Economics of Technology – Page 56

Intel’s Computer-on-a-Chip “Was Achieved Largely by Immigrants from Hungary, Italy, Israel, and Japan”

(p. 111) By launching the computer-on-a-chip, Intel gave America an enduring advantage in this key product in information technology–an edge no less significant because it was achieved largely by immigrants from Hungary, Italy, Israel, and Japan. Intel’s three innovations of 1971–plus the silicon gate process that made them the smallest, fastest, and best-selling devices in the industry–nearly twenty years later remain in newer versions the most powerful force in electronics.

Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

Did Fairchild Fail Due to Bad Management or Disruptive Technology?

Clayton Christensen has shown how good management, following respected practices, can fail in the face of disruptive technologies. It would be interesting to investigate whether Fairchild was an example of what Christensen is talking about, or whether it just did not have good management.

(p. 89) Andrew Grove . . . had played a central role in bringing Fairchild to the threshold of a new era. But Fairchild would not enjoy the fruits of his work. Following the path of venture capital pioneer Peter Sprague were scores of other venture capitalists seeking to exploit the new opportunities he had shown them. Collectively, they accelerated the pace of entrepreneurial change–splits and spinoffs, startups and staff shifts–to a level that might be termed California Business Time (“What do you mean, I left Motorola quickly?” asked Gordon Campbell with sincere indignation. “I was there eight months!”).

The venture capitalist focused on Fairchild: that extraordinary pool of electronic talent assembled by Noyce and Moore, but left essentially unattended, undervalued, and little understood by the executives of the company back in Syosset, New York. Fairchild leaders John Carter and Sherman Fairchild commanded the microcosm: the most important technology in the history of the human race. Noyce, Moore, Hoerni, Grove, Sporck, design genius Robert Widlar, and marketeer Jerry Sanders represented possibly the most potent management and technical team ever assembled in the history of world business. But, hey, you guys, don’t forget to report back to Syosset. Don’t forget who’s boss. Don’t give out any bonuses without clearing them through the folks at Camera and Instrument. You might upset some light-meter manager in Philadelphia.
They even made Charles Sporck, the manufacturing titan, feel like “a little kid pissing in his pants.” Good work, Sherman, don’t let the big lug put on airs, don’t let him feel important. He only controls 80 percent of the company’s growth. Widlar is leaving? Great, he never fit in with the corporate culture anyway. Sporck has gone off with Peter Sprague? There are plenty more where he came from.
“It was weird,” said Grove, “they had no idea about what the company or the industry was like, nor did they seem to care. . . . Fairchild was just crumbling. If you wish, the semiconductor division management consisted of twenty significant players: eight went to National, eight went into Intel, and four of them went to Alcoholics Anonymous or something.” Actually there were more than twenty and they went into startups all over the Valley; some twenty-six new semiconductor firms sprouted up between 1967 and 1970. “It got to the point,” recalled one man quoted in Dirk Hanson’s The New Alchemists, “where people were practically driving trucks over to Fairchild and loading up with employees.”

Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.
(Note: the first ellipsis was added; the others were in the original. The italics were also in the original.)

“Every Physicist Wants Two Things: Glory and Money”

(p. 54) . . . in 1950, Shockley published his book Electrons and Holes in Semiconductors, which stood for many years as the definitive work in the field and confirmed his credentials for the Nobel Prize that he shared with Brattain and Bardeen in 1956. The fact was that for his theory of the field effect transistor that later dominated the industry and for the junction transistor that was dominating it at the time, Shockley deserved the prize alone. He had at last made his point.

Yet Shockley was not satisfied. “Every physicist,” he said at the time, “wants two things: glory and money. I have won the glory. Now I want the money.”

Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.
(Note: ellipsis added.)

Gilder’s Microcosm Tells the Story of the Entrepreneurs Who Made Personal Computers Possible

Source of book image: http://images.indiebound.com/923/705/9780671705923.jpg

Many years ago Telecosm was the first George Gilder book that I read; I enjoyed it for its over-the-top verbal exuberance in detailing, praising and predicting the progress of the then-new broadband technologies. I bought his earlier Microcosm at about the same time, but didn’t get around to reading it because I assumed it would be a dated read, dealing in a similar manner with the earlier personal computer (PC) technology.
In the last year or so I have read Gilder’s Wealth and Poverty and Recapturing the Spirit of Enterprise. There is some interesting material in Gilder’s famous Wealth and Poverty, which has sometimes been described as one of the main intellectual manifestos of the Reagan administration. But Recapturing the Spirit of Enterprise has become my favorite Gilder book (so far).
In each chapter, the main modus operandi of that book is to present a case study of a recent entrepreneur, with plenty of interpretation of the lessons to be learned about why entrepreneurship is important to the economy, what sort of personal characteristics are common in entrepreneurs, and what government policies encourage or discourage entrepreneurs.
In that book I read that the original plan had been to include several chapters on the entrepreneurs who had built the personal computer revolution. But the original manuscript grew to unwieldy size, and so the personal computer chapters became the basis of the book Microcosm.
So Microcosm moved to the top of my “to-read” list, and turned out to be a much less-dated book than I had expected.
Microcosm does for the personal computer entrepreneurs what Recapturing the Spirit of Enterprise did for a broader set of entrepreneurs.
In the next few weeks, I will occasionally quote a few especially important examples or thought-provoking observations from Microcosm.

Reference to Gilder’s MIcrocosm:
Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

Other Gilder books mentioned:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992. (The first edition was called simply The Spirit of Enterprise, and appeared in 1984.)
Gilder, George. Telecosm: The World after Bandwidth Abundance. Paperback ed. New York: Touchstone, 2002.
Gilder, George. Wealth and Poverty. 3rd ed. New York: ICS Press, 1993.

Wind Power is Volatile and Unreliable, Especially When Power Demand is Highest

Graph of total electric power load and total wind power generation from the Bonneville Power Authority (BPA) for a week in late July 2009. Source of graph: http://blog.oregonlive.com/environment_impact/2009/07/real_time_wind.jpg

(p. A14) For more than a century, producing power has been a matter of flipping a switch. Need more electricity? Fire up some fuel. Need less? Dial the flame back down.

Things won’t be that easy in a world that gets much of its energy from renewable sources, which come and go at nature’s whim. Wind tends to blow hardest at night — a problem, since people use electricity mostly during the day. Sunshine can lose its intensity in seconds if eclipsed by a cloud — inconvenient for people who like their air conditioners to run steadily on summer days.
. . .
Most of the electricity in Bonneville’s service area comes from hydroelectric power. To compensate for the volatility of wind, Bonneville tweaks the amount of water it lets through the dams. But that doesn’t work for the most extreme shifts in wind. Sometimes, when the wind is blowing hard, Bonneville releases extra water over the tops of dams without using it to generate electricity. Otherwise, electrical wires might get overloaded. And when the wind is so strong that Bonneville can’t ditch enough water, the utility orders wind turbines shut off.
“Everything changes with wind,” says Bart McManus, a wind expert at Bonneville.
Sudden doldrums can be as troublesome as sudden gusts. That was the problem on Feb. 26, 2008, in Texas, which produces more wind power than any other state.
At 3 p.m. that afternoon, Texas’s wind farms, concentrated in the western part of the state, were throwing off about 2,000 megawatts of electricity, enough to serve about one million households. Then a cold front blew in. By 6:30 p.m. — when electricity demand typically peaks — wind production in Texas had cratered to about 360 megawatts.
Exacerbating matters, Texans began turning up their heat — much of which, in rural parts of the state, comes from electricity. So, just as wind power unexpectedly plummeted, demand for power spiked.

For the full commentary, see:
JEFFREY BALL. “Unbridled Energy: Predicting Volatile Wind, Sun
Utilities Ramp Up Focus on Forecasting When Renewable Fuel Is at a Peak to Avoid Squandering Power That Still Can’t Be Stored.” The Wall Street Journal (Fri., OCTOBER 5, 2009): A14.
(Note: ellipsis added.)
(Note: the last sentence of the quoted passage, appeared in the print edition, but was inexplicably deleted from the online version.)

For an updated “Near-Real-Time” graph of BPA load and wind generation, see:

http://www.transmission.bpa.gov/Business/Operations/Wind/baltwg.aspx

Incandescent Bulb Defended by Light Expert Who Relit Statue of Liberty

(p. A13) The Energy Independence and Security Act of 2007 will effectively phase out incandescent light bulbs by 2012-2014 in favor of compact fluorescent lamps, or CFLs. Other countries around the world have passed similar legislation to ban most incandescents.

Will some energy be saved? Probably. The problem is this benefit will be more than offset by rampant dissatisfaction with lighting. We are not talking about giving up a small luxury for the greater good. We are talking about compromising light. Light is fundamental. And light is obviously for people, not buildings. The primary objective in the design of any space is to make it comfortable and habitable. This is most critical in homes, where this law will impact our lives the most. And yet while energy conservation, a worthy cause, has strong advocacy in public policy, good lighting has very little.
. . .
As a lighting designer with more than 50 years of experience, having designed more than 2,500 projects including the relighting of the Statue of Liberty, I encourage people who care about their lighting to contact their elected officials and urge them to re-evaluate our nation’s energy legislation so that it serves people, not an energy-saving agenda.

For the full commentary, see:
HOWARD M. BRANDSTON. “Save the Light Bulb!; Compact fluorescents don’t produce good quality light.” The Wall Street Journal (Mon., AUGUST 31, 2009): A13.
(Note: ellipsis added.)
(Note: the online version of the article is dated Sun., Aug. 30.)

Google Does Good

Source of cartoon: online version of the NYT commentary quoted and cited below.

(p. A25) . . . the vast majority of books ever written are not accessible to anyone except the most tenacious researchers at premier academic libraries. Books written after 1923 quickly disappear into a literary black hole. With rare exceptions, one can buy them only for the small number of years they are in print. After that, they are found only in a vanishing number of libraries and used book stores. As the years pass, contracts get lost and forgotten, authors and publishers disappear, the rights holders become impossible to track down.

Inevitably, the few remaining copies of the books are left to deteriorate slowly or are lost to fires, floods and other disasters. While I was at Stanford in 1998, floods damaged or destroyed tens of thousands of books. Unfortunately, such events are not uncommon — a similar flood happened at Stanford just 20 years prior. You could read about it in The Stanford-Lockheed Meyer Library Flood Report, published in 1980, but this book itself is no longer available.
Because books are such an important part of the world’s collective knowledge and cultural heritage, Larry Page, the co-founder of Google, first proposed that we digitize all books a decade ago, when we were a fledgling startup. At the time, it was viewed as so ambitious and challenging a project that we were unable to attract anyone to work on it. But five years later, in 2004, Google Books (then called Google Print) was born, allowing users to search hundreds of thousands of books. Today, they number over 10 million and counting.
. . .
In the Insurance Year Book 1880-1881, which I found on Google Books, Cornelius Walford chronicles the destruction of dozens of libraries and millions of books, in the hope that such a record will “impress the necessity of something being done” to preserve them. The famous library at Alexandria burned three times, in 48 B.C., A.D. 273 and A.D. 640, as did the Library of Congress, where a fire in 1851 destroyed two-thirds of the collection.
I hope such destruction never happens again, but history would suggest otherwise. More important, even if our cultural heritage stays intact in the world’s foremost libraries, it is effectively lost if no one can access it easily. Many companies, libraries and organizations will play a role in saving and making available the works of the 20th century. Together, authors, publishers and Google are taking just one step toward this goal, but it’s an important step. Let’s not miss this opportunity.

For the full commentary, see:
SERGEY BRIN. “A Library to Last Forever.” The New York Times (Fri., October 9, 2009): A25.
(Note: ellipses added.)
(Note: the online version is dated October 8th.)

Omaha’s MidAmerican Energy “Is Ready to Assist BYD’s Foray into the U.S. Auto Market”

“Wang Chuanfu, the chairman of Chinese auto maker BYD, with one of the company’s cars at the automobile show in Detroit in January.” Source of photo and caption: online version of the WSJ article quoted and cited below.

(p. B5) XIAN, China — BYD Co., the Chinese auto maker part-owned by Warren Buffett’s company, is finalizing plans for an all-electric battery car that would be sold in the U.S. next year, ahead of the original schedule, Chairman Wang Chuanfu said.
. . .
One source of Mr. Wang’s confidence in attacking the U.S. car market is BYD’s ties with MidAmerican Energy Holding Co., the unit of Mr. Buffett’s Berkshire Hathaway Inc. that paid about $230 million for a 9.9% stake in BYD.
MidAmerican Chairman David Sokol, who was also interviewed in Xian, said MidAmerican is ready to assist BYD’s foray into the U.S. auto market in “any way we could be helpful.” MidAmerican also might invest in BYD’s new initiatives in the U.S., which, in addition to automobiles, could involve solar panels and battery technology for power utilities.
Mr. Sokol also said MidAmerican hopes to boost its BYD stake if the chance arises. “If in the future there is an opportunity for us to continue to invest in BYD, we will be happy to increase our stake over time, but we will do it in cooperation with BYD,” he said. Mr. Wang said an increase is “negotiable.”

For the full story, see:
NORIHIKO SHIROUZU. “BYD to Sell Electric Car in U.S. Market Next Year.” The Wall Street Journal (Sat., AUGUST 22, 2009): B5.
(Note: ellipsis added.)

Obama Industrial Policy Risks Funding Dead Ends

(p. B1) President Obama has cast himself as a reluctant interventionist in two of the nation’s major industries, Wall Street and Detroit. The federal aid, he says, is a financial bridge to a postcrisis future and the hand-holding will be temporary.

Even so, the scale of the government investment and control — especially by the auto task force now vetting plans at Chrysler and General Motors — points to an approach that has been shunned by the United States more than other developed nations.
“By any coherent definition, this is industrial policy,” said Marcus Noland, a senior fellow at the Peterson Institute for International Economics.
. . .
(p. B7) . . . a more comprehensive, industrial-policylike approach to Detroit carries its own perils, economists say. In trying to manage the industrial shrinkage, they say, there is a fine line between easing the social impact and protecting jobs in ways that inhibit economic change and renewal. In pursuit of new growth, governments risk encouraging overinvestment in areas that prove to be technological dead ends.
In the Japanese experience, economists see evidence of both dangers. Problems, they say, are typically byproducts of what economists call “political capture.” That is, an industrial sector earmarked for special government attention builds up its own political constituency, lobbyists and government bureaucrats to serve that industry. They slow the pace of change, and an economy becomes less nimble and efficient as a result.
Economists say the phenomenon is scarcely confined to nations with explicit industrial policies and cite the history of agricultural subsidies in America or military procurement practices.
But going down the path of industrial policy certainly holds that risk. “You have to bear in mind the opportunity costs of these kinds of government interventions, and remember that life is not an economic textbook and that politics can easily override economic rationality,” said Mr. Noland, an author, with Howard Pack, of “Industrial Policy in an Era of Globalization: Lessons From Asia.”

For the full story, see:
STEVE LOHR. “Highway to the Unknown; Forays in Industrial Policy Bring Risks.” The New York Times (Weds., May 19, 2009): B1 & B7.
(Note: the online title is “In U.S., Steps Toward Industrial Policy in Autos.”)
(Note: ellipses added.)
The full reference to Noland and Pack’s book is:
Noland, Marcus, and Howard Pack. Industrial Policy in an Era of Globalization: Lessons from Asia, Policy Analyses in International Economics. Washington, D.C.: Peterson Institute, 2003.

Electric Mitsubishis and Nissans May Leapfrog Hybrid Toyotas

(p. B6) Both Nissan and Mitsubishi have their own reasons for rushing out an all-electric car. Having invested little in hybrids, they hope to leapfrog straight to the next technology.
. . .
“You don’t see many competing technologies survive in a key market for very long,” said Mr. Shimizu, the Keio University professor.
And more often than not in the history of innovation, a change in the dominant technology means a change in the market leader.
“Electric cars are a disruptive technology, and Toyota knows that,” Mr. Shimizu said. “I wouldn’t say Toyota is killing the electric vehicle. Perhaps Toyota is scared.”

For the full story, see:
HIROKO TABUCHI. “The Electric Slide.” The New York Times (Thursday, August 20, 2009): B1 & B6.
(Note: The online version of the article had the title: “Toyota, Hybrid Innovator, Holds Back in Race to Go Electric.”)
(Note: ellipsis added.)