Author: Art Diamond

Xerox Will Cease to Exist as Independent Firm

(p. A1) When Xerox introduced its popular copying machines in 1959, their wizardry was considered as high tech as the iPhone when Steve Jobs presented it to the world almost 50 years later.
But just as Xerox made carbon paper obsolete, the iPhone, Google Docs and the cloud made Xerox a company of the past.
On Wednesday [January 31, 2018], Xerox said that, after 115 years as an independent business, it would combine operations with Fujifilm Holdings of Japan. The deal signaled the end of a company that was once an American corporate powerhouse.
“Xerox is the poster child for monopoly technology businesses that cannot make the transition to a new generation of technology,” said David B. Yoffie, a professor at the Harvard Business School.
The move offers a stark reminder that no matter how high a company may fly, it is still vulnerable to the next big breakthrough. Xerox joins once formidable tech companies like Kodak and BlackBerry that lost the innovation footrace.
Under the deal, Fujifilm will own just over 50 percent of the Xerox business. There are plans to cut $1.7 billion in costs in coming (p. A11) years. Fujifilm said its joint venture with Xerox would cut its payroll by 10,000 workers worldwide.
How Xerox fell so far is a case study in what management experts call the “competency trap” — an organization becomes so good at one thing, it can’t learn to do anything new.
Xerox traces its origins to the founding in 1903 of the M. H. Kuhn Company. But it was an invention dreamed up in a makeshift Queens lab in the 1930s — a forerunner of the Silicon Valley garages used by the likes of Mr. Jobs — that changed Xerox’s trajectory.
That invention, by Chester Carlson, a patent lawyer, led to the creation of the modern copy machine. He even came up with a term for the process: “xerography.” In 1959, Xerox, which had won the right to explore the technology, offered the office copier that went mainstream.

For the full story, see:
STEVE LOHR and CARLOS TEJADA, “Xerox, Tech Icon That Became a Verb, Is Suddenly Past Tense.” The New York Times (Thursday, Feb. 1, 2018): A1 & A11.
(Note: bracketed date added.)
(Note: the online version of the article has the date JAN. 31, 2018, and has the title “After Era That Made It a Verb, Xerox, in a Sale, Is Past Tense.” The online version says that the New York edition also had title “After Era That Made It a Verb, Xerox, in a Sale, Is Past Tense.” My copy was the “National Edition.”)

Upward Mobility from Moving to the Robust Redundant Labor Markets of Open Boomtowns

(p. B3) Chicago in 1850 was a muddy frontier town of barely 30,000 people. Within two decades, it was 10 times that size. Within another two decades, that number had tripled. By 1910, Chicago — hog butcher for the world, headquarters of Montgomery Ward, the nerve center of the nation’s rail network — had more than two million residents.
“You see these numbers, and they just look fake,” said David Schleicher, a law professor at Yale who writes on urban development and land use. Chicago heading into the 20th century was the fastest-growing city America has ever seen. It was a classic metropolitan magnet, attracting anyone in need of a job or a raise.
But while other cities have played this role through history — enabling people who were geographically mobile to become economically mobile, too — migration patterns like the one that fed Chicago have broken down in today’s America. Interstate mobility nationwide has slowed over the last 30 years. But, more specifically and of greater concern, migration has stalled in the very places with the most opportunity.
As Mr. Schleicher puts it, local economic booms no longer create boomtowns in America.
. . .
Some people aren’t moving into wealthy regions because they’re stuck in struggling ones. They have houses they can’t sell or government benefits they don’t want to lose. But the larger problem is that they’re blocked from moving to prosperous places by the shortage and cost of housing there. And that’s a deliberate decision these wealthy regions have made in opposing more housing construction, a prerequisite to make room for more people.
Compare that with most of American history. The country’s economic growth has long “gone hand in hand with enormous reallocation of population,” write the economists Kyle Herkenhoff, Lee Ohanian and Edward Prescott in a recent study of what’s hobbling similar population flows now.
. . .
Were it not for all the restrictions on housing in the most productive places — if workers were able to more freely migrate to them — Mr. Herkenhoff and his co-authors and the economists Enrico Moretti and Chang-Tai Hsieh have estimated that the nation’s G.D.P. would be substantially higher. By their calculations, there are millions of workers missing from the Bay Area and metropolitan New York today.
The population growth that is occurring in these metro areas is fueled almost entirely by immigration, as Ryan Avent points out in “The Gated City,” where he makes a similar argument to Mr. Schleicher. If we consider only domestic moves, about 900,000 more people have moved away from New York than to it since 2010. On net, about 47,000 have left both San Jose and Washington, D.C., while Boston has lost a net 36,000.

For the full commentary, see:
Emily Badger. “Why New York and the Bay Area Are Missing Millions of Workers.” The New York Times (Friday, Dec. 8, 2017): B3.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Dec. 6, 2017, and has the title “What Happened to the American Boomtown?”)

The Herkenhoff et al. paper mentioned above, is:
Herkenhoff, Kyle F., Lee E. Ohanian, and Edward C. Prescott. “Tarnishing the Golden and Empire States: Land-Use Restrictions and the U.S. Economic Slowdown.” Journal of Monetary Economics 93 (Jan. 2018): 89-109.

The Moretti and Hsieh paper mentioned above, is:
Hsieh, Chang-Tai, and Enrico Moretti. “Housing Constraints and Spatial Misallocation.” Working paper, May 18, 2017.

The book by Ryan Avent, mentioned above, is:
Avent, Ryan. The Gated City. Amazon Digital Services LLC, 2011.

Millions of Dollars and 30 Years Later, A.I. Still Has Lacks Crucial Common Sense

(p. B6) SAN FRANCISCO — Microsoft’s co-founder Paul Allen said Wednesday [February 28, 2018] that he was pumping an additional $125 million into his nonprofit computer research lab for an ambitious new effort to teach machines “common sense.”
. . .
“To make real progress in A.I., we have to overcome the big challenges in the area of common sense,” said Mr. Allen, who founded the software giant Microsoft in the 1970s with Bill Gates.
. . .
In the mid-1980s, Doug Lenat, a former Stanford University professor, with backing from the government and several of the country’s largest tech companies, started a project called Cyc. He and his team of researchers worked to codify all the simple truths that we learn as children, from “you can’t be in two places at the same time” to “when drinking from a cup, hold the open end up.”
Thirty years later, Mr. Lenat and his team are still at work on this “common sense engine” — with no end in sight.
Mr. Allen helped fund Cyc, and he believes it is time to take a fresh approach, he said, because modern technologies make it easier to build this kind of system.
Mr. Lenat welcomed the new project. But he also warned of challenges: Cyc has burned through hundreds of millions of dollars in funding, running into countless problems that were not evident when the project began. He called them “buzz saws.”

For the full story, see:
CADE METZ, “A.I.’s Greatest Challenge: Digitizing Common Sense.” The New York Times (Thursday, March 1, 2018): B6.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the article has the date Feb. 28, 2018, and has the title “Paul Allen Wants to Teach Machines Common Sense.”)

Value of Property Rights Now Seen by One Who Seized Land

(p. 4) MAZOWE, Zimbabwe — The police first came early one morning five years ago, catching villagers by surprise as they worked in their fields. As hundreds of anti-riot police officers jumped down from their vehicles, their commander issued the villagers an order.
“He said that mother and daughter Grace Mugabe wanted this place,” recalled a village leader, Denboy Chaparadza. “So you better move away.”
The villagers understood right away: Grace Mugabe, the wife of Robert Mugabe, who was ousted from power in November after 37 years as Zimbabwe’s leader, and their daughter, Bona, coveted the villagers’ land. The Mugabes already owned property and businesses in Mazowe, about 25 miles north of Harare, the capital, and they were eager to expand.
Before the villagers could object, the police, armed with sticks and iron bars, demolished their modest houses. “Every house,” Mr. Chaparadza said. “They left us out in the open. We felt betrayed.”
. . .
One reason the 146 families who lived in Mazowe felt betrayed by their leader was that they themselves had seized the land from a white farmer in 2000, under Mr. Mugabe’s fast-track land reform program. Now, they risked losing everything to his wife and daughter: 3,100 acres of prime land for farming and cattle ranching that abuts a lake and gold mines.
. . .
Determining who owns the land is a necessary step to development and democratization in Zimbabwe. Nearly all Zimbabweans who benefited from Mr. Mugabe’s land reform policy lack titles, or legal ownership of their property — leaving them at the mercy of the politically powerful.
. . .
Land also remains a tool of political control, one that Mr. Mnangagwa and other leaders of the governing ZANU-PF party have never shown a willingness to relinquish.
. . .
In recent years, as fighting over succession intensified inside ZANU-PF, land was used to punish and to keep people in line.
High-ranking officials expelled from the party had their land seized, or suffered repeated incursions into their properties by party youths. The threat of losing their farms led some officials to stay in ZANU-PF, instead of decamping to new opposition parties.
. . .
Mr. Chaparadza, the village leader, said that as part of any resolution of the land issue, the new government should compensate white farmers.
“Even if they come back, that’s fine as long as they give us another place,” he said. “We won’t deny them. What we need is only some land where we can survive — and title to the land.”

For the full story, see:
NORIMITSU ONISHI. “Land Issue Stands in Zimbabwe’s Path.” The New York Times, First Section (Sunday, January 21, 2018): 4.
(Note: ellipses added.)
(Note: the online version of the story has the date JAN. 20, 2018, and has the title “Resolving Who Owns What Land Lies at Heart of Zimbabwe’s Future.”)

FDA Regulations Stop Vape Shop Innovations

(p. A19) After Kimberly Manor lost her husband to lung cancer, she was inspired to make a dramatic career change. Kimberly now owns and operates Moose Jooce in Lake, Mich., a “vape shop” that sells various electronic nicotine devices. These products use battery-powered coils to vaporize liquids, with differing levels of nicotine or none at all. Thus, vapers may inhale nicotine without the tar or other harmful chemicals in tobacco smoke, since there is no tobacco and no combustion. Scientific evidence suggests this is a much safer alternative to smoking.
Ms. Manor estimates that her business has helped more than 500 people quit smoking, most of them longtime smokers in their 50s or older. Yet the Food and Drug Administration is discouraging more such enterprises. In a regulation issued in 2016 known as the “deeming rule,” the agency ordered that vaping products would be subject to the same regulations developed for the cigarette industry under the Tobacco Control Act of 2009.
The deeming rule has been devastating to businesses like Ms. Manor’s. To give just one example, vape shop owners frequently experiment by mixing new flavors for the liquid “juice.” Now, each separate creation requires its own prohibitively expensive application for FDA approval, which means that vape shops have been forced to stop innovating.

For the full commentary, see:
Todd Gaziano and Tommy Berry, “Career Civil Servants Illegitimately Rule America; Leslie Kux has never been elected or confirmed by the Senate. She’s issued nearly 200 regulations.” The Wall Street Journal (Thursday, March 1, 2018): A19.
(Note: the online version of the commentary has the date Feb. 28, 2018.)

By Many Metrics, Life Is Better Than Ever

(p. A15) . . . , Mr. Easterbrook argues, “at no juncture in American history were people better off than they were in 2016: living standards, per-capita income, buying power, health, safety, liberty, and longevity were at their highest.”
A potent counter to today’s unwarranted pessimism, the author claims, is not just the evidence that can be seen (rising employment, wages, wealth, health, lifespans and so on) but what has not been seen. Granaries, for instance, are not empty: The many predictions made since the 1960s that billions would die of starvation have not come true. “Instead, by 2015, the United Nations reported global malnutrition had declined to the lowest level in history. Nearly all malnutrition that persists is caused by distribution failures or by government corruption, not by lack of supply.” In fact, obesity is rapidly becoming a global problem.
Similarly, even though there are occasional panics, “resources have not been depleted despite the incredible proliferation of people, vehicles, aircraft, and construction.” Instead of oil and gas running out by the year 2000, as some in the 1970s predicted, both “are in worldwide oversupply” along with minerals and ores.
. . .
Data supporting this author’s optimistic observations are presented throughout “It’s Better Than It Looks.” Similar catalogues can be found in books like Steven Pinker’s “Enlightenment Now” (2018), Johan Norberg’s “Progress” (2016), Peter Diamandis and Steven Kotler’s “Abundance” (2012) and Matt Ridley’s “The Rational Optimist” (2010). I even touched on some of the same points in my own “The Moral Arc” (2015). Apparently, though, this chorus is not loud enough, since pessimism remains as prominent as it ever was.

For the full review, see:
Michael Shermer. “BOOKSHELF; Why Things Are Looking Up; Though declinists in both parties may bemoan our miserable lives, Americans are healthier, wealthier, safer and living longer than ever.” The Wall Street Journal (Wednesday, Feb. 28, 2018): A15.
(Note: ellipses added.)
(Note: the online version of the review has the date Feb. 27, 2018, and has the title “BOOKSHELF; ‘It’s Better Than It Looks’ Review: Why Things Are Looking Up; Though declinists in both parties may bemoan our miserable lives, Americans are healthier, wealthier, safer and living longer than ever.”)

The book under review, is:
Easterbrook, Gregg. It’s Better Than It Looks: Reasons for Optimism in an Age of Fear. New York: PublicAffairs, 2018.

The More Governments Tax, the Less Workers Work

(p. A17) European countries trail the U.S. in working hard and controlling taxes, and their economies have lagged in comparison. France has a tax-to-GDP ratio of about 44%, and in Italy it’s 43%. The French and Italians work almost 30% fewer hours per person than Americans. Notably, the French economy has flatlined since 2010 while Italy’s has contracted.
These patterns are not a coincidence: High taxes discourage work and capital formation. Data from the Organization for Economic Cooperation and Development suggests that a 1% increase in a nation’s tax rate is associated with a 1.4% decrease in hours worked per person in the working-age population. U.S. data dating to the 1970s also shows that higher taxes cause workers to limit their hours, reducing economic output.

For the full commentary, see:
Winkler, Rolfe and Justin Lahart. “Government Spending Discourages Work; The French and Italians pay higher taxes and put in 30% fewer hours per person than Americans.” The Wall Street Journal (Tuesday, Feb. 27, 2018): A17.
(Note: the online version of the commentary has the date Feb. 26, 2018.)

Proof of Concept for Regenerating Limbs and Internal Organs

(p. D3) Scientists have decoded the genome of the axolotl, the Mexican amphibian with a Mona Lisa smile. It has 32 billion base pairs, which makes it ten times the size of the human genome, and the largest genome ever sequenced.
The axolotl, endangered in the wild, has been bred in laboratories and studied for more than 150 years. It has the remarkable capacity to regrow amputated limbs complete with bones, muscles and nerves; to heal wounds without producing scar tissue; and even to regenerate damaged internal organs.
This salamander can heal a crushed spinal cord and have it function just like it did before it was damaged. This ability, which exists to such an extent in no other animal, makes its genes of considerable interest.
. . .
The researchers have identified some of the genes involved in regeneration, and some genes that exist only in the axolotl, but there is much work still to be done.

For the full story, see:
NICHOLAS BAKALAR. “TAKE A NUMBER; 32 Billion.” The New York Times (Tuesday, February 6, 2018): D3.
(Note: ellipsis added.)
(Note: the online version of the story has the date FEB. 1, 2018, and has the title “TAKE A NUMBER; The Smiling Axolotl Hides a Secret: A Giant Genome.”)

Art Diamond Predicts a 40% Chance that Elon Musk Will Make It to Mars

(p. A1) What are the chances that readers will make it to the end of this article? About 40%.
If you do make it, that prediction will look smart. If you don’t, well, we said the odds were against it.
Such is the nature of the 40% rule, a favorite forecasting tactic of Wall Street analysts and other prognosticators trying to make a bold call without being too bold.
Former British Prime Minister Tony Blair said last month there’s a 40% chance that Brexit will be reversed; Citigroup Inc. analyst Jim Suva wrote that there’s a 40% chance Apple Inc. buys Netflix Inc.; and Nomura Holdings Inc. economist Lewis Alexander said there’s a 40% chance Nafta gets ripped up.
The nice thing about 40% is that you never have to say you were wrong, says Peter Tchir, a market strategist at Academy Securities. Say you predict the Dow Jones Industrial Average has a 40% chance of hitting 30000 before year-end.
“Get it right and you can say ‘See, I was telling everyone it could happen,’ ” he says. “Get it wrong and you can weasel your way out: ‘I didn’t say it was likely, I just said it was a strong possibility.’ “

For the full story, see:
Winkler, Rolfe and Justin Lahart, “How Pundits Never Get It Wrong: Call a 40% Chance.” The Wall Street Journal (Tuesday, Feb. 27, 2018): A1 & A10.
(Note: the online version of the article has the date Feb. 26, 2018, and has the title “How Do Pundits Never Get It Wrong? Call a 40% Chance.”)

Independent Snapchat Entrepreneurs Turned Down Facebook’s Three Billion Dollars

(p. A17) Snap Inc. provides a remarkable story, not only because it has accumulated so many users so rapidly but also because it has remained an independent company in the shadow of Facebook, which in 2012 acquired Instagram, also photo-centered, for $1 billion. A year later, noticing Snapchat’s power to attract young users, Facebook offered Snap’s founders $3 billion for the company, a figure that the book’s publisher has rounded down for the title. Mr. Spiegel, the chief executive, said “no,” and Snap’s current market capitalization, around $23 billion, would seem to be sweet vindication. But Snap has yet to figure out how to convert its many users into net profits, and Instagram has shown no compunction about copying Snapchat features and has grown even faster.
. . .
In Mr. Spiegel’s view, sharing snaps–of anything–was enjoyable because the images were ephemeral and didn’t have to be composed for posterity. “It seems odd that at the beginning of the internet everyone decided everything should stick around forever,” he said.

For the full review, see:
Randall Stross. “BOOKSHELF; A Startup in Focus; Snapchat was born when casual photos replaced text messages among Stanford students. It now boasts 187 million daily users.” The Wall Street Journal (Monday, Feb. 12, 2018): A17.
(Note: ellipsis added.)
(Note: the online version of the review has the date Feb. 11, 2018, and has the title “BOOKSHELF; Review: A Startup in Focus; Snapchat was born when casual photos replaced text messages among Stanford students. It now boasts 187 million daily users.”)

The book under review, is:
Gallagher, Billy. How to Turn Down a Billion Dollars: The Snapchat Story. New York: St. Martin’s Press, 2018.