education

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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Dan Solin: Comparisons to Other Mutual Funds Can Be Misleading

April 3, 2012

The mutual fund industry is highly competitive and very lucrative. Fund managers earn fees through “expense ratios” charged by their funds. These fees add up to big bucks. According to one report , in 2010 there were thirty stock fund classes with assets greater than $10 billion. Collectively, those funds would collect a whopping $3.9 billion in fees for the following year, assuming an average expense ratio of 0.548 percent. With revenues like that, it is not surprising that publicly traded funds have huge pretax margins. The same report noted that T. Rowe Price had a pretax margin of 37.1 percent. Federated Investors was 27.7 percent and Gamco (which offers the well-known Gabelli Funds) reported 35.6 percent. In an effort to capture more assets and keep those profits flowing, fund families engage in extensive advertising, intended to demonstrate how well their funds performed. I was struck by this statement on the web page for T. Rowe Price : “100 percent of our Retirement Funds beat their 5-year Lipper average as of 12/31/11.” That does seem pretty impressive. As regular readers of my blogs are well aware, I advocate purchasing index funds and avoiding actively managed funds (where the fund manager attempts to beat a designated benchmark). My views are based on the overwhelming research indicating that actively managed funds are statistically likely to underperform index funds over the long term. This research is summarized here . All of the retirement funds offered by T. Rowe Price are actively managed funds. Its web page extols the ability of its “global research team” to engage in “bottom-up research” in order to “enhance returns”. Since 100 percent of its retirement funds beat their 5-year Lipper average, investors could believe that T. Rowe Price has found a way to consistently “beat the market”. Is this accurate? Not if you understand how the use of benchmarks can be misleading. Lipper mutual fund averages are benchmarks that measure the performance of funds in a given category against other funds in that category. The fact that all of the retirement funds managed by T. Rowe Price beat their Lipper averages means they were better than the average performance of the other funds measured by Lipper. While interesting, it tells you nothing about how those funds performed against their benchmark indexes. Morningstar assigns a benchmark index to each mutual fund it rates. This is the index against which the performance of a given fund can be measured. These indexes are assigned by the Morningstar fund analyst team, based on its Morningstar category. It is the index the Morningstar analyst team believes is the most appropriate benchmark for the Morningstar category. The performance of a fund against its appropriate index is a more accurate way to evaluate the performance of a mutual fund. Think of it this way. If the average 8th grader can run a 100 yard dash in 20 seconds and your child took 40 seconds, you might be concerned. However, if the only information you had was that your child was better than the average in his class (and the average in his class was 45 seconds), you might believe he was in great shape. Using data from Morningstar (for example see here ), Index Funds Advisors calculated the returns for the five-year period ending December 31, 2011 of the T. Rowe Price Retirement funds against their analyst assigned benchmark. This was the same period used by T. Rowe Price to measure performance against the Lipper average. We measured the performance of all 33 T. Rowe Price Retirement Funds. The results were surprising. None of them equaled (much less beat) their Morningstar analyst assigned benchmark. Underperformance ranged from 0.84 percent to 1.73 percent (annualized). Only twelve of these funds are available for direct purchase by individual investors. Representatives for T. Rowe Price disagree. They believe the Lipper results give investors “… a valid apples-to-apples comparison.” They also note you can’t purchase the Morningstar benchmarks so the use of them doesn’t represent a valid comparison. Finally, they quarrel with the benchmarks assigned to their funds by Morningstar and believe their custom benchmarks are more accurate. Their funds outperform their customized benchmarks. If fund families want to brag about the performance of their funds against their peers, that’s fine. But you should insist on knowing how they did against an appropriate benchmark (whether you believe that benchmark is the one set by a third party like Morningstar, or the fund family itself). Otherwise, your portfolio could be out of breath at the finish line. Dan Solin is a senior vice president of Index Funds Advisors. He is the New York Times bestselling author of “The Smartest Investment Book You’ll Ever Read,” “The Smartest 401(k) Book You’ll Ever Read,” “The Smartest Retirement Book You’ll Ever Read” and “The Smartest Portfolio You’ll Ever Own.” His new book is “The Smartest Money Book You’ll Ever Read.” The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

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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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Rabbi Peter H. Schweitzer: 10 New Plagues For Passover 2012

April 3, 2012

The Passover holiday, which this year begins on Friday (April 6), celebrates the story of freedom of the ancient Hebrew people from Egyptian bondage. But more than just a compelling lesson about our legendary past, it is an urgent call for justice, equality and freedom for those who are still oppressed today. According to the Exodus story, Pharaoh had an obstinate heart and refused to let the Hebrew slaves go free. As a consequence, he brought 10 plagues on his land, including blood and frogs, lice, gnats and flies, murrain and boils, hail and darkness, and finally, the death of the first-born Egyptians. Pharaoh ultimately capitulated, but we are cautioned not to rejoice at his downfall or that Egyptians were drowned in the Red Sea while attempting to catch the fleeing Israelites. Instead, during the Seder (service before the Passover meal) it is a custom to recite the plagues and spill a drop of wine at the mention of each plague, thereby diminishing our pleasure. In recent years, many new modern Haggadahs have been created — the books used to retell the Passover story — and they are likely to incorporate a list of “Contemporary Afflictions,” including AIDS, drugs, hunger, illiteracy, pollution, poverty and racism, modern plagues that continue to darken our lives today. As we find ourselves in the midst of the latest presidential election cycle, an affliction unto itself, here is a set of 10 New Plagues for Passover 2012. 1. Out-of-control SuperPACs that are unaffiliated, uncoordinated, unassociated and secretly run by billionaires. 2. No-holds-barred political consultants who run unfettered, unrestrained, carpet-bombing smear campaigns. 3. Fear-mongering politicians who foster anxiety and anger rather than confidence and hope. 4. Arrogant candidates who sarcastically deflect important and legitimate questions with snide responses that scapegoat the “elite” media. 5. Puritanical religious crusaders who make outrageous attacks on contraception, freedom of choice, women, gays and lesbians, teachers and union members, as well as intellectuals and liberals and the colleges that “indoctrinate” them. 6. Rogue robocalls that are unleashed, unregistered and illegal. 7. Bloviating, bombastic, pompous and inflammatory talkshow hosts. 8. Crackpot conspiracy theorists who don’t care about facts, evidence or truth. 9. All-powerful, self-interested banks and financial organizations that don’t care about the client. 10. Otherwise reasonable, caring people who let them all get away with it. Rabbi Peter H. Schweitzer is the leader of The City Congregation for Humanistic Judaism (New York City) www.citycongregation.org. He is the author of “The Liberated Haggadah: A Passover Celebration for Cultural, Secular and Humanistic Jews.” (secularhaggadah.com)

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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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Michael Pento: What Causes Interest Rates to Rise

April 3, 2012

The prevailing notion among the mainstream media and economists is that interest rates are rising because of improving economic growth. But like many of the readily accepted tenets of today’s world of popular finance, this too has its basis in fallacy. Interest rates have increased by nearly 40 basis points on the 10-year note since the first week of March and that is being offered as proof that the economy is healing and GDP growth is about to accelerate. But in truth, the recent spike in Treasury bond yields is only the result of a temporary ebbing in the fear trade that brought about panic selling in Euro-denominated debt, which had previously caused U.S. Treasury prices to soar. The head of the European Central Bank, Mario Draghi, just finished printing over a trillion Euros in an effort to calm the bond market. This new liquidity predictably found its way into distressed Eurozone debt and has mollified bond investors — for the moment. Since a Greek exit from the Euro in no longer perceived an imminent threat, investors have sold their recent purchases of U.S. Treasuries and piled back into Eurozone sovereign debt. For example, the yield on the Italian 10-year note took a rollercoaster ride above 7 percent at the start of this year, before plunging south of 5 percent by the beginning of March. However, in contrast to what passes for the economic wisdom of today, an increase in the rate of sovereign bond yields would be a function of deterioration in their credit, currency and inflation risks. But it would never be because of an increase in the prospects for growth. An economy that is experiencing a healthy growth spurt would experience a reduction in all three of those factors that would cause bond yields to rise. Strong GDP growth-which results from increased productivity — serves to improve credit risk, due to a bolstered tax base, while it also lowers the rate of inflation by increasing the amount of goods and services available for purchase. Therefore, it also tends to boost the currency’s exchange rate as well. Economic growth that is also accompanied by a sound monetary policy tends to lower the rate of inflation and thus increases the real rate of interest. But it does this without increasing nominal interest rates. It instead serves to provide a higher real rate of return on sovereign debt ownership. This is precisely what occurred in the U.S. during the early 1980s. After Fed Chairman Paul Volcker fought and won the battle against inflation, economic growth exploded while the stock market soared in value. And nominal bond prices began to fall, not rise. At the start of the 1980s, GDP fell by 0.3 percent, the 10-year note was 12 percent and the rate of inflation was 14 percent. Therefore, real interest rates were a negative 2 percent at the start of that decade. But by 1984 GDP had accelerated to 7.2 percent in that year. However, the nominal 10-year note fell to 11 percent and inflation had plummeted down to 4 percent. In this classic example that illustrates clearly how growth isn’t inflationary, real interest rates soared by 9 percentage points to yield a positive 7 percent return on sovereign debt! In a healthy economy, stocks, bond prices, and the currency, should all rise together as nominal yields fall and real interest rates rise. The simple truth is that the rate of inflation should fall faster than the rate nominal yields decrease. However, what the Fed, ECB and BOJ are doing now provides a prescription for soaring nominal interest rates in the not too distant future. These central banks are violating all three conditions that lead to low and stable interest rates for the long term. By massively increasing the money supply, they have caused inflation to rise and reduced the purchasing power of their currencies. And by creating superfluous money and credit, the central banks have given the cover needed for their respective governments to run up an overwhelming amount of debt. The currency, credit and inflation risk of owning those three sovereign debt markets has soared. Therefore, they have created the perfect conditions for a collapse of their bond markets. Central bankers believe they have more power and influence over the yield curve than what they indeed possess. The fact is they can only control interest rates for a relatively short period of time. By not allowing interest rates to function freely, the Fed, ECB and BOJ are facing the eventuality of a bond market debacle that will also crush their currencies and stock markets. Recent history has proven that these central banks will fight the ensuing run-up in yields with QEs III, IV and V in an effort to postpone the pain. This failure to acknowledge reality will cause the eventual collapse to become significantly more acute. Michael Pento is the President of Pento Portfolio Strategies .

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Michael Martin: To Invest Like Warren Buffett, Learn How to Sell

April 3, 2012

If you want to learn how to invest like Warren Buffett, you’ve got to learn how to sell investments effectively. So says Steve Sears, the long-time Barron’s columnist and author of the new book The Indominable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails . Throughout his career, Sears has always been struck by what actually happens on Wall St. and how it’s perceived on Main St. — based in no small part upon his own observations and from the reader feedback he gets from his Barron’s column, The Striking Price . “Bad investors think of ways to make money. Good investors think of ways to not lose money,” he says during a recent podcast interview. Professionals tend to be hyper-vigilant about what’s not working in their portfolio, as opposed to falling in love with the investments that are working. “Most investors think of Warren Buffett as the man with gift for picking stocks, which he surely has, but he’s also a great seller of stocks as well. But because of Buffett’s public persona and cult of personality, unless someone has read the fine print of the Berkshire Hathaway annual reports, no one really ever hears about what he sells.” Selling in this case can mean selling to take a profit or selling to take a loss to free up the cash and to emotionally move on. The point Sears is making is that you’ve got to pull your weeds in order to let the flowers bloom, something that Buffett does as a matter of course. This is true for those Huffington Post readers who still may own Research In Motion (ticker: RIMM), seen above, maker of the BlackBerry… which many think could be on its last Berry. RIMM traded at $144 in June 2008, not four years ago. Since then, it’s been Research In Downward Motion. Even if an investor sold RIMM at $72, after a 50% decline, that would have been almost 5 times where it closed yesterday at $14 per share. The odds of anyone seeing 10 times their investment in RIMM anytime soon are poor at best. Could you have sold it at $72 after having owned it at $144? It’s true Buffett is not known for owning technology within his holding company Berkshire Hathaway, but the point is this: Buffett’s portfolio ultimately burgeons the way it does because he divests of a stock that behaves like RIMM usually long before it becomes troublesome, a key tenet of eventually becoming an indominable investor. The Downside of the Information Age As noted in The Indominable Investor , we are fed an endless stream of information online via social networks such as Facebook, LinkedIn, finance blogs, and Twitter. That’s in addition to the Huffington Post, Wall Street Journal , the New York Times , and Barron’s . According to Sears, a person must learn to become what is known as a contrarian. “You have to be skeptical of everything you hear and everything you read. You have to consider the source and how the data could be tainted or biased.” In other words, you have to think for yourself. A contrarian is someone who thinks for him or herself, but in doing so often goes against the grain of what the crowd is thinking. Thinking with the crowd could be part of the downside of investing during the information age. Don’t forget television’s endless stream of infotainment. There are no shortage of shows and guests who will tell you where to put your money. Rarely, if at all, will they delineate where and when to sell at a loss when they’re wrong. During information overload, investors lack the ability to separate the good information from the bad. Even if they do, they oftentimes don’t act because they are overwhelmed with a cacophony of statistical noise — information that has no value. How do you get started? Consider what the benefit might be of your going on a financial information diet. For those of you using Twitter, what would be the value of an “Un-Follow Friday”? Instead of looking to add new Twitter users to follow, how about deleting some? Doing so would be thinking like a contrarian… and it might be worth more to you than you know.

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Vanity Fair: Four-Wheeled Future: All Hail the Taxi of Tomorrow

April 3, 2012

The latest version of our city’s only private form of public transportation — the yellow cab — will be unveiled this week at the 2012 New York Auto Show. By Brett Berk , Vanity Fair After exhaustive evaluation by all manner of stakeholders — taxi drivers, fleet owners, transportation bureaucrats, the mayor, and the notoriously cranky New York City public — the Nissan NV200 has been selected to replace the venerable Ford Crown Victoria as the Big Apple’s official cab. This so-called Taxi of Tomorrow will be unveiled to skeptical residents for the first time at this week’s New York Auto Show. Intimate Portraits from the 2012 Vanity Fair Oscar Party Booth Like many of Gotham’s unique antediluvian artifacts — intelligent theater, human interaction, walking — the creaky Crown Vic is beloved. So what will the Mexican-made mini-minivan offer to win over nostalgic urbanites when it begins being phased into the city’s 13,200-yellow-cab fleet next year? Well, in addition to besting its two rivals for the job — the wee and equilateral Ford Transit Connect micro-van and the lunky and unproven Turkish Karsan V1 rolling doorstop — the city’s first purpose-built cab will host myriad bespoke features calibrated to the distinctive needs of New York’s taxi users. These include a standard driver’s navigation system that will preclude ever again having to explain which numbered streets precede and follow West 17th, a panoramic glass roof for staring up at the young men on those Hollister billboards, a low-annoyance horn tuned to a frequency that’s only audible to other cabbies (or so we hope), one 12-volt and two USB charging ports so all your batteries will be as fresh as the scent inside the cabin, fuel-economy numbers that double those of the neolithic Ford, and antibacterial pleather seats that provide lower rates of Ebola transmission than most other fabrics. Also baked into the compact new cab: space. And not just inside the cabin, where a flat-floored, “no hump” rear seat and lengthy wheelbase will provide ample legroom for drivers and passengers. On the streets, too: “When all of the Crown Vics are replaced with NV200s,” David Reuter, Nissan’s V.P. of global communications, told us, “there will be five acres of real estate given back to the city of New York.” During its 10-year reign, the Nissan will also replace the other, non-Vic models now on the road. Later this year, when an advance-production version of the Taxi of Tomorrow is available for us to manhandle, we plan to assemble a diverse dream team of New York passenger types — a magazine girl, a Wall Street broker, a fireman, and a clueless tourist — and put our yellow-journalism skills to the test by taking them on a marathon ride through all five boroughs (literally: over the course of the N.Y.C. Marathon). Until then, you’ll have to make do with the images herein, and our admonishment to check out this vehicle, and all the other fabulous world premieres, at the New York Auto Show this week. The show is open to the public April 6-15 at the “Convention Hall of Yesteryear” — the newly refaced, but still underwhelming, Javits Center — all the way over on 11th Avenue in the West 30s. Take a cab. More from Vanity Fair: The Fashion of Mad Men’s Season-Five Premiere Lady Gaga’s Most Talked-About Looks A Look Back at Vintage Playboy Bunnies

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Sen. Jeff Merkley: The Wild, Off the Mark Arguments Against the Volcker Rule

April 3, 2012

Big banks are formulating a host of arguments – wild, off the mark arguments – aimed at dismantling the Volcker Rule firewall between loan-making, customer-serving banks and high-risk hedge funds. That firewall is essential for a stable banking system. When hedge funds blow up, and they regularly do, one doesn’t want them taking out our loan-making system that is so vital to our families and businesses. MF Global, for example, blew up just a few months ago due to big bets on currency markets. But those bad bets didn’t damage our banking system, because MF Global wasn’t part of a bank. So why do big banks want to tear down the Volcker firewall ? Quite simply, hedge funds and similar trading buried in legitimate risk hedging and market-making are big business and, often, make big profits. Moreover, hedge funds inside banks have a competitive advantage by benefiting from government subsidies in the form of insured deposits and access to the Federal Reserve discount window. So what are the arguments the banks are making to attack the Volcker firewall? First they argue that the Volcker firewall will hurt retired teachers and cops by decreasing “liquidity” in markets, which is how easy or hard it is to buy or sell securities. They argue that any decrease in bank trading will make it harder for investors to buy or sell stocks and bonds, which they assert will increase the amount that investors will have to pay for transactions, thereby decreasing the profits for pension funds of retired teachers and cops. Wrong . First, the Volcker rule explicitly allows for “market-making” by bank brokers. Banks will continue to be able to serve investors by helping them make trades. Second, if additional trading is truly profitable without the support of the discount window and FDIC-insured deposits, such trading will take place outside of banks as it has for decades. Third, “liquidity” is not a holy grail. Being able to trade ever faster is not always an economic gain, either for investors or for the economy. High speed trading and computerized trading don’t add much to the economy, and they can do massive damage when things go awry. For these and other reasons, pension funds such as CalPERS, the nation’s biggest, support the Volcker Rule because they depend on a stable financial system free from boom and bust cycles. Moreover, they benefit by reducing the conflicts of interest that derives from massive hedge fund trading by multi-trillion dollar banking institutions. A second major line of attack that the banks have opened up on the Volcker firewall is it will raise gas prices even further. They even have a fancy study for their conclusion, financed by Morgan Stanley, where they argue that if a bank cannot make massive bets on the price of oil, then the price of gasoline will go up and 180,000 jobs will be lost. Wrong. The evidence points in the opposite direction. When big banks invest huge sums on the belief that oil markets are going up, it creates an artificial surge in demand that raises the price of oil. A recent Goldman Sachs report estimated that oil speculation increases the price of gasoline by about 56 cents per gallon. Even the chairman of Exxon-Mobil estimated that the true price of a barrel of oil based on supply and demand should be in the $60-70 range at the same time prices were over $100. A strong Volcker firewall, by getting the banks out of the commodities trading market, will reduce excessive speculation, creating a pathway to more stable prices. As Chairman Volcker has emphasized, U.S. markets worked well for sixty years under a much tougher Glass-Steagall separation of commercial banking from investment banking, including strong limits on bank participation in commodities. Similarly, the markets will work very well under the Volcker Rule’s modernized firewall. The big banks aren’t paying for phony studies, and shielding themselves behind teachers, cops, and drivers because they want to actually lower prices for anyone. Rather, they are doing it because the Volcker firewall will force them to give up the hedge fund-like trading that makes them billions of dollars in profits in good times, but billions of dollars in losses when things go south. When the bank’s hedge fund trading blows up the banks, it will deeply damage loan-making for families and business across America causing deep economic destruction. In short, and to paraphrase Warren Buffet’s comments, hedge funds inside banks are instruments of mass financial destruction. The sooner the Volcker firewall is implemented, the better for all of us.

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Annie Duke: Where’s the Free Lunch?

April 3, 2012

A lot of our decision making stems from the need to protect ourselves emotionally. It is really hard to admit when you made a mistake, that you might have done something wrong to lead you to a bad outcome. Accepting the possibility that you might be at least in part responsible for a bad outcome is hard. Just listen to any poker player after they lose a hand. “I got so unlucky.” If luck causes bad outcomes, then it is not our fault. We don’t need to examine our bad choices. And we protect our fragile psyche. Of course, in taking the route of short-run protection, we sacrifice the long-run upside to honest assessment of ourselves. Learning from mistakes is what makes us better decision makers and, ultimately, ensures better outcomes in the future. And nowhere is this more evident than in our assessment of others. Honesty assess your reaction to other people’s successes. We all know the phrase “failing upward.” When someone gets a promotion it seems we never allow that perhaps they earned it. The knee-jerk reaction is that they schmoozed the right people, that you deserved it more. Rarely do we allow that perhaps someone else might have actually done things better than you, deserved the job more. That you didn’t just get unlucky to not have the success of someone else. That they didn’t just get lucky to have succeeded. At the poker tables, this tendency is so clear. One of the most memorable moments in poker television is when Phil Hellmuth lost a hand in the World Series of Poker Main Event and then declared, “If it weren’t for luck I’d win every one.” Hellmuth was just saying out loud what pretty much every poker player thinks. If they lose a hand the other player got lucky. It is rare to see a poker player admit that perhaps they got outplayed, that their opponent is actually better than they are. When others have success, it emotionally protects us to attribute it to luck because then we don’t have to admit that maybe they are doing something better than we are. That would be hard. That might be honest. That might mean that maybe we aren’t as smart as we like to think we are. This dismissal of others’ successes to avoid cognitive dissonance might have short term psychological benefits but in the long run is disastrous because assessing and learning from others is generally free. At the poker table, if I get in a hand and make a mistake, I might lose my whole chip stack. There is a high cost to learning from your own missteps. But if I watch other people play and honestly assess what they do better than I do, I get that information at no cost because I get to watch them play hands that I am not in, where I am risking zero dollars. But I only get this no cost feedback if I am willing to honestly and properly assess my opponents’ actions. Business is no different than the poker table. Watching other people fail and, more important, watching other people succeed and learning from those success and failure is almost always free. But it is on you to not assume that every failure means the person played poorly or that every success means the person got lucky. Sometimes the best learning experiences come from understanding outcomes that have absolutely nothing to do with you because those don’t cost you anything. But if you dismiss a success as just luck then you are rejecting the free gift that comes with purchase. Yes, there is a free lunch. You just have to be willing to pay attention to when it is offered.

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Rev. Dr. James A. Forbes, Jr.: Resurrecting The Cause For Which King Died

April 2, 2012

44 years after Dr. King’s death, jobs are still the No. 1 issue in America April 4 will be the 44th anniversary of the day Dr. Martin Luther King, Jr. stepped out on the balcony of the Lorraine Motel and was cut down at the age of 39. He had just asked that his favorite hymn, “Precious Lord, Take My Hand,” be sung at the event he was to attend that night; instead it was sung by his friend Mahalia Jackson at his funeral. Most people know the King remembrances. First, the day in January set aside as the Martin Luther King, Jr. Birthday Celebration; and second, the April observance of his death date. King’s name is most frequently associated with civil rights, integration and nonviolent protest. What we should be thinking about, however, is what this preacher also was preaching: economic justice. In other words, jobs . It’s true that Dr. King had a dream about racial integration — hallelujah for that. Today I think he’d say: “Can’t you all get over this color thing?” In King’s speech against the war in Vietnam at the Riverside Church one year before his assassination, he said we cannot fulfill the American dream if we are using up all our resources in war, not just making that a dream deferred, but of the sin-sick soul: “A nation that continues year after year to spend more money on military defense than on programs of social uplift” he said, “is approaching spiritual death.” Integrate? Fine. Stop the war? Fine. But economic redistribution? Economic justice? Spreading the resources so that all God’s children have a place at the table? All good, all important. But neither racial discrimination or segregation nor war in Vietnam got him killed. It was the issue of economic justice. Oh sure, you could talk about economic justice, but King was getting ready to do something about it. The very week he died, he was in the process of planning the Poor People’s Campaign to go to Washington, D.C. to document that poor people in this nation are citizens just like everybody. He was reminding us about the Constitution of the United States that talked about inalienable rights, among which are life, liberty and the pursuit of happiness and all God’s children ought to have food to eat and clothes to wear. They ought to have jobs and opportunity and some place to stay. All God’s children have a right. He was organizing to come to Washington and he said we will tie up the legislative process–we will bring white poor people from Appalachia, Latinos from the border states, bring poor people from the urban centers and say to our nation, “We are Americans too and we have a right to all of the wonderful bounty which God has bestowed on our great nation.” Dr. King was still committed to “I have a dream” when his life was cut short, but it wasn’t a black folk’s dream. It was an American dream — “a dream yet unfulfilled” — that is, the dream of reaching the Promised Land of economic justice as well as equality and peace. I would like to challenge citizens of today with this admonition. Every time you hear, I have a dream , please make sure people understand it’s not just about black folk and white folk getting together. Every time you hear it please make sure that folks know it’s not just about a war in Vietnam, Afghanistan, Iraq or possibly Iran or North Korea. Please make sure that it’s a dream about King that has to do with economic justice. On April 4 this year, a group of us leaders on the Upper West Side of Manhattan are convening a coalition of local and national legislators; interfaith, labor and civil rights activists and leaders; and an esteemed panel of journalists and newsmakers for a symbolic evening of history, re-enactment, riveting discussion and healing songs. Our dedicated interfaith, inter-disciplinary group will pick up the piece of King’s mantle that people have let die — jobs. With more than 12.8 million Americans unemployed, jobs, economic freedom, living wage and worker justice remain the greatest challenges this country faces. The timing is prophetic. Dr. King was slain in Memphis where he had travelled to show his support for striking black sanitation workers. He was about jobs. We will mobilize churches, mosques and synagogues throughout the country, public and private industry, local governments and Congress to create jobs and to lobby for a comprehensive jobs solution by August 28, 2013 — the 50th anniversary of the March on Washington. We will make jobs a priority in the American consciousness. We heard the “I have a dream” speech, but here is a speech not often heard, but deeply reflective of King’s commitment to economic justice: “This will be the day when we shall bring into full realization the American dream — a dream yet unfulfilled. A dream of equality of opportunity, of privilege and property widely distributed; a dream of a land where men will not take necessities from the many to give luxuries to the few, a dream of a land where men will not argue that the color of a man’s skin determined the content of his character; a dream of a nation where all our gifts and resources are held not for ourselves alone but as instruments of service for the rest of humanity; the dream of a country where every man will respect the dignity and worth of human personality — that is the dream. And as we struggle to make racial and economic justice a reality, let us maintain faith in the future. We will confront difficulties and frustrating moments in the struggle to make justice a reality, but we must believe somehow that these problems can be solved.” (December 11, 1961) RESURRECTING THE CAUSE FOR WHICH HE DIED Call-to-Action Wednesday, April 4, 2012 – 5:30 p.m. – 8:00 p.m. (Specific actions at 6:02, when Dr. King was shot, and at 7:04, when he died) Riverside Church, 490 Riverside Drive @ 120th Street, New York, N.Y. 10027

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Allan Brawley: Let’s Stand With Working People Against the Crony Capitalists and Their Political Lackeys

April 2, 2012

The labor unions have always been in the forefront of the national struggle for workers’ rights to organize, a living wage, safe workplaces, health and unemployment insurance, pensions and countless other benefits we have all come to take for granted. Many of these gains were won with the blood and other personal sacrifices of those workers who stood up to the depredations, and often violent, responses of their employers. Those early union struggles need to be remembered and appropriately re-enacted if we are to take the country back from the corporate interests that again control it, their political and judicial allies and the complicit mainstream media. Unfortunately, expecting the gravely weakened unions to take the lead in today’s struggle by themselves is unrealistic and unfair, although their full participation in the battle is essential. The labor movement opened itself to criticism by the behavior of some of its leaders in the past that undermined its image — defending the retention of unproductive workers, insisting on overly generous benefit packages, etc. But, anyone who knows anything about unions is fully aware that these were aberrations that distracted attention from the invaluable role they have played in promoting a higher standard of living and democracy, not only in the workplace, but also for the country as a whole. At least in part because of these achievements, they have been systematically and unfairly demonized by big money interests for decades. It is to be hoped that these sustained misrepresentations of what unions have fought for and achieved for all of us over the years will not result in a repetition today of the more extreme conditions that provoked their founding. Last year’s explosion at Massey Energy’s Upper Big Branch Mine in West Virginia that killed 29 people and the disastrous blowout at BP’s Deepwater Horizon oil platform in the Gulf of Mexico that claimed eleven lives are eerie reminders of events that occurred at the turn of the last century. Last year was the 100th anniversary of the Triangle Shirtwaist Company fire in New York City that cost the lives of 146 workers (mostly young Jewish immigrant women) who were trapped in their workplace because their employers had barred the means of escape. Eyewitnesses to the tragedy saw a steady stream of workers pause helplessly amid the flames before jumping to their deaths on the sidewalk before their eyes. The impact of the Triangle fire on the national psyche and on the organizing efforts of the unions cannot be overstated. Within five years, several clothing industry unions had gained recognition and played a key role in securing from their employers the 45-hour week, a living wage, paid vacations, health insurance and pensions. Mine, steel, textile, railroad, automobile and countless other workers had to suffer their own versions of employer-inflicted inhumanity, violence and multiple deaths and injuries before they secured recognition and some degree of workplace fairness and safety. We owe all of them a great deal — at the very least, to remember and honor them for their courage and sacrifice. Progressives succeeded in having many of these workplace rights (initially secured by the unions), adopted by specific states and municipalities and, later, enacted into Federal law, especially in the 1930s. These rights were expanded and enforced for the next 30 years until the Right Wing of the Republican Party mounted their systematic assault on ordinary working people, their families and the people who sought to represent them. We are now witnessing the consequences of three decades of corporate deregulation, tax breaks for the biggest corporations and the wealthiest Americans, and a complete disregard for the poor and vulnerable, including children and sick people — a disgraceful and unsustainable gap between the ultra-rich and everyone else. That the restoration of the power of the labor unions would be a huge benefit to the country at this time is undeniable and they should be supported and strengthened by the efforts of all of us who care about the American way of life — and democracy itself. It will take a concerted effort by all persons with a sense of fairness, as well as a commitment to truly representative government, to fight the seemingly limitless greed of the country’s billionaires and multimillionaires and its destructive effects on the political process. Fortunately, Wisconsin’s million-signature recall campaign against its union-busting governor (and Koch Brothers-funded lackey) has demonstrated what energized union members and their outraged neighbors can accomplish. Similarly, the ability of the Occupy Wall Street movement to strike chords that have resonated nationally with a large segment of the 99 percent of Americans whose voices and well-being have not counted in recent years is an encouraging development. There is hope, therefore, that effective progressive movements such as these, as in the past and with our energetic support, can save the country from the crony capitalists who have rigged the economy and the democratic process for their exclusive benefit and those political operatives who have benefitted hugely from doing their bidding.

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Caroline Dowd-Higgins: This Is Not the Boss I Ordered

April 2, 2012

Whispered water cooler conversations about bad bosses used to surface sporadically in work environments. These days, the complaining seems to be getting louder and less clandestine since lack of leadership is a growing frustration for professionals in a myriad of career sectors. Forbes blogger Erika Andersen summed it up nicely, stating in a recent post, “Top talent leave an organization when they’re badly managed and the organization is confusing and uninspiring.” I have been fielding numerous questions on my CBS radio show: Career Coach Caroline from people who are at their wits’ end dealing with an incompetent boss. Sadly, the good bosses are harder to find than those who wind up in leadership positions because of the Peter Principle where in a hierarchy employees tend to rise to their own level of incompetence. We aren’t teaching enough leadership skills at university and in a tough economy, professional development budgets have been slashed or eliminated. Well-meaning individuals who land roles as leaders often make your work life hellish because as nice as they are (and some are not!), they are inept at leading. So what’s a professional to do? Take Control I’ve seen many professionals leave great companies and wonderful jobs because of bad bosses. While leaving is always an option, in a tight job market you should consider a few other things first. Take control of how you operate in your work environment and how you communicate with your boss. Figure out your boss’s work and communication style and deliver your message accordingly. For example — does your boss respond better to verbal or written communication? Does he need specific details or a big picture overview? Is she a planner or more spontaneous in implementing the mission of the organization? Most conflicts in the workplace come from differences in personality, communication, and work styles. Understanding how your boss operates may alleviate some of your stress and give you and your boss better clarity of expectations. So watch and listen, and ask others who have some institutional history to share their strategies for dealing with your boss. Manage Up In many workplaces, the boss does not notice what their staff is doing unless they are on fire (literally!) or if something goes terribly wrong. If you are chugging away, producing great results, chances are your boss will focus more on his work since you don’t appear to need anything. While the autonomy may seem liberating, you must make sure that you manage up so your boss and her boss know the value you bring to the organization. If you don’t tell the powers that be what a great return on investment you are — you may stay a well-kept secret and that will stunt your professional growth within the organization and beyond. Don’t wait for an annual performance review to showcase what you do well. Schedule a periodic check-in or send written updates documenting your results and initiatives. Consider creating a portfolio that illustrates exactly how you impact your organization positively. This evidence will also help you plead your case when you are seeking a raise or promotional opportunity. Boss from Hell While some bosses just need leadership training — others are beyond repair. If your boss behaves unethically, egregiously, or harasses you — get yourself to human resources immediately. There are labor laws to protect you and you deserve a healthy and safe work environment. Don’t worry about being the bad cop; let the human resources people advocate on your behalf and document the unacceptable behavior of your boss so you have a record. What I have seen over and over again in my consulting practice is that many naïve bosses simply don’t know what their team needs — so take the boss by the horns , as it were. Have a frank conversation with your boss and tell him what you need. Tell her what your purpose is on the team, your goals, and the culture you believe will enhance productivity. If you can clarify your aspirations for the future of your organization and be a solution provider, instead of a complainer, then your boss may learn from you and appreciate your leadership insight. Of course that utopian concept doesn’t always work and sometime bad bosses are also jerks. If your boss is beyond repair and you have an unhealthy work environment that prohibits you from doing your job successfully, you may want to consider moving on. After all, you deserve to work in an environment where you are valued, appreciated, and recognized for your accomplishments. Having a boss who will mentor you, or even sponsor you would be an added perk but you may need to work elsewhere to find this. So start a stealthy job search since you are much more employable when you are currently employed. No matter how bad it gets, your bad boss is not worth being unemployed for so stick it out until you find a non toxic environment and let their shenanigans roll off your back. Don’t Diss Your Bad Boss As tempting as it may be to announce to the social media masses what an ass your boss is — take the high road and keep all communication professional. The network is small and you will need a recommendation from your current boss if you move on. Never throw your boss under the bus and develop talking points for why you are looking to move on. In many cases, a bad boss’s reputation is far reaching so you need not say a word in order to be understood by a prospective employer. When you are on the job hunt be sure to interview your prospective bosses wisely. Don’t assume that your next boss will be better. Here are some questions to ask during an interview: • What is your leadership style? • How do you mentor or sponsor your team members and encourage their professional development? • Of all the people who have worked for you, who are you the most proud of and why? • Can you describe a conflict between you and your team and how it was resolved? • Why did the person who left this position move on? • What are your future goals for the team? Know When It’s Time to Go If your new boss passes these interview questions with flying colors then you may be lucky enough to land in a healthy new work environment with a great boss who will give you an opportunity to grow and prosper. But if the new boss seems worse than your current boss, it may be a deal breaker and force you to extend your job search for a better fit. It’s worth waiting for a functional boss so never underestimate your boss’s role in your success and happiness in the organization. You should be looking for a multiplier boss who will optimize your strengths and give you an opportunity to take on new challenges, debate decisions, and invest in the organization with direct buy-in and accountability. The perfect boss may be difficult to find so in the meantime capitalize on your expanded network within and beyond your organization to find mentorship, leadership, and the professional respect you deserve. Caroline Dowd-Higgins authored the book “This Is Not the Career I Ordered” and maintains the career reinvention blog of the same name ( www.carolinedowdhiggins.com ) She is also the Director of Career & Professional Development and Adjunct Faculty at Indiana University Maurer School of Law. She hosts the national CBS Radio Show Career Coach Caroline on Tuesdays at 5pm http://sky.radio.com/shows/coach-me/

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Mary Ellen Biery: The Hottest Industries To Start A Business In

April 2, 2012

Last year, three out of every 1,000 American adults chose to start their own businesses, according to a study out this month by the Kauffman Foundation. And while that’s slightly below the entrepreneurship rate of 2010, it’s still among the highest levels of entrepreneurship over the past 16 years — a byproduct of the Great Recession’s high unemployment rates, according to the foundation. There are, of course, many considerations to starting your own business. But if you’ve been wondering what fields might be fertile for a new business, a good place to start is the Bureau of Labor Statistics’ new employment projections for 2010 to 2020. Sageworks examined several businesses that entrepreneurs might consider as they look to tap into the trends cited in the government’s employment outlook. Based on a financial analysis of privately held companies’ results in 2010 and 2011, we’ve generated some key operating metrics that may be helpful in evaluating and planning your options. These metrics show some of the routine costs associated with running that type of business. Cost of sales, which covers the direct costs involved in producing a product or delivering a service, could include auto parts for a mechanic’s shop, for example. Overhead, or operating expenses, typically includes things like office-employee salaries, rent and advertising. Average annual revenues for the businesses were derived from the 2007 Census data on taxable establishments. We used taxable entities because Sageworks’ metrics are based on financial statements for for-profit companies. A day care center, an assisted living center or a consulting firm might be options, considering the BLS expects that the health care and social assistance sector, as well as the professional and business services sector, will generate nearly half of the job growth in the current decade. That’s not too surprising, said Libby Bierman, an analyst with Sageworks, a financial information company. “The aging population and growing technological efficiencies will keep demand for these industries fairly strong,” she said. For example, the growing pool of elderly seeking to maintain some level of independence is expected to help make nursing and residential care facilities one of the biggest job boosters, with annual employment growth of 2.4 percent. And the management, scientific and technical consulting services industry should add 575,600 jobs, or 4.7 percent growth annually, as businesses increasingly use consultants to keep up with the latest technologies, government regulations, and management and production techniques, the BLS says. If you’re thinking of hanging out your own shingle, other industries expected to see stronger employment: computer systems design, automotive repair and maintenance, and various non-physician health fields, including massage therapy and chiropractic care. As shown in the chart below, many of these growing industries are labor-intensive. “Personnel play a large role in operations and in the value they deliver to clients,” Bierman said. “That is why these industries–especially day care centers, assisted living residences, and consulting firms–have relatively high payroll costs and overhead expenses more generally.” Day care centers and assisted living residencies must closely watch the number of workers they have relative to clients, often because of various laws or regulatory oversight. “Keeping that ratio high is a also selling point, which makes adding workers a good investment,” Bierman said. “Given the variability in rent or mortgages, a company’s working space and its maintenance can hugely impact the company’s profitability,” Bierman said. Rent expense is more critical for some industries than others, she noted. “Businesses that typically pay out a lot in rent, like day care centers that need playground areas, may try to buy a space while real estate is less expensive or may begin the operation out of a residence,” Bierman said. Other start-ups, like a massage therapist or a management consultant, may be able to set up and maintain their business in a smaller space, allowing more of the revenues to fall to the bottom line sooner.

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Daniel Burrus: A Lesson From Google: Why Innovation Is the Key to Your Company’s Future

April 2, 2012

I’ve always said that innovation is a key driver of business success . We saw this in action with Google. Back when Google was a startup, they focused heavily on innovation in search. As a result, they created a major source of income and a name for themselves as the dominant search engine. Google was able to accomplish this in a relatively short amount of time because they kept the pipeline of innovation going and encouraged their engineers to spend 20 percent of their time coming up with new ideas. As a result, they gave us Gmail, Google Maps, Chrome, and a host of other advances. One of the hard trends happening right now is that the main computer people use is shifting from a laptop/desktop to a smart phone and tablet . This shift started two years ago and was fully predictable. Just look back over my previous blogs and you’ll see I was talking about this shift long before it happened. When the trend started to emerge, what did Google do? They saw the iPhone and its success and they introduced the Android. It was a bit more copying than innovating, but they did still innovate (albeit just a little bit). Where Google dropped the innovation ball was with social media. They saw Facebook grow incredibly, so they introduced Google+. Was much innovation involved? Not really. It’s definitely more copying than anything else. They simply made their own version of Facebook. No wonder Google+ is having a hard time taking off. Here’s the problem: When you focus on your competition and copy them, you end up competing with them. However, when you focus on innovation, you become the competition and others try to copy you. That’s a huge difference. Realize that no matter how hard you try to copy someone, you can never catch up because the leader is innovating. In fact, the only way to really catch up is to jump ahead. Unfortunately, Google became so focused on social media that they lost their original spirit of true innovation. I even heard that the engineers who spent 20 percent of their time on innovation were told to focus that time on innovation within the realm of social. That, of course, dilutes the innovation engine. Moving forward, I’d like to see all companies, not just Google, get back on the innovation bandwagon. For any company to thrive in the future, innovation, not copying, is the key. Remember that we’re in a world of exponential transformational change. With bandwidth, processing power, and storage accelerating so rapidly, it’s truly a time for every company to innovate at new levels. Technology has leveled the playing field, and the game is changing.  It’s time to stop playing the old game and start defining the new one. Article first published as  A Lesson From Google  on Technorati.

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The Center for Public Integrity: FedEx fails to deliver for drivers

April 2, 2012

By Amy Biegelsen , iWatch News Gary Terrio used to work for himself driving lost luggage from the airport in Manchester, N.H., out to the owners’ homes. “Working with my own business I could deliver whatever I wanted,” he says. “If it was something that was ridiculous, I could say no.” When he and his wife started a family, he started looking for something more lucrative and stable. He heard that FedEx Ground drivers in the shipping giant’s home delivery division bought their delivery routes and worked them as their own business, which sounded pretty good. He could earn more and still be his own boss. “And is that how it panned out?” Terrio laughs. “It was nothing, nothing, nothing of what they said.” Rather than making his own schedule, he had to be at the package terminal for pick-up at 6:00am FedEx Ground paid by the delivery, not the hour, and assigned the roster of packages each day. If Terrio delivered the package outside the window of time that FedEx assigned or if a customer complained, his paycheck got docked. He had to buy his own FedEx specified truck and financed and insured it by refinancing the mortgage on his house. After all the expenses and deductions, he says he’d be lucky to bring home $500 a week. “I would have loved to have been just an independent contractor,” he says. Instead, “I felt like an employee.” You might think it’s easy to know the difference between an employee and an independent contractor. It’s not. The distinction sits in a stubbornly murky corner of the law, and workers, employers and governments have a lot riding on the outcome. Meanwhile the number of people who are working but not considered employees continues to grow . Employees are eligible for a host of legal benefit and protection programs that governments run and regulate. Employers must pay into those programs on behalf of “employees,” but not “independent contractors.” The murkiness comes in when someone calls a worker’s status into question, often when a worker and employer disagree over what benefits are due. There is not one single, legal definition for “employee” or one central government agency that decides a worker’s status. Different federal agencies regulate different aspects of employment, and often apply distinct tests to make the decision. State agencies may use other measures still. Supreme Court Justice Hugo Black wrote in a 1968 opinion that “there is no shorthand formula or magic phrase that can be applied to find the answer,” and, for at least as long, lower courts have bemoaned the difficulty of deciding these cases. The confusion is so entrenched that in the case of the IRS — which calculates the federal tax employers owe based in part on how many employees they have — there is a federal law prohibiting the service from issuing clearer guidelines for distinguishing between employees and independent contractors. Legislation introduced in Congress as recently as March 1 aims to address these issues, but historically, similar bills have not made it very far in the legislative process. Terrio felt like he was taking all the risks of being a contractor without being able to exert control over the work. Some of his fellow drivers agreed and in 2005 sued , arguing that in reality they were employees and that FedEx’s treatment of them violated federal overtime and state labor laws. The case is still ongoing. Increasingly, businesses have been shifting to contractor workforces to save money and reduce regulatory exposure. Critics say the model is so alluring that some businesses find ways to intentionally “misclassify” employees as independent contractors. When that happens people lose legal rights, governments lose tax revenue, and businesses gain an unfair advantage over competitors who pay the extra costs to treat their workers as employees. Federal and state governments have started coming down harder on businesses for misclassification, but without a clear definition for employee, how much of the problem can they really solve? The right to a Ron Paul bumper sticker? If Terrio had been working as an employee, the Department of Labor would ensure that he earned overtime pay and could collect workers’ compensation if he had gotten hurt on the job. Anti-discrimination protections would have prevented any of his fellow drivers from being terminated just because they were Latino, a woman, or 52-years-old. As an independent contractor, over 10 percent of his pay went to Social Security and Medicare taxes. As an employee, FedEx would have split that bill and contributed to a state unemployment insurance fund that Terrio could draw on if he lost his job. Independent contractors don’t get any of it. Once, Terrio’s infant son was too sick for daycare. His wife couldn’t get time off so Terrio had to strap him in the front seat of the truck. An employee whose child has a “serious health condition” would generally be entitled to time off under the Family and Medical Leave Act. Rich Farrell, a New Jersey FedEx Ground driver and medic in the Army National Guard, was deployed overseas for six months. FedEx terminated his contract and refused to let him come back; a move that would have been illegal if he had been classified as an employee. Tony Marcellino, a FedEx Ground driver in California, died on the job in a traffic accident. His family couldn’t collect death benefits under California’s Workers’ Compensation Act that families of employees receive. While foregoing benefits, Terrio wasn’t getting the freedoms he expected as a contractor, either. He got frustrated when he wasn’t allowed to put a Ron Paul sticker on the truck he’d refinanced his house for, or run personal errands in it without masking all the FedEx logos. “What does it matter if I stop at the store and pick up groceries?” he says. “It’s my truck.” The government doesn’t regularly count independent contractors. The last time they did, in 2005, contractors represented up to 7.4 percent of the workforce, or 10.3 million people, up from 6.7 percent, or 8.3 million, in 1995. Observers agree that the number has likely grown since. Denise Drake , a management-side attorney in Kansas City, Mo., says “We absolutely see employers using as many different staffing arrangements as possible to get their jobs done in the best and most cost-effective manner possible,” Drake says. “This means there has been, and likely will continue to be, a big increase in the use of temporary employees … and independent contractor arrangements.” Catherine Ruckelshaus , legal co-director for the National Employment Law Project, says businesses can save 30 percent substituting independent contractors for employees. She sees the growth of independent contractors in the workforce running hand-in-hand with increased misclassification. “The independent contractor abuses have been rising for a while. Even before the recession it was really kind of a surge,” Ruckelshaus says. A Labor Department study from 2000 audited companies in nine states and found that up to 30 percent had misclassified employees. Between 2007 and 2010, New York state alone identified over 50,000 cases of misclassification, assessing over $21.5 million in taxes and over $4 million in fines. The Labor Department study estimated that every 1 percent of the workforce misclassified as an independent contractor cost federal unemployment insurance funds $200 million. A FedEx spokeswoman says the company stands by its independent contractor model because it “gives us a flexibility to be competitive in the market.” It’s a flexibility FedEx has gone to great lengths to keep. A 2010 audit from the Montana Department of Labor Insurance of FedEx Ground’s operations there shows one way the company keeps workers as contractors. The audit found that FedEx Ground would advertise on its website for temporary drivers. FedEx conducted an interview and if they decided to hire, the driver would complete paperwork at the FedEx terminal or online for an outside temporary employment agency. The agency, not FedEx, would issue paychecks. “A few of these drivers were already employees of FedEx in other capacities,” the audit said. Montana ruled those drivers ought to have been classified as FedEx employees. Rather than comply with the audit determinations, FedEx settled with the state for $2.3 million, admitting no wrongdoing, and adjusted its business operations there. Meanwhile, a spokesperson for the company says that FedEx has continuing relationships with three different temporary agencies nationwide, and uses them “at any point that there is an operational need.” Montana is not the only state that has looked into FedEx Ground’s employment practices. FedEx’s 2011 annual report says the company is involved in “numerous” lawsuits and audits. Losing those disputes could entitle drivers “to the benefit of wage-and-hour laws,” the report says, and could force FedEx to change their independent contractor status. If that happens, the report warns, “labor organizations could more easily organize these individuals, our operating costs could increase materially and we could incur significant capital outlays.” Drivers at FedEx’s main competitor, UPS, belong to a union. Definition derby Terrio’s lawsuit illustrates how complex the wrangling over “employee” status can get. His suit was not the only one active against FedEx. In fact it was one of 42 separate drivers’ suits coming out of 27 different states. To streamline the litigation they were all rolled together into one federal courtroom in Indiana. In December 2010, the judge announced that drivers in lawsuits covering 23 states were properly classified as independent contractors, but drivers from three other states should have been employees. The case is now on appeal. So the Indiana court found employment status distinctions among the drivers even though they were doing identical work in different states. To make matters trickier, some drivers were getting different answers from the Indiana court than they had previously gotten in their home state. While Terrio was fighting FedEx in federal court, the state of New Hampshire audited their operations in 2008 and found hundreds of state labor violations. As in Montana, FedEx settled admitting no wrongdoing. They wrote the state a check, but did not reclassify the drivers as employees. Instead, they now require drivers in New Hampshire to incorporate as businesses before they can buy delivery routes. The Indiana decision also ruled that drivers in a California suit were independent contractors even though a landmark decision in a California court granted drivers employee benefits from FedEx in 2006. Stickier still, while the litigation focuses on FedEx’s labor practices, the IRS has already blessed the drivers’ contractor status for tax purposes. After auditing FedEx’s 2002 filings, the service calculated a tentative assessment of $319 million in back tax, penalties and interest for misclassifying the drivers, but withdrew the case in 2009, letting the contractor designation stand. The criss-crossing categories reflect the haziness in state and federal law over how “employee” gets defined. “There is nothing definitive,” says Ann Hodges , a labor law professor at the University of Richmond’s law school. The IRS, for instance, uses a 20-part common-law test that focuses on how much control the employer has over the work. Scoring 11 out of 20 doesn’t guarantee a victory, and no single point clinches. The Department of Labor uses a 7-point test focused on the “economic reality” of the worker’s dependence on the employer. The National Labor Relations Board uses something in between. Many other government employment tests are variations on one of those themes. At the IRS the confusion is not an accident, it’s the law. The 1935 Social Security Act set up a trust fund for retirees financed by employers contributing an amount equal to a set percentage of each employee’s pay and withholding a sum from each employee’s check. The IRS hadn’t had to distinguish among workers before, but the statute did not define “employee.” The IRS had to glean its 20-point test from court decisions. That worked until the 1970s when the IRS kicked up its misclassification enforcement. When a major tax reform bill came up in the late ’70s, a coalition of lobbyists representing industries built around a contractor workforce — trucking, real estate, construction and direct sales like Mary Kay — saw an opportunity to get the IRS off their backs. With help from then-Rep. Dick Gephardt and then-Sen. Bob Dole, they condensed the 20-part IRS test into a single law, but couldn’t get it approved. Instead, Congress passed a temporary measure while, theoretically, better language would be crafted. It specifically prohibited the IRS from publishing regulations “clarifying the employment status of individuals for purposes of the employment taxes.” Rather than replacing the temporary law, Congress made it permanent in 1982. The 1982 law goes further than just banning a clearer definition. It includes a provision that says that if the IRS ever audits a company and doesn’t find any problems with employee misclassification, it can never demand that the same business change its employment practices in a later audit even if it finds misclassification the second time around. FedEx was able to avoid $319 million in back taxes under this provision. After 1982, the issue mostly hibernated. “There’s been very lax enforcement by federal and state government agencies that has contributed to a comfort zone for employers to increase their use of independent contractors,” says Richard Reibstein , an attorney in New York City who helps businesses write independent contractor policies that will withstand regulatory scrutiny. In 2006, the Government Accountability Office released a report on misclassification and renewed government interest. The next year then-Sen. Barack Obama sponsored a bill that would repeal the 1982 ban on the IRS defining employment, but it died. On March 1 this year, both the House and Senate introduced another round of bills to free the IRS from the 1982 law, but similar bills have been killed in every Congress since 2006. More attention or more confusion The recession has focused the attention of cash-starved governments on the issue. “The governments need money and they look at this as revenue,” says William Weissman, a tax attorney in California. “I also think there’s a push in the current administration to create a safety net for everyone. So if you want people in the system, you’ve got to collect the taxes.” What Obama could not do legislatively, he’s attempted to do through his agencies. His Department of Labor budget for fiscal 2013 proposes $10 million for state grants to combat misclassification and $4 million for new federal investigators. The Labor Department is hoping to add 35 more full-time employees to investigate misclassification. The department has also announced information-sharing arrangements with 12 states. The IRS has begun allowing companies that voluntarily reclassify independent contractors as employees and pay 10 percent of what would have been owed the previous tax year to avoid other penalties. The IRS refused repeated requests for information on how many businesses had signed up for the program. States have begun ramping up regulation, too. A new California law , for instance, includes civil penalties up to $15,000 per misclassified employee and up to $25,000 per willful violation. “There’s a lot of intentional misclassification going on and we would all agree, whatever your party, that that is wrong,” Reibstein says. He worries, though, that this new run of regulation will hurt businesses that make changes out of fear or have to fight off costly enforcement actions and lawsuits. Weissman says “a simple brightline test would likely be more useful,” than tougher penalties, but that administration-side enforcement is easier than waging a political battle in Congress for a uniform definition. “Whether that uniformity would wind up tougher or weaker is a political choice,” says Harold Datz, former chief counsel at the NLRB. Interest groups on both sides — from the unions to the U.S. Chamber of Commerce — are wary of a definition that would go against them. Russ Hollrah , executive director for the Coalition to Preserve Independent Contractor Status, says “I think current law is fine.” The exemption for businesses with a clean prior tax audit “works very effectively.” As for a change that might provide greater clarity, he says, “It depends on the clarity you get.” Matt Capece, who works for the president’s office of the United Brotherhood of Carpenters and Joiners of America , says “For us in the construction industry, Jesus Christ could write the definition of ‘employment’ and we’d have a problem because the unlawful practices are so ingrained,” he says. Construction firms that treat their builders as employees, he says, often “face the double indignity of losing jobs to the cheaters,” whose savings on labor allow them to underbid the competition. “Then they see their tax rates going up to cover the people who don’t pay” for unemployment insurance and workman’s compensation, he says. Capece doesn’t like the term misclassification. “I refer to it as the ‘M’ word,” he says. “What we see is payroll fraud.” He’s heartened by the state escalations and sees the IRS ban on guidance as a “straitjacket,” but for him, enforcement is the game. The construction industry is a frequent target for state enforcement. In January, Massachusetts’ attorney general extracted $400,000 in unpaid wages and penalties, and more than $141,000 for Massachusetts’ unemployment system from Pulte Homes, one of the nation’s largest builders. “Frankly every time we talk about this issue, the other side paints a picture of a husband and wife sitting at a kitchen table with statutes spread all around them, and they can’t figure out how to classify their workers, and they make a mistake, and the government comes in and severely punishes them,” Capece says. In fact, sitting at Marie Washington’s kitchen table in a rented townhouse in Owings Mill, Md., she is still trying to sort out what she and her husband could have done differently to avoid the employee misclassification lawsuit they’re stuck in. Her husband, Darian, runs Washington Home Installation, which subcontracts out jobs from the company that manages home deliveries for BestBuy. He pays his installers by the job, but says they pick how many deliveries they want to do, which order in which they want to make them and if they want to come in the next day. In March 2011, a former installer sued the business saying he was denied overtime pay even though he regularly worked 70-hour weeks. In an affidavit, the installer describes having far less control over the work, meaning the lawsuit will involve heavy fact-finding. Marie maintains that the independent contractor relationship was clear. When they found out about the lawsuit, the Washingtons discovered that because of the uncertainty of employment lawsuits, many lawyers require a hefty down payment — often as much as $10,000 — before they’ll take a case. It was then that Marie says she realized, “We’re really going to have to exhaust all our financial resources.” When they got married, the plan was for Marie, 25, to finish college and build her own career, but that’s been put on hold. “Even now there’s not clarity,” she says. “I’ve looked at the IRS website, at the state website — there are no answers.” Meanwhile, the Washingtons worry that if they lose, other former employees will come after them for overtime pay, and they may be vulnerable to other liabilities, too. “If we’re wrong in all this,” she says, “then what about the government?” Continue this story and read more investigations at iWatch News

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Simon Johnson: Volcker Rule Would Cause Irreparable Damage to the Muppets — and Much More Broadly

April 1, 2012

A major new research report — released this weekend by the renowned international consulting firm, IMS — finds conclusively that implementation of the proposed Volcker Rule would damage not just the irreplaceable Muppets but also “all children-oriented television or other media-based educational program content.” The logic in the report is straightforward and, quite frankly, compelling. The Volcker Rule — which aims to limit proprietary trading and excessive risk-taking by the country’s largest banks — would reduce the ability of “too big to fail” institutions to bet heavily on the price of commodities used to produce puppets (mostly cotton, but also apparently wood, aluminum, and some rare earths). “In response to the changing demands of their customers, banks have expanded their role of providing financial resources and services to include risk management and intermediation services to [various kinds of puppets](p. ES2) These services are highly profitable and of great value to the skilled artisans who produce puppets, but if the very biggest banks are not allowed to engage in these activities, then no one else will. This, of course, is elementary economics — dating back as far as Adam Smith. If there is a profit-making opportunity to be had, then everyone will spurn it, unless they work for a massive international bank. The history of the United States is replete with examples of business sectors that would never have come into existence were it not for the proprietary trading of banks that were large enough to damage the economy when they failed. Thomas Edison worked long and hard for J.P. Morgan (the man) before being allowed into the speculative trading side of the business. Henry Ford’s entire model was a spin-off from Bankers’ Trust — with a substantial equity investment from his former employer. And the Wright Brothers’ business concept — as well as their most basic notions of aeronautics — derived from their early work with paper airplanes on the trading floor of what became First National City Bank of New York (i.e., Citigroup today). Put simply, there has never been real entrepreneurship in the U.S. financial markets or economy — other than what these banks have put there, directly or indirectly. The fact these banks were very small relative to the economy until the 1980s is irrelevant. And the fact that these banks now draw on huge government implicit subsidies — while also creating an enormous and dangerous tax payer liability — is neither here nor there. Malfeasance by these banks has brought us to the brink of fiscal disaster. In political terms, we are manipulated by bankers just as if they are pulling our strings. But you have to consider the benefits, as well as the costs. Do you enjoy watching the Muppets or not? If the Volcker Rule is implemented as planned, that would have a major negative effect on the bond yields — the spread over the “risk-free” interest rate — paid by the Muppets and other leading providers of children’s entertainment. No one else will ever trade these bonds to any significant degree — just as no one would have produced cars or planes without the dominance of big banks in those sectors. Even the electricity you are using to read this piece was made possible by the market dominance and overbearing presence of deeply entrepreneurial and ethical entities such as Enron. The Muppets themselves have come out strongly in favor of the financial sector as currently structured. As Lloyd Blankfein, head of Goldman Sachs, reportedly said recently: “It’s not the dealers and it’s not the investment bankers and providers that have to grapple with regulation. It’s users and [puppets of all kinds] in the market that have to deal with different margin requirements…have to deal with unfortunately and inevitably higher cost in managing their portfolios…and have to pay the price for the higher cost of holding inventories.” The IMS report was paid for by Morgan Stanley (see p. 3), further evidence of smart entrepreneurial investments by big banks that support the deeper development of the economy and help create puppets everywhere. Simon Johnson is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You , available from April 3rd. This post is cross-posted from The Baseline Scenario .

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Pamela Hartigan: Inventing a New Future: Beyond Our Humpty Dumpty World

March 31, 2012

For the last few years since becoming director of the Skoll Centre, I have closed the Skoll World Forum with an Irish prayer. This year, I want to start my reflections with a riddle — its origins of which I am not sure. What is it that you keep forever when you give it away — that changes as it moves from place to place — and without which there is no past or future, no reason or meaning? The answer? A story. We are storytelling animals. Indeed many people believe that storytelling is what makes humans unique. We use stories to share our knowledge and experience, to learn from our past and to imagine our future. We only need to look at Nick Danzinger’s wonderful work to see how true this is. Oxford is a city of stories and those who have woven them — Cornmarket Street in the city centre was the setting for the Crown Tavern where a young actor named Will Shakespeare grew rather too fond of his landlady. Sir Walter Raleigh learned his Latin at Oriel College, and the poet Gerard Manley Hopkins learned about beauty in Oxford’s magnificent Baroque church. Oscar Wilde amused and amazed his examiners at the examinations schools where we will be tomorrow; and it was in Oxford one winter’s night at 2 a.m. where J.R.R. Tolkien converted C.S. Lewis to Christianity. Oxford is the home of A.A. Milne whose characters including Winnie the Pooh, Tigger, Piglet and Eeyore still live with me today, as does Kenneth Graham’s story of Mr. Toad and his wild ride in The Wind in the Willows — and while I haven’t followed Alice down the rabbit hole, I have followed her into Christ Church and to the dining hall which much later became a film set for J.K. Rowling’s Harry Potter . Oxford’s associations spill beyond literature into history and legend. For more than a thousand years the city has played a central role in England’s history, as a home and inspiration to kings and politicians, saints and bishops, artists and academics, inventors and industrialists whose stories have helped to shape our world. Having been part of the Oxford community for three years, I often wonder what story will be told in 2812 about our current time, when the University of Oxford will double its current 800 year-old existence. I wonder what that story will say about this period of unparalleled difficulty for our planet and for the people it hosts. How will it capture our mood of foreboding that deep and complex forces are rapidly reshaping the world as we know it? How will the story describe the new global landscape now surfacing and the national and global institutional arrangements now emerging to replace those that are proving to be inadequate to deal with the deepest problems we confront? Currently, we are living in a Humpty Dumpty world where a good many of the king’s horses and the king’s men are scrambling to put Humpty together again — while a growing movement of men and women with imagination, commitment, persistence and strong ethical fiber — people such as each one of you gathered here for the Skoll World Forum — are working furiously to ensure that the Humpty Dumpty model is transformed and replaced with pathways that achieve economic and social justice and arrest the destruction of our planet. We are in an interesting phase of new thinking and experimentation, and we must seize this hugely important opportunity. Like most of you here, I am an optimist. I cannot imagine that our story will not have a happy ending, even while at times a happy ending seems to be a pipe dream. Let’s just review the stories that grabbed our attention in 2011. The year started with natural disasters including the earthquake off Japan that caused its tsunamis and nuclear disaster. In August, Hurricane Irene ripped through the Caribbean and along the east coast of the U.S., and with this storm system came the floods responsible for the deadliest U.S. tornado season since 1936. Then, in September, another earthquake struck Van in eastern Turkey killing 600 and leaving 60,000 homeless. And no one tuning into CNN or the BBC could escape the scenes of the monsoons that raged across Asia between June and November, killing untold thousands in Pakistan, Burma, Thailand, Laos and Cambodia. Typhoons battered the Philippines and Indonesia and few in Asia, including China, escaped the deluge crisis of this past year. Moving on, the global financial crisis assumed urgent momentum in 2011. The stock market recovery of late 2010 and early 2011 was ephemeral, as many expected. The financial crisis took a definitive step as world markets plunged and as the sovereign debt crisis spread from peripheral states into the heart of Europe. The U.S. lost its AAA rating for the first time in history. In Europe, the tragicomedy of the DSK sex scandal was forgotten as the debt crisis spiraled. As, Greece, Ireland, Italy, Portugal, Spain and others have struggled to implement the austerity measures needed to refinance their debt — the grand European project has teetered. Meanwhile, the enormous levels of additional debt that the U.S. has taken on since the start of the crisis have been sustainable only because so much of China’s foreign reserves are locked in to the dollar. Borrowing your way out of debt, as advocated by Keynesian solutions, works only if the present generation can pass its borrowings onto the next one. But with the aging of the developed world, the next generation will be smaller than the last, while the cost of energy and other commodities all continue to rise as emerging countries industrialize. Add to this Iran’s putative nuclear program, a world population that reached 7 billion, rampant inflation, food riots and a climate catastrophe. This litany of gloomy stories is enough to give any Pollyanna pause for thought. Yet as described in Stumbling on Happiness by Harvard professor Daniel Gilbert, research in cognitive functioning find that human beings reinterpret negative things in a more positive light — the “every cloud has a silver lining” idea. My hope for the future springs from past and current personal experience. I was a university student in the late ’60s, early ’70s when ordinary citizens constituted the core of the anti-war movement and the civil rights movement. Globally, it was ordinary citizens who challenged the Chinese Communist system in Tiananmen Square, the apartheid structure in South Africa, and led the anti-nuclear movement, the environmental movement, the women’s movement, and so on. This past year, citizens’ movements have risen to new heights in shaking the status quo, propelled by the newest technologies that connect them to one another around the world. In 2011, we saw people — primarily young people — take to the streets. The deeply democratic nature of the uprisings caught mainstream media and all of us by surprise as youth in the Middle East and North Africa rose up to demand freedom of expression and opportunities. Starting in Tunisia, the spark spread to Algeria, Egypt, Saudi Arabia, Syria and Libya, toppling long entrenched tyrants. The movement spread to Europe where tens of thousands marched to express their frustration with the lack of employment, of opportunities, and of politicians who didn’t seem to care, from “Los Indignados” or “the Outraged” in Spain, to Greece and then to the USA with the Occupy Wall Street movement and to the UK and the crowds gathered at St. Paul’s in London. More recently, thousands in Moscow have taken on the Putin regime demanding the same things as protesters worldwide — a systemic change that will provide greater dignity, transparency, participation and access to opportunities. This movement of people worldwide is perhaps the most exciting global phenomenon of our time. It is our promise that we will not put Humpty Dumpty together again as before — and for me, this is where entrepreneurial approaches to social change come in. These new approaches are the harbingers of the types of organizational and business models that our compartmentalized world so desperately needs in order to integrate where we make our money and where we do good, tear down the firewalls between our personal and professional lives, and reap the true value we all should be making to the world. In sum, I am optimistic for many reasons, but mainly because for most of my life, I have hung out with creative and positive people who, regardless of their backgrounds and their resources, manage to punch way above their weight. So when one is surrounded by men and women with a “can do” attitude, an infectious energy, and an ability to see opportunities for innovation and transformation at every turn, it is pretty hard to be gloomy about the state of the world. Entrepreneurship of this sort is highly contagious. I now work primarily with university and graduate students — they are full of hope that they will find careers where they can contribute their business savvy and other talents to improve human welfare. They don’t want to wait until they are 50 years old to “give back.” Some are entrepreneurs themselves while others — like young adults everywhere — seek to contribute to endeavors that are fundamentally innovative, philosophically positive and morally compelling. So how do we rewire our systems, our practices and our mindsets so our story reflects greater convergence rather than fragmentation of effort? That, for me is the great challenge before us, no matter where our life journey takes us. In that sense, the global movement of outrage on the part of ordinary citizens against an increasingly unfair and unsustainable society — joined up with practical, creative and committed social entrepreneurs — will ensure that Humpty Dumpty is not recreated — and that when my story, your story, our collective story is told, it will be about depicting the triumph that occurs when human ingenuity, empathy and integrity rise to dominance together to address unprecedented threats. Thank you.

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Stephan Chambers: What It Takes to Change the World

March 31, 2012

Good afternoon ladies and gentlemen. Welcome to the closing plenary of your amazing forum. It’s not really the closing, of course. Eliot again, “In my end is my beginning.” Your forum ends today only in the sense that you leave Oxford and go back to work. It carries on in that work all through the year, it carries on in the relationships you have with each other, it carries on in the renewed energy you give each other and in the difference you make. The Forum isn’t an event, it’s a stream. And if you think I’m going to step into the same quote twice, you’re wrong… As some of you know, I’m not new to this family… but I hadn’t really, really understood until this week how much your comparative advantage is each other and the trust you place in each other. Every single conversation, suggestion, and story was premised on really staggering amounts of trust. It’s been hugely impressive to see. You do really brave things. You focus on where we’re going not what’s in the way. You’re crazy in the ways that Eve Ensler would have you be crazy. You are, above all, generous. You share your luck and your energy. 
We have a wonderful final discussion for you now. I have been reading Zoe Williams’ work for years. It’s amazing in its breadth and in its depth. When we met on Wednesday, Zoe challenged me to an arm wrestle. This augurs well for your panel. Zoe will introduce her very distinguished panel. It is my pleasure to introduce her to you. Zoe… I don’t know about you, but I don’t always experience our Forum in an entirely linear way. I can’t quite remember if Hans Rosling predates Gordon Brown or whether George Soros is one of the world’s greatest singers. If you’d like a quick reminder of what you’ve been doing, here’s a short film to bring back some memories. What a forum it’s been. I don’t know about you but I’m a little giddy with exhilaration and maybe some exhaustion. We’ve been warmed by the sun and each other. We’ve been in plenary, in workshops, in convenings, in panels, in moderations, in connections, in the Colab, in receptions, and at dinners. We’ve seen films and still photographs, graphs and slides. Heard at least one cello, a string quartet, seen dancers and been to a jam. And we heard Annie. I learnt a lot from you this week. I’m not sure I can do justice to what I’ve learnt but here’s a highly selective list of some things that stand out: I learnt that impossible problems aren’t impossible. They’re just very hard. I learnt that we should all get more sleep. I learnt that the global village needs elders. I learnt that voles are more interesting than I thought. I learnt that being outrageous matters. I learnt that the cracks are where the light gets in. I learnt that we must tap into the timeless to solve the urgent. Around these fragments I also felt a collective belief that we must link the fact-based world with the meaning-based world — that some of the mechanistic models we’ve built are no longer adequate. We look at the world as if it’s chess when it’s Jackson Pollock, as Carne Ross puts it. And I felt that mass mobilization, in person, in dance, in technology, is on your agenda. I have cried every day this week. Remember as I tell you this, that I’m male. And British. And from Oxford. I cried when I heard Nick Danziger. I cried when I heard Eve Ensler. I cried when I heard Annie Lennox. I cried in Pat Mitchell’s panel and when I saw the film clips at yesterday’s awards ceremony. I’ve also smiled a lot. I smiled at the Olympic torch, I smiled at Larry’s socks, I smiled at the images of the survivors of trafficking. I smiled at you all and your demonstration that what it takes to change the world isn’t, in the end, mostly about facts or money. In the end, it’s mostly about people and collaboration. As Debra Dunn said yesterday, “If the stakes are high enough you have to collaborate.” We know the stakes are high. Imagine if this event gave us back mass mobilization. That would be harnessing flux. It is time now for me to thank you for being here and to wish you safe journeys home. I look forward very much to seeing you next year and will leave you, not where we began with TS Eliot but with the theologian Reinhold Niebuhr. “Nothing is intrinsically good,” he wrote “except goodwill.” You have goodwill and I’m grateful to you for sharing it this week. Thank you and goodbye.

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Bob Edgar: Citizens United, the Supreme Court, and Our Independent Judiciary

March 30, 2012

I’m not a lawyer but I’ve spent the better part of my adult life working with and often admiring lawyers. There are some bad ones of course, but I’ve always been impressed by the devotion almost all lawyers share to the law and our system of justice. So I’m perplexed these days as I consider how justices of our Supreme Court — lawyers at the pinnacle of that system — have opened the door to an unprecedented assault on judicial independence. Millions of Americans now understand how the high court’s Citizens United decision, along with other campaign finance rulings, has opened a financial floodgate that leaves government vulnerable to corruption. They see the enormous potential, indeed the likelihood, that the millions of dollars being invested in the 2012 campaign will be repaid in government contracts, laws and policies crafted to benefit a relative handful of campaign donors. But I also fear that most folks, including many lawyers, haven’t yet grasped how money, and the strings attached to it, also is pouring into judicial elections. And as in races for president, Congress, governorships and other offices, much of the money is being spent by groups that take pains to shield their donors from view. While our few hundred federal judges enjoy lifetime appointments that protect their independence, there are thousands of state court judges who must periodically face the voters. That means they’re vulnerable to negative ad campaigns, often financed by business interests or ideological groups angry about past rulings, and that they must busy themselves raising money from people and groups who may need or want something from them in the future. “Outside forces are becoming a bigger deal,” Georgetown University law professor Roy Schotland, told the Washington Post in a story published Friday. “We’re seeing more takeover of the races from the outside.” State court judges, he added, “are like sitting ducks.” Florida Tea Party activist Jesse Phillips told the Post that he hopes to raise more than $1 million to unseat three of the state’s Supreme Court justices this fall; he has no intention of disclosing his donors, Phillips indicated. Two years ago, in the first round of judicial elections of the post-Citizens United era, three Iowa Supreme Court justices were swept from office by voters angered over the court’s ruling upholding same-sex marriages. A few anti-gay groups poured about $1 million into the campaign to unseat them. There were similar uprisings across the country, often financed by individuals and groups asserting that judges should pay more attention to public opinion and less to their views of what the law and the Constitution require. That’s scary. “We can make all the strides we can make in the executive and legislative branch, and we can have all that thrown out if we don’t have a court that’s responsible to the will of the people,” Phillips said. This is the leading edge of a movement that could transform our courts from guardians of the Constitution into subsidiaries of corporations and ideologues. We’ll have the Supreme Court to “thank” for it.

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Monika Mitchell: Bruce Springsteen & Wall Street’s Wrecking Ball: A Contract With America

March 30, 2012

A rather caustic editorial from Bloomberg News ‘ nameless “editors” mocked Goldman Sachs defector, Greg Smith, in fake bully-on-the-playground bravura. Just like blogging commentators, it’s easy to be brave when your identity is hidden. It is even easier to be a bully when you can take a few swings and slink back under your rock in the refuge of a giant media powerhouse. The anonymous jabs aimed at Smith’s hope that integrity be part of Wall Street profit-making reveal the wide disparity between common financial models and the 21st century ethos of “Doing Well by Doing Good.” The editors retort: “Yes, Mr. Smith, Goldman Sachs Is All About Making Money,” Nowhere in that statement or any other defense of Goldman is there anything about creating value for dollars, simply a tacit endorsement of profit at any cost. What Greg Smith’s op-ed confirms is that four years after Bear Stearns collapsed under the weight of risky bets, the destructive and toxic for-profit model that created the crisis has not changed: the model that Bruce Springsteen lyrically calls “the Wrecking Ball.” Since when does the biggest baddest investment bank of them all, one that transformed from the most admired financial institution in the world to the poster-child of Wall Street evil, need to be defended from a single “mid-level” rogue employee? Since the accusation of greed and corruption struck a resonant chord of truth so deep between Wall Street’s wrecking ball and the rest of the modern world, it could not be ignored. In a powerful Rolling Stone interview with national heroes, Bruce Springsteen and comedian Jon Stewart, “the Boss” outlines “the street criminalization of the big-money Wall Street hustle” echoed in Smith’s op-ed that has lit the fire of outrage in millions of Americans. Explains Bruce: “That hustle has been legitimized over the past four years, when you have that level of risk and greed at the top of the financial industry, and people basically walking away scot-free, completely unaccountable. That lack of accountability is the poison shot straight into the heart of the country.” And so it has. The poison has created a dual society in our nation that Springsteen warns, slices “the country down the middle” — one where the powerful and well-placed follow a different set of rules from the rest of the nation. Main Street is supposed to obey the law and pay the price for its actions if it doesn’t, while Wall Street’s most powerful institutions are handed the get-out-of-jail card free by those who make and enforce the laws. To America’s citizens, the hustle of the 2008-2010 crisis and unilateral banking bailouts go far beyond government failure and move to political corruption of the highest degree. Springsteen compares the lack of accountability in the post-crisis handling of both the Bush and Obama years to the Watergate scandal, one of the darkest periods in our national history. “Watergate legitimized the hustle at the top of the game … It legitimized every street-corner thug.” Watergate made a mockery of American justice revealing a corruption so deep and pervasive that it “almost had the country brought down by it.” For Springsteen and America, the financial crisis has exposed the same. Financial historian Professor Robert Wright calls the flaws in the current Wall Street-Federal model: the socialization of risk and the privatization of profits that has ” planted the seeds of future crisis. ” Everyone in America knows, with the possible exception of a few still in denial, that the “risk takers” were rewarded by transferring Wall Street losses onto the backs of an overburdened Main Street. Every day in grade school, children put their hands over their hearts and pledge allegiance to a nation that stands for “liberty and justice for all.” Springsteen asks, “What happened to that social contract?” Where is the promise that our children pray for? What made this country great were not the bullies in the playground who laugh at the “naïve” integrity of fellow citizens. It is the shared sacrifice of our parents and grandparents who fought against injustice both on foreign and home shores to right the wrongs of an unequal dream. Those that saved every penny of their hard earned cash only to watch it evaporate during the Great Depression — a time so tough that a new president came to the aid of the powerless and demanded that America’s promise of equality be fulfilled. So here we are again: one more time. As Occupy Wall Street began the conversation last fall with a call for a fair deal for everyone, Greg Smith’s op-ed reveals that good conscience may be dead for a soul-sick Wall Street, but Main Street is still holding out hope to reinstate America’s broken social contract. The antidote for the poison shot into the heart of America is justice. Springsteen sings the struggle of many Americans who lost their jobs and homes in these post-crisis years: I’ve been lookin’ for the map that leads me home; I’ve been stumblin’ on good hearts turned to stone…We yelled “help” but the cavalry stayed home; There ain’t no one hearing the bugle blown… Springsteen’s ballad asks the questions the nation asks of its leaders: Where the eyes, the eyes with the will to see Where the hearts, that run over with mercy Where’s the love that has not forsaken me Where’s the work that set my hands, my soul free The social contract implicit in America’s promise and defended by country men and women on the beaches of Normandy, the streets of Birmingham and the squatter city of Zuccotti Park is woven into every aspect of American culture from Washington, to Wall Street, to Main Street. The contract is not “All About Making Money” as some would have us believe. Rather it represents a common commitment to abolish tyranny and injustice that continues to surface in legal battles of foreclosure fraud and class actions suits against an out-of-control banking industry that became an enemy to its own people. The social contract that our culture is based on is something far greater than the myopic self-serving greed we have witnessed. It emanates from deeply embedded values established centuries ago like integrity, democratic ideals and fair play that improve with each generation. Echoed in Springsteen’s poetry is the historic promise of America to its citizens: “From sea to shining sea…Wherever this flag’s flown, we take care of our own.” Monika Mitchell is the co-author of ” Conversations with Wall Street ” — a collection of candid discussions with Wall Street market makers on ethics in the mortgage securities industry. CWWS outlines a social contract between America and the Financial Industry.

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Scott Bittle: Is Regulation Really Strangling Start-ups, and How Much Would the JOBS Act Do to Keep It Under Control?

March 30, 2012

Here are two facts that should be attracting a lot more attention than they are. Over the last decade, nearly two-thirds of new jobs in the U.S. economy came from businesses less than five years old. That’s a big hint on how to rev up job creation. Opening up an ice cream parlor in San Francisco can cost $20,000 in fees and include a 2-year wait for the city to approve permits. All the while, the owner is incurring rent and other expenses while waiting for the powers that be to say it’s OK for the business to operate. According to the New York Times , Juliet Pries, the owner of The Ice Cream Bar, had to hire a lawyer and pay $11,000 to get the water turned to make it through San Francisco’s marathon approval process. Her business is up and running now and she has 14 employees. That one owner persisted where others might have failed is a small step forward on job creation, but her experience raises the question of exactly who benefits by making the process so slow, cumbersome, and difficult. A lot of people try to make this issue simple: It’s government regulation versus business start-ups and job creation. That’s the way the issue is being framed in the debate over the JOBS Act , designed to exempt “emerging companies” from certain financial disclosure requirements, while opening the door to online “crowd financing.” But the reality is that for many businesses, such as The Ice Cream Bar, the problem isn’t about Sarbanes-Oxley, where the debate has been largely defined by lobbyists, and mostly lobbyists for big businesses that can take care of themselves. The reality of regulation demands a more careful assessment of what’s wrong and a set of well-thought-out remedies. Here are some points to consider. It’s not all about Washington. In the simplistic world of political campaigns, Washington is the mega-villain. But the truth is that most businesses, small businesses in particular, spend a lot more time dealing with other levels of government. Most states require someone starting a business to get a license. If you’re in a specialized field, whether you’re an accountant, barber or mortician, you probably need occupational licenses, as well. If you’re hiring people, you need unemployment insurance, and depending on what you’re selling and where, you may need a license to sell your product and another to charge your customers sales tax. Local governments often require environmental, health, building and other permits , and you’ll have to obey zoning laws as well. Is regulation the problem or is it its complexity? Just about every regulation starts for a legitimate reason — and sometimes, sadly, they emerge from horrific tragedies like New York City’s Triangle Factory fire. No one wants unsafe buildings where workers are in danger. But sometimes even good regulations seem to go bad. New York City has a seven-step process for getting a building permit — one that’s replete with admonitions to file under “Directive 14″ or “Directive 2″ and consult other documents and agencies. In Step Number 5, the department “perforates the plan.”Apparently, when you’re nearing the end, you need to bring your folder to the “Record Room,” where the “Record Room clerk perforates the plans and forms and returns them to the applicant.” Then you microfilm the plans, and return them to the Record Room so they’re “now ready for permit.” OK, we’re bewildered (And are they actually still using microfilm?) We certainly invite New York City’s Record Room clerk to weigh in and explain it to us. Maybe some periodic housecleaning is in order . Every regulation exists for a reason, usually a good one. But the reasons change long before the regulations do. Maybe we need to start thinking about a regular review process, either allowing regulations to sunset or requiring a re-examination every 10 or 20 years. And we need to look at the accumulated impact on businesses and employers, along with the need to protect employees, consumers, and the public in general. At the federal level, businesses have to comply with a whole host of regulations ranging from the Fair Labor Standards Act to OSHA to the Family and Medical Leave Act to Veteran’s Preferences. Each one fulfills a mission most Americans support, but each is also detailed and complex. Taken together — well, this is why there’s a thriving market for compliance officers. The problem with regulation is that it all adds up, and no one is really in charge of looking at the full sweep of regulation an industry faces and seeing whether it’s reasonable or not. Whether regulation is hampering business and stymieing job creation is just as important as whether the public interest is being served and what would be lost if the regulations were rolled back or pruned. In the end, there’s not much point worrying about the issues surrounding complex federal laws while still making small business owners run around City Hall with folders of perforated papers looking for someone who still handles microfilm processing.

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Daniel Wagner: Carbon Taxes and Global Decision-Making

March 30, 2012

Co-written by Joshua Wallace The European Union’s decision to impose a carbon levy on air travel to Europe had the best of intentions but has provoked howls of protest from some of the world’s largest economies, with both China and India having stated they will not comply. The conundrum now facing the EU — whether to double down on the idea, modify it, or withdraw the concept altogether — serves to emphasize the myriad of interdependencies and impacts that today transcend borders. The EU carbon levy on air travel became effective from January 1st, though airlines will only be billed next year after 2012′s carbon emissions have been calculated. The EU insists that the cost of the tax is manageable for airlines and is necessary to help it achieve its goal of cutting carbon emissions by 20% by 2020. China and India consider the tax a unilateral trade levy disguised as an attempt to fight climate change. Fears have surfaced that the deadlock over this issue could spark a trade war resulting in retaliatory measures that would damage all sides. The issue has served to epitomize the brewing battle between the developing and developed worlds over supremacy of the emerging global financial and regulatory structure. The carbon tax has captured the changing dynamics of global decision making. For many years the West has assumed de facto leadership by determining the framework of global standards and norms, as it has been uniquely positioned to do so, given its resources and capacity to drive its vision of the future forward. However, with western countries slipping from the economic and political pedestal they have long held — by virtue of their lacklustre growth rates and failure to adapt to the new realities of the 21st century — the pendulum has been shifting in favor of emerging countries with greater rapidity over the last decade. With the pendulum shifting, the economic, political and financial clout of the developing world has risen in tandem, and the unilateral decisions taken by western nations have begun to prompt emerging countries to coalesce into unified blocs. Brazil made it clear that at this week’s BRICS summit that it will be seeking a united response to the manner in which the EU and US have reacted to the Great Recession, which they believe has damaged medium-term growth prospects for emerging markets. The World Bank has just announced that it plans to partner with a new development bank to be created and jointly funded and sponsored by the BRICS countries. And China is in the process of creating an offshore bond market for the renminbi, to facilitate its internationalization. This may ultimately position the RMB to become a meaningful alternative to the dollar and euro as a global currency in due course. Unilateral and collective actions by emerging countries will undoubtedly afford them greater bargaining power, which will become manifest sooner than many realize. The Bretton Woods institutions (the IMF and World Bank) — historically led by the US and Europe — are also beginning to be impacted by the shifting pendulum, with more and more emerging economies demanding a greater say in how the institutions are run, and by whom. China has demanded a say in the selection of the next World Bank president, and the BRICS nations have all threatened to withhold a portion of the additional financing requested by the IMF to avert a European sovereign debt crisis unless they gain greater voting power. While Christine Lagarde managed to maintain the European monopoly of IMF directorship, Jim Yong Kim — the US candidate to head the World Bank — faces fierce competition from a range of candidates from across the developing world — and rightly so. The rise of the BRICS nations as viable alternative donors to the developing world, and the idea of an alternative development bank being touted by the BRICS nations, underscore the possibility for meaningful change led by the emerging world. If the institutions that have governed the world economy since their post-war inception are unable to adapt to the new realities, then the emerging world will not wait for them. The flip side of that is that those countries which no longer truly possess ‘developing’ country status — such as China, with its immense economy and foreign exchange reserves — should no longer claim that status and continue to receive funds from multilateral development institutions. Doing so takes precious resources away from truly needy countries and takes credibility away from the collective emerging economy argument that the system must change. How the EU will respond to its carbon tax conundrum remains unclear, but what is becoming increasingly obvious is that the days of unilateral attempts to impose developed country will on the developing world are numbered. The world already finds itself at a crossroads. The developed world would be wise to embrace the ‘rise of the rest,’ for it is a force that is unstoppable and has already manifest itself in surprisingly effective ways. If you want a vision of the future, look no further than the important action the BRICS countries have taken this past week. *Daniel Wagner is CEO of Country Risk Solutions, a cross-border risk consulting firm based in Connecticut (USA), Director of Global Strategy with the PRS Group, and author of the new book Managing Country Risk (www.managingcountryrisk.com). Joshua Wallace is a research analyst with CRS. Daniel can be followed on Twitter at: http://twitter.com/countryriskmgmt . Joshua can be followed on Twitter at: http://twitter.com/JLP_Wallace .

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Bernie Bulkin: About Leadership: Pressure and Its Consequences

March 30, 2012

When I became Chairman of AEA Technology, we were probably less than three months away from losing the Company. Debt was moving beyond our limits with the bank, we had issued two profit warnings in the space of three weeks, we were overstaffed, the person who was Chairman and CEO had left and the two posts split, and all of this left our employees with a lot of uncertainty about their futures. This in a business that was all about selling the skills of our employees to solve difficult problems for others. In this situation, what was the first thing that I said to the new CEO and the Finance Director? It was this: Yes we are in trouble, yes we have to take some radical actions to get out of trouble, but no matter what, no matter how difficult things become, you are never to act in any way that is unethical. We don’t cheat; we don’t lie to each other, to the board, to our investors. Indeed, because we are in trouble we are as strict on our ethical behavior as possible. As a company, and for the three of us as individuals, never try to push the boundaries of what is ethical. If you are a leader, you will know that you have to put people under pressure, sometimes under extreme pressure, to perform. We achieve great things because of that pressure, because we don’t approach our jobs casually but with great intensity. But we need to be alert to the possibility that the pressure will cause people to do things that they know are wrong, just because it is the only way they can see to satisfy the boss. Some years ago, when I headed the Products Division in BP Oil, we were developing a new lubricant product, a project that was high profile and late. It was late because any new lubricant, before it goes to market, must pass a large number of tests, and these are difficult when the product is meeting the highest standards with some new attributes. We had failed a few of these tests first time through. My colleague Tony Roxburgh, as Director of Marketing, knew the sort of pressure the team was under, and he himself was under pressure from our business units to get the product out. In this situation, he had the courage and insight to ask me to form a small independent group to review all the test results, and only when that group was satisfied would he release the product for sale. Because while getting the product to market was a big deal for the team and for him, he realized that there was a bigger deal at stake, the reputation of the Company for integrity in its offer. While leaders have a right, even an obligation, to exert pressure to perform, they have to think about the consequences of that pressure for the people involved. One of those consequences is the possibility that people will do something that they themselves know is not right, because we have left them no way out. Checks on this happening are, in effect, providing them with a way out, and clear thinking leadership will see that such checks are in place. There is another consequence of pressure that requires alertness and sensitivity from leadership. The physical and mental health of the team members. Of course we should always be watching this, but when the team is under pressure, perhaps struggling to achieve objectives, I am especially looking for unexplained absences, explosions of temper, team members going off on their own away from colleagues, changes in dress or physical appearance, anything signalling a person not coping physically or mentally. It is useful for a team leader to know if any team members have a history of problems under pressure, but this is not usually something that is shared with the leader by HR or by individuals themselves. Remember also that problems at home can become aggravated in pressure situations at work. Putting pressure on the team is a tool for leaders to use in order to achieve extraordinary performance. We learn that setting expectations beyond what people believe is possible can lead to great achievements. None of what I have said by way of caution is meant to deter you from using this tool but as with any tool it must be done with attention to safety. About Leadership: About Leadership is a series of 52 columns on corporate leadership — essential skills, leading teams, managing your career, the strategic and business practices to make a company and its leader distinctive from competitors. These columns will be of interest to people leading small and medium sized companies today, many of whom have not had much formal training in management skills and techniques; for the many people in big companies who aspire to senior management; and for anyone who thinks: Give me a hint, how can I do this better?

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James Berman: Why Muppets Everywhere Should Worry

March 30, 2012

Goldman Sachs referring to clients as muppets? Like Captain Renault in Casablanca, I’m once again shocked. Goldman’s alleged disdain for their clients points to a far greater problem at the core of the financial regulatory landscape, one that should strike fear into the hearts of would-be-muppets everywhere. Many people — even those in financial services — don’t realize that there are two vastly separate regulatory regimes out there that watch the people who watch over other people’s money. On the one hand are “registered investment advisers” who are registered with the SEC and are held to a higher fiduciary standard, meaning they can only put their clients into investments that are in their clients’ best interest. Amazingly, a whole other regulatory regime exists: one of “registered representatives” who are regulated by FINRA. These registered reps are what most people call stockbrokers (brokers). Brokers do not have to put their clients’ interests first. Usually, they call themselves “financial advisers” in a seemingly transparent bid to piggyback on the term “investment adviser.” But “financial adviser” is not a legal term with any designated meaning. Stockbrokers are held to the much lower “suitability standard” — which basically means you can’t put a great-grandmother into 100% internet stocks. Since it doesn’t require putting the client first, you might have a guess at who frequently gets first dibs instead. Yes, stockbrokers are often glorified car salesmen. They sell a product, usually an annuity or sometimes a mutual fund, and not always the best one, but sometimes the one with the highest commissions and fees attached — something which benefits them at the miserable expense of the client. Of course, there are honest, well-meaning brokers out there. But if they were really serious about putting the client first, why wouldn’t they drop their stockbroker sheep’s clothing and become registered investment advisers? The good ones have already done so. I’m proud to say I’ve been a registered investment adviser since I started managing money 16 years ago — and nothing but. Goldman Sachs is such a large firm that it probably has both brokerage divisions and investment adviser divisions, which ironically would have different standards of care to their clients. But to call your customer a muppet speaks of a culture that couldn’t possibly think of clients with any dignity. If that wasn’t the brokerage division, I’d be surprised. The big firms are usually brokers, not investment advisers. And the culture is an unsurprising result. Clients should protect themselves by always asking their adviser straight-up: are you a registered investment adviser ? Only those three exact words will tell the tale. And they should get it in writing — to prove they aren’t a muppet.

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Jared Bernstein: The Myth of the Myth of the Disappearing Middle Class

March 30, 2012

Brookings economist Ron Haskins puts a hurt on some numbers in this AM’s Washington Post . His piece has two parts. The first part, discussed below, has a pretty fat thumb on the scale. The second is about how decisions regarding marriage and the pursuit of higher ed can have a profound effect on a person and family’s economic success. I’ll leave that for now, though I should say that while I don’t often agree with him, Ron’s done solid, thoughtful work on those important issues. Which is one reason why the rest of the piece struck me as uncharacteristically misleading. Let’s go piece by piece. – The argument is framed as “the myth of disappearing middle class.” That’s a canard. Most living standards analysts, including Ron in this piece (!), think of the middle class as some chunk in the middle of the income distribution — say the middle fifth or some variation there in (e.g., 40th to 80th percentile), which of course cannot by definition “disappear.” I’ve been writing about middle-class economics for decades, including nine editions of the “State of Working America. Not once did I or my colleagues argue “disappearance.” – We did, and do, argue that the wage and income growth of middle class workers and families has weakened over time-that the middle-class has becoming increasingly squeezed. How does that square with Ron’s findings? He cites research much like that of the Congressional Budget Office on family income trends, noting that middle class income (the middle fifth of the income scale) “grew by nearly 40 percent” 1979-2007 (CBO analysis shows 35%; Ron’s source shows 37%, so about the same — I’m using CBO because it’s available to me in some detail; note that these trends include the effect of taxes, transfer payments, and the value of employer provided health care). First of all, 35% over 28 years is 1.1% per year, over a period when productivity grew at twice that rate (up 72%, or 2% per year). There’s no reason to expect middle-class incomes to grow at the rate of productivity year in and year out, though they did so for a few decades in the post-war years. But this persistent divergence is important context that should not be left out. – The value of health care isn’t as big a deal as he thinks it is, though it’s characteristic of this “myth” literature to invoke the value health benefits as a game-changer for middle-class living standards. This raises two questions. First, are such benefits totally fungible? That is, if the value of my employer or government provided health care benefits is $1,000, is my family that much better off? It’s not clear that this is the case, especially given the fact that the rising costs of health care don’t always reflect quality improvements for the broad middle class (i.e., they have more to do with technology and end-of-life care). It’s certainly not worth zero — to go without health coverage is a real blow to living standards. And if you or your family gets sick, it’s extremely valuable. But it’s wrong to just tack it onto income and argue everyone is that much better off. Second, what’s the empirical evidence here? On inequality, as the figure below reveals, there’s little difference in the trend of the Gini coefficient (a measure of income inequality) when you include the value of employer-provided care (see the lines labeled market income with and without ESI — employer-sponsored insurance). The two lines are almost coincident, meaning the increase in inequality doesn’t go away when you include the value of health care. In terms of real growth, it turns out that taxes matter much more than the value of health care. The CBO data show that real median income, all in (taxes, ESI, etc.), grew 35%, 1979-2007, as noted. Take out taxes and transfers (and it’s taxes that are the big story for the middle, not transfers), and that growth falls by almost half, to 19%, or 0.6% per year. More on that in a moment, but woe betide the middle class-or anyone else-if the fate of their living standards is tied not to economic growth or their labor market outcomes, but to the largess of the Congressional tax writing committees. – It’s also wrong to lump all these time periods together (note: this is a mistake that Ron’s source data — a paper by Rick Burkhauser et al doesn’t make — they break growth periods up in useful ways). About 80% of that 19% growth in pretax income occurred in the 1990s expansion (1993-2000), a period of uniquely full employment, and the only period over the last thirty years when the middle class kept up with overall economic growth. Over the 1980s business cycle, market incomes for the middle class grew 5%; in the 2000s cycle, a measly 3%. – To understand the middle class squeeze, you’ve got to look and wages and hours. Census data reveal the amazing fact that the median earnings of full-time male workers were almost exactly the same in real terms in 1979 as in 2010: in real 2010 dollars, 1979: $47,621; 2010: $47,715. How could that possibly not be relevant in an article about middle-class well-being? Because of this long-term stagnation in men’s earnings, middle-class families have had to work a lot more hours to get ahead. Of course, women’s contributions to their families’ incomes have become much more important over these years, and that too needs to be accounted for, as EPI does in State of Working America. There you’ll find evidence of 3-4 more months spent in the paid labor market by married-couple families over this period. That’s not all bad, of course, and partially reflects women’s integration into the job market as well as the decline in gender wage differentials. But you can’t ignore it, tack on taxes and health care, and wash your hands of any possible problems here. In fact, if you include these observations about wages to Ron’s thesis here, you’re left with a pretty uncomfortable conclusion: the middle class doesn’t need to worry about how they’re doing at work — we’ll make up any shortfalls with tax and health benefits. Good luck with that. As I said, a lot of what Ron has in here makes more sense than this “disappearing middle” stuff. He’s got good evidence of the importance of increased benefits to the poor, which as we at CBPP have also stressed, have often been very effective at lifting the incomes of the bottom fifth (especially the EITC). But the part on the middle class is incomplete at best and misleading at worst. This post originally appeared at Jared Bernstein’s On The Economy blog.

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Efraim Chalamish: Lets Talk About Trade

March 29, 2012

Trade policies are not a sexy business. Customs, anti-dumping, subsidies are just some of the concepts international investors are trying to avoid. Yet, recent weeks reminded all of us that trade can make headlines. And make or break industries around the globe. The subsidies to the aerospace industry in the EU and USA, the limitations on Indian cotton, and the World Trade Organization, or WTO, claims against China by the U.S., Europe, and Japan for export control of rare earth metals all have a dramatic impact on the respective industries. We cannot avoid them. How should we explain the recent hyper-activity in this area? And what are the ramifications? First, it is important to understand the story in light of the trade-investment nexus. The foreign investment boom of the ’80s and ’90s replaced global trade as ‘the’ economic engine, with global trade being au-courant post- World War II. While the world saw a quadrupling of trade in goods between 1980 and 2008, before the global financial crisis, global investment has risen more dramatically. Global stock of outward investment, for example, grew from $550 billion in 1980 to almost $19 trillion at the end of 2009. The years since the global financial crisis of 2008 have reversed this trend. Credit crunch, a slowdown in mergers and acquisitions activity, lack of faith in the future of globalization, and regulatory reforms — all made it ever-more challenging for multinational corporations to do business abroad through foreign investment and their subsidiaries. Hence, trade is becoming a crucial element of the ‘new globalization’ and its policies even more so. Moreover, since emerging markets are the real forces behind the current recovery post-financial crisis and the developed world has traditionally led cross-border investments, it is clear why emerging markets’ exports and trade policies towards them are critical. Second, trade legislation and disputes are clearly a reflection of foreign relations and protectionist sentiment. Lack of trust and economic competition make even right wing governments think that certain market-based trade policies should be reconsidered. Recent disputes in India can exemplify that. Third, this is a big year for those who follow the link between politics and economics. France, the United States and several other developed markets are going to the polls. We tend to think about general elections as an internal event with external consequences. In other words, the nation decides on its political and economic future but it is the international community and global markets that pay part of the price. Yet, watching the current elections’ campaigns carefully, it seems like the trend is reversed. These elections become an external affair with internal consequences, at least when it comes to trade, foreign investment and growth. Foreign investment traditionally attracts very little attention in elections season. Speaking about the need to bring foreign investors is usually perceived as a threat to local industries and a trigger for unemployment. Additionally, investors would shy away from markets that may experience a political change with a potential impact on foreign investors. French candidate, Francois Hollande, for example, is talking about taxing high the super rich (75 percent) and increasing local subsidies. Some investors interpret his policies as anti-foreign investment. This kind of talk is risky. Trade, however, allows politicians to communicate to their voters without risking their standing vis-à-vis the global investment community and their supporters. Obama’s active participation in the fight against China in the WTO is a case in point. Finally, this dramatic shift that I describe is a reflection of the broader agenda of the WTO. A decade ago, when world leaders met in Cancun to negotiate trade agreements as part of the Doha Round, also known as the development round, any attempt to include non-core topics with trade impact, such as investment or trade facilitation, failed. These topics, the “Singapore Issues,” have been perceived as a barrier to trade negotiations. Recently, however, politicians and trade negotiators refer to the WTO as a weapon of last resort for dealing with strategic macroeconomic disputes, such as the old-new currency wars. While formal international institutions were part of the problem just a few years ago, now the world is looking at them as the solution. While investors will have to watch trade policies and disputes more carefully, it will also require them to develop the know-how to understand the essence of the policies and their impact on markets. The next decade will look differently. An earlier version appeared on Economonitor.

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Robert Reich: Break Up the Big Banks, Says the Dallas Fed

March 29, 2012

As the Supreme Court shows every sign of throwing out “Obamacare” and leaving 30 million Americans without health insurance, another drama is being played out in the quiet corridors of the Federal Reserve system that may affect even more of us. Taxpayers will be on the hook for another giant Wall Street bailout, and the economy won’t be mended, unless the nation’s biggest banks are broken up. That’s not just me talking, or the Occupier movement, or that wayward executive who resigned from Goldman Sachs a few weeks ago. It’s the conclusion of the Dallas Federal Reserve, one of the most conservative of the Fed’s regional banks. The lead essay in its just released annual report says a cartel of giant banks continues to hobble the recovery and poses an ongoing danger to the economy. Wall Street’s increasing power remains “difficult to control because they have the lawyers and the money to resist the pressures of federal regulation.” The Dodd-Frank act that was supposed to control Wall Street “leaves TBTF [too big to fail] entrenched.” The Dallas Fed goes on to argue that the Fed’s easy money policy can’t be much help to the U.S. economy as long as Wall Street is “still clogged with toxic assets accumulated in the boom years.” So what’s the answer, according to the Dallas Fed? It’s “breaking up the nation’s biggest banks into smaller units.” Thud. That’s the sound the report hitting the desks of Wall Street executives. They and their Washington lobbyists are doing what they can to make sure this report is discredited and buried. When I spoke with one of the Street’s major defenders in the Capitol this morning he snorted, “Dallas represents small regional banks that are jealous of Wall Street.” When I reminded him the Dallas Fed was about the most conservative of the regional banks and knew firsthand about the dangers of under-regulated banks — the Savings and Loan crisis ripped through Texas like nowhere else — he said, “Dallas doesn’t know its [backside] from a prairie gopher hole.” So as Republicans make the repeal of “Obamacare” their primary objective (and Alito, Scalia, Thomas, Roberts and perhaps Kennedy sharpen their knives) another drama is taking place at the Fed. The question is whether Bernanke and company in Washington will heed the warnings coming from its Dallas branch, and amplify the message. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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Jeremy Rifkin: The Third Industrial Revolution: How the Internet, Green Electricity, and 3-D Printing Are Ushering in a Sustainable Era of Distributed Capitalism

March 28, 2012

The great economic revolutions in history occur when new communication technologies converge with new energy systems. New energy revolutions make possible more expansive and integrated trade. Accompanying communication revolutions manage the new complex commercial activities made possible by the new energy flows. Today, Internet technology and renewable energies are beginning to merge to create a new infrastructure for a Third Industrial Revolution (TIR) that will change the way power is distributed in the 21st century. In the coming era, hundreds of millions of people will produce their own renewable energy in their homes, offices, and factories and share green electricity with each other in an “Energy Internet” just like we now generate and share information online. The creation of a renewable energy regime, loaded by buildings, partially stored in the form of hydrogen, distributed via a green electricity Internet, and connected to plug-in, zero-emission transport, opens the door to a Third Industrial Revolution. While the TIR economy allows millions of people to produce their own virtual information and energy, a new digital manufacturing revolution now opens up the possibility of following suit in the production of durable goods. In the new era, everyone can potentially be their own manufacturer as well as their own internet site and power company. The process is called 3-D printing; and although it sounds like science fiction, it is already coming online, and promises to change the entire way we think of industrial production. Think about pushing the print button on your computer and sending a digital file to an inkjet printer, except, with 3-D printing, the machine runs off a three-dimensional product. Using computer aided design, software directs the 3-D printer to build successive layers of the product using powder, molten plastic, or metals to create the material scaffolding. The 3-D printer can produce multiple copies just like a photocopy machine. All sorts of goods, from jewelry to mobile phones, auto and aircraft parts, medical implants, and batteries are being “printed out” in what is being termed “additive manufacturing,” distinguishing it from the “subtractive manufacturing,” which involves cutting down and pairing off materials and then attaching them together. 3-D entrepreneurs are particularly bullish about additive manufacturing, because the process requires as little as 10 percent of the raw material expended in traditional manufacturing and uses less energy than conventional factory production, thus greatly reducing the cost. In the same way that the Internet radically reduced entry costs in generating and disseminating information, giving rise to new businesses like Google and Facebook, additive manufacturing has the potential to greatly reduce the cost of producing hard goods, making entry costs sufficiently lower to encourage hundreds of thousands of mini manufacturers — small and medium size enterprises (SMEs) — to challenge and potentially outcompete the giant manufacturing companies that were at the center of the First and Second Industrial Revolution economies. Already, a spate of new start-up companies are entering the 3-D printing market with names like Within Technologies, Digital Forming, Shape Ways, Rapid Quality Manufacturing, Stratasys, Bespoke Innovations, 3D Systems, MakerBot Industries, Freedom of Creation, LGM, and Contour Crafting and are determined to reinvent the very idea of manufacturing in the Third Industrial era. The energy saved at every step of the digital manufacturing process, from reduction in materials used, to less energy expended in making the product, if applied across the global economy, adds up to a qualitative increase in energy efficiency beyond anything imaginable in the First and Second Industrial Revolutions. When the energy used to power the production process is renewable and also generated on site, the full impact of a lateral Third Industrial Revolution becomes strikingly apparent. Since approximately 84 percent of the productivity gains in the manufacturing and service industries are attributable to increases in thermodynamic efficiencies — only 14 percent of productivity gains are the result of capital invested per worker — we begin to grasp the significance of the enormous surge in productivity that will accompany the Third Industrial Revolution and what it will mean for society. The democratization of manufacturing is being accompanied by the tumbling costs of marketing. The internet has transformed marketing from a significant expense to a negligible cost, allowing startups and small and medium size enterprises to market their goods and services on internet sites, like Etsy, that stretch over virtual space, enabling them to compete and even out compete many of the giant business enterprises of the 21st Century. As the new 3-D technology becomes more widespread, on site, just in time customized manufacturing of products will also reduce logistics costs with the possibility of huge energy savings. The cost of transporting products will plummet in the coming decades because an increasing array of goods will be produced locally in thousands of micro-manufacturing plants and transported regionally by trucks powered by green electricity and hydrogen generated on site. The lateral scaling of the Third Industrial Revolution allows small and medium size enterprises to flourish. Still, global companies will not disappear. Rather, they will increasingly metamorphose from primary producers and distributers to aggregators. In the new economic era, their role will be to coordinate and manage the multiple networks that move commerce and trade across the value chain. The rapid decline in transaction costs brought on by The Third Industrial Revolution are leading to the democratization of information, energy, manufacturing, marketing, and logistics, and the ushering in of a new era of distributed capitalism that is likely to change the very way we think of commercial life in the 21st Century. For a more detailed look at how 3D printing in the Third Industrial Revolution era is going to transform the global economy you can link to my cover story in the current issue of The World Financial Review here . Jeremy Rifkin is the author of The New York Times best selling book, The Third Industrial Revolution, How Lateral Power is Transforming Energy, the Economy, and the World. Mr. Rifkin is an adviser to the European Union and to heads of state around the world. He is a senior lecturer at the Wharton School’s Executive Education Program at the University of Pennsylvania and the president of the Foundation on Economic Trends in Washington, D.C.

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Gina Harman: Why We’re Still Talking About Small Business

March 28, 2012

Taking a look at some of my past articles on this site, I am struck by how much has changed and how much has stayed the same: the importance of entrepreneurship, the impact small businesses can have on nationwide job creation and the slow but steady economic recovery in the U.S. Today, I want to come back to entrepreneurship and small business growth. Last week, the NYSE Big StartUp was announced and, through this initiative, three nonprofit partners are collectively forming an eco-system to support small business growth and job creation: Accion , Start-Up America and Entrepreneurs’ Organization . The theme: it’s time for big business to help small businesses generate jobs. Through a fund called the Accion-NYSE Job Growth Fund, corporate donations can be transformed into business loans. In addition, those who have an idea strong enough to start a business and those whose businesses are poised to make a significant leap forward will find events, networking opportunities and mentorship to help them succeed, along with a platform for businesses both large and small to provide opportunities to volunteer, offer in kind services and join hands. Why are we still talking about small businesses? Of the 27.8 million businesses in the U.S., 91 percent have fewer than five employees. These businesses have been the largest net contributor of new jobs to the U.S. economy in the past 15 years and collectively employ 50 percent of all private sector employees. Unfortunately, small business job growth was essentially flat in 2011. The demand for loan capital for small businesses is at an all-time high but access to credit remains seriously challenged, particularly for businesses of this size. Now is precisely the time for us to accelerate our pace of job creation through more action. And we must focus on the smallest of businesses to make the largest impact. Microenterprise is key to generating employment opportunity for hundreds of thousands across the United States, and providing access to capital and key technical support to these entrepreneurs is vital to economic recovery. Partnering with leading companies and identifying unique and powerful ways to impact change can be a dynamic path for a sustainable impact — both across the country and directly on the local level. There are roles we can all play in this effort and we must leverage our collective expertise to be efficient, innovative and successful in creating the right partnerships around the country. As the Big StartUp starts up, we can move words to action and support small businesses as they seek to grow with capital and meaningful networking and learning opportunities.

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Dr. Serena Reep: Meaning of Work: What For-Profit Corporations Can Learn From Non-Profits

March 28, 2012

According to PricewaterhouseCoopers’ 2010 data , 33 percent of the U.S. workforce is highly disengaged from the work they do as compared to 20 percent in 2008 and 10 percent pre-2008. Gallup 2010 also reports that 33 percent of employees in world-class organizations are either not engaged or actively disengaged and 67 percent of employees in average organizations are either not engaged or actively disengaged. What is the cost of this disengagement to the U.S. corporations, you ask? About $292-$355 billion annually, according to Gallup. What gives? Why is there such disconnect and dissatisfaction with the work we do? We spend the largest portion of our wakeful moments at work; if these precious moments are spent in emotional detachment, it speaks volumes about our quality of life. The way the corporations “run” their business with the “profit first” philosophy ignores the fundamentals of human nature. When people have the opportunity to develop trusting, caring and mutually supportive relationships and form a sense of community with the people they work with, they have a stake in the outcome of the individual and team performance. When this is lacking, however, it becomes “just a job that pays the bills.” They will trade their bodies and time for the paycheck but not their hearts and souls. Contrast this with Martha’s story — a clear example of what “employee engagement” looks like in everyday life. I’ve been honored to work for a short time with breast cancer awareness charities. I can’t get one particular lady, Martha, out of my mind. She was the most pleasant, vibrant, and positive woman that I’ve ever met. She was a volunteer; she didn’t make a dime from her work but somehow you knew her sentiment was worth more than a paycheck. She helped, she advised, she rolled up her sleeves, she marched, raised money and answered the phones when needed. Martha was the perfect employee who wasn’t hired. I couldn’t help but think about why more people like Martha weren’t actually working at a for-profit company. How can we bottle her incredible attitude and infectious optimism? Why is the nine-to-five worker largely unhappy and disengaged from work while this unpaid woman is eager to get to work every morning? Why? There is clearly a lack of meaning and passion, lack of relevance, in their jobs, compared to Martha’s. Everything Martha did as a volunteer had meaning and was fueled by inspiration. She had beaten the breast cancer that took her mother. Her motivation was not only personal but positively vengeful. After seven years of intense chemo, losing all her hair, her confidence and her marriage, she had one chance left. The chance came in the form of a little known alternative cancer treatment used widely in Asia. She traveled there as a last resort, and this became her saving grace. Now back in the U.S., Martha had made it an obsession to have alternative remedies approved by the FDA, so other woman can have access to treatment options. She is passionate and unrelenting. She squeezes more productivity out of one day than most people do in a month, because she found meaning for her remaining days here on earth. When your work makes a difference in the world, you will never fully grasp its true influence. The magic of passion is that it lights the passions of others in areas outside of your purpose. When was the last time you saw someone doing something with such passion and intensity that you could only think about what lies dormant in your own life? Martha not only affected those passionate about research and development of cancer treatments but also lit the fires of anyone whose dreams were covered by hesitation and disbelief. The point is this — when you find meaning in your life’s work and lean into it with all that you have, others cannot help but be inspired and lean into their own dreams. When corporations can replace process with passion, and re-engineer the workplace to sustain a culture of caring and trust, there is much better likelihood that employee engagement statistics will improve and so will their bottom-line.

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James Doran: Free Trade Like Manna From Heaven for Middle East Entrepreneurs

March 28, 2012

A colleague staggered into the office a couple of days ago weighed down by a rather large, ornately designed cardboard box. Inside it were dozens of brightly wrapped candies, each the size of a bantam’s egg. They were, she told us, a delicacy from her native Iraq, recently delivered by her mother who had just returned from a brief trip to Baghdad. The gold-and-purple wrappers peeled away — eventually, as the heat of the journey had taken its toll — to reveal a beige mass of toffee studded with pistachios. They were scented with rose water and a hint of saffron. Al man wa salwa is a heavenly treat for many Iraqis, especially those, it seems, who are far from home. The term translates into English as “manna from heaven” and is borrowed from a sura in the Quran. With such credentials, and such a following, it is a wonder that the delicacy is not an international marketing success story, with al man wa salwa sold at every street-corner candy store the world over. Perhaps it could be. Why would an Iraqi manufacturer not use such a household name as the foundation to create the region’s own Hershey’s or Cadbury? The truth is politics, geography, conflict and red tape conspire to make life tough for entrepreneurs all across this region. But it could be so different. As expatriates in the UAE, we are surrounded every day by friends and colleagues from every country in the Middle East and North Africa. Each one of them holds a product from their homeland so dear they would go to the ends of the Earth and pay handsomely for a ready supply. The examples are endless and each one underscores a vast untapped potential for regional and international trade. A friend from Yemen loves his Yemeni honey — Sidr honey, to be precise. It is harvested just twice a year in the Hadramaut mountains. A single kilogram of the rare nectar costs Dh3,500 ($952) or more today as supplies are restricted by continuing unrest, making it more expensive than caviar. Palestinian olive oil is recognized by gourmands the world over as the finest available. (Don’t tell the Italians, though.) The fair-trade community has made substantial progress over the past year branding and selling Palestinian olive oil on international markets. Members of the Canaan collective, for example, were last year paid twice the going rate for their olives and secured contracts with J Sainsbury supermarkets in the United Kingdom and Whole Foods in the United States. Canaan, the company that markets the oil, says it works with more than 1,500 farmers from 43 villages across the Palestinian Authority, accounting for more than half of all West Bank olive oil exports. Sales are expected to hit $5 million this year, with a profit of at least $600,000 to be shared among the farmers. Canaan was started by Nasser Abufarh, a young entrepreneur with a relatively small $100,000 of seed capital. Mr. Abufarha’s international success is notable, sadly, as it is an exception, despite a recent surge in bilateral free-trade agreements between countries of this region and counterparts all over the world. The path to such free-trade agreements has long been hindered by familiar obstacles. A lack of transparency, corruption, political instability and unreliable supply chain management are the most common problems cited by organisations such as the U.S.-Middle East Free Trade Coalition. Not all countries are equal in this regard, however. The UAE has used the free-zone model to encourage international trade, and to facilitate trade from other countries in the region. Within zones such as Jebel Ali in Dubai and the nascent Kizad free-zone in Abu Dhabi, entrepreneurs from all over the world, large or small, can find a haven for trade. Campaigns are under way in the U.S., Latin America, Asia and Europe to strike fresh trade agreements with new governments in Egypt, Tunisia, Libya and hopefully one day with Syria, Yemen and others. The free-zone model should be given equal consideration by the new governments as they forge important new ties. If they succeed, perhaps one day we will all enjoy Iraqi manna from heaven, wherever on Earth we happen to be. For more Middle East Business, News and Features visit www.thenational.ae

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Ethan Rome: Paul Clement Calls for Tax Hike in Supreme Court Arguments Against Obamacare

March 28, 2012

In Tuesday’s oral arguments at the Supreme Court about the Affordable Care Act, the attorney representing the 26 states challenging the law called for a new general tax to pay for the costs of ending the private insurance industry’s discrimination against women and people with health conditions. It appears to be a thus-far overlooked moment that revealed that the law’s opponents don’t have any other ideas for how to guarantee that all Americans have access to quality, affordable health care that they can count on. So Paul D. Clement, legal icon of the conservative movement, found himself suggesting a tax hike that violates every fiber in the political body of congressional Republicans as well as the Grover Norquist pledge to never raise taxes in any way or for any reason — ever. In the two hours the court devoted to the individual responsibility provision, or the so-called mandate, there was a frank discussion about the cost of providing care for people without insurance. It was acknowledged that the insurance industry discriminates against sick people — by refusing to cover them and charging them more, and dropping people when they get sick — because that’s how they make money. Obviously it would be more cost-effective and efficient, and would make people healthier, if we had a mechanism to ensure that everyone had insurance. That would also eliminate uncompensated care and more broadly spread the costs of ending insurance company discrimination. But that’s the Obamacare law that the Republicans want the court to strike down. They’re also against Medicare for all because that would be socialist and put the private insurance industry out of business, although it does have the virtue of being unquestionably constitutional. So that leaves dealing with the problem on the back-end of the process in the way America’s conservatives know and like best: add up the private costs and use public funds to pay for them. Specifically, in an exchange between Justice Ginsberg and Clement about how to pay for the costs of requiring insurers to accept all comers and not discriminate in coverage and price against people who need health care, Clement said the following: I think there are other options that are available. The most straightforward one would be to figure out what amount of subsidy to the insurance industry is necessary to pay for guaranteed issue and community rating. And once we calculate the amount of that subsidy, we could have a tax that’s spread generally through everybody to raise the revenue to pay for that subsidy. This is as objectionable as it is ironic. I suspect that Clement’s national health care tax may not be what the political opponents of the law had in mind when they hired him. Clement’s tax hike is certainly not what organizations like the Koch Brothers-funded Americans for Prosperity are trumpeting on their website and in their public statements. Clement’s tax hike suggestion also blurs the most basic fact about their case and their approach to this issue: the Republicans aren’t interested in doing anything to address America’s health insurance crisis. It’s not an accident that they don’t have any real alternatives — they just don’t appear to care.

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Don McNay: Injured People and the One Percent

March 28, 2012

Most people perceive my job as strictly helping people make money. What I really do is help injured people. I keep injured people from wasting a settlement. I help them find every government benefit and program that might make their lives better. I find ways for them to minimize taxes and maximize what they keep. I assist in mediations and help them get claims settled. Many of my clients are in the top one percent of income earners. The bracket that some people are marching against. Most of my “one-percenters” are in wheelchairs or had their families wiped out in accidents. I’ve been doing my work for nearly 30 years and would never trade places with any client who got a large settlement or judgment. No sane person would give up their health or their family for money. Thus, going to war against the top one percent is not black and white for me. I’m for making hedge fund managers pay ordinary income tax like the rest of us do. I’m for tying Wall Street bonuses to doing something productive for society, instead of taking a bonus but not creating wealth. I want to see more being done for Main Street and less being done for Wall Street. I want the average American to get a fair shake and not be ignored by Washington. But what I really want is to keep doing things to help injured people with their money. A financial guru once called me a “financial evangelist.” I think I am more like a financial pastor or minister. I want to comfort the injured and help them heal. I also want them to hang on to their money. Thus, when they start going after the top one percent, I want to make sure that my clients are not the one percent of people they are going after. I want Congress to go after Wall Street but have found that Wall Street have a lot better lobbyists than injured people do. I’ve been encouraged that injured people will benefit from health care reform. I’ve spent the past few months becoming immersed in the nuances of the new health care reform act. I’ve read all 1990 pages of the law several times. After months of study, I understand it. I see how it helps people I want to help. If you like the law, you call it health care reform, if you don’t like it, you call it Obamacare. Before I took the time to really study the legislation I called it Obamacare. I encouraged my Democratic Congressman to vote against it, which he did. Now I am calling it health care reform. It is going to turn the medical system upside down. I don’t know how we will pay for it but I see where it truly helps injured people. Some of the reforms are coming to place now, before 2014, and I am learning how to use them to help my clients. When you dig into the details of the law, you see how health care reform empowers people who have been shut out or minimized by the health care system. It promotes wellness and good health. That’s not such a bad thing. I can also see the new law, along with the bailouts and stimulus packages of recent years, putting a huge strain on the federal budget. There have been calls of “tax reform” to pay for the looming larger deficits. I’ve learned one thing from watching Washington. Whenever there is a “reform” or “call to sacrifice” it is the little people who are supposed to do the sacrificing. Wall Street gets paid back 100 cents on the dollar. I can see reforms, aimed at the “one percent,” actually hitting people like my clients who are using their resources for medical care and a better quality of life. I don’t mind taxing a Wall Street banker’s second yacht or third vacation home. I don’t want them taxing a client who wants to buy a lift for his wheelchair. It’s simple to aim focus at the top one percent of income earners and assume they are all doing something wrong. It’s more complicated when you add in people who got to the one percent by having a drunk driver smash into their car and kill their family. When we start talking about the “one percent,” we need to think about the one percent of society who are hurting and need government assistance and help. And make sure that help is provided. Don McNay, CLU, ChFC, MSFS, CSSC is the bestselling author of the book, ‘Wealth Without Wall Street’; McNay, who lives in Richmond, Ky., is an award-winning financial columnist and Huffington Post contributor. You can learn more about him at www.donmcnay.com. He is the Chairman of the Board for the McNay Settlement Group (www.mcnay.com) which provides structured settlement consulting for injury victims, lottery winners, and the families of special needs children. McNay founded Kentucky Guardianship Administrators LLC, which assists attorneys in as conservators and setting up guardianships. It is nationally recognized as an administrator of Qualified Settlement (468b) funds.

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LearnVest: Body Oil, Babysitters And Boob Jobs: The Craziest Tax Deductions

March 27, 2012

Bet you didn’t know that you can deduct body oil from your taxes. Well, that’s only if you’re a bodybuilder–it’s a legitimate work expense! CheapSally.com put together this fun infographic documenting some of the craziest tax deductions they’ve run across, both successful and not. One of our other favorites? The farmer who tried to write off his plants as a business expense … his marijuana plants. For more outlandish deductions, and some high-profile celebrity tax evaders, check out the infographic below. Image: CheapSally.com More From LearnVest Don’t let taxes intimidate you–master them with Ace Your Taxes Bootcamp . These seven tax deductions will earn you a bigger refund. Deducting from charitable contributions? Make sure you read this first . This story originally appeared on LearnVest.com .

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Karen Steuer: Where Have All the Farms Gone?

March 27, 2012

During the past 50 years, animal agriculture has gone through a seismic shift in the United States. Long gone are the iconic scenes of American landscapes dotted with family farms and red barns. Most of these have been replaced by industrialized facilities controlled by large corporations that rely on concentrated animal feeding operations (CAFOs). In this system, cavernous warehouses crowded with thousands — even tens of thousands — of animals form the equivalent of an agricultural assembly line. And independent farmers, once the cornerstone of rural America, struggle to compete in a marketplace dominated by a few big corporations. As large corporations (known as integrators) have applied an industrial model to farming, they have also generated a host of new problems. The CAFO model relies on three interlinked practices in order to increase profits: Maximize the number of animals squeezed into the least amount of space and require the fewest number of employees to provide care. Administer continual doses of antibiotics to the animals to prevent the diseases prevalent in their close-quarters housing. Minimize the disposal cost for the substantial volume of animal waste produced by the facilities. These practices may turn a profit for the big corporations, but they are disastrous for human health and the environment. Up to 1 billion tons of manure is generated by livestock operations every year, much of it from CAFOs. In some cases, the waste is stored in large lagoons or open piles that can leak or spill into adjacent land and water. In other cases, manure is liberally spread on fields in such overwhelming concentrations that soil and crops often cannot impede all of the nitrogen, phosphorus, and pathogens from reaching public waterways. The mishandling of manure has resulted in contaminated drinking water sources for 40 percent of the U.S. population in recent years, according to Environmental Protection Agency estimates. Tainted drinking water, destruction of fish and other aquatic life, and polluted recreation areas, however, are just part of the damage caused by CAFOs. Countless independent farmers have been pushed out of business. Millions of animals have been confined to crates or cages and subjected to inhumane practices. The human health threat of antibiotic-resistant infections continues to rise. And the corporate integrators have largely been insulated from regulation, transparency, and requirements many other industries must follow with regard to pollution. Shortly after the Pew Commission on Industrial Farm Animal Production released a groundbreaking report on this topic in 2008, the Pew Environment Group launched a campaign aimed at reforming this sector of agriculture. Pew is working to address these challenges by securing effective, sensible government oversight to protect water resources and human health; urging the industry to change its practices; and building public awareness of the problems. During the next several months, I will use this series to describe the environmental concerns associated with CAFOs, the impact on independent farmers, the industry’s resistance to change, and how this issue affects our quality of life in the United States. For more information and to take action, please click here .

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Timothy A. Ridout: Satellite Security Requires More Rules, Not Fewer

March 27, 2012

Satellites are crucial to modern life. We rely on them for civilian uses such as TV, Internet, ATM banking, GPS, agriculture, and weather forecasting. On the military side, we use satellites to guide munitions, operate drones, gather intelligence, and monitor enemy movements. Unfortunately, satellites are increasingly threatened. Earth orbits in which satellites operate are becoming cluttered with debris. As the number of operational satellites increases, competition for orbital “slots” is intensifying. The military uses of outer space also mean that space-faring nations are eying each other warily as they work to “harden” their own space assets while simultaneously developing new ways to destroy or incapacitate those of potential adversaries. This intensified competition has led to a debate about how to ensure that outer space remains viable for productive use. Russia and China have proposed a treaty that would ban the deployment of space weapons and prohibit the threat or use of force against space assets. The Bush administration pursued a policy of U.S. space dominance , but the Obama administration has since reversed this in favor of a cooperative multilateral approach. In January, Secretary Clinton indicated that the United States would work with the European Union in developing an International Code of Conduct for Outer Space Activities . In their recent op-ed in the New York Times , John Bolton and John Yoo advocate a return to Bush-era unilateralism, supporting near-absolute freedom of U.S. action in space. They begin their argument with the false claim that “The Obama administration recently declared that America would follow, though not sign, a European Union code of conduct for outer space.” In reality, the administration has agreed to work with the EU on creating a code of conduct, but it has explicitly refused to follow the EU code of conduct as it stands, saying that it is too restrictive. Aside from this inaccuracy in their argument, Bolton and Yoo’s opposition to greater cooperation in outer space is worrisome. The kind of muscular, unilateral policy that Bolton and Yoo advocate would encourage unrestrained anarchy in a fragile environment. If the U.S. acts as it pleases, other countries will do the same. Without efforts to coordinate traffic or restrain dangerous behavior, outer space will remain in the kind of anarchic limbo that led the Chinese to conduct an anti-satellite test against their own weather satellite in 2007, destroying it and creating a lot of debris in the process. Russia and the United States have had the capacity to destroy satellites this way since the 1980s. The Chinese test could have been avoided if there were a clear norm discouraging such behavior. Additionally, a more cooperative atmosphere would have reduced the security concerns that created a perceived need for a show of force in the first place. A non-binding code of conduct of the sort proposed by the European Union in 2010 is currently the best way to improve outer space security. A treaty banning space weapons is not realistic both because defining a “space weapon” is infinitely difficult given the dual-use nature of space assets, and because there is little political will for a new outer space treaty. Broad principles are already outlined in the 1967 Outer Space Treaty , which ensures the universal right to peaceful use and extends international law to outer space. What a code of conduct would do is clarify specific norms and best practices. Article I of the Outer Space Treaty — to which the United States and 100 other states are party — establishes space as “the province of all mankind,” adding that it “shall be free for exploration and use by all States.” In this sense, outer space is roughly analogous to the high seas: free for all to use for peaceful transit. In the maritime case, a broad set of rules and standard practices have developed over centuries, providing guidance on issues as mundane as which ship has the right of way in given situations. Without these international norms governing maritime operations that enable the safe transit of ships all over the world, global commerce could grind to a halt. Of course, the physics in outer space are quite different. In the event of hostilities or accidental collisions at sea, destroyed ships and debris will sink to the bottom of the ocean. In outer space, debris in lower orbits could be pulled into Earth’s atmosphere in maybe 25 years. However, debris in higher orbits can last for centuries, endangering any space assets seeking to use those orbits. The speed at which objects in orbit travel means that even a marble-sized piece of debris could destroy a satellite. As of yet, there is no cost-effective way to eliminate space debris, although some are trying . Aside from the threat of hostile acts foreshadowed by the Chinese anti-satellite test, mere negligence and lack of coordination pose a serious danger to the outer space environment. For example, if an operator does not maneuver a satellite into a useless “graveyard” orbit before it runs out of fuel, that satellite becomes a hunk of debris at risk of colliding with other objects (as occurred in 2009 with an Iridium communications satellite and a defunct Russian spy satellite). Clear rules and accepted best practices can help mitigate such threats. An outer space code of conduct would codify and strengthen emerging norms such as those outlined in the Space Debris Mitigation Guidelines , a set of best practices formulated by the world’s major space agencies. Whatever the specifics of a code of conduct or other agreements may be, developing norms and promoting a cooperative framework are in the U.S. interest. With nearly half of the roughly 1,000 operating satellites , the United States has the most to lose. We must emphasize collective traffic management and condemn the initiation of hostilities in outer space rather than supporting unrestrained freedom of action.

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Gary M. Krebs: The Mentor’s Mentor

March 27, 2012

I have what I refer to as “farsighted memory”: I can recall the red carpet from my family’s apartment in Brooklyn when I was less than 2 years old; I remember all my childhood friends’ telephone numbers; and I can even cite how much money I made shoveling snow for the first time when I was 10 ($79.50, mostly in quarters, which weighed my snow pants down to my knees). In spite of all this, I sometimes can’t remember the most obvious things, like when I drew a blank at a doctor’s office the other day when prompted for my age. Either I’m getting old or my brain needs memory glasses. When it comes to work, however, I pride myself on being detail-oriented and rarely forget a thing. Many work memories and details are as vivid to me as those previously mentioned from my childhood. The one that stands out most is my first day as an editorial assistant at Facts on File publishing company. Gerry Helferich, my boss, who was then VP and Editorial Director, said these words: “Feel free take on whatever responsibility you can handle. Anything you see you want to do, just ask. You can manage my books, edit books, acquire books — anything you want.” At the time I had no idea how rare it was for assistants in the book business — or in any business — to hear those words from a supervisor. I’ve since heard horror stories of assistants who waited years to even be able touch a manuscript (which was possible then, because it was still paper), much less be able to put red ink on an author’s copy. Yet there I was, 21 years old with very little experience, and the man in charge had trusted me with the responsibility of managing all his books. Gerry’s word was good: I handled all 50 of his projects through production, several of which became award winners and great sellers; he gave me a few manuscripts to edit; and, incredible as it may seem, helped (or, more accurately, spoon-fed) my first book acquisition, less than three months into joining the company. I had found a lifelong mentor. There isn’t a thing I know about the business that can’t be traced back to Gerry: he showed me how to choose the right trim size (format) for a book; how to run (and manipulate) a P&L (profit/loss statement); how to pitch a book to a room full of people; how to negotiate; how to write great copy; and on and on. Gerry never raised his voice, made a crack when I asked a dumb question, or dismissed my crazy ideas (in fact, he welcomed them). The only time I ever remember seeing him disappointed was when he asked me to water his office plants while he was away on vacation. In my zealousness, I overwatered and killed them all; I still feel guilty about that, two decades later. I was distraught when Gerry left Facts on File for a better opportunity: how could I possibly survive without him? To my astonishment, although he had moved on to much larger organizations, he always returned my calls and spent time with me when I needed his advice. He came to my aid on numerous occasions — helping me figure out job challenges, offering me references, and even counseling me on terms for my book deal. When I became a leader myself in the industry, Gerry continued to be a significant influence, even though our schedules rarely matched up. For years the most we could arrange was the two-minute catch-up at his company’s booth at Book Expo (the largest book convention in the U.S.). On one such occasion, I was drowning in employee issues, author problems, and overbooked meetings, and babbled to him in an over-caffeinated way that probably suggested I was about to implode. He stopped me mid-sentence, floated his hands up and down, looked me in the eyes, and said, “Calm down.” Those two words not only got me through that event, but they have guided me many times since: I just hear Gerry’s voice in my head, and I know everything will be OK. I felt more than just a tinge of grief a few years later when Gerry told me he was leaving the industry and moving to Mexico with his wife so that they could become full-time authors themselves. What a loss for the industry, I thought, but on a more selfish note, I knew there was no replacing him as my mentor. I would have to fend for myself during crises. No matter the situation, I would ask myself the question: “What would Gerry do?” Just imagining the answer got me through many complex challenges. I even made a list of the top six attributes that made his leadership style so effective: Empower others: Gerry let you run with the ball. He was never threatened by anyone else’s success. Stay calm under pressure: He didn’t overreact to anything. The worst problems were figured out in the same laid-back style as the easy ones. Don’t piss anyone off: He never yelled at anyone, burned a bridge, or insulted anyone. He knew that even the most difficult colleague has the potential to become an ally. Make time for people: He assisted everyone — direct reports, indirect reports, colleagues in other departments, and even people who threw axes at his back. He always stopped to listen and didn’t offer an opinion unless asked. Take the chance: Gerry was collegiate and agreeable, but not to the point where nothing got done. Sometimes a leader needs to push an idea or innovation through, even if there are naysayers. It’s as brave to take a positive stand on someone else’s project as it is a negative one — especially when it means disagreeing with the hierarchy, spending money, or implementing a change. Admit to mistakes: Gerry had no qualms about saying when he did something wrong. It made the team admire him all the more. Over the years, I’ve had the remarkable opportunity to give back some of the above wisdom to quite a few talented professionals. Many of these individuals are now successful editors, agents, entrepreneurs, and even leaders themselves. At my last company, I was privileged to become a corporate mentor to a star employee in the U.K. office. “Uh oh,” I thought. “This guy is so much smarter than I am — what could I possibly hope to impart to him as his mentor?” It turns out that my mentee did have some challenges, and I think on a small scale I was able to support him by listening, sharing my experiences, and steering him toward decisions when he was straddling the fence. I couldn’t have been prouder when he earned a well-deserved promotion. I found that I may have gotten as much out of that relationship as he did; not only did we exchange work advice on both sides, but we even shared our scripts (he’s a talented playwright). The book I’m now delighted to read is The Stone of Kings: In Search of the Lost Jade of the Maya , by Gerard Helferich. Not only is my mentor the author, but the book was published by Lyons Press (Globe Pequot) — my former company. As I turned the pages, it was difficult for me to avoid being reflective and another memory hit me: Gerry’s last day at Facts on File. At his farewell party, his peers made teary-eyed speeches and wished him well. I couldn’t hold back any longer and stepped forward. It didn’t occur to me how ridiculous it must have seemed; I was his assistant — a mere 23-year-old, wet-behind-the-ears kid — making a speech in front of a whole room full of people about the company’s most revered leader. But I stood up and thanked him for everything he taught me and for all of his support. I closed by proclaiming, “You’re the best manager I ever had!” Gerry burst into laughter and remarked, “Of course I am — I’m the only boss you’ve ever had!” Well, I’ve had a few bosses since — some wonderful, some pretty awful — but Gerry is still #1. Someday I hope to have another leadership opportunity where I can create those magical memories with a new staff…

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Connie Dieken: Influencer of the Week: Apple’s New CEO Tim Cook

March 27, 2012

“Just do what’s right,” Apple’s co-founder Steve Jobs reportedly advised Tim Cook, his successor as CEO of Apple Inc. That’s how shift happens. Cook proved his inner boldness this week in a major shift with the late Jobs’ philosophy. He announced the company’s new dividend and buyback plan, essentially bringing sexy back to the musty old dividend. The quarterly check, one seen as taboo for tech companies, is now cool again. This is an extraordinary move for a company that is still in high growth mode. In the past, issuing regular payments to stockholders has signaled that growth mode is over and a company’s best days may be behind. Other sleek tech companies like Google and Amazon don’t pay a dividend. Cook begs to differ. And he does so with precision. During last week’s teleconference with New York analysts, he front loaded his announcement with influential buzzwords, such as: “We are innovating at an incredible pace.” “We’re building a tremendous ecosystem with apps and content.” “We’re expanding our footprint with new carrier partners and other third-party resellers.” “We continue to open stores, including 40 this fiscal year alone.” “We are investing in our direct enterprise sales force.” The last comment is another telling departure from Steve Job’s approach. Jobs famously loathed corporate IT buyers. Cook emphasizes their importance. Apple was hoarding a ridiculously large cash reserve — at last count, $97.6 billion — the largest reserve of any non-financial organization in the U.S. To put that number in context, Apple’s reserve was larger than the entire market value of 485 of the 500 companies in the Standard & Poor Index. The measure of any communication is the listeners’ response. Wall street responded by pushing Apple shares to a record $601.10 , its first-ever close above $600. And Cook’s message is also resonating with large fund families such as Vanguard and Fidelity, whose rules previously prevented them from including stocks that didn’t pay a dividend. They’re now able to include Apple in their funds. Sure, there are grumblers. Some analysts are disappointed with the size of Apple’s 1.8 percent divided. In comparison, Hewlett-Packard pays 2 percent and Microsoft pays 2.5 percent. But as Cook summed up his announcement, he noted , “Simply stated, we don’t see ceilings to our opportunities.” The same can be said about Cook. He appears to be fueled by an inner boldness to do what’s right — he delivered a compelling message that resonated with his target audience, and he gained their commitment. Like his predecessor, the late, great Steve Jobs who handpicked him, it appears that Tim Cook is a true influencer.

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Evan Bailyn: How To Cock-Up A Cocktail Conversation

March 26, 2012

If you regularly attend events for work, or rely on interacting with other people for your career, I have a fantastic guide for you on how to absolutely never get what you want. Other people may provide strategies that only occasionally backfire. However, completely ruining your own conversational aims takes surprisingly little time. All you have to do is master one foolproof tactic: never, ever allow people a glimpse of who you really are. Impossible, you may say — but no! As with all the best how-to guides, it comes down to the three C’s: be cool, collected and corporate. Be Cool : As any junior high student knows, the essence of ‘cool’ boils down to three words: don’t care. Period. This especially applies to professional interactions with people who have the potential to further your cause or help grow your business. Remember how the cool kids in school never messed up, because they never got involved? Be that cool. Don’t strike up a conversation — be professional and let people come to you! Cool people are coolest when they resemble mannequins — no warmth, no animation, no enthusiasm. The cool businessperson never makes the first move — which guarantees that you stay stock-still forever. Be Collected : One of the strongest arrows in your quiver of ineptitude is being polished, pressed, starched and entirely self-possessed (think distant politician or blank runway model). You are focused on you, which means you have wasted no time trying to understand the objectives of the people you might speak to. You put no effort into preparing, in case you meet someone whose objectives align with yours, and so you will be happily unable to offer solutions (this would only make them more eager to talk to you). Having accomplished this, you are ready for the next level. Be Corporate : Who doesn’t have warm and fuzzy feelings about their favorite corporation? The tangled bureaucracy, the glassy impersonality and uniformity… sigh. They dispense information in declarative-sentence fact bites, never ask how you’re doing and list their contact information where you can only find it if you’re looking for it. In other words, they are the perfect models for those who want their professional networks to be as lively as a morgue. Here’s how you can apply their tactics to ruin a conversation with a potential donor, client or contact at any event: • Don’t ask, just tell : Wait for the inevitable “So, what do you do?” Answer. Then wait. No need to show personal interest — you want this conversation to grind to a painful halt, and the best way to do that is to act like a call service operator. Answer direct questions, but don’t go any further. If you actually wanted to develop this person as a viable, lasting contact who might one day be a client or refer you business, you would forge a relationship, which would require finding out about what drives them professionally, why they chose their fields, what they hope to accomplish in the next few years — finding real common ground and a shared sense of purpose. Which takes time. And effort. So remember — no corporate flunky really wants an answer to “How are you today?” That’s why they don’t pause before plowing ahead with their next sentence. • Numbers or names, they’re all the same : A beautifully dead-end conversation resembles an elevator pitch. When you treat your conversational partner like a captive audience, you get to talk as much as you like about business, all while avoiding those icky personal topics like family, mutual friends, children, backgrounds and personal passions and interests. When you learn what makes the person you are speaking to unique, and relate to them on a personal level, you exponentially increase the likelihood that they will anticipate — even look forward to — speaking to you again. So speed through your conversation. Say what you want to say and move on to the next person. In no time, you’ll have covered the entire room, and have nothing to show for it. Score one for the good guys. • Here’s my card : Your conversational partner’s pocket is already bulging with business cards. You want yours crammed in with the rest (after all, dry cleaners need something to read, too), so hand yours off with a vague “Let’s connect.” Failing to offer a concrete time or reason for your new acquaintances to get in touch with you ensures that they won’t. On the other hand, promising to touch base via email within a week about a specific subject you discussed will only improve your relationship — just say no. With the three C’s at your disposal, I guarantee that no conversation, whether it be with potential clients, networking contacts, or donors will lead to a sound working relationship. So enjoy your next networking event, secure in the knowledge that you can leave your phone off — it won’t be ringing. Who needs new business anyway?

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Ron Ashkenas: Firing Someone the Right Way

March 26, 2012

Perhaps the most difficult part of any manager’s job is telling a subordinate that he can no longer stay with the company — that he’s been “fired,” “let go,” “dismissed” or otherwise taken off the payroll. It’s a gut-wrenching conversation, knowing how this simple act affects a person’s career, self-esteem and livelihood. Firing an employee also affects everyone else on your team. Not only does it change work assignments, but it also makes people wonder about your judgment as a manager and their own job security. Given these emotional undercurrents, many managers let anxiety drive the firing process instead of intellect, making a difficult moment even worse. For example, I know of a senior manager who walked unannounced into his employee’s office, junior HR person in tow, and declared: “You’ve been fired. Our HR associate will answer your questions and then escort you out of the building.” The manager then exited, leaving the shocked (former) employee and the ill-prepared HR person staring awkwardly at each other. What made this situation even worse is that the senior manager had given no previous indication of the employee’s performance difficulties and had given him nothing but positive feedback in the previous six months. Now, suddenly, the reason for the firing was “lack of teamwork.” And because it was “for cause,” no severance was offered and pay was terminated immediately. From the manager’s perspective, this approach avoided the anxiety associated with firing. He didn’t have to engage in any difficult performance discussions or justify his actions. He also avoided any kind of emotional scene and (temporary) budget impacts. Of course, he also probably generated a major lawsuit that left the company liable for far more than the cost of a severance. And once the story got out, he likely lost the respect of his team. Clearly this may be an extreme example, but there are too many stories like this one. Because firing is so emotionally charged, it’s easy to act counterproductively. To avoid that, here are some guidelines for those times when firing an employee becomes a necessity: First, make sure that letting your employee go is the last step in a careful, thoughtful, fair and transparent process that started long before the actual firing. In other words, if the dismissal is for poor performance, then it should occur after a series of performance discussions, plans and documented actions. If it’s due to reorganization or job elimination, it also should follow conversations, announcements and a reasonable “fair warning.” The key is that, if possible, firing should not come as a surprise. In most companies, the HR function has guidelines for how this process should unfold. Second, come to the “firing meeting” prepared to address the practical logistical questions that the person will have about leaving her job: When is the official end date? Are there severance arrangements? Are there opportunities elsewhere in the company? Is career counseling available? What happens with benefits? You may need help from HR to make sure that these answers are available. Third, at the meeting be ready to listen but not react. Losing a job can be traumatic, and your employee may display a range of emotions, which he might direct toward you. Try not to get caught up in responding. Listen with respect and then direct the person toward the practical realities of moving on. Offer to talk again later when the emotions are not so raw, or ask a trained HR counselor to join you. Finally, after the firing, talk to your team about the process, the reasoning and the implications for them (within the limits of confidentiality). In some cases, they will fully understand the decision. In others, they may have a very incomplete picture. In either case, you need to be sensitive to their emotions, and then help redirect their focus back on work. Firing a subordinate is one of the most difficult and painful tasks you’ll ever have to do as a manager, and for most of us it never gets easier. Unfortunately, avoiding the anxiety associated with firing only makes things worse. So if you have to do it — do it right. What’s been your experience with firing — or being fired? Cross-posted from Harvard Business Online .

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Mike Callicrate: Ex-GIPSA Head Seeks Apology

March 26, 2012

In an interview with WORC’s Western Organizing Review , Dudley Butler, former administer of the Grain Inspection, Packers and Stockyards Administration, has called on Sen. Pat Roberts (R-Kan.) to apologize for his veiled threats and knowingly lying about what Butler supposedly had said about the proposed GIPSA rule. Listen to his challenge to Roberts in this short audio clip here . WORC will publish the interview in April in the next edition of our newsletter. During a June Senate Agriculture Committee hearing, Sen. Roberts said, “To be perfectly blunt, this rule, as proposed, looked like a trial lawyers Full Employment Act. Better yet, I’ll read a quote from Administrator, Mr. Dudley Butler, regarding the core of the material in the rule. His quote, ‘That’s a lawyer’s dream, a plaintiff lawyer’s dream.’ He [Butler] was a plaintiff’s lawyer.” Butler had not been invited to the hearing. Butler’s quote, however, referred to the broad terms included in the Packers and Stockyards Act, not the proposed rule, which would have clarified terms in the act. Butler had made his statement well before the proposed GIPSA rule had even been published.

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David Isenberg: A Covert Mystery, Wrapped in Classification, Inside a Contractual Black Hole

March 26, 2012

Think about what we’ve experienced by doing oversight of private military and security contractors over the past decade in places like Afghanistan and Iraq. Think it was difficult? In fact it was very difficult, and in many cases it still is, despite a decade’s worth of learning curve. But at least we’ve learned from our mistakes and it can only be easier now, right? Well, actually not, Or as the old saying goes, you ain’t seen nothing yet, when it comes to overseeing contractors. That’s because we’ve barely begun to consider the use of private contractors in another critical, formerly primarily inherently governmental, national security realm. That would be, wait for it, the intelligence community (IC). Aside from the professional spook literature and the 2008 book, Spies for Hire , by Tim Shorrock, this remains a covert mystery, wrapped in classification, inside a contractual black hole, to paraphrase Winston Churchill. Don’t take my word for it. Instead, take a look at the article ” Outsourcing Covert Activities ” by George Washington University Law School professor Laura Dickinson and published in the Journal of National Security Law & Policy . She is the author of the 2011 book Outsourcing War and Peace: Preserving Public Values in a World of Privatized Foreign Affairs . When it comes to intelligence community’s use of contractors, it appears that at least sometimes the right hand doesn’t know what the left hand is doing. Dickinson notes that while the CIA and the Pentagon have now formally banned the use of contract interrogators and DoD has outlawed intelligence gathering by contractors, the lines appear to be blurred on the ground. Indeed, even after the military ban, former CIA agent Duane Clarridge reportedly established a private network of spies and information gathered by these agents to the U.S. government. Why does this matter? Dickinson writes: “Government privatization of covert activities is of particular concern. To be sure, reining in the excesses of government actors engaged in covert operations is a challenge even without outsourcing. This is because it is much harder to gather information about such activities, regardless of whether they are carried out by government employees or by contractors. And the tools of oversight and accountability we might deploy to control covert actors are especially limited because of the secrecy that these kinds of operations demand. Increased oversight by Congress and the general public through enhanced transparency laws such as an expanded Freedom of Information Act (FOIA), greater whistleblower protections, and agency reporting, may often be impractical.” Spoiler alert for those industry advocates who may think Dickinson is proposing to bar use of private contractors by the IC. She believes that outsourcing, even of covert operations, is here to stay, at least for a long time to come. “Most notably, a political culture that assumes the efficiency of the private sector (without necessarily accumulating data to prove it) makes the hiring of contract workers much easier politically than expanding the number of government employees or uniformed soldiers. Providing contracts to private employees serves the illusion that “government is not big” or “is getting smaller.” As a consequence, the starting point for my argument is that we should accept the reality of outsourcing and seek to control it better. We are in a brave new world, and we cannot ignore it. Accordingly, our best way forward is not to rail against the use of contractors in toto, but to provide better accountability for the contractors upon whom we increasingly rely.” She has various recommendations to improve oversight but given that we are talking about spy agencies after all, it is safe to say that expanding transparency (say what?) is not one of them. But she does have this rather novel recommendation: “Even for contractors conducting covert operations, we could require contract firms to install internal accountability agents with a role comparable to that of uniformed lawyers in the military. Such agents should be responsible for training employees, monitoring their actions, tracking abuses, and imposing sanctions in the case of such abuses. Perhaps the decision by Academi (formerly Blackwater) to appoint former Attorney General John Ashcroft as their lead ethics agent is a step in this direction.” Putting aside the fact that John Ashcroft and ethics are not normally words I use in the same sentence this might be something the congressional oversight committees might want to try implementing.

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Ralph Gomory: Making Corporate Actions Visible

March 26, 2012

In a recent article we wrote: “America today is very different from the country that fought the Revolutionary War and framed the Constitution. Then, it was a nation of farmers; today, it’s a nation of corporations.” Though we are today a nation of corporations, there is remarkably little discussion about corporate actions and the impact of those actions on our lives, even though it’s clear that what our corporations, especially our major corporations, choose to do affects in major ways wages, jobs, healthcare and the overall economy. There is even less discussion on what we want from our corporations. Is it, for example, enough that their sole goals are to maximize the return to their shareholders? This article suggests something citizens can do to spur these needed discussions and to make visible what corporations are actually doing and the effects of their actions. Here we are not calling on the government to mandate this transparency, rather we are calling on ordinary citizens and citizen organizations to act to make the actions of corporations more visible, more transparent. Labeling the Corporation We are used to the idea that many of the products we buy are labeled. For example, many processed foods are obliged to disclose their ingredients, and they are labeled so that we do not have to guess at what we are eating. Consumers are often encouraged to “read the label”, so they will know what they are buying. Similarly, let us now insist on labeling and making visible what corporations are doing. Corporations affect us and our country through their decisions on outsourcing and on wages and pensions, and by what their goals are. Do they consider in their actions the effects on customers, their own employees, the communities in which they operate, and on the country that sustains them with its laws? Or do they only consider shareholder value? Do they pioneer with new and valuable products, and if they do, how do they decide where those products are made? Or, in the realm of services, do they exploit the ignorance of their customers to either give them loans they cannot repay or investment advice more tailored to corporate profits than to the welfare of the customers. Let’s label corporations with labels that tell us what they are actually doing. How to Label the Corporation We are not talking here about physical labels attached to products that corporations make, but about electronic labels attached to the corporations themselves. But where would these labels come from? How would they be made? What would they look like? What would they do? An example of corporate labeling already exists. It was created by a cooperative effort between the Zicklin Center for Business Ethics Research at The Wharton School of the University of Pennsylvania and the Center for Political Accountability (CPA). While this is a label that only describes the political spending activities of corporations, the methodology can be applied equally well to other corporate actions. Together the two organizations developed a set of twenty-nine criteria by which the corporate approach to managing, overseeing and disclosing political expenditures could be judged. The criteria covered disclosure of the range of a company’s political spending — contributions to candidates, Party committees and ballot initiatives as well as payments to trade associations and other tax exempt entities organized for political purposes — and its policies and practices for associated decision making and oversight. They then scored the top 100 U.S. corporations on all twenty-nine criteria, and for each company the weighted scores for the individual criteria were combined into a single rating, specifically, the CPA-Zicklin Index of Corporate Political Accountability and Disclosure. Before the Index was made public each company was informed of its rating and had the opportunity to dialog with CPA about them. This also gave the company the opportunity to make changes in the policies and practices they were publicly posting on their website. Only after that was the rating made public. The result is that you can see today this well thought out rating of the top 100 U.S. companies on the CPA website and also, for those who want it, a detailed d e scription of how it was determined. We believe that something very much like this can be done for other corporate activities. The essential step is to work out criteria about which you want information, then see what information can be obtained for each company. It was important to the CPA-Zicklin effort, that a corporation not providing information to the public on a specific criterion would result in a score of zero on that criterion and thus a lower rating when the result is made public. We suggest that civic organizations with a particular interest, label corporations on that interest., whether that is the environment, how they treat their employees, the quality of their goods, or the degree of outsourcing. They should then develop their criteria, and gather information; not always only from the corporations.. They should then produce a publicly available rating that is easy to link to. Modern technology makes all this possible and more. People with a particular interest in a particular company could organize a Facebook page. There could also be Smartphone apps, similar to those that already exist for comparison shopping. Pointing the camera of a Smartphone at a product would immediately reveal the company that makes it and the rating given to that company by a selected website on a selected issue. Any and all of these actions will contribute to making visible, transparent and discussible what our corporations are doing. We are a nation of corporations, but our press and our conventional politics do not in any systematic way make visible the effect of corporate actions on the country. Let us as citizens make up for that significant omission.

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Robert Kuttner: Health Reform’s Day in Court: Don’t Bet the Farm on the Mandate

March 26, 2012

The constitutionality of the Affordable Care Act, the subject of three days of oral argument before the Supreme Court beginning Monday, could well turn on whether the Court concludes that Congress can compel a citizen to buy a commercial product, in this case health insurance. At the heart of the Act is the “individual mandate” which President Obama campaigned against as a candidate, and then turned around and supported as president. The mandate was part of a deal with the health insurance industry, which stopped ferociously opposing the Administration’s bill once it became a source of additional business. The Administration and its supporters contend that requiring people to purchase health insurance is a natural extension of the Constitution’s Commerce Clause. If government can regulate health insurance at all, they say, it can legitimately use a mandate as a policy instrument. The Administration brief contends that the mandate and the prohibition of discrimination by insurers against people with pre-existing conditions are so logically connected that if the Court finds the mandate unconstitutional it must strike down the entire law. Otherwise, large numbers of young and healthy people would “free ride” and wait to buy insurance until they got sick, making the whole law financially unviable. Opponents argue that the mandate represents a new, dangerous, and unconstitutional infringement on liberty. The decision will be treated by commentators as either a huge victory or momentous defeat for President Obama, and either another dangerous over-reach by a right-wing court, or a prudent retreat by the court’s conservatives. But this may be a complete misreading of the logic and the stakes. The individual mandate may or may not be unconstitutional, but it’s dubious policy. And it would not be a fatal setback if the Court did find that it violated the Constitution. The Administration, in my view anyway, has made both a tactical and a Constitutional error in arguing that if the mandate is unconstitutional so is the entire act. If the Court were to strike down the mandate but not the rest of the Act, the insurance industry would be all over Congress to find another way to solve the free-rider problem. As my colleague Paul Starr has demonstrated , that would not be difficult. Instead of being required to purchase private insurance, people without employer-provided insurance or access to Medicaid could be given a choice — either buy affordable insurance through the exchanges, or deliberately opt-out of coverage. But if they opted out, they would be precluded from getting insurance through the exchanges for five years. This use of incentives would be constitutional, and would be sufficient to induce most people to get insurance, but less coercively than a mandate. Starr also proposes that people could pay an annual fee to preserve their right to buy insurance after a waiting period of only a year. The point is that if the best we can do politically is a mixed system such as the Affordable Care Act, there are perfectly good alternatives to a mandate should the mandate be struck down. There is also a delicious irony here. If conservatives on the Court were to decide that a federal mandate requiring citizens to purchase commercial products has no basis in the Constitution, it would usefully doom another favorite conservative project — privatization of Social Security. Obviously, if Congress cannot require citizens to buy private health insurance, neither can Congress use tax dollars to require citizens to purchase commercial pension offerings. At least one very conservative judge has noticed this potential. In his dissenting opinion in the DC Circuit case on the Affordable Care Act, Judge Brett Kavanaugh, widely touted as the next Supreme Court nominee if a Republican is elected president, opined that throwing out the individual mandate might not be such a good idea since it would upend other privatization schemes. [D]espite the Government’s effort to cabin its Commerce Clause argument to mandatory purchases of health insurance, there seems no good reason its theory would not ultimately extend as well to mandatory purchases of retirement accounts, housing accounts, college savings accounts, disaster insurance, disability insurance, and life insurance, for example. This did not get much coverage because Kavanaugh’s odd dissent attracted more attention for its other contentions, including the bizarre claim that a president who thought the Act violated the Constitution could just decide not to enforce it. Readers of judicial tea leaves have noted that one of the High Court’s most influential conservatives, Justice Antonin Scalia, has gone both ways on the issue of the reach of the Commerce Clause. He held that the 1994 Violence Against Women Act was unconstitutionally expansive attempt to regulate commerce, but that the federal regulation of medical marijuana was constitutional. In a 2005 case on marijuana regulation, Scalia wrote: “Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general economic regulation of interstate commerce.” Does this mean that Scalia is likely to side with the Administration in the Affordable Care Act case? More likely, it means that Scalia is one of the Court’s great opportunists, finding constitutional justifications when they support his own policy preferences (no to federal regulation of violence against women, yes to federal suppression of marijuana use.) However, Scalia has undoubtedly read Judge Kavanaugh’s dissent. And he might decide to uphold the mandate lest the Court also block the right’s entire privatization agenda. One further irony: As a little-noticed amicus brief by two organizations and fifty physicians who support national health insurance points out, if the government had simply enacted a single payer program, it would have been beyond constitutional challenge — because government has an unambiguous power to tax and to use the revenues for public purposes. Medicare is a single payer program for the elderly, and nobody challenges its constitutionality. Toss out the mandate, and single-payer might be taken more seriously. Bottom line: If the Court were to overturn the individual mandate, one of the worst provisions of the Affordable Care Act, it would be no tragedy. It might well do some wider good. Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is “A Presidency in Peril.”

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Martha Burk: No More Bull: What Women Need to Know About the Economy and Why it Matters in 2012

March 23, 2012

“It’s the economy, stupid!”  That was the rallying cry for the Clinton campaign in the 1992 presidential election.  It’s even more true today. With the U.S. suffering from the effects of a long and painful recession (I know, I know — it’s technically over) — the economy is the number one issue for women and men alike going into the 2012 elections. But women arguably have a bigger stake. They lost more jobs as the downturn continued (men lost more in the beginning), and have gained far fewer back as employment slowly and painfully inches up. On top of that, women earn less in the first place, hold more forced part-time or temporary jobs, and have fewer benefits. All of that adds up to a compelling reason to understand and pay attention to the economy. And we’re not stupid — we’re just mad as hell — and who can blame us? The temptation is just to vote ‘em all out of office.  Women are the majority of the population, of registered voters, and of those who actually go to the polls — meaning women can control any election.  But voting doesn’t help (and can actually hurt) if you can’t cut through the mumbo-jumbo of political rhetoric to get to reality.  That’s where being “well informed and well armed” comes in.  When you know what to ask of candidates, and which answers mean something and which are just bumper-sticker reasoning, you’ll know where your vote belongs — and where it doesn’t. Go ahead and be partisan — not for a political party, but for your own interests. The Deep Divide — What Can Government Do? What Should Government Do?   When the economy slips into a recession or near-recession as it did in early 2008, both political parties get nervous, and propose various “fixes” to get more money into circulation and stop the downward spiral. (It’s unclear whether they’re feeling the people’s pain, or feeling the pain of trying to get elected in a downturn). Debate over how to produce a healthy economy goes to the very heart of the liberal/conservative philosophical divide. Conservatives put their faith in the business sector and the wealthy, while liberals and progressives believe government has a more direct role. From the day he took office in 2001, President George W. Bush had one solution to virtually every economic problem — tax cuts primarily benefiting the wealthy. His philosophy was a simple-minded version of conservative arguments in general: If corporations and the wealthy individuals who fund them through investments pay lower taxes, they will invest those tax savings in ways that will create jobs, such as building new plants, acquiring new subsidiaries, or expanding product lines. Businesses will direct money to suppliers, contractors and employees to accomplish these goals. Everyone will have more money to spend and the economy will grow. Trickle Down, or Trickle Up?   This theory has been generally referred to as “trickle down,” or “supply side economics,” meaning change made at the top of the wealth pile eventually makes its way to workers at the bottom. Corollaries are that private enterprise is always better than government spending, and the less government interferes in the “free market” through regulation, the better. Liberals and progressives believe that putting money in the hands of those that actually need it to live on is a better plan to keep the economy going — because they spend more of what they have instead of just adding it to investment accounts. Low and moderate income people have to spend it all, every month, just to buy the basics. They hold the principle that in a recession, money should be injected into the economy as fast as possible. Progressives also believe that the government can have a positive influence on economic growth through spending tax dollars. They would create some jobs by repairing infrastructure such as roads and bridges, funding green energy research and development, hiring more teachers, police, and firefighters, and restoring government services that have been cut. Fallout for Women   One big factor in both the rise of the Tea Party and the debate over the debt ceiling that almost shut down the government in 2011 was an attack on public sector jobs and public sector unions.  In addition, federal budget cuts and the lack of tax revenue in the states has contributed to the shrinking of public sector jobs. Because firefighters and police are often exempted from these layoffs, the axe has fallen mostly on women, who make up the majority of teachers, health workers, child care workers, and public welfare workers. An analysis by the Institute for Women’s Policy Research (IWPR), in Washington, D.C. found that women employees lost 81 percent (473,000) of the 581,000 jobs lost in the public sector from December 2008 through July, 2011. Though job growth for everyone is recovering very slowly, it is slower for women than for men. According to the Bureau of Labor Statistics, women have regained only one out of five (536,000 or 19.7 percent) of the total jobs they lost as a result of the recession, while men have gained almost one out of three (1.95 million or 32.3 percent).  In the last year, from November 2010 to November 2011, of the 1.6 million jobs added to payrolls, 474,000 or 30 percent were filled by women and 1,126,000 or 70 percent were filled by men. The Big Argument for 2012   The economy promises to be the most contested issue in the 2012 elections, from the race for the White House to down-ticket congressional, gubernatorial, and even local races. The fundamental differences between the parties, and liberal/conservative ideology, remain as entrenched as ever. Because the “super committee” created by the 2011 Budget Control Act failed to come up with additional cuts in the name of deficit reduction, the law provides for automatic spending cuts (called “sequestration”) of $1.2 trillion to kick in in January 2013, divided equally between defense and non-defense programs. Some believe the committee never intended to come to agreement, because members on both sides believed the threat of automatic spending cuts would be politically advantageous.  Regardless of whether this is true, the issue is likely to dominate the 2012 political debate — and women have the most to gain. Or to lose. This post was adapted from “No More Bull: What Women Need to Know About the Economy and Why It Matters in 2012.”

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David Kiley: Can The UAW Organize Volkswagen In The U.S.?

March 23, 2012

Having failed at its organizing efforts with Toyota, Honda, Nissan and Mercedes-Benz in the U.S., the United Auto Workers has turned its sites to Volkswagen’s growing manufacturing facility in Tennessee for new members. It will be a tough slog for the union. The outcome will be perhaps the biggest single decider on whether the union ever organizes any of the foreign-brand factories in the U.S. Union reps have been in Chattanooga passing out authorization cards the last few weeks, a first step toward trying to get a vote for unionization. It is doubtful that Volkswagen’s management will take the same tack as Nissan to try and defeat the UAW. In past years, when the UAW has tried to organize Nissan’s plants, workers got to see CEO Carlos Ghosn via closed-circuit TV reminding them that Nissan has a lot of options around the world to source new vehicles. Hint, hint: Vote to unionize and we will start phasing out this factory. Volkswagen has a different relationship with unions, especially in its home market in Germany. If workers in Chattanooga look poised to organize, I don’t think it will move the company to short-circuit its expansion plans of the new plant. Chattanooga is critical to VW achieving its sales goals in the U.S. and profitability in this market. But Southern states are not the same as Michigan and the rust-belt when it comes to unionizing. These are markets that were economically devastated long before the rust belt began oxidizing with the failure of the steel companies and before auto and other manufacturing began leaving the U.S. for China and Latin America. These states are largely still in a mode of being grateful for all the new good jobs. And politically, the states are Republican and very anti-union. Tennessee is also a right-to-work state. For those who don’t know what that means, this from the National Right To Work Legal Defense Foundation: “[Every citizen has the right] to work for a living without being compelled to belong to a union. Compulsory unionism in any form–”union,” “closed,” or “agency” shop–is a contradiction of the Right to Work principle and the fundamental human right that the principle represents.” I’ve visited the VW plant in Tennessee, as well as Southern plants of Mercedes-Benz, Honda, Toyota and Nissan. In a few cases, I’ve had the opportunity to hang out with some line workers and talk freely. What I observed is an attitude of gratitude for the work, the opportunity for a career, and the investments in these local areas. It’s a very different atmosphere and attitude than I have observed in northern union plants where you commonly find a lot of third- and fourth-generation union workers who were sold a long time ago on the idea that they could retire at 48 on full pension and benefits, and are frustrated that the game changed on them. I have also talked to union members who have told me about rivalries within factories among unions — with members of one union sabotaging the work of a member of another union as a means of trying to gain extra headcount. Then there are higher-than-average absentee rates among union members at UAW plants, in part because they know the union will make it tough for the company to fire them. VW just announced an additional 800 jobs going into the manufacturing campus in Chattanooga, on top of the 2,700 people, including salaried employees, already there. About 2,200 were hired by VW and the rest are on contract with staffing company Aerotek. How much do they make? Newly hired VW workers earn $14.50 an hour and can make up to $19.50 an hour within three years. That compares with workers at GM UAW plants where the average pay for entry-level GM workers is $17.50 an hour, while veteran workers at GM make an average of $29 per hour. Who are the workers the UAW is after? A lot of them are like a worker I met at Honda’s Alabama plant not long ago who put it this way: “Before I came here I was working two jobs with no benefits, sixteen hours a day, convenience store work. Honda hired me and paid me to learn the job … even sent me to Canada to learn, put me up in a hotel and paid all my expenses. Nobody has ever treated me that way, with that kind of respect.” This guy is not anxious to sign a union card if he thinks Honda isn’t going to like it. There are more like him in Chattanooga. The UAW pitch to VW workers will be higher wages and job security. But the VW workers will be wary. They saw how much the union gave up to GM and Chrysler in the 2009 bankruptcies. “I don’t think the UAW makes a lot of sense down here,” said one VW worker I spoke with who did not want to be identified because of the sensitivity of the issue. “But I will tell you this … I am grateful to the union for setting a good pay-scale. The salary is lower, but it’s close enough for most of us, and we know it would be lower without the union setting the standard.” That will not be much consolation for UAW President Bob King if he can’t make his case in Tennessee. King has seen the union’s membership decline over three decades, and the union is experiencing financial pain. It has added non-auto membership in the form of casino workers, university student-employees, and other groups. But the loss of auto worker headcount has cost it. The union has dipped into its strike fund for normal operating funds and sold assets. If King can reel in one foreign-owned transplant factory, it will make others sit up and take notice. Next up on his radar would likely be Mercedes-Benz’s Alabama plant, which the union has long targeted without success. The UAW has done a lot of good for the working class in the United States. Unions are the last entity standing as a source of power to stand up to the country’s monied class. With a historically high and ridiculous disparity between a CEO’s salary and the salary of an average line worker, the only way to balance the power is through collective bargaining. But the union has also been its own worst enemy, arguing for and winning bottom-line killers like the infamous “Jobs Bank,” where workers were paid for years to do zombie work after their jobs evaporated; work rules that had floor sweepers making as much as skilled labor; and protection of bad workers who would have been fired in any other workplace. Those are the kind of measures and contract victories that loses the union respect from non-union workers and the public at large. Grand Blvd. is a weekly column about cars from David Kiley. For more of his writing, and everything about cars, head over to AOL Autos .

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Martin Varsavsky: The Internet Did Not Sink the Markets a Decade Ago, the Markets Almost Sunk the Internet

March 23, 2012

10 years ago all of us on the Internet were licking our wounds. We had been taken for a crazy ride in which we went from a point in whatever we touch was champagne to whatever we did was shit. As an entrepreneur that lived through 1998 to 2002 I emerged reasonably well, I sold my shares in Viatel when it was worth $1.2bn, I sold Ya.com for $700 million but did not sell Jazztel when it was worth $5bn because I was its CEO and saw it go down to $700M (now it`s worth $1.4bn). Then I lost $50M in Einsteinet one of the best cloud computing start ups in Europe that was killed by the post bubble era in which financing completely dried out. So as you read this post you will see no bitterness. But looking back at 2001/2002 I see this time not as a period in which Internet companies destroyed the financial markets, but as a time in which the financial markets almost destroyed the Internet. It was financiers/analysts who drove those insane valuations up and then down. What should have been a smooth ride on the internet, an era of taking more and more global citizens in its midst, became a crazy ride in which the internet itself gained enormous prestige and was later, for a while, seen as a useless gimmick. Only around 2007 people again realized that the Internet was simply transforming the world economy and was here to stay. And then came 2008, when the financial industry practically destroyed the world economy. That was when the same financial firms did to the world what they had done to the Internet, inflate it and let it fall like dead weight. Having been a happy customer of Goldman Sachs, Morgan Stanley and others I don’t want people to read this post as a rant against financial firms. We need financial firms. But what we don’t need is financial firms to do what they did first to the Internet and then to the overall economy, namely to hype them out of value and sink them hard for no reason. In simple terms what I am advocating has been done before and that is to separate trading from advising. The Chinese Walls in these firms never worked and never will.

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Andrea Sittig-Rolf: Don’t Waste My Time, Strategy Tips For Getting the Sale

March 23, 2012

Contrary to popular belief, the secret to successful sales isn’t necessarily the “close.” While asking for the business is an important and crucial step, sales is a process that requires careful strategic planning. The “close” should be a natural next step in the sales process, not just a question you ask your prospect out of the blue such as “Are you ready to place your order?” Here are a couple of ideas to consider when walking your customers through the sales process so that closing the business is seamless, and the natural next step. A philosophy I live by in my business is “the purpose of a meeting is to get another meeting.” In other words, the purpose of a meeting is not necessarily to close the business, unless you’re in a business where “one-call closes” are common. If your business is like most, it will require more than one meeting, as well as other forms of communication such as phone conversations, e-mail exchanges, and other written correspondence before you actually close the sale. By ending the first meeting with agreeing to the next step with your prospect, you’re ensuring that the prospect is willing to move through the sales process with you. Another key factor at the end of the first meeting is to ask your prospects for a commitment that they will, in fact, respond to you when you follow up. How many times have prospects asked you to follow up, and when you do, they don’t respond to you? Maddening, isn’t it? I don’t know about you, but if the answer to doing business together is “no,” I’d rather know that sooner than later so I don’t waste my time following up with someone who isn’t really a prospect anyway. One way to insure that your prospects will respond to you when you follow up is to give them an “out” if they decide not to do business with you. To do this, after you’ve agreed to the next follow-up step, say something like, “Can I ask you a favor? When I follow up with you in two weeks, if for some reason you’ve decided not to proceed, will you please let me know? There’s a saying in sales that ‘a fast no is better than a slow no’ and if you’ve decided to go another way, that’s okay, just let me know so I won’t waste your time or mine.” Sounds a little bold, I know, but most prospects will respond positively to this because one, it gives them the out they need if they decide to go with another solution, and two, it shows your prospect that you are a busy professional and you don’t want to waste anyone’s time. This technique also works well because suddenly you’re not a desperate salesperson, but rather a confident consultant who has something of value to offer. I’ve found it necessary to practice this technique over the years when coming across prospects who are just too nice to say “no.” As much as we hate to hear “no,” I know you’ll agree that you’d rather hear it early on in the process so you don’t waste time working with someone that’s never going to become a customer anyway. The funny thing is, more often than not when using this technique, based on my personal experience, you will not hear “no” and will actually end up closing the sale. Next, you’ll need to prove your solution doesn’t just show a return-on-investment, but actually creates a profit center for your prospect. For example, if by implementing the solution you provide your customer will invest $10,000 but actually save $15,000 in other operating costs within six months, you can show not just an ROI of six months, but an actual profit (or savings) of $5,000. (Savings can also be viewed as profit since it ultimately affects the bottom line, which is probably the thing your prospect cares about most.) Finally, creating a sense of urgency will help move the sale along through the sales process. Creating a sense of urgency requires your solution to be so compelling that it doesn’t make sense for your prospect to go another day without it. A sense of urgency is created by emphasizing the pain your prospects are experiencing by not having your solution and showing that by comparison, your solution will help. Now all you have to do is show that the sooner your solution is implemented, the sooner their pain will go away, and the next logical step in the sales process will be the sale, but don’t forget to ask for it.

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Emilio Azcarraga Jean: A Mexican trade: More Open Television And Telecommunications

March 23, 2012

Last month brought mixed news for Carlos Slim, the world’s richest man . Mexico’s Federal Competition Commission disapproved an investment by Televisa, the country’s largest television broadcaster, in Iusacell, a cellular phone company. That was good news for Mr. Slim because it hampered a rival to his telecommunications empire. The bad news: The nation’s Federal Communications Commission failed to reach an agreement to clear the way for a third and fourth broadcast television network. Mr. Slim badly wants to get into the television business. Both decisions lock in the status quo, are bad for consumers, bad for Mexico, and bad for Televisa, the company I chair, manage and in which I am the largest shareholder. First things first. While we may have seemed against this in the past, Televisa does not oppose the creation of a third, fourth or even fifth nationwide broadcast TV network. If and when the Communications Commission announces the terms of an auction for additional television frequencies, we will not legally challenge it — so long as the rules create a level playing field for competition. We would also not challenge an attempt for a new television network backed by a U.S. partner, so long as we receive reciprocal treatment in the U.S. Currently, U.S. law prohibits foreigners from owning more than 25% of any television station. We welcome greater competition in the Mexican mass media market, particularly in television, because we think our company is the best, and has been so for over a half century. Before launching new networks, however, it is essential to establish regulations that level the playing field for the telecommunications industry. Otherwise, the future of the broadcast, cable and satellite television business would be severely jeopardized. Mexico’s broadcast TV advertising pie is slightly more than $2.5 billion per year; the pay-TV market is another $2.5 billion. But while 95% of Mexican homes have TV sets, cable television (which we own a large subsidiary in) only reaches 30% of all households. And since U.S. law makes it difficult for us to expand our stake in Univision (the U.S.’s largest Spanish-language network and No. 5 overall), Televisa has to branch out to grow. This is why we made a deal last year with Iusacell, a small mobile operator with a 4% market share, owned by our broadcast competitor TV Azteca (which has roughly 30% of the broadcast TV market). We want to participate actively in the telecommunications market, especially cellphones. Mexico’s mobile-phone market is today worth roughly $15 billion. Mexico’s antitrust agency, Cofeco, blocked our transaction with Iusacell on concerns that two broadcasters joining in a common venture in the telecommunications industry could collude in the mass media market. This has never happened and is not Televisa’s intention. We are prepared to establish firewalls in order to address the agency’s concerns. The antitrust agency should understand that not only is it good business for us to enter the telecommunications market, it is also good news for Mexico. That’s because Mexico’s telecommunications market sorely lacks competition. Companies owned by Carlos Slim control 70% of Mexico’s mobile phone market, 74% of fixed broadband service and 80% of the country’s landline market. According to a recent study by the Organization of Economic Cooperation and Development (OECD), Mexico loses 2.2% of its gross domestic product each year because of astronomically high cellphone rates, low Internet penetration, and mediocre connectivity. Mexico has 10% as many wireless Internet subscribers per 100 inhabitants as Turkey. Its cellular phone rates are by far the most expensive in the OECD. Relative to other OECD countries, Mexico is ranked last in terms of investment in telecommunications per capita; but, says the study, “profit margins of the incumbent nearly double the OECD average.” We welcome competition in television. But Mr. Slim has fought tooth and nail to block competition in telecommunications, and delayed government attempts to regulate his fixed-line firm Telmex and cellphone provider Telcel in Mexico’s courts. The OECD recommends that “Telmex should be authorized to provide television services only when it is subject to adequate asymmetric regulations, and there is evidence that it is complying with them and not resorting to judicial challenges to delay or suspend their fulfillment.” Such “asymmetric” regulations would regulate Telmex more heavily than companies trying to enter the market to make up for Telmex’s market dominance. Mexico is changing for the better. Televisa is too. So should someone with the vision, the talent and the clout of Carlos Slim. Originally published in The Wall Street Journal

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