November 2013 – Page 3 – artdiamondblog.com

If Feds Stalled Skype Deal, Google Would Have Been “Stuck with a Piece of Shit”

Even just the plausible possibility of a government veto of an acquisition, can stop the acquisition from happening. The feds thereby kill efficiency and innovation enhancing reconfigurations of assets and business units.

(p. 234) . . . , an opportunity arose that Google’s leaders felt compelled to consider: Skype was available. It was a onetime chance to grab hundreds of millions of Internet voice customers, merging them with Google Voice to create an instant powerhouse. Wesley Chan believed that this was a bad move. Skype relied on a technology called peer to peer, which moved information cheaply and quickly through a decentralized network that emerged through the connections of users. But Google didn’t need that system because it had its own efficient infrastruc-(p. 235)ture. In addition, there was a question whether eBay, the owner of Skype, had claim to all the patents to the underlying technology, so it was unclear what rights Google would have as it tried to embellish and improve the peer-to-peer protocols. Finally, before Google could take possession, the U.S. government might stall the deal for months, maybe even two years, before approving it. “We would have paid all this money, but the value would go away and then we’d be stuck with a piece of shit,” says Chan.

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.
(Note: ellipsis added.)

Entrepreneurial Spirit Values “Voyaging into the Unknown”

“Edmund Phelps, winner of the 2006 Nobel Prize for economics.” Source of caption and photo: online version of the WSJ review quoted and cited below.

(p. C7) Edmund Phelps’s “Mass Flourishing” could easily be retitled “Contra-Corporatism,” for at its heart this fine book is an attack on that increasingly common “third way” between capitalism and socialism. Mr. Phelps cogently argues that America’s current economic woes reflect a reduction in the innovative dynamism that generates economic success and personal satisfaction. He places little hope in the Democratic Party, which “voices a new corporatism well beyond Franklin Roosevelt’s New Deal or Lyndon Johnson’s Great Society,” or in Republicans in the thrall of “traditional values,” who see “the good economy as mercantile capitalism plus social protection and social insurance.” He instead yearns for legislative solons who “could usefully ask of every bill and regulatory directive: How would it impact the dynamism of our economy?”
. . .
The book eloquently discusses the culture of innovation, which can refer to both an entrepreneurial mind-set and the cultural achievements during an age of change. He sees modern capitalism as profoundly humanist, imbued with “a spirit that views the prospect of unanticipated consequences that may come with voyaging into the unknown as a valued part of experience and not a drawback.”
. . .
In . . . [the] new corporatism, the state protects both organized labor and politically connected companies. and the state has acquired a “panoply of new roles,” from regulations “aimed at shielding companies or workforces from competition” to lawsuits that “add to the diversion of income from earners to those receiving compensation or indemnification.” It is as if “every person in a society is a signatory to an implicit contract” in which “no person may be harmed by others without receiving compensation.” But protection against all conceivable harm also means protection against almost all change–and this is the death knell of dynamism and innovation.
. . .
But what is to be done? The author wants governments that are “aware of the importance of the role played by dynamism in a modern-capitalist economy,” and he disparages both current political camps. He has a number of thoughtful ideas about financial-sector reform. He is no libertarian and even proposes a “national bank specializing in extending credit or equity capital to start-up firms”–not my favorite idea.

For the full review, see:
EDWARD GLAESER. “How to Unleash the Economy.” The Wall Street Journal (Sat., Oct. 19, 2013): C7.
(Note: ellipses, and bracketed word, added.)
(Note: the online version of the review has the date Oct. 18, 2013, and has the title “BOOKSHELF; Book Review: ‘Mass Flourishing’ by Edmund Phelps; Innovative dynamism is the key to economic success and personal satisfaction, a Nobel-winner argues.”)

The book under review is:
Phelps, Edmund S. Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change. Princeton, New Jersey: Princeton University Press, 2013.

Source of book image: http://blogs.reuters.com/great-debate/files/2013/08/Mass-Flourishing-cover.jpg

Not All Environmentalists Reject the Refrigerator

(p. D4) MANY environmentalists — even many who think nothing of using recycled toilet paper or cut the thermostat to near-arctic levels — see fridge-free living as an extreme choice or an impractical and excessive goal.
“The refrigerator was a smart advance for society,” said Gretchen Willis, 37, an environmentally conscious mother of four in Arlington, Tex., who recently read about the practice on a popular eco-themed blog, thecrunchychicken.com, and was astounded.
“I never would have thought of it,” Ms. Willis said, explaining that although she’s committed to recycling and using fluorescent bulbs, she draws the line at any environmental practice that will result in great expense or inconvenience. Living without a refrigerator, she said, qualifies on both counts: she would have to buy more food in smaller quantities because of spoilage, prepare exact amounts because she couldn’t refrigerate leftovers, and make daily trips to the grocery store.
“It’s silly not to have one,” she said, “considering what the alternative is: drinking up a gallon of milk in one day so it doesn’t spoil.”
Deanna Duke, who lives in Seattle and runs the site Ms. Willis visited, said that taking a stand for or against unplugging has become “a badge of honor” for those on either side. “It’s either ‘look how far I’m willing to go,’ or ‘look how far I’m not willing to go,’ ” she said. For her part, Ms. Duke may refrain from watering her lawn in an effort at conservation, but she’s firmly in the pro-refrigerator camp. “I can’t think of any circumstances, other than an involuntary extreme situation, that would make me unplug my fridge,” she said. “The convenience factor is too high.”
. . .
Marty O’Gorman, the vice president of Frigidaire, said an 18-cubic-foot Energy Star-rated Frigidaire refrigerator uses about 380 kilowatt-hours a year — less than a standard clothes dryer — and costs a homeowner $40, or about 11 cents a day.
. . .
. . . , Mr. O’Gorman said downsizing from a standard model to Frigidaire’s smallest minifridge would result in only about $6 in energy savings over a year.
It’s this sort of practical calculus that has led many who advocate sustainable living to view unplugging the fridge as a dubious practice. They point out that it is likely to result in more trips to the store (which burns more gas, for those who drive) and the purchase of food in smaller portions (thus more packaging).
“It’s easy to look at your bill and say, ‘I’m saving energy,’ ” Ms. Duke said. “But you need to look at the whole supply chain.”

For the full story, see:
STEVEN KURUTZ. “Trashing the Fridge.” The New York Times (Thurs., February 5, 2009): D1 & D4.
(Note: ellipses added.)
(Note: the online version of the story has the date February 4, 2009.)

Multimillionaire Entrepreneur Ek’s Life Is Not Satisfying Without a Project

“Daniel Ek” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. C11) As a 16-year-old computer geek, Daniel Ek applied for a job at Google but was turned down because he didn’t have a college degree. “I was kind of upset about that,” he says. “I was like, ‘I’ll show them–I’m going to create my own search engine!’ “

That turned out to be harder than he thought, so instead he spent several years building an online advertising company in his native Sweden (and no, he never did finish college). In 2006, he sold the company’s rights and related patents for over $2 million.
“Now I was 23 and a multimillionaire, but I didn’t have anything to do,” he said over lunch recently in midtown Manhattan. He became depressed. “You’re supposed to be the happiest guy on the planet but…there’s no reason why you’re existing,” he says. “I realized it’s really, really fun for a while to go big and go to all of these nightclubs,” but just spending money was not satisfying.
In search of a purpose, he came up with a new model for listening to music: Spotify, a digital streaming service that has made the music business look viable again.

For the full interview, see:
ALEXANDRA WOLFE. “Weekend Confidential: Daniel Ek.” The Wall Street Journal (Sat., June 22, 2013): C11.
(Note: ellipsis in original.)
(Note: the online version of the interview has the date June 21, 2013.)

Steve Jobs Felt Betrayed by Google’s Page and Brin

(p. 221) From all accounts, Jobs prided himself as a canny observer not only of business but also of human character, and he did not want to admit– especially to himself–that he had been betrayed by the two young men he had been attempting to mentor. He felt the trust between the two companies had been violated. After increasingly contentious phone calls, in the summer of 2008, Jobs ventured to Mountain View to see the Android phone and personally judge the extent of the violation. He was reportedly furious. Not only did he believe that Google had performed a bait and switch on him, replacing a noncompeting phone with one that was very much in the iPhone mode, but he also felt that Google had stolen Apple’s intellectual property to do so, appropriating features for which Apple had current or pending patents.
While Jobs could not stop Google from developing the Dream version of Android, he apparently was successful, at least in the first version of the Google phone, in halting its implementation of some of the multitouch gestures that Apple had pioneered. Jobs believed that Apple’s patents gave it exclusive rights to certain on-screen gestures–the pinch and the swipe, for example. According to one insider, Jobs demanded that Google remove support of those gestures from Android phones. Google complied, even though those gestures, which allowed users to resize images, were tremendously useful for viewing web pages on handheld devices.

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

Entrepreneur Arik Achmon Stood Down Powerful Union to Keep His Company Alive

Source of book image: http://www.seraphicpress.com/wp-content/uploads/2013/10/like-dreamers.jpg

(p. C2) Mr. Halevi, an American immigrant who has worked as a journalist and analyst in Jerusalem for 30 years, has created a textured, beautifully written narrative by focusing on seven men — and they are all men — . . . , who served in the paratroop brigade that conquered the Old City of Jerusalem in the 1967 war.
. . .
. . . , the men Mr. Halevi has chosen are compelling. One is Arik Achmon, a secular liberal from a kibbutz who helped transform Israel’s failing statist economy into a thriving capitalist one. Mr. Achmon helped found the first private domestic airline in Israel. The story of how he stood down the once-powerful Histadrut trade union federation to keep his company alive illustrates the enormous changes that Israeli society has undergone in the past three decades.

For the full review, see:
ETHAN BRONNER. “BOOKS OF THE TIMES; 7 Paratroopers and Paths They Took Through an Israel at a Crossroads.” The New York Times (Thurs., September 26, 2013): C2.
(Note: ellipses added.)
(Note: the online version of the review has the date September 25, 2013.)

The book under review is:
Halevi, Yossi Klein. Like Dreamers: The Story of the Israeli Paratroopers Who Reunited Jerusalem and Divided a Nation. New York: HarperCollins, 2013.

“Yossi Klein Halevi.” Source of caption and photo: online version of the NYT review quoted and cited above.

Better Batteries Would Be a General Purpose Technology (GPT)

Economists of technology have been thinking about General Purpose Technologies (GPT) for the last 10 years or so. As the name implies, a GPT is one where there are broad applications, and new applications are invented as the price of the GPT declines. My plausible guess is that a breakthrough in battery technology would be a very important GPT. The progress sketched below is probably not a breakthrough, but progress is good.

(p. C4) People take batteries for granted, but they shouldn’t. All kinds of technological advances hinge on developing smaller and more powerful mobile energy sources.
Researchers at Harvard University and the University of Illinois are reporting just such a creation, one that happens to be no bigger than a grain of sand. These tiny but powerful lithium-ion batteries raise the prospect of a new generation of medical and other devices that can go where traditional hulking batteries can’t.
. . .
Jennifer Lewis, a materials scientist at Harvard, says these batteries can store more energy because 3-D printing enables the stacking of electrodes in greater volume than the thin-film methods now used to make microbatteries.

For the full story, see:
DANIEL AKST. “R AND D: Batteries on the Head of a Pin.” The Wall Street Journal (Sat., June 22, 2013): C4.
(Note: ellipsis added.)
(Note: the online version of the interview has the date June 21, 2013.)

Castro First Fired, and Then Jailed, Economist Chepe, Who Defended Capitalism

“Oscar Espinosa Chepe in 2010.” Source of caption and photo: online version of the NYT obituary quoted and cited below.

(p. B15) Oscar Espinosa Chepe, a high-ranking Cuban economist and diplomat who became a vocal critic of Fidel Castro in the 1990s but chose to remain in Cuba, despite enduring harassment and imprisonment, died on Monday [September 23, 2013] . . .
. . .
Mr. Espinosa Chepe (pronounced CHEH-pay) lost his job as an official of the National Bank of Cuba in 1996 after advocating the limited restoration of capitalist principles like the right to buy and sell one’s home or start a business.
He then became a journalist, writing articles for American and Spanish-language Web sites in which he used statistical data to analyze Cuba’s economic problems. In March 2003 he was one of 75 activists arrested as part of a government crackdown on dissent known as the Black Spring.
. . .
Mr. Espinosa Chepe, who joined Castro’s revolutionary government in the early 1960s and was once head of the powerful Office of Agrarian Reform, had frequently clashed with fellow economic planners over policies he considered overly dogmatic.
His internal critique became increasingly adamant after 1991, when the loss of the Soviet Union’s financial support began taking a devastating toll on the country’s economy. But his proposals for change, many of which had already been adopted in former Soviet bloc states, were labeled counterrevolutionary, said Carmelo Mesa-Lago, a professor emeritus of economics and Latin American studies at the University of Pittsburgh and an expert on Cuban economic policies.

For the full obituary, see:
PAUL VITELLO. “Oscar Espinosa Chepe, Cuban Economist and Castro Critic, Dies at 72.” The New York Times (Fri., September 27, 2013): B15.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the obituary has the date September 25, 2013.)

Google Used Auction Model to Allocate Internal Resources

(p. 202) Google’s chief economist, Hal Varian, would later explain how it worked when new data centers open: “We’ll build a nice new data center and say, ‘Hey, Google Docs, would you move your machines over here?’ And they say, ‘Sure, next month.’ Because nobody wants to go through the disruption of shifting. So I suggested we run an auction similar to what airlines do when they oversell a plane– they keep offering bigger vouchers until enough customers are willing to give up their seats. In our case, we offer more machines in exchange for moving. One group might do it for fifty new ones, another for a hundred, and another won’t move unless we give them three hundred. So we give them to the lowest bidder– they get their extra capacity, and we get computation shifted to the new data center.”
Google eventually devised an elaborate auction model for divvying up existing resources. In a paper entitled “Using a Market Economy to Provision Computer Resources Across Planet-wide Clusters,” a group of Google engineers, along with a Stanford professor of management science and engineering, reported a project that essentially made Google’s
computational resources into a silicon Wall Street. Supply and demand worked here not to fix stock prices but to place a value on resources. The system not only allowed projects at Google to get fair access to storage and computational cycles but identified shortages in computers, storage, and bandwidth. Instead of the Vickery auction used by AdWords, the system used an “ascending clock auction.” At the beginning, the current price of each resource would be displayed, and Google engineers in competing projects could claim them at that price. The ideal outcome would ensure sufficient resources for everyone, in which case the auction stopped. Otherwise, the automated auctioneer would raise the prices for the next “time slot,” and (p. 203) remaining competitors for those resources had to decide whether to bid higher. And so on, until the engineers not willing to stake their budgets on the most contested resources dropped out. “Hence,” write the paper’s authors, “the auction allows users to ‘discover’ prices in which all users pay/ receive payment in proportion to uniform resource prices.”

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

Sound Economic Policies Benefit Africa More than Sachs’ Profligate Interventions

Source of book image: http://images.huffingtonpost.com/2013-09-02-TheIdealist.jpg

(p. A19) Nina Munk’s new book, “The Idealist,” is about the well-known economist Jeffrey Sachs and his “quest to end poverty,” as the subtitle puts it.
. . .
The quest began in 2005, when Sachs, who directs the Earth Institute at Columbia University, started an ambitious program called the Millennium Villages Project. He and his team chose a handful of sub-Saharan African villages, where they imposed a series of “interventions” in such areas as agriculture, health and education.
. . .
With almost every intervention, she documents the chasm that exists between the villagers and those running the project. At one point, the Millennium Villages Project persuades the farmers in Ruhiira to grow maize instead of their traditional crop, called matoke. “The results were fantastic,” she reports, a bumper crop. Except there were no buyers for the maize, so some of it wound up being eaten by rats. In Dertu, Sachs’s staff decided it should set up a livestock market. It flopped. Efforts to convince villagers to start small businesses largely failed. The critical problem of getting clean water to the villages was enormously expensive.
Ultimately, reports Munk, Dertu was scaled back by the Millennium Villages Project while Ruhiira is today lauded as one of the project’s most successful villages. “There is no question the lives of people in Ruhiira have been improved,” Munk told me. “I’ve seen it.” But she is dubious about what that means — other than the fact that if you pump millions of dollars into an isolated African village, the villagers’ lives will be better.
. . .
That things in Africa are getting better is undeniable. Child mortality is down, as is the number of people living in extreme poverty. In his book, “Emerging Africa,” Steve Radelet, the former chief economist for the United States Agency for International Development, gives credit to such factors as more democratic governments, a new class of civil servants and businesspeople, and sounder economic policies. Sachs wants us to believe that the Millennium Villages Project has also helped show the way.
“The Idealist” makes it tough to believe it’s the latter.

For the full review, see:
JOE NOCERA. “Fighting Poverty, and Critics.” The New York Times (Tues., September 3, 2013): A19.
(Note: ellipses added.)
(Note: the online version of the review has the date September 2, 2013.)

The book under review is:
Munk, Nina. The Idealist: Jeffrey Sachs and the Quest to End Poverty. New York: Doubleday, 2013.

The Radelet book mentioned is:
Radelet, Steven. Emerging Africa: How 17 Countries Are Leading the Way. pb ed. Washington, D.C.: Center for Global Development, 2010.