tag:blogger.com,1999:blog-51904189252852306742024-03-14T02:20:28.236-07:00itsnotmybiznessRob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.comBlogger96125tag:blogger.com,1999:blog-5190418925285230674.post-476957883979304892014-09-17T11:46:00.002-07:002014-09-17T11:46:48.918-07:00IKEA , the world's largest furniture company is a non-profit. <span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;">IKEA , the world's largest furniture company is a non-profit. </span><br style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;" /><br style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;" /><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;">Sounds BS isn't it :) </span><br style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;" /><br style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;" /><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;">Well . That's the truth . It has 'Non-Profit' status because IKEA is registered as a non-profit that is dedicated to furthering the advancement of architecture and interior design--a cause they give a pittance of $2 million or so to a year.</span><br style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;" /><br style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;" /><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;">Did I forget to tell that out of $28 Billion dollar they earn every year , they pay a measly 3.5 % against 18 % which they are supposed to pay, because of this 'non-profit' status. </span><br />
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Why is Ikea a Non-profit?</h1>
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Ikea is a nonprofit. It’s stated mission: to “offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them.” But why? Why choose to be a nonprofit? And how can a company with 135,000 employees in 44 countries with $27 billion in annual sales, possibly justify being a not-for-profit? Watch the video and learn how Ikea uses its unique business model and nonprofit status to exploit tax loopholes for the benefit of its founding family.</div>
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VIDEO TRANSCRIPT</h2>
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IKEA has a little known secret: the company is a non-profit. Ingvar Kamprad the founder of IKEA created the philanthropic Stichting Ingka Foundation whose mission is to “further the advancement of interior design.” IKEA’s bizarre business model looks like this: the nonprofit Stichting Ingka owns a private Dutch Company, Ingka Holdings that owns the majority of individual stores at the franchise level.</div>
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The company’s main motivation for having a non-profit structure seems business-driven. Consider the fact the Stichting Ingka Foundation only donated $1.7 million (out of billions in profits) to a design school – which is in line with the foundation’s mission - but the rest of the money goes to IKEA stores and into savings “as a cushion for the future.”</div>
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IKEA employs 135,000 people in 44 countries. Because of tax breaks for non-profits, IKEA pays about 33 times less on taxes than their for-profit counterparts, a minuscule 3.5% in taxes on its $27 billion in annual sales.</div>
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An IKEA store manager typically takes home $125,000 per year, while store support staff earn just $28,000. As for the executives, their salaries don’t have to be reported publicly thanks to Dutch privacy laws.</div>
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But, there is one big hole in the IKEA non-profit operation. IKEA Systems, another private Dutch Company owns the trademark. This means money is paid directly from IKEA profits to the owners of this private company to license the trademark. The beneficiaries are not publicly recorded, but it’s not hard to speculate that the Kamprad family is on the receiving end of this loop hole.</div>
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According to the Economist: “The overall set-up of IKEA minimizes tax and disclosure, handsomely rewards the founding Kamprad family and makes IKEA immune to a takeover.”</div>
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</article><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-size: 12px; line-height: 16.7999992370605px;"><br /></span>Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-25932999350942907412014-09-16T15:46:00.006-07:002014-09-16T15:46:56.584-07:00What Is Alibaba.com <div class="networth_head">
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What Is Alibaba.com And Why Is It About To Be The Largest IPO Of All Tim</h1>
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On Thursday September 18th, a Chinese company that most Americans have probably never even heard of is expected to have the largest Initial Public Offering (IPO) of all time. Even if you are one of the few Americans who has actually heard of <strong>Alibaba.com</strong>, it's a safe bet you've never been on the site before. So how is it possible that this seemingly random Chinese company is about to have the largest IPO ever? An IPO that is expected to raise <strong>$24 billion dollars</strong>, and give the company a market cap at <strong>$150 billion</strong> on the low end, and <strong>$220 billion</strong> on the high end… right out of the gate?! Let's take a look at this behemoth e-commerce empire. What is Alibaba used for by average consumers, how is it changing the world, and why does this IPO have companies like Amazon and eBay shaking in their boots?<br />
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<strong>What Is Alibaba.com?</strong><br />
As crazy as this might sound for people who are hearing the company's name for the first time, Alibaba.com happens to be the largest commerce site on the planet. In terms of both active shoppers (289 million) and total amount of value exchanged per year ($300 billion), Alibaba is bigger than both eBay and Amazon.com <strong>COMBINED</strong>. And speaking of those two companies, in case you're wondering what Alibaba actually does, a very simplified answer is that it's a hybrid of eBay, Amazon, Google shopping, the Yahoo homepage and Paypal (which is owned by eBay). The Alibaba Group operates commerce platforms that power shopping search engines, cloud-based computing, payment processing services, web portals and much much more.<br />
Alibaba.com's slogan is "Global trade starts here". A more realistic slogan might be "Hey, if you live outside of China and you want buy something from China, or have something made in China, Alibaba will help you do that, and make sure you don't get screwed."<br />
Need a new computer? You can log on to Alibaba and buy a Lenovo laptop, exactly like you would on Amazon. Getting married to a plus-sized woman and can't afford the $2000 price tag at your local dress boutique? The Suzhou City Haosijie Wedding Dress Co offers plus-sized dresses that can be shipped around the world, for exactly <strong>$189 dollars</strong>. These are probably the type of transactions most Americans will easily understand. But it doesn't stop there. Here are some other not-so-typical products you can buy on Alibaba:<br />
For $50,000 you can buy a 10-ton capacity waste recycling plant. For $8000, you can buy 20 tons of copper alloy. You can buy bee-keeping equipment, a forty foot container of white-shell eggs, 100 logs from Thailand, 25 metric tons of frozen beef tongue or 1000 sheep from Moldova. I'm not kidding:<br />
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You get it. There's a lot of weird stuff on there, in very weird quantities. But that's not all you can do on Alibaba. Let's say you don't want to buy something, you want to have something <strong>MADE</strong> in china. For example, let's say I just drew up plans for a working flux-capacitor for my DeLorean and I want to mass produce <strong>ten thousand units</strong>. I can upload my project requirements directly to Alibaba and receive bids from manufacturers in China with the factories, laborers and materials to make time-traveling dreams come true for me and 9,999 of my friends/customers.<br />
But the real value Alibaba brings is twofold. <strong>Number one</strong>, Alibaba clearly opens up the massive Chinese commerce and manufacturing market to the global economy. <strong>Number two</strong>, Alibaba serves as the intermediary in the middle of every transaction. The company vets all suppliers, vendors and sellers so you won't get screwed. More than that, Alibaba also holds all payments in escrow until each party is satisfied with the final product/transaction. This simple step has made westerners, who are traditionally nervous about China, much more comfortable with dipping their toes into these lucrative new markets. For being the middle man, Alibaba charges a fee.<br />
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<strong>How Much Money Does Alibaba Make?</strong><br />
A lot. Unlike many American companies that produce no revenues yet are still somehow worth tens or hundreds of billions of dollars (Twitter, SnapChat, WhatsApp… even Amazon), Alibaba makes a ton of money. In 2013, Alibaba earned roughly <strong>$4 billion</strong> in profits off <strong>$7.5 billion</strong> in revenues. By comparison, in 2013 Facebook earned $1.5 billion in profits off $7.8 billion in revenue.<br />
<strong>Understanding Just How Big This IPO Could Be:</strong><br />
When Twitter went public in November 2013, the company raised $2 billion and ended its first day of trading with a market cap of roughly $24 billion. When Facebook went public in May 2012, the company raised $16 billion and ended its first day of trading with a market cap of roughly $100 billion. When Alibaba goes public, it's expected to raise a minimum of <strong>$24 billion</strong>. By the end of the first trading day some analysts expect the company to have a market cap of <strong>$220 – $250 billion</strong>.<br />
If you total up all the money that has been raised from IPOs in the first 9 months of 2014, you'll get $47 billion. Alibaba will probably raise more than half that amount in one day.<br />
If Alibaba succeeds at raising $24 billion, it will be the largest IPO of all time, surpassing the $22.1 billion that was raised by the Agricultural Bank of China back in 2010. As of this writing, here are the top 6 IPOs of all time and how much they raised:<br />
<strong>#1</strong>: Agricultural Bank of China (2010) – $22.1 billion<br />
<strong>#2</strong>: Industrial and Commercial Bank of China (2006) – $21.9 billion<br />
<strong>#3</strong>: American International Assurance (2010) – $20.5 billion<br />
<strong>#4</strong>: Visa Inc. (2008) – $19.7 billion<br />
<strong>#5</strong>: General Motors (2010) – $18.15 billion<br />
<strong>#6</strong>: Facebook (2012) – $16 billion<br />
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Alibaba Founder Jack Ma</div>
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<strong>A Quick Note About IPOs:</strong><br />
When we say that Facebook raised $16 billion in its IPO, not all of that money actually goes to the company. In Facebook's case, the company itself only received $5 billion. In Alibaba's case, the company will only receive $7.7 billion for itself out of the $24 billion. The rest of the money goes to early Venture Capital investors and a bunch of Investment Banks. Here's a very simplified explanation of how an IPO works:<br />
Let's pretend a company called "<strong>Celebrity Net Worth Inc</strong>" wants to go public. CNW goes out and hires a group of Investment Banks to walk them through the process and sell the company to potential big investors. The banks and CNW then work together to figure out how many shares will actually be offered to the public. Let's pretend CNW has <strong>100 million</strong> total shares and is going to make <strong>15%</strong> (15 million) available for regular people to buy on sites like eTrade or ScottTrade. Before going public, the investment banks essentially offer to pay CNW a <strong>guaranteed</strong> flat amount of money for those 15 million shares. In this example, let's pretend that the banks offer CNW $15 million (valuing each share at $1). CNW accepts the money and is happy to have the guaranteed cash to spend on whatever it pleases to grow the business (acquisitions, new employees, private jets to Turks and Caicos).<br />
The banks basically now own the right to sell those 15 million shares at whatever price they can get on the IPO day. The downside risk is that when the company goes public, no one wants to buy any of the shares. When the company goes public, the banks might only be able to sell their shares for $0.50. If that happens, the banks take a big loss. CNW feels embarrassed, but at least it still got paid up front. On the other hand, if after debuting, everyone in the world is chomping at the bit to get some of those hotcake CNW shares, maybe the banks sell their stakes for $5 a share, or $10 a share. The banks get to pocket the difference from the $1 they paid.<br />
Generally speaking, it's considered slightly impolite for the banks to make <strong>TOO MUCH</strong> money off an IPO. That would mean the banks <strong>way</strong> undervalued the company, and <strong>way</strong> underestimated demand. It happens periodically, but it's not encouraged and will cause future companies looking to IPO to potentially hire different banks to get a better deal.<br />
<strong>Who Gets Rich Off Alibaba's IPO?</strong><br />
First and foremost, company founder <a href="http://www.celebritynetworth.com/richest-businessmen/ceos/jack-ma-net-worth/">Jack Ma</a>. Assuming Alibaba Group goes public at a $150 billion market cap, Jack will be left with a <strong>$22 billion personal fortune</strong>. That amount will easily make him the <a href="http://www.celebritynetworth.com/map/china/">richest person in China</a>. Yahoo actually owns around 23% of Alibaba and is planning to sell $7.6 billion worth of shares (1/4th of their total shares) on the IPO day. The remaining lottery winners are made up of a group of banks and venture capital firms.<br />
So there you have it. That's everything you need to know about Alibaba.com and its upcoming IPO. Now if you'll excuse me, I have to prepare my apartment for the arrival of 1000 Moldovan sheep.</div>
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Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-11781693043844775322013-12-28T11:08:00.002-08:002013-12-28T11:08:33.832-08:00Jim Carrey's Journey from Homeless Teenager to $150 Million Superstar <!--[if !mso]>
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<b><span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Jim Carrey</span></b><span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">'s crazy, no-holds barred performance in the live-action
version of "The Grinch Who Stole Christmas", made him an indelible
part of the holiday pop culture landscape. There are families who have
made watching the film a necessary part of their holiday preparations.
From the moment <a href="http://www.celebritynetworth.com/richest-celebrities/actors/jim-carrey-net-worth/" target="_blank"><span style="color: blue;">Jim Carrey</span></a> truly burst onto
the scene in the early 90s with his wild performances on the sketch comedy
"In Living Color", through his work in such popular films as
"Ace Ventura", "Dumb and Dumber", "Lemony Snicket's A
Series of Unfortunate Events", and "Yes Man", he has always
pushed the character envelope for big laughs. His fearlessness earned him
big paychecks, too, and he now has a <b>net worth $150 million</b>.
However, his early years were anything but funny, and his drive to succeed was
partially fueled by a strong desire to never have to relive his childhood
experiences. As Abraham Lincoln said, "I laugh because I must not
cry…". In Jim Carrey's case, that was very true.</span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes;"><br /></span><span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Jim Carrey, also known as James
Eugene Carrey, was born in Newmarket, Ontario, Canada on January 17,
1962. He was the youngest of four, and grew up with a stay-at-home Mom
and a musician father. His father knew that supporting four children as a
musician was going to be difficult, so he found a "real job".
However, he later lost the job, and everything in the Carrey family's life
quickly spiraled out of control. Money had always been tight, but without
his father's salary, they lost their apartment. The family moved into
their van. Then, in order to help support the family, Jim Carrey left
school, and began working as a janitor. He was 15. He was filled
with so much rage that he used to carry a baseball bat around on janitor cart
because he "wanted to beat the heck out of something". The
family eventually relocated to Scarborough, Ontario, Canada, where he was able
to enroll in school again briefly. However, he eventually had to drop out
again in order to continue supporting his family. His mother also
suffered from a chronic illness that required constant care, and he split his
energy between working full-time and caring for her.</span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">During all of this, he attempted to
launch a stand-up comedy career. His father drove him to his first
professional gig at Toronto's "Yuk Yuk's" comedy club. He
received a dismal reception, and between his family's financial issues and his
lack of success, he put his performance aspirations on hold. However, in
the late 70s his family was able to get back on track financially. He
decided to give comedy another try. This time, he was much more
successful. The critical raves started rolling in. His career took
a distinct upswing when Rodney Dangerfield invited the young comedian to open
for him on tour. From there, he went on to perform in Las Vegas, and then
made the move to Hollywood. By the early 80s, he was a popular regular at
The Comedy Store, and appeared on "The Tonight Show" in 1982.
His stand-up routine, which featured his amazing facility with impressions, was
packing houses each night, but he knew he wanted a career in television and
film more. Throughout the 80s, he slowly built up a resume of
increasingly high-profile roles in such film and television projects as
"Rubberface", "Copper Mountain", "The Duck
Factory", "Once Bitten", "Peggy Sue Got Married",
"The Dead Pool", and "Earth Girls Are Easy". In 1990,
he began working his friend and "Earth Girls…" cast mate, Damon
Wayans, on a show called, "In Living Color". The sketch comedy,
which had been created by Damon's brother Keenen, made household names of all
of the cast members. In 1994, Jim Carrey took his career to the next
level, starring in the comedy, "Ace Ventura: Pet Detective".
The film was a massive hit worldwide, and catapulted him into the spotlight.</span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">He has since gone on to release an
astounding number of very popular features. At the height of his
popularity, he was earning <b>$20 million</b> per feature. While not all
of his films have been critical darlings, he has managed to connect with
audiences around the world. His films have made incredible amounts of
money for the producing studios, and are regularly included on "best
of", "greatest" and "favorite lists". Some of
his projects include "The Mask", "Dumb and Dumber",
"Batman Forever", "Ace Ventura: When Nature Calls",
"Liar, Liar", "The Truman Show", "Man on the
Moon", "Me, Myself, & Irene", "How the Grinch Stole
Christmas", "Bruce Almighty", "Eternal Sunshine of the
Spotless Mind", "Fun with Dick and Jane", "Yes Man",
"I Love You Phillip Morris", and "Kick-Ass 2″. He has won
two Golden Globe Awards, and been nominated for multiple Golden Globe, SAG,
BAFTA, and Saturn Awards, among many other honors. He also recently made
a foray into writing, and penned his first children's book, "How Roland
Rolls". The story was a 2013 Gelett Burgess Children's Book Honoree.</span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">When Jim Carrey was working as a
teenage janitor to support his homeless family and his ill mother, he probably
never imagined how far he would come. The dream was there, but it must
have looked very nearly impossible to achieve. However, he stuck to his
goals, and now, thirty-five years later, he has accomplished what he set out to
do, and more. He chose to laugh rather than cry. More importantly,
he chose to make those around him laugh, as well. That decision spawned
one of the most successful and prolific comic careers in Hollywood history.</span></div>
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Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-76966003080671663462013-12-28T11:00:00.002-08:002013-12-28T11:00:25.292-08:00David Geffen's Journey<!--[if !mso]>
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<b><span style="font-family: "Times New Roman","serif"; font-size: 24.0pt; mso-fareast-font-family: "Times New Roman"; mso-font-kerning: 18.0pt;">David Geffen's Journey from College Dropout to $5.5
Billion Hollywood Mogul</span></b></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">We hear stories every day about
people who excelled at school, and excelled at sports, or excelled at, well,
everything, going on to greater and greater things as adults. We also hear
stories every day about people who became extremely succesful thanks to a
well-connected parent or inheritence. Those stories are fine, but rarely do we
read or hear about a very ordinary person with no headstarts at all, going on
to have a massive impact on multiple industries. <b><a href="http://www.celebritynetworth.com/richest-businessmen/richest-billionaires/david-geffen-net-worth/"><span style="color: blue;">David Geffen</span></a></b> is one of Hollywood's most
powerful executives, and with a <b>net worth of $5.5 billion</b>, he is also
one of the wealthiest. Unlike many major executives, however, he built
his empire from absolutely nothing. He had no road map and no clear idea
of what he was trying to achieve. There were no family members to show
him the way, and no doting mentors to steer him down the right path.
Instead, David Geffen was an ordinary young man… who went on to have an
extraordinary impact on entertainment around the world.</span></div>
<div class="MsoNormal" style="line-height: normal; margin-bottom: .0001pt; margin-bottom: 0in;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes;"><br /></span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">David Geffen – Billionaire Mogul</span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">David Geffen was born in February
21, 1943 in Brooklyn, New York. His parents were Jewish immigrants who
had met in Palestine. His father was a pattern maker and his mother made
and sold undergarments in her own shop called, Chic Corsets by Geffen. He
went to public school and hung out with other kids from the neighborhood.
He discovered an interest in theater and music after reading "Hollywood Rajah",
the story of Louis B. Mayer. He began to appear in theater productions at
school. His father passed away when he was 16, and he got a job working
in the mailroom at CBS. After graduating from New Utrecht High School in
Brooklyn, he headed West. He spent one semester at the University of
Texas at Austin, but flunked out due to low grades. He then headed to
Santa Monica College, but his education there did not last either. He
headed back to the East Coast, where he held a series of odd jobs, while making
another attempt at college, this time enrolling at Brooklyn College. His
third try was not the charm either, unfortunately, and he dropped out.</span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Around this time, he secured a job
as an usher at CBS-TV. In his eyes, it was the perfect job. He was
able to watch stars like Judy Garland and Red Skelton rehearse, and to see how
each program came together from the inside out. He recognized that he
didn't have the innate talent of performers like Judy Garland, but he knew he
wanted to be involved in production in a more direct way. He began to
climb the ladder at CBS, moving from being usher to serving as the receptionist
for the series, "The Reporters". He was almost immediately
fired, however, when he began making script suggestions to producers. A
casting director on the program suggested he might make a better agent with his
attitude, and David Geffen decided to listen to him. Unsure of where to
begin, he simply opened the phone book and looked for the biggest agent
advertisement he could find. That advertisement belonged to the William
Morris Talent Agency. He snagged a spot in the mailroom at William
Morris, and began working his way up the ladder again. He wanted to
become a talent agent, but he had to prove that he was a college graduate.
He told his bosses at William Morris that he had graduated from the University
of California at Los Angeles. Then, when the letter arrived stating that
he had not actually attended the school, he grabbed it out of the mail (he
worked in the mail room after all), altered it, and sent it on its way.
He was soon made a junior agent.</span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes;"><br /></span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Young David Geffen</span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Always gregarious and fun, he had
begun to make friends in the music community, and ultimately decided to focus
on being a personal manager. His first major clients included Laura Nyro,
Crosby, Stills and Nash, and Jackson Browne, all relative unknowns when they
began working with him. He was tenacious about building the careers of
his artists, and he quickly became known as a fair, ambitious, and loyal
manager. Watching him attempt to secure a record deal for one of his
artists, a record executive at Atlantic suggested he start his own label.
Recognizing good advice when he heard it, David Geffen launched Asylum
Records. He seemed to have an unerring eye for artists whose sound
existed outside of the box, but who would come to revolutionize music. He
signed the Eagles, Joni Mitchell, Tom Waits, Linda Ronstadt, and Judee Sill, to
name just a few. Warner Communications ending up buying Asylum, merging
it with its record company, Elektra. He ran Elektra/Asylum until 1975,
when he was invited to take over Warner Brothers' film studios. Though he
had been able to figure out how to succeed in the agent and music worlds, his
foray into running a film studio was not particularly successful. He was
also ill, and was subsequently diagnosed with terminal bladder cancer. He
retired and stepped away from the Hollywood lifestyle. However, three
years later, he was still alive and kicking, and it was revealed that he was
actually cancer-free and had been misdiagnosed. He dusted himself off and
went back to Hollywood.</span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes;"><br /></span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Geffen, Michael Jackson and Madonna</span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Now re-energized and focused, he
returned to his first love, music, and launched Geffen Records. The
label's first year, 1980, was tumultuous. He signed Donna Summer first,
and released her album, "The Wanderer". However, her former
label retaliated, releasing multiple tracks from her 1979 album, "Bad
Girls", and a greatest hits compilation. Though "The Wanderer"
spawned a hit single, it was buried in the influx of other Donna Summer
material and the advent of the New Wave sound. That same year, he
released John Lennon's album, "Double Fantasy". It was a coup
for the new label, but it quickly turned bittersweet, when Lennon was
assassinated that year. The album became a massive bestseller, but Geffen
was unable to celebrate its success with its artist. From there, he went
on to sign and work with a "who's who" of music heavy-hitters,
including Olivia Newton-John, Elton John, Sonic Youth, Cher, Aerosmith, Peter
Gabriel, Whitesnake, Blink-182, Nirvana, Guns N' Roses, Lifehouse, Pat Metheny,
and Neil Young, among many others. Along the way he sold Geffen Records
in one of the largest music deals in music history, and launched another label
called DGC Records, which was equally successful.</span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman"; mso-no-proof: yes;"><br /></span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"></span></div>
<div class="MsoNormal" style="line-height: normal; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">He also decided to try his hand at
film production again, and launched the Geffen Film Company. Like Asylum
and Geffen Records, it was a success out of the gate. The company's first
project, "Risky Business", was box office gold and made a star out of
then unknown, Tom Cruise. He went on to produce the film version of
"Little Shop of Horrors", "Beetlejuice", and "Interview
with the Vampire", as well as the Broadway productions of
"Dreamgirls" "Cats", "Miss Saigon", and "M.
Butterfly". In 1994, he teamed up with <a href="http://www.celebritynetworth.com/richest-celebrities/directors/steven-spielberg-net-worth/"><span style="color: blue;">Steven Spielberg</span></a> and <a href="http://www.celebritynetworth.com/richest-businessmen/producers/jeffrey-katzenberg-net-worth/"><span style="color: blue;">Jeffrey Katzenberg</span></a> to form Dreamworks SKG.
The movie studio has gone to release a steady stream of hit movies, including
"Amistad", "Deep Impact", "Saving Private Ryan",
"American Beauty", "Gladiator", "Chicken Run",
"Almost Famous", "Meet the Parents", "Castaway",
"Shrek", "A Beautiful Mind", "Minority
Report", "Catch Me If You Can", "Old School",
"War of the Worlds", "Red Eye", "Match Point",
"Revolutionary Road", "The Lovely Bones", "Cowboys and
Aliens", "Real Steel", and "Lincoln".</span></div>
<div class="MsoNormal" style="line-height: normal; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">With his massive wealth and
influence, David Geffen is walking proof that you can come from completely
ordinary beginnings and arrive at greatness. He was an average student
with no contacts in the entertainment industry, but he still managed to become
one of the most powerful executives in Hollywood. Sometimes it's not
about where you're from, it's about where you choose to go. For David
Geffen, he clearly chose to go all the way to the top.</span></div>
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<br /></div>
Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-22751014510670701672013-01-28T04:37:00.002-08:002013-01-28T04:37:34.290-08:00Start-Up Puts Streaming TV on Campus<h1 class="articleHeadline" itemprop="headline">
Start-Up Puts Streaming TV on Campus</h1>
<h6 class="byline">
By
<span itemid="http://topics.nytimes.com/top/reference/timestopics/people/s/brian_stelter/index.html" itemprop="author" itemscope="" itemtype="http://schema.org/Person">
<a href="http://topics.nytimes.com/top/reference/timestopics/people/s/brian_stelter/index.html" rel="author" title="More Articles by BRIAN STELTER"><span itemprop="name">BRIAN STELTER</span></a></span></h6>
<h6 class="dateline">
Published: January 27, 2013 </h6>
<div class="articleBody">
<span itemid="http://www.nytimes.com" itemprop="copyrightHolder provider sourceOrganization" itemscope="" itemtype="http://schema.org/Organization">
</span>
<div itemprop="articleBody">
At Harvard, resident students do not have to borrow their parents’ HBO
GO passwords to watch “Girls” and “Game of Thrones” online. They can log
in with their own college credentials, getting in the habit of having a
cable subscription at an early age. </div>
</div>
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<h6 class="credit">
Peter DaSilva for The New York Times</h6>
<div class="caption">
Tuan Ho, left, and Nick Krasney, founders of Tivli,
which lets students watch television shows over school wireless
networks. </div>
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This ability, provided by a start-up called Tivli, may be part of the
answer to a conundrum for the television industry. Young people <a href="http://www.nytimes.com/2012/02/09/business/media/young-people-are-watching-but-less-often-on-tv.html" title="Times article.">watch less TV than they used to</a>,
and some say they do not see the point of an expensive cable or
satellite subscription. That could chip away at the profits of cable
companies like Comcast and programmers like HBO. </div>
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But Tivli is an attempt to adapt to the ways young people increasingly
want to watch TV — through a computer or tablet or video game console —
while keeping the existing cable model intact. </div>
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Residents at Harvard and, as of last week, Yale, can use the service to
stream local TV stations, a couple of dozen cable channels and the
universities’ own in-house channels to their devices anywhere on campus.
The service is free for the students, since it supplements the
university’s existing cord-in-the-wall cable system. </div>
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Tivli will need to sign up dozens if not hundreds more universities to
make a dent in television consumption. But Tuan Ho and Nick Krasney, its
two Harvard-educated founders, and the company’s 10 employees have a
vision for how so-called TV Everywhere systems could be rolled out in
environments like campuses, hotels and hospitals. </div>
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“We think people just want TV delivered to them in a convenient way,
whether it’s in their dorm or on computers, tablets and mobile,” said
Christopher Thorpe, the company’s president. “People who are getting
what they want won’t cut the cord.” </div>
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To date, the promise of TV Everywhere — that paying customers could
stream live and on-demand TV shows to all manner of devices — has only
partly come true, because of technological challenges, conflicts over
contracts and concerns that online viewing will come at the expense of
the old-fashioned TV set. </div>
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It can be hard to log in and even harder to know which channels allow
what shows to be streamed. Many customers have not even tried. When GfK,
a market research firm, surveyed 1,000 paying cable customers last
September, 64 percent said they were aware of the TV Everywhere services
supplied by programmers, and 52 percent said they were aware of the
services supplied by cable companies. But only a third of those
customers had actually streamed something by logging in, a process the
industry calls authentication. </div>
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Knowing the necessary user names and passwords is “one of the biggest
barriers,” said David C. Tice, who oversaw the research for GfK. </div>
<div itemprop="articleBody">
Some programmers, like HBO, which is owned by Time Warner, are further
along than others. HBO GO, a streaming Web site with a companion app, is
widely considered the best in its class, making the company’s
cooperation a coup for Tivli. </div>
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Historically, HBO “hasn’t been available as widely as we’d like” in dorm
rooms, said Bernadette Aulestia, its senior vice president for domestic
network distribution. </div>
<div itemprop="articleBody">
Most universities outsource their wired cable systems to the local cable
company, a satellite provider or a reseller. By and large, the
distributors have not come up with ways to authenticate TV Everywhere
apps for students, though many are trying. This has given rise to <a href="http://www.nytimes.com/2012/05/26/arts/television/seeing-girls-and-other-hbo-shows-with-hbo-go.html" title="Times article.">password-sharing by families</a> and — worse, from HBO’s perspective — pirating of shows. </div>
<div itemprop="articleBody">
“Gone are the days of the cachet of ‘I have a TV in my room,’ ” said Ms.
Aulestia. “These students now have mobile devices instead.” </div>
<div itemprop="articleBody">
With them, they are forming new media habits. So HBO was intrigued when
it took a call from Tivli about eight months ago. “From a technological
standpoint,” Ms. Aulestia said, “it’s very impressive what they’ve been
able to develop.” </div>
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Tivli links up with a student’s university ID and Facebook account,
making the login process somewhat smooth. Its interface is a channel
guide much like that of Aereo, the much-talked-about service backed by
Barry Diller that <a href="http://www.nytimes.com/2012/09/17/technology/aereo-distributes-local-tv-channels-via-the-internet.html?pagewanted=all" title="Times article.">pulls local stations’ signals out of the air</a> and repackages them for Internet viewing. </div>
<div itemprop="articleBody">
Aereo is being sued by several station owners that claim the service is
illegal because it does not pay for the right to retransmit the signals.
Tivli takes a different tack: it carries the channels that a university
already provides, then adds content like HBO. </div>
<div itemprop="articleBody">
Mr. Ho and Mr. Krasney graduated from Harvard in 2009. In a joint e-mail
message, the said that they created an early version of Tivli because
Harvard did not have cable TV service for residents. Mr. Thorpe said
that when it was made available to others in 2011, more than half the
resident population registered for it in the first few weeks. At
Harvard, viewership tends to spike around live sports on Sundays and
breaking news events like election nights. </div>
<div itemprop="articleBody">
Along with Yale, tests of the service are under way at the University of
Washington and Texas A&M. “We’re excited about the growth
opportunities in other multidwelling environments like hotels and
hospitals, where we can take advantage of the fast data networks and
high-density populations,” Mr. Thorpe said. </div>
<div itemprop="articleBody">
Students cannot take Tivli home with them, since it works only on the
wireless network of the institution providing it. But by the time
students move off campus, the theory goes, they will be hooked on cable —
and may expect TV Everywhere to fully exist elsewhere too. </div>
Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-80786306390642932552012-11-09T06:27:00.001-08:002012-11-09T06:27:01.431-08:00America! Meet Your Puppet Master<em>How Eddie Bernays got you to buy books, wear hairnets, and eat bacon for breakfast.</em><br />
<img alt="" data-height="824" data-width="600" src="http://uploads.neatorama.com/images/posts/669/54/54669/1352380221-0.jpg" style="display: block; margin-left: auto; margin-right: auto;" /><br />
One
could argue that the birth of modern public relations is really the
story of bacon and eggs. Prior to the 1920s, breakfast was toast and a
cup of coffee. When a company called Beech-Nut Packing wanted to boost
its bacon sales, they called PR man Edwards Bernays. <br /><br />Bernays
didn't place ads in magazines or post billboards with catchy slogans.
Instead, he commissioned a research study on the eating habits of
Americans. A doctor concluded that, because the body loses energy during
the night, a robust breakfast is healthier than a light one. Bernays
saw to it that thousands of physicians got the report, along with a
publicity packet touting bacon and eggs as a hearty way to start the
day. Pretty soon, doctors were recommending it to their patients, and
the all-American breakfast was born.<br /><br /><strong><img alt="b" class="alignright" data-height="440" data-width="357" src="http://uploads.neatorama.com/images/posts/669/54/54669/1352380814-0.jpg" style="float: right; margin: 0 0 1em 1em;" width="240" />Syphilis and Propaganda</strong><br /><br />Edwards
Bernays was born in Vienna to Jewish parents and immigrated to the
United States with his family when he was an infant. The elder Bernays
had been a wealthy farmer, and he hoped his son would follow in his
footsteps. So, he enrolled young Eddie in Cornell's esteemed College of
Agriculture. Eddie complied, albeit unwillingly. A child of the
Manhattan brownstone, he'd grown accustomed to the bustling pace of the
big city. Upon receiving his degree in 1912, the only thing Eddie seemed
certain of was that farm life was not for him. And that's when fate
intervened. <br /><br />One day while boarding the Ninth Avenue trolley on
Manhattan, Eddie crossed paths with an old friend named Fred Robinson.
Robinson offered Bernays a job managing two monthly journals, the <em>Medical Review of Reviews</em> and the <em>Dietetic and Hygienic Gazette</em>.
Eddie accepted, although he knew little about publishing or medicine.
Fortunately, none of that mattered a few months later, when he used the
journals to publish a review of the play <em>Damaged Goods</em>. That may not sound like a big deal, but <em>Damaged Goods</em>
was about a man who had syphilis. Sex was such a taboo subject at the
time that New York censors had previously shut down George Bernard
Shaw's <em>Mrs. Warren's Profession</em> because it dealt with
prostitution. Regardless, Eddie published a rave review and even offered
to help produce the show. But the real trick was convincing censors to
look the other way. <br /><a href="http://www.blogger.com/blogger.g?blogID=5190418925285230674" name="more"></a><br />Employing a technique
that would later become one of his trademarks, Eddie created a "third
party authority" called the Sociological Fund Committee. It was a fake
organization tailor-made to legitimize the play as a crusade against the
prevailing attitude of "sex-pruriency." After lobbying prominent
society figures, Eddie had supporters like John D. Rockefeller and
Franklin Roosevelt on his side. Although critics lampooned the play,
Bernays made syphilis a <em>cause célèbre</em>, and turned the production into a huge financial success. <br /><br /><strong>Id, Ego, and Super-Uncle</strong><br /><br /><img alt="" class="alignleft" data-height="313" data-width="236" src="http://uploads.neatorama.com/images/posts/669/54/54669/1352380868-0.jpg" style="float: left; margin: 0 1em 1em 0;" />The
future looked bright for Bernays the Producer, but then fate stepped in
again with the outbreak of World War I. Eddie tried to enlist, but was
turned away due to flat feet and poor vision. Undeterred, he set his
sights on the Committee on Public Information -the propaganda machine
responsible for Uncle Sam's "I Want You" recruitment poster. There, as
co-head of the Latin American section, Bernays honed his manipulative
propaganda skills. <br /><br />Although the agency's propaganda helped
America win the war, its methods were sharply criticized by members of
Congress, who suspected the CPI of censoring the media. The organization
was dismantled, the profession of public relations came under heavy
scrutiny, and Bernays was left severely disillusioned. <br /><br />Salvation
came in the form of Sigmund Freud, Bernays' famous uncle. In 1919,
Eddie translated a series of Freud's lectured into English, and the work
brought the psychiatrist widespread attention in America. Despite being
derided by some critics as a "professional nephew," Eddie largely
benefitted from having a famous uncle. Freud's theories on human
behavior ignited a new fire in Bernays. He realized that if propaganda
could be used to manipulate Americans during times of war, it could also
be used in times of peace to influence trends, habits, and -most
importantly- consumer spending. <br /><br /><strong>Bookshelves, Hairnets, and Children Who Love to Wash Their Hands</strong><br /><br />Buoyed
by Freud's success, Bernays embarked upon a series of campaigns that
secured him as the master of marketing. When a group of major book
publishers asked him to bolster sales, he proclaimed, "Where there are
bookshelves, there will be books." Bernays then convinced architects,
construction companies, and interior designers to install bookshelves in
new homes. The scheme paid off, and the book business skyrocketed. <br /><br /><img alt="n" class="alignright" data-height="343" data-width="400" src="http://uploads.neatorama.com/images/posts/669/54/54669/1352430205-0.jpg" style="float: right; margin: 0 0 1em 1em;" width="250" />In
another campaign, Bernays helped a company named Venida salvage lagging
hairnet sales. Short hairstyles were in, thanks to dancehall icon Irene
Castle. And without long locks, women had no need for hairnets. Bernays
created a new market, repurposing the beauty accessory as safety gear.
He asked experts to issue reports explaining the hazards of hair falling
into food or getting caught in machinery. Soon, Venida hairnets became
essential for all restaurant and factory workers.<br /><br />His genius
didn't stop there, either. When client Proctor & Gamble approached
Bernays in the 1920s to help make its soap more appealing to children,
Eddie promised that "Children, the enemies of soap, would be conditioned
to enjoy using Ivory." And just like Pavlov and his dogs, Eddie trained
America's youth to associate soap with fun. He created the National
Soap Sculpture Contest, complete with heavily publicized cash prizes. A
sweeping success, it became an annual tradition that kept children
whittling away at Ivory for the next 38 years. <br /><br /><strong>Torches of Freedom</strong><br /><br /><img alt="" class="alignleft" data-height="330" data-width="210" src="http://uploads.neatorama.com/images/posts/669/54/54669/1352430205-1.jpg" style="float: left; margin: 0 1em 1em 0;" />Not
all of Bernays' campaigns were so wholesome. One of his most
well-known, if not controversial, projects was for Lucky Strike
cigarettes. In the late 1920s, American Tobacco Company chairman George
Washington Hill charged Bernays' PR firm with acquiring a new market for
its cigarettes -women. In Eddie's words, "Hill become obsessed with the
prospect of winning over the largest potential female market for
Luckies. 'If I can crack that market.' he said to me one day, "it will
be like opening a new goldmine right in our front yard.'"<br /><br />For the
campaign, Bernays enlisted the help of his wife, fellow marketing
genius Doris Fleischman. First, they worked to brand cigarettes as an
alternative to candy. When that didn't work, they tried to convince
women that green -the official color of Luckies- was the new black. With
assistance from editors at Vogue and Harper's Bazaar, green began to
dominate the fashion world. The duo even orchestrated a "Green Ball" in
New York, featuring some of the city's most prominent socialites.
Although Lucky Strikes' sales climbed, it wasn't enough. Bernays and
Fleischman realized that true success would require overcoming a major
taboo. In society's eyes, women still weren't allowed to smoke in
public. Armed with the knowledge that many women smoked in private, they
staged an event that captivated the nation.<br /><br />On Easter Sunday in
1929, a group of ten women strolled down Fifth Avenue in full view of
church-going families (as well as conveniently-placed photographers)
flaunting lit cigarettes, which they called their "Torches of Freedom."
The news story caught fire, and controversy raged between women's groups
on both sides of the issue. Around the nation, copycat "Torches of
Freedom" sparked up, and millions of dollars poured into the coffers of
American Tobacco.<br />
<img alt="" data-height="358" data-width="513" src="http://uploads.neatorama.com/images/posts/669/54/54669/1352430205-2.jpg" style="display: block; margin-left: auto; margin-right: auto;" /><br /><br /><strong>Smoke and Mirrors</strong><br /><br />Unfortunately,
the tobacco campaign backfired on Bernays. His wife Doris joined the
legions of female smokers and became a lifelong tobacco user, despite
protests from Eddie and their children. <br /><br />Overcome with guilt,
Bernays launched a radical plan in 1964 to eradicate smoking from
society. Wielding medical research on the harmful effects of tobacco, he
campaigned to convince America that smoking was an "antisocial action
which no self-respecting person carries on in the presence of others."
His efforts led to a ban on cigarette advertising from radio and
television, which dealt a major blow to companies he once served. <br /><br /><img alt="" class="alignright" data-height="320" data-width="213" src="http://uploads.neatorama.com/images/posts/669/54/54669/1352430205-3.jpg" style="float: right; margin: 0 0 1em 1em;" />Eddie
felt guilty about other things, too. In the early 1950s, the United
Fruit Company enlisted his help in Guatemala. The company was trying to
hold onto the land leased to them by the government -land that national
officials wanted to reclaim for the Guatemalan people. Bernays responded
by waging a propaganda war that made president Jacobo Arbenz out to be a
Communist. The claim was categorically untrue, but McCarthy-era
politicos seized the rhetoric and rallied for war against the tiny
nation. Bernays enlisted the CIA's help and orchestrated an elaborate
liberation campaign to replace the democratically-elected president with
a United Fruit Company puppet. The resulting Banana Republic lasted for
decades. <br /><br />Bernays must have felt his greatest moment of
self-doubt in 1933 when foreign correspondent Karl von Weigand contacted
him upon his return from Nazi Germany. During an interview with Joseph
Goebbels, Hitler's devoted friend and minister of propaganda, von
Weigand had noticed a familiar book sitting prominently on Goebbels'
desk; it was Bernays' seminal work <em>Crystallizing Public Opinion</em>. Ironically, Eddie was Jewish.<br /><br /><strong>The Sultan of Spin</strong><br /><br />Bernays
formally retired in the early 1960s, but he kept working as a
consultant until he was 100 years old. In 1990, he was voted to <em>LIFE</em>
magazine's list of the 100 Most Influential People of the 20th Century.
Bernays died on March 9, 1995 in Cambridge, Mass. at the age of 103. <br /><br />Through
his long and storied career, it's estimated that Bernays had 435
clients, not to mention countless disciples. His exhaustive list of
clients included General Motors, the NAACP, the Multiple Sclerosis
Society, and CBS, as well as famed individuals like playwright Eugene
O'Neill, painter Georgia O'Keefe, and presidents Calvin Coolidge and
Herbert Hoover. <br /><br />Despite his controversial campaigns, Bernays
always demanded that PR professional adhere to a strict moral code. He
believed the field should be licensed, like that of lawyers or doctors,
so that only qualified professionals could practice. After all, he -more
than anyone- understood that with the power of public persuasion came
great responsibilities.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-26606968445261403622012-11-07T16:36:00.001-08:002012-11-07T16:36:27.304-08:00Joseph Caramadre Is A Robin Hood Or Con Artist Depending On Who You Ask <big> <strong>By <a href="http://www.propublica.org/site/author/jake_bernstein" target="_hplink">Jake Bernstein</a><br />
ProPublica</strong> </big><br />
Joseph Caramadre has spent a lifetime scouring the fine
print. He's hardwired to seek the angle, an overlooked clause in a
contract that allows him to transform a company's carelessness into a
personal windfall. He calls these insights his "creations," and he
numbers them. There have been about 19 in his lifetime, he says. For
example, there was number four, which involved an office superstore
coupon he parlayed into enough nearly free office furniture to fill a
three-car garage. Number three consisted of a sure-fire but short-lived
system for winning money at the local dog track. But the one that landed
him on the <a href="http://www2.turnto10.com/news/2010/feb/05/i-team_businessman_target_of_criminal_investigatio-ar-42861/">evening news</a>
as a suspect in a criminal conspiracy was number 18, which promised
investors a unique arrangement: You can keep your winnings and have
someone else cover your losses. <br />
Caramadre portrays himself
as a modern-day Robin Hood. He's an Italian kid from Providence, R.I.,
who grew up modestly, became a certified public accountant and then put
himself through night school to get a law degree. He has given millions
to charities and the Catholic Church. As he tells his life story, his
native ability helps him outsmart a phalanx of high-priced lawyers,
actuaries and corporate suits. Number 18 came to fruition, he says, when
a sizeable segment of the life insurance industry ignored centuries of
experience and commonsense in a heated competition for market share. <br />
Federal prosecutors in Rhode Island and insurance companies paint a
very different picture of Caramadre: They say he's an unscrupulous con
artist who engaged in identity theft, conspiracy and two different kinds
of fraud. Prosecutors contend he deceived the terminally ill to make
millions for himself and his clients. For them, Caramadre's can't-miss
investment strategy was an illusion in which he preyed on the sick and
vulnerable. <br />
ProPublica has taken a close look at the Caramadre
case because it offers a window into a larger issue: The transformation
of the life insurance industry away from its traditional business of
insuring lives to peddling complex financial products. This shift has
not been a smooth one. Particularly during the lead up to the financial
crisis, companies wrote billions worth of contracts that now imperil
their financial health. <br />
In a series of detailed interviews,
Caramadre said the companies designed the rules; all he did was exploit
them. Their hunger for profits in a period of dizzying growth and
competition, he contends, left them vulnerable to someone with his
unusual acumen. The companies have argued in court that Caramadre is a
fraud artist who should return every last dime he made. In his rulings
to date, the federal judge hearing the civil cases has agreed with
Caramadre's contention that he was doing what the fine print allowed. <br />
The secret to Caramadre's scheme can be glimpsed in a 2006 brochure for
the ING GoldenSelect Variable Annuity. On the cover is a photo of a
youthful older couple. The woman sits next to a computer, sporting a
stylish haircut and wire-framed glasses. A man with graying hair and an
open collared shirt, presumably her husband, is draped over her in a
casual loving way. Images of happy vibrant seniors enjoying their golden
years together — frolicking on the beach, laughing in chinos next to a
gleaming classic car, enjoying the company of grandkids — populate the
sales material for life insurance's hottest product — the variable
annuity. <br />
<div class="ad_wrapper" id="ad_mid_article">
</div>
As outlined in the brochure and in countless others like it, the
contracts worked this way: The smiling couple gives money to ING in
return for the promise of future payments. The consumer chooses how the
money is invested, usually in mutual-like funds that have stocks, bonds
or money market instruments. This is the "variable" part of the
equation. <br />
There are two main benefits to this arrangement not
found in the ordinary mutual funds sold by brokers and financial
advisers. Taxes on <a href="http://www.propublica.org/documents/item/413286-sec-guide-to-variable-annuities">variable annuities</a>
are deferred until the consumer takes out cash, which means it's
possible to move your money among funds without paying taxes until the
money is withdrawn. (An investor who cashes in shares of a mutual fund
must pay taxes on any gains.) <br />
Variable annuities also typically
include a life insurance component called a guaranteed death benefit.
With this guarantee, if the market crashes — but you die before your
investment recovers — your beneficiary still gets a lump sum equal to
either the death benefit or the value of the investments in your
account, whichever is greater. <br />
The target audience for brochures
like that of ING's are people nearing retirement with a nest egg to
safeguard and perhaps grow a bit. It's a huge and growing market. In
2011, as the first wave of baby boomers began to retire, there were more
than 40 million people age 65 or over. Between 2001 and 2010, life
insurance companies sold about $1.4 trillion worth of variable
annuities, according to <a href="http://www.limra.com/">LIMRA</a>, an industry association. <br />
Caramadre got the seeds of his idea in the mid-90s when he attended an
investment seminar for insurance agents. He quickly saw how variable
annuities could be a hot product for insurance companies — particularly
when they could charge hefty fees for attractive goodies like the
guaranteed death benefit. <br />
Caramadre decided that he wouldn't
offer variable annuities to clients in the way the insurance companies
envisioned. It was too expensive. "They are just whacking you for fees,"
he says. <br />
What Caramadre wanted was a way to get his clients the benefits without their having to die. <br />
* * *<br />
Society has long frowned on certain behaviors. Taking out an insurance
policy on a friend or neighbor and killing them? Not acceptable. Taking
out a life insurance policy that gambles your neighbor will die soon,
even without your help, also crosses the line. Today, it is
well-established law that one must have what is called an "insurable
interest" before purchasing an insurance policy on someone else's life.
The person who benefits from the policy must be a relative or business
associate who himself would face financial or familial loss from the
death. <br />
Insurable interest worked fine for 200 years or so until
the life insurance business itself changed. Despite its name, the
industry doesn't sell as much "life insurance" anymore. Life companies
now peddle financial services, particularly annuities. Variable
annuities were developed in the 1950s, initially as a way to give
teachers retirement options. Insurable interest was not an issue and
could have been an impediment to widespread adoption of the product. <br />
Caramadre did his research and concluded that Rhode Island law did not
require that people buying variable annuities have an insurable
interest. <br />
As imagined by the insurance companies, variable
annuities have two participants. There's the investor, the person who
puts up the money. That person typically also serves as the annuitant,
or the "measuring life." If that person dies, the death benefit is paid
to the beneficiary, usually a spouse or child. <br />
Caramadre
realized it didn't have to be that way. There was no requirement that
the investor and the annuitant be the same person. In fact, as he read
the contracts, the annuitant didn't need to have a relationship with the
investor at all. Caramadre or one of his clients could buy an annuity
on the life of someone who was not expected to live long and then pocket
any profit when that person died. <br />
"All we need to do is replace the necessity of the investor having to die, with someone else, dying," says Caramadre. <br />
If they chose well, the account went up and they reaped the benefits.
If they chose poorly, the death benefit kicked in and they recouped
their original investment. <br />
"If you won, you keep the winnings. If you lose, they give you your money back," says Caramadre. <br />
There is something morally unsettling about this. Put simply: Caramadre
was setting himself and his clients up to profit from the demise of
strangers. While the macabre aspect of his scheme offends many, it did
not make Caramadre squeamish. He rationalized that a lot of people —
funeral homes, hospitals and cemeteries — make money from the dead and
dying, why not him? <br />
Caramadre's insight might have remained a
curiosity were it not for something called "the arms race." As
competition intensified in the mid-2000s, many life insurance companies
launched an unprecedented war for customers, offering benefits they now
acknowledge were far, far too favorable. <br />
The insurance
companies' contracts provided little defense against Caramadre's
approach. For policies under a million dollars, they didn't check the
health status of people receiving variable annuities. Instead, they
limited the ages of annuitants or the amount that could be invested. All
that the companies required for persons to serve as a measuring life
was their signature, birthdate and Social Security number. Some didn't
even require the signature. <br />
There was usually only a single
line that touched on insurable interest in the contract. Companies would
ask if a relationship existed between the investor and the annuitant.
Caramadre and the men with whom he worked would either leave the answer
blank or type in "none." The companies, eager for business, took the
policy anyway. <br />
There have been at least eight lawsuits filed in
Rhode Island's federal district court relating to Caramadre's scheme.
Insurance companies Nationwide, Transamerica and Western Reserve have
all sued. The companies have not fared well in civil court. United
States District Court Judge William Smith keeps knocking out claims. The
companies then re-file new ones. As of this writing, Western Reserve
has filed five successive complaints against Caramadre in the same case.
When he dismissed Nationwide's complaint, Judge Smith questioned
whether the company ignored its own contracts. In the Western Reserve
case, <a href="http://www.propublica.org/documents/item/413290-judges-order-in-western-reserve-and-transamerica#document/p27">Judge Smith wrote</a>,
"It is a bit ironic for Plaintiffs [the insurance companies] to suggest
that they did not know the true nature of contracts that they
themselves drafted." <br />
The lawyer who represents both Transamerica and Western Reserve declined to comment. <br />
The more serious charges are the criminal ones. Caramadre usually paid
dying people between $3,000 and $10,000 for agreeing to serve as
annuitants. He characterizes the arrangement as a win-win for everybody
but the insurance companies. Prosecutors charge that he instructed
participants in the scheme to lie, to steal identity information and to
forge the signatures of annuitants in an effort to defraud insurance and
bond companies. <br />
The <a href="http://www.propublica.org/documents/item/413342-indictment-against-joseph-caramadre">story as told by prosecutors</a>
goes like this: In an effort to get rich, Caramadre and his associates
enticed the dying to give up their vital information by offering them
$2,000 as a charitable donation. More than 150 people received the
$2,000. Of those, at least 44 went on to play a role in number 18. <br />
The government alleges that Caramadre directed his associates to lie to
both the annuitants and the insurance companies. Sometimes, prosecutors
assert, the dying people had no idea someone else stood to profit. In
other instances, the indictment says, dying people were told that their
signatures were just for the receipt of the charitable donation. A
Caramadre employee allegedly told other family members they would be the
beneficiaries. In five cases, the government says, signatures were
forged. <br />
Caramadre denies the accusations. He says that he
instructed his employees to properly explain the program to the
annuitants and that he would never permit forgeries. <br />
Youthful
looking with a round expressive face etched with deep lines across his
brow, Caramadre appears more like an eager-to-please bulldog than a
criminal mastermind. During the arms race, he says, companies did not
complain when Caramadre paid their hefty fees and later filed claims
seeking death benefits. Family members didn't object either. Everything
changed in 2009 with the financial crisis. Companies started to feel
the consequences of the arms race, the insurance companies sued and the
FBI began visiting relatives and surviving annuitants. Today, some of
those family members are the strongest witnesses for the prosecution. <br />
"I lose my mom, who is my best friend, my world, and in me, losing my
mother forever at the age of 64, you, in turn, profit and get X amount
of dollars," says Stephanie Porter, whose mother received $2,000 from
Caramadre before she died of cancer. "It's slimy what the man did." <br />
* * *<br />
Caramadre learned to hustle early. He graduated from the University of
Rhode Island in three years with an accounting and finance degree,
supporting himself through odd jobs that included running his church's
weekly bingo game. After graduation, he took a job at a bank preparing
documents for trusts. A friend convinced him that his fastest track to
becoming a millionaire would be to sell life insurance, so he took a job
as an agent with the Penn Mutual Life Insurance Company. <br />
Caramadre had landed in an industry on the cusp of a historic transformation. <br />
Life insurance used to be safe and profitable. Many insurance companies
had begun in the 1800s as mutual aid societies. They were ostensibly
owned by their customers who sometimes even received dividends. The idea
behind the business was simple: Collect premiums from lots of people at
a price high enough to account for mortality, which can be quite
accurately predicted. The companies invested their pools of money. When
they wandered into trouble, it almost always involved poor investment
choices rather than unforeseen behavior by policyholders. By 1985,
annual compensation for a top company CEO could be in the high six
figures. While this was not a Wall Street salary, the business had the
benefit of comfortably predictable profits. <br />
Insurance agents
worked for specific companies and offered products only from that firm.
The agent was a man of the community, hawking a service that few young
and healthy people want to contemplate. The old adage in life insurance
is that "it's sold, not bought." Agents sold a relationship and a vision
for the future, encouraging clients to protect their family from a
tragic event and, possibly, give their heirs a leg up. <br />
By the 1990s, the business was changing. <br />
Under pressure from banks offering new retirement products including
annuities, insurance companies decided to shed the cost of keeping large
numbers of agents on their payroll. Rather than train, staff and equip
insurance agents, the industry moved increasingly to a freelance model.
"Independent" insurance agents paid for their own offices and expenses
solely through commissions earned on the policies they sold. Insurance
companies like Prudential, which once had as many as 18,000 agents,
whittled their in-house force down to about 2,500. <br />
The rise of
independent agents was accompanied by the widespread transformation of
mutual companies. Between 1985 and 2003, more than 20 mutual life
insurance firms converted themselves into stock companies, most of which
were traded on Wall Street. This process heightened the focus on
quarterly earnings and eventually helped lead to an increase in
executives' pay. Rising stock prices meant bigger bonuses. <br />
The
change in culture and incentives in the life insurance business created
the perfect conditions for the arms race. It also made the business a
prime target for Caramadre. <br />
It wasn't until the 1990s that the
growth of variable annuities took off. Between 1990 and 1999, the amount
of variable annuities individuals purchased in the U.S. leapt from $3.5
billion to nearly $63 billion in 1999, according to the American
Council of Life Insurers. <br />
For the companies, it was easier to
sell a product customers could use while still alive. Unlike life
insurance, annuities did not require an expensive health examination.
Life insurance was based on premium payments that remained steady. But
the yearly fees charged on annuities, which sometimes topped 4 percent
of the value of the account, would rise in line with those values. More
money under management meant more fees, which buoyed the companies'
stock prices and their executives' compensation. <br />
Annuities
were not a terrible idea. They fit a growing gap in the nation's pension
system. The defined benefit plan, a retirement approach where the
employer guaranteed a pension based on salary and years of service, was
disappearing. From 1980 through 2008, the proportion of private sector
American workers covered by company pensions fell from 38 percent to 20
percent, <a href="http://www.ssa.gov/policy/docs/ssb/v69n3/v69n3p1.html">according to the Bureau of Labor Statistics</a>. Meanwhile, a demographic bubble of baby boomers needed other retirement options. Annuities seemed to be tailor-made. <br />
At Penn Mutual, Caramadre broke sales records, becoming at age 24 one
of the youngest Golden Eagles — a recognition the company bestowed on
top sales performers. Caramadre left Penn Mutual two years before the
company ended its captive agent system. As an independent agent he could
find better deals for his customers on the open market. He became a
student of insurance products, deconstructing the product software
provided by the companies, delving deep into the contracts. It became
almost like scouting a ball player, he says. <br />
* * *<br />
Caramadre says annuities provided only about five percent of the profits
he made from his business. He says he took out policies for himself,
family members and clients. When he offered his "creation" to investors,
Caramadre would either share the commission on the policy with brokers
who worked in his office or, in a few cases, he would take a percentage
of the gain on the account, he says. He says his lawyers have advised
him not to reveal how much he made but it was likely in the millions.
Prosecutors allege that he and his accomplices fraudulently obtained $15
million from insurance companies. <br />
Caramadre anticipated that
eventually companies would close the loopholes and shut him down. But
what began in 1995 with AIDs patients grew over time to an effort that
advertised weekly in a Catholic newspaper aimed at hospice patients. <br />
By 2006, Caramadre had several people combing through the fine print of
variable annuity prospectuses. He claims they looked at 680 of them
that year. Most he could eliminate quickly. The companies were too small
or had sub-par ratings. If they lost millions, they might go out of
business which would be bad for both Caramadre and the company. <br />
Caramadre found that the companies with the best benefits were the ones
who were most eager to expand their market share. ING Group, for
example, was a favorite selection. The Netherlands-based company went on
an acquisition spree in the 1990s in an effort to become a dominant
player in the U.S. annuities business. ING spent most of the arms race
fighting to stay in the top 10 life insurance companies in variable
annuity sales. In 2004, ING had new annual variable annuity sales of
$7.7 billion. Four years later, that number had increased to $12.3
billion, according to Morningstar. <br />
"When a company is pushing
hard to sell bells and whistles on a product — they are desperate to get
money through the door — either because they are in an expansionary
phase or they want more assets under management in order to sell
themselves to a bigger company," Caramadre says. <br />
ING offered a
bevy of benefits. It started with a "bonus credit." This became common
by late 2006. In the case of ING's Golden Select Premium Plus variable
annuity, the company promised to add 5 percent of the value of the
contract. If you deposited a million dollars, the insurance company
would add $50,000 on top of it. <br />
Why would ING give away free money? <br />
It never expected to pay the majority of the benefits it offered. <br />
The 5 percent was added to the death benefit, which was held in a
separate account known as a shadow account. The insurance company only
paid the shadow account if the policyholder died and the money — the
million dollars — in the real account had shrunk to a lesser value. <br />
The companies' models of customer behavior, which were based on data
collected before the 2008 financial collapse, predicted that the death
benefit would rarely be paid. Something would happen. Policymakers would
take the money out for a big purchase, surrendering their account. If
the policyholder annuitized — started taking a stream of monthly
payments — the shadow account disappeared. In any event, the rising
market made it likely that the account would outperform the promises. <br />
But the models turned out to be the insurance industry equivalent of
the housing bubble. When the market crashed, consumers began acting
differently than they had in the past. <br />
Perhaps the gaudiest of
the benefits the companies never expected to pay was known as the
"rachet." The idea was perfect for a steadily rising market. Say you had
$1 million in your account in 2007 and your investment did well,
boosting the value to $1.2 million. That amount would be set on a given
date as your death benefit which you would be paid <em>no matter what had happened to your investment</em>. <br />
If stocks cratered, as they did in 2008, and your account fell to, say,
$600,000? The insurance company would still owe you $1.2 million when
you died. <br />
ING offered a quarterly ratchet — it set every four
months — and charged only about a quarter of a percent annual fee to
customers who wanted it. Many companies, including Nationwide Life and
Annuity Insurance Company and Transamerica Life Insurance Company,
offered monthly ratchets. <br />
To differentiate themselves,
companies also sold exotic investment options into which the buyers of
the annuity could invest their funds. ING featured funds managed by
reputable companies like Pimco, Fidelity and T. Rowe Price. Each fund
carried a fee that ING split with the fund manager. While ING provided
aggressive growth and real estate funds, many annuity companies went
beyond that to give consumers a choice of funds that used derivatives to
bet for or against the market, sometimes with multipliers, so-called
double betas. For example, if the stock market plunged, investors could
double their money. <br />
"Double betas were crazy funds," says Caramadre. "It hyper inflates the problem." <br />
Caramadre's first step was to make sure his clients qualified for every
incentive. If there was a monthly ratchet and bonus, he might invest
the funds in a money market account until the ratchet set with the
bonus. <br />
It was as if Caramadre was playing with the house's
money and going straight to the blackjack tables. With decent gains
locked in, he would take flyers on the riskiest investments possible.
Sometimes, he would invest his clients' money in two variable annuities,
one that paid out if the market went up and the other if it declined.
It didn't matter. When the annuitant died, Caramadre's client, at the
very least, would get both principals back plus the gains from whichever
fund paid out. <br />
Caramadre kept increasing the number of annuitants and placing big bets. <br />
"It was pretty fun being in the market without the risk," he says. <br />
* * *<br />
The fun ended in 2009 when the insurance companies began to
investigate. In March, Nationwide formally complained to the Rhode
Island insurance supervisor who didn't take any action. <br />
Nationwide had calculated the fees it charged and the guarantees it
offered based on the assumption that the policyholder would keep the
product for a certain period of time, it told Rhode Island officials.
Caramadre's treatment of the annuity as a short-term investment caused
"a negative economic impact on annuity issuers such as Nationwide," the
company wrote in its complaint. <br />
Nationwide's main allegation
involved a lack of insurable interest, the relationship between the
investor and the annuitant. "It is Nationwide's position that the
insurable interest statute applies to annuity contracts," the company
wrote. <br />
Attorneys for the two insurance brokers who worked with
Caramadre, Edward Hanrahan and Edward Maggiacomo Jr., filed detailed
responses to the Nationwide complaint with the Rhode Island state
insurance regulator. <br />
The company, the attorneys argued, had "no one to blame but itself." <br />
"Having attracted buyers, Nationwide now seeks to evade its payment
obligations, which arise from the very documents that Nationwide itself
drafted," Hanrahan's response read. <br />
In 2009, Alaska and
Nebraska were the only two states with insurable interest statutes that
encompassed annuities in all circumstances, according to Adler, Pollock
& Sheehan, one of the law firms that prepared the response. It said
Rhode Island has no such requirement. <br />
<a href="http://www.propublica.org/documents/item/326954-nationwide-v-steiner-complaint">Nationwide filed suit</a>
against one of Caramadre's investors in May of that year, a suit it
would lose. Transamerica and Western Reserve would wait until November
to file their suits. <br />
In June, Caramadre got word that the FBI had contacted one of the hospice nurses who had referred annuitants to him. <br />
His lawyer, Robert Flanders Jr., a former state Supreme Court justice,
asked for a meeting with prosecutors. He hoped to persuade them that the
matter was best left to the civil courts. According to Flanders, at the
meeting prosecutors let him know they didn't like Caramadre's creation
regardless of whether it was criminal or not. "Here was a guy who was
just throwing a few shekels at some poor sick people at the end of their
lives, and he was reaping the lion's share," says Flanders. "They
didn't like what they considered the inequity of it." <br />
Flanders
says he took the prosecutors' remarks as a threat. "At one point, the
lead attorney there said to me, 'You know all that money your client
made from the insurance companies?' I said, 'Yeah, what about it?' 'All
that is now going to go from him to you, because during the course of
this investigation, this is going to be a thing where he is going to be
drained of all the money he made.'" <br />
Asked specifically about the meeting and this accusation, a Department of Justice spokesman declined to comment. <br />
An FBI agent started conducting interviews with hospice workers, investors and family members of annuitants. <br />
Investigators learned that most of the contact with the dying
participants had occurred with Raymour Radhakrishnan, an employee
Caramadre hired in the summer of 2007. A graduate of Wheaton College in
Boston, Radhakrishnan was only 23 years old at the time. His job would
be to interact with the annuitants: assess their health, explain the
program, get their signatures and dispense the cash. Mainly, he would
oversee a growing corporate bond program (Creation 19). <br />
The
bond program had similarities to the variable annuity scheme. Caramadre
would buy certain corporate bonds on the secondary market. After the
financial crisis, these bonds were selling at a steep discount. As a
sweetener, the companies that originally sold the bonds had included
survivorship rights for co-owners. <br />
For example, if you owned
the bonds with your wife and she died, you didn't have to wait decades
to redeem them. The company would buy them back at full value. Caramadre
would "co-own" the bonds with a terminally ill person. When that person
died, he would redeem the bonds at face value, reaping the value of the
discount. <br />
Radhakrishnan is a co-defendant along with
Caramadre in what the government contends was a vast criminal
conspiracy. Reached through his public defender, Radhakrishnan declined
to comment. He has pleaded not guilty to the charges. <br />
Radhakrishnan's conversations with the terminally ill are at the heart
of the criminal case against both men. Caramadre seldom met with the
annuitants directly, but prosecutors allege that he instructed
Radhakrishnan to deceive the potential annuitants. FBI reports,
depositions and interviews suggest that Radhakrishnan told different
stories to different potential annuitants. The most serious charges
against the men involve allegations that they forged signatures. <br />
<a href="http://www.propublica.org/documents/item/413342-indictment-against-joseph-caramadre#document/p34">One forgery count in the indictment</a>
involves Stephanie Porter's mother, Bertha Howard. In January 2008,
Radhakrishnan met with Howard and Porter at Fatima Hospital where she
was being treated for lung cancer that had spread to her brain and
spine, according to Porter. Radhakrishnan gave her mother a check for
$2,000 and explained how Howard might be able to get more if she signed
more documents. The next meeting between Radhakrishnan and Howard
occurred in a nursing home a few weeks later. Porter was also present.
She says her mother, shaky and heavily medicated, struggled to sign some
forms. There was no additional explanation from Radhakrishnan,
according to Porter. A week later, Howard died. Shortly after that
Radhakrishnan called Porter to tell her that the company would not
accept the signatures so there would be no more money forthcoming.
Porter said it didn't matter since her mother was dead. <br />
But a
bond account was opened under Howard's name nonetheless. On the account
are signatures that Porter does not recognize as those of her mother.
The indictment charges that they are forgeries. Caramadre says it was a
mistake and documents he provided to ProPublica show that no money was
ever put into the account. <br />
The prosecution persuaded a judge
to allow it to take depositions of dying participants in the schemes
even though no charges had been filed at the time. Over a few weeks in
hospitals and private homes, with tubes in their noses and a variety of
high-powered medications in their blood streams, the annuitants
testified that they did not understand the arrangement they had entered
into with Caramadre and Radhakrishnan. Some denied writing their
signatures on forms submitted to insurance and bond companies. <br />
Caramadre believes the depositions show that the FBI and prosecutors misled witnesses and thus tainted their testimony. (<a href="http://www.propublica.org/article/excerpts-of-video-depositions-in-the-case-against-joseph-caramadre">See video clips from the depositions.</a>) An FBI spokesman said the agency does not comment on active cases. <br />
The Wall Street Journal wrote two stories on Caramadre's cases, <a href="http://online.wsj.com/article/SB10001424052748704479704575061392800740492.html">one in February 2010 on variable annuities</a> and <a href="http://online.wsj.com/article/SB10001424052748704784904575112081251438468.html">another a month later on the corporate bond program</a>. <br />
Two months later, the National Association of Insurance Commissioners held a <a href="http://www.propublica.org/documents/item/346099-soa-hearing-agenda-5-20-10-rev">hearing on stranger-originated annuities</a>.
Thomas R. Sullivan, a former Hartford Insurance executive and the state
regulator from ING's home state of Connecticut, chaired the meeting. <br />
"This is about embarrassment," says Caramadre. "Nobody ever complained
about what I did until the insurance companies and the FBI came
knocking." <br />
In November 2011, after almost two years of work, a Rhode Island grand jury issued a <a href="http://www.propublica.org/documents/item/413342-indictment-against-joseph-caramadre">66-count indictment against Caramadre and Radhakrishnan</a>. <br />
Their criminal trial is scheduled to begin in November. <br />
Today, several of the companies Caramadre targeted have stopped selling
variable annuities. ING has been forced to get out of the business and
write down billions in losses. Others have had to boost their reserves.
Transamerica is trying to buy back some of the variable annuities it
sold to policyholders. The French insurer Axa is offering its variable
annuity holders money if they surrender their death benefit guarantees.
Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-89975391938186237762012-11-03T10:10:00.001-07:002012-11-03T10:10:04.831-07:00Fresh food fixation becomes a business for Wash. U student<div class="title-block">
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Fresh food fixation becomes a business for Wash. U student</h1>
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Sarah
Haselkorn, 20, sweeps the floor of her restaurant, Green Bean, in the
Central West End on Oct. 23, 2012. The Washington University student
opened the restaurant one year ago. Photo by J.B. Forbes
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<span class="pubdate">November 02, 2012 12:18 am</span> • <span class="byline"><a href="http://www.stltoday.com/search/?l=50&sd=desc&s=start_time&f=html&byline=By%20Georgina%20Gustin%0Aggustin%40post-dispatch.com314-340-8195">By Georgina Gustin
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On a recent weekday afternoon, Sarah Haselkorn sat table-side
at a restaurant in the Central West End, wearing shorts, a T-shirt and
running shoes, with her hair pulled back in a ponytail and a backpack at
her side.<br />
She looked a lot like a typical college student — which she is. Sort of.<br />
Haselkorn
is, in fact, a senior at Washington University. But, between classes,
exams and the demands of a her systems engineering major, she has also
managed to co-launch and run Green Bean, a quick-service restaurant that
serves fresh salads and wraps.<br />
In the process, she’s tapped into a growing national trend — and an exploding market for fast, healthy food.<br />
Haselkorn
and her concept have, in fairly short order, caught the eye of a
prestigious national entrepreneur organization, and a week from Monday
she’ll give a presentation to its members on the floor of the New York
Stock Exchange. She has another non-restaurant concept in development,
and probably a lot more floating around in her head.<br />
Oh, and she’s a triathlete. And she’s only 20.<br />
Haselkorn
moved to St. Louis from her hometown of Washington when she was 17, and
soon determined the city’s food landscape was missing something.<br />
“I noticed quickly there weren’t very many healthy restaurants in St. Louis where you could get something fast,” she remembers.<br />
Healthy
and fast are important attributes for a busy student who happens to run
the odd triathlon. So rather than complain about the lack of
quick-service, healthy restaurants, she opened one herself.<br />
Haselkorn
got in touch with a friend from her hometown, Nick Guzman, who had
recently graduated from Amherst College, and the two started developing a
business plan via email.<br />
After a couple months trading ideas and
doing research — Haselkorn spent hours watching customers come and go
inside other area restaurants — the two had a formal pitch.<br />
Based loosely on salad-centric restaurants they’d been to in New York and Washington, Green Bean would be fast and healthy.<br />
It
also would go a step beyond that: Green Bean, the concept went, would
use recycled materials in all its packaging, reuse building materials,
compost and recycle everything, and order food daily, tailoring it to
the ebbs and flows of daily traffic to minimize waste.<br />
“We wanted
to have real, whole food and transparent nutrition,” Haselkorn says.
“But we also wanted to focus on sustainability. We wanted to be better,
different. We wanted it to be Green Bean.”<br />
The two were confident
in their concept, Haselkorn says, but were less so about their menu. So
they approached James-Beard-award-winning chef, Peter Pastan — who is
the father of one of Guzman’s friends — and asked him to develop a menu.<br />
“I was 18 when I went to him,” Haselkorn remembers. “He said: Are you sure you want to do this?”<br />
A
few months later, they had found a space in the 200 block of North
Euclid Avenue, and a few months after that they were tearing the place
apart. Acting as their own general contractors, Haselkorn and Guzman
oversaw the renovation and did much of the work themselves, using
materials recovered during demolition.<br />
Today Green Bean employs
eight people, with Haselkorn and Guzman doing much of the work
themselves, from maintenance to ordering.<br />
When asked whether
there’s anything she’s not involved in, Haselkorn says: “No. Not really.
Well, maybe. We have a tax accountant.”<br />
The restaurant does a
steady business, mostly from health-conscious customers in the
neighborhood and medical students from Wash U. It has been in business
for about a year, and Haselkorn is already thinking about expansion
possibilities.<br />
“I think there’s room in the market in St. Louis,
but the other option is to franchise,” she says. “We want to make sure
it’s perfect first. You don’t want to replicate any imperfections.”<br />
Analysts see more potential, too.<br />
A
“fast casual” restaurant — the category that Green Bean finds itself in
— serves food that’s a notch or two higher in quality than typical fast
food, but is not a full-service restaurant. Food usually is ordered at a
counter, with a server sometimes delivering it to a table.<br />
The category has boomed in the past decade as people seek out healthier, convenient food.<br />
“Fast
casual continues to outperform the rest of the industry,” said industry
analyst Darren Tristano of Chicago-based Technomic. “ The drivers are
from customers moving up from fast food, and diners moving down from
full-service.”<br />
Technomic estimates that the fast-casual category represented about $27 billion of the $370 billion restaurant market in 2011.<br />
“It’s
still very small,” Tristano said. “But there’s growth at double digits
for the past 10 years, and it’s growing. We’re going to see more ethnic
food concepts, and more healthy concepts.”<br />
On Nov. 12, Haselkorn
will present the Green Bean concept to a group of judges with the
Entrepreneurs’ Organization’s Global Student Entrepreneur Awards. She’s
one of 30 finalists from 42 countries.<br />
Haselkorn — to her surprise
— was selected to compete in a regional competition earlier this year,
taking first place and earning the spot in New York.<br />
That she won
comes as no real surprise to her Wash U professor, Clifford Holekamp. He
teaches a highly popular class for entrepreneurs called The Hatchery,
which has launched dozens of successful businesses.<br />
“Part of the
award is based not just on the business, but on the entrepreneur,”
Holekamp explained. “She’s a very talented young lady. She’s balancing
an engineering curriculum, minoring in entrepreneurship and running a
successful business, and that is just extraordinary.”<br />
<span class="print_trim">Indeed,
sitting in Green Bean, Haselkorn has to remind herself that she should
start preparing for the competition, which will dole out $250,000 in
cash and in-kind business services.</span><br />
<span class="print_trim">But she also takes the prospect of not winning the title like a wise old pro.</span><br />
<span class="print_trim">“Just going to New York City is enough,” she says. “Even the opportunity to be there will affect my entire future.”</span><br />
<span class="print_trim">Then she left her restaurant and headed to class.</span><br />
</div>
Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-28610405150677084972012-05-23T08:24:00.001-07:002012-05-23T08:24:51.664-07:00Movies are Corporations (Hollywood Accounting)By Chad Upton | Editor<br />
One of the most interesting classes I took in College was taught by a
film producer. He only taught that one class, for two hours, once a
week. He shared learnings from the entire film making process, from
writing a script and getting funding to shooting and distribution.<br />
From this class, I learned is that each film is incorporated as its
own corporation and there are a number of reasons why they do this.<br />
For one, it offers limited liability. If someone sues the production,
the people who financed and produced the film have some
legal separation between the film and their personal assets and other
businesses.<br />
It also offers financial abstraction from the people and companies
who financed the film. Here’s a little math test to help explain this
concept: if it costs $300 million to make a product and then you sold $1
billion worth of it, how much was your profit? $700 million right? Yes.
Unless, your product was a film or TV show.<br />
<a href="http://www.flickr.com/photos/cityprojectca/3796152911/in/photostream/" target="_blank"><img alt="" src="http://brokensecrets.files.wordpress.com/2012/05/hollywood-e1337456084579.jpg?w=455" title="hollywood" /></a><br />
This is almost exactly what happened with <em>Harry Potter and the Order of the Phoenix</em> (2007).
The studio invested just over $300 million to make the film and it
grossed almost $1 billion from the box office and other distribution
deals. But, instead of making $700 million, it actually <em>lost</em> $167 million (on paper). So, what happened to all of that money?<span></span><br />
Hollywood has their own system of accounting, often referred to as
“Hollywood Accounting” or “Hollywood Bookkeeping” where only about 5% of
films actually show a profit. How?<br />
Because the film itself is a corporation, that company is loaned
money by the studio to make the film. The film pays the studio interest
on that loan, which is one way to channel money back to studio.<br />
Also, the studio generally owns other verticals where the film
corporation can pay for things like advertising. For example, Harry
Potter was made by Warner Bros, a subsidiary of Time Warner. Time Warner
owns multiple TV networks and publications where the film company could
buy advertising, thus channeling more money back to the parent company.<br />
There are also distribution costs. The parent company may also have
business interests in these channels where they can pay themselves
again.<br />
All of these things are done to essentially bankrupt the corporation that was formed to make that single film. Why?<br />
If there are no profits, they don’t have to pay partners who agreed
to a share of net profits. This is why you’ll often see some heavy
hitters get a share of the box office or gross income instead of net
profit. Depending on how they setup the initial investment in the film
entity, there may also be a payroll tax advantage to financing the film
this way.<br />
<a href="http://brokensecrets.files.wordpress.com/2012/05/harry-potter-net-profits.png" target="_blank"><img alt="" height="615" src="http://brokensecrets.files.wordpress.com/2012/05/harry-potter-net-profits.png?w=455&h=615" title="harry-potter-net-profits" width="455" /></a><br />
There have been plenty of lawsuits over this type of accounting and
the film company often loses. Jurors have awarded favorable settlements
to actors and other partners who have been shorted money due to
hollywood accounting. Although one judge called it, “unconscionable” —
it’s not illegal.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-84198577035476676192012-03-27T16:33:00.001-07:002012-03-27T16:33:32.808-07:004 Tricks Restaurants Use to Make More Money4 Tricks Restaurants Use to Make More Money<br />Written by Miranda Marquit <br /><br />This is a guest post from my online buddy Robb Engen. He writes over at Boomer & Echo, as well as contributes to Moneyville.ca. I love his look at some of the ways restaurants try and squeeze a little more out of you. Personally, even knowing this, I still like to eat out — I enjoy the experience.<br /><br />We all love going out to eat to enjoy good food and wine with our friends and family. But when you go to a large chain restaurant, keep in mind that it’s a business and their aim is to boost the bottom line at the same time they’re creating an enjoyable evening out for you.<br /><br />When I worked in the hospitality industry, I learned a few different techniques to get customers to spend more on their dining experience. Here are a few tricks restaurants use to get more money out of your wallet:<br /><br />Menu engineering<br /><br />The menu is the place where people choose their meal so a lot of time is spent trying to items more profitable. The uses of shaded boxes and borders around items on the menu are designed to catch your eye and can increase sales by 25 per cent. The word, ‘special’ or ‘new’ can increase orders by up to 20 per cent.<br /><br />Often these highlighted items are dishes with the lowest food cost which means they may not the best value for you.<br /><br />Each menu item is priced according to its cost. Most restaurants want to keep their food cost below 30 per cent. However, you won’t see oddball pricing of $19.31 simply because it fits a formula. Customers don’t perceive a difference between $19.31 and $19.99, so the restaurant raises the price and the extra 68 cents goes to the bottom line<br /><br />Up-selling<br /><br />In the hospitality industry, more emphasis is placed on training employees to become better sales people. The waiter, hostess, and bartender become extensions of their sales and marketing team.<br /><br />Now up-selling has become the industry standard, as side dishes, appetizers, desserts and drinks all help build a higher average cheque per customer.<br /><br />Your server is trained to ask if you want to add mushrooms or prawns to your steak dinner, or to try a specialty coffee with your dessert. Some restaurants expect their servers to suggest bottled water or Perrier when you ask for water, and offer a bottle of wine instead of the two glasses you asked for. The best servers take every opportunity to up-sell you on an item.<br /><br />I had to say, “no thanks”, at least a half dozen times during our last restaurant experience.<br /><br />Buffets<br /><br />Buffets aren’t a big money maker for most restaurants, which means they likely offer the best value for you. Still, a good restaurant can find ways to make money on their buffets.<br /><br />Restaurants use smaller plates on their buffet line, which reduces the amount of food you can take at one time. The buffet line starts with an assortment of low-cost breads and salads to fill you (and your plate) up faster.<br /><br />Drinks<br /><br />Some restaurants can even find savings with the smallest of items. Take drinking straws, for example. Your non-stop pop might come with the thinnest straw possible to help slow down your consumption. On the other hand, alcoholic beverages usually come with a big fat straw so you’re able to drink much faster.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-66818358125093648792012-02-07T14:01:00.000-08:002012-02-07T14:02:54.640-08:00Is Kohl's Marking Up Prices Before It Puts Items On Sale?When you see a sale advertising "40% off" an item, what exactly does that mean? Is it 40% off the price it was selling for last week? 40% off the MSRP? There's a gray area in retail pricing that has some shoppers accusing Kohl's of inflating prices so that an "on sale" item looks to be a better deal than it actually is.<br /><br />CBS Sacramento's Kurtis Ming -- one of the best named consumer reporters in the country -- looks at a few instances, including one where a Kohl's shopper thought she'd got a great deal when she bought a $210 sheet for for 50% off, only to later find a price tag showing the product had recently been selling for $170, and that the price had been marked up three times since until reaching $210.<br /><br />"You always expect to see the price tag stuck on top of another one is the cheaper price," she says. "Actually, it was more expensive."<br /><br />So CBS sent in hidden camera crews to several Kohl's outlets to see if this was standard operating procedure:<br /><br /> A CBS producer found clothes, luggage, kitchen, bath and bedding products -- 15 items in all -- marked up, some as much as $100, and price tags on top of price tags.<br /><br />Other items have different price tags on different areas of the product.<br /><br />One twin sheet set was listed at 50 percent off the original price of $89.99. But inside the plastic zipper, the earlier price tag shows $49.99, indicating the current sale is only $5 savings from the original tag.<br /><br />A 10″ skillet was listed on sale for $34.99, with a regular price of $39.99, but underneath that sticker, the earlier price tag was marked $29.99 -- meaning Kohl's current price on sale is $5 more than the originally marked price.<br /><br />One producer tried pointing out that a $150 sheet set marked at 30% off also had a price sticker showing a price of $90, about $15 less than what they would pay with the discount.<br /><br />The producer asked the cashier if they could get 30% off the $90. A manager decided this was okay and told the undercover producer, "Sometimes when we do scratch-off coupons, we mark stuff up."<br /><br />A consumer attorney tells CBS that Kohl's may be violating California state law if it is deliberately marking up prices just to make sales appear better than they should.<br /><br />But Kohl's denies any such behavior, saying that prices of in-stock items went up because the cost of certain new inventory went up:<br /><br /> As is common in the retail industry, from time-to-time, product prices are increased due to production and raw material costs. When these types of price increases are implemented, our stores are instructed to re-ticket all items currently in our inventory to match the price tags for all in-coming merchandise...<br /><br />Price increases at Kohl's are not common. However, the unprecedented increases in the cost of certain commodities such as cotton over the past 24 months have caused us to take these actions.<br /><br />The retailer confirms that the price of the sheet set mentioned at the top of the story did indeed go up dramatically because they had to match the price Kohl's was going to charge for sheets made with cotton that was now costing everyone more money.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-21303405223227454362012-01-09T09:53:00.000-08:002012-01-09T09:59:56.149-08:00Using Buffett's Favorite Ratio To Analyze Apple And Its Industry<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjUrOIyZFON3fWyJXSXIMxdFZuqjoKKguAtYhQlXQ4M1vm0GeNqjkZD3Eeu2vGSwRgJESYkS-FjFn-qttCLQW5pqPB7ILHtQfVWoRvIeXUy21nAoTf0r3j9KIDqMArqUjMBO2CN0S_x6k/s1600/498843-132585783295577-Peter-Mycroft-Psaras_origin.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 245px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjUrOIyZFON3fWyJXSXIMxdFZuqjoKKguAtYhQlXQ4M1vm0GeNqjkZD3Eeu2vGSwRgJESYkS-FjFn-qttCLQW5pqPB7ILHtQfVWoRvIeXUy21nAoTf0r3j9KIDqMArqUjMBO2CN0S_x6k/s400/498843-132585783295577-Peter-Mycroft-Psaras_origin.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5695693507188385874" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQJUvm_GESmrig_-245sb0ek27cFrcQ80ItlptZ62gQ-f8PjIVbAtZrdasoFpHlhRPjgGLrxmAhZUHFsZ3hDeZCkOJecVXlHU1K_LFxFlo9HYJzw8VgTjJ2563L8yr8Wrhd-KplodSuO0/s1600/498843-132585814644002-Peter-Mycroft-Psaras_origin.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 290px; height: 400px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiQJUvm_GESmrig_-245sb0ek27cFrcQ80ItlptZ62gQ-f8PjIVbAtZrdasoFpHlhRPjgGLrxmAhZUHFsZ3hDeZCkOJecVXlHU1K_LFxFlo9HYJzw8VgTjJ2563L8yr8Wrhd-KplodSuO0/s400/498843-132585814644002-Peter-Mycroft-Psaras_origin.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5695693504524436194" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgh2VOo6RFz6-LypgxpcbKWbV8MzA57HJGSDLWVtkUZ0Gfn_TyX0EiJhzqRP4jiD6QPYNFd-3Jv0UEK01OufedJiBCXzxjJhyZyd-SZ9dOwqnAs1F2k17SiNPSCx4SUgKMNlvBYObnyd9E/s1600/498843-132585828209223-Peter-Mycroft-Psaras_origin.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 240px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgh2VOo6RFz6-LypgxpcbKWbV8MzA57HJGSDLWVtkUZ0Gfn_TyX0EiJhzqRP4jiD6QPYNFd-3Jv0UEK01OufedJiBCXzxjJhyZyd-SZ9dOwqnAs1F2k17SiNPSCx4SUgKMNlvBYObnyd9E/s400/498843-132585828209223-Peter-Mycroft-Psaras_origin.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5695693502740428066" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLisXJ-mdjMAz4f9yswUCCnSqpgQVDymaT4CPdDK-mVBrL9LBS7_liDcVn-qleNDeLgGB1JKpuo1V3Z0XrXwDsQmTsbJuTEpF9gD7yqMRhyphenhyphenzwyxPHt2HHS5bKVS45MBZp7Iu1VDnXFfrY/s1600/saupload_aapl.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 400px; height: 176px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjLisXJ-mdjMAz4f9yswUCCnSqpgQVDymaT4CPdDK-mVBrL9LBS7_liDcVn-qleNDeLgGB1JKpuo1V3Z0XrXwDsQmTsbJuTEpF9gD7yqMRhyphenhyphenzwyxPHt2HHS5bKVS45MBZp7Iu1VDnXFfrY/s400/saupload_aapl.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5695693499923371138" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidJCxKrTW4zyZJFuhufcaHJA1RRHVCzBle9RJAZA5oT7eo22fzm-xaA2V2q6oKxZuVfpY7J8GZiaooTUxjUdfjhyphenhyphenUfFItWAa0qIltgnruU25RI-l1EMjzKkIi9GPEWVHVAIGaEqAFZx-Y/s1600/498843-132585777183483-Peter-Mycroft-Psaras_origin.jpg"><img style="display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;width: 232px; height: 400px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEidJCxKrTW4zyZJFuhufcaHJA1RRHVCzBle9RJAZA5oT7eo22fzm-xaA2V2q6oKxZuVfpY7J8GZiaooTUxjUdfjhyphenhyphenUfFItWAa0qIltgnruU25RI-l1EMjzKkIi9GPEWVHVAIGaEqAFZx-Y/s400/498843-132585777183483-Peter-Mycroft-Psaras_origin.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5695693512480590818" /></a><br /><br /><br />Many years ago while reading the Berkshire Hathaway (BRK.A) 1986 Letter to Shareholders, I discovered Warren Buffett’s ratio, which he calls "Owner Earnings". And to my amazement, in a little footnote Mr. Buffett actually explains how to use it and basically states that it is one of the key ratios that he and Charlie Munger use in analyzing stocks.<br /><br />Due to the popularity of my “Buffett’s Favorite Ratio” articles, I have gotten many emails asking me to analyze Apple in that context. The following is my analysis of Apple (AAPL) and its industry using Mr. Buffett's ratio. For those new to this type of analysis please look here.<br /><br />I would like to start this analysis by first showing everyone how Apple has done from a historical owner earnings perspective, going back to 1995: (Click to enlarge)<br />As you can see from the data above, buying Apple when its price to owner earnings broke below 15 in 2009 would have been the best time to buy its stock. Buying a company's stock when it breaks below that specific number on a price to owner earnings basis is key in doing this type of analysis. I proved that point in my back test of the DJIA 30 Index for the 60 year period of 1950-2009.<br /><br />From a CapFlow perspective, Apple has consistently stayed below 50% since 2004 and the chart below will show you what that has meant for the company’s stock price<br />CapFlow is a key indicator of how management is conducting its cost controls. Had you been using this system at the time, you would have seen Apple's CapFlow drop from 84.62% in 2003 to 40.74% in 2004. Management cut costs by 51.85% in that year and proceeded to drop CapFlow in 2005 to 18.02%. This miraculously amounted to another drop of 55.78%. Management was clearly in charge of their destiny at the time because in just two years they were able to drop Apple's CapFlow by some 78.07%. This was a key breaking point for the company and because management has continued to keep the company's CapFlow low, it has been able to generate some serious Owner Earnings growth rates.<br /><br />Before continuing with our analysis of Apple let us first look at their competitors and see how they are doing from an owner earnings perspective. The following is a table of the major companies that are in Apple’s Industry<br />As you can see from the table above, with my system you can zero in (within minutes) and know exactly which companies are the super stocks and which ones are the dogs with fleas. Western Digital (WDC) and Brocade (BRCD) are definitely dogs with fleas, as Western Digital comes in with two negative results and has a CapFlow of 122.64%. So one could say “look out below!”<br /><br />IBM (IBM) and Dell (DELL) are definitely super stocks as they are clearly putting up strong owner earnings numbers. Unlike Apple, Dell is concentrating on consumers who are looking for a low price point. In comparing the two, one finds that Dell's computers sell for about half of what Apple's do, but even so, Apple is winning in the owner earnings game because it gives its consumers "white glove" customer service and quality. In this world you get what you pay for.<br /><br />IBM's long-time CEO recently retired and I am not sure how good its new CEO will be. So I will give her some time to show me what she can do before joining Mr. Buffett in buying it.<br /><br />If you are looking for value plays, then Dell, Logitech (LOGI) and Seagate Technology (STX) have insanely low price to owner earning numbers. Had you done this analysis on Seagate back in September you would have had an amazing buying opportunity as the stock was only selling in the low teens. Here is a chart of Seagate that will clearly show you what can happen to you as an investor when you get the owner earnings numbers right<br />Finally one stock being pumped up by analysts is Hewlett Packard (HPQ) as Meg Whitman is now the CEO. But we need to give Meg some time to get things organized as the stock is still a value trap, in my opinion. I can say this because its FROIC is still too low for a tech stock and though its CapFlow is under 50%, it is not much below that. If Whitman can shed some assets that are underperforming and bring HP's FROIC up to 20%+, you may have a great turnaround story here.<br /><br />Recently Apple's stock has been in a trading range even though its Owner Earnings numbers have been fantastic. I don't know if this is a result of its CEO Steve Jobs' passing, but I believe that I may have the answer as to why this may be happening. It can be attributed to the company having way too much cash on its balance sheet. This excess cash reduces the company's Main Street performance numbers because it effects its FROIC. Remember that FROIC measures owner earnings return on total capital. Total capital is basically long term debt + shareholder’s equity. Cash which returns 1% at best makes up the lion's share of Apple's total capital. In my opinion, Apple needs to either start making acquisitions of companies that have a FROIC of 20%+ or it needs to start paying a dividend. Until the company does that, I have decided to sit on the sidelines. As you can see, FROIC is actually expected to drop from 30.64% in 2011 to 27.96% for 2012, even though Apple's owner earnings are expected to grow at 27.02%.<br /><br />You can’t really be expected to move much in the stock market if the return on half of your capital is growing rapidly and the other half is dead- growing at just 1%. It is an anchor on the stock, which can be remedied very quickly by paying a one-time $20 a share dividend to shareholders. Warren Buffett has this similar problem as Berkshire Hathaway (BRK.A) generates way too much cash. He solves this problem by being proactive about it and invests the cash in companies like IBM (IBM), Intel (INTC) or MasterCard (MA) which are all monster FROIC producers in their own right. If Apple's management decides not to pay out a dividend or buy out other companies, they should at least start buying stock in other companies which have tremendous FROIC. Until they do something about all that cash, the stock should remain in a trading range as much of its total capital is only earning 1% at best.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-41553966859035503032011-09-23T15:03:00.001-07:002011-09-23T15:03:59.582-07:00Moneyball: It's About Investing, Not BaseballMoneyball: It's About Investing, Not Baseball<br /> <br />By Joseph Hogue<br /><br />The movie adaptation of Michael Lewis’ book, “Moneyball” comes out today to what will surely be big box office bucks (if advertising is any indication). The book is based on the front office career of Oakland A’s scout Billy Beane. Around 2002, Beane adopted Bill James’ Sabermetric approach to recruitment in order to help the team compete against teams with upwards of three times their salary power. Not able to recruit the big name athletes, the A’s had to find undervalued players. They did this by using statistical analysis of uncommon metrics, but ones with higher correlations to career success in athletes, than the more traditional metrics like stolen bases and RBIs.<br /><br />The movie is sure to be a feel good romp about an underdog story and determination. What most will never know is that the book, “Moneyball: The Art of Winning an Unfair Game,” was written by one of the great financial journalists and has significant importance for investors. Those of us without the money power of institutional investors would do well to learn something from Mr. Beane and the Oakland A’s.<br /><br />Metrics<br /><br />Sabermetrics places emphasis on in-game statistics rather than the industry norm of career averages. Key metrics include: "late-inning pressure situations" (LIPS) and my favorite "narration, exposition, reflection, description" (NERD). What is important to investing is the idea that many measurements, i.e. price-to-earnings, debt-to-equity, and earnings per share are so popularized as to be commoditized and of relatively little value. To compete with the institutional players, investors must look deeper into stock metrics to find measures more highly correlated with success and less often used. To this end I will present two methods of measurement not universally used and with proven success.<br /><br />The first method will be the Piotroski Score, named after the University of Chicago Professor, Joseph Piotroski. Piotroski argued that because value stocks are often distressed companies, investors should implement a way to distinguish between companies with good future potential and those more likely to be value traps. The scoring is built on a series of nine criteria for evaluating a firm’s financial strength. Over a 20-year test period, those stocks scoring highest also outperformed a portfolio of all value stocks by about 7.5%. Additionally, those stocks scoring lowest were up to five times more likely to file bankruptcy or de-list their shares. Piotroski immediately came to mind when I first saw the commercials for "Moneyball." Both the movie and the method involve finding undervalued picks with a good future. Both Sabermetrics and the Piotroski Score look at ‘in-game’ (financial statement) statistics instead of getting caught up in the more popular relative valuation methods.<br /><br />The scoring is fairly simple and straightforward with one point given for each of the following criteria:<br /><br /> Positive prior year net income.<br /> Positive prior year operating cash flow: This is a better gauge of income and less susceptible to management manipulation.<br /> Current year return-on-assets is greater than prior year: A good measure of profitability.<br /> Prior year operating cash flow exceeds net income: A warning sign of income statement manipulation by management is net income that significantly exceeds operating cash flow. Managers can manipulate accounts to show higher net income, but it is much harder to manipulate actual cash flows.<br /> Ratio of long-term debt to assets is lower than prior year: Lower liabilities relative to assets is a sign of improving financial stability.<br /> Increasing current ratio (current assets divided by current liabilities): This is a signal of improving access to working capital and solvency.<br /> Number of shares outstanding is equal or lower than prior year: An increasing number of shares outstanding means that prior investments are being diluted.<br /> Current year gross margin exceeds prior year: Margins measure the company’s competitive position.<br /> Percentage increase in sales exceeds percentage increase in total assets: An improving asset turnover means the company is improving productivity.<br /><br />DR Horton (DHI) and Dell Inc. (DELL) both did well in a Piotroski screen with top scores of nine. DR Horton is a $3.1 billion homebuilder operating in 26 states. Its stock price has been pressured along with the rest of the homebuilders, losing 11.4% over the last twelve months. Eighty-seven percent of the shares are held by institutions and 12.5% are held by insiders making the float relatively limited. Another 26 million shares are sold short, about 11.2% of float, meaning there could be some support as short-sellers return to buy back their positions.<br /><br />Dell is the $27 billion computer-maker and retailer that was once the darling of wall street and the kind of stock that made you rich. In the ten years to 2000, the stock price increased by 846 times, but has not been able to catch a break since. The stock is up 14.7% over the past year but still off 15.1% from its July highs. The company’s CEO, Michael Dell, recently told Bloomberg that they would continue to look for 8-10 acquisitions per year of companies with proven technologies. The stock price is relatively cheap at only 8.0 times trailing earnings though return on assets is fairly low at only 7.5%.<br /><br />Big Lots (BIG) and Eastman Kodak (EK) did not do as well on the screen with scores of 0 for Big Lots and 3 for Eastman Kodak. Big Lots operates a chain of cost-leader retail stores across the 48 contiguous states and 88 stores in Canada. Though the stock has been supported over the last few years as a low-cost retailer, lowered expectations on economic growth and a generally tired consumer are holding the company back. The stock, at $33.62, is up 1.4% over the year but well off its highs of $43.68 per share.<br /><br />Eastman Kodak, that once great camera company is now only a $700 million shell of its former glory. The company operates in three segments: consumer digital imaging; graphic communications; and film, photofinishing, & entertainment. Looking over the financial statements is depressing with negative profit margins, return-on-assets, and cash flow. The stock is down 38.7% over the last year and has a negative book value when goodwill is backed out.<br /><br />The Altman Z-Score is similar to the Piotroski Score in that it is a predictor of financial distress and used primarily in value investing. The method, published in 1968, was named after Professor Edward Altman of New York University. It uses five ratios, multiplied by a coefficient for weighting of importance, to predict the likelihood of bankruptcy within two years. The model was found to successfully predict 72% of corporate bankruptcies two years prior to filing chapter 7 and only falsely predicted bankruptcy in 6% of cases. Subsequent studies have found the method to accurately predict distress 80-90% of the time with 15-20% false predictions (pdf).<br /><br />The five ratios and their coefficients are:<br /><br /> Working Capital/Total Assets (1.2): Measures liquidity of assets and the financial flexibility of the firm.<br /> Retained Earnings/Total Assets (1.4): A measure of profitability relative to the company’s size.<br /> Earnings Before Interest and Taxes/Total Assets (3.3): A measure of operating efficiency outside of tax and debt considerations.<br /> Market Value of Equity/Book Value of Total Liabilities (.6): It is a possible warning signal when the market value of the firm is substantially below the book value.<br /> Sales/Total Assets (1.0): A measure for total asset turnover and efficient use of firm assets.<br /><br />The scores for each ratio are then summed and interpreted as follows:<br /><br /> Score>3.0 - The company is safe based on financial figures.<br /> 2.7><2.99 - The company is on alert and investors should be cautious.<br /> 1.8><2.7 - There is a good chance the company will file bankruptcy within two years.<br /> Score<1.8 - The probability of the company filing for bankruptcy within two years is high.<br /><br />One notable Altman Z laggard is media conglomerate Time Warner Inc. (TWX) with a score of negative .50 and a high probability of financial distress. The company trades for a persuasive price-to-earnings growth (PEG) ratio of just .78 and an even price-to-book value. The stock is only off 3.6% over the last year but has traded flat since 2002 and is off its 2007 highs by more than half. Media companies have had a tough go of it lately as more content goes to the internet and traditional media loses advertising revenues. Though the company’s margins and revenue growth are in-line with industry averages, a deeper look into the financial statements presents a possible unstable future.<br /><br />There is some redundancy between the two measurements and not much research as to which is the better predictor. They are relatively easy to calculate and an Excel spreadsheet template makes the process even faster, so I use both for my value investments. Stocks scoring well on both metrics usually make the cut for value picks, while those scoring well in one but not the other would need further scrutiny. A note of caution, I’ve found several screens on the internet that give different scores for the same stock so you will want to take the time to dig into the financial statements and do the actual scoring yourself.<br /><br />Adapt or Lose Money<br /><br />Another key take-away from the book is the idea of adaptation to market efficiency. The success of the A’s Sabermetrics approach brought imitators and competitors in the field. Today, most big league teams have a staff of statisticians analyzing a slew of data. To continue their run, the A’s had to continuously search for neglected metrics that would correlate with success.<br /><br />This is just as true in investing. The first guy to discover the January Effect probably made some good money. The millions of investors that have tried the approach since then haven’t fared as well. As soon as a metric or strategy is popularized, the market starts pricing for it and the easy money is gone. Investors must continuously adapt their strategy to stay one step ahead of the market.<br /><br />Investing, like professional baseball, is an extremely competitive field. Those that do not spend the time to find novel and superior analytical tools will be fodder to the big dogs, i.e. the Detroit Tigers. Further, without an analytical staff to back our stock picks, regular investors like you and me need to analyze and adapt our strategies continuously to gain those coveted few percentage points above the index. The two measurement tools above will help to assess financial stability and solvency, but you’ll need a few other predictors to build out your toolbox.<br /><br />Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-90228683115936696652011-09-12T05:56:00.000-07:002011-09-12T05:57:01.850-07:00Payout Ratio: Important Dividend Metric, Too Often OverlookedPayout Ratio: Important Dividend Metric, Too Often Overlooked<br /> 1 comment | September 12, 2011 | includes: DUK, ETE, FTR, MO, NOK, T, VGR<br /> <br />I was recently talking to one of my friends last week. He had about $600,000 invested in high yield stocks. These were companies paying well above what they were earning. I told him to be careful as these companies could cut their dividends in the future. This seems like a common problem for investors who overlook one simple metric, which is the payout ratio. The payout ratio is simply the percentage of earnings that are being paid out in dividends. Here are four companies that are actually paying out more than they take in.<br /><br />Frontier Communications Corporation (FTR), a communications company, provides regulated and unregulated voice, data, and video services to residential, business, and wholesale customers in the United States. It offers local and long distance voice services, including basic telephone wireline services to residential and business customers.<br /><br />Frontier pays nearly 11% in dividends. It sounds nice, except for the fact the payout ratio is around 450%. The company pays 75 cents a year and isn't even expected to earn half that next year. Another issue with Frontier is that it is in a dying area of business. It primarily deals with landlines. Landlines are quickly going away as people start switching to wireless telecom carriers.<br /><br />Nokia Corporation (NOK) manufactures and sells mobile devices, and provides Internet and digital mapping and navigation services worldwide. Its devices & services segment develops and manages a portfolio of mobile devices, such as mobile phones, smartphones, and mobile computers; services; applications; and content.<br /><br />Nokia pays a 7.6% dividend. The payout ratio is about 110%. This is set to increase as the company's earnings are set to decrease. Apple (AAPL) and Google (GOOG) have been taking a bite out of Nokia's market share. Nokia is already said to be stumbling as it tries to find new ways to innovate.<br /><br />Energy Transfer Equity, L.P., (ETE) through its direct and indirect investments in the limited partner and general partner interests in Energy Transfer Partners, L.P., engages in midstream, intrastate, and interstate transportation of natural gas, as well as in storage of natural gas in the United States.<br /><br />Energy Transfer Equity pays a 6.5%. The payout ratio is more than 200%. ETE has a good business model and I do like the MLP space, but the fact that it pays out so much is a huge red flag.<br /><br />Vector Group Ltd., (VGR) through its subsidiaries, engages in the manufacture and sale of cigarettes in the United States.<br /><br />The company pays an 8.5% dividend. The payout ratio is over 200%. Vector's brand of cigarettes have a very small market share. With the company paying out all its earnings and taking on debt, it is not putting any capital into potential growth opportunities.<br /><br />The payout ratio can tell us what future distributions will look like. A few things to note is that you also need to look at future earnings growth. If a company cannot match distributions with earnings, it may be time to sell. Here are three companies that have a nice yield and low payout ratios.<br /><br />AT&T Inc., (T) together with its subsidiaries, provides telecommunication services to consumers, businesses, and other service providers worldwide. Its Wireless segment offers wireless voice communication services, including local wireless communications service, long-distance service, and roaming services.<br /><br />AT&T pays a 6.2% dividend. The payout ratio is 50%. The company has a strong base of customers. There is plenty of growth in the dividend as well. The company is a strong blue chip as well as being a Dow component. AT&T is a favorite amongst many dividend investors.<br /><br />Altria Group, Inc., (MO) through its subsidiaries, engages in the manufacture and sale of cigarettes, smokeless products, and wine in the United States and internationally.<br /><br />Altria pays a 6.1% dividend. Its payout ratio is 93%. However, its earnings are suppose to increase substantially over the coming years, meaning the payout ratio will decrease. The company has some of the strongest brands around. Although, the dividend may not be as high as Vector's, the company is much safer.<br /><br />Duke Energy Corporation (DUK) operates as an energy company in the Americas. It operates through three segments: U.S. franchised electric and gas, commercial power, and international energy.<br /><br />Duke currently pays a 5.3% dividend. The payout ratio is 64%. Duke is one of the largest utility companies in the U.S. Americans will always need energy and consumption is set to increase. Duke is an extremely stable company and with its recent purchase of Progress Energy (PGN), the company is set to increase its earnings power.<br /><br />These three companies are great example of strong dividend payers with a low payout ratio. Always be careful when investing. Sometimes companies have high yields for a reason simply because there exists more risk. The best advice I can give in this case is "Slow and steady wins the race."<br /><br />Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-26045013019224020062011-04-05T05:29:00.000-07:002011-04-05T05:35:50.605-07:00Netflix's Market Opportunity Is A Lot Bigger Than You ThinkOur INTERVIEW OF THE WEEK this week is with one of the most successful Founder-CEOs in the history of the online industry: Reed Hastings of Netflix.<br /><br />In the past decade, Reed has built Netflix from a little DVD-by-mail company into an international behemoth with a $12 billion market cap that is disrupting the traditional TV distribution business.<br /><br />Along the way, Netflix's surging stock price has made fools (and paupers) of no end of skeptics.<br /><br />What's next for Netflix? Will the skeptics finally be right? Or will the company's second decade be even more impressive than its first?<br /><br />SAI's Dan Frommer and Henry Blodget spent a half-hour on the phone with Reed last week discussing the following topics...<br /><br /> * The size of Netflix's market opportunity (bigger than you think)<br /> * "Personalized" Netflix accounts (one for every person in the family)<br /> * The competition<br /> * Why Netflix isn't offering pay-per-view<br /> * Whether Netflix will offer "tiered" streaming prices<br /> * Whether content companies will screw Netflix in the next round of negotiations<br /> * Whether the cable cos will try to crush Netflix by enacting bandwidth caps<br /> * The three key aspects of Netflix's culture that have helped it become such a success<br /> * Whether Reed will be running Netflix for the next 10 years<br /><br />And more...<br /><br />Enjoy!<br /><br />(And thanks to Business Insider's Ellis Hamburger for transcribing the call.)<br /><br />Henry Blodget: Welcome, Reed! Thanks for doing this. Ten years ago, I remember when Netflix was originally thinking of going public, you were a tiny DVD-by-mail business, and everybody smart I talked to said there’s no chance in hell this thing ever works. Here we are ten years later, 20 million subscribers, two billion in revenue, 12 billion dollar market cap. Where do you think you’ll be ten years from now?<br /><br />Reed Hastings: Well sticking with ten years ago, we couldn’t even get a meeting with you. (Laughs) Anyway, where are we in ten years? I don’t know, I couldn’t have predicted where we are from then.<br /><br />BI: So it’s bigger than you thought it might’ve been?<br /><br />RH: Oh, bigger and different. We were back in 2001. We were not yet profitable. We were growing on DVD and wondering how things will work. There are a lot of differences.<br /><br />BI: Well, let's look forward 10 years. Do you think you’ll still be running the company?<br /><br />RH: Ten years is always too long to make any useful prediction.<br /><br />BI: But that’s your ambition? You’re not ready to hang up the skates?<br /><br />RH: I can certainly say that I’m not thinking of retirement this year, but ten years for anyone, it can depend on so many things.<br /><br />BI: Okay, let's talk about your market opportunity. You have 20 million subscribers now, approximately, in the United States, and there are something like 115 million households now. When you think about the total market opportunity domestically, what should people think is a reasonable number of subscribers that services like Netflix ultimately will have?<br /><br />Netflix long term stock prices<br /><br />NFLX stock price.<br /><br />Image: Google Finance<br /><br />RH: The way we look at it is on the upper bound, we do it by mobile phone subscriptions, the number of people in the United States that pay for a mobile phone. That cuts out very young kids, people with zero income, and that number is about 300 million. <br /><br />BI: Our household only has one Netflix subscription. We currently pay you a lot more than eight dollars per month, but I don’t envision a scenario where my wife has one account and I have one account and each of my kids have an account, so you really think that that’s a reasonable way of looking at it?<br /><br />RH: No, that's the upper bound. So the upper bound, if it was natural for each family member to have a separate subscription, like you each have a separate Facebook account, if it becomes so personalized video that you do want it individualized, than that would be the upper bound. Another way of looking at the market is the number of households that can subscribe to cable or satellite, and that number is about 100 million. <br /><br />BI: Do you think that you ultimately will start offering personalized accounts? That’s an interesting idea that I hadn’t heard before.<br /><br />RH: It’s quite personalized now, but not in a way that’s so compelling that you never want to say “I don’t want to use my kid’s account.” The question is, over time, can we make Netflix so personalized that as the kids get to be teenagers and they get their own Facebook account and their own mobile phone, that they also get their own Netflix account?<br /><br />BI: Do you think that that’s likely?<br /><br />RH: No, it’s a possibility. It’s an aspiration.<br /><br />BI: So, as you think about it, do you think the 100 million number is the right market-opportunity number that people should think about, or should it be a 200-300 million type number?<br /><br />RH: Well 100 million is another upper bound, and that assumes, in this case, that every single cable or satellite household subscribes to Netflix, so both of those are available market figures. As to how they get split between Netflix and its competitors, that’s really hard to tell. Somewhere north of 20 million, south of 300 million.<br /><br />Netflix subscribers chart small<br /><br />Image: Silicon Alley Insider<br /><br />BI: What percentage of the 20 million now have cancelled cable or other TV?<br /><br />RH: Everyone, essentially, on Netflix has a TV service and also 30% of them have HBO, which is the national average.<br /><br />BI: So right now, it’s definitely not an either/or, in fact it’s just how many more services can you pile on top of your existing cable service?<br /><br />RH: Yes, that’s right. We’re like one more cable network. We’ve grown from in the last three years, the number of streaming accounts in the US from zero to 20 million, and MVPD (multi-channel video programming distributor) is basically steady, so last year, total MVPD in the US went down slightly, or the first three quarters of the year, but that was largely due to the recession. And then in Q4, total MVPD households went back up. And if Netflix were a substitute, you would see MVPD going down like landlines have, or something like that, which you don’t see.<br /><br />BI: We already talked about one possible way that you could get more money per household, which is personalized accounts. Do you think that with streaming, you will ultimately have tiers, the same way that you do with DVDs. Like I get a basic selection for $8, but if I pay $15 I get twice as much stuff, or I get cooler, different stuff. Or if I pay $50, I get everything?<br /><br />RH: We don’t have any plans for that. We want to focus on a simple proposition: unlimited streaming for $7.99 per month. Our big focus is taking that simple proposition around the globe. We started with Canada seven months ago, we’ve been super successful there, we’re targeting to surpass 1 million subscribers this summer. Less than one year from launch in Canada. That’s been so successful that we’re now expanding to other countries.<br /><br />BI: What other markets are attractive?<br /><br />RH: All the markets where people have broadband and like TV.<br /><br />BI: Must be a tiny opportunity.<br /><br />RH: Exactly.<br /><br />BI: Switching gears, let's talk about content deals going forward. I know Time Warner CEO Jeff Bewkes was quoted recently as saying something like “Look, back when Starz did their huge deal with Netflix, they were asleep at the switch, it was just a test, and suddenly, everyone has now woken up. There’s no way anyone would ever cut a deal like that again.” Do you think that’s true?<br /><br />RH: When we did the Starz deal in 2008, we almost walked away from it because it was so much money for an activity that basically didn’t happen, i.e. streaming, at the time. Now, as we look at renewal coming up the middle of Q1 next year, we will clearly pay more. And there are more people streaming, so we can afford to pay more.<br /><br />Reed hastings<br /><br />Image: JD Lasica/Flickr<br />NFLX Apr 4 2011, 05:20 PM EDT<br />244.72 Change % Change<br />+2.63 +1.09%<br />BI: Do you think you’ll pay the same way? As I understand it, the last deal was basically a flat fee--will the next deal be a per-sub fee, or is it likely to be per-stream? How do you think the content deals of the future like that will be structured?<br /><br />RH: I’m not really sure. We’re looking about how to acquire content. Traditionally or generally, most of our content, they want a guarantee, and a flat rate. <br /><br />BI: They want that even with you going from however many single-digit million subscribers you had when you started the Starz deal to now, with 20 million subscribers, even going forward you think they’ll want that, or will they want an average fee per sub or per stream?<br /><br />RH: Many of our deals are shorter term, 1-2 year deals, so it’s fixed in the short term, but fundamentally it’s variable in the long term. <br /><br />BI: You’ve said you ultimately hope to be the biggest revenue source for a lot of the content providers. The objection that I hear raised to that very quickly is “Oh come on, look how much the cable companies pay, that’s why the bills are $160 per month, Netflix is $8, how could that possibly be?” What’s your reaction to that?<br /><br />RH: For some content owners like Relativity Media, where we did an output deal with them, we’re already their biggest customer. So it depends on the content, in terms of the big bill that you referred to. There’s a huge amount of sports content, a majority of the value of MVPD. And then of course there’s news and reality and lots of other content types that we don’t focus on.<br /><br />BI: Do you think you ever will offer news and reality and other types of content? I know I read a presentation a couple of years ago from you saying “No, we’ve picked our market, we’re going to focus on that market.” I know a lot of subscribers hope that you’ll go into sports and things like that. Is that possible?<br /><br />RH: Now we’re very focused on TV shows and movies, and there’s an enormous opportunity. If you look at our selection, it’s really good. But it’s still a small part of the total universe of TV shows and movies. So both on the subscriber view and on the content view, we have tons of room to expand within TV shows and movies.<br /><br />BI: On the selection issue, certainly with our family, what often happens is that we’ll start talking about watching a particular movie, everyone gets all excited, and the kids will say “Oh it’ll be on Netflix." Then they’ll go check and find out that it’s there via DVD, which is great, but suddenly it seems like Pony Express to wait for the DVD, and it’s often not there on streaming. How long will it take before most of the stuff that we’re all looking for is just going to be there, and it becomes relatively rare that you don’t have something available for streaming?<br /><br />RH: Really, it is there today, from iTunes or Amazon, it’s just that you have to pay-per-view. So the newer stuff is first available in pay-per-view, and both of the services, iTunes and Amazon, are pretty comprehensive, but you’ve got to pay each time.<br /><br />BI: Will you ever get into pay-per-view?<br /><br />RH: Very, very unlikely. We’re focused on the subscription. Unlimited for a flat fee. That simple proposition. So the same answer I gave you about simple possibilities with tiering.<br /><br />BI: Do you see Apple getting into a subscription thing at any point? There have been talks that they are, in theory, doing that, but we haven’t seen it yet.<br /><br />RH: You’d have to ask them. Amazon is in subscription as you know with Prime, Hulu Plus is in subscription, and there may be others over time.<br /><br />BI: But, really, why wouldn’t you offer pay-per-view? You now have this incredible catalog where you can find any movie and it’s either available by DVD or streaming--would it really muddy the waters that much to have a pay-per-view option?<br /><br />RH: It’s a little like Business Insider doing sports news or something.<br /><br />BI: We do have sports news!<br /><br />RH: If you do sports news, you'd find that some of your readers really enjoy it, because you have a unique take on it, but that mostly it’s such a big competitive market that you really have to make your brand stand for something very specific. At least until you’re the size of the Wall Street Journal. And for us, it’s about brand clarity, and that we stand for $7.99 per month for unlimited streaming. That’s what we really want to focus on and we think that’s the optimal strategy. Rather than try to get into every possible thing that our subscribers also want, like should we sell DVDs? Should we offer various equipment? Etc etc.<br /><br />reed hastings netflix<br /><br />Image: JD Lasica/Socialmedia.biz<br />NFLX Apr 4 2011, 05:20 PM EDT<br />244.72 Change % Change<br />+2.63 +1.09%<br />BI: You guys are on a tremendous number of devices ranging from video game consoles to connected TVs and all that. Have you noticed anything unusual or interesting about the way people are consuming streaming content across any of these devices?<br /><br />RH: It’s really quite broad. We get great traction on internet TVs, on Blu-ray players, on game consoles, iPads, Apple TV, iPhone. It’s amazing really how broad the viewing of our content is.<br /><br />BI: Do you have any interest in the complementary social aspects that a lot of startups are focusing on? Getting people communicating on a second screen or even the first screen while they’re watching a show, or is Netflix kind of a private experience?<br /><br />RH: We’re open to adapting our service as new enjoyment paradigms rise (such as multi-person viewing), so there’s social thing for finding content you want to watch, like these six other people you know just watched X, and then there’s social thing during the watching which is a little trickier with online because it’s asynchronous. Everyone watches at a different time. But, just as social transforms the internet generally, it will also transform the Netflix experience. <br /><br />BI: So you just had to offer a higher compression streaming option in Canada because of bandwidth caps and overage charges, and I saw you talk quite a bit about this during the last earnings presentation. Do you think this is going to be a problem here in the states where we’re going to have to think about keeping an eye on the bandwidth meter, and do you foresee yourself having to adjust your service here to meet that?<br /><br />RH: Well in ways we already have caps. If you look at most of the iPad mobile plans, they’re 2 GB, and then $10 per GB after that. AT&T just implemented an 150 GB cap on DSL, 250 GB on U-Verse fiber. So that’s clearly a move by some ISPs at least, and hopefully other ISPs will compete against them on the basis of being unlimited.<br /><br />RH: With Google’s Kansas City move, hopefully that’s a sign of a long-term future trend that most of America gets Gigabit Ethernet, or Internet, and that these kind of skirmishes around 50 gigs, 100 gigs, 200 gigs are perceived to be like the 640K PC barrier 30 years ago.<br /><br />BI: There seem to be people who think that MSOs [cable operators] and Telcos will try to stifle competition from people like you by imposing really small caps and high overage fees. Is that plausible or do you think that’s a worry that people shouldn’t have?<br /><br />RH: No that’s plausible. In Canada, right after we announced that we were entering Canada, a few days after, Rogers lowered the caps on their most popular plans. So those kinds of things can definitely happen and then it’s an ongoing tension. We can do those high-density encodes like you referred to, and hopefully over time, broad, fast, inexpensive Internet becomes more and more a part of every person’s life, and that will open the possibility again over five or ten years for more online video.<br /><br />BI: That's a good segue into competition. This market is just incredibly noisy and there’s so much competition, you’ve got TV everywhere and you’ve got pay-per-view stuff, you’ve got Amazon now linking streaming to Prime, you’ve got Facebook suddenly doing a deal with Warner, Google TV, so forth. Who scares you?<br /><br />Streaming Netflix comparison chart<br /><br />Image: Clicker<br />NFLX Apr 4 2011, 05:20 PM EDT<br />244.72 Change % Change<br />+2.63 +1.09%<br /><br />RH: In the beginnings of a new market, it’s really hard to figure out who the long-term competition is, and what we tend to focus on is how to grow our business, and we’ll see what competition emerges. In general, the big incumbents, like the MVPDs, they may turn out to be the biggest competition with TV everywhere. But it depends on what their goals are and how they execute, and in particular, the more consumers see us as truly complementary, to MVPDs, then the less incentive they are to try to stop us or kill us.<br /><br />BI: What percentage of the 100 million households that have cable and satellite do you think can actually afford a complementary service on top of the cable service?<br /><br />RH: Your typical cable bill is, what, $70-$80? If you ask how many could afford $7.99, it’s probably pretty high, right?<br /><br />BI: What do you think is the likely future of cable? A lot of people are saying “Look, there’s certainly a business for cable. Somebody’s got to be the actual hook-up to the Internet, but the idea that somebody else is going to have a box and control all the content is just ludicrous, and ultimately they [cable providers] will be reduced to being big fat pipes. Do you think that’s reasonable?<br /><br />RH: No, that’s too pessimistic. They certainly will have a broadband business, which has very high profitability because it doesn’t have content costs. They’ll have a telephony business, and many, many more people get telephony from their cable company than they do from Vonage or Skype. Third, they’ll have a video business and they’ll offer unique content bundles, unique other things. I mean look at DirecTV—it’s growing substantially because it’s got incredible NFL content.<br /><br />BI: On that subject--the sports question--are there folks who will do what Netflix has done in sports and become a very viable alternative option?<br /><br />RH: Well there’s MLB TV which runs direct to consumer subscriptions today. So that would be a place to start, and then whether NFL and other leagues do the same I’m not sure. Certainly MLB is doing that to a degree today, and I think they try to keep it somewhat complementary. Out of season games, that kind of thing.<br /><br />BI: Lastly, I have a couple questions about Netflix’s culture. I was fascinated by the presentation you did about that a couple of years ago. For example, the fact that you have no set vacation policy company-wide--that folks can take as much vacation as they want. When I broached that idea here asking if it was a good idea and if we should do that, people freaked out because they said “No, what’ll happen is everyone will work around the clock and I will feel like I can never take a vacation.” Why do you have the no vacation policy?<br /><br />RH: I would say we don’t have a “no vacation” policy, that’s a little ambiguous. Instead, we have no policy on vacation. Perhaps because I take lots of great vacations it sets a good example. If you [Henry] were more visibly on vacation and then when you asked the question about it, everyone would probably relax. To the degree that you hardly ever are seen to take vacation, that might scare people.<br /><br />BI: So it’s my fault?<br /><br />RH: I think so. <br /><br />BI: And the other thing you said that jumped out was “We’re not a family, we’re a professional sports team. Therefore, we’re going to try to have the best players at every position, and that means that folks who are B-players are going to be working elsewhere.” And when I raised that as a possibility here, people said “It’s ridiculous. There are lots of players who are B’s who want to be A’s. It’s just much too harsh.” What’s your reaction to that?<br /><br />RH: You’re over-simplifying with A’s and B’s. There’s a lot of graduations in terms of how someone performs. We’ve often had someone who was performing OK at one job so we move them to another job and they do fantastic. So it’s not even that much a reflection on the person. But in general, a sports-oriented model is “If you want to win the championships, you have to have great players who can work together.” You need both of those, and so that’s what we focus on: getting great people who can work together. <br /><br />BI: How do you convey to somebody that they’re just not quite great enough?<br /><br />RH: An employee who doesn’t work out usually knows it and the parting is mutual. Most admit they thought it would be for them and ignored signs that it wouldn’t. For example, we hire a lot of seasoned people but we don’t have all the perks – cubes, not offices, very few assistants, small staffs, no traditional HR support (plan your own offsite!). Some find that refreshing, others learn quickly that they’re accustomed to all the trappings and aren’t comfortable without them. It’s an honest and candid environment, and as a result, most employees who don’t work out say thank you when they leave. And severances are generous.<br /><br />BI: Is there anything else that you think is critical to Netflix’s culture that has helped you become such an incredibly successful company over the past ten years?<br /><br />RH: It’s like the classic example: Which of the innovations for the DC-10 were most important? The retractable flaps and retractable wings, they all went together, and it’s pretty hard to put a finger on it. Some of the things are symbols -- the vacation policy symbolizes freedom and responsibility. But you couldn’t really do freedom and responsibility without high performance. And so those are intimately linked. And you couldn’t do freedom and responsibility without our kind of context management model. <br /><br />BI: Which is what?<br /><br />RH: In our culture deck, there’s a chapter on “context, not control,” which is using your role as manager and leader to educate people and what we’re trying to do and not guiding each specific action a person takes. When someone working for you does something that you think is a bad choice, instead of blaming them, it’s reflecting on yourself in terms of what context you failed to provide. Such as finding a talented person, who would come to the right decision. So it’s always reflecting back on the manager--what context did I fail to set? <br /><br />BI: Are there other key aspects of it?<br /><br />RH: The values are really key, that not only should one be clear about one’s values, but that there’s a collective intolerance to bad behavior. <br /><br />BI: Anything else?<br /><br />RH: No, I think those are the key elements.<br /><br />tilson netflix<br /><br />Image: Stockcharts<br />NFLX Apr 4 2011, 05:20 PM EDT<br />244.72 Change % Change<br />+2.63 +1.09%<br /><br />BI: Last thing… you wrote an extraordinary public letter to Whitney Tilson, who had publicly shorted your stock. When CEOs do that it’s usually a huge red flag and everybody in the world says “The company is screwed--I can pile on now.” Obviously you phrased the letter in a way that wasn’t like that at all. You went point by point. Yet, in the middle of it, you say that there are some things that Whitney was right to be concerned about. So what else should people actually be worried about?<br /><br />RH: I’d refer you to our January earnings letter where we said the two core questions are: “Given our approach, how big will we get in the domestic market?” and second, “How successful will we be internationally?” Those are the two core investor questions. <br /><br />BI: You never did actually answer the first question we asked about how big you’ll get domestically. How big will you get domestically?<br /><br />RH: That’s exactly why there are investors who debate that. It doesn’t really matter what I think. It matters what actually happens.<br /><br />BI: I know it doesn’t matter, but I’m interested. How big do you think you’ll get?<br /><br />RH: There’s no simple way to tell it. We’re growing very well right now, and we’re focused on making our service better and better. But other than those benchmarks that I gave you, and then the question is “Well, what’s the appropriate discount to apply to those?” That’s where the investor judgment comes in. And then once an investor answers those questions for themselves, then they can figure out if they want to be a buyer of our stock at the current price.<br /><br />BI: And what about the international question? Are there unique challenges in many of the other attractive markets where there is broadband and people that want to watch TV that will prevent you from being successful?<br /><br />RH: Yes--in certain markets, in China in particular, it looks very daunting for US companies to build a profitable business. <br /><br />Now read the presentation on "Culture" that Reed refers to above ><br /><br />http://www.businessinsider.com/netflix-management-presentation-2011#-1Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-70387353710074671842010-10-29T03:18:00.000-07:002010-10-29T03:21:22.874-07:00The Profit MotiveBy Michael Totty<br /><br />The Battelle Memorial Institute was founded in the 1920s to encourage "creative and research work and the making of discoveries and inventions." When it opened its doors on the eve of the Crash of 1929, it had fewer than 50 people, dedicated mainly to metallurgical research.<br /><br /><br />Today, the Columbus, Ohio-based nonprofit—whose motto is "the business of innovation"—employs 23,000, runs an in-house research-and-development lab and manages or co-manages eight national laboratories for the federal government. The institute also conducts contract research and development for companies, mainly small and midsize businesses that don't have their own R&D shops. And it does contract manufacturing—for instance, it makes parts of the cockpit display for the Army's Black Hawk helicopter—and maintains its own venture investment fund.<br /><br />Its most famous product is the office copier. Chester Carlson, a New York lawyer, had invented a method to duplicate printed documents but lacked the backing to commercialize the technology. In the early 1940s he took it to Battelle, which developed Mr. Carlson's concept and later licensed the technology to the company that would become Xerox Corp. Battelle's lab also has turned out the technologies behind the compact disc, automobile cruise control and the bar code.<br /><br />The Wall Street Journal's Michael Totty recently spoke with Jeffrey Wadsworth, who has been Battelle's chief executive since early 2009, about managing a large research-and-development organization, fostering an inventive culture and what we get wrong about innovation. Here are edited excerpts of that conversation.<br /><br /><br />MR. WADSWORTH: When Battelle scientists think they have an interesting idea, they have what is called an invention disclosure, where they write down what that idea is. Then a group of people evaluate which ones of those are worthy of investing the money needed to have a patent application.<br /><br />WSJ: What are the criteria you use?<br /><br />MR. WADSWORTH: One of them is: Can you conceive of this invention creating a product that is useful to society and makes money?<br /><br />Another way of thinking about it, which is more defensive, is to say, "We've discovered something. Somebody else may discover it, and we don't want to have to pay them for that. Therefore we're going to patent it to protect ourselves."<br /><br />Most of the things that we're working on are a race to be there first. Innovation's good, doing it fast is better and doing something with it is really the objective. When we look at what we want to patent, we have to think, are we going to make money out of it? It's not like we want to patent in order to have a publication.<br /><br />WSJ: Battelle has been doing this for a long time. Do you have a secret sauce, and if so, what is it?<br /><br />MR. WADSWORTH: We are a different kind of company. We have a lot of labs and look like a university at some level. But we try to operate more like a business.<br /><br />WSJ: How does that combination of pure research and a business orientation help foster innovation?<br /><br />MR. WADSWORTH: Some universities—certainly not all of them—will leave discovery on the floor, or it won't get developed, because often a company will not want to invest in something that's available to everyone because they won't then have an advantage.<br /><br />Industry will often work with a university to use the resources of the university and hold the information proprietary. That often isn't something the university wants to do. They want to publish.<br /><br />We're in a different business.<br /><br />If a client comes to us and wants to have us solve a problem for them and wants that kept extremely confidential and private, we do that. We have that capacity. We also conduct work for the federal government that needs protecting. We'll do basic research, applied research, but we'll also hold the results very, very confidential. And that makes us different.<br />Current State of Innovation<br /><br />WSJ: We've seen an incredible wave of innovation over the past 40 years. How would you describe the current state of innovation?<br /><br />MR. WADSWORTH: There are more people being educated in more parts of the world. There's more cross-fertilization.<br /><br />People from other countries come to the United States because 17 of the top 25 universities in the world are still in the United States. In the '70s they came and stayed. But nowadays, you can go back to your home country with education and insights and the network you've built in the United States, and you can live with your family and eat your home food.<br /><br />We built a nanoscience center at Oak Ridge National Lab and one at Brookhaven. When I went to Beijing about three or four years ago, I went to Tsinghua University—it's their MIT. They had a brand new nanoscience facility there. The building was filled with Chinese nationals who had returned from somewhere else.<br /><br />[The director] had a name for them: They're called hai gui—sea turtles. They had gone out, and they've come back.<br /><br />The work they were doing was just as good as ours. The equipment they had was just as good as ours. The facility was just as good as ours. And the people were just as good. Technology evolution and development is far more global than it was.<br /><br />Another thing that's happened is that the ownership of the entire lineage of discovery is no longer found in a company. I worked at Lockheed in the early '80s. Lockheed is very much like other big companies. They did not like to rely on other people for critical parts of their discovery chain.<br /><br />It was almost seen as weakness if you had to go and get help from somewhere else. That not-invented-here syndrome has markedly moved to one we call "proudly found elsewhere."<br /><br />That's a big shift.<br /><br />WSJ: You're a big organization devoted to innovation. How do you avoid the problems of big organizations?<br /><br />MR. WADSWORTH: If you'd talk to some of our people, they'd say we haven't. Because when you get to be very big, you end up putting a lot of processes in place to ensure that you're not violating the plethora of regulations, rules and expectations of big organizations. That can become stifling.<br /><br />We all try to minimize it by being aware of it.<br /><br />And at the same time, you can't expose the company to devastation by having a small group do something that's not being monitored and they get into trouble.<br /><br />WSJ: How do you do this?<br /><br />MR. WADSWORTH: It's impossible to know everything that's going on at an organization like ours. Often what you do is—we call it a deep dive. So that's one thing we do: Get data from the people who work for you.<br /><br />Another way is to constantly benchmark.<br /><br />I'm not a huge fan of benchmarking, because you're comparing yourself to the current, not the future. But if you find you have 10 times as many people in some support function as everyone else—first of all, you need to know that. Then you have to ask why. It could be a good answer, but it might not be.<br />Fostering Innovation<br /><br />WSJ: What can you do to foster a culture of innovation?<br /><br />MR. WADSWORTH: The tone at the top for what you want to see done is absolutely essential. If you tell a laboratory that you're only going to do basic research and that's all we're going to value, you won't get the same productivity commercially as you would if you say, I love basic research, but I also want to embrace the fact that we're here to put products out to the community, to the country, to help foster economic well-being for the United States.<br /><br />You can encourage it in lots of ways financially. You can give rewards for things that you want to have done.<br /><br />This is manifest throughout industry and universities. They'll have different ways of rewarding people for innovation. If you publish a patent, you get $1,000, or you get $1 in a frame. Or you get a piece of the action going forward. There are lots of ways that companies and institutions try to financially incentivize new thinking.<br /><br />WSJ: What are some common misconceptions about innovation?<br /><br />MR. WADSWORTH: The first one is the Edisonian thing. There is no Lone Ranger.<br /><br />Most of the things that I've seen be successful have come from remarkably complex teams. If you want to have a successful enterprise, every job has got to be important. You can have the most innovative thing in the world, but if you've got terrible lawyers and terrible accountants and terrible people dealing with customers, it's not going to get out.<br /><br />Another myth is that stuff happens fast. It doesn't. Xerox was in Chester Carlson's head for a decade before he came to us, and it took two decades to get it out.<br /><br />The examples you hear about very, very fast return are iconic, but not typical. You'll hear about something being invented and three years later somebody's a billionaire, but I think under close inspection you'll find there's a lot—maybe decades—of work behind it.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-32899636093539473152010-05-19T08:27:00.000-07:002010-05-19T08:30:14.991-07:00Google Readies Its E-Book Plan, Bringing in a New Sales ApproachBy JESSICA E. VASCELLARO And JEFFREY A. TRACHTENBERG<br /><br />Google Inc. plans to begin selling digital books in late June or July, a company official said Tuesday, throwing the search giant into a battle that already involves Amazon.com Inc., Apple Inc. and Barnes & Noble Inc.<br /><br />Google has been discussing its vision for distributing books online for several years and for months has been evangelizing about its new service, called Google Editions. The company is hoping to distinguish Google Editions in the marketplace by allowing users to access books from a broad range of websites using an array of devices, unlike rivals that are focused on proprietary devices and software.<br /><br />Chris Palma, Google's manager for strategic-partner development, announced the timetable for Google's plans on Tuesday at a publishing- industry panel in New York.<br /><br />Jeff Trachtenberg discusses Google plan to start selling digital books this summer, setting the stage for a battle of the online behemoth booksellers. Plus, Apple attracts antitrust scrutiny from regulators and Congress drafts a web-ad privacy bill.<br /><br />Google says users will be able to buy digital copies of books they discover through its book-search service. It will also allow book retailers—even independent shops—to sell Google Editions on their own sites, giving partners the bulk of the revenue.<br /><br />The company would have copies on its servers for works it strikes agreements to sell. Google is still deciding whether it will follow the model where publishers set the retail price or whether Google sets the price.<br /><br />While Mr. Palma didn't go into details, users of Google Editions would be able to read books from a web browser—meaning that the type of e-reader device wouldn't matter. The company also could build software to optimize reading on certain devices like an iPhone or iPad but hasn't announced any specific plans.<br /><br />By contrast, Amazon's digital book business is largely focused on its Kindle e-reader and Kindle software that runs on some other hardware.<br /><br />The project is Google's attempt to crack into the market of distributing current and backlist works.<br /><br />Publishers have yet to publicly commit to participate in the service but Google isn't expected to run into much trouble getting them to join. Publishers tend to believe the more outlets to sell books the better. Even the smallest independent bookstore will have access to a sophisticated electronic-book sales service with a vast selection of titles.<br /><br />"This levels the retail playing field," said Evan Schnittman, vice president of global business development for Oxford University Press. "And as a publisher, what I like is that I won't have to think about audiences based on devices. This is an electronic product that consumers can get anywhere as long as they have a Google account."<br /><br />Google says users will be able to buy digital copies of books they discover through its book-search service.<br /><br />He said Google Editions will also be critical because it represents "the ultimate test" of whether the ability to search, find and instantly buy content will generate significant gains in revenue. "This tears down barriers," he added.<br /><br />Retail isn't Google's calling card, but the company has an online store for Android apps, sells software for businesses and it sells a phone.<br /><br />Google may struggle to build awareness about the service. It is hoping users click to buy books through its Book Search product, which has a relatively small following compared to its overall search service. It is also betting on other book resellers to push and promote Google Editions themselves. Whether they do so will probably depend on how much revenue they are generating.<br /><br />The online sales effort is separate from Google's fight to win rights to distribute millions of out-of-print books through its digital book settlement with authors and publishers. U.S. District Court Judge Denny Chin is expected to rule in that case soon.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-22986413068074434442010-05-18T16:24:00.000-07:002010-05-18T16:25:36.835-07:00Too Fat for Hooters?Employee says she was told to lose weight or lose her job<br /><br /><script type="text/javascript" src="http://video.foxnews.com/v/embed.js?id=4201260&w=400&h=249"></script><noscript>Watch the latest news video at <a href="http://video.foxnews.com/">video.foxnews.com</a></noscript>Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-37529374537245119102010-05-11T06:00:00.000-07:002010-05-11T06:05:07.450-07:00RadioShackThe Lost Tribes of RadioShack: Tinkerers Search for New Spiritual Home<br /><br /> * By Jon Mooallem<br />Andy Cohen waves his arm at the electrical miscellany hanging around him, showing off his tubular lugs and a box labeled “81-piece terminal assortment”. Cohen is holding court at the back of the RadioShack store he owns in Sebastopol, California. To his left, a tattooed kid fishes through a metal chest of drawers labeled “fast-acting/slow-blow 3ag-type”. Another cabinet is labeled “capacitors: electrolytic, radial (pcb-mount) leads, axial (in-line) leads”. Behind him, a spinning rack is hung with baggies containing dozens of different brass and gold solderless connectors. They’re the little widgets you think of when you think of RadioShack — the sort of electronic parts the company once had a near monopoly on but that are increasingly hard to find there. Cohen gets much of his supply direct from China. “Where are you going to find all these different kinds of solder? A selection of five soldering irons? All these connectors?” Cohen says. “Other RadioShacks, they hide this stuff or don’t buy enough of it anymore. We go out of our way to show you these things.”<br /><br />Cohen is 54, with a gruff voice and the intense, deep-set eyes of an older Joaquin Phoenix. As a kid, he built computers, yammered on ham radios, and took special trips to the electronics shops in Lower Manhattan with his dad. He also pored over the RadioShack catalog the day it arrived, studying up on what was then cutting-edge technology — reel-to-reel tape decks, fax machines — and the pages and pages of arcane electronic components.<br /><br />Cohen bought this store in 2003 after 25 years as a project manager at companies like Hughes Aircraft and Hewlett-Packard. Housed in a strip mall between a pet supply shop and a dry cleaner, it is not among RadioShack’s 4,470 corporate-owned stores but one of about 1,400 franchised dealerships. In exchange for using the RadioShack name, Cohen is required to buy a certain amount of his inventory from the company. Otherwise, he has a lot of leeway. And he has used it to fashion his shop into something like the eccentric, mad-scientist RadioShacks he grew up with. But he knows that he’s largely on his own in this, fighting a battle for the soul of the company that’s pretty much been decided everywhere else.<br /><br />Recently, RadioShack has been forcefully rebranding itself, trying to shed its image as a temple of transistors, parts, and cables. Polished executives have parachuted in from the boardrooms of Safeway, Kmart, and Coca-Cola to turn the iconic American retailer around after years of underperformance and uncertainty. (In 2007, The Onion summed up the brand’s decline with the satiric headline “Even CEO Can’t Figure Out How Radioshack Still in Business.”)<br /><br />The plan? The new bosses want to turn RadioShack into a hipper, more mainstream place for “mobility” — which is what they insist on calling the cell phone market. (In an interview, RadioShack’s marketing chief used the word mobility an average of once every 105 seconds.) Selling phones is central to the new RadioShack. And so far, it seems to be working. Per-store sales are up, and corporate profits jumped 26 percent in the fourth quarter of 2009.<br /><br />Wall Street seems to like the strategy. After Apple finally deigned to let the chain sell iPhones late last year, the same Morgan Stanley analyst who in 2008 had described RadioShack as “a decaying business model” lauded its “growing relevancy as a wireless destination.” And in early March, the company’s stock price was pumped up by unsubstantiated rumors that it might be taken over by an investment firm. If nothing else, the gossip could suggest that RadioShack has whipped itself back into respectable-enough shape to be a plausible investment target.<br /><br />But a small subculture of RadioShack nostalgics, including many former employees, have watched all this unfold with sorrow — if not a feeling of betrayal, then at least loss. The last nails are being hammered into the coffin of the little electronics hobby shop they once loved. And the cell phone seems to be an apt symbol for the superficiality and ordinariness they feel are taking its place.<br /><br />“You walk into a regular RadioShack and it’s become like a neurosis,” Cohen says. “‘Sir, can I sell you a cell phone today? How old is your cell phone? What about your family, do they have cell phones?’”<br /><br />The story of RadioShack’s evolution over the past half century turns out to be the story of America’s changing relationship with technology. The RadioShacks of old catered to customers who could diagnose a busted TV on their basement workbench. They might be messing around with some project on a Saturday afternoon, find that they were missing a part, and hustle out to the nearest RadioShack for some of the very gear Cohen still stocks.<br /><br />But his shop is a lone outpost; in a single generation, the American who built, repaired, and tinkered with technology has evolved into an entirely new species: the American who prefers to slip that technology out of his pocket and show off its killer apps. Once, we were makers. Now most of us are users.<br />“We are not looking for the guy who wants to spend his entire paycheck on a sound system,” RadioShack’s chair, Charles Tandy, bragged to analysts in the mid-1970s. “We are in the do-it-yourself business.”<br /><br />Craftiness was in Tandy’s bloodline. He cut his teeth helming the family business, the Tandy Leather Company, which sold leather and leatherworking tools to veterans’ hospitals and Boy Scouts. The cigar-chomping Texan was the kind of eccentric, larger-than-life executive that any modern PR handler would keep tightly muzzled. He celebrated his 60th birthday by riding a rented elephant around the grounds of his mansion, and he kept a plastic breast on his desk that made a gong sound when he pressed the nipple. It was how he called for more coffee.<br /><br />Tandy recognized that leatherworking was probably not a growth industry, and in 1963 he strong-armed his board of directors into buying and pouring money into RadioShack, then a 42-year-old company with nine stores. RadioShack quickly ballooned into a chain of more than 6,000 locations, becoming a kind of cluttered general store for the pioneers of the electronic age. That growth was spurred on in the mid-’70s, when the company smartly got in front of one particular technological fad: the CB radio craze. At the peak of the boom, RadioShack was opening three new stores a day. (”Americans sure like to jabber,” a befuddled executive told the press.)<br /><br />This is not to say Charles Tandy himself was an early adopter or technogical visionary. According to the book Tandy’s Money Machine, by Irvin Farman, when a RadioShack vice president rushed down to Tandy’s departing Lincoln Continental to tell him they had created a promising prototype of a computer, Tandy shot back, “A computer? Who needs a computer?” Nevertheless, by 1977, the company was preparing to unveil the TRS-80, the world’s first mass-produced, fully assembled PC.<br /><br />“I remember the TRS-80 very well,” says Forrest Mims. At the time, Mims had already begun his career writing how-to books like Getting Started in Electronics and Engineer’s Notebook, definitive editions in the world of hobby electronics that have sold more than 2 million copies. The books were written exclusively for RadioShack and were offered in stores for a few dollars each. They were essentially giveaways; the real money came from all the diodes, transistors, and tools that hobbyists needed to build the circuits he diagrammed. It was a shrewd tactic. Those little parts and pieces had huge markups — some as high as 500 percent — and RadioShack could fit lots of them in its relatively small stores.<br /><br />Mims was invited to take a look at the TRS-80, before it went on sale, at a RadioShack R&D unit located in a warehouse in downtown Fort Worth. The two young engineers who had developed the machine led him around. “They escorted me into this room,” Mims recalls. “It was all hush-hush.” Inside, arrayed on long tables, were two dozen TRS-80s, with cassette decks for data storage and 12-inch RCA monitors. They were being tested, and each had an image on its screen of a waving American flag. “It was really a shock,” Mims says. He had never seen 24 computers in a room before; in those days, if you wanted a personal computer, you pretty much had to build it yourself.<br /><br />One of the engineers invited Mims to sit down and try out the TRS-80 — just fool around on it a little. He declined. “I didn’t have a clue how to use the thing,” he says. Mims was an expert engineer, but he didn’t know anything about the machine’s programming language, Basic.<br /><br />A new era was beginning. Computers, and all consumer electronic goods, were on their way to becoming what they are today: slick low-cost commodities heaped in the aisles of big-box stores. When they break, it’s cheaper to throw them out than open them up and repair them, and most can’t be sold for the kind of profit margins required by small stores like RadioShack. In retrospect, the launch of the TRS-80 was probably the most promising moment in RadioShack’s history — and the start of its decline.<br /><br />“Let’s put it this way,” Mims says. “Hobby electronics peaked with the advent of the ready-made PC. There was no longer a need for anyone to build digital displays and TTL processors in their garage or spend time messing with circuitry. Now you could spend time at a keyboard, working on an actual computer.” It was a fulfillment of a dream. But it also served as a portent that the hands-on way of life RadioShack embodied would become irrelevant.<br /><br />Mims couldn’t use the TRS-80 that day because he knew much more about how that piece of technology was wired on the inside than how to do anything with it. In other words, he was the exact opposite of today’s typical consumer. And that cultural shift is what RadioShack has been struggling with ever since.<br /><br />The TRS-80 may have signaled the arrival of modern consumer electronics, but that revolution largely failed to transform RadioShack. The company, with its roots stuck deep in the DIY business, sold electronic products under the Tandy and Realistic brands, but they suffered in comparison with brands like Sony and Panasonic. Now the company is trying to engineer a dramatic change of course. Last August, it launched a $200 million “brand transformation” effort — not changing its name, exactly, but instead asking America to call it by a nickname: the Shack.<br /><br />The company ran bizarre animated television spots. In one, a gaggle of Albert Einsteins scampered into a dump truck; in another, cell phones in Nordic attire sang in the native tongue of “Phonelandia.” (The message: “The Shack sells more phones than the population of Scandinavia.”) An outdoor party called the Summer Netogether was held simultaneously in San Francisco and New York City in front of two 17-foot laptop mock-ups and streamed live on the Web. But as the hours crawled on, the event started to feel like a painfully long red-carpet party with no main event to follow. At one point, there was a dance contest. One entrant whipped off his prosthetic leg and air-guitared with it.<br />Chief marketing officer ` says the aim has been to make RadioShack synonymous with mobile phones and “unwind decades of brand misconception.” The problem, in short, was that Americans didn’t think RadioShack was cool. To the extent that most people thought about RadioShack at all, it was as a convenient place to grab some printer ink or a hearing-aid battery.<br /><br />Between 2004 and 2009, the company’s profits fell by 39 percent. It had gotten to the point where, early last year, executives were putting a little too much hope on the nationwide switch-over to digital TV, imagining that folks coming in to buy conversion boxes could be seduced into other, more expensive purchases, too. But the little old ladies with coupons for government-subsidized antennas were resistant to impulse buys.<br /><br />Still, where giant specialty retailers like the Good Guys and Circuit City rode the electronics boom and bust right into bankruptcy, RadioShack has survived, although that survival was less a matter of salesmanship than cost-cutting. Around the time new CEO Julian Day took over in 2006, the company liquidated poorly selling inventory, closed 481 stores, and squeezed $100 million out of administrative expenses; even the houseplants in RadioShack stores were sold — to employees for $5 each — to save on the cost of watering them.<br /><br />One of Day’s other priorities has been to meticulously homogenize RadioShack stores, á la McDonald’s and Starbucks. Whereas the company once gave store managers an astounding amount of autonomy, a recently distributed internal handbook provides precise instructions for everything from organizing merchandise on the show floor to which cleaning fluid they must use to shine their metallic lower shelves. (Armor All Original formula, if you’re wondering.) Another page presents, with a series of painstakingly annotated photographs, the head-to-toe elements of the only two acceptable styles of dress for salespeople: Traditional Business (tie, optional vest or blazer, light-colored shirt, dress shoes) and RadioShack Casual (black, white, or red shirt, no tie, dress loafers).<br /><br />Day’s efforts have made the company look better on paper, but it was only when it began to sell itself as a place to comparison-shop for wireless phones and calling plans that RadioShack began to seem viable again.<br /><br />It may seem strange that, finding themselves in a financial morass, executives decided their best option was to compete head-to-head with both the wireless carriers’ own stores and the cell phone departments of giants like Walmart and Best Buy. But they may have had little choice: The average RadioShack store is only 2,500 square feet and can’t possibly stock a competitive selection of large appliances like flatscreen TVs. (Managers have had to stash merchandise in the rafters or rent off-site storage units in the run-up to Christmas.) Cell phones, on the other hand, like the parts and pieces the company once thrived on, are small products with exceptionally high profit margins. There’s the handset and the accessories, but most important, there’s the commission that wireless carriers pay to cell phone retailers for every new contract on a phone. A phone is like a tiny slot machine that pays off month after month.<br /><br />The logic is hard to resist, and in fact, RadioShack’s focus on wireless has been building gradually for at least the past decade — always at the direct expense of hobbyists, says Tim Oldham, a former corporate buyer at the company. “They intentionally decided to downsize the product offering for hobbyists, all the capacitors and resistors and connectors,” in order to cram in more phones, Oldham says. “It’s not coincidental. The money was just too big.”<br /><br />Applbaum says he doesn’t want to “disenfranchise” hobbyists, but his job is to bust RadioShack out of that niche and reintroduce it to people as a competitive, mainstream retailer of consumer electronics. Especially mobility. Applbaum wants to send a message: “The RadioShack of yesterday … is not the RadioShack of today.”<br /><br />Andy Cohen is not an unreasonable man. He’s willing to admit — begrudgingly — that he doesn’t totally disagree with what RadioShack is doing. “As a stockholder at a lot of other companies, I look at what Julian Day is doing and I think, actually, that looks like the right thing to do.” His shop is an anomaly, Cohen says — a product of its idiosyncratic community. He doesn’t pretend it’s some kind of concept store RadioShack ought to roll out nationwide.<br /><br />Cohen takes pride in the fact that his store carries only a single model of cell phone: a bulbous white handset called the Jitterbug. It has no features to speak of — it’s basically the mom jeans of mobility.<br /><br />Cohen and his store manager, Steven Muscarelli, have made the centerpiece of their shop something they call the Make Case. Make magazine, the quirky bible of the DIY community, happens to be headquartered down the street, and in a glass showcase right under the register, Cohen and Muscarelli have an exhibit of back issues, tools, printed circuit boards, kits, and a slew of components to screw around with: ultrasonic range finders, dual-axis accelerometers, microbots. (There are also a bunch of Star Wars action figures in the Make Case, just because.) Muscarelli says people will come in, pick up an issue of Make, buy all the stuff they’ll need to build a particular project or hack outlined in the magazine — like a TV-B-Gone or a USB device charger made from an Altoids box — then head off to their garages. “They come back in later and say, ‘Look what I made!’”<br /><br />But elsewhere, it’s a grim time for old RadioShack diehards. Mike D’Alessio, a once-devoted customer in Illinois who grew up playing with crystal radios and electronics kits he bought at his local RadioShack, tells me, “We’re living in a disposable world. It’s just not worth it to repair things; it’s not worth it to build things from scratch. The magic of that seems to have passed.” For reasons he can’t fully articulate, D’Alessio felt moved to scan 67 years’ worth of old RadioShack catalogs, page by page, and post them online. He often gets grateful emails from wistful or disenfranchised former customers and employees.<br /><br />“Some people say RadioShack is just a store,” D’Alessio says. “But to me it was an idea — a learning and resource center that really shaped people’s lives.” D’Alessio has started talking about the company in the past tense.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-45847196016751760412010-04-06T14:22:00.000-07:002010-04-06T14:23:44.956-07:00Unpaid Internships May Be IllegalNew York Times: “With job openings scarce for young people, the number of unpaid internships has climbed in recent years, leading federal and state regulators to worry that more employers are illegally using such internships for free labor. Convinced that many unpaid internships violate minimum wage laws, officials in Oregon, California and other states have begun investigations and fined employers.” The U.S. Department of Labor issued “Training and Employment Guidance Letter 12-09” that explains when a person can be an unpaid trainee rather than an employee. The Guidance Letter states:<br /><br /> The U.S. Department of Labor’s Wage and Hour Division (WHD) has developed the six factors below to evaluate whether a worker is a trainee or an employee for purposes of the FLSA:<br /><br /> 1. The training, even though it includes actual operation of the facilities of the employer, is similar to what would be given in a vocational school or academic educational instruction;<br /> 2. The training is for the benefit of the trainees;<br /> 3. The trainees do not displace regular employees, but work under their close observation;<br /> 4. The employer that provides the training derives no immediate advantage from the activities of the trainees, and on occasion the employer’s operations may actually be impeded;<br /> 5. The trainees are not necessarily entitled to a job at the conclusion of the training period; and<br /> 6. The employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.<br /><br /> If all of the factors listed above are met, then the worker is a “trainee”, an employment relationship does not exist under the FLSA, and the FLSA’s minimum wage and overtime provisions do not apply to the worker.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-53982306341009224822010-04-06T10:22:00.000-07:002010-04-06T10:24:00.817-07:00John G. McCoy, Innovator in Banking, Dies at 97By NATASHA SINGER<br /><br />John G. McCoy, who transformed the smallest bank in Columbus, Ohio, into the national powerhouse Banc One, died Sunday at his home in New Albany, Ohio. He was 97.<br /><br />His death was confirmed by his son, John B. McCoy.<br /><br />Mr. McCoy was the bank’s chief executive from 1958 to 1983, during which the bank’s assets increased to $8 billion, from about $140 million.<br /><br />Early on, Mr. McCoy identified growth opportunities for his bank in consumer-friendly customer service and in acquiring other banks.<br /><br />“I had to sit down and figure out what kind of a bank I wanted to run,” Mr. McCoy told The New York Times in 1981. “Right away I realized that I wanted to run a Tiffany’s, not a Woolworth’s.”<br /><br />In the 1950s, for example, when many people still received their salaries in cash and banks often had only one office, Mr. McCoy began building branches and had them open on weekends.<br /><br />In the 1970s, because securities firms were not permitted to offer checking accounts to their money market mutual fund customers, Banc One signed an agreement with Merrill Lynch in which the bank offered checking accounts to 300,000 Merrill customers.<br /><br />Banc One was also an early adopter of services like drive-through banking, A.T.M.’s, credit cards and debit cards.<br /><br />But being an early adopter didn’t always pan out. Before the era of online banking, for example, Banc One tested in-home banking via set-top boxes connected to televisions. But customers weren’t ready for such technology.<br /><br />Banc One also invested in information technology research, earning a reputation as a leader in data processing. By the 1980s, the bank was processing credit card transactions for dozens of other banks.<br /><br />But Mr. McCoy had conservative lending policies, courting smaller companies instead of the country’s biggest corporations.<br /><br />“He used to say ‘I’d rather make a thousand loans for $1,000 than one loan for $1 million,’ ” his son recalled, “because no matter how good you are, you are always going to have one loan go bad.”<br /><br />In 1979, Banc One ranked first in profitability among the country’s 100 largest bank holding companies.<br /><br />For Mr. McCoy, banking was also a family business.<br /><br />He was the second of three McCoys to lead the bank, originally called the City National Bank and Trust. The third was his son, who took over in 1983, serving as its chief executive until 1999.<br /><br />John G. McCoy was born in Marietta, Ohio, on Jan. 30, 1913, the oldest of five children of John H. and Florence McCoy.<br /><br />His father was an oilman and banker who moved the family to Columbus in 1930s after the governor of Ohio asked him to supervise the closing of banks that had failed during the Depression. In 1933, his father became president of City National Bank and Trust.<br /><br />John G. McCoy attended Marietta College in Ohio. He also graduated from the Stanford Graduate School of Business with a master’s degree in business administration.<br /><br />Mr. McCoy joined City National in 1937. He married his wife, Jeanne Bonnet, in 1941. She died in 2006.<br /><br />Besides his son, of Columbus, Mr. McCoy is survived by a daughter, Virginia McCoy of Kansas City, Mo.; three grandchildren; and seven great-grandchildren.<br /><br />In 1958, after his father died, Mr. McCoy became president of City National Bank. He changed the name when he created a bank holding company that became known in 1979 as the Banc One Corporation. But the bank’s branches, like Bank One Columbus, used a “k” in the name.<br /><br />A 1991 article in The New York Times described Banc One as the best-run bank among regional powerhouses and “perhaps the best bank in America.”<br /><br />During Mr. McCoy’s son’s tenure, Banc One became one of the country’s largest banks, when it purchased First Chicago Bank for $21 billion. After the merger, the bank moved its headquarters to Chicago. John B. McCoy resigned in 1999 after the bank had earnings shortfalls. The board hired Jamie Dimon as chief executive in 2000.<br /><br />JPMorgan Chase bought Banc One in 2004. Chase later changed the name of its two-million-square-foot corporate offices in Columbus to the McCoy Center.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-84883286378682330012010-03-10T08:32:00.000-08:002010-03-10T08:35:49.655-08:00Starbucks’ Midlife CrisisThe coffee giant can’t quite accept its own customers’ tastes.<br /><br />Greg Beato from the March 2010 issue<br /><br />Last summer in Seattle, Starbucks opened 15th Avenue and Tea, an unbranded café featuring “small batch coffees sourced from individually owned farms” and a variety of fussy brewing methods designed to appeal to those connoisseurs who believe a cup of $4 coffee ought to be at least as complicated to make as a Big Mac. Live music is provided by a small-batch indie rock piano band sourced from a tiny town in Wisconsin. There’s an in-house “tea master,” and occasional outbreaks of poetry. Starbucks is 39 years old now, and like a lot of 39-year-olds, especially those who’ve experienced great success in their salad years but are beginning to wonder if they’ve lost their touch, it’s having a bit of an identity crisis.<br /><br />In 2008, Starbucks closed 661 under-performing locations. In 2009 it shuttered an additional 300 stores and laid off 6,700 employees. In an attempt to position itself against newer, hipper rivals, the company started talking up its “heritage.” It resurrected a less polished version of its logo for use in certain branding situations. Presumably, its coffee is still brewed from coffee beans, but everything else in its new stores seems to have made a radical career switch. The bar at a London Starbucks is upholstered with scraps from an Italian shoe factory. The countertop at the Paris Starbucks is made out of recycled cell phones.<br /><br />For all their ostensible authenticity, such adventures in interior design cannot match the truly radical act of installing espresso machines in bank lobbies. Like Seattle’s other great cultural export from the early 1990s, Nirvana, Starbucks has always been most vital, most interesting, most revolutionary when at its most commercial.<br /><br />Granted, not everyone thinks of the chain as radical. Take Bryant Simon, a historian at Temple University. In his 2009 meditation on Starbucks, Everything But the Coffee, he offers the usual critiques of the company. It says it sells coffee, but it doesn’t. It says it’s a venue for conversation and civic discourse, but it isn’t. It sells overpriced coffee-like beverages and a safe, predictable, environment. It preys on needy, status-seeking consumers by offering them clean bathrooms, innovative products, and a soothing ambiance in myriad convenient locations. For Simon, Starbucks was designed to be an exclusive, elitist institution: When CEO Howard Schultz began adding locations in the late 1980s, he “made sure to put his stores in the direct path of lawyers and doctors, artists on trust funds and writers with day jobs as junk bond traders.”<br /><br />If you’re thinking to yourself, damn, that’s totally unfair to writers with day jobs as unemployed writers, well, yes, that was Schultz’s evil scheme! He wanted to introduce fancy coffee to people who weren’t already drinking fancy coffee. So, Simon reports, “unlike an owner of one of the beat coffee shops in the 1950s, he didn’t set up in transitional neighborhoods or fringe places like, for instance, Chicago’s neobohemian Wicker Park.”<br /><br />In the late 1980s, of course, there weren’t many cafés serving high-quality coffee anywhere. Coffee consumption per capita was at its lowest point since 1962, soft drinks had recently surpassed hot caffeine as the nation’s favorite beverage, and Coke was in the midst of a campaign advertising its utility as a breakfast drink. The few cafés that were selling espressos and capuccinos, however, were located precisely in places like Wicker Park.<br /><br />In choosing to locate his outlets in busy downtown locations, Schultz was expanding the world of high-end coffee—diversifying it, in fact, by taking it beyond its insular, self-conscious subculture. The décor of his stores amplified this process. They had the clean and slick streamlining of a fast food restaurant but were more comfortably appointed. Instead of walls lined with old books, there were gleaming espresso machines for sale, packages of whole beans, ceramic cups. They felt a little like a Williams-Sonoma store crossed with an unusually tasteful airport lounge. They were cafés for people who would never set foot in a bohemian coffeehouse, people traditional coffeehouse entrepreneurs had completely ignored.<br /><br />For less than the price of a Whopper, you could hang out in a sophisticated middlebrow lounge/office for hours on end. And they were popping up everywhere. Exclusive, elitist? Starbucks was exactly the opposite, introducing millions of people who didn’t know their arabica from their robusto to the pleasures of double espressos. Finally, good coffee had been liberated from the proprietary clutches of hipsters, campus intellectuals, and proto-foodies and shared with bank managers and real estate agents. In offices across America, it suddenly smelled like ’ffeine spirit.<br /><br />For Schultz, this mainstream customer base was both a boon and a curse. In Pour Your Heart Into It, his 1997 account of Starbucks’ rise to global behemoth, he reveals a preoccupation with authenticity that echoed Kurt Cobain’s. In 1989, he initially balked at providing non-fat milk for customers—it wasn’t how the Italians did it. When word trickled up to him that rival stores in Santa Monica were doing big business in the summer months selling blended iced coffee drinks, he initially dismissed the idea as something that “sounded more like a fast-food shake than something a true coffee lover would enjoy.”<br /><br />Eventually, Schultz relented. And really, what greater punk-rock middle finger is there to purist prescriptions about what constitutes a true coffee drink than a blended ice beverage flavored with Pumpkin Spice powder?<br /><br />Simon recounts the birth of the Frappuccino in Everything But the Coffee too, but while he acknowledges the grassroots origins, he quickly positions it as an item the chain is “pushing” on “caffeine-dependent women and men.” In his estimation, the company’s “consumer persuaders” and “mythmakers” are the ones with real power. They’re constantly selling false promises, implanting “subliminal messages” in store décor, and otherwise manipulating hapless consumers.<br /><br />In reality, the chain’s customers have played a substantial role in determining the Starbucks experience. They asked for non-fat milk, and they got it. They asked for Frappuccino, and they got it. What they haven’t been so interested in is Starbucks’ efforts to carry on the European coffeehouse tradition of creative interaction and spirited public discourse.<br /><br />Over the years, Starbucks has tried various ways to foster an intellectual environment. In 1996 it tried selling a paper version of Slate and failed. In 1999 it introduced its own magazine, Joe. “Life is interesting. Discuss,” its tagline encouraged, but whatever discussions Joe prompted could sustain only three issues. In 2000 Starbucks opened Circadia, an upscale venue in San Francisco that Fortune described as an attempt to “resurrect the feel of the 1960s coffee shops of Greenwich Village.” The poetry readings didn’t work because customers weren’t sure if they were allowed to chat during the proceedings. The majority of Starbucks patrons, it seems, are happy to leave the European coffeehouse tradition to other retailers.<br /><br />At 15th Avenue and Tea, the quest to cultivate highbrow customers continues. There’s a wall covered with excerpts from Plato’s dialogues. Blended drinks are banned from the premises, and you can safely assume that Bearista Bears, the highly sought-after plush toys that Starbucks has been selling since 1997, won’t ever appear here either.<br /><br />But if Starbucks really hopes to re-establish its authority as an innovative, forward-thinking trailblazer, it should perhaps use its next experimental venue to honor its heritage as the first chain to take gourmet coffee culture beyond the narrow boundaries of traditional coffeehouse values and aesthetics. Imagine a place with matching chairs, clean tables, beverages that look like ice cream sundaes, Norah Jones on the sound system, and absolutely no horrid paintings from local artists decorating the walls. A place, that is, exactly like Starbucks! <br /><br />Because despite its ubiquity, despite its advancing years, Starbucks is still the most radical thing to hit the coffeehouse universe in the last 50 years.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-46569992723505982812010-02-16T09:40:00.000-08:002010-02-16T09:41:26.747-08:00What Bankrupted Greece? It Was The Olympics!Here's an angle on the Greek financial crisis I hadn't considered: Victor Matheson, a member of the Sports Economist group blog, argues that one reason the Greeks wound up in such deep financial trouble is that they went deep in hock to pay for the Olympics:<br /><br />Greece's federal government had historically been a profligate spender, but in order to join the euro currency zone, the government was forced to adopt austerity measures that reduced deficits from just over 9% of GDP in 1994 to just 3.1% of GDP in 1999, the year before Greece joined the euro.<br /><br />But the Olympics broke the bank. Government deficits rose every year after 1999, peaking at 7.5% of GDP in 2004, the year of the Olympics, thanks in large part to the 9 billion euro price tag for the Games. For a relatively small country like Greece, the cost of hosting the Games equaled roughly 5% of the annual GDP of the country.<br /><br />Of course, the Olympics didn't usher in an economic boom. Indeed, in 2005 Greece suffered an Olympic-sized hangover with GDP growth falling to its lowest level in a decade.<br /><br /> <br />That would certainly follow the pattern of crazy civic development projects in which stadiums and museums are supposed to somehow substitute for everything that is missing in the local economy. But the governments in question don't usually end up in receivership.<br /><br />Fun Olympic factoid of the day: the television news yesterday reported that the Whistler ski complex had essentially been developed in the hopes of the area someday scoring a winter Olympics. I have no idea if this is true, but it seems both plausible and deeply troubling.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-16115662537325017272010-01-17T05:54:00.000-08:002010-01-17T05:55:35.277-08:00Procter & Gamble to Test Online Store to Study Buying HabitsBy ANJALI CORDEIRO And ELLEN BYRON<br /><br />Procter & Gamble Co. plans to launch an online store that will sell key brands, aiming to study consumer buying habits as it counters moves by traditional retailers, which have reduced the variety of brands they carry.<br /><br />P&G spokeswoman Tressie Long said the company sees the new online store as more of a "learning lab," where it can study consumers' online buying habits, rather than as a direct source of sales growth. P&G, which already sells its products online through the Web sites of such retailers as Wal-Mart Stores Inc., says it will share what it learns with retailers that carry its brands.<br /><br />P&G's new "eStore" will start as a pilot using 5,000 consumers in coming days. The site will carry only P&G products but will be owned and operated by PFSweb, an e-commerce service provider. Pricing on the site will be at the discretion of PFSweb, P&G says.<br /><br />Not every P&G product will be available via the site initially, although big brands including Tide, Pampers and Olay will be sold there. The new Web site, at pgestore.com, is not yet publicly accessible but will be up for use beyond the pilot program in the spring. There will be a flat $5 shipping fee for all orders.<br /><br />Procter & Gamble has increasingly been looking for new avenues of growth as consumers have cut back. In recent months the company has said it will push to sell more of its products online,<br /><br />Despite P&G's push into the online medium, sales at traditional retailers will remain key to its business. P&G gets about half a billion dollars in online sales, a fraction of its roughly $79 billion in annual sales. Researcher Nielsen estimates online sales of consumer packaged goods including food, beverage, health and beauty aids and household cleaners increased 20% to 25% between 2004 and 2008, hitting roughly $10 billion in 2008.<br /><br />In separate news, Procter & Gamble plans to end its fragrance licensing agreement with Valentino Fashion Group, according to a person familiar with the matter. Puig Beauty & Fashion Group SL, the Spanish fashion and fragrance company, is expected to take over the license from P&G in February 2011, this person said.<br /><br />P&G produces a number of fragrances for Valentino, which is owned by U.K. based private-equity fund Permira. But sales never reached the heights of P&G's other fragrance licenses, including those with Gucci and Dolce & Gabbana, which last year launched a makeup line.<br /><br />A spokeswoman from P&G declined to comment. A spokesman from Puig couldn't be immediately reached for comment.<br /><br />P&G wants to weed out underperforming brands to focus on its more competitive products. The company has been moving into luxury beauty products, including the expansion of skin care line SK-II and its acquisition of high-end men's grooming lines like The Art of Shaving.Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0tag:blogger.com,1999:blog-5190418925285230674.post-49282089991538906652010-01-09T07:26:00.000-08:002010-01-09T07:27:33.721-08:00Banks vs. Credit UnionsWould a credit union be a better alternative for you? The Early Show's financial contributor Vera Gibbons compares banks and credit unions. <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/dSSH82DdMH4&hl=en_US&fs=1&"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/dSSH82DdMH4&hl=en_US&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>Rob Hoodhttp://www.blogger.com/profile/02211809421832142963noreply@blogger.com0