movie

ProPublica: The Heroes Are Really Zeroes in HBO’s Too Big To Fail

by on May 25, 2011

Huffington Post…

By Jesse Eisinger , ProPublica HBO’s Too Big To Fail — I just caught up with it last night, thanks to HBO On Demand — is extraordinarily revealing about the financial crisis. Only its revelations are almost entirely inadvertent. The movie is set up in the Hollywood conventional way: A gang of misfits, each with a special expertise, is brought together for an impossible mission. There’s Treasury Secretary Henry Paulson, steely eyed at the moment of truth. There’s New York Federal Reserve head Timothy Geithner, the athlete (he doesn’t just jog, but also plays what appears to be squash). And then there’s Federal Reserve chairman Ben Bernanke, the professor with a heart of gold and secret knowledge of the Great Depression. Ostensibly it’s a story of their success against all odds. Michael Kinsley, reviewing the movie in the New York Times , labeled Hank Paulson [1] the “hero” of the account. Except that the movie actually depicts something entirely different: failure upon failure. Too Big To Fail the movie isn’t the story of how the Three Musketeers saved the global economy. It’s a story of how the three didn’t see the financial crisis coming; hadn’t prepared for it; made mistake after mistake as it was cresting; and then, in their moment of triumph, made their most colossal blunder of all. That, it turns out (whether or not Too Big To Fail knows it), is the true story of the financial crisis. How much did Curtis Hanson and the writers mean for that to be the story? Throughout, the characters drop hints about their missteps, but the plot unfolds like a financial “Die Hard,” with our intrepid heroes battling fiendishly powerful forces toward a happy ending. (Full disclosure in this era of transparency: I write a regular column [2] for DealBook, the New York Times section edited by Andrew Ross Sorkin, the reporter upon whose book [3] the movie was based.) Early on, Paulson complains to his staff that they have been behind on everything as the crisis began to emerge. And that’s true! The crisis actually started in the late summer of 2007 [4] . Paulson’s first effort, late that year, was to get a bunch of banks to assemble a giant off-balance-sheet concoction [5] that would save each individual bank’s off-balance-sheet monstrosity. It was a complete flop. In the movie, as bankers and government officials frantically try to save Lehman, Chris Flowers, the private equity investor and banking impresario, is depicted as informing Paulson and Geithner that AIG is teetering on the edge. In their fumbled response, he immediately grasps the truth. “They’re not on top of it,” he tells a confederate. And they weren’t. In real life, AIG had been struggling since the middle of 2007. Paulson and Geithner [6] of course had some inkling of the problems [7] at the world’s largest insurer. But they didn’t prepare for it. In the movie, the chief executive of General Electric, Jeff Immelt, places a terrified call to Paulson [8] saying that GE can’t borrow. GE is standing in for every Real American manufacturing company. We are reminded it makes light bulbs and washing machines. Paulson is shocked that such a stalwart could be having trouble borrowing. The reality, of course, is that GE was more a finance company than a manufacturer and was teetering because it financed those operations with billions of short-term borrowing. It is also true that Paulson, Bernanke and Geithner had no inkling of GE’s troubles until the very last moment and therefore had no plan to deal with it. Plans are, in the movie, almost nonexistent. The team of heroes races from crisis to crisis, as Bond goes from chase scene to babe, eventually stumbling on the evil SPECTRE [9] plot to take over the world. Intentionally or not, the movie is echoing real life. Despite warning signs [10] , Paulson, Geithner and Bernanke had no evident plans throughout the last half of 2007 and the first eight months of 2008. Not for how to resolve Lehman after Bear Stearns’ collapse, not for AIG, not for recapitalizing the banking system. Indeed, they asked Congress for $700 billion to implement the Troubled Asset Relief Plan [11] to buy toxic assets from the banks, and then, without any further discussion, abandoned that idea and injected capital into the banks. Many economists [12] and financial experts had been urging them to do just that, but when they finally hit on that as a solution, it was so poorly thought out that they gave the money to the banks on overly generous terms. This moment is depicted at the end of the movie, and because it is both a triumph in the conventional narrative sense, but also a major mistake by our heroes, it is the

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Jeffrey Korchek: Are Studios Dead?

by on February 17, 2011

While it may be true that in the movie business nobody knows anything, although I imagine James Cameron begs to differ, what about other businesses? Steve Jobs seems to know exactly what we want in elegantly styled electronics products, even before we do and even if they aren’t quite perfect. Jeff Bezos knows how to sell us almost everything we want online — and we thought he’d never make it past books. And how about that guy at Groupon who just turned down $6 billion for a company that didn’t exist 3 years ago and has zero barriers to entry in its business plan — he must know something. Of course, you can forget about Jesse Eisenberg/Mark Zuckerberg — he knows, what, about 600 million somethings. So, what does this have to do with movie studios? Well, it’s possible that the General Motors model of a studio — to paraphrase Alfred P. Sloan, “a movie for every person and purpose” — where one studio and its executives try to make a steady stream of comedies, dramas, genre pictures and those $200 million-plus things that hold up tents, is over. With studios’ high overhead and proven inability to control costs on one hand, and the daily onslaught of new technology that takes their product from them in ways they can’t understand and pays them less per viewing on the other, the very model of a modern major studio may just be dead. It’s a mixed up muddled up shook up world if you’re a major studio; everything that should go up is just going down — movie admissions, cable TV subscribers, and most dramatically DVD sales — while the wrong things — motion picture production and distribution costs, Redbox rentals, internet streaming and Netflix’s share price — all keep going up. Only the steady rise in the average price of movie tickets — up 5% in 2010 over the prior year, keeping box office results flat while attendance fell 5.3%, makes the business seem in okay shape. But, it’s not. Especially if you plot rising ticket prices and falling attendance on the same x:y graph and think about where that ends up. In the past, when studios green-lit their movies, theatrical performance was always the variable with video revenue and cable output deals a given, escalating based on box office gross. But now, with DVD sales down 33% over the past four years and cable networks like Showtime less interested in studio output deals, how can a studio even begin to green-light a movie based on historical revenue assumptions that are unlikely to be accurate 12-18 months later when the picture comes out? The existing major studios are all part of very large corporations, so their continued existence is not in jeopardy. Their corporate parents may get tired of owning them, like General Electric, but a bad movie or a few years of them isn’t likely to put them out of business. And while now nearly everybody can make a movie (but not necessarily get it released) the major studios still do something that other movie companies can’t: produce, distribute and market motion pictures on a worldwide basis, in all possible media and, of equal importance, collect the money. What the major studios don’t seem to be able to do, however, is adapt their current business model to the new world. They’re still making a yearly portfolio of unrelated movies with decision-making done on an incremental basis, paying big participations on expensive star-driven pictures in success (maybe less first dollar gross but then it’s just a participation pool with a minimal or no distribution fee and 100% of video income thrown in), while owning all the failure. While studios can say that financing partnerships lessen their risk, they also lessen the upside, which is what you’re in the movie business for in the first place. It’s possible, then, that the better model is the one practiced by Apple, Amazon and yes, Jim Cameron: do what you do, do it better than anybody else in a way or volume that allows you to exact a premium, build brand loyalty and keep your competitors out. Apple, Amazon, Groupon and the Facebook, despite their different businesses — one sells stuff they make, one predominantly sells other peoples’ stuff, one allows other people to sell their stuff to people who otherwise wouldn’t buy it, and one allows everyone to sell themselves — have something very important in common: a direct relationship with their customers and customers’ affinity for their brand. Studios long ago ceded that relationship. Back when, when people actually went to the movies every week, that relationship existed and studios had individual identities. And they controlled all aspects of the motion picture process — the talent, the production, distribution and exhibition of the pictures and the publicity surrounding them. Those days, of course, are long gone for a variety of reasons: crushing overhead, the Justice Department, technology the studios didn’t control and lack of foresight. The world is a different place, and movies may just have a different place in it. For the large corporations that control the 6 remaining major studios, what is the maximum point of leverage, and therefore revenue potential: producing content or controlling its distribution? With the high cost of producing content, a studio wants to maximize distribution of its product to consumers, but some of the alternatives, Redbox rentals for $1 or unlimited streaming on Netflix for $9.99 a month and whatever Amazon may do generate relatively minimal revenue and commoditize the product that the studios spend so much to make. And here the movie business is unique as the cost of making movies is totally separate from the price at which they’re sold, and increased costs cannot be passed on to consumers. So as a studio you’re torn between getting your content out there in the form that consumers demand while trying to retain some control so you’re not, say, merely providing a loss leader to companies who’s main business is something else, like electronic devices. In the future, fortune will favor the content producers with direct access to consumers, especially in the home and through the electronic devices that serve as extensions of the home — News Corp. which controls Fox and Direct-TV, Comcast with its purchase of NBC-Universal and Disney with its network and cable channels and its brand that guarantees access and Apple in its back pocket (actually it’s the other way around). Warner, which recently spun off Time-Warner cable, has the sheer power of its size. Paramount and Sony are riskier; the former with less connection to the home and the later with a foreign parent preventing ownership of a network (Is it odd that we allow foreign governments to own a good part of our country through Treasury bonds and other investments but we won’t let them tell us what to watch?). Now, don’t let me go all Peter Bart on you but here’s a memo: what the movie business needs is a unified plan and someone to lead it. Where is the movie business’ Steve Jobs, the person who knows what people want to see before they do, knows that giving content away for free on the internet isn’t such a good idea and who creates excitement, brand loyalty and an enduring corporate culture? Or is the development and production process for movies just too attenuated so that what once seemed like a good/clever idea isn’t when it finally gets made and released? And, is it unrealistic to expect that the same group of executives can effectively manage a diverse slate of 20 pictures, year in and year out, especially given the cost of all that? Before, even without enlightened leadership we could count on the intersection of self-interest and money to secure a future for the movie business. But now, with so much uncertainty in the economy, turbulence in the distribution of motion pictures, reduced shelf space for DVD’s at Walmart and maybe no shelf space at Blockbuster, and with the stakes so high because of the costs, there is no safe harbor. While change may be a natural cycle of any market economy, the motion picture business has to be careful to not bring it upon itself. Schumpeter would call this “creative self-destruction.” To avoid this, there must be a consensus among studios, talent and their representatives and unions. The unanimity with which the studios generally approach union negotiations should be brought to bear on distribution windows, technical standards and other forms of distribution, as well as talent relationships, just so long as cooperation stops short of collusion. If a secure future for studios is no longer merely controlling a vast library, it must be controlling the destiny, and exploitation, of their product. And in that, what is the defining relationship? It is the one with the consumer. It’s what Apple has mastered with their products, their stores; their community. It’s what Netflix has done by making its streaming service available on over 100 platforms — truly Movies Everywhere. That’s what studios or their corporate parents need to create and if it’s not through their content, it’s through how that content is delivered to the consumer. Consumer products companies create that relationship through brands, reaching through the retail outlets for their product to consumers. But movies aren’t really brands (and neither are stars; they, like Soylent Green, are just people) — brands offer security, status by association and trust, not to mention premium pricing. Movies are individual products that have one weekend to make a first, and lasting, impression on their audiences. Studios risk their future by ceding the relationship with the consumer to all those who sell their product.

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Jeffrey Korchek: Are Studios Dead?

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Naveen Jain: Manage Your Company’s Online Identity — Or The Competition Will Manage It For You

February 15, 2011

Your LinkedIn profile is diligently maintained, your blog is free of comment spam, and you tell your kids to wipe their Facebook pages clean of party photos. You work hard to maintain control of your personal online identity. But do you give the same attention to how your business is portrayed online? The online identity, or “o-dentity,” of your business can help or hinder its bottom line. Yet, too many executives fail to safeguard their company’s online reputation. If you allow disgruntled customers or bloggers with a grudge to speak out unhindered about your company, rest assured your competitors will pounce on this opportunity to spread the (negative) word. Following are the five most common mistakes top executives make regarding the management of their company’s o-dentity, and some advice on taking control to prevent a downward spiral. 1) Delegating o-dentity and holding steadfast to the “it’s not my job” attitude. Many top executives see managing the link between CEO voice and corporate brand as something their PR and marketing firms do, along with managing a blog and the company’s Twitter feed – that’s why you hired them, right? However, control of a company’s online reputation can no longer be outsourced without further thought — or worse, kicked downstairs to IT and the SEO management team. Noise from the online world is too loud, complicated, and fast-moving to delegate this task. CEOs need to proactively communicate with potential customers or investors in social media outlets such as blogs, Twitter, Facebook, and LinkedIn. If you’re not making a connection between your voice and views as a CEO, and your company’s brand, you’ll become a corporate dinosaur. Think of Steve Jobs and Apple Computer, or Jeff Bezos at Amazon, execs who truly live and breathe their brands. The presence and voice of the CEO is now more important to branding than the right logo, tagline or campaign. 2) Clinging to one-way communication with customers. In the old days (that is, before 2003 or so), you talked to your customers and they didn’t talk back – or at least they didn’t talk back in a way that could result in a crisis in a matter of hours. If customers were unhappy, they called customer service, their problem was solved, and the CSR rep closed the file – end of the story. Nowadays, customer communications has morphed from a one-way street into a multi directional super highway, and CEOs who ignore this fact do so at significant peril. Top executives who are engaged with customers and online influencers on a daily basis can rectify problems before they turn into crises. To get a handle on the dialogue surrounding your company, you need to spend time reviewing the top 10 thought-leader blogs and Twitter feeds covering your industry – don’t rely on summaries from assistants or wait until they tell you about the negative buzz. You and your company should be engaged daily in two-way conversation with the top influencers in your industry, whether these are executives of other businesses or vocal customers. Granted, this won’t be an easy transition for executives who aren’t comfortable with such direct (and possibly confrontational) contact with influencers – it’s easier to deliver a speech and be done with it. Nevertheless, you need to ask questions and listen to what influencers are saying. Don’t talk “at” people — talk “with” them. 3) Underestimating the power of insights from unhappy customers. Building on the last point, not all CEOs are willing to accept the fact that today the power of one voice – that is, a customer – can provide valuable insights on products and services. Before social media changed the world, a disappointed consumer could only tell a handful of other people about their experience. Today, one viral posting about lousy service (like the infamous recording of an AOL member’s argument with a customer service rep) can result in thousands of social media posts or even stories in The New York Times or Wall Street Journal . Learn from Dell’s example of retooling customer service: After getting hammered in the blogosphere about poor response to online customer complaints, Dell created a “social media swat team” that monitored blogs for negative posts about Dell’s products. The posts are routed to this team, which can then quickly respond before the negative post gains traction. And be proactive: Don’t wait for complaints to come in through the toll-free number before you do anything about them – contact unhappy customers before they can negatively influence other customers. Airlines, often roundly criticized for poor service, are getting smarter about fast response to customer problems via Twitter and other social networks. Delta Air Lines now has a special team, @DeltaAssist , that monitors Twitter for passenger complaints. 4) Believing that customers understand the difference between The Wall Street Journal and a blogger. Executives think consumers can differentiate between a respected media outlet like The Wall Street Journal or The New York Times – whose staff are governed by a code of ethics, and whose lawyers ensure reportage is fair and accurate – and a blogger with a few readers who could be backed by your competition. Today everyone with a Internet access can be a “journalist,” regardless of whether they have had training and answer to a team of editors, or simply started a blog using free software. Don’t assume consumers can discern the nuances of journalism – if your customers take bloggers or Twitter users seriously, then you should too. When Sean Parker, an entrepreneur and the first president of Facebook, was concerned at how his portrayal in the movie “The Social Network” was damaging his online reputation, he didn’t just sit still. He reached out to Henry Blodget, CEO of the online business publication Business Insider and a Huffington Post columnist, to tell his side of the story . Thanks to Blodget’s posts, as well as tweets to his 24,000+ followers, Parker was able to present an alternate picture of his life and accomplishments. 5) Sending out inconsistent messages to external and internal audiences. Do you tell customers that you pride yourself on exemplary customer service, then fail to offer them a toll-free number for questions so they can speak with a real person? Do you proclaim your company as an innovator, yet tell your employees that you’re pulling back on R&D? You need to represent the company internally in the same way you do to your customers. Two excellent examples come to mind: Nordstrom and Gilt Groupe . Nordstrom is legendary for its in-store customer service, and has successful extended this experience to the web. Likewise, Gilt Groupe, the discount designer fashion website, projects an image of exclusivity and stellar customer service. Both embrace consistent messaging. There’s no disconnect, because the image is reality. When you make a mistake — like shoe retailer Kenneth Cole did recently by tweeting, “Millions are in uproar in #Cairo. Rumor is they heard our new spring collection is now available online,” — quickly apologize and communicate that the message is at odds with the company’s image, both inside and out. Cole tweeted : “I apologize to everyone who was offended by my insensitive tweet about the situation in Egypt. I’ve dedicated my life to raising awareness about serious social issues, and in hindsight my attempt at humor regarding a nation liberating themselves against oppression was poorly timed and absolutely inappropriate.” Avoiding the “don’ts” above can help you gain visibility into and control of the online dialogue surrounding your company. Remember, if you don’t take charge of your o-dentity, the competition will be happy to do it for you.

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Daniel Dicker: Food Commodity Speculation Adds to Egypt Unrest

January 30, 2011

While the protests in Egypt are politically motivated, there is also little doubt that the rage of the populace there, as well as in Tunisia, Yemen, Algeria and elsewhere, is being inflamed by the huge and volatile increases in basic food prices. While the seeds for huge percentage increases in corn, wheat, sugar, coffee and of course oil are based in some fundamental supply shortages, they have been unnecessarily hypercharged by the influx of investor money, speculative energy and the panic of governments trying to stockpile basic foods and quench the growing hostility of its people. We’ve seen this movie before, in 2007-2008, but it hasn’t looked nearly as bad as this. Massively spiking commodity price inflation, before the global financial collapse, was a far easier problem to find solutions for and contain. Now, with practically all Western governments in the midst of austerity budgeting, less money is available to help Middle Eastern and other emerging nations find adequate and subsidized supplies. But this movie rerun is in widescreen Technicolor: the across-the-board food price increases have never seen this kind of spike before, ever. Wheat is up 75% in the last 12 months, corn up a little more. Coffee is up 85% and cotton a spectacular 140%. While flooding in Australia, a drought in Russia and weak harvests in India and China are the fundamental drivers for this upwards trend, there is little doubt that investors and traders looking to diversify and capitalize on the supply shortages are moving these prices much more significantly and faster. Commodity index investment increased an estimated and whopping $80B dollars last year, bringing total long-only commodity index investment to $350B, according to Barclays. Another $30B of commodity ETF investment is also overwhelmingly long-only, as short commitment in these instruments is normally well under 5% of float. Financial buying of commodities in indexes and ETF’s, with the speed that these instruments operate, overwhelm the futures mechanisms and cause much greater volatility and overall higher prices. We’ve seen this roller coaster ride play itself out once already in oil, moving from 2005-2008 to $147 a barrel, only to collapse to $32 dollars in March of 2009, before re-initiating its upwards trajectory. Whether financial investment in commodities can be absorbed by a free market or not, this kind of boom/bust cycle, now playing itself out again in other critical foodstuffs, is intensely destabilizing and threatens the order in brittle governments around the globe. And governments have been forced to play into this struggle. Increased stockpiling of basic commodities has added to the frenzy of price increases: Algeria and Saudi Arabia have doubled their usual stockpile of wheat, Bangladesh and Indonesia have tripled orders for rice. The mechanism for halting, or even slowing down the massive money flows into financialized commodities is lacking. Small steps on position limits and transparent clearing, mandated under Dodd-Frank legislation, have seen widespread pushback from industry advocates and trading companies. Rules for the energy markets, mandated by Dodd-Frank to be in place and operating today under the Commodity Futures Trading Commission (CFTC), are at least another year away, if they are coming at all. Very little looks to be changing. And with very little changing, we might have to get used to these street scenes in Egypt and other emerging nations elsewhere, as rage from native populations spills over from the spiking prices of simple food basics.

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Daniel Dicker: Food Commodity Speculation Adds to Egypt Unrest

January 30, 2011

While the protests in Egypt are politically motivated, there is also little doubt that the rage of the populace there, as well as in Tunisia, Yemen, Algeria and elsewhere, is being inflamed by the huge and volatile increases in basic food prices. While the seeds for huge percentage increases in corn, wheat, sugar, coffee and of course oil are based in some fundamental supply shortages, they have been unnecessarily hypercharged by the influx of investor money, speculative energy and the panic of governments trying to stockpile basic foods and quench the growing hostility of its people. We’ve seen this movie before, in 2007-2008, but it hasn’t looked nearly as bad as this. Massively spiking commodity price inflation, before the global financial collapse, was a far easier problem to find solutions for and contain. Now, with practically all Western governments in the midst of austerity budgeting, less money is available to help Middle Eastern and other emerging nations find adequate and subsidized supplies. But this movie rerun is in widescreen Technicolor: the across-the-board food price increases have never seen this kind of spike before, ever. Wheat is up 75% in the last 12 months, corn up a little more. Coffee is up 85% and cotton a spectacular 140%. While flooding in Australia, a drought in Russia and weak harvests in India and China are the fundamental drivers for this upwards trend, there is little doubt that investors and traders looking to diversify and capitalize on the supply shortages are moving these prices much more significantly and faster. Commodity index investment increased an estimated and whopping $80B dollars last year, bringing total long-only commodity index investment to $350B, according to Barclays. Another $30B of commodity ETF investment is also overwhelmingly long-only, as short commitment in these instruments is normally well under 5% of float. Financial buying of commodities in indexes and ETF’s, with the speed that these instruments operate, overwhelm the futures mechanisms and cause much greater volatility and overall higher prices. We’ve seen this roller coaster ride play itself out once already in oil, moving from 2005-2008 to $147 a barrel, only to collapse to $32 dollars in March of 2009, before re-initiating its upwards trajectory. Whether financial investment in commodities can be absorbed by a free market or not, this kind of boom/bust cycle, now playing itself out again in other critical foodstuffs, is intensely destabilizing and threatens the order in brittle governments around the globe. And governments have been forced to play into this struggle. Increased stockpiling of basic commodities has added to the frenzy of price increases: Algeria and Saudi Arabia have doubled their usual stockpile of wheat, Bangladesh and Indonesia have tripled orders for rice. The mechanism for halting, or even slowing down the massive money flows into financialized commodities is lacking. Small steps on position limits and transparent clearing, mandated under Dodd-Frank legislation, have seen widespread pushback from industry advocates and trading companies. Rules for the energy markets, mandated by Dodd-Frank to be in place and operating today under the Commodity Futures Trading Commission (CFTC), are at least another year away, if they are coming at all. Very little looks to be changing. And with very little changing, we might have to get used to these street scenes in Egypt and other emerging nations elsewhere, as rage from native populations spills over from the spiking prices of simple food basics.

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Video: Netflix’s Hastings Tells T2′s Tilson to Drop Bearish Bet

December 20, 2010

Dec. 20 (Bloomberg) — Netflix Inc. Chief Executive Officer Reed Hastings publicly asked T2 Partners LLC co-founder Whitney Tilson to stop betting against the movie-rental company. Tilson defended his short-selling strategy in a blog post. Bloomberg’s Julie Hyman reports. She talks with Pimm Fox on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

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Nelson Davis: Small Business Wiki Leaks

December 11, 2010

Conflict is what I feel about the current plight of Julian Assange, the WikiLeaks founder. I’m an advocate for small business and believe that he is a fellow small business owner. On the other hand I’m not sure that his pursuits are business driven. Looking at the various reactions to the systematic leaking of diplomatic cables, I’m reminded of Jack Nicholson’s immortal “You can’t handle the truth” line from the movie “A Few Good Men.” We ask for greater transparency in business transactions and government actions but when the real facts are poured over us like confetti, there is lots of shouting to stop throwing that stuff around. Whatever the political noise around it right now, I do believe that WikiLeaks is a small business and that is my level of interest. How often does a single small business have presidents and potentates plus at least one attorney general talking about its product and its founder? I’d say hardly ever. In looking for their mission statement, the following is taken from their website. “WikiLeaks is a not-for-profit media organisation. Our goal is to bring important news and information to the public. We provide an innovative, secure and anonymous way for sources to leak information to our journalists (our electronic drop box).” Is there a whole new business category emerging here? Maybe it could be called info-war. In this digital era, good people and not so nice folks all have access to the same information and the means to share it widely and instantly. Just about everything we do these days leaves a trail. The old days of exerting power-by-secrecy are gone. As this big world has been made smaller by electronic communications, small events have been made larger because millions of people can read about them worldwide. Almost anything can be monetized and made into a business. The private lives of public personalities have been the raw material for new businesses such as the web sites TMZ, Perez Hilton and others. Corporate America spends millions of dollars per year subscribing to intelligence reports that purport to deliver private information about their competitors and marketplace influences. Is it useful that we have greater access to knowledge about the judging panel of American Idol that we have to information regarding the principal players in the war in Afghanistan? Which one really affects our lives now and in the future? Back to the business of WikiLeaks. Someplace in all this current controversy is probably a person or persons who broke a law by dumping private information onto the servers of WikiLeaks. That is a matter for prosecutors and attorneys to unravel. The revenue model for Wiki seems to be modest cash contributions from people who believe strongly in what Julian Assange and his associates do. A clear and purpose driven mission is the strongest heartbeat and customer magnet that a business can have. Don’t we all want a customer base who anxiously await each product release and who continue to support us through thick and thin. In this case they seem to have even been willing to wage a cyber war in defense of the business. Corporate marketers would do a lot to develop that level of brand loyalty. Being in business means that you face many hard choices. I certainly don’t support anyone breaking laws, but sometimes trailblazers face loud opposition and criticism while operating within the law. Slave owners didn’t exactly celebrate Eli Whitney’s invention of the Cotton Gin. If there was a Blacksmiths of America trade group in 1910, they probably didn’t erect statues of the auto manufacturers. There can be enough static to shake your belief in self or in whatever you are doing. Those people who launch and lead mission driven causes have my admiration. It probably started as a child when I read about Joan of Arc and reached a comic high when Jake and Elwood, in the Blues Brothers movie declared “We’re on a mission from God.” Will WikiLeaks continue in business? Will Julian Assange find himself convicted in either of the world’s most popular crime categories, sex or money? Will his associates or followers create their own leaky organizations? Repackaging information is a growing business and if it comes from a folder labeled secret, it has extra cachet and value in the marketplace. The Genie is out of the bottle and information wars in cyberspace have been engaged.

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David Isenberg: Miles to Go Before the PMC Industry Rests

December 7, 2010

When reading about private military contractors there are two pieces of supposed conventional wisdom to keep in mind. The first, which is especially touted by PMC advocates, is that media coverage of their sector is frequently shallow, inaccurate, incomplete, out of context or wildly sensationalistic. The second is that while there may be problems things are a lot better than they used to be and are getting better yet. Those assertions are, at least partly, true. For example, the tired old canard that private security contractors are just mercenaries in drag is scurrilous and should have been laid to rest many years ago. And yes, thanks to the efforts of legislators, non-governmental organizations, reporters, academicians, lawyers, groups like the Special Inspector General for Iraq Reconstruction and the Commission on Wartime Contracting and even some executive branch officials the overall environment, from an oversight and accountability perspective, is somewhat better. But that is not the entire truth. To paraphrase Robert Frost’s famous poem, “Stopping by Woods on a Snowy Evening,” the PMC industry has promises to keep and miles to go before it rests. As a case in point, consider the remarks made last week by Sen. Byron Dorgan (D-ND), He is Chairman of the Senate Democratic Policy Committee (DPC). He is retiring after 30 years in Congress. On December 2 he addressed the Senate and reviewed the 21 hearings the DPC has conducted on contracting waste, fraud and corruption in Iraq and Afghanistan since 2003. You can see a listing of past DPC hearings here . Sadly, none of the media seems to have covered Dorgan’s remarks. Here is a case where PMC advocates are right; media coverage is lacking. As far as I know I am the first to write on this. But his remarks merit careful reading as they illustrate how far the government has to go before it reaches a level of reasonably effective oversight of PMC. Note that I wrote reasonably effective, not perfect. You can find Dorgan’s remarks in the Congressional Record for December 2, 2010 (Senate)] [Page S8377-S8380]. I recommend you read the whole thing as it is not very long. Here are a few excerpts. I believe I have held 21 hearings as chairman of the Democratic Policy Committee over recent years–21 separate hearings on the subject of waste, fraud, and abuse in contracting in the wars in Iraq and Afghanistan. Much of it still goes on in terms of the work with the Pentagon on this contracting issue. I have just received a letter from the inspector general at the Pentagon, who is looking into one of the issues of the last hearings– the issue of soldiers and contractors who were exposed to sodium dichromate, a chemical that was the subject of the movie “Erin Brockovich,” soldiers who were exposed and not told they were exposed to that deadly carcinogen and some of whom have already died. They were both National Guard and Regular Army soldiers. In the context of doing a lot of these hearings, I have discovered and I believe that throughout the last decade, we have seen the greatest waste and fraud and abuse in the history of this country. It has contributed immeasurably to this overspending and deficits and debt. I wanted to talk about that work we did, myself and my colleagues, over 21 separate hearings. At one of the hearings we held, we had testimony from a man who, in Iraq, was responsible for rooting out corruption in the Iraqi Government. His name was Judge al-Radhi. I have a photograph of Judge al-Radhi. He testified in this country. He testified that in his work as head of the anticorruption unit in Iraq, he found that $18 billion was missing, most of it American money, most of it coming from the American taxpayer. Just missing. Now, why was he here in the country testifying at a hearing I held? Because he got booted out of Iraq, and he got no support from the U.S. Government as he was booted out of Iraq, and he ended up in this country. But he is the person who was supposed to be rooting out and investigating and prosecuting waste and fraud and abuse. His investigations and the investigations of his staff–some of whom were assassinated, some of whose families were killed–show there was $18 billion–$18 billion–missing, and most of it was American money. Well, that is the story about Judge al-Radhi. We had a hearing early on in this process and talked about the issue of contractors and contracting. As you know, in the early part of the war in Iraq and in Afghanistan, money was just shoved out the back door of the Pentagon, hiring contractors, very large contracts, in most cases no-bid, sole-source contracts. A very courageous woman came to testify before our committee. Her name was Bunnatine Greenhouse . She was the highest civilian official at the Army Corps of Engineers, the highest civilian official in the Pentagon in charge of contracting. Here is what she said. She objected to the way the Pentagon was doing these contracts, massive contracts, sole-source, a massive amount of money, and she watched as the normal processes were avoided and ignored. She testified in public: I can unequivocally state that the abuse related to contracts awarded to Kellogg, Brown & Root represents the most blatant and improper contract abuse I have witnessed during the course of my professional career. This is an extraordinary woman, the highest civilian person in the Army Corps of Engineers. She was in charge of contracting. Two master’s degrees, came from a family in Louisiana. All three kids have advanced degrees. Her brother, by the way, was one of the 50 top professional basketball players in the last century, Elvin Hayes. Bunnatine Greenhouse. Remember that name. A very courageous woman, she saw abuses, spoke about it publicly, and for that she lost her career. She gave up her career. She was told: Resign or be fired. Let me talk about what she meant when she said the most unbelievable abuses she had seen in contracting. I want to do it starting small because then I am going to talk about billions of dollars. But at one of our hearings, we had a man who kind of looked like a bookkeeper at a John Deere dealership in a small town. He was kind of a good old guy with glasses, and he had been in charge of purchasing for Kellogg, Brown & Root or Halliburton over in Kuwait, purchasing the things our troops needed in Iraq. He came and testified, and he said: You know, as I was purchasing things, I was told by my employer, Halliburton: Don’t worry what the cost is, the taxpayer pays for this. This is cost-plus. So he told us a number of examples, big examples, but he brought a small one that I thought reflected the entire attitude. This is a towel. I ask unanimous consent to show the towel on the floor of the Senate. The PRESIDING OFFICER. Without objection, it is so ordered. Mr. DORGAN. This is a towel. Halliburton was to purchase towels for the troops, hand towels. You know, they were purchasing hand towels to be awarded to the troops. So he ordered some white hand towels for the troops, and his boss said: Well, you can’t order those white hand towels. You have to order the hand towels that have the logo of our company, “Kellogg, Brown & Root,” on the hand towel. Mr. Bunting said: Yes, but that would quadruple the cost. His boss said: That doesn’t matter. This is a cost-plus contract. Order the towels. Put our company name on them. I mean, this is such a small but important symbol of the behavior that went on for most of the decade that fleeced the American taxpayers. … We heard from witnesses about the Parsons Corporation, which got a $243 million contract to build or repair 150 health clinics in Iraq. Two years later, the money was all gone, and there weren’t 150 health clinics, there were 20. I had a doctor, a very brave, courageous physician, come to this country to testify to what he saw of the ones that were completed. Unbelievable. So what happened to the money? The American taxpayers lost the money. Did this improve the health of the Iraqis? The physician who came to testify said he went to the Minister of Health in Iraq and said to the Minister of Health: Where are those clinics, because I am told the Americans have spent $243 million to build health clinics. Where are the clinics? The Iraqi Health Minister said: Well, most of them are imaginary clinics. Yes, but the money was not imaginary. The American taxpayers’ money is gone. We had several hearings on the issue of Kellogg, Brown & Root. And I mention them because they got the biggest contract, sole-source contract. That is why they are the ones that are mentioned the most. They were providing water treatment to the military facilities in Iraq. So our solders are in military camps in Iraq, and KBR gets the water treatment contract. It turns out that the nonpotable water they were providing to soldiers in the camps that we had a hearing on was more contaminated than raw water from the Euphrates River. We actually had, from a whistleblower, the internal memorandum from Kellogg, Brown & Root, by the guy who was in charge of the water contract in Iraq, and in his memorandum, he said this was a near miss. It could have caused mass sickness or death. But publicly, they said it didn’t happen. The Defense Department said it did not happen. But it did happen, and I asked the inspector general to investigate it. He did. He did a report and said that both the Defense Department and Kellogg, Brown & Root were wrong. It did happen, in fact. That kind of contaminated water was being served to the troops because the contract was a contract that was not provided for appropriately by the company. The company was taking the money and not doing what it was supposed to do with the water. By the way, in the middle of these hearings, while the Department of Defense, Department of the Army, as well as Kellogg, Brown & Root were denying it all, I got an e-mail here in the Senate from an Army doctor, a captain, and she wrote to me and said: I am a physician in the camp. I had my lieutenant follow the water line to find out what was happening because I had patients here who showed that they were suffering diseases and suffering problems as a result of contaminated water. So that came from the physician who was in Iraq on the ground. So despite all of the denials, the inspector general finally issued a report saying: No, no, the Defense Department was wrong, as was Kellogg, Brown & Root. A contract to provide water to these soldiers across Iraq at the Army camps was not being appropriately handled, and very contaminated water was going to those camps. The list is almost endless. I know there is a photograph I have shown on the floor previously because it is another contract to provide electrical capabilities to the Army camps. When you put up an Army camp, you have the need to provide electricity. And I held two hearings on this subject. This is a photograph of SGT Ryan Maseth–quite a remarkable young man, a Green Beret from Pennsylvania. He is shown there with his mother, who is a very courageous woman as well. He was killed in Iraq, but Sergeant Maseth wasn’t killed by a bullet from an enemy gun; Sergeant Maseth was killed taking a shower. He was electrocuted in a shower. And it wasn’t just Sergeant Maseth; others lost their lives as well–electrocuted in a shower, power-washing a Jeep. The fact is, what we discovered when we held the hearings was that the work that was done to provide electricity and to wire these camps was done in some cases by people who didn’t have the foggiest idea what they were doing. Third-country nationals who couldn’t speak English and didn’t know the first thing about electricity were working on these issues. The Army originally told Mrs. Maseth that her son died, they thought, because he took an electrical appliance into the shower. No, he didn’t. He was killed because shoddy electrical work was done that ended up killing this soldier. Now, Kellogg, Brown & Root denied that, as did the Defense Department. The inspector general did the report and said: Oh, yeah. Yeah, that sure did happen. In fact, let me show you what the inspector general has said. This is from Jim Childs, master electrician hired by the Army Corps of Engineers, to inspect this electrical work for which the American taxpayer paid a bundle. Jim Childs, master electrician, went in after I held the hearings. He said: [T]he electrical work performed by KBR in Iraq was some of the most hazardous, worst quality work I have ever inspected. Let me show what Kellogg, Brown & Root said: The assertion that KBR has a track record of shoddy electrical work is simply unfounded. The inspector general did the inspection. We had to redo much of the work in Iraq and Afghanistan, inspect it all and redo much of it. In the meantime, people died. We have demonstrated that there is evidence of shoddy work in a range of areas. Yet the contractors continue to be given additional contracts. For the shoddy electrical work for which some soldiers gave their lives, this contractor was not only given the money from the contract but bonus awards for excellent work. I have tried very hard to get the Pentagon to take back those bonuses, unsuccessfully. But the reason I am going through this is to point out that we have for a decade now been shoveling money out the door at a time when we are deep in debt, spending a great deal of money on the defense of this country, on the Defense Department, on the war effort, and so on. A substantial portion of that which goes out the back of the Pentagon in the form of contracts has represented the most egregious waste in the history of the country. … I started by talking about the issue of sodium dichromate. We think about 1,000 soldiers were at risk at a place in Iraq that is called Qarmat Ali. Some have died. Those soldiers who were at Qarmat Ali told of seeing something like sand blowing all over the place. It was red, however. That was the sodium diechromate, a deadly carcinogen. It is the subject over which a movie was made called “Erin Brockovich.” We have tried for a long time to get the Pentagon to be as active and involved as they should be with respect to the health and safety of those 1,000 soldiers who were potentially exposed. Like most of these issues, they have been very slow to respond. My point is twofold. One is about supporting America’s fighting men and women, doing what is right for them. There have been a number of people in the Pentagon–one of whom testified before the Armed Services Committee in the Senate and who I strongly believe knew he was not telling the truth. He was a general, as a matter of fact. There have been a number who have denied virtually all of these circumstances. Yet inspectors general have investigated and said they are wrong. Obviously, the contractor denies these things. The contractors have gotten wealthy doing this. We have had whistleblowers come in. A woman came in and told us she was working at a recreational facility in the war theater, and that is at the base. There is a facility where you can play pool and ping-pong and do various things. It was a facility with many different rooms. She worked for Kellogg, Brown & Root and she was to keep track of how many people came in because they got paid based on how many people came in. She said: What they told me to do was to keep track of how many people came in to each room, and that is what we billed the government for. If somebody came in and went through three rooms, the government was billed for three visits. I went to the people in charge and said: This is fraud. We can’t do this. We are defrauding the government. They immediately put me in detention in a room under guard and sent me out of the country the next day. It is the story of virtually all the hearings we have held. … This has been an abysmal record. In this decade, the amount of money spent on contractors–in many cases with no-bid, sole-source contracts that were negotiated under the most abusive conditions and in violation, in many cases, of rules, according to the highest civilian official in charge of contracting–has been a disgrace. This country needs to do much better. The work I and a number of my colleagues did holding these hearings has in many ways held up a spotlight and tried to shine it on the same spot. We have cajoled, embarrassed, and pushed, and I think we have made some progress. But so much more needs to be done and can be done.

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Charles H. Green: The Best Movie You Haven’t Heard of: Inside Job

November 22, 2010

Here are the ratings (% who liked) from Flixster for some of the movies playing this weekend: 90% The Social Network 88% Inside Job 81% Unstoppable 78% MegaMind 78% Jackass 3-D 77% Red 75% Skyline 65% Due Date 65% Morning Glory 64% The Next Three Days 54% Saw 3D You know The Social Network. But how about the #2 movie, Inside Job ? Ever hear of it? 96% of the critics liked it. Rotten Tomatoes rated it 96% . It’s narrated by Matt Damon. Feeling out of the loop yet? Why haven’t you heard of this movie? More on obscurity later, but here’s the official synopsis: ‘Inside Job’ is the first film to provide a comprehensive analysis of the global financial crisis of 2008, which at a cost over $20 trillion, caused… ‘Inside Job’ is the first film to provide a comprehensive analysis of the global financial crisis of 2008, which at a cost over $20 trillion, caused millions of people to lose their jobs and homes in the worst recession since the Great Depression, and nearly resulted in a global financial collapse. Through exhaustive research and extensive interviews with key financial insiders, politicians, journalists, and academics, the film traces the rise of a rogue industry which has corrupted politics, regulation, and academia. It was made on location in the United States, Iceland, England, France, Singapore, and China. There has been no shortage of books and articles about the meltdown. But most of those have had a reporter’s flavor to them–here’s what happened, then here’s what happened next. I felt that no one had really pulled it together with a narrative theme and the data to back it up. Until this weekend, that is. The theme is now not just clear, but tight. Bad things happened. They were not an accident. They were the results of bad people behaving badly. They knew what they were doing. They did them anyway. And to this day, they refuse to acknowledge responsibility. Think of this movie as what Michael Moore would produce if he had a PhD in economics and a career as a Federal Prosecutor. It’s the project of Charles Ferguson , who in fact does have a PhD in political science from MIT (he has also consulted to the White House and the Department of Defense, was a Senior Fellow at Brookings, and a member of the Council on Foreign Relations). You may know Ferguson as the director of No End in Sight , a powerful documentary about the Iraq war. He’s confident enough to interrupt an economist and say , ‘You can’t be serious about that. If you would have looked, you would have found things.’ Or to tell a former Bush administration under-secretary of the Treasury, “Forgive me, but that’s clearly not true.” Here is a review by A.O. Scott , in the New York Times. Boston.com calls it “a masterpiece of investigative nonfiction moviemaking — a scathing, outrageous, depressing, comical, horrifying report on what and who brought on the crisis. Here’s Kenneth Turan’s review in the LA Times. Go see for yourself; see the trailer here . The Role of Ideology in the Meltdown There’s much to say about this documentary; I’ll limit my thoughts to just one–the role of ideas in the meltdown. In this day and age of neuro-explanations and insistence that only measurable behavior is relevant for management, the role of ideas gets pooh-poohed. Big mistake. I’ve written before about the power of strategic doctrine taught in business schools to negatively influence our general business thinking. But after seeing this documentary, I’m newly persuaded. Ideas have huge power: especially when those ideas happen to greatly serve the economic interests of patrons. In the pharmaceutical industry, it’s become well accepted that a researcher or writer who takes money from a drug company is at the very least subject to rules of disclosure. Failure to do so constitutes an immediate presumption of conflict of interest. Yet somehow, we have never held our nation’s leading economists and business school faculty to the same standards. One of the most eye-opening aspects of Inside Job for me was to put this issue front and center. Some of Fergusons’ hardest-hitting interviews are with the elite heads of academic institutions: Frederic Mishkin , a former Fed governor, now at Columbia Business School; his boss Glenn Hubbard , chairman of the Council of Economic Advisers under George W. Bush; John Campbell , Harvard’s economics department chairman; and fellow Harvard economist Martin Feldstein . They come off, respectively, as incompetent, blustering, inarticulate, and smug. None of them seem to have noticed a disconnect between their laissez-faire ideas and the disasters engineered by those who quoted them; much less any sense of impropriety at the comfortable financial relationships they shared with those very firms. Somewhere there is a researcher at Harvard Medical School screaming at the injustice of his not being published in NEJM because of some disclosure requirements, while his academic counterparts in business and economics were happily and openly opining on the health of the Icelandic banking system and the liquidity of the US subprime mortgage market, all the while getting very well paid . (Note: b-school profs provide functional consulting services to companies all the time; I don’t see that as an issue. This is vastly different; more another time). Results of the Meltdown Ferguson touches clearly, albeit briefly, on one enduring outcome of this decades-long debacle–the increased gap in the US between the haves and the have-nots. In 1976, the richest 1% of Americans had 9% of the income . Now they have 24%. From 1980 to 2005, 80% of the gain in income went to the top 1% . Guess what industry disproportionately accounts for that gain? But the most significant casualty, I think, is a great old American belief: the belief that you can make it here in the good old USA, land of opportunity, where anyone can be what they want. You don’t have to be limited by the circumstances of your birth, like in all those Old World countries. Sorry: no longer true. By one study , it is harder for someone to get ahead now in the US than it is in Denmark, Australia, Norway, Finland, Canada, Sweden, Germany, Spain, and even France. Only Italy and the UK are more class-bound, and I’ve seen other studies where even the Brits are less sclerotic than we are. That decline in opportunity is another result of greater income disparity. Again, one of the legacies of the financial industry. You may disagree with a lot of what I’ve said here. You may think this movie won’t change your mind; and since it’s extremely hard to change people’s minds, you may be right. But if so, may I suggest you owe it to yourself to see it–if only to write back and point out the flaws in the movie.

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Mastin Kipp: ‘The Social Network’: 13 Lessons Entrepreneurs Can Take Away

October 15, 2010

I’ve seen “The Social Network” twice and plan on seeing it again at least two more times. I am taken by this movie. It took me about a week to understand consciously why. There is so much jammed into this film that it’s hard to take it all in in one sitting. Ever since I walked out of the movie on opening night, I have been more inspired than ever to continue my entrepreneurial path in technology, media and textiles. As an entrepreneur watching this film, here are the lessons I see from watching “The Social Network”: 1. Sometimes there are more important things in life than school. As a college dropout myself (I dropped out during my junior year at USC), there has always been a little voice telling me I did the wrong thing. I’m not bashing education; I’m just saying that the system as is isn’t for everyone. Bill Gates and Mark Zuckerberg both left college to pursue their dreams and went on to establish Microsoft and Facebook, respectively. Here are some other surprising billionaire college dropouts: Steve Jobs (Apple), Paul Allen (Microsoft), Ralph Lauren (designer), Michael Dell (Dell Computers), Kirk Kerkorian (Vegas entrepreneur), Barry Diller (IAC) and many more. People like Richard Branson (Virgin), Walt Disney, Milton Hershey (Hershey Chocolate), Coco Chanel and Henry Ford didn’t even go to college. The lesson here is that being pulled by the inspiration of a big idea within you is more important than doing what the “system” tells you to do. My advice is to follow your dreams, and as you go along, surround yourself with the smartest and most talented people you can find. I personally chose my education to be the act of having a business instead of learning about it in school and then having no real-life experience at graduation. I wanted a head start at the experience of having a business instead of just knowledge about business. Obviously this isn’t true for all professions. If you want to be a doctor, for example, school is a must, but for budding entrepreneurs with big ideas, school can be a dead-end choice. Dropping out of school is a big risk. You have to to have a major belief in yourself and the determination and persistence of a warrior. It’s not an easy path, but for people like me, it’s the only path. You can always go back to college later in life after having gained so much from your life experience in the real world. 2. It’s not about who has an idea but who can execute it. There’s a phrase that says, “There are no original ideas.” Also, a lot of mystics, saints and sages believe that all human beings are tapped into the “Universal Mind” and that we all have access to the same ideas and inspiration. It’s all about who is listening and who has the chops to pull it off. Aaron Sorkin, the writer of “The Social Network,” has said that no one knows the exact truth of what happened between Zuckerberg, the Winklevai and Saverin. But the truth is in the outcome. Facebook happened because Mark Zuckerberg had the chops, the confidence, the vision and the discipline to make it happen. So if you have a big idea, you should know that you probably aren’t the only one. Your job is to get busy making it happen. Look how fast Zuckerberg created and put Facebook online. It wasn’t years of slaving away; it was weeks of hard work to create the first version — the most important weeks of his life. 3. Change can happen fast. The phase “from idea to execution” doesn’t have to be forever. Zuckerberg is living proof that with enough vision, talent and hard work, you can change your life in the blink of an eye. If you have an idea, don’t wait on it. Throw yourself into it. Ideas, once executed, have a way of pulling you up out of your current circumstances and elevating you to a whole new level of living that you were never aware of before. Enough lollygagging; start now. Half of me understands why Eduardo Saverin’s stake in the company was reduced when others’ weren’t. The other half feels that Mark betrayed him as depicted in the film. That being said, the guy did move to New York and stay in school as Facebook was blowing up. Mark took action. He moved to Silicon Valley, dropped out and dove into his passion. If I were Mark, I’d feel like my partner had abandoned me and that although he had contributed to the beginnings, he wasn’t showing up when I needed him most. The lesson here is that in any relationship, business or personal, if you want it to blossom, show up. Your time, presence and attention are valuable commodities. 5. Figure out how to be of service. Facebook’s popularity and quick rise has nothing to do with Mark Zuckerberg’s programming chops. He could have easily programmed a million different sites. But the site he chose to program provided so much value to the users that the product sold itself through the strongest way possible: word of mouth. Facebook unites us. Facebook allows us to express ourselves. It helps us keep in touch with the world and our loved ones. Sometimes, Facebook even helps us get laid. That’s being of service. If you want to rise in your business endeavor, figure out how your product can solve problems and be of service. This is the key to your success. Everything else is just details. 6. Content and community first, revenue second. I am totally inspired by Zuckerberg’s decision to not go for ads in the beginning. One of the best lessons in the movie is that if you have something cool, don’t sell out too quickly. Yes, we are all entrepreneurs and we want to make a buck, but Sean Parker’s analogy of having all the little fish versus the big fish is correct. Keep the bigger vision and shoot for the big fish. Keep your product cool. Put out the best content, build a large community of trusted consumers and users. If you focus on that, the numbers will organically grow. And then, as my partner Malcolm CasSelle says, “where traffic grows, revenues will follow.” Put content and community first. Revenue will come. 7. Visualize success as your final result. One of the great things about “The Social Network” is that from the beginning, you know that success is on the other end of Zuckerberg’s efforts. That gives a wonderful perspective for the viewer, because we know that no matter what struggles he went through, the end result was success. This is a great view to take on your life. No matter what struggles you have in your life, see it all working out and that success will be your end result. It might work on idea one or idea 10,000, but the important thing is to keep success in mind and know that is how your story will end if you choose it to be. 8. When you have a great product, money finds you. When you’ve created a great product that gives great value and is of service to your consumers, they will tell their friends. If you keep delivering the same high level of value and also constantly improve the value you are giving, money will find you. Money will find you from your consumers as well as your investors. Investors want to invest in companies with momentum and a story. Because of the Internet and relatively low costs and barriers to enter into many businesses these days, investors want more than an idea. Consumers can’t buy an idea; they can only buy hard goods and services. Focus on making the product as amazing as possible and it will begin to sell itself. Let money chase you; don’t chase the money. 9. Sex is fun but can hold you back. In ” Think and Grow Rich ,” one of Napoleon Hill’s main reasons why men are successful later in life is because they spend their early years chasing tail. Your creative energy can be used up with too much sex and dating. Entrepreneurs should cherish their creative energy the same way they would cherish an angel investment. Focus on your business and love will follow. 10. Not getting what you want can be a blessing. Along the same lines as number nine above, sometimes we are meant for greater things. Imagine what would have happened that fateful night if Mark Zuckerberg had gotten the girl. It’s quite possible that Facebook wouldn’t exist. Many times, creativity is born in the anger of rejection. See the events of your life as playing out perfectly, and if you aren’t getting what you want, try to detach and see the bigger picture. From now on, see not getting what you want as a gift from the universe that leaves room for something much greater to enter. And don’t sit around and mope; get creative! Make something happen. Use that “poor me” energy and dive into your creative mind. Who knows, that one person rejecting you could be the start to your own multi-billion-dollar, world-revolutionizing venture. 11. Focus, young Jedi. I love how after getting an inspiration for Facebook, Zuckerberg totally dove into the creation of it. He was so focused and dedicated that he changed his life forever in less than a month. How many of us can say that? If you have a great idea that lights you up, don’t fear what will happen if you focus all your energy on that. What we think about expands; what we focus upon expands — focus on your idea! Give yourself over to it and let the journey of following your idea take you into a wonderful and brand new land. You can be sure that on the other side you will be a stronger and wiser person. Don’t take your ideas lightly. Cultivate a burning desire to make it happen, yesterday. Time waits for no one. Get busy getting busy. The universe respects focused and bold action. You’ll be surprised how much progress you can make when you focus on one thing at a time. 12. Not everyone is going to be happy with you. You are going to ruffle some feathers if you want to fly. Since no one knows what really went down, it’s hard to draw a real conclusion about the morals of everyone involved. But the fact remains that to be successful, you need to develop an energy shield that reflects the negativity that you will certainly encounter as you rise. When you stand up and begin to shine, you become a target. Shine on anyways. Who gives a damn about the negative opinion of others. Get used to critics and haters. Sometimes they have really good things to say and can help you grow. Remember that your haters are still watching you and are most likely your number-one fan. I heard a statistic that over 50 percent of Howard Stern’s audience back in the day hated him but tuned in to hear what he would say next. They might hate him, but who’s laughing all the way to the bank? 13. Don’t screw over your friends. Money changes people. Don’t be that person. Make your friendships way more important than money. Money comes and goes but friendships are priceless. You don’t want to be the person who is sitting on top of the money pile all alone. Put the top value on building strong relationships and less value on money. Amazing people and love are priceless. Don’t take these very precious resources for granted. They make life worth living.

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David Spencer Seconi: Rattner’s Case Just Another Chapter in a Frightening New Trend

October 14, 2010

Probably not the person the White House wanted to see in the news — Steven Rattner, the individual once in charge of Obama’s initiative to overhaul the auto industry, was reported to have agreed to a $5 million settlement and a partial ban on participating in the securities industry. The story of Mr. Rattner is quite striking. Worth hundreds of millions of dollars, founder of the powerful Quandrangle Group and long-time industry insider, Mr. Rattner certainly had everything that one could have wished from a career in finance. Yet, these most recent charges are not the first time he has been caught pushing the boundaries of ethical behavior. After being promoted to the job of auto industry overseer, it was revealed that Rattner had been an investor in the hedge fund powerhouse Cerberus, which had significant stakes in Chrysler and GMAC. At the same moment, the S.E.C. and New York State Attorney General Andrew Cuomo were investigating a case involving Rattner’s alleged “pay to play” deals with the state’s pension fund. Pension funds are massive organizations that require the services of highly skilled financial professionals in order to meet their annual goals. The boards that run the funds will often hire independent advisors to help management the fund’s assets. Yet, the fairness of the selection process can be undermined in two ways, both of which are often referred to as “pay to play”: First, independent advisors looking to gain access to these funds may bribe the elected officials in order to skew the selection process. Second, these board members may require under-the-table contributions as a prerequisite for the advisors to work for the fund. The recent rise in pay to play schemes has touched pension funds around the country, most famously CALPERS, the California behemoth that admitted to working closely with such insiders. They were forced to settle with prosecutors for a crippling $895 million in 2008 and recently announced that they were severing ties with a different private equity group, Pacific Corporate Group, after the group’s recent settlement with Cuomo. Things have not been pretty for the $125 billion New York pension fund, either. Alan G. Hevesi, the former state comptroller, pleaded guilty just last week for steering money to an organization that had contributed to his campaign. David Loglisci, the former chief investment officer, pleaded guilty last March on claims that he often conceded control of the fund to Mr. Hevesi’s top political officers. The problems for Mr. Rattner began in 2004 when, upon hearing that pay to play was common industry practice, he reached out to Mr. “Hank” Morris, Mr. Hevesi’s top political advisor, and soon Quadrangle became the happy recipient of a cool $100 million from the pension fund. Afterwards, it was revealed that Rattner had been involved in the distribution of a film made by the brother of the fund’s chief financial officer, a clear conflict of interest. When the movie allegations first arose, Rattner was accused and later acquitted following information supplied to prosecutors claiming that he was in no way involved in the movie’s distribution. Soon after, however, information surfaced that contradicted these claims, and Rattner was brought back into court. Yet, the consequences of this behavior are very marginal in the scheme of things. A $5 million fee for a man worth hundreds of millions is certainly not the message that the S.E.C. should be sending to others who engage in this elicit behavior. While securities fraud in the past has often been a game played with rich people’s money, investment firms have been creating ever more elaborate schemes in the pursuit of squeezing profits out of the average individual (think the most recent mortgage crisis). Playing with pension funds, however, is much more dangerous, and the recent rise in pay to play settlements should send a clear warning signal not only to the federal government, but to those putting their money in these organizations. The incentive for investment firms to enter the market is clear, as public pension plans alone hold approximately $2.9 trillion in assets. Yet, workers place their complete trust in these organizations to do what is right with their money. When pension funds are caught up in the scandals, it is not the embarrassment of the funds that should be making headline news, but rather the fact that they are playing with future security of millions of workers. Unlike the mortgage crisis, where many individuals bought outside their means and failed to read the fine print, pension funds become embroiled in conflict of interest scandals without ever consulting those from which they take money.

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Eric J. Weiner: Lockerbie Bomber Case Exposes the Money Gun in the Global Economy

October 1, 2010

Once again our leaders in Washington are missing the point. This week the Senate Foreign Relations Committee held hearings on Scotland’s decision last August to free the convicted Lockerbie bomber, Abdel Basset Ali al-Megrahi. The hearing followed a fact-finding mission to Scotland by a Senate staffer that raised more questions than it answered. Powerful senators such as Charles Schumer, Barbara Boxer, Diane Feinstein, and Frank Lautenberg have decried the fact that British Petroleum in particular lobbied the U.K. government to free Megrahi so it could gain access to Libyan oil fields. And the topic has been front-and-center in America’s interactions with the U.K. and new British Prime Minister David Cameron. Obviously there are political benefits to all this tough talk from our elected officials since it’s bound to be popular with constituents of varied ideological stripes. But the problem is this grandstanding is largely a waste of time and comes at the expense of much larger issues that are crucial to America’s long-term prosperity. Rather than reexamining this one incident, Congress and the Obama Administration should be looking at the bigger picture and trying to figure out how the world has been transformed in ways that made Megrahi’s release all but inevitable. And they also might want to begin exploring what America can do to remain a relevant force in the face of these unstoppable changes. Because like it or not, the U.S. will be grappling with similar questions before too long. Megrahi, a Libyan national, was convicted in January 2001 of carrying out the 1988 Lockerbie airliner bombing over Scotland. He was sentenced to life in prison. So naturally the expectation was that he would never breathe the air as a free man and would eventually die in prison. Although the decision was hailed as justice throughout much of the West, in parts of Europe, and the Middle East there were serious questions about the veracity evidence presented and the overall fairness of the trial. For its part, Libya consistently believed that Megrahi was an innocent patsy. The country’s leader Muammar el-Qaddafi vowed to see him freed. And to accomplish this, Qaddafi planned to utilize Libya’s most potent weapon, the nation’s growing economic ties with the U.K. Libya brought up the Megrahi situation at just about every trade conversation with U.K. officials. But in 2007, with Megrahi still behind bars, it started applying serious pressure by threatening to pull out of an oil exploration deal with BP. In response, BP began lobbying U.K. government ministers for Megrahi’s release. BP’s pushing apparently worked because, lo and behold, last August the Scottish government finally freed Megrahi. Scotland’s ostensible reason for the decision was “compassionate grounds” because Megrahi was stricken with terminal cancer. The ruling was made after doctors examining Megrahi determined that he had just three months to live. To the Scottish government, holding Megrahi violated the nation’s sense of compassion because he was literally sitting on death’s door. However, despite that grim prognosis, Megrahi is still alive today at his home in Tripoli, more than a year after gaining his freedom. He is now the longest surviving prisoner ever freed by Scotland on compassionate grounds. Since his release, his doctors have questioned whether they should have stated so emphatically that he only had three months to live. And his case has taken on a broader meaning as a symbol of shifting power dynamics around the world. I mean, does anyone seriously think that if Megrahi was from a poor African nation like Rwanda or Senegal instead of Libya he would’ve received such compassionate treatment? But even with all of the obvious questions about Scotland’s decision, there’s really no need for the U.S. to spend time and money “investigating” any of this. The facts are right there on the surface and have been all along. BP publicly admitted that it lobbied for Libyan prisoner exchange in a statement issued last year and again in July. BP readily acknowledges that it told the British government that this prisoner’s continued imprisonment “could have a negative impact on U.K. commercial interests, including the ratification by the Libyan government of BP’s exploration agreement.” Meanwhile, British and Scottish government officials have vociferously denied that the drilling deal was a key part of the ultimate decision. And they’re right. The Megrahi case always was about much more than oil. It was about money, too. Over the past few years Libya and other oil-rich Arab states have poured capital into the U.K. economy. In February 2010, just six months after Megrahi was freed, Libya’s $70 billion sovereign wealth fund unveiled plans to assist Britain by investing $8 billion in U.K. businesses and real estate. Libya also has relocated LIA’s offices to London with plans to invest heavily in the U.K. economy. But that’s not all. Scotland also was pressured to release Megrahi by the government of Qatar, another significant contributor to the U.K. economy. Qatar recently bought Harrods department store for more than $2 billion, is developing the $3 billion Shard London Bridge, which when completed will be the tallest building in Europe, and owns substantial stakes in the British bank Barclays, the supermarket chain J. Sainsbury, and London’s Canary Wharf financial district. With all of this cash at stake, is it any wonder that Scottish officials found a way to satisfy Libya? Essentially the U.K. had a money gun held against its head until it signed the papers. Remember the famous line from the movie The Godfather : “Either your your signature or your brains will be on that contract.” Same thing here. The trouble is Britain is hardly alone in this predicament. Over the past few years, as Western nations have battled repeated brutal financial crises, the strength of the global economy has shifted. Today, newly wealthy countries are using their economic might to assert themselves geopolitically. And what has emerged is a global shadow market where much of the world’s liquidity is being provided by wealthy foreign governments that may have political agendas beyond investment returns. In the U.S. we see this transition most clearly in China’s ability to ignore direct pressure from the Obama administration to revise its currency policy, which undervalues the renminbi in order to boost Chinese exports. But it’s also visible in China’s foot-dragging on a host of other global issues, such as human rights and environmental degradation. America may be considered the world’s sole superpower. But it owes so much money to China that it no longer can dictate terms. Instead it has to try to coax its rival to the table before the real conversations can begin. Looking at the story behind Megrahi’s release, it’s clear that the challenges we face are much more complicated than our political leaders realize or are willing to acknowledge. The question isn’t whether BP pushed to have a convicted murderer freed. It did. And it isn’t whether the U.K. caved in to financial pressure to free a convicted murderer. It did. Instead, the question is when will a foreign government point its money gun at the U.S.? And when it does, will America be powerless to stop it?

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Tom Donohue: We Can’t Wait for "Superman"

September 28, 2010

The 2010-11 school year is well underway and with it, a season of new beginnings. We send our children into the classroom with an expectation that they will learn and succeed in core academic subjects, be given opportunities to explore their interests, and be prepared to enter college or a career upon graduation. For students who are lucky enough to attend good schools and receive instruction from good teachers, this is the case. But far too many young Americans are not so fortunate. These students are trapped in low performing schools, often with no way out. While school reform has been debated for years, there’s been too little action. A groundbreaking new film, Waiting for “Superman” , may permanently change that dynamic. This movie tells the story of five children as they try to make their way out of failing public schools and into charter schools. Along the way, viewers are exposed to the low expectations and poor results that exist in our public school system. The statistics are alarming. Among developed countries, the United States ranks 21st out of 30 in science literacy and 25th out of 30 in mathematics literacy. Perhaps our greatest shortcoming is the 1.2 million students who fail to graduate from high school each year. But the movie is at its most powerful when it goes beyond facts and figures to show the human impact of a failing education system. Take, for example, Anthony, a fifth-grader living in Washington, D.C., who wants a different life than the one that caused his father to die from drug addiction. But Anthony’s path to a brighter future — acceptance into a high performing public charter school — will be determined by a lottery. The school to which he is applying has only 24 slots for 61 applicants. This is tragic — and maddening. Because a superhero isn’t coming to save our schools, it’s up to every American to demand more from the educational establishment. A good K-12 education isn’t just for the privileged few; it’s the birthright of every American child. The U.S. Chamber of Commerce has been at the forefront of efforts to shake up K-12 education so that every child is prepared for higher education or productive careers. We continue to advocate for commonsense reforms including greater accountability in schools, merit pay for high-performing teachers, fair removal of ineffective teachers, and expanded access to charter schools. The Chamber is proud to promote Waiting for “Superman.” For more information about the film and campaign, visit www.waitingforsuperman.com/action . For more about the Chamber’s education activities, visit www.uschamber.com/icw .

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Richard (RJ) Eskow: Wall Street Noir: Moody’s "Double Agent" Ratings

September 28, 2010

What happened to Moody’s is what happens to every “agent” who thinks he can serve two masters. The sad thing is that it keeps happening, even though we’ve seen this movie before. Credit rating agencies are supposed to monitor debt that’s issued by financial institutions and governments. It’s their job to protect investors from purchasing financial instruments that are misleadingly packaged or are riskier than the buyer can afford. These “agencies” hold extraordinary power — to destroy companies, to make people fabulously rich, even to influence governments. The problem is they’re not “agencies” at all. They’re for-profit companies who have their palms outstretched to the big banks for revenue even as they’re “policing” the soundness of their portfolios. Consider the recent checkered past of Moody’s, which holds a 40% market share in the worldwide credit rating business. Allegations have been raised about its CEO’s stock trading, harassment of a whistle blower, and intentional deception of the public for its own financial gain. It got everything wrong when it came to rating debt, despite reports it should have known all along. How is Moody’s handling the public shame caused by its ignominious failures? By lecturing the government on how to handle the disaster its own ratings helped to create. The Moody’s File The SEC declined to file fraud charges against Moody’s last month, not because they thought the “agency” was innocent — the evidence showed otherwise — but because it said there was a jurisdictional problem. As the SEC’s report made clear, Moody’s knew a number of credit ratings had been incorrectly rated too favorably. But rather than face the public embarrassment of admitting its mistake, Moody’s let the public believe the ratings were accurate. Moody’s looked the other way as investors were placed at risk, twiddling its thumbs and whistling to itself like a crooked cop ignoring a robbery. To conceal its mistake, Moody’s s-l-o-w-l-y let the numbers climb back to where they should have been all along. As the SEC makes clear in its report, there is substantial evidence that fraudulent behavior occurred and that investors were misled as a result. The report also presents evidence which shows that Moody’s misled the SEC itself, which is a violation of law. In the latest scandal, a firm that analyzes home mortgages just testified that it told banks that the mortgages they were bundling were a mess , with more than one in four failing to meet even basic underwriting standards — and they kept on doing it anyway. They told the rating franchises, too . But, as the head of the analysis firm observed, “if any one of them would have adopted it, they would have lost market share.” He can’t help it if he’s lucky As if Moody’s reputation wasn’t battered enough, there’s the matter of Kevin Hall of McClatchy Newspapers as follows: “If you look at his major sales in 2007, 2009, 2010, they are all around price peaks and followed by large declines. The likelihood that this is just ‘lucky’ is very low — it appears he is using inside information to time his trades.” Hall and McClatchy had been on the Moody’s story like white on rice, as the saying goes. The headline McClatchy gave to Hall’s October 2009 story, ” How Moody’s Sold Its Ratings — And Sold Out Investors ,” shows how strongly his editors backed his work. Senate panels and the Financial Crisis Inquiry Commission both began investigating Moody’s shortly thereafter, and the FCIC found it tough sledding. Both the FCIC and California Attorney General Jerry Brown found that Moody’s was dragging its feet on providing requested documents. The FCIC was forced to issue a subpoena, and Brown had to go to court to force compliance with a subpoena he had already issued. Revenue over research Moody’s drive to “always be selling” severely compromised its judgment, according to reports. As Hall reported last June , Moody’s executives described its former CEO as “getting in their face whenever they raised obstacles to rating a complex deal, often boasting that they weren’t the ones responsible for Moody’s surge in revenues.” “Agencies” like Moody’s don’t make money by generating accurate ratings. They make it by generating ratings that make the customer — the banks, funds, and insurance companies issuing these debts — look good. No wonder analysts were discouraged from raising red flags about risky deals. A review of emails and other documents generated by the Senate Permanent Subcommittee on Investigations provided more evidence of this pattern. As an internal PowerPoint showed, consultants who spoke with members of the group that rated the riskiest financial instruments found that they saw their roles as follows: Generating increased revenue. Increasing Market Share and/or Coverage Fostering good relationships with issuers and investors Delivering high quality ratings and research Just in case that didn’t make priorities clear enough, the consultants added: “When asked about how business objectives were translated into day-to-day work, most agreed that writing deals was paramount, while writing research and developing new products and services received less emphasis.” A “franchise,” not an agency That’s why the word “agency” is such a misnomer. It’s a word with multiple meanings, but in this case it suggests a quasi-government function. The FBI is an “agency.” The Environmental Protection Agency is an “agency.” Moody’s isn’t that kind of agency. You’d have to look to another definition , like “the capacity, condition or state of exerting power” or “an establishment engaged in doing business for another.” The analysts who placed “writing deals” above research aren’t “agents,” except for the high-stakes gamblers who pay their fees. Follow the money. McDaniel held a “town hall meeting” with employees as the economy was crashing around them, thanks in large part to the great ratings they and their colleagues had given to fraudulent products. He said “… my thinking is there’s a much greater concern about the franchise. Everyone in this room is a long-term investor (ed: presumably in Moody’s stock), for sure.” The raters all own stock in Moody’s and want “the franchise” to succeed. That’s not an agency. It’s a “franchise.” That’s why the company reportedly ” purg(ed) analysts and executives ” who warned that there was trouble coming. It’s why Moody’s and its competitors don’t want to be held liable for “recklessly” issuing bad information. It’s why they withheld their services at a crucial time because they didn’t want to responsible. Now an ex-employee is alleging they defamed him after he raised issues of fraud and inflated ratings internally, and then to investigators. Agencies don’t do that. Franchises do. Ending the rigged game Despite all the evidence, Moody’s is still treated as a credible player … and one that’s powerful enough to send a warning shot across the bow of the United States government . It threatened to downgrade the US government’s debt last March if more wasn’t done to reduce the government’s debt. That’s the kind of rigged game we’re facing: One of the biggest sources of the government’s debt is the economic collapse. That collapse was enabled in large measure by the bad ratings issuing by rating franchises like Moody’s. Now Moody’s wants to hamstring the government’s ability to repair the damage it helped create. And it might. They’re that powerful, and the system is that rigged. Imagine: Moody’s still holds enormous power because it can deny the government a AAA rating — the same rating it once freely gave to mortgage securities underwritten so badly that 28% of them were virtually worthless. It’s a classic film noir ending: The double agents, the cops on the take, they’re the ones who wind up having connections, the ones who seem to come out on top in the end. The Franken Amendment would slow down the profit-driven salesmanship of the ratings franchises. Good idea, but why stop there? Where are the prosecutions? And it’s time to consider shutting these groups down. You’ve seen this movie, too: everybody knows you can’t trust a double agent. _______________________________________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Video: Stone Says Bank Chiefs Inspired `Money Never Sleeps’: Video

September 23, 2010

Sept. 23 (Bloomberg) — Oliver Stone talks about his new film “Wall Street: Money Never Sleeps” and the financial industry executives that inspired the characters in his movie. Stone talks with Carol Massar on Bloomberg Television’s “Wall Street: Hollywood Returns.” (Source: Bloomberg)

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Josh Bernoff: Empowered: Managing In Real Time

September 21, 2010

Does it seem to you that world is moving faster now? You can whip out your iPhone and instantly find the price online of any product with a bar code. Or look up the movie you were thinking of seeing and see what a thousand people had to say about it – while you’re waiting in line. Even as the consumer is moving faster, corporations are still plodding along. How long does your bank make you wait on hold for service? Why are they designing mass marketing programs months in advance, when people can get instant feedback on what to buy from their Facebook friends? When Heather Armstrong – a self-proclaimed professional blogger who goes by the name dooce – talked to Maytag about her brand new, broken Maytag washing machine that three service calls had failed to fix, the customer support rep was deaf to her pleas. Even when she told the rep that she had a million Twitter followers. Then she tweeted, “DO NOT EVER BUY A MAYTAG . . . OUR MAYTAG EXPERIENCE HAS BEEN A NIGHTMARE.” Brand disaster. Face it. Top-down management can’t move at the speed of today’s technology. The solution for companies is to empower their workers to solve customer problems with technology. Let me share some examples. Leonard Bonacci runs stadium security for the Philadelphia Eagles football team. Working with a company called GuestAssist , he put in place a system that lets anyone at the game text for help to a short code. Those texts could say “A guy spilled coke on my seat” or “The person in front of me is having a heart attack” – but either way, Leonard’s two dozen staffers can get there and solve the problem quickly. He’s turned the 68,000 people in the stadium into his eyes and ears, and the result is an organization that moves a lot faster. Marty Collins, a community marketer at Microsoft, saw that lots and lots of people were tweeting, posting photos and videos, and making Facebook connections about getting stuff done with PCs. She helped Microsoft marketing see how to reclaim “I’m a PC” from Apple ads and make it a positive. And she corralled those positive comments into a feed that anyone could see. It’s at www.windows.com/social . During the launch of Windows 7, that feed was on the home page for Windows, showing what positive things people are posting about Windows right this minute. Sunbelt Rentals rents construction equipment to work sites. Its salespeople were visiting those sites, but by the time they got there, pricing and availability information was often out of date. So John Stadick, the CIO, equipped the salespeople with iPhones and an app that called up accurate inventory and price lists. The people with the iPhones generated 3.5% more rentals and called the office 30% less, because they were now operating at the speed their customers required. These aren’t isolated cases. These people who find and deploy technology to serve consumers are what we call HEROes – highly empowered and resourceful operatives. In the companies I’ve interviewed for our new book Empowered , I see a trend – companies that embrace their HEROes can operate at Internet speed and create loyal customers who spread word-of-mouth. This takes a new way of working for three groups within the companies: managers, the technology department, and the HEROes themselves. Managers need to embrace their workers’ technology ideas and help clear obstacles out of the way. These obstacles can come from PR, senior management, legal, or IT – but they need to be negotiated. Managers also need to be clearer about strategy, so their workers will come up ideas that fit the corporate goals. IT people need to get out their current mindset around technology, which is typically as the department of “No.” People are using social networks, google docs, and other simple tools to get work done (unless you work with Dilbert , of course). Instead, they need to support workers with technology advice. These projects will go forward, but they’re typically too small for IT to own. And IT has to help people work together with collaboration systems. At Deloitte Australia, 4,500 people work together with a tool called Yammer – a sort of corporate version of Twitter – that allows people to operate at the speed of their customers, finding the required resources quickly. And the HEROes themselves need to use their creativity to serve customers, not just to fool around with technology. We’ve got a tool that HEROes can use to assess their projects for value and effort – a better idea than just rushing in. HEROes who work with management and IT to nail down benefits and risks of their projects are far more likely to succeed. The future of business is HERO-powered. HEROes can operate at a speed no top-down organization can match. Every company has them. The question at your company is – will they get the chance to make you more responsive, more sensitive to customers, more competitive? In this age of empowered consumers, you’d better hope so. Josh Bernoff is Senior Vice President of Idea Development at Forrester Research and the co-author of Empowered: Unleash your Employees, Energize your Customers, and Transform your Business (Harvard Business Review Press, 2010). His previous book , Groundswell: Winning in a World Transformed by Social Technologies , was a BusinessWeek bestseller and won the American Marketing Association Foundation’s award for the best marketing book of the year in 2009.

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Charles Gasparino: Oliver Stone’s Wall Street Sequel Sure to Be a Day Late and a Dollar Short

September 15, 2010

Last week, it was reported that director Oliver Stone dined with a New York Times columnist at the Four Seasons restaurant; a place where the top executives on Wall Street (the same guys who caused the financial crisis exactly two years ago and it’s fair to say the Great Recession that followed) love to hang out and shoot the shit about their unsavory business. Stone, as everyone should know by now, is putting out the long-awaited sequel to his mega hit movie Wall Street . This one is called Wall Street: Money Never Sleeps . It is, of course, a fictionalized account of the financial crisis (if you know anything about Oliver Stone, you know that even his attempts at non-fiction are pretty fictionalized), and based on the various interviews Stone has given (including this one to the Times ) he views the movie has one of those teachable moments. On the two year anniversary of the bankruptcy of Lehman Brothers and the broader collapse of the financial system that followed, it is supposed to help us all understand something about the men who led us into the abyss; namely what drove them in their pursuit of greed at all costs. Don’t bet on it. I haven’t seen the movie yet (I’m supposed to go to the premier next week) but based on some of Stone’s own commentary, I may just wait for the DVD. In his interview with the Times , Stone reminds us that, “Wall Street’s gone crazy. It’s banking on steroids.” (Not exactly news, Oliver.) He fears that many of the Wall Street titans he’s dining with that afternoon think that “Stone must be a communist here, a liberal; a liberal is worse than a communist.” (That’s an interesting conclusion since as I show in my new book, Bought and Paid For , it was the Wall Street brass who helped elect Barack Obama, his Liberal fellow traveler, as president). And just so we all don’t think that the new Oliver Stone is that same guy who came up with the most bizarre conspiracy theory to account for JFK’s assassination (and one of the most bizarre Joe Pesci performances ever), he reminds the Times columnist that, “It’s silly to be simplifying and say Wall Street is evil,” even if “Goldman Sachs is evil, maybe.” (I wonder what he thinks about Al-Queda?) During the interview, Stone comes back to earth a bit with this little gem: “Most of the people I know on Wall Street are good people. Like my father. He really would like to make some money, yeah, but they would also like to do good for society.” The only thing worse than a goofy, washed up director trying to reclaim his greatness with a teachable-moment movie is a columnist like this one, who rather than portraying Stone in his schizophrenic best, just sucked it all in without once questioning Stone’s sanity. The new Wall Street movie might be entertaining, but given its hype and the bizarre mindset of its director, I’m sticking with the old one. The fact of the matter is, we don’t really need another teachable moment about the financial crisis. At least, not one that flows through the brain cells of Oliver Stone or someone from the New York Times who can’t get enough of a washed-up director’s illogical view of the world, and it is my guess that after the initial hype has passed, most movie goers will think the same. Two years after the financial crisis, Americans face nearly 10 percent unemployment, mountains of debt, businesses that make money but won’t hire, and a president who found it part of his job description to opine about a Mosque near Ground Zero while the economy is falling apart. Wall Street greed, which seems to be Stone’s obsession, much like the rest of the media, is, to coin a journalistic cliché, yesterday’s news. Note to Stone: We know these guys are assholes, and we probably don’t need to be reminded of it again during a 133 minute film. What we don’t know is how they became such assholes, and I’m pretty certain Oliver Stone won’t be shedding much light on that either. Jimmy Cayne being “out of touch” with reality (Stone’s description) cannot fully explain why trillions of dollars of stocks, bonds, and financial instruments derived from stocks and bonds were created and held by his bank Bear Stearns with little regard that someday they might be worth nothing. Yes, some people on Wall Street are “good people” (like we really need Stone to point that out); but what is it that allows good, well- educated people to do stupid things? Remember, when Jimmy Cayne was CEO, the guy running Bear’s bond department which was loading up on toxic debt was a man named Warren Spector, one of the most intellectually gifted traders on Wall Street. The guy taking charge at the risk committee meetings was the legendary trader and risk expert Alan “Ace” Greenberg. Cayne may have been a goofy, pot-smoking slouch who would rather play golf than tend to the firm’s needs, but what about Spector and Greenberg? What made them think that buying mortgage debt in the quantity they were buying it at as a massive housing bubble was raging was such a good thing? In other words, it can’t be just greed–why would anyone, even the most greedy Wall Street type, simply bet the ranch if the end result could be the demise of their gravy train? They wouldn’t of course. That’s because it wasn’t just greed that motivated the Wall Street bankers to behave as if they were on “steroids;” no matter how many movies in the next year (I hear there are nonfictional accounts of the financial crisis being shot as I write this) tell you so. In fact, I bet if you can get a straight answer from either Greenberg or Spector, or any other of the fallen Wall Street titans (like Dick Fuld, the former head of Lehman Brothers) they would tell you that the real reason they felt compelled to gamble as they did is because based on past experience, they were all involved in a no lose operation. Wall Street would never implode because the government wouldn’t let it happen. Lehman Brothers failed in 2008, but it was bailed out in 1994 and 1998 by various government policies that inflated the financial system with cheap money and turned losses into gains; same with Merrill Lynch, Citigroup and the rest of the big firms. And that’s what all these movies and many of the books written about the greed merchants Stone was dining with at the Four Seasons leave out: That it was next to impossible for the financial system to accept so much risk as the norm without the government approving of it all along the way. This approval went beyond lax regulation that allowed firms like Lehman and Bear to borrow more than 30 times the amount of capital they had on hand to make market bets. It’s an approval that comes only from a partnership between government and Wall Street that dates back decades. It may surprise Oliver Stone to learn that most of those guys in the Four Seasons aren’t quite as right-wing as he thinks. They most probably share his world view about government and business; namely how bureaucrats like the former Fed President and current Treasury Secretary Tim Geithner and his ilk (think Robert Rubin, Hank Paulson, and Larry Summers to name just three) can make the world a better place by working with Wall Street–protecting the markets when times get rough as they have countless times during the past 30 years by bailing out Wall Street with taxpayer money when it screwed up — including the ultimate screw up in 2008. Those bailouts gave Jimmy Cayne the confidence he could play golf and leave the heavy lifting to Spector and Greenberg. Those bailouts gave Spector and Greenberg the security to know if they bet wrong, the Fed and the Treasury would come to their rescue by handing out cheap money or free money to make things better. Full disclosure: While I was at CNBC I spent a few minutes with one of the stars of the new Wall Street film, Shia Lebeouf, who looked me up through an acquaintance and wanted my take on what makes the typical trader on Wall Street banker or trader tick. Unlike most of the people he spoke with, I actually covered the financial crisis on daily basis since its beginning and I reported on both the implosion and the massive profits that began to be showered on Wall Street following the bailouts as the government flooded Wall Street with guarantees and benefits as it had done in the past. If my memory serves me right, I told him it was the typical Wall Streeters sense of entitlement that stands out the most in my mind. I implored him to go to bars and restaurants around New York City where they all hang out. Not just the places where their bosses dine and are on their best behavior, but the places where the traders and bankers who are not as polished take clients and watch them in action. “Now that the bonuses are flowing they will act as if the whole financial crisis didn’t happen,” I remember saying. My point being: For them, losing money, getting bailed by the government, and making money on the backs of taxpayers is the way the system is supposed to work because it has always worked that way. Why should this time be any different? LeBeouf just listened intently. We spoke for about 15 minutes more and he thanked me for my time. I’m not sure he understood what I meant by all that, and I’m pretty certain his boss wouldn’t either.

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Andy Ostroy: Donald Trump Needs to Shut His Mouth

September 10, 2010

As if the heated debate over the proposed Islamic Community Center two blocks from Ground Zero wasn’t controversial and divisive enough, Donald Trump has decided to exploit the situation in a pathetic attempt for attention while ratcheting up the inflammatory rhetoric. Trump, the narcissistic, carnival-barking real estate developer in desperate need of a 12-step program for self-promotion addiction, offered this week to purchase the equity in the Park Place property held by one of it owners, Hisham Elzanaty. Of course, Trump portrayed his offer as an altruistic, selfless, patriotic act designed to diffuse and find a solution to the situation. So what does Trump do? In an obvious and shameful publicity stunt, he made a low ball offer of 25% over the $4.8 million Elzanaty paid (a paltry sum he’d never accept on one of his own properties), and turned down the owner’s counter for $25 million. And then on MSNBC’s Morning Joe Friday, The Donald made a baseless, trumped up prediction that “You’re gonna have riots in the streets.. I believe September 11 is going to be a very bad day down there,” referring to lower Manhattan on Saturday’s anniversary of the 9/11 attacks. Trump was then aggressively challenged by one of the show’s guests, Lawrence O’Donnell, who charged, “If you really wanted to buy this building you could do just like the movie, and ‘make him an offer he can’t refuse’….” He then accused Trump of having no real intention of purchasing the building. Major props to O’Donnell. That guy’s got more balls than anyone else in the political media today. Trump kept defending his decision by claiming the building’s owner was asking way too much money and was looking to hose him. “He just wants to bludgeon a lot of money out of somebody and it’s not gonna be me,” Trump said, adding, “I don’t want him saying Donald Trump is stupid.” O’Donnell brilliantly and swiftly replied, “Someone says you’re stupid every day. It’s water off your back.” In continuing to relentlessly press Trump on his ulterior motives, O’Donnell suggested that the billionaire entrepreneur, if he truly wanted to help New York, simply view the purchase as a charitable donation and not assess the price tag with his normal real estate due diligence. “Don’t you give $25 million to charity each year?” I’m willing to bet that Trump spends more than $25 million each year changing the faucets in his gazillion bathrooms, so if he really wanted to come to the city’s rescue he could certainly afford to. To be sure, the egomaniacal, self-aggrandizing Trump saw the mosque controversy as an opportunity to grab the media attention he so ravenously craves. He got himself in the papers and on TV, and he got to talk about himself and display his bloated self-importance yet again. I can accept that from Trump, because that’s who he is and what he does. But to predict violence and riots on this sacred day, without any reasonable or rational basis for which to make such an irresponsible and reprehensible claim, is despicable and anything but patriotic.

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Don McNay: Bailouts Don’t Work: The Lotto Winners Study

September 7, 2010

“Keep on working hard boy, try as you may, you’re going to wind up where you started from.” – Cat Stevens I nterviewer: “What is your prediction for this fight?” Clubber Lang (the actor Mr. T): “Pain!” -From the movie, Rocky III I stumbled upon a fascinating academic article, entitled The Ticket to Easy Street? The Financial Consequences of Winning the Lottery. It was written by three economics professors, Scott Hankins from the University of Kentucky, Paige Marta Skiba from Vanderbilt University, and Mark Hoekstra from the University of Pittsburgh. The professors were not just looking to learn the habits of lottery winners. They were searching for the answer to a much larger question: “Whether a bailout will have a permanent impact or whether it will merely postpone financial pain.” In other words, does throwing money at people solve financial problems or just push those problems down the road? The paper gives empirical proof of two things that I’ve been saying for a long time: 1. Bailouts don’t work; and, 2. People who get large sums of money run through it in five years or less. I am starting my 28th year in the structured settlement business. I have written a book about lottery winners. I’ve seen people blow huge amounts of cash. The professors came up with an ingenious and comprehensive method for their research. They obtained a list of winners of the Florida lottery Fantasy Five lotto game from April, 1993 to November, 2002. They compared those names to Florida bankruptcy records to see how many of the winners filed bankruptcy and when. Filing bankruptcy means a person has completely hit bottom. You wouldn’t expect that to happen to a lottery winner. Yet it does. Over and over again. In the first couple of years after winning a jackpot, people who won small amounts were more likely to file than were people who won larger amounts. That makes sense. Someone with a large amount of money can initially weather a bad time or keep creditors at bay. After three years, large winners are more like likely to file bankruptcy than small winners. Also, people who received large sums did not use that money to pay down debt or increase assets. Winning the lottery did not help people increase their net worth. They needed to have set goals and an understanding of finance to make their lives better. It appears that they did not have those fundamental tools. Giving someone a lump sum does not make financial problems go away. It’s like putting an overweight person on a crash diet. Unless you can fix the underlying problem, he is going to fall back to his old habits. This is true for lottery winners and the average American, too. The professors’ paper refers to a 2007 study in the Journal of Political Economy, where it was determined that although “consumers initially used federal rebate checks to reduce debt, eventually debt levels returned to pre-rebate levels.” In other words, all of those billions we have been throwing at rebates, bailouts and stimulus programs have been a waste of money. They did not make a long term difference for people on Main Street. Hankins, Hoekstra and Skiba concluded that “While we cannot be sure that homeowners or other beneficiaries of government aid would respond in the same way lottery winners did, the results may warrant some skepticism about the long term efficacy of such a bailout.” You can see why bailouts fail. Wall Street and lottery winners have a common bond. They have access to easy money without restraints. In my experience with lottery winners, some of the biggest reasons behind winners blowing their money is their family and “friends.” Easy money seems to attract an “entourage” or a “posse” of hangers-on who never tell a lottery winner the one word he needs to hear. “No.” The entourage hangs on until the money is gone. Once the party is over, they are nowhere to be found. Wall Street has its own posse, called “Washington.” The easy flow of campaign contributions, the revolving door between regulators and those they are supposed to be regulating, and the explosion of well-connected, highly paid, lobbyists makes it impossible for Washington to tell Wall Street, “No.” I’ve been promoting concepts designed to help Americans create wealth without Wall Street. The first is moving your money away from Wall Street. If you take your money out of the “Too big to fail” banks, you are reducing their political power. You can learn more at www.moveyourmoney.info. If we keep on moving our money, eventually the people in Washington will have the backbone to tell Wall Street, “No.” There has been talk in Washington of another stimulus package. Instead of looking at short term solutions, the country needs to make long term, painful, economic changes. Otherwise, like the Florida lottery winners, we are going to wind up where we started from. Or worse. Don McNay, CLU, ChFC, MSFS, CSSC of Richmond Kentucky is an award-winning financial columnist and Huffington Post Contributor. You can read more about Don at www.donmcnay.com McNay founded McNay Settlement Group, a structured settlement and financial consulting firm, in 1983, and Kentucky Guardianship Administrators LLC in 2000. You can read more about both at www.mcnay.com McNay has Master’s Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University. McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.

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Don McNay: The Hangover from America’s Bailout Party -Video

September 5, 2010

“Flounder: You _______ up — you trusted us.” -Otter in the movie Animal House. Let’s face it, we screwed up. In the decade before 2008, the financial world was like a presidential inauguration ball. On Inauguration day, there is a ball where only the closest insiders and Washington power players get invited. There are also a lot of parties around town, so just about everybody in Washington feels like they were part of the event. For a decade, Wall Street was playing funny money games. They were allowed to grant themselves multi-million dollar bonuses, and many Americans also felt like they were invited to the celebration. Real estate prices were soaring. People were flipping houses and condos. People with lousy credit and no income were living in nice houses. Almost anyone could get a loan for anything. Stock prices were going up and pension plans were getting fatter. State and local governments had lot of money to throw around and could cut taxes without anyone really noticing. We had easy money and reaped many benefits without hard work or sacrifice. We were living in fantasy land. The fantasy is over. We woke up to a nightmare. A nightmare that our nation has not yet dealt with. People with addictions go through a process called “bottoming out.” They reach a point where they realize their actions are hurting themselves or others. They get help and dramatically change their lives. Because of the Wall Street bailouts, America never got the chance to “bottom out.” Like a drunk who keeps “having a drink or two,” America has not really dealt with the problems that got us in the mess. Like an addict who keeps using, we are setting ourselves up for repeat failure. I’ve been reading Maria Bartiromo’s new book, The Weekend That Changed Wall Street . A better title might have been “The Weekend that Changed the World.” It was America’s chance to bottom out. We didn’t. To paraphrase Otter in Animal House , we screwed up. We mortgaged the future to make Wall Street happy today. I liked Bartiromo’s book. One of her insights jumped out at me. In talking about the fall from grace that some Wall Street insiders felt, she noted “When the wealthy falter, there is a deep shame that the average person cannot grasp. In that world, you are either in or you’re out.” That line explains everything. Wall Street was in. They had the right lobbyists and had an alumni association from Goldman Sachs, including Treasury Secretary Hank Paulson, doing their bidding in Washington. Those who came from Wall Street looked out for their own. They made sure their Wall Street cronies were paid back, 100 cents on the dollar. The rest of us were out. And we have stayed there. Unemployment remains around 10% and underemployment is even more chronic. Sales of existing homes are at a 15-year low, despite some of the lowest mortgage rates in history. It’s almost impossible for a Main Street business to get financing and state and local government entities are looking at severe cuts in revenues and services. We’ve spent trillions in bailout money and all we got was “One day older and deeper in debt.” Although it sounds gloomy, I’m not a gloomy person by nature. With focus, hard work and resiliency, people can overcome any obstacle. Including what Wall Street and Washington did to us. People can solve problems by taking a hard look at themselves and making changes. Washington is afraid to take that hard look or make real changes. Our political “leaders” won’t do anything that cuts off the campaign contributions and lobbying money that Wall Street provides. My next column will give a concrete plan for creating wealth without Wall Street. You can see signs of it. Concepts like Move Your Money, http://moveyourmoney.info/ are catching on. People are starting to pay down debt and look at creating their own businesses. We weren’t really invited to the big Wall Street party. But we sure wound up paying for it. Now it is time to recover from the hangover. Don McNay, CLU, ChFC, MSFS, CSSC of Richmond Kentucky is an award-winning financial columnist and Huffington Post Contributor. You can read more about Don at www.donmcnay.com McNay founded McNay Settlement Group, a structured settlement and consulting firm, in 1983, and Kentucky Guardianship Administrators LLC in 2000. You can read more about both at www.mcnay.com McNay has Master’s Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University. McNay has written two books. Most recent is S on of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.

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Wyatt Closs: Worker Worthy Standouts: The Best Films About Work for Labor Day 2010

August 29, 2010

There’s a blog to be written about Greatest Films of All-Time about Workers and work themes but for now, lets look at those made or released in the last year. Whether set in a grocery store, amusement park or airplanes, there’s a DVD for everyone to watch this Labor Day weekend. In terms of feature films, there are 5 standouts. They are The Maid, Humble Pie, Adventureland, Extract, and Up in the Air. Of these, Up in the Air is the best known given its star George Clooney and its box-office receipts and Oscar run. And it is arguably the best in this particularly specific category of Best Worker Voice Film, due in part to its uncanny timing connected to today’s economy. And its use of actual people who had been laid off playing people who had been laid off was original, poignant, and sad all at once. But there’s more. While the Chilean film, The Maid centers on the story of a maid trying to hold on to her position after having served a family for 23 years, it also shows the level of dependence that family has relied on her “work” which goes much beyond daily domestic chores. You might say for Humble Pie , with the leading man at 400 pounds and set in a grocery store, that “if you like Little Miss Sunshine, Juno, and Napoleon Dynamite, you’ll love this” but only if you had a 30-second elevator pitch to make. Or in this case, a short blog. You could also try the same cheap trick about Adventureland by calling it a Judd Apatow-esque film set in an amusement park but that would undercut the originality of this story, the workers, and the unique workplace where they find themselves. And I don’t want Martin Starr to cringe. If you like good, entertaining documentary, there are lots of good choices from the last year. Capitalism: A Love Story, Yes Men Fix the World, The Philospher Kings, Parking Lot Movie, and Floored all do a great job of either reflecting workers voices and experiences or channeling them with the equivalent of a 2-ton, 20,000 watt megaphone. Like Up in the Air, Michael Moore’s Capitalism: A Love Story was the heavyweight in this category, clearly the favorite of a loose-knit jury I polled, and worth seeing to get your juices flowing about the state we’re in and some idea about getting out of it. But some space is needed to highlight Yes Men Fix the World . Not only is it entertaining and daring as the Yes Men go undercover, including on BBC, goofing on all manner of corporations. But they also manage to champion some genuine causes like Bhopal, post-Katrina New Orleans and more. And perhaps most importantly, they give its audience the sense that “maybe I could go do something like that too”. And what better inspiration for the masses of unemployed and stomped-on workers than that. As a special mention, notice should be given to a film project that was not quite a film or a TV show: The People Speak. Based on the book by Howard Zinn, and eventually developed into a docu-mini series on the History Channel, it features a large and diverse number of actors from Matt Damon to Marisa Tomei, Kerry Washington, Josh Brolin and Danny Glover. With producer Chris Moore, I’ve tracked its development over the years into the product that aired back in January 2010 (now on DVD as well). The reading by Marisa Tomei of Harriet Hanson Robinson’s recound of the Lowell, MA factory strike is worth the price alone for thoughtful reflection about why we have Labor Day in the first place.

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Karen Luniw: Success in the City: Leveraging Your Brilliance – Part Two

August 25, 2010

Most people don’t know they possess brilliance. But they do. We all have brilliance. Many times it goes untapped. Even business owners leave much of what they have to offer untapped. Why? Oh, you know, those nasty cousins – Doubt and Fear, oh yeah, and the other cousin, Worry. I’m not going to spend a lot of time on the Trinity of Trouble today but know this – the most successful people that I know – multi-millionaires – have these three visit them regularly. They don’t slam the door shut on them and resist them because they know that what you resist, persists. Rather, they acknowledge them, thank them for their visit and make the decision to move forward anyway. This is one of the ways that they let their brilliance shine. You can do that, too. You see, right now, in whatever business you’re in right now, you have a story that makes you naturally attractive to more business. There is likely a reason that prompted you to do what you do. That’s what I want you to start to share with your customers. It’s this story that makes you more attractive to business but it’s likely that you’re not sharing your story as fully as you could. Years ago, I started to follow two people that I found absolutely compelling. I have a few passions, learning about and applying universal laws to life and business, business success, and internet marketing. (hmm, okay – there’s a ton more but we’ll go for these now) When it comes to internet marketing, even 5-7 years ago there was a lot of people to choose from but I decided on two – Corey Rudl (late) and Ali Brown. Why them? Because they seemed real and relatable to me. They shared their story about their journey to gaining the success they were gaining and I ate it up, hook, line and sinker. I thought, if they can do this, I can, too! Three and a half years ago, when I decided to start my first Law of Attraction Tips podcasts , I decided very firmly that I wanted to be real and say what I had to say. I told my story and that, along with a great topic, had people listening from the start from 18,000 downloads in the first month to an average of 50,000 downloads a week today. That’s how I leverage part of my brilliance. You can do that, too. It doesn’t have to be in a podcast (but I recommend it!) but there are plenty of ways to start sharing your story in a way that’s real, relevant and relatable to your potential customers. This alone will set you apart from your ‘competition’. In fact, it’s hard to have competition when your story is so different from other business doing something similar to you. Right now, people want to relate to you before they spend their money with you. There is a low trust level out there and it’s up to you to bridge that gap. Leveraging your brilliance is possible with what you have, now. Here’s the thing, in having a desire for your business to do well, you could not have that desire without the ability to make it happen. The Law of Polarity proves this. This law indicates that all things have an opposite or contrast to it. For instance, you cannot have an up without a down, a right without a left, a black without a white. All things must be accompanied by the opposite. In this case, you cannot have a desire without the ability for you to create it NOW. No, I’m not talking about wiggling your nose, Jeannie! It means that the ability to create that desire exists in your vicinity now. Right now, the way to make it happen is around you. Whoa! Okay, so let’s come full circle. To leverage the brilliance that you already have you need to: Be vigilant about what you focus on. Focus only on what you want not what you don’t want. Watch for that ‘million dollar idea’ now; Kick the Trinity of Trouble – Doubt, Fear and Worry – to the curbside, respectfully, everytime they tap you on the shoulder trying to get your attention; Start to identify what your story is about the ‘why’ of why you do the business you do; Start to understand and KNOW that your brilliance and your desires are yours to have and create – go back to #1 and repeat… Remember, you can do this on your own but you don’t have to go it alone, I’m here to help – connect with me about my coaching programs – I truly am great helping people identify and live their brilliance! Karen Luniw is the author of Attraction in Action: Your How to Guide to Relationships, Money, Work and Health and is a coach who helps people break through blocks in their personal and business lives. For inspiration, check out her Top 10 Law of Attraction Tips for 2010 movie. There are huge clues in the movie to help you move further towards your goals.

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Katherine Warman Kern: Innovation Is Relative

August 23, 2010

In John Kao’s Book, Innovation Nation , he says: “breakthrough technologies regularly set the stage for staggering waves of innovation.” In other words, he is establishing that new technology isn’t innovation. It simply creates the potential for innovation. This is a critical distinction. What are the factors that make the potential created by new technology realized? Alan Patrick , an author of the Big Potatoes: The London Manifesto for Innovation , provides a summary of the research he did on the pace of innovation : ” . . . I looked at . . . the history of innovation over the last 100 years, from 1909 to 2009. If I had a hypothesis before starting it would be that there was an accelerating pace of innovation. The results — so far — tell me that is not the case, and it is probably cyclical. In fact, one could argue that innovation in 1909, 1949 and 1969 was greater than 2009.” Alan told me that my Grandfather (1989-1990) probably experienced more “Future Shock” than I have. But while discussing this with my Grandfather’s daughter ( my “early-adopter” Mother who rightly says she has been much more likely to try new technology than her father ever did), I understood what John Kao meant when he said that “Probably, the most widely shared misconception about innovation is that it’s all about science and high tech.” My grandfather really didn’t have a reason to be motivated to use many of the new technologies which emerged in his lifetime. As a dentist, neither the telephone nor air flight were critical to expanding his revenue potential. He had plenty of business in his hometown to fill his calendar. No need for conference calls by telephone. All phone appointments were made through his assistant. In fact, he was never comfortable talking to me on the phone even when I was hundreds of miles away. He preferred letters. So he didn’t experience so much “Future Shock.” In fact, when interviewed by the local NBC affiliate on his 100th birthday and asked what the most important advancement in his time was, his answer — “The forward pass.” Why would he think allowing the forward pass in American football was the most important advancement in his time when automobiles, air flight, telephones, radio, television, film, etc. were introduced? Because football was his passion. The memories he cherished the most from his life were when he played football for his college team (picture scenes from the movie, Leatherheads ) and coaching football as a high school teacher before he went on to study to become a dentist. This implies that a factor that transforms a new technology into an innovation is the reason to use it. In other words, innovation is relative to the reason as much as the technology. This makes sense when you consider that people need a reason to be highly motivated to leave behind what is comfortable to discover new possibilities. What are the reasons that disrupt the ambiguity of the pros and cons of risking something new? In a previous post, I gave the example of turning a loss into a positive . In a subsequent post, I discuss the evidence that innovators and creators are playing it safe because the perceived risks are too high to explore possibilities with unknown outcomes. Next I will explore examples of reasons that have motivated people to “disrupt the ambiguity” created by new possibilities.

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Rob Johnson: Double Dip and Dysfunction

August 19, 2010

Standin at the crossroad babe risin sun goin down Standin at the crossroad babe eee eee eee, risin sun goin down I believe to my soul now, Poor Bob is sinkin down –” Crossroad Blues “, by Robert Johnson (1936) We’ve been hearing a lot lately about the possibility of a double-dip recession. I do not know if we will actually go to a double dip or just substandard growth given the high level of underutilized human resources. But that is beside the point. It is a very sad feeling, one that I had during the aftermath of Katrina, when the government reveals that it does not intend to respond to a crisis. It is a cold, dehumanized feeling. The tolerance of 9.5 percent unemployment, which is in reality a much larger number (say 15 percent) than the official numbers, is a symptom of dysfunction. The dysfunction arises in part because of a failed vision. Society needs public goods and their repair. Adam Smith identified this in The Wealth of Nations . Education, schools, roads, and bridges are the lubricant of a productive society and there is no better time to repair or upgrade them than when you have slack resources that can be hired to address the task. Denigration of government’s essential role has gone on too long. It is doing us harm. Yet it has roots in experience. Our lockdown on spending is a symptom of lack of trust. It is also in part because our government is seen by the population as favoring large institutions and corporate power, not people. Given the choice between perceived corporate welfare that enlarges our future tax burden and curtailing the government, many people now opt for the latter. Not because people lack the desire for services, but because we do not trust our political system to deliver those needed services. See a recent Pew Reseach Poll , which illustrates the pervasive perception that government economic policies benefit Wall Street rather than Main Street. This is a very difficult impasse. Given the way the government behaved, insuring the powerful during the bailouts and after, it is understandable that trust has eroded. It is a question of representation and political voice. It is like being asked to pay dues to a golf club but then being told that only the powerful and connected will get to play the course. We are amidst a breakdown. An irrational macroeconomic strategy and a nonsensical growth strategy is being chosen in a way that is perfectly understandable in a money politics-driven collapse of trust in government decision making. Deterioration of government services is bad enough, but imposing austerity due to lack of trust in a time of high unemployment and slack resources is tragic. It is a means to accelerate the decline of living standards of those who have taken a beating since 2007. Double dip or stagnation is too subtle a distinction. We are amidst an unfolding collective choice to pursue a downward spiral. I do not for a minute believe this will result in a lower debt/GDP ratio. I do see deflationary risks as a prelude to an inflationary response. Our leaders, showing their fear by responding to the fearful polling results are not leading. Where will this end? As the Oscar winning song ” Falling Slowly ” from the movie Once by Glen Hansard and Marketa Irglova pleads with us: Falling slowly, eyes that know me And I can’t go back Moods that take me and erase me And I’m painted black You have suffered enough And warred with yourself It’s time that you won Take this sinking boat and point it home We’ve still got time Raise your hopeful voice you had a choice You’ve made it now Cross-posted from New Deal 2.0 .

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Rob Johnson: Double Dip and Dysfunction

August 19, 2010

Standin at the crossroad babe risin sun goin down Standin at the crossroad babe eee eee eee, risin sun goin down I believe to my soul now, Poor Bob is sinkin down –” Crossroad Blues “, by Robert Johnson (1936) We’ve been hearing a lot lately about the possibility of a double-dip recession. I do not know if we will actually go to a double dip or just substandard growth given the high level of underutilized human resources. But that is beside the point. It is a very sad feeling, one that I had during the aftermath of Katrina, when the government reveals that it does not intend to respond to a crisis. It is a cold, dehumanized feeling. The tolerance of 9.5 percent unemployment, which is in reality a much larger number (say 15 percent) than the official numbers, is a symptom of dysfunction. The dysfunction arises in part because of a failed vision. Society needs public goods and their repair. Adam Smith identified this in The Wealth of Nations . Education, schools, roads, and bridges are the lubricant of a productive society and there is no better time to repair or upgrade them than when you have slack resources that can be hired to address the task. Denigration of government’s essential role has gone on too long. It is doing us harm. Yet it has roots in experience. Our lockdown on spending is a symptom of lack of trust. It is also in part because our government is seen by the population as favoring large institutions and corporate power, not people. Given the choice between perceived corporate welfare that enlarges our future tax burden and curtailing the government, many people now opt for the latter. Not because people lack the desire for services, but because we do not trust our political system to deliver those needed services. See a recent Pew Reseach Poll , which illustrates the pervasive perception that government economic policies benefit Wall Street rather than Main Street. This is a very difficult impasse. Given the way the government behaved, insuring the powerful during the bailouts and after, it is understandable that trust has eroded. It is a question of representation and political voice. It is like being asked to pay dues to a golf club but then being told that only the powerful and connected will get to play the course. We are amidst a breakdown. An irrational macroeconomic strategy and a nonsensical growth strategy is being chosen in a way that is perfectly understandable in a money politics-driven collapse of trust in government decision making. Deterioration of government services is bad enough, but imposing austerity due to lack of trust in a time of high unemployment and slack resources is tragic. It is a means to accelerate the decline of living standards of those who have taken a beating since 2007. Double dip or stagnation is too subtle a distinction. We are amidst an unfolding collective choice to pursue a downward spiral. I do not for a minute believe this will result in a lower debt/GDP ratio. I do see deflationary risks as a prelude to an inflationary response. Our leaders, showing their fear by responding to the fearful polling results are not leading. Where will this end? As the Oscar winning song ” Falling Slowly ” from the movie Once by Glen Hansard and Marketa Irglova pleads with us: Falling slowly, eyes that know me And I can’t go back Moods that take me and erase me And I’m painted black You have suffered enough And warred with yourself It’s time that you won Take this sinking boat and point it home We’ve still got time Raise your hopeful voice you had a choice You’ve made it now Cross-posted from New Deal 2.0 .

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Richard (RJ) Eskow: Techno-Thriller: Why Was Goldman Sachs So Worried About One Nerdy Sentence?

August 13, 2010

It sounds like the plot to a dozen movies: Picture a corporation so powerful that its tentacles circle the globe and reach into the highest corridors of power. Yet a single sentence on an ex-employee’s obscure website forces it to move into action. That sentence is so important that it leaves the corporation with no choice but to make that employee … No, not disappear. They just made him delete it. (This is where the movie comparisons end.) But the question is, why? The sentence described the Goldman Sachs risk system, SecDB (which stands for securities database). It read: “Unbeknownst to most of the non-strategists, you could see basically every position and holding across the company, whether you were supposed to or not.” Without some digging we can’t know that the sentence is true – but why did it cause such a reaction? It was pretty well buried in a blog post by Antonio Garcia-Martinez, a former Goldman “quant” (financial analyst). The post is a long, kiss-and-tell piece about his reasons for joining Goldman, his experiences there, why he left, and why he’s happier at his new start-up company. He says a number of unflattering things about Goldman Sachs in his post. So do a great many people, for that matter – every day. So why did Goldman Sachs bother making Garcia-Martinez delete this particular sentence, out of the reams of scandalous things said about them, and then contact Business Insider’s Clusterstock blog (which had reprinted it) to deny that it was true ? Because it could have a serious impact on Goldman’s future. First, consider the effect a revelation like this would have on Goldman’s already-battered client relationships. The firm is struggling to overcome the now-public knowledge that it bet against some of those clients, causing them financial harm while claiming at the same time to “serve their needs.” Personal relationships can influence a business deal even more than the corporation’s reputation, which is probably one reason Goldman’s still around. A corporate exec may continue to place his business with them even after he’s heard the bad stuff, as long as he likes and trusts hiscontact there. But what if our exec knew that his trusted “friend” at Goldman was aware of every position Goldman or its clients were taking against him (or had taken in the past), and that the guys betting against him knew instantly what he was doing? He might not want too much to do with his “friend” after that. Then there’s the question of market manipulation. Goldman has approximately 15% of the entire derivatives market. If its traders can immediately cross-check any deal they negotiate against what’s happening across 15% of the market, in real-time, that could raise serious legal issues. And it could seriously undercut statements like these, in which Goldman’s senior management tried to defend itself from accusations of fraud: “We certainly did not know the future of the residential housing market in the first half of 2007 any more than we can predict the future of markets today. We also did not know whether the value of the instruments we sold would increase or decrease. ” (emphasis mine) If they and their employees were tracking every deal in real-time they had a better picture of the those instruments’ value than they let on. A database like the one Garcia-Martinez described, if it exists, would be an invaluable tool in getting a jump on the market – or manipulating it. But wait: it gets worse. David Viniar, Goldman’s CFO, testified under oath to the Federal Crisis Inquiry Commission and claimed that Goldman didn’t track its derivatives deals separately from its other transactions. FCIC panel chair Angelides pressed him: “Are you telling me you have no system at your company that tracks revenues or assets of contracts, and liabilities and payments under contracts? You have no management reports, no financial reports that track these contracts?” “I’ve never seen one,” Viniar answered. The Commissioners seemed to verge on accusing him of lying. “Nobody here really believes (that),” said one. Flash back to February of this year, when David Viniar said this in a presentation to investors : “Technology is fundamental to everything we do, from revenue-producing activities to enabling much of the control infrastructure of the firm.” And here’s another quote, from Goldman’s Business Principles: “We take great pride in the professional quality of our work.” As the Wall Street Journal reported, Goldman has said that “credit trading desks … are separated by industry group … (and) traders are indifferent to whether they are selling clients a bond or a credit derivative.” The Journal added: “The firm also said its technology systems firm-wide don’t single out derivatives transactions.” Now comes the part of the movie where we place our sentence, that jigsaw puzzle piece, into context so that we get its full meaning: ” The Goldman Sachs risk system is called SecDB (securities database), and everything at Goldman that matters is run out of it. … Database replication was near-instant , and pushing to production was two keystrokes. You pushed, and London and Tokyo saw the change as fast as your neighbor on the desk did (and yes, if you fucked things up, you got 4AM phone calls from some British dude telling you to fix it). Regtests ran nightly, and no one could trade a model without thorough testing … Unbeknownst to most of the non-strategists, you could see basically every position and holding across the company, whether you were supposed to or not. The whole thing was so good …” He’s saying that Goldman Sachs has a first-rate, centralized data system that captures each deal in detail, and that everyone can see it as soon as it’s posted. What’s more, if I understand him correctly, he’s saying that employees are required to run a detailed model of their deals before they can post them on the system. And all this information is stored on a database. How can a system can do all this and yet be unable to distinguish between a bond and a derivative? Nevertheless, David Viniar testified under oath that Goldman’s systems were so unsophisticated that he couldn’t even tell the FCIC how much profit the company made from derivatives. Eventually, under continued pressure, Goldman provided the FCIC with an estimate which amounted to 25%-35% of its 2009 revenue. Yet Goldman is telling investors it won’t lose any revenue as a result of the financial reform bill , and analysts believe them. “They’ve clearly seen the writing on the wall and are planning their moves ahead of time,” said one. That brings us to Goldman’s plans to shut down its proprietary trading unit and spin it off into an independent hedge fund — or move it into Goldman’s asset management arm. Here’s a question that probably hasn’t been asked yet: Do they plan to use Goldman’s SecDB, or any other Goldman systems, in that asset management firm? If this trading unit is moved into a hedge fund, will that fund ‘rent’ its computer systems from Goldman? Will all the traders and ‘quants’ at these various organizations be able to ‘see’ deals happening in real time? That could trigger calls for an SEC investigation or other actions to prevent Goldman from improperly using computer data. And it could raise questions about the other big banks’ systems, too. It’s understandable why, given the implications of this nerdy sentence, Goldman would dispatch its publicists to tell Clusterstock it isn’t true. As for Garcia-Martinez, he was asked why he deleted the sentence. ” Prudence is the better part of valor ,” he answered — followed, no doubt, by a click as a gloved hand placed the telephone back in its cradle. Or course, this is no thriller. But the story raises serious questions, ones we should be asking anyway. If a bank is “too big to fail,” its data is “big enough to misuse.” It also shows why we need strong regulations behind the financial reform bill, to make sure that information doesn’t become another “financial weapon of mass destruction.” And it shows why we need to end “too big to fail.” The story also illustrates how much we don’t know about what the big financial players are doing. It reminds us that we wont be able to protect the economy from future Wall Street crimes unless we keep investigating the ones that have already taken place. _______________________________________________________________ Richard (RJ) Eskow, a consultant and writer (and former insurance/finance executive), is a Senior Fellow with the Campaign for America’s Future. This post was produced as part of the Curbing Wall Street project. Richard also blogs at A Night Light . He can be reached at “rjeskow@ourfuture.org.” Website: Eskow and Associates

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Karen Luniw: Success in the City: Leveraging Your Brilliance

August 13, 2010

Did you know that right now, right this moment you have the ability with what you already have to leverage your own personal brilliance in order to build your business? Well, you do. One of my favorite things to share with groups I speak to is about how their brain works. Often people claim that their processing capability is less than what I’m about to share with you but no matter how you slice it — it is incomprehensible. The shame is that we don’t always use it to leverage ourselves in our business. The fact is, we work way too hard. Do you go through your day expecting to come across the million-dollar idea? (It’s all relative – for some a million isn’t going to cut it — for others, it’s over and beyond) Next question: Would you be able to recognize the million dollar idea if you saw it? Most people say ‘yes’ at this point. I say it’s not likely they would. This is where we need to start to leverage what you already have — your focus. The fact is, day in and day out, we tend to focus on what’s in front of us and if we’re in business or trying to make a quota — what we’re usually focused on is the problem. C’mon, be honest and think about yesterday — what did you spend most of your day thinking about? It’s a rare bird that can say they were focused solely on the good that’s happening around them. The way our brain works means that whatever we’re focused on, whatever messages we constantly feed it (which turn into beliefs) in turn sets off a mechanism that I compare to a huge radar dish that is constantly scanning the environment to prove us right. I’ll repeat that – whatever we consciously choose to focus on – our brain looks for in order to prove us right….whether it’s right or wrong. Ever lose your keys temporarily? When you did, you were likely muttering to yourself, ‘I can’t find my keys,’ ‘They’re not here.’ Notice what you’re prompting your brain to do. You’re prompting it to prove you right even though your subconscious mind can process over 400 billion bytes of information per second and it knows EXACTLY where your keys are — it can’t send your conscious mind that sensory information because it would be contradicting your focus that ‘the keys are not here.’ It’s the same with us at work. If we’re constantly focused on the problem or the challenges that are facing us — we will find them — it cannot be any other way. The great news is that you can leverage this knowledge and create an almost unfair advantage in your work and business. If you truly start to shift your focus to be expecting the million dollar idea to show up — your subconscious will start to scan the environment for it. This is the first thing you can do to start leveraging your brilliance for your business. If the million dollar idea is there (and it is) if you keep your focus – you will have no choice but to see it. This is just the start in leveraging your brilliance — next, I’ll share how the power of your story can attract all the business you want and how an amazing natural law proves that you can have what you desire for your self and your business. Remember, if you want this to be easier, contact me and we can work together to make this process easier, faster and with great results!! Karen Luniw is the author of Attraction in Action: Your How to Guide to Relationships, Money, Work and Health and is a coach who helps people break through blocks in their personal and business lives. For inspiration, check out her Top 10 Law of Attraction Tips for 2010 movie. There are huge clues in the movie to help you move further towards your goals.

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Vitaliy N. Katsenelson: Capitalism — A True Love Story

August 10, 2010

In the 1980s, in Soviet Russia, a few times a year my class walked to a movie theater where we were shown a documentary. Attendance was mandatory. The documentaries were different but the themes were the same: to the accompaniment of patriotic music, we learned about the righteousness of socialism, the greatness of Mother Russia, and the intelligence and foresight of our great leaders. To demonstrate how good we had it, we were shown images of “decaying” American capitalism. Of course, capitalism did not get the benefit of patriotic music as we were shown the poverty-stricken homeless, the KKK burning crosses and lynching blacks, and Russia-hating capitalists being poisoned by hamburgers (of course, later I learned this part about hamburgers was not a complete lie). Last year Americans voluntarily spent a few million dollars to see a documentary by Michael Moore: Capitalism: A Love Story . But don’t kid yourself, this piece of work is not a documentary, it lacks objectivity and has no intention of seeking the truth, and it is anti-American and anti-capitalist propaganda. Mr. Moore is a talented propagandist; in Soviet Russia this documentary would have gotten him a medal and elevated him into a state hero. A successful propaganda initiative has to have three elements: (1) to influence attitudes, instead of providing information, (2) to selectively present facts (i.e., lying by omission) to achieve a certain synthesis, and (3) to get an emotional rather than a rational response. There is little information in this movie. Moore spends the bulk of the film going through our country’s trash and presenting it as the main course. For instance, a corrupt judge sentences innocent teenagers to spend months at a privately owned (i.e., for-profit, nongovernmental) youth-correction facility, while the judge is getting kickbacks from the facility owners. Moore interviews these poor teenagers, and we feel bad for them, as we should. We feel angry. Moore directs this anger towards capitalism (i.e., private enterprise): it is rotten and corrupt. Of course, the fact that corruption and bribery are the rare exception in the US, not the rule (as in Russia), is never mentioned. Really, if you want to make a successful propaganda movie, you must evoke emotion and rightly or wrongly direct it at your subject of hate — in Moore’s case, capitalism. Moore shows families being evicted from their houses, in which some of them have lived for twenty years, and some of them have kids. Again, we feel bad for these people, we feel their pain, and we want to help. We are angry. That’s what Moore wants. But should we be angry at the bank that has given these people a loan? Or perhaps we should accept the fact that some people will make bad financial decisions, and they’ll pay a price. It is the easiest thing to blame a bank, or capitalism — they are not very popular today. But let’s do the impossible, let’s humanize a bank. Let’s say you and I and a few friends put our life savings together and start a bank. We take deposits and make loans. Should we “forgive” a loan on a house to a person who overextended, made bad financial choices, or found himself facing hardship and unable to earn his way out of it? If we do enough of this “forgiving” we’ll go bankrupt, our kids won’t go to college, and we’ll need to ask someone else to “forgive” us for the loans on our houses, credit cards, etc. I am not even mentioning our depositors losing their money (and the FDIC — the taxpayer — bailing them out) and our employees losing their jobs. So the heartless bank — you and I and a few friends — have to make a choice between sacrificing the well-being of our families for the sake of strangers. What would you do? See, this point is too rational and lacks the sensationalism of good propaganda; and thus Mr. Moore, who I am sure thought of it, omitted it. Moore attacks BofA for not resorting to charity and not extending a loan to a factory in Michigan, even after BofA received TARP money. The same logic I just went through applies to the huge, unpopular BofA. Should BofA have thrown away money in a loan to the factory, knowing that the factory would not be able to repay it? Is this not what got us into the present problem in the first place? Banks and Wall Street in general played a role in today’s crisis, but they were just one of many responsible players. Consumers in pursuit of keeping up with the Joneses overextended themselves (with the exception of cases of outright fraud, no one was forced to buy a bigger house). Rating agencies were getting paid by the customers they were rating. The Federal Reserve kept rates at very low levels for too long, politicians pressured lending at any cost, regulators were not regulating – and the list goes on. Vilifying banks as the only culprit is intellectually dishonest and a very myopic way to look at this complex problem, and Mr. Moore does just that! Moore brought a brigade of priests to proclaim: “Capitalism is evil, immoral”; “Jesus doesn’t like the rich”; “the rich will have a hard time getting into heaven.” Two employees from a factory, talking on camera, made a really important point about capitalism. They said something along the lines of, “Maybe we should start a cooperative or something, but no, we cannot; we don’t have the money, we are not capitalists.” Ayn Rand said it well in Atlas Shrugged: “But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man’s capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy?” Moore neglects to admit that capitalism has brought people out of poverty and socialism sunk them there. He blames rising health-care costs on HMOs, though HMOs are just a pass-through vehicle between payers and service providers. He accuses capitalism as a system that “allows getting away with paying so little.” He offers no alternative to our “broken” capitalism system other than let’s have “democracy.” This is laughable, as democracy is not a market system, it is a political system. What he wants is a command-based economy – the Soviet Russia that failed so miserably. He wants Mr. Mouch from Ayn Rand’s Atlas Shrugged, a mediocre bureaucrat who failed at everything in his life, to be put in charge of Mr. Moore’s version of a “democratic” economy (still not sure what that means). Mr. Mouch decided how much everyone produced, at what prices goods were sold, and what “fair” wages everyone got paid. In the end, despite sacrifice after sacrifice, Mr. Mouch’s economy collapses. Mr. Mouch’s visible “fair” hand fails to accomplish what the invisible “impartial” hand of the free market accomplishes so effortlessly. Mr. Moore’s propaganda flick ends with pictures of the aftermath of hurricane Katrina. The images are powerful, full of emotion, and again in his final misdirection, Moore manages to blame it on capitalism. Vitaliy N. Katsenelson, CFA, is a portfolio manager/director of research at Investment Management Associates in Denver, Colo. He is the author of “Active Value Investing: Making Money in Range-Bound Markets” (Wiley 2007). To receive Vitaliy’s future articles by email, click here .

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‘Other Guys’ End Credits Feature Animated Financial Crisis Commentary (VIDEO)

August 10, 2010

There are times during the new Adam McKay/Will Ferrell movie, “The Other Guys,” in which the movie subtly acknowledges that it is something of a post-crash comedy. There’s some pointed bagging on the incompetence of the Securities and Exchange Commission, for example, as well as some cute meta-media commentary in which a New York Observer reporter sullenly adds, “…online” to his introduction while another vapid journotart talks about representing “TMZ’s Print Edition.” But the movie takes it to another level during the end credits, which is an amusing animated sequence explaining Ponzi schemes, TARP, and the inbalance of CEO pay. [WATCH] The credit sequence is the work of Picture Mill . I found the animated sequence to be a pretty hilarious addition to the movie, but take that with a grain of salt: I’m just the sort of person to bring “Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager” on vacation to read, for “fun.” [Would you like to follow me on Twitter ? Because why not? Also, please send tips to tv@huffingtonpost.com -- learn more about our media monitoring project here .]

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Mark V. Vlasic: The Next Financial Reform Floodgate

July 30, 2010

A lot can turn on an active verb. Hamlet said, “To be or not to be–that is the question.” The same applies to the new Dodd-Frank financial reform bill’s whistleblower provisions, signed by President Obama last week, which requires that any whistleblower providing “original information” leading to a penalty over $1 million “shall” receive between 10 and 30% of that collection. For many companies, a world of hurt will soon turn on that single word, “shall,” unleashing a whirlwind of decentralized private enforcement for a public issue that’s taken even greater importance in the Obama administration and the Department of Justice’s Criminal Division–the nexus of corruption, bribery, and terrorism. The Foreign Corrupt Practices Act of 1977 (“FCPA”) was enacted to make it unlawful for certain classes of persons and entities to offer or provide money or anything of value to officials of foreign governments or foreign political parties with the intent to obtain or retain business. This criminal statute, which permits jail time for its (often white collar) offenders, applies to all U.S. persons and certain foreign issuers of securities, as well as foreign firms and persons who cause, directly or through agents, an act in furtherance of such a corrupt payment to take place within the territory of the United States. The new bill will empower the SEC to reward FCPA whistleblowers financially. For anyone who remembers the movie Syriana with George Clooney and Matt Damon, the FCPA is often associated with shady dealings and government contracts in far-away places. With the new financial reform law, however, acts in distant countries will haunt businessmen here at home. These new whistleblower “bounty” provisions mean that well-meaning employees (or even disgruntled employees with a bone to pick), are now incentivized to do well by doing good – collecting monetary rewards from Uncle Sam, while helping put U.S. executives in prison for violations of the FCPA. This is partly about foreign policy. President Obama’s foreign policy sees the roots of bellicosity in civil society, meaning that lawlessness abroad can become lawlessness exported. With the stroke of a pen, President Obama not only democratized the global fight against corruption, he created a new weapon against the sorts of cultures that breed violent extremism, whether in Afghanistan or Pakistan, India or Russia. But foreign policy will be far from the minds of the most immediate beneficiaries of the new law. To be blunt, the word “shall” will open up a world of financial security for hundreds of potential new whistleblowers, rewarded for their candor and courage with potentially enormous payments. This is especially the case when you consider the penalties paid by companies for FCPA-related offenses. In 2010, BAE paid $400 million, and in 2008 Siemens settled a FCPA mater for a staggering $800 million. With settlements–now mandatory–likely to run the hundreds of millions, you don’t need to be a mathematician to know a 10 to 30% cut will provide a prove powerful incentive to cooperate with the government. For these new bounty-hunters, just as much turns on the word “shall,” much will also turn on how the statute is translated into practice. Two major inflexion points will be: (1) the discretion exercised by the officials at the Securities & Exchange Commission, and (2) how whistleblowers can avoid the potentially adverse consequences of disclosing corruption. Let’s take those in turn. As the Securities Docket blog reports, “It will be interesting to see how the SEC exercises its discretion here.” We’ll say. The legislation gives the SEC complete discretion to determine the amount of the award. They’ll be considering factors such as the significance of the whistleblower’s information and the degree of assistance provided. In other words, the decision to blow the whistle is only the beginning. This all means that whistleblowers will need to ensure that they are as helpful (substantively and process-wise) to the SEC as possible in order to receive the maximum award. The second question is even more pressing for the whistleblower, considering the hundreds of millions of dollars in penalties that firms have paid for FCPA violations. With these stakes, the most vulnerable actors in the new system will be–no surprise here–the whistleblowers themselves. To cite another movie, anyone who saw The Insider (where Russell Crowe plays a whistleblower employed by a tobacco company) remembers the world of fear that can envelop someone exposing corrupt practices. Experience shows that whistleblowers can be put through challenging and even dangerous experiences as a result of their actions. A recent study by professors at the University of Chicago and University of Toronto found that 82% of named whistleblowers experienced harassment or altered responsibilities. Many said, “If I had to do it again, I wouldn’t.” True, the new law requires protections against retaliation. A wrongfully discharged individual will be entitled to reinstatement, twice back pay, litigation costs, and reasonable attorneys’ fees. With these stakes, however, it’s likely that whistleblowers will decide that the greatest insurance is anonymity. The law provides that whistleblowers can submit information anonymously, as long as they are represented by counsel (and, of course, disclose their identity prior to receiving the award). In the manure of corruption, let a thousand flowers bloom. By allowing counsel to represent such whistleblowers, Obama’s financial reform bill will also empower a new generation of lawyers to do well by doing good – helping fight corruption by helping whistleblowers bring these cases to light. Michael Signer, a 2010 candidate for the Democratic nomination for Lieutenant Governor of Virginia, is managing principal of Madison Law & Policy Group PLLC, where he works on financial regulation matters. Mark Vlasic, a former prosecutor and head of operations of the World Bank’s Stolen Asset Recovery Initiative, works on international and anti-corruption matters as a partner at Ward & Ward PLLC.

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Don McNay: Was "Financial Reform" Really Robin Hood – In Reverse?

July 18, 2010

At the dark end of the street That’s where we’ll always meet -Gram Parsons One the insights I got from Gary Rivlin’s book, Broke USA, is that people often use payday lenders because they don’t have access to traditional banks. I didn’t realize that many banks won’t give a checking account to people with bad credit. Under the alleged “Financial Reform” changes, banking services for lower income people is only going to get worse. “Too big to fail” banks are racing to charge fees for checking, raise the minimum balance required to get free checking and hitting consumers with a bunch of nickel and dime charges. Those nickels and dimes will add up to billions in profits for the banks we bailed out only two short years ago. In reaction to financial reform, Jamie Dimon, whose Chase Bank earned a $4.8 billion profit last quarter, seemed to speak for all of Wall Street when he told the New York Times, “If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger.” The burger is going to come out of the hides of their poorest customers. As payday lenders and others in the poverty business have found out, it is easy to stick it to poor people. They have the fewest options. More and more of them will fall out of the traditional banking system altogether. They will cash their paychecks at Wal-Marts, liquor stores and payday lenders. “Financial Reform” will be a boom for people in the payday loan business. There will be many new customers who need bank-like services. It’s almost like Congress implemented a plan of “Reverse Robin Hood.” Rob from the poor to give to the rich. It is not really a surprise. Reverse Robin Hood is a good way to describe the past couple of decades. Wall Street made much of its profits sticking it to Main Street. I wonder what “Financial Reform” actually accomplished. As Paul Volcker noted, the bill is so watered down that it really did little to avoid financial meltdown. We had a system that worked for 80 years. It was called Glass-Steagall Act. It became law in 1933. Under Glass-Steagall, banks were banks and brokerage houses were brokerage houses. They stayed in the businesses they knew best. And, more importantly, each was required to stay out of the business of the other. Glass-Steagall fell during Bill Clinton’s administration. The person who championed its fall was Dr. Lawrence Summers. The same Dr Summers who went on to become president of Harvard and who is now President Obama’s chief economic guru. With Dr Summers whispering in the President’s ear, it’s easy to see why bringing back Glass-Steagall was not on the table. I’ve been championing a concept first proposed by Arianna Huffington and others at Huffington Post: Move Your Money. You can learn more about it at h ttp://moveyourmoney.info/ I’m hoping that two things will happen. First is that people keep moving their money from “too big to fail” giants to community banks and credit unions. Second is that the community banks and credit unions have an open door to the segment of society that the big banks are running off. Being fair to your customers is a great marketing opportunity for community banks and credit unions. Everyone knows that the Wall Street banks have not played fair. If you need further proof, call Citibank and try to speak to a “customer service” representative. Making money with small depositors is hard work. But it can be profitable. It’s not the multi-billion dollar casino games that Wall Street has been playing, but it is a money-making, steady business. It provides a service at a decent margin and makes their communities better places to live. Small banks and credit unions can make or break a community. They can truly add to the quality of life. I doubt Main Street banks will be looking for a future bailout. Most of them missed out on the first round of handouts. Banks can make money without squeezing every last nickel out of their customers. Banks can make money by doing good, just as George Bailey showed us in the movie, “It’s a Wonderful Life. ” I’m counting on people to move their money and I’m counting on community banks and credit unions to do the job that Wall Street banks ought to be doing. If it doesn’t happen, I’m counting on it being a big year for the payday lending industry. Don McNay, CLU, ChFC, MSFS, CSSC is an award-winning financial columnist and Huffington Post Contributor. You can read more about Don at www.donmcnay.com McNay founded McNay Settlement Group, a structured settlement and financial consulting firm, in 1983, and Kentucky Guardianship Administrators LLC in 2000. You can read more about both at www.mcnay.com McNay has Master’s Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University. McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.

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Mark Silver: Why Marketing Is A Critical Part of the Solution to Our Woes

June 27, 2010

At 1:10 p.m. I’m standing in line at the post office. I know it’s 1:10 p.m. because my iPhone prayer app lets loose with a resounding call announcing the time for the midday prayer. The three other people in the post office avoid looking at me. Or maybe it doesn’t bother them. I carry the awareness of the waiting prayer for two hours, until I make it back home to my office. I do the ritual washing of my hands, face, and feet, take out my prayer rug, and face northeast. Then I breathe. My prayer carries me through various positions, my forehead approaching, then touching, the floor, then rising up again. Because the midday prayer is done silently, the silence of the devotion carries me. I’m grateful for this, because my heart is trembling with grief. Struggling to Express Grief The gushing bleeding of oil in the Gulf of Mexico is not anything I can contain. I alternate between numbness, denial and grief. It’s simple: the lifestyle that we’re living, that I’m living, is unsustainable, and it’s killing many things in this world. We know this. It’s not a surprise, but it’s hard to keep that much pain present. I believe that our unexpressed grief is a significant fuel on the fire of our unsustainable lifestyle. Grief for the loss of life, the loss of the hope, the loss of beauty and connection. Have you heard of Farmville? It’s a virtual game within Facebook where you can run a virtual farm. Millions of people are playing this game on a daily basis. Even though it’s a free game, you can spend real money on it if you choose to. And people choose to. More than US$1 billion annually is spent on this game alone. What are we doing? Where are we putting our resources? This is not about blame. I don’t blame anyone for numbing out to what’s going on. Marketing Has Gotten Very Sophisticated Over the years, more and more psychological tricks have been implemented in marketing and product development. Add extra nicotine to cigarettes, put cheap, high-alcohol beer in convenience stores, make porn and video games and violent movies easily accessible. Put marketing messages everywhere so that they are nearly inescapable. And make those marketing messages full of the promise of a wealthy, sexy lifestyle that the vast majority of the world’s population can’t reach. The result? A loss of hope. A disconnection from the true source of our happiness and nourishment. An ever-increasing consumption of material goods. Resources, money and time, end up being funneled to the very things that continue to hurt us all so much. Our economy, our marketplace is deeply dysfunctional. Billions spent on war, chemicals and oil, a small fraction of that spent on things that really make a positive difference in our lives. And the rest spent on numbing out to the powerlessness that we all feel when facing it. Hey, Let Go of That Despair It’s important to face things as they are. Expressing grief is something I highly recommend. But don’t indulge in despair. Despair is just another way of avoiding grief. Despair is a decision that things will never work out, that there is no hope. Instead, think about marketing. Well, first indulge your heart in love, then think about marketing. Yes, I Said Marketing There are so many good people doing good things. Sauvie Island Organics here in Portland has a community-supported agriculture program, which means that up to 400 families buy a share in the farm, and then share in the harvest. Delicious, local, organic food delivered directly from the farm. They have openings. Huh? There are over 1.5 million people in the Portland area, and this farm hasn’t filled all 400 openings? So much of our attention is taken up in distraction by our dysfunctional economy. Fast food instead of fresh, organic vegetables, for instance. The healing work that amazing people are doing in sustainable food, in holistic health, in alternative energy, needs to take up a lot more of the attention and resources. Our local Hollywood Video store is being shuttered because the parent corporation, Movie Gallery, Inc. filed for Chapter 11 bankruptcy. I’m guessing that’s because the entertainment dollars have shifted to online downloads and Farmville, among other things. But wouldn’t it be amazing if they went bankrupt because all of those millions of dollars went to healers, coaches and practitioners of all stripes who were supporting people in regaining wholeness and connecting with each other in meaningful ways instead of zoning out in front of screens? Marketing Is a Piece of the Answer We find ourselves in urgent times. There is a desperate need for love, acceptance, and healing. The grief I feel at the distance between where we are and where my heart so longs to live is profound. If we are going to heal the world, we are going to do it one imperfect step at a time. We need political activism. We need internal healing. We need love and community. And we need the people doing the good work locally, sustainably, beautifully to be visible. To take up space. To be the recipient of the over-abundance of resources flowing through our culture. There is a way to do marketing with integrity. There is a way to do it with love and heart and be very effective. If you struggle with marketing or business even a little bit because of how you’ve seen marketing used, I’m with you. I share that pain.But please don’t abandon the airwaves to those hocking greed and dissatisfaction. Instead, open your heart to marketing. Open your heart to business. Business is in pain, it’s sick. Don’t abandon it. Bring your heart, engage with love and integrity, and let’s see if we can come together to claim the space and bring the healing we are all so desperate for. By the time my forehead has touched the ground for the final time at the end of my prayer, my heart has returned to love. It has found hope and inspiration once more. I remember that the weight of the world is not on my shoulders alone. You and I are in this together. Let’s take up the space the Divine has given us, and bring your good work out into air, where everyone can see it. Form your marketing in love, bring it out in inspired action, and connect with the people who need what you do so much more than the alternatives they’re faced with.

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Mark Cuban Will ‘Most Likely’ Tender Lions Gate Shares To Icahn

June 10, 2010

Found via LA Times , Mark Cuban tells CNBC he’s “most likely going to tender” his shares of Lions Gate to Carl Icahn. Such a move would make Icahn the movie and TV studio’s largest shareholder, and move Icahn closer to taking control of the company.

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Wal-Mart Sees World Cup Sales Boom in Countries Reaching Final

June 7, 2010

By Sarah Shannon June 7 (Bloomberg) — Wal-Mart Stores Inc. , which has outlets in eight of the 32 countries competing in the soccer World Cup, anticipates sales will boom in those markets should their teams reach next month’s final match. Revenue at stores open at least a year in the nations that contest the final will probably gain by an additional 2 to 4 percentage points over the tournament’s monthlong duration, Wal- Mart’s international chief marketing officer Rick Bendel said by phone from Bentonville, Ankansas. Countries whose teams make the semi-final may see a 1 percent to 2 percent benefit, he said. “It’s a television event, and what goes with TV is fresh food, drinks, TV sets, sofas, memorabilia, mugs,” Bendel said. In the U.K., where Wal-Mart’s Asda is the second-biggest supermarket chain, the event could drive “hundreds of millions of pounds” in additional revenue, he said. Wal-Mart has an exclusive global agreement with a subsidiary of FIFA, soccer’s governing body, to sell memorabilia with the patented term “World Cup” on items such as paper plates, beer vessels and balls. The retailer, which has outlets in 14 countries outside the U.S. including World Cup contenders Brazil, Chile, Mexico, Japan, Honduras and Argentina, will face competition from rivals such as Britain’s biggest supermarket company Tesco Plc , which is sponsoring the England team. Retailers are tapping the fervor surrounding the World Cup with special products and in-store displays. DSG International Plc , Britain’s largest consumer electronics retailer, is offering 10 pounds ($15) in cash for every goal England scores to customers buying a television for more than 599 pounds. Kingfisher Plc ’s B&Q home-improvement chain in the U.K. is stocking gnomes and wheelbarrows with England’s St George flag. ‘New Dimension’ Wal-Mart sees potential for similar global deals to the FIFA agreement, whose terms Bendel wouldn’t disclose. “It’s really great that FIFA approached us,” Bendel said. “It’s a signal of the fact that this is a new dimension for Wal-Mart in terms of leverage. It might open up channels for license suppliers, the movie industry etc. to consider Wal-Mart as a slightly better partner.” The executive said Wal-Mart’s planned 778 million-pound acquisition of Netto’s 193 U.K. discount supermarkets shows the retailer has “tremendous belief” in growing the Asda unit, “when they could be investing in some developing markets.” Asda’s U.K. market share fell to 16.8 percent in the three months through May 16, according to Kantar Worldpanel, leaving it 0.5 percentage points ahead of third-placed J Sainsbury Plc. To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net .

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McDonald’s Recall: ‘Shrek’ Glasses Contain Cadmium

June 4, 2010

LOS ANGELES — Cadmium has been discovered in the painted design on “Shrek”-themed drinking glasses being sold nationwide at McDonald’s, forcing the burger giant to recall 12 million of the cheap U.S.-made collectibles while dramatically expanding contamination concerns about the toxic metal beyond imported children’s jewelry. The U.S. Consumer Product Safety Commission, which announced the voluntary recall early Friday, warned consumers to immediately stop using the glasses; McDonald’s said it would post instructions on its website next week regarding refunds. The 16-ounce glasses, being sold for about $2 each as part of a promotional campaign for the movie “Shrek Forever After,” were available in four designs depicting the characters Shrek, Princess Fiona, Puss in Boots and Donkey. In the animated comedy, which debuted May 21 as the latest installment of the successful DreamWorks Animation franchise, the voice of Shrek is performed by Mike Myers of “Austin Powers” fame, Cameron Diaz performs as Princess Fiona, Antonio Banderas as Puss in Boots and Eddie Murphy voices Donkey. The movie has been No. 1 at the box office since its release. The CPSC noted in its recall notice that “long-term exposure to cadmium can cause adverse health effects.” Cadmium is a known carcinogen that research shows also can cause bone softening and severe kidney problems. In the case of the Shrek-themed glassware, the potential danger would be long-term exposure to low levels of cadmium, which could leach from the paint onto a child’s hand, then enter the body if the child puts that unwashed hand to his or her mouth. Cadmium can be used to create reds and yellows in paint. McDonald’s USA spokesman Bill Whitman said a pigment in paint on the glasses contained cadmium. “A very small amount of cadmium can come to the surface of the glass, and in order to be as protective as possible of children, CPSC and McDonald’s worked together on this recall,” said CPSC spokesman Scott Wolfson. He would not specify the amounts of cadmium that leached from the paint in tests, but said the amounts were “slightly above the protective level currently being developed by the agency.” Wolfson said the glasses have “far less cadmium than the children’s metal jewelry that CPSC has previously recalled.” Concerns about cadmium exposure emerged in January, when The Associated Press reported that some items of children’s jewelry sold at major national chains contained up to 91 percent of the metal. Federal regulators worry that kids could ingest cadmium by biting, sucking or even swallowing contaminated pendants and bracelets. The consumer protection agency has issued three recalls this spring for jewelry highlighted in the AP stories, including products sold at Wal-Mart, the world’s largest retailer; at Claire’s, a major jewelry and accessories chain in North America and Europe; and at discount and dollar stores. Those recalls all involved children’s metal jewelry – and all of that jewelry was made in China. Manufactured by ARC International of Millville, N.J., the glasses were to be sold from May 21 into June. Roughly seven million of the glasses had been sold; another approximately five million are in stores or have not yet been shipped, said Whitman. Associated Press reporters tried unsuccessfully to buy the glasses late Thursday at McDonald’s in New York, Los Angeles and northern New Jersey but were alternately told the merchandise was sold out, no longer available or “there’ll be more tomorrow.” E-mails sent after business hours to two spokesmen for ARC International seeking comment were not immediately returned. McDonald’s said it was asking customers to stop using the glasses “out of an abundance of caution.” “We believe the Shrek glassware is safe for consumer use,” Whitman said. “However, again to ensure that our customers receive safe products from us, we made the decision to stop selling them and voluntarily recall these products effective immediately.” Whitman said that as the CPSC develops new protocols and standards for cadmium in consumer products, “we adjust as necessary to ensure that our customers can continue to trust what they receive from McDonald’s.” Federal scrutiny of the glasses began last week. The Washington office of U.S. Rep. Jackie Speier, a California Democrat who has proposed strictly limiting cadmium in jewelry, received what a spokesman described as an anonymous tip that testing with an X-ray gun that estimates how much cadmium an item contains indicated the metal was present in the glass paint. Speier’s office requested samples of the glasses from the tipster, and upon receiving them May 27 sent them to the CPSC for further investigation. “Our children’s health should not depend on the consciences of anonymous sources,” Speier said in a statement Friday. “Although McDonald’s did the right thing by recalling these products, we need stronger testing standards to ensure that all children’s products are proven safe before they hit the shelves.” ___ The Associated Press National Investigative Team can be reached at investigate(at)ap.org

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Video: ‘Sex and City’ Sequel Faces Abu Dhabi Ban Over Content

May 31, 2010

May 31 (Bloomberg) — Bloomberg’s Heidi Couch reports on Abu Dhabi being the setting for “Sex and the City 2.” Yet the movie may never be shown there. The Warner Bros. film, released last week in the U.S., moves its high-rolling stars from New York to one of the richest cities in the world — where it has stirred anger even before the United Arab Emirates censors decide if its sexual content is unacceptable.

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Ellen Sterling: The Way We Watched Movies…Remember?

May 29, 2010

In the May 18 edition of the New York Observer Lee Siegel wrote an article titled Ciao to the Cineplex; I Miss Mass Culture! He noted that “The Federal Communications Commission has just decided to allow the Motion Picture Association of America to send recently released films directly to your television or computer before they are released on DVD or Blu-ray” and went on to explain the potential impact this will have on movie-going. Since I, personally, prefer seeing a film in a theater as a member of an audience, this is sad news, indeed. And, equally sadly, it’s already begun to change. Remember what it used to be like when you went to the movies? Did you ever tell your children what it was like when there were no commercials — only coming attractions — in the theater? Have you ever waxed nostalgic for the days when an film advertised to begin at 8 pm actually did began at 8 or, perhaps, a few minutes later, after the trailers? Well, my dear, those days are gone and are probably never going to be seen again. Now, I’m not talking about the 20 minutes of commercials for various products (lots of soft drinks) and TV shows shown before the advertised movie start time. We’re pretty used to this by now and know that if we get to the theater early we’ll be subjected to this. No, what I am talking about is totally different. First, let me explain that here in Las Vegas, movies open weeks — sometimes months — after they open in New York City or Los Angeles. This is true of many large cities — Chicago, Miami, Seattle among them. For example, Crazy Heart, was released in New York and LA on December 16 and in Las Vegas on February 5. After awhile you get used to that. Foreign films are often difficult to find in Las Vegas. Fortunately, the two theaters closest to my home, the Regal Village Square and the Century Theater in the Suncoast Hotel and Casino (Yes! But that’s another story.) are the only two here that regularly play foreign, independent and small films. It’s nice know that even if they arrive months after they play on a coast, they will play here. Eventually. So, that is the overall film-going picture here in Las Vegas. And that is what we expected when we went to the Regal Village Square Friday night to catch City Island before it leaves on Thursday. The showing was advertised at beginning at 6:30. We took our seats about 10 minutes before the show and got what we expected, the last 10 minutes of the series of commercials called “Regal First Look,” (Most likely it is so called in an attempt to make the audience stuck watching it believe it’s a special privilege to get a “first look.”) You know the drill: the 20 minutes of business, a couple of quick commercials (Fandango/Fathom Events) then the trailers for 10 minutes or so and, finally, the film you came to see. That’s what we know and that’s what we expect. Right? Wrong. When we went to buy the tickets we saw that the price had gone up 50¢. That might be understandable in a bad year for movie attendance but, when I reported on ShoWest, the annual convention of film exhibitors this year, I noted they reported that, despite “the number of US-produced films being down 12 percent, attendance was up 11 percent and the box office worldwide totaled a staggering $300 billion.” But, if Regal needed to raise its prices, I guess 50¢ isn’t too bad. So we paid and went in. The usual First Look ended and then we were treated to 26(!) minutes or so of more commercials for TV shows and products no one really needs to know about. There were even two ads for the same TV series on two different stations. Couldn’t both stations be listed in one ad? This ad marathon ended and there were about five minutes of previews. This included one for Princess Kaiulani . It ended with the words “Coming Soon” written in large white against a black screen. The only thing is, the film was showing in the theater already. In the end, we had to pay 50¢ more to have our time wasted. (And, by the way, we also paid for the privilege of sitting next to a man who loudly munched popcorn out of a huge trough and, that finished, started equally loudly on candy. But that’s another story.) We really enjoyed City Island and I wrote a very positive review for it. But that wasn’t the point. On the way out we asked the manager, who turned out to be a thoroughly dyspeptic, nasty woman, about the length and abundance of the ads. She explained as if she was talking to recalcitrant four year-olds, that we were wrong. “It’s always been like this. There are 15 minutes of ads and 15 minutes of coming attractions.” No, I responded, there are always a couple of minutes of ads after the First Look stuff, then the trailers for a few minutes and, finally, the film. She was insistent (and very rude). “It has always been like this. And blame CineMedia, not us. They place the ads.” she said, raising her voice. She then turned her back, walked into the box office from whence she’d come and slammed the door. It was charming. In researching the issue, I found a terrific website called CaptiveAudience. Browsing it I found Regal is apparently the worst offender. Some theaters do post actual film start times but they’re very difficult to find. I learned that a class action lawsuit had been filed in 2003 against Loew’s Cineplex Entertainment Group for showing ads. It was dismissed. The site quotes Raymond W. Syufy, CEO of Century Theaters. “If we start showing commercials and go that route, then we are blurring the line between the 500 cable channels at home and the experience we want people to have when they leave their homes.” Hooray for Mr. Syufy! So, with more and more time devoted to advertisements in movie theaters, what can we, the people who don’t want to witness the demise of the movie theater culture, do about it? Maybe we should sign the online petitions to end this practice and hope it works. If it doesn’t, I guess I’ll learn to love watching movies at home.

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Dennis Hopper, Hollywood’s Easy-Riding Counterculture Hero, Dies at 74

May 29, 2010

By Laurence Arnold May 29 (Bloomberg) — Dennis Hopper , who drew upon his own rough-edged lifestyle to create menacing villains and devil-may- care outlaws in movies including “Rebel Without a Cause,” “Easy Rider” and “Apocalypse Now,” has died. He was 74. Hopper died today at his home in Venice, California, the Associated Press reported, citing family friend Alex Hitz. Hopper disclosed last October that he had been diagnosed with prostate cancer. “ Easy Rider ” (1969) established him as a counterculture hero and a gifted actor recognized, if not fully embraced, by Hollywood. He was nominated for an Academy Award for co-writing the movie with Peter Fonda and Terry Southern. He also directed it and, with Fonda, co-starred as freedom-celebrating bikers roaming the American Southwest. The American Film Institute in 2007 included “Easy Rider” on its list of the top 100 U.S. movies. The film was a personal expression for Hopper, who had himself been immersed in the drug-fueled culture of beatniks and hippies throughout the 1960s. “I wanted it to be like a time capsule” of that period, Hopper said in a 2008 interview with Bloomberg Television. ‘Apocalypse Now’ After spending four-and-a-half weeks on the road filming the movie, “I came back to 60 hours of film, so it took me a year to edit it,” he recalled. “While I was editing I would listen to the radio and I would hear ‘Born to Be Wild,’ ‘Goddamn the Pusher Man,’ ‘If 6 Was 9’ by Jimi Hendrix , and I’d just start plopping them into the riding sequences. And it’s really the words of the songs that tell the story more than the screenplay.” Among his 150 film roles , he also played a teenage hoodlum to whom James Dean ’s impressionable character is drawn in “Rebel Without a Cause” (1955); a drug-crazed photojournalist in the Francis Ford Coppola-directed “ Apocalypse Now ” (1979); a bomb-loving terrorist in “Speed” (1994); and the leader of a marauding gang in “ Waterworld ” (1995). His own long struggle with drugs and alcohol, which lasted well into the 1980s, at times stalled his entertainment career. “Hollywood has never embraced me, despite the fact I went and lived there,” he told London’s Sunday Times in 2008. Political Conservative He earned his second Academy Award nomination, as best supporting actor, for his role in “ Hoosiers ” (1986) as a onetime-athlete-turned-alcoholic who is enlisted by his son’s coach to help the high-school basketball team. His return to sobriety around that time also coincided with his well-received role as a sadistic villain, Frank Booth, in David Lynch ’s “ Blue Velvet ” (1986). His villainous roles on television included one as a vengeful warlord in the first season of the Fox series “24.” Nike Inc. deployed his manic creepiness in a series of commercials in the 1990s in which he played an obsessed football fan. Unusual for a countercultural figure, Hopper was a political conservative for much of his life and moved left in his later years. “I was the first person in my family to have been Republican,” he told reporters shortly before the 2008 U.S. presidential election. He said he had supported Republicans George H.W. Bush and George W. Bush but was planning to vote for Democrat Barack Obama. Blackballed by Hollywood Hopper was married five times, including an eight-day union with singer Michelle Phillips of the Mamas & the Papas. An artist and art collector, Hopper exhibited his photographs and presented them in a book , “Photographs: 1961-1967.” Dennis Lee Hopper was born on May 17, 1936, in Dodge City, Kansas, where he lived until age 9 on his grandfather’s wheat farm. He became an avid moviegoer and fan of westerns and started acting after his family moved to San Diego when he was 13. During the shooting of “Rebel Without a Cause,” one of his first films, he had a romantic affair with co-star Natalie Wood. That movie was followed quickly by “Giant” (1956), which also starred Dean as well as Elizabeth Taylor and Rock Hudson . Working with Dean — who was killed in a 1955 automobile crash, while production of “Giant” was in progress — made a lasting impression. “I wouldn’t say I learned to be difficult, but I did learn there was another way of doing things,” Hopper told Australia’s Sunday Telegraph Magazine in 2009. He said Hollywood studios “blackballed” him for several years after he resisted the instructions of director Henry Hathaway while filming “ From Hell to Texas ” (1958). He moved to New York City to study for five years under acting teacher Lee Strasberg . Hopper had four children, including one with his fifth wife, actress Victoria Duffy, whom he married in 1996. He filed for divorce from Duffy in January 2010 while in the final stages of his battle with cancer. To contact the reporter on this story: Laurence Arnold in Washington at larnold4@bloomberg.net

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Ian Bremmer: Have We Really Come To ‘The End Of The Free Market’?

May 24, 2010

When you write a book called The End of the Free Market , you can be pretty sure what the first question is going to be: “Do you really believe we’re seeing the end of the free market? Really?” Yes, I do. But there are two important caveats. Not everywhere and (hopefully!) not forever. We’re used to living in a world where we see corporations as the future of political and economic power. Remember the movie “Network”? Ned Beatty as Arthur Jensen standing in a darkened corporate boardroom and thundering at Peter Finch’s disturbed and cowering network news anchor Howard Beale: “There are no nations; there are no peoples. There are no Russians. There are no Arabs. There is no third world. There is no West… There is no America. There is no democracy. There is only IBM and ITT and AT&T and DuPont, Dow, Union Carbide and Exxon. Those are the nations of the world today.” How about Rollerball and Robocop, variations both on the idea that big corporations are drinking the rest of the world’s milkshake–and don’t mind killing people who get in their way? Here’s why you can put those fears aside and worry about something that’s actually happening: One – The free market’s largest, most successful experiment in history, the single European market, has hit some serious turbulence. The kind you experience when trying to land a plane during a hurricane. I think the pilots will get that plane down in one piece–especially since they can safely ignore the screaming passengers on the other side of the cockpit door a little longer. But there’s no guarantee. The latest rescue package may have cleared the plane for landing but there’s plenty of wind and rain between here and the runway. Things will get bumpier before they even out. Not a good advertisement for free market capitalism. Two – The elected leaders of nearly every free market state (with the exceptions of relatively small, well-governed commodity exporters Australia and Canada) are facing serious levels of anti-government public fury. US midterm elections look to take “throw the bums out” to a whole new level. (Bums of both parties.) Gordon Brown is already out, but the British public didn’t have enough confidence in opposition conservatives to give them a majority either. French President Sarkozy has low poll numbers. German Chancellor Angela Merkel’s are even lower. Japanese Prime Minister Yukio Hatoyama can’t even get a dinner reservation. At the moment, none of these leaders is any position to praise the enduring virtues of free markets. Three – After three decades of double digit growth and a strong rebound from the global market meltdown, China is looking pretty strong these days. It’s easy for Beijing to blame the West for the world’s setbacks–and to propose an alternative that, on the surface, appears to promise sustainable prosperity and political stability. China is using state-owned companies, privately owned national champions, and state-dominated investment funds to distort the performance of markets for political advantage. They’re doing this inside China and throughout the developing world, where those big, bad multinational corporations find themselves competing with Chinese and other companies armed with every financial and diplomatic advantage their governments can provide. The title of my book came from a meeting last spring with Chinese Vice Foreign Minister He Yafei. “Now that the free market has failed,” he asked me, “what do you think is the proper role for the state in the economy?” (Coincidentally, He Yafei was the official President Obama found himself negotiating with when Premier Wen Jiabao decided he didn’t want to make a deal on carbon emissions in Copenhagen.) I don’t agree with the premise of his question, and told him so. But I’m pretty confident that that isn’t going to undermine the confidence of his bosses in China’s state-driven model of capitalism. Next week, I’ll answer the question posed by the book’s subtitle: “Who wins the War Between States and Corporations?” Ian Bremmer is president of Eurasia Group and author of The End of the Free Market: Who Wins the War Between States and Corporations? (Portfolio, 2010)

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Martin Luz: Fealty to Folly: Oil Is Dead! Long Live Oil!

May 14, 2010

Memo to oil apologists: When VHS supplanted BetaMax nobody shed a tear. When word processing software replaced typewriters , nobody shrieked about a socialist revolution in the steno pool. And when the jet engine replaced the propeller, there were no protests on the Mall in Washington about a vast supersonic conspiracy. Face it. Technology changes. And the petroleum-based economy is dead. It’s built on antiquated technology that’s killing us and our planet. Now quit your whinging, get over it, and move on. A Drop In the Gulf Since the dawn of the industrial age, human beings have pumped about 46 TRILLION gallons of oil from under the ground ( 1.1 trillion barrels ). Where did it all go? We’ve burned it. We turned it into fertilizers. We turned it into plastics. Among other things. But wait. Where did all those petrochemical “products” go after they were burned, and dispersed, and tossed into trash bins? All that petro-refuse sure as hell didn’t just find it’s way back down the oil well from whence it came. Nope. We’re wallowing in it… in the air, ground, and water. Is it really so hard to picture? Where else do you imagine 46 trillion gallons of oil could possibly go after we’re done with it? And what about the next 46 trillion gallons? And the next 46 trillion after that? In fact, in 2008, the chief of Saudi Arabia’s state run oil company ARAMCO scoffed at peak oil theorist and claimed that there was easily another 500 trillion gallons of conventional and unconventional oil yet to be pumped out, processed, used up and discarded. Oh… Well hooray then. But where will all that oil go? The great Pacific Garbage Patch – a toxic soup of plastic particles – is already estimated to cover an area somewhere between the size of Texas and the size of the entire Continental U.S. ( explanation here ; nauseating video here ). And recently another great garbage patch was discovered, stretching from Bermuda half way across the North Atlantic to the Azors ( icky pictures here ). At the mouth of the Mississippi River, in the Gulf of Mexico, there’s a hypoxic ” dead zone ” the size the state of New Jersey, caused in large part by a run off of petrochemical-based fertilizers. And the carbon toll on the atmosphere is well known… even if denialists still protest. What will planet Earth look like after we’ve processed and discarded 450 trillion more gallons of oil – ten times what we’ve already used and discarded ? Put it this way: the spill in the Gulf will look like a drop in the bucket. The oil economy is like a zombie from the movie Night of the Living Dead… an economic corpse that’s roaming the land and threatening to eat us alive. Fealty to Folly Oil has served its purpose. It was great while it lasted, and it got us to a point where we have the industrial and technological wherewithal to chart a new course. Thanks oil, we say a prayer for the ghosts of the dinosaurs whose flesh and bones we have burned. But we’re no longer primitives who need to animal fat to light our evening meditations, or chase away evil spirits. Hospitals no longer use leeches, or bloodletting, or even mercury thermometers for that matter. Audio cassettes long ago replaced vinyl, and were themselves replaced by CDs, which are now being replaced by MP3 files. Sure it sucked to have to pay good money to replace music I already owned. But some of it I didn’t replace, which turned out OK really. I replaced the timeless stuff that I really wanted, and the other stuff, truth be told, I don’t miss it. And if I do get a nostalgic hankering, for a buck I can download that one song I really miss, revel in its dated novelty, and then re-enter the 21st Century. Facts are facts, and the fact is we can’t afford the socialized environmental cost of having another 450 trillion gallons of oil pumped out of the ground, processed, used up and then strewn all about the place – the Earth isn’t that big. Look at the mess we’ve already made with just the 46 trillion gallons we’ve used so far. (And just because there’s enough wildlife left to fill up several time slots of cable programming on NatGeo, that in no way means that the planet is healthy. Not by a long shot.) Those who are doubling down on the oil economy are like addicts who swear that this last bender and this last bet at the roulette table will cure all that ails us. It’s sheer folly. But they’re too busy living in the past to see it. And yes, it will take Herculean effort, and lots of money to rejigger our economic infrastructure to function on something other than oil. (Let’s not even start on coal.) But what’s the option? Put on your Walkman headset and swing your Hoola-Hoop while you ask your Magic 8 Ball how to make all the problems with the oil economy magically disappear?

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Film Studios Allowed by U.S. to Use Anti-Piracy Technology on TV Equipment

May 10, 2010

By Todd Shields May 8 (Bloomberg) — Movie studios won U.S. permission to disable features on television equipment to prevent copying of films, clearing the way to send first-run films to consumers in their homes. Temporarily restricting TVs and the set-top boxes used for cable service will “enable a new business model” that wouldn’t develop without such anti-piracy protection, the Federal Communications Commission said yesterday in an order . Home viewing of recently released movies over cable and satellite systems would provide revenue for studios such as Viacom Inc. ’s Paramount Pictures and Sony Corp. ’s film division, which have seen DVD sales drop as more people get films through Internet, mail-order and kiosk rental services. The advocacy group Public Knowledge is among opponents who say the plan interferes with viewer choice. The FCC order “‘will allow the big firms for the first time to take control of a consumer’s TV set or set-top box, blocking viewing of a TV program or motion picture,” Gigi Sohn , president of Washington-based Public Knowledge, said in a statement. The Consumer Electronics Association, the Arlington, Virginia-based trade group for manufacturers including LG Electronics USA and Samsung Electronics , said that studios’ wish for a new business “does not mean that functioning products should be disabled by them.” The Motion Picture Association of America in 2008 sought an FCC waiver from rules against disabling video outputs so that its members could send movies over cable and satellite services using “secure and protected digital outputs,” according to the trade group’s petition at the agency. ‘Important Victory’ “This action is an important victory for consumers who will now have far greater access to see recent high-definition movies in their homes,” Bob Pisano , president and interim chief executive officer of the MPAA, said yesterday in a statement. “It is a major step forward in the development of new business models by the motion picture industry to respond to growing consumer demand.” The FCC yesterday said companies could block outputs for a film for 90 days, and said it would review use of the technology after two years. The Washington-based MPAA represents Paramount Pictures, Sony’s film unit, News Corp. ’s Twentieth Century Fox, General Electric Co. ’s NBC Universal, Walt Disney Co. and Time Warner Inc. ’s Warner Bros. Pictures. To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

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News Corp. Says Fourth-Quarter Profit to Fall on Flagging TV, Film Units

May 4, 2010

By Sarah Rabil May 4 (Bloomberg) — News Corp. , owner of the Twentieth Century Fox film studio, said fiscal fourth-quarter results will fall from a year earlier on flagging performances by the film division and the Fox broadcast network. David DeVoe , chief financial officer of New York-based News Corp., made the forecast today on a conference call following third-quarter results that beat analysts’ estimates on the movie “Avatar” and higher cable profit. “Avatar,” James Cameron ’s 3-D science-fiction adventure, produced the bulk of its theatrical revenue in the quarter ended March 31, en route to becoming the top-grossing movie of all time. While local TV revenue recovered in the quarter, the Fox broadcast network’s ad sales dropped amid a slide in viewership. News Corp. fell 59 cents, or 3.8 percent, to $14.81 in extended trading. The shares lost 64 cents to $15.40 in regular Nasdaq Stock Market trading before results were announced. Third-quarter net income fell to $839 million, or 32 cents a share, from $2.73 billion, or $1.04, a year earlier, when News Corp. had a gain from asset sales and a tax benefit, the company said in a statement. Analysts expected 23 cents, the average of 14 estimates compiled by Bloomberg. Revenue rose 19 percent to $8.79 billion, also topping estimates. Operating income increased 55 percent to $1.25 billion in the quarter ended March 31. News Corp. is evaluating uses of its cash, which totaled $8.18 billion at the end of the quarter, and is considering share repurchases and dividends, Chairman and Chief Executive Officer Rupert Murdoch said on the call. Local TV Local TV station revenue increased 18 percent in the quarter, driven by automobile and telecommunications advertising, while the Fox broadcast network’s ad sales dropped amid a slide in ratings. “In the ad market, we are currently seeing strong across- the-board growth particularly in the U.S. and Britain and that bodes well for many of our core businesses,” Murdoch said on the call. Cable network operating income climbed 38 percent to $588 million, as Fox News’s profit gained 31 percent on affiliate fees and higher ad sales. Profit also increased at the regional sports networks, FX and Fox international channels. “Avatar” has taken in $2.72 billion in worldwide box- office receipts since its Dec. 18 release, according to researcher Box Office Mojo . News Corp. began selling the film on Blu-ray and DVD April 22 in the U.S. and Canada. News Corp.’s Wall Street Journal sparked a turf war April 26 when it introduced a local New York section to lure readers and advertisers from the New York Times. Newspaper Profit The newspaper unit’s operating income rose more than fourfold to $131 million on 10 percent ad gains at U.K. publications, 25 percent higher ad revenue at the Journal and favorable foreign exchange between the Australian dollar and U.S. dollar. Anthony DiClemente , an analyst with Barclays Capital, expected newspaper operating income of $83.9 million. The Dow Jones division, which includes the Journal, sued Briefing.com for copyright infringement last month over unauthorized use of its articles and headlines. Murdoch is battling online news aggregators that provide access to subscription material. Excluding some items, profit rose from a year ago. In the year-earlier quarter, the company had earnings of 16 cents a share, excluding the tax benefit, a gain from the partial sale of its stake in NDS Group, and restructuring costs in units including newspapers and book publishing. To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

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Warren Buffett Defends Goldman Sachs As Berkshire Posts A Profit

May 1, 2010

OMAHA, Nebraska — Berkshire Hathaway CEO Warren Buffett declared his support for Goldman Sachs Group Inc. CEO Lloyd Blankfein Saturday, and said he has no plans to sell his company’s stake in the bank. Buffett and Berkshire vice chairman Charlie Munger praised Goldman before a crowd of about 40,000 at Berkshire’s annual shareholder meeting. Both executives said they’re happy with Blankfein’s leadership and said they don’t view the Securities and Exchange Commission’s civil fraud charges against Goldman as a strike against him. “There’s really no reason to think about somebody else running Goldman,” Buffett said when asked whether someone besides Blankfein should be leading the investment bank. The charges filed April 16 have raised questions about Blankfein’s tenure. Buffett previewed his company’s first-quarter earnings report at the meeting at Omaha’s Qwest Center. He said Berkshire rebounded from last year’s first-quarter loss and earned $3.6 billion as the economic recovery began and Berkshire absorbed Burlington Northern Santa Fe railroad. The full report will be released Friday. In the first quarter of 2009, Berkshire lost $1.5 billion. The addition of Burlington Northern more than doubled Berkshire’s regulated businesses unit income to $555 million in the January-March period. The unit also includes utilities, which, along with railroads, operate under government regulations. Buffett said Berkshire’s quarterly results show the economy is improving because manufacturing and retail income grew 85 percent to $477 million. Berkshire’s assortment of businesses, including clothing, insurance, furniture, utility, jewelry and corporate jet companies, gives Buffett insight into the health of the overall economy. Berkshire also has big investments in companies including Coca-Cola Co. and Wells Fargo & Co. Last year’s loss included $241 million on the sale of investments. Berkshire also took a $1.9 billion charge from writing down a ConocoPhillips investment. Buffett has been one of Goldman’s biggest supporters before and since the SEC filed its civil lawsuit against the bank. The government charged that the investment bank misled investors about a deal involving complex mortgage-related investments that later plunged in value. During questioning by shareholders, Munger noted that the SEC vote to file the charges was 3 to 2. He said that if he had been a member of the SEC, he would have voted against the suit. Buffett and Munger both expressed confidence in Blankfein. “There are plenty of CEOs I’d like to see gone in America, and Lloyd Blankfein is not one of them,” Munger said. On Friday, Goldman stock plunged 9 percent on reports that the Justice Department had opened a criminal investigation of Goldman. Buffett said Berkshire’s $5 billion of preferred stock in Goldman is a good investment because it generates 10 percent interest a year. He said the investment includes warrants that can convert the preferred shares into regular stock at $115 a share, a discount from Goldman’s current price of $145.20. “We love this investment,” Buffett said. Buffett and Munger also discussed the financial overhaul legislation now before Congress. Munger said the regulatory system should be changed to be much less permissive for investment banks. The House has passed a version of the bill, which among other things would limit the kinds of lucrative trading that banks including Goldman Sachs do. The Senate has yet to begin debate on its version. Berkshire has objected to one provision of the financial overhaul that could require companies to post collateral on existing derivative contracts. Derivatives are complex investments that have been blamed in part for the 2008 financial crisis and the recession. Banks lost billions of dollars on derivatives, and that and the recession led the government to bail out hundreds of financial companies. But Buffett said he doesn’t believe the bill, as it’s written now, would require Berkshire to post any additional collateral on its 250 derivatives because the company is unlikely to be considered a threat to the system. “If the bill passes tomorrow … we would not have to put up a dime,” Buffett said. Buffett also talked about the European debt crisis. Negotiations were continuing this weekend on a bailout package aimed at helping Greece avoid default on loans that are coming due May 19. Buffett said Greece sets its own budget, but can’t print its own money because it shares the euro currency with 15 other countries. So that limits its options and keeps them from printing money to help with its credit problems. “I don’t know how this movie is going to end,” Buffett said. “This will be high drama in my view.” A growing concern for Berkshire shareholders is who will eventually replace the Buffett, 79, and Munger, 86. Buffett did not offer any new clues Saturday about the plan he’s discussed previously, to split his job into three parts: a chief executive, chairman and several investment officers. Both Buffett and Munger remain in good health and have not announced any plans to retire. Many shareholders, like Dave Taylor of Minneapolis, don’t seem worried about losing Buffett’s leadership someday. “The companies he bought aren’t going to go away,” Taylor said. “He’s got so many smart people working for him. They may not have his personality, but they might have his smarts.” Buffett showcased BNSF by doing interviews in front of an orange cardboard BNSF locomotive and playing with a model BNSF train set. Railroad CEO Matt Rose looked on while Buffett was mobbed by reporters and shareholders. Rose said the transition into Berkshire went smoothly. Buffett also grabbed his ukulele to perform a version of “I’ll Be Working on the Railroad” with the Quebe Sisters Band at the Justin Boots booth before the meeting started. ___ On the Net: Berkshire Hathaway Inc.: http://www.berkshirehathaway.com

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Warren Buffett Defends Goldman Sachs As Berkshire Posts A Profit

May 1, 2010

OMAHA, Nebraska — Berkshire Hathaway CEO Warren Buffett declared his support for Goldman Sachs Group Inc. CEO Lloyd Blankfein Saturday, and said he has no plans to sell his company’s stake in the bank. Buffett and Berkshire vice chairman Charlie Munger praised Goldman before a crowd of about 40,000 at Berkshire’s annual shareholder meeting. Both executives said they’re happy with Blankfein’s leadership and said they don’t view the Securities and Exchange Commission’s civil fraud charges against Goldman as a strike against him. “There’s really no reason to think about somebody else running Goldman,” Buffett said when asked whether someone besides Blankfein should be leading the investment bank. The charges filed April 16 have raised questions about Blankfein’s tenure. Buffett previewed his company’s first-quarter earnings report at the meeting at Omaha’s Qwest Center. He said Berkshire rebounded from last year’s first-quarter loss and earned $3.6 billion as the economic recovery began and Berkshire absorbed Burlington Northern Santa Fe railroad. The full report will be released Friday. In the first quarter of 2009, Berkshire lost $1.5 billion. The addition of Burlington Northern more than doubled Berkshire’s regulated businesses unit income to $555 million in the January-March period. The unit also includes utilities, which, along with railroads, operate under government regulations. Buffett said Berkshire’s quarterly results show the economy is improving because manufacturing and retail income grew 85 percent to $477 million. Berkshire’s assortment of businesses, including clothing, insurance, furniture, utility, jewelry and corporate jet companies, gives Buffett insight into the health of the overall economy. Berkshire also has big investments in companies including Coca-Cola Co. and Wells Fargo & Co. Last year’s loss included $241 million on the sale of investments. Berkshire also took a $1.9 billion charge from writing down a ConocoPhillips investment. Buffett has been one of Goldman’s biggest supporters before and since the SEC filed its civil lawsuit against the bank. The government charged that the investment bank misled investors about a deal involving complex mortgage-related investments that later plunged in value. During questioning by shareholders, Munger noted that the SEC vote to file the charges was 3 to 2. He said that if he had been a member of the SEC, he would have voted against the suit. Buffett and Munger both expressed confidence in Blankfein. “There are plenty of CEOs I’d like to see gone in America, and Lloyd Blankfein is not one of them,” Munger said. On Friday, Goldman stock plunged 9 percent on reports that the Justice Department had opened a criminal investigation of Goldman. Buffett said Berkshire’s $5 billion of preferred stock in Goldman is a good investment because it generates 10 percent interest a year. He said the investment includes warrants that can convert the preferred shares into regular stock at $115 a share, a discount from Goldman’s current price of $145.20. “We love this investment,” Buffett said. Buffett and Munger also discussed the financial overhaul legislation now before Congress. Munger said the regulatory system should be changed to be much less permissive for investment banks. The House has passed a version of the bill, which among other things would limit the kinds of lucrative trading that banks including Goldman Sachs do. The Senate has yet to begin debate on its version. Berkshire has objected to one provision of the financial overhaul that could require companies to post collateral on existing derivative contracts. Derivatives are complex investments that have been blamed in part for the 2008 financial crisis and the recession. Banks lost billions of dollars on derivatives, and that and the recession led the government to bail out hundreds of financial companies. But Buffett said he doesn’t believe the bill, as it’s written now, would require Berkshire to post any additional collateral on its 250 derivatives because the company is unlikely to be considered a threat to the system. “If the bill passes tomorrow … we would not have to put up a dime,” Buffett said. Buffett also talked about the European debt crisis. Negotiations were continuing this weekend on a bailout package aimed at helping Greece avoid default on loans that are coming due May 19. Buffett said Greece sets its own budget, but can’t print its own money because it shares the euro currency with 15 other countries. So that limits its options and keeps them from printing money to help with its credit problems. “I don’t know how this movie is going to end,” Buffett said. “This will be high drama in my view.” A growing concern for Berkshire shareholders is who will eventually replace the Buffett, 79, and Munger, 86. Buffett did not offer any new clues Saturday about the plan he’s discussed previously, to split his job into three parts: a chief executive, chairman and several investment officers. Both Buffett and Munger remain in good health and have not announced any plans to retire. Many shareholders, like Dave Taylor of Minneapolis, don’t seem worried about losing Buffett’s leadership someday. “The companies he bought aren’t going to go away,” Taylor said. “He’s got so many smart people working for him. They may not have his personality, but they might have his smarts.” Buffett showcased BNSF by doing interviews in front of an orange cardboard BNSF locomotive and playing with a model BNSF train set. Railroad CEO Matt Rose looked on while Buffett was mobbed by reporters and shareholders. Rose said the transition into Berkshire went smoothly. Buffett also grabbed his ukulele to perform a version of “I’ll Be Working on the Railroad” with the Quebe Sisters Band at the Justin Boots booth before the meeting started. ___ On the Net: Berkshire Hathaway Inc.: http://www.berkshirehathaway.com

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Dreamworks’s `How to Train Your Dragon’ Back This Weekend as No. 1 Movie

April 25, 2010

By James Callan and Cristina Alesci (Corrects “Pct. Change” column in the table.) April 25 (Bloomberg) — “How to Train Your Dragon” worked its way back into first place at U.S. and Canadian theaters this weekend, finishing atop the rankings with $15 million in ticket sales for DreamWorks Animation SKG Inc. “The Back-Up Plan,” a romantic comedy starring Jennifer Lopez , opened in second place with $12.3 million for CBS Corp. ’s film division, Hollywood.com Box-Office said today in an e- mailed statement. “How to Train Your Dragon,” a 3-D adventure film, debuted as the top movie on March 28 before dropping to third place and then inching its way into second place last weekend. Twelve of the first 17 box-office weekends in 2010 have been topped by 3-D films such as “Avatar” and “Alice in Wonderland,” according to Hollywood.com. “It’s unusual for a picture to come back and top the box office,” said Brandon Gray , president of Box Office Mojo, a research company in Sherman Oaks, California. “Dragon” has made $178 million in five weeks of release. In “The Back-Up Plan,” Lopez plays a woman who meets the man of her dreams after she becomes artificially inseminated. ‘The Losers’ “Date Night,” a comedy starring Tina Fey and Steve Carell , remained in third place with $10.6 million in sales for News Corp. The film, which follows a married couple who find themselves the target of gangsters after a case of mistaken identity, has posted sales of $63.5 million in three weeks. “The Losers,” an action thriller based on a comic book, debut in fourth place with ticket sales of $9.61 million for Time Warner Inc. ’s Warner Bros. studio. The movie features Jeffrey Dean Morgan and Zoe Saldana and follows members of a Special Forces unit who seek revenge following betrayal from within their ranks. “‘(The) Losers’ was never expected to be a big hit, but it turned out to be more modest than one might have thought,” Gray said. “Kick Ass” fell to fifth place with $9.5 million in receipts for Lions Gate Entertainment Corp. after opening in second place last week. Sales Fall Sales for the top 12 films fell 14 percent to $89.7 million from $104.2 million a year earlier, Hollywood.com said. Year-to- date receipts total $3.3 billion, up 8.5 percent from a year earlier. Attendance has increased 6.4 percent this year. The following table has figures provided by studios to Los Angeles-based Hollywood.com. The amounts are based on actual ticket sales from April 23 and April 24 and estimates for today. Rev. Avg./ Pct. Total Movie (mln) Theaters Theater Chg. (mln) Wks ================================================================ 1 HOW TO TRAIN DRAGON $15.0 3,665 $4,100 -23% $178.0 5 2 THE BACK UP PLAN 12.3 3,280 3,735 — 12.3 1 3 DATE NIGHT 10.6 3,294 3,218 -37 63.5 3 4 THE LOSERS 9.61 2,936 3,271 — 9.6 1 5 KICK ASS 9.5 3,065 3,100 -52 34.9 2 6 CLASH OF THE TITANS 9.0 3,271 2,751 -42 145.6 4 7 DEATH AT A FUNERAL 8.0 2,459 3,253 -51 28.4 2 8 OCEANS (DOC.) 6.0 1,206 4,975 — 8.5 1 9 THE LAST SONG 3.7 2,794 1,326 -38 55.4 4 10 ALICE IN WONDERLAND 2.2 1,385 1,619 -39 327.5 8 11 HOT TUB TIME MACHINE 1.9 1,787 1,109 -43 45.7 5 12 DIARY OF A WIMPY KID 1.8 1,605 1,090 -37 59.5 6 Top 12 Films Grosses This Week Year Ago Pct. (mln) (mln) Chg. =================================== $89.7 $104.2 -14 Year-to-date Revenue 2010 2009 YTD YTD Pct. (mln) (mln) Chg. =================================== $3,323 $3,063 +8.51 Year-to-date Attendance: 6.4% To contact the reporter on this story: James Callan in New York at jcallan2@bloomberg.net .

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Wall Street Journal Revs Up New York Times Rivalry

April 24, 2010

NEW YORK — It might be the last great American newspaper war. And Rupert Murdoch intends to win it. He has made a career of grabbing readers and advertisers from competing newspapers, and now he is racheting up the challenge his Wall Street Journal poses to The New York Times. On Monday, the Journal is launching a metro section that will vie for readers and advertisers on the Times’ turf. Although the new section will be available only in the New York City area, collateral damage could spread around the country. Both newspapers are jostling with each other, USA Today and regional dailies for readers. By dramatically lowering advertising rates in New York to undercut the Times, Murdoch’s assault could leave both newspapers with fewer resources for other expansion plans. “The Times has a lot of readers and a lot of them are very loyal, long-standing folks. It’s not going to be easy to peel off the Times’ core constituency,” says Dean Starkman, a former Journal reporter who writes for the Columbia Journalism Review. “As a business proposition, I think I’m with the majority of skeptics who think that this could ultimately damage both papers.” Luxury retailer Bergdorf Goodman, a longtime prominent advertiser in the Times, plans to advertise in the new Journal section. “We’re going to try it and see,” spokeswoman Ginger Reeder says. “We always look for new ways to reach our customers.” It’s not yet clear whether Bergdorf will reduce its advertising in the Times. Times President and General Manager Scott Heekin-Canedy says several prominent advertisers have assured him that their promotions in the Journal’s new section will not come at the expense of the Times. He declined to name the advertisers. “We won’t get in a pricing war,” he says. News Corp. said Murdoch, 79, was not available for an interview. But he has been open about his goal of using his media properties to challenge what he considers a left-leaning news establishment in the U.S. And he took a swipe at the Times in a speech to New York real estate executives last month. “We believe that in its pursuit of journalism prizes and a national reputation, a certain other New York daily has essentially stopped covering the city the way it once did,” he said. Times Co. CEO Janet Robinson fired back Thursday. “When you’re the lead dog, people are constantly going to go after you,” she told financial analysts. But she argued that the Times has a better case to make with advertisers. “They are aware of the fact certainly that we have a larger female audience. They are aware of the fact that there’s more time spent with our newspaper and website than the Wall Street Journal,” she said. Going after the Times is the fight Murdoch had in mind when News Corp. bought the Journal and its parent Dow Jones & Co. for $5 billion in 2007. Since then, he has tried to broaden the newspaper’s appeal by remaking the Journal’s front page. Last year it surpassed USA Today as the nation’s most widely circulated newspaper. The new Journal splashes color photos in place of its customary small, black-and-white renderings and includes more coverage of topics outside of business and finance. One recent edition carried a photo of the volcanic eruption in Iceland across the top of the page. To fill its new metro section, the Journal has hired several former staffers of The New York Sun. The Sun, a feisty upstart that – like the Journal – had conservative opinion pages, spent six years trying to rival the Times with aggressive local coverage before going out of business in 2008. John Seeley, the Sun’s former deputy managing editor, will lead the Journal’s new metro section. Pia Catton, the Sun’s former culture editor, has been named the section’s lead arts and leisure reporter. “They are hiring people trained to compete with the Times,” says one former Sun contributor who was approached about a job with the new section. He spoke on condition of anonymity because his discussions with the Journal were supposed to be confidential. Murdoch has relished similar competitions. After buying the Times of London in 1981, he grabbed circulation from The Daily Telegraph by slashing subscription prices and introducing coupon promotions and prize raffles. As the owner of the Telegraph, Conrad Black battled Murdoch before Black was convicted of defrauding his own company in 2007. The Telegraph survived, but in an e-mail from prison Black wrote that if his experience is any guide, The New York Times could struggle to “absorb the kind of price-cutting and profligate expenses Murdoch will pour on.” As owner of The New York Post, Murdoch has been willing to cut newsstand prices and lose tens of millions of dollars in his bid to outsell the New York Daily News. In 2000, the Post sold about 435,000 copies on an average weekday, compared with 714,000 for the Daily News. By 2009, the Post was up to roughly 530,000 copies while the Daily News had sunk to 570,000. And Murdoch’s underlings have been accused of using rougher tactics than just price cutting or promotions. News Corp. subsidiary News America, which prints coupons and grocery store ads and is led by New York Post publisher Paul Carlucci, agreed in January to pay $500 million to settle a lawsuit with rival Valassis Communications. Valassis had accused News America of using its market clout to demand that customers advertise exclusively with News America. It likened Carlucci to the gangster Al Capone beating his enemies with a baseball bat in the film “The Untouchables.” News Corp. would not make Carlucci available for comment. In a statement, the company said it settled the lawsuit because “significant risks were developing in presenting this case to a jury.” So far, competition between the Journal and the Times has taken a less cinematic course. The newspapers have shadowed each other’s moves across the country over the past year by opening sections devoted to local issues for readers in San Francisco and Chicago. But those new sections are running once or twice a week. The Journal has shuffled resources to staff its sections and hasn’t done any hiring. The Times has sought partnerships with local media rather than add staff. By contrast, the Journal is hiring about 35 reporters for its New York section, which will run about 10 pages every day. It will include color – a critical feature for advertisers who want to stand out. And it will mimic the wide range of coverage offered by the Times, including stories on local politics, culture and sports. Murdoch is willing to put $30 million into the section over the next two fiscal years, according to a person familiar with the Journal’s finances who was given anonymity to speak about internal company figures. The Times has countered with an ad campaign boasting that twice as many business professionals in the New York market read the Times as the Journal, based on surveys by the research group Scarborough. The Journal sells almost 2 million copies a day nationwide, and the Times sells about 900,000. But the advantage is reversed in the New York market, which includes the city and parts of New Jersey, Connecticut and Pennsylvania. The Times sold an average of 406,000 copies in the area on weekdays and the Journal sold 294,000 in the year that ended Sept. 30, based on Audit Bureau of Circulations figures. Even so, Murdoch still could reshape the local ad market. News Corp. is offering a discount for advertising in both the Journal and the Post and could package ads with other outlets it owns, such as the local Fox TV station. The Times essentially just has itself. Roberta Garfinkle, who heads print advertising strategy at the New York ad firm TargetCast, called Murdoch’s plan a “smart move” because it will offer advertisers a cheaper way to target wealthy New Yorkers than having to pay for ads that run nationally. For instance, a full-page black-and-white ad in the Journal’s national edition costs about $223,000 per day, while the same ad in the eastern edition – delivered from Alabama to Maine – costs about $102,000. (Both figures assume no volume discounts.) An ad that runs just in the New York market will cost even less. Materials prepared for one advertiser by the Journal and reviewed by The Associated Press offer a full-page ad in the New York section of the Journal – plus a full-page ad in the Post – for less than $20,000. Dow Jones says such promotions have been offered to a small number of advertisers. A comparable ad running in the New York regional edition of the Times could cost about $50,000, although rates vary by category of advertiser. The heightened competition for ad dollars comes as nearly every newspaper has lost advertising to the Internet. The newspapers’ own websites haven’t yielded the same kind of income that printed newspapers are used to. The Times Co. unit that includes its flagship newspaper lost more than 25 percent of its overall ad revenue last year and might not see it come back. News Corp. doesn’t disclose the Journal’s advertising figures or profits. But there are clear signs the newspaper has been struggling financially. It cut staff last year. According to the person knowledgeable about its finances, the Journal lost more than $80 million in the fiscal year that ended June 30. Journal spokeswoman Emily Edmonds would not confirm or deny the figure. However, if it comes down to who can hold his breath longer while the ad slump continues, Murdoch would appear to have the odds. News Corp. has more flexibility. Some of its businesses, such as Fox News and other cable channels, are larger than the entire Times Co. Analysts expect the movie “Avatar” alone will earn News Corp. as much as $400 million in operating profit. The Times Co. had an operating profit of just $74 million last year. As Starkman, the former Journal reporter, put it, “The Times is a cork bobbing in a pretty big ocean.”

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Jasmine Boussem: Fortune’s Green Brainstorm

April 17, 2010

For the past three years Fortune Magazine has put together an annual conference called The Green Brainstorm, gathering captains of industry, venture capitalists, sustainability experts, NGO’s and innovators to brainstorm about environmental issues and devise ways to address them. This year’s meeting in Laguna Niguel just concluded. It was a Fortune event, so the emphasis was on how business can contribute to a healthy, stable and sustainable environment. There are plenty of conferences held around the environment and its problems, but with more political gamesmanship being played than solutions being implemented. What distinguishes this event is that it focuses on solutions, and largely sets aside pointless ideological debates. Over three days, the topics included; the electric car, sustainability through innovation, the Smart Grid (sounds like a good idea), geo-engineering, and solutions to unsustainable population growth. The line-up of speakers included some people the general public never heard of who nonetheless have very impressive credentials, as well as some business super stars. A partial list; Wal- Mart’s Lee Scott, Architect Bill Mc Donough, Ford Motor Company chairman, Bill Ford, legendary venture capitalist Vinod Khosla and Sylvia Earle. The tone was can-do optimistic, avoiding the wishfulness and idealized trappings that so often seem delusional in retrospect in favor of pragmatism. Judging by the many venture capitalists that showed up, it seems the business community is interested in sustainability. It is pretty simple: Without sustainability, nobody can make plans, and without plans, it is very hard to do business, at least in a way that is intelligent over the long term. During a conversation with Time editor in chief John Huey, Lee Scott explained that Wal-Mart’s commitment to sustainability was not fueled by altruism. In 2006, Scott committed the company to three ambitious goals; to be supplied 100 percent by renewable energy, to create zero waste, and to sell products that sustain Wal-Mart’s resources and the environment. They decided this because it made economic sense to them at the time. Critics might agree Wal-Mart’s professed lack of altruism is borne out by their less-than-progressive workplace policies, but on environmental issues, they are way ahead of the curve. Have we been marginalizing environmental concerns by fostering the notion that promoting environmental sustainability is a charitable, altruistic choice, rather than a practical self-serving one? Environmental leaders are becoming aware that the charity model does not compete well in an age when dire immediate human need is brought on by disaster and strife. Only if environmental health is regarded as a necessity, rather than a luxury or a good cause, do we start to own the problems rather than just shake our head at them. Among progressives, self-interest is sometimes treated as a tarnished motive. And among hard-nosed business types, causes and charities move to the back of the line. Both attitudes may be contributing to a missed opportunity to make sustainability a non-partisan effort in which anyone can find a reason to be personally invested. If everyone starts to own sustainability, environmental activism will shed its stereotypes of elitist tree-hugging and liberal attacks on competitiveness. Many environmental leaders have acknowledged the need to change the way they talk about the environmental problem and move beyond the common misperceptions that suggest it’s about the polar bears, saving trees, and supporting Al Gore. Sea World’s Julie Scardina made an eloquent point comparing our planet to the fictional Pandora in the movie Avatar . “Our planet is even more amazing than Pandora,” she said. I loved Avatar , and would probably move in a heartbeat to Pandora, where everything seems so magical and interconnected. It’s hard not to long for that closeness to the beauty of nature. But wait: Pandora is a fiction. Our planet is far more amazing because it is real and every bit as interconnected and magical. The grass is not greener on Pandora. The grass on Pandora got its idea from the real thing. Explorer Sylvia Earle, during her inspiring talk about the necessity to protect our oceans, said “I am pleased to see that business leaders are thinking green and that Green Leaders are thinking business but it’s important we start thinking blue. We have to treat the oceans as if our lives depended on it, because they do.” With survival in the balance, there is no reason for environmental sustainability to continue to carry an ideological stigma.

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Bob Berkowitz: Can You Make Someone Great Who Really Isn’t?

April 5, 2010

The short answer is no. That said, I’ve had a few clients who have asked me to make someone into something they are not. For example, the boss wants me to help John be as good a communicator as Bill. That’s like asking the bench player to hit as well as the man hitting clean up. I’m reminded of the movie All That Jazz . It was a bio-pic of the late choreographer, Bob Fossee. In one scene, Fosse (played by Roy Scheider) was particularly harsh in his criticism of one of the dancers in a show that he was choreographing. Finally, she burst into tears. Fosse turned to her and said “Look, I don’t think I can make you into a great dancer. I’m not even sure I can make you into a good dancer. But if you listen to me, I can make you a better dancer.” As a media and message trainer, I feel confident that I can help virtually anyone be a better communicator. But great? Maybe, but you better be good to begin with. We can all be better at communicating. I’ve never met anyone who couldn’t improve. It’s hard to imagine being successful in business or in life without good communications skills.

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`Clash of the Titans’ Is Top Weekend Movie With $61.4 Million Ticket Sales

April 4, 2010

By Esmé E. Deprez and Linda Sandler April 4 (Bloomberg) — “Clash of the Titans,” a 3-D adventure based on Greek mythology, was the top film at U.S. and Canadian theaters this weekend, bringing in $61.4 million in ticket sales for Time Warner Inc. “Why Did I Get Married Too” opened in second place, posting $30.2 million for Lions Gate Entertainment Corp. , Hollywood.com Box-Office said today in an e-mailed statement. “Clash,” starring Sam Worthington and Liam Neeson , is competing for 3-D screens with Walt Disney Co.’s “Alice in Wonderland” and DreamWorks Animation SKG Inc.’s “How to Train Your Dragon,” which was the top movie last weekend. A remake of the 1981 film, “Clash” follows Perseus, the son of Zeus, who embarks on a quest to protect earth from Hades, god of the underworld. “Clash’s” strong debut was fueled by moviegoers’ excitement over 3-D, said Paul Dergarabedian , president of the box-office division of Hollywood.com, in an e-mail. “With three of the top five films in this format, there is no question that 3-D is here to stay.” “Clash” posted the biggest Easter debut ever, beating out the $40.2 million “Scary Movie 4” had in receipts in 2006, Hollywood.com said. ‘The Last Song’ Second place’s “Why Did I Get Married Too,” a comedy sequel from director Tyler Perry , follows four couples on vacation. “How to Train Your Dragon” fell to third place, taking in $29.2 million. Distributed by Viacom Inc.’s Paramount Pictures, “Dragon” features the voices of Jay Baruchel and Gerard Butler and tells the story of a young Viking who unexpectedly becomes the owner of one of the creatures. The film has taken in $92.3 million in two weeks. “The Last Song” opened in fourth place with $16.2 million for Disney. The drama, based on the novel by Nicholas Sparks , stars Greg Kinnear and Miley Cyrus as an estranged father and daughter who learn to bond through a shared love of music. Sales Rise “Alice in Wonderland” dropped to fifth place from second with $8.3 million for Disney. The Lewis Carroll tale, re- imagined in 3-D by director Tim Burton , has made $309.8 million in the U.S. since its March 5 release. Sales for the top 12 films rose 14.3 percent to $170.2 million from $148.9 million a year earlier, Hollywood.com said. Year-to-date receipts total $2.84 billion, up 10.3 percent from a year earlier. Attendance has increased 8.1 percent this year. The following table has figures provided by studios to Los Angeles-based Hollywood.com. The amounts are based on actual ticket sales from April 2 and April 3 and estimates for today. Rev. Avg./ Pct. Total Movie (mln) Theaters Theater Chg. (mln) Wks ================================================================ 1 CLASH OF THE TITANS $61.4 3,777 $16,256 — $64.1 1 2 WHY DID I GET MARRIED 30.2 2,155 13,991 — 30.2 1 3 HOW TO TRAIN DRAGON 29.2 4,060 7,192 -33 92.3 2 4 THE LAST SONG 16.2 2,673 6,062 — 25.6 1 5 ALICE IN WONDERLAND 8.3 2,980 2,774 -53 309.8 5 6 HOT TUB TIME MACHINE 8.0 2,771 2,887 -43 27.8 2 7 THE BOUNTY HUNTER 6.2 3,118 1,988 -48 48.9 3 8 DIARY OF A WIMPY KID 5.5 2,842 1,944 -45 46.2 3 9 SHE’S OUT OF MY LEAGUE 1.463 1,390 1,053 -58 28.7 4 10 SHUTTER ISLAND 1.462 1,356 1,078 -54 123.4 7 11 GREEN ZONE 1.2 873 1,394 -64 33.1 4 11 THE GHOST WRITER 1.1 656 1,730 -33 11.0 7 Top 12 Films Grosses This Week Year Ago Pct. (mln) (mln) Chg. =================================== $170.1 $148.9 14.2 Year-to-date Revenue 2010 2009 YTD YTD Pct. (mln) (mln) Chg. =================================== $2,838 $2,574 10.3 Year-to-date Attendance: 8.1% To contact the reporters on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net ; Linda Sandler in New York at lsandler@bloomberg.net .

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Apple IPad’s Debut-Weekend Sales May Reach 700,000, Surpassing Estimates

April 4, 2010

By Connie Guglielmo April 4 (Bloomberg) — Apple Inc. is likely to sell more than twice as many iPads in its debut weekend than some analysts estimated, an early sign that Chief Executive Officer Steve Jobs may succeed at reviving demand for table-style computers. The iPad’s initial sales may have reached 700,000 units, Piper Jaffray & Co.’s Gene Munster said in an interview today. The Minneapolis-based analyst previously predicted sales of 200,000 to 300,000, while Sanford C. Bernstein & Co.’s Toni Sacconaghi projected 300,000 to 400,000. The device went on sale yesterday, drawing crowds to stores across the U.S. and rivaling the frenzy seen when the iPhone went on sale in 2007. Lines at five stores surveyed by Piper Jaffray were longer than expected, yet Apple had iPads available yesterday evening, signaling the company was able to produce enough devices to fulfill initial demand, Munster said. “Sales held relatively steady during the day,” said Munster, who bought a $499, 16-gigabyte model for himself. “I have high expectations.” The iPad is Apple’s bid to turn tablet computers into popular consumer devices, something rivals such as Microsoft Corp. have failed to do. The product builds on the success of Apple’s iPhone and iPod, staking out the middle ground between smartphones and laptop computers. Apple is betting the design is enticing enough that consumers are willing to pay a premium over low-cost notebooks. It starts at $499. ‘Unique, Sexier’ “It’s ridiculously expensive, way overpriced,” said Josh Klenert, a 36-year-old graphic designer, who still went ahead and bought one. “You may call it a dumb computer or a smart telephone –it’s in between. It’s a unique, sexier device.” Klenert, whose one-bedroom apartment in Tribeca has “more Macs than people,” pre-ordered the iPad as soon as it was available and came down to Apple’s SoHo store in New York to be one of the first to buy it. He plans to use it for reading newspapers and magazines. Hundreds of shoppers lined up to wait for stores to open, though crowds didn’t camp out for days this time, as they did when the iPhone debuted. Many of the buyers identified themselves as early adopters and Apple enthusiasts, making it harder to tell if the iPad will win over mainstream customers. “I love it,” said Jacob Arentoft, a 37-year-old digital business developer from Copenhagen. After exiting Apple’s Fifth Avenue store in Manhattan, he unpacked the brand-new silver gadget and waved it at the crowd. “The size fits, the design fits, everything fits.” Jobs made an opening-day appearance at his hometown store in Palo Alto, California, chatting with shoppers. Apple retail chief Ron Johnson was at the Fifth Avenue store and addressed employees before it opened. Positive Reviews Users can surf the Internet, peruse digital books, watch video and play games on the iPad. What it lacks is a built-in camera or support for Adobe Systems Inc. ’s Flash software, which runs much of the video on the Web. The device also doesn’t let users carry out multiple tasks at once. The iPad’s first wave of reviews praised its ability to deliver digital books and video quickly, saying it measures up well against other devices, including Amazon.com Inc.’s Kindle e-book reader. Bloomberg columnist Rich Jaroslovsky said it may change the way people relate to computers, requiring users to learn a “new language” that Apple has made “both elegant and very easy to master.” USA Today’s Edward Baig called the iPad “fun, simple, stunning to look at and blazingly fast.” TV Shows Tablets have been available in one form or another since the 1990s, without ever catching on. They account for less than 1 percent of the personal-computer market, according to research firm Gartner Inc. The iPad’s success will depend partly on the attractiveness of applications that run on it. CBS Corp., the most-watched U.S. TV network, announced plans last week to offer episodes of shows such as “Survivor” and “CSI” on the iPad. Walt Disney Co . will release iPad applications for ABC shows and ESPN games. And Netflix Inc. , the movie-rental company, will let subscribers watch programming streamed to the iPad. Apple , which has more than doubled in the past year, rose 97 cents to close at a record $235.97 April 1 in Nasdaq Stock Market trading. U.S. markets were closed April 2 for the Good Friday holiday. Like the iPhone, the iPad will test Apple’s ability to conquer new markets. Since returning to the company in 1997, Jobs revived the Macintosh computer business, reshaped digital music with the iPod and pushed Apple into the mobile-phone field. Adding those products propelled revenue and profit to record levels . Sales Estimates When the iPhone debuted, Apple struggled to keep it in stock. Most of its stores quickly sold out, and resellers on EBay and Craigslist hawked the device to desperate shoppers for as much as $12,000. Apple sold about 270,000 iPhones in its 2007 debut weekend. Apple may sell about 5 million iPads in the first 12 months, compared with 6.1 million iPhones in its first year on the market, according to Sacconaghi. Researcher ISuppli Corp. says full-year sales may reach 7.1 million globally. Apple declined to comment, said Natalie Kerris , a spokeswoman for the Cupertino, California-based company. At the outset, iPads will connect to the Web through localized hot spots that use Wi-Fi technology. Some shoppers may wait for a version with 3G, which lets the iPad connect to mobile-phone networks. It’s due later this month. Luis Martinez, a 30-year-old from Brooklyn who repairs computers, bought a Wi-Fi iPad yesterday and already put in an order for the 3G version. “People who criticize iPad are basically saying it doesn’t fit their lifestyle. It fits mine,” Martinez said. “Overall, I’m sold.” To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net

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