261 (20 April 2016)

Welcome to week 261!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

(14 April 2016): “How the Maker of TurboTax Fought Free, Simple Tax Filing” (https://www.propublica.org/article/how-the-maker-of-turbotax-fought-free-simple-tax-filing)

——–“Imagine filing your income taxes in five minutes—and for free.  You’d open up a pre-filled return, see what the government thinks you owe, make any needed changes and be done.  the miserable annual IRS shuffle, gone.  It’s already a reality in Denmark, Sweden and Spain. . .. Advocates say tens of millions of taxpayers could use such a system each year, saving them a collective $2 billion and 225 million hours in prep costs and time, according to one estimate.  The idea, known as ‘return-free filing’ . . . has been around for decades and has been endorsed by both President Ronald Reagan and a campaigning President Obama.  So why hasn’t it become a reality?  Well, for one thing, it doesn’t help that it’s been opposed for years by the company behind the most popular consumer tax software—Intuit, maker of TurboTax. . .. Intuit has spent about $11.5 million on federal lobbying in the past five years—more than Apple or Amazon.  Although the lobbying spans a range of issues, Intuit’s disclosures pointedly note that the company ‘opposes IRS government tax preparation.’”

********Evidently, California has a limited system of return-free filing called ReadyReturn.  But with a limited marketing budget, “Fewer than 90,000 California taxpayers used it last year.”

(16 April 2016): “Schumpeter: Keeping it under your hat” (http://www.economist.com/news/business-and-finance/21696911-tech-fashion-old-management-idea-back-vogue-vertical-integration-gets-new)

——–“Apple and Tesla are two of the world’s most talked-about companies.  They are also two of the most vertically integrated. . . . A century ago this sort of vertical integration was the rule: companies integrated ‘backwards’, by buying sources for raw materials and suppliers, and ‘forwards’, by buying distributors. . . . Today this sort of bundling is rare . . . Yet a growing number of companies are having second thoughts.”  Although this is most visible in information technology, other areas are also embracing it.  There are five principal reasons for the turnaround: simplicity, the challenges of operating on a technological frontier, the importance of customer relationships, speed, and geopolitical uncertainty.  But “vertical integration will not sweep all before it.  For the most mundane products the logic of contracting out still reigns supreme. . . . That said, striking the right balance between doing things in-house and contracting out is clearly much more complicated that it was in the days when Tom Peters and his fellow gurus told companies to focus on what they do best and outsource the rest.”

********One challenge of long-supply chains is that they are subject to disruption from geological events, as most recently illustrated by the article “Japan Earthquakes Rattle Toyota’s Vulnerable Supply Chain” [SR](http://www.wsj.com/articles/japan-earthquakes-rattle-toyotas-supply-chain-1460986805).  “Toyota’s decision to shut 26 car assembly lines this week nationwide due to production halts by a supplier shows how the auto maker’s lean manufacturing system, often viewed as a model of efficiency, can be affected by disasters.”

********It appears the reference to Tom Peters relates, ultimately, to In Search of Excellence (http://www.amazon.com/Search-Excellence-Americas-Best-Run-Companies/dp/0060548789/), which was first published in 1982.  In trying to identify the work, I stumbled upon an interesting post: “What Five Great Economists Can Tell Us About Outsourcing” (http://www.supplychain247.com/article/what_five_great_economists_can_tell_us_about_outsourcing).  The economists—Adam Smith, Ronald Coase, Robert Solow, John Nash, and Oliver Williamson—are well chosen.  Evidently Peter Drucker is most-closely connected to the statement “Do what you do best, and outsource the rest.”  A sense of this thought and some of its consequences appeared in The Wall Street Journal in his 1989 article “Sell the Mailroom” (http://www.wsj.com/articles/SB113202230063197204).  He concludes the article, noting “Of course there is a price for unbundling.  If large numbers of people cease to be employees of the organization for which they actually work, there are bound to be substantial social repercussions.”  Perhaps we are seeing those repercussions this election cycle.

********The foregoing all seems to have some relevance for the review of Connectography, by Parag Khanna in “Made Everywhere and Nowhere” [SR](http://www.wsj.com/articles/made-everywhere-and-nowhere-1461021225).  As there noted, “These are dark days for supporters of globalization.  Bernie Sanders and Donald Trump have upended the U.S. presidential race by championing protectionism . . . [and] Hillary Clinton has renounced her former support for the Trans-Pacific Partnership.”  Connectography is “a counter-blast to such thoughts. . . . Mr. Khanna argues that the most important fact about the modern world is the rise of connectivity.  Countries and companies have been building bridges, digging tunnels, constructing airports and laying fiber at a breathtaking pace, soldering the world ever-closer together.”  All things considered, “Mr. Khanna has succeeded in demonstrating that the forces of globalization are winning the battle for connected space, building tunnels, bridges and pipelines at an astonishing pace.  He is less successful in demonstrating that they are winning the battle for people’s minds, let alone their souls.”  We are left with the question, I suppose, “What is a more connected world for?”

(17 April 2016): “How Asheville’s Big Beer Deal Fell Flat” (http://www.citizen-times.com/story/news/local/2016/04/16/how-ashevilles-big-beer-deal-fell-flat/82888810/)

********I am resisting the temptation to summarize this excellent article.  It is well worth the read and provides many opportunities to learn for those who are so inclined.  I hope that all of our present and prospective elected officials will be so inclined.

(20 April 2016): “Marijuana Legalization in New England Is Stalled by Opiate Crisis” (http://www.nytimes.com/2016/04/20/us/marijuana-legalization-in-new-england-is-stalled-by-opiate-crisis.html)

——–“First came Colorado and Washington.  Then Alaska, Oregon and Washington, D.C.  Now advocates for legal marijuana are looking to New England, hoping this part of the country will open a new front in their efforts to expand legalization nationwide.  But this largely liberal region is struggling with the devastating effect of opiate abuse, which is disrupting families, taxing law enforcement agencies and taking lives.  And many lawmakers and public officials are balking at the idea of legalizing a banned substance, citing potential social costs.”  A major stumbling block in legalization effort is “the opiate crisis, in which heroin, fentanyl and other drugs have killed more than 2,000 people in New England in the last year.”  At the same time, legalization advocates “are using the heroin crisis as an argument in favor of legalization, saying that it would move the substance out of the hands of trackers” and reduce “the amount of interaction with hard drug dealers.”

********Interesting how the opiate crisis is used as the basis both for and against the legalization of marijuana.  I have been reading Methland (http://www.amazon.com/Methland-Death-Life-American-Small/dp/1608192075/) of late, and I have found it to be instructive and chilling.  For people who have watched the television series Breaking Bad, and to a lesser extent Justified, there is familiar material but the people are all-too-real.  More directly related to the opiate crisis is Dreamland: The True Tale of America’s Opiate Epidemic (http://www.amazon.com/Dreamland-True-Americas-Opiate-Epidemic/dp/1620402505/), by Sam Quinones.  It will be my follow up to Methland.

(20 April 2016): “BMW Loses Core Development Team of Its i3 and i8 Electric Vehicle Line” (http://www.wsj.com/articles/bmw-loses-core-development-team-of-its-i3-and-i8-electric-vehicle-line-1461086049)

——–“BMW AG has lost the core development team of its i3 and i8 electric vehicle line to Future Mobility Corp., a Chinese startup backed by Tencent Holdings, as the German premium brand struggles to come up with a convincing answer to Tesla Motors Inc. . . . The defections come as BMW and other premium brand manufacturers are struggling with weak sales of their electric vehicles and a growing threat from new rivals in the nascent electric car market. . . . the defection of BMW i’s core development team suggests that BMW’s strategy of developing niche products at a time when Tesla is moving into the mass market could make it harder for MBW to attract and retain young talent in the future.”

********The article is accompanied by a 1.5-minute video.  No doubt the development team was offered some significant monetary incentives to move from BMW, but I suspect, too, that talented people would like to work on a project with the potential for market transformation rather than simply serving a niche.  This seems consistent the comment made at the end of the article that the launch date for the next model in the BMW i series is 2020.  According to BMW CEO Harald Krüger, “That’s too long for young people who want to change the world.”

********There is so much in play in electricity and in energy at this time, with large coal, oil, and solar producers filing for bankruptcy.  But solar-based power continues to expand along with new technologies.  One technology is related in “Solar Panels Get Small.  Real Small” (http://daily.jstor.org/solar-panels-get-small/).  Such panels “can be embedded in windows, in walls, in cell phones, basically anywhere you can think of—and will not really be visible.”  Some of these developments are taking off from biological examples, such as polar bears.

May you have a good week!

Bruce

 

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