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Chip Conley: The 7 Practices of PEAK Leadership

by Chip Conley on April 17, 2012

Huffington Post…

Why don’t we “practice” business? I’ve come to realize that — unlike medicine and law — we don’t think of our profession as business leaders as a “practice.” A few years ago, in the last downturn, I developed the principles of PEAK as an alternative operating model for my business based upon Abraham Maslow’s iconic Hierarchy of Needs pyramid. Reinterpreting this well-known theory of human motivation helped me to see that all stakeholders associated with a company have their own Hierarchy of Needs. My company Joie de Vivre tripled in size during this difficult period and I came to find out that a variety of other transformational companies like Harley-Davidson have used Maslow’s theory as a foundation for their business model. Business principles are only as good as the practices that back them up. Recently, with the assistance of some good friends, I’ve developed a set of PEAK Leadership practices that can assist any leader or leadership team to move from survival to success and on to being a transformative role model in their industry. When a company embeds these principles and practices in how they grow their leaders, the end result is PEAK performance: a phenomenon of sustained growth — both for the organization as well as for those within the organization. Practice 1: Embody an inherently positive view of human nature. The principles of PEAK have their roots in humanistic psychology and a basic belief that man is meant to “be all that he can be.” So, it’s not surprising that the fundamental first practice is assuring that a PEAK leader believes that humans — at their very core — gravitate to goodness when the right conditions exist for them to flourish. Creating what Maslow called “psycho-hygiene” in a company means focusing on people’s best qualities and believing in what’s been known for a half-century in business as a “Theory Y” perspective on management versus “Theory X.” With Theory X, management assumes employees are inherently lazy and will avoid work if they can. As a result of this, management believes that workers need to be closely supervised and a comprehensive system of controls developed. With Theory Y, management assumes employees may be ambitious and self-motivated. They believe the satisfaction of doing a good job is a strong motivation and seek to create the conditions for the employee to develop their own strengths to be successful. While this latter theory may feel intuitively right to many of us, is your organization still structured in a Theory X style of business? Practice 2: Create the conditions for people to live their callings. Great leaders understand there are only three relationships you can have with your work: a job, a career, or a calling. A job tends to deplete you and a calling energizes you. Most employees live in the bartering world of work. The company gives them a compensation package and recognition and, in return, the employee gives their time and energy. Yet, those that are living their calling have moved from external to internal motivation. And, these employees are not exclusively focused on the specific collection of tasks they perform and are more focused on the impact or purpose of what they do. The best hospitals have more nurses living their calling. The best airlines have the happiest flight attendants (Southwest). What are you doing to help your people find their sense of calling in what they do? Practice 3: Promote and measure the value of intangibles. In business, we are taught that leadership is all about managing what you can measure, but what’s most easily measurable is the tangible in life. Yet, is it the tangible or the intangible in business and life that creates value? In business, the metrics that track the tangible are well known: your profitability, assets & liabilities, cost structure, market share. Yet, in reality, these tangible metrics are the result of a series of intangibles that drive excellence: brand loyalty and reputation, employee engagement, customer evangelism, the ability to innovate. Great leaders nurture, value, and evolve corporate culture — one of the most valuable intangibles — as a key differentiator for their company. These intangibles are the inputs that drive the tangible output that most companies use to evaluate their performance. In the 21st century, great leaders are learning how to measure and benchmark these intangibles so that they’re not out of sight, out of mind. Which intangibles are most valuable to your business and how are you measuring them? Practice 4: Ability to move fluidly between being a “transactional” and a “transformational leader.” Author James McGregor Burns once wrote that, “Transformational leaders look for the personal motives in followers, seek to satisfy higher needs, and engage the full person of the follower.” Yet, most management decisions require only transactional thinking because the goal is purely to optimize existing resources. A great leader is able to move fluidly between addressing the foundational needs that people have, but also helping them see beyond the short-term so that they can be motivated by a compelling vision that helps them transcend their momentary challenges. How much of your time is stuck in the trenches as a transactional leader versus focusing on how to create transformation? Practice 5: Calibrate the balance between “Conscious” and “Capitalism.” Business has quite often been seen as a “zero-sum” game. One person’s win is another person’s loss. Taken to the global level, some believe that capitalism’s short-term gains are often to the long-term detriment of the environment and to certain communities. And, at this crossroads, in an increasingly transparent world, this is why great leaders have to think more broadly about the impact of their decisions, not just on the bottom line, but on their broader stakeholders. In many ways, Walmart took this step when they saw their stock price flat line even with sizable revenue and net income growth. Yet, for those socially conscious business leaders, cash flow is the blood that keeps your organization alive. Make sure the basic survival needs of your company are met. How do you balance the priorities of the broader community versus the financial needs of your company? Practice 6: Focus on your customers’ highest needs. Henry Ford once suggested, “If I asked my customers what they wanted, they would have said a faster horse.” PEAK leaders and companies understand what the customer wants even before the customer has articulated it and they realize that customer innovation requires a certain amount of mind reading and cultural anthropology. By doing this well (with Apple being the best example in the world), you create a movement and evangelists and reduce your need to spend money on traditional marketing. Are your customer satisfaction surveys just asking the obvious questions that will track their expectations and desires, but not their unrecognized needs? How can you “mind read” your customers? Practice 7: Lead to PEAK. Just as a Sherpa does in the Himalayas, great leaders meet their people where they are on the pyramid and help them to see the natural path to the peak. They recognize the value of loyalty and mentoring as a means of sustainable success in business. PEAK leaders champion personal development in tandem with corporate development knowing that there’s a synergistic effect of having a self-actualized individual in the workplace as evidenced at companies like Google. And, most importantly, they embody authentic leadership by being, not just by doing. How are you incubating a collection of great leaders? Conscious people pay attention. It’s true of spiritual leaders. It’s true of business leaders. PEAK leaders pay attention to the higher needs while not neglecting the base needs that provide a foundation for their organization. Leadership is all about making conscious choices and knowing that the higher you are in a company, the more magnified your decisions and behavior will be throughout the organization.

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Chip Conley: The 7 Practices of PEAK Leadership

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Liz Ryan: The Worst Way to Pick a Job Candidate

by Liz Ryan on April 17, 2012

Huffington Post…

When anthropologists of the future turn their gaze to the 21st-century workplace, they’re going to be surprised at how many pointless, absurd things 21st-century people (that’s us) used to do at work. The anthropologists are going to say, “The 21st-century workplace is a treasure trove of anthropological riches! There’s the formulaic and stilted decision-making process, the hierarchical overtones in every conversation and glance, and the overpowering pressure to conform with the group — and we’ve only just begun our research!” I’d love to read that study, if scientific advances allow me to live another 90 years or so. One of the phenomena that will come up for review when future researchers dig into 21st-century workplace culture is the job interview process. I can’t imagine how we could employ a worse system for choosing people to work on our teams, but the godawful American corporate job interview process is so firmly entrenched that most corporate people are shocked when I suggest overhauling it. We know it stinks. We sit in an awkward room with a resume and a desk between us and another person and we ask, “So, tell me why you left Acme Explosives?” as though we cared about the answer to that question. We ask idiotic questions because we don’t know a better way to get through an hour’s worth of conversation, and we know we have to do that. I’m not blaming the managers who sit through those painful interviews, or the candidates themselves, of course. The system itself is broken. The interview script is brainless. It’s time for smart people to change the way we conduct interviews, and the good news is that it couldn’t be easier to do. If we needed someone to remodel our bathroom, we wouldn’t call a bunch of contractors and have each of them come over to our house so we could ask them: “So, why did you start your own plumbing business in 1997?” We actually couldn’t care less why they started that business. What we really need to know is: “How would you remodel my bathroom? What sorts of similar projects have you done in the past? How did those work out?” We’d want to get a feel for our contractor’s gravity and professionalism. We’d want to get a taste of his communication style and interpersonal manner. Later, we’d check references on one or two of the folks we were thinking about hiring. We’d negotiate a price for the job. Boom! We’d be done. We wouldn’t ask the contractors what their greatest weaknesses are. We wouldn’t ask them why they want our bathroom remodeling job; we would consider it insulting to ask that question, because each of these contractors had already expressed interest in the project. They’re bathroom remodelers — why shouldn’t they be interested in remodeling a bathroom? We wouldn’t ask them to tell us why, of all the contractors in our city, we should hire them for the job. We wouldn’t ask them to grovel, in other words. Here’s what we might do, instead. YOU: So, George, thanks so much for coming over. GEORGE: No problem. What’s the project, now? YOU: It’s my master bathroom. It’s long and narrow, not the perfect footprint, but I want a new tub so I figure it makes sense to remodel the whole bathroom. GEORGE: That’s usually what I recommend, unless you love the way the bathroom looks now. There are tubs in pretty much any size out there. YOU: I hate the colors, so if I’m painting and picking tile anyway… GEORGE: Definitely. Might as well do the whole thing. YOU: You’ve done a lot of these? GEORGE: I used to do just bathrooms, working with a tile guy named Jesse. Jesse moved to Texas, but I work with his cousin Wally now. We do about half and half kitchens and bathrooms. YOU: I got your name from Sue Barnes… GEORGE: Oh right, I did Sue’s addition last year. That had a bathroom in it. We found a really nice antique tub at a salvage place, and Sue had some Italian tile that she got on vacation. YOU: You found that tub? I love that tub! I covet it! GEORGE: I’m an antiques geek I guess. I picked up that tub even before Sue chose it, because it looked so perfect for her job. If she hadn’t wanted it I could have taken it back, but I was 99 percent sure she would love it. YOU: It’s amazing. I’ve never seen one so ornate. GEORGE: It’s perfect in that space, I think, with the window and the green tile… YOU: Well, I love your design sense. Let’s talk about project management. GEORGE: Sure. YOU: Well, I actually don’t know anything about project management, I confess. I’m a massage therapist. I just know that that’s a big part of doing a job like this. GEORGE: I run anywhere from two to six jobs at once. Right now, I have three I’m juggling, but luckily two of them are wrapping up this month. If we can walk through the bathroom and you can tell me a little more about what you want to do, I can get you an estimate and whatever you need to see insurance-wise. If you decided you want to get started and if we could start next month, we’d do the job in about four weeks. YOU: Four weeks for a bathroom? GEORGE: That’s me walking in to everything finished and I’m out of your hair. The bathroom would be out of commission for about two weeks. If you happened to be planning a vacation, you could miss the worst of it. YOU: We could go out of town. You could make sure the place was locked up at night? GEORGE: Oh sure, we do that all the time. It’s easier for us. If you could board the dogs or take them with you — YOU: They’re wuss dogs, they travel with us. GEORGE: Perfect. Then we could do the worst of it, the dusty stuff, while you’re gone and it would be all done when you got home. YOU: Could you share some references with me, George? GEORGE: For sure. Sue Barnes is one of them, and I’ll send you three more. YOU: I’m so excited! When we zero in on what needs to be done and start getting a feel for how the candidate (or contractor) would approach the job and how he or she has managed past jobs, we learn something relevant. We learn tons, in fact. When we’re talking about our project or role in context — sharing a bit of dirty laundry, if needed, to say something like, “Our sales guys are great, but they’re so focused on new business that our largest accounts are getting overlooked and we need to solve that. What else can I tell you?” then we can get to the heart of the matter at hand, namely, does this candidate sitting with me understand what I’m up against it, and have good ideas for surmounting our obstacle? Of course, we can’t have an in-depth, substantive job interview like the one I’m proposing unless we come down off the perch that many hiring managers and HR folks have installed themselves on top of. We have to be willing to say, “Everybody is making an important decision, here. You are deciding whether or not to come and work for us. We are deciding whether you’re the right guy to work with us on this problem. We’ve all got to get beneath the surface, today.” We shouldn’t be asking job applicants lists of pointless interview questions. We should be talking with them about the work at hand. Who gives a rat’s behind what adjectives the job-seeker thinks other people use when describing him or her? Who cares what sort of animal or canned soup the job-seeker identifies with? This made-up garbage falls into the category of what my old mentor Jon Zakin calls “playing business.” It’s pointless, but we do it over and over and over, anyway. Sitting behind a desk asking lists of pre-written interview questions is not only insulting to the candidate, but it’s bad business too. We could have more substantive conversations with job-seekers if we opened the kimono a little bit to say, “Look, here’s what’s going on in the department. I’d love your take on it.” We’d let the candidate ask as many questions as he or she wanted to. Questions show the applicant’s brain moving, and that’s exactly what we want! I can’t imagine how stupid an interviewer would have to be (or how fearful of stepping outside the lines) for the interviewer to say, “No, I’m sorry, you won’t have a chance to ask us any questions today.” I encourage a job-seeker to get up and leave the room, the building and the opportunity at that very moment. Life is too short to waste time with amoeba companies who don’t understand human beings, only spreadsheets and policies and hoary job-interview scripts. Those guys don’t get you, and they don’t deserve you. If you’re in charge of hiring for your organization, ask yourself: Why are we still interviewing job candidates the way we did eighty years ago? The world has changed. We can loosen the bonds of workplace ritual enough to say, “This isn’t working.” We can change the interview frame, and the sooner we do it, the better off we’ll be.

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Liz Ryan: The Worst Way to Pick a Job Candidate

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Sarah Damaske: Equal Pay Day: In the Wake of the So-Called "Mommy Wars" Renewal and Partisan Attacks on Equal Pay Bills

April 17, 2012

Equal Pay Day comes this year in the midst of the renewal of the so-called “mommy wars” on the one hand, and a blatant attack on equal pay rights bills on the other. Last week, Hilary Rosen set off a media maelstrom when she said that Mitt Romney’s wife, Ann, “has never actually worked a day in her life.” Just a week before (and to much less fanfare), Wisconsin Gov. Scott Walker repealed Wisconsin’s Equal Pay law and one of the state senate Republicans, Glenn Grothman, was quoted as saying, “You could argue that money is more important for men, anyways.” Both have serious implications for the equal pay cause. The National Committee on Pay Equity started Equal Pay Day in 1996 to bring more public attention to the gender wage gap, the difference between what an average full-time, year-round, male worker earned and what the average full-time, year-round, female worker earned. In 1996, the difference was 73.8 cents to the dollar and, today, the difference is about 77.4 cents. Not a terribly huge improvement over the last 16 years. Researchers have long noted that a number of factors can partially explain the gender wage gap. Notably, women and men tend to work in different industry sectors and different occupations within industry, which can explain a sizable portion of the gap. But differences in pay for various occupations may be due to whether jobs are associated with women or men. In other words, while occupational differences may explain some of the gender wage gap, the pay scale for different occupations is connected to whether or not the occupations are made up of mostly men or mostly women. And as sociologist Paula England and economist Nancy Folbre found in their research , women are more likely to work in caring fields, which offer relatively poor pay given the skill and education necessary for much of this work. Devaluing the hard work of acting as a primary caregiver of children not only dismisses the unpaid labor done in the home, it also contributes to the struggle of the millions of paid female laborers who work in caring fields and find that their work is neither recognized nor justly rewarded. Calling this past week’s maelstrom a renewal of the “mommy wars” dodges the real issue: Caregiving, whether done unpaid in the home or for pay outside of it, is not particularly valued in this country and women (whether in the labor market or not) suffer the brunt of this. Differences in pay are likely also connected to bias. Having children often increases men’s wages, according to research from sociologist Rebecca Glauber , but it often decreases women’s wages and women working in low-wage jobs face the toughest wage penalties for motherhood, as sociologists Michelle Budig and Melissa Hodges found . When Grothman argued, “Money is more important for men,” he may have been tapping a generally unspoken belief — that a woman’s salary is less necessary to her family than is her spouse’s. But, these beliefs are a remnant of times gone by in which men were primary breadwinners and women were primary homemakers (although as historian Stephanie Coontz has noted, even during the 1950s, this gender divide was never as big a phenomenon as we remember it to be). Today, only 20 percent of children are raised in families with a traditional breadwinning father and stay-at-home mother. Most children, then, live in families that depend on the wages of women, and one-third of children live in single-mother households and are most at risk of living in poverty. The National Women’s Law Center reports that bridging the gender wage gap would give the average full-time working woman’s family the money to pay for an additional 4 months’ supply of groceries, 5 months’ of childcare, 3 months’ rent and utilities, 5 months’ health insurance premiums, 4 months’ student loan payments, and 5 tanks of gas. Addressing the wage gap would go a long way in increasing women’s economic security, as well as the financial security of their families. In 2010, all Senate Republicans voted against considering the Paycheck Fairness Act. As both President Obama and presidential hopeful Governor Romney continue to vie for women’s votes, it would be nice to see some serious proposals from the candidates about how to bridge the wage gap.

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Ted Harro: 7 Kinds of Smart You Need to Look for When Hiring

April 17, 2012

I work with smart people all of the time. They are often products of the best schools in the world, have impressive accomplishments, and can do super mental gymnastics. If you haven’t watched a Harvard MBA do a mental triple somersault with a twist in the layout position, you really ought to. It’s stunning. And I confess that I love these people. But sometimes smart people do the darnedest things when hiring employees. Here’s one. When evaluating a job candidate, smart people often have a short-hand that sums up their thoughts. “She’s crazy smart!” They actually use a different adjective, but this is a family-friendly blog and I never know when my mom might drop in for a read. Or if they don’t like someone, they might say, “He’s not that smart.” This is the kiss of death. You can be awkward, ugly, or downright rude. But don’t be “not that smart.” There is plenty of evidence assembled by the smart people that intelligence is a key factor to success. But here’s the question I’m sometimes courageous enough to ask: “What kind of smart does this job require?” Anyone who has hired employees will recognize the pitfalls of trying to nail down what kind of smarts they need. I have a friend who has been very successful in the publishing world. Once, she was asked to do a first interview of a highly recommended candidate for one of the biggest news websites in the world. The kid launched into a speech on a 14th century French play and seemed so introverted that she recommended against hiring him thinking he was a bad personality fit as well as better suited to graduate school than a popular website. Fortunately, someone else saw his talents and he went on to become a star business reporter, known for his focused and thorough research. If you’ve hired more than one employee, you recognize that story. It’s easy to be imprecise about what kind of “smart” we are looking for when hiring. Asking, “is someone smart” is a smart thing to do. It’s a simple way to screen a candidate. Just be sure that you’re not going from being simple to being simplistic. Know what you need and where you need it. Ask what kind of smart. Here’s your starter list: Analytically/Technically Smart — These whizzes can weave magic with spreadsheets and numbers. They can model out a business with breathtaking elegance. They can take overwhelming data and turn it into meaningful information. They can discover the algorithm that will make your product do backflips for your customers. They’re smart. You want them in finance, R&D, and IT. Book Smart — These brainiacs know all of the right answers based on the established research. They can check and double-check and yes, triple-check your facts and figures to be sure your answer is supported in the literature. You want them on your legal team. They just might find that one thing cracks the case or covers your backside. People Smart — These geniuses are good at what a lot of academically gifted folks struggle with: dealing with people. They have a natural read for how others are interacting and they can find ways to connect with almost anyone. I have client who has made a considerable fortune largely based on being people smart. He says he’s not that smart. Actually, he’s a genius at making connections with people and being genuinely friendly and helpful to them. This means that he is probably two to three phone calls away from talking to virtually anyone of influence in our country. Now that’s smart. You want people like that on your Business Development team or your board. Quick-on-Their-Feet Smart — When I started in consulting, my first boss used to joke about how important it was to have a good pair (or three) of “dancing shoes.” He was pointing out that certain roles demand people who can think on their feet. They have to walk into situations and conversations with a general approach in mind, but then adjust on the fly with seeming ease. They need to be able to see around corners in a conversation and know what to say and what not to say. They’re smart. You want them on your sales or PR team. Politically Smart — We all know there are two realities: how organizations say things get done and how they really get done. Politically smart people know both but they’re experts at the latter. They can read where influence really lies in any situation and how to get powerful people moving in the same direction. They figure out what matters to different constituents and they can shape options that turn into deals that turn into action. They’re smart. You want them on your negotiation team and in any part of your company that drives significant change. (I’m looking at you, IT!) Organizationally Smart — Any fast moving organization manages far too many details. These people can cut through the clutter and bring order to the chaos. They sort out what matters and find ways to make tasks work. They’re realists and keep us honest about what can be done. They’re smart. You want them on your project management teams. And any executive lucky enough to have one as an admin will bite your hand off if you try to recruit theirs. Wisdom Smart — Some situations just require experience. You can be smart in any of the ways above, but without having seen it before you’re going to struggle. Having been a successful salesperson isn’t the same as having successfully run a regional sales team. Reading books about a startup just isn’t the same as having effectively dealt with the chaos of rapid growth with scarce resources. Having visited Europe on vacation just isn’t the same has having lived and done business there. These people are smart. You want a balance of people with battle scars along with your bright up-and-comers. One caveat: experienced and crusty don’t have to go together. Pick Wisdom Smart people who are humble enough to know that they can learn from those unburdened by experience.

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Andrea Sittig-Rolf: The Audacity of Nope: Why Hearing "No" Can Help Salespeople Get to "Yes"

April 16, 2012

You may often think, “How can I increase my number of face-to-face appointments when so many companies aren’t buying right now?” The problem lies in the question itself. If you’re scheduling an appointment just to sell something, you may have a tough time getting the appointment. If the perception of your prospect is that the very reason you’re calling is to either sell them something over the phone, or schedule a meeting to sell them something, you’ll likely hear things like “It’s not in our budget,” “We’re not making any purchases now,” “We don’t have any money,” “We’re not in the market,” and “Our budget has been frozen.” In other words, you may be setting yourself up to hear “no.” If, however, you position your introduction over the phone as an opportunity to meet in person so you can learn more about your prospect and their potential future needs, you may have better luck. After all, if your goal is simply to learn about the prospect, you may not have an opportunity to sell them anything at all, so there’s less resistance to setting up a meeting. If you still encounter “no” when asking for that first meeting to start the discovery, and potentially selling process, here are some tips to get the meeting anyway. First, if you have a good sense of humor, use it, and you’ll be half way there. Making someone laugh breaks down the barrier between two otherwise strangers. If the response to your question in asking for a meeting is, for example, “We don’t have any money,” say “Neither do I, that’s why I’m calling YOU!” Now of course, part of the humor in this is your delivery, so you may want to practice a few times before trying it live. Another response to the all too common, “It’s not in our budget” objection is “In that case, now is the perfect time to meet! We’ve found it very beneficial to discuss future needs and our solution early so that if you decide to proceed, we can be of help during your decision-making process.” Notice I said, “If you decide to proceed” which implies that you’re not going to shove the sale down their throat, but that the prospect will be making the decision to proceed or not. It’s also a good idea to present yourself as a resource to the prospect, regardless of whether they’re in the market at the moment or not. Then, actually BE a resource for them, even if it means meeting several times, providing valuable information that will help them and offering advice in your area of expertise even if it’s outside of the potential solution you may have to sell them. Another good rule of thumb is to give something of value to your prospect three times before asking for anything in return, like an order. Providing something of value might mean something as simple as sending an email with an article relevant to a recent discussion the two of you had about their needs, or introducing your prospect to another member of your team or resource within your company who can provide expertise, such as an engineer or project manager. If you’re genuinely interested in helping them with their plight, regardless of having the entire solution to sell yourself, your sincerity will become obvious to the prospect and it will only make sense they buy from you when they’re ready to make a purchase. Also, the rule of reciprocity is at play here. It’s human nature to give back to those who have helped us. By helping the prospect first, you set up the dynamic of the rule of reciprocity and they will be likely to reciprocate the favor you’ve done for them, by placing their order with you. Once you’re ready to close the sale, if budget is still an issue, you can discuss payment plans, leasing options, no money down, 90-day payment and other terms that may make your solution more appealing to your prospect. Your willingness to work with them and their budget will increase your chances of ultimately closing the sale. You can also reflect back with the prospect to your earlier discussions about what was important to them which will help build the value of your solution, framing the money issue more as an investment than as a cost. Finally, sometimes the answer is “no,” but you know what? That’s okay too. Part of learning to love hearing “no” is knowing that it’s only a matter of time before you hear the word “yes.” The more “nos” you get, the closer you get to “yes.”

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Terry Connelly: We Have Seen This Stock Market ‘Horror’ Movie Before

April 16, 2012

Here we go again. It’s the second quarter of the year, and once again — as in 2010 and 2011 — the hedge fund investors that missed the rally in the U.S. stock market have rebooted their “sky is falling” pitch to scare the rest of us out of our shareholdings. They do this so they can buy back into the market on the cheap and enjoy the rally that will occur in the second half of the year — just like the previous years. Two months ago, “a few” members of the Federal Reserve Board were favoring a QE. Now, they say it’s just “a couple.” So, one day it’s a strained reading of month-old Federal Reserve Board meeting minutes that concludes that the Board has taken additional monetary stimulus “off the table” because just “a couple” as opposed to “a few” have agreed that action may be necessary. (What if the “couple” happened to be Chairman Bernanke and Janet Yellen, his deputy?). In the end, a couple and a few are the same thing, but the market has overread “a couple.” Curiously, CNBC, the main market news outlet on cable, started promoting this thesis right away (presumably as part of its virulent anti-Obama campaign to talk down the market lest the President’s re-election campaign get any bounce from better stock prices and fatter 401(k)s and sure enough the market went down by triple digits. Then came the monthly jobs report showing only 120,000 net jobs created in March. Clearly a disappointing number compared with the more than 200,000 in February and January, except for the fact that these monthly estimates (which are based on a projection model for a set of interviews with employers, not an actual numerical “headcount”) are always wrong and corrected in subsequent months. On a corrected basis, the QUARTERLY jobs report — a more reliable indicator — shows a step up in hiring for each of the past THREE quarters, rising from 300,000 plus in Q3 2011 to 400,000 plus in Q4 2011 to more than 600,000 plus in Q1 2012. Of course, this data never made it onto CNBC. Then came the hedge fund hit to Spanish and Italian sovereign debt interest rates when the European markets opened Tuesday after the Easter holiday. Here’s how that happens: the hedgies don’t have to actually sell Spanish and Italian government bonds and take losses. All they have to do is bid up the price of credit-protection (the famous credit default swaps (CDS) that helped bring on the U.S. financial panic in 2008) on Spanish and Italian debt. The CDS contracts pay out only if the debt defaults, so a higher price implies a higher risk of default on the underlying debt. When that happens, investors tend to dump the underlying debt, sending the interest rates up. The hedge funds and other big investors know from the past two years of experience that such movements in the CDS markets move the European sovereign debt markets down and in turn, spook the U.S. stock markets into their now famous “chicken little posture.” Translation: you can manipulate the U.S. stock market down by 500 points or more over two or three days just by bidding up a few Euro debt CDS contracts on Italian and Spanish debt! But you won’t hear that on the supposedly informative CNBC. You just hear about the Spanish and Italian interest rate spikes, just like last year and the year before. You also hear about other European sovereign debt at just about this time of the year — after a run up in the U.S. market that some of the “big boys” missed out on. And so, on Tuesday after Easter, we went down 200 more points on the Dow. As CNBC cheers on the incipient “market correction” and puts on a series of chartists warning of free-fall. Just to top it off, the CNBC mavens chat incessantly about the coming downturn in corporate earnings on the first day of Q1 reporting season, quoting of course unnamed experts that earnings will actually fall for the quarter. Never mind that 3/4th of the early reporters — a small but at least “actual” sample — have already reported earnings that EXCEEDED estimate. Never mind that Alcoa, which was panned all day long by the cable Cassandras, actually reported earning revenues and earnings after Tuesday’s closing bell that also significantly exceeded estimates! Are we seeing a pattern here? It’s déjà vu all over again, as Yogi Berra would say. Fool me once, your fault; fool me twice, my fault; fool me three times, well, that’s the lot of U.S. equity traders, as they again fall for the hedge funds’ head-fake apocalyptic scenario in the second quarter, and take the rest of us down with them. What the hedgies and their shills at CNBC count on is the fact that average investors aren’t used to short selling, so they don’t understand that folks who come on TV and talk the market down might actually be “talking their book” just like the typical stock “promoters” they are justly suspicious of. Wise up, stock investors — you are being had, again — by some real pros that count on you having a short memory from the games they played the last two years, at just this time of the year. They, not you, made the money in the second half of the past two years. Wise up!

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Scott Bittle: The Long and the Short of It: America’s Jobs Problem Now and For Years to Come

April 16, 2012

When it comes to jobs, can the U.S. walk and chew gum at the same time? After several months of robust, promising job creation, the economy only added about 120,000 jobs in March, barely enough to keep up with population growth . Last week, the number of claims for unemployment also jumped up . Maybe we’re on the road to recovery from the Great Recession, but when it comes to jobs, the after-effects are still haunting us. We’re also facing a historic shift in the nature of work — one that could turn out to be as extraordinary and wrenching as the Industrial Revolution. The combined impact of technology and globalization mean many businesses can do their work as effectively and more cheaply with fewer employees in the United States. If they can — and if that’s what their competitors are doing — then they’ll automate and move jobs offshore. Those jobs aren’t likely to come back just because the economy picks up. This means we need to do something we just aren’t good at: having a serious debate on how to tackle a near-term problem while also looking at what to do for the future. As the candidates for president and Congress begin offering up their ideas on “jobs,” voters need to consider whether their proposals are aimed at creating jobs quickly or whether they’re aimed at strengthening the job picture over the long haul, say the next decade or two. The truth is the country really needs both, but we can’t expect short-term cures to fix long-term problems (like job losses due to globalization or technology), and we can’t expect long-term solutions to kick in quickly. You probably won’t hear any subtleties like this on the campaign trail. Generally speaking, politicians are in the confusion business, so drawing these kinds of distinctions isn’t their strong suit. Here’s a quick tour of some of the jobs ideas out there and their short-term and long-term implications: Cut payroll taxes : According to studies by the Congressional Budget Office (CBO), this is one of the better strategies for persuading employers to hire, and in a relatively short period of time. But unless we find some other way to fund Social Security and Medicare, this can’t possibly be a long-term solution. Both programs are paid for by payroll taxes, and both face serious long-term funding problems. Not collecting these taxes for years would make these shortfalls even worse. Cut income taxes : This gives people more money in their pockets, and that can bolster consumer spending and help merchants preserve existing jobs — maybe they can even expand a little. But when the CBO looked at 11 different ways to create new jobs quickly, this idea actually came in near the bottom. Over time, low tax rates can encourage wealthier Americans to invest in new ventures or stocks, which does support job creation over time. But those potential advantages have to be weighed against the country’s budget problems and our mounting federal debt. Have the government jumpstart big infrastructure projects : If the projects are “shovel-ready” (everybody is on board with the plans and the money), this can create jobs quickly. But if they’re not, getting all the approvals and raising the additional money can take years. This has been one of the biggest criticisms of the $787 billion “stimulus” program — rightly or wrongly, people expected bigger, faster results than they actually got. Obviously, construction projects don’t provide jobs forever, but major national infrastructure improvements like improving the electric grid can take decades to build. Plus, improved energy, communications, and transportation networks lay the groundwork for economic development in the future. Extending unemployment benefits : This does preserve and create jobs in the short term. When unemployed people have an income, even a small one, they’re more likely to spend at local businesses, so those businesses are less likely to lay off workers and more likely to hire. The CBO gives this strategy a high rating for helping create jobs quickly. But one of the most troubling problems we’re facing is the growth in long-term unemployment, where people struggle to find work for years. And the longer you’re unemployed, the harder it is to get back in the workforce. Unemployment benefits help people keep food on the table, but they don’t help get them back to work, especially when people’s skills are out-of-date for today’s jobs. Plus, supporting people who aren’t working for very long periods of time can become divisive. Eventually, a lot of the people who are working may come to resent paying for those who don’t, especially if they suspect that some people on unemployment aren’t really doing their best to find jobs. Investing in scientific research and cutting-edge technology : Again, this is mainly long-term. It provides some jobs for researchers and college professors when the grants come in, but discovering and commercializing innovations that open new industries and create thousands of jobs — well, that just doesn’t happen quickly. Pursuing more trade agreements : Opening up foreign markets for U.S. products can lead U.S. companies to beef up their work forces to meet the new demands, and most economists say that trade is good for jobs over the long haul. In the near term, though, some companies may lose business, reduce their work forces, or even close due to foreign competition. On the other hand, not trading with other countries could turn out to be even worse for jobs. Politicians have a knack for making their ideas on jobs (and everything else) sound quick and easy, but truth is more complicated, as well it should be. The United States needs a strategy to help people who need jobs now, and we need a plan to create good jobs for Americans in the years to come. Co-authored with Jean Johnson.

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Deborah J. Vagins: We Can’t Wait for Fair Pay

April 16, 2012

Would you know if the person sitting next to you at work was being paid significantly more than you to do the same job? If you suspected that might be the case, would you know what to do about it? You might start by simply asking the question. Unfortunately, there’s a chance that you could be fired for doing just that. Nearly half of American workers are either forbidden or strongly discouraged from discussing their pay with colleagues. Not just inquiring, but merely discussing — that means that in plenty of workplaces, you can be fired for just volunteering information about your own salary. That’s right: your conversation at the water cooler could cost you your job. This brand of punitive pay secrecy has dire implications for women, who even today — almost 50 years after the passage of the Equal Pay Act of 1963, still make just 77 cents for every dollar earned by men. For women of color, the facts are even worse : in 2010, African-American women earned only 62 cents and Latinas only 54 cents for each dollar earned by a white man. It’s these dismal statistics that force us to reluctantly mark Equal Pay Day this year on April 17, 2012 — the point into 2012 that a woman must work, on average, to make she same amount a man did in 2011 alone. The serious wage gap, combined with pay secrecy policies, means that many women are not only being paid less than their male co-workers, but they have no way of knowing it. And if they don’t know it, they can’t fight it. Thankfully, this Equal Pay Day, we can do something to change that. President Obama has the opportunity to take a huge step towards ensuring pay equality right now by signing an executive order that would protect people who work for federal contractors against retaliation for disclosing or asking about their wages. Federal contractors include any company that receives federal taxpayer dollars to do work for the government. About 26 million people in America work for such contractors — that’s over 20 percent of the entire U.S. workforce. For over 70 years , president after president, of both parties, have used the power of executive orders to protect employees who work in companies that contract with the federal government. These steps have often led the way later for expanded protections for all workers. Allowing all of these workers to discuss their salaries without fear of losing their jobs will give women an important tool for finding out whether or not they are being treated equally. And that’s the first step to fighting back against pay discrimination. This month, the president has put the issue of women’s economic security center stage. Speaking at a forum on women and the economy, he announced the release of a new report by the White House Council on Women & Girls, which details progress the administration has made in initiatives that support women throughout their careers. He also acknowledged the continued pay gap, noting , “Overall, a woman with a college degree doing the same work as a man will earn hundreds of thousands of dollars less over the course of her career.” And in an op-ed last week, he emphasized the importance of fixing that, writing “Closing this pay gap – ending this pay discrimination – is about far more than simple fairness, it’s about strengthening families, communities and our entire economy.” We couldn’t agree more. With 40 percent of women acting as the primary breadwinners in their homes, far too many families are taking home far less than they deserve. Women can’t wait any longer. That’s why it is so crucial that President Obama brings immediate relief to the millions of women employed by federal contractors by issuing an executive order that will protect them from retaliation for discussing their wages. Of course, federal legislation is still needed to protect all workers against discrimination. The Paycheck Fairness Act, a bill currently pending in both the House and Senate , would help close some of the loopholes in the Equal Pay Act of 1963, which have made that law less effective over time. Among a range of other provisions, it would prohibit retaliation against employees who inquires about or discloses wage information–much like the proposed executive order — but would extend coverage to all workers (with some limited exceptions), not just those who are employed by federal contractors. There’s no question that the Paycheck Fairness Act is necessary — but while Congress remains gridlocked, millions of women are still waiting for fair treatment. You can help to end that wait for millions of women. Take action today by urging President Obama to issue an executive order banning retaliation against federal contract employees for discussing their pay.

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David Burwell: Of Oil Prices and Elephants

April 16, 2012

Six wise men of Industan, of learning much inclined, went to see an elephant, though all of them were blind, that each by observation might satisfy his mind. The debate over gas prices, what causes them to soar and crash, and who is to blame, is a parlor game played out in Washington at the start of the driving season every spring, and even more so in presidential election years. It is a redundant, blind-leading-the-blind discussion. So, let’s see if we can parse the arguments made by the proponents of the various “truths” about gasoline prices to find the culprit. By analogy, we will track the arguments to the classic J. G. Saxe poem, “The Blind Men and the Elephant,” with oil being the “elephant” in the room. The first approached the elephant and happening to fall against his broad and sturdy side at once began to bawl, “This mystery of an elephant is very like a wall.” The wall of worry — that some natural (like a hurricane) or man-made (such as a terrorist act, a war, or an embargo ) disaster will cut off our access to oil and drive gasoline prices higher. This is a fear that oil exporters of any stripe diligently encourage. And it is partly true–Hurricane Katrina cut off both access to oil and caused refineries to shut down, causing a gasoline price spike. But the United States, like all net oil importing nations, have set up strategic petroleum reserves to safeguard access to oil in times of such interruptions. The U.S. strategic reserves already have more than 200 days of U.S. oil imports safely stored in salt domes in Texas. Absent an OPEC-like coordinated embargo, which would do more damage to OPEC than to oil importers (see below), these interruptions will be short term and the price hike mild. So risk of supply interruption can’t fully explain the problem. The second, feeling of the tusk, cried “Lo what have we here, so very round and smooth and sharp? To me ’tis mighty clear, this wonder of an elephant is very like a spear.” The spear of the gas tax — a tax that pierces the heart of every American driver. But the 18.4-cent federal gas tax is less than 5 percent of the price of a gallon of gasoline. It is also getting smaller as a percentage every day as gasoline prices rise. Add state and local gas taxes and the average is still only 12 percent of the total price per gallon — one of the lowest in the world. It also has not risen since 1993 — even though fully 60 percent of Americans think the gas tax rises every year. While this tax is supposed to keep our transportation infrastructure in good shape and performing efficiently, it is so inadequate to meet present needs that the quality of U.S. infrastructure has fallen, according to the World Economic Forum, from fifth in 2001 to twenty-third place globally. So gas taxes — while a minor contributor — can’t be the culprit either. The third approached the elephant, and happening to take the squirming trunk within his hands, thus boldly up and spake, “I see,” quoth he, the elephant, is very like a snake.” The snake of speculation — this argument appears to have some merit, especially if one compares global daily consumption of oil (89 million barrels) to actual oil traded on public commodity markets every day (over three billion barrels ). Clearly most oil traded is done by those who have no intention of ever taking possession of it. This argument is bolstered by commentators who note the existence of ” dark pools ” of oil traded privately between oil companies, banks, and investment companies as a kind of reserve currency. These private trades are estimated to be many multiples higher than publicly-traded oil stocks and can lock up inventories, thus causing prices to soar even in times of low demand and high supply. A recent study by the St. Louis Federal Reserve estimates that speculation accounts for about 15 percent of the oil price rise over the last ten years. But it also says that “fundamentals (supply and demand) continue to account for the long-term trend in oil prices.” This snake, if it has a bite, is not poisonous. The fourth reached out with eager hand, and felt above the knee, “what this most wondrous beast is like is very plain” said he, “tis clear enough the elephant is very like a tree.” The ever-growing tree of demand expansion — true, global demand for oil has risen over the last decade, from 76 million barrels per day in 2000 to 87 million in 2010 , but supply has kept pace. Moreover, OECD oil consumption has peaked and is now in decline , and new, unconventional oils have expanded potential supply to meet all needs far beyond the time their carbon emissions will push global temperatures to catastrophic levels. The simple fact is that the OPEC nations, with 77 percent of global proven oil reserves and 42 percent of production, have models that calibrate the exact amount of that oil to put on the market to secure maximum financial return. The United States, representing about 10 percent of global production but 20 percent of global consumption, cannot substantially affect the oil price — nor can more drilling. In fact, America already has more than 50 percent of all the in-use wells in the world. Canada, which produces 50 percent more oil than it consumes , has higher gasoline prices than the United States. The fifth, who chanced to touch the ear said, “E’en the blindest man, can tell what this resembles most — deny the fact who can; This marvel of an elephant is very like a fan.” The fan of inflation — the theory goes that as the U.S. continues printing money to cover its trillion-dollar deficits, inflation will rise and, with it, the price of oil, since it’s priced in dollars. Nice idea. But inflation remains tame while the price of oil has doubled since the depth of the Great Recession in early 2009. Inflation may be a future culprit, but it certainly is not pushing oil and gas prices up anytime soon. The sixth no sooner had begun about the beast to grope, than seizing on the swinging tail that fell within his scope; “I see,” said he, “the elephant, is very like a rope.” The rope of the resource curse — this is a little-understood contributor to the world oil price that may eventually hang the oil-exporting economies. These economies, primarily the OPEC countries, Norway, and Russia, are heavily dependent on export sales of their natural resources — especially oil — to fund their national budgets. Over 50 percent of the federal budget of the Russian Federation is from taxes on sales of exported oil, and this percentage is much higher in some Middle Eastern countries. These revenues are then disbursed to subsidize their social contracts with their citizens — cheap energy and low-cost housing, without which social unrest would accelerate. This requires ever-rising oil prices. Ten years ago, Russia could fund its social contract at a world barrel price of oil of $20. But by this year, Moscow’s budget needs an average price of $115 a barrel to break even. The Middle Eastern states are feeling the pinch as well: Barclay’s Capital recently estimated that the cost of the Arab Spring alone pushed the break-even point for Saudi Arabia’s budget from $78 a barrel to $91 a barrel — to fund the extra spending needed to prevent social unrest from threatening the regime. So, if gas prices are the elephant, did the six wise men find their answer? So six blind men of Industan disputed loud and long, each in his own opinion exceeding stiff and strong; though each was partly in the right, they all were in the wrong! As it is with elephants, so it is with oil prices — plenty of “wise men” talking about what drives oil prices and all are partly in the right — but mostly in the wrong. For the real answer on what is driving gas prices higher, let’s look into the mirror. We all hate high gasoline prices but we love the lifestyle that gasoline supports: the freedom of the open road — flat, straight, fast, and free (with no tolls). We buy up cheap land where you can “drive until you qualify” for a home mortgage (with interest deductible). We then expect the government to build and maintain the infrastructure that supports our 50-mile commute to work, even though we oppose the gas taxes that fund all the infrastructure that provides these very same lifestyle benefits. Until we grasp the reality that the price of oil is directly related to how we waste it, we will continue to dedicate countless hours and endless column inches looking for a different culprit. The elephant in the room is not the price of gasoline — it is us. David Burwell is the director of the energy and climate program at the Carnegie Endowment for International Peace .

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Geri Stengel: Closing the Leadership Gap

April 16, 2012

What gives? As the Women Entrepreneurs as Economic Drivers, a report from the Kauffman Foundation shows, getting those women-owned businesses on a high-growth track would energize our sluggish economy. But it’s not happening. Why? I’ve been asking women who haven’t been stopped what they think the barriers are and here’s what they say: Dream bigger. When women start a businesses, they think too far ahead, to the day when they’ll be managing a family as well as a business.They opt for career paths that seem safer and more flexible than running a major corporation. Liz Elting, CEO and founder of global language service provider TransPerfect, advocates another tack: Go for broke when you are young and have nothing to lose. Don’t worry about what your life will be like in 10 years. Dream big and follow your dreams. When your business grows, so do your options for work/life balance. And being a high-powered CEO doesn’t mean you can’t be a good mom. “If you want to have a family and run a business, you can — and a growing number of us do,” says Elting. Be tough. Nice girls please people. CEOs have to make tough decisions, from firing people to cutting services. In a man, that’s being strong; in a woman it is seen as being bitchy. “If you want everyone to like you, you will have a hard time doing what is necessary,” Elting says. Wake up the men. At home, men must share in household responsibilities, recognizing that the woman’s career is as valuable as the man’s. At work, men need to be more inclusive. Networking events shouldn’t just be guy things. Deals are done in informal settings after the conference or out of the office — on golf courses and in the corporate box at the ball game. Yes, some women like sports, but a lot are left out of that schmoozing and dealing. It’s not that men are circling the wagons; they’re just not thinking it through. They’re losing, too, when possibly great deals get left at the clubhouse. Support each other. Whether in peer groups, such as the Women Presidents’ Organization, or through mentoring women starting out, women need to support and mentor each other. As Sheila Lirio Marcel, CEO of Care.com says, “We must lift as we climb, bring others along with us and collect talented people as we rise.” Men know how to network. Women seem to be falling behind . That needs to change. Change the way business is done. Let’s start firms that don’t follow the same old businesses model; let’s build a model that can accommodate the differing needs of GenY, parents, Type A workers and those who want to work reduced hours. You can retain and grow talent by being flexible — flexible about taking a year off for family without losing a rung on the career ladder; flexible in working hours; flexible about telecommuting. If we don’t restructure business culture, we’re going to keep losing the talented people we’ve paid money to train. Rosalie Mandel, principal of the alternative investments accounting firm Rothstein Kass, has changed the culture of her company. “Our firm had the vision to see the benefits of flexible scheduling — and it’s never said no. We’ve had an official flex policy since 1999,” she said in an article for The Glass Hammer . Changes now, in attitudes, awareness and culture could end the stagnation of small women-led businesses and make them into the economic drivers we need. For more articles about high-growth women entrepreneurs, visit Guiding the Way for Women Entrepreneurs , Ventureneer’s curated source for information women entrepreneurs can use to power-up their businesses.

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Martha Burk: Equal Pay — Will We Ever Get There? An Interview With Lilly Ledbetter

April 15, 2012

April is the month every year when the paychecks of women working full-time, year-round catch up with what men earned by the previous December 31. This year it’s April 17. There are a number of causes for the pay gap, including job segregation (so-called “men’s jobs” pay more than “women’s jobs”) and the fact that working moms are often seen as less serious or less reliable, despite solid evidence to the contrary. But plain old sex discrimination plays a big part. Lilly Ledbetter found out the hard way after 19 years at Goodyear, when she learned she had been underpaid all along compared to men doing the same job. She sued — and won in lower courts. But the Supreme Court overturned 40 years of precedent when it ruled against her in the now-infamous Ledbetter v. Goodyear case, saying she should have complained earlier — even though she didn’t know about the discrimination. The Lilly Ledbetter Fair Pay Act restoring the previous standard (a victim has 180 days to complain beginning when she learns about the discrimination) was the first law President Obama signed. Ledbetter’s new book Grace and Grit chronicles her struggle and the aftermath. I interviewed her this month for my radio show Equal Time With Martha Burk . MB: When did you go to work for Goodyear? LL: I was hired in 1979. There were 5 of us in the group, 2 female. MB : How did you find out after 19 years that you were making less than the men doing the same job and in some cases with less seniority? LL: An anonymous note — a little piece of paper with my salary and 3 male co-workers. I knew it was correct, because my numbers were there to the penny. The first thing that hit me was devastation, humiliation. Then I thought about how many hours of overtime I had worked and not been compensated for what I was legally entitled to, and how hard it had been on my family struggling to pay the mortgage, education, doctor bills. We had done without quite a bit. And this was not right. I didn’t know how I could through my 12 hour shift. MB : Did you leave the plant and go home? LL: No, I finally got my composure. Halfway through my night shift it hit me. My retirement, my 401(k), and someday my Social Security all were dependent on what I was making — and that’s another tremendous loss. MB : Did you go to the company and complain? LL: I had already been to the company recently, because there were rumors, and I wanted to know where I stood. They told me “you’re just listening to too much B.S.. Your salary is fine.” Later my lawyer found out that for many years I had been paid below the minimum for the job I was doing. MB : It had to be a hard decision to file a suit, and risk retaliation or even getting fired. LL: Yes, I thought about it. But I decided I could not let a major corporation do me this way, and not stand up for myself. I went straight to the Equal Employment Opportunity Commission closest to my home. MB: You’ve said that one of the most important pieces of advice you can give to women in this situation is “don’t hold back, tell the investigators as much detail as you can, and document as much as you can.” LL: That’s absolutely correct. It’s very hard — you feel like you’re being a complainer and a whiner, and that’s actually the reputation you get when you do file a charge. But you should open up and tell everything. I was shunned by co-workers. MB: You were transferred to another job where you had to lift heavy tires all day. You were over 60 years old. Wasn’t that retaliation for filing the charge, which is against the law? LL: Yes, but I lost that part and also an age discrimination complaint. MB: The State of New Mexico has a rule that any company applying for a state contract has to file a gender pay equity report showing pay statistics for men and women in each job category. Would that have helped you? LL: Absolutely. I thought because Goodyear was a federal contractor they would be following the law. But that turned out not to be the case, and I couldn’t find out. MB: What would your advice be to women who might be considering filing a complaint? LL: Do your research on salaries in your area. Do not take anything for granted, and document everything. Discrimination is alive and well today. You cannot afford to work any length of time accepting less money, because you can never catch up. Listen to the full Lilly Ledbetter interview here:

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Simon Johnson: Jim Yong Kim for the World Bank

April 15, 2012

A decision on choosing the next president of the World Bank is expected this week — perhaps as early as Monday. The Obama administration nominated Jim Yong Kim, president of Dartmouth College and a noted public health expert. The reaction to this nomination from development economists and people experienced in the business of lending to poor countries has been overwhelmingly negative. They are making a big mistake. Mr. Kim would make an excellent World Bank president. There are three issues. First, should the president of the World Bank continue to be an American? Second, should this position be held by someone with a primary background in economics and finance? Third, should this job go to a person — like Mr. Kim — who has specialized on public health? The job of running the World Bank should not necessarily go to an American — just as the job of managing director at the International Monetary Fund should not be presumed to go to a European. The divvying up of these important positions is a de facto arrangement that became established in the 1940s and 1950s, but it has really outlived its appropriateness. There should be an open competition for both positions — and Mr. Kim faces appropriately strong competition from Ngozi Okonjo-Iweala, a well-respected Nigerian finance minister and former senior official at the World Bank. There is no question that the White House wants this job to go to an American, mostly because no administration likes to be the one to give up such prerogatives. And gone are the days when anyone put up by the United States would necessarily be chosen — even the controversial Paul Wolfowitz went through with surprisingly little push back, although he ran into trouble subsequently. But Mr. Kim is a brilliant nomination, precisely because he is so far from the mold of standard World Bank presidents. For a full write-up of his accomplishments, see this piece by Anjali Sastry and Rebecca Weintraub. (Sastry is one of my colleagues at MIT, where she teaches a very successful course that integrates global health and management issues, follow her @anj_sas; Weintraub is a physician and prominent public health specialist.) The World Bank does not need “more of the same” in terms of vision from its leadership. Like it or not, the World Bank will continue to issue bonds and make loans to countries for infrastructure and other projects, typically at an interest rate that is somewhat below what is being charged by the private sector. It will also try to raise donor funds that can be shared with very poor countries, preferably in a productive manner. The World Bank will also continue to struggle having a profound impact on people’s lives with these standard development lending activities. To understand this point, look at two books. Bill Easterly’s The Elusive Quest for Growth is a brilliant account of what has gone wrong — repeatedly — with thinking about development, including but not limited to the World Bank. Daron Acemoglu and Jim Robinson’s new bestseller, Why Nations Fail , provides all you need to know — and probably more than you can stomach — about why some countries stay so poor. The very sad truth is that powerful people in some places do very well, in their own estimation, when the rest of the country remains in ruins. And there is nothing the World Bank — or anyone else in development economics — can do to break through and share prosperity more broadly in those places. (You can follow Easterly and Acmeoglu/Robinson on twitter: @bill_easterly and @WhyNationsFail; the conversation around @WhyNationsFail is particularly lively and informative at present.) But public health is different. In contrast to the lack luster performance of development economics over the past half century, public health intellectuals and officials have completely transformed health outcomes around the world. This process started early in the 20th century but really picked up pace in the 1940s and 1950s (for more historical background and medical details, see “Disease and Development,” a 2007 paper co-authored with Daron Acemoglu.) The very poorest people in the world did not participate fully in this global health transformation — partly because of the problems outlined in Why Nations Fail. But leaders like Mr. Kim — and in fact Mr. Kim himself — are leading a second breakthrough, in which better health services are being delivered even to very poor people in some of the most difficult conditions imaginable. There is a great deal more to be done. The World Bank does good work supporting public health initiatives, but it could do much more. If Mr. Kim becomes World Bank president — and preferably stays in that position for a decade — we should expect to see a great deal more progress. The task now is to mobilize private donors, pharmaceutical companies, and officials in a robust coalition focusing on improving health and increasing life expectancy. The mortality of children under the age of five is likely to be a top priority in that context. Reducing maternal mortality should also get a great deal of attention. All of this is completely achievable. Public health has done well in the past half century. We should provide more resources and encourage greater success. Save and improve millions of lives. Mr. Kim is exactly the right person to lead the next transformation of global health outcomes. Simon Johnson is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You , available now. This post is cross-posted from The Baseline Scenario .

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Dave Johnson: The National Manufacturing Strategy Debate

April 14, 2012

President Obama has been pushing policies to boost American manufacturing. Democrats in Congress are pushing a package of bills under the label “Make It In America.” The Obama administration’s Gene Sperling gave a big speech recently describing the vital importance of a healthy manufacturing sector to our economy. But others say promoting manufacturing is “the wrong target” and reviving manufacturing won’t help revive our economy. So what’s the story? Gene Sperling, Director of the Obama administration’s National Economic Council gave a big speech at the recent Conference on the Renaissance of American Manufacturing . Sperling talked about how a manufacturing “commons” works, and why it is a good thing if government promotes this commons. A manufacturing commons is an ecosystem, in which manufacturers, suppliers, designers, innovators and all the other manufacturers, suppliers, designers and innovators all complement each other, creating a “cluster” effect. When all of these components are working together it creates a “virtuous cycle” but when they don’t it creates a “vicious cycle.” So because the sum of these parts is greater than the whole, each component’s interests do not align with the interests of the whole — and “our” (We, the People’s) manufacturing capacity is degraded, which degrades our standard of living. So government (We, the People) must play a role in promoting the whole effort. From Sperling’s speech: The ecosystems that grow up around these intersections of innovation and production tend to be complex. They are the result of evolutions that occur over periods of years and decades. Once the virtuous, reinforcing cycles are broken they are difficult to recreate, and they can turn to a vicious cycle. That’s why losing pieces of our manufacturing base should be such a serious concern. … For any single firm, the decision to move production elsewhere may make economic sense. But that decision impacts suppliers and the local talent pool. This makes the decision even easier for the next firm to leave and even harder for the next firm considering coming there to say yes. Job Loss Not Just Competition And Productivity Sperling traces the history of our manufacturing and shows that we didn’t lose jobs when competing with Japan, and didn’t lose jobs during periods of high productivity growth. He shows that what happened between 2000 and 2009 (the Bush years, and China in the WTO) with the loss of 50,000 factories and millions of manufacturing jobs was different , saying “the dramatic loss of manufacturing employment in the past decade was a break from the past and cannot be explained by the conventional view of productivity and technology gains.” Since 2000, the manufacturing sector lost nearly one-third of its workforce, a total of nearly six million jobs. Unlike the preceding decades, according to the Federal Reserve, manufacturing production, the measure of the physical amount of goods that we make, actually declined from 2000 to 2010 by 5 percent. This drop was not just a result of the recession. From 2000 to 2007, manufacturing production grew at only 1.3 percent per year, the worst peak-to-peak performance since World War II. Sperling explains why this loss is so significant to our economy: Manufacturing is special in that so many other jobs depend on manufacturing, extending “from the web of suppliers that support manufacturers to the communities where manufacturing plants often serve as an anchor employer.” For those of you here from towns across the U.S. that rely on a major manufacturer, or states like Michigan where I come from, you understand the impact of manufacturing. In addition to the web of suppliers, the expansion of an auto plant brings other types of businesses to town including new restaurants, retailers, and service providers feeding off of this economic activity. If an auto plant opens up, a Wal-Mart can be expected to follow. But the converse does not necessarily hold — that a Wal-Mart opening definitely does not bring an auto plant with it. So it is clear that this is not just about the back-and-forth of companies competing, we have a national interest in bolstering the manufacturing sector. Finally, Sperling described some of the administrations manufacturing initiatives. He did not come out and advocate for a coordinated national industrial strategy — which every major competitor has and we don’t have. But his speech did advocate “policy to support manufacturing.” This is at least a start. Criticisms And Agreements Matthew Yglesias at Slate, in “Forget the Factories” writes that it is “foolish” and worries about the, “troubling possibility that these ideas will actually guide policy in a second term rather than simply serve as props in a re-election campaign.” Yglesias writes that. It should be obvious that the path forward for America is to focus on our strengths in information technology and media, and not compete with the Chinese for manufacturing supremacy. Yglesias writes that manufacturing areas are “poor” while high-tech areas are “richer” and “more prosperous” and we should “earn from the most prosperous parts of the country, not to imitate Chinese clusters that are even poorer than America’s industrial hubs.” Also, “creating new billion-dollar software startups has a lot more to do with the future of American prosperity.” Yglasias concludes that we should “instead build and expand new industries that push living standards up and keep factory owners searching abroad for cheap labor.” Ezra Klein wrote a piece for the the Washington Post titled “Is industrial policy back?” in which he argued that “cozy consensus against industrial policy is, at least when it comes to manufacturing, flawed.” Describing what Sperling’s argument, Klein wrote: There is, in other words, a building argument that the market is failing to appropriately price the benefits of manufacturing firms. They’re worth more to the economy than they are to individual firms. And that’s the key to this new argument: Sperling isn’t saying America should support the manufacturing sector because it delivers good jobs, or it’s been important to America’s middle class, or even because China is competing unfairly. He’s saying there’s a market failure. And even the most orthodox economists will tell you that it’s appropriate for the government to intervene to correct market failures. Even so, he says the Obama administration isn’t really doing all that much, For all this, the Obama administration’s strategy to promote high-tech manufacturing is modest: A couple of tax cuts, mostly. Some money for research into basic technologies and new techniques. And a sustained effort to talk up the industry’s importance and thus signal to investors that America intends to fight for its manufacturing base. None of these are game changers. At least the consensus against doing anything is changing. Economist Mark Thoma writes in Is Manufacturing the Answer? , “At one time I would have been opposed to industrial policy, but I have been reevaluating my position lately (I can’t say I’ve been convinced as of yet, but I want to stay open-minded on the question).” He links to EPI’s Lawrence Mischel, who writes in Robert Lawrence misleads the New York Times on manufacturing , saying that, … closing the trade deficit would provide millions of jobs and boost the economy. For instance, my colleague Robert Scott has shown that growing trade deficits with China eliminated 2.8 million U.S. jobs between 2001 and 2010 alone, including 1.9 million jobs displaced from manufacturing. Similarly, correcting the currency imbalances with China, Hong Kong, Taiwan, Singapore and Malaysia could add up to $285.7 billion (1.9 percent) to the U.S. GDP, create up to 2.25 million jobs over the next 18 to 24 months (most in manufacturing) and reduce U.S. budget deficits by up to $71.4 billion per year. … manufacturing employment will not return to 25 percent of employment. Nevertheless, we can gain a lot of manufacturing jobs by strengthening the recovery and through appropriate trade and currency policy. This would provide millions of good jobs, aid many communities, and be good for the nation. Edward Luce of the Financial Times writes in “America reassembles industrial policy” that we do have an industrial policy, that favors oil and Wall Street, Whether it is the schooner-rigging of tax incentives for Wall Street — and the federal tax system’s subsidies for debt over equity — or the panoply of write-offs for Big Oil, Washington never stopped promoting favored sectors. Manufacturing was simply not among them. Most are of long pedigree. Some might say it would be easier to pass through the eye of a needle than to separate the fossil fuel sector from its Washington subsidies, which date from the second world war. No presidential hopeful would dare to suggest scrapping Depression-era farm subsidies because they skew so heavily towards key states such as Iowa. Luce points out that Facebook and Twitter might be glamorous, but making actual things is where innovation comes from, Facebook and Twitter may bring disruptive social change. But the most valuable innovation still comes from making products such as semi-conductors, batteries and robotics. Just Look Around I think a problem with economists (and a lot of big-city columnists and journalists) is that they somehow are unable to just look around them. All one has to do is drive around the midwest for a few days, Michigan, Ohio, etc. and you will see for yourself how important — and different — manufacturing is to the country, and what happens when factories close. It affects the entire community and those jobs are not replaced — and the ripple effect from the loss of a community’s jobs base is terrible. All the other jobs that manufacturing supports go away, too, when manufacturing goes away. I live in Silicon Valley. Facebook, Google and Twitter employ relatively few people relative to manufacturing. Apple sends its manufacturing to China , because in China working people don’t have any say , so they can treat workers there worse than workers here in our democratic society will allow. In fact, Silicon Valley has high unemployment , in some areas here as much as 25 percent or more of the office and light industrial buildings are for lease, and our downtowns and commercial streets have plenty of empty stores. They’re just newer , so they don’t look as bad as the downtowns across the midwest. But it is as bad. In February, economist Christina Romer wrote in a New York Times op-ed, “Do Manufacturers Need Special Treatment?” that argued that our government should not promote manufacturing. In it she wrote: American consumers value health care and haircuts as much as washing machines and hair dryers. And our earnings from exporting architectural plans for a building in Shanghai are as real as those from exporting cars to Canada. I responded, in Manufacturing On Planet Economus , and think my sentiments very much still apply in response to this ongoing discussion: Here is the difference: We can’t just keep servicing each other. This “service economy” thing hasn’t worked out so well here on Earth, and now we have a huge trade deficit. It is “better to produce real things” because that is what you sell to others to get the money to pay each other for haircuts (and scissors). Manufacturing brings so much along with it that entire economies have been, are and will be supported. China isn’t making its living by cutting each others’ hair. Neither is Germany, or other countries that have realized the importance of manufacturing and manufacturing policy to an economy. Manufacturing brings with it all the businesses in a supply chain, it brings the research and innovation that manufacturing requires, and it brings a lasting real infrastructure that requires enormous investment to duplicate elsewhere before competition is enabled. Today we have a tremendous current account imbalance that resulted from the terrible trade deficits suffered since we were invaded by this crowd from planet Economus, who told us we don’t need manufacturing — that we should transform ourselves into a “service economy.” And it will require enormous investment to restore the ecosystem that we allowed to escape to other countries in that period. Once you’ve got it, it’s hard to lose it, and once you lose it, it’s hard to get it back. Not so much with services. This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture . I am a Fellow with CAF. Sign up here for the CAF daily summary .

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Mark Engler: ALEC Annoyed at Losing Sponsors? It Breaks My Heart

April 13, 2012

It is a myth that Gandhi said, “First they ignore you, then they laugh at you, then they fight you, then you win.” But that old saying nevertheless carries a lot of truth when it comes to social movements. And it is always a pleasure to see a worthy target of activism move from disregard or mockery to going on the attack. Therefore, I was happy to see the right-wing American Legislative Exchange Council (ALEC) release a half-defiant, half-pathetic statement bemoaning the “coordinated and well-funded intimidation campaign against corporate members of the organization.” Its statement reads : ALEC is an organization that supports pro-growth, pro-jobs policies and the vigorous exchange of ideas between the public and private sector to develop state based solutions. Today, we find ourselves the focus of a well-funded, expertly coordinated intimidation campaign. Our members join ALEC because we connect state legislators with other state legislators and with job-creators in their states. They join because we support pro-business policies that promote innovation and spur local and national competitiveness. They’re ALEC members because they’re more interested in solutions than rhetoric…. At a time when job creation, real solutions and improved dialogue among political leaders is needed most, ALEC’s mission has never been more important. This is why we are redoubling our commitment to these essential priorities. We are not and will not be defined by ideological special interests who would like to eliminate discourse that leads to economic vitality, jobs and fiscal stability for the states. After about the third reference to “job creators,” it’s hard to miss that this is an operation nestled snugly within the depths of the far-right echo chamber, never passing over a chance to frame tax cuts for the top 1 percent as a moderate, bipartisan path to common bliss. In fact, far from sticking to promoting “improved dialogue,” ALEC has (with troubling effectiveness) advanced a slew of reactionary measures in statehouses throughout the country. Stand Your Ground? Check . Prison privatization? Check . Right to Work? Check . Discriminatory Voter ID laws? Check . The list goes on and on . These legislative outrages have inspired a coalition of progressive groups to fight back. They are going after the companies that are paying $25,000 annual dues to this far-right outfit — exposing these brand-sensitive patrons for aligning themselves with the conservative fringe. The tactic is proving very effective. On Wednesday, fast-food giant Wendy’s joined McDonald’s in ending its ALEC membership. Previously Pepsi, Coke, Kraft, Intuit, and the Bill & Melinda Gates Foundation all announced that they were jumping ship. This exodus is what prompted ALEC’s response. That organization complaining about a “well-funded, expertly coordinated” political operation surely merits placement in the pot-calling-the-kettle-black hall of fame. But these words serve as high praise for the organizations that have endeavored to expose the group’s corporate funders. Prominent among them is ColorOfChange.org , which has quickly established itself as a leader in the field of corporate campaigning. I previously lauded ColorOfChange.org for its successful effort to strip Glenn Beck of advertisers after the demagogue (then at Fox News) said that President Obama harbored a “deep-seated hatred for white people or the white culture,” among other batshit-crazy statements . Few in the mainstream media wanted to give the boycott credit for ousting Beck, preferring to believe that the cable news personality had simply outstayed his welcome on the network. Beck himself was not about to acknowledge activists’ impact, just as Kraft now says that it is leaving ALEC for a “number of reasons” — none, of course, related to the tens of thousands of signatures pouring in from ColorOfChange.org and allies such as the Progressive Change Campaign Committee . This is exactly what you would expect. Wendy’s, for its part, says that it didn’t renew its ALEC membership not because of pressure but because it “didn’t fit our business needs.” That, in the end, is a pretty good definition of the purpose of corporate campaigns — making businesses decide that it doesn’t “fit their needs” to attack workers, reinforce institutional racism, wreck the environment, or undermine the social safety net. In any case, it certainly doesn’t fit the needs of the rest of us. Cross-posted from the “Arguing the World” blog at Dissent magazine.

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Joanne Lang: Breaking Free From Fear of Failure

April 13, 2012

As a start-up founder, I’ve come to expect new and interesting experiences on a regular basis. It’s part of what makes being an entrepreneur so exciting. Not long ago, James Logan, Program Director for the Chester County Chamber of Business & Industry , asked me to be the keynote speaker at their Annual Small Business Dinner. I’d never given a keynote before, and like many people, I find public speaking a bit unsettling. However, another wonderful aspect of being an entrepreneur is the amazing support I regularly receive from those around me. After a lovely lunch with Nancy Keefer, the Chamber President, and James, I was so buoyed by their enthusiasm and encouragement that I accepted their invitation to speak. I decided to use this opportunity to reflect on my entrepreneurial experiences over the past year. I wanted to identify lessons learned that would be useful in both the corporate and start-up worlds and I realized that the most important and valuable lesson I had to share was breaking free from fear of failure and embracing the opportunity to learn from failure. Because I think these lessons are worth sharing with others, I’ve included excerpts from my keynote below. Several years ago, I had a big idea that originated from my direct experiences as a mom of 4 children: While I used LinkedIn to organize my career and Facebook to organize my social life, there was no single, private and secure application to help me quickly and easily organize my family and home life. At the time, I was a member of SAP’s original cloud technology team, and I was convinced that Software as a Service was the answer. However, in order to turn this idea into a reality, I had to take the plunge from a safe, senior position at SAP to the unknown waters of a bootstrapped start-up. Because I was the primary income earner in my home, this was a difficult and risky move to make. So what stopped me from pursuing my idea at that time? Fear of failure. Sharing my idea with naysayers just furthered this fear. I’ve heard Arianna Huffington refer to the obnoxious roommate in her head, and this was exactly how I felt. Everyone who discounted my idea fueled the obnoxious roommate in my head that made me doubt myself and fear failure — especially in regard to competing with large, well-established companies like Google. And of course, there was the state of the economy to consider. Then my son had a life-threatening medical emergency and I could not give the paramedic the information he needed. I thought my son was going to die and I felt like a failure as a parent. My son is fine now, but that experience taught me new way of thinking — a positive way of thinking. Instead of worrying about failure, I began to think, “What if this will work?” I put the perceived risks into a perspective that made sense to me: “What is the worst thing that can happen — will it hurt my children?” Once I kicked out that obnoxious roommate in my head, I achieved things that I would never have imagined. My idea, AboutOne, now has partnerships with Microsoft and Suze Orman. We’ve closed a Series A for $1.8M led by an amazing investment group called Golden Seeds , and I’m part of the 6% of women in tech who have received venture capital funding. I was featured in a documentary film about start-up life called CTRL+ALT+COMPETE . In order to find the repeatable models necessary for my start-up to grow quickly, I had to learn that if you are not failing you are not trying enough new things; I had to learn to encourage my team to celebrate and openly share failures so we could learn from those lessons. When I look back at my previous corporate job, I realize that I never failed and I now wonder if that was really a good thing. I wonder if CEOs of large companies should allow their teams to fail, and to celebrate those failures as opportunities to learn and improve. Entrepreneurial opportunities in the US are fabulous. Because of this, AboutOne has been able to help millions of people quickly and easily organize their family and home lives, even when they feel that they are too busy or don’t know how to get started. I’ve also been able to show my children that if they work hard and have faith in themselves, they really can live their dreams. As a mother, I feel these lessons about breaking free from fear of failure and embracing the opportunity to learn from failure are as important for my boys as they are for my company and myself. Originally posted on Joanne’s blog, Notes from the CEO

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Jared Bernstein: A Debate on Inequality, Opportunity, and Politics

April 13, 2012

Had a rousing debate on inequality last night with Scott Winship from Brookings, moderated by Reihan Salam, both of whom lean conservative, and both of whom brought generally interesting and provocative views to the discussion. The conservative take on the issue tends to fluctuate from mild denial (Winship, not Salam), to which I strongly object, to “is it really that big a deal?” with which I disagree but find interesting and challenging. On the denial front, what you mostly get is the “if-you-just-adjust-it-this-way-or-that-way-it-all-goes-away.” Scott raises immigration, incarceration, family structure, employer-provided health insurance, deflators, to name just a few. Some of these don’t affect inequality, like deflators (although Scott cited research that finds prices grow more slowly for poor people); others cut “the other way” — incarceration disproportionately takes lower earners out of the mix, so putting them back in would widen the gap between lower and middle-wage earners. Most of these are dealt with in the CBO data shown in the figure below, including health care, family size, taxes and transfer payments. So, yeah, there’s a lot more inequality and forgive me if I won’t swim in de-Nile on this point. More interestingly, both Scott and Reihan raised questions about how much all this inequality matters. The first argument is that there’s nothing zero-sum about the rise in inequality. Romney’s or Buffett’s or Gates’ or Zuckerberg’s gains are not anyone else’s losses. That’s hard to accept, given that it’s not just that most people’s real incomes kept going up like they used to, just not as fast as those at the top. Income grew more slowly for middle- and low-income households and poverty rates were stickier (i.e., less responsive to growth) in times of rising inequality. The divergence of median compensation from productivity suggests that in the age of inequality, the typical worker is simply not capturing as much of their contribution to growth as was formerly the case. In economese, some of what these and other rich guys and gals capture are ” rents ,” which are not zero-sum. We see this most commonly in the growth of financial markets as a share of the American economy, an important factor in not just the growth of inequality but in the bubble-bust cycle that’s done so much damage of late. In the 2000s, the median income of working-age families stagnated and poverty went up, even as the economy grew and the capital-gains powered income of the top 1% soared (see figure). Since the current recovery began, profits have soared, inequality is back on the rise , and the pay of average workers has stagnated of late. My own longer-term analysis of the factors responsible for the diminished elasticity of poverty with respect to growth finds inequality to be the most important factor (see figure here ). The latter 1990s provides a very useful counterexample. With true full employment upon the land — my favorite inequality antidote — inequality actually diminished between the middle and bottom (the top continued to pull away — cap gains, again), low wages grew with productivity for a New York minute, and poverty rates fell sharply. Inequality, at least in the bottom half of the wage scale, compressed and a lot more growth reached a lot more people. Similarly, Scott doesn’t buy that inequality negatively affects opportunity, despite all the arguments here . From that post, I keep coming back to this anecdote, because I think it’s so emblematic of the problem: …once you start looking for these linkages between inequality and opportunity, they show up everywhere. Here’s a great example from this AM’s WaPo, where public schools facing budget cuts–the disinvestment in public goods noted above–turn to parents to raise funds, and not for one-off trips to Mount Vernon, but for science curriculum, guidance counselors, smaller class sizes, music classes, etc. Of course, the affluent parents can raise hundreds of thousands; the poor parents, barely hundreds. It’s a classic example of inequality reinforcing itself through educational opportunity. One of the problems, admittedly, is that, as noted, this is anecdotal. And most of the other evidence that inequality thwarts opportunity is too, showing that, for example, the inequality of enrichment expenditures on kids or college completion rates grew as income inequality grew. It’s evidence but it’s circumstantial. But it’s convincing to me, and to most others who’ve looked at this closely, so I don’t for a second buy the argument that inequality is economically benign. More challenging was their point that income concentration is a lot more politically benign then I’ve been thinking. As I argue in this deck (slides 16-18), hopefully well known to OTEers, while money in politics has long been a problem, it’s gotten a lot worse as there is so much more income at the top and so much more leeway for that income to “buy” the politics it wants. Read Hacker and Pierson’s book , and you find it awfully hard to avoid the conclusion that we’re stuck in a nasty feedback loop, where the increased concentration of money in politics locks and blocks–it’s locks in policies that perpetuate its growth, and blocks policies that would ameliorate it. An egregious example of late is that one person -Sheldon Adelson, whose net worth according to Forbes in $25 billion (yes, that’s with a ‘b’)-by dint of the Citizen’s United decision, was able to keep a candidate in a national primary for months on end. That strikes me as profoundly undemocratic, and is a potent symbol of how corrupt our political system has become. But Reihan and Scott argued that perhaps this was less portentous than all that. It was basically just a rich guy wasting some money, indulging a fantasy or something (hey, whatever turns you on, I guess). As Scott put it, if Gingrich wins the election, I’ll have a point. And of course he won’t. That’s interesting, although it’s a bit weird to contemplate that allegedly smart investors would make such foolish investment. But are they really that foolish? They’re using their unimaginable riches to steer the ideology, and they’re doing it throughout the system, from local school boards to national elections. This is scary and damaging to America. I’m open to good arguments from smart people like Scott and Reihan. But I simply don’t see how these extreme economic, social, and political imbalances are so benign. I fear they’re cancerous, and if we allow ourselves to be distracted by adjustments to deflators or we over-discount correlations because we haven’t yet determined causality, that cancer will metastasize and America will be in real trouble. Added bonus/penalty : here’s Scott and me debating this stuff on the radio yesterday.

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Matthew Kavanagh: Transformative Development: How Jim Yong Kim Might Change the World Bank

April 13, 2012

Since President Obama nominated Dr. Jim Yong Kim as President of the World Bank commentators have weighed in on his past writings, his nationality, his part in upholding an unjust U.S. domination of the Bank, and his qualifications. But at the heart of this presidential decision is a fundamental question of focus and mission for the World Bank. Jim Kim represents a break from the past — as both his supporters and detractors agree — and would surely steer the Bank in new directions. Interestingly, so too might Dr. Jose Antonio Ocampo, the Columbian economist and former UN official, leaving for the first time two heterodox candidates to head one of the World’s most fraught institutions. What seems to be unsaid in discussions of Dr. Kim, however, is that the new direction is likely toward a focus the stated mission of the bank: the elimination of poverty. A Focus on Delivering Development Dr. Kim’s career gives us a fairly clear understanding of what he would prioritize as World Bank president. He would be, without question, more expert and experienced in development than any World Bank president since its inception. He led the World Health Organization’s 3×5 initiative that, as the journal The Lancet notes , “helped change forever the way we thought about AIDS.” Most recently he’s run the Ivy League Dartmouth College. But it is in founding Partners in Health and more recently in pioneering the field of “delivery science” in global health that we see where Kim would take the bank and the fight against global poverty. At Partners In Health, he and the other pioneering physicians worked to break the mold on medical care in impoverished settings — bringing world-class medicine to people when the general wisdom said it was neither feasible nor “cost effective.” Again and again, Dr. Kim and PIH proved the dominant voices in the development community wrong — showing, for example, that anti-retroviral treatment of AIDS in Africa and the Caribbean could succeed when leading economic and development experts said it was not practical or did not meet the economic conditions ” test for action .” Now some of these same economists are campaigning against Dr. Kim. But to imply, as some have, that Kim’s experience is somehow limited to charity shows a willful misunderstanding of what is unique about Partners in Health. The group’s outlook is medical, but where Dr. Kim has worked in Rwanda, Haiti, Peru, and the former Soviet Union they have managed to transform communities: building and staffing schools, training and (against the development grain) paying community health workers through effective employment strategies, and building community-based research for development. Later Kim brought experts in business, economics, and health together to create the Global Health Delivery Project and the Dartmouth Center for Health Care Delivery Science to bring rigorous study to the actual delivery of health care to impoverished communities. It is in this work that we see what Dr. Kim is likely to do quite differently than other candidates as World Bank President: focus on community-level development in education, health care, infrastructure, and employment and take transformative practices to scale to change nations. And in doing so, he and others have shown that when people demand drugs or doctors or classrooms, well-done health and development can transform the relationship between people and government. To some observers this may seem obvious — isn’t this the raison d’etre of the World Bank today? And yet it is at the heart of a question about the Bank’s future. Challenging Bank Orthodoxy The stated mission of the World Bank is poverty reduction and achieving the millennium development goals on health, education, food, and sustainability. But at the heart of the fight over the future of the Bank has been the word “growth,” which appears nowhere in that mission or in its public description of itself. Long time Bank insiders and orthodox publications like the Economist have taken to challenging Kim’s credentials. Kim, they say, isn’t sufficiently focused on pure economic growth. They cite his suggestion that increases in Gross Domestic Product and corporate profits have often failed to trickle down to poor communities. But in 2012 is this really a question? Who but the most committed neoliberal economists believes that growth alone will end poverty? And to be fair, Dr. Kim has responded to his critics agreeing that, “Economic growth is vital to generate resources for investment in health, education and public goods.” But he clearly has a vision beyond GDP. Here we see the real decision in the 2012 World Bank Presidency race: a vision of the World Bank focused on community-level development results vs. a Bank focused primarily on GDP growth. Only for those who believe in the latter are folks like Larry Summers or PepsiCo’s CEO Indra Nooyi ” better qualified ” for the job than Dr. Jim Kim. For the GDP-purists, Dr. Ngozi Okonjo-Iweala is a better pick as a U.S.-trained free market, growth-oriented economist who spent over twenty years working at the World Bank. And yet during this time the Bank too often failed in exactly the areas the bank is supposed to be focused on: poverty reduction, health, and the Millennium Development Goals. For example: The most recent ten-year evaluation showed that three quarters of World Bank health programs in Africa failed by their own unambitious measures and a recent report suggest the Bank is remains focused on short-term domestic-only financing for health that undermines efforts to halt infectious disease. In the Bank’s education efforts “fewer than half of projects have succeeded in achieving education quality, labor force, management, learning, or efficiency objectives.” At the International Finance Corporation, the arm of the World Bank dedicated to the dubious mission of fighting poverty through financing “companies and other private sector partners” only 13% of IFC policies even had any objectives related to people in poverty. The majority (60 percent) of their advisory programs actually delivered no identifiable benefits to society, let alone to the poor. Why? Because despite rhetoric to the contrary, the Bank’s focus has often drifted from achieving development for people living in poverty. The World Bank’s failures have not been lack of focus on economic growth, but a lack of focus on delivering results to communities it claims to serve. What the Bank needs is someone willing to have audacious goals, to use the bully-pulpit of the World Bank to push for pro-poor policies, and to work to transform a massive institution into an effective institution for impoverished communities. The next Bank president will need to transform the agency’s ideology and practice and move the thousands of staff and consultants along with them. We need an expert in delivering development and cutting through policies that have failed in the past. Dr. Jim Yong Kim’s track record shows he can pull off exactly that. Regardless of the outcome this presidential decision will portend change at the Bank: a serious candidacy by Ocampo and Okonjo-Iweala challenging U.S. dominance is only positive. And hopefully a merit-based selection process will emerge in which the World Bank’s board actually debates the who and the how of delivering for communities. For many of us, though, the key question is who will actually challenge the ways of doing things at the Bank.

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William S. Becker: Children v. Dirty Business

April 11, 2012

On May 11, a group of children will face off against the Obama administration and the National Association of Manufacturers for the latest round of a David vs. Goliath battle in federal court. The kids filed a lawsuit last year against the administration, arguing that common law requires governments to protect critical natural resources on behalf of current and future generations. In this case, the kids argue, the government has an inherent duty to protect the atmosphere from greenhouse gas emissions, and all of us from the impacts of global climate change. In their lawsuit, a group called Our Children’s Trust filed against a who’s who of administration officials including EPA Administrator Lisa Jackson, Interior Secretary Ken Salazar, Agriculture Secretary Tom Vilsack, Commerce Secretary Gary Locke and Energy Secretary Steven Chu. Earlier this month, U.S. District Judge Robert Wikins ruled that the National Association of Manufacturers (NAM) and several California businesses could intervene against the kids, based on the argument that limiting greenhouse gas emissions would lead to a “diminution or cessation of their businesses” — in other words, jeopardize their profit margins. Now, NAM and the administration have asked the judge to dismiss the case. That’s the motion to be considered in May. Blogger Ben Jervey has done a good job describing the lawsuit’s background , including who the kids are and why they’re doing this, so I won’t go into it here. But I am curious about an argument attributed to one of the attorneys for the businesses, that companies have a “legally protected cognizable interest to freely emit CO2.” Of course, what is legal is not necessarily moral, but morality is the province of the clergy, not the courts. More to the point, it would seem that the public — present and future — has a “cognizable interest” to live without the natural disasters, health hazards, humanitarian tragedies and threats of war that are the likely results of climate change and that already are in evidence today. Further, as unofficial co-plaintiffs in this case, we might all point out that while companies can resolve this problem by installing better emission controls, or using cleaner fuels, or changing the nature of their operations, the damages from greenhouse gas emissions are not so easily avoided. In fact, scientists tell us that some of the damages are irreversible. At the heart of this case, it seems to me, is not whether current law permits corporations to willfully alter the atmosphere with their wastes. If we depend solely on political bodies to protect the climate, for example, then we will politicize the atmosphere as well as polluting it. The health of oceans, forests, fresh water supplies and soils — and consequently human beings — all will be subject to the whims and prejudices of politicians. The real issue is whether the health of the natural systems and resources that all of us “own” is protected by a doctrine that transcends the interests of any one industry, the statutes of any one Congress, the actions of any administration, or the abdication of responsibility by any of them. As a 65-year-old, I must admit some embarrassment that our children now feel obligated to face off against the giants of industry and government and all their lawyers. These kids are stepping in where their elders in Washington and the international community have feared to tread. But it’s also heartening and none too soon. What could be established as a result of this lawsuit is that protecting a global life-support system from irreparable harm is a higher priority than corporate profits — profits derived in part from making the rest of us pay the god-awful price of greenhouse gas emissions. It’s our kids who will have to live with the court’s ultimate decision, but it’s in the interest of all of us for Judge Wilkins to allow the lawsuit to proceed.

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Jason Alderman: Put Your Tax Refund to Work

April 11, 2012

If you’re among the millions of Americans expecting an income tax refund this year, you’ve probably already filed your 2011 return and are eagerly awaiting the money. But if you haven’t already mentally spent your refund on a guilty pleasure, here are several great ways you might better put that money to work for you: Pay down debt. Beefing up credit card and loan payments can significantly lower your long-term interest payments. Suppose you currently pay $120 a month toward a $3,000 credit card balance at 18 percent interest. At that pace it’ll take 32 months and $788 in interest to pay off, assuming no new purchases. By doubling your payment to $240 you’ll shave off 18 months and $441 in interest. Use this calculator to try different repayment scenarios. If you carry balances on multiple cards, always make at least the minimum payments to avoid penalties. Paying down the highest-rate card first will save the most money overall, but some people find that paying off smaller-balanced accounts first is a better motivator. Start an emergency fund . To protect your family against the impact of a layoff or other unexpected financial crisis (e.g., medical emergency, major car repair, theft), set aside enough cash to cover at least six months of living expenses — nine months is even better. Seed the account with part of your refund and then set up monthly automatic deductions from your paycheck or checking account. Boost retirement savings. Another great use for your refund is to beef up your 2012 IRA or 401(k) contribution, especially if your employer offers matching contributions; a 50 percent match corresponds to a 50 percent guaranteed rate of return — something you aren’t likely to find in any investment. Spend now to save later. Reap long-term savings on things you’ll eventually pay for anyway: Replace older appliances with energy-efficient models that will pay for themselves through lower utility bills. For example, replacing a 1980s refrigerator with an ENERGY STAR model will save over $100 a year. The government’s ENERGY STAR website can help you find ENERGY STAR products and estimate savings. Sell your older appliances or donate them to a charitable organization for the tax write-off to help offset the cost of new models. Switching from traditional light bulbs to energy-efficient alternatives like CFLs and LEDs, while initially more expensive, can save about $6 per bulb in annual energy costs. Just make sure they are ENERGY STAR-qualified models, which exceed minimum standards. Click HERE to learn more. Schedule routine car maintenance. According to AAA , simply changing your car’s air filter once a year can save over $270, while replacing older spark plugs can save $540 in wasted fuel. Ask whether your utility company offers free or subsidized home energy audits. An audit will tell you which investments — such as increasing home insulation and replacing drafty windows and doors — will lower both winter and summer energy bills. Overcome bad habits . If all that stands between you and quitting an unhealthy (and expensive) habit is the treatment cost, now’s your chance to make a down payment on your health. Also ask whether your health insurance will help cover weight loss and smoke-ender programs or at least lower your premiums afterwards. Finance education. Strengthen your career prospects and earnings potential by adding new skills through college courses or vocational training. Ask if your employer will help pay for job-related education. You can also set money aside for your children’s or grandchildren’s education by contributing to a 529 Qualified State Tuition Plan or Coverdell Education Savings Account. Bonus: Your contributions will grow tax-free until withdrawn. Visit the U.S. Securities and Exchange Commission’s Introduction to 529 Plans and the IRS’s Tax Topic 310 — Coverdell Education Savings Accounts for details. Vacation fund. Start budgeting and saving now for your summer vacation so you’re not caught off guard when the bills start rolling in. See my previous blog, Trim Your Vacation Costs , for travel budgeting tips. Charitable contributions . Many people wait until year’s end to make charitable donations, but nonprofits need help year-round. Prepay bills . If you expect major expenses later this year (e.g., insurance premiums, orthodontia, college tuition), start setting money aside now so you won’t rack up interest charges. Also, use this calculator to see how paying slightly more each month toward your mortgage principal can save you thousands of dollars in interest over the life of the loan. And finally, if you regularly receive large tax refunds, you’re probably having too much tax withheld from your paycheck — you’re essentially giving the government an interest-free loan. Ask your employer for a new W-4 form and recalculate your withholding allowance using the IRS’ Withholding Calculator . This is also a good idea whenever your pay or family situation changes significantly (e.g., pay increase, marriage, divorce, new child, etc.) This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation. To participate in a free, online Financial Literacy and Education Summit on April 23, 2012, go to Practical Money Skills .

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Richard Komaiko: The Ultimate Irony of Groupon

April 11, 2012

Just yesterday, a Pennsylvania class action lawyer, Howard G. Smith, filed a class action lawsuit against Groupon on behalf of all shareholders who bought in during the infamous IPO. The complaint alleges that Groupon misrepresented or failed to disclose information that they had an obligation, under Securities Laws, to share with prospective investors. According to MarketWatch , “no class has been certified” at this time. Here’s what that means in plain language. When large numbers of people have been harmed in the same way by the same defendant, each of them could file a lawsuit on their own, which is very expensive. Alternatively, they can merge all of their lawsuits into one, which totally changes the economics of litigation. All of a sudden it becomes very cost effective to sue, because the overhead of the legal fees is defrayed over large numbers of plaintiffs. Needless to say, it’s in the interest of the plaintiffs to do this, but courts are cautious about when they should and should not permit it. When the court decides to permit it, that’s called certifying the class. The principal factor that courts look to when deciding whether or not to certify a class is the number of people who come forward to announce that they believe they have been wronged. And often times, these types of law suits can sink or swim depending on whether or not the class gets certified. In other words, the fate of Groupon literally depends on whether this class action lawsuit “tips.” The irony is just too delicious… This post originally appeared on AttorneyFee

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Joseph Rauch: Why Obama Should Raise Taxes in 2013

April 10, 2012

If my title didn’t catch your attention, I’ll say it again: Obama is going to win the election this year and when he does, I want him to raise taxes on wealthy Americans by repealing the Bush tax cuts or introducing new tax legislation on the “1 percent” as well as capital gains. Why he will win is an entirely different issue, so for now I’ll just explain why raising taxes on the rich is a good idea. Proponents of tax cuts often ask the question, “Why punish success?” I think the implications of this question and the beliefs of those who pose it are much more important than the question itself. The first implication is that raising taxes on wealthy Americans, commonly referred to as job creators or investors, will make these job creators stop creating jobs and investing/stimulating our economy. I believe this is false because raising taxes will not affect the potential of an investment. In other words, a good investment will still be profitable and appealing and allow wealthy Americans to create jobs and stimulate the economy even if they have to pay a little more money in taxes as a result. I am certain that taxes would not stunt the growth of an industry if the idea behind it has potential and if the investors see this potential. The second implication of “Why punish success?” is that raising taxes on the rich is class warfare. Hyperbole aside, this is also not true. Raising taxes on the rich in any capitalistic society is simply logical. We have a massive debt to China, and one of the most feasible ways to pay them back and regain our economy is to generate revenue by raising taxes. Raising taxes on rich people is the most sensible solution simply because they have more money. A member of the “1 percent” will still be able to live the same lifestyle and will not have to make significant sacrifices if their taxes are raised while a tax increase for a poor American can mean the difference between sending a child to college or not. It is not class warfare, just math and the idea that shaving a piece off a loaf of bread is not so tragic if the loaf is as big as a refrigerator. I believe the last purpose of the “Why punish success?” question is to generate sympathy for wealthy Americans by creating the illusion that all rich people gained their wealth by working incredibly hard throughout their life. Proponents of tax cuts for the wealthy want people to think, “How could I possibly be so spiteful as to raise taxes on someone simply because they worked hard and earned every penny they have?” While many of the “1 percent” percent are rich because they worked hard on brilliant ideas or creating businesses, the life stories of these people are not the definition of becoming wealthy. The less inspiring story is that a lot of wealthy Americans (in this case I mean Americans that make more than $300,000 dollars a year) are rich because their parents were rich and afforded them connections, opportunities and the financial support to go to a top-tier college. Thus, rich people with rich parents usually have their inheritance to thank more than hard work, not that these people aren’t capable of working hard in addition to their given advantages. There are also a lot of Americans that become rich due to having luck in their investments and not necessarily skill in predicting the market. I always chuckle when I think of the people who were persuaded into investing into some little company named Google because they thought the worst case would be they would lose a little money if the company bombed. The logic of believing rich people are necessarily rich because they worked hard is also dangerous because of its implications about other Americans. If rich people have lots of money because they worked hard, then are poor people inherently lazy, and are middle class Americans inherently not quite lazy but not hard-working either? Fortunately, some of the wisest and most influential of the “1 percent,” whose financial savvy and hard work earned them their fortunes, such as Warren Buffet and Irwin Jacobs, do not see taxes as punishment and have stated that their taxes should be raised. Jacobs stated that the economy was healthy during the Clinton years when taxes were high and Buffet argued that it was unfair for him to pay fewer taxes than some of his staff. I hope these men act as shining examples and that Warren Buffet does not continue to be a pariah due to his statements. If Obama raises taxes on the “1 percent,” the worst-case scenario is that they will be upset. Many of them will moan and make threats, but please do not take this as a stereotype of being rich. Rich people will not like increased taxes simply because they are human or rather because they are American. However, if Obama wants to raise their taxes, he has to change his attitude a bit from what is was in his first term and be less willing to compromise. The word bipartisan has a nice ring to it but is generally a waste of political time and effort for both parties. I’ll try to use a positive analogy by saying that American politics is and should be, for better or worse, a lot like American football. The opposing teams smash into one another and try to score more points than the other team. The fans of the winning team cheer and the fans of the losing team boo and have to swallow their pride and cheer again next game. In conclusion, I believe this is the attitude that the formerly naïve Obama should have in his second term if he wants to implement new tax legislature or repeal the Bush tax cuts.

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Jared Bernstein: What Is This Thing Called… Escape Velocity?

April 10, 2012

A number of economists, myself included, have been talking for awhile about the underlying strength of the recovery in terms of “escape velocity.” The idea we’re trying to convey — or at least the one I’m contemplating — is a virtuous cycle of growth begetting jobs, which in turn generates incomes, which supports more growth, etc. Others talk about it in terms of “taking the training wheels off” of the economy, which I also kind of like in the sense that an economy that’s growing too slow is like a wobbly bike ride, where there’s not enough speed to ensure stability. The training wheels analogy also implies that the bike has enough momentum to take off fiscal and monetary stimulus… we’re already taking off fiscal stimulus, by the way — and too soon. Well, someone asked me a good question the other day: how would we know if we’ve achieved escape velocity? The best answer is, of course, multiple quarters of real GDP growth above trend, which right now is generally thought to be in the 2-2.5% range (perhaps a bit lower given slower labor force growth, but that could accelerate as the improving job market pulls more folks back in from the sidelines), followed by consistent quarters of robust job growth. We started kinda, sorta, maybe, seeing something like that in recent months, with GDP averaging north of 2% and employment above 200K. But both of these trends are still too shaky for many economists’ comfort (last Friday’s jobs report didn’t help), and while forecasts disagree, some predict slower growth ahead, jobs settling in around 150-200K, and unemployment staying about where it is, in the low 8′s. That’s about what I expect in the near term. It’s not bad — it’s progress, moving steadily in the right direction –, but neither is it fast enough to ensure the bike doesn’t wobble, especially if it hits a bump. But there’s another, related version of self-sustaining growth that also warrants a close look.* I don’t have time to do it justice right now (Monday night basketball beckons!), but I can get things started, and I encourage others to join in. In this version, you assume that absent a flock of albatrosses around its neck, the economy can pretty much be expected to grow at trend. I admit, there are many important nuances of great import that this theory brushes over (is not the underlying trend insufficient from the perspective of truly full employment; what about the structure of jobs? Too much finance? Too little job growth among startups? Accelerated labor-saving technology? A structural gap between pay and productivity?) I worry intensely about all of those questions — but it’s also true that absent the weights around its neck, the economy is a lot more likely to be on track toward self-sustaining growth. Trend growth may not be sufficient for solving our structural problems. But it’s surely necessary. So, how do you gauge our economic progress in this regard? One good way is to think about the corrections that need to take place and see how far along they are. Once they’re complete, we’re more likely to hit escape velocity. Like I said, I’ll get the party started and will add more in days to come. The first and one of most important corrections is housing. True, it was a home price bubble that got us into this uniquely deep mess, but it’s also the case that housing, goosed by low interest rates, is a traditional escape route from recession. Here, two slides suggest the correction is largely, but not wholly over. First, the Case-Shiller price index doesn’t appear to have bottomed and similarly, the residential investment contribution to GDP has yet to show any life. Sources: 1, S&P’s Case-Shiller Index, 2, NIPA Next, the TED spread. This is a measure of riskiness in credit markets, and back in the heart of the GR, we talked about targeting the TED , recognizing that if it remained high, there was little hope of credit markets coming back on line. Think of the TED spread as a measure of blood pressure in the veins of credit. It’s picked up a bit lately, but clearly credit default risk is way down from its heights. It’s fair to say that this correction is and no longer weighing on the economy. Source: FRED, 3mos LIBOR minus 3mos T-bill (that’s right, I got the TED from FRED, like I SAID) What else? There’s household indebtedness — very important, and well-analyzed here , related to housing, of course, and not yet fully corrected. But that’s where I’ll start when I can get back to this. *I thank the great econometrician Jim Stock for helping me to crystallize these thoughts, but any mistakes in logic or measurement are mine, not his. This post originally appeared at Jared Bernstein’s On The Economy blog.

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Robert Pozen: An Intermediate Approach to the Auditor Rotation Issue

April 10, 2012

In March the Public Company Accounting Oversight Board (PCAOB) held hearings about whether to require public companies to change (or “rotate”) their external auditor periodically. Similarly, the European Union has proposed mandatory auditor rotation every six or 12 years. Mandatory auditor rotation is designed to address a potential conflict of interest between a public company and its auditor. Because an auditor is hired and paid by the public company it audits, the auditor’s desire to maintain a good relationship with its client could conflict with its duty to rigorously question the client’s financial statements. Advocates of mandatory rotation generally object to the historic coziness between auditors and the management of public companies: the auditors of almost 36 percent of all companies in the Russell 1000 have held that position for 21 years or more. These advocates cite two specific benefits of replacing the auditor every five or 10 years: a term limit for an auditor’s engagement with a company would decrease the auditor’s incentive to ingratiate itself with management, and furthermore, mandatory rotation would keep the current auditor on its toes, since it would fear that a new auditor would expose any previous errors or omissions. On the other hand, public companies have vigorously argued that the benefits of mandatory rotation are outweighed by its costs. Because multinational corporations are very complex, an auditor must develop company specific knowledge to fully understand the company’s finances. Mandatory rotation would quickly erode this institutional knowledge, reducing audit quality and increasing costs. In addition, critics point out that mandatory rotation undermines the role of the audit committee in overseeing the audit process, as expanded by the Sarbanes Oxley Act. That Act made the auditor report to the independent audit committee, which now has the power to appoint and terminate the auditor. Given these competing arguments, I favor a compromise proposal requiring the independent audit committee to periodically issue a request for proposal (RFP) for the audit engagement, but allowing the existing auditor to bid on the RFP. This proposal would reap most of the benefits of auditor rotation without imposing many of the costs. Even if the existing auditor usually wins the RFP, the bidding process raises the probability that the audit committee would appoint a new auditor. This would encourage the existing auditor to maintain its professional skepticism more vigilantly. The existing auditor would be worried that any deficiencies in its audits would be discovered if a new auditor were subsequently engaged. Yet an RFP requirement would not impose large costs on a public company from switching its auditor every five or 10 years. The existing auditor would be replaced only if the audit committee decided that this change met a cost/benefit test in the context of that particular company. Most importantly, an RFP process would reinforce the critical role of the independent audit committee in the eyes of the external auditor, especially one with a longstanding relationship to the same company. The RFP process would make it clear that the independent directors on the audit committee, not company management, were in charge of choosing the auditor and supervising its work. Nevertheless, commentators are likely to raise three practical questions about this RFP proposal. 1. How often should the audit committee be required to issue a RFP? In my view, the answer is every 15 years. This period would allow an audit firm enough time to gain the expertise it needed to understand the complexities of a global company. This period would also be long enough to warrant a serious effort by other large audit firms in responding to these RFPs. Audit fees for 15 years might even persuade one or two middle-size audit firms to develop the capability of auditing multinational companies. 2. Will there be enough firms bidding on the RFP other than the existing auditor? Even if only one firm other than the existing auditor responds to the RFP, that should be sufficient to obtain most of the benefits of a competitive bidding process, as shown by the bidding for many large defense contracts . Of course, audit firms cannot perform both audit and non-audit services for the same public company. But the regulators could allow any qualified firm to respond to a RFP as long as the firm stopped the non-audit services if it won the RFP for the audit. 3. Will the RFP process make audit firms more likely to fold on tough accounting issues? With a periodic RFP process, the auditor would make great efforts to serve the needs of the audit committee, not company management. Thus, the RFP process would make the existing auditor to be more responsive to the audit committee — exactly what we want. With the RFP process in mind, the auditor would be more likely to alert the audit committee to close questions on financial reporting and possible areas of debate with company management. In short, mandatory audit rotation as a blanket rule is probably not cost effective. Instead, the PCAOB should require the audit committee to issue a RFP for the auditor engagement every 15 years, but allow the existing auditor to participate in the bidding process. This process would enhance the auditor’s willingness to make tough calls and reinforce its primary allegiance to the audit committee.

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Andrea Learned: Sustainability’s Neglected Frontier: The Young and the Entrepreneurial

April 10, 2012

Where should we be looking for sustainable business change today? Perhaps it should not be toward the usual corporate suspects, many of which are slow to decide on even minor operational and product development shifts. The more compelling view may instead come from looking in the entrepreneurial direction. I’ve been covering corporate sustainability for a while now, but, admittedly, my passion for it has waned. What most big companies can achieve in their attempts to change centuries old operational systems struggles to compare with the game-changing energy, ideas and commitment I’ve recently come across in the young entrepreneur community. The potential sustainability impact of what those in Seattle (my own city) and those of similarly innovative minds on many other college and university campuses across the nation/globe is what strikes me to the core of my ever-hopeful, change-through-business soul. A week ago I spent a day with representatives of the Pacific Northwest’s emerging generation of sustainability and socially-minded entrepreneurs, and it blew me away. To fully disclose, and though the thoughts I share here are my own, I participated in this event in my social media role for the University of Washington’s Center for Innovation and Entrepreneurship, covering their Environmental Innovation Challenge (EIC). After being at this gathering, I realized that corporate sustainability likely has nothing better than the potential for paradigm shift that bubbles inside the men and women now attending our colleges and universities. But, back to the actual event. As the 23 student teams made their two-minute pitches early on, it was all my Twitter-happy fingers could do to capture each of their cool ideas and smart thinking. And, I was not the only one impressed. Even the highly experienced Seattle-area entrepreneurs who judged the challenge seemed to have the same feeling as me, which was that our economy will do just fine — as long as we identify, support and encourage this generation of student sustainability innovators. (Many also said something like “Darn, why wasn’t I this smart when I was that age?”) A quick look at three of the winning innovations from this one event demonstrates why there is great sustainability promise in our next generation of entrepreneurial minds: • An alternative to freeway “jersey barriers” made from something so often found lying shredded near them: old tires. • Sustainable shelter-building materials packaged in an easy to transport barrel as an alternative to post-disaster relief transitional housing. • A radical re-design of non-stick cookware surfaces that eliminates the coating altogether. ( More on those innovations , including some video.) Such incredible ideas might never have made it to prototype or professional business plan format were it not for an approach now starting to get more emphasis on campuses: multi-disciplinary collaboration. The various combinations of students developing these particular innovations, in fact, reflected a mix of undergraduate and graduates, and included engineering and science students working right alongside business majors. Creation at this level comes from true teamwork, and sustainability innovation demands collaboration like nothing else. If I seem enthusiastic, it’s because I’ve been so newly reminded of this and want to spread the word: Students are not some separate entity to be forgotten (until they graduate) in our struggling but sustainability-pursuing economy. Instead, these inspiring men and women are the beginning of a talent pipeline that is already changing our world. Before our very eyes, sustainable innovation is turning the young and restless into the young and entrepreneurial. Here’s hoping your company is paying attention.

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Jacqueline Corbelli: Insights on Tech as an Agent for Transformative Change, on Madison Avenue and Beyond

April 9, 2012

When you think about advertising, it’s not likely that the latest tech gadget immediately leaps to mind. But, new technologies and digital devices play a vital role in how today’s digitally connected consumers engage with and experience life, and as an extension brands. Over the past ten years, technology has helped redefine the way businesses in most industries add value. From online banking to internet advertising, the business landscape has been reshaped by the ways consumers discover, interact with, and absorb information and content. And there’s a pattern — when technology proves it can enhance our experience as consumers, it tends to catch on. Pure technology solutions on the other hand (‘technology for the sake of technology’), most often, do not. From advising CEOs on how to best harness and capitalize on the promise of technology, to my current role leading the TV advertising company I founded and architected off the same premise back in 2003, I consistently find that true technology solutions feed our desired behaviors and preferences as consumers, rather than simply change or replace them. Smart phones, tablets, mini-laptops, connected TVs — the value to us of this ever-increasing array of devices lies in the ways we combine our use of them to specifically fit our life; our decisions are most often guided by choice, ease of use and control. As part of my new contributed blog series, I’m going to cover the various ways technology is influencing our behavior, what and why we adopt and the impact of true technology solutions on the world — from mental models to business models, economic development to keeping a business relevant to consumers. All with a persistent focus on the winning formula: a sustained commitment to increasing the impact and quality of the end consumer experience. I’ll begin with one of my latest passions, advertising. Digital Killed the TV Star? Digital media reporters have asserted that Silicon Valley is the new Madison Avenue. With so much focus on digital and social media, you would have expected technology to successfully kill the 30-second TV commercial. Not true. In fact, TV advertising and how you experience it has been going through a decade of gradual transformation that allows your favorite brands to build an interaction and relationship with you, through deeper engagement and an ongoing dialogue. It’s a widely held belief that as consumers we hate advertising; many point to our desire to skip commercials in favor of a TiVo or VOD experience. However, the latest statistics on the topic show there is a place for advertising in consumers’ lives. That, indeed, when made enjoyable and to fit seamlessly with the way we prefer to watch television, ads not only “break through” the clutter and noise of our busy lives, they actually can inspire us to voluntarily watch and interact with them — at a rate of millions per week, to be exact. As a result, major consumer brands — and the country’s top advertisers — have set their sights on the latest in interactive TV advertising as a way to build an ongoing dialogue with their target consumers. Here are just a few of the brands running the newest, most innovative forms of interactive TV ads that viewers can watch right now: Axe, via Xbox and iPhone iAd Degree for Men, via Xbox Dr. Pepper, via Xbox, DIRECTV and Dish GM Chevy Sonic, via DIRECTV and Xbox Hellmann’s, via Dish and Verizon FiOS Suave Keratin Infusion, via DIRECTV, Cablevision and iPad iAd Tresemme, via DIRECTV and Dish Red Bull, via Xbox What’s most shocking to some is the results these interactive campaigns are generating. iTV ad campaigns average 3 to 5 percent click rates. For some perspective, this compares to best performance benchmark online of just less than one percent. In addition, TV viewers are spending up to 15 minutes playing custom branded games, downloading recipes, entering sweepstakes, ordering products and more, all with their remote control. According to Nielsen, these interactive campaigns consistently outperform traditional TV and online advertising in generating awareness, engagement and ROI. I’ll touch more on these compelling figures in my next blog post, “New Digital Technologies Set to Advance Interactive TV Advertising.”

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Harlan Green: The Terrible Cost of Bush II’s Deficit

April 9, 2012

It is now becoming evident just how much damage the GW Bush budget deficit has done to the U.S. In part from the tax cuts of 2001 and 2003, which sharply reduced taxes on income, capital gains, and corporations, two wars and the Great Recession that began halfway through Bush’s second term, the deficit now threatens not only our fiscal soundness, but our status as the world’s economic powerhouse. It was VP Cheney who maintained that Reagan had said deficits don’t matter, but President Reagan raised taxes some 11 times during his tenure to save the budget, and the economy, as his Budget Director David Stockman described so well in The Triumph of Politics . In other words, President Reagan didn’t dare go as far as Dubya and VP Cheney in creating a deficit that siphoned off revenues to the wealthiest 1 percent and raised corporate profits to the highest in history as a percentage of GDP, while almost causing the disappearance of our middle class while endangering Medicare and social security. So it shouldn’t be a surprise that Republican Paul Ryan’s 2013 budget proposal passed by the Republican House follows in GW Bush’s footsteps. President Obama assailed it as “… a Trojan horse, disguised as deficit-reduction plans,” said the president at an Associated Press luncheon in Washington on April 3. “It is thinly veiled Social Darwinism.” Obama was referring to the fact that Ryan’s plan doesn’t really reduce deficits. Because it calls for trillions of dollars in spending cuts without raising revenues, 62 percent of which would come from low-income programs, just as the Bush II budgets did. And both revenue increases and spending reductions are necessary to pay down the budget deficit. In fact, the new tax cuts at the top would dwarf those for middle-and lower-income families, says The Center for Budget and Policy Priorities, a non-partisan think tank. After-tax incomes would rise by 12.5 percent among millionaires, but just 1.9 percent for middle-income households. It’s Bushonomics all over again. What was most unconscionable about the Bush tax cuts was that they occurred during his first recession — from March to November 2001, caused mostly by the dot-com bubble bust. In fact, he was starving the government of revenues at the same time that he was planning two wars, as has been revealed in several books by Ron Susskind , including The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neil . Now we have a yawning federal deficit that continues to grow past $15 Trillion. Bush Treasury Secretary Paul O’Neill, who was fired by VP Cheney for advocating that the four Clinton years of budget surpluses be used to put social security and Medicare on a more secure footing, described the result of the debate that led to such a disastrous decision in The Price of Loyalty . It was to return government to its 1900 size, the era of William McKinley and the Robber Barons, by reducing government spending enough “to shrink it down to the size where we can drown it in the bathtub”, Grover Norquist , architect of the no tax increase pledge signed by more than 200 Republican legislators, once famously said. So we now know what makes up the current $15 trillion federal debt. Most of the deficit was created by the Bush tax cuts , war spending, and the second Great Recession that occurred under the Bush presidency — from June 2006 to December 2007 — says the CBPP . It resulted in the most anemic recovery since WWII, with just 5 million jobs created, not even recovering from the 8 million jobs lost since 2000, and the median household income decline from $56,000 in 2000 to $52,000 in 2011 dollars, where it was in 1997, according to the New York Times and Moody’s Analytics . Graph: CBPP/org That cost of the Bush II deficit is just now becoming evident, because of its growing size and the fact that budget matters are so arcane and hard to understand by the public and politicos alike. But all of the Bush tax cuts contributed to the deficit, because they weren’t paid for. GW Bush wouldn’t cut back spending to match the loss in revenues because he wanted to pay for his wars, so he borrowed the monies. Whereas during the Clinton era, legislators had agreed to pay-as-you-go rules, where spending cuts had to match tax cuts. And the Great Recession has continued to grow the deficit. In fact, if just the Bush tax cuts were extended it would increase that deficit by $4.6 trillion over the next 10 years, says Andrew Fieldhouse and Ethan Pollock of the Economic Policy Institute , a labor think tank. That means we are now facing its terrible cost. Republicans have proven their ideology of starving the beast of government ends up starving the economy of growth, except for the 1 percent who are their supporters.

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Dr Layla McCay: Wanted: Professional Soulmate

April 9, 2012

I had never heard of the term “professional soulmate.” But it turns out that while I was spending my formative years coming up with brilliant ideas to change the world, I should actually have been screening my fellow students for their potential as my future business partners. That’s what the founders of “farm-to-table” company Sweetgreen did, while they were students at Georgetown University. Recently, they told us at TEDxDupont Circle , a screening party that streamed the TEDxChange conference from Berlin (with “local voices” afterward), that as an entrepreneurial society, we put too much emphasis on the big idea. They argued that you could have all the best ideas in the world, but it takes a synergistic partnership to make it happen. As they said, Ben and Jerry didn’t become big because of Chunky Monkey. (Not that I’m suggesting that flavor is the best idea in the world, though it’s not unpleasant…) The conference wasn’t specifically about partnerships, but it really drove home the message — finding the right partners is critical to success. I liked hearing about designer Jeff Chapin’s partnership with a non-profit organization to design low-cost latrines that people really want, with huge potential impact on sanitation and health in the world’s poorest countries. It was intriguing to think of how aesthetics can play such a central role in the success of public health measures. Then Theo Sowa made a thought provoking presentation about how interventions to empower African women keep making the mistake of conceptualizing these women as “victims” who need to have things done to help them, rather than recognizing their leadership and partnering with them to deliver change. Bill and Melinda Gates are surely each others’ professional soulmates. The TEDxChange chair noted that their Foundation has become the biggest change agent in the world outside of government. This conference launched their ‘ no controversy ‘ campaign to catalyze the leadership needed to increase access to contraception in low and middle income countries. I suspect it will get results. In the meantime, there may be a gap in the market for professionalsoulmate.com …

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Jerry Jasinowski: A Mixed Economic Picture

April 9, 2012

I’ve just spent an interesting weekend with a group of CEOs discussing the global economic outlook, and how firms are striving to compete and grow in a challenging economic environment. They described a world of rapid change, financial and stock market volatility, and uncertainty. On balance, they are fairly upbeat about the U.S. economy, but have major concerns about Europe, China, and — of course — what’s going on in Washington. After major restructuring, most companies have dramatically reduced their breakeven points and strengthened their balance sheets so they can generate good earnings even in this slow growth environment. The CEOs believe that the U.S. economy is in better shape than most of the rest of the world, and is today the best place to invest. There was uniform agreement that Europe is in a recession and has done little to reduce its sovereign debt problem. More specifically, Spain’s economy is in deep trouble and will have difficulty financing its debt this spring. There were similar concerns about Italy and France. In general, the CEOS are skeptical that the Euro community has put in place the kinds of reforms necessary to make them more competitive and reduce debt. Few companies see a slowdown in China as a problem. Rather, the majority see China as a big opportunity as the Chinese hike investment in infrastructure and switch to a more consumer driven market. The CEOs were concerned about intellectual property protection and unfair business and trading practices by the Chinese. Many companies believe the Chinese government will always tip the scales in favor of Chinese firms, discriminating against U.S. business. I contended the recent run-up in the stock market was in large measure due to the easy credit environment driven by zero interest rates here, a short-term central bank bailout in Europe, and quantitative easing by most central banks. While it is clear that these actions have helped restore economic growth in some areas, particularly mining, oil, housing, commodities, and finance, there have also been negative impacts on economic fundamentals. More importantly, there is growing concern that more quantitative easing will stoke the fires of inflation either here or abroad. Overall, there was near uniformity of opinion among the CEOs that the U.S. will experience 2% to 2.5% growth in the months ahead. Although not satisfied about that, most of the CEOs felt quite able to operate profitably in that environment. They all stressed that they have in place lean manufacturing, new sourcing practices, and new product development that will allow them to be successful in both this country and abroad. Moreover, virtually everyone in the room was looking at acquisitions as a possible add-on to their organic growth models. They were not so optimistic about employment. All the companies were concerned about the high level of unemployment and inadequate training of the U.S. workforce. Friday’s weak — 120,000 payroll — number reinforces their view that too many workers are being left behind in this weak recovery, either because of weak growth, inadequate skills, or uncertainty emanating from Washington. What we need now is a public-private partnership backing a bi-partisan, pro-manufacturing, pro-growth agenda that creates jobs. Jerry Jasinowski, an economist and author, serve d as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements.

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Raymond J. Learsy: The New York Times Sheds a Tear for Wall Street Paydays

April 8, 2012

Andrew Ross Sorkin, The New York Times ‘ and CNBC’s subtle apologist for Wall Street, Goldman Sachs et al slinks again –this time in a featured babble on the growing difficulties being encountered by the Wall Street folk to strike it big time. Mr. Sorkin presents us with a laundry list of why the cascade of wealth that has been showered on Wall Street players is coming to an en end. That henceforward times are going to be tough with its implication that we should all be more charitable and understanding in our judgments of the errant behavior that has done so much to bring our economy close to its knees. He plaintively intones, “It is harder than ever to become one of the world’s wealthiest individuals by working on Wall Street.” He then goes on to draw a distinction between the Wall Street Poobahs such as JP Morgan’s Jamie Dimon, Goldman’s Lloyd Blankfein being the poorer cousins of the hedge fund crowd, a bit like saying they all belly-up to the same bar, but one set is drinking scotch, the other ordering gin. Then, brimming with a subtext of the unfairness of it all, that the Wall Street types haven’t reached the herculean heights of wealth such as the likes of a Bill Gates. Without any qualifier, thereby implying Bill Gates’ billions were achieved by the same razzle-dazzle as the Wall Street players and their speculative excesses. No mention that Bill Gates earned his billions by his exemplar of American meritocracy, thanks to his entrepreneurial vision and courage through which we have all realized richer lives — this, in stark contrast to the largely self-enriching crony capitalism of Wall Street laid bare by the events of 2008 and thereafter. In the meanwhile, working in the trenches, getting their hands dirty on farms, on assembly lines, tending the sick in emergency rooms, driving the trucks or buses, getting splattered with oil working on a rig, or whatever day to day undertaking in which they were engaged, clearly those below were too busy to take heed of Mr. Sorkin’s concerns. Last year alone these hard working souls pulled in the following paydays from their one year’s sweat and labor: Ray Dalio, Bridgewater Associates,$3.9 Billion Carl Icahn, Icahn Capital Management,$2.5 Billion James H. Simmons, Renaissance Technologies Corp,$2.1 Billion Kenneth C. Griffin, Citadel,$700 million Steven A. Cohen, SAC Capital Partners,$585 million If timing is everything, than the timing of Mr. Sorkin’s article becomes ever so curious coming just one week after the publication of these humungous sums. There he was, as so often before, trying to steer our focus from the excesses of Wall Street’s “Big Money” parade.

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Mark Samuel: Being Indispensable: When Keeping Commitments Undermines Your Accountability

April 7, 2012

It is common thought that accountability is about keeping commitments. There is nothing so frustrating as when someone has made a commitment to us — to communicate with us, to complete a task we asked them to complete, to assist us with something we’re having difficulty with — and then fails to follow through. It can be hurtful or frustrating, and our typical response is “You aren’t being accountable.” It can be even more frustrating when we don’t keep our own commitments — to things like our diets, keeping ourselves organized or to staying in touch with our friends. We feel we are letting ourselves down and may label ourselves as “not very accountable.” Regardless of which side of the broken agreement or commitment we may find ourselves, thinking that a broken agreement is necessarily an example of a lack of accountability may be a misdiagnosis. It might surprise you to learn that being accountable does not have to mean keeping all of your commitments. Why? Because accountability is more about being counted on to achieve desired results than accomplishing lots of meaningless activities. How many times have you seen someone looking busy doing lots of things they’ve committed to, but failing to achieve quality results, or satisfaction of their target audience (spouse, boss or customer)? Accountability is not just keeping commitments. Accountability is taking action consistent with your desired outcome. It begins with defining the kind of results you want to achieve in your life at home and at work. What kind of partner do you want to be in your relationships? What is the optimal health that you want to experience? What kind of reputation do you want to have at work with your teammates, your boss and/or your direct reports? Being accountable is taking actions consistent with those desired outcomes. It is not making and keeping commitments that take you away from your purpose. Based on those desired outcomes, it is essential to only make commitments that support your “picture of success” rather than accepting every commitment put before you in order to accommodate others… Sometimes, you may even make a commitment that you have to break or change in order to get back to creating your desired outcomes. For instance, I made a commitment one day to go out with my co-workers after work the following Friday. However, after getting on the scale on Wednesday, I decided it was important for me to get back on my eating plan immediately to lose weight and get my cravings under control. I had to break my commitment with my friends for a higher purpose of getting myself back on track with my health. Now, you might wonder, why didn’t I just go out with my co-workers and eat healthy foods and drink water? Because, at that stage of getting healthy, I was still having difficulty curbing my cravings, and I didn’t want to risk breaking a commitment to my higher purpose. I also wanted to support myself by not putting myself in a risky position in order to accommodate others. The problem with keeping commitments that support others at the expense of supporting ourselves is that we feel like we have undermined our own value by breaking a bigger and more meaningful commitment to our own personal success. Six Steps for Increasing Accountability and Keeping Commitments Identify your “picture of success” and desired outcomes for various aspects of your life — relationships with yourself, family and friends; your performance and communication at work; your contribution to your community or your personal/spiritual growth, hobbies and health. Develop the very few commitments you are willing to make to support yourself in achieving your “picture of success” or desired outcomes. These are your “non-negotiable” commitments. Create “recovery plans,” or your best responses which you will use if you find yourself in jeopardy of breaking one of these commitments or agreements. Recovery plans represent how you will communicate with others and yourself if you can’t keep a commitment as is, so that the commitment can be amended or changed without breaking integrity with yourself. Assess any new commitments that others ask you to make in order to stay consistent with your “picture of success” and have the courage to say “no” to a new commitment that breaks your accountability to your higher purpose or your values. If you can’t make a commitment to support or accommodate another person, assist them in finding a new solution or re-evaluating their request so that they can achieve or make progress on their “picture of success.” Acknowledge yourself for every commitment you keep that reinforces your “picture of success,” and acknowledge yourself for every commitment you break or don’t agree to because it will take you away from acting consistent with your purpose or values. If you would like to learn more about making yourself indispensable, I invite you to visit http://www.MarkSamuel.com to download two FREE chapters of my new book. For more by Mark Samuel, click here . For more on success and motivation, click here .

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Kay Koplovitz: Women & Augusta: The Long Drive From the First Tee to the Green Jacket

April 6, 2012

Virginia Rometty isn’t the first women to approach the first tee at Augusta National Golf Club. I entered a man’s domain when I became the first women to join the ranks of television CEOs to be invited to the privileged Media Day luncheon, always a Thursday event, and the first day of tournament play. The year was 1982. I am the founder and then the CEO of USA Network. We had negotiated a license to cover the Thursday and Friday tournament coverage in cooperation with CBS and Augusta National Golf Club. It was the first time the first two days were to be covered live on TV. It was also the first time I had ever attended the event. It was a magnificent spring day, sunny and warm, and the generous hospitality of the Augusta members was on display. This really is one of the world’s most prized events to experience even if you aren’t a golfer. The course is lined with flowering dogwood, cherry blossoms, azaleas and a potpourri of other plants of magnificent color. I was truly impressed with its beauty. Also impressive was the lack of commercialism — no big corporate banners, no merchandise tents. It was and still is the club of Southern hospitality. However, it was also the club with no black, women or Jewish members. In that year I also remember being astonished that all the club caddies were black and that they were the only black people allowed on the course. So I should not have been surprised by what happened as a dozen or so executives of the TV networks gathered with Chairman Hord Hardin in front of the Clubhouse to go to lunch. We entered the front door and into the main dining room where club members and guests, including women, were having lunch. We proceeded up the staircase just to the left of the hallway leading back from the main dining room. Hord was leading the way and I was right with him as we ascended the staircase. The men followed. As we approached the top of the stairs, Hord turned to me with a concerned look on his face and said in his deep southern drawl, “Ah, Kay, we’ve got a problem.” Hmm, a problem, I thought. “What’s our problem, Hord?” He hemmed and hawed a little and then said, “We don’t allow women on the second floor.” Knowing I wasn’t about to go downstairs and eat by myself, I quipped back, “Well, Hord. What are we going to do about that?” After only a moment’s hesitation on Hord’s part he offered, “Well, I guess we’ll eat downstairs in the Trophy Room.” The group turned around en masse and filed back out the front door and walked over to the Trophy Room, just 30 yards or so away. And so it was in 1982 that a new tradition was started at Augusta, as the TV luncheon was held in the Trophy Room for the next decade, until the upstairs men’s grill was finally open to all. Flash forward to eight years later, when racial equality was causing pressure for the PGA at Shoal Creek, Alabama. A colleague and I were seated on Hord’s veranda overlooking the lake in Harbor Springs Michigan. Hord was rambling on when he stopped short and his eyes lit up. Out of the blue he commented that I’d make a fine member of the club. Obvious to me then, he was thinking he’d throw the heat off the race issue by inviting a woman to join. But suddenly another thought crossed his mind, and I saw his eyes cloud over. He looked me directly in the eye and softly said, “You married a Jew, didn’t you?” I know traditions are slow to change, but change they do. Augusta does have a few black and Jewish members but no women yet. Now, thirty years after I first arrived, our time has come. It’s been a long drive since I first teed up women at Augusta. Now it’s time for Ginny and others to don the coveted Green Jacket.

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Ron Ashkenas: Rejection Is Critical for Success

April 6, 2012

There are few experiences more painful than being rejected . We vividly remember the hurt of not being picked for a sports team, not being invited to a social event, or not being accepted to university. Our basic human need to belong causes these incidents to stick with us through the years. Even as adults, at various times in our careers we’re not selected for jobs , promotions, or projects; or even less significant benefits such as parking spaces, preferred offices, or new computer equipment. Whether it’s fair or not, the hard reality is that everyone cannot have everything. Accepting rejection however is not an easy process — for children or adults — and many of us handle it poorly. When this happens repeatedly, it often leads to two types of dysfunctional patterns in organizations: entitlement and resignation. Entitlement is when someone feels that he deserves certain benefits, no matter the reality of the situation. For example, I recently worked with a company that reduced costs by moving staff members into smaller offices and having them share meeting rooms, printers, and other services. A few people refused to accept the new standards, arguing their unique needs for privacy, space, and administrative support. They felt entitled to these benefits and considered anything less to be a rejection of their status and personal self-worth. At the other extreme is resignation , when people avoid situations where they might be rejected. In the example above, some people resigned themselves to the reduced space by not engaging in conversations about how the design of the office would work. By passively accepting the new constraints, they made sure that none of their ideas were rejected (because they didn’t offer any). This may have been psychologically comfortable, but the organization didn’t benefit from their contributions and their buy-in to the new facility was minimal. In light of these behaviors, leaders need to encourage a more conscious and healthy toleration of rejection. While all employees should feel comfortable offering ideas, raising issues, and making observations — they should do so with the knowledge that they may be rejected. If they get discouraged or angry about not having their ideas accepted, they might shut down and stop contributing. Similarly, if employees feel so self-important that the organization should never turn them down, their sense of entitlement will make it difficult to drive constructive change. It’s easier to talk about learning from rejection than to actually experience it. Rejection often triggers painful emotional doubts about our own competence and self-worth, so we either try to avoid it or pretend that it doesn’t matter. A more constructive approach is to remember that rejection can be beneficial: It can force us to come up with more ideas, redirect us to different paths, and keep us humble and open to learning. How has rejection helped or hindered your career? Author’s Note: The original draft of this post quoted the Rolling Stones song ” You Can’t Always Get What You Want ,” but my HBR editor deleted the reference because she thought it “would detract from the ideas.” It seems that even regular HBR bloggers get rejected from time to time. Cross-posted from Harvard Business Online .

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The Technician: Getting Down to Business

April 6, 2012

By Alex Lewis At some point or another, many of us have had the idea of starting our own business. There are a variety of reasons for this — chiefly, the potential to make a profit. Instead of forcing yourself into a career with a set salary or wage, your ability to make money as an entrepreneur is limited only by your imagination. Many great American success stories have been self-made businessmen and businesswomen. Now is the time for you to write your own destiny. David Neeleman, founder of JetBlue, started his first foray into free enterprise while he was an accounting student at the University of Utah. Using a few connections he had in Hawaii, he sold discount, all-inclusive vacations to this tropical paradise. It didn’t take long for his business to take off. In fact, he started making so much money he found it necessary to drop out of college before attaining his degree. He has since opened, or at least played a role in, five different air carriers. If this man can be as successful as he is, there is no doubt in my mind one of you can do the same. Personal knowledge in a particular field is an excellent foundation from which to begin. When I was in high school, I was heavily involved in FFA. Besides learning about farming and growing crops in a greenhouse, we gained knowledge of basic business and accounting practices. With this acquired knowledge, I opened my own greenhouse business back home. Thus far, I consider it a success. Contrary to what you may think, it is possible to start a business with limited resources. Your largest concern, financing, isn’t difficult to come by, depending on the type of business you would like to start. For example, I started my greenhouse business with a few hundred dollars I had saved for some time. If you plan it out well, it is very possible to get a business going with less than $100. Think intelligently, and you’ll see your bank account grow. The advent of computers and the Internet has completely revolutionized the way business is conducted. Never before has anyone been able to reach as many customers as today. You can have access to millions of customers with just the click of a mouse. The best part is, you don’t even have to own a designated website to complete transactions. Online marketplace, eBay, is used for buying and selling a variety of goods around the globe. There are many success stories of entrepreneurs using this website to make millions of dollars. If you have an old coin or something of use lying around your house, put it up for sale on eBay. You can use the profit to buy something else and then sell that something else for yet more profit. There has never been a better time than now to start your business. Barriers to entry are low, and it is feasible to start a business with limited resources in today’s marketplace. When you allow your creativity to take off, before you know it, you’ll find out you’re in business.

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Lynn Parramore: Capitalism’s Dirty Secret: Corporations Don’t Create Good Jobs Anymore, They Destroy Them

April 6, 2012

Co-authored by William Lazonick and Ken Jacobson Corporations are not working for the 99 percent. But this wasn’t always the case. In a special five-part series, William Lazonick, professor at UMass, president of the Academic-Industry Research Network, and a leading expert on the business corporation , along with journalist Ken Jacobson and AlterNet’s Lynn Parramore, examine the foundations, history and purpose of the corporation to answer this vital question: How can the public take control of the business corporation and make it work for the real economy? For the last four decades, U.S. corporations have been sinking our economy through the off-shoring of jobs, the squeezing of wages, and a magician’s hat full of bluffs and tricks designed to extort subsidies and sweetheart deals from local and state governments that often result in mass layoffs and empty treasuries. We keep hearing that corporations would put Americans back to work if they could just get rid of all those pesky encumbrances — things like taxes, safety regulations, and unions. But what happens when we buy that line? The more we let the corporations run wild, the worse things get for the 99 percent, and the scarcer the solid jobs seem to be. Yet the U.S. Chamber of Commerce wants us to think that corporations — preferably unregulated! — are the patriotic job creators in our economy. They want us to think it so much that in 2009, after the financial crash, they launched a $100 million campaign, which, among other things, draped their Washington, DC building with an enormous banner proclaiming “Jobs: Brought to you by the free market system.” But the truth is that unfettered corporations are just about the worst thing for creating decent jobs. Here’s a look at why, and where the good jobs really come from. Taming the Wild Horses Corporations are kind of like wild horses. They can run you down. Or sweep you around in circles till you’re exhausted. And in today’s world, they’ll surely run off and take your jobs to China or someplace else if you don’t learn how to tame them. Bad things happen when corporations are unconstrained by strong national policies that force players to think long term, behave decently, and refrain from dumping their short-term costs on the rest of us. They tend to focus single-mindedly on maximizing profits for shareholders at the expense of all else — including jobs. Executives set their sights on a path to short-term boosts in share prices paved with layoffs, wage cuts, and jobs moved overseas, while slashing research and development and investing in the skills of their employees. The U.S. Department of Commerce found  that from 2000 to 2009, U.S. transnational corporations, which employ about 20 percent of all American workers, cut their domestic employment by 2.9 million even as they boosted their overseas workforce by 2.4 million. The result was an enormous loss of jobs nationally, as well as a net loss globally. In the 1990s, these companies added more jobs at home than abroad. What changed? 1) The rise of India and China, with 37 percent of the world’s population, as hotspots for off-shoring; and 2) the availability of tens of millions of workers in these places, many with college degrees, to do the jobs previously done by American workers. In India, indigenous companies like TCS, Infosys and Wipro along with transnationals like IBM, HP and Accenture employ hundreds of thousands of college-educated workers to perform IT services, in large part for American firms. In China, the electronics contract manufacturer Foxconn (headquartered in Taiwan) barely existed a decade ago, but now employs about 1.2 million workers, with Apple its single biggest customer. And yet Big Business still trumpets itself as the American Job Creator Fairy. Apple has released a report claiming to have created half a million domestic jobs — a highly dubious number which takes credit for everything from the app industry to FedEx delivery jobs (never mind that drivers would be hauling someone else’s gadgets if Apple went out of business). It’s true that in the U.S. managers, engineers and other professionals have found good jobs at Apple. But the non-professional employees are just barely scraping by. A study of the iPod value chain in 2006 calculated that among Apple’s domestic employees, professionals earned around $85,000, not counting stock options, but the retail workers in Apple’s stores earned only $26,000. This is troubling because as Apple has grown in size, most of the employees it has hired in the U.S. work in retail. Are these jobs paths to long-term, stable careers ? Quite likely they are not. While a company like Apple whistles “God Bless America”, executives are not going to talk about the job losses induced by off-shoring, nor the horrifically abused foreign workforce that moving jobs to China has produced. And they’re not going to tell us about Apple’s preference for hiring part-time employees who can’t afford to buy health insurance. When such uninsured people have health emergencies, someone has to pay, and the burden falls on the taxpayers. Here is what Apple executives tell us instead : “We don’t have an obligation to solve America’s problems.” The Real Deal Corporate executives have lost the sense that they owe anything to the public. They have forgotten that the 99 percent, as taxpayers, have made huge investments in them. They fight to lower taxes as if all the money “belongs” to the companies. They fight regulations as if the public doesn’t have the right to interfere in their business. All nonsense. Despite the anti-government rhetoric from conservative leaders, the truth is that the government, elected by the people, plays a critical role in creating the conditions in which companies can succeed and good jobs can flourish. The government is able to invest in human capital through key services like education. What’s the point of a job if you don’t have an educated worker to fill it? The government also creates job-friendly conditions by investing in infrastructure. How can you get to work if your roads and bridges are falling apart? And it boosts job creation through investing in technology. How could Google create its amazing search engine without state investment in the creation of the Internet? When the government invests in the knowledge infrastructure, businesses can then employ and train people who can, in turn, engage in the kind of organizational learning that leads to that wondrous thing called “innovation.” We learned this once before. After Wall Street financiers ran amok to cause the Great Depression in the 1930s, the government responded by putting in place regulations on banks and corporations, a highly progressive tax system, and a robust social safety net. President Franklin D. Roosevelt created the conditions in which good jobs were possible with programs like the Civilian Conservation Corps and other New Deal initiatives. He focused on the development of highways, railways, airports and parks, investing in the future rather than focusing solely on short-term profits. The GI Bill, rather than leaving graduates with big debts, left them well educated and therefore with a chance of to provide a middle-class life for their families and to retire with dignity. After victory in World War II, America was able to emerge as the world’s most powerful nation because it had a large middle-class and a strong industrial and technological base. The horses of Big Business were tamed, and they could be harnessed to do useful things for society. Then came the Reagan Revolution and Big Business freed itself from the regulations, unions and taxes that had curbed its worst instincts and it began to shred the nation’s economic and social safety net. The gap in income inequality grew, and jobs were eliminated and outsourced. Long-term investment in innovation and human capital slowed down, while fraud and financial speculation took off. Today, corporate executives ask for more special treatment and freer rein in calling the shots in our economy, and they threaten to pack their bags if we don’t agree. Some politicians and policy makers respond to this blackmail by saying that we have to create a “friendly business climate” to convince them to stay. But what makes a “friendly business climate” — low wages, minimal taxes and so on — creates a very hostile climate for the 99 percent, which is ultimately bad for everyone — business included. The state of Mississippi and Rick Perry’s Texas, where city and state officials bent over backwards to lure Big Business with subsidies and other perks, are hardly bursting with good jobs. Many researchers have concluded that tax rates are actually not terribly important to where a company locates. Further, a common rule of thumb for business headquarters location is that quality of life for key personnel is decisive. True, vastly different levels of regulation in the U.S. and China is a problem for which there are no easy answers. But there are real costs to ignoring the environment and keeping workers in a state of misery. If you want job growth, you have to have demand growth: profits and consumption go hand in hand. That’s why the best way to unleash America’s job-creating potential is to support rights and protections for ordinary people. A climate friendly to the 99 percent is not just fair, it makes the best sense for the economy. We need to remember the complementary roles that government and business have to play in creating well-paid, stable employment opportunities and then ensuring that people can access these opportunities over the course of their careers. To get corporations working for the 99 percent on the job front, we have three major challenges: 1) Education : Young people from low-income groups (especially black and Hispanic people) need schooling and training to move to good career jobs. 2) Incentives : Corporations must have incentives to retain educated and experienced workers instead of laying them off or off-shoring their jobs. (To do so forces valuable workers into low-skill jobs and wastes their human capital, which was expensive to acquire.) 3) Investment : Executives of financialized corporations who want the government to invest in the knowledge base have to make complementary investments in people that can keep the U.S. economy innovative and generate good jobs. That would mean changing the single-minded focus on boosting company stock prices through buybacks and other financial manipulations that serve the 1 percent but no one else.

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Mike Lux: Darwin: Scientist but Not Economist

April 5, 2012

I wrote a book that came out in early 2009 called, The Progressive Revolution: How The Best In America Came To Be , that talked about the history of the American political debate. One of my fundamental arguments was that conservatives are using the same arguments against modern day progress that their ideological ancestors used against the progress we made throughout history. What I underestimated, though, is how fiercely and broadly the modern conservative movement is trying not only to block advances in progress, but to actually roll back the gains of our history. Things that had seemed long settled only a few years back when I wrote that book are now being fought over anew, and not by trivial people on the fringes of our politics but by most of the leaders in the Republican Party. Over the last couple of years, we have seen the Supreme Court overturn 100 years of precedent in dramatically expanding corporate political power, and have seen Supreme Court Justices imply in oral arguments that Medicaid might be unconstitutional; we have seen leading Republican presidential candidates openly calling for the repeal of child labor laws, argue for letting the states ban contraception, and say that Social Security is unconstitutional and a Ponzi scheme; there was a Republican governor and presidential candidate, Rick Perry, who opened the door to his state seceding from the union; there is a Republican senator who called for a repeal of the Civil Rights Act of 1964 (although he later pulled back from that under intense pressure); and the Paul Ryan budget, passed twice by the Republican House and unreservedly endorsed by their presumptive, ends Medicare and Medicaid as we know them, and calls for a 95 percent cut in domestic spending over the next four decades. This was the stuff of the extremist fringe — the John Birch Society, the militia types, the neo-Confederacy fan boys in the South, the Ayn Rand apostles, the Christian Dominionists — until fairly recently. But this group of outside-the-mainstream ghouls has become the twisted heart and soul of the 2012 Republican Party. President Obama’s speech this week went after the extremists who control the Republican Party hard, and he nailed it. As a history buff, and someone who wrote at length about the original Social Darwinists in my book, I was glad to see him explicitly tie Ryan and Romney to their Social Darwinist ancestors: This congressional Republican budget is something different altogether. It is a Trojan Horse. Disguised as deficit reduction plans, it is really an attempt to impose a radical vision on our country. It is thinly veiled social Darwinism. It is antithetical to our entire history as a land of opportunity and upward mobility for everybody who’s willing to work for it; a place where prosperity doesn’t trickle down from the top, but grows outward from the heart of the middle class. And by gutting the very things we need to grow an economy that’s built to last — education and training, research and development, our infrastructure — it is a prescription for decline. Just to give you a flavor of the original Social Darwinists, their intellectual founder was British writer Herbert Spencer, who happily applauded the divine right of Kings and “anyone who can get uppermost”. He attacked democratic forms of government, as well as trial by jury, where “12 people of average ignorance” would dare to sit in judgment of great corporations or wealthy people. In the U.S., the leading Social Darwinist was a Yale professor named William Graham Sumner, who said that every society had a choice between only two alternatives: “liberty, inequality, survival of the fittest” or “un-liberty, equality, survival of the unfittest.” It is ironic that the modern Republican Party is a place where most of its adherents reject Charles Darwin’s ideas on science yet have embraced them fully on economics. Here’s the problem, though: Darwin was a scientist, not an economist. His ideas have been accepted, and have thoroughly stood the test of time, in the realm of science. But when applied to economic policy in the U.S. in the 1880-90s, the 1920s, and the Bush era at the turn of this century, they have caused economic depressions and the massive destruction of the middle class every time. President Obama’s messaging on this is right where it needs to be. This paragraph is beautiful: In this country, broad-based prosperity has never trickled down from the success of a wealthy few. It has always come from the success of a strong and growing middle class. That’s how a generation who went to college on the G.I. Bill, including my grandfather, helped build the most prosperous economy the world has ever known. That’s why a CEO like Henry Ford made it his mission to pay his workers enough so they could buy the cars that they made. That’s why research has shown that countries with less inequality tend to have stronger and steadier economic growth over the long run. This is an election where it is very clear that people are going into the voting booth unhappy with the economy and with both parties. For the most part, they aren’t going to have faith in anyone on the ballot, and they aren’t going to be feeling optimistic about winning the future. They are going to need to see a clear contrast. On the one hand, they need to understand just what the Republicans are offering: a Social Darwinist, Ayn Randish future where all the benefits go to the wealthiest, who got that way because they are the “fittest” — where only the wealthy “job producers” get any benefits at all from government. On the other, they need to see Democratic candidates from the presidential level on down who they believe will fight without pause or fear for the middle class and those trying to climb the ladder up into it. From the looks of the president’s speech Tuesday, that is exactly what we will get.

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Marian Salzman: Newscrafting the Future

April 5, 2012

Normally when I speak or write, it’s to comment on a new trend or the implications of breaking news — the sort of stuff that’s out there in the public spaces of the media. So at first, I thought speaking about social media at the American Association of Advertising Agencies’ Public Relations Conference later this month would be treading familiar territory. But it’s turning out to be something entirely different, something that feels like mapping a personal journey from Madison Avenue to Mars. I’m fascinated by people and by the way ideas emerge and move through society. I’ve always wanted to figure out what’s happening and why, to work up hypotheses. I’ve never been content with just observing from a distance; I’ve always wanted to feel involved, to live trends as they emerge. But I’ve never written out long-term goals or a map for achieving them. A series of right-place-right-time breaks got me into marketing communications in the early 1990s. It turned out to be the ideal environment for a suburban mall rat interested in people and influence: fast-moving, creative, results-oriented and powered by human relationships rather than products and processes. What’s more, compared with most industries at the time, it was unfazed by smart women. The lingering whiff of Mad Men sexism was fading fast in an industry in which clients paid for ideas, talent and results. In fact, although I do remember the heavy drinking of 20-plus years ago, I have zero recall of gender having been an issue, unless being the first woman to raise my hand worked in my favor, sort of in the “If you’re game, so are we” vein. I became ChiatDay’s first head of emerging media and consumer insights, which evolved to director of its Department of the Future (which Fast Company called one of 10 “Job Titles We’d Like to Have”) in the early ’90s, the first TBWAChiatDay employee exported to hip, trendy Amsterdam after our 1995 merger. For the next decade and a half, advertising was the place for me. TV and press ads were still the centerpieces of marcomms and commanded the lion’s share of clout, budgets and glamour. It’s easy to forget that until recently the marcomms playbook pretty much dictated pushing out creative work into paid media in the expectation and/or hope that enough consumers would pay attention, be influenced and buy. I never fully committed to believing in interruption marketing, but advertising was getting smarter. Working on emerging media and consumer insights gave me the chance to scan the zeitgeist and develop new ways of spotting trends (I will never forget co-hosting the Kurt Cobain wake on AOL in an auditorium which, until then, had never been filled to its cybercapacity of — dare this be true — 500 people at once), to feed them into creative development and the agency dialogue with clients and the wider world. From Madison to PR Looking back, 2007-08 proved to be a turning point for all of us on many levels. For the United States, the subprime chickens started coming home to roost. In technology, the first iPhone launched, giving on-the-move access to social media sites. And Facebook overtook Myspace on its way to social media domination. As for me, I was diagnosed with a brain tumor. Still trying to pack in as much work as I could, it was a scheduling nightmare: six spells in the hospital between Labor Day 2007 and Martin Luther King Jr. Day 2008; a trip to Cannes that June (avoiding cigarette smoke because I was obsessed with good health to prep for surgery); running a big agency study of the American Muslim market and a global pitch for Nokia; delivering a keynote in Amsterdam in November 2007 when I could barely remember my own name — but sounding coherent, maybe even more coherent, because suddenly I was speaking slowly; spending Thanksgiving in Russia; and making my usual regular trips to the United Kingdom. It all prompted my move in early 2008 from advertising (with JWT) to public relations (with Porter Novelli). With the benefit of hindsight and a friendly audience, I can credibly claim that I was going with the trend toward PR. I certainly lucked out on the timing. In 2007-08, the balance of marcomms power was starting to tip noticeably. Interactivity in general, and social media in particular, was down-tuning the preeminent influencing power of classic advertising and up-tuning the importance of PR. I had collaborated with PR outfits before, including Porter in 1996 (anyone remember the Lego Mindstorms launch?), but being inside PR wasn’t at all what I expected. It was a new language and a new way of working, long on cerebral and short on aesthetic. It demanded squeezing a lot of juice out of fractional budgets, which moved ROI to the center of the conversation and upped the emphasis on performance and delivery. It was the ideal starting point to develop campaigns where media-neutral ideas truly do live at the center of the deliverable — perfectly in line with my old Euro RSCG Worldwide boss Bob Schmetterer and his “Creative Business Idea” concept. And last but not least, social media was storming the Internet, opening the way for PR to take more of a lead in marcomms. One of the strangest paradoxes of Madison Avenue versus PR is that on the inside and in terms of personality, adland is far more spontaneous and freewheeling, while PR is more cautious and buttoned-down. But in terms of output, adland is more constrained. To influence consumers, adland has to go through the expensive process of creative development to embed branded messages, then work out complex schedules of expensive paid media to put the work in front of consumers. PR also used to work under media constraints, patiently cultivating contacts to deliver crafted messages to reporters and opinion formers in editorial media. Now social media has blown that world wide open. How consumers get their news and how they spend their media time and attention is definitely changing. From PR Programs to Newscrafting I’m still fascinated by tracking ideas as they emerge and move through society, and I love getting involved in shaping them. As I discovered way back in my days of pioneering online focus groups through Cyberdialogue, which I founded with Jay Chiat in 1993, interactivity is what makes the Internet so much more than just another medium. Social media has hugely increased my ability to track ideas, and it has become a must-have tool for shaping them. Over the past 20-plus years, my interests have broadened from corporate brands to charities and social enterprises (the Bob Woodruff Foundation , One Young World ) and to local development initiatives ( Fairfield County Creative Corridor ). As we found with trial-and-error newscrafting initiatives such as the PepsiCo Tweetup in 2009, social media is a great way to spark attention-grabbing ideas, develop them and amplify them fast, on the fly. Five years into my full-on PR life, my trendspotter radar is giving me strong signals that the traditional Madison Avenue approach to marcomms is destined to become history sooner rather than later. We all know only too well how consumers are using technology to get less of what they don’t want (“Look at this” advertising) and more of what they do: entertainment, interaction and information. The best output of classic adland can still score with consumers, but it must be created with an eye to living in social media, the new home turf of PR. For brands and causes, the essential value of PR is increasingly coming from its ability to master the changing forms of news as traditional and social media intertwine. PR firms have a massive opportunity to go way beyond the old practice of pitching the news to become masters of newscrafting for our clients — a mix of putting out routine news in more compelling ways, creating news opportunities and coattailing relevant breaking news. Marcomms as newscrafting costs a lot less in media spending than Madison Avenue marcomms and has a lot more potential for leverage than classic PR, but it demands a lot from its practitioners: creativity, originality, daring, mastery of social media, constant awareness of news and trends, and 24/7 responsiveness. I feel as if I’m director of a new Department of the Future.

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Jeff Jarvis: The Importance of JOBS

April 5, 2012

The JOBS bill being signed by President Obama today is critical to the emergence and growth of the next generation of industries as ecosystems. Those ecosystems are made up of three layers: Platforms (Google, Amazon, Salesforce, Facebook, Kickstarter, Federal Express, Foxconn), which make it possible for entrepreneurial ventures to be built at lower cost with less capital and reduced risk at greater speed. To provide the critical mass that large corporations used to provide — to, for example, sell advertising at scale or acquire distribution or acquire goods or services at volume — sometimes these ventures need to band together in networks (Glam, YouTube, Etsy, eBay). This is how I simplistically draw it on a whiteboard: Our economy — equity markets, regulation, taxation — has been built to support The Firm : large companies that controlled the entire chain from design to manufacturing to marketing to distribution, gaining efficiency and control as they gained size. The new ecosystem still benefits large companies if they are platforms, as today much — perhaps most — of the value created via the net falls to new corporate behemoths: Google, Amazon, Facebook…. But it’s at the entrepreneurial layer that the real work is being done, the real efficiency is being found, and the real value is being built. But they need capital — not much, but they need it. And they need to be able to recognize the value they create. That’s what I hope Steve Case and others worked toward with the JOBS bill. Andrew Ross Sorkin worries that the new law’s loosened regulation for some companies will mean that more will lose money. But Henry Blodget counters that it’s not the SEC’s job to save you if you’re stupid enough to invest in Groupon (told ya!). The lighter regulation certainly bears watching . But the part of the bill that encourages me is the ability of small companies to raise small amounts from small investors. I see this as economically democratizing on both sides of the transaction: more small companies disrupting large firms and more real investors able to get in on the opportunities (and risks) of a platform-enabled entrepreneurial economy. Such small-scale investment has already been possible in the U.K. — not just possible but encouraged through 30 percent tax break on investments. Recently I got an email from a company set to benefit, Escape the City (soon to be renamed escape.co), which helps would-be refugees from London’s financial district build new and, one hopes, better lives outside it. Cofounder Mikey Howe kindly wrote to me because he’d read What Would Google Do? and said it helped him think in new ways. (Thank you, Mikey.) Howe wrote on the occasion of the company sending a letter to its 57,000 members inviting them to pledge to invest in the venture. Within one hour, $6.6 million was pledged. I checked back with him three weeks later and 2,200 members had pledged $15 million (more than they will end up raising). What’s exciting is not just that a small company can more easily raise investment funds but that this small company knows its potential investors. They are members of the service already: a community of customers and investors. Imagine what that relationship could do to help a startup, when your users, your customers have a stake in your success. (I also enjoy the notion that their venture attempts to disrupt the financial district they left.) Start Something You Love: Escape the City…1 year on from Escape the City on Vimeo . Until the JOBS bill, about the closest thing we had in America was Kickstarter . My entrepreneurial journalism students are eager to try to use it to raise funds — perhaps a bit too eager, I caution them, for funding a single product or project does not a sustainable strategy make (any more than begging for grants from foundations). But properly used, Kickstarter reduces risk by performing the best possible market research (pre-orders) and allowing an entrepreneur to use her customers’ capital to start her venture while also turning customers into marketers. Kickstarter could not sell equity. Should it? I think that’s an entirely different proposition. In any case, now we can see Kickstarters of a new sort help more new companies. See also the U.K.’s Funding Circle , which loans capital to startups (and which just got an investment from New York’s Union Square Ventures). The irony of the JOBS bill’s title (it stands for Jumpstart Our Business Startups) is that it may end up killing more jobs than it creates as it funds highly disruptive and highly efficient new ventures that will try to replace large and now inefficient companies in old vertical industries. (See my post, the jobless future .) But if the disruption is inevitable — and I believe it is, across many industries from media to retail, banking to travel and even manufacturing — then the only sane response is to find the opportunity in the change. The JOBS act helps more people, entrepreneurs and investors, find more opportunity. That, more than bailouts, is the wise role for government to play in the shift from an industrial to a digital economy.

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Blythe McGarvie: Wealth, Prosperity and Longevity (Part II)

April 5, 2012

In last month’s newsletter, I provided a Values Framework and stated that in subsequent letters I would dig deeper into the implications of the five dimensions of cultural values. Today, I will explain the first three dimensions. In Part 2 of this two-part series, I will discuss risk-taking and how people from different cultures deal with time. Today’s fast-paced technology is changing the levels of risk-taking in certain cultures. Individual vs. Collective Dimension When I worked in France, I advised my multicultural team to remember that French management holds in great esteem those individuals who make a name for themselves through their investments or accomplishments in great respect. Napoleon Bonaparte is still revered because he dared to be different and succeeded. Many western cultures, like those in the U.S. and the UK, tend to celebrate the strength of the individual and individual achievement. In such cultures, family ties tend to be secondary to individual goals and self-sufficiency is an honored trait. Nations like Japan or Kenya, however, embrace a collective or group-oriented value orientation, in which people tend to identify or define themselves as members of a group rather than as individuals. For example, an American company operating in Japan with Japanese employees must be sensitive to the notion that those workers think less about individual achievement than about how their efforts reflect on the group’s achievement as a whole. Also, unlike the American ideal of self-sufficiency, Japanese workers highly value the interdependence that comes from working within a group. For leaders, that means creating incentives and recognizing achievements for groups rather than individuals. In such a culture, a business should adopt a “high context,” defined as keeping the volatility and variability of a group to a minimum. In many Asian cultures, awareness of the concept of “saving face” should restructure a westerner’s behavior. How another person is perceived within his or her group is important. Accordingly, do not criticize an Asian individual in his own culture in public. Even praise should be done in a manner that does not isolate the individual from his group. Equality vs. Hierarchy Dimension Surprisingly, although Liberté, égalité, and fraternité is the national motto of France, the idea of equality is much different than to which Americans have grown accustomed. Hierarchy is quite important in France and modeling behaviors after King Louis XIV will serve you well when you meet the CEO or key political leaders. Whereas cultures like those found in the U.S., Canada or Sweden tend to share a value that people with different levels of power, prestige, and status, can interact with each other as equals, the cultures of nations like France as well as Asian countries expect recognition of social hierarchies based on a person’s social status. This acceptance of hierarchy leads to higher status differences, formal social relations and greater power concentrations among fewer people. It also means people who reside in lower rungs of the social order may have fewer perceived choices and rarely question authority. As a global leader coming from an egalitarian culture that might reward individuals that speak out or question authority figures, you will need to adjust your leadership approach if you want to create trust. It is crucial for you to define your rank and status at the onset of any relationship so that other individuals will know how to interact with you. You will also be expected to make the decisions affecting your organization with less input from subordinate. Tough vs. Tender Dimension I’ve done business and observed negotiations in Russia and learned that it is a tough culture. A “tough” culture has a preference for high material rewards to a winner and nothing to the loser. Tough societies also tend to enforce gender and racial stereotypes accepting male domination and aggressive behavior and discounting of minority races and cultures. When I was walking in downtown Moscow with our company controller who was of Indian descent, he was stopped by police who demanded to see his passport and questioned him. We found out later that this harassment was common and sent a message that certain foreigners are not welcomed. A book entitled Dilemmas of Diversity After the Cold War: Analyses of “Cultural Difference” by U.S. and Russia-based Scholars by Michele R. Rivkin-Fish and Elena Trubina expands on this theme describing social differences which often lead to symbolic violence and struggles between groups. It’s more difficult to assert which countries have a tender culture because the more aggressive participants stand out in business. When working within a tender culture, leaders need to be sensitive to gender issues. Men may also assume more domestic roles and take an active role in raising the family. Tender cultures also reject the “winner take all” approach championed in tougher cultures. Leaders need to adjust how they conduct their outreach to members of each kind of culture. While individuals from tough cultures will respond to personal challenges, members of tender cultures will respond more positively to efforts that result in “win-win” scenarios for everyone involved. Prepare differently Generalizations are dangerous yet they can give a clue to deep-rooted attitudes. With different nationalities in today’s workplace, just thinking in advance about how someone might think and behave will create better alignment in an organization and make your day more effective. Read Part I of this series here .

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James Doran: Keeping It in the Family Is Not Always the Best Business Policy

April 5, 2012

A business partner must be chosen with extreme care. No amount of due diligence is enough when entrusting someone with half your fortunes. Family, on the other hand, cannot be chosen. It is forced upon us whether we like it or not. A financial decision requires cold calculation, an almost Vulcan absence of emotion. Such a state of mind is virtually impossible to attain in the company of a sibling, a spouse or an offspring. Particularly the latter. It seems odd, then, that the idea of a family business has always been so popular. In the Middle East and India, family and business are almost synonymous. The wealthiest and most successful business people in both regions — the Tatas, Mittals, bin Talals, Al Futtaims and the like — are all from long lines of equally successful and wealthy forebears. In Russia and China, meanwhile, family business is almost unheard of, chiefly because until very recently there was no wealth to pass from one generation to the next. In the U.S., individuals tend to make fortunes and spend them or give them away. Look at Warren Buffett and Bill Gates, two of the world’s richest men, who are in the process of doing precisely that. Europe still has a fine tradition of family businesses, particularly France but Britain has hardly any at all. Société Générale, the French investment bank, recently studied the fortunes of more than 1,200 billionaires from all over the world to determine how big an influence family ties had on their commercial endeavors. The broad results of the global study are fascinating, not least because they reveal how the world is divided into differing business cycles dependent on the political and historical development of a region or country. The report also reveals that families, despite the large number of successful business dynasties in the world, don’t seem to be the best at running commercial affairs. The Middle East is a fine case in point. As The National reported last week, fortunes among the wealthiest families in the Middle East have fallen by an estimated 33 per cent since the beginning of the financial downturn in 2008. The survey studied the fortunes of 21 billionaires from the UAE, Kuwait and Saudi Arabia with closely held family business empires. Businesses run by wealthy individuals in the same countries without the inclusion of an extended family in the boardroom only suffered a 3.6 per cent decline in fortunes. A huge difference. But this fact should come as no surprise. Family adds another layer of complication and opacity to affairs that business can well do without. Examples abound all over the world. Rupert Murdoch has plenty of problems running his British newspaper publishing division. The fact that his son and heir James was at the helm of the division only added to his woes. There is nothing to say that James Murdoch is an inherently bad manager or necessarily swayed by his father’s opinions but that is how his leadership was perceived. Inevitably he had to fall on his sword. Closer to home the Abdullah brothers, the founders of Damas, one of the region’s biggest jewellery groups, provide another example. Born into a family of jewelers, they ran their business privately and very successfully for years. But when it became a public company their traditional way of doing business on a handshake and paying themselves using funds and assets without seeking permission from investors did not go down well and led to regulatory censure and dismissal for all three of them. Although worlds apart on many levels, Damas and News Corp have something fundamental in common. They are both good businesses that have outgrown the dynastic model. As public companies there is no room for the inherited loyalties and understandings only a family can provide. Instead, transparency, good governance and independence are needed. Family businesses are like children. There comes a point when they must fly the nest if they are to continue to flourish and become successful enough to keep their parents in their old age. For more Middle East business news and comment visit www.thenational.ae

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Paul Boden: I Ain’t No Broken Window

April 5, 2012

James Q. Wilson, the person credited with coining the theory of broken-windows policing , died last month and people are starting to ask what “Broken Windows” is all about. Those of us who have been identified as no more than a broken window are sick of it. The broken-windows theory holds that one poor person in a neighborhood (or, using Wilson’s words, “a single drunk or a single vagrant”) is like a first unrepaired broken window. If the window is not immediately fixed, if the vagrant is not immediately removed, it is a signal that no one cares, disorder will flourish, and the community will go to hell in a handbasket. For this theory to make sense, you first have to step far far away from thinking of people, or at least poor people, as human beings. You need to objectify them. You need to see them as dusty broken windows in a vacant building. Wilson himself admits that his reasoning here seems unjust on the individual level, but goes on to argue that not dealing with a single drunk or vagrant who hasn’t even harmed anybody may lead to “a score of drunks or a hundred vagrants” who could destroy an entire community or downtown business district. That is why we now have Business Improvement Districts (BIDs) with police enforcement to keep that neighborhood flourishing and poor unsightly people out of it. There are now over 1500 BIDs worldwide and their number is growing. And we are right back to Jim Crow Laws, Sundown Laws, Ugly Laws and Anti-Okie Laws, local laws that profess to “uphold the locally accepted obligations of civility.” Such laws have always been used by people in power against those on the outside. In other words, today’s Business Improvement Districts and broken-windows policing are, at their core, a reincarnation of various phases of American history none of us is proud of. Central to the argument is the need to adhere to “locally accepted obligations of civility.” But who is setting these “locally accepted obligations of civility?” Where is our “human civility?” We have gone from the days where people could be told “you can’t sit at this lunch counter” to “you can’t sit on this sidewalk,” from “don’t let the sun set on you here” to “this public park closes at dusk” and from “you’re on the wrong side of the tracks” to “it is illegal to hang out” on this street or corner. Of course a tired shopper can sit on the sidewalk to rest between stores and the people that lined up for two days waiting to get the new iPod can loiter and none of them will ever be ticketed, moved on, or arrested. These are the civilized people; they are consumers. They are us. The people these laws are enforced against are not us. They are them. And their mere presence makes us uncomfortable, so therefore they are not civil and need to be replaced with someone more like those of us who set the locally accepted obligations of civility. Jim Crow Laws, Sundown Laws, Ugly Laws, Anti-Okie Laws, and Broken Windows Laws, its all the same old wine — just in a new bottle. I guess history really does repeat itself and that’s sad.

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Richard (RJ) Eskow: Good Guys Win One: With ALEC, Things Go Better Without Coke

April 4, 2012

Score one for the good guys: After being pressured by Color of Change and other progressive groups, Coca-Cola has left ALEC — the cynical corporate coalition that has pushed a bevy of anti-democratic, anti-middle class, and anti-consumer initiatives. Now that Coke’s come around, next up is Walmart. Their response on the ALEC issue was equivocal and unacceptable. And the issue needs to be raised directly and firmly with the other companies that back the organization – a list that includes AT&T, Bayer, Coca-Cola, ExxonMobil, GlaxoSmithKline, Johnson & Johnson, Kraft Foods, Pfizer and UPS. Standing Up This weekend on The Breakdown we interviewed Rashad Robinson , Color of Change’s executive director, about the Trayvon Martin case and the role of ALEC in “stand your ground” laws like Florida’s. He indicated that ALEC’s member companies were going to be a leading target of the campaign for greater political and economic justice. A few days after that interview aired, Color of Change sent an email to its mailing list that read in part: You and more than 85,000 Color Of Change members have called on corporations to stop supporting the American Legislative Exchange Council (ALEC) because of its role in voter suppression. We contacted Coca-Cola to make sure they understand that through their membership in ALEC, they are supporting racially-discriminatory voter ID… They told us they recognize the importance of voting rights but claimed that they weren’t responsible for ALEC’s voter ID legislation. But it doesn’t matter whether the company had a direct role in the legislation — by funding ALEC, Coca-Cola is supporting an effort to disenfranchise African-Americans, Latinos, students, the elderly, the disabled and the poor. Eventually, representatives from Coca-Cola stopped responding to our emails and phone calls. Will you help us hold Coca-Cola accountable for supporting voter suppression? No Defense It’s true that ALEC is like the United States Chamber of Commerce, in that many of its member companies don’t realize what it really stands for. But the ones who have consciences (or understand the power of consumer anger) will eventually respond, just as they have for the Chamber. (Many leading corporations have left that organization as it moves to the extreme right.) So the role of activists in this situation isn’t just to exert pressure, but to educate. Companies like Coca-Cola need to understand the real nature of the organization they’re supporting. These corporations do bear moral responsibility for the actions taken with their funding and support, and they should be held accountable. (We’ll be airing an interview this weekend with Zaid Jilani, who wrote an excellent piece on The Five Most Despicable Laws Passed by ALEC , which Zaid lists as “banning living wages,” “crippling collective bargaining,” “privatizing our schools,” attacking voter rights,” and “selling prisons to the highest bidder.” We asked Zaid about laws that didn’t make the top five, and they were pretty bad too.) A Coke and a Smile Coca-Cola responded either to the information or to the persuasion. As Think Progress reports , Coke officials told the Washington Examiner today: The Coca-Cola Company has elected to discontinue its membership with the American Legislative Exchange Council (ALEC). Our involvement with ALEC was focused on efforts to oppose discriminatory food and beverage taxes, not on issues that have no direct bearing on our business. We have a long-standing policy of only taking positions on issues that impact our Company and industry. As Think Progress notes, the withdrawal came just five hours after Color of Change sent its email. In other Coca-Cola news, the company just signed a deal with Dunkin’ Brands to make its soft drinks available at Dunkin’ Donuts, Baskin-Robbins, and other Dunkin’ facilities. If you ask me, it’s a good day for a Coke (classic only, if you ask me), along with a donut or a couple scoops of ice cream. Attention Shoppers Coca-Cola’s retraction came in the Examiner ‘s ” Secrets ” blog. Blogger Paul Bedard’s interpretation of the facts comes with a strong ideological bias, but the facts are clear: The good guys won. By contrast, Wal-Mart told the Examiner : Our membership in any organization does not affirm our agreement with each policy created by the broader group. Wal-Mart has a long history of supporting voter rights, and we continue to be a strong proponent of this issue. In fact, Wal-Mart was an active supporter in 2006 of the renewal of the Voting Rights Act of… One of Wal-Mart’s basic beliefs is respect for the individual, and Wal-Mart will continue to stand with all Americans in ensuring our right to vote. Not good enough. If you support people who are attacking the right to vote, financially and with your reputation, then you are supporting injustice. Attention Sellers : This could affect your bottom line in a big way. There’s a large majority in this country that feels disenfranchised from the political process — and is. They’ve been, in the crude words of bar patrons everywhere, “screwed, blued, and tattooed.” They’ve lost their jobs, or their wages have stagnated, while organizations like ALEC strip them of organizing rights and the chance for a job at a living wage. They’ve also been disenfranchised by voter laws like the ones ALEC supports, and by a money-driven, corporate political process. But that disenfranchised majority has enormous economic power — and it’s learning how to use it. One of our most effective tools for responding to the power of corporate money is by cutting off the source of that money. Heads up, Wal-Mart. Know who does a lot of shopping in your stores? People who have been victimized by ALEC policies: Poor people, minorities and people who are working more and earning less. They’re getting wise, they’re getting angry — and they’re getting involved. Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future and the host of The Breakdown, broadcast Saturdays nights from 7-9 p.m. on WeAct Radio, AM 1480 in Washington, DC.

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Clifford W. Smith: Meddling in Banks Causes Its Own Perils

April 4, 2012

After four of the 19 biggest financial institutions failed Federal Reserve’s stress tests, it drew a line marking the industry’s “winners” and “losers.” Winners got to raise dividends and buy back stock, driving up stock prices. The losers remained in a position where the Federal Reserve was making their decisions about what to do with their capital. This sort of regulation and oversight poses a great hazard to the banking industry. While there is a duty to prevent fraud and offer oversight on the part of the Federal Reserve, the Federal Deposit Insurance Corp (FDIC), Comptroller of the Currency and other regulators, intrusive actions could stifle financial innovation. The more that the government does to take the decision making away from people running the banks and substitutes its own judgment, the greater the risk that the banking industry emerges into something resembling the U.S. Postal Service, which is struggling to adapt to change but is constrained by a combination of government oversight and an array of legacy costs. During the past 40 years, financial services has been one of the industries in which the United States has a competitive advantage that has been exported to the world. These stress tests came about after $245 billion in federal funds was provided to the banking industry under the Troubled Asset Relief Program during the financial crisis of 2008. According to Bloomberg News, The Fed had committed $7.77 trillion in financing as of March 2009 to rescue the financial system with funds largely going to a small group of the largest banks. Yet, stress tests prior to 2008 failed to detect weakness at the banks. A column that appeared on Bloomberg.com by Jonathan Weil points to flaws in the Fed’s approach to the stress tests, which were designed to test what would happen during an economic downturn, leading to higher unemployment and a drop in housing prices. The column found the government’s approach to the stress test to be window dressing to boost confidence rather than perform reliable measures of financial health. The stress test didn’t take changes in liquidity or market conditions into account when looking at potential losses on securities. The scope of the Federal Reserve and federal government’s intervention to support banks as “too big to fail” has created its own set of problems. The perception is that a safety net is available to big banks anytime they get overextended and the taxpayers will be dragged into saving them. We are creating monumental problems down the road from regulators pursuing this disruptive, counterproductive and dysfunctional course of protecting the banks and also intervening with their operations. If there is a crisis with these banks that are regarded as too big to fail, there are tools in place to place them into receivership to protect depositors and other creditors. The proper way to do it would be to replace management, ensure liquidity with counterparties and place more of the onus on equity holders to bear some of the risk for failure. The bailouts had been too lenient on equity holders, despite the requisite drops in share price since 2008. The banks that received bailout funds without making management changes shows a degree of failed governance, as well. Poor governance can also be punished by the marketplace, since those companies will suffer from stagnant or declining share prices if they continue to keep underperforming, but entrenched management. At the heart of this matter, regulators need to realize that banks are too important of a part of America’s economy to micromanage. Regulators should just assure that investors are not being defrauded and that the banks are being transparent about their performance to investors and prospective investors, meaning they should not be dictating how balance sheets should look and how capital should be deployed. When regulators overstep their role and take too great of control, investors and ultimately the customers will be hurt by poorer service, a lack of innovation and unmet needs when it comes to managing risk or raising capital necessary to expand businesses or purchase goods. The American public then becomes the big loser from regulatory meddling. Clifford W. Smith is the Louise and Henry Epstein Professor of Business Administration and Professor of Finance and Economics at the University of Rochester’s Simon School of Business.

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Stephen Robert Morse: Tracking the Success of Seed Accelerators

April 4, 2012

As a Tow-Knight Entrepreneurial Journalism Fellow at the CUNY Graduate School of Journalism, I am one of 16 lucky new media entrepreneurs who have access to world class mentors, financial opportunities, industry leaders, venture capitalists and like-minded thinkers. It is difficult to classify the program as a seed accelerator (because no seed funding is provided from the get-go), an incubator (because of the aforementioned relationships and opportunities that go beyond free office space), or an intrapreneurship for in-house academic experiment (because we have no obligations to continue our relationship with the university after the program ends). What I had not considered before embarking on this adventure was that a major benefit of having the Tow-Knight Center housed at CUNY is that all intellectual property that my colleagues and I create is our own. We don’t have to fork over any percentage of future revenues that we may derive from our forthcoming ventures to the institution or our advisers. I consider us lucky and rare to have this combination of resources without the potential of buyer’s remorse if a project grew but some equity was already distributed. This morning, I read an interesting INC article that provides an insider’s look into TechStars , the popular and fast-growing startup accelerator. While TechStars and YCombinator are generally considered the Harvard and Princeton equivalents of the accelerator world, I wonder whether the rest of the pack, essentially startups themselves, has equal value. While I enjoyed the INC piece, I was somewhat disappointed to learn that some TechStars applicants are accepted because of their relationships with the organization’s leaders, despite having severely underdeveloped or non-existent products. But on the other hand, I recognize that this is the way the world works. In private business, democracy has a very limited role. And merit may have even less. In the startup world, a frequently heard maxim is that venture capitalists invest in personalities and founders, not companies. With seed accelerators proliferating all over the world , one wonders if the talent pool at each individual accelerator will become severely diluted. Though it is impossible to gain data about the success of companies grown from seed accelerators that have not yet had the opportunity to flourish or flop, one can surmise that more startup accelerators will mean fewer success stories from each specific program. When YCombinator had less competition, it meant that they got their pick of the litter. Nowadays, founders may not want to schlep to Silicon Valley if they are confident that they can still make it in their home cities or countries. Jed Christiansen , a London-based American who works at Google, keeps track of seed accelerators through a spreadsheet on his personal blog . He defines seed accelerators as follows: The following are required to be a “seed accelerator” Open application process; anyone with an idea can apply Accelerator invests in companies, typically in exchange for equity, at pre-seed or seed stage Cohorts or ‘classes’ of startups; not an on-demand resource Programme of support for the cohorts, including events and company mentoring Focus on teams, and not individual mentoring Examples of what isn’t a seed accelerator: Programme where the startup pays for mentoring Incubator where the startup pays (discounted) rent in return for equity and/or discounted business services Programme where applications are restricted to certain groups (like students from a particular university) Because of the rapid growth of seed accelerators, now would be an ideal time for someone (an academic, perhaps, hint, hint) to create a more comprehensive database that keeps track of the success to failure ratio at each of these accelerators. I can already guess that firms that are only given $20K in seed funding in exchange for 7% of their company won’t have the same advantages that firms who are given $100k for an equal stake. In this sense, it will also be important for entrepreneurs to report back on any seed accelerators that are disorganized, don’t deliver on what they promise, or steal intellectual property — all issues that I foresee arising in the near future. But at the end of the day, one must think about Facebook, YouTube, Groupon and countless other uber-scalable companies that weren’t working within any set of rules at a seed accelerator when they launched. The investors flocked to them when their products were proven to be hits. So while some people wonder, what comes first — the chicken or the egg — I wonder what comes first — the seed or the flower that creates its own seeds to spread.

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Amy Siskind: What if Goldman Sachs Was Run by ‘Fiona’ Blankfein?

April 4, 2012

Wake up Goldman Sachs! If your firm had more women, things would be better. In recent years, those of us on the outside have come to view Goldman Sachs as the perennial poster child for ethical lapses. But, when a departing employee — an insider for 12 years — writes an op-ed describing the Goldman environment as ” toxic and destructive ” — unrecognizable from when he joined in 1999, it’s all the more damning: When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival. Which left me to wonder: what if Goldman were run instead by ‘Fiona’ Blankfein? An interesting question in light of survey data just released by the Harvard Business Review which analyzes the leadership styles of women and men . Are women better leaders than men? The finding of the survey: unambiguously, yes! Here’s how the Goldman Sachs insider described the ingredients — the secret sauce — of the firm’s successful culture: “It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients.” According to Harvard Business Review , a ‘Fiona’ would outperform Lloyd in every element: ‘Collaboration and Teamwork’ — female mean percentile +6.1 , ‘Displays High Integrity and Honesty’ +9.3 , ‘Practices Self Development’ +9.4 and ‘Builds Relationships’ +7.1 . Women managers represent the same values which allowed Goldman to earn it’s clients’ trust for 143 years. Truth is, however: the difficulties at Goldman Sachs are not unique — even if they are the latest corporate pariah. My former employer, Morgan Stanley, recently announced its 2012 class of Managing Directors — 83 percent are men . The same as our current Congress ( 83 percent ) which, by the way, is the least productive and least popular Congress in our country’s history! The problem of gender imbalance is endemic and our leadership is failing us. Desperately failing us. And here’s the startling fact behind the numbers: unless we take action and change course, trends suggest gender imbalance will only get worse! The Truth about Women’s Progress: Where are the Fionas? On Wall Street, in corporate America and in politics, women today aren’t even getting into the pipeline. In the last decade — during the period depicted as ‘toxic and destructive’ in the Goldman op-ed — 141, 000 women — roughly 2.6 percent of female workers in finance — left Wall Street (389,000, or 9.6 percent, more men entered). More alarming, over that same period, the number of college and young women entering Wall Street declined by 22 percent . (Read why women are leaving Wall Street here ). And it’s not just on Wall Street. For the first time in decades, from corporate management to even politics, women’s progress has stalled or is moving backwards . The Rules of Engagement: A gift of the women’s movement in the 60s and 70s was for women to enter the workforce. But it was like giving us a car, without driving lessons. Women still haven’t learned to play the game. How could we? We haven’t been taught and these ways aren’t intuitive to us. It’s not our rules of engagement. The game remains male defined and male oriented. Because men still occupy the vast majority of leadership positions. And since we all tend to hire ‘people like us ‘ (We all pay lip service to the melting pot, but we really prefer the congealing pot), we’re in a vicious cycle. The way to break the cycle is advancing Fionas. Once women have a chance to set new rules of engagement, we will flourish and succeed. National Girlfriends Networking Day (‘NGN Day’): How do we get there? By cultivating and supporting one another. Today, just as many Fionas are graduating from college as Lloyds. But after college, women and men have vastly different trajectories with salaries and promotions. Why? Connections and networks are readily available and established for men. But women don’t have these connections, don’t think we deserve them, and don’t know how to build them. Decades ago, as women entered the workforce, we made a conscious effort to bring our daughters to work once a year. Today, we need to teach our daughters what to do once they are there — to teach women, young and old, to build their network of connections. This year we are starting that process — on June 4th — the first annual National Girlfriends Networking Day! On that day, we’ll begin the process of linking women together by creating a national network to help us all succeed. Women around the country will be meeting for breakfast, coffee, lunch and drinks to connect. Get involved by pledging to connect , attending a virtual event around the country — or making herstory as an Angel Investor along with prominent women like Senator Kirsten Gillibrand and FOX News co-anchor Gretchen Carlson. Desperately Seeking Fiona! We also need to give college and young women — our Fionas — a road map to success: A Girlfriends’ Guide . Our goal is to provide a realistic game plan — concrete steps and actions which young women can take, starting in their 20s — towards become tomorrow’s Fionas. Teaching them how to build their networks, connections and brand — and on their own terms! A Girlfriends’ Guide changes lives ( read this )! Join us cultivating and supporting tomorrow’s Fiona’s: 1) Get involved in National Girlfriends Networking Day ; 2) Devote one hour a month to mentor a young woman at The Mentor Exchange ; and 3) Reach out to The New Agenda set up a presentation of A Girlfriends Guide on campus.

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Ernan Roman: New Value Exchange: Preference Info to Drive Personalization

April 3, 2012

THE CHALLENGE: Consumer frustration with opt-out marketing policies is growing. Marketers need to convince them to share information regarding their preferences in exchange for a valuable, personalized relationship. Unfortunately, Opt-Out Is the New Norm There are now over 200 million numbers listed on the National Do Not Call Registry. Moreover, a number of states have introduced “Do-Not-Mail” bills and the topic of “Do Not Track” legislation is red-hot. Overseas, governments are taking even more drastic actions. For example, the Italian government banned all unsolicited mail, phone, email, fax and mobile communications. As consumers find more ways to avoid unsolicited marketing communications, panicked businesses are responding by creating opt-out relationships wherever they can. This is the wrong approach. Customer Frustration is Growing Today’s empowered consumers are questioning why the burden should be on them to opt-out. In fact, prominent opt-in campaigns have resulted in enthusiastic customer response. Consider the case of comedian Louis C.K. In recent years, Louis C.K. has risen to prominence as a stand-up comic, an actor, and, with his show Louie , a writer, director and editor. And with his self-produced and distributed “Live at the Beacon Theater” video, he’s setting an important example for online marketers. Rather than forcing his consumers to opt-out, he asked them to opt-in — in a prominent, tongue-in-cheek way: “I’m going to be offering other things through this site. Would you like to hear about them? – Yes, I’d like to receive further emails about Louis C.K. things. – No, leave me alone forever, you fat idiot.” The latter was selected by default. The customer response was unequivocal: “‘Opt in’ as the default is such a minor thing, but it makes people feel good.” Create a Reciprocity of Value Rather than making “opt-out” the default, marketers should compete to engage consumers with compelling value propositions that motivate them to opt-in. The most compelling value you can offer is relevance. Consumers are eager for meaningful personalization. The challenge for marketers is to make them aware that, in order to receive or access increasingly relevant information, consumers must share increasing amounts of information regarding their preferences. Microsoft used Voice of the Customer (VoC) research to create a highly personalized experience in their Business Resource Center, which asked over 14 detailed business questions in order to deliver targeted and relevant information. As a result, they have achieved opt-in rates as high as 95 percent. Three Takeaways for Marketers > Create a Reciprocity of Value Consumers opt-in to share increasingly detailed personal preference information in exchange for marketer’s promises to deliver relevant information and offers. > Opt-In Is Not About Passively Agreeing to Receive Email It’s about actively opting-in to a relationship and self-profiling your preferences and aversions. > Consumers Are Eager to Tell You How They Want to be Treated The key is to ask. Ernan Roman is President of the marketing consultancy, Ernan Roman Direct Marketing. Recognized as the industry pioneer who created three transformational methodologies: Integrated Direct Marketing, Opt-In Marketing, and Voice of Customer Relationship Research. Ernan was recently inducted into the Marketing Hall of Fame. Clients include Microsoft, NBC Universal, Disney, Hewlett-Packard and IBM. Ernan was named to “B to B’s Who’s Who” as one of the “100 most influential people” in Business Marketing by Crain’s B to B Magazine. His fourth and latest book on marketing best practices is titled: Voice of the Customer Marketing: A Proven 5-Step Process to Create Customers Who Care, Spend, and Stay . Ernan is also the co-author of “Opt-In Marketing: Increase Sales Exponentially with Consensual Marketing” and author of “Integrated Direct Marketing: The Cutting Edge Strategy for Synchronizing Advertising, Direct Mail, Telemarketing and Field Sales.” www.erdm.com ernan@erdm.com

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Richard Barrington: Seven Ways to Straighten Your Boomerang Child

April 3, 2012

Blame the economy. And get the spare bedroom ready. The recent wave of young adults returning to live with their parents has spawned the term “boomerang generation,” named for the object that turns after you throw it and sails back to you — a painful event if you weren’t expecting it. Similarly, if you’ve recently found your grown children asking to move back in, you may be experiencing pains of your own. Naturally, most parents are more than willing to make sacrifices for their children, and will make accommodations for them when they are in need. However, when young adults return home, it shouldn’t be to experience a second childhood. Parents need a game plan to make the arrangement bearable, get the kids on track to move back out, and most of all, help them finally achieve financial and social independence. In other words, parents need a plan for straightening their boomerangs. About the boomerang trend According to a recent study by the Pew Research Center , 29 percent of young adults (ages 25 to 34) have lived with their parents at some point in recent years. As of 2010, 21.6 percent of that age group was living in a multi-generational household — which typically meant living with their parents. High unemployment is one reason, but there is more to the trend than that. The percentage of young adults living in multi-generational households has been steadily rising since 1980. Back then, this percentage bottomed out at 11 percent, and remained well below today’s levels during the early 1980s, even though the unemployment situation back then was even worse than it has been in recent years. Also, while the trend slowed during the economic boom of the 1990s, the percentage of young adults in multi-generational households continued to rise. The rate of increase has accelerated again as the economy worsened in recent years. In other words, while the Great Recession may have exacerbated the situation, a long-term trend toward this kind of living arrangement has persisted through multiple economic cycles. Seven ways to straighten a boomerang Whatever the reason young adults have for moving back home, some parents may welcome it, while others may view it as a necessary evil. However, in no case should it be an excuse for the younger generation to lapse into adolescence. So, to help make the living arrangements bearable, to keep the kids focused on moving back out, and to help them develop a stronger sense of independence, here are seven tips for straightening out the boomerang generation: Come up with some kind of rent arrangement. Naturally, this should be on more favorable terms than it would be out in the cold, cruel world of landlords, but the young adult should not be absolved of financial responsibility. With so many older Americans behind on their retirement savings , this extra income might come in handy for the parents. If you don’t want to take money from your kids, have them put the equivalent of rent into a savings account , so they start building up the resources necessary to live more independently. Change rooms. If feasible, put young adults who return home somewhere other than the rooms they grew up in. This will help send the signal that this is not a second childhood. Establish ground rules for personal behavior. Your home should not be treated as a dorm or a hotel. Rules regarding noise, visitors and hours for coming and going should be established so as not to disturb your peace. Monitor job application activity. Make sure your son or daughter is applying for work every day — and keeping an open mind. Chances are, mommy and daddy didn’t start out in their dream jobs, and young adults need to understand that they can’t be too choosy in a tough economy. Make volunteering a substitute for work. If your adult child can’t find a job, have them volunteer for a regular set of hours instead. This will help them build a resume, make contacts and avoid slipping into the habit of idleness. Formulate a financial plan. Once your son or daughter starts working, help create a budget that will prepare them to move out. This will make sure they don’t take advantage of your cheap lodging to simply spend what they earn, and will teach them principles of goal-setting and budgeting that will help them maintain their financial independence once they’re back on their own. Discuss all these expectations explicitly and up front. You don’t need a formal contract or rental agreement — though some might prefer that — but you do need to set and reinforce these expectations. If they protest against “being treated like a child,” point out that you would lay down formal terms for any adult who sought to rent a room for you. With the baby boom generation now entering its retirement years, the percentage of multi-generational households may continue to increase, but for a different reason: Many aging parents will have to move in with their children for a combination of health and financial reasons. When that happens, perhaps it will finally be the kids’ turn to make the rules. The original article can be found at Money-Rates.com : ” 7 Ways to straighten your boomerang child ”

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Josh Levy: Hey America! We’re Ranked #16 in Broadband!

April 3, 2012

Q: Do you live in America? If you answered, “yes,” you can proceed directly to the “You live in a country ranked 16th in the world in broadband penetration, speed and price” section below. You live in a country ranked 16th in the world in broadband penetration, speed and price. It’s true . The U.S. ranks an average of 16th in the world in these three categories. That puts us behind countries like Portugal (15th), Belgium (9th) and Denmark (2nd), whose residents enjoy greater access to a faster, cheaper Internet than Americans do. There’s one core reason for our poor global performance. As journalist Rick Karr explained in his film on the state of broadband in Europe, a simple “game changer” — competition — leads to better broadband. But competition in the U.S. broadband market is virtually nonexistent. That means that millions of Americans live without high-speed Internet access, and those who do have it experience slower speeds and higher prices than their European counterparts. Most U.S. residents have a choice of only one cable provider, with slower DSL and satellite providing a cheap façade of competition . Big broadband companies are all too happy to point to this “competition” whenever they’re asked why they’ve been allowed to become quasi-monopolies that dictate how — and for what price — we connect to the Internet. Now the tiny sliver of broadband competition that still exists in America could disappear completely. Verizon and a group of cable companies including Comcast, Cox and Time Warner Cable have settled on a deal that would allow them to divide up the broadband market among themselves, leaving Internet users in the lurch. In short, Verizon would purchase a big chunk of wireless spectrum owned by the cable companies in exchange for an agreement to resell those companies’ broadband services to its customers — customers who once hoped that Verizon would build out its own FiOS network to compete with these very same cable companies. This deal amounts to an agreement between Verizon and these cable companies to stop competing. Whatever slices of the broadband market they currently dominate, they’ll continue to dominate — without the threat of competition. With that threat removed, these companies will have little incentive to lower prices, increase speeds or build out to underserved areas. Meanwhile, Verizon’s wireless spectrum purchase would make the already concentrated mobile market even more so — with AT&T and Verizon controlling two-thirds of all wireless subscriptions, 80 percent of the most valuable wireless spectrum and 80 percent of the entire industry’s profits. The U.S. broadband market is in bad shape. More competition could help fix it, but shady business deals and bad government policies are fostering more concentration, not less. How do we solve this competition problem? We’re asking Congress, the Justice Department and the FCC to block Verizon’s proposed deal . That’s a start. But we also have to support other forms of broadband competition, like municipally owned networks that compete with — and often beat — big incumbents like Comcast when it comes to speed, access and affordability. Unfortunately, those incumbents have spent millions to pass state-level bills that outlaw such networks. A movement is coming together to support communities’ right to decide for themselves whether to build such systems. You can join it here . You can also learn more about the history of corporations trying to control our access to basic utilities at the expense of residents who have depended on those utilities for their very survival. Indeed, many people see the battle for broadband as the 21st-century equivalent of the fight for rural electrification . We oppose the Verizon-cable deal and support community-owned broadband networks for one simple reason: Without competition, companies will leave Americans behind when it comes to the basic information utility of our time.

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D. Sidney Potter: More Smoke and Mirrors From the Bank of America Pilot Program

April 3, 2012

For my inaugural posting for the formidable Huffington Post, let me get this out there for the record. Firstly, I am a card-carry registered Independent and proud of it. In terms of politically leanings, I adhere to the 80/20 rule. What is that you may ask? As a former commercial real estate broker, all sales guys will know what I’m talking about. As for which way I lean (Is it to the Left of Right?), follow my musings on the current state of economic despair of this great country of ours and it should be somewhat evident. As a clue, if I were a true rhino I would likely be a donkey! First up to bat for critical analysis, is Bank of America’s new pilot program, titled “Mortgage to Lease.” Rolled out last week with splashy headlines, the program is structured to assist its mortgage customers that are in current default on their loans. Sounds well-intentioned, right? (Not!) When you read the fine print, its got more holes than a piece of rotting Swiss cheese. Don’t believe me. Per the Bank of America website , note the following: · Have loans owned by Bank of America. · Are delinquent for more than 60 days. · Have exhausted modification solutions or have not responded to alternatives to foreclosure, including short sale and deed-in-lieu. · Have high loan balances in relation to their current property value. · Face considerable risk of ultimate foreclosure. · Have no junior liens. · Are still occupying the home. · Have adequate income to make an affordable rent payment. And I almost forgot, the program is limited to 1,000 customers, and to the states of Arizona, Nevada (two of my former stomping grounds as a new tract home investor), and the great state of New York. In addition, the 1,000 customers have to be “invited.” Which I must admit, I’m not certain what that means. “This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support,” Ron Sturzenegger, legacy asset servicing executive of Bank of America said in a statement . “This program may have the potential to further round out the broad set of solutions we offer our customers in need of assistance.” Translated (and in code): We’re doing this program to stave off criticisms that we really don’t care for our customers when in fact we don’t… excuse me… I mean we do care. In all fairness to the banks, wherein most that work for them are taxpaying, God-fearing Americans that simply want to put food on their table, a pilot program of this non-magnitude is at least a start. Albeit it’s a ‘day late and a dollar short’ — figuratively and literally speaking. Kinda like offering a terminally ill patient medical assistance while their being filled with embalming fluid on a cold metal slab. It is however freakishly similar in scope (or lack thereof), of other “pilot programs” that are meant to quell criticism that the banks are not doing enough to assist their customers out of this scorched earth environment. The fact is, they aren’t, and this program isn’t helping. Three and a half years into this mess — or four and a half, depending when you start the clock as the ” beginning of the end” — many banks are still resistance to “change.” Why are most banks resistant? Because it’s difficult, primarily. It’s not that complicated. Making a cultural and organizational change to a cataclysmic financial meltdown is fairly difficult. Remember, at 35,000 feet it takes a 747 jumbo jet five miles to make a u-turn. Imagine a bank culture steeped in decades of entrenched resistance to anything different then what their use to. And this just doesn’t go for banks; it goes for the butcher, baker, and candlestick maker. Defining new paradigms is difficult – but not forgivable. As one example, and in 2008 when the banks started to realize that the rules would have to change and that they might have to play the game differently – in what I like to call the 1st Inning in the Game of Darkness, some mid-sized commercial banks in Los Angeles started to institute partial loan forgiveness and interest rate reductions for nearly all its loan. I repeat, for nearly all its loans. Even though the market capitalization rate for small to mid-size banks, community thrifts and credit unions are substantially different – kinda like a single prop Cessna idled next to a 747 Jumbo jet, they are still from the same aeronautical tribe – and in this case, similar banking tribes. The distinction between the variant response between large banks and their more nimble sized counterparts – is the culture stupid. In short, it all comes down to culture, organizational bandwidth and accountability to shareholders. Banks too big to fail are so fortified with bureaucratic layers of Brooks Brothers suits and “yes men” that expecting a reasonable degree of change is a Herculean task. Many of the changes bandied about over the past three to four years have been promulgated through the Home Affordable Act, which gave birth (some say prematurely), to the “alphabet soup” programs, such as HAMP, HARP, HAFA, etc — some of these programs I can proudly say I was a consultant on. America has witnessed the failure of these alpha programs as a result of the alpha male — and their inherent resistance to change. Try talking about the reasonableness of a “cram down” (aka principal loan reduction), to a banking operations manager, and you would think you were taking their first-born. And believe me, I’ve had these conversations at operation sites across the country. It’s not a popular topic. Nor are “pilot programs” for consumer advocates, who in short view there negligible efforts of the banking industry, as another attempt to disguise itself again in sheep’s clothing.

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Tom Grasty: The Difference Between "Invention" and "Innovation"

April 3, 2012

Two and a half years ago, I co-founded Stroome, a collaborative online video editing and publishing platform and 2010 Knight News Challenge winner . From its inception, the site received a tremendous amount of attention. The New School, USC Annenberg, the Online News Association and, ultimately, the Knight Foundation all saw something interesting in what we were doing. We won awards; we were invited to present at conferences; we were written about in the trades and featured in more than 150 blogs . Yet despite all the accolades, not once did the word “invention” creep in. “Innovation,” it turns out, was the word on everyone’s lips. Like so many up-and-coming entrepreneurs, I was under the impression that invention and innovation were one and the same. They aren’t. And, as I have discovered, the distinction is an important one. Recently, I was asked by Jason Nazar, founder of Docstoc and a big supporter of the L.A. entrepreneurial community, if I would help define the difference between the two. A short, three-minute video response can be found at the bottom of this post, but I thought I’d share some key takeaways with you here: INVENTION VS. INNOVATION: THE DIFFERENCE In its purest sense, invention can be defined as the creation of a product or introduction of a process for the first time. Innovation , on the other hand, occurs if someone improves on or makes a significant contribution to an existing product, process or service. Consider the microprocessor. Someone invented the microprocessor. But by itself, the microprocessor was nothing more than another piece on the circuit board. It’s what was done with that piece — the hundreds of thousands of products, processes and services that evolved from the invention of the microprocessor — that required innovation. STEVE JOBS: THE POSTER BOY OF INNOVATION If ever there were a poster child for innovation it would be former Apple CEO Steve Jobs. And when people talk about innovation, Jobs’ iPod is cited as an example of innovation at its best. But let’s take a step back for a minute. The iPod wasn’t the first portable music device (Sony popularized the “music anywhere, anytime” concept 22 years earlier with the Walkman); the iPod wasn’t the first device that put hundreds of songs in your pocket (dozens of manufacturers had MP3 devices on the market when the iPod was released in 2001); and Apple was actually late to the party when it came to providing an online music-sharing platform. (Napster, Grokster and Kazaa all preceded iTunes.) So, given those sobering facts, is the iPod’s distinction as a defining example of innovation warranted? Absolutely. What made the iPod and the music ecosystem it engendered innovative wasn’t that it was the first portable music device. It wasn’t that it was the first MP3 player. And it wasn’t that it was the first company to make thousands of songs immediately available to millions of users. What made Apple innovative was that it combined all of these elements — design, ergonomics and ease of use — in a single device, and then tied it directly into a platform that effortlessly kept that device updated with music. Apple invented nothing. Its innovation was creating an easy-to-use ecosystem that unified music discovery, delivery and device. And, in the process, they revolutionized the music industry. IBM: INNOVATION’S UGLY STEPCHILD Admittedly, when it comes to corporate culture, Apple and IBM are worlds apart. But Apple and IBM aren’t really as different as innovation’s poster boy would have had us believe. Truth is if it hadn’t been for one of IBM’s greatest innovations — the personal computer — there would have been no Apple. Jobs owes a lot to the introduction of the PC. And IBM was the company behind it. Ironically, the IBM PC didn’t contain any new inventions per se (see iPod example above). Under pressure to complete the project in less than 18 months, the team actually was under explicit instructions not to invent anything new. The goal of the first PC, code-named “Project Chess,” was to take off-the-shelf components and bring them together in a way that was user-friendly, inexpensive and powerful. And while the world’s first PC was an innovative product in the aggregate, the device they created — a portable device that put powerful computing in the hands of the people — was no less impactful than Henry Ford’s Model T, which reinvented the automobile industry by putting affordable transportation in the hands of the masses. INNOVATION ALONE IS NOT ENOUGH Given the choice to invent or innovate, most entrepreneurs would take the latter. Let’s face it, innovation is just sexier. Perhaps there are a few engineers at MIT who can name the members of “Project Chess.” Virtually everyone on the planet knows who Steve Jobs is. But innovation alone isn’t enough. Too often, companies focus on a technology instead of the customer’s problem . But in order to truly turn a great idea into a world-changing innovation, other factors must be taken into account. According to Venkatakrishnan Balasubramanian, a research analyst with Infosys Labs, the key to ensuring that innovation is successful is aligning your idea with the strategic objectives and business models of your organization. In a recent article that appeared in Innovation Management , he offered five considerations: 1. Competitive advantage: Your innovation should provide a unique competitive position for the enterprise in the marketplace. 2. Business alignment: The differentiating factors of your innovation should be conceptualized around the key strategic focus of the enterprise and its goals. 3. Customers: Knowing the customers who will benefit from your innovation is paramount. 4. Execution: Identifying resources, processes, risks, partners and suppliers and the ecosystem in the market for succeeding in the innovation is equally important. 5. Business value: Assessing the value (monetary, market size, etc.) of the innovation and how the idea will bring that value into the organization is a critical underlying factor in selecting which idea to pursue. Said another way, smart innovators frame their ideas to stress the ways in which a new concept is compatible with the existing market landscape, and their company’s place in that marketplace. This adherence to the “status quo” may sound completely antithetical to the concept of innovation. But an idea that requires too much change in an organization, or too much disruption to the marketplace, may never see the light of day. A FINAL THOUGHT While they tend to be lumped together, “invention” and “innovation” are not the same thing. There are distinctions between them, and those distinctions are important. So how do you know if you are inventing or innovating? Consider this analogy: If invention is a pebble tossed in the pond, innovation is the rippling effect that pebble causes. Someone has to toss the pebble. That’s the inventor. Someone has to recognize the ripple will eventually become a wave. That’s the entrepreneur. Entrepreneurs don’t stop at the water’s edge. They watch the ripples and spot the next big wave before it happens. And it’s the act of anticipating and riding that “next big wave” that drives the innovative nature in every entrepreneur. This article is the seventh of 10 video segments in which digital entrepreneur Tom Grasty talks about his experience building an Internet startup, and is part of a larger initiative sponsored by docstoc.videos, which features advice from small business owners who offer their views on how to launch a new business or grow your existing one altogether.

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Russell C. Smith: The Hunger Games and the Death of Winner-Take-All Capitalism

April 3, 2012

Much has been written about the underlying message of The Hunger Games , and how the inspiration for the dystopian Young Adult novel series came from the author Suzanne Collins flipping through TV channels between a reality television show and news footage of the war in Iraq. From this beginning, Ms. Collins delivered a series that has captured the imaginations of readers both young and old with a theme as ancient as war itself: offering up a nation’s young as lambs to slaughter. While the cinematic version of The Hunger Games may be more politically ambiguous than the novels, the time period in which the books were published is anything but ambiguous. America’s rude economic awakening had as much to do with being overextended in ongoing wars paid for on imaginary unlimited capital, as it does with large segments of the population getting by on overextended credit and never suspecting the other shoe was about to drop, and land right on top of their houses. With some economic forecasters predicting that a full recovery may not happen until 2018, America’s younger workers are witnessing their future economic infrastructure collapse around them. One could view the ritualized “killing as entertainment” of the tributes in The Hunger Games as an allegory about cashing in on the next generation’s future hopes and dreams. Add our deteriorating education system to the ongoing financial hard times, and we have a perfect storm of social and economic problems that could easily tip the balance toward social unrest on a scale not seen since the late 1960s. Without a healthy economy where a more all-inclusive segment of the population can depend upon a livable wage, we all lose, since everyone lives in and depends upon the same unstable system. And the powers that be can’t keep expecting people to accept an economically unbalanced system that’s simply no longer sustainable. The Hunger Games is a far more dark and complex vision than other recent popular teen sensations. One can easily find articles asking whether a movie like this could have been given the go ahead by studio executives a decade ago, much less promoted as a suitable teen movie, similar to Twilight or the Harry Potter movies. Critics and parents may already be looking fondly back on the safe reliability of teen girls making moon eyes and breathing heavily toward a vampire in their midst, or boy wizards battling the dark forces with his eager, well-groomed friends by his side. Nope, in The Hunger Games the revolution’s for real kids, and may the most kick-ass warrior win. It’s true, Harry Potter had its somber moments, but even in its most harrowing scenes it was set in a fantasy world full of wizards, witchcraft, and just the right amount of thrills and chills. In The Hunger Games , the stark images of kids dying on the field of televised battle, in a future dystopian United States where a decadent power elite rule the masses, seems a little too close for comfort. Politicians vainly scream out “class warfare” and “socialism” to fuel their followers when people rise up in protest, but a bold vision put up on screen lets our culture know what’s really going on. In the same way Orwell wrote about 1948 and titled his novel 1984 , one can ask whether The Hunger Games is a reflection of our current world or a warning of horrific things to come. Is the tip-off also in the title? Aren’t we all hungry for a world where innocence doesn’t have to be needlessly killed off, much less where blood sport as entertainment sinks down to appeal to younger and younger audiences, becoming more real as it continues in a downward spiral? In the meantime, The Hunger Games poses the question: Is all of this the inevitable result of Winner-Take-All Capitalism?

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