Conferences

Family Office Exchange is betting that RIAs and the ultra-affluent can’t get … – RIABiz

by admin on May 31, 2011

Family Office Exchange is betting that RIAs and the ultra-affluent can’t get … RIABiz This is the story of Family Office Exchange ramping up its efforts in response. Impervious to the gravitational pull of a down economy, the family office business keeps plowing ahead and one big Chicago-based consultancy is planning its own aggressive … and more »

Read more:
Family Office Exchange is betting that RIAs and the ultra-affluent can’t get … – RIABiz

Bookmark and Share

9th Annual Coal Markets

by admin on February 20, 2011

Singapore, 22 – 23 February 2011

See more here:
9th Annual Coal Markets

Bookmark and Share

Tony Hsieh: Zappos CEO: In Your Next Speech, Just Wing It

February 18, 2011

Excerpted from #1 NY Times Bestseller Delivering Happiness by Zappos CEO Tony Hsieh In the two years leading up to the announcement of the Amazon acquisition, Zappos started getting more and more media coverage. A lot of people assumed that we must have stepped up our PR efforts, but that wasn’t the case at all. We simply continued doing what we had always done: constantly improving the customer experience while simultaneously strengthening our culture. The funny thing is that a lot of the press we got was for things we had first done several years earlier, such as paying employees to quit during their new hire training or occasionally sending flowers to customers. We didn’t intend for any of the things we were doing to end up in the news or on blogs. But every once in a while, a reporter or popular blogger would pick up on something that we were doing, and the story would spread like wildfire. We were as surprised as anyone else by the publicity because it was never planned for on our end. We learned a great lesson: If you just focus on making sure that your product or service continually wows people, eventually the press will find out about it. You don’t need to put a lot of effort into reaching out to the press if your company naturally creates interesting stories as a by-product of delivering a great product or experience. As our media coverage increased, I started receiving more and more speaking requests for different conferences and industry events. One of my first speeches was at the Footwear News CEO Summit in 2005. I remember I was a nervous wreck, because I hadn’t really done much public speaking before. At the time, I agreed to do it because it would be a good opportunity to tell the Zappos story to a lot of footwear vendors we were still trying to establish relationships with. I wrote out my entire speech beforehand, and then spent a month memorizing it and rehearsing it. I couldn’t sleep the night before my speech. It ended up going okay, and I was relieved when it was finally over so I could catch up on my sleep. Even though I didn’t really enjoy the whole experience, it had a very positive impact on our business, so I was glad I had done it. Over the next year, a few more speaking requests started trickling in. I agreed to all of the with a feeling of dread, but I knew they would help build our business and our brand. I also thought that, as uncomfortable as I was with doing them, they were opportunities for me to grow both personally and professionally. Like anything else in life, I figured that public speaking was just a skill that required practice on a regular basis. Each speech I gave was just another practice session. During my first year of public speaking, I was diligent about writing out my speeches beforehand and memorizing them. It took a lot of time to do, and I would never sleep well the night before my talks. Sometimes, while giving the speech, I would accidentally skip over or forget a sentence or an entire paragraph, which would leave me temporarily flustered on stage as I racked my brain trying to remember the lines I had practiced the night before. With each speech, I found myself slowly improving. But I still didn’t enjoy the actual speaking itself. Even though my speaking was helping build the Zappos brand, I thought that maybe I just wasn’t meant to be a public speaker because I was so uncomfortable with the process, even after having done it for a year. And then one day, I had an epiphany. I realized that nobody knew what I had written down beforehand. Nobody would ever know if I skipped a sentence, a paragraph, or even an entire section. I had also noticed that while people appreciated the content of my speeches, they generally commented about two things afterward. They told me they really enjoyed the personal stories, and they said that, even though many of them had already read about Zappos in the press, it made a huge difference to actually hear it come from me. They told me they could really feel my passion for company culture, customer service, and Zappos in general. So, for my next speech, I tried a completely different approach. I decided not to memorize or rehearse anything. I would just wing it and see what happened. I knew I had a lot of stories I could choose from on the fly to tell, and I knew that as long as I stuck to topics I was passionate and knowledgeable about — customer service and company culture — that I would have plenty of material to draw from to fill the time. When I finally got on stage, I still had some jitters for the first minute or two as I adjusted to the audience and the room. After that, the time just flew by. The audience was more engaged than they had been in my previous talks. I even managed to get some unexpected laughs from moments in my stories when I was just trying to tell a story instead of trying to recite lines from a script I’d written. I would later learn that I had achieved the state of flow . In his book by the same name, researcher Mihaly Csikszentmihalyi describes flow as a type of happiness, in which someone loses sense of time, self-consciousness, and even self. That’s exactly what happened to me. From that point forward, I used the same formula for all of my speeches and found that most of the rest of the stuff that I used to worry about usually just fell into place. I just went by three basic rules for my talks: 1. Be passionate. 2. Tell personal stories. 3. Be real. I made the mistake once of agreeing to speak at a conference about a topic that I wasn’t actually passionate about. Even though I knew all the content inside and out, I wasn’t able to speak passionately, so my performance turned out to be only okay. But it was a good learning experience. Today, whenever I’m invited to speak somewhere, I let them know that I will only speak about certain subjects, which may or may not match the overall theme of the conference. I then leave it up to the conference organizers to decide whether they are okay with that or not. Usually they are fine with it, but occasionally not. In those instances, no matter how much money the conference is offering to pay Zappos and no matter how good an opportunity it would be for Zappos to be exposed to that audience, I always do the same thing. I politely decline.

Read the full article →

Don Tapscott: The State of the World: 10 Belated Reflections on 2011 Davos

February 9, 2011

It is my custom after attending Davos to formulate my top 10 reflections. These are not necessarily the top issues discussed at Davos but rather some observations about the state of the world. 1. The Age of Wiki Revolutions Not surprisingly, the historic events in Tunisia and Egypt captured the attention of many at Davos. The timing was impeccable, reminding some of the Davos conspiracy theory — that the world’s leaders organize big events to time well with the Davos meeting. Tunisia and Egypt are examples of a new species of revolution based on social media. Traditional revolutions have a leadership and are positioned to take power with popular support. The new “wiki revolutions” are so explosive and happen so fast, that there is no clear vanguard to take power, leaving a vacuum. The vacuums that result pose significant challenges for everyone who cares about moving from oppression, dictatorship and fundamentalism to openness, democracy and 21st century governments. Appropriately, Tunisia’s so-called Jasmine Revolution was hailed by many as a model of social and democratic revolution in the Arab world. “We are going to leverage social media to build a horizontal democracy rather than a vertical democracy,” said Yassine Brahim, Tunisia’s new minister of infrastructure and transport. The new governor of Tunisia’s central bank, Mustapha Kamel Nabli, went to Davos to reassure attendees and the international media that Tunisia was getting back to business as normal. Nabli said Tunisia plans to move forward following the toppling of President Zine al-Abidine Ben Ali. “The situation is stabilizing and security is back. This means that democracy has taken root. We have come a long way. People had had such depressed feelings for so long that something had to break — which was fear of the regime. When it was removed everything happened very quickly.” “I would like to convey to investors that that the country has returned to business. Democracy is good for investment,” Nabli said. Foreign companies will be “doing business in a much more favorable environment.” He promised corruption would be replaced with transparency, and asked international investors not to flee the country or speculate in ways that would hurt the economy. Yes, everyone was left wondering: what country is next? And how will each of these wiki revolutions play out? 2. Bifurcated Norms for the New Realities The theme of Davos was “Shared Norms for the New Realities.” It reflects what the Forum organizers say is the top global issue: The world is increasingly complex and interconnected, and, at the same time, experiencing an erosion of common values and principles. This undermines the public’s trust in leadership, which in turn threatens economic growth and political stability. In the words of the WEF’s founder Klaus Schwab, we need to “concentrate on defining the new reality and discuss which shared norms are required for making global cooperation possible in this new age.” Compared to previous Forum meetings, there is growing awareness by corporate executives that business can’t succeed in a world that is failing. Environmental sessions at Davos used to be attended by environmentalists only. Now the participation is much broader. This year serious business leaders spoke convincingly of their responsibilities for helping develop a globally sustainable economy. A broad cross-section of business leaders spoke of the urgency of helping Africa. I chaired two sessions. The first was “Rethinking our Institutions for the New Realities.” The second was about how young people around the world share a positive new culture and set of norms, but were bumping up against “old models.” At both sessions there was a rich, sometimes exhilarating discussion about the need for change. But when it comes to norms being shared we’ve got a long way to go. In fact, a bifurcation is underway. Many CEOs, government leaders, economists and media still view the world in traditional ways. The biggest disconnect was about the state of the global economy. Many executives are quite comfortable with the status quo. They think the financial and economic crisis is over and that we’re now coming out of a predictable and traditional business cycle. Implicit in this view is that there are no truly new realities, just variations on the age old business rhythms. According to the typical CEO, especially bankers, all is well. Profits are good and bonuses can’t be far behind. It was reported last week that the top five U.S. banks will pay staff a combined $119 billion for 2010, up 4 percent from 2009. Nevertheless, bankers insist the proper tonic for other sectors of the economy is austerity. Writing from Davos for States News Service, Simon Johnson noted that “Leading bankers, in particular, insisted on the paramount importance of providing unlimited government support to their sector during 2008-09; now they insist with equal or greater vigor that support to all other parts of society be curtailed.” These business leaders are trying to turn back the clock. When they see any signs of improvement they have a natural inclination to fall back on old ways and conclude it is business as usual. This is a big problem. Those who say the global economic crisis is over are wishful thinkers with a false sense of comfort. There were bifurcated norms on many of the issues discussed. Some were uneasy at the uprising in Egypt, insisting this was bad news and that such instability would be harmful for business. They preferred the old paradigm where the West supports any government — including despots and tyrants — if it suits the West’s strategic interests. This was in sharp contrast to those who saws Egypt’s turmoil as an opportunity for democracy, social justice and economic prosperity. They believe that the main problem for economic growth in the Mid-East is that it is run by despots who act as a brake on their local economies. They agree with the young people tweeting from Tunisia and Egypt that “Democracy is good for business.” 3. A New Era of Global Risks We haven’t come to grips with what it means to live in a networked and increasingly interdependent world. There are traditional risks like nuclear war, terrorism, climate change, infectious diseases, economic crisis and failed states. But new risks are emerging everywhere. Consider something as seemingly mundane as the global supply chain. The vast networks that provide the world with food, clothing, fuel and other necessities could handle an Iceland volcano and one other catastrophe like the failure of the Panama Canal. But according to experts, a third simultaneous disaster would collapse the system. People around the world would stop getting food and water, leading to unthinkable social unrest and even a disintegration of civilized society. By tackling this issue, the Forum is filling a void that no other organization addresses. It gets people talking constructively, in sharp contrast to the recent failures of other bodies such as the Doha Development Round of the World Trade Organization and the Copenhagen Conference on climate change. This year the Forum inaugurated a Risk Response Network. Risk Officers from top corporations, governments and international organizations will be brought together online. They will draw on insights from the Forum’s communities and contributors, including expert Forum working groups and a network of the world’s top universities. If some new global crisis arises, these leaders could spring to action on a secure network, drawing on insights from the any of the Forum’s 50 communities. It is hoped that rather than just reacting to unanticipated problems like the European Sovereign Debt Crisis, leaders could be more proactive and take preventive action. Chancellor of Germany Angela Merkel warned participants against being complacent about the risks of a further financial crisis, saying that the international mechanisms needed to prevent another crash are not yet in place. She stressed that Germany stands firmly behind the Euro and will continue to defend the currency. 4. For Growth to be Sustainable it must be Inclusive In the Davos wrap-up communiqué this was one of four themes, but again there were big differences in the views of participants. Some CEOs don’t really care, believing that the world economy can continue to grow without concern for how the wealth is shared. As far as they were concerned, the global economy is back on track and business is back to usual. I said you can’t call it a recovery if it’s not inclusive. The people at the very bottom aren’t benefiting. Huge parts of the world are mired in economic stagnation. This has huge risks, as is illustrated by the developments in Egypt and Tunisia. In one television interview I argued that we’re in more than a global slump. The journalist challenged me, saying “what slump – economy is doing great, already running at 4 percent growth.” I replied that he should tell that to the millions of young people who are unemployed – to them the term jobless recovery is an oxymoron. The incident was reflective of the divide. United Nations Secretary-General Ban Ki-moon said that a “revolution” is urgently needed in thinking and policy to bring about sustainable economic growth that can both protect the environment and raise living standards. Chanda Kochhar, managing director and chief executive officer of the ICICI Bank of India, said we will only make growth sustainable “if we make our growth inclusive.” Greek Prime Minister George Papandreou said there had been a “race to the top” among the rich. More and more wealth was concentrated in fewer hands, while the middle and working classes were being forced to make do with less and less. Despite the well-meaning concern, there was inadequate about how to achieve inclusive growth. In the United States 80 percent of new private sector jobs come from companies less than 5 year old. But smaller companies are having a tough time. There is lower demand due to recession and some behavioral change from consumers along with very high levels of uncertainty in the economy. There is a credit crunch as banks are not lending money and there is a lack of venture funding. Internationally the situation is ever more complicated. These problems need to be addressed with fresh thinking. 5. The Potential of a New Global Youth Radicalization As the events of Tunisia and Egypt unfolded I became convinced that a new youth radicalization is underway. First, there is a massive generation of young people coming of age. Born between 1977 and 1997, the children of the baby boom in North America outnumber their parents. The echo is larger than the boom itself. In South America the demographic bulge is huge, and even bigger in Africa, the Mideast and Asia. A majority of people in the world are under the age of 30 and a whopping 27% under the age of 15. Second, despite the digital divide, this generation is the first to grow up digital. They have been bathed in bits; computers, the internet, and interactive technologies are a fundamental part of the experience of youth. To them, technology is like the air. When young people today use digital devices, they are interacting, searching, authenticating, remembering, collaborating, composing their thoughts, and organizing information. They interact with the media and know how to inform themselves and use technology to get things done. Third, as they become adults, they are entering a world that is broken. Youth unemployment is high around the world. In Spain more than 40 percent of young people are without work. In France the rate is over 20 percent. Many failing institutions are in need of reform. Throughout the Mideast there are undemocratic regimes with few human rights. Women want to be part of the work force but in many countries are denied full opportunities to do so. Put these three factors together and there is a perfect storm brewing. During the 1960s there was a generation gap where young people and their parents had different attitudes towards many things, from civil rights and women’s role in society to war. The youth radicalization of the time brought about significant changes in society, among them the end of the war in Vietnam. But this time is different. Today a huge, deeply frustrated generation has at their fingertips the most powerful tool ever for finding out what’s going on, informing others and organizing collective responses. The leaders of Iran, Tunisia, Egypt , Syria, Saudi Arabia or even China can take steps to prevent them from communicating with new media, but ultimately this will not work. Turning off the Internet, as Egypt has tried to do, only broadens dissent as outlying nodes on the human network become engaged and for everyone the best way to communicate is to come into the streets. Further, as the Internet becomes an essential part of the economy’s infrastructure, shutting it down is akin to self-inflicting a general strike. 6. Oblivious Bankers Take the Offensive At last year’s meeting, the prevailing mood was that banks needed to be reined in, the sooner the better. US banking executives used to be the stars of Davos, but the last two years they were a low-key, humble and dour-looking group. I remember my wife and I attended the reception one of the world’s largest financial institutions and were greeted with eerie enthusiasm by a welcoming line of the CEO several of his top execs. They stood at the door in a wedding-style line greeting, thanking every guest. They were just delighted to have some new faces at their sparsely attended event. Even the Wall Street Journal reported that an international backlash at Davos has “bankers are on the run.” What a difference one year can make. In private, and sometimes in public, top bankers were hitting back, warning that the mind-set of increased regulation was jeopardizing the economic recovery without making the system any safer. The Times (UK) reported that Jamie Dimon, the chief executive of JP Morgan Chase, led the attack, which provoked a furious response from French President Nicolas Sarkozy. Gary Cohn, No 2 at Goldman Sachs, warned the new rules would merely ensure that the next crisis was in the unregulated world. The Times also reported that people close to Tim Geithner were privately exasperated by Cohn, even before it emerged that his boss Lloyd Blankfein’s compensation had been a salary of $2 million and $12.6 million in shares. 7. Asia, Asia and More Asia When it comes to talk about the Asian Tigers, India displaced China this year, including hosting the final gala that was a technological and cultural tour de force. But the region’s biggest individual star was Russia’s President Dmitry Medvedev, whose speech notes were conspicuously on an iPad. Obama might have to stand down as the Internet President. Medvedev presented ten reasons investors should flock to Russia and it was impressive. The government has begun an unprecedented economic modernization program, including uniform regulation to make it attractive to investors. Russia hopes to join the WTO and OECD and is working to establish a common economic area with the European Union. The government is promoting innovative joint ventures as part of a massive technological modernization program and a great number of enterprises will be working on the development of Russia’s Innovation Center Skolkovo. The Russian government will also pass laws to protect intellectual property rights. The country is striving to be more energy efficient and implementing programs to expand broadband technology throughout the country. In the next ten years, thousands of Russia’s leading minds will receive masters and doctorate degrees in the world’s top institutions and will take leadership roles in Russia’s economic development strategy. Finally, the country has launched large scale infrastructure projects, including having obtained the right to host major global sporting events. Medvedev’s speech came just two days after the deadly terrorist attack on Moscow’s Domodedovo airport. Medvedev told attendees that “All our efforts to further develop the world economy will be for nothing if we fail to defeat terrorism, extremism and intolerance, and if we fail to eradicate altogether these evils which are the greatest danger to mankind.” Indonesia, the world’s fourth most populous country, also considerable buzz. Indonesian President Susilo Bambang Yudhoyono attended the Forum along with a number of his ministers and senior officials. Indonesia has a lot of poverty, and Yudhoyono warned about the fallout of recent increases in food and energy prices, which “impact inflation and poverty, and could lead to social and political unrest.” Yudhoyono also used Davos to network. “In terms of investment, Davos is an extraordinary place for us to build networks because this forum is attended by more than 1,000 chief executive officers from more than 1,000 companies,” Trade Minister Mari Elka Pengestu said. But in the talk of India surpassing China as the world’s economic juggernaut was most interesting to me. India has the advantages of being a more open and less hierarchical society. China’s disciplined command-and-control style work force could ultimately be trumped by a massive force of Indian professionals who are creative, collaborative, entrepreneurial and life- long learners. 8. Crippling Sovereign Debt Almost everywhere countries, regional states and cities are in debt. Many thought prior to Davos that this would be one of the Forum’s biggest issues, but it wasn’t. Nevertheless, the increasing reliance on borrowed money to sustain government expenditures was referenced often. It’s easy to see why. The debt/GDP ratio for the Eurozone is a startling 85 percent, but the situation is worse in the US. The Congressional Budget Office estimates that the US debt/GDP ratio will continue to rise this decade and next, reaching 200 per cent around 2030. The highest debt to GDP ratio the US has experienced was 109 percent just after World War II. The deficit headache will get worse as baby boomers retire and social security pay-outs increase. But in the US, it’s not just the federal government that has problems. Of the 50 US states, 48 ran deficits in fiscal 2010. Federal stimulus funds to the states will run out 2012, so it’s possible that more than one state will default. So might a number of cities. Taken together, state and municipal debt is more than $2 trillion. It’s not clear to me how this global problem will be solved. The irresistible force to cut government spending is confronted with the immovable object of essential services, entitlements, military spending and extraordinary expenditures stemming from corporate bailouts and fiscal stimulation. Many Tea Party members just elected to Congress have vowed to cut government spending come hell or high water, despite warnings this may wreak havoc with the US and global economy. 9. Progress on New Models of Global Problem Solving The World Economic Forum is quickly morphing from a once-a-year talkathon into a year-round network of leaders and leading thinkers tackling global problems – from think tank to do tank. Nature hates a vacuum, and new networks are expanding to fill a void in our systems for global cooperation. The forum itself is an example, getting people acting constructively, in sharp contrast to the recent failures of other bodies such as the Doha Development Round of the World Trade Organization and the Cancun or Copenhagen Conferences on climate change. The world is organized around nation states based on national economies and that is unlikely to change in the foreseeable future. The idea of national sovereignty was initiated hundreds of years ago with the Treaty of Westphalia of 1648 and persists today. After the second world was there were many bold initiatives to create better systems of global cooperation, including Breton Woods, The United Nations, The General Agreement of Trades and Tariffs (GATT), the World Trade Organization and now the G8 and G20. But these international systems for cooperation are failing in achieving world goals of economic growth, climate protection, poverty eradication, conflict avoidance, human security and promotion of shared values. What’s needed is a Wikinomics approach — embracing more agile, networked structures enabled by global networks for new kinds of collaboration. Nation states would continue to play a central role but can overcome their silo thinking and behavior by sharing information more effectively, cooperating on real-time networks, and basing their decisions more deeply in the processes of multi-stakeholder networks. But how would this new, networked system of global cooperation work? There are many tough issues. How would these vast multi-stakeholder networks achieve legitimacy? How could they be held accountable? How would they interact with existing structures? How would participation be achieved? What should existing governments and other institutions do to embrace global networked cooperation and problem solving? 10. The Internet Does Change Everything, including Davos Understandably social media, mobility and the relentless digital revolution continues to drive change and cause concern in everything from intellectual property to youth revolutions. One striking indication is that Davos (really) embracing social media and consequentially opening up. The Forum wants to shake its elitist reputation and be seen as an open venue for global debate. But not everyone who wants to participate in the discussions can make their way to this small Swiss town. So Forum officials have arranged the next best thing: participating in Davos via social media. The newly established Social Media Corner was a hub of activity. Most of the major sessions were streamed live online and then posted on YouTube. WEF officials say that more than 42.000 people watched the sessions live, and the YouTube recordings were watched more than 60,000 times. Press conferences were also streamed live and viewers could submit questions to those in the press conference. “Ask a Leader” series put questions from the general public to participants. More than 120 participants uploaded a video response directly to the person who submitted the question via YouTube. The videos were viewed more than 20,000 times over the 5 days. Randi Zuckerberg from Facebook hosted Live Stream interviews with crowdsourced questions with participants ranging from Kumi Naido to Paulo Cheolo to John Kerry to Bono. More than 104,000 people watched the live interviews during the 5 days. More than 400 Davos participants were on the official Twitter list, including Presidents, Prime Ministers and top business leaders. The hash tags #WEF and #Davos were mentioned more than 65,000 times on Twitter. The Forum blog, featuring 50 guest posts from participants was read more than 21,000 times. The Forum is serious in wanting to be less elitist. This year’s social media innovations were a good start.

Read the full article →

Ron Ashkenas: Is Your Calendar Managing You?

February 3, 2011

Cross-posted from Harvard Business Online Not long ago, I was talking with a senior executive who was frustrated that some of her high priority initiatives were not moving fast enough. After exploring various reasons for the slow uptake, I asked her to look at her calendar and calculate the amount of time she personally spent on these initiatives. The answer shocked her: a grand total of two hours over the course of two months, and this was being generous. In my years of consulting, I’ve found that this disconnect between stated priorities and the actual allocation of managerial time is extremely common, and often happens without the manager even realizing it. The only exception is during a crisis or in the face of an impending deadline — when somehow the use of time magically shifts to match the short-term priority. But in the absence of crisis, managers’ schedules fill up with all sorts of lower-value activities that water down the focus on high-priority projects, change efforts, or opportunities. In fairness to managers, they probably shouldn’t be spending as much personal time on high-priority initiatives as their subordinates, to whom they may have delegated all or part of the responsibilities. But delegating is not an excuse for disappearing. If a manager like the one mentioned above wants to see progress, she needs to visibly demonstrate support for the initiative, run interference with other related groups in the company, coach the designated leaders, create a sense of urgency , and make decisions. These, and many other activities, take time. And although most managers know that they should make this commitment, they still don’t. I’ve written previously about some of the psychological dynamics of why managers spend their time on low-value activities . Through the years I’ve found that there is a very tactical, but unconscious, trap that many managers fall into: They let their calendars manage them. If you are a manager, think about how your daily, weekly, monthly, and yearly schedule is constructed. First there are corporate or divisional meetings — essentially command performances — in addition to the standing and ad-hoc meetings called by your boss. Many of these are dictated by the rhythms of corporate processes such as strategic planning, budgeting, and performance management — and include countless other preparatory meetings. Of course if you are an operational manager or running a team, you also have to schedule your own meetings: staff meetings, one-on-ones, town meetings, visits to key locations, and more. Somewhere in this mix are interactions with customers, either external or internal, depending on your job. You may also be invited to staff meetings and various project review meetings which may or may not be about your own priorities. If this is not enough, many managers also attend industry conferences and briefings, leadership workshops, or other developmental events. On top of all this is the time required to actually accomplish your day-to-day job — reviewing reports, reading spreadsheets, preparing and modifying presentations, and the like. Finally — if you’re really well-organized — you might devote a little time to “thinking and planning” (although not much in the formal sense), your family, and other non-work pursuits. Collectively, the demands we face at work are daunting and require constant juggling and trade-offs. For senior people much of this juggling is done by an executive assistant and/or chief of staff, while middle or junior managers do it themselves, often with the assistance of electronic scheduling that automatically puts meetings on the calendar. Unfortunately, neither method substitutes for thoughtful prioritization by the manager herself. Without such prioritization, the outcome is often a schedule that bounces managers from meeting to meeting, trip to trip, and requirement to requirement — without a sense of how to add the most value. If you are concerned that your calendar is managing you, here’s how to start taking back control. First, do a calendar analysis. Examine the events and activities described above that apply to you, and find out how much time you are really spending on the areas where your presence will make a difference. If that’s not enough, conduct a zero-based reconstruction of your calendar to reflect a better balance of value-adding time. To do this, start by designating specific times that you will devote to your highest priorities, even if you’re not sure how you will use those times. If you find later that you won’t need all of those slots, you can change them. But if you don’t save them now, you’ll lose that choice. Next, build your calendar from the ground up. Add in the mandatory meetings that you have to attend that also add value, such as decision-making meetings or customer visits. Finally, go through the calendar and create a list of recurring meetings and other activities that seem to create less (or no) value. For each of these, ask yourself: Is the activity or meeting needed at all? If needed, do I need to attend or can I designate someone else? Can this be done less frequently? Can it be done in a different way that will require less time? These tough questions may be worth addressing with your boss, your team, or with a coach. But if you don’t address them, and continually try to zero-base your schedule, it will end up managing you (instead of the other way around). How do you get more control over your time?

Read the full article →

Lawrence G. McDonald: Fannie Mae and Freddie Mac’s Days Are Numbered, But It’s a Big Number

February 3, 2011

In my New York Times Best Selling book, A Colossal Failure of Common Sense — The Inside Story of the Collapse of Lehman Brothers , I make a strong case. Our government allowed Fannie Mae and Freddie Mac to become a giant mortgage backed security hedge fund, complete with 70-1 taxpayer funded leverage. They had sub Libor financing, meaning the luxury of borrowing money at one of the lowest interest rates in the world, all risks backed by the US taxpayer. To understand this kind of leverage imaging walking into the most profitable casino in Las Vegas, all you have is $100 in your pocket. Yet, because of your good credit, the casino allows you to play blackjack with $7000 at risk on the table. The slightest loss and your equity is wiped out. That’s exactly what happened to Fannie and Freddie and today the US taxpayers have lost well over $360 billion in this reckless risk taking bonanza. That’s over half the cost of the entire war in Iraq. It wasn’t always this way but as Samuel Johnson once said, the road to hell is paved with good intentions. In the 90′s Fannie and Freddie only used 30-1 leverage but the great enabler, US Congress, was there all they way either ignoring or clueless as to the real risks lurking below the surface. I know a thing or two about risk and leverage. My former employer was levered 40-1, that was before we filed Chapter 11 bankruptcy. Uncle Sam chose not to save Lehman yet letting her fail cost the taxpayer dearly. When that $660 billion domino fell, she obliterated the value of Fannie and Freddie’s $5 trillion mortgage portfolio, crushing the US taxpayer in the process. Thank you Hank Paulson. Where We Stand Today The recent conferences in Washington debating reform of Fannie Mae and Freddie Mac are filled with political mud slinging, it’s the ultimate blame game. Last week’s release of the Financial Crisis Inquiry Commission’s (FCIC) Report and Dissents are making big headlines. Yet, the story within the story is how political infighting tore this dysfunctional commission apart, ten million dollars spent and we have very little to show for it. I am outraged that President Obama has not stepped in here. I think he blew a golden opportunity to lead and protect billions of US taxpayer dollars at stake. The FCIC report is a joke, it’s the rehash of all rehashes. It looks like my book, Andrew Ross Sorkin’s Too Big to Fail and Michael Lewis’ The Big Short . All thrown into one 700 page document. Is there anything new we have learned in the Commission’s report? Are there clear recommendations that will help prevent another financial crisis? No. The commission was divided by politics and their conclusions are as messed up as a Brett Farve retirement party, his 7th one no less. Ironically the most hapless part of the commissions report is probably the most important. What really went wrong with Fannie and Freddie and how do we fix them? The real battles are being fought within the Obama Administration, among regulators over smaller related housing issues, and between Republicans in the new Congress. The next few weeks will show significant developments in some of these areas, but the process for reforming Fannie and Freddie, the housing finance system more broadly, lags far behind the deficit and job creation in the minds of Congress and the Obama Administration. It’s a shame but look for this battle to take years, not months, dragging out the uncertainty and sclerosis which has plagued the housing markets for the past several years. The Obama Administration has recently leaked reports to the press that their report outlining suggested reforms to Fannie Mae and Freddie Mac, will be delayed till mid-February, from the statutory due date of January 31. The Deadly Divide? My friends at DCTripwire [firewalled] tell me the likely causes of this delay are twofold: (1) A lack of senior staff at Treasury and the Federal Housing Finance Agency (FHFA)–the same over loaded team responsible for implementing many of the rules and regulations of the Dodd-Frank Act. Guess what? They’re also in charge of Fannie and Freddie reform. (2) The fact that there is a divide within the Obama Administration, both substantively and politically on any reform efforts. One side is determined to maintain some sort of government (and hence taxpayer) guarantee of mortgage securities, providing support of middle class homeowners. The other side seeks to remove the government from having either an explicit or even implied guarantee. Instead they hope to trade this removal of the government from the market for the creation of a fund to assist low-income citizens in attaining affordable rental housing. We all know President Lincoln once said “A house divided against itself cannot stand.” Well, this one can’t even roll over. Why? Because Treasury Secretary Geithner (and former National Economic Council Director Larry Summers) are in the former group, while Housing and Urban Development (HUD) Secretary Shaun Donovan and other progressive members of the Administration are in the latter. This might explain President Obama’s silence over the politically handicapped Financial Crisis Inquiry Commission. Even with the Administration’s move back towards the political center, I think the President’s chum Tim Geithner wins and their report, whenever it is issued, will maintain some government role in the mortgage market. I’m told the report will also spell out several options for housing finance reform, in very broad terms, and will not be in legislative language. The Obama Administration wants this report to add to the discussions on Fannie and Freddie, but for political reasons, they want to allow Republicans in the House of Representatives to launch the first salvo in this legislative battle. Inside the Reform Process Despite the lack of concrete action by the Administration, there are several regulatory actions that are being discussed or implemented at present. The first actions have been taken internally by Fannie and Freddie. They each have improved their balance sheets since conservatorship began. Credit standards have been raised, and both they are refusing to purchase mortgages from borrowers with poor credit scores. Fees that each entity charges to banks to guarantee their loans have also been increased and this income has helped to rebuild their balance sheets. Fannie and Freddie still owe a substantial quarterly payment to the Treasury Department in the form of a 10% dividend on the Treasury’s preferred stock. If this dividend was lowered, it would allow the them to begin to repay the billions in taxpayer support and simplify any future restructuring. Any change to the dividend would need to be approved by both Treasury and the Federal Housing Finance Administration (FHFA) which is the GSEs conservator. Expect that any changes will be subjected to heavy Congressional scrutiny. In a move I support, Fannie and Freddie are contemplating is a shift in the ways that servicers are compensated. This is crucial because the incentives in the mortgage servicing business are all screwed up and have hurt the foreclosure process. According my DCTripwire, a Federal Housing Finance Administration / HUD study is being made of future mortgage servicing structures and compensation for single-family conforming mortgage loans. Servicer compensation at present is based on a minimum servicing fee that is included in the mortgage rate, and thus decreases the flexibility of servicing non-performing loans, which has the potential to affect negatively both borrowers and guarantors. Democrats will continue to hammer on mortgage servicers and the lack of investigation and sanctions by the Obama Administration on servicers. Special Inspector General for TARP, Neil Barofsky has assured the Congressional Oversight Committee that criminal investigations and audits of the largest servicers are currently underway, in addition to the 50 state attorneys’ general investigation, though he also emphasized that the Administration could and should do more in this area. Fannie and Freddie Reform Efforts in Congress After the release of the White House report on options for the future of housing finance, look for Congress, especially Republicans in the House of Representatives, to take the lead in proposing GSE reforms. The House Financial Services Committee has already scheduled four hearings on housing and GSE-related topics. When following these developments, it is important to note that the Committee’s rules have reverted to “regular order” whereby the Subcommittee Chairs will hold all, or nearly all, of the hearings on individual topics and investigations , leaving the full Committee hearings, led by Chairman Spencer Bachus (R-AL), for marking up legislation and receiving prominent figures, such as Federal Reserve Chairman Bernanke. Reading between the lines, in my opinion I don’t think House Speaker Boehner and House Finance Committee chair Bachus are all that close these days, especially on reform of Fannie and Freddie. Boehner’s Boys This Subcommittee move is significant change and will introduce important new names and characters into the contentious world of housing finance, including the Rep. Neugebauer (R-TX); Rep. Jeb Hensarling (R-TX), Committee Vice-Chair; Rep. Scott Garrett (R-NJ), Chairman of the Subcommittee on Capital Markets & GSEs (Fannie and Freddie). The list of hearings shows that housing finance and GSE reform are the main focus of the Committee, save Dodd-Frank oversight and macroeconomic policy. What has also become apparent is that Committee Republicans are no further along in devising a credible plan for reform of the GSEs than they were during Dodd-Frank Act negotiations. After conversations with House staff, it is likely that Vice-Chairman Hensarling’s bill from the 11th Congress remains the starting point for Republican legislative reforms. The bill was widely derided in the 111th Congress as “unserious,” since it remains ideologically pure, and refuses to acknowledge the fact that the GSEs currently represent nearly 100% of the mortgage securitization market, alongside an extremely weak housing market. With this in mind, look for the Obama Administration, despite their internal disagreements, to acknowledge this reality and allow Republicans to take the lead in this contentious area as part of a delaying tactic, hoping to push reform off for as long as possible. As mentioned earlier, House Republicans have painted themselves into a corner, consistently and eagerly proclaiming that any government guarantee or involvement in the housing finance markets, save perhaps the Federal Housing Administration and Veterans Administration (for providing assistance to first-time moderate income homebuyers), is unacceptable. Look for any House Republican bill to draw heavily from the work of Peter Wallison, who along with Alex Pollock and Edward Pinto, have recently released a White Paper entitled : “Taking the Government Out of Housing Finance: Principles for Reforming the Housing Finance Market.” Rep. Garrett, who is expected to lead the way on this issue, has been quoted this past week saying definitively, “There can’t be any explicit guarantee. The main problem has been that the taxpayer has been on the hook for this credit risk for a long time. We are adamant there should be no more bailouts.” This will make any compromise with the Democrat-controlled Senate very difficult, if not impossible, let alone with the Obama Administration. Although Garrett and his fellow House Republicans are often portrayed as sympathetic to the financial services industry, the Congressman has also been quick to pour his scorn on an industry proposal, from the Financial Services Roundtable, which proposes to replace the GSEs with several privately capitalized firms that would package mortgage-backed securities, while the federal government would guarantee the interest and principal for investors. In theory the very same entities securitizing nonconforming and private label securities would also be the co-owners of the guaranteeing entities, but these would only be allowed to work with traditional, conforming, 30 year mortgages. The Federal guarantee would not apply to the new entity itself, or any debts or securities issued by them to cover the costs of their operation. The Long Road Ahead The problem for Garrett and other Republicans will be the presence of a “federal catastrophic insurance fund,” similar to that which was put in place after 9/11 for terrorism reinsurance. This fund would support the guarantee only if one of these firms fell into financial trouble. The guarantee firms would contribute to the insurance fund and several layers of capital would need to be used up before the government was responsible. Even this level of taxpayer exposure is unacceptable to many Republicans. Instead of any government support, the Republican school of thought espouses a housing finance sector where the government operates only on the margins, by setting and enforcing standards for what types of mortgages can be securitized, what are appropriate servicing standards and procedures, and potentially by explicitly offering rental assistance for affordable housing. Most plans for privatization of the GSEs are implemented chiefly through the gradual reduction in the size of the conforming loan limit (at a rate of around 20% per year), so that in theory, the private sector is able to securitize more and more newly originated mortgages, and/or an alternative such as covered bonds are introduced. Due to the problems that may result from such a plan, it is likely that the Senate Banking Committee will proceed on GSE reform at a far more deliberate pace than the House akin to the recent Dodd-Frank Act preparations. The Senate Committee (which has yet to hold its first organizational hearing) also will have several new personalities, including a new Chairman, Tim Johnson (D-SD). Its increased Republican presence, which is increasingly made up of conservative-leaning members, will likely echo the House Republicans. Two Senate Republicans are likely to emerge as key thought-leaders in this debate, Senator Mike Crapo (R-ID) and Bob Corker (R-TN). Early indications are that although they each consistently show concern for taxpayers, they both recognize the inherent risks of rushing though a privatization of the GSEs with a weak housing market and without deep and serious reforms of the other aspects of housing finance, such as the rules regarding securitization (including servicing standards, representations and warranties.) It is doubtful that any substantive legislation will be introduced before the summer and even then, it will likely only be in the House, with the Senate months, if not nearly a year behind. For more info go to www.lawrencegmcdonald.com or www.dctripwire.com

Read the full article →

Eboo Patel: Davos: The Global Village and the Local Community

January 26, 2011

The World Economic Forum — like the Clinton Global Initiative, the TED Conference, the Aspen Ideas Festival and other such global confabs — is a carnival of ideas, opportunities, dreams and confessions. It’s less manic than CGI, not quite as laid back as TED, but definitely part of the same family. And it has the added distinction of being, as far as I can tell at least, the Mothership — the event that launched the pattern in which the global meritocratic elite would gather together face-to-face to discuss a wide-ranging, even eclectic agenda. Clinton very definitely shaped his conference to be Davos-like (with the added layer of the attendees making “commitments” to do good works in the world), and while TED began life with a smaller and quirkier dream, it has morphed under Chris Anderson’s leadership to rival (in talent and ideas at least) any other gathering on the planet. Other major conferences tend to gather a narrower range of people to talk about a single subject (the World Health Organization) or have become so unwieldy as to be impossible to navigate (most UN gatherings). The World Economic Forum and its close cousins are different, and professor Klaus Schwab, the founder, knows it. In his introductory session for Davos newbies, he explained the big idea and how it came about. As a Management Professor, he advanced something called “stakeholder theory” – the idea that companies are not just responsible to their shareholders but to a broader range of stakeholders. If such stakeholders gathered to discuss issues, shape a common agenda and find resonances, not only would the company be stronger, but society would be better. Schwab wrote a book about the idea in 1970, and then decided that he wanted to build a platform to try putting it into practice. The first World Economic Forum took place in 1971. The result, 40 years later – a conference that CEOs, presidents and prime ministers feel like they have to come to, and that some happily pay literally hundreds of thousands of dollars to attend – is nothing short of astonishing. The people who come to the World Economic Forum are segmented into different communities – government leaders, media leaders, strategic partners (which are basically Fortune 500 companies, and are the ones who pay the big bucks to attend). Over time, Schwab has added other key communities — technology pioneers, young global leaders, social entrepreneurs, global growth companies (which are going to be the future Fortune 500 and are largely in China). The list of communities shows that he’s a man who is on the cutting edge without being faddish. All in all, it’s a reasonable representation of many of the groups who make things happen at the global level in our world. The more I thought about it, the more I realize that the core idea — and this is not a criticism, simply an observation — is quite old and simple: a healthy social ecology gathers its various segments every so often to bat around ideas, address recurring problems and shape a to-do list for the year or ten ahead. It’s old-school community development really, something that good alderman do in their neighborhoods and good mayors do in their cities: gather the shopkeepers and real estate developers and homeowners and cops and kids and teachers and say, “So what’s this neighborhood going to be about next year?” The fact that Professor Schwab came out of the management world simply means that his scope was global and his network was CEOs. Comparing Davos to a local community development meeting will inevitably bring up local/global issues. The image is so crystal clear it begs to be said out loud. Isn’t it quaint that a slice of the world’s ecology gathers in a Swiss hamlet to engage face-to-face. It makes that global village metaphor feel so, well, real. I wish. In a smart Atlantic piece, Chrystia Freeland explains the rub: “Today’s global super-rich are increasingly a nation unto themselves.” They move their companies where their customers are (increasingly Asia), they can’t find their way around their hometowns because they are so infrequently at home. If lifting people into the middle class in India with jobs and goods means someone has to fall out of the middle class in Indiana, well, that’s globalization. One of the reasons for the increase in the number of World Economic Forum-type events is because the group that gathers here likes to be together. The down-low on Davos is that the really exciting events – the soirees, the nightcaps, the endless-discussion dinners — happen after 10 p.m., like in a college dorm. Leading up to the World Economic Forum, I got dozens of e-mails advertising various late-night social events, and almost nothing touting the formal agenda during the day. These people like to socialize with each other. This is their community. Look, nobody expects the CEO of Citi to walk to work, become president of the PTA and support the neighborhood Little League team. But there was a time that great companies were proud of the cities they were based in. That meant something for jobs, neighborhoods, art museums, local charities. Are those days numbered? Interesting that a stakeholder-driven, community-development-like approach to shaping an agenda for a globalized world could hold such dangerous consequences for local communities. (This piece is re-posted from the Washington Post .)

Read the full article →

Don Tapscott: Davos 2011: Davos Becoming a Year-Round Network to Tackle Global Problems

January 26, 2011

Davos, Switzerland — The World Economic Forum is quickly morphing from a once-a-year talkathon into a year-round network of leaders and leading thinkers tackling global problems. Nature hates a vacuum, and the Forum is expanding to fill a void in our systems for global cooperation. It gets people acting constructively, in sharp contrast to the recent failures of other bodies such as the Doha Development Round of the World Trade Organization and the Cancun or Copenhagen Conferences on climate change. It also fills a special role in bringing together the leaders of the Asian “Tiger Countries” into dialogue with the West — something no one else is doing well. We need such networks for dialogue and for launching important initiatives. True, no one “elected” the Forum to try and solve global problems. But increasingly legitimacy flows to those who actually accomplish things and most participants would say that the Forum is doing just that. For example, over the last two years a thousand leading thinkers have been collaborating in 72 so-called Global Agenda Councils, rethinking many aspects of society from poverty to the future of government. One group of legal scholars has a modest little project — rethinking the global legal system, which they argue is “no longer fit for function.” These councils meet several times a year and collaborate between meetings on a global technology platform developed by the Forum. Many of the recommendations from these councils have been implemented by governments and corporations and some important initiatives have been catalyzed. One of these, the Global Risk Response Network to be launched here this week, addresses a new set of emerging risks that threaten the global economy, society and even the very existence of humanity. Failure of the financial system, weapons of mass destruction, new communicable diseases, collapse of environmental systems, water security and 20 other possibilities make the world a volatile place subject to significant and potentially catastrophic risks. Consider something as seemingly mundane as the global supply chain. The vast networks that provide the world with food, clothing, fuel and other necessities could handle an Iceland volcano and one other catastrophe such as the failure of the Panama Canal. But according to experts, a third simultaneous disaster would collapse the system. People around the world would stop getting food and water, leading to unthinkable social unrest. The Risk Network is designed to help corporate, government and civil society leaders better mitigate such risks. The world’s most relevant global decision-makers will be brought together through a community of Risk Officers from top corporations, governments and international organizations. It will draw on insights from the World Economic Forum’s communities and contributors, including expert Forum working groups and a network of the world’s top universities. If a global crisis arises, these leaders could spring to action on a secure network, drawing on insights from any of the Forum’s many communities. More important, rather than just reacting to unanticipated problems like the European sovereign debt crisis, leaders could be more proactive. This approach was informally prototyped during the Haitian earthquake disaster. It wasn’t the United Nations that organized the world’s response to Haiti – it was myriad organizations and individuals that self-organized to save lives and restore order and Haitian society. The informal network of collaborators orchestrated by the Forum was one of these, pointing to the potential of a more disciplined approach. Rather than a typical think tank, the World Economic Forum is becoming a do tank. Don Tapscott recently co-authored Macrowikinomics: Rebooting Business and the World.

Read the full article →

What If Davos Actually Worked?

January 25, 2011

Later this week, the world’s elite will once again gather in Davos, Switzerland at the World Economic Forum’s annual meeting. For those of us not attending, you can think of the Davos conference as a kind of Olympic Village for the powerful. In any given year, there will likely be no greater concentration of influence, sheer talent and wealth than at Davos. Which makes it all the more disappointing that, by many accounts, little is actually accomplished there. World-class networking opportunities aside, there’s considerable gloom surrounding this year’s events, even from the normally supportive media. “Who needs a World Economic Forum?” the BBC asked, while the U.K.’s Telegraph grimly wondered , “Does all the talking make a difference?” Even the WEF’s founder, Klaus Schwab, alluded to the weariness of the tone at Davos this year by warning that the economic recovery may be hindered by “global burnout syndrome.” “We have in the world a situation where the political system and the institutions are just overwhelmed by the complexity which they have to face,” Schwab told Reuters last week. This may explain why, sprinkled amid jargon like “Global Risk Response Mechanism” and “Inclusive Growth,” the WEF’s theme this year is the dreary “Shared Norms For A New Reality.” But what if Davos actually worked? Below, we’ve suggested — okay, not entirely seriously — a few ways the world could benefit if the Davos attendees dropped the rhetoric and got down to business: Russian President Dmitry Medvedev, slated to be the conference’s opening speaker, would realize that his country can’t use Davos to solicit private investment shortly after imprisoning a billionaire in a trial widely viewed as a sham . Many Davos attendees would be dumbstruck upon their first introduction to the concept of “hypocrisy.” The conference’s title would change to “How We Can Help.” Chastened by the 2010 words of Greek prime minister George Papandreou, who told a Davos crowd “We need no bilateral loans ” — just a few months before his country received a massive bilateral loan — the world’s elite would collectively agree on the meaning of “no.” With two “strategic partner” tickets to Davos costing somewhere near $301,000 , per Andrew Ross Sorkin’s estimates, the nonprofit WEF would prominently display a statement of the total revenue pulled in each year, as well as the cost to put on the soiree. Conference attendees would then be able to property assess the value of their Davos swag. Despite Medvedev’s fielding questions via social media , the Davos crowd would realize that just because you’re on Twitter doesn’t mean you’re transparent. Or support human rights . The Davos organizers, recalling their “inclusive growth” theme, would stop prevaricating about a shortage of qualified female attendees and realize they can’t become an “unrivaled platform to shape the global agenda” without full representation from the group that makes up roughly half the world’s population. World leaders would agree that though there are ” dumb regulations ” and bad taxes, there are just as many dumb, if profitable, business ideas and bad CEOs. In a burst of inspiration, the Davos crowd would agree to ditch the Manichean framing of taxes and economic growth. For a lesson, the attendees would consider the entrepreneurial haven of Norway . Instead of waiting until 2019, the bankers in attendance would agree to adopt all of the Basel III requirements , including rules increasing the amount of capital banks must hold against losses. The move would set off a global race to become the healthiest bank in the world. On the news, stock prices would magically rise somehow. Climate change, on the heels of the U.N.’s recent meeting in Cancun , would be recognized as a environmental, social and political threat — and, crucially, a threat to ski conditions at future Davos conferences. Journalists would recognize the terms “pro-business ” and ” pro-growth ” for what they are: euphemisms for a specific set of interests shared by large and powerful corporations. Still, conference attendees would unanimously agree that a “pro-business” global agenda is necessary. Bankers like Barclays chief Bob Diamond would realize that blaming the banking industry for what the IMF has estimated is a $2.28-trillion loss in global wealth is both necessary and deserved — even if he skipped a bonus or two. After widespread worries about his emotional well being, conference founder Klaus Schwab would stop warning of “global burnout syndrome” and begin cautioning about an excess of “reasoned optimism.” Even if the world is heading into, as one top analyst put it, a”super cycle” of economic growth , the Davos-scenti would realize that the bust from our last period of hyper-growth exacted enormous social costs on much of the world. Including, but not limited to

Read the full article →

Scott Gerber: What’s The Best Way To Increase The Size Of Your Network?

January 24, 2011

Q: What is the best way to increase the size of my network? How can I get myself and my brand in front of people? –Christina Montgomery, FL The following answers are provided by the Young Entrepreneur Council , an advocacy group founded by serial entrepreneur Scott Gerber that works to take action against youth unemployment by teaching young people how to build successful companies. The council’s members include Generation Y entrepreneurs and experts in a variety of fields. A: Attend Events First, figure out what kind of network you want to build: do you want to meet other entrepreneurs? Marketing thought leaders? Fellow kayak enthusiasts? Then, go to your college alumni e-mail list or even Craigslist, and see whether there are any meet ups in your area. If there are none, think about starting your own group and posting to your college list/Craigslist. Get out there and mingle! –Eric Bahn ( @beatthegmat ), founder of beat the gmat A: Go Out There Make sure that you have business cards with your logo on them with you at all times. Wear a t-shirt with the logo on it. It’s easy and when someone glances at the shirt it opens the door for you to tell them about it. Being out and about you may find customers, future contacts, employees and who knows maybe even someone who might want to work with you. People get to see the brand face to face. –Ashley Bodi ( @businessbeware ), co-founder of Business Beware A: Tap Social Media For Personal Branding The best way to meet new cool people is through a personal introduction from someone already in your network. Ask someone you know if they know someone who you should meet. Most likely they do and would be happy to do an e-mail intro. –Elizabeth Saunders ( @RealLifeE ), founder of Real Life E A: Be A Connector Networking is hard work, not because the interactions are actually difficult, but because it must happen on top of all the other daily tasks your business requires. This makes it easy to stay holed up in your office. I am constantly amazed at how quickly and easily those extra meetings pay off, so be sure to time take for the early breakfast meeting or meet someone for coffee in the afternoon. — Anderson Schoenrock ( @ScanDigital ), co-founder of ScanDigital A: Become An Industry Expert The best way to increase the size of your network is to be active both online and offline in the same places your target audience is active. If your audience is on Twitter, you should be on Twitter. If you audience also attends local Meetups, you should attend local Meetups. The first step is to be there and listen. The second step is to engage. –Heather Huhman ( @heatherhuhman ), founder of Come Recommended A: Leave Your Comfort Zone Sometimes meeting new people is as easy as shooting them an email and inviting them to lunch. When you email a prospective lunchtime consultant, be sure to clearly identify who you are, offer concrete reasons why you are worth the person’s time, list the specific topics you would like to discuss, and throw out at least three potential dates, times and locations. –Scott Gerber ( @askgerber ), founder of Sizzle It!

Read the full article →

Watchdog Claims Conspiracy Driving Rules On For-Profit Colleges

January 20, 2011

A Washington advocacy group is claiming that Wall Street investors have conspired with the Department of Education to craft rules that would damage for-profit colleges to drive down their stock prices and allow short-sellers to profit. The as-yet unsubstantiated conspiracy theory — advanced in a press release Wednesday — underscores the intensity of the campaign by for-profit colleges to derail proposed federal rules that could tighten their access to federal aid dollars. The new rules come in response to a growing body of evidence that for-profit colleges such as the University of Phoenix and Kaplan University have left graduates suffering under debts they cannot repay given the meager wages they typically earn. In the press release, the self-described watchdog, Citizens for Responsibility and Ethics in Washington (CREW), portrays the rule-making as little more than a ploy aimed at driving down stock prices of the publicly-traded companies that operate for-profit colleges so that savvy short sellers can cash in. “Wall Street investors have been working with high-ranking education officials to craft regulations, allowing them to net millions of dollars through the short sale of for-profit college stocks,” declares the press release. When pressed for evidence of this conspiracy, the group’s executive director, Melanie Sloan, cited e-mails that did little more than establish that department of education officials have met with one prominent short seller, Steve Eisman, who Michael Lewis profiled in his best-selling book The Big Short . In recent months, Eisman has emerged as a strident critic of the for-profit college industry, asserting that it fleeces taxpayers and preys on students. Asked to explain how a meeting between the government agency and a critic of the for-profit industry amounts to proof of a conspiracy, Sloan said only that Eisman was unfit to offer advice on the subject. “They should be cautious, given that Eisman was making money on the market fluctuations,” she said, referring to the profits he garnered by betting against mortgages. Eisman declined to comment. A Department of Education spokesman dismissed the allegations as “patently ridiculous,” adding that officials gather information from a wide range of sources in drafting all regulations, including members of the for-profit sector. Stocks of companies that own for-profit colleges have indeed dropped significantly over the past year in anticipation of the Department of Education’s new rules, and after public statements made by Eisman. Another major trigger for plummeting stocks was the release of a Government Accountability Office report last year that found widespread fraud in recruitment practices at several for-profit colleges. None of the e-mails referenced by the group indicate that Eisman’s sentiments played any role in shaping the rules being crafted. CREW describes itself as a “non-profit legal watchdog group dedicated to holding public officials accountable for their actions.” But the group’s executive director, Sloan, had planned to join a prominent Washington lobbying firm that represents the for-profit college industry, Lanny J. Davis and Associates. Davis has been in the center of a bruising battle over new rules that could restrict the for-profit college sector’s access to federal student aid money, the lifeblood of the industry. Davis has become a lighting rod in Washington for his paid representation of highly controversial figures, among them the Ivory Coast dictator Laurent Gbagbo. A press release announcing Sloan’s hire last November quoted Davis saying he was “thrilled” by the addition to his team. But Sloan said Wednesday she plans to remain at CREW indefinitely and has no ties to Davis. She did not explain the discrepancy between her statement and the press release. “I think I am being clear,” she maintained. “I don’t work with the coalition or Lanny Davis.” Davis said Sloan might yet join his firm, though the timetable is “still uncertain.” He added that she would not be working on for-profit college rules regardless. Davis’ most recent lobbying disclosure form lists only two clients for the firm, the Coalition for Educational Success and Martek Biosciences Corporation. Both the Coalition for Educational Success, the trade group represented by Davis, and CREW have sued the Department of Education, seeking documents and correspondence that policymakers had in the lead-up to the development of the new regulations for the for-profit sector. The regulations aim to curb some of the more controversial trends for the for-profit education sector, including high student loan default rates and excessive burdens of debt compared to the salaries students attain after graduation. The for-profit education industry has waged an extensive advertising and e-mail campaign against the so-called “gainful employment” rules being considered by the Education Department, arguing that the rules would limit low-income students’ access to college and would hold for-profit schools to a different standard than public or private non-profit colleges. Davis and Sloan have frequently assailed statements made by Eisman, the Wall Street short seller who famously bet against the subprime mortgage market and has since turned his attention to what he portrays as predatory recruitment and financial practices by for-profit colleges. At industry conferences and in testimony before the Senate, Eisman has excoriated the for-profit sector for vacuuming up federal student aid, leaving students with excessive debt burdens. In a speech made at an investment conference last May, Eisman likened for-profit colleges to subprime mortgage lenders. “Are we going to do this all over again?” he asked. “We just loaded up one generation of Americans with mortgage debt they can’t afford to pay back. Are we going to load up a new generation with student loan debt they can never afford to pay back?” CREW claims that Eisman’s depictions are not motivated by civic interest, but rather personal investor gain. His mere meeting with Department of Education officials crafting the new rules amounts to proof of an improper proceeding, the group claims. “Education officials knowingly allowed that process to be tainted by the undisclosed role of short-sellers, seeking to use the regulatory arena to manipulate the financial markets and drive down the share value of for-profit education companies, all for their own personal gain,” declares a letter CREW sent Wednesday to Education Secretary Arne Duncan. The letter asks that Duncan investigate the matter.

Read the full article →

Neighboring States Celebrate Tax Hike, But Will It Really Help Them?

January 13, 2011

SPRINGFIELD, Ill. — While many states consider boosting their economies with tax cuts, Illinois officials are betting on the opposite tactic: dramatically raising taxes to resolve a budget crisis that threatened to cripple state government. Neighboring states gleefully plotted Wednesday to take advantage of what they consider a major economic blunder and lure business away from Illinois. “It’s like living next door to `The Simpsons’ – you know, the dysfunctional family down the block,” Indiana Gov. Mitch Daniels said in an interview on Chicago’s WLS-AM. But economic experts scoffed at images of highways packed with moving vans as businesses leave Illinois. Income taxes are just one piece of the puzzle when businesses decide where to locate or expand, they said, and states should be cooperating instead trying to poach jobs from one another. “The idea of competing on state tax rates is . . . hopelessly out of date,” said Ed Morrison, economic policy advisor at the Purdue Center for Regional Development. “It demonstrates that political leadership is really out of step with what the global competitive realities are.” By going where no other state dares to tread, Illinois could prove itself to be a policy pacesetter or the opposite – a place so dysfunctional that officials created a jaw-dropping budget crisis and then tried to fix it by knee-capping the economy. Illinois faced a budget deficit of $15 billion in the coming year, equivalent to more than half the state’s general fund. Officials warned that state government might not be able to pay its employees. It certainly would fall further behind in paying the businesses, charities and schools that provide services on the state’s behalf. To avoid that, the Democrat-controlled General Assembly voted to temporarily raise personal income taxes 66 percent, from 3 percent to 5 percent. Corporate rates will rise, too – from 4.8 percent to 7 percent – when Democratic Gov. Pat Quinn signs the measure. The increase is expected to produce $6.8 billion a year for the four years it’s in full effect. That should be enough to balance Illinois’ annual budget and begin chipping away at a backlog of roughly $8 billion in old bills. The tax move inspired a day of taunts across state borders and finger-pointing between parties. “Years ago Wisconsin had a tourism advertising campaign targeted to Illinois with the motto, `Escape to Wisconsin,’” Wisconsin Gov. Scott Walker said in a statement. “Today we renew that call to Illinois businesses, `Escape to Wisconsin.’ You are welcome here.” Illinois state Sen. Dan Duffy, a Republican, labeled the tax increase “the nuclear bomb of jobs bills.” There was even some carping from Illinois Democrats. Chicago Mayor Richard Daley predicted jobs will start trickling out of Illinois with little fanfare. “Businesses don’t have press conferences like this and announce they’re moving 50 people out, 60 people out, 70 people,” Daley said at an event in Chicago. But Illinois’ governor rejected the idea that the increase would allow other states to lure jobs away. “Lots of luck to them, but that’s not going to happen,” Quinn said at a news conference Wednesday. Businesses look at more than taxes when making financial decisions, Quinn said. They also look at whether state government is stable and able to provide good roads and schools. “It’s important for their state government not to be a fiscal basket case,” Quinn said. A Wisconsin company seemed to prove his point. Train-maker Talgo Inc. is threatening to leave Milwaukee because Wisconsin rejected federal funds for high-speed rail. Talgo still considers Illinois a strong possibility for its new the company’s new home, despite the tax increase, said spokeswoman Nora Friend. The tax increase “would not weigh in as a positive, but it’s difficult to say whether it’s the deciding factor,” Friend said. “It would be one more factor that gets weighed in.” Illinois Democrats note that even after the increase takes effect, the 5 percent personal income tax rate will still be lower than many nearby states’. The top personal rate in Wisconsin is 7.75 percent, for example, and Iowa’s is 8.98 percent. Indiana and Michigan will have lower rates, however – 3.4 percent and 4.35 percent. Bill Ecton, 54, owns Ecton’s True Value Hardware in Robinson, Ill., just a few miles from the Indiana border. He was resigned to the fact that Illinois ultimately would raise taxes to repair the budget, but he said the taxes will take a toll. “If I have to pay more to the state, it’s money that I can’t pay out in wages,” Ecton said. “I’m not saying I’m laying people off, but maybe I’m going to look twice at adding another one.” ___ Associated Press writers David Mercer in Champaign, Ill., Scott Bauer in Madison, Wis., Dinesh Ramde in Milwaukee and Charles Wilson in Indianapolis, Ind., contributed to this report.

Read the full article →

Dr. Leslie Gaines-Ross: 8 Ways Reputations Will Change in 2011

December 30, 2010

As Weber Shandwick’s chief reputation strategist, I have decided to join the ranks of the end of the year palm readers and offer my predictions for the next year. Time and time again during the past twelve months, I have been asked to hold my finger up in the air and divine from whence come the changing winds of reputation. My head has filled with reputation-related ahahs and hunches. Now is my chance to let it all out. So here is my list of what to look for in 2011. 1. Hijacked Reputations: As increasingly more information gets leaked, mismanaged and corrupted via the Internet and otherwise, more and more companies will suffer as a result. Repairing such reputational damage will not be easy — what used to be 15 minutes of shame may now last forever on the Internet. The best antidote will be, as it always has been, being prepared beforehand to act quickly, decisively and transparently. 2. Reputation Recoverers Anonymous: The prevailing trend for 2011 will be reputation recovery. As the “stumble rate” increases (Weber Shandwick regularly measures this), so does the rate at which many companies will pick themselves up and rejoin the race. Trophies will increasingly be handed out to CEOs who lead their companies back from worse to first. In 2005, there were 455,000 search mentions of reputation recovery. Five years later, that number has soared to nearly 2, 500,000 mentions. Reputation rehab is a new industry to watch. 3. Reputation Warfare. Reputation warfare will expand and intensify. Enabled by the Internet and social media, individuals and small groups will continue to rise up and take greater control of reputations by slinging criticism, some valid, against companies and other entities. Adopting strategies on how to better leverage and counter these reputation insurgents will be essential (See my article on Reputation Warfare in Harvard Business Review for more insights). The release of confidential U.S. embassy cables via WikiLeaks is only the most conspicuous of these attacks. It will become apparent in the year to come that WikiLeaks was only the tip of the iceberg. 4. Online Reputation Revisionism. Further advances will be made in establishing a workable system of erasing or amending unfairly disparaged online reputations. One such particularly promising idea is likely to be at the forefront: a one-time only policy that grants social amnesty to young adults turning 21 who are about to enter the workforce. Google’s CEO Eric Schmidt hinted at the wisdom of this kind of social amnesia: “every young person one day will be entitled automatically to change his or her name on reaching adulthood in order to disown youthful hijinks stored on their friends’ social media sites.” The day will come, maybe not next year but soon, when a communally agreeable system of “social amnesia” will arise. We can expect increasing discussion in 2011 on what form that system will take, since the need for one is critical. 5. Ascendancy of Social CEOs: Chief executives will increasingly join the 21st century, expanding their use of various online channels to burnish their company reputations, including writing or participating in internal blogs, telling the company story at conferences and on corporate YouTube channels and being interviewed by journalists on online media channels. The socialization of CEOs has begun and will continue in 2011. 6. Reputation Blacklisting: List mania will continue to expand. Every day new rankings and league tables are born: best companies to work for, best companies to launch a career, best companies for hourly workers, best companies for C-level executives. These rankings help companies build and differentiate their reputations through third-party endorsements. In the year ahead, however, we can also expect the long overdue but inevitable reaction to such “best of” lists. Look for more reputation “blacklists” to sprout and then propagate – for example, worst companies for women to work for, worst companies for training and least socially responsible companies. 7. Reputation Risk Insurance: After a year of reputation scandals and downfalls, now would be the time for reputation risk insurance to firmly take hold. Several large insurance brokers already cover reputational damage as part of their directors’ and officers’ liability insurance (D&O) designed to shield board members from shareholder law suits. A more expansive reputation-based product is due that would compensate companies whose reputations have taken a hit whether offline or online and caused them to suffer declining sales, additional marketing and public relations expense and other reputational fallout. 8. The Corporate Brand Rises: In the next year, companies which own a portfolio of individual brands will focus more intensely on developing the reputation of the parent corporation, not just the individual brands. Consumers have access to a dizzying array of information. Even the most unsophisticated consumer can now easily identify the company standing behind any brand. If the parent company’s reputation is strong, known for treating its employees well, being transparent and sustainable, and having good leadership, consumers are more likely to make a purchase and then tell their friends about it. We will revisit these trends as next year closes and 2012 awaits us.

Read the full article →

UN Climate Deal Marks A Tiny Step Forward For Fighting Climate Change

December 11, 2010

CANCUN, Mexico — A U.N. conference on Saturday adopted a modest climate deal creating a fund to help the developing world go green, though it deferred for another year the tough work of carving out deeper reductions in carbon emissions causing Earth to steadily warm. Though the accords were limited, it was the first time in three years the 193-nation conference adopted any climate action, restoring faith in the unwieldy U.N. process after the letdown a year ago at a much-anticipated summit in Copenhagen. The Cancun Agreements created institutions for delivering technology and funding to poorer countries, though they did not say where the funding would come from. In urging industrial countries to move faster on emissions cuts, it noted that scientists recommended reducing greenhouse gas emissions from industrial countries by 25 to 40 per cent from 1990 levels within the next 10 years. Current pledges amount to about 16 percent. Mexican President Felipe Calderon, in a 4 a.m. speech, declared the conference “a thoroughgoing success,” after two separate agreements were passed. The agreements shattered “the inertia of mistrust” that had settled over the frustrated efforts for a broad climate treaty, he said. One of the agreements renewed a framework for cutting greenhouse gas emissions but set no new targets for industrial countries. The second created a financial and technical support system for developing countries facing grave threats from global warming. Foreign Secretary Patricia Espinosa, the conference president, gaveled the deal through early Saturday over the objections of Bolivia’s delegate, who said it was so weak it would endanger the planet. Decisions at the U.N. climate talks are typically made by consensus, but Espinosa said consensus doesn’t “mean that one country has the right to veto” decisions supported by everyone else. The accord establishes a multibillion dollar annual Green Climate Fund to help developing countries cope with climate change, though it doesn’t say how the fund’s money is to be raised. Last year in Copenhagen governments agreed to mobilize $100 billion a year for developing countries, starting in 2020, much of which will be handled by the fund. The agreements also set rules for internationally funded forest conservation, and provides for climate-friendly technology to expanding economies. Espinosa won repeated standing ovations from a packed conference hall for her deft handling of bickering countries and for drafting an acceptable deal, though it fully satisfied no one. “It’s been a challenging, tiring and intensive week” said U.S. special climate envoy Todd Stern, clearly content with the results. The European Union’s top climate official, Connie Hedegaard, said Saturday’s decisions would help keep international climate talks on track. “But the two weeks in Cancun have shown once again how slow and difficult the process is,” Hedegaard said. “Everyone needs to be aware that we still have a long and challenging journey ahead of us to reach the goal of a legally binding global climate framework.” Christiana Figueres, the U.N.’s senior climate official, said the agreements would put all governments on cleaner trajectory. “Cancun has done its job,” she said. Environmentalists cautiously welcomed the deal. It “wasn’t enough to save the climate,” said Alden Meyer of the Washington-based Union of Concerned Scientists. “But it did restore the credibility of the United Nations as a forum where progress can be made.” The Cancun deal finessed disputes between industrial and developing countries on future emissions cuts and incorporates voluntary reduction pledges attached to the Copenhagen Accord that emerged from last year’s climate summit in the Danish capital. It struck a skillful compromise between the U.S. and China, which had been at loggerheads throughout the two week conclave on methods for monitoring and verifying actions to curtail greenhouse gases. “What we have now is a text that, while not perfect, is certainly a good basis for moving forward,” Stern said during the decisive conference meeting. His Chinese counterpart, Xie Zhenhua, sounded a similar note and added, “The negotiations in the future will continue to be difficult.” The accord “goes beyond what we expected when we came here,” said Wendel Trio of the Greenpeace environmental group. Underscoring what’s at stake in the long-running climate talks, NASA reported that the January-November 2010 global temperatures were the warmest in the 131-year record. Its data indicated the year would likely end as the warmest on record, or tied with 2005 as the warmest. The U.N.’s top climate science body has said swift and deep reductions are required to keep temperatures from rising more than 2 degrees Celsius (3.8 F) above preindustrial levels, which could trigger catastrophic climate impacts. Bolivian delegate Pablo Solon protested that the weak pledges of the Copenhagen Accord condemned the Earth to temperature increases of up to 4 degrees Celsius (7.2 F), saying that is tantamount to “ecocide” that could cost millions of lives. He also complained that the text was being railroaded over his protests in violation of the U.N.’s consensus rules. In the 1992 U.N. climate treaty, the world’s nations promised to do their best to rein in carbon dioxide and other heat-trapping gases emitted by industry, transportation and agriculture. In the two decades since, the annual conferences’ only big advance came in 1997 in Kyoto, Japan, when parties agreed on modest mandatory reductions by richer nations. But the U.S., alone in the industrial world, rejected the Kyoto Protocol, complaining it would hurt its economy and that such emerging economies as China and India should have taken on emissions obligations. Since then China has replaced the U.S. as the world’s biggest emitter, but it has resisted calls that it assume legally binding commitments – not to lower its emissions, but to restrain their growth. Here at Cancun such issues came to a head, as Japan and Russia fought pressure to acknowledge in a final decision that they will commit to a second period of emissions reductions under Kyoto, whose current targets expire in 2012. The Japanese complained that with the rise of China, India, Brazil and others, the 37 Kyoto industrial nations now account for only 27 percent of global greenhouse emissions. They want a new, legally binding pact obligating the U.S., China and other major emitters.

Read the full article →

Study: Boycott Cost Arizona $140 Million

November 18, 2010

PHOENIX — A boycott of Arizona in the wake of a controversial immigration law has cost the state more than $140 million in lost meeting and convention business, a new report released Thursday shows. The economic impact analysis commissioned by the Center for American Progress put hotel industry losses during the first four months after the signing at about $45 million. Visitors would have spent an additional $96 million during their stays, said Angela Kelley, the group’s vice president for immigration and advocacy. “This is as much I think to serve a warning to other states, particularly those who rely on tourism and conferences and conventions, that there is an economic impact to it,” Kelley said. “We feel like this is a very modest slice, just a piece of what the economic impact is, and we don’t think that we’re overstating it or overselling it.” The study was paid for by the group, a liberal-leaning think tank, but conducted by the respected Scottsdale-based economic firm Elliott D. Pollack & Co. It also says lost bookings will probably continue for more than a year, multiplying the effect of a boycott called by immigrant-rights activists after Republican Gov. Jan Brewer signed the state’s new law in April. Former state Sen. Alfredo Gutierrez said the goal of the boycott was to bring the state’s economy to a stop in much the same way that a boycott punished the state 20 years ago over its refusal to honor the Rev. Martin Luther King Jr. with a holiday. The immigration law would require police – in enforcing other laws – to question the immigration status of those they suspect are in the country illegally. Opponents said that could lead to racial profiling, and said immigration enforcement is the job of the federal government. After U.S. District Judge Susan Bolton put the most controversial parts of the law on hold on constitutional grounds in July, some opponents of the measure called for the boycott to end, including U.S. Rep. Raul Grijalva of Arizona and the grocery workers union. An estimated 15 million visitors come to Arizona each year for vacations, conventions and sporting events such as the Fiesta Bowl, pro golf tournaments and baseball spring training. The state tourism office estimates that conventions and other tourism-related activity brought in $16.6 billion in 2009 and that 157,200 people were employed in industry. __ Online: Center for American Progress: http://www.americanprogress.org/

Read the full article →

$12 Billion Hedge Fund Has Its Own Unofficial Golf Pro

November 18, 2010

NEW YORK (By Matthew Goldstein) – Sam Evans may not have the most powerful or lucrative position in the hedge fund world. But his job at SAC Capital Advisors is one a lot of people, and not just financial industry types, would die for. Unlike his co-workers, the hundreds of traders and analysts who work at Steven Cohen’s $12 billion hedge fund, Evans does not stare at computer screens, map out stock charts or work the phones for information on the markets all day. Rather, he spends much of his time negotiating the greens — quite literally. Evans, 49, who joined Cohen’s Stamford, Connecticut-based firm in August 2009 after more than 20 years as an institutional stock broker, is SAC Capital’s unofficial golf pro. Evans job isn’t so much helping SAC Capital portfolio managers and others at the fund with their strokes, as it is helping them gain a better understanding of some of the companies Cohen’s hedge fund puts money into. As part of the hedge fund’s business development group, he sets up dozens of golf outings for SAC Capital traders and analysts over the course of a year. Guests at these small gatherings are varied, say investment bank sources familiar with Evans’ job description. Invitees might be wealthy individuals from whom Cohen is trying to raise money. Or they might be corporate executives with companies about which the hedge fund is trying learn more. A handful of SAC Capital employees and Wall Street analysts may also tag along from time to time. An amateur golfer with a respectable 7-stroke handicap, Evans has found a unique way to marry his golf skills with the big rolodex of corporate executives he struck up friendships with during his time at Donaldson Lufkin Jenrette and more recently Deutsche Bank. A member of more than a half dozen prestigious East Coast golf clubs, Evans has played with an elite group over the years, including former President Bill Clinton. Now there is nothing unusual about brokers, traders and business executives spending a lot of their free time teeing off on the links. Many a corporate merger has been agreed to in principle on the back nine. And Wall Street investment firms are famous for sponsoring charity golf outings that are widely attended by hedge fund traders, mutual fund managers and corporate executives. Investment firms and mutual funds often arrange similar “corporate access” events — typically conferences and dinners — where money managers and analysts are invited to meet and schmooze with business leaders. Yet, the ability of a big hedge fund to get several hours alone with a corporate executive on a golf course reveals the great information disparity that exists between ordinary investors and the savviest of traders. “To some extent, the notion of a level playing field and a truly public market is a myth,” said Donald Langevoort, a Georgetown University Law Center professor. SOMEBODY’S GOT TO DO IT What’s clear is that there aren’t many on Wall Street, much less at a hedge fund, like Evans, who gets paid to play golf three or four times a week with corporate executives and other rich people at historic courses like Merion Golf Club in suburban Philadelphia or Shinnecock Hills Golf Club on Long Island. In fact, one person who knows Evans and has golfed with him calls him something of a “pioneer” in the $1.7 trillion hedge fund industry. Others, upon learning of Evans and his unusual post, expressed a sentiment similar to the one stated by the manager of another hedge fund: “How do I get a job like that?” Evans, a 1987 Harvard Business School graduate who was named one of Wall Street’s top institutional equity salesmen in a Reuters survey in 2000, declined to comment through an SAC Capital spokesman. Like his boss, Cohen, he appears to guard his privacy vigorously — a fairly intensive Internet search for a picture of him on the links came up empty. Jonathan Gasthalter, SAC’s spokesman, also declined to discuss Cohen’s decision to hire Evans and his unusual corporate role. To some degree, Evans may owe his job to the new reality hedge fund managers find themselves in following the worst financial crisis in decades. Today, even the industry’s most successful managers must work harder than ever to woo new investors and keep current ones from bolting. But beyond the need to raise capital, Evans’ time spent on the greens also sheds a light on the many often subtle ways that hedge funds use to get access to corporate executives and a potential edge over their competitors. “While this job sounds unique, it is my understanding there are a lot of people with jobs at hedge funds who are there to help facilitate information flow,” said Jill Fisch, a University of Pennsylvania Law School professor, who specializes in corporate governance issues. “The whole goal at a hedge fund is to have an information edge.” PAR FOR THE COURSE Securities experts said there’s nothing inherently wrong with a hedge fund organizing small golf outings for its traders and analysts to meet with corporate executives in order to get to know a company or an industry better. That is the kind of fundamental research and basic information gathering that often separates one hedge fund from the other. But securities lawyers said there is always a concern that in a casual setting like playing three hours of golf, a company executive may blurt out some confidential corporate information and the hedge fund later trades on it. “The potential issues are fairly obvious because these are events where there is unlikely to be strong compliance control,” said Langevoort, the Georgetown professor. “Everybody knows in their head what the rules are. But when you go out in one of these settings it is easy to slip.” A securities lawyer in New York, who did not want to be identified because he and his law firm do a lot of regulatory defense work for Wall Street investment firms, said concern about the leaking of confidential information is always greatest when traders and executives gather in more intimate settings as opposed to some well-attended public event like a football or baseball game. In the wake of the October 16 2009 arrest of Galleon Group co-founder Raj Rajaratnam and nearly two-dozen others on insider trading charges, federal authorities have said stamping out the misuse of secret corporate information by hedge funds is a major priority. Authorities are particularly focused on the ways hedge funds gather information to get a so-called trading edge. The Galleon investigation also has caused headaches for Cohen because several people charged in the case had once worked at SAC Capital. But so far no one has been charged with wrongful trading while working at Cohen’s fund. CHIP SHOTS To be sure, there’s no indication that the golf excursions arranged by Evans have raised any concerns with regulators or federal authorities. People familiar with them said Evans’ main task is to set up golf dates with corporate executives to help cement better relationships, not unearth confidential corporate information. In fact, SAC Capital takes steps to make sure that even if some executive let his lips flap a bit too much while waiting to hit a putt, the fund doesn’t trade on anything that is said. A former SAC Capital employee familiar with the golf outings said shares of companies whose executives attend a golf outing that Evans has either arranged or co-sponsored are put on a “restricted list” — meaning the stock can’t be traded for a set period of time. In September, for instance, SAC Capital put shares of chemical company DuPont on the restricted list, after Evans and another SAC employee attended a small golf outing with Deutsche chemical analyst David Begleiter and Dupont Chief Financial Officer Nicholas Fanandakis. The outing, which also included a few mutual fund managers, was officially organized by Begleiter. The small outing was held at Merion Golf Club, often rated as one of the top private courses in the United States, because Evans is a member of the 114-year-old club. He and Begleiter became friendly during the nine years Evans worked for Deutsche. Officials with Deutsche and DuPont declined to comment. Chandler Withington, Merion’s assistant golf professional, said in an email that the club does not disclose “information on any of our members without their consent.” In a regulatory filing, SAC Capital reported owning 65,000 shares of DuPont, a rather meager position for a large hedge fund. Evans, a former college swimmer and baseball player at American University, did not take up golf until graduate school. Standing approximately 6’4″ inches tall, he is said to be ambidextrous, able to throw and write with both hands. People who know him say Evans has worked hard to hone his golfing skills, even overcoming a case of Guillain-Barre syndrome in 1994 — an ailment that can cause temporary muscle paralysis. Several of his friends, who did not want to be identified, said Evans values the relationships he made with wealthy individuals and corporate executives while working on Wall Street. They added that he would not do anything to jeopardize the friendships he has made or his reputation. Jack Thompson, an avid golfer who is in the business of raising capital for a number of investment funds, said he sees nothing unusual about using golf as a way to get to know a person or a company. “This is no different than the CEO of some company golfing with customers,” said Thompson. “They are networking and sharing information. It doesn’t mean they are doing anything wrong.” Some on Wall Street said getting face time with a corporate executive on a golf course is akin to a hedge fund throwing a splashy party at a nightclub or renting a cruise boat to entertain guests — something many funds are known to do from time to time. Others point out that many hedge funds work with doctors to get insight on medical industry trends and some even hire private investigators to gather dirt on chief executive officers. For instance, in 2007, William Ackman, the manager of Pershing Square Capital Management, employed an outside consultant to track the corporate plane travel of Ceridian Corp.’s then chairman L. White Matthews. Ackman, in mounting a campaign to push for changes at Ceridian, had charged the company let Matthews misuse the corporate jet by flying seven times in 63 days to his vacation home in Jackson Hole, Wyoming. SHUSH Still, there is something about golf, with its leisurely pace and the tendency of players to turn off their phones and Blackberrys for a while, that can encourage normally tight-lipped people to let their hair down. Over the years, it’s something securities regulators have noticed as well. In 2001, for instance, the Securities and Exchange Commission and federal prosecutors charged a San Diego man with making $137,485 in illegal profits from a confidential tip he got while golfing with the director of a company that was on the verge of being acquired. Federal authorities charged Douglas Gloff with trading on the inside information after the director of Acuson said the company was “going to go away.” Authorities didn’t charge the unnamed director with any wrongdoing after concluding he made a mistake and tried to prevent Gloff from trading on the confidential buyout information. Regulators said the director called Gloff and told him not to buy any Acuson shares “unless you want to go to jail.” Gloff subsequently pleaded guilty to insider trading, forfeited his illicit trading profits and paid a $137,485 fine to the federal government. Still, securities experts say a savvy trader can glean a lot from a long golf game with a company executive even if the talk on the greens has nothing to do with business. They point out that an astute trader can learn a lot from a person’s body language and demeanor. “Sometimes you can watch a person for four hours and get an idea of how things are going at a company,” said Georgetown’s Langevoort. “You can learn a lot from what he doesn’t want to talk about.” Cohen just might be onto something here with the hiring of Evans. As one of the hedge fund industry’s most successful managers for more than two decades, he’s had a reputation for making some groundbreaking hires. SAC Capital was one of the first hedge funds to hire an in-house psychiatrist, Ari Kiev, to talk to stressed traders and analysts. Kiev died last November. Several years ago, Cohen aggressively started adding compliance people to the payroll to make sure traders at the fund do not cross the line. Other big funds have since followed suit. So, who knows? Maybe instead of “2 and 20″ — a typical hedge fund’s management and performance fees — “fore!” will become the industry’s new mantra. (Reported by Matthew Goldstein; Editing by Jim Impoco and Claudia Parsons) Copyright 2010 Thomson Reuters. Click for Restrictions .

Read the full article →

Ron Ashkenas: Why Best Practices Are Hard to Practice

November 12, 2010

Not long ago a senior HR executive confessed to me that her company’s succession planning and talent management processes didn’t work very well. She also expressed frustration that her team had spent countless hours studying other well-known companies and had copied most of the best features, but somehow what worked elsewhere didn’t work for her company. More recently I met with a senior team to share ideas about reducing complexity — and during the course of the conversation I talked about how GE had developed the Work-Out approach to build a culture of simplification. Several of the executives quickly remarked that they had tried Work-Out in their organization already, but it didn’t produce any results. Again, what had worked in one company hadn’t worked in another. It would be easy to say that processes and tools cannot be picked up and moved from one organization to another. After all, each organization is unique — with different markets, commercial forces, structures, histories, leadership , and cultures. But if there weren’t any universals, the sharing and transferring of best practices would be a waste of time, and there would be little learning across companies (or even within companies). But in truth some firms are exceptionally good at “stealing shamelessly.” For example, think of all the companies that have benefited from Toyota’s production model. So why do some organizations succeed at utilizing processes and tools developed elsewhere while others fail? Here are two common pitfalls of applying best practices, and how to avoid them: Lack of adaptation: The first pitfall is the temptation to take on a process or tool without tailoring it to the new environment. Because companies are so different, it is rare that a practice developed in one place can be applied elsewhere without significant customization. This not only requires learning the tool or process, but truly understanding the principles behind it. Practice comprehension calls for hard work — far beyond making road trips or sending a few people for training. For example, some years ago GE’s senior team visited Wal-Mart to learn about its “quick market intelligence” approach. What they found was that dozens of managers from Wal-Mart’s headquarters went out to the field during the week, and would then spend Friday in Bentonville to analyze what they had learned. On Saturday they would share their findings with store managers through a company-wide video-conference. GE took away from this the benefits of capturing and disseminating field data quickly and systematically, but realized that sending managers back and forth wouldn’t work in their businesses. As an alternative, GE developed a QMI process that required business leaders to conduct regular, pre-scheduled group teleconferences between headquarters people and managers who interfaced directly with customers. Each GE business was allowed to adapt the process, based on the nature of the business. Lack of adoption: The second pitfall is to utilize a borrowed process or tool without full leadership support and commitment, as though just having the tool itself will generate the desired results. A former client at GE called this “the difference between doing it and really doing it.” In the succession planning case mentioned above, the HR leader admitted that her people were driving the process instead of line management — so for most people it was a form-filling exercise that led to a nice book, but wasn’t used for making key staffing decisions. In the other company that had unsuccessfully tried the GE Work-Out approach, it turned out that the process was really a glorified brainstorming meeting and that senior managers did not put themselves on the line to make real-time decisions (a key feature of Work-Out) during the sessions. One of the characteristics of great companies is that they actively learn from others. But to be successful at doing this requires more than just identifying and borrowing best practices; it also requires adaptation to your culture and full adoption by your leadership. Without paying attention to these two steps, it is unlikely that best practices will actually be put into practice. How does your company adapt — and adopt — best practices? Cross-posted from Harvard Business Review .

Read the full article →

Jack Myers: Magazine Industry Confronts a Challenging Yet Hopeful Future

October 5, 2010

As the magazine industry gathers this week in Chicago under the new moniker MPA – The Association of Magazine Media , ( http://www.magazine.org/ ) the focus is on restructuring and refocusing to address a stark economic reality: print -only consumer magazine advertising spending, which declined more than 15% between 2000 and 2010, is projected to decline at least another 10% to 20% by 2020. However, new data being developed by Jack Myers Media Business Report reflects a radically different magazine industry outlook, projecting that multi-platform consumer magazine ad spending will increase by more than 40% by 2020. This new data offers corporate management gathering this week at the American Magazine Conference a radically different perspective on their industry’s growth prospects. The traditional print magazine is being extended to:

Read the full article →

Patricia Handschiegel: The New Power Girls: Meet The Power Girl Who Is Changing How Brands Market Online

October 5, 2010

Palo Alto, CA is quiet but busy on a late weekday afternoon as I join fellow Power Girl Julia Kung for a business lunch on the outdoor patio of one of the city’s cute restaurants. A half dozen or so dot the “downtown” area of the sleepy town, many of which appear to serve Italian food. As we take our seats and dig into a selection of fresh bread, we are like any other women in the city, having a late lunch. Julia’s in killer gray peep toe ankle boots and a chic, oversized top. I’m in gold Christian Louboutin heels. Our companies were doing business together at the time, but like most Power Girls, business is always peppered with friendships and camaraderie. Today’s new modern women entrepreneurs and executives aren’t just blazing it in business, they’re also cool, fun people you get along with. When it comes to marketing, Julia is the best in the business. A hybrid mix of old and new school practice, with a tech-savvy that’ll blow your social media expert out of the water, Julia’s work is garnering major attention in the business. Her work with Moxsie.com has captured major fashion industry cred like WWD and California Apparel News. In the past year, she’s been invited to speak at prestigious conferences like Internet Retailer. Most marketers today operate under false assumptions, aren’t savvy about page views and analytics, rely on tired, elaborate “call to action” campaigns because they believe that every consumer wants (or has time) to “engage,” etc. When marketing strategy came up among a group of female founders this past week, I couldn’t help but to email Julia to tap her insight. Here’s what she shared: You’re one of the best cross-platform, cross-media marketers I know, particularly on the web. What’s the secret? There is no secret at all. Since Moxsie is a small company and our target demographic is very wired and engaged on many platforms, it’s a no-brainer. Also, the twin limitations of bandwidth and budget mean that we can’t rely solely on traditional marketing and advertising, so we have to get creative and experiment. We’re always willing to be the guinea pig with new technology. I’m impressed by big brands that are able to get corporate buy-in for new media since it’s got to be harder for them to take those risks. Finally, I’d like to emphasize that it all depends on the product. Our site might have all the bells and whistles, and we might promote and cross promote on a billion platforms, but it won’t matter if the independent fashion we sell isn’t appealing. Luckily, we carry the best stuff! Moxsie’s generated tons of traffic and sales through your marketing efforts, what do you feel has been the key/critical piece to your strategy? This’ll be a surprising answer from someone who sells independent fashion, but I think our location has been very key. New York and LA are generally considered the US fashion centers, but Moxsie’s location in the Bay Area means that we have easy access to a lot of great partners. Polyvore, Kaboodle, Twitter, and TheFind are examples of companies that we’ve established great working relationships with. They like it when we test new products for them, and we like that these products help us drive sales. Also, I’ve been very lucky to hire extraordinary people for the marketing team: (Nathan Zaru and Mayka Mei- check out Mayka’s blog at themaykazine.com). They’re young, eager to learn, and great at multi tasking. Most importantly, they are well versed in new media and have specialized skill sets that encompass the whole range of marketing needs. We’re a very small team, but we’re able to accomplish so much because of this. Companies may feel overwhelmed by all the noise, wide marketplace and reach they can have. How can they remain focused? The marketing mantra is “what’s the goal?” As long as you only use tools and media to accomplish the goals you set out initially, you won’t be distracted. Moxsie created what’s essentially a new niche (indie fashion) — how important is it today for companies to differentiate, especially since there is so much of the same things online? Why would customers come to your site if you’re exactly the same as something that already exists? Moxsie carries accessibly priced independent fashion for men and women, which is already unique. We’ve also made the purchasing experience unique too! For example, you can see a live twitter feed of Moxsie mentions through the twitter-sphere when you’re browsing so you know what sorts of things other people are interested in, during check-out we allow you to choose a charity that we donate a portion of our proceeds to, every purchase from our warehouse is gift-wrapped, and people that purchase from us get special deals that aren’t available to everyone else. These are just some of the ways we make sure that the Moxsie experience is an indelible memory. What do you feel are the online marketing must-haves for companies today? Investment in social media is crucial for B2C companies, and usually very useful for B2B. The basics of marketing and also SEM + SEO are obvious necessities. Probably the most important must-have isn’t any sort of tool, but the right mindset. Marketing should be an adventure! What are some of the mistakes a lot of companies make in marketing online? Never waste an opportunity. This is when I offer anyone who’s read this far into the article a 15% off coupon code on www.moxsie.com- Just use “NEWPOWERGIRLS” in your shopping cart for 15% off. It’ll be live till the end of 2010. Thanks for reading this far people, and may I recommend our women’s shoe and boot selection ? They are to die for. I love that. How important are blogs and media today to online strategy? Are these things still relevant when companies can now reach audiences themselves more than ever? Blogs and media are extraordinarily important! Moxsie stays in touch with a large number of bloggers. We love the blogging community because it’s fun, unfettered, and allows information to be communicated so creatively. Additionally, many of these blogs are influencers not only of consumers but of other media. It all feeds off of each other. Moxsie’s also really great about advertising online — what’s behind your success in it? There is definitely no magic formula here. We’ve done plenty of testing to determine which formats and audiences work best. Since we have a limited budget, we keep our focus narrow and campaigns are always ROI driven. Is there anything companies absolutely should NOT do online? You have to try everything once, right? Can’t be scared of making mistakes. If there’s one don’t, I’d choose Google’s corporate motto of “Don’t be evil.”

Read the full article →

Grant Cardone: Work from Home Successfully

October 5, 2010

Want to work or run your business from home and like the idea of never having to go anywhere, work in your underwear, and do as you please with no one looking over your shoulder? Well, whether you are working for someone else from your home or running your own business from home, there are some things you must know to make a home-run business successful. I have run multiple businesses from a home office for over 20 years. Each of these started out small and grew into something much larger. Each quite different, each requires a different focus and different levels of support. I started my first business when I was 29 from home only because I couldn’t afford an office. In the beginning, I was everything from sales person , sales team, CEO, shipping, receptionist, bookkeeper, and boss. For almost 3 years I worked for less money than I ever had and put in double the hours. I figured out how to make my home business successful and then was able to expand into multiple businesses with partners and employees. Still today I continue to operate a home office with support staff and partners working from traditional offices. With technology what it is today this is becoming more and more a possibility for the self-starter and self-disciplined. And those two traits will be required! There are many benefits to working from home from getting more done, working all hours, reduced travel time, tax advantages, and cost savings but you should beware of the many pitfalls and traps. Some of the problems with working from home are first the blur between work and personal life. Some find themselves unable to get focused on the business at hand and others unable to turn it off. I believe both of these responses are more about the individual than the location of the office. Also many people believe that they will have more freedom working from home and finally be their own boss. This I believe to be an unrealistic expectation. If you aren’t disciplined and a self-starter then working from home is a bad idea. But in this economy, (really any economy) self-discipline and personal motivation is critical no matter where you office. In the beginning, you probably will not have the support of a team and will be doing everything. Also many people run a home business that looks more like a home than a business that others will not take seriously and even you don’t take seriously. Here are some tips you may find beneficial to making your home business successful. 1. Define your spaces and separate work from home. Have a room dedicated for work. This room should not be mixed with family. Set aside a workspace that when you enter it, you are there to work. Your family needs to know this is your office not their home. 2. Set regular hours, and stick to the schedule. This is not a vacation because you are at home, it is work. Tell the kids, “I’m going to work, see you later.” I added one hour to my schedule when I had my first child so I could spend it with my daughter and then each day I also have lunch with them. Then it’s back to my office uninterrupted by family. 3. Prepare as you would any public job. Get dressed, get shaved/makeup and be presentable as a professional as you would in a public office. 4. Have a professional desk and chair. It doesn’t have to be expensive but you need a place to work from that is professional. 5. Private phone number, computer, email address and social media addresses. Do not mix your communication terminals with personal activities. The tools you use to communicate must be professional and set apart from those you use for personal uses. 6. Avoid retreating to family on tough days. This kills people at home because it is easy to retreat into the comfort of your kids, the sofa, TV or refrigerator. It is called work, dig in on tough days and push through! 7. Wear the boss hat. You have to be able to manage yourself by being the boss of you that directs you on what is expected, what has to get accomplished and manage yourself accordingly. 8. Get a predictable start each day. I start with the one hour with my daughter, then exercise, breakfast, shower, get dressed and go straight to my office. When in my office I start by writing my long-term goals, then today’s to do list and then start hammering away at it. 9. Keep statistics. If you don’t keep statistics on yourself it will be very unlikely that you are able to create a successful business. I keep stats on everything; out bound calls, in bound calls, teleconferences, emails, articles written, and the likes so that I can see my activity growing each day. This is also the only way to rationally discover what is working and not working. 10. Use the office after your schedule. One of the advantages of a home office is you can use it more than you would an office away from home. Once I have spent time with my family, then I return to my office at all times during the night when I am inspired. I predict over the next five years there will be an explosion in people working from home due to the massive numbers of unemployed that will last for years, combined with an aging population living longer and unable to retire and then aided by the technology development provided by the internet. Working from home is not for everyone but it does become a great option for the highly disciplined and self-motivated. There are tons of advantages of working from home but you remember that when you go to work from home, you still have to go to work to work! Grant Cardone, NY Times Best Selling Author and Sales Training Expert

Read the full article →

Jodi R. R. Smith: Back to School, Moving Up

September 30, 2010

September means back to school for many families, but for those of you in the working world I have a quick quiz. Think fast, True or False: _____ Working hard and doing your job are the best ways to get ahead. In our Mannersmith Professional Protocol seminars we always catch participants who believe this statement to be true. But it is not… This statement is completely false. Working hard and doing your job are why you receive your paycheck. To be eligible for promotion, you need to position yourself properly. Not sure what this means? Here are our top ten tips: 1. Create Perception ~ Make sure you look the part. Dress for the job you want. Keep your work area neat and clean. Arrive early, stay late. Respond in a timely manner. Deliver on promises. 2. Behave Better ~ Everything you say and do reflects on your professional persona. Be sure your actions communicate “polished professional.” Imagine your every interaction being captured on video. Act accordingly. 3. Read Cultural Landscapes ~ Understand what is valued in your office. Who are the stars, who is being promoted, who has the VP’s ear? Know the organizational chart as well as those who have personal power in your office. 4. Be the Answer ~ Look for issues at work that need resolution. From the kitchen fridge than needs emptying to the giant software conversion, helping to make things better identifies you as a problem solver. 5. Move Beyond the Safety of Your Desk ~ While you need not be friends with everyone in the office, you should understand the importance of being friendly. Ask about weekends, hobbies, interests. This way, when you do need to work together, the relationship will be there and the interaction will be comfortable. 6. Cross Boundaries ~ Take the time to know people from other departments. Understand how your job impacts them. 7. Follow in Footsteps ~ Look for mentors and ask about their career paths. Know what options you have for promotion based upon your current position. Know your next steps. 8. Replace Yourself ~ Be sure to train a potential replacement. There are times when managers do not promote great employees due to the time, hassle and stress of having to train a replacement. Being “irreplaceable” can hold you back. 9. Next Stop, Knowledge ~ There is always something new to learn in your field. Take the time to take classes and attend conferences so that your skills remain up to date. 10. Build Professional Networks ~ Know others in your field. Look for mentors, make connections, take on leadership roles. Your next stop may be in another organization before returning to your original company. Still not sure what it takes to be promoted? Then you had better ask. From your manager, to human resources, to those in the position you target, to mentors, there is always someone with knowledge and information to share. Lesson One: You are responsible for your own career path, start by playing an active role!

Read the full article →

Eric K. Clemons: Time to Wake Up and Smell the Antitrust

September 21, 2010

Introduction The recent House Committee on the Judiciary Hearing on Competition in the Evolving Digital Marketplace raises interesting questions on regulation, on the frameworks needed to regulate emerging digital businesses, and on the applicability of existing regulatory frameworks. Does the high tech sector require additional regulatory attention, or is the Sherman Antitrust Act, at a geriatric 120 years and still counting, sufficiently general and sufficiently frisky to deal with modern online business models as adequately as it dealt with the emergence of smokestack industry monopolies and cartels? Or are there companies, even entire categories of business, that require new regulatory models? If so, of course, it would not be the first time that the intersection of new technology, new economic forces, and new corporate strategies required a significant extension to existing antitrust law. Intent and capability Military analyses focus on both intent (or what you think a potential opponent might want to do to you) and capability (or what you think that opponent would be capable of doing to you if it so chose). Intent changes over time, perhaps quite rapidly and quite without warning. Arming Iran under the Shah was not in America’s best interests, as we discovered when Iran’s intent changed dramatically and instantaneously after the installation of the Islamic Republic of Iran. Likewise, arming the Taliban in Afghanistan so that they could defeat the Russians turned out to have surprising consequences when we, not the Russians, were the opponent in the Taliban’s cross-hairs. If the stakes are high enough, and capability is great enough, ” trust me ” is not an adequate way to assess intent or to balance benign present intent against possible future actions. Should we be interested at all? Is current antitrust regulation working or not? I will argue below that it demonstrably is not. Do regulators fully understand how the oft-touted new economics of the internet, beloved by internet and dot-com entrepreneurs , may be impossible to control with regulation designed to enhance competition in the old economy? I will argue, again, demonstrably not. FTD Bureau of Competition Director Richard Feinstein, testifying on behalf of the Federal Trade Commission, said ” Some have argued that there should be different rules for markets characterized by rapid technological development, but Congress drafted the antitrust laws in general terms to accommodate changing markets and new products, and the laws are flexible enough to meet the challenges of the high-tech era .” This was part of his testimony before the House Committee on the Judiciary, Subcommittee on Courts and Competition Policy on September 16, 2010. Not only is this statement about the Sherman Antitrust Act not true today, but it was not true almost from the Sherman’s inception. The regulatory regime of the Sherman Act was found wanting almost immediately after its drafting, and almost immediately needed to be extended to deal with the emerging telecommunications industry. Telecommunications technology, network economics, and AT&T strategy interacted in a way not anticipated when Sherman was drafted. In particular, telecommunications offers positive participation externalities or network effects , where a service gains value as the number of users increases, leading to the idea of a natural monopoly. The Government had to go outside Sherman to regulate AT&T, leading to the Kingsbury Commitment of 1913, which created AT&T as America’s first privately owned but regulated monopoly company. Sherman needed a “manual override” because it could not accommodate the market power of AT&T in the new network economy. America wanted the clear benefits of interconnectivity, with everyone able to communicate with everyone else, which given the technology of the time required a single telecommunications company. Although network effects argued in favor of a single monopoly telecommunications service provider, America did not want monopoly power in this critical new industry concentrated in one firm. For the first time, consumer welfare and technology interacted in a way that demanded that telecommunications be provided by a monopoly, and that likewise demanded regulation of that monopoly in a way not anticipated when Sherman was drafted; clearly not one of the drafters of Sherman anticipated that there would be benefits if we all used steel or oil or detergent or canned soup from the same manufacturer. So even in 1913 Sherman was not sufficiently flexible and required a “patch”. Today it is not at all clear that Sherman is up to the challenge presented by third-party payment business models, where users have free access and third parties are billed. Since users pay nothing for service, and indeed are largely ignorant of the cost of service, prices may be effectively decoupled from the discipline of the marketplace. (At present this has been covered only in academic conferences or on YouTube ; we will post on the regulatory challenges of third party payment business models shortly). The Internet economy will almost certainly pose new regulatory challenges to Sherman, and may require solutions not envisioned in the drafting of Sherman. It is easy to dismiss the need for any regulation if you fail to understand the presence or absence of barriers to entry on the Internet. Although entering online appears easy, it is one thing to create a website, and it is quite another to ensure that it has traffic. Ed Black, President of the Computer and Communications Industry Association, spoke at the House hearings and rejected claims that Google has reached a point where its practices are anti-competitive, arguing instead that there are ” few barriers to entry ” in the Internet marketplace. This sounds so plausible, and will be repeated so many times at so many future hearings, that it demands a response. Ease of Entry? Instead of assuming away barriers to entry and therefore assuming away the threat of monopolists, let’s look at the data. One of the tell-tale signs of monopoly power is monopoly profits; a first course in economics assures us that there should be no long-term super-normal risk adjusted profits; high profits not only invite competition, they more or less guarantee it. And Google demonstrably has extraordinary profits in search. Another tell-tale sign of monopoly profits is the presence of cross-subsidies; if a company is earning enough in one market to cross-subsidize other lines of business, then the business providing the cross subsidies enjoys monopoly power in the absence of contestability; once again Google demonstrably is earning extraordinary profits in search, and once again it is clearly using its monopoly power in search to subsidize everything from high speed internet access and mobile phone service to online video (YouTube) and photo sharing (Picasa). Monopoly profits are not inherently evil nor are they inherently illegal; market power legitimately obtained, without intent to monopolize or to restrain competition, is not legally actionable. But it does demand rethinking statements about the absence of barriers to entry. This suggests that we should at least look for the possibility of serious barriers to entry in search, and it’s not hard to see that they exist. Just look at how much Microsoft has spent to develop and promote Bing (hundreds of millions of dollars on advertising alone) and how limited its current market share is, and you get a sense of how severe the barriers to entry can be. How Can There Be Barriers to Entry Online? But how can anyone have monopoly power online? Anyone can build an online website; this is not like building a huge industrial facility, right? And customers are only a click away from switching, right? How can there be barriers to entry online? Build a better and cheaper mousetrap, or a better one, or a cheaper one, or even just a newer one with a catchy name, and customers will flock to you, right? The first and perhaps most important barrier to new competitors is the third party payer model . You search for a hotel in Arlington, Marriott and ArlingtonHotels.com bid for keywords, and if ArlingtonHotels.com bids enough, your search for Marriott Hotels Arlington takes you to ArlingtonHotels, one of dozens of websites operated by Otels.com. You can still book your Marriott, so you don’t care, but the surcharge Otels.com charges Marriott is 30%, so they certainly care! They might prefer to have you go to Bing, to Yahoo!, or to almost anyone else, but since you are not paying for search, the third party is paying, you have no reason to switch search engines. The second barrier is the geometry of the net . Mostly consumers can’t find anything without going through some search engine. That may make search an Essential Facility , and one that enables search engine operators to control what we find, or what we do not find. Even the ” one click away ” argument is misleading; as long as search is free to consumers, and as long as a search engine’s results are good enough for consumers, then consumers have no reason to invest in even that single click. If consumers stay with their existing search engine choices, then corporations have to go where the consumers are. Once again, the geometry of the net and the third party payer model come into play, making it almost impossible for a new entrant to compete, and almost impossible for a corporate customer to drop out of a keyword auction on an existing search engine. Why should we care? There are lots of reasons why we should care about online monopolists. In general, monopolists can and do extend their reach, subsidizing new markets until they are able to obtain monopoly power there, and in general when a “practicing monopolist” obtains new monopoly powers, we can expect these markets to be exploited also. That is, abusive monopolists grow, extend their reach, and abuse their new monopolies. The Sherman Act does not exist to protect poorly run competitors but the Sherman Act does exist to protect competition and to protect consumers from abusive monopolists. But we should worry even more about an online search monopolist, even if it could be shown that the search monopolist had not charged monopoly prices and had no intention of abusing new monopolies. Search has become the principal way in which most of us learn about everything online, from how to book a new hotel or the quality of a new movie, to how China is handling its dissidents or how the Tea Party candidates are preparing for the November elections. The net is a diverse place, and somewhere one can find exactly the right product, or the story that exactly supports or counters any opinion. But what if ” monopoly of search ” can trump ” diversity of source “? If monopoly of search can trump diversity of source, then a dominant search engine has enormous power to promote its own offerings and to stifle innovation in a range of industries. Other problems likewise follow automatically. At present, a dominant search engine can charge almost whatever it wants for keywords, effortlessly switching the balance of power between compliant and uncooperative companies, or compliant and uncooperative politicians. It can promote or stifle points of view by shifting what news stories we find, or don’t find, hiding stories it wants to hide, or allowing companies to pay to alter what we learn about them . I am, of course, not saying that any of this has happened or will happen. But if online monopolies are possible, they are also particularly dangerous. It’s time for Washington to wake up and smell the antitrust If it walks, talks, acts, and smells like a monopolist, odds are it’s a monopolist. And if this monopolist is earning extraordinary profits, and if there is even the possibility that this monopolist might be using those profits to restrain trade, then perhaps the Sherman Antitrust Act is not working. The possibility of online monopolists demands better theory than ” there are no barriers to entry online ” and purported monopolists need better defense than ” trust me .”

Read the full article →

Eric K. Clemons: Time to Wake Up and Smell the Antitrust

September 21, 2010

Introduction The recent House Committee on the Judiciary Hearing on Competition in the Evolving Digital Marketplace raises interesting questions on regulation, on the frameworks needed to regulate emerging digital businesses, and on the applicability of existing regulatory frameworks. Does the high tech sector require additional regulatory attention, or is the Sherman Antitrust Act, at a geriatric 120 years and still counting, sufficiently general and sufficiently frisky to deal with modern online business models as adequately as it dealt with the emergence of smokestack industry monopolies and cartels? Or are there companies, even entire categories of business, that require new regulatory models? If so, of course, it would not be the first time that the intersection of new technology, new economic forces, and new corporate strategies required a significant extension to existing antitrust law. Intent and capability Military analyses focus on both intent (or what you think a potential opponent might want to do to you) and capability (or what you think that opponent would be capable of doing to you if it so chose). Intent changes over time, perhaps quite rapidly and quite without warning. Arming Iran under the Shah was not in America’s best interests, as we discovered when Iran’s intent changed dramatically and instantaneously after the installation of the Islamic Republic of Iran. Likewise, arming the Taliban in Afghanistan so that they could defeat the Russians turned out to have surprising consequences when we, not the Russians, were the opponent in the Taliban’s cross-hairs. If the stakes are high enough, and capability is great enough, ” trust me ” is not an adequate way to assess intent or to balance benign present intent against possible future actions. Should we be interested at all? Is current antitrust regulation working or not? I will argue below that it demonstrably is not. Do regulators fully understand how the oft-touted new economics of the internet, beloved by internet and dot-com entrepreneurs , may be impossible to control with regulation designed to enhance competition in the old economy? I will argue, again, demonstrably not. FTD Bureau of Competition Director Richard Feinstein, testifying on behalf of the Federal Trade Commission, said ” Some have argued that there should be different rules for markets characterized by rapid technological development, but Congress drafted the antitrust laws in general terms to accommodate changing markets and new products, and the laws are flexible enough to meet the challenges of the high-tech era .” This was part of his testimony before the House Committee on the Judiciary, Subcommittee on Courts and Competition Policy on September 16, 2010. Not only is this statement about the Sherman Antitrust Act not true today, but it was not true almost from the Sherman’s inception. The regulatory regime of the Sherman Act was found wanting almost immediately after its drafting, and almost immediately needed to be extended to deal with the emerging telecommunications industry. Telecommunications technology, network economics, and AT&T strategy interacted in a way not anticipated when Sherman was drafted. In particular, telecommunications offers positive participation externalities or network effects , where a service gains value as the number of users increases, leading to the idea of a natural monopoly. The Government had to go outside Sherman to regulate AT&T, leading to the Kingsbury Commitment of 1913, which created AT&T as America’s first privately owned but regulated monopoly company. Sherman needed a “manual override” because it could not accommodate the market power of AT&T in the new network economy. America wanted the clear benefits of interconnectivity, with everyone able to communicate with everyone else, which given the technology of the time required a single telecommunications company. Although network effects argued in favor of a single monopoly telecommunications service provider, America did not want monopoly power in this critical new industry concentrated in one firm. For the first time, consumer welfare and technology interacted in a way that demanded that telecommunications be provided by a monopoly, and that likewise demanded regulation of that monopoly in a way not anticipated when Sherman was drafted; clearly not one of the drafters of Sherman anticipated that there would be benefits if we all used steel or oil or detergent or canned soup from the same manufacturer. So even in 1913 Sherman was not sufficiently flexible and required a “patch”. Today it is not at all clear that Sherman is up to the challenge presented by third-party payment business models, where users have free access and third parties are billed. Since users pay nothing for service, and indeed are largely ignorant of the cost of service, prices may be effectively decoupled from the discipline of the marketplace. (At present this has been covered only in academic conferences or on YouTube ; we will post on the regulatory challenges of third party payment business models shortly). The Internet economy will almost certainly pose new regulatory challenges to Sherman, and may require solutions not envisioned in the drafting of Sherman. It is easy to dismiss the need for any regulation if you fail to understand the presence or absence of barriers to entry on the Internet. Although entering online appears easy, it is one thing to create a website, and it is quite another to ensure that it has traffic. Ed Black, President of the Computer and Communications Industry Association, spoke at the House hearings and rejected claims that Google has reached a point where its practices are anti-competitive, arguing instead that there are ” few barriers to entry ” in the Internet marketplace. This sounds so plausible, and will be repeated so many times at so many future hearings, that it demands a response. Ease of Entry? Instead of assuming away barriers to entry and therefore assuming away the threat of monopolists, let’s look at the data. One of the tell-tale signs of monopoly power is monopoly profits; a first course in economics assures us that there should be no long-term super-normal risk adjusted profits; high profits not only invite competition, they more or less guarantee it. And Google demonstrably has extraordinary profits in search. Another tell-tale sign of monopoly profits is the presence of cross-subsidies; if a company is earning enough in one market to cross-subsidize other lines of business, then the business providing the cross subsidies enjoys monopoly power in the absence of contestability; once again Google demonstrably is earning extraordinary profits in search, and once again it is clearly using its monopoly power in search to subsidize everything from high speed internet access and mobile phone service to online video (YouTube) and photo sharing (Picasa). Monopoly profits are not inherently evil nor are they inherently illegal; market power legitimately obtained, without intent to monopolize or to restrain competition, is not legally actionable. But it does demand rethinking statements about the absence of barriers to entry. This suggests that we should at least look for the possibility of serious barriers to entry in search, and it’s not hard to see that they exist. Just look at how much Microsoft has spent to develop and promote Bing (hundreds of millions of dollars on advertising alone) and how limited its current market share is, and you get a sense of how severe the barriers to entry can be. How Can There Be Barriers to Entry Online? But how can anyone have monopoly power online? Anyone can build an online website; this is not like building a huge industrial facility, right? And customers are only a click away from switching, right? How can there be barriers to entry online? Build a better and cheaper mousetrap, or a better one, or a cheaper one, or even just a newer one with a catchy name, and customers will flock to you, right? The first and perhaps most important barrier to new competitors is the third party payer model . You search for a hotel in Arlington, Marriott and ArlingtonHotels.com bid for keywords, and if ArlingtonHotels.com bids enough, your search for Marriott Hotels Arlington takes you to ArlingtonHotels, one of dozens of websites operated by Otels.com. You can still book your Marriott, so you don’t care, but the surcharge Otels.com charges Marriott is 30%, so they certainly care! They might prefer to have you go to Bing, to Yahoo!, or to almost anyone else, but since you are not paying for search, the third party is paying, you have no reason to switch search engines. The second barrier is the geometry of the net . Mostly consumers can’t find anything without going through some search engine. That may make search an Essential Facility , and one that enables search engine operators to control what we find, or what we do not find. Even the ” one click away ” argument is misleading; as long as search is free to consumers, and as long as a search engine’s results are good enough for consumers, then consumers have no reason to invest in even that single click. If consumers stay with their existing search engine choices, then corporations have to go where the consumers are. Once again, the geometry of the net and the third party payer model come into play, making it almost impossible for a new entrant to compete, and almost impossible for a corporate customer to drop out of a keyword auction on an existing search engine. Why should we care? There are lots of reasons why we should care about online monopolists. In general, monopolists can and do extend their reach, subsidizing new markets until they are able to obtain monopoly power there, and in general when a “practicing monopolist” obtains new monopoly powers, we can expect these markets to be exploited also. That is, abusive monopolists grow, extend their reach, and abuse their new monopolies. The Sherman Act does not exist to protect poorly run competitors but the Sherman Act does exist to protect competition and to protect consumers from abusive monopolists. But we should worry even more about an online search monopolist, even if it could be shown that the search monopolist had not charged monopoly prices and had no intention of abusing new monopolies. Search has become the principal way in which most of us learn about everything online, from how to book a new hotel or the quality of a new movie, to how China is handling its dissidents or how the Tea Party candidates are preparing for the November elections. The net is a diverse place, and somewhere one can find exactly the right product, or the story that exactly supports or counters any opinion. But what if ” monopoly of search ” can trump ” diversity of source “? If monopoly of search can trump diversity of source, then a dominant search engine has enormous power to promote its own offerings and to stifle innovation in a range of industries. Other problems likewise follow automatically. At present, a dominant search engine can charge almost whatever it wants for keywords, effortlessly switching the balance of power between compliant and uncooperative companies, or compliant and uncooperative politicians. It can promote or stifle points of view by shifting what news stories we find, or don’t find, hiding stories it wants to hide, or allowing companies to pay to alter what we learn about them . I am, of course, not saying that any of this has happened or will happen. But if online monopolies are possible, they are also particularly dangerous. It’s time for Washington to wake up and smell the antitrust If it walks, talks, acts, and smells like a monopolist, odds are it’s a monopolist. And if this monopolist is earning extraordinary profits, and if there is even the possibility that this monopolist might be using those profits to restrain trade, then perhaps the Sherman Antitrust Act is not working. The possibility of online monopolists demands better theory than ” there are no barriers to entry online ” and purported monopolists need better defense than ” trust me .”

Read the full article →

Eric K. Clemons: Time to Wake Up and Smell the Antitrust

September 21, 2010

Introduction The recent House Committee on the Judiciary Hearing on Competition in the Evolving Digital Marketplace raises interesting questions on regulation, on the frameworks needed to regulate emerging digital businesses, and on the applicability of existing regulatory frameworks. Does the high tech sector require additional regulatory attention, or is the Sherman Antitrust Act, at a geriatric 120 years and still counting, sufficiently general and sufficiently frisky to deal with modern online business models as adequately as it dealt with the emergence of smokestack industry monopolies and cartels? Or are there companies, even entire categories of business, that require new regulatory models? If so, of course, it would not be the first time that the intersection of new technology, new economic forces, and new corporate strategies required a significant extension to existing antitrust law. Intent and capability Military analyses focus on both intent (or what you think a potential opponent might want to do to you) and capability (or what you think that opponent would be capable of doing to you if it so chose). Intent changes over time, perhaps quite rapidly and quite without warning. Arming Iran under the Shah was not in America’s best interests, as we discovered when Iran’s intent changed dramatically and instantaneously after the installation of the Islamic Republic of Iran. Likewise, arming the Taliban in Afghanistan so that they could defeat the Russians turned out to have surprising consequences when we, not the Russians, were the opponent in the Taliban’s cross-hairs. If the stakes are high enough, and capability is great enough, ” trust me ” is not an adequate way to assess intent or to balance benign present intent against possible future actions. Should we be interested at all? Is current antitrust regulation working or not? I will argue below that it demonstrably is not. Do regulators fully understand how the oft-touted new economics of the internet, beloved by internet and dot-com entrepreneurs , may be impossible to control with regulation designed to enhance competition in the old economy? I will argue, again, demonstrably not. FTD Bureau of Competition Director Richard Feinstein, testifying on behalf of the Federal Trade Commission, said ” Some have argued that there should be different rules for markets characterized by rapid technological development, but Congress drafted the antitrust laws in general terms to accommodate changing markets and new products, and the laws are flexible enough to meet the challenges of the high-tech era .” This was part of his testimony before the House Committee on the Judiciary, Subcommittee on Courts and Competition Policy on September 16, 2010. Not only is this statement about the Sherman Antitrust Act not true today, but it was not true almost from the Sherman’s inception. The regulatory regime of the Sherman Act was found wanting almost immediately after its drafting, and almost immediately needed to be extended to deal with the emerging telecommunications industry. Telecommunications technology, network economics, and AT&T strategy interacted in a way not anticipated when Sherman was drafted. In particular, telecommunications offers positive participation externalities or network effects , where a service gains value as the number of users increases, leading to the idea of a natural monopoly. The Government had to go outside Sherman to regulate AT&T, leading to the Kingsbury Commitment of 1913, which created AT&T as America’s first privately owned but regulated monopoly company. Sherman needed a “manual override” because it could not accommodate the market power of AT&T in the new network economy. America wanted the clear benefits of interconnectivity, with everyone able to communicate with everyone else, which given the technology of the time required a single telecommunications company. Although network effects argued in favor of a single monopoly telecommunications service provider, America did not want monopoly power in this critical new industry concentrated in one firm. For the first time, consumer welfare and technology interacted in a way that demanded that telecommunications be provided by a monopoly, and that likewise demanded regulation of that monopoly in a way not anticipated when Sherman was drafted; clearly not one of the drafters of Sherman anticipated that there would be benefits if we all used steel or oil or detergent or canned soup from the same manufacturer. So even in 1913 Sherman was not sufficiently flexible and required a “patch”. Today it is not at all clear that Sherman is up to the challenge presented by third-party payment business models, where users have free access and third parties are billed. Since users pay nothing for service, and indeed are largely ignorant of the cost of service, prices may be effectively decoupled from the discipline of the marketplace. (At present this has been covered only in academic conferences or on YouTube ; we will post on the regulatory challenges of third party payment business models shortly). The Internet economy will almost certainly pose new regulatory challenges to Sherman, and may require solutions not envisioned in the drafting of Sherman. It is easy to dismiss the need for any regulation if you fail to understand the presence or absence of barriers to entry on the Internet. Although entering online appears easy, it is one thing to create a website, and it is quite another to ensure that it has traffic. Ed Black, President of the Computer and Communications Industry Association, spoke at the House hearings and rejected claims that Google has reached a point where its practices are anti-competitive, arguing instead that there are ” few barriers to entry ” in the Internet marketplace. This sounds so plausible, and will be repeated so many times at so many future hearings, that it demands a response. Ease of Entry? Instead of assuming away barriers to entry and therefore assuming away the threat of monopolists, let’s look at the data. One of the tell-tale signs of monopoly power is monopoly profits; a first course in economics assures us that there should be no long-term super-normal risk adjusted profits; high profits not only invite competition, they more or less guarantee it. And Google demonstrably has extraordinary profits in search. Another tell-tale sign of monopoly profits is the presence of cross-subsidies; if a company is earning enough in one market to cross-subsidize other lines of business, then the business providing the cross subsidies enjoys monopoly power in the absence of contestability; once again Google demonstrably is earning extraordinary profits in search, and once again it is clearly using its monopoly power in search to subsidize everything from high speed internet access and mobile phone service to online video (YouTube) and photo sharing (Picasa). Monopoly profits are not inherently evil nor are they inherently illegal; market power legitimately obtained, without intent to monopolize or to restrain competition, is not legally actionable. But it does demand rethinking statements about the absence of barriers to entry. This suggests that we should at least look for the possibility of serious barriers to entry in search, and it’s not hard to see that they exist. Just look at how much Microsoft has spent to develop and promote Bing (hundreds of millions of dollars on advertising alone) and how limited its current market share is, and you get a sense of how severe the barriers to entry can be. How Can There Be Barriers to Entry Online? But how can anyone have monopoly power online? Anyone can build an online website; this is not like building a huge industrial facility, right? And customers are only a click away from switching, right? How can there be barriers to entry online? Build a better and cheaper mousetrap, or a better one, or a cheaper one, or even just a newer one with a catchy name, and customers will flock to you, right? The first and perhaps most important barrier to new competitors is the third party payer model . You search for a hotel in Arlington, Marriott and ArlingtonHotels.com bid for keywords, and if ArlingtonHotels.com bids enough, your search for Marriott Hotels Arlington takes you to ArlingtonHotels, one of dozens of websites operated by Otels.com. You can still book your Marriott, so you don’t care, but the surcharge Otels.com charges Marriott is 30%, so they certainly care! They might prefer to have you go to Bing, to Yahoo!, or to almost anyone else, but since you are not paying for search, the third party is paying, you have no reason to switch search engines. The second barrier is the geometry of the net . Mostly consumers can’t find anything without going through some search engine. That may make search an Essential Facility , and one that enables search engine operators to control what we find, or what we do not find. Even the ” one click away ” argument is misleading; as long as search is free to consumers, and as long as a search engine’s results are good enough for consumers, then consumers have no reason to invest in even that single click. If consumers stay with their existing search engine choices, then corporations have to go where the consumers are. Once again, the geometry of the net and the third party payer model come into play, making it almost impossible for a new entrant to compete, and almost impossible for a corporate customer to drop out of a keyword auction on an existing search engine. Why should we care? There are lots of reasons why we should care about online monopolists. In general, monopolists can and do extend their reach, subsidizing new markets until they are able to obtain monopoly power there, and in general when a “practicing monopolist” obtains new monopoly powers, we can expect these markets to be exploited also. That is, abusive monopolists grow, extend their reach, and abuse their new monopolies. The Sherman Act does not exist to protect poorly run competitors but the Sherman Act does exist to protect competition and to protect consumers from abusive monopolists. But we should worry even more about an online search monopolist, even if it could be shown that the search monopolist had not charged monopoly prices and had no intention of abusing new monopolies. Search has become the principal way in which most of us learn about everything online, from how to book a new hotel or the quality of a new movie, to how China is handling its dissidents or how the Tea Party candidates are preparing for the November elections. The net is a diverse place, and somewhere one can find exactly the right product, or the story that exactly supports or counters any opinion. But what if ” monopoly of search ” can trump ” diversity of source “? If monopoly of search can trump diversity of source, then a dominant search engine has enormous power to promote its own offerings and to stifle innovation in a range of industries. Other problems likewise follow automatically. At present, a dominant search engine can charge almost whatever it wants for keywords, effortlessly switching the balance of power between compliant and uncooperative companies, or compliant and uncooperative politicians. It can promote or stifle points of view by shifting what news stories we find, or don’t find, hiding stories it wants to hide, or allowing companies to pay to alter what we learn about them . I am, of course, not saying that any of this has happened or will happen. But if online monopolies are possible, they are also particularly dangerous. It’s time for Washington to wake up and smell the antitrust If it walks, talks, acts, and smells like a monopolist, odds are it’s a monopolist. And if this monopolist is earning extraordinary profits, and if there is even the possibility that this monopolist might be using those profits to restrain trade, then perhaps the Sherman Antitrust Act is not working. The possibility of online monopolists demands better theory than ” there are no barriers to entry online ” and purported monopolists need better defense than ” trust me .”

Read the full article →

Ellen Brown: Basel III — Tightening the Noose on Credit

September 17, 2010

The stock market shot up on September 13, after new banking regulations were announced called Basel III. Wall Street breathed a sigh of relief. The megabanks, propped up by generous taxpayer bailouts, would have no trouble meeting the new capital requirements, which were lower than expected and would not be fully implemented until 2019. Only the local commercial banks, the ones already struggling to meet capital requirements, would be seriously challenged by the new rules. Unfortunately, these are the banks that make most of the loans to local businesses, which do most of the hiring and producing in the real economy. The Basel III capital requirements were ostensibly designed to prevent a repeat of the 2008 banking collapse, but the new rules fail to address its real cause. Why Basel III Misses the Mark Two years after the 2008 bailout, the economy continues to struggle with a lack of credit, the hallmark of recessions and depressions. Credit (or debt) is issued by banks and is the source of virtually all money today. When credit is not available, there is insufficient money to buy goods or pay salaries, so workers get laid off and businesses shut down, in a vicious spiral of debt and depression. We are still trapped in that spiral today, despite massive “quantitative easing” (essentially money-printing) by the Federal Reserve. The money supply has continued to shrink in 2010 at an alarming rate. In an article in the Financial Times titled “US Money Supply Plunges at 1930s Pace as Obama Eyes Fresh Stimulus,” Ambrose Evans-Pritchard quoted Professor Tim Congdon from International Monetary Research, who warned: The plunge in M3 [the largest measure of the money supply] has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly. In a working paper called “Unconventional Monetary Policies: An Appraisal”, the Bank for International Settlements concurred with Professor Congdon. The authors said, ” The main exogenous [external] constraint on the expansion of credit is minimum capital requirements .” (“Capital” means a bank’s own assets minus its liabilities, as distinguished from its “reserves,” which apply to deposits and can be borrowed from the Federal Reserve or from other banks.) The Bank for International Settlements (BIS) is “the central bankers’ central bank” in Basel, Switzerland; and its Basel Committee on Banking Supervision (BCBS) is responsible for setting capital standards globally. The BIS acknowledges that pressure on banks to meet heightened capital requirements is stagnating economic activity by stagnating credit. Yet in its new banking regulations called Basel III, the BCBS is raising capital requirements. Under the new rules, the mandatory reserve known as Tier 1 capital will be raised from 4 percent to 4.5 percent by 2013 and will reach 6 percent in 2019. Banks will also be required to keep an emergency reserve of 2.5 percent. Why Is the BCBS Raising Capital Requirements When Existing Requirements Are Already Squeezing Credit? Concerns about the credit-tightening effects of Basel III were reported in a September 13 Huffington Post article by Greg Keller and Frank Jordans, who wrote: Bankers and analysts said new global rules could mean less money available to lend to businesses and consumers… European savings banks warned that the new capital requirements could affect their lending by unfairly penalizing small, part-publicly owned institutions. We see the danger that German banks’ ability to give credit could be significantly curtailed,’ said Karl-Heinz Boos, head of the Association of German Public Sector Banks. Insisting that French banks were ‘among those with the greatest capacity to adapt to the new rules,’ the country’s banking federation nevertheless said they were ‘a strong constraint that will inevitably weigh on the financing of the economy, especially the volume and cost of credit.’ Juan Jose Toribio, former executive director at the IMF and now dean of IESE Business School in Madrid, said the rules could hamper the fragile recovery. “‘These are regulations and burdens on bank results that only make sense in times of monetary and credit expansion,” he said. For smaller commercial banks and public sector banks (government-owned banks popular in Europe), the credit-constraining effects of Basel III are a serious problem. But larger banks, said Keller and Jordans, “were quick to praise the agreement and insisted they would meet the required reserves in time.” The larger banks were not worried, because ” The largest U.S. banks are already in compliance with the higher capital standards demanded by Basel III, meaning their customers won’t be directly affected .” Their customers, of course, are mainly large corporations. “Small businesses that rely on borrowing from community banks,” on the other hand, “may be more affected… They will try to make up for the higher capital requirements by lending at higher rates and stiffer terms.” If the big banks that brought you the current credit crisis can already meet the new requirements, what exactly does Basel III achieve, beyond shaking down their smaller competitors? As David Daven remarked in a September 13 article called “Biggest Banks Already Qualify Under Basel III Reforms”: “Indeed, on the day Lehman Brothers collapsed, they would have been in compliance with the Basel III standards.” Punishing Your Local Bank for Wall Street’s Misdeeds What precipitated the credit crisis and bank bailout of 2008 was not that the existing Basel II capital requirements were too low. It was that banks found a way around the rules by purchasing unregulated “insurance contracts” known as credit default swaps (CDS). The Basel II rules based capital requirements on how risky a bank’s loan book was, and banks could make their books look less risky by buying CDS. This “insurance,” however, proved to be a fraud when AIG, the major seller of CDS, went bankrupt on September 15, 2008. The bailout of the Wall Street banks caught in this derivative scheme followed. The smaller local banks neither triggered the crisis nor got the bailout money. Yet it is they that will be affected by the new rules, and that effect could cripple local lending. Raising the capital requirements of the smaller banks seems so counterproductive that suspicious observers might wonder if something else is going on. Professor Carroll Quigley, an insider groomed by the international bankers, wrote in Tragedy and Hope in 1966 of the pivotal role played by the BIS in the grand scheme of his mentors: [T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations . The BIS has now become the apex of the system as Dr. Quigley foresaw, dictating rules that strengthen an international banking empire at the expense of smaller rivals and economies generally. The big global bankers are one step closer to global dominance, steered by the invisible hand of their captains at the BIS. In a game that has been played by bankers for centuries, tightening credit in the ebbs of the “business cycle” creates waves of bankruptcies and foreclosures, allowing property to be snatched up at fire sale prices by financiers who not only saw the wave coming but actually precipitated it.

Read the full article →

Ellen Brown: Basel III — Tightening the Noose on Credit

September 17, 2010

The stock market shot up on September 13, after new banking regulations were announced called Basel III. Wall Street breathed a sigh of relief. The megabanks, propped up by generous taxpayer bailouts, would have no trouble meeting the new capital requirements, which were lower than expected and would not be fully implemented until 2019. Only the local commercial banks, the ones already struggling to meet capital requirements, would be seriously challenged by the new rules. Unfortunately, these are the banks that make most of the loans to local businesses, which do most of the hiring and producing in the real economy. The Basel III capital requirements were ostensibly designed to prevent a repeat of the 2008 banking collapse, but the new rules fail to address its real cause. Why Basel III Misses the Mark Two years after the 2008 bailout, the economy continues to struggle with a lack of credit, the hallmark of recessions and depressions. Credit (or debt) is issued by banks and is the source of virtually all money today. When credit is not available, there is insufficient money to buy goods or pay salaries, so workers get laid off and businesses shut down, in a vicious spiral of debt and depression. We are still trapped in that spiral today, despite massive “quantitative easing” (essentially money-printing) by the Federal Reserve. The money supply has continued to shrink in 2010 at an alarming rate. In an article in the Financial Times titled “US Money Supply Plunges at 1930s Pace as Obama Eyes Fresh Stimulus,” Ambrose Evans-Pritchard quoted Professor Tim Congdon from International Monetary Research, who warned: The plunge in M3 [the largest measure of the money supply] has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly. In a working paper called “Unconventional Monetary Policies: An Appraisal”, the Bank for International Settlements concurred with Professor Congdon. The authors said, ” The main exogenous [external] constraint on the expansion of credit is minimum capital requirements .” (“Capital” means a bank’s own assets minus its liabilities, as distinguished from its “reserves,” which apply to deposits and can be borrowed from the Federal Reserve or from other banks.) The Bank for International Settlements (BIS) is “the central bankers’ central bank” in Basel, Switzerland; and its Basel Committee on Banking Supervision (BCBS) is responsible for setting capital standards globally. The BIS acknowledges that pressure on banks to meet heightened capital requirements is stagnating economic activity by stagnating credit. Yet in its new banking regulations called Basel III, the BCBS is raising capital requirements. Under the new rules, the mandatory reserve known as Tier 1 capital will be raised from 4 percent to 4.5 percent by 2013 and will reach 6 percent in 2019. Banks will also be required to keep an emergency reserve of 2.5 percent. Why Is the BCBS Raising Capital Requirements When Existing Requirements Are Already Squeezing Credit? Concerns about the credit-tightening effects of Basel III were reported in a September 13 Huffington Post article by Greg Keller and Frank Jordans, who wrote: Bankers and analysts said new global rules could mean less money available to lend to businesses and consumers… European savings banks warned that the new capital requirements could affect their lending by unfairly penalizing small, part-publicly owned institutions. We see the danger that German banks’ ability to give credit could be significantly curtailed,’ said Karl-Heinz Boos, head of the Association of German Public Sector Banks. Insisting that French banks were ‘among those with the greatest capacity to adapt to the new rules,’ the country’s banking federation nevertheless said they were ‘a strong constraint that will inevitably weigh on the financing of the economy, especially the volume and cost of credit.’ Juan Jose Toribio, former executive director at the IMF and now dean of IESE Business School in Madrid, said the rules could hamper the fragile recovery. “‘These are regulations and burdens on bank results that only make sense in times of monetary and credit expansion,” he said. For smaller commercial banks and public sector banks (government-owned banks popular in Europe), the credit-constraining effects of Basel III are a serious problem. But larger banks, said Keller and Jordans, “were quick to praise the agreement and insisted they would meet the required reserves in time.” The larger banks were not worried, because ” The largest U.S. banks are already in compliance with the higher capital standards demanded by Basel III, meaning their customers won’t be directly affected .” Their customers, of course, are mainly large corporations. “Small businesses that rely on borrowing from community banks,” on the other hand, “may be more affected… They will try to make up for the higher capital requirements by lending at higher rates and stiffer terms.” If the big banks that brought you the current credit crisis can already meet the new requirements, what exactly does Basel III achieve, beyond shaking down their smaller competitors? As David Daven remarked in a September 13 article called “Biggest Banks Already Qualify Under Basel III Reforms”: “Indeed, on the day Lehman Brothers collapsed, they would have been in compliance with the Basel III standards.” Punishing Your Local Bank for Wall Street’s Misdeeds What precipitated the credit crisis and bank bailout of 2008 was not that the existing Basel II capital requirements were too low. It was that banks found a way around the rules by purchasing unregulated “insurance contracts” known as credit default swaps (CDS). The Basel II rules based capital requirements on how risky a bank’s loan book was, and banks could make their books look less risky by buying CDS. This “insurance,” however, proved to be a fraud when AIG, the major seller of CDS, went bankrupt on September 15, 2008. The bailout of the Wall Street banks caught in this derivative scheme followed. The smaller local banks neither triggered the crisis nor got the bailout money. Yet it is they that will be affected by the new rules, and that effect could cripple local lending. Raising the capital requirements of the smaller banks seems so counterproductive that suspicious observers might wonder if something else is going on. Professor Carroll Quigley, an insider groomed by the international bankers, wrote in Tragedy and Hope in 1966 of the pivotal role played by the BIS in the grand scheme of his mentors: [T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations . The BIS has now become the apex of the system as Dr. Quigley foresaw, dictating rules that strengthen an international banking empire at the expense of smaller rivals and economies generally. The big global bankers are one step closer to global dominance, steered by the invisible hand of their captains at the BIS. In a game that has been played by bankers for centuries, tightening credit in the ebbs of the “business cycle” creates waves of bankruptcies and foreclosures, allowing property to be snatched up at fire sale prices by financiers who not only saw the wave coming but actually precipitated it.

Read the full article →

Jack Myers: Advertisers Have Stopped Complaining and Learned to Love the Media

September 14, 2010

After more than a decade of advertisers’ complaints and discontent with media, their tone has noticeably changed in the past several months. Upcoming ANA conferences are focusing more on success stories and positive experiences than the calls-to-action media vendors have come to expect. Marketers are being invited to industry events to extol the values and virtues of their relationships with media and agency ‘”partners’” rather than to deliver wake-up calls and ‘”Come to Jesus’” sermons demanding that media and agency suppliers step up to the plate and deliver better service, support and evidence of return-on-investment. The holy grail of R-O-I has subtly changed as marketers have invested in analytics resources such as Marketshare Partners and TRA , and ultimately learned that the marketing and media suppliers they have been challenging to improve are actually delivering more and better results than expected. While traditional media metrics such as Nielsen ratings will remain dominant for the remainder of this decade at least, their purpose and role have been more clearly defined as procurement tools, required for media negotiation and purchase but subservient to more marketing focused and results-oriented planning research. This is good news for investors who are concerned about the health of national media, advertising and marketing services companies and the many early stage companies that are being funded on expectations of advertiser support. The U.S. national media business should be held up as a standard of economic well being. While it’s clear that traditional media and marketing companies must invest in and nurture digital enterprises and innovation, marketers are demonstrating renewed confidence in the traditional pillars of national media and marketing communications. For the extended subscriber-only version of this report with detailed economic analyses, subscribers can click here . If you do not have your required subscriber passcode, contact maryann@jackmyers.com . Disclosure: Jack Myers is an advisor to Marketshare Partners and TRA. For a full list of Myers’ portfolio companies and underwriters, visit www.jackmyers.com . To comment, visit www.jackmyersthinktank.com . JackMyersThinkTank and MediaBizBloggers are free and underwritten as an industry service by corporate subscribers to Jack Myers Media Business Report . For subscription information, visit www.myersreport.com . Visit the archives of JackMyersThinkTank and MediaBizBloggers . Jack Myers can be contacted directly at jm@jackmyers.com .

Read the full article →

Fred Whelan and Gladys Stone: What’s On Your Career Bucket List?

August 12, 2010

You may remember the hugely popular 2007 movie ,”The Bucket List” starring Jack Nicholson and Morgan Freeman about two terminally ill men who decide to do all of the things on their wish list before they “kick the bucket”. For many of us, there is a similar bucket list of things that we want to do in our career before we retire. The career bucket list has less to do with promotions and career advancement. It’s more about unique things you would like to try and experiences you would like to have in your career at least once before you retire. As you develop your list of the one or two or ten things you’d like to accomplish, put a time frame around it so you’re more apt to get it done. Here are some of the more common things we hear people say during coaching sessions: Living and working internationally -You’ve probably fantasized about this with your spouse: after work taking a long walk by the Seine or down the Champs-Élysées in Paris. Enjoying weekend getaways to Italy, Spain and Switzerland and taking in the sights. Experiencing the charm of learning a new language and gaining a real appreciation for another culture. If you’re part of a global company, chances are this may be an option for you. Many people dream about an international assignment but don’t take the necessary steps to make it happen. If your spouse works or if you have kids, there will be other considerations, all doable. There are thousands of families living abroad while working for US companies. If this is something you’ve always wanted to do, start the wheels in motion now. The sooner you begin the process the sooner you’ll be packing your bags! Starting your own company – Who hasn’t dreamed about being the boss, and we’re not talking about Bruce Springsteen. Maybe you have an idea for a product or service which you think is unique and different. Things may be holding you back from taking the leap even though you believe in its potential success. Starting a business is a major consideration. As a first step you may want to do some research and evaluate your idea. Then see where that leads. If starting your own company is a dream of yours, it’s important to take the initial steps or it will always remain a dream. Giving a big talk – How many of you have been part of a huge audience, impressed with a captivating speaker and thought, “I wish I could do that.” The thought of being able to inspire hundreds of people is exhilarating. There are organizations like Toastmasters that can help prepare you to be a dynamic speaker. The speaker you want to emulate didn’t start with an audience of 2,000. Most likely they started out by speaking up in meetings, then running meetings, giving office/client presentations, being a panel member, speaking at small conferences and working their way up to large events. As scary as it may seem, most people’s reaction to their first big speech is, “I can’t wait to do it again.” There is no greater feeling of satisfaction than accomplishing things that really matter to you – things that may not be connected to financial gain, but give you a terrific feeling for having done them. People tell us that achieving things on their career bucket list gives them a sense of fulfillment that lasts long after they have retired. Tell us what’s in your career bucket, “I’ve always wanted to…..” Fred & Gladys Whelan Stone Executive Search and Coaching Authors of GOAL! Your 30 Day Career Plan for Business & Career Success

Read the full article →

Matt Wilson: 10 Best Cities to Start a Business in as a Young Entrepreneur

August 4, 2010

Under30CEO.com recently asked its readers to vote on the best cities for young entrepreneurs . Considerations included the resources available, schools, events, social atmosphere, weather and the networking opportunities that young entrepreneurs look for. Take a look at the list below and let us know your thoughts, and while you’re at it, take a look at last year’s results as well. Top 10 cities list courtesy of Under30CEO.com the resource for young entrepreneurs 10. Seattle Squeezing into the top 10, Seattle makes its mark on the list. Seattle has always been driven by old industrial companies but more recently newer technology and internet companies have begun to call it home. Companies like Amazon and Starbucks call Seattle home with Microsoft, Boeing and Nintendo in nearby communities. Seattle’s climate, while mild year round, is still not ideal with lots of rainy and cloudy days. However, Seattle’s location in the Northwest gives it a huge advantage in outdoor activities with natural forests, lakes, oceans and mountains all nearby. 9. Washington DC DC is an obvious choice for the list with its ideal location to the political scene. Washington has a large number of attractions like the National Mall and countless museums. The area is also home to leading colleges like Georgetown, American and George Mason University. These schools bring a very active social scene to the city which makes it a great spot for young people along with providing numerous resources for start-ups. 8. Portland, OR Portland has been referred to as the “greenest” or most “environmental friendly” city in the US. Portland has also been growing faster then the average over the past decade showing the increased interest in the city. Portland is a great business location with lower energy costs then the bigger cities and also air, rail and shipping transportation available to any part of the world. As with the Northwest cities Portland has a temperate climate and all the outdoor activities one could dream up which makes it great for the upstart adventurer. 7. San Diego Making an appearance on the list this year in large part due to the climate. San Diego is warm, sunny and dry. The area is also known for its beaches which is a major plus for any young business person. The city is characterized as wealthy with a major tourism economy. Along with its population (8th largest in US) the city makes an ideal place to build a business. 6. Chicago Chicago is known as one of leading financial centers in the world making it a truly business minded community. The city is located on the shore of Lake Michigan giving it a unique blend of beaches and a downtown life. The city has an active social scene and streets like Michigan Ave will appeal to anyone’s recreation or shopping interests. 5. Denver “The Mile High City”. Denver is a bustling city at the base of the Rocky Mountains. The city has a lot to offer a young entrepreneur with its numerous professional sports teams to some of the best ski resorts in the country only a short drive away. The winters are cold but for the skier or snowboarder it becomes the perfect city to build a business and hit the slopes. 4. Boston Boston has a vibrant college community which has a major impact on the overall city. Colleges like Harvard, MIT, Boston College and others contribute countless jobs and revenue to the city. The schools have also attracted the high-tech industry to the city along with many major companies. The city is home to countless start-ups, incubators and resources to entrepreneurs as many college students take a stab at their own business. The cold winters and high cost of living possibly stop Boston from being at the top of the list. 3. Austin Austin has built a reputation on being the “live music capital of the world”. However Austin has also become a major tech hub with many start-ups and major corporations calling it home in recent years. Many people in Austin experienced the dot-com boom and bust in the late 90s. The city has a great climate and abundant resources as it continues to move forward as a technology hub with much lower costs of living then places like Silicon Valley. 2. San Francisco San Francisco is near Silicon Valley giving it no choice but to be a major hub for start-ups and high-tech companies. Start-ups like Twitter and Craigslist call San Francisco home along with countless numbers of small companies looking to make it big. The city is a big tourist destination giving the young community plenty to see and do along with many great west coast destinations only a short drive away. Because of the vibrant tech community networking events, conferences and meet-ups are being held consistently giving new companies a chance to network and learn with the best. 1. New York This year the #1 city for young entrepreneurs is New York City. New York is the largest city in the United States which gives it just about anything a business or young person would want. There is a major social scene in the city where it reigns with the most bars in the country and also countless festivals, meet-ups and social activities. The city is one of the leading business centers in the world where the New York Stock Exchange and the Nasdaq are housed. Despite the expensive cost of living, in recent years the city has become a thriving place for start-ups and young entrepreneurs. The city is often referred to as Silicon Alley and continues to push forward with its start-up community. This article originally appeared on Under30CEO

Read the full article →

Al Eisele: A Very Good Week for a Small Town Newspaper Publisher

July 25, 2010

Nick Benton probably would be the first to admit that he’s not everybody’s cup of tea, especially in a conservative small town in Virginia whose citizens he’s been both informing and outraging in equal measure since March 28, 1991. As founder, owner and editor-in-chief of the Falls Church News-Press, Benton and some 150 of his friends and faithul readers, myself included, celebrated the publication of the 1,000th consecutive issue of his weekly newspaper by sharing pizza, liquid refreshments and memories of life in this suburban Washington community named after an 18th century Anglican church.. As usual, ever since the banner headline of his first issue proclaimed, “Rancorous Public Hearing on School Cuts, Tax Increase,” the latest issue of July 22, 2010 deals with the nitty-gritty of representative self-government at the local level, in this case whether the city of a little over 11,000 residents can continue funding a local bus system that can’t survive without a tax increase, and the newly elected mayor’s and city council’s efforts to overhaul ordinances governing commerical versus residential development. “F.C.’s Local Bus System GEORGE Once Again on the Chopping Block,” the paper’s 1000th issue announced to readers of its 30,500 press run, along with a story suggesting that the new mayor and aldermen may want some “minor tweaks” rather than a major overhaul of the city’s government operations. Both stories carried the byline of Nicholas F. Benton, which I suspect but don’t know, is typical of every one of the paper’s 1000 issues. Benton is a crusading editor in the finest tradition of American journalism, as he reminded readers in his editorial, titled “A Celebration of the First Amendment.” “Authored by none other than Virginia’s own George Mason [who with George Washington was a vestryman at the Falls Church], the First Amendment and its guarantee of free speech is the cornerstone of America’s great experiment in democracy,” he writes. “It’s the first thing to go when political repression arises or when control of the transmission means of its effective exercise wind up in the hands of the too few and the too powerful.” But, as I said, Benton isn’t everybody’s cup of tea. First of all, he’s an unabashed liberal who delights in bashing Republicans and boosting President Obama, as he did in his weekly editorial page column – he writes almost half of every issue – “A Very Bad Week for the GOP.” He also regularly runs the columns of New York Time’s columnists Paul Krugman, David Brooks and Maureen Dowd, as well as that of Hearst’s Helen Thomas, until her incendiary comments about Jewish-Palestinian relations cost her a front row seat at White House press conferences. Second, he’s not your average suburbanite. He’s openly gay – not that there’s anything wrong with that – and his paper features a regular gay columnist whose views on gay and lesbian issues appear alongside the local Democratic congressman’s column and that of a local County Board of Supervisors member’s “News of Greater Falls Church.” Benton got into a huge fight several years ago with the local Episcopal Church – where George Washington once worshipped – after the columnist described a local teenage student’s coming out. And third, he’s a former acolyte of bizarro economist and perennial fringe presidential candidate Lyndon LaRouche – he worked for the LaRouche organization from 1974 and well into the 1980′s, first as a political organizer and then Washington bureau chief and White House correspondent of LaRouche’s Executive Intelligence Review before severing his ties with LaRouche. He even ran for governor of California against Jerry Brown in 1978 as the candidate of the LaRouche-backed U.S. Labor Party. As he explained in a June 27, 2007 column, “Maybe it was always bad, but by the late 1970′s, LaRouche’s movement had turned decidely ugly, into something existing only for the purposes of LaRouche’s own aggrandizement and the twisted agendas of too many sinister forces that seemed to influence him.” A California native, Benton earned a degree in English from Westmont College in 1966, where he had an athletic scholarship, and a master of divinity degree in 1969 from the Pacific School of Religion in Berkeley, where he began a lifetime crusade as an antiwar, anti-poverty and gay and civil rights activist, motivated in part by the assassinations of Martin Luther King and Robert F. Kennedy. He became a contributor to the alternative Berkley Barb, helped found the Berkeley Gay Liberation Front and wrote the first editorial for the newspaper Gay Sunshine, which proclaimed that gay liberation would represent “those who understand themselves as oppressed — politically oppressed by an oppressor that not only is down on homosexuality, but equally down on all things that are not white, straight, middle class, pro-establishment… It should harken to a greater cause — the cause of human liberation, of which homosexual liberation is just one aspect — and on that level take its stand.” Benton, who has been divorced three times but has no children and lives with his cat Mimi, says his “dearest friend” is an ex-wife who lives in Falls Church. He describes himself on his MySpace page as a “relentless if imperfect warior against the ‘vast right wing conspiracy,’” whose mission as a journalist is “tirelessly warring against the religious right, promoting the confluence of interests between good development and community concerns, and playing a role in the cultural shift the the region, overall, toward more progressive and fair-minded virtues.” Benton displayed his penchant for non-conformist thinking in a column a week ago by suggesting that the current worldwide economic crisis may have vindicated the legacy of Marxism, a view that drew shocked responses from readers and probably explains why the new mayor declined to congratulate him on his journalistic milestone. But Benton is unapolgetic. When I asked him which of his 1,000 issues had the greatest impact, “other than the Marxist column,” he couldn’t cite any one example, but later wrote that the paper’s “best story” was its successful effort in the mid-1990′s wotking with the Chamber of Commerce, when he was its president, to end years a acrimony between Falls Church’s business and residential communities. “Through our editorial and other efforts, we caused a paradigm shift in Falls Church where each of these two components suddenly realized the value of each to the other,” he said. “It introduced an era that led to the most aggressive new development in the city’s history, which has helped bouy the city’s ability to maintain its excellent schools and services in tough economic times.” Benton, who employs a bevy of student journalists, also pointed with pride to his paper’s weekly publications of community and school news, from a crime blotter to local sports teams to reviews of local restaurants, as the secret to its success. “It is also the newspaper’s role to particularly stand up on behalf of the under-represented in society,” he added. As a journalist myself and longtime resident of Falls Church, it’s nice to know that my hometown newspaper is thriving at a time when almost every other newspaper is struggling to survive. And better yet to know that the newspaper’s owner believes, as H. L. Mencken put it, that a newspaper’s role in society is to “comfort the afflicted and afflict the comfortable.”

Read the full article →

Brett King: The 5 stages of social media grief

July 22, 2010

This week I’ve met with some very interesting people and the subject of social media has been high on the agenda. Yesterday, I met with Tom Cannon, who is leading the charge on the Internet Banking initiative that is part of HSBC’s “OneH” project – essentially their customer dashboard, single-view of the customer baseline technology. Earlier in the week with Sam Oakley from WolfStar, John Beck the Technology Editor for the Financial Times/The Banker magazine in London, and my good pal Christophe Langlois from Visible Banking , amongst others. At these sessions we invariably repeated a discussion I’ve had 30 times in the last few months with innovators in the banking space the world over. The question simply being “when will the banking senior executives get social media?” Facebook, Twitter, Foursquare – when will it end? Facebook this week announced their 500 millionth active user . That number is pretty significant. Firstly, any corporation that can claim it’s customer base would make it the third largest country in the world (behind only China and India) has a case for celebration. Secondly, it doesn’t look as if its growth will slow any time soon. Lastly, their growth is not restricted by physical distribution or inventory constraints, their marketplace is anywhere you are. Twitter is not far behind, with 190 million users as of June 2010 , and 65 million tweets a day. Foursquare , the Geolocation Social Networking service is up there too – adding 100,000 new users every week at the moment. When will it end? It’s won’t – that’s like asking when the internet and mobile phones will end. Which brings me to the realization that dealing with innovation in banking is a lot like dealing with grief. So here are the 5 stages of Innovation Grief for Banks and Bankers (It probably works for most companies actually) Stage 1 – Total ignorance When a new innovation comes out banker’s simply ignore it because ‘banking has been around for centuries and it fundamentally doesn’t change…” Stage 2 – It’s just a fad “Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms … Commerce and business will shift from offices and malls to networks and modems … Baloney . Do our computer pundits lack all common sense? The truth is no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works … Yet Nicholas Negroponte, director of the MIT Media Lab, predicts that we’ll soon buy books and newspapers straight over the Internet. Uh, sure.” – Clifford Stohl, Newsweek, 27 February, 1995 Ok so now it’s on our radar, but it’s just a fad – all the fuss will blow over soon. Stage 3 – I still don’t get it, where’s the money? Because of Stage 1 and Stage 2 banker’s are looking at social media’s incredible rise to fame and then looking at their competitors (who are mostly doing nothing) and saying, “well as an industry no one is making any money out of this, so let’s not bother just yet…” How can you tell you are this stage? You have a Facebook page for the bank, but no one actively managing your social media listening post Stage 4 – The Sonic Boom Tom Cannon gets the credit for this analogy. He said internet banking, mobile banking, social media is all the same for bankers. It’s like them sitting there watching the Concorde or an F15 doing a low-pass, fly-by and not yet registering what they are seeing as significant, until the Sonic Boom hits them and blows them off their feet. By then it is already too late because at Mach 1 or Mach 2 your competitors are already way, way in front of you. This is where the message finally breaks through the ignorance! BOOM! This is the stage we are hitting for most banks today… If you work in a bank how can you tell if you are at this stage – your bank has just hired a Head of Social Media. Social Media is starting to hit banks like a Sonic Boom Stage 5 – The Mad Scramble Excuse the vernacular, but this is the “oh, crap” moment where bankers suddenly realize that they should have been heavily invested in this 3-4 years ago, and their lack of preparedness is highlighting to their customer base, employees and the world just how out of touch bankers are. The mad scramble may have occurred because of a PR disaster like those that BP has experienced with the Gulf Oil Spill, that Bank of America experience with Ann Minch’s Debtor revolt, or that Citibank experienced with the Fabulis debacle. This is when the knee-jerk hiring spree starts with hit and miss initiatives occurring throughout the bank. How do you know when you are at this stage? The CEO of the bank is talking about Social Media in press conferences and how the bank is committed to better reaching customers through this medium. Getting out in front So how do you stop the grief cycle within your organization? The first thing bankers need to do is rethink their organizational structure around customer. Social Media is a tool for reaching customers, for engaging customers. It is as important as investing in branches, it is just as critical as having a telephone number for customers to call, but more than that, it can help you transform your business internally too. To fix your organization to serve customers in the digital and social media age – you need to think independently of channels . We talk about multi-channel alot these days, but clearly social media is showing us that new channels and ways of interacting can grow very fast. Who’s to say what will come after social media? Something will. The key is that channel complexity continues to grow, and no single channel should be singled out as more important. For customers branch is no more important than Internet, mobile than social media, call centre than ATM. These are tools to engage, and increasingly banks need to be more pervasive – everywhere the customer is. So break the back of organization structure silos around channels. Think customer – think total channel engagement, and get moving on Social Media fast: BOOM!

Read the full article →

Susan Klein: The Controversy Surrounding the Criminal Probe into the Gulf Oil Spill

July 19, 2010

Now that oil is no longer pouring into the Gulf, everyone can breathe easier –except the people responsible for the spill. They may go to prison. The Justice Department has a criminal investigation underway. Admittedly, governmental investigations of business torts are more likely to result in fines than prison time. Joseph Hazelwood, who captained the Exxon Valdez when it ran aground, was the only person indicted in connection with that accident and he was sentenced to community service after being convicted on a misdemeanor charge. The BP spill is different, of course. Eleven people died when the Deepwater Horizon caught fire, and the environmental damage is unprecedented. The feds may reasonably decide that the magnitude of the catastrophe requires a high profile criminal prosecution, the same conclusion President Bush’s Justice Department reached in the wake of the Enron debacle. Still, if history provides any guidance, years will pass before anyone is indicted and few people, if any, will spend much time in prison. We know that a criminal investigation is underway because Eric Holder, the Attorney General, has said so many times. He first announced it at a press conference on June 1. Since then, he has commented on it and clarified its scope, emphasizing that BP is not the only potential target . Both for launching the investigation and discussing it openly, Holder has taken serious heat. Initially, political opponents of the Obama Administration contended that the investigation diverted BP’s attention from its efforts to plug the well and deal with the consequences of the spill. The merits of this allegation never were clear. Even before the probe was acknowledged, BP’s managers knew the EPA would punish the company severely. The reputational damage and civil consequences flowing from the spill were also known to be enormous. BP’s executives must also have expected a criminal investigation. In 2007, the company pled guilty to felony violations of the Clean Water Act after a refinery outside Houston, Texas exploded, killing 15, injuring 170, and ultimately saddling BP with $373 million in criminal and civil fines. The prospect of being prosecuted criminally may even have strengthened BP’s resolve to make every possible effort to get matters under control. The U.S. Sentencing Guidelines, which apply to every federal criminal felony conviction, mandate significantly lower sentences and fines for corporations and individuals who cooperate with federal investigators. Reductions are even greater (and may include deferred or non-prosecution agreements, called DPAs and NPAs) when corporations police themselves by creating compliance programs and reporting potential federal criminal and civil violations before to getting caught. Conservatives also slammed Holder for publicly acknowledging the investigation. They claimed, first, that he departed from Justice Department policy which, they said, is neither to confirm investigations nor to deny them. They also charged that, by speaking about the investigation in public, Holder caused BP’s stock to tank. Finally, several commentators and editorial boards criticized Holder for participating in the negotiations, headed by President Obama, which led to the creation of the $20 billion BP victim compensation fund. The Washington Post argued that Holder’s “presence inevitably raised the specter of the criminal probe — and the possibility that it could be used to pressure BP on the size and terms of the fund.” Texas Representative Joe Barton (in)famously characterized to BP as the victim of a “shakedown.” In a column endorsed by Sarah Palin and many others, conservative commentator Thomas Sowell argued along the same lines, while raising the level of hyperbole considerably. Sowell accused President Obama of following in Adolf Hitler’s footsteps by using a crisis as an excuse for subjecting a private enterprise to an illegal and unprincipled exercise of raw power. None of these criticisms makes sense to us. Start with the claim that Holder acted wrongly by acknowledging that a probe was underway. True, the general policy of the Justice Department is to disclose neither the existence of a criminal investigation nor its details. But in two sections (1-7.401C and 1-7.530B), the U.S. Attorneys’ Manual expressly recognizes that “[t]here are exceptional circumstances when it may be appropriate to have press conferences … about ongoing matters before indictment or other formal charge, … includ[ing] cases where … the heinous or extraordinary nature of the crime requires public reassurance that the matter is being promptly and properly handled by the appropriate authority.” Disciplinary rules governing public statements by prosecutors similarly permit communications needed to inform the public of the nature and extent of the government’s response to high-profile crimes. The BP oil spill is the worst environmental disaster in U.S. history. If a crime was committed in connection with it, then the crime was extraordinary by definition and is obviously a matter of great public interest. By confirming the existence of the investigation, Holder acted properly and responsibly. Now consider the charge that Holder’s public statements caused the value of BP’s shares to tumble. Assuming the charge is correct (something that is not self-evident, given the fairly continuous decline in the price of BP stock from April 23rd to June 25th), one must ask, So what? Holder is the highest law enforcement officer in the land. The criticism supposes that he should have acted so as to enhance the value of a private company rather than to protect the public interest. That can’t be right. Public officials are supposed to advance the public good. Shareholders can protect themselves from these extraordinary occasions which require public disclosure by diversifying their stock holdings. Finally, consider the charge that Obama and Holder acted improperly by using the crisis to twist BP’s arm. Although we certainly believe that governmental coercion of private persons, including companies, should be regulated by law, when creating the compensation fund the federal government neither confiscated BP’s money nor coerced the company into paying victims of the spill. Thomas Sowell recognized this, but he thought it an irrelevant nicety. In fact, this is the heart of the matter. The compensation fund is creature of a contract between BP and the federal government. Like all contracts, this one created value for both sides. President Obama showed Americans that he was focused on the disaster and trying to protect them. BP showed the world that its word was good. Hoping to salvage some measure of goodwill, BP had verbally promised to cover losses stemming from the spill. The agreement to create the compensation fund made that promise formal. It also gave BP an opportunity to stretch out its payments and reduce the volume of spill-related civil litigation greatly. As an article in the New York Times pointed out, in return for agreements not to sue, BP is offering to quickly reimburse victims for their full economic losses, thereby sparing them years of delay and the burden of paying attorneys. The compensation fund is an example of mutual gain, not Hitler-esque subjugation. Years or decades will pass before all civil and criminal liabilities stemming from the disaster in the gulf are resolved. Real arm-twisting will occur at many points. Plaintiffs’ attorneys will threaten BP with enormous punitive damage awards to squeeze as much money as they can from BP for their clients. The federal government will hit the responsible companies with billions in penalties and may threaten to put their executives in prison. Fortunately, given the magnitude of the disaster, intense media interest, reporting requirements for public companies, and the transparency of the compensation fund, the negotiations that resolve these complaints will likely be open and above board. Attorney General Holder can and should be involved in these negotiations. Global settlements, DPAs and NPAs, which have been utilized under both Republican and Democratic Administrations, provide many advantages when compared to criminal prosecutions and concurrent civil regulatory actions by multiple federal agencies. Such agreements encourage full disclosure to the investing public, allow targeted reform of mismanaged or corrupt corporations, ensure restitution to victims, and may protect shareholders and employees from bankruptcy proceeding, all while minimizing the collateral consequences on the current law-abiding customers, shareholders, and the general public. Attempting this type of negotiation in the wake of a national disaster of this magnitude is something that cannot be done on the down low.

Read the full article →

Susan Klein: The Controversy Surrounding the Criminal Probe into the Gulf Oil Spill

July 19, 2010

Now that oil is no longer pouring into the Gulf, everyone can breathe easier –except the people responsible for the spill. They may go to prison. The Justice Department has a criminal investigation underway. Admittedly, governmental investigations of business torts are more likely to result in fines than prison time. Joseph Hazelwood, who captained the Exxon Valdez when it ran aground, was the only person indicted in connection with that accident and he was sentenced to community service after being convicted on a misdemeanor charge. The BP spill is different, of course. Eleven people died when the Deepwater Horizon caught fire, and the environmental damage is unprecedented. The feds may reasonably decide that the magnitude of the catastrophe requires a high profile criminal prosecution, the same conclusion President Bush’s Justice Department reached in the wake of the Enron debacle. Still, if history provides any guidance, years will pass before anyone is indicted and few people, if any, will spend much time in prison. We know that a criminal investigation is underway because Eric Holder, the Attorney General, has said so many times. He first announced it at a press conference on June 1. Since then, he has commented on it and clarified its scope, emphasizing that BP is not the only potential target . Both for launching the investigation and discussing it openly, Holder has taken serious heat. Initially, political opponents of the Obama Administration contended that the investigation diverted BP’s attention from its efforts to plug the well and deal with the consequences of the spill. The merits of this allegation never were clear. Even before the probe was acknowledged, BP’s managers knew the EPA would punish the company severely. The reputational damage and civil consequences flowing from the spill were also known to be enormous. BP’s executives must also have expected a criminal investigation. In 2007, the company pled guilty to felony violations of the Clean Water Act after a refinery outside Houston, Texas exploded, killing 15, injuring 170, and ultimately saddling BP with $373 million in criminal and civil fines. The prospect of being prosecuted criminally may even have strengthened BP’s resolve to make every possible effort to get matters under control. The U.S. Sentencing Guidelines, which apply to every federal criminal felony conviction, mandate significantly lower sentences and fines for corporations and individuals who cooperate with federal investigators. Reductions are even greater (and may include deferred or non-prosecution agreements, called DPAs and NPAs) when corporations police themselves by creating compliance programs and reporting potential federal criminal and civil violations before to getting caught. Conservatives also slammed Holder for publicly acknowledging the investigation. They claimed, first, that he departed from Justice Department policy which, they said, is neither to confirm investigations nor to deny them. They also charged that, by speaking about the investigation in public, Holder caused BP’s stock to tank. Finally, several commentators and editorial boards criticized Holder for participating in the negotiations, headed by President Obama, which led to the creation of the $20 billion BP victim compensation fund. The Washington Post argued that Holder’s “presence inevitably raised the specter of the criminal probe — and the possibility that it could be used to pressure BP on the size and terms of the fund.” Texas Representative Joe Barton (in)famously characterized to BP as the victim of a “shakedown.” In a column endorsed by Sarah Palin and many others, conservative commentator Thomas Sowell argued along the same lines, while raising the level of hyperbole considerably. Sowell accused President Obama of following in Adolf Hitler’s footsteps by using a crisis as an excuse for subjecting a private enterprise to an illegal and unprincipled exercise of raw power. None of these criticisms makes sense to us. Start with the claim that Holder acted wrongly by acknowledging that a probe was underway. True, the general policy of the Justice Department is to disclose neither the existence of a criminal investigation nor its details. But in two sections (1-7.401C and 1-7.530B), the U.S. Attorneys’ Manual expressly recognizes that “[t]here are exceptional circumstances when it may be appropriate to have press conferences … about ongoing matters before indictment or other formal charge, … includ[ing] cases where … the heinous or extraordinary nature of the crime requires public reassurance that the matter is being promptly and properly handled by the appropriate authority.” Disciplinary rules governing public statements by prosecutors similarly permit communications needed to inform the public of the nature and extent of the government’s response to high-profile crimes. The BP oil spill is the worst environmental disaster in U.S. history. If a crime was committed in connection with it, then the crime was extraordinary by definition and is obviously a matter of great public interest. By confirming the existence of the investigation, Holder acted properly and responsibly. Now consider the charge that Holder’s public statements caused the value of BP’s shares to tumble. Assuming the charge is correct (something that is not self-evident, given the fairly continuous decline in the price of BP stock from April 23rd to June 25th), one must ask, So what? Holder is the highest law enforcement officer in the land. The criticism supposes that he should have acted so as to enhance the value of a private company rather than to protect the public interest. That can’t be right. Public officials are supposed to advance the public good. Shareholders can protect themselves from these extraordinary occasions which require public disclosure by diversifying their stock holdings. Finally, consider the charge that Obama and Holder acted improperly by using the crisis to twist BP’s arm. Although we certainly believe that governmental coercion of private persons, including companies, should be regulated by law, when creating the compensation fund the federal government neither confiscated BP’s money nor coerced the company into paying victims of the spill. Thomas Sowell recognized this, but he thought it an irrelevant nicety. In fact, this is the heart of the matter. The compensation fund is creature of a contract between BP and the federal government. Like all contracts, this one created value for both sides. President Obama showed Americans that he was focused on the disaster and trying to protect them. BP showed the world that its word was good. Hoping to salvage some measure of goodwill, BP had verbally promised to cover losses stemming from the spill. The agreement to create the compensation fund made that promise formal. It also gave BP an opportunity to stretch out its payments and reduce the volume of spill-related civil litigation greatly. As an article in the New York Times pointed out, in return for agreements not to sue, BP is offering to quickly reimburse victims for their full economic losses, thereby sparing them years of delay and the burden of paying attorneys. The compensation fund is an example of mutual gain, not Hitler-esque subjugation. Years or decades will pass before all civil and criminal liabilities stemming from the disaster in the gulf are resolved. Real arm-twisting will occur at many points. Plaintiffs’ attorneys will threaten BP with enormous punitive damage awards to squeeze as much money as they can from BP for their clients. The federal government will hit the responsible companies with billions in penalties and may threaten to put their executives in prison. Fortunately, given the magnitude of the disaster, intense media interest, reporting requirements for public companies, and the transparency of the compensation fund, the negotiations that resolve these complaints will likely be open and above board. Attorney General Holder can and should be involved in these negotiations. Global settlements, DPAs and NPAs, which have been utilized under both Republican and Democratic Administrations, provide many advantages when compared to criminal prosecutions and concurrent civil regulatory actions by multiple federal agencies. Such agreements encourage full disclosure to the investing public, allow targeted reform of mismanaged or corrupt corporations, ensure restitution to victims, and may protect shareholders and employees from bankruptcy proceeding, all while minimizing the collateral consequences on the current law-abiding customers, shareholders, and the general public. Attempting this type of negotiation in the wake of a national disaster of this magnitude is something that cannot be done on the down low.

Read the full article →

Charles M. Silver: The Controversy Surrounding the Criminal Probe into the Gulf Oil Spill

July 19, 2010

Now that oil is no longer pouring into the Gulf, everyone can breathe easier –except the people responsible for the spill. They may go to prison. The Justice Department has a criminal investigation underway. Admittedly, governmental investigations of business torts are more likely to result in fines than prison time. Joseph Hazelwood, who captained the Exxon Valdez when it ran aground, was the only person indicted in connection with that accident and he was sentenced to community service after being convicted on a misdemeanor charge. The BP spill is different, of course. Eleven people died when the Deepwater Horizon caught fire, and the environmental damage is unprecedented. The feds may reasonably decide that the magnitude of the catastrophe requires a high profile criminal prosecution, the same conclusion President Bush’s Justice Department reached in the wake of the Enron debacle. Still, if history provides any guidance, years will pass before anyone is indicted and few people, if any, will spend much time in prison. We know that a criminal investigation is underway because Eric Holder, the Attorney General, has said so many times. He first announced it at a press conference on June 1. Since then, he has commented on it and clarified its scope, emphasizing that BP is not the only potential target . Both for launching the investigation and discussing it openly, Holder has taken serious heat. Initially, political opponents of the Obama Administration contended that the investigation diverted BP’s attention from its efforts to plug the well and deal with the consequences of the spill. The merits of this allegation never were clear. Even before the probe was acknowledged, BP’s managers knew the EPA would punish the company severely. The reputational damage and civil consequences flowing from the spill were also known to be enormous. BP’s executives must also have expected a criminal investigation. In 2007, the company pled guilty to felony violations of the Clean Water Act after a refinery outside Houston, Texas exploded, killing 15, injuring 170, and ultimately saddling BP with $373 million in criminal and civil fines. The prospect of being prosecuted criminally may even have strengthened BP’s resolve to make every possible effort to get matters under control. The U.S. Sentencing Guidelines, which apply to every federal criminal felony conviction, mandate significantly lower sentences and fines for corporations and individuals who cooperate with federal investigators. Reductions are even greater (and may include deferred or non-prosecution agreements, called DPAs and NPAs) when corporations police themselves by creating compliance programs and reporting potential federal criminal and civil violations before to getting caught. Conservatives also slammed Holder for publicly acknowledging the investigation. They claimed, first, that he departed from Justice Department policy which, they said, is neither to confirm investigations nor to deny them. They also charged that, by speaking about the investigation in public, Holder caused BP’s stock to tank. Finally, several commentators and editorial boards criticized Holder for participating in the negotiations, headed by President Obama, which led to the creation of the $20 billion BP victim compensation fund. The Washington Post argued that Holder’s “presence inevitably raised the specter of the criminal probe — and the possibility that it could be used to pressure BP on the size and terms of the fund.” Texas Representative Joe Barton (in)famously characterized to BP as the victim of a “shakedown.” In a column endorsed by Sarah Palin and many others, conservative commentator Thomas Sowell argued along the same lines, while raising the level of hyperbole considerably. Sowell accused President Obama of following in Adolf Hitler’s footsteps by using a crisis as an excuse for subjecting a private enterprise to an illegal and unprincipled exercise of raw power. None of these criticisms makes sense to us. Start with the claim that Holder acted wrongly by acknowledging that a probe was underway. True, the general policy of the Justice Department is to disclose neither the existence of a criminal investigation nor its details. But in two sections (1-7.401C and 1-7.530B), the U.S. Attorneys’ Manual expressly recognizes that “[t]here are exceptional circumstances when it may be appropriate to have press conferences … about ongoing matters before indictment or other formal charge, … includ[ing] cases where … the heinous or extraordinary nature of the crime requires public reassurance that the matter is being promptly and properly handled by the appropriate authority.” Disciplinary rules governing public statements by prosecutors similarly permit communications needed to inform the public of the nature and extent of the government’s response to high-profile crimes. The BP oil spill is the worst environmental disaster in U.S. history. If a crime was committed in connection with it, then the crime was extraordinary by definition and is obviously a matter of great public interest. By confirming the existence of the investigation, Holder acted properly and responsibly. Now consider the charge that Holder’s public statements caused the value of BP’s shares to tumble. Assuming the charge is correct (something that is not self-evident, given the fairly continuous decline in the price of BP stock from April 23rd to June 25th), one must ask, So what? Holder is the highest law enforcement officer in the land. The criticism supposes that he should have acted so as to enhance the value of a private company rather than to protect the public interest. That can’t be right. Public officials are supposed to advance the public good. Shareholders can protect themselves from these extraordinary occasions which require public disclosure by diversifying their stock holdings. Finally, consider the charge that Obama and Holder acted improperly by using the crisis to twist BP’s arm. Although we certainly believe that governmental coercion of private persons, including companies, should be regulated by law, when creating the compensation fund the federal government neither confiscated BP’s money nor coerced the company into paying victims of the spill. Thomas Sowell recognized this, but he thought it an irrelevant nicety. In fact, this is the heart of the matter. The compensation fund is creature of a contract between BP and the federal government. Like all contracts, this one created value for both sides. President Obama showed Americans that he was focused on the disaster and trying to protect them. BP showed the world that its word was good. Hoping to salvage some measure of goodwill, BP had verbally promised to cover losses stemming from the spill. The agreement to create the compensation fund made that promise formal. It also gave BP an opportunity to stretch out its payments and reduce the volume of spill-related civil litigation greatly. As an article in the New York Times pointed out, in return for agreements not to sue, BP is offering to quickly reimburse victims for their full economic losses, thereby sparing them years of delay and the burden of paying attorneys. The compensation fund is an example of mutual gain, not Hitler-esque subjugation. Years or decades will pass before all civil and criminal liabilities stemming from the disaster in the gulf are resolved. Real arm-twisting will occur at many points. Plaintiffs’ attorneys will threaten BP with enormous punitive damage awards to squeeze as much money as they can from BP for their clients. The federal government will hit the responsible companies with billions in penalties and may threaten to put their executives in prison. Fortunately, given the magnitude of the disaster, intense media interest, reporting requirements for public companies, and the transparency of the compensation fund, the negotiations that resolve these complaints will likely be open and above board. Attorney General Holder can and should be involved in these negotiations. Global settlements, DPAs and NPAs, which have been utilized under both Republican and Democratic Administrations, provide many advantages when compared to criminal prosecutions and concurrent civil regulatory actions by multiple federal agencies. Such agreements encourage full disclosure to the investing public, allow targeted reform of mismanaged or corrupt corporations, ensure restitution to victims, and may protect shareholders and employees from bankruptcy proceeding, all while minimizing the collateral consequences on the current law-abiding customers, shareholders, and the general public. Attempting this type of negotiation in the wake of a national disaster of this magnitude is something that cannot be done on the down low.

Read the full article →

Douglas MacKinnon: Out of Touch CEOs at "In Your Face" Locations

July 19, 2010

Normally when in my office, I have the television tuned to CNBC with the sound down. A little more than a week ago it seemed that any time I turned to look at the screen I was greeted mostly by the smiling tanned faces of wealthy, white, male media moguls attending the ultra-trendy Sun Valley Media Summit. For those in the communications business, they seemed quite tone deaf to the Marie Antoinette “Let them eat cake” message they were once again sending with their exclusive retreat. How many arrived at the summit in private jets? How many had personal drivers? How many played golf? And how many used personal assistants to make resort reservations or fetch them water, coffee, or meals? More importantly, how many of these privileged and pampered CEOs and executives truly understand the real economic pain and suffering being visited upon the vast majority of people in our nation and the world? As a conservative who grew up in abject poverty and was homeless off and on as a child, I begrudge no one their success. All the opposite. I am living proof that hard work, experience and tenacity can still be rewarded in this country. I want people to succeed, to produce wealth, to inspire innovation and to create the jobs and opportunities that come with such success. That said, as someone who has some experience with message development and communications strategy, I’m horrified at the elitist attitude these gatherings and venues tend to connote. Be it Sun Valley, Davos, Aspen, Jackson Hole, or Napa Valley, the underlying theme for many near the poverty line remains basically the same. That being “we’re rich, we’re white, we’re male, we’re entitled, and we are staying at resorts you couldn’t afford in two lifetimes.” Congratulations to them all. Sadly what they also are is incredibly out of touch. It’s as if many of them were not aware of the economic meltdown of 2008 and the severe aftershocks being felt by tens of millions of their fellow citizens. That, or they simply don’t care what signal their display of hedonism sends. Again, nothing wrong with enjoying the fruits of your labor as long as that enjoyment is not seen as a punch in the stomach to those most devastated by unaccountable bankers, CEOs, and politicians. As I watched the parade of rich white guys in the picture perfect surroundings of Sun Valley, I couldn’t help but wonder what would happen if such a “summit” were held instead in Harlem, South Central Los Angeles, Liberty City, Miami or a city along the Gulf Coast reeling from the effects of the oil spill? Why not? In a country where “minority America” will soon represent the majority, why not bring one of these aristocratic-like conferences into a poor inner-city? Why not actually walk the walk and lead by example? These inner-cities have hotels, they have meeting rooms, and they have outdoor venues. More than that, they have real people who would not only benefit from the influx of cash these gilded-age conferences would bring to their depressed neighborhoods, but have residents who — precisely because of their real-world experience with poverty, crime, and bloated, inefficient, and often corrupt bureaucracy — could bring needed voices of reason to the millionaire-heavy panels. I’m just saying. *** MacKinnon is a former White House and Pentagon official and author of the novel “Vengeance Is Mine.”

Read the full article →

Video: Realignment May Help Struggling College Sports Teams: Video

June 25, 2010

June 25 (Bloomberg) — Rick Horrow, founder of Horrow Sports Ventures Inc. and a Bloomberg Television contributing editor, reports on the reasons behind the the recent movement among conferences of major college sports teams. (Source: Bloomberg)

Read the full article →

Video: Realignment May Help Struggling College Sports Teams: Video

June 25, 2010

June 25 (Bloomberg) — Rick Horrow, founder of Horrow Sports Ventures Inc. and a Bloomberg Television contributing editor, reports on the reasons behind the the recent movement among conferences of major college sports teams. (Source: Bloomberg)

Read the full article →

Brett King: Mobile Data Plans are wrong…

June 15, 2010

The greatest competitive differentiation a mobile operator can give me today is an always on data plan across devices. Right now I have an iPhone, a Blackberry, an iPad and a Mac and I effectively have to manage different data plans for each device. This sucks. I also maintain a broadband connection at home, although I would abandon that gladly if my wireless data deal were better. Not only does multi-device connectivity cost me more than I believe it should, but I actually have different plans with different providers for different devices. Some are monthly WiFi deals, others are mobile data deals that actually limit my downloads on a monthly basis, and others are pre-paid deals that I pick up when I am visiting other countries. My best deal is a great 3.5G solution through CSL in Hong Kong, where I pay around US$50 a month for 21Mbps access speeds and unlimited downloads. Unfortunately when I am working in the United States, UK and Australia on my iPhone or iPad, I can’t get a deal even remotely close to this sort of value for money. Firstly, 21Mbps isn’t available on AT&T, Telstra or many of the UK providers.  Secondly, unless you are Sprint 4G in the US, there’s not one provider who gives an unlimited download deal. In the US, UK and Australia on my mobile plans I am restricted to downloading between 6 Gb and 10 Gb per month. You might think that sounds like a lot, but I’ve recently been conducting webinars and Skype teleconferences frequently, and I can chew through 1 Gb of data in a single day. If you exceed the monthly download limit, then that’s where you start to singlehandedly make an sizeable direct contribution to the profits of the telco themselves. Normally this manifests itself as overage charges that resemble the budget of a mid-size multinational. Plans need to be for access, not data I understand the need and right of an operator to make margin from their business. To some extent with fixed line business I understand the cost of running cable and the fact that as a user of the infrastructure I must pay a penalty. But let’s face it, when it’s wireless data of the 3G or 4G network, essentially the operator is providing this over cell tower infrastructure that was installed in most cases over 10 years ago, and has just undergone successive upgrades of antenna and firmware to operate at the new frequencies. Unless you are a VNO (Virtual Network Operator) the data is costing you nothing. In any case, the cost of the infrastructure is a sunk cost, and regardless of how much data I suck down the pipe, I should be paying for the size of the pipe, not for the data because the operator most certainly isn’t paying for the data. To illustrate the great digital divide let’s compare the more progressive countries with US, UK and Australia based on 12 month contracts. The great digital divide Pricing plans should get cheaper a lot faster than they do You’ve heard of Moore’s Law right? Well there’s a law for the telecoms sector in respect to bandwidth too. It’s called Gilder’s law . Gilder’s law effectively states that the capacity of a pipe to carry data will increase by at least 3 times Moore’s law. Moore’s law says that computing capacity/power will increase at 200% per 2 years, so that means bandwidth will increase 600% in carrying capacity every 2 years. So the cost of data over a 7Mb Next-G modem, if it is $50 today, should be $8 in 2 years time for the same deal. From my experience, this is extremely unlikely. So what is happening is operators are getting increasingly cheaper pipes, and are maximizing the profit of those pipes over more years than they need to. If South Korea can provide 1 Gbps broadband in the home for the same price as Australia charges for a 2.5Mbps connection, you know something has to give eventually. So what is the great equalizer? 4G – Herein lies the problem The next generation of mobile standards (4G) allows for much faster download speeds, infact, when 4G taps out the upper end will allow 1 Gbps download speeds. The problem is that when Australian, UK and US providers move to the next generation of technology, capping downloads with limits just won’t make any sense whatsoever. What would you cap it at? 100 Gb? It gets a little ridiculous. I could download a DVD quality movie every day and still not exceed my download limit. But more importantly, once in place, the whole benefit in 4G is the fact that I become permanently unwired as a consumer. To understand where we are going means that we will move from one device to another seamlessly. This is already happening with the iPad, iPhone and your HD TV. I am looking for a data provider that allows me access to connectivity as a bundle, not by Mb. Conclusion In a Wired article back in 1993 George Gilder predicted that Bandwidth would eventually be free. I believe that bandwidth will eventually be so cheap that it is effectively free, but right now operators need to understand that charging for the pipe, and not the data is how they can both enable business and future revenue.

Read the full article →

Brett King: Mobile Data Plans are wrong…

June 15, 2010

The greatest competitive differentiation a mobile operator can give me today is an always on data plan across devices. Right now I have an iPhone, a Blackberry, an iPad and a Mac and I effectively have to manage different data plans for each device. This sucks. I also maintain a broadband connection at home, although I would abandon that gladly if my wireless data deal were better. Not only does multi-device connectivity cost me more than I believe it should, but I actually have different plans with different providers for different devices. Some are monthly WiFi deals, others are mobile data deals that actually limit my downloads on a monthly basis, and others are pre-paid deals that I pick up when I am visiting other countries. My best deal is a great 3.5G solution through CSL in Hong Kong, where I pay around US$50 a month for 21Mbps access speeds and unlimited downloads. Unfortunately when I am working in the United States, UK and Australia on my iPhone or iPad, I can’t get a deal even remotely close to this sort of value for money. Firstly, 21Mbps isn’t available on AT&T, Telstra or many of the UK providers.  Secondly, unless you are Sprint 4G in the US, there’s not one provider who gives an unlimited download deal. In the US, UK and Australia on my mobile plans I am restricted to downloading between 6 Gb and 10 Gb per month. You might think that sounds like a lot, but I’ve recently been conducting webinars and Skype teleconferences frequently, and I can chew through 1 Gb of data in a single day. If you exceed the monthly download limit, then that’s where you start to singlehandedly make an sizeable direct contribution to the profits of the telco themselves. Normally this manifests itself as overage charges that resemble the budget of a mid-size multinational. Plans need to be for access, not data I understand the need and right of an operator to make margin from their business. To some extent with fixed line business I understand the cost of running cable and the fact that as a user of the infrastructure I must pay a penalty. But let’s face it, when it’s wireless data of the 3G or 4G network, essentially the operator is providing this over cell tower infrastructure that was installed in most cases over 10 years ago, and has just undergone successive upgrades of antenna and firmware to operate at the new frequencies. Unless you are a VNO (Virtual Network Operator) the data is costing you nothing. In any case, the cost of the infrastructure is a sunk cost, and regardless of how much data I suck down the pipe, I should be paying for the size of the pipe, not for the data because the operator most certainly isn’t paying for the data. To illustrate the great digital divide let’s compare the more progressive countries with US, UK and Australia based on 12 month contracts. The great digital divide Pricing plans should get cheaper a lot faster than they do You’ve heard of Moore’s Law right? Well there’s a law for the telecoms sector in respect to bandwidth too. It’s called Gilder’s law . Gilder’s law effectively states that the capacity of a pipe to carry data will increase by at least 3 times Moore’s law. Moore’s law says that computing capacity/power will increase at 200% per 2 years, so that means bandwidth will increase 600% in carrying capacity every 2 years. So the cost of data over a 7Mb Next-G modem, if it is $50 today, should be $8 in 2 years time for the same deal. From my experience, this is extremely unlikely. So what is happening is operators are getting increasingly cheaper pipes, and are maximizing the profit of those pipes over more years than they need to. If South Korea can provide 1 Gbps broadband in the home for the same price as Australia charges for a 2.5Mbps connection, you know something has to give eventually. So what is the great equalizer? 4G – Herein lies the problem The next generation of mobile standards (4G) allows for much faster download speeds, infact, when 4G taps out the upper end will allow 1 Gbps download speeds. The problem is that when Australian, UK and US providers move to the next generation of technology, capping downloads with limits just won’t make any sense whatsoever. What would you cap it at? 100 Gb? It gets a little ridiculous. I could download a DVD quality movie every day and still not exceed my download limit. But more importantly, once in place, the whole benefit in 4G is the fact that I become permanently unwired as a consumer. To understand where we are going means that we will move from one device to another seamlessly. This is already happening with the iPad, iPhone and your HD TV. I am looking for a data provider that allows me access to connectivity as a bundle, not by Mb. Conclusion In a Wired article back in 1993 George Gilder predicted that Bandwidth would eventually be free. I believe that bandwidth will eventually be so cheap that it is effectively free, but right now operators need to understand that charging for the pipe, and not the data is how they can both enable business and future revenue.

Read the full article →

Raymond J. Learsy: Oil,Cartels, Venezuela- A Moment of Truth For The Department of Justice and the Obama Administration

June 15, 2010

This post is not about the merits of fossil fuels, fully cognizant of the growing existential danger they present to the environment and planet, but rather about the price of fossil fuels and our government’s decades long complicit policies in the transfer of literally trillions of dollars of the nation’s wealth to oil interests and despots around the world. Trillions that have helped to destabilize today’s world lubricating the clash of civilizations, making it possible for the billions upon billions to be expended by Mid-East oil producers to radicalize generations of the young and vulnerable throughout all corners of the globe, to the ethos of jihad and intolerance. The issue is highlighted in a remarkable and eye opening court battle currently being litigated: United States District Court for the Southern District of Texas (No. 06-3569) Spectrum Stores Inc,…et al Plaintiffs -Appellants v. CITGO Petroleum Corporation; Petroleos De Venezuela S.A… et al In essence the case charges that CITGO Petroleum Corporation, an American refining company with refineries in Lake Charles La., Corpus Christi, Tex, and Lemont, Ill. supplying more than 13,500 domestic gasoline stations and wholly owned by the Venezuelan State oil company, Petroleos de Venezuela S.A. is “liable under the Sherman Act for its participation in a global price-fixing conspiracy with the OPEC member nations and other private oil companies.” The essence of the charge against CITGO, and I quote form the complaint as filed: “If the member nations of the Organization of Petroleum Exporting Countries (“OPEC”) were American companies, their participation in an open price fixing conspiracy would be illegal under the Sherman Act. The member nations might take comfort in the special protections afforded sovereign nations but private, especially American companies cannot. This case seeks to hold CITGO Petroleum Corporation, an American refining company wholly but indirectly owned by Venezuela, liable under the Sherman Act for its participation in a global price fixing conspiracy with OPEC member nations and private companies.” The brief goes on to comment, “The conspiracy’s avowed purpose and direct, substantial and foreseeable effect is extraterritorial; increasing the price of oil and Related Petroleum Products (RPPs) globally, including the United States, which is a key target of the conspiracy…CITGO and OPEC have had common high ranking officials. CITGO officers prepared OPEC’s Long-Term Strategy and organized OPEC summits and conferences; provided technical services and information on the U.S. market.” In essence, the complaint alleges That CITGO conspired with OPEC and is therefore liable as a principal and materially assists the cartel in achieving those aims. But here is the nub of the matter. Given the issue of ‘Sovereign Immunity’ as it attains to this proceeding the court has asked the Obama administration to file a brief commenting on the merits of the complaint. In early July the Department of Justice is scheduled present the court with their amicus brief setting forth the Administration’s position. Amazingly, perhaps even inadvertently in that it is a clarion wake up call to our government, CITGO having wrapped itself in the cloak of Sovereign Immunity, has made our government’s actions the cornerstone of its defense. In CITGO’s court filings, incorporating a chronology of the International Oil Policy of The United States which in turn “summarized that over thirty years of public policy statements made by members of (former Presidential Administrations), all reflecting a commitment to cooperation instead of confrontation with foreign sovereign oil-producers.” And therein lies a profound and hidden truth. A truth stemming from a fateful pilgrimage by then Vice President George H.W. Bush in 1986 to then King Fahd’s throne in Saudi Arabia to rescue America’s domestic oil industry reeling from oil prices veering toward single digits. Bush pleaded for a then moribund OPEC to be resuscitated in order to ratchet up oil prices. With the implicit backing of the American government, King Fahd’s Saudi Arabia was quick and eager to comply. Within a year prices near doubled and the rest is history. Thus by giving OPEC a reprieve, Bush and the benign, better said insidious neglect and complicity of subsequent American administrations over the decades, helped saddle world consumers, rich and poor countries alike, transferring literally trillions into the coffers of the OPEC producers and their Big Oil cronies. In the guise of protecting the American oil industry, and likely because of its influence, the United States became OPEC’s guardian. With the American government being acquiescent, OPEC oil producers had little to fear politically. An example of our government’s cartel embracing policies one need look no further than George W. Bush’s – it runs in the family- scuttling through threat of veto the proposed NOPEC Bill (NOPEC Act, S.879, 110th Cong (2007) that would have readily passed in Congress – of which then Senator Hillary Clinton was a co-sponsor and then Senator Obama voted to support), legislation that would have lifted sovereign immunity in American courts for all OPEC related entities, permitting action by the Federal Trade Commission and the Department of Justice under the Sherman Act before the American Bar of Justice. Brazenly, CITGO in its reply to the charges, permitted itself to instruct the court and anyone else interested, in the following civics lesson: according to CITGO, “The United States government has never pursued anti-trust sanctions against any oil producing sovereign…It has instead consistently opted for cooperation and constructive diplomacy with oil producing nations as reflected in numerous public policy statements made by members of the Executive Branch over decades.” Well there you have it, a clear statement of our government’s abject alliance with the machinations of the OPEC cartel. The brief being prepared by the Department of Justice will resonate far and wide. It will be a tell tale act of further collusion by our government in a trillion dollar decades long extortion visited on us and the rest of the world by OPEC and its allies. Or it will be a comprehensive break with past policies whereby our courts and our government are once again on the side of the American people and not the oil nabobs.

Read the full article →

Raymond J. Learsy: Oil,Cartels, Venezuela- A Moment of Truth For The Department of Justice and the Obama Administration

June 15, 2010

This post is not about the merits of fossil fuels, fully cognizant of the growing existential danger they present to the environment and planet, but rather about the price of fossil fuels and our government’s decades long complicit policies in the transfer of literally trillions of dollars of the nation’s wealth to oil interests and despots around the world. Trillions that have helped to destabilize today’s world lubricating the clash of civilizations, making it possible for the billions upon billions to be expended by Mid-East oil producers to radicalize generations of the young and vulnerable throughout all corners of the globe, to the ethos of jihad and intolerance. The issue is highlighted in a remarkable and eye opening court battle currently being litigated: United States District Court for the Southern District of Texas (No. 06-3569) Spectrum Stores Inc,…et al Plaintiffs -Appellants v. CITGO Petroleum Corporation; Petroleos De Venezuela S.A… et al In essence the case charges that CITGO Petroleum Corporation, an American refining company with refineries in Lake Charles La., Corpus Christi, Tex, and Lemont, Ill. supplying more than 13,500 domestic gasoline stations and wholly owned by the Venezuelan State oil company, Petroleos de Venezuela S.A. is “liable under the Sherman Act for its participation in a global price-fixing conspiracy with the OPEC member nations and other private oil companies.” The essence of the charge against CITGO, and I quote form the complaint as filed: “If the member nations of the Organization of Petroleum Exporting Countries (“OPEC”) were American companies, their participation in an open price fixing conspiracy would be illegal under the Sherman Act. The member nations might take comfort in the special protections afforded sovereign nations but private, especially American companies cannot. This case seeks to hold CITGO Petroleum Corporation, an American refining company wholly but indirectly owned by Venezuela, liable under the Sherman Act for its participation in a global price fixing conspiracy with OPEC member nations and private companies.” The brief goes on to comment, “The conspiracy’s avowed purpose and direct, substantial and foreseeable effect is extraterritorial; increasing the price of oil and Related Petroleum Products (RPPs) globally, including the United States, which is a key target of the conspiracy…CITGO and OPEC have had common high ranking officials. CITGO officers prepared OPEC’s Long-Term Strategy and organized OPEC summits and conferences; provided technical services and information on the U.S. market.” In essence, the complaint alleges That CITGO conspired with OPEC and is therefore liable as a principal and materially assists the cartel in achieving those aims. But here is the nub of the matter. Given the issue of ‘Sovereign Immunity’ as it attains to this proceeding the court has asked the Obama administration to file a brief commenting on the merits of the complaint. In early July the Department of Justice is scheduled present the court with their amicus brief setting forth the Administration’s position. Amazingly, perhaps even inadvertently in that it is a clarion wake up call to our government, CITGO having wrapped itself in the cloak of Sovereign Immunity, has made our government’s actions the cornerstone of its defense. In CITGO’s court filings, incorporating a chronology of the International Oil Policy of The United States which in turn “summarized that over thirty years of public policy statements made by members of (former Presidential Administrations), all reflecting a commitment to cooperation instead of confrontation with foreign sovereign oil-producers.” And therein lies a profound and hidden truth. A truth stemming from a fateful pilgrimage by then Vice President George H.W. Bush in 1986 to then King Fahd’s throne in Saudi Arabia to rescue America’s domestic oil industry reeling from oil prices veering toward single digits. Bush pleaded for a then moribund OPEC to be resuscitated in order to ratchet up oil prices. With the implicit backing of the American government, King Fahd’s Saudi Arabia was quick and eager to comply. Within a year prices near doubled and the rest is history. Thus by giving OPEC a reprieve, Bush and the benign, better said insidious neglect and complicity of subsequent American administrations over the decades, helped saddle world consumers, rich and poor countries alike, transferring literally trillions into the coffers of the OPEC producers and their Big Oil cronies. In the guise of protecting the American oil industry, and likely because of its influence, the United States became OPEC’s guardian. With the American government being acquiescent, OPEC oil producers had little to fear politically. An example of our government’s cartel embracing policies one need look no further than George W. Bush’s – it runs in the family- scuttling through threat of veto the proposed NOPEC Bill (NOPEC Act, S.879, 110th Cong (2007) that would have readily passed in Congress – of which then Senator Hillary Clinton was a co-sponsor and then Senator Obama voted to support), legislation that would have lifted sovereign immunity in American courts for all OPEC related entities, permitting action by the Federal Trade Commission and the Department of Justice under the Sherman Act before the American Bar of Justice. Brazenly, CITGO in its reply to the charges, permitted itself to instruct the court and anyone else interested, in the following civics lesson: according to CITGO, “The United States government has never pursued anti-trust sanctions against any oil producing sovereign…It has instead consistently opted for cooperation and constructive diplomacy with oil producing nations as reflected in numerous public policy statements made by members of the Executive Branch over decades.” Well there you have it, a clear statement of our government’s abject alliance with the machinations of the OPEC cartel. The brief being prepared by the Department of Justice will resonate far and wide. It will be a tell tale act of further collusion by our government in a trillion dollar decades long extortion visited on us and the rest of the world by OPEC and its allies. Or it will be a comprehensive break with past policies whereby our courts and our government are once again on the side of the American people and not the oil nabobs.

Read the full article →

Gulf Oil Spill: BP’s Failures Amplified By Numerous Gaffes

June 11, 2010

HOUSTON — BP is already fighting an oil gusher it can’t contain and watching its mighty market value wither away. Its own bumbling public-relations efforts are making a big mess worse. Not only has it made a series of gaffes – none greater than the CEO’s complaint that “I’d like my life back” – the company hasn’t even followed its own internal guidelines for damage control after a spill. Executives have quibbled about the existence of undersea plumes of oil, downplayed the potential damage early in the crisis and made far-too-optimistic predictions for when the spill could be stopped. BP’s steadiest public presence has been the ever-present live TV shot of the untamed gusher. What BP has lacked, crisis management experts say, has been much of a show of human compassion. “All crises are personal,” said Richard Levick, who runs a public relations firm, Levick Strategic Communications, that advises companies. “Action and sacrifice is absolutely critical.” The best move for BP’s image, of course, would be to stop the leak. That has proved difficult enough, with one fix after another failing and estimates of the severity of the spill growing by the week. Failing a solution, Daniel Keeney, president of a Dallas-based PR firm, suggested putting CEO Tony Hayward in a hard hat and life vest, helping crews contain and clean up the spill. “You want to get him right in the thick of things, even if he looks somewhat uncomfortable doing it,” Keeney said. Levick suggested BP could have cut gas prices at its stations along the Gulf Coast – a show of financial solidarity. BP has taken a stab at soothing angry Americans, airing a slick, multimillion-dollar national TV spot this week in which Hayward pledges: “We will make this right.” Hayward also promised BP would clean up every drop of oil and “restore the shoreline to its original state.” President Barack Obama said the money spent on the ads should have gone to cleanup and compensating devastated fisherman and small business owners. And even those efforts violate the company’s own prescription for damage control. Its own spill plan, filed last year with the federal government, says of public relations: “No statement shall be made containing any of the following: promises that property, ecology or anything else will be restored to normal.” On top of everything else, BP can’t figure out what to say about its dividend. Lawmakers in the U.S. insist the company must look after the devastated people of the Gulf before paying its shareholders. But in Britain, legions of retirees count on the steady payouts. And earlier this week when Wall Street freaked out over the prospect of billions of dollars in BP liabilities and sent its stock to its lowest point since the mid-1990s, the company response was positively tone-deaf. “The company is not aware of any reason which justifies this share price movement,” the company said early Thursday, after its stock was hammered on New York and European exchanges. Almost from the beginning, BP has been as unable to control its public message as it has the spill itself. Hayward was ridiculed for telling reporters “I’d like my life back” earlier in the crisis, remarks the families of some of the 11 men killed in the explosion of the Deepwater Horizon rig felt were insensitive. He also suggested that the environmental impact of the spill would be “very, very modest.” Former Shell chairman John Hofmeister said it might have been more appropriate for senior U.S. executives of the company to take the heat. Hayward is an Englishman, and BP is based in Britain. “I think it was a mistake for Tony Hayward to come and put his physical presence in the U.S.,” Hofmeister said. “The U.S. has its own culture and traditions. Foreign companies can come and do business there, but they are not necessarily welcomed.” BP’s chief operating officer, Doug Suttles, an American, was rolled out for interviews, but his aides grumbled Hayward was stealing the spotlight. Hayward’s decision to present a video explaining BP’s “top kill” attempt took the company’s Louisiana command by surprise. As for Suttles himself, he insisted this week that there were no massive underwater oil plumes in “large concentrations” from the spill. To NBC, he offered that it “may be down to how you define what a plume is here.” The government had said three tests confirmed oil as far as three-fifths of a mile below the surface of the Gulf, at least 40 miles away from the site of the gushing well. Suttles also predicted the spill would be reduced to a “relative trickle” by early next week. BP later sought to walk the comments back, saying the company was optimistic but that getting the spill to a trickle would take more time. By late this week, the government had reported that the spill was spewing the equivalent of the Exxon Valdez disaster into the Gulf every two weeks or less, with the catastrophe nearing the end of its second month. Since the April 20 explosion, BP has parachuted its own staff, plus staff from at least two independent public-relations firms, to deal with the deluge of round-the-clock media inquiries. Early on in the crisis, BP and government officials held daily in-person briefings with media, allowing questions. In recent days and weeks, officials have increasingly resorted to teleconferences with reporters and have limited the ability to ask questions and the number of questions that could be asked. In Houston, where BP has set up a U.S. command center, company PR officials have grown weary of reporters going directly to engineers and other higher-ups for information, at times trying to insist media go through them first. Spokesman Robert Wine said in an e-mail to The Associated Press that media visits to the Houston center are “very carefully controlled and sparingly arranged” by design. “The rooms that are shown are full of the teams who WILL make a difference on the result of this crisis,” Wine wrote. “Every second they are not helping with media visits is time they are not doing the `day job.’” In the meantime, BP has been buying up spill-related search terms on Google and Yahoo, so that links to its own oil-response sites pop up first. BP says the idea is to help people on the Gulf find the right forms and people quickly and effectively. Others suggest it’s a move to steer searchers away from bad press for BP. “It is clearly trying to protect its brand image,” said Matthew Whiteway, director of campaign management at London consulting firm Greenlight, which says 95 percent of BP’s search listings are rated very negative. Crisis management experts say the only reliable way to repair BP’s badly tarnished image is the obvious one – to plug the hole. “Crisis management is about fixing the problem. It’s not about looking good,” said Tony Jaques, a crisis management consultant in Melbourne, Australia. “BP has done some things that have not been smart, but really, what would they have done to look good in this kind of situation anyway?” ___ McClam reported from New York. Associated Press writers Michael Liedtke in San Francisco, Tamara Lush in New Orleans and Jane Wardell in London contributed to this report.

Read the full article →

AlaskaDispatch.com: BP Shareholders, Give Tony Hayward His Life Back. Fire Him

June 6, 2010

BP Chief Executive Tony Hayward told shareholders last week that the well technology that should have prevented the Gulf oil spill wasn’t failsafe. Yet, industry knew this for years. And Hayward let his company continue to drill. Bad PR is not the reason BP Chief Executive Tony Hayward should be in trouble today; corporate integrity is. Forget Hayward’s snafu last week, the one the idiot press made much about, when the man in charge of the company smearing the Gulf of Mexico with crude oil said, “There’s no one who wants this over more than I do. You know, I’d like my life back.” Hayward was just being honest then and stating what a lot of people in the Gulf of Mexico are thinking as BP’s undersea volcano continues to gush oil. With the amount in the water now up past twice that of the Exxon Valdez spill in Prince William Sound, who wouldn’t want the disaster to be over with? No, honesty about feelings is not Hayward’s problem. This is: His statement to investors in a conference call Friday when he said the oil industry needs a “paradigm shift.” “We need better safety technology,” he said. “For example, the blowout preventer which this incident has shown is not failsafe.” There are two things wrong with this statement. The first is that the oil industry has known for years that the failsafe devices in blowout preventers — the rams designed to shear the drill pipe and seal a well in the event of a catastrophic blowout — were inadequate. The U.S. Minerals Management Service warned of this years ago. It has been discussed at oil drilling conferences around the globe for at least a of couple years. And a truly failsafe blowout preventer has been in the design stage for at least five years, first with Devon Energy and Cameron, and now with Chevron and Cameron. Houston-based Cameron is one of the major, global producers of blowout preventers, or BOPs, as they’re commonly called in the industry. Cameron and Chevron are supposed to be at this moment testing what Chevron has called an alternative well kill system, or AKWS, which is another way of saying “a BOP that is indeed failsafe.” It didn’t take an enterprising reporter more than a few days to learn about this, or discover from talking to oil-drill rig operators that they’ve long known that existing BOPs won’t shear joints where drill pipe is welded together, won’t shear the pipe if there are tools in it (which now appears might have been the case deep below BP’s sunken Deepwater Horizon rig in the Gulf), and might not shear new, high-tensile-steel pipe, especially at extreme depths. The Deepwater Horizon, it is worth noting, was drilling 5,000 feet beneath the surface of the ocean. All of which brings us to the second and most important problem with Hayward’s statement during that conference call with investors: Either he didn’t know when he took the job as BP chief executive that the BOPs the company was using beneath its drill rigs weren’t failsafe, or he is now trying to pretend — “for example … this incident has shown (it) is not failsafe” — that he didn’t know. It’s hard to say which is worse. Tony Hayward gets paid $4.6 million a year to run BP. He should be expected to know more about the huge risks to his company posed by an oil leak than some poorly paid reporter in Podunk, Alaska. If that reporter can find out in a matter of days that everyone actively involved in oil drilling knows BOPs aren’t failsafe, shouldn’t Hayward have figured this out from about day two on the job? Wouldn’t he think to ask someone, “Hey, what’s the greatest risk facing our company at this time?” At this point, there is little doubt what his engineers would have told him: A deepwater blowout. Everyone in the drilling business — EVERYONE — knew they were pushing into a new frontier in the Gulf of Mexico. Drilling deepwater isn’t quite as difficult as venturing into space, but it’s close. People were working at the limits of technology where things can be expected to go wrong, and they did. Everyone in the drilling business — EVERYONE — also knew that there were and are flaws in existing BOPs. Highly experienced drillers have tried to explain this away by noting that if they do everything right they’ll never need to use the “failsafe” shear-ram in the BOP to shear and seal a well. Read more of this story at AlaskaDispatch.com.

Read the full article →

Leslie Grossman: What’s Your New Business Model for 2010

May 16, 2010

For many of us in the world of business, and particularly business owners and leaders, 2009 was a year to which we are thrilled to say “adieu.” Now that we’re past it, I can stop being angry at 2009, and take a moment to say thank you for all that I learned from it. I don’t know about you, but I’ve gathered up all that learning and am applying it to our business in the new decade. What did I learn? Most important of all, I learned to be willing to change my company’s business model. What worked in the ’90′s, most likely may not work in the new decade. So take a hard look at your market. Do research on what your target audience wants and be willing to really shake up your business. 2009 was about reducing costs and staying in business. 2010 is about growing the business. In many cases, that may require a new business model, or at the very least, a new way of doing business. What is my company’s new business model? Women’s Leadership Exchange (WLE) – a company known for its live conferences since 2002, is presenting the first Virtual Summit for Women Business Owners and Professionals, www.womensleadershipexchange.com (and men can attend, too) on Wednesday, May 26. How did we arrive at the decision to change our business model? First, the technology has finally arrived to the point that we can deliver everything we have at live conferences virtually in streaming video – right to your own PC or Mac. Second, businesses are looking to save on expenses. So if my company can deliver to our audience valuable keynotes, workshops, networking, resources and exhibits on our customers’ computers, they save time and save money – two things that are in low supply these days. Business owners can use those bucks they would have used on fees, travel and parking to invest in their own businesses. Third, business owners have no time. They are multi-tasking like crazy. The virtual format enables us to archive the conference content so that our attendees can go back after the event and listen and see it again as often as they want. Once a live event is over, it’s over and if you missed hearing something, it’s gone forever. But at the WLE Virtual Summit, you can replay the speeches, etc. and remind yourself and your team about all the great information you learned or didn’t get to hear the first time. The fourth reason we decided to change our business model is that a Virtual Summit is NEW and exciting. It gives us something new to talk about – it’s a great opportunity for PR. By the way, the WLE Virtual Summit is being keynoted by Arianna Huffington, who created a new business model herself – The Huffington Post. So the theme of the conference “A New Way of Doing Business is kicked off by a leader who embraces change and doing things differently. So what’s your new business model? What are you doing differently? Please share, so we can all learn from each other!! Tell us what you are doing and maybe we’ll invite you to share your story at the next WLE Virtual Summit.

Read the full article →

EU Leaders Seek to Defend Euro, Tighten Rules Amid Widening Greek Crisis

May 7, 2010

By James G. Neuger and Tony Czuczka May 7 (Bloomberg) — European leaders sought to restore confidence in the euro as Greece’s escalating debt crisis threatened to engulf Portugal and Spain, testing the stability of the 11-year-old currency and rattling financial markets worldwide. Leaders of the 16 countries sharing the euro plan to endorse a 110 billion-euro ($140 billion) aid package for Greece and mull ways of capping budget deficits to strengthen the management of the $12 trillion economy at a summit in Brussels tonight. “We have to accelerate the regulation of the financial markets,” German Chancellor Angela Merkel told reporters before the summit. “We also have to take steps to secure the stability of the euro overall, that means a firm commitment by all that it is our common currency but also internally that we stiffen the Stability and Growth Pact including possible treaty changes.” Europe’s failure to contain Greece’s fiscal crisis triggered a 4.3 percent drop in the euro this week and led the U.S. and Asia to rally around in a bid to prevent a global sovereign-debt crisis from pitching the world back into a recession. The Brussels summit won’t announce new measures, instead sending a political message that the euro-area governments are united and willing to act, a French official told reporters on condition of anonymity. The summit started at 7 p.m. Final press conferences are slated for 10 p.m. Intensive Debate Austrian Chancellor Werner Faymann warned that any changes to the European Union’s governing treaties “might come at the end of the debate” and predicted the EU will have an “intensive debate before we develop our own financial-market instruments” such as a separate European credit-rating agency. He also urged a ban on short sales. The extra yield that investors demand to hold Greek, Portuguese and Spanish debt instead of safer German bonds rose to euro-era highs today. The premium on 10-year government bonds jumped as high as 973 basis points for Greece, 354 basis points for Portugal and 173 basis points for Spain. Europe’s unprecedented lending pledge for Greece has “proven insufficient to stop market contagion to the rest of the euro-zone periphery,” Michael Saunders and other economists at Citigroup Inc. said in an e-mailed note. “Different kinds of solutions are necessary to fix the underlying problems of the rest of the euro periphery other than Greek-style packages, and these are unlikely to come in the very short term.” Turmoil The spreading contagion prompted Group of Seven finance chiefs to hold an emergency conference call today, though no communiqué was put out afterwards. “All the financial markets are now in turmoil,” Japanese Vice Finance Minister Rintaro Tamaki , the country’s top currency official, said before the G-7 call in an interview in St. Gallen, Switzerland. “The impact of the Greek crisis has gone beyond the border of the euro area. This is a global issue.” In an echo of the worst days of the credit crisis of 1998, overnight deposits with the European Central Bank yesterday rose to a 10-month high as banks became more reluctant to lend to each other. The London interbank offered rate, or Libor, that financial institutions say they charge each other for three- month loans in dollars rose to the highest since August. European stocks sank the most in 14 months today, with the Stoxx Europe 600 Index tumbling 3.9 percent to 237.18. The euro rebounded 0.7 percent to $1.2702, snapping four days of declines. It’s still down 15 percent since late November. Government Bonds ECB President Jean-Claude Trichet unsettled markets yesterday by signaling no immediate steps to stem the panic, denting global confidence in Europe’s handling of the severest crisis since the euro’s debut in 1999. Trichet resisted pressure to implement new policies to combat the crisis such as buying government bonds or offering banks access to more cash on better terms. He instead elevated his demand for governments to cut budget deficits and tried to quarantine the problem by saying Spain and Portugal are “not Greece.” Greece will have Europe’s highest debt load by the end of 2010, equal to 124.9 percent of gross domestic product, according to European Commission forecasts. Portugal’s debt will be 85.8 percent and Spain’s 64.9 percent. Global Crisis After winning plaudits for handling the global crisis that began in 2007, Trichet has also seen his status eroded as politicians ignored his pleas for a fast aid pact and then objection to bringing in the IMF. He also has been forced to twice reverse the ECB’s position on Greece after originally saying it wouldn’t gear its policies to a single country. The ECB last month extended emergency collateral rules into next year and this week dropped all restrictions on Greek bonds to ensure they didn’t become ineligible for cash. European leaders contributed to the tumult by taking two months to draft the Greek aid package after making a pledge of support on Feb. 11. Greece needs money in time to redeem 8.5 billion euros of bonds on May 19. Nine governments have given formal approval to the package. Germany, the biggest contributor with as much as 22.4 billion euros over three years, fell in line today with endorsements in the lower and upper houses of parliament. A group of German academics filed a lawsuit to try to halt the payout. Greek Prime Minister George Papandreou ruled out further steps at tonight’s summit, saying the point is to “reaffirm our confidence in our economies and our common currency and this I believe is a very important message for the global economic recovery.” Longer-term measures to prevent future crises must include tougher sanctions on violators of deficit rules and better Europe-wide economic management, Finnish Prime Minister Matti Vanhanen said. “Firm economic policy coordination enhanced by sanctions and pragmatic tax coordination are all possible,” Vanhanen said in a pre-summit appeal. To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net ; Tony Czuczka in Brussels at aczuczka@bloomberg.net .

Read the full article →

Steven G. Brant: Wall Street Is Suicidal. It’s Time To Focus On Those Who Aren’t

May 6, 2010

The debate over whether the DOW dropped today because of Greece or because someone pushed “billion” rather than “million” in trading Proctor & Gamble stock doesn’t matter. What does is the market’s response to bad news, whether that news is real or an accident. Our Suicidal Market The current market psychology is suicidal. Bad new arrives, and Wall Street immediately starts to drive our economic system off a cliff… again! This should tell you and me… and our representatives in Washington… all we need to know. Since I don’t think any of us want suicidal people determining the fate of our economy or of our nation ( No Matter How Wealthy Those Suicidal People Are ), it’s time to change who we put front and center when looking at the fate of our nation. “It’s the response, stupid!” is what people should keep in mind. We are living in the most challenging period since The Great Depression. Maybe even more challenging, because the fate of America is tied more directly – and more immediately – to world events than ever. WWII may have been global in scope, but it took years for the winners and losers to be decided. Cooler, More Forward-Thinking Minds Needed Because today’s challenges involve economic transactions that happen in nanoseconds (rather than weeks, months, and years), the time has come for the most forward thinking people in America to come to the fore, both politically and economically. We now know that the people on Wall Street are not those people. We now know that people on Wall Street do not know how to responsibly control how they respond to current events. “Responsibility” = “Response Ability” = The ability to control your response. And Wall Street doesn’t have any such ability. The people on Wall Street react like rats fleeing a sinking ship. And this after “we the people” gave them $Billions to keep their stupidity from crashing the system two years ago. Well, now we know the people on Wall Street are both stupid and chicken . I’d say we’ve found out not a moment too soon. What To Do? Where To Look? It’s time to change how we measure the well-being of America. It’s time to change which people’s behavior we watch. The DOW is not America. Wall Street is not America. What is America are the innovators amongst us. And I don’t mean the innovators on Wall Street who create new forms of nothing – nothing of social benefit to society – to make money from. Here are the kinds of innovators I’m talking about: I am not associated with this event , but I did hear about it today. These two quotes from the larger event description are why I think you should know about it too: Federal agency deciding how to better inform citizens? Engage. Social entrepreneur trying to spread the cause? Sign up for a heaping serving of good. Securing the homeland? Fast track through the security line. TRDC is designed for a diverse mix of business strategists, designers, developers and communication professionals from media; government agencies and service providers; NGOs, associations and non-profits; device-makers; designer-developers; techies, marketers, investors, as well as mobilecom, telecom, social media and entertainment transformers. So, this isn’t just about making money without caring who you hurt in the process. There’s a strong ethical element built into the agenda. Here’s the complete description. I have some closing thoughts after it. Tabula Rasa DC what’s your app? A million iPads have been unboxed in just a few weeks. 2300 pay-for apps are now creating cash flow on the iTunes store. Only one question remains: What’s your app? We’re bringing Tabula Rasa to the Gannett-USAToday campus from 1-4:30 pm on June 14 to help you answer the question. Media-maker competing for audience? Jump the competition. Developing apps for your business or service? Get an edge. Designer or developer? Show off. Federal agency deciding how to better inform citizens? Engage. Social entrepreneur trying to spread the cause? Sign up for a heaping serving of good. Securing the homeland? Fast track through the security line. We’ve been preparing for this creative moment since we bought our first Mac II back in the Dark Ages. Read our Right> Brain agenda for achieving meaning in the Conceptual Age. What to do We’re assembling another master cast (see our group in NYC ) of innovators, developers and visionaries — we call them Davincis — for hands-on guidance, creative inspiration and how-to maps for apps on the iPad and the wave of mobile, high-concept, high-touch personal computers. We’ll demonstrate how first-movers create advantage. We’ll show how the app-savvy can expand engagement. We’ll flash forward to the shiny new things that will make your eyes pop in the exciting years to come. But mostly we’ll help you figure out what to do now, as well as in your flash-forward future. Who should attend? TRDC is designed for a diverse mix of business strategists, designers, developers and communication professionals from media; government agencies and service providers; NGOs, associations and non-profits; device-makers; designer-developers; techies, marketers, investors, as well as mobilecom, telecom, social media and entertainment transformers. A nutritional disclosure: We eat our own cooking. Tabula Rasa is hands-on, presented on the iPad. Bring yours. Our experts will show how to get the most out of it, make you aware of its limitations, and disclose what’s coming next. We’ll also provide a glimpse of other shiny new things headed our way, as well as what they mean. There’s nothing mushy about TR. It’s not one of those me-too conferences with posers who sit on panels and complain about Facebook. Save the five-hundred bucks (or more) for those conferences; buy an iPad instead. At $200, Tabula Rasa is less than half of what the iPad-come-lately conferences charge. We know where this moment leads. Check out our agenda here and join us. You get the point Washington. Space is limited, so register today and watch this blog for updates on the program and participants. Interested in throwing down your app? Contact dale@wemedia.com What’s your app?: The program 12:30 pm: Registration at Gannett conference center (directions below) 1 pm: The Apportunity In just a few weeks, a stunning future has emerged with new markets, audiences and opportunities. We’ll describe how it both disrupts and enhances personal computing and digital communications. We’ll demo the best, early responses and measure their success. And we’ll show where this moment of creativity, innovation and entrepreneurship leads. – Design-driven innovation – Shiny new things – Everyone, everything, everywhere – Right> Brain Rules 1:45: Apponomics Please don’t ask “where’s the money?” Play and prosper in the App Economy. – How to profit – Open vs. Apple – The balance sheet – Creating good – Engagement 2:30: Meet the DaVincis: Networking and coffee break at our Genuis Bar 3:00 Apptitude How to get it. Get down with developers. – Fast company – What to do. And with whom. – Test drives 3:30: Throwdown DC Demo your so-cool app and get some good back from DC’s top innovators Want to throw down your app or idea? Email dale@wemedia.com to get on the program. We Must Look To The Future, Not Just The Past So, the innovative culture surrounding the Apple iPad – (and maybe the upcoming HTC EVO 4G ?) – will meet to continue figuring out what the world – both business and social – is going to look like. I’m thinking of going. And I hope the mainstream media decides to cover it. Why? Because it’s time we stopped thinking that what happens on Wall Street is the most important thing happening in America. I constantly hear talk about how “We need to grow our way out of this recession.” Well, Wall Street is not where that growth is going to come from. In fact – as we saw today – it’s where that growth can be killed in a manner of minutes! The real growth is in the entrepreneurial sector. It’s where the innovators who work with real products and services can be found. It’s where a future that produces both profit and increased well-being for all is being born! We Must Reform Wall Street Too Just to be clear, I know how important it is to reform Wall Street. I favor strongly regulating the banking industry and creating an independent consumer financial protection agency. But part of what will make reforming Wall Street possible is to move Wall Street out of the center of our focus… to take away the celebrity element that has been part of the Wall Street culture for the last 30 years. I want the celebrities in our society to be those who are helping make society work better, not those who are so psychologically unstable that they are ready to jump ship at a moment’s notice… taking the American economy with them. That is short-term thinking – which we already know runs rampant on Wall Street anyway – taken to the limit: to the point where it really could kill the American economy. Here’s to a more hopeful future… where we all start watching those people who want to help rather than hurt America.

Read the full article →

Goldman Hid Mortgage Moves From SEC For Months

May 1, 2010

In December 2006, Goldman Sachs embarked on a frantic effort to shed billions of dollars in risky mortgage securities and purchase exotic insurance to protect itself against what it had concluded could be the collapse of America’s housing market. Yet for nine months, until Sept. 20, 2007, the Wall Street giant didn’t disclose its actions in key filings with the Securities and Exchange Commission, in telephone conferences with analysts or in its press releases.

Read the full article →

Goldman Sachs Did Not Disclose Mortgage Moves To SEC For Months

April 30, 2010

WASHINGTON — In December 2006, Goldman Sachs embarked on a frantic effort to shed billions of dollars in risky mortgage securities and purchase exotic insurance to protect itself against what it had concluded could be the collapse of America’s housing market. Yet for nine months, until Sept. 20, 2007, the Wall Street giant didn’t disclose its actions in key filings with the Securities and Exchange Commission, in telephone conferences with analysts or in its press releases.

Read the full article →

Stadiums Beat Stocks After Public Colleges Bet Football Is Recession-Proof

April 29, 2010

By Curtis Eichelberger April 29 (Bloomberg) — The University of Texas is profiting from a decision to renovate its football stadium four years ago instead of investing in securities. As the worst recession since the Great Depression beat down the S&P 500 Index 41 percent between July 2, 2007, and July 1, 2009, and caused more than 8 million job losses, athletic departments such as Texas and Louisiana State University used their on-field success to drive increases in operating revenue. Among the largest schools — the nine with at least $90 million in operating revenue — the biggest winners were Texas, up 32 percent to $138.5 million; LSU, up 32 percent to $100.9 million; and Texas A&M , up 33 percent to $98.1 million, according to a review of athletic department financial records. “Good grief, who is in charge down there?” asked Texas Athletic Director DeLoss Dodds , making a joke on his own behalf. “He needs a raise.” Dodds, 72, said the school’s annual debt payment from the football stadium construction is about $14 million, while revenue from the renovation is about $24 million a year. He said placing the money in endowments would have produced a 30 percent drop. Texas played for the national football championship twice in the past five years, winning in 2005, and has sold out 59 straight home football games dating to Sept. 9, 2000. Records Request Bloomberg News received financial statements for the fiscal years ending in 2007 through 2009 from 51 public universities in the Atlantic Coast, Big East, Big Ten, Big 12, Southeastern and Pacific 10 conferences after filing open-records requests. The average increase in operating revenue — money from things like tickets, concessions and program sales, but excluding items such as interest on investments — was 11 percent. Jim Isch , interim president of the Indianapolis-based National Collegiate Athletic Association, said the significance of revenue gains at schools such as Texas and LSU will become more apparent when this year’s data is available this fall. All but the most successful athletic departments probably will show declines in ticket revenue, contributions and endowment income, he said. “These schools are the anomalies,” Isch said in a telephone interview. “They are playing for national football championships, they have tradition, people know if they don’t keep their tickets, someone else is standing in line to get them. “But the average programs are going to see declines.” Stadium Renovation In Austin, Texas, the Longhorns renovated their football stadium in stages between 2006 and 2009, adding 13,000 seats priced from $65 to $95 depending on the game; 2,200 club seats starting at a minimum $2,000 annual donation, plus the cost of the ticket; 2,450 chairback seats priced at a minimum $750 annual donation, plus the ticket; 47 suites priced from $62,000 to $75,000 plus the tickets and catering; an $8 million, 55- foot-by-134-foot video scoreboard; and ribbon scoreboards that offer more opportunities for advertisers. At their baseball field, they added 19 suites priced from $32,000 to $40,000 plus catering; 400 club seats at field level priced at a minimum $750 annual donation, plus the tickets; and a video board. The bricks-and-mortar investment paid off, according to Texas’s athletic director. “Had we gone with endowments, we’d be down 30 percent,” Dodds said. “This is a huge success.” LSU’s Championship LSU Athletic Director Joe Alleva , 56, said the Tigers’ 2007 national football title is still driving revenue increases. “Everything stems from the championship,” he said in a telephone interview from his office. “We increased ticket prices, we increased seat-licensing revenue, and we had a lot of licensing revenue generated by the championship that spilled over into subsequent years.” Alleva said that while New Orleans is just an hour’s drive from the school’s Baton Rouge campus, LSU sports are everything to the hometown community. “I have never seen passion like LSU fans have for Tiger football and our other sports,” said Alleva, who was Duke University’s athletic director from 1998 to 2008. “I’ve had people tell me they’d rather give up a vacation and other luxury items before they’d give up their tickets to Tiger Stadium.” Michigan’s Boost Michigan increased its sponsorship and licensing revenue by 43 percent to $17.3 million after exiting an apparel sponsorship with Nike Inc. for a new agreement with Adidas AG in June 2007. In August 2008, the Ann Arbor-based school bundled most of its athletic sponsorship accounts and outsourced them to closely held IMG Worldwide Inc., the U.S.’s largest collegiate licensing and multimedia rights agency, representing more than 200 properties. “We had fortuitous timing,” said Jason Winters, the chief financial officer for Michigan’s athletic department. “It’s a challenging market. But our brand is sustainable. We have a long history and tradition of success.” Isch said schools may begin showing the recession’s effects when financial results are calculated for the fiscal year ending in 2010. Some schools close their books in June, others wait until August. “I believe you will see that intercollegiate athletics is not recession-proof,” Isch said. Revenue Skids Nineteen of the 51 schools in the Bloomberg survey showed declines in operating revenue in the final year of the three- year survey. Andrew Zimbalist , an economics professor at Smith College in Northampton, Massachusetts, said when 2009-10 data becomes available later this year, it will probably show back- to-back years of revenue declines for many schools. “The sharp impact of the downturn happens around the beginning of October 2008,” he said. “By that time, many of the season tickets, the booster donations, the catering functions have already been booked for the 2008-09 year.” Schools that had drops in operating revenue between fiscal 2007 and 2009 include the University of Florida, down 11 percent to $96.8 million; Arizona State, down 5 percent to $51.9 million; and the University of Washington, down 9 percent to $54 million. A separate Bloomberg survey in November showed that 45 of the largest U.S. college athletic programs lost a combined $209 million in their investment portfolios between June 30, 2007, and June 30, 2009, with the University of North Carolina experiencing the biggest loss — $52 million, dropping the market value of its endowment fund to $148 million, according to the school. More to Come Meanwhile, in Austin, the athletic department’s finances promise even greater success in the future. “I’ve just spent 20 minutes with the (Longhorns) Foundation to check on donor levels, and they tell me we are going to be up this year on donations,” said Dodds. “It’s our football success. It’s the passion people have for football in Texas.” To contact the reporter on this story: Curtis Eichelberger in Washington at ceichelberge@bloomberg.net

Read the full article →

Goldman Sachs Clashes With Senate’s Levin Ahead of Blankfein’s Testimony

April 24, 2010

By Christine Harper and Ryan J. Donmoyer April 25 (Bloomberg) — Goldman Sachs Group Inc. and U.S. Senator Carl Levin fired opening shots ahead of a congressional hearing this week, releasing conflicting evidence of the investment bank’s tactics during the mortgage market’s collapse. Levin , a Michigan Democrat who leads the Senate’s Permanent Subcommittee on Investigations , posted internal Goldman Sachs e- mail s on his website yesterday that he said show the firm “made a lot of money by betting against the mortgage market.” Goldman Sachs responded with documents indicating the firm lost money on mortgages in 2008 and that executives didn’t know the market would fall. Chief Executive Officer Lloyd Blankfein , 55, and six current and former Goldman Sachs employees will have to face questions from Levin ’s panel against the backdrop of fraud claims from the U.S. Securities and Exchange Commission. The regulator sued the firm on April 16, saying it defrauded investors when selling a debt instrument tied to mortgages. Goldman Sachs, which contests the SEC’s claims, said Levin’s committee has “cherry-picked” evidence and jumped to conclusions “even before holding a hearing.” “Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis,” Levin, 75, said in a statement released with the e-mails. One of the e-mails provided by Levin yesterday shows Blankfein telling colleagues on Nov. 18, 2007, that the firm was making more money from its so-called short bets on mortgages than it lost on its investments related to home loans. ‘Mortgage Mess’ “Of course we didn’t dodge the mortgage mess,” Blankfein wrote in an e-mail dated Nov. 18, 2007, that was among eight pages of documents made public by the Senate’s Permanent Subcommittee on Investigations. “We lost money, then made more than we lost because of shorts. Also, it’s not over, so who knows how it will turn out ultimately.” Another document contains an exchange between Chief Financial Officer David Viniar and Gary Cohn , the firm’s president and chief operating officer, about the fixed-income division’s profit and loss statement in July 2007. Cohn’s e-mail describes how the firm’s mortgage unit is up “in the index book,” while recording writedowns on residential mortgages and collateralized debt obligations. One method the firm used to make bets against the mortgage market was to take short positions on the so-called ABX index. “Tells you what might be happening to people who don’t have the big short,” Viniar replies, according to the documents. Losses Overwhelmed Gains Documents released yesterday by Goldman Sachs show that the firm’s gains from shorting subprime mortgages in 2007 were overwhelmed by losses in 2008 when higher-quality mortgages suffered more than the firm anticipated. “Goldman Sachs did not have access to any special information that caused us to know that the U.S. housing market would collapse,” the firm stated in an “executive summary” of its arguments released yesterday. “As a result of the spread of the crisis from subprime to all residential mortgages, Goldman Sachs had overall net losses of approximately $1.7 billion with respect to residential mortgage-related products for fiscal 2008.” A lawyer for Goldman Sachs wrote a letter to Levin April 23 asking the subcommittee to warn the firm of any information the panel plans to release so it has a chance to respond. The letter followed Levin’s statement at a hearing the same day that “investment banks such as Goldman Sachs were not market makers helping clients; they were self-interested promoters of risky and complicated financial schemes that were a major part of the 2008 crisis.” ‘Already Drawn Conclusions’ “The statement suggests that you and the subcommittee have already drawn conclusions about the conduct of Goldman Sachs,” K. Lee Blalack II from the law firm O’Melveny & Myers LLP wrote to Levin. “We strongly disagree with your statement at today’s hearing and believe that, if we were provided an opportunity to respond to your specific findings, Goldman Sachs could produce to you information that establishes that your findings are incorrect.” Blalack, a partner in the Washington office of O’Melveny & Myers, is a former chief counsel and staff director of the Permanent Subcommittee on Investigations, according to his biography on the firm’s website. As other banks struggled throughout the financial crisis, Goldman Sachs posted record earnings in 2007 and then set a new record in 2009. In late 2008, following the collapse of Lehman Brothers Holdings Inc. , the firm was allowed to convert to a bank under the oversight of the Federal Reserve and received $10 billion of taxpayer money, which it repaid with interest about eight months later. Blankfein, whose $67.9 million bonus in 2007 was a record for a Wall Street CEO, received no bonus in 2008 and a $9 million all-stock bonus for last year. Making Markets Goldman Sachs disputes the criticism that the firm’s short position on mortgage securities during 2007 constituted a bet against its own clients. In a letter to shareholders earlier this month, Blankfein and President Gary Cohn said the positions “served to offset our long positions. Our goal was, and is, to be in a position to make markets for our clients while managing our risk within prescribed limits.” The interrogation of Goldman Sachs, the most profitable securities firm in Wall Street history, may echo Ferdinand Pecora’s Depression-era investigation of powerful financiers like J.P. Morgan Jr. , said some historians. Levin, who has served in the Senate for more than 30 years, and his panel have a reputation for thorough research. “This is Pecora II,” said Charles Geisst , a finance professor at Manhattan College in Riverdale, New York, who has written about Wall Street’s history. “They have to squirm and they have to answer the questions.” Pecora Commission The Senate investigation into the causes of the Wall Street crash of 1929 became known as the Pecora Commission, after the former New York City assistant district attorney who was appointed its chief counsel. Congress went on to pass the Securities Act of 1933 and the Securities Exchange Act of 1934, portions of which Goldman Sachs and an employee, Fabrice Tourre , are accused of violating in the Securities and Exchange Commission’s suit filed on April 16. The SEC said Goldman Sachs and Tourre, 31, failed to inform investors in a 2007 collateralized debt obligation that hedge fund Paulson & Co., led by billionaire John Paulson, played a role in choosing the mortgage securities that underpinned the CDO and planned to bet on its failure. Goldman Sachs said it would never mislead investors and that ACA Management LLC and IKB Deutsche Industriebank AG, investors in the deal, had all the material information they needed. Tourre will tell Levin’s panel he did nothing wrong, according to a person briefed on his planned testimony. SEC Enforcement Chief Robert Khuzami , the SEC’s enforcement chief, oversaw a group that helped create CDOs when he worked at Deutsche Bank AG, the Wall Street Journal reported April 23, citing unidentified people familiar with the matter. It isn’t clear whether Khuzami reviewed any documents at Deutsche Bank related to CDOs, the newspaper said. Khuzami declined to comment because the terms of his SEC recusal prevent him from discussing Deutsche Bank, John Nester , an agency spokesman, told Bloomberg News. Like Pecora’s, Levin’s hearings may have implications for financial regulation. They take place as the Senate starts considering a package of financial rules that would require better disclosure of derivatives trading and could force banks to split off divisions that trade for their own accounts. Tougher Questioning Blankfein may get tougher questioning than he received in front of the Financial Crisis Inquiry Commission led by former California state Treasurer Phil Angelides in January, Geisst said. Levin’s committee first subpoenaed information from Goldman Sachs on June 30 and sent a second subpoena on March 12, before conducting interviews with Goldman employees this month. “Levin is smarter,” said Martin Mayer , a guest scholar of the Brookings Institution who has written books including “The Fed” and “The Bankers” about the financial system. “It’s a stronger committee.” Levin has been chairman or the top Democrat on the Permanent Subcommittee for more than a decade. He delves deeply into the issues, said Jack Blum , who spent 14 years as an investigator for other Senate panels and has testified before Levin’s committee as a private citizen. “What you’re going to expect is a guy who first of all really will have done his homework,” Blum said. “He’s a very influential senator.” Blum said the permanent subcommittee also is one of the rare panels in which senators and their staffs cooperate across party lines. Parade of Critics Criticizing Goldman “is going to be everybody’s great moment,” Blum said. “It’s the parade you want to be in.” Testimony is scheduled to begin at 10 a.m. Washington time on April 27. The first panel will question Tourre, Michael Swenson , a managing director in Goldman Sachs’s structured products group, and two former employees: Daniel Sparks , who was head of the mortgage department, and Joshua Birnbaum , who was a managing director in the structured products group. A second panel will feature Chief Financial Officer David Viniar and Chief Risk Officer Craig Broderick , followed by a final panel at which Blankfein is slated to appear alone. Levin’s chief investigator, Robert Roach , has been at the permanent subcommittee since September 1997 and has almost 20 years of experience working for congressional oversight committees. Staff director Elise Bean has focused on the pay gap between executives and average workers for almost as long. Roach balances his investigative work with speeches at conferences that interact with his areas of expertise, such as a meeting on offshore bank jurisdictions held annually in Miami Beach. After an interview over drinks last year, Roach insisted on paying for his own $3 beer, saying he never let anyone, reporters included, pay for his meals. Budget Watchdog Keith Ashdown , chief investigator for the Republican staff led by Oklahoma Senator Tom Coburn , is a former executive at Taxpayers for Common Sense, the Washington-based budget watchdog group that first dubbed a proposal to build a bridge in Alaska the “Bridge to Nowhere.” Created in 1948, the panel was led in the 1950s by then- Senator Joseph McCarthy of Wisconsin, who alleged that communists had infiltrated the federal government. McCarthy later was censured for hearings that Levin wrote in 2003 “destroyed careers of people who were not involved in the infiltration of our government.” In the last two years, the committee focused on the role played by UBS AG and Liechtenstein’s LGT Group in facilitating offshore tax evasion worldwide. At a July 2008 hearing, UBS made worldwide headlines by announcing it would stop offering offshore banking services for U.S. customers. Enron, Saddam Hussein Under Levin’s leadership, the panel has exposed how banks such as Citigroup Inc. and JPMorgan Chase & Co. helped Enron Corp. structure fraudulent financial transactions, and investigated the dangers of buying prescription drugs over the Internet and how former Iraqi dictator Saddam Hussein abused the United Nations Oil-for-Food program. The committee has focused on tax issues other than the UBS case in recent years. In 2003, it revealed how firms such as KPMG LLP, Ernst & Young LLP and PricewaterhouseCoopers LLP spent much of the 1990s devising and marketing tax shelters judged illegal by the Internal Revenue Service. In 2007, Levin introduced legislation to limit tax benefits for companies that pay executives millions of dollars in stock options after his panel concluded the tax subsidies helped widen the divide between compensation of top officials and ordinary workers. The panel’s shortcoming, Blum said, is that it rarely enjoys legislative jurisdiction in the areas it investigates, meaning any bill the probes produce must go through other committees. In the Goldman case, any ensuing legislation would probably go through the Senate Banking Committee or the Committee on Homeland Security and Governmental Affairs. Still, Blum said, when Levin holds hearings, “the companies involved have a hell of an image problem.” To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net ; Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net

Read the full article →

← Previous Entries