answers

Major Fishing Cuts To Protect Dwindling Cod Could Ruin Fishermen

by AP on January 1, 2012

Huffington Post…

BOSTON (AP) — In an industry where agreement comes slowly, the sudden prospect of huge fishing cuts to protect New England’s codfish inspired a quick consensus: Scores of fishermen will be ruined if those cuts are passed. But it’s not clear how or if that pain can be avoided, weeks after new scientific numbers indicated cod in the Gulf of Maine is much weaker than thought. “We really haven’t heard of something that works right now,” said Gib Brogan, of the environmental group Oceana. Fishery science and law present major obstacles to preserving both cod and fishermen. The law requires scientists to set a limit on how hard fishermen can fish for any species. If they exceed it, they’re illegally overfishing and regulators are charged with “immediately” stopping it. That means, given the grim new estimate of cod’s health, fishermen would have to accept a debilitating cut of about 90 percent in their cod catch next year, and there’s little wiggle room to avoid it. Meanwhile, the new data — though attacked from the outset by skeptical fishermen — has survived an initial review, and scientists say it likely won’t change much. Several lawmakers, starting with U.S. Sen. John Kerry, are now asking the U.S. Commerce Secretary to order a new assessment of the cod’s health in hopes of getting better data, but prospects are uncertain. Still, there’s optimism a solution can be found, if only because the alternative is devastating cuts that could sweep away remaining fishermen from Provincetown to northern Maine. “I’m not a betting man, but I’m optimistic to a fault,” said fisheries scientist Steve Cadrin, who works at the University of Massachusetts at Dartmouth. He added, “Someone up high (in government) is going to have to make a bold move to allow a common-sense solution.” For centuries, Gulf of Maine cod has been the key species for small-boat fishermen on day trips from northern New England ports, including historic Gloucester. In 2010, cod brought in $15.8 million, second-most among the valuable bottom-dwelling groundfish species fishermen have long chased, such as flounder and haddock. Cod’s future looked great in 2008, when a major assessment indicated the Gulf of Maine species was headed for full recovery. But the new data, released this fall, said cod was actually so badly overfished that even if fishermen completely stop catching it, it can’t recover to a federally mandated level of abundance by a 2014 deadline. The new numbers are still being verified. If they hold up, onerous cutbacks on the cod catch are certain, and that would also mean tight limits on many other valuable groundfish off New England, to protect the cod that swim among them. But cod aren’t scarce and anyone who fishes the Gulf of Maine knows it, New Hampshire fishermen David Goethel said. He said the gap between the new estimate and reality demands a complete reworking of the new cod assessment, just as lawmakers have requested. That includes rethinking the numerous assumptions that go into the various population models, including such complexities as how well the federal boat that catches fish population samples scoops up older cod. “We need a do-over,” Goethel said. Absent new science that leads to a drastically different outlook for cod, another hope is that regulators will interpret fishery law differently than they ever have. Right now, fishermen are boxed in by the requirement to stay under that maximum rate at which they can catch codfish without overfishing it. In essence, the rate allows fishermen to haul home a safe fraction of a species. But in the case of Gulf of Maine cod, the new stock estimate is so low that that fraction shrinks to a pittance the fishing industry can’t survive on. And since the rate is determined by such basic biological factors as a species’ growth, reproductive and natural death rates, political pressure can’t do much to budge it. But Cadrin sees one possibility for fishermen to get some help. He hopes for new flexibility in how regulators react after they determine there’s overfishing on cod. He said that regulators have traditionally acted as if the law requires them to “immediately” stop overfishing on any species, but the actual law doesn’t require that — the word “immediately” is contained in a guideline to the law. Cadrin said if fishery managers want to be bold, they could give fishermen a short amount of time to stop overfishing, rather than “immediately” enforcing lethal restrictions when the new fishing year starts in May. More time would mean less severe cuts now, and a chance for more fishermen to survive. There is some sign from the top levels of U.S. fishery management that regulators are ready to do something different about codfish, even if they don’t know what. At a quickly called meeting last month to deal with the cod crisis, Eric Schwaab, the head of the National Oceanic and Atmospheric Administration Fisheries Service spoke of undiscovered solutions outside the traditional channels of government bureaucracy. The situation is so serious, Schwaab said, “those kind of extraordinary options ought to be on the table.”

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Major Fishing Cuts To Protect Dwindling Cod Could Ruin Fishermen

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Ask Rod: Should We Outsource Our Manufacturing?

by Rod Kurtz on December 21, 2011

Huffington Post…

Moving your company’s manufacturing overseas can be a tempting way to trim your budget. But what about the hidden costs? And attracting customers to your website is only half the battle. How do you convince them to be once they’re there? Executive Editor Rod Kurtz — along with special guest, Billy Leroy of Billy’s Antiques & Props , shares his tips on overseas manufacturing and increasing sales. Got a question about your business? We’re here to help! Just send us an e-mail at  askrod@huffingtonpost.com . Or tweet us at  @HuffPostSmBiz .

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Ask Rod: Should We Outsource Our Manufacturing?

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Paul A. London: Economic History Holds the Answers

July 31, 2011

It took the United States 10 years to recover from the Crash that ended the stock speculation of the late 1920s. It may take longer to emerge from the aftermath of the housing crash of 2007 because today’s politics makes it impossible to imagine a massive spending program like the one that finally ended the Depression. Yes, World War II in its economic dimension was a stimulus program plain and simple. The great economic surge in the U.S. between 1940 and 1945 came from producing 300,000 military aircraft, 2,700 Liberty ships, aircraft carriers, battleships, 88,000 tanks and self-propelled guns, 2.4 million trucks, millions of bombs and billions of bullets, and more billions of dollars worth of food and clothing to supply 13 million American soldiers. It was largely financed by purchases of government bonds by the Federal Reserve, America’s way of printing money. What the Nation got for this was victory, full employment, and a boost to the economy that lasted well into the 1960s. Today’s “Great Recession,” painful as it, is not as dreadful as the Great Depression. Three years after the Crash of 1929 unemployment stood at 24 percent. Frederick Lewis Allen in Since Yesterday , his classic book on the lost decade of the 1930s, conveys the utter confusion of political and business leaders in the face of economic catastrophe. The Crash “blew into thin air” $30 billion of wealth, a share of the Nation’s wealth in those days far larger than the share blown into thin air by the collapse of housing prices since 2007, and nobody knew what to do about it. Allen’s book is no panegyric to Franklin Roosevelt, the New Deal or the Democratic Party. He is sympathetic to Herbert Hoover, who he sees as the unlucky Republican president who presided over a debacle that no one understood. Hoover worked himself to the bone to find a solution, and suffered because he could not do so. He was no hard-hearted reactionary. He cared about people, having skillfully managed vast humanitarian efforts in Europe after World War I, and along the Mississippi after the great flood of 1927. He tried all the conventional economic cures that the Republican Party still believes in today. He got Congress to pass “a reduction in individual and corporate income taxes.” He cut public spending wherever he could. The government maintained a budget surplus well into 1932. He and the “Big Men” of business urged “confidence.” They told the public over and over again in 1929, 1930, 1931 and 1932 that everything would be all right if the government would just let the private economy alone. But the Depression deepened until in 1933 Hoover and the business titans admitted that they had no answers. The disappearance of all that speculative wealth was not followed automatically by a recovery. Nor was the disaster amenable to small measures and happy talk, and that was all the Republicans had in their repertoire. It should be obvious on the basis of this history that the hangover from the vast destruction of housing wealth since 2007 will not be cured by a repeat of the policies that failed Hoover, and the cheery hope that business investment is waiting in the wings for a friendlier administration. The United States needs the economic equivalent of World War II to put people back to work. A large infrastructure program financed by Federal Reserve — a QE3 that encourages real investment instead of just pushing down interest rates and filling the coffers of banks — is what I think we ought to be discussing. The Fed bought government bonds in vast quantities from 1941 through 1945 to finance the war. It would be no different if the Fed now purchased a few trillion dollars worth of new infrastructure bonds collateralized in most cases — as World War II bonds were not — by a flow of user fees. And this time Americans would get assets far more useful and durable than tanks, war planes, Liberty ships, and uniforms The pity is that the Republican Party ignores the economic history captured in Lewis’s readable classic. It wants to bet the country’s future on policies that Hoover himself knew had failed. This is the definition of reaction and it is very dangerous as Allen sensed as he watched Hitler rise to power in Germany because he promised action.

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Toyota Announces Social Network For Drivers

May 23, 2011

TOKYO — Toyota is setting up a social networking service with the help of a U.S. Internet company and Microsoft so drivers can interact with their cars in ways similar to Twitter and Facebook. Japanese automaker Toyota Motor Corp. and Salesforce.com, based in San Francisco, announced their alliance Monday to launch “Toyota Friend,” a private social network for Toyota owners that works similar to tweets on Twitter. In a demonstration at a Tokyo showroom, an owner of a plug-in Prius hybrid found out through a cell phone message from his Prius called “Pre-boy” that he should remember to recharge his car overnight. When the owner plugged in his car to recharge it, the car replied, “The charge will be completed by 2:15 a.m. Is that OK? See you tomorrow.” The exchanges can be kept private, or be shared with other “Toyota Friend” users, as well as made public on Facebook, Twitter and other services, the company said. The companies did not give details of how the technology, such as the content of the talking car’s dialogues, will be managed. But officials said the answers will be automated through sensors in the car. If your car is up for an inspection, for example, the owner will be notified through “Toyota Friend,” which will in turn automatically link to a dealer to set up an appointment. Toyota is investing 442 million yen ($5.5 million), Microsoft Corp. is investing 335 million yen ($4.1 million) and Salesforce.com 223 million yen ($2.8 million) in the project. Many cars are already equipped with navigation and other network-linking capabilities, and can function as a mobile device just like an iPhone or a Blackberry. Toyota’s service, built on open-source cloud platforms that are the specialty of Salesforce.com, as well as on Microsoft’s platform, will start in Japan in 2012, and will be offered later worldwide, initially with electric vehicles and plug-in hybrids, according to Toyota. Such next-generation cars need to be recharged and so drivers may need real-time information, such as the battery level of their cars and locations of charging stations, more than regular gas-engine cars. Toyota President Akio Toyoda, a racing fan, said he always “talks” with his car when he is zipping around on the circuit. With the popularity of social networking, cars and their makers should become part of that online interaction, he said. “I hope cars can become friends with their users, and customers will see Toyota as a friend,” he said. Salesforce.com chief executive Marc Benioff said social networks can add value to products and companies. It can also help Toyota gain massive information not only about their buyers but about how the car is working or not working, he said. “I want a relationship with my car in the same way we have a relationship with our friends on social networks,” he said. Toyoda, who has always been interested in telematics, or the use of Internet technology in autos, has been aggressive in forging alliances with new kinds of companies, including one with U.S. luxury electric carmaker Tesla Motors that he announced last year. Partnerships with dot.com types have been a bright spot in Toyoda’s bumpy career as president. He has faced growing doubts about reliability and transparency because of the massive global recalls that began two years ago, shortly after he took office, and which now affect more than 14 million vehicles. Toyota is also battling parts shortages after the March 11 earthquake and tsunami in Japan destroyed key suppliers, hampering production.

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Madoff Chronicler Discusses The Mind Of America’s Most Notorious Swindler

April 26, 2011

Perhaps the only individual more qualified than veteran New York Times financial reporter Diana Henriques to write the book on Bernard Madoff’s epic Ponzi scheme is Madoff himself. Hardly a stranger to the devastation wrought by white-collar crime, Henriques covered the Enron aftermath and a host of financial misdeeds and foul-ups and twice has been a Pulitzer Prize finalist. Henriques was born in Texas, grew up in Virginia and has lived in Hoboken, N.J. with her husband since 1988. Over tea in the study of her Hoboken brownstone, she discussed her experience writing “ The Wizard of Lies .” She said the book, for which she interviewed over 100 sources, was the most difficult project she’s ever undertaken. Unflinchingly cordial, Henriques speaks with a measured, authoritative tone, occasionally pausing to contemplate her answers. Every now and then, for a fleeting syllable or two, the remnants of a southern accent make their presence known. In “Wizard of Lies,” out today , she describes her prison meetings with the disgraced financier in detail, identifying what she calls the “Madoff magic,” and attempts to uncover what Madoff’s wife Ruth and his two sons knew about his decades-old scheme. She said the family made characters “straight out of Shakespeare.” You were the first reporter to visit Madoff at Butner Federal Correctional Complex and interview him face-to-face. I was. The Financial Times reporters visited him in March, but I was the first. It took about 18 months to set it up. Tell me about how you got the interview. Well, I started asking for the interview when he was at MCC [Metropolitan Correctional Center] in Manhattan, right after he pleaded guilty. I had a mailing address for him. I wrote him my first letter requesting it and I just kept after it. Note to young reporters: never give up. I kept asking and then he was moved to North Carolina, and I kept asking again. I didn’t even get an answer back for months. Then, I got a letter in September ’09, handwritten from the prison, full of flattery, saying that he’d followed my career, admired my professionalism — all this stuff. He wasn’t free to talk right now, he said. But when he was, I would be at the top of his list. So I folded that up and continued research on the book, assuming I was going to have to write this book without Bernie Madoff. So I interviewed everybody in the world that I could. Finally, in the early summer of 2010, his lawyer reached out and suggested to me that it was looking a little more promising that he would talk to me. He eventually agreed and then it took a month to get the prison paperwork done because the warden has to approve any media visit. Eventually the warden approved it; I got a call that gave me six days notice to be down there on the particular day. That was in August 2010 and that was my first visit. It was a little over two hours and I still had pages of questions. And he volunteered — he said, “Write them out and I’ll answer them by letter.” And he did. I exchanged letters and then emails and a phone call or two between that visit and my visit in February, which was my second visit. And we continue to trade emails. I just got one from him yesterday. Have you given him an advance copy of the book? No. So he has no idea. He hasn’t seen it yet. And do you expect that he’ll read it? He says he wants to. He’s asked if the publisher can ship him one. They have restrictions in prison on what they can receive through the mail. But he certainly wants to get one. He didn’t like the title, though. He did tell me after the interview in February he thought the title was “too sensationalistic.” [Laughs] Come on? A Times reporter sensationalizing the title? I didn’t pick the title, but, you know, we changed the title actually, after the first visit. It was originally going to be called “A World of Lies” to reflect this global Ponzi scheme, this web that he had stretched from Palm Beach to the Persian Gulf. But after I visited him that first time and really got a taste of the Madoff magic, and began to see how he tried to manipulate people and how he dealt with selling his story, it was clear to me and my editor that he belonged at the center of the title, because he kind of shifted the center of gravity for the book. So that’s when we changed the title to “The Wizard of Lies.” And once I heard it, I knew it was the right one. I like it even if he doesn’t. How did he strike you at first as a human being? Well, I had known him slightly, before he was arrested. He had been a middling prominent figure in a topic I covered for the Times back in the 1990s, when stock exchanges were going through this great upheaval, similar to what newspapers are going through now — where technology was radically changing the way of doing business, the cost of doing business. And Madoff was quite visionary and quite a pioneer in the effort to computerize stock trading. And I covered a number of conferences where he was on the panel or he was a keynote speaker. I talked to him. I got to know his firm because they were pioneers in after-hours trading. When he was first arrested, the name instantly rang a bell with me and I immediately went to the [ Times ] business editor and said, “We’ve got something big here. Bernie Madoff’s just been arrested for fraud.” So, I knew him before. And then I thought of him as a very down-to-earth, plainspoken, very approachable person. A typical trader, a typical roll-up-your-sleeves, up-from-the-neighborhood kind of guy. When I first met him in prison, my first impression was how polished he had become since I had known him 15 years earlier, even in his prison uniform. Every crease is crisp, every button is buttoned. His belt is shiny, his shoes gleam. Very much the dandy, even in prison. And very much in control of our conversation. He had a very engaging, low-key style. Never took his eyes off of me. [He] leaned forward and was very interested in everything I had to say. A few little jokes, a little bit of flattery. But very much on-message. When I saw him the second time, after his son’s suicide, I was stunned at the change in him. From across the room, I would not have recognized him as the same man. So much thinner. In fact, the uniform involves one of the those web belts and he had the belt pulled so tight that the end of it was folded under to keep it from flopping. One of his buttons on his shirt was undone and he didn’t notice it until about halfway through. He buttoned it up. This had been an immaculately groomed, crisp, confident man back in August. In February, he seemed to holding on to his control with both hands. Fiercely. No jokes. No humor. Barely a smile. And this was two months after his son’s suicide. He was clearly devastated by that. I want to come back to that, but you mentioned a minute ago the “Madoff magic.” Can you elaborate on that? Is he a charming guy? You know, he isn’t. And that makes him a very unusual Ponzi schemer. I’ve covered at least half a dozen Ponzi schemers during my career. Unfortunately, there are a lot of them around. Nothing on this scale, of course. But they are typically bon vivant, swashbuckling, charismatic guys. They’re the guy over in the corner telling the funny stories that everybody wants to hear. Madoff was never the most charming man in the room. But, he could make you feel like you were the most charming person in the room. That was the magic. He could reflect back on you a very attractive image of yourself that made you feel good. I felt it. I’m sitting there interviewing him in this prison and I’m feeling like I’m one of the best reporters he’s ever known. He bounces it back — that feeling of, “Oh, you’re so interesting, you’re so competent, you’re so professional.” It’s an amazing gift. And I’ve never before met a Ponzi schemer who’s so low-key in terms of his gregariousness and yet able to sprinkle that pixie dust on you and make you feel like, suddenly, you were so special. It’s an amazing gift. And he is so believable. I did not ask him to grant me an exclusive interview. But when he asked that the interview in August and emails and conversations be embargoed for use in the book, and his lawyer explained why, I agreed to that. But I also explained to him that an embargo is a two-way street. If he broke it, then I’m off the hook. He repeatedly assured me that he would not talk to any other reporters, that he would not let any other interviews get ahead of my book. Well, of course he was lying. But you know, he had me for just a little while. Here I know he’s the biggest liar in North America, but for just a little while, I said, “Phew, there’s one less thing I have to worry about. Good. That’s fantastic. Thank you, Bernie!” And, of course, it wasn’t true and I realized the next morning, you wake up and say, “Oh yeah, that’s Bernie Madoff giving me this promise. I can’t rely on it too heavily.” He is a fascinating character. Do you like him? Did you find that you built a rapport with him after the meetings and emails and phone calls? No, I did not. To be candid, he frightened me a little because he was so unpredictable and so untrustworthy. Absolutely no predictability. And he’s extremely intense. When he seizes on a topic, it’s hard to pry him away. But, I didn’t expect to like him. It was relatively easy to work with him, but I was always uneasy about it because he was so unpredictable and untrustworthy. I owe it to him to say that he’s an extremely bright man, he’s extremely intelligent. So there’s a level at which you can converse with him about things that is satisfying. He knows an enormous amount about financial history, which is one of my favorite topics, so we had that in common. He is smart and engaging to talk to. On that level, I felt we found a little common ground. But just in terms of dealing with him as a human being, [there was] something uncomfortable about him. Were you able to interview any of his immediate family members — Ruth and his kids — for the book? Everyone I interviewed on the record is identified by name in the book. People who are not identified by name in the book — and the immediate family members are not — either did not talk to me or spoke with me in confidence and it would not be fair to either group to start playing guessing games like that. But my research about the family was pretty intense and pretty broad. And I feel confident that I have a fairly clear picture of the family dynamics. There’s no doubt the family has been shattered by this crime. It’s almost a blinding glimpse of the obvious to say so. Madoff’s sons were deeply upset that Ruth did not walk out on him. I worked very hard to try to understand, through as many confidential sources as I could, why she didn’t go. And I asked Madoff himself why she stayed. That’s the one point in the first interview where he broke down and cried. And I do think it was genuine. He didn’t even have a Kleenex with him. His lawyer had to find some little paper napkins in the snack bar area. But he said all her friends told her she should leave, which I knew to be true. He told her she should leave, that she didn’t have to stay. As the firestorm of criticism and vitriol was growing, he could see that it was hurting her to stay with him. But she would not walk out on him. And, as I understand it, how she has explained it, is that she had a love affair with this man for 50 years and she just felt she couldn’t abandon him at this time of his near destruction. You know Larry and I have been married for 42 years and I can sort of understand it. I don’t think younger couples can. She met and fell in love with Bernie when she was 13 years old. He was a lifeguard, she wasn’t even in high school yet. Pretty girl. And he was handsome, sun-bleached hair. She fell in love the first time she met him and married him at 18. You have to keep that in mind when you weigh the decisions she made after his arrest. It was a lifelong love affair. Everybody who knew them agreed that they were still like sweethearts. One person said that the only person who thought more of Bernie than Ruth was Bernie. She really worshipped him. Do you believe the story that she had no idea about the Ponzi scheme? I do. What about his sons? I do not believe they knew and I explain in the book my reasoning. My goal with “The Wizard of Lies” was to assemble the available evidence, offer my analysis of it and let the reader make the decision. My starting point was: innocent until proven guilty. Fairness requires that. And then as a reporter, I began looking for the evidence that would change that verdict, if you will. I couldn’t find it. I couldn’t find one victim that could ever remember talking to Ruth, Mark or Andrew about their investments. And there are some pretty strong and, to me, convincing bits of evidence that argue in the opposite direction. For example, Frank DiPasquale, Madoff’s key lieutenant, is facing a 125-year sentence, having pleaded guilty. He has given grand jury testimony that has resulted in five indictments of people who worked at the firm, none of them are Madoff family members. None of the employees who have been indicted have made any move to try to get leniency or to cut a deal to make a plea bargain by providing evidence implicating the Madoff family members. But even more telling to me, there’s a scene in the book where Bernie is notifying Ruth, Mark and Andrew that it’s all falling apart, that the firm in insolvent, that he is ruined, that it is all a fraud. Now, if they’re his accomplices, what happens next? They pack their bags, they empty the bank accounts, they take the keys to the private jet, they fly off to the ocean-going yacht in the Mediterranean and they wind up in some country with no extradition treaty with the United States and live the life of the comfortable fugitive. I mean, it’s worked for [indicted commodities trader] Marc Rich for decades. That didn’t happen. They had the means to flee. They had the time to flee. And if they were his accomplices, they certainly had the motive to flee. Nobody fled. That’s pretty telling to me. After he confessed to his sons and his wife, they acted like people who suddenly learned they were financially ruined. They did not act like people who expected to be arrested and locked up for the rest of their lives any minute. And if they were his accomplices, it’s hard to believe that would not have been their fear. Frank DiPasquale was in a lawyer’s office within less than 24 hours of Madoff’s arrest. Everybody on the staff was hiring lawyers and looking out for themselves. The reader will make their own decisions. I could not find any convincing evidence, really almost no evidence at all, that they knew. I pored through every lawsuit that’s been filed against them, both by the Madoff trustee and by the private litigants. There’s not an email, not a conversation, there’s nothing presented in any of that litigation that casts any doubt on them at all. My conclusion is the odds-on likelihood is that they didn’t know. How does that speak to the pressure he was under, not being able to share the secret with his wife, his kids, who worked for him? Did you sense a really strong individual when speaking with him? He is a strong-minded man. Even after Mark’s death, in the first few emails we exchanged, there was no mention of it. There were things he wanted to talk to me about, questions he wanted answered, research he wanted me to do about something he remembered reading that he thought was significant for his case. He’s operating on this completely cerebral level and only about the third email after Mark’s death did he even acknowledge that I’d sent a condolence note. He is what psychiatrists call a very well-defended mind. He has defended himself against that which with he cannot cope. I think that defense — his ability to lock things away and not acknowledge them — which I’ve seen dealing with him in prison, is the same quality that enabled him to live with what he was doing on a daily basis. Were you able to interview Harry Markopolos, who repeatedly tried to notify the SEC that something was up with Madoff. I know Harry. In fact, I attended Harry’s book party when his book came out. Harry was helpful to my research. I think that’s as much as I can say. After being brushed off by the SEC many times, why do you think he didn’t seek out a reporter? Or did he? It’s a wonderful question and I put it to his lawyer and everyone who knew him. It almost seems like you’d want to do something like that just to stick it to the SEC for rebuffing him so many times. There are any number of places that might’ve taken his accusations, if acted on. But he didn’t, and I have never found his explanations particularly satisfying. He claimed that he and his investigative friends were in fear for their lives. That Madoff had so much to lose that he would think nothing of snuffing them out in order to avoid detection. And yet he kept reporting this allegedly murderous criminal to a civil regulatory agency that doesn’t even carry handcuffs. The explanations never made any sense to me. He publicly acknowledges that he’s a failed whistleblower. What’s the state of the SEC today? Have they improved since the Madoff scandal broke? Certainly they’ve addressed many of the management problems that the Madoff case exposed. It’s a much flatter management pyramid. More boots on the ground, fewer people behind desks. They have recruited some very impressive talent. Trying to hire top-flight accountants, forensic lawyers and investment experts at a time when the economy is so bad is pretty easy. They were able to pull in some talent they might not have been able to get in an earlier age. They have really amplified their technology, their computer analysis, their ability to use data analysis. They certainly have become far more aggressive about the cases they’re taking on. If you look at the cases they’ve brought in the two years since Madoff, look at who’s been sued and settled: Goldman Sachs, UBS — I could go on and on. I think the foundation is there to rebuild, but the SEC wasn’t undermined in a day and it won’t be rebuilt in a day. It’s going to be a process that’s going to take time and continued budget commitment. And that’s what I’m not sure we’re seeing — a continued commitment by Congress to provide the SEC with the money everyone thought it should have in the aftermath of the financial meltdown and the Madoff scandal. Stay tuned to see whether the promises of reform at the SEC get financed. Do you think there’s another similar type of fraud out there the SEC doesn’t know about, but is kind of under their nose like Madoff was? I would be surprised for this reason: A whistleblower like Harry Markopolos knocking on the door of any SEC office in this country today is going to get a very different reception. One of the things the SEC did was to completely revamp how it deals with incoming tips, whistleblowers, anonymous letters. It has created a new structure for incoming tips and whistleblowers so that they don’t get lost and don’t fall off the table. Fool me once, shame on you. Fool me twice, shame on me. I can guarantee you that there is another Ponzi scheme out there that we haven’t heard about yet. Ponzi schemes are, to me, one of the most fascinating crimes on Wall Street, one of the most fascinating financial crimes that there is. The air they breathe is trust. A Ponzi scheme cannot grow in an environment that’s devoid of trust. Nothing else can either, so in order to eliminate Ponzi schemes, you’d have to create a world completely devoid of trust. And when you’ve got a world like that, number one, none of us wants to live in it. And, number two: You can’t run a modern economy without a minimal level of trust. But that level of trust is exactly the level of trust a Ponzi schemer needs to get away with it. Now, Ponzi schemes are a peculiar crime in that you don’t feel any pain until the very end. I think the Madoff story introduces a new species of Ponzi scheme. Traditionally, we’ve thought of Ponzi schemes as the classic, too-good-to-be-true fraud. Fifty percent returns a month. Double your money in 10 days. The classic Ponzi scheme, all the way back to the first one in the 1920s, appealed to our greed. The get-rich-quick itch. The Madoff scheme did not appeal to people’s greed; it appealed to their fear. Through most of the Madoff scam, you could’ve made more money somewhere else. There were years when the Magellan Fund at Fidelity was producing much better results that Madoff’s investors were getting. It wasn’t that they were greedy: He was so consistent. He was so safe. They felt safe with Bernie in an increasingly volatile, scary, complicated market. If a Ponzi scheme appeals to your greed, a Madoff scheme appeals to your fears. I can’t tell you how many people told me, “He made me feel safe.” Those are the kinds of frauds I worry we’re going to see more of. Should the SEC just hire Bernie Madoff to help investigate tips that come in? No, I don’t think we would go there. Why not? When they finally caught up with him after all those years, the FBI hired Frank Abagnale, Jr. to help it investigate forfeiting crimes. Could Madoff do the same for the SEC? That’s an intriguing question. No one’s ever asked me that. I guess it’s a two-part question. Would he want to do something like that and would the SEC ever entertain something like that? I think he would. In fact, some academics have written to him in prison and asked him to contribute his thoughts on Wall Street ethics. They essentially are asking him, “What do you think would have helped alert people to what you were doing?” And Madoff has told me he’s interested in talking to them, corresponding with them. So, I do think he feels like he’s got something to teach. But I don’t think he understands himself well enough yet to teach people how to avoid con artists like him. Would the SEC ever entertain the idea? Not in this universe. Is there any way he can redeem himself, even in the smallest sense? Is that something he’s expressed to you that he’s interested in doing? He does. He certainly says he wants to. He claims he’s tried to help the bankruptcy trustee recover assets for Madoff victims. Would that amount to a form of redemption? Well I think Irving Picard could say, “Thanks, but no thanks.” Picard and his legal staff are doing a pretty remarkable job of going after assets without much help from Madoff, although I think that Madoff has provided them with some information. I know that Picard’s lawyers have met with him and spent 16 hours interviewing him in prison a couple of weeks before I was down there. And I’m told he was a confirmatory source, as lawyers say. He confirmed much of what they thought they knew, confirmed that, in some cases, they were on the right track. But he has subsequently said things that in many cases contradict the allegations they are making in the lawsuit they’re filing. He told me in the very first visit something that shocked me so that I included it in the prologue of the book: He said that with the money that investors had already gotten out of the Ponzi scheme and with the money that the bankruptcy trustee was going to be able to raise for them and return to them, his victims were probably going to make out better than people who were legitimately invested in the stock market during the meltdown of 2008. He thinks that about all of them? Not the ones who committed suicide and their families. Not the ones who’ve had to uproot their entire lives and sell their beloved homes. The human cost of the crime is part of the equation that he just doesn’t see. He’s utterly in denial about that. And what should the finance industry, lawmakers and America at large take away from this story? A moral if there is one? Self-deception is an extremely dangerous practice. Lying to ourselves is how we get in the most trouble. If there is a lesson, it is the oldest human lesson. To thine own self be true. If people take nothing else away from the book, I hope they take that. Lying to yourself is a luxury that you just can’t afford. How’s it feel to get this project done? I’ve never worked harder on any project. This is my fourth book, but without a doubt the most laborious, most fascinating. This is like a novel, but it’s true. Bernie had four near-death experiences before he was finally caught, some of which people will read about for the first time in the book. I fell in love with the story. At the beginning of this process, I kind of flippantly said that to do this story justice would take a collaboration between Shakespeare and Woody Allen, without the jokes. But it truly is such a timeless drama. I felt kind of humbled at the challenge of trying to live up to the potential.

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Danny Wong: How Yahoo Can Save Itself

March 24, 2011

After being seen as a repeated failure of a company over the past couple years, Yahoo may just yet redeem itself with its latest search engine update, Search Direct . While this reminds most Google users of one of the latest and biggest Google updates, Google Instant, with its real-time results as you type, Search Direct is less about helping you find the most relevant links for your search query and much more about giving you the appropriate answer, right then and there, to what you are searching for, because the fact is, we all search to ultimately find an answer, information about the thing we’re searching for. This is actually quite an exciting update to Yahoo’s search index, which I first heard about after Anthony Ha reported it on VentureBeat. This advancement in the usability of search engines is incredible. It was first thought that the Google Instant update was exciting because it eliminated the use of having to hit the search button to perform your search query. But now, you don’t even need to click the first link in the results page to get the answers you want to the most common of queries, easily finding out things like the local weather forecast, stock performance, even where to find a local theatre playing the films you want. Yahoo has been seen as dying for several reasons: 1. It’s becoming less innovative in the search game. Yahoo hasn’t done anything exciting with its search algorithm in a while, and while Bing is gaining popularity amongst shoppers and media consumers, Google reigns king because it continues to deliver the best search results, despite some of the bad press it’s received as of late in terms of spammers compromising their search quality. 2. It’s becoming less prominent a company. With less big acquisitions, Yahoo doesn’t have prominence like Google who’s snatching every hot business up both for branding and for profit purposes. No one thinks about Yahoo much anymore because Yahoo’s not doing much of anything that’s interesting, or applicable to our everyday lives. I’ve even stopped using my Yahoo mail for the most part, and use two Gmail accounts, one for personal use and one for professional use. 3. As a media company, they’re not doing anything special. AOL is getting most of the spotlight these days as the big media company to end all media companies, especially with its recent merger with the Huffington Post to house all of its media properties under the Huffington Post. Yahoo just continues to aggregate content from the newswire and isn’t doing enough news publishing itself. What Yahoo can do now to save itself: 1. Actually make Search Direct awesome. While the concept of Search Direct is amazing, and they have rolled out their public beta for the system, I’m sure there’s a lot more to do in updating their algorithms and ensuring that quality answers are always provided for search queries that could easily be answered and immediately displayed without searchers having to click a search results link to find the answer they are looking for. 2. Get back on the media’s good side. Yahoo should be doing more amazing things as a company, and should also be creating more value for users. As such a large company, the media will always bite at anything special going on with Yahoo, so as long as Yahoo is continually building better products for users, it’ll get better press and more people will begin to trust and use Yahoo again. 3. Become an integral part of users’ lives. While Yahoo failed in making Delicious their Yahoo owned service that everyone used and associated Yahoo with, Yahoo can acquire similar companies, or perhaps build its own products and services that millions of users will use each and every day, solidifying its place in users’ daily lives. Yahoo has a long way to go before it redeems itself again as the golden company it once was, but luckily, it’s far from dying anytime soon, so we’ll just have to wait and see how Yahoo develops. Danny Wong is a Boston-area entrepreneur running Blank Label Group , which powers the startups Blank Label , Thread Tradition and RE:custom . Danny also blogs at TheNextWeb and ReadWriteWeb .

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Roger Ehrenberg: What Keeps Venture Investors Up At Night

March 15, 2011

As a venture investor, one thought routinely keeps me up at night: Are we making the right investments? After the beads of sweat form on my brow, they really get going when I think of the complexity and multi-dimensional nature of the question. Some related issues that keep me awake include: Are we seeing the right deals? Is our evaluation process effective? Does our method of decision-making promote successful outcomes? Are we capturing the data necessary to make a reasoned assessment of the above? Gulp. Each one of these represents a key strategic initiative, core questions whose answers are necessary for building the best firm possible for the long term. Needless to say, these issues can’t be assessed in a vacuum, as the vectors of time, competitive pressures and market conditions are at play and invariably impact the answers. In short, running a venture firm is very difficult, and it’s successful operation involves navigating a multi-variate thicket of obstacles while optimizing the combination of long-term franchise value and LP returns. Are we seeing the right deals? One of the eternal questions in venture capital relates to the “deal funnel”: Should we work to maximize throughput or optimize for quality. There are massive trade-offs between these two approaches, and different strategies subject themselves better to one or the other. For example, a general fund that is seeking to make a very large number of small investments is likely to solve for maximum throughput. They will apply a very basic but robust screen to quickly weed out the definite “nos,” likely do those that arrive with a high degree of “social proof” and spend some time thinking about the rest. Conversely, a more specialized fund (like IA Ventures) works to be crystal clear in its messaging in order to only attract deals that fundamentally fit with its investment thesis. This will yield a smaller amount of more highly-curated throughput, providing a more manageable pool of deals that require more in-depth screening before a go/no-go decision is arrived at. Seems pretty rational, right? Well, if you consider being almost 100 percent reactive rational. The problem is, I don’t. While having a giant catcher’s mitt is a fine way to gain a sense of what’s trending, it is very hard to identify true gems sitting on your ass and letting the market define your opportunity set. So that means thinking deeply about what the future holds, considering mega-trends, and actively seeking opportunities that others think suck or simply don’t understand but really represent a window into the future. It is quite difficult to have this level of conviction and risk tolerance and to subject yourself to ridicule by shunning conventional wisdom. But who said the road to innovation — and riches — was going to be easy? It’s not. Being contrarian and pursuing true innovation requires a lot of hard work, and sitting in your office and simply being a filter is not the way to achieve extraordinary returns IMHO. So bottom line: our approach is to combine a clear domain focus (which generates curated, but reactive, deal flow) with a willingness to try, test and incubate. Is our evaluation process effective? The Big Screen. Not easy, when you consider the massive inbound volume of most venture firms (and IA Ventures is no exception.) Do we have a clear sense of what we’re looking for (like a checklist), or is the spark of a crazy idea what really gets us going? More importantly, what should get us going? And are we able to glean enough from basic written materials to make an educated judgment as to whether or not an idea is worth digging into? Due to sheer volume, it is impossible for us to engage with more than a small percentage of the companies that reach out to us. Since we’re almost exclusively focused on pre-revenue opportunities, it really is about the entrepreneur, the idea and the vision, not actual performance. And most challenging of all, we are too young to have much data on the efficacy of our evaluation process. We do not yet have an “anti-portfolio,” a series of misses that might be instructive of our fears, biases and blind spots. So we are using our experience and best efforts to choose well, but with precious little data on which to base our decisions. As a firm, we have a series of well-understood “hot buttons”: a set of attributes we are looking for in an opportunity. These attributes are applied to the top of our deal funnel, sharply reducing the number of potential opportunities that warrant a follow-up phone call, meeting, etc. We definitely try to apply the lens of “Is this really differentiated/transformational/addressing a sharp pain point in a large market?” when gauging our interest. We are also predisposed towards opportunities that reach us early in the financing process, where we can both play a significant role in the deal and work with the entrepreneur on the plan, milestones and syndicate. The nature of our interaction with the entrepreneur is also instructive of whether we make a good team, and a positive working relationship can help de-risk execution of the plan. While I feel like we’re doing the right things, the jury is still out until we are able to collect the data necessary to validate our process. Does our method of decision-making promote successful outcomes? Now this is where it gets very tricky. Different partnerships have starkly different views on how a deal gets approved. They also have different cultures with respect to individual “check writers” versus a firm approach. Some firms want consensus. Others will not do a deal if there is consensus. Some firms have very rigid time frames around which funding decisions can get made. Others are more free-form. How a firm makes decisions can define a culture and a partnership, and is not a matter to be taken lightly. At IA Ventures, we take a team-managed approach to investing. There are no individual check-writers. We invest as a group. We do not strive for consensus or have hard and fast “thumbs up/thumbs down” rules. Deal deliberations are active and ongoing at each stage of the evaluation process, and by the time we are considering issuing a term sheet, we’ve all hashed it out pretty well. It is rare that all four of us are equally pumped about a deal, which is good. Because if we’re all psyched, it probably means the idea isn’t sufficiently differentiated to disrupt a market. In fact, we revel in conflict and dissent because it forces us to look at all sides of an opportunity, and to guard against the group-think/rose-colored glasses associated with a “hot” (read: popular) idea. I think we do a pretty good job on this front. One thing we don’t do — an idea that my smart friend Phin Barnes and I were kicking around last week — is empower an individual to meet an entrepreneur, fall in love, have a strong gut feel and make a commitment on the spot. The benefits: a willingness to fund orthogonal ideas without over-thinking and detailed analysis; a forced focus on the entrepreneur and their power to make an idea come to life; a special bond with the entrepreneur by showing deep confidence and conviction in their idea by offering an immediate commitment; and the signaling effects of having a firm and culture that supports such instinctive and passionate decisions in favor of the entrepreneur. If one truly believes that success in stage investing is heavily dependent upon the quality and passion of the entrepreneur and a contrarian take on the market, then having this as part of an investment program might be both rational and effective. I’m not there yet, but it is certainly a provocative and interesting approach to deploying an amount of high risk, high return capital. Are we capturing the data necessary to make a reasoned assessment of the above? It is early days, but we have built instrumentation and processes to help us collect data on the dimensions discussed above. While there is little doubt in my mind that smart venture investing — specifically seed stage investing — is impacted by a heavy dose of art, with a modicum of science, we want to collect as much data as possible about how we do what we do to ensure that we’re using all the information at our disposal. Are we seeing the deals we want to see, and what portion of the deals are because we went out and got them as opposed to them coming to us? Are we doing a good job investing in companies consistent with our mission, some of which are off the beaten path? Are we taking enough risk, and do members of our firm have the opportunity to be hard-core champions of a deal and to get it done in the face of dissent? Do our dashboards give us useful and actionable information about how we should be running our business? All of these metrics are important for doing the best job possible and building the best long-term business at IA Ventures, for the benefit of our entrepreneurs, our LPs and our firm colleagues. Being a startup investing in startups is no easy task. But we’re trying to be thoughtful about it, try new things and iterate rapidly with the benefit of data. Sounds a lot like what we expect from the startups we invest in. Makes sense. This post originally appeared on Information Arbitrage .

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Olivier Blanchard: Rewriting the Macroeconomists’ Playbook in the Wake of the Crisis

March 4, 2011

Before the global economic crisis, mainstream macroeconomists had largely converged on a framework for the conduct of macroeconomic policy. The framework was elegant, and conceptually simple. Caricaturing just a bit, it went like this: The essential goal of monetary policy was low and stable inflation. The best way to achieve it was to follow an interest rate rule. If designed right, the rule was not only credible, but delivered stable inflation and ensured that output was as close as it could be to its potential. This was achieved by setting the key policy rate that then affected the term structure of interest rates and asset prices, and then to aggregate demand. One could safely ignore most of the details of financial intermediation. Financial regulation was outside the macroeconomic policy framework. On currencies, countries could set an inflation target and float, or instead choose a hard currency peg or join common currency areas. In general, in a world in which central banks followed inflation targeting, there was no particular reason to worry about the level of the exchange rate or the current account balance. Certainly, attempting to control exchange rates through capital controls was undesirable. And multilateral coordination was not required. Fiscal policy had a limited role at best, at least in the short run. With the right use of monetary policy, it was not really needed. Automatic stabilizers, such as unemployment benefits, would kick in during downturns, but discretionary policy was more likely to be misused than used well. The focus had to be on the medium run, and on fiscal sustainability. These were simple principles, and they seemed to work. From the early 1980s on, macroeconomic fluctuations were increasingly muted, and the period became known as the “Great Moderation”. Then the crisis came. If nothing else, it forces us to do a wholesale reexamination of those principles . Here are some ideas to guide the conversation: Economic imbalances: Achieving stable inflation is good, but we can now see it does not guarantee stable output. Before the crisis, steady output growth and stable inflation hid growing imbalances in the composition of output and in the balance sheets of households, firms, and financial institutions, as well as growing misalignments of asset prices. These imbalances ended up being very costly. The question now is how best to address such imbalances. Should we think of macroeconomic policy as having three legs–monetary, fiscal, and financial–each with separate authorities? Or should we think of extending both the mandate and the set of tools of monetary policy to cover both output and financial stability? And, if so, what tools do we have and how do we use them? Interest rates: Early in the crisis, central banks decreased policy rates, until they reached their lower bound–namely zero. From then on, interest rate policy could not be used to prop up aggregate demand, and central banks turned to both credit and quantitative easing. This raises many questions. First, would it have helped if nominal interest rates had been higher to start, giving more margin of maneuver to central banks? Put another way, should we revisit the low inflation targets, and the associated low average nominal interest rates, that central banks had adopted pre crisis? Second, are credit and quantitative easing policies just for exceptional times, or can they work and do they make sense in more tranquil times? Fiscal policy: When interest rates reached the lower bound, fiscal policy came back to the fore. Going beyond automatic stabilizers, most countries adopted fiscal stimulus programs to increase aggregate demand, but debates about the size and even the sign of multipliers associated with different fiscal measures made clear how little work had been done on fiscal policy, and how much needed to be done. The large increase in debt since the beginning of the crisis (an increase which is overwhelmingly due to the loss of output and the implied loss in revenues rather than to the fiscal stimulus programs themselves) also raises many issues. Even though it will be a long time before debt levels are reduced sufficiently, what levels of public debt should countries aim for? Are old rules of thumb, such as trying to keep the debt to GDP ratio below 60 percent in advanced countries, still reliable? Capital flows: The crisis triggered very large capital flows. Often, these flows had little to do with conditions in the country that they left, and more to do with the need by foreign financial institutions to repatriate funds in a hurry. More recently, capital has gone back to emerging market countries, sometimes with such force as to trigger complaints of ‘currency wars,’ leading to intense discussions about capital account management. How should countries react to large capital inflows? If they want to mute their effect for example, when should they build up reserves and when should they use capital controls? Should each country be left to do what it feels is best for itself, or should there be international rules of good behavior? International monetary system: Talking about international rules of good behavior, the crisis raises both old and new questions about the international monetary system. Should benign neglect determine the coordination of monetary policies across countries? Should there be international rules not only with respect to capital controls, but with respect to reserve management, and monetary policy in general? Should countries be free to run the current account deficits or surpluses they want, or should there be restrictions on what they should do? Before the crisis, a number of emerging market countries had relied on low exchange rates and export-led growth. As these countries get larger and the competitiveness effect on other countries becomes more visible, does export-led growth remain an acceptable strategy for a multilateral point of view? Safety net: In a different dimension, the great recession has showed that not only emerging countries, but also advanced countries, can suffer sudden stops. During the crisis, foreign liquidity was provided mostly through swap lines offered by the major central banks. Since then, the IMF has created two new liquidity windows. Is the problem solved, or is more needed? These questions, and many more, will keep us busy for years to come. To take stock of the questions, and start exploring the answers, David Romer, Michael Spence, Joseph Stiglitz, and I have organized a conference on these issues. This conference will take place on March 7 and 8 at the IMF. While the conference is by invitation only due to space constraints, it will be webcast live. To follow it, and get more information please visit the conference website . After the conference, we shall open a discussion site, and continue the discussion online. I hope many can join us and contribute as we continue to search for new approaches to the world’s changing macroeconomic and growth challenges. From iMFdirect blog

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Michael Brenner: Demystifying Our Economic Predicament

February 28, 2011

Transcendental mystery is of a bygone era. Yet our profane secular world also contains extraordinary things that are baffling and defy logical comprehension. Economics is especially rich in these mystifying puzzles. This despite the omnipresence of the experts who declare themselves wizards of the premier social science. Here are a few bewitching mysteries that bedevil us. Number one is the gross discrepancy between a reviving national economy and public penury. Unprecedented deficits are exacting a painful price in austerity. Budgets of states and municipalities across the land are under the knife. Libraries have become luxuries, schools stepchildren, and even police and fire departments are endangered. In aggregate, the 50 states are running deficits of $175 billion. Cities in aggregate suffer a deficit of between $30-40 billion. In Washington, tax revenues are flat so that the deficit continues to mount despite the curtailment of stimulus spending and other austerities, e.g. a freeze on federal employee salaries. However, the numbers tell us that our stuttering recovery has succeeded in bringing GDP very close to where it was before the financial crisis broke in 2008. At that time, governments at all levels enjoyed fiscal good health. How is this possible? Doesn’t GDP today measure what it measured three years ago? Aren’t local and state tax rates set where they were three years ago? Haven’t the one-time federal tax cuts of 2009 expired? ‘Yes’ to all those questions. Indeed, real estate taxes in most jurisdictions have been kept level or actually increased — as in N.Y.C. and in Austin where they were raised by 10% despite stable housing prices. So what’s going on? Intervention by the capricious gods on Mount Olympus? Looking for an answer from the community of economists is frustrating. Rare is the specialist who addresses the question squarely. Certainly, a scouring of the financial press in a fruitless hunt for edification. No need to consult either the Delphic Oracles or the economic seers. For there are clues that point to the solution of this mystery — a deeply unsettling solution. One glaring truth is that those who pay taxes in a manner commensurate with income now are reduced in number relative to those who routinely elude tax by means fair or foul. That latter category includes corporations and very wealthy individuals. Warren Buffett’s secretary is in a higher tax rate than the maestro of Omaha — as he himself has pointed out. Of the Fortune 500 companies, 123 pay less than 23% on corporate revenues even though the official corporate tax rate is 35%. (Tim Geithner urges that the nominal rate drop to 25%). Those taxable earnings themselves represent only a fraction of profits given all the dodges built into tax code that invite accounting antics to hold official profits to a minimum. Then there are the special tax breaks for the oil and gas industry. Then there are the off-shore tax havens that allow corporations to locate their fictive headquarters in places with low or no taxes, Cayman Islands. Those havens are also available to the super rich. Then there is the infinite variety of financial shenanigans that befuddle underfunded, under motivated so-called regulators. The games that have shifted so much national wealth into the accounts of the top 2% are almost all still permitted despite their having brought the global economy to the brink of the precipice. Then there is ever more extensive outsourcing of jobs and facilities abroad. GE, whose former CEO Mr. Jeffrey Immelt is now one of Mr. Obama’s chief economic advisors, cut its payroll by some tens of thousands over the past decade. Its revenues have soared over this period because more and more of its corporate activity takes place in other countries. According to the numbers, much of the ensuing GE revenues are recorded as increases in national GDP. But foreign workers don’t pay taxes to the IRS (nor do they or GE contribute to FICA). The downward effect on government tax revenues if twofold: GE is in a better position to ‘hide’ earnings by showing the greatest profits in whichever of its locations have the lowest tax rates; and the earnings of American employees (who do file IRS returns) have become a smaller and smaller fraction of GE’s corporate wage bill. A similar logic applies to the growing practice of raising ‘productivity’ by forcing white collar workers to work uncompensated overtime and by the reliance on part-time workers who are paid less and receive few if any benefits. Consequently, the inflation-adjusted income of the median household — smack in the middle of the populace — fell 4.2% between 2007 and 2010 (even worse than the 1970s, when median income rose 1.9% despite high unemployment and inflation). GDP numbers themselves are distorted. The methodology for their calculation is a simple tabulation of transactions. Every time players in the financial money game trade ‘products’ of dubious value to the ‘real economy,’ like the notorious CDSs and Collateralized Debt Obligations (CDOs) or Credit Default Swaps (CDSs), the national cash register records the transaction as an addition to GDP. Those sorts of pseudo financial transactions have increased as a fraction of all financial dealings. The financial sector as a whole has grown to about 20% of the overall national economy and an even larger share of corporate profits. If we were to assume that 50% of financial transactions fall into the fictive category, then 10% of nominal GDP growth is also fictive. The American economy that allegedly grew at an annual rate of 2.8% in the fourth quarter may actually have grown by only 2.5%. There are other distortions of this kind that tend to overstate the rate of increase in GDP. All of this could be inferred from the stubbornly high rate of unemployment coincidental with record corporate profits. Too, those profits are coincidental with a continuing decline in mean hourly wages for American workers — another telltale sign. Moreover, connivance with the 1990s reformulation of unemployment measures masks the fact that today’s unemployment as stated in 1980 terms is more like 15% than the official 9%. These disparities are incomprehensible if we insist on taking at face value the numbers that are thrown at us about the state of the national economy. A related mystery in embedded in the headline stories about the dire budgetary straits in which the country finds itself. The ‘age of austerity’ has become a commonplace in our public discourse on why America can no longer afford this, that or another thing. The concrete referents are everything from social services for the poor and elderly, to school counseling services, to public transportation on par with any other reasonably prosperous country, to unemployment benefits, to decent health care. By any logical standard this is literally nonsense. The United States today is as rich as it ever has been — according to the numbers. And far richer that in earlier periods when we could afford most of those things — not to mention that other developed countries can afford them. Yet our political life accepts these apocalyptic assertions as Gospel Truth. Indeed, the economics priesthood provides the added reassurance of a scientific laying on of hands. Some of its luminaries actively proselytize in promotion of this creed. They are the intellectual mainstays of think tanks that go a step further to send forth the Word that we cannot even afford some basic things that we’ve had for 75 years — like Social Security. These numerologists are so deft that the obvious is cast into oblivion and the unreal is sealed in supposedly incontrovertible algebraic equations. The cultural equivalent of shamans speaking in tongues. The United States does not pay for things of social value because IT chooses not to — not because it cannot afford them. IT has multiple antecedents: society as a whole; elected representatives; government officials; political parties; all those powerful interests that distort the process in every facet to their own advantage. The choices made in recent years include expending $1 trillion to $2 trillion to hunt spectral terrorists in the far corners of the globe to little effect. It includes the $87 billion spent annually on our intelligence agencies. It includes the huge tax breaks given by the Bush administration concentrated on those in the upper 2% income bracket. Between 2002-2010 that diverted approximately $2.7 trillion dollars out of the Treasury into the pockets of the wealthy (adding the debt servicing of resulting deficits). Barack Obama’s ready acquiescence in their extension means that over the next decade another $3.1 trillion will be similarly diverted. As someone said, “a trillion here, a trillion there, and soon you’re talking about real money.” $7-8 trillion could pay for all the state/municipal budget cuts, the rebuilding of the country’s infrastructure, a serious energy program, environmental clean-up, aid to the elderly. (As for health care, we could pay for first rate coverage of every citizen at a cost one-third lower than what we now spend were we to switch the kind of single payer system that works nearly everywhere else in the developed world — freeing another trillion or so for other purposes). Think of higher education. When I began graduate school at Berkeley, I paid $105 per annum. That was not even tuition; it was a fee that covered maintenance of the student union and the pool complex in Strawberry Canyon. My total debt after receiving my PhD was $300 owed to the federal government for an interest free loan that I wisely invested in a vintage Pontiac convertible. Today, students at state universities pay tuition of between $10,000-16,000 per annum. They accumulate heavy debts on which they pay market rates. The Obama administration now has declared that Perkins Loans grants will start accumulating interest from day 1 rather than upon graduation — adding to students’ financial burden. No wonder that the percentage of American high school graduates attending college is declining to the point where we rank below most developed countries. This did not happen because of ‘hard times’ or inexorable economic forces. Rather, it is due to social choices that the country has made. This also is why the last subway system of any consequence in the United States was built when Nixon and Ford were presidents (D.C. and the San Francisco Bay area). So we suffer dilapidated transport while the residents of better endowed places ride efficient, clean trains in Calcutta, New Delhi, Recife (Brazil), Medellin (Columbia), Cairo, Baku (Azerbaijan); Tashkent (Uzbekistan), Yerevan (Armenia), Busan (South Korea), Izmir and Yekaterinburg — not to speak of the state of the art systems that speed on their way residents of every major city in China. It is concrete realities like this, and those noted above, that should be the starting point for serious intellectual and political discourse about the American economy — not the supposed economic verities that require ‘fiscally responsible’ government officials to make draconian teacher layoffs and to deprive the aged of a decent life. Reality based assessments of the United States’ economic predicaments should begin with a set of bedrock questions. What is the country’s actual wealth? How is it distributed? Why is it distributed in this way? What is the role of government in producing that distribution? What are the consequences of that distribution? What are the reasons for a possible reallocation of national resources? How might it be done? Is that a desirable or undesirable goal? How could the transitions be made at minimal cost while maintaining a smooth functioning of the economy? Some economic tools are useful to refine the answers. Most of the rest is ritual, theoretical filigree for scholarly archives or mere distraction?

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Lucy P. Marcus: Future Proofing the Boardroom: Today’s Agendas

February 18, 2011

The board room agenda is going through a reformation . To ensure that we are helping organizations future proof themselves, what are some of the essential things that boards and board members need to think about, no matter the size, location, or sector of their organization? Five areas need an update in the way we as board members think about them: infrastructure, technology, internationalization, communication, and balancing continuity and change. Infrastructure Boards must embrace the political, economic, and social reality of the way the world is operating today and tomorrow. One of the areas that needs a real rethink is building organizations that can operate effectively in a low-carbon economy. The main issues here are about energy consumption, integrating clean tech and sustainability, and they apply to all facets of the business: from facilities, to building stock and rolling stock, from changing work patterns and practices to the ways in which companies engage with their stakeholders and the local communities where they are based. It touches everything an organization does, how it behaves, how it invests, and it means board members need to be asking the questions about how these decisions will impact the business five and ten years down the road. Most importantly, it isn’t about green washing or perception; it is fundamentally about how the organization does business. Technology At the heart of many of the issues on the modern board agenda is technological innovation. Technology, thus, is not a stand-alone issue, but an integral part of how effectively and successfully a company can be run. It is not an end in itself, but an instrument that can only prove its worth if it serves a concrete purpose. Coupled with that is the speed at which new technology comes into play and the level of disruption it creates in the process of integrating it into the daily running of a company. For all the importance of disruptive innovation, if ‘old industries’ and the tech sector communicate effectively, if one understands the other’s needs, and the other, in turn, comes to grips with the significant benefits that today’s technology offers, innovation more generally can be enormously helpful in future proofing companies. For this potential to be fulfilled, boards must make sure that their organization is flexible enough to recognize important technological developments and incorporate them into existing business models. Internationalization Regardless of a company’s main business or where it is located, its success will ultimately depend on grasping the completely internationalized environment in which it operates. The world today is politically, socially, and economically more inter-connected, and this offers opportunities and poses risks at the same time. Board directors need to be able to think outside the walls of their own corporate board room, they need to speak their own language as well as the language of the markets where they want to be, for while the world gets smaller and in some respects more similar, local cultural difference remains and understanding it gives companies a distinct edge. Corporate boards need to set an example and help implement an agenda that is focused on attracting the best people from anywhere and put them in a place where they work most productively for the success of the company as a whole. Communication No corporate board will be able to implement its modern agenda without effective and dynamic communication, both with all its stakeholders (customers, staff, investors, etc.) and within the board room. Within the boardroom, this is about asking the necessary questions and being open to hear the answers, however uncomfortable they might be. Outside the boardroom communication is about the image and strategy of the company, and it is about the methods used to communicate this message , and increasingly so. A board that sends out a message of a forward-looking, socially and economically responsible, and politically aware strategy and does it by old and new forms of communication also sends a message about the right balance between continuity and change, about the unity of word and deed, demonstrating in action to which it rhetorically commits. Balancing Continuity and Change Embracing new ideas and news ways of thinking does not mean completely disregarding the old. Boards will only succeed in their task of future proofing their organizations only if they see the connections between the old and the new. This requires casting a critical eye on the old, innovating where fruitful, and integrating new technologies and items on the corporate social responsibility agenda into the tried and tested business practices of corporate governance, risk assessment, and finance. Corporate directors need to understand the purpose, strengths and limitations of existing practices and be willing and able to take steps to address them. The modern board agenda does not disregard ‘old issues’, it is not driven by short-lived ‘flavors of the month’ or temptations of every disruptive technology or idea that comes into the room, but is rather guided by the needs and vision of the business. This need for balance requires board rooms to have a mix of people to ensure a comprehensive and complementary diversity of approach, background, and skills Stargazing is most effective if it is done from a strong foundation where the nuts and bolts of the company work, and where they are grounded in a solid foundation. This is nowhere more obvious then when it comes to a company’s financial stability and sustainability. Past, present, and future are a continuum when companies seek opportunities for investment and expansion; when they carefully assess risks connected with either; and as they determine the right level of (not only monetary) compensation for their directors and staff. Note: For more information on the juxtaposition of grounding and stargazing see Future Proofing the Boardroom: Grounding and Stargazing . This was originally published on the Marcus Ventures website and on CSRWire .

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Nancy F. Koehn: Davos Diary: Day Three

January 28, 2011

The day dawned clear and cold in Davos, but most participants in the World Economic Forum here had little bandwidth for the weather. Typically, Thursday and Friday are the days when some of the most powerful leaders come to town. This means larger entourages (and bigger traffic jams to accommodate convoys), higher energy levels in the Congress Center, the Forum’s main hall, and greater attention to who’s who in formal sessions and those behind closed doors (I, for one, could not help staring when former U.S. president Bill Clinton walked by as I was standing at one of the two coffee bars). During the lunch break, the substantive buzz was about French president Nicolas Sarkozy’s morning address and his unflagging support for the European single currency in the wake of Greece and Ireland’s pressing fiscal problems and broader mass protests. Over a cheese sandwich, I eavesdropped on an animated conversation about how important it was (or was not) for Sarkozy to send such a signal at this moment. I left this debate midstream to scurry on to an interactive session on Shakespeare’s lessons for leadership. For more than an hour, about 50 men and women analyzed several passages in the Bard’s plays, looking for insights and assorted “takeaways” to apply in our respective lives. The arts, our discussion leader explained, appeal to the heart as well as the head, so the lessons we glean from understanding literature and other similar pursuits stick (“Here, here,” I said under my breath, relieved to find myself in a professional setting without PowerPoint slides). I have long been drawn to Shakespeare’s stories, particularly the characters that shape and drive these stories. In my leadership work with MBA students and executives, I often use examples from Shakespeare, finding that these instances resonate with most people. As our discussion leader said, we “learn best from stories.” The conversation in the afternoon about three Shakespeare excerpts had a number of takeaways. The passage from Hamlet , for example, in which Polonius, a courtier in Hamlet’s uncle’s court, sends his son, Laertes, off to school in France, is full of important lessons for business and life, including: listen more than you speak; make friends carefully and keep those you have close; be careful with your personal finances; dress well, but do not be flashy; and perhaps most significant, “to thine own self be true.” A second excerpt, from Julius Caesar , between two angry Roman leaders, Brutus and Cassius, dealt with conflict management. Avoid getting personal in stressful encounters, don’t assume another person’s motivations, and be mindful of outside influences were several of the insights from this dramatic exchange. The final, and most famous excerpt, was the St. Crispin’s Day speech that Henry V delivers near the end of the play named after him. The short speech, intended to rally the English king’s troops before the Battle of Agincourt, is elegant and moving. Behind the power and unforgettable language are a number of lessons for those trying to motivate others in difficult situations: appealing to a worthy mission that is bigger than any one individual, instilling pride in colleagues and comrades, bringing the future into the present to help others understand the broader impact of what they are doing, offering one’s team a choice about whether to invest in a particular undertaking, and fostering a sense of collective enterprise. I left the session engaged and heartened, not only by what I had learned from the session but by how I had learned it. Late in the afternoon, I filed into the largest auditorium in the Congress Hall to hear a conversation between Bill Clinton and Klaus Schwab, the founder and executive chairman of the World Economic Forum. For 45 minutes, Clinton answered a range of questions about Haiti, the global economy, job creation, U.S. politics, and the shifting geopolitical order. He looked thinner–by some measure–than he has and as a result perhaps a bit less robust. But his answers were thoughtful, confident without being arrogant, and consistently supported by relevant facts. At several moments during his remarks, I marveled at his speed and breadth of thinking, all powered by great engagement. Unconstrained by the limits imposed on officeholders, Clinton talked about the mistakes the Democratic Party made in the midterm elections by not offering up another narrative to that told (relentlessly) by the political right. When asked for his advice to leaders, he said individuals should not just talk about particular challenges; they should go out and do something, no matter how small, about these challenges. The world, he continued, is “so hungry for examples of things that work.” I was most struck by Clinton’s implicit call for a revised version of capitalism, one that accounted for the interconnectedness of our global village, that no longer regarded aspects of economic activity such as environmental concerns as externalities but rather as critical parts of a viable business model, and that recognized a broader breadth of stakeholders than do older, narrower conceptions of free markets. Late in the evening, a friend in Boston sent me a text message about a small explosion here in a Davos hotel. It was the first I had heard of this although the blast, which happened in an underground storage area of the Morosani Posthotel, occurred about 9 a.m. Blessedly, no one was injured, and authorities are saying little about causes or circumstances. Security will no doubt be very tight for the remainder of this gathering. Yesterday, U.S. Secretary of the Treasury Timothy Geithner is speaking in the morning. And in the afternoon–in what was the Forum highlight for me–so did Bono. Coming up: Stay tuned for my World Economic Forum recap on Monday and keep following my tweets live from the event.

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Edward Muzio: Over 30? Quit Whining About The Next Generation At Work

January 25, 2011

I’m going to say something to my fellow professionals over 30. You probably don’t want to hear it, but you should: Quit whining about how the next generation is ruining the workplace. My grandparents’ parents were looked upon by their elders as being headed for big trouble because of their newfangled, non-traditional ways of living. Something about immigrating to America, I think. It was bound to end in disaster. My parents were chastised by their parents — the children of those same wacky, devil-may-care immigrants — for listening to overly suggestive, inappropriate music, destined to be the downfall of modern society. I’m talking about stuff like — brace yourself — “I want a dream lover so I don’t have to dream alone” (Bobby Darin, 1959) or “You are my candy girl and you’ve got me wanting you” (The Archies, 1969). Scandalous! The old people were up in arms. Need I bore you with more examples? I’m sure you have your own. Every generation gripes about the next one. If you’re over 30 and complaining about young peoples’ short attention spans caused by Twitter, or their insensitivity to violence caused by video games, or the reduction in their thinking and problem solving skills caused by Google, stop it. It’s not novel, not interesting, not productive, not effective. Just stop it. I’m not saying you should stop believing those things — that’s up to you, and whatever research you’re willing to find. To be honest, I’m inclined to agree with you on some of the facts. It’s undisputed, for example, that people who have worked for less time often lack the wisdom that experience brings. That’s not exactly news. If you meet a younger person in the workplace who has poor communication skills, or lacks a complete understanding of your business, and you want to be a mentor, great! Of course, if you meet someone your own age in the workplace with poor communication skills, or an incomplete understanding of the business, you might also want to mentor that person. Come to think of it, you probably shouldn’t make decisions regarding who to mentor based on age. You certainly wouldn’t feel comfortable making such decisions based upon gender or race. Helping is good. Creating action plans is good. Doing research and publishing results along with suggested improvement actions is great. Complaining, on the other hand, is useless. It creates unnecessary worry, fear and division. It reinforces the notion that this generation is different from that one, when in reality there many similarities that offset the differences. If you don’t believe me, just find a few sets of parents in their 20s, a few in their 30s and a few in their 40s and ask them what they want for their children. I’ll bet the answers are pretty similar. Besides being divisive, complaining also damages your credibility. I can’t be the first person who has noticed this, but many of you are complaining about social media on social media. It would be one thing if you weren’t participating in the evils you condemn. I suppose you’d still be the next generation of old-fogeys, griping about those young whippersnappers, but at least you’d have integrity. You’d be on the porch in a rocking chair, bemoaning the loss of your old Model T and shaking your fist at youngsters speeding by in their new, fast, scary cars. But that’s not the case. A surprising number of you are on blogs, Facebook and Twitter, mourning the demise of youth caused by blogs, Facebook and Twitter. I personally know more than one person who will bemoan the younger generation’s loss of interpersonal skills because of text messaging, then stop mid-sentence to flip open a phone and read an inbound text message. That’s just crazy. And, it makes you look like a hypocrite. You and I have both already figured out that the new tools themselves are not bad. (I can tell you’ve concluded that, because you’re using them.) Much of our concern, then, stems from our discomfort with the change itself. We’re somewhat distracted by all the texts, blogs and social media, so we assume younger people will be, too. I hate to be this particular messenger, but the problem might not be with the new stuff. The problem might be that our brains got all baked up before the new stuff came along. We didn’t have the chance to build the kinds of neural pathways necessary to use all of it. That’s why your kid is better with a computer than you are: he or she grew up with it. You and I didn’t. Actually, I did grow up with just a little of it. My generation was predicted to have serious violence issues because of our modern video games. Games like “Pac Man” and “Donkey Kong,” played on controllers that had a single joystick and maybe two buttons at most, doomed us. And yet, rarely do you see a delinquent 30-something prowling the streets hurling wooden barrels at innocent bystanders. We turned out so well, in fact, that we’re the ones now worrying about serious violence issues in children because of the current generation of video games — games, by the way, which are played on controllers so complex that many of us can’t even use them properly. Of course, I’m not saying don’t worry. I’m saying don’t complain! Instead, take action within your sphere of influence. You could mentor a few kids in your neighborhood, or start a new hire development program at your office. Or, if you manage young people, you could be extra careful to be specific and clear about job expectations and the results of performance and non-performance. Be a really great manager, and you’ll be a really great role model. But whether you’re mentoring or role modeling, I suggest you avoid broad statements about generational differences and details about how your young audience is doomed. Instead, tell them they’re joining the workforce at the most exciting time in history, when technology is going to help us make personal and informational connections beyond our wildest dreams. Tell them the basics are still important — businesses need revenue, for example, and people need to know how to communicate with each other. But also show them you understand that they’re going to have to do some things differently than you did, because the challenges they face will be different than yours were. Show them what they need, and then ask for their thoughts on how they might apply what you’ve demonstrated. In short, treat them with respect. That’s one interpersonal behavior that never goes out of style. If you do that, I’ll bet the respect will flow both ways. Who knows, your blog might get more hits than ever before. I promise I’ll read it — at least until my next text message comes in.

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Michael Thornton: Gibbs: 99ers Will be Saved by Jobs, Not Unemployment Benefits. But Honestly….

December 31, 2010

In replying to ABC’s Jake Tapper’s question about 99ers and what can be done to help the millions of long-term unemployed, Presidential Press Secretary Robert Gibbs offered a baffling, disjointed, mishmash answer chock full of clichés and lacking any substance. Gibbs-speak, shall we say? First let’s look at the unedited version of the 99er exchange. TAPPER: … they’re individuals who have been — whose unemployment insurance has run out. They were not included in the deal, the tax deal that the president signed with Mr. McConnell, the Republicans and others. Is there anything that the president can do for them? GIBBS: Well, I think the best thing that we can do as a country is to get — get a fragile economy more stable, and one that creates more jobs. I think that’s — that’s why I think, you know, economists said that they would reorient their growth estimates based on the agreement that the president signed. And obviously, the best thing we can do for them is to create an environment where businesses are hiring. Look, we have — what you’ve heard me say on a number of occasions, that one of the great benefits of the agreement was taking the politics out of — out of unemployment insurance. We — we — we have — it’s been a contentious battle just to get unemployment insurance to continue up to 99 weeks. It’s not — it’s not in any way been easy. And this takes the politics out of that throughout 2011 and hopefully we can focus — continue to focus on getting the economy moving again and providing — providing those guys with a helping hand with a job. As Mr. Tapper alludes, the 99ers, those who have exhausted all unemployment benefits, were not part of the $856 billion tax agreement brokered between Obama and the Republicans. While many 99ers are certainly glad that Mr. Tapper at least brought up the subject of 99ers, his question to Mr. Gibbs lacked any sense of urgency or breath of the issue. After all, millions have exhausted all available unemployment benefits and have no other means of support What was most telling was that the interview Q & A ignored reality. Mr. Tapper posed a softball question to a hardball subject and Mr. Gibbs tried his best to spin a bad situation into a confusing situation. Let’s see if this interview can be better understood with some realities added to the question and answer. Here’s how the interview segment would have made more sense: Honest Mr. Tapper: Estimates are that 4-5 million unemployed have exhausted all their unemployment benefits – the 99ers. Since job creation is near zero and millions more 99ers are in the pipeline for 2011, why didn’t the president demand some relief for these long-suffering jobless, instead of just giving billions more in tax cuts to businesses that aren’t hiring and to the wealthy who don’t need the extra money? Honest Mr. Gibbs: Yes, the economy is still unable to create the jobs needed to help the four to five million and growing ranks of 99ers. We didn’t include 99ers in the monster tax package plan because economists think job growth will increase and you know how much you can trust economists to be correct (LOL)! We are more concerned about continually giving untold billions in tax breaks to businesses that still are not hiring even though they have recorded record profits and are sitting on over one trillion dollars in capital. Eventually, they will have to hire some additional people, maybe even a couple 99ers, just to count all that extra cash! We took the politics out of the next 13 months of unemployment benefits extensions for those who haven’t exhausted benefits, but when millions more do exhaust benefits in 2011, well, honestly, tough luck. In fact we didn’t even bring up the matter of unemployment benefits exhaustion because we were afraid to make Republicans angry. You know how nasty Republicans can get if you bring up government job creation or longer term benefits! Are you crazy (LOL)? Did you see what that whacko Sen. Bunning did last year when we tried to extend unemployment benefits? We didn’t want to go there again. Those guys are nuts! We feel it’s much more important to bailout corrupt and mismanaged Wall Street and foreign banks, large insurance companies and auto manufacturers than it is to bailout the long-term unemployed. I mean, do you think the president will receive more money for his 2012 reelection campaign from corrupt business leaders or 99ers? Get real, Jake. Sure, we hope 99ers support us, but we know where our bread is buttered and it’s not from contributions from unemployment checks! We will continue to go down the same path of giving billions in tax breaks to businesses and the wealthy, but we have our fingers crossed that they create a few jobs for the very long-term unemployed. Our job creation policies haven’t worked for the past two years, but we’re certain, certain those same policies will work this time. Third time lucky, we think! Tapper: Thank you for being honest with your answers. Gibbs: Thank you for asking a probing, difficult question. Although that interpretation is over the top, many long-term unemployed 99ers may not see it that way. They have been ignored for almost a year and their ranks are growing quickly. 99ers were and are being ignored by elected representatives, but the media has a responsibility to do more than simply ask questions, they need to investigate and determine why so many are being ignored for so long. You can see the entire interview: Power, pop, and probings from ABC News Senior White House Correspondent Jake Tapper . Weakness, fizzle and pleasantries may be a more appropriate title to Mr. Tapper’s interview, but he does deserve some credit for having the decency to ask the 99er question. Observing how many politicians and media pundits avoid, disparage, manipulate and dismiss those who have exhausted unemployment benefits is disturbing, but it’s demoralizing, depressing, damaging and destructive to those families who have to live through it, the long-term unemployed, the 99ers.

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Scott White: CNBC’s Midlife Crisis

December 20, 2010

Once upon a time, like maybe 2-1/2 years ago, just as the financial crisis was starting to deliver a series of swift kicks to the stock market’s nether regions, CNBC was — and had been, for years — a terrific, informative, “must-watch” business news channel. Squawk Box in the morning was a fun, funny, and informative pre-market potpourri of economic and company-specific business news, information, features, and light banter. Power Lunch was two hours of the same, at mid-day — different cast of characters, same mind-set. Market close brought a recap of the day’s events, plus post-market earnings announcements. Throughout the day there was a procession of talking heads, usually analyst sell side and usually bullish, but that was to be expected. Listen with a dose of skepticism, but maybe get some good ideas. And stay in touch with the latest trends and company news. CNBC, Wall Street Journal , Barron’s , Wall Street Week with Louis Rukeyser , all manna in an investor’s paradise. Then something happened. I don’t know exactly what caused it. But CNBC changed. For the worse, and hasn’t looked back. Maybe several somethings happened. Not sure. Maybe it was the shattering of investor confidence in Wall Street, the devastating losses to folks’ 401ks, despite daily insistence by the talking heads that the financials were a screaming buy and the sell-off was overdone, and thus a big ratings downturn. Maybe it was the proliferation of infotainment channels on cable tv, where to survive you needed an edge, conflict, confrontation, shouting — not just talking, but shouting — heads, to be noticed in an increasingly crowded media landscape. Maybe, more specifically, it was growing competition from Fox Business Network, which epitomized the new, opinionated, strident, “my way or the highway”, brass knuckles form of business journalism. But having swallowed the old Fnn 20 years ago and solidified its position as the preeminent voice in TV business programming since then, in its mid-life, about two years ago, CNBC morphed into something I no longer recognize most of the time. When did every sneeze or cough by a company or from Washington become “Breaking News”? When did it become necessary for the anchors to say, at the beginning of almost every program, “we have a lot to talk about” today. Meaning, if they didn’t say it, there wasn’t much going on that day? When did every interview become an “exclusive” interview (what, before that, they invited Larry King and Barbara Walters to join them)? When did normal programming morph into “special editions” of Power Lunch , simply because they were going to have an “exclusive” interview with a CEO who hadn’t given an interview in, can you imagine, over three weeks? When did 3-4 pm become “the most important hour of the trading day”? So, every other hour is just chopped liver? But I’m still supposed to watch then, right? Why did they start asking, at 4 pm, “do you know where your money is”? (OK, Madoff’s in jail, what do you know I don’t know about where my money is?) And why aren’t you telling me?) When did the anchors become “personalities”, more important than the people they were interviewing? (The other day, they were supposed to get parting words from their daily Squawk Box guest host, but Joe Kernan spent so much time talking about his hair, they ran out of time and said, “next time”). Why did it suddenly become so important for me to know what Maria Bartiromo’s market views are? Why did “In Cramer We Trust” become an unofficial slogan of CNBC? When did Fast Money plus Mad Money expand to fill 1/4 of the day’s programming, breathless prose for day-traders and options traders, fawning interviews with CEOs, and “buy, buy, buy” stocks with PE ratios of 75, 100 or higher? With no accountability, to anyone. Is that it, CNBC now caters to Main Street day-traders, as well as their staple of Wall Street traders and CEOs? I know, Cramer says he simply wants to educate his viewers. And that’s why he whips them, and himself, into a frenzy every evening. And why you have to pay to get access to many services on his website, which he touts every day. I do wonder, does anyone, anyone , stop to ask whether this is a good way to prime the public for a lifetime of serious investing, right after the worst financial crisis in 80 years? But I digress. When did rants replace analysis? When did every guest have to be asked his/her opinion of QE2 (Fed quantitative easing), the deficit, and whether President Obama is anti-business, beating the issues to death, mercilessly, each and every day, and then beating them some more? When did certain guest hosts (Michelle Caruso-Cabrera and the departed-but-not-lamented Denis Kneale were the worst offenders) start asking pointed questions and then interrupting their guests to give the answers themselves? Are guests just props? Why is Bob Pisani hawking new CNBC software for “only $29.95″, or a free trial, to viewers (just this week)? Why are CNBC employees touting Federal Express as a great investment for the better part of a week and then broadcasting from Fedex locations twice within a week (last Tuesday and this coming Monday, promos on the hour)? Isn’t that just a tad too cozy, or, dare I utter the phrase, even a conflict of interest? Of course, by that standard CNBC would be a perpetual conflict of interest machine, since they constantly interview analysts who recommend companies that are big CNBC advertisers. But again I digress. Isn’t anybody else noticing this? Am I crazy? Has the world changed, and I’m a fuddy-duddy, stuck in another universe? Is this the “new normal”? I used to think I was Everyman or a good litmus test for what the average guy or girl was thinking. But the silence on CNBC’s transmogrification (a 20th century word, perhaps) is deafening. Isn’t anybody else tired of this ? In the past 2-1/2 years, I feel the CNBC universe has turned upside down, and no one has noticed. I’m no longer informed by the opinionated program anchors, I’m told what they think about the major political/business issues of the day. To be honest, I don’t much care what they think. With all respect, that’s not why I watch. There are exceptions, of course, and you can see those anchors squirm as the new journalists wax, rant and polemicize. But they are in the minority. And I do still get long stretches where CNBC actually focuses on business and company news, and then they remain very, very good. So why do I still watch, you might ask? Why not vote with my remote? Good questions. Well, in truth, I now watch increasingly less. First, I just turned down the volume. Then I started turning the channel. Just the other day, I saw David Einhorn, head of Greenlight Capital, on CNBC and then a few days later on Bloomberg. The Bloomberg segment with Einhorn was highly informative. Rather than asking him his views on tax cuts and QE2, which is what CNBC does, they actually talked about his holdings and his investment philosophy, at length. How refreshing, I thought! I learned something! Such a feeling! But it’s like an abusive relationship, me and CNBC. I’ve been in it so long, it’s hard to extricate myself. And, for the longest time, I failed to recognize how increasingly unhappy I was in the relationship. I was saddened when Bill Griffeth took his sabbatical a year ago, I felt like Sue Herrera did. Yes, they had become part of my daily life, they were “family”, I was hooked. Having lived with many of them for between 10 and 20 years, I didn’t want to be the one to leave. I don’t want to change channels. I want them to change. Back to what they were before, funny and informative, but nothing more. Not the story. So why isn’t anybody writing about this? Are they too busy day-trading? Speaking of which, I’ve probably missed a half-dozen breaking stories by now, and the next edition of Fast Money will be on again soon, so I gotta go, don’t want to miss out. Maybe they are getting to me, after all. I still think, though, something is seriously off the tracks at CNBC nowadays. And I still hope that someday soon, somewhere, someone is going write about how things have changed for the worse at CNBC, so they can see the error of their ways, and we can return to — the way we were.

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Art Levine: After Obama-GOP Tax Deal, AFL-CIO’s Trumka Seeks to Rally Liberals to Save Medicare, Social Security

December 17, 2010

With Congress sending to the White House a tax deal larded with tax breaks for the rich, progressives and labor supporters now find themselves facing a challenge starting in January of beating back Republican-led efforts to cut back Social Security, Medicare and other safety-net programs in a GOP-run House of Representatives. As Howard Fineman observes, the Tea Party is already running the show in the Senate , still nominally controlled by Democrats, with the result that the omnibus spending bill needed to run the government was blocked. On Thursday, AFL-CIO President Richard Trumka, who had earlier condemned the new $850 million deficit-raiding tax package because ” the gains for the middle class and jobless workers in the deal come at too high a price,” sent out an email alert worth reading. An open question is whether labor and progressive groups will have the financial and organizational power to fight an ascendant GOP and outside pro-business conservative groups such as Crossroads GPS that have virtually unlimited money to spend on TV ads and organizing, abetted by an enraged Tea Party movement. This week, the Karl Rove-linked group announced its first post-election ad buy targeting vulnerable Democrats. What will progressives be able to offer to counter that on issue after issue over the next year? One hopeful sign for liberals is the announced formation of American Bridge , organized by David Brock of Media Matters, for a counterweight to business interest groups, looking towards the 2012 elections. Yet the potentially well-funded group, chaired by Former Maryland Lt. Gov. Kathleen Kennedy Townsend also aims to help Democrats “compete dollar to dollar” with Republicans over the next two years, she told ABC New s. It could serve as a communications bulwark to promote a progressive agenda alongside labor’s efforts. Here’s Trumka’s latest appeal: BREAKING NEWS: Congress has passed a deal that extends emergency unemployment for more than a year. And the role you played in shining a light on the struggles of jobless Americans helped make it happen. This is a huge relief for the more than 1.4 million long-term job seekers who already have lost their emergency unemployment benefits. But this deal comes at a terrible price: It rewards obstructionists with huge tax breaks for millionaires and billionaires. To get their way, Senate Republicans terrorized millions of jobless workers–making them live in fear for months as cold weather and the holidays approached. Some of our jobless brothers and sisters lost the ability to warm their homes or put food on the table and gas in the car. Some working families even lost their homes to the Big Banks that caused our economic meltdown–all so Senate Republicans could get tax breaks for the rich. These tax cuts throw away precious resources needed for investments in jobs and will do very little to propel economic growth. Senate Republicans have shown themselves to be morally bankrupt hypocrites. They capitalized on the hardships of our country’s most vulnerable people to extract tax cuts for their rich friends, like the top executives of Goldman Sachs. Just yesterday, they reported they’d be splitting $111 million in bonuses this January. They’ll save millions on their taxes–money that should go toward fixing the mess they helped create. A nd we know this is not the end. Soon, the same lawmakers who fought to get tax cuts for millionaires and billionaires will be coming after your Social Security and Medicare. Count on it. They’ll say we need to have “shared sacrifice”–but they won’t ask Wall Street and moneyed interests to share in the sacrifice required to clean up the mess they created. Instead, they’ll come after working people. If it wasn’t clear already, it’s clear now: We’re going to have quite a fight on our hands between now and 2012. We’ll need your help to preserve vital middle-class programs–and to beat back these deficit hypocrites at every turn. Here’s what I’m asking you to do. Sign up for the front lines by pulling out your mobile phone right now. Send a text message with the word DEAL to 225568–we’ll send urgent alerts to your mobile phone when deficit hypocrites try to defraud the middle class by launching attacks on our Social Security, Medicare and more in 2011. We must vigorously oppose solving our country’s long-term financial problems on the backs of working people. If the America we all love is going to survive this century–or even this decade–we’ve got to find a way to restore balance in our politics and our economy. How do we use our power to escape caving in to Wall Street and moneyed interests? And how do we create the millions of jobs we need now and move toward a future of broadly shared prosperity? I don’t have all the answers today. But I do know we can’t keep doing what we’re doing now. I know we have to fight harder and louder and more creatively–and I know we can only win together. Please pull out your mobile phone and text the word DEAL to 225568. We’ll keep you updated on our fight to stop deficit hypocrites from stealing our hard-earned Social Security and Medicare benefits. Two years ago, working Americans had high hopes we would ultimately emerge from the deep, punishing financial debacle with a sharp focus on a fundamentally stronger, fairer and more balanced economy. We can’t throw in the towel and give up now. Too much is at stake. We’ve got to redouble our efforts and fight harder than ever to move forward for working people. And we need you standing with us. In solidarity, Richard L. Trumka President, AFL-CIO **************************************************************************************** For more on labor and reform issues, read the Working in These Times blog.

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Tony Hsieh: Zappos Founder: Why I Walked Away From Big Money At Microsoft

December 13, 2010

From Delivering Happiness: A Path to Passion, Profits and Purpose by Tony Hsieh. A bet is a bet. If I lose a bet, I always pay up. On graduation day in college, my friends made a bet with me. They bet that I would become a millionaire within 10 years, and if it happened, then we would all go on a cruise together, and I would pay for everyone’s trip. If it didn’t happen, then we would still go on a cruise together, but they would pool together and pay for my trip. To me, it seemed like a win-win situation: either I would be a millionaire or I would get a free cruise. Either way, I would be happy, so agreed to the bet. It was early 1999, and we all flew to Florida to take a three-day cruise to the Bahamas. I decided to invite some of my other friends as well, so we ended up with a group of about 15 people. I had never been on a cruise before, so I was pretty amazed at how big the ship was. There was a nightclub, ten bars, swimming pools, and five all-you-can-eat restaurants. We had a great time drinking, eating, partying, and then drinking, eating, and partying some more. It was like a mini college reunion, without all the boring parts. We all decided to go to the nightclub on the final night of the cruise to drink and dance the night away. In the eyes of all my friends on the cruise, I was everything that they thought defined success and happiness. My friends commented that I seemed more self-confident and congratulated me on selling the company to Microsoft. (Tony Hsieh sold LinkExchange , a web-based advertising company, to Microsoft in 1998 for a $265M.) At 1:00 AM, the DJ announced that it was last call, and that the bar and club would be shutting down soon. As everyone headed to the bar to get one last drink before the night was over, I stood by myself for a moment to avoid the rush and to take in the moment. If someone had told me four years ago that I would be a millionaire and on a cruise ship celebrating, I would not have believed it. Yet, as the drinks flowed, the music pulsated, and friends cheered and toasted one another, a nagging voice in the back of my mind repeatedly brought up the same questions that had been there ever since the silent walk with Sanjay back to the office the day the Microsoft deal closed: Now what? What’s next? And then there were the follow-up questions: What is success? What is happiness? What am I working toward? I still didn’t have the answers. So I went to the bar, ordered a shot of vodka, and clinked glasses with Sanjay. Figuring out the answers could wait until later. After the cruise, I felt like I was on autopilot: waking up late, making an appearance at the office for a few hours and checking my e-mail, then heading home early. Every once in a while, I’d skip going to the office altogether. I had a lot of free time and I didn’t know what to do with it. So I had a lot of time to think. I’d already bought all the things I wanted: a place to live, a big-screen TV, a computer, and a home theater system. I started going to Vegas every other weekend to play poker. I wasn’t playing for the money. It was about the challenge of figuring out how to beat the game. Poker is the only casino game where you’re playing against other players instead of the house, so as long as you’re better than the average player at your table, you actually can win in the long run. But most of my free time was spent just being introspective and thinking. I didn’t need more money, so what was it good for? I wasn’t spending the money I already had. So why was I staying at Microsoft, vesting in peace, trying to get more of it? I made a list of the happiest periods in my life, and I realized that none of them involved money. I realized that building stuff and being creative and inventive made me happy. Connecting with a friend and talking through the entire night until the sun rose made me happy. Trick-or-treating in middle school with a group of my closest friends made me happy. Eating a baked potato after a swim meet made me happy. Pickles made me happy. (Although for that one, I’m still unclear why. I think it’s just because they are obviously delicious and I enjoy saying “pickles.”) I thought about how easily we are all brainwashed by our society and culture to stop thinking and just assume by default that more money equals more success and more happiness, when ultimately happiness is really just about enjoying life. I thought about how I enjoyed creating, building, and doing stuff that I was passionate about. And there was so much opportunity to create and build stuff, especially with the Internet still exploding, and not enough time to pursue every idea out there. And yet here I was, wasting my time, wasting my life, so that I could make more money even though I had all the money I ever needed for the rest of my life. A lot was going to change about the world. We were on the eve of not only a new century, but a new millennium. The world was about to change in a dramatic way, and I was about to miss out on it so that I could make even more money when I already had all the money I would ever need. And then I stopped thinking to myself and started talking to myself: “There will never be another 1999. What are you going to do about it?” I already knew the answer. In that moment, I had chosen to be true to myself and walk away from the all the money that was keeping me at Microsoft. A few days later, I went to the office, sent my good-bye e-mail to the company, and walked out the door. I didn’t know exactly what I was going to do, but I knew what I wasn’t going to do. I wasn’t going to sit around letting my life and the world pass me by. People thought I was crazy for giving up all that money. And yes, making that decision was scary, but in a good way. I didn’t realize it at the time, but it was a turning point for me in my life. I had decided to stop chasing the money, and start chasing the passion. I was ready for the next chapter in my life.

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Vivian Norris de Montaigu: The Future of Banking

September 30, 2010

Based on the adherence to the Chatham House Rules, no individuals nor companies will be identified by name. A remote location near St. Andrews, Scotland, was a somehow ideal place for bankers and their technology bedfellows to discuss their common future, held under gray clouds and bad financial news brewing in nearby Ireland, and austerity protests in much of Europe. Except these bankers were 90% from Africa, Asia and the Middle East. The rare European and even rarer (expat) American, although often dominating the speaking space, added little to the reality of those who attended. Underlining this fact was a Kenyan banker who announced a 36% yearly profit or an Indian CEO expanding internationally taking the stage just after a gloom and doom American analyst or frankly depressing former Central Bank representative from the West. Will the emerging market economies be able to sustain this optimism or will yet another wave of crisis hit those markets as well? Or had they learned from the ’97 crisis (bankers from countries such as Thailand helped to put that crisis in perspective) and were thus in better shape to deal with any new ones to come? And is this crisis in the West not a kind of karmic payback for that ’97 Asian Financial Crisis, without which China and much of Asia would have already been much stronger? Africa, without violence, famine and AIDS too would have risen up as a financial leader much earlier. At last these parts of the world, where the majority of the poor, those Bottom of the Pyramid citizens of the world, were seeing a brighter future. Our crisis in the West should not be hindering their prosperity, nor should globalization force those who have begun pulling themselves out of dire poverty, fall back because of rising food prices or debts to the IMF and World Bank. Ironically those same countries, which were told they could not bail out their own banks when times became rough, have been watching closely as the US bailed out its own banks. This kind of hypocrisy does not go down well. I doubt that kind of advice will be listened to again. Yet one hopes they do not follow in our Western footsteps and that regulations will indeed hinder the kind of hyper-speculation and virtual splicing, bundling and reselling of thin air. Ironically we ran into an old friend who had been an executive at a large bank in the US (which had failed) who happened to be vacationing, golfing in St Andrews. When he found out we were attending a banking conference he asked questions, and the answers we provided demonstrated that not all was gloom and doom. The demographic charts showed the aging US and Europe while most of the developing world has young populations that are energetic and entrepreneurial… and which can trade with one another. In other words, speaking from a US perspective, in some ways, they simply do not need us. The former banker friend went on to work with manual laborers and has been questioning the way things were done in the past. He witnessed firsthand how cheap credit and over-expansion brought down a once strong economy. And though the first evening a former Irish rock star turned philanthropist and humanitarian took the stage to address and scold those he perhaps believed to be a Goldman Sachs and City crowd, the reality was that I spent much of the free time discussing with Indian, African and expat US bankers, about the good being done by banking the unbanked, how technology could help speed up that process, and how the BRIC economies were not looking towards their Western colleagues for how to build their economies, but rather trying out new architectures and customer-focused approaches that we in the West would be wise to learn from and implement. Microcredit, women, microsavings were all discussed with bankers who all focused on the human needs in their countries. I was impressed time and again that they did not ignore these difficult topics but were extremely straightforward. I was also frankly shocked as I spoke to several expat American former bankers and analysts who had seen the crisis coming and has moved to Australia and other parts of the world. All of them stated they had done so to ensure their children a better future. WE in the West are now finding ourselves having to stare poverty in the face as much of our population is suffering and without work. There was talk of the end of banks as we know it, mobile banking and bank branches in a box, but also maintaining a human connection and knowing the customer. But the most exciting ideas came from ex-bankers or those who had been running big banks and who were focusing on funding projects and businesses created by women, or looking at how the poorest of the poor were fulfilling their financial needs via new technologies. African telecoms buying up banks, non-banks doing business that used to be monopolized by banks — local investments in Africa and Asia were paying off. But perhaps the most moving part of the event was the final evening, as we were bussed to a farm for a Scottish dinner and dance, accompanied by traditional music of the bagpipes and a farewell sendoff by the Scottish guards. As we stood there, bankers who came in many cases from former European, especially former British empire colonies, watching the cultural manifestation of a fading glory, I realized that the world has already changed, things will never be as they once were, and that is for the best. It is a new time. We need to learn from those we thought we were helping, as they will save us in the end.

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Ron Ashkenas: Leverage Your Top Talent Before You Lose It

September 8, 2010

Do you have an exceptional performer on your team — a person who stands head and shoulders above everyone else? If you do, it can be a wonderful gift for a manager to have an employee whom you can count on to get the right results; who thinks about what else needs to be done without being told; who doesn’t need to be pushed or motivated; who is always asking to do more. Unfortunately many managers don’t know how to deal with such exceptional employees. They often unintentionally dampen their star performance or cause them to find better opportunities elsewhere. I’ve seen many cases where, instead of leveraging top talent, the manager has quietly suggested that the employee “slow down” or “do more research” or “wait for the right time” or “keep those ideas to yourself for now.” I’ve even seen managers allow their teams to ostracize or marginalize the top performer so that other people won’t “feel bad.” What’s behind this kind of counter-productive behavior? Let’s start with two possible reasons for these seemingly irrational actions: The first is lack of self-confidence. Some managers, instead of being grateful for a top-notch employee, feel threatened when a subordinate is more capable, more energetic, or smarter than they are. Particularly for managers whose self-image is to be “in charge,” a high performer triggers tremendous anxiety. How can I be the boss if one of my reports is more capable of getting things done? What will happen to my authority if subordinates go to someone else for help and advice? What will my boss think if one of my team members is the one who knows all the answers? Based on these concerns, the insecure manager might overexert authority, demean the high performer’s contributions, or even take credit for much of the high performer’s work. The second reason for not leveraging a highly talented person is lack of imagination. Sometimes managers simply don’t know what to do with an exceptional performer. When a subordinate finishes a first assignment quickly, the unimaginative manager often is at a loss for a next assignment. So the high performer ends up doing busy work, helping someone else who may not need it, or creating a new project alone. When the high performer is an entrepreneurial self-starter this pattern may be all right. But more often the exceptional person isn’t challenged sufficiently — and the organization doesn’t receive the full benefit of his or her capabilities. Naturally insecure or unimaginative managers don’t attract or keep great talent, which diminishes their team’s ability to get results. So if you think that you might unconsciously be exhibiting these behaviors, and would like to better leverage your best people, here are a few guidelines to keep in mind: * Remember that hiring and developing people who are smarter than you is one of the best decisions a manager can make. The more talent you have on your team, the higher your performance. There is no substitute for an A-team. *Once you have really good people, take advantage of them. Stretch them. Challenge them. Find out what they are good at — and what they need to learn. Craft assignments that will take them to the next level. *Give your best people credit and visibility. Let others know what they are doing. Remember that they are corporate assets and not just members of your team. *Be willing to let your best people go to new opportunities if it makes sense for their development and learning. Don’t push them to leave before they have made a real contribution, but don’t needlessly hold on to them either. By following these guidelines you’ll eventually develop a reputation as a talent developer, which means that you will be multiplying your contribution to the organization many times over. Gifted people will be beating down the doors to work for you — and you’ll always have a team around you that can deliver. What’s your experience with managing exceptional performers?

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Robert Reich: The Real Lesson of Labor Day

September 5, 2010

Welcome to the worst Labor Day in the memory of most Americans. Organized labor is down to about 7 percent of the private work force. Members of non-organized labor — most of the rest of us — are unemployed, underemployed or underwater. The Labor Department reported on Friday that just 67,000 new private-sector jobs were created in August, which, when added to the loss of public-sector (mostly temporary Census worker jobs) resulted in a net loss of over 50,000 jobs for the month. But at least 125,000 net new jobs are needed to keep up with the growth of the potential work force. Face it: The national economy isn’t escaping the gravitational pull of the Great Recession. None of the standard booster rockets are working. Near-zero short-term interest rates from the Fed, almost record-low borrowing costs in the bond market, a giant stimulus package, along with tax credits for small businesses that hire the long-term unemployed have all failed to do enough. That’s because the real problem has to do with the structure of the economy, not the business cycle. No booster rocket can work unless consumers are able, at some point, to keep the economy moving on their own. But consumers no longer have the purchasing power to buy the goods and services they produce as workers; for some time now, their means haven’t kept up with what the growing economy could and should have been able to provide them. The Origin of the Crisis This crisis began decades ago when a new wave of technology — things like satellite communications, container ships, computers and eventually the Internet — made it cheaper for American employers to use low-wage labor abroad or labor-replacing software here at home than to continue paying the typical worker a middle-class wage. Even though the American economy kept growing, hourly wages flattened. The median male worker earns less today, adjusted for inflation, than he did 30 years ago. But for years American families kept spending as if their incomes were keeping pace with overall economic growth. And their spending fueled continued growth. How did families manage this trick? First, women streamed into the paid work force. By the late 1990s, more than 60 percent of mothers with young children worked outside the home (in 1966, only 24 percent did). Second, everyone put in more hours. What families didn’t receive in wage increases they made up for in work increases. By the mid-2000s, the typical male worker was putting in roughly 100 hours more each year than two decades before, and the typical female worker about 200 hours more. When American families couldn’t squeeze any more income out of these two coping mechanisms, they embarked on a third: going ever deeper into debt. This seemed painless — as long as home prices were soaring. From 2002 to 2007, American households extracted $2.3 trillion from their homes. Eventually, of course, the debt bubble burst — and with it, the last coping mechanism. Now we’re left to deal with the underlying problem that we’ve avoided for decades. Even if nearly everyone was employed, the vast middle class still wouldn’t have enough money to buy what the economy is capable of producing. Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008 . They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income. It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle. The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs. What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns — sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result. Meanwhile, as the economy grows, the vast majority in the middle naturally want to live better. Their consequent spending fuels continued growth and creates enough jobs for almost everyone, at least for a time. But because this situation can’t be sustained, at some point — 1929 and 2008 offer ready examples — the bill comes due. What We Learned and Didn’t Learn From the Great Depression of the 1930s This time around, policymakers had knowledge their counterparts didn’t have in 1929; they knew they could avoid immediate financial calamity by flooding the economy with money. But, paradoxically, averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession. The Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity. In the 1930s, the American economy was completely restructured. New Deal measures — Social Security, a 40-hour work week with time-and-a-half overtime, unemployment insurance, the right to form unions and bargain collectively, the minimum wage — leveled the playing field. In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes. And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs. By contrast, little has been done since 2008 to widen the circle of prosperity. Health-care reform is an important step forward but it’s not nearly enough. What Else Should Be Done What else could be done to raise wages and thereby spur the economy? I don’t pretend to have all the answers but some initiatives seem worthwhile. [Pause for a commercial announcement. These points, and others, are developed at length in my upcoming book, Aftershock: The Next Economy and America's Future , out in two weeks from Alfred Knopf.] We might consider, for example, extending the earned income tax credit all the way up through the middle class, and paying for it with a tax on carbon. The carbon tax would raise the prices of goods and services especially dependent on carbon-based fuels, which is appropriate given that the social costs of carbon-based fuels should be included in their prices. Consider how much our society now spends on such things as foreign wars designed to secure our sources of oil, as well as oil cleanups. But the wage subsidies would more than make up for these price rises, at least for most Americans in the middle and below. Another step would be to exempt the first $20,000 of income from payroll taxes and paying for it with a payroll tax on incomes over $250,000. This, too, seems reasonable, given that under current law only the first $106,000 of income is subject to the Social Security portion of the payroll tax – a particularly regressive system. Most higher-income people, who get good medical care, live longer and collect far more in Social Security benefits, than do lower-income people. In the longer term, Americans must be better prepared to succeed in the global, high-tech economy. Early childhood education should be more widely available, paid for by a small 0.5 percent fee on all financial transactions. Public universities should be free; in return, graduates would then be required to pay back 10 percent of their first 10 years of full-time income. Another step: workers who lose their jobs and have to settle for positions that pay less could qualify for “earnings insurance” that would pay half the salary difference for two years; such a program would probably prove less expensive than extended unemployment benefits. These measures would not enlarge the budget deficit because they would be paid for. In fact, such moves would help reduce the long-term deficits by getting more Americans back to work and the economy growing again. Here’s the point. Policies that generate more widely shared prosperity lead to stronger and more sustainable economic growth — and that’s good for everyone. The rich are better off with a smaller percentage of a fast-growing economy than a larger share of an economy that’s barely moving. That’s the Labor Day lesson we learned decades ago; until we remember it again, we’ll be stuck in the Great Recession. This post originally appeared at RobertReich.org .

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Samuel H. Williamson: The Macro Economics Social Security – Part Three

August 31, 2010

From the comments on the previous postings, I see that I am still not getting my points across to everyone. SirWillae does not like comparing Social Security to insurance, because “Getting old is the rule, not the exception. Therefore, it makes no sense to insure against getting old.” I guess I could reply that not everyone gets old, but everyone dies, so why buy life insurance? Also But SirWillae should remember realize that the official name of Social Security is: Old Age and Survivor’s Insurance (OASI). As I explained, if everyone had to take care of their parents in old age, then some would end up with great expenses and others, whose parents died just as they retired, would have none. Both my parents died when they were in their late 80s 88, so I benefited. I have a friend who is my age and his parents were killed in a car crash when he was in his 30s so he did not get the same benefit, but we did not know this when we started working. So as he and I paid into Social Security, we were buying potential benefits for our parents, not knowing if they would collect. Jackson, who is 23, says “I can’t help but to trust individuals more to save for their own retirement than the federal government, which has taken what should have been savings and lent it… to itself.” But This statement has two problems.; First, most of the money paid to Social Security has not been saved, but passed on to folks such as his grand parents. Jackson should ask them if they appreciate getting those benefits, and he should ask himself if he would like to have his grandparents dependent on his salary to eat. The second problem is to whom the Social Security trust fund should loan these funds if not the government? The fact that everyone else from hedge funds to the Chinese want to lend money to our government would seem to validate this choice. I personally am happy that the trust fund was not invested in real estate the past four years. But I do not want to get into the debate about the size of the federal debt and deficit; though I do think there is a bit of an exaggeration as to how big a problem it is. I will discuss in another posting the question of what would happen if we abolished Social Security so that everyone chose for himself or herself when they retire. If we were ever to go that way, it would take a long time. But for now, before we decide that there needs to be changes in Social Security, we as a society must decide how much of the nation’s output is to be shared with the dependent part of our population. Instead of trying to manipulate the age that people retire for fiscal reasons, let us decide how much leisure we want at the end of life. The per capita income in the United States is higher than every nation in the world except Norway. If we choose, we can have fewer older workers and more people retired. This would mean less output and more leisure time. When politicians say the retirement age should be raised, is it because: (1) They think we will not have enough workers, particularly those over 60? (2) They think we will not have enough output to share with our dependent population unless we all work more years? I doubt these are their answers, but until we address these questions first, our public retirement insurance program is not the place to manipulating the retirement age.

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Marty Zwilling: Eight Questions Every Startup Hopes You Won’t Ask

August 24, 2010

If you really want to impress a startup founder as a potential employee, or you want to be a smart investor, you need to know the right questions to ask. These are the questions that get past the hype of a founder “vision to change the world,” and into the realm of real business strengths, weaknesses, and current health. Some founders try to deflect these questions by talking incessantly, so you often need to be calm, patient, and persistent to get the answers. My advice to founders out there is to not volunteer too much, but be open and honest in the face of direct questions like the following: What is your burn rate and runway today? These are investor slang terms referring to how fast money is being spent, with an implicit question of how long the startup can survive before break-even or another cash infusion is required. You need to know this as a future employee, since it probably gates how long your new job will last. If the runway is less than six months, with no new source signed, both you and the startup are at risk. How much “skin” is already in the game? The intent of this question is to determine the level of commitment of founders, both cash and “sweat equity,” and how much others have already invested into this plan. Implicit in the analysis of the answers is how much progress has been made for the investment, and how stable the business is now. What’s the total history of this company? Gaps in the history of a startup are big red flags, just like gaps in your resume. If the company was incorporated five years ago, and is still in early stages, with the same founding team, chances are slim that it will suddenly get back on track with you as an employee, or you as an investor. How well do the founders get along with each other, and with the team? The smartest people are often the most eccentric, so some conflict in the ranks is normal. Excessive conflict, lack of communication, or lack of mutual respect is indicative of a dysfunctional team, and eventual failure of the startup. You won’t get this answer from the founder, but it’s not hard to get it by talking to other team members. What’s in this deal for me? Investing in a startup, or joining a startup, is always a very big risk, so the potential return better be large. As an employee, you salary will likely be low, your job security low, so the job title better be large, and the stock options better be large. As an investor, look for an ROI that is 10x your initial investment, based on something more than a dream from the founder. What traction can be measured today? Who do you have as outside board members? The only true outside board or advisory members are not family members, not current investors, but are experienced entrepreneurs with deep knowledge and connections in the relevant business area. They should be asking to speak to you if you are a potential investor or a superstar hire. If you talk to them, they better know the answers to the previous questions. Who is a real customer that I can talk to? Real customers are ones who have paid full price for the product, have it installed and in use, and are still satisfied. Free trials don’t count, betas don’t count, and “excited about the potential” doesn’t count. If there are no customers yet, when will the product ship, and how many times has the date been set? How solid is the intellectual property? Provisional patents, or lawsuits pending, don’t add up to a strong sustainable competitive advantage. You need to know these things before you put your money on the table, or bet your career and your family’s future on this startup. Again, I’m not suggesting that you go on the attack to get answers to these questions. But don’t let management divert you with comments on your failure to understand “the vision and the big picture.” If you are a potential employee, it probably makes sense to get the job offer first before you tackle some of these, always staying calm and assertive. In the parlance of an investor, asking these questions and getting answers is the heart of that mysterious “due diligence” process. Now you know. If you are a potential employee, you need to do the same due diligence before you sign on. Every good founder will have done the same on you, before they make you an offer.

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Donald Bren, Billionaire Real Estate Tycoon, SUED By His Illegitimate Kids (VIDEO)

August 20, 2010

LOS ANGELES — Billionaire real estate mogul Donald Bren testified Thursday in the child support case brought by his two adult children, saying he was shocked when his then-lover told him decades ago that she was pregnant with their first child. Bren, one of the nation’s richest men, has an estimated net worth of $12 billion and has spent a lifetime protecting his privacy. Twenty-two-year-old Christie Bren and 18-year-old David Bren have sued him for $400,000 a month in child support retroactive to the time they were born. That comes to about $100 million. WATCH: The 78-year-old Irvine Co. chairman told a courtroom that he suggested to Jennifer McKay Gold that they create a legal agreement to provide for child care. He said they never talked about marriage or having a family. Four contracts were created involving child support entered into by Gold each time she became pregnant and after the children were born. The accords, beginning in 1988, rose from $3,500 a month to $18,000 a month between 1992 and 2002. Bren recounted that he and Gold dated in the mid-1980s but she never slept over at his home and the two would see each less frequently as the years passed. Bren said he was surprised that Gold became pregnant twice because he was under the impression she was using birth control. “I felt I was betrayed in that she promised me she would be protected and she wasn’t,” he said while under questioning by his lawyer, John Quinn. Bren said he saw both children after they were born a handful of times and sent them toys. He also said he paid for their college expenses. “I felt an education at the university level, at the graduate level is perhaps the best gift a parent can give a child,” he said. Gold gave an entirely different account of the pair’s 13-year relationship, saying she and Bren loved one another and saw each other regularly. She portrayed Bren as a jilted lover when she said she broke off the courtship in 1997 because she wanted a full-time partner. “He was not very happy about that,” Gold told jurors. “He said I would pay for that. He said he would punish me.” On cross-examination, however, Gold testified Bren never withheld child support payments from her after the split. She also confirmed that she received about $3 million in child support from Bren between 1988 and 2002. The payments were her only source of income for a majority of that time, she said. While her children had many amenities growing up, Gold attempted to tell jurors why she filed the lawsuit against Bren in 2003 on behalf of her kids. “I would have liked my children to have more in the lifestyle as their father,” said Gold, adding that Bren wasn’t keeping his promise to be involved in the kids’ lives. Earlier, the children’s attorney Hillel Chodos pointed out to Bren that none of the legal agreements limited the amount of support payments the billionaire could make. Bren noted that Gold could have sought to increase the child support through a court order. “She always had the right to appeal to the court,” he said. But Gold said Bren didn’t want her to seek additional child support because of the undue attention he would receive. “He wanted to preserve his privacy,” she said. “He was adamant about that.” Chodos portrayed Bren during his opening statement Wednesday as a high-living executive who has two California homes, a New York apartment, a Sun Valley ranch, two yachts and five private jets. Gold said Bren told her he spent $3 million to $5 million a month on personal expenses. Bren, wearing a black blazer, gray pants and a powder blue shirt, remained composed during his testimony and rarely elaborated on his answers. He could be recalled to testify on Monday.

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Elisabeth Rhyne: Measure? Alleviate? No, Eliminate Poverty

August 17, 2010

While academics from prestigious East Coast universities are developing randomized trials to test the impact of microfinance on poverty – and coming up only with modest-sounding results, Martín Burt, the founder of Fundación Paraguaya , is making a bold leap. Not content to measure poverty impact, or even to alleviate poverty, Burt thinks he can get every Fundación Paraguaya client out of poverty. His secret? Tapping the energy of the clients themselves. Martín Burt is a microfinance pioneer. He started Fundación Paraguaya in 1985 as a micro-lending affiliate of ACCION International , and he built it to acclaim as a top-performing microfinance organization (including the InterAmerican Development Bank best microfinance institution award in 2004). After a brief foray into politics–a term as mayor of Asunción–Burt came back to Fundación Paraguaya with a broad social focus at a time when much of microfinance was exclusively narrowing in on financial services. Burt contends that the most important contribution of microfinance to development is not so much what it provides but how it operates. Microfinance showed that institutions assisting the poor must become financially self-sustaining if they are to have scale and permanence, two qualities necessary for significant impact on global poverty. Just as important is the way microfinance treats clients – the poor of the world. It treats them as capable people who can be agents of their own development. It supports them in their own efforts toward a better life – the proverbial hand up, not handout. Burt applied this philosophy in developing a model agricultural high school serving students from disadvantaged families in rural Paraguay. The school operates without external subsidy, financed through sales of student-grown and processed products. Recently, Burt turned his fertile social entrepreneurship imagination to the foundation’s group loan clients. They seemed to benefit from their access to Fundación Paraguaya loans, but rarely crossed the line out of poverty, and this bothered him. He started looking for ways to measure poverty that coincided with his broad “capabilities” view of what poverty is. He and his team came up with a list of 50 indicators in these categories: employment and income; health; housing and physical surroundings; education; civic participation; and self-awareness. Taken together, these indicators would reflect a well-rounded view of a family’s quality of life. The next step is where poverty researchers often bog down. They may agree on shelter quality as an indicator, but how to calibrate shelter quality? Number of rooms? Type of floor? Electricity? And who is going to measure those indicators? Usually a trained enumerator visits a client to ask many probing and personal questions about facets of their lives people may prefer to keep to themselves. The answers are not always reliable. But reaching back to the microfinance philosophy, Burt saw that the best people to calibrate the indicators were the clients, and the best people to rate the clients against the indicators were again, the clients. Not only did they have the best information about their poverty status, they were also the people for whom the answers mattered most. So, working with five of the client groups and grant support from the Peery Foundation, Fundación Paraguaya began assisting clients to assess their own poverty status. Each person rated herself as green, yellow or red on each of the 50 indicators. The groups then looked at their overall results and began to create specific goals. For example, one group might decide that for the indicator “nutritious diet” their goal would be for all members of the group to be either yellow or green (no red) by the end of the year. The group would then form action plans, starting with small steps to yield tangible progress, like eating beans twice a week. Some goals, like registering to vote, might be relatively straightforward, while others, like all-weather road access, might not. And some could be tackled individually, while other would require collective action. Burt is counting on group pressure and group encouragement to provide both motivation and a pooling of capabilities, and the foundation will provide training clients to organize themselves into neighborhood committees to lobby for their needs with government officials. In some cases, Fundación Paraguaya may actually require some actions (one example – child savings accounts) as conditions for remaining clients in good standing. And it is making microfranchising available to some clients who need new income sources. Clients become micro-franchisees, selling services that range from eyeglasses to food kits, generic medicines and school supplies. Their products help neighbors address other poverty indicators while providing income to the seller. The beauty of Fundación Paraguaya’s concept, christened Ikatú (“Yes we can” in Guaraní), is that although it starts out like a poverty measurement program, it turns into a much more important poverty reduction program. As this is written, the project is still in a pilot stage, but Burt is encouraged because the pilot groups already express their feelings of empowerment. They are excited to compete with other groups to see who can meet their poverty elimination goals faster, and that gives them hope in the future.

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Bill Singer: The $600 Million Teddy Bear Case

August 2, 2010

Way back in February 2009, BrokeAndBroker.com detailed the story about the The $600 Million Teddy Bear: WG Trading. On February 25, 2009, the Securities and Exchange Commission issued a 22-page Complaint : Securities and Exchange Commission v. WG Trading Investors, L.P., WG Trading Company, Limited Partnership, Westridge Capital Management, Inc., Paul Greenwood And Stephen Walsh, (Defendants) And Robin Greenwood And Janet Walsh (Relief Defendants) (SDNY, 09-CV-1750). The SEC characterized the matter as an “emergency enforcement action to halt ongoing securities fraud involving the misappropriation of hundreds of millions of dollars of investor assets.” In reality, the WG Trading case represents yet another long-term fraud (described in the Complaint as dating back to 1996) that went undetected by our nation’s many regulators and prosecutors for far too long with disastrous consequences. Exposure and Enhanced Management The Defendants are charged with soliciting institutional investors, including educational institutions and public pension/retirement plans, by promising to invest in a so-called “enhanced equity index strategy.” Starting at Paragraph 21, the Complaint details the supposed intricacies of this scam. First off, you got “exposure.” Oh, how I love that term of art! Invest with us and we will give you “exposure” to the market. The minute you start hearing such gobbledygook, head for the hills! Nonetheless, like most porn movies, the strategy here involved a lot of exposure to a stock index. The Defendants explained that they would be making purchases of ” long positions in equity index futures that provided exposure to the entire index.” Now that’s a very difficult market strategy. Hmmm . . . if I buy an S&P 500 index future I get exposure to the entire index. My, what a complicated concept. Sort of like, if I buy one share of Apple stock I get some kind of exposure to… what…no…wait a minute…don’t tell me….I’m getting it…it’s exposure to an entire one-share of interest in the Apple company. Right? If you feel that you understand the arcane exposure strategy, then read on. We are now going to discuss the second prong of Defendants’ sophisticated investment plan: the “enhanced cash management.” This is a very complex spin on the prior exposure thingy. Here, instead of buying the futures index, the Defendants would sell the index short and buy the underlying index equities. You got that? You sell short the index but also buy the underlying stocks. You do that to lock in a rate of interest. Of course, as part of this super sophisticated exposure and enhanced management technique, the Defendants often took the extreme measure of doing the exact opposite of the complicated sell/buy program. Yes…indeed….they engineered the buy of the index and a sell of the underlying stocks. That’s the famed double reverse flip with a half gainer into the index pool. Getting Stiffed by a Steiff According to the SEC’s Complaint, those Defendants “used client money invested in WGTI as their personal piggy-bank to furnish lavish and luxurious lifestyle which include the purchase of multi-million dollar homes, a horse farm, cars, horses, and rare collectibles such as Steiff teddy bears.” See Paragraph 2 of the Complaint. And we’re not talking chicken feed here. No, this is $667 million in investor funds, of which Greenwood and Walsh are accused of misappropriating $554 million–okay, well, sure, the SEC does allow that some of that money went to Greenwood’s spouse (R. Greenwood) and to Walsh’s ex-spouse (J. Walsh). You also have to give these guys some credit for bravado. As recently as February 5, 2009 — in the midst of the Madoff case and the growing rumors about Stanford, and, well, add all those other lurid names as you see fit — the Defendants raised another $21 million from the University of Pittsburgh, an existing client. On February 5, 2009, the National Futures Association (NFA) started an audit of Defendants and those good auditors were likely astonished to discover that the balance sheet showed only $95 million had been invested in the stock arbitrage strategy. Some $573 million was largely in notes payable to WGTI from Greenwood and Walsh–notes dating back to 1996! Apparently not getting the answers and assurance the NFA regulators sought, the organization suspended Greenwood’s and Walsh’s NFA membership. What had NFA uncovered? Nothing more complicated than an apparent effort by Greenwood and Walsh to take investors money from the business, use it for their own personal desires, and to cover the withdrawals through the issuance of personal promissory notes. That was the third prong of their strategy. First prong was the exposure. Second prong was the enhanced cash management. Third prong was take the suckers for all their worth and we’ll issue promissory notes back to the firm. If the allegations are proven true, it’s no small wonder that the SEC beat a hasty retreat to the courthouse and sought an immediate temporary restraining order and asset freezes. Then there is also the sensible demand for disgorgement of the ill-gotten gains and for civil money penalties. Now it’s not like WG Trading Company (WGTC) was some fly-by-night pennystock promoter. Certainly not — if that were the case, I’m sure our regulatory community would have been all over such a little fraudster. No, in this case, WGTC is a New York Stock Exchange (NYSE) member firm. That always meant that you were just a cut above the riff raff. How times have changed. Time for Some Answers? Here are some tough questions that I think the public needs to demand are answered: How many times did the NFA, NYSE, NASD, FINRA, CFTC, and SEC examine the Defendants since 1996, and what were the findings? Why are we only now learning about this (and other) multi-year frauds (many of a decade or more duration)–why did the regulators fail to detect the misconduct earlier? Why did the promissory note scenario escape regulatory scrutiny for over a decade? Who was personally in charge of NFA, NYSE, NASD, FINRA, CFTC, and SEC’s regulatory program as it related to the Defendants and what explanations do those individuals offer for the apparent failures to detect the serious fraud? The 2010 Recap As things presently stand, in August 2010, from at least 1996 through February 2009, Greenwood and others ran a fraudulent commodities trading and investment advisory scheme using an entity they controlled called WG Trading Investors. Through a marketer, Greenwood and others solicited $7.6 billion in investor funds on the understanding that they would invest the funds in a program called “equity index arbitrage,” which they represented was a conservative trading strategy that had outperformed the results of the S&P 500 Index for more than 10 years. Contrary to their representations to their investors, Greenwood and others misappropriated at least $331 million in investor funds, and, among other things, used the funds to construct Greenwood’s home, purchase expensive collectible items, and operate a horse farm. Greenwood and others also diverted investor funds to satisfy obligations on investments that were unrelated to the “equity index arbitrage” trading business. Greenwood and others executed promissory notes in favor of WG Investors to, among other things, conceal trading losses and their misappropriation of investor funds. These promissory notes totaled approximately $554 million, of which approximately $293 million was Greenwood’s. Greenwood and others also created and caused others to create false account statements that were sent to clients to reflect fictitious returns consistent with the returns that had been promised to those clients. Guilty Pleas Duffy On July 21, 2009, Deborah Duffy, the former Chief Compliance Officer of WG Trading Company, pled guilty to conspiracy, securities fraud, and money laundering, for her role in the fraud scheme. See the SEC Complaint and the SEC Order Instituting Administrative Proceedings/Settlement . Greenwood On July 28, 2010, sixty-three-year-old Paul Greenwood pled guilty before United States District Judge Miriam Goldman Cedarbaum to a six-count Indictment charging him with conspiracy, securities fraud, commodities fraud, wire fraud, and money laundering for running a fraudulent commodities trading and investment advisory scheme while a principal of WG Trading Company and WG Trading Investors. See the Department of Justice Press Release . Greenwood pled guilty to six charges, which carry the following maximum penalties: Conspiracy. 5 years in prison; fine of $250,000, or twice the gross gain or loss from the crime Securities Fraud. 20 years in prison; fine of 5 million, or twice the gross gain or loss from the crime Commodities Fraud. 10 years in prison; fine of 1 million, or twice the gross gain or loss from the crime Two Counts of Wire Fraud. 20 years in prison; fine of 250,000, or twice the gross gain or loss from the crime Money Laundering. 10 years in prison; fine of 250,000, or twice the gross gain or loss from the crime, or twice the amount of criminally derived property involved in the transaction Pursuant to a plea agreement, Greenwood agreed to forfeit at least $331 million, which represents the amount of funds that were misappropriated and diverted to make an investment in Signal Apparel Company, Inc., which was not disclosed to investors. Last Man Standing Stephen Walsh, another principal of WG Trading Company and WG Trading Investors, is charged with conspiracy, securities fraud, commodities fraud, wire fraud, and money laundering for his role in orchestrating and perpetrating the fraud scheme. Walsh allegedly used investor funds for himself and to make large cash payments to his ex-wife and, like Greenwood, executed $261 million worth of promissory notes in favor of WG Investors to conceal trading losses and the misappropriation of investor funds. The charges against Walsh remain pending, and he is presumed innocent unless and until proven guilty.

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Adele Scheele: How to Take Control of Your Job When You Get Really Sick

July 27, 2010

Jim was diagnosed with prostate cancer at 54. John suffered a heart attack at age 42. Sarah underwent surgery and chemo for breast cancer at 48. Each one lived through the terror of illness, the agony of prolonged recuperation, and the stigma of sickness. They all returned to work. Jim, who had elected radiation therapy, which he received at dawn before work, decided to safeguard his job by keeping his cancer a secret from everyone. But for the others, especially those who had to take time off to recover from surgery, questions arose as they wondered whether they would be able to keep their jobs — or even whether they still wanted them. Most often, however, we return, gratefully, to our work places and hope to fit in as usual. Yet in the minds of our bosses and co-workers, there is no “usual” anymore. They are nervous, even afraid of us and “it” — the unmen¬tionable disease. Unlike Jim who could take his therapy without anyone noticing, most of us can’t pretend it didn’t happen because everyone knows it did. So how do you cope with coming back? As in all of life, it’s up to the one who changes to make it comfortable for everyone else, even though it doesn’t feel fair. Therefore, you have to come back in, make up your work, and educate those around you who are holding their collective breath. Talk about it a bit and reassure everyone else. You must. Briefly tell people, individually or in small groups over lunch or before meetings what happened, what you experienced, and what you learn¬ed. And try to share some comforting health statistics –”Did you know that the survival rate for women with early localized breast cancer is 88 percent?” But don’t go on about it. Don’t make it your only conversation. Don’t make your disease define you. Closely monitor yourself. A little humor, too, goes a long way; it helps to develop a comic’s repertoire to ease dealing with everyday stress. Yet, without getting paranoid, watch for signs that you are already being pushed out — your phone calls and emails don’t come so regularly; you’re not included in meetings or those planning sessions for future projects; you are treated too sym¬pathetically; your boss soft-pedals what ought to be straight-out talk. You can’t be passive now even though you may still be in recovery. You must be pro-active without showing resentment about having to do it. Your task is to re-enter and reassure. If you don’t, unspoken fear of your illness will take you down. There’s often a silver lining after illness strikes, one that can impel change. Upheaval forces us to reevaluate our lives, certainly more than just take it for granted. It makes us question what we enjoy and what we don’t, what we still want to achieve and what we’re satisfied with, what we need versus what we want. Sometimes after regaining health, the answers shock us even though during that road to recovery all we could think of is regaining the status quo. Your point of re-entry into work might also serve as a threshold for your future and provide an opportune time to ask yourself some questions about what you really want to do now that you are well. Continue in the same job? Transfer to another one within the company? If you want to change within your organization, then figure out the benefits to your employer and sug¬gest ideas to con¬tribute in a new way. Transferring to trainer, adviser, consultant, or staffer can be the start of something longed-for and perhaps now possible. Or maybe you have already finished your old work and yearn to do something that you have always wanted but never done, or else something that can only occur to you at this point. For some, our sick leave pays off in unexpected bounty when we find ourselves so profoundly involved with our illness and recovery that we forge a completely new career based solely on these experiences. It might mean teaching coping skills to patients in the doctor’s office, joining associations specifically formed to help — such as the American Heart or Cancer Associations – and getting involved in support groups, information guides, promoting or fund-raising or advocating. In this unexpected way, some of us find a new calling from the very crisis that we have endured. Whether you want to get back from where you were or embark on something new, coming back from illness can offer new insight and opportunity. I’d like to hear your comeback stories. Make your luck happen! Adele Scheele, Career Coach DrAdele.com Author, Skills for Success and Launch Your Career in College

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Marshall Goldsmith: Are You Keeping Pace With Change — or Not?

July 27, 2010

Wayne Turmel is a unique voice in the leadership and communication field. He’s the “Connected Manager” blogger for BNET, host of “The Cranky Middle Manager Show” podcast that has a worldwide following and the president of Greatwebmeetings.com. Recently, I had the chance to ask him some questions about how the world of work has changed and how leaders — and especially their organizations, haven’t kept pace. What’s so radical about the fact that the way we’re working today — telecommuting, remote teams, and matrixed organizations? In many ways, management and leadership haven’t changed in millennia. Peter Drucker famously said the best management job ever was getting the pyramids built — and I’d agree. The big difference is that at least the guy in charge of building the pyramids was actually AT the pyramids. Now managers are expected to do the things they’ve always done without physically being with their teams. Think about what good leaders do — build human connections, inspire people, help them engage with the organization, provide timely coaching and feedback. It’s not like we’ve done a great job of that over the years and now we’re trying to lead over distance, usually mediated by technology. You say the change has already happened. What do you mean by that? Businessweek’s research shows that by 2012 more than a quarter of the US workforce will be part-time, contractors, or temporary workers. Many of these people will be working remotely. The leader of the future (and in fact today but nobody’s told HR) will have to quickly create cohesive, functioning teams from people they may not even know, bring them together, and get work done. Additionally, these teams will break up and re-form for the next project. Do you want to have to start over every time or do you want to be able to inspire the kind of relationships that have people wanting to work for you again? Which is easier, building a team from scratch each time or just saying to people you know and trust, “Hey, we’re getting the band back together?” There are a lot of tools out there to help. What’s the impact of technology on these teams and managers? I don’t think the problem is a lack of tools. Don’t forget, Genghis Khan ruled half the planet and never held a single conference call. The problem isn’t that technology isn’t available. The real problem is that people aren’t using the tools well and frankly companies do a lousy job of helping managers understand the human factors in using technology effectively. What do you mean? Nobody is saying, I think we need a new social networking tool like Yammer or Bloomfire! No, they say, “I need my people to capture their thinking and share it with the team better. I need my team to trust each other to have the answers.” There are tools that help do that. Think about how technology is rolled out in most companies. Trainers are told they can’t travel and have to deliver by webinar. Sales people have to make more virtual presentations before they’re allowed to travel. Tools are purchased and people are told “Here’s a WebEx license. Good luck and try not to hurt anyone”… They’ve never seen a well-run virtual meeting, the technology is intimidating, and who has time to learn? So they continue working the way they always have and tools don’t get used, or at least used well. Sure they’ve saved money on travel, but what have they lost in terms of productivity, sales or turnover because remote workers are more prone to leaving? Who is teaching the best practices like, “When is the right time for a full-blown webmeeting and when will a simple email suffice?” And then (maybe more importantly), “What can this tool do for me when used correctly? How can I build team cohesion by doing better webmeetings?” It’s not the tools; it’s the soft skills associated with using them. How can companies boost adoption of technology? There are three simple things that help adoption rates: 1. Start with small teams, show success, and grow virally. Enterprise-wide, top-down solutions are doomed to failure. 2. Get buy-in by assessing the needs of the group before rolling out the tool. There’s a huge difference between, “We need to share information more effectively, so let’s use SharePoint” and “You now have SharePoint, go share information.” People will use tools that solve their problems. Senior leadership needs to lead by example and use them as well. 3. Give real training on the tools. Real training means both the “how” and the “why.” It means that people need to receive real feedback on their use. If you’re expecting sales people to do web demos, teach them how to give good demos, watch them, and provide feedback. Don’t just tell them to watch an online tutorial and then get out there and sell. Looking at those, I realized Drucker was right, nothing’s changed in thousands of years. Maybe soon we’ll get it right.

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Michael Tasner: Conducting a 360 Degree Review of Your Web Platform and Marketing Efforts

July 23, 2010

I’m a huge fan of 360-degree reviews. You may have heard of these. They are typically used in the Human Resource department of a company for employee reviews. The objective of the review is to get a view from all different angles (thus the name 360 degrees) of the particular employee. Here’s how it works: You’re an employee working at one of the large automakers (who will remain nameless). Assuming you still have a job, you work daily with other employees just like you, for a direct supervisor. You have people reporting directly to you. In the process of conducting your review to decide whether you will get a two-cent-per-hour raise (I know, don’t get too excited), your performance will be reviewed by your boss, your peers, and your own direct reports. This ensures that you’re getting the most accurate representation of the quality of your work. It also serves as a great checks-and-balances system. If your boss didn’t like you, that is only one leg of the review. And one of these days you will be part of your boss’s 360-degree review. Let’s take similar methodology and apply it to your current marketing tactics. This will allow us to see your greatest opportunities for expansion. Step 1: Make a list of all the people who have a hand in or are touched by your marketing efforts. For example: The CEO, your marketing director, marketing executives, salespeople, engineers, research and development folks, vendors, partners, and your customers. The key here is to make sure you are not leaving anyone out. If you miss one person, you are not fully getting a 360-degree review. Step 2: Construct two to three surveys for those people to complete. The first survey will go to all internal employees, the second to your vendors/partners, if applicable, and the last to your customers. It’s up to you if you want to send this to all your customers. It depends highly on how many customers you have. If you’re a smaller company, I recommend sending it to all your customers. If you’re a larger company with thousands of customers, send it to enough clients to get a good response back. Typical response rates range from 3% to 10%. I’ve seen lower, but I’ve also seen response rates as high as 90%. But those are just the averages. A few important notes on these surveys: I encourage you to send these 100% electronically. When sending surveys electronically, you have a much higher chance of getting a response. There are various survey tools out there, such as SurveyMonkey.com , Zoomerang.com , and KeySurvey.com . Keep them short to increase your response rate. Give some type of incentive for your outside vendors, partners, or customers to fill these out, and watch your response rates skyrocket. (For example, give them 10% off their next order.) Modify anything to fit your business. I like allowing for comments after each question to solicit additional feedback. The reason I ask and solicit more open-ended feedback is to ensure that we don’t miss any of the trends. Step 3: Compile the data. This is going to take you quite a bit of time. Here are some tips for compiling the data: Many of the survey software tools will do this for you. Develop three different Microsoft Excel files and label them appropriately (internal, vendors/partners, customers). Start with the quantifiable data and get that into Excel. Most likely this will be a simple export. Move on to the open-ended questions. Take all the responses for each question and place them into Excel so you can see all the data in front of you. Scroll down the column of open-ended questions and look for trends. I like to use the find feature in Excel to see whether similar words are being found. For example, you could search for craigslist to see all the places it was mentioned. When you find similar answers in the open-ended questions, group those together. When you have this task done, you should be able to easily see the results for the quantifiable section, and all the answers to the open-ended sections grouped together with similar thoughts. Lastly, do the same thing with the comments as you did with the open-ended questions: Group similar comments together, using the find feature to aid in this task. Step 4: Interpret the data. You now have your data organized in a much more logical format so that you can start figuring out what it all means. Print out all the sheets and spread them out across a long desk so you can see everything. What you’re looking for here are trends across the various groups, as well as weaknesses in your marketing strategy. Keep in mind that in this exercise bad news is actually good — it’s what you’re looking for. It’s great to see the good stuff, but we’re more concerned with the areas in which you need to improve because these are your greatest opportunities for improvement and growth. What you are most likely going to find is two-fold: 20% of your marketing is producing the most results. The other 80% is a waste of time, money, and energy. The above is an adapted excerpt from the book Marketing in the Moment: The Practical Guide to Using Web 3.0 Marketing to Reach Your Customers First by Michael Tasner. The above excerpt is a digitally scanned reproduction of text from print. Although this excerpt has been proofread, occasional errors may appear due to the scanning process. Please refer to the finished book for accuracy. Copyright © 2010 Michael Tasner, author of Marketing in the Moment: The Practical Guide to Using Web 3.0 Marketing to Reach Your Customers First

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Jan Phillips: Sparking the Collective Imagination

June 30, 2010

I read about an executive who had a real flat response from his employees when he put out the question “How can we best the best company in the world?” There was a long pause and a deep silence in the room until a worker said, “How about this: how can we be the best company FOR the world?” And that was the question that charged everyone’s imaginations and started everyone thinking creatively. It’s not about what we can get. It’s more about what we can give. And it’s our giving that opens the door to all the abundance we are going to receive in the world, as a person or a corporation. Just as a battery is charged by the union of positive and negative forces, just as a child is conceived by the union of a male sperm and female ovum, just as a thought issues forth from the union of right and left brain, so does original thinking emerge from the practice of joining “us” and “them” into a “we.” Our imaginations are the most potent engines of change in the universe. There is no doubt that we can evolve ourselves forward once we replace our dualistic thinking with thought processes that re-pair the opposites and cause convergence. In this matter, emotions are essential. They are our guide, our body’s means of instant messaging to the brain. Yes, this decision is wise. No, that choice is unwise. Our bodies are hardwired for survival of the species, and if we listen deeply to them, if we are wise enough to trust the feelings they emanate on our behalf, then we will find the clarity necessary to make inspired choices that are as good for the whole as they are for the one, which is an absolute prerequisite for thought leadership today. And because the work of transforming our own thought processes is so evolutionary an act, it requires the total engagement of body, mind, and spirit. This is not business as usual. This is reorienting to a new star. We are organisms in a constant state of flux, exposed to an ever-changing environment, and the more we inquire into our own state of consciousness and notice the evolution of our own ideas, the more aware we become of our place in the family of things. As a civilization, we are shifting out of an industrial, assembly-line mindset of isolated units into an organic, knowledge-based network of communities. There is a tectonic shift of consciousness occurring and an evolutionary tendency away from the mechanical and back toward the natural. This may be seen as Mother Nature’s mid-course correction. As the thinking neurons of the planet, biologically oriented toward survival, we are finding ways of connecting and communicating with unimaginable speed and precision. Someone has calculated that we can globally transmit the contents of the Library of Congress across a single fiber optic line in 1.6 seconds. Science and nature have announced their engagement. It is not the task of creators to know the answers, but to articulate the questions we face as a people and to call us together to create our solutions. This is the potential of corporate America–to re-think their structures and processes in such a way that they become furnaces of inspiration, centers of creative ingenuity, arbiters of a culture conscious enough to bring the whole human family into the picture. The profits from such an endeavor–materially, culturally, spiritually–could overwhelm the most skeptic imagination. Thought leaders do not think in terms of “me” and “mine.” They think in terms of “we” and “ours.” They do not think outside the box, they live outside the box. No matter what their address, they think of themselves as global citizens, responsible to the earth, responsible to the human family, and aware that their well-being is tied to the well-being of others. They are balanced and in tune with their own inner life, and they are awake to the immense possibilities that erupt when the inner lives and imaginations of their colleagues are fully engaged. These are the kinds of alliances that can emerge when we change our questions from “What can we gain?” to “What can we give?” Businesses have always been on the cutting edge of creative innovation, and finding ways of bridging their bottom line concerns with the basic needs of the poor opens up whole new avenues for win-win solutions. There is a tremendous opportunity here for commercial enterprises that balance commerce with compassion, that reframe “the poor” from a category of charity to a category of collaborator, and that imagine new ways of working with and in these communities so that everyone benefits. -from The Art of Original Thinking

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EU Vows to Disclose Bank Stress-Test Results, Rebuffing Industry Concerns

June 17, 2010

By Tony Czuczka and Gregory Viscusi June 17 (Bloomberg) — European Union leaders agreed to disclose how banks perform on stress tests, seeking to show investors that the financial system can withstand shocks. In reaching agreement at a summit today in Brussels, the EU leaders rebuffed financial-industry executives’ concerns that publishing the results could undermine confidence in banks. “We will do stress tests institution by institution and we’ll announce results, though I don’t know the details about how much exactly we announce, like if we release the answers to each question,” French President Nicolas Sarkozy told reporters. Results will be published in July. The decision by EU leaders came a day after an announcement by the Bank of Spain that it would make its findings public. Greece’s debt woes focused attention on Spain’s public finances and the costs of buttressing the country’s banks, including the foundation-based lenders known as “cajas” that have been hobbled by a surge in bad debts. “What’s important right now is that we have maximum transparency,” German Chancellor Angela Merkel said in a separate briefing. “If you have something to hide, it would come out into the open in the long run anyway.” Merkel said that EU leaders also agreed to pursue a banking levy and a financial transaction tax that apply worldwide, “to ensure fair burden-sharing and rein in systemic risks.” The EU will take those proposals to the Group of 20 summit in Canada later this month. U.S. Stress Tests Europe’s move on stress tests comes more than a year after the U.S. released the results of evaluations it carried out on 19 financial institutions to determine whether they needed more capital following the subprime mortgage crisis. The U.S. Treasury, whose tests measured how the biggest firms would perform if the economy worsened, promised to provide capital to banks that couldn’t raise it. Merkel sidestepped questions on how the governments would react if tests revealed shortcomings, saying the EU has “taken precautions,” including a 750 billion-euro ($927 billion) financial backstop. Publishing the results may lead to a “run on a perfectly sound bank,” the British Bankers’ Association said in a statement yesterday. Germany’s BdB banking association, which represents more than 220 private firms, initially said it opposed making the findings public. The group changed its stance today, and said publishing the results can “contribute to creating confidence and calming the markets” if done in a way that does not leave “room for misinterpretation.” Trichet ‘Happy’ European Central Bank President Jean-Claude Trichet told reporters today in Brussels that he was “happy” that EU leaders reached a consensus on stress tests, and said the results will be published in the second half of July at the latest. EU regulators are evaluating the strength of the region’s lenders after they racked up losses and writedowns during the financial crisis, leading to taxpayer-funded bailouts. ECB Governing Council member Axel Weber said future stress tests in the banking industry will be more comprehensive than the current evaluations and may include government bond markets. Questions have arisen over whether the tests would take into account risks tied to sovereign debt of Greece, Portugal and other European nations. Marking down the value of Greek bonds, even for the purposes of a test, might imply that regulators perceive a debt default as a possibility, which could further unsettle investors, according to analysts. BBVA, Santander Finding common ground on an approach to carrying out and publicizing stress tests in Europe has also been complicated by the fact that there are 27 nations in the European Union, each with its own government and central bank. Merkel said all EU countries had agreed to publish the findings. Bank of Spain Governor Miguel Angel Fernandez Ordonez announced yesterday that the central bank would make the findings public to bolster confidence in the country’s banks. The Bank of Spain, seeking to shore up its savings banks, seized a lender last month and is urging ailing cajas to complete merger plans to tap a government rescue fund. Francisco Gonzalez , chairman of Banco Bilbao Vizcaya Argentaria SA , Spain’s second-largest bank, added to concern about the nation’s lenders this week when he said capital markets were closed to most Spanish companies and banks. He advocated “doing and publishing” stress tests. “Europe needs this because the markets are asking for it,” Gonzalez said on June 14 at a seminar in Santander, Spain. Bond Sale Matias Rodriguez Inciarte , a vice-chairman at Santander, Spain’s biggest bank, told reporters today that the decision to publish results of the tests is a step toward restoring confidence in the country’s banks. Spain sold 3.5 billion euros of bonds today, the maximum set for the auction, easing concern that it will struggle to finance looming debt. Santander and BBVA rose in Madrid trading and the euro rallied. The U.S. stress tests were criticized by some analysts and economists who said they weren’t rigorous enough and others who said it could fuel investor concern. The effort forced banks including Wells Fargo & Co. and Morgan Stanley to issue common equity after the Federal Reserve released results on May 7, 2009, that showed 10 of the 19 lenders needed new capital. It also kicked off a rally that lifted the Standard & Poor’s Financials Index 36 percent from the start of May through the end of last year. To contact the reporters on this story: Gregory Viscusi in Brussels at gviscusi@bloomberg.net ; Tony Czuczka in Berlin at aczuczka@bloomberg.net

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Marshall Goldsmith: The Human Side of Business: Traumatized but Ready for Recovery

June 8, 2010

I often hear business leaders relate how difficult it is to motivate their organizations during this difficult economic recovery period. In discussing this with noted consultant and author Jon Katzenbach, senior partner at Booz & Company, we agreed that the economic crisis left the human side of many organizations traumatized and ill-equipped for recovery. In his new book, Leading Outside the Lines: How to Mobilize the (in)Formal Organization, Energize Your Team, and Get Better Results , co-authored with Rockefeller Foundation Vice President Zia Khan, Jon argues that harnessing the human side of the enterprise can make the difference between either eking out incremental improvement or roaring back to life. And he points out that harnessing the human means engaging and mobilizing the “informal” dimension of the organization — doing it from the bottom up. We had a conversation with Jon Katzenbach on this subject, and here are some excerpts: Q: Why did you write Leading Outside the Lines ? A: To help leaders gain a powerful performance “boost” from their informal organizations. In our years helping leading organizations improve performance, we’ve learned that leaders at all levels have a difficult time with, or don’t realize they need to address, a key avenue to success: balancing two distinct dimensions of human behavior and organizational performance — the formal and the informal elements. Q: What is the “informal organization”? And what is the “formal”? A: The informal unlocks the emotional side of behavior; the formal is the rational side. The informal organization is a bundle of organizational elements that are often hidden from view, but exert strong influence on people’s decisions and behaviors. It includes values that drive decisions, networks that guide personal interactions and the spread of information and emotional feelings that drive the amount of effort and commitment that people put into their jobs. The formal organization, on the other hand, includes the codified elements of organization that are usually disseminated on paper. Q: You say that if the informal isn’t working for you, it’s working against you. What do you mean by that? A: Informal forces are always at play — you cannot simply turn them on and off by command. It either resists and derails what the formal is trying to accomplish, or it supports and accelerates it. So, the chances that the informal organization is working for you without any deliberate attempt to mobilize it in the right direction are fairly low. Q: What are the results when leaders successfully balance the informal with the formal? A: Overall, leaders can accelerate performance results by combining the best of both the informal and the formal, without having to make tradeoffs. They get the efficiency of the formal with the creativity of the informal; the focused execution with the responsiveness to new opportunities; the accountability with the emotional commitment. Q: What kinds of leaders are best at “leading outside the lines”? A: Those who have learned the power of the informal through trial and error — and realize they don’t have all the answers. They spend time with people at any level, particularly the frontline, and not just with a select few at headquarters. Most importantly, they believe that while the informal organization may appear to be unruly chaos and resistant to control, they know it can be mobilized to generate real performance results. Q: What are the biggest mistakes leaders make when trying to manage and maximize the informal organization? A: The biggest mistake is to try and manage the informal like the formal. It can’t be told what to do; it must be convinced, influenced and energized. It’s a big mistake to think that top-down communication will keep the informal interactions positive. Q: Your book mentions “master motivators” and “pride builders.” Who are they, and what do you do with them? A: They are people in supervisory situations who know how to make others “feel good” about the work that has to get done every day; they instill pride in the work itself. We urge leaders to listen and learn from them, and get them into networks and communities where they can spread motivational skills experientially among peers and colleagues. Q: What can leaders do to get better at actively leveraging the informal and balancing it with the formal? A: Keep working at it; if at first you don’t succeed, try and try again. The first thing is to get an understanding of your current informal organization — the values, the networks and sources of pride. Front line leaders can seek out peers who are natural pride-builders; leaders at the top can find ways to connect with them, learn from them, and spread their behaviors; leaders in the middle can do both. You can find the book on Amazon here .

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DK Matai: Beyond Oil: Beginning of A New Era?

June 6, 2010

Future life forms might ask: Who were they, what happened to them? To which the reply would be: They were primitive humans belonging to a less advanced civilisation and they were forced to break their addiction to oil after the Gulf of Mexico catastrophe which started in 2010. Easy oil is over for international energy firms without access to sovereign reserves in the Middle East, Russia and Latin America, driving an ever more desperate search for more costly supplies deep under the sea or trapped in shale and sand. Whilst the deep water oil gusher has caused an unparalleled environmental and economic disaster along the US Gulf Coast, Canadian tar sands are also in the investor spotlight over substantial pollution and influence on longer term climate chaos. The stage is now being set for an extreme makeover in investment flows from large pension funds, mutual funds and some sovereign wealth funds away from the oil industry, which is in the process of losing its “safe haven” status. This tidal movement in investment flows will have massive, and as yet unknown, consequences for the end of the oil dependency era. Beyond Oil: Beginning of A New Era? We Are All Involved Not just the US, the Gulf oil spill is a disaster for all of us worldwide as supercomputer modelling demonstrates the rapid drift of the oil into Atlantic waters and beyond in the coming weeks and months. Whilst it is easy to lay blame on a single global oil company, as some are wont to do, this complex issue is much broader and deeper than that. It is a world-wide civilisation challenge. The whole global economic system is oil dependent. Even the financial world is an inverted pyramid resting on the fossil fuel energy that powers world growth. None of us are excluded. We would be truly surprised if we knew where the oil and gas burnt in our cars, boats and aeroplanes actually comes from and how it is transported, refined and delivered to find its way into our forever hungry fuel tanks! The complicit nature of our relationship with the oil industry is ill understood. Man-made Disaster The Gulf of Mexico gusher is a reminder that the oil industry is now a high-risk sector where the risk profile has grown exponentially. “Black gold” is running out and oil exploration companies are entering more and more risky areas of operation to keep production levels up. The Deepwater Horizon disaster has all the familiar ingredients of deregulation, deception, and knee jerk damage-limitation that typically characterise the relations between government regulators and multinational corporations in crisis after crisis. Enron, Worldcom, Lehman Brothers, AIG etc. The list goes on. It is a man-made disaster, like Three Mile Island in 1979, Chernobyl in 1986 and Exxon Valdez in 1989. Toxic Rain? Not only are several million gallons of crude oil sitting within the Gulf of Mexico, with more pouring in by the day, but the region is relatively prone to hurricanes early in the season, which begin in less than a few weeks. In parallel, millions of gallons of toxic dispersants like Corexit 9500, are being dumped into the Gulf of Mexico to add to the pollution from the oil spill. Dispersants have never been applied on this scale. The oceans are part of a larger precipitation cycle, and scientists are concerned that soon the consequences of using dispersants could be falling from the sky. The hurricanes could take some of the lighter oil and toxic dispersant components with them and promptly drop the lot as toxic rain along the east coast of the US and beyond. This toxic rain could be fatal for all species — from the microbial level all the way to humans — no matter where it falls, essentially collapsing the environment from the bottom up. Oil Consumption and Investment Exit There is a fundamental change happening. The moratorium on offshore drilling is to be expected given the rising public concern. This is a direct result of the metamorphosis in psychological perception and attitudes amongst mass consumers and return-hungry investors in regard to the risk of oil. The Gulf oil gusher is ushering in an end to the era of oil investment and consumption without questions asked. Generally there has been a perception in the global financial community that the oil and gas majors are reliable, blue chip investments delivering a steady stream of above-average growth in profits and generous dividends. As fund managers see billions of dollars wiped off the value of BP and some US lawmakers want the company to suspend shareholder dividends, large investors will undoubtedly be keen to ensure they understand all the issues surrounding deep-water drilling thoroughly and begin to diversify away from their massive oil industry exposure. It is a big change in direction since oil has played such a large role in global investment strategy for so long. This will mean asking oil companies probing questions about risk management, contingency planning, crisis management and approaches to regulatory compliance etc. Investors’ scrutiny is likely to spread beyond offshore drilling to tar sands and then shale gas. For example, the half a trillion dollar Norwegian sovereign wealth fund, has demanded that major oil companies account for the environmental impacts of their tar sand operations. An extreme response to the spill may be for funds to exit oil companies altogether, for example into low-carbon clean energy alternatives. This could trigger the end of the oil era. Eleventh Hour and Extinction We have reached a collective turning point in history as we arrive at the eleventh hour. It’s time to shape up, to get our act together, and to find an equitable place in the interwoven fabric of nature, or else we face the possibility of extinction of a number of species with unintended consequences for ourselves. If everything is interlinked, how long before we pay a formidable price as a species? Whilst these questions may not be at the top of the mind of investment houses, their extreme risk aversion to oil stocks in coming months and years may prove to provide the answers that enlightened humanity has been seeking for decades. Common sense should now tell investors and consumers that the current industrial-scale exploitation of hard to reach oil fields in vulnerable natural spots is an insult to intelligence. The alternatives may be slightly more expensive but the risk profile is significantly lower. No sensible analyst can deny that we are bringing disaster on ourselves and the global ecosystems, when we engage in ruthless practices, such as deep sea drilling at 5,000 feet below the surface, with wanton disregard for safety and environmental security. The exorbitant cost of the Gulf oil spill cleanup is likely to deter future adventure licensing and high-risk investment in the oil sector. This is what will begin to mark the end of the oil era, step by step, just like the Three Mile Island nuclear accident in 1979. That accident crystallised anti-nuclear safety concerns among activists and the general public, resulting in new regulations for the nuclear industry, and has been cited as a contributor to the accelerated decline of new reactor construction that was already underway in the 1970s. Unintended Consequences The business fallout from the Gulf oil gusher is likely to be widespread. The Deepwater Horizon oil spill could end up causing massive damage to companies that were in no way involved with the tragedy. Risks of different types of operation will be reassessed, new rules will be enacted, and the energy business will change radically. Conclusion What is the real moral in the Gulf oil gusher narrative? As the marginal cost of extracting oil has risen ever higher, it has been a red rag to the investment bulls seeking a return. However, given that the risk profile of extracting that extra barrel of oil has now grown exponentially. This is likely to act as a new deterrent. The risks are rising much faster than previously anticipated as we approach peak oil. Recalibrating the value we put on hydrocarbon extraction is now the new mantra amongst oil investors and analysts. This is no different from the changed perception in regard to bank stocks, which were considered to be solid cash cows until The Great Unwind (2007-?) and The Great Reset (2008-?) began. Beyond subprime and sovereign risk, as the revelations about high frequency trading and flash crashes manifest, coupled with trillion dollar bailouts, many financial institutions are also seen as high risk casino players. Similar changes are likely to occur in the perception of oil companies as safe cash cows, which they have ceased to be. The inertia which has set in amongst governments, businesses and the investment community in regard to preserving the status quo is going to be knocked sideways by the Gulf oil spill and as the costs of the cleanup mount, it will become imperative to invest in cleaner and safer forms of energy. The change in direction will ultimately be driven by a forced change in our collective value system. The end of oil-dependency is likely to mark the end of an era for the globalised western civilisation’s model of oil-centric capitalism. If we survive, the age of oil will be followed by an age of recovery, restoration and a return to local generation of power through alternative means. What does the future look like without oil-dependency? Cleaner forms of energy are likely to proliferate. The possibility of a world in balance with natural resources, clean air, clean water, and with the natural environment, is like a shining light at the end of a dark tunnel. To reach a new agreement, to explore our way into a friendlier way of life could be fun, more interesting, more gratifying, healthier and happier! Generations to come will also thank us for this welcome change of direction precipitated by the global financial community’s new found risk aversion to the age of oil.

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Ban Call to Sanction North Korea on Ship Sinking Pushes Limits of UN Post

May 26, 2010

By Bill Varner May 27 (Bloomberg) — United Nations Secretary-General Ban Ki-moon , a former South Korean foreign minister, is setting aside the traditional impartiality of his post to push for sanctioning North Korea over a suspected naval attack. Ban has endorsed the conclusion of an international probe that North Korea was behind the March 26 sinking of a South Korean warship, before neighboring China and Russia have judged the findings. In a departure from the tradition that UN chiefs let the Security Council take the lead in such disputes, he said May 24 the body should adopt “necessary measures appropriate to the gravity and seriousness of this issue.” South Korea has said it will bring the case to the Security Council with U.S. backing. Secretary of State Hillary Clinton told reporters yesterday in Seoul that the U.S. appreciated Ban’s “strong statement.” “It is the duty of the secretary-general to be objective, but not to sit on the fence on all issues,” Ban’s spokesman, Martin Nesirky, told reporters yesterday in New York. “He has consistently expressed strong concerns on any number of worrisome events.” Ban’s validation of the investigation and his expression of concern were “extremely timely and important,” said Evans Revere , former president of the Korea Society in New York and now a senior director for the Albright Stonebridge consulting group in Washington. Humanitarian Needs The UN chief balanced his talk of concern with a pledge to meet the humanitarian needs of the North Korean people, said Revere, a retired U.S. diplomat who just returned from a visit to the region and advised American and South Korean officials. The Korean tensions have roiled stock markets and currency exchanges. The won fell 3 percent on May 25 to 1,251.1 per dollar, the biggest drop since March 30, 2009. The Kospi index sank 2.8 percent to 1,560.83 before rallying yesterday to recover about half of the decline. Playing an active role in the crisis leaves Ban open to criticism that he is favoring South Korea. Ban was advised to limit his role by China, Japan and Russia when he took office on Jan. 1, 2007. Ban’s involvement should be “informal, low key, silent,” Wang Guangya , then China’s ambassador to UN, said at the time. No Holding Back “Usually the secretary-general holds back in order to be available to parties that want to find ways out of unwanted escalations,” Jeff Laurenti , a political analyst at the New York-based Century Foundation, said in an interview. “It might seem to some now that he was reverting to his previous employment.” China and Russia have limited their reactions to the South Korean report to urging restraint from all sides. Ban, 65, told reporters May 24 that while he’ bound to be “objective and fair,” his South Korean roots and former diplomatic role make it difficult to stay on the sidelines. “I myself participated as one of the negotiators in drawing up a joint declaration for the de-nuclearization of the Korean Peninsula in 1991 and 1992,” Ban said. “I myself served as vice chairman of the Joint Nuclear Control Commission between South and North Korea. Therefore, I have a very strong attachment and even a sense of responsibility. This is most troubling for me to see what is happening. That’s my motherland.” Ban asked reporters to understand why he would “limit as much as I can my answers or involvement in this case.” ‘Deeply Disturbed’ After North Korea carried out a second nuclear-bomb test a year ago, Ban said he was “deeply disturbed.” The Security Council voted unanimously on June 12 to curb loans and money transfers to North Korea and step up inspection of cargoes suspected of ties to development of nuclear weapons or ballistic missiles. Ban’s ability to intervene is constrained by his inability to establish a direct line of communication with Pyongyang leaders. He sent his top political aide, former U.S. diplomat Lynn Pascoe , to North Korea in February in part to solve that problem. While Pascoe described the visit as “useful” and met with officials including Foreign Minister Pak Ui Chun , the trip didn’t secure a communications link for Ban. He hasn’t spoken to North Korean leader Kim Jong Il . “The challenge in this situation is to get China on board,” John Park, director of the Korea Working Group at the U.S. Institute of Peace in Washington, said in an interview. Ban’s role “is to build consensus rather than being a prime mover. The real movers will be China and the U.S.” Diplomacy Chinese Premier Wen Jiabao arrives tomorrow in South Korea for a summit with President Lee Myung Bak and Japanese Prime Minister Yukio Hatoyama . China, North Korea’s main ally and trading partner, has so far refused to take a stand on the sinking of the Cheonan, in which 46 South Korean sailors died. In the Korean crisis, Park said Ban may see the need to build support for a second five-year term, a decision the UN General Assembly and the Security Council will make next year. Winning another term requires the support of the five permanent members of the Security Council: China, Russia, the U.S., U.K. and France. To contact the reporter on this story: Bill Varner at the United Nations at wvarner@bloomberg.net

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Geithner Shifts Focus to Global Threats as Crisis `Fires’ Subside in U.S.

May 25, 2010

By Ian Katz May 26 (Bloomberg) — Treasury Secretary Timothy F. Geithner ’s trip to Europe today shows how his focus is shifting to global economic threats as Congress puts the finishing touches on its overhaul of financial regulations and the U.S. winds down bailout programs. Geithner has two days of meetings in London, Berlin and Frankfurt with leaders including European Central Bank President Jean-Claude Trichet to discuss the nearly $1 trillion rescue package aimed at stopping the Greek debt crisis from spreading. The trips were tacked on to Geithner’s visit to China, which ended yesterday, as the euro fell to the lowest in almost nine years against the yen. “To the extent that the near-term fires in the U.S. have been put under control and progress has been made on reg reform, he can now spend the time, as he should, engaging globally with other global leaders to make sure we’re acting in a coordinated manner,” Neel Kashkari , who headed the $700 billion Troubled Asset Relief Program under Geithner’s predecessor, Henry Paulson , said in an interview. Kashkari now heads new investment initiatives at Pacific Investment Management Co., which runs the world’s biggest bond fund. Geithner’s trip comes amid warnings that fallout from the European debt crisis threatens the global economic recovery. Corporate and sovereign credit-risk indicators reached or approached their highest levels in 10 months yesterday. Geithner is stepping into the crisis just as he tries to resolve another. Along with Treasury Deputy Secretary Neal Wolin and Assistant Secretary Michael Barr , he will work with U.S. lawmakers to close the differences between the Senate bill on financial regulations approved this month and the House version passed in December. London, Berlin Meetings The Treasury secretary will meet today in London with U.K. Chancellor of the Exchequer George Osborne and Bank of England Governor Mervyn King , before traveling to Frankfurt for a working dinner with Trichet. Tomorrow, he will see German Finance Minister Wolfgang Schaeuble in Berlin. European leaders face “the difficult challenge of trying to restore sustainability to an unsustainable system,” Geithner said yesterday in Beijing, where he took part in the two-day U.S.-China Strategic and Economic Dialogue. Other officials have gone further. Federal Reserve Governor Daniel Tarullo said May 20 that Europe’s crisis may pose a threat to the U.S. and world economies as trade shrinks and banks incur losses on European investments. Former Fed Chairman Paul Volcker , an adviser to President Barack Obama , spoke May 13 of the euro’s “potential disintegration.” Euro’s Slide The euro today fell to $1.2282 at 10:59 a.m. in Tokyo from $1.2345 in New York yesterday, when it touched $1.2178, the lowest since May 19. Europe’s common currency dropped to 110.69 yen from 111.39. It fell to 108.84 yen yesterday, the least since November 2001. The London interbank offered rate, or Libor, for three month loans in dollars advanced yesterday to 0.536 percent, the highest level since July 7, according to data from the British Bankers’ Association. Geithner, 48, is returning to a familiar arena. Before serving as president of the Federal Reserve Bank of New York from 2003 to 2009, he was the International Monetary Fund’s director of policy development and review. He was undersecretary of international affairs from 1998 to 2001 under Treasury Secretaries Robert Rubin and Lawrence Summers . Geithner, whose father worked abroad for the Ford Foundation, attended high school in Thailand, has studied Japanese and Chinese, and also lived in China, Japan, India and East Africa. Resolving Differences “It’s always helpful to understand where people are coming from,” Geithner said in a Bloomberg Television interview yesterday. “It’s easier to resolve differences and challenges when you come to that appreciation.” Unlike Rubin, who dealt with emergencies in Latin America, Russia and Asia, Geithner is stepping into a developed-world crisis. “There’s always been an understanding that Third World sovereign debt is very risky, but the assumption has been that the developed countries are pretty riskless,” said Wayne Abernathy , an executive vice president at the American Bankers Association and a former Treasury assistant secretary. “Now we’re discovering that might not be correct.” The U.S., with a budget deficit forecast at $1.6 trillion for the fiscal year that began Oct. 1, may also be at risk, according to Pimco. The U.S. is among nations whose debt puts them in a “ring of fire” along with Japan, U.K., Spain, Italy, Ireland, France and Portugal, John Wilson, the head of Newport Beach, California-based Pimco’s Australia unit, said in a May 24 statement. Winding Down TARP As companies including Citigroup Inc. and Bank of America Corp. have paid back taxpayer bailouts, Geithner has been able to wind down rescue efforts and focus more on international issues. The projected cost of the TARP, which was authorized by Congress in October 2008, has fallen to $105.4 billion from an estimated $341 billion as recently as last August, the Treasury said last week. Geithner’s foreign travels will require him to be diplomatic at home, where lawmakers are wary of any U.S. role in bailouts for foreign nations. House Republicans last week introduced a resolution disapproving of U.S. participation in IMF rescues of European Union countries that don’t comply with the bloc’s debt and deficit limits. Given the role of U.S. banks in the global economic crisis that started with the collapse of Lehman Brothers Holdings Inc. in September 2008, Geithner will also need to be diplomatic in his talks with European leaders. “I don’t think he’s going to go over there and start saying, ‘Here are the answers, you must do this,’” said Kashkari, 36. “I think he’ll be much more subtle than that.” To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net .

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Geithner Shifts Focus to Global Threats as Crisis `Fires’ Subside in U.S.

May 25, 2010

By Ian Katz May 26 (Bloomberg) — Treasury Secretary Timothy F. Geithner ’s trip to Europe today shows how his focus is shifting to global economic threats as Congress puts the finishing touches on its overhaul of financial regulations and the U.S. winds down bailout programs. Geithner has two days of meetings in London, Berlin and Frankfurt with leaders including European Central Bank President Jean-Claude Trichet to discuss the nearly $1 trillion rescue package aimed at stopping the Greek debt crisis from spreading. The trips were tacked on to Geithner’s visit to China, which ended yesterday, as the euro fell to the lowest in almost nine years against the yen. “To the extent that the near-term fires in the U.S. have been put under control and progress has been made on reg reform, he can now spend the time, as he should, engaging globally with other global leaders to make sure we’re acting in a coordinated manner,” Neel Kashkari , who headed the $700 billion Troubled Asset Relief Program under Geithner’s predecessor, Henry Paulson , said in an interview. Kashkari now heads new investment initiatives at Pacific Investment Management Co., which runs the world’s biggest bond fund. Geithner’s trip comes amid warnings that fallout from the European debt crisis threatens the global economic recovery. Corporate and sovereign credit-risk indicators reached or approached their highest levels in 10 months yesterday. Geithner is stepping into the crisis just as he tries to resolve another. Along with Treasury Deputy Secretary Neal Wolin and Assistant Secretary Michael Barr , he will work with U.S. lawmakers to close the differences between the Senate bill on financial regulations approved this month and the House version passed in December. London, Berlin Meetings The Treasury secretary will meet today in London with U.K. Chancellor of the Exchequer George Osborne and Bank of England Governor Mervyn King , before traveling to Frankfurt for a working dinner with Trichet. Tomorrow, he will see German Finance Minister Wolfgang Schaeuble in Berlin. European leaders face “the difficult challenge of trying to restore sustainability to an unsustainable system,” Geithner said yesterday in Beijing, where he took part in the two-day U.S.-China Strategic and Economic Dialogue. Other officials have gone further. Federal Reserve Governor Daniel Tarullo said May 20 that Europe’s crisis may pose a threat to the U.S. and world economies as trade shrinks and banks incur losses on European investments. Former Fed Chairman Paul Volcker , an adviser to President Barack Obama , spoke May 13 of the euro’s “potential disintegration.” Euro’s Slide The euro today fell to $1.2282 at 10:59 a.m. in Tokyo from $1.2345 in New York yesterday, when it touched $1.2178, the lowest since May 19. Europe’s common currency dropped to 110.69 yen from 111.39. It fell to 108.84 yen yesterday, the least since November 2001. The London interbank offered rate, or Libor, for three month loans in dollars advanced yesterday to 0.536 percent, the highest level since July 7, according to data from the British Bankers’ Association. Geithner, 48, is returning to a familiar arena. Before serving as president of the Federal Reserve Bank of New York from 2003 to 2009, he was the International Monetary Fund’s director of policy development and review. He was undersecretary of international affairs from 1998 to 2001 under Treasury Secretaries Robert Rubin and Lawrence Summers . Geithner, whose father worked abroad for the Ford Foundation, attended high school in Thailand, has studied Japanese and Chinese, and also lived in China, Japan, India and East Africa. Resolving Differences “It’s always helpful to understand where people are coming from,” Geithner said in a Bloomberg Television interview yesterday. “It’s easier to resolve differences and challenges when you come to that appreciation.” Unlike Rubin, who dealt with emergencies in Latin America, Russia and Asia, Geithner is stepping into a developed-world crisis. “There’s always been an understanding that Third World sovereign debt is very risky, but the assumption has been that the developed countries are pretty riskless,” said Wayne Abernathy , an executive vice president at the American Bankers Association and a former Treasury assistant secretary. “Now we’re discovering that might not be correct.” The U.S., with a budget deficit forecast at $1.6 trillion for the fiscal year that began Oct. 1, may also be at risk, according to Pimco. The U.S. is among nations whose debt puts them in a “ring of fire” along with Japan, U.K., Spain, Italy, Ireland, France and Portugal, John Wilson, the head of Newport Beach, California-based Pimco’s Australia unit, said in a May 24 statement. Winding Down TARP As companies including Citigroup Inc. and Bank of America Corp. have paid back taxpayer bailouts, Geithner has been able to wind down rescue efforts and focus more on international issues. The projected cost of the TARP, which was authorized by Congress in October 2008, has fallen to $105.4 billion from an estimated $341 billion as recently as last August, the Treasury said last week. Geithner’s foreign travels will require him to be diplomatic at home, where lawmakers are wary of any U.S. role in bailouts for foreign nations. House Republicans last week introduced a resolution disapproving of U.S. participation in IMF rescues of European Union countries that don’t comply with the bloc’s debt and deficit limits. Given the role of U.S. banks in the global economic crisis that started with the collapse of Lehman Brothers Holdings Inc. in September 2008, Geithner will also need to be diplomatic in his talks with European leaders. “I don’t think he’s going to go over there and start saying, ‘Here are the answers, you must do this,’” said Kashkari, 36. “I think he’ll be much more subtle than that.” To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net .

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Adele Scheele: Or, should I Just Start My Own Business?

May 10, 2010

Still no job? Isn’t it time to stop waiting for someone to hire you and start taking matters into your own hands? How about starting your own business? Well, that’s the current counsel from some quarters. And it sounds like a great idea especially when we hear such promising stories: a laid-off mid-manager selling her artisanal marmalade to local shops; a lawyer photographing weddings; a teacher attending a franchise fair with a check in her hand. These tales sound oh-so-tempting. Being your own boss is at the heart of the American Dream. And it’s no wonder it is such a common fantasy: the idea of ownership taps into our profound longing for freedom — freedom from bosses, restrictive policies, glass ceilings, and everything else that robs you of rewards, both financial and creative. But is it really right for you? Do you have what it takes to become an entrepreneur? The French root, prendre, means to take. And when you start your own business, you must take on massive responsibility and total risk for any future gains or profit, however delayed they are. So, can you do it? Here are some quick questions that might resolve whether you have what it takes. Just answer Yes or No. Be brutally honest with yourself. Recall your past experiences — or lack thereof — to support your answers to the following: 1. Do I initiate projects and carry them through successfully? 2. Have I managed projects well without supervision? 3. Have I enjoyed being in charge? 4. Can I hire and fire others when necessary? 5. Can I delegate work? 6. Can I criticize others’ work when and get what I need from them? 7. Can I negotiate and compromise without feeling that I am selling out? 8. Do I have abundant energy? 9. Can I delay gratification to attain a goal? If you answer mostly No, you need to recognize that this form of enterprise is not for you, at least not yet. After all, most of us are used to the discipline of structure and fulfilling the tasks required of us. Don’t feel bad if you like, even thrive, working for a boss. The upside is that there are plenty more jobs and opportunities. So, being an entrepreneur is just not your style. If you answer mostly Yes, your risk-taking skills suggest that you can be adept at taking chances. Experiment first by working for an established entrepreneur to see how it’s done and test the process to see if you like it before you go out for something you are unprepared for. If all your answers are Yes, you are most likely ready to start on your own. Alternatively, your high score can suggest that you’re ripe for an even higher level of management. You might consider that position now. This could work in surprising ways, taking you out of your comfort zone, a good thing, but not out of your career. Know that business owners and entrepreneurs are not just born. I coach many such people and witness them evolving in the process. Business owners have to develop a set of skills that they practice throughout their lives. I call this skill set, Risking Linking. Linking, of course, is connecting to people – in person and online – in meaningful ways of exchange. Risking is more difficult to understand and requires much more than just time and money, though it will take plenty of both. It demands that we act despite our profound fears that we aren’t good enough. There is no cure for anxiety or timidity except to keep practicing this skill, which will, in time, prune our terrors. A career coach can help you overcome your own self-imposed limitations – invaluable lessons. If you are ready, find groups that will support your ideas whether in person or online. Sample local networking meetings, powerful places– but only if you become an active member. Just attending doesn’t do it. Use your entrepreneurial spirit to start an exchange that can lead to your next step. Find and use a civic or professional association to practice leadership skills and meet others who can become or introduce you to investors. Interview members, including the group’s officers, for their success stories. Volunteer for a committee or task relating to the business you want to start or buy in order to segue into brainstorming and planning. Make your luck happen! Dr Adele Dr Adele.com Author, Skills for Success

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Aaron Harber: Set America’s CEOs Free: Why Corporate Chieftains Should Talk More

March 15, 2010

At the recent IHS CERA Week — considered the world’s premiere international energy conference — a phalanx of chief executive officers made their cases to a generally friendly audience filled with energy industry leaders. The audience — whose members paid $7,500 to attend the elite event — was surprised at times by the differences in viewpoints and opinions each executive expressed — with many disagreeing with the others in what proved to be a thought-provoking, almost existential “debate” on issues ranging from future energy prices to the roles to be played by competing energy resources to corporate responsibility to Climate Change. The common element throughout the event, however, was how impressive the executives were in their knowledge, articulateness, and ability to make the case for their perspectives. Most even exhibited a keen sense of humor — a necessity when speaking any time after lunch. Conference keynote speakers such as Energy Secretary Steven Chu, Presidential Economic Adviser and former Treasury Secretary Larry Summers, CNN Senior Analyst and Harvard Professor David Gergen, and Washington Post columnist David Ignatius were expected to be smart, articulate, entertaining, and humorous — and were. But the private sector professionals were their equals in every respect — demonstrating superb speaking abilities. Andrew Liveris, CEO of DOW Chemical, brought down the house when he mentioned his company’s annual utility bill was $30 billion and then, after pausing before the 2,000 energy industry attendees, said “You’re welcome.” It was obvious when top industry leaders such as Saudi ARAMCO President Khalid Al-Falih, ConocoPhillips CEO James Mulva, Edison International CEO Ted Craver, GDF SUEZ President Jean-Francois Cirelli, Apache CEO Steve Farris, Baker Hughes CEO Chad Deaton, TOTAL Gas & Power President Phillippe Boisseau, PG&E CEO Peter Darbee, Spectra Energy CEO Greg Ebel, American Electric Power CEO Michael Morris, RasGas CEO Hamad Rashid Al Mohannadi or Southern Company CEO David Ratliffe spoke, they knew the issues and had the answers — and could deliver information in a compelling and engaging manner. Today many CEO’s hide behind communications and public relations staffs. This is a mistake and represents a loss for companies who waste such a valuable resource. While their time is limited due to their responsibilities, CEO’s often are the best spokespersons for their organizations. And when it comes to public policy related to energy issues, they need to become far more engaged — making the case for their perspectives and being willing to debate the issues with those who have different views. The conference demonstrated there are no better people to do this than CEO’s — the people who know better than anyone else the issues, their industries, their companies, their business partners, their customers, and the public policies under which they function. These men and women should not shy away from those who disagree with them. If CEOs more actively engaged in public debate, it would give everyone the chance to hear what the needs and concerns of all stakeholders are. And that would be good for CEO’s to hear other opinions as well. In addition, such an initiative creates the opportunity to create relationships which can serve the interests of companies, their customers, other stakeholders, and members of the public. Furthermore, this has the potential to positively impact regulatory requirements under which different industries labor. Although not every CEO is a great public speaker and or a great debater, most are. They rarely obtained their positions by being wallflowers. It’s time to let them bloom and get out in the public arena more than ever before. If they do, everyone will benefit from the information they have, the knowledge they can share, the caring and commitment they can convey, and the sense of humor they have. It also is an opportunity for the CEOs to get new information and better understand the concerns of others. Let a thousand CEOs bloom! ========================================================================= Aaron Harber hosts ” Colorado Election 2010 TM” seen Mondays at 8:00 pm on COMCAST Entertainment Television and viewable 24/7 at www.Colorado2010.com. He also hosts ” The Aaron Harber Show ” seen on CET and at www.HarberTV.com. Send e-mail to Aaron@HarberTV.com. (C) Copyright 2010 by Aaron Harber and USA Talk Network, Inc. All rights reserved. =========================================================================

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Only the Savviest Forecasters Win My DEFT Contest: John Dorfman

March 1, 2010

Commentary by John Dorfman March 1 (Bloomberg) — Very few people foresaw the Great Recession of 2007-2009. That’s really no surprise. Most economic forecasters fall on their faces at turning points. For example, in January 2008 only five of 62 economists surveyed by Bloomberg News predicted a recession. The consensus was that the chance of a recession developing within 12 months was 40 percent. In fact, it was already under way. Can you do any better than the experts? One way to find out is to enter my annual Derby of Economic Forecasting Talent (DEFT), which I am now reviving after a few years of dormancy. Some of the previous contests were won by financial professionals, including a Fed official in Richmond, Virginia, and money managers in Chicago and New Jersey. Other winners were amateurs. For example, the victor one year was a recent graduate of the University of New Mexico who hadn’t yet found her first job. (At least she was an economics student, not an English major.) So far, no economist has taken first place, though quite a few have entered. The number of entrants per year has ranged from about 40 to more than 100, including people in all walks of life from about a dozen countries. Pros and Amateurs Why can amateurs fare as well as they have in the contest? Experts in almost all fields make mistakes frequently. This is not because they are inept poseurs, but simply because forecasting complex systems is incredibly difficult. Researchers have studied cardiologists analyzing electrocardiograms, racetrack bettors handicapping thoroughbreds, and meteorologists forecasting storms. Their studies show it is often difficult even for knowledgeable people to outperform a simple computer model. The DEFT contest itself provides strong evidence of the challenges of forecasting. Contestants have often missed the boat whenever a key aspect of the economy veers from trend. For example, in 2003-2004 every single contestant underestimated the rise in the price of oil. Here are the six questions you must answer to enter the DEFT contest for 2010-2011. Question 1: Economic Growth. U.S. gross domestic product in the fourth quarter of 2009 was growing at an annualized rate of 5.7 percent. Growth was 2.2 percent in the third quarter, and had been negative in five of the six previous quarters. What will be the pace of economic growth in the fourth quarter of 2010? Question 2: Inflation. The U.S. consumer price index rose 2.6 percent in the year ended January 31, 2010. Twelve months before that it was flat. What will be the comparable figure as of January 31, 2011? Question 3: Interest rates. The interest rate on 10-year bonds issued by the U.S. Treasury stood at 3.58 percent at the end of January, up from 2.84 percent a year earlier. What rate of interest will 10-year Treasury bonds pay as of January 31, 2011? Question 4: Oil prices. A barrel of crude oil (West Texas intermediate, spot price) traded for $72.89 at the end of January, up from $41.68 a year earlier. What will be the price of a barrel of oil on January 31, 2011? Question 5: Retail sales. U.S. retail stores rang up $356 billion in sales in January, compared with $340 billion a year previously and $376 billion two years earlier. Rounded to the nearest billion, what will be the monthly total for retail sales in January 2011? Question 6: Unemployment. The U.S. unemployment number is crucial in affecting public mood, consumer confidence, political fortunes and quality of life for many Americans. As of January 31, the official unemployment rate was 9.7 percent. The comparable figures were 7.7 percent in January 2009 and 5 percent in January 2008. What will be the unemployment rate as of January 31, 2011? To enter, e-mail me at dorfman1@bloomberg.net , providing your answers to the six questions above, plus a phone number and e-mail address to allow me to contact you if you win. If you do not receive an acknowledgement of your e-mail entry within 72 hours, please re-send it. All entries must be time-stamped by midnight on March 15, 2010. The contestant with the most accurate answer to each question receives three points. Second place gets two points, third place one point. While the theoretical maximum is 18 points, a score of four to six points is often enough to win. The winner will receive a trophy from me, plus bragging rights at home and at work. Good luck. ( John Dorfman , chairman of Thunderstorm Capital in Boston, is a columnist for Bloomberg News. The opinions expressed are his own. His firm or clients may own or trade securities discussed in this column.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: John Dorfman at jdorfman@thunderstormcapital.com

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Norb Vonnegut: Euro: If It’s Broke, Don’t Fix It?

February 26, 2010

Hedge Funds Try ‘Career Trade’ Against Euro Here’s the deal. Hedge funds are betting the Euro will crash against major currencies. The “short-Euro” trade, however lucrative to the gods of Greenwich, raises three scary questions with one thing in common: Nobody knows the answers. 1. What happens when money exploits problems instead of fixing them? The Wall Street Journal describes the economics of a bear Euro bet as follows: The euro, which traded at $1.51 in December, now trades around $1.35. With traders using leverage — often borrowing 20 times the size of their bet, accentuating gains and losses — a euro move to $1 could represent a career trade. If investors put up $5 million to make a $100 million trade, a 5% price move in the right direction doubles their initial investment. The Euro is weak, in part, because of the financial crisis in Greece. Investors are hesitant to refinance the country’s debt, which makes sense on one level. Who wants to buy a bad bond? But the incentives are out of whack, when money flows into misery bets that turn “long-term value” into an oxymoron. 2. What happens when empty creditors create an endless supply of problems? Credit default swaps enable investors to buy and sell credit risk. The securities sound like clever financial tools. But said another way, they enable financiers to originate bad loans and then trade out of the problem. Credit default swaps gained notoriety at AIG, and now these weapons of money destruction keep appearing in connection to Greece: The threat of ratings reversals, a downgrade of Greek banks by Fitch, and strikes that shut down most of Athens on Wednesday have precipitated another spike in the price of Greek credit default swaps, which investors buy as insurance against default. Investors are now demanding a risk premium of 392 basis points, the most in two weeks. That means someone who holds Greek debt would have to pay $392,000 to insure $10 million in debt against default for a year. 3. What happens when hedge funds attack in packs ? Money managers signal their moves at dinners, conferences, and through warnings from guys like George Soros that “the Euro may fall apart.” Big money chases good ideas, right? But what happens when smart money turns destructive? Wall Street 101, if you’ll excuse the vernacular, is to attack the weak sister. Short Euro or short Greece — nobody can project the unintended consequences when there’s massive firepower behind the assault. Personally, I think credit default swaps have to go. What do you think? Norb Vonnegut

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Google to Build High-Speed Internet Network in Challenge to AT&T, Verizon

February 10, 2010

By Ari Levy and Kelly Riddell Feb. 10 (Bloomberg) — Google Inc. is planning to build high-speed fiber-optic broadband networks in the U.S. to offer Internet speeds that are more than 100 times faster than what Verizon Communications Inc. and AT&T Inc. sell today. The company, owner of the world’s most popular Web-search engine, said today it will offer the service at a “competitive price” to at least 50,000 people and potentially as many as 500,000. Google wants to use the networks for applications that consume lots of bandwidth. Google’s jump into the market may pressure AT&T , Verizon and Comcast Corp. to bolster their high-speed networks, said Mike Jude, an analyst at researcher Frost & Sullivan in Denver. The company already offers a wireless network in Mountain View, California, and is an investor in Clearwire Corp. , which provides Internet access using a technology called WiMax. “The more competition in broadband the better, the higher the bandwidth the better,” Jude said. Google’s plan to offer speeds of 1 gigabit per second may prompt competitors to follow, he said. “If Google went out and started delivering a gigabit per subscriber, it would show that anybody with fiber can do the same thing.” Verizon’s FiOS, AT&T’s U-Verse, and Comcast’s DOCSIS 3.0 services offer residential downloads no faster than 50 megabits a second, with the cheapest connections being 1 megabit or less. While the companies could offer faster speeds, they haven’t done so because there hasn’t been demand, said Lawrence Harris , an analyst at CL King & Associates in New York. A 1-gigabit service could be popular with video-game players and those who want faster video, and could eventually extend into 3-D viewing, Harris said. ‘Real Progress’ Google’s first step is to find cities that want the service, said Minnie Ingersoll, a product manager at the Mountain View-based company. She said Google will likely identify at least one city this year. The company’s engineers and outside developers will work on applications that illustrate the speed of the fiber connection, she said. Google plans to work with companies that build fiber-optic networks, Ingersoll said. Google is probably still soliciting interest from vendors, and companies that helped with Verizon’s FiOS build may be poised to benefit from the project, Harris said. Those include Alcatel-Lucent SA , BigBand Networks Inc., Tellabs Inc. and Corning Inc., he said. “Network providers are making real progress to expand and improve high-speed Internet access, but there’s still more to be done,” Google said on its blog. “We don’t think we have all the answers — but through our trial, we hope to make a meaningful contribution to the shared goal of delivering faster and better Internet for everyone.” Broadband ‘Testbed’ Google fell $2 to $534.45 at 4 p.m. New York time on the Nasdaq Stock Market. Comcast slid 8 cents to $15.31. AT&T fell 14 cents to $25.12 on the New York Stock Exchange, and Verizon rose 12 cents to $28.87. Google has urged the Federal Communications Commission to find new ways to promote high-speed Internet access. FCC Chairman Julius Genachowski said today in a statement that Google’s trial is a “testbed for the next generation” of Internet services. Bob Varettoni , a spokesman for New York-based Verizon, said Google’s network expansion is “another new paragraph in this exciting story.” AT&T spokesman Michael Coe and Comcast spokeswoman D’Arcy Rudnay declined to comment. “We look forward to learning more about Google’s broadband experiment in the handful of trial locations they are planning,” Brian Dietz , a National Cable and Telecommunications Association spokesman, said in a statement today. The cable industry will invest in and improve the speed of its networks, he said. Clearwire Investment Google will collect responses from communities until March 26, and will announce which areas have been chosen later this year. The company plans on building the fiber lines to the home, much like Verizon’s FiOS, and will be paying for the deployment, Ingersoll said. Verizon is investing $23 billion in its fiber-optic network. Ingersoll declined to specify how much money Google has dedicated to its venture. The company had $24.5 billion in cash and short-term investments at the end of December. Google is expanding in the telecommunications industry in other ways. In January, the company introduced a touch-screen mobile phone called Nexus One and opened an online store to sell the handset. In 2008, Google was part of a group of companies that invested in Clearwire, founded by mobile-phone pioneer Craig McCaw . ‘Grandiose’ Plans In 2008, Google pushed for spectrum being auctioned by the U.S. government to be open to any device or program. “Google’s announcement today amounts to a nationwide competition for communities to step up and make the case for what a next generation network could do for them and then show America what is possible,” Massachusetts Senator John Kerry said in a statement. “I believe in the power of big broadband pipes over which people are free to innovate and deliberate and will be watching this experiment carefully.” In 2006, Google won a bid to build a free Wi-Fi network in San Francisco. The plan was put on the back burner after EarthLink Inc., which was going to build the network, backed out and city politics delayed deployment. “Sometimes Google has a very short attention span, they have grandiose plans and then a year later everyone asks what have they done with that?” said Tero Kuittinen , an analyst at MKM Partners LP in Greenwich, Connecticut. “This announcement took everyone a bit by surprise and we don’t know what’s going to come of it.” To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net ; Kelly Riddell in Washington at kriddell1@bloomberg.net

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Don Tapscott: Stephen Harper Defends the Status Quo

January 30, 2010

Although Prime Minister Stephen Harper’s speech on Thursday in Davos was received well, many of the delegates that I spoke with told me they thought Harper’s vision was too blinkered. With the conspicuous exception of global warming, Harper acknowledged that many challenges face the world, but told delegates that the two most appropriate arenas for discussion and decision making are the G8 and the G20. He described the latter as “the world’s premier forum for economic cooperation.” And each country should be guided by “enlightened self-interest” and a better “attitude.” But the consensus in Davos is that the planet is facing urgent, complicated, 21st century problems, and we need to craft 21st century systems to develop the answers. We should involve all of our planet’s best talent in the solution-seeking process, including the private sector, civil society and individual citizens. Doubtless Harper placed emphasis on the G8 and G20 because this year’s meetings will occur in Canada and he is the Chair. But that doesn’t mean he should be indifferent to the enormous contributions that could be made by others, or closed to the exciting new approaches to solving global problems. Following last year’s World Economic Forum at Davos, many delegates went on to participate in the Forum’s Global Redesign Initiative in meetings around the world. The Initiative brought together diverse stakeholders to develop fresh solutions to the many challenges facing our small and fragile planet. Much of this year’s Forum was devoted to discussing the proposals developed by the Initiative. The Initiative itself was driven by the belief of Forum members that our international collaborative processes are tired and too constrained to meet current needs. In Davos, the failed Copenhagen global-warming conference was frequently used by delegates as a metaphor for the inadequacy of existing processes. To be sure, no one is suggesting that nation states do not need to sit down and hammer out accords. But many Davos delegates believe that such meetings, while necessary, are by themselves insufficient to grapple with the many thorny issues confronting us. Had Harper come to Davos a day earlier, he would have heard French President Nicolas Sarkozy deliver a withering critique of how the planet’s issues are managed today. “From the moment we accepted the idea that the market was always right and that no other opposing factors need be taken into account, globalization skidded out of control,” Sarkozy said. Many systems in the world, including capitalism, were in serious need of reform. “Each of us must hold the conviction that the world of tomorrow cannot be the same as the world of yesterday.” A text of Sarkozy’s remarks can be seen here . Yes the G8 and G20 meetings will be important and they may even make some progress on issues such as climate change. But today there are collaborations involving millions of people, along with governments, private companies and civil society organizations that are actually doing something about climate change. Government leaders need to listen to fresh thinking about how to harness this power, rather than relying on old approaches that have the world stalled.

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Blankfein Avoids Apology as London Risks Suicide: Mark Gilbert

January 27, 2010

Commentary by Mark Gilbert Jan. 28 (Bloomberg) — When almost every media mention of your institution is accompanied by the nickname “vampire squid,” you might think it prudent to learn a little humility. Not, it seems, if your name is Lloyd Blankfein . The Goldman Sachs Group Inc. chief executive officer missed another opportunity to express contrition when he appeared before the U.S. Financial Crisis Inquiry Commission earlier this month. While his answers weren’t quite belligerent, he offered little in the way of an apology. He may regret not saying sorry if President Barack Obama makes good on his threat to geld the banking industry by imposing new regulations on proprietary trading, private-equity investments and future balance-sheet growth. More importantly, the furious White House reaction to the seeming indifference of finance chiefs to the economic chaos they created threatens to inspire a patchwork of unilateral rule changes around the world. Without coordination, financial reform won’t work. If countries go their own way, the result will be what Barclays Plc Chairman Marcus Agius last week called “regulatory arbitrage,” with financial firms shopping between different jurisdictions to find the least onerous regimes. A piecemeal approach to new rules may result in the regulatory equivalent of an arms race. Bashing bonus-hunting bankers has never been more popular, and no politician will want to miss this opportunity to play to the gallery. Public Wrath Finance chiefs still don’t seem to comprehend just how much anger they have aroused among ordinary folk, or how appalled most of the world is at the lack of either an apology or an acknowledgment that even the strongest players only survived the credit crunch because of the transfusion of billions of dollars of taxpayers’ money. If different administrations around the world reckon they can win more popular support by retaliating more fiercely than the country next door, those desired improvements in banking oversight could become too tough. The U.K., for example, has been championing the introduction of a so-called Tobin tax, designed to pinch a sliver of revenue every time a security is traded anywhere in the world. The proceeds would be set aside to build a rainy-day fund to protect us from future financial crises. ‘Arbitrage and Speculation’ The tax was initially proposed in 1971 by Nobel Prize- winning economist James Tobin . Back then, central banks were struggling to manage monetary policy after the collapse of the Bretton Woods system of pegging currencies. So Tobin, a professor emeritus of economics at Yale University before he died in March 2002, proposed a tax on currency trading, say 0.05 percent, to deter what he himself termed “speculators.” Tobin argued in an article published in the Financial Times in September 2001 that a tax would help underpin monetary policy. “Market arbitrage and speculation tend to keep money- market interest rates (risk-adjusted) the same in every currency throughout the world, preventing a central bank from adjusting its monetary policy to its local economy,” Tobin wrote. “If such arbitrage and speculation require repeated taxed transactions, one nation’s interest rates can differ from those in New York or Tokyo.” A tax, Tobin said, would “preserve some measure of national monetary autonomy.” On the surface, the idea is seductive. The authorities could sell it to the public as killing two birds with one stone, raising some much-needed revenue at the same time as deterring those pesky speculators. Farmer’s Futures Problems arise when you try to distinguish between, say, a legitimate hedging transaction in the futures market by a farmer seeking to guarantee the price of next season’s crop, and a trader punting on the price of wheat to boost this year’s bonus. A further complication springs up when a particular country decides that not implementing the tax will win it market share in financial trading. That’s a particular issue for London. U.K. Prime Minister Gordon Brown has to face an election in the first half of this year, and is behind in the opinion polls. There’s a non- negligible risk that he might seek salvation for his government by putting Britain at the forefront of financial regime change with the solo introduction of a transaction tax — a surefire vote-winner, albeit spelling commercial suicide for the City of London as a financial center. Public wrath will filter into government policies designed to lash safety air bags around the banking community. The next time a senior banker finds himself on public trial for the misdemeanors of his profession, it might be wise to show some remorse for the $1.7 trillion of financial-asset writedowns and the 25 percent drop in global stock-market values from the December 2007 peak — otherwise those bindings are more likely to smother than merely chafe. ( Mark Gilbert , author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable,” is the London bureau chief and a columnist for Bloomberg News. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Mark Gilbert in London at magilbert@bloomberg.net

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Paul David Walker: The Answer Is Already There

January 18, 2010

While working with a company which does direct marketing through infomercials, I met Steve Ober, SVP and Partner. Steve directs and produces most of their shows. His success record is far greater than anyone in the industry. Seven out of ten of his shows produce successful levels of sales. The industry average is one, or during a good year, two out of twenty. I asked Steve why he was so successful. He said, “I am driven to win and the answers are already there. If you work hard enough, you will find them.” He also said, “I know what I want because I can see it.” He went on to explain that he never gives up until the show is exactly right. He said that he stays humble, and always looks for a better way before releasing his shows. After listening to his story, I told him about a movie Martin Scorsese recently produced about the life and career of Bob Dylan. As the story is told, they cut to interviews with Bob Dylan. He comments on the various stages in his life throughout the interviews. Dylan discovered the needs and wants of his market and became the voice of his generation, while transforming American folk music from the backrooms of Greenwich Village to a global craze. Dylan in response to the interviewer saying he was the voice of a generation commented that, “It was already there.” He explained, that he noticed how people would respond positively to various aspects of singers like Woody Guthrie, Pete Seeger and many others. Each singer had certain things that would connect with the audience: the look in their eyes, the tone of voice, the way they picked the strings on their guitar, and combined great singing with meaningful words. What the generation wanted was already out there, but not embodied in one person. Dylan observed what worked and then let go of the aspects of his act that were not connecting, and adopted all of the elements that were connecting with the audiences. He literally became the voice of a generation by discovering existing realities and combining his intention and creativity with the needs he noticed in his audience. It seemed simple to him. He could see the future success by observing what was happening in the moment. He truly unleashed his genius by living in what I call “Integrative Presence” and connecting with an existing intelligence, which was the flow of cause and effect in his market. When he returned to Minnesota after only five months in New York City, which was the center of folk music at the time, he had been transformed from an okay singer to a genius. Many from Minnesota commented on what seemed to be a magical transformation. One said, “It was almost like he had sold his soul to the Devil.” But, of course, he didn’t; he was able to let go of what he knew, and be open to a series of insights about what was really impacting the audiences, combined it with his intention, and became the voice of a generation. To make that transition Dylan had to let go of his past and be totally present. He even changed his last name and often says that, “it really does not matter who I was.” Letting go of the past is the first step to insight and discovery of present reality. After listening to the story, Steve Ober said, “Exactly, and that just shows what a great filmmaker Martin Scorsese is.” Steve Ober and Dylan have formed the habit of allowing insight: which is as Webster’s says “A clear understanding of the inner nature of some specific thing” … which in my view is the gateway to genius.

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Adele Scheele: Acing the Interview When You’re Not the Interview Type: How to Un-stack the Deck

January 14, 2010

If you are artistic or technical, you probably hate being interviewed more than anyone else. Why? Because you are focused on the merits of your work; you measure your success by the sheer quality of your work. In that way, you are trapped like a Good Student who prepares exactly for the test’s questions. In school, giving those correct answers has always rewarded you with good grades and automatic promotion. And that has reinforced the idea that work is just like the big Test with right and wrong responses and therefore you will be taken care of by the system. But, work is not like school. To be hired or promoted, you need a lot more than right answers. In addition to displaying your talents and skills, you have to make your prospective employer fall in love with you. That’s right: an interview is more like a courtship than a test. And that’s good! Strategies to ace the interview: 1. Learn all you can about the organization. Look online for info and contacts. Find friends and colleagues who know people who work there. Talk to them; get the insider’s scoop on who they are looking for and what they expect. Uncover any similar interests between you and other employees. For example, did the interviewer(s) go to the same university that you did? Are they as crazy about soccer or jazz or vegetarianism as you are? The more you know about them before you walk in, the easier it will be for you to make the necessary and too often underestimated small talk. That bonding will open the door for them to like you back. That’s right: liking you is as important to them as needing your skills. There are many who can compete with your abilities, but employers are looking for a great fit. And if you are honest with yourself, so are you, even if you don’t recognize it yet. 2. Try to see a copy of someone’s resumé who works there so you that yours will line up. Look over your own resumé to expand your achievements and minimize small filler jobs you might have had along the way. Remember the old Johnny Mercer song: Accentuate the positive and eliminate the negative? Being too modest on a resume and in an interview is a mistake. 3. Weird as it will feel, make yourself rehearse out loud answers to the inevitable questions about who you are, what your talents and skills are, how you contributed to your prior company, why you want this job, and why you should be hired. You would make a mistake giving only short, simple answers. Instead, you have to create a script focusing on your best side. Don’t casually recite a list of where you were born and reared, what your major was, places you worked. You have to make meaning of your story. As enthusiastically as you can, share the discovery of your keenest interests, mentors who encouraged you, and projects that make you the proudest. That means you need to have at the tip of your tongue several explanations about you and your accomplishments. Your answers lie not in the facts alone, but in how they got shaped: your accidental discoveries, your support systems, your intellectual pursuits. 4. And ask for the job. If they say they are still interviewing, ask for their concerns about you so that you can address them right away. Make your luck happen!

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Help Us Raise Money To Save America, Destroy The Opposition — Pick The Political Player Behind The Solicitation (QUIZ)

December 30, 2009

Dear fellow American/patriot/taxpayer, are you worried about the survival of the country, Harry Reid’s selfish ways, partisan muck, career politicians, the unthinkable consequences of the climate crisis and the assault on our values? Well, send a check for $25, $50, $100, $250 to _______________________ to demonstrate your passionate opposition, refocus policy on the conservative values on which the country was built, fight back against baseless attacks from right-wing activists, stop ObamaCare, help America lead the way on climate protection and defend life. It’s that time of year again. While your own New Year’s resolutions may consist of losing weight, balancing your checkbook or finding a job, members of Congress want you to share their more ambitious goals. Lawmakers from John McCain to Chris Dodd, along with various political action committees, are flooding inboxes with end-of-the-year solicitations that rely on melodramatic prose warning of a veritable apocalypse if their opponents prevail. So, we’ve assembled a multiple choice quiz in which excerpts of various solicitations are listed, alongside a list of their potential authors. Match the political player with the fundraising letter: Good luck!* 1. In just one year, liberals have altered the course of this country so dramatically that current U.S. policy is almost unrecognizable from the conservative values on which we built this country. America cannot survive on this new course. 2. He’ll lose the power he covets and his ability to do any more damage to America’s taxpayers. 3. Obama’s win at any cost policy using payoffs and threats will not let any Democrat prevent them from the forcible rape of America with Socialized Health Care. 4. When I see decisions that I disagree with, I offer criticism. Yes, I can be passionate in my opposition but I always try to ensure that it is loyal, civil and construction opposition. 5. This is an important moment and we must demonstrate to my opponents and the special interests and right-wing activists who fund their campaigns that we’ll be ready to fight back against every baseless attack, every distortion and every assault on our values. 6. To put it bluntly, we are running out of time to act. We must succeed next year, because the alternative is unacceptable… I know you understand what is at stake. I need to know that I can count on you to help us overcome the tall odds we face. 7. Won’t you help our push back against Washington D.C.’s insider lobbyists? 8. With the right-wing fringe running the Republican Party these days, you know they will pull out the Karl Rove playbook next year. 9. Make no mistake about it: …special interests are going after Main Street America… And, they have engaged in some of the worst demagoguery and destructive rhetoric America has seen in decades. 10. But if you think this debate was heated, just wait. The battlefield now shifts from health care to the 2010 elections, and our opponents have never been more united, angry, and flush with cash. We must match their every dollar to combat their lies. 11. Even more scary was knowing this country was one faulty detonator away from an American airliner being blown out of the sky. Remember right after the inauguration, it was revealed President Obama no longer wanted to acknowledge the “global war on terror” and referred to terrorist acts as “man-made disasters”? Back then you and I knew that showed a remarkable lack of understanding of the threat America faced but in the face of what nearly happened a couple days, it is even more infuriating. And here are the options: A. Sen. John McCain B. Democratic Senatorial Campaign Committee C. Al Gore D. Rep. Pete Sessions E. Sen. Chris Dodd F. Sue Lowden for U.S. Senate G. National Republican Senatorial Committee H. Public Campaign I. House Majority Leader Harry Reid J. General Wesley Clark/Democratic Congressional Campaign Committee K. AmeriPAC *Check back later for the answers! Get HuffPost Politics On Facebook and Twitter!

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Eliot Spitzer, Frank Partnoy, William Black: Treasury Should Make AIG Emails Public For ‘Open Source’ Investigation

December 19, 2009

The three of us, as experienced investigators and prosecutors of financial fraud, cannot answer these questions now. But we know where the answers are. They are in the trove of e-mail messages still backed up on A.I.G. servers, as well as in the key internal accounting documents and financial models generated by A.I.G. during the past decade. Before releasing its regulatory clutches, the government should insist that the company immediately make these materials public. By putting the evidence online, the government could establish a new form of “open source” investigation. Once the documents are available for everyone to inspect, a thousand journalistic flowers can bloom, as reporters, victims and angry citizens have a chance to piece together the story. In past cases of financial fraud — from the complex swaps that Bankers Trust sold to Procter & Gamble in the early 1990s to the I.P.O. kickback schemes of the late 1990s to the fall of Enron — e-mail messages and internal documents became the central exhibits in our collective understanding of what happened, and why.

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Nelson Davis: What Is Important?

December 15, 2009

As the year end approaches, my office is rather messy right now and badly in need of a “paper tossing party.” While sitting here gazing at too many stacks of paper, I can hear the voices from a cable news network describing the battle over health care and the dangers of our Afghan policy. As I listened to the dimensions of the various problems that we face, it becomes clear that we all have to figure out what is truly important and be resolutely prepared to discard or shred the rest. Deciding what stays in your enterprise and what is miscellaneous can be a grueling process which brings many business owners into touch with a raft of old files including goals, dreams, and plans. I think that everyone in business should hang on to some of these materials because they will certainly help bring perspective to how far you’ve traveled and how you’ve overcome the inevitable bumps. The right course is probably somewhere between being a pack-rat and a compulsive neat freak. Of course not every important thing you want to hold onto is written on paper or captured in the snapshots that are falling out of your photo box. Knowledge and attitude are at the top of the list. An unscheduled visitor at my office today was Gordon, a successful salesman who has handled radio spots, TV time, and is now hawking the benefits of multimedia. He reminded me that the most important thing is to sell something. So often I speak to prospective business owners who are spending gobs of time and money on the office layout, business cards, and stationery. Generally, I suspect they are trying to avoid the sting of rejection that is a fundamental part of the sales process. According to my visitor, “The only thing that matters is to get in front of people who can buy what you are selling.” Another memorable bit of his advice is “the only thing that drives sales is sales.” Speaking of that box where old photographs go to live, it can now be an asset for the online aspects of your business. The pictures can be used to post a charming history of your business on the web site and having an interesting illustrated history is a good way to begin a customer relationship. Another joy of the photo file came to me recently. I’m very proud of some of my ex-employees from a decade or more ago. Not only do I smile seeing their happy faces and knowing how well they’ve done, but a couple of them have connected me to new business opportunities. Back in 1955, Life Magazine featured pictures of renowned physicist Albert Einstein at his desk. It was messy to the fourth power! Einstein is quoted as saying, “If a cluttered desk is a sign of a cluttered mind, then what are we to think of an empty desk?” While pecking at my own paper stacks like they were Thanksgiving leftovers, I was reminded that we’ve told the stories of over 1000 entrepreneurs on the weekly Making It television show and that experience has given me a graduate course in start ups and business building. That is not only very important; it also fills me with gratitude. Looking at where you’ve been can help refresh your resolve to push forward. Here are a couple of the thoughts gleaned from those hundreds of hours of conversation about the entrepreneurial spirit. Commitment is the key. To make your dream a durable reality and endure the tough times that always show up, you need a high level of commitment that is cast in stone. Don’t be afraid to ask for help and advice but choose wisely. If your uncle Louie hasn’t started a successful business before, then don’t bother asking if he thinks your business idea is a good one. Some of the most able business owners are also among the most generous people with sharing their experience and insights. While shuffling through my abundant stash of paper, it is fascinating to note how the idea for the Making It TV show evolved over the years. When it was still only on a sheet of paper, the name of the program and its format went through several iterations. Once on the air, features were tried and sometimes quickly discarded. But the important idea that its mission was to inform and inspire entrepreneurial thinkers of all types remained as the guiding force. Staying to that course has been our secret of success. The organizational guru David Allen (author of Getting Things Done ), says GTD rests on the principle that a person needs to move tasks out of the mind by recording them externally and putting them on paper. You see, the file cabinets or overstuffed desk drawers can not only make you scream but they may hold the answers as to how you can survive and maybe even thrive in the tough times. Instead of allowing all the bad news that surrounds us to get inside your mind, it is important and wonderfully nourishing to revisit the history of your dream in words and pictures. While I’m often tempted to handle the abundance of paper in my life with a shredder and a fireplace, I’m glad to have resisted that seductive thought this week. The most important thing is to make sure that you know how to win in 2010. Be sure to visit www.MakingItTV.com !

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Tareq Salahi Says Virginia Couple Didn’t Crash State Dinner at White House

December 1, 2009

By Jeff Bliss and Roger Runningen Dec. 1 (Bloomberg) — Tareq Salahi, who with his wife is accused of attending last week’s White House state dinner without an invitation, said today he didn’t “party-crash” and the media attention has been “devastating.” “This has been the most devastating thing that’s ever happened to us,” Salahi said on NBC’s “Today” program. “We’re greatly saddened by” the media reports “portraying my wife and I as party crashers. I can tell you we did not party- crash the White House.” Salahi was interviewed together with his wife, Michaele. The Salahis attended the Nov. 24 event, which honored Indian Prime Minister Manmohan Singh , although they weren’t on the official guest list. Their attendance has spurred a Secret Service investigation into how they slipped past security amid concern over the president’s safety. A Defense Department official said yesterday she told the couple that she didn’t have tickets to offer them for the event and couldn’t grant them access. “I did not state at any time, or imply, that I had tickets for ANY portion of the evening’s events,” Michele Jones, special assistant to the secretary of defense, said in a statement released by the White House last night. Jones, an acquaintance of the couple’s lawyer, exchanged e- mails with them before the dinner about getting tickets, the Washington Post reported yesterday, citing anonymous sources familiar with the Secret Service investigation into the matter. ‘Decided to Come’ The e-mails encouraged the Salahis, who live in a nearby Virginia suburb, to come to the White House on the night of the dinner, according to the Post, citing the anonymous sources. In her statement, Jones denied making that suggestion. “I specifically stated that they did not have tickets and in fact that I did not have the authority to authorize attendance, admittance or access to any part of the evening’s activities,” she said. “Even though I informed them of this, they still decided to come.” The Salahis received an invitation yesterday from the U.S. House Homeland Security Committee to testify at a Dec. 3 hearing about how they slipped past security. The House panel also asked U.S. Secret Service Director Mark Sullivan to testify, according to a press release from the committee. Malcolm Wiley , a Secret Service spokesman, said that if called to testify, Sullivan would do so. ‘Time for Answers’ “This is a time for answers, recognition of security deficiencies past and present, and remedies to ensure the strength of the Secret Service and the safety of those under its protection,” Representative Bennie Thompson , the Mississippi Democrat who chairs the committee, said in a statement. The hearing will focus on other security breaches, such as concerns expressed by top campaign donors to President Barack Obama about potential lapses during his inauguration on Jan. 20, said Dena Graziano , a spokeswoman for Thompson. The panel “is not going to look at this one isolated incident,” she said, referring to the state dinner. The Secret Service is investigating the breach, which Sullivan on Nov. 27 said “deeply concerned and embarrassed” the agency. Agents failed to follow procedures that should have prevented the man and woman from crashing the event, he said. Wiley said yesterday he didn’t know when the probe would be finished. “These things generally take a little time,” he said. President Aware White House spokesman Robert Gibbs told reporters yesterday that Obama is aware of the seriousness of the breach. “The president shares the concern that the director has for how this happened and how we can remedy it from happening again,” he said. A statement from the couple’s publicity agent denied reports the Salahis were trying to sell an interview about their experience to the highest bidder. “We refute these false allegations,” said Mahogany Jones, the press agent. “The Salahis are not ‘shopping’ any interviews or demanding money from any media networks to tell their story.” In an interview, the press agent said the couple would give a complete version of what happened, declining to say when they would talk. “We will address” the incident “top to bottom,” she said. “They’re eager to get their story out.” The couple has been vying for a spot on a Bravo cable reality-television program, the Washington Post previously reported. Spokeswomen for Bravo, which is owned by General Electric Co., didn’t immediately return a phone call or e-mail seeking comment. White House Photo A photo released by the White House on Nov. 27 showed Obama shaking hands with Michaele Salahi in the receiving line with her husband and Singh on either side. Michaele Salahi posted photos on her Facebook page of the couple posing at the event with Vice President Joe Biden and White House Chief of Staff Rahm Emanuel , as well as other guests. It was the first state dinner of Obama’s presidency, and more than 300 people were invited. The couple’s attorney in Baltimore, Paul Gardner, has said they were approved to enter the White House. Gardner didn’t return phone calls yesterday seeking comment. To contact the reporter on this story: Jeff Bliss in Washington jbliss@bloomberg.net .

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Rajaratnam Lawyers Slam Wiretaps, Say Bets Were Based on Analyst Research

November 24, 2009

By David Scheer, Joshua Gallu and David Glovin Nov. 24 (Bloomberg) — Attorneys for Galleon Group founder Raj Rajaratnam denied a U.S. regulator’s claims he engaged in insider trading, saying he based investments on analyst research and media reports and that government wiretaps were illegal. Rajaratnam’s filing in response to a Securities and Exchange Commission lawsuit, which came today in Manhattan federal court, includes a broad attack on the regulator’s lawsuit. He will likely advance the same arguments in a pending criminal case against him. “Mr. Rajaratnam denies that he received and/or traded on the basis of material non-public information” in eight stocks, defense attorney John Dowd wrote. Galleon “analysts conducted their own examination of the companies at issue” and developed research that “was more detailed and precise” than any of the tips Rajaratnam allegedly got, Dowd said. Rajaratnam, 52, was arrested on Oct. 16 and accused by federal prosecutors of earning millions of dollars from stock trades made with inside information from corporate executives. The SEC filed parallel civil lawsuits against him and more than 20 other hedge fund executives and corporate insiders, in many cases basing claims on telephone calls covertly recorded by criminal authorities. The case is the first insider trading prosecution based on telephone wiretaps. Preliminary Stage The criminal case has yet to move past preliminary stages, while the SEC’s case is assigned to a judge who has scheduled a trial for Aug. 2. The judge may decide whether the evidence from wiretaps may be admitted at the trial. Rajaratnam’s defense has three strands, which he is likely to use in both the civil and criminal cases. Rajaratnam says he has an innocent explanation for his trades, based on research by Galleon analysts and on published media reports. Second, he says the SEC shouldn’t be free to use evidence from illegal wiretaps. Third, he assails a star government witness, former Intel Corp. executive Roomy Khan , as a liar unworthy of belief. “The government’s unprecedented use of electronic surveillance in this case violated” Rajaratnam’s constitutional rights, Dowd said in his answer. “Electronic surveillance is permitted only when necessary for the investigation of specific crimes and only when alternative investigative procedures have been tried or appear unlikely to succeed.” Many Documents When seeking authorization for wiretaps, criminal investigators didn’t call to the court’s attention that the SEC had already interviewed Rajaratnam and other witnesses “under the guise of an investigation of another unrelated hedge fund,” Dowd wrote. Galleon had also given the agency tens of thousands of pages of documents, he said. “The government misrepresented to the court that interviews of Mr. Rajaratnam and others could not be done and were ‘too risky,’ and that a ‘failed interview’ would ‘seriously compromise the entire insider trading investigation,’” Dowd said. John Fahy , a former U.S. prosecutor now in private practice at Fahy Choi in Rutherford, New Jersey, said Rajaratnam’s lawyers will have a hard time persuading U.S. District Judge Jed Rakoff , who is presiding over the SEC case, to exclude evidence gathered from wiretaps. Fahy said that while the wiretaps were under way, prosecutors were required every 10 days to present portions of transcripts of Rajaratnam’s conversations to a judge, who then had to conclude there was enough evidence of Rajaratnam’s wrongdoing for the taps to continue. Prosecutors had no duty to inform the judge that Khan, a star government witness, had been convicted of crimes, Fahy said. ‘Going Nowhere’ The bid to exclude the wiretap evidence “is going nowhere,” said Fahy, who isn’t involved in the case. Prosecutors will argue in court that they couldn’t directly ask Rajaratnam whether he traded on secret tips, Fahy said. “He wasn’t going to say, ‘Yeah, I got this information, yeah, I got that information,’” Fahy said. “It would be very hard for a judge to throw it out on that basis.” James Cohen , a professor of criminal law at Fordham University Law School in New York, agreed, saying the chances of the wiretaps being ruled illegal are “a tiny shred above zero.” He said the government will argue that unless Rajaratnam was prepared to admit his guilt in interviews with regulators, “it would have been futile” to ask him whether he was trading on secret tips. “We look forward to presenting our case in court,” SEC spokesman John Heine said. Yusill Scribner, a spokeswoman for U.S. Attorney Preet Bharara , who brought the criminal case, declined to comment. Public Information Another part of the answer says confidential information received by Rajaratnam was already public and investments were made under a Galleon strategy that was in place before he allegedly got tips, the lawyers said. “Galleon employed professional analysts who covered companies and provided in-depth analysis that was utilized for investment decisions,” Dowd wrote. Khan, the former Intel executive, once worked at Galleon and has emerged as a key witness in the case. She has pleaded guilty and is cooperating with prosecutors. Dowd notes in his answer that Khan has pleaded guilty to two federal felonies, destroyed evidence in a government investigation, and lied in a civil lawsuit. Other defendants in the SEC’s case will file their answers on Dec. 9. The case is SEC v. Galleon Management LP, 09-cv-8811, U.S. District Court, Southern District of New York (Manhattan). To contact the reporters on this story: David Scheer in New York at dscheer@bloomberg.net ; Joshua Gallu in Washington at jgallu@bloomberg.net . David Glovin in New York at dglovin@bloomberg.net .

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Janet Tavakoli: Goldman Sachs Responds to the New York Times

November 24, 2009

Pulitzer Prize winner, Gretchen Morgenson of the New York Times wrote a must read article (” Revisiting a Fed Waltz with AIG ,” November 21, 2009) on Sunday in which she recaps salient points from the November 17, 2009 report of the Office of the Special Inspector General (Neil Barofsky) for the Troubled Asset Relief Programs, ” Factors Affecting Efforts to Limit Payments to AIG Counterparties ,” and wrote: On the question of whether this payout was what the report describes as a “backdoor bailout” of A.I.G.’s counterparties, Mr. Barofsky concluded: “The very design of the federal assistance to A.I.G. was that tens of billions of dollars of government money was funneled inexorably and directly to A.I.G.’s counterparties.” [T]his was money the banks might not otherwise have received had A.I.G. gone belly-up. Timothy Geithner’s interaction with the New York Times , first in his role as President of the FRBNY and later as Treasury Secretary, seems to be that of a bailout enabler and a PR spin doctor for Goldman Sachs. Based on the Sunday article’s revelations, I would not characterize his behavior as that of “a good man in a storm;” he seems a mere water-boy: According to an e-mail message that Goldman sent to the New York Fed at the time [September of '08], Mr. Geithner talked about the article with Mr. Viniar, Goldman’s chief financial officer, before calling me. When Mr. Geithner called, he said that Goldman had no exposure to an A.I.G. collapse and that the article had left an incorrect impression about that. When I asked Mr. Geithner if he, as head of the regulatory agency overseeing Goldman, had closely examined the firm’s hedges, he said he had not. Mr. Geithner told me on Friday that he spoke with Mr. Viniar that day to ensure that Goldman’s hedges were adequate. And, notwithstanding the inspector general’s findings, he said he still believes Goldman was hedged.” Prior to the article’s publication, Goldman Sachs responded to Ms. Morgenson’s questions about the Barofsky report via an email from its spokesman Luca van Praag. The entire exchange can be found here ” Goldman’s Response to Questions About A.I.G.,” November 22, 2009 . Did Goldman Sachs dissemble and equivocate in its responses to the New York Times ? Based on these responses answer is yes. Treasury Secretary Geithner may wish to keep that in mind the next time he looks to Goldman Sachs for his answers. Mr. van Praag states “Starting in the mid-90s, we bought credit default swaps from AIG to protect our firm from the risk of a decline in the value of risk we had assumed on behalf some of our clients, (i.e. assets to which we had exposure).” Near the end of his email he again mentions ” CDOs from our clients ” (emphasis added). His email never once mentions that the problematic CDOs requiring collateral calls from A.I.G. that precipitated its liquidity problems, the one’s referenced in report, seem to be chiefly 2004/5/6 vintage CDOs. Goldman underwrote the Abacus CDOs on its own list, and Goldman also underwrote CDOs that featured prominently and in large portion on the lists of French Banks SocGen and Calyon as well as Bank of Montreal and Wachovia that also hedged this risk CDSs with AIG. When responding about whether or not Goldman would have trouble collecting on its hedges in the event of an A.I.G. collapse as Barofsky’s report indicates, Mr. van Praag that Barofsky’s report stated a collapse” “‘ might have made it difficult for Goldman Sachs to collect on the credit protection it had purchased’ (emphasis added by Mr. van Praag) – however, it might not, and it is our belief that it ultimately would not have done so.” For a firm that trumpets its risk management, it seemed to present only one scenario on September 16, 2008. Lehman had just gone bankrupt, Bank of America had just agreed to takeover Merrill Lynch, and banks were starved for liquidity just like A.I.G. The banks’ TARP bailout had not yet occurred. I suggest that Goldman may self-deluding with its claim to be the stellar risk managers here: “I Retract My Apology and Call for More Regulation of Goldman Sachs .” Mr. van Praag notes that Barofsky’s report said had AIG not been rescued, Goldman would have had to bear the risk of further declines in the CDOs that it transferred to Maiden Lane III. He retorts “This is accurate in concept; however, Goldman Sachs has significant experience in adeptly managing this form of market risk.” I previously noted how “adeptly” Goldman Sachs manages its risk (” Goldman’s Undisclosed Role in AIG’s Distress “). How did that work out for the global markets? Fed Chairman Ben Bernanke told Congress on March 24, 2009: “Conceivably, [AIG's] failure could have resulted in a 1930′s-style global financial and economic meltdown, with catastrophic implications. Mr. van Praag also wrote: “It is worth noting that we participated in the transfer of assets to the Maiden Lane III vehicle at the request of the New York Federal Reserve.” I agree this is especially worth noting given that Stephen Friedman, a former Goldman Sachs co-chairman was Chairman of the New York Fed Board, and given the degree of capture then President of the FRBNY demonstrated in his seeming lack of curiosity about Goldman’s hedges as mentioned above. Ms. Morgenson also asked for some perspective about Goldman CEO Lloyd Blankfein’s apology for Goldman’s practices and its contribution to the credit crisis. She asked why Blankfein said Goldman “participated in things that were clearly wrong and have reason to regret” Mr. van Praag responded: Lloyd has expressed regret in various different forums, including a speech to the Council of Institutional Investors in April and one at the Handelsblatt Conference in September. He has stated that the financial services industry collectively neglected to raise enough questions about whether some of the trends and practices that became commonplace really served the public’s long-term interests. In particular, the industry let the growth and complexity in some new instruments outstrip their economic and social utility as well as the operational capacity to manage them. Of special note is Goldman’s admission that these products have outstripped ” their economic and social utility and operational capacity to manage them .” [emphasis added] That statement is apt for many subsequent trading activities as well. But as risk managers, Goldman is dodging its responsibility in its representation that these products merely outstripped management “operational capacity.” Goldman risk management ability was not up to the task, and its ability is not up to the task of managing the systemic risk of its now gigantic CDS operations in the wake of the demise and hobbling of many of its competitors. Operational capacity is one part of the problem. The other problem is that in Goldman’s responses to the New York Times, a bunch of operators tried to gaslight the press.

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Buffett Says U.S. Regulators Should Put Pressure on CEOs of Rescued Firms

November 13, 2009

By Andrew Frye Nov. 13 (Bloomberg) — Warren Buffett , the billionaire chief executive officer of Berkshire Hathaway Inc. , said the U.S. should demand greater sacrifices from the heads of bailed- out companies. “More sticks are called for,” Buffett told business school students at Columbia University yesterday in a town-hall discussion broadcast by CNBC. “There should be more downside to the head of any institution that has to go to the federal government to be saved for reasons of the greater society.” He shared the stage at the event with Microsoft Corp. co-founder Bill Gates . Buffett protected Omaha, Nebraska-based Berkshire from the recession by stockpiling $44 billion of cash and avoiding the risky mortgage investments that helped send the biggest U.S. financial firms to the government for bailouts last year. Banks including JPMorgan Chase & Co. and Goldman Sachs Group Inc. have reported improved results this year after paying back aid from the Treasury’s Troubled Asset Relief Program. Buffett, 79, and Gates fielded questions on ethics, the role of luck and the outlook for the economy from first- and second-year students pursuing master of business administration degrees. The students also asked for advice on investing and finding the right job, applauding the answers. “A terrible market or a terrible economy is your friend,” Buffett responded to a student asking whether stocks have risen too much this year, even as U.S. unemployment stands above 10 percent. “It’s a terrible mistake to look at what’s going on in the economy today and decide whether to buy or sell stocks.” Burlington Northern Buffett, who attended Columbia in the 1950s, is taking on debt and risking Berkshire’s AAA rating at Standard & Poor’s with the $26 billion takeover of railroad Burlington Northern Santa Fe Corp. The purchase, Berkshire’s biggest, is an “all-in wager” on the U.S. economy, Buffett has said. Berkshire, who hasn’t accepted government cash, benefited from the U.S. rescues because its investment portfolio contains equity and debt holdings in at least five bailed-out companies. Berkshire has reported two straight profit increases after a $1.53 billion loss in the first quarter. Berkshire is the biggest shareholder in credit-card lender American Express Co. , which repaid $3.4 billion in federal aid in June, and in San Francisco-based Wells Fargo & Co. , which still has the $25 billion in U.S. cash it took last year. American Express, based in New York, has more than doubled this year and is the biggest gainer on the Dow Jones Industrial Average since Dec. 31. Wells Fargo , the biggest U.S. home lender, has more than tripled from lows in March. Berkshire has advanced 5.6 percent on the New York Stock Exchange this year after dropping about 32 percent in 2008. Building Berkshire Buffett, the second-richest American, built Berkshire into a $150 billion company over four decades by investing in out-of- favor firms. The companies he finances often tout his investments as seals of approval, and as the credit markets contracted last year firms including Goldman Sachs and General Electric Co. turned to Berkshire. Buffett got 10 percent coupons by injecting a total of $8 billion in Fairfield, Connecticut-based GE and New York-based Goldman Sachs, which took $10 billion in federal capital. He refused to provide a lifeline to American International Group Inc. , which got a U.S. rescue package worth $182.3 billion. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net .

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