Business Today Fall 2010 by businesstoday

By students for students published at Princeton since 1968

The New Boardroom Welcome to the conversation!

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A little business Advice from sHoWtime Work killer Hours.

dexter

HAve pAtience.

nurse jackie

A Showtime originAl SerieS

tAke risks.

keep groWing.

californication

A Showtime originAl SerieS

S:10.375”

A Showtime originAl SerieS

weeds

A Showtime originAl SerieS

©2010 Showtime Networks Inc. All rights reserved. SHOWTIME and related marks are trademarks of Showtime Networks Inc., a CBS company. “Dexter™” & “Californication”: ©Showtime Networks Inc. All rights reserved. “Nurse Jackie”: ©Showtime Networks Inc. and Lions Gate Television, Inc. All rights reserved. “Weeds”: ©Lions Gate Television Inc. All rights reserved.

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40 66 Words from the Editor

n business, no place is as feared or revered as the boardroom. Around that table, ideas become actions, handshakes become contracts, and workers become leaders. Yet while the space itself remains fixed within an organization, the people and conversations that fill it are continuously evolving. In this issue, the students of Business Today set out to reexamine this storied seat of power. Who is sitting around the boardroom table today and what are they talking about? Donald Trump has become the most recognizable image of the boardroom boss, after bringing the drama and politics of climbing the corporate ladder into living rooms across America with the breakout reality series “The Apprentice.” When viewers tune into the show’s tenth season, however, they will get to know a new mainstay of the Trump organization, Donald Trump Jr. This young face of the group has breathed new life into both the Trump real estate division and the dynamics of the television show. Increasingly, world economic players also operate outside the traditional boardroom setting, influencing the global flow of capital and resources. Hometown fans now power a growing fantasy sports market, shifting revenue from the sidelines and stands to family room drafts. Female comedians such as Nasim Pedrad are using the stage to boldly redefine the norms of the entertainment industry. A Stanford activist gives BT a look at how students are influencing decisions around the dining hall table, encouraging their universities to adopt “trayless” servery practices that can cut post-consumption food waste by 25%. Some collegians are even forsaking a degree to foster change and grow their professional networks at leadership conferences across the globe and through managing Internet startups. All the while, traditional CEOs still steer corporate America. Business Today sat down with some of today’s biggest names in technology, healthcare and management and found that these leaders are taking a value-based approach within their organizations. Evan Chesler of the legal powerhouse Cravath, Swaine & Moore wants you to stay honest. Qi Lu of the search engine Bing wants you to get creative. And Bill McDermott of SAP, the leading provider of business management software, wants you to forget your wallet and go with your gut. Their insight is crucial to understanding today’s increasingly nontraditional business world. Follow their advice and you will get that much closer to hearing those two prized words, “You’re hired.” ON CAMPUS

BUSINESS TODAY FALL 2010

64 22

56 CONTENTS [Fall 2010. Volume 47. Issue 2]

FEATURES 14 My Big Fat Greek Bailout 18 Revaluing the Yuan 26 Google vs. the Great Firewall 36 Student Internet Startup 44 Greening Dining Halls 52 The Goldman Sachs Story 64 Fantasy Football Fanatics

INTERVIEWS 28 Qi Lu, Bing 40 Bill McDermott, SAP 48 Philosopher King 56 Donald Trump, Jr. 60 Nasim Pedrad, SNL 66 Dr. Harold Urschel III, EH 08 12

BT Bits - the marketâ&#x20AC;&#x2122;s latest and greatest BT Books - reads to sharpen your mind

FALL 2010 BUSINESS TODAY

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Motorcycle and ATV coverages are underwritten by GEICO Indemnity Company. Homeowners, renters, boat and PWC coverages are written through non-affiliated insurance companies and are secured through the GEICO Insurance Agency, Inc. Some discounts, coverages, payment plans and features are not available in all states or all GEICO companies. Government Employees Insurance Co. • GEICO General Insurance Co. • GEICO Indemnity Co. • GEICO Casualty Co. These companies are subsidiaries of Berkshire Hathaway Inc. GEICO: Washington, DC 20076. GEICO Gecko image © 1999-2010. © 2010 GEICO

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THE

eam 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. AMIRA polack President Philipp Bewerunge Seminar Series Director ALLAN AMICO Texas Conference Co-Director CHENYU ZHENG Texas Conference Co-Director ALEXANDER KATZ West Coast Conference Director Jasmine Chen International Conference Director

CAROLINE HANAMIRIAN Editor-in-Chief Carmen Maria Sanchez Pinilla Executive Editor MiLES WU Design Director MAY LI Publisher Editorial ANI DESHMUKH SAM HEFFERNAN ALINA JENNINGS MICHAEL LACHANSKI MARK LOCK GEORGE MALIHA MARGARET MEYER BRIAN NWACHUKWU KAREN O’NEILL OCASIO Brian reiser RYAN SHYU Design ALEX CHUKA AJ KOGER ERIC REHE LINDIE WANG TIANTIAN ZHA

CAROLINE HANAMIRIAN Editor-in-Chief MAY LI Publisher EILEEN CHEN Executive Relations James Connolly Online Journal Director Alexander Cantwell Corporate Contacts Director ANDREW LEWIS Finance Director Emerson moore Investment Director TIANTIAN ZHA Design Director AJ KOGER Marketing Director DI PAN Technology Director

THE MAGAZINE

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

Cover design by Mandy Lee

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.

FALL 2010 BUSINESS TODAY

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BT Cheek’d Eligible bachelors and bachelorettes tired of blind dates but looking for adventure should look no further than cheekd.com. For $25, subscribers receive a month’s subscription to the dating site and a pack of 50 personalized cards, which they can then distribute at their discretion to crushes, acquaintances or total strangers. One side of the cards displays cheeky messages like “I am totally cooler than your date.” The other reads “I’ve said ‘what if’ too many times…not this time” and includes instructions on how to pursue the card giver on the website.

Pinkberry This up-and-coming desert empire has invaded trendy neighborhoods from California to New York. With the recent opening of its hundredth store, Pinkberry is at the forefront of this decade’s froyo revival. The concept is simple—serve fresh, high quality yogurt chilled to perfection with toppings ranging from fresh strawberries to honey almond granola to rich Belgium chocolate shavings. Pinkberry is even revolutionizing the way you buy desert, with its new online delivery service that will bring the tasty treat right to your door. And at 29 calories an ounce, this all-natural phenomenon is guilt-free.

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BITS BITS

The Exchange Bar & Grill What happens when a Georgetown MBA grad gets his hands in the economics of eat and drink? The Exchange Bar & Grill, a revolutionary pub in Grammercy Park, that lets the prices of food and beverage rise and fall with client demand. Just like Micro 100 taught you, when an item is in high demand, the price rises accordingly. That means a beer could start at $6 but fluctuate as high as $8 or as low as $4, depending on what customers are ordering. And, of course, a ticker lines the wall indicating the price of a Guinness or burger at any given time.

Masdar, United Arab Emirates The worldâ&#x20AC;&#x2122;s first zero-carbon city combines technological innovation with ancient architecture to transform imagination into reality. Masdar will house a renewable energy research institute, cleantech companies, and at least 45,000 residents. Relying on 16th century cooling techniques, designers elevated the city by 23 feet and will construct several wind towers that funnel air into the shaded streets. These energy-saving measures, already expected to reduce local temperatures by 70 degrees, will be supplemented by waste incineration and a fleet of photovoltaic cells to power the entire city. Since cars are not allowed within the cityâ&#x20AC;&#x2122;s walls, an underground system of unmanned, electric vehicles will transport citizens to wherever they wish to go.

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College Only

For those of you who are creeped out when a friend’s mom “likes” your photo from last Saturday night, you may consider dropping Facebook and turning to CollegeOnly. The name speaks for itself—a social network whose membership is tightly restricted to university students. So tightly, in fact, that even the creator has blocked his own ability to join the site. After providing a valid university e-mail address, the site instantly connects you to every other student at your school. “On CollegeOnly you can know which frat/sorority has the best parties, which class is the best or most boring, which restaurant is the most popular…and also do it in real time,” said creator Josh Weinstein. For now, the site is only accessible at Princeton, Yale and Cornell.

Fashism Ever wish you had a second opinion before heading to the big interview or the first date? Enter Fashism.com, one of several new websites that allow users to post photos of themselves in an outfit and receive instant feedback from total strangers. Visitors of the site can either chose to upload a photo of themselves to solicit advice or share their thoughts about posted images. Each couture features a running stream of commentary and a score, indicating the percentage of viewers who “liked” or “hated” the ensemble. Beware, though, the comments that appear on the (aptly named) site can sometimes be a bit blunt. Take, for example, a tidbit which simply read, “u r way 2 pretty 2 be wearin that.”

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BITS BITS

The SkyRider

Just when you thought airplane seats couldn’t be more crammed, Italian aircraft manufacturer Avioninteriors introduces the “SkyRider.” This ultra slim seat is designed so that passengers virtually stand-up when harnessed in, allowing airlines to cram more seats into tighter spaces. So how does it feel? Director General of Avioninteriors describes it just “like riding a horse.” Buckle up and giddy up.

Camcard Bringing the business card into the digital realm is Camcard’s mission. With the ability to scan in 12 languages, Camcard allows iPhone, Android, and Blackberry users to edit, organize, and search through their digitized library of business cards. By opening the program on your iPhone, Android, or Blackberry, you take a photo of any card and store it in a virtual card holder. And if there are any physical blemishes on the object, a photo editing system allows desired changes. Multiple reviews of smartphone users have praised the app’s ability to work on multiple platforms in addition to its ease of use. Cost of app ranges from $7 to $15 based on selected add-ons.

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BT BOOKS

Rewriting the Rules of Management... The Next Generation of Women Leaders While we’d all like to think that society, and in particular the corporate world, is gender-blind, the reality is that for whatever reason, there are comparatively few women in positions of corporate leadership. If this strikes you as a little strange, you’re not alone; this curious phenomenon motivated Selena Rezvani to interview 30 women in positions of corporate leadership. Her book, The Next Generation of Women Leaders, contains what she learned. The various forms of entrenched discrimination against women in leadership positions is certainly a concern of Rezvani’s, and she explores the topic in some detail, naming various barriers to women gaining access to corporate leadership positions, such as oldfashioned chauvinism, wage discrimination, and competition among women for a perceived scarcity of women leadership positions. Wisely, however, Rezvani does not dwell on barriers; she explains that her reasoning behind discussing these issues is so that women will be able to better overcome them. The material that Rezvani distilled from her interviews is certainly not earth-shaking material. She spends an entire chapter advising women to essentially discover what they want to do and to do it, and to use various strategies (such as journaling) to ensure selfawareness. As is the case with much of Rezvani’s advice, this is fairly gender-neutral; after all, it is reasonable to think that men will be happy if their career harmonizes with their dreams and interests. It may be thought of as a book full of sound business advice which happens to use many women in its anecdotes and examples. Much superficially gender-specific material, such as Rezvani’s discussion of the benefits to women of joining an all-woman networking group, could easily be applied to, for instance, ethnic groups. Even Rezvani’s discussion of office politics, which seems to lend itself to a women-specific treatment, is very broad, advising women to be “positive, solution-oriented,” which though helpful, could easily have been lifted from any number of self-help books. But Rezvani does have an intriguing discussion of motherhood and the negotiation of non-traditional work arrangements. Unfortunately, this is the exception to the rule. It is not necessarily bad that Rezvani’s book is not extremely gender-specific. At its core, it is a solid, can’t-go-wrong self-help book with a business slant; The Next Generation of Women Leaders is filled with somewhat obvious platitudes such as “Go find the life you want!” and “Keep in mind that how you treat others says a lot about you.” Outside of a few apt and intriguing gender-specific sections, such as the previously mentioned discussion of pregnancy and nontraditional work arrangements, these are really the heart of the book. One would hope that this kind of material is not new to anybody, but it is never bad to be reminded of common-sense strategies for success. Ryan Shyu

BUSINESS TODAY SPRING 2010

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BT BOOKS

...for the Leaders of Tomorrow Empowered Empowered, a how-to book for employers seeking to thrive in the digital age, is best seen as a guide for survival against the unstoppable force of empowered customers. Its authors, Ted Schadler, a VP and specialist in technology and the workforce at Forrester Research, and Josh Bernoff, co-author of Groundswell, bring both their undeniable expertise and clarity of style to make the case for empowering customers through empowered employees. It is the content of Empowered, not its style, that makes it an indispensable read for managers today. The primary purpose of the book is to explain how to facilitate and take advantage of Highly Empowered and Resourceful Operatives, or HEROes. This is more necessary than ever, argue the authors, because we have entered the era of customers who are “mass influencers,” such as those with enormous Twitter followings or most trusted reviewer status on sites like Amazon.com. These customers must not only be kept happy, but also tapped and converted into unofficial advocates for the company. This is accomplished by reaching them through their medium of choice, such as social networking, online videos, cloud computing services (e.g. zillow.com), and mobile devices like smartphones. The authors help delineate the path toward this goal by means of another acronym, IDEA: Identification of these influencers, Delivery of groundswell service, Empowering of customers with mobile information, and Amplification of the voice of the company’s fans. In other words, the HEROes must be able to innovate effectively within the company in such a manner that benefits the mass influencers, who in turn promote the company and bolster its service reputation. This is obviously crucial for large companies that rely on service, instead of low pricing, to sell their brand. This necessity is by no means breaking news. It is, however, much easier to identify this need for revolutionary innovation with corporations than to understand its implications and to implement ways to satisfy it. Empowered masterfully presents the outlines for a solution that anyone, even those who have never entered the social network, can understand. Furthermore, the quantitative facet of the book (it includes an impressive amount of data on social networking and technology) makes the authors’ advice that much more contextualized and credible. The book does not revolutionize the genre of guides for operations and management, but it takes each component and executes it flawlessly. From the perfectly picked and well-explained case studies to the explanations of how to identify worthwhile HERO-pushed projects, Empowered gives its readers a crash course in adaptation to the digital era, one of instant communication and high customer expectations. Brian Reiser

SPRING 2010 BUSINESS TODAY

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MY BIG FAT GREEK BAILOUT An Economy In Ruins

When the financial crisis washed ashore on the Greek isles, a deal was struck with the IMF and the European Commission to alleviate budgetary shortages. BT breaks down the causes of Greece’s economic meltdown and what the future holds for its recovery. By Xenofon Kontargiris

hat could I possibly write about the Greek bailout that hasn’t already been written? I can come up with only one thing: a journal log of an actual Greek citizen, who has lived through the crisis for the past year.

September – December 2009 One year ago, Greece was in the middle of a fervent pre-election period that would culminate in a national bailout, when then Prime Minister Costas Karamanlis called for a swift election. With pressure mounting from both the global financial crisis and a series of embezzlement scandals involving top government officials, it was in Karamanlis’s best interest to call for a quick vote. The socialist opposition party, Pan-Hellenic Socialist Movement [PASOK], won, resulting in the election of current Prime Minister George Papandreou. One of the socialists’ most popular slogans during these weeks was, “Yes, we do have money.” Almost 45% of the electoral body was convinced of this

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Global Solidarity

assertion. The socialists were offered a majority government and the mandate to both protect the country from the international financial storm and institute new social welfare policies.

quidity—not in order to foster further fused to recognize that the “Greek dead development but simply to pay off its al- end” was actually a European threat. ready voluminous debt and the interest There was also a societal outcry proowed to past lenders. voked by the disruption of every single

It was a gloomy month marred with bitter negotiations between the Government and the ec.

December 2009 – April 2010 Known as the “time of disillusionment” for Greece, these 5 months marked the fast-paced march of a Eurozone member state to one of its worst financial stalemates ever. The main factors leading up to the disaster were as follows: The mounting volume of EU legisla- norm that the Greek society was based tion waiting for incorporation in the on for some 30 years. The majority of The “discovery” of the frailty of the Greek legal system Greeks simply refused to pragmatically Greek economy This has probably been the most deal with the impending bailout as a In adherence to its own electoral pathogenic element in Greece’s mod- necessary procedure to make up for conpromises and the European Commis- ern history and, in particular, its post- secutive decades of stagnation and inefsion’s pressing demand for an updated EU accession decades. During the late ficiency. On the contrary, they adopted a report on the status of the Greek econo- 1980s and through the 1990s, the Euro- stubbornly resistant attitude toward any my in the wake of the devastating finan- pean Commission passed several items of the intended changes the government cial crisis, the new socialist government of Community legislation with the goal agreed to push forward and have chosen began a strenuous investigation of every of modernizing European markets and to express this negation in numerous aspect of public economics in the coun- making them function more efficiently destructive ways. It is hard to forget the try immediately after taking office. The in the ever-changing global environ- deadly clashes in downtown Athens, outcome of this monitoring was, how- ment. Members of the EU were allowed the actual human lives sacrificed durever, anything but encouraging. Because a lengthy adaptation period for the in- ing uncontrollable riots in the country’s of a toxic mixture of poor public affairs corporation of the new legislation. Over biggest cities, and the disgraceful haste management over the last 25 years and a the years, Greece stood out as a negative with which the government had toreach decade long practice of false data report- example among EU countries by system- a bailout agreement with the IMF and ing to Eurostat and other EU institu- atically postponing the incorporation of the European Commission in order to tions by the Greek Ministry of Econom- Community legislation and requesting deal with pressing budgetary shortages. ics, the country was under an illusion of more and more time. This resulted in prosperity and robustness. This illusion Greece facing the global financial cri- June 2010 – September 2010 came to a bitter end in December 2009. sis with a sclerotic and rigid economy, This past summer, Greece suffered The new gloomy picture was now one of functioning under outdated patterns. through the aftermath of the financial a state in dire conditions with limited crisis. It was a very illustrative period budgetary margins and a huge external May 2010 for what is to come next. The country debt. This can be described as the time will have to abide by an asphyxiating of bargaining for the country. It was a agenda of change. Greece must modify The ongoing international financial havoc The exposure of Greece’s weak economy came at a very inopportune time. The world was undergoing quite possibly the worst financial crisis since World War II. It was only a matter of time before disaster struck the Greek economy. Not only was the country completely unprepared to face such a gloomy month marred with bitter ne- several cornerstone elements of its econcrisis, but it also held a deteriorating gotiations between the Greek national omy with the hope of coming out as a position in global markets. Big lend- government and the European Com- competitor in the international markets ers were simply not willing to lend any mission. There was, of course, austere in 2013. IMF money poured into the money to Greece. To make matters behavior from major Euro zone partners state reserves and offered a temporary worse, the country was desperate for li- (primarily Germany) who initially re- way out from a looming bankruptcy,

The picture was now one of a state in dire conditions with limited budgetary margins and huge external debt.

SPRING 2010 BUSINESS TODAY

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Global Solidarity

but Greece faces a rigid time frame for implementing badly needed changes to its economic foundation. Those affected by the oncoming changes have avoided productive dialogue with the government. Rather than compromise,

with which many Greeks view the present downturn of the economy. Truck drivers, for example, simply refuse to let their profession become an “open and unconstrained” one for new entrants and demand to retain their decade-long

It is hard to forget the deadly clashes in downtown Athens and the lives that were sacrificed during uncontrollable riots across Greek cities. they mostly chose to protest and em- privileged “licensed occupation” status. phatically demand the preservation of This is in clear opposition of Commutheir current privileged status quo. As nity law and fundamental provisions of a result, Greece suffered three months the EU treaties. of strikes and roadblocks that only further deteriorated the economic outlook What lies ahead? of the country, jeopardizing its most Thus far, you probably understand important national industry: tourism. the complexity of the Greek bailout This havoc actually continues as work- case. As complicated as its nature is, ers in the trucking industry are on strike there are also questions about the future for the third consecutive week with the of it. Now that the tripartite agreement national market already lacking in pro- between Greece, the IMF and the Euroduction from several main industries. pean Commission is in place, one might The actual reason for this strike is an reasonably expect that the big wave has example of the distorted perception been tamed and it only takes careful

300

The Top 10 Most Debt-Ridden Countries

250 Public Debt (% GDP)

handling of the plan in order for the country to surpass this milestone. However, numerous are the wary voices that point out other issues and future projections about the country that make the picture seem anything but clear. There are several questions which scholars, citizens, and the media are now demanding answers to. Is the threeyear period enough for the country to regain its credibility and knock on the door of its traditional lenders again? Do the bailout funds suffice for an actual decrease of the public debt or are they part of a cycle that will only permit Greece to pay the interest on what it has already borrowed and mismanaged, leaving Greece back at square one by the end of the bailout period? Is the Greek society robust enough to withstand the upcoming changes that the IMF-backed agenda calls for or will striking workers paralyze any economic development? And, last but not least, will Greece be the only one or has the nightmare just started for traditionally socialist states of old Europe? Any quick answer to the above would be extreme speculation. Since the roots of the Greek case have been so perplexing, why should its way out be obvious? BT

200

150

100

Zimbabwe Japan

St. Kitts Lebanon Jamaica and Nevis

Italy

Greece Singapore Iceland

Sudan

Source: CIA World Factbook (2009)

BUSINESS TODAY SPRING 2010

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“Education is not the filling of the pail, but the lighting of the fire” - W.B. Yeats

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Revaluing the Yuan Why politicians in Washington D.C. and economists accross the globe are worried about Chinaâ&#x20AC;&#x2122;s monetary policy. By George Maliha, Princeton University

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Global Solidarity

RMB to USD exchange rate

n a recent hearing before Congress, base. Today, however, the yuan is esti- yuan would stimulate greater purchasing Federal Reserve Chairman Ben Ber- mated to be undervalued anywhere from power for Chinese consumers, granting nanke testified, “It would be good for 15-50%. In any case, the relatively minor multinational fi rms the type of access the Chinese to allow more flexibility in revaluation (approximately 20% appreci- Chinese companies have had for many their exchange rate.” Although China ation over the last five years), which came years in the US and Europe. has allowed the Chinese yuan to increase to a near halt during last year’s fi nancial Recently, progress has been made in in value over the years, regulation in the crisis, has not gone far enough for some correcting the trade imbalance. China’s form of a managed floating exchange rate economists and US policymakers. agreement in May to continue revaluastill keeps the value of the yuan artifiAllowing the yuan to appreciate tion at a slow pace (at most 5% this year) cially low relative to other foreign curren- further, then, would be beneficial to the is a small step in the right direction. cies. As nations such as the United States entire international community as recov- While the Treasury Department has pruattempt to recover from the recession ery from the global recession continues. dently delayed labeling China a “currenthrough export-oriented growth, the Another 20% revaluation, according to cy manipulator,” the Obama administraundervalued yuan ensures that foreign some estimates, could create as many as tion must continue to push China until it exports into China remain relatively ex- a million US jobs and alleviate the trade allows the yuan to freely trade on global pensive compared to Chinese products, deficit. As American unemployment markets. In the wake of June’s unsuccesswhich remain relatively cheaper in in- hovers around 10%, such job creation is ful G-20 talks for China to revise their ternational trade markets. Because the vital for economic recovery. In China, monetary policy, the US and other counstrength of the yuan has a direct impact consumers and domestic manufactur- tries like Japan, Europe, India and Brazil on the US economy, American students ers would gain access to cheaper foreign are putting up a united front to pressure and other fi rst time job seekers will be ad- imports, potentially improving domestic China to let the yuan appreciate. versely affected by any drag on the global living standards and production capabilAllowing international market forces recovery. Thus, there are justifiably strong ity, respectively. Floating the yuan could to determine the yuan’s exchange rate may pressures coming from the governments shift lower-end manufacturing (e.g. t- be a mutually beneficial action for both of the United States and other affected shirts, jeans, and other textiles) to cheap- the United States and China. While many nations to move China’s monetary policy er venues such as Vietnam or Bangladesh, other trade-related issues remain, such as to a more open one. improving living standards in those na- intellectual property rights and environTo examine the issue surrounding tions as well as opening up new markets mental protection agreements, revaluatthe devaluation of the yuan, it is fi rst nec- for Chinese products. Th is movement, ing the yuan is at the core of rebalancing essary to understand China’s incredible according to the International Monetary international trade. Benjamin Franklin growth since its ascension into the World Fund, will not hamper Chinese econom- once quipped that “no nation was ever ruTrade Organization (WTO) in 2001. Ac- ic growth if the government undertakes ined by trade,” but unfair competition can cording to some metrics, China’s indus- steps to off set potential drops in exports. ruin all players. China’s currency controls trial base will surpass that of the United Chinese officials have already expressed might have been justifiable two decades States within the next few years. Such a desire to stimulate domestic consump- ago, but continuing undervaluation of industrialization delivers low-cost goods tion, which would more than adequately the yuan will not only undermine future to global consumers, while crowding out make up for the migration of lower-end Chinese progress, but also jeopardize the international producers who must spend industries. Under this model, a stronger fragile global recovery. BT more money to create similar products. Th is same scenario manifests itself in the The Yuan to Dollar Exchange Rate United States’ trade deficit with China, which has ballooned from about $80 billion in 2000 to a projected $230 billion this year. The costs of this trade deficit to the United States are staggering: from 1989 to 2003, 1.5 million US jobs were lost. Many economists agree that smaller nations and developing economies should enjoy a degree of protection from global competition in the initial stages of industrialization, but does China need such assistance as the world’s largest exporter? Currency controls might have been acceptable in the 1980s or early 1990s as the nation was developing its industrial Data copyright Yahoo! Inc. 2010

FALL 2010 BUSINESS TODAY

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Sharpening My Vision by Losing My Sight Global Solidarity

A senior at Princeton University shares his experience at a student leadership conference in Hong Kong. by Mark Lock

[ ] 20

About Li & Fung The Li & Fung Group, based in Hong Kong, is a multinational group of companies that provide high-volume factory sourcing, global supply chain management, and retail operations. Li & Fung Ltd.’s exports include all Disney theme park merchandise in the world, Toys “R” Us toys, and the majority of Wal-Mart’s products. The Fung Scholarship, sponsored by the Victor and William Fung Foundation, is awarded to university students to develop their leadership and global vision through exchange programs with foreign universities. BUSINESS TODAY FALL 2010

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Global Solidarity

ur traditional view of a business leader is a person who is able to get ahead of the pack. My time at the Fung Scholars Leadership Conference 2010 (sponsored by Li & Fung Group, Hong Kong’s largest sourcing company) painted a new picture of the modern, successful leader. Not only is he smart and fearless in his pursuits, but he is a man of integrity who cares about humanity. Although the media is quick to point out corporate scandals that arise out of leaders’ insatiable desires to get ahead, success does not need to be derived through morally compromising behavior but can be produced through constructive, socially responsible worldviews as well. Gaining novel insights on my leadership approach required losing my sight for thirty minutes. The first part of the conference saw forty Fung Scholars arrive at an exhibition hall called “Dialogue in the Dark.” “Dialogue in the Dark” (DiD) is a social enterprise now located in fourteen countries selling darkness to its customers. I entered the dark exhibition without any preconceived notion of how the experience would play out even after reading the mysterious description on the website. I was robbed of my eyesight in a room of absolute darkness and asked to navigate a maze with a blind tour guide and my colleagues. Eighty percent of human sensory input comes in the form of vision. When my most valuable asset disappeared, my world changed drastically–namely how I thought, communicated, and behaved. During the course of the thirty minutes in darkness, I experienced riding a ferry, crossing a street, visiting a grocery store, and attending a movie at the cinema without my eyes. Doing such simple tasks became ten times more challenging and would have been impossible without the guidance of the tour guide. There are few experiences like DiD that can change you. From a leadership perspective, DiD served as a tactile, experiential metaphor for the decision-making and team-building processes that leaders may go through. Business leaders are always required to “make decisions in the dark”– with tight time constraints, limited information about the present or future, and limited resources. In DiD, my colleagues naturally broke down our

communicative barriers. Because we were moving in a line formation, those in the front would have to take the perspective of those in the back and communicate what was happening. Bringing one’s business team on the same page is a valuable and necessary skill for any leader. The blind tour guide knew how to effectively guide my group, because he effectively adopted the perspective of those who have lived with sight their whole lives. As a result, he anticipated where my group would have difficulties. DiD illustrated the power of perspective-taking and open communication in leadership roles. A leader is not

players in the global business arena. Dr. Locke presented a nontraditional notion that being a socially responsible business actor is not just an image ploy or something that companies are pressured into. Corporate social responsibility makes sound financial sense in the long run, even though there may be some tradeoffs in the short run. While each business must evaluate whether sustainability initiatives are feasible, there is always some area in which businesses can do more. The golden rule of profit is in line with the philosophy of a more sustainable world—increasing productivity while reducing the costs. In this

A leader is not successful until he can leverage the backgrounds of his team members by adopting their perspectives. successful until he can leverage the backgrounds of his team members by adopting their perspectives and until he can be honest about his weaknesses in order to seek help from others. The modern leader is one who understands humility and cares about the humanity of others. The conference’s keynote speaker, Richard Locke, Deputy Dean of the MIT Sloan School of Management, communicated a progressive view on corporate and individual leadership. The MIT model of leadership teaches one to not only identify one’s strengths but more importantly to identify one’s weaknesses. No leader can be the best at everything he does. Psychologists have accepted and thus been able to design a better world through the idea of bounded rationality–that humans have limits to their rational cognitive abilities. A similar notion that leaders and successful humans are imperfect is a valuable insight. It allows leaders to be honest, generating greater productivity by building teams that complement their leaders’ weaknesses. Leaders not only should be able to understand their own limitations: they should also understand the limitations of the world and act as socially responsible

case, companies have to take into account environmental and cultural costs as well. Businesses are not just money-making machines. In an age when energy shortage is predicted to occur in the 2020’s in countries like Taiwan that are struggling to build traditional coal fire power plants to accommodate demand, the energy crisis is real and approaching. However, Dr. Locke states that water supply is an even larger issue that has been glossed over by the media. Companies like Nestle, Nike and the Li & Fung Group have picked up on this message and have walked towards goals that preserve environmental and cultural sustainability. These corporate leaders have realized that not only will such goals preserve the world for the future, but these goals are also necessary for creating greater success in long run business operations. Leadership is not about one’s ability to give the perfect answers all the time. Leadership is about humanity and a broader worldview that incorporates the perspectives of others. Leadership is being able to identify weaknesses and, more importantly, to admit them. A leader does not desire to gain respect through his success. Rather, he creates success through the respect he gives the world. BT FALL 2010 BUSINESS TODAY

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Executive Advice

BUSINESS TODAY FALL 2010

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Executive Advice

Climbing the Ladder of Success In a free market economy, industry leaders sometimes believe that value-based thinking and efficiency-based thinking are at odds with each other. With a constant emphasis on winning, how can CEOs, lawyers, and students also stay true to their core beliefs? This contribution explores The Code of Professional Conduct and how trading virtue for success is perhaps the most fundamental mistake made by professionals today. Can honesty and success go hand in hand? By Evan Chesler, Presiding Partner, Cravath, Swaine & Moore LLP

ur capitalist system is built on competition. We extol its virtues, we teach it as a discipline in our business schools, we have enacted federal and state laws to ensure its vigor. It is certainly a major driver of our prosperity. But like all virtues, it has a darker side. The intensity of competition is increasing. In a laboratory or classroom setting, that might seem like a good thing. But in the real world, that is not necessarily so. The globalization of markets, propelled by advances in processing and communication technologies, is exerting enormous pressure on prices and related margins. The ubiquity of information makes it more difficult to arbitrage price and quality differences. There is a smaller margin for error. Each competitive loss seems to be more important and competitors feel less able to absorb them. In that environment, there is far more emphasis on winning. To be clear, I am very much in favor of winning. But winning for winning’s sake, without due emphasis on the values that are embodied by the process, is potentially dangerous. The supercharged, outcome-driven marketplace is not limited to product markets. It has found its way into the marketplace for professional services as well. In my part of that market—the legal profession—we pride ourselves on having a well-

developed set of rules. The Code of Profes- order to make the job of finding the ones sional Conduct purports to tell lawyers what your opponent wants achievable, the court they may and may not do. So, in a sense, the orders you and your adversary to agree on pressure to trade virtue for success should be search terms that will be used electronically easier to resist for a group that has effectively to search the documents before the search is promised to obey a set of rules in exchange actually done. In an effort to exert control for obtaining a license to compete. over the process, your opponent insists upon But it is important to understand that giving you a set of search terms for your use. it is not that simple. If the point was only Upon receiving them, you realize that they that lawyers have rules and that they should will not uncover a small group of documents obey them (and if they don’t they should pay you have come across that are particularly the consequences), then there would not be unhelpful to your case and good for the much else to say. However, the challenge re- other side. sides not in the black-and-white space, but in —The relevant evidence in a case centers the gray. Consider these illustrations: largely around a series of meetings that took —Your adversary has served a request place inside your client’s company 10 years that your client produce a number of cat- ago. If a particular subject was discussed egories of documents. The request is poorly at those meetings, your opponent’s case drafted. In the course of reviewing thou- will be strengthened; if the subject was not sands of potentially responsive documents, discussed, that will help you. There is only you come across one that is quite harmful one employee left at your client who was at to your case. You go back and review your the meetings. He claims not to recall if the opponent’s document demand and discover subject was discussed but you don’t believe that it could be read so as not to call for the him. Your opponent has the burden to prove production of this document. However, that whether the subject was discussed and withconclusion is not clear because of the poor out the employee’s recollection, it is unlikely quality of the draftsmanship and, of course, that he will be able to satisfy that burden. you are quite sure that your adversary would My goal here is not to provide answers love to receive this document, if she knew it to these dilemmas. That is the stuff of law existed. school ethics courses (assuming they go —Your client has a huge volume of e- down that far into the weeds). Rather, my mails that may be relevant to the case. In point is to underscore that the opportunities

FALL 2010 BUSINESS TODAY

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Executive Advice

Now, some of this is nothing more than to know how you got to an answer than to to trade virtue for success abound, the incenroutine group dynamics. And it is also true know what the answer is. So he insisted that tives to do so are great and growing, and the that one responsibility of the lawyer is to fa- we adhere to what seemed at the time to be “right answers” are far from clear. cilitate the achievement of his client’s goals an overly formalistic, stylized methodology. So what is to be done? At the risk of within the boundaries of the law. But every He even insisted that we fold our work pagiving unsolicited advice (a dubious practice once in a while, the answer is “no” and it falls pers in a particular way, placing diagrams on for any lawyer), it is critical to recognize that to the lawyer to deliver that message. It is one side of the fold and the written “proofs” “how you played the game” still matters. It not an easy or popular position to be in and on the other, and he routinely lowered the may not be true in the real world that winthe outcome determinative forces at work in grades of students who got the right answers ning or losing is largely beside the point. But today’s marketplace only serve to make the but failed to show how they got them. I can how you played the game counts for a lot. It task even more daunting. But those are not still remember his often repeated admonimust be value-driven or you are not adding tion, “you didn’t show me how you got there.” justifications for trading values for success. the value you are there to provide. So my point is that competitors in genIndeed, they are precisely the circumstances I believe that quality clients actually eral, and lawyers in particular, need to infuse in which those values must be on display. still want lawyers for whom “close to the values into the process of getting the answer. At those moments, the ability to deliver line” is not the place they wish to be. To be From my experience, I am confident that any bad news and be listened to depends fundasure, there are clients who are willing and lawyer will get the wrong answer from time mentally on the credibility of the messenger. able to pay handsomely for lawyers who are And if the messenger has not consistently exto time. But that will not hurt the system. comfortable in that location. But lawyers hibited a value-based approach to problem What will endanger the system is getting with values can and should find other clients. solving, she won’t have the required credto the answer, whether right or wrong, by I have found that, quite often, the most the wrong route. We must each constantly important value a lawyer can provide is say- ibility. I remember taking geometry in high ask ourselves, “How did I get there?” We ing “no”. People charged with achieving a mission understandably get caught up in get- school. On the first day of class, the teacher, a must each challenge those who work for us ting to the goal. They see questions about the rumpled man with chalk dust in his hair and to show us the proofs. Since the answers are goal as obstacles to be overcome. They look on his fingers, told us that he loved geom- often obscure, it is critical that the process of upon those who raise the questions as chal- etry because it taught an important lesson getting to the answers is one of unassailable 10-8347 HARTINGad4-BT_CH_Layout 1 10/12/10 5:05 PM Page 1 that it was often more important integrity. BT about life: lengers to be repulsed.

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HARTING — Pushing Performance to innovative solutions. BUSINESS TODAY FALL 2010 24 HARTING, Inc. of North America 1370 Bowes Road | Elgin, IL 60123 | +1 (847) 741-1500 | more.info@HARTING.com

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Fighting for:

cleaner energy sources and the power to change.

The American Lung Association is fighting for a day when we can all breathe easier. Thatâ&#x20AC;&#x2122;s why we support cleaner energy sources that make The Lung safer. Association is fightingLung for Association a day when we can all for air the American air we breathe The American is fighting breathe Thatâ&#x20AC;&#x2122;s whybefore. we support cleaner energy sources that make in moreeasier. ways than ever Join the fight at FightingForAir.org. the air we breathe safer. The American Lung Association is fighting for air in more ways than ever before. Join the fight at FightingForAir.org. Book 1.indb 25

15/10/2010 16:20:33

tEch rEvolution

n today’s tech world, “Don’t be evil” may be a tougher company standard to uphold than originally thought. As Google’s unofficial motto, this simple phrase may be at odds with Google’s presence in China, a nation notorious for media censorship. Launched in 2006, Google China (www.google.cn) has had a brief yet turbulent history. From its inception, the search engine has been characterized by stringent regulation by the Chinese government. Google has also detected “unknown hacks” into its network system, theft of intellectual property, and a breach of the Gmail accounts of two human rights activists. Though no evidence has been officially presented linking these events to the Chinese government, the media has repeatedly criticised Google’s silence. As an Internet powerhouse, Google continues to grapple with a catch-22: abandon the largest potential market in the world in favor of free access to information, or play by China’s authoritarian rules. Yet Google is not alone. Approximately 20 companies, including Yahoo and Adobe, experienced security breaches that were detected on January 14, 2010. Dubbed by McAfee as “Operation Aurora,” a weakness in the Microsoft Internet Explorer server was identified as the entryway for the hackers. McAfee Inc. explains that, “The attack,

which was initiated surreptitiously when However, some skeptics claim that targeted users accessed a malicious web there is more to the story than a civil page… ultimately connected those com- rights crusade. Adding a pinch of spice puter systems to a remote server. That to the controversy is the current compeconnection was used to steal company tition between Google and Baidu.com, intellectual property and, according China’s largest search engine. Often reto Google, additionally gain access to ferred to as the “Google of China,” Baiuser accounts.” The coordination of the du attracts 64% of web user traffic versus hacks highlights the expertise and delib- Google’s 26.2%. Critics of Google see erate nature of the breach. As mentioned, the humanitarian justifications as a mere the impact of the hack on Google was a façade for a failure to integrate fully into game changer for the company, which, the Chinese market. Others even go so up to that point, had complied with far as to say that the American company China’s censorship requirements. facilitates the hegemony of Western ideThis year’s tug-of-war between Chi- als that are spilling over from the United na’s political clout and Google’s econom- States to Asia. Google’s current transparic momentum has resulted in unexpect- ency report asserts that, “We believe that ed decisions made by both. On March more information means more choice, 23, 2010, if you happened to be a main- more freedom and ultimately more powland China web user, you would have er to the individual.” This type of supundoubtedly encountered a DNS error port for individualistic values has been when surfing on Google China. This occasionally condemned as invasive to was not triggered by a faulty Internet local culture rather than being eye-openconnection or even a momentary hiccup ing and liberating. in the Google system, but by a deliberThough much of the initial friction ate block imposed by the government on between Google and China remains lathe site. Google’s reaction to this drastic tent, one must ask if this may be the calm measure was to redirect Chinese users to before the storm. Uncertainty still lurks Google Hong Kong. Due to the unique on the horizon. Eric. E. Schmidt, chief legal jurisdiction in Hong Kong, web executive of Google, expressed to the users there enjoy greater freedom of ex- New York Times that, “The situation in pression and a less filtered flow of infor- China is stable… and Google now redimation than the rest of China: thus an rects users to the Hong Kong site. But apparent loophole for the Internet giant. the Chinese government may change

BUSINESS TODAY FALL 2010

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tEch rEvolution

that arrangement at any moment.” For Chinese economic system is prosperous. the time being, it seems that Google will Instead, the question is whether China be at the mercy of China if it wishes to continue generating profit from Chinese web users. One interpretation of the current Chinese Internet atmosphere can be found in China’s economic policy. Other than the alleged currency manipulation of the yuan, it may be possible that China’s attempts at excluding Google from the market are a type of trade war or veiled protectionism. By cutting off Google from Chinese web users, there will continue to sustain the same rate of would be one less obstacle for local com- economic growth and simultaneously panies (such as Baidu) to thrive. Though dodge unfavorable foreign interests. The real test of the current InterChina’s remarkable economic growth net market in China will come along spurt may be inspiring to other nations, with the next face-off between foreign, in this case the nation has taken a step private and state interests. In the realm backwards from opening up its trade markets. It is possible that this failed of politics, this has been most recently maneuver would have safeguarded the noted by the internationally-recognised Chinese Internet industry from foreign Liu Xiaobo. A detained human rights accompetitors, yet the decision was lack- tivist in China, Xiaobo is the 2010 Noluster in comparison to other initiatives bel Peace Prize Winner. However, the implemented by means of authoritarian prestige of the award has not altered his capitalism. There is little doubt that the current judicial status. Instead, China

refuses to budge from its position and has censored most news related to the

Google continues to grapple with a catch-22: abandon the largest potential market in favor of freedom or play by china’s rules. award recipient. Nevertheless, there are still some “big picture” questions left unanswered. Will politics generally dictate Internet markets, and will this fragment the Web as a whole? Can concerns of US hegemony be addressed while still providing ample sources of information to users? Who, at the end of the day, holds final jurisdiction concerning Internet controversies? While no one is suggesting that Schmidt and President Hu Jintao become Facebook friends, it should be a priority to settle these issues in the immediate future. BT

Data unavailable, due to state secrecy No requests 1

Requests in last six months

4300

Source: Google Transparency Report - Government Requests

Access Denied? a world map depicting the number of requests made in the last six months by governments to Google for the removal of content or the disclosure of user data.

Book 1.indb 27

FALL 2010 BUSINESS TODAY

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tEch rEvolution

BUSINESS TODAY FALL 2010

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Tech Revolution

Qi Lu Developer of search engine Bing Qi Lu, Developer of Bing, IS the man behind Microsoft’s challenge to Google’s search monopoly. HE TELLS BT how this relatively new search engine implements the latest developments in artificial intelligence and machine learning in order to decipher your keywords and read your mind.

In this Interview > Bing’s TEchnology > Business & Marketing > Exciting New Features

TEchnology

Business Today: Can you explain the technology behind finding what the user is looking for just based on keywords? For example, the user can type the name of two cities and Bing will automatically look up cheap flights between the two cities. What was the process of coming up with those possibilities? Qi Lu: Let me actually give you a picture of the overall structure and then maybe elaborate, because the question you asked is a rather deep technological question. The idea of a search engine is to computationally understand user intent and use infor-

mation technologies captured in the digital universe to fulfill those users’ intent. In the specific case of a search engine, you have a search query, or the words people enter into the search field. There are many other forms of understanding user intent and providing the information that can fulfill those intents. Intent is generally defined as the purpose of the user, what the user has in mind. There are a number of computational steps that we go through to try and discern user intent and fundamentally there are several key dimensions of computation that we apply. First, we consider what we call the understand-match process and match the user with the web content

of two cities. Inside the digital universe on the web, there is a variety of different information that can capture information about two cities, from a novel about two stories happening in two cities to flights that connect these two cities. The key is to estimate the likelihood that the user will be searching to find flights. We have developed a sophisticated machine-learning statistical model to guess what the user really wants. Then we will construct our search result page to provide that information, an integral part of the search experience. For example, we might say that the likelihood that students searching the names of two cities are looking for travel information

we need to understand human language, the user, and the context and combine all of those to discern semantic meanings and ultimately the user’s intent that we are most confident they are looking for. Let’s say that the query was the name

between those cities is X percent, higher than any other purpose. Usually we find FALL 2010 BUSINESS TODAY

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Tech Revolution

that there is one dominant intent for a particular query so we use this information to construct a search results page. Another technical problem involves understanding language. A lot of times users may add additional natural language strings as part of the query string. So in addition to just typing in two city names, the user may add the words cheap fares, and that changes the nature of the query completely. So we need to understand linguistics. We are building a large suite of technology to have better capabilities to understand the language and the semantic meaning of that language. BT: Is that more database-based or more logic-based? QL: We use a variety of different technologies to try to understand semantics, many of which use existing search databases and all of which rely on some forms of logic. One traditional method uses both computer science and linguistics to generate “rules” for understanding what people are searching for. In practice, many of these rules are then modified by machines learning to adapt to changes in what people want. But first, we need to understand the basic interactions between semantic content and structure. For example, in English we know there are nouns, verbs, adjectives, and adverbs. You can use that knowledge about structure a priori to understand what particular phrases mean. Microsoft acquired a company called Powerset that focuses on using a variety of techniques to understand human language. We use their knowledge to help our engine recognize equivalent queries like “lowest airfare London Rome” and “cheapest airfare London Rome.” The last technique uses IP mapping to take advantage of a user’s location. For example, if they live in Los Angeles and type in a movie name we can direct them to a movie theater in Los Angeles. To summarize, at the higher level we need to understand what’s on the web that can possibly match with what the user is looking for. We need to understand human language, the user, and the context and combine all of those to discern semantic meanings and ultimately the intent of a user’s query to construct a search result page. So the question you asked is actually in many ways at the very core of search engine technology. 30

Business & Marketing BT: I frequently use Google as a search engine and it also contains recognition features like this. What was lacking about these other search engines? How do you distinguish yourself from them?

we view our fundamental focus as doing the best we can to provide a great search experience and we don’t respond to what our competitors do because we want to own our journey

QL: Instead of commenting on specifically what Google does versus what Bing does, let me discuss our product’s direction. Our focus is on understanding the semantics—what the user is trying to find—and then constructing a search experience that enables users to make informed decisions faster. If you recall, when Bing initially launched we were the first major search en- our users to make informed decisions. gine to have three columns. In most search engines you have the main column, which BT: Google recently implemented Google is the search engine, and on the right hand Instant, where you can immediately see the side you have ads. The reason why we have results of what you are typing in. Is there a third column is to discover the semantic anything that Bing is planning in response? intent of the user’s query. For example, if Or is that outside what you do? you type in two city names it could be for travel information. If you only type in one QL: Here’s how we think about the syscity like Seattle, on the left hand side will tem. We view our fundamental focus as also show results like attractions and res- doing the best we can to provide a great taurants. As it turns out, if you do semantic search experience and we don’t respond to analysis, the real intent of users often has what our competitors do because we want a substantial amount of distribution prob- to own our journey. At the same time, we abilities. Sometimes the user is looking for watch the evolution of the industry and restaurants in downtown Seattle, some- see if there are new features consumers like times he is looking for weather informa- and want us to provide. We give credit to tion, and sometimes he is looking for local Google for introducing new features and attraction information. So we put those innovations but all of those pieces are just links at the left hand side, and now we also the natural evolution of the search industry. put the link at the top, right below the que- We welcome our competitors’ new features. ry, to make it much easier to find focused We’re going to focus very hard on what information rather than having to scan the we do to ensure that we are not only very whole page. In addition, at Bing, we in- competitive but also that we provide a great stantly organize our results in what we call overall consumer experience. web groups. It’s not just a list of links, but a list organized by topics. We display a group BT: What about business strategy? Of the of restaurants or attractions so that the user many ways that Bing has been promoted, can quickly zero in on the area as opposed banner ads, TV, etc., which have been to scanning through the entire page. Those the most successful and which have been are many of the ways in which we focus slightly less so? on technological capabilities that improve search experiences and make it easier for QL: That’s also a very good question.

BUSINESS TODAY FALL 2010

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Tech Revolution

There’s a suite of strategies that we have to drive more usage and one of these strategies is brand marketing. Bing is a new brand so we introduced a brand marketing campaign to ensure that our consumers are aware of our brand and know what Bing stands for. We do a variety of campaign tactics including TV and online advertising and we have specific targets for measurements of awareness which are determined through surveys asking people

we would like Bing to attract new users and add value to other Microsoft products what they think of the Bing search engine and whether or not they use it. All of those are important measurement targets for us and allow us to optimize our marketing campaigns. On an ongoing basis we optimize what we do to improve our brand recognition. The other area of marketing deals with distribution. We try to make our search engine more readily available with the help of our distribution partners such as PC OEMs who put Bing as a search engine choice on the browsers of newly sold PCs. In these ways, we promote Bing as a brand and distribute the service to a greater number of users. But we are constantly searching for ways to optimize the effectiveness of our approaches. BT: Given the recent fallout between Google and China, what kind of opportunities do you see in that area? Do you view that as a positive thing for you or do you also view that as a challenge that you, as a search engine, have to face? QL: That’s a good question and here’s how we think about it. As I mentioned earlier, we really want to focus on what we do when one of our competitors makes a bad decision. Fundamentally we view China as a very strategic market and, for long-term growth, it’s very important that we are in that market and do a good job there. The

second thing that we focus on is building our products and making the Bing experience very strong and competitive in serving the Chinese consumers’ search needs. For example, when I go to China I always conduct focus groups in which I ask groups of Chinese people about their search needs. One thing we learned is that college stu- that most beginner users won’t know about dents and white-collar workers actually do and that you would like to share with our a lot of queries in English or other foreign readers? languages. Because Bing is a global engine and we have a lot of information that we QL: Yes, I have a lot of examples to share have “index-crawled” in both Chinese and with the readers. We have recipe finders for foreign languages, we believe that our over- users looking for recipe information, and all search experience will serve Chinese we have a special function that finds suitconsumers’ needs. That’s definitely one able recipes for people who have specific area in which we can do a better job than dietary needs. For example, if they can’t local search engines like Baidu because eat beans, they can use our search engine they are mostly only China-focused, but, to find recipes that don’t contain beans. as we operate globally, we offer greater ex- Another great feature comes from our partposure to international information. That’s nership with Wolfram Alpha. You can go just one example of the ways in which we to Bing and type in mathematical probare to provide a great search experience for lems or questions like “What’s the ratio beour users in China. tween the height of the Himalayas and the Golden Gate Bridge?” We integrated WolBT: So what is the role of Bing’s success fram Alpha to improve our search experiwithin Microsoft’s overall goal of continu- ence and move closer to achieving our mising to establish itself as an industry leader? sion. We also have visual search capabilities and video categories. I really encourage you QL: At Microsoft, we do have a well-pub- to explore the site because there are a lot of lished mission statement. Our company’s rich features that are part of the Bing exmission is to enable individuals and orga- perience. Now we need to do a better job nizations to realize their full potential, so of making those features more accessible to we provide a lot of products and services as our users. part of our plan to accomplish this mission. When building products like Bing, we keep BT: Who represents your biggest group of this mission in mind because the search en- user demographic at this time? gine is an important tool that enables users to effectively find the information they QL: It depends on the market. In the US need to make informed decisions. From we are very happy that our product is atthat standpoint, our success depends upon tracting an increasingly younger demobeing the favored product of our custom- graphic. Students in K-12 are drawn to ers while at the same time running a viable Bing because we have a lot of pictures. I business. To accomplish this we need to have two daughters. The older one just generate revenues and reduce costs over a went to college at Berkeley and the younger period of time so that our business can be one is in 6th grade and she goes to Bing profitable and provide steady returns for every day because the homepage pictures our shareholders. Finally, we would like have useful knowledge and information. Bing to attract users and add value to other For example, the pictures might be about Microsoft products so that the overall suite foreign places and if you click around you of Microsoft products can fulfill our mis- can find out more about that place so you sion of allowing individuals and organiza- see the beautiful pictures but you also gain tions to realize their full potential. That’s new knowledge. That’s why we are attractthe basis of how we measure our successes. ing younger demographics, which we are very excited about. BT BT: Are there any cool features in Bing Interviewed by Tiantian Zha

Exciting New Features

FALL 2010 BUSINESS TODAY

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Tech Revolution

Dr. JC Alvarez Dr. Alvarez is an independent Market Research, Retail Strategy & Corporate Training consultant with Santiago ROI, a business, marketing & strategic planning company.

ecently, I’ve coined my own phrase for the Social Media Networking that I must now dedicate my time to every day: “smetworking.” At first, I debated calling it “smeddling” because I felt I was intruding on other people’s affairs or business. But there is something about the word “meddling” that implies intruding without rights or property, and in social media sites, I have actually been invited to “meddle.” So I went with “smetworking” and I beg your indulgence as you read on. I was first introduced to “smetworking” as a work requirement. I had to set up a Facebook account a couple of years ago in order to help design a marketing campaign for a company. Immediately, I was inundated with “friend” requests. I am by nature a very social person, with a wealth of friends I have kept for years. But suddenly, there was this awkward sense of obligation to “friend” people I saw more as “acquaintances.” If I had really wanted to know the daily thoughts and actions, and mutually share my own, with these “acquaintances,” I would have maintained contact with them by phone or email prior to this. Obligation is a strange motivator, however, espe32

cially when you have mutual friends in almost 90% of adults age 18 and over are common who might later describe you utilizing social media networks, it was as rude for “dissing” their friend. So I clear that social media, like the Internet, accepted these “friend” requests, grow- was not just going to be a passing trend, ing my smetwork. but a growing network with a few chalWithin a couple of weeks, I found lenges. I committed to “friending” this myself in the midst of a common con- mass communication system. sequence of smetworking: TMI, or too Fortunately, there seemed to be an much information. I soon realized that abundance of very current online websome “friends” have way too much time sites, research, and radio and television on their hands and too much narcissism programs that addressed this very subin their heads. Some “friends” posted ject. Everywhere I searched, the topic several times a day, every self-indulgent of the pros and cons of smetworking thought and action, truly TMI and popped up. Search engines pushed relatmore than I really would ever want ed stories at me and surprisingly, despite to know about anyone. Before long I the high number of users joining smetwas forced to block their posts on my works, not everyone was a fan. Even as I Facebook account. Smetworking is sup- was writing this piece and refreshing my posed to make certain aspects of my life research, Harrisburg College in Pennmore efficient and effective, but people sylvania announced it was conducting who liked to use it as their personal an experiment in which the entire camhourly blog were killing the efficiency pus, faculty and students, were blockquotient. ing their connections to social network I had to do some quick account systems to assess the psychological and management to keep my smetworking sociological impact on the population. from becoming a “big waste of time,” as Clearly they were concerned about the I have frequently heard it described. I negative effects of smetworking and wanted to have a better smetworking ex- whether individuals heavily involved in perience. With Facebook announcing a this system of constant communication half billion users and reports citing that system could survive without it. When

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you add that to the release of the movie, The Social Network (a.k.a. the Hollywood-ized version of Mark Zuckerberg’s story), the buzz on social media is all around. There is a growing curiosity as to how smetworks really operate and whether they are the best thing for us as individuals and as a community. So what are the pros and cons of smetworking? Is it a great new communication medium or just a social play toy for young people? Will we all have to jump blindly on the smetwork bandwagon in order to be connected and successful, or will the system allow for the possibility that smetworks are not for everyone? I explored the possibilities. The Pros:

bringing issues to the forefront. A suc- their ads. It is a symbiotic relationship cessful political campaign today will that benefits both the customer and the most certainly have a strong social me- company. dia component. With many issues and causes vying for attention, it is hard to Social Unquestionably the biggest draws tell which ones will rise to the top inside such a vast system. In a recent radio for smetworks are, as the name says, interview, leadership of several cause- “social” and personal. People want to related organizations claimed that the be connected, to be part of a commusmetworks are now so inundated with nity. Many stay connected to family and cause-related issues that it is hard to friends by putting posts and pictures on stand out. While they still maintain smetworks. In a recent interview, David a presence on social media sites, some Kirkpatrick, senior technology editor at

Some of the problems associated with excessive smetworking include ADHD, the loss of face-to-face contact and personality disorders.

Global Community The true power of smetworks to create viral connections is perhaps most evident in the arena of issues and events. Social media networks are able to al- cause-related organizations tend not to Fortune Magazine, spoke of Facebook most instantly grow niche communities rely on smetworks as much as they did as the largest repository for photos in around a critical issue or event, locally, in the past, either for rallying or for fun- the world, with picture sharing as one of nationally or globally. It is hard to forget draising. the top reasons people go to Facebook. the global rallying which occurred durFor the growing numbers of indepening the protests of the Iranian election Business dent contractors who now work from in June 2009. Although the government Many large companies and small home, smetworks provide an “around had imposed a phone and media black- businesses today use smetworks as an the water cooler” place, which keeps out, the world had a real-time, front important business resource, for infor- them from feeling so isolated. As people row seat to the crisis, thanks to Twitter mation and ideas coming in and going move away from the small towns, into and the tweets from the front-line. An out. Small businesses, from bakeries to the big anonymous cities, smetworks equally powerful, but lesser-known sto- book authors, find it easy to develop a can introduce you to groups and indiry involves a young programmer in Ba- Facebook page to develop a viral public viduals with whom you share common ranquilla, Columbia who in early 2008 presence. Larger businesses, in particu- interests. Last but not least, there are those created a page on Facebook protesting lar consumer products companies, now the FARC Guerilla Movement and their have a staff dedicated exclusively to so- who turn to smetworks hoping to find rampant kidnappings and killings of his cial media networking sites. The compa- Mr/Ms. Right or Mr/Ms. Right-Now. fellow countrymen. Overnight, follow- nies strive to engage the customer with While some claim to have met frauds ing from his initial invitation to 100 Facebook and Twitter updates, cou- with double identities on smetworks, friends to join, the members of his Face- pons, contests, new products, promo- research seems to point to users havbook protest group grew to 1200. After tions, and interactive smart phone apps. ing more confidence in the people they one month to the day of his initial post- While they are putting out information, meet on social networking sites, as oping, ten million people joined him in a companies also draw in critical informa- posed to relationship sites, because they countrywide protest against the FARC tion, through various statistical counts, are validated by their “friends.” guerillas, the largest single demonstra- comments, and responses. tion in Columbian history, if not the Claims have been made that Face- Professional Professional sites are seeing memworld. book has the single largest database on Politicians and their parties are a population that ever existed, allowing bership increase by 1 million users per aware of the power of smetworking for their advertisers to specifically target month. Research seems to indicate that

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while many professionals have joined business networks such as LinkedIn and Xing, real maximization of opportunities from these networks is a learned art that requires a more complex set of skills to manage and see results. Col-

vacation. Posting too much personal information on smetworks can also impact employment situations. The web is full of stories of lost job opportunities resulting from embarrassing personal

If it’s on a smetwork, you are vulnerable. The growth of smetwork sites is outpacing the development of rules, laws, and etiquette. leges are now offering classes in proper professional smetworking and new companies have sprung up which help individuals build a strong “personal brand” and online presence to showcase their talents and stay ahead of the competition. As Human Resource Departments turn more frequently to these networks for recruiting purposes, individuals will have to become more adept at mastering professional smetworking skills. Social media experts seem to agree that when it comes to professional networking, signing up with every site, and adding more posts, tweets and mentions isn’t necessarily the answer for securing a job. The user should have a strategy for a well-managed, targeted, career-specific, goal-focused message and online presence.

posts, pictures and information. Research reported that almost 75% of HR Departments now have hiring policies in place that require HR personnel to research applicants online and review their social media pages as part of the hiring process. Not only can individuals be compromised by their own posts, but other users can tag you in compromising photos on their pages. Companies are also reporting that even after being hired, HR personnel are following employees posts on smetworks, with some posts and pictures having led to termination (a touch of Big Brother, perhaps, but employers feel they are operating within their rights).

Vulnerability Today, most people are comfortable searching the web, buying and selling, The Cons: posting personal information, whether for job applications or personal bankTMI ing, on the Internet. The same, howReleasing too much personal in- ever, cannot be said for social media formation on smetworks can have nega- networks. With growing regularity, tive consequences on multiple levels. the news media is reporting stories of With people reporting a higher trust worms, malware, hacking, and security level with others on social networking breaches on social media sites. Perhaps sites, they lower their guard, revealing it would be more accurate to say: if it’s too much personal data and leaving on a smetwork, you are vulnerable. Sothem vulnerable to crimes from scams cial media networks are still very young and identity theft to robbery. A recent in their development (Facebook is only night news program centered on of- six years old), and while they are becomfline crimes resulting from TMI, such ing more and more integrated into our as home burglaries which occurred after modern culture, the growth of smetusers announced they would be away on work sites is outpacing the development 34

of rules, laws and etiquette. As social media networks grow, so too will the regulations governing the safety and security of the users on smetworking systems. In the meantime, there is clearly still an information vulnerability users need to be aware of. Excessive Smetworking Surprisingly, there were many reports found which warned about the serious repercussions of excessive smetworking, most of them psychological and sociological. Some of the problems identified as being associated with excessive smetworking include increased Attention Deficit Hyperactive Disorder (ADHD), lower work productivity, decreased academic performance, the loss of ability to have personal, face-to-face contact, limited attention span, the inability to focus on or complete a project, diminished parent-child and partner/ spouse relationships, preferring digital connections instead of interacting with each other, personality disorders characterized by excessive narcissism, self-centeredness, insistence on instant gratification, vulnerability to cyberbullying, sexual predators, and smetworking addiction. While no single problem was identified as an absolute negation to participating in smetworking, several did surface in different reports as serious repercussions from excessive smetworking that must be considered. Addressing any of these problems can be accomplished by individuals, families, friends or by working with a professional. The debate on the use of smetworks goes on and will continue to grow as more studies are conducted and more information is revealed. More studies are examining user motivation behind joining a smetwork, questioning what is the need, the goal and possible outcome from its use. Whether one sticks a toe in the shallow part or jumps in the deep end of the smetworking ocean, individuals should arm themselves with the proper tools to maximize their smetworking experience and minimize their risks: knowledge, information, discernment, selective restraint, and a healthy dose of savvy. BT

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How to Drop Out of the Ivy League and Start a Social Network What happens when smart and driven students trade in the econ textbooks for some real life entrepreneurship experience? Innovation, failure, difficult decisions and network building all ensue, and that’s just the beginning of the story. One such student gives BT a first look at the roller coaster ride of launching an internet startup. Joseph Perla, Princeton University

can tell you how drop out of college Founders at Work, by Jessica Livingston, a and start a social network that will brilliant entrepreneur and interviewer at (ironically) grow into a leader in the YCombinator. The book’s stories are stircollege admissions arena. I can tell you ring; James Hong’s amazing viral growth how to start a social network for scientists of HotOrNot will make you want to do whose lead investor is Peter Thiel, the man the same and become an overnight millionwho funded Facebook and started PayPal. aire. These writings are inspirational. After Finally, I can tell you about how to help I read them, I itched to start something, launch the hottest new rival to Facebook, anything. I started to build things and talk also funded by Peter Thiel and the Google to more people about these interests. of Japan, SoftBank, and then move on to work on Stickybits, which seeks to revolu- Step 2: Be friendly. tionize the way people interact with everyThrough a friend and my work, I met day consumer products. Mick Hagen and Jeremy Johnson in my spring semester. We shared a common inStep 1: Read Paul Graham’s essays. terest in technology startups, and started The story starts during my freshman talking about what we could do together year at Princeton. I had read all of Paul by drawing on all of our skills. Graham’s essays, which describe his own Jeremy was interested, as he still is, in experience starting ViaWeb, which he the higher education market. What could eventually sold to Yahoo! for tens of mil- we do to help improve college admissions, lions. These essays were instructive and the students at the colleges, and the college stimulating. experience? He had an ambitious plan, but My advice? Read good books. Blog I proposed a simpler one: let students form posts are useful, but books have much a social network with ties to college admismore in-depth information and are more sions officers. Students could display their insightful. Blogs give you tidbits of infor- test scores, interests, and activities online, mation, but a good book gives you all that and admissions officers could search for and more, and at a deeper level. Those them. We’d charge on a per-student found hundreds of pages are worthwhile. Read basis. I reasoned that the College Board

has the same basic idea with PSAT scores, so I called them (an abbreviated transcript following): Step 3: Test your assumptions. Me: Hello, my name is Mark West erner from Marbur College. CB: Which college? Me: [will they look it up?] Marbur College, a small liberal arts college in New Jersey. CB: Marbur, can I help you Mr. Westerner? Me: We are interested in purchasing some student PSAT scores and mailing address information. How much would that cost? CB: Let me see, you can buy 1000 names and addresses for $280. Me: Thank you. [I quickly hang up] I decided we would sell student information to colleges and thought it would be a goldmine. Colleges already pay lots of money for incomplete data. Now, they would get to recruit in a way that they had never been able to before. Everyone would win. This was our primary business model, which is still used at Zinch. Step 4: Use university resources to get

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feedback and advice. With a business model in place, we went to professors who might be able to help. Ed Zschau helped us write a business plan. We also met with our Dean of Admissions, who said she would love an electronic way to target individual students. Armed with a business model, we entered an undergraduate business plan competition. We won second place, and, more importantly, we received valuable feedback from the experienced venture capitalist judges. We tweaked the presentation, and then entered the Princeton alumni business plan competition, which is open to all Princeton alumni. We won first place to clamorous applause. Step 5: Ask for forgiveness, not permission. The next step was to reach out to admissions officers to learn more about what exactly they wanted and how we should sell it to them. How could we do this? There happened to be a conference on college admissions in June at Harvard University with admissions officers from across the country. This would be the perfect place to make connections. We certainly weren’t admissions officers, but we decided

to crash. When we drove up to the confer- conference, and had told us not to come in ence, we didn’t expect to be allowed in, but the first place. We were kicked out, but not we hoped that we could get some informa- before we had the contacts and market retion and trade business cards. When we search we needed. We drove home happy. arrived, we saw that the conference was in There are many more unbelievable stories a hotel lobby. We walked up, put on nam- from the formation of this company, but etags, and started mingling. (For the re- those will have to wait for the memoirs. cord, whenever asked, we would always tell the truth, which was that we were Princ- Step 7: Don’t drop out of school. eton students interested in learning about For most students, this advice is corcollege admissions. We didn’t eat any of rect: you should not drop out. While there their food or interrupt any classes. We are a special few students who will find merely observed and met target clients.) school unnecessary for them, this won’t be true for most of us. I decided to stay in Step 6: Do your research. school and stop working on the company, We sat at the back of a panel discus- which was the right decision for me at the sion with the admissions officers of Har- time. Mick and Jeremy continued on difvard and the University of Pennsylvania. I ferent paths. couldn’t believe what I heard out of their As an epilogue, Mick is now in Calimouths. “It is really hard to find good stu- fornia with Zinch, which is now so big that dents that are the right fit for our colleges. it is expanding to students in China. JereWe would love to be able to find a student my co-founded and now runs 2tor, which is with these exact interests and academic re- leading the online college education space. cord, pick her out of this area of the coun- Through 2tor, Jeremy and John Katzman try, and recruit her.” These were exactly the (founder of the Princeton Review) put real, clients we were trying to tap into. leading universities such as USC online, so The next day at the conference, we met that students from around the world can even more people, and they loved us. Sud- take classes entirely online and receive a denly, a woman walked up to me with a full diploma. You would be lucky to get to very stern face. She was the organizer of the know these guys. SPRING 2010 BUSINESS TODAY

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Step 8: Integrate into your local community of entrepreneurs, or, lacking one, build it. Having just returned from my startup adventure, I wanted to evangelize the gospel of Paul Graham back on campus. Un-

interview. It was going to be a busy weekend. In the Bay Area, it feels as though almost everyone is involved in startups. And there are overwhelming resources to help you in both the early and later stages. Be

Fresh from my startup adventure, I wanted to evangelize the gospel of entpreneurship. Financial firms were hiring in full force, but students knew nothing about starting a business. fortunately, the Princeton Entrepreneurship Club was defunct. Financial firms were hiring in full force, and almost no students knew anything about starting a business. I decided to start it anew. I grew it from zero members to hundreds, and made sure that the new leaders in every year learned how to run the club and raise the following year’s leaders. The network of people at Princeton now involved in startups is growing, and we have helped each other flourish in innumerable ways. Step 9: Talk to other students from your school who have taken time off. On one occasion, the club invited James Currierto give a talk. James, who had taken time off from Princeton, had started Tickle.com, which sold to Monster. com for an incredible amount of money. He proclaimed, “Silicon Valley is absolutely the place to start a company. It’s the forefront of technology and is where Google, Yahoo, Intel, Oracle, and other technology companies started.” He inspired me to do it. I had to see what was so special about this place. How can it actually be that great? What in the air breathes life into world-changing tech empires? Step 10: Pick a startup hub like Silicon Valley. On the next break from school I bought a flight out to California for the weekend. I emailed every company on TechCrunch headquartered in Silicon Valley, San Francisco, or Berkeley to ask for an 38

friendly, learn what you need to know, and everyone will do everything they can to help you be successful. If you do decide to stay in your hometown, acknowledge that you do so not out of a desire to maximize the success of your startup, but for some other reason, like comfort. Startups are risky, not comfortable. Get a job at Microsoft for comfort. I was done with comfort; I wanted to get involved in a startup.

mark quick decision. These kinds of lucky coincidences happen all of the time in the Bay Area. Now, thousands of scientists use Labmeeting to manage their labs and do research. Step 13: Help other entrepreneurs. In the meantime, I was helping another young entrepreneur start up his own company, Josh Weinstein. He refused to drop out, but I did help him get GoodCrush off the ground. Since its launch, GoodCrush has been relaunched as CollegeOnly and funded by several notable people and venture firms (including Thiel). It will face off against Facebook on its turf: the college market. Through the Entrepreneurship Club, I’ve advised and helped set up half a dozen different companies. They may or may not do well, but the students will certainly learn a great deal. In just a few years, we have seen a tremendous amount of interesting startups come out of Princeton, far more than I thought would happen in such a short time.

Step 14: Let others help you. Josh introduced me to Billy Chasen at Stickybits. Stickybits is an iPhone app that Step 11: Ask a dean about how to take a lets you scan barcodes, and then attach imleave of absence, and how long you can ages, video, or text to the barcodes. It’s like take one. a virtual bulletin board, so that people can Contact the nearest dean about tak- have conversations around products. We ing a leave of absence, who will point you have exciting new ideas for how to transin the right direction. Luckily, Princeton form the way you interact with consumer was very supportive. Other schools may be brands, but those can’t be discussed yet. less so. Our backers include Mitch Kapor, Chris Sacca, First Round, and Polaris Ventures. Step 12: Reach out to your friends and The amount I’m learning from other team brainstorm. members is tremendous. I contacted some friends I had met in California, asking them if they knew of Now it’s your turn. other people interested startups. I spoke Peter Thiel just launched a new proto Mark Kaganovich and Jeremy England, gram that will give you money to drop out and we talked about creating a social net- and launch a startup. Startup businesses work and practical tools for managing re- are on the rise as the economy is improvsearch for scientists. Mark and Jeremy went ing. Facebook and other companies are ento Harvard and are hard-core scientists. I abling newer business models. More people met them through a friend of a friend, and are on the Internet than ever. This is really we got along right away. the perfect time to start a company. ConWe started Labmeeting, with funding sider doing it now, but don’t drop out of by Peter Thiel, who met the Labmeeting school. Meet people, make friends, brainteam at one of the many events at Stan- storm, build a community, and help others. ford. He saw the quality and depth of the You will know when it’s time to leave and thinking of the team, and made his trade- create your own startup. BT

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BUSINESS TODAY FALL 2010

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B ill M c de r mott Co-CEO of SAP – On How to RUN BETTER Bill McDermott is the co-CEO of SAP, the world’s leading business software provider. After graduating from the Kellogg School of Management at Northwestern University, he went on to become a director at Under Armour, Inc., PAETEC Holding Corporation, and Ansys, Inc., focusing primarily on the technology sector. He became a member of the SAP Executive Board in 2008 and was appointed co-CEO in February, 2010. Business Today: SAP has a history of fostering the creation of collaborative ecosystems that unite customers, software developers, and business strategists to deliver innovative, efficient products and research management systems. How does SAP maintain a distinct competitive edge in an industry where so many ideas and product designs are shared?

would take us too long to bring to market or we’re simply responding to a big idea we hadn’t thought of. And then occasionally we’ll do large scale M&A which I’m sure we’ll cover in this discussion at some point, such as business objects or Sybase to take the company into brand new categories. BT: How does SAP’s approach to providing IT solutions for large corporations differ from its approach to providing similar solutions to midsize businesses and small startups? Does efficiency mean different things for different businesses?

on business outcomes. Whether you are a small, medium, or large business, you have to get a return on your invested capital, not just from your IT investment, but, more importantly, from enabling the business strategy in the first place. And that, more and more, is what executives of companies will be held accountable for. When they go into the boardroom, the board of directors will want to know whether the strategy is rock-solid, execution is good, and if they can consistently report on progress. This leads to considerations of transparency, accountability, corporate culture, etc. In the big picture, I believe the number one difference between SAP and others is that we use the thought-leadership cycle from strategy to business outcome.

Bill McDermott: You have to listen to the customer. One of the things that we have prided ourselves on in the last 38 years is building our innovation from the customer in versus SAP out. We listen to the customer on what they need today and what BM: What’s interesting is all businesses they think they’re going to need two, three, want the same thing. They want to grow, four, five years out. And then it is our job to they want to be the best-run businesses. invent something they haven’t thought of The small ones want to be big ones, and the yet. The greatest brands in the world aren’t big ones want to be bigger. What we try BT: You are one of SAP’s two co-CEOs. just responding to customer requirements; to do is align everything around customer How does dividing the responsibilities of they’re actually innovating around designs strategy. By understanding markets and executive leadership contribute to SAP’s the customer hasn’t thought of yet to cre- industries in different market segments, success as a company with such a diverse ate new categories. We try to do that in 25 we pick up the best business practices of range of clients and activities all across the industries, and as you can imagine, that’s the best-run businesses in the world. We globe? really a big task. We are now approaching then tailor our best practices to the stratearound 100,000 customers, across all mar- gies that are shaping industry. Everything BM: I must say that the world is more fasket segments, in the world and are running begins with a rock-solid vision and a rock- cinated with this topic than Jim, or myself, SAP in 130 different countries. It’s really solid strategy. From there, we emanate a ever thought it would be. The reason is that, key that you keep the R&D cycle strong technology roadmap that will enable that at SAP, the co-CEO structure is the norm. and continue to invest in research and de- strategy to be executable. Most strategies The original founders of the company were velopment. Not surprisingly, we out-invest are good but, unfortunately, fall apart at co-CEOs, and when one of those foundanyone else in our industry as a percent the execution phase. And generally, when ers moved on, there was another co-CEO of sales, which is good. We also perform you ask people why that strategy fails, it structure. This has worked for SAP. We M&A [mergers and acquisitions] on small is because the strategy wasn’t enabled by like the balance of power, we like complicompanies that have innovative ideas that the right technologies. Finally, we focus mentary skills coming together, and we like FALL 2010 BUSINESS TODAY

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executing in a global world where each can better. You might say, “Well that’s pretty Another area we really wanted capitalize on be on opposite ends of the globe. I think ambitious, Bill, what gives you the right to is in-memory computing capacity. As you that really helps segregating the duties of think you can do that?” Well, 60% of the offer more of your applications on-demand, your day to day work; therefore, SAP gets world’s transactions run through an SAP you also want to think about in-memory, a force-multiplier effect of two people that system. So, we obviously serve an important because as hardware costs drop, and procare equally about the mission, have com- role in the global economy. In fact, in some ductivity, bandwidth and computing power plimentary skills, and are executing on cases, entire industries run on SAP systems. goes up, you want to put more and more of both ends of the spectrum to drive produc- We feel we fulfill a higher purpose, which the computing power in-memory on these tiveness into the company and really move is to help those industries, economies, and kind of devices. Overall, on-demand and the culture forward. The outside world has people run better. This happens at the busi- in-memory will drastically enlarge our marbeen fascinated by this, but Jim and I have ness level—we have to make every customer ket opportunity. And then, finally, there are worked together for 8 years now. It’s really a best-run business, but it also happens at a upwards of 4.2 billion mobile consumers of important when you build a relationship business-consumer level, where by 2015 you business who want more applications on that it’s built on a foundation of trust and have to make a billion people really produc- their mobile devices in order to collaborate mutual respect. I think that’s probably why tive and happy with our systems. When the on Facebook, tweet, jump back into their CRM [Customer Relationship Manaement] system and execute a customer request, or simply manage their day-to-day business activities. In China, for example, three out of four knowledge workers skip the PC all together and go right to the mobile. This fact drove us to a pretty bold decision in the first 100 days of our leadership here as co-CEOs, namely to acquire Sybase. That acquisition was worth $5.8 billion because Sybase is the best middleware infrastructure company in the world. What they do is move those mobile applications onto devices so consumers like you and I can do our jobs faster and in real-time. Basically, we were chosen for this role, because since board, Jim and I reviewed that strategy, we having amazing growth, a great vision, and we’ve been co-CEOs, the great results, mo- were participating in a 110 billion-market driving new categories to discover new martivation, and inspiration of our people and opportunity, which is good, but then we ket opportunities are the core aspects of our ecosystem around us speak for themselves. said, “Why not make it 220 billion?” Af- strategy that will substantially grow SAP I seriously believe that we are on an early ter much change, we decided to focus on between now and 2015. business model here. I think that other on-premise business applications that run companies, when they see our success, will companies all over the world. We will do BT: SAP is a fast-growing company with a follow our lead. Not that there aren’t any that in 25 distinctly different industries, distinct office culture. For this reason, many now—there are, but I think they’ll start to in small, medium, and large customer seg- young students are attracted to it. What adfollow it in greater numbers. ments. Furthermore, we know that there vice would you give a student who is looking is a big market called on-demand, which is to pursue a career in the software industry, BT: How exactly do you see SAP growing an evolution of cloud computing, allowing or even business management in general? and evolving in the next decade and what customers to take greater advantage of the changes in the IT services industry do you investment others have made in technol- BM: The best piece of advice I would give anticipate being the most challenging for ogy infrastructure and bandwidth within anybody with a great education and a SAP as a competitor for market share in the the cloud. In response to this need, we are dream is to think really big. Don’t waste immediate future? launching a revolutionary product at the any time thinking average thoughts. Save end of July called Business by Design. The that for somebody else, because there is a BM: Well, if you believe in two being bet- new product takes all the core operations of perfect correlation between the size of your ter than one, in this co-CEO model like I a company, on a multi-tenant platform, on ambition, your dream, and the outcome do, then it would only serve to be a natural an end-to-end business process basis, and you will receive in your lifetime. There are outcome that SAP would be an amazing enables you to run your business. Whether going to be a lot of people that tell gradugrowth company. Since we want to be an you are in China, Germany, the UK, or ates that they can’t do things, that they amazing growth company, our vision has the United States, or Brazil, you’ll be able have to do something or behave a certain to be set around something big and bold. to access this solution from the cloud and way, and while some of that conforming That vision is simply to help the world run run your company. That’s a game changer. is necessary to break in and break through,

I believe you are successful when you create an aura and a role in a company or world where other people aspire to be like you, because the character you exhibit on a day-to-day basis exudes inspiration.

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Tech Revolution

never change the DNA, the actual scope BT: What is your definition of success? of who you are, what your values are, and where you really want to go with your life. BM: My definition of success is really a There’s going to be some upside, there’s go- 360-degree view of the person. I don’t being to be some downside, there’s going to be some breaks and there’s going to be some setbacks. The number one critical success factor that I have seen in my lifetime is that the people that get knocked down but then come up swinging refuse to be held down. Thus, you should push, go for it, work the network, think about the long-term ambition, and then think about the roadmap to get there. It’s the model I gave you for SAP. There’s a vision, there’s a strategy, and lieve that you are successful just because you there’s a roadmap to execution. Now man- are wealthy. I don’t believe you are successagement, obviously, is an exciting career. ful just because you have a big business card But managing what? A lot of people want and title. I don’t believe that you are successto manage something, but they don’t know ful simply because you have a lot of people what they want to manage. I personally that are on your organizational chart that think there is a big deficit in the world of report to you. I believe you are successful leaders. There are plenty of managers. We when you create an aura and a role in a have a real shortage of leaders, and a lot of company or world where other people aspeople say, “Well, what’s the difference be- pire to be like you, because the character tween a manager and a leader?” A leader has you exhibit on a day-to-day basis exudes one main trait that is found in all leaders. inspiration, confidence, and a followership. Although they may come in various sizes, That character is what really sets the tone on shapes, backgrounds, and schools, the one whether you will succeed or fail in life. How thing they have in common, is a group of many people have we seen that were on the followers. If you are born to lead, you will mountaintop that fell down hard because know early on, because you will have at- they didn’t have the character to sustain tracted followers for your whole life. Get themselves? In the end, it’s the character in a company where you can get training, card that will make or break you. mentorship, and have role models of whom you can say “I want to be like her,” or “I want to be like him,” because these are the kinds of intangible effects that come with great brands. Great companies that have great training and management programs develop you for your future ambitions. Get into those kinds of companies early on. A lot of people, if they have the dream to lead and manage, go for the money. No, no, no…I would go for the management program, the training, and all those dreams I had when I was young, but I would take a pay cut. Why are we so worried, at 22 years old, about the pay? How many of you can actually eat more than one steak at a time anyway? So my philosophy is to get all the foundational elements early. Build on them. Hustle. Work hard. Do things that are difficult to do, because later on, those dividends will be paid to you 10, 20, 100s of times over.

BT: Is there a particular legacy you want to leave as a CEO? How does it fit or differ from SAP’s business vision or the vision of previous CEOs?

Why are we so worried, at 22 years old, about the pay? How many of you can actually eat more than one steak at a time anyway? BM: Well, I think everybody brings a certain leadership style to the equation, so comparing yourself to others is easier for others to do than you. But I will say that if there is anything that I want to leave behind, I want others to say that I put people first and helped them feel totally empowered, entrepreneurial, and creative so that they could go for every ambition and goal they had. That should be the kind of environment I leave behind. And incidentally, that same environment should help families create jobs, manage wealth, send kids to great schools, and make the world a little bit better of a place. That would be a great legacy to leave behind. BT

Interviewed by Juliet Tempest and Vivian DeWoskin

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on campuS

BUSINESS TODAY FALL 2010

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Sustainability

on campuS

Student activists have moved their protests from the picket line to the salad line, as college residents become increasingly conscious of the environmental impact of cafeterias and waste. Going trayless just got trendy.

in University Dining Halls by Tommy Tobin, Stanford University

et’s face it—students are busy people. We balance numerous, competing demands on our time both inside and outside of the classroom. While we hear a parade of clichés and platitudes about “making a difference,” these ideas can wither away in the hustle and bustle of daily life without any concrete plans or details on how to actualize positive outcomes. Fortunately, social change does not require an enormous commitment of time or effort. Small actions can amount to large change to benefit individuals, serve communities, and, even change the world. We, as students, can do this all in an unlikely place—the university dining hall. Dining halls may not be the first place you think of when contemplating social action. Let me be the first to say that you should let your heart and your hands follow your stomach. Dining halls represent an opportunity for student intervention to forward both environmental concerns and social justice. Eating in university dining halls provides a veritable cornucopia of options. Dr. David Kessler’s The End of Overeating illustrates that we may be conditioned to overeat in cafeterias because of the sheer volume of food available. Within these dining halls, food waste is almost inevitable, as the exact number of individuals at any given meal cannot be accurately forecasted prior to mealtime. Dining administrators have an incentive to overproduce within the context of this uncertain information. If they underproduce, diners (their clients) will be inconvenienced and unable to access their prod-

uct. In contrast, over-production will not only ensure clients’ access but also provide some opportunity for reduced effort later, as they can reserve some foods for multiple meals. Even so, the excess food produced is too often tossed into the trash. As a result, food waste is even budgeted into the operational costs of university dining systems. Food waste in America is a significant national issue. According to The Guardian, Americans toss out a staggering 40% of the food produced in this country every year. Put simply, nearly half of the food produced in the United States is thrown out annually. From a global perspective, this statistic is staggering, considering that one billion people worldwide suffer in the throes of hunger and domestic food insecurity. According to the Environmental Protection Agency (EPA), if just 5% of America’s food waste was used to feed the hungry, four million people would be fed every day. In addition to its social implications, food waste represents a loss of 2,030 trillion British Thermal Units (BTU) in terms of the national energy system according to a July report from Environmental Science & Technology. Most strikingly, wasted food costs the United States at least $100 billion every year. As students and as diners, we have the power to change this. But how? Among the simplest ways that students can make an impact is just to talk to their dining hall staff in both a personal and an organized fashion. Writer and restaurateur Aaron French, who operates the blog EcoChef.com, notes that, “Despite how it may appear, it is extremely important to chefs

and dining hall managers that their customers, the students, like their food.” Students get to “vote with their forks,” selecting what they want to eat, the size of their portions, and the amount of food they leave on their plate. On the personal side, Jonathan Bloom recommends fighting the conditioned hyper-eating of Dr. David Kessler’s research. Bloom, arguably the nation’s expert on food waste and author of the forthcoming American Wasteland: How America Throws Away Nearly Half of its Food (And What We Can Do About It), challenges us to take sensible portions and choose “taste not waste.” Additionally, Bloom recommends thinking of “All you can eat” as “All you care to eat” and thinking of your stomach rather than your eyes when deciding what to put on your plate. Bloom notes that the university dining hall system’s “all-you-can-eat” nature means they send more than their share of food to the landfill.” On a broader level, students can organize to make change happen. My campus, Stanford University, and colleges around the country have gone “trayless” to varying degrees based on student interest. At Stanford, a student-originated survey went out to students with the help of the dining system and the student government, resulting in a trayless program which has reduced environmental and energy waste. A report from LeanPath, a technology company that provides food waste tracking systems, notes that trayless programs can cut post-consumer food waste by 25-30%. Compounding these efforts, students FALL 2010 BUSINESS TODAY

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On Campus

can encourage their peers to take less food. neering to politics, “hunger is an issue that efficiency, and efficiency usually leads to The “Love Food, Hate Waste” program at can be solved within their lifetime and that greater profits.” Compounding this, “even Stanford, which students helped coordinate, they can have a part to play in it no matter small reductions in waste quantities can rehas raised the profile of wasted food at the what their chosen profession or career path sult in labor savings,” as less waste means less university. Students scrape off their plates in life.” staff time spent dealing with its transport into bins designated for either compost or For Coutts, the recovery of unused and disposal. Matt Rothe, Stanford Dinthe landfill, ensuring that as little as possi- food to feed the community is plain “obvi- ing’s Sustainable Foods Coordinator, utible is actually thrown out. Students can also ous.” Successful food recovery programs, ac- lizes the information he receives from the push for more sustainable sourcing at their cording to Jonathan Bloom, are those that Stanford Food Recovery Organization to campus, arguing for local, organic food “get healthy food that would otherwise be lower rates of food waste across the residenwith a less severe environmental impact. thrown away to those in need…the impor- tial and retail units of their operation. AcWhile efforts to raise awareness, pur- tant thing is getting needed calories to the cording to Rothe, “The data from SPOON sue source reduction, and motivate sus- hungry, which as a bonus keeps food out of plays a vital role in our ability to measure the tainable sourcing are worthwhile, Douglas the landfill.” Programs like Student Food efficacy of our sustainability programs and Casson Coutts, a UN World Programme Rescue at Boston University and the DC it is quite helpful as a management tool in official, highlighted service-learning and Central Kitchen’s multi-campus Campus understanding where to focus our efforts food recovery as two of the most powerful Kitchens Project illustrate the potential of and resources.” student interventions. Coutts sees student food recovery programs to utilize a wasted More generally, salvaging food waste action at university dining systems as a resource. The Stanford Project on Hunger decreases greenhouse gas production. way “for students to give their time—their (SPOON) salvages approximately 14,000 When food goes into landfills, it rots and most scarce resource—to meet the com- pounds of food every year to provide over produces methane, which is over twentymunity and fight hunger.” On assignment 60,000 meals for the local community. Un- times more harmful for the environment from the UN to start partnerships with derstanding that students are busy, volun- than carbon dioxide. A 2008 CNN report universities, Coutts has worked to create teers only work 30-60 minutes every week noted that a drastic reduction in food waste Universities Fighting World Hunger, whose to pick up food from dining locations and could decrease the nation’s overall environmembership now boasts over 150 universi- take it to a central campus freezer, where it mental impact by 25%. ties around the world. The organization is transported once a week for use by a local Hunger and environmental degradahosts annual international summits and charity, InnVision, in Palo Alto. Just small tion are two of the most salient problems promotes academic partnerships, incorpo- actions, when aggregated, can lead to tre- in today’s America. Hundreds of students rating hunger studies into existing curricula. mendous impacts in the local community. across the country and around the world are Over the past two years, Professor Coutts Feeding the hungry is a noble goal, but participating in programs like Universities has seen his classes at Auburn University does it make economic and environmental Fighting World Hunger, Campus Kitchens, balloon from 20 students to 72, as students sense? Absolutely. According to French, or Slow Food. By recovering food for the come to realize that, whatever their major, “Ultimately, sustainability in relation to hungry and advocating for sustainable pracfrom agriculture to business or from engi- business is almost always synonymous with tices, you can be an agent of change. BT

Dining digits

e am each

40% 5% $100bn 25% 14,000lbs

the amount of food produced in the US that is thrown away by American consumers each year

the amount of food waste that could be used to feed four million hungry people every day the amount of money that wasted food costs the US economy each year

the amount that trayless programs could cut food waste by at universities the amount of food salvaged by the Stanford Project on Hunger each year

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On Campus

Josue lajeunesse Princeton University Custodian – On The Philisopher Kings

Josue Lajeunesse has worked as a custodian at Princeton University for over 15 years and is featured in the documentary “The Philosopher Kings,” which follows the lives of eight janitors at universities across the country. After finishing work at Princeton, Lajeunesse is off to his next job, driving folks around Princeton, NJ in his taxicab well into the evening. With this characteristic determination, Lajeunesse has been able to send money and supplies to bring purified water to his hometown of Lasource, where villagers would otherwise have to travel to a nearby mountain for clean water. By Mark Lock

Business Today: What did you do when you were in Haiti before coming to the US? Josue Lajeunesse: Before I came to Princeton University, I went to high school and then went off to military school. When you come here [the United States], it is totally different. It’s a different life, different personality, different system, different law. So you cannot act like when you are at home. Home is home. To come to a country that is different is pretty difficult for every foreigner no matter where you are coming from– China, England, Paris, everywhere. But sometimes in bigger countries there are a lot more opportunities than in smaller countries. Some countries, like my country, have problems, so that’s why I came.

to do. The schedule and calendar is always changing. My regular hours when the kids are not here is 7AM to 3:30 pm. When there are so many kids here I have to be here from about 6 AM. It really depends on what we have to get done. After I get off from the university, I start my limo service from about 3:30 PM and then go to about one or two in the morning. Then I go home, sleep, and come back here.

dents check out and check in. Some people will call and I will have to attend to a lot of things during this time but we deal with it. Our goal is to make the place better. To me as a man, I never see anything as hard. In life, there are good times and there are bad times. It’s part of life. BT: How were you approached and why did you decide to participate in “The Philosopher Kings” documentary?

JL: First of all, I did not know anything about the documentary. Then the JL: Well, you have to do what you have to University office contacted me and said do, but even I cannot keep on doing that. they wanted to interview me first on the Sometimes you just have to take care of phone. It was not just me. They also interbusiness. viewed fifteen to twenty janitors. When I was on the phone the director was very BT: Have there been difficult times interested in what I had to say. I did not working here? expect that the documentary would be viewed by so many people, because it’s BT: What does a typical day as a PrincJL: There are always good times and dif- not like an action movie! eton University custodian look like? ficult times. In difficult times you will JL: I wake up at five or six depending on have to deal with it. It’s part of the job. BT: After “The Philosopher Kings” docwhen they need me and what we have The busiest time of the year is when stu- umentary was released, what kind of imBT: Then that’s very little sleep.

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On Campus

pact did it have in your life? Have people reacted to you differently? JL: We have been traveling to places, many colleges. We went to Washington, Cornell University, upstate New York, Ithaca University. In Princeton, people have told me how good the documentary is whenever they see me. BT: How did you first start the drinking water project in your hometown in Haiti that has now become your trademark?

help fundraise and whatever money they raise they send to Generosity Water. The project still has a long way to go. There is still a cleaning project there that I really want to do. We also want to start a school in my hometown to help the people in the town. It is difficult, but I will figure out how to get it started. BT: How long have you been working on the water project?

JL: Honestly, this started a very long time ago. Since I was a kid I always wanted to help my hometown—make JL: A lot of staff here at the University it a better place—but I did not have the support me in this. In addition, an orchance to do so at the time. My brother ganization called Generosity Water supand I started this water project on our ports my project. They are located in own money. Now the water project is California, and the people who run it getting done, but there are still improveare Jordan Wagner and Michael Muniz. Many of the students in the University— ments that can be made. We can extend I respect them a lot—also support my the water project, but my dream for good project after seeing the documentary. I water in the town has gone through. I started the project on my own and fin- feel much better because the people there ished about 50 to 60%. Generosity Water now are much better. The kids do not get is helping me to complete it. The students sick from bacteria. They used to get sick

from the water because it was undrinkable. Now I am really happy. BT: How do you keep in touch with your family in Haiti and how often do you go back? JL: Since the earthquake I have been back eight times. I also went with “The Philosopher Kings” crew and Generosity Water to Haiti to film a Philosopher Kings part two and help with the disaster in the area (Note: La Source, the follow up documentary focusing specifically on Lajeunesse’s water project, is in post-production). A lot of people travelled with me to help. An organization called One Hundred for Haiti offered us their cars and private jeeps to travel to different areas, and I am very thankful for that. BT: Was the area where your family lived affected by the earthquake? JL: Some of my family members were in the capital Port-au-Prince and yes,

Philosopher Kings Documentar y Review

n early 2010, The Philosopher Kings documentary won an overwhelming cult following among university students across the nation. Facebook and Twitter accounts buzzed nonstop with praise, surprise, and curiosity about a new documentary on the janitors that work in the halls of our very universities. Directed by Patrick Shen and produced by Greg Bennick, The Philosopher Kings outlines the experiences of eight janitors, delving into their personal stories, knowledge and aspirations in life. While custodial work may not seem particularly interesting in real life, onscreen the film intrigued viewers and brought awareness to those that comprise this workforce. Who are the Philosopher Kings? Josue Lajeunesse is a janitor at Princeton University by day, taxi cab driver by night, and the primary breadwinner for fifteen family members in New Jersey and Haiti. More importantly, he is a constant reminder of how one can never be too busy to create real social change. With his hard earned funds, Lajeunesse started a water project in Haiti. Corby Baker is a janitor who uses leftover

art materials at his workplace, Cornish College of the Arts, to create his own masterpieces. Luis Cardenas is the survivor of a traumatic drunk driving accident, when he was struck one morning driving to his workplace at Caltech. Melinda Augustus is one of fifteen children and a custodian at the University of Florida. Oscar Dantzler of Duke is described by the blue devils as a father figure, acting as a mentor to the undergraduate students. Michael Seals is learning what it means to be a father after years of making mistakes and is supporting his family by cleaning at U.C. Berkeley. Gary Napieracz, who was sent to Vietnam as a youth, had to learn quickly about the importance of trust. Jim Evener of Cornell was barely nineteen when he was called to serve in Vietnam. One day, he woke up alone in the middle of the jungle, shot in the back and unable to walk. As a Princeton student who lives in the same hallway as one of the janitors documented in the film, I attended one of the first screenings of the documentary with certain expectations in my mind about the direction of the film. Upon watch-

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On Campus

they were affected big time. Even in the countryside, my brother’s house cracked right in the middle and the whole front was destroyed. Thank God nobody died in that house. However, one of my cousins—my mother’s sister’s son—he lost all of his family. Him, his wife with four kids, and aunt. The earthquake was a destroyer. I get a call and I realize I have lost ten members in my family. It is painful but what can we do? We can try to do something to prevent this from happening, but only God can prevent this. We can only pray. BT: Given that you are around students all the time, do you have stories of how students have helped you and how you have helped students? JL: As I said before, students help me by supporting Generosity Water. I respect a lot of the students here. They always have a good attitude and are very human. They care about humanity. It is my job as a university staff member to serve the stu-

dents—to make this place as good as pos- in my life. They are here in the States, so sible. You never have a place where people I am sure they will be better off than I are 100% perfect but I would say 99% of was. They will be educated well and have the people I meet at Princeton are great. more opportunities. Second of all, I want Sometimes, things can get messy in the to serve the kids down in La Source to dorms but I don’t complain—kids are give them the opportunity to be well edkids sometimes and I treat them like my ucated and prepare them for the future, own. When my own kids make a mess in so they will not be at the same level they the house, I don’t get angry at them, I just are at now. That’s my goal, and I know have to help them out. Sometimes when God will protect me to work hard. Now the small train that goes from Princeton there’s the cleaning project I want to do station to Princeton junction breaks and the water project is being completed. down late in the night, I drive 3-4 stu- I want to build a school to train the kids dents to Princeton junction in my limo at in my hometown so they can go to Unino cost. There are many ways in which I versity and come back and serve the town. When I die, I know that I have passed on help the students and they help me. something and that the younger generaBT: We talked about your past and pres- tion can continue to carry out the kind ent. What do you see in the future for of work I do. Before I was taking classes you? in Mercer, but I have kids so it’s very busy. I have stopped because it’s just too tiring JL: Well, there is still a lot that must to be to drive my kids where they need to go accomplished. Right now I am working and also take classes. However, I will go on my own kids, trying to get them to be back and take classes once my kids have the best they can be. I do not want them driving licenses. Those are the three big to face the same difficulties that I faced plans for my future. BT

Interviewed by Mark Lock

ing the film, I felt moved by the unique stories woven through the plot, but was surprised by the way the director chose to present the documentary’s pearls of wisdom. Boiled down to its core, the film was not about the janitorial lifestyle and the effects of that profession on the individuals at all. It simply presented the stories of interesting people who just happened to be janitors. The film did not shatter any notions of what a janitor actually does—what you see is what you get. . In this sense, all of they hype surrounding the fact that these individuals were janitors was misguided. No matter what professional context you place them in, the stories would be just as heroic, just as incredible. In terms of the technique of the director, the film’s presentation is modern and flawlessly cohesive. Although scenes of different janitors’ interviews and actions are interspersed in a non-linear fashion, the film never feels disjointed. The attraction lies in the graphic design and typography between scenes. By incorporating graphic design elements, the film feels comfortably informative and young at the same time. BT

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Goldman Sachs: A Survival Story A

The W ord on Wall Street By Brian Nwachukwu

ccording to the US National Bu- ket. Rather, they continued to package, of the payout stirred quite a controversy, reau of Economic Research, the repackage, and sell mortgages to their leading to suspicions about Goldman’s recession ended in June 2009 af- investors. While their investors were dealings with AIG prior to the financial ter an 18-month tenure. While officials unable to protect themselves from even- crisis, Goldman’s involvement with the declare that the recession has been over tual losses, however, Goldman hedged bailout of AIG, and the investors who for a year-and-a-half, it is clear that the its bets and continued to make profits seemingly profited from AIG’s demise. American and global economy have been on many of its deals. In 2009, Goldman This was merely the beginning of Goldsuffering from its aftermath for a signifi- posted $13.4 billion in profit while pay- man’s public relations issues. cantly longer period of time. With the ing back TARP funding. On Wall Street, On April 16, 2010, an aggressive national unemployment rate currently Goldman Sachs could do no wrong, and Securities and Exchange Commission hovering around 9.5%, according to the Goldman CEO Lloyd Blankfein was the (SEC) filed a civil lawsuit against GoldUS Bureau of Labor Statistics, the effects belle of the ball. Goldman employees man Sachs that accused the investment of the financial crisis have not been fully have been awarded bonuses totaling bil- bank of misleading its investors by creatassuaged by either the landmark legisla- lions of dollars and offered high-power ing a mortgage-backed security (in this tion passed by the Obama Administra- positions at competing firms. After the case, a Collateralized Debt Obligation tion or the Fed’s persistent implemention financial markets hit rock bottom, when or CDO) that was designed to fail, so of low interest rates. Even with these dra- the dust cleared, Goldman Sachs stood that they could profit from both selling matic efforts, banks are still unwilling to tallest amongst the rubble. it to investors and betting that the seculend and businesses are still unwilling to rity would fail. This particular CDO was hire long-term employees. The US econ- AIG, Controversy & SEC just one of many the SEC had been inomy has slowed to a glacial pace, with a The financial crisis led to an accel- vestigating, leading many to believe that nominal GDP growth rate of 1.6%, a rate eration of the perpetual finger-pointing the manipulation of investors through trumped by Germany’s 2.2% this sum- game between Washington and Wall CDOs was a regular practice during the mer. With such dismal numbers being Street. Because of the clear state of eco- financial crisis. The SEC alleged that the released on a regular basis, it’s hard to see nomic emergency, however, Washington hedge fund Paulson & Co. paid Goldhow anyone could emerge from the 2007 seemed to have no choice but to keep man Sachs to structure a CDO that was financial fallout in strong condition. the Wall Street giants from tumbling compiled from the subprime mortgages and crushing everything that stood be- of states with highly overvalued housGoldman Sachs low them. Both the Bush and Obama ing markets (such as Florida, California, The ominous signs of an imploding administrations heeded pleas from Wall and Arizona). According to the SEC, housing market appeared suddenly, leav- Street for massive bailouts supported by Goldman pressured credit ratings agening most investment institutions strug- taxpayer dollars. The Fed initially loaned cies to overvalue the safety of the CDO gling to manage their losses. In the midst $85 billion to a crumbling AIG that was and then sold it to their investors while of these collapses, however, Goldman unable to overcome its massive debts. withholding information concerning was still able to make billion-dollar prof- However, about $13 billion of the bailout Paulson’s involvement in the structurits. Financial juggernauts such as Morgan money went to Goldman Sachs. The scale ing of the CDO. Paulson supposedly bet Stanley, Bear Sterns, and Merrill Lynch wilted under their own toxic assets, but Goldman garnered praise for its ability to navigate the tumultuous credit markets. With superb business acumen, Goldman found a way to absorb the blow of the financial crisis. The strategy was to sell off the risk-laden mortgage-backed securities and instead purchase insurance from American International Group (AIG) as protection from any other securities-related losses. At the peak of the financial crisis, Goldman would reap a windfall of profits if AIG paid the subsequent insurance claims. But this doesn’t mean Goldman was entirely out of the mortgage marSPRING 2010 BUSINESS TODAY

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The Word on Wall Street

against the security, winning gains identical to the losses of the other Goldman clients and investors. News of the allegations caused a drop in Goldman stock prices, signaling not only a financial predicament but also one of reputation.

ton and on Wall Street. On July 15, the SEC announced that Goldman Sachs would pay a $550 million settlement and alter its business practices in response to the allegations of fraud. In settlement papers, Goldman conceded some form

million dollars in assets—not quite your middle-class American. Most important, however, is that the SEC did not prove any wrongdoing on the part of Goldman Sachs. For all anyone knows, Goldman Sachs simply outsmarted the competition. But make no mistake, there are multiple situations where Goldman Sachs came out the clear loser. The particular case discussed centered on only one allegedly fraudulent deal but the SEC has stated that it would conduct more investigations of similar deals. Goldman Sachs is also facing other suits and a fine of £20 million by the UK’s Financial Service Authority. The FSA has also accused Goldman Sachs of neglecting to disclose the fact that they were under investigaof negligence: “Goldman acknowledges tion by the SEC. Since the accusations that the marketing materials for the … of fraud and signs of more potential letransaction contained incomplete infor- gal trouble, Goldman’s stock prices have mation.” Evidence against Goldman was taken a precipitous dive of over 18%. But presented in the form of incriminating while Goldman Sachs has taken a seriand profanity-laden email messages. At ous blow, it is still trading at significantly a hearing of the Senate Permanent Sub- higher prices than any of its rivals. In committee on Investigations, members comparison, Goldman remains a beheof the committee quoted emails by Gold- moth. It’s simply a matter of time before man employees in which they described its stock price returns to previous levels. the relevant transaction as “shitty” and read aloud messages of large profits Repercussions gained from betting against the housIt’s clear that Goldman’s actions ing market. While Goldman still de- during the crisis have already helped nies any wrongdoing in its transactions sculpt the new financial landscape. This at the start of the financial crisis, it has July, President Obama signed into law a sustained a serious blow to its reputation controversial reform bill to increase govamong the average taxpayer. ernment oversight of Wall Street. ConThere have been generally mixed sidered the most dramatic financial refeelings about the settlement between form since the Great Depression, the law the SEC and Goldman Sachs. In terms revamps the powers of several of regulaof publicity among “Main Street,” the tory agencies and further empowers the SEC is the clear victor. The settlement Fed. This past May, Goldman Sachs anappears to severely punish Goldman nounced the creation of their own BusiSachs for its actions during the financial ness Standards Committee that would crisis, as $550 million is a large sum of review the company’s business standards money to the everyday person. The aver- and advise the Board of Directors on relage American views Goldman Sachs as a evant matters. Goldman also has promcorporation that cheated the system and ised to return to a more client-focused deserved some kind of punishment. But business model, something they strayed if one looks at the situation from a differ- from during the financial crisis. With ent perspective, there is a drastically dif- dramatic financial reform in DC and ferent outcome. To a firm that generated Goldman promising to alter the way they over $45 billion in 2009, the settlement do business, Wall Street is clearly changis mere pocket change. While its reputa- ing. To what extent? Only time will tell, tion among Main Street is not ideal, its but it is clear the Goldman Sachs will be primary investors are those with over $10 a powerful player far into the future. BT

The average American views Goldman Sachs as a corporation that cheated the system, but for all anyone knows, they simply outsmarted the competition. Goldman immediately denied all accusations, claiming that the issued statement by the SEC was “completely unfounded in law and fact.” Goldman insisted that there was no backhanded dealing whatsoever and their intentions had always been aligned with those of their clients. As for the accusation of masterminding the short-selling of subprime mortgages they themselves created, Goldman said that they simply did what other firms chose not to do: realistically revalue their securities. While other firms continued down the path that led them into the financial mess, Goldman was prudent enough to purchase expensive securities insurance and protect itself from the housing market. Goldman also asserted that it actually lost money on the controversial transaction. Another argument in Goldman’s favor is that all of the investors involved had access to expert advice and made their own informed decisions. Goldman cannot be held responsible for the actual decisions of their clients. Client confidentiality also factored into Goldman’s defense, as it was and is vital to its operations as an investment firm. Goldman fought this suit tooth and nail. Settlement At the beginning of this past summer, Vice President Joe Biden dubbed the period the “Summer of Recovery.” While economic recovery is still yet to be seen, history was definitely made in Washing54

BUSINESS TODAY SPRING 2010

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Showbiz

BUSINESS TODAY FALL 2010

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Showbiz

donald trump jr. Executive VP, Trump Organization – On Riches, Real Estate and Reality TV

Donald Jr. directs new project acquisition and development for The Trump Organization throughout the world – in areas from Eastern Europe to Southeast Asia, the Middle East to South America, and mainland China to the United States. In addition to new project acquisitions, Don actively oversees The Trump Organization’s property portfolio, which contains over 70 projects. As a co-host of The Apprentice, he sits alongside Ivanka Trump and the legendary Donald Trump to build the next generation of leaders in the Trump organization.

Business Today: The Apprentice has just entered its tenth season. With so many reality shows swarming cable television today, what keeps Apprentice fans tuning in? Donald Trump Jr: People keep watching because it’s something everyone can relate to. The situations that the contestants are put in mimic those that the average worker faces on a daily basis, and being able to see how my father, a great business mind, dissects a situation can be very useful. The fireworks in the boardroom are pretty fun to watch as well! BT: One noticeable difference between this season of The Apprentice and past versions is the reward system for the winning teams. Instead of flying on a private jet to celebrate, winning now means an opportunity to speak with industry experts about meaningful experiences. Is this a sign of the times? DT: Definitely. In the past, the rewards

for winning were more superficial—that worked when the average contestant who was fired could go back to their job and make a great living. Today, we’ve had to adapt a practical, yet aspirational approach, and I think that everyone, including the viewers, can take something away from it. Additionally, with the rewards being skewed towards a concept of mentorship, all the contestants on the show are getting something out of the experience and not just the person who will come out on top in the end. BT: Whether selling ice cream or an advertisement campaign, the contestants on your show appear to spend more time playing the role of salesmen than businessmen. Are these roles actually one in the same? DT: Not always, but sales is an essential part of any business transaction. If you can’t sell yourself, your ideas, and/or your product, it’s very difficult to attain a high level of success. There have been

many great concepts or business plans that have not gotten off the ground because the people who created them didn’t understand how to sell them. Whether one likes sales or not, it is a fundamental reality of success in most cases. BT: Over the past ten seasons of The Apprentice, what mistake is most repeated by unsuccessful contestants? DT: Not standing up for themselves when someone is killing them in the boardroom, and then going on to compliment their own work. If you did good work, don’t let someone annihilate you and then fight back once their done! I will never understand that mistake, but it seems to happen over and over every season, and all the people who do it seem to get fired for it. I am hoping that at some point the contestants will learn. BT: On the show, your father is famous for putting team members on the spot and asking them to single out the most FALL 2010 BUSINESS TODAY

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Showbiz

unproductive member of the group. do anything at a slower pace. On one hand, firing the “weakest link” makes the teams stronger. At the same BT: What is the most difficult part time, however, this can be a divisive tac- about working for your father? tic. How do you find a balance between

I think we have always known that the biggest downfall of any family business is fighting, so we do whatever it takes to avoid it. honesty with your employees and maintaining a positive, team-oriented mentality? DT: The truth always manifests itself in time. A contestant can throw another competitor under the bus for no reason, but we are always able to see what’s really happening. In the boardroom you may only see 20 minutes or so of my father and his judges deliberating, but in reality, we are filming for a long while and while a lot of the decision making “material” ends up in edits, we’ve taken the time to study what’s gone on. We always feel that we are making the right decision based on the performance that we see as a whole.

DT: Being on the other side of the boardroom table. BT: What is your relationship like with your siblings Ivanka and Eric? Has work-

ing together been a challenge or an asset? DT: We have always had a great relationship and work surprisingly well together as a cohesive unit, given the alpha personalities we all have. I think we have always known that the biggest downfall of any family business is fighting, so we do whatever it takes to avoid it. BT: What advice would you give to the graduating senior about to step out into the business world? DT: Find the field you love, go there, and give it everything you have. Don’t get suckered into the better opening pay at a place you don’t love. If you don’t have the passion you will never be the best at what you do. BT

Interviewed by Caroline Hanamirian

The same is true in the workplace—the strongest and most competent individuals are those that remain standing in a “real” work environment. If a weaker worker tries to sabotage a stronger player, it usually doesn’t work out in the long run. The stronger individual’s qualities and work product will always rise to the top. BT: How did your time as an undergraduate at the University of Pennsylvania ultimately influence your career path? DT: My time at Penn really just drove home the notion that I want to do what I am currently doing. The individuals at Penn are some of the smartest, most aggressive and motivated people anywhere in the world. Once you start competing at that level and thriving, it’s hard to ever 58

BUSINESS TODAY FALL 2010

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naked-juice.indd 4

05/03/2010 11:05:00

Showbiz

BUSINESS TODAY FALL 2010

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Showbiz

nasim p ed r ad Saturday Night Live Castmember – On the Business of Laughs Nasim Pedrad is the first Iranian-American cast member of Saturday Night Live. She performed as part of the ImprovOlympics, The Groundlings, and the Upright Citizens Brigade Theater following her graduation from the School of Theatre, Film, and Television at UCLA. She appeared in ER, Gilmore Girls, and her own show, Me, Myself & Iran, was chosen for the 2007 HBO Comedy Festival in Las Vegas.

Business Today: Comedy is not a traditional course for females in the entertainment industry. Do you feel that your gender has presented itself as a barrier at any point in your career?

exposed to so many things in your young college life that it can be as helpful as actually working a job in comedy. I ended up meeting a lot of my classmates who I would write and perform shows with independent of our formal curriculum. Those are people with whom I continue Nasim Pedrad: I really don’t. Through to stay in touch with. After graduation, all of my training in comedy, I never felt those different networks were really helpin any way discriminated against because ful in breaking into the industry because of my gender. Thanks to people like Tina we weren’t doing it alone. Fey, you’ll find that it’s a lot less uncommon for women to pursue comedy. So by the time I was doing it, it really wasn’t BT: How early were you involved in thethat crazy. And, if anything, I feel like ater? it was exciting because more and more NP: I knew from a young age that I wantwomen are doing it. ed to perform. High school was just the BT: How did your time as a student at first chance that I got because I went to a UCLA influence your early career path? public high school with strong arts fundDid you ever feel that you were at a dis- ing, allowing me to audition and perform advantage relative to the actors who skip in many plays. formal education to break into the indusBT: You were born in Tehran and had a try earlier? successful one woman show entitled Me, NP: It definitely helped becase, if noth- Myself and Iran. How has your Iranian ing else, college can be a great way to gain heritage influenced your comedy? life experience aside from the obvious formal training and education. You’re just NP: My heritage is part of my identity,

so it’s definitely influenced my comedy. I have a lot of funny characters in my extended family that have inspired some of the characters I’ve played in my one woman show. I come from a big, loud, fun family and they’ve always encouraged me, even though it might have been more common or traditional to go to law school. As far as material goes, a lot of times when you begin to create your characters, especially early on in your career, you pull from things that you know. My Iranian heritage definitely came into play there—I kept observing relatives and quirks about them that I found fascinating. BT: Who is your comedic idol? NP: Early on, I would say Lucille Ball. When I was a kid I would watch I Love Lucy. What she was doing was not only funny, but was so ahead of her time. As I grew up, Cheri Oteri on SNL, and then Tina Fey. Tina was really inspiring because of how much she also wrote. Your writing affords you many awesome opportunities to perform. After I graduated FALL 2010 BUSINESS TODAY

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Showbiz

For anyone that’s trying to break into comedy, my biggest piece of advice would be to never stop generating material. Don’t wait for opportunities to be brought to you. from UCLA I focused more on my writing because I didn’t just want to sit around and wait for a new audition to come up. BT: What has been the biggest surprise coming on as a new cast member on “Saturday Night Live?” NP: The biggest surprise has been honestly how incredibly nice everybody is. I expected—I didn’t know what I expected! I feel like right off the bat I was welcomed into a family. I thought it would be more cutthroat, but everyone is so incredibly kind to one another. It’s really just a group of people writing things that are funny, and that’s the best part about it. BT: Have you always envisioned yourself

as part of an ensemble cast or do you hope to pursue a solo career?

a very, very tiny part of another sketch but I did it on one of the Thursday shows and she’s just super fun to impersonate and my impersonation definitely comes from a place of love. I think the most challenging one for me was Barbara Walters, just because so many people had done it before me. That was fun in a challenging way to tackle. You’re not starting with a blank slate with Barbara Walters! BT: Do you have any advice for students in film school now interested in pursuing an acting career?

NP: For anyone that’s trying to break NP: I love being part of an ensemble cast; into comedy, my biggest piece of advice messing around and laughing with every- would be to never stop generating mateone else are some of the most fun parts rial. Don’t wait for opportunities to be of the job. I wouldn’t say I’m itching to brought to you. You have to try to write pursue a solo career anytime soon. I love everyday if you can. If you do have an outbeing part of an ensemble on SNL and let where you live, like a theater where you would certainly be open to it in the future. can test yourself out and put your work You feel like you’re part of a team, going on its feet, do a sketch or an improv show. into the trenches with other people. I just Any sort of outlet where you can generhappen to have an amazing, supportive ate material is what I would recommend doing—it’s the only way you’ll grow and group that I get to work with everyday. get better. Then, when an opportunity BT: Who is your favorite famous face to presents itself, you’ll be ready. In the end, make sure you love it, because it can be impersonate on SNL? hard at times. BT NP: I had fun doing Kathy Griffin. It was Interviewed by Caroline Hanamirian

BUSINESS TODAY FALL 2010

nasim.indd 62

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ShoWbiz

Moneyball: by Siddharth Damania, Stanford University

s a life-long, die-hard Minnesota Vikings fan, I never thought I would be cheering for any football player from our border rival Green Bay Packers. But this year, when I landed Packers QB Aaron Rodgers as a pick on my fantasy football team, I knew a change in attitude was in order. The fantasy world has long been an integral aspect of the fan experience in many of the major sports leagues, but its popularity is now penetrating other branches of the sports world. Put simply, fantasy sports have changed the way people interact with sports. The challenge now is for companies to change the way they interact with fantasy players. In the most common versions of fantasy sports, people draft teams of professional players that “play” against other teams, accumulating points based on the statistical performance of their roster. Some leagues have a fairly predictable, turn-based draft system while others allot a fixed amount of fantasy money per player and hold a cutthroat auction process, by which the highest bidder gets the player. The format for competition may be a “roto” league, in which each team simply competes to pile up the best statistics over the course of a season, or a “head-to-head” league, in which fantasy players match the statistical merit of their teams against each other over given periods of time. Whether the sport is baseball, which involves almost daily fantasy roster maintenance over the course of a 162-game season, or football, which requires only that players set their rosters for the NFL’s once-a-week slate of games, fantasy sports can be a full-time commitment. The duties of fantasy aficionados include obsessively keeping up with news involving their players, most importantly injury developments, as well as the latest rumors and forecasts involving their players’ expected output, playing time, and anything else that could affect their statistical performance. Perhaps most importantly, fantasy players spend much time trying to figure out which

unwanted player to pick up on the waiver wire and which trades to make in order to improve their team’s performance. Only a phenomenon as powerful as fantasy sports could induce bored high school students and mid-career professionals to dust off their mathematical skills and use advanced statistical measures to predict the performance of recruited athletes. While it’s a bit humorous to imagine not only teenagers but grown adults centering their lives on the minutiae of the sports world, fantasy sports do have a real economic impact. The fantasy football sector alone is worth $2 billion. The broader world of fantasy sports is worth between $3 and $4 billion annually, according to a study by the University of Mississippi. The huge size of this market should not come as a surprise. Any time millions of teenagers and adults have a common obsession, there exists a great opportunity for businesses to provide beneficial services and profit in the process. Media network ESPN, for example, now routinely runs segments containing fantasy sports content, and even runs advertisements for the online fantasy football service that they support. The market for fantasy sports is crowded with companies who hope that fantasy leagues will use their programs and services. These companies realize that fantasy sports players constitute a deep, profitable market with a wealth of customers worth competing for. However, ESPN and other companies that help fantasy aficionados organize and predict their teams’ performance are only servicing part of the activities of fantasy enthusiasts. In addition to roster changes and statistical comparisons, an integral component of playing in fantasy leagues is betting money on your team’s future success. Many leagues take money from each of their members at the outset, with the agreement to pay the first few winners at the end of the season. Who helps manage this money? Websites like LeagueSafe.

BUSINESS TODAY SPRING 2010

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ShoWbiz

Innovation in the World of Fantasy Sports com are moving to take advantage of this aspect of fan- tain a steady stream of cash, making the company a tasy sports. These rookie companies have found a path depository institution with periodic, large infusions to profit in an industry that is eager to grow. of capital earmarked with fixed withdrawal dates. If LeagueSafe.com has a business model in which customer usage and thus capital influxes are substanits clients, the members of a fantasy sports league, pay tial enough, the fantasy sports company can invest in their entrance fees into the company, which then safe- commodities, bonds, real estate, or low-risk mutual ly and securely deposits the money in a FDIC-insured funds and function like a normal depository institubank. At the end of the season, they distribute the pot tion with the benefits of being able to control the risk of money back to the winners of the fantasy league. factors of the timing of capital influxes and the timing This is clearly a useful and economical service—there of withdrawal. In a sense, it would be a less dynamic, are no management fees, the money is FDIC-guaran- but more risk-insulated bank. Given the recent trauma teed, and the winner doesn’t have to go through the on Wall Street involving excessive amounts of risk and embarrassing hassle of bothering friends to pay up (or leverage, this tradeoff might in fact be very attractive. having people drop out halfway through the season The costs of setting up the website, taking in fanand ask for their money back). The company—de- tasy football-lovers’ money, and then letting the games pending on the number of users—may be taking in begin seem low compared to that of many other startthousands to millions of dollars, based on interest for up companies. With advertising and other potential up to six months. streams of revenue, these rookies could hit a home While already impressive, it is possible that this run in the near future, especially if such a service is business model could be made even more dynamic and blended with the actual servicing of the fantasy league. profitable. Suppose that a company copied this con- This would help attract more customers, and thus cept, but instead of depositing the money in a bank, it more capital, given the company’s ability to support a simply guaranteed the return of funds to league own- league with the same platform as that which holds the ers and invested the funds themselves, or otherwise league’s money. worked out an arrangement with an FDIC-insured Companies like LeagueSafe are here to take adbank to do more with the funds than let them sit. As vantage of the new market that these virtual experilong as the company can gain the trust of fantasy own- ences have created by introducing a business model ers, the company can essentially amount to being a that could prove viable in the future. Such a model depository institution—that is, a bank—which knows could not only aid businesses in providing a full range its customers’ exact withdrawal time. It may not be of services to fantasy sports players but could also bebeneficial to run this model with only one league, come very lucrative. since it would necessitate repeated short periods Fantasy sports have evolved to be an important of investment, but if a company with such a money- way that Americans interact and show moneyed inholding business model were able to service leagues in terest in their favorite past-times. Enthusiasm for the a variety of sports, such as the NFL (National Foot- home team transcends gender and age, creating a virball League), NBA (National Basketball Association), tually inexhaustible market which fantasy sports serand MLB (Major League Baseball), it could then at- vicers are beginning to explore. BT

SPRING 2010 BUSINESS TODAY

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Healthcare

BUSINESS TODAY FALL 2010

Healthcare

DR URSCHEL Co-Founder of Enterhealth – On Battling Addiction Dr. Urschel is the Chief Medical Strategist and Co-Founder of Enterhealth, an addiction disease management company based in Dallas, Texas. He is also founder and CEO of the Urschel Recovery Science Institute—Dallas/Ft Worth’s only outpatient addiction treatment center of excellence. Dr. Urschel graduated from Princeton University for his undergraduate training and from UT Southwestern Medical School and the University of Pennsylvania for his graduate and medical training.

Business Today: How does alcohol addiction differ from other addictions on a medical, psychological, and social level? Dr. Harold Urschel III: Well, let’s go back a bit to an even more basic level: alcohol and drug addiction. Alcohol and drug addiction is nothing more than a chronic medical disease of the brain. That statement alone is very new and very few people in the country understand it, but that’s what science has shown us. Taking alcohol or drugs actually injures the brain over time until you reach some sort of a threshold, like a cliff, and all of a sudden you become addicted. This occurs because you’ve had enough damage done to a certain area of your brain that has caused the addiction to kick in or the disease to start. Such addiction is a chronic medical disease of the brain similar to diabetes or bad blood pressure. You approach any chronic disease comprehensively and in a multidimensional way, knowing that you have to change your lifestyle. Now, none of this information is mine, this isn’t Harold Urschel’s finding. My company, EnterHealth, disseminates that information nationally and globally via the web, but what I am really doing is openly plagiarizing all the stuff from the National Institute of Health (NIH). The NIH has studied the disease of alcohol and drug addiction for about three decades, and they’ve learned some really cool

stuff. They found out what the disease is, how to treat it, and then they put all this stuff out there in the public domain. Unfortunately, the treatment providers in our country have not chosen to fully accept the NIH findings yet.

only go to Alcoholics Anonymous. Now, let’s step back and give AA its credit: it works in about 33% of all cases. That’s good if you’re one of those 33%. What the NIH and all the science has shown is that you should take AA, which is a good fundamental component of treatment, but BT: Do you have Alcoholics Anonymous then add other pieces around it. Most of (AA) or any particular treatment providers the time there is an associated psychiatric in mind that do not take a scientific ap- disorder like depression, anxiety, or manproach? ic-depression. Thus, you need to treat the psychiatric disorder at the same time. BeHU: No, Alcoholics Anonymous is not cause the family is usually involved, you treatment. Alcoholics Anonymous is an also need family therapy. And because organization that promotes a way of life to addiction damages your body, you need help you stay sober. Unfortunately, most to put the right building blocks into your treatment programs, like some of the more body with a wellness-nutrition program well-known ones in the country that have that can help put the right substrates into facilities, only use the twelve-step program your body so that your body can rebuild to address alcohol and drug addiction. The itself more quickly and accelerate the healNIH shows that if you use AA by itself, if ing. Essentially, you take the twelve-step, you only use the twelve-step method for add a wellness program for the healing, treating alcohol and drug addiction, you and add some other medications to help have about a 33% chance of long-term so- the brain recover more quickly. You also briety. That means years… multiple years add psychiatric treatment to help stabilize of long-term sobriety. But statistically, 70% moods and add a family therapy or relaof people are going to relapse. The problem tionship component to help the person rewith this is that alcohol and drug addic- connect with people that care. If you add tion is a life-threatening illness. These are all these things together you have a 90% very dangerous substances that can kill chance of staying sober vs. a 30% chance you in all kinds of different ways, from of staying sober. You’re still using the overdoses to trauma to driving accidents twelve-step, but you’re just adding more to falling out of a window from a ledge. If to it. What I told you…well that’s kind 70% of people can’t stay sober that means of the secret to recovery. But, just because you have about a 70% chance of dying ear- you temporarily stop the disease, does not lier from alcohol related symptoms if you mean you stop treating it, because this is a FALL 2010 BUSINESS TODAY

Healthcare

disease that won’t go away. That’s another real high or euphoria. That is the problem. fallacy that people think: “Gosh I’m go- Alcohol and drugs cause such a pleasurable ing to detox once. If I go to a thirty day feeling in people that people want to use program I’m better. I go home and go back them over and over again. And over time, to my normal way of life. I can handle it as they continually stimulate that part of now. I’ve visited mecca and I’ve seen the the brain, they damage it and can cause

Alcoholism is ten times as big a problem in this country as drug addiction. light.” That couldn’t be further from the truth. No more can you recover from your alcoholism than can you recover from your diabetes.

we had the tools, the science went to work. In the last twenty years of the century, the NIH poured hundreds of millions of dollars into investigating alcohol abuse because it was causing so many problems for us in this country. They found a lot of great treatments and medications, including how to treat with a comprehensive approach. Then they started trying to figure out how to get providers to adopt it, but the providers were very stubborn. Before the science came along all we had was the twelve step program, so the providers were used to just doing twelve steps. You could call it reverse Darwinian selection, because many of the former alcoholics, who had successfully completed the twelve step method, became the next generation of care providers. That philosophy of treatment is still pervasive around the country, and that’s why I wrote the book. That’s why I created Enterhealth. Because the consumers, they’re hungry for that information. If they go to their doctor and their doctor hasn’t been trained, what will he say? The doctor will say, go to AA. So they go to their treatment provider, the provider says go to AA. And then they get the same instructions from anybody they ask. The trouble is that those instructions are fifty, sixty or seventy years old, and that’s why the book and the website have put all this information into a form that the average person can understand.

addiction to develop in certain people. Note that for alcohol, only 7% of people that drink alcohol will get addicted. 93% won’t. But for that 7% that do get addicted, that’s a terrible illness. And sadly, those To return to your original question, I see people are not being treated adequately by drug abuse as very similar to alcohol- most treatment programs in the country. ism. But the interesting thing is that even though you hear about drug abuse a lot on BT: When you first started Enterhealth, the news, if you take methamphetamines, did you identify specific gaps in the way speed, K-2, ectasy, pot, heroin, cocaine that healthcare providers treat alcoholics? and prescription drug abuse – if you take What did you find most problematic in all the drug addiction and put all the other treatment providers’ approach? people with drug addiction together, and combine them into one group, you would HU: What I found most problematic was have to multiply the size of that group by that most treatment providers only used ten to get all the alcoholics in our country. one approach, when there were so many Alcoholism is ten times as big a problem in tools available. I joined up with a bunch this country as drug addiction. And drug of other very bright people and founded addiction is still a problem. If you look at Enterhealth to design methods for treatthe jails, 60 to 70% of inmates are there ing diseases comprehensively. The goal is for some alcohol or drug related offense. to change the way world looks at addic- BT: So has your own philosophy changed Most of those people are there for alcohol- tion and to provide hope for those affected since you published Healing the Addicted related offenses even though alcohol is le- by addiction. The issue right now is that Brain? gal. But what happens is the same. The most physicians do not have any training alcohol and drugs both go to the same part in treating addiction. I went to medical HU: No, I’m just convinced even more of your brain, the limbic system (a golf ball school for four years, during which I had a that the treatment providers in the country sized area right in the targeted center of total of four and a half days of education in are only using the old methods. We have your brain), and that’s the part that is your alcohol abuse, even though it is the third a residential treatment program in Dallas reward system as it has your dopamine leading cause of death. On the other hand, that is built completely around this comneurons. When the dopamine receptors I had probably twelve months of diabetes prehensive science-based model. Nothing in your brain are activated, you go, “Oh training, twelve months of heart disease has ever been created like it before, so it wow, that’s really good!” That’s like when and all of the other stuff. So the question is, was built from the ground up around a you score 100 on a test or you get a $500 why didn’t we study alcoholism more? The whole new approach. Whenever you start summer bonus or when something good trouble is that before the invention of the a new program, you get only the hard cashappens to your dad and he gets promoted. CAT scan in the 1970’s we couldn’t look at es and the people that failed at all the other programs. We show our program, and When good things happen, you get that the brain of a living person. they stay sober and say, “Wow, why didn’t good tingly feeling. That’s your dopamine system being activated. With alcohol and By the mid to late 1980s there were several anyone ever show this to me before? Why drug addiction, they go straight to that other inventions, such as PET scans and haven’t I ever heard about this?” And that’s part of the brain and turbo-charge the ac- computers that really made a big differ- why we’re here. When people come to us tivation of that reward system. It’s like a ence in how we looked at the brain. Once they recognize that this is really different, 68

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Healthcare

and their results significantly improve. BT: So what was the biggest challenge you faced when you decided to open your research and clinical research facilities? HU: Keeping the cash flow going. Managed care was in the middle of all this, and managed care doesn’t provide enough money to make providing good care easy The most important things are access to capital and business expertise from people that actually run start-ups. If you look at this from a business perspective, you have a huge market. Alcoholism is the third leading cause of death and kills over a hundred thousand Americans a year. Alcoholism is costing this country over a half a trillion dollars a year and the main reason why is that most of the people with alcoholism are either not in treatment or are in inadequate programs. So you have a really large and currently flawed industry but which has all the tools to make it work. What we are doing is putting it all together. We’re in our fourth year of Enterhealth and the second year of the residential program and we’re profitable every month. In this economy, that’s huge. That’s the business side, but what’s even more satisfying for me is that patients are getting better. BT: We’ve read that you work in tandem with Harvard Medical School, UPenn, and other leading medical centers. How important are partnerships to your business model? HU: Those relationships are very important for the philosophy and mission development of Enterhealth. Partnerships are

especially important with our internet site. you need to look out for each other’s needs, The addiction treatment industry is very and you need to cover each other’s backs. competitive and trying to differentiate ourselves and come up with a marketing BT: How does health reform impact your strategy is very important. We partnered business? with a company called The Point Group who has been instrumental in helping us HU: Both our practice and the residential find the expertise for the interactive web- facility are mainly cash businesses. Insite development and develop the PR and surance doesn’t understand the addiction communications strategy for the com- treatment field. If you tried to build a propany. With the academic institutions-and gram based around what they would pay I would add UCLA to that group as well- for, you couldn’t do what you needed to we focus more on having leaders from the do to help patients in the big picture. In industry who help develop the best treat- that sense, we’re insulated from healthcare ment program. reform. Hopefully, the Enterhealth model Partnerships were key to my startup. will positively impact healthcare reform They are key to anything these days be- because if healthcare reform understands cause it is hard to be somebody that covers that alcohol addiction, the third leading the entire spectrum. cause of death, can be treated more efficiently, it will save a lot of money BT: So you’ve mentioned some of the tensions between being an MD and a CEO. BT: So what motivated you to go into the Do you see yourself as more of an MD or treatment of alcohol and drug addiction as a CEO and how has working as both pre- opposed to other areas of psychology? sented a challenge? HU: When I was in my psychiatry trainHU: Being an MD is a real gift. Unfor- ing program, I saw people who were intoxtunately, the training you have to have icated but then sobered up and were very to become a physician in our society pre- nice people. I felt very comfortable workcludes much business training. And so, ing with them. And I just happened to be physicians have a well-deserved reputation in a great training program with a focus on as not being good businessmen. I think, addiction. I was shown the great tools and especially with all the new healthcare re- I said, “Gosh there are tremendous possiform and all the changes in healthcare, it’s bilities here.” What was really attractive to very important that our physicians get a me was that you could use the medications basic understanding of business so that and a lot of other neat things to shorten they can make more informed decisions the time it took for people to get better. about healthcare policy. I still see patients One of these tools is called Vivitrol, a drug as a physician. I think it’s very important that helps with alcoholism by decreasing to continue to see patients as an MD/CEO cravings and preventing the patient from because that keeps your foot grounded. It becoming drunk. I mean, how huge of a is very easy to get distracted by the busi- breakthrough is this? And most physicians ness side of things. Having access to the have never heard about it. It’s in my book patients is just so critical for me to make Healing the Addicted Brain and it’s on our sure that what we’re doing is helping peo- websites www.recovery-science.com and www.enterhealth.com. Once patients read ple. We want to make a difference. One other aspect you might not think about it, they ask their doctor for it. And about is that business people don’t under- then they start getting better, and the docstand physicians. Physicians are very dif- tor uses it on other patients. We have some ferent animals from business people. So amazing treatments that nobody knows I’ve always been able to kind of have a foot about, which is really sad. Because if you in both camps and to help translate and in- know about them, you can truly save a life. terpret back and forth because physicians don’t understand the business people and BT what’s important to them and vice versa. Interviewed by Michael Lachanski As a result, you need to partner together, FALL 2010 BUSINESS TODAY

Company Profile

Allscripts

The new Allscripts is a leadng provider of information tools that encompass the needs of medical practices of all sizes and scopes.

Company Profile By Tiantian Zha, Princeton University

f all companies to pick as an ex- Systems to cut costs and increase efficiency merger between Allscripts and Misys Health ample of business excellence, how while maintaining ever increasing safety stan- Care Systems LLC. Allscripts was originally on earth could one land on a dards, the Allscripts ePrescription software founded in 1986 as a provider of prepackaged healthcare company? Didn’t we all agree the to allow for easy and safe online prescribing, medication that doctors could immediately healthcare industry was rotten, with a need the cost-effective Document Management prescribe to patients. When Morgan Stanley for total reform and revamping? Not com- system to improve chart access and work flow Venture Partners purchased a majority stake pletely. Allscripts tells us why. by eliminating paper records, and the Patient in Allscripts in 1997, the company refocused The new Allscripts is a leading provider Access solutions, to enhance the patient expe- its efforts toward developing technological of health care solutions to facilitate storage rience through better online communication tools, such as its signature electronic prescripand exchange of information between physi- between the doctor and patient. Allscripts is tion service. Over the years, Allscripts accians and health care companies. Allscripts committed to providing easy-to-use services quired several other companies and extended its range of services. Misys Healthcare Systems, is currently serving over 160,000 physicians that suit the needs of all practices. Just as this company is dedicated to meanwhile, entered the industry in 1982 with and 700 hospitals across the nation. Through improving the customer’s experience, so is the acquisition of Medic Computer Systems, their various products and services that alAllscripts committed to providing employees and continued to pursue cutting-edge solulow easy access to vital data and up to date with the best possible working environment. tions for healthcare-providing companies. resources, this dynamic company seeks to With a casual dress code and frequent social Emerging from a history of transformation, connect doctors to resources and revolutionevents such as the Annual Cookout and today’s Allscripts stands strong as a model of ize the way they practice medicine. monthly Laser Tag, Allscripts pursues a corsmart management and innovative marketing Allscripts’ mission is to provide simple porate culture where executives are accessible in a healthcare industry whose reputation has solutions to healthcare professionals’ needs. to employees, and where the two groups intersuffered in the wake of political debates reTheir wide range of software and web-based act on a regular basis. Employees immersed garding its reform. Allscripts reminds us that services are tailored to the demands of pracin this interactive workplace are motivated to healthcare is still about helping people stay tices of different scopes and sizes. Allscripts’ perfect existing products and pursue new ophealthy. No matter what side of the healthcare products include the award-winning Elecportunities for product development. debate you are on, you can find something to tronic Health Record to improve accounting BT admire in the Allscripts model. and accountability, Practice Management The new Allscripts was born from a 70

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