Former Biggest Retailer Sears Limps into Bankruptcy

(p. A1) For much of the 20th century, Sears defined American retailing with catalogs and department stores that brought toys, tools and appliances to millions of homes.
By the time Sears Holdings Corp. limped into bankruptcy on Monday [Oct. 15, 2018], the once-great company was shriveled and sickly. Decades earlier, it had been dethroned by Walmart Inc. as the biggest U.S. retailer. Then it was crippled by a chief executive with unorthodox strategies, and Amazon.com Inc., an endless online catalog that sucked profits out of the business.

For the full story, see:
Suzanne Kapner. “Sears, Once Retail Colossus, Enters Painful New Era.” The Wall Street Journal (Tuesday, Oct. 16, 2018): A1 & A6.
(Note: bracketed date added.)
(Note: the online version of the story has the date Oct. 15, 2018, and has the title “Sears Reshaped America, From Kenmore to Allstate.”)

David R. Henderson Offers Advance Praise for Openness to Creative Destruction

In Openness to Creative Destruction, Art Diamond tells amazing story after story of entrepreneurs who have made our lives better. Read it and pinch yourself at your luck in being alive in the 21st century. And learn about how, as a citizen, to keep the innovations coming. Hint: Don’t give government too much power over us.

David R. Henderson, Research Fellow, Hoover Institution.

Henderson’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

Medtronic Founded in Garage

(p. A1) In the mid-1950s, heart pacemakers were bulky devices that had to be wheeled around on carts and plugged into a wall socket. A heart surgeon in Minneapolis asked Earl Bakken if he could make something better. After consulting a back issue of Popular Electronics, Mr. Bakken within a few weeks fashioned a wearable pacemaker powered by a battery.
. . .
Mr. Bakken, who died Oct. 21 [2018] at the age of 94, had no inkling he was creating anything more than a local repair shop when he and a brother-in-law, Palmer Hermundslie, set up Medtronic. “We didn’t analyze or study the market,” he wrote in “One Man’s Full Life,” a 1999 memoir. “We just did it.”
Medtronic’s inventions eventually sustained him physically as well as financially. “I’m on my second pacemaker, and I’m on about my third or fourth insulin pump,” he told the St. Paul Pioneer Press in 2010. “So I’m glad I invented the company, or I wouldn’t be sitting here.”
. . .
Noting his talents, university medical personnel sometimes asked Mr. Bakken to fix their equipment. He noticed that few hospitals had technical staffs to maintain their electrical gear. A chat with his brother-in-law, Mr. Hermundslie, prompted them to fill that niche by setting up a repair shop inside a garage.
. . .
In 1957, a power outage was blamed for the death of a baby dependent on a plug-in pacemaker. A University of Minnesota heart surgeon, Dr. C. Walton Lillehei, asked for alternative technology. Mr. Bakken found a design for an electronic metronome in Popular Electronics and used that as the model for a circuit. He housed the circuitry in a metal box small enough to be taped to a patient’s chest. After a successful test on a dog, Dr. Lillehei began using the device. Articles he wrote about it created a stir, and soon Medtronic was receiving orders from around the world.

For the full obituary, see:
James R. Hagerty. “Founder Started Medtronic as a Local Repair Shop.” The Wall Street Journal (Tuesday, Oct. 27, 2018): A6.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the obituary has the date Oct. 26, 2018, and has the title “Medtronic Founder Earl Bakken Turned a Tiny Repair Shop Into a Giant of Medical Technology.”)

The autobiography mentioned above, is:
Bakken, Earl E. One Man’s Full Life. Fridley, MN: Medtronic, Inc., 1999.

Bureaucratic FDA Delays Approvals for Fear “We’ll Be Toast”

(p. A21) Oct. 30 [2018] marks the 36th anniversary of the FDA’s approval of human insulin synthesized in genetically engineered bacteria, the first product made with “gene splicing” techniques. As the head of the FDA’s evaluation team, I had a front-row seat.
. . .
My team and I were ready to recommend approval after four months’ review. But when I took the packet to my supervisor, he said, “Four months? No way! If anything goes wrong with this product down the road, people will say we rushed it, and we’ll be toast.” That’s the bureaucratic mind-set. I don’t know how long he would have delayed it, but when he went on vacation a month later, I took the packet to his boss, the division director, who signed off.
That anecdote is an example of Milton Friedman’s observation that to understand the motivation of an individual or organization, you need to “follow the self-interest.” A large part of regulators’ self-interest lies in staying out of trouble. One way to do that, my supervisor understood, is not to approve in record time products that might experience unanticipated problems.

For the full commentary, see:
Miller, Henry I. “Follow the FDA’s Self-Interest; While approving a new form of insulin, I saw how regulators protect themselves.” The Wall Street Journal (Monday, Oct. 29, 2018: A21.
(Note: ellipsis, and bracketed year, added.)
(Note: the online version of the commentary has the date Oct. 28, 2018.)

P&G Bureaucracy Suffocates New Chapter

(p. A5) Vermonters Paul and Barbi Schulick sold their vitamin business to Procter & Gamble Co. in 2012, hoping P&G ‘s PG’s deep pockets would fund research needed to nurture the small-but-profitable company.
Instead of growing, New Chapter, founded in 1982 by the Schulicks, spiraled downward.
. . .
The Schulicks kept roles at the company training managers and running research and development at its offices in Brattleboro, Vt., but this month they quit. They said excessive bureaucracy hurt New Chapter and that P&G–coming off a fight with activist investor Nelson Peltz–ramped up pressure for profitability and vetoed plans to develop breakthrough products.
M”The patience factor has really worn out” at P&G, Mr. Schulick said in an interview. “There is a lot of pressure to meet targets, and we weren’t responding fast enough.”

For the full story, see:
Sharon Terlep. “At P&G, Vitamins Maker Loses Energy.” The Wall Street Journal (Friday, July 20, 2018: A5.
(Note: ellipsis added.)
(Note: the online version of the story has the date July 19, 2018, and has the title “They Sold Their Startup to P&G. It Struggled. They Quit.”)

Benjamin Powell Offers Advance Praise for Openness to Creative Destruction

Productive entrepreneurship is not automatic. Art Diamond’s new book brilliantly illustrates how free markets allow entrepreneurs to innovate in ways that disrupt economy activity and, crucially and contrary to popular fears, ultimately reorganize production in ways that allow us to live longer, richer, and more flourishing lives.

Benjamin Powell, Professor of Business Economics, Texas Tech University. Author of Out of Poverty, and other works.

Powell’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

Worn Down by Growing Regulations, American Entrepreneurs Leave China

(p. A1) SHANGHAI–Fifteen years ago in California, a tall technology geek named Steve Mushero started writing a book that predicted the American dream might soon “be found only in China.” Before long, Mr. Mushero moved himself to Shanghai and launched a firm that Amazon.com Inc. and Alibaba Group Holding Ltd. certified as a partner to serve the world’s biggest internet market.
These days, the tech pioneer has hit a wall. He’s heading back to Silicon Valley where he sees deeper demand for his know-how in cloud computing. “The future’s not here,” said the 52-year-old.
For years, American entrepreneurs saw a place in which they would start tech businesses, build restaurant chains and manage factories, making potentially vast sums in an exciting, newly dynamic economy. Many mastered Mandarin, hired and trained thousands in China, bought houses, met their spouses and raised bilingual children.
Now disillusion has set in, fed by soaring costs, creeping taxation, tightening political control and capricious regulation that makes it ever tougher to maneuver the market and fend off new domestic competitors. All these signal to expat business owners their best days were in the past.
The Trump administration is making a hard-nosed challenge to China using trade tariffs, in-(p. A12)vestment controls and prosecution of technology thieves, and many in American business are cheering, if silently, having soured on the market after years of trying.
. . .
From Silicon Valley in 2003, Mr. Mushero felt China’s rumblings and started writing his book, “Off-Shoring the Middle Class.” He saw U.S. companies save money by shifting accounting, X-ray evaluations and other technical jobs overseas. China, he thought, was becoming globalization’s “one-stop-shop” for manufacturing, basic tech work and advanced research.
He predicted a broad shift to China of not only factory work, but U.S. white collar jobs, too.
. . .
At a Starbucks in mid-2008, he sketched out “a napkin business plan” for a new company called ChinaNetCloud (Shanghai) Co. with Mr. Eron. China was overtaking the U.S. as the biggest internet market, and the partners would trail-blaze into cloud services by managing the online operations of local businesses.
. . .
Tougher regulations and competition deterred foreign players. China’s reputation for technology theft kept many out of the market, which reduced the number of Mr. Mushero’s potential clients. In 2013, the American Chamber of Commerce said only 10% of its members trusted data security enough to consider cloud services in China.
Walt Disney Co. tapped ChinaNetCloud to manage the computers hosting some interactive games in 2012, including one based on its hit movie “Frozen.” Mr. Mushero looked forward to more work with the U.S. entertainment giant, but Disney scrubbed the gaming push in mid-2014. Disney declined to comment. Online gaming in China is dominated by big domestic tech companies; it is derided by regulators as chaotic and harmful and hit regularly with new rules.
. . .
On a recent drizzly afternoon, flanked by framed commendations from Amazon and Microsoft for his firm’s achievements in China, Mr. Mushero said that after New Year’s he will head back to California, where he sees burgeoning demand for corporate online services, to market the company’s cloud-management tools.

For the full story, see:
James T. Areddy. “American Entrepreneurs in China Are Heading Home, Disillusioned.” The Wall Street Journal (Saturday, Dec. 8, 2018): A1 & A12.
(Note: ellipses added.)
(Note: the online version of the story has the date Dec. 7, 2018, and has the title “American Entrepreneurs Who Flocked to China Are Heading Home, Disillusioned.”)

Early Medical “Leaps of Ingenuity”

(p. A17) Using a panoply of colorful examples, the author artfully illustrates the frustrations, uncertainty, poorly founded confidence and frequent futility of medical practice in the prescientific age. Employing a consistently light and humorous touch, he effortlessly navigates a cornucopia of fascinating, esoteric and obscure patient histories.
The carefully selected vignettes demonstrate the befuddled mindset of the well-intentioned physicians who were forced to contend with the vagaries of damaged and failing human flesh without the benefit of anesthesia, and armed with little more than the fanciful theories of Galen (a second-century Greek who attributed disease to imbalances of the four “humors”: blood, phlegm, and yellow and black bile) and an elementary knowledge of human anatomy.
Yet despite their lack of mechanistic understanding, these individuals showed leaps of ingenuity no less startling than those of today’s physicians and genome rewriters. To avoid subjecting himself to the dangers of 18th-century surgery to remove a bladder stone, Mr. Morris tells us, the French-born surgeon Claude Martin fashioned an instrument out of a knitting needle and a whalebone handle, which he then inserted through his urethra and used to manually file away the stone.

For the full review, see:
Adrian Woolfson. “BOOKSHELF; Desperate Remedies; Treatments of old for common health ills included tobacco-smoke enemas, arsenic cigarettes–and the “Pigeon’s-Rump Cure.” The Wall Street Journal (Tuesday, Dec. 13, 2018): A17.
(Note: ellipses added.)
(Note: the online version of the review has the date Dec. 12, 2018, and has the title “BOOKSHELF; ‘The Mystery of the Exploding Teeth’ Review: Desperate Remedies; Treatments of old for common health ills included tobacco-smoke enemas, arsenic cigarettes–and the “Pigeon’s-Rump Cure.”)

The book under review, is:
Morris, Thomas. The Mystery of the Exploding Teeth: And Other Curiosities from the History of Medicine. New York: Dutton, 2018.

A Tale of Two Bookstores: New York City Subsidizes Amazon and Regulates the Strand

(p. A22) Since it opened in 1927, the Strand bookstore has managed to survive by beating back the many challenges — soaring rents, book superstores, Amazon, e-books — that have doomed scores of independent bookshops in Manhattan.
With its “18 Miles of Books” slogan, film appearances and celebrity customers, the bibliophile’s haven has become a cultural landmark.
Now New York City wants to make it official by declaring the Strand’s building, at the corner of Broadway and 12th Street in Greenwich Village, a city landmark.
There’s only one problem: The Strand does not want the designation.
Nancy Bass Wyden, who owns the Strand and its building at 826 Broadway, said landmarking could deal a death blow to the business her family has owned for 91 years, one of the largest book stores in the world.
So at a public hearing on Tuesday before the city’s Landmarks Preservation Commission, her plea will be simple, she said: “Do not destroy the Strand.”
Like many building owners in New York, Ms. Wyden argues that the increased restrictions and regulations required of landmarked buildings can be cumbersome and drive up renovation and maintenance costs.
“By landmarking the Strand, you can also destroy a piece of New York history,” she said. “We’re operating on very thin margins here, and this would just cost us a lot more, with this landmarking, and be a lot more hassle.”
. . .
Another rich twist, Ms. Wyden said, was that the move coincides with the announcement that Amazon — not exactly beloved by brick-and-mortar booksellers — plans to open a headquarters in Queens, after city and state leaders offered upwards of $2 billion in incentives to Amazon and its multibillionaire chief executive, Jeff Bezos.
“The richest man in America, who’s a direct competitor, has just been handed $3 billion in subsidies. I’m not asking for money or a tax rebate,” Ms. Wyden said. “Just leave me alone.”
. . .
Owners of buildings with landmark status are in many cases barred from using plans, materials and even paint colors that vary from the original design without the commission’s approval.
. . .
Ms. Wyden — who is married to Senator Ron Wyden of Oregon, whom she met at the similarly renowned Powell’s book store in Portland — is a third-generation owner of the Strand, which stocks roughly 2.5 million used, rare and new books and employs 230 people.
. . .
While she would not divulge the bookstore’s finances, she said that she could make more money renting out the Strand’s five floors, but she loves the family business too much.
She accused city officials of trying to hurry the landmarking process, leaving her little time to prepare a defense, especially during the holiday rush.
“It’s our busiest time of year, and we should be focused on customers and Christmas, which is where we make our most money,” Ms. Wyden said. “But they have no sympathy for that.”

For the full story, see:
Corey Kilgannon. “‘Declaring Strand Bookstore a Landmark Would Kill It, Says Strand.” The New York Times (Tuesday, Dec. 4, 2018): A22.
(Note: ellipses added.)
(Note: the online version of the story has the date Dec. 3, 2018, and has the title “Declare the Strand Bookstore a City Landmark? No Thanks, the Strand Says.” The online version says that the New York print edition appeared on p. A20 and had the title: “A Bid to Preserve Strand Bookstore Would Destroy It, Owner Says.” The page and title in the citation I give further above, is from the National print edition that I receive.)

George Bittlingmayer Offers Advance Praise for Openness to Creative Destruction

For tens of thousands of years, before the Age of Innovation, human beings merely survived by hunting, gathering or tilling, and lived in caves or dirty, squalid huts. In marked contrast, the average person alive today enjoys a standard of living and access to entertainment, medical services, travel, and communications technology that our ancestors would have regarded as miraculous. Art Diamond skillfully shows how we got the many wonders we take for granted – everything from indoor plumbing to SUVs to iPhones – by telling the stories of the determined tinkerers, iconoclasts and visionaries who wouldn’t take “no” for an answer. They succeeded because they were willing to wage the good fight and because they could draw on flawed but ultimately supportive legal, cultural and economic institutions. Diamond also addresses the question of whether the Age of Innovation has run its course, and he provides a timely warning about the dangers that current political and intellectual forces pose to the many potential innovations yet to come. The Age Innovation may end, but whether it does is largely in our hands.

George Bittlingmayer, Economist, Angel Investor, and Professor Emeritus, University of Kansas.

Bittlingmayer’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.