Process Innovations Are Neglected, But Important

 

In discussing the process of creative destruction, Schumpeter mentioned both product and process innovations.  By far the greater attention has been given to product innovations.  But maybe process innovations deserve more attention than they have received:

 

Snazzy products are the stuff of legends, romanticized by “early adopters” and skewered by neo-Luddites. Yet while these products bring glory to companies, novel processes are often more important in keeping the cash registers ringing.

. . .

Consider the question of Google’s greatest business secret. Is it the algorithms behind its search tools? Or is it the way it organizes vast clusters of computers around the globe to answer queries so quickly? Perhaps predictably, Google won’t disclose the number of computers deployed in its vast information network (though outsiders speculate that the network has at least 450,000 computers).

I believe that the physical network is Google’s “secret sauce,” its premier competitive advantage. While a brilliant lone wolf can conceive of a dazzling algorithm, only a superwealthy and well-managed organization can run what is arguably the most valuable computer network on the planet. Without the computer network, Google is nothing.

Eric E. Schmidt, Google’s chief executive, appears to agree. Last year he declared, “We believe we get tremendous competitive advantage by essentially building our own infrastructures.”

Process innovations like Google’s computer network are often invisible to the public, and impossible to duplicate by rivals. Yet successful companies realize that maintaining competitive advantage depends heavily on sustaining process innovations.

 

For the full commentary, see: 

G. PASCAL ZACHARY. "PING; The Unsung Heroes Who Move Products Forward." The New York Times, SundayBusiness Section (Sun., September 30, 2007): 3.

(Note:  ellipsis added.)

 

More Live Longer and Better, Due to Ag Biotechnology

 

The author of the commentary excerpted below, 93 year-old Norman Borlaug, received the 1970 Nobel Peace Prize, and was awarded the Congressional Gold Medal on Tues., July 18, 2007. 

 

Agricultural science and technology, including the indispensable tools of biotechnology, will be critical to meeting the growing demands for food, feed, fiber and biofuels. Plant breeders will be challenged to produce seeds that are equipped to better handle saline conditions, resist disease and insects, droughts and waterlogging, and that can protect or increase yields, whether in distressed climates or the breadbaskets of the world. This flourishing new branch of science extends to food crops, fuels, fibers, livestock and even forest products.

. . .

Consider these examples:

 Since 1996, the planting of genetically modified crops developed through biotechnology has spread to about 250 million acres from about five million acres around the world, with half of that area in Latin America and Asia. This has increased global farm income by $27 billion annually.
 
 Ag biotechnology has reduced pesticide applications by nearly 500 million pounds since 1996. In each of the last six years, biotech cotton saved U.S. farmers from using 93 million gallons of water in water-scarce areas, 2.4 million gallons of fuel, and 41,000 person-days to apply the pesticides they formerly used.
 
 Herbicide-tolerant corn and soybeans have enabled greater adoption of minimum-tillage practices. No-till farming has increased 35% in the U.S. since 1996, saving millions of gallons of fuel, perhaps one billion tons of soil each year from running into waterways, and significantly improving moisture conservation as well.
 
 Improvements in crop yields and processing through biotechnology can accelerate the availability of biofuels. While the current emphasis is on using corn and soybeans to produce ethanol, the long-term solution will be cellulosic ethanol made from forest industry by-products and products.

 

For the full commentary, see: 

NORMAN E. BORLAUG.  "Continuing the Green Revolution."  The Wall Street Journal  (Weds., By  July 18, 2007):  A15.

(Note:  ellipses added.)

 

Let There Be Light

 

  One of Mark Bent’s solar flashlights stuck in a wall to illuminate a classroom in Africa.  Source of the photo:   http://bogolight.com/images/success6.jpg

 

What Africa most needs, to grow and prosper, is to eject kleptocratic war-lord governments, and to embrace property rights and the free market.  But in the meantime, maybe handing out some solar powered flashlights can make some modest improvements in how some people live.

The story excerpted below is an example of private, entrepreneur-donor-involved, give-while-you-live philanthropy that holds a greater promise of actually doing some good in the world, than other sorts of philanthropy, or than government foreign aid. 

 

FUGNIDO, Ethiopia — At 10 p.m. in a sweltering refugee camp here in western Ethiopia, a group of foreigners was making its way past thatch-roofed huts when a tall, rail-thin man approached a silver-haired American and took hold of his hands. 

The man, a Sudanese refugee, announced that his wife had just given birth, and the boy would be honored with the visitor’s name. After several awkward translation attempts of “Mark Bent,” it was settled. “Mar,” he said, will grow up hearing stories of his namesake, the man who handed out flashlights powered by the sun.

Since August 2005, when visits to an Eritrean village prompted him to research global access to artificial light, Mr. Bent, 49, a former foreign service officer and Houston oilman, has spent $250,000 to develop and manufacture a solar-powered flashlight.

His invention gives up to seven hours of light on a daily solar recharge and can last nearly three years between replacements of three AA batteries costing 80 cents.

Over the last year, he said, he and corporate benefactors like Exxon Mobil have donated 10,500 flashlights to United Nations refugee camps and African aid charities.

Another 10,000 have been provided through a sales program, and 10,000 more have just arrived in Houston awaiting distribution by his company, SunNight Solar.

“I find it hard sometimes to explain the scope of the problems in these camps with no light,” Mr. Bent said. “If you’re an environmentalist you think about it in terms of discarded batteries and coal and wood burning and kerosene smoke; if you’re a feminist you think of it in terms of security for women and preventing sexual abuse and violence; if you’re an educator you think about it in terms of helping children and adults study at night.”

Here at Fugnido, at one of six camps housing more than 21,000 refugees 550 miles west of Addis Ababa, the Ethiopian capital, Peter Gatkuoth, a Sudanese refugee, wrote on “the importance of Solor.”

“In case of thief, we open our solor and the thief ran away,” he wrote. “If there is a sick person at night we will took him with the solor to health center.”

A shurta, or guard, who called himself just John, said, “I used the light to scare away wild animals.” Others said lights were hung above school desks for children and adults to study after the day’s work.

 

For the full story, see:

Will Connors and Ralph Blumenthal.  "Letting Africa’s Sun Deliver the Luxury of Light to the Poor."  The New York Times, Section 1  (Sun., May 20, 2007):  8.

(Note:  the title of the article on line was:  "Solar Flashlight Lets Africa’s Sun Deliver the Luxury of Light to the Poorest Villages.")

 

 EthiopiaMap.gif   Source of map:  online version of the NYT article cited above.

 

Must-Visit London Attraction “Was Entirely Commercially Funded”

 

The most elegant big wheel in the world, standing 443 feet high, . . .

Unlike old-style Ferris wheels, where the cars hang inside the structure as it rotates, here the pods are on the outside so as to obtain the best view. Their rotation is not dependent on gravity, but on electric motors synchronized by computerized radio signals sent from the hub. Finally, the whole wheel is hung from one side only, so as to hover over the river. This meant some nifty foundation work. Two separate forests of concrete piles — one taking the Eye’s weight, the other stopping it from toppling over sideways — plunge 108 feet into the ground.  . . .  

As with all the best engineering structures, building it became a public spectacle. It was floated up the Thames in segments on giant barges, complete with the world’s largest floating cranes in attendance. It was then assembled flat on pontoons in the river, its giant central spindle was attached to the perimeter by a skein of steel cables — the suspension-bridge variety, but acting like bicycle spokes — and then came an unforgettable week as the whole wheel, weighing 1,780 tons without its 32 capsules (each a further 10 tons), was hauled slowly from the horizontal to an acute angle. Where it stayed, leaning alarmingly, for several days while the final work was done to bring it to its vertical position.

. . .  

Even more remarkably at a time when ambitious architectural projects funded by a national lottery were being built all over Britain, the London Eye — costing £85 million, or about $150 million at the time — was entirely commercially funded. Today it is a must-visit attraction in the British capital, carrying an average of 10,000 visitors a day. Each trip is one 30-minute revolution.

It opened in late 2000 and immediately became exactly the iconic object that the Millennium Dome downstream had tried and failed to be. That was perhaps unfair — the Dome was also a prodigious feat of engineering and architecture — but in the end what decides these things is the public response.

And the public has always responded to a buccaneering spirit in engineering, the idea that enormous risks are being taken, that enormous reward is the prize, but that total disaster is a looming possibility. That, in short, is the achievement of Mr. Marks and Ms. Barfield’s London Eye: The process of making it was every bit as compelling as the ride on the finished product. They are diffident people — the way they tell it, it was just a matter of A following B — but they surely fall into the category of designer as hero (and heroine). In this sense they are in the tradition of the great 19th-century British engineer Isambard Kingdom Brunel, who with his extraordinarily ambitious railways and steamships overcame obstacles with flair and style.  . . .

 

For the full commentary, see: 

HUGH PEARMAN.  "MASTERPIECE; Anatomy of a Classic; Reinventing the Wheel; The London Eye is an engineering marvel with tourist appeal."  The Wall Street Journal  (Sat., May 26, 2007):  P14.

(Note: ellipses added.)

 

Easily Available Capital and Technology Lower Barriers to Entry in Oil Industry

 

CobaltOilDataAnalysis.jpg   "Cobalt scientists analyze data to help pinpoint oil deposits."  Source of caption and photo:  online version of the NYT article cited below.

 

(p. 1)  HOUSTON.  JOSEPH H. BRYANT, still boyish-looking at 51, jostles with glee among tens of thousands of people here at the Offshore Technology Conference, one of the energy industry’s biggest trade fairs. He is surrounded by newfangled technologies occupying more than half a million square feet of display space: drills stuffed with electronic sensors, underwater wells shaped like Christmas trees, mini-submarines and pipes, pumps, tubes, gauges, valves and gadgets galore.

“There is every little gizmo you need to make this business work,” Mr. Bryant says, joyously. He stops at a plastic model of an offshore oil rig, an exact replica of a huge platform he commissioned while running BP’s business in Angola a few years ago. “I love this stuff.”

Like the pieces of a giant puzzle, the parts showcased here could fit together and build an oil company — and that’s exactly what Mr. Bryant set out to do two years ago after a 30-year career directing energy projects for the likes of Amoco, Unocal and BP. With a team composed largely of retired energy executives, he wants to hunt for oil in the deep waters of the Gulf of Mexico or offshore West Africa, challenging Big Oil in its own backyard.

The American oil patch, once left to languish during an extended period of low oil prices, is on the rebound. Wildcatters like Mr. Bryant are ready to pounce. With oil prices now hovering around $60 a barrel — three times higher than they were throughout the 1990s — the industry is expanding at a pace last seen decades ago.

“The oil industry has changed dramatically in the last 20 years,” Mr. Bryant says. “Barriers to entry have dropped significantly. It doesn’t matter if you’ve been in the business 100 years or 100 days.”

Easily available capital and technology, once the preserve of traditional oil companies, are reordering the business. Investors are lining up to finance energy projects while leaps in computing power, imaging tech-(p. 7)nology and collaborative online networks now allow the smallest entities to compete on an equal footing with the biggest players.

“There’s a lot of money out there looking for opportunities,” said John Schaeffer, the head of the oil and gas unit at GE Energy Financial Services. “It seems like everyone wants to own an oil well now.”

Still, oil exploration remains a costly business fraught with peril. While the odds have improved, success is elusive; three-quarters of all exploration wells come up dry, either because there is no oil or because geologists miss its exact location. All of which means that Mr. Bryant’s start-up, Cobalt International Energy, which plans to begin drilling next year, faces formidable hurdles.

“There’s no sugar-coating this — at the end of the day, it’s a high risk venture,” Mr. Bryant says. “Financially, we’re definitely wildcatting. It’s either all or nothing.”

 

For the full story, see: 

JAD MOUAWADA.  "Wildcatter Pounces; Oil Riches Lure the Entrepreneurs."  The New York Times, Section 3  (Sun., May 20, 2007):  1 & 7.

 

 BryantJosephOilWildcatter.jpg   Wildcatter entrepreneur "Joseph H. Bryant started Cobalt."  Source of caption and photo:  online version of the NYT article cited above.

 

Internet Transmits and Applies Libertarian Ideas

 

Source of book image:  http://ec1.images-amazon.com/images/P/1586483501.01._SS500_SCLZZZZZZZ_.jpg

 

Today the Internet has become, Mr. Doherty notes, an efficient way to transmit libertarian ideas and show their practical application. (With its decentralized, free-wheeling ethos, the Internet is itself libertarian without even trying to be.) Jimmy Wales, the man who started the interactive online encyclopedia Wikipedia, believes that "facts can help set the world free." The largest retail market in the world is eBay, which allows anyone to buy and sell without a government license.

Louis Rosetto, the "radical capitalist" who founded Wired magazine, notes that, even if libertarian ideas must now push against a statist status quo, "contrarians end up being the drivers of change." Among the most ornery contrarians, he says, are the libertarians "laboring in obscurity, if not in derision." They have managed "to keep a pretty pure idea going, adapting it to circumstances and watching it be validated by the march of history." Mr. Doherty has rescued libertarianism from its own obscurity, eloquently capturing the appeal of the "pure idea," its origins in great minds and the feistiness of its many current champions.

 

For the full review, see: 

JOHN H. FUND.  "BOOKSHELF; Free to Choose, and a Good Thing, Too."  The Wall Street Journal (Thurs., February 15, 2007):  D7.

 

To the Ultimate Luddites: “Build Coffins, That’s All You’ll Need”

   Charlton Heston as Robert Neville, the last scientist on earth.  Source of photo:  http://datacore.sciflicks.com/the_omega_man/images/the_omega_man_large_09.jpg

 

In the 1970s, one of my favorite films was "The Omega Man" (1971) starring Charlton Heston as the doctor/scientist who was the last healthy man on earth.  A plague had killed most of humanity, leaving a few in a demented "tertiary" condition.  Heston as "Robert Neville" had developed a vaccine, but only had been able to test it on himself, as the world collapsed.  

Those in the "tertiary" state had been organized by a former broadcast commentator named "Matthias" into the "family" whose goal it was to burn books, and destroy all remnants of science and technology. 

At one point near the end, the family captures Neville, and as the family destroys Neville’s paintings, and laboratory, Matthias rants that Neville is the last scientist, the last remnant of the old world, and that all will be well when they have destroyed him.  Then comes one of my favorite exchanges.

 

Matthias: Now we must build.

Robert Neville: Build coffins, that’s all you’ll need.

 

When I saw the movie again today (3/16/07) for the first time in decades, I was worried that I had built it up in my memory, and that the reality would be way disappointing. 

I was relieved to see that the movie, though not perfect, was still plenty good enough.

 

Creative Destruction in Science Fiction

Source of book image: http://ec1.images-amazon.com/images/P/0809557487.01._SS500_SCLZZZZZZZ_V38973347_.jpg

 

There’s a new collection of science fiction stories entitled Creative Destruction (after one of the main stories in the collection that is also entitled "Creative Destruction").  I have not read the book, but used to enjoy reading science fiction, and hope to have a look before too long.

I welcome comments from anyone who has read the book.  Does Schumpeter get a mention? 

 

The reference to the book is:

Lerner, Edward M. Creative Destruction. Rockville, MD: Wildside Press, 2006.

 

“You Have to Keep On Trying New Things”

   Stewart Brand with his prototype for a computer-clock that he hopes will continue to tell time for 10,000 years.  Source of photo:  online version of the NYT article cited below.

 

Decades ago, I really enjoyed the spirit, and sometimes the usefulness, of Stewart Brand’s refreshing, libertarian, over-the-top Whole Earth Catalog.  From the article excerpted below, I learned that Brand, and his spirit, are still alive:

 

(p. D1)  Stewart Brand has become a heretic to environmentalism, a movement he helped found, but he doesn’t plan to be isolated for long. He expects that environmentalists will soon share his affection for nuclear power. They’ll lose their fear of population growth and start appreciating sprawling megacities. They’ll stop worrying about “frankenfoods” and embrace genetic engineering.

He predicts that all this will happen in the next decade, which sounds rather improbable — or at least it would if anyone else had made the prediction. But when it comes to anticipating the zeitgeist, never underestimate Stewart Brand.

He divides environmentalists into romantics and scientists, the two cultures he’s been straddling and blending since the 1960s. He was with the Merry Pranksters and the Grateful Dead at their famous Trips Festival in San Francisco, directing a multimedia show called “America Needs Indians.” That’s somewhere in the neighborhood of romantic.

But he created the shows drawing on the cybernetic theories of Norbert Wiener, the M.I.T. mathematician who applied principles of machines and electrical networks to social institutions. Mr. Brand imagined replacing the old technocratic hierarchies with horizontal information networks — a scientific vision that seemed quaintly abstract until the Internet came along.

. . .

(p. D3)  Mr. Brand’s latest project, undertaken with fellow digerati, is to build the world’s slowest computer, a giant clock designed to run for 10,000 years inside a mountain in the Nevada desert, powered by changes in temperature. The clock is an effort to promote long-term thinking — what Mr. Brand calls the Long Now, a term he borrowed from the musician Brian Eno.

Mr. Brand is the first to admit his own futurism isn’t always prescient. In 1969, he was so worried by population growth that he organized the Hunger Show, a weeklong fast in a parking lot to dramatize the coming global famine predicted by Paul Ehrlich, one of his mentors at Stanford.

The famine never arrived, and Professor Ehrlich’s theories of the coming “age of scarcity” were subsequently challenged by the economist Julian Simon, who bet Mr. Ehrlich that the prices of natural resources would fall during the 1980s despite the growth in population. The prices fell, just as predicted by Professor Simon’s cornucopian theories.

Professor Ehrlich dismissed Professor Simon’s victory as a fluke, but Mr. Brand saw something his mentor didn’t. He considered the bet a useful lesson about the adaptability of humans — and the dangers of apocalyptic thinking.

“It is one of the great revelatory bets,” he now says. “Any time that people are forced to acknowledge publicly that they’re wrong, it’s really good for the commonweal. I love to be busted for apocalyptic proclamations that turned out to be 180 degrees wrong. In 1973 I thought the energy crisis was so intolerable that we’d have police on the streets by Christmas. The times I’ve been wrong is when I assume there’s a brittleness in a complex system that turns out to be way more resilient than I thought.”

He now looks at the rapidly growing megacities of the third world not as a crisis but as good news: as villagers move to town, they find new opportunities and leave behind farms that can revert to forests and nature preserves. Instead of worrying about population growth, he’s afraid birth rates are declining too quickly, leaving future societies with a shortage of young people.

Old-fashioned rural simplicity still has great appeal for romantic environmentalists. But when the romantics who disdain frankenfoods choose locally grown heirloom plants and livestock, they’re benefiting from technological advances made by past plant and animal breeders. Are the risks of genetically engineered breeds of wheat or cloned animals so great, or do they just ruin the romance?

Mr. Brand would rather take a few risks.

“I get bored easily — on purpose,” he said, recalling advice from the co-discoverer of DNA’s double helix. “Jim Watson said he looks for young scientists with low thresholds of boredom, because otherwise you get researchers who just keep on gilding their own lilies. You have to keep on trying new things.”

That’s a good strategy, whether you’re trying to build a sustainable career or a sustainable civilization. Ultimately, there’s no safety in clinging to a romanticized past or trying to plan a risk-free future. You have to keep looking for better tools and learning from mistakes. You have to keep on hacking.

 

For the full story, see:

JOHN TIERNEY.  "FINDINGS; An Early Environmentalist, Embracing New ‘Heresies’."  The New York Times  (Tues., February 27, 2007):  D1 & D3.

(Note: ellipsis added.)

Bush Should Take Lab Coat Off

Decisions about which new technologies to develop should be left to the market, not the government.  One reason is that markets generally make the more efficient choice.  Another reason is that when technological risks are taken in the market, they are taken with voluntary private money; when risks are taken by the government, they are taken with your money that has been coerced from you through taxation.

With all due respect, President Bush should take the lab coat off. 

  

(p. A16) FRANKLINTON, N.C., Feb. 22 — President Bush put on a white coat and visited a laboratory here Thursday to promote his goals for making alternative fuels from switch grass, woodchips and other plant waste.

After touring the laboratory, which is developing enzymes to make cellulosic ethanol, fuel distilled from plant byproducts, Mr. Bush spoke buoyantly about new technologies that may reduce the nation’s thirst for foreign oil.

 

For the full story, see: 

EDMUND L. ANDREWS.  "Bush Makes a Pitch for Amber Waves of Homegrown Fuel."  The New York Times  (Fri., February 23, 2007):  A16.