Entrepreneurship – Page 101 – artdiamondblog.com

Informal Sector Responded Quicker to Quake than Established Companies

“In Port-au-Prince . . . , Haitian vendors peddled small bags of coal.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A10) PORT-AU-PRINCE, Haiti — The price of candles in the teeming La Saline market here has climbed 60 percent since last week’s earthquake. A box of matches is up 50 percent. A package of Perdue Chicken Franks has gone up 30 percent.
. . .
Haiti’s huge informal sector reacted faster to the quake than did established companies and banks. Outdoor markets like La Saline are already filled with goods from the countryside, including salt, cornmeal, fruits like mangoes and used clothing from the United States.
. . .
“People want candles because they have no electricity or fuel for their generators,” said Manouchka Wendiwou, 21, a vendor in La Saline who raised her candle prices by 60 percent and made no apology for charging what the market would bear.

For the full story, see:

SIMON ROMERO. “Economy in Shock Struggles to Restart.” The New York Times (Fri., January 22, 2010): A10.
(Note: ellipses added.)
(Note: the online version of the article is dated January 21, 2010.)

“Inventors Are Sometimes Beneficiaries of Their Own Ignorance”

William Rosen gives us a thought-provoking anecdote about Edmund Cartwright, the inventor of the first power loom:

(p. 238) He was also, apparently, convinced of the practicality of such a machine by the success of the “Mechanical Turk,” a supposed chess-playing robot that had mystified all of Europe and which had not yet been revealed as one of the era’s great hoaxes: a hollow figurine concealing a human operator. Inventors are sometimes beneficiaries of their own ignorance.

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

Federal Regulations Hurt Small Toy Makers

(p. C12) The story begins in 2007, an unusually good year for Peapods Natural Toys and Baby Care, in St. Paul, Minn., and many similar mom-and-pop businesses. Frightened by news that toys made in China contained unsafe levels of lead, customers were looking for alternatives to the usual big-box offerings. Just as organic farmers gain market share whenever there’s a food-safety panic, the lead scare boosted sales of artisanal children’s goods. “People wanted made-in-USA products, and we were the only place in town that had them,” says Dan Marshall, the owner of Peapods.

Vendors offering organic materials and a personal touch seemed poised to prosper. But the short-term boon soon turned into a long-term disaster. In response to the lead panic, Congress passed the Consumer Product Safety Improvement Act, or CPSIA, by an overwhelming majority. The law mandates third-party testing and detailed labels not only for toys but for every single product aimed at children 12 and under.
. . .
Although big companies like Mattel could spread the extra costs over millions of toys, Mr. Marshall’s small-scale suppliers couldn’t. Unable to afford thousands of dollars in testing per product, some went out of business. Others moved production to China to cut costs. Many slashed their product lines, reserving the expensive new tests for only their top sellers. The European companies that used to sell Peapods such specialty items as wooden swords and shields or beeswax-finished cherry-wood rattles simply abandoned the U.S. market. The survivors jacked up prices.

For the full commentary, see:
VIRGINIA POSTREL. “COMMERCE & CULTURE; Small Crafts vs. Big Government.” The Wall Street Journal (Sat., January 29, 2011): C12.
(Note: ellipsis added.)

Carlyle (and Rosen) on Arkwright

(p. 236) The greatest hero-worshipper of them all, Thomas Carlyle. described Arkwright as

A plain, almost gross, bag-checked, potbellied, much enduring, much inventing man and barber… . French Revolutions were a-brewing: to resist the same in any measure, imperial Kaisers were impotent without the cotton and cloth of England, and it was this man that had to give England the power of cotton…. It is said ideas produce revolutions, and truly they do; not spiritual ideas only, but even mechanical. In this clanging clashing universal Sword-dance which the European world now dances for the last half-century, Voltaire is but one choragus [leader of a movement, from the old Greek word for the sponsor of a chorus] where Richard Arkwright is another.

. . .
Arkwright was not a great inven-(p. 237)tor, but he was a visionary, who saw, better than any man alive, how to convert useful knowledge into cotton apparel and ultimately into wealth: for himself, and for Britain.

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.
(Note: internal ellipses in original; ellipsis between paragraphs added.)

“It Isn’t the Consumers’ Job to Know What They Want”

“Steven P. Jobs has played a significant role in a string of successful products at Apple, including the iPad, shown above, which was introduced last year.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) Shortly before the iPad tablet went on sale last year, Steven P. Jobs showed off Apple’s latest creation to a small group of journalists. One asked what consumer and market research Apple had done to guide the development of the new product.

“None,” Mr. Jobs replied. “It isn’t the consumers’ job to know what they want.”
For years, and across a career, knowing what consumers want has been the self-appointed task of Mr. Jobs, Apple’s charismatic co-founder. Though he has not always been right, his string of successes at Apple is uncanny. His biggest user-pleasing hits include the Macintosh, the iMac, iBook, iPod, iPhone and iPad.
But as he takes a medical leave of absence, announced on Monday, the question is: Without him at the helm, can Apple continue its streak of innovation, particularly in an industry where rapid-fire product cycles can make today’s leader tomorrow’s laggard?
. . .
(p. B4) With the iPad tablet, Apple jump-started a product category. But with the iPod (a music and media player) and iPhone (smartphone), Apple moved into markets with many millions of users using rival products, but he gave consumers a much improved experience.
“These are seeing-around-the-corner innovations,” said John Kao, an innovation consultant to corporations and governments. “Steve Jobs is totally tuned into what consumers want. But these are not the kind of breakthroughs that market research, where you are asking people’s opinions, really help you make.”
Regis McKenna, a Silicon Valley investor and marketing consultant, said employees at Apple stores provide the company with a powerful window into user habits and needs, even if it is not conventional market research.
“Steve visits the Apple store in Palo Alto frequently,” said Mr. McKenna, a former consultant to Apple.
. . .
In a conversation years ago, Mr. Jobs said he was disturbed when he heard young entrepreneurs in Silicon Valley use the term “exit strategy” — a quick, lucrative sale of a start-up. It was a small ambition, Mr. Jobs said, instead of trying to build companies that last for decades, if not a century or more.
That was a sentiment, Mr. Jobs said, that he shared with his sometime luncheon companion, Andrew S. Grove, then the chief executive of Intel.
“There are builders and traders,” Mr. Grove said on Tuesday. “Steve Jobs is a builder.”

For the full story, see:

STEVE LOHR. “The Missing Tastemaker?” The New York Times (Weds., JANUARY 19, 2011): B1 & B4.
(Note: ellipses added.)
(Note: the online version of the article is dated January 18, 2011 and has the title “Can Apple Find More Hits Without Its Tastemaker?.”)

Stranded Chinese Drivers Curse Government and Buy Noodles from Entrepreneurs

“Enterprising residents of Hetaocun sold food to stranded travelers at a markup.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A7) HETAOCUN, China — Compared with some of the more spectacular recent traffic jams in China, among them a 60-mile snarl last summer that paralyzed a major artery outside Beijing for two weeks, the thousands of travelers who spent the night trapped on a snow-coated highway in southwest Guizhou Province on Monday did not even warrant a mention in the local news media.
. . .
Stranded drivers chain-smoked, stomped their feet against the chill and cursed the government for failing to come to their rescue. As the night wore on, fuel lines froze and cellphone batteries died.
The residents of Hetaocun, however, saw the unmoving necklace of taillights from their mountain village and got entrepreneurial. They roused children from their beds, loaded boxes of instant noodles into baskets and began hawking their staples to a captive clientele. The 500 percent markup did not appear to dent sales.
“It rarely snows here, so this is a good thing,” said Yi Zhonggui, 42, as he wove past stalled vehicles with his wife and 4-year-old daughter lugging thermoses of hot water.
As the supply of noodles ran low, residents began gathering up the walnuts that give the village its name. In between cries of “walnuts, walnuts,” salesmen like Chen Xianneng obliged the desperate with snippets of news from the front, even if the information was based on hearsay.

For the full story, see:
ANDREW JACOBS. “Hetaocun Journal; As Traffic Backs Up, Villagers See Opportunity.” The New York Times (Weds., JANUARY 19, 2011): A7.
(Note: ellipsis added.)
(Note: the online version of the article is dated January 18, 2011 and has the title “Hetaocun Journal; In China, Traffic Jam Benefits Enterprising Villagers.”)

Economic Importance of Inarticulate Knowledge Undermines Case for Central Planning

(p. 78) . . . the intelligence of humans, though immensely strengthened by articulation, nonetheless contains a large component of tacit understanding by individuals who know more than they can say. If this is also true with respect to the sorts of knowledge relevant to our economic activities, then no comprehensive planning agency could obtain the sort of knowledge necessary for economic planning, for it would lie buried deep in the minds of millions of persons.

Source:
Lavoie, Don. National Economic Planning: What Is Left? Washington, DC: Cato Institute, 1985.
(Note: ellipsis added.)

U.S. Sets Capital Requirement Too High for Entrepreneurs’ Visas

“Brian Wong, above at his company’s office in San Francisco, is a Canadian citizen hoping for a rule change that would ease U.S. visa restrictions.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B7) San Francisco entrepreneur Brian Wong has already hired two employees and secured $300,000 in funding for his start-up, and hopes to have a staff of 40 or more full-time workers by this time next year.

But there’s at least one red flag in his business plan: Mr. Wong isn’t American; he’s Canadian.
. . .
. . . foreign entrepreneurs have long played an outsized role in the U.S. start-up sector, especially in the tech industry. Immigrants are nearly 30% more likely to start a business than nonimmigrants, the Small Business Administration says. University of California researchers estimate about a third of Silicon Valley technology firms were started by Indian or Chinese entrepreneurs, while a joint study with Duke University found at least one immigrant founder in over a quarter of all engineering and technology firms launched in the U.S. since the mid 1990s, together generating nearly 450,000 jobs by 2005. Google Inc., Intel Corp., Yahoo Inc. and eBay Inc. all had at least one immigrant founder.
Yet many of these companies were also started on a shoestring, leading some tech industry insiders to say the bill’s capital requirements are far too high.
. . .
. . . , the start-up visa’s high capital requirement is certain to filter out sole-proprietorships, while ensuring it attracts innovative, mostly tech-savvy entrepreneurs, says Bob Litan, a researcher at the Kauffman Foundation. The downside, he says, is that only a handful of immigrant entrepreneurs will qualify.
“Hardly any businesses get venture capital in a given year,” Mr. Litan says. “This isn’t going to have much of an impact on the U.S. economy and I suspect that’s why so few people are opposed to it.”
. . .
Without a visa, Mr. Wong says he’ll be forced to launch his start-up back in Canada, taking the new jobs with him.

For the full story, see:
ANGUS LOTEN. “New Pitch for Start-Up Visas; Senate Bill Would Make for Smoother U.S. Entry for Foreign Entrepreneurs .” The Wall Street Journal (Thurs., December 16, 2010): B7.
(Note: ellipses added.)

Under Health Care ‘Reform’ the Total Cost of Health Care Will “Go through the Roof!”

“Jonathan Bush, nephew of one former president and cousin of another, built a small medical practice into a national enterprise with nearly 1,200 employees.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B10) In the world of health care innovation, the founder and chief executive of Athenahealth has an outsize name. In part, that’s because his name is Jonathan Bush, and he is the nephew of one former president and the cousin of another. But it’s also because his company has mastered the intricacies of the doctor-insurer relationship and become a player in the emerging medical records industry.

Based in Watertown, Mass., Athenahealth offers a suite of administrative services for medical practices. It collects payments from insurers and patients, and it manages electronic health records and patient communication systems. All of this is done remotely through the Internet — or “in the cloud,” as Mr. Bush puts it. Doctors don’t have to install or manage software or pay licensing fees; instead, Athenahealth keeps a percentage of the revenue.
. . .
Q. What’s going on in the health care industry to deliver that kind of growth to you?
A. We are a disruptive technology. We are the only cloud-based service in an industry segment full of sclerotic, enormous, personality-free corporations that have been in business making 90 percent margins doing nothing for decades and decades.
Q. What keeps other companies from building cloud-based systems?
A. For software companies, the biggest barrier to entry is that they give up their business model. Those companies would get hammered on Wall Street if they started selling a service that they have to deliver at a loss for five years. In terms of new entrants, there are two things that we’ve done that would take a good decade to replicate. One, we’ve built out the health care Internet. We’ve been building connections into insurance companies and laboratories and hospital medical records for years and years and years.
And the other barrier to entry is that rules engine. Every time a doctor anywhere in the country gets a claim denied, we have analysts ask the Five Whys. When we get to root cause, we write a new rule into Athenanet and from that day on, no other doctor gets that particular denial from that particular insurance company ever again. We now know of 40 million ways that a doctor can have a claim denied in the United States. The average practice has to rework about 35 percent of their claims, and we only have to rework about 5 percent of ours.
Q. What’s the prognosis for bill collecting under health care reform?
A. Well, there’s going to be new connectors and a whole series of new insurance products that will be managed by the states’ health insurance commissioners. And the law provides for every state to do all of these its own way, so they will have their own rules and regulations, and each state will do it differently. That sounds like springtime in Complexity Land.
Q. What do you think will happen to the total cost of health care under reform?
A. Oh, it’s going to go through the roof! It’s widely accepted that this is not a cost-reform bill — it’s an access bill. It’s in fact a cost-expansion bill.

For the full story, see:

ROBB MANDELBAUM. “Views of Health Care Economics From a C.E.O. Named Bush.” The New York Times (Thurs., September 9, 2010): B10.
(Note: ellipsis added.)
(Note: the online version of the article has the date September 8, 2010.)

Whittle “Struggled for Years to Get Funding and Time to Pursue His Idea”

“When Britain Ruled The Skies: A De Havilland Comet under construction in Belfast in 1954.” Source of caption and photo: online version of the WSJ review quoted and cited below.

(p. C8) Frank Whittle, the brilliant British military pilot and engineer who began patenting jet designs in 1930, struggled for years to get funding and time to pursue his idea. Even after World War II, when a competing Nazi design showed what fighter jets could achieve in battle, U.S. airlines were slow to see jets’ potential for passenger travel.

It took another Brit, airplane designer Geoffrey de Havilland, to awaken postwar America’s aviation behemoths. While Lockheed and Douglas were still churning out rumbling, low-flying propeller planes, De Havilland’s jet-powered Comet began breaking records in 1952. Only after seeing Comets scorch the stratosphere at 500 miles an hour did Howard Hughes want jetliners for TWA and Juan Trippe get interested for Pan Am.
Among American plane makers, it was a military contractor that had struggled in the prewar passenger-plane market–Boeing–that first took up the jetliner challenge. In retrospect, the outcome seems obvious. The Boeing 707 inspired the term “jet set.” Boeing’s iconic 747 “Jumbo Jet” opened jet-setting to the masses.
But in 1952, that outcome was far from obvious. Mr. Verhovek zeroes in on the mid-1950s, when Comets first seemed to own the world and then started plunging from the sky in pieces. The Comet’s fatal design flaw–the result of an insufficient appreciation of the danger of metal fatigue–holds resonance today as both Boeing and Airbus struggle to master the next generation of jetliner materials, composites of carbon fiber and plastic.
. . .
Although “Jet Age” inevitably centers on technology, Mr. Verhovek wisely focuses as well on the outsize personalities behind world-changing innovations. There’s Mr. De Havilland, a manic depressive who was so dedicated to aviation that he kept going after two of his three sons died testing his planes. Mr. Whittle, we learn, sniffed Benzedrine to stay awake, popped tranquilizers to sleep and shriveled to just 127 pounds while developing the jet engine. And Boeing chief executive Bill Allen, a meticulous lawyer, bet the company on passenger jets when not a single U.S. airline wanted one.

For the full review, see:
DANIEL MICHAELS. “Shrinking the World; How jetliners commercialized air travel–stewardesses and all.” The Wall Street Journal (Sat., October 9, 2010): C8.
(Note: ellipsis added.)

The book under review is:
Verhovek, Sam Howe. Jet Age: The Comet, the 707, and the Race to Shrink the World. New York: Avery, 2010.