Business Today Fall 2009

By students for students published at Princeton since 1968

Downturn in Dubai | Dr. Sanjay Gupta on Health | Get a Job! | Suze Orman: Save money, live well

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CONTENTS

14 Downturn in Dubai Once the poster child of excess and innovation, this star of the Persian Gulf has fallen on hard times as construction slows and tourists dwindle.

[Article by Ryan Shyu]

10

[Fall 2009. Volume 46. Issue 2]

Stretching the Dollar in China If you’re planning to swing through China, or are just an enthusiast of Chinese customs, here are some of the great finds—culinary and otherwise—that won’t break the bank.

[Article by Michael Keaton]

40 Suze Orman

World-famous personal finance expert and popular TV show host, Suze Orman dishes on what college students need to know about credit, spending, and dealing with common money-related problems.

[Interview by Caroline Hanamirian]

Dr. Sanjay Gupta Stressed about finals? CNN’s medical correspondent and pop culture icon gives us some helpful insights on health for the workaholic.

20

Going Green The idea of legalizing marijuana has been hotly disputed for some time. But forget Bob Marley and free love, and take a look at another side of the debate—the economics.

[Article by Caroline Clark]

[Interview by Caroline Hanamirian]

30

Eric Schmidt

Silicon Valley titan Eric Schmidt, Google’s CEO, fields questions about Chrome and the Googleplex, and offers reflections on his time at the helm of the Internet’s powerhouse web browser.

26

34

Brain Drain

Tour de Force Many people envision business and military as dichotomous careers. But they are far more compatible than they appear.

[Article by Jessica Bruckert]

66

International students are flocking to the US for higher education.

What happens when they take their degrees back to their home countries? Should universities be in the business of educating the world?

[Article by Emily Banks]

FALL 2009 BUSINESS TODAY 3

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RNZ Business Today is America’s largest student-run publication, reaching 200,000 readers nationwide. Published at Princeton University, the magazine is distributed at over thirty of the top schools in the country and has extensive online readership at our website, www.businesstoday.org.

Business Today is dedicated to presenting the opinions of students and business leaders. By examining controversial issues facing our world and exploring life after college, we hope to help readers prepare for their futures. The magazine has been published by Princeton University undergraduates since 1968.

amit mukherjee President clayton sachs Vice President bj sullivan Editor-in-Chief IRENE ZHANG Publisher scott baxter Regional Conference Director kevin cheng Regional Conference Director amira polack West Coast Conference Co-Director remy greeno Seminar Series Director robert ostrowski International Conference Director remi meehan Executive Relations JimMY connelly Online Journal Director rohan patil Corporate Contacts Director dan salvato Finance Director

Business Today Princeton University 48 University Place Princeton, NJ 08540 609.258.1111 magazine@businesstoday.org

The Foundation for Student Communication, Inc. is the parent company of Business Today. FSC, a 501(c)(3) non-profit foundation, is run entirely by students for students at Princeton University. In addition to the magazine, FSC sponsors International and Regional Conferences held across the country that bring together students and executives to discuss the future of business. For more information, visit our website, www.businesstoday.org.

THE MAGAZINE BJ Sullivan Editor-in-Chief IRENE ZHANG Publisher MiLES WU Design Director Editorial Eileen Chen Caroline Clark CAROLINE HANAMIRIAN NAN HU BRIAN NWACHUKWU Brian reiser CARMEN MARIA SANCHEZ HANNAH SACHS RYAN SHYU Design DAN HONG AJ KOGER KATE MACHTIGER TIANTIAN ZHA Publishing gREGORY CHEUNG kEANAN CLARK WILLIAM ELLIS AUGUSTO LEAL ALICE LI MAY LI YUPENG LIU ANDREA SCHILLER JULIET TEMPEST PHILIP THALHEIM Hanna Tian MATTHEW WENDER Cover design by Mandy Lee

FALL 2009 BUSINESS TODAY 5

“Nothing in the world can take the place of persistence.

Talent will not... genius will not... education alone will not...

Persistence and determination alone are omnipotent.”

– Ray Kroc

WORDS FROM THE

EDITOR Okay. Breathe. Most experts agree that the entire global economy is back from the brink of total collapse. While few businesses are thriving and many recent grads are still struggling to find employment, the stage does seem set for a recovery to begin.

But what happens now? What is the recovery going to look like?

As we reflect on what has transpired in the past year—without some of the anxiety of before—it really did seem like a perfect storm of things that went awry. But in all the chaos, a certain theme resonates throughout.

The least common denominator: risky, foolhardy money management.

And so in this issue, we focus not only on compensation practices in the financial sector but also on personal finance. It’s something often scoffed at by many university economics departments in favor of the theoretical and the academic. But our entertaining and informative interview with TV personality and personal finance guru Suze Orman will hopefully lay groundwork for your fiscally responsible future.

In this issue, you will find not only informative and sometimes irreverent commentary on interesting developments in business but also a series of interviews geared towards you. Whether it’s about kicking the recession in the patootie and landing a job, or keeping your mind and body sound during stress-filled, caffeine-mediated late nights at school, perusing this issue will give you an edge in tackling the major hurdles you will likely encounter.

To sign off with a slightly kitschy but highly appropriate Suze Ormanism: “First people. Then money. Then things.”

Remember that as you enjoy the holiday season!

BJ Sullivan

Editor-In-Chief

Send comments, feedback, and story ideas to magazine@businesstoday.org.

www.businesstoday.org

FALL 2009 BUSINESS TODAY 7

Beijing Exploitation

BT BIZ

Commercializing Culture The painful pasT retains an inexplicable appeal.

In Beijing, an entire industry has sprung around this not unfounded belief. Witness the rise of a number of Hutong brand names: stores based in refurbished little alleyways that once housed the working class of the city. These businesses make their fortune by commercializing and marketing the Cultural Revolution, exploiting one generation’s nostalgia, a younger generation’s curiosity, and the whole Western world’s fascination.

Stores such as Plastered T-Shirts, NLGX (acronym for NanLuoGuXiang, the most successful of these Hutongs), and a number of lesser known brands design products that are reminiscent of the Cultural Revolution, but often with a slightly irreverent twist. Chairman Mao’s ideologies are inscribed onto sets of matchboxes that sell for roughly $10, propagandist slogans – original or mockingly altered – are printed onto equally overpriced faux-vintage iron-bowls, the emblem of the proletariat, and iconic figureheads are pasted onto the front of t-shirts available for roughly $20.

The main clientele of this cultural exploitation industry can be divided into demographics as such: the older generation who want to relive or at least commemorate the Cultural Revolution years of their youth, the younger, second-generation Chinese immigrants to Western countries who seek an accessible way of comprehending their country’s past, and, of course, the foreign tourists for whom the Cultural Revolution has some mystical charm.

In the wake of China’s capitalist boom, this industry proves that just about anything can be commercialized. ~TZ

8 BUSINESS TODAY FALL 2009

PJ Clarkes Satisfying Hungry Business Since 1884 for The business folk of MidTown ManhaTTan, lunch is frequently a visit to the nearby Cosi for a gourmet salad made at the speed of light, or perhaps the company’s favorite sushi spot for a few bites of spicy tuna. After a hectic day of briefings and conference calls in a Lexington Avenue, 40-floor office building, analysts and managers often go to downtown’s cobble-stoned streets, where they can sit down for a drink at a place with just one brand, in one location, before trudging back uptown.

But what if you’re stuck in midtown?

That’s when you go to PJ Clarke’s. [xx] This 125-year old American bar and grill is not built on a cobble-stoned street— Third Avenue looks more like a Nascar raceway— and sits next to a corporate complex that occupies the entire block, except for PJ’s corner on 55th street. A welcome visual break from Midtown’s characteristic architecture, here stands what customers young and old treasure as a “real saloon,” where suit-wearing chief financial officers order from the same bartender as jean-wearing construction workers.

PJ’s menu doesn’t venture far past the basic and the delicious. Just a burger is enough. No further customization of orders is required, except maybe for an order of patrons’ beloved blue cheese sauce for a little classic zest. Service is fast for those who choose to sit at the bar and listen to Chuck Berry on the restaurant’s famous jukebox; those who want to stay a while can sit in the dining room, where tables covered in simple sophisticated red-and-white-checkered table cloths are fit closely together to create a boisterous, warm feel.

The paint-chipped walls and exposed www.flickr.com/photos/maguisso/ old bricks of this ‘holdout’ spot do not suggest, however, that PJ Clarke’s hasn’t kept pace with modernization taking place around the block. The building itself has undergone numerous alterations since Steven A. Walker purchased the property in 1884, and management has re-fashioned the restaurant’s image to make it fit into Midtown’s corporate culture in spite of its old-school façade. This 21st century saloon is a corporate sponsor for various New York-based charity organizations, including Sprout Creek Farm, an agricultural cooperative and public awareness program that encourages the use of organic ingredients in producing quality food while protecting the environment.

PJ’s has even opened a new location overlooking the Hudson River to cater to the Wall Street clientele. This institution may be old, but it retains the street smarts of native New Yorkers.

Though market demands have persuaded PJ Clarke’s to expand its reach beyond its original Third Avenue location, for those who have tasted its home-made apple cobbler, there is still only one PJ’s. Serving today’s eclectic, fast-moving Manhattan work force, this lunch venue may not be a place where everybody knows your name, but everybody certainly should know PJ’s name. ~CMS

Redefining Economics:

Make Way for the Herd [Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism] able to expand upon animal spirits in a way that was not possible in Keynes’ time. Specifically, they break animal spirits down into five categories: confidence, fairness, corruption and antisocial behavior, money illusion, and stories. Of the five catagories, Akerlof and Shiller focus on confidence and its effect on the economy, but they also explain the importance of fairness in the establishment of wages and prices, the harmful but often overlooked effects of corruption, the role of money illusion and its confusing implications for people trying to understand inflation and deflation, and stories that provide a framework for our identities—both as individuals and as a people—that guide the way that people act in the economy. All five of these aspects of animal spirits are absent from today’s commonplace economic theory, where machine-like people act only rationally. The authors go on to use these aspects of animal spirits to answer specific, important questions about our economy. Why do economies fall into depression? Why can’t some people find a job? Why are financial prices and corporate investments so volatile? These are some of the issues that they tackle using animal spirits. In the end, Akerlof and Shiller admit that the truly fine details are beyond the scope of their book—they can’t give answers for what specific kind of regulation there should be for hedge funds, or who should be bailed out when, or how bankruptcy laws should be modified in the face of systemic risk. However, they do set the stage and present the background understanding that can be used to flesh out these details and lead our economy to a bright future where we avoid the mistakes of the past. ~DKH

BT BOOKS

In their 2009 book, Animal Spirits, economists George Akerlof and Robert Shiller explain the reason why we have suffered through catastrophes ranging from the Great Depression of the 1920’s to the most recent global financial crisis of modern times: the failure to understand the importance of animal spirits in the workings of capitalism. The term “animal spirits,” coined by John Maynard Keynes, refers to people’s noneconomic motives, underscoring the importance of human psychology in capitalist economies around the world. Akerlof and Shiller first cite Adam Smith’s “invisible hand” model—the supposedly magically self-regulating market system—as inadequate. Under this system, when economies are left completely alone, bubbles form, and bubbles burst, as we have seen in the recent crisis. Alternatively, in their view, the government must play a role in the economy, moderating it so that the creative powers of capitalism can take form while still using an understanding of animal spirits to prevent disasters that can come with an unrestrained capitalism’s fundamental inadequacies. With the amount of research that has accumulated in the last seventy years, as well as the focus that has come with the budding field of behavioral economics, Akerlof and Shiller are

[The Starbucks Experience: 5 Principles for Turning Ordinary into Extraordinary]

From Tall to Venti: Starbucks’ Inspired Business From its humble beginnings to a name that is now synonymous with coffee, Starbucks is one of the great growth companies of our time. The Starbucks Experience examines the inner workings of a company that has taken an ordinary, even mundane, product and transformed it into a “grande” business success story.

Joseph Michelli’s inside look at Starbucks has led to the identification of five main principles that that form the foundation of Starbucks’ phenomenal success. How do you inspire a coffee drinker to pay six to eight times more for a cup of coffee at Starbucks when she can make her own for fifty cents? How can Starbucks have two successful stores literally right across the street from each other?

From the origins of the name, to store ambience, to a unique corporate culture and its seamless integration into the surrounding community, Michelli answers these questions. This book opens our eyes to Starbucks’ unique business strategy, distinctive mentality, and approach to business that has differentiated this chain from other similar coffee shops and franchises. On the same tan-

gent, Michelli also examines many of the obstacles that Starbucks has faced and how the company has dealt with these challenges. The Starbucks Experience introduces the facets of the business that transcend the Starbucks story and offer all business leaders an opportunity to greatly enrich their workplace. These concepts enable all kinds of people and companies to seize on the types of opportunities that catapulted Starbucks into international prominence. They remind us all – you, me, the janitor, and the CEO – of the significance of attention to detail and the importance and meaning of character and dedication. ~EC FALL 2009 BUSINESS TODAY 9

Downturn in

T

he list of Dubai’s big-ticket real-estate projects reads like a page from the Guinness book of world records: Dubai Mall is the world’s largest shopping center, the Palm Islands are the world’s largest artificial Islands, Burj Dubai will be the world’s tallest building, the Dubai Metro is the world’s largest computeroperated train system, its Union Station will be the world’s largest underground railway, and Dubailand promises to be twice the size and many times the fun of Disneyworld. Also on the menu are treats like a separate group of artificial islands—The World—whose design imitates a combination of a world map, the Atlantis Hotel chain with imported dolphins, an imitation Sydney Opera House, and the indoor ski paradise Sunny Mountain Skidome.

The brash nature of this litany of projects embodies the general economic atmosphere of the recent past in Dubai. The emirate has always been a paradise for business; the late Sheikh Rashid bin Saeed Al Maktoum recognized that Dubai’s scant oil resources could not be relied upon indefinitely and subsequently initiated a series of business-friendly reforms that have culminated in Dubai’s contemporary policies of a nonexistent corporate tax and numerous economic free zones. Such conditions are irresistible for international corporations, and indeed companies from Halliburton to Goldman Sachs have offices in Dubai. Durham University’s Chris Davidson has described the emirate as having a “spongelike economy”—its policies are nakedly designed to attract foreign business, labor, and investment.

The real driver of Dubai’s explosive economic ascendancy, however, has been real estate.

Beginning in 2004, real estate construction—and prices—began to skyrocket. The boom was fueled

by perpetually sub-inflation interest rates, a steady stream of foreign workers demanding housing, and a flourishing tourism industry. Dubai’s precocious financial center was happy to have an infallible asset with which to populate its portfolios.

The unique combination of these ingredients led to boom times in Dubai. Few, however, realized that they had made Dubai dangerously susceptible for what Yale economist Robert Shiller has termed a naturally occurring Ponzi scheme—that is, an asset bubble. In short, people kept buying up housing not for its own merits but because they thought someone would buy the property from them at a higher price. Economists love to illustrate bubbles by likening them to the cartoon character Roadrunner, who is able to temporarily defy reality and run on air until the critical moment in which he glances down—a painful fall inevitably follows.

Profit-hungry investors played the role to perfection during the boom in Dubai, making a habit of buying up properties before construction had begun for down payments as low as ten percent. These incredibly favorable deals allowed investors to buy up bundles of property and then to immediately sell the assets for a net profit before any subsequent payments had actually been made. The result was a vicious cycle of speculation in which housing prices were driven up to unsustainable heights.

The market, all along channeling its inner Roadrunner, looked down in late 2008. Housing prices fell by about 25% in the final quarter of 2008 and by a whopping 42% in the first quarter of 2009, according to Collier’s International. The news was not lost on Dubai’s real-estate moguls; it was clear that the era of selling debt-fueled realestate projects into inviting, liquid markets was over; in point of fact, an estimated $335 billion’s

Dub [ by Ryan Shyu, Princeton University ]

worth of planned construction projects have been postponed. Housing stabilized somewhat over the summer, but the market has not yet bottomed out—prices still fell 9% in the second quarter of 2009.

Though the worst may be over, there has been considerable damage done to the economy in general. Declining housing prices in the U.S. and most economically developed countries indirectly inflicted their pain, freezing credit markets and inflicting shocks to consumption through wealth destruction. In Dubai, these effects still occurred, but were piled on top of the direct damage done by the falling housing prices to construction and financial firms, which make up the majority of Dubai’s economy. Tourism, Dubai’s other mainstay, had already been suffering as the global economic downturn sapped worldwide disposable income.

A bailout was needed. It wasn’t because Dubai’s companies were somehow too big to fail. In Dubai, most of the large financial and real-estate companies are partly or wholly owned by the government; these companies are loosely referred to as “Dubai Inc”.

Three major holding companies—Dubai World,

ai

Investment Corporation of Dubai, and Dubai Holding, along with a triumvirate of developing companies—Nakheel, Emaar, and Dubai Properties—comprise the majority of this ephemeral entity.

Allowing these companies to fail would have been nearly the equivalent of allowing the government to fail. Most thought that the UAE would not allow its second-largest member to fail. On February 22nd, 2009,

Even in the absence of such an inter-emirate power struggle, Dubai’s future troubles will be substantial. The financial bailout, though encouraging, was no deus ex machina for Dubai’s economic problems. Almost a full quarter of Dubai’s available office space is still vacant, and new space constantly goes on the market. This is promising for neither real business productivity nor for property prices. Many in the country have simply lost

alongside and in part because of the economic crisis. Dubai has traditionally been a very liberal-minded place; their permissive social policies are aimed at making economically useful western workers and tourists feel at home. Their rulers in the past derived a good deal of the political capital necessary for such lax laws from their economic successes. However, as the economy and Dubai Inc. have faltered,

an economy so dependent on financial services and real estate must be wary of rampant speculation the pundits were proved right when the UAE’s central bank bought $10 billion of Dubai’s five-year bonds, effectively bailing out the nation. Most of the money was provided by Abu Dhabi, the richest of the emirates with regard both to money and to oil.

The bailout was not inexpensive for Abu Dhabi; it is still unknown, however, how much Dubai will be made to pay in return.

Abu Dhabi committed nearly $10 billion in financial assets to Dubai for relatively little tangible compensation. Pundits speculated that Abu Dhabi would demand exorbitant returns for its money, or alternatively that Dubai would be forced to cede equity in its major companies. Interestingly, the bailout came with none of these strings attached—it was, superficially, strictly an act of goodwill.

There is still widespread speculation that Abu Dhabi will attempt to leverage the bailout by attempting to exert greater influence over Dubai, but some assert that such claims are vastly overblown. In particular, Emirates University political science professor Abdulkhaleq Abdullah claims that, “the two emirates also complement one another more than they care to compete with each other…the recent $10 billion Central Bank bond…does not mean that the city has to give in to Abu Dhabi”.

12 BUSINESS TODAY FALL 2009

their jobs, and wages have fallen on average 26-30%. Moreover, the economy in Dubai suffers from an automatic destabilizer—an unemployed foreigner must leave after thirty days. This policy not only lowers total consumption and potential labor productivity, it lowers overall demand for housing. It is difficult to project when the housing prices and general economic production in Dubai will bottom out.

Going forward, Dubai must rein in its economic practices—there is no question that the emirate is an attractive location for property, but an economy so dependent on financial services and real estate must be wary of rampant speculation. One proposed antidote to Dubai’s seemingly perpetual bubble-in-waiting has been for development companies to colloaborate to control real estate supply. In the past, competition has been the rule—one incisive example of this was Nakheel’s ambition to surpass Emaar’s Burj Dubai project by building a 1 km high tower. The status of this venture has been thrown into doubt by the economic crisis. In any case, such projects are likely part of the past in Dubai as the emirate looks to transition into a less reckless, more sustainable economic era.

Even more troubling, however, is the cultural turmoil that has been brewing

the group of small—they make up less than 10% of the population—but vocal natives began to pressure the rulers to deliberalize in favor of more traditional Islamic policies.

The government has not been immune to such pressure; recently, a British woman was sent to jail for committing adultery. The government has legislated a code of conduct which restricts people to holding hands only with their spouses, drinking only in state-approved bars, and dancing only in non-public places.

Despite such developments, Dubai is still incredibly liberal by Middle-Eastern standards. Their laws are a far cry from the comparatively draconian policies of Saudi Arabia, where a 75-year old woman was recently sentenced to forty lashes for inviting two young males who were bringing her bread into her house. Still, Dubai’s rulers must guard against the temptation to deliberalize further. Saudi Arabia is a living testament to the detrimental effects of such policies. The country struggles to attract the skilled professionals its economy needs because of its unpleasantly strict social laws. If Dubai’s “spongelike” economy is to restore and sustain its former vitality, it must not only return to stable economic fundamentals but also maintain its cultural openness. BT

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Stretching

the Dollar in

CHINA I

f you want to live richly, you should work for Goldman. But if you want to live cheaply, you should move to China. Backpacking through Beijing this summer was an eye-opening experience—a major culture shock but also a series of bargain basement steals. With my limited knowledge of Pinyin (romanized phonetic Chinese) and a little help from a Mandarin-speaking friend, I found my way to the Imperial City, which is possibly one of the most impressive cities in the world. Though some might tell you that China is a developing country, Beijing’s state-of-the-art public subway system puts that of most US cities to shame; a subway ride to anywhere in town was only two yuan (about 28 cents). For those willing to live on the edge, venture into the Hutongs—small alleys leading to a series of traditional courtyard-style houses—where you can pick up two-dozen delicious dumplings for one dollar. A kebab, a serving of grilled meat, or a sweet pastry might cost 15 cents in the right neighborhood. If you have an adventurous palette, you can opt for the more mysterious kebabs; it could be anything from duck heads to penises to fried insects. Who knows, it might even be good!

It’s important to get away from the Westerner hubs if you want to take advantage of the deals. Foreign brands actually cost between 30% and 50% more than they do in the US. That makes foreign labels the envy of many Chinese, which partially explains the rampant bootleg business on everything from DVDs to Louis Vuitton handbags. I picked up a Spyder ski jacket, which would have retailed for $400 or more in the US, for about $25. While I know it’s fake, I doubt anyone could tell the difference. You should be forewarned, however, that vendors in Chinese markets can be extremely aggressive.

They do not hold back and will literally use every tactic in the book to try to sell you

[ by Michael Keaton, Princeton University] 14 BUSINESS TODAY FALL 2009

something. Don’t be flattered when they tell you that you look like Tom Cruise— you’re not the first person to hear that.

When you’re walking through the stalls in the Silk Market in Beijing, salesmen might also grab your arm to try to rope you into a deal. Frequently, I’d either get compliments on what I was wearing or harsh criticism as a lead-in to try to sell me something similar to what I already had. Vendors had the most ridiculous demonstrations to try to differentiate their products such as holding a flame to some leather goods to prove its authenticity.

In one of the most confrontational negotiations for the Spyder jacket, I was dragged into a stall to discuss pricing. I played their game and when they threw out a ridiculous price, I walked out, pretending to be offended. The two female vendors chased me down and insisted I come back.

Boxing me into the corner of their stall, they furiously typed in prices on a pocket calculator. When it came down to the last one hundred yuan on which I wouldn’t budge, they said they would agree to my price only if my friend and I took the girls out for ice cream. Needless to say, we thought it was a very reasonable way to complete a sale.

As a rule of thumb, let the vendor name his price first. This gives you the advantage of forcing him to establish the playing field.

Your first offer should be about one tenth of what his is. They will likely act offended, and may even hit you; this is only a sales tactic. Do not feel pressured to buy if they don’t meet a price you like. Walking away from a deal is probably the best way to get a better price. Only allow yourself to be negotiated to about double your first offer, or one fifth of their initial price. With these rules in mind, you should get great deals on just about anything. Whether or not they fall apart five days later is another story.

While you’re at one of these markets, why

not pick up a few fun Beijing souvenirs on the way? You’ll find an abundance of fake Cultural Revolution relics, such as vintage propaganda posters depicting healthy, content workers hailing Chairman Mao’s teachings, and pins worn by members of the Red Guard. Also popular are English translations of the Little Red Book, a collection of famous epithets by Mao. And instead of, or in addition to, the fake Rolexes your friends will undoubtedly ask you to bring back, surprise them with a Mao watch. The face of the watch consists of a picture of the Chairman, and every second his hand will wave at the masses. When purchasing these souvenirs, employ the same bargaining tactics: each item should cost no more than five dollars.

Negotiation is less common and somewhat frowned upon in areas outside the markets. That being said, you can certainly still find very attractive fixed prices. When it comes to accommodation, you can pay five dollars a night for a mediocre hostel or get basic hotel accommodations (private room, bathroom, TV, phone, and internet) for twenty dollars a night. The latter was the case for the 1 Hai Inn in Beijing, which was one the nicest, cleanest, and cheapest hostels at which I’ve ever stayed (it was much more like a basic hotel). Of course, if you want to pay a pretty penny, you still can. I’d recommend heading to Shanghai, the most westernized Chinese city, and having dinner on top of the Shangri-la hotel on the Pudong side overlooking the city, followed by drinks at one of the rooftop bars of the Custom Houses to enjoy the skyline and view of the river. It’s expensive, but the prices still beat New York City by a long shot. Pretty much anything is for sale in China for the right price, but if you don’t want to get ripped off, you need to get away from the other foreigners, have the patience to negotiate, and preferably bring a native speaker with you. BT

精 打 细 算

15 BUSINESS TODAY FALL 2009

Modernizing the Middle East

From Pipeline to Pipette: [ by Brian Reiser, Princeton University]

S

audi Arabia does not typically conjure up thoughts of cutting-edge science and technological innovation. Billed as an institution for engineering sciences, the King Abdullah University of Science and Technology (KAUST) — which was inaugurated on 23 September 2009— may herald the advent of internationally significant technological development and research in the Middle East. Armed with an endowment that is now almost twenty billion U.S. Dollars and a faculty and student body from around the world, the public graduate school marks a giant stride for the Saudi economy away from oil profits.

KAUST breaks with traditional Saudi Arabian culture in several respects. It is the first coeducational university in the country, which will certainly change the shape of the Saudi job market as female scientists begin to enter technical fields with KAUST degrees. The university also does not follow many of the religious practices that are standard in the rest of the country. Women, who account for at least twenty percent of the incoming student body, are not segregated, will not be forced to wear veils in the classrooms, and may drive on campus. Finally, it is one of the largest— and perhaps the most well-funded and prominent—examples of long-term investment in science and technology in a country whose wealth has come largely from its natural oil supplies. “We have a long term view. We don’t survive on what we did last week,” explains Dr. David Keyes, Dean of Mathematical and Computer Sciences and Engineering at KAUST. The university therefore has the potential to transform the landscape of the Saudi economy and challenge the gender structure of the country, at least in the job market.

Given the revolutionary nature of the university, a very strong vision and planning process coupled with efficient and pragmatic leadership have been key in the construction and opening of the university. Saudi Aramco, the state-owned oil company that raked in almost $200 billion in revenue in 2007, played a significant role in spearheading and running the university. Now that KAUST has opened its doors, the oil company operates the Facilities and Community Services Department. Mr. Khalid Al-Falih, the company’s President and CEO, also sits on the Board of Trustees. Aramco worked with Mr. Ali Al-Naimi, the Saudi Minister of Petroleum and Mineral Resources, and Mr. Nadhmi Al-Nasr, KAUST’s interim Executive Vice President and a former

16 BUSINESS TODAY FALL 2009

Aramco engineer, to build the University’s reputation years before its first class had even matriculated. Aramco’s heavyhanded involvement in the embryonic stages of KAUST’s development may have raised eyebrows initially, but the diverse Board of Trustees and faculty suggest that the university is, beyond being a public university, an autonomous entity.

KAUST had the collective brainpower of some of the world’s leading academics and professors, especially from elite American colleges, contributing to the university development. Part of the attraction to KAUST according to Dr. Keyes was the underlying sentiment of “If we could do it again, we want to do it right.”

In order to ensure an internationally competitive first class, supporters of KAUST sent Saudi undergraduate students to some of the most competitive universities around the globe. “There was a recognition that the quality of higher education in the Kingdom was not preparing the country for the future,” explains Dr. Shirley Tilghman, President of Princeton University and a member of KAUST’s Board of Trustees. These students would return to Saudi Arabia well equipped to make good use of KAUST’s impressive research laboratories.

In

addition, KAUST partnered and worked with universities such as Stanford, UC Berkeley, and the Hong Kong University of Science and Technology. Not only do such relations promote international name recognition, they can also be used to recruit faculty members. Dr. Tilghman notes that this is not necessarily a permanent solution: “I don’t think they can continue that form of external investment for a long period of time.” KAUST will ultimately have to attract students and faculty on its own facilities and merits if it hopes to maintain an international image. Even as it stands now, however, the Saudi Arabian university can boast an impressively cosmopolitan population. ““KAUST is perhaps the most international institution in the world,” says Dr. Keyes.

KAUST’S course offerings are standard for graduate schools, but they are backed with an impressive international cast of faculty. Professors include former faculty at universities such as Yale, University of Lyon, and the University of Singapore, former Microsoft employees, and catalysis and energy specialists.

The faculty recruitment campaign, spearheaded by the partnership programs, has been successful thus far. These professors develop and implement a curriculum that spans the fields

of science and engineering. These courses of study are organized into three broad academic divisions: Chemical and Life Sciences and Engineering, Mathematical and Computer Sciences and Engineering, which Dr. Keyes heads, and Physical Sciences and Engineering. The university hierarchy is very clearly delineated—each division is responsible for the degrees and academic programs under it, with nine courses of study in total and master’s and doctoral degrees. Because of this clear structure and organization along with the faculty roll, the eight hundred graduate students at KAUST appear to be enjoying a very rigorous and opportunityladen academic environment.

“The class of the faculty is one of the reasons that drew me to KAUST” explains Mr. Sampad Talukdar, a current student who completed his undergraduate education at the Bangladesh University of Engineering and Technology. Yet the focal point of KAUST is undoubtedly its cutting-edge research facilities, all located on its campus at Thuwal on the border of the Red Sea. The university’s opportunities for serious scientific research are focused on four particular “thrusts:” Resources, Energy, and Environment; Biosciences and Bioengineering; Materials Science and

FALL 2009 BUSINESS TODAY 17 J.B. Picoulet – S. lourié / KAuSt

Engineering; and Applied Mathematics and Computational Science. Due to pressures to open the university in time for the 2009-2010 academic year, not all of the labs are currently open for use. In the near future, however, there will be nine operating interdisciplinary research centers, including one for membranes, one for computational biosciences, and one for plan stress genomics. KAUST also houses Shaheen, the fourteenth fastest supercomputer in the world and the fastest in Asia. As a result, KAUST has become relevant in the field of computer science and a hotbed for potential innovation within weeks of its inauguration.

These research centers have also served as a way to attract students and professors from around the globe. Because admissions are based on merit, KAUST has had to compete with universities around the world that are more established and provide well-respected diplomas. KAUST, which seeks to attract top students worldwide, has relied on its modern technology and substantial research funding as an incentive to potential graduate students and faculty to travel to Saudi Arabia. This approach has appeared effective thus far.

Dr. Tilghman believes that the research park on campus, which will be used by companies and technological start-ups, will serve as a lasting attraction for those considering the university. The long-term 18 BUSINESS TODAY FALL 2009

goal, according to Dr. Tilghman, is to have university-provided research grants replaced by prominent international grants as KAUST solidifies its global presence and reputation. In the meantime, however, the faculty may enjoy the funding provided by the university, which range into the hundreds of thousands.

“The hunt is over, no longer do we have to be animals looking for research grants,” states Dr. Keyes. The students are just as enthusiastic as the faculty when it comes to using the research centers. “There is no university in the world where you will find a nanofabrication lab like KAUST” explains Mr. Talukdar, who is studying electrical and electronic engineering.

KAUST is seeking to be a leader in sustainable development and green technology innovation—a priority that is embedded in its current facilities and classroom philosophy. The University installed reflective roofing and energyefficient lighting and ventilation systems on structures constructed with environmentally friendly construction materials, and implemented a recycling program. In addition, KAUST also focuses on specific aspects of green technology through its research centers. These include the centers for clean combustion, Red Sea environmental science, solar and alternative energy, catalysis, and water desalination and reuse. This was a

very deliberate choice on the part of the university leadership. “The research centers have been chosen because they directly relate to major issues that the Middle East is going to face over the next ten years, and a lot of those are environmental,” explains Dr. Tilghman. Collaboration with multinational corporations could produce industrial green technologies that have very beneficial prospects for a sustainable economy in the future.

Given the immense endowment, international partnerships, and worldclass research facilities, it would appear that KAUST is on a fast-track toward recognition as one of the top universities in the world, as stated in its vision.

The university is also set to become an economically significant presence, especially as Saudi Arabia shifts from an oil economy to a knowledge-based economy.

“If in twenty-five years those behind the university found that they had a rough equivalent of Silicon Valley,” states Dr. Tilghman, “they would think that their investment had paid off handsomely.”

These attributes are reflected in the university’s missions, which emphasizes the impact and recognition of the scientific research and instruction present at the university, the future of KAUST graduates as business and education leaders, and the diversification and commercialization of the Saudi economy.

Although the university is already poised to progress rapidly toward these goals, there are certainly challenges it faces as a new university, particularly one located in Saudi Arabia.

One of the most prominent roadblocks to a fast ascent into the international spotlight is the location of the university.

Although the campus itself is mixedgender and not subject to the same religious law as the rest of the country, a simple move off campus forces one back into reality of traditional Saudi culture.

This may be a particular deterrent for potential female students and faculty members, who are not compelled to follow a Muslim lifestyle on campus but who must obey sharia if they leave the KAUST campus. Dr. Tilghman adds that the conservatively religious culture of Saudi Arabia could make it hard in the future to find faculty willing to stay for longer than the university’s current policy of two- or five-year renewable appointments. Unless the research centers quickly lead to widereaching innovations, this roadblock to KAUST’s status as a global institution is likely to be an issue in the university’s future.

Another concern for the university is the job market into which KAUST’s graduates will enter. Saudi Aramco is a major employer for scientists and engineers, but KAUST is also intending to diversify the Saudi economy. Unless companies establish branches in the Middle East or the start-up companies formed in KAUST’s research park remain in the Kingdom, many graduates will likely go abroad or find jobs with Aramco. “There will be enormous pressure on the University administration and Board of Trutees to ensure that our graduates are placed in meaningful jobs where their education is relevant,” states Dr. Tilghman. “If KAUST is always thinking in terms of the kingdom,” she continues, “it will never be an international university.” Although an exodus of graduates into the international economy is in line with the university’s vision of being globally relevant, it will fall short of its goal to bolster the Saudi economy and catalyze the shift from an oil economy to a diversified one. There is therefore a balance that KAUST needs to preserve if it is to simultaneously improve the international scientific world while

also improving the domestic economy.

Perhaps most important to the future of KAUST is the opportunities for female graduates after successfully completing their graduate education. Saudi Aramco has a strong track record in hiring women, but having an oil company as the only option for female graduates who wish to remain in the country is not conducive to economic diversification. “This university will be a failure if it educates women in the Middle East who have no job opportunities after they graduate,” Dr. Tilghman explains frankly. KAUST alone is unlikely to be able to effect these changes in societal and economic views of gender; they require a more fundamental shift in the opinions of Saudi citizens. The government, as a supporter and proponent of KAUST, could potentially help to ensure a successful future for female students at the university. This aspect of KAUST’s role in the scientific and economic future of Saudi Arabia and the world is one with enormous implications that extend into the political and societal realms as well.

Given these concerns, it is apparent that KAUST has enormous potential to become not only a prominent economic and technological force, but also a significant agent for a social transformation as well.

“The vision of this university from the very beginning was extraordinarily forwardthinking and progressive,” remarks Dr. Tilghman. Mr. Talukdar shares the same optimism with regard to KAUST’s future, predicting that “when all the labs will be open and running, researchers from every corner of the world will be coming to conduct research because KAUST is giving them the necessary facilities and a world class faculty.” In addition, there appears to be an underlying perception that the Middle East’s time has come with respect to scientific modernization and international significance. ‘“Toyko became a world player, Beijing became a world player, and now its time to open up the hub of the Middle East,” declares Dr. Keyes. The King Abdullah University of Science and Technology, the first coeducational, secular university in tto spark innovative technological genius in the Middle East and permanently shake the perception that the only economic significance of the region is its oil. BT

Scott NelSoN / KAUSt

Scott NelSoN / KAUSt

J.B. PicoUlet – S. loUrié / KAUSt

KAUSt

FALL 2009 BUSINESS TODAY 19

Dr. Sanjay Gupta, a practicing neurosurgeon and assistant professor of neurosurgery, is the chief medical correspondent for the health and medical unit at CNN. Earlier this year, Gupta was tapped by Obama for Surgeon General but declined. In 2003, he was named one of PEOPLE magazine’s “Sexiest Men Alive” and a “pop culture icon” by USA Today and in 2004, the Atlanta Press Club named him “Journalist of the Year”. Gupta just released a new book, Cheating Death, chronicling medical miracles, with an accompanying documentary “Another Day: Cheating Death,” which debuted in October.

Ask the Expert

Dr. Sanjay Gupta On stress, sleep, and health for a workaholic [ by Caroline Hanamirian, Princeton University] Business Today: Does stress affect young people and adults in different ways?

Dr. Sanjay Gupta: Stress is a term that is probably way overused because people define stress in different ways. I think what happens to a younger person versus an older person is very much the same in terms of physiology. But someone who has been stressed their entire life, since childhood, can become quite adapted to stress. So your ‘set point,’ if you will, can change. Someone who has been through a life or death situation for example, would not be as stressed by certain situations as others. Stress acts in the same ways, but your resilience is affected by lots of factors.

BT: What are some of the long-term health effects of getting too little sleep?

SG: You will tend to be in what’s called a 20 BUSINESS TODAY FALL 2009

fight or flight mode for a larger chunk of your waking hours. When in fight or flight mode, everything is different in your body.

For example, when you eat something, if you’re not stressed or you’re someone who is not releasing all of those stress hormones, you’re metabolizing the food and using the energy and you’ll be hungry the next time around. In fight or flight mode, the body sort of assumes that you might not eat again. It’s a real panic sort of situation, so the body stores all of those calories as fat because who knows when the next meal is coming. So people who are stressed, for example, have trouble with their metabolism. You’ll have a harder time losing weight or becoming fit as a result of that stress. They also have a higher risk of just about every chronic disease, including heart disease, for example, and diabetes. For some of the same reasons that I mentioned for your metabolism, chronic illness is at

Jeff Hutchens / CNN

a higher risk because of all the effects that specific stress hormones have on the body.

Cortisol and adrenaline, for example, can raise your blood pressure, making it harder for your heart to work.

BT: Often times students or young workers will turn to products like Red Bull or anything that gives them a high dose of caffeine to stay awake and keep performing.

What are the dangers of this habit?

SG: Taking caffeine in and of itself is not really a problem in the long term. If you do it every single day then you’ll have a problem.

If you take Red Bull or something high in caffeine, you probably will notice some changes. You may notice your heartbeat start to rise, you may perspire a little bit more heavily and you may be more edgy.

But, in fact, the studies looking into the longer-term effect of drinking something

like Red Bull around exam time probably doesn’t cause as much of a concern as people once thought it did. Now, drinking it every day, you’re raising your heart rate, you’re raising your blood pressure, and you could have some problems, but I think I wouldn’t overreach the potential detrimental effects of caffeine.

BT: What are “power foods,” or healthier options you would suggest that would help someone stay up?

this for men and for women: to lift some weights, to build a little muscle mass. You don’t have to become Ironman, but building muscle can burn calories, for example, and it can improve your posture. Doing upper body training is what I recommend for people of all ages and both genders.

BT: Whether in school or at work, sometimes pulling an “all-nighter” is inevitable. What would you say is the best

want to go to bed is really unproductive. I did a whole documentary about this and there is no great answer on sleep. We’re not even sure exactly why a human being sleeps the way it does. We know that there seems to be a sweet spot for sleep and if you’re hitting it you will be much more productive.

BT: What is that “sweet spot?” How do you know if you’re hitting it?

“One way you can test yourself is put yourself in a dark room and sit or lie down on a chair.

If you fall asleep within ten minutes, you’re probably sleep deprived.”

SG: Staying up is ultimately probably a pretty counterproductive thing. If you’re getting four to five hours of sleep every night for six days, by the seventh day it’ll feel like you haven’t slept at all. For example, going 24 hours on call is like having a blood-alcohol level of .1. So that’s really the first issue in mind. If you stay up, you’re just not going to be as sharp for the exam or studying or whatever it is that you have to do. We know that certain foods tend to be better. Carbs tend to make you a little fuller and a little sleepier, whereas having lighter foods and especially protein foods throughout the day will allow you to stay up, both physically and mentally. Like I said, caffeine is okay but you need to make sure you’re drinking plenty of fluids because caffeine can be dehydrating.

way to recover from one or several sleepdeprived nights?

SG: If you’re going to take a nap, you have to make sure you have long enough that

BT: With regards to exercise, what would be a good regiment for someone who is on a tight schedule, whether a student or an employee? Would you suggest cardio or weight training?

SG: The reality is that students are pretty physically active. You’re walking around campus, you’re getting out and you’re getting pretty good aerobic activity. Just being active all day is probably not just as good as going to the gym but actually better. A lot of people will sit around all day and then go to they gym for an hour and that is just not the way human beings were designed. We were designed to be very active creatures so student life is the best. When you do go to the gym, which I still recommend, as long as you’re getting that aerobic activity elsewhere, you could do some resistance training. I recommend

SG: I think there is a set point that varies person to person. Probably some people need less, but seven to eight hours is a good amount. One way you can test yourself is put yourself in a dark room and sit or lie down on a chair. If you fall asleep within ten minutes, you’re probably sleep deprived.

When I was shooting my documentary, I did that and was asleep in two and a half minutes! I used spend a lot of time with President Clinton, who was famous for getting only five hours, when I was working for him and I noticed that even he would catch up. He would catch up on plane rides and on the weekends. I think overall he was still recognizing the importance of sleep, which is a critical message.

BT: Is there any advice you would give the overworked student or the stressed out intern?

Ingun Alette MAeHluM / cnn

you can actually go through all the various stages of sleep. You can always catch up on weekends or some other time, which would make a difference as well. Basically, the only way to really catch up on sleep is to get it. But I will say that as far as caffeine goes, if you want to get a really restorative sleep, drinking caffeine around the time that you

SG: I think that as with most things in life, whether you’re studying for a test or finishing a paper, you want to do your best, but everyone has to recognize at some point that the enemy of good is perfect.

I also want to say that, as far as thinking about school and the future, don’t forget to do the things that really excite you.

BT

FALL 2009 BUSINESS TODAY 21

Maryellen Lamb entered the business world as a buy-side currency trader and went on to work for various firms including Commodities Corporation, Capital Group, and JP Morgan. On her trek across the financial services industry, Maryellen picked up the key facts and crucial strategies that make for a successful career at the entry level and beyond.

Ask the Expert

Maryellen Lamb

[ by Carmen Maria Sanchez, Princeton University]

Business Today: As you travel, meeting young aspiring professionals, what experiences do you draw on to offer advice?

Maryellen Lamb: A lot of it is being practical. I just think, what does the interviewer want to know? A lot of times I think people don’t understand why they would ask a particular question, and that’s where I try to help. Looking for a job, interviewing for a job—it’s not rocket science. But it can be really daunting to people who just haven’t done it much, so that’s why it’s fun for me to work with students on this. In my career I’ve interviewed with a lot of people. So I got pretty good at telling my story. Using my own experiences is a great way to be able to help someone else.

BT: Is it worth going to things such as career fairs and using those events as opportunities to practice impressing recruiters that may come to campus? Or is it just shooting into thin air?

ML: It’s worthwhile to go to those things to build your communication skills. It’s important to go and learn the art of networking—shaking hands, giving your pitch, practicing in front of people. If you use career fairs as your only resource for finding a job, though, it’s probably less effective. I think it’s a great first pass at getting to know a company—especially investment banking space, because it’s

22 BUSINESS TODAY FALL 2009

a relationship-driven business, and it’s important to start developing those relationships. So go to the networking event after a presentation and get to know the people the company brings out. It can’t be your only source, but it’s a good one, particularly if you want to get some exposure and practice your pitch or your handshake.

BT: Often in those conversations, an important discussion point is your major.

What about people who are a little self-conscious about their majors? Do employers have preconceived ideas about which majors are desirable, which majors are serious? Does your major choice feed into an employer’s assessment of your GPA and your academic performance?

ML: I can speak specifically for banking, and it does play into the way that they’re going to judge you. Every answer you give, everything you talk about—someone is going to be making a judgment about whether or not you’re going to be able to do the job, whether you’re going to fit into the environment. Does your major matter?

Initially it might, to get you through that first screening, but it shouldn’t be the be all and end all. Your GPA, though, regardless of your major, does matter.

BT: Let’s say you’re a psychology major—which is not typical if you are applying to, say, JPMorgan. What about counterbalancing that oddity of a major

with a cover letter that explains that you are involved in a field that is very analytical, where you have experience working on group projects. In this case, is using a cover letter to complement a resume a good tactic?

ML: It is, and I think that there’s also a way to do it in your resume, like to highlight the statistical work you’re doing. In the trading area, one of the areas that has been growing over the years is behavioral finance—why people make financial decisions. That’s something that fits with a psychology major. There are ways to talk about your major and your courses that are relevant. There are things you can highlight in almost every major that apply to business in some capacity. But grades are a real differentiator. A lot of firms in this economy are saying, “We’re not going to talk to anyone below a certain GPA.” And that’s where it’s important to demonstrate your academic capacity.

BT: Would you say that they are more lenient towards engineers, or perhaps engineers and schools with grade deflation?

ML: It’s difficult to say. Especially in banking, there’s a lot of interest in engineers—particularly those who have done financial engineering. It would depend on the firm and on the particular student’s situation and their explanation for why their grades might not be as

strong.

BT: Moving past resume-building and the mass screening process, when you’re one-on-one with a recruiter, how do you make yourself desirable without seeming desperate?

ML: The things you want to communicate about yourself are a passion for the specific job that you’re talking about and genuine interest in the industry as a whole. Being able to communicate those things to the interviewer very concisely is important.

By being able to do that second piece— demonstrating a passion for the industry and not just the company—you should be able to lose that edge of desperation. If you’re talking about investment banking as a whole, if you’re communicating, “I want to be in the field of investment banking and I would love the opportunity to work with you,” that’s a good thing. In short, you have to be able to articulate your skill set in context of the company.

BT: Walking into the interview, what should you be reminding yourself not to do?

ML: Well one thing is you never want to disparage a prior employer or a professor— or really anyone. Don’t say anything bad about anyone in an interview. If you have anything negative to say, try to say it with a positive spin. If not then they’re going to wonder what you’re going to say about them next. If you just came out of a terrible interview, you want to make sure you don’t mention that to the next person you’re talking to.

Also, make sure you don’t leave anything out. You want to show up prepared in a way that you are able to cover all of the things about yourself that you feel this company really needs to know. Before an interview, you want to come up with

the four things that this company needs to know about you. By the end of the interview, you need to make sure you have communicated these things to them.

And, of course, it’s about minding your manners. Shake hands, make eye contact.

All those things are so important and sometimes when you’re nervous and walking into a situation where you don’t know the people and you’re not sure of what questions might be coming your way, you might tend to forget some of those things.

BT: Is it awkward to compliment the interviewer genuinely? If I like her jacket, for instance, should I tell her so?

ML: It will seem disingenuous. You don’t want to do that. Even if there’s some kind of connection, complimenting someone might come off as smarmy.

BT: One question people have trouble with: What are your best and worst qualities? How do you handle this question?

ML: There are a lot of way you might hear this question. They may first ask, “Tell me your three greatest qualities, your three biggest weaknesses.” The way you want to answer that question is to go back to the four things you decided you wanted to convey to the interviewer and use those in some way. If, for example, you’re

interviewing and you want the person to know 1) that you are quantitatively very strong, 2) that you’ve worked in two or three different countries and consequently you’re good at working with different kinds of people, and 3) that you are captain of whatever team or organization you are part of. With these three things in mind, when they say tell me about your greatest strengths, you can answer, “My ability to lead. When I was captain of my high school soccer team, I led the team to X, Y, and Z…” Admittedly, it’s hard not to feel like you’re bragging, but you need to be able to do that. You need to be able to say, “These are my strengths.”

To flip it around, when the question is “Talk to me about one of your biggest weaknesses,” what you want to do with that answer is identify something that is close to you but also do it in a way that shows you are aware of it and are working on it. So, for example, “I have a tendency to get nervous when I speak in public. I’m fine in front of five or ten people, but when I get in front of a whole class, I tend to get nervous. So what I’ve been doing to work on that is that I joined debate club or I’ve taken an extra course in public speaking”.

Your answer comes out in two parts— what you know you’re not doing well or what you’re not good at and what you’re doing to fix it. It shows self-awareness and the ability to ask for help and get further training.

BT: When listing your strengths and

FALL 2009 BUSINESS TODAY 23

weaknesses, should you balance between intellectual/academic strength and personality strengths? Do they want more skills or more personal qualities?

ML: I think it’s good to mix and match.

Put yourself in the shoes of the interviewer.

They’re talking to six, maybe eight, maybe ten of you that day. You’re all going to be smart. You’re all going to be quantitatively motivated or whatever it may be. But make it something that’s real. If you think what you’re bring to the job is your leadership, then it’s going to be something more personal. If you think the one thing that’s going to differentiate you from everyone else is going to be quantitative, then you want to gear it that way. But part of the process of preparing for the interview is thinking about how you want to answer a lot of those questions in advance. And a lot of those behavioral questions, like “Talk to me about a time you had to overcome a challenge, and how you dealt with it,” you want to have thought of that ahead of time and try to balance out your answers so you’re prepared on either side.

BT: Should you let your resume speak for itself and talk about other things during the interview, or should you be referring back to it? How do you build on it?

ML: I think the whole process should be like a trail of breadcrumbs that should eventually get you to the job. The networking you do ahead of time, the people you meet as you’re going through the process and conversations you have should make them want to read your cover letter, which should make them want to read your resume, which may make them want to give y o u the

24 BUSINESS TODAY FALL 2009

interview. And each one of those things should build on the other so that by the time you are sitting in the interview, they should have a pretty good idea of who you are. The stories that you’re going to tell in the interview are just going to expand on things in your resume.

So, for example, say you had a summer internship working for a non-profit in Brazil, and you have three or four bullet points about the work you did—financial modeling, helped with annual report, whatever else. Now you’re going to expand on those by telling stories about specific things that happened there. When, for instance, they ask you to talk about a time when you were faced with a challenge and how you overcame it, you can say, “Well, when I was working at a non-profit last summer, we had to work on the annual report…” And they say, “Oh, I see that on your resume.” Take it from there; now you can expand on it. Talk about things you did beyond what’s on your resume.

It’s important that your interview and your resume not be two totally separate things. It’s important that you bring them together, and it’s important that you keep building.

BT: What about brain-teasers? They’re the signature of I-banking and consulting interviews. How do you prepare for them? What’s the worst one that always gets people, from your experience?

ML: There are websites you can go to that have hundreds and hundreds of brainteasers you can do. I think the only preparation you can do for them is just exposing yourself to them. It may be that there are some people that

are better at them than others. It is important to do some prep work— whatever form it may take.

BT: Is there a way to buy time when answering a difficult question like that?

ML: The obvious thing is to say, “Could you repeat that? I don’t think I understood the question.” Another way, if you don’t know how to answer it, is to explain how you would go about answering it—what your thought process is. There’s another question that gets asked a lot: “How many haircuts are given on any given day in New York City?” So you have to figure out how many people there are, how often people get haircuts…It’s like a population conversation. There are a lot of factors involved, and you might not be able to identify each one of those factors by specific numbers, but you might be able to explain what each one of the factors is. It’s about the population, it’s about how quickly does hair grow, how often to people need haircuts generally. So you can talk the person through it, even if you don’t have the numbers they’re looking for. Yes, it’s like partial credit on a math test.

BT: What about once you’ve gotten past the testing phase, you’re at the end of the interview, and the recruiter asks you, “If we were to give you an offer, would you accept?” How do you handle that question if you’re not sure?

ML: All of your recruiting happens around the same time—around January.

When you’re going through campus interviewing, what you can say is “I’m really flattered you’re even asking me that question. I think it’s terrific that you’d even considering hiring me. And I would love the opportunity to work for you, but I am evaluating a couple of other things right now, I still have a few more interviews to go through, but you would be one of my top choices.” When they ask you who else you’re talking to and who they’re competing against, you don’t have to pin yourself down.. Some people will really try to pin you down. Now is that fair? I don’t think so. But the better candidate you are, the more of those conversations you’re going to end up having unfortunately.

BT: What might people do to pin you down?

talk to, then by all means say yes. It breeds a ton of good will.

ML: People will say, “If you can’t tell me right now that you will accept my offer, then I can’t give you an offer.” I am always suspicious of that because if someone is really that good, then they can wait another four days for them. I think the best you can do is tell them, “I’m really excited.

Unfortunately, I’ve already committed to a couple of other interviews and I don’t feel right cancelling at this point—I’d like to explore those options. As soon as I know something, I will let you know. You are absolutely one of my top choices.” That’s as good a response as anybody could give.

BT: You’ve gotten an offer. How do you approach salary negotiations? In this kind of market, do they even take place?

BT: Say you really do want to work for that company, is it okay to say yes?

ML: Yes, especially in a job market like this, you don’t want to play hard to get. So if they say, “If I made you an offer today, would you accept it?” and you think you would and there’s nobody else you’d rather

ML: They really don’t take place unless it’s a smaller firm or a startup, or something where there’s some flexibility.

But in many industries—whether it’s consulting or banking—everyone’s at the same level, everyone’s at the same salary when they start. There’s very little room for negotiation. At best, I’ve seen some students able to negotiate some extra vacation or something more on the benefits side. But the thing is, in the economy we’ve had for the past eighteen months or so, if you don’t want the job as it is, there are ten people behind you who want the job just as it is. And companies know that. So negotiations aren’t really happening.

BT: Are there still quality full-time

positions, especially in finance, for those who didn’t intern and get an offer at the end of the summer before their senior year?

ML: I think there are absolutely positions out there. Last January, when recruiting was happening for a lot of summer internships, a lot of firms didn’t know how many people they would be able to hire or how many people they would need for the summer because it was difficult to predict how much business there was going to be. But as we’ve seen the market come back and deal flows begin to improve, a lot of places that are hiring for finance roles are finding that they’re short-handed. So I think there are still quality opportunities out there for fulltime hiring. But students really need to network and prepare to make sure they are the best candidate out there because there are still a lot of people who graduated last year who are still looking—who are going to be competing. BT

Practice Brain Teasers > How many firefighters are there in San Francisco? > How many trees are there in NYC’s Central Park? > How many shoes have you had in your life? > How many golf balls can fit in a school bus?

How many times heavier than a mouse is an elephant?

> In 1999, how were these baby boy names ranked by popularity: Kevin, Jose, Hugh. > What is the weight of a large commercial airplane?. > Some months have 30 days, some months have 31 days. How many months have 28 days? > If a doctor gives you 3 pills and tells you to take one pill every half hour, how long would it take before all the pills had been taken? > I went to bed at eight o’clock in the evening and wound up my clock and set the alarm to sound at nine o’clock in the morning. How many hours of sleep would I get before being awakened by the alarm? > Divide 30 by half and add ten. What do you get? > A farmer had 17 sheep. All but 9 died. How many live sheep were left? > If you had only one match and entered a COLD and DARK room, where there was an oil lamp, an oil heater and a candle, which would you light first?

FALL 2009 BUSINESS TODAY 25

GOING Benefits and Costs

26 BUSINESS TODAY FALL 2009

W

ith the nation in the midst of a recession, there has been a newfound enthusiasm for creative ways of stimulating the economy. One such proposed stimulant is the legalization of marijuana. From an economic perspective, legalization would permit the government to cut enforcement expenses and implement taxes, providing a windfall of monetary gains to be funneled into government initiatives.

The United States is currently waging a very expensive war on drugs. We spend $68 billion dollars a year on the corrections of criminals, with one third of those being corrected serving time for nonviolent drug crimes (this figures to around $23

Institute, conducted a study in 2004 to calculate how much tax revenue the Canadian government could gain by legalizing marijuana. His study estimates that since the average price of 0.5 grams (a unit) of marijuana is sold for $8.60 on the street whilst its cost of production is only $1.70, there is a steep profit of $6.90 for the seller.

This “risk premium� profit is so high because its illegality keeps the supply low.

Therefore, it is a lucrative business for those in organized crime. Easton argues that if marijuana was legalized, the excess profits caused by the risk premium and from these grow operations could go to the government. However, this does not take supply

GREEN of Marijuana Legalization

[ by Caroline Clark, Princeton University] billion dollars spent on these low priority drug crimes). In addition, we spend $150 billion on policing and courts, with 47.5% of all drug arrests marijuana-related.

But is it ethical to legalize marijuana and levy a high risk consumer tax (similar to that of cigarettes) to stimulate the economy, despite potential social and health costs? Critics of marijuana as an economic stimulant suggest that the legalization of the once-illicit substance would increase its demand. But with 15 million Americans already using marijuana once a month, will marijuana legalization actually dramatically increase demand?

Economic Focus: What Would Actually Happen If Marijuana is Legalized?

In order to answer this question, we must address the expected gains from the legalization of marijuana. Stephen T. Easton, an economist with The Fraser

fluctuation into account. Marijuana legalization is likely to increase demand, which will drive the cost and profit down. Of course, this case study is based on the Canadian economy and drug market. In the United States, it is a different picture.

Case Study: California as Mini Model?

Decriminalization of marijuana is one step before legalization. One state that is on this path is California. With a population of almost 40 million people, California is currently experiencing a severe fiscal crisis.

Therefore, it can serve as a mini-model of the United States: it is experiencing a recession of its own while confronting the possibility of legalizing marijuana.

California joins states like Massachusetts and New York in which civil fines, drug FALL 2009 BUSINESS TODAY 27

education, or drug treatment take the place of jail time and/or criminal charges for possession of a small quantity of marijuana. Supporters of the legalization of marijuana are already gathering signatures for legalization measures on the ballot for 2010, which suggests that the legalization of marijuana is possible in the very near future. This past February, California State Assemblyman Tom Ammiano introduced a bill that legalizes marijuana and regulates and taxes its sale in California. This act, if passed, could generate billions of dollars to pay off California’s increasingly large debt.

Marijuana is California’s biggest cash crop, surpassing corn and wheat, with $14 billion dollars a year in sales. The state’s tax collectors estimate that if a $50-per-ounce levy were put on retail sales of marijuana and sales taxes, it

public through both legal and illegal means. Therefore, legalization of marijuana might not significantly alter its demand or production. There is also the question of costly clashes between local and national law enforcement procedures, assuming that marijuana is still illegal on the federal level.

Nationwide—A Look at the Past and the Future But we must ask ourselves, is it really possible that California’s legislature and populace will legalize marijuana in the face of federal law? It is, as it has occurred with other controversial measures, including gay marriage and stem cell research.

In order to look into the possibility of federal legalization, we must first look back to its antecedents. One such obvious antecedent is the Prohibition, when alcohol was criminalized. Milton and Rose Friedman draw this parallel in their classic “Free to

legalization would produce tax revenues of at least $2.4 billion annually... would bring in about $1.3 billion a year. Right now, $200 million in medical marijuana sales are subject to taxation.

It is unknown how much marijuana would be subjected to taxes if it is legalized.

What is known is that in California, like in many other states, marijuana is already readily accessible to a resourceful

28 BUSINESS TODAY FALL 2009

Choose” by comparing Prohibition to the current drug enforcement and its monetary losses. His argument is based on the fundamental hypocrisy of the government’s legalizing alcohol and tobacco while criminalizing marijuana. Furthermore, he suggests that the illegalization encourages more drug use.

In 2005, Milton Friedman joined over 500 other economists in signing “An

Open Letter to the President, Congress, Governors, and State Legislatures,” in which they drew attention to a study by Jeffrey A. Miron called “The Budgetary Implications of Marijuana Prohibition.”

Miron shows that legalization, by using a system of taxation and regulation, would save $7.7 billion per year in state and federal expenditures on prohibition enforcement alone and produce tax revenues of at least $2.4 billion annually if marijuana were taxed like most consumer goods. If, however, marijuana were taxed similarly to alcohol or tobacco, it might generate as much as $6.2 billion annually.

However, this report is out of date and was drawn up in 2005. Much has changed in the economic landscape, namely that the risk premium as grown.

As much revenue that the legalization, regulation, and taxation of marijuana can bring to the current recessive economy, as with any cost-benefit analysis we must consider other, non-monetary, costs. What would we lose if we broaden the use of marijuana? Although in some rare cases marijuana can improve one’s condition, marijuana for most will have a negative impact on health. Its addictive properties, although not as dangerous as those of other drugs, are well known. It is often referred to as the “gateway drug” that can lead users to abuse other, more potent and addictive substances.

Therefore, the question is: despite the economic benefits of marijuana legalization, is it worth the societal costs? Will rescuing the economy temporarily lead to a bigger problem down the road? It is up to the government to decide whether they place a higher priority on fiscal concerns or societal concerns.

When asked his opinions on the legalization of marijuana in a town hall meeting last March, President Obama bluntly said “I don't think that [the legalization of marijuana] is a good strategy to grow our economy.” Thus it seems unlikely that marijuana will be legalized within the next few years. However, this may be subject to change depending on whether or not economists choose to follow Friedman’s footsteps and put pressure on the White House and Capitol Hill to more seriously consider this controversial possibility. BT

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ERIC SCHMIDT CEO of Google Inc. Business Today: Earlier this year, Google announced plans to enter the world of PC Operating Systems with Google Chrome.

How will Google Chrome distinguish itself from Microsoft and Apple? Are operating systems the future of the company, or will they be a compliment to the current web based industry?

Eric Schmidt: Google’s Chrome OS hasn’t launched yet, so it’s probably a little too early to start predicting its future. With that said, the future is absolutely in the cloud, and we’re building Chrome and Chrome OS to make sure that people will be able to get the most out of the Internet in the future.

BT: Is Google’s overwhelming reliance on advertising for revenue a case of ‘placing all your eggs in one basket’? Does Google have any strategic hedges, in case the advertising content model of the Web proves to be another dot-com bubble?

ES: It’s true that most of our revenue comes from online advertising in general, and AdWords in particular, but this is more a reflection of the phenomenal success of AdWords than it is of a lack of other sources of revenue. We talk often about “thinking big” at Google, and our display advertising, mobile and enterprise apps businesses all have fantastic revenue potential. In Enterprise alone, we have more than 2 million businesses using Google Apps and our year-over-year growth in the higher education market is 400%.

BT: What will Google look like 20 years from now? Will it still be primarily known as a technology company? If it were to merge with companies in previously unexplored industries, would it keep its original brand name?

ES: Things change with incredible speed in our industry so it’s difficult to see that far ahead. When you’re talking in terms

of exponential growth, capabilities will grow by leaps and bounds in a relatively short amount of time. Computers will be hundreds of times faster and more capable and much cheaper. One thing is fair to say: Google is a technology company at heart and will remain so 20 years from now. As for the Google name, I think it’s worked out pretty well so far!

BT: Google is known almost as well for its unique work environment -- the Googleplex is nonpareil, even in the Valley-- as it is for its search engine. How will Google continue to fashion its work place to promote unique levels of creativity and business success?

ES: Despite our tremendous growth over the past ten years, we’ve worked hard to stay true to a set of values that have guided us since the beginning. When we say our mission is to organize the world’s information and make it universally accessible and useful, we’re serious. We mean that in the broadest possible sense, and we want people to come to work here because they want to change the world by working on the most important, biggest problems. To that end, we do whatever we can to keep Google an open company that values ideas over hierarchy.

BT: What is the biggest lesson you’ve learned about successful business management in your role as CEO? ES: There’s a lot of evidence that groups make better decisions than individuals, especially when you get the smartest people together. This “wisdom of crowds” argument suggests that you can run a company by consensus, which is, indeed, how Google operates. Encouraging this is an art, not a science, but it’s important to remember that the best ideas typically don’t come from the top. You have to encourage dissent and the free exchange of ideas at all levels. Debate is very important and a CEO can’t forget that! BT

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34 BUSINESS TODAY FALL 2009

Tour De Force [ by Jessica Bruckert, Duke University]

H

e recently debuted on GQ’s venerable list of the 50 Most Powerful People in D.C. She works with multinational, Fortune 500 PepsiCo, Inc. He founded an acclaimed international nongovernmental organization while in college. All served in the U.S. Marine Corps. Nathaniel Fick, Maura Sullivan, and Rye Barcott field questions on business, the military, and those critical intersections where crisis meets opportunity — on the battlefield, in the boardroom, and in life.

Rye Barcott served as a Marine captain in Bosnia, Africa, and Iraq. He founded Carolina for Kibera (CFK), an international nongovernmental organization based in Nairobi, Kenya, and is a graduate of Harvard’s Business and Kennedy Schools.

He attended college at The University of North Carolina in Chapel Hill.

Business Today: In a recent article featured on Harvard Business’ Frontline Leadership site, Listen Well and Ask Better Questions, you assert: “I believe that we who are graduating with our MBA’s in the midst of the deepest recession of our

lives to date must be much more effective in leading responsible companies and creating value for all stakeholders.” You also reference “the creation of a more enlightened or equitable standard for business leadership.” Broadly concerning the role of service, what kind of meaningful ways to serve the country or humanity exist, inside the military or out?

Rye Barcott: That’s a great topic, and a really important one today. A number of students joined together right before graduating at Harvard Business School (HBS) and put together an MBA Oath, which about half the class signed in the last three weeks, just before graduation.

The intent behind the oath is to set a common standard of values to which all business leaders should, and can, aspire.

Principally among those—the ones that are really central to military service as well—are integrity and putting the mission and the organization above your own narrow and selfish ambitions. That’s a movement that’s now underway—this idea of professionalizing the MBA (Master of Business Administration) program, that plays into a broader discussion of the role

FALL 2009 BUSINESS TODAY 35

of service in business leadership.

BT: Increasingly, private sector companies are working effectively with other social institutions to promote positive change.

You’ve raised the question, “How can business principles be applied to improve government agencies and non-profits?

Where are the productive intersections and how can they be leveraged for the most good?” What are your thoughts about the potential for these relationships, and exercising leadership in that capacity?

RB: At a more theoretical level, the intersections do exist, but they are not clearly defined. In order to lead a career that blends these different sectors, the onus is on the individual because it’s not particularly easy, and there are not career trajectories that are well designed. MBA graduates are facing careers that will, more likely than not, take us into six, seven, eight jobs—some of which are in vastly different sectors. I thought the MBA program, particularly the first year, was a good basis for developing a standard set of knowledge about how to approach organizational problems—be that in forprofit or not-for-profit companies. There’s a certain overlap. For a more concrete example, my particular focus has been on clean technology and companies that are innovating out of the traditional venture capital model for Silicon Valley. Our work in the Kibera slum of Nairobi, Kenya connects for-profit, high-tech companies coming out of Silicon Valley with technologies that can directly be used for some of the poorest citizens in the world. Doing that in a way that comes at no loss to the company is a potentially challenging endeavor. A hightech fiber optic cable now connects East Africa with much of the world, and that’s creating opportunities for companies that were otherwise based solely in the U.S. market. From a business standpoint, you can potentially reach a larger market of customers. It’s something I’m still personally aspiring to do, finding these intersections— this is really where a lot of the most exciting innovations are happening.

Nathaniel Fick served as a Marine officer in Afghanistan, Pakistan and Iraq. He is the author of New York Times best-seller One Bullet Away, the CEO of the Center for a New American Security (CNAS), and a graduate 36 BUSINESS TODAY FALL 2009

of Harvard’s Business and Kennedy Schools.

He attended college at Dartmouth College.

Business Today: Recently, we have seen examples of success being closely linked to creativity in tough times. One Bullet Away offers many analogous situations. Can you elaborate more about the value of innovation and creativity both in the military and business world?

NF: Two things come to mind. One: The current White House Chief of Staff, Rahm Emanuel, has a saying to the effect of, “never miss the opportunity presented by a good crisis”, that crises are opportunities; they are opportunities to make changes that are hard to do when things are going well. I’m at the helm of an organization now that is undergoing pretty serious leadership transition and sure, it’s a challenge—but it also provides us with the opportunities to do a whole host of things that are very difficult to do when everyone perceives that things are on an even keel and moving smoothly. In the military, you learn as you are rehearsing for and conducting missions that the points of real danger—and of real opportunity—are in the transitions. So, for instance, if you’re doing a raid, and you’re on a helicopter, as you’re flying along, going to your mission objective, it’s a static part of the mission.

There’s a remote chance that something crazy could happen—the helicopter could fall out of the sky or whatever—but it’s pretty unlikely. But when the helicopter lands in the landing zone, and you’re getting off and you’re getting ready to move into your assault, at that transition, it’s a time of dynamism—a time of risk, and of opportunity. By the same token, when you’re sitting in a static position on the ground, there’s not a lot of risk—not a lot of opportunity. But when you’re kicking in the door of a building and going through into the room, that’s your moment of great risk and great opportunity. I think it’s true in a business career: that at those organizational transitions, it’s when you face the greatest risk—but, just like in investing, risk and reward are correlated, and when you have the opportunity to have a great reward with very little risk, you should take it, because those are rare. It’s more often that you go through a period of great risk—and it also provides the opportunity for great reward for your institution. I think about it that way. I also think about it that way looking at a career.

We’re in college for four years, and it’s a time, frankly, of not necessarily great risk. You’re kind of moving through the pipeline. And then you graduate, and you face a transition.

And at that inflection point—that transition, when you’re deciding what to do next—it’s analogous to moving through the door of that building: it’s a period of risk and also of opportunity. It’s a time that you need to seize. There’s something about a crisis, there’s something about a transition—in our lives, in business, in the military, wherever—that makes it a moment of risk, and of opportunity, and we need to be good at recognizing them and seizing them.

BT: Another question to append to transition, opportunity, and risk: balancing professional duties with personal beliefs.

Marine Corps leadership traits and core values don’t just function solely as virtuous qualities, but, arguably, success in battle is dependent upon such principles. How do you retain these theoretical ideals when a mission or objective possibly calls on them to be compromised in some way, or in a situation when it becomes incredibly trying to maintain them?

NF: The Marine Corps has a whole list of leadership traits and leadership principles.

You’re right; there are times when you may feel as if you need to compromise—or when in fact, you do have to compromise.

In my training, I was taught about the dual obligations of mission accomplishment and troop welfare. As a junior officer, you have an obligation to win; to accomplish your mission. You also have an obligation to the mothers and fathers, and husbands and wives of America to bring their loved

have the core values of the Marine Corps: honor, courage and commitment. And the core values of an organization are never compromised. Never in my experience in the Corps was I in a position where I felt I had to compromise my honor and the honor of my men, where I needed something other than my courage or the courage of my men, or where I was expected to demonstrate something other than my commitment

Maura Sullivan, a former Marine captain,

... crises are opportunities; they are opportunities to make changes that are hard to do when things are going well. and the commitment of my men. There are some bedrock core values, when you cut right to the heart of it, that you don’t have to compromise. Then, the messy reality is, as you get a little further out to the periphery, you do recognize that these are competing sometimes, and you have to choose. You’re going to make mistakes. As a young leader especially, you are going to make mistakes.

You better recognize it. Making a mistake is forgivable; making the same mistake twice is a lot harder to forgive.

BT: Can looking back and reflecting on a mistake also be used as a constructive opportunity?

Making a mistake is forgivable; making the same mistake twice is a lot harder to forgive. one home safe. Those are two conflicting goals, sometimes. One of the hard truths of military combat leadership is that there are times when you have to choose one above the other: by choosing the mission you’re sacrificing the men, and by choosing the men, you might be sacrificing the mission.

It’s an incredibly difficult balancing act. But I think at a more fundamental level, you

Too often, your planning process ends with the execution of whatever it is you’re doing, and you don’t always follow through and incorporate that feedback, so that you learn—and so that you do it better next time.

It’s one place where I think that military training can serve civilian organizations very well.

NF: I think that’s true. We need to, in our careers and in our lives, build in that structured time to reflect. You need to build in that feed-back loop. In the military, we do it pretty well. You do a de-brief after every mission, and I found that in civilian organizations, we don’t necessarily do that as well. It’s not a natural part of the process.

spent seven months as a logistics officer in Fallujah. She is a part of PepsiCo’s leadership development program, and is a graduate of Harvard’s Business and Kennedy Schools. She attended college at Northwestern University.

Business Today: A New York Times article was recently published, “GI Jane Breaks the Combat Barrier”, profiling women in the military. It seems as a result of the successful experiences of military women in Iraq and Afghanistan, it’s becoming more culturally acceptable to have women in positions where they may be involved in ground fighting, whereas that wasn’t part of the protocol before. Dr. Nagl, president of the Center for a New American Security (CNAS), is quoted in the article as saying, in reference to the Iraq conflict, “We literally could not have fought this war without women.”

MS: First of all, I was very happy to see that was the top story. I think it brings a lot of national attention to what women are doing in Iraq and Afghanistan, educating the public on the status of our fighting forces. Women do make a very significant contribution that sometimes can be overlooked, because it’s not inherent in the military’s nature to advertise what women or men are specifically doing and highlight their gender. I think it was very helpful in that it dispelled some FALL 2009 BUSINESS TODAY 37

preconceived notions that women who are in Iraq and Afghanistan are simply doing desk jobs. I should point out the desk jobs are absolutely every bit as important as the sergeant charging the firefight on the cover of The New York Times. Nothing happens without them. They’re serving their country just as much as someone who’s kicking down a door in Baghdad. That being said, it is important that the public—and young women who may be looking at the option of going into the military—realize the tremendous progress that women have made. We were located in and around the city of Fallujah, and, in order to adhere to Iraqi cultural sensitivities, we had women who were from our battalion, and other adjacent battalions, that were working alongside the infantry assisting at all checkpoints. You have women co-located with and accompanying the infantry.

What’s really important to remember is that should anything happen to a convoy, should they get attacked—the vehicle patrol becomes a ground patrol. Those Marines are getting out of their vehicles and now they’re fighting on the ground. Women have been doing that for a long time. When we were in Iraq, if I recall correctly, we had five convoy commanders, and three of them were women. I thought the article was very well done. Slowly but surely, preconceived notions that women are of second-tier status, or can’t hang with the guys, so to speak, are being dispelled.

BT: Rye Barcott mentioned that the HBS class of 2009 created an MBA Oath. What did that involve?

MS: There were about thirty students, of which Rye and I were two, who came together and thought there was a need to professionalize management, to have an oath of ethics very similar to the Hippocratic Oath. One of the students on the team was a joint degree student between Harvard Business School and Harvard Medical School. He was active as a knowledge source for us as we looked at the role the Hippocratic Oath had played in the profession of medicine. A statement of intent: first, do no harm. With the MBA Oath: first, do no harm to the corporation.

It’s not an oath to say, “don’t make profit…” because we live in a capitalist society. Profit is what makes the world go around—or what 38 BUSINESS TODAY FALL 2009

makes our world go around. It’s what brings about innovation, it’s what creates jobs, it’s how families exist. But it is saying that to do business in an ethical manner, and to conduct yourself honestly when looking at the needs of the corporation and the various stakeholders that you represent when you’re on a management team. It’s really exciting.

The Oath got a lot of traction in a New York Times article. The long-term intent is to change the profession of management, and have it be institutionalized throughout MBA programs. It has to go beyond Harvard—the oath is not about Harvard, it happened to have originated there—and to start to incorporate other schools.

BT: It sounds like a creative and useful tool, and a good connector between business school and entering back into business at large. You mentioned a blog. The address?

MS: http://mbaoath.org/ BT: You have said, “I see tremendous potentials for companies to make a favorable impact on the environment and in the global community.” How did the Marine Corps, or your time at business school, influence your thoughts about those partnerships?

MS: The Marine Corps gave me exposure to different cultures and leading socioeconomically and regionally diverse teams around the world, which helps equip you to lead any sort of team in the private sector.

Harvard Business School—and interacting with my peers at Harvard Business School—has changed the way I think about the role of the corporation. It’s exciting to see the power of capital markets around the world bring jobs, clean water, supplies, food, to third world countries that otherwise wouldn’t have that option. One of the things I’m most excited about is this new, recently defined concept: social entrepreneurship.

The partnering of social entrepreneurs with the corporation; using the resources of the corporation, leveraging networks, assets, and resources to bring about something like that—for me, that’s something I hope to have the opportunity to be involved in, in the private sector. BT The conversation continues with Rye Barcott, Nathaniel Fick, and Maura Sullivan in the spring issue of Business Today.

US01-1426 BT FP_ final:Layout 1 10/14/09 11:01 AM Page 1

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SUZE ORMAN Orman, host of the award winning Suze Orman Show, has established herself as a no-nonsense financial guru. Named one of TIME Magazine’s 100 Most Influential People in the World in both 2008 and 2009, she offers advice through print as the contributing editor of O, The Oprah Magazine and O at Home and has a biweekly column “Money Matters” on Yahoo! Finance. As an author, Suze has found success with five consecutive New York Times bestsellers: The Money Book for the Young, Fabulous & Broke; The Laws of Money, The Lessons of Life; The Road to Wealth; The Courage to Be Rich; and The 9 Steps to Financial Freedom, in addition to other highly acclaimed books. For students, Suze’s The Money Book for the Young Fabulous & Broke, is an easy to read guide on how to manage everything from credit reports to career moves to the finance of relationships. Before achieving her celebrity status, Suze directed the Suze Orman Financial Group, served as vice president of Investments for Prudential Bache Securities, and was an account executive at Merrill Lynch. [by Caroline Hanamirian, Princeton University]

Business Today: As college students, we often receive mixed signals from our parents and from credit card companies about opening up a credit card. When and how can a college student start establishing a good line of credit?

time – to all of their cards as an authorized user. They don’t have to give you a card.

They don’t have to let you know that they did that. Then their FICO scores would become your FICO scores. You would establish credit based on their history.

Suze Orman: What’s funny is that it would be great if, by the time you get to college, you actually already had a background in what credit cards are, how they really work, what they want you to do, what they don’t want you to do, and the truthful

BT: What is a FICO Score?

role that they play in your future finances.

It’s one thing to establish a FICO Score, which everybody needs. It’s another thing, however, to emerge from college with a bad FICO Score, which most students do today. Because students don’t understand that when they get one of these credit cards, if they go over their credit limit, if they are not on-time in paying their credit card bills, that in fact that’s reported to the credit bureau…One of the easiest ways to establish credit, believe it or not, is when you are younger, when you are 12, 13, 14, if your parents have good FICO scores, if your parents are responsible, is to have your parents simply add you on – at that 42 BUSINESS TODAY FALL 2009

SO: A FICO Score would be your equivalent to an SAT score. A FICO Score is a three-digit number that determines the interest rate that you will pay on credit cards, car loans, and home mortgages. It not only determines the interest rates that you pay, it determines if an employer will hire you, a landlord will rent to you, if a cell phone company will sign you up for service and, in most states, what your car insurance premium happens to be. The higher your FICO Score, the lower your interest rates and the more of a chance that someone will hire you, rent to you, give you a low car insurance premium and so on and so forth.

The lower your FICO Score, the higher your interest rates and the less of a chance you’re going to be able to rent an apartment and get a job. It’s what matters. FICO Scores run from 300 all the way up to 850. You have not only one FICO Score, you have three. You have one for every credit reporting bureau out there. And the three credit reporting bureaus are Equifax, Experian, and TransUnion. Every thing that you do in life when it comes to money and paying a bill is reported to one of those three credit unions. Your utility company may report to one of them, your landlord or your mortgage company, if you ever get a home, will report to another, your car payment when you buy a car will be reported to one of them, your student loan companies report to one of them. Everything that you do is reported to one of those three credit reporting bureaus. When you go to apply for credit, a credit card, a car loan, a home loan, when you go to apply for a job, rent an apartment, your insurance on your car, they pull up what’s known as your FICO Score. And at a glance, what that FICO Score is determines what happens to you.

The higher your FICO Score, the better off you are. Anything under 500, you are in serious trouble. You are FICO-ed. There’s no other way to say it. From 500 hundred up is what they’re looking for, but really today, because of the credit crisis that’s out there, anything below 760 isn’t good.

BT: What determines the FICO score?

SO: 30-35% of your FICO score is made up of “Do you pay your bills on time?”.

The problem with college students is that they go to the college the very first day, and the university allows credit card dealers on your campuses to give you credit cards.

That should be outlawed. Any and every university that does that absolutely should be ashamed of themselves. How do you give a student a credit card if the student does not have the ability to pay it back? The credit card companies are wishing, hoping, and praying – in my opinion – that you get yourself into financial trouble. Because normally when a student gets themselves into financial trouble, guess who saves the children’s credit? The parents. It doesn’t make any sense that when you go to college and you don’t have an income (some kids do, but some kids don’t - they give it to anybody regardless of income) that you’re charging things. You don’t have the ability to pay it back because you don’t have the money to pay it back. Why would they do that? They do that in the hopes that your parents will step up to the plate and pay off your credit card debt for you after it has accumulated, after you have been paying interest rates anywhere from 9-30% on that credit card. What you have to be very aware of today is that, throughout the United States of America, there is something known as the Debtor’s Revolt going on. People who have never been late on their credit card payments, people who have always paid on time, never gone over their credit limits, have been customers of these banks – Bank of America, Chase, American Express – you get it, any single bank out there, as the credit crunch has worsened (over the past year or so), what happens is these credit cards have been increasing interest rates on people from 1230%, have been increasing the minimum payments due, and have been shutting down the credit cards once they’ve been paid off. So the greatest advice that I could

give you today is: if you get a credit card, you should never, ever use it unless you know you can pay it off in full every single month after you have charged…So, credit is something that is essential, a FICO score is essential; however, I find it fascinating that there are no universities that I know of that teach a useful, personal finance course. Sure, they’ll teach you about economics and the economy and this and that – you’re going to school, do you have a personal finance course, there? – “No, I do not.” – What does that tell you? They’re allowing credit cards to come on your campuses, but they don’t even have the ethics to be able to also teach a course that goes with it? Hey! You want to sign up for a credit card? But only get that credit card after you have gotten an A on your personal finance course. But no, that’s not what the universities and the colleges do. Now, why do they allow credit card on your campuses? Because they, I am sure, get a revenue share of what goes on with those credit cards. They’re not doing it out of the goodness of their hearts.

BT: Relating to the suggestion of a personal finance course, do you think that, when it comes to managing personal finance, an economics major has an advantage over a comparative literature major? How much of managing your money requires financial savvy and how much is just about common sense?

{

SO: I think that an economics major who studies not only from the perspective of the economy of the world, so to speak, but also the economy of personal finance, may very well have an advantage over a comparative literature major, especially if that comparative literature major has never gotten involved with personal finance, does not understand why paying bills on time matters, what a FICO score is, why you need credit cards, why you need to stay out of credit card debt – even though you need a credit card – or how to balance your checking accounts. Banks make the majority of their money on fees from going over your budget. People write a check for money that they don’t have in their accounts. They write checks and they have overdraft protection and they think, “Oh, how cool, the bank is paying for me.” But they don’t understand that, in that one little stroke of a pen, they’re paying a $39 late fee, an over-the-limit fee, and they’re paying a seriously high interest rate on the money that the bank fronted for you. So I know people who have five, six hundred dollars-a-month in late fees. I do not and I will never understand why universities – as well as high schools – do not make it mandatory that there is a personal finance course that has got to be passed with flying colors before you get a degree, before you are allowed to get a credit card, before you emerge into the world. And the reason that I’m stressing this so much is, obviously, it

is no secret that the entire economy of the United States – of the world – but especially of the United States, almost stopped a little bit more that one year ago, brought down by the misuse of credit, brought down by inappropriate mortgages, brought down by the shenanigans, the greed, the deceit, the lies of Wall Street, the administration, the real estate/mortgage companies, the businesses on Wall Street to begin withthe Merrill Lynches, the Lehman Brothers, all of them – almost destroyed the entire United States economy. I’m not sure if any of your parents were affected by it, but on my own television show, which has been on the air for 9 years, I have never seen anything like it before. One person loses their home every 7 seconds.

BT: If a student has a credit card and has established a decent line of credit, is it better – in your opinion – to use that card and consistently pay off the monthly bill, or to spend in cash, just from a budget perspective? Do you think that people actually tend to pay less when they have to hand over bills?

SO: I wrote a book in 1998, called “The Nine Financial Steps to Freedom,” which really put personal finance on the map. It was in that book that I made the statement that we are so out of touch with money because we are not touching our money any more. You used to look inside somebody’s

}

The higher your FICO Score, the better off you are. Anything under 500, you are in serious trouble.

You are FICO-ed. There’s no other way to say it.

FALL 2009 BUSINESS TODAY 43 Marc royce

yourselves, and the way that you do it is through using a credit card and paying it off, showing the institutions that students have the ability to charge something and pay it off in a timely manner. If I were you, I would charge, rather than $200 a month on a credit card, instead charge $100 a month and pay $100 in cash. Do not get out of touch with cash. Once you’ve established a high FICO score, and even for myself today, I normally only use cash.

I very seldom use a credit card any more, unless it’s for very large ticket items.

BT: On sites like Amazon and eBay, it’s very easy for student shoppers to get pulled into and almost addicted to the quest to find the best internet deal. At what point Marc Royce

wallet and there was money. Now you look in somebody’s wallet and all that’s there are credit cards. When you have a credit card, you are out of touch. Let’s just say you charge $1000 on your credit cards.

And the bills come in, all they’re going to make you pay of that is, normally, $20 a month. Even when you don’t have $1000 in your account, you’re going to look at that and go, “Wow! I can keep my $1000 in my account, and only pay $20 a month.”

And that’s what you will do. Because the fear of that money not being there when you need it comes into play, and before you know it, you’re paying $20 a month, you’re being charged 19, 20, 30% interest.

You know, in most cases, when you only pay the minimum, the minimum is 2% a year or 2% of your outstanding balance.

The way credit card payments are done is, if you owe, let’s say $1000, it doesn’t matter what the interest rate is, you will pay 2% of that $1000 as your minimum payment.

Let’s say that minimum payment is $20, the interest on it could be $30 a month. So, you are not even paying the entire interest, and now you’re in big trouble. The $1000 is $1010 the next month. And although now you only have to pay 2% of $1010, the next month you owe $1020. So, yes, if, in fact, you put money on a credit card, you need to pay it off in full.

Do I also think, however, that you should use actual cash, if you have some, to pay for it rather than use your credit card?

Yes. But now you’re in a little bit of a catch22 because you need to establish credit for 44 BUSINESS TODAY FALL 2009

Marc Royce

the phone while this was happening. The daughter threw the most extraordinary fit I have ever seen in my life. “Mommy, I hate you! Mommy, you should die! Mommy, what’s the matter with you? All the other kids have this! Mommy, you are so out of touch!” She went on and on and on. And the texts were coming back and forth, back and forth. The texts were seriously hurtful towards this woman, but thank God she’s a mature woman. The two of us were actually laughing about it, as it was happening. Like, “Is she joking? Is she kidding? She actually thinks she’s going to win this one?” And so although it was very funny for us, it was also not so funny – the absolute pain and agony the daughter was going through simply because she couldn’t buy $300 worth of clothes. So, again, that type of behavior goes into college, where she’s now given a credit card, and she now starts to rebel and she buys everything and anything she wants on that credit card because she wants to look like the other kids, she wants to feel like the other kids. The truth of the matter is you have to think beyond that. I always say to kids, think beyond the first orgasm, okay? Just understand there’s repercussions to every, single thing that you do, whether it’s drugs, sex, or whatever. So just think beyond that. And the same is true with money: think beyond this one sweater or this one, cool deal on eBay, or on Amazon, and that you’re saving money. It’s not, “Are you saving money?” It’s, “Is this a need? Or is this a want?” Because when you graduate from college, when you are on your own,

are we going overboard on spending money to save money?

SO: Well, normally, all of you spend money that you don’t have to impress people you don’t even know. That’s what you normally do. One of the producers, actually, from the Today Show has a daughter. The daughter is fifteen years of age. The daughter wanted to spend over $300 on new clothes for the new school year. Now her mother is a single mother, raising her, and even though she had the money to do so, she is saving that money because the daughter is 15 and she wants the daughter to be able to go to college without student loans. So she said, “No. You have enough clothes, you don’t wear half your clothes.” I was on

Marc Royce

BT: In the realm of dating, do you think that signing a lease with your significant other, right after college, spells disaster?

SO: Well, before you sign a lease with somebody, what do you know about them besides how they are in bed? I’m very serious about that. Do you know their FICO score, if they have one? Are they big tippers or are they not? Do they like to buy clothes and spend more money than they should be? Are they responsible with money in terms of paying the bills on time or not? What do you know about your significant other’s personal, financial habits? How do you expect to split the bills? You move in with the person, and, let’s just say, you both hit it lucky. You both get jobs right out of college. You get a job at $3,000 a month. He gets a job at $7,000 a month. You go, and you rent a place, and now your joint expenses are $3,000 a

You used to look inside somebody’s wallet and there was money. Now you look in somebody’s wallet and all that’s there are credit cards.

[

the title should have been “Young, Fabulous, Depressed, and Broke.” Because it’s depressing. Once again, the price for a barrel of oil on the commodity markets is back at $80 a barrel. That means a gallon of gasoline is going to very shortly be at $3.00 again, $3.50, very possibly it can go up to $5.00 a gallon again – it almost was there just a few months ago, last summer.

So you come out of college at a time when gasoline could be $5.00 a gallon, food has skyrocketed in costs, etc. Even though it may seem cheaper because real estate has come down, nobody can qualify for a mortgage for it. You better know about personal finance, and you better know it now. And if the schools aren’t teaching it to you – I am not joking – you better watch the Suze Orman show every Saturday night on CNBC. All of you have cable, you can all go to iTunes, you can download the podcasts for free. One of my largest audiences are 20-25 year olds. So you better be watching it. You better see the smack downs that I give everybody. And you better get it. You better get – to the women that are reading this – you better get that you’re going to hook-up with some boyfriend and he’s going to convince you to co-sign a car loan for him. You’ll do it because you’re going to think that’s the best way to help other people. And you’re going to be screwed up one end and out the other if you do that.

[

as life goes further on, you may be the one responsible for the student loan debt that you’ve created. You’re going to find it very difficult to find a job today. We have almost a 10% unemployment rate, and it is most likely going to rise. The jobs and the opportunities out there for you, today, are not the same as they were a number of years ago. So, you may not think that $100 here and $100 there matters – but it most certainly does. You would be far better off if you took that money, and, rather than buying something that you don’t really need, save it. And if you had a little side job to establish a Roth IRA for yourself, if you put $100 a month away in a Roth IRA, and you started it at the age of 18 or 19, and you did that every single month, with normal market returns over a 40 year period of time, by the time you are essentially 58 years of age - before you’re even 60 – you would have essentially one million dollars.

That’s at $100 a month- but let’s just say you waited. You said it didn’t matter, you bought the stuff on eBay, on Amazon, and you waited from 18 to start, until 28 to start – still relatively young at 28, no big deal, right? At 28, if you started at $100 a month, by the time you were 58, you’d have only $300,000. So those 10 years cost you $700,000. And that’s at just $100 a month.

You know if you, at this age of 18, started to put money in a retirement account, you maxed it out from 18 to 28, and you never put another penny in there, you would have more money than if you started at 28 and did it all the way until 65. But nobody teaches you those things, they don’t teach you the time value of money. They don’t teach you about the FICO scores. They don’t teach you about being irresponsible to your debtors. They don’t teach you how a grade-point average can absolutely save you a serious sum of money on your car insurance premiums. They don’t tell you those things, so you all emerge from a very expensive education into a world where you may or may not find a job that no longer provides retirement accounts and pension plans and really good health insurance for you. It is still very difficult to get a home now, to qualify for a mortgage, or qualify for a car loan without paying a very high interest rate. Nobody teaches you any of those things and they expect you to financially make it? The book I wrote, The Young, Fabulous, and Broke–

Marc Royce

FALL 2009 BUSINESS TODAY 45

month. How are you going to split those bills? If you split them 50/50, $1500 of your money is 50% of what you make. $1500 of what the significant other is making is essentially 20, 25% of what they’re making.

Is that fair? No! They’re going to have a whole lot more money to spend, that isn’t how you divide bills. You divide bills by adding your incomes together, so $7000 plus $3000 –your take-homes – together, that’s $10,000. Divide it into your joint expenses of 3000, that’s 30%. You pay 30% of your take-home, 30% of 3,000 is $900 a month. 30% of your significant other’s, $7,000, is $2100 a month. Now you have the $3,000 a month to pay the bills, and it’s done equally. But, when you move in together, you better know that before you move in. One out of two people who get married today, get divorced. The number one reason for divorce in the United States of America is arguments over money.

one priority is to create an eight-month, emergency fund, where you literally have eight months of what you know it costs you to live put aside. That is your number one priority. Your number two priority is to make sure, if you do have any credit card debt, that you get rid of it. Your number three priority is that, if you finally get a job, and you are working for a corporation that offers a retirement plan, known as a 401K, possibly a 403B if it’s a non-profit, and they match your contribution – you put in a dollar into this retirement plan, and they give you, let’s say, 50 cents for every dollar you put in, usually up to 6% of your base pay – that you cannot afford to pass that up, even if you don’t have an eight-month emergency fund and you have credit card debt. Because that’s free money. That’s like a 50% return on your money.

BT: Back to setting up a college budget, even during those post-grad years, could you suggest some quick, painless ways to cut down on daily expenses?

SO: 401K is an employer-sponsored, retirement plan, where you put money into that plan on a pre-tax basis, meaning you have never paid income taxes on that money, and therefore it needs to stay in there until you are 59 ½ years of age. Or, if you take it out prior to that time, you will pay not only ordinary income tax on it, but a 10% penalty, as well. Many 401Ks are match-a-contribution for an employee, where, again, you put in a dollar, they give you 50 cents, or 25 cents or whatever. That’s

SO: Yes – don’t buy what you can’t afford.

Right? Be very realistic. If you aren’t making a lot of money after your college, or believe it or not, if you’re not making any money after college, it’s “Mommy and daddy, here I come!” If you are bringing home $3000 a month, you cannot rent an apartment for $1000 a month. Because, along with the apartment are utilities. Most likely you have a student loan repayment, most likely you’re going to need a car so there’ll be a car payment. Then, you have your cell phone bills, and you want to go out with your friends. You have got to be realistic: what is it going to cost you to live and can you afford it. So you have to play the “Can I afford it?” game. And if you can’t, you have to deny yourself. Less is more when you first come out of college. You come out of college and you’re working, so who cares if that means you get another apartment where you share it with two people? And remember; the more money you make, the more money you will spend. So what you’ve got to understand is just because you have landed a job, which maybe is paying you $80,000 a year, doesn’t mean that $80,000 a year is going to continue. Your number

46 BUSINESS TODAY FALL 2009

BT: Can you define 401K for our readers?

an automatic 25% or 50% return on your money. But you have to know about 401Ks, you have to know how they work. You have to know, is a 401K for you better than a Roth IRA? So your plan of action would be a 401K, up to the point of the match, and then a Roth IRA, because a Roth will be better. If your employer does not match your contribution, you’re better off with a Roth IRA to begin with, if you qualify. But these are all things that you should know before you leave college. You should not have on-the-ground training. You should leave college knowing the difference between a Roth IRA, a 401K, a matching one, non-matching, what is best in a 401K, what is not. FICO scores, credit reporting bureaus. Do you get life insurance? Do you not? If you buy a car, how long do you finance a car for? You should never purchase a car when you have to finance it, if you have to afford it because you extend the years you pay for it. You should never finance a car for more than 3 years. And the truth is, you should never buy a new car anyway. The day you drive a new car off the lot, you lose 20-30% of its value. You’re better off buying a used car from somebody who can’t afford it. You should never lease a car – biggest waste of money in your life.

But what’s the difference between leasing and renting? Nobody’s ever explained it – or leasing and financing a car, nobody’s ever explained that to you.

BT: Were you smart about money in college?

SO: No! After four years at the University of Illinois in 1973, with $300 in my pocket, with three other friends of mine, I headed out to Berkeley, California. I lived in my van for four months, until I got my dream job as a waitress at the Buttercup Bakery in Berkeley, California. And I stayed a waitress until I was 30 years of age, making $400 a month. I could not have been more stupid with money if I had tried. That’s why I can talk to all of you like this, and say “I was one of you. I was the young and the broke, and I wasn’t so fabulous.”

Marc Royce

BT: What has it taken to build up your celebrity persona and gain the trust of your audience? What makes them tune in every week?

SO: I buy Love shampoo and Love cream rinse – I have very coarse hair.

And I absolutely love it. I buy it from drugstore.com, but it is expensive.

SO: I tell them the truth. I don’t pretend to be who I want to be. I am who I am. I say it like it is. I do not give anybody any slack, and I do it all out of love. And I have become who I wanted to be in the end.

So people love to watch me because they know I’m telling the truth.

BT: Toilet paper: Two-ply or three ply?

SO: Absolutely two-ply.

BT: First date: Picnic or Five-Star?

BT: QVC or Gilt Group?

SO: For me? Remember, I’m 58 years of age. Back then, first dates were not picnics and they weren’t five-stars. They were kind of like – what were they? – they were…I don’t even know what they were. But they weren’t either of those.

SO: Given that I’ve been on QVC for over 14 years now and have sold over 100 million dollars on QVC alone, absolutely QVC. BT: Visa or Amex?

BT: Shampoo: Generic or Brand?

SO: Amex. You have to pay off your bill in full at the end of every month. BT

SO: Oh, brand.

BT: Which brand?

Marc Royce

Personal Finance 101

P

ractical knowledge is not a standard fixture in college course offerings. Fred Selinger, a lecturer at University of California, Berkeley, is working to inject some real-world skills into the curriculum. His course, Personal Financial Management, provides the indispensible know-how that all college graduates need to ensure a financially secure life after saying goodbye to the haven of college.

Personal Financial Management, “From College to Career,” (or “PFM,” as Selinger abbreviates it) seeks to fill this gap for Cal students, who are among the smartest in the nation but are “woefully unprepared to deal with the complex financial world to which they will soon be exposed,” according to his course description. The Berkeley student body has certainly appreciated the value of the course, whose enrollment has jumped from twenty-four students to over two hundred in only three years. Both students and the Haas School of Business, which sponsors the course, have realized

that the current environment of shifting government policy on taxes, health care, and retirement plans demands knowledge of how to navigate the maze of personal finance.

Selinger brings a career of relevant experience in the financial world to his PFM class. He graduated from UC Berkeley, held senior positions in investment banks and business consulting firms, and is currently a Senior Directing Manager at Sutter Securities Incorporated.

After working with educational nonprofits and serving as a guest teacher in high schools, he noticed a serious gap in the financial literacy of high school and college students. Selinger developed the course as a response to this glaring need in the educational system.

Personal Financial Management is certainly not the most rigorous college course available at UC Berkeley, but it is arguably more relevant to post-college life than any other class offered. The course gets technical very quickly, addressing the differences between mutual funds and

exchange-traded funds (ETFs), dissecting different types of individual retirement accounts (IRAs), and exploring the issues and tax policy surrounding real estate, automobiles, and insurance. In other words, PFM provides information about the financial decisions they will be making both in college and throughout their careers. The structured environment of the class provides a very significant benefit: the students who have taken it do not learn about financial management through trial and error. In the cases of credit cards and purchasing homes and automobiles, even small mistakes can be very costly and may take years to correct.

Given the rapid increase in the number of students enrolled, it seems likely that Selinger’s Personal Financial Management course will become a fixture at other colleges as well. The complexity of today’s financial world will certainly be easier to navigate for those who have learned from experienced sources. Berkeley was one of the first to understand this benefit, but it will not be the last. ~B.R. FALL 2009 BUSINESS TODAY 47

My attitudes haven’t changed - I think by the time I figure out what I really want to do, the job market will be fine. ~ Ryan Lee (Princeton University)

I’ve always wanted to run my own business, and the events of the past year have certainly not changed my career aspirations. ~ Peter Frank (Wesleyan University)

My image of Wall When statistics support that forty percent of all homeless Street has gone from people in New York City are children, I wonder at the being rich, profitable, a source of high paid wealth discrepancy I feel Wall Street and corporate jobs, to being risky, America fosters. Social justice has become my passion unstable. I’d think twice upon observing this phenomenon, creating within before going. That’s why I’m an engineer. The me a need to enter a profession that advocates for plan when I first started those who are disabled by the financial system’s high school was to major in Economics. volatility. ~ Akihiro Matsukawa (UC ~ Kaitlyn Dobyns (New York University) Berkeley)

Student Opinions

48 BUSINESS TODAY FALL 2009

Wall Street provides opportunities for winners and losers. For those who understand the way the markets work, the profits can be undeservedly large. These profits often come at the expense of the rest of investors who risk away their life savings in the market; those who profit do so at their expense. ~ Peter Perdue (Princeton University) Corporate America has actually changed my perception of the film industry, the field in which I want to pursue a career in critical analysis. Film studios in particular have taken a more capitalist approach in their productions, in which the financial payoff is far more important than the creation of something unique and original to them; this makes me hesitant about the future of films quality in the years to come. ~ Andrew Espe (NYU Tisch)

Has your opinion changed in the past year or so of Corporate America, Wall Street, or business in general?

FALL 2009 BUSINESS TODAY 49

My opinion definitely has changed, especially in terms of how I view my future. After seeing what has happened in the U.S. (and all over the world), I have definitely started to question what I want to do a career after school is over. I had considered at one point opening my own business, but now, honestly, I don’t know if I would want to do that. Just the fact that we have to go out into a job market at a time like this is pretty scary, let alone trying to start a business...The economic crisis has definitely made me reevaluate my future plans. ~ Francesca Guglielmo (Denison University)

Ryan Lee, Sophomore, Princeton University

My attitudes haven’t changed—I think by the time I figure out what I really want to do, the job market will be fine.

My attitude towards corporate America has not changed. As for my career, I initially thought I’d go straight into it after my undergrad education, but now I feel that that’s less likely. I think my career will spawn after some kind of grad school. ~ John Michael Pennington (Duke University)

No, I believe it is business as usual. New regulations may be enforced, perhaps more government oversight, but Wall Street will continue to be a world financial centre and its functions are essential to corporate functions. ~ Robert Xie (University College of London)

I think the media has exposed some of the inner dealings of Wall Street, but I don’t think much has changed from a year ago and I don’t think much will change a year from now, and so my career plans haven’t changed significantly. ~ Kelvin Kwok (University of Toronto)

I think they’re really fallible and the whole corporate world seems really volatile. But I’d still want to work for it. ~ Florence Sit (Northwestern) The recent problems in corporate America have really made me more skeptical of the business world. I used to want to work in business as soon as possible but now I’m thinking about staying in school longer and maybe pursuing a career in education. ~ Kevin Boecke (St. Joseph’s University)

A general distrust of corporate America has steadily grown inside of me over the last year.

Some aspects of business, which once seemed like the driveshaft of our nation, now seem more like a leech or anchor. I feel less inclined to work on Wall Street. It seems now likeIy could contribute more to society in other fields. ~ Charles Gertler (Harvard University)

After witnessing what’s been happening on Wall Street recently, I really wish it wasn’t so much of a fraternity. I wish the financial world could be open to a more diverse group of people. Recently I’ve wanted to pursue a career in finance to try to shake things up in the business world. ~ Clara Fraden (University of Texas, Austin) I’m probably even more skeptical of wall street than I was before, but I haven’t really thought about it as much as I probably should. My career aspirations haven’t changed; I’ve always wanted to pursue medicine. ~ Shakti Nochur (Georgetown University)

While the last year has made me a little more conscious about what can go wrong in business, I still trust the benefits of capitalism and business. I have always wanted to work in business when I’m older, and that’s still what I want to do.

- George Kaplan (College of Charleston)

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I

f you are a college student, regularly employed, or you have a co-signer, credit remains readily available in the United States. Credit card offers are stuffed in campus bookstore bags, printed in the coupons section of the Sunday newspaper. Even Wal-Mart is aggressively marketing prepaid debit cards on U.S. college campuses.

However, effective February 2010, credit card applicants under age 21 will need an adult co-signer or provide proof of sufficient income. Creditors, in turn, will be required to leave the interest rate on a newly issued credit card unchanged for at least 12 months under the Credit Card Accountability, Responsibility and Disclosure Act of 2009.

Currently, the average college graduate already carries a $2,748 credit-card balance, and nearly one in four graduates leaves school with more than $5,000 in creditcard debt. Credit card use is thrust upon young people as a given way of American life. Bank of America, the largest U.S. bank, recently launched a student-targeted ad campaign featuring “financial freedom while you build credit.” Students are offered the novelty of getting their school logo printed on an introductory, 0% APR BankAmericard. Past credit card usage has proven some will not read or comprehend

52 BUSINESS TODAY FALL 2009

the full implications of t h e contract’s fine print. BofA’s default rate jumped to 13.82% in July – a 20-year high – and consumer debt hovers at $2.5 trillion. Some students may sign away the best years of their life.

As CEO of the nation’s debt settlement industry leader, my philosophy is that credit is for emergency use only. Why? Because in life, things can and will go wrong, and it’s important to establish healthy savings habits so you’re ready for the inevitable – and the sooner, the better.

Financial leaders now applaud the concept of bringing basic financial education and tools into classrooms as early as intermediate school – before young people have jobs and disposable income.

Credit Solutions represents consumers

overwhelmed by unsecured debt who, upon facing hardships like job loss or serious illness, have nowhere else to turn. Bankruptcy often is unavailable or unaffordable to these consumers because current bankruptcy laws can mandate 100% repayment of what is owed.

What if an individual can’t pay it back because they lost their job, or a family member suffered a severe injury or longterm illness? Among households seeking credit counseling services, 40% report that a medical problem contributed to their debt problem. Single-female headed households and older households are more likely to have a medical problem with financial consequences, and having medical insurance doesn’t necessarily guard against burdensome health care costs. With U.S.

unemployment approaching 10%, what are the alternatives?

An established industry in Europe and elsewhere in the world, settlement is still considered as somewhat innovative here in the U.S. There’s no doubt: many citizens desperately need immediate debt-relief options in today’s economy.

There remains significant confusion about the difference between debt settlement, credit counseling and debt consolidation. Settlement companies act on behalf of consumers, negotiating directly with creditors to facilitate repayment of consumer debts at a reduced percentage of the total amount owed. In return, consumers generally pay a monthly service fee or a percentage of the total debt enrolled. Upon completion of a settlement program, all of the consumer client’s credit card accounts are “settled,” or resolved with zero balances.

In contrast, debt consolidation bank loans and “non-profit” credit counseling agencies (which, incidentally, are funded by the credit card companies) lump all of a consumer’s debt into one convenient monthly payment, often at a reduced annual percentage rate, but again, such loans still involve repaying 100% of the total amount owed.

Settlement firms serve as consumers’ financial advocate, maintaining certification for standardized business practices, membership in leading industry associations that require written and verbal disclosure of program risks, and support of model legislation like the Uniform Debt Management Services Act, designed to ensure transparency. Given today’s economy, consumers would be best-served by legislation like the Uniform Debt Management Services Act, put forth by the National Conference of Commissioners on Uniform State Laws, which does precisely that.

Some personal finance writers advocate settling one’s debt on one’s own; however, not everyone is capable of doing so without some assistance. There are card issuers who have revised internal guidelines to give front-line employees the power to make concessions to consumers. The question is not whether consumers can settle their debts themselves, it’s whether they choose to do so – and how well they can do it.

The same thing can be said about hiring

an attorney, an accountant, or even just getting an oil change. These are all things someone can do on their own, but most choose to hire an expert to handle these tasks. Doing business with a specialist not only is more convenient, it ensures the job will get done right, because an expert’s skill set surpasses that of most consumers in his or her respective area.

Debt settlement firms have grown in direct response to the needs of their customers. These companies often are on the front lines of individuals’ economic battle to maintain and provide for their families’ basic needs. These companies often are the first contact a debt buyer (or third-party collection agency) will receive from the debtor. For example, our company, one of thousands, settles approximately $30 million in unsecured debt every month for consumers, utilizing industry knowledge and a significant amount of buying power among creditors.

Collection firms are paying less than ever to buy up delinquent accounts from banks (around 5 cents on the dollar, as opposed to the pre-recession rate of close to 15 cents).

New credit card regulations are another motivating factor for such settlements.

Bank of America saw its “charge-off ” rate (the share of accounts it doesn’t expect will ever be paid back) reach 12.5% this last Spring – the highest in 20 years. A mindboggling one in eight Bank of America cardholders will not be paying back their balance owed ... ever.

The average American with a credit file is responsible for $16,000 in debt, excluding mortgages. U.S. consumers racked up an estimated $51 billion worth of fast food on their personal credit and debt cards in 2006. Consumers carry more than 1 billion Visa cards worldwide, more than 450 million of which are in the United States. More than 23 billion credit card transactions were processed in the United States in 2007, and that’s projected to grow by 26% over the next five years.

Doing the math reveals most consumers pay many times over in penalty fees and interest charges than they ever charged in the first place. If the average APR today is 24%, and you owe $20,000 in total, and you’re making just the minimum payments every month, it will take more than 30 years to pay it off.

James Scurlock’s 2007 film documentary

Maxed Out and Frontline’s Secret History of the Credit Card should be required viewing.

Says Scurlock in Maxed Out’s director’s statement: “We’re all led to believe that people get into financial trouble because they are irresponsible, but I’ve learned that most people are getting in trouble because the banks and credit card companies are setting their customers up to fail. Why? The more credit they give us, the more credit we need.

When we inevitably fall behind, they can charge the huge late fees and the over-limit fees and the stratospheric interest rates that drive their profits.”

When selecting a card, know your own spending habits and how you will use the card. Pay off your balance whenever possible, and pay your bills on time. If things go wrong, know there’s help available if you need it. Save, save, save – not just for a rainy day, but for your own long-term financial well-being.

“The fact that the personal savings rate has gone up is a positive sign,” say the authors of freefrombroke.com, a personal finance blog for regular folks. “People are starting to ‘get’ the fact that you can’t spend everything you make and hope to always be OK.” One thing this great recession has taught us is funds need to be available when jobs are tight. If you live within your means, “practice safe saving,” and anticipate getting laid off sometime after you graduate, chances are you will have enough money to cover at least three months’ expenses. At minimum, maintain an emergency fund, and if at all possible, put your savings to work by investing. Part of all you earn should be yours to keep, said the Richest Man in Babylon. Today’s college grads shouldn’t settle for anything less.

Doug Van Arsdale is CEO and founder of Credit Solutions, the U.S. settlement industry leader, headquartered in Dallas, TX and established in 2003. Credit Solutions is recognized by the American Business Awards for the “Best Customer Services Department in Financial Services” and won a 2009 Red Herring 100 North America Award for its custom online technology. A charter policy partner of the United States Organization for Bankruptcy Alternatives (USOBA), Credit Solutions is certified by BSI Management Systems for USOBA best-practice compliance. BT FALL 2009 BUSINESS TODAY 53

Outlook for the Future of The Financial Services [ by John R. Strangfeld, Chairman and CEO, Prudential Financial ]

Where We are Today The recent market crisis has had far-reaching effects on the economy and the financial services industry. It’s tough to talk about the current landscape without acknowledging the position that the markets were in just one year ago, when we were in the throes of a global financial crisis and saw a number of long-standing financial institutions shuttered or taken over. It was becoming clear that the markets weren’t going to recover without government playing a significant role. A rescue plan was passed on October 1, 2008 – the Troubled Asset Relief Plan, or TARP. Through the TARP Capital Purchase Plan, the government made huge investments in a number of banks and other companies.

Several firms who received this capital have since repaid it.

Having been through perhaps the worst financial crisis since the Great Depression, here we are, one year later. Financial markets are better than we might have expected a year ago, though we did not get there in a straight line. Since the abyss in March of this year, the stock market improved, and debt markets improved even more. Panic is largely past – for now. It’s important to remember that financial markets recovery won’t be linear – it’s

never been linear, and it never will be. There will be fits and starts.

Equity market improvement is typically a leading indicator of economic recovery, and, in fact, progress in the real economy has been more modest. In mid-September, Federal Reserve Chairman Ben Bernanke declared the recession very likely “over” from a technical perspective, but he was quick to acknowledge that it’s going to feel like a very weak economy for quite some time. This is especially true for those who have lost jobs, homes, and a significant portion of their savings. Nearly seven million jobs have been lost since 2007, and recovering these will be a slow process.

While we still have reasons to be cautious,` we also have reasons for optimism. We are fortunate to have talented people in Washington trying to solve the short term issues without compromising the long term. Also important is the prospect of positive behavioral

change for Americans. We’re seeing the initial trends of less consumption, less debt, and more savings. It will be interesting to see if these trends are as durable as those that characterized the behavior of the generations that lived through the Great Depression.

Industry Dynamics The financial services industry was in the eye of the financial

storm. Many financial services companies were knocked around indiscriminately – some deservedly, some not. Most were painted with the same brush. During the market crisis, the investment community and others who follow the industry were intensely focused on capital adequacy, liquidity, and investment quality; for a time, there was very little focus on business fundamentals. Now that the dust has settled, the focus on the financial services industry is returning to earnings and growth potential, and that’s an encouraging sign. Companies are once again being evaluated on their own merits, not as a group. The financial services industry plays a prominent role in keeping the wheels turning in the economy. For businesses, it provides fuel for the system – for example, supplying the credit companies need to invest in their operations and meet their payrolls.

The financial services industry also provides vital products a n d ser vices to individual consumers to help them grow and protect their assets.

One of the markets where I see great growth potential is the retirement market, because of the important role financial services companies can play in helping individuals achieve a secure retirement, and in helping employers help employees along this path.

Retirement security is one of greatest challenges and concerns facing individuals, employers, and the government, and will be for decades to come. The nation’s 76 million aging Baby Boomers are beginning to reach retirement age. People are living longer, and longer life spans mean longer retirements that can last 20 to 30 years, or more. Among the roughly 50 percent of private sector workers that have access to a workplace retirement plan, more and more have access to a defined contribution plan, like a 401(k), and fewer and fewer

have access to a traditional defined benefit pension plan. As a result, more workers are bearing personal responsibility for saving adequately, investing appropriately, and creating their own retirement income.

This also means that workers bear the responsibility for managing retirement risks.

T h e events of the past year have made clear how

severe those risks can be. Millions of Americans who saved diligently lost a significant portion of their retirement assets right before retirement. Total defined contribution plan assets declined by over $1 trillion in 2008. According to a recent Prudential survey, six in 10 consumers express significant concern about their retirement savings and investments, and many are making immediate sacrifices, including cutting back on spending and postponing retirement.

We need to put measures in place that will provide protection against this kind of risk and automatically create guaranteed streams of income from 401(k) and similar plans – just like workers used to get from pension plans. Providing this protection involves investment skills, actuarial skills, and consumer trust.

Many of the products financial services companies sell – life insurance, annuities, retirement plans – are long-term promises.

Investors, both individual and institutional, are turning to companies who have the strength, dependability, and durability to stand behind their promises. We are beginning to see the haves and the have nots; companies that emerged with their financial strength intact are taking market share from weakened competitors.

Lessons Reinforced The environment of the past year called for a balance of defense and offense. The

markets clearly called for senior leaders to focus on “defense” – those day-to-day activities and decisions that enabled some companies to weather the storm: capital and liquidity management; outreach to customers, the investment community, and employees; and a focus on fundamentals, such as sales and service.

Difficult environments also present managers with opportunities to go on the “offense,” through organic growth, making acquisitions, bringing new products and solutions to market, and acquiring talent.

This brings me to the lessons I’ve learned, or have had reinforced, through the market crisis. First, this is a marathon, not a sprint.

It is important to manage the short-term without compromising long-term goals, to find the proper calibration between defense and offense, particularly during trying times. Second, communication is important, but never more so than in time of crisis. We saw firsthand the value of well-timed and active communication with investors, customers, and employees.

Third, perhaps most importantly, the events of the past year validated the importance of having the right people and the value of teamwork.

Financial services is a people business, not a numbers business. Prudential aspires to be a magnet for talent, where top performers come to build their careers. Talent and leadership practices are integral to how a company is run, and are not just the purview of Human Resources professionals.

Leaders must own and be responsible for all aspects of managing talent. In an industry like financial services that is mostly about intangibles, talent wins the game.

Outlook So what is my outlook for the financial services industry? Well, I’m admittedly an optimist, but I think the outlook has never been more promising, because the role we play has perhaps never been as needed or as important. Government, employers, and financial services providers each have a role to play in helping individuals get back on track – saving during the working years, protecting those assets, creating guaranteed retirement income that cannot be outlived, and, for those lucky enough to be able to do so, leaving something behind for future generations. BT

FALL 2009 BUSINESS TODAY 55

Eric Stotz Hollywood-Style Fundraising

Eric Stotz is the President, CEO, and co-founder of the Karma Foundation, LLC, a business that throws what have been known to be “the world’s biggest parties”, at venues such as the Playboy Mansion and the Palms Casino Resort in Las Vegas, to raise money and awareness for non-profit organizations. By night Eric’s life revolves around Hollywood glitz and world-class VIPs, by day he’s a down-to-earth deli sandwich connoisseur in jeans.

[ by Amira Polack, Princeton University] Business Today: What inspired you to start the Karma Foundation, and what gave you the vision/idea for its business model?

experience driven. With Karma, I get to be the cool kid by throwing the parties. It’s pretty awesome.

Eric Stotz: I wish I had a good answer to that question. Basically, I wanted to throw awesome parties for awesome people. I think that parties really have the power to bring people together, and I wanted to do something unique and out-of-this-world, something extraordinary. I also wanted to help good causes, so the idea for the Karma Foundation came together naturally.

BT: What are your latest big projects with Karma?

ES: Karma Online is our big project right now. It’s our premier luxury lifestyle base for our members, and its infrastructure is going to include a points system. In short, it’s gonna be bad to the bone.

BT: How do you select beneficiaries?

ES: We usually select beneficiaries through non-profits recommended by our board members. For each event, we receive about a dozen applicants, which we narrow down to three, then one. We tend to go for smaller organizations so that we can see our marketing impact. Children’s groups probably make up the majority… [and] cancer research foundations. We’ve even thrown a party for a unique program that works with prisons to give homes to dogs in need, as well as companions to inmates.

BT: How did you initially fund Karma and get it off the ground?

BT: Due to the mature themes of your events, do you ever run into controversy?

ES: I funded the first party myself out of my own pocket. I wanted the process to be organic. The thing is, when you try to fundraise from outside sources, that becomes your business. Know how to sell yourself. Otherwise, you’ll be spending too much time, effort, and money in the business of raising money rather than your actual business.

ES: There are certainly people out there who question Karma’s philanthropic side, or who’d rather we soften our sexy image.

I’ll admit – we’re a unique animal. Karma isn’t what people are used to seeing. They can take shots at us, but at the end of the day we know who we are and we’re true to that. We help great causes, make a huge difference, change lives. People can say what they want, but I know charity is a big deal.

BT: What steps did you take to make Karma as successful as it is today?

ES: It’s amazing how successful we’ve been this year; I really thought we’d get creamed by the economy, but we’ve continued to sell out every event this year. We’ve been getting heads of state, even royalty buying our tickets. One thing that doesn’t change, even during a recession, is that everybody wants to hang with the cool kids, to do cool things. People still want a taste of the lifestyle that Karma offers, to be a part of an amazing experience – people are 100% 56 BUSINESS TODAY FALL 2009

BT: Apart from throwing events for worthy causes, do you get much of a chance to interact with them further?

ES: I absolutely insist on it. It’s more than helping a cause fiscally; we get our hands in there and can give them great PR as well.

A great example is Reading to Kids – just the other weekend, I went to read to first graders and met this kid Ben. He was a little rough around the edges at first, but soon we were hanging out, drawing, and it

turns out he was a really nice kid after all!

I’d like to think that I made at least a small difference to some of those kids, showed them that I care. In that way, I think Karma on the whole has a great legacy. I could do this for the rest of my life.

BT: What are your long-term goals for the Foundation?

ES: Ideally, I’d like for us to have between 7,500 and 10,000 members in the long term. I want to cement our position as the number-one luxury lifestyle base in the world, for Karma to become the steamroller of its kind; if you’re not riding the steamroller, you’re part of the road.

There’s no in-between.

BT: What are the biggest pieces of advice you would give to young entrepreneurs?

ES: I’d say that to be a good entrepreneur requires good multitasking. Be able to wear different hats and be a risk-taker.

Also, channel those skills through a sense of purpose.

BT: What was the most important thing you learned at USC Business School?

ES: That’s a good question. I think the most important thing I learned at USC was how to start something difficult and see it through. On top of that, I learned to do the task at hand well and to be held completely accountable for my work.

BT: The 4 pillars of Karma are networking, revelry, philanthropy, and ultimate access.

What are your personal “4 pillars” so to

speak – 4 words that best describe you?

ES: Hmm, I’d say noble, peaceful, honest, and civic-minded. I know that last one’s two words, but you get the picture.

do. The most challenging thing for me is balancing my social calendar.

BT: How do you deal with pressure of orchestrating a huge-scale event?

BT: Karma’s Pillar 1: Networking. You obviously have a lot of friends in high places – what are some tips in successful networking? Tricks you’ve learned over the years?

ES: Something important to know when you’re throwing an event is that you gotta keep your cool. You set the tone for everyone, and there’s nothing in the world that is worth freaking out about. Nothing!

ES: When it comes to networking, be specific beyond your purpose. Know what you’re there for and enroll people in your vision. Do you want a job? A client? Know what you want and what they want, and just jive.

BT: Who have been some of the more interesting guests at Karma events? Celeb sightings?

BT: What do you think sets the A-listers apart, and how do you cultivate relationships with those types of people?

ES: You just know when people are the real deal. I’ve been around so many people of different walks in life, and have definitely developed a nose for sniffing out B.S. Are they being specific or nebulous about what they do and who they know? Are they being superficial? In terms of appealing to people, in general you just have to articulate yourself confidently, play the game, and roll with it. Add and demonstrate value to them.

BT: Pillar 2: In your own personal life, how do you balance a very involved professional career and your philanthropic efforts?

ES: Actually, achieving life balance is not that difficult, mostly because I love what I

ES: Hugh Hefner, of course, but we’ve also had the CEO of Baja Fresh, the Dean of Duke Business School, Cristiano Ronaldo, and Ron Artest.

BT: What was your first job?

ES: Door-to-door sales. That’s where I learned to sell, and I kicked ass at this job.

I knew how to talk, converse about value, and I was hungry- I really needed the cash.

I learned so much and had to deal with so much rejection, but I learned to stomach it and not to take it personally. I learned to think of failure this way: every “no” brings you that much closer to the next “yes.” That which doesn’t kill you makes you stronger.

At one point, my bosses told me, “when we first took you up, we thought you’d fail miserably.” I just looked like that nice, sweet kid next door. And I turned out to be the best in the crew. A lot of my friends dropped the job it was so rough, but I loved it. BT

FALL 2009 BUSINESS TODAY 57

A

ccording to the American Marketing Association, “marketing” is “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” Judging from this description, being a marketer sounds like being Superman, except in this case you have to do the impossible without even taking off your tie. What kind of training can prepare you to simultaneously create, communicate, deliver, exchange, and enrich in the name of society at large while still wearing the clothes of a real-life human being?

Fortunately, the advertising industry’s real-life leaders don’t subscribe to the AMA job description. “It’s too academic,” said Bob Seelert, CEO of Clio Award-winning global marketing firm Saatchi and Saatchi. His job, he explained, goes beyond the scope of technical definition.

To future college graduates, Bob’s statement is no more comforting than the prospect of fighting Superman for a job on Planet Krypton. The fact is that today’s aspiring professionals like definitions. In what most students continue to perceive as a uncertain job market, it’s nice to read a job description that you can break down into a manageable list of “to do’s.“ Career services departments at colleges throughout the 58 BUSINESS TODAY FALL 2009

[ by Carmen Maria Sanchez, Princeton University] nation promise ‘training and preparation’ for the real world by offering leadership workshops, practice interviews, public speaking classes — all jam-packed with concrete-sounding formulas which, if conscientiously applied, will equal a job offer.

Students are told that when armed with a “five-minute elevator speech,” they will survive successive networking rounds with I-bank executives. Computer science majors aiming to land a job at the Googleplex are told they should make sure C, C++, Java, and Python appear on their resume. Econ majors should practice with Stata before applying for a ‘quant’ position at a hedge fund. All these elements are portrayed by career services as part of a tangible toolbox. All these tools are well defined and obtainable through academic learning, be it an intro computing course, or a series of Stata tutorials, or a “How to Speak Persuasively and Honestly” workshop. Learning C++ is not easy, but at least it is a task that students can treat as a concrete assignment, with the knowledge (or is it an assumption?) that once they scratch “learn C++” from their “to do” list, they will be one step closer to post-college security. Again, we students, who are used to completing assignments with concrete instructions, like definitions when it comes to finding a job.

But what class or workshop can prepare you for Bob Seelert’s job? According

to the Saatchi and Saatchi website, the company’s primary goal is to “fill the world with Lovemarks.” “Lovemarks” isn’t in the dictionary; I’ve checked. At Ogilvy, a another first-class global communications firm, the function of advertisers is “sell, or else.” At Young and Rubicam, yet another leader in the industry, the aim is to “resist the usual in order to create brands that are irresistible.”

Nowhere in these job descriptions are there instructions as to how, with what tools, in what tone, in what kind of suit, marketing should be done. Such lack of specificity can be interpreted as a way to promote independent thought in the workplace, but what college senior is thinking about thinking independently in an office into which they haven’t yet been accepted?

This is not to suggest that students shouldn’t bother with jobs in marketing. In fact, it’s surprising we aren’t scrambling to get recruited by firms like Saatchi and Ogilvy.

Let’s think critically. A) Is there money to be made in this industry? Certainly. After all, don’t most companies in the world spend most of their money paying for advertising?

Google, for instance, spent 9% of its 2008 revenue on sales and marketing services, about $2 million. Multiply $2 million by the hundreds of clients that a well-reputed advertising company serves on a daily basis, and you start to get the picture. In 2008, when countless companies across the globe

were suffering from widespread economic recession, Saatchi and Saatchi pulled in yearly earnings just under $7 billion. B) Do I need a graduate degree for this industry? Nope.

Unlike students who must come to terms with the prospect of paying for five years of medical school before earning a residency position at a respectable hospital, students who want to operate on “Lovemarks” can apply directly after college and dive directly into the profession. Though Mr. Seelert attended business school, today he asserts that the skills needed to be a marketer are learned through persistent curiosity about the people and ideas that circulate outside the campus. C) Do I have to stay in one place to work in this industry? Hardly.

Young and Rubicam has offices from Manila to Budapest to Dubai to New York to

Mexico City. If your job consists of building brands “irresistible” to an increasingly heterogeneous global pool of consumers, the prospect of travelling internationally at some point in your career is an inch short of certain.

Okay, that’s all tempting, but we are still missing the formula that will get us an “A” on a marketing job application. Why aim for a job destination that you can’t type into Mapquest, when you can take defined steps toward other high-salary, high-prestige positions? Most career services departments do not offer “Making Lovemarks 101,” nor can any single workshop prepare us to meet the mouthful of functions described by the American Marketing Association.

But maybe missing specific instructions for the marketing industry can help us get a

hold on the fundamentals of success in the professional world at large. Maybe juggling too many instructions is blinding us in the face of what we already know is the key to finding a job we like and a job we are good at. What really matters, leaders of the marketing industry remind us, is thinking and working outside the toolbox you are given by academics. Whether you envision yourself trading stock options, designing Google’s next operating system, or building an architectural model for an eco-friendly New York City sky-scraper, do not forget that the really successful professionals—the ones that stand out—stand out precisely because they didn’t stick to a formula and strived to be Superman, even when career services told them that only Kryptonites could apply. BT

Start with the Answer, Start with Bob Seelert Bob Seelert is one of the most senior executives to emerge into the recessionary business landscape in 2009. His new book Start with the Answer is a success recipe for both young aspiring professionals and current business leaders alike. With two Harvard degrees and a 40-year career as a ‘Captain of Industry,’ Bob Seelert has earned a reputation as a turnaround expert, reviving the fortunes of companies and brands in the USA and abroad. For the past 12 years Seelert has been the Chairman of Saatchi & Saatchi, one of the world’s leading creative ideas companies.

[ by Carmen Maria Sanchez, Princeton University] Business Today: What does it mean to be a marketer? Is it a skill you personally developed inside or outside the classroom?

Bob Seelert: I have a couple of stories in my book that have been helpful to me. One of them is called my formula for success: 1 part brains, 2 parts common sense. Marketing has to do with common sense, and sometimes if you overanalyze things, you get the formula reversed, where it’s 2 parts brains and 1 part common sense. That doesn’t square with the real world. And after all, the consumer is your wife. It’s a pretty straight-forward world here in marketing.

The other story I have in the book is “Listen to Your Barber,” which is essentially a parallel for go out and live life and participate in the real world and take advantage of interacting with people you may not frequently meet.

Ask everybody. Be incredibly curious. Just

participate. Marketing is all about what is on the cutting edge of going on in life. So you want to live life and keep it down to the world of common sense.

BT: How have you weighted the importance of brains and a prestigious education, compared to the importance of sound instincts and personal skills?

BS: Prestigious schools provide great screening grounds. You have to be smart to go to places like [Harvard, Seelert’s alma mater or Princeton, BT’s home base]. But once you get to a certain level, I really like the combination of brains and street smarts.

There is the school of practical reality. Take your education and marry it up with that.

BT: What sorts of advice would you give to college students who aren’t sure they want to go into the cut-throat career of business,

where you need street smarts but also school smarts? Based on your book, what are the tough questions—well, I suppose the tough answers—seniors should focus on to figure out exactly what they want to do?

BS: My career advice always falls into the same category. The first thing you should do is think, what is it that you’re good at? Do a candid self-assessment. Utilize resources like family, friends, counselors, former work associates in this. Second, you should write down what it is that you really like to do.

What do you groove on? Where is your heart? What really turns you on in life? And when you have those two things—what you’re good at and what you like to do— you should put them together with either a company or a career that highly values those attributes. If you put all these things together, you will have a combination for both success and happiness.

FALL 2009 BUSINESS TODAY 59

BT: Would you say that it matters more who you’re working with—the type of people you are interacting with—than what you’re actually doing or what the job is?

BS: It’s a combination of the two things.

On the one hand, someone might choose to go into advertising. But on the other hand, these companies are what I would call cultural animals. They can be very different, one from another—which gets at the idea of who you’re working with. So I think you should pay attention to both. But you have to be true to yourself. So I would start with what you’re doing, since that ought to reflect both what you’re good at and what you like to do. And if you find out that it doesn’t seem to be the right place or these don’t seem like the right people, maybe within the field you want to be in there is another place that would be better.

BT: You’ve worked successfully in many industries, and now you’re in the ad business.

Would you say that there is a big difference, if any, between pursuing a career in the marketing industry straight out of college and applying for jobs in other competitive industries, such as investment banking?

BS: When we hire people at Saatchi and Saatchi, we like them to have three attributes: passionate, competitive, and restless. We want to make an assessment that this is the field they really want to get into

and that they’ve done some self-examination and thinking about what it’s all about and whether it’s something they really want to do. We want them to be competitive, getting ahead in their careers, growing as people, but also winning on behalf of their clients. We want to see them wanting us to win as a company, and wanting to see their clients winning in the markets they’re in.

And we also want them to be restless, which means they subscribe to the mantra of our company, which is “nothing is impossible.”

No task is too great— just tell us what needs to get done, and we’ll figure out a way to do it better than anybody else.

The field that we’re in is on the cutting edge of what’s going on in life. It’s constantly changing. So it’s something that can either keep you young or really tire you out—but it always keeps you in the present.

BT: You mentioned people who were getting ahead in their career. What about students, who don’t yet have a career per se?

BS: Well you’re going to go build one.

Building a career starts off as something you want to be passionate about and you’re going to learn that field in a professional kind of sense. You’re going to develop functional skills. As you go along in that journey, you’re also going to develop managerial skills. And on that journey, you’re going to think a lot about who you are as a person—values, beliefs, principles, practices you stand for and guide you through life—and that’s going to make you become a leader and inspire others in that endeavor. It’s a journey of personal growth—from functional skills, to managerial skills, to leadership skills.

BT: Would you say it is advantageous to have work experience in other industries before venturing into the advertising industry, which is so wide ranging, or can you dive into it?

BS: You can dive into it. Experience and exposure can always be helpful, but we wouldn’t be reluctant for you to dive into our business if that’s what you had really thought through and were passionate about.

One of the things that is fascinating about it [the marketing industry] is that you get to interact with a lot of different businesses over time— because an agency like ours has

60 BUSINESS TODAY FALL 2009

a broad range of clients and exposure to a broad range of businesses.

BT: In your opinion, what has been the most successful or most unprecedented branding venture in the past fifty years?

BS: In the last decade, one of the best jobs in branding has been done by Apple. This is a company that we don’t have any association with, but I have great admiration for them.

I think they’ve done a great job of branding as they go from things like the iMac to the iPod to iTunes to the iPhone —they’ve got it all collected under this Apple banner. It’s a real “Lovemark,” in our vocabulary. It’s all supported by products that are cuttingedge in terms of design, technology, and innovation. They’ve done a fabulous job.

If you ask me in the last fifty years, we do have a client that I think has done a fabulous job, and that is Toyota. They have developed a complete line of vehicles that are quality cars that are reliable. They’ve established a bunch of model name equities that have perpetuated over a long period of time by re-launching, by continuously innovating, by continuously improving.

BT: What exactly is a “lovemark”?

BS: A lovemark is the future beyond brands.

Brands are things that are differentiated and that you can have a lot of respect for, but if you can go beyond that in the emotional connection kind of way—all the way to what we call lovemarks—you can, in truth, inspire loyalty beyond reason. That’s what we’re trying to do: bring our products to life in such a manner that people fall in love with them.

BT: Would you say that a company with a horrible-sounding brand name— a company with no lovemark so to speak—can succeed?

What if the name is terrible but the product is of great quality?

BS: Brand names are a funny thing. They’ve sprung from all different vantage points to be successful. For example, along the lovemark kind of line, just in naming, Apple versus Microsoft kind of has a propensity to be a lovemark. One of them sounds like you could take a bite out of the apple and fall

in love with it, and the other sounds more techie, geekish.

I was once in the pet food industry and Alpo was a very successful brand at the time. What was Alpo? Where did they come up with that? It stands for the Allen Products Company. But it was short, it was distinctive, and it was memorable. Those are some characteristics of a good brand name.

BT: Would you say that the goal of marketing changes during hard economic times?

BS: The goal of marketing is to maintain brand recognition and understanding, and we want to build revenue on behalf of our clients. When you get into a recession, one of the things we need to do is step back and take a look at the reality of the environment and we want to make sure that we do what we call “reframe” the value of our clients’ products for the nature of the environment we’re in. For example, Tide has always had a reputation for being the best laundry detergent around. In a recessionary environment, it doesn’t hurt to remind consumers that Tide’s color integrity feature helps to keep clothes looking brighter and newer longer. Because in a recession you might not go out to buy that new blue dress as often as you would like, the fact that the one you have is looking brighter and newer longer isn’t a bad benefit. That checks the value proposition and ensures the product stands up for the environment that it’s in.

You always want to be relevant.

provide her with products and information and be a partner in creating happy, healthy babies. Marketers used to be intrusive; we used to bang people over the head with our message. Now, we want to be invited into their home. We want them to be coming to us, as opposed to us coming to them.

BT: Theories about ‘the hypodermic needle effect’ suggest advertisers inject poison into people’s brains and induce them to buy products they don’t actually need. Do you think these kinds of dangers exist?

BS: I don’t believe you can make people do things they don’t want to do. I have a tremendous respect for the consumer to sort through the wheat from the chaff. Abraham Lincoln was once quoted saying, “You can fool some of the people all the time, all of

the people some of the time, but you can’t fool all of the people all of the time.” I’m not into the hypodermic needle deal.

BT: What was the most challenging or disillusioning moment in your quest to build your career? How did you turn yourself around?

BS: I had one moment in my life when, if I went home and were honest with myself and looked in the mirror, I was working for money, as opposed to the satisfaction of what I was doing. That was a big mistake. I moved on and put that behind me because I like to get up and feel good about what I’m doing when I go off to work every day of my life. Fundamentally, I have done that for forty years. Have fun while you work—it’s a big thing. BT

BT: What about the growth of webbased advertising in changing the way that customer service is defined by companies and how companies go about getting people to buy their product in a way that goes beyond reason?

BS: Advertising is not just providing information. What we need to do is make connections. We need to be connecting the products and services of our client with the needs and requirements of consumers—and how these things fit into a consumer’s life.

In the old days of Pampers, you used to talk about functional benefits—how Pampers keep babies dry. But today’s women want happy, healthy babies, and someone who can

FALL 2009 BUSINESS TODAY 61

$1,000,000 SMALL BUSINESSES

“[ Keep your government hands off my Medicare.”

Attendee at meeting in Simpsonville run by Rep. Robert Inglis (R-SC)]

One way to extend insurance over the 26.8 million uninsured workers is for more small businesses to offer health benefits to their employees. President Obama has suggested employer mandates that would force businesses up to a specific size to offer some form of health benefits. Due to the rising costs of health insurance premiums, the number of small businesses offering health insurance has gone down to 62% in 2008 (from 68% in 2000). While some small business owners suggest that they would fare significantly better if the burden of offering insurance to employees was eliminated entirely, many employers believe that they would offer health benefits if costs were significantly lowered. In order to help small business owners pay for insurance, Obama has proposed tax credits for employers. Possible penalties for owners not offering health insurance include fees for each uninsured employee.

“The argument against the public option is sheer nonsense, we know that, it’s nothing except the insurance lobby.”

PRICEY

[Paul Krugman]

PHARMACEUTICALS

Pharmaceutical companies have spent over $110 million dollars on lobbying Washington to ensure that they don’t take too great a hit because of health care reform, according to Time magazine.

This past summer, they struck a deal with the Obama Administration promising to give back $80 billion in discounts and rebates. With this agreement, Obama has assured drug companies that he would block any Congressional efforts to ask for more than the agreed upon amount.

Drug expenditures have helped pave the way to the skyrocketing costs of health care. With the US spending over $250 billion dollars on prescription drugs, 8% percent of health care spending is devoted to drug expenditures.

going to revert to my ethnic heritage and answer your question “withI ama question: on what planet do you spend most of your time? ” [Barney Frank (D-MA)

in response to a woman likening health reform to a Nazi policy]

LAW FIRMS The legal industry may not make headlines in the media health-reform circus, but there is no question that it plays a pivotal role in the reform process. The legal interest in health care is well-understood; the trial lawyer who makes a fortune by hunting doctors has reached near-proverbial status. Such trial lawyers are notoriously cozy with the Democratic Party; they donate generously to Democratic campaigns and had one of their own, John Edwards, achieve considerable success (albeit, before sexual indiscretions ruined his political fortunes). It is a safe bet that Democrats will not allow significant tort reform to pass in a health care bill. This is a shame; a 2008 Massachusetts Medical Society investigation estimated that defensive medical practices represent as much as 12% of yearly medical expenditures, costing nearly $100 billion annually. Liability insurance premiums for medical firms similarly cost upwards of $26 billion annually. In sum, tort reform is one promising avenue to cost-reduction that has been taken off the table by the powerful legal lobby.

The insurance industry is rolling out the big guns and breaking out their massive war chest to marshal their “forces for one last fight to save the status quo. They’re filling the airwaves with deceptive and dishonest ads. They’re flooding Capitol Hill with lobbyists and campaign contributions. And they’re funding studies designed to mislead the American people. ” [President Obama]

$2,500,000 62 BUSINESS TODAY SPING 2009

0,000,000 [ possible cost for health care over the next decade ] The Associated Press

LABOR UNIONS The White House had counted the nation’s labor unions as a key ally in the fight for healthcare reform. In fact, the unions are not only endorsing reform legislation but actively pushing for it; the AFL-CIO has mobilized over 1 million people in support of healthcare, and the AFSCME has spent over $2 million on pro-reform advertising. Unions are convinced that a strong public option, along with appropriate regulation of private insurance companies, will provide more affordable healthcare for working families. Why, then, has AFSCME chief Gerry McEntee published an open letter threatening to oppose the Max Baucus-sponsored bill that recently cleared the Senate Finance committee? Baucus’ first priority was costcutting, and he accomplished this partially through a tax on the health benefits of the working families that McEntee has pledged to represent. No union officials are happy with this tax; some, however, question the political wisdom of his hardball tactics. Still, as long as the health-benefits tax persists, labor unions will be reluctant to support reform legislation.”

PROGNOSIS >>The Business of Health Care Reform INSURANCE COMPANIES Insurance companies are undeniably one of the biggest stakeholders in the Health Care reform debate. The White House and other Democrats are advocating for the introduction of a public option to create more competition among insurance companies, while many Republicans maintain that a government run plan is an infringement on the private markets. Nancy Pelosi told reporters in October that, “At the end of the day, we will have a public option in our legislation to keep the insurance companies honest.” Pelosi has outlined market reforms that would prohibit insurers to selectively refuse to renew coverage and stop the setting of premiums on the basis of gender, health status and occupation. The proposed “Health Insurance Exchange” would streamline administrative forms and allow consumers to compare plans based on clearly defined costs and benefits.

Critics fear, however, that the establishment of a public option and the Health Insurance Exchange would be the first step toward a nationalized health care system. CNN Money cited that the insurance lobbying group America’s Health Insurance Plans (AHIP) and the BlueCross BlueShield Association wrote to Sen. Edward Kennedy (D-Mass), “Regardless of how it is initially structured, a government plan would use its built-in advantages to take over the health insurance market.” Some even argue that the profit margins for insurance companies are actually slim, and a public option would therefore have little effect. The Wall Street Journal reported that Wellpoint, the biggest private health insurer on Wall Street with 35 million customers across the country, report a total net (after-tax income) of 4.1% of total revenue in 2008. Carl McDonald, a health insurance analyst at Oppenheimer and Company, told the Journal that, “For every premium dollar that they take in, about 83 cents goes out in medical costs -- doctors, hospitals, and drugs.” The return on assets, an indicator of how profitable a company is relative to its total assets, averaged at 4.2% for Aetna and 5.8% for WellPoint over last five years. Robert Reich, who served as secretary of labor under the Clinton administration, has a different take. He told CNN, “It gives private plans a new set of benchmarks and provides them with incentives to get new deals…It would squeeze their profits and force them to make several reforms.”

[ expected cost of health care spending in 2009 ]

0,000,000 National Coalition on Health Care

FALL 2009 BUSINESS TODAY 63

Organic Food:

healthy option or farce? [ by Gabino Iglesias, University of Texas, Austin]

O

nce considered a niche market that provided an alternative for consumers with special nutritional needs and the über-healthconscious and/or eco-friendly crowd, organic product commerce is now a major business in the United States. A study conducted in 2001 found that 63 percent of Americans buy organic foods and beverages regularly. Furthermore, with around 11 billion dollars in sales in 2003, which represented about 2 percent of all U.S. food sales for that year, the organic food market is still growing at an unprecedented rate, and college students play a major role in this trend.

Offering an ever-expanding assortment of foods, dietary supplements, household items and personal care products, the organic goods market is undoubtedly booming. A trip to any grocery store will attest to the fact that products ranging from tortilla chips to nail polish now prominently display the organic stamp on their packages. Unfortunately, when other products (such as meat, poultry, eggs, milk, vitamins, pet food, hand soap, household cleaners, bed linens, etc.) share the organic label, it becomes a tad harder to define what 64 BUSINESS TODAY FALL 2009

organic is, comprehend its alleged benefits, and understand where it comes from.

So, if all those things are organic, we need to ask the inevitable question: what exactly is organic food?

According to the United States Department of Agriculture (USDA), organic foods are those produced by farmers who put emphasis on the use of renewable natural resources and the conservation of soil and water to enhance environmental quality for future generations. Also organic animal products (i.e. meat, poultry, eggs, and dairy products) come from animals that are given no antibiotics or growth hormones. When it comes to fruits and vegetables, the organic stamp means that no pesticides were used, the fertilizers involved in the process were made with synthetic ingredients or sewage sludge, and the plants are not the result of bioengineering nor been subjected to ionizing radiation.

The aforementioned definition goes hand in hand with the clear-cut set of regulations the USDA has set for organic farming: — Use of cover crops, green manures, animal manures and crop rotations to

fertilize the soil, maximize biological activity and maintain long-term soil health.

— Use of biological control, crop rotations and other techniques to manage weeds, insects and diseases.

— An emphasis on biodiversity of the agricultural system and the surrounding environment.

— Use of rotational grazing and mixed forage pastures for livestock operations and alternative health care for animal wellbeing.

— Reduction of external and off-farm inputs and elimination of synthetic pesticides and fertilizers and other materials, such as hormones and antibiotics.

— A focus on renewable resources, soil and water conservation, and management practices that restore, maintain and enhance ecological balance.” (USDA Sustainable Agriculture Research and Education (SARE), 2006.)

Even if a farmer complies with all of the guidelines mentioned above, a Government-approved certifier needs to visit and inspect the farm where the food is grown to make sure the farmer is following all the rules necessary to meet USDA organic standards. Only after receiving the approval of the USDA can a product be

labeled ‘organic’, and it is with the labeling that the problems begin.

For example, a product that wishes to claim it is 100 percent organic needs to prove that it contains 100 percent organically produced ingredients and then put on its label the name and address of the handler and the name of the certifying agent. To claim simply ‘organic’, 95 percent of the product needs to be entirely organic and it cannot contain sulfites. Only 70 percent of the ingredients need to be organic in order claim a product is made with organic ingredients. A product can also use the word organic in its label if it is produced with organic materials.

The complicated labeling system, far from allowing students to know exactly what they’re consuming, is often catered toward organic connoisseurs, who are interested enough to spend the time reading the whole package. And those who actually read the labels are informed only if the company was truthful in its labeling.

Truthful? Yes, unscrupulous companies are putting products on the market that carry the organic label even if they’re not certified In this rather shady and confusing market the questions then become: are students making sure that what they buy is truly organic? Are they aware of the labeling system? Why are they buying organic in the first place? What do they think are the benefits of organic food?

“I only buy organic stuff sometimes…

I’m not really convinced of the whole organic thing but if the price is about the same I’ll buy organic because it’s free of pesticides”, said Cheryl Fey, a senior in Broadcast Journalism at the University of Texas at Austin (UT). She went on to comment that she was not aware of the labeling: “If it says organic I guess it’s free of pesticides, right?”

Her unawareness regarding the labeling was echoed by others. “I think a lot of the labeling can be misleading,” commented Nikki Marterre, a first year graduate student in Anthropology at UT who buys organic because she feels it is “good for my health and good for the planet.” Marterre also had an interesting theory as to why college students jump on the organic bandwagon: “When people enter college they want to experience new things and their attitudes can change, especially because they start

imitating their friends.”

Whether it happens because students replicate the behavior and consumption practices of their friends or because they seek new experiences, the fact is that several stores in the UT area were full of students buying organic products. “I buy organic because I want to take care of myself and age gracefully,” explained Salwa Martinez, a recent graduate in Nutrition who is now back at UT for her first semester in Nursing. Martinez had her own reasons for criticizing the labeling system: “I don’t pay attention to the labels and… I also think they’re not making it very easy for organic farmers.”

Marsha Riti, who works as a cashier at an organic foods store in Austin, said

Cooked in an inferno of oil you scarcely speak, nor do you sing in the fried-fish shops of the harbours; when close to the guitars you are silent, potato, meal of the subterranean night, interminable treasure-trove of the people.

Pablo Neruda, “Ode to the Potato”

that many students enter college and become confused. They mix together environmentalism, a healthy lifestyle and diet, eco-friendliness and support for local farmers in such a way that they think they can achieve all of it simply by eating organic.

Riti also believes the labeling system doesn’t work: “A lot of people are becoming more interested in learning about the food they eat but I don’t think enough people are doing it. I think the labels can be confusing and nobody explains to us how it works.

Even I’m not familiar with it.”

Regardless of the popularity of organic foods, some students remain skeptical about it. “I don’t buy organic because I think it’s overpriced and I really don’t think the extra cost is going to meet the benefit,” said Michael Groth, a second year graduate student in Kinesiology at UT.

Surprisingly, his indifferent answer struck very close to the main problem of organic food: proof of its superiority.

Despite the never-ending claims stating that organic food is better for us, so far only one scientific study has been produced that supports a portion of those assertions. The study, conducted in the UK and spanning over a period of four years, claimed to have found that organic fruits and vegetables contained as much as 40 percent more antioxidants, which scientists believe can help lessen the risk of cancer and heart disease. The article was published by the UK Food Standards Agency (FSA) and clearly negated a previous study also published by them that stated that there was absolutely no difference in health benefits between

A Literary Moment

organic and non-organic products.

So what should we believe? The question is not easily answered. We could argue that organic is nothing more than a buzzword, a brilliant marketing strategy, or the trendy thing to do. But doing that would send consumers into a frenzy: “What do you mean I’m paying three times as much and only getting a few more antioxidants for my money?” On the other hand, many people would smartly say that the organic business is much more than just the food: a lot of farmers put food on the table growing organic products and it’s also a healthy way to protect our battered planet.

What would happen if the organic market is nothing more than a big farce?

Well… it wouldn’t be the first time America has had to shake its head at senseless consuming, would it? BT

FALL 2009 BUSINESS TODAY 65

The Brain Drain [ by Emily Banks, University of North Carolina]

W

hether it’s around the corner or halfway around the world, college is a new experience for everyone. It’s a place where young people from all over the world leave behind the comforts of home to challenge themselves with new ideas, difficult responsibilities, and an occasional party (or two). For some students, the journey to college takes a bit longer than a drive down the street. Each year, over 500,000 international students attend US universities. The majority of these students come from India, China, South Korea, and African nations. Some stay and get a job in America after graduation, but others return to their home countries with their valuable American degrees. Similarly, professors from these less-developed countries often come to the United States to earn money and prestige, only to return home a few years later. The migration of skilled intellectual people to and from the United States, called the “brain drain,” greatly affects the American higher education system and the global economy.

It is undeniable that international students can bring a lot to a college community.

66 BUSINESS TODAY FALL 2009

College is an opportunity for American students to expand their viewpoints and experience new things, and interacting with students from foreign countries is a good way to accomplish that. Many universities have programs designed to incorporate international students into campus culture, including diversity-themed floors and student organizations. Meeting a student from another country can be a great way to learn about another culture without paying airfare. Exposure to different cultures and ways of thinking is valuable in today’s global economy, as many students—particularly those in the field of business—are likely to work with people from other countries after they graduate. International students can also offer different points of view in class discussions, broadening the spectrum of ideas presented.

The debate over brain drain is ultimately one over educational philosophy. Some perceive education as a product that students buy with their tuition. What students choose to do with the product—whether it is staying and working in the US or moving abroad—is their prerogative. Others see

education as an investment in America’s future, preparing generations of students for jobs and providing resources necessary for students to be contributing members of society after graduation. In this view of education, the investment would go to waste if students were to take their diplomas and leave without positively impacting the US. The idea of education as an investment in a state’s future is the cornerstone of state-run public universities. Being from New York, I was daunted when applying for admissions at the University of North Carolina. UNC has a strict 80% in-state quota, meaning that at least 80% of students must be from North Carolina. And while that quota worried me as an applicant, I now understand why it’s in place. As a state school, UNC should primarily serve students from North Carolina, who pay taxes in the state and who are more likely to stay here after graduation.

While not all American universities are staterun public schools, nearly all institutions receive funding from the government, usually through grants. Thus, American universities should primarily serve American students.

Many American students who intend to live and work in the US for the rest of their lives are denied higher education due to socio-economic conditions. From elementary school on, American students are—in most cases—given an education proportional to their parents’ incomes, and that makes it much more difficult for lower class Americans to get into college. On average, schools in poorer neighborhoods have fewer resources and greater drop-out rates than schools in affluent areas. Thus, poorer students are at a disadvantage when applying to college. Even if they do get into college, students from lower socio-economic classes also have trouble paying the exorbitant tuitions that many universities charge.

Similarly, the issue of international professors who do not intend to live in the US permanently is two-sided. Professors from less-developed countries come to the US hoping to earn money and then use their research and teaching experiences to build their résumé and help them get

get material across to us while understanding our needs, limitations, and extra-curricular obligations. After teaching similar courses semester after semester, professors gain an understanding of what concepts students find difficult and what they can do to make the subject more palatable. Professors who are only in the United States for a few years do not have that experience. So, despite extensive knowledge in their fields, they are limited when it comes to developing relationships with their students.

It is also necessary to consider the effect that the brain-drain has on the students’ and professors’ native countries. It is difficult for these countries to improve their education systems when their most qualified students and educators are constantly leaving, and it is also difficult for those who cannot afford to live temporarily in the US to compete economically with those who can. Even when these people come back to their countries, it is also difficult for them to become economically self-sufficient without

American universities should primarily serve American students. professorships back in their home countries.

These professors are generally highly qualified in their fields, and universities see them as potentially beneficial both to students and to their research programs.

Despite their academic qualifications, foreign professors sometimes have difficulty in teaching American students. I often hear students, especially those pursuing degrees in business, math, or science, complain about professors with strong accents and confusing teaching styles. While that may sound trivial and even xenophobic, it is a symptom of the overarching problem that students find “brain drain” professors less accessible than others.

I’ve never actually had a professor from a foreign country, but I’d have to say that my favorite professors are the ones who are fixtures at the University and have taught here for a long time. These professors have built a reputation and rapport with students, and learned through experience how best to

the most academically promising people staying to build their education systems.

The continent of Africa is particularly affected by this phenomenon: many have left the continent every year to work or go to school in North America and Europe. This has caused a huge problem in the medical field. According to the UN Development Program, 60% of the doctors trained in Ghana during the 1980’s have since immigrated to other countries. It may be helpful for us to have these doctors working in our hospitals and teaching in our medical schools, but in their home country—where they’re undoubtedly needed more—suffers because of it. In an attempt to reverse the negative effects of the brain drain, African countries spend approximately $4 billion each year on programs that seek to employ non-African expatriates.

It is difficult to say what should be done

about t h i s The issue. incorporation of other cultures into our own is a cornerstone of the American “melting pot,” and I would not advocate demolishing that by excluding foreign students from our universities altogether. It is, in many ways, beneficial for American college students to have international classmates, and it is true that American universities can benefit from qualified professors from developing countries.

But we must also consider harmful effects of the brain drain on the educational systems and the economies of other nations—nations that waste millions, even billions, trying to retain the “brains” of their population. At the same time, we also have to consider the impact of an influx of foreign students and professors on American students. While we do not want to be isolationist or xenophobic, we must still keep our students’ best interests at heart. After all, it is American students who will shape America’s future.

Perhaps the key to correcting both issues is a shift in focus. Rather than concentrating on attracting foreign students and professors, American universities should focus on offering opportunities to underprivileged American students. In addition, some form of help or aid should be given to other nations with weaker institutions of higher learning, so that they’ll be able to retain more of their best students and professors. Once we have shifted our focus and achieved necessary results, we can welcome back the cultural exchange with more positive results. BT

FALL 2009 BUSINESS TODAY 67

i·di·o·cy /ˈı-dı-ə-sı/ n.

1. extreme mental deficiency commonly due to incomplete or abnormal development of the brain 2. something notably stupid or foolish.

T

f i na l wo r d

he concept of Cap and Trade reaches a new level of something notably stupid or foolish.

In an effort to castigate and expose the inherent evil and demonic sinister nature of the Federal Government and their bold face effort to turn the citizens of the United States into hewers of wood and drawers of water, the underlying premise that carbon dioxide causes global warming must be debunked.

Al Gore is no Albert Einstein. As the titular head of the new state religion, “The Greenies”, Mr. Gore has asserted that, “all scientists agree that global warming is caused by carbon dioxide.”

Not many scientists were happy with the Inquisition of the 15th century, and are fully aware of the abuse and mistreatment of Galileo (back when the state religion asserted that Rome was the center of the Universe). A new Inquisition sponsored by the Idiot leaders of the New State Religion would be materially rejected by men and women of science and all other rational beings on the planet.

Let us start out with the First Amendment: “Congress shall make no law respecting the establishment of religion,

or prohibiting the free exercise thereof; or abridging the right of free speech, or of the press; of the right of the people peaceably to assemble, and to petition the government for the redress of grievances.”

Notably, the first part of the first amendment forbids the government from establishing a religion. Back to Webster’s Dictionary: religion 1 a (1): the service and worship of God or the supernatural (2): commitment or devotion to religious faith or observance b: the state of a religious <a nun in her 20th year of __ > 2: a personal set or institutionalized system of religious attitudes, beliefs, and practices 3 archaic: scrupulous conformity 4: a cause, principle, or system of beliefs held with ardor and faith.

Without a doubt, Mr. Gore and his concept of carbon dioxide causing global warming meets definition 4 of religion.

As a second point, scientists do not agree on many things. Some make measurements and develop theories, some theories are remarkably accurate. The debate among scientists are not political but efforts to understand many aspects of our world, the universe, and disciplines like chemistry, genetics, physics, climatology, etc., the way cool thing is that under the right circumstances a scientist can discover something that results in a product or process that makes life better for all of us. In many cases, scientists will agree to disagree as we continuously improve the understanding of the world around us. For example, Newtonian physics are fairly precise under conditions that are not relativistic. Relativistic theory is a good first cut, but has not yet led to all the secrets of the Universe.

Dan Wray 68 BUSINESS TODAY FALL 2009

In the history of science, dogma has proven the bane of new thought. The dogma that “all scientist agree that carbon dioxide causes global warming” is a religiously inspired, fundamentally flawed exercise of nonsensical dogma.

As a third point, let us identify the source of global warming. For those of you who appreciate a little flair for the dramatic, please think of a drum roll and some heraldic trumpet music. Imagine a fiery orb, one hundred times the size of the Earth—the sun.

Yes! It is the nearest star, the object of worship for many early civilizations, Ra god of the sun, giver of life. The sun causes global warming. From an average of 93,000,000 miles the sun delivers 135mw/ cm2 of energy to the planet during the day.

It goes without saying, when the earth is rotating and the sun is no longer in the field of view, the 135 mw/cm2 is no longer being delivered and it seems the temperature goes down. Most people would agree that when the sun goes down, the temperature goes down and the period with no sun is called night.

While the sun is really hot in terms of temperature, thermal energy requires molecular vibration to transmit heat. Aside from two small planets there is virtually nothing between the earth and the sun. It is a hard vacuum. The energy from the sun is transmitted to the earth in the form of electromagnetic radiation.

If carbon dioxide is really responsible

“No Albert Einstein” Al Gore

no difference. They both steal your money and give it to their friends. The only real difference is who their friends are.

With spending out of control in virtually every aspect of government and the total lack of responsibility to citizenry, who should be their customers, the government, aside from the local governments and military, produces nothing and provides no services of value.

The Federal

for any change in global c l i m a t e what would be the mechanism?

How much of the electromagnetic spectrum does carbon dioxide absorb? In total all of the energy capable of being absorbed by carbon dioxide is only a mere 0.117% of the solar radiation.

Aside from nitrogen and oxygen, carbon dioxide has a little bit of water vapor to compete with in terms of energy absorption from the sun. The absorption frequencies for water run virtually throughout the emission spectra of the sun. Perhaps it would be better to have congress outlaw water vapor from the air as a more effective method of climate control.

The entire concept of cap and trade is a ludicrous absurdity that is based on fiction amplified by a religious quack in an attempt to destroy the economic vitality of a nation already reeling from years of mismanaged government. Both the Republicans and the Democrats have plenty of blame to share. There is virtually

government takes a huge amount of resources from the economy and gives nothing back.

So the taxpayers will be paying government debt service and government retiree benefits and there will be nothing left. I urge the Republicans or a third party of fiscally responsible people to buy 130,000,000 bottles of AstroGlide速 and send them off to the taxpayers on April 15. While they will still be screwing you, at least you might feel like they kissed you.

If they pass the cap and trade we are all screwed. BT

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