Coronaviris - innovation

A Wall Street Journal article is about innovation during the coronavirus pandemic. Shoes to Masks: Corporate Innovation Flourishes in Coronavirus Fight. It features several cases of how private companies have changed what they do in response to economic demand. Since the article is behind a paywall, the following -- until the asterisks -- are some excerpts.

The innovations "run the gamut from individuals using 3-D printers to turn out N95 masks and academic labs repurposing themselves into coronavirus test centers to General Motors Co. teaming up with Ventec Life Systems to make ventilators."

The "shoes to masks" in the title refers to a small Pennsylvania company that switched from making children's shoes to making face masks for protection against the coronavirus.

The True Value Co. switched some of its paint production lines to make hand sanitizer.

During World War II, government agencies "such as the War Production Board and the U.S. Maritime Commission decided what should be produced and which companies would get contracts, which generally had a guaranteed profit margin."

"Yet compared with wartime, the federal government has thus far mostly played a supporting role in mobilizing economic resources to combat the pandemic. Most of the acquisition and production of vital supplies has fallen to states and health-care providers working with private suppliers and intermediaries."

*******

The above innovations occurred in a partly free market economy, where production and decision-making are not centralized. Any market participants may make decisions and take initiative. They do not need authorization from government officials (with exceptions). Socialism is usually the idea that government should own and control all production. (Even socialists who advocate worker-owned firms typically desire extensive government planning at a macro level, especially for finance and capital allocation.) Production, capital allocation, and decision-making are centralized, subject to laws, regulations, and approval by government officials. The spontaneous order of markets is more conducive to innovation and more adaptive to changing circumstances than the command or planned order of politicians and government bureaucrats.

The Entrepreneurial State #3

The author says that integrated circuits were designed by Jack Kilby and Robert Noyce. She omits that they did so when they worked at private companies. She then gives huge credit to the US Govt for the development of the microprocessor industry. “As the sole consumers of the first processing units based on the new circuit design, defense contracts helped fund the development of the infant microprocessor industry and those introducing complementary electronic equipment and devices were simply unaffordable in regular commercial markets. Large-scale demand for microprocessors by the US Air Force was created by the Minuteman II missile programme” (p. 104).

The microprocessors in the missile’s guidance system were made by Texas Instruments (and two other companies). However, the use of microprocessors in missiles was not the sole demand for microprocessors or the transistors in them. The hearing aid industry began making use of transistors a few years earlier. Also a few years earlier, the huge consumer demand for transistor radios spurred the development of microprocessors. Shortly after the surge in demand from defense contractors came another surge in demand for microprocessors for use in hand-held or pocket calculators. The author mentions none of these and thus gives no credit to the buyers of those things.

She also claims that “government agencies helped to drive down the costs of integrated circuits significantly” (p.105). This is another instance of her magnifying government and diminishing the private sector. The costs fell due to more efficient production, economies of scale, and competition.

She devotes an entire chapter to the State behind Apple. She praises Steve Jobs and Apple, but exaggerates the State’s role – for example, public schools buying Apple computers and a $500,000 State-backed investment. “[I]n 1980 Apple additionally secured $500,000 as an early-stage equity investment from Continental Illinois Venture Corp, a Small Business Investment Company (SBIC), which was licensed by the Small Business Administration (SBA), a federal agency” (100-101). Nothing is said about that $0.5 million being a drop in the bucket. In 1980 Apple’s net sales were $117 million and its profits $11.7 million. In 1979 the amounts were $48 million and $5 million (link). She says nothing about whether or not Continental Illinois might have invested with or loaned Apple the money without the SBA. She also says little about SBIC failures. The LA Times says about Apple’s case: “But such success stories are rare among SBICs. Since the program started in 1958, 465 SBICs out of a total of 1,597 have been placed in liquidation after defaulting on their payments. Since 1980, the backlog of the SBIC program's liquidation portfolio has grown from $100 million to more than $500 million, and the number of SBICs placed in liquidation has doubled in the past five years” (link).

I bet Apple Inc. and its employees paid billions in income taxes before Mazzucato finished writing her book. It apparently was not enough to satisfy her. Also, per its 10-Ks Apple Inc. paid $55.7 billion in income taxes 2014-18. Not all of it went to the US Treasury, but I wonder if she now believes that the US government has had an adequate return on its tiny support via Continental Illinois.

She doesn’t write about Internet browsers, which surprises me. The first very successful browser was Mosaic. It was developed by Marc Andreessen and Eric Bina at the National Center for Supercomputing Applications at the University of Illinois, which had been funded by the (Sen. Al) Gore Bill. (The Innovators, 415-6). Al Gore took credit, so why didn’t she credit the State?

She says the algorithm developed by the Google founders was funded by a National Science Foundation grant (27). She says this was while the founders attended Stanford University, but does not say Stanford is a private, not a public, university. She also says nothing about how much the government has benefited from Google. How much have government employees used Google without paying? She says, “After Google made billions in profits, shouldn’t a small percentage have gone back to fund the public agency that funded its algorithm?” I bet Google (Alphabet Inc), Page and Brin have paid income taxes many, many times the amount of the NSF grant, but she says nothing about that.

She asserts that the drug Taxol was discovered by the National Institute of Health (203). An Internet page belies this (link).  It credits two men at the Research Triangle Institute (RTI) for the discovery and the National Cancer Institute (NCI) for some further work. RTI International is a nonprofit organization headquartered in North Carolina that provides research and technical services. It was founded in 1958 with $500,000 in funding by local businesses and the three North Carolina universities (Wikipedia). NCI is part of the NIH. But why did she give all credit to NIH and none to those local businesses who helped fund RTI? Obviously, it is because she is very biased.

The Entrepreneurial State #2

The author often wrote ‘the State’ as another term for government(s). I will follow her practice.

Before commenting on some of her specific narratives, I will make general criticisms of the method of her narrative. I haven’t read all the reviews on Amazon, but all the criticisms I read were at a more specific level.

She bases much of her exaggeration of the State’s role on funding or being a customer, rather than the developing and implementing the basic ideas. She says little about an entrepreneur’s work in implementing new ideas and bringing a new product to market. Sorry, buying, subsidizing, and demanding are not producing. The author blurs the difference between a producer of X and its customers buying X.

True entrepreneurs rely on funding, money for research and producing their products/services. The funding may be from issuing stock, borrowing, revenue from selling their products/services to customers, or, when from the State, subsidy or grant. When the State is involved, the author conflates the last three ways and says funding. Customers aren’t always passive ones; they may give specs to a supplier or otherwise assist the supplier. However, in her narratives the State is never only a customer; it provides “entrepreneurial funding.” She hypes this customer and downplays the role of the true entrepreneur. That’s like shifting most or all credit from those who invented and produced iPhones to the buyers of iPhones.

The author mentions Xerox a few times, but not about the State being a customer for Xerox’s copy machines, toner, and paper. I’m confident that States were a major customer for these things. But does that imply the State played a major entrepreneurial role in Xerox’s growth? I think not.

The author purports to define entrepreneurship (64). She cites Schumpeter: “[A]n entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. It is not not just about setting up a new business … , but doing so in a way that produces a new product, or a new process, or a new market. Citing Knight and Drucker, “entrepreneurship is about taking risks.”

That’s fine, but she falls short of illuminating the nature of this risk. The risk is that the revenues from selling the product are enough to meet or exceed the funds spent in creating the product. I’d like to know how the US or a European government does this. What does it create with a plan to sell it for money exceeding the funds spent in creating it?

The Entrepreneurial State #1

I read The Entrepreneurial State by Mariana Mazzucato, an economics professor in the UK. Its thesis is that the entrepreneurial actions of government have been enormous and much underappreciated, and those of the private sector exaggerated. She claims to debunk the pervasive myth that the government is sluggish and inept, and at odds with a dynamic private sector.

She claims to debunk the alternative view of the private sector. “The fast-moving, risk-loving, and private sector, by contrast, is what really drives the innovation that creates economic growth. According to this view, the secret behind an engine of innovation like Silicon Valley lies in its entrepreneurs and venture capitalists. The State can intervene in the economy – but only to fix ‘market failures’ or level the playing field. It can regulate the private sector in order to account for the external costs companies may impose on the public (such as pollution), and it can invest in public goods such as basic scientific research or the development of drugs with little market potential. To some on the political right even fixing market failures would be a sin, because such attempts would lead to a worse outcome in the form of ‘government failures’“ (2-3).

“This conventional view of a boring, lethargic State versus a dynamic private sector is as wrong as it is widespread. This book concentrates on telling a very different story: in counties that owe their growth to innovation … the State has historically [been] a key actor in it, and often a more daring one, willing to take the risks that businesses won’t.” Government investments, not merely spending, have proved transformative, creating entirely new markets and sectors, including the Internet, nanotechnology, biotechnology and clean energy (4). “Instead, the truth is that government investment often has the effect of ‘crowding in’, meaning that it stimulates private investment that would not otherwise happen” (9). Of course, the opposite view is that government spending ‘crowds out’ private investment that would otherwise happen.

She advocates a more mutual public-private ecosystem that requires new methods, metrics, and indicators to evaluate public investments and their results (9).

The book is filled with narratives about how government-led innovations and investment have been so beneficial. The USA’s DARPA (Defense Advanced Research Projects Agency) is a prominent agency of innovation. Fair enough, but some of the key people at DARPA had their seminal ideas while at MIT, a private university, before they were hired by DARPA (Brief History of the Internet).  As one can glean from the reviews on Amazon that give the book a low rating, she greatly exaggerates the role of the State in success stories, such as Apple’s, and greatly shrinks that of the private sector. I agree with her critics and will say more why in subsequent posts.

Information and Investment #4

Chapter VIII of Information and Investment is The Need for Adaptability. It includes a very extensive discussion of liquidity.

The author assumes an entrepreneur will adopt the investment plan which offers the highest mathematical expectation of income, irrespective of the degree of dispersion which the possible values of income may show. I know from personal experience in risk management this isn’t wholly true, but I don’t regard it as very wrong.

Ideally, an investment plan is designed to offer positive profits under all possible scenarios likely to develop. In practice, however, such perfectly adaptability is out of reach. So long as the investor holds his resources in the form of money, he remains free to choose to engage in a variety of activities, the range of which is limited by technical, legal, and financial restraints. Whenever he decides to commit his resources in a form other than money, the scope of future activities is to some extent curtailed. However, the committing of resources in that way is the only hope the entrepreneur has for a substantial return. The more capital-intensive is the process, the greater is the fixed cost, and the greater will be the per unit cost of output if the total volume of production has to adapted to a lower level of demand.

Adaptability is enhanced by the power to make net expenditures from a source of readily available purchasing power. This has two dimensions – amount and speed. This is the heart of liquidity. Of course, money is the most liquid asset. Further resources are trade credit granted by suppliers and credit from a bank or other lender. Urgent sales of assets typically mean getting less money in return than patiently waiting.

An actual liquidity position at a particular time may be accounted for not in terms of intentions but as the unplanned result of recent transactions – of unexpected variations in costs or receipts. Cash balances in this sense are ex post, not ex ante in terms of a ‘transactions motive.’

Information and Investment #3

Chapter VI of Information and Investment is The Assortment of Production, or in other words, product differentiation.

Usually economic models assume a fixed set of goods and services, for both consumers and producers. But it is important to deal explicitly with the qualitative composition, for the variety of production is quite great. If we wish to consider, as does an entrepreneur, what kinds and qualities of goods to produce.

Consumers buy goods because of the satisfaction they expect to receive. They also experiment when making purchases as part of an endeavor to find newer and better ways of meeting their desires. Businesses also experiment with product variations to find newer and better ways of meeting customer satisfaction. Most formal economic models, especially the perfect competition model, ignore this.

Imagination, rather than information in an ordinary sense, is what entrepreneurs require in order to discover new ways of combining resources to meet consumers’ desires. Undiscovered ways of production are somewhat like musical tunes awaiting discovery. Often the competitiveness of a market is associated with or defined in terms of the cross elasticity of demand for the products sold in it. A high degree of competitiveness in this sense is much greater in reality than in the so-called pure competition model, which recognizes only price.

Information and Investment #2

Chapter IV of Information and Investment is The Co-ordination of Complementary Investments. It concerns investment by an entrepreneur’s suppliers, actual or potential.

It will be necessary to inquire both about the information which entrepreneurs will wish to have and as to the conditions which will permit access to it. It is probably the qualitative assortment of production that complementary investment is of greatest importance.

An entrepreneur needs to recognize that the profitability of his own investment will depend on the terms on which he can obtain inputs, and therefore indirectly on the volume of investment which has been, or will be, undertaken elsewhere. It is possible for two or more firms to be in a complementary relationship without there being transactions between them. For example, the other party could be a supplier to one’s supplier.

A further complementarity results from the fact that investment of any kind, by generating income, will increase the demand for other goods and services. No very close relationship between particular firms is likely to be created by this form.

The problem is to explain how producers may obtain information or assurances about the likely volume of complementary investment sufficiently reliable to persuade them to invest themselves. Complementarity between various lines of production does not imply that investment in them will be simultaneous and coordinated. Although producers may be able, on the basis of implicit collusion, to expect an increase in complementary production, it seems doubtful such expectations could be held with much confidence.

Every business makes plans, with greater or lesser precision, for a set of investment activities. It will be based on an assessment of the various technical and market conditions upon which the prices at which the firm will buy its inputs and sell its outputs. Due to the uncertainty of expectations, an entrepreneur will want to be as flexible or adaptable as possible, to allow for modification. But inflexibility will be to some extent unavoidable, such as due to more or less fixed equipment or personnel. Attempts to secure a more perfect coordination, such as by contracts, may reduce future adaptability.

It is difficult to resist the conclusion that in less developed markets, the coordination of investment, at least in manufacturing, may require more deliberate planning than with advanced markets. Unfortunately, it is in less developed markets that the administrative skill and experience required for such coordination is likely to be absent.

Information and Investment #1

I return to G. B. Richardson's book Information and Investment: A Study in the Working of the Competitive Economy. My previous (November) posts’ titles start with 'The Organization of Industry’ and ‘Perfect Competition.’

Chapter III is The Co-ordination of Competitive Investments. It is about an entrepreneur’s information and consideration of other entrepreneurs who are his competitors. (Like Richardson did, I use he/his for convenience. It could be she/her, or it/its for a firm, as well.)

The profitability of any one investment project is dependent in part on the volume of investment by competitors. Suppose an entrepreneur expects the demand for a particular product to rise, one that he could fulfill. If he believes the situation offers a profit opportunity for him in particular, he needs assurance that that the volume of investment undertaken by his competitors will not be so much that an excess supply will occur. However, the information available for that assurance often doesn’t exist. In a free enterprise system all the competitors don’t meet and plan their levels of production together. The less they cooperate, the more difficult it is to see how the required information could be obtained. Adequate market information seems unobtainable. Nor can one plausibly contend that it is possible to predict the actions of competitors merely by considering what one would do oneself in like circumstances.

In some circumstances certain producers having a temporary monopoly of information about a general profit opportunity may be important to securing its successful exploitation.

The upper limit on the volume of future competitive supply will depend on the number of firms which could increase their capacity in time and to the extent they could do so. Perhaps for some the extra resources aren’t available. The impossibility of borrowing unlimited sums at the same rate of interest is a crucial check, and an ‘imperfection’ of the capital market that is incompatible with the perfect competition model.

When we consider an individual producer, we should couple his supply curve and his demand curve – not the general supply curve and demand curve for his commodity in a wide market.

Perhaps the most obvious way in which a producer may try to secure the loyalty of his customers is by offering a differentiated product which they prefer to any substitutes. Commodities may be differentiated, not only by their particular attributes, but by where they are available due to transport costs.

The market attachment known as ‘goodwill’ has probably received more attention from businessmen than by most economists. Buyers may be unwilling to patronize a different producer, even if momentarily tempted, if they believe loyalty to him affords the best chance of good treatment over a long period.

The availability of information about competitive production depends on various restraints that reduce the freedom of action of individual entrepreneurs. By assuming, overtly or tacitly, that it is zero, and therefore neglecting the whole problem of information, the perfect competition model is unrealistic and inadequate.

China From Above

Monday night I watched an episode of China From Above subtitled Dynamic Coast on the Smithsonian Channel. It was fascinating.

There were aerial views of the big cities with rising populations along the east and south coast.

Part of the episode was about fishermen on icy Chagan Lake. They caught fish from under ice using a huge net, catching several tons of fish in one haul. They have been doing this for many generations.

Part of it was about erecting offshore wind turbines for power generation.

I recommend watching the series. The whole episode of Dynamic Coast is online here, but it seems you have to be a subscriber to a streaming service or have cable TV service including the Smithsonian Channel to get online access. As a Spectrum cable TV subscriber, I am able to see it and two episodes from Season 1. 

The Organization of Industry #2

A coordinating example Richardson doesn't give is a home-builder, HB for short. HB could contract with an architect to create detailed design and specs for building a new house. After the architect's work is done, HB contracts with an excavator, landscaper, concrete provider, carpenters, plumbers, electricians, painters, roofers, and so forth to build the house. When the home is at least partly built, HB could contract with a realtor to sell the property.

The quantitative mix between direction, co-operation and market transactions can vary due to other particulars such as the size and specialization of the firms. Richardson's paper addresses some of this relying in part on brick-making. "What is important, for our present purposes, is to note that impersonal co-ordination through market forces is relied upon where there is reason to expect aggregate demands to be more stable (and hence predictable) than their component elements. If co-ordination were to be sought through co-operation, then individual brick-makers would seek to match their investment and output plans ex ante with individual builders. Broadly speaking, this does not happen, although traditional links between buyers and sellers, such as are found in most markets, do introduce an element of this kind. Individual brick manufacturers rely, for the most part, on having enough customers to ensure some cancelling out of random fluctuations in their several demands. And where sales to final consumers are concerned, this reliance on the law of large numbers becomes all but universal. Thus we rely on markets when there is no attempt to match complementary activities ex ante by deliberately co-ordinating the corresponding plans; salvation is then sought, not through reciprocal undertakings, but on that stability with which aggregates, by the law of large numbers, are providentially endowed[.] "

Richardson's summary section begins as follows: "This article began by referring to a vision of the economy in which firms featured as islands of planned co-ordination in a sea of market relations. The deficiencies of this representation of things will by now be clear. Firms are not islands but are linked together in patterns of co-operation and affiliation. Planned co-ordination does not stop at the frontiers of the individual firm but can be effected through co-operation between firms. The dichotomy between firm and market, between directed and spontaneous coordination, is misleading; it ignores the institutional fact of inter-firm cooperation and assumes away the distinct method of co-ordination that this can provide."

The Organization of Industry #1

The title is that of a seminal 1972 paper by English economist George B. Richardson. The entire text is here. It is also included in Richardson's book Information and Investment: A Study in the Working of the Competitive Economy  (Amazon link).

When Friedrich Hayek wrote about the spontaneous order of a market economy, his main concern was prices. He said that market prices help to guide and coordinate the actions of market participants. Richardson's view of coordination is more extensive.

"[C]o-ordination can be effected in three ways; by direction, by co-operation or through market transactions. Direction is employed when the activities are subject to a single control and fitted into one coherent plan. Thus where activities are to be co-ordinated by direction it is appropriate that they be consolidated in the sense of being undertaken jointly by one organisation. Co-ordination is achieved through co-operation when two or more independent organisations agree to match their related plans in advance. The institutional counterparts to this form of co-ordination are the complex patterns of co-operation and affiliation which theoretical formulations too often tend to ignore. And, finally, co-ordination may come about spontaneously through market transactions, without benefit of either direction or co-operation or indeed any purposeful intent, as an indirect consequence of successive interacting decisions taken in response to changing profit opportunities."

An example of such co-operative coordination is sub-contracting, such as when a manufacturer buys specialized parts from a supplier. The supplier learns in advance what specifications the parts must meet, and the supplier works to assure the specs are met.

Richardson's paper gives the British retailer Marks and Spencer as another example. "Not only do Marks and Spencer tell their suppliers how much they wish to buy from them, and thus promote a quantitative adjustment of supply to demand, they concern themselves equally with the specification and development of both processes and products. They decide, for example, the design of a garment, specify the cloth to be used and control the processes even to laying down the types of needles to be used in knitting and sewing. In the same way they co-operate with Ranks and Spillers in order to work out the best kind of flour for their cakes and do not neglect to specify the number of cherries and walnuts to go into them."

To further distinguish inter-firm co-operation from market transactions: "Where buyer and seller accept no obligation with respect to their future conduct, however loose and implicit the obligation might be, then cooperation does not take place and we can refer to a pure market transaction. Here there is no continuing association, no give and take, but an isolated act of purchase and sale such, for example, as takes place on an organised market for financial securities."

Marconi #11

I end this series of posts with some of the author's (Marc Raboy) reflections on Marconi and his legacy.

"Marconi was without a doubt the dominant – as well as most enigmatic and controversial – figure in the pioneering stage of the information age. After a certain point, it does not really matter who did what; it is impossible to speak about the history of modern communication – from the wireless telegraph to radar, the cellphone, GPS, and the Internet – without paying close attention to Marconi and his career" (Marconi 673)

Quoting a historian: "Marconi's inventions, modifications, and improvements fit into a small box, at that time dubbed Marconi's 'secret-box' or 'black-box.' When Marconi 'opened' this 'black-box' by publicizing his first patent in 1897, people were amazed and intrigued by its simplicity. The solutions appeared so simple and obvious that many began to wonder why no one else had come up with them" (673).

"Marconi thus personifies the paradox of communication. His ambivalence is ours. How does a technology that promotes and facilitates contact, openess, and human potential become an instrument for domination, manipulation, and control?" (677).

Thank you, Mr. Raboy.

Marconi #9

In 1922 Marconi began experimenting with short waves. "Using a transmitter described as a "baby wireless set," he awed his audience by demonstrating "how a flying shaft [beam] of radio waves may be hurled in a desired direction, straight at a receiving station intended to receive it." This was the new directional "beam" system he had been developing with his associate Charles Franklin since 2016" (Marconi 472).

In a talk Marconi said he thought it possible to design an apparatus by which a ship could send a beam of rays in a desired direction and the rays coming across a metallic object such as another ship could be reflected back to the sender, thus revealing the presence and bearing of the other ship. Marconi was describing a process that would come to be known as radar. Successful use of radar was one of the keys to allied superiority in WW II, and now is essential to air traffic control (473-4).

Others were developing broadcasting. Marconi did not see what the fuss was about. He thought radio was about communication, not the one-way delivery of light entertainment, what he thought broadcasting was doing (486). Broadcasting used continuous waves as opposed to Marconi's spark waves.

Largely due to the efforts of other people the radio boom was well under way by 1922. In 1922, the first year when numbers were available, 100,000 radio sets were sold in the USA. It was 5 times that a year later. Such enormous growth continued for several years afterwards. The proliferation of broadcasting attracted the powers that be, too. Vatican Radio was established with Marconi's help. In February 1931 millions of listeners around the world heard the Pope speak. Inspired by the example of the Vatican, totalitarian dictators and Franklin Roosevelt and Winston Churchill were soon using radio to "inspire, cajole, mobilize, or terrify" (568).

In a May 1931 broadcast the pope called for "the reconstruction of the social order, describing the dangers of both unrestrained capitalism and totalitarian communism, as well as the ethical implications of reconstruction. It was one of the most important political interventions of the 1930's, approving the triparate corporatism of government, industry, and labor [ ] favored by Italian fascism ... [I]t was also couched in a tone that could invite the praise of a liberal politician like FDR" (568-9). FDR later met with Marconi, and FDR was interested in Italy's domestic policies (591).

Marconi #8

In 1915 Marconi traveled to Schenectady, New York to visit the General Electric plant where Ernst Alexanderson developed and patented a high-frequency alternator capable of generating continuous waves (Marconi 393). Marconi wanted to buy it. Marconi and GE's chief counsel arrived at the verge of an agreement whereby GE would manufacture the alternator, while Marconi would have exclusive rights to use it. The agreement didn't materialize (439).

"The proposal was intensely political and essential to Marconi's global strategy. Marconi's UK base was constricted by British wartime restrictions, but the war also presented opportunities for technological development and the company was still determined to build a global network anchored by a British imperial wireless chain. At the same time, the US domestic market and likely emergence of the United States as the dominant world power after the war foreshadowed an increased role for Marconi's American operations. A deal with GE would palliate American nationalist concerns and reduce Marconi's exposure to the British public sector, with which he had such a fraught relationship. At the same time, the company was anxious to position itself once and for all against the anticipated postwar resurgence of Telefunken.
     The United States' entry to the war in April, 1917 put a major crimp in Marconi's plans. The US Navy took over all wireless operations on April 7, and as the war proceeded it was not entirely clear what would happen to them once the conflict ended" (439-40).

Telefunken was a German wireless company and Marconi's chief competitor.

In 1919 Marconi reopened his negotiations with GE, proposing purchase of 24 alternators. GE's chief counsel conferred with the US Navy. The response requested that GE not sell the alternators to Marconi. Even President Wilson wanted to dissuade GE from doing the deal. The president was convinced that world pre-eminence would be determined by three factors: oil, transportation, and communication. Wireless, however, was still up for grabs, and if the United States could achieve dominance there, the result would be a standoff between the USA and Britain (441).

As the situation evolved, almost the opposite of Marconi's plan occurred. GE bought Marconi's American operations. It resulted in the birth of the Radio Corporation of America (RCA), incorporating the assets of the Marconi Wireless Telegraph Company of America (MWTCA) into a new public company in which GE owned a controlling interest. RCA replaced MWTCA as the major US domestic wireless company and gave the US a solid foothold in global communication (443).

Marconi #7

The Marconi biography includes the following. I will be brief.

Marconi wins the Nobel Prize in Physics in 1909. He was nominated a few times before. He was the first entrepreneur to win the prize. He shared it with a German, Karl Ferdinand Braun, who contributed significantly to the development of radio and television technology.

In 1909 two ships collided, one with 1200 passengers. Marconi's wireless system aided a quick rescue response. Only six lives were lost, demonstrating the benefit to mankind made possible by wireless.

After H. Cuthbert Hall was ousted, Marconi took on much of what Hall had done. In 1910, though, Godfrey Isaacs joined the firm, which gave Marconi more time to devote to research and experiments.

In 1911 Italy declared war on the Ottoman Empire in defense of Italians in northern Africa. Then Italians started building wireless stations on Africa's northern coast. This was the third time wireless was used in war.

On 10 April 1912 the passenger ship Titanic left Ireland headed west to New York, with 2,208 (estimated) passengers and crew. The ship had the then-best wireless equipment aboard. On 14 April, four days into the crossing and about 375 miles (600 km) south of Newfoundland, she hit an iceberg at 11:40 p.m. ship's time. The wireless operator sent distress signals while the ship was sinking. Unfortunately, the closest ship to receive the signal, the Carpathia wasn't very close. Almost two hours after the collision the Carpathia arrived and rescued an estimated 705 survivors. Many people gave Marconi a lot of credit for saving the survivors.

In 2012 the British Postal Office's not yet signed agreement with a British Marconi Company made the news. The agreement drew criticism for the terms being too favorable to Marconi's business and political insiders who made investment gains from holding stock in Marconi companies (ref. Marconi scandal).

Marconi #6

In my opinion Marconi's scientific achievement was more spectacular than John Galt's motor in Atlas Shrugged. Firstly, Marconi's was real and Galt's was fictional. One might say that's an example of "truth is stranger than fiction" (Mark Twain quote; Lord Byron quote). Galt's motor was designed to harness static electricity from the air for power generation. Secondly, unlike radio waves, static electricity can be seen, felt and heard. The electromagnetic waves -- originally called "Hertzian waves" -- used by Marconi for wireless telegraphy cannot be directly perceived. They can only be indirectly perceived via instruments -- radio, television, antenna, cell phone, computer. Thirdly, Marconi's achievement made possible Galt's hijacking a radio broadcast in order to make his speech. 😉

Marconi and John Galt (really Ayn Rand) did have very different ideas about politics. Marconi courted governments to commercialize his wireless telegraphy. They wanted it mainly for military use. Marconi also relied on government-backed patent protection. Conversely, Galt's motor was targeted for the private sector.

H. Cuthbert Hall was second in command to Marconi in Marconi's business from 1901 to 1908. Hall's political views were far closer to those of Ayn Rand than were Marconi's. Hall had led the company's fight against the Berlin Convention (see #5). Hall had an aggressive attitude toward the British government, Marconi's biggest client. "Hall was an ideological free enterpriser, to whom government interference of any kind was anathema. If dealing with the government could bring benefits to the company, then fine. But there was nothing intrinsically beneficial to the relationship. Marconi, though not at all ideological, felt intuitively close to political power of every stripe. In his mind, nothing could be more powerful than a partnership with government -- any government" (Marconi 285).

In 1907 Marconi became increasingly dissatisfied with Hall. Marconi thought his companies'  business dealing were impaired by Hall and depended upon its relation to governments. So Marconi, with the support of board members other than Hall, ousted Hall.

A future post will contain some more about Marconi's relationship to Mussolini and fascism many years later.

Marconi #5

Marconi sought exclusive contracts with licensees of his system, and there were other, different wireless telegraphy systems provided by competitors, especially in Germany. This led to disputes internationally.

The International Radiotelegraph Conference took place October 3 to November 3, 1906 in Berlin, Germany. Its proposals were endorsed by twenty-six countries and, if ratified, would take effect mid-1908. "The [proposed] treaty's most important provision governed wireless communication between the shore stations of contracting nations and vessels of any state, regardless of the wireless telegraphy system these ships employed. The United States insisted on ship-to-ship transmission. One clause that attracted far less attention provided for a bureau to oversee international wireless telegraphy [...]. This bureau [...] would be the first international regulatory body for broadcasting and telecommunication. This was the lasting legacy of the process that started because Marconi refused to allow his licensees to communicate with competing systems."

Marconi had used contracts and patents to establish a monopolistic position in Italy and Britain [...], but the rest of the world was wide open (Marconi 276-80).

I believe it is important to note that this was before the United Nations, or even the League of Nations, was formed.

Marconi #4

By 1905 Marconi's sytem was pervasive. "On ships it was sometimes suggested that wireless had ruined 'the delights of complete repose which have hitherto ... been associated with the idea of being on a long ocean voyage,' but this notion was discounted by the benefits it brought for minimizing danger at sea. It was also good for business travelers who could for the first time remain in touch with their offices as they crossed the Atlantic. With cheap long-distance telegraphy within reach, emigration took on a less onerous meaning; it would be easier for members of disporic communities to keep in touch with their families back home. At the same time, ambitious corporations and military establishments everywhere vied for ways to use the new technology as an instrument for their grand designs. Indeed, the sentiments for and against Marconi's invention were not unlike those we hear today about the good and evil of the constant connectedness that comes with modern communication technology. There was full agreement, however, on the basic point: wireless communication had changed people's relationship with time, distance, and mobility" (Marconi 247-8).

Reginald Fessenden was "soon known in the United States as a sharp critic of Marconi's system. Fessenden realized that if Marconi's spark transmitter could be replaced by one that gave off a continuous wave, it would be possible to transmit voice by wireless. This was the technical breakthrough that enabled what would eventually be known as broadcasting, and for this reason, Fessenden is often claimed to be the inventor of radio. The spark-reliant intermittent wave transmission that Marconi pioneered could transmit dots and dashes but not speech and music (hence the distinction between "wireless telegraphy" and "broadcasting"). However, both methods relied on the medium of elecromagnetic waves, and Marconi was unquestionably the first to use the wave spectrum for communication" (250).

Dots and dashes, of course, refer to Morse code. By the way, Thomas Edison's first two children were nicknamed Dot and Dash (link). 😊

Marconi #3

G. Marconi secretly worked on a project he referred to as "the great thing" -- an attempt to signal across the Atlantic Ocean. Theoretical physicists said it couldn't be done because they claimed electromagnetic waves radiated in a straight line into space and would not follow the curvature of the earth. Holders of this view included the great French mathematician and physicist Henri Poincare, who understood the properties of Hertzian waves. But Marconi was convinced that the theoreticians were wrong; he believed electromagnetic waves would bend to follow the curvature of the earth (Marconi, 148).

In December, 1901 Marconi experimented with signals sent from a station in England across the Atlantic Ocean to a station in Newfoundland. At the receiving end he did indeed hear signals "serenely ignoring the curvature of the earth which so many doubters considered would be a fatal obstacle" (174).

Prompted to explain how Marconi had been able to receive a Hertzian wave signal nearly two thousand miles away, two theoretical physicists later hypothesized that there might exist an ionized layer in the upper atmosphere capable of reflecting or refracting radio waves of certain frequencies back to earth (176).

The biography doesn't address the varying range of radio wave lengths/frequencies. However, Wikipedia shows the whole range of radio waves (link1) and includes the following (link2).

"Lower frequency (between 30 and 3,000 kHz) vertically polarized radio waves can travel as surface waves following the contour of the Earth; this is called groundwave propagation."

"In this mode the radio wave propagates by interacting with the conductive surface of the Earth. The wave "clings" to the surface and thus follows the curvature of the Earth, so groundwaves can travel over mountains and beyond the horizon."

"Early long distance radio communication (wireless telegraphy) before the mid-1920s used low frequencies in the longwave bands and relied exclusively on ground-wave propagation. Frequencies above 3 MHz were regarded as useless and were given to hobbyists (radio amateurs). The discovery around 1920 of the ionospheric reflection or skywave mechanism made the medium wave and short wave frequencies useful for long distance communication and they were allocated to commercial and military users."

So it seems both Marconi and Poincare were partly correct and partly incorrect. Marconi's experiment used lower or medium frequency (longer or medium length) radio waves.

Marconi #2

Radio waves were first predicted by mathematical work done in 1867 by Scottish mathematical physicist James Clerk Maxwell. Maxwell noticed wavelike properties of light and similarities in electrical and magnetic observations. His mathematical theory, now called Maxwell's equations, described light waves, and waves of less or more length, as waves of electromagnetism that travel in space, radiated by a charged particle. In 1887, Heinrich Hertz demonstrated the reality of Maxwell's electromagnetic waves by experimentally generating radio waves in his laboratory, showing that they exhibited the same wave properties as light: standing waves, refraction, diffraction, and polarization. The waves were first called "Hertzian waves." The modern term "radio wave" replaced the original name around 1912. (Link).

"Hertz's breakthrough had attracted worldwide excitement when he published his results in 1888, but no one had yet found a practical application for the discovery" (Marconi 27). Hertz's interest in the waves was theoretical, and he died in 1894 (age 36). Marconi was strongly interested in their practicality and/or commercial use.

Besides developing the technology, much of his early career was devoted to obtaining patents in different countries and defending his patents from infringement. He sought exclusive contracts. A big part of advancing the technology was increasing the useful range of radio waves for communication. A big step was succeeding in transmitting radio waves over the Atlantic Ocean. That would allow wireless communication with ships very far from land and between continents. The greater part of practical interest in Marconi's wireless telegraphy was by governments for military use. A private sector exception was Lloyd's of London. "The first major firm to recognize the commercial potential of Marconi's invention was Lloyd's, the world's leading provider of marine insurance and, hence, dealer in shipping information" (88).

P.S. You might wonder how G. Marconi and wireless communication relate to a blog named Correspondence and Coherence. The relationships aren't strong, but there are some. 1. One definiens of correspondent is 'a journalist employed to provide news stories for newspapers or broadcast media.' Such correspondents nowadays often communicate using wireless technology with a cell phone or computer. 2. A coherer "was a primitive form of radio signal detector used in the first radio receivers during the wireless telegraphy era at the beginning of the 20th century" (Wikipedia).  😊