Cornell Business Review Spring 2017 by Cornell Business Review

Spring 2017 Issue

The New Kings of Wall Street Featured Article • Page 13 • by Jeremie Mutolo

exclusive interview with

ROBERT F. SMITH

Cornell Business Review Spring 2017 Editor-in-Chief Bjorn Bjornsson Managing Editor Hunter Bosson Business Manager Rhea Somaiya

Editorial Team Nolan Abramowitz, Andrew Billiter, Nikhil Dhingra, Ignacio Garcia Conway, Cameron Griffith, Leora Katzman, Hamish MacDiarmid, Jeremie Mutolo, Eric Reuben, Josh Thompson, Lillian Wang, Catherine Wei

Design Editor Grace Lucia McBride

Business Team Kathleen Curtin, Lena Jiao, Nicole Johnston, Hayan Lee, Karim Naguib, Michal Pisarek, Jenna Roland, Ruoshui Shen, Mike Sosa, Savanna Steinberg

Associate Editors Hyun Ho Lee, Emma Nelson, Grace Shi, Samantha Torre, Avirook Upmanyu

Design Team Kathleen Curtin, Michelle Huang, Alessandra Piccone, Grace Santarelli, Daye Shin *Front Cover Illustration by Sabine Strauch

Letter From the Editor Welcome to the Spring 2017 Issue of Cornell Business Review. It is my honor to present to our readers what I believe to be our best issue yet. Since its inception in the Fall of 2010, Cornell Business Review has brought together creative and entrepreneurial students to provide readers with timely, investigative articles. Focusing on both Cornell and business around the world, our goal from the start has been to encourage students, faculty, and the Cornell community to “Join the Conversation.” Our work this semester has been a reflection of that continued pursuit. With 35 members divided into Business, Editorial, and Design teams, we completed one of our most ambitious projects yet— CBR Now, a weekly newsletter with interviews, articles, campus events, and more. To our delight, our subscriber base has grown immensely over the semester, and we hope to continue expanding our audience. In the 14th issue of the Cornell Business Review, we cover a myriad of topics, including the increasing presence of algorithmic trading, political activism in the modern era, the rise of subscription services across different industries, and the use of drones for animal conservation. In addition, we had the privilege of interviewing two prominent alumni and two current MBA student entrepreneurs. An exclusive interview with Robert F. Smith, Founder and CEO of Vista Equity Partners and Cornell Entrepreneur of the Year, discusses the climate for entrepreneurship and artificial intelligence. We also feature Eva Papoutsakis Smith (Senior VP of Sales Strategy and Operations at Integral Ad Science), Ziad Jarjouhi, and Serdar Mizrakci (Co-Founders of PureSpinach). We would like to thank Cornell for its financial support, our advisor Deborah Streeter for her consistent guidance, and our Alumni Board for their continued involvement. Further, we greatly appreciate Robert F. Smith, Eva Papoutsakis Smith, Ziad Jarjouhi, and Serdar Mizrakci for giving our readers thoughtprovoking and insightful interviews. Finally, I would like to extend my gratitude to our wonderful members. This magazine and CBR Now would not be a reality were it not for their continued ambition and resourcefulness. Before starting my tenure as Editor-in-Chief, I workshopped some recruiting materials with the Executive Board. We came up with a number of ads and taglines, but one of them stuck: “write an excellent read.” Now, as the semester draws to a close, I am confident that we have done exactly that. Happy reading!

Bjorn Bjornsson Class of 2018 Editor-in-Chief

Table of Contents Government

POCKETBOOK PROTESTS by Andrew Billiter

COLLEGE ADMISSIONS SCARE by Nikhil Dhingra

Industry

by Eric Reuben

by Josh Thompson

THE NEW ERA OF SHOPPING

LEANING OUT

WHAT'S SO SPECIAL ABOUT CUBAN HEALTHCARE? by Ignacio Garcia Conway

FOR-PROFIT FORECAST by Leora Katzman

Finance

THE NEW KINGS OF WALL STREET

BALANCING ACT by Cameron Griffith

DISAPPEARING ACT by Hamish MacDiarmid

by Jeremie Mutolo

Technology

VENMO: VIRTUE OR VICE? by Lillian Wang

FROM A CHAIN TO AN ECOSYSTEM by Nolan Abramowitz

AN EYE IN THE SKY by Catherine Wei

Exclusive Interviews

23 PURESPINACH

ROBERT F. SMITH

EVA PAPOUTSAKIS SMITH

Pocketbook Protests by Andrew Billiter

Since his stunning electoral victory in November, the opening months of President Donald Trump’s administration have been marred by internal scandal, allegations of unprecedented foreign influence, and vigorous resistance from the judiciary, federal officials, politicians, and countless protesters across the nation. As the battle lines are drawn in Washington and Democrats and establishment Republicans gear up for total war with the administration, a new breed of online activists targets Mr. Trump where it hopes will hurt him most: his cherished brands. The political landscape of the 21st century, where social media and a network of partisan digital outlets serve as middlemen for the nation’s debates, news, and constituent communication, has led to the spectacle of competing hashtags and online feuds between supporters and opponents of the Trump Administration. Leading the charge against the Trump brand is #grabyourwallet, a social media campaign developed shortly after the release of videos featuring Donald Trump describe sexually assaulting women, which has since become the leading exponent of retail resistance. The related website, grabyourwallet.org, lists 55 companies that carry Trump products, with ten prioritized and the rest sorted “From Most Boycott-Able to Least.” The website does not explain how these rankings are determined. So far, the movement has several notches on its gun belt: the website lists 22 companies it delisted after pulling Trump products, although the list also notes that some of the targeted vendors operate under flash sale models and may not have permanently featured Trump products to begin with. While Grab Your Wallet positions itself as the heart of the anti-Trump retail movement, it is perhaps just the best-known of a loose confederation of groups, websites, and

individuals motivated by a shared hatred of the 45th president. On Facebook alone, there are dozens of groups and pages named with some variant of “Boycott Trump,” and behemoths— ranging from individuals like George Takei to the nearly 4 million member strong “Pantsuit Nation” group—routinely share news of the boycotts and their apparent effects on Trump businesses. On the other side of the political spectrum, Trump loyalists have mounted their own campaigns, most prominently against Starbucks after the coffee conglomerate announced a plan to hire 10,000 refugees. While financial fallout from this decision is unavailable, Credit Suisse reported a sharp drop in the company’s brand perception following the announcement, and the company appeared to moderate its position when it announced plans to accelerate their planned veteran hiring initiative. However, the Starbucks saga appears to be more of an isolated incident next to more widespread anti-Trump sentiment. While Trump supporters may damage liberally-inclined brands, it appears they cannot effectively counteract the dollar diplomacy of anti-Trump factions. The highest-profile casualty of the boycotts, after Kellyanne Conway (who has been largely exiled from network television after playfully promoting the brand in casual contravention of federal law), has been the Ivanka Trump brand, which has the dubious distinction of being skewered by Saturday Night Live and removed from the shelves of several retailers. However, it is difficult to quantify the damage Grab Your Wallet has wrought, and even more so to determine the movement’s effect on the president himself. President Trump’s finances exist under a veil of secrecy, and emphasizing the effect of specific boycotts on the president’s profits risks confusing causation and correlation. That said, retail analysts observed a 26 percent drop in year-to-year performance in Ivanka

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Trump online sales—a steep decline that appears inseparable from the intense backlash against her father and his policies. While the boycotts of Trump products seem to cause financial damage, they have not spurred any policy changes or concessions from the administration. President Trump has demonstrated that he keeps a close eye on the family brands and is sensitive to attacks on their image, but has steadfastly refused to backtrack on any of his public positions. Boycotters can join the Democratic Party, Senators McCain and Graham, the Central Intelligence Agency, and the judicial branch on the list of entities that have tried, and failed, to moderate the President’s positions. Ivanka Trump herself, the figure most closely associated with the targeted brands, appears unaffected by the vigorous boycotting and will soon join her father in the White House as an informal adviser. This is not to say that the leaders of these boycotts feel defeated or unfulfilled: from their perspective, hurting the Trump brand and

"As the battle lines are drawn in Washington and Democrats and establishment Republicans gear up for total war with the administration, a new breed of online activists targets Mr. Trump where it hopes will hurt him most: his cherished brands." cutting into the family’s profit, to any degree, is a victory in of itself. A social movement born of a hashtag reflects the digital culture that brought President Trump to office in the first place. When the vox populi is heard online more than in town halls, and when the president’s own social media habits are infamous, the politics of image and simply making a statement have become increasingly important even in the absence of substantive effects. Despite the “Never Trump” and “Not My President” rhetoric, a complete Trump boycott would be difficult and, in some places, highly impractical. Cornellians can sympathize, as students and Ithacans would likely have a hard time without shopping at Wegmans or Amazon, both of which Grab Your Wallet targets for selling Trump products. The controversy

over the Trump brand also puts retailers in an awkward position; they face pressure from both Trump opponents and Trump loyalists, the latter condemning decisions to remove Trump products as submitting to left-wing bullying. Retailers who remove the Trump brand can frame their decisions in purely economic terms, although the extent to which Trump supporters see this as thinly-veiled appeasement to leftist agitators is unclear. So far, retailers have explained that the Trump brand owes its removal to its inability to sell, and the Ivanka brand’s slumping sales reinforces the move as a sound business decision, not just saving face. Regardless of its sincerity, this explanation is an option unavailable to similarlyembattled politicians and public figures who have to work through the political calculus of appealing both to hardline Trump supporters

and establishment Republicans in their districts Setting aside concerns about efficacy, some opponents of the president fear that boycotts of Trump products may satisfy people’s urge to “do something” and, feeling that they have done their part to combat the administration, make them less likely to engage in more involved activities such as volunteering for campaigns or even voting. While the 2018 midterm elections will largely determine if the outrage seen so far is the first sign of a great awakening of political activism, retail boycotts, with their comparatively low barriers to entry, show little sign of flaming out. What remains to be seen is the extent of the damage, and if this particular flavor of crowdsourced retail retribution will become a go-to form of political activism in an increasingly digital and hyper-partisan landscape.

College Admissions Scare: How Wealth Adversely Affects Lower-Income Student's Chances At Success by Nikhil Dhingra

IF HE HAS A MY NEPHEW IS GOING ON TO COLLEGE

FINANCIAL AID PACKAGE ALREADY, CONGRATULATIONS CARDS ARE HERE

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IF NOT, SYMPATHY CARDS ARE HERE

Decision Day, the nerve-wracking conclusion to high schoolers’ college searches, has always been a socioeconomically bifurcated process. Wealthy students equipped with private testing tutors, admissions counselors, and test-preparation programs often have a much better position than those that are not so fortunate. However, the introduction of test-optional schools may shift this trend; less focus on standardized testing, which typically favors high-income students, could mitigate the role of money in university admissions. Critics retain concerns of this transition, such as the SAT’s importance in highlighting certain skills in a student’s application and that test-optional policies may fail to diversify the student body. But schools continue to embrace test-optional policies as a more effective tool of measuring a student’s college readiness and breaking down socioeconomic barriers to educational opportunities. For many affluent students, the admissions process has been paved by the benefits of their parents’ wealth. Due to the oftentimes heavy weight that admissions officers place on standardized tests, money spent on testing programs tends to improve a student’s chance at acceptance. In addition, many well-off parents hire former admissions officers to proofread their child’s application and ensure that it is tailored to the highest standards. Since admissions officers sometimes fail to account for the difference in resources that students have in preparing for these tests, wealthy students already have an advantage in this crucial part of the admissions process. Critics of American higher education argue that the admissions process boils down to income discrimination. For example, colleges consider a student’s “demonstrated interest” in the school, which may involve an expensive flight out to the campus for an onsite visit. Additionally, heavy weight placed on early decision admissions puts low-income applicants at a disadvantage. Students who must weigh financial aid packages cannot easily commit to a school based on preference alone, keeping them from an applicant pool enjoying acceptance rates far higher than general admission. For students who sign an agreement committing to a school upon their acceptance, their chances of admission raise significantly since the school knows it is a student’s first choice. Lastly, a focus on weighted GPAs hurts students living in lowerfunded school districts with less access to AP

and IB courses. These admissions criteria have contributed to financially skewed student bodies at many universities. The number of Pell Grants to low-income students rose only 1 percent from 2000, further entrenching the socioeconomic disparity. Lower-income students are further dissuaded from applying to selective universities in a process called “undermatching,” where misinformation on financial aid packages and the increased costs of elite colleges tends to deter highly talented students from applying to selective schools. As a result, students from households in the bottom income quartile compose only 3 percent of the enrollment at the most competitive colleges in the United States. In an attempt to counter this trend, many experts recommend that selective universities follow public colleges’ lead by emphasizing low-income preferences as a consideration within the admissions process. Critics of the current admissions system argue that by factoring income status into the admissions process, selective colleges will be able to tap into a larger pool of high-achieving students. Although experts disagree on the best replacement, they generally agree that schools should incorporate socioeconomic status in a way that does not lower admission standards, but rather uses proactive efforts to recognize high-achieving, low-income students. At the center of this debate lie test-optional schools. In recent years, more colleges have welcomed the idea of forgoing standardized test scores during the admissions process. Instead, colleges ask for graded writing samples or place more weight on other aspects of an application such as the rigor and achievement within their courses. For these schools, a high standardized test score will usually not outweigh an otherwise weak application. As of 2015, 47 new colleges announced testoptional policies, raising the number of testoptional schools to over 850 in the United States. Forty-six percent of the top tier liberal arts colleges no longer require tests, and those who drop test requirements typically see 250 new applicants on average. While students can still submit test scores to these universities in place of a graded assignment, both will be assessed individually and will contribute to different aspects of an admissions officer’s

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evaluation of the student. The new applicant avenue does not appear to lower admissions standards. According to a study of 123,000 students conducted by William Hiss, the former Dean of Admissions at Bates College, there were no significant differences in graduation or cumulative GPA rates between the applicants who submitted test scores and those who opted out. The study found instead that non-submitters of test scores were more likely to be lower-income and or first generation minorities, suggesting that removing standardized testing requirements reduces the “undermatching” effect. However, not everyone promotes this movement towards test-optional policies. David Z. Hambrick, an Associate Professor of Psychology at Michigan State University and vocal critic of test-optional policies, argues that the SAT “works for its intended purpose—predicting success in college.” While Hambrick acknowledges the SAT’s flaws, he references a study conducted by the University of Minnesota concluding that the SAT can predict a student’s college GPA just as well as a student’s high school GPA can. In addition, a separate Vanderbilt study found that the SAT can help predict outcomes in life that extend well beyond college years, validating its use as a metric for general academic performance. Previous studies regarding the validity of testoptional policies also face scrutiny. In fact, a study conducted by Andrew Belasco, CEO of college consulting firm College Transitions, concluded that there exist few, if any, significant gains to low-income and minority students through test-optional policies. While test-optional admissions are not the perfect solution to an ever-growing wealth disparity among America’s students, they do offer the potential to promote egalitarianism at elite colleges. Rather than pour more funds into test preparation programs, these progressive policies could help tackle the admittance rate gap between rich and poor students, ultimately resulting in more diverse admitted classes. While removing the SAT from the admissions process has its flaws, an improved version of test-optional policies could offer lower income students greater opportunities to reach their fullest potentials.

What’s so special about

Cuban Health Care? by Ignacio Garcia Conway

American discussions of Cuba usually resort to words like “backwards,” “communist,” and “poor” to describe the island nation. Conversations focus on economic instability and political oppression, emphasizing the Castro regime’s impact on Cuban sociopolitical society. There is little discussion on the government’s achievements, particularly those in healthcare. In the decade following the Cuban Revolution, the government adopted a universal healthcare system based on preventive

care and research. Today, world leaders have praised the Cuban industry for its commitment to medical advancement and successes in patient care. Among these is Director-General of the World Health Organization Margaret Chan, who stated “Cuba is the only country that has a healthcare system closely linked to research and development.” The government’s preventive medicine approach consists of mandatory vaccina-

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tions and a required yearly check-up. All neighborhoods have a corresponding primary care physician who must care for everyone in his or her assigned area. Cuba’s abundant number of doctors makes such a system possible. There are around 8 physicians for every 1,000 people, a little over 3 times the amount in the US. The program has successfully reduced the presence of disease on the island, making the main causes of death related to alcohol, tobacco and obesity. This profile is unusual for

a country with Cuba’s economic development, as it shares wealthy countries’ common problem of death by heart disease, diabetes, cancer and stroke. As part of its preventive care program, the Cuban government started an education initiative to inform people about non-disease related deaths. Moreover, it established research initiatives to combat fatal contagious illnesses. On June 2015 Cuba became the first country in the world to eliminate mother-tochild transmission of HIV and syphilis thanks to the scope of its healthcare program. Primary physicians

and gynecologists give special attention to pregnant woman in order to prevent costly complications and provide proper treatment if they do test positive for HIV or syphilis. Furthermore, the government’s focus on research led medical professionals to develop a treatment for diabetic ulcers in the feet known as Heberprot-P, alternative cancer treatments, and Nimotuzumab, a treatment for late stage tumors in the head and

neck.

expectancy garnered praise from interna-

Advancements such as these attract a large number of health tourists to the island. Cuban doctors tend to patients from all over the world who come to receive treatments that are not found in their respective countries. The Cuban government’s shockingly low physician salary provides doctors with an incentive to work in private-international hospitals. Government leaders use its health services, specifically medical staff, in negotiations with other states. For example, Cuba provides Venezuela with medical staff in exchange for cheap oil, which Cuba later can re-sell for cash. Unfortunately for Cuba, Venezuela’s economic and political catastrophe created complications in this system of trade. Although the Cuban government is dedicated to the universal well-being of its citizens, the economic strain forces the island to spend a smaller portion of its resources on healthcare than the United States government. Cuba devotes 11.1 percent of its GDP to the health industry, spending an average of $2,475 per person. The United States spends around 18 percent of its GDP, averaging around $9,500 per person. Yet, Cuba’s smaller investment has not proven disadvantageous. The island’s infant mortality rate is 4.5 deaths per 1,000 people, 1.3 fewer deaths than that of the United States. At 77 years, male life expectancy is the same in both countries while females’ life expectancy is only one year longer in the United States. Although the healthcare program’s ability to maintain a low infant mortality rate and high life

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tional medical professionals, the program has not escaped the stresses of the island’s poor socioeconomic conditions. In March 2014, the Cuban city of San Miguel de Padron suffered an outbreak of hepatitis A due to water contamination. A few months earlier, floods led to increased urbanization in La Habana, causing a rise in cases of certain contagious diseases. The program’s failures root themselves in the government’s inability to provide sufficient funds for quick or emergent care. People must wait weeks to get prescribed tests and medicines as pharmacies’ low supply of essential medicine further strains patient care. Many Cuban hospitals rely on foreign aid to re-stock their pharmacies and equipment. The 1960 U.S. embargo on exports to Cuba further limits the government’s ability to purchase medicine and medical equipment predominantly found in the United States, leading doctors to push for reform. Cuban doctors are hopeful that better relations with the United States and a possible end to the embargo will fix the gaps of the island’s healthcare. An influx of American health tourists would increase medical profits and investment opportunities. Yet, shifting focus towards more profitable health tourism might displace physicians’ priorities away from public services. The program’s primary concern, though, is its ability to stay afloat as the Cuban economy avoids full-on collapse. With an uncertain future, Cuba’s celebrated healthcare system is threatened by socioeconomic limitations as it awaits economic or political reform.

The New Era of Shopping: Subscription Services by Eric Reuben While subscription services have traditionally been restricted to gym memberships and magazines, subscribers are now receiving beauty products and groceries shipped to their door. Subscription cosmetics and groceries have grown in popularity, especially among millennials. Blue Apron and Birchbox are pioneers in the trend toward subscription services and have successfully differentiated themselves from traditional E-Commerce retailers. The now saturated marketplace of retailers offering subscription groceries and cosmetics is increasingly comprised of industry giants and startups. The introduction of subscription services forces retailers to evolve and will change the way consumers shop. While E-Commerce has been one of the fastest growing industries in the past five years with an annualized growth rate of 10.1 percent, growth is expected to slow to a modest 4.4 percent in future years. In order to sustain a profitable business in a declining revenue growth environment, differentiation is necessary. Subscription cosmetic services have been successful thanks to their ability to differentiate themselves from traditional E-Commerce and brick-and-mortar retailers. While the $56.7 billion industry is still dominated by traditional retailers such as L’Oreal and Procter & Gamble, startups have acted as disruptors. For a recurring fee, companies like Birchbox and Glossybox deliver beauty boxes each month to subscribers’ front doors filled with luxury sample-sized makeup and skincare products. The creative packaging and unique business model provide subscribers with a memorable experience without having to walk into a store. Boxes contain new products each month that are creatively aligned and decorated with materials such as colorful tissue paper. The target market is primarily millennial women who do not have the time to visit boutique beauty shops but value the convenience, quality, surprise, and customization of the service. Utilizing a variety of sample-sized products from different brands helps attract millennials, a generation that values access and variety. The popularity of subscription boxes is more than a fad; Birchbox has accumulated over a million loyal subscribers, and Glossybox reached a quarter million. Birchbox’s scale and creativity have transformed and inspired the way consumers shop for cosmetics. Startups such as Glossybox, JolieBox and Ipsy entered the market within two years of Birchbox’s founding in 2010. In an effort to play catch-up, industry giants such as Target, Walmart, Men’s Health, Allure, and Sephora have also begun offering beauty boxes. Subscription shopping has become such a large part of E-Commerce that 10 percent of online shoppers have signed up for a subscription service. The growing popularity of beauty

to grow to $6 billion by 2020. Though meal kit services are estimated to grow in market share, grocery giants’ offerings of meal kits make it difficult for new startups to enter the market and become profitable.

boxes will impact the profitability of brick-and-mortar cosmetic and beauty retailers, an industry expected to experience no revenue growth over the next five years. An oversaturated marketplace will also lead to further consolidation, innovation, and cost reduction. For instance, Birchbox cut 15 percent of its employees in January 2016, invested in automating its factories, and recently bought out JolieBox, a subscription cosmetic retailer based in Paris. While beauty boxes are here to stay and have transformed the way we shop, it is likely too late for startups to enter the competitive market. Just like subscription beauty services, subscription grocery services have also soared in popularity and disrupted their industry. Blue Apron, which was founded in 2012, delivers ingredients and recipes in the form of meal kits to 8 million subscribers. Organic, locally-sourced ingredients are conveniently pre-measured and delivered to customers weekly. Blue Apron has continued to grow in scale since its founding. The company received a valuation above $2 billion in June 2016, prompting it to postpone any plans of going public. Blue Apron’s popularity has led to the rise of other subscription-based grocery providers such as Plated and HelloFresh. Subscription groceries has grown to a multibillion dollar industry. By only using locally sourced and organic ingredients, Blue Apron successfully attracts millennials, the generation leading the transition toward healthy and sustainably grown food. Millennials value the affordability, high ingredient quality, and convenience associated with the service. The success of startups like Birchbox and Blue Apron has inspired industry leaders such as Tyson Foods, Martha Stewart, and Kroger to develop their own meal kits. Tyson Foods teamed up with Amazon Fresh to develop Tastemakers, a meal kit service with an educational component. According to Technomic Research, the market for meal kit services is projected

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Even with the rise in popularity of subscription groceries, meal kit services’ impact on grocery stores will remain minimal. If meal kit services grow to earn $6 billion in revenue, the industry will still remain much smaller than grocery stores, which earned $612 billion of revenue in 2016. Specialty grocery stores, such as Whole Foods, Trader Joes, and Wegman’s are likely to take the biggest hit as they attract the same type of customer that has signed up for meal kits. Additionally, according to Cardylitics, an Atlanta based company which analyzes credit and debit card purchases, customers receiving meal kits only reduce spending at specialty groceries by 7.6 percent. While the rise of the meal kit will have a minimal impact on grocery stores, the influx of subscription groceries has sparked innovation in the industry. Although grocery stores have been slow to integrate technology into their operations, they have finally started to innovate. In the next five years, store operators like Kroger and Amazon will provide consumers with never-before-seen ways to buy groceries. Kroger, the second largest player in the grocery industry behind Wal-Mart, is partnering with Uber to expand its home delivery service. By 2022, Amazon is projected to rise from the ninth to the third largest grocery provider in the United States. The expansion of their online grocery delivery service and development of new business models such as Amazon Go will serve as a catalyst for future growth. The proposed cashier-less store utilizes sensors to track inventory and requires customers to enter and checkout of the shop using their smartphones. Amazon Go serves as a model for innovation in the grocery industry and will offer meal kits as well as standard grocery items. While traditional brick-and-mortar grocery stores and beauty shops still control most of their respective markets, subscription services have grown in popularity and served as a catalyst for innovation. There are striking similarities between Birchbox and Blue Apron. Both companies successfully differentiated themselves from E-Commerce retailers, deliver products that align with millennial trends, and inspired other startups and industry giants. While the scale and popularity of subscription services indicate the trend will continue, there will also be further innovation. Industry leaders such as Amazon will continue to integrate technology into their business models and ultimately change the way we shop for groceries and cosmetics.

Leaning Out by Josh Thompson unused employee creativity. Leaning the production model requires the creation of detailed process analyses drafted from all perspectives; there should be a clear line of communication between line workers, supervisors, engineers, and even upper management. The creation of a comprehensive process analysis requires a collaborative effort from all members of a company to promulgate a culture of efficiency in which both employees and employers consistently attempt to spot out waste and eliminate it from the production process. As Jeffrey Liker, author of “The Toyota Way,” contends, the strategy is “more a state of mind than it is a type of company.”

Allow me, for a moment, to digress from the typical politicized discussion of American manufacturing and focus on statistics and strategy. According to the Congressional Research Service’s 2016 report titled U.S. Manufacturing in International Perspective, U.S. average hourly compensation costs tallied at nearly $29, significantly higher than nearly any other major manufacturing nation. Higher costs do not correlate with higher productivity. Since 2002, American output per labor hour has increased by a mediocre 47 percent, lagging far behind foreign competitors such as Taiwan and South Korea, recording 106 percent and 94 percent increases, respectively. This disparity has had a striking impact on domestic employment; the country has lost almost five million manufacturing jobs since the turn of the millennium. The reasons for the domestic slide are many and varied: technology, taxes, and domestic economic shifts are some of the most frequently cited explanations. Globalization, however, is often the first explanation invoked in America’s public discourse. Foreign competition boasts lower costs and often higher productivity. While myriad solutions have been proposed, and implemented, they lack attention to the undesirable, the lazy, and the inefficient: waste. While companies cannot control entire countries’ costs, they can control the efficiency of their own processes. Eliminating waste allows domestic manufacturers to cut costs and compete with foreign enterprise. The predominant strategy for streamlining is known as lean. While the philosophy is applied predominantly to manufacturing, it can be used to optimize any process. The official “lean” philosophy was developed in the late 80s from Toyota management principles which are collectively known as “The Toyota Way.” Dr. Edward Deming, an American engineer, management consultant, and statistician, introduced this system of quality control to the Japanese manufacturing industry in the post-WWII restructuring of the country’s economy. “The Toyota Way” focuses on eliminating eight types of waste from the production process: defects, overproduction, waiting, excess processing, transportation, inventory, motion, and

I was fortunate enough to get inside of Multisorb technologies, a top ‘small manufacturer’ in the United States located in Buffalo, New York. Multisorb specializes in the production of sorbent products— desiccants, moisture regulators, oxygen absorbers, volatile absorbers and any other item designed to extend the shelf or service life of a good. In the Fall of 2014, the business was purchased by Summer Street Capital, a private equity firm also headquartered in Western New York. The firm wanted to continue Multisorb’s history of innovation while accelerating its international expansion and solidifying its home base. Newly-appointed executive Eric Armenat wanted to help the company continue to find success by eliminating the inefficiencies of the former company model, so he turned to the trusted Toyota Way. Armenat and his team of consultants from Projects Quality, a consulting firm that helps companies implement lean into business culture, worked to mitigate all eight forms of waste. However, the improvement of three types of waste—waiting, excess inventory, and unused employee creativity—appeared especially apparent. To start the overhaul, Projects Quality consultants Brian Wolf and Carol Novak set out to identify “A players,” individuals who could be trusted to comprehend lean tactics and pass these on to their fellow employees. Next, they set out to establish a clear line of communication, and collaboration, between line workers, engineers, and upper management. By selecting “teams” composed of all occupations from each product division (for example, a freshpax team and a minipax team), Projects Quality solidified the relationship between those involved in the physical process and those who oversee it. This connection is essential to preventing the most insidious form of waste: unused employee creativity. Once a product’s team was in place and all members of the local hierarchy were granted participatory representation, the teams met weekly to discuss process improvement. Changes were seen immediately, and not just in the production process. As one employee put it, “[the] biggest thing I’ve seen happening here is a change in attitude.”

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Excessive inventory was one of the most egregious challenges Multisorb faced, although the teams quickly learned how to deal with it using a common lean practice known as Kanban. Kanban, which underpins Toyota’s “just in time” manufacturing system, is Japanese for “visual signal,” or “card.” This simple technique implements a signal that alerts employees when inventory reaches a certain point and a new order is necessary to continue production at the usual rate. For example, one Multisorb team found that it needed two strips of material to finish the product during the time that it took for a new order to be delivered. The team eliminated any excess inventory by ordering a smaller number of strips and then replenishing the strips once they reached the Kanban. Leaning out this process also mitigated other forms of waste, such as excess processing and waiting. This is often the case, as streamlining one inefficiency has a butterfly effect. For example, one action affected unused creativity, excess processing, inventory, and motion. When Armenat and Projects Quality first began implementing lean, Armenat employed an essential lean tactic: go and see. Experiencing the inefficiency of a process is the best way to understand its solution. Armenat went and worked a machine for an entire shift. By the end of the day, he concluded that far too much of his time was spent waiting to transfer material, and even more of his money was wasted in excessive processing and defective product. The executive called his engineering team together and gave them one assignment: design a consistent new machine that eliminates waste and excessive processing. The result was the ‘gold machine,’ which cut useless waiting out of the production process and essentially doubled output in a shift. While Multisorb provides an excellent example of lean implementation, it is by no means the first American enterprise to do so. According to Womack and Jones, firms have been adopting similar management principles since the 1990s. Lean just happens to be a particularly salient choice. A multitude of prominent companies have adopted either lean or Six Sigma (a later adaptation developed by Motorola engineer Bill Smith), including Sears, Bank of America, and even Amazon. Lean is not something that can be adopted and forgotten;when done properly, the work is never actually finished.

For-Profit Forecast by Leora Katzman

For-profit colleges have an abysmal track record, often leaving students buried in debt with no job. During the Obama administration, the Justice Department clamped down on predatory for-profit colleges that make false advertising promises to unsuspecting students. However, President Trump and new Secretary of Education Betsy DeVos have indicated fewer scruples with privatization of the education system, raising the prospect of a for-profit university resurgence. Already stock prices of for-profit colleges have surged since Trump’s election, indicating the market sentiment that regulation of these predatory companies may not be a priority in the new administration. However, others are hopeful that Trump’s promise to weed out fraud, abuse, and waste will outweigh his penchant for fewer regulations. The for-profit tuition system is fueled by government-backed student loans. Without government funds, for-profit colleges are doomed. For instance, ITT Tech was forced to file for bankruptcy immediately after it was barred from benefiting from federal student loans.

According to a 2017 article in The Daily Beast by Jackie Kunich, the forprofit college industry has developed a reputation for “peddling bogus diplomas and draining billions from federal coffers.” In August 2012, the Health, Education, Labor and Pensions Committee of the U.S. Senate released a report of statistics which gave bruising details about for-profit higher education. The 2012 report disclosed that 96 percent of those enrolled in for-profit schools take out student loans and that the average student at a for-profit college graduates with a median $32,700 in debt. Private non-profit college graduates and public university graduates had median debts of $24,600 and $20,000, respectively. Additionally, according to the National Center for Education Statistics, while 52 percent of students complete their bachelor’s degree within 4 years at nonprofit private schools, only 20 percent of students complete their bachelor’s degree within 4 years at for-profit schools. For-profit colleges are the fastestgrowing postsecondary schools in the

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nation, although instead of focusing on traditional college students—recent high school graduates—they tend to target people over the age of 25, many of whom are veterans or working parents. These colleges also enroll a disproportionately high share of low-income and minority students; students enrolled in for-profit colleges are 22 percent African American and 65 percent female. Many students in for-profits schools tend to be in more precarious financial situations than other students even before they enroll. In terms of unemployment and earnings rates, 23 percent of students who graduated from for-profit colleges were unemployed six years after initial enrollment compared with 15 percent in other institutions. Because for-profit schools, many them large national chains, derive most of their revenue from taxpayer-funded student financial aid, they are of interest to policymakers both for the role they play in the higher education ecosystem and the value they provide their students. Ensuring that potential students have objective information about the costs and expected benefits of for-profit programs could

FOR - PROFIT

improve postsecondary education opportunities for disadvantaged students and counter misleading recruitment practices at for-profit colleges. The Obama administration oversaw a major crackdown on predatory forprofit colleges. In 2014, the Obama administration announced that for-profit colleges would have to prove they were preparing students for careers or face having their federal aid revoked. Obama sought to protect Americans from poorperforming career programs that burden students with debt and leave them few opportunities to succeed. In 2015, Obama introduced the “gainful employment” rule, requiring for-profit schools to keep track of how much debt their students take on relative to their employment numbers. This rule linked vocational schools’ access to federal funds with their record on job placement and earnings. In November 2016, Obama introduced a second rule, the “defense to payment” rule, which stated that a student who could prove that a school misled them would have their loans forgiven. Legal actions arose from allegations regarding exaggeration of the success of graduates.

PUBLIC COLLEGE

One of the most publicized cases involved the infamous Trump University that ultimately paid $25 million in November 2016 to settle lawsuits with former students who claimed that they had been swindled by the university.

the intentions are. The last thing any of us want is to unnecessarily close down important programs.” Clearly regulation of these for-profit colleges will not be a priority in the new administration.

Since the election of President Trump, there has been renewed focus on deregulation and its impact on markets. Many investors are bullish on for-profits under President Trump. By early February 2017, the stock price of DeVry, a for-profit college invited to a January “listening session” on education with Trump’s team, had jumped almost 40 percent since the November election. Additionally, forprofit Strayer Education’s stock price jumped 35 percent and Grand Canyon Education’s stock price has jumped more than 28 percent.

However, while many focus on the influence of deregulation on markets, it is essential to consider the grander social impact. In terms of the future of education and employment in the U.S., deregulation of these for-profit schools could have a much larger impact than simply market trends: further entrenching socioeconomic inequality. Since these colleges enroll a disproportionately high share of financially disadvantaged and minority students, these students are at the greatest risk of defaulting on their student debt if unemployed after graduation. While the forecast appears bright for for-profit college companies during the Trump administration, prospects of graduation and employment for for-profit college students appear dim and obscure.

Many observers are worried that the Trump administration will not be as much of a “ferocious watchdog” of the for-profit college industry. At Betsy DeVos’s confirmation, when asked about rules such as the “gainful employment” rule, DeVos said “I will review that rule and see that it is actually achieving what

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Featured Article

The New Kings of Wall Street by Jeremie Mutolo Much like death and taxes, a cold and rainy September afternoon in Ithaca, NY is a certainty of life. Seeking refuge from the torrential downpour, students all across campus scrambled back to their respective homes. Yet, inside of the newly-opened eHub workspace in Kennedy Hall, just off Tower Road, a gathering of undergraduate and graduate students chatted, settling in and preparing to learn more about one of the hottest topics on campus: algorithmic trading. Sparkstone Analytics Executive Director Ryan Kishore, alongside his fellow cofounder, Analytics Director Rishab Gupta, was giving a presentation to a sizeable group of students on how to develop their own algorithmic trading strategy. This presentation was part of their biannual Sparkstone Trading Challenge, a competition where participants are given access to the Sparkstone database and tasked with developing their own trading strategy over the course of a month. The competition, much like Sparkstone, is a new addition to the already large financial presence on Cornell’s campus. Last semester, over 100 students partook in the competition, seeking prizes including dinner with employees at Optiver, a high frequency trading firm that has experienced growing success over the past few years. “As the first major organization on

campus to embrace quantitative finance and consolidate interested people, we are thrilled as we serve this growing curiosity," says Kishore when asked about the growing presence of quantitative trading on the Cornell campus. “We also notice that not too many people understand that quantitative finance has a large range of roles that can exist within the field. I am looking forward to students discovering what the spectrum looks like, whether it is algorithm design, factor modeling, or even low latency hardware design.”

" It only takes a brief look at the performance of actively-managed hedge funds over the past several years to see what causes the mass exodus of investors from their firms." Sparkstone Analytics is a small group of students that represents the growing interest in quantitative trading sweeping the campus and, more broadly, the finance industry. Over the past few years, numerous clubs and projects have sprung up across campus to satiate demand among students seeking to learn more about automated trading. What explains the billions of dollars institutional investors have moved to this new technology-driven form of investment?

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Quant funds allocate investor capital to securities relying heavily on advanced quantitative analysis. The strategies employed by the fund managers rely on heavy mathematical and computergenerated algorithmic models built on data gathered from the past several decades. Many of the traders employed by these firms come from traditional STEM-heavy backgrounds, with some holding doctorates in mathematics and physics and others having strong engineering backgrounds. Take Two Sigma, for example: in their Manhattan office they employ nearly 800 researchers. Roughly 130 of them holding doctorates, and 6 are former Math Olympiad winners. These funds’ consistent performance derives from using its algorithms and mathematical models to sift through mammoth amounts of data, attempting to find relationships and trends that a regular fund manager may not. They don’t trade based on “gut feelings” but rather precise reasoning. It only takes a brief look at the performance of actively-managed hedge funds over the past several years to see what causes the mass exodus of investors from their firms. Since 2009, actively-managed funds have been up roughly 3 percent, posting returns lower than those of the S&P 500 and equity dividends of the index during that time. According to Bloomberg, hedge funds in 2016 delivered returns of 1.2 percent, well

Featured Article below the S&P 500’s 7.6 percent return. These funds saw a resounding $25.2 billion withdrawn last July alone, facing a $55.9 to $106 billion outflow in 2016 overall as investors sought out larger returns. Much of the frustration that has catalyzed the demise of hedge funds has come from the traditional “2 and 20” fee. 2 percent of the value of the fund is paid to the manager, regardless of whether it performs well, with an additional 20 percent pocketed from any profits the fund earns. When these firms posted gargantuan returns, investors could easily turn a blind eye. But lately, funds’ poor performance has caused investors to lash out against managers. Renowned investor Warren Buffett has even voiced his concern about the absurd fees in an interview with CNBC, saying that “two and twenty… borders on obscene.” A few of the most notorious hedge fund managers like Bill Ackman and Paul Tudor Jones have had to answer for the lackluster performance of their funds over the past few years. They have since begun cutting their fees and reevaluating their investment strategies in hopes of stopping the financial bleeding. While active funds spent much of the past year dealing with investor backlash and poor performances, quant funds flourished. Over the past several years, roughly $7.9 billion has poured into funds that employ consistently-performing quantitative strategies, pushing the total amount of assets under management for quant funds up to $908 billion. According to Forbes, quant funds hauled in $113 billion over the past several years, making up 25 percent of total net gains brought in by the top 20 hedge funds over the course of their existence. Firms like Two Sigma, Renaissance Technologies, D.E. Shaw, and PDT Technologies have all enjoyed robust returns. Renaissance’s Equity Fund rose 4.6 percent last June, 3.8 percent higher than hedge funds globally. Two Sigma’s fund rose 12.6 percent through last year, versus 2.2 percent for hedge funds across the board according to Bloomberg. D.E. Shaw, considered one of the pioneers of quantitative finance, has consistent doubledigit returns net of fees over the past several years. Some quant fund managers have

achieved near celebrity status; top Wall Street investors have forked up to $1000 just to spend an evening with the “quant fund master”, Peter Mueller, of PDT Partners. His fund has seen annualized returns of roughly 18.5 percent since its inception. While quant funds already outperform their competitors, some investors believe they have a long way to go before being widely trusted. Big name quant funds such as Systematica saw losses of $3.8 billion, or a resounding 11 percent drop in their flagship fund, while Cantab Capital saw its main quant fund drop nearly 8 percent. BlackRock recently reported that its quantitative hedge fund strategies suffered losses for 2016. Much of the industry’s hesitation towards quant funds stems

“No man is better than a machine. And no machine is better than a man with a machine.” -Paul Tudor Jones from the great quant meltdown of 2007. In August 2007, quantitative hedge funds across the board faced monumental losses seemingly out of the blue. As one fund began to unwind, others followed quickly behind resulting in a massive sell-off by numerous quant funds. The surprise crash still lacks a suitable explanation, leading some to fear similar implosions will happen again and feeding into concerns about placing money in the hands of computers. Despite their past inconsistencies, the beauty of quant funds lies in their capacity for evolution. They constantly develop new strategies, each one more sophisticated and utilizing more data than the previous, in hopes of generating larger, more consistent returns. Sparkstone’s Kishore believes that the superiority of human investors is beginning to decay: “This is a critical question with implications for anyone considering work in the finance industry. Ultimately, alpha generated by humans will diminish as computational techniques improve and thought processes are systematized,” he says in an interview. It seems that more and more actively-

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traded hedge funds are beginning to adopt quantitative strategies to bring back investors. Paul Tudor Jones, who was a key investor in the opening Two Sigma Partners in 2001, has laid off 15 percent of the workforce at his Tudor Investment Corp. and is working towards implementing quant-driven strategies in order to post higher returns. The rest of Wall Street is also following this trend, hiring some of the top talent from Silicon Valley in hopes of making their firms more competitive and appealing to investors. While the past few years have seen humans take the backseat in many industries, finance may be the only frontier in which computers will never gain total control. Hedge fund managers, despite the absurd fees, are able to command so much by harnessing their ability to see things that a computer-generated algorithm may not, honing in on potentially lucrative investments. “Yet, we will not see a complete overtaking as there are certain roles and pattern recognition abilities that humans will continue to excel in the foreseeable future," Kishore says. Hedge fund managers can still sift through current events and make the appropriate trades to ensure his investors are protected. But hedge fund managers should not take too much comfort in their edge. Quantitative hedge funds are beginning to implement better artificial intelligence into their strategies, allowing them to seek out patterns that could not be detected with a mathematical formula. Take traders at BlackRock, who use satellite images of China’s largest cities to draw conclusions on China’s real estate industry. There has become a much greater emphasis on artificial intelligence’s implementation in these already tech-heavy funds. As AI evolves, quant funds can turn to machines to sift through millions of news articles and test models that make trades based on hypothetical world events, further diminishing the need for human intervention. Paul Tudor Jones said it best in an address to the remaining employees of his firm: “No man is better than a machine. And no machine is better than a man with a machine.”

Wall Street Deregulation by Cameron Griffith

Donald Trump’s campaign pledged to cut excessive regulation that burdens small businesses and slows economic growth, promising that “for every new regulation, we must get rid of two existing regulations.” One of the prime targets for deregulation is the Dodd-Frank Wall Street Reform and Consumer Protection Act. President Trump recently issued an executive order outlining the intended business policies of his administration and asking his Treasury Secretary, Steve Mnuchin, to submit his review of current financial regulations and possible policy changes within 120 days. Although he did not offer any specifics, many expect that Trump will look to the Dodd-Frank Act as his first target for financial deregulation, having made campaign promises “to do a big number” on Dodd-Frank. Dodd-Frank was signed into law by President Obama in 2010 to reign in the power of major financial institutions following the 2008 subprime mortgage crisis in the hopes of preventing another financial meltdown. Among its 2,300 pages were the requirements that large banks undergo routine “stress tests” to ensure they have enough capital reserves to meet unexpected demand and that they adhere to the Volcker Rule, a rule preventing consumer banks from making speculative investments with their client’s money. Dodd-Frank also overhauled nearly all of the existing financial regulatory agencies and established the Consumer Financial Protection Bureau which has helped return over $10 billion to the victims of financial malpractice and fraud. Despite mixed public opinion of Dodd-Frank itself, many Americans believe the law did not go far enough to limit the power of Wall Street. A poll taken by Lake Research, a leading public opinion and political strategy firm, found that 70 percent of people believe it is “very important” to regulate financial services and products “to make sure they are fair for consumers.” It is highly likely that Dodd-Frank will face serious rollbacks from a Trump presidency. Perhaps the clearest indications of Trump’s intentions come from those selected to run his administration. Treasury Secretary Steve Mnuchin has expressed that Dodd-Frank “limits banks' liquidity,” thus harming both consumers and small businesses. Gary Cohn, the director of Trump’s National Economic Council, has

said that Dodd-Frank causes banks to “hoard capital” instead of investing it in the economy. Both Mnuchin and Cohn have served as top executives at Goldman Sachs, one of the many firms implicated in the financial crisis. In Trump’s administration, they will be reunited with White House Chief Strategist Steve Bannon, Securities and Exchange Commission Chairman Jay Clayton, and White House advisor Anthony Scaramucci, all of whom held senior positions at Goldman in some capacity. These appointees appear unlikely to favor more stringent regulation of Wall Street, priming Trump’s administration for a departure from the anti-Wall Street attitude of his predecessor. Although various politicians and bank executives have taken issue with the provisions of DoddFrank, saying that it hinders economic growth and raises the cost of running a small business, Trump must choose his side on the issue carefully. Allying himself with Wall Street risks linking his name with the industry widely blamed for the financial crisis and putting him at odds with the working-class men and women who lost their jobs, homes, and retirement savings in the Great Recession. To preserve his populist pro-business and pro-middle America image, Trump will likely target the most controversial aspects of Dodd-Frank. Many assume that the conflict minerals clause will be the first target of Trump’s administration. A recently leaked executive order proposes to repeal this provision altogether, citing the cost to U.S. businesses, the increase in Congolese unemployment and poverty, and the violence for control of mines that has erupted between the country’s various militia groups. Section 1502 of the Dodd-Frank Act requires companies to disclose the use of “conflict minerals,” or minerals mined using slave labor. Originally intended to reduce the instances of slave labor in the Democratic Republic of the Congo, this measure has had disastrous consequences for the locals who rely on the precious mineral trade to earn a living. By reducing the demand for Congolese minerals, the act has driven many miners into poverty and has incentivized militias to turn to extracting wealth directly from local communities. Trump is also likely to focus on eliminating the

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CEO Pay Ratio Disclosure Rule, which many believe is politically motivated and does nothing to improve financial regulation. This rule requires that most publicly traded companies disclose the ratio of CEO pay to the median income of all other employees of the company. The U.S. Chamber of Commerce has said that the rule is a “costly disclosure which fails to provide investors with useful, comparable data.” Even the chairman of the SEC under Obama, Michael Piwowar, has made several efforts to forestall implementation of the rule. While the fate of the conflict minerals clause and the CEO Pay Ratio Rule seem to be largely decided, the future of the Volcker Rule remains uncertain. The Volcker Rule prohibits commercial banks, banks that issue loans and hold deposits, from investing in hedge funds, derivatives, or other proprietary trading instruments. Under the Volcker rule, banks are still allowed to make speculative investments, provided they do so on behalf of their clients and not for their own operating profit. This ensures that the risk of such investments is limited to the wealthy few who can afford to invest in hedge funds and other alternative investments. Despite its merits, almost all major commercial banks oppose the Volcker Rule for the damage it has done to their bottom line. The Federal Reserve has given credibility to their argument by publishing a report that concludes the Volcker Rule limits liquidity in the corporate bond market during times of financial stress. Despite the high levels of opposition from the big banks, it is interesting to note that Steve Mnuchin argued in favor of the Volcker Rule during his senate confirmation hearing, going on to say that “proprietary trading does not belong in banks with FDIC insurance.” This revelation only adds to the confusion about the administration’s intentions towards the Volcker Rule. The Trump Administration’s true intentions remain unclear with regard to financial regulation. Trump’s past promises to dismantle Dodd-Frank are at odds with his own Treasury Secretary’s beliefs that parts of the act hold merit and should continue to be enforced. Only time will tell whether this administration will choose to stand by American business or the American consumer.

Disappearing Act by Hamish MacDiarmid

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A radical change in Swiss banking regulation will now have a tremendous impact on the global economy. In September 2015, the Swiss Bankers’ Association reported that Switzerland had $6.5 trillion in assets under management of which 51 percent originated abroad; a large percentage of that wealth came from the United States. To gain access to these funds, the United States instituted its Foreign Account Tax Compliance Act (FATCA), which essentially requires that foreign financial institutions and certain other non-financial foreign entities report foreign assets held by citizens of the United States. Recently, Switzerland began to demand that America comply with the FATCA tax laws, which the United States has imposed upon the European nation, but has not enforced domestically. The FATCA implementation has caused widespread anger, as Switzerland has been forced to abandon its primary attraction for foreign investors: its anonymity. What had allowed for much of its continued economic strength in recent years is now being weakened through U.S. foreign policy. Prior to the passage of FATCA, Americans could have a relatively unknown amount of money stashed away in Europe, but now the IRS through FATCA documentation can access these accounts. Essentially, this means that any United States citizen with hidden assets in foreign accounts held in Switzerland will now have to pay taxes on this previously untapped income. The United States, one of the only nations that requires citizens living abroad to pay taxes, hopes to repatriate some of these foreign assets. It is estimated that there is $100 billion a year in unpaid taxes on US citizens' assets overseas. United States citizens must now report this income to the United States government. This has effectively ended the period of secret banking in Switzerland and in many other secret banking nations. There has been a distinct backlash against these measures, especially in Switzerland. Domestic investors fear that Swiss banks

will no longer issue loans or accounts to U.S. citizens in retaliation. Many foreign U.S. citizens are highly critical of the move. “People are very angry and upset but some are really scared,” declared Jackie Bugnion, a director and tax specialist at American Citizens Abroad (ACA), a Swiss-based organisation that calls itself “The voice of Americans overseas." Americans have long viewed the Swiss banking industry as highly secretive and corrupt, an image reinforced with the popularity of movies like The Wolf of Wall Street. However, thanks to FATCA, this world of shady financial dealings is shrinking. The United States began enacting FATCA when it decided to act on Switzerland’s vast stores of foreign wealth. Switzerland is not alone in engaging in this kind of behaviour; several other countries, such as Bermuda and the Caymans, participate in this practice regularly. The biggest holders of these shady offshore accounts are the super-wealthy, who are believed to have up to $21 trillion stashed across the world from the Caymans to Switzerland. This $21 trillion stashed by the superrich could provide an estimated $188 billion in tax revenue, which could have a sizeable impact on domestic fiscal policy. Swiss bankers believe that the efficient services they provide will ensure their banks remain in full-force. However, Sandro Bartolini, a Geneva-based director of the private consultancy US Tax & Financial Services, believes that “The costs of administrating FATCA will be quite substantial, but the pendulum has swung back to the middle.” This type of attitude critiques the dangers that FATCA could place on the Swiss banking system and its role as an integral part of the nation’s economy. Several rivals to the Swiss banking model still have maintained their secretive financial systems with lax regulations, such as Lichtenstein and Monaco. However, many investors now look to the United States as a place to store their assets. For both non-Americans

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and U.S. citizens, several states such as Delaware have low taxes and a secret banking structure even under federal law. The Trump administration intends to deregulate the financial sector and banking to provide a more competitive economy. It is likely that the United States would ignore calls from foreign governments to regulate the United States’ banking secrecy. The strength of the dollar and the reliance of the world economy on the United States would ensure that no aggressive policies could be taken to oust the United States from its entrenched financial shadiness. The United States has a huge offshore sector which continues to provide foreigners and citizens alike the ability to protect their money. While the United States has repelled any foreign attempt to regulate its financial markets, it has hypocritically massacred the Swiss banking establishment with the creation of FATCA. This has led many wealthy internationals to choose to move their money to the United States where the dollar and federal government will protect it from homeland interference. For many of those outside the U.S., it is not just about hiding money but about security. Wealthy individuals living in countries with weak financial protections and or insufficient criminal justice systems often find it necessary to hide their money somewhere safe and secure from local crime syndicates. The implementation of FATCA risks leaking information on citizens’ wealth to observant syndicates. This could lead to kidnappings, like the young former Argentinian President Mauricio Macri, to extort money from affluent families. When not even the United States government is safe from forces like WikiLeaks, wealthy individuals must be aware that information on their money could leak to local crime groups, putting them in danger.

Venmo: Virtue or Vice? by Lily Wang

“Venmo me.” It's a phrase that has already integrated into our daily vernacular, as most of us have personally used or seen the app in action. With Venmo, one can quickly buy a Krispy Kreme donut at a fundraiser, easily pay back a friend who covered everyone at Miyake yesterday, or effortlessly charge a roommate for the money he borrowed three months ago, all in seconds. That’s why college students swear by Venmo—it’s fast, iPhone accessible, and best of all, involves minimal to no physical interaction. Venmo is the perfect life hack.

Unsurprisingly, millennials account for over 50 percent of those who use peer-to-peer (P2P) payment apps. P2P apps like Venmo allow users to easily transfer money to each other with their smartphones. The rising popularity of P2P apps brings to light a subtle shift in consumer preferences: a global move towards a cashless society in which cash and checks become irrelevant. Although some countries already enjoy the benefits of ascendant digital finance, a cashless society potentially jeopardizes the safety of our money, opening opportunities for

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corrupt governments or malicious hackers to access people’s finances. Founded in 2009 by two University of Pennsylvania graduates, Venmo was originally marketed as a music startup. People would to send a text message to a band requesting a song and have an mp3 show up in their email. The founders, Andrew Kortina and Iqram MagdomIsmail came up with the name “Venmo” by combining the Latin word vendere, meaning “to sell," with “mo” for mobile. They wanted to give

the brand a name that could easily be used as a verb. And sure enough, Venmo is increasingly gaining acceptance as a verb with “Venmo me” replacing the out-of-date “Pay me back later.” The momentous idea to turn Venmo into an app for transferring money sprouted when MagdomIsrail forgot his wallet when he visited Kortina in New York City for a few days. Although Kortina covered for his friend, it was very difficult and cumbersome for Magdom-Israil to pay him back with a check. Kortina never did cash the check, but instead was paid back with something even more valuable than money—an idea. Originally, Venmo was designed to allow customers to pay and receive payments through text message. Realizing that the information exchanged within these text messages portrayed stories about how and where people were spending their time, Kortina and Magdom-Israil decided to incorporate a social aspect to the application. Soon, Venmo was not just an app used to pay back a friend for covering a meal, but a social networking platform where emojis could be used to symbolize daily activities. Typing fun emojis and messages with every digital exchange is certainly more fun than filling out a check.

action would help prevent the use of counterfeit cash to fund illegal activity and terrorism. Since taking office in 2014, Modi’s government has pointed India towards demonetization, aiming for a larger goal of “financial digitization,” where financial exchanges will be run completely by technology. For example, Indian citizens will shift to using smartphones and programs that will identify users from fingerprints and retina scans to maximize security. India’s dramatic leap towards a cashless society offers a rough blueprint for the United States. Nobel Prize-winning economist Joseph Stiglitz has argued that the U.S. should follow India’s steps to offset the rising global issue of inequity and corruption. During the World Economic Forum meeting in Davos, Switzerland, Stiglitz said, “I believe very strongly that countries like the United States could and should move to a digital currency so that you would have the ability to trace this kind of corruption. There are important issues of privacy, cybersecurity, but it would certainly have big advantages.”

Venmo’s evident success quickly turned into big payouts. In 2012, the two friends sold Venmo to Braintree for $26.2 million. PayPal bought Braintree a year later for $800 million, acquiring Venmo. Now Venmo operates more than $1 billion in peer-to-peer payments each year. In less than six years, Venmo has become the leading P2P app, quickly catching up to even the biggest companies. The Financial Brand reports that in the fourth quarter of 2012, Venmo’s transaction volume totaled $59 million, less than half of Starbucks’s during that period. However, by the first quarter of 2014, the two companies were tied at $314 million. Venmo may already be a giant in its industry, and it shows no signs of stopping.

A cashless society benefits from efficiency. As many have experienced through Venmo, digital transactions are fast, clean, and accurate. For the most part, there is no room for human error or miscalculation. Similarly, mobile apps allow for easy tracking of payments and balances. With every transfer recorded in a database, people can conveniently refer to their transactions whenever needed. Tangible money itself causes problems. Ironically, storing, creating, and processing physical money costs money. Last September, the head of Singapore’s central bank encouraged banks to transfer the cost of managing cash and checks to their customers to promote the use of digital payments. Cold cash’s anonymity also attracts criminals and facilitates dubiously legal and under-the-table transactions. Getting rid of cash, especially bills worth over $20, could make crimes such as drug and human trafficking, bribing public officials, and terrorism harder to commit.

The idea of a cashless society has appeal beyond the United States. Last November, the Indian Prime Minister Narendra Modi announced that the 500 Rupee and 1,000 Rupee notes, which account for roughly 86 percent of all Indian currency in circulation, were no longer legal tender. Instead, the government would issue new 500 and 2,000 Rupee banknotes in exchange for the old ones. Modi claimed that the

Nevertheless, India’s case shows that there are still challenges associated with shifting towards cashless society. Modi’s sudden decision to alter the currency system disrupted the economy and threatened economic output. The suddenness of the action paired with prolonged cash shortages resulted in the BSE SENSEX and NIFTY 50 stock indices falling over 6 percent on the day the policy was implemented. People had to wait

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for hours in long lines just to exchange their bank notes. Outside of India, financial digitization must wrestle with widespread fears of security issues. Many Americans simply do not trust big banks to manage and hold their money. According to the Federal Deposit Insurance Corporation (FDIC), nearly 9.6 million households do not have bank accounts. Labeled “unbanked” by the FDIC, these people prefer to keep their money close and away from the scrutinizing eyes of banks. The unbanked population presents a challenge for proponents of a cashless America: would the government have to force people already skeptical of a digital Big Brother to create mobile accounts? Eric B. Delisle, founder of the cybersecurity company ICLOAK, explained that “the personal computer systems used to access account management or online shopping where credentials may be input are being compromised at a greater rate than ever before. Without using a specialized, secure system, users have no good way of knowing they are using a safe computer that isn’t stealing their credentials.” And that is exactly why people are concerned; technology holds all the power. Every time someone opens a mobile app, logs on to email, or accesses a website, someone or something could be watching. Any American transition to a cashless society, however, should start with phasing out higher bills, a method already being deployed in Europe. Last May, the European Central Bank announced that it would discontinue the 500Euro bank note by the end of 2018. A slow and gradual push towards cashless lifestyles may help countries avoid financial distress. Looking at the present, Venmo and other P2P apps are not going away anytime soon. People treasure Venmo’s convenience, accessibility, and emojisavvy statuses. Every day, Americans inch towards adopting a cashless lifestyle. But the country is not ready to make the big leap just yet. Nevertheless, Venmo demonstrates the possibilities of digital money and its advances upon society. Most importantly, it represents the reality that one day, something as intangible as an iPhone app may usurp humanity’s most tangible entity: money.

From a Chain to an Ecosystem by Nolan Abramowitz

Industry is entering a new age of smart automation fueled by cyber-physical systems capable of learning, predicting, and making independent decisions with little human intervention. The new industrial revolution, labeled industry 4.0, will disrupt businesses operations on a large scale; however, this revolution has tremendous potential to increase the quality of life for people around the world. History illustrates the net positive gain from past industrial revolutions. Three times, industrial revolutions challenged the status quo and were met with skepticism. All three times, the revolutions birthed innovative technologies that created long term returns to capital, labor, and society. According to a study by Mckinsey & Co., industry 4.0 will follow this trend and generate $3.9 trillion to $11.1 trillion in economic value by the year 2025. Value will be created by improving supply chain management technology and increasing consumer accessibility to new markets around the world. In the 1970s, the third industrial revolution utilized electronics and information technology to automate production which pushed the productivity of manufacturers to new levels. The fourth industrial revolution builds on the third and is characterized by a fusion of technologies resulting in fully automated cyber-physical systems. The fourth industrial revolution was coined as “industry 4.0” by Henning Kagermann, the head of the German National Academy of Science and Engineering (ACATECH). He explains that manufacturing processes will be determined by the interaction between real and virtual worlds. The complete symbiosis of hardware and software will create an intelligent production network by enabling new machines to produce output while simultaneously analyzing data from all aspects of a business’s supply chain. A few new technological drivers that will facilitate the real and virtual world connection are advanced robotics, artificial intelligence, sophisticated sensors, cloud computing, data capture and predictive analytics, and digital fabrication. Industry 4.0 has the potential to generate value for consumers, workers, and businesses. Specifically, cyber-physical systems will create $3.7 trillion in value for factories and distribution centers through operations and equipment optimization as well as by improving worker health and safety. In addition, $600 to $900 billion in value will be created in offsite settings such as improved out-

bound logistics through predictive routing and autonomous trade (Mckinsey & Co.). According to a recent PwC poll, 72 percent of companies expect to reach advanced digitalization in their operations by 2020. During the same time, 86 percent of companies anticipate major cost reductions and revenue gains. The world economy will become highly advanced and reach optimal efficiency through the use of cyber-physical systems. However, as was the case for previous industrial revolutions, many jobs will become automated early on. Bloomberg reports that more than 50 percent of jobs in the US could become automated in the next 20 years. Automation will create many immediate challenges, and it is even possible that the net displacement of workers by machines at the beginning of the revolution will overshadow the net returns to capital and the labor force in the future. Supply chains have continued to resist fundamental change and remain outdated systems. Industry 4.0 will create a dynamic, interconnected ecosystem which will enable the supply chain to evolve and merge into a digital supply network. External drivers of a digital supply network include: increasing customer expectations, global regulatory requirements, cost pressures, and supply chain complexities. Technologies that will enable the digital supply network to be developed include: cloud platforms, smart sensors and mobile tracking solutions, and intelligent algorithms. The digital supply network affects how managers make decisions and can create more opportunities for strategic advantages. In the past, it was difficult to analyze the final steps of the supply chain despite the importance of considering distribution and out-bound logistics. Companies can utilize industry 4.0 for material sourcing and inbound logistics. Currently, disruptions in the flow of raw materials are common due to unforeseen disasters or shortages. However, with industry 4.0 data can be collected and analyzed from the outside world in real time to determine where changes in demand occur. This information can be automatically relayed to factories, allowing production and distribution schedules to be updated to the optimal levels. Furthermore, the digital supply network will lead to logistic optimization by allowing manufacturers to receive constantly updated transportation information through sensors. For example, an algorithm can analyze weather data to determine the optimal time to transport

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goods to consumers. Logistical optimization can also add value to firms through predictive maintenance and direct delivery with drones and driverless trucks. However, cyber-attacks on the digital supply network are a major threat, making the economic ecosystem vulnerable to terrorism. Due to the complexity and interconnectedness of the system, securing every aspect of industry 4.0 technology will be difficult. One virus could irreversibly damage billions of dollars of tangible and intangible assets. Cyber-physical systems will make new markets available to consumers and drive economic growth in many parts of the world. Specifically, companies in the Asia-Pacific region are forecasted to have the highest gains. Reductions in transaction, transportation, and communication costs will help unlock these new markets. Transaction costs are currently a major expense for multinational corporations and deter access to international markets. Autonomous distribution channels and the instant transfer of information through the digital supply network will decrease the cost of trade. Many firms have started to focus on distribution centers to gain a strategic advantage from recent advancements in smart automation. New low-cost sensors, augmented reality, wearable technology, and high-performance computing and robotics are all used to improve automation. Industry 4.0 will add value to distribution centers by increasing the inventory turnover rate and helping meet customer expectations that require rapid delivery. For example, vision picking, a type of wearable technology, can use AR to overlay computer generated images across a worker’s line of sight to assist them in picking necessary inventory items or tools. Also, new software such as warehouse execution systems will monitor all automated assets and balance them with the labor force to create optimal schedules to reach distribution targets. By using cyber-physical systems, distribution centers can maximize their asset utilization, minimize downtime and increase response speed. The age of automation appears daunting, yet companies must adapt to the changing technological landscape to stay competitive. Companies and individuals that refuse to adapt to these changes will be left behind. It is imperative that firms invest now in smart automated technologies to establish a first mover advantage so they can stay ahead of their competition and be leaders of industry 4.0.

An Eye in the Sky by Catherine Wei

Previously, technology and nature have been at odds with each other, resulting in the destruction of wildlife and the rise in poaching. However, drones are modernizing wildlife conservation by providing an eye in the sky to detect poachers and closely examine populations and habitats, ultimately protecting the world's endangered species. Human technology has accelerated the destruction of wildlife areas, changed the climate, and provided deadly weapons to poachers. The International Union for Conservation of Nature (IUCN) estimates that 41,415 species are endangered and 16,306 are threatened with extinction. However, the latest drone applications are flipping the script on how technology affects animal conservation by helping scientists track night-time poachers, observe populations of endangered species, and collect up-close data. Animal poachers target many profitable animals like elephants, rhino, and humpback whales to harvest valuable products from horns to meat. In 2015 alone, more than 30,000 African elephants were killed for their tusks; roughly 3 rhinos and 96 elephants are poached every day. “The fundamental challenge of poaching is that there's more money to be made in killing and selling rare, exotic, and endangered animals than there is in protecting them,” says journalist Kelsey Atherton. Elephant poaching has increased in recent years, with some of Africa’s most notable armed groups hunting the animals to trade valuable ivory tusks for weapons. Much of the ivory is flown to China where the ivory is transformed into ornaments, jewelry, and medicine. The price per pound of ivory can be upwards of $1,000. The effort to reduce poaching is challenging because tracking poachers and monitoring animal conservation is difficult and lifethreatening. Conservation groups aiming to catch poachers often face dangerous weather conditions and even unpredictable attacks from wild animals. The Game Rangers Association of Africa estimates that 1,000 rangers have been killed worldwide over the last 10 years while working to protect wildlife and combat armed poachers. In addition, poachers are difficult to track because they operate at night using the

cover of darkness. With the rise of aerial technology like drones, governments and nonprofits now have the resources to intervene against poachers. Drones allow conservation groups to closely monitor both poachers and protected animals from above. Tanzania and many conservation groups have deployed drones specifically to track animals and identify poachers. Drones can work in tandem with on-the-ground agents to predict when animals are in danger and take protective measures. Park rangers can connect with off-site drone operators by sending location coordinates using GPS chips. Animals can also be GPS tagged, which allows operators to pinpoint location and analyze historical geolocation movements. The use of drones for conservation is increasing, and in 2013, Google awarded the World Wildlife Fund (WWF) $5 million to develop more advanced UAV drone systems specifically designed to meet the needs of conservation groups. WWF hopes to expand its drone operations and integrate UAVs with sensors and tracking software to reduce poaching. The conservation organization expects to partner with countries like Namibia and Nepal to provide hardware and training to government officials. Drones can scale down the highly profitable trade of illegal animals. The illegal trade of exotic animals generates between $7 - $10 billion annually. For example, a well-preserved rhino can be worth nearly $500,000, with each horn selling for roughly $60,000 per kilogram. The high value of animals like rhinos provides an incentive to poach. The profits gained from selling animals are resources for poachers to purchase more efficient weapons and equipment. In contrast, conservation groups tasked with fighting poaching are often nonprofits relying on donations or underfunded government departments. For instance, Ol Pejeta Conservancy in Kenya estimates that their organization has spent $2 million to save white and black rhinoceros. Their conservation technology has to be cheap. Drones provide a cost-efficient approach to animal conservation. Jonathan Downey of Airware, an American venture-funded startup that provides UAVs, estimates that drones intended for antipoaching cost between $50,000 - $250,000

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depending on the specification and batteryoperated range of the UAV. Compared to the selling price of animal tusks and meat, the cost of drones is vastly more affordable and while also protecting against losing human life. In addition to tracking poachers, drones can help scientists study endangered species. Marine biologist David Johnston uses drones’ unique aerial perspective to study humpback whales in Antarctica. Humpback whales hunt by blowing rings of bubbles, which can be difficult to view from land or boat. A drone’s camera can pick up details like the size and frequency of the bubbles and how many whales are involved, allowing scientists to observe the behavior of whales intimately through cameras from above without disturbing their natural habitats. This respects the animals and protects scientists from unexpected attacks when they step foot into the animals’ personal space. Drones offer a safe alternative to manned aircraft for collecting data on wildlife conservation. Equipped with cameras and sensors capable of taking high-definition photos and thermal imaging, drones can affordably access areas not easily reached by land. In the past, biologists like Johnston had to fly in small planes or helicopters to get satellite pictures of wild animals. These methods are expensive and potentially dangerous. With drones, scientists can stay safe on land or a boat and fly the machinery across dangerous terrain to reach animals. Drones are modernizing wildlife conservation by providing an eye in the sky to change the way society currently addresses poaching and research. Conservation groups can use drones as powerful tools to protect endangered species from illegal poachers with thermal and nightvision sensors. Drones also allow scientists to collect data on these animals and observe their behavior to recognize hunting patterns or malnutrition. Drones bridge the gap between technology and nature and shed light on how technology can be an advantageous tool to protect the world’s most valuable and unique species.

Our Interview With

PureSpinach

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How did you come up with the concept of ride back about our love and appreciation faced by growers in the greenhouse, from PureSpinach? for food and connected immediately. providing them with harvesting and seeding equipment designed specifically Serdar: When we both came to Johnson, When was the moment you both decided for baby leaf spinach to solutions that we were two guys coming from different you could pursue this as a serious business control the environmental parameters in places brought together by our love and venture? the greenhouse for successful growing and frustration for food. Spinach is my favorite maximizing yields. leafy green, and if we want to go out and Serdar: That is a very hard question actually. buy good spinach, we can go to a farmer’s We got into a product which we did not I recall from your pitch that the price of market, but they only have fresh spinach a know was economically and technically spinach is going to be relatively similar to few months of the year. For the rest of the viable because the product is not on the what other brands are on the market. Is it year, you can go to a supermarket, but then market. So for the last year and half, we have a costly process? Would there be a loss? the product is compromised. It has to be been working on our idea and it has been Would you still be able to make a profit? shipped from California and is washed in a battle of “are we there yet,” and asking chlorine solution before packaging. At that when we are going to hit the milestone of Serdar: No, it is certainty profitable. In point the spinach no longer has the same being able to say that we are a profitable terms of technology we are there. The whole fresh flavor and texture. We were surprised, and sustainable business. I am glad to say point of launching a pilot product in Ithaca as the United States is a place with an that we are definitely there right now, and is to figure out all those numbers and make abundance of products but not necessarily we have made our way through uncharted our business plan. So we will still price it fresh produce year-round. That is when we territory. at organic package spinach price which decided this is a problem we wanted to work sells for about $3.99 at Greenstar. This also on. We started working on this product with Ziad: The lines are blurry, but I believe that makes us happy because we don’t have to be Cornell researchers in the Plant Science you must have faith in both the product and “premium” and can be accessible to people department. the team. When I saw both the consumers’ who just like organic. and retailers’ reaction after sampling our Is this your first entrepreneurial spinach and their interest in our product, experience? I knew we were on to something. If he How do you plan to turn this into a scaled were selling recyclable toilet paper with his business, and what do you envision for Serdar: I come from an entrepreneurial vision, my faith would be in him. PureSpinach in the future? background where I started my career in my family’s business in Turkey, dealing Were you told about this hydroponic Serdar: We plan to turn this into a scaled with solid fuels and consumer packaged process by Cornell plant science business by being present in as many goods. Before I moved here, I was working researchers, or did you go to them with cities as possible by operating our own on a robotics startup in Turkey where we your own research? greenhouses or partnering with existing developed an industrial packaging company. greenhouses. We met with FreshDirect I decided to come to the U.S. to pursue Serdar: No, we saw hydroponic spinach in recently and are finalizing the paperwork my MBA for both political and economic the greenhouses; there was a research being to have our product sold on their website. reasons relating to my home country. But done at Kenneth Post Labs at the time. I We are also in talks with other retailers in greater than that, I felt like it was the right became genuinely very curious about all the New York. So that’s what we want to do: time for me to look into other opportunities crops. And that is how we got into it. have a small-scale production in New York because I knew I wanted to get out of the City soon. Get our brand out there and start industrial products industry and into the And going off that, how do you plan to working on building our big facility. consumer products realm. I love food, and continue developing the technology that I had a burger pop-up in Istanbul which you use for growing your spinach, and Where will the facility be? Would it be in was a good gateway for me to get into food what prevents competitors from copying New York? manufacturing. your methods? Serdar: It would be ideally outside of the city. How did you both meet? Serdar: So what we have is a recipe for We would look in locations in Long Island growing spinach sustainably, continuously, or Hudson Valley. So we are still keeping Ziad: Actually, it is a funny story; we met and profitably within our fields. What we our promise of fresh grown spinach. during orientation. Serdar and I were didn’t have when we started was the full coming back from New York City from a scale process. As we move forward, we What opportunities or resources has trip, and we had a conversation the entire will continue to find solutions to problems Cornell provided that have been helpful?

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Serdar: We got into e-Lab which has been excellent; it has different resources and professors to guide us through the venture. We treat it as though the professors are investors requesting something, and that we have to meet those deadlines. Going back to your question, I think the biggest challenge right now is finding the right type of investor. We emphasize people a lot; we really love and respect the people we work with, and we would look for that in our investors as well. Have you ever thought about Shark Tank? Serdar: Someone told us about this, but we haven’t. Do we need to waste a lot of time pitching this, or could we be marketing our business that is up and running? For the future of PureSpinach, do you intend to only focus on Spinach? There are other vegetables in the US that are consumed at higher rates, such as lettuce, potatoes, tomatoes, why spinach? Serdar: Spinach is our favorite leafy green, and I always say spinach is America’s favorite leafy green. People who love spinach are really set on it, and they don’t want to substitute it with anything else. We want to target those people with the best spinach in the world. We expand after this to another spinach product: spinach pesto, spinach dressing, etc. We want to be a spinach brand, not a farm that makes anything that our customers demand. For someone who is used to having spinach in salads or smoothies, how will they know that it’s “PureSpinach” spinach? Ziad: Specifically, for people who are used to having spinach in salads or smoothies, they will taste the difference. During our consumer research phase, we used to go to Wegmans and casually interview people. Peoples’ responses would range from those who would tell you they would pay a premium to get good spinach that is local, pesticide free, and available year round to

people that said, “It’s just spinach, bro." When you get those people to try it, and they see the difference in taste, that’s the moment they say, “This is what spinach should taste like, but that [packaged spinach] is what we are used to eating.”

for what you want and continuing in order to get where you want to be.

So you somewhat touched on your marketing strategy, which includes getting people to taste the product and to realize that you have a much better product. How do you, in a more general sense, plan to have those people relate fresh spinach to PureSpinach immediately?

Serdar: For me it was for a lot of reasons. I just need to take some time off to think critically about who I am and what I want to do in life and to find a piece of work that I’ll be happy to do for a long time.

Serdar: I think the simplest advantage for us is freedom from weather constraints. When you go into GreenStar, and they have a sign that says “due to a mildew issue in California we do not know when we will be getting our next organic spinach,” the shelf is empty. Putting PureSpinach in that area, people will start to equate it to local spinach, and after trying the flavor will be hooked. Any advice you have to any aspiring entrepreneurs here on campus? Serdar: Talk to a lot of people. Cornell is an amazing place with amazing people and has a great entrepreneurial culture. But before getting into any venture, my advice would be to find the people knowledgeable about what you want to do, who love surrounding themselves with new ideas, and make friends with them. I think the first pillar of getting something started is to get other people excited about your idea and what you want to do. If you can sell the idea to people who actually know about the industry and the product you want to get into, then it’s just much easier since you have more supporters. It’s really about spending time with people and building relationships. Ziad: I think knocking on the door, picking up the phone, and sending an email. I feel that the biggest barrier for people is that they think people won’t be responsive. We had a lot of perseverance, I don’t want to say it’s stubbornness, but it’s really fighting

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Just out of curiosity, if you guys weren’t working on PureSpinach, what would you have done with your MBA?

Ziad: I was working for 8 years in finance, and I realized how quickly time passes. It was a job and I wanted something more than a job. So for me it was selfactualization, a soul-searching type thing. I feel that coming to an MBA here gives you the opportunity to properly search, and I think that was what I wanted. I missed being in an environment where I can get challenged on something not related to the capital markets or retail banks. That’s why I believe school was the only opportunity for me to better develop and break out from my routine. As an undergraduate, it’s becoming a trend that everyone tries to work for the bulge bracket banks. I feel like that curiosity and that exploration in the entrepreneurial spirit is sometimes missing. Ziad: Even here, I believe that this rat race exists and it’s great to develop people skills; I mean, if it wasn’t for my job for 8 years, I don’t think I would have the skill set. And again, it’s about finding the right people, as you won’t find people like Serdar everyday. It’s really tough to be entrepreneurs in the right environment. Everyone has different interests, different needs, different priorities, and some can’t be entrepreneurs. They can’t take that risk. The experiences you will get as an undergrad, the corporate jobs, are great, but that’s where you have to stop and get a higher degree.

Robert F.

Cornell Entrepreneur of the Year 2017

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Entrepreneurship in this country has in many ways become institutionalized by (if not endemic to) university campuses like at Cornell with eHub. As someone who did not pursue the entrepreneurship path until years out of school, do you think that these changes are essential to the creation of a new generation of entrepreneurs or serve as distractions to driven students? These programs are definitely helpful and can help push some of our brightest entrepreneurial minds in the right direction by offering the right resources, support, and counsel. Having institutionalized entrepreneurship programs can help the right individuals learn some of the lessons of entrepreneurship in a faster and more effective manner. This is the moment to become an entrepreneur. We live in a unique time in history; for the first time, opportunity can be created without inheriting massive amounts of capital, without ownership of land or natural resources or even people. For the first time, wealth can be created through the power of one’s mind, thoughts and ideas—developed, monetized, and instantaneously distributed across the globe. Intellectual property has become the new currency of business and finance, and the promise of brainpower to move individuals, families, and communities from poverty to prosperity has never been more possible. We need entrepreneurs to harness this power and create jobs. As you have progressed from a budding

entrepreneur to a private equity titan, how has your involvement in your own business changed? Furthermore, what unforeseen challenges have you faced in recent years as a CEO? We built Vista for scale. We have taken lessons from what we have learned about running software companies and captured them in 100+ Vista’s Best Practices. While a small team and I were testing and honing these practices in the beginning, we now have a team of nearly 200 technical experts focused exclusively on supporting our portfolio companies adopt best practices and create value.

This is the moment to become an entrepreneur.

I like to think of Vista as a software company – the 4th largest when our portfolio companies are taken together –

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in a private equity wrapper. The challenge I face as a CEO every day, as do the CEOs of our software companies, is finding the best talent. There are over 2,700 open jobs across the Vista ecosystem. We are looking for people with technology skills who we can train. This is precisely why on-ramping African-Americans and women into our technology economy is such a priority in my philanthropy; the jobs are there if they have the skills and opportunity to access them. Recently, through your personal contribution and the Fund II Foundation, The Robert Frederick Smith Tech Scholars Program was launched to provide scholarships and fellowships to underrepresented minority and female students. In an ideal world, what kind of impact would you like this program to make, both here at Cornell and in the United States as a whole? I want these programs to create access and opportunity for minorities and women to access jobs and become leaders in the technology economy. Technology is changing almost every facet of the way we do our jobs and live our lives. It is not only important to have the necessary skills, it’s also critical for students to have the infrastructure of support and mentors around you. We can do this by producing a critical mass of job-ready minorities and women. I expect these scholars will live up to their potential and their responsibility to create opportunities for others, serve as mentors, and lead as role models for legions more minorities and women.

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Teaching the entrepreneurial spirit of asking tough questions, constantly learning, demanding excellence, taking calculated risks, and bouncing back from setbacks are all part of Cornell’s curriculum and should continue to be. We need to harness the full power of the American workforce and their creativity and technology and provide the most adept platform for this to happen. We need to harness the full power of the American workforce and their creativity, and technology provides the most adept platform for this to happen. What are specific endeavors universities like Cornell can implement to further increase and instill entrepreneurship? My definition of entrepreneurship does not mean just starting a company. Not everyone should start their own business, but everyone should be entrepreneurial about their careers. Teaching the entrepreneurial spirit of asking tough questions, constantly learning, demanding excellence, taking calculated risks, and bouncing back from setbacks are all part of Cornell’s curriculum and should continue to be. Moving from an investment banking position at Goldman Sachs to taking a leap of faith to start your own private equity firm, what’s your advice to aspiring entrepreneurs to decide to listen to your gut versus other people’s opinions? I often remind my children of the three words that resonated with me in my early years in college, at Goldman Sachs, and when I made the decision to go out on my own: “You Are Enough.” In essence, this means that everyone should find their destiny. My advice to aspiring entrepreneurs is to find their courage, conviction and resolve.

What do you think are the next steps with Artificial Intelligence? What roles will investors like yourself play with Artificial Intelligence? All industries are being transformed by Artificial Intelligence today. The future is already here. I was recently the moderator on the Artificial Intelligence panel at this year’s World Economic Forum in Davos. I was joined by the CEO of Microsoft, Satya Nadella; the CEO of IBM, Ginni Rometty; the Founder and CEO of Healthtap, Ron Gutman; and Joi Ito of the MIT Media Lab. It was a fascinating discussion. There was a common understanding that we need to invest in cognitive solutions that are designed to enhance human intelligence, not replace it. We also discussed the need to agree to a set of principles for transparency and trust to manage the ethical considerations related to AI in order to protect privacy and the dignity of work. There was also a clear recognition that we could use AI to increase productivity in education systems. The same effort being devoted to AI in enterprise and consumer applications should be directed to AI in education systems to help create more opportunities and avert accelerating income disparities. Do you think young talent’s fixation on prestigious startups is to the detriment of technological advancement and industry innovation? There’s definitely a glamor around tech startups, but the vast majority of younger

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people I have worked with and meet are mission-focused and care about working at a place that merges values and value. We should really push back against this cliché that everyone wants to move to Silicon Valley to start the next billion dollar company. Young people are smart enough to realize that these are one in-a-million ideas, and while they do of course want to earn a good living and support their families, this is a very community-focused and serious-minded generation for the most part. There is a common opinion that the most lucrative careers are not necessarily the most beneficial to society. Do you think your social impact could have been as large had you pursued a career in the sciences or engineering? I don’t agree. Lucrative careers can create jobs, contribute to GDP and unleash a level of productivity that raises the standard of living for everyone. The social impact that I have achieved – through my business and my philanthropy – is precisely because I am an engineer. Once an engineer always an engineer. My joy of figuring things out, taking risks, and finding elegant solutions to complex problems has allowed me to deliver social impact and consistent returns. I take a similar approach to philanthropy – figuring out how to scale programs and innovations that work is the perfect role for an engineer.

Senior Vice President of Sales Strategy and Operations at Integral Ad Science Previous: Pinterest, Weather Channel, WebMD, Microsoft, Estee Lauder

Do you think there are any resources or experiences at Cornell that helped form your marketing role in your life? I graduated in 1997, majoring in Economics and Communication. I was really fortunate that I was in Human Ecology and took a lot of courses in the Agriculture School, as the Internet was just in its beginning state. We were one of the first colleges to have access to email and a search engine. I think the technological advancements of Cornell opened up a unique opportunity to me. A lot of folks who shared similar interests as me at other

colleges went into ad agencies, PR, or the publishing world. Cornell introduced me to the fact that the Internet was going to be this new aggressive channel. Now 20 years later, I can say that I’ve have had a 20-year career in this field that has revolutionized everyone’s lives. In addition, one of the branding classes I took at Cornell really opened my eyes on the importance of perception. That class taught me that it’s not just the product you have, but how you talk about it and position it. I felt that class and all of the communication classes I took

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were incredibly valuable and really laid the foundation for how I approached marketing. How do you think Cornell can improve on its brand? You always hear about Stanford and how technologically advanced it is or Harvard and its prestigious brand. If you think about most of the Ivy League and top-tier schools, Cornell lets itself be somewhere in the middle of that continuum. You don’t hear stories like mine, about what I got from Cornell, often. Cornell’s culture

Eva

Papoutsakis Smith Page 32

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has historically been to keep your head down, work hard, and stay focused. But unfortunately, it’s not enough to work hard. Someone needs to know you are both working and making progress, otherwise you won’t get credit. I think Cornell has been too reserved and humble for its own good in terms of branding. One book that I read on branding is called “Lovemarks,” and it's about the fact that in this day and age it’s not enough to just provide a service. You have to make the consumer love you and the service you provide. How do you transcend just having a utility and reach consumers’ emotions? That is what Cornell really needs to figure out: how it will instill that internal community and pride. What has been your most significant barrier in female leadership? I think of myself as quite fortunate because I’ve had really strong female mentors at every stage in my career that

command respect while still being true to myself. As I went through my career, I found people that were where I wanted to go. When I had children, I found myself gravitating towards mentors who also had children. These people helped me navigate different issues, such as “how do you get through being pregnant without being labeled as someone who’s not going to come back to the workplace?” and “how do you get through the first few years of your children's lives, which are really hectic and require flexibility, but also tend to coincide with some of the most critical years in your career development?” I am also incredibly fortunate to have a husband who is both a true partner and a feminist. We split the responsibilities at home equally. There is no feeling that if I go on a business trip things won’t be taken care of at home. Who you choose as your partner is so critical in life. Having a partner that recognizes the biases you

modeled, and been a famous singer. She threw all the rules out the window that a woman needs to be tall and skinny and white in order to act, model, and succeed. I connected to her in that I felt different, didn’t fit into this mold for achieving the things that I wanted, but was going to do all I could to do it anyway. I wrote about how she inspired me to keep my wild curls, be the loud Greek woman, be funny, warm, yet tough and approach things my own way. And maybe in turn, I’ll pass it forward, cut through for someone who feels similarly, and make someone think twice about conforming versus being okay with standing out. I think people gravitate towards unique people that define their own path, at least I do. Does work life balance really exist for women? Does it really exist for anyone? I think it depends on your definition of having it all. Are you going to be the perfect stayat-home mom and at the same time the

One woman I look at, someone who really inspired me, is Queen Latifah. My Harvard application essay on the business professional that inspired me most was on her. She’s my inspiration because if you play by someone else’s rules you are never going to win. really prepared me for any challenges. A lot of people don’t realize there might be some discrimination. They might have to deal with inappropriate advances, or their ability to have children might put them on the mommy track. They proceed into that environment and have to deal with the sudden realization that these systemic issues are going on and have to figure out how to deal with them. This is something that Cornell has taught me: the power of mentorship, of working with people who have walked the path before you. Even though I had to go through it, I felt so fortunate that I was prepared for it. I had people that spoke to me on how to navigate this, how to proceed through my career, and how to

face, respects you, and advocates for you has been really huge in my ability to be a woman, executive, mom, and wife and somehow make that all work. Can you speak about the women who have inspired you and why? There are so many women that inspire me. But one woman I look at, someone who really inspired me, is Queen Latifah. My Harvard application essay on the business professional that inspired me most was on her. She’s my inspiration because she made me realize that if you play by someone else’s rules you are never going to win. She came from a poor background, her sexuality was always questioned, and she is overweight. Yet she has starred in a ton of movies,

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perfect CEO while doing everything else? You are setting yourself up to fail if you think you’re going to be perfect across all those things. I believe that men and women can take a step back and think about what’s important to them and what’s going to make them feel happy and fulfilled. Focus on your own definition of success and how to achieve it. Also, perfect is highly over-rated. You have been in the industry for 20 years. What are the greatest challenges facing women in the workplace? I think the biggest challenge today really comes down to unconscious bias. It is great that we are having conversations about women and that they are at the forefront.

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For the next steps in relation to equality, there need to be more examples of women in powerful roles so people don’t always think of the authority figure as male. The school shouldn’t default to calling the mom first. Men should take time off for childcare without being judged at work. Until the default mental pictures change, there is still work to do. Did you always want to do Marketing and Sales? How has the industry changed from the beginning of your career to now? I knew I wanted to be involved in marketing, but I didn’t always know that I wanted to be involved with the sales side. I discovered that I got more excited about servicing individuals in a consultative way to further their brand rather than being the holistic owner of the brand. It provided more variety and intellectual stimulation, and I discovered that I loved the selling aspect of it. The number one change has been the introduction of richer data analytics and how much you can do in terms of marketing to cater to the end consumer. I’ve focused my career on new communication channels, new technological applications, and the data both provide through their increased accessibility to the end consumer. Do you think social media is a good marketing tactic? Absolutely. When I was younger, if you wanted to be famous, you would go to Broadway or Hollywood. Now you have people everywhere that have made their own brand because of Snapchat, Facebook, YouTube, and Pinterest. This has completely disrupted how people think about brand creation. And now you’re seeing the influencers who have developed their own brand are starting to impact traditional marketing. If you really think about it, what it really meant to be famous was first within print, then on film, then television, then the Internet. I do believe social media, even more than just the “Internet,” is really what allowed that shift.

My own purchase behavior is influenced much less by traditional channels now, largely replaced by the social elements of the Internet. Reviews and how consumers research have had a massive impact on how people approach purchasing and branding. This is really about reaching beyond a product’s utility and making an emotional impression. And I think this disruption of social media is only in its beginning phase. Things like in-home and in-store connectivity and artificial intelligence have begun to, and will continue to, disrupt the industry. Do you think there are any downsides to social media? Yes, I do think there are downsides. Whether it’s concerns about security, the pressures that social media put on curating yourself in a certain way, or the focus on marketing and branding and commercialization, I think those all can be downsides, but it’s like anything else. It’s this idea of knowing that there are a lot of opportunities that can also be abused if you aren’t careful. It’s a powerful platform that should command our respect but also requires significant responsibility. We wanted to ask you about how some experts have called into question the importance of having an MBA, given that you received your MBA. Do you think that it supplemented your Cornell education? And what did your MBA teach you that you couldn’t learn elsewhere? I think, for me, the MBA absolutely helped. It gave me a broader worldview, exposing me to a lot of people from a lot of places. I did a tremendous amount of travelling. It opened my eyes to methods of business that I hadn’t been exposed to before. So I found it incredibly valuable. I think it's opened a lot of doors for me. How long did you wait after you graduated from Cornell to get your MBA? Four years. I got four years of experience

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and then I went and got my MBA. A lot of my friends talk about when is a good time for us to get our MBA and that it’s always recommended that you get some work experience. What do you think? I think of it as highly personal because if you end up being fortunate enough after graduation to work at the next Facebook, or Pinterest, or Google, then absolutely don’t leave that opportunity. Get all the experience you can. For me personally, four years was something that I had in the back of my head, but also a really big recession coincided with my MBA. A lot of my friends were getting laid off. Right after I started my MBA, 9/11 happened. So for me, it made sense. There was a natural lull, and I knew this was a good time to improve my skill set and expand my network. But if I had been at a startup that had a lot of potential or the economy was much stronger, I might’ve postponed it. Going full circle, you aren’t going to succeed if you follow someone else’s rules. You really need to figure out how to make it work for you. If you could give Cornell students any piece of advice on creating their personal brand, what would it be? Always create your brand through the value that you’re providing to somebody else. Figure out what you’re really good at. That will create a sustainable brand. If it is gimmicky or based on a cult of personality, the brand just isn’t going to have the ability to endure. I also personally don’t think it's going to be as fulfilling for you as an individual. It kind of goes hand in hand with what you want to do. People tend to focus on what they’re not good at, but if you figure out what you’re good at, it will give you energy. It's easier to get better at what you’re good at than to overcome what you’re bad at. So if you can figure out what that strength is and how to leverage that to drive value and solve problems, you’re going to have a brand that is both externally very popular and internally very fulfilling.

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