• The bestselling book's movie adaptation

    Freakonomics: The Movie

    Jun 25 • The Pulse • 138 Views

    Looking for a laugh and to learn something new?  In this documentary based on Steven Levitt and Stephen Dubner’s bestselling book titled Freakonomics, human behavior is explored through humorous examples.  Vote and comment!

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  • Tesla Licensing Restrictions

    Why Tesla’s Totally Illogical Strategy Might Work

    Jun 25 • Businesses, Demand, Supply, and Markets, Economic Thinkers, Environment, Innovation, Lifestyle, Macroeconomic Measurement, Tech • 273 Views

    Our Wednesday environment focus

    Elon Musk just flipped entrepreneurial logic upside down. Rather than building a patent moat around his technology, he announced it would be available to anyone using it “in good faith.” That means Tesla’s 203 patents will be accessible to all who want to copy them. Musk even eliminated his “wall of patents” at Tesla HQ.

    Eliminating patent protection extends Tesla's economies of scale

    Tesla Wall of Patents. Photo from: Steve Jurvetson

    In his 1791 “Report on Manufactures,” Secretary of the Treasury Alexander Hamilton said patents (and tariffs) were necessary for protecting infant industries. Through a domestic monopoly for a fixed time period, the entrepreneurial “pay off” could be guaranteed. In that way, the country and the individual would benefit.

    So why would Elon Musk have given his R&D to everyone?

    Perhaps he wants an Electric Vehicle (EV) ecosystem. If the industry adopted his battery, his factories could be a source of supply for everyone. Furthermore, if the Tesla battery became an industry standard then so too could the Tesla charging station. With only 100 Supercharging Stations currently in the US and Europe, Tesla surely wants more. Imagine an EV ecosystem in which Toyota and BMW join with Tesla to build a charger station network similar to our gasoline station prototype.

    Tesla would enjoy a larger economy of scale if other firms built Supercharger Stations.

    Ultimately, Tesla’s push for standardization could give the industry the power it needs to move past 1% of vehicle sales. By diminishing the incentive to develop competing green technologies like hydrogen fuel cells, the strategy could lessen fragmentation. United, the EV industry might fight the gasoline engine more successfully.

    Tesla is creating bigger economies of scale by diminishing its patent power.

    From: The  Market Oracle

    Our bottom line: For electrically powered vehicles, Tesla inspired standardization is somewhat reminiscent of the 19th century spread of railroads. Only when track size was standardized could they become a viable transportation infrastructure. Perhaps Tesla needs standardization to create the economy of scale that will generate its nationwide infrastructure.

    Can you envision an EV industry infrastructure developing from the economy of scale Musk hopes for? Please let us know in a comment.

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  • Declining entrepreneurial activity impacts economic growth

    Note to Self… Entrepreneurial Activity Shapes Our World.

    Jun 24 • Businesses, Economic Growth, Economic Thinkers, Government, Innovation, Labor, Macroeconomic Measurement • 144 Views

    Asked about how much market research he did for the iPad, Steve Jobs said, “None. It’s not the consumer’s job to know that they want.”

    Art Fry could have said the same thing. His story is a good one…

    But first, where are we going with this? Through an unexpected example of an entrepreneur, we can illustrate two basics about innovation:

    • Because entrepreneurs make an invention a practical reality, they accelerate economic growth.
    • Whether looking at a country or a firm, the institutional environment and the “payoff” shape the extent and character of entrepreneurial activity.

    And now the story…

    During the late 1960s, when a chemist at 3M tried to develop a better adhesive, he came up with a seemingly impractical result. His new adhesive was not permanent. Yes, it would stick something to something else, but also you could unstick the items just as easily. No one knew where it could be used.

    Fast forward to 1974. Art Fry, also a 3M employee, needed a better bookmark. The pieces of paper he placed in his choir book after practice at church on Wednesday nights always fell out by Sunday when he needed them. Having heard about the adhesive with the “removability characteristic,” he says one day he had a “eureka moment.” Soon Fry not only had a new kind of bookmark but also, he and his chemist associate started circulating office messages on notes with the new adhesive.

    The rest of the story is history. 3M produces in the neighborhood of 50 billion Post-It Notes a year.

    Usually, when we think of an entrepreneur, the Steve Jobs of the world come to mind because they started their own firms. However, using a broader definition that relates to any individual whose innovation destroys the status quo, we can include the “business innovators” who work for large firms like 3M.

    Our bottom line? Whether looking at Steve Jobs or Art Fry, we can see the crucial role of the entrepreneur. For that reason, when I saw that the Kauffman Foundation’s annual look at entrepreneurial activity indicated a decline, I wanted to share some of their data with you.

    The decline of entrepreneurial activity

    From: Kauffman Foundation

    It is also interesting to see how states vary.

    State by state entrepreneurial activity

    From: Kauffman Foundation

    Thinking of the institutional environment, does your home country, state or town encourage entrepreneurial activity? Please let us know in a comment.

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  • barbies

    What Barbie Tells Us About Women

    Jun 23 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Growth, Economic History, Entertainment, Fashion, Gender Issues, Innovation, Labor, Lifestyle • 178 Views

    Our Monday gender issue focus

    Equipped with a smart phone, a tablet and her distinctively shapely proportions, pink-clad Entrepreneur Barbie just arrived.

    Because Barbie reflects what has become culturally acceptable, I guess we should applaud her newest incarnation. In 1959, Barbie (her name was Barbie Millicent Roberts from Willows, Wisconsin) began as a teenage fashion model but since then, examples of her 150 professions include astronaut, presidential candidate, Women’s World Cup Soccer player, surgeon and news anchor.

    The one missing category was CEO.

    Entrepreneur Barbie

    From: Salon

    So yes, now as an entrepreneur, we can finally expect her to run a firm. Tweeting, “Remember if you can dream it, you can be it,” she takes the first step. But according to a Dell study, here is what else she will need:

    Entrepreneurs Success SSRN-id1604653__1__pdf

    And, she is in the right place. Looking at entrepreneurial ecosystems, business environments, and entrepreneurial aspiration, according to the Dell study, the most welcoming entrepreneurial environments are in Australia, Sweden, and the United States.

    Covering 30 countries, here are the best places to be a female entrepreneur:

    In several nations, including the United States, the environment supports entrepreneurs.

    From: Dell

    And finally, I guess it did not matter that Barbie broke up with Ken for several years before they got together again:

    Most female entrepreneurs are married.

    From: Dell

    Our bottom line: Barbie is a barometer of normal. If she is an entrepreneur, then women have indeed begun fully to contribute their human capital in the US.

    Did you own a Barbie doll? Her profession? The year? Maybe we can gather some of our own Barbie history. Please let us know in a comment.

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  • Creating inefficient use of land, labor and capital, a Comcast Time Warner merged firm would become a monopsony.

    Why Mickey Mouse Worries About Monopsonies

    Jun 22 • Businesses, Demand, Supply, and Markets, Economic Debates, Economic History, Entertainment, Financial Markets, Households, Labor, Lifestyle, Media, Regulation • 168 Views

    No, we don’t mean monopoly. A monopoly is the single seller in a large or small geographic area. Monopsony, by contrast, indicates there is a single buyer.

    In a competitive market structure, monopsony means one buyer.

    From: SMBC

    Where are we going? Whereas a monopoly has the power to charge too high a price, the amount a monopsony pays to its suppliers is too low. As a result, like monopolies, they are inefficient users of land, labor and capital.

    Comcast’s pending acquisition of Time Warner Cable is an example of why monopsonies are worrisome. Not yet approved by the Justice Department, a merger of Comcast with 21.6 million subscribers and Time Warner Cable with 11.4 million would create a more concentrated competitive market structure. As the 2 largest cable companies in the US, combined, they would control close to 30% of the market and have the power to offer suppliers of programming like Walt Disney an excessively low price. From the supply side, Disney then has the incentive to provide less programming. And even if Disney said okay, the monopsony would probably not pass along its savings to us.

    Until the beginning of 1976, when baseball players were no longer prohibited from negotiating elsewhere because of the reserve clause, team owners ran monopsonies. Some say public school teachers work for a monopsony because there is only one local school district. Others see company towns where there is one employer as a monopsony.

    You can see below the markets in which monopsony creates a gap–called the “rate of exploitation”– between the wage that is paid and the market wage.

    As a competitive market structure, monopsony creates inefficiencies

    From: “Monopsony in American Labor Markets”

    Our bottom line? A firm’s competitive market structure shapes its behavior. For monopsony, that means excessive control of suppliers–who could be other producers or labor–and inefficiency.

    Do you think the Comcast/Time Warner Cable Deal should proceed? Please let us know in a comment.

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