Every large company — especially ones that have been around for a long time — goes through multiple cycles of change. But how do you know where to go next, and when, and how? The management literature is full of …
Do you still use Yahoo? Do you still remember MySpace? Compaq? Kodak? The cases of startups with superior ideas dethroning well-established incumbents are legion. This is the beauty of “creative destruction” – the term coined by innovation prophet Joseph Schumpeter almost a century ago. Incumbents have to keep innovating, lest they be overtaken by a new, more creative competitor. Arguably, at least in sectors shaped by technical change, entrepreneurial innovation has kept markets competitive far better than antitrust legislation ever could. For decades, creative destruction ensured competitive markets and a constant stream of new innovation. But what if that is no longer the case?
The trouble is that the source of innovation is shifting – from human ingenuity to data-driven machine-learning. Google’s self-driving cars are getting better through the analysis of billions of data points collected as Google’s self-driving cars roam the street. IBM Watson detects skin cancer
The new U.S. tax law is likely to increase after-tax cash flows for U.S.-based companies by anywhere from 10% to 20%, depending on their current tax position. As we approach earnings season, investors should listen carefully to what CEOs plan to do with the money. There’s a strong argument that they should invest in growth, and the newly available cash offers them a unique chance to do so. Unfortunately, too many are likely to squander the opportunity.
The size of this windfall is remarkable, and it comes from several sources. The new law reduces the statutory corporate rate from 35% to 21%. It permits immediate expensing of many capital investments. It treats pass-through entities more favorably than in the past, and it increases the incentive to repatriate off-shore cash. In a world already awash in investable capital, these changes should
The basic fact is that technology eliminates jobs, not work. It is the continuous obligation of economic policy to match increases in productive potential with increases in purchasing power and demand. Otherwise the potential created by technical progress runs to waste in idle capacity, unemployment, and deprivation. —National Commission on Technology, Automation and Economic Progress, Technology and the American Economy, Volume 1, February 1966, pg. 9.
The fear that machines will replace human labor is a durable one in the public mind, from the time of the Luddites in the early 19th century. Yet most economists have viewed “the end of humans in jobs” as a groundless fear, inconsistent with the evidence. The standard view of technical change is that some jobs are displaced by the substitution of machines for labor, but that the fear of total displacement is misplaced because new jobs are created, largely due
The new U.S. tax law is surprisingly unpopular. According to a New York Times survey, only one-third of Americans think their taxes will go down in 2018 as a result of the new tax law. These pessimists are wrong. Almost every household will pay less in tax. And over time the corporate tax reforms will lead to more capital accumulation, higher productivity, and higher real wages, raising pre-tax incomes as well as lowering the share of incomes taken in taxes.
Before the tax bill passed, critics said that the Congressional Republicans would not be able to cooperate enough to pass legislation and that, if they did, it would be just a tax cut and not tax reform. When it passed the critics said it was written in secret at the last minute. All of that affected the public’s attitude about the tax
One of the big challenges in both expanding the number of Americans with health care coverage and keeping premiums affordable for people with chronic or serious illnesses has been persuading young and healthy adults to obtain policies. Critics argue that the new U.S. tax law has made this task even harder with its elimination of the individual mandate for health insurance, a part of the Affordable Care Act that requires individuals to buy insurance or risk having to pay a tax penalty. But the effect of the mandate on coverage was never particularly impressive.
In 2014 only 28% of exchange members were between 18 and 34 years of age. That percentage stayed level into 2016, and with a shorter enrollment period in 2017, this year’s percentage may be lower. These numbers are well below the 40% enrollment rate that actuaries estimated was needed to allow for stable premiums.
Soda’s empty calories are public enemy number one in the fight against obesity, and taxes on sugary drinks are an increasingly popular tool among local governments hoping to curb consumption.
State and federal taxes on tobacco and alcohol have helped reduce consumption; local governments are simply assuming a soda tax will work in the same way. The idea is that making soda cost more will encourage consumers to drink less of it. But that only happens if retailers pass along the added cost to their customers — something that doesn’t always happen.
For instance, Berkeley, California, was the first city in the U.S. to approve a soda tax on distributors, a one-cent-per-ounce tax that was instituted in March 2015. But our research estimated that this tax reduced calorie intake among Berkeley soda drinkers by only a few calories per day. We found that much of the cost of the tax is not being
Market concentration is rising while economic competition — the bedrock of a dynamic, free market economy — is under threat. No wonder the framework that has guided antitrust enforcement for the last four decades is coming under intense scrutiny.
There are at least three schools of thought about the future of antitrust, each of which deserves consideration. To determine which one is best — and we do have a view — it’s helpful to review the growing evidence on why market concentration is so dangerous to the economy.
The Perils of Industry Concentration
A comprehensive study of recent mergers found that product prices rose post-merger in nearly two-thirds of cases. Price increases are particularly burdensome for individuals and families on the lower end of the income distribution.
The Economy in 2018
Not only does economic consolidation exacerbate economic inequality among consumers, it also
With tax cuts now a done deal, Republicans are turning to regulatory reform to give economic growth a further boost. There, they may find more bipartisan support. Past reforms of airlines, rail, and trucking regulation were, after all, set in motion by Democrats. Today there is significant Democratic support for reform of financial regulation, especially for smaller community banks. Overregulated small businesses can be found in every congressional district, red or blue.
But while regulatory reform could provide a big boost if it is done right, indiscriminate deregulation could do more harm than good.
Blanket Deregulation Won’t Help
Many conservatives and libertarians seem to think the only good regulation is a dead regulation. If that were true, it should be possible to quantify regulation and measure the harm it does. However, attempts to do so have not been particularly successful.
Consider the regulatory freedom indexes published
As has become my practice, I celebrate the end of a year and the start of a new one here at AVC with back to back posts focusing on what happened and then thinking about what might happen.
Today, we focus on what happened in 2017.
If you look at the Carlota Perez technology surge cycle chart, which is a framework I like to use when thinking about new technologies, you will see that a frenzy develops when
Mihir Desai, a professor of finance at Harvard Business School, breaks down the brand-new U.S. tax law. He says it will affect everything from how corporate assets are financed to how business are structured. He predicts many individuals will lower their tax burdens by setting themselves up as corporations. And he discusses how the law shifts U.S. tax policy toward a territorial system of corporate taxes, one that will affect multinationals and national competitiveness. Finally, Desai explains what he would have done differently with the $1.5 trillion the tax cut is projected to cost.
This year, we saw a transition of presidential administrations — and all of the accompanying policy and bureaucratic reshuffling that inevitably comes with such a change. Issues of innovation and tech policy have remained front and center, with the Trump …
Many of the big tech policy issues of the day play out more so at the state and local level, not just federal level. The decisions that cities and states make every day — from autonomous vehicles to bike sharing …
I got a chuckle out of this:
TONIGHT: The FCC voted to repeal #NetNeutrality today which sucks for everyone who uses the Internet (which if you’re reading this, is you), but it especially sucks for @StephenAtHome’s personal Etsy shop. #LSSC pic.twitter.com/7vLmoBxLyy
— The Late Show (@colbertlateshow) December 15, 2017
As the U.S. Congress considers the tax proposal put forward by Republicans, there has been plenty of debate over how it would affect innovation. Proponents argue that lower taxes would increase corporate investment; critics contend that the bill would hurt research universities and that the bills as written would neutralize the R&D tax credit for businesses.
But the tax bill’s effect on innovation won’t depend solely on the provisions dedicated to universities or corporate R&D. As two recent studies remind us, the likelihood that would-be inventors live up to their potential depends on many other factors — not just their abilities but also the environment they grow up in; the incomes of their parents; the quality of the public services they receive, particularly education in science and math; and the health of their communities. And those things depend on public policy, including taxes. The weight of
What happened to the antitrust movement? This was the question asked by Richard Hofstadter in the mid-1960s. Antitrust, observed the historian, once was the subject of a progressive movement in the U.S. that stirred public agitation and imagination, despite few antitrust prosecutions. By the 1960s, there were many antitrust prosecutions (by both Democratic and Republican administrations), but without any antitrust movement. Fifty years later, the U.S. has neither an antitrust movement nor much enforcement. That needs to change.
To understand the current moment in antitrust and what should come next, let’s take a historical perspective. U.S. antitrust policy and enforcement have waxed and waned over four cycles:
- 1900–1920. After initial administrative neglect and judicial hostility, this era ushered in the promise of antitrust with the breakup of Standard Oil and the enactment of the Clayton and Federal Trade Commission Acts to prevent the Continue reading "The Rise, Fall, and Rebirth of the U.S. Antitrust Movement"
This conversation between the members of a16z’s bio team — including general partners Jorge Conde and Vijay Pande; Malinka Walaliyadde; and Jeffrey Low (the interviewer) — takes a quick pulse on where we are with when bio becomes more like …
USV TEAM POSTS:
Albert Wenger — December 11, 2017
AlphaZero Chess: Computers Will Think Differently from Humans, Letting them Outperform Us (on Many Tasks)
Bethany Marz Crystal — December 10, 2017
Lessons in Leadership: What I Learned from an Evening Spent Dining at the Chef’s Table
The House and Senate have passed somewhat different versions of major legislation to restructure the federal income tax. A House-Senate conference committee still needs to reconcile the two bills, with the goal of finishing before Christmas. Both bills would significantly overhaul the corporate income tax, increase the federal budget deficit, and disproportionately benefit upper-income taxpayers. And the bills include many provisions that are poorly understood and may have unintended consequences.
The legislation would dramatically change how both companies and individuals pay taxes. Here are the broad strokes of the bills, as of this writing, some of which are more positive than others.
Corporate Tax Reform
The bills would reduce the federal statutory corporate tax rate to 20% (which translates to about 25% including state corporate income taxes), putting the U.S. statutory corporate rate more in line with our major trading partners and reducing many of the
The Trump Administration has a chance to start working with 164 other countries to create “rules of the road” to stop China building national champions with government funding. Such state-owned enterprises or state-supported industries (SOEs) — think steel, aluminum and solar panels — have flooded global markets, depressed prices, and literally shut down hundreds of U.S. solar-panel startups.
Trade ministers of the World Trade Organization (WTO) will meet December 11-13 in Buenos Aires for their eleventh conference to review progress and set the agenda for global trade negotiations. The United States will ask the 163 other Member nations to begin talks on new “transparency” provisions — targeted at China but applicable to all members — that are intended to shed light on the murky business of government subsidies. Existing WTO rules require all members to notify the WTO when they establish subsidies that favor domestic industries (e.g., loans