Culture as the Foundation

"There is an experiment I'd love to conduct. I'd like to survey a cross-section of Americans and ask them how many active NBA players, Major League Baseball players, and "American Idol" finalists they can name. Then I'd ask them how many living American poets, playwrights, painters, sculptors, architects, classical musicians, conductors and composers they can name. I'd even like to ask how many living American scientists or social thinkers they can name.

"Fifty years ago, I suspect that along with Mickey Mantle, Willie Mays and Sandy Koufax, most Americans could have named, at the very least, Robert Frost, Carl Sandburg, Arthur Miller, Thornton Wilder, Georgia O'Keeffe, Leonard Bernstein, Leontyne Price and Frank Lloyd Wright. Not to mention scientists and thinkers like Linus Pauling, Jonas Salk, Rachel Carson, Margaret Mead and especially Dr. Alfred Kinsey.

"I don't think that Americans were smarter then, but American culture was. Even the mass media placed a greater emphasis on presenting a broad range of human achievement...

"The same was true of literature. I first encountered Robert Frost, John Steinbeck, Lillian Hellman and James Baldwin on general-interest TV shows. All of these people were famous to the average American -- because the culture considered them important. Today no working-class kid would encounter that range of arts and ideas in the popular culture. Almost everything in our national culture, even the news, has been reduced to entertainment, or altogether eliminated.

"The loss of recognition for artists, thinkers and scientists has impoverished our culture in innumerable ways...

"I have a reccurring nightmare. I am in Rome visiting the Sistine Chapel. I look up at Michelangelo's incomparable fresco of the "Creation of Man." I see God stretching out his arm to touch the reclining Adam's finger. And then I notice in the other hand Adam is holding a Diet Pepsi...

"We must remember that the marketplace does only one thing -- it puts a price on everything. The role of culture, however, must go beyond economics. It is not focused on the price of things, but on their value. And, above all, culture should tell us what is beyond price, including what does not belong in the marketplace. A culture should also provide some cogent view of the good life beyond mass accumulation. In this respect, our culture is failing us."

(“The Impoverishment of American Culture.” Dana Gioia. Wall Street Journal: July 19, 2007. ; p. D.7)



UNDERGIRDING all human activities and relationships are shared beliefs, values and norms. The social fabrics of our marketplaces are woven of unfolding threads of enacted conversations about the way things are, the way things work, what is of relative importance, and the shape and borders of behavior. Without this warp and woof, the meaning and purpose of social and material interactions unravel rapidly.

What Goes Around Comes Around

"For years, PNC Bank found it relatively easy to fill the humblest branch job: the teller. Offering modest wages and standard hours, the position required only basic skills and was supposed to diminish with the advent of new technology such as ATMs and online banking.

"Today, PNC needs more tellers than ever and is having trouble finding them.

"Throughout the U.S. service economy, companies are stumbling across similar problems as they transform once mechanical front-line jobs into troubleshooting and marketing roles that demand greater abilities. For banks, the entry-level teller position has become the primary way to win new customers and sell new services to existing ones.

"As a result of that switch, and a boom in the number of bank branches, there's a staffing crunch in the industry that is forcing employers to raise wages, perks and training to get qualified staff. PNC is now targeting retirees, homemakers and college students to fill teller jobs...

"Banks say they face an additional problem: Many of today's high school graduates are no longer equipped with the skills -- from fundamental math to the customer-service touch -- to fill increasingly complicated jobs.

"Tellers, who generally have a high-school education, are being positioned to interact more with customers and nudge them toward newer financial services…

"Officials at LaSalle Bank, the Chicago-based unit of ABN Amro Holding NV, have started discussing whether teller applicants need an associate degree instead of just a high-school diploma or equivalent. Their worry: bank branches tend to fill more-senior positions from the ranks of tellers. As a result, the company needs people with more education to fill the teller jobs so they can be trained and promoted."

(“Expanding Banks Bemoan Lack of Qualified Tellers.” Sudeep Reddy. Wall Street Journal: July 17, 2007. pg. B.1)



HUMANITY trumps technology once again as touch remains the central principle of commerce.

Damned If You Do, And Damned If You Don't

"Health food -- of all things -- may have gotten in the way of a marriage of snack-food titans.

"PepsiCo Inc., the maker of Doritos and Pepsi-Cola, explored a merger with Nestle SA in late spring, which would have created an immense global food concern with increasing emphasis on 'wellness' products. The effort was ultimately scuttled over a host of complications, according to people familiar with the matter.

"PepsiCo made the initial approach, according to a person familiar with the situation. But Nestle resisted the idea for fear that Pepsi's reliance on snacks such as potato chips and soft drinks would dilute its mission of building a business around more-healthful food and beverage products...

"PepsiCo declined to comment. A Nestle spokesman said the company 'has not been pursuing anything outside of our stated strategic acquisition interests, which are in the area of nutrition...'

"Indeed, Pepsi's move raises the question of what's next for the Purchase, N.Y., food conglomerate. Chairman and Chief Executive Indra Nooyi has steadily won over Wall Street investors with rock-solid sales and earnings growth. The company's shares traded yesterday at $66.13, about in the middle of its 52-week trading range.

"Without Nestle or another big acquisition, the question for Pepsi is how it will deepen its health-and-wellness portfolio, an effort it is increasingly emphasizing.

"After reformulating some of its foods with more-healthful oils in the U.S., it is doing the same overseas, where it is also reducing salt and adding oat and grain products. Yesterday, Pepsi, along with several other food companies, pledged to limit marketing to children.

"The risk to Pepsi is these nods to wellness will hurt sales, pushing the company's shares down. Without more-healthful brands that Pepsi can pitch to everyone, its growth prospects could be limited."

(“How Junk Food Spoiled Megadeal; Nestle's Wellness Drive Scotched PepsiCo Talks.” Dennis K. Berman, Deborah Ball and Betsy McKay. Wall Street Journal: July 19, 2007. pg. C.1)



PERCEPTIONS, beliefs and assumptions again trump the numbers. Who are we? Why do we exist? What does that imply for where we can and should go, and how we get there?

The Other Face of Focus

"Facebook, the networking Web site for college students… says it attracts some 30 million active members, nearly double the previous year. This has led to rampant speculation that Yahoo or Google will swoop in and take it over…

"Here are a few reasons why [Facebook] founder Mark Zuckerberg should resist the temptation to sell…

"Facebook is a data gold mine about the most sought-after consumer demographic segment: college graduates 18 to 30 years old. This information is priceless to advertisers, but it has been virtually untapped by the company…

"Turning down suitors has already proved smart. Yahoo offered to pay $1 billion for Facebook in September 2006. Google was said to have offered more than double that amount shortly thereafter. Recently, board member Peter Theil indicated the company is worth some $8 billion, based on internal valuations…

"Other Internet companies that grew with internal cash flow instead of selling out to bigger rivals include Google Inc. and eBay Inc. Facebook would be in good company."

(“breakingviews.com / Financial Insight: Why Facebook Works Solo; Given Its Favorable Facets, The Social-Networking Site Could Grow Like Google.” Wall Street Journal: July 11, 2007. pg. C.12)



FOCUS on who you are; why you exist; where you want to go, and how to get there. Remember AOL's merger with Time-Warner... ?

Focus, yes! But... on what?

"Amid a slack period for apparel retailers, Limited Brands Inc. surprised investors by agreeing to take a loss on the sale of most of its Limited Stores chain.

"Limited, based in Columbus, Ohio, continued its gradual exit from the apparel business by agreeing to transfer a 75% ownership interest in Limited Stores to affiliates of private-equity firm Sun Capital Partners Inc. The terms of the deal indicated there was little buyer interest in the company's namesake division, founded in 1963 by Chief Executive Leslie Wexner. The company said in May that it was exploring options for the chain.

"Though Limited Stores once was one of the most powerful brands in specialty retail, its parent gradually had been closing Limited locations as it invested in its Victoria's Secret and Bath & Body Works chains. While that extracts Limited from a turbulent business, the moves also leave the company more vulnerable to downturns at Victoria's Secret or Bath & Body Works…

"The Limited chain once wielded such a popular brand that in the 1980s, the company was the nation's largest specialty retailer. But in recent years, executives hadn't made the division a priority, and the muddled collection of styles in its stores reflected the lack of focus."

(“Advancing Its Sharper Focus, Limited Sells Namesake Chain at Loss.” Amy Merrick. Wall Street Journal: July 10, 2007. pg. C.3)



SOMEDAY Microsoft, Wal-Mart, GM, Dell, Google... Montgomery Ward, Eastern Airlines and Pan Am, Penn Central, Bethlehem Steel, etc.

Doing Well? by Doing Good?

“If you think microfinance is the exclusive domain of do-gooders seeking a free-market cure to global poverty, think again. While much of the money flowing into loans for the working poor is indeed ponied up by people with high-minded goals, these days it’s coming increasingly from those with a sharp eye for the bottom line--raising new questions over how to balance the altruistic mission of microfinance with the pursuit of profits.

“The high interest paid on microloans makes the operations surprisingly profitable. So hedge funds, venture capital firms, and other big investors are angling to get into the business. ‘This is not a charitable activity, says Scott Budde, a managing director at U.S. pension colossus TIAA-CREF, which aims to invest $100 million in such outfits. We're looking to produce competitive returns.’

“There’s no shortage of demand for microloans. Consultancy McKinsey & Co. estimates that as many as half of the globes 3 billion poor people may be eligible for loans--typically just a few hundred dollars at interest rates that average 31% a year...

“The rush of money into microfinance has raised questions about the hefty profits some microlenders earn...

“Some say rates, and returns, may fall with competition. Sky-high returns are a temporary phenomenon, says Matthew J. Bannick, who heads Omidyar Network, backed by eBay Inc. founder Pierre M. Omidyar. Bannick figures even investors who only want to do well for themselves will do good by helping microlenders reach more people. ‘Is it better to serve 100 million poor people and break even, he asks, or to serve 2 billion poor people and make a modest profit?’"

(“Microfinance Draws Mega Players; Hedge funds, VCs, and other big investors are seeing the huge profit potential in tiny loans.” By Keith Epstein, with Geri Smith in Mexico City, Nandini Lakshman in Hyderabad. Business Week: July 09, 2007. , Iss. 4042; pg. 96)



SO... why aren't risks discussed? Risks to whom? Of course, the maxim is not: "High risk, high return." Sensibly, we may say, "High risk, high expected return."

Globalization and Trade-offs

“America's product liability attorneys have begun rolling out the lawsuits as stories about unsafe and counterfeit imports from China continue to make headlines. The defendants: U.S. companies that distribute the products to American consumers. The cases might prove to be the vanguard in a march of litigation, with plenty of deep-pocketed American companies targeted.

“On June 26 such a lawsuit prompted regulators to demand a recall of nearly a half-million Chinese-made tires. Foreign Tire Sales, a Union (N.J.) distributor of tires made by Hangzhou Zhongce Rubber, was named in a wrongful death case filed in a New Jersey federal court after one of its made-in-China tires allegedly caused an accident that killed two people. In turn, Foreign Tire Sales has sued its Chinese supplier. Both companies say they're not at fault.

“Lawyers have also gone after U.S. companies such as Del Monte, which sold pet treats made with tainted Chinese ingredients. Del Monte, which issued a voluntary recall, hasn't yet responded to the suit. ‘We're just as interested in getting answers as some of the other folks,’ says John McDonough III, head of litigation at the New York office of Cozen O'Connor, which is representing the company.

“Meanwhile, the Washington (D.C.) firm of Cohen, Milstein, Hausfeld & Toll is weighing litigation against Western distributors of Chinese-made counterfeit glycerin that found its way into cold medicine, killing hundreds of children in Panama and elsewhere. ‘Do people along the chain have responsibility for knowing where key ingredients are coming from? The answer you're going to find in an era of globalization is Yes,’ says Cohen Milstein's Michael Hausfeld.

“Despite a wave of business-friendly legal reforms in recent years, companies can be held liable in most states in the U.S. even if they unwittingly sell a dangerous product. ‘All you have to show is that the product was defective,’ says William Ruskin, a defense litigator with Epstein, Becker & Green in New York. ‘It's no defense to say, We didn't know.' Under product-liability law, one company often can be held 100% liable for all damages awarded to all consumers, regardless of its market share or the amount of tainted product it might have sold.”

(“Made In China. Sued Here.” By Lorraine Woellert Edited by Deborah Stead, Cristina Lindblad. Business Week: July 09, 2007. , Iss. 4042; pg. 9)



GLOBALIZATION: Is the principle or the practice the problem?

Innovate or Perish? Innovate and Perish?

"President Bush will hand Xerox's Sophie Vandebroek the National Medal of Technology at the White House in late July. It will be a sweet moment for her and for a company that was built on a world-changing innovation - xerography - but that lost its way for a while in the Digital Revolution. The story of how Xerox's Palo Alto Research Center in the 1970s failed to capitalize fully on two of the most critical elements of the personal computer - the graphical user interface and the mouse - has become legend. Recent years have been better. At a shade less than $16 billion, revenues have not changed much since 2003, but Xerox has increased profits every year, added $7 billion in market cap, and more than tripled its profit margins. One key to the turnaround: Xerox has become an innovation power again, producing new technologies that can read, understand, route, and protect documents, among other things. Leading that effort is Vandebroek, the company's chief technology officer since late 2005. Her task is to keep Xerox at the leading edge of infotech progress in ways that make shareholders richer."

(“Xerox's Inventor-In-Chief.” Geoff Colvin. Fortune. New York: July 9, 2007. Vol.156, Iss. 1; pg. 65)


Innovation is NOT the point. What is the point? Wealth generation through value creation?

Multiple Performance Criteria

"The recovery in mortgage applications to purchase a home has caught economists' attention. The increase seemingly points to better home sales. But there are reasons to be skeptical about the latest mortgage activity figures while other housing data show no signs of improvement.

"In May, applications to purchase a home rose for the third straight month and were up 6.7% from a year ago, according to the Mortgage Bankers Assn. The data are traditionally viewed as a leading indicator of home sales, offering some hope that more buyers are entering the market.

"Other gauges of future housing demand still look bleak, though. The National Association of Realtors' April Pending Home Sales Index, which tracks signed contracts for existing homes, fell 3.2%. And in June, the National Association of Home Builders' Housing Market Index hit a more than 16-year low on softer sales and fewer visits to model homes.

"Which numbers should we believe? The applications data may be overstating demand, according to Michelle Meyer, an economist at Lehman Brothers. First, the MBA does not survey mortgage brokers who use third parties to fund loans. These independent brokers probably gained market share during the housing boom and subsequently lost business as credit standards tightened this year. The data 'likely understated applications last year and overstate applications today,' says Meyer. Plus, a rise in denials and an increase in multiple applications among those rejected may be inflating the MBA's figures."

(“Home Sales: Optimism May Be Misplaced.” By James Mehring. Business Week: July 02, 2007. , Iss. 4041; pg. 30)



WOW! Am I ever glad that numbers don't lie.

Conventional Wisdom and Numbers

Politicians from both parties say the U.S. capital markets are being suffocated by regulation. In town meetings, op-ed pieces, and industry gatherings, they have attacked the Sarbanes-Oxley Act of 2002 and other corporate reforms for driving companies away from U.S. stock exchanges to other, more business-friendly locales. The statistics, however, paint a somewhat different picture. It turns out that a record number of non-U.S. companies are flocking to NYSE Euronext and NASDAQ to make their initial public offerings. So far this year, 22 companies, many from China and Israel, have raised nearly $4.4 billion on U.S. exchanges, according to Thomson Financial. That's more than even the first half of 2000. The conventional thinking is that Sarbanes-Oxley's tough restrictions on corporate audit practices and internal controls will lead foreign companies to list elsewhere. But companies such as RRSat Global Communications Network Ltd. aren't being frightened off. To be sure, the less regulated London market is attracting its share of foreign IPOs, too. Critics of U.S. regulations still argue that the IPO surge could be even stronger if the stringent rules were eased.

(“SARBOX Isn't Really Driving Stocks Away; Despite the doomsayers, many foreign companies are rushing to list on U.S. exchanges.” By Joseph Weber, with Xiang Ji in Hong Kong. Business Week. New York: July 02, 2007. , Iss. 4041; pg. 87)


QUESTIONS: Do we know what we know in spite of data, or do we find facts to corroborate any position that we may like to see? Can we torture the data until they confess whatever we might like to hear? Can we understand the way things really are if the numbers just won't fall into line for us?

Spellbound, Distractions Distort

"Call it the curse of Hogwarts. It turns out that -- at least for some in the wizarding world -- it's tough to make money out of magic. Harry Potter has fans clamoring in excitement as the seventh and last book in J.K. Rowling's hit series, Harry Potter and the Deathly Hallows, lands worldwide on July 21. With the fifth movie due out in weeks and the recent announcement of an Orlando theme-park attraction that could cost half a billion dollars, Pottermania is at an all-time high.

"But what should be a pot of gold for Harry's business partners is turning into an empty cauldron for many of them. The most successful literary brand in recent history has made its author a billionaire, but others have not fared so well. Retailers, spellbound by the chance to reach millions of Potter-obsessed customers, are cost-cutting for market share to the point where many stand to lose money. For book publishers, the tsunami distorts results in Potter release years, creating wild share-price swings and a distraction from other parts of the business. Even Warner Bros. Entertainment Inc., which has made billions off the Harry Potter movies, saw sales and profits drop last year and in the first quarter without a fresh Potter offering in the mix.

"For booksellers, the source of the pain is mammoth retailers like Amazon.com, Wal-Mart, and Britain's ASDA chain, which have slashed prices by 50% to woo fans. 'It's like being in the trenches with the bullets flying over you,' says Sonia Benster, owner of The Children's Bookshop in Huddersfield, England. Amazon.com CEO Jeff Bezos concedes that the company won't make a profit from the new Potter book. But he told shareholders that it has racked up more than 1 million pre-orders so far--and, Amazon hopes, plenty of new customers who will buy other books. Because of such struggles for a piece of the Potter pie, notes Simon Fox of Britain's HMV Group PLC, owner of the Waterstone's book chain, it's 'hard to make money.'"

(“The Twisted Economics Of Harry Potter; The wizard brings both profit and pain to his business partners.” By Diane Brady, with Kerry Capell in London, Joshua Vittor in New York. Business Week: July 02, 2007. , Iss. 4041; pg. 38)


IMAGINE if we did not fall into the masses and ride the wave of mania... Would we be better off outside of the mainstream, swept up in the confounding of revenue and profit? What is "better off," and for how long?

Jobs, Dell, Yang, etc.

“For a company that helped spawn the commercial Internet 12 years ago, this seems an odd time to have an existential crisis. Web business is booming, especially advertising. And Yahoo! Inc. has capitalized on that, building a business worth $37 billion on the stock market. But that only sounds impressive if you're not up against a $160 billion juggernaut, Google Inc., that keeps pulling away in the metrics that matter...

“On June 18, Semel stepped down as Yahoo CEO, passing the torch to Jerry Yang, one of the company's co-founders. With the surprise appointment, the Yahoo board is betting that Yang… can cut through the bureaucracy and indecision that have grown up around the company, leading it out from under the shadow of Google.

“For many within Yahoo's Silicon Valley campuses, there is a sense of relief at the long-anticipated departure of Semel. True, Yang, self-effacing and by most accounts a bland public speaker, appears to be an unlikely corporate leader. Even his previous title--Chief Yahoo!--evokes a playfully casual image. But many techies see him as the only logical choice to energize the Yahoo troops. If there's one truism in Silicon Valley, it's that the most successful tech companies are still best run by leaders with technology chops, preferably the founders. Yang, 38, is a tech nerd from way back who still has a passion for the Internet. "He's no Steve Jobs," says Ned May, an analyst with media researcher Outsell Inc. ‘But he's a founder. Putting a founder back in the reins will create excitement inside Yahoo.’

“More than anything, that's precisely what Yahoo is lacking. If Jerry Yang appears to some observers more symbol than CEO, he's just the symbol that Yahoo's 12,000 employees from Silicon Valley to Mumbai yearn for. They want someone with the authority to flatten the layering that built up under Semel, whose perceived diffidence and lack of deep Internet roots turned off techies and led to a wave of departures by key personnel. They also want someone who's a real Valley Guy, who knows that survival in this Darwinian place means quickly building or buying new technologies even -- no, especially -- if they undercut existing business models. ‘Yahoo needs a visionary driving forward against the competition more than a seasoned executive,’ says one Yahoo vice-president, who is rethinking a plan to leave the company because of Yang's new role.”


(“Back To The Future At Yahoo!; With co-founder Jerry Yang at the helm, morale may soar and turnover could plummet. But will profit make a comeback?” Robert D. Hof. Business Week: July 02, 2007. , Iss. 4041; pg. 34)


OBSERVATION: Watch the life-cycle. From emergence through growth the Visionary thrives. In maturity the Professional is called upon. Facing decline, we grasp for a Savior.

Costly, Risky, Threatening -- and Vital

"As I write this, the drama concerns who will bag Dow Jones. Or how gruesome staff cuts under some possible scenarios will be... Or whether the controlling Bancroft family might yet swallow hard, face certain investor outrage, and continue to go it alone. No matter the outcome, one question remains: How do you fix a problem like Dow Jones?

"The company owns one of the world's best newspapers. Which, judging by the gentlest interpretation of the data, is barely profitable. (The consumer media unit, for which a Deutsche Bank analyst estimates the Wall Street Journal supplies around 80% of revenue, posted profit margins of 3% in '06. It lost money in '05.) The company's coulda-woulda-shouldas of the past 15 years fill volumes. In just one episode, Reuters made entreaties regarding a combination back in 1997, precisely a decade before the Thomson-Reuters deal. Stiffening competition from those quarters and from the ever-powerful Bloomberg only make Dow Jones loom smaller. A wise new owner will bring a long fix-it list and large toolkit, and they will include the following: Giving the web away… Double down on data... Blow out the video."


(“How To Resuscitate Dow Jones; The same issues will face whoever bags the Journal.” Jon Fine. Business Week. New York: July 02, 2007. , Iss. 4041; pg. 28)



QUESTIONS: If change is costly, risky, threatening, and vital... and if strategic management is all about investing in long-term, long-range, holistic commitments of resources, how will you sense the balancing of these competing priorities? Are your priorities well-grounded? Are your principles centered on that which builds up? Is your vision clear?

(Very) Apparent Contra-diction

“US Airways' aggressive attempt to acquire Delta Air Lines, which fizzled earlier this year when DL's creditors refused to endorse the takeover, might have sparked a consolidation frenzy that could have reshaped the world's largest air transport market.

“If the merger actually had gone through, it's unlikely the US's other four legacy carriers-United Airlines, American Airlines, Northwest Airlines and Continental Airlines-could have afforded to stand pat.

“A scenario in which the Big Six became the Bigger Three did not appear too far-fetched, particularly since few are really growing on their own…

“Is consolidation inevitable, as US and UA fervently contend, or is the current structure sustainable given the rigorous cost-cutting airlines have endured and the return to profitability many of them enjoyed last year? And would antitrust officials, who shot down a UA-US merger proposed in 2000, allow consolidation to move forward?

“At the heart of this thorny debate is an apparent contradiction. Airline executives generally concede that there are too many major international carriers in the country and that the market as currently structured is not ideal. Yet many also believe that their particular airline is well-positioned in its current form, especially after spending the last several years shedding billions of dollars in annual costs. Further, even if they may think a merger would be a good idea in theory, they also may believe that the obstacles to achieving one in reality are too great to overcome and ultimately would damage the potential value of the merged entity.

“Blank Sheet: ‘There's no question that if you had a blank piece of paper, you probably wouldn't come up with six hub-and-spoke carriers. I think that has probably been the underlying thesis for consolidation,’ Continental Airlines Chairman and CEO Larry Kellner told analysts and investors recently at the JP Morgan Aviation and Transportation Conference. But, he quickly noted, ‘We don't see huge benefits in consolidation for us.’”

(“Is US Consolidation Inevitable?” Aaron Karp. Air Transport World: June 2007. Vol.44, Iss. 6; pg. 49)



QUESTION: How long can companies fly into the face of fundamental economics while trying to fool themselves with contra-diction?

Fearful of Complacency? Try Paranoia!

“If there's one thing a company can learn from Toyota Motor Corp., it's the power of paranoia. Consider that Toyota just two months ago overtook General Motors Corp. as the world's biggest carmaker. As Detroit bled, Toyota pulled down a record $15 billion in profits last year. Still, its executives in Japan and North America are worried that they'll be spoiled by success. ‘The scariest symptom of 'big-company disease' is that complacency will breed,’ Toyota President Katsuaki Watanabe told BusinessWeek in an interview.

So Toyota is giving itself a dose of strong medicine, meant as both an elixir for current ills and as preventive maintenance. The company's U.S. management has just launched its most far-reaching initiative in 50 years of doing business here. Called EM2, for "Everything Matters Exponentially," it's a total re-examination of product planning, customer service, sales and marketing, and even the car dealers the company doesn't directly own. Simultaneously, Toyota is retraining all of its U.S. factory workers. Company executives also expect sales growth to slow. The concept of continuous improvement, or kaizen, remains part of Toyota's DNA. But ‘the challenge is [how to] sustain that paranoia,’ says Ranjay Gulati, a professor at Northwestern's Kellogg School of Management.

(“Staying Paranoid At Toyota; Fearful of ‘big-company disease,’ the No. 1 carmaker keeps scrambling to retool itself.” David Welch. Business Week: July 02, 2007, Iss. 4041; pg. 80)

Return on Dreams...

"Drugs firms are rethinking their business model.

"LIPITOR is a drug company's dream. The cholesterol pill made by Pfizer, an American pharmaceuticals giant, is the world's best-selling drug. Last year it earned over $13 billion in revenues. Other hugely successful drugs include GlaxoSmithKline's Advair, an asthma remedy, and Plavix, a blood thinner, which is sold by Bristol-Myers Squibb and Sanofi-Aventis. Both enjoy billions of dollars in annual sales.


"Despite such rewards, however, pharmaceutical companies are reconsidering their pursuit of blockbuster drugs, as new technology permits the creation of niche remedies that target rare ailments or sub-populations of people suffering from common diseases."

(“Business: Beyond the blockbuster; Pharmaceuticals.” The Economist: June 30, 2007. Vol.383, Iss. 8535; pg. 75)

Risk, Value and Personal Perspectives

"Billionaire investor Carl Icahn said his $36-a-share offer for Lear Corp. represents 'a very fair bid' for the company, and he won't raise the offer even if he isn't completely confident shareholders will approve the deal...

"During a phone interview, Mr. Icahn said he is surprised that certain shareholders and shareholder advisory firms have voiced opposition to the offer, which was originally put forth in February. He insisted that Lear's short-term risks -- including a union strike against Detroit's Big Three auto makers and falling truck and SUV sales -- represent a substantial uncertainty at this point, making his $36-a-share offer more than adequate.

"'If you look at the risks involved, I think we're paying a fair price for it,' Mr. Icahn said, noting that Lear's recent share price, which closed Friday at $36.50, is much higher than it was last summer when Lear was considered to be at a significant risk given the downturn in the U.S. auto industry. 'I don't think that much has changed in terms of risk equation.'

"Even as risks continue to cloud the U.S. auto industry, a range of investors spanning deep-pocketed private-equity firms to hedge funds have been scrambling to snap up distressed automotive assets that are seen as undervalued. On Friday, Delphi Corp. -- General Motors Corp.'s largest supplier -- inked a labor deal with the United Auto Workers union that allows it to sharpen its focus on the battle among hedge funds for control of the Troy, Mich., auto supplier.

"Mr. Icahn did say he likes the longer-term prospects for Lear, and that is why he has put forth the offer to buy the entire company. Nevertheless, he said he is concerned that even though Lear's board entertained more than 40 offers during a 'go shop' period, no one topped the Icahn bid. 'It worries me also that people didn't bid for it,' he said.

"Lear, meanwhile, said it believes Mr. Icahn's offer is fair and timely given the risks in the industry. 'North America isn't going to turn around overnight,' said Lear's general counsel, Daniel Ninivaggi. 'We're confident that once shareholders have all the information, and the misinformation is cleared up, the shareholders will support this transaction.'"

(“Icahn Defends Lear Bid, Says He Won't Sweeten It.” John D. Stoll and Jared A. Favole. Wall Street Journal: June 23, 2007. pg. A.6)

The Eternal Pendulum: e.g. Buyouts

"When Dollar General Corp. received a nearly $7 billion buyout offer in early March, investors scooped up shares in other discount retailers.

"And when SLM Corp., the student-loan provider better known as Sallie Mae, announced in April that it would be bought out for $25 billion, bonds issued by Countrywide Financial Corp. and CIT Group Inc. sold off on fears that they too could become takeout targets. Bond holders typically disdain buyouts because they add new debt to companies, potentially straining their finances and credit standing.

"For the past year, similar jumps and falls have occurred in sectors ranging from consumer-goods companies to industrial groups to technology companies as investors tried to game which companies would get taken out next in the great private-equity-led buyout wave. Once a company became a buyout target, investors would look to peers, screening them in a search for companies with high, stable cash flows and low debt levels as potential candidates for a buyout. They would then buy these stocks, or sell their bonds, in the hope of an acquisition-led payoff.

"Now, investors are wondering if the game of buyout bingo will soon come to an end as the investors who purchase the debt that fuels such takeovers begin to balk at some of the riskier deals...

"These debt-market problems could render moot the seemingly endless stream of lists that have been generated in a bid to identify companies that could be the next takeout target…

"The premise for much of the chatter was that no company, no matter how big, was off limits from a potential buyout because of the seemingly endless appetite for the debt funding these deals. With the use of borrowed money, or leverage, buyout firms had been able to dramatically increase the amount they could pay for a company.

"That's changing. 'I know there's been talk about $100 billion and $150 billion deal sizes, but that's probably not on the table anymore,' said Gregory Peters, head of credit strategy at Morgan Stanley. From now on, 'buying a company at higher leverage multiples and expecting to easily finance it through the debt markets is going to be much more heroic…'

"To be sure, investors aren't expecting the buyout boom to end outright. Nor will stocks that have been pushed up by buyout speculation likely sell-off overnight, strategists said."

(“Game of Buyout Bingo May Be Ending; Investors Stop Guessing Which Target's Peer Will Be Next Player Up.” David Reilly. Wall Street Journal: June 28, 2007. pg. C.1)

Humanity and Technology

"How is this for low: Elite computer scientists are using highly addictive computer games to trick unsuspecting Web users -- possibly including children -- into toiling without pay for some of the world's richest companies on stupefyingly dull grunt work.

"It's all true. Though, in fairness, nothing nefarious is going on at all.

"The scientists are part of a minimovement known by the oxymoronic name of 'human computation.' The idea is that because there are many tasks that humans still do better than computers, why not just get people to do them? Often, the best way to do just that is to make a game out of it.

"That was the insight of Luis von Ahn, a 28-year-old professor at Carnegie Mellon University who is the creative force behind a Web hit known as the ESP Game, at espgame.org. The site has had more than 130,000 visitors and has lately inspired other researchers to try the same thing…

"To what extent is this use of humans to dot the I's that computers can't themselves dot a retreat from the grand idea of computer scientists to have machines spare people from just this sort of work?

"Professor von Ahn says it's just a stopgap; that in 20 years, at least in the case of vision and images, all of these problems will have been solved, and we won't need the human labor. But he concedes that result is contingent upon a research breakthrough, the likes of which he can't even begin to describe. Absent such a bolt from heaven, even 20 years might not be enough time, at least in the field of computer vision and image recognition, and human beings will likely be needed for much longer."

(“Computer Scientists Pull a Tom Sawyer To Finish Grunt Work.” Lee Gomes. Wall Street Journal: June 27, 2007. pg. B.1)

Changing Times

"On a visit to Marietta, Ga., last fall, T.J. Palmer stopped into an Applebee's and ordered a bruschetta burger. 'I didn't like it at all,' she says.

"After having visited the restaurant chain regularly for years, Ms. Palmer says, she rarely goes anymore. 'It doesn't have anything that would make me want to come back.'

"Her assessment counts. Twenty-seven years ago, Ms. Palmer co-founded Applebee's."

(“Table Talk: A Shift in Dining Scene Nicks a Once-Hot Chain; Applebee's Retained Bar-and-Grill Formula As Tastes Moved On.” Janet Adamy. Wall Street Journal: June 29, 2007. pg. A.1)

Fickle Rumor and Sentiment

"Rumors were flying around Silicon Valley in November 2005 that something intriguing was happening in one of the underground parking garages at Google's world headquarters. The gadfly Robert X. Cringely blogged that the company was hiding a 40-foot-long shipping container in a secret area off limits even to regular GoogleFolks. But when a cutting-edge data center in a shipping container was announced in October 2006, the company behind it was not Google. It was Sun Microsystems. Its Project Blackbox would be available for delivery in 2007. Project Blackbox may be Jonathan Schwartz's, CEO, Sun Microsystems, biggest initiative to date, and the one that best reflects his vision for the new Sun. Whether Project Blackbox will be more than a niche product is an open question.

"Of course, the Street is notoriously fickle and will swing back and forth based on rumor and sentiment -- until the numbers come in. And that is where Sun and Schwartz and the Blackbox have to show their muscle."

(“Dawn Of The Dead.” Alan Deutschman. Fast Company. Boston: June 2007. Iss. 116; pg. 86)

Public Trade-offs

In an interview, Mike McCue, co-founder, Tellme Networks, discussed Microsoft's recent acquisition of Tellme Networks... “Going public feels great -- and then the next day, you wake up and realize you have all these expectations. It is very hard to innovate and leap forward as a young public company when you need to hit quarterly goals.”

(“Finding His Voice.” Linda Tischler. Fast Company. Boston: June 2007. Iss. 116; pg. 48)