Who Invented the Dog?

6th in a #ReadWithMe series.

When you look at your dog, you seldom thing it is “a crucial innovation”. Yet dogs were. We have difficulties even conceiving that somebody, at a certain point, thought about domesticating them, as we are so used to having them on our side. Yet somebody, at some point, did.


The domestication of dogs happened between 20,000 and 40,00 years ago.

“The DNA from a wolf that died 35,000 years ago in northern Siberia … hinted that by then wolves were separate from dogs. Thus well before the last glacial maximum, but during a much colder period than today, people living on the Eurasian mainline somehow made friends with wild wolves and turned them into useful tools. Or was it the other way around?”


It is likely, writes Matt Ridley, “that the domestication began with wolves tentatively hanging around human camps to try to scavenge leftover carcasses. The bolder ones risked being speared, but got more food; gradually boldness in the presence of people became commoner in one group of wolves till people saw the advantage of having semi-tame wolves hanging around”.


Ridley knows that “it is stretching it to call domestication genetics an innovation”, particularly when the view widens to include the way in which we human beings domesticated: we are dogs to our wolves ancestors. Though it is not clear which genes accomplished the result, some kind of selection took place, changing us profoundly, in a way fitter to a far more gentle, less violent and rumbustious life.


In closing his chapter on the invention of the dog, Ridley makes one of the key points of his book in a very clear way: “Innovation is a lot less directed and planned, even today, than we tend to think. Most innovation consists of the non-random retention of variations in design”.



Read my previous posts here.


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The Big Store:The Dropout, Episodes 3 and 4

A #ReadWithMe series. Read Part 1.


As Theranos’s profile as a company, and Elizabeth Holmes’s profile as a startup star, began to rise, Holmes began a publicity push unlike anything seen before.

She worked with Errol Morris, director of The Thin Blue Line, on a set of promotional videos that focused on patients’ fears about blood tests, and Theranos’s promise to provide a better patient care experience. Holmes appeared at Glamour’s Women of the Year awards. Forbes 30 under 30. She was interviewed on CNN and CBS This Morning. She was on the covers of Forbes, Inc., Fortune, and Bloomberg Businessweek. She even got a feature in the Style section of the New York Times.


By 2014, Theranos was valued at almost 10 billion dollars. Holmes personally was worth 4.5 billion. 


And the technology still didn’t work. 


More shockingly than that, perhaps, is that none of the media coverage of Holmes and Theranos seemed particularly interested in how, or if, the Theranos machines functioned. Her unsupported claims were simply repeated.


How unsupported were those claims? When Vice President Joe Biden came to visit Theranos he was shown a fake lab, with machines rigged to play video of tests being run. It was at this point that I paused the podcast, by the way, and googled “con games” to see if I could find the technical term for what Theranos reminded me of. I was hard pressed to see much distinction between the show put on for Biden’s visit and what con artists call the “Big Store”–where elaborate props and sets and a team of confederates are used to build a false front to persuade marks that real business is happening. (See The Sting, Leverage, or Hustle for examples).


Audio clips from the deposition of Holmes make it clear that she was more or less indifferent to the fact that the Theranos machines weren’t working. Instead, she and Balwani bought commercial blood testing machines from Siemens and used them to run the tests instead.


Rather than pouring her vast amount of investment funding into trying to get the machines to work, Holmes hired Chiat/Day the advertising firm that produced Apple’s most iconic ads to publicize Theranos–and herself–with an 11 million dollar campaign. Employees at Chiat/Day who worked on the account report that they were stonewalled when seeking information about how the technology worked. This made it almost impossible to verify the claims that Holmes and Balwani wanted to see in the advertising, and meant that copy had to be constantly altered to avoid illegal claims.

The Chiat/Day team also discovered, while working on the account, that Theranos did not have a lab in Phoenix. Instead, all the blood from all the tests done at all the Theranos wellness centers in all the Arizona Walgreens was FedExed to Palo Alto for testing. The issues with security, biohazard safety, and the potential deterioration of blood samples were immediately apparent. And as Balwani casually admits in his deposition, it was all done to avoid the need for FDA approval. 


But Theranos’s board, including Henry Kissinger, General James Mattus, George Shultz, Senator Bill Frist, and Admiral Gary Roughead, were still solidly on board with Holmes and her claims. And with names like those on the board, combined with all the press coverage and the Walgreens deal, investors kept coming. The Walton family, the De Vos family, Rupert Murdoch, everyone wanted in.


The Dropout” leans on its strength of bringing us the voices attached to the stories again in this episode. Eileen Lepera, a retired executive assistant, who invested $150,000 in Theranos, seems grimly resigned to the loss of her investment, made based on the “knowledge and advice” of the people who sold her on it. But it is the voices of those who got test results from Theranos that stay with me from episode three. There is Sheri Ackert, a breast cancer survivor and double mastectomy patient, whose Theranos test results indicated she had a new tumor. But the test was wildly wrong, and Ms Ackert was fine. Dr. Pallav Sharda got a test result indicating that he was pre-diabetic.He retook the test at another lab. The Theranos test was wildly wrong, and Dr. Sharda was fine. 


But the human costs of Theranos were rising.


In episode four, finally, someone speaks out.


One of the great questions raised by the Theranos scandal is why it took so long for someone to point out that the emperor had no clothes. Throughout the first three episodes of the podcast, employee after employee mentions that they were essentially, just waiting for the news to break. Why didn’t any of them speak up?


Part of the reason seems to be that Holmes and Balwani’s response to any questioning or criticism of Theranos policies or technology was to accuse and harass the people who brought it up. Turnover was high, even for a startup, and constant. When tests failed or were unreliable data was massaged and cherry-picked in order to provide acceptable results. But the tech problems that caused the bad results were never fixed.


And then Holmes hired Tyler Shultz, George Shultz’s grandson. Tyler Shultz seems to have bounced into Theranos like a ball cap wearing lacrosse player sliding into the back row of class ten minutes late. He cheerfully notes that he got his internship because Holmes wanted to charm his grandfather.


But Shultz almost immediately noticed that the Theranos machines didn’t work and that the information his grandfather was getting was entirely different from what he saw in the lab every day. George Shultz heard about cutting edge blood testing. Tyler Shultz saw machines that got caught in their own gears, needed their doors taped shut, and–as I keep saying–just didn’t work. But thought Tyler Shultz and his friends at Theranos thought it was funny to joke about the wild inaccuracy of, for example, Theranos tests for STDs, he was increasingly concerned about people like his grandfather, getting their blood tested by Theranos.


He anonymously contacted Board of Health regulators, who asked him to file an anonymous report. He also sent an email to Holmes, detailing the issues he had noticed. Holmes promised to look into it, but Balwani responded with a threatening demand for an apology. So Tyler Shultz quit.


Tyler Shultz’s full story is available in his podcast “Thicker Than Water,” and I may visit that in my final post. What is important here is that, at the same time that he was filing his reports and leaving Theranos, others were beginning to dig as well. Dr. Jon Ionnides started to look into Theranos and found that there were no scientific publications about Theranos’s research. (Ordinarily, one would expect a startup with such a radical new technology to produce hundreds or thousands of papers about their work.) John Carreyrou, author of Bad Blood and investigative reporter, was also beginning to be suspicious. Holmes’s credentials just didn’t seem to add up to someone who would be likely to produce world-altering research.


But Theranos was well protected. The big names on its board and the intimidating reputation of its outside council, David Boies, served to keep a lot of employees quiet. Even Tyler Shultz, protected by about as much privilege as one can have in America, was terrified to talk with Carreyrou. He was right to be. He and other anonymous sources were followed, handed threatening letters by strangers, and threatened with lawsuits. Shultz’s grandfather was enlisted to get him to sign a confidentiality agreement to “make everything go away.” When he showed up to discuss the situation with his grandfather, he found two Theranos lawyers there waiting for him.


Soon the FDA was showing up to do a surprise inspection of the Theranos labs.Tyler Shultz was hiring lawyers, and he and another source, Erika Cheung were talking to Jon Carreyrou. And on October 15, 2015, the Wall Street Journal began to run Carreyrou’s work, and Theranos began to get the kind of publicity that no fancy documentaries and no iconic advertising firms could hope to counteract.       


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Innovation Travels

5th in a #ReadWithMe series.


Henry Robinson Palmer was a trained engineer. As Matt Ridley writes:

“In 1826 he was appointed to oversee the extension to a dock in east London. Having finished the excavation and construction of the locks he turned his attention to the buildings. He seems to have hit upon the idea of using an iron sheet for the roof an open shed, but to make the sheet stronger, he passed the wrought iron through rollers to give it a sinusoidal wave. On 28 April 1829 he patented the use or application of fluted, indented or corrugated metallic sheets or plates to the roofs and other parts of buildings”. This “immensely strengthened the iron sheet, made it more rigid and capable of spanning a wide gap without extra support while supporting a load such as snow. Crinkly tin was born”.


Corrugated iron is mentioned by David Edgerton in his book The Shock of the Old, as one of those innovations the so-called “first world” takes for granted but are proving very useful still in developing countries. “In the nineteenth century”, writes Edgerton, “it spread around the world to areas of British Army operation as transportable housing. … It was hugely important In the twentieth century as a truly global technology. Its cheapness, lightness, ease of use and long life made it a ubiquitous material in the poor world in a way it never been in the rich world”.


Writes Ridley: “in the slums of today’s expanding megacities, where property rights are uncertain, corrugated iron is not only affordable and available but buildings made of it can be easily dismantled and moved. It is one of the first things shipped into earthquake zones to provide shelter in short order”.


Innovation travels, so to say. It may be received differently in different contexts. Its success depends on the circumstances, and on people’s needs, more than on the sheer brilliancy of a certain invention or of a given inventor (though Palmer was clearly brilliant: he also imagined a monorail system and conceived something similar to containerization, an improvement which was to come to fruition one century later).


Read the earlier posts in this series herehere, here, and here.


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Sounds Suspicious: The Dropout, Episodes 1 and 2

John Carreyrou’s book about the rise and fall of Elizabeth Holmes and Theranos is so comprehensive, it’s hard to imagine what a podcast covering the same material could add. (You can read my first post on Carreyrou’s book here.) But the first thing we hear in the first episode of the ABC News podcast, The Dropout, is an audio clip from Holmes’s deposition. 

And that means we hear Elizabeth Holmes’s voice.


Holmes’s voice is a consistent theme in Carreyrou’s book, significant enough to have its own entry in the index. In public interviews and in her deposition, Holmes’s voice is a startlingly deep baritone. Carreyrou, and others who have worked and spoken with her, say that this is a pretense. Holmes’s natural speaking voice is more traditionally feminine and higher-pitched. The baritone is something she adopted to sound more authoritative and more powerful.


Any woman in the business world can sympathize with the difficulty of being taken seriously–particularly when one has a quiet, high, “girlish” voice. But Holmes’s baritone and the long pauses she uses either for emphasis or in order to keep her voice in this lower register combine with what we now know about the level of deception practiced by Holmes and her company to emphasize just how deeply her duplicity ran.


It is a voice we hear a lot over the six episodes of The Dropout. 


The first episode is dedicated to the young Elizabeth Holmes who, from childhood, had wanted to invent something big and to change the world. Everyone’s favorite childhood anecdote about Holmes involves her drawing involved plans for a time machine at age 7. It sets the stage for her as a person with big dreams and a sense she could accomplish anything. But the second anecdote everyone tells about Holmes. A relative asks her what she wants to be when she grows up, and she says: “A billionaire.”


It would be unkind to base our understanding of anyone’s character on their childhood answers to questions like this. (I wanted to be a ballerina, after all.) But since we know how the stories of Holmes and Theranos have evolved, it is hard to remember that, and hard not to read her ferocious ambition directed towards nothing more specific than the accumulation of wealth, as the source of so many problems.


Episode one interviews some of Holmes’s high school teachers and her professors at Stanford. When Holmes was introduced to Phyllis Gardner, a professor of medicine. Gardner found her unimpressive, “It was just a 19 year old talking, who had taken one course in microfluidics, and she thought she was going to make something out of it.” With a chilly reception from Gardner, Holmes sought a mentor in the engineering department–Channing Robertson. Robertson became very involved in Holmes’s goals, introducing her to venture capitalists, and becoming a director of her nascent company. He compared her to Mozart, Beethoven, Newton, and Einstein. 


While Holmes had trouble getting funding from those with medical and pharmaceutical experience, venture capitalists with more generalized interests were excited by her dream of radically changing the world of blood testing. Donald Lucas Sr., who originally backed Oracle, is another voice we hear in the first episode of the podcast. He notes his initial skepticism about this 19 year old Stanford dropout with a big idea, but then notes that her great grandfather was an entrepreneur and the hospital in her area was named after her great uncle, “so she came by the two things that were necessary here–one medicine, and the other entrepreneur–quite naturally. And she was attractive, too.” Hearing Holmes’s staged baritone helps cement her dishonesty for podcast listeners. In much the same way, hearing Lucas marveling at Holmes’s mystic bloodline of medical innovation as well as her blonde beauty helps us understand how Holmes got so much money so early with so little to go on. 


She had a great story. 


But great stories don’t make great companies. Neither does hiring designers from Apple to make an impressive looking case, nor does redesigning Holmes’s own personal style to mimic that of her idol, Steve Jobs. 


At the end of episode one, we learn that Holmes had arranged for Theranos to be allowed to test its technology on 3rd and 4th stage cancer patients. The machines didn’t work, and the data was corrupted. The tests were just for research purposes, and were not used for diagnostic and treatment purposes. But Theranos employees did not know that. We also learn that Avie Tevanian, Steve Jobs’s right hand man who had left Apple to serve on the board of Theranos had been invited to resign for “asking too many complicated questions.” 


The ever growing level of secrecy and dissimulation at Theranos is the focus of episode two.


In this episode, Sunny Balwani enters the story. With Theranos rapidly running through its initial investment capital, and having trouble getting funding, Holmes sought loans from other sources. Balwani, who had known her since the summer before she went to college, gave her a 13 million dollar interest free loan. And he came on board to Theranos as the president and CEO. With no background in science, and with an abrasive and threatening personality, Balwani seems to have been immediately a source of tension and fear among Theranos employees.


What employees and investors did not know, however, was that Holmes and Balwani were romantically involved. The relationship may have been kept under wraps because Sunny originally met Elizabeth when she was 18 and he was 37, or because investors would have disapproved of Sunny’s involvement in the company if the relationship had been public, or to try to burnish Elizabeth’s mystique as the driven founder with no passions other than her start up. Whatever the reasons, it was never disclosed. 


Holmes and Balwani worked closely together to persuade Walgreens to adopt Theranos technology for lab testing. They told executives that the technology was “viable and consumer ready” and had been validated by the FDA, and was used by the US military. None of this was true.  When Walgreens brought outside experts into Theranos headquarters to review the technology, Balwani’s extensive security was on display, but nothing else was. Experts were not allowed to see the lab or speak with anyone but Holmes and Balwani. And when they asked to run blood tests on the Theranos tech and at an outside lab in order to compare results, Holmes and Balwani refused. In the podcast one expert comments. “I never saw anything that would indicate that the machine would do anything at all…I never got it to do anything.”


Theranos’s claim to be able to perform more than 250 lab tests on a single drop of blood was nothing but fiction.


Yet, Walgreens agreed to a deal with Theranos. By 2015 there were 41 Theranos wellness centers in California and Arizona, and they seemed poised to roll out across America.


The increasing prominence of Theranos, and the prospect of Theranos and its non-existent technology becoming a major–perhaps the major–source of lab test results in the nation, began to horrify and frighten employees. Ian Gibbons, a biochemist at Theranos, worked in the labs, trying to make Holmes’s and Balwani’s outsized promises come true. Unable to make the technology work (and as the podcast proceeds, one wonders if anyone could), he spoke in confidence with Channing Robertson–that supportive Stanford professor who compared her to Beethoven–and was fired the next day. He was rapidly hired back but demoted to HR work. At the same time, Ian Gibbons had been subpoenaed to appear in support of Theranos in a patent dispute. He did not want to testify because it would have required either perjuring himself or revealing that the Theranos tech didn’t work.


Ian Gibbons committed suicide before the court date.


Beginning episode one with the voice of Elizabeth Holmes allows listeners access to the vocal change that is a part of her extensive deceptions. Closing episode two with the voice of Rochelle Gibbons, telling her husband’s story and dissolving into anger and anguish when discussing his death makes very real the very human costs of the games being played by Holmes, Balwani, and Theranos.


And yet, there seemed to be no end to their rise.


Next time: Episodes 3 and 4


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One of Civilization’s Greatest Accomplishments

One of the secrets of a good book is a curious author. Consider this from Matt Ridley:

“I walk a lot in London, and a few months ago I set myself a goal: somewhere in the vast city, while walking down a street, to catch the smell of sewage. I have yet to achieve this goal. Close to ten millions defecations occur in London every day, presumably, for most people it is daily occurrence. I hazard that I am rarely more than 100 feet from somebody actively at work on this task … Yet you never smell it. Why not? This is a new phenomenon, an innovation”.


How many people ever think about such things? The fact that a city as big as London doesn’t smell of sewage is now taken for granted, in spite of the fact the opposite was true for quite a long time. This is “one of the finest achievements of our civilization”, writes Ridley, and he is not joking.


One of the key elements behind the ingredients was the S-bend in the pipe beneath every toilet, which traps water so as to prevent the smell to come back up. Before it, “flush toilets were expensive and unreliable and they had the huge disadvantage that they took away the sewage but not its smell”. The S-bend, “one of those things that could have been invented at almost any time and by almost anybody”, was actually the product of a “fine mathematical mind at the height of the Enlightenment”, Alexander Cummings.


It may sound strange to recommend a book on innovation because he neatly presents, in only a few pages, the history of the water closet and the modern sewage network – but I think this is not a minor merit of Ridley’s book.


Besides commending Matt’s walking habits, I think it is worth stressing again the logic of the book: “innovation” consists not only of things that are big, visible, and breath-taking (pardon the pun). Innovation is a pervasive phenomenon in a modern economy, all the more relevant in the daily undertakings of life, that are improved, little by little, with most of us not noticing it and happily taking for granted a better status quo than our forerunners ever dreamt possible.


Read the earlier posts in this series here, here, and here.


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Kurt Vonnegut and The Idle Rich

Final in a #ReadWithMe Series

Read the first two parts here and here.


The second half of the book takes us to the Rhode Island Rosewaters, who were swindled out of their fortune by a cunning ancestor of their Indiana cousins.  Although Fred Rosewater is an Ivy League graduate, he doesn’t get to slurp from the Money River; his disappointed wife “married Fred because she thought everybody who lived in Pisquontuit and had been to Princeton was rich” (155).  She spends her idle and modest days in envy of her idle and rich friend Amanita Buntline. The Buntlines got to slurp from the Money River, so they are now among the rich people who will never have to work.  Neither will their kids.


Before the questions, I can’t help myself but take another jab at the academy.  Attorney McAllister asks, with a blend of horror and incredulity, “How dare a university teach compassion without teaching history too?” (169).  Oh dear, if he could only see today’s post-Marxism, identity politics, and grievance studies!


Lest I spoil the dénouement, I will focus here on questions, rather than commentary.


1- Pisquonquit is “populated by two hundred very wealthy families and by a thousand ordinary families whose breadwinners served, in one way or another, the rich” (134). One need not be a deeply committed Randian to admire the movers who employ those who lack the capital or imagination to drive the economy and create jobs.  Without the capital and jobs provided by the 200, where would the 1,000 work? Is there any nobler task than meeting payroll faithfully every two weeks?


2- There is a second unsung hero in Vonnegut’s pages. The idle rich may provide capital for business and funds for charities (a point Vonnegut does not entirely neglect) – but Vonnegut doesn’t have much respect for them.  He clearly admires the manual work of Harry Pena and his sons (182).  And Fred’s unglamorous sales slog does not enrich him – but it does allow widows and orphans to have basic necessities after the family breadwinner dies (146).  Yet Vonnegut also suggests that “real people don’t make their livings that way any more…  That’s all over, men working with their hands and backs.  They are not needed” (185-186).  What do you make of this?  Are workers somehow more deserving of esteem than the idle rich, even if they live lives of quiet despair?


3- Where does respect come from – honest toil or good ancestry? Fred Rosewater defends his ancestors:  “The Rhode Island Rosewaters have been active, creative people in the past, and will continue to be in the future… Some have had money, and some have not, but, by God, they’ve played their parts in history!  No more apologies!” (205).  This theme comes to a climax – without spoiling the novel’s plot – with the prediction that human beings will eventually become worthless as producers (264).  What do you make of this?  What is the source of a person’s worth and the approbation of others?  What would Adam Smith have to say?


4- This brings us to the question of helping the poor. We’ve already seen Eliot’s reservations about living as a rich boulevardier, or about the arts elevating souls – versus direct charity.  Stewart Buntline worried that his money should be given to the poor, without realizing that money spent or invested also helps the poor.  I am reminded here of a story, perhaps apocryphal, of a Peace Corps volunteer in the early 1990s.  Assigned to digging latrines for a village in Central America, he soon realized that his work might change the lives of a few dozen people in the village – but a cell phone network would changes the lives of millions throughout the country.  So he quit the Peace Corps and went to work for a consulting firm.  Using profits over charity, he helped the country develop a wireless network.  This meant, of course, not just the opportunity to share cute pictures of pets on Instagram or engage in shallow emoting on Facebook – but online banking, communication, and e-commerce.  How does one help the poor?  Are there limits to markets?


Vonnegut raises many other questions, but that they are beyond the purview of this short assay.  I hope you have enjoyed this delightful and insightful novel as much as I have.  After a short break to catch up on other reading, I will surely return to Vonnegut.



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The Marvel of Trains

Third in a #ReadWithMe series.*


“For all of human history until the 1820s, nobody went faster than the speed of a galloping horse”. I cannot think of another consideration equally telling, of the tremendous progress we made in a rather short time. The main engine, pardon the pun, of such progress was the locomotive. “The man who did most to make the breakthrough in speed” as a craftsman of humble origin, George Stephenson:

“The year is 1810 and a new coal mine has been sunk at Killingworth in Northumberland, with a brand-new Newcomen engine installed to pump out the water. But it does not work, and for a whole year the pit remains drowned, despite the best efforts of engine-men from all around … the humble brakesman in charge of the winding gear at a neighboring pit, 29-years-old George Stephenson, who has a reputation for being able to mend clocks and shoes, offers to help. His only condition is that he will pick his own workmen to help him. Four days later, having dismantled the engine, reshaped the injection cap and shortened the cylinder, he has the engine working well, and the pit is soon dry. Stephen gets the job of engineman and is soon much called upon as an engine doctor all over the district”.


Using a steam engine to pull wagons was not a new idea, but it was made more interesting by the war, as “the Napoleonic conflict created an insatiable demand for horses and for hay to feed them, driving up the price of both”.

In 1814, Stephenson “built a two-cylinder locomotion at Killingworth” which “proved capable of hauling fourteen wagons carrying 2 tons of coal each at 3 miles an hour [this is _not_ a typo], doing the work of fifteen horses”.

In a few years, in 1822, Stephenson will be busy in the building of the Stockton to Darlington railway. Fast forward to 1832, he will be inaugurating the Liverpool-Manchester one.


In his book, How Innovation Works, Matt Ridley makes a splendid use of these stories, which may remind us of the work of Samuel Smiles. In describing Stephenson’s “moving up” from workman to “engineer” (“he was no less a worker, but only in a different way”), Smiles noted that he had “now many more opportunities for improving himself in mechanics than he had hitherto possessed. His familiar acquaintance with the steam-engine proved of great value to him. The practical study which he had given to it when a workman, and the patient manner in which he had groped his way through all the details of the machine, gave him the power of a master in dealing with it as applied to colliery purposes”.


The 19th century was the era of the inventor, geniuses of unlikely backgrounds who through tinkering accomplished magnificent innovations. In a sense, the steam train is the quintessential example of “ideas having sex”, to use a favorite catchphrase of Ridley’s. The steam engine mated with wagons and rail tracks. This happened not because of grand designs, but of very practical needs: how to save on horses. It happened not because of grandiose theorists, but of very practical men, such as Stephenson.


Here’s a point many tend not to get about innovation: needs are a big part of it. It is not necessarily about grandiose research programs pursued for the sake of mere knowledge (though pursuing knowledge qua knowledge is a great source of meaning and happiness to scholars who write on this subject). More often than not, it comes out of very precise, “local”, needs. Adam Smith observed long ago that “a great part of the machines made use of in those manufactures in which labour is most subdivided, were originally the inventions of common workmen, who, being each of them employed in some very simple operation, naturally turned their thoughts towards finding out easier and readier methods of performing it”. That is not necessarily true today, but when it comes to the beginning of the industrial age, I think Ridley would agree with Smith that common workmen played a central role.



*Read Part 1 here.

*Read Part 2 here.


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Rosewater’s River of Wealth

Second in a #ReadWithMe Series


The Rosewater Foundation’s inflation-adjusted $87 million endowment represents roughly $700 million, not billion, in today’s dollars.  Nothing to sneeze at, but I apologize for the error in my first entry.  I must have had federal stimulus bills on my mind…


I have now read the second quarter of Rosewater.  Eliot Rosewater has walked away from high culture, a beautiful French wife, and charitable support of the arts – returning instead to small-town Indiana, where he can help “these discarded Americans, even though they’re useless and unattractive.”  “That is going to be my work of art”, he gushes (44).  With the help of Southern Comfort and the Foundation’s millions, Eliot becomes a social worker, therapist, coach, and benefactor to the downtrodden.


In this fun and rich continuation, I will focus on three economic themes.


First, the human condition has been one of misery:  before the 19th century, everybody was poor (there were no antibiotics, novocaine, or indoor plumbing in the wealthiest of courts).  It is easy to understand despair in the face of famine, low life expectancy, and limited socioeconomic opportunity.  But it is harder to understand why the small percentage of humanity that was able to escape abject poverty feels malaise rather than gratitude.  The portmanteau “affluenza” was coined in the early 1950s to describe either “feelings of guilt, lack of motivation, and social isolation experienced by wealthy people” or “extreme materialism and consumerism associated with the pursuit of wealth and success and resulting in a life of chronic dissatisfaction, debt, overwork, stress, and impaired relationships.”  A decade earlier, Joseph Schumpeter had warned that capitalism might contain the cultural seeds of its own destruction.  Vonnegut writes of “one more kid rotten-spoiled by postwar abundance” (42) and Sylvia Rosewater suffers from samaritophobia, which could be quickly summarized as rich guilt (52).  Why the high rates of depression in rich countries?  Comedian Tom Lehrer joked of a Dr. Samuel Gall (inventor of the gallbladder), who was able to retire at an early age, because he had specialized in diseases of the rich.  He was on to something.


Second, a delightful and curmudgeonly friend once described the modern American university as “a country club – with a brothel attached to it.”  As a libertarian, I am not so worried about the students’ after-hours activities… assuming, of course, that there are hours in the first place, and that the students aren’t goofing off around dumbed-down classes with grade inflation.  But add a hearty dose of post-Marxist identity politics, and you’ve got real trouble.  So I was amused when Senator Rosewater appealed to his alma mater.  If the mother is nourishing, she is also a minister of culture, a transmitter of social mores:  “Ask yourself what Harvard would think of you now” (120).  Eliot reassures his father than an annual donation of $300,000 from the Foundation buys him plenty of respect.


Third, we have the most interesting economic theme in the first half of the book:  the Money River, Eliot’s theory of income and wealth (122-124).


I close with some questions:

  1. What virtues are required to sustain capitalism? Does capitalism indeed contain the seeds of its own destruction?  Is capitalism sustainable if the culture of savings that leads to wealth engenders a culture of consumption?
  2. Why is wealth icky, when capitalism is plainly the greatest anti-poverty program ever? What about the post-1800 growth, or the post-1980 massive drop in extreme poverty – or the 130,000 people around the world who were lifted out of poverty, yesterday and every day, without a fuss or a headline?
  3. There are three actors (or… dare I use the word?…  classes?) around the River of Wealth:  born slurpers, experts who help the slurpers, and the masses who don’t know about the river – and a fourth, rare group, those who are guided to the riverbank.  What do you make of this?  On the one hand, the theory holds that one is simply born into a certain class, and that work and merit are irrelevant.  On the other hand, could we not translate the River of Wealth as the much less romantic “human capital”?  Some acquire it readily, but many are excluded (because of a failed K-12 government monopoly, college tuitions bloated by federal subsidies, regressive job licensing requirements, mass incarceration, and the million other obstacles of the swarms of regulations that harass the poor and eat out their substance).



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Why Matt Ridley Writes on Innovation

First in a #ReadWithMe Series


Matt Ridley’s How Innovation Works is a remarkable book. It is the third book in a row that Ridley, better known as a scientific journalist and, indeed, one of those rare people who makes highly complex scientific arguments understandable to the average educated reader, devoted to the _economic_ and _social_ realm. The first was The Rational Optimist, followed by The Evolution of Everything.

The book is masterful in two different ways. It is, of course, insightful. But it is also a pleasure to read. As a good journalist, Ridley knows that the human brain is a “stories processor” and not an “argument processor”. He showers the reader with anecdotes and stories, which make his points more cogent and clearer.

I will highlight some points that Ridley makes very effectively in a series of posts. This is the first.


Why did Ridley choose to devote a book to innovation? Because, he maintains, “innovation is the most important fact about the modern world, but one of the least well understood. It is the reason most people today live lives of prosperity and wisdom compared with their ancestors, the overwhelming cause of the great enrichment of the past few centuries, the simple explanation of why the incidence of extreme poverty is in global freewill fort the first time in history: from 50 per cent of the world population to 9 per cent in my lifetime”.

So, Ridley is perfectly attuned to Deirdre McCloskey’s understanding of innovation as what is a truly peculiar of modern economies: so not “capitalism” (in the sense of the accumulation of capital being the primary force behind betterment) but “innovism” (ideas breeding the modern world).


Why is innovation not properly understood? “The surprising truth”, he writes, “is that nobody really knows why innovation happens and how it happens, let alone when and where it will happen next”. This is an unbearable thought and a very hard sell, both for the economist who consults with the government on how to foster innovation in the economy and for the corporate executive who boasts about the future achievements of his company.

One of the problems is that “innovation is nearly always a gradual, not a sudden thing.” Yet Ridley argues that it is seldom understood as such. People like to focus on great breakthroughs and their makers, on their stories. Ridley does his fair share of that, too, but always highlighting how great innovators actually built on what other great innovators did before them. “It is all too easy and all too tempting for whoever makes a breakthrough to magnify its importance, forget about rivals and predecessors, and ignore successors who make the breakthrough into a practical proposition”.


So How Innovation Works is also a book on how innovation doesn’t work: through eureka moments (well, sometimes they happen too) irrespective of culture and institutions.


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#ReadWithMe: God Bless You, Mr Rosewater

In early June, I was scheduled to travel to Indianapolis for a wedding.  I am admittedly no huge fan of the Midwest, as I endured five intellectually gratifying but frigid winters at Hillsdale College.  The quiet but friendly Midwestern culture triggered a good bit of bovarysme and international travel.  But I followed the advice of Hillsdale’s Provost, David Whalen, and tiptoed through the Midwest to find its treasures.  I fell in love with Michigan’s Upper Peninsula, and I enjoy Chicago’s unassuming cosmopolitanism – what it loses at the margin over New York City in vibrancy, it gains in humility.  So I was excited to return to Indianapolis, and to visit the new Kurt Vonnegut Museum and Library.  Alas, COVID thwarted my best-laid plans.


I am a voracious reader of literature, but I have no formal training in literary analysis.  Before this project, I had read precious little Vonnegut:  only “Harrison Bergeron”, Slaughterhouse Five, and Welcome to the Monkey House (a collection of short stories).  So when I was asked to comment on economic themes in a Vonnegut novel, I was in a bit of a bind.  Where to start, in such a rich bibliography?  Well, I went straight to the author… in his 1981 collection of essays, Palm Sunday (chapter 18), Vonnegut grades his owns books.  I was looking for a balance of economic themes and quality writing.  Player Piano (Vonnegut’s first), with its questions of human labor in the face of AI and robotics, was surely tempting… but Vonnegut graded it a mere B.  Sirens of Titan (“A”) came up next, and free will was tempting… but I’m no philosopher, and I have limited taste for science fiction.  Cat’s Cradle and Slaugtherhouse Five were the lone A+ rankings, but they had no obvious economic themes.  This brings us to God Bless You, Mr. Rosewater (“A”).


Rosewater deals with income inequality.  Groan.  Sigh.  Why did I choose this, in the era of Sanders, AOC, and equality of outcome?  Well, this is still Vonnegut, the author of “Harrison Bergeron”, a short story about a dystopian future where all inequality has been corrected by ham-fisted state interventions.  And, besides Vonnegut’s own praise, I just couldn’t help myself; I simply had to select a novel with an unlikely and exciting hero:  “A sum of money is the leading character in this tale about people…”  I love money!  Not filthy lucre (well, not just filthy lucre, as a reward for serving others), but money as medium of exchange, unit of account, and store of value.  “The sum was “$87,472,033.61 on June 1, 1964” – or a touch more than $700 billion in today’s dollars (Jeff Bezos, Bill Gates, and Warren Buffett, by comparison, are worth a paltry $100 billion each).


In the first 70 pages of this delicious novel, we see a few themes emerge.  I will return to more details in my next post, but for now, I have some curiosities:


  1. Where do Vonnegut’s sympathies lie? Is he being playful, or is he trying to make a point?  In chapter 1, he seems to express admiration for business, but worries about cronyism and bribery.  Lawyers, it’s pretty clear, are parasites.  But what about honest entrepreneurs?
  2. Honoré de Balzac wrote that, behind every fortune there is a crime. Is this so?  Can wealth really not be accumulated honestly?
  3. What is Vonnegut trying to tell us about the downtrodden? He has a few choice words about the “lazy” and “stupid” Midwestern wards of the Rosewater Foundation.  At the same time, if wealth really is hoarded by a “handful of rapacious citizens [who] control all that [is] worth controlling in America” (9), and if those oligarchs can “order the militia to fire into crowds whenever a poor man seemed on the point of suggesting that he and a Rosewater were equal in the eyes of the law” (10) – can the poor really be blamed for their circumstances?
  4. What do you make of the “Golden Age of Rome” speech (27-31)? Déclinisme seems to be back in vogue, half a century after Rosewater was published.  Are Senator Rosewater’s concerns justified, or are they the grumblings of a plutocrat who is losing power to democratic opening?




Nikolai G. Wenzel is the L.V. Hackley Chair for the Study of Capitalism and Free Enterprise, and Distinguished Professor of Economics, Broadwell College of Business and Economics, Fayetteville State University (Fayetteville, NC).

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