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Pay It Forward

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Words from the Editor In the midst of the ferocious debate over the national debt, the proposals to slash overseas aid have gone almost unnoticed in the media. Secretary Clinton has warned that if current legislation is passed, the State Department will have to cut 41% of its funding allocated to humanitarian programs. With countries around the world introducing austerity measures, international support for poverty alleviation programs is at risk. At a more fundamental level, there is a growing question of whether traditional charity and international aid programs will ever be sufficient to empower the world’s poor. This issue of Business Today will examine what students, professors, entrepreneurs, hedge fund managers, corporate executives, and our own readers are doing to make a meaningful impact in the fight to eradicate global poverty. In one exclusive interview, BT sat down with Marina Kim, Executive Director of Ashoka U. Kim helped found this organization dedicated to improving social entrepreneurship education by connecting universities around the globe. Looking to start your own social entrepreneurship venture today? Then Professor John Danner’s “Top 10 Tips and Mistakes” are a must read. As a Senior Fellow of the The Lester Center for Entrepreneurship and Innovation at UC Berkeley’s Haas School of Business and a visiting Professor at Princeton, Danner has firsthand experience in launching ventures and student leaders. Corporate America and financial institutions are also at the forefront of bold and innovative humanitarian efforts.The Giving Pledge, launched by Bill and Melinda Gates, is an invitation to the nation’s richest to commit the majority of their wealth to philanthropic causes during lifetime or after death. BT sat down with T. Boone Pickens, the legendary Texas oil executive, who signed Gates’ pledge. We also took a look at the Robin Hood Foundation, which is taking on poverty in New York City by combining smart investment principles with philanthropy. Whether through small business start-ups or leading by example through public pledges to charity, today’s leaders are tackling poverty through a broad spectrum of tactics. Social entrepreneurship ventures and microfinance institutions reveal how doing good for the globe can translate into profitability. At the top of the income bracket, Americans are bringing private giving back into the limelight. Across the United States and the world, these innovators remind even us that even in the midst of a difficult economic climate, it’s the responsibility of leaders to pay it forward. 4





Business Today is America’s largest student-run publication, reaching 200,000 readers nationwide. Published at Princeton University, the magazine is distributed at over thirty of the top schools in the country and has extensive online readership at our website, Business Today is dedicated to presenting the opinions of students and business leaders. By examining controversial issues facing our world and exploring life after college, we hope to help readers prepare for their futures. The magazine has been published by Princeton University undergraduates since 1968. ALEX KATZ President ALLAN AMICO Managing Director JULIA VILL Seminar Series Director DILLON SMITH Texas Conference Director LAURA DU West Coast Conference Director ANDREA WOLBERG International Conference Director ANDREA SCHILLER Online Journal Executive Director RAJA GOEL Online Journal Editor-in-Chief JAMES LUO Corporate Contacts Director TURNER SMITH Finance Director EMERSON MOORE Investment Director SLOAN RUDBERG Marketing Director MAY LI Magazine Publisher CAROLINE HANAMIRIAN Magazine Editor-in-Chief ERIC REHE Magazine Executive Editor BRYTON SHANG Technology Director

ERIC REHE Executive Editor MAY LI Publisher Editorial


Design Business Today Princeton University 48 University Place Princeton, NJ 08540 609.258.1111

Business Today is a publication of the Foundation for Student Communication, Inc.. FSC, a 501(c)(3) non-profit foundation, is run entirely by students for students at Princeton University. In addition to the magazine, FSC sponsors International and Regional Conferences held across the country that bring together students and executives to discuss the future of business. For more information, visit our website,






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14 Microfinance Bubble

16 Student Entrepreneurs

18 24 26 30 42 54

20 Marina Kim, Ashoka U 38 Max Anderson, MBA Oath 44 John Lipsky, IMF 50 Clive Brown, JP Morgan 58 Erik Prince, Xe Services 62 Michel de Carvalho, Heineken

Tips for Launching Your Venture The Healthcare Train Robin Hood Foundation The Giving Pledge ORIGINALS The Gaping Gap 08 BT Bits - the market’s latest and greatest H-1B Visas 12 BT Books - reads to sharpen your mind 48 Executive Contribution: Rita Soronen, Dave Thomas Foundation 66 Executive Contribution: Brian Walsh, Liquidnet 68 Executive Contribution: Josh Rosenbaum and Josh Pearl FALL 2011 BUSINESS TODAY


BT Sweden’s Jumbo Hostel Have you ever had trouble falling asleep on an airplane? Well, you won’t have any trouble on the Jumbo Hostel located just outside the Stockholm International Airport. Customers looking to join the “mile-high club” will be disappointed with this grounded former Singapore Airlines and Pan American Boeing 747 now equipped with 25 dorm-style bedrooms. The hostel is staffed by a crew of uniformed maids and waitresses and features a café and wing-top observation deck that can be rented out for conferences or weddings. For about $450, you can spend the night in the cockpit, now converted into a two-person suite with 180-degree views, a flat-screen TV, wireless internet, and a full bathroom.




Robotic Hair Washer Panasonic has created the first robotic hair washer that uses complex computer algorithms to analyze a customer’s scalp and design a washing cycle that achieves maximum cleanliness and comfort. Originally designed to assist elderly people in nursing homes or hospitals, this product seems to replace a job that has been done successfully and efficiently by humans for hundreds of years. Its 24 finger-like apparatuses work together to shampoo, condition, rinse, and dry a customer’s hair while at the same time applying pressure to key spots on the scalp for added comfort. For other zany Panasonic products, take a look at the Bucking Bronco fitness equipment or the computerized mattress.

BT 4food A new burger restaurant in New York City gives a whole new meaning to playing with your food. 4food allows diners to build their own burgers, rice bowls, or salad bowls online for pickup at their store on 40th and Madison. However, the fun starts far before you get a chance to take the first bite of your burger creation. Once you submit your order and give it a name, you have the chance to share it with friends via Twitter and Facebook. This is where the “playing with your food” part comes in. Each time someone orders your burger, you move up on the leader board (which is displayed prominently on 4food’s homepage) and get a 25 cents credit towards your next order. Who knows, if you get lucky and your burger gains a loyal following you could be eating all of your meals for free.




Google Wallet

Google has rolled out yet another product that goes far beyond a simple Internet search. The Google Wallet app, available for now only on Sprint’s Google Nexus S, enables phones to act as a copy of a credit card. For now, it can only replicate a Citibank MasterCard, though Google says that they one day plan for credit cards of all types from all banks to run with Wallet. The search giant says that its SingleTap feature distinguishes its app from using a credit – it also stores digital offers, loyalty points, and Groupon-like deals in one place. While the Wallet app is far from perfected, only time will tell if Google will turn our wallets electronic, too.


BT Books

A Businesswoman’s Uphill Battle... Across the Divide Susan Elliott

Susan S. Elliott, Chairman of System Service Enterprises, Inc, the renowned IT consulting and management firm, and ex-Chairman of the St. Louis Fed, serves as a paradigm of the strides that female entrepreneurs have made in the male-dominated world of tech development over the past fifty years. Her new book, entitled Across the Divide: Navigating the Digital Revolution as a Woman, Entrepreneur, and CEO, provides an autobiographical account of her participation in a business environment rife with seismic change and abundant opportunity. Due for release in late September, Across the Divide spans Elliott’s career from her undergraduate years at Smith College, to her recruitment and training by IBM’s marketing division to the founding of Systems Service Enterprises (SSE) to her years at the St. Louis Fed and beyond. In characteristically terse and precise prose, Elliott describes the attitudes and conditions that cultivated her early interest in the world of data processing (DP), the ancestral cousin of modern information technology (IT). She opens the book with a rhetorical question that she posed in early 1958 to her career placement counselor as a senior at Smith: “Isn’t there a job anywhere in the country that doesn’t require me to go to typing school after college?” The answer to that question, Elliott recollects, led her down the rabbit hole of the budding tech industry and to the gates of IBM, where she developed and honed her expertise with various early programming languages and first encountered the misogynistic culture with which she would struggle for the next half century. After she was forced to leave IBM due to its “China doll” maternity leave policy, Elliott incorporated in 1966 under the title “System Services Enterprises” and opened an office in St. Louis. The focus was a new brand of consulting: adapting the available DP technology to fit clients’ most pressing needs, while facilitating the interface between systems through a comprehensive education program. Over the course of the next twenty-five years, SSE grew into a national presence in IT consulting, working in major cities around the country and issuing their first nationally distributed newsletter, SSE connections, in 1989. All the while, Elliott fought an uphill battle against the industry establishment, whose members were often loath to acknowledge the accomplishments of a female CEO. She describes the tenuous period surrounding SSE’s certification as a Women’s Business Enterprise in 1998. “A woman who founded a business was presumed to be a fraud and a shill for some male until she could prove it otherwise,” she writes. “We dubbed this being ‘guilty until proven innocent.’” Elliott concludes the account with her ruminations on a productive, five-year tenure as chairman of the St. Louis Federal Reserve. Her reflections on working with Alan Greenspan and other high-profile policy makers to navigate the treacherous waters of the blooming tech bubble during the early 2000’s evokes an understanding of just how far women’s roles in the world of technology had come. Across the Divide exudes an air of accomplishment. It is in no way self-aggrandizing or trite, merely a measured and accurate account of the thought processes and inspirations that motivated a truly noteworthy career. Susan Elliott’s success paves the way for female leaders in all industries, and has implications not only for the advancement of women’s interests in the IT industry, but also, more generally, for the evolution of opportunities for women in business at large.

by Dan Elkind



BT Books

...and Finding the Right Path 18 Minutes Peter Bregman

“Either we keep moving along a path that isn’t quite right but we fail to knock ourselves off it, or we intentionally choose the right path but keep getting knocked off of it,” states Peter Bregman, the author of 18 Minutes. Fortunately, the remainder of 18 Minutes is devoted to explaining not only how to find the right path, but also how to stay on it. It instructs readers to take a bird’s-eye view of their lives, isolate their priorities, pursue their passions, and master distractions in order to get meaningful work done. And let’s be honest, who doesn’t want to do that? In order to give readers the necessary cognitive foundation to live a more fulfilling life, Bergman asserts that we must begin by slowing down our momentum, pushing the “find me” button, and acknowledging our skills and potential. Then, we must undergo self-examination as we search for our true passion by utilizing strengths, embracing weaknesses, and asserting individuality. The book points out that if we spend all of our time working, scheduling meetings, making to-do lists, answering emails, and responding to phone calls, we will begin to view ourselves as solely workers…so what happens if we lose our jobs? In order to prevent our very identity from being dependent on factors we cannot always control, Bregman stresses that priorities should not be constrained solely to work and should also contain more personal aspects. The reminder of the book concerns cutting through the overwhelming amount of clutter surrounding us in order to get the right things done. The author explains that this is achievable by organizing your day, which includes choosing what to focus on as well as what to ignore. The next step is to develop an 18-minute plan for managing your day, including morning minutes to plan the day, one minute every hour to refocus, and five minutes every evening to reflect on the day. The book concludes with a section on mastering distractions and setting boundaries with other people. This includes interesting pointers for determining when you should agree to help, how you should refuse to help, and when you should confront someone. The book is relevant for anyone who is constantly trying to work, but often ends up achieving less than a satisfactory amount. It is also relevant to those who manage to finish their dauntingly long “to-do” list, but are left feeling unfulfilled and unmotivated. Although self-help books are often tedious to read, the author keeps the chapters short and entertaining, achieving a riveting effect that is usually found in novels. The book usually presents advice through amusing personal anecdotes or succinct stories about friends, keeping the message realistic and believable. Furthermore, the constant reassurance that everyone has untapped potential, should dare to be different, and has the ability to make life changes keeps the reader’s selfconfidence high and mood upbeat. All in all, the book is an enjoyable and worthwhile read. Adopting just a few new practices could lead to improved time management skills or even noticeably increased contentment. Although the information in the book is not new or groundbreaking, Bregman does a nice job of summing up a large amount of advice and presenting it in practical ways that can be assumed into everyday rituals.

by Alisa Tiwari



Pay it Forward

Microfinance: Bubbling Over? by Alina Jennings, Princeton University

The rise of microfinance has been heralded as a new opportunity to alleviate poverty in both the developing and the developed world. Advocates of the practice allege that targeted, relatively small-scale loans empower individuals and provide the foundation for sustained economic growth. However, the recent debt crisis and reports of trouble have raised doubts about the prospects of microfinance’s sustainability.


ver the past decade, microfinance for microlenders. The idea has become so has been lauded as the ideal way popular it is even spreading to the develfor developing countries to lift oped world: Muhammed Yunus, who won themselves out of poverty. Microlending a Nobel Peace Prize for his pioneering provides low-income individuals with work in microfinance, opened a branch small loans, thereby encouraging them of his Grameen Bank in Queens, New to become small-scale entrepreneurs. It is York in early 2008. As a result of microfipraised for allowing the world’s poorest nance’s global prominence, the loan portclasses to become empowered consumers folio of Indian microfinance institutions rather than charity cases relying on others’ (MFIs) has dramatically increased in value largesse, while generating healthy returns – according to Sa-Dhan, a microcredit um-



brella group, it jumped from $252 million to $2.5 billion between 2005 and 2009. In addition, microfinancial markets, once dominated overwhelmingly by the nonprofit sector, have been flooded by private equity investors attracted by high yields. In the wake of the subprime mortgage crisis, such explosive growth is coming under scrutiny from those who fear that the rabid demand for microfinancial products will produce a microfinance bubble like

Pay it Forward

the housing bubble of the mid-2000’s. tion levels.” The report also noted that by Certain signs do suggest the possibilEven among its supporters, micro- projecting MFI performance from lowity of danger, especially in India, where finance is not without controversy. The income financial institutions, the sector microfinance has seen its most rapid Mexican microfinance firm Comparta- should survive the crisis in good health. If growth. Experts, drawing parallels between the subprime mortgage bubble and the microfinance boom, insist that the same “irrational exuberance” that drove the housing bubble in the United States could lead to overvaluation in Indian microfinance. A March 2010 report done jointly by J.P. Morgan and the Consultative Group to Assist the Poor (CGAP), a microfinance group of the World Bank, found that a surfeit of capital was inflating the prices of Indian microfinancial mos Banco has been criticized for charg- there is a bubble, it will likely be localized products to the point that private equity ing annual interest rates near one hundred and not industry wide. Fortunately, there valuations of the assets exceeded six times percent. Now, those who were the earliest are clear steps that can be taken to curtail book value and three times the global me- in the field have voiced concerns about the a potential bubble. In India, for example, dian. Furthermore, as investment pours for-profit investors flooding the industry. the formation of a credit bureau that will in, there are concerns about the lack of a Achla Sabyasachi, vice president of Sa- increase transparency by making microsophisticated infrastructure that can deal Dhan, notes that early microlenders were loan information available to the public is properly with such large amounts of capi- “patient” but that “[Venture capitalists] very important. tal. Lenders are willing to provide funds look for high risk and high returns.” Considering all the evidence, the danwith limited requirements concerning However, there is strong evidence ger of a global or even a localized microfiproof of income, leading to concerns that suggesting the risk of a bubble is low. A nance bubble seems overstated. As rapidly for-profit microcredit firms are lending to leading proponent of microfinance, Vi- as microfinance has grown in recent years, those who are unable to repay. Repayment kram Akula, points out that Indian mi- the numbers of the world’s poor are still so crises have already occurred; in the Indian crofinance institutions have repayment great that they remain appreciably understate Andhra Pradesh, suicides in 2006 rates over ninety-five percent. Also, the served by the financial services industry. led to the temporary shutdown of fifty mi- average Indian microloan is $109, while Despite concerns about diminished credit crolending offices on charges of institut- rural Indians have a debt capacity of up to requirements, the capacity of the world’s ing predatory interest rates and repayment $1000, according to World Bank and In- poorest to continue borrowing exceeds policies. These credit conditions should dian government reports. the flow of capital entering the market. sound familiar those acquainted with Despite going through one of the While steps like establishing credit the U.S. subprime mortgage crisis. And, most severe recessions in decades, valu- bureaus and improving risk management troublingly, due to the very youth of the ations in the sector remain high. Xavier are necessary, a systemic microcredit bubindustry, there is a dearth of established Reille, co-author of the J.P. Morgan/ ble resembling the subprime mortgage criperformance benchmarks by which MFIs CGAP report, noted that MFIs contin- sis appears unlikely to occur. BT can be assessed. ued to have “strong reserve and capitaliza- Photo by McKay Savage (Creative Commons)

As investment pours in, there are concerns about the lack of a sophisticated infrastructure that can deal properly with such large amounts of capital.



On Campus

Filling Tables / Filling Minds Pioneering Students in Business

Güimar Vaca Sittic is a senior at the University of Chicago Buenos Aires, Argentina. A global citizen, Vaca Sittic has an extensive record of business and community involvement. His achievements include co-founding a startup, Cena Plus, in 2010, and organizing TEDxUChicago, an independent offshoot of the TED conference experience. Cena Plus provides restaurant reservation services, similar to the OpenTable company, to Argentinean diners. Business Today: We’ve all heard it: the undergraduate experience gives us perspective and exposes us to diversity. But how has college helped you to perceive a need for your business to fill?

by Alexander Chuka, Princeton University Richard She is a senior at Princeton University from Seattle, Washington. Interdisciplinary in mindset (a molecular biology major), She was a winner of the 2011 TigerLaunch entrepreneurship challenge for M-Profesa, his unique approach to exam preparation, and spent the summer making his ideas reality in Kenya, growing the startup he co-founded. M-Profesa utilizes the Kenyan mobile phone network to provide entrance exam study aids.

the need for a new start-up in a specific market, yet it will help you to develop your way of analyzing complex problems or situations. This experience has helped me make important decisions for Cena Plus.

Güimar Vaca Sittic: Since the beginning Richard She: Last fall, I took a wonderful of time, all entrepreneurs have been practi- class, Ventures to Address Global Chalcal people, known as those who get the job lenges. In fact, the class was almost entirely done. Therefore, it’s hard to value indirect focused on needs that businesses can fill. benefits from other experiences such as The twist was that we were talking about college education. Today, most young en- the needs of people living on a dollar a day. trepreneurs would place higher value on an accounting class or mentoring lessons from BT: Despite the benefits of higher educaa good incubator, such as Y Combinator or tion, there are reasons why successful busithe Founder Institute. A political economy nessmen have cut their educations short in class will definitively not help you to find order to pursue their ideas. How have you 16


overcome the limitations of a university environment? GVS: The main setbacks that a university environment can give to a young entrepreneur are in time management and the inability to raise venture capital money. Yet, contrary to popular belief, not all successful start-ups have to be VC-funded. A bootstrapping method is a great alternative for entrepreneurs in college. RS: It all depends on the needs of your business, which is like your baby. I think all successful entrepreneurs live and breathe their business. I wake up in the morning and think about my business. I think about it on

On Campus

my walk to class every day. If we got 25,000 What kind of business can I create where I users and I had to drop out and move to Ke- have a unique competitive advantage over nya, I’d do it. more experienced entrepreneurs? The obvious answer to me was test prep. Now “test In this case, the process of creating some- prep” is a dirty word to me because it makes thing compelling has just taken some time. me think of companies that prey on the Luckily for us, the market opportunity isn’t anxieties of parents for profit. Nevertheless, going anywhere, and the degree of difficulty what you have in Kenya is a system where in what we’re doing means no one is copying the entire purpose of primary school is to do us, yet. 800,000 students in Kenya still have well on this one test. In this case, I’m not so to take a make-or-break standardized exam sure if there’s a big difference between real every year, and more and more of them are education and “test prep.” getting cell phones and Internet. When we’re finally able to roll out a useful cellphone based learning system for about $1 a month, I think we’ll get a warm reception. BT: For any undergraduate, time management requires a careful balance. Growing a business requires all the more care, however. How do you manage time between your business and your education? GVS: Focus. Writing a paper for a literature class might take a student 20 hours in total from the planning to the review. However, people usually are effective on less than half of the hours devoted for work. My advice? Work for a couple of hours and then go and do something else. Work on a different project, go to the gym or even nap.

in adapting the OpenTable model to Argentina? GVS: Many people say that start-ups fail because of a poor user interface, poorly targeted niche market or even mismanagement. However, things change when you’re starting a company where your main customers are late adapters. When starting an online reservation site, the first thing you need to do is sell your product to the restaurant owner. In general, restaurant owners are more foodies than tech geeks and, at the

I wake up in the morning and think about my business. I think about it on my walk to class every day. If we got 25,000 users and I had to drop out and move to Kenya, I’d do it.

BT: Richard, in what ways are you engaging with consumers directly in order to cater the project to current educational needs?

beginning, will oppose any type of change. That was, and still is, the biggest challenge.

BT: You have a history of juggling multiple RS: The challenge for us is to take all test- commitments. How do you manage? able facts and transfer them onto a compelling mobile platform. This will require a lot GVS: After three years of college spent RS: Honestly, I don’t. The business comes of collaboration with the locals; the process working on at least two projects at the same first and my grades suffer. My admittedly of refining our product will be continual. time, I decided to follow the saying “divide idealized philosophy goes like this: I will The beauty of having a completely electronic and conquer.” If you want to be a successful spend time on class to the point where it is curriculum is that it allows us to monitor entrepreneur, your start-up has to be your enhancing my learning. However, when we how all students interact with our program. day and night, and unfortunately we only hit the inflection point where the correla- Thus, if we notice that 70% of students get have 24 hours each day. tion between effort and learning diminishes stuck on this one tricky problem, we can deand effort is expended primarily for the sake cide to introduce a “hint” button. BT: How do you measure your success? of the grade, that’s when I try to stop. BT: What have been some of the challenges GVS: In value, and by value I refer not only BT: Why did you choose the field for your of working in Kenya? to monetary value, but also to personal business that you did? value. Looking back to Cena Plus or TEDxRS: The slow Internet saps away your pro- UChicago and seeing that you’ve successGVS: My viewpoint is one that there are ductivity. Also, getting mugged and having fully added value to not only society but also two types of tech start-ups. The first type is my laptop stolen was a bit of a setback. You to individual people is one of the most restart-ups that satisfy the needs of a specific see, I was trying to do entrepreneurship the warding feelings for me personally. Success community by adapting to their needs; the American way: working out of a house, eat- relies on a personal transition from a mere second one encompasses value propositions ing (metaphorical) ramen noodles all day, conglomeration of atoms to a change agent. that are key to a community’s development. and saving pennies by using public transGastronomy is very important in people’s portation. I now have a new appreciation for RS: Creating something that is more uselifestyles in Buenos Aires and other cities in why real businesspeople hire drivers in Ke- ful than Farmville, used by more people, the area. Besides, I’m a huge food fan! nya: anything valuable makes you a target. and makes way less money. That’s right. I’m abandoning the gold standard for the ZynRS: What are college students good at? BT: Güimar, what challenges did you find ga standard. BT FALL 2011 BUSINESS TODAY



Tips to Launch a Social Entrepreneurship Venture


Know the context: It’s easy to imagine all kinds of possible social venture ideas that could change the world for the better. But every business has to start someplace, serving real customers in real settings. Try to get to know as much as you can personally about the customers and markets whose needs you expect your venture to solve. Be prepared to be wrong about your original assumptions of what they think, how they make decisions, what terms they use, how and why they buy things, and - most importantly - whether they care as much about the need you are addressing as you thought they did or should.


Be prepared to collaborate: Most social ventures do not have the luxury of acting unilaterally, although some have the temerity to try. Every market is its own network: of organizations, individuals, resources and relationships. Think carefully and creatively about how you can take and offer reciprocal advantage in weaving your venture into that local fabric. I’m not suggesting you weaken your competitive zeal; after all, you wouldn’t be doing this if you didn’t think you had a better answer than the status quo. But try to identify critical allies who can help you realize your vision, while also reducing the risks along the way.

Get ready to test yourselves to the limit: Launching any venture that depends on customers choosing to buy what you are offering is never easy. That’s true whether your business is in Silicon Valley or an African village. But creating a sustainable social venture in markets with unreliable infrastructure, uncertain and sometimes corruptible laws and regulations, differing customs and a frequent history of powerlessness is even more challenging. That’s why I view social entrepreneurship as the “X Games” of entrepreneurship: it has less margin for error, faces more risks and requires more ingenuity and perseverance, even courage, than its more benign counterparts in the developed world.

Be clear about your moral compass: If the challenges you face as a social entrepreneur were easier, they wouldn’t need your vision, drive, resilience and tenacity. It is precisely the urgency, complexity and magnitude of the social issues you are trying to address that probably inspired you in the first place. But the price of admission is developing a venture that can financially sustain itself over time. And that requires a host of difficult strategic, operational and even ethical choices in structuring a viable business, not a philanthropic project. What prices will you charge that offer a fair return to the venture while not taking advantage of your customers? What trade-offs are you prepared to make in the quality of your products in order to keep them affordable? What interest rates will you charge on financing you arrange? At what point will you refuse to pay what looks, smells and feels like a bribe in order to get permission or access to do something important for your business?

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Be willing to just try it: Nobody knows whether your idea will work or not. You may not know whether you have what it takes to be a successful social entrepreneur, or whether it’s the right path for you. The only way to know is to do. So take the next step, whether it’s developing your original inspiration into a carefully thought through business plan, launching a couch surfing itinerary to raise money, building a virtual team on the web to help you develop a prototype of your product, or visiting the community where you’d like to launch your business. You may find an insurmountable obstacle, but even then you’ll have the satisfaction of having pursued your original dream to the fullest. And you may well discover an even better one in the process.


Tips by John Danner- entrepreneur, Senior Fellow of the Lester Center for Entrepreneurship and Innovation at

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Mistakes that Student Entrepreneurs Make

Underestimating how much time and effort it takes to actually launch a venture: Some business ideas are simple and relatively easy to start; most aren’t. If you’re serious about both your studies and your entrepreneurial passion, prepare to face some difficult choices around how to balance both goals. Your business will not have a regular schedule, study hours, exams, etc. It can be, and usually is, unpredictable. It can make voracious demands on your time - especially when you have investor expectations and customer demands to satisfy.


Not taking full advantage of your campus network: Every university has its own array of talented people (including its faculty) whose insights and experience are usually available to you for free. I like Howard Stevenson’s definition of entrepreneurship: “the pursuit of opportunity beyond the resources you control.” Campuses are an open field of opportunity filled with resources - professional, informational, personal and otherwise - you can leverage to better understand your market, technology, competition, financial requirements and especially find possible teammates to help you launch your venture.

Not fully using your student status as a passport beyond your campus: Being a student is a wonderful reason, and occasional excuse, to ask anybody about anything. Most people outside academia understand and respect the spirit of inquiry and exploration of students, and are usually happy to spend time responding to your questions. Don’t be shy about reaching out to alumni or members of your community who you think might have useful knowledge to refine your business idea. And don’t be surprised if people are willing to spend more time and share more information with you than you originally thought possible.

Being too afraid to talk about your venture idea with others: Students are often afraid that others might steal their idea. While that is certainly a risk, it is not a big one in my experience. Almost every idea worth pursuing benefits from the perspective, creative additions and even skeptical scrutiny from others. The word is not “solo”preneurship; it’s entrepreneurship. It’s a team sport, even if you’re the next Richard Branson or Steve Jobs. Ideas need oxygen; be willing to both talk about yours, but more importantly listen to what you get back. Be ready to trust people. If you have reservations about discussing your idea, try to clarify the ground rules for your conversations in advance to avoid misunderstanding. But remember: If you can’t talk about your idea, maybe your idea isn’t worth talking about.



Overestimating what it takes to get started: Students are often intimidated by what they expect - in money, degrees, contacts and other resources - a new venture will require; and postpone or shelve their dreams accordingly. Lots of potentially great ideas never see the light of day for that reason. I encourage you to look at it differently. Focus on what it takes for you to just “take the next step” in developing your business idea. You may well discover that you don’t need as much of what you don’t have as you originally thought. Commitment, initiative, curiosity and tenacity can go a long way in helping you attract the real resources you need to convert your idea into reality.

UC Berkeley’s Haas School of Business, and Visiting Professor in Entrepreneurship at Princeton. FALL 2011 BUSINESS TODAY


C Suite



C Suite

MARINA KIM Founder, Executive Director, Ashoka U – On Social Entrepreneurship Ashoka is an international network of social entrepreneurs. Since its founding in 1980, its mission has been to promote social change and create a supportive environment for social entrepreneurs to work in. One of its programs is Ashoka U, which works to make colleges and universities places where students are given the tools and support to pursue careers in social entrepreneurship.

Business Today: How were you involved with social entrepreneurship in college and how does that shape what you do now?

concepts, courses, and possibilities of social entrepreneurship at the university.

The more role models campuses can proMarina Kim: I was fortunate to find out vide, the better. More examples of social about social entrepreneurship during my entrepreneurs coming from all backgrounds, very first week of college. I took every class working across lots of different industries in social entrepreneurship at Stanford. I will inspire students and spark involvement. brought this academic background into my At Ashoka U, our Social Entrepreneur in extra-curricular activities and became a stu- Residence program brings a social entrepredent leader at Stanford, becoming friends neur to campus to do just this. with fellow student leaders and professors. It was a transformative experience for me! In sum, there are a variety of ways colleges and universities can guide students to beI now lead Ashoka’s initiative, Ashoka U, to come agents of change on their campus. A partner with student and faculty leaders at consortium of twelve institutions, the Ashocolleges and universities around the world ka Changemaker Campuses, are at the foreto launch and grow their social entrepre- front of this new movement in the emerging neurship programs. field of social entrepreneurship education.

BT: What can colleges and universities do to engage students in social entrepreneurship? MK: From the moment students step on campus, colleges and universities can equip their students with the skills, information, and resources that they need to engage in social entrepreneurship. At freshman orientation, students can learn about relevant social entrepreneurship student activities that they can get involved with, find out which classes to take, and possibly get matched up with older students to look up to as mentors. Among the Changemaker Campuses, Babson University in Massachusetts has a standout program called “From Day One” to introduce matriculating students to the

BT: What can college students themselves do to learn the skills they need to be social entrepreneurs?

students can develop an actionable plan that actually addresses the designated need. Social business plan competitions are great opportunities to test out these plans with a judging committee. During the research process or before heading out to start their venture, they could do an internship or apprenticeship with an established social entrepreneur in their chosen issue area. They could seek out campus mentors and avenues of involvement. Professors of social entrepreneurship can serve as either teachers or mentors (or both). Professors across nearly all disciplines are now emerging across the country and, indeed, across the globe. BT: What are the differences between training an entrepreneur and training a social entrepreneur?

MK: In terms of training particular competencies for entrepreneurs versus social enMK: Ideally, students should first identify trepreneurs, there isn’t that much difference. the problem they wish to solve. They should The qualities it takes to become successful understand the issue from the perspectives as a for-profit or social entrepreneur are the of multiple stakeholders and investigate the same: you need to be persistent, resilient, real need of a community. Prospective social creative and excited about solving problems entrepreneurs should take this learning pro- day in and day out. cess seriously since understanding the problem well and engaging partners is key to de- To be successful, entrepreneurs need to veloping a systemic and sustainable solution. understand the needs of their main conSet goals to meet with the leaders – both on stituents or client base to help effectively campus and in the community – in the field solve their problems. However, in the case that you care about. Then after specifically of social entrepreneurs, they almost always defining the problem you seek to address, work in complex systems and inside comFALL 2011 BUSINESS TODAY


C Suite

munities. Therefore, aspiring social entrepreneurs should gain experience not only in communicating effectively, but also in coalition building and partnership development within communities as a core part of their development. Students who seek to become social entrepreneurs should be educated in the difference between the financial and legal structures available to help advance their goals once they start an organization. The start-up process varies between a non-profit, a for-profit, or the new L3C organizational structure. BT: What are some examples of successful college and university programs regarding social entrepreneurship education? MK: Ashoka U has partnered with a set of twelve Changemaker Campuses. These institutions run the gamut from large public research universities to small colleges, yet each are doing exemplary activities in social entrepreneurship education. For example, Tulane just launched a $100M campaign called “Tulane Empowers” which will help them build out a major social entrepreneurship initiative both on-campus and within the city of New Orleans. The University of Colorado-Boulder is launching a freshman dorm focusing on social entrepreneurship and sustainability. The residence will connect the core curriculum and the co-curriculum together with the student’s living environment to create an integrative learning experience. Arizona State University’s Changemaker Central is a centrally located, student-run resource hub for academic courses and extracurricular activities involving social entrepreneurship, civic engagement, service learning and community service that catalyzes student-driven social change. BT: What role can business schools and prebusiness curricula play in training social entrepreneurs? MK: Social entrepreneurship education was born out of the business school context as an opportunity to explore the adaptation of business concepts to the social sector. Although we are seeing a trend of social entrepreneurship training being seeded outside 22


of the business school and branching and growing across the curriculum, business school and pre-business curricula still have a key role to play in developing future social entrepreneurs and change makers.

ship organizations, recent graduates can take advantage of existing connections and networks. In addition to tapping into their own networks, recent graduates can investigate field level organizations, such as Ashoka, the Skoll Foundation, Echoing Green, New Profit, and the Acumen Fund. These organizations may be of interest to the graduate, as well as the social innovators they support.

Every social entrepreneur who wants to create social impact requires a certain set of business skills. These skills will help them plan and execute on their aim of social change. This business acumen will help as- The perfect training for social entrepreneurpiring social entrepreneurs to explain their ship is to be creative about developing a career staffing and funding model to seed funders, path. What is your dream job? How would to ensure that revenues and expenses are rea- you create it? Do you feel like you need to sonable, and to plan for sustainable growth gain more experience? Consider internships that accomplishes a measurable social im- or fellowships, such as Think Impact’s social pact over time. A strong foundation in busi- entrepreneurship immersion experience ness and entrepreneurship fundamentals in rural Kenya and South Africa, the New will provide the necessary foundation to Sector Alliance Fellowship in consulting, or meet these goals. the Coro Fellowship in ethical leadership in public affairs. Undergraduates can look into However, business skills are not enough; graduate programs, such as the NYU Reynthey need to be combined with a deep un- olds Program for Social Entrepreneurship derstanding of the problem/need that is be- or Duke’s Center for the Advancement of ing solved, a deep respect and empathy for Social Entrepreneurship. Ready to run but the community that you are serving, and an need a little inspiration? Check out Echoing unwavering internal compass that is guided Green’s new book “Work on Purpose” and by making decisions that align with the ul- their online resource guide covering career timate mission/vision of success for the or- and internship resources. ganization. Interdisciplinary course recommendations and curriculum development Colleges can better prepare students to can help to round out the experience of a get engaged in social entrepreneurship besocial entrepreneur to provide the full range yond graduation by intentionally creating of exposure to the principals, methods, and space for students to map out their career potential impact of social innovation. and life goals. As Scott Sherman, Founder and CEO of the Transformative Action BT: What do students need to do to become Institute so boldly recognized, “student engaged with social entrepreneurship after rarely know what they want to major in, graduation and how can colleges prepare let along what kind of huge change they them to do so? want to see in the world.” Through the Transformative Action curriculum, which MK: It is important for recent graduates to has been adapted at more than 20 camrealize that there is not one clear linear path puses, teaching thousands of students in to start a career in social entrepreneurship. more than 40 countries, Scott has helped The most important thing is to decide what students to achieve a clear understanding they hope to gain out of the experience both of themselves, their dreams, motivations, personally and professionally, and how they talents, strengths, and aspirations to help will use their first job to build expertise, con- them connect their passions to social tacts, content knowledge, and relevant com- entrepreneurship and change making. munity experience. Hopefully these goals Understanding oneself, and then drivwill align with the graduates’ own goals for ing forward with a sense of purpose and the impact they hope to achieve in their life- self-permission, enables individual social time. entrepreneurs to thrive, and colleges and universities are the ideal partners for helpTo get feedback on goals and aspirations, ing to provide guidance for this journey. BT and to get connected to social entrepreneur-

Interviewed by Tommy Tobin, Stanford University

Pay it Forward

Remedy on the Rails 24


Bringing modern medicine with old technology: the South African Railroad By Karen O’Neill Ocasio, Princeton University

Pay it Forward

“It is a remarkable story.” Nobel Peace Prize winner Desmond Tutu is a lifetime supporter of social equity in South Africa. Only 17 years after the fall of Apartheid, Tutu has witnessed both great institutional and economic transformation within the nation. South Africa, nevertheless, continues to tackle challenges such as reducing one of the largest income inequality gaps in the world. This time, it is not the next Nelson Mandela that inspires the Archbishop Emeritus. It is the 9,500-mile trek of a train. Here’s a hint: it’s not Amtrak. Born from a partnership between the Transnet Foundation and the Department of Public Enterprises, the Phelophepa Medical Train provides medical support to rural areas of South Africa with limited access to health facilities. Awarded the 2008 UN Public Service Award, the Phelophepa Healthcare Train is the first of its kind and has traveled through South Africa for almost two decades. It has also assisted an estimated 2.4 million people since its establishment in 1994. At each of its 35 stops, the Phelophepa Train parks at the railway siding for a week. There it offers patients an array of services ranging from dentistry and optometry to psychological counseling and pharmaceutical care. Even the railroad tracks themselves represent the nation’s recovery from deep historical wounds. The tracks were first constructed in the 19th century to transport goods to the port cities of Cape Town and Durban for export. Behind those tracks lies a history of harsh migrant labor and the exploitation of mineral resources to the north of the Cape. During Apartheid, the train system was also used to facilitate the forced racial segregation of entire communities. Rather than enjoying city life after work, many Africans were forced to commute back to the outskirts. With the creation of the Phelophepa Train, what had formerly been an instrument of separation has been transformed into a vital asset for public health. With 45,000 patients from 37 communities each year, the Phelophepa Train finds ingenious ways to employ limited resources. First, the Train has partnered with medical professionals, private pharmaceutical companies and provincial

health ministries to execute its services. does an organization mediate tensions beThe majority of staff onboard the train are tween the technical and spiritual? This has last-year medical and professional interns been a hot topic at the core of the South from a variety of fields including nursing, African health debate especially with reoptometry and catering. According to Im- gards to the HIV treatment and the side pumelelo, a nonprofit dedicated to innova- effects of antiretroviral drugs (ARVs). tive models for social change, “There can Leaving adversity aside, the Transbe little doubt that the immediate impact net Foundation is busy at work building on the students of their experience on the a second Phelophepa Train. The TransTrain is profound.” While the patients net Foundation is financing the majority

With 45,000 patients from 37 communities each year, the Phelophepa Train finds ingenious ways to employ limited resources. receive medical treatment, the last-year of the project with an initial investment students gain invaluable expertise by pro- of more than 80 million South African viding dental fillings, testing eyesight and Rand (approximately 11.2 million USD). performing therapeutic work. The Phelophepa II is meant to compleGoing a step further from immediate ment and scale up the services provided medical treatment, the Phelophepa pro- by the original train. In a recent statement, motes good health practices by sponsoring the CEO of Transnet, Christ Wells, ancommunity outreach programs. Before nounced, “We are really delighted at the departing each of the 35 stops, sixteen prospects of having to replicate the runmembers of the local community are se- away success that Transnet Phelophepa I lected for basic preventative healthcare in- has been to the less fortunate and needy struction. Instructors are chosen from the communities in our country.” community and follow a standard course Trains are sometimes seen as an outoutline along with a specific focus on lo- dated form of transportation. Why board cal health issues. After a week of seminars, a train when you can fly? In fact, many the students are given additional lectures countries are underutilizing their trains as by the Order of St. John with a particular a means of transportation. Beyond freight emphasis on home-care of AIDS patients. cars, one can imagine how the Phelophepa Since the Train will not return to each of Train model can be replicated to dissemithe communities for many months, this nate information, foment literacy or even component of its operational model is es- repair basic infrastructure. Moving forpecially important. ward, both the public and private sector In the current political arena, are dif- will have to rethink the ordinary. fering viewpoints on how to keep South “The Phelophepa train is one of the African communities healthy. It is esti- most innovative developmental health mated that eighty percent of the South projects anywhere in the world,” said ProAfrican population consults sangomas, fessor Francis Wilson of the University of or traditional healers, about health issues. Cape Town. “Other large countries with Considered an integral practice of Zulu, miles of 19th-century  railway track might Swazi, Xhosa and Ndebele cultures, san- find it instructive to learn how these tracks gomas seek to establish contact with an- can be turned into the foundation of a cient ancestors in their attempts to cure 21st-century mobile  clinic system which the ill. Thus, it is easy to see how a train is providing not only health care to rural equipped with state-of-the art medical people in need but also hands-on training equipment could be at odds with the long- to the doctors, dentists and nurses of toestablished methods of the sangoma. How morrow.” BT



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Provides 200 hot meals at soup kitchens throughout the city


by Dan Elkind, Princeton University


Provides a year of home visits by a nurse specialist

n Saturday night, Octo- enthusiasm, was not the one you might exber 1st, Madison Square pect. Amidst the sea of vogue and flashing Garden’s glamorous camera bulbs, David Saltzman, executive Beacon Theatre played host to one of the director of the Robin Hood Foundation, trendiest events of the year. Sting was made his remarks. performing to honor both his sixtieth As he described Robin Hood’s ambibirthday and the twenty-fifth anniver- tious charter to combat poverty in New sary of his solo career, and a host of high York City by engaging in a plethora of profile celebrities–including Mary J. Blige, philanthropic ventures, he was met by Lady Gaga, and Robert Downey Jr.–had polite but energetic applause. “For more flocked to midtown Manhattan to par- than 20 years, Robin Hood has found, ticipate. But as Sting prepared to take the funded and partnered with programs that stage, the man standing front and center, have proven they are a consistent force for addressing the crowd with a certain calm good in the lives of New Yorkers in need,” 26



Provides two weeks of job training and placement in a home attendant position

he pronounced, as several members of the audience yipped their approval. Clearly, the Robin Hood Foundation is not your typical, run-of-the-mill charitable organization. From its donors, to its fundraising events, down to its website (recently redesigned by SoundCloud, the stylish audio design platform), the organization exudes a sort of “hipness” that seems alien to our usual conceptions of the white-collar benefit gala. Robin Hoodsponsored events are mass media extravaganzas, always featuring performances by A-list artists–the Rolling Stones, Beyonce,

Pay it Forward


Jay-Z, and Lady Gaga, to name a few from just the past year. “In September, the Black Eyed Peas performed a concert in Central Park for 60,000 fans on the Great Lawn – the first time a concert of this scale has ever been held in Central Park as a charitable benefit,” Patti Smith, a senior press representative at the foundation, told Business Today. “We’ve been very fortunate that Robin Hood’s mission of fighting poverty in New York City has resonated with so many talented artists and musicians.” She continued, “These artists have all been moved to help New Yorkers during difficult times and to do so through Robin Hood because of our model and our vision.” That vision was first conceived in 1988 by founder Paul Tudor Jones, and has grown into a philanthropic behemoth that has disbursed nearly $1 billion in total grants in its 23-year history, and $140 million in the past fiscal year alone. The latter figure is particularly notable because it represents nearly 70 percent of Robin Hood’s net spendable assets over the same time period. “Robin Hood gives it all away,” Jones, who is still intimately involved in the foundation’s operations, insisted in an interview with Lisa Endlich, author of Be the Change. “We’re not in the wealth-building business,” he goes on. “That dog ain’t going to hunt.” The all-or-nothing attitude that pervades Jones’ rhetoric when he discusses the war on New York City poverty has clearly assimilated itself into the sensibilities of the foundation and its leadership. With a board of trustees boasting such industry leaders as GE’s Geoffrey Immelt, ABC’s Dianne Sawyer, and Goldman Sachs’ Lloyd Blankfein, the culture is as competitive, and the expectations as lofty, as any Wall Street firm’s. “We are lucky to have a group of board members who are deeply passionate about Robin Hood’s mission,” Saltzman said in a statement following Sting’s performance. “These are not people who do anything without a full commitment.” But while Jones and his board have gone about turning a lofty mission into fiscal reality, the business of actually modeling and implementing Robin


percent of babies in NYC are born into poverty


million New York residents rely on emergency food to survive


thousand people in NYC will sleep in shelters tonight


percent of NYC public school students will not graduate on time



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Hood’s grant-giving process has fallen into the hands of Michael Weinstein, the foundation’s Senior Vice President. Weinstein, who holds a PhD in economics from MIT and was formerly a member of the New York Times’ editorial board as an economics columnist, has spent the last decade applying a sophisticated quantitative approach to chari-

signing implicit values to the activities you fund, and its impossible not to do it,” he told the Bill and Melinda Gates Foundation’s exploratory committee as part of a 2008 study. “But it’s better to face tradeoffs explicitly than to behave passively or implicitly.” There is certainly nothing passive about Robin Hood’s anti-poverty strat-

Robin Hood Grants

The organization exudes a sort of “hipness” that seems alien to our usual conceptions of the white-collar benefit gala. table giving; in the process, he has made the Robin Hood Foundation a paragon of what he refers to as “model-driven philanthropy,” or, more inclusively, “accountable philanthropy.” The centerpiece of Weinstein’s approach is the notion that models and metrics provide the grant-makers at Robin Hood with more information, and more information can never hurt. To those who cringe at the idea of a quantitative treatment of charitable giving, Weinstein insists that judgments concerning the relative worth of different grants are implicit in any grantor’s decision making process, from the moment he puts together a budget. “The major difference in the way Robin Hood makes grants is the level of transparency,” Weinstein writes in a 2007 paper examining Robin Hood’s modeling practices, “With an explicit metric system in hand, interested parties are able to scrutinize our decision making in detail.” He goes on to give thorough descriptions of the various metrics – each one more involved than the last – that Robin Hood employs to assess the poverty-fighting efficacy of its current distribution of grants. From cost-benefit ratios, to statistics like “the marginal benefit to the poor of an additional grant dollar,” Weinstein lays out how and why Robin Hood disburses funds the way it does. “If you’re making grants, you’re placing bets – you are as28


egy under Weinstein’s leadership. Tackling the causes of poverty on four specific fronts – early childhood and youth, education, job training and security, and survival – the foundation provides targeted aid to a broad cross-section of New York City charitable organizations in an attempt to exert the greatest influence with its available funds. The Sting concert marked the advent of a new program in the so-called “survival portfolio.” “We’ve announced a bold new initiative to aid men and women who have served out country but have no alternative but to live on the streets,” Smith noted, adding, “It is a condition we sincerely consider to be one of the profound shames of our time.” She went on to mention that Robin Hood’s goal was to completely eradiate street homelessness among veterans within the next two years, in part by funding veterans hospitals and other existing institutions, and in part by providing seed money for new initiatives that, for example, would seek out homeless veterans and relocate them to permanent or transitional housing. The goal sounded ambitious, perhaps even implausible. But knowing a bit about the foundation’s methodology, its significant cultural and technical capabilities, and its singular commitment to its mission, the issues plaguing New York City’s poor have begun to look a bit less insuperable. And for that, Robin Hood has my pledge. BT

13% 11% 31% 13% 13% 19%

Feeds + Shelter Nurtures





“Whatever your discipline, become a student of excellence in all things. Take every opportunity to observe people who manifest the qualities of mastery. These models of excellence will inspire you and guide you toward the fulfillment of your highest potential.” – Tony Buzan


GIVING PLEDGE The Gates Foundation’s Giving Pledge is a challenge to the world’s wealthiest to give back to society.

By Sam Heffernan, Princeton University


aving amassed an unprecedented fortune, Andrew Carnegie recalled in his autobiography that at some point in his career he “resolved to stop accumulating and begin the infinitely more serious and difficult task of wise distribution.” In early 2008, Bill Gates, arguably the Andrew Carnegie of our time, underwent a similar transformation as he transitioned from Chairman of Microsoft, the software company he co-founded in 1975, to the parttime, non-executive Chairman in order to dedicate more of his time to The Bill and Melinda Gates Foundation. Together with his wife, Melinda, and Warren Buffett, Chairman and CEO of Berkshire Hathaway, he embarked on another journey to change the world, this time by giving away the fortune he had spent over 25 years accruing. By 2006, the Gateses and Warren Buffett had pledged a combined fortune of over $32 billion to The Bill and Melinda Gates Foundation. The Foundation is based upon the fundamental governing principle that all lives have equal value and seeks to embody that principle by improving the United States educational system and making strides in global health care and vaccine development. The Gateses firmly believe that for foundations, much like for businesses, high risk can yield high reward. This is one of the strengths of private philanthropy: it is willing to take risks, such as The Gates Foundation’s $10 billion investment in developing an AIDS vaccine, that government-run aid programs cannot afford to take. Despite the enormity of their foundation’s potential, the Gateses were not merely satisfied to give away their own money, but instead wanted to leverage their philanthropic gifts to serve as an inspiration for others. In June 2010, after a series of private dinners for American billionaires hosted by Buffett, Gates, and David Rockefeller Sr., The Giving Pledge was formally announced and over 80 eligible pledges were asked to participate. The Giving Pledge is a moral commitment signed by over 70 American billionaires to donate at least 50% of their net worth to philanthropic causes either during their life or at the time of their death. Most would agree that it succeeds

in drawing attention to large-scale philanthropy and has directed an enormous amount of money to charity, but some have criticized it as merely a publicity stunt for those involved. Buffett responds to skeptics by pointing to the income gap that has grown dramatically over the last 15 or so years. He has said that “a rising tide lifts all yachts, not all boats” and sees philanthropy as a moral obligation for those who have been financially successful. Trickle-down economics, the idea that by letting the wealthy keep more of their money they will provide jobs and money will work its way into the hands of middle and lower class families, has proved ineffective over the past quarter

ally does more harm than good” and that he enjoys giving money away as a “close second” to making it. David Rubenstein, co-founder and managing director of The Carlyle Group, regards his donation as “a repayment of a debt to the country that has been so generous to my family and me” and sees the most important aim of the pledge as encouraging “all Americans--not just a select few--to consider increasing their own giving to worthy organizations and causes.” Carl Icahn, a successful Wall Street investor, believes that “with wealth comes responsibility” and that “those who have benefited the most from our economic system have a responsibility to give back to society in a meaningful way.” Similarly, Warren Buffett writes, “Were [my family and I] to use more than 1% of my claim checks on ourselves, neither

Carl Icahn Larry Ellison George Lucas T. Boone Pickens • pg 32 Bill and Melinda Gates Mark Zuckerberg Warren Buffett Julian Robertson, Jr Diane Von Furstenberg of a century as the rich have gotten richer and the poor have remained impoverished. Similarly, the idea of billionaires pledging at least 50% and often closer to 100% of their wealth to charity has raised questions about inheritance. Buffett, who calls children of wealthy couples “winners of the ovarian lottery,” famously remarked that one should leave to one’s children “enough money so that they would feel they could do anything, but not so much that they could do nothing.” Signatories of The Giving Pledge were asked to share a letter about their views on and experiences with philanthropy upon joining the pledge. Oil Tycoon turned environmental energy activist and philanthropist T. Boone Pickens remarked that he thinks inherited money “gener-

our happiness nor our well-being would be enhanced. In contrast, that remaining 99% can have a huge effect on the health and welfare of others.” His wealth, he argues, “has come from a combination of living in America, some lucky genes, and compound interest.” Buffett seems humbled by the fact that the American economy “rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions. In short, fate’s distribution of long straws is wildly capricious.” It is this belief in an inherent bias in the American economic system towards rewarding financiers and leaders of industry and, of course, the “lucky genes” with which he was endowed that compel Buffett and so many other signatories to make the proud, public pledge to join an elite group of givers hoping to make a real change in the world. BT

Innovation and Enterprenuship

“I was put here to work hard, make money and be generous.”



T. Boone Pickens has been a pioneer in America’s oil and gas industry for decades. Now into his eighties, he continues to innovate and has developed the Pickens Plan to solve the ongoing security threat posed by America’s increasing dependence on OPEC oil. Business Today sits down with him to discuss the plan, his thoughts on Corporate America, his charity work, and his future plans. He can be followed on Twitter @BoonePickens.

Innovation and Enterprenuship

Business Today: One of your more recent initiatives has been the “Pickens Plan” for America’s energy future. Could you give a brief overview of the plan for readers?

largest transfer of wealth from one group everyday goes to transportation. So, when to another in the history of mankind. you go after OPEC oil, you have to go after Again, it’s insane—totally unnecessary. transportation. Now, you say, “wait a minWe do not have to do this. So, why does it ute, solar and wind are going to generate happen? Because our leadership has never power, so let’s go to electric cars.” That’s really understood the problem. Neither fine with me. Anything American I’m for. T. Boone Pickens: I got out of Republicans nor Democrats have ever deschool in ’51. I’m a geologist by training, cided to understand the issue well enough BT: So, for instance, the Pickens Plan so I’ve been in the business forever. I think to craft legislation to fix the problem. If calls for increased utilization of our natuI know the energy business better than you go back to 1970, Richard Nixon said ral gas resources. Do we have the resources anybody. that at the end of the 70’s, we would not to make this transition, and how can we The United States has never had an import any oil to the United States. On ensure that these resources will remain afenergy plan, and we use 20 million barrels the day he said that, we imported 24% of fordable in the future—even if they come of oil per day. We produce 7 of that, and our oil. At the end of the decade, we im- from this country? we import 13. We import twice as much ported 28%. We have never gone down. as the country second to us: China. They Up until 2011, our imports have always TBP: Let’s compare the cost of import 5 and we import 13 and have no increased. So, again, it’s insane what we’re equivalent amounts of energy. 1 million energy plan. We’re the only country in the doing. That is the Pickens Plan. Let’s get cubic feet of natural gas is $4.50. It comworld without an energy plan. We need on our own resources and get off OPEC petes against 30 gallons of diesel for $30. an energy plan, and we have resources in oil first. I don’t want to get off oil from So, don’t take the negative attitude that America that we can use. We don’t have to Canada and Mexico. That’s ok. That’s safe we can’t supply enough natural gas. We import that much oil. This year, we will oil. But, OPEC oil is unsafe. You’re buy- have a 200-year supply of natural gas in import about $500 billion worth of oil. ing from the enemy, and you’re paying for the United States. Natural gas costs in the Two-thirds of our trade deficit comes from both sides of the war. United States are the lowest in the world— the purchase of foreign oil. Last week, we the lowest. Now, natural gas producers are announced a trade deficit of $52 billion BT: If I understand your plan cor- thinking very seriously about exporting and $30 billion of that was oil. So, it’s in- rectly, it does go beyond using oil. There is natural gas out of the United States into sane that we’re doing what we’re doing. Of a component to get beyond the fossil fuel. the global market. So now we are going the 13 billion barrels we import, only 5 to export clean (it’s cleaner by 30% than billion come from OPEC. So, the OPEC TBP: Remember what I said. I said diesel or gasoline). It’s cheaper, it’s abunoil is what I’m focused on right now. In get on your own resources. I’m taking dant, and it’s ours. We’re going to export the last 10 years, the total cost of oil from care of the OPEC situation. Then I want the clean, cheap, abundant and import the OPEC was $1 trillion. Going forward 10 to get on renewables, which are wind and dirty OPEC oil. It’s hard to understand years and capping the cost of oil at $100 solar. But, wind and solar do not replace why our leadership hasn’t said, “why aren’t a barrel, it will cost $2.2 trillion. It’s the OPEC oil. 70% of all the oil used in world we using our own resources?”



BT: How easy is this transition, and what are the main obstacles to executing the Pickens Plan? TBP: There are 12 million vehicles in the world on natural gas, and we have 130,000 of them in the United States. We have more natural gas than any other country in the world; we have more natural gas than Russia and Iran. Will it work? Of course, it will work. What my plan— and HR 1380—does is that it takes natural gas to the heavy duty trucks. There are 8 million heavy duty trucks, so I’m after those because they’re an easy target; it’s easy to understand. If I talk about the 250 million vehicles in America and say let’s put them all on natural gas, it’s a little too big to swallow. So, go after a target that’s doable, and let it be the model to take you where you want to go. You don’t want to become overcommitted, so go after the 8 million 18-wheelers. What does that do for you? You cut OPEC in half. That’s 2.5 million barrels a day, a huge result with a small number of vehicles. BT: In another part of your plan, you have been advocating wind power. Do you think this resource—going forward from the fossil fuels—can stand up without the public subsidy? TBP: No, it will have to be subsidized if you want to do it. Where we are in this country right now is that wind is priced off the margin, and the margin is natural gas. So, power generated by natural gas sets the price of wind. Ok, so natural gas is $4.50, and to get wind in the range to finance it (and you have to have a production tax credit to finance this), the price of natural gas has to be $6. So, right now, it’s out of range unless you have a renewable energy standard (RES). So, with an RES, you can go forward, but what you’re doing is subsidizing. Natural gas will go above six dollars in the future and wind will be able to compete then. I’m in the wind business, and it’s a struggle right now. BT: On a different note, the recession has caused many to question the integrity and even viability of corporate America. As someone who helped foster the revolution in the American corporate system, 34


in the 1980s, do we need corporate re- Texas for a long time. Why do you think structuring and reform? If so, what form the state escaped the full force of the recesshould they take? sion and continues to create a significant number of jobs? TBP: Well, the most vital parts of corporate America are the board of direcTBP: I was born in Oklahoma, and tors and the leadership of the company. I’m very much involved with Oklahoma The board of directors pretty much sets State University. The governor of Oklahothe policy and is, in most cases, captive to ma is an Oklahoma State grad and asked the management of the company. If you me why Oklahoma City isn’t like Dallas. I had a better method for putting people on responded, “Well, look at Oklahoma’s taxthe board, you would strengthen corpo- es and compare them to Texas, and what rate America dramatically. do you have? Just try a five-year test and switch your taxing over just like Texas and BT: In an age where investors in- see what happens to you. Texas has been creasingly turn their capital over to man- progressive. They’re fortunate to have agers and institutions, does increasing certainly all the oil and gas production shareholder rights play a role in holding they have in that state. I think her govercorporate officers accountable? nor, Rick Perry, has done a good job, but I think the governor before him, George W. TBP: Who has the proxy? The hedge Bush, did a good job too.” So, we Texans fund operator is sitting there with the have been blessed with much, and that’s a proxies, so there should be some method big part of it. At the same time, Oklahofor the hedge fund operator to get help ma has good legislators too, but Texas is a from their customers (who are the share- pretty good model. holders indirectly). We’re in the place where you can help corporate America the BT: You have signed the Giving best. You start out very simply: who owns Pledge. Could you explain what the pledge the company? If the shareholders own it, entails? why shouldn’t they be allowed to decide who the board of directors will be? AnyTBP: Fifty percent of my estate will one would say of course, and we have a sys- go to charity. tem for that. The proxy goes to the hedge fund operator, and the hedge fund operaBT: As someone who has already givtor votes on it. They’ll vote with manage- en much to charity over your lifetime, why ment; they mostly don’t want to fool with do you believe it is important? and check off management. TBP: It isn’t other than it might inBT: Many lament that this economic fluence somebody else into doing it. I will recovery has been relatively jobless. As donate well over fifty percent of my estate seniors prepare to go into the job market, to charity. I said to Bill Gates, “Well, let’s why do you think growth has been so slug- up it a little bit.” Then, he said, “No, fifty gish? percent to get in this club, and that’s it.” So, I said, “That’s good. Put me in the club.” TBP: There are a lot of people better able to answer that question than I can. If BT: Do you believe that your colyou want my answer, it is that you have too leagues in corporate America are giving much regulation. There’s so much doubt enough? If not, what is an appropriate today in Washington that starting to ex- benchmark? pand is a little bit risky. You wonder what you’re going to be dealing with a year from TBP: I’m not passing judgment on now. You may be dealing with regulations any of my colleagues. They can do whatthat you never thought of. We’re not in a ever they want to. If I show any leadership, stable climate to expand your business. it will be by example. BT: You have lived and worked in

BT: How do you select the organi-

Innovation and Enterprenuship

zations with which you trust your donations? For instance, you have donated greatly to the Red Cross. TBP: The Red Cross gift was at Katrina-time. I’m a Red Cross giver, though, because back in Holdenville, Oklahoma (that’s a small town in Eastern Oklahoma; that’s where I was born), my grandmother had just a red cross in the window in her living room, which you could see from the street. It was just a white piece of cardboard with a red cross. I asked her why she had that up. And she said because she supported the Red Cross. I asked, “What do you mean?” She said, “Well, I give money to it every year.” And then, she told me what the Red Cross did, and I noticed that there was not another Red Cross on our block. That always intrigued me. She was always proud to put that in her window, and I always remembered that. BT: Could you give any advice to young aspiring businessmen and women?

TBP: You know, I’m frequently asked Plan. You got it pretty quick. I could have the question. It goes along with the next gone through a lot more numbers and evquestion: How can I go out and make as erything else, but there was no reason to. much money as you did? I think that’s what In addition, being able to read and write the first question is too. The first thing, un- is also important. If you can write it and less you’re just unbelievably smart or unbe- make it brief and tell it and make it brief, lievably lucky, you better have a good work you’ve got a much better chance of sellethic. And that has served me well. I got ing your deal. Somebody might say, “Well, a good education, and I have a very good I’m not going to be a salesman.” You’re work ethic. It was instilled back in Hold- kidding yourself. You’re a salesman in evenville, Oklahoma, and it has served me erything that you do. You’re either selling well. I’ve made a lot of money, but I’ve been your teacher or you’re selling your parents. generous with it. I think that’s what I’ve You’re selling to somebody all the time, been put here to do. It’s a simple story. A and when you’re out in life, you’re selling little luck helps too. Also, learn to explain yourself. You’re selling continually. That’s your situation in five minutes. If you can kind of the way I’ve done it. get it down to three, it’s better because when the opportunity for a young person BT: What are your future plans? to present comes before the audience that he or she most wants to have, you might TBP: To do more—my mission has find you’re not ready. That’s unfortunate. always been the same. I said I was put here Always be ready and be able to tell your to work hard, make money, and be generstory in five minutes or less. I’ve found it ous with it. That’s the same mission tomorBT to be extremely important to have it down row as it is today. that tight. You asked me about the Pickens Interview by George Maliha, Princeton University FALL 2011 BUSINESS TODAY


Setting an example.





Peter Singer, the Ira W. Decamp Professor of Bioethics in the Center for Human Values at Princeton, is an internationally recognized author and humanitarian. He believes that people should give where it will do the most good, and holds controversial views on poverty alleviation and animal liberation. Singer has praised the Gates Foundation’s Giving Pledge, stating, “The Giving Pledge is about changing the culture of giving. Research shows that when people know that others are giving, they are themselves more likely to give. Publicly pledging to give will encourage others to give. This holds true for billionaires and for those of us who aren’t anywhere near that level of wealth. We can all make a difference, and play our part in making the world a better place.

Business Today: Giving publically is seen by some as tasteless or even taboo, but I think that one of the strengths of the Giving Pledge is that it is a very public display of philanthropy. Would you say that the power of the Giving Pledge lies mostly in the funds that it offers philanthropic causes or is it equally in the display of very prominent industry leaders publically pledging their wealth and serving as an inspiration for others? Peter Singer: Yes, it’s certainly about setting an example. Obviously, the amount of money pledged is significant in and of itself, but it is setting an example for everybody, not only for billionaires, and I think that’s important. I think this attitude that you mentioned that people are hesitant to give publically is really unfortunate because there is a lot of psychological research that shows that one of the big factors in whether people give is whether they know that others are giving. So now that people do know that a substantial number of billionaires have pledged to give half of their wealth away, I think that that will mean that other people are more likely to give—it makes it easier for them to give. BT: By that logic, do you believe that when people give to a university or another institution and buildings or endowed programs are named in their honor it is helpful in promoting others to give? PS: Well, less so because I think that—to be blunt, I think that if you’re giving to a university, particularly one of the elite universities in this country, you’re not really getting the best possible value for your dollar, right? I think that given that there are a billion people living in extreme poverty who lack basic heathcare, for example, or clean drinking water, then there are a lot of better causes to give to than to have a new building built with your name on it at your university. So while that might encourage giving in some sense, I don’t think it encourages people to think carefully about where they are going to get the biggest bang for their buck. BT: Do you believe that the way private philanthropy is done now is the most

effective method of investment in society or do you believe that state run programs or mandatory giving policies will help to direct more money to where it is most needed?

lands, and Denmark both in terms of the percentage of GDP that they give and in terms of how much of it is really thought out and well focused in terms of going to extreme poverty.

PS: Well, I think that private philanthropy is really important. I think that private philanthropy is often innovative and prepared to take risks in a way that pubic giving programs are not, so I do think it is necessary. I think that the Giving Pledge is a great idea, but the main drawback from my point of view is that it doesn’t say

BT: The Giving Pledge focuses only on billionaires which is great in that it attracts many people who are famous and well respected in their fields and who have a lot of money to make real difference, but do you think that the program is one that should be replicated with people who have more limited funds,

I think that private philanthropy is often innovative and prepared to take risks in a way that pubic giving programs are not. anything about where the money is to go. wouldn’t be as well known, and cannot Now if you look at the people who start- have the same impact with their reputaed it, Bill and Melinda Gates and War- tion, but in great enough numbers could ren Buffet, they are very clear that they have an impact? want their wealth to go overwhelmingly to helping people in extreme poverty and PS: Well, obviously the answer that to helping overcome diseases that kill I am going to give to that is “Yes” because millions of kids each year. But I think I have myself not replicated the Giving that they felt they couldn’t impose those Pledge, but have set up a pledge for everyviews on other billionaires, so the pledge body. I have a website called thelifeyouis very open as to where the money is sup- and it asks people to pledge in posed to go. I’d rather that more of it did proportion to their wealth, so it is a progresgo to those causes that I think do reduce sive scale, like the tax scale, starting out at suffering the most, including trying to just 1% for some but going up to a higher relieve global poverty, so I think that that percentage for those who have more. We is the direction that private philanthropy have more than 10,000 people who have should go. Having said that, I do think pledged, which is a good start but could be that state aid programs can be very useful a lot more. And I am speaking in a couple and I think that the U.S. should firstly of weeks for a student based group called reform its foreign aid program, which Giving What We Can and you should have it is showing some signs of doing under a look at their website as well. This group President Obama. It’s not very much pub- is actually international and was started licized, but they are looking at foreign aid at Oxford and it asks people to give 10% reform. Secondly I think that the govern- of their income, whatever it may be. So I ment should be increasing the amount of think that there are already these other aid that it gives, which I know is a tough pledges around and it’s important because, thing to say in this time of deficit reduc- although it’s great that very wealthy people tion, but still compared to the leading are giving, everybody can do something. nations in the aid field we give very very We will raise more money that way, and I little. So I think we should follow the think that people will find it a very satisfyexample of some of the better nations ing and rewarding thing to do. BT such as Norway, Sweden, the Nether- Interview by Sam Heffernan, Princeton University



C Suite



C Suite

MAX ANDERSON Co-Founder/Chairman, MBA Oath Initiative – On the Education of Character Max Anderson is co-founder and chairman of the MBA Oath Initiative, a movement to “professionalize“ the MBA degree. He is a 2001 graduate of Princeton University and received his MBA from Harvard Business School in 2009. He has enjoyed a variety of experiences during his undergraduate and postgraduate careers: from working for Google to teaching children in Kazakhstan. He is currently a senior management associate at Bridgewater Associates. Business Today: For those readers who are not familiar with the MBA Oath, could you give a brief overview of the oath and what it entails? [To read the oath, please go to] Max Anderson: The MBA Oath is an attempt to create a “Hippocratic Oath” for MBAs—managers. The Hippocratic Oath establishes a professional code of ethics for all doctors. It is one of the things that makes medicine what it is today, in which doctors are well-respected and trusted. We thought, naturally, that we should have a similar thing for MBAs or managers. BT: What inspired you and your colleagues to develop the oath? MA: There are a couple of things, including graduating from business school in the worst recession in 80 years. In the months leading up to graduation, there was a lot of discussion of the financial crisis and a lot of criticism of business schools and the MBA for their role in the crisis and their failure to avert the crisis. MBA was said to stand for “Mediocre But Arrogant” or “Masters of Business Apocalypse.” It didn’t square with the hopes and aspirations that my classmates and I had. I thought at graduation from Harvard Business School, the oldest and most well-known business school in the world, we should have a paper about what the MBA stood for and how we should conduct ourselves professionally. Frankly, it was not just meaningful for us but also to business schools worldwide. So, as we approached graduation, I had this idea of

taking this oath of honor. I think that one of the influences was my undergraduate at Princeton. I sat on the Honor Committee, an undergraduate-staffed body that is responsible for preventing cheating during in-class final examinations and midterms. I felt that my Princeton career showed me that students can take a choice not only in knowledge but also in character. We actually have an obligation to do so. BT: Several business schools, including Columbia’s, and businesses have developed honor pledges or codes of ethics. Why do you think that the MBA Oath has spread so quickly and has enjoyed such great success? What makes it different? MA: I think it’s a couple of things. Number one, it’s all in the timing. I think if we had done this five years ago before the crisis, people would not have paid attention. But, I think we were all looking for responses. The development of the Hippocratic Oath itself, in some way medicine itself, goes back to the Greeks. Honestly, the idea that every doctor takes a professional oath is a relatively new one. The New England Journal of Medicine did a study of the oath in medical schools. Basically, before World War Two, only a minority (I believe about 20%) of medical schools had their graduates take the Hippocratic Oath while in school. It was really only after World War Two when people discovered the atrocities committed in the name of medicine in Nazi Germany that medical schools began to require it. It’s very much in line with what business schools should be. Business schools were started at

the turn of the twentieth century—in the first decade of the 1900s. They were started with the idea of making management a profession with the thought that graduate schools could become professional schools with licensing boards, associations, and codes of conduct. That vision was never fully realized. No one has really considered management as a profession. But the founding vision of those who started business schools was that was what management would become, and I think that there has been latent effort to lay out a framework of what business leaders ought to be. I think that it just needed the right movement at the right time to really take shape. BT: Out of curiosity, why has the organization developed several manifestations of the oath, including the legacy version? What are the major differences? MA: Honestly, when we started this, it was literally my classmates and I saying at our graduation, “what can we do to take a stand ourselves?” We didn’t set out to create a global movement. So, as more and more have become interested and as more and more schools have adopted it, we update it and we improve it. I would say that we will amend it still. We still haven’t gotten hold of the golden answer yet, but it’s a move in the right direction. BT: While the MBA Oath is a student-led initiative, has your organization attempted to have corporations adopt the oath for their employees?



C Suite

MA: We have had several CEOs reach out to us and say that they are interested in adopting the oath for their companies. In one way, that’s the thing that could make it the standard. If an employer saw two people with the same resume, but one had taken the oath and the other hadn’t—and they would choose the one that had taken the oath because they feel they could trust him more— that would be powerful. On the other hand, there’s a question that we’re still looking at: is this an oath for all businesses and managers or is this oath for MBAs? Right now, we are focusing on MBAs. However, you can be a manager without being a MBA and you can be an MBA without being a manager. I think there’s a need to have something for both groups. BT: I understand that many have shied away from or refused outright to take the pledge. What are their reasons, and how are MBA Oath chapters working to overcome those concerns? MA: There are a couple of different reasons given by those who will not sign the oath. One is that they don’t feel that a public promise matters. I see what they are saying as it’s not legally binding at this point. It’s just words. But, I think words are something our culture values. When you testify in court, you have to swear to tell the truth. When you get married, you have to swear to care for that person through thick or thin, for richer or poorer. You are going to become a citizen with a pledge of allegiance to the United States. We demonstrate by custom and practice that if we believe in something, we have to show that promise publically. Think of your own life. If you say you are going to lose weight and you tell your friends that, then if you order ice cream for desert, they are going to say, “Wait a second, you told us you were going to lose weight.” That’s one objection and response. A second would be that business has no responsibility other than to maximize shareholder value. They argue that managers have to define shareholder value in the short term, usually in terms of quarterly profits. I think that that is a narrow and short-sighted position and that we would be more successful by focusing on the long-term. BT: The economist and Nobel Laureate 40


Milton Friedman was famous for arguing We need to treat life as sacred. We need to that the only social responsibility of busi- look at our whole lives as an opportunity to ness was to increase its profits. Has the fi- live out our values. The Oath itself is nonsecnancial crisis proven him wrong, or is the tarian; it’s not religious or particular to any ethical business the most profitable at the one faith. My own faith is certainly influenend of the day? tial in my own values. MA: I don’t know, but I think that the financial crisis certainly calls it into question. Here is a situation in which many people were not doing things that were illegal— they were unwise, overly risky, and detrimental to their counterparts, but not illegal. I think a lot of CEOs will tell you that short-term shareholder profit maximization is really a farce because you have to look at a total evaluation. This quarter’s numbers can be restated. You can “game the system” that way. A lot of specialists will say that you have to look at long-term performance to do business the right way—eventually you get

BT: With your interesting experiences, do you have any specific advice to give future business leaders? MA: There’s a lot that can be said. In a general sense, I think I can say that I would encourage them to separate what’s important and what’s not. What’s not important is knocking the lights out as the first thing you do. What’s important is recognizing the opportunities you have and forming good relationships with people, relationships with trust. People are going trust you because they know you are going to do a good

There’s a lot more in their life, in their character, and in the long-term health of their company. Their community is more important. found out. I think there is a lot of cultural job. They trust you because they know that and systemic pressures out there. I think your word is your bond. Because what I’ve that when you are in the seat of responsibil- found, even from the very first job I had out ity—you watch CNBC everyday and you of school, is that I still see the same people have the ticker price of your stock scrolling again and again—it’s a small world. Another by—and your quarterly earnings call com- thing I’d say is don’t stress too much if you ing up next week, there’s a lot pressure from wander a bit and if it takes a while to figure people saying that you better hit your num- out your calling. J.R.R. Tolkien said that bers. I think that’s why there’s such a des- “all who wander are not lost.” I believe that’s perate need for people to be reminded that really true. We had our ten-year reunion there is something other than those short- this year. A lot of people spent their twenterm pressures—to be reminded that there’s ties and early thirties hammering things out, a lot more in their life, in their character, wandering a bit. That’s ok. Think of that as a and in the long-term health of their com- natural part of your growing up. pany. Their community is more important. BT: What are your future plans? ConsidBT: On a more personal note, has your faith ering that business ethics has received such influenced your commitment to business political scrutiny lately, would you contemethics and the development of the oath? plate a run for public office? MA: It definitely has had an influence. I think that what we do has real significance. I think who we are has significance. I don’t think that we’re all just running around for no purpose, no meaning. I think that there is great meaning and purpose in our lives.

MA: I have no particular plans to run for office at this time. Take it as it comes. I think the important thing is to figure out what are the causes and the problems that move your heart. BT

Interviewed by George Maliha

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Pay it Forward

America the


New York City has some three thousand homeless people sleeping in subways, under bridges, or in parks each night. Yet it also has some of the most expensive real estate in the country, which is owned by the rich and powerful. This stark contrast between the poor and wealthy is an example of the income inequality and biased economic opportunities that have become the subject of many debates in America. Does this story indicate a trend? Is our society splitting towards two poles - the fabulously wealthy and the miserably poor, with no opportunity for movement between the two? A study of income would certainly make it seem like the gap between the rich and poor in America is widening. Over the past years, median household income for the bottom tenth of the income bracket fell by 12% from its 1999 peak. By contrast, the top 90th percentile of earners saw their income fall by merely 1.5%. Before the recession, the picture was even bleaker - in 2006, incomes in the United States were more concentrated at the top than they had been since the 1920s. Another disconcerting phenomenon is what Edward Wolff of the Levy 42


By Scott Norgaard, Rice Universirty

Economics Institute calls a “middle class uted equally among the population. Older squeeze” following the 2008 recession. Americans were able to escape seemingly According to Wolff, “Indebtedness, which unscathed, while younger Americans fell substantially during the late 1990s, were hit with sharp decreases in income. skyrocketed in the early and mid- 2000s. Americans 65 and older actually saw a rise Among the middle class, the debt-income in income, up 5.5 percent between 2007 ratio reached its highest level in 24 years. and 2010, while every other age group saw Wealth also shifted in relative terms away a decrease, including a 15.3 percent fall from young households (particularly un- for those ages 15 to 24. Professor Andrew der age 45) and toward those in the 55 to Sum from Northeastern University ex74 age group.” plained that families with young children The Gini Index is another tool used to are six times as likely as elderly families to make sense of America’s income inequal- be poor. This raises questions about govity. It describes a nation’s income distribu- ernment policy, in particular the numertion with a single number between zero ous programs such as Medicare, Medicaid, and one. A zero indicates perfect equal- and Social Security that are focused on ity—an economy in which everyone earns financially supporting older Americans. It the same income—while a one indicates also raises the issue of public education, as the most unequal society possible. Amer- economists cite the rising value of college ica’s Gini coefficient is approximately .45, degrees in the current economic dowturn. in comparison to the United Kingdom at It is important to educate the young gen.34 and China at .41. erations if they are to increase their earnAmerica also exhibits other forms of ing power. income inequality. This September, the Perhaps even more intriguing are the Census Bureau released the poverty report results from the analysis of immigrant infor 2010. The overall outcome of the re- comes. Immigrants actually fared better port, that poverty is rising while income is than American-born citizens. Immigrants falling, is not surprising. But what is inter- who obtained citizenship only had a 3.9 esting is that these effects are not distrib- percent decline, while people born in the

Pay it Forward

US had a 6.1 percent decrease. This might to the prices of luxury goods. The buying example, the case of Steve Jobs at Apple be the result of the recent influx of highly power of the poor is increasing. Prices of or Lee Iacocca at Chrysler. One may educated immigrants, once again empha- items that were once ‘luxury’ goods are be- wonder: What strategy would these comsizing the importance of eduaction. ing driven down and are becoming more panies have implemented under different However, economic inequality in the and more available to the masses. Thus, leadership? A good CEO is a valuable asUS may not be as bad as these statistics the differences in purchasing power be- set because executives have a great deal of make it seem. A mere examination of the tween the rich and poor are becoming less control over their organizations’ success. differences in income cannot accurately relevant. Furthermore, the CEO has the potential portray the real differences in earnings or the more severe disparities in well being between the rich and poor. This is in part because income is affected by a number of outside factors that are not reflected in these measurements. One outside factor that influences the rich particularly is the federal tax rate. Many Americans allocate their earnings so that they pay the least amount in taxes. David Splinter, a Ph.D. Another issue to examine when dis- to expand the business, bringing jobs to candidate in economics at Rice Univer- cussing income inequality is the behav- many. They bring their companies into sity, pointed to the 1986 change in the ior of the super-rich, in particular the new territory and take risks. tax code as a crucial turning point. When CEOs of the world’s largest corporations. A valid concern remains that there is the tax code changed, many businessmen The growth of CEO salaries has far out- a small group of high-income elites conchanged the filing status of their compa- stripped that of the typical worker. In the trolling more and more of the economy. nies to route their incomes through the in- ‘50s and ‘60s, CEOs of major American Nevertheless, it can also be argued that dividual tax system (where they were taxed companies earned 25 to 30 times the wage the top 1% of US earners is a highly fluid less) rather than the corporate tax system. of the average workers, but in 2007 (just group, and the amount of money flowing Personal incomes during this time period before the economic crash), this multiple to “the rich” is perhaps the most volatile. appeared to increase, when really earnings grew to a staggering 350. The earnings and wealth of the richest are were simply reallocated. It may seem unjust that CEOs earn the most sensitive to tax policies and ecoFigures about income differences also far more than their companies’ workers, nomic trends. Some dramatic examples ignore differences in prices and, therefore, but one must also consider that CEO pay are framed by the most recent recession. buying power. Some economists, such is driven by supply and demand, not the One such case was John McAfee (whose Christian Broda and John Romalis from salary of the average worker. In many in- anti-virus computer software bears the the University of Chicago, claim that the stances, the presence of a powerful CEO same name). McAfee’s net worth fell 96 gap between the rich and poor is closing has nearly single-handedly catalyzed percent; from $100 million to $4 million. because the prices of basic needs (food, incredible earnings that more than com- This data suggests that social hierarchy in clothing, etc.) are falling in comparison pensate for the CEO’s pay. Consider, for the US is not topped by a selective and permanent upper tier, but is frequently a “fluid” group. There are 46.2 million poor people in America, with 44.3% of them living in deep poverty (meaning they have half the income defined as the poverty level). These numbers are startlingly high and call out for reform. Perhaps one way to effectively target the economic failures of the country is to remedy the economic inequality that plagues the nation. But in order to find the solution, we must first identify the factors influencing the problem with a valid measurement of individuals’ economic standing. Without frequent updates on American inequality, people will continue to fall through the cracks. BT

A valid concern remains that there is a small group of high-income elites controlling more and more of the economy.



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JOHN LIPSKY Former First Deputy Managing Director, IMF – On the Global Economy John Lipsky served as the First Deputy Managing Director of the International Monetary Fund from September, 2006, until August, 2011, and is currently the Special Advisor to the Managing Director. His previous positions include JP Morgan’s Chief Economist, Chase Manhattan Bank’s Chief Economist and Director of Research, and Chief Economist at Salomon Brothers.

Business Today: How was your experience in running one of the most prominent financial institutions in the world after the resignation of Dominique Strauss Kahn? John Lipsky: I can assure you that the news was shocking. But I felt calm about having to take on the role of Acting Managing Director. I had great faith in the organization, reflecting the dedication of the staff and their understanding of the important issues that we were dealing with. It is an organization of 2,400 exceptional professionals serving 187 member countries.

for granted that tends to cause big problems. If there is a message, the message is to think ahead, to consider the alternatives. Just because things are calm today doesn’t mean that they’re going to be calm tomorrow. BT: It is important to recognize that the IMF faced some difficult economic situations, from the collapse of Lehman Brothers to the crisis in Greece. What lessons in particular stand out in your mind? JL: I would say that two things have stood out—actually, lets make it three. First, the power and immediacy of the interconnectedness of the global economy, which has been demonstrated dramatically throughout the crisis. It has been a global crisis, one in which manufactured exports from Asian countries virtually collapsed for a time in places where the Lehman brothers were unknown and no one would have been certain what those brothers did for a living. In short, global interconnections were much more linear than had been understood.

BT: How has the U.S. reacted to these crises and what policies are needed in order to reach a sustainable position? JL: The most immediate need following the events of September 2008 was to stabilize the financial sector. If you remember, the events built up dramatically in America, and yet, when the crisis peaked in September 2008, not only with the failure of Lehman Brothers and the virtual collapse of AIG, but also including the bankruptcy of General Motors and Chrysler, the merger of Merrill Lynch and the Bank of America and the failure of the GSEs, it appeared to catch U.S. authorities by surprise. It looked as though the crisis response was being improvised on the spot. Out of that experience has come a significant effort to address and improve financial regulation, most significantly through the Dodd-Frank Bill, which remains controversial. Time will tell how successful these regulatory changes will have been, but it’s safe to say that U.S. financial regulatory reform will require ongoing attention and effort for some time to come…

I never doubted for a moment that the Fund’s staff and its Executive Board were going to respond energetically, appropriately, and effectively to the challenges before us, and they did. It was clear to me that the organization didn’t depend on any one individual, no matter how talented. While I didn’t underestimate the challenges before us, I never doubted that the institution would be able to respond in an absolutely first-rate way. When I first spoke to the staff after taking over as Acting Managing Direc- The second lesson is that some of the most tor, I told them that I knew I could count on powerful interconnections are carried along them and they could count on each other, financial routes. So whereas it might have The IMF has identified four key aspects and I was absolutely right. been thought previously that trade and in- of financial sector repair. One is regulavestment connections were the principle tion—and I daresay that when most people BT: The IMF was in the news every day. route for transmitting economic impulses think of financial sector reform, they think What can be learned from the turmoil of across borders—including shocks—it turns that it means regulatory reform alone. Certhat time period? out rather that financial channels are the tainly it’s important that the regulations principle conduit. And that leads to the be amended and improved, especially so JL: The lesson to learn is to be prepared. You third conclusion, which is when problems that the perimeter of financial regulation never know what’s going to happen next, but arise in a globally interconnected world, a is expanded to encompass all systemically you’re rarely seriously harmed by the things cooperative, global approach to finding so- important financial institutions. Second, fiyou’ve worried about. It’s what you’ve taken lutions is required. nancial supervision needs to be improved. In FALL 2011 BUSINESS TODAY


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other words, the application of regulations is just as important as the regulations themselves. Next, there’s need for a resolution mechanism to eliminate the so called “too big to fail” effect. And finally, the fourth element of financial sector repair is assessment. This includes providing an independent assessment of the quality of financial regulation, supervision, and resolution, and of the actual implementation of the rules and laws governing the financial sector. The latter is a responsibility that falls to the IMF and, in fact, only last year we conducted our first Financial Sector Assessment Program (FSAP) for the United States. One element of reform has been an agreement that all G20 members will undertake a FSAP conducted by the IMF and the World Bank at least every five years. And the IMF membership itself decided that all IMF member countries that have systemically important financial sectors should undergo a FSAP every five years.

broader problems that are inherent in the architecture of the euro area and more broadly of the European Union itself. As is widely recognized, there is at present a varied vision among the member countries of how Europe will evolve. Moreover, in virtually every European country there is a spectrum of opinions about what the future of Europe should look like. The 17 countries that today make up the Euro area have a single central

Making this organization more effective at promoting economic and financial cooperation will be the key to sustaining the progress that we aim for. bank that issues the Euro, but there is no matching political authority. That has lead to problems of maintaining a good balance in budgetary and fiscal policy across all the members of the Euro zone.

Moving beyond the financial sector, the United States—like most other advanced economies—obviously needs fiscal reform. There simply is no equivalent to the U.S. fedThe recent discussions and negotiations eral government and its relations to the U.S. in Washington attracted enormous atten- economy in the European construct. The tion. There are some who would say that the rule that was created to compensate for the agreement that has been reached is a good lack of a central fiscal authority—the Staone, while others are more critical. Regard- bility and Growth Pact—was intended to less, it is clear that what is needed for better discipline the fiscal policies of its members, U.S. economic performance in the future but it was breached almost immediately by not only is a better balanced public budget, the two biggest economies in the Euro area, but also spending controls and a thorough Germany and France, sharply undercutting reform of the tax system in order to elimi- the Pact’s credibility. nate distortions that impede economic efficiency. As is also well known, entitlements, As the crisis in the peripheral euro counespecially Medicare and Medicaid, are tries evolved in the wake of the 2008/2009 clearly unsustainable in their current form. downturn, the Euro members have strugLooking beyond that, the education system gled to create new institutions to stabilize must be strengthened and improved in or- markets and restore confidence. The Euroder to create a more highly trained and more pean Financial Stability Facility is designed productive labor force. to provide financing across the Euro area to undertake many of the actions that the BT: What do you think will be some of federal government would undertake in the the significant long lasting consequences of United States—such as the efforts that have what is occurring in Europe? Is the Greek been taken by the U.S. government to uncrisis just one symptom of a disease that is derpin the financial system in times of crisis. spreading in the region? BT: Crisis is good for the IMF, but bad for JL: The strains in the peripheral countries the world—how can the IMF be a more acof the Euro area—Ireland, Portugal, and tive player during times of peace? Greece—clearly are symptoms of two 46


JL: I would disagree with the premise of the question. Our goal is to help avoid crises. However, under our original income model, it’s true that the IMF lived on income from making loans to its members in financial difficulty. So that’s one reason it might have been said that a crisis was good for the IMF because then it has more income. Or maybe the idea is a bit subtler: the IMF feels more important in a crisis because it helps deal

with the crisis. At the end of the day, however, that’s not our goal. Our goal is to create a financial and economic environment of progress and stability. So in this fundamental sense, crisis means we’ve failed. So how can the IMF contribute to peacetime? Well that comes back to our opening discussion. How do we effectively take account of the economic and financial interconnection that is a hallmark of our globalized world? Making this organization more effective at promoting economic and financial cooperation will be the key to sustaining the progress that we aim for. We can do this in many ways: by enhancing our understanding of economic and financial linkages, and by cooperating with the policy coordination efforts of the Group of 20 countries, for example. I can assure you that from the outside it may look more exciting when there is a crisis, but our goal is to create and sustain a very different world, indeed. BT: What lies ahead for you? JL: First of all, on September 1st, I will turn over my position as First Deputy Managing Director to David Lipton. The new Managing Director, Christine Laguarde, has asked me to stay on as a Special Advisor to her through the G20 leaders summit in November and when that’s over it’ll be time to start thinking about what’s next. BT

Interviewed by Alisa Tiwari

1.800.ASK.DTFA (1.800.275.3832)

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Rita Soronen is the President and CEO of the Dave Thomas Foundation for Adoption, which is working closely with Wendy’s to revolutionize adoption in America. By Rita Soronen


lthough we say his name dozens of times every day, there is an entire population of young adults who may have never heard of Dave Thomas. Not only was he the founder of Wendy’s, the iconic international hamburger chain, but he also created the Dave Thomas Foundation for Adoption. Adopted as a child, Dave Thomas understood the dynamics of melded families, and was keenly sensitive to



the challenges embedded in America’s foster care system and, notably, the children who must navigate government structures, frequently on their own. He emerged as a national adoption advocate in 1990, when President George Bush asked him to become a spokesperson for a new adoption initiative. Dave Thomas urged businesses to provide adoption benefits to employees, testified before Congress in support of adoption

tax credits, appeared in public service announcements, led the effort to create the U.S. Postal Service’s adoption stamp, and in 1992 created the Dave Thomas Foundation for Adoption. Clearly ahead of his time, he also put in place a unique nonprofit/corporate partnership that thrives today and focuses on dramatically increasing the adoptions of children from foster care. Cause marketing was not uniformly

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accepted as good for business 20 years ago; today it is the rare corporation that does not align with efforts to impact social change – from eradicating cancer to supporting families of critically ill children, from building homes for the displaced to assuring clean water for citizens of African nations. Research now shows that doing good is good for business, but in focusing on foster care adoption, Dave Thomas simply wanted to give back. As a result, Wendy’s franchisees– including their employees and their customers–The Wendy’s Company corporate staff, and suppliers associated with the business all work to generate significant funds for the national nonprofit public charity with the same commitment that resonated in Dave Thomas’ quote, “These children are not someone else’s responsibility. They are our responsibility.” The Dave Thomas Foundation for Adoption is equally committed to measurable results from the programs that have grown under this partnership, most notably Wendy’s Wonderful Kids, a signature program of the Foundation.

Consider the child welfare landscape today. According to the most recent national estimates, last year, nearly three million investigations of child maltreatment occurred in this country. As a result of those investigations, more than 700,000 cases of child abuse or neglect were substantiated by the professionals charged with assuring the safety and care of these very special children. In line with procedures defined by statute and jurisdictional protocol, more than 255,000 children were placed in foster or temporary care to assure their safety and to assist the family last year alone. Sadly, for 107,000 individual children, more than 50 percent of whom are age 8 or older, the egregiousness of

their abuse, neglect or abandonment demanded not only intensive court involvement and the resulting maze of systems and professionals, but also permanent separation from their parents

the adoptions of 2,376, with 708 more children in their pre-adoptive placements, simply waiting for the final court hearing. Significantly, of these children, 69% are age nine or older, 48%

A wait of four years, a lifetime to a child, is often further complicated by multiple placements in different homes, schools, and neighborhoods and frequent separation from siblings. and homes. The balance of children entering the system remains uneven and the length of time in care is frequently too long. Last year, for example, 64,000 children in foster care were permanently removed from their families of birth, yet only 53,000 children were adopted. These same children waited in foster care an average of four-and-a-half years to be adopted and many waited even longer. A wait of four years, a lifetime to a child, is often further complicated by multiple placements in different homes, schools and neighborhoods and frequent separation from siblings. Childhood moves very quickly in four years. Understanding the urgency of this dynamic, the Dave Thomas Foundation for Adoption designed and implemented Wendy’s Wonderful Kids in 2004 to increase adoptions from foster care, concentrating especially on children that will most likely linger in or age out of care – older youth, children with siblings who are also available for adoption, and children who are physically or emotionally challenged. With the fundraising partnership of Wendy’s, the program has grown from seven pilot sites to now 122 individually grant-funded positions in public and private agencies in all 50 states, D.C. and four provinces in Canada. To date we have served more than 7,200 children and have finalized

have at least one identified disability, 27% have had six or more placements at the time of referral, and 21% have had failed or disrupted adoptions prior to Wendy’s Wonderful Kids. Numbers alone, though, are insufficient to fully explain the success of the program. Rigorous evaluation of adoption recruitment programs should be standard practice given the importance of the outcomes, yet until now, none have been evaluated using methods that yield rigorous evidence suggesting that they work differently than the status quo. In order to understand the effectiveness of the child-focused model, the Foundation commissioned Child Trends to conduct an unprecedented five-year research effort that presents the most rigorous empirical evaluation of foster care adoption recruitment practices completed to date. The results from a randomized control trial involving more than 20 of the Wendy’s Wonderful Kids sites show that children in the experimental group were substantially and significantly more likely to be adopted, with the greatest impact on older children and children with disabilities. The partnership of the Dave Thomas Foundation for Adoption, Wendy’s and its customers, and adoption agencies across the nation are making a measurable and substantial difference for children waiting to be adopted. Dave Thomas has two equally important legacies: the business he created and the lives he has changed through the Dave Thomas Foundation for Adoption. BT



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CLIVE BROWN COO of JPM Asset Management – On Superior Service and the Debt Crisis

Clive Brown is the chairman of JPMorgan Chase’s Investment Management business in Asia and global chief operating officer responsible for business management of the investment management platforms in Asia, EMEA, Latin America and the U.S. His role encompasses new strategic developments for the business, as well as overall oversight for the business infrastructure and supporting functions. He is also a member of JPMorgan Chase’s Executive Committee, the most senior policy-making group within the firm.

Business Today: Could you briefly explain the functions and structure of the Asset Management division and its role within an investment bank? Clive Brown: Firstly let me clarify that JP MorganChase has a number of operating divisions which includes the Investment Bank and the Asset Management business as well as Treasury and Securities Services (‘TSS’), the retail and commercial banks in the US and a very large credit card business. The Asset Management business is part of the overall bank and does not play any role within the Investment Bank. The Asset Management division manages money for ultra-high net worth and high net worth individuals through its Private Banking and Private Wealth Management arms, and for the mass affluent, corporations, financial intermediaries, sovereigns and central banks through its Investment Management arm. We manage money against all sorts of benchmarks designed to achieve a variety of outcomes. A lot of the money we manage is destined to provide pensions for people but we also manage a lot of cash and short term fixed income on behalf of corporate treasurers.

BT: As the Chief Operating Officer of AM, what are your main responsibilities in running the division? CB: My main task is to oversee all of the operational functions that support the IM business to ensure that they are functioning properly and are able to support the business as it grows in size and expands into new business areas and geographic locations. As

CB: JPMorganChase has always been prudently run by Jamie Dimon, who has long emphasized the importance of maintaining a very strong balance sheet that is not overextended in any particular area. Throughout the company we have a very strong culture of rapid escalation of issues and close and regular reviews of each of the businesses. Management responsibility is devolved to each line of business, and we place strong

Throughout the company we have a very strong culture of rapid escalation of issues and close and regular reviews of each of the businesses. such, I am heavily involved with new business decisions and need to maintain a close understanding of new regulatory developments and their impact on our business. BT: JPMorgan is widely considered to have been one of the banks least hit by the 2008 crisis. How did the bank manage to minimize losses and come out on top?

emphasis on having strong local management in each of the countries in which we operate. In Asset Management in particular we believe in longevity of service, and many of my colleagues I have known for over 15 years. BT: How does JPM AM compete against not only other AM groups in investment FALL 2011 BUSINESS TODAY


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banks but also large private equity funds and hedge funds?

ties. Other banks have tried to emulate this strategy, but none so successfully.

CB: The single most important thing about a successful active Asset Management business is whether it can deliver consistently superior investment performance over time. That is what our clients expect and want, and after that they also expect great service and operational excellence. We compete by providing these things to our clients. In certain areas, being part of a very large inte-

BT: What is your outlook on the current debt crises in the US and Europe? How do you see it affecting the AM industry and the global economy in the long run?

CB: I am a committed believer in the continued growth and rise of emerging markets possibly because I have spent 20 years of my CB: The crisis in Europe is a real problem career living and working in Asia, and over at the moment, with no obvious end game that time have witnessed the growth and currently in sight. The excesses of the past development of economies in the region. decade are coming home to roost, which I would challenge anybody who visited China in 1988 not to be impressed by what they would witness if they visited again today. It is true that Asian manufacturers still depend to an extent on Western consumers, but that dependence is moderating fast as a middle-income group develops across Asia and as governments in the region refocus their efforts in this regard. Asia has concentrations of population, significant reserves, increasingly well-educated workforces, and most important, the drive and work ethic to almost certainly means a lower growth en- continue to succeed. The risks are of course vironment across Europe for the next few that imbalances in the world will lead to years than we were anticipating. Equity protectionism and eventually conflict. Chiprices are in retreat as a result and by most na’s growing military strength in the Pacific valuation measures now look cheap, but that does not sit comfortably with Japan or other does not mean they won’t become cheaper Asian nations who will look to the US for still. As for the US, the situation is much support. the same, save that consumers still seem to have money to spend and many companies BT: A significant number of the readers are have restructured themselves and look to be interested in working in finance – what do in reasonably strong financial health. The you see as the biggest attraction of working problem, though, is growth, and until the in the AM division rather than in Investpolitical situation moderates and some lead- ment Banking Division or Sales & Trade? ership emerges it looks as if the US markets may also struggle to make much headway. CB: My observations are that the asset manMost AM businesses are to a certain ex- agement business is all about long-term pertent dependent on market growth to make formance and long term relationships. As money. It is hard to encourage investors such we tend to want to attract people who once they have lost confidence in markets to are looking to build a long-term career with invest, and so until confidence is restored to us rather than those in a hurry. It’s about markets it will be difficult for the industry making the right investment decisions overall to make good headway. That said often for the long term rather than about there are always areas of opportunity for all doing transactions and as such it tends to businesses and we have been using the recent attract individuals who are willing to build period of weakness to focus on areas where their skills through a variety of assignments we see additional opportunities or where within the firm before finally settling in we have not been as strong as we might have their specialist area. We constantly remind liked. our staff that the money we manage belongs to our clients, not the bank, and I think this BT: Some experts are turning their eyes to breeds in our staff a fiduciary mindset that emerging markets in times of trouble in the feeds into how they approach things on a developed world markets, while others are day-to-day basis. BT showing concern that emerging markets Interviewed by Woojin Chae

The single more important thing about a successful active Asset Management business is whether it can deliver consistently superior investment. grated financial services organization delivers strong advantages for us – it means our clients have access to greater resources and we have access to clients at the very highest of levels. Our high net worth clients appreciate that we can provide them with access to products and deals that they might find harder to access directly themselves and when needed we can help them with other financial transactions as many of them are owner or managers of corporations. BT: What influenced JPM’s decision to buy Highbridge Capital Management and what do you see as the benefits of such an acquisition? Why have other large asset management firms not purchased large, prominent hedge funds? CB: Our largest clients around the world are looking for diversification in the way their money is managed and access to specialist managers who can offer them new and innovative products not available more broadly in the market. Equally, specialist hedge fund managers typically want access to these large clients, typically corporates, and many of them don’t have the resources or manpower to be able to reach them. It was these basic business needs that drove the decision to buy Highbridge – i.e. to combine JPMorgan’s distribution and client franchise with Highbridge’s specialist investment capabili52


may be extremely volatile due to the instability in the developed world markets. What is your view on the investment opportunity/ risk in EM in this current financial climate?

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To be or not to


Fierce Debate Over Work Visas

by Aigerim Tulepbergenova, University of Oregon


very year, more than 600,000 in- American businesses to take advantage ternational students graduate from of these skills by limiting the number U.S. colleges. On that special grad- of work visas available for highly skilled uation day, each student celebrates the workers. success of his or her college career. They Work visas available for highly are excited and happy; the whole world skilled labor in the United States are is in their hands. These students would known as H-1B visas. The H-1B visa alseemingly not have a problem landing lows US employers to hire and recruit inthe perfect job: they are multilingual, ternational professionals to work in the have an excellent work ethic, and bring USA for a specified time period. H-1Bdiversity to the workforce. Although Visa-qualifying occupations include jobs these new international graduates might that are related to professional fields such wish to work in the United States instead as IT, computing, finance, accounting, of returning home and there are compa- banking, marketing, advertising, enginies that desire their valuable skills, im- neering, healthcare and other related migration policies in the United States fields. In order to obtain a H-1B Visa, an have made it increasingly difficult for applicant must find a US company that



will offer him or her a job and sponsor his or her H-1B visa application and present a college diploma, a current resume, or curriculum vitae with a detailed employment history, a passport, or any other documents that can serve as a proof of a specific job offer. The primary difficulty in obtaining a H-1B visa comes not from the application process itself, but rather the yearly limit on the number of visas issued. Beginning in 1990, Congress passed a law establishing a limit on the number of H-1B visas issued each year. When the quota was first established, it was rarely reached and thus had little impact. By the mid 1990’s, however, the quota began to fill up by

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year’s end. As globalization has increased every H-1B visa issued, technology com- companies that do not routinely hire and labor mobility has become incredibly panies increase employment by five work- foreign workers have found themselves important to maintaining a competitive ers.” In fact, this program is considered at a disadvantage compared to large corlabor force, the quota has become an even to be one of the primary sources for job porations like Microsoft that apply for greater burden upon the national econ- creation and innovation in America. Ac- thousands of H-1B visas each year. For omy as more and more companies are cording to the National Venture Capital many small- to medium-sized companies, denied the ability to hire foreign skilled Association, research has shown that im- the legal fees and application process are workers. According to the official website migrants have started 25% of U.S. public hurdles to sponsoring a worker on a H-1B of U.S. Citizen and Immigration Servic- companies, which account for more than visa. Karen Erne, a former HR Director es, the current H-1B cap is set at 65,000 $500 billion in market capitalization, for GeoEngineers Inc., states that “it was plus an additional 20,000 visas for inter- add significant value to the U.S. economy, definitely an educational process to hire and hire thousands of U.S. workers. the first H-1B employee. Yet after that, it This great proportion of American got easier and more common.” In the past public corporations started by immi- several years, the financial crisis has siggrants shows that H-1B visas are essential nificantly reduced the amount of employfor keeping young and driven entrepre- ees being recruited by most companies; neurs in the country to assure the further H-1B visas have been easier to obtain success, innovation, and international since there are fewer employers sponsorcompetitiveness of the U.S. econo- ing foreign workers to hire. For example, my. Doreen Barth, an Employment Stephanie Boedhi-Tjahjono, an internaManager at Blount International, tional student from Indonesia, is currentsuggested that international ly working for EagleView Technologies as professionals help the organiza- a revenue accountant. When asked about tion “by providing hard to find her H-1B application steps, Ms. Boedhiskills in critical areas where Tjahjono suggested that she considered it is especially challenging herself lucky: “It’s all based on the year to find the necessary skill you apply. I am lucky enough that there level.” With an increas- were not many H-1B visa applicants that ingly global and inter- year.” However, as the national economic connected economy, situation improves and companies begin many corporations to hire at pre-financial-crisis levels, the require employees H-1B quota will once again be a limiting that can effective- factor on America’s prosperity. ly communicate As the competitive field for busiand work with nesses continues to shift from domestic branches, cus- to global, it will become increasingly tomers, and important that American companies national students that graduate with an suppliers around the world. According to be competitive in their ability to recruit MBA or higher degree from an Ameri- Magid Shirzadegan, Director of Interna- the most innovative, skilled, and encan university. This cap has become such tional Student & Scholar Services at the trepreneurial workers from around the a burden on American companies’ ability University of Oregon, “the global market world. Although it was conceived as an to hire the most skilled workers that in dictates to hire more globally minded attempt to promote employment of US 2008 every H-1B visa allocation was tak- staff that can communicate effectively in citizens, the quota on H-1B visas has inen within a week of the application being other languages besides English.” H-1B stead reduced the global competitiveness available. professionals help develop fresh ideas, of American businesses and denied them While many labor unions have been open new markets, create more jobs, and growth that would facilitate the hiring of concerned that foreign workers on H-1B raise the U.S. economy to the next com- additional domestic employees. Many of visas displace American citizens from petitive level. America’s most successful businesses, indomestic jobs, there is a great deal of eviHowever, a worrying trend has cluding Google, DuPont, Intel, and Sun dence that highly skilled foreign workers emerged in the H-1B visa application Microsystems, were started by foreign actually increase domestic employment process where larger corporations and immigrants. For every highly talented opportunities by making our companies universities have seemed to dominate and skilled H-1B applicant that is denied more competitive and successful in the the application pool at the expense of a visa due to an arbitrary quota, America international market. According to The smaller businesses and entrepreneurial is risking the entrepreneurial spirit that Economic Times, NASDAQ CEO Robert companies. Due to the time window has made it competitive around the globe Griefeld, stated that studies show “for within which the H-1B quota is reached, and prosperous at home. BT FALL 2011 BUSINESS TODAY


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ERIK PRINCE Founder, Xe Services – On Successful Entrepreneurship Erik Prince built and developed Blackwater Worldwide into a major private military company, starting with an idea to improve national security in the United States, his education from Hillsdale College and training as a SEAL. Blackwater Worldwide was renamed Xe Services, which he sold in 2010 to USTC Holdings. He is planning on starting a private equity firm to deliver necessary commodities to countries in need.

Business Today: You once said that “Blackwater is trying to do for the national security apparatus what FedEx did for the Postal Service.’’ How so? Erik Prince: It is an objective fact that the rise of Fedex gave consumers an alternative, cost-effective choice for delivering goods overnight or by truck with the actual ability to track a parcel’s location. Fedex gave a government monopoly–the U.S. Postal Service–another entity to measure and benchmark itself against. The Department of Defense is the largest monopoly in the world. The DOD budget is currently about half of what the rest of the world spends on defense combined. With the defense budget at unnecessarily and unsustainably high levels, the U.S. certainly needs some competitive benchmarks to help policy makers find efficient resource allocations.

Activity-based costing is an unfamiliar term among government employees. Only by applying private sector comparisons will fiscal sanity be brought back to defense spending and other facets of government expenditure.

BT: Does outsourcing international secu- to build the temporary camp for all those rity make sense for the U.S. government? U.S. military personnel, who were coming to build a simple barracks, since Azerbaijan EP: Outsourcing the policy making for in- borders Iran. ternational security makes no sense. That is a constitutionally required function of our BT: What motivated you to sell your stake government. However, the implementation in the company you built? of those policies certainly can be done by a blend of public and private entities, apply- EP: I sold the business because it was time ing whichever tools best fit the job. A simple to move on. Building a business and a team example: in 2005, the U.S. wanted to help from scratch and seeing it grow is a truly Azerbijan build some maritime security ca- satisfying experience. For me, the business pabilities to protect Azeri oil infrastructure was a great extension of what I and the leadin the south Caspian Sea. U.S. Special Oper- ership team loved to do with our time and ations were already fully tasked in the region energy. It kept us close to the Special Operaand unable to provide trainers. Blackwater tions community we came from and it was entered a difficult situation because Azeri truly a forum where we could work hard and Navy officials were irate due to the con- still serve our country. Whether rescuing a stant delays plaguing the delivery of USG diplomat or wounded US soldier from comresources. The mission was to build and im- bat, training US forces to conduct their misprove their training areas while conducting sions and survive another deployment, or numerous courses in individual and small delivering food, mail, ammunition, or whatunit tactics for Maritime operations. Black- ever was needed to the far flung Forward water accomplished the mission fully and Operating Bases (FOBs) in Afghanistan, under budget, pleasing both USG and Az- we constantly pushed ourselves to raise our eri customers. Instead of sending in sixteen performance, serve the government client, guys for a couple of weeks at a time to come and never lose sight of mission imperatives. and go, Blackwater sent four specialists to Lots of companies say they supported the come and live on the economy, oversee the troops, but we took great pride in delivering construction of eight buildings and training whatever they needed down to the last mile areas, and conduct all the training. We did or meter. Selling was a painful decision, but this while the U.S. Navy was unsuccessfully the endless political attacks and severely ditrying to build a barracks with a 150-man minished merit of the government contractSeabee Unit. They could not get past where ing process made the decision necessary. FALL 2011 BUSINESS TODAY


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BT: Do you think the American media has a positive or negative effect on entrepreneurial ventures and, more generally, corporate finance? Why or why not? EP: It’s alarming to me how few people respect or even understand entrepreneurship anymore. Most reporters have no understanding of small business since they have little or no practical exposure to it. America was made great by lots of small entrepre-

always have to find a way to get the job done, to serve your customer, to take care of your people, and to try to figure out how to overcome tomorrow’s challenges today. I highly recommend military service for those seeking business careers. No other job can imbue you with so much responsibility at an early stage of your career. The learning curve of your first five years in the military is like no other. I wouldn’t recommend staying for twenty years unless you are the unique type

It’s alarming to me how few people respect or even understand entrepreneurship anymore. neurs – farmers, miners, trappers, inventors of person who can avoid getting stuck in and innovators who found a way to make “government think.” Too many military catwo plus two equal five. The American me- reerists fall into that trap and can’t keep up dia has grown more hostile to these pioneers with the speed and the spirit of innovation and risk takers. The media generally por- required of small business owners. There are trays entrepreneurs as succeeding on some- always exceptions but the military is a vast one else’s back instead of as giving people a bureaucracy that tends to breed bureaucratchance to earn a competitive wage and pro- ic thinking. vide for their families. BT: I understand you are planning on startBT: Do you think today’s Congress and the ing a private equity firm. What can you tell Obama Administration have a positive or us about it? negative effect on entrepreneurial ventures? Why or why not? EP: This private equity effort will focus on reliable delivery of food, energy, and mineral EP: They have had a seriously negative im- commodities from some of the tougher enpact. Just look at the economy. Simply put, vironments in the world. Since food prices whenever government increases costs and have gone up almost fourty percent over the uncertainty for the risk taker (be it in the last two years, I want to focus on doing busiform of more mandates, taxes, regulation ness in the frontier parts of the world where and litigation), government drives down others dare not tread. Ultimately, logistics incentives encouraging more investment and security requirements in those regions and risk-taking from entrepreneurs, be they are paramount. That is an area in which my large or small. team has built some real capabilities over the past decade. BT: How did your military background as a SEAL prepare you for starting your own BT: How did your field of study in college business? Would you recommend military prepare you for life as a SEAL and an entreservice for those interested in business? preneur?

paradigm, and took some other business classes as well. As for leadership training, I joined the local fire department as a paid part-timer, and the sheriffs’ department dive squad. Both were excellent experiencebuilders on a lot of levels. Showing up as a snot-nosed college kid and earning the confidence of the firefighters to enter a burning building with me or to conduct a thru-ice body recovery dive was excellent experience both in how to follow and how to lead. BT: What advice do you have for college kids interested in business and entrepreneurship as to what sort of subjects they should study or activities they should pursue? EP: My Dad gave me good advice when I was entering college. He stressed that what I did over the next four years, both academically and in my “extra-curricular” activities, would have great effect on what I did for the rest of my career. He encouraged me to get exposed to many diverse business areas and a broad range of studies. While in college, work in areas that will give you practical life skills such as accounting, machine or

electronics repair, mid level management, or anything that will build your base of practical experience. Build your skill sets more like a Leatherman tool than a narrow fragile scalpel. Spend more time filling up your toolbox of life skills than with a fraternity. Start a business, even a small one, because EP: SEAL training is difficult and really EP: I left the U.S. Naval Academy and stud- the building blocks of success are all the teaches perseverance and determination un- ied at Hillsdale College. It was quite a stark same. Be willing to take risks and to fail. der extremely difficult physical, psychologi- change to go from a school run by the fed- There truly is more learning to be gained cal and emotional conditions. You can’t be a eral government to Hillsdale College, which from trying hard and failing then there is SEAL if you’re a quitter. Starting a business accepted no federal funding at all. I studied from smooth sailing. BT shares common challenges and stresses. You Austrian economics, the pure free market Interviewed by Nick Lulli



A LittLe BUSiNeSS Advice from Showtime ®

whatever you do, do it better than anyone else.

Always be prepared to reinvent yourself.

The Avenging Angel ReTuRns

©2011 Showtime Networks Inc. All rights reserved. SHOWTIME and related marks are registered trademarks of Showtime Networks Inc., a CBS company. “Dexter ®”: ©Showtime Networks Inc. All rights reserved. “Homeland”: ©Twentieth Century Fox Film Corporation. All rights reserved.

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MICHEL DE CARVALHO Board Member, Heineken NV – On the Rise of the Heineken Empire Michel de Carvalho is currently a member of the Supervisory Board of Heineken NV and a financier at CitiGroup. He is married to Charlene de Carvalho-Heineken, the fourth generation family member to control the majority of the shares via Heineken Holding NV, where she also sits on the Board of Directors. The company was founded in 1864 by Charlene de Carvalho-Heineken’s great-grandfather. It is now the world’s third largest brewer, complete with a total of nearly 250 brands that are sold in over 170 countries.

Business Today: Heineken NV obviously does not only represent the main Heineken brand but also manages hundreds of other brands. Could you please give us a brief overview of the entire group? Michel De Carvalho: Heineken now has brewing operations in about 70 countries. 10 to 20 years ago, a lot of the Heineken that we sold globally was actually shipped from Holland where there was an export division. Whereas now, we have brewing operations in almost all countries where we sell Heineken. Ironically, although today the biggest export from Holland is the U.S., we actually have no brewing operation [in the U.S.], which means that every beer sold in the U.S. comes by ship from our breweries in Holland. In most other big countries today, France, Spain, Brazil, Mexico, we brew locally. We went from brewing in 25 countries to 70 countries. We did that mostly through acquisitions and by picking up in each of those countries the leading local brand. If you have a mainstream brand, you can then add the Heineken brand onto the same distribution truck which then goes around and makes it economic to sell the lower volume, yet higher price premium Heineken. So today we are in excess of 230 brands worldwide of

which the most prominent world brands are pricing that we are able to obtain the in the Heineken and Amstel. In Asia, our leading U.S. is based on the fact that people know brand is Tiger, in the U.K., Kronenbourg, every bottle or can of Heineken they drink and in Mexico and lot of U.S., Dos Equis. So is made in Europe and is very fresh – it’s only we have built the Heineken business to the on the sea for 5 days, and then it gets very point where the total volume in percentage rapidly distributed around the U.S. terms of Heineken has gone down in relation to the total portfolio from 25% to 17% BT: What strategies does Heineken use to and the profit contribution has gone down not only compete against but also differenfrom 35% to 25 %. So yes, in expanding the tiate itself from its main competitors like Heineken Empire, we must deal with 230 Anheuser-Busch Inbev and SAB Miller? or so brands, but the main focus has always been and will be on the Heineken brand. MDC: You have to look within the portfolio of each of the big three companies. What BT: You mentioned that Heineken has is the percentage of their flagship brand in brewing operations in most of your major relation to the total? Now, before Anheusmarkets, and yet not in the U.S. Why is this? er-Busch and Inbev got together, there was already Inbev that was already bigger than MDC: It has two main disadvantages; the we were. Their flagship brand was Stella first is the economy of shipping beer on a Artois, and everybody in the U.K. assumed ship and its costs. Worse still, we are brew- that Stella was their no.1 brand, though it ing in Euros and selling in Dollars, so we represented a mere 5% of Inbev sales. Back are always exposed to exchange rate fluctua- then, the Heineken brand represented 25% tions, which has only gone against us in the of our sales. So impact-wise, the Heineken last ten years as the dollar has consistently brand obviously has a much smaller global got weaker. So why then don’t we brew in impact, and now that they’ve bought Anthe U.S.? The reason’s very simple. The mo- heuser-Busch, they’ve picked up the biggest ment we brew in the U.S., we become a do- brand in the world: Budweiser. Even though mestic beer. And there is an absolute love of those two names are vastly bigger than imported beer in the U.S. There is definitely Heineken, Budweiser only relies on the U.S. a premium caché for an imported beer and market, of which we wouldn’t mind having that is reflected in the price. The premium 47%. Though you do occasionally see Bud FALL 2011 BUSINESS TODAY


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in London, Milan, and Asia, there’s no way you’ll see the global reach that a brand like Heineken sets. BT: There have been talks of the beer world going ‘black’. Could you please explain what they mean by this and what steps Heineken are taking to overcome this challenge ahead?

and yet that tagline has now become in the folklore of the country. BT: What are some of the most significant Heineken acquisitions? MDC: There are three transformational

We got the number 2 position in Mexico, which is a huge beer drinking market. I think it is third or fourth in the world. So had we lost that to SAB Miller, SAB would have owned a huge chunk of Europe, taking away the Mexican brands that we had been developing in the US and shutting us out of

We try to be associated with events, because they will hopefully transcend the ban of advertising.

MDC: The same type of concerns about advertising alcohol is surfacing as they did with tobacco. Some countries are what we call going ‘black’, meaning you can no longer advertise beer, or any alcohol for that matter. France, for instance, is one where you can only advertise in magazines. If the whole world went ‘black’, as it is heading in the ones, all of which have built positions in key Mexico forever. That was a 7.6 billion dollar cigarette world, then brands that are more markets that you could never achieve by or- acquisition. We’ve started brewing Heinekestablished in certain countries have more ganic growth. en locally in Mexico. Why? The U.S. marof a chance moving forward. So we try to ket is a very special market; it divides into be associated with events, because they will The first, in 2002, was a Central and Eastern domestic/imported/craft beer and they’re hopefully transcend the ban of advertising. European business called BBAG that gave seen as being very segmentised. Mexico, on Now, if you take the Heineken Rugby Cup, us the number one position in Austria, Bul- the other hand, is actually proud that forthe equivalent of the Champion’s League for garia, Czech Republic, Romania, and Slova- eign breweries are coming in to brew in their rugby, we’ve been involved for many years kia. It was a 2 billion dollar acquisition and country because it means we’re trusting local and have established the symbol of the red they enabled us to pick up a lot of local and water, management, etc. star. We are also very fortunate in that the regional brands through which we could rugby goal posts are in the shape of an ‘H’ for then start getting Heineken onto the trucks. BT: What are some of your favorite beers Heineken. Additionally, we use the Heinekwithin the Heineken group portfolio? en Cup in the hopes that, if the world ever The next most significant acquisition was in does go completely black, newspapers will 2007/2008 with Scottish and Newcastle. S MDC: I really like something you only find still talk about the Heineken Cup. & N itself was the result of 25 years of acqui- in the U.S.: Heineken Light. We introduced sitions in the U.K. From what was an insig- it several years ago and we probably need to Another area that is growing in importance nificant share for us in the U.K., we reached put a little more effort in marketing it. I find is music festivals. For instance, there’s a the number 1 position among U.K. compa- it very refreshing and I can drink quite a lot huge music festival in Poland sponsored by nies with major brands like Fosters, Kronen- of it. I used to drink Amstel Light in the U.S., Heineken. We’re also sponsoring a festival in bourg, John Smith’s Ale, Newcastle Brown but now I’ve switched to Heineken Light. Rio called Rock in Rio where Coldplay, El- Ale, plus Bulmer’s and Strongbow ciders. Moving into our exotic brands, I really like ton John, and other artists from all over the We could then use our number 1 platform Newcastle Brown Ale. There’s a brand that world will perform. Thanks to new media, to develop the Heineken brand. Heineken didn’t develop until very recently. these concerts are replayed and talked about It’s called Desperados. It’s a brand we’ve had immediately on social networks, etc. Then right in 2009, the Mexican conglom- for years and years; a tequila flavored beer. erates Femsa, (a three-business company It comes in a very cool bottle with red and BT: While we’re talking about marketing, focused on cola, beer, and 7-Eleven type of green, and the taste is wonderful. Heineken is well known for its highly enter- shops) said that they would like to diversify taining television commercials and ad cam- and sell their beer business. We were very We are going to make that one of our global paigns. What are some of your favorites? close to Femsa a few years before because push brands. In Spain, I love Cruzcampo they had given us the licensing rights to sell and in Portugal I love Sagres. I’m a big cider MDC: The most successful Heineken ad their beers in the US, which was very profit- drinker, so I’m very glad we’ve now got Bulin the U.K. was the tagline ‘Heineken re- able. There’s a large Hispanic population in mer’s and cider in our portfolio. In our Mexfreshes the pubs other beers don’t reach’ and the U.S. that enjoys Mexican beers, so it had ican portfolio, I’m a big fan of virtually all it’s such a successful tagline that if you use added vastly to our portfolio. So when Fem- of them and drink them in rotation: Tecate, it in the U.K. now, people will still say ‘Oh sa wanted to sell their beer business, it was Sol, Dos Equis, and then occasionally I’ll yes, that’s the Heineken ad’. Some of them an opportunity to get complete ownership have a Murphy’s which is our stout. I always weren’t even born then since it’s been 25 of the brands we’d already been working on have a Tiger when I’m in Asia. BT Interviewed by Woojin Chae years since it was last shown on television, and selling for the last 4-5 years. 64



Corporate Social Engagement at Liquidnet By Brian Walsh, Head of Liquidnet For Good

Brian Walsh is passionate about the intersection of social impact and business value. As head of Corporate Social Engagement for Liquidnet, Brian focuses on leveraging the company’s resources to generate local and global impact while delivering value to the company.


ow should a company engage gaging employees and marshaling resources the broader society? Since the to apply a company’s core competency to late 1960’s, the term “corporate social challenges. social responsibility” (CSR) implied a sort Similar to Michael Porter and Mark of self-regulation, whereby businesses rec- Kramer’s framework for creating “shared ognize their obligation to multiple stake- value,” which involves “creating economic holders and work to minimize their nega- value in a way that also creates value for sotive impact on people, communities, and ciety by addressing its needs and challenges” the environment. (HBR, January/February 2011), CSE aims Liquidnet is a different kind of compa- to generate business value while also maxiny for a new era of business. We believe in mizing social impact. The two are not at actively engaging broader society through odds; in fact, we believe they are complewhat we refer to as Corporate Social En- mentary. gagement (CSE). To Liquidnet, corporate At Liquidnet, we do not believe in social responsibility is a defensive and reac- mere “checkbook philanthropy.” Instead, tive effort to “atone for corporate sins” by we believe that CSE is most effective when making half-efforts and token gestures. In it leverages all available resources – financontrast, CSE is a robust effort to re-imag- cial capital, human capital, brand capital, ine a company’s role in society, actively en- technology, physical space, business net-



works – to generate positive social impact. Liquidnet For Good, our CSE program, is designed to strengthen the local communities where we have operations and offer innovative solutions to global challenges. There are three components to Liquidnet For Good: Core Programs, Signature Project, and Markets for Good initiative. Our Core Programs focus on employee engagement in the local communities where we live and work. Beyond local grant making, a holiday toy drive, high school student mentoring, disaster relief, local organic vegetable delivery for employees, and local group volunteering opportunities, Liquidnet offers a matching gift program unlike any other company. Our “Double Down” matches three types of impact employees make on causes important to them: giving


money, giving time, and giving inspiration by raising money from others. No matter how employees give back, we double down on their impact. We also host a bi-weekly event called “Tuesdays w/ TED,” where we watch a recorded TED session and then have a spirited conversation about the topic, all in an attempt to raise employee awareness about a range of global issues. Our Signature Project is a comprehensive partnership with the AgahozoShalom Youth Village (ASYV), a residential community for vulnerable orphans in rural Rwanda. The ASYV recognizes that, with the right place to heal and the tools to flourish, these orphans have the potential to invigorate their communities and launch Rwanda to a new level of social and economic success. Liquidnet has partnered with the ASYV since the project’s inception. Beyond substantial financial contributions, employees and their family members – through a group called the Liquidnet Family – have volunteered their time, passion and expertise to help build the village. Over 70 employees have travelled to Rwanda to directly apply their skills on the project, from setting up the IT infrastructure to helping with accounting systems to providing capacity-building training for the local Rwandan staff. Back home, teams of employees train for months to take on challenging races to raise money and awareness for the project through an

effort called Race4Rwanda. Over the past three years, teams of 30-40 employees and friends have competed in the NYC Triathlon, raising several hundred thousand dollars for the project. Our third component to Liquidnet

For Good, and our biggest undertaking to date, is Liquidnet’s Markets for Good initiative. In a perfect world, markets would efficiently distribute money – in the form of debt, equity and philanthropic grants – to organizations that are sustainably achieving

the greatest social impact. Through Markets for Good, we leverage our core competency – using technology to make markets more efficient – to help unleash more money for good through both philanthropy and impact investing. We have a four-point strategy: 1) Clarify - Leverage brand to frame the possibilities; making sense of the challenges and the opportunities to make philanthropy more effective and bring impact investing to scale. 2) Convene - Bring together major stakeholders to develop system-wide solutions, playing the role of a “neutral quarterback” to move collective action forward. 3) Research - Partner with other leaders such as the Bill & Melinda Gates Foundation and the William & Flora Hewlett Foundation to produce new insights on what will drive more money to higher performing social organizations. 4) Innovation - Partner with Net Impact to engage business students to generate innovate solutions to challenges in the social enterprise ecosystem. At Liquidnet, our culture of innovation fuels not only the pursuit of a more perfect financial marketplace, but also the pursuit of a better world. Since 2007, our Liquidnet For Good program has re-imagined a company’s role in the broader society by offering innovative solutions to global challenges. BT






Written by two current Wall Street professionals, Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions breaks new ground in explaining how the pros perform valuation, M&A, capital markets analysis and leveraged finance. The book focuses on the primary methodologies used to determine valuation for public and private companies on a standalone basis, as well as within the context of M&A and capital markets transactions, restructurings, and investment decisions.

A Word from the Authors, Joshua Rosenbaum & Joshua Pearl Business Today: Why did the authors in the market was authored by current our book we consulted with top bankof Investment Banking: Valuation, Lev- Wall Street professionals or walked peo- ers, private equity investors, hedge fund eraged Buyouts, and Mergers & Acquisi- ple through the core valuation method- professionals, corporate lawyers, accountions decide to write this book? ologies in a practical, step-by-step guide. tants, and business school professors. Our book broke ground by doing both. Joshua Rosenbaum & Joshua Pearl: Feedback on the book has been incredWe wrote Investment Banking because Even the best business schools, including ible. Investment Banking is currently this is the book we wish we had when our alma maters (Rosenbaum: Harvard being used by numerous bulge bracket we were looking for jobs and internships. College and Harvard Business School, banks and private equity firms, and over It is the ultimate job-seekers guide for Pearl: Indiana University- Kelley School 50 undergraduate and MBA programs those looking to break into Wall Street. of Business), do not quite teach the skills have incorporated it into their curricuThere is nothing else on the market that that are needed on Wall Street. Although lum. We were featured in the Wall Street teaches the nuts-and-bolts of the pillars universities and other finance books pro- Journal and several Wall Street titans of corporate finance – valuation, comps, vide a foundation, they do not capture have recommended our book, including DCF, M&A, LBOs and leveraged fi- the specific techniques, frameworks, and Joseph R. Perella, David M. Rubenstein, nance – in such an accessible and effec- real-world applications that are needed Thomas H. Lee, and Josh Harris. tive manner. to fully understand the highly specialized world of investment banking. Since its publication in May 2009, the The overwhelming majority of books book has been, and continues to be, the available for students, and even finance In our book, we harnessed the ultimate best-selling valuation book in the world. professionals, are written by professors blend of theory and practice, and filled and have much more of an academic em- the void that was missing in finance lit- BT: How can students interested in a caphasis. These books are centered on the- erature. The financial techniques and ap- reer in finance best prepare for landing ory, and are far less applicable to how fi- plications in Investment Banking reflect a job in investment banking? How can a nance is actually practiced at investment contributions from both academia and student stand out in such a competitive banks. No valuation book previously Wall Street. Throughout the writing of landscape? 68



Josh & Josh: We have recruited and con- less you get this training and experience? kets, what kind of future can students ducted interviews on-campus for many By teaching all the key technical valua- expect in investment banking and in the years and have several insights in this tion techniques for investment banking, financial industry in general in the next area. For your resume, it is important to private equity and hedge funds, our book 3-5 years? Will the outlook change in the have certain traditional things in your is the ultimate preparation tool for inter- next 5-10 years? favor – strong grades, leadership expe- views, including a how-to for building rience, and other indicators of achieve- financial models. Josh & Josh: First off, let us say that ment and commitment such as sports, there is, and always will be, a critical music, running a business, etc. The re- As with the resume, the key differen- need for investment banking, arguably sume points, however, are often neces- tiator for interviews is a mastery of the even more so in an increasingly global, sary but not sufficient. Assuming all of finance techniques used on Wall Street. fast-moving and complex world. An everthe above is in good standing, the best Interviewers will be very impressed if a growing global pool of companies across way to truly distinguish yourself from student without prior investment bank- the world need financial intermediaries other students is to demonstrate relevant ing internship experience knows the for their M&A, equity and debt financfinance working experience, ideally in in- inner workings and complexities of val- ing needs, among other financial prodvestment banking . uation and modeling, and is able to artic- ucts and transactions. At the same time, ulate them. Technical questions are in- investment banks will have to adapt to This brings us to the ultimate chicken- creasingly commonplace in interviews so new regulations and the ever-changing and-egg conundrum that our book seeks students should be very prepared. Ques- volatile markets. Long term, investment to solve for student job-seekers – namely, tions on valuation, comps, DCF, WACC, banking will probably look different how do you get investment banking or LBOs – all of them are fair game in the than it does today due to new laws and corporate finance experience unless you interviews! regulatory standards, but it will continget a job on Wall Street; and, conversely, ue to be dynamic and present exciting cahow do you get a job on Wall Street un- BT: In such tumultuous financial mar- reer opportunities for aspiring students.

This book will surely become an indispensable guide to the art of buyout and M&A valuation, for the experienced investment practitioner as well as for the non-professional seeking to learn the mysteries of valuation. David M. Rubenstein, Co-Founder and Managing Director, The Carlyle Group

Investment Banking provides a highly practical and relevant guide to the valuation analysis at the core of investment banking, private equity, and corporate finance. Mastery of these essential skills is fundamental for any role in transaction-related finance.This book will become a fixture on every finance professional’s bookshelf. Thomas H. Lee, President, Lee Equity Partners, Founder, Thomas H. Lee Capital Management

As a practitioner of hundreds of M&A and LBO transactions during the last 20 years, I recommend this book to advisors, financiers, practitioners, and anyone seriously interested in investment transactions. Rosenbaum and Pearl have created a comprehensive and thoughtfully written guide covering the core skills of the successful investment professional with particular emphasis on valuation analysis. Josh Harris, Managing Partner, Apollo Management



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Women in Business

The Texas Exception Lessons from the Lone Star State in Leading the Economic Recovery

February 18-19, 2012 The Hilton Anatole Dallas, TX 72

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Business Today Fall 2011