Sternbusiness Spring 2011 by NYU Stern

S P R I N G / S U M M E R 2011 the Alumni Magazine of NYU Stern

STERNbusiness Putting on the Ritz STERN’S NEW SPECIALIZATION IN LUXURY MARKETING PLACES THE SCHOOL OUT IN FRONT

Nobel Laureate Michael Spence Speaks ■ Geithner,Greenspan,and Rohatyn Visit ■ The Price of Sin ■ R x f o r F a n n i e a n d F r e d d i e ■ D e m i n g a n d t h e I O M S D e p a r t m e n t ■ R e s c u i n g N e p a l ’s C h i l d r e n

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My first year as Dean has been a whirlwind of activity here on campus and with our extended family around the globe, and as we go to press our colleague, Geeta Menon, the Abraham Krasnoff Professor of Global Business and Professor of Marketing, has just been named as the Dean of the Undergraduate College. In every corner, our students, faculty, and alumni are deepening and diversifying their connections to the world of business. The strength of the School’s bench in the field of finance draws both scholars and leaders from government and business to our campus. The power of their collective intelligence has enabled us to gain valuable insight into the global recession: its causes; which countries have rebounded, which are lagging, and why; and, especially, how the US can reshape its financial system to avoid future meltdowns. We were privileged to welcome many government and business leaders to campus this past year. Treasury Secretary Tim Geithner addressed the core principles that will guide the implementation of the Wall Street Reform and Consumer Protection Act; former Treasury Secretary Henry Paulson was interviewed by Morgan Stanley Chairman John Mack, and separately Mack recounted his own experience guiding Morgan Stanley through the rough economic seas. Former Fed Chairman Alan Greenspan (BS ’48, MA ’50, PhD ’77, Honorary Doctorate of Commercial Science ’05) gave his perspective on the future of finance in an interview with John Paulson (BS ’78), president of Paulson & Co., in February. Later that month, New York Federal Reserve Bank President and CEO William Dudley gave a major speech on the economic outlook for the future. On the research front, our finance and economics faculty continue to push the frontiers of knowledge. In 2009 they published a collection of white papers on the economy, Restoring Financial Stability: How to Repair a Failed System. In the past year, they’ve written two more books: Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Wiley, 2010), and Guaranteed to Fail: Fannie Mae, Freddie Mac, and the Debacle of Mortgage Finance (Princeton University Press, 2011). Both recent books are highly detailed sequels to the first, and all three are team efforts by the

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more than three dozen Stern professors who have made the School’s voice part of the national and global conversation on financial reform (page 10). In September, Nobel Laureate Michael Spence joined the economics department. In the fall, preceding International Monetary Fund talks in Washington, he hosted a two-day conference of academics and G20 leaders at Stern on sustainable growth. Spence’s thoughts on how developed and emerging economies are recovering from the recession and the role of the IMF and World Bank make for interesting reading (page 12). Our academic programs continue to evolve, amplifying opportunities for our students. The entertainment, media, and technology department has been a longstanding jewel of a program. In response to strong, and, as it turns out, prescient student demand, the marketing department has implemented a new area of specialization for MBA candidates, luxury marketing. This makes Stern one of the few business schools in the world to offer such a program (page 6). The luxe sector is one of the first to emerge from the recession, and our faculty have been quick off the mark to prepare students to make a valuable contribution. As you will see in this issue, the breadth and depth of ongoing faculty research remain impressive. Sam Hui goes Hollywood, devising a system of predicting box office success from movie scripts; Marcin Kacperczyk looks at the performance of “sin stocks;” and Robert Salomon mines Olympics statistics to reveal patterns in the diffusion of knowledge that may be transferrable to the economic progress of developing nations. Read about these intriguing papers beginning on page 24. In the course of the academic year I have visited alumni in London, Buenos Aires, São Paolo, Korea, Hong Kong, Abu Dhabi, and Tel Aviv, as well as alumni closer to home in Washington, D.C., and Los Angeles. I call on you to stay connected to your alma mater, because your engagement with current students and professors enriches our experience, and, I hope, your own as well. We are proud of your accomplishments and, as always, remain grateful for your continuing commitment.

Peter Henry Dean

STERNbusiness A publication of New York University Stern School of Business

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S P R I N G / S U M M E R

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Public Offerings Timothy Geithner speaks on financial reform; Felix Rohatyn and Martin Lipton reminisce; Henry Paulson and John Mack discuss the Treasury’s actions; a conference on counterparty risk and Dodd-Frank; an event centered on measuring social impact; TV execs ponder new media and innovation; and more

Blissed Out 8 Questions for Bliss World’s Mike Indursky

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Cover Story – Putting on the Ritz

Meet Michael Spence

Chairman Emeritus, Board of Overseers Henry Kaufman

Chief Marketing Officer Beth Murray

14 Design guru Emanuela Frattini Magnusson puts the style in lifestyle By Carolyn Ritter 16 Conor Grennan reunites stolen Nepalese children with their families By Marilyn Harris

Associate Dean, Marketing and External Relations

Leading Indicators Stern’s CEO Series: Tom Glocer of Thomson Reuters discusses necessary skills in the global economy Ernst & Young’s Jim Turley talks about managing a corporate career

Joanne Hvala

Editor, STERNbusiness Marilyn Harris

Prospectus

Managing Editors, STERNbusiness

Ranking systemic risk, noteworthy faculty papers, awards, and honors

Rika Nazem and Carolyn Ritter

Entertaining Pastimes

25 And the Oscar Goes to … By Sam K. Hui, Jehoshua Eliashberg, and Z. John Zhang

27 Going for the Gold By Robert Salomon and Jin-Hyun Bae

28 The Price of Sin By Marcin Kacperczyk and Harrison Hong

Peer to Peer Student Life in Washington Square and Beyond: Online celebrity photo auction, a class on cultural norms in global business with Maria Bartiromo

Frederick D.S. Choi

Stern in the City

Three papers by NYU Stern faculty delve into movies, sports, and sin stocks and come up with intriguing conclusions for emerging economies, investors, and film studios

Vice Dean and Dean of the Undergraduate College

William R. Berkley

Office Hours – Faculty Research 24

Peter Henry

Guaranteed to Influence

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Dean, NYU Stern School of Business

Chairman, Board of Overseers

The Nobel Laureate and new faculty member digs into the global economy

John E. Sexton

Stern’s new luxury marketing specialization ramps up Stern faculty publish two timely books on financial reform

President, New York University

Alumni Relations Alumni News and Events: Alumni Ball’s 10th anniversary; Haskins Dinner; donor wall unveiled; Dean Henry’s visits; new reunion tradition; networking opportunities

Class Notes

Past Performance W. Edwards Deming, quality management guru and inspiration for Stern’s IOMS department By Marilyn Harris

Contributing Writers Keith Layton, Jessica Neville, Angela Parks, and Joey Schmit

Illustrations Sergio Baradat Gordon Studer Christophe Vorlet

Design Anne Sliwinski

Letters to the Editor may be sent to: NYU Stern School of Business Office of Public Affairs 44 West Fourth Street, Suite 10-160 New York, NY 10012 www.stern.nyu.edu/newsroom/sternbusiness sternbiz@stern.nyu.edu

Public Offerings THE FINANCIAL CRISIS AND THE ECONOMY REMAINED THE FOCUS OF THOUGHT LEADERS VISITING STERN…

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1. Timothy Geithner discussed the Wall Street Reform and Consumer Protection Act. 2. (from left to right) Martin Lipton, Felix Rohatyn, and Dean Peter Henry 3. Lipton (left) interviewed Rohatyn about his new book and experience in the City’s political and financial spheres. 4. (from left to right) Bill McNabb, Robert Thurman, and Daniel Kahneman debated the ways that society measures progress. 5. John Mack (left) interviewed Henry Paulson on the Treasury’s response to the “Great Recession.” 6. Daniel Kahneman 7. John Mack 8. John Mack spoke to a group of students in Professor Diana Mayer’s class on Authentic Leadership Development. 9. Felix Rohatyn autographed copies of his new book, Dealings: A Political and Financial Life.

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On August 2, NYU Stern hosted Timothy Geithner, US Secretary of the Treasury, who gave his first public remarks since the enactment of the Wall Street Reform and Consumer Protection Act. The secretary addressed the core principles guiding the implementation of these historic reforms, including speed in bringing clarity to the new financial rules, full transparency, and ensuring a more level playing field among banks and economies abroad through high standards. He also cited the Act’s consumer protection measures, such as simplified disclosure on mortgages, stronger capital requirements, and derivatives reform. “New York is the apple of the universe,” declared Felix Rohatyn, Lazard investment banker, former US ambassador to France, and author of Dealings: A Political and Financial Life, before 150 students and alumni from NYU Stern, as well as students from NYU’s School of Law and Wagner Graduate School of Public Service. Martin Lipton, chairman of NYU’s Board of Trustees, discussed with Rohatyn his new book and lessons learned from his life in the City’s political and financial spheres. Rohatyn lamented that politics today has overwhelmed the social contract that served this country so well, uniting all sectors of society to face challenges. Former Treasury Secretary Henry Paulson was interviewed in Spring 2010 at Stern by Morgan Stanley Chairman John Mack before hundreds of NYU Stern, Law School, and Wagner Graduate School of Public Service students and alumni. CNN Money taped the event and broadcast it intermittently the following day. Paulson and Mack discussed the historic decisions and events surrounding the Treasury’s response to the worst financial crisis since the Great Depression. On a second visit, Mack also addressed leadership development with Stern MBA students in an intimate classroom setting. Interviewed by Stern Professor Diana Mayer, who teaches the MBA elective, Authentic Leadership Development, Mack spoke about the lessons he learned from leading on Wall Street, day to day and in

times of crisis. Recounting the recent financial crisis and his role then as Morgan Stanley’s president and CEO, Mack shared how he “fought to death” to save the firm from collapsing or being sold. More than 100 financial, academic, and regulatory representatives participated in a November conference, “Managing Counterparty and Systemic Risk Under Dodd-Frank,” co-hosted by the School’s Volatility Institute Robert Engle and the Depository Trust and Clearing Corporation (DTCC). Three industry experts led the discussion: Stern Nobel Laureate Professor Robert Engle, who, with faculty colleagues, recently developed the NYU Stern Systemic Risk Rankings (pg. 22); Darrell Duffie, Dean Witter Distinguished Professor of Finance at Stanford University; and Commissioner and Former Acting Michael Dunn Chairman of the US Commodities Future Trading Commission Michael Dunn. As part of the 2010 Aspen in New York Business & Society Forum, Erik Schatzker, anchor and editor-atlarge at Bloomberg, led a discussion in October at Stern about defining and measuring success among three panelists – 2002 Nobel Laureate in Economics and Princeton Psychologist Daniel Kahneman; Chairman and CEO Bill McNabb of The Vanguard Group; and the holder of the first endowed chair in

Erik Schatzker

Robert Thurman Sternbusiness

Public Offerings Buddhist studies in the West, Columbia University Professor Robert Thurman. After introductory remarks from Stern Dean Peter Henry and Walter Isaacson, president and CEO of the Aspen Institute, the panelists debated the ways society gauges progress.

…while social entrepreneurs contemplated challenges… “While the social entrepreneurship field has matured, our ability to measure the impact of a venture’s efforts still remains a significant challenge for most organizations,” explained Stern Professor Jill Kickul, organizer of Stern’s Seventh Annual Satter Conference of Social Entrepreneurs. Practitioners from the public, nonprofit, and for-profit sectors, along with leading academics from around the world, convened for the Satter Conference on November 5, hosted by Stern’s Berkley Center for Entrepreneurship & Innovation and sponsored by the Stewart Satter Program in Social Entrepreneurship. Participants discussed new approaches for measuring an organization’s social impact – key for influencing social capital market investors and important stakeholders.

Convening approximately 130 industry experts, Stern MBA students and alumni, and academics, the Eighth Annual Future of TV Conference focused on digital media and innovation. Hosted by Digital Media Wire, in association with NYU Stern and the Consumer Electronics Association, the event was co-chaired by Professor Al Lieberman, executive director of Stern’s Entertainment, Media, and Technology Program, and Ned Sherman, CEO and publisher of Digital Media Wire. Panels addressed the outlook for TV and digital media, trans-media franchises, building online social communities around TV properties, the evolution of advertising, mobile video, and new distribution strategies. Panelists represented A&E Television Networks, Disney/ESPN/ABC, Google, Fox Mobile Group, Microsoft, MTV & VH1 Digital, NBC Universal, TiVo, TV Guide Digital, Verizon, Wired, and Yahoo! Connected TV.

…and alumni donors and Dean Henr y viewed a vast personal art collection

…TV execs and academics pondered new media and innovation…

Peter Kraus (right) shared some of his contemporary art collection with Dean Peter Henry (center), Steve Zelin (left), and donors at Stern’s After Market Hours event. 1

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1. Cesar Conde (right), president of Univision Networks, pointed to the company’s rapid growth during an interview with Georg Szalai (left) of The Hollywood Reporter. 2. Matthew Blank, chairman and CEO of Showtime Networks Inc., discussed the TV industry landscape. 3. John Penney, executive vice president of strategy and business development for Starz, shared his predictions for the future of TV content.

Peter Kraus (MBA ’76), CEO of AllianceBernstein, shared his passion for contemporary art, including photos from his vast collection, with an intimate group of alumni during an After Market Hours event, a series hosted by the Dean’s Executive Board that showcases successful alumni and their diverse and creative careers. Dean Peter Henry and Steve Zelin (MBA ’91), senior managing director of the Blackstone Group LP and chairman of the Dean’s Executive Board, and about 40 donors participated in the event, held at the Barbara Gladstone Gallery in New York City.

Questions MIKE INDURSKY (MBA ’90)

President, Bliss World Holdings Inc.

Mike Indursky joined Bliss World, a subsidiary of Steiner Leisure Ltd., as president in March 2010. For five years before that, he was chief marketing and strategic officer of Burt’s Bees Inc., where, among other things, he spearheaded the development of a new industry standard for natural products, leading to a sale of the business to Clorox for $950 million. Prior to that, he was vice president of marketing at Maybelline and Garnier, both L’Oréal brands, and had spent 12 years at Unilever Home and Personal Care North America, where he held various leadership positions of increasing responsibility. In his current post, Indursky oversees the Bliss and Remède brands and is tasked with leading the global spa and personal care company of more than 700 employees around the world into the next phase of growth. 1. How would you articulate the marketing message at Bliss versus that of Burt’s Bees? Both operate in the arena of well-being, but the marketing message is totally different. Burt’s Bees was a fun, quirky brand that happened to be natural; we refocused the brand to being the leader in natural personal care products that happens to have great personality, and to stand for something as well. At Bliss, we are evolving the brand from one about destressing at spas and selling wonderful products to one about overall well-being, with quality products backed by the expertise of hundreds of technicians from six continents and their relationships with customers. You walk out of a Bliss spa with a smile on your face. 2. What is your biggest challenge in taking the helm at Bliss? Our model is complex. We have a multilevel marketing model. At the spas, we provide services and products. We also sell to retailers. Plus we have a catalog and a website where we sell third-party products as well as our own. We’re part retailer, part wholesaler, part cataloguer, and part direct marketer. The challenge is to make this complexity simple and make it a powerful tool rather than an unwieldy structure. 3. Bliss Spas around the world are mostly located in upscale hotels, with some exceptions, as in Singapore, where the spa is attached to a Sephora cosmetics store. What innovative strategies are you launching now? When you stand for well-being, your opportunities expand

exponentially. In distribution, we’ve expanded significantly this year, in the US and internationally. To better communicate our message to retailers, we’re setting up a new merchandising system to get across the spa/product relationship. We’re doing very provocative local advertising for the first time, on billboards and bus shelters. 4. Bliss targets many different demographics, from Gen Y to baby boomers. Which media channels work best for getting your marketing message across? We can’t do mass campaigns. We use a laser pointer. For instance, when it was back-to-school time for college kids, we utilized viral messages, we went right to sororities. We also use our catalog database extensively. With boomers, we use e-mail and postcards from technicians. 5. You’ve worked at large cosmetics companies and at relatively tiny Burt’s Bees. How would you describe the pros and cons of large versus small companies? Both experiences are valuable. At a large company you get the benefit of research and training and you accumulate a good knowledge base – all valuable for moving out to a small company, where you really roll up your sleeves. At a small company, you can benefit from that experience in an environment or category you love. 6. How has your experience at Stern shaped your career? It taught me the critical value of working in groups as a team, which you do your entire career. 7. Did you have a favorite Stern course? Knowing what you know today, was there a course you would have liked to have taken? I had a lot of great courses, especially in entrepreneurship, strategy, and game theory. I should have taken investment banking. 8. Bliss is well-known for its spas. How do you like to relax? Ironically, I have serious trouble relaxing. I love playing electric guitar loud and recently played with a punkabilly band at my 50th birthday party. I like to box, I write, and will do crosswords until I fall asleep. Sternbusiness 5

Putting on the Ritz “Give us the luxuries of life, and we will dispense with its necessaries.” — John Lothrop Motley (American Diplomat and Historian,1814-1877)

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NYU STERN’S MBA PROGRAM IS RIGHT ON THE MONEY WITH A N E W S P E C I A L I Z AT I O N I N L U X U RY M A R K E T I N G

he global financial tsunami that began in 2008 left strewn in its wake a long list of recession-racked economies. The big surprise: the first harbinger of a recovery is arriving on a Lazzara yacht, decked out in Prada, sporting a Breguet watch, and hoisting a Tiffany flute of Cristal Champagne. Gan bei! One of the bright spots as the world peeks warily out from the gloom is to be found in luxury goods, a sector that dipped slightly in the 2008-2009 timeframe but is roaring back. That robustness is being driven in significant measure by the larger emerging economies, chiefly China, Brazil, and Russia, and to a lesser extent India. The worldwide luxury retail sector was estimated at $220 billion last year. NYU Stern’s MBA candidates are ready to contribute to building that boom. Last year, Stern formally recognized luxury marketing as a new specialization, making the School unique among top US business schools and one of the few business schools in the world to offer such a program. “We are in the business of convening, shaping, and driving the conversation about the challenges facing business in the 21st century,” said Dean Peter Henry. “The nature of the current recovery is about more than prestige brands; this is the first time an economic recovery is being driven by emerging

economies. It is critical to understand how to engage the consumer when you talk about rebuilding the road to global prosperity.” With the new specialization, luxury marketing as an academic focus has arrived. It’s been an extracurricular area of interest at Stern since 2004, in the form of the Luxury & Retail Club, whose 160 members make it one of the largest and most active clubs. “As a club, we want to make sure we look at all aspects of the business – social, IT, buying, merchandising, sourcing, and operations, as well as marketing,” said Katherine Palmieri (MBA ’11), and former Luxury & Retail Club vice president of public relations and events. The club’s marquee event is the annual Luxury & Retail conference, which last year was conducted in partnership with Clinical Associate Professor Scott Galloway’s Luxury Lab. A speaker series has featured CEOs from Louis Vuitton, Saks, Urban Outfitters, and Molton Brown, and club members partner with companies through the Luxury Consulting Corps. The Corps works with a client company to identify a key business issue, conducts in-depth analyses of the situation, and generates recommendations under the guidance of Stern faculty. Clients have included West Elm, Kiehl’s, Banana Republic, and Ferragamo USA.

(Left) Bertrand Stalla-Bourdillon, CEO of Marc Jacobs, LVMH Group, discussed the future of the global luxury sector at Stern’s joint conference with HEC Paris. (Right) Attendees listened to experts explain why luxury brands are leading retail sector growth in the global economic recovery.

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(Across top and bottom right) Studying the high fashion and luxury industries, MBA students traveled to Milan as part of NYU Stern’s “Doing Business in...Italy” course. (Right) Professor Scott Galloway, creator of the Digital IQ Index™, looked at the digital competency of luxury and retail brands at the NYU Stern/HEC Paris conference.

The Democratization of Luxury “The luxury marketing specialization came about largely in response to student demand,” said William H. Joyce Professor of Marketing Russell S. Winer, marketing department chair. “It makes sense in many ways, beyond differentiating Stern,” he added. “Most of the headquarters of luxury brands, outside of their home countries, are in New York, and luxury’s become a very important sector. You can’t just talk about the wealthiest one percent of the population as customers – luxury’s been democratized.” The specialization, still a work in progress, currently consists of seven courses aimed at enabling students to develop the perspective and skills they will need to pursue careers in the luxury sector. Marketing upscale products and services presents a number of unique challenges, including the nature of the target market, the importance of establishing a strong relationship with customers, the critical role of brand image, and the nature of the distribution system. Winer noted that Stern has the opportunity to fill a vacuum in academic research in the subject. “I’d love to see alumni with an interest in the luxury industries offer to fund some research projects to kick-start the program,” he declared. The curriculum is growing as quickly as resources allow. The most recent addition is “Luxury 2.0 – Prestige Brands in a Digital Age,” a course taught by Galloway, who joined the faculty in 2002. Galloway has made a career, as well as an academic specialty, of 8 Sternbusiness

digital and luxury marketing. He has created nine comMercedes understand how its brand was resonating with panies, including Red Envelope, which was the premier younger people. One of the participants was Justin Kenlon Internet-based branded consumer gift retailer, and L2, a (MBA ’10), then a second-year MBA student at Stern. “It think tank on digital innovation. Among Galloway’s was a very Gen Y approach to engaging my demographrecent innovations is the Digital IQ Index, which measic,” Kenlon said. Stern students participated in a similar ures a firm’s digital competenMercedes competition earlier “The nature of the current recovery is cy and shows its correlation this year. about more than prestige brands; this is with annual sales growth. the first time an economic recovery is Luxury brands were the first Ciao, Ciao being driven by emerging economies. to undergo the Digital IQ Perhaps the most glamorous treatment, which measures a experience for students specialIt is critical to understand how to engage company’s effectiveness across izing in luxury marketing is the consumer when you talk about four dimensions: website/ethe DBi program, or “Doing rebuilding the road to global prosperity.” commerce; digital marketing Business in….” This past year — Dean Peter Henry efforts outside the site; social Ginette Lospinoso (MBA ’10), media; and mobile applications. then a part-time MBA student, along with a half-dozen Stern classmates, traveled to Milan for a firsthand look at Let’s Do Lunch one of the world’s centers for luxury brands. The group The School has generated sufficient traction to attended lectures at Milan’s Bocconi University, one of become a focal point for companies in the luxury space. only a couple of European business schools to offer a luxIn the past year, Stern has hosted clinics with LVMH, ury concentration. They were addressed by the chief marGucci, Prada, Coach, Tiffany, Burberry, Chanel, and keting officer of Ermenegildo Zegna, visited a silk atelier Ferrari. “Almost every iconic luxe brand has been on near Lake Como that produces for Ferragamo, and campus,” noted Galloway. Last September, Stern colearned why luxury items demand a premium. “Part of it hosted a day-long conference with HEC Paris, a leading is the brand, but so much of it is the true artisanal workEuropean business school. Jean-Noel Kapferer, an HEC manship that goes into making these items,” said marketing professor and author of The Luxury Strategy; Lospinoso. The trend post-recession, the group was told, is Bertrand Stalla-Bourdillon, CEO of Marc Jacobs, LVMH away from mass marketing and mass production of luxury Group; and Galloway spoke on the future of luxury goods and back to small artisanal fabricators. The execumarketing. In November, Stern, along with L2, hosted tives also highlighted the importance of China to the maran Innovation Forum focusing on the prestige sector at ket, even that country’s second- and third-tier cities. “My the Morgan Library in New York, attracting a large takeaway was that luxury is truly a global industry, and gathering of luxury executives and scholars in a peralso that Stern has amazing access to this industry,” formance-like setting. Lospinoso added. Upscale brands are beginning to appreciate what Stern students and faculty have generated enormous MBA students can bring to the party as well. In early momentum in creating both a new specialization and dis2010, Stern students spent a weekend huddled with tinction for the School. “Our goal,” asserted Galloway, “is peers from other leading MBA programs at Mercedesto be number one in the world of graduate education in Benz’s US headquarters in New Jersey, for the company’s this area.” ■ first business-school case competition. They helped Sternbusiness

Guaranteed to Influence Stern Faculty Publish Two More Books on Fixing the US Economy by Marilyn Harris

In two years, the NYU Stern faculty have written and published three timely and important books that have had notable impact among thought leaders, legislators, and policy makers engaged in remaking the US financial system. In so doing, the faculty have built up a body of work that, in addition to providing valuable prescriptions for the ailing economy, will stand as a history of this tumultuous time that is unique in its focus and precision. Their newest book, published in March, is Guaranteed to Fail: Fannie Mae, Freddie Mac, and the Debacle of Mortgage Finance (Princeton University Press, 2011). In it, the four co-authors – finance professors Viral V. Acharya, Matthew Richardson, and Stijn Van Nieuwerburgh and economics professor Lawrence J. White – focus their intellectual lasers on what some consider the dark heart of the mortgage crisis: the debacle of Fannie Mae and Freddie Mac. “When the history of the crisis is all written, these institutions will turn out to be the most costly of the financial sector, and this sector includes some of the most tarnished financial institutions in America,” declared the authors. “Fannie Mae and Freddie Mac are where they are because they were run as the largest hedge fund on the planet.” Bold indictment to be sure, but backed up by the meticulous detail in the faculty’s two prequels, both of them team efforts produced by 30 to 40 professors. The 10 Sternbusiness

first book, Restoring Financial Stability: How to Repair a Failed System (Wiley, 2009), co-edited by Acharya and Richardson, was a product of late nights, intense conferences, and midnight runs to the printer, all in the service, originally, of turning out a pre-publication collection of white papers that would be studied over the 2008-2009 holiday break by congressmen and their staffers and policy wonks. After the book was published in March 2009, it made waves in the policy arena, with invitations to testify before Congressional subcommittees and attention from the financial press, economics websites and blogs, and think tanks. Last November, the faculty, by then a well-oiled machine, turned out a second book, Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Wiley, 2010), co-edited by Acharya, Richardson, economics professor Thomas F. Cooley, and finance professor Ingo Walter, with three dozen more members of the Stern and NYU faculty as co-authors. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is widely described as the most ambitious and far-reaching overhaul of financial regulation since the 1930s. Together with other regulatory reforms introduced by the Securities and Exchange Commission, the Federal Reserve, and other regulators in the US and Europe, the Act will alter the structure of

Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance influenced policy and debate on US financial regulation. The four co-editors of the NYU Stern faculty book are (from left to right) Viral V. Acharya, Thomas F. Cooley, Matthew Richardson and Ingo Walter.

financial markets in profound ways. The 40 faculty contributors provide an overall assessment of the Act in three different ways: from first principles, in terms of how economic theory suggests the financial sector should be regulated; in a comparative manner, relating the proposed reforms to those that were undertaken in the 1930s following the Great Depression; and, finally, how the proposed reforms would have fared in preventing and dealing with the crisis of 2007-2009 had they been in place at the time. “Regulating Wall Street goes a long way toward clarifying the intent of the various provisions of the Dodd-Frank Act and evaluating both its effectiveness and limitations,” commented Paul Volcker, chairman of the Economic Recovery Advisory Board and former chairman of the Federal Reserve (1979-1987), in an endorsement of the book. “The need for effective implementation by agencies is appropriately emphasized,” he noted, calling it “not a quick read, but a useful reference work on an enormously complex piece of legislation, dealing with an even more complex financial reality.” In Guaranteed to Fail, the Stern professors start from the premise that perhaps the most glaring omission of Dodd-Frank is the Fannie-Freddie problem. Although both entities were originally chartered by Congress to provide liquidity, stability, and affordability to the US housing market, the authors show how the business model virtually ensured they would run aground. The two government-sponsored enterprises (GSEs) are now sitting on more than 150,000 foreclosed homes, and, as of August 2010, the Treasury had injected $148.2 billion into the ailing entities, while the Congressional Budget Office

(CBO) was projecting an additional $65 billion might be required to keep them afloat until 2019. Taxpayer losses, according to CBO estimates, might ultimately reach $350 billion. As Stern’s authors write, “Where is the outrage?” In intricate detail, the faculty authors present and analyze various proposals to reform these institutions, including their own. “First and foremost,” they write, “government entities of the scale of Fannie and Freddie should simply not exist. That is, their job should be performed by private markets or not at all.” Smaller-scale versions are acceptable, but only if they are run as “boring public utilities” subject to strict regulations, which are laid out in the book. More concretely, the authors recommend that the GSEs’ investment function should be wound down in an orderly fashion: “The government has no business running a gigantic hedge fund.” To handle the issue of mortgage default guarantees that have been an essential element of the development and liquidity of the mortgage markets in the US, they recommend a public-private partnership and present a full-blown plan for it. Two months before publication, Guaranteed to Fail was already working its way into the national dialogue. In January, the four co-authors debated the mortgage crisis in Washington at a conference on the GSEs, housing, and the economy. By any measure, with this third book, the faculty’s output is not just prodigious, it’s extraordinary, and the group’s influence is only growing as the nation’s policymakers continue their efforts to give financial systems and regulations a thorough makeover. ■ Sternbusiness

Man with a Mission Nobel Laureate Michael Spence turns his talent to helping the developing world Last fall, Nobel Laureate Michael Spence joined Stern as William R. Berkley Professor of Economics and Business. Spence won the Nobel Memorial Prize for Economic Sciences in 2001 for his research on the dynamics of information flows and market development. A former dean of Harvard’s College of Arts and Sciences and more recently professor and dean at Stanford’s Graduate School of Business, Spence, who remains a senior fellow of the Hoover Institution, explained that his coming to Stern was a matter of the planets aligning: After years of university administration, followed by chairing the independent Commission on Growth and Development, he was eager to return to the classroom; former Stanford colleague Peter Henry had just assumed his post as Stern’s Dean and was beckoning; and on the personal side, Spence and his wife, Giuliana, an Italian journalist, had always wanted to live in New York. Spence teaches a course on emerging economies and also represents the School at selected international conferences – for instance, this spring he is slated to appear at a conference in Abu Dhabi and later in London. Last fall, Spence and Dean Henry chaired a workshop at Stern on restoring inclusive growth in advanced economies that drew nearly 70 participants. Spence agreed to sit down with STERNbusiness and share his thoughts on the International Monetary Fund (IMF), the World Bank, emerging economies, and the global recession.

Q: The G-20 recently decided to strengthen the IMF’s role as arbiter of international economic frictions. How has the landscape changed? Michael Spence: I think the landscape is changing fairly quickly. We are at a crossroads in the global economy. The best way to see that symbolically is the fact that the G-20 is taking over from the G-7 as the main place where the coordination and management of the global economy needs to get done. This transition was precipitated by the crisis, but it’s simply a recognition that the major emerging economies – China, India, and Brazil, among others – are systemically important and need to be part of the process of reaching consensus at the international level. The role of the IMF is shifting from being the backup financing mechanism for developing countries in the context of crises; now it has expanded dramatically to provide the policy and intellectual underpinnings for the G-20 finance ministers and heads of state. Q: How does the IMF’s migration away from strict fiscal and monetary austerity affect positively or negatively its ability to play this expanded role, and what enforcement capability does it have? MS: All these so-called solutions in a crisis context have to be a balancing act between what is politically doable and what is economically required. The IMF is a main player in that context, and that means it has to be realistic in thinking it can restore balance. In the past they were slightly insensitive to the social and political dimensions; on the other hand the IMF has to be tough – some of these crises require fairly drastic action in order to prevent a worse disaster. They’ll always be subject to resentment and criticism in that role. In the role of supporting the G-20 countries, the G-20 has to take the burden of responsibility for its actions – the IMF shouldn’t be held responsible. It doesn’t have the authority to take authoritative actions with respect to 8 Sternbusiness 12 Sternbusiness

nation-states. The main capability it had before was the ability to withhold financing or make it conditional, and it still has that power provided it keeps the backing of the big players. Q: What role, if any, should the IMF have in regulating exchange rates? MS: That’s to be determined. Unlike in the past, the major emerging economies now have a major systemic effect. I don’t think they can live with free-floating exchange rates and no capital controls. We’ll need some form of reasonably managed exchange rate system that balances the needs of the individual nations on the one hand and the whole system on the other. It’s not an easy process to design or agree on, and meanwhile we’ll have potential volatility and other problems. It could be a decade-long process. Q: How will a more authoritative IMF affect the US and others going forward? MS: We need to go through a big transition where at the end countries have to be able politically to make agreements about what they’re going to do. The advanced countries, especially the US, aren’t used to doing that because we were overwhelmingly dominant; we weren’t selfish all the time, especially in the postwar period. We helped open the global economy, after all, and we were an economically healthy player with generally good intentions. We’re not used to accepting extreme crises like the one we just had. We’re not used to making decisions in a collaborative way with other countries, but for the G-20 that’s what’s going to have to happen. We’re talking about inching toward a global system for managing a global economy as opposed to everybody’s doing what’s in their own interest. But we’re not there yet.

Q: You spearheaded the Commission on Growth and Development, a global policy group. What were its goals? MS: The Commission was ongoing from 2006 to 2010 and consisted mainly of political and policy leaders from developing countries. They decided the most useful thing to do was to collect what has been learned from experience in the last 15 years in developing countries in economics and policy and from research, and then digest and deliver it back in a form that would be useful to people like themselves, policymakers who wrestle with problems of growth and poverty reduction. I think it’s worked quite well, and it sounds like it will have an extended life – there’s talk of restarting it. We tried to sidestep any ideological debate and talked about the driving forces of development: competition, market access, diversification of economy, exports. To facilitate that, government plays a fairly crucial role, and we looked at what governments do in the way of policy and investment in things like education and infrastructure that underpin private sector dynamics. Q: With the global economy still unsettled as the worldwide recession lingers, where are the bright spots and the laggards? MS: With a combination of learning, confidence, quick response, and good fundamentals (no toxic assets like ours), developing countries bounced back much more quickly than advanced countries. Now they are in a pattern of sustainable growth at or near pre-crisis levels, which will only be at risk if we have a major downturn in Europe or America, or if China slows down dramatically. Their size and rising income make them much more resilient. They’re getting good at sustaining growth and maintaining a high level of public sector involvement; also, they have the tailwind of the emerging market group as a whole, which is getting larger and wealthier, and that makes them a little more independent of the advanced countries than they previously were. Of course there are pockets where there are difficulties, and they need help from the World Bank. The advanced countries are very different: we are still in the midst of a long, difficult recovery because of the crisis; balance sheets were badly damaged, especially in the US household sector; and there was substantial loss of asset value, houses, pensions, and so on. Q: Last spring, the member countries of the World Bank voted to increase its capital resources by $86.2 billion. How significant is that increase? MS: It’s very important, because they’re not only working with countries that need help but are looking to significantly expand their financing of things like infrastructure, which is where developing countries tend to fall short. The expanded capital will turn out to be very important to the resources available to sustain growth in developing countries, especially the poorer ones.

Q: What’s ahead for the US vis-à-vis its role in the global economy? MS: Ideally we would both get our fiscal house in order over time and increase the level of investment in things that have some chance of creating additional growth: education, infrastructure, and technology. Given the fiscal deficits, that will be very hard. The biggest structural problem is the high unemployment. I don’t think there’s been enough discussion about that. My personal view is that we can learn from developing countries that government has an important role in building the knowledge and technological underpinning that will be the basis for the economy’s competitiveness and dynamism. I’d have to say I’m pessimistic in the short run, but not in the long run, assuming we can solve these problems. Q: You won the Nobel Prize for your work on the dynamics of information flows and market development. Where were you when you heard that you won? How did it feel? How did your life change? MS: I was on vacation in Hawaii. The news was published on the Web before I heard, because they call you about 10 minutes before they release it, and they had called my home in California. A friend called me in the middle of the night and woke me up. It was a complete surprise. I didn’t go back to bed, that’s for sure. I had been interested in returning to economics after my period of university administration, and this accelerated that process. Another effect was that you become instantaneously globally visible when previously nobody outside your profession knew who you were – so you try to use that to good effect, say, to encourage younger people in developing countries who have an inclination for social science research. Q: You are well known for the job market signaling model, which examined the workplace to show how in some economic transactions – in this case, potential employees sending a signal to their employers about their ability level – the inequalities in access to information upset the normal market for the exchange of goods and services. How has this research influenced the field? MS: I chose to study this fairly general phenomenon of asymmetric information and signaling in the specific context of the job market, where communication and credibility are an issue. The fundamental question is how markets and societies adapt and what emerge as credible signals. That, and the structure of markets with this asymmetric information structure, has had a life of its own in the profession. These are structural characteristics of the world that aren’t going to go away, so they get modified over time. On the whole, paying attention to informational structures and signals – which ones are credible or not – is a continually interesting part of the discipline, actually several disciplines. You can ask the question why did people believe the bond rating agencies, leading up to the recent economic meltdown. People weren’t asking themselves if these securities made sense. That won’t happen again, but that leaves the question, why did market participants assume the ratings were accurate signals? ■

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Inspiration Around Every Corner Design Guru Takes on Architecture, Furniture, Leather Goods, and More By Carolyn Ritter

“Designers are filters,” said Emanuela Frattini Magnusson (MBA ’09). “They take in information from clients, from their surroundings, and from mentors and colleagues, while also garnering inspiration from any number of sources that can range from a city skyline to an object. In the end, there’s rarely ever a 100 percent right or wrong solution to a design problem.” A woman who wears many hats – designer, CEO, mother, president, founder, and architect – Magnusson is constantly looking for creative design solutions and inspiration that she can infuse into her many current design projects. She also takes multitasking to a whole new level. Founder of three firms – EFM Design, an architecture and design firm; Manù, a website vendor for leather accessories; and Articolo, a collection of European-produced furniture – Magnusson hits the ground running each morning. She spends her days visiting suppliers, drafting designs, managing projects, and juggling priorities among the three companies. Raised in Milan, Italy, Magnusson was exposed to design at a very early age through her father, who was an architect. While studying architecture at Politecnico di Milano, Magnusson worked side by side with him, gathering practical experience that she would call on frequently in her future design career. Magnusson moved to the US when her husband was transferred by his employer. It was a huge adjustment, but proved to be the opportunity she needed to realize some of her own ambitions. It was then that she founded EFM Design, a design company that spans architec14 Sternbusiness

ture, interiors, product design, brand management, and graphics. “Ignorance can be better than courage when you’re starting out,” said Magnusson. Referring to the early days as the “trial and error” period, she remembers having to pound the pavement, set up booths at design fairs, reach potential clients, and work tirelessly to develop her company’s reputation. Her hard work paid off when she met with executives at the Museum of Modern Art (MoMA), who agreed to take over the firm’s operations and sell EFM’s goods in their merchandise division. Under the auspices of EFM, Magnusson has worked on a number of residential and commercial projects as well as product design contracts with large US corporations. One recent high-profile project involved the complete renovation of a Frank Lloyd Wright house in Rye, New York. Past clients also include the American Institute of Graphic Arts and United States Surgical Corp. “As my kids grew older and I had some additional time to devote to my career, I quickly realized that gaining a business education and enhancing my business vocabulary would be incredibly valuable,” explained Magnusson, who enrolled in Stern’s Executive MBA Program. Highlighting the program’s schedule (Friday and Saturday every other week), Magnusson described why she chose Stern: “The class schedule allowed me to continue working, but more important, the atmosphere at Stern was very welcoming to non-traditional students like me.” Because she had been seeking an open, collaborative, and yet rigorous learning environment, Magnusson said the decision was easy: “Stern offered the best of everything.”

how to run a new venture.” The classroom training Tapping into her NYU came in handy as Stern network once again, Magnusson launched Manù, Magnusson is beginning to which designs and produces collaborate with a fellow stua line of leather handbags dent from the Executive MBA and accessories. Magnusson Program, Aaron Duncan built the business from the (MBA ’11), founder of ground up, drawing from Wondermode, an online her classes on entrepreneurluxury retailer, which ship, strategy, and manageplans to carry the Manù ment, while leveraging her collection. existing relationship with Always on a quest for new the largest leather manufacknowledge and design inspiturer in the US, whose corration, Magnusson recently porate headquarters she collaborated on a research designed. Bridging fashion, project on the use of color in function, and quality, Manù environments with Professor offers goods produced by Anat Lechner and color expert American craftsmen from top-quality materials. Leslie Harrington (MBA Following the strictest environmental standards during ’02). “Color has always the leather production process in Italy, the company been an important facalso uses water-based dyes and warehouses its materials tor in my design in the US – all in an effort to minimize the company’s work,” explains carbon footprint. Magnusson. Magnusson is relieved to report that Manù “Having the has survived the economic storm of the last two opportunity to years. “Our customers seem to be very happy. In work closely with an fact, we haven’t had a single return since our expert like Professor launch,” she said. Magnusson attributed the Lechner, who has been doing business’ initial positive results to Emanuela Frattini research in this field for many word-of-mouth advertising and the Magnusson’s design comyears, is incredible.” The two power of social media. “Housing the pany, EFM Design, managed researchers recently presented their business online and not having to the complete renovation of a Frank Lloyd Wright house (top studies at a conference on color in architeccarry the cost of a retail structure ture in Italy. keeps our overhead costs down,” she photo). The company also takes on various design and architecture projects When asked for advice for other entreexplained. “That means that we can including interior office design (middle photo). preneurs, Magnusson said that persistence channel more value into the actual Magnusson’s latest venture, Manù, offers a line is key. “The romantic notion of starting a product and keep our prices compet- of leather handbags and accessories. business is never the reality; it’s far from itive, which in turn, is one of our difglamorous,” she explained. “You need to be passionate ferentiators at the level of quality we offer.” about your ideas, but also committed to hard work. Plus “I also have to credit Stern for helping me get Manù you need to remain objective and realistic when making off the ground,” said Magnusson. “Throughout the decisions about what’s best for your company.” Pointing process of developing my business plan and launching to her strong network of family and friends, Magnusson Manù, the faculty and administration were incredibly underscored the importance of having someone to lean supportive.” In addition, Magnusson’s classmates soon on when times get tough. “Being an entrepreneur means became her first clients and business champions. taking risks,” she said. “So that means that at some “Several classmates and faculty with entrepreneurial point, after all the due diligence in the world, you still backgrounds, including Professor Glenn Okun, gave me have to take the plunge!” ■ valuable feedback on my business plan and advice on Sternbusiness 15

sternInTheCity

Stern’s Catcher in the Rye

fter college, Conor Grennan explored the world. He hung around Prague, volunteered for an NGO to have something to do, turned that into a paying job, worked in the wartorn Balkans, moved to Brussels, got restless, and, after about eight years, set out to trek in the Himalayas. In 2004, he ended up in Godawari, Nepal, a provincial village where he volunteered in an orphanage for young boys. At the time, he didn’t really like children, he recalled recently, but at least he had somewhere to go every day and something to do. Then, he said, “I just sort of got to know the kids and they started to become more like family. When you’re living in this little village with 18 little kids, I guess you can’t help but start to get attached to the kids.” He didn’t know it at the time, but Grennan had found his calling. It turned out that the youngsters in the orphanage

16 Sternbusiness

By Marilyn Harris

weren’t exactly orphans. During the 10-year civil war in Nepal, their parents, in an effort to prevent their boys from being conscripted into the Maoist army, had been swindled by child traffickers, who had promised, for a huge fee, to put the kids in boarding school and raise them in safety until the war was over. The traffickers had then abandoned the boys, some as young as three, to the streets of Kathmandu, which is how they originally ended up in the orphanage, called the Little Princes Children’s Home. When the war ended, Grennan was back in New York, imagining the children were being returned to their families. Then he heard that the trafficker had returned and taken seven of the kids from the orphanage and sold them. “I was gutted,” he recalled. “Just gutted.” With a colleague, he was determined to return and track down the kids. “I raised something like $5,000 or $6,000, which took absolutely every moment of my time, plus I had to start an organization. I didn’t know how to

Conor Grennan, author and founder of Next Generation Nepal, volunteered at the Little Princes Children’s Home (this page, upper left) where he met and set out to reunite children with their families (opposite page, second photo from left). Above, Conor, with his wife Liz in the background.

do that, so I’d go to the law library and research all that and figure it all out.” Back to Nepal he flew, hoping to start a home for the kids if he located them. “One by one, I started to find them. They were slaves: one was being held by a trafficker. When I found them, I just kind of grabbed them. They were in terrible conditions. Two of them I thought weren’t going to live. We had to bring them to the malnutrition ward of the hospital and they were practically in a coma – they literally didn’t wake up for two days. They were on the verge of death. But one by one we found them. From the moment we knew where they were, it took probably 10 months to find all seven. But we found every single one of them.” Grennan didn’t stop there. He started his own NGO, calling it Next Generation Nepal, with the mission of finding as many of the country’s estimated 15,000 trafficked kids as possible, providing a home and education, and, ideally, reuniting them with their families. But he needed more knowledge to do it properly. “I was trying to run Next Generation Nepal on my own, just by the skin of my teeth, I had no

idea what I was doing, and I was like – I need to understand how things work.” He returned to New York, married his girlfriend, whom he had met volunteering in Nepal, and entered the MBA program at Stern. “Stern was just a natural fit,” he said. “My wife and I both wanted to be in New York; she was a lawyer. When I came to look at Stern it just seemed like such an open place with such a diverse student body. And I thought if any place is going to help me do this, this would be the place.” Last summer, after graduating from Stern, where he was student body president, Grennan took a break from the job recruiting process to write a memoir of his incredible story. Little Princes: One Man’s Promise to Bring Home the Lost Children of Nepal, written in Stern’s reading room, was published in January by William Morrow. He maintains active ties with Next Generation Nepal as president of the board of directors, while managing to carve out precious family time in Connecticut with his wife and two young children. He is modest about his accomplishment in Nepal: “I was the one that showed up there, and there wasn’t anybody else. You don’t walk out on a situation like that.” ■ Sternbusiness 17

LeadingIndicators Tom Glocer chief executive officer

Thomson Reuters

Tom Glocer has been CEO of Thomson Reuters since 2008, when Thomson and Reuters merged. Glocer joined Reuters Group in 1993 as vice president and deputy counsel, Reuters America. He held a number of senior leadership positions at Reuters, including president of Reuters Latin America and Reuters America, before being named CEO of Reuters Group plc in July 2001. He is both the first nonjournalist and first American to become CEO of the company. Thomson Reuters is a multibilliondollar global news organization and the world’s leading source of information for businesses and professionals in the financial, legal, tax and accounting, scientific, healthcare, and media markets. Glocer, who writes an eponymous blog, holds a bachelor’s degree in political science from Columbia University and a JD from Yale Law School.

Stephen Adler: Tom, currently on your blog – called Tom Glocer’s Blog – the quote of the month is, think how hard physics would be if particles could think. That’s a quote from Murray Gell-Mann, a Nobel Prize-winning physicist. What does that mean and what does it have to do with what you do? Tom Glocer: I think the point he is making, or the point that I’m using it to make, is that physics is an ordered universe. In theory these particles are following rules – unified theory or quantum mechanics, for example. The challenge when you are managing 53,000 employees around the world, as we are, is that they are not just like particles that are following some rule. They’ve got independent volition and minds and sometimes act very rationally and sometimes act really crazily. What I enjoy about managing a big enterprise is precisely that the particles are people who think and therefore sometimes surprise you in the most wonderfully positive ways.

SA: You have a law degree and somehow went from being a practicing bigTom Glocer was interviewed on firm lawyer to the CEO of a big informaFebruary 11, 2010 by Stephen tion company. It would be useful if you Adler, then senior vice president talk about how that happened and maybe and editorial director of the profesreflect on what kinds of training are usesional division of Thomson ful as you move up through a system Reuters. A former editor-in-chief of and become CEO. Business Week, Adler is a Pulitzer TG: People imagine there is some prize-winning reporter and author incredibly intentional career path. The of the book The Jury: Trial and Error truth, at least in my case, was a bit like in the American Courtroom. how I used to play basketball, which was to hang under the basket and wait for the 18 Sternbusiness

tall guy to miss and then put it in. I took some chances in my career. Joining Reuters was one. I had neither the ambition nor the idea that I would ever become chief executive, and I think in part because of that I wasn’t obnoxiously political, always scheming how can I get face time. I was led, as I have been in every organization that I have been in, by the question, how do I make a real contribution? How do I make it a better place? Things like position, pay, title – that always worked out. I don’t think you can fake that. I think you have to genuinely throw yourself in and say, I trust it is going to work out, and if it doesn’t, I will go do something else.

the other? Also, how do you manage people in difficult cultures? How do you talk to people and have an honest performance review? The journals are full of all the academic stuff, and it is not wrong. It is just not sufficient. SA: Is there a way to integrate it all in a way where you can be very quantitative and process-oriented but still create a sense of excitement and foster innovation? TG: I think you can do both. You can really overdo the metrics. I would rather have three things that I watch and that really matter than 112 subindices where you are measuring every little thing. Of course, if I were building a nuclear reactor, I would

“I was led, as I have been in every organization that I have been in, by the question, how do I make a real contribution? How do I make it a better place?” SA: What are some things business school students should be thinking about? What behaviors and skills are going to be important 10 years from now that aren’t so important now? TG: I would start by saying it is good to collect substantive knowledge. There is nothing wrong with spending six months learning finance or the principles of marketing and pricing. All the basic skills are sort of table stakes at this point. Far more important to me than that, though, unless you are really going to go and do high quant finance, is, do you have an intuitive sense immediately of how the time value of money works? What creates and what destroys value, and why and how? Do you have a sense of how to approach risk and reward, not as two separate things, but as a bundle of which I want more of the one at the lowest level of

quite like to use Six Sigma. SA: Global skills are something that people are talking about. There was an interesting study recently saying that it turns out that when people who are moving up in their careers move away from headquarters, it hurts their career development. TG: I think that is probably statistically meaningful and correct in playing the odds, but ultimately it should be meaningless to people. I think you have to have enough confidence just to go. Not everybody wants to or is able to have an international career, and I don’t think everyone has to go the same route. Personally it was really valuable to me. I think traveling abroad makes you broader and ultimately more emotionally intelligent.

SA: Let’s talk about time management – how you run a company with 53,000 employees and know what to do with your time. How far in advance is your time booked? How do you think about how to structure your time and what is worth doing and what is not worth doing? Do you have a lot of people managing your time for you? Are there tricks that you could share that would be useful for people in managing their time? TG: Leave time to do what you know you like to do. Every job has a certain percentage of really cool, great things, but even my job has a percentage of things I can’t stand, such as SarbanesOxley sign-off meetings, but that is just a cost of doing business. You try to maximize the good and minimize the bad. I’m really interested in technology and I like being around young companies, and I will meet directly with, say, young entrepreneurs and be exposed to their passion and their ideas. The best lesson I learned about time management was the week my first child was born. Every minute was booked, and she arrived, and then everything got cancelled. You know what? Nothing mattered. So every now and then I will just say, I’m cancelling this afternoon; I’m going to go do something else because I think that’s important. SA: The Thomson Reuters merger closed a little less than two years ago. Is it integrating well? What is the key strategic direction that is going to make this really work? TG: This company is right at the crossroads of applying really good technology in the service of content and software for professionals, sold into their businesses at the point in their day where they must make critical decisions. It is true in our healthcare business, in our financial services business, and right across.

SA: Your businesses touch so many different types of clients. Where do you think the economy will be in a year, and where do you think it is heading? TG: I’m more sanguine about our business than perhaps the economy at large. We are seeing real pressures in developed markets, Europe in particular. Our business is much more correlated to professionalization around the world than GDP. If you believe there are going to be more wealth managers, doctors, lawyers, and engineers in China and in the Gulf and eventually in Africa, India, and Brazil, then we have a very good business. America is just going through a really wrenching period. It is going to be very tough in developed economies to readjust to a standard of living more in keeping with the productive capacity of the economy rather than our consumerist ideals. SA: Have we learned anything from the financial collapse? TG: You know, the one wonderful thing is you have to be an optimist because the alternative is not a particularly wonderful philosophy to live by. As bubbles in the past have shown, I think we will not have learned the definitive lesson for all time. That is probably a good thing – otherwise no one would get out of bed and dream. One of the wonderful things about the American economy is precisely that people do go against the odds and believe that their garage project can be the next Google or Facebook or whatever. When they stop believing, the economy, the pie, isn’t going to get much larger for anyone. SA: What advice do you have for business school students? TG: Don’t be afraid to show who you are. I will leave you with one story. On my blog or somewhere, I mentioned I like the Grateful Dead, among others. The CEO of a huge company, much larger than ours, comes to see me and

Thomson Reuters’ Tom Glocer discussed time management and global careers at a CEO Series event held at NYU Stern.

he asks, how many Dead shows have you been to? I’m embarrassed, and I say five or six, maybe seven. He says seven? That’s nothing. I dropped out of school and followed the Dead – I went to 200 Dead shows. We got into a very interesting conversation, which would have never happened had I said, well, I like Mantovani and opera. So be yourself. People will get the joke and that’s a really good thing.

around the world. So we are working in India to help modernize the notoriously slow Indian judicial system, which is now recognized to be a bit of a brake on growth. Nobody else has the particular software capabilities and domain expertise to do that. We are charging a substantial amount of money to provide something very targeted to professionals who can put it into their workflow and find it useful.

AUDIENCE QUESTIONS Q: What are the innovative ideas you have for the company? What market segments do you want to push it towards? TG: I think of our business as a series of vertical businesses – legal, finance, media, tax, accounting, healthcare, science – with a set of horizontal capabilities which are layered across. We can snap on new vertical segments. I think water rights are going to be pretty interesting as the world runs out of water. What about an environmental business? We already have a very good energy and commodity sector inside our finance business, and they will achieve escape velocity and be another vertical. We do risk, governments, and compliance. The basic model is always the same: serve up content people need and the software tools and analytics needed to make better decisions. Then there are the geographic dimensions, which is just taking the same things that work here or in London and bringing them

Q: A lot of information in the marketplace is being delivered free. How do you defend against that and get ahead of it? TG: I think about it in two ways. One is, if only technology solves the issue, there are companies that can throw more talent and money at it. But if it requires technology plus deep subject expertise and content, then it is really difficult to do it right. So if all you want to do is look up Brown v. Board of Education, you can dump that into Google Scholar and you will get the case. But if you want to research the liability of the trustees of NYU if I slip and fall coming off the stage, you can enter that just like that in natural language into the new WestlawNext, and it will give you the confidence that not only has it gone out to every authority that is there, but it will have returned to you the most relevant and most relevantly written top-to-bottom authority. ■

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LeadingIndicators Jim Turley chairman and chief executive officer

Ernst & Young

James S. Turley is chairman and CEO of Ernst & Young, a leading global professional services organization providing assurance, tax, transaction, and advisory services. With approximately 144,000 people in 140 countries, Ernst & Young is one of the largest professional services organizations in the world and has been consistently recognized by Fortune as one of the 100 Best Companies to Work For. Turley began his career with Ernst & Young in 1977 in the US firm’s Houston office. Over the years, he has held a series of leadership positions throughout Ernst & Young, becoming chairman and CEO in July 2001. Turley serves as senior advisory partner for many of Ernst & Young’s largest global clients. He co-chairs the Russia Foreign Investment Advisory Council and is also a member of the Business Roundtable and IBLAC (International Business Leaders’ Advisory Council for the Mayor of Shanghai). Turley holds a master’s and a BA in accounting from Rice University, in Houston, Texas.

Jim Turley was interviewed on October 20, 2010 by Diane Brady, an award-winning senior editor and content chief for Bloomberg Businessweek, covering corporations and management issues. She is a frequent guest on CNN, NPR, CNBC, and numerous other broadcast outlets, and has twice been nominated for the Business Journalist of the Year award. 20 Sternbusiness

Diane Brady: There is so much confusion right now about the environment, inflation, deflation, and where we are going. What’s your perspective? Jim Turley: We’re seeing recovery. It is very challenging because the recovery is at very different speeds in different geographies around the world. It’s U-shaped in North America, and in almost every other part of the world, whether you’re talking about Latin America, the Middle East, India, Asia, Eastern Europe, it’s a pretty sharp Vshaped recovery. What we saw during the depths of the crisis was coordination and cooperation between the countries of the world that was almost unprecedented, including the formation of the G-20. Now, in recovery, there is a little more let’s-go-it-alone, and that’s not a good thing. That raises risks of protectionism – the currency wars are an example. DB: What could derail this recovery? JT: My biggest concern in this country is that entrepreneurs are staying on the sidelines. All these different balls are up in the air: healthcare, financial reform, cap and trade, overall trade policy. Everyone will impact a company in some fashion, so it’s caused uncertainty, caused entrepreneurs to say, “You know what? I’m going to go slow on making the most important long-term investment I make, which is hiring somebody.” DB: What is your advice to entrepreneurs and to people in this audience who are perhaps planning an entrepreneurial career?

JT: I’d say to keep that aggression and opportunistic attitude, and at the end of all this, they’ll emerge stronger than when they went in. You’ve got to pay close attention to your own capital, your own strength and liquidity, but I don’t think now is the time to be timid, I think now is the time to start being more active. DB: You have a huge E&Y alumni network. When is the turning point when people ask, do I stay or do I go? JT: We did some looking at this because we hire the best and brightest, we continue to give them experiences, and they continue to develop, so it’s no surprise they get job offers from the clients we serve and from

Young. Success in Ernst & Young, or in business in general, is a team game, and anyone who goes into this thinking it’s like playing singles tennis is going to miss the boat. I decided after several years in the firm that being a partner would be a nice thing because I just wanted to be a respected and contributing member of the business community. At that time I was living in St. Louis where my family is from, and I thought being a partner in our firm would align with that. Then I said yes to a couple of opportunities that were offered to me, moved to Cleveland and back, and then was asked to lead our Minneapolis office and then our New York office, and at no point did I

“Success in Ernst & Young, or in business in general, is a team game, and anyone who goes into this thinking it’s like playing singles tennis is going to miss the boat.” others in the marketplace all of the time. We wanted to be able to advise our people, if they wanted to go do something, when they should do it. The research on this found that if someone left after just three or four years, compared to after they made manager, say after five to seven years, their career earnings were about twice as high if they stayed, and the highest position they reached was substantially higher. If you stayed 10 or 12 years and left as a senior manager, career earnings increased another 30 or 40 percent. The longer they stay, the better their ultimate situation will be, whether it’s inside or outside. DB: You started in Houston. When did you think you would like to be considered to run the company? JT: The short answer is I never thought that I wanted to lead Ernst &

really think, “Hey, this could be a path to lead the firm.” Then at the end, when they were going through succession planning, I was far from the lead candidate. DB: What do you think distinguished you? JT: One, because I never really talked about myself, and didn’t try to say, “Hey, I ought to be the next CEO.” The biggest reason is because I’m a client guy. We are a client service organization. I spent my career serving clients, being part of teams, and leading other teams and so I was known as somebody who was always close to our teams and clients, and I was never part of overhead. DB: You’re just back from attending the Women’s Forum in Deauville, where there was a commitment from

engagement, of flexibility around life. Every person I’ve ever met, woman and man, has a life that's more important than what they do for us. We’ve got to make sure they win at that, not just win with us. Of course, cultural norms vary dramatically across the world. We have to be global in our thinking, but localized in how we deal Bloomberg Businessweek’s Diane Brady interviewed Ernst & Young’s Jim Turley about the economic recovery with people in their and what it takes to retain top talent at a CEO Series event held at NYU Stern. expectations. For senior-level executives like yourself making the richness of the team come instance, we have found in China that about getting more women into senior alive. typically money and opportunities management. One of the commitments that mean more than flexibility and learnJT: There are, in my and Ernst & came out of Deauville at the Women’s ing, though that may evolve. Young’s view, two huge trends that are Forum was to make sure that we have shaping the future of the world: the both diversity and inclusion. They’re Q: What advice do you have for shift in capital from West to East, very different things. Diversity is about business students as they enter the North to South, developed markets to the mix of talent that you have, and workforce and embark on their emerging markets, even from regulatinclusive culture is about making that careers? ed markets to less or unregulated mar- mix work. We’ve got a lot of efforts JT: First, find something you love kets; and just as important, the shift in within the firm around both of those doing. Make sure you align with an demographics. Students coming out dimensions, and you need them both. organization that is actually thinking of the university and business schools At Deauville, we all committed that it about where the world is going. I are much more diverse when it comes has to be at the center of the strategy talked about our view of the global to gender, ethnicity, national origin, as much as revenue growth is, as capital trends and the demographic religion, and sexual orientation, not to much as product innovation and geotrends and how they drive our stratemention generational differences. We graphic expansion are. gy. I love where the world sees Ernst have committed ourselves to be lead& Young today, and how we’re posiers, to be the most global company, AUDIENCE QUESTIONS tioned as being uniquely different in and to have the most diverse and Q: What are some efforts Ernst & regard to globalization and people inclusive culture in the profession. Young has made to retain talent? culture, because it gets us lined up for Our teams today are more diverse than JT: People clearly need raises, but it’s winning in the future. If someone is 10 years ago. In my experience, when more than just money for people these not using what’s happening outside to diverse teams don’t work out, it’s days. What we’ve got to focus on, in drive their internal thinking, then because they're not actually bringing addition to compensation, are things they’re not going to end up being the different points of view onto the like the learning that we provide to long-term winners. I would also try to table to let the differences create a bet- people, how engaged our people are, find an organization that really wants ter solution. They are trying to drive and how we really help them create you to change it, as opposed to it their own perspective. Typically it’s a their own opportunities. We also have changing you. white male perspective, and they’re not to have the intangible benefits of

Q: Can you expound on the impact of the shift in capital on your organization’s plans for the future? JT: We’re investing hundreds of millions of dollars a year in building our practices in places outside the US, as well as here, too. Today we have just a little under 10,000 people in China and about 30,000 people in the US. If you believe like I do that China’s economy is going to be as big as the US economy in 15 or 20 years, and if you believe as I do that China is embracing global standards of governance and transparency, we’ve got to figure out a game plan to get from 10,000 people there to 30,000 people. So we’re investing very heavily to be market leaders in the places where the world is growing. We will never, as Ernst & Young, be leaders in the US 20 years from now if we’re not also leaders in China, India, Russia, Brazil, the Middle East, and maybe Africa as they continue to develop. The investment there is fundamental to market leadership here. Q: How do your goals and your company’s outlook get through to employees in, say, India? JT: I think my most important job is to make sure that 145,000 people wake up every day knowing what’s expected of them and what’s right and wrong. We’ve got to have a culture where people know that nothing is more important than their own integrity and commitment to quality, that if something smells funny at a client, we need you to raise your hand. We also want you to raise your hand if something smells funny inside Ernst & Young. You can’t communicate that culture and vision through an e-mail. That’s part of the reason I’m traveling around the world all of the time. ■

Sternbusiness 21

P rospectus NYU Stern’s Citi Leadership & Ethics Program Appoints Dorian Dale as Eighth Distinguished Fellow As countries grapple with how best to curb global warming and reduce the world’s carbon footprint, Stern’s Citi Leadership and Ethics Program is focusing on how to apply market-based approaches to address environmental issues and foster economic growth. Marking its eighth year, the program appointed Dorian Dale, energy director and sustainability officer of Babylon, NY, as the 2010-2011 Distinguished Citi Fellow in Leadership and Ethics. Recognized for his expertise in the area of sustainability, Dale has demonstrated how energy efficiency initiatives can foster economic opportunities. Babylon appointed Dale to the newly created position of energy director in 2006. Since then, Babylon has codified the most rigorous energy efficiency standards in the country. This spring, Dale keynoted the Citi Program’s annual conference for Stern students and alumni, and throughout the academic year, he interacted informally with faculty and students. “Dale’s insights on how to devise and implement a strategy on energy and sustainability initiatives will be invaluable to the Stern community,” explains Bruce Buchanan, C.W. Nichols Professor of Business Ethics and Director of the Business and Society Program Area at Stern. Established in 2003, Stern’s Citi Leadership and Ethics Program, made possible through the generous support of the Citi Foundation and managed by Stern’s Business & Society Program Area, represents a comprehensive effort on behalf of the School to extend its longstanding commitment to the practice of professionally responsible business.

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NYU Stern Launches Systemic Risk Rankings NYU Stern launched the NYU Stern Systemic Risk Rankings, a weekly rating and ordering by level of risk that the largest US financial institutions bring to the financial system. The new rankings use stock quotations and other market data, from 1990 to the present, and provide an early warning that will help regulators identify threats to the overall health of the financial system. The rankings are accessible online at www.systemicriskranking.stern.nyu.edu, thanks to NYU Stern’s Volatility Lab, under the direction of Nobel Laureate Robert Engle, whose award-winning work on the ARCH model underpins the calculations. Several indices are presented and combined to predict the expected loss of a firm in a future financial crisis. The Marginal Expected Shortfall (MES) orders firms by the expected loss on equity each would experience if the market falls by at least two percent. Ultimately, the Systemic Risk Contribution Index (SRISK%) ranks firms by the percentage of total system risk each is expected to contribute in a future crisis. The Systemic Risk Rankings take into consideration company size, exposure to loss of market capitalization, and leverage. Looking backwards, the ranking methodology successfully predicted the firms most involved in the recent financial crisis. The rankings also accurately forecast the relative losses of more modest downturns. The Systemic Risk Rankings are based on two related NYU Stern faculty research efforts. Professors of Finance Viral Acharya, Lasse Pedersen, Thomas Philippon, and Matthew Richardson developed the Marginal Expected Shortfall (MES), the per dollar systemic risk contribution for each institution, in their paper “Measuring Systemic Risk.” Their paper provides the theoretical justification for the ranking. Engle and post-doctoral fellow Christian Brownlees’s research is “Volatility, Correlation and Tails for Systemic Risk Measurement.” Engle’s econometric model increased the precision of the measure and enabled daily risk computations.

Two NYU Stern Professors Under 40 Receive Prestigious Awards for Their Research in Finance and Entrepreneurship Two of NYU Stern’s faculty members have received prestigious awards, each given to researchers under the age of 40, for their research to date and respective contributions to their fields. Xavier Gabaix, Martin J. Gruber Chair in Asset Management, was awarded The Fischer Black Prize, considered one of the most esteemed awards among scholars in the field of finance. Established in 2002 and awarded biennially by the American Finance Association, the prize is given to a single researcher under the age of 40 for a body of original work that is relevant to finance practice. As noted by the selection committee, Gabaix has made many highly original research contributions on a number of subjects in financial economics, notably on the level of compensation of corporate executives and behaviorally influenced decision making and its influence on asset market behavior. Gabaix joined Stern in 2007 and, in addition to his individual research, has contributed to collective faculty efforts, namely Restoring Financial Stability: How to Repair a Failed System (Wiley, 2009) and Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance (Wiley, 2010). He has been quoted for his views in The Economist and The Wall Street Journal among other media. Alexander Ljungqvist, Ira Rennert Chair in Finance and Entrepreneurship, received the 2011 Ewing Marion Kauffman Prize Medal for Distinguished Research in Entrepreneurship. This award is also given biennially to a researcher under 40 years old, who has made a significant contribution to the literature in entrepreneurship. Ljungqvist joined Stern in 2000, and has been research director of the Berkley Center since 2005 and leads the Salomon Center’s research activities in the field of alternative investments. In addition to his work at Stern, Ljungqvist serves as the editor of the Review of Financial Studies.

researchroundup Stijn Van Nieuwerburgh, associate professor of finance, with Sydney Ludvigson of NYU’s Faculty of Arts and Sciences, Stijn Van Nieuwerburg received a threeyear, $425,000 National Science Foundation grant for a project to build understanding of how housing wealth and housing finance affect the macroeconomy and asset markets. Separately, Van Nieuwerburgh was appointed associate editor for a three-year term at the Review of Financial Studies, where he received the excellence in refereeing award. He received Stern’s Excellence in Teaching Award in early May 2010. Panagiotis Ipeirotis, assistant pro-

shorttakes Nobel Laureate and Professor of Finance Robert Engle was selected to be a member of a Securities and Exchange Robert Engle Commission (SEC) and Commodities Futures Trading Commission (CFTC) joint committee to address emerging regulatory issues. The committee will examine the May 6, 2010, stock market fall and the market forces that contributed to that day’s volatility. Assistant Professor of Information, Operations, and Management Sinan Aral Sciences Sinan Aral was the first social scientist chosen to be a Microsoft Faculty Fellow, one of seven. Aral will receive $200,000 to pursue his research program on the movement of information in massive social networks. He was also named a 2010 PopTech Science Fellow, a leadership development program sponsored by such organizations as Microsoft Research, Intel, and the National Science Foundation.

fessor of information, operations, and management sciences, and a colleague received a $70,000 research award from Google for their proposal, “Collaborative Adaptive Data Sharing,” to create theory and technologies that facilitate the effortless creation of “metadata” about information to enable easier Internet searching for specific information. The Google Research Awards program aims to identify and support world-class, fulltime faculty pursuing research in areas of mutual interest. Anindya Ghose, assistant professor of information, operations, and management sciences, was awarded a competitive research grant by The Marketing Science Institute and the Wharton Interactive Media Initiative for his co-authored research (with

Sangpil Han, a post-doctoral student at Stern), “Modeling Consumer Behavior in Social Media: Analyzing the Role of Geographical Location and Multichannel Usage in Microblogging Platforms.” Ghose received a second grant, from the Wharton Interactive Media Initiative, for his co-authored research (with Sanghee Bae, a Stern marketing PhD student), “Modeling and Examining the Interdependence between Search and Display Advertising.” Edward I. Altman, Max L. Heine Professor of Finance, has co-developed, with Dr. Herbert Rijken of the Vrije University of Amsterdam and in partnership with RiskMetrics Group Inc., the ZMetricsTM credit analysis tool to enable investors and lenders to more accurately estimate company credit ratings and default risk probabilities. Using 15 “ratings” categories ranging from the high-

est quality “ZA+” rating to the lowest quality “ZF-” rating, the Z-Metrics model evaluates the creditworthiness of nonfinancial enterprises. Professor Altman is the creator of the Z-score method for assessing the financial health of companies and their risk of bankruptcy. Vicki Morwitz, research professor of marketing, together with Maya Vadiveloo, a doctoral candidate studying nutrition at NYU, and Professor Pierre Chandon of INSEAD, was awarded a $9,984 grant from the Marketing Science Vicki Morwitz Institute for her research proposal entitled, “Mere Belief Effects: The Effect of Health Labels on Consumers’ Perceived and Experienced Satiety.”

Professor of Economics Lawrence J. White was a panelist at a September conference on housing finance reform convened at the Federal Reserve Bank of Cleveland by the US Department of Housing and Urban Development and the Treasury. On July 19, 2010, he testified before a Federal Bank Agencies Hearing. A new book by Harold Price Professor of Entrepreneurship William J. Baumol, The Microtheory of Innovative Entrepreneurship (Princeton University Press, 2010), provides what may be the first formal microeconomic analysis of innovative entrepreneurship. Crisis Economics, by Professor of Economics and International Business Nouriel Roubini and Stephen Mihm (Penguin Press, 2010), was cited in a New York Times list of “Top 10 Books of 2010” and was named one of the top 30 business books of 2010 by Bloomberg. William H. Joyce Professor of Marketing and Chair Russell Winer of the Marketing Department Russell Winer received the 2011 AMA/Irwin/ McGraw-Hill

Distinguished Marketing Educator award. This annual award is given to someone who is universally acknowledged as a long-standing leader in marketing education and who has made extensive contributions to the marketing discipline. David S. Loeb Professor of Finance Stephen Brown was selected by the Australian Research Council (ARC) as a member of the Research Evaluation Committee for the Excellence in Research Australia (ERA) initiative for 2010. Henry Kaufman Professor of the Richard Sylla History of Financial Institutions and Markets and Professor of Economics Richard Sylla was unanimously elected chairman of the board of the Museum of American Finance. Professor of Finance Viral Acharya received the Review of Finance Best Paper Award for his paper, Viral Acharya “Corporate Governance Externalities,” co-authored with Paolo Volpin. Another paper, “The Seeds of a Crisis: A Theory of Bank Liquidity and Risk Taking Over the Business Cycle,” co-authored with

Hassan Naqvi, was awarded the Best Conference Paper Award from Goldman Sachs International. Acharya also received a Curriculum Development Grant from Deutsche Bank and a grant of € 10,000 from the Europlace Institute of Finance (EIF) for his paper, “Measuring Systemic Risk,” coauthored with Professors Lasse Pedersen, Thomas Philippon, and Matthew Richardson. He was also invited to discuss the Stern faculty’s book, Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance, at the International Monetary Fund in September. Assistant Professor of Finance Emiliano Emiliano Pagnotta Pagnotta and Associate Professor of Finance Thomas Philippon were awarded a grant from the Smith Richardson Foundation to fund a new research project, called “The Social Value Thomas Philippon of Financial Innovation: High-Frequency Trading in Equity Markets.” Sternbusiness 23

NOW THAT’S ENTERTAINMENT!

By Marilyn Harris

NYU STERN PROFESSORS MINE THE WORLD OF SPORTS AND ENTERTAINMENT TO DISCOVER INSIGHTS INTO ECONOMIC DEVELOPMENT, SOCIALLY RESPONSIBLE INVESTING, AND THE PROFIT PROPHESIES HIDDEN IN MOVIE SCRIPTS Broadly speaking, entertainment is the playground for the serious academic research displayed in the following three journal articles. One paper develops a methodology to help movie studios identify the scripts that are sure box office winners and weed out the ones that will bomb – before big money is committed. A second studies the Olympic Games for lessons on how developing countries close the medal performance gap and points the way to future research into economic development. The third paper analyzes the performance of gaming, alcohol, and tobacco stocks to reveal how socially responsible investing comes with costs, for both the investors and the “sin” stocks they shun. 24 Sternbusiness

AND THE OSCAR GOES TO . . . A METHODOLOGY THAT HELPS STUDIOS CREATE BLOCKBUSTERS AND AVOID DISASTERS COULD BE WORTH AN ACADEMY AWARD

ovies are magic. The good ones reel us into their world, where we remain happily mesmerized for a couple of hours. Unfortunately for studio executives – and their parent companies, shareholders, and production partners – the profits aren’t always so magical. This is largely because the decision to produce any particular movie relies, for want of any hard data, on a risky combination of experience, intuition, and just plain guesswork. However, thanks to recent research and the development of forecasting methodology by Jehoshua Eliashberg, Sam K. Hui, and Z. John Zhang, making movies, and making money from movies, could become, as the authors put it, less of a crapshoot. Eliashberg, Hui, and Zhang, all marketing professors, have developed a forecasting and risk management tool, based on movie scripts, to aid movie studios and production houses in their decisions about which scripts to move forward to production, an approval process called green-lighting. The methodology, laid out in their paper, “Green-lighting Movie Scripts: Revenue Forecasting and Risk Management,” would also be helpful for outside investors, if they have access to the scripts. “Based on our interactions with industry executives,” the authors said, “forecasting

and risk management are the two capabilities that are sorely needed in the movie industry in order to transform it from intuition- and experience-based decision making into more sciencebased decision making.” Using textual information from scripts in their predictive model, Hui and his co-authors were able to accurately forecast ROI for both box office hits and flops. For example, looking at the script from the smash hit “Hotel Rwanda,” the researchers’ estimates were within 4 percent of the actual box office revenue. Similarly, with the flop “Batman and Robin,” the model predicted its failure within 5 percent of the film’s actual returns. Movie production is labor-intensive at every stage. Each of the major studios typically keeps a slate of 100 to 400 films or film ideas at a time in the development phase. From this pool of potential movies, the studio then generates a portfolio of around 12 to 25 “green-lit” films a year; independent production firms do this on a smaller scale. The traditional method for creating a tentative production budget is to cost out the script through a Sternbusiness 25

shot-by-shot breakdown. To develop their methodology, Back to the Future From that point on, how a movie the authors worked from a data set If only studios had had this tool will perform financially is a big of 200 scripts of movies released at their disposal decades ago. unknown, at least until the first few between 1995 and 2006 and their While the value of this research weeks after its release. Studio execcorresponding estimated produclays in the future application of its utives are hardly unsophisticated. tion budgets – the only information methodology, the investigation Once a movie hits theaters, their available to studios at the point into past productions turned up research departments are able to when go/no-go production decisions some interesting results. For one, forecast box office revenues for the are made. From these full scripts, a higher movie budget tended to theatrical run on a global basis. they performed a sophisticated increase the box office, but at a Worldwide rights for the film’s evenanalysis of the textual information diminishing rate, so one lesson is tual transition to video/DVD and and hidden story structures. Trained that throwing money at a script television are also quantifiable. But script readers identified such varidoes not always generate a blockby that time, tens of millions buster – the millions lavof dollars have been commitished on “Heaven’s Gate” “Based on our interactions with industry ted. Contrast this to the (1980), “Ishtar” (1987), executives,” the authors said, “forecasting financial world: When large “Cutthroat Island” (1995), and risk management are the two capabilities investors commit millions to and “The Adventures of that are sorely needed in the movie industry buying equities or other Pluto Nash” (2002) come financial instruments, they to mind. in order to transform it from intuitionbase their purchase on a The authors found that and experience-based decision making into trove of available informabox office success more more science-based decision making.” tion: for example, earnings, often depended on the yield, price/earnings ratios, film’s genre, the developand market share. The ratio of facts ment of its central plot conflict, ables as genre (e.g., drama, to intuition is at least a little more and how different conflicts were romance, comedy); content (e.g., favorable. structured. Family movies and premise, setting, conflict, resolucomedies tended to generate the tion); and frequency of key words highest risk-adjusted gross profA Shot in the Dark (e.g., love, die, sex, blood). its, while horror flicks perClearly, prior to a film’s release, In addition, the authors characformed the worst. And non-Rmuch less its production, very little terized not only the expected return, rated movies fared better than information about its ultimate sucbut also the uncertainty of box office R-rated ones. Hence, the authors cess or failure can be known, yet revenues. Their analysis employed a conclude, a production house production commitments need to be Bayesian Additive Regression Tree, with different portfolios of made. The lack of information is or BART, to recognize and allow for movies can deliver different further compounded by the high, a wide variety of interactions among risk-adjusted gross profits, makand rising, cost of producing and the different ingredients in the ing portfolio choice an impormarketing a movie. In 2007, movie scripts. They validated the predictant management decision. studios spent an average of around tive performance on actual data, $70 million to produce a movie. “As including box office revenue, then a consequence,” the authors write, demonstrated how their model can SAM K. HUI is assistant professor o f marketing at NYU Stern. “content providers often have to be used to manage risk exposure J E H O S H U A E L I A S H B E R G and Z. make decisions with high financial based on risk preferences and budgJ O H N Z H A N G are professors of impact to their companies without etary restrictions and ultimately to marketing at the Wharton School of the University of Pennsylvania. knowing precisely what the potenoptimize the studio’s (or outside tial risk-payoff structure is.” investor’s) film portfolio. 26 Sternbusiness

GOING FOR THE GOLD HOW DEVELOPING COUNTRIES LEARN TO CLOSE THE MEDAL GAP AT THE OLYMPICS MAY HAVE IMPLICATIONS FOR THEIR ECONOMIC DEVELOPMENT

he comedian and pundit Stephen Colbert, riffing about the Commonwealth Games held in India last October, joked that Cameroon always ranks last for medals won at such international athletic competitions. True or not, Cameroon may have the last laugh, according to “Medal Performance at the Olympic Games: Knowledge Spillovers and Learning-by-Doing,” a paper by Jin-Hyun Bae, a PhD student in management at NYU Stern, and Robert Salomon, a professor in Stern’s department of management and organizations. The authors analyzed competition in the modern Olympic Games and concluded that less-developed nations, over time, close the performance gap with developed countries. The ultimate aim of Bae’s and Salomon’s research was not sportsrelated, but rather an effort to shed light on a longstanding controversy in economic development. They explain that, for decades, economic development scholars have been puzzled about whether developing countries can become competitive with, and catch up to, developed countries. Not surprisingly, differing theoretical viewpoints among academics have led to contradictory schools of thought on how competition and exchange affect economic development. A lack of convincing empirical evidence on either side has hampered progress in the area. Hence, the authors selected the Olympics

as their research lab, because the Games yield a well-defined set of readily available data involving international competition in events that have remained relatively unchanged. Perfect Conditions High-quality record keeping, with great length and breadth, is chief among the Games’ practical advantages. Further, the Olympic environment is relatively “innovation-constrained,” or standardized,

in that the competitions remain virtually the same over decades – an Olympic-length pool is always 50 meters, and aside from incremental equipment improvements, ski jumping has involved flying down a mountain for decades. A broad array of countries participates, and performance can be reliably, cleanly, and objectively measured. In this context, write the authors, the games can be seen as analogous to empirical contexts of economic exchange and competition, at least in relatively mature

industries. The competition also fosters the exchange of athletic knowhow, and, as prior research into sporting competition has shown, periodic competitions facilitate learning and the diffusion of knowledge, much like the benefits derived through economic exchange. The authors set out to investigate whether competing in the same arena leads to a narrowing of the medal performance gap among countries over time. Their sample consisted of 208 countries across 42 sports in 45 Olympiads, for a total of 20,276 country-sport-Olympiad observations. Bae and Salomon subjected the data to a number of sophisticated analyses. Controlling for variables such as a country’s overall population, GDP, the effect of boycotts, the formation and break-up of federations, the number of participating nations, and the number of events per sport, they used a reduced form estimation method called a Poisson regression. They set up tests to determine first whether there was in fact discernible convergence in performance, and subsequently to identify the learning mechanisms by which countries were able to close the performance gap. They refer to the two main types of learning that can bring about convergence as learning-bydoing and knowledge spillovers. Learning-by-doing involves repetitively practicing a particular activity or sport. Knowledge spillovers can be described as learning-by-emulating, and/or gathering insights from other participating nations. Sternbusiness 27

Gold-Medal Results The findings were clear: In a relatively stable context such as the Olympics, with minimal impact from outside innovation, there was indeed convergence in the performance between less-developed and developed nations. Further, both learning-by-doing and knowledge spillovers contributed to that convergence, though the latter perhaps contributed more, as the rate of convergence was greater in sports whose participants met more frequently in international competitions outside the Olympic context. In fact, developing countries caught up more quickly in those sports where there were greater opportunities to compete internationally. On average, the authors’ findings suggest that it takes developing countries 133 years

to close the medal gap in strongly internationalized sports versus 201 years in weakly internationalized sports. This indicates that although learning-by-doing plays a role in bringing about convergence, knowledge spillovers brought about by international competition hastens the process. Bae and Salomon concluded, “Together these results suggest that although having fewer resources holds countries back, they receive benefits from competing with more advanced countries that can help them catch up.” While it’s interesting to know this, and it may inspire Cameroon’s athletes and Jamaica’s bobsledders to keep plugging, the real import of these findings lies in their application to economic development. Extending the findings from the

Olympics to industry, the authors suggest that “[economic] openness might provide the greatest benefit in more mature industries where competition is relatively stable.” In contexts that are dynamic, they cautioned, “where there is substantial heterogeneity across countries, industries, or firms in innovation, there is likely to be less convergence.” Thus, convergence appears to depend on context, and the authors suggested that future research could explore whether there are differing convergence patterns across static and dynamic technological contexts. R O B E RT S A L O M O N is associate professor of management and organizations at NYU Stern. JIN -H Y U N B A E is a PhD student in management at NYU Stern.

THE PRICE OF SIN COMPANIES THAT SELL GAMING, ALCOHOL, AND TOBACCO PRODUCTS PAY A PENALTY, BUT SO DO INVESTORS THAT SHUN THEIR SHARES

n the classic musical “Guys and Dolls,” Sister Sarah, the Salvation Army spinster, inveighs against human vice. Hers is a deeply moral, even admirable, stand, yet she pays a bit of a price for it: Her lifestyle is a whole lot less fun than that of her gambling, drinking, and smoking bête noir, Sky Masterson. Similarly, moral investors who shun the shares of publicly traded companies that sell gaming, alcohol, and tobacco products also pay a price, albeit a more quantifiable one: They earn roughly 2.5 percent lower annual returns (on a risk-adjusted basis) as a result. That morality penalty was one

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of several important research findings by finance professors Marcin Kacperczyk of NYU Stern and Harrison Hong of Princeton University, in their paper, “The Price of Sin: The Effects of Social Norms

on Markets.” Kacperczyk and Hong set out to explore the effects of social norms on markets by analyzing the performance of companies in the three so-called sin industries: gaming, alcohol, and tobacco. They also hypothesized that there is a societal norm against funding operations that promote vice and that some investors, particularly institutions subject to norms, pay a financial cost in abstaining from sin stocks. The Triumvirate of Sin investing environment “is an ideal setting in which to study the effects of social norms on markets,” the authors write, citing the strong societal norm against funding vice-related companies. The stock market provides a rich set of data that can yield proof of significant, quantifiable financial costs associated with norm-constrained investing. Kacperczyk and Hong studied the performance of stocks between 1926 and 2006, screening for companies and company divisions engaged in the three sinful activities. The list included many well-known names, such as Altria, Anheuser Busch, Bacardi, Bally, Caesars, Loews, Mandalay, and Trump Hotels, for a total of 193 names, comprising 36 tobacco, 62 alcohol, and 95 gaming companies. The authors excluded the sex industry, because the number of publicly traded companies in it is trivial, and also the defense industry, because it is not universally considered a sinful business. Portfolio Outcasts The authors’ first assumption was that shares of sin stocks would be spurned by institutions that are subject to social norm pressures.

They ran a series of regressions controlling for various variables and discovered that the assumption indeed held up for investing institutions such as pension funds, universities, banks, insurance companies, religious institutions, employee stock ownership plans, and the like. Mutual funds and independent investment advisors,

period, most likely because social norms around smoking had evolved.

Filthy Lucre? Overall, the authors found that sin stocks’ market-to-book ratios were smaller relative to comparables by nearly 15.4 percent. They concluded that the neglect of sin stocks by institutions meant that the prices of those stocks were depressed “The Triumvirate of Sin investing relative to their fundamental environment ‘is an ideal setting in values because of limited risk sharing. It followed that sin which to study the effects stocks had higher expected of social norms on markets.’” returns than comparables – about 29 basis points a month however, as expected, behaved more higher, including tobacco in the opportunistically, like arbitrageurs, group, and net of tobacco (because its buying sin stocks if they were ignored litigation risk could be thought to and priced cheap. Consistent with the skew results) about 21 basis points, lack of participation by most institu- or 2.5 percent annually. Research in tions, sin stocks are also less followed seven large international markets by sell-side analysts. One ramifica- confirmed the US results. “This research shows that social tion of this neglect, the authors found, was that sin companies, less norms are important for economic successful in raising capital in the outcomes and that they affect marequity markets, were more leveraged kets, including investment decisions, than companies with otherwise com- stock prices, and returns,” said parable characteristics. Thus, their Kacperczyk. He added that the next key question is, does socially responcost of capital was generally higher. With proof that social norms sible investing make a difference in affected how widely sin stocks were terms of getting corporations to both held and followed, the authors change their behavior, or is socially next investigated whether the price of responsible investing simply about sin stocks was affected. For each vice feeling good, with little consequence category, there were different consid- for real investments? Although erations that created variables. The investors may pay a price by popularity of tobacco stocks, for neglecting sin stocks, companies instance, may have declined slightly involved in sin businesses pay a after medical research conclusively higher cost of capital. That, declared tied tobacco to cancer in the late Kacperczyk and Hong, is the begin1940s, and more so after the Surgeon ning of the answer. General’s warning and consequent federal legislation in the early to mid- MARCIN KACPERCZYK is assistant pro1960s. Indeed, from 1947 to 1965, fessor of finance at NYU Stern. HARRISON tobacco stocks underperformed the HONG is John. H. Scully ’66 Professor in US market by a significant 3 percent Finance at Princeton University. a year, or about 40 percent over the Sternbusiness 29

Peer

Paparazzo for a Cause

By Joey Schmit

Celebrity sightings are not uncommon in New York City, but while some people may have an autograph or Facebook status update in mind, NYU Stern junior David Niederhoffer sees these photo ops as a chance to do good. Shortly before arriving at Stern, Niederhoffer founded an organization called The Elephant Project, which has raised more than $20,000 so far to combat Alzheimer’s disease by auctioning celebrity photos online. “My grandfather passed away from Alzheimer’s when I was 16, and once I was exposed to it, I knew I needed to do something to fight it,” said Niederhoffer. “My friend and I were brainstorming ways that we could creatively symbolize Alzheimer’s, when we came up with the elephant because of the phrase ‘elephants never forget.’” Niederhoffer, who is majoring in marketing with a specialization in entertainment, has found a unique way to combine his interest in the arts with his passion for charity work. Every month, he strategically seeks out celebrities at New York City cultural events such as book signings or outside Broadway stage doors. Once a celebrity arrives, he often has less than 30 seconds to sell the star on The Elephant Project’s mission and convince him or her to pose for a photo with an elephant Beanie Baby. So far his pitch seems to be working, with hundreds of celebrities participating, including Tina Fey, Anne Hathaway, and the Jonas Brothers. “I usually carry my elephant Beanie Baby whenever I go out, just in case I run into a celebrity,” explained Niederhoffer. “I feel that by having celebrities that kids admire lend their 30 Sternbusiness

Student Life in Washington Square and Beyond

Celebrities pictured with The Elephant Project’s mascot (clockwise from top left): Tina Fey, Kristin Chenoweth with Stern student David Niederhoffer, Julie Andrews, and Anne Hathaway

image to the cause, it is helping to raise awareness among kids who would never have learned about the disease.” To spread the word about The Elephant Project, Niederhoffer mainly relies on his writing skills and online marketing savvy. “Most of the marketing happens on the Internet because that is the easiest way to get in touch with the key demographic of people who are interested in the auctions. Teenagers seem to be the most active in fan bases for celebrities, and it is easy to target them via fan sites, message boards, and Twitter. I also try writing to blogs and other sites on the Internet that would be interested in the story.” While planning to work in the entertainment marketing field after graduation, Niederhoffer says The Elephant Project will likely continue. “I’m not sure exactly what stage it will be in at that point, but I’m excited to find out. If I have the chance to grow the organization, the skills I’ve been learning at Stern will definitely be valuable.” Visit elephantproject.org to learn more about The Elephant Project. ■

Business Luminaries Join Stern Professor to Teach Graduate Global Markets Course

By Rika Nazem

“I have to be in this class!” That was second-year MBA student Titilola Bakare’s first reaction when she heard about the new elective course, Global Markets and Normative Frameworks, to be co-taught by Stern Professor Bruce Buchanan, CNBC’s Maria Bartiromo, and private equity firm Ripplewood Students in the Global Markets and Normative Frameworks course share views with CNBC’s Holdings CEO Tim Collins. “The course appealed to Maria Bartiromo and former Federal Reserve Chairman Paul Volcker. me because it sounded forward-looking and progressive in that we would be exploring how the global Forte, who studied in Barcelona during her spring identity that people tend to embody as we travel more and semester, described how the course altered her perspecwork in different places affects how we do business. And the tive on global business. In one session, the class prospect of being in close proximity to some of the world’s focused on the Japanese banking crisis, reading Tett’s best-known businessmen and women was exciting.” book, Saving the Sun, that describes how Collins’ Conceptualized by financier Collins, the course was private equity group purchased the bankrupt Long Term intentionally kept on the small side so that students, Credit Bank of Japan from the government, introduced drawn from Stern and around NYU, could have dynamic Western management principles, and then took it public. discussions around the course’s topics, as well as have Students heard both Tett and Collins reflect on the culaccess to Bartiromo, Collins, and the roster of high-profile tural differences between Japanese and Western managespeakers who co-led each session, including Gillian Tett, ment. Forte said, “It gave me a new appreciation for the US managing editor of the Financial Times, and Maurice way business gets done and a better understanding of “Hank” Greenberg, former chairman and CEO of AIG. how to approach the people that you’re working with in Marisa Forte, another second-year student, was parbusiness. If you cannot effectively communicate your ticularly impressed by Muna Abu Sulayman, executive ideas to people from other cultures, industries, or busidirector of the Alwaleed Bin Talal Foundation, who, nesses, you cannot move your ideas forward.” together with the class, examined the norms across She concluded, “This is the kind of class that you Islamic and Western culture. “She talked a lot about the always hear about being able to take in business role of women in Saudi Arabia and the way the country school, and it’s the kind of experience that you believe thinks about women and why. We learned that it has to you will have by going to a school in New York City. do with their traditions and the way the country has The City provides amazing access to people, and Mr. developed over time, and the sorts of things they’re doing Collins and Ms. Bartiromo were able to bring them to change that.” here to NYU. To sit down and talk with them… I don’t Former Federal Reserve Chairman Paul Volcker was really know of another place where I would have been also a class favorite, said Bakare. “Chairman Volcker gave able to have this opportunity.” Bakare added, us his point of view on banking, and spoke nostalgically “Professor Buchanan effectively led the class discusabout the dignity that came with being a banker by prosion, and Mr. Collins and Ms. Bartiromo were amazing fession.” She asked Volcker what he thinks business at being the ambassadors between these great business school students can do to make sure they are giving back leaders and the students. When I was choosing an MBA to the world. “He wished that more professionals were program, I knew that there were going to be some doing things to really make an impact. It was almost intangibles about being at Stern – the combination of heartwarming to see someone who is an economics/finance the City, the professors, and the academic offerings – genius talk about the softer side of things – a perspective that were going to make it really special. But I could that you may not expect from someone like him. It was a never have predicted the array of opportunities – this sort of intimate, special moment.” course being one – that Stern has afforded me.” ■ Sternbusiness

A LUMNI R ELATIONS

Alumni News & Events

NYU STERN CELEBRATES 10TH ANNIVERSARY OF THE ANNUAL ALUMNI BALL (All photos from left to right)

1. Alumni danced and mingled at the annual holiday celebration.

Nearly 600 alumni and guests gathered at The Museum of Modern Art in celebration of the 10th Annual NYU Stern Alumni Ball on December 4, 2010. Alumni reconnected with each other and the School during a festive, holiday evening at one of New York City's most famed cultural landmarks.

2. Eduardo Aguayo (MBA ’97), John Williams (MBA ’95), and Sean J. Holland III (MBA ’95) 3. Jeannine Heal (BS ’09), Sarah Wleklinski (BS ’09), and Ariana Poursartip 4. Lisa Nelson Henry; William R. Berkley (BS ’66), Chair of the NYU Stern Board of Overseers; Marguerite Bouchner (MBA ’07), Chair of the Alumni Ball Host Committee; Marjorie Berkley; Peter Henry, Dean; Frederick D.S. Choi, Vice Dean and Dean of the Undergraduate College; Lois Choi; Julie A. Lucas, Associate Dean of Development & Alumni Relations; Richard Bouchner 5. Members of the 2010 Alumni Ball Host Committee helped to plan the event. 6. Christopher O'Connell (MBA ’00), Chair of the NYU Stern Alumni Council, and Monique O'Connell 7. Victor Baran (MBA ’90) and Dawn Ortell (MBA ’86) 8. Alumni and their guests enjoyed the festive holiday evening. 9. A kick line to celebrate New York, New York, and NYU Stern 10. & 11. Alumni enjoyed exclusive access to MoMA's Architecture and Design Galleries. 12. Generations of graduates came together to celebrate their shared Stern heritage.

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NYU Stern Honors Peter G. Peterson, Chairman of the Peter G. Peterson Foundation, at the Annual Haskins Dinner

Peter G. Peterson (second from left), 2011 Haskins Award Recipient, is joined by (from left to right) Kenneth G. Langone (MBA ’60), Vice Chairman, NYU Board of Trustees, Vice Chairman, NYU Stern Board of Overseers; Peter Henry, Dean; Martin Lipton (LAW ’55), Chairman, NYU Board of Trustees; William R. Berkley (BS ’66), Vice Chairman, NYU Board of Trustees, Chairman, NYU Stern Board of Overseers.

Nearly 250 NYU Stern alumni and friends gathered at the 32nd annual Haskins Award Dinner in April to honor businessman, philanthropist, and statesman Peter G. Peterson, Chairman of the Peter G. Peterson Foundation, and to celebrate the support of the School’s most generous and dedicated group of alumni, faculty, and friends. NYU Stern Dean Peter Henry presented Peterson with the Charles Waldo Haskins Award, established in 1980 to recognize outstanding individuals, whose careers, like Stern’s founding dean, Charles Waldo Haskins, have been characterized by the highest level of achievement in business and public service. Visit http://sternalumni.nyu.edu to learn more about the Haskins Partners giving society and to become a member.

Donor Wall Unveiled, Honoring Supporters of the Concourse Project Members of the NYU Stern community who made a gift to the Stern Annual Fund in support of the Concourse Project were honored for their generosity at a reception on March 10, 2011. The Concourse Project – the School’s most ambitious and transformative facilities renovation since the unification of (Left) Dean Henry thanked the 450 Stern Fund donors who raised more than $3M in support of the Concourse Project. (Right) Joann Pucciarelli, Philip Pucciarelli the undergraduate and (BS ’98), Andrea Au Levitt, and Erik B. Levitt (BS ’02) enjoyed the opportunity to connect with fellow alumni and to see their names on the donor walls of Stern’s graduate programs on renovated Lower Concourse Lobby. Washington Square Julie A. Lucas were in attendance, and shared their more than 30 years ago – offered alumni the opportugratitude for the financial support from the alumni nity to support their alma mater in an exciting and community, which provided the state-of-the art techunique way. By making a three-year pledge of at least nology, classrooms, and community spaces. The reno$5,000 to the annual fund, directed toward the renovation, which encourages collaborative learning, vation, alumni received recognition on the walls of research, community building, and networking, has NYU Stern. drastically changed the Stern experience for students The response to the campaign exceeded all expectaand alumni alike. tions: nearly 450 supporters gave more than $3 million The donor walls are a lasting legacy to all those to the project, which was funded entirely by alumni, who pass by, reminding future generations of the parents, and friends of the School. strength of the alumni community during this major During the reception, donors were able to view their transformation. names on the donor walls, mix and mingle with fellow View a complete list of supporters to the project alumni and friends, and tour the completed space. under the Annual Fund header on pages 60 through 62 Dean Peter Henry, Vice Dean and Dean of the of the online Dean’s Report at Undergraduate College Frederick D.S. Choi, and www.sternalumni.nyu.edu/deansreport. Associate Dean of Development and Alumni Relations Sternbusiness 33

Dean Peter Henry Meets with Alumni Across the Globe NYU Stern’s “Dialogue with the Dean” global tour, an expansion upon Dean Henry’s domestic travels in his first year at Stern, afforded the dean the opportunity to meet with alumni in key countries throughout the year.

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1. The NYU Stern Alumni in Korea regional group welcomed Dean Henry in Seoul in October 2010. 2. Dean Henry with members of the NYU Stern Alumni in Hong Kong regional group in October 2010. 3. Members of the NYU Stern Alumni in London regional group at a reception with Dean Henry in January 2011. 4. Dean Henry and Julie A. Lucas, Associate Dean of Development and Alumni Relations, join Stern alumni in Buenos Aires, Argentina, in February 2011. 5. Peter Gallagher (MBA ’03) (left), and Michel Gutnik Steinberg (MBA ’02) (right), regional leaders for NYU Stern Alumni in Brazil, welcomed Dean Henry to São Paolo in February 2011. 6. (L - R) Dean Henry; JieMing Oh (BS ’07); Anil Adnani (BS ’88); and Duncan Finnie (MBA ’90), at a regional alumni event in Dubai, UAE, in April 2011. 7. Dean Henry and alumni in Tel Aviv, Israel, raise a glass in honor of NYU Stern at dinner in April 2011.

London 2011: Glob al Alumni Conference Hundreds of alumni joined Dean Henry, members of NYU Stern’s leadership team, and faculty, in June for this weekend-long conference that offered exclusive access to world-renowned speakers, timely and thought-provoking content, and unparalleled cultural opportunities. For a full recap of London 2011, visit the website at www.sternalumni.nyu.edu/london2011, or stay tuned for full coverage in the next issue of STERNbusiness. 34 Sternbusiness

Save the Date for NYU Stern’s Reunion

This year marks an important milestone in NYU Stern’s history – the launch of a new annual reunion tradition on Oct. 22, 2011. This year’s program, the first of its kind at Stern, will include a special breakfast for alumni celebrating their 50th reunion, campus tours, academic sessions led by Stern faculty, and a lunch with Dean Peter Henry. The day will conclude with an evening gala dinner at the Waldorf Astoria Hotel. At this festive gathering, Stern will honor alumni from the classes of 2006, 2001, 1996, 1991, 1986, 1981, 1976, 1971, 1966, and 1961.

The new program will offer alumni the chance to reconnect and reminisce with friends, make new connections, as well as share and celebrate accomplishments and achievements. Alumni who wish to get involved by reaching out to fellow classmates are invited to join their Reunion Committee. For more information on how to join your Reunion Committee or to make a gift in honor of your class, visit the Reunion 2011 website at www.sternalumni.nyu.edu/reunions2011.

Sternbusiness 35

classnotes Send us your news, update your contact information, and access the contact information of your fellow alumni through NYU SternConnect, Stern’s online alumni community, at www.sternalumni.nyu.edu.

1950s Robert Baldini (MBA ’55), of Naples, FL, has been named an independent member of the Board of Directors of K-V Pharmaceutical Company. He works with two start-up organizations, Accubreak, a pharmaceutical company which utilizes tablet technology for life-cycle management, and Dermworx’s, a dermatological company utilizing nano-technology and drug delivery systems.

1960s Medhat Hassanein (MBA ’65), of Philadelphia, PA, is a Professor of Finance and Banking in the Management Department of the School of Business at the American University in Cairo and serves on the Joint Committee on the Remuneration of Executive Directors and their alternates of the World Bank and the International Monetary Fund. He was formerly Egypt’s Minister of Finance from 1999 to 2004. Miles Slater (BS ’68), of Pound Ridge, NY, was named interim President of Axion International Holdings, Inc., a next-generation technology innovator utilizing recycled plastic for high-load industrial products. Slater is the former President and CEO of Salomon Brothers International, Ltd., and also served as a member of Salomon Brothers’ Board of Directors. Michael Badawy (PhD ’69), of Merrifield, VA, Professor of Management at Virginia Tech’s Pamplin College of Business, received the International Association for Management of Technology’s 2009 “Lifetime Achievement Award.”

1970s John R. Buran (BS ’71, MBA ’77), of Massapequa, NY, President and CEO of Flushing Financial Corporation, was elected to the Board of Directors of the Federal Home Loan Bank of New York.

36 Sternbusiness

David Fitzgerald (MBA ’71), of Brandon, VT, has been appointed President and CEO of ArthroCare Corp., where he has served as acting President and CEO since February 2009. Craig H. Studwell (BS ’72), of Manhattan Beach, CA, has been named CFO of Fushi Copperweld Inc., a global manufacturer and innovator of copper-clad bimetallic wire used in telecommunication, utility, transportation, and other electrical applications. Peter Longo (MBA ’73), of Scarsdale, NY, President of Logistics and Operations at Macy’s Inc, was elected to co-chair the Voluntary Interindustry Commerce Solutions (VICS) Association from 2011 to 2013. Gerald Rosenfeld (PhD ’73), of New York, NY, has been appointed as member of CIT Group Inc.’s Board of Directors. Rosenfeld currently serves as Deputy Chairman of Rothschild North America, and previously served as its CEO for eight years. He is also a member of the NYU Stern Board of Overseers. Magatte Diop (MBA ’74), of New York, NY, has been named to the Board of Directors of IntraHealth International, a US-based global health nonprofit. Jeanne Goulet (MBA ’74), of Armonk, NY, has joined Marks Paneth & Shron LLP as a Senior Tax Consultant and will launch the firm’s new services for emerging growth companies and entrepreneurs. Kathryn Coyne (MBA ’75), of NJ, has been appointed CEO of The Animal Medical Center, where she is responsible for the strategic planning and operations of the acute care teaching hospital. Christophe Pham Minh Duong (BS ’75, MBA ’76), of New South Wales, Australia, moved to Sydney, to start a partnership in the fashion industry representing European brands in Australia and Australian brands in Europe.

Steve Sturm (MBA ’75), of New York, NY, has been named CMO of Advanstar Communications, Inc., a worldwide media company providing integrated marketing solutions for the fashion, life sciences, and power sports industries. He previously served as Group Vice President of Americas Strategic Research and Planning and Corporate Communications for Toyota Motor North America, Inc. Lisa Polsky (BS ’78), of New York, NY, was appointed Chief Risk Officer by CIT Group Inc. Eric C. Fast (MBA ’78), of Greenwich, CT, President and CEO of Crane Co., was elected to the Regions Financial Corp. Board of Directors. Thomas G. O’Keefe (BS ’79), of Rutherford, NJ, has been appointed President of the Penn Foster Division by The Princeton Review, Inc., a leading provider of test preparation and online career education services. David Sorin (BS ’79), of Morganville, NJ, is Co-founder and Co-managing Partner of SorinRoyerCooper LLC, a law firm that focuses on emerging businesses and life science enterprises. He is currently a Clinial Associate Professor of Legal Studies at Drexel University’s LeBow College of Business. Michael Kwatinetz (MBA ’79), of Atherton, CA, is a Founding General Partner at Azure Capital Partners, where he specializes in software and related infrastructure technologies. AlwaysOn, the open media network, ranked him among 2009’s “Top 100 Venture Capitalists.” Barbara Levy (MBA ’79), of Old Greenwich, CT, has been named to the Board of Directors of the California State University Northridge Foundation. Levy is a former accountant at Arthur Young & Co. Mandy Williams (MBA ’79), of Houston, TX, has written a memoir that

addresses topics related to personal finance and “life lessons.”

1980s Wah Chu (MBA ’80), of Fairfield, CT, has been named Customer Officer for the Americas and EMEA with Triple Point Technology, a provider of multi-market commodity and enterprise risk management software solutions. Malik Sarwar (MBA ’80), of New York, NY, will lead Abu Dhabi Islamic Bank’s new wealth management service. He joined the bank in 2009 as a global wealth management executive. Previously, he was the Head of US Business for Permal. Carmel Patrick (BS ’81), of Troy, NY, has been named Executive Director of Development at Schenectady County Community College. Previously, she was the Director of Development and External Relations for the Schenectady Museum and Suits-Bueche Planetarium. Kerrie Gillis (MBA ’81), of New York, NY, has been named VP for Advertising at The New York Times Company. Gillis, who joined the Times in 1985, was most recently the Advertising Director, Corporate, for the Times and Advertising Director for the Americas for the International Herald Tribune. William F. Spengler (MBA ’81), of Cambridge, MD, has been named President of Irvine, California-based ChromaDex Corporation. He is currently the Executive Vice President, CFO, and Treasurer of Smith & Wesson Holding Corporation. Robert Okun (BS ’82), of Brooklyn, NY, has been named an advisor to L & L Energy, Inc., to assist in the company’s strategic planning. Okun is a managing director of the Seaport Group, a creditfocused investment bank.

Tina Exarhos (BS ’83), of Rye, NY, has been named to the Board of the Rye Arts Center for the 2010-2011 season. Exarhos is Executive Vice President of Marketing and Multiplatform Creative for MTV: Music Television and MTV2. Tom Florio (BS ’83), of New York, NY, has been named to the newly created position of Senior Advisor for Fashion to the Office of the Chairman of IMG Worldwide, a global sports and media company. Most recently, Florio was SVP and Publishing Director at Condé Nast with responsibility for Vogue, Teen Vogue, Bon Appetit, and Condé Nast Traveler. Brenda Izzo (BS ’83), of New York, NY has joined the newly launched life science and technology banking division of TriPoint Global Equities, LLC, a boutique investment bank, as Managing Director. Lauren Rich Fine (MBA ’83), of Cleveland, OH, has joined Howard & O’Brien Associates, a boutique executive search firm. She currently serves as a Practitioner-in-Residence at Kent State University’s School of Journalism & Mass Communication and was Director of Research at ContentNext, an organization focused on media-related newsletters and conferences. Murray S. Kessler (MBA ’83), of Armonk, NY, has been named President and CEO of Lorillard, Inc., where he will serve as a member of the company’s Board. Previously, he was Vice Chair of Altria and President and CEO of UST LLC, a wholly-owned Altria subsidiary. Deirdre Mahlan (BS ’84), of London, England, has been promoted to CFO of Diageo, the largest multinational beer, wine, and spirits company in the world. She joined the company in 2002 as Vice President of Finance for its beer business. Thomas E. Dooley (MBA ’84), of Mill Neck, NY, has been promoted to COO at Viacom. He was formerly Senior Executive Vice President, CFO, and Chief Administrative Officer.

Glenn Engel (MBA ’84), of Summit, NJ, has joined BofA Merrill Lynch Global Research as the Senior US Airlines Analyst. Most recently, he spent nearly three years as an industrials analyst and a managing director at Maverick Capital. Anil Jagtiani (MBA ’84), of Gladwyne, PA, has been named President of Crane & Co.’s stationery division. He comes to Crane from IBM Global Business Consulting, where he advised clients on digital technology opportunities. Scott Melnick (MBA ’84), of Bethesda, MD, has been appointed Managing Director of Jones Lang LaSalle Capital Markets, where he manages the financial and professional services firm’s Mid-Atlantic multifamily investment sales business. Charles Neral (MBA ’84), of Cross River, NY, has been named SVP and CFO of SafeNet, Inc. Previously, he served as the Vice President of Finance for IBM. Philip H. Osman (MBA ’84), of Far Hills, NJ, has been named SVP of Global Services with Comverse, Inc. John Mahedy (BS ’85, MBA ’91), of Mount Kisco, NY, has joined Sanders Capital as Co-chief Investment Officer and Research Director. Mahedy previously worked as Chief Investment Officer of US and North American Value Equities at AllianceBernstein. Sharon Elizabeth Sarkisian (BS ’85), of Forest Hills, NY, has released a new book called Étonné and Eclatée: Cari Chesterfield and the Pirate, BOOK I. It is a work of fiction exploring the perils which accompany acting without complete information and forging ahead rashly without considering resulting consequences. Sheryl Schwartz (BS ’85, MBA ’88), of Stamford, CT, has joined Perseus, LLC as a Senior Managing

O n W a l l S t r e e t ’ s F a s t Tr a c k Paul Scialla set his sights on Wall Street early on. “I knew where I wanted to end up after I graduated,” he said. To that end, NYU Stern was the perfect choice for his undergraduate business education. “Stern had the best access to internships, which made it the best fit for me,” said Scialla. While he was a student, Paul Scialla (BS ’95) Scialla worked at Kidder, Peabody & Co., in its mortgage bond trading department. “I was interning and going to school full-time,” he said. But it wasn’t the trading that was the most intense part of his day. “Stern’s campus was full of fast-paced people looking to succeed, looking to their future and harnessing the energy of New York City,” he recalled. After graduating from NYU Stern in 1995, Scialla accepted a position at UBS in the sales and trading department, where he worked for three years. In 1998 he moved to Morgan Stanley, where he ran the mortgage pass-through business for the next five years. Scialla joined Goldman Sachs as a vice president in 2003 and was named a managing director in 2004. Then, after fewer than five years at the firm, he was named a partner in 2008. “It was an extremely exciting time for me,” Scialla said. “My twin brother, Peter, who also graduated from Stern with me in 1995, made partner in the same year.” It was the first time in Goldman’s history that twin brothers made partner at the same time. Today, Scialla is head of the US government, mortgage and agency bond trading businesses for fixed income at Goldman Sachs. “Navigating through the financial crisis was one of the biggest challenges in my career,” he said. With all of his responsibilities, Scialla finds it important to stay grounded and keep things in perspective. “I try to play sports and stay in shape both mentally and physically,” he said. “I also give back to the community philanthropically any time that I can.” Director. She was formerly a Managing Director at TIAA-CREF. Herbert J. Scheidt (MBA ’85), of New York, NY, has been named Chairman of Swiss bank Vontobel.

Leslie Seidman (MBA ’85), of Westport, CT, was promoted to Chairperson of the Financial Accounting Standards Board.

Sternbusiness 37

classnotes Asking the Right Questions For more than 35 years, Mark Kritzman has straddled that thin line between academia and industry. While working for many large institutions and co-founding two of his own firms, he has maintained roots in the field of education through his involvement with NYU Stern and his position on the faculty of the MIT Sloan School of Management. “I think of a successful ‘quant’ not as someone who is merely mathematically proficient, but rather as someone who asks the right question and then applies the appropriate quantitative tools to answer it,” said Kritzman, a self-proclaimed quant. Kritzman marked the start of his career at his first position Mark Kritzman (MBA ’77) in the pension department at Equitable Life Assurance Society, the third largest insurance company in the US at the time. “I had a bachelor’s degree in economics, but little exposure to quantitative methods,” he recalled. Soon after his arrival, he accepted a position that managed the asset allocation for Equitable’s pension fund clients. Simultaneously, he began studying in the Langone Part-time MBA Program at Stern. “I was able to practice mean-variance analysis during the day and learn about it at night,” Kritzman said. He also participated in many industry forums such as The Institute for Quantitative Research in Finance and the Society for Quantitative Analysis, which encouraged his interest in quantitative methods. “As the theory of modern finance was written by peer academics, I was in a role where I could apply it fairly quickly,” he explained. In 1980, Kritzman accepted a position in the investment department at AT&T and became the in-house quant, working to consolidate the pension funds of all the regional telephone operating companies into one company valued at $53 billion. He then moved to Bankers Trust, where he focused on the development of risk models until 1986, when he left to co-found New Amsterdam Partners. In 1988, he left New Amsterdam to start up Windham Capital Management. Eventually split into two companies, Windham Capital Management LLC continues today as an investment advisory firm serving both institutional and private investors throughout the world. Kritzman, who is as passionate about philanthropy as he is about quantitative methods, also serves on the Board of the Global Alliance for Vaccines and Immunization (GAVI) Campaign, an organization that delivers vaccines to children in less-fortunate nations. “The three most effective ways for improving the human condition,” Kritzman said, “are vaccinating children, providing clean drinking water, and educating women in the developing world.” Kritzman has two children of his own, both adopted from Russia, and enjoys spending his free time with them. Todd Korren (BS ’86, MBA ’94), of Roslyn, NY, has received the “Young Real- Estate Man of the Year Award” from the Young Men’s/Women’s RealEstate Association of New York. He is currently SVP and Director of Commercial Leasing & Operations for Swig Equities. John A. Fry (MBA ’86), of Lancaster, PA, has been named President of Drexel University. He was previously President 38 Sternbusiness

of Franklin and Marshall College in Lancaster, PA, and was a former University of Pennsylvania executive. Aliza Jabès (MBA ’86), of Paris, France, who is the Founder and Chairman of cosmetics laboratory Nuxe, has been appointed to the Board of French mediato-telecom group Vivendi SA. She also is a Director of the French National Institute of Industrial Property and of the Federation of Beauty Companies.

Brian T. Schreiber (BS ’87), of New York, NY, has been named EVP of Treasury and Capital Markets with AIG. Previously, as Head of Strategic Planning, he led AIG’s restructuring and corporate development efforts. Greg Casagrande (MS ’87), of Summit, NJ, has been named to the Board of Trustees at the WardlawHartridge School in North Edison, NJ.

He is also Founder and Managing Director of MicroDreams. Michael Christenson (MBA ’87), of Summit, NJ, has been named to the Board of Directors of LogMeIn, Inc., a leading provider of SaaS-based remote connectivity solutions. Christenson is a Managing Director at Allen & Company, a New York investment bank. Eric Chu (MBA ’87), of Taipei, Taiwan, was named Mayor of Xinbei City, Tapei. John P. Meegan (MBA ’87), of Pittsburgh, PA, has been named to the Board of Directors of Northwest Bancshares. Meegan is EVP and COO of Hefren-Tillotson Inc., a Pittsburgh financial planning firm. Sharon Potts (MBA ’87), of Miami Beach, FL, earned great critical acclaim for her debut novel, In Their Blood. James C. Thomas (MBA ’87), of Land O-Lakes, FL, has been named CFO and Board Member of VOIS.com. Previously, Thomas was CFO and Partner with Tatum, LLP, an executive services firm. Barbara Yastine (MBA ’87), of Stockton, NJ, has been appointed as the new Chief Administrative Officer of Ally Financial Inc. Yastine will be responsible for the risk, compliance, legal, and technology functions at the lender. Richard Flynn (BS ’88, MBA ’94), of Oradell, NJ, has been named CEO of Corporate Legal Services (CLS), a business unit of Wolters Kluwer. Previously, Flynn held a number of senior-level positions at American Express, most recently as SVP and General Manager for OPEN, the market leader of US card businesses dedicated to small companies. Brett Rochkind (BS ’88), of New York, NY, has been promoted to Managing Director at General Atlantic LLC (GA), a global growth equity firm based in Greenwich, CT.

Wendy Barasch (MBA ’88), of New York, NY, has been named Partner and Head of Business Development with Evercore Wealth Management. She previously spent two decades at Alliance Bernstein, most recently as a Managing Director in the private client business, responsible for hiring and developing teams of financial advisors. Andre Hilton (MBA ’88), of Summit, NJ, is Managing Director and Co-head of the Japan/Asia focus group with Sagent Advisors, an independent, privately owned investment banking firm headquartered in New York. Mitchell Hymowitz (MBA ’88), of Seattle, WA, has been elected to the Board of Directors of Light Sciences Oncology, Inc. Hymowitz is the Founder and Managing Member of CFO Services LLC. He previously served as VP and CFO of Olympic Broadcasting Corporation, a publicly traded radio broadcasting company. K. Darcey Matthews (BS ’89), of New York, NY, has been named Director of Investor Relations and Corporate Communications with Endeavour International Corporation. Previously, she was Managing Director in the global corporate client group at the NYSE Euronext in the US and Europe. James E. Mostofi (BS ’89), of Louisville, KY, has been named President of the US warranty division of Chartis, a property-casualty and general insurance organization serving more than 45 million clients in 160+ countries and jurisdictions. Duncan Szeto (BS ’89), of Brooklyn, NY, was named Chief Actuary of Presidential Life Corporation’s operating subsidiary, Presidential Life Insurance Company. John Dearborn (MBA ’89), of Midland, MI, has been named VP of Business Development for Energy Megatrends Market Solutions.

Michael Kurtz (MBA ’89), of Port Washington, NY, has been named CFO of Fedcap. Richard Magrann-Wells (MBA ’89), of Lafayette, CA, has been appointed SVP and Leader of the North American financial services practice of Willis Group Holdings, the publicly traded global insurance broker. Magrann-Wells joined Willis after completing his LLM degree in banking and financial Law at Boston University. Heidi Lorenzen Wu (MBA ’89), of Brisbane, CA, has been named VP of Marketing with GlobalEnglish Corporation, a provider of on-demand learning and support for business English communication. Kurt Zyla (MBA ’89), of Lebanon, NJ, has been named Regional Director for listed derivatives with Russell Investments.

1990s Scott Butera (MBA ’90), of Las Vegas, NV, has been named President and CEO of Mashantucket Pequot Gaming Enterprises. He was previously the CEO of Tropicana Entertainment and has held a number of executive positions in the gaming industry. Tom Naratil (MBA ’90), of Warren, NJ, has been named group CFO and member of the group executive board at UBS. Jim Hindenach (MBA ’91), of Fairfield, CT, has joined Pali Capital, Inc.’s High Yield Sales and Trading Team. Previously, he was a Director in High Yield Sales at Summit Securities. Michael L. Judlowe (MBA ’91), of New York, NY, has been named a Managing Director in the Global Equity Capital Markets Group at Jefferies. He joins the global securities and investment banking firm from Citigroup, where he was a Managing Director and Head of Real Estate and Homebuilding Origination in the Equity Capital Markets Group.

David Nagger (MBA ’91), of Seattle, WA, has been named President of iAmplify.com, a Web-based content publisher and syndication network. Mark Norwicz (MBA ’91), of Highland, MD, is CFO of Towne Park, a hospitality service company whose 6,500 associates serve more than 200 hotels and more than 100 hospitals in 50+ markets nationwide. Kevin J. Rochford (MBA ’91), of Arlington Heights, IL, has been named Managing Director and Head of the Chicago Office with Bessemer Trust. Previously, he was Managing Director at Nuveen Investments Wealth Management Services in Chicago. Elizabeth Thornton (MBA ’91), of Southborough, MA, has been appointed as Babson College’s first Chief Diversity Officer. She has also been named to the Board of Directors of the Massachusetts Growth Capital Corporation by Governor Patrick. Jeffrey L. Blumin (MBA ’92), of Syosset, NY, has been named a managing director in the New York office of LBC Credit Partners, a provider of financing solutions to middle market companies. Gary R. Larsen (MBA ’92), of Satellite Beach, FL, has been named SVP of Finance and CFO with Power-One, Inc., a provider of renewable energy and energy-efficient power conversion and power management solutions headquartered in Camarillo, California.

Patrick Trozzo (MBA ’92), of Blauvelt, NY, has been named Chief Compliance Officer of Reval, a global derivative risk management and hedge accounting solutions provider. Maryam Ayromlou (MBA ’93), of New York, NY, has been named SVP of Ruder Finn. She joined Ruder Finn from CBS News/The Early Show, where she was the Supervising Producer and oversaw the planning of all interview-driven segments, garnering an Emmy nomination. David Charles Berse (MBA ’93), of New York, NY, and Allison Leigh Berlin were recently married. He is an Assistant Vice President at JPMorgan Chase. Rebecca Clulow Cicarelli (MBA ’93), of Sandy Hook, CT, has been named Marketing Manager with CustomVault, a Bethel, CT-based supplier of high-security modular vault systems. Prior to joining CustomVault, she was Marketing Manager for Berkshire Food. Barbara Van Allen (MBA ’93), of Washington, DC, has been named SVP of Communications and Marketing with the Mortgage Bankers Association. Calvin Wong (BS ’94), of Summit, NJ, has been promoted to COO at the social media sales firm Appssavvy. He was previously EVP of Product and Sales Operations.

Ed Meyercord (MBA ’92), of Princeton, NJ, has been named to the Board of Directors of Extreme Networks, Inc. He is currently the President and Managing Partner of Council Rock Advisors LLC.

Jeff Becker (MBA ’94), of Livingston, NJ, has been hired as Partner in America’s Growth Capital New York City Investment Banking Group. He was previously Co-head of Software Investment Banking at JMP Securities and Head of Software Investment Banking at ThinkEquity Partners.

Karen Quintos (MBA ’92), of Austin, TX, has been named SVP and CMO for Dell. She has been a marketing executive at Dell for more than 10 years, and most recently was VP of Marketing for Dell’s global public business.

Louis DiFranco (MBA ’94), of Newtown, PA, has been named Head of Insurance Services with Western Asset Management, the fixed income affiliate of Legg Mason, Inc. He will be responsible for leading and expanding its insurance

Sternbusiness 39

classnotes Paying it Backward When Steven Kassin received a phone call from fellow NYU Stern alumnus Chet Patel, he had no idea that their serendipitous meeting would lead to one of the most successful business deals of his life. At the time, Kassin was working at Infinity Real Estate, a unit of his family-owned, New York City-based Infinity Group, that focuses on the acquisition, Steven Kassin (left, BS ’07) and Chet Patel (right, BS ’02) with Vice Dean redevelopment, and re-positionand Dean of the Undergraduate College Frederick D.S. Choi (center) ing of commercial properties across select US markets. In 2007, Infinity had purchased three parcels of land on 26th Street in Manhattan for a hotel, eventually completing the development and launch of the Fashion 26 hotel during the darkest days of the economic downturn. Patel recalled: “Steve’s well-guided passion and focus were immediately apparent to me from our first phone call. My sense of the property’s potential value continued to magnify as I further understood the concept he created and the careful detail instilled throughout the hotel.” At the time, Patel, founder and principal of Chet Kanti Realty Advisors, a boutique hotel advisory company focused on establishing long-term relationships with select clients, was advising a client who was looking for unique, value-added hotel investments in New York City. When he heard that Kassin had recently opened a full-service hotel property in Chelsea, he jumped at the opportunity. Although weary of the many business propositions that crossed his desk, Kassin knew that the call from Patel would be different. “We get unsolicited calls all the time, so after a while you become desensitized to them,” he recalled. “When I heard that Chet had gone to Stern, I called him back that same day.” United by their Stern heritage, Kassin and Patel embarked on a unique business venture. In just 45 days, Kassin and Patel closed an all-cash transaction without any exclusive agreements or contracts. “I knew within the first few minutes of our meeting that Steve was someone with honesty and integrity,” Patel said. “It is good to know that you can do business today on a simple handshake and one’s word.” At a value of $122 million, the deal between the two is officially ranked as the fifth-largest hotel transaction closed in New York City in 2010. Both men maintained a mutual trust for one another, confident that all the negotiations had been done in good faith partly due to their shared alma mater. “Chet did a great job of managing his client without overmanaging the transaction,” Kassin said. “We closed on time, with all parties commending one another. It was one of the smoothest deals I’ve ever been involved with.” In honor of the School, and for the successes their education has brought them, part of the proceeds from the deal will go to support Stern. “We felt strongly that one beneficiary of this deal should be the source of our connection,” Kassin said. 40 Sternbusiness

business, which manages $52 billion for insurance clients. Louis Fabregas (MBA ’94), of Bridgeport, CT, has been named an SVP at Houlihan Lokey, an international investment bank working in mergers and acquisitions, capital markets, financial restructuring, and valuation. Marc A. Reiser (MBA ’94), of Bellmore, NY, has been named CEO of the National Notary Association. He will also serve on its Executive Committee. Xiaodong Wen (MBA ’94), of Elmhurst, NY, has been named to the Board of Directors of Asia Cork Inc., a company that works in the development, manufacturing, and marketing of cork-based building materials in Shaanxi, China. Darren Campo (BS ’95), of New York, NY, has published a sequel Alex Detail’s Rebellion to his original book Alex Detail’s Revolution. Both books focus on how science fiction can help you find your passion. Kevin Barry (MBA ’95), of Mendham, NJ, has been named Chairman of the Board of the University of Medicine and Dentistry of New Jersey by New Jersey Governor Chris Christie. Richard Hauer (MBA ’95), of Princeton, NJ, was named Managing Director of BDO Consulting’s real estate advisory area. He was previously President of Real Estate Services at Great American Group. Paul Julius (MBA ’95), of West Windsor, NJ, was named CFO of Morgan Stanley’s investment management arm. Aloysius T. McLaughlin (MBA ’95), of Summit, NJ, was named Head of the special asset pool unit for Citigroup. He previously oversaw sales of newly issued investment-grade bonds. Douglas Wendell (MBA ’95), of Hingham, MA, has been named a managing director in the global technology

investment banking group at Jefferies. He joins Jefferies from Citigroup, where he was Managing Director in the Technology Investment Banking Group, specializing in the software sector. Joseph Wynne (MBA ’95), of Easton, PA, has been named to the Board of Directors of Atlantis Systems Corp., a globally recognized training integrator in the military and commercial aviation markets and is President and CFO of SCPW Acquisition, Inc., a privately held company that acquires and consolidates specialty referral and primary care veterinary facilities. Taesik Yoon (MBA ’95), of New York, NY, is Senior Analyst and the Associate Editor of the Forbes Growth Investor and Forbes Special Situation Survey investment newsletters. Ken Ades (MBA ’96), of New York, NY, recently married Elizabeth Anne Manheim. Ades is Vice President of the New York office of Markit. Thomas J. Miller (MBA ’96), of Westfield, NJ, has been promoted to President and CEO of ALI Solutions, a company that develops and markets event-based decision support and predictive analysis solutions for consumer financial service organizations. Scott Alper (BS ’97), of Jericho, NY, recently married Randi Udell. Alper is a Principal in the Witkoff Group. Carol Cheng-Mayer (MBA ’97), of Port Washington, NY, has been named VP of Bel Air Investment Advisors, an independent wealth management advisory firm to high net-worth individuals, families, trusts, and foundations. Ralph G. D’Ambrosio (MBA ’97), of Huntington, NY, has been promoted to the position of SVP of L-3 Communications. He retains his current role as CFO. Michael Friedlander (MBA ’97), of North Woodmere, NY, recently married Marni Weiss at Temple Israel in

Lawrence, NY. Friedlander is the owner of Holey Cream, a doughnut and ice cream shop in Manhattan. Robert Gender (MBA ’97), of New York, NY, has been named SVP and Treasurer with AIG. Prior to joining AIG, Gender served as AVP in the treasury department of the Equitable Life Assurance Society, a division of the AXA Group. Oona McCullough (MBA ’97), of Voorhees, NJ, has been named Director of Investor Relations at Urban Outfitters, Inc., a lifestyle specialty retail company operating under the Anthropologie, Free People, Leifsdottir, Terrain, and Urban Outfitters brands. Most recently, McCullough was a VP at BlackRock, Inc., where she performed equity research on the consumer sector, focusing on the specialty retail industry. John Orwin (MBA ’97), of Hillsborough, CA, has joined Affymax, Inc., as President and COO. Previously, he was SVP of the BioOncology business unit for Genentech, Inc. Lisa Scopa (MBA ’97), of Acton, MA, was been promoted to Vice President and Treasurer of Staples, Inc., from her position as Director of Corporate Financial Planning and Analysis. Ben Daitch (MBA ’98), of Dallas, TX, has been named to the Board of Directors of Consolidation Services Inc., a petroleum industry energy company engaged in the development and operation of domestic oil and gas wells and the acquisition of petroleum mineral rights. Peter D. Howard (MBA ’98), of New York, NY, has been named a managing director and head trader of Braver Stern Securities LLC, an independent brokerdealer. He joins Braver Stern from Cross Point Capital, LLC, where he most recently served as a head trader focused on all securitized products.

Samuel Wright (MBA ’98), of Little Silver, NJ, joined WeiserMazars as Partner in the Transaction Services Group. Herb Chen (MBA ’99), of Columbus, OH, will serve as Director of the new Huntington Family Office, part of Huntington National Bank. Huntington Bancshares Incorporated is a $52 billion regional bank holding company headquartered in Columbus, OH.

Advertising Operations for Discovery Communications. Kai-Shing Tao (BS ’00), of New York, NY, has been elected to Playboy Enterprises’ Board of Directors. He is Chairman and CIO of Pacific Star Partners, a private investment group. Keith Berger (MBA ’00), of Atlanta, GA, has been named VP of Operations at Endeavor Telecom.

Matthew DesChamps (MBA ’99), of Old Greenwich, CT, was recently named COO of Kepos Capital, a quantitative hedge fund based in New York. DesChamps was previously Principal and CFO of hedge fund firm Satellite Asset Management.

Josh Golden (MBA ’00), of Tuckahoe, NY, joined Grey New York, the flagship office of Grey Group, as the company’s first EVP and Chief Digital Officer. Golden joined Grey from EuroRSCG New York, where he served as Managing Director of Digital.

Daphne Quimi (MBA ’99), of Jackson, NJ, has been appointed to the role of Principal Accounting Officer and Assistant Treasurer of Amicus Therapeutics Inc.

Shawn McNinch (MBA ’00), of Beverly, MA, has been appointed as Global ETF Product and Sales Head of Brown Brothers Harriman. McNinch previously served as Senior Principal within Barclays Global Investors’ iShares Product Strategy Group.

Bret Scholtes (MBA ’99), of Bellaire, TX, has joined Omega Protein Corporation, a producer of Omega-3 fish oil and specialty fish meal products, as SVP of Corporate Development. Scholtes is a CPA and also has served as a tax professional with PricewaterhouseCoopers LLP and Arthur Andersen & Co LLP.

Karen Rose (MBA ’00), of New York, NY, has joined pharmaceutical advertising agency Cline Davis & Mann as Vice President and Associate Director of Business Development.

Kathleen Tierney (MBA ’99), of Pelham, NY, has been appointed COO of Chubb Personal Insurance.

Dino Sani, Jr. (MBA ’00), of Scarsdale, NY, has been named Managing Director and Head of Treasury Services for Latin America with the Bank of New York Mellon.

Stacey Lynn Widlitz (MBA ’99), of New York, NY, was recently married to Roger Murray Thomson at the Jumeirah Essex House in New York. She is a Managing Director and a stock research analyst at Pali Capital.

Haitao Zhai (MBA ’00), of New York, NY, has been named an independent non-Executive Director, a member of the Audit Committee, and a member of the Remuneration Committee of China Everbright International Limited.

2000s

Sara L. Braun (MBA ’01), of Chicago, IL, and Dan Weisberg were married in Pittsburgh, PA. Braun is Director of Shopper Marketing at Kraft Foods.

Rosanna Lam (BS ’00), of Flushing, NY, and Rungtum Tom Boonyasai were married on October 2, 2010, at the Lighthouse at Chelsea Piers in New York. She is Director of Digital Media

Ronald Chan (BS ’02), of Kowloon, Hong Kong, published a book, Behind the Berkshire Hathaway Curtain: Warren Sternbusiness 41

classnotes Real Estate Connoisseur From a young age, David J. Wine knew he had a passion for real estate. “My parents moved from Long Island to New Jersey when I was a teenager,” he said. “They took me to look at houses on weekends, and I was completely fascinated by the process.” Of particular interest to him was why a property had a certain asking price, layout, and design, and what made it a “good” home. Through the years, Wine has learned what it means to develop a successful property. He is currently Managing Partner of New York-based Oliver’s Realty Group, a newly formed development, investment, and brokerage company that is a wholly owned subsidiary of Oliver’s Company LLC, the David Wine (MBA ’84) personal holding company he founded in 1995. Prior to establishing Oliver’s, named after his son, Wine spent more than 30 years at The Related Companies, which he joined in 1978. His most notable projects with Related include the Time Warner Center’s One Central Park and The Residences at Mandarin Oriental condominiums, the Hudson riverfront’s Superior Ink condominiums and townhouses, five notable residential towers in Battery Park City, and six residential towers on Roosevelt Island, as well as dozens of rental and condominium developments throughout New York, Los Angeles, and Boston. “I love shaping my vision for each building into a realized, branded lifestyle,” said Wine. Each building has its own distinct challenges, however. Working on Time Warner Center, for example, was a unique experience for him both as a real estate professional and a New Yorker: “The offering plans were approved by the New York Attorney General’s office within weeks of September 11, 2001; the success of Time Warner Center really signaled New York’s coming back from those events.” Wine’s additional accomplishments include Tribeca Tower, one of the most successful real estate developments from the slow economic period in the early 1990s, and The Chatham, an Upper East Side residential condominium that ushered in the era of “starchitecture” with the decision to hire Robert A.M. Stern to design his first New York City for-sale building in 1999. “I attribute a lot of the success in my career to my education,” he said. “I selected Stern because it allowed me to attend part-time and continue to work in New York City; real estate is very much a local business.” That doesn’t prevent him from traveling avidly and gaining exposure to different cultures, ways of life, and designs in order to incorporate the world into his work. In addition to his career at Related, Wine was a multi-housing representative for the US Department of Housing and Urban Development. He serves as a board member of the Public Art Fund, the New York Foundation for Senior Citizens, the Design Industry Foundation Fighting AIDS (DIFFA), Citizens Housing and Planning Council, and Congregation Beth Simchat Torah in Greenwich Village. Buffett’s Top Business Leaders, about Buffet’s top executives, how they made their climb, and the advice they would give to younger generations. James Gregory Coe, Jr. (BS ’02, MBA ’06), of New York, NY, and Erica

42 Sternbusiness

Christine Hutchins were married on October 30, 2010, in Atlanta, GA. David Gordon Goodman (BS ’02), of New York, NY, and Kate Lindsey Usdin were recently married at the Brooklyn Botanic Garden.

Suzanne L. Thau (BS ’02), of New York, NY, joined the Blank Rome LLP firm as an Associate in the private client group. Prior to joining Blank Rome, Thau served as a Senior Tax Consultant at Deloitte Tax LLP.

John Boris (MBA ’02), of New York, NY, has been appointed EVP at Lonely Planet and the Managing Director at Lonely Planet Americas. Previously, he was President of Marketing and Interactive at Zagat Survey. Tal Cohen (MBA ’02), of Melville, NY, was named CEP of Chi-X(R) Global Inc. Chi-X(R) Global Inc., is a provider of market infrastructure technologies and trading venues. John DeRaimo (BS ’03), of New York, NY, has been named COO of Arrow Capital Management, LLC. Prior to joining Arrow, he worked for Landmark Advisors. Rachael Blain Hope (BS ’03), of New York, NY, and Jeremy Nathan Tilsner were recently married in Minneapolis, MN. Hope is Director of Digital Advertising Operations for MTV Networks. Michelle Tang (BS ’03, MBA ’10), of Forest Hills, NY, and Richard Jin Lee were married on October 10, 2010. Serena Carlynn Tong (BS ’03, MBA ’08), of New York, NY, and Louis Kay (MBA ’08), of New York, NY, were married on May 30, 2010. Teresa Black (MBA ’03), of New York, NY, has joined Freedom Specialty Insurance Company as VP of Commercial Directors and Officer Liability. Jiyoon Chung (MBA ’03), of San Jose, CA, has been appointed VP of Marketing by online retailer Beau-coup Favors, Inc. Geoff Slevin (MBA ’03), of Mechanicsburg, PA, has been named VP of the Solar Division with LG Electronics North America. Susan Salgado (PhD ’03), of New York, NY, launched Union Square Hospitality Group’s Hospitality Quotient, a learning business, with

Danny Meyer, the owner of Union Square Café and Gramercy Tavern. Ryan M. Haney (BS ’04), of New York, NY, and Bridgette H. Thom were married on November 13, 2010. Ben Lilienthal (MBA ’04), of New York, NY, was chosen to be a 2010 Henry Crown Fellow. The Henry Crown Fellowship is designed to engage the next generation of leaders in the challenge of community-spirited leadership. Lilienthal is the General Manager of Citrix Online-Audio. Josh Stinchcomb (MBA ’04), of New York, NY, has been appointed Publisher at Condé Nast Digital. Formerly, he was the Executive Director of Condé Nast Digital Business Group. Jared Alexander Chung (BS ’05), of Boston, MA, married Jennifer Jie Pan on October 3, 2010. Chris Burggraeve (MBA ’05), of New York, NY, was named President of the World Federation of Advertisers (WFA), which represents marketers worldwide through a network of 58 national advertiser associations across five continents. Burggraeve has been CMO of AnheuserBusch InBev since 2007. Patricia A. Guerra (MBA ’05), of New York, NY, who is the VP of Risk Management at Citigroup, has been recognized by Cambridge’s “Who’s Who” for demonstrating dedication, leadership, and excellence in banking. Ajay Kejriwal (MBA ’05), of Jersey City, NJ, has been named VP and an analyst in diversified industrials research with FBR Capital Markets Corporation. Simon J. Samaha (MBA ’05), of Haddonfield, NJ, was appointed to the NJHCFFA Board of Directors. Dr. Samaha is the President and Chief Executive Officer of Summit Medical Group, New Jersey’s largest independently-operated, multi-specialty medical practice.

Francesca Tedesco (MBA ’05), of New York, NY, has been named VP of APCO Worldwide’s healthcare team. Judson Laver Coplan (MBA ’06), of San Francisco, CA, was recently married to Katherine Anne Goldstein-Breyer. Mike Scotti (MBA ’06), of Colts Neck, NJ, released “Severe Clear,” a documentary about the early stages of Operation Iraqi Freedom that discusses the moral complexities of war and the difficulties many service members face upon returning home. Andrew Sharp (MBA ’07), of Brooklyn, NY, and Brooke Beaney were married in August 2010. Rebecca Barton (MBA ’08), of Lee’s Summit, MO, was named Director of Marketing at Osiris. Erez Biala (MBA ’08), of New York, NY, has been named Managing Director and Global Co-head of Collateralized Loan Obligation and Collateralized Debt Obligation trading with Jefferies, a global securities and investment banking group. Kaj Hagros (MBA ’08), of Helsinki, Finland, was named Managing Director by Tecnotree Government. Tecnotree is one of the world’s leading telecommunications operators.

Katelin Shea (BS ’09), of Roslyn, NY, was featured in Entrepreneur Magazine’s December 2010 issue for her company CitiSoles. Alan King Hsu (MBA ’09), of New York, NY, and Meagan Elizabeth Crowley were recently married.

In Memoriam George Wanner (BS ’29) Max A. Hubar (BS ’33) William H. Soller (BS ’33) Theodore J. Montigel (MBA ’34) Edward F. Jackman (BS ’36)

Scott Stimpfel (MBA ’09), of Philadelphia, PA, a doctoral student in the University of Pennsylvania Graduate School of Education, received the 2010 Social Entrepreneurship Award from the Manhattan Institute for co-founding and serving as the Executive Director of Resources for Educational and Employment Opportunities.

Irving S. Richland (BS ’38) Bernard A. Marden (BS ’40) Howard E. Seaman (BS ’40, MBA ’53) Sidney Kraines (MBA ’42) Viola Abel (BS ’48) Lester Goodman (BS ’48) Anita Schwartz Paul (BS ’48) Joseph J. Brady (BS ’49) Stanley B. Frieze (BS ’49, MBA ’53)

Nelson S. Yip (MBA ’09), of Astoria, NY, was recently married to Laina Briane Vlasnik. Adam Zeller (MBA ’09), of Brooklyn, NY, recently married Ryan Todd Kroft. Ashley Dawn Donnenfeld (MBA ’10), of New York, NY, and Christopher Scott Shackelton were recently married.

Judge Aileen Haas Schwartz (BS ’49) Robert W. Weber (MBA ’49) Ralph Heinrich (BS ’50) William F. Taussig (BS ’52) Thomas A. Spears (MBA ’53) William McInnes (PhD ’54) Charles A. Baulch (MBA ’55) Walter P. Guenther (MBA ’55) Claude J. Montane (BS ’56, MBA ’59) George F. Duborg, Jr. (MBA ’57)

Amelia Bruno Hanley (MBA ’10), of Hoboken, NJ, was married on September 11, 2010, to Christian Andrew Cavallo. Melissa Lauren Kurtz (MBA ’10), of Hartsdale, NY, and James Christian Anderson were recently married.

George F.B. Owens, Jr. (MBA ’58) Louis G. Peloubet (MBA ’58) Harold O. McDonald, Jr. (MBA ’60) Robert E. Brown (MBA ’61) Henry G. Schaefer (BS ’63) Loretta Chiongbian (BS ’64) Catherine C. Kane (BS ’64)

Jennifer Hensley (MBA ’08), of Astoria, NY, was appointed Executive Director of the Association for a Better New York. Emily Powers (MBA ’08), of New York, NY, has been named Director at NBC Universal, Television Networks and Digital Distribution. She was previously Manager of Business Development. Amy G. Tsang (MBA ’08), of New York, NY, was recently married to James E. Menapace (MBA ’08).

Sanjay Rupani (MBA ’10), of Morristown, NJ, was named Chief Strategy Officer of the George Washington University School of Business. He most recently served as Managing Director of Direct Involvement, an organization that educates future leaders about sustainability efforts in developing countries.

Dr. Palmer Chiyuan Sze (PhD ’64) David L. Weisen (MBA ’64) James J. O’Brien (MBA ’65) Wade F.B. Thompson (MS ’65) Gerrit Lansing (BS ’66) Thomas A. DeLong, II (MBA ’69) Michael G. Morris (MBA ’69) Bruce C. Potter (MBA ’71)

John Michael Willey (MBA ’10), of Riverside, CT, and Megan Marie Monaghan were recently married.

Jay J. Avelino (MBA ’76) Josef Leithner (MBA ’78) Andrei Derevenco (MBA ’83) Warren Ong (MBA ’86) Glenn Elliot (MBA ’88) Ravi K. Sundararaman (MBA ’89)

Sternbusiness 43

PastPerformance THE APOSTLE OF QUALITY MANAGEMENT Edwards Deming’s Enduring Legacy By Marilyn Harris

44 Sternbusiness

Deming Professorship in Quality and Productivity, Deming was an original: “He was a man of conviction who plucked ideas from the environment and connected the dots in combinations that didn’t exist yet.” Photo: New York University Archives

W. Edwards Deming, the post-World War II giant of quality management and long-time NYU Stern professor, had a name for his theories that was quaint even in his era: a System of Profound Knowledge. However dated his nomenclature, his seminal insights into the management of industrial processes not only transformed postwar Japan into a manufacturing giant, but continue to influence today’s industrial and commercial processes – and promise to do so for the foreseeable future. At Stern, his legacy has endured in the work of the School’s Information, Operations, and Management Sciences (IOMS) department. Deming, an Iowa native who taught in Stern’s Economics department from 1946 until his death in 1993, would have celebrated his 110th birthday last October. In homage to him – and in honor of its own 10th anniversary – the IOMS department held an event last fall at NYU’s Torch Club, attended by Dean Peter Henry, current and emeriti professors, and students. Deming is remembered not just as a towering figure in the world of industrial quality management, but as a likeable curmudgeon who marched to his own drummer. “He was always challenging his audience,” recalled IOMS Department Chair Michael L. Pinedo. “And he didn’t suffer fools gladly, though he had a special sense of humor.” In the late 1950s and 1960s, Deming’s achievement in Japan, where he had been recruited by General MacArthur to aid in postwar recovery efforts, had made him one of the most influential people in the management field. According to Vice Dean Eitan Zemel, who holds the W. Edwards

His mantra was metrics If quality was Deming’s religion, metrics was his mantra, but how metrics were applied made all the difference. For instance, to achieve better results in terms of customer satisfaction with product quality, it was Deming’s innovation to remove the focus from company employees and train it on manufacturing operations instead. His System of Profound Knowledge relied on 14 points that included a consideration of psychology, leadership, and motivation, as well as the concept of building quality into the product at the earliest stages. “All this is what took quality management from the basement to the CEO suite,” said Zemel. “When he was done with it, every CEO in America knew him and his ideas.” A favorite Deming pronouncement was “In God we trust, all others bring data.” He believed metrics could be usefully applied to almost every aspect of management, including performance evaluations. However, Zemel said, he preached against tying employee compensation to the evaluations, because it could affect performance in a negative way and “corrupt the metrics.” Similarly, despite pressure from the university, Deming didn’t assign grades

other than pass/fail, because he believed that students would work only for the grade and not to produce quality work. Tatsuro Toyoda, a 1958 Stern alumnus and former president of his family business, Toyota Motor Corp., was one of Deming’s students, and paid tribute to his former teacher when he received an honorary doctorate from NYU in 2004. During his long tenure at Stern, Deming taught statistics and operations research as a member of the Economics department. Shortly before his death, a stand-alone statistics and operations research department was created, under Professor Emeritus Ernest Kurnow, who taught the first operations management course. By 2000, it was clear that the department’s brief had expanded, and the IOMS department was born, a move Deming would have championed. Said Pinedo: “The idea was to give a home to faculty whose style of research was analytical or technology-based.” The combination of disciplines has proved fruitful, with abundant cross-fertilization opportunities. The IOMS department currently offers several areas of specialization that cut across its three disciplines: data models and decisions; management of technology and operations, supply chain management and global sourcing; and financial systems analysis. Graduates are prime candidates for global consulting firms. While Deming’s quaintly titled System of Profound Knowledge may have passed into history, his legacy continues to be relevant in today’s world. Since the financial crisis, for instance, the area of operational risk has become a focus for preventing the next meltdown. “One of the ways to combat operational risk is through Deming’s Total Quality Management (TQM),” Pinedo pointed out. “The moment people start working on operational risk, they’re applying TQM.” ■ MARILYN HARRIS

is editor of STERNbusiness.

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