Monday, September 9, 2002
Cashing in on 9/11? Hucksterism has a long history in America
Lee Gomes writes about the commercialization of 9/11 in this Wall Street Journal story (subscription required):
One feels vaguely guilty for even raising the topic of all this cashing in on Sept. 11. The way we like to tell the story, 9/11 was a crucible from which we emerged as a stronger, better country. But hucksterism has a long history in America. It's the flip side of our go-go, can-do culture.
Spend some time flipping through magazines from the 1940s, and you'll start to think that WWII wasn't a war as much as an opportunity for combat-themed product placements. An orange growers' ad in an old National Geographic shows a drawing of a GI Joe ferociously lobbing a hand grenade; the caption describes the debt this battlefield vigor owes to "Victory Vitamin C."
If the Greatest Generation could use Guadalcanal to sell orange juice, can't we use the destruction of the World Trade Center to sell plastic containers and TV reruns? Some would say it's the American way!
There are so many 9/11-related press releases out there, you can easily find two that can be paired for tragicomic effect. A release from Winchell's says it will give free doughnuts on Wednesday to uniformed emergency workers. Another from the American Institute for Cancer Research notes that many Americans are "struggling to lose weight gained after attacks by exercising more, eating lighter."
Mutual funds bloodbath
The most important lesson learnt by investors over the last two years, according to this Wall Street Journal story (subscription required), is that maybe they weren't cut out to stomach the risk of having their money invested in the stock market.
In the past year, an already limping stock market and a weak economy were further unnerved by the shock of the terrorist attacks. Then disclosure of massive corporate deception led to two huge bankruptcy filings and put many other blue-chip stocks on the ropes. U.S. stock-focused mutual funds on average have declined 19.9% in the 12 months through this week and fallen 30.3% since stocks' peak in early 2000.
So what have mutual-fund investors learned as the market turned from bad to worse? For one thing, many have found out whether they were really cut out for the risk entailed in owning stocks.
A decade-long bull market left some unprepared when gains turned into losses. Indeed, in July, investors pulled $52 billion -- a record dollar amount -- from their stock funds.
Bifurcation! The buzz word of choice
Wall Street Journal (subscription required) writes that bifurcation is the new buzz word of choice when referring to the market. People like, "Steve Galbraith, a managing director over at Morgan Stanley, are throwing it around like you're supposed to know it."
What does bifurcation actually mean?
Bifurcation is a fancy way of saying that in this brutal market, the universe of companies is splitting into two camps. Call them the vanquishers and the vanishers. Vanquishers are companies that are chugging through these times with solid balance sheets. They're companies that can still raise capital. And, in a somewhat ironic twist, the vanquishers pay or are on the path to paying a dividend -- the sign of a dinosaur just a few years ago.
The vanishers are none of the above.
Signing up for a slower broadband connection
A "lite" version of broadband is probably coming to a provider near you according to this AP story.
Tiered broadband may also be a response to a glut of unused network capacity.
"What these providers are discovering is that they all spent a decent amount of money to build out their backbones. They have a good amount of capacity and a lot of it is not being utilized," said Mr. Kersey at ARS. "Covad's got this great backbone, and only about 350,000 people using it, so why not persuade people to switch from dial-up?"
But ideally, for players both big and small, any entry-level tier of service will serve as a stepping stone to higher-revenue plans.
According to Messrs. Golvin and Kersey, once people convert to broadband, getting them to pay $10 more for faster service is easier than getting them to initially switch from dial-up, which often entails hassles such as installation and e-mail address changes.
Actual invitation copy
A special thanks to my friend, Steven Brewster who was good enough to send me the details of the panel:
The UC Berkeley Graduate School of Journalism invites you to a
Sept. 17 panel discussion on:
Challenging Mass Media and Society
Weblogs have received a lot of press lately, and journalism Weblogs are proliferating. Are Weblogs rejuvenating public discussion?. Are they an alternative to mass media?
Join us in a discussion with:
Author of "The Weblog Handbook" and creator of Rebecca's Pocket, one of the first-wave Weblogs.
San Jose Mercury News Technology Columnist and author of Dan Gillmor's eJournal Weblog
Co-author of "We Blog: Publishing Online with Weblogs," co-founder of Blogger.com, and creator of megnut.com, one of the earliest weblogs
Online Journalism Review Senior Editor and author of the New Media Musings Weblog
Salon Managing Editor and creator of Scott Rosenberg's Links & Comments Weblog
Tuesday, Sept. 17
Journalism School Library
North Gate Hall
The event is free and open to the public. Please pass this invitation along to anyone else who might be interested in attending.
Directions to the J-School are at http://journalism.berkeley.edu/directions.html. Street parking should be available within a few blocks of the school, which is on the northern edge of the campus.
If you have any questions contact Journalism School New Media Program Director Paul Grabowicz at email@example.com
Berkeley Panel on Weblogs
Hi, I'm a teenager and "I've time-mapped well"
The $3.6 billion organization industry, according to the Wall Steet Journal (subscription required), "sees a whole new market of pimply future CEOs out there, and it's churning out products catering to them."
Meet the new buttoned-down, ultra-organized CEO: your teenager. If it looks like kids are growing up even faster than usual lately, one of the reasons is they're getting a big push -- from parents and teachers seemingly intent on raising a new generation of Organization Kids. They're getting help from an industry that's deluging kids with MBA-style strategies for success, from books (a teen-tailored version of the blockbuster "Who Moved My Cheese?" hits stores this fall) and $400 Palm organizers to workshops and tapes that push go-getter mantras like "sharpen the saw." Schools across the country are buying into the idea big-time, shelling out thousands on journals, workbooks and other classroom materials intended to teach organizational skills.
It's all a long way from a traditional American adolescence, in which boredom was practically a teenager's right and the biggest time-management question was how to get that social studies paper done in time to watch "Happy Days." But then came the business world's mania for organization, which sent ambitious grown-ups scrambling to read manifestos like Stephen R. Covey's "The 7 Habits of Highly Effective People." In fact, the new craze for teen efficiency traces its roots back to Mr. Covey -- or more precisely his son Sean, who published "The 7 Habits of Highly Effective Teens" in 1998.
Another exec beneficiary of loan writeoff
I wish I could have my loan to my last company paid back just like these professional managers get their loans from their companies written off as reported in this Wall Street Journal story (subscription required):
In the SEC filing, Microsoft, based in Redmond, Wash., characterized the $15 million as an advance given to Mr. Belluzzo against the value of stock options he was given in 1999 and 2000. The loan represented the "minimum benefit" Mr. Belluzzo would receive by exercising those options at a later date, Microsoft said. The options allowed Mr. Belluzzo to buy 3.5 million Microsoft shares.
At today's depressed stock prices, however, all of those options are worthless now. So Microsoft said it would cancel the options and, in turn, forgive the loan and its interest. A Microsoft spokeswoman noted that the original loan agreement with Mr. Belluzzo did include some provisions that would allow forgiving the loan, under certain circumstances. The spokeswoman added that Microsoft thinks the loan was "appropriate and necessary," noting that "Mr. Belluzzo's compensation package was developed at a time when the market for senior executives was hyper-competitive."
SBA-backed investment funds
From the Deal [via Venture Reporter]:
In the tight fund-raising climate, the SBIC program has continued to draw a steady stream of applicants. But these days, half the applicants eager to tap its $7 billion pool are rejected, compared with only 10% a couple of years ago, according to estimates by SBIC funds' attorneys. This fiscal year, ending Sept. 30, the program expects to approve about 40 licensees, down from about 80 last year, and 60 in 2000.
After reaping more than $500 million in cumulative profits since 1994, the program's success has been tempered by funds lacking the resources for follow-on investments, leaving struggling portfolio companies to wither on the vine.
...An SBIC, which stands for Small Business Investment Companies, is a privately owned and operated investment fund licensed by the SBA. The license makes it eligible to receive $2 for every $1 raised.
Real Options Valuation (ROV) in Project Analysis
A simple decision such as whether to develop a new technology in-house or acquire it from an outside party illustrates the utility of the decision-tree framework
. In-house development requires three years and leads to three possible outcomes. In two of these outcomes, the firm expects to create significant value. But there's also a 25 percent chance that the in-house development would fail; obviously, this outcome would have no payoff. Figure 1 shows this decision using a decision-tree framework. The probabilities of the three outcomes are based on a combination of managers' experience and judgment.
|Figure 1 |
After calculating the value of each alternative, the manager is able to pick the highest-valued alternative. For the acquisition alternative, subtracting the $10 million cost of acquisition from the $20 million payoff yields a value of $10 million. For each of the three outcomes in the in-house development alternative, you have to subtract the cost from the payoff and then multiply the result by the probability of success. Thus, for the most successful of the three outcomes, the expected value would be:
($25 million - $7 million) ¥ .35 = $6.3 million
An expected value calculation—the weighted average of the outcomes, with the probabilities used as weights—is used to blend the value of the three outcomes into a single number. A 10 percent cost of capital is used as the discount rate. Performing this calculation reveals the value of the in-house alternative to be $7.14 million, or less than 75 percent of the value of acquiring the technology from outside.
Rise of the Creative Class
A new book by Richard L. Florida about the Rise of the Creative Class:
About a quarter of the U.S. workforce belongs to a social class that has the power to create fundamental change in society—if only this class knew it existed and could act in concert. The author, a professor at Carnegie Mellon University, says that people who rely on creativity in their jobs (artists, engineers, teachers) share values and a self-image that comes from a right-brain way of life. Furthermore, this class has the financial, educational, and political wherewithal to find answers to some of the world’s most pressing problems.
Role of Government when all else fails
An interview with HBS professor David A. Moss who has written a book on the government's role as risk manager, especially when all else fails:
One of the things that a historical perspective helps make clear is that risk management has always been an essential function of government. From the very earliest days of the American Republic, government policymakers have actively managed risk in the private sector—shifting it from one party to another, spreading it out over large groups, and (in some cases) simply reducing it outright. These policies, in turn, have profoundly shaped the environment in which business operates.
Public risk management itself has obviously evolved and expanded quite considerably over time, such that now—at the dawn of the twenty-first century—it is hard to conceive of any more important or pervasive governmental function. The federal government now devotes a larger part of its budget to social insurance (such as unemployment and old-age insurance) than to anything else, including defense. In several critical sectors of the economy, including banking and private insurance, federal and state governments act as insurers of last resort, assuming literally trillions of dollars in contingent liabilities. Whether you like it or not, the nation's product liability system, which shifts risk from consumers to producers, has dramatically influenced the calculus of production in a large number of industries. Our federal disaster relief policy, meanwhile, has likely affected housing patterns all over the country. In fact, the list just goes on and on. Risk management truly is a critical—and extremely powerful—function of government.
Generating and Measuring Social Impact in Enterprise
Berkeley's Haas School of Business (in collaboration with the Goldman Sachs Foundation, Stanford GSB and London Business School) is presenting the Annual National Social Venture Symposium
on Generating and Measuring Social Impact in Enterprise on Sep 13:
This half-day forum will capture and convey the latest intellectual capital, research and best practices emerging from the global community of academia and practitioners working at the forefront of social venturing, with a focus on the ways entrepreneurs and investors are generating and measuring the social impact of their enterprises.
Get out of the advertising mentality
Treat people as customers rather than consumers says this Harvard Business School article on the Working Knowledge site:
Companies spent $22 billion on customer relationship management (CRM) software last year, according to the Gartner Group, but just what did it buy them? The snazzy technology was supposed to make one-to-one interactions with customers a reality, but experts say all it has done is enable companies to disappoint their customers faster and more efficiently—anytime and anywhere. Customer loyalty hasn't increased. Companies still can't target their most profitable customers, and their data-mining and sales processes are just as convoluted as ever.
...Sellers must reengage with customers, but not by "creating a communications campaign," cautions Jerry Michalski, president of the consulting firm Sociate (Mill Valley, California), "because that approach has pretty much lost its credibility." Get out of the advertising mentality, which focuses on the messages your company is trying to get across to customers, and spend more time trying to discern what customers are trying to say to you.
Sunday, September 8, 2002
Amazon adds Office Depot store
Amazon announced on Friday (subscription required) that it will add an Office Depot store to its offering. Shoppers also be able to order the most popular Office Depot products online for pickup at Office Depot's more than 820 retail stores in the U.S. or have them delivered.
Amazon, Seattle, manages Internet stores for or delivers customers to a host of retailers, including Target Corp., Toys "R" Us Inc., Borders Group Inc. and Circuit City Stores Inc. The so-called services business is one of Amazon's most important and profitable ones.
Wanting peace of mind from their piece of meat
Though Americans are eating less red meat these days -- about 4% less per person in the last two years -- sales of "natural" meat have jumped 30% or more this year according to the Wall Street Journal (subscription required).
Of course, upscale restaurants have been trumpeting their chops' provenance for years, making Niman Ranch pork and James Ranch lamb name brands among well-to-do foodies who have it shipped. But only recently has all this boutique food gone mainstream, showing up in the local supermarket and suburban kitchens. And while you'd think the shaky economy would make people think twice before shelling out as much as $25 a pound for tenderloin, stores like the Whole Foods chain say sales have jumped in the past two years. "People have started wanting peace of mind from their piece of meat," says Kate Lowery, a spokeswoman for the market.
Saturday, September 7, 2002
eGray political parody of eBay
Cute but it won't help. Story in the New York Times on Bill Simon's campaign doing one thing well -- a parody of eBay to help promote their negative campaign.
"Our attorneys will determine what the appropriate step will be," [eBay] spokesman Kevin Pursglove said Friday.
The creators of the site--members of Republican candidate Bill Simon's campaign--say they plan to keep eGray.org up and running. The site closely matches eBay's look and feel, but lists "California laws for sale," and accuses Davis of pushing legislation backed by special interest groups who donated to his campaign.
"Want to get rid of the pay-for-play governor? Click here to donate to Simon for Governor," the site reads. Davis campaign representatives did not return calls seeking comment.
Gym attendance up 11%
The average health clubber went 93 times last year, up 11% from five years ago, says the International Health, Racquet & Sportsclub Association as reported in the Wall Street Journal's story (subscription required)
on the search for a good man's gym bag. Amazing. I've been facing this problem myself for three months now since I started making it into 24-Hour Fitness every second day.
Absolut: The interaction rates have been fantastic
Absolut's online adveritising campaign mimics the creativity and quality of its print ads and has achieved fantastic results: 7% of all the ads shown are clicked on or interacted with in some way according to the Wall Street Journal (subscription required).
"When people are engaged, they like it," says Cheryl Lucanegro, senior vice president of sales for Salon Media Group Inc., which has been running the ads for about a year. Readers respond to the Absolut ads because they are eye-catching without being annoying, she says. "One of the nice things about Absolut is they understand the Internet, and know that they shouldn't be interrupting the user experience," with pop-up or other intrusive ads.
The Ads: One ad shows an Absolut bottle and a magnifying glass. Mouse over the ad and the magnifying glass shifts to reveal enlarged details of the bottle. Mouse over the bottom of the ad to reveal the tagline "Absolut Investigation."
Why It Works (According to Absolut): The ads continue Absolut's offline strategy of engaging the user with offbeat humor, Absolut's Mr. Persson says. "What we want to do is get the consumer to leave the story [they're reading] for a while and to interact with Absolut, and to give them something unexpected to smile about," he says.
Stepping aside as CEO
Top VC firm Kleiner Perkins Caufield & Byers brought in Hugh C. Martin as EIR. He'd held positions such as head of desktop engineering at Apple Computer and president of 3DO, a video game start-up.
Kevin Compton, a partner at Kleiner, then offered him the top job at ONI. "He told me, `You will work harder than you ever have before in your life, but I have the feeling you will make more money than you can ever imagine,' " recalled Mr. Martin, now 49.
...He soon learned firsthand a business principle akin to the law of physics that says no two bodies can exist at the same time in the same place: When two companies wed, there can be only one surviving boss.
Those who are asked to step aside rarely like to talk publicly about the experience. But now, taking the summer off to sail around Martha's Vineyard with his family and to ponder what to do next, he has agreed to tell about his.