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THE WALL STREET JOURNAL.
Wednesday, July 2, 2014 | A13
OPINION
C
an something good come
from a U.S. splurge of climate pork that, in itself,
would have no discernible effect
on global climate or atmospheric
carbon dioxide?
A probable answer is no. It
would actually end up making our
putative carbon challenge worse.
But Paul Krugman and others
say a carbon tax is politically
impossible, and that we should
settle for President Obama’s “second-best” approach. The problem
with subsidies
and mandates is
that they create
vested interests
in inefficient renewable energy.
Warren Buffett
BUSINESS already
is colWORLD
lecting millions
By Holman W.
for what he adJenkins, Jr.
mits is hopelessly cost-ineffective solar energy in California.
State mandates for renewables
favor in-state providers, discouraging competition that would
lower costs.
Lobbies that form around such
favors are quietly unfriendly to
interstate power lines that would
force expensive local energy to
compete with cheaper renewables
elsewhere. In Germany, where
vast subsidies flow to wind and
solar, coal has become the fuel of
choice for utilities struggling to
provide backup power. Result:
German carbon-dioxide output is
growing not shrinking.
Most glaring is the renewable
lobby’s opposition to fracking—
never mind that fracking, by
displacing coal, has done more to
reduce carbon output than renewables have. As for cap-and-trade,
check out the Senate testimony
two weeks ago by Joseph Mason,
of LSU and the Wharton School,
Getty Images
Birth of a Climate Mafia
A wind farm on Pellworm island off the North Sea coast of Germany.
on how easily such schemes have
succumbed to fraud and corruption.
A straight-up, revenue-neutral
carbon tax clearly is our first-best
policy, rewarding an infinite and
unpredictable variety of innovations by which humans would
satisfy their energy needs while
releasing less carbon into the
atmosphere.
Failing that, our second-best
policy might well be to do nothing,
skip the green pork bonanza, and
hope that new energy technologies
emerge out of the already-ample
natural incentives to do so. Why?
One thing that can be safely predicted is that renewable energy
that becomes addicted to subsidies
in order to survive will not meaningfully replace fossil energy that
remains cheaper in real terms.
Now the new entrants in the climate policy derby: Robert Rubin
and Henry Paulson. Impressive is
the fanfare greeting the former
Treasury secretaries and their
splashy, economically focused
climate lobby, the “Risky Business
Project.” Unfortunately, they trod
a well-worn path by trying to
scare the American people into
compliance.
Their emphasis on “extreme
weather” is an especially tired
piece of foolishness. Whatever the
human impact on climate, the
overwhelming reason storms are
becoming more destructive is the
simple fact that more people and
property stand in their way.
Their unnaturally specific forecasts of rising sea levels and heat
waves are based on the same
speculative climate models that
do such a poor job of explaining
even the present and recent
past—and whose limits the report
doesn’t even mention in a footnote. The principals clearly want
their assertions about the future
to be taken as facts, not as extrapolations from simulations whose
credibility they are wholly unprepared to defend.
Their assertion that the U.S. can
shame China and India into giving
up carbon energy is no more plausible in their mouths than in
anybody else’s. But Mr. Paulson’s
policy heart is in the right place—a
carbon tax. He has explicitly
rejected the climate cronyism of
BOOKSHELF | By Ben Downing
the Krugman-Obama school.
Sadly he and the passel of worthies behind his group (including
Michael Bloomberg and hedge-fund
impresario Tom Steyer) colossally
fumble their 15 minutes by adopting the hectoring, frighten-the-public approach that Al Gore, Bill
McKibben and James Hansen have
so reliably demonstrated leads
nowhere, produces no results and
ultimately discredits the cause.
They should have focused on
tax reform first—on hope, growth
and opportunity. Tax reform already has quietly been climbing
the nation’s agenda—even President Obama has paid lip service. A
tax reform that restored dynamism
to the U.S. economy is an example
that other countries could adopt
out of self-interest, not because
they are shamed into doing so by
the overpowering moral gigantism
of Al Gore. The one impeccable
finding of climate science is a 40%
increase in atmospheric carbon,
even if our ability to detect its
impact on climate is hampered by
extraordinarily noisy weather data
and the inadequacies of climate
modeling. That’s reason enough
many voters might accept a modest
carbon tax that would be offset by
reduced payroll and income taxes.
And if a technologically superior
answer to our energy needs is in
the cards, tax reform is a better
way to help elicit it than anything
else government might do.
By the way, if we had to bet,
our bet (not preference) would be
that humanity will not organize a
coherent and meaningful carbon
policy. The worst-case climate
scenarios will prove overdrawn.
Fossil energy will be outmoded
over some period by cheaper alternatives. To boot, the world will
discover that climate change is
not the greatest challenge facing
it after all.
An Innovation Slowdown at the Tech Giants
By Michael S. Malone
F
or more than a half-century,
big technology companies
have led the way in inventing revolutionary products and
services, from calculators to
smartphones. Startups, meanwhile, have built upon those creations with innovations like
peripheral devices and software
applications. This was as true for
the IBM 360 computer as it was
for the Apple iPhone.
But something fundamental
has shifted in Silicon Valley. The
emblematic event was Facebook’s
February acquisition of the
mobile messaging startup WhatsApp for an astounding $19 billion.
WhatsApp was barely five years
old and had 55 employees. The
question from one end of Silicon
Valley to the other was: What
possessed Facebook to spend that
kind of money?
Surely there must be a method
to Facebook CEO Mark Zuckerberg’s apparent madness. In fact,
a strategy is emerging: In 2012,
the social media giant bought
Instagram for $1 billion. The
number of Facebook users grew
less than 4% last year, but the
number of Instagram users
jumped 23%. Millennials are
getting bored with the website
and abandoning the platform in
far greater numbers than their
Seen anything new and
big lately from Cisco,
Yahoo or even Twitter?
Valley and it’s hard to find established companies still devising
their next products in-house. Seen
anything new and big lately from
Cisco, Yahoo or even Twitter?
Even Apple, tech’s most innovative company under Steve Jobs,
now seems to have slowed down
with Tim Cook as CEO. During
Jobs’s tenure, the company produced three landmark products—
the iPod, iPhone and iPad—in
little more than eight years. Now,
after four years, customers are
growing impatient waiting for the
rumored iWatch, which, if real,
won’t appear until at least autumn. Meanwhile, Apple has
purchased nearly 30 companies.
Google, though it requires employees to spend part of their
time inventing, has acquired more
than 150 companies in its history,
including drones and Boston
Dynamics’s robot cheetahs. Even
Intel has been slogging along for
the past few years.
On the other hand, even if they
are short on new ideas, most of
these companies are long on cash,
with some of the biggest war
chests in American industrial history. Apple is sitting on $160 billion—enough to buy the entire
next generation of tech startups.
We’ve seen this strategy elsewhere. It defines the pharmaceutical industry, where young biotech companies develop new
drugs, shepherd them through the
Food and Drug Administration
approval cycle and if, against
great odds, they succeed are
quickly snapped up by pharmaceutical companies for a handsome payday. Those that don’t get
FDA approval quickly die.
Is that the future of Silicon
Valley and the tech industry? It’s
what Oracle CEO Larry Ellison has
been doing at his software companies for decades: buying the
latest enterprise software companies, firing their employees, and
adding their products to Oracle’s
portfolio. No one else is that ruthless yet, but Mr. Ellison has a
history of being ahead of his time.
Why are large tech companies
losing the ability to innovate?
Entrepreneur and author Salim
Ismail studies the new generation
of “exponential corporations,”
enterprises that grow 10 times
faster than the average rate. He
believes that established companies simply aren’t structured for
this kind of speed. So their only
choice is to buy those companies
that can still innovate rapidly.
If Mr. Ismail is correct—and the
current dynamic in Silicon Valley
suggests that he may be—we’re on
the brink of a major restructuring
of business strategy, venture capital and almost every part of the
high-tech world. It may be time to
stop waiting for famous tech companies to roll out the hottest new
product and start investing in
startups that can sell their innovations to big companies. Tech
appears to be evolving into a different kind of field: one that is,
paradoxically, more static at the
top but also more dependent on
entrepreneurship than ever before.
Mr. Malone’s new book, “The
Intel Trinity: How Robert Noyce,
Gordon Moore, and Andy Grove
Built the World’s Most Important
Company” (HarperBusiness), will
be published in July.
Restive Republicans Target the Ex-Im Bank
was understandable that Mr.
Cantor’s defeat would be taken to
spell the end of hopes for immigration reform in this Congress,
and perhaps the next as well. Less
predictably, it has also jeopardized the reauthorization of the
Export-Import Bank, a venerable
if modest institution whose mission is to promote U.S. exports by
providing financing for transactions in which the private sector
declines to participate.
The majority leader’s successful challenger castigated him for
being too close to Wall Street and
for encouraging what populists of
the left and right call “crony capitalism.” The Export-Import Bank,
which Rep. Cantor supported, has
become the poster child for this
allegedly corrupt, self-dealing
relationship between government
and the private sector.
Kevin McCarthy, the favorite to
replace Mr. Cantor, was also an
advocate for the bank. But
Bloomberg reports that on June
18, the day before Republicans
were to vote on a new majority
leader, a group of populist members met with Mr. McCarthy and
told him that the Ex-Im Bank
must go. Three days after winning
the election, he went on national
television to announce that he
had withdrawn his support from
the bank, sparking panic in the
ranks of business groups who had
long relied on the House Republican leadership’s steadfast defense
of the bank against its critics.
Most of these critics are restive rank-and-file members. But
not all. At the beginning of a
hearing convened in June 2013 to
Composite
ouse Majority Leader Eric
Cantor’s shocking primary
loss has exposed the divide
between establishment and populist conservatives over economic
fundamentals.
The most recent survey from
the Pew Research center sheds
light on the core differences
between these two groups, who
together account for 70% of the
Republicans who pay close attention to politics and
vote in nearly every election. The
survey shows that
71% of populist
conservatives bePOLITICS lieve that too
& IDEAS much power is
concentrated in
By William
large companies,
A. Galston
versus only 35% of
the establishment conservatives.
Among the establishment, 74%
think that Wall Street helps the
economy more than it hurts; only
49% of populists agree.
These
differences
shape
stances on particular issues. The
survey finds that 68% of establishment conservatives believe
that free-trade agreements benefit the U.S., compared with only
39% of populists. On immigration,
64% of the establishment thinks
that immigrants strengthen our
country, a view shared by only
17% of the populists. And by a
margin of two to one, populists
reject any and all reductions in
Social Security benefits, while a
plurality of the establishment
believe that such reductions need
to be considered.
In light of these differences, it
assess Ex-Im’s progress reforming
its risk-management policies,
House Committee on Financial
Services Chairman Jeb Hensarling
(R., Texas) noted that President
Obama had once described the
bank as “little more than a fund
for corporate welfare,” adding that
“I could not agree more.” (Mr.
Obama made his statement during
the 2008 campaign. As president,
he has supported expanding ExIm’s financing authority.) Former
vice-presidential candidate Paul
The populist crowd is
going after the wrong
‘crony capitalism’ target.
Ryan is also opposed to reauthorizing the bank.
As always, the real issues are
more complex than the public
debate. In fiscal 2013, Ex-Im supported the exports of more than
3,400 small businesses that probably could not have obtained
commercial financing, for reasons
unrelated to the creditworthiness
of the prospective borrowers or to
the quality of their proposed
transactions. (Transaction costs
and unfamiliarity with foreign
businesses are two often-cited reasons for this commercial lending
gap.)
The relationship between ExIm and big business raises murkier issues. Of the roughly $12
billion in long-term loan guarantees the bank extended in fiscal
2013, the top 10 beneficiaries
received 97% of the total. Boeing
alone received nearly $8 billion—
about two-thirds of the total.
At first glance, this looks indefensible. But the manufacture and
sale of commercial aircraft is far
from a free market. Boeing’s major competitor—Airbus—receives
massive export subsidies from a
European consortium. In the best
case, Europe and the U.S. would
negotiate the mutual elimination
of subsidies. But until that happens, say Ex-Im’s supporters, it
would be self-destructive for the
U.S. to stand down unilaterally.
They have a point. Still, large
corporate beneficiaries of Ex-Im
financing should be required to
prove that they could not compete
profitably in overseas markets
without this assistance. We should
not be asked to take Boeing’s word
for it—all the more so because the
bank is working with our tax
dollars.
Although Ex-Im boasts that it
returns money to the Treasury
each year, a former bank president told me that if it were subject to standard capital adequacy
requirements and accounting
standards, it would not be reporting a profit. After everything that
has happened since 2007, taxpayers deserve to know the real subsidies they are paying and risks
they are running.
“Crony capitalism” may be a
populist rallying cry, but it is too
blunt for the complex reality of
market failure and government
subsidies in today’s cutthroat competition for global exports. Populists should train their fire instead
on the epicenter of crony capitalism—our corporate tax code.
The Owl Who Liked Sitting on Caesar
By Martin Windrow
(Farrar, Straus & Giroux, 302 pages, $26)
I
n the annals of publishing, there may be a precedent
or two for a venerable military historian setting
aside his generals and artillery to evoke the love affair that consumed him as a younger man, but it’s probably safe to say that in none of these memoirs is the object of adoration feathered, 10 inches tall and given to
maniacally attacking the historian’s shoelaces. Such is
the case with Martin Windrow’s “The Owl Who Liked
Sitting on Caesar.” If the above description makes the
book sound funny, touching and divertingly novel, so it
is. But there’s more to it than that. In relaxed yet lapidary prose, Mr. Windrow—best known for “The Last Valley,” his 2004 account of the Battle of Dien Bien Phu—
has produced an homage to both a creature and its
species that is almost Leonardo-like in its precision and
spirit of curiosity. The result is nothing less than a small
masterpiece of
animal literature.
In the late
1970s, having
grown fond of an
owl that lived with
his brother in rural
Kent, Mr. Windrow
decided to get his
own, despite living
in a London highrise. After a disastrous experiment
with a Little Owl
that rejected him utterly, he obtained a
month-old Tawny
Owl. At their first
meeting, he encountered a life form
“shaped rather like a
plump toy penguin with a
nose-job. It appeared to be wearing
a one-piece knitted jumpsuit of pale grey
fluff with brown stitching, complete with an attached
balaclava helmet. From the face-hole of the fuzzy balaclava, two big, shiny black eyes gazed up at me trustfully. ‘Kweep,’ it said quietly. . . . It blinked its furry grey
eyelids, then jumped very deliberately up onto my right
shoulder. It felt like a big, warm dandelion head against
my cheek, and it smelt like a milky new kitten. ‘Kweep,’
it repeated, very softly.” He was a goner.
Mumble, as he named her, had a cage on the balcony
yet was often given the run of the flat. At times she
would “roost happily” atop either a door or the author’s
bust of Germanicus. At others she would indulge in
“boisterous hunting games,” insist on riding the carriage
of his typewriter as he wrote, and freely heed the call of
nature. (Owls, he sighs, are “impossible to housetrain.”)
Decidedly a “one-man bird,” she was highly affectionate
with him but a territorial menace to others; whenever
he had a visitor, he would issue them one of his many
“old military helmets,” since Mumble was bound to “fly
for their scalp.”
A military historian and an owl make a
home together in a London high-rise. Visitors
are issued vintage helmets for protection.
“Her job, her hobby, her passion was watching things,”
Mr. Windrow writes of Mumble, and his own passion was
watching her. His observations—many of them quoted
from the journals he kept—are a joy to read, in part because of his gift for metaphor and association. “While
Mumble was patrolling around the living-room floor,”
one passage begins, “her vainglorious strut suddenly reminded me of a character in a Japanese samurai film.
Like some warrior played by Toshiro Mifune, she had the
touchy air of someone who is ready, at an instant, to
take furious offence over some imagined slight.” He distinguishes and names Mumble’s various poses—“giant
moth” and “cottage loaf,” to mention only two—and lists
“six basic types of call,” including a “sort of ‘whistling
kettle coming to the boil’ as she pumps herself up in indignation, e.g., when she notices a pigeon lurking
around. This starts with a crouch, a puff of the feathery
throat, and an interrogation that quickly turns dangerous: ‘skwer? . . . skwer? . . . SKWER! . . . SKWERKK!”
Riveted by Mumble, Mr. Windrow began reading up
on the Tawny Owl and owls in general. He presents the
fruits of his research in a series of interlarded chapters
on the behavior, anatomy, place in the British ecosystem
and folkloric reputation of owls. (“In Yorkshire, owl soup
was supposed to cure whooping-cough.”) But he also
light-handedly dramatizes the way in which his growing
expertise, together with his prior knowledge of aviation
and military hardware, put him ever more in awe of
Mumble as “a supremely elegant example of functional
design.” He was especially dazzled by her telescoping
neck, which he compares to the gyroscopic stabilizers
used in tank turrets. Realizing that she could, while
perched on his hand, keep her head fixed in place even
as her body is raised and lowered, he succumbed to “the
mischievous temptation to play ‘owl yo-yo’. . . . I did this
several times, giggling foolishly, until Mumble got fed up
with this childish game and took off.”
In 1981 he decided to move to a small town in Sussex.
For Mumble he built an outdoor aviary, where she
thrived. Then one day in 1993, just before her 15th birthday, he found her dead, probably of a heart attack.
Though tersely expressed, his devastation is clear. Like
J.R. Ackerley, whose classic “My Dog Tulip” documents a
relationship of almost exactly the same length, Mr.
Windrow was a bachelor heavily invested in his pet. At
the time he got Mumble, he was “chewing over the cold
cud of some fairly discouraging insights into my own
character and the probable future shape of my life.” Yet
he found it “impossible to sustain a mood of self-centered depression while an indignant ball of fluff was doing squeaking pratfalls all over the place.” Mumble became his mate-equivalent, and he hers. With the
restraint typical of an educated Englishman of his generation, he does not dilate on what she meant to him, but
we feel it the more keenly for his reticence.
A paradoxical pitfall of animal literature is that it
achieves its effects too easily: Consider how quick we are
to laugh when a writer so much as mentions a monkey.
The good stuff, however, stands out for its refusal to push
buttons or indulge in glib anthropomorphism. In this perfect book, Mr. Windrow may compare Mumble to a samurai and think of her as hurling at pigeons the owlish equivalent of a certain Anglo-Saxon expletive, but he never
loses sight of what she is: Strix aluco, a beautiful alien.
Mr. Downing is the author of “Queen Bee of Tuscany:
The Redoubtable Janet Ross.”
P2JW183000-0-A01300-1--------XA
H
parents—the kiss of death—are
joining.
So Mr. Zuckerberg has two options: radically transform his current product (no small matter with
the drag of 1.3 billion users), or
buy the Next Big Thing. And the
next one. Then the one after that.
It may prove a brilliant strategy. But it also means that Facebook, one of the most innovative
companies of the past decade, now
depends on purchasing the inventiveness of others. The company
isn’t alone. Look around Silicon
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