Sunday, April 12, 2015

Why is US entrepreneurship declining precisely when entrepreneurship is getting easier?

This should be alarming for policymakers (Inc):

The Kauffman Foundation, citing its own research and drawing on U.S. Census data, concluded that the number of companies less than a year old had declined as a share of all businesses by nearly 44 percent between 1978 and 2012. And those declines swept across industries, including tech. Meanwhile, the Brookings Institution, also using Census data, established that the number of new businesses is down across the country and that more businesses are dying than are being born. All this at a time when entrepreneurship had reached its cultural apex and was widely viewed as the sole sizzling ember in an otherwise cooling economy. The business and academic worlds were left slack-jawed: How could this be?

The implications are huge. “New businesses are disproportionately responsible for the innovation that drives productivity and economic growth, and they account for virtually all net new job creation,” says John Dearie, executive vice president for policy at the Financial Services Forum. “I would say, as a policy person, this is nothing short of a national emergency.”
I'm not convinced by Inc's theories. Generational? Markets have actually increased with access to more markets globally - and I'd argue risks have actually declined with the costs of starting a business falling.

Big companies? Big companies and the lure of a secure job seem to have been even greater in the past. Funding? Again, I'd suggest it's easier today than ever before. Possibly related, TheSignal has a fairly aggressive column making the argument that the decline in jobs (making the fall in entrepreneurship even more alarming) is the result of government and regulation that's currently sucking the oxygen out of the job market. Maybe it's also true for US entrepreneurship? (And on a related note, maybe it's the dramatic rise in student debt?)

Betting on farming

According to the WSJ, venture capitalists are placing bets on ideas to improve food production and food itself:

The money involved in U.S. food startups is still small compared with Internet companies. But venture-capital investment in agriculture and food soared 54% to $486 million last year, according to Dow Jones VentureSource.

Big agribusinesses have launched their own VC initiatives, and investment managers have raised funds dedicated to food and agriculture technology. New York-based private-equity firm Paine & Partners, for instance, raised $893 million in January for investments in boosting productivity in areas like protein production and food safety, according to its president, Kevin Schwartz.

Driving the investments are a combination of cheap wireless technology, improved tools for collecting data and monitoring crops, and budding entrepreneurs looking to address new market demands and feed a growing global population. Increasingly health-conscious consumers also are scrutinizing what is in their food, pushing vendors to boost the transparency of their supply chains.

Is modern healthcare killing us?

Provocative question from Freakonomics. What I think is entirely clear is that the system in the US is broken. I'm more skeptical of claims that the problems are the result of profit seeking rather than warped incentives:

In our system, we have an asymmetry in price. So we pay a whole lot of money if you cut, scan, and hospitalize patients. If they have procedures, if they go through machines, we pay an enormous amount of money for those things. If you talk to a patient, you actually lose money in many instances. So when a cardiologist walks in the room and talks to your family member, that’s actually a loss leader. That doctor is losing money every moment they stay in a room with your family member. The way they make money is by getting you out of that room and back into the scanner that they’re leasing in the back of the office. That’s not their fault. That’s the fault of how we’ve structured the incentives in the system.

Where's the top programming talent in the world?

Hint: surprisingly, not California (venturebeat). This is just snapshot data, but I'd be curious if there have been any trends here.

Saturday, April 11, 2015

Friday, April 03, 2015

How much does the minimum wage help the poor?

Not very much (JStor via MarginalRevolution):

About 35 percent of the total increase in after-tax benefits goes to families with income less than two times the poverty threshold, a common definition of the working poor or near-poor; nearly 13 percent goes to families principally supported by low-wage workers defined as earning wages at or below 117 percent…of the new 1996 minimum wage; and only about 14 percent goes to families with children on welfare.

Unlike most public income support programs, increased earnings from the minimum wage are taxable. Over 25 percent of the increased earnings are collected back as income and payroll taxes…Even after taxes, 27.6 percent of increased earnings go to families in the top 40 percent of the income distribution.

Thursday, April 02, 2015

How fracking is changing geo politics

And yet some politicos would rather increase the barriers to fracking rather than drop them. How fracking is reshaping global power (WSJ):

Fracking overnight has relieved Saudi Arabia of its swing-producer dominance. Fracking overnight has relegated the Middle East to a sideshow, albeit a still-important sideshow, in the world economy.

Things change fast and could change back. A sizable share of the world’s oil still flows from the Persian Gulf and so far production has not been disrupted. Prices would shoot up—they’re already creeping up. But a weight on U.S. fracking would also be lifted. At prices below $50, much fracking becomes long-term unprofitable. But then there’s the flip-side: the flexibility exhibited by the U.S. wildcat sector, allowing drilling to ramp up quickly in response to higher prices, helping to counteract any damage to global growth.

Wednesday, April 01, 2015

American regulation drives innovation north...

You can't stop the signal... or the drones apparently (TechCrunch)

It’s happening here, and not 2,000 ft to the south, because the U.S. Federal Aviation Authority, has been dragging its heels on green lighting testing in Washington on existing Amazon company property. Last week, the FAA did finally relent and approve experimental testing for Amazon, but the company responded (with no small amount of evident pique) by noting that the actual drone approved from testing was a prototype that has since become obsolete thanks to more recent technical advances.

In Canada, by contrast, Amazon endured only a single three-week licensing undertaking, after which it has received what the Guardian says is essentially “carte blanche” permissions regarding its full fleet of drones for testing. Of course, one could argue that given Canada’s much, much lower population density and less charged political climate, comparing the FAA’s responsibilities with those of its equivalent body in Transport Canada from the neighbor to the north is essentially comparing apples to oranges.

Still, Canada’s openness to work with drone companies on early testing might usher in a small industry boom – already in 2014, Transport Canada has approved 1,672 companies for commercial drone use, compared to just 48 total for the FAA, the Guardian notes. Canada offers some big benefits to companies hoping to eventually serve the U.S., too, including general geographic and climatological similarity with its southern companion.

Drone companies, especially those focused on solving the hard problems surrounding machine learning and autonomy, are already springing up like weeds in Canadian innovation hubs like Waterloo and Toronto, so the FAA’s sluggishness may prove vitalizing to Canada’s emerging flying robot industry.

Sunday, March 29, 2015

Saturday, March 28, 2015

Earth Hour

A yearly reminder that some environmentalists would prefer that we return to the dark ages.

Wednesday, March 25, 2015

Resilience, Grit and Learning

A somewhat related and hopeful, if tangential, article to the discussion of "safe zones" sheltering students from ideas (or White people) at institutions of learning (NationalPost) - resilience can be learned (WSJ):

He and Mr. Charney came up with 10 traits of people who survived war, assault and disasters, as well as less traumatic events, and ultimately thrived. These people tend to be optimistic—thinking things will work out—and are able to accept what can’t be changed and focus on what can be, he says. They recognize that even though they didn’t have a choice in their loss, they are responsible for their own happiness.

Although genetics plays a role in being resilient, it isn’t a huge one. Resilience can be learned and enhanced, he says. For example, people can develop a more optimistic view by cultivating friendships with positive people and challenging negative thoughts.

“When you change the way you are viewing things, it has a pretty big impact on all sorts of things,” Mr. Southwick says. It isn’t easy to do, he acknowledges.
Harvard researcher Angela Duckworth defines grit as being "the ability to persist and passionately pursue your goal of winning, whatever it takes." According to Ducksworth, when it comes to success, grit is more important than talent. (99u)

Sunday, March 22, 2015

Tech to watch: DNA nanobots to cure cancer

This is amazing (nextbigfuture):

In a brief talk, Bachelet said DNA nanobots will soon be tried in a critically ill leukemia patient. The patient, who has been given roughly six months to live, will receive an injection of DNA nanobots designed to interact with and destroy leukemia cells—while causing virtually zero collateral damage in healthy tissue.

According to Bachelet, his team have successfully tested their method in cell cultures and animals and written two papers on the subject, one in Science and one in Nature.

How high taxes drive away innovators

People respond to incentives. Even inventors (via ASI):

This paper studies the effect of top tax rates on inventors’ mobility since 1977. We put special emphasis on “superstar” inventors, those with the most and most valuable patents. We use panel data on inventors from the United States and European Patent Offices to track inventors’ locations over time and combine it with international effective top tax rate data. We construct a detailed set of proxies for inventors’ counterfactual incomes in each possible destination country including, among others, measures of patent quality and technological fit with each potential destination. We find that superstar top 1% inventors are significantly affected by top tax rates when deciding where to locate.

The elasticity of the number of domestic inventors to the net-of-tax rate is relatively small, between 0.04 and 0.06, while the elasticity of the number of foreign inventors is much larger, around 1.3. The elasticities to top net-of-tax rates decline as one moves down the quality distribution of inventors. Inventors who work in multinational companies are more likely to take advantage of tax differentials. On the other hand, if the company of an inventor has a higher share of its research activity in a given country, the inventor is less sensitive to the tax rate in that country.

The effects of the minimum wage hike in Seattle

More unintended consequences (Shiftwa)? Pretending that effects like these are accidents is either political malpractice or simple idiocy at this point...
Related: "The Minimum Wage and the Great Recession: Evidence of Effects on the Employment and Income Trajectories of Low-Skilled Workers" (Cato)

Friday, March 13, 2015

Falling commodity prices

Trying to predict commodity prices isn't dissimilar to trying to catch a falling knife - but it shouldn't surprise anyone how quickly neo malthusians were once again proven wrong (Reason):

Plunging oil prices have been big news over the past year. Since mid-summer 2014, the price for benchmark West Texas Intermediate (WTI) crude has fallen from $105 to $48 per barrel. But it's not just the price of petroleum that has plummeted. The prices of lots of other industrially important commodities have also been dropping.

Erten and Ocampo also point out, "The magnitude of cumulative decline during the downward trend is 47 percent for the non-fuel commodity prices, with recent increases of around 8 percent far from compensating for this long-term cumulative deterioration." The recent upswing phase of the current super-cycle did not boost commodity prices to nearly what they were a few cycles back.

However, Erten and Ocampo report that metals have been an exception—the mean of the last cycle was higher than the preceding one. Still, they note, "The contraction phase of this cycle has not even begun yet, which can lower the mean of the whole cycle in the upcoming years." It now appears that commodity prices were just reaching their pinnacles when Erten and Ocampo were writing up their results back in 2011. Instead of peak resource production we are most likely now past peak commodity prices—and heading lower for at least for the next ten to fifteen years.

Bridge International Academies: privatized mass education in developing countries

Developing countries need more entrepreneurs and business selling solutions that people want and need vs bureaucrats forcing interventions down their throats 'for their own good.' This is exciting. From the WSJ - "For-profit Bridge International Academies is challenging the assumption that governments and charities should lead education programs in impoverished countries":

Bridge’s founders are challenging the long-held assumption that governments rather than companies should lead mass education programs. The company’s goal is to eventually educate 10 million children and make money by expanding its standardized, Internet-based education model across Africa and Asia.

The Internet and Barnes & Noble Inc. Nook tablets are used to deliver lesson plans, which are then used by teachers. The tablets also are used to collect test results from students scattered across hundreds of towns and villages and serve as a means of monitoring their progress.

“It’s like running Starbucks,” said Greg Mauro, a partner at California-based venture-capital firm Learn Capital LLC, the largest shareholder in Bridge with a 15% stake, likening it to the coffee chain with standardized systems and procedures that can be replicated across new locations. If all goes to plan, the American-run, Nairobi-based education startup will seek a stock-market listing in New York in 2017, according to Mr. Mauro.

The endgame of Chinese communist rule?

Cautiously optimistic... an even bigger question is what comes after (WSJ):

The endgame of Chinese communist rule has now begun, I believe, and it has progressed further than many think. We don’t know what the pathway from now until the end will look like, of course. It will probably be highly unstable and unsettled. But until the system begins to unravel in some obvious way, those inside of it will play along—thus contributing to the facade of stability.

Communist rule in China is unlikely to end quietly. A single event is unlikely to trigger a peaceful implosion of the regime. Its demise is likely to be protracted, messy and violent. I wouldn’t rule out the possibility that Mr. Xi will be deposed in a power struggle or coup d’├ętat. With his aggressive anticorruption campaign—a focus of this week’s National People’s Congress—he is overplaying a weak hand and deeply aggravating key party, state, military and commercial constituencies.

Monday, March 09, 2015

Piketty: About that inequality? Nevermind.

Piketty's correction (WSJ):

Though his formula helps explain extreme and persistent wealth inequality before World War I, Mr. Piketty maintains, it doesn’t say much about the past 100 years. “I do not view r>g as the only or even the primary tool for considering changes in income and wealth in the 20th century,” he writes, “or for forecasting the path of inequality in the 21st century.”

Instead, Mr. Piketty argues in his new paper that political shocks, institutional changes and economic development played a major role in inequality in the past and will likely do so in the future.

When he narrows his focus to what he calls “labor income inequality”—the difference in compensation between front-line workers and CEOs—Mr. Piketty consigns his famous formula to irrelevance. “In addition, I certainly do not believe that r>g is a useful tool for the discussion of rising inequality of labor income: other mechanisms and policies are much more relevant here, e.g. supply and demand of skills and education.” He correctly distinguishes between income and wealth, and he takes a long historic perspective: “Wealth inequality is currently much less extreme than a century ago.”
More here (WSJ): "Why Thomas Piketty’s Revisions Don’t Fix His Book."

Saturday, March 07, 2015

How automation will wipe out (private sector) unions...

It's pretty basic economics (Reason):

Forecasts differ on the specifics, but they generally point to automation being disruptive as far as traditional workplace roles are concerned. A recent Oxford University study put nearly half (47 percent) of all jobs at risk of replacement by automation in two decades. A Wired article puts the number at 70 percent by the end of this century.

Computers are getting smarter and stronger while employees, with their health insurance, pensions, and vacation time are becoming increasingly expensive. The writing is on the wall; plenty of jobs, at least as performed by humans, aren't long for this world.
I think the more interesting question will be how long we will tolerate the public sector unions who earn far more than their private sector peers and the politicians who have been beholden to them.

Sunday, March 01, 2015

Turning beehives into honey on tap

This is cool (wired):

Beekeepers Cedar Anderson and his father Stuart have, essentially, hacked the honeycomb—a nearly flawless geometric and structural achievements—to make it more mechanically efficient. In a nutshell, Flow frames have a partially formed honeycomb matrix within a transparent frame. Bees complete the comb, fill the cells with honey and cap them. To harvest the honey, the beekeeper inserts a tool into the top of each frame and twists, a move that splits each cell in the honeycomb vertically, allowing the honey to flow freely. It is collected at the bottom through a tube. Presto! Honey on tap. [...]

“There’s more to bees than harvesting honey. Over one third of the food we eat is dependent on bees for pollination,” Cedar says. Without the help of bees, our crops would suffer devastating consequences, and with available areas for natural bee habitats disappearing each year, systems that make it easier for humans to look after bees are crucial.

Crossfit is great for entrepreneurs...

6 reasons why, according to Entrepreneur. I confess I require a bit of the external motivation that Crossfit provides (that is when I drag myself out of bed at 440am...).

Thursday, February 26, 2015

Responding to hypothetical crises: "what happened to the rare earths crisis?"

Instapundit appropriately and sarcastically responds: "shockingly, markets." From MIT's Tech Review:

Demand appears to have fallen mainly because companies stockpiled these materials in anticipation of shortages, says Hatch. As it turned out, China’s lower export quotas—which were deemed unfair by the World Trade Organization—didn’t constrain the world’s supply, and China recently stopped imposing those limits on rare earths. Hatch notes that while the prices for some rare earth materials remain above 2010 levels and could go up again, a price spike like the one seen in 2011 is unlikely.
As it turns out, net neutrality is another hypothetical crisis that American politicians have decided to take a different approach on: regulation. I predict the phrase "unintended consequences" is going to be used - that were very much and vocally predicted before hand (Reason).

How landlocked Botswana found economic growth

Through 'economic liberty'. Remarkable for a country once the third poorest in the world (dailysignal):

Friday, February 20, 2015

Whither the Greeks...

The entire Greek situation is bizarre... but in the midst of the Greek government demanding that they receive new loans, an oddly lucid piece of journalism (NYT - yes, oddly, the NYT):

Businesses are still stymied by labor rules and tax policies that under the previous government often changed week to week — 2,200 new tax regulations in the last two years alone.

Firms like Mr. Stamatiou’s, as well as investors and start-ups, face high administrative costs and bureaucratic inefficiency that Greek business associations say jeopardize jobs and leach about €14 billion a year from the economy. Corruption remains widespread, and vested interests have fought against opening swaths of the economy to competition.

“The removal of austerity is all fine and well,” said Constantine Mihalos, president of the Athens Chamber of Commerce. “But it will only be the right solution if it is followed by the necessary structural reforms in the public and private sector creating conditions for growth.”