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  • What the Black Death Can Teach Us About Economic Development Today

    To understand the future of economic development, we must better understand economic history. So contends Peter Temin ,Gray Emeritus Professor of Economics at MIT. In a column at Vox , Temin takes us back to the 14th century, when the Black Death prompted an historic shift. The rise in wages as a result of the Black Death was sustained by a shift in marriage patterns that increased the age of women’s marriage, and reduced the rate of population increase. The adaptation to the initial shock led to a durable rise in people’s income. This, in turn, led to a demand for more meat in their diet, which, of course, was accommodated by more husbandry. The whole pattern fit together with the Black Death as a shock that shifted households and the economy from one demographic equilibrium to another. This research dovetails with Allen’s argument that the initial innovations of the Industrial Revolution emerged from tinkering by producers to reduce the costs of expensive labour and reap the benefits of cheap power. In response to the awareness that wages were generally high in western Europe, Allen (2009) went to some lengths to show that the small gains from these initial innovations were not profitable in either France or the Netherlands. Allen (2013) also argued that wages and energy prices in North America were close enough to the British pattern for policy initiatives – tariffs, education, and infrastructure investments – to create conditions hospitable to industrialisation. This was definitely true for countries in western Europe that followed the British pattern once industrial productivity advanced from its initial level. Although these countries did not have the factor prices to make the initial innovations of the Industrial Revolution profitable, the further development of these innovations rendered them profitable at factor prices close to those in Britain. And, as Allen noted, policy changes helped industrialisation along as it spread. But this was all within the high-wage area described by Voigtländer and Voth. They noted that the European marriage pattern extended only from the Atlantic to a line from St. Petersburg to Trieste. Other countries in Asia or Africa were low-wage economies, subject to Malthusian pressure on wages, and their factor prices were not close to the English ones. Small changes in economic policies were not sufficient to make industrialisation profitable in India or Egypt. The story that links the Black Death to the Industrial Revolution, therefore, is also a story telling why Europe industrialised in the past two centuries. Read The Black Death and industrialisation: Lessons for today’s South here .
  • Trust, Safety, Leadership

    "Leadership is a choice. It is not a rank." So says Simon Sinek in this recent Ted Talk. Sinek studies leadership. In this talk he shares some of what he learned in researching and writing Start With Why: How Great Leaders Inspire Everyone to Take Action .
  • Economist Live Chart: 'American Dynamism Dimmed'

    We have come to understand that failure is an important part of success. Or, to be more precise, not being afraid to fail, and learning from failure, is an important part of innovative thinking. But the live chart below, from The Economist , presents a stark picture of failure in the U.S. economy. Since the global economic crises, the number of failed companies each year has exceeded the number of startups.
  • Cities: The Place for Faster Learning and Faster Innovation

    Want to learn and innovate faster? Get yourself to a place that is full of creative people inventing, making, and doing new things at a rapid pace. In other words, get to a city. At least that's the advice of John Hagel . Hagel works "at the intersection of business strategy and information technology , " so one might expect him to tout the power of digital connectivity to overcome the importance of place. But in this Big Think interview, he argues that innovation hubs matter now as much as ever.
  • The Role of Policy in Innovation

    Mariana Mazzucato studies the relationship between innovation and economic growth. She looks closely at all the actors involved: entrepreneurs, consumers, companies, policy makers. And she wants us to reconsider the way we frame discussions about innovation and policy. Namely, she sees the "market vs state" sensibility as a bit out of touch with what is going on when companies innovate. In this Ted Talk , she makes the case that the state matters--and that part of the reason that the Apples and the Googles became the global powers they are is because of policy and not government "getting out of the way."
  • R&D Spending: 'Something to Worry About'

    John Robertson --vice president and senior economist in the Atlanta Fed ’s research department--gives us "something to worry about" at the Atlanta Fed Macroblog. This is the trend line for private R&D spending: Robertson writes: Notice the unusually slow pace of R&D spending in recent years. The 50-year average is 4.6 percent. The average over the last 5 years is 1.1 percent. This slower pace of spending has potentially important implications for overall productivity growth, which has also been below historic norms in recent years. R&D spending is often cited as an important source of productivity growth within a firm, especially in terms of product innovation. But R&D is also an inherently risky endeavor, since the outcome is quite uncertain. So to the extent that economic and policy uncertainty has helped make businesses more cautious in recent years, a slow pace of R&D spending is not surprising. On top of that, the federal funding of R&D activity remains under significant budget pressure. See, for example, here . Read The New Normal? Slower R&D Spending here .
  • Case Study: The Fall of the Blackberry

    Not long ago the Blackberry was as ubiquitous in offices as the necktie. Research In Motion had produced an innovative product that was credited with increasing productivity in a business culture that more and more depended on 24/7/365 connectivity. Then the Canadian success story changed. The once-breakthrough phone/email - retrieval-device was out innovated and outsmarted by the iPhone and other smartphones. And now, its days appear to be over. One lesson: in a consumer driven marketplace, if your product's success has more to do with the choice of companies rather than the end user, you might be in trouble. The New Yorker 's Vauhini Vara reports on the decline: As early as 2009, BlackBerry’s share price had fallen to less than fifty dollars, from its high of two hundred and thirty-six dollars in the summer of 2007. The “consumerization” of business technology was already underway, and the company had failed to come to grips with it: when BlackBerry users returned home and pulled off their ties, they picked up iPhones, which were a lot more fun to use. Soon, they wanted to use iPhones at work. Simultaneously, companies realized that workers would be happier and more productive buying the device of their choice, and the firms themselves, spared the expense of providing their employees with phones, would save money. By the time BlackBerry realized it needed to reach consumers directly, it was too late. In November, 2008, the company released its first touchscreen phone, the Storm, to middling reviews. BlackBerry then turned its focus to Asia and Latin America, where the smartphone market continued to explode. For several months, the strategy worked. In Indonesia, where the company made a special push, its products held forty-seven per cent of the market by the first half of 2011, up from only nine per cent in the first half of 2009, according to the research firm Canalys. The decline in the company’s stock price finally started to level off. But the plateau was short-lived: soon, a new crop of Asian companies started to build cheaper smartphones. Around the time that BlackBerry deepened its efforts in emerging markets, it also bought QNX Software Systems, whose operating systems powered technology ranging from medical devices to computerized automobile interfaces. BlackBerry hoped to augment its own operating-system expertise—but in April of 2011, when the company introduced a tablet powered by a QNX-based operating system, the PlayBook, it flopped. Then BlackBerry appointed a new C.E.O., Thorsten Heins, at the start of 2012. It would take a year for the firm to throw what David Pogue, the Times technology critic, called “BlackBerry’s Hail Mary pass”: this January, the company launched the Q10 and Z10, its most serious attempts at high-end phones that would actually be attractive to everyday consumers. While some critics praised the phones—Pogue called the Z10 “lovely, fast and efficient, bristling with fresh, useful ideas”—they have failed to sell as well as the company had hoped. In its most recent quarter, BlackBerry shipped only 6.8 million smartphones—roughly a fifth of what Apple sold during the same period. Read How Blackberry Fell here .
  • AthenaHealth's Jonathan Bush on Profits and Healthcare

    When Jonathan Bush co-founded AthenaHealth in 1997, his goal was to bring some basic business practices into medical offices and allow doctors to focus on being doctors rather than small business owners. We know Jonathan, and so we have watched him grow as a CEO, and AthenaHealth grow as a company. As with many successful startups, the business has changed its approach a few times. But Bush's basic push to make healthcare more efficient, as a business, remains. In this TedMed talk, Bush shares his views on the business side of medical care, and the role of profit motives for hospitals, doctors, and healthcare providers:
  • Connectivity and the Future of African Economies

    Juliana Rotich says "Africa is transcending its geography problem." Thanks to relatively new undersea fiber-optic cables (some of which are still being set up), some parts of the continent are connected to the world like never before. This map from Many Possibilities illustrates what Rotich is noting: Rotich is co-founder of Ushahidi, an open-sourc e software and web-based reporting system based in Kenya. In order to get the software to as many people in Africa as possible, Rotich found she had to work on extending connectivity. In this TedTalk , Rotich discussed the push to make sure that African communities and businesses were not left behind in the digital revolution:
  • World Economic Forum: Immigrant Inventors

    Let's block out the political discourse (if you can call it that) on immigration for a moment. The World Economic Forum has posted an interesting article on the migration of inventors. The U.S. is by far the preferred location for "immigrant inventors," as Carsten Fink calls them. Fink writes: Immigrant inventors account for 18% of all inventors residing in the US. Several small European countries see even higher immigration rates –notably, Belgium (19%), Ireland (20%), Luxembourg (35%), and Switzerland (38%). Among the larger European countries, the UK (12%) shows a relatively high share of immigrant inventors. By comparison, foreign nationals only account for 3% to 6% of all inventors in Germany, France, Italy and Spain. Japan is the only high-income economy with an inventor immigration rate of less than 2%. Inventor migration is a concentrated phenomenon. The 30 most important bilateral migration corridors account for less than 0.08% of all corridors in our dataset; yet, they account for close to 60% of overall inventor migration. Among the 30 top corridors, the US is the most frequently listed destination. Most origin countries are other high-income countries, although the top two corridors – China-US and India-US – have middle-income country origins. Looking specifically at south-north migration, the lead position of the US is even more pronounced: close to 75% of migrant inventors from low- and middle-income countries reside in the US. China and India clearly stand out as the two largest middle-income origins, followed by Russia, Turkey, Iran, Romania, and Mexico (Figure 2). Fink goes on to explore some of the reasons inventors choose to migrate. Read the full article here .
  • Key Factors Behind 'Reshoring Phenomenon'

    We are hearing more and more talk of reshoring --multinational companies moving jobs closer to home. Knowledge@Wharton 's Mukul Pandya spoke with Morris Cohen--professor of manufacturing and logistics at Wharton--and Scott Staples --President of Americas at Mindtree--about the key factors driving "the reshoring phenomenon." Cohen outlined four important drivers: Costs, risks, technology, and innovation. Staples points to another big driver: "talent availability."
  • What Makes a Company a Global Growth Leader

    Wharton marketing professor George Day has been studying growth leaders like IBM and GE for 25 years. His goal: to find the secret formula for scale, or, to answer a key question: "how do companies become growth leaders? Day has put his findings into a new book: Innovation Prowess: A Leadership Strategy to Accelerate Growth . In this Knowledge@Wharton video, Days speaks with his Wharton colleague David Heckman about innovation, management strategies, and finding the right balance of organic and inorganic growth.
  • Innefficient Supply Chains: Where Innovation Goes to Die

    Inventor/entrepreneur David Berry has a problem with the the way most supply chains stifle real innovation. Writing at Project Syndicate , Berry argues that innovation requires open minds, at all stages of the process: Breakthroughs lie at the intersection of technological possibility and market pull. An understanding of these forces enables innovators to optimize the direction of invention. With well-defined constraints, a clear path for developing innovative technologies – one that accounts for both the known and the unknown – can be planned. This unconventional approach has consistently produced groundbreaking technologies that, if successfully implemented, revolutionize a field. What might be more interesting, however, is the response that such progress often elicits: “This seems so obvious. Why hasn’t someone done it before?” Early in my career, this reaction troubled me; it made me wonder whether I had, in fact, overlooked something obvious. But, as my experience with entrepreneurial innovation has grown, I have realized that the response is rooted in the fact that most people are trapped in a specific doctrine, which obscures the innovative solutions that lie beyond its borders. Companies exhibit similar behavior when it comes to acquiring innovative technologies, adhering to ineffective, restrictive processes, despite an ostensibly obvious alternative: the efficient systems that manufacturers use to secure inputs for production. In order to establish a clear, low-risk path to producing their goods at a predictable (and profitable) cost, companies employ teams dedicated to securing the relevant supply chains, controlling inventory, managing the production process, and so on – from the point of origin to the point of consumption. In many cases, this involves maintaining relationships with a dedicated network of suppliers, with which producers share detailed product specifications. Doing so ensures that producers get exactly what they need, and that suppliers are able to deliver the correct inputs. The result is a well-defined, highly productive, and mutually beneficial working relationship. Read Fixing the Innovation Supply Chain here .
  • Quartz: Manicures, Immigrant Workers, and Innovation Driven Growth

    In assessing the possible economic benefits of immigration reform, Quartz 's Tim Fernholz chooses to look at an industry we've not thought about: manicures. Fernholz shares some key takeaways from a study on manicure businesses in California, and reveals that it is a thriving business. And the growth has been driven by Vietnamese immigrant workers: Fernholz writes: Why was this possible? Because the immigrants were—wait for it—innovators in the manicure space. They developed the idea of the standalone nail salon that reduced costs, “making a once-exclusive service commonplace.” That meant more nails to paint, not just more workers per nail. The benefits of immigration accrued to people who got their nails painted, to the new immigrants, and even to the remaining non-Vietnamese manicurists. While nail-care business might not be the perfect stand-in for all low-income work, it does reflect what economists find more broadly: When new immigrants come, it does mean new competition for similarly-skilled local workers, but the new immigrants may also create opportunities that lead to more investment, which maintains wage growth and leads to economic growth. Indeed, with more immigration, average wages seem to rise, not fall. But the American workers most similar to low-skilled immigrants are uneducated Americans. Economists looked at how immigration affected them between 1990 and 2006, when a lot of unauthorized workers were coming into the country. If they assumed every new immigrant had the exact same abilities as a native worker (which obviously isn’t true, starting on the language front), the effect of immigration on the wages of native workers who didn’t finish high school fell 0.6% over 16 years, while those of everyone else improved. In a more accurate simulation, they found that less-educated natives saw their wages increase by 0.3% due to immigration, and average wages increased 0.5%. That’s not so bad at all. Read How manicures explain the benefit of low-skilled immigration here .
  • Richard Florida Calls Rising Creative Class the "Growth force of our time"

    It has been more than a decade since Richard Florida got our attention with his book, The Rise of the Creative Class . Even with the tumult of the last several years, Florida has not changed his position. He continues to believe that workplaces that tap into, and encourage, the creativity in workers will reap benefits in today's global economy. In this Big Think interview, Florida discusses the continuing rise of the creative class:
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