Flatley’s Law

Friday, August 29th, 2014

Over the past 13 years, the cost of sequencing DNA has dropped from $100 million per human genome to only $1,000:

The only thing more extraordinary than the growth rate of the sequencing revolution is that the beneficiary is a single company, Illumina of San Diego, and most of the credit for the rate of change can be laid at the feet of one entrepreneur, Chief Executive Jay Flatley. Thanks largely to Flatley’s leadership, Illumina emerged as the dominant maker of DNA sequencers eight years ago and has maintained 80% market share despite an assault by several well-funded competitors.

Since 2008 Illumina’s sales and profit have both increased 147%, to $1.42 billion and $125 million, respectively, as the stock increased 617% and the company’s market capitalization reached $23 billion.


Tuesday, August 26th, 2014

Crowdfunding sites like Kickstarter have decided that they simply cannot allow firearm projects to sully their mission, so now TwistRate aims to fill the gap:

TwistRate is Americans coming together online to build the innovations, dreams and causes of America’s veterans, service members, law enforcement, outdoor enthusiasts, fishing and hunting communities. We bring your ideas to life, giving you the tools to take your great ideas to others in your community so they can benefit from your ingenuity. TwistRate brings communities together to fund their own, build their own and make their own – all on their own.

TwistRate and you make the American Dream a reality by connecting the dreamers with the dollars.

My first thought is, TwistRate? You couldn’t think of a better firearms metaphor for getting something going?

How Marvel Became the Envy (and Scourge) of Hollywood

Friday, August 15th, 2014

Marvel became the envy (and scourge) of Hollywood through its CEO, Isaac “Ike” Perlmutter:

Under his tightfisted management, Marvel has become one of the most admired, envied and, in some quarters, resented entertainment companies. The 300-employee outfit has thrived despite insistence on ever-stricter creative controls and a reputation for extreme cheapness that strikes many accustomed to old-school industry dealings as disrespectful.


Perlmutter is not featured on Disney’s website (conversely, the heads of its Pixar and Lucasfilm divisions are), but he has shown no sign of relaxing on fiscal control simply because Marvel has become part of a big conglomerate. When staff moved from Manhattan Beach to the Disney lot in Burbank, a source says Perlmutter declined to upgrade the company’s worn furniture because he did not want to change the culture. “Disney owns Marvel, but Ike gets to control every budget and everything spent on marketing, down to the penny,” says a studio insider.

Disney does not disclose Marvel’s contribution to its bottom line, but a non-Disney executive says Marvel hits are more profitable than tentpoles at other studios because of the company’s deals with talent. “Avengers was a $200 million movie, but they’re not giving away a lot of their back end,” he says.

The Israel-born Perlmutter, who lives in New York and Palm Beach, Fla., with wife Laura, does not give interviews, and photos are all but nonexistent (except for a 1985 portrait in which he appears dark, handsome and slightly fearful-looking). He and fellow Israeli army veteran Avi Arad got into the Marvel business via a toy company they owned during the early 1990s. On the Marvel board, Perlmutter helped steer the company through bankruptcy protection and survived a battle with investor Carl Icahn to become CEO in 2005 — after which Marvel’s plan to produce its own movies was hatched. Perlmutter is said to have attended the Iron Man premiere in disguise and has not been spotted at a Marvel event since. He relishes his reputation as secretive and frugal, according to a top executive who has dealt with him: “It’s things like, ‘Why do you need a new pencil? There’s 2 inches left on that one!’ ”

Some at Disney are so intimidated, says one source, that they believe “he has spies or is listening in on phone calls,” though this person allows that “it could be paranoia.” (Or not: A Marvel veteran says “the way to curry favor is to tell Ike that someone spent more than he should have.”) Perlmutter once complained that journalists at a junket were allowed two sodas each instead of one, and Disney ran out of food at an Avengers media event because of Perlmutter’s constraints, causing reporters to pilfer from Universal’s nearby suite for The Five-Year Engagement.

Perlmutter allows actors traveling on Marvel business only a single companion. A source with ties to the CEO says he makes no apologies. “He’ll pay for the A-list talent — they get to travel with their entourage,” says this person. Otherwise, he rejects Hollywood excess: “He’s seen companies go into bankruptcy, and he thinks shareholders look at this stuff — and he doesn’t believe in it.”

Perlmutter is one of the top individual holders of Disney stock — the company declines to say how much he owns — and is said to have pressed Iger to dismiss studio chief Rich Ross in 2012. (Pixar’s John Lasseter also is said to have lost patience with Ross.) Perlmutter also has been identified as a force behind the 2011 departure of Andy Mooney as head of Disney’s consumer products division. (Perlmutter is said to have felt Mooney was not sufficiently focused on Marvel products and wanted more aggressive deals with licensees. Mooney, now CEO of Quiksilver, declined comment.)


And according to the FT, when Marvel replaced Terrence Howard with Don Cheadle in Iron Man 2 to save money, Perlmutter was alleged to have told colleagues that no one would notice because both actors are black.

Propane-Powered Motor Scooter

Tuesday, August 5th, 2014

The ProGo 3000 is a (proposed) propane-powered motor scooter that runs on 16.4-ounce canisters:

Technical Specifications

Engine: 25cc 4-stroke
Fuel Type: Propane
Start up: Pull start engine
Acceleration: Thumb throttle
Brakes: Disk
Tire size: 8 inch
Speed: Up to 20 mph
Dry Weight 35 lb.
Frame: Steel
Max Weight: 250 lb.
Run Time: 2-3 hours / 30-40 miles

They plan on retailing them for $449.

ProGo 3000

How America Fell in Love with Vitamins

Tuesday, August 5th, 2014

Brian Alexander tells the story of how America fell in love with vitamins and fortified foods, how public universities were transformed into money-making patent mills serving corporations, and how a clever young man, an electrical engineer from Cincinnati born with an ample supply of ambition and drive, became an unlikely celebrity and was hailed as a genius — all because of vitamin D:

In the beginning, fame was the prize in vitamin research, not money. This is why most of the early research on vitamins took place in universities: Scientists were freed from the demands of commerce. Patenting a discovery was taboo. The ethos demanded science for the sake of science, and for the public good.

But business soon developed a simple formula: If a little bit of vitamin in food was good, more had to be better. The only way to get lots more in one gulp was with a pill, or by finding some way to add more of it to food. Vitamin D, the scourge of rickets, was an especially good candidate for commercialization because most food didn’t have it at all.

With the cultures of business and academia circling each other, it didn’t take long for someone to break the taboo. The big leap came in 1922 when Frederick Banting and Charles Best at the University of Toronto announced that they had treated diabetes with a purified cow pancreas extract called insulin. The two scientists quickly patented their process and gave the rights to the university — which then licensed Eli Lilly and Company to produce insulin for the U.S. and Latin American markets in return for a 5 percent royalty on net sales. Lilly would go on to dominate the insulin market for the next 50 years and grow into a pharmaceutical powerhouse, and the university reaped millions.

For American scientists, it was a eureka moment: Suddenly, universities — and select researchers — could get rich. George Sperti would eventually be one of those lucky researchers. But so would the man who ultimately outplayed him in the arena of science and commerce, relegating Sperti to a curious, if still famous, footnote.

Though he had a nice-guy reputation among his lab employees, Harry Steenbock zealously guarded his turf. You had to if you worked in the vitamin field. An agricultural biochemist at the University of Wisconsin, he had reason to envy the Toronto scientists. His first push to patent a vitamin discovery had been pooh-poohed by the university. He never forgot the slight.

In 1924 Steenbock published a paper in the Journal of Biological Chemistry detailing an experiment that involved exposing rat food to light from a quartz-mercury vapor lamp. Rats who ate the irradiated food did not get rickets; control rats did. Somehow, and he wasn’t sure exactly how, the light had activated anti-rachitic properties in the food. Recognizing the potential, Steenbock included an addendum to the paper: “To protect the interest of the public in the possible commercial use of these and other findings soon to be published, applications for Letters of Patent…have been filed with the United States Patent Office.”

It was a bold move, and in some corners of the medical-industrial complex, an outrage. Children were suffering and Steenbock was patenting a possible preventive? The British Drug Houses, a trade group, tried to shame him, declaring in a letter: “As you know, extremely important contributions to this discovery were made by workers in this country who refused to seek any patent protection for their work.”

Steenbock shrugged off the criticism. He foresaw big commercial possibilities for vitamin D. With the help of a tough-minded Chicago patent attorney and Wisconsin alum named George Haight, he set up an independent, private, nonprofit business group called the Wisconsin Alumni Research Foundation (WARF). Though not part of the university, its aim was to fund University of Wisconsin research by licensing intellectual property created by university scientists. For the time being, that meant Steenbock, who remained intimately involved in WARF’s vitamin D deals.

Quaker Oats was the first; WARF made a secret agreement with the company in 1926. Quaker could experiment with what was being branded as the “Steenbock Process” for small yearly royalties. If the company commercialized a product, it would pay WARF an annual fee of up to $60,000 (almost $800,000 in today’s dollars) once sales began.

Movie Film at Death’s Door

Friday, August 1st, 2014

Kodak’s motion-picture film sales have plummeted 96% since 2006, the Wall Street Journal reports — from 12.4 billion linear feet to an estimated 449 million this year:

With the exit of competitor Fujifilm Corp. last year, Kodak is the only major company left producing motion-picture film.

Why Comic Books Are Almost Dead

Friday, July 25th, 2014

Sean J. Jordan explains why comic books are almost dead:

Comics used to be produced in a model very similar to magazines; comics were sold on newsstands and via subscriptions, and the cost of each comic was low because the comic books were being mass-produced and carried advertisements. Part of the appeal of comic books was their relative inexpense, but there was also a huge incentive for readers to trade comics because there were simply too many available for most people (namely, kids) to keep up on.

That all changed in the late 1980s and early 1990s, when comics went from being newsstand items to collectibles, much like the baseball card market had already done. Comics had traditionally been published on low-quality newsprint with a 4-color process that didn’t allow for a lot of variety. (One of the reasons traditional superheroes are so brightly colored has to do with this lacking palette.)  In the 1990s, everyone suddenly began focusing on quality to enhance the value of comics as collectibles. The price of comics shot up, and suddenly, everyone was a speculator. This is often said to have culminated in the release of Todd McFarlane’s Spawn #1, a book that sold over a million copies due to speculation about its future value, but which is still worth about a penny an issue today. (It was a terrible comic, too, for what it’s worth.)

So, the price of comics went up, the value of comics went down, and the entire market for comics crashed. This resulted in many changes for the comic book industry, including the eventual consolidation of distribution under one company, Diamond Comic Distributors. Every comic book store in America was eventually forced to deal with Diamond or deal with no one. One of the reasons this was bad for comic book shops was because Diamond had a “non-returnable product” policy. Retailers had to order carefully, or be stuck with assets that they would have a hard time unloading.

By the time I got on the scene, comics were pretty much dead. Whereas it’d been normal for comics to circulate in the hundreds of thousands in previous decades, now a hit comic was any book that sold about 10,000 copies. Comic book stores were closing left and right, and those that hung on were adjusting their product mix to become focused on collectible toys, tabletop gaming, and Japanese comics and anime.


But even so, I often heard during my time in the comic book industry that the only thing keeping Marvel afloat was its licensing department. The comic books were not really a profitable enterprise; it was the licensing from the comics that kept the entire machine alive. Apparently, something very similar was going on over at rival DC (which was and still is owned by Time Warner). Comic books had become an anachronism, something that only a handful of enthusiasts wanted to keep up with. What’s more, the serial nature of the storytelling has made it difficult to keep up with comics since they tend to ebb and flow in quality and frequently ship late.

Another problem (and it’s a big one!) is the barrier that hardcore fans present. Oddly, fans are never really happy with Marvel and/or DC, and they are probably the hardest group of people to appease. Yes, they spend money, and yes, they are the ones who are keeping comics alive, but they are not a desirable market because they are not growing. Plus, when you factor in the reality that many fans want to be comics creators themselves, you tend to find a lot of fans who keep up with comics to be able to participate in the conversation, but who make demands on publishers for stories that few people really want to read.

Demands on publishers for stories that few people really want to read? I can’t imagine…

Smart Money Buys Brand X

Thursday, July 24th, 2014

National brands succeed because of consumer ignorance:

To test whether a lack of information is responsible for consumers’ choices, Bronnenberg and his co-authors compared a range of consumers who shop in the same markets and chain stores during the same time periods. They used both indirect and direct measures of how well-informed the shoppers were about headache remedies. The indirect measures included occupation and education. The direct measures came from shoppers’ responses to questions about the active ingredients in headache remedies. There was a close connection between the indirect and direct measures: The average person accurately answered the ingredient question 59 percent of the time, but that figure rose to 85 percent for registered nurses and to 89 percent for pharmacists.

Using purchase data on more than 77 million shopping trips from 2004 to 2011, the authors matched consumers’ actual choices to their knowledge and professions. Pharmacists bought national brands only 8.5 percent of the time, while the average consumer bought them 26 percent of the time. People lacking a college education were especially likely to buy national brands. On the other hand, health-care professionals — including nurses and doctors — were more likely to buy store brands than lawyers, who don’t have relevant expertise.

In the case of pantry staples (salt, sugar, baking soda and the like), national brands accounted for 40 percent of total sales volume. But among chefs, the share dropped to just 23 percent — the smallest for any other occupation.

It’s interesting that health-care professionals show no special interest in buying store-brand salts, sugars or baking sodas; for those products, their choices look a lot like most other consumers’. And while chefs do show a preference for store-brand headache remedies, it’s not nearly as great as that of health-care professionals. For the most part, people’s knowledge is domain-specific.

Bronnenberg and his co-authors tell the same basic tale for other health products, including cold remedies, bandages, vitamins and contact-lens solutions. Knowledgeable consumers tend to choose store brands. The effects are smallest for first-aid and eye-care products — which suggests that informed consumers might find genuine differences in their quality.

Young Money

Tuesday, June 10th, 2014

Ezra Klein talks to Kevin Roose about Young Money and how Wall Street recruits so many insecure Ivy League grads:

Ezra Klein: My big takeaway from your book was that Ivy League graduates aren’t going to Wall Street because they love risk and want to make a ton of money. They’re going because they hate risk and are terrified about what to do next and Wall Street has figured out a way to calm their anxieties.

Kevin Roose: Wall Street invented this new way of recruiting in the early 80s. Before that they hired like any other industry. If you wanted to be a banker you applied for a job at a bank and they hired you or they didn’t. But in the early 80s Goldman Sachs and others figured out they could broaden their net and get lots of really smart people if they made it a temporary position rather than a permanent one.

So they created the two-and-out program. The idea is you’re there for two years and then you move onto something else. That let them attract not just hardcore econ majors but people majoring in other subjects who had a passing interest in finance and didn’t know what else to do. People now think going to a bank for two years will help prepare them for the next thing and keep them from having to make these hard decisions about the rest of their life. It made it like an extension of college. And it was genius. It led to this huge explosion in recruitment and something like a third of Ivy League graduates going to Wall Street.

EK: This seems really at odd with finance’s vision of itself as a world of capitalist cowboys.

KR: We think of Wall Street as being full of these crazy risk takers. But in a lot of schools it’s these scared organization kids going to Wall Street. One thing Wall Street does that’s really smart is they actually tell you way earlier than other industries if you got a job. They’ll let you lock the job down in the fall of your senior year. So you can take that job on Wall Street or you can gamble on getting something after you graduate.

EK: One of the other programs that uses that model is Teach for America. And it’s amazing, anecdotally, how often you see college seniors deciding between making huge money on Wall Street or making almost nothing with Teach For America. It really suggests to me that this isn’t nearly as much about the money as people think.

KR: The lesson of that is you don’t have to pay people a ton of money to come to your program after college if what you’re giving them still offers prestige and structure and the sense that they’re not signing up for something forever. Teach for America has really approximated the banking model without the money. If what you’re seeking is short-term rewards there’s no way you’d choose teaching in the Mississippi Delta over working at Goldman Sachs but there’s something calling people to do work they find meaningful.

Third World Construction

Friday, June 6th, 2014

Third World construction has its charm:

If Russia Gets Gay With Us

Friday, May 30th, 2014

If Russia gets gay with us,” a 1903 Dry Goods Reporter ad promises, “she’ll have some pretty muscular soldiers to meet.”

The relevant meaning of “get gay with,” a Google Books search suggests, is to provoke, threaten, harass, insult, or — to use a colloquialism equally likely to become incomprehensible with time — diss. Take this ominous sentence from the May 1913 issue of Business Philosopher magazine: “Germany, Austria, and Italy have formed a combination, and said, ‘We will help each other. If Russia, France, or England gets gay with you, just let us know, and we will help you show them where they get off.’”

Dry Goods Reporter Ad for Nazareth Waist

In the 1903 ad, the bellicose language appears, oddly enough, in a promotion for children’s underwear. For decades, the Nazareth Waist Company advertised its wares as stretchy enough to allow vigorous exercise. “We needn’t ask if you would have the boys and girls sturdy and strong, with bright eyes and rosy cheeks. The Nazareth Waist allows them to grow, play and romp unhampered,” promised a 1895 Ladies Home Journal ad. In an urbanizing society increasingly anxious about physical fitness, the company declared its products good for kids’ development. Hence the promise that young men “reared in a Nazareth Waist” would make “muscular soldiers.” (“Heavy stocks,” by contrast, has nothing to do with muscles. It means “large inventories” held by financially strong wholesalers.)

The ad’s saber rattling marks a notable departure from the company’s usual promotions. Nazareth Waist’s trade ads typically emphasized the popularity of its products, their easy availability from wholesalers, or the brand’s ample consumer advertising. Yet in July 1903 tensions with Russia were running so high that the subject could plausibly make catchy copy to sell children’s underwear, at least at wholesale. What was going on?

So, what was going on?

Two sources of hostility had become entangled, as a search for newspaper stories on Russia reveals. One was Russia’s aggressive action in Manchuria, which would eventually lead to the Russo-Japanese war. In particular, the United States objected to the closing of treaty ports to foreigners, including U.S. merchant vessels.

The second was the Boko Haram story of its day: the brutal massacre of Jews in the Russian town of Kishineff (or Kishinef or, its common spelling today, Kishinev) over Easter. As stories of what had happened trickled out, including the role of local officials in abetting the pogrom, the incident became a cause célèbre, not only for Jews but for Americans in general. Newspapers ran horrifying accounts, relief drives took place, and B’nai B’rith organized a petition to the Russian czar asking for religious liberty and tolerance “in the name of civilization.” Opposing the massacre of Jews in Russia became an expression of American culture and values.

The past is a foreign country.

Ralph Lauren’s Fading Fantasy

Wednesday, May 21st, 2014

Ralph Lauren isn’t a company in trouble, Virginia Postrel says, but its brand image depends on an ideal of the good life that, to those unaccustomed to hardship, looks out-of-touch and even a little dull:

Glamour isn’t about a specific style. It’s about channeling the audience’s longings into compelling images of escape and transformation. Both those longings and the images that embody them change with the times.

“The world of Ralph Lauren” isn’t universally alluring. It’s created from the images and ideals that enchanted a poor Bronx boy born in 1939: the country life of the WASP leisure class, cowboys in the American west, exotic African safaris, aviators wearing bomber jackets.

Lauren often compares his work to filmmaking. “What I do is make movies with my clothes,” he recently told the Telegraph. But he isn’t talking about today’s films. He’s talking about yesterday’s.

Explaining his “timeless” approach to fashion, he cited a movie from his teens: “Watch Cary Grant in ‘To Catch a Thief’ tomorrow, next year, whenever — you would still want to be him at the end of it. And a woman will want to be Grace Kelly. That’s timeless.”

In fact, that’s 1955, with stars born in 1904 and 1929. Grant and Kelly are still compelling, their clothes still look good, and the film is much loved by classic-movie fans. But “To Catch a Thief” is a historical artifact. Its vision of leisured, international wealth spoke to the striving, upwardly mobile, little-traveled American audiences of the mid-20th century, including the young Ralph Lifshitz. The children and grandchildren of those moviegoers live different lives and dream different dreams.

The New Karate

Tuesday, May 20th, 2014

In Silicon Valley, product testing is the new karate:

As more young children get their pudgy hands on their parents’ mobile devices, tech and toy industry entrepreneurs are feverishly cranking out apps and gadgets aimed at these digital-savvy youngsters. A side effect of this kiddo-market miniboom is a surge in product-testing sessions relying on tot testers.

Much of this product development is centered in the Bay Area, the hotbed of the startup economy. For local tech-minded parents looking to fill their children’s schedules, product testing is the new karate.

“Instead of going to the playground or gymnastics class, we go to the LeapFrog lab,” says Christy Mast, a mother of two in San Leandro, Calif., whose husband works in the biotech industry.

Fixing Income Inequality

Monday, May 19th, 2014

If you could snap your fingers and magically double the wealth and income of every human on earth, Scott Adams (Dilbert asks), would you do it?

Before you answer with some version of “Duh, yes.” keep in mind that you would be severely worsening income inequality. And that, as we are often reminded by the media, will destroy civilization.

I’m not entirely clear why income inequality leads to doom, all other things being equal, but I hear it has something to do with the French. The analogy, as I understand it, is that Marie Antoinette and her historically inaccurate philosophy “Let them eat cake” is exactly like Bill Gates pledging his fortune to eradicating malaria, fixing education, and providing clean water to the poor.


You can kill that guy with a shovel. That has jury nullification written all over it. I haven’t looked into it, but I’m fairly sure there are a few assholes among the middle class and poor too. Can we ignore the outliers for now?

One of the odd things about my career, and where I live, is that I meet a lot of billionaires and hundred-millionaires in the normal course of my work. Allow me to label my experience anecdotal and rare before you do. Anyway, my experience is that all the super-rich people I meet seem to have a few things in common:

  • They don’t need to work.
  • They all work 60+ hours per week.
  • Every penny they make from now on will be spent by others.
  • They are trying to find the best way to give away their money.
  • No one likes higher taxes.

I don’t think we want the rich to stop working. We’re all lucky that Steve Jobs didn’t quit before Pixar. But if the rich keep working, inequality is likely to keep getting worse. So how do you solve the problem of helping the rich give away their money in ways that help low-income folks the most while being meaningful to the givers?

Rich people wish they had a better and more meaningful way to get rid of excess wealth than buying jets or paying taxes:

How about a private entity creating some sort of venture capital funding program that allows the rich to leverage their experience and their cash in ways that best help the economy? Think of it as micro-loans to low-income borrowers but with the kicker that the lender can offer mentoring, contacts, and even training.

Yeah, let’s harness all those low-income people with good business ideas…

Amazon’s Wholesale Slaughter

Thursday, May 15th, 2014

Jeff Bezos hasn’t exactly talked up AmazonSupply — “You can get industrial motors, flanges, valves, fasteners, materials, janitorial supplies,” is all he has said about it — but it could lead to wholesale slaughter:

While U.S. retailers took in more than $4 trillion in revenues according to the most recent U.S. Census, wholesalers brought in $7.2 trillion selling everything from Bunsen burners to toner cartridges. Even better for Amazon: Of America’s 35,000 distributors, almost all are regional, family-run companies pulling in annual revenues of $50 million or less, and only 160 have more than $1 billion in sales annually. “The industry is largely ignored,” says Dirk Van Dongen, president of the National Association of Wholesaler-Distributors. “You can go your whole life without having a single thought about it.”

Amazon, meanwhile, booked more than $74 billion in revenues last year, selling everything from beds to server time with a viruslike strategy that values opportunity and disruption above short-term profitability. Almost identical to the company’s flagship website, albeit without ads for its ubiquitous Kindle e-readers, AmazonSupply.com launched quietly in April 2012 with 500,000 items for sale.

Two years later, with the site still officially in beta, that list of products has grown to more than 2.2 million–covering 17 product categories from tools and home improvement to janitorial supplies, stocking everything from 12-packs of Hawaiian Punch to schedule-40 stainless steel pipe. If 2.2 million products doesn’t sound like a staggering figure on its own, consider that the average wholesaler sells closer to 50,000 products online.


“The challenge of distribution is to have orders big enough to make money,” says Scott Benfield, a B2B consultant who’s been following the wholesale and distribution game for 20 years. “It’s a very thin-margin business: 2% to 4% for traditional businesses in this sector.” Amazon’s scale is ideally suited to compete in this kind of high-volume, low-margin operation. A Boston Consulting Group study found AmazonSupply’s prices to be about 25% lower than the rest of the industry on common items.

Margins are 2–4%, and Amazon sells for 25% less than its competitors? (They make it up in volume…)