Gourt > Business > Employment > Careers > Directories
The term directory may refer to:
Computing
- directory (file systems) — a way of organizing files and other directories
- directory (databases) — a large collection of information primarily for reading
History
- French Directory — a government in revolutionary France from 1795 to 1799
Portfolio.com: Careers
The Bond Market
Wed, 15 Oct 2008 12:00:00 -0000
Writer Ian Fleming never wanted James Bond to be an especially likable character. In the first 007 novel, Casino Royale, he describes Bond as “ironical, brutal, and cold” and once said that he’d given him the “dullest, plainest-sounding name I could find.” Yet the character has proven to be extremely lucrative for two families—the Flemings and their Hollywood partners, the Broccolis. With the latest Bond movie, Quantum of Solace, out this month, Condé Nast Portfolio takes aim at determining how much 007 has generated over the years. MoviesIn 1961, Fleming sold the film rights to all published and future novels to Harry Saltzman and Albert R. Broccoli, co-producers of the first Bond film, Dr. No. Today, Broccoli’s daughter and stepson oversee EON Productions, which makes the Bond films in tandem with MGM and Sony. The 21 films released so far have generated $11.6 billion in sales at the box office. (The most successful was 1965’s Thunderball, earning $986 million, adjusted for inflation; the least successful was 1989’s License to Kill, which brought in $277 million.) DVD and VHS sales have probably added an extra $400 million. Subtotal: $12 billion Videogames Developers have released more than two dozen Bond games, including several from Electronic Arts—like 2001’s Agent Under Fire—that aren’t based on specific movies or books. According to NPD Group, a market research firm, Bond games have generated about $662 million in U.S. revenue since 1995. One title alone—1997’s Goldeneye 007, for the Nintendo 64—racked up $251 million. Throw in an additional $150 million or so for the prior decade. Subtotal: $812 million Books In addition to the 14 Bond books Fleming wrote between 1953 and 1966, Ian Fleming Publications (owned by his descendants) has commissioned 30 Bond sequels, a Young Bond series for teens, and The Moneypenny Diaries, a trilogy that follows the life of the personal secretary of Bond’s boss, M. The books have been translated into 45 languages and sold more than 100 million copies in 25 countries. The recently released Devil May Care, by Sebastian Faulks, became the fastest-selling hardcover fiction title in Penguin’s history. Subtotal: $1 billion The Bottom Line The master spy is one of the most lucrative fictional characters in history, leading a pack that includes Harry Potter, Frodo Baggins, and Batman. Total: $13.8 billion Most Popular Theme Songs Goldfinger, Anthony Newley1 Played 196,035 times on radio Die Another Day, Madonna Played 85,073 times on radio Live and Let Die, Paul McCartney and Wings Played 72,498 times on radio A View to a Kill, Duran Duran Played 22,774 times on radio SOURCE: Nielsen BDS. NOTE: 1 Released on a 30th anniversary compilation album, The Best of Bond ... James Bond; Shirley Bassey recorded the original. Related LinksA Superhero's Car Can Be YoursHollywood's Pay TV ProblemSuperheroes Save Hollywood! (Barely.)
The $58 Trillion in the Room
Wed, 15 Oct 2008 12:00:00 -0000
At a time when the reputation of bankers has been shredded, Bill Demchak is a throwback. The day I meet him, the financial world is once again poised on the brink of destruction. The Dow Jones Industrial Average lost 358 points the day before and is already down another 150 this morning. Yet the green-eyed Demchak, in pleated khakis hiked up unfashionably high onhis waist, seems preternaturally calm—especially for a man who, unwittingly, has had a hand in bringing Wall Street to its knees. Demchak, now the vice chairman of PNC Financial in Pittsburgh, returned to his hometown in 2002 to help rescue the bank after it became mired in an accounting scandal. Under Demchak and the rest of its new management team, PNC has avoided most of the terrible mistakes of its Wall Street peers by spurning bad mortgages, dubious off-balance-sheet deals, and questionable corporate loans. It’s now one of the best-performing banks in the country. But before he had this life, Demchak had another, as the leader of a small group at J.P. Morgan in New York that pioneered the kind of financial instruments that eventually led to this autumn’s wreckage on Wall Street. The J.P. Morgan team created and then industrialized credit derivatives, which have enveloped the global markets, growing to a mind-numbing $58 trillion worth of credit contracts. They have spread and morphed in ways that Demchak never intended but always feared. Long celebrated as a way for banks to diffuse their risks, the credit derivatives invented by Demchak’s team have instead multiplied them. The new credit vehicles encouraged banks and other financial firms to take on riskier loans than they should have; helped increase leverage in the global financial system; and exposed a much wider array of financial firms to the risk of default. (View an interactive timeline of derivatives.) Credit derivatives aren’t, of course, solely to blame for the pandemic that has helped bring down Wall Street. They didn’t single-handedly force Bear Stearns and Lehman Brothers to bulk up on toxic debt, dooming them to collapse. But they made the financial world more complex and more opaque. Ultimately, they have exacerbated the market panic, as financial firms and regulators have belatedly come to grips with the enormity of the problems. Merrill Lynch ultimately capitulated to a sale because investors had no confidence that the firm had a handle on what its problems were. When the federal government took over A.I.G. in September, it was largely because of the insurance behemoth’s exposure to credit-default swaps, a type of derivative that flourished in the wake of Demchak and his team’s creations. By mid-September, Treasury Secretary Hank Paulson was forced into proposing the largest bailout in U.S. history. Securities and Exchange Commission chairman Christopher Cox (S.E.C. No Evil, October) called for regulating credit derivatives. Morgan’s derivatives project began in the wake of the Asian financial crisis in 1997 as an attempt to protect the bank from bad loans. Demchak’s innovations worked—for his bank. Morgan came to dominate this corner of the financial world while preserving a culture of prudence. Morgan—deemed to be so safe that it snagged two of the victims of the financial-system collapse, Bear Stearns and Washington Mutual—is still swimming in credit derivatives, far more than any other firm on Wall Street, though the bank says it’s hedged. As of the second quarter of 2008, the bank had written derivatives contracts backing credit valued at $10.2 trillion, roughly three-quarters the size of the U.S. economy. But Demchak’s innovation has a more troubling legacy. J.P. Morgan, rather than being inoculated, was actually becoming the Patient Zero of Wall Street, eventually carrying the credit virus to the far corners of the global financial system. The structure of the first derivatives deal wasn’t as solid as Demchak’s team had intended. That initial, flawed financial instrument was later replicated thousands of times by J.P. Morgan and other banks, with the same defects repeated and magnified over and over again. The creation of credit derivatives, only a decade ago, is more responsible than anything else for binding the global financial world together more closely. Now some of the trailblazers are puzzling over what has been wrought. “How can we have a financial system so precariously balanced after such an extraordinarily profitable period?” asks Andrew Donaldson, a former colleague of Demchak’s who runs an asset management firm in London. Demchak spends his days in an unassuming office in PNC’s headquarters, situated amid a slightly seedy collection of streets in downtown Pittsburgh. Demchak warned for years about excesses in lending and is now baffled by, and even somewhat contemptuous of, his peers’ disastrous mistakes: “At the end of the day, I’m never going to be—knock on wood—a guy you see in the paper and say, ‘Look at this stupid, self-serving decision.’ ” Later, as he thinks back to 1997 and the days in New York when his team helped get the derivatives market off the ground, he lights up. “Oh, God,” Demchak says. “It was absolutely the best time ever in my life.” In the mid-1990s, Demchak, along with his boss, Peter Hancock, an effervescent Briton, became converts to the closest thing the banking industry has had to a religious reformation. Back then, relationships drove the commercial-banking business. Glad-handing bankers with tight connections to corporate boardrooms made the rain. These guys never met a loan from a corporate client they would turn down, even if they weren’t sure it would be profitable in the long run. Hancock and Demchak’s creed was simple: Banks should know whether their loans were going to make money. The pair insisted that loans be priced to their current value in the market. Because of the legacy of the old relationship bankers, J.P. Morgan was struggling. The problem, in the view of the stock market, was that the bank had the wrong clients. They were sleepy American icons, some of whom John Pierpont Morgan himself had lent to and even helped build. Though bank officials were promising Wall Street that it could generate returns of 20 percent, the return on many of its loans was much lower, forcing the bank to run the race while dragging lead weights on its ankles. The Asian financial crisis highlighted the problem. Morgan lost money on loans to Asian companies. That prompted the bank to take a look at all of its corporate lending practices, abroad as well as at home. When it did, top executives came to a sobering realization: Not only was J.P. Morgan not making nearly enough profit on these blue-chip corporate loans, the bank had also made far too many of them. Most weren’t loans at all but lines of credit promising funds at some later date. Hancock and Demchak realized that in a crisis, many of these companies would probably ask J.P. Morgan for access to the money they were promised. Worse, they wouldn’t do it unless they were on the brink of collapse—exactly the wrong time for a banker to make a loan. The bankers who made those loans thought the odds of that happening were too small to even consider. “The old banking mentality viewed them as riskless,” Demchak says. But the mentality was wrong. Morgan realized it needed to act quickly to reduce its exposure. It had to free up capital for more profitable business. But it couldn’t sell the loans without alienating its longtime, blue-chip customers. Demchak put the new religion into action. “Demchak was the first person I know of who had the vision that the credit-derivatives market could be anything like it is today,” says Charles Pardue, who worked for Demchak at J.P. Morgan before moving to a hedge fund in London. Over the coming months, Demchak would put his assault team of math whizzes and marketers to work on fixing the problem. Within the bank, the project was called the Credit Transformation. Demchak received crucial help from his lieutenant, Blythe Masters, a rising star and formidable presence at the bank. She interned at Morgan while still in college at Cambridge, in Britain, and joined the bank after graduating. Ultracompetitive and driven with a passion for debate, she would give talks and seminars proselytizing about the promise and power of credit derivatives, ultimately becoming their “poster child,” according to credit-markets consultant Eileen Murphy. “When you are doing something new, it gets done only by imposing your force of will,” says a former colleague of Masters’. “She was that person.” Wall Street likes to call its innovations “technologies” to convey a weighty sense of importance. What Demchak and Masters did was combine two of these technologies—securitization and credit derivatives—for the first time. Securitization has been around since the 1970s. In such a transaction, a group of loans—for example, mortgage, credit card, or corporate loans—is bundled together and sliced up into pieces called tranches. The lowest portion, called the equity, is exposed to the first losses. The next slice up is exposed to the following losses, and so on, until you get to the top. The slices are usually rated by the rating agencies. (Often, the media and even some on Wall Street colloquially refer to tranches of securitizations as derivatives; they aren’t. Tranches are securities backed by a pool of cash-producing assets.) The Demchak group’s breakthrough was to inject a little magic into standard securitizations. Instead of putting a particular loan into the sliced-up instrument—say, a 30-year loan to I.B.M.—it put a piece of J.P. Morgan’s exposure to I.B.M. into it. For this, the team used credit-default swaps, a burgeoning form of credit derivative. In a C.D.S. transaction, the buyer is protected against a default. These contracts had been floating around in small, experimental form for several years, having been created by Bankers Trust, a scrappy cowboy investment bank. Demchak’s team was the first to take them wholesale, using credit-default swaps in a huge deal. They mashed up J.P. Morgan’s exposure to more than 300 giant corporations, created an off-balance-sheet vehicle, then sold slices of that to investors. The vehicle then protected J.P. Morgan from defaults. In effect, Morgan was paying insurance premiums to investors who now were on the hook if one of Morgan’s clients went belly-up. “The innovation of not being tied to specific loans or bonds is what made the credit-derivatives market what it is today,” says Romita Shetty, who was part of Demchak’s team at J.P. Morgan. Development on the project continued slowly through the second half of 1997, involving painstaking and tedious legal and accounting work, quantitative analysis, and hand-holding and persuasion of banking regulators and credit-rating agencies. Demchak and Masters wanted their first deal to hit the market by the end of the year so that Morgan could get credit for it when the bank reported its earnings. The period was so intense that Masters, an avid equestrienne, at one point took a conference call from atop her horse. Finally, in December 1997, Demchak’s team closed on this first big credit-derivatives deal, the Broad Indexed Secured Trust Offering, or Bistro for short. Insurance companies and banks, the initial customers, were enthusiastic, snapping it up in just two weeks. The deal was enormous for the time, off-loading more than $9.7 billion of J.P. Morgan’s exposure. Morgan had succeeded in reducing its balance-sheet risk and was able to free up capital to buy its stock back. J.P. Morgan would go on to launch a credit-derivatives assembly line, becoming the Henry Ford of the new financial market. Throughout the 1990s, the bank was a major player in persuading lawmakers to allow the derivatives markets to remain unregulated—a move regulators are now reevaluating. Bistro helped J.P. Morgan traders in London kick-start the expansion of the “single-name” C.D.S. market, where individual contracts that cover just one company or entity trade hands. This market became liquid and deep by the early 2000s. “We had 100 people,” Demchak recalls. “We helped create the regulatory framework, the legal and accounting framework, and we did billions. We industrialized the product.” J.P. Morgan continues to dominate the world of derivatives. It has derivatives contracts tied to $90 trillion of underlying securities. Of that, $10.2 trillion are credit-derivatives contracts. Those mind-boggling totals are somewhat misleading. They reflect what is called the “notional” amount in the world of derivatives, based on the underlying amount of the contract, not its current value. When offsetting contracts are taken into account, that figure is whittled down to a much smaller—though still enormous—$109 billion of derivatives, of which $26 billion are credit derivatives. That’s the amount the bank could lose if all its trading partners went out of business, an extremely remote event. But the exposure is climbing, up 17.4 percent from the end of 2007. That’s equal to 20 percent of the bank’s net worth. Bistro “was the most sublime piece of financial engineering that was ever developed. It was breathtaking in terms of beauty and elegance,” says Satyajit Das, a risk consultant and the author of Traders, Guns, and Money, a financial history. But “in many ways,” Das adds, “J.P. Morgan created Frankenstein’s monster.” For J.P. Morgan, Bistro worked wonderfully. But even in that first deal, the weaknesses in structured finance and credit derivatives that would come to the fore in the 2007 credit-market crash were already there. Despite its blue-chip assets, Bistro didn’t perform pristinely. The initial slice, the equity layer that Morgan retained as a cushion against trouble, was so thin that it couldn’t weather even one default from one of the bigger companies in the bundle. That ultimately happened, wiping the slice out entirely. The investors who were one notch up, in what’s called the mezzanine layer, lost money as well. Even the buyers of the top-rated tranches, which were thought to be rock solid, had to endure bumpy periods before they got their money back. During that first major deal, the credit-rating agencies, which were supposed to be impartial, were already deeply enmeshed in the give-and-take of the process. A former Morgan banker who helped create Bistro recalls that Standard & Poor’s was giving the bank a tough time. The rating firm would run the deal through its models, and “each time, it came up with disastrous results. We did some tinkering and all of a sudden, it could rate the deal,” the banker says. The pattern was set. The rating agencies would become integral to the creation of the structures. Standard & Poor’s says questioning that first deal was appropriate and stands by its original rating. It further says it doesn’t get involved in structuring deals. But the close relationships between the rating agencies and the Wall Street firms were heavily criticized following widespread mortgage-related securities failures after the housing bubble burst. After Bistro, investors and regulators embraced derivatives as ways to free up capital to make more loans. Banks around the world used the structures to off-load their own credit risk. Competitors rushed to copy Morgan and Bistro. The knockoffs and followups were even more flawed than the original model. The second Bistro deal, in 1998, suffered credit downgrades. One of the big deals that followed fast on Bistro’s heels was York Funding, a Credit Suisse structure. “They stuffed it with the worst possible credits,” recalls a former rating-agency employee who examined the deal. One major problem was that banks had the ability to substitute loans in and out of the structure, as long as the loans had the same credit rating. This allowed managers to scour their books for a loan that looked shaky but still retained a good credit rating and swap it in for a healthier one. The tranche’s credit rating would remain the same, making the whole deal look better on paper than it actually was. Ultimately, the game became less about reducing risk and more about fooling regulators and the rating agencies. “From 1999 to 2000, there was a lot of innovation for innovation’s sake. A lot of products game the rating agencies and game the regulatory capital requirements,” says a former J.P. Morgan banker who was involved with Bistro. Warning signs piled up. After the tech bubble burst in 2000, myriad similar deals performed terribly. Some were backed by corporate loans. Many were Bistro-like constructs with credit derivatives. As a class, they hadn’t made it through a cycle of corporate defaults profitably, the acid test of any stable credit product. In his recounting of the period, Das writes, “The credit models failed miserably.” Despite the obvious failure of the first round of this wizardry, Wall Street was at it again by 2003, this time with mortgages. Investment banks sold billions of structured securities, made up mostly of housing loans to subprime customers with shaky credit. As the market got going, Wall Street bundled leveraged loans made to companies that had junk ratings from the credit-rating agencies. At the peak in 2006, Wall Street issued $89 billion worth of Bistro-like structures called synthetic collateralized-debt obligations. Many of the $415 billion worth of the main type of C.D.O. carried embedded credit derivatives as well. It’s not surprising that they failed again. Investors and financial firms lost hundreds of billions of dollars as part of the housing and corporate loan meltdown. Only then did the credit-rating agencies come under assault for being too closely involved in helping Wall Street create the complex structures. It took until this year for the structured-finance market to come to a screeching halt. Today, the financial markets are living in the slipstream of the Bistro deal. “People like to talk about what a shambles the banking system is. But it’s a shambles by design. You are taking on capital, reserving some of it, and lending it out. The whole system is levered,” says a former J.P. Morgan banker. After Bistro, it became more so. The practice of crafting loans that banks had no intention of keeping on their own balance sheets wasn’t invented by J.P. Morgan, nor was the credit-derivatives market solely responsible for making it possible. Certainly, not all the lending excesses, especially in mortgages, can be laid at the feet of the complex Wall Street structures that used derivatives. But Bistro spread the popularity of this “originate and distribute” model. This experience taught the banking industry that loans designed to be sold to investors for a quick profit performed much more poorly than loans that banks had to keep. In addition to keeping the very small piece of Bistro’s first-loss equity slice, J.P. Morgan retained part of the very top slice. Demchak’s team christened it “supersenior.” His group knew that there were risks, though slight, in keeping exposure to these slices. A.I.G., Merrill Lynch, and bond insurers MBIA and Ambac ignored them. Knowingly or not, these firms followed the Bistro deal, retaining supersenior exposure on their books to billions of dollars’ worth of structures in recent years. These companies thought—erroneously—that the slices were so unlikely to default that they needn’t set aside much capital for that eventuality. The problem was that the underlying assets propping these slices up weren’t blue-chip loans but rather loans to subprime borrowers and junk companies. The supersenior slices turned out to be enormously risky, exposing these companies to huge losses. Bankers have lost their heads in the past several years. The financial system has run amok. When the federal government took control of mortgage giants Fannie Mae and Freddie Mac, the takeover was deemed a “credit event,” triggering the credit-default swaps that other companies held as insurance against such an event. A week later, Lehman filed for bankruptcy, shrouding the market in an even greater fog. And then, investors in A.I.G. panicked. The insurance giant had written hundreds of billions of dollars’ worth of protection on the supersenior slices of mortgage-backed securities. Because of its high credit rating, A.I.G. hadn’t needed to post any initial collateral. But as the market sent the cost of default protection soaring, A.I.G.’s trading partners demanded collateral from the insurer. A.I.G. didn’t have it. Credit-rating agencies downgraded the insurance company, requiring that it post even more collateral. This left A.I.G. teetering on the edge of bankruptcy, and in an unprecedented intervention, it had to be nationalized by the federal government. For the first time, the C.D.S. market shrank in the first half of the year, after doubling every year since 2001. Bistro had tied the world together, taking credit risk from the banks and passing it on to anyone who wanted it. For years, proponents of credit derivatives, including then-Federal Reserve chairman Alan Greenspan and current chair Ben Bernanke, had celebrated the way they spread risk. Everyone might share a little bit of risk, but no firm would collapse from it. Yet in this credit crisis, everyone has become infected. You can almost detect a crisis of faith in Demchak. In the past eight years, he’s seen one market failure after another. First came the Chase takeover of J.P. Morgan. Chase’s stock soared in the ’90s as investors credulously rewarded its growth. Although it was able to take over the languishing J.P. Morgan, Chase had exposure to almost every big blowup in the wake of the bursting of the 1990s stock market bubble. Much of Demchak’s good work to off-load risk was for naught. (After Demchak left J.P. Morgan in 2002, almost every member of his team followed except Masters, who now runs the bank’s commodities businesses and is regarded as a possible C.E.O. candidate one day.) Then the credit markets ran wild, with bankers handing out loans that Demchak knew could never be profitable. Today, the markets are gripped with what he sees as an oft-irrational panic, driving prices to fluctuate wildly. Since Ronald Reagan’s presidency, the dominant ideology governing the financial world has been what George Soros calls “market fundamentalism”—the belief that we should trust the market when deciding how to allocate our resources. We’ll all be better off, the argument goes, if capital is allowed to flow wherever the prices call for it, with as little central planning and governmental interference as possible. But we have had two great investment bubbles, first in the stock market and now in the credit markets. For the first time in a generation, even some bankers question whether the markets know anything. If they can’t be trusted, what’s going to replace them? “I used to be the biggest advocate of marking everything to market at all times, because it keeps everyone honest,” Demchak says, referring to the practice of recording the value on the books at the current value. But he saw markets overreacting, swinging from euphoria to pessimism. Now he thinks the fates of great companies are in the hands of inexperienced traders speculating in thin markets. A colleague complained to Demchak recently that “some 24-year-old kid is going to mark me down or up 100 million bucks today. How is that?” Demchak understands his colleague’s frustration. “He is right.” Related LinksThe Shears are OutSalvaging the WreckageThe Man Who Saved (or Got Suckered by) Wall Street
Ten Is Enough?
Wed, 15 Oct 2008 12:00:00 -0000
FiveFord C.E.O. Alan Mulally, 63, has five kids, ages 20 to 31. Ford has let Mulally’s family fly on the company jet from their home in Seattle to the office in Dearborn, Michigan, even when he wasn’t aboard. SixThe C.E.O. of Hilton Hotels, Chris Nasetta, 46, has six daughters ages five to 15, who all attend the same schools he did in the Washington suburb of Arlington, Virginia. Seven“It’s absolutely essential to find a balance between work and family,” says Peter Olson, former C.E.O. of Random House. Olson, 58, has seven children ages 13 to 31—two adopted from Russia and one from Hungary. Edgar Bronfman Jr., the 53-year-old C.E.O. of Warner Music, also has seven children. An anti-file-sharing crusader, Bronfman has admitted to catching his kids downloading music illegally. NinePeopleSoft co-founder David Duffield, 67, has nine children, six of them adopted. The family homestead, near Lake Tahoe, Nevada, is on a piece of property formerly home to the ranch where Bonanza was shot. David Neeleman, 49, the ex-C.E.O. of JetBlue and the founder of Brazilian airline Azul, has nine kids as well, ages nine to 26. Neeleman is in Brazil Tuesdays to Thursdays; on Sundays, wherever he is, he attends church with his family. TenAt least two C.E.O.’s are the fathers of 10 children: Nelson Peltz, 66, chairman and former C.E.O. of restaurant giant Triarc Companies, and Richard Schulze, 67, founder and former C.E.O. of Best Buy.
Potter's Field
Wed, 15 Oct 2008 12:00:00 -0000
When Warner Bros. announced it was moving the sixth Harry Potter film from November 2008 to July 2009, the official explanation was that the writers strike had left gaps in the studio’s summer 2009 lineup. Potter, already completed, could be moved. And Warner could easily afford to wait, given the box office success of The Dark Knight, a film that took in $158 million in its first weekend alone. Not all of the businesses that depend on sales of Potter-related merchandise (especially during the all-important holiday shopping season) were in the same position, though. Some manufacturers were forced to halt or redirect shipments of items like lightup wands and scarves, while retailers had to rethink marketing plans. All had to adjust their revenue expectations for 2008. We survey the damage.1. ElopeColorado SpringsRevenue delayed: about $250,000This costume maker produces more than 30 Potter accessories, from hats to Quidditch goggles. In years when one of the books or films is released, sales of Potter-related merchandise can quadruple. In July 2007, the month Harry Potter and the Order of the Phoenix came out, Elope sold 4,000 Sorting Hats, up from less than 1,000 in July 2006. Sales manager Kelli Borel says retailers have scaled back orders since the announcement. 2. Electronic ArtsRedwood City, CaliforniaRevenue delayed: about $120 millionFor each of the past five Potter films, Electronic Arts has created a matching videogame. This year, the release was to be Half-Blood Prince, featuring original content from the new film. But now the company is resetting its marketing strategy and plans to record the revenue in fiscal year 2010. “We are disappointed we won’t have a game for fans this fall,” says Trudy Muller, senior director of public relations. 3. Cinemark HoldingsPlano, Texas Revenue delayed: about $29 millionWith more than 4,700 screens, Cinemark is the U.S.’s third-largest theater chain. Like its competitors, the company relies on Potter films to sell tickets—and con-cessions. In the same quarter Order of the Phoenix opened (it was the seventh-highest-grossing film ever), Cinemark’s box office sales jumped 73 percent and concessions 60 percent. The company also attributes the growth to an acquisition.4. F.A.O. SchwarzNew YorkRevenue delayed: about $117,000The Harry Potter boutique at F.A.O. Schwarz’s flagship store has been popular year-round since its opening in July 2007, but there is a downside: When the movies leave theaters, some products’ sales dip accordingly. Wand sales, for example, were 41 percent lower in July 2008 than in July 2007, when Phoenix was released. The chain’s Potter investments, says C.E.O. Edward Schmults, are “going to go down the sinks for this holiday season.” 5. ScholasticNew YorkRevenue delayed: about $60 millionScholastic, the U.S. publisher of the Potter books, doesn’t have a formal partnership with Warner Bros. But in years when a film and novel are paired for simultaneous release, sales of the book can reach upwards of $200 million. Without a new book or movie, Scholastic’s Potter sales stop at about $20 million. A spokeswoman doubts the delay of the movie will impact sales, since Scholastic is releasing another J.K. Rowling novel. Related LinksHollywood's Pay TV ProblemTough Times, Even in TinseltownCash Flow Woes Make MGM a Cowardly Lion
Philanthropist Ron Perelman Q and A
Wed, 15 Oct 2008 12:00:00 -0000
Where has your philanthropic dollar been best spent? The Revlon/U.C.L.A. Breast Center that produced the cancer drug Herceptin. That would be followed by a Jewish day school for girls that today educates about 3,000 girls. Besides the development of Herceptin, what result of your giving makes you proudest? I think renaming Logan Hall at the University of Pennsylvania for my ex-wife Claudia Cohen. There was a lot of negative buzz about renaming it. It got me all mad, but she would have loved it. She would have said, “Man, oh man! Look at this fuss I’m creating!” displayPromoModule ('{"moduleType":{"value" : "linksModule", "index" : "0"},"l_mediaType1":{"value" : "article", "index" : "0"},"l_mediaType2":{"value" : "article", "index" : "0"},"l_mediaType3":{"value" : "article", "index" : "0"},"l_mediaType4":{"value" : "if", "index" : "3"},"l_url1":"/guides/The-Generosity-Issue-2008","l_url2":"/executives/features/2008/10/15/Wealth-and-Charity-Index","l_url3":"/executives/features/2008/10/15/Philanthropist-Carl-Icahn-Q-and-A","l_url4":"/interactive-features/2008/10/Match-Billionaires-to-Boards-They-Sit-On","l_headline1":"The Giving Game: Billionaire Edition","l_headline2":"The Generosity Index","l_headline3":"Q&A With Philanthropist Carl Icahn","l_headline4":"Strange Boardfellows","l_src1":"/images/site/editorial/magazine/2008/11/giving-game-medium.jpg","l_alt1":"Offering plate full of cash","title":"The Generosity Issue" }'); How do you measure the productivity of your giving? We don’t have the staff or the interest to try and control the process. If it doesn’t work, you just don’t do it again. Is the downturn in the economy affecting the giving of your wealthy peers? In times like this, when the economy is having difficulties, it’s more important for individuals to step up and do stuff privately that may have been historically funded by public money. That will be a task for us going into the next two years. Do you have a philanthropic role model? Buffett and Gates. Eli Broad in the arts. Hank Greenberg in medical gifts. If you could see your gifts accomplish one thing, what would it be? I’d like to find the cure for cancer, absolutely. Is that likely? No. But as long as our giving creates a better, happier, healthier lifestyle for people who are touched by it, that’s a good thing. Related LinksPhilanthropist Pierre Omidyar Q and AA.I.GoodbyeA Booster Shot for Goldman Fund
Marc of the Valley
Wed, 15 Oct 2008 12:00:00 -0000
Marc Andreessen would rather blog from home in his underwear than give an interview to a journalist, especially in front of an audience. That’s what he wrote in his blog earlier this year. Thankfully, this one time, Andreessen got dressed and stepped onstage. displayPromoModule ('{"moduleType":{"value" : "featuresModule", "index" : "1"},"mediaType1":{"value" : "videos", "index" : "2"},"mediaType2":{"value" : "article", "index" : "0"},"mediaType3":{"value" : "article", "index" : "0"},"mediaType4":{"value" : "article", "index" : "0"},"url1":"/video/news-and-analysis/pulp-killer","url2":"/views/blogs/the-tech-observer/2008/09/05/andreesen-on-chrome-obama-and-investing-in-start-ups","url3":"/executives/features/2008/09/18/CNET-Founder-Halsey-Minor-Profile","url4":"/culture-lifestyle/goods/real-estate/2008/09/18/Michael-Lewis-Mansion","teaser1":"Marc Andreessen says that newspapers should "shut off the print editions."","teaser2":"The Silicon Valley player weighs in on politics, technology, and more.","teaser3":"Why do so many of his former tech-world colleagues revile CNET founder Halsey Minor?","teaser4":"Author Michael Lewis suffers a few housing crises of his own.","headline1":"Pulp Killer","headline2":"Andreessen on Chrome, Obama, and Investing","headline3":"The Baddest Boy in Silicon Valley","headline4":"The Mansion: A Subprime Parable","title":"More From Portfolio.com" }'); At 37, Andreessen is a legend in Silicon Valley. He created, with Eric Bina, the first graphical browser while at the University of Illinois, then co-founded Netscape Communications with überentrepreneur Jim Clark in the early 1990s. Netscape’s browser brought the internet to the masses, set off the dotcom boom, and so angered Microsoft at the time that Steve Ballmer, now the software giant’s C.E.O., led employees in “Kill Netscape!” chants. By bundling its Internet Explorer browser into Windows, Microsoft eventually drove Netscape into the arms of a suitor: AOL bought Netscape in 1999 for $4.2 billion. Andreessen hasn’t had a success of that magnitude since. But he did create another billion-dollar company, Loudcloud, a tech-services outfit that later changed its name to Opsware and was sold to Hewlett-Packard for $1.6 billion. More recently, Andreessen started Ning, a website that lets anyone create a mini social network. Its most prominent customer: 50 Cent. Andreessen joined Facebook’s board this year, invested in Twitter, and generally manages to show up on the front end of new technology trends. His blog, Blog.pmarca.com, has been a tech-industry must-read, in part because he’s willing to be brutally outspoken. In February, Andreessen ignited emotions when he blogged that he was starting a “New York Times Deathwatch.” ( Watch an exclusive video of Andreessen talking about the future of newspapers.) Condé Nast Portfolio’s Kevin Maney interviewed Andreessen at a gathering of Silicon Valley’s Churchill Club in Palo Alto, California. The following is an edited transcript. How’s your relationship with Steve Ballmer now? He’s my Facebook [makes air quotes with his fingers] friend. I’m going to stop there while I’m still ahead. Do you carry around any bitterness? I’m a big believer that it’s like in The Godfather—it’s business, not personal. Netscape was an unbelievable experience for me. We sold the company for a lot of money. After that, I’m on to the next one. I have to ask the guy who created the browser: What do you think of Google’s Chrome browser, introduced in September? It’s very meaningful. It’s going to force Firefox and Internet Explorer to accelerate their performance. Basically, the barriers to doing everything in the browser are falling fast. And that includes a whole range of things, like Google Docs, spreadsheets, presentation packages. The Chrome browser is going to really push forward the wave. Does this open up possibilities for companies you’re working with? I’ll give you one example: I just announced this company called Qik. It will turn every phone that contains a camera into a source of streaming video and audio [which works better in a faster browser like Chrome]. Anybody can watch live, and then it can all get recorded. It’s almost the reverse of George Orwell. In 1984, the government had cameras mounted everywhere. In a Qik-based world, it’s the exact opposite. Literally, everybody on the planet is going to be streaming video. Excellent reason to stay at home. And blog in your underwear. Exactly. Qik raises some issues, like what if 10,000 people at a concert all broadcast the show live? About a year ago, we went to see one of the major sports leagues—I won’t mention which one. We presented how they can have social networks and users can post videos shot at games and photos and all this stuff. And the main topic of conversation was how they could prevent people from recording video with their mobile phones and posting it online. displayPromoModule ('{"moduleType":{"value" : "featuresModule", "index" : "1"},"mediaType1":{"value" : "videos", "index" : "2"},"mediaType2":{"value" : "article", "index" : "0"},"mediaType3":{"value" : "article", "index" : "0"},"mediaType4":{"value" : "article", "index" : "0"},"url1":"/video/news-and-analysis/pulp-killer","url2":"/views/blogs/the-tech-observer/2008/09/05/andreesen-on-chrome-obama-and-investing-in-start-ups","url3":"/executives/features/2008/09/18/CNET-Founder-Halsey-Minor-Profile","url4":"/culture-lifestyle/goods/real-estate/2008/09/18/Michael-Lewis-Mansion","teaser1":"Marc Andreessen says that newspapers should "shut off the print editions."","teaser2":"The Silicon Valley player weighs in on politics, technology, and more.","teaser3":"Why do so many of his former tech-world colleagues revile CNET founder Halsey Minor?","teaser4":"Author Michael Lewis suffers a few housing crises of his own.","headline1":"Pulp Killer","headline2":"Andreessen on Chrome, Obama, and Investing","headline3":"The Baddest Boy in Silicon Valley","headline4":"The Mansion: A Subprime Parable","title":"More From Portfolio.com" }'); You won’t tell us which league? I won’t. But, you know, it’s a whole new world. The presumption is that there’s going to be live video all the time. You seem to have your fingers in a lot of Valley companies. Walk us through Marc Andreessen’s daily life now. My third company, Ning, is my day job. The only corporate board I’m on is Facebook, which I think is a very important company. I’m doing angel investing with Ben Horowitz, my business partner from my previous company. We’ve invested in 15 companies or so in the past year and a half. Maybe one a month, give or take. What’s your approach to investing in startups? Have it be a small enough amount of money that if it fails, we can still talk to the founder without getting mad. How much is that? I usually put in $25,000 to $100,000 per company. So far, so good—which is to say, I haven’t gotten really mad at anybody. You said Facebook is a very important company. That’s not always the opinion you get, right? I’m on Facebook’s board because Facebook is a true, old-fashioned Silicon Valley company in the best sense of that term: super-technology-focused, super-product-focused, very innovative—much more than it gets credit for—and very determined to build out a service that’s going to reach a very large number of people. Qik, Twitter, Facebook, and other social networks—who has time for all of it? Consumers are freeing up an enormous amount of time that they were spending with stereotypical old media, and clearly, that time is going primarily two places: videogames and online. If you were running the New York Times, what would you do? Shut off the print edition right now. You’ve got to play offense. You’ve got to do what Intel did in ’85 when it was getting killed by the Japanese in memory chips, which was its dominant business. And it famously killed the business—shut it off and focused on its much smaller business, microprocessors, because that was going to be the market of the future. And the minute Intel got out of playing defense and into playing offense, its future was secure. The newspaper companies have to do exactly the same thing. The financial markets have discounted forward to the terminal conclusion for newspapers, which is basically bankruptcy. So at this point, if you’re one of these major newspapers and you shut off the printing press, your stock price would probably go up, despite the fact that you would lose 90 percent of your revenue. Then you play offense. And guess what? You’re an internet company. What’s your relationship like with Jim Clark after all these years? I’ve had two critical mentors in my career. One was Clark. Another was Jim Barksdale, who was Netscape’s C.E.O. And it’s funny because they worked extremely well together, but they have almost polar opposite personalities. Clark is intensely entrepreneurial, extremely passionate, extremely emotional, completely fearless, absolutely delighted to create a new business, loves if it causes a lot of controversy. Barksdale is a builder and an operator and a manager. Clark is off in Florida. He has largely opted out of the tech industry. Yeah, we haven’t seen him in a long time. He is having a lot of fun. He is dating an Australian swimsuit model. Seriously. He’s been in the real estate business in Miami doing a bunch of different business things. He sails a tremendous amount. I’m pretty much the exact opposite. I don’t like to leave Palo Alto. So you’re 37, and you’ve taken on this mentoring role to people like Facebook’s Mark Zuckerberg and other entrepreneurs. There’s a new generation of entrepreneurs in the Valley who have arrived since 2000, after the dotcom bust. They’re completely fearless. displayPromoModule ('{"moduleType":{"value" : "featuresModule", "index" : "1"},"mediaType1":{"value" : "videos", "index" : "2"},"mediaType2":{"value" : "article", "index" : "0"},"mediaType3":{"value" : "article", "index" : "0"},"mediaType4":{"value" : "article", "index" : "0"},"url1":"/video/news-and-analysis/pulp-killer","url2":"/views/blogs/the-tech-observer/2008/09/05/andreesen-on-chrome-obama-and-investing-in-start-ups","url3":"/executives/features/2008/09/18/CNET-Founder-Halsey-Minor-Profile","url4":"/culture-lifestyle/goods/real-estate/2008/09/18/Michael-Lewis-Mansion","teaser1":"Marc Andreessen says that newspapers should "shut off the print editions."","teaser2":"The Silicon Valley player weighs in on politics, technology, and more.","teaser3":"Why do so many of his former tech-world colleagues revile CNET founder Halsey Minor?","teaser4":"Author Michael Lewis suffers a few housing crises of his own.","headline1":"Pulp Killer","headline2":"Andreessen on Chrome, Obama, and Investing","headline3":"The Baddest Boy in Silicon Valley","headline4":"The Mansion: A Subprime Parable","title":"More From Portfolio.com" }'); Does that create the danger of a new tech bubble? If there’s been a crisis in a market, you don’t tend to have a new crisis in that market until the people who went through the last crisis aren’t in the system anymore. It was only eight years ago. So here we are in 2008, and there’s still no sign of a bubble in technology, which I can encapsulate in two words: no I.P.O.’s. No tech I.P.O.’s—is that a good thing or a bad thing? Well, a very important thing. Through the 1980s and ’90s, tech companies would basically get into their expansion stage and then go public. In part, it was to have access to capital, in part to have an M&A currency, in part as a branding and a credibility event, and in part because there was a base of investors who wanted to invest in high-growth technology companies. Those days are just over. It’s just frozen. Is it a crisis in terms of company formation? Not yet. We haven’t talked at all about mobile internet. There was mobile before this thing [holds up an iPhone], and then there’s mobile after. If you were trying to build software for mobile phones last year, you were in a world of pain, of incompatibility—you had probably seven different operating-system platforms you had to deal with. You didn’t have any way to do over-the-air distribution of software or content. The carriers, especially in the U.S., had a choke hold on distribution and would put up huge barriers. It was an absolute nightmare. As of now, that hasn’t changed. That hasn’t changed, unless you’re on an iPhone. The iPhone is going to be at 100 million units before you know it. This is going to force everybody else to raise their game. Is Google the new Microsoft—the new big, scary, monster company in tech? It is true that Google is doing a lot of different things, and some will compete with other Valley companies. But the pros outweigh any future competitive threat. Google does so much to make other startups possible. Google makes new internet efforts easy to find. Google runs a large advertising network that distributes money to people who run ads. It is training and educating a very large base of really sharp people, many straight out of college, many of whom are not going to spend their entire careers at Google. Google is fertilizing the base. So I think it’s been very, very positive. How about all the fears that Google is too powerful? I don’t see it yet—and a big part of why is Google C.E.O. Eric Schmidt. Eric literally does not want to run a company whose M.O. is to just gratuitously go around and stomp on people. You’ve probably got a good 30 to 40 years left in the business. What do you ultimately want to accomplish? I love what the Valley does. I love company building. I love startups. I love technology companies. I love new technology. I love this process of invention. Being able to participate in that as a founder and a product creator, or as an investor or a board member, I just find that hugely satisfying. And I think the outcome can be big and important and profound. I hear you’re getting deeper into philanthropy—Stanford Hospital, Room to Read. That is increasingly important to me, for a couple different reasons. Partly, it’s wanting to give back. And partly, my wife of almost two years teaches philanthropy at Stanford. So I am completely committed to philanthropy because if I’m not, I’m in a great deal of trouble. I can’t even tell you. Related LinksGoogle Phone: Blockbuster or Bust?First Bytes: Google, Bezos, Facebook, moreInnovation Crisis in Tech? Seriously -- What Innovation Crisis?
U.S. Equal Employment Opportunity Commission
Supreme Court Denies FedEx Bid To Review Punitive Damages Award Under Disabilities Act
Wed, 08 Oct 2008 00:00:00 -0000
The U.S. Equal Employment Opportunity Commission (EEOC) today announced that the Supreme Court has denied a petition for review by Federal Express Corporation (FedEx) of a ruling by the U.S. Court of Appeals for the Fourth Circuit upholding a $100,000 punitive damages award in an EEOC lawsuit under the Americans With Disabilities Act (ADA) on behalf of a deaf package handler
Dillard's Sued For Disability Discrimination
Tue, 30 Sep 2008 00:00:00 -0000
Dillard Store Services, Inc. (Dillard’s), the nationwide chain of department stores, unlawfully discrimin¬ates against employees by requiring them to disclose personal and confidential medical information or face disciplinary action including termination, the U.S. Equal Employ¬ment Opportunity Commission (EEOC) charges in a class lawsuit filed under the Americans with Disabilities Act (ADA).
Sterling Jewelers Sued for Sex Discrimination
Wed, 24 Sep 2008 00:00:00 -0000
Sterling Jewelers Inc., the largest specialty retail jeweler in the country, violated federal law by discriminating against a large class of female employees at stores nationwide, the U.S. Equal Employment Opportunity Commission (EEOC) charges in a systemic lawsuit filed yesterday under Title VII of the Civil Rights Act.
Subscribe to Careers RSS feed 
The Bond Market
Wed, 15 Oct 2008 12:00:00 -0000
Writer Ian Fleming never wanted James Bond to be an especially likable character. In the first 007 novel, Casino Royale, he describes Bond as “ironical, brutal, and cold” and once said that he’d given him the “dullest, plainest-sounding name I could find.” Yet the character has proven to be extremely lucrative for two families—the Flemings and their Hollywood partners, the Broccolis. With the latest Bond movie, Quantum of Solace, out this month, Condé Nast Portfolio takes aim at determining how much 007 has generated over the years. MoviesIn 1961, Fleming sold the film rights to all published and future novels to Harry Saltzman and Albert R. Broccoli, co-producers of the first Bond film, Dr. No. Today, Broccoli’s daughter and stepson oversee EON Productions, which makes the Bond films in tandem with MGM and Sony. The 21 films released so far have generated $11.6 billion in sales at the box office. (The most successful was 1965’s Thunderball, earning $986 million, adjusted for inflation; the least successful was 1989’s License to Kill, which brought in $277 million.) DVD and VHS sales have probably added an extra $400 million. Subtotal: $12 billion Videogames Developers have released more than two dozen Bond games, including several from Electronic Arts—like 2001’s Agent Under Fire—that aren’t based on specific movies or books. According to NPD Group, a market research firm, Bond games have generated about $662 million in U.S. revenue since 1995. One title alone—1997’s Goldeneye 007, for the Nintendo 64—racked up $251 million. Throw in an additional $150 million or so for the prior decade. Subtotal: $812 million Books In addition to the 14 Bond books Fleming wrote between 1953 and 1966, Ian Fleming Publications (owned by his descendants) has commissioned 30 Bond sequels, a Young Bond series for teens, and The Moneypenny Diaries, a trilogy that follows the life of the personal secretary of Bond’s boss, M. The books have been translated into 45 languages and sold more than 100 million copies in 25 countries. The recently released Devil May Care, by Sebastian Faulks, became the fastest-selling hardcover fiction title in Penguin’s history. Subtotal: $1 billion The Bottom Line The master spy is one of the most lucrative fictional characters in history, leading a pack that includes Harry Potter, Frodo Baggins, and Batman. Total: $13.8 billion Most Popular Theme Songs Goldfinger, Anthony Newley1 Played 196,035 times on radio Die Another Day, Madonna Played 85,073 times on radio Live and Let Die, Paul McCartney and Wings Played 72,498 times on radio A View to a Kill, Duran Duran Played 22,774 times on radio SOURCE: Nielsen BDS. NOTE: 1 Released on a 30th anniversary compilation album, The Best of Bond ... James Bond; Shirley Bassey recorded the original. Related LinksA Superhero's Car Can Be YoursHollywood's Pay TV ProblemSuperheroes Save Hollywood! (Barely.)
The $58 Trillion in the Room
Wed, 15 Oct 2008 12:00:00 -0000
At a time when the reputation of bankers has been shredded, Bill Demchak is a throwback. The day I meet him, the financial world is once again poised on the brink of destruction. The Dow Jones Industrial Average lost 358 points the day before and is already down another 150 this morning. Yet the green-eyed Demchak, in pleated khakis hiked up unfashionably high onhis waist, seems preternaturally calm—especially for a man who, unwittingly, has had a hand in bringing Wall Street to its knees. Demchak, now the vice chairman of PNC Financial in Pittsburgh, returned to his hometown in 2002 to help rescue the bank after it became mired in an accounting scandal. Under Demchak and the rest of its new management team, PNC has avoided most of the terrible mistakes of its Wall Street peers by spurning bad mortgages, dubious off-balance-sheet deals, and questionable corporate loans. It’s now one of the best-performing banks in the country. But before he had this life, Demchak had another, as the leader of a small group at J.P. Morgan in New York that pioneered the kind of financial instruments that eventually led to this autumn’s wreckage on Wall Street. The J.P. Morgan team created and then industrialized credit derivatives, which have enveloped the global markets, growing to a mind-numbing $58 trillion worth of credit contracts. They have spread and morphed in ways that Demchak never intended but always feared. Long celebrated as a way for banks to diffuse their risks, the credit derivatives invented by Demchak’s team have instead multiplied them. The new credit vehicles encouraged banks and other financial firms to take on riskier loans than they should have; helped increase leverage in the global financial system; and exposed a much wider array of financial firms to the risk of default. (View an interactive timeline of derivatives.) Credit derivatives aren’t, of course, solely to blame for the pandemic that has helped bring down Wall Street. They didn’t single-handedly force Bear Stearns and Lehman Brothers to bulk up on toxic debt, dooming them to collapse. But they made the financial world more complex and more opaque. Ultimately, they have exacerbated the market panic, as financial firms and regulators have belatedly come to grips with the enormity of the problems. Merrill Lynch ultimately capitulated to a sale because investors had no confidence that the firm had a handle on what its problems were. When the federal government took over A.I.G. in September, it was largely because of the insurance behemoth’s exposure to credit-default swaps, a type of derivative that flourished in the wake of Demchak and his team’s creations. By mid-September, Treasury Secretary Hank Paulson was forced into proposing the largest bailout in U.S. history. Securities and Exchange Commission chairman Christopher Cox (S.E.C. No Evil, October) called for regulating credit derivatives. Morgan’s derivatives project began in the wake of the Asian financial crisis in 1997 as an attempt to protect the bank from bad loans. Demchak’s innovations worked—for his bank. Morgan came to dominate this corner of the financial world while preserving a culture of prudence. Morgan—deemed to be so safe that it snagged two of the victims of the financial-system collapse, Bear Stearns and Washington Mutual—is still swimming in credit derivatives, far more than any other firm on Wall Street, though the bank says it’s hedged. As of the second quarter of 2008, the bank had written derivatives contracts backing credit valued at $10.2 trillion, roughly three-quarters the size of the U.S. economy. But Demchak’s innovation has a more troubling legacy. J.P. Morgan, rather than being inoculated, was actually becoming the Patient Zero of Wall Street, eventually carrying the credit virus to the far corners of the global financial system. The structure of the first derivatives deal wasn’t as solid as Demchak’s team had intended. That initial, flawed financial instrument was later replicated thousands of times by J.P. Morgan and other banks, with the same defects repeated and magnified over and over again. The creation of credit derivatives, only a decade ago, is more responsible than anything else for binding the global financial world together more closely. Now some of the trailblazers are puzzling over what has been wrought. “How can we have a financial system so precariously balanced after such an extraordinarily profitable period?” asks Andrew Donaldson, a former colleague of Demchak’s who runs an asset management firm in London. Demchak spends his days in an unassuming office in PNC’s headquarters, situated amid a slightly seedy collection of streets in downtown Pittsburgh. Demchak warned for years about excesses in lending and is now baffled by, and even somewhat contemptuous of, his peers’ disastrous mistakes: “At the end of the day, I’m never going to be—knock on wood—a guy you see in the paper and say, ‘Look at this stupid, self-serving decision.’ ” Later, as he thinks back to 1997 and the days in New York when his team helped get the derivatives market off the ground, he lights up. “Oh, God,” Demchak says. “It was absolutely the best time ever in my life.” In the mid-1990s, Demchak, along with his boss, Peter Hancock, an effervescent Briton, became converts to the closest thing the banking industry has had to a religious reformation. Back then, relationships drove the commercial-banking business. Glad-handing bankers with tight connections to corporate boardrooms made the rain. These guys never met a loan from a corporate client they would turn down, even if they weren’t sure it would be profitable in the long run. Hancock and Demchak’s creed was simple: Banks should know whether their loans were going to make money. The pair insisted that loans be priced to their current value in the market. Because of the legacy of the old relationship bankers, J.P. Morgan was struggling. The problem, in the view of the stock market, was that the bank had the wrong clients. They were sleepy American icons, some of whom John Pierpont Morgan himself had lent to and even helped build. Though bank officials were promising Wall Street that it could generate returns of 20 percent, the return on many of its loans was much lower, forcing the bank to run the race while dragging lead weights on its ankles. The Asian financial crisis highlighted the problem. Morgan lost money on loans to Asian companies. That prompted the bank to take a look at all of its corporate lending practices, abroad as well as at home. When it did, top executives came to a sobering realization: Not only was J.P. Morgan not making nearly enough profit on these blue-chip corporate loans, the bank had also made far too many of them. Most weren’t loans at all but lines of credit promising funds at some later date. Hancock and Demchak realized that in a crisis, many of these companies would probably ask J.P. Morgan for access to the money they were promised. Worse, they wouldn’t do it unless they were on the brink of collapse—exactly the wrong time for a banker to make a loan. The bankers who made those loans thought the odds of that happening were too small to even consider. “The old banking mentality viewed them as riskless,” Demchak says. But the mentality was wrong. Morgan realized it needed to act quickly to reduce its exposure. It had to free up capital for more profitable business. But it couldn’t sell the loans without alienating its longtime, blue-chip customers. Demchak put the new religion into action. “Demchak was the first person I know of who had the vision that the credit-derivatives market could be anything like it is today,” says Charles Pardue, who worked for Demchak at J.P. Morgan before moving to a hedge fund in London. Over the coming months, Demchak would put his assault team of math whizzes and marketers to work on fixing the problem. Within the bank, the project was called the Credit Transformation. Demchak received crucial help from his lieutenant, Blythe Masters, a rising star and formidable presence at the bank. She interned at Morgan while still in college at Cambridge, in Britain, and joined the bank after graduating. Ultracompetitive and driven with a passion for debate, she would give talks and seminars proselytizing about the promise and power of credit derivatives, ultimately becoming their “poster child,” according to credit-markets consultant Eileen Murphy. “When you are doing something new, it gets done only by imposing your force of will,” says a former colleague of Masters’. “She was that person.” Wall Street likes to call its innovations “technologies” to convey a weighty sense of importance. What Demchak and Masters did was combine two of these technologies—securitization and credit derivatives—for the first time. Securitization has been around since the 1970s. In such a transaction, a group of loans—for example, mortgage, credit card, or corporate loans—is bundled together and sliced up into pieces called tranches. The lowest portion, called the equity, is exposed to the first losses. The next slice up is exposed to the following losses, and so on, until you get to the top. The slices are usually rated by the rating agencies. (Often, the media and even some on Wall Street colloquially refer to tranches of securitizations as derivatives; they aren’t. Tranches are securities backed by a pool of cash-producing assets.) The Demchak group’s breakthrough was to inject a little magic into standard securitizations. Instead of putting a particular loan into the sliced-up instrument—say, a 30-year loan to I.B.M.—it put a piece of J.P. Morgan’s exposure to I.B.M. into it. For this, the team used credit-default swaps, a burgeoning form of credit derivative. In a C.D.S. transaction, the buyer is protected against a default. These contracts had been floating around in small, experimental form for several years, having been created by Bankers Trust, a scrappy cowboy investment bank. Demchak’s team was the first to take them wholesale, using credit-default swaps in a huge deal. They mashed up J.P. Morgan’s exposure to more than 300 giant corporations, created an off-balance-sheet vehicle, then sold slices of that to investors. The vehicle then protected J.P. Morgan from defaults. In effect, Morgan was paying insurance premiums to investors who now were on the hook if one of Morgan’s clients went belly-up. “The innovation of not being tied to specific loans or bonds is what made the credit-derivatives market what it is today,” says Romita Shetty, who was part of Demchak’s team at J.P. Morgan. Development on the project continued slowly through the second half of 1997, involving painstaking and tedious legal and accounting work, quantitative analysis, and hand-holding and persuasion of banking regulators and credit-rating agencies. Demchak and Masters wanted their first deal to hit the market by the end of the year so that Morgan could get credit for it when the bank reported its earnings. The period was so intense that Masters, an avid equestrienne, at one point took a conference call from atop her horse. Finally, in December 1997, Demchak’s team closed on this first big credit-derivatives deal, the Broad Indexed Secured Trust Offering, or Bistro for short. Insurance companies and banks, the initial customers, were enthusiastic, snapping it up in just two weeks. The deal was enormous for the time, off-loading more than $9.7 billion of J.P. Morgan’s exposure. Morgan had succeeded in reducing its balance-sheet risk and was able to free up capital to buy its stock back. J.P. Morgan would go on to launch a credit-derivatives assembly line, becoming the Henry Ford of the new financial market. Throughout the 1990s, the bank was a major player in persuading lawmakers to allow the derivatives markets to remain unregulated—a move regulators are now reevaluating. Bistro helped J.P. Morgan traders in London kick-start the expansion of the “single-name” C.D.S. market, where individual contracts that cover just one company or entity trade hands. This market became liquid and deep by the early 2000s. “We had 100 people,” Demchak recalls. “We helped create the regulatory framework, the legal and accounting framework, and we did billions. We industrialized the product.” J.P. Morgan continues to dominate the world of derivatives. It has derivatives contracts tied to $90 trillion of underlying securities. Of that, $10.2 trillion are credit-derivatives contracts. Those mind-boggling totals are somewhat misleading. They reflect what is called the “notional” amount in the world of derivatives, based on the underlying amount of the contract, not its current value. When offsetting contracts are taken into account, that figure is whittled down to a much smaller—though still enormous—$109 billion of derivatives, of which $26 billion are credit derivatives. That’s the amount the bank could lose if all its trading partners went out of business, an extremely remote event. But the exposure is climbing, up 17.4 percent from the end of 2007. That’s equal to 20 percent of the bank’s net worth. Bistro “was the most sublime piece of financial engineering that was ever developed. It was breathtaking in terms of beauty and elegance,” says Satyajit Das, a risk consultant and the author of Traders, Guns, and Money, a financial history. But “in many ways,” Das adds, “J.P. Morgan created Frankenstein’s monster.” For J.P. Morgan, Bistro worked wonderfully. But even in that first deal, the weaknesses in structured finance and credit derivatives that would come to the fore in the 2007 credit-market crash were already there. Despite its blue-chip assets, Bistro didn’t perform pristinely. The initial slice, the equity layer that Morgan retained as a cushion against trouble, was so thin that it couldn’t weather even one default from one of the bigger companies in the bundle. That ultimately happened, wiping the slice out entirely. The investors who were one notch up, in what’s called the mezzanine layer, lost money as well. Even the buyers of the top-rated tranches, which were thought to be rock solid, had to endure bumpy periods before they got their money back. During that first major deal, the credit-rating agencies, which were supposed to be impartial, were already deeply enmeshed in the give-and-take of the process. A former Morgan banker who helped create Bistro recalls that Standard & Poor’s was giving the bank a tough time. The rating firm would run the deal through its models, and “each time, it came up with disastrous results. We did some tinkering and all of a sudden, it could rate the deal,” the banker says. The pattern was set. The rating agencies would become integral to the creation of the structures. Standard & Poor’s says questioning that first deal was appropriate and stands by its original rating. It further says it doesn’t get involved in structuring deals. But the close relationships between the rating agencies and the Wall Street firms were heavily criticized following widespread mortgage-related securities failures after the housing bubble burst. After Bistro, investors and regulators embraced derivatives as ways to free up capital to make more loans. Banks around the world used the structures to off-load their own credit risk. Competitors rushed to copy Morgan and Bistro. The knockoffs and followups were even more flawed than the original model. The second Bistro deal, in 1998, suffered credit downgrades. One of the big deals that followed fast on Bistro’s heels was York Funding, a Credit Suisse structure. “They stuffed it with the worst possible credits,” recalls a former rating-agency employee who examined the deal. One major problem was that banks had the ability to substitute loans in and out of the structure, as long as the loans had the same credit rating. This allowed managers to scour their books for a loan that looked shaky but still retained a good credit rating and swap it in for a healthier one. The tranche’s credit rating would remain the same, making the whole deal look better on paper than it actually was. Ultimately, the game became less about reducing risk and more about fooling regulators and the rating agencies. “From 1999 to 2000, there was a lot of innovation for innovation’s sake. A lot of products game the rating agencies and game the regulatory capital requirements,” says a former J.P. Morgan banker who was involved with Bistro. Warning signs piled up. After the tech bubble burst in 2000, myriad similar deals performed terribly. Some were backed by corporate loans. Many were Bistro-like constructs with credit derivatives. As a class, they hadn’t made it through a cycle of corporate defaults profitably, the acid test of any stable credit product. In his recounting of the period, Das writes, “The credit models failed miserably.” Despite the obvious failure of the first round of this wizardry, Wall Street was at it again by 2003, this time with mortgages. Investment banks sold billions of structured securities, made up mostly of housing loans to subprime customers with shaky credit. As the market got going, Wall Street bundled leveraged loans made to companies that had junk ratings from the credit-rating agencies. At the peak in 2006, Wall Street issued $89 billion worth of Bistro-like structures called synthetic collateralized-debt obligations. Many of the $415 billion worth of the main type of C.D.O. carried embedded credit derivatives as well. It’s not surprising that they failed again. Investors and financial firms lost hundreds of billions of dollars as part of the housing and corporate loan meltdown. Only then did the credit-rating agencies come under assault for being too closely involved in helping Wall Street create the complex structures. It took until this year for the structured-finance market to come to a screeching halt. Today, the financial markets are living in the slipstream of the Bistro deal. “People like to talk about what a shambles the banking system is. But it’s a shambles by design. You are taking on capital, reserving some of it, and lending it out. The whole system is levered,” says a former J.P. Morgan banker. After Bistro, it became more so. The practice of crafting loans that banks had no intention of keeping on their own balance sheets wasn’t invented by J.P. Morgan, nor was the credit-derivatives market solely responsible for making it possible. Certainly, not all the lending excesses, especially in mortgages, can be laid at the feet of the complex Wall Street structures that used derivatives. But Bistro spread the popularity of this “originate and distribute” model. This experience taught the banking industry that loans designed to be sold to investors for a quick profit performed much more poorly than loans that banks had to keep. In addition to keeping the very small piece of Bistro’s first-loss equity slice, J.P. Morgan retained part of the very top slice. Demchak’s team christened it “supersenior.” His group knew that there were risks, though slight, in keeping exposure to these slices. A.I.G., Merrill Lynch, and bond insurers MBIA and Ambac ignored them. Knowingly or not, these firms followed the Bistro deal, retaining supersenior exposure on their books to billions of dollars’ worth of structures in recent years. These companies thought—erroneously—that the slices were so unlikely to default that they needn’t set aside much capital for that eventuality. The problem was that the underlying assets propping these slices up weren’t blue-chip loans but rather loans to subprime borrowers and junk companies. The supersenior slices turned out to be enormously risky, exposing these companies to huge losses. Bankers have lost their heads in the past several years. The financial system has run amok. When the federal government took control of mortgage giants Fannie Mae and Freddie Mac, the takeover was deemed a “credit event,” triggering the credit-default swaps that other companies held as insurance against such an event. A week later, Lehman filed for bankruptcy, shrouding the market in an even greater fog. And then, investors in A.I.G. panicked. The insurance giant had written hundreds of billions of dollars’ worth of protection on the supersenior slices of mortgage-backed securities. Because of its high credit rating, A.I.G. hadn’t needed to post any initial collateral. But as the market sent the cost of default protection soaring, A.I.G.’s trading partners demanded collateral from the insurer. A.I.G. didn’t have it. Credit-rating agencies downgraded the insurance company, requiring that it post even more collateral. This left A.I.G. teetering on the edge of bankruptcy, and in an unprecedented intervention, it had to be nationalized by the federal government. For the first time, the C.D.S. market shrank in the first half of the year, after doubling every year since 2001. Bistro had tied the world together, taking credit risk from the banks and passing it on to anyone who wanted it. For years, proponents of credit derivatives, including then-Federal Reserve chairman Alan Greenspan and current chair Ben Bernanke, had celebrated the way they spread risk. Everyone might share a little bit of risk, but no firm would collapse from it. Yet in this credit crisis, everyone has become infected. You can almost detect a crisis of faith in Demchak. In the past eight years, he’s seen one market failure after another. First came the Chase takeover of J.P. Morgan. Chase’s stock soared in the ’90s as investors credulously rewarded its growth. Although it was able to take over the languishing J.P. Morgan, Chase had exposure to almost every big blowup in the wake of the bursting of the 1990s stock market bubble. Much of Demchak’s good work to off-load risk was for naught. (After Demchak left J.P. Morgan in 2002, almost every member of his team followed except Masters, who now runs the bank’s commodities businesses and is regarded as a possible C.E.O. candidate one day.) Then the credit markets ran wild, with bankers handing out loans that Demchak knew could never be profitable. Today, the markets are gripped with what he sees as an oft-irrational panic, driving prices to fluctuate wildly. Since Ronald Reagan’s presidency, the dominant ideology governing the financial world has been what George Soros calls “market fundamentalism”—the belief that we should trust the market when deciding how to allocate our resources. We’ll all be better off, the argument goes, if capital is allowed to flow wherever the prices call for it, with as little central planning and governmental interference as possible. But we have had two great investment bubbles, first in the stock market and now in the credit markets. For the first time in a generation, even some bankers question whether the markets know anything. If they can’t be trusted, what’s going to replace them? “I used to be the biggest advocate of marking everything to market at all times, because it keeps everyone honest,” Demchak says, referring to the practice of recording the value on the books at the current value. But he saw markets overreacting, swinging from euphoria to pessimism. Now he thinks the fates of great companies are in the hands of inexperienced traders speculating in thin markets. A colleague complained to Demchak recently that “some 24-year-old kid is going to mark me down or up 100 million bucks today. How is that?” Demchak understands his colleague’s frustration. “He is right.” Related LinksThe Shears are OutSalvaging the WreckageThe Man Who Saved (or Got Suckered by) Wall Street
Ten Is Enough?
Wed, 15 Oct 2008 12:00:00 -0000
FiveFord C.E.O. Alan Mulally, 63, has five kids, ages 20 to 31. Ford has let Mulally’s family fly on the company jet from their home in Seattle to the office in Dearborn, Michigan, even when he wasn’t aboard. SixThe C.E.O. of Hilton Hotels, Chris Nasetta, 46, has six daughters ages five to 15, who all attend the same schools he did in the Washington suburb of Arlington, Virginia. Seven“It’s absolutely essential to find a balance between work and family,” says Peter Olson, former C.E.O. of Random House. Olson, 58, has seven children ages 13 to 31—two adopted from Russia and one from Hungary. Edgar Bronfman Jr., the 53-year-old C.E.O. of Warner Music, also has seven children. An anti-file-sharing crusader, Bronfman has admitted to catching his kids downloading music illegally. NinePeopleSoft co-founder David Duffield, 67, has nine children, six of them adopted. The family homestead, near Lake Tahoe, Nevada, is on a piece of property formerly home to the ranch where Bonanza was shot. David Neeleman, 49, the ex-C.E.O. of JetBlue and the founder of Brazilian airline Azul, has nine kids as well, ages nine to 26. Neeleman is in Brazil Tuesdays to Thursdays; on Sundays, wherever he is, he attends church with his family. TenAt least two C.E.O.’s are the fathers of 10 children: Nelson Peltz, 66, chairman and former C.E.O. of restaurant giant Triarc Companies, and Richard Schulze, 67, founder and former C.E.O. of Best Buy.
Potter's Field
Wed, 15 Oct 2008 12:00:00 -0000
When Warner Bros. announced it was moving the sixth Harry Potter film from November 2008 to July 2009, the official explanation was that the writers strike had left gaps in the studio’s summer 2009 lineup. Potter, already completed, could be moved. And Warner could easily afford to wait, given the box office success of The Dark Knight, a film that took in $158 million in its first weekend alone. Not all of the businesses that depend on sales of Potter-related merchandise (especially during the all-important holiday shopping season) were in the same position, though. Some manufacturers were forced to halt or redirect shipments of items like lightup wands and scarves, while retailers had to rethink marketing plans. All had to adjust their revenue expectations for 2008. We survey the damage.1. ElopeColorado SpringsRevenue delayed: about $250,000This costume maker produces more than 30 Potter accessories, from hats to Quidditch goggles. In years when one of the books or films is released, sales of Potter-related merchandise can quadruple. In July 2007, the month Harry Potter and the Order of the Phoenix came out, Elope sold 4,000 Sorting Hats, up from less than 1,000 in July 2006. Sales manager Kelli Borel says retailers have scaled back orders since the announcement. 2. Electronic ArtsRedwood City, CaliforniaRevenue delayed: about $120 millionFor each of the past five Potter films, Electronic Arts has created a matching videogame. This year, the release was to be Half-Blood Prince, featuring original content from the new film. But now the company is resetting its marketing strategy and plans to record the revenue in fiscal year 2010. “We are disappointed we won’t have a game for fans this fall,” says Trudy Muller, senior director of public relations. 3. Cinemark HoldingsPlano, Texas Revenue delayed: about $29 millionWith more than 4,700 screens, Cinemark is the U.S.’s third-largest theater chain. Like its competitors, the company relies on Potter films to sell tickets—and con-cessions. In the same quarter Order of the Phoenix opened (it was the seventh-highest-grossing film ever), Cinemark’s box office sales jumped 73 percent and concessions 60 percent. The company also attributes the growth to an acquisition.4. F.A.O. SchwarzNew YorkRevenue delayed: about $117,000The Harry Potter boutique at F.A.O. Schwarz’s flagship store has been popular year-round since its opening in July 2007, but there is a downside: When the movies leave theaters, some products’ sales dip accordingly. Wand sales, for example, were 41 percent lower in July 2008 than in July 2007, when Phoenix was released. The chain’s Potter investments, says C.E.O. Edward Schmults, are “going to go down the sinks for this holiday season.” 5. ScholasticNew YorkRevenue delayed: about $60 millionScholastic, the U.S. publisher of the Potter books, doesn’t have a formal partnership with Warner Bros. But in years when a film and novel are paired for simultaneous release, sales of the book can reach upwards of $200 million. Without a new book or movie, Scholastic’s Potter sales stop at about $20 million. A spokeswoman doubts the delay of the movie will impact sales, since Scholastic is releasing another J.K. Rowling novel. Related LinksHollywood's Pay TV ProblemTough Times, Even in TinseltownCash Flow Woes Make MGM a Cowardly Lion
Philanthropist Ron Perelman Q and A
Wed, 15 Oct 2008 12:00:00 -0000
Where has your philanthropic dollar been best spent? The Revlon/U.C.L.A. Breast Center that produced the cancer drug Herceptin. That would be followed by a Jewish day school for girls that today educates about 3,000 girls. Besides the development of Herceptin, what result of your giving makes you proudest? I think renaming Logan Hall at the University of Pennsylvania for my ex-wife Claudia Cohen. There was a lot of negative buzz about renaming it. It got me all mad, but she would have loved it. She would have said, “Man, oh man! Look at this fuss I’m creating!” displayPromoModule ('{"moduleType":{"value" : "linksModule", "index" : "0"},"l_mediaType1":{"value" : "article", "index" : "0"},"l_mediaType2":{"value" : "article", "index" : "0"},"l_mediaType3":{"value" : "article", "index" : "0"},"l_mediaType4":{"value" : "if", "index" : "3"},"l_url1":"/guides/The-Generosity-Issue-2008","l_url2":"/executives/features/2008/10/15/Wealth-and-Charity-Index","l_url3":"/executives/features/2008/10/15/Philanthropist-Carl-Icahn-Q-and-A","l_url4":"/interactive-features/2008/10/Match-Billionaires-to-Boards-They-Sit-On","l_headline1":"The Giving Game: Billionaire Edition","l_headline2":"The Generosity Index","l_headline3":"Q&A With Philanthropist Carl Icahn","l_headline4":"Strange Boardfellows","l_src1":"/images/site/editorial/magazine/2008/11/giving-game-medium.jpg","l_alt1":"Offering plate full of cash","title":"The Generosity Issue" }'); How do you measure the productivity of your giving? We don’t have the staff or the interest to try and control the process. If it doesn’t work, you just don’t do it again. Is the downturn in the economy affecting the giving of your wealthy peers? In times like this, when the economy is having difficulties, it’s more important for individuals to step up and do stuff privately that may have been historically funded by public money. That will be a task for us going into the next two years. Do you have a philanthropic role model? Buffett and Gates. Eli Broad in the arts. Hank Greenberg in medical gifts. If you could see your gifts accomplish one thing, what would it be? I’d like to find the cure for cancer, absolutely. Is that likely? No. But as long as our giving creates a better, happier, healthier lifestyle for people who are touched by it, that’s a good thing. Related LinksPhilanthropist Pierre Omidyar Q and AA.I.GoodbyeA Booster Shot for Goldman Fund
Marc of the Valley
Wed, 15 Oct 2008 12:00:00 -0000
Marc Andreessen would rather blog from home in his underwear than give an interview to a journalist, especially in front of an audience. That’s what he wrote in his blog earlier this year. Thankfully, this one time, Andreessen got dressed and stepped onstage. displayPromoModule ('{"moduleType":{"value" : "featuresModule", "index" : "1"},"mediaType1":{"value" : "videos", "index" : "2"},"mediaType2":{"value" : "article", "index" : "0"},"mediaType3":{"value" : "article", "index" : "0"},"mediaType4":{"value" : "article", "index" : "0"},"url1":"/video/news-and-analysis/pulp-killer","url2":"/views/blogs/the-tech-observer/2008/09/05/andreesen-on-chrome-obama-and-investing-in-start-ups","url3":"/executives/features/2008/09/18/CNET-Founder-Halsey-Minor-Profile","url4":"/culture-lifestyle/goods/real-estate/2008/09/18/Michael-Lewis-Mansion","teaser1":"Marc Andreessen says that newspapers should "shut off the print editions."","teaser2":"The Silicon Valley player weighs in on politics, technology, and more.","teaser3":"Why do so many of his former tech-world colleagues revile CNET founder Halsey Minor?","teaser4":"Author Michael Lewis suffers a few housing crises of his own.","headline1":"Pulp Killer","headline2":"Andreessen on Chrome, Obama, and Investing","headline3":"The Baddest Boy in Silicon Valley","headline4":"The Mansion: A Subprime Parable","title":"More From Portfolio.com" }'); At 37, Andreessen is a legend in Silicon Valley. He created, with Eric Bina, the first graphical browser while at the University of Illinois, then co-founded Netscape Communications with überentrepreneur Jim Clark in the early 1990s. Netscape’s browser brought the internet to the masses, set off the dotcom boom, and so angered Microsoft at the time that Steve Ballmer, now the software giant’s C.E.O., led employees in “Kill Netscape!” chants. By bundling its Internet Explorer browser into Windows, Microsoft eventually drove Netscape into the arms of a suitor: AOL bought Netscape in 1999 for $4.2 billion. Andreessen hasn’t had a success of that magnitude since. But he did create another billion-dollar company, Loudcloud, a tech-services outfit that later changed its name to Opsware and was sold to Hewlett-Packard for $1.6 billion. More recently, Andreessen started Ning, a website that lets anyone create a mini social network. Its most prominent customer: 50 Cent. Andreessen joined Facebook’s board this year, invested in Twitter, and generally manages to show up on the front end of new technology trends. His blog, Blog.pmarca.com, has been a tech-industry must-read, in part because he’s willing to be brutally outspoken. In February, Andreessen ignited emotions when he blogged that he was starting a “New York Times Deathwatch.” ( Watch an exclusive video of Andreessen talking about the future of newspapers.) Condé Nast Portfolio’s Kevin Maney interviewed Andreessen at a gathering of Silicon Valley’s Churchill Club in Palo Alto, California. The following is an edited transcript. How’s your relationship with Steve Ballmer now? He’s my Facebook [makes air quotes with his fingers] friend. I’m going to stop there while I’m still ahead. Do you carry around any bitterness? I’m a big believer that it’s like in The Godfather—it’s business, not personal. Netscape was an unbelievable experience for me. We sold the company for a lot of money. After that, I’m on to the next one. I have to ask the guy who created the browser: What do you think of Google’s Chrome browser, introduced in September? It’s very meaningful. It’s going to force Firefox and Internet Explorer to accelerate their performance. Basically, the barriers to doing everything in the browser are falling fast. And that includes a whole range of things, like Google Docs, spreadsheets, presentation packages. The Chrome browser is going to really push forward the wave. Does this open up possibilities for companies you’re working with? I’ll give you one example: I just announced this company called Qik. It will turn every phone that contains a camera into a source of streaming video and audio [which works better in a faster browser like Chrome]. Anybody can watch live, and then it can all get recorded. It’s almost the reverse of George Orwell. In 1984, the government had cameras mounted everywhere. In a Qik-based world, it’s the exact opposite. Literally, everybody on the planet is going to be streaming video. Excellent reason to stay at home. And blog in your underwear. Exactly. Qik raises some issues, like what if 10,000 people at a concert all broadcast the show live? About a year ago, we went to see one of the major sports leagues—I won’t mention which one. We presented how they can have social networks and users can post videos shot at games and photos and all this stuff. And the main topic of conversation was how they could prevent people from recording video with their mobile phones and posting it online. displayPromoModule ('{"moduleType":{"value" : "featuresModule", "index" : "1"},"mediaType1":{"value" : "videos", "index" : "2"},"mediaType2":{"value" : "article", "index" : "0"},"mediaType3":{"value" : "article", "index" : "0"},"mediaType4":{"value" : "article", "index" : "0"},"url1":"/video/news-and-analysis/pulp-killer","url2":"/views/blogs/the-tech-observer/2008/09/05/andreesen-on-chrome-obama-and-investing-in-start-ups","url3":"/executives/features/2008/09/18/CNET-Founder-Halsey-Minor-Profile","url4":"/culture-lifestyle/goods/real-estate/2008/09/18/Michael-Lewis-Mansion","teaser1":"Marc Andreessen says that newspapers should "shut off the print editions."","teaser2":"The Silicon Valley player weighs in on politics, technology, and more.","teaser3":"Why do so many of his former tech-world colleagues revile CNET founder Halsey Minor?","teaser4":"Author Michael Lewis suffers a few housing crises of his own.","headline1":"Pulp Killer","headline2":"Andreessen on Chrome, Obama, and Investing","headline3":"The Baddest Boy in Silicon Valley","headline4":"The Mansion: A Subprime Parable","title":"More From Portfolio.com" }'); You won’t tell us which league? I won’t. But, you know, it’s a whole new world. The presumption is that there’s going to be live video all the time. You seem to have your fingers in a lot of Valley companies. Walk us through Marc Andreessen’s daily life now. My third company, Ning, is my day job. The only corporate board I’m on is Facebook, which I think is a very important company. I’m doing angel investing with Ben Horowitz, my business partner from my previous company. We’ve invested in 15 companies or so in the past year and a half. Maybe one a month, give or take. What’s your approach to investing in startups? Have it be a small enough amount of money that if it fails, we can still talk to the founder without getting mad. How much is that? I usually put in $25,000 to $100,000 per company. So far, so good—which is to say, I haven’t gotten really mad at anybody. You said Facebook is a very important company. That’s not always the opinion you get, right? I’m on Facebook’s board because Facebook is a true, old-fashioned Silicon Valley company in the best sense of that term: super-technology-focused, super-product-focused, very innovative—much more than it gets credit for—and very determined to build out a service that’s going to reach a very large number of people. Qik, Twitter, Facebook, and other social networks—who has time for all of it? Consumers are freeing up an enormous amount of time that they were spending with stereotypical old media, and clearly, that time is going primarily two places: videogames and online. If you were running the New York Times, what would you do? Shut off the print edition right now. You’ve got to play offense. You’ve got to do what Intel did in ’85 when it was getting killed by the Japanese in memory chips, which was its dominant business. And it famously killed the business—shut it off and focused on its much smaller business, microprocessors, because that was going to be the market of the future. And the minute Intel got out of playing defense and into playing offense, its future was secure. The newspaper companies have to do exactly the same thing. The financial markets have discounted forward to the terminal conclusion for newspapers, which is basically bankruptcy. So at this point, if you’re one of these major newspapers and you shut off the printing press, your stock price would probably go up, despite the fact that you would lose 90 percent of your revenue. Then you play offense. And guess what? You’re an internet company. What’s your relationship like with Jim Clark after all these years? I’ve had two critical mentors in my career. One was Clark. Another was Jim Barksdale, who was Netscape’s C.E.O. And it’s funny because they worked extremely well together, but they have almost polar opposite personalities. Clark is intensely entrepreneurial, extremely passionate, extremely emotional, completely fearless, absolutely delighted to create a new business, loves if it causes a lot of controversy. Barksdale is a builder and an operator and a manager. Clark is off in Florida. He has largely opted out of the tech industry. Yeah, we haven’t seen him in a long time. He is having a lot of fun. He is dating an Australian swimsuit model. Seriously. He’s been in the real estate business in Miami doing a bunch of different business things. He sails a tremendous amount. I’m pretty much the exact opposite. I don’t like to leave Palo Alto. So you’re 37, and you’ve taken on this mentoring role to people like Facebook’s Mark Zuckerberg and other entrepreneurs. There’s a new generation of entrepreneurs in the Valley who have arrived since 2000, after the dotcom bust. They’re completely fearless. displayPromoModule ('{"moduleType":{"value" : "featuresModule", "index" : "1"},"mediaType1":{"value" : "videos", "index" : "2"},"mediaType2":{"value" : "article", "index" : "0"},"mediaType3":{"value" : "article", "index" : "0"},"mediaType4":{"value" : "article", "index" : "0"},"url1":"/video/news-and-analysis/pulp-killer","url2":"/views/blogs/the-tech-observer/2008/09/05/andreesen-on-chrome-obama-and-investing-in-start-ups","url3":"/executives/features/2008/09/18/CNET-Founder-Halsey-Minor-Profile","url4":"/culture-lifestyle/goods/real-estate/2008/09/18/Michael-Lewis-Mansion","teaser1":"Marc Andreessen says that newspapers should "shut off the print editions."","teaser2":"The Silicon Valley player weighs in on politics, technology, and more.","teaser3":"Why do so many of his former tech-world colleagues revile CNET founder Halsey Minor?","teaser4":"Author Michael Lewis suffers a few housing crises of his own.","headline1":"Pulp Killer","headline2":"Andreessen on Chrome, Obama, and Investing","headline3":"The Baddest Boy in Silicon Valley","headline4":"The Mansion: A Subprime Parable","title":"More From Portfolio.com" }'); Does that create the danger of a new tech bubble? If there’s been a crisis in a market, you don’t tend to have a new crisis in that market until the people who went through the last crisis aren’t in the system anymore. It was only eight years ago. So here we are in 2008, and there’s still no sign of a bubble in technology, which I can encapsulate in two words: no I.P.O.’s. No tech I.P.O.’s—is that a good thing or a bad thing? Well, a very important thing. Through the 1980s and ’90s, tech companies would basically get into their expansion stage and then go public. In part, it was to have access to capital, in part to have an M&A currency, in part as a branding and a credibility event, and in part because there was a base of investors who wanted to invest in high-growth technology companies. Those days are just over. It’s just frozen. Is it a crisis in terms of company formation? Not yet. We haven’t talked at all about mobile internet. There was mobile before this thing [holds up an iPhone], and then there’s mobile after. If you were trying to build software for mobile phones last year, you were in a world of pain, of incompatibility—you had probably seven different operating-system platforms you had to deal with. You didn’t have any way to do over-the-air distribution of software or content. The carriers, especially in the U.S., had a choke hold on distribution and would put up huge barriers. It was an absolute nightmare. As of now, that hasn’t changed. That hasn’t changed, unless you’re on an iPhone. The iPhone is going to be at 100 million units before you know it. This is going to force everybody else to raise their game. Is Google the new Microsoft—the new big, scary, monster company in tech? It is true that Google is doing a lot of different things, and some will compete with other Valley companies. But the pros outweigh any future competitive threat. Google does so much to make other startups possible. Google makes new internet efforts easy to find. Google runs a large advertising network that distributes money to people who run ads. It is training and educating a very large base of really sharp people, many straight out of college, many of whom are not going to spend their entire careers at Google. Google is fertilizing the base. So I think it’s been very, very positive. How about all the fears that Google is too powerful? I don’t see it yet—and a big part of why is Google C.E.O. Eric Schmidt. Eric literally does not want to run a company whose M.O. is to just gratuitously go around and stomp on people. You’ve probably got a good 30 to 40 years left in the business. What do you ultimately want to accomplish? I love what the Valley does. I love company building. I love startups. I love technology companies. I love new technology. I love this process of invention. Being able to participate in that as a founder and a product creator, or as an investor or a board member, I just find that hugely satisfying. And I think the outcome can be big and important and profound. I hear you’re getting deeper into philanthropy—Stanford Hospital, Room to Read. That is increasingly important to me, for a couple different reasons. Partly, it’s wanting to give back. And partly, my wife of almost two years teaches philanthropy at Stanford. So I am completely committed to philanthropy because if I’m not, I’m in a great deal of trouble. I can’t even tell you. Related LinksGoogle Phone: Blockbuster or Bust?First Bytes: Google, Bezos, Facebook, moreInnovation Crisis in Tech? Seriously -- What Innovation Crisis?
U.S. Equal Employment Opportunity Commission
Supreme Court Denies FedEx Bid To Review Punitive Damages Award Under Disabilities Act
Wed, 08 Oct 2008 00:00:00 -0000
The U.S. Equal Employment Opportunity Commission (EEOC) today announced that the Supreme Court has denied a petition for review by Federal Express Corporation (FedEx) of a ruling by the U.S. Court of Appeals for the Fourth Circuit upholding a $100,000 punitive damages award in an EEOC lawsuit under the Americans With Disabilities Act (ADA) on behalf of a deaf package handler
Dillard's Sued For Disability Discrimination
Tue, 30 Sep 2008 00:00:00 -0000
Dillard Store Services, Inc. (Dillard’s), the nationwide chain of department stores, unlawfully discrimin¬ates against employees by requiring them to disclose personal and confidential medical information or face disciplinary action including termination, the U.S. Equal Employ¬ment Opportunity Commission (EEOC) charges in a class lawsuit filed under the Americans with Disabilities Act (ADA).
Sterling Jewelers Sued for Sex Discrimination
Wed, 24 Sep 2008 00:00:00 -0000
Sterling Jewelers Inc., the largest specialty retail jeweler in the country, violated federal law by discriminating against a large class of female employees at stores nationwide, the U.S. Equal Employment Opportunity Commission (EEOC) charges in a systemic lawsuit filed yesterday under Title VII of the Civil Rights Act.
100 Top Career Sites - View this week's top 100 career sites arranged by our editors into a comprehensive career guide and search engine.
Meta Description: [ Provides the 100 most relevant Web sites for each major category, selected, edited and ranked by professional editors. Scores of categories including animals, autos, books, business, careers, entertainment, celebrities, chat, education, games, jokes, kids, news, sports, and weather. ]
A Job and Career Center - Providing job listings in many categories worldwide. Fax broadcast your resume to companies in 100 countries.
Meta Description: [ International employment directory selecting world-wide top job sites. hotjobstogo.com includes more than 5000 reviewed career resources in 190 countries and is a starting point for overseas jobs. ]
Abbycon.com - Specialized directory of career planning companies and career resources.
Meta Description: [ Directories of jobs, employment, recruiting and careers ]
America's Career InfoNet - Resource library providing occupational information, job search aids, job and resume banks, and relocation information.
America's Job Bank - A computerized network between the US Department of Labor and the state operated public Employment Service. Free to post and use.
404
Blue House Job and Career Links - Guide to the top sites for job seekers and those starting new careers, including where to find employers and general career advice.
Career Cafe - Search a job database, contact headhunters and employment agencies.
Career Resource Center - Links sorted by topic and region. A directory of job web sites.
Meta Description: [ A career guide and directory of jobs and careers with an extensive selection of links to career reference, advice, job search, employment and career planning on the web. Reources sorted by topic and region, since 1995. ]
Career Voyager - The Job Search and Career Management Portal with easy, one-click access to several hundred helpful sites from around the World
Meta Description: [ The Job Search, Career Management, and Education Desktop Career Directory Portal with easy, one-click access to over 2400 useful sites worldwide. Find worldwide jobs. ]
EmploymentSpot - Simplifies the search for job fairs, job posting sites, career guidance, job listings by vocation and location. Site also offers news and career information.
Meta Description: [ Employment resources for the job seeker and employer. Employment Spot helps you find a job, post a job, search by location vocation and more. ]
500
Geo Skills - Guide to job search firms. Includes executive, technology, student search firms, with career experts and online tutorials.
Meta Description: [ GeoBiz2Biz, guide to Biz2Biz transactions, trading, exchanges, supply chains, & more biz tools for all business professionals ]
Get Jobs - Provides jobs in all categories. Free job search and resume management for jobseekers. Also online career resources available.
Meta Description: [ getJOBS - The Student Jobs Website Online ]
JobBank USA - Job seekers may visit a comprehensive directory of Internet employment resources, including a Job MetaSearch page that accesses a large employment database.
Meta Description: [ JobBank USA Specializes in providing employment and resume information services to job candidates, employers and recruitment firms. ]
Monster.com - A one-stop career management resource. Job search, resume management, 1200 pages of advice from career experts, plus chats and message boards on dozens of topics.
Meta Description: [ Find the job that's right for you. Use Monster's resources to create a killer resume, search for jobs, prepare for interviews, and launch your career. ]
Muslimsonline - Job and career resources, on-line job announcements, resume banks, guidance and counselling within an Islamic frame.
Meta Description: [ Job and Career Resources, guidance, counselling, jobbank and resumebank, resources for immigration, islamic financial institutions, physicians, IMG related resources, tax, webresources and promotion, e-commerce ]
Personneldesk.com - Includes job search and resume posting features.
Meta Description: [ Job search made easy and free job posting. Employers, you do not have to pay for job listings any more. That's right! Free job posting. ]
Quintessential Careers - A comprehensive career and job-hunting site
Meta Description: [ Start your job-search here! We have the tools to help you succeed,
including expert advice, career articles, and the best job sites on the Web. ]
SearchEase - A free job market resource for job seekers and employers featuring web-based resumes, job postings, company profiles and a personal job search agent.
The Career Spot - Valuable links to relevant resources regarding your career.
Meta Description: [ Descreption goes here ]
The Jobs Site - Jobs listings by profession and location, worldwide.
Tiscali Jobs - Directory of career information, advice and jobs searches.
Meta Description: [ Thousands of jobs including sending new jobs by email. Lots advice on easy ways to find a job, how to create a great CV and improve your interview technique. Plus lots of valuable advice on the widest range of problems at work - from health and safety to discrimination, pay to loo breaks.
]
| More Free Videos At www.BlogCashGuide.com ... | |
| Next Video | |
