August 2008 – artdiamondblog.com

Kodak Ignored Digital to Its Peril

“Steven J. Sasson, an electrical engineer, created the first digital camera.” Source of caption and photo: online version of the NYT article quoted and cited below.

Kodak’s problems in detailed in the article below, fit very well Christensen’s account about how difficult it is for incumbent firms to embrace major disruptive technologies.

(p. C1) ROCHESTER — Steven J. Sasson, an electrical engineer who invented the first digital camera at Eastman Kodak in the 1970s, remembers well management’s dismay at his feat.
“My prototype was big as a toaster, but the technical people loved it,” Mr. Sasson said. “But it was filmless photography, so management’s reaction was, ‘that’s cute — but don’t tell anyone about it.’ ”
. . .
(p. C2) The company now has digital techniques that can remove scratches and otherwise enhance old movies. It has found more efficient ways to make O.L.E.D.’s — organic light-emitting diodes — for displays in cameras, cellphones and televisions.
This month, Kodak will introduce Stream, a continuous inkjet printer that can churn out customized items like bill inserts at extremely high speeds. It is working on ways to capture and project three-dimensional movies.
. . .
Paradoxically, many of the new products are based on work Kodak began, but abandoned, years ago. The precursor technology to Stream, for example, pushed ink through a single nozzle. Stream has thousands of holes and uses a method called air deflection to separate drops of ink and control the speed and order in which they are deposited on a page.
“I remember wandering through the labs in 2003, and seeing the theoretical model that could become Stream,” said Philip J. Faraci, Kodak’s president. “The technology was half-baked, but it was a real breakthrough.”
Other digital technologies languished as well, said Bill Lloyd, the chief technology officer. “I’ve been here five years, and I’m still learning about all the things they already have,” he said. “It seems Kodak had developed antibodies against anything that might compete with film.”
It took what many analysts say was a near-death experience to change that. Kodak, a film titan in the 20th century, entered the next one in danger of being mowed down by the digital juggernaut. Electronics companies like Sony were siphoning away the photography market, while giants like Hewlett-Packard and Xerox had a lock on printers.
“This was a supertanker that came close to capsizing,” said Timothy M. Ghriskey, chief investment officer at Solaris Asset Management, which long ago sold its Kodak shares.

For the full story, see:
CLAUDIA H. DEUTSCH. “At Kodak, Some Old Things Are New Again.” The New York Times (Fri., May 2, 2008): C1-C2.
(Note: ellipses added.)

“Allan Camp, a technician at Kodak’s inkjet development center in Rochester, works on the development of print heads for printers.” Source of caption and photo: online version of the NYT article quoted and cited above.

European Bureaucrat Forces Businesses to Make “a Smart Business Decision”

If open standards are always “a smart business decision” why do business managers need government bureaucrats to force that decision on them (through fining firms, like Microsoft, that sometimes favor proprietary standards)?
In fact, there are circumstances in which open standards are better for customers, and there are also circumstances in which proprietary standards are better.
To better understand these issues consult Shapiro and Varian’s Information Rules and Christensen and Raynor’s The Innovator’s Solution.

(p. C8) BRUSSELS — The European Union’s competition commissioner, Neelie Kroes, delivered an unusually blunt rebuke to Microsoft on Tuesday by recommending that businesses and governments use software based on open standards.

Ms. Kroes has fought bitterly with Microsoft over the last four years, accusing the company of defying her orders and fining it nearly 1.7 billion euros, or $2.7 billion, on the grounds of violating European competition rules. But her comments were the strongest recommendation yet by Ms. Kroes to jettison Microsoft products, which are based on proprietary standards, and to use rival operating systems to run computers.
“I know a smart business decision when I see one — choosing open standards is a very smart business decision indeed,” Ms. Kroes told a conference in Brussels. “No citizen or company should be forced or encouraged to choose a closed technology over an open one.”

For the full story, see:
JAMES KANTER. “Harsh Words for Microsoft Technology.” The New York Times (Weds., June 11, 2008): C8.

References mentioned:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.
Shapiro, Carl, and Hal R. Varian. Information Rules: A Strategic Guide to the Network Economy. Boston, MA: Harvard Business School Press, 1999.

NASA Suffers From “Utterly Dysfunctional Funding and Management System”

Source of book image: http://press.princeton.edu/images/k8618.gif

(p. A13) The space shuttle Discovery arrived safely home over the weekend, and I suppose we are all rather relieved – that is, those of us who were aware that the shuttle had blasted off a couple of weeks ago on yet another mission. Space exploration is attracting a lot of excitement these days, but the excitement seems to have less to do with the shuttle and more to do with private space ventures, like Richard Branson’s Virgin Galactic or Robert Bigelow’s plans for space hotels or Space Adventures Ltd., whose latest customer for a private space trip is Google co-founder Sergey Brin. He bought a ticket only last week.

Robert Zimmerman’s “The Universe in the Mirror” serves to remind us that NASA, too, can do exciting things in space. Yet the career of the Hubble Space Telescope has been both triumphant and troubled, bringing into focus the strengths and the weaknesses of doing things the NASA way.
. . .
In addition to telling a thrilling tale, Mr. Zimmerman provides a number of lessons. One, he says, is the importance of having human beings in space: Had Hubble not been designed for servicing by astronauts, it would have been an epic failure and a disaster for a generation of astronomers and astrophysicists. Though robots have their uses, he notes, “humans can fix things, something no unmanned probe can do.” . . .
But the biggest lesson of “The Universe in a Mirror” comes from the utterly dysfunctional funding and management system that Mr. Zimmerman portrays. Hubble was a triumph, but a system that requires people to sacrifice careers and personal lives, and to engage in “courageous and illegal” acts, in order to see it succeed is a system that is badly in need of repair. Alas, fixing Hubble turned out to be easier than fixing the system that lay behind its problems.

For the full review, see:

GLENN HARLAN REYNOLDS. “Bookshelf; We Can See Clearly Now.” The Wall Street Journal (Mon., June 16, 2008): A13.
(Note: ellipses added.)

The revised edition of the book under review (including an afterword added by the author) is:
Zimmerman, Robert. The Universe in a Mirror: The Saga of the Hubble Space Telescope and the Visionaries Who Built It. revised pb ed. Princeton, NJ: Princeton University Press, 2010.

Schumpeter on Civil Servants Drifting into “Bureau-Sadism”

(p. 435) . . . , the British civil service, which Schumpeter had admired ever since his youth in Vienna, had become enamored of their new role in economic planning, encouraged by the Labour government. Civil servants had drifted into “downright bureau-sadism” in their attitude toward business.

Source:
McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.
(Note: ellipsis added.)

A.D.A. Tries to Stop Dental Therapists from Competing with Dentists

“Aurora Johnson, left, a dental therapist, filled cavities for Paul Towarak, 10, in the village of Unalakleet, Alaska. For more involved procedures, Ms. Johnson refers patients to a dentist.” Source of caption and photo: online version of the NYT article quoted and cited below.

Clayton Christensen (and co-authors) have suggested that disruptive technologies could reduce the cost and improve the quality of health care. One pathway for this to occur is new technologies that permit effective treatment to be carried out by para-professionals with less education than MD’s.
The article below illustrates Christensen’s idea, and also highlights the main obstacle to its implementation: professional organizations asking the government to regulate and restrict competition from the lower-cost para-professionals.

(p. A1) UNALAKLEET, Alaska — The dental clinic in this village on the edge of the Bering Sea looks like any other, with four chairs, a well-scrubbed floor and a waiting area filled with magazines.
But to the Alaska Dental Society and the American Dental Association, the clinic is a place where the rules of dentistry are flouted daily. The dental groups object not because of any evidence that the clinic provides substandard care, but because it is run by Aurora Johnson, who is not a dentist. After two years of training in a program unique to Alaska, Ms. Johnson performs basic dental work like drilling and filling cavities.
Some dentists who specialize in public health, noting that 100 million Americans cannot afford adequate dental care, say such training programs should be offered nationwide. But professional dental groups disagree, saying that only dentists, with four years of postcollegiate education, should do work like Ms. John-(p. A15)son’s. And while such arrangements are common outside the United States, only one American dental school, in Anchorage, offers such a program.
. . .
(p. A15) In Alaska, the A.D.A. and the state’s dental society had filed a lawsuit to block the program that trained people like Ms. Johnson, who are called dental therapists. The groups dropped the suit last summer after a state court judge issued a ruling critical of the dentists. But the A.D.A. continues to oppose allowing therapists to operate anywhere in the lower 49 states. Currently, therapists are allowed to practice only in Alaska, and only on Alaska Natives.
. . .
Therapists are a low-cost way to provide care to people who might not otherwise have access to it, according to Dr. Ron Nagel, a dentist and consultant for the Alaska Native Tribal Health Consortium, a nonprofit group financed mostly by federal money that provides medical and dental care to tribal communities. “There’s a huge need for these basic services,” Dr. Nagel said.
. . .
Since 1990, the number of private dentists has remained roughly flat, at 150,000, even as the United States population has increased 22 percent. As a result, dentists can easily fill their appointment books without seeing people who cannot meet their fees, and patients who have decayed teeth are suffering needlessly, said Tammy Guido, 50, who is one of seven students now training in Anchorage to become a therapist.
“We’re meeting a need that is not being met,” Ms. Guido said.
Alaskan tribal organizations sponsor Ms. Guido and the other students in Anchorage for the program. To be accepted, students must have a high school diploma or equivalency degree; for the newest class, 7 of 18 candidates were accepted.
In interviews, the students in this year’s class all said they were enthusiastic about the chance to serve communities that have little access to care. All seven had quit full-time jobs and must now get by on a $750 monthly stipend during the two years of training.
“Anybody who’s ever had a toothache can tell you it hurts,” said Ben Steward, 24, the only man in this year’s class. “But talk to someone who’s had a toothache for a year.”

For the full story, see:
ALEX BERENSON. “Dental Clinics, Meeting a Need With No Dentist.” The New York Times (Mon., April 28, 2008): A1 & A15.
(Note: ellipses added.)

One source of Christensen’s views on health care can be found in a chapter in:
Christensen, Clayton M., Scott D. Anthony, and Erik A. Roth. Seeing What’s Next: Using Theories of Innovation to Predict Industry Change. Boston, MA: Harvard Business School Press, 2004.

Google Considers Creative Entrepreneur’s Trial Balloon

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

Apparently the WSJ‘s new owner, Rupert Murdoch, has not yet succeeded in killing the wonderful, quirky, inimitable front page, center column, articles that are part of what makes the WSJ great:

(p. A1) CHANDLER, Ariz. — Jerry Knoblach wants to bring wireless service to millions of rural Americans. His plan: Beam it down from balloons hovering at the edge of space.
This isn’t just hot air. His company, Space Data Corp., already launches 10 balloons a day across the Southern U.S., providing specialized telecom services to truckers and oil companies. His balloons soar 20 miles into the stratosphere, each carrying a shoebox-size payload of electronics that acts like a mini cellphone “tower” covering thousands of square miles below.
His idea has caught the eye of Google Inc., according to people familiar with the matter. The Internet giant — which is now pushing into wireless services — has considered contracting with Space Data or even buying the firm, according to one person.
. . .
Maintaining a telecom system based on gas-filled bladders floating in the sky requires some creativity. The inexpensive bal-(p. A9)loons are good for only 24 hours or so before ultimately bursting in the thin air of the upper atmosphere. The electronic gear they carry, encased in a small Styrofoam box, then drifts gently back to earth on tiny parachutes.
This means Space Data must constantly send up new balloons. To do that, it hires mechanics employed at small airports across the South. It also hires farmers — particularly, dairy farmers.
They’re “very reliable people,” says Mr. Knoblach. They have to “milk the cows 24-7, 365 days a year, so they’re great people to use as a launch crew.” Space Data pays them $50 per launch.

For the full story, see:

AMOL SHARMA “Floating a New Idea For Going Wireless, Parachute Included; Balloon Launch Gets Google’s Attention; Dairy Farmers Can Help.” The Wall Street Journal (Weds., February 20, 2008): A1 & A9.
(Note: ellipsis added.)

“A balloon being launched in Piedmont, Oklahoma.” Source of image: online version of the WSJ article quoted and cited above.

Castro’s Legacy Is Fear

“A NATION’S PHOTO ALBUM. The prospect of life without Fidel Castro is unsettling to many Cubans, who are wary of drastic change.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) We arrived not at the fine new airport in Havana I’ve used many times as a correspondent, but at a smaller, more crowded one that Cuba uses for these family visits, as if to rebuke exiles for having left.

Our reunion was delayed, however, by the surprise announcement last Tuesday that Fidel Castro — whose revolution had torn the family apart — was too ill to return to power. Suddenly, I was at work.
. . .
Still, what most surprised us was how little Cubans clamored for drastic change. Dictator or hero, Mr. Castro’s grip on power was ending, and no one seemed to care. Miriam was disappointed that the streets of Matanzas, Havana, San Agustín and Guanabacoa, the working class city across Havana Bay where she grew up, were tranquil, as if nothing at all had happened.
Of course we understood that things are not always as they seem, and that became clear when the maid in our 133-year-old hotel came to mop up the mess caused by a leaking pipe. Hearing the lilt of Miriam’s Spanish put her at ease. After chatting for a few minutes, she poked her head into the hallway to check for supervisors and shut the door. Only then did she speak from the heart.
“Nobody says it, but everybody knows that someone new could be worse than what we have now,” she whispered. It was the kind of dec-(p. 8)laration I’ve learned to trust because it stems from neither fear nor a desire to curry favor.
Despite having plenty of motivation to demand change — the frequent shortages, the decrepit housing, the cruelty of having one currency for tourists and another with far less buying power for Cubans — she said she feared change more than she feared the status quo. Then she checked the hallway again.
. . .
Truth is, things have changed since my first trip to Cuba in 1978. The heavy presence of the Soviet Union then is a faint shadow now, reflected in blue-eyed Cubans named Yuri. There seem to be more new cars on the roads, more fast food on the street, and more buildings undergoing repair. There even seem to be more buses and fewer people waiting for them since Fidel’s younger brother and temporary replacement, Raúl, publicly demanded that something be done about the pitiful mass transit system when I was here just a year ago.
But much has not changed, or has gotten worse. More families live two or three generations in the same cramped apartments. Detention, interrogation and other troubles still descend on people who dissent in ways as small as wearing a plastic wrist band embossed with the word “cambio,” which means change. The press is still controlled, and disloyalty to the Communist Party still raises the suspicion of neighbors that can lead to the loss of a job or a house. Dissidents remain enemies of the state.
. . .
The revolution itself has left many Cubans, including our relatives here, fed up with promises of change. They long ago tired of sacrificing for an ideal tomorrow; when we finally got together, three days after Fidel’s announcement, Miriam’s stepbrothers and sisters told me their main concerns are getting enough to eat, getting shoes for their children and getting to work on time each day.

For the full commentary, see:
ANTHONY DePALMA. “Future to Wince At.” The New York Times, Week in Review Section (Sun., February 24, 2008): 1 & 8.
(Note: ellipses added.)

Schumpeter on How Amphibial State Capitalism Lacks “Motive Power”

From McCraw’s summary of a brief Schumpeter essay published in 1943 in Seymour Harris’ Postwar Economic Problems:

(p. 424) Schumpeter went on to argue that both in the United States and in capitalist countries abroad, a high rate of public spending during the postwar period would likely evolve into total government control of investment. . . . Some industries might be nationalized, and if the government “should try to run the nationalized industries according to the principles of business rationality, Guided Capitalism would shade off into State Capitalism, . . . ”
. . .
The overall result would likely be “an amphibial state for the calculable future.” The amphibial state might well generate frictions among business, labor, and government and would not benefit from the “motive power” of either capitalism or socialism.

Source:
McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.
(Note: ellipses added.)

Health Care Spending Takes a Large and Growing Share of Income

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

The most interesting part of the article quoted below, was the above graph, that dramatically shows health care’s large and growing share of disposable personal income.

(p. 28) Among employers, the hardest pressed may be small businesses. Their insurance premiums tend to be proportionately higher than ones paid by large employers, because small companies have little bargaining clout with insurers.

Health costs are “burying small business,” said Mike Roach, who owns a small clothing store in Portland, Ore. He recently testified on health coverage at a Senate hearing led by Ron Wyden, Democrat of Oregon.

Last year, Mr. Roach paid about $27,000 in health premiums for his eight employees. “It’s a huge chunk of change,” he said, noting that he was forced to raise his employees’ yearly deductible by 50 percent, to $750.

For the full story, see:

REED ABELSON and MILT FREUDENHEIM. “Even the Insured Feel Strain of Health Costs.” The New York Times, Section 1 (Sun., May 4, 2008): 1 & 28.

Brain-Controlled Prosthetics Within Reach

“A grid in the monkey’s brain carried signals from 100 neurons for the mechanical arm to grab and carry snacks to the mouth.” Source of caption and photos: online version of the NYT article quoted and cited below.

(p. A1) Two monkeys with tiny sensors in their brains have learned to control a mechanical arm with just their thoughts, using it to reach for and grab food and even to adjust for the size and stickiness of morsels when necessary, scientists reported on Wednesday.

The report, released online by the journal Nature, is the most striking demonstration to date of brain-machine interface technology. Scientists expect that technology will eventually allow people with spinal cord injuries and other paralyzing conditions to gain more control over their lives.
The findings suggest that brain-controlled prosthetics, while not practical, are at least technically within reach.
In previous studies, researchers showed that humans who had been paralyzed for years could learn to control a cursor on a computer screen with their brain waves and that nonhuman primates could use their thoughts to move a mechanical arm, a robotic hand or a robot on a treadmill.
The new experiment goes a step further. In it, the monkeys’ brains seem to have adopted the mechanical appendage as their own, refining its movement as it interacted with real objects in real time. The monkeys had their own arms gently restrained while they learned to use the added one.

For the full story, see:
BENEDICT CAREY. “Monkeys Think, Moving Artificial Arm as Own.” The New York Times (Thurs., May 29, 2008): A1 & A18.