, the scientists were able to home in on hints of subtle differences between the ancient and modern DNA affecting skin, stature, fertility and brain power that may have given Homo sapiens an edge over their predecessors.
“It is tantalizing to think that the Neanderthal is not totally extinct,” said geneticist Svante Pääbo at the Max Planck Institute for Evolutionary Anthropology in Leipzig, Germany, who pioneered the $3.8 million research project. “A bit of them lives on in us today.”
. . .
For their analysis, Dr. Pääbo and his colleagues extracted DNA mostly from the fossil remains of three Neanderthal women who lived and died in Croatia between 38,000 and 45,000 years ago. From thimblefuls of powdered bone, the researchers pieced together about three billion base pairs of DNA, covering about two-thirds of the Neanderthal genome. The researchers checked those samples against fragments of genetic code extracted from three other Neanderthal specimens.
“It is a tour de force to get a genome’s worth,” said genetic database expert Ewan Birney at the European Bioinformatics Institute in Cambridge, England.
In research published Thursday in Science, the researchers compared the Neanderthal DNA to the genomes drawn from five people from around the world: a San tribesman from South Africa; a Yoruba from West Africa; a Han Chinese; a West European; and a Pacific islander from Papua, New Guinea. They also checked it against the recently published genome of bio-entrepreneur Craig Venter. Traces of Neanderthal heredity turned up in all but the two African representatives.

For the full story, see:
ROBERT LEE HOTZ. “Most People Carry Neanderthal Genes; Team Finds up to 4% of Human Genome Comes From Extinct Species, the First Evidence It Mated With Homo Sapiens.” The Wall Street Journal (Fri., MAY 7, 2010): A3.
(Note: ellipsis added.)
(Note: the online version of the review is dated MAY 6, 2010.)

A related article, the online version of which is the source for the caption and photo above, is:
NICHOLAS WADE. “Analysis of Neanderthal Genome Points to Interbreeding with Modern Humans.” The New York Times (Fri., May 7, 2010): A9.
(Note: the online version of the review is dated May 6, 2010 and has the title “Signs of Neanderthals Mating With Humans.”)

“A close-up of the bone Vindija 33.16 from Vindija cave, Croatia.” Source of caption and photo: online version of the WSJ article quoted and cited above.

Fannie Mae and Freddie Mac Are Still a “Burgeoning Money Pit” for Taxpayers

(p. 1) If you blinked, you might have missed the ugly first-quarter report . . . from Freddie Mac, the mortgage finance giant that, along with its sister Fannie Mae, soldiers on as one of the financial world’s biggest wards of the state.

Freddie — already propped up with $52 billion in taxpayer funds used to rescue the company from its own mistakes — recorded a loss of $6.7 billion and said it would require an additional $10.6 billion from taxpayers to shore up its financial position.
The news caused nary a ripple in the placid Washington scene. Perhaps that’s because many lawmakers, especially those who once assured us that Fannie and Freddie would never cost taxpayers a dime, hope that their constituents don’t notice the burgeoning money pit these mortgage monsters represent. Some $130 billion in federal money had already been larded on both companies before Freddie’s latest request.
But taxpayers should examine Freddie’s first-quarter numbers not only because the losses are our responsibility. Since they also include details on Freddie’s delinquent mortgages, the company’s sales of foreclosed properties and losses on those sales, the results provide a telling snapshot of the current state of the housing market.
That picture isn’t pretty. Serious delinquencies in Freddie’s single-family conventional loan portfolio — those more than 90 days late — came in at 4.13 percent, up from 2.41 percent for the period a year earlier. Delinquencies in the company’s Alt-A book, one step up from subprime loans, totaled 12.84 percent, while delinquencies on interest-only mortgages were 18.5 percent. Delinquencies on its small portfolio of op-(p. 2)tion-adjustable rate loans totaled 19.8 percent.
The company’s inventory of foreclosed properties rose from 29,145 units at the end of March 2009 to almost 54,000 units this year. Perhaps most troubling, Freddie’s nonperforming assets almost doubled, rising to $115 billion from $62 billion.

For the full commentary, see:
Gretchen Morgenson. “Fair Game; Ignoring the Elephant in the Bailout.” The New York Times, SundayBusiness (Sun., May 9, 2010): 1-2.
(Note: ellipsis added.)
(Note: the online version of the article was dated May 7, 2010.)

Mr. Africa Carries a Gun to Keep the Press Free

“Anchors read the latest news from around the world this month in the studio at Radio Mogadishu, which opened in 1951.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A6) This is a typical day at Radio Mogadishu, the one and only relatively free radio station in south central Somalia where journalists can broadcast what they like — without worrying about being beheaded. The station’s 90-foot antennas, which rise above the rubble of the neighborhood, have literally become a beacon of freedom for reporters, editors, technicians and disc jockeys all across Somalia who have been chased away from their jobs by radical Islamist insurgents.

. . .
Somalia has become one of the most dangerous places in the world to practice journalism, with more than 20 journalists assassinated in the past four years. “We miss them,” Mr. Africa said about his fallen colleagues.
He cracked an embarrassed smile when asked about his name. “It’s because I’m dark, really dark,” he said.
Mr. Africa used to work at one of the city’s other radio stations (the city has more than 10) but decided to move on after fighters with the Shabab dropped by and threatened to kill the reporters if they did not broadcast pro-Shabab news. Mr. Africa called the Shabab meddlers “secret editors” and now he carries a gun.
“I tried to get the other journalists to buy pistols,” Mr. Africa remembered. “But nobody listened to me.”
Another reporter, Musa Osman, said that his real home was only about a mile away.
“But I haven’t seen my kids for months,” he said.
He drew his finger across his throat and laughed a sharp, bitter laugh when asked what would happen if he went home.
The digs here are hardly plush. Most of the journalists sleep on thin foam mattresses in bald concrete rooms. The station itself is a crumbling, bullet-scarred reflection of this entire nation, which has been essentially governmentless for nearly two decades.
. . .
They air the speeches of insurgent leaders, they say, and stories about government soldiers robbing citizens.
“If the government does something bad,” Mr. Africa said. “We report it.”

For the full story, see:
JEFFREY GETTLEMAN. “Mogadishu Journal; A Guiding Voice Amid the Ruins of a Capital City.” The New York Times (Tues., March 30, 2010): A6.
(Note: ellipses added.)
(Note: the online version of the review is dated March 29, 2010.)

Wozniak’s Dad Taught Him the Power of Technology

(p. 12) . . . my dad taught me . . . a lot about electronics. Boy, do I owe a lot to him for this. He first started telling me things and explaining things about electronics when I was really, really young–before I was even four years old. This is before he had that top secret job at Lockheed, when he worked at Electronic Data Systems in the Los Angeles area. One of my first memories is his taking me to his workplace on a weekend and showing me a few electronic parts, putting them on a table with me so I got to play with them and look at them. I can still picture him standing there working on some kind of equipment. I don’t know if he was soldering or what, but I do remember him hooking something up to something else that looked like a little TV set. I now know it was an oscilloscope. And he told me he was trying to get something done, trying to get the picture on the screen with a line (it was a waveform) stable-looking so he could show his boss that his design worked.

And I remember sitting there and being so little, and thinking: Wow, what a great, great world he’s living in. I mean, that’s all I (p. 13) thought: Wow. For people who know how to do this stuff–how to take these little parts and make them work together to do something–well, these people must be the smartest people hi the world. That was really what went through my head, way back then.
Now, I was, of course, too young at that point to decide that I wanted to be an engineer. That came a few years later. I hadn’t even been exposed to science fiction or books about inventors yet, but just then, at that moment, I could see right before my eyes that whatever my dad was doing, whatever it was, it was important and good.

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.
(Note: ellipses added.)

“Climate Change Was One of the Forces that Led to the Triumph of Homo Sapiens”

“The David H. Koch Hall of Human Origins in Washington includes this 30,000-year-old handprint from France.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. C32) The exhibition’s theme is “What Does It Mean to Be Human?” And the new image of the human it creates is different from the one from a century ago. It isn’t that nature has suddenly become a pastoral paradise. Some of the most unusual objects here are fossilized human bones bearing scars of animal attacks: a 3-year-old’s skull from about 2.3 million years ago is marked by eagle talons in the eye sockets; an early human’s foot shows the bite marks of a crocodile. In one of the exhibition’s interactive video stations, in which you are cleverly shown how excavated remains are interpreted, you learn that the teeth of a leopard’s lower jaw found in a cave at the Swartkrans site in South Africa match the puncture marks in a nearby early-human skull: evidence of a 1.8 million-year-old killing.

. . .
During the brief 200,000-year life of Homo sapiens, at least three other human species also existed. And while this might seem to diminish any remnants of pride left to the human animal in the wake of Darwin’s theory, the exhibition actually does the opposite. It puts the human at the center, tracing how through these varied species, central characteristics developed, and we became the sole survivors. The show humanizes evolution. It is, in part, a story of human triumph.
. . .
. . . at recent excavations in China, at Majuangou, stone tools were found in four layers of rock dating from 1.66 million to 1.32 million years ago; fossil pollen proved that each of these four time periods was also associated with a different habitat. “The toolmaker, Homo erectus,” we read, “was able to survive in all of these habitats.”
That ability was crucial. The hall emphasizes that enormous changes in the planet’s climate accompanied hominin development, suggesting that the ability to adapt to such differing circumstances was the human’s strength. Climate change was one of the forces that led to the triumph of Homo sapiens.

For the full review, see:
EDWARD ROTHSTEIN. “Exhibition Review; Hall of Human Origins; Searching the Bones of Our Shared Past.” The New York Times (Fri., March 19, 2010): C25 & C32.
(Note: italics in original; ellipses added.)
(Note: the online version of the review is dated March 18, 2010.)

Class Action Suit Did Little for Class Members, But “Enriched” Attorneys

Many attorneys are good people, including my late father, one of my brothers, and one of my favorite former students.
But a few attorneys must be conscience-challenged; for instance the ones “representing” the class in the case described below.
More importantly, class-action litigation increases the costs and uncertainty of doing business, and thereby increases the prices of the products and services we buy.
In speaking to one of my classes a few years ago, Omaha entrepreneur Joe Ricketts made a strong case for tort reform. it is hard to disagree, unless, like the Democratic Party, you are receiving large contributions from trial lawyers.

(p. B1) . . . , a 2008 settlement of a class action against Ford Motor Co., involving incidents in which Firestone tires exploded on Ford Explorers, offered certain Explorer owners coupons worth $500 toward the purchase of a new Explorer and $300 toward the purchase of any other Ford vehicle.

As of March, only 148 people had redeemed a coupon out of 1,647 people eligible. The plaintiffs’ attorneys who led that litigation collected about $19 million in fees.
“It was rather absurd,” said Julie Hamilton Webber of Glendale, Calif., a class member who has a 1993 Ford Explorer. “The net result was the attorneys were enriched and did nothing for the class.”

For the full story, see:
DIONNE SEARCEY. “Toyota Owners May Reap Little.” The Wall Street Journal (Thurs., MAY 20, 2010): B1-B2.
(Note: ellipsis added.)
(Note: the online version of the article has the slightly different title “Toyota Owners May See Little.”)

Exposing the Hot Air of Wind Power

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

(p. A15) So you want to build a wind farm? OK, Mr. Bryce says, to start you’ll need 45 times the land mass of a nuclear power station to produce a comparable amount of power; and because you are in the middle of nowhere you’ll also need hundreds of miles of high-voltage lines to get the energy to your customers. This “energy sprawl” of giant turbines and pylons will require far greater amounts of concrete and steel than conventional power plants–figure on anywhere from 870 to 956 cubic feet of concrete per megawatt of electricity and 460 tons of steel (32 times more concrete and 139 times as much steel as a gas-fired plant).

Once you’ve carpeted your tract of wilderness with turbines and gotten over any guilt you might feel about the thousands of birds you’re about to kill, prepare to be underwhelmed and underpowered. Look at Texas, Mr. Bryce says: It ranks sixth in the world in total wind-power production capacity, and it has been hailed as a model for renewable energy and green jobs by Republicans and Democrats alike. And yet, according to the Electric Reliability Council of Texas, which runs the state’s electricity grid, just “8.7 percent of the installed wind capability can be counted on as dependable capacity during the peak demand period.” The wind may blow in Texas, but, sadly, it doesn’t blow much when it is most needed–in summer. The net result is that just 1% of the state’s reliable energy needs comes from wind.

For the full review, see
TREVOR BUTTERWORTH. “BOOKSHELF; The Wrong Way To Get to Green; Once you’ve carpeted the wilderness with wind-farm turbines, and crushed any guilt about the birds you’re about to kill, prepare to be underwhelmed and underpowered.” The Wall Street Journal (Tues., APRIL 27, 2010): A15.
(Note: the online version of the article is dated APRIL 30, 2010.)

The book under review is:
Bryce, Robert. Power Hungry; the Myths of “Green” Energy and the Real Fuels of the Future. New York: PublicAffairs, 2010.

Becker Believes the Fight for Liberty Can Be Won

(p. A13) My last question involves a little story. Not long before Milton Friedman’s death in 2006, I tell Mr. Becker, I had a conversation with Friedman. He had just reviewed the growth of spending that was then taking place under the Bush administration, and he was not happy. After a pause during the Reagan years, Friedman had explained, government spending had once again begun to rise. “The challenge for my generation,” Friedman had told me, “was to provide an intellectual defense of liberty.” Then Friedman had looked at me. “The challenge for your generation is to keep it.”

What was the prospect, I asked Mr. Becker, that this generation would indeed keep its liberty? “It could go either way,” he replies. “Milton was right about that.”
Mr. Becker recites some figures. For years, federal spending remained level at about 20% of GDP. Now federal spending has risen to 25% of GDP. On current projections, federal spending would soon rise to 28%. “That concerns me,” Mr. Becker says. “It concerns me a great deal.
“But when Milton was starting out,” he continues, “people really believed a state-run economy was the most efficient way of promoting growth. Today nobody believes that, except maybe in North Korea. You go to China, India, Brazil, Argentina, Mexico, even Western Europe. Most of the economists under 50 have a free-market orientation. Now, there are differences of emphasis and opinion among them. But they’re oriented toward the markets. That’s a very, very important intellectual victory. Will this victory have an effect on policy? Yes. It already has. And in years to come, I believe it will have an even greater impact.”
The sky outside his window has begun to darken. Mr. Becker stands, places some papers into his briefcase, then puts on a tweed jacket and cap. “When I think of my children and grandchildren,” he says, “yes, they’ll have to fight. Liberty can’t be had on the cheap. But it’s not a hopeless fight. It’s not a hopeless fight by any means. I remain basically an optimist.”

For the full interview, see:
PETER ROBINSON. “‘Basically an Optimist’–Still; The Nobel economist says the health-care bill will cause serious damage, but that the American people can be trusted to vote for limited government in November.” The Wall Street Journal (Sat., March 27, 2010): A13.
(Note: the online version of the interview is dated March 26, 2010.)

At Apple Wozniak Was the Inventor, and Jobs Was the Entrepreneur

Source of book image: http://1.bp.blogspot.com/_TwOg8fVl5Og/SkXmn7MyaxI/AAAAAAAAAug/G-klN-KQHis/s1600/iWoz.jpg

iWoz is a fun read, with wild fluctuations in the significance of what is written. When Wozniak writes about the ingredients of inventiveness, it is significant. When he talks about his pranks, or his obsessions with certain number combinations, it is strange. (Maybe I just haven’t figured out the significance of Wozniak’s quirks—I once heard George Stigler say that even the mistakes of a great mind were worth pondering.)
In the next few weeks I’ll be quoting a few of the more significant passages.
An over-riding lesson from the book, is the extent to which both Wozniak and Jobs were necessary for the Apple achievement. Wozniak was a genius inventor, but he did not have the drive or the skills, or the judgment of the entrepreneur.
Schumpeter famously distinguished invention from innovation. Wozniak was the inventor, and Jobs was the innovator (aka, the entrepreneur).

Book discussed:
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.