December 2007 – Page 3 – artdiamondblog.com

“Hit ’em Where They Ain’t”

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

The key to business success is usually thought to be to beat the competition. An alternative sketched by Clayton Christensen, and in the book Blue Ocean Strategy, is to do something that the competition isn’t doing. As a once-famous, old-time baseball player once said: "Hit ’em where they ain’t."

MILPITAS, Calif. — Erik Soule had been waiting 15 months for this moment. The semiconductor engineer was about to launch a new chip, and he needed his pricing approved. In a conference room at Linear Technology Corp., Mr. Soule anxiously explained why his amplifier chip is so advanced that it should sell for $1.68, a third more than its rivals.

His bosses’ reaction: Charge even more. The chip is 30 times better than the competition, they asserted, and high-end customers will crave it on any terms. Why not boost the $1.68 list price by 10 cents? Mr. Soule was nervous. "I can live with that," he guardedly replied, "but what does that accomplish?"

"It’s a dime!" declared Linear’s chairman and founder, Robert Swanson. "And those dimes add up."

For many U.S. companies, such exuberant pricing power vanished long ago. They now struggle to deliver more at lower prices, amid intense global competition. But Linear has built one of the world’s strongest profit fortresses by staying strictly at the fringes, where competition is low and margins are still high.

Away from the semiconductor industry’s frenzied center stage, this midsize company makes 7,500 arcane, unglamorous products that solve real-world problems for a long list of customers. Instead of the better-known digital chips that power the brains of the world’s computers and bring in 85% of the industry’s revenue, Linear makes so-called analog chips that are too cheap for customers to haggle over, but perform chores too important to ignore.

Pick apart a medical ultrasound machine, a hybrid car battery or thousands of other costly devices, and somewhere inside is a Linear chip that helps monitor power consumption or guard against voltage surges. It’s a backwater of high tech well-suited to Linear’s engineer-driven culture, where quirky developers shop for old part testers at flea markets to keep costs down. Many of Linear’s chips cost less than 50 cents to build and sell for three to four times as much, but customers seldom complain about the markup.

Linear made a 39% profit on its $1.1 billion in sales in calendar 2006 — more than five times the average for U.S. industrial companies. Linear easily outpaced even the tech industry’s best-known profit powerhouses, Microsoft Corp. and Google Inc., which earned profits of 26% and 24% of sales for the same period.

For the full story, see:

GEORGE ANDERS. "PRICING POWER; In a Tech Backwater, A Profit Fortress Rises; Maker of Arcane Chips Earns Better Margins Than Google, Microsoft." The Wall Street Journal (Tues., July 10, 2007): A1 & A19.

CEO of Linear Technology Corp. Source of image: online version of the WSJ article cited above.

Omaha Government Displays Pretentious Concrete Donuts: Is Dog Poop Next?

The city of Omaha is forcing its citizens to endure four concrete donuts that are sometimes called "Sounding Stones" and sometimes called "art." Source of photo: online version of Dane Stickney. "ART MOVEMENT; Some neighbors don’t want sculpture in Elmwood Park." Omaha World-Herald (Sat., Nov. 17, 2007): B1.

I believe that all art should be private art. But if the government is going to force art on us, at least they should commission art that most find enjoyable to look at.

Tom Wolfe in The Painted Word skewered the pretension of modern "artists" whose "art" is not intended to please, but is intended to make some obscure philosophical point.

If somebody wants to privately finance such activity, fine. But don’t force the rest of us to finance it through taxation.

(p. 1B) “So is this where they’re putting Stonehenge?”
Stan Hille was walking his dog through Elmwood Park when he stopped to ask me the question. He thought I was a city employee.
“Yes, it is,” I said as I stood near one of the gravel pads awaiting Leslie Iwai’s gigantic five-piece sculpture “Sounding Stones .” “But you don’t sound excited.”
“Well, I guess I’m not,” he said, stopping to contemplate art. “This thing just reminds me of that old question: ‘When is art not art?’ ” Hmm. Great question. Ancient question. I suggested it might not be art until people, especially a commission of people, tells you it’s art. Or, if it’s big, it’s art. Or, if you make something and then say there’s some meaning to it, then maybe it’s art.
As we pondered, Hille’s dog defecated.
“Perhaps if I can find some meaning in this poop, then maybe it’s art,” I told him as I rubbed my chin.
The retired UNO professor and Dundee resident absorbed my genius. “Perhaps,” he responded, rubbing his chin also.
But, alas, I could find no meaning. “Perhaps its lack of meaning is its meaning,” I then argued, sounding not unlike French philosopher Jacques Derrida. “It’s post-postmodern ironic poop.”

. . .

For Hille and others around Elmwood Park, the bigger question seems to be aesthetics.
Elmwood Park is a quiet forest setting. Is this really the place for large chunks of concrete, no matter what they mean?
“It just doesn’t seem to fit,” Hille said.
I’m with him on that. “Sounding Stones ” might make more sense, or at least be better received, in the midst of, say, modern architecture, not nature.
You know, perhaps put it downtown, where it could look like it fell off the old Union Pacific building.
But if “Sounding Stones ” does end up in Elmwood Park, whichit most likely will, I’m guessing it still will end up being a positive move.
Because, as with Hille and me, it’s going to get people thinking and talking about art.
And even when you’re looking at dog droppings, taking time out of the day to contemplate art can’t be a completely bad thing.

Yes, Robert, it can be "a completely bad thing" if you have alternative uses for your time.

For the full commentary, see:

Robert Nelson. "Rocky art may lead to heavy thoughts." Omaha World-Herald (Nov. 21, 2007): 1B.

(Note: ellipsis added.)

USDA Sugar Allocations and Tariff System “Keeps the Price at a Fairly High Level”

Sugar beats unloaded in Scottsbluff, Nebraska at Western Sugar in 1999. Source of photo: online version of the Omaha World-Herald article cited below.

In the article excerpted below, why does Chet Mullin of the Omaha World-Herald care only about beat growers, but not about sugar consumers?

The International Sugar Organization predicts a sizable global surplus of the sweet stuff this year. If the prediction comes true, will it hurt sugar beet growers like those in Nebraska’s Panhandle?

The answer is no, according to Paul Burgener, agricultural economic research analyst at the University of Nebraska’s Panhandle Research and Extension Center in Scottsbluff.

"We have allocations (for sugar production) and we also have a tariff system for imports, and between the two, the USDA manages supply and keeps the price at a fairly high level," Burgener said.

For the full story, see:

CHET MULLIN. "Sugar surplus won’t harm beet growers." Omaha World-Herald (Tuesday, July 17, 2007): 1D & 2D.

Omaha’s Westroads Mall Stops Good Guys From Shooting Back

John Lott earned his PhD at the University of Chicago in economics. What he says below is not popular, or politically correct, but it is probably true. And if it is true, and if we fail to act on its truth, then more good people will continue to be killed, who could have been saved.

The horrible tragedy at the Westroads Mall in Omaha, Neb. received a lot of attention Wednesday and Thursday. It should have. Eight people were killed, and five were wounded.

A Google news search using the phrase "Omaha Mall Shooting" finds an incredible 2,794 news stories worldwide for the last day. From India and Taiwan to Britain and Austria, there are probably few people in the world who haven’t heard about this tragedy.

But despite the massive news coverage, none of the media coverage, at least by 10 a.m. Thursday, mentioned this central fact: Yet another attack occurred in a gun-free zone.

Surely, with all the reporters who appear at these crime scenes and seemingly interview virtually everyone there, why didn’t one simply mention the signs that ban guns from the premises?

Nebraska allows people to carry permitted concealed handguns, but it allows property owners, such as the Westroads Mall, to post signs banning permit holders from legally carrying guns on their property.

. . .

The law-abiding, not criminals, are obeying the rules. Disarming the victims simply means that the killers have less to fear. As Wednesday’s attack demonstrated yet again, police are important, but they almost always arrive at the crime scene after the crime has occurred.

The longer it takes for someone to arrive on the scene with a gun, the more people who will be harmed by such an attack.

Most people understand that guns deter criminals. If a killer were stalking your family, would you feel safer putting a sign out front announcing, "This Home Is a Gun-Free Zone"? But that is what the Westroads Mall did.

For the full commentary, see:

John R. Lott, Jr. "Media Coverage of Mall Shooting Fails to Reveal Mall’s Gun-Free-Zone Status." FOXNEWS.COM (Thurs., December 6, 2007).

(Note: ellipsis added.)

(Note: I am grateful to Luis Locay, for forwarding me Lott’s commentary.)

Reducing Nickel Pollution is an Entrepreneurial “Business Opportunity” in Russia

Vladimir Stratyev in front of a lake containing nickel dust from the nickel factory in the background. Source of photo: online version of the NYT article quoted and cited below.

(p. A4) NORILSK, Russia — A former Siberian gulag with a population of about 210,000, this decrepit city has some of the worst air quality in the world. It is surrounded by dead trees, as far as the eye can see, poisoned by acid rain.

But to Vladimir M. Stratyev, the eye-stinging haze is an unalloyed blessing, for Mr. Stratyev is, in effect, a miner of air pollution. For him the smog of Norilsk is a mother lode.

The smelters here produce one-fifth of all the world’s nickel, a key alloy of stainless steel, while emitting 1.9 million tons of sulfur dioxide a year, more than the entire country of France. They also spew out 10,800 tons of heavy metal particulates.

. . .

Spotting a business opportunity, factory officials have brought in a contractor, Poligon, to extract the metals from one of these deposits, known euphemistically as “technogenic sources of ore.”

Mr. Stratyev, the supervisor of a mining crew, uses a dredge and bulldozer to scoop up the black sludge, rich in nickel that once fell from the sky. He gathers it in mighty piles from a large pond that lies directly downwind from the smelters and returns it to the factory from which it came.

“They should put a monument up to us,” Mr. Stratyev said, standing in front of the dredge he just used to mine air pollution from the bottom of a pond. “We’re solving an ecological problem.”

. . .

The pollution mining began five years ago, according to Aleksandr I. Korolev, a deputy chief engineer at the factory. “It’s a year-round operation,” Mr. Korolev said of the work, which has accelerated recently because of high metals prices. “The pond does not freeze,” he said, because of the chemicals and the inflow of warm effluent from the factory.

For the full story, see:

ANDREW E. KRAMER. "NORILSK JOURNAL; For One Business, Polluted Clouds Have Silvery Linings." The New York Times (Thurs., July 12, 2007): A4.

Source of map: online version of the NYT article cited above.

Energy Experts Question Reliability of Wind Power

"A wind farm near Malmo, Sweden. The use of wind power in many European countries has stagnated in recent years." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. C1) Yet Sweden’s gleaming wind park is entering service at a time when wind energy is coming under sharper scrutiny, not just from hostile neighbors, who complain that the towers are a blot on the landscape, but from energy experts who question its reliability as a source of power.

For starters, the wind does not blow all the time. When it does, it does not necessarily do so during periods of high demand for electricity. That makes wind a shaky replacement for more dependable, if polluting, energy sources like oil, coal and natural gas. More-(p. C5)over, to capture the best breezes, wind farms are often built far from where the demand for electricity is highest. The power they generate must then be carried over long distances on high-voltage lines, which in Germany and other countries are strained and prone to breakdowns.

In the United States, one of the areas most suited for wind turbines is the central part of the country, stretching from Texas through the northern Great Plains — far from the coastal population centers that need the most electricity.

In Denmark, which pioneered wind energy in Europe, construction of wind farms has stagnated in recent years. The Danes export much of their wind-generated electricity to Norway and Sweden because it comes in unpredictable surges that often outstrip demand.

In 2003, Ireland put a moratorium on connecting wind farms to its electricity grid because of the strains that power surges were putting on the network; it has since begun connecting them again.

In the United States, proposals to build large wind parks in the Atlantic off Long Island and off Cape Cod, Mass., have run into stiff opposition from local residents on aesthetic grounds.

As wind energy has matured as an industry, its image has changed — from a clean, even elegant, alternative to fossil fuels to a renewable energy source with advantages and drawbacks, like any other.

“The environmental benefits of wind are not as great as its champions claim,” said Euan C. Blauvelt, research director of ABS Energy Research, an independent market research firm in London. “You’ve still got to have backup sources of power, like coal-fired plants.”

For the full story, see:

MARK LANDLER. "Wind Power, and Resistance; Sweden Turns to a Promising Power Source, With Flaws." The New York Times (Fri., November 23, 2007): C1 & C5.

(Note: online the title was simply "Sweden Turns to a Promising Power Source, With Flaws.")

Measuring Trends in Government Corruption

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

(p. A6) Africa, often stereotyped as a place of epic corruption and misrule, emerges in a World Bank report as a continent of great variety, with some countries — Tanzania, Liberia, Rwanda, Ghana and Niger — making notable progress over the past decade, and others — Zimbabwe, Ivory Coast and Eritrea — moving backward.

The report, released yesterday and based on the most comprehensive data on governance in more than 200 countries, found that not just poor countries struggled with corruption and flawed government.

. . .

The report, “Governance Matters, 2007: Worldwide Governance Indicators 1996-2006,” was written by Mr. Kaufmann and the World Bank researchers Aart Kraay and Massimo Mastruzzi. It was posted on the Internet at www.govindicators.org. Data came from an ideologically diverse array of groups that included Freedom House, Transparency International, the Heritage Foundation, Reporters Without Borders and the State Department.

“This is the best data source on governance now,” said Steven Radelet, a senior fellow at the Center for Global Development, a Washington research group. “It is of huge importance in development. Ten years ago, there was no data. Fifteen years ago, we didn’t talk about this stuff.”

. . .

The report found that the gains and losses balanced out such that the average quality of governance worldwide over the past decade was little improved.

For the full story, see:

CELIA W. DUGGER. "World Bank Report on Governing Finds Level Playing Field." The New York Times (Weds., July 11, 2007): A6.

(Note: ellipses added.)

Cuba’s Best Doctors Not Blind to Incentives Offered by “Communist” Government

"Patients at the Ramón Pando Ferrer eye hospital in Havana." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A4) Cuban doctors abroad receive much better pay than in Cuba, along with other benefits from the state, like the right to buy a car and get a relatively luxurious house when they return. As a result, many of the finest physicians have taken posts abroad.

The doctors and nurses left in Cuba are stretched thin and overworked, resulting in a decline in the quality of care for Cubans, some doctors and patients said.

For the full story, see:

JAMES C. McKINLEY Jr. "Havana Journal; A Health System’s ‘Miracles’ Come With Hidden Costs." The New York Times (Tues., November 20, 2007): A4.

Sanctimonious Celebrities at “Live Earth” Concert “Eco-Extravaganza”

Global-warming concert participants Garner, Madonna, Ludacris, and Gore. Source of photos: online version of the NYT article cited below.

(p. B1) . . . , celebrity efforts to curb the greenhouse effect backlash into the glass-house effect: People who own Escalades, private jets and McMansions shouldn’t recycle bromides at people who fail to carpool to work. Carbon-offsetting, the newly fashionable practice of compensating for one’s own carbon emissions by paying into a fund to reduce them elsewhere, may be better than nothing, but to some it sounds too much (p. B5) like rich men paying others to take their place in the draft during the Civil War.

That credibility gap seemed to fuel much of the skepticism and sniping along the sidelines (British newspapers which gleefully counted Madonna’s many houses and cars, discouraged readers from following in her outsize carbon footprint) and drove Bob Geldof, founder of Live 8, to question this concert’s usefulness.

ALESSANDRA STANLEY. "The TV Watch Sounding the Global-Warming Alarm Without Upsetting the Fans." The New York Times (Mon., July 9, 2007): B1 & B5.

(Note: ellipsis added.)

Effective Foreign Aid

"HOMELAND SECURITY. Many women in Mexico, like Estela Palacio Calzada, with her granddaughter, rely on money sent back from the U.S. " Source of caption and photo: online version of the NYT article quoted and cited below.

Adam Smith argued in The Theory of Moral Sentiments, that altruism is more effective when it is directed toward those we know best–mainly our family, and immediate neighbors.

A policy implication may be that the most effective foreign aid is to have more open immigration policies, that then permit the migrants to send back funds to those in their home country who they know best.

THE money flows in dribs and drabs, crossing borders $200 or $300 at a time. It buys cornmeal and rice and plaid private school skirts and keeps the landlord at bay. Globally, the tally is huge: migrants from poor countries send home about $300 billion a year. That is more than three times the global total in foreign aid, making “remittances” the main source of outside money flowing to the developing world.

Surveys show that 80 percent of the money or more is immediately spent, on food, clothing, housing, education or the occasional beer party or television set. Still, there are tens of billions available for savings or investment, in places where capital is scarce. While remittances have been shown to reduce household poverty, policymakers are looking to increase the effect on economic growth.

Some migrants, for instance, send home money to savings accounts at small bank-like microfinance institutions, which use the resulting capital pool to lend to local entrepreneurs.

For the full story, see:

JASON DePARLE. "Migrant Money Flow: A $300 Billion Current." The New York Times, Week in Review Section (Sun., November 18, 2007): 3.

Source of map graphic: online version of the NYT article quoted and cited above.