What Jeremy Lin Says About U.S. Competitiveness

When Yao Ming retired from the National Basketball Assn. last July, followers of Chinese basketball lamented that none of his countrymen were ready to take his place. Yao’s retirement, according to the New York Times, triggered “frustration over why no one in China, which has tens of millions of basketball players, appears capable of replacing him as an N.B.A. star.” By grooming players based almost solely on their height, China’s state-run sports system had developed a small army of Yao clones—fundamentally sound giants who could grab rebounds and clog the paint—but no one who could get them the ball.

Bob Donewald Jr., the American-born coach of the Shanghai Sharks, succinctly summed up China’s problem: “What’s amazing is that in a country of 1.3 billion, I can’t find a point guard.”

What Chinese basketball needs, in other words, is Jeremy Lin. It’s no surprise that, as Evan Osnos reports, Lin is the most-searched term on Baidu, China’s biggest search engine. Lin is a sensation in China largely because of his ethnicity (although his parents are immigrants from Taiwan, not mainland China). But also because he plays the game with a flowing, creative dynamism instantly recognizable to NBA fans, but which you rarely see exhibited by members of the Chinese Olympic team. Put simply, Lin plays like an American. And that may say something about what China—well on its way to passing the U.S. as the world’s biggest economy—can still learn from America.

For all the hand-wringing among pundits about American decline, the U.S. retains key advantages over such emerging powers as China. It has a more open economy, a more favorable environment for venture capital investment, and a stronger culture of innovation. Grass-roots genius can flourish far more easily in the American system than in a top-down society like China’s. As Michael Beckley writes in the current issue of International Security, when it comes to patent applications—an indicator of high-level scientific innovation—the U.S. accounts for 43 percent of the world’s patent applications in nanotechnology, 41.5 percent in biotechnology, and 20 percent to 25 percent in renewable energy technologies. (In the last category, China accounts for just 1 percent to 4 percent.) According to the Organisation for Economic Co-operation & Development (OECD), the U.S.’s lead over the rest of the world in producing “knowledge and technology-intensive industries” has actually increased since 1996.

What does any of this have to do with Jeremy Lin? Much has been made of how Lin’s talents were consistently underestimated and ignored by college recruiters, professional scouts, just about every NBA general manager, and even the Knicks’ coaching staff. That reflects lingering cultural biases against Asian-American athletes. But it’s inconceivable that a player of Lin’s caliber would never have a chance to shine. The rise of Jeremy Lin shows that American meritocracy, for all its shortcomings, still works. That alone isn’t enough to prevent China from surpassing the U.S. in raw economic strength. But it can help keep America in the game.

Ratnesar is deputy editor of Bloomberg Businessweek.

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Where the U.S. Solar Industry Is Shining

(Corrects the size of the Bank of America loan in the third to last paragraph.)

There’s at least one bright spot in the troubled U.S. solar industry. After a plunge in prices sent panel manufacturers reeling, consumer demand for the alternative energy is soaring. That’s a boon for California companies such as SunRun, SolarCity, and Sungevity. These startups are buying panels at depressed prices and leasing them to homeowners at little or no up-front cost.

By teaming up with lenders such as Bank of America (BAC) and U.S. Bancorp (USB) and taking advantage of a federal tax credit for renewable energy, installers can bring down the costs of panels, which for a home typically run between $30,000 to $40,000, and help consumers and businesses reduce the use of fossil fuels. Their success is helping revive the solar industry, which gained notoriety last year from the collapse of panel maker Solyndra. “The price of solar is coming down even faster than anyone expected, so who benefits? The consumer benefits,” says Steve Vassallo, a general partner at Foundation Capital, which is an investor in SunRun.

The residential market for solar is still nascent, with less than 0.1 percent of U.S. homes outfitted with panels. That number could climb to 2.4 percent by 2020, estimates Bloomberg New Energy Finance. Prices for solar cells fell 51 percent in 2011, to 88? a watt, according to data compiled by Bloomberg.

While rising demand is boosting the installation business, the more notable story last year was the crash of Fremont (Calif.)-based Solyndra, which got a $535 million U.S. government loan. Solyndra was one of three U.S. panel makers pushed into bankruptcy in 2011, in part because lower-cost Chinese manufacturers ramped up production. Other U.S. companies that, like Solyndra, bet on thin-film technologies—which use cadmium telluride or a combination of copper, indium, gallium, and selenide, as opposed to silicon—are also struggling. Nanosolar, SoloPower, and Abound Solar, which have raised about $1.5 billion combined in government loan guarantees and venture funding, couldn’t bring down their costs enough to keep up with the plunge in panel prices. “I don’t think most of the companies that are in later stage are going to succeed,” says Mark Pinto, executive vice-president of the energy and environmental unit of Applied Materials (AMAT), which sells manufacturing gear to the solar industry.

While competition from China threatens to drive more U.S. thin-film companies out of business, it has spurred adoption of solar stateside. Developers in the U.S. added 449.2 megawatts of solar-generating capacity in the third quarter of 2011, the latest data available, up 140 percent from the same quarter a year earlier.

Demand for clean power is also driven by government incentives. In 2009 the Treasury Dept. instituted a 30 percent tax credit for construction projects using renewable energy. The subsidy, which will remain in place until 2016, has helped five solar leasing companies raise more than $1 billion in venture capital combined, according to a Dec. 27 report from Lux Research analyst Matthew Feinstein.

SunRun is backed by $85 million in venture capital. The San Francisco company also has raised $750 million in project financing from U.S. Bancorp and utility PG&E (PCG), a sum which co-founder Lynn Jurich says is enough to outfit about 20,000 homes with solar. Installing and financing panels is a more sustainable business than manufacturing, she says: “Participating downstream, we thought we’d be the beneficiary of the process of making solar cheaper.”

SunRun hires local companies in 10 states to install solar arrays on customers’ roofs. The company charges clients for the electricity they generate— at monthly rates as much as 15 percent below those of regular utilities. Jurich says she expects SunRun to have a presence in 15 to 20 states within five years.

SolarCity, headquartered in San Mateo, Calif., operates on a similar basis, except that the company employs its own installers. SolarCity counts Google (GOOG) among its backers: The search giant contributed $280 million to a financing round that closed in June. The company also secured a loan for as much as $350 million from Bank of America in November for a $1 billion project to install panels in military homes and offices in as many as 33 states.

SolarCity, which is chaired by Elon Musk, chief executive officer of electric carmaker Tesla Motors, will file for an initial public offering as early as next month, according to three people with knowledge of the matter who are not allowed to speak on the record. The IPO may value the company at more than $1.5 billion, one of them said. SolarCity spokesman Jonathan Bass declined to comment.

Sungevity has raised more than $175 million for residential solar projects. The Oakland (Calif.)-based company sold a minority stake last year to home improvement retailer Lowe’s (LOW), which has said it will eventually offer the company’s installation services through its stores.

Heather Smith, a partner at Greentech Capital Advisors, expects there to be consolidation in the market over the next 18 months. The winners will be those that have developed a profitable all-in-one package of delivery, installation, maintenance, and finance that works for homeowners. “The only way we’re going to deploy solar in the U.S. isn’t by the government telling people to put solar panels on your roof,” Smith says. “It’s by an economic model which makes sense to the consumer.”

The bottom line: Tax breaks have helped solar leasing companies raise more than $1 billion in venture capital financing.

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Android May Be Losing Ground in the App War

Google (GOOG) has turned Android into the most popular operating system for smartphones. Yet the platform may be losing ground to Apple’s iOS in a major area: new applications.

Relative to Apple (AAPL), fewer apps were created for Android in January than a year earlier, according to Flurry, a company that analyzes mobile-software data. Developers made roughly one new Android app for every three Apple apps, Flurry found. A year ago, they created two Android apps for every three Apple apps.

While the study tracked only developers who design apps using Flurry’s tools, the shift suggests that Google’s bid to overtake Apple’s industry-leading App Store may be losing some steam. Apple has more than 550,000 apps in its store, compared with over 400,000 for Google’s Android Market. Both companies count on the array of apps to make their phones more enticing and lock in consumers who are already using the devices.

“We saw a greater migration to iOS,” says Peter Farago, vice president of marketing at San Francisco-based Flurry.

Google has made quick gains on Apple since the first Android phones went on sale in 2008. In 2011, though, the growth in new apps for Android was about half that for Apple, according to the firm, which tracks more than 55,000 developers. The study measured more than 65,000 new software projects over the course of the year.

Other research firms are seeing a similar slowdown in Android. A survey of about 2,000 developers conducted by Appcelerator and IDC found that fewer programmers were “very interested” in developing for Android phones and tablets in November than in June, while their interest in iOS devices remained unchanged.

Christopher Katsaros, a spokesman at Google in Mountain View, Calif., declined to comment. Christine Monaghan at Cupertino (Calif.)-based Apple didn’t return a request for comment.

The reasons for the smaller interest in Android involve time and money. Apple apps can be quicker to develop and it’s easier to generate revenue from them, thanks in part to Apple’s iTunes system.

“Developers can make more money on iOS,” Farago says.

Take GameHouse, a maker of games such as Doodle Jump and NCIS the Game. It makes three to four times greater revenue on an iOS title than on an Android game, says Ken Murphy, a vice president at the company, which is part of RealNetworks (RNWK). GameHouse also has to spend an extra two months working on an Android game, vs. what’s needed for an iOS title. That lengthens the time it takes to get it to market by about 30 percent, he says.

“It’s nowhere near as simple as iOS,” Murphy says.

The sheer variety of Android devices is one complication. GameHouse has to tweak its games to account for variations in accelerometers and responsiveness in more than 550 different Android gadgets, Murphy says. Apple, by contrast, has just a few models.

Bill O’Donnell, general manager of mobile products at the travel site Kayak.com, says his company isn’t able to test its software on every variety of Android phone. There are just too many of them.

“It puts developers in a tough spot,” he says.

Sometimes individual models require many extra changes. With Amazon.com’s (AMZN) Kindle Fire tablet, two Kayak engineers had to spend a month and a half changing all the company’s apps to work with Bing Maps rather than Google Maps, O’Donnell said. Despite being an Android device, Kindle Fire didn’t come with Google apps preloaded.

“That was a huge pain,” he says.

Distributing Android software to multiple application stores takes more work as well, whereas developers merely have to submit iOS programs to Apple’s site.

“For Android, there are 90 app stores,” says Alex Caccia, president of Marmalade, whose software lets developers adapt apps to different devices. “And if you are serious about this market, you’ve got to do it.”

It’s also not as easy to charge Android users for apps as it is on Apple devices. With iPhones and iPads, owners’ credit-card accounts are already stored on iTunes, which makes app purchases simple. Android doesn’t have the same mechanism for all its users, Farago said.

“Consumers are more trained to get free things on Android,” he says.

While Android developers can make money off sales of in-game merchandise, such as virtual weapons and other digital items, many are still working out how to do that, Caccia says.

Even so, the slowdown in app development hasn’t stopped the spread of Android devices. In the fourth quarter, Android was running on 47.3 percent of U.S. smartphones, up from 44.8 percent in the previous three months, according to research firm ComScore (SCOR). And while Google’s Android Market has fewer apps than Apple’s store, the number of programs has almost tripled from a year ago.

Developers still see Android as a valuable source of revenue in the longer term, as Google irons out wrinkles. GameHouse is planning to hire additional staff to work on the software.

“In the short term, there’s a lot of money in iOS,” Murphy says. “In the long term, we are very bullish on Android.”

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Alcatel-Lucent Leads in Wireless-Capacity Race

(Bloomberg) — Sprint Nextel Corp. is in talks to use new Alcatel-Lucent telecommunications gear designed to help wireless networks handle more calls. The discussions reflect the industry’s race to avert a capacity crunch for mobile service.

Alcatel-Lucent’s lightRadio, introduced a year ago, is a Rubik’s Cube-sized device that contains radios and antennae and can be mounted on rooftops, phone poles and bus shelters to expand a network’s capacity in a given spot. LightRadio is one of several new technologies created to help the mobile-phone industry cope with the rising tide of calling and data that’s putting a strain on mobile networks just as the wireless airwaves—or spectrum—used to carry traffic grow scarce.

As consumers do more Web surfing and application downloading on devices such as Apple Inc.’s iPhone and tablets using Google Inc. Android software, mobile-data traffic will surge 26-fold in the five years through 2015, Cisco Systems Inc. estimates. And with limited spectrum available, mobile-service providers are looking for ways to squeeze more from existing capacity. That has Alcatel-Lucent and other gear makers racing for part of the $36 billion that Ovum predicts U.S. phone companies will devote to capital spending in 2012.

“We use technologies to mine spectrum as much as possible,” Bob Azzi, senior vice president of network at Overland Park, Kansas-based Sprint, said in an interview. “That can give us some wiggle room along the way.”

Multiple U.S. carriers are testing lightRadio and may begin deploying it this year, Marcus Weldon, chief technology officer at Paris-based Alcatel-Lucent, said in an interview. He declined to identify the carriers. Representatives of Dallas-based AT&T Inc. and Verizon Communications Inc., based in New York, declined to comment.

“We are in a spectrum crunch,” Weldon said.

For the past two decades, the U.S. government has helped carriers meet increased demand by auctioning off large blocks of airwaves, used to carry calls and data. Freeing new spectrum has emerged as a “crucial challenge,” Federal Communications Commission Chairman Julius Genachowski said in a speech last year. Even after new auctions happen, it would take several more years for the buyers to deploy the spectrum.

As a result, U.S. carriers may grow more dependent on new technologies to keep up with escalating user demand.

“The No. 1 issue for us as we move forward, and for the industry, I believe, continues to be spectrum,” AT&T Chief Executive Officer Randall Stephenson said during a January earnings call. “This growth cannot continue without more spectrum being cleared and brought to market. And despite all the speeches from the FCC, we’re all still waiting.”

Qualcomm Inc., the biggest maker of mobile-phone chips, has developed its own software and chips for small cells—these the size of a cigarette pack—designed to boost network capacity.

New capacity-boosting cells augur an overhaul of the design of wireless networks, which now rely on placement of large, expensive cell towers that transmit signals between handsets and the vast underground fiber-optic cable networks that send calls instantly across the globe.

“It’s going to change the way that networks get deployed, and we’re going to get the data rates through the devices up pretty dramatically by using that,” Paul Jacobs, CEO of San Diego-based Qualcomm, said during a November conference call with investors.

A recent survey by Informa Telecoms & Media showed that 60 percent of carriers say small cells of various types will be more important than traditional cells in advanced wireless networks.

Revamping networks won’t come cheap. Each cell has to be attached to existing equipment. The market for outdoor cells like those from Alcatel-Lucent could rise to as high as $8 billion by 2016, according to ABI Research. U.S. wireless carriers will increase capital spending 10 percent to $36 billion this year, according to London-based Ovum. That’s double the rate of last year.

“There’s a real concern: Can we keep up with demand?” Alcatel’s Weldon said. “There’s only one solution, and it’s a difficult solution to afford. Carriers can’t afford to increase spending much. All this means, they’ll take longer to do it. Network congestion is always going to be a factor.”

Capacity constraints already interfere with call quality and download speeds in highly populated areas. According to J.D. Power & Associates, 13 percent of all calls made with smartphones experience some degradation.

“There are already isolated, but regularly occurring congestion issues in major cities,” Peter Rysavy, president of consulting firm Rysavy Research, said in an interview. “Over time, usage will increase, and it will constrain usefulness of the service.”

Carriers such as Sprint are coping in other ways, including shifting more traffic to local Wi-Fi networks, and using software to adjust mobile video so it takes less bandwidth during peak hours.

Sprint is also buying capacity from other network owners, such as Bellevue, Washington-based Clearwire Corp. As a result of the Clearwire arrangement, Sprint won’t face a spectrum crunch until 2016, Azzi said.

Clearwire is in discussions to provide airwaves to other carriers, Clearwire CEO Erik Prusch said in a recent interview.

“Spectrum deficiency really gets large in 2013-2014,” Prusch said. “We are talking to a lot of players, anybody who’s in need of it.” He declined to identify other carriers.

Another option is for carriers to raise consumer prices, discouraging network use. Tim Horan, an analyst at Oppenheimer & Co., expects U.S. service providers to raise prices on wireless contracts at a faster pace in the coming years.

“They are going to either charge for usage more or increase the minimum amount” paid for a data plan, Horan said in an interview. AT&T in January increased the cost of its cheapest smartphone data plan for new customers to $20 a month, from $15. Several carriers moved away from unlimited data plans to limited plans last year.

For some carriers, technological innovation may do most to avert the capacity crunch, said Reed Hundt, a former chairman of the Federal Communications Commission.

“God only made a certain amount of spectrum,” Hundt said in an interview. “To go beyond that you have to have a different architectural solution, and that’s where micro cells come in.”

With assistance from Ian King, Ari Levy and Tom Giles in San Francisco.

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Stupid Corporate Moves

Mistakes are one thing, but when you simply could have known better, let’s call it what it is—stupid. Many business problems today are not the result of software bugs or other factors outside our control. They are self-inflicted, the result of “mind-bugs” in the critical internal processes that occur in the space between our ears. The pervasiveness of mind-bugs in corporate decisions is the product of human nature—hard-wired and highly resistant to feedback. Mind-bugs can affect fact gathering, analysis, insights, judgments, and decisions—and, as you’ll see from the examples below, they increase risk accordingly. By the way, this is the short list. It doesn’t include now classic missteps such as Neflix reversing its decision to separate its DVD rental and streaming business; the subprime mortgage crisis; and the BP Gulf of Mexico oil spill, to cite just a few.

Shortcoming Denial at Toyota
Automaker Toyota’s slow awakening to an accelerator problem resulted in congressional hearings and incalculable damage to its once stellar reputation. It went from discounting early reports of problems to overconfidently announcing diagnoses and insufficient fixes. Akio Toyoda, the chief executive of Toyota, issued the following statement: “Quite frankly, I fear the pace at which we have grown may have been too quick … priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before.” It sounds like Toyota was infected with both data rejection and informed leader fallacy mind-bugs.

Hewlett-Packard: Were Palm and the TouchPad a Blind Investment?
After buying Palm for $1.2 billion in 2010 and announcing the TouchPad in early 2011, HP killed these products six months later. On an earnings call, the CFO said, “To make this investment a financial success would require significant investments over the next one to two years, creating risk without clear returns.” Shouldn’t HP have known this market would require an investment beyond six months? One mind-bug HP likely had is competency blindness. It seemed to believe unreasonably that it could pull off a win in six short months.

Amazon Assumes Your Books Can Be Removed
Amazon discovered that a third party put 1984 and Animal Farm for sale on Amazon.com without the rights. Amazon deleted the files from its website and from Kindle customer devices with a refund but without prior disclosure. Shouldn’t Amazon have known that people would get upset? CEO Jeff Bezos apologized by saying, “Our ‘solution’ to the problem was stupid, thoughtless, and painfully out of line with our principles.” Amazon employees failed to challenge their assumptions—a deadly mind-bug.

Borders Books Rejects Data It Is Dying—and It Dies
For a decade, Borders’ market share had been almost static while Amazon experienced double-digit growth. Borders even outsourced its website to its competitor Amazon. Should Borders have recognized that a permanent 15 percent cut in revenue from store sales would greatly affect margins and operations? Yes, the evidence was there for a decade. There is no question that a disruptive technology is a hard thing to fight, but Borders fell victim to two mind-bugs: a) It rejected data that showed this outcome was possible; and b) it stuck to the status quo.

Did Cisco Lose Its Flippin’ Mind?
Cisco bought the Flip video camera maker in 2009 and shut it down two years later. Flip’s revenue was less than 1 percent of Cisco’s $40-plus billion in sales. Should Cisco have known that competing with existing camera makers and smartphone devices was going to require substantial, ongoing investment? Should it have chosen to spend money on an acquisition that was more strategically aligned? It is quite possible that Cisco had the conforming error mind-bug—subconsciously conforming to the thinking of the group. Somehow, it became enamored with Flip.

Larry J. Bloom is the author of The Cure for Corporate Stupidity: Avoid the Mind-Bugs that Cause Smart People to Make Bad Decisions, adviser to several business leaders, a board member, and an owner of a startup media and software company that promotes better thinking. For more information, please visit http://curecorporatestupidity.com/

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Slave Receipt, Caddy Lead $500 Million African American Museum

(For more Bloomberg Muse, click on MUSE .)

Feb. 21 (Bloomberg) -- An ordinary sales slip consigning a young woman to slavery is among the chilling items that will be displayed at the National Museum of African American History and Culture.

The $500 million branch of the Smithsonian in Washington breaks ground tomorrow for an opening in the autumn of 2015 that will add an ambiguous exclamation to the imposing line of culture palaces along the Mall.

A rendering of the museum’s design reveals it to be too polite to capture the tragic and redemptive African-American experience. Yet I can feel an exuberant Africanness struggling to escape the civic blandness imposed by fundraising, watchdog groups and design review that are part of building on America’s most sacred ground.

Athletically sloping columns hoist tiers of bronze metalwork above the National Mall. David Adjaye, the project’s chief designer, says those sprouting bronze metal bands derive from Yoruba motifs. The building captures a sensibility found in textiles and art throughout West Africa, where the chief slave- trading ports were.

London-based Adjaye is working with the insightful architect Philip Freelon, of Durham, North Carolina. (The team includes architecture firms Davis Brody Bond and SmithGroup.)

As you approach the museum, the apparently solid bronze surface is revealed as a delicate screen made from a high-tech composite of concrete and bronze that softens the building’s bulk. Its patterns energetically update the ornamental ironwork screens that veiled porches in 19th-century New Orleans, where many of the artisans were African-American.

On the Porch

The museum’s Mall-facing south side welcomes visitors with a broad veranda -- another image drawn from collective memory. Even the poorest could take refuge from the heat of summer on a porch where family life was carried on.

Fronted by a cooling pond, the veranda will beckon visitors trudging the walkways from the nearby Washington Monument. The location is extraordinary -- next to the Smithsonian National Museum of Natural History, where the mall opens to the broad green cross-axis that leads from the White House and flows around the monument to the picturesque tidal basin.

The ground floor is given over to a glass-wrapped public room, a convivial gathering and event space with a ceiling from which hangs a forest of wood boards; these conceal lighting and projection screens. The convex ceiling rises highest at the edges to call attention to views of the White House and the Lincoln Memorial. No other Washington museum takes in this extraordinary setting.

In the Basement

In basement galleries, museum director Lonnie Bunch links black experience to the full sweep of American events, from slavery to the election of Barack Obama. The museum will display a French Croix de Guerre earned by a World War I “Harlem Hellfighter,” who was permitted to fight for the U.S. only under the French.

You’ll walk through a comfortable rail car reserved for whites, swing open a pair of doors and find bare benches where blacks were segregated.

“I am not creating a building by, and about, and for African Americans,” said Bunch. “We’re helping people understand American ideas of freedom and resiliency.”

The history galleries culminate in a contemplative memorial room, where water spills down from a ground-level oculus above.

Two upper-level exhibition floors focus on black contributions in music, sports and fine arts. You’ll find Chuck Berry’s guitar and Cadillac.

Out the Window

Adjaye has cut angled windows into the mesh exterior. One aims at the domed pavilion that commemorates the slave-owning Thomas Jefferson. Another frames the Lincoln Memorial, where the Rev. Martin Luther King. Jr. delivered his famous “I Had a Dream” speech.

Visitors can truly comprehend the power of King’s oratory by imagining the vast space in front of Lincoln’s statue filled with thousands of listeners.

(James S. Russell writes on architecture for Muse, the arts and culture section of Bloomberg News. He is the author of “The Agile City.” The opinions expressed are his own.)

--Editors: Jeffrey Burke, Lili Rosboch.

To contact the writer of this column: James S. Russell in New York at jamesrussell@earthlink.net. web.me.com/jscanlonrussell

To contact the editor responsible for this column: Manuela Hoelterhoff at mhoelterhoff@bloomberg.net.

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How to Get a Permit for Your Driverless Car

About a year ago, Bruce Breslow, the newly appointed director of Nevada’s Department of Motor Vehicles, was invited to Mountain View, Calif., to test one of Google’s driverless cars. “I sat in the back seat first, looking at the laptop that shows what the vehicle is seeing,” he says. “My apprehension disappeared after about five seconds. Once I felt confident that the car could see better than I could, they allowed me to get behind the wheel.”

Now Nevada has become the first state to allow driverless cars to apply for their own drivers’ licenses. The rules, which go into effect March 1, will make it possible for companies such as Google (GOOG) (whose lobbyist arranged Breslow’s trip) and Mercedes-Benz (DAI) and maybe even General Motors (GM) to test their robot cars on Nevada’s 26,000 miles of road. “There are two ways to bring amazing technology to market: to seek forgiveness and to seek permission,” says Steve Jurvetson, managing director at Draper, Fisher & Jurvetson and another one of those who’ve been in Google’s autonomous vehicles. “This gives Google and everyone else permission. And Nevada is the state to go to when you want to do things on the edge.”

To his point: The Nevada legislature gave the DMV just nine months to come up with the requirements and put them into effect. Breslow expects at least one company, which he wouldn’t name but which isn’t hard to guess, to apply right away. The companies have to prove to the DMV that the cars have already driven 10,000 miles. That makes sense in terms of safety but also seems to favor Google, which has logged some 200,000 miles in California. Other than that, the cars have to do what every teenager applying for a learner’s permit can. To operate on a state highway, the vehicle has to be able to manage a 75-mile-per-hour speed limit while looking out for cows. On the Las Vegas strip, it has to be able to avoid pedestrians, construction, and debris of all kinds.

Just to be sure, two trained drivers have to be in every car, one of them in the front seat prepared to take back control. And the DMV requires the cars to have a separate data recorder to collect information in case of a crash. “If the car is programmed properly, it shouldn’t cause an accident,” says Breslow. “But it’s possible it could still get into one.”

An application costs only $100, but companies have to put up a cash bond of anywhere from $1 million to $3 million, depending on how many cars they want to put on the road. There will be no “Student Driver” banner to let others know no one’s behind the wheel. The big clue will be the license plate, which will be dark red. Instead of the Nevada sunset over a snow-covered mountain, the logo will be one Breslow designed himself.

Sometime in the future, which Breslow says could be as soon as three years from now, the cars could get full licenses. They would be green, a color that to Breslow indicates “the future is here.” Those in the car would be allowed to text or talk on the phone, but if they’re tipsy they still can’t get behind the wheel. “If you’re in the car, you need to be able to take over,” says Breslow. “For now, it’s a partnership between the person and the machine.”

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Book Review: <em>The Conundrum</em> by David Owen

Editor's Rating: A New Yorker writer catalogs the parodoxes of living green, including why driving a Prius may just make things worse

The Conundrum:
How Scientific Innovation,
Increased Efficiency, and
Good Intentions Can Make
Our Energy and Climate Problems Worse
By David Owen
Riverhead Books; 261 pp; $14

Nothing singes the psyche of an eco-conscious do-gooder quite like being rebuked by another eco-conscious do-gooder. In The Conundrum, which catalogs the hypocrisies and paradoxes of living green, the scolder is David Owen. His progressive bona fides are robust. In the 1970s, Owen moved with his new wife to Manhattan, a place he has described as a “utopian environmentalist community” because without a clothes dryer, a car, or even a lawn, their ecological footprint was minuscule. He writes frequently about the environment for the New Yorker, once arguing in its pages that an upside to the global economic crisis was that it decreased emissions. That he also writes for Golf Digest is confusing if not disqualifying.

The tough-love upbraiding in The Conundrum seems mostly directed at hybrid-driving, energy- efficient-lightbulb-screwing locavores convinced that such practices will set the world on a path to green salvation. Owen’s book brings deflating news: Most supposedly sustainable products and eco-living strategies are, he writes, “irrelevant or make the real problems worse.”

Owen’s logic is backed up by an economic principle known as the “rebound effect”: Advances in energy efficiency lower the cost of a given activity, which causes people to engage in that activity more, canceling out not only savings but also environmental benefits. Owen keeps a 1940s aluminum beer can on his desk. It weighs five times more than today’s can of Bud Light. Efficiency gains made beer cans cheaper to produce, transport, and dispose of. The cost of popping a brew declined so that more people can do it, using up more aluminum, not less.

It doesn’t take long for him to establish the Prius Fallacy: “a belief that switching to an ostensibly more efficient travel mode turns mobility itself into an environmental positive.” Owen cites statistics showing that as government officials have moved to increase automobile fuel efficiency, our gas consumption has gone up, not down. We simply drive more miles as a species. He also disses HOV lanes, traffic-control systems, and even smartphone apps for finding a parking spot as “counterproductive from an environmental point of view because they make drivers even happier with cars than they were already.”

The Conundrum is littered with other dilemmas. Air conditioners are more efficient and cheap; ergo, more homes are now air-conditioned. The more affordable lightbulbs get, the more they’re left on. Airplanes are more energy-efficient and faster than at any point in history, and therefore cheaper to fly longer distances. Owen is unafraid of questioning even that most sacred principle of guilt-free green living: eating local, organic food. Well-meaning consumers will drive minivans long distances to buy small quantities of organic food at urban farmers markets supplied by growers who make the schlep in trucks loaded at farms well beyond the suburbs. “If all the world’s groceries traveled from farm to fork in minivans, two bags at a time, we’d have exhausted many of the world’s resources long ago,” the author writes.

Owen’s short book is a contrarian page-turner and can be read in a few hours, making its ecological impact small. Even the most conscientious Whole Foods shopper will see his supposedly small footprint grow. Problems arise as Owen’s book progresses from description to prescription; the solutions offered, while ingenious, are unrealistic.

A stay-the-course, hope-for-the-best strategy is ludicrous to Owen. Instead, he’d like humans to live closer together and holds up New York City as a model. The metropolis is dense, living spaces are restricted, public transportation is (mostly) convenient, and car ownership is low. More important, he says, populations and governments should embrace strategies that effectively force reduced consumption of the planet’s natural resources. He would like us, metaphorically and perhaps actually, to drive Model T’s.

“If the only motor vehicles available today were 1920 Model T’s,” Owen writes, “how many miles do you think you’d drive each year, and how far do you think you’d live from work?” He wants to impose energy frugality by increasing fuel taxes and capping consumption. “Efficiency initiatives make no sense as an environmental strategy,” he writes, “unless they’re preceded—and more than negated—by measures that force major cuts in total energy use.”

Owen is right: The planet would be better off if we cut highway lanes and jacked up electricity rates. But he fails to answer the real conundrum: how to reverse humanity’s relentless pursuit of comfort.

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London Landlords Facing Rents of Zero Turn Offices to Condos

More people will be making their homes among the banks and insurance companies of central London as a shrinking financial industry and the prospect of leasing out buildings for free prompts landlords to convert offices into luxury apartments.

Developers including Axa Real Estate Investment Managers Ltd., Berkeley Group Holdings Plc (BKG) and Heron International Inc. also plan to build homes in the heart of Britain’s financial services industry, known as the Square Mile, after purchasing obsolete commercial buildings in the area.

“The fringes of the City are struggling in terms of letting secondhand buildings,” said Anthony Duggan, head of real estate research at Deloitte LLP. “There will be a number of developments looking at alternative uses.”

London has seen demand for offices slump after banks cut more jobs in the U.K. than in any other country last year. Rents in the City of London will fall 4 percent this year, compared with earlier predictions of a 6.1 percent increase, JPMorgan Chase & Co. said in a Jan. 11 note. Values will drop 7.3 percent in 2012, the bank said.

Axa is seeking older offices or partly developed “brownfield” sites on the fringes of the financial district to turn into housing. Berkeley plans to renovate a derelict office property near Moorgate into 90 residences. Heron is building a 36-story residential tower near the Barbican, and Hammerson plans to develop 253 apartments near Liverpool Street station.

Employment in the Square Mile dropped 8.5 percent last year and it will remain below 1998 levels until 2014, according to the Centre for Economics & Business Research Ltd. The cutbacks and the amount of aging space give City tenants greater bargaining power on rents with owners of older, empty office blocks.

About 54 percent of office space in the City of London and on its fringes is more than 15 years old, meaning it can no longer be marketed as “prime,” according to research from DTZ Holdings Plc (DDTZ).

Some landlords may choose to lease space for nothing to avoid a charge on empty buildings, Michael Marx, Chief Executive Officer of Development Securities Plc, said in an interview.

“I’m feeling more and more robust about that forecast as time goes past,” he said.

Since April 2008, the U.K. government has required office property owners to pay business taxes, equal to those usually owed by tenants, on buildings that remain vacant for more than three months.

Axa Real Estate plans to build homes and offices that will be worth at as much as 100 million pounds ($158 million) when completed Harry Badham, U.K. director of development, said in an interview. The company, which has 40 billion euros ($52.4 billion) of property under management, is looking at buildings and sites in Clerkenwell, Farringdon and Shoreditch.

“Residential conversion of older buildings can be an obvious route to value,” Badham said. Purchases would be by its Development Venture III fund, which has raised 588.5 million euros to date to buy property across Europe, he said.

A separate Axa Real Estate fund is developing an office building at 1 St Paul’s, close to the cathedral, that will include 10,000 square feet (929 square meters) of homes as well as 60,000 square feet of offices and 20,000 square feet of retail, the insurer said in a statement.

“There’s more value in going residential,” said Badham, who said home values were 10 percent to 15 percent higher at St. Paul’s than that for offices. Axa Real Estate may retain flats and lease them to a serviced apartment owner.

Home prices in the City of London typically range from 650 pounds to 1,350 pounds a square foot, Neil Chegwidden, residential research director at Jones Lang LaSalle Inc., said in October. Knightsbridge has the highest average price per square foot in London at 2,007 pounds, followed by Belgravia at 1,982 pounds and Mayfair at 1,960 pounds, broker Savills Plc said in an October report.

The average two-bedroom apartment in the U.K. is about 800 square feet (74.3 square meters), according to 2008 data from Nationwide Building Society. That means a property that size in the City of London is worth 520,000 pounds to 1.08 million pounds based on Jones Lang’s valuations.

Luxury home prices in central London have increased for 14 consecutive months through December, Knight Frank LLP said Jan. 9, making conversion to homes more attractive to owners of empty buildings.

Berkeley, the U.K.’s largest homebuilder by market value, won approval to renovate Roman House, a derelict office near Moorgate, into a 90-apartment building in December. It’s seeking more empty structures or brownfield land in the City to convert into homes, Berkeley (Capital) Plc managing director Piers Clanford, said in an interview.

“There’s interest from the City for a pied a terre and somewhere to stay during the week,” Clanford said. “People work long hours and that’s a target market us.”

Renovating Roman House, which contains a protected Roman wall, rather than building from scratch, saved Berkeley as much as six months in construction time, he said. For other developers, sites will need to be demolished and rebuilt because their layout is unsuitable for homes. When refurbishment costs reach about 160 pounds a square foot, they equal the cost of developing a site, said Iain Parker, head of European offices at real-estate adviser Davis Langdon.

“The environment is almost more suitable for refurbishment and reinvention,” Parker said. “It’s almost like all of the moons are aligning in terms of cost, money being tight, the sustainability agenda” and planning.

Heron demolished a fire station when it tore down the Barbican Centre’s service building to develop The Heron, a 36- story residential tower. The project is less than one kilometer (0.62 miles) from Berkeley’s development and Heron is seeking what it says will be the highest home prices ever charged in the City at about 1,600 pounds a square foot.

New residential developments will deliver better quality than renovating old offices into homes, though winning planning approval can be difficult, said Paul Cheshire, professor of economic geography at the London School of Economics.

“You really should be building houses in the first place because what you’re going to end up with is second-class houses or apartments,” by converting offices, Cheshire said in an interview at the university. “But the planning system may make it very difficult.”

The fringe of the Square Mile is more suitable for residential conversion than the center because housing would “sterilize” the surrounding area, said Ken Shuttleworth of Make Architects. Residents would have the right to impede future development if it blocks out sunlight, and that would reduce the value of neighboring buildings, he said.

Brookfield Office Properties Inc., lower Manhattan’s biggest office landlord, is also looking to buy obsolete City office blocks for conversion to flats, said Martin Jepson, senior vice president for development and investment at the New York-based company.

“Redundant offices are the natural provider of future residential land,” said Ian Marris, partner of London residential development at Knight Frank LLP, by phone. “There’s an acute shortage of supply of new-build homes across all of central London.”

From 2007 through 2011, landlords began turning 19 commercial buildings in the Square Mile into homes, according to research by Savills and London Residential Research. Of those, 14 refurbishments were completed and all the apartments in them have been sold, Savills said. Two of the five projects still under construction are new build.

“The land registry doesn’t report residential index figures for the City because it’s so small,” Lucian Cook, director of residential research said in an interview today. “Scarcity is one of the biggest drivers of price in prime central London.”

The City of London, which has restricted the majority of homes to the Barbican area, had about 11,677 residents in the middle of 2010, according to the Office for National Statistics. That’s likely to increase, according to David Wootton, the lord mayor of London.

“We would like to have more residences,” Wootton said in an interview. “It’s a matter of balance and making sure that small pockets of residential don’t disrupt the business cluster.”

A similar phenomenon has taken place in lower Manhattan, where almost 16 million square feet of space, mostly in older buildings deemed obsolete for offices, have been or are slated to be converted to housing between 1995 and 2013, according to the Alliance for Downtown New York, an organization representing area businesses.

“The goal in lower Manhattan has always been to keep it a globally competitive business address,” said Elizabeth Berger, the alliance president. Beginning in the 1990s, “you saw both the conversion of obsolete office space and the creation of new residential, and the community has grown exponentially. I’m a lower Manhattan resident for 30 years, and when I moved here, about 10,000 people lived below Chambers Street,” she said.

The most recent population estimate is 56,000, according to the alliance.

Hammerson Plc (HMSO), the U.K.’s third-largest publicly traded developer, delayed plans to develop an office block at Principal Place on the edge of the City after talks to lease part of the building to CMS Cameron McKenna LLP prior to construction failed, according to a Jan. 16 statement.

The project was canceled to avoid exposing shareholders “to excessive risk,” Hammerson Chief Executive Officer David Atkins said in the statement.

Hammerson still plans to develop a residential tower with 253 apartments at the site near Liverpool Street rail station and is in talks with companies to develop the tower in a joint venture. One of the companies is Manhattan Loft Corp., its chairman Harry Handelsman said in an interview.

“It’s a sexy opportunity,” said Handelsman, who masterminded the conversion of a disused building at Kings Cross railway into a luxury hotel and residences. “Towers are still a bit of a novelty in London. It’s a way of sustaining growth of a city. It needs to adapt to the high-rise model.”

To contact the reporters on this story: Neil Callanan in London at ncallanan@bloomberg.net; Christopher Spillane in London at cspillane3@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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How to Drink Your Coffee: There's an App for That

I am an irregular coffee drinker. I don’t need it to get up in the morning, but I do need it after a rough night or a heavy lunch. I am also, though, an irregular sleeper. Some nights I find myself wide awake at 3 a.m. Could it have been that cup of coffee I had after lunch? Should I have had tea instead? Would that have been enough to get me through the afternoon?

Well, now, as they say, there’s an app for that: Caffeine Zone, based on research on the “pharmacokinetics of caffeine.” You enter how much coffee or tea you’ve had, when you had it, and how quickly you drank it, then the app sends you an alert when you might need another cup to keep you sharp. It also warns you when the coffee you’re about to have might keep you up at night. On a graph, it maps the amount of caffeine in your body against color-coded zones corresponding to the compound’s metabolic effects.

According to Frank Ritter, the Penn State cognitive scientist who thought up the app, one of the lessons it teaches is that, like many other daily drugs—antibiotics, for example, or nicotine—caffeine is most effective when intake is front-loaded. The first coffee of the day should be the biggest, and drunk the fastest, for a big bump, and the rest of the day’s doses should be smaller and ingested more slowly. You want to stay in that optimum range. “You don’t want to have these big pulses of a whole cup,” he emphasizes. “I say cold coffee is good.” It’s trajectory management: Launch rocket, achieve desired altitude, maintain orbit with tweaks.

According to my Caffeine Zone app, as I write these words 35 minutes after my first sip of Starbucks (SBUX) house blend, I have just entered the forest-green band of optimum cognition. If I don’t re-caffeinate within the hour, I will drop out of the zone. I inform Caffeine Zone 45 minutes later that I am about to redose with a large 16 oz. coffee. The app warns me this will actually launch me past the upper boundary of the “Max Optimal” zone (200 mg of caffeine per kilogram of body weight). It will also keep me wired past 11:30 p.m., the time I entered as my bedtime.

The problem with the way many coffee-drinkers manage their intake, Ritter says, is they don’t think cumulatively. A small coffee at 2 p.m. isn’t going to keep most people up at night, but it will if there’s still caffeine coursing through the system from an earlier couple of cups. Ritter himself thinks nothing of ordering a two-thirds decaf cup of coffee, even a three-quarters decaf cup. “It’s hard for us to do the math because it requires a lot of exponential calculations, but your body does it,” he says. So does Caffeine Zone.

I opt instead for a Cherry Coke with lunch. There is no button for caffeinated soda (there is, strangely, a button for caffeinated gum), but there is a custom feature that allows me to enter Cherry Coke’s dose information and my intake speed (usually the time it takes me to walk from the soda machine upstairs to my desk, which I round up to 5 minutes). My Coke’s measly 34 mg of caffeine, it turns out, will barely keep me above the 150 mg/kg lower bound of the optimum zone. So I add a medium cup of tea after lunch, which keeps me in the optimum zone for much of the afternoon but will, Caffeine Zone predicts, keep me up for an extra half-hour tonight. That’s O.K., 11:30 was sort of an aspirational bedtime anyway.

Of course, the next step might be to connect the iPhone to a caffeine drip and just have it pump a few dozen milligrams of caffeine directly into a vein when I begin to flag. Or maybe I could rig the app to sync with my workstation and track my typing speed, dosing me when I slow, or when it notices I have spent more than five minutes on YouTube. Where do these strange, idle thoughts come from? My iPhone chimes as Caffeine Zone warns me that I have dropped out of the optimum zone. Time for that cup of tea.

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George Takei's Facebook Masterclass

The brightest Facebook star of 2012 hasn’t been the new timeline, a Mafia assassination game, or even the company’s initial public offering. It’s 74-year-old actor, gay rights activist, and sci-fi icon George Takei, best known for playing the cool headed, deep-voiced Mr. Sulu on the original Star Trek series. After launching his Facebook page last October, Takei has gained more than a million followers and his short, visual, fan-generated posts—which range from dogs dressed as Yoda to jabs at Rick Santorum—have rapidly spread to the news feeds of many millions more Facebook users.

Bloomberg Businessweek recently tapped Takei to school us in the art of Facebook curation.

Tell us a little about the growth of your page.

I began with Twitter in January of 2011 but moved to Facebook in October of 2011, as it gave me more of a way to interact and share ideas and laughter as a community. The site really gained traction after the first of the year, when we hit some kind of critical mass of people sharing and reposting, so that all “friends of friends” started joining in. Things really took off after I went on strike for a day [January 17th] to protest SOPA [the Stop Online Piracy Act proposed in Congress]. I think fans realized that the page had become a part of their daily lives, and so they were more eager than ever to participate.

What do you look for when you’re considering a post?

True to my base, I like to find fan-generated images that are in the world of science fiction, especially Star Trek or Star Wars—both are franchises that I have worked in. One of the most popular posts ever was a picture of Nichelle Nichols [who played Lt. Urura on Star Trek] and myself on the bridge of the Enterprise, and we had a fan caption contest, with the fans voting for the three finalists. The winner had Uhura saying, “the captain kisses like a girl.” And I was there saying, “I know.”

I also have a strong LGBT following, so images that have a gay spin to them are common. We’re split about 50/50 men and women, so posts that poke fun at either or both sexes are popular. On top of these, posts that make you think—or speak to the politics of the day or even of the moment—tend to be shared and commented on frequently.

How many submissions do you get per day—and how many, on average, do you post?

I receive hundreds of posts on the wall and e-mails from fans and unfortunately, don’t have the time to look at them all. But when I do, it’s not hard to find very funny material to share. I’ll share six items on a good day.

You’ve managed to capture a fairly large swath of users from different backgrounds. What’s the key to Facebook posts with wide appeal?

I think the fans understand that I am an equal-opportunity Facebooker. That is, everyone needs to be able to poke fun at themselves and not be too serious. We aren’t out to hurt anyone, just laugh together. Things that bring a smile, even if they are a bit naughty or edgy, are my favorites. Like the recent Gay Terrorist picture, with a fine-legged Arab fellow in heels, a full beard and a white dress, named Yomama Been Shoppin. I knew it was wrong, but I laughed anyway and thought: “If I can laugh at this, others should be able to as well.” And I was right.

The intros to each posting are short, succinct, and witty. What are you looking for when you write them? They’re almost Haiku-like.

I’ve had the fortune in my career of working with terrific writers for television, film, and stage, across all genres. Perhaps I am channeling them. The English language is a beautiful, malleable, and glorious tool when used effectively, so I like to put a little more effort into each post.

As the page’s followers have snowballed, how has this affected your posting, or the quality of material?

I like to think not. Certainly the material is shared more often, so I try to be careful to post higher-quality images, so that as many people on Facebook can enjoy them as possible. And I try to proofread more carefully—there’s nothing worse than a typo that 100,000 people point out to you. I also reduced the number of times per day I interact with the site, so that I can give each post and as many of the comments within them their due.

You’re a political figure on many issues, but the page seldom has overt political postings, and politics are more often subtly referenced. [For example, a cartoon with
marshmallow peeps standing around a plate of Fig Newtons, holding signs that say "God Hates Figs."] What place should politics have on a Facebook page?

There are fans from all political spectrums who follow the page, and I wouldn’t want it to become some large bridge for “trolls” to dwell under. Finding material that unites people in laughter is better than standing on a soapbox to disseminate messages that divide. That said, when there is an issue that all of us of good conscience can get behind, irrespective of political affiliations—like same-sex marriage—I am happy to pontificate.

Facebook has filed for an IPO and is valued somewhere close to $100 Billion. Given the spread of your page and the quantity of Facebook users who are forwarding and reposting your posts—and that the Telegraph recently valued each Facebook user at approximately $125—what would you value the page at?

There are certainly more important things than money, and I’m the last person to be able to answer that question. On occasion, I will ask the fans for support of a charity or project, and if they respond with contributions, that’s good enough for me. We were able to help a young documentary maker, for example, get funding for his Second Class Citizens project on gay rights. And we’re doing a plug for The Old Globe Theater and the Japanese American National Museum, both of which are favorite nonprofits of mine.

How has the background of your existing fan base helped this page grow so rapidly?

It appears that sci-fi fans tend to be quite avid Facebookers, so that core has really helped us grow initially. They also like to communicate with one another on the page, since it reminds them that we’re all a little weird, and finding other weird people with the same weird sense of humor is quite comforting. That’s one of the great aspects of Facebook: It can bring people together—in this case to laugh—without forcing you to sit right next to someone else. I’m not sure it’s what Mark Zuckerberg had in mind initially, but now look what’s happened. I’m having the time of my life at nearly 75 years old. But just imagine when all the 20- and 30-somethings today are still on Facebook as grandparents, poking each other and starting Facebook fights. How very droll!

Sax is a Bloomberg Businessweek contributor.

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Fracking’s Toll on Pets, Livestock Chills Farmers: Commentary

Smelling gas one morning, a southern Pennsylvania farmer almost passed out when he went outside to check on his bellowing cows.

One of the animals did keel over, kicking its feet in spasms. A couple of days later, a calf was fighting for its life, the farmer said. It died.

Something awful is happening over the Marcellus Shale, the vast geological formation in eastern North America where energy companies are looking for natural gas.

Hydraulic fracturing, or fracking, a process for extracting gas by injecting high volumes of water and chemicals into deep wells, has sparked complaints about ruined landscapes and fouled groundwater. Increasingly there is evidence, mostly anecdotal, that animals are suffering.

A new study by veterinarian Michelle Bamberger and Robert Oswald, a professor of veterinary medicine at Cornell University, chronicles case studies of dozens of farmers and pet owners in six states over the Marcellus Shale.

Their findings, published in “New Solutions: A Journal of Environmental and Occupational Health Policy,” are a harrowing account of sudden deaths of cattle, as well as reproductive and neurological problems in horses, cats, dogs and other animals.

The Pennsylvania farmers I spoke with have lost cows, calves, a horse, a couple dozen chickens. Many of the animals succumb in the same way: seizure-like symptoms, gasping for breath and a quick wasting away. A Rottweiler and a Dalmatian also fell ill and died.

These farmers are getting out of the beef business, in part over concern that their animals will become delivery systems for contaminants.

An organic farmer from southeast Ohio told me he has abandoned his cash crop, ginseng, for now, concerned that contaminants would enter his product. He began noticing changes around his 20-acre property in 2007, when a fracking operation began dumping wastewater nearby. He lost quite a few deer that were drawn to the brine and antifreeze in the fluid.

Energy representatives dismiss the veterinarians’ study. They say that health indicators have actually improved in areas with shale development.

“The paper is little more than a collection of personal testimonials that cannot be independently assessed or verified,” says Steve Everley, a spokesman for industry group Energy in Depth. “The paper is full of bold assertions about oil and gas development, but empty of any facts or scientific evidence to support those opinions.”

Establishing a causal link between fracking and specific health threats is tricky. Energy companies are not required to disclose the composition of fracking fluids for proprietary reasons, so they don’t.

Like a lot of people who live near fracking operations, many of the farmers I interviewed are in litigation with an energy company and wish to remain anonymous.

“We don’t know what the chemicals are in a lot of these cases,” says Bamberger. “It gets very frustrating when you start saying: What was in the tissue? What killed these animals exactly?”

In 2010, the Pennsylvania Department of Agriculture quarantined 28 head of cattle after they drank wastewater from a fracking site in Tioga County. The fear was that a radioactive contaminant in the water, strontium, would end up in beef.

In December 2011, the Environmental Protection Agency linked water pollution to fracking for the first time, after examining contaminated water in central Wyoming.

Last month the federal agency announced it would test water in dozens of homes around Dimock, Pennsylvania, a hotbed of fracking activity. It also told New York it would need to improve safeguards for drinking water before tapping into the Marcellus Shale.

New York placed a moratorium on fracking in 2010 so it could revise the rules governing the practice. Bamberger and Oswald are among those who contributed to the tens of thousands of public comments on the draft regulations, which were closed last month.

Bamberger submitted the published study; Oswald contributed 15 pages of his own to denounce the inadequacy of the proposed rules.

“There are so many flaws in the document,” he says. “It is unlikely to be able to protect us from the industrialization of our landscape and hydraulic fracturing.”

Now, New York’s Department of Environmental Conservation will review comments and revise regulations as necessary. It seems inevitable that the state will be fracking eventually, so the question is whether the industry can proceed safely -- for humans and animals.

New Yorkers should listen to the stories of farmers, hunters and vets before making the same fracking mistakes that are being made elsewhere.

(Mike Di Paola writes on preservation and the environment for Muse, the arts and culture section of Bloomberg News. The opinions expressed are his own.)

To contact the writer of this column: Mike Di Paola at mdipaola@nyc.rr.com.

To contact the editor responsible for this story: Manuela Hoelterhoff in New York at mhoelterhoff@bloomberg.net.

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Rush to Open Sept. 11 Memorial Cost $500 Million, Agency Says

Feb. 9 (Bloomberg) -- Accelerating and redesigning World Trade Center projects so the Sept. 11 memorial could open by the 10th anniversary of the attacks cost about $500 million, a Port Authority of New York and New Jersey commissioner said.

The mass-transit terminal and subsurface infrastructure had to be “resequenced and accelerated” to meet the 2011 deadline, Vice Chairman Scott Rechler said in an interview today. The cost of those two projects, part of the almost $15 billion redevelopment of the Lower Manhattan site, has risen by $977 million since November 2008, according to an audit released Feb. 7. A majority of that increase was due to the rush to complete the memorial garden, Rechler said.

The specifications for the transit hub, designed by Spanish architect Santiago Calatrava, were only 70 percent complete when the project was bid, Rechler said. The decision to move ahead with incomplete plans was part of the “political and patriotic mission that was put in front of the Port Authority,” he said.

“At 70 percent complete, you know you’re going to have cost overruns,” he said. “This is one of the most complex construction jobs in the country, if not the world.”

Rechler and authority Chairman David Samson today spoke to reporters before a board meeting, two days after the release of the audit. Ordered by New York Governor Andrew Cuomo and New Jersey Governor Chris Christie in August, the financial review showed the entire project could cost as much as $14.8 billion, up from $11 billion estimated in 2008.

‘Challenged and Dysfunctional’

The audit called the agency, which oversees the metropolitan area’s airports, shipping terminals and interstate bridges and tunnels, “a challenged and dysfunctional organization” with $19.5 billion in debt and growing.

New York City Mayor Michael Bloomberg yesterday said not opening the memorial by the anniversary would have been an “embarrassment around the world,” and that “the Port Authority had to deliver.”

Most of the increase to $14.8 billion isn’t due to cost overruns, Samson said. The reason is that the authority took on jobs, including the memorial and subway and security improvements that are supposed to be paid for by third parties, including the city, the Metropolitan Transportation Authority and the National Sept. 11 Memorial & Museum Foundation. The net cost to the authority rose by $1.7 billion to about $7.7 billion, the report said.

That $1.7 billion increase includes $537 million for the transit hub and $440 million for the infrastructure, the audit said.

The cost of 1 World Trade Center, the 1,776-foot tower slated for completion next year, was estimated in the audit to cost $3.9 billion, a 27 percent jump from the $3.1 billion estimate the authority made in 2008. Some of that is because the earlier projection didn’t include leasing commission and tenant fit-out costs, the commissioners said.

--Editor: Mark Schoifet, Mark Tannenbaum

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net

To contact the editors responsible for this story: Daniel Taub at dtaub@bloomberg.net; Mark Tannenbaum at mtannen@bloomberg.net

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"What We Want is More Innovation in America" He Said

Accelerating Trade-offs to Improve Your Customer Value and Innovation

The Logic Behind Developing Metrics For Innovation

Success in Innovative Leadership - Modeling Strategic Excellence

What is Social Innovation?

Excellent Outcomes of Product Innovation

Four Drivers of the Innovation Scorecard

Innovative Problem Solving Teams - Are You Getting the Results From Your Teams That You Need?

How To Build An Innovative Culture So You Can Leave Your Competition In The Dust

Getting Product Innovation Right

How To Resolve CEO's Strategic Concerns That May Preempt Open Innovation

Cats - The Nine Lives Of Innovation - Stephen C. Lundin Ph.D, With Jimmy Tan

Innovative Leadership Needs Innovation Strategy Models

So, How Does Innovation Work?

Knowledge Sharing the Key to Marketing Innovation

The Winners Approach To Sales And Marketing: How The Pros Use Incremental Innovation To Win

Innovation Management Ideas - A Key to Success in the Globalised World

Can We Learn to Innovate?

How to Nurture a New Innovation Idea

Innovation Workshops - Best Way to Drive 'Out-Of-The-Box Thinking' in Employees

Fuelling Growth Through Innovation

How to Manage an Innovation Process

Importance of Innovation and Creativity in Business

Core Innovation Strategy

5 Tips for New Innovative Businesses

Innovation Services: The Changing Definition of Innovation in Business

The Importance of an Innovation Business Process

Reasons As to Why Innovation Websites and Innovation Funnel Are Important for Your Business

Innovation Management Process: The Perfect Way to Exploit New Ideas Successfully

Cultivating Creativity and Innovation in a Modern Organization

5 Tips For Promoting Innovative Thinking

Creativity Innovation and Leadership in Fostering Innovation

Understanding Strategic Innovation

5 Tips on Innovation in Management Practices

At Procter & Gamble, the Innovation Well Runs Dry

For much of its history, Procter & Gamble (PG) didn’t just launch new products, it created new product categories, from the first mass-produced disposable diapers to Crest teeth-whitening kits. That’s one reason P&G has more than 1,000 Ph.D.’s among the 8,000 employees at its 26 innovation facilities around the world. “P&G is largely a branded science company,” says Larry Huston, former innovation officer at P&G who’s now managing director of 4inno, a consulting firm.

Lately, though, there’s been a dearth of pioneering brands emerging from the world’s largest consumer-products company. Spending on research and development in fiscal 2012 ended June 30 was $2.03 billion, or 2.4 percent of sales, the same as the prior year and down from 3 percent of sales in 2006. P&G’s most recent homegrown blockbusters—Swiffer cleaning devices, Crest Whitestrips, and Febreze odor fresheners—were all launched at least a decade ago. Says Peter Golder, a professor at the Tuck School of Business at Dartmouth College: “P&G is built on creating new categories, and innovation is in its DNA, but they need to rediscover it.”

Regaining its new-product mojo is crucial because P&G’s business strategy has long been to charge premium prices for cutting-edge products. A 150-oz. container of liquid Tide detergent is $18 at Target (TGT), for instance, 20 percent more than the retailer’s house brand. As rising commodity prices have increased the cost of most basic household products, cash-strapped customers may still be willing to pay more for true innovations but not necessarily for the kind of product extensions and embellishments P&G has turned to.

That’s created a challenge for Chief Executive Officer Bob McDonald, who has lowered profit forecasts three times since Jan. 1. He’s trying to cut $10 billion in costs by 2016 and reverse market-share declines in such key categories as U.S. detergents. McDonald is under pressure from activist investor William Ackman, who in July took a $1.8 billion stake in P&G and may seek management changes. Blockbusters have “dried up a bit,” acknowledges Bruce Brown, P&G’s chief technology officer. “We want to get back to more of that.”

McDonald earlier this year assembled a team of researchers, marketing managers, and senior executives from across the company to chart a bolder innovation course. The group spent 10 weeks analyzing P&G’s new-product pipeline and selecting the most promising ideas for development. But most won’t be ready for at least another year.

P&G’s 175-year history is filled with such consumer-product innovations as the first synthetic detergent (Dreft, in 1933), the first fluoride toothpaste (Crest, in 1955), and the first stackable potato chip (Pringle’s, which later dropped the apostrophe, in 1968). Researchers typically have leveraged technologies already used in P&G products to come up with entirely new ideas. For Crest Whitestrips, launched in 2002, they adapted bleaching methods from P&G’s laundry business, film technology from the food wrap business, and glue techniques from the paper business.

In recent years, however, the company’s product pipeline has been mainly focused on “reformulating, not inventing, products,” says Victoria Collin, an analyst at Atlantic Equities in London. Among these are new scents of Tide for Eastern European markets and Secret deodorant’s Natural Mineral line. As a result, analysts say P&G has lost customers in the U.S. and other developed countries, who’ve switched to cheaper products made by such rivals as Unilever, as well as store brands.

When former CEO A.G. Lafley took charge in 2000, he sought to increase the rate of product development by collaborating with outside partners who could help with everything from packaging to product design. Working with outsiders has enabled P&G to gain access to some important technologies, such as a wrinkle-reducing ingredient made by a French company, Sederma (CRDA), that’s used in its best-selling Olay Regenerist skin cream.

But Lafley also decentralized R&D, making business-unit heads responsible for developing new items. R&D chief Brown says that inadvertently slowed innovation by more closely tying research spending to immediate profit concerns. Between 2003 and 2008, the sales of new launches shrank by half. By the time McDonald became CEO in 2009, the number of what the company considered to be big product breakthroughs had fallen to an average of fewer than six per year as unit heads focused on short-term results and smaller inventions, says Brown.

McDonald, who has acknowledged that the company’s R&D has been “inadequate” in some product categories and regions, has now centralized 20 percent to 30 percent of P&G’s research efforts. He also named Jorge Mesquita, already chief of its pet care and snacks businesses, as head of P&G’s new business creation and innovation unit and given him responsibility for coordinating product launches.

One area of focus is beauty, where “we lost our way for a couple of years,” says Brown. That business, which includes deodorants, cosmetics, and hair care and made up 24 percent of P&G’s $83.7 billion in sales in fiscal 2012, has been lagging competitors such as L’Oreal (OR) in product launches. (L’Oreal says it rolls out about 500 a year.)

McDonald has said he hopes cost-cutting will free up more money for product development. Yet the squeeze has forced P&G to make tough choices even when it does introduce appealing products. One example: Spending to support a popular new Olay hair removal product last year pulled money from other products, “so the base business lost more than this new thing gained,” Brown says.

Meanwhile, Unilever says it can roll out 10 new products in 60 countries in the same time it once took to introduce them in just 10 countries. Recent new products include Clear anti-dandruff shampoo and a Rexona deodorant that uses proprietary Motionsense technology to activate the product as the wearer moves.

Kimberly-Clark (KMB), maker of Huggies diapers and Kleenex tissue, has opened research centers in South Korea and Colombia and increased R&D spending in the first half of this year by double-digits from the year before. “Our international business is growing so rapidly that the demand for innovation has increased,” Chief Financial Officer Mark Buthman says.

P&G still brings plenty of new products to market. SymphonyIRI’s New Product Pacesetters report, which tracks the top-selling non-food innovations, showed P&G with one-third of the top 25 last year. And the company over the years has acquired big brands, including the Olay and SK-II skin care lines and Gillette. Yet homegrown products remain the challenge. Says 4inno’s Huston: “You’ve got to be constantly creating innovation.”

The bottom line: P&G, with $84 billion in annual sales, made its name as a new-product whiz. But its biggest homegrown hits are at least a decade old.

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Kill Your Desk Chair—and Start Standing

Arise, office workers of the world! You have nothing to lose but your chairs. And even if they are of supple executive leather or high-tech Aeron mesh, those chairs are lethal. A raft of recent medical research has shown that the more time a person spends sitting every day, the more likely he or she is to suffer from heart disease, diabetes, obesity, cancer, and, worst of all, an early death. One recent study, from the Pennington Biomedical Research Center in Baton Rouge, La., followed 17,000 Canadians over 12 years and found that those who sat for most of the day were 54 percent more likely to die of heart attacks than those who didn’t. The findings have spawned a new diagnosis: “sitting disease.” And strikingly, even regular exercise and a healthy diet don’t protect you—sitting in a chair for eight hours after going to the gym and munching on tempeh is still sitting.

For those in nonsedentary lines of work these findings are probably validating. But most Americans have the sort of jobs where they sit at desks while day by day their arteries harden and their bellies soften. The good news is that we don’t have to revert to a hunter-gatherer lifestyle to combat this silent assassin. Many of the problems can be solved, researchers say, simply by getting up: standing and stretching once an hour or walking down the hall to talk to someone rather than sending an e-mail. A growing number of office workers, though, are opting for something more radical—they’re going seatless. Their savior is the standing desk.

Standing desks aren’t new. Ernest Hemingway used one; so did Vladimir Nabokov, Winston Churchill, and Henry Clay. Thomas Jefferson designed his own. Standing-desk proponents claim Leonardo da Vinci as one of theirs, as well as Michelangelo, at least when he wasn’t on his back painting the Sistine Chapel ceiling. As Secretary of Defense, Donald Rumsfeld spent his days dashing off his infamous “snowflake” memos from a stand-up desk. Ever the standing evangelist, he questioned limits on how long Guantanamo interrogators could keep detainees on their feet in a “stress position.” “I stand for 8-10 hours a day,” he wrote at the bottom of one memo. “Why is standing limited to 4 hours?”

Today, though, the standing desk is going mainstream, especially in the tech world, with its office perks and geekish penchant for workspace optimization. Standing desks have been spotted at Google (GOOG), Facebook (FB), Twitter, and AOL (AOL). Asana, a startup launched by a Facebook co-founder, provides employees with motorized desks that adjust from standing to sitting height at the touch of a button. Office furniture maker Steelcase (SCS) says sales of its stand-up desks are growing at four times the rate of its conventional desks, and Ergo Desktop, a small firm that makes an attachment that converts a normal desk into a standing one, says this year’s sales are on pace to triple last year’s.

Like the proponents of macrobiotics and barefoot running, today’s antisitting crusaders argue that our modern lifestyle—with its roughage-free processed foods, foam-cushioned shoes, Barcaloungers, and swivel chairs—has, by cosseting the body, actually caused it to break down. When we sit our muscles atrophy, our back crimps, and our metabolism slows. As James Levine, a Mayo Clinic endocrinologist, has written, “[A] growing body of evidence suggests that chair-living is lethal. Of concern is that for most people in the developed world chair-living is the norm.”

Yet if sitting is deadly, standing all day can also be hard on the body. It puts more strain on the heart and can increase the likelihood of atherosclerosis and varicose veins. “You’ve got to remember, 100 years ago most work was done with people standing up, and that’s why we tried to sit people down, because there are a number of problems,” says Alan Hedge, a design and ergonomics professor at Cornell University. “Standing all day is really, really not good for you.”

The watchword among ergonomists these days is “postural rotation”: sit a little, stand a little, then repeat. Michael Mullen is a designer at Oregon–based Anthro, which makes Steve’s Station, an adjustable standing desk. (“Steve” is another designer at the firm.) Mullen divides his workday between standing up to sketch on a tablet computer and sitting to do computer-aided design on his PC. He says many of the workers at Anthro’s client companies settle into a similar routine: “Maybe they stand for the morning, then sit in the afternoon. Or they do an hour or two sitting, and then stand for relief.” So-called sit-stand desks such as Steve’s Station or the cheaper WorkFit line, from Ergotron, are built for this kind of variation. In Denmark employers are required by law to provide their employees with adjustable desks. Research by Hedge and others, however, suggests that sit-stand desks themselves are no panacea. Hedge looked at how the desks were adopted at Intel (INTC) and found that when the novelty wore off, users tended to stop adjusting them and just stayed seated all the time.

Those workers who think they can keep to a strict postural rotation regime, though, and don’t happen to work at an ergonomically progressive place such as Google, or in Denmark, face another challenge: convincing their employer to install new furniture. One strategy might be to walk around the office gingerly, touching one’s back and giving off an air of litigiousness. Vanessa Friedman is an ergonomics consultant for mid- to large-size companies. Most of the businesses that call her to help install standing desks, she says, do so after a worker’s compensation claim. “In California, where we are, back injuries commonly cost $60,000. After that, $1,500 on a desk doesn’t seem like a lot to spend,” she says. If sitting disease catches on as a diagnosis, she points out, claims are likely to increase.

Photograph by Jason Nocito for Bloomberg Businessweekjury

A few companies, including Mutual of Omaha and Blue Cross Blue Shield, have gone one step further: They’ve installed desks with treadmills, allowing some of their employees to work while walking in place (slowly, at speeds less than two miles per hour). Even at that pace, treadmill desks leave their sitting and standing brethren in the dust healthwise, their champions claim. The writer A.J. Jacobs jury-rigged one in his home office as part of his research for his book Drop Dead Healthy, a gonzo exploration of today’s wellness research. He still uses it, balancing his laptop on two photo albums and a large toy train whistle stacked on a treadmill he originally bought to run on. “I’m a great believer. I’m on it right now. I try to get to five miles a day,” he told me when we spoke by phone. “It gets rid of all my excess energy. It also keeps me awake. Now when I sit down and try to work while sitting, I fall asleep.”

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Why the U.S. Olympic Committee Cracked Down on a Knitting Group

As it did for the 2008 and 2010 Olympic Games, the online knitting group Ravelry plans next month to host its own Ravelympics, in which thousands of knitters attempt to complete an ambitious project—such as knitting a hat for the first time, or finishing an entire blanket—during the two weeks the Games take place. They form teams and challenge each other to events such as “scarf hockey” and “sock put.” Often people knit their Ravelympic projects while watching the real Olympics on television. As long as a craft is completed, each Ravelete, as the participants call themselves, wins a virtual medal. “The idea was that these amazing events would inspire us and motivate us in our own projects,” says Kimberli Smith, 47, the Ravelry member who first conceived of the Ravelympics.

The first year the knitting games took place, more than 2,000 people completed close to 8,900 projects. This year, more than 7,500 people have signed up. On July 27, the 2012 Ravelympics kicks off with a marathon knit-off during the opening ceremonies of the 2012 London Games. At least, that was the plan. Earlier this week, the U.S. Olympic Committee (USOC) sent the 2 million-member knitting group a cease-and-desist letter, asking them to stop.

“We believe using the name ‘Ravelympics’ for a competition that involves an afghan marathon, scarf hockey and sweater triathlon, among others, tends to denigrate the true nature of the Olympic Games,” the USOC wrote in the letter. “It is disrespectful to our country’s finest athletes and fails to recognize or appreciate their hard work.”

This is not the first time the USOC has contacted Ravelry regarding its Olympic knitting enthusiasm. During the 2010 Ravelympics, the group sold a $6 handmade enamel lapel pin called “2010 Ravelympic Badge of Glory” and donated half the proceeds to the Special Olympics. The badge featured an image of a dog wearing a knit hat and a gold medal. It was very cute, but there was a problem: The Olympic theme infringed on the USOC’s intellectual-property rights. Since 1978, the nonprofit organization has had exclusive rights to control the commercial use of the word “Olympics” (or anything that resembles the word) in the U.S. Companies like Nike (NKE), Adidas, and Gatorade pay millions of dollars for the rights to use the Olympic name and rings on their products—something Ravelry obviously didn’t do. After they were contacted by the USOC, the group immediately stopped selling the pin, although they’d already made enough money to donate $3,200 to the Special Olympics.

The Ravelry vs. USOC situation highlights the difficulty companies and organizations face when they try to protect their copyrighted work on the Internet. Ravelry was founded in 2006 as a social networking site and pattern database for people who knit; a place where users could discuss different types of yarn, swap knitting patterns, and form online friendships through their shared hobby. A search through the site today reveals a lot of original handiwork, but also the occasional trademark-infringing craft. There are Batman sweaters, sock patterns that incorporate MLB team logos, and even an X-Men finger puppet. All of these projects are handmade and none of the finished items are for sale, although every once in a while a user will ask for compensation for a knitting pattern. (For its part, the MLB seems to encourage these knitting projects and has reportedly featured some in a display at the Baseball Hall of Fame.)

In its cease-and-desist letter, the USOC linked to nine Ravelry members’ Olympic-themed projects, both free and for sale, and asked that they be taken down. Targeted items included a free hat pattern inspired by Lindsey Vonn, a free crocheted Olympic ring necklace pattern, and a $2 Olympic-themed dish towel pattern. “As far as individuals using [the Olympic logo] and supporting the Olympic Games, I think that’s great,” says USOC spokesman Patrick Sandusky. “For personal use. But this is about using our trademark in a commercial way without giving us that information.” In other words, you can knit as many Olympic-themed dish towels as you like, but you can’t sell the pattern for $2 on the Internet.

“Most people on Ravelry understand that even though it doesn’t seem like a big deal, there is a legitimate trademark issue and that the USOC has to aggressively protect its trademark to hang on to it,” says Donna Bowman, 46, one of the co-organizers of the Ravelympics. “But we don’t understand how the idea that having a competition that references the Olympics is somehow taking away from the athletes and the prestige of the brand.”

It’s this aspect of the USOC’s letter—the request that the Ravelympics be renamed, and the insistence that a knitting competition somehow disrespects the athletes—that has the social networking site in an uproar.

“Our active user base has a fierce love for this site,” says Bowman. “I don’t know if Facebook inspires the same kind of passion and love that we have for this thing.” Ravelry’s founders don’t have the funds to fight a legal battle with the USOC, and if pressed, Bowman says they will agree to change the name of the Ravelympics. But they won’t do it quietly. A surprising number of the group’s members have taken to Facebook (FB), Twitter, and other online outlets to protest the USOC’s decision. “I hope this is the death of the corrupt USOC,” one user wrote on the U.S. Olympic Team’s Facebook wall. “I got a nice new hashtag for ya.. #StitchThis,” wrote another. “I don’t think they knew the hornet’s nest they were poking,” says Bowman. One blog, called Mason-Dixon Knitting, is even trying to knit enough pairs of socks for Stephen Colbert that he takes notice and addresses the Ravelympics’ plight on his TV show. “All these knitters with pointy sticks have a lot more presence and support on the Internet than they probably imagined.”

The USOC, for its part, has released two written apologies on its website, but it has not backtracked on its requests. “That [cease-and-desist] letter was sent from our law department and was written by a summer law clerk,” explains Sandusky. “The ‘denigration’ statement was made in error. The letter was probably a bit strongly worded and we regret that and apologize to the community. But we don’t apologize for trying to protect our right to the term ‘Olympics.’”

Oh, well. If Ravelry can’t have the Olympics, at least the group can rely on another massive knitting competition: its annual Tour de Fleece.

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My Bright Idea: Jennifer Granholm on Worker Retraining

The most powerful recent innovation in government is when states aggressively use community colleges for retraining. In Michigan, where large numbers of workers were displaced from the manufacturing industry, we created a wildly successful program: No Worker Left Behind. NWLB’s unique configuration resulted in worker placement at four times the national average. We received federal waivers to reconfigure our workforce training dollars and used the business community to identify specific skills needs. The first 100,000 unemployed workers who enrolled received two years’ tuition at their community college or approved training school—$5,000 per year. The catch: They had to agree to be trained in an area of need. Steering people into specific training while they collected unemployment benefits allowed them to feed their families while achieving advanced skills for specific jobs. Eighty percent of those employed after training were employed in their degree field. Our goal was to enroll 100,000 people; in 18 months more than 150,000 people enrolled, with thousands more on the wait list. Bottom line: Specific, relevant training allowed us to give skills and dignity to a generation of displaced adults.
Jennifer Granholm, the former Democratic governor of Michigan, now hosts Current TV’s The War Room with Jennifer Granholm.

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Apple vs. Samsung: The Longer View

For much of the 1980s, Apple (AAPL) battled Microsoft (MSFT) in court, trying to prove that early versions of Windows illegally copied the look and feel of Apple’s Macintosh operating system. Steve Jobs lost that fight, a defeat that at the time seemed like an industry-defining event. History proved otherwise.

On Friday, Aug. 24, Apple, now the world’s most valuable company in terms of market capitalization, got the best of Samsung Electronics in the first of its patent cases to go to a U.S. jury. A nine-person panel in San Jose spent an astoundingly brief three days forging through a 600-question verdict form to conclude that the Korean manufacturer infringed six patents for Apple mobile devices. The judgment in federal court came with a $1.05 billion price tag—less than half what Apple was looking for, but not too shabby all the same.

On the first day of trading after the verdict, Aug. 27, Samsung shares plunged 7.5 percent (it made up some of the loss the next day). As Bloomberg Industries mobile-device analyst John Butler explains, the court outcome “signals competitors to steer well clear of Apple’s designs or face the possibility of a lawsuit.”

While Apple and its legal team had every reason to celebrate, the mobile-device wars aren’t over yet—not by a long shot. The verdict represented just one round in a bout being fought fiercely among at least a half-dozen companies, on four continents, that likely will continue for years.

David Paul Morris/BloombergApple CEO Tim Cook has little incentive to destroy Samsung, one of Apple's biggest component suppliers

Samsung’s attorneys next will ask U.S. District Judge Lucy Koh to throw out the verdict. She’ll probably decline to do that, and then Samsung will appeal to a higher court. In coming months, Koh is scheduled to decide whether to issue an injunction blocking the sale in the U.S. of eight Samsung mobile phones and one tablet that the jury found to have infringed Apple patents, in which case the Korean company may have to delay some deliveries until it can design around the offending features. The timing could be advantageous to Apple, which is expected to launch the new iPhone 5 in September and a smaller version of its iPad tablet in October.

Still, Samsung will not have to write a billion-dollar check anytime soon, if ever. And the effect on Samsung of a possible injunction would not be cataclysmic; the devices in question are older ones and will account for less than 1.4 percent of the Korean company’s worldwide profits next year, says Mark Newman, an analyst with Sanford C. Bernstein who previously worked at Samsung.

The best way to view Apple’s smartphone victory is that the company now has the upper hand in a global negotiation being conducted via litigation. That’s right: a negotiation. Apple and Samsung are using the courts to help set prices for a series of eventual cross-licensing agreements covering each other’s intellectual property. Apple, which already cross-licenses some of its mobile patents with Microsoft, just saw the price of its IP go up as a result of the San Jose verdict, but it did not mortally wound Samsung.

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Apple’s larger conflict is with a range of device-making rivals that, like Samsung, use the Android operating system that Google (GOOG) gives away for free. The big prize in the far-flung patent disputes is having the dominant operating system in a growing market for mobile phones and tablets that’s already worth several hundred billion dollars a year. Currently, Android accounts for about 60 percent of the mobile market, three times the reach of Apple’s iOS, according to analysts with Bloomberg Industries.

Eventually all the competitors will settle up (on confidential financial terms) and get back to ordinary competition. Steve Jobs and Bill Gates didn’t exactly become friends after their software litigation petered out in the 1980s; instead, they leashed the lawyers and focused on new products. Indeed, Apple is Samsung’s biggest customer for mobile-device components; the companies continue to quietly collaborate even as their lawyers bash one another. Unlike his predecessor Jobs, who was intent on defeating Android, Apple CEO Tim Cook has no incentive to crush Samsung.

Given how popular Samsung’s and other companies’ Android devices are with consumers, it’s unlikely that major telecom carriers would limit their selection of them in the wake of the San Jose verdict. And in the long term, the duel between Apple’s closed-garden operating system and Google’s open system (and between the iPhone and its many imitators) will be determined where it ought to be: at retail sales counters in the U.S. and around the world. In the court of capitalism, consumers are the ultimate jurors.

The bottom line: Apple’s $1 billion court victory over Samsung ultimately will have little impact on the larger battle for mobile device dominance.

With Adam Satariano and Peter Burrows

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