Archive for the ‘Technology’ Category

Older Entries »
h1

Honeywell vs. Nest, continued

February 10, 2012

Michael Giberson

Slate‘s technology columnist Farhad Manjoo examines Honeywell vs. Nest from a tech consumer’s point of view.

The Honeywell v. Nest lawsuit is being justifiably criticized as another black mark on our broken patent system. If Honeywell invented all these cool features, why didn’t it make something of them? …

Honeywell seems to have patented a bunch of great ideas in order to just sit on them. The sad thing is that if it tried, Honeywell seems capable of building a thermostat that’s every bit as wonderful as the Nest. From my testing, I found that Honeywell really does make great home heating and cooling equipment. If it competed in the marketplace rather than in the courts, I suspect it could really turn up the heat on Nest. (Sorry, couldn’t resist.)

When I compared the Nest and the Prestige, I found that feature for feature, Honeywell’s thermostat is more capable. …

On the other hand, you don’t need a one-page dossier, two installers, and an hour-and-a-half briefing to describe and install the Nest. That’s Honeywell’s greatest problem….

Manjoo concludes Honeywell has the technology, but not the consumer design nor the business model to get consumers clamoring for their product.

But Nest isn’t unstoppable. Honeywell has been in the thermostat business forever, and it’s got a lot of engineering and distribution advantages. It also, clearly, has a lot of innovative ideas. From what I’ve seen of its gear, Honeywell seems quite capable of creating a consumer-friendly version of the Prestige, one that works as easily and stylishly as the Nest. Now that Nest has paved the way, Honeywell would likely earn a lot of press coverage, too.

If I can summarize that last paragraph, he’s suggesting that rather than suing Nest for copying Honeywell technology, Honeywell ought to be copying some of Nest’s consumer-oriented design and marketing attitudes. (Fortunately for Honeywell, you can’t patent attitudes.)

Posted in Electricity, Technology | Tagged | Leave a Comment »

h1

A secret to Chipotle’s good-food-fast innovations

February 10, 2012

Michael Giberson

At Slate, Matthew Yglesias tells the story of a business that is booming: Chipotle’s Mexican Grill, “a company that shows there’s clearly room for growth and innovation in even the most basic sectors of the economy.”

The chain has been expanding rapidly, Chipotle’s stock has risen 500 percent over 5 years, and yet:

… the food service industry can’t seem to get any respect. Politicians don’t name-drop burrito innovators as examples of the kind of entrepreneurs they want to encourage, and despite food’s ubiquity in our lives, culinary progress is slighted as a source of human progress.

Chipotle’s growth since its 2006 IPO should be seen as a great American success story. There’s nothing new about fast food, of course. But it’s not as if Steve Jobs invented the cellphone.

Yglesias follows with, “In many ways, the Chipotle burrito is very similar to the iPhone.” Maybe that analogy is a little strained, but it doesn’t matter, we get a peak at some of Chipotle’s key innovations. The article usefully reminds us that not all innovations are high tech or high science.

(The article gives a brief shout out to burger chain Five Guys, also a family favorite.)

MORE: Another story of entrepreneurial insight in action: Risk and stealth paid off in Eagle Ford shale.

Posted in Energy markets, Food and wine, Technology | Tagged , | Leave a Comment »

h1

Online privacy is like portfolio diversification

February 8, 2012

Lynne Kiesling

You know the down-home advice on investing — don’t put all of your eggs in one basket? That advice also holds for maintaining your online privacy in the face of Google’s impending “service integration” to use all of the information you provide in all of their services. This Wired article on how to hide from Google is the best I’ve seen thus far, and the advice is pretty straightforward — don’t put all of your activity in the Google basket. Use different search engines, use different browsers, spread it around.

For example, I’m now using Chrome to manage my Gmail accounts, calendar, and Google+ account. I have signed out of all Google accounts in Firefox and Safari, and I do all of my searching and other activities in one or the other of those browsers, depending on the application.

Sure, I’m giving up the ability to +1 articles, but that’s a small price to pay … and as we learn from portfolio theory, diversification comes at a cost but provides a net benefit.

Posted in Technology | Leave a Comment »

h1

How patents stifle innovation, Honeywell edition

February 7, 2012

Lynne Kiesling

In the comments on Mike’s post yesterday about the Honeywell patent lawsuit against Nest, Ed asks in the comments how it is that patents stifle innovation rather than promote it. The theoretical answer is that, as a government-granted monopoly, patents embed both incentives — at the margin they increase the incentive to create new patentable knowledge while also slowing or stifling the dissemination of that knowledge, and/or knowledge deemed too close to it. The fine balance of managing the tradeoff between those two effects is the objective of a “good” patent law, because to get net benefits the breadth and duration of the allowed patents has to be enough to be stimulative, but not so much that it deters other innovative activity. A good patent law allows differentiation of breadth and depth for different types of inventions in different areas/industries, and holds diligently to the “non-obvious” requirement that is written into U.S. patent law and is part of any economic theory of intellectual property.

It’s increasingly clear, particularly in technology, that the U.S. patent law is not striking that balance, and is instead doing more of what Michele Boldrin characterizes as using the political and patent process to protect monopoly rents (as per a post I wrote on the topic in 2009, with links worth pursuing). At least to me, some of Honeywell’s patents don’t pass the common sense/non-obvious test, such as their “natural language temperature range setting” patent.

In following up on their extensive reporting at Earth2Tech yesterday, which Mike linked to in his post, Katie Fehrenbacher today offers several reasons why she thinks this Honeywell lawsuit will in fact deter innovation. She agrees with me that the natural language patent does not pass the “non-obvious” test, and she also discusses the cost of a patent war, the David/Goliath nature of this lawsuit, and some other important reasons why this lawsuit may bode poorly for robust innovation in the home energy technology space.

Posted in Economics, Electricity, Technology | 2 Comments »

h1

Honeywell International Inc. claims Nest thermostat infringes on patents in federal court lawsuit

February 6, 2012

Michael Giberson

Economist Alex Tabarrok, author of Launching the Innovation Renaissance and Marginal Revolution blogger, worries that the proliferation of patents is stifling innovation, particularly patents for business processes. In an interview with Russ Roberts for EconTalk, Tabarrok remarked that large companies like Apple, Microsoft and Google building up massive numbers of patents mostly to insulate themselves from costly patent battles. One side effect of this defensive effort is that smaller innovators can themselves end up in costly patent battles when trying to innovate in the same product space.

Maybe Tabarrok has another example on his hands.

This morning Honeywell International, Inc. (market capitalization of more than $46 billion) filed a patent infringement lawsuit against little Nest Labs, Inc. (unknown capitalization, but backed by a number of venture capital firms). Honeywell is also suing retailer Best Buy which has a marketing arrangement with Nest Lab. (Prior link goes to the lawsuit. More: news release, reports by GigaOm, Mashable Tech, GreenWire, Dow Jones Newswires, and CNet.)

Honeywell asserts Nest infringed several patents: one for methods that use natural language to decrease the time and complexity of programming a thermostat, another for thermostats that indicate how long it will take to reach a desired temperature, another for a thermostat that relies on remotely stored data to manage energy costs, another three patents related to having a rotating portion of the thermostat set one or more parameters of the device, and finally, a patent for powering a thermostat by drawing power from one or more of the circuits controlled by the thermostat. All of the patents have been issued since 2005.

I have no insights into the workings of the intellectual property system, and I’ll spare you my unrefined attitudes on the matter. My only interest is in encouraging innovation that supports energy users.

RELATED, from Quora: What is it like to own a Nest thermostat?

BELOW, image of a Honeywell thermostat app running on a tablet computer.

Honeywell Total Connect Comfort Systems.

With a Honeywell Total Connect Comfort System you can sit in your dining room and adjust the room temperature settings for the master bedroom!

ALSO: Previously on KP, “Nest’s elegant learning thermostat — but is it transactive?“

Posted in Electricity, Energy markets, Law, Technology | Tagged , | 6 Comments »

h1

A Friday flash

January 27, 2012

Lynne Kiesling

I found a lot of interesting and insightful thoughts in my morning reading today; here’s a synopsis:

  • Election year linguistics 1: The New York Times has an analysis of the language used by Obama and the four presidential candidates; at Cato at Liberty, David Boaz points out how different Ron Paul’s emphasis is from all of the others. He speaks about the fundamentals of both economics and the American small-l-liberal political tradition, while the others focus on topics that are more matters of expediency.
  • Election year linguistics 2: Newt Gingrich is currently getting his panties in a twist about people calling his ideas and his rhetoric “grandiose”, claiming that grandiosity is a defining American characteristic. I encourage Mr. Gingrich to consult his dictionary. According to dictionary.com, the first two definitions of “grandiose” are (1) affectedly grand or important; pompous and (2) more complicated or elaborate than necessary; overblown. I submit that while these meanings fit Mr. Gingrich, they are not defining characteristics of American culture, historically or at present.
  • Speaking of rhetoric and meaning, the Wall Street Journal has an interview, The New Theories of Moral Sentiments, with Deirdre McCloskey. She is doing more than any one person I know to return the perspectives of political economy and economics as transcending “Max U” to the professional and policy conversations.
  • Adam Thierer has a review of Liars and Outliers, the new book from security expert Bruce Schneier. Schneier analyzes the social institutions and mechanisms that enable trust to evolve in societies, and it sounds like it will be a great read; I’ve been looking forward to it, and Adam’s review whets my appetite even further. Schneier is the preeminent voice of reason in the debate over the surveillance state, so this book is self-recommending.
  • Also in technology, Steven Titch unpacks Google’s consolidation of its privacy policies across its suite of applications, and discusses what information Google does and does not capture, and what they will and won’t do with it. Very useful corrective to some of the anti-Google hyperbole, although I have some remaining skepticism.

Happy Friday!

Posted in Economics, Liberty, Technology | 1 Comment »

h1

Does a public good argument justify subsidizing private energy production?

December 21, 2011

Michael Giberson

Yesterday I disputed the analysis by which the Breakthough Institute wanted to claim credit on behalf of the federal government for the shale gas boom; today I dispute their claimed broader implications for federal energy R&D policy.

Late in their op-ed, the Breakthrough folks shift emphasis from a narrow drilling technology story to a broader examination of energy R&D policy:

Giving the federal government credit where it is due takes nothing away from Mitchell, who was determined and tenacious. But the lesson of the shale gas revolution is that we should not be so quick to judge government investments in energy technology. Between 1978 and 2007, the Energy Department spent $24 billion on fossil energy research. Billions more were spent through the Gas Research Institute and non-conventional gas tax credits. Those investments were widely panned as a failure during the ’80s and early ’90s, when gas was plentiful and cheap.

Whatever one thinks about shale gas today — we worry about its environmental consequences — there’s no denying the extraordinary economic return on taxpayer investments.

This last point is interesting, but undeveloped in the article. If one were to calculate the “economic return on taxpayer investments,” would one have to conclude they were extraordinary?

The essay ultimately wants to argue against claims that the Solyndra episode proves governments can’t pick winners and the shale gas boom proves private enterprise can. Defenders of subsidies for solar power projects claim critics are too focused on a single failure, Solyndra, when reasonably critics should be assessing the overall portfolio of projects supported. It is a fair observation, but it may turn against their conclusion. If we are to consider the return on “taxpayer investments” in energy R&D, we’d reasonably need to survey the full portfolio of energy technology concepts funded by the federal government. We’d have to count the winners and losers both, based on the best current understanding, and again (as yesterday) we’d want to work out some idea of what would have happened in the energy technology space without federal government intervention. Further, we wouldn’t just worry about the environmental consequences, we’d have to compute some estimate of the costs and include it in the analysis.

The article goes nowhere close to presenting the relevant case. Near the end of the article they claim federal credit for “nuclear power, natural gas turbines, solar panels, and wind turbines — pretty much every significant energy technology since World War II.” Hmmm, notice they don’t mention the other big selectively-cited-by-critics failure: the Carter-era launch of an$88 billion effort to make oil from coal. Like the Solyndra and Synfuels Corp. complainers, the Breakthrough Institute wants to draw policy implications for an uncertain future based on a selective invocation of history.

It is further a kind of mistake to invoke Solyndra in an essay all about energy R&D policy. Much recent taxpayer-extracted support for energy shows up in the production tax credit, the investment tax credits, the Section 1603 Treasury grants and miscellaneous other subsidies that are directed to help promote the fortunes of companies building renewable power components or producing power via renewable sources. While some of these companies are pursuing technological developments, these subsidies are not tied to research in any substantial way and yield very little in the way of publicly available research results. Try gathering detailed data on production from a wind farm or solar power plant benefiting from millions of dollars in taxpayer-supported subsidies – their lawyers will likely tell you it is commercially-sensitive information and not publicly available. And by the way it isn’t just renewable energy, the lawyers for subsidized production from low-output oil and gas wells will likely say the same thing.

There is a respectable public good argument that can be made in support of subsidizing at least some research. The “extraordinary economic return” that the Breakthrough Institute wants to claim on behalf of government subsidized research into oil and gas drilling technology is this kind of an argument. If Breakthrough wants to drag Solyndra and the full range of energy production subsidies into this argument, an economist looking for a respectable public good argument has got to ask: where is the public good in subsidizing private energy production from projects that hide publicly useful information from public review?

Posted in Economic history, Economics, Energy markets, Technology | Tagged , , | Comments Off

h1

Did the federal government invent the shale gas boom?

December 20, 2011

Michael Giberson

In the Washington Post the folks at the Breakthrough Institute try to learn us some history about the shale gas boom. Maybe you think the shale gas boom was some big surprise suddenly made real after the decades-long work of a hard-headed oil and gas guy – George Mitchell – willing to spend millions of dollars on the crazy idea that hydrocarbons stuck in a rock could be produced economically, once the right mix of technologies could be brought to bear.

Wrong, says the Breakthrough Institute, credit the shale gas boom to the federal government.

They have their reasons:

  • “Slick-water fracking, the technology that Mitchell used to crack the shale gas code, was adapted from massive hydraulic fracturing, a technology first demonstrated by the Energy Department in 1977.”
  • “Mitchell learned of shale’s potential from the Eastern Gas Shales Project, a partnership begun in 1976 between the Energy Department’s Morgantown Energy Research Center and dozens of companies and universities ….”
  • “Mitchell’s success depended on a revolution in monitoring and mapping technologies driven largely by government labs.”
  • In 1991, Mitchell asked the publicly funded Gas Research Institute, then funded by a tax on gas production, and the Energy Department for help.”
  • “Sandia National Labs provided Mitchell with many critical microseismic tools.”
  • “Mitchell also benefited from 3-D imaging, which the Energy Department had long supported.”
  • “The third critical technology was horizontal drilling and well installation …. In 1976, two government engineers … patented an early-stage directional drilling technology that became the precursor to horizontal drilling.”
  • “A joint venture between the Energy Department and industry drilled the first horizontal Devonian shale well….

There are a few more similar points. The article pursues a larger goal – some statement concerning current energy policy support – but today I just want to consider how to assess the credit for technological advancement. (See tomorrow for part II.)

A fair analysis of credit and blame requires more than just a recounting of history, such as provided in the article, we need also to construct a counterfactual history for comparison. Should we reasonably believe that but-for the energy technology programs of the Department of Energy, we’d be unable to produce natural gas from shale? It would be difficult to do this analysis well, and the authors don’t attempt it here, but a full assessment calls for it.

A sketch of technology developments may be helpful. Note that fracturing as a well-stimulation technology started in Pennsylvania in the early 1860s. A few clever folk discovered dropping gunpowder down a well, later liquid nitroglycerin,  often brought marvelous returns. Edward A. L. Roberts submitted a patent application for the process in 1864. Hydraulic fracturing technology was first developed by Standard Oil (Indiana) in the late 1940s.  In the 1960s, Project Gasbuggy had the federal government collaborating with the oil and gas industry to test a nuclear-weapon based fracturing technology on federal land in New Mexico. The Breakthrough Institute’s story picks up in the 1970s, but what the backstory reveals is a history of efforts to develop fracturing technology, funded privately in some cases and publicly in others. Department of Energy involvement may have shaped the direction of research, but I suspect its pool of research funds was merely convenient to technological advancement and not necessary. (More recently, GasFrac Energy Services of Alberta has pioneered a propane-based fracturing technology.)

Directional drilling, a precursor to horizontal drilling, first became practiced in the industry in the 1920s – well before “two government engineers … patented an early-stage directional drilling technology” in 1976. (See “Slanted Oil Wells,” published in Popular Science magazine in 1931.) As with hydraulic fracturing,  the industry found the technology quite useful in application and companies pursued technological advancements. Taxpayer funding may have been convenient support for the oil and gas industry, government research involvement may have shaped the direction of directional-drilling research, but the industry would have pursued the technology in any case.

So possibly the federal government’s involvement advanced by a few years the technologies that were finally blended in a sufficiently promising mix by George Mitchell. Even if we grant as much, it isn’t the whole of the shale gas boom that federal involvement gains credit for, just the added value that comes from shifting shale gas production forward by a few years. Of course possibly the whole of the federal government’s involvement in the industry – tax policies, regulatory policies, antitrust policies, federal lands policy, and so on – could reasonably be counted as delaying technological advancement when compared against what would have happened under some more rational regime.

Admittedly, they were just writing an op-ed and I’m complaining that they didn’t do a dissertation’s worth of work to support it. Maybe my complaints are a little unfair.

Okay, here is an offer: I’ll admit my complaints are unfair if they admit that their analysis was insufficient to justify their conclusions.

Posted in Economic history, Economics, Technology | Tagged , , , | 20 Comments »

h1

Cost savings and value creation are different

November 28, 2011

Lynne Kiesling

The cost saving-focused mindset has prevailed in regulated industries for over a century, slowing innovation in the process. In electricity, regulation that bases firms’ profits on cost recovery erects market barriers by recognizing only a business model that involves providing a specified product (110v power to the home) transported over a monopoly network. Even in 2011, well into the third decade of the digital revolution, this narrow focus and cost-saving mindset persists, and it fetters smart grid-enabled economic growth by emphasizing cost recovery and ignoring value creation.

In fact, one of the main reasons why smart grid investments face regulatory and political opposition is that focus on cost recovery (among others). I think this Greentech Media article gets the story right: the ways that smart grid investments can lead to cost savings are limited. We’ve discussed this idea here at KP quite a bit — a limitation on the benefits of transactive technologies and dynamic pricing is the fact that for most people, electricity bills are not a large share of their annual expenses, so even saving 15% on the electricity bill may not be a salient enough benefit to induce a lot of people to make technology investments. In other words, smart grid may or may not lead to cost savings for a lot of residential customers.

But is that the right metric by which to evaluate smart grid investments? Of course not. The Greentech Media article linked above starts with a telecom metaphor that I use frequently. In nominal terms, most of us pay much more for our communication services today than we did when all we had was a single land line (and leased Western Electric phone!) back in the 1980s, and even in real terms we probably still pay more than we did then. But look at how much more value we get — mobility, Internet, automation, all of the services that have been created at the edge of the network. We are much richer and better off because of the change in communication technologies and services since the 1980s, even taking into account that we pay more for them. Apply this metaphor to the regulatory calculus today, and the mismatch of its cost recovery focus and the benefits arising from new value creation is apparent. Innovation in telecommunications didn’t occur and thrive and expand because of cost savings and cost recovery, but instead because of new value creation.

Those who argue that the business model for customer-facing smart grid investments has to be grounded only in cost savings are incorrect, and are looking too narrowly at consumer value propositions. This debate came up in the post I wrote in October about the new Nest thermostat, a gorgeous and beautifully designed piece of consumer-focused in-home technology from a group of former Apple engineers, and in other articles about Nest around the same time. Observers from this traditional cost savings mindset dismissed the Nest thermostat because of its $250 price tag, saying that consumers would not save enough money to make the payback period on it make sense, even with dynamic pricing. This criticism overlooks the additional features and capabilities of such a device — motion sensing, serving as a hub to integrate and manage and automate in-home digital devices, learning algorithms, extensibility to be able to bundle with other digital services in the home, and so on. It also overlooks the persistent pattern in the history of new technology adoption, from the Roman baths onward; there will always be consumers with strong “first adopter” preferences, who are willing to pay more to be the first ones to have the novelty, and in the case of digital devices, incur that cost fully aware that prices will fall in the future as the technology matures. They guinea pig new technologies for the rest of us.

Those two aspects — additional features and first adopter preferences — mean that a lot of the value proposition in consumer-facing smart grid technologies is new value creation, not cost savings. This means that the regulatory calculus and the traditional electricity cost-focused mindset misses the real action, the real opportunity, the real potential that the investments could unleash.

One data point supporting my claim is that, only one week after its commercial release, the Nest thermostat was sold out and is now only available on backorder. Such innovation is about value creation more than cost savings, and ignoring and stifling that process holds back the contribution of the electricity industry to economic growth and well-being.

Posted in Economics, Electricity, Technology | Tagged , , , | 2 Comments »

h1

A good non-technical introduction to shale gas

November 7, 2011

Michael Giberson

Paul M. Barrett, for Bloomberg, has written up a pretty good introduction to natural gas from shale. The article delves a bit into the history and geology of the subject, but focuses more on the business efforts that turned a modestly interesting rock into a significant economic resource and the environmental politics that have risen in response. Highly recommended if you want to know where the natural gas that is changing the world’s energy outlook has come from.

A few things are left out of this “introduction.” Of course we could dig deeper into each of the topics mentioned. The next step in the story is the international angle – shale gas is being developed in Argentina, the United Kingdom, Poland and elsewhere – with significant implications for national and international trade and public policy. Among other things, as examples, central and western Europe will likely become less reliant on Russian gas supplies, and the United States and Canada probably don’t build a natural gas pipeline from Alaska through Canada and into the Midwestern U.S. for at least thirty or forty years.

The complete story of shale gas would also delve a bit into the controversy over the size of the the resource, would go a little deeper into the particular efforts of Devon Energy, and talk about the spillover of the shale gas boom into a boost for unconventional oil. One might wrap up the story by casting it into the big picture “cornucopians vs. Malthusians” debate.

So Bloomberg doesn’t do everything in this introduction, but it is a pretty good introduction to the shale gas issue.

NOTE ALSO: For a bit more on the environmental politics of shale gas, in September the journal Nature carried a pair of articles under the heading “Should Fracking Stop?” The case for stopping was written by Robert Howarth and Anthony Ingraffea, both of Cornell University; the case for continuing was written by Terry Englander of Penn State University. Neither piece gets very close to a complete policy analysis, but both highlight a bunch of the relevant issues.

 

Posted in Energy markets, Environmental policy, Technology | Tagged | 1 Comment »

Older Entries »
Follow

Get every new post delivered to your Inbox.

Join 41 other followers