The Economist UK - 22.02.2020

14 The EconomistFebruary 22nd 2020

Letters are welcome and should be

addressed to the Editor at

The Economist, The Adelphi Building,

1-11 John Adam Street, LondonWC 2 N 6 HT

Email: [email protected]

More letters are available at:

Economist.com/letters

Letters

Disruption and competition

Schumpeter’s otherwise

worthy encomium for Clayton

Christensen makes the mistak-

en claim that he asserted a

monopoly on disruptive

wisdom (February 1st). After

his seminal “The Innovator’s

Dilemma”, Clayton only ever

wrote with co-authors, and he

took every opportunity to

attribute the staying power of

the theory to other writers, for

he valued work that challenged

the theory even more than

work that confirmed it.

Furthermore, claiming that

Clayton “shrugged off” Apple

and “brushed off” Tesla and

Uber is also mistaken. Clayton

pointed out, correctly, that

these companies were not

following a disruptive path to

success over rivals. Apple

disrupted the personal com-

puter, but it did not disrupt

Nokia or BlackBerry: it out-

competed them in good old-

fashioned Michael Porter style.

Clayton’s mistaken prediction

that Apple would fail led him

to develop a more careful

specification of the limits of

disruption theory, which

places his work within the

context of other theories that

explain different phenomena.

Subsequent analyses of Tesla

and Uber (neither of which

have followed disruptive paths

regards relevant competitors)

reflect this. That is a story of

learning and progress to which

we should all aspire.

michael raynor

Mississauga, Canada

Nevada? South Carolina?

The answer to Lexington’s

question “Could it be Bernie?”

is a resounding no (January

25th). It is inconceivable to me,

a life-long Republican who will

not be voting for Donald

Trump, that the Democrats

could choose the only person

whom Mr Trump could beat.

When Bernie Sanders jumped

to the lead, Mr Trump tweeted

nice things about him. He

knows he can beat Bernie with

an impeached arm tied behind

his back. The Democrats’ man-

tra should be electability, plain

and simple. Choosing Bernie

would only show that they can

screw up the sleeves on a vest.

stephen cooney

Pottstown, Pennsylvania

Treating transgender kids

Regarding puberty blockers for

transgender children (“Pill-

pushers”, February 1st), it broke

our hearts to watch our bril-

liant, funny kid descend into a

deep depression once puberty

started. It took every ounce of

courage she had to tell us she

was transgender. We took her

at her word, and have sup-

ported her these past two years

as she began her transition. We

were told of the risks of hor-

mone therapy, but for us there

was never any question. On

hormones, our child has a

chance for a happy and fulfill-

ing life. Without them, we

might have lost her, and that is

a risk we simply were not

willing to take.

jessica veter

Dundas, Canada

Debt and private equity

Your otherwise excellent re-

port on private markets repeat-

ed a well-known shibboleth in

private equity (“Privacy and its

limits”, February 1st). This is

the idea that buy-outs use high

external debt levels to sharpen

the performance of operating

managers, which is sometimes

called the “discipline of debt”.

For 30 years the story has

been that high debt levels give

buy-out managers a financial

incentive to focus on maxi-

mising cashflow. On the face of

it that sounds plausible. The

flaw in the argument where

private equity is concerned is

that buy-out firms already have

all the financial incentive they

need: their “carried interest”

typically pays them 20% of the

profits they generate. The idea

that buy-out firms need high

interest payments as well as

this incentive to focus on

cashflow defies belief.

High debt levels in private

equity are not just logically

redundant. At least one empiri-

cal example shows high debt is

unnecessary in practice, too.

Melrose Industries, a publicly

listed company, follows a

strategy which it calls “Buy,

Improve, Sell”. This is private

equity in all but name. Melrose

has generated high returns and

its market capitalisation is

now almost £12bn ($15.5bn).

But Melrose has not needed

high leverage. It makes a point

of using the lower debt levels

seen in quoted companies.

It suits buy-out insiders

and investors to suggest that

their use of high debt involves

more than just financial engi-

neering. Unfortunately, this

idea fails to pass muster either

in theory or in practice.

peter morris

London

Keep ’em peeled

Without more resources, you

say, increasing the number of

police officers in Britain will

result in more of the accused in

courts and more prisoners

(“What’s going wrong here?”,

January 18th). But there is also

an opportunity cost. Bobbies

on the beat are associated with

crime prevention. Potential

criminals feel more restrained

if detection rates improve and

they think they could get

caught. So if 20,000 extra

police are put on the streets

and into detection and tech-

nology channels, a lot of crime

could be prevented.

deep sagar

Former chair

Audit and assurance board

National Police Chiefs’ Council

Berkhamsted,Hertfordshire

The coronavirus epidemic

You hold a prejudice against

China’s political system when

reporting on the country’s fight

against the coronavirus epi-

demic (Chaguan, February 1st).

The Communist Party puts a

priority on people’s lives and

health. President Xi Jinping

has set up a task force to lead

effective prevention and con-

trol, describing the coronavi-

rus as a “devil”, which “we will

not let hide”. Under strong

leadership China has taken

swift and concerted action to

contain the disease. Infor-

mation has been released in an

open and transparent manner.

China has closely co-operated

with the whoand the wider

international community to

safeguard the safety of people

in Hubei province, in China

and in the world.

Tedros Adhanom Ghebreye-

sus, the who’s director-gen-

eral, has hailed the speed and

scale of China’s actions. He has

said that other countries

should learn from China’s

experience, pointing out that

President Xi’s personal guid-

ance and deployment show his

great leadership capability.

Turning a blind eye to

China’s hard efforts and their

effective results and trying to

politicise the issue is not con-

ducive to the prevention and

control of the novel coronavi-

rus epidemic. The Chinese

people are united and have full

confidence that we can win

this battle.

zeng rong

Spokesperson of the Chinese

Embassy

London

Love will tear us apart

The Graphic detail on why

people listen to sad songs in

February (February 8th)

brought to mind “The Saddest

Music in the World”. Directed

by Guy Maddin, known for his

homages to Russian and Ger-

man Expressionist films, it

stars Isabella Rossellini as a

brewery heiress with plexi-

glass prosthetic legs (filled

with beer, of course). She holds

a contest to find which country

has the saddest music, parody-

ing the Olympics. Great fun.

keith carlson

Belmont, Massachusetts

Missing from your analysis

was the Valentine’s Day factor.

That’s the time when broken

hearts get to see their ex-

partner Instagramming cuddly

pictures with their new catch.

There’s no happiness in that.

zumme mphatso chirwa

Blantyre, Malawi