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C OV E R

By Students for Students w Published at Princeton since 1968

WORRIES ON WALL STREET DUSTY DREAMS OF BEIJING MICROFINANCE LENDS A HAND

Frist Aid Former Senate Majority Leader Bill Frist, M.D. takes the pulse of the nation in an exclusive interview with BT.

Spring 2008 Volume 45, Issue 1

FA LL 2006 BU SIN ESS TODAY

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Who We Are

Business Today is America’s largest student-run publication, reaching 200,000 readers nationwide. 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. Business Today Princeton University 48 University Place Princeton, NJ 08544 609.258.1111 magazine@businesstoday.org

SUDEEP DOSHI EDITOR-IN-CHIEF KATE HOLMAN PUBLISHER WILLIAM PLUNKETT DESIGN DIRECTOR Editorial WILL BEUTTENMULLER EXECUTIVE EDITOR MICHAEL KEATON ELIZABETH KOHANSEDGH MACKENZIE LUZZI BJ SULLIVAN BRITTANY URICK Design KATE HOLMAN SENIOR DESIGNER DAN LI SENIOR DESIGNER WILL BEUTTENMULLER JONATHAN GOH EMILY HILDNER ELIZABETH KOHANSEDGH IAN LORD RAFAEL ROMERO BJ SULLIVAN

JULIO ROJAS PRESIDENT SUDEEP DOSHI EDITOR-IN-CHIEF KATE HOLMAN PUBLISHER ALEX KENNEDY SEMINAR SERIES DIRECTOR AMIT MUKHERJEE INTERNATIONAL CONFERENCE DIRECTOR ANKUR PATEL EXECUTIVE RELATIONS DIRECTOR WILL PENG ONLINE JOURNAL DIRECTOR WILLIAM PLUNKETT DESIGN DIRECTOR CLAYTON SACHS CORPORATE CONTACTS DIRECTOR CONOR SUTHERLAND FINANCE DIRECTOR BEAU THOMAS BUSINESS DEVELOPMENT DIRECTOR MARK UNGERER REGIONAL CONFERENCE DIRECTOR The Foundation for Student Communication, Inc. is the parent company of FSC, a 501(c)(3) non-profit foundation, is run entirely by students at Princeton the magazine, FSC sponsors Business Today Conferences, annual events held bring together students and executives to discuss the future of business. FSC www.businesstoday.org.

Magazine Staff 2008

Business Today magazine. University. In addition to accross the country that also maintains a website,

Publishing CAROLINE CLARK DAVID LEVIT ROHAN PATIL

SP R ING 2008 BU SI N ESS TODAY

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Here at Wachovia, we’ve worked hard to earn a reputation as a great place to build a career. Part of our success is in recruiting the best people – those who believe in our core values of integrity, teamwork, service, personal excellence and accountability, as well as a drive to win and a commitment to respect and value the individual. Wachovia is a proud sponsor of Business Today and their dedication to examining issues facing the world and helping prepare fellow students for their futures. For more information about opportunities at Wachovia, please visit us at wachovia.com/campus. Wachovia is an Equal Opportunity/Affirmative Action Employer committed to workforce diversity. ©2007 Wachovia Corporation


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Contents

BUSINESS TODAY Spring 2008 / Volume 45 / Issue 1

COVER:

30 | FRIST AID: JUST WHAT THE DOCTOR ORDERED A BT Exclusive Interview with Former Senate Majority Leader, Bill Frist BY

BJ SULLIVAN, PRINCETON UNIVERSITY

37 | The Critical Condition of Healthcare A question of initiative, incentive, and intervention BY MICHAEL KEATON, PRINCETON UNIVERSITY

41 | Mapping Medicine Going beyond borders in search of global healthcare solutions. A BT interview with Dr. Richard Shannon BY BRITTANY URICK, PRINCETON UNIVERSITY

SP R ING 2008 BU SI N ESS TODAY

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Contents Cont.

BUSINESS TODAY Spring 2008 / Volume 45 / Issue 1

News + Analysis 20 | 2007 International Conference Recap | 150 students and 60 executives gathered in New York City to discuss sustainable growth | BY JULIO ROJAS, PRINCETON UNIVERSITY 23 | Credit Casualties | When real estate values fell and sub-prime mortgages collapsed, lenders took the hit and lost big | BY KUNAL BHATIA, UNIVERSITY OF WISCONSIN AND YASH MATHUR, CORNELL UNIVERSITY

26 | The President | America is perched on the threshold of change | BY EMERALD MORROW,

15 23 20

23 55

NORTHWESTERN UNIVERSITY

World 44 | Creative Capitalism | Microfinance provides boon for world’s poorest | BY SAURABH PARANJAPE, COLUMBIA UNIVERSITY

48 | Free, Fair, & Far Away | Studentdriven initiatives try to transform trade in Madagascar | BY TERESA WALLACE, WASHINGTON UNIVERSITY IN ST. LOUIS

52 | 2008 Olympics | How will the world measure Beijing? | BY MICHELLE ANNEL PEÑA, UNIVERSITY OF HOUSTON

48

58 | On the Rise | The rebirth of the greatest economies in the Ancient World | BY HAYAN WANG AND ANIL K. GUPTA, PROFESSOR, UNIVERSITY OF MARYLAND

On Campus 62 | Sinful Subsidies | $190 Billion Farm Bill Hurts American Consumers | BY MICHAEL D. COE, UNIVERSITY OF COLORADO

64 | Timing The Trends | Economic secrets to navigating through business cycles | BY MEADE CURTIS AND AMANDA GARFI NKEL, WASHINGTON UNIVERSITY IN ST. LOUIS

68 | Not Making the Grade | Why Students Make Bad Research Subjects | BY JENNIFER LLOYD, UNIVERSITY OF TEXAS

52 10

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Final Word


Thoughts? Ideas about any article, design, or topic we publish? Write us a letter to tell us what you think! By Students for Students w Published at Princeton since 1968

Businessman Peyton Manning is more than just a football player. Speaking exclusively with BT, the NFL’s top QB discusses leadership, teamwork, and giving back.

u EXEC PAY: HOW MUCH IS TOO MUCH?

G Fall 2006 Volume 43, Issue 2

[E XP ER TS

E-mail your letters and submissions to magazine@businesstoday.org or mail them to:

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We are also looking for articles for our landmark 40th Anniversary Issue this fall. This is your chance to be heard by students across the nation in the largest student-run publication in the country.

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From the Editor

Spring 2008

A PLATFORM FOR HEALTHY DEBATE HEALTHCARE IS AN issue that concerns us all and has done so for quite some time. Its prominence is particularly marked this year, as America chooses a new leader. Every serious presidential candidate has placed healthcare at the top of his or her priority list. It has been at the center of a lively national debate and is likely to be the one marker that American voters – many of whom will be students – turn to in November. This issue of Business Today seeks to further the conversation about healthcare with a focus on students and business. This is especially relevant as many of our readers are prospective first-time voters who want to know how policy decisions will affect them. Former Republican Senator and Senate Majority Leader Bill Frist attempts to tell them exactly this in an interview with BJ Sullivan. Senator Frist’s medical career as a transplant surgeon, in addition to his experience as a politician and policy maker, makes him very qualified to talk about the healthcare issues that face the country. His interview is an illuminating blend of political and personal views, with the Senator talking about health policy, his transition from medicine to politics, and his take on the future. Brittany Urick’s interview with Dr. Richard Shannon, the Chair of the Department of Medicine at the University of Pennsylvania, provides a current perspective on these issues and moves into the realm of international healthcare and medical education in the U.S. and abroad. Dr. Shannon talks about the moral responsibility America has to support healthcare development around the world and warns of the dangers of medical imperialism. Michael Keaton’s analysis of domestic healthcare complements Senator Frist’s interview with its detailed focus on the relationship between healthcare incentives and market efficiency. Keaton underlines

some of the growing socio-economic obstacles that policymakers face. The ‘World’ section continues our discussion about relevant international issues, led by Michelle Peña’s article on whether the Chinese are really prepared for the 2008 Summer Olympics in Beijing. Peña talks about the political, infrastructural, and environmental problems that China faces and outlines the controversies that could mar the Games, including proposed boycotts and athletes wearing masks because of the pollution levels. Anil Gupta, a professor at the University of Maryland’s School of Business, offers an explanation for the recent rise of China and India, while Teresa Wallace writes about socially responsible globalization as the way forward. In addition, Saurabh Paranjape’s article on microfinance supports its growing use as a financial tool in developing countries. BT’s own commitment to students in the global community interested in business is reflected in its annual International Conference in New York City. This issue reports on the 33rd conference, held last November, which focused on corporate social responsibility. A related interview with David Jones, the worldwide CEO of the multinational advertising firm Euro RSCG, discusses the growing importance of responsible business. With the elections fast approaching, Emerald Morrow takes a look at the key qualities America will look for in its new President. Her article claims that no matter who the next President is, he or she must embody a set of core qualities that the American public supports. Mike Coe’s article criticizes a proposed bill to raise nationwide farm subsidies. Describing it as a “tax for all” Coe says the bill will cost American taxpayers an additional $190 billion if ratified. The economic woes do not end there. Kunal Bhatia and Yash Mathur report on the causes and effects of the recent worldwide credit crisis that has crippled sections of the American economy.

In particular, they examine whether poor financial performance will affect rates of recruitment for new workers and interns. With summer internships around the corner, readers may be interested in Meade Curtis and Amanda Garfinkel’s article about using business cycle economics to obtain the perfect placement. Curtis and Garfinkel break the process into five sequential phases that closely follow an economic model of market entry. Jennifer Lloyd wraps up the ‘On Campus’ section with a short piece about the pitfalls of using students as subjects for research. Articles like these reflect both the diverse spectrum of topics this issue deals with and the commitment to a wider intellectual curiosity that BT fosters. This publication is approaching a milestone. The fall 2008 issue will mark the 40th anniversary since BT was founded by Steve Forbes, Michael Mims, and Jonathan Perel in 1968 at Princeton. Their aim was to provide a worthwhile link between the business world and student communities. By engaging students and executives in active discussion and debate, this issue has hopefully stayed true to their vision.

SUDEEP DOSHI EDITOR-IN-CHIEF

SP R ING 2008 BU SINESS TODAY

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BT TRAVEL

Puerto Rico enjoys year-round summer temperatures, averaging 80 degrees. It is best to go between December and April to avoid the hurricane season.

SAN JUAN [PUERTO RICO]

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biggest and best natural harbors in the Caribbean. There you can visit some of San Juan’s many plazas, such as Plaza de Armas, which is Old San Juan’s main city square. A popular historic site is El Morro, which is the largest fortification in the Caribbean and open to the public daily. Old San Juan also offers its guests a large shopping district, a number of restaurants, and a large bar scene. If you have time after the beach and Old San Juan, you should visit the El Yunque National Forest located southeast of San Juan. This rainforest is the home to 240 species (26 are unique to the island) of plants, and rare wildlife, including the Puerto Rican Parrot, which is one of the ten most endangered species in the world. Here, you can enjoy horseback riding, hiking, picnicking, and camping (permit required) to see the forest’s waterfalls, crags, and exotic wildlife. 0115-000003 Snap Decision/courtesy of Getty Images

San Juan, Puerto Rico, has all the makings of a fantastic sunny vacation spot. Known for its natural beauty, white sand, coconut palms, and turquoise blue water, the island has been a travel hotspot for years. Puerto Rico owes its popularity to its amazing beaches and warm weather. Isla Verde is a well known tourist area located only a short distance from the nation’s capital, San Juan. It boasts numerous hotels, casinos, and dance clubs, all of which are within walking distance of a gorgeous local beach. One of the most distinguished and posh hotels in the area is El San Juan, which offers guests an ocean view of the Isla Verde beach, a number of fine dining options, and its own casino and dance club. What sets Puerto Rico apart from its island neighbors is the historic part of its capital city, El Viejo San Juan (Old San Juan). Old San Juan is the second oldest city in the Americas and is home to one of the

MACKENZIE LUZZI

200553333-001 Turner Forte/courtesy of Getty Images

[CALIFORNIA]

LAKE TAHOE Boasting 15 exquisite resorts, Lake Tahoe can satisfy the avid skier’s or snowboarder’s craving for snow and slopes from the winter months until May. Looking for a snowy oasis while spring is in full bloom? Ski resorts in Lake Tahoe can provide the perfect winter wonderland getaway. Renowned for its beauty, Tahoe’s resorts provide the most enjoyable skiing you will ever experience. If you are an intermediate skier partial to windy runs, Northstar is your ideal destination. The black diamond-studded backside will challenge you, but if your thighs are burnt out by the third afternoon, you can cozy up with coffee at the base of the mountain or ice skate at Northstar’s outdoor rink. Squaw Valley, the host of the 1960 Winter Olympics, features short runs, but the view stretching over Lake Tahoe that awaits you at 9000 feet of elevation will take your breath away. While most of Squaw Valley’s runs are manageable, those near the Granite Chief lift are not designed for the faint of heart. If you find yourself on South Lake Tahoe, you will not want to skip Heavenly Mountain Resort. Living up to its name, Heavenly has stunning views, and even multiple terrain parks for the experts in your group. Here, your camera will probably work harder than your legs. When booking lodging accommodations, renting a house in Truckee might be your best bet. A quaint town, Truckee boasts cabins that snake along the hillsides and have been owned by individual families for generations. One of the clearest alpine lakes in the world, Tahoe can satisfy your longing for one last week of winter if spring’s warmth is making you nostalgic for the cold. Because of the amount of powder dumped daily on the slopes this winter, some resorts expect to be open until May. So take advantage of the opportunity and head to Tahoe, but be sure to pack your thickest wool socks.

BRITTANY URICK


Not knowing how far away the finish line is

only makes us run harder. Is the cure for breast cancer around the corner or off in the distance? No one knows, but we do know we’re getting closer all the time. Which is why we’re more determined than ever to keep pushing ahead. After more than two decades in pursuit of a cure, we refuse to rest until we’ve reached our goal. Learn how you can help by visiting komen.org or calling 1.800 I’M AWARE®.

This space provided as a public service. ©2006, The Susan G. Komen Breast Cancer Foundation


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With spring upon us, student entrepreneurs have been busy on college campuses across the country. Innovators with novel ideas can reap lucrative cash prizes—often thousands of dollars—for their business plans. For example, in late February, the TigerLaunch Business Plan competition at Princeton University wrapped up its three-month contest with a “Super Saturday.” Five finalists faced off in front of a panel of 10 judges composed of venture capitalists, experienced entrepreneurs, and experts from different fields. Seth Priebatsch ‘11 took the $5000 prize for his SCVNGR plan. According to the TigerLaunch program, “SCVNGR is an interactive texting scavenger hunt that uses proprietary cellular technology to send out clues and receive responses via SMS. SCVNGR hunts will be designed for major tourist destinations such as Boston and New York, offering visitors and locals a fun and active way to spend all or part of the day. As each clue is solved, the SCVNGR texts a locally relevant reward to successful teams, such as a free ice-cream cone from the ice-cream shop across the street or a ticket to the museum they’ve just discovered. Users can sign up for these free SCVNGR hunts on-the-go by texting “SCVNGR New York” or ahead of time by signing up on the web.” While TigerLaunch is exclusively for Princeton students, there are plenty of other upcoming opportunities for student entrepreneurs. When considering these options, remember that they can provide incredible access to venture capital firms, publicity to gain new customers, and a wealth of experienced mentors to teach you how to build your first startup.

MICHAEL KEATON

BTW

“Innovators with novel ideas can reap lucrative cash prizes for their business plans.”

MICHAEL KEATON

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GOOD MORNING, SUNSHINE Sick of waking up to the monotonous drone of an alarm clock? Instead of blaring sounds, the Glo Pillow simulates a sunrise to get you up in the morning. The time is displayed on the surface of the pillow by an inner LED grid that also begins emitting light 45 minutes prior to the set alarm time. This system serves to reset natural circadian rhythms in the body and induce more restful sleep. Perfect for the sleep-deprived college student.

ELIZABETH KOHANSEDGH

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BT BOOKS

WHAT CAN

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DUMB IDEA

[FALLEN GIANT: THE AMAZING STORY OF HANK GREENBERG AND THE HISTORY OF AIG]

BROWN DO FOR YOU? [DRIVING CHANGE: H TO THE UPS APPROACH BUSINESS]

“Hey, Susie, want to buy some insurance?” “Insurance? What a dumb idea. Who would ever want to buy insurance from you, Calvin?” Then Calvin hits her in the back of the head with a slingshot. That was the only interesting literary piece I had ever read on insurance—a Calvin and Hobbes comic strip. All that changed when I recently picked up a copy of Ron Shelp’s Fallen Giant. The book is an enthralling tale of one of the greatest American entrepreneurs, C.V. Starr, and the meteoric rise and fall of his successor, Hank Greenberg. Fallen Giant has all the makings of great fiction, yet it actually recounts the true history of the multinational insurance company AIG. As author, narrator, and a former employee of AIG, Shelp starts his story in 1919 in Shanghai, with the disembarking of a young entrepreneur and born salesman named Cornelius Vander Starr. In the beginning of that year, C.V. Starr came to Shanghai with nothing but a vision, but by the end of the year, he had opened his own insurance agency, which would eventually become AIG. After describing Starr’s half-century reign at AIG and then recounting his failed marriage, Shelp reveals that Starr ultimately found solace only through helping youngsters receive the education he never did. After focusing on Starr for the first half of the book, Shelp comes to analyze Hank Greenberg, Starr’s successor. Shelp describes Greenberg as an extremely ambitious man who lived according to a fifteen percent philosophy: fifteen percent growth in revenue, fifteen percent growth in profit, fifteen percent return on equity year in and year out. To achieve this vast growth, Hank employed aggressive business tactics, using “[AIG’s] considerable political clout to threaten trade sanctions, cut off aid, and take whatever other dire actions it could find.” According to Shelp, if Greenberg was not listed in Fortune’s “Ten Toughest Bosses to Work For,” he was disappointed. Ultimately, the proof of the effectiveness of Greenberg’s managerial strategy was in AIG’s growth under his tenure. From the day AIG went public, its market cap grew from $915 million to $165 billion. As history shows us time and time again, managers like Greenberg often sow the seeds of their own destruction. According to Shelp, Greenberg’s favorite quote was, “All I want in life is an unfair advantage.” That is the way then-New York Attorney General Eliot Spitzer saw it too, as he ultimately forced Greenberg to resign both as CEO and chairman of AIG. Overall, the book is very well written. It conveys a fascinating story, written by an insider with connections throughout the company. I would definitely recommend it whether you are interested in an easy read or an enthralling story of eminent business success destroyed by hubris.

Picture this: A canoe cruises across the wild Zambezi River with a smiling, well groomed UPS delivery man in the classic brown uniform at the helm. Then imagine that thousands of miles away, one of his coworkers is parking one of those iconic brown trucks in the middle of Fifth Avenue. It is this dichotomy that “Driving Change: The UPS Approach to Business”, by Mike Brewster and Frederick Dalzell, presents in its first few pages. But as the reader delves in deeper, hoping to learn about the way UPS has evolved and integrated into the global economy, he is likely disappointed. The seamless way in which UPS has woven its business into the cultural and economic fabrics of the world is worth reading. This book, however, provides little of the intrigue and insight that one might expect. It details how the company began, and how corporate reorganization kept it afloat during the Great Depression and other national economic crises. While this is interesting, the general focus of the book is more than a little myopic. Very few people care about revolutions in packagesorting technology. And very few people care how UPS circumvented every internal problem in its history. The majority of readers want to understand UPS business development in context of more macroscopic business trends. As if the authors were somewhat confused about the purpose of their work, at the end of each chapter they add a little synopsis of the business principles UPS taught us during the respective period in their history. This is a well-intentioned endeavor, but the little recaps straddle the line between patronizing and inane. The takeaways the authors present are such baseline observations that their direct relevance to UPS history is questionable. “Driving Change” suffers from an identity crisis. The book’s most crippling shortcoming is that after finishing it, the reader is still unsure of what exactly the purpose of the book is—a historical glance at the evolution of the largest courier service in the world? A case study in best practice in business? A poorly executed, glorified checklist for corporate managers? The book, which seems to be an odd mélange of all of them, flounders in the lack of clear direction.

WILLIAM BEUTTENMULLER

BJ SULLIVAN

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N E W S + A N A LY S I S

2007 International Conference Recap 150 students from around the world gathered in New York with 60 leading executives to discuss the public policy and private interests surrounding sustainable growth by Julio Rojas, Princeton University WHAT DO THE Bayer Corporation, Euro RSCG, Comcast Cable, Wachovia, Aetna, and Southwest Airlines have in common? All six sent high-level business executives to participate in the 33rd annual Business Today International Conference on Sustainable Growth. The Business Today International Conference, held every year in mid-November in New York City, is an all-expensespaid, four-day event that brings together students and executives from across the country and around the world to discuss relevant business issues. Participation in the International Conference has always been competitive, which was especially true this past year. Business Today selected only 150 students out of an applicant

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pool of well over 1,200 through a rigorous application review process. Those selected to attend hailed from top colleges in 15 countries around the globe. With the world’s brightest young business minds and top business executives engaging in dialogue for days over pressing issues, the conference was destined for success. The conference featured keynote speeches, executive seminars, and a case study competition. The keynote speeches were delivered by C-suite executives, including David Jones of Euro RSCG, Michael Rizer of Wachovia, and Gary Kelly of Southwest Airlines. The executive seminars were led by other high-level business leaders and fostered open dialogue and discussion between executives

and students in focus groups. Finally, a competition featuring several business school case studies allowed the students to formulate and present their innovative business solutions in front of their peers. Each year, the conference has a unifying theme that reflects the changing landscape of the business world. This year, we felt compelled to highlight the increasingly important role that sustainable growth plays in how companies do business. What exactly is sustainable growth? What usually comes to mind are environmental issues, especially “green business.” While “green business” is certainly an important aspect of sustainable growth, it by no means encompasses the scope of the sustainability movement. When we were conceptualizing this year’s conference, we felt that we could best address the subject by partitioning it into three main subtopics: commercial responsibility, labor force responsibility, and social responsibility. Within the framework of commercial responsibility, we intended to underscore the tradeoff between current profits and future growth and how a company could optimally strike a balance between the two. As public companies feel more and more pressure to increase profits, executives are hard pressed to justify mortgaging the present for a better future. Our foucs on labor force responsibility promoted dialogue on the changing nature of the social contract between employers and employees. Off-shoring, outsourcing, and globalization have affected both college students and executives. We wanted to create a forum where both parties would express their views and concerns. Lastly, social responsibility covered philanthropic and environmental contributions. More specifically, because the majority of the companies represented at the International Conference are publicly traded, we wanted to pose Milton Friedman’s thirty-year-old question to executives: Should the leader of a Fortune 500 company be willing to sacrifice profits, often against shareholder wishes, to engage in greater charity work? We learned that, in fact, the two are far from BT mutually exclusive.


N E W S + A N A LY S I S

David Jones Global CEO, Euro RSCG 2007 International Conference keynote speaker David Jones talks about changing from the perception “greed is good” to “green is good” Business Today: As someone involved in the marketing industry, when you hear the words “sustainable growth,” what first comes to mind? David Jones: From my perspective, sustainable growth is absolutely critical not only to the future of business but also to the future of the planet. It’s clear that we’re doing a lot of things to this planet that if we carry on doing, we’re going to curtail its life and have a serious negative impact on the future of our children, our children’s children. So I think that sustainability is an absolute imperative from a human perspective. Secondly, consumers are in a mindset where they are expecting companies and corporations to actually do good business. We’ve done a major corporate study recently, and we’ve seen that people today basically believe that the onus is on the corporations to actually behave in a completely ethical way, in a way that’s green, in a way that’s sustainable. From a business perspective, consumers are expecting it and demanding it more and more. And the third thing is that it’s actually good

business. If you look at the number of facts and figures around, they prove that being green is good not only for the planet but also for business. For example, if you look at companies that embraced sustainable growth and changed the way they did business, we see great success. Toyota’s probably one of the biggest of these success stories. They were one of the first companies to get very serious about the hybrid and about the whole issue of sustainability around the automotive industry. We conducted a brand momentum study, looking at brands that were seen at the forefront of their sectors and their industries. We found an absolute direct correlation between the brands that were doing the most in green and sustainability and the brands that were viewed as frontrunners of their respective sectors. On the flip side of that, there was a study done a few years ago by McKinsey into Wal-Mart that found that up to 8 percent of Wal-Mart customers no longer shop there because of their reputation, so it can hit you in both ways. For me, there’s an up and a down side. The downside is that if we don’t sort this out, it’s going to have serious implications for the planet. The upside is that if you do, consumers will reward you, and you can actually make being green good for business. BT: Moving on to Euro RSCG, what steps are you taking to becoming a more sustainable company? DJ: We’re making progress. We’re not where I’d like to be, but we’re making progress. Our holding company, Havas, was the first company to go carbon neutral in the industry, so that was very important. Our UK group is carbon neutral, our San Francisco office has gone carbon neutral, and we track my travel to ensure that I’m carbon neutral. We’ve done little things in New York: we’ve developed a program to reduce our carbon use, a corporate character program to completely get rid of paper cups—everyone uses a mug now. In our UK office in London, we’ve built the UK Government’s carbon footprint calculator, so in the industry,

we’re probably as good as anybody. That being said, we need to make more progress. BT: As you know Business Today is a student-run publication for students. How important do you think it is to engage college students in discussion on business issues? DJ: I think it’s absolutely critical. These students are the next generation of leaders, and they will become these leaders before we know it. BT: What role do you think the college student demographic is playing in the sustainable growth movement? DJ: The reason I chose to come and speak to you is two-fold. First, I remember that when I was in college I enjoyed people who came and gave speeches. Second, I think your organization has the capability, in conjunction with the entire business world, to change the whole business landscape. For example, if your entire generation leaves business school absolutely obsessed with ensuring that the companies they work for are sustainable, then we have effected a great, great change. If, however, we remain very cynical about the ability to positively impact the world with regard to sustainablity, we make very little progress. As I see young men and women going off to the best universities and best business schools in the world, I feel our generation has been a major catalyst of change. These young people care more about these types of issues. I hope that this up and coming generation will further and improve upon our impact on the business world. BT: Finally, what would you say if someone asked you about your experience at the Business Today International Conference? DJ: I thought it was terrific. It was a very good event, bringing so many very bright minds into one room to discuss and debate key issues for the future of business. I think it’s a terrific initiative, and I would wholeheartedly support it BT moving forward.

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10169653 Rob Van Petten/courtesy of Getty Images

SINCE THE EMERGENCE of the concept of an economy, businesses have relied upon credit as one of its central features. At present, the United States’ financial sector is founded upon the principles of borrowing, and credit has therefore become the backbone of the nation’s infrastructure. With limitless lending practices, steady GDP growth, a stable job outlook, and increasing wealth, the American economy tricked itself into believing that growth would always be inevitable. The credit crisis of 2007, however, left many boggled as they tracked the unanticipated decline.

Credit Casualties When real estate values fell and sub-prime mortgages collapsed, lenders took the hit and lost big. Credit became scarce, and without credit, consumers stopped spending. Now we find ourselves on the brink of the recession of the decade. by Kunal Bhatia, University of Wisconsin, and Yash Mathur, Cornell University

Origins of the Credit Crisis “It’s a crisis if everybody calls it a crisis,” says Morgan Downey, Managing Director of LaSalle Global Funds, reflecting upon the 2007 financial situation. As a top official with Jones Lang LaSalle, one of the world’s premier real estate services and money management firms, Morgan Downey is one of many members of the finance world whose business has been heavily impacted by the events beginning in the third quarter of 2007. As with any major crash, there were indicators of the oncoming crisis, most notably the inherent problems in the sub-prime mortgage market. The subprime market delivered lending services both to those with tarnished credit and to those unable to repay their loans. According to the Wall Street Journal, sub-prime loans accounted for nearly 47% of total loan origination during 2006. With nearly half of all lending practices directed towards a high-risk market, the idea of a credit crisis was definitely plausible far before 2007. Moreover, the effects of the crisis have been pronounced in nearly every area of the market. Financial institutions, mortgage companies, and credit rating agencies alike have all been hit. Not only are these entities victims of the “credit crunch,” but more importantly, they are responsible for their own downfall. With write-downs exceeding $130 billion, it is clear that our current system is flawed. To understand the problems in the mortgage sector that led to the credit crisis, we must retrace our steps to the housing bubble in 2001.

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TOTAL SUB-PRIME LOSSES SINCE JULY 2007 Citigroup

Region 1

Region R i 2

Merrill Lynch

18

UBS

14.1

Morgan S a ey Stanley

13.5

HSBC

9.4

3.4

J.P. Morgan Chase 3.2

$18 bn 18

$12 bn

12

BC HS

Mo JP

nS Mo

rga

rga

tan

n

ley

UB

S

h Lyn c

$6 bn

0

rill Me

Cit

igr ou p

6

Source: Company Reports (BBC)

Housing Bubble A housing bubble is characterized by rapid increases in the valuations of real properties, shifting the market’s pricing towards levels that are unsustainable. According to a report by BusinessWeek, prices within the housing market increased by an average of 12% during the years 2001 to 2005. On account of this phenomenon, home owners enjoyed increased equity, which then translated into increased purchasing power. The Federal Reserve even estimated that during 2005 an increase in consumer’s equity caused by rising real estate values over the last four years accounted for $750 billion of consumption. This is an astounding figure compared to its 1996 counterpart of $106 billion. With an inflection in the trend of real-estate prices beginning in August 2005, however, home owners began to experience negative equity. As housing prices declined, refinancing became more expensive, default rates on subprime loans surged, and an increasing number of foreclosures placed nearly 25

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sub-prime lenders at risk of bankruptcy. New Century Financial, one of the largest sub-prime lenders in the United States, experienced the wrath of the housing market, filing Chapter 11 with $100 million in liabilities. While many continued to ignore the deviation in housing prices beginning at the end of 2005, business officials and economists, including Alan Greenspan, finally coined the phenomenon as a “housing bubble” in the aftermath of the credit crisis of 2007. One of the flaws that led to the decline of the housing market can be traced to the interaction between lenders and borrowers. While issuing the sub-prime loans, mortgage lenders ignored their borrowers’ backgrounds, loaning to people incapable of paying. One of the primary reasons for this faulty system was the reliance on automated systems when analyzing potential borrowers. This system has been a source of criticism, as it allowed individuals who would normally be turned down for loans to receive credit.

The dangers of the housing market were assumed by Wall Street firms, as they tried to diversify their risk. As distribution of sub-prime loans continued to rise, mortgage lenders experiencing high-credit risk had to rely on securitization to spread out risk. By filtering risk through securitization, most notably through mortgaged back securities, lenders were able to diversify the risk of sub-prime loans. Ultimately, however, this attempt to diversify risk failed, and bulge bracket banks such as Bear Stearns, Citigroup, and Merrill Lynch lost billions. Bear Stearns in particular pledged nearly $3.2 billion to revive one of its hedge funds that bet too heavily on sub-prime mortgages. Finally, credit rating agencies ought to share some of the blame for this debacle, as these organizations are responsible for rating debt. Given that companies rely on these ratings as their primary source for determining the risk of investing in debt, it is crucial that these ratings are accurate. Moody’s and Standard & Poor’s, however, were oblivious to the pitfalls of the housing market and failed to downgrade mortgage bonds and related structured debt products until July 10, 2007. With independent due diligence at a bare minimum and credit agencies failing to accurately rate debt, the U.S. financial system was set for disaster. Financial Sectors The division of credit is the economy’s lifeline, fueling the vitality of the financial infrastructure. Through borrowing and lending practices, both the consumer and business sectors facilitate the movement of liquidity and inject the economy with funding. By issuing credit, banks and other financial entities generate revenues for further expansion of their businesses while consumers enjoy increased purchasing powers and ultimately, higher consumption spending. As credit plays such a central role in the U.S. economy, troubles in this market have greatly affected several financial sectors. Primarily affecting the housing market, the credit crisis has transformed mortgages into loans with sharply higher monthly payments.


N E W S + A N A LY S I S Furthermore, with increased difficulty in applying for refinancing, many home owners are obligated to downgrade due to property foreclosures. In terms of borrowing, the effects of the credit crisis have spilled into the municipal sector. According to the Washington Post, many cities and school systems are experiencing trouble extracting cash for “buildings, ballparks, and other vital projects from the $2.5 trillion market for municipal bonds, a sector of Wall Street that rarely sees trouble.” Many cities with a fragile financial base rely on support from

it is conclusive that the U.S. economy has secured growth via increases in consumer expenditures. Like the movement of securities in the stock market, personal consumption is driven by market sentiment. With the credit crunch, consumer spending has heavily decreased since the summer of 2007. This drop can be traced to several different factors. First, energy prices experienced a worrisome increase during the latter part of 2007. This spike in gas prices made President Bush’s plan of cutting U.S. gasoline consumption by 20% over the next 10

It’s just that credit availability has disappeared.” With billions of dollars in losses from write-downs, several financial institutions have tried to save face by restructuring management. Citigroup, arguably the firm hit hardest by the ordeal, has been forced to seek investment from several sources, both domestic and foreign. As explained in the Wall Street Journal, the company has “raised or priced $30 billion worth of capital, including a $7.5 billion infusion from Abu Dhabi’s investment authority and another $12.5 billion from a more recent private placement

“WHEN YOU’RE IN A PIT,” ADVISES JAMES ELLMAN, PRESIDENT OF SEACLIFF CAPITAL, AN INVESTMENT MANAGEMENT FIRM, “THE FIRST THING TO DO IS STOP DIGGING.” bond insurance firms in order to enjoy low interest rates. With this support declining as a result of the credit crisis, many cities are either cancelling bonds or experiencing a cessation of several improvement projects. Finally, a major determinant of an economy’s status is the performance of the stock market. The success of the stock market is heavily contingent upon investor sentiment, and with the recent crisis, the market has certainly experienced hardship. In response to the ominous plummeting of the subprime market on July 26, 2007, the Dow Jones experienced an intraday loss of 450 points, though it was partially recovered by 311.50 points. Amidst the turmoil in the U.S. stock market, Jonathan Binder, a Managing Director and Fund Manager at INTL Consilium, commented, “the effects in terms of the real economy are frankly just beginning to be felt.” Consumer Spending According to the United States GDP report in October 2006, there is a clear indication that the nation relies heavily on consumer spending. With the report of a 2.13% growth of GDP,

years seem far more urgent. Second, falling home values caused consumers to stray from their typical spending patterns. Finally, a mediocre job outlook meshed with stagnant real wage growth presented concerns for consumers. This concern presented itself in retail sales and overall personal spending. In an intricate financial report on the state of consumer spending, an official handling of the U.S. retail division of the auditing firm Deloitte commented, “for the holidays and heading into the new year, retailers should continue to be conservative with headcount and inventory.” Apart from the precipitous drop in consumption, spending, and investments, businesses have been the core casualties of the credit crisis. In an effort to ease the economic situation, the Federal Reserve interfered by cutting interest rates. With the largest interest rate drop since 1982, lenders are losing incentive to distribute loans. In response to the credit problem, Christopher Whalen, Managing Director of Institutional Risk Analytics, an organization that advises banks with risk management, comments, “There’s no lack of capital in the system...

with several funds and individuals.” The credit crisis has undoubtedly presented a challenge for the U.S. economy. Consumers, businesses, and governments have experienced hardship at an altogether new level. The wheel that represents American enterprise, supporting personal spending, credit activities, and investments, has been temporarily halted by the severity of the crisis. While many Americans and members of economies around the globe view the nation with suspicion and question its prosperity, most understand the importance of adopting vigilant measures. James Ellman, President of Seacliff Capital, an investment management firm, put it best in advising that “when you’re in a pit, the first thing to do is to stop digging.” The only positive light that we can shine on this crisis is that our country has survived worse. With measures like unemployment insurance and the SEC, we will be able to avoid another Great Depression, but as for when we will rise out of this recent crisis—that is a question that even the Sage of Omaha, the great Warren Buffet, cannot BT answer.

SP R ING 2008 BU SINESS TODAY

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?

THE PRESIDENT WITH AMERICA ANXIOUSLY perched on the threshold of change, Election Day 2008 will be one for the history books. For the first time in the history of American politics, both a woman and an African-American will have had, at one time or another, a realistic opportunity to serve as President of the United States. Regardless of their political views, most people would agree that this anomaly is worthy of celebration. It marks America’s coming of age with regard to racial and gender equality. More important than opening doors and breaking down barriers, however, is what will happen in the months and years following January 20, 2009.

by Emerald Morrow, Northwestern University 26

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N E W S + A N A LY S I S Whether the new president be male or female, Caucasian or AfricanAmerican, leadership skills, cognitive style, and emotional intelligence will all be significant determinants of the success of the incoming president. Fred Greenstein, both a professor of political science at Princeton University and an expert on presidential leadership, confirms this view, emphasizing that political savvy, organizational skills, and vision are all key parts of presidential leadership. “Resilience and capacity to grow on the job are important because presidents

example, Janda points out, “Most of his successes occurred when he was elected in his own right in 1964. But he also had enormous majorities of Democrats in both chambers and that is how he was able to get things done. No matter how popular a president is, if he doesn’t have enough working majority in both the House and the Senate, he’s not going to get much done.” Furthermore, the next president of the United States must stimulate a new level of confidence in the American people. According to Larry Berman, political science professor at the University of

particularly vis-à-vis Hillary Clinton.” Berman elaborates on the Obama “phenomenon,” noting that “it is absolutely stunning how many young people feel revitalized and vitalized for the first time as they once again look into politics, and they don’t turn off ; they turn on.” Berman goes on to identify Obama’s rhetoric, charisma, and ability to allow people to dream as the major selling points of his campaign. These strengths, however, could become drawbacks for Obama. “I think if he were to be elected president, this would come at a great cost to him,”

THE MOST IMPORTANT ATTRIBUTE FOR ANYONE WHO TAKES OFFICE WILL BE THE ABILITY TO INSPIRE TRUST IN THE OFFICE OF THE PRESIDENCY. often mess up one way or another early in their presidency,” suggests Greenstein. “Those who bounce back constructively are more likely to perform well than those who do not… A president who can win and hold public support is more likely to be able to accomplish things than one who is unable to put his errors behind him. President Bush and other presidents who have made some severe missteps shortly after coming into office provide good examples.” While public support is critical to presidential leadership, popularity ratings are even more fundamental. As Kenneth Janda, professor of political science at Northwestern University, notes, “Every president takes office with this kind of support and over time, a president’s popularity tends to decline. That’s true for virtually every single president we’ve had since we’ve been doing polling. I would imagine whoever takes office next January will be backed by a majority of the American people. The question is what they do with that. Then, of course, we will find out whether or not their popularity declines and how swiftly.” Support from Congress is also tremendously important for the effectiveness of a president’s time in office. Referring to President Johnson as an

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California, Davis, and author of The Art of Presidential Leadership, “The most important attribute for anyone who takes office, Democrat or Republican, will be the ability to inspire trust in the office of the presidency and trust in the man or woman who is the occupant of the office.” Berman also notes that the current political landscape will create many challenges for the next president. “These are tumultuous times we are living in,” he observes. “How the extrication from Iraq occurs will have a great deal of impact on the legacy of the president who has yet to take office.” That legacy may also be marked by profound changes in politics that set the country off on a new tack. “One of the things this campaign for the presidency has shown, particularly on the Democratic side, is that it will really be an election that will focus [on] change on one side and a continuation of politics on another side,” he says. It comes as no surprise then that “change” as a theme has been a key buzzword throughout Barack Obama’s campaign. “Without a doubt [Obama is] the most interesting [candidate] because of the phenomenon of his candidacy,” comments Berman. “Very few people eight months ago or ten months ago would have thought that he would be in the position he is in today,

Berman remarks, “because expectations will be so high that to change this political system that moves so slowly and requires compromise will be a very formidable leadership challenge for him.” In comparison, Berman sees other candidates as offering very different levels of expertise. Clinton, for example, may not embody Obama’s rhetoric, but she has accumulated years of experience as a political insider. Her insight does not necessarily stem from being married to former president Bill Clinton but rather from her senatorial experience and work on various public policy issues. Republican candidate John McCain also brings something to the table. “If McCain were to be elected president, he would do so on the strength of one thing,” claims Berman. “It’s not his biography or his record as a POW. It would be on the fact that he will be able to attract not just Republicans but conservative Democrats and Independents.” Given what they have shown the country thus far, all three leading candidates have a range of strengths. What matters most, though, is how they leverage these strengths upon their arrival in the White House. “We all have a stake in the president doing well,” says Janda. “There is natural logic for the president BT being supported.”


H E A LT H C A R E


JUST

WHAT THE

DOCTOR ORDERED

SENATOR BILL FRIST PRESCRIBES A CURE FOR THE HEALTHCARE CRISIS IN A BUSINESS TODAY EXCLUSIVE INTERVIEW

by BJ Sullivan, Princeton University


H E A LT H C A R E Senator Bill Frist is what some might call the ultimate Renaissance Man: a pioneering cardiothoracic surgeon, Senate Majority Leader, Princeton professor, and soon-to-be investor. His unique career as a self-described “citizen-legislator” gives him a multifaceted perspective of the state of healthcare in America. After graduating with honors from Harvard Medical School, he became chief resident at Massachusetts General Hospital and was later appointed to the faculty of Vanderbilt School of Medicine. He eventually left medicine to run for the Senate from from his home state of Tennessee, and he became the Majority Leader during his second term in office. He now teaches healthcare reform at the Princeton’s Woodrow Wilson School of Public and International Affairs, of which he is a graduate. Business Today: In the United States, we have middle class Americans who are trapped between the wealthy, who can pay for health insurance, and the poor, who are covered under the federal Medicaid program. So we have millions of people across the country receiving substandard care. If we can agree that some kind of reform must be enacted, what form would it take? Senator Bill Frist: The country is crying out for significant reform because health care costs too much, and there are too many uninsured in the country today. The issue of the uninsured is huge in that there are 47 million people who are poor, near poor, and middle class who do not have adequate health insurance coverage in the event that they have an accident or become ill. If you don’t have health insurance in this country, you get less preventive care, you get acute care too late, and you get chronic care in an inadequate way—which means that your outcome is worse. According to the National Institute of Medicine, 18,000 people die each year because they are uninsured. The laws of our country say that anyone who walks into an emergency room that needs care must be treated. The near poor are the most challenging in that the cost of healthcare and the cost of insurance are

near-poor category who are too rich for Medicaid, but do not have enough money to enter the private insurance market. We also need to deregulate the health insurance industry to the point that there can be competition across state lines, which would significantly bring down the cost of premiums in the market. These four things must be done in the near future to address this issue of the uninsured and the near-poor who cannot afford to enter the private healthcare market. BT: If you don’t mandate healthcare and uninsured people solicit treatment in the emergency room, who pays for this treatment? BF: Every hospital in the country has bad debt because they are taking care of people who have no health insurance. By law if you go to an emergency room, you are taken care of, no matter what your insurance status is. People assume that either the government pays for it or that the hospitals pay for it—neither of them pays for it. The person on whose back it ultimately falls is the person with private health insurance. If we could make the privately insured person out there understand that, then they would understand the importance of having a government-sponsored program for those people who simply can’t pay for themselves. The average health care plan costs about $1,100 more every year just to subsidize the care provided to those who don’t have insurance today. So obviously an appropriate health reform plan would take the burden off the backs of the privately insured people—not the taxpayers, not the government, and not the hospitals—and then shift that money over to pay for affordable insurance coverage for the uninsured. BT: How is it, though, that the costs are transferred to the privately insured people? BF: Basically the hospital has to stay in business, so they just raise prices to pay off their bad debt. And you can’t raise prices on the government, so they raise the prices on the privately insured.

THE HOSPITAL HAS TO STAY IN BUSINESS, SO THEY JUST RAISE PRICES TO PAY OFF THEIR BAD DEBT. AND YOU CAN’T RAISE PRICES ON THE GOVERNMENT, SO THEY RAISE THE PRICES ON THE PRIVATELY INSURED. so high. Things that can be done include an expansion of Medicaid to include all people under the poverty level. People assume that all people below the poverty level are covered by Medicaid; they are not. Single poor men are ineligible for Medicaid. Also included in an ideal reform would be an appropriate expansion of the State Children’s Health Insurance Program (SCHIP), which is the healthcare plan for poor children. But the fact is that there are six million children today eligible for SCHIP who are not taking advantage of the program. Let’s get them enrolled! Another component of my reform would be refundable tax credits that are related to income that serve as a voucher for people in this

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BT: Many presidential candidates have touted a change in the American lifestyle—the way we eat, exercise, and conduct our daily lives—as the key to the long-term success of the healthcare system by increasing the overall health of the population. How can we implement that? And how can government team up with the private sector to make it happen? BF: If you compare us to other countries, we’re 27th in how long we live; 28 countries have better infant mortality than we do. And that’s why people say we need to reform the healthcare system. And they’re wrong. How healthy we are depends not only on our healthcare system, but it depends on: 1) behavior, 2) genetics, 3)


H E A LT H C A R E socioeconomic status, 4) health services, and 5) environment. This is interesting because if the goal is the health of the nation, then what we really have to do is focus on behavior. Behavior is by far the most important determinant of health. That doesn’t mean that we don’t fix health services—take care of the uninsured and reduce costs. But if you really want to improve your quality of life, we need to hone in on behavior. The biggest challenge we have today is obesity. It is the epidemic of the first half of this century. The major behavior-oriented health epidemic that influenced life in the last century was smoking. But it was successfully addressed through a combination of public sector movement and private sector intervention. It’s easier to tax cigarettes than it is to tax McDonald’s hamburgers. It is also easier to argue

bed, getting people to the hospital, treatment with CPR—all of that. The most powerful tool in the armamentarium of medicine today is a pill. It will provide the cure to HIV/AIDS; it will ultimately provide the cure to malaria, to heart disease, to lung disease, and to cancer— it goes across the board. The next ten years for the pharmaceutical sector will be very difficult, which means they will have less money to spend on a vaccine for malaria or a treatment for Alzheimer’s. All of the current generational challenges have yet to be cured by drugs—which is going to require continued research. But in the next decade, there will be declining profits and declining operating margins in the pharmaceutical industry. But more important to the slowdown in the industry is the lack of drugs in the pipeline right now. It takes a billion dollars and

TO IMPROVE QUALITY OF LIFE, WE NEED TO HONE IN ON BEHAVIOR. THE BIGGEST CHALLENGE WE HAVE TODAY IS OBESITY. IT IS THE EPIDEMIC OF THE FIRST HALF OF THIS CENTURY. that second-hand smoke affects everyone in the room and therefore public policy should come in and say ‘no smoking’ in that room, than it is to say that half of a room being obese has an impact on the other half of the room. Except it does because of skyrocketing healthcare costs. But how do we address it? From a legislative standpoint, it is much more difficult for the reasons that I just said, yet there are things that can be done…Urban planning is important; we need to have more parks and more bicycle paths, more walkways and greenways. It means at the local level that government and communities need to decide whether or not they want vending machines with sugary drinks as the primary nutrient in schools, and whether they can take steps to make school lunches healthier. That is still very different than banning smoking, though. Working hand-in-hand, public and private sector is going to be absolutely necessary whereas with smoking, you had more legislative levers, like taxation. Increase taxes, reduce smoking. You don’t have that with obesity. BT: And a Coke a day is part of this optimal new diet? That was a great Super Bowl ad. BF: Yes! A Coke a day is good for you—especially Diet Coke… Bringing people together. It’s fun. BT: How can we keep the influence of pharmaceutical lobbyists over our nation’s government in check? What is the best balance between respect for corporations’ profits and the public’s access to much needed drugs? BF: The most powerful tool in American medicine today is the prescription drug. It’s important to state that right upfront because when my dad practiced medicine 50 years ago, that was not true. It might have been the surgical knife, it might have been the hospital

12 years to find a drug. That money has to come from somewhere. The pharmaceutical industry puts $40 billion a year into research. As their profits fall, they put less money in research which means those cures may take 20 or 30 years to be developed. Now on the flipside of that, the cost of medicine is the biggest challenge to the individual consumer today because the cost of these drugs is extraordinarily high—too high, clearly, without health insurance. The best way to keep the prices low is competition. But this competition must be highly regulated, short of price controls. If you put in price controls, fix the prices of drugs, you will drive out all of the research and innovation. Without any restraint, however, the price of drugs will continue to escalate beyond the reach of the average American. BT: How do you feel that your role as a doctor has affected or illuminated your role as a politician? What were the difficulties in dealing with less medically enlightened Congressmen vis-à-vis healthcare and public health policy? BF: 1928 was a big year. It was the last time, before I was elected, that a practicing physician was elected to the United States Senate. When I arrived, we had 100 Senators, 60-odd lawyers, and no physicians in the Senate—yet healthcare is 16% of our economy. My medical background enabled me to ask fundamental questions like: How can the United States Senate and the government of our country do nothing to address the single most important moral, humanitarian, and public health challenge of our time, HIV? Especially when based on my annual mission trips to Africa, it was clear that this virus was going to continue to wipe out 50, 60, or 70 million more people. Yet our government was doing nothing… In addition, it was a natural question for me to ask why the federal government was doing nothing to provide affordable access to prescription drugs for seniors when these drugs are the most powerful tools in medicine today…

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H E A LT H C A R E So my role, at least in the body of the Senate—which was devoid of medical expertise, as no one had written a prescription, no one had performed surgery, and no one had been an integral part of that vital sector of our economy—allowed me to ask questions that affect every single American and a large number of people living on earth today. BT: But do you really need an M.D. to ask questions about why we are ignoring millions of people suffering worldwide? BF: The questions were talked about and the rhetoric had been out there. It’s not that we weren’t talking about it then, there was just nothing done about it. Translating this talk into action is important. BT: How did your family go about developing the idea for the Hospital Corporation of America (HCA) in its early stages? What advantages does HCA, or any other for-profit chain of hospitals, offer over traditional not-for-profit healthcare facilities? BF: HCA is a classic example of a very entrepreneurial idea developed around the table in my house on Bowling Avenue in Nashville that germinated and grew—calling upon the public markets for capital for the first time in history of health services, applying principles of business efficiency such as economies of scale, and demanding business principles be applied at the top instead of hiding behind a nonprofit, charitable veil with no bottom line. It came alive and prospered over the past fifty years. When HCA started, there were no chain hospitals, and there was no sharing of information among hospitals; it was a cottage industry. My brother, a young doctor in the Air Force at the time, brought the idea to my dad and said that he wanted to spend the next thirty years of his life developing that concept. So it grew from one hospital to ten hospitals to a hundred hospitals to over three hundred hospitals all over the world. The real advantage they had was access to capital from the marketplace by going public. And therefore, they were able to get new equipment, better equipment, more capital, and newer facilities. And at the same time, they were burdened with taxes. They operated under the same rules as all of the other hospitals—they had just as much bad debt from the uninsured. The role they played in the history of medicine was to establish a level of competition not just among the investor-owned hospitals, but among the broad array of nonprofit and for-profit hospitals. So the nonprofit hospital, of which there are five times as many, had to start meeting the standards of business efficiency, transparency, and accountability. Competition improved the quality of all hospitals BT: How is healthcare coverage and insurance changing the practice of medicine as a business? Will increased coverage mean less profit for the doctors? Do you think this will cause an exodus of talent from the field? BF: You can’t be squeezing physicians out of the practice of medicine either by excessive malpractice suits or inadequate reimbursement— simply not paying them enough. The physicians today are being squeezed to the point that they’re leaving the practice of medicine. They’re retiring early—instead of retiring at age 65, they’ll retire at

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age 50. They are not taking as sick a patient as they have in the past because they don’t want to be sued. Obstetricians stop delivering babies; neurosurgeons stop taking trauma calls. Urologists I know are now making enough money to get by and cover their expenses, but not enough to put their children through college. And national laws, unless reversed this July, will cut physicians’ pay by 10% this year. If that were to happen, there would be a huge efflux of talent from the field; people wouldn’t go into medicine because they couldn’t make ends meet. If that is going to continue, our healthcare system will implode. BT: Every day we hear stories of medical breakthroughs in stem cell technology and biotechnology. Is the media hyping up their potential impact on the way we treat illness and disease, or do you think they will radically change our understanding of healthcare over the next few years, the next decade, or even the next century? BF: With the half-life of science now being so short, there’s no question in my mind that there will continue to be transformative technology that will improve the quality of life and length of life of Americans. Most of the technology—which can be very expensive and is a key factor in the increasing costs of healthcare—comes from the United States still. We have a reputation around the world—in terms of intellectual capacity and the number of patents that are distributed in science—for being the center of innovation. That can be at risk if we do not continue to educate people at the primary and secondary school level—and we’re failing there miserably as a country. We’re doing well in higher education. We’re doing well in graduate education. But China and India are moving much more quickly than us, threatening our position. For the foreseeable future, however, the next 15 or so years, we will continue to be the font of medical development. When I got in the field of medicine, heart transplants were not successful. We made them successful. Lung transplants had never been done in the history of mankind when I was a surgical resident. When I finished my residency, within five years I was doing them regularly. So I’ve been able to see the great benefits of science and technology. But imagine what we can do with advanced stem cell technology. All those hearts that I replaced, all of the hundreds of thousands of heart attacks that occur every year could be treated with the appropriately induced stem cell. That’s the potential of these remarkable cells. It is the power of regenerative medicine. BT: What is your next career move? BF: For the next decade or so, I’m focusing mainly on global health issues. I am using this year to teach healthcare reform here at Princeton while I sit on the boards of the Millennium Challenge Corporation, Save the Children, and Africare—in addition to working with Bono on the ONE Campaign. Now as I finish here, I’m beginning to work in the private equity business with Cressey and Co., a firm that specializes in healthcare services. We’re raising half a billion dollars to invest in healthcare companies that have as their purpose to lower healthcare cost, increase quality, and increase access. I will continue BT doing that for the foreseeable future.


Another bright idea‌ Creating Energy-from-Waste

Reducing our nation’s reliance on fossil fuels Offsetting 15 million tons of greenhouse gases Providing safe, solid waste disposal for local communities Generating 8,000 gigawatt hours of renewable energy

www.covantaenergy.com


H E A LT H C A R E

THE CRITICAL CONDITION OF HEALTHCARE by Michael Keaton, Princeton University

A QUESTION OF INITIATIVE, INCENTIVE, AND INTERVENTION AMERICAN HEALTHCARE IS SICK. The overarching issues— quality of care, professional qualifications, roles of pharmaceutical and insurance companies, financing, and public policy, to name a few—are mired in inefficiencies and inequities. According to the National Coalition on Health Care (NCHC), “Experts agree that our healthcare system is riddled with inefficiencies, excessive administrative expenses, inflated prices, poor management, and inappropriate care, waste, and fraud. These problems significantly increase the cost of medical care and health insurance for employers and workers and affect the security of families.” Our social values need to be brought in line with public policy, and the healthcare system must be restructured in order to reduce gaping inefficiencies. The U.S. now spends more on healthcare per person, as a percent of GDP and in total dollars, than any other country in the world. According to the NCHC, total national health expenditures rose 6.9 percent in 2005, two times the rate of inflation. Total spending was $2 trillion, equaling $6,700 per person, or 16 percent of the Gross Domestic Product (GDP). Astonishingly, however, the healthcare provided by the government for the poorest of the population is utterly inadequate, and moreover, another 50 million Americans have no health insurance at all. Only three decades ago, the United States enjoyed some of the best healthcare in the world. We did not have nationalized healthcare, and though many Americans were uninsured, people without coverage received good medical care. Today such luxuries are in the realm of fantasy. How did our healthcare become so inadequate? How should we repair the situation? A great national debate on healthcare is urgently needed. The Great Transition of the Healthcare System Over the last three decades, the control over the healthcare system has switched hands. Though the beloved general practitioner and his

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H E A LT H C A R E community hospital traditionally controlled the system, recently big business, big government, and big universities have become completely dominant in today’s healthcare system. Before 1980, doctors were some of the most respected professionals. They took pride in their work, and according to Karl Mangold, a retired ER doctor of over 20 years, almost 90 percent of physicians would take half a day off each week to volunteer their services at free health clinics for the poor. Why? Medicine felt like a passion more than a career. As a result of the Bayh-Dole Act of 1980, universities are allowed to retain the patents on and profit from governmentfunded research. Consequently, these universities have come to act more like venture capital organizations with portfolios of intellectual property (IP) than research centers. This IP has now found its way into large pharmaceutical companies at a fraction of its government-funded cost, providing an entrée for big business as a power player in the healthcare system. With new capital pouring into medicine, opportunistic trial lawyers have dived head first into the field of medical malpractice. This trend has not only contributed to the exorbitant cost of healthcare but has also hindered the entire system by forcing doctors to perform unnecessary procedures in order to protect themselves from litigation. Finally, these malpractice suits have forced doctors to cease volunteering at clinics. In order to make ends meet, doctors need to work more hours, charge higher rates, and reduce their exposure to high legal risk patients. Ultimately, this culture shift in the medical profession has caused doctors to view patients, not as people with whom they share a protected rapport, but as potential legal adversaries. As doctors face malpractice suits and universities offer higher salaries for research positions, many students are opting to leave the world of physicians and become research scientists, catering to universities and pharmaceutical companies alike. If our best doctors are becoming researchers rather than healthcare professionals, we are inevitably impacting the quality of care we receive. If we are to fix our healthcare system in the near future, we must provide students with incentives to become practicing physicians. A Confounding System The rising cost of healthcare has been a problem for decades, and both the private sector and the government have proposed several solutions. In the private sector, insurance companies minimize healthcare costs in two ways. They spread the costs over a large group of people, and they operate their own hospitals through health maintenance organizations (HMOs). The government has used its own programs, such as Medicare and Medicaid, to help the country’s poorest receive medical care. Insurance companies, either through programs for individuals or through employer provided healthcare, cover most Americans’ medical costs. People with good insurance coverage enjoy an extraordinarily high quality of care and timely access to top professionals. Though they are quite successful in helping Americans receive high quality treatment, insurance companies are ultimately in the business of maximizing profits, which begs the question about where their allegiance lies. These companies have extremely high premiums as well as high deductibles. While

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high deductibles force patients to think more carefully about which procedures are necessary, they also force patients to pay out of pocket for many minor-cost services. Insurers have come up with a variety of ways to keep costs low and profits high – often at the expense of patients. Some companies are preferred provider organizations (PPOs). A PPO is a conglomerate of medical professionals who have agreed to offer healthcare at a discounted rate to the clients of the insurance company. Though in theory this agreement reduces costs, it has led to some blatant attempts at cheating the system. Under the PPO system, insurance companies require pre-approval for most procedures. Since insurance companies benefit the most when patients visit a doctor but are not approved for a procedure, the insurance companies have begun to award bonuses to medical professionals who reject the most procedures. Michael Moore’s film Sicko exposed employees at Humana, a large health insurance company, who received salary bonuses and perks like special trips if they met procedure rejection quotas. Getting insurance in this day and age is an enormous hurdle for many Americans because insurance companies only want to insure those who are not at risk for high-cost treatment. The free-market drive for profits emphasizes high efficiency and low-cost care but does not necessarily produce an equitable outcome. Though HMOs have their own networks of hospitals, clinics, and care providers, patients bound to them suffer similar problems to those of PPOs. Under the HMO system, patients are given lots of choices within these networks, but they are only covered for that specific HMO’s services. By being tied to one HMO, patients cannot necessarily choose their own doctors or specialists. HMOs not only control who patients see but also when they see them. For example, at the HMO, Kaiser Permanente, patients can only see specialists if they first have referrals from their primary care provider. Like any other business, an HMO has an incentive to cut costs by reducing referrals. Again, the drive for efficiency comes at the cost of the consumer. Recognizing that the burden of healthcare costs does not fall equally on everyone, the government implemented Medicare to cover some medical expenses of senior citizens and disabled persons. As Medicare is a government-run program, it has suffered from high costs caused by bureaucratic waste, most notably from healthcare providers exploiting its large loopholes. Though this has traditionally been the case, the government has tightened up the system by refusing to compensate hospitals for preventable expenses. According to the New England Journal of Medicine, Medicare refuses to compensate hospitals for costs associated with professional mistakes such as leaving instruments inside patients after surgery, failing to install rails on beds to prevent patients from falling out, and causing infection due to improper hospital sanitation. Each instance of negligence can cost the hospital between $40,000 and $300,000, depending on the degree of damage done. By refusing to reimburse hospitals for their employees’ mistakes, Medicare has properly realigned incentives, providing greater savings to society in all sectors. Like Medicare for the elderly, Medicaid provides healthcare


H E A LT H C A R E for the country’s poorest. However, Medicaid is usually only offered in instances when emergency care is required. Without access to physicians, the poorest patients have an incentive to exaggerate the severity of their conditions in order to receive treatment. Because people without coverage use emergency rooms as doctor’s offices, the already overloaded hospital system becomes strained even further. The bureaucratization of the care of the poor combined with the increasing threat of malpractice suits and the alluring salaries of university research has left a gaping hole in our system. Should We Have a National System? While our semi-private healthcare system provides good incentives for the highest echelons of care, it contains huge gaps in coverage, glaring inequities in service, and loopholes that render it vulnerable to fraud, manipulation, and inefficiencies. These vulnerabilities stem from the inefficient bureaucracy of the federal government and the profit-maximizing mentality of insurance companies. Though our system has significant problems, experience in other countries suggests that as a sole provider, government might be even less efficient than the private sector. The United States is the only developed Western nation without socialized medical care, a fact that may be more a reflection of cultural traits than of regressive policies. This issue has become the topic of heated national debates. Hillary Clinton, for example, pushed for a national healthcare plan while her husband was still in office, but the plan ended in

choose their own doctors. The system in the U.S. is more efficient in terms of both getting people in to see doctors and completing procedures quickly. As cited by Mr. Salvato, more MRIs are done in Philadelphia each year than in all of Canada. However, the affordability of care is another issue. The socialized medicine model is arguably a more equitable system, yet the quality of care appears to be lower. The single biggest problem with the American system is that 50 million Americans live without health insurance either because they cannot afford it or because they do not qualify for government assistance. Leaving out this substantial proportion of the population represents a cost to society beyond the peril that the uninsured face. Issues of equity aside, leaving vast numbers of people without healthcare coverage is an enormous social burden in terms of lost productivity for the nation and potential for disease outbreak among the greater population. Healthcare is not an individual problem; as a society, we need to decide which values to uphold and which to sacrifice. A National Conversation on Limited Resources However our society chooses to pay for healthcare, we must think about how effectively our dollars are spent. Because advanced medical technology allows us to do more than we can afford, it becomes a question our social values. We live in a world where our resources are far from unlimited, forcing us to make some very difficult decisions. In terms of our national funds for healthcare, we often play a zero-sum game: dollars

WHILE CITIZENS IN OTHER COUNTRIES LIKE ENGLAND, GERMANY, AND FRANCE MAY ENJOY FREE HEALTHCARE, THE BEST FOREIGN DOCTORS GENERALLY EMIGRATE TO THE UNITED STATES, EMBARRASSED BY THE QUALITY OF HEALTHCARE IN THEIR HOMELAND AND IN SEARCH OF HIGHER PAY. disaster, becoming the pockmark of her career. While citizens in other countries like England, Germany, and France may enjoy free healthcare, the reality is that the best foreign doctors generally emigrate to the United States, embarrassed by the quality of healthcare in their homeland and in search of higher pay. According to Al Salvato, the Vice President of Finance and the Treasurer of Thomas Jefferson University (home to the Thomas Jefferson University Hospital), the “herding methodology” of nationalized healthcare plans essentially dilutes the quality of and rapid access to care. Mr. Salvato believes that this explains why many Canadians and Europeans travel to the U.S. to see specialists and have surgeries. In countries with socialized medicine, patients often wait in long queues for mediocre care and are not necessarily able to

spent wastefully are dollars lost for more cost-effective ends. In order to effect meaningful change on something as important as healthcare, we need to have a national conversation about what values we choose to prioritize. Everyone will need to compromise on various points, but the end result will be a more efficient system that reflects our country’s concerns. We invest more than enough money in healthcare; it’s a question of how effectively that money is used. Above all, we must align incentives so that dollars are well spent. There are significant structural obstacles to tackle, such as lobbyists who will fight to protect the current system. America will therefore need leadership from the top down that prioritizes healthcare and takes a long-run view of the BT welfare of the nation.

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H E A LT H C A R E

MAPPING

MEDICINE GOING BEYOND BORDERS IN SEARCH OF GLOBAL HEALTHCARE SOLUTIONS

by Brittany Urick, Princeton University

During his time as Chair of the Department of Medicine at Allegheny General Hospital in Pittsburgh, Pa.,

Dr. Richard Shannon became dismayed by evidence showing that patients in his intensive care units were dying not from the complications with which they were admitted but rather from hospital acquired

infections. Exhaustive research and observation showed the culprit was not an incurable super bacterium but instead was the hospital staff. Poor hand hygiene on the part of doctors, nurses, and technicians allowed bacterial infections like Methicillin Resistant Staphylococcus Aureaus (MRSA) claim the lives of patients with defenseless immune systems. Dr. Shannon wasted no time in solving his hospital’s greatest problem and immediately standardized hygiene procedures. Within ninety days, the number of hospital acquired infections in the intensive care units went from fortynine to zero. Results like these prove why Dr. Shannon has achieved so much success in his profession. After graduating Cum Laude from Princeton in 1976, he attended University of Connecticut Medical School. He completed his training in internal medicine at Beth Israel Hospital in Boston and his training in cardiovascular medicine at Massachusetts General Hospital. Dr. Shannon has taught at Harvard and Drexel and has received multiple teaching awards from both institutions. After spending a decade at AGH in Pittsburgh,

Business Today: In your opinion, Dr. Shannon, what should be done about the 50 million Americans without health insurance? Dr. Richard Shannon: I think there is no question that as a society we must figure out a way to provide affordable health insurance to all Americans, in particular to those 50 million, whose arrears continue to grow after double digit increases in healthcare costs. Where my view differs from many of the political solutions is I don’t favor raising taxes, I don’t favor cutting reimbursements

Shannon accepted an offer for a position at the University of Pennsylvania in 2006. He is now the Frank Wister Thomas Professor of Medicine at the University of Pennsylvania School of Medicine, Chair of the Department of Medicine at the University of Pennsylvania Health System, and a Senior Fellow at the Leonard Davis Institute for Health Policy at the Wharton Business School. Dr. Shannon’s achievements and credentials speak volumes about his ability, but his character is perhaps what is more impressive. Dr. Shannon is deeply committed to the Hôpital Albert Schweitzer in the Arbenite Valley in central Haiti. Founded in 1956 by Dr. Larimer and Gwen Mellon, Hôpital Albert Schweitzer delivers healthcare to the poor in this region. Dr. Shannon and his son Alec have traveled to the institution multiple times to relieve its patients’ suffering. Business Today felt honored to have the opportunity to speak with Dr. Shannon and hear his nuanced opinions about the current crisis in American healthcare and the condition of healthcare in the wider world.

to doctors in hospitals. Rather, I favor looking inside healthcare and identifying the enormous waste in the way care is currently delivered. In America we spend two trillion dollars on healthcare, and very bright, insightful people…estimate that as much as four hundred billion is embedded in error and waste. The concept is that care delivery in hospitals and in medical clinics is highly unreliable. There are frequent mistakes; there are frequent errors. You only

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H E A LT H C A R E hear about the ones that end up causing human harm. But the duplication, medication errors, and conditions such as hospital acquired infections cost society billions of dollars. This is what I refer to as the conspiracy of error and waste. One approach is to look at other industries, particularly manufacturing industries, where…leaders such as Toyota and Alcoa have pushed up their processes in their manufacturing centers that lead to highly reliable products that are high quality and at low cost. So the question is, why cannot similar approaches be applied in healthcare? Why can’t the delivery of care in intensive care units

how can that be delivered in as reliable and as safe a fashion as possible? Part of the problem is that the current system rewards activity not outcome. By that I mean, as a physician, you get paid more the more you do, but none of that reimbursement is tied to outcome. That’s like saying you would go to the appliance store and buy a refrigerator that didn’t work and you’d be willing to pay the full freight. The analogy in healthcare is if I go in and perform a heart catheterization, I get paid the same thing whether I do it right or not. The reimbursement system clearly would need to be different.

THERE ARE FREQUENT MISTAKES; THERE ARE FREQUENT ERRORS. YOU ONLY HEAR ABOUT THE ONES THAT END UP CAUSING HUMAN HARM, BUT THE DUPLICATION, MEDICATION ERRORS, AND CONDITIONS SUCH AS HOSPITAL ACQUIRED INFECTIONS COST SOCIETY BILLIONS OF DOLLARS. THIS IS WHAT I REFER TO AS THE CONSPIRACY OF ERROR AND WASTE. be standardized? Why can’t it be done in a reliable fashion so that any time there is a defect it can be identified and eradicated before it propagates into an error? I think there are demonstration projects underway across the country, which are using tools borrowed from highly reliable industries and applying them to care giving toward the eradication of these errors. And so it’s my belief that if we within the medical profession are willing to reexamine the processes by which we deliver care and realize there are other industries that have really perfected these things, we could go a long way toward fixing this from within. There are four hundred billion dollars in the U.S. healthcare system that are unproductively engaged, and that’s the basis by which we can insure America. Until we realize that within our own control is the opportunity to fix the process, we’re not going to solve this huge societal problem. BT: What do you see as other areas in healthcare aside from infection prevention and control that need drastic improvement? RS: I think that there are a limitless number of defective processes in healthcare. Medication error and costs; falls, where people who are hospitalized are inadvertently injured because the physical environment in the hospitals is not designed in a safe and effective manner; and surgical procedures, where someone comes into have his right knee fixed and his left knee is operated on, show defects in a system that is largely governed by those who have as much as twenty years of education. One could go down a list of defective processes, and it’s quite baffling to think about the magnitude of these problems, but I think the fundamental question is when a person arrives in the healthcare system, what does he want and

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I think the national dialogue on that matter comes under the notion of pay for performance, where rather than paying just for the opportunity for doing a hundred tests, you actually pay for the outcome which is the advancement of human health. My concern about pay for performance is that it requires an investment. You have to free up resources in order to reform the system, and the way I would see freeing up those resources is by eliminating unsafe conditions and the waste associated with them by eradicating medication errors and hospital-acquired infections. BT: How do you think healthcare in other nations compares to that of the United States, and is there anything we can learn from other countries? RS: Despite the extraordinary expenditures on healthcare, the United States never ranks in the top five and often not even in the top ten with respect to clinical outcomes. Unquestionably there’s much we can learn from how other countries have done this. One of the ways they have done it is by socializing medicine, a solution that I think probably would not work in America. When you argue that you can’t socialize medicine, then I think to a certain extent one does have to think about how one rationalizes care. The most expensive year of life when it comes to healthcare expenditures is the last year of life. All of us consume more dollars in the last year of our life than we do throughout the entire period. Much of that, again, is due to a system that fails to reward outcome but rather rewards activity. The system of hospice and end of life care in America is woefully underdeveloped compared to many that of many Western European countries. A person with a severe end-


H E A LT H C A R E stage heart failure who has an underlying chronic leukemia and develops renal failure is constantly dialyzed in America, where as that would never be considered an option in other countries. And so [in the U.S.] there’s every intent to continue dialysis even though it’s futile. Keeping someone alive on dialysis so he can die of leukemia is no meaningful tradeoff. BT: On the flip side, how can healthcare be improved in developing nations? What do you see as the largest obstacle to improving this care? RS: There are several ways the United States in general but specifically academic medical centers in America can contribute importantly to healthcare in the developing world. First, I think America must stop its policy of what I call medical imperialism. By that I mean, in the United States every year, there’s a need for 25,000 residents to fill residency positions in the hospitals. America graduates 17,000 from U.S. medical schools every year. That means every year there are 8,000 individuals that we have to recruit from other countries in an attempt to fill our need for medical residents. And where do those 8,000 individuals come from? They’re the best and brightest from India, Pakistan, China, and developing African countries. What happens is that we, in that process to meet our own need, end up depriving these resources from these developing nations. My proposal would be to expand the ranks of U.S. medical schools to provide enough physicians from American graduates in order to meet this demand. Every year, there are 35,000 college graduates that apply to medical school, and we accept 17,000 of them. If you look at the other 17,000 that don’t get in, at least half of them are as qualified as individuals that did. Studies that have looked at the performance of individuals who were not accepted initially but ultimately were indicate they perform above the median performance of all U.S. medical students who enroll in the first round of admission. Why would we not expand the ranks of U.S. medical schools and meet our own need for medical care, rather than robbing it from developing countries? From a public policy perspective, stopping this notion of medical imperialism would be absolutely critical to helping developing countries. Now, having brainpower and no resources is not a solution. So similarly, instead of wasting four hundred billion dollars in the American healthcare economy, we could begin to realize that one could devote sizable proportions of that to the development of healthcare in nations where it is simply inadequate. But those are social policies that are quite complex because to have a healthcare system and no portable water or no system of sanitation makes for very limited gains. My own experience in Haiti indicates that you can spend a lot of money trying to develop healthcare systems in really poor nations, but if there is no government infrastructure it’s extremely hard to sustain them in any meaningful way. A second way to improve the global health of all human beings would be to think about taking some of that money to reform our own system from within or dedicate it elsewhere. In addition, I think all academic medical centers have an absolute moral obligation to participate in the development of healthcare systems in developing nations. You see increasing numbers of global

compacts, where academic medical centers have come together, committing to the development of healthcare organizations within these developing nations. Those three general steps would certainly be starting points for thinking about how we improve the health of not just Americans but all human beings. But it begins fundamentally with where we’re going to find the money. It’s not sustainable to say that America’s commitment to global healthcare can be funded on the backs of working people. Rather, I think we have to ask the question of how we’re using the two trillion dollars that we currently have, and is there a fundamental way we can use it better so that it becomes the basis for what are absolutely critical social reforms. BT: How do you think international medical schools compare to those in the United States? RS: I think it’s quite variable. I think the Western European medical schools are outstanding and compare very favorably with those in America. I think many of the medical schools in the former Soviet Union have come back quite strongly and are quite good. I think in many of the poorest countries, as you might imagine, medical schools cannot be as good. And yet I would say that in countries like India, Pakistan, Iran, and China, which are particularly big contributors to the American physician pool, individuals who graduate from medical schools at the top of their class are often as good, although I would argue that the overall performance is not as good. The top people from those schools tend to do quite well, and it’s those individuals who are desperately needed at home in their own countries and that we’re exporting to America to meet a need that we decided we had to have but don’t want to provide ourselves. BT: How do you think healthcare issues pertain to the upcoming presidential election? RS: It seems as this election has progressed, the issues have really shifted from concerns about the war, which is a huge issue that is sapping the nation of extraordinarily important resources, to issues of the nation’s economy where I think healthcare is playing a crippling role because the cost of healthcare is increasing in a double-digit way, well above what productivity is increasing, in American industry. There’s no question that healthcare is a major issue in the campaign, but I have to say that the solutions proposed by candidates on all sides are simply not possible. Sure, it would be great to say “let’s fund the uninsured,” but the specifics about how to do that without crippling the reimbursement rate to the hospitals is not clear to me. Thus I propose that what we should do is create literally a zero-tolerance for totally preventable error in medicine. If we did that, not only would human beings be better, but we would have a lot more money to devote to the sorts of things that Americans would like to see as part of a civilized society. I think it’s a critical issue – nothing is dragging the U.S. economy more – and I don’t think it has necessarily taken the headline that it should. BT: Thank you for being so willing to speak with us, BT Dr. Shannon.

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Creative Capitalism On the rocky path towards financial security, microfinance provides boon for the world’s poorest. Is it a panacea for global poverty or a temporary financial fad? by Saurabh Paranjape, Columbia University MICROFINANCE, OR THE practice of providing financial services to the poor, has evolved considerably from its anecdotal beginning in 1976 when a $27 loan given to a group of 42 poor women in Chittagong, Bangladesh, by Nobel Peace Prize winner Dr. Muhammad Yunus. Then the Head of the Rural Economics Program at the Chittagong University, Dr. Yunus would lead teams of students to visit the poorest households in the village of Jobra, near the university. During these visits, Yunus observed that villagers, lacking any access to fair, organized credit, were forced to suffer at the hands of usurious private lenders to finance their livelihoods. Yunus’s experience in Jobra led him to theorize that very small loans, when made on fair terms, could significantly improve the lives of the poor. However, the idea proved to be a tough sell. Detractors contended that the loan amounts themselves were sometimes smaller than the cost of processing the loan, and that without proper collateral, traditional banks could not accept the high risk of default. Yunus, a long-time admirer of Dr. Akhtar Hameed Khan—the man credited with pioneering the concept of microcredit—strongly believed that microfinance could be developed into a viable business model. In December 1976, armed with little more than an idea, Yunus approached the local branch of government owned ‘Janata’ Bank, which, ironically, means People’s Bank in Bangla, and secured his first funding —a loan which he then disbursed amongst poor women of Jobra. These small loans allowed the women to buy the raw materials needed to make goods like bam200390556-001 David Noton/courtesy of Getty Images

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WORLD boo stools and weave mats, which they would then sell in the open market to earn a decent profit. Yunus and his colleagues reached out primarily to women, as Yunus felt that women suffered more disproportionately from poverty than men, and were more likely to devote their earnings to their families. They faced stiff opposition from all corners, ranging from skeptical bank managers, indifferent political leadership and a jaded bureaucracy, to violent radical leftists and a conservative clergy. Against almost insurmountable odds, they soldiered on, and on October 1, 1983, under a special law passed for its creation, Yunus’s pilot project became Grameen Bank (Grameen means Village in Bangla). How to Teach a Man to Fish The idea behind Grameen Bank stems from a belief that sustainable poverty alleviation is possible only through financial empowerment of the poor. The bank aims to achieve this by providing the poor with access to fair and organized credit so that they can launch their own enterprises, however small, and attain financial selfreliance. Profits are a welcome outcome of the bank’s operations, but not actively sought. In fact, all profits earned by the bank are transferred to a disaster mitigation and rehabilitation fund set up by the Bangladesh government. The interest rate

who meet a certain set of strictly enforced criteria. Borrowers are then organized into small homogenous groups or Centers, functionally linked to the bank through field workers – the ‘Bicycle bankers’ – who attend the groups’ weekly meetings. Each group provides a mutual, morally binding guarantee of repayment in lieu of collateral. The repayment performance of every group is continuously monitored and forms the basis for extension of future credit. The borrowers are also encouraged to save through compulsory and voluntary savings and are educated on various aspects of financial planning. Apart from entrepreneurial activities, the bank also encourages loans for social welfare projects, housing and sanitation facilities, telecommunication equipment, and higher education and offers scholarships to deserving children of Grameen members. Yunus proudly contends that his idea has “turned conventional banking on its head,” eliminating the need for collateral by creating a banking system based on trust, accountability, participation, and creativity. A Bank for the Poor, by the Poor Today, Grameen Bank is a financial behemoth that boasts 7.41 million borrowers, 97 percent of whom are still women, with 2481 branches covering more than 96 percent of Bangladesh’s villages and loans

seen red ink on the balance sheet just three times, in 1983, 1991, and 1992. However, perhaps the greatest testament to the effectiveness of the Grameen model lies not on the balance sheet, but in social indicators. According to the Financial Times, poverty in Bangladesh dropped 10 percentage points to 40percent between 2001 and 2006, putting Bangladesh well on track to its goal of halving poverty by 2015. At the same time, the bank has stayed true to Dr. Yunus’s ideal of a bank owned by the poor, with borrowers owning 94 percent of the total equity of the bank while the government of Bangladesh owns the remaining 6 percent. It has also succeeded in keeping its lending rates lower than those mandated by the government, with the highest borrowing rate being 20 percent for income generating loans and lowest being 0 percent for loans offered to beggars. In the late 1980s, the bank also expanded into activities including fisheries and agriculture. Over time, this diversification has created an impressive range of successful, independent profitable and non-profit ventures in sectors ranging from agriculture (Grameen Krishi), to information technology (Grameen Software Ltd.) to telecommunications (Grameen CyberNet Ltd. and Grameen Telecom), among others. A case in point is Grameen Phone, in which Grameen Telecom owns a sub-

YUNUS’S IDEA HAS “TURNED CONVENTIONAL BANKING ON ITS HEAD“ ELIMINATING THE NEED FOR COLLATERAL BY CREATING A BANKING SYSTEM BASED ON TRUST, ACCOUNTABILITY, PARTICIPATION AND CREATIVITY. charged reflects only the operational expenses borne by the bank for originating, disbursing, and collecting the loans issued. The bank seeks to consistently increase the capital base for future lending by increasing membership, and thus focuses on deposits rather than revenue. In keeping with the bank’s goal of serving the poorest of the poor, even beggars are eligible to become members and take loans. The bank is selective in choosing its borrowers, and offers credit only to those

worth $6.55 billion issued so far ($5.87 billion of which has been recovered). In 1995, the bank decided not to receive any more donor funds and has since financed all its lending activities with its deposits alone. The bank also boasts an almost unheard of loan recovery rate of more than 98 percent. In 2006, Grameen’s profit stood at $20 million on revenues of $134.9 million, justifying Yunus’s contention that financing the poor need not be an act of charity. In its entire 24-year history, the bank has

stantial stake, which, through its ‘Village Phone’ Project, has brought cellular phone ownership to nearly 260,000 poor people in rural Bangladesh since March 1997. Courting Criticism and Controversy Today, Grameen has evolved into the leading face of a movement that seeks to bring capitalism to the poor. It has inspired a range of microfinance institutions (MFIs) all over the world, in Africa, Latin America, Asia, and even North America.

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WORLD Not all have been able to replicate the success of Grameen, however, and some have even courted controversy with allegations of organized usury. Commonly cited examples of the risks associated with microfinance include the large scale bankruptcy of MFIs and borrowers in South Africa during the 1998 emerging markets crisis, and the failure of the rural microlending sector in Zimbabwe, which, having received a $66 million cash influx from the World Bank in the 1980s, reeled under a delinquency rate of nearly 80 percent a decade later. In other cases, critics of microfinance have pointed to the dangers associated with its misuse at the hands of unscrupulous operators operating in relatively unregulated economies. A case in point is the Mexican microfinance sector, where established players with deep pockets, such as Banco Azteca, Banamex, Financiera Independencia and even Wal-Mart, are offering poor Mexicans credit for everything ranging from two-wheelers to plasma televisions, in stark ideological contrast to Grameen’s founding principle of social empowerment. Although lower than the rates charged by private money lenders, which can go up to 300 percent, the rates charged by the organized microfinance sector in Mexico are still enough to incite a revolt in developed nations: rates can be as high as 120 percent, compared to the global average of

31 percent for the non-profit microfinance sector. Moreover, in spite of receiving several plaudits for its pioneering work, Grameen itself has come under its fair share of scrutiny. Concerns over so-called ‘Ponzi’, or Enron-like accounting practices—refinanced loans are not listed separately on the Grameen balance sheet, and by its own estimates, make up one fifth of its loan portfolio—have been raised by several observers, including the late Daniel Pearl, who wrote an article about the bank for the Wall Street Journal in 2001, and the Consultative Group to Assist the Poorest (CGAP), which consults several MFIs all over the globe. Several critics also point to studies that have shown that almost one fourth of all Grameen loans are being used to fund household expenses. Reports of rising delinquencies and rebellious borrowers in some regions, such as Tangail in central Bangladesh—more than 32percent of the loans here were two years overdue as of 2001—have also called the bank’s loan recovering ability into question. While Grameen declares a loan to be ‘at risk’ if it is overdue by two years or more, most MFIs adopt much stricter standards, with CGAP suggesting a term of 90 days as appropriate. The rise of several competing microlenders has also raised doubts about the bank as a preferred credit source among the poor.

MICROFINANCE AT A GLANCE + Half of the world’s population lives on less than $2 a day. + More than 2,000 MFIs serve nearly 77 million people in developing countries.

+ Nearly 95% of microfinance borrowers repay their loans. + Microfinance borrowing has grown at a rate of 30% annually over the past decade.

+ The average loan amount is approximately $400, ranging from $1,000 as an average in the former Soviet Union and Eastern Europe to around $100 for borrowers in Asia.

+ Interest rates for MFIs average 30% to 31% to cover the cost of small loans and weekly repayments. Rates are declining due to increased competition and larger loan balances associated with repeat clients and new financial offerings, but moneylenders tend to charge double or triple the interest rates of MFIs.

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Brave New World For all the doubts raised by skeptics, however, no one can deny the impact Grameen has had not only on Bangladeshi society but also on the global stage. The success of the Grameen experiment has lent fresh credibility to a banking system considered idealistic by many until a few decades ago. In the process, it has encouraged increased allocation for MFIs in the budgets of public-commercial investment agencies like the World Bank’s International Finance Corporation (IFC), and the European Investment Bank. Moreover, the sector’s demonstrated ability to generate profit has also made it an attractive investment proposition for socially motivated investors, hedge funds, venture capital funds, and investment banks. Currently, over 80 investment funds specialize in microfinance, most of which are run by established banks such as Citi, Morgan Stanley, and Deutsche Bank, among others. The sector is further boosted by agencies like the Microfinance Information Exchange (MIX) that provide prospective donors and investors ready access to financial information, performance metrics and other relevant data for hundreds of MFIs around the world. Some recent innovations are taking an even more revolutionary approach. Prominent examples include Kiva.org, which enables people to lend money to prospective entrepreneurs in developing nations (selected by partner MFIs) online; MicroPlace.com, a wholly owned subsidiary of eBay that allows retail investors to invest in trade-able securities linked to microfinance loans; and maverick billionaire Richard Branson’s latest venture, Virgin Money, which repackages microfinance for the developed world by facilitating loans as small as $500 between family and friends. In Conclusion The microfinance sector holds immense promise for developing nations to make capitalism work for rather than against the poor. While the debate over the efficacy of the Grameen model, and the larger concept of microfinance, rages on, one thing is for certain. Yunus and his kind have certainly set the wheels in motion towards a brighter financial future for the millions of people that conventional capitalism left BT behind.


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WORLD

Free, Fair & Far Away By Teresa Wallace, ...

sb10066637w-001 Bruno Morandi/courtesy of Getty Images

Student-Driven Initiatives Try to Transform Trade by Teresa Wallace, Washington University in St. Louis Sinking knee-high into a foot of African soil and manure, well into a two hour hike across flooded rice fields in search of a fourth Malagasy village in three days, I wondered, “Is this really business?” Mahabois a small rural commune of ten villages along the southeast coast of Madagascar. The agrarian community has an estimated population of 10,000 all living at or below the poverty line. Mahabo is a vibrant community but is ravaged by drought, flood, malnutrition, and sickness. I was first introduced to Mahabo in the spring of 2007. As a first year MBA student, I applied for a practicum project in order to gain hands-on experience in

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an international setting. The Global Practicum Project (GP Projects) is a student-driven initiative supported by the Taylor Community Consulting Program at Olin Business School. GP Projects provide international experiential learning opportunities. The 2007 Global Practicum Projects included the following: GE Ecomagination in Japan, Monsanto crop yield strategy in Mexico, Emerson financial feasibility analysis in Eastern Europe, and Missouri Botanical Garden (MBG) economic development in Madagascar, Africa. Led by two local guides, our team crossed hectares of ruined crop. Aghast, we continued an academic analysis of the

situation. We wondered what practical solutions might really work to improve the conditions in Mahabo. The “Hidden Village,” home to the local king and the site of the most tragic devastation in the area, was our final scheduled destination. We arrived exhausted to stares of hesitant eyes and giggling children. Sunburned, dehydrated, and filthy we crouched in the corner of a small bamboo hut eye-to-eye with a dozen village elders. The meetings in Mahabo began with a presentation of gifts, which was followed by extensive formal introductions. Our talented guides, and now translators, identified each of us by name and expertise: professor of business, master student of finance, undergraduate student of econom-


WORLD ics, master student of social work, thirdyear law student, undergraduate arts and sciences and entrepreneurship student. For the next two hours we essentially played twenty questions. The elders answered thoughtfully; they provided us with intimate details of their lives, a glimpse into an unknown world. Our questions were naïve but honest. We wanted and needed to know the reality of Mahabo. We had to understand the social structure, business practices, agricultural technology and legal system. The Missouri Botanical Garden has a longstanding collaborative relationship with the Mahabo commune. Over the past four years MBG has conducted an extensive Mahabo conservation project in an effort to save one of Madagascar’s last remaining living rainforests. MBGs conservation efforts stress “minimal impact,” respecting the necessary relationship between local villagers and available natural resources. Therefore, conservation strategies, led by local trained Malagasy, include harvesting education, replanting education, botani-

Discussions centered on the problems and strengths of Mahabo and Madagascar. MBG representatives, familiar with the long history of the region and its people, told stories, explained comments expressed by villagers, and identified political restraints and conflicts. The diverse team argued over salient issues (water control systems, health care, education, and malnutrition), what needed to be “fixed” first and how our knowledge and connections might help. Across the wooden picnic table, our conversations lasted hours. Inevitably, 11:00 pm arrived too early (lights out at 11, really, our generator was timed to saved gas), and we were left with more questions than answers. In order to resolve the issue of stagnant conservation policy in these African communities, MBG representatives approached Washington University, Olin Business School, and the Blessing Basket Project (www.blessingbasket.org) with the hopes of instituting an economic development initiative enlightened by a more in-depth understanding of the rela-

terprise, is dedicated to the reduction of poverty in Third World countries through the creation of sustainable jobs. BBP has successfully increased the standard of living for thousands of women, children, and men in five other developing countries: Ghana, Uganda, Indonesia, Papua New Guinea, and Bangladesh. BBP was the first to answer MBG’s “call to action,” implementing a development model based on living wages for the production of local fine-woven baskets. Shortly after BBP’s response, Olin Business School and Washington University in St. Louis, turned to their most abundant resource: students. The “MAD” project (a clever abbreviation for Madagascar coined by team members) transitioned through two business school programs: The Hatchery and the Global Practicum Project. By the spring of 2007, the “MAD” Team, headed by Ken Harrington Director of The Skandalaris Center for Entrepreneurial Studies (http://www.sc.wustl. edu), consisted of five students from four academic departments. During our initial meeting, the team

OUR QUESTIONS WERE NAIVE BUT HONEST. WE WANTED AND NEEDED TO KNOW ABOUT THE REALITY OF MAHABO. WE HAD TO UNDERSTAND THE SOCIAL CULTURE, BUSINESS PRACTICES, AGRICULTURAL TECHNOLOGY, AND LEGAL SYSTEM. cal education, specimen collection and species cataloging. Though MBG and Mahabo villagers have reduced forest devastation in the region, pervasive economic strains created by crop destruction, flooding, drought and sickness threaten past gains. Dinner in Mahabo was a wonderful time and food a welcomed sight. Not surprisingly, after trekking across the African countryside, we had worked up a bit of an appetite. Dinner also offered the team a chance to review and discuss the previous day’s events for the first time.

tionship between village economics and forest preservation. MBG’s experience demonstrated that economic strain and subsistence living forced Mahabo villagers into the forest for basic needs. When faced with a choice between survival and conservation, residents rightly chose survival. MBG representatives therefore argued that without a successful economic development project, the Mahabo forest would succumb to local consumption pressures despite any and all conservation efforts. The Blessing Basket Project (BBP), a St. Louis-based nonprofit social en-

outlined several ambitious goals for our semester project that included an on-site visit to Mahabo. Our primary interests were to learn about Mahabo and Madagascar, create lasting relationships with traditional leaders, formal government officials, and local villagers, evaluate the economic benefits of BBP, observe economic changes in Mahabo, identify potential enterprise opportunities, and outline a sustainable model for project replication. As we strolled through the Saturday market crowds, we were “vaza” ( foreigners), a rare sight in the interior of Madagas-

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WORLD car. At a small booth our team recognized a “knock off ” Blessing Basket. The quality was low but the style unmistakable. Through our translators we learned that Blessing Basket weavers were teaching their new skills to family members and

today’s society. In fact, a quick “globalization” Google search returns over 23 million hits. Globalization is also a contentious topic; the surrounding conflict pits big business against societies and individuals.

reflections from our five-day adventure. We marveled at the overwhelming initial success of the BBP model. The team identified the success as three fold. First, conservation efforts in Mahabo were gaining ground. Second, Blessing Basket weav-

OUR PROJECT EXPERIENCED A DIFFERENT SORT OF GLOBALIZATION – A GLOBALIZATION IN WHICH ECONOMIC DEVELOPMENT WAS MARKED LESS BY THE CUT-THROAT COMPETITION OF “FREE TRADE” AND MORE BY THE SOCIAL RESPONSIBILITY OF “FAIR TRADE.” friends. Because these baskets were new and scarce, weavers were able to leverage a higher price in their own local market. We were ecstatic! Webster defines globalization as “the development of an increasingly integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labor markets.” The concept is quite prevalent in

Corporations argue that globalization not only generates profit but also stimulates economic growth in some of the world’s most marginalized economies. Alternatively, critics of globalization maintain that hostile corporate business practices exploit less developed countries and retard economic development. Back in Antananarivo, the capital of Madagascar, the “MAD” team compared

MADAGASCAR M + The country has a population of 1 19.5 million.

+ Its GDP is ranked 169 out of 192 ccountries in the world.

+ Fifty percent of the population lilives below the poverty line.

+ Madagascar embarked on the p preparation of a Poverty Reduction SStrategy Paper under the Heavily In Indebted Poor Countries Initiative in 2000, which determined the ccountry required debt relief.

+ The country is located in the In Indian Ocean off the coast of Africa eeast of Mozambique and is the fo fourth largest island on Earth.

+ The economy is driven by aagriculture, fishing, and forestry.

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ers fulfilled their first full order, utilizing higher wages to plant rice, buy medicine, hire help, and educate their children. Third, project knowledge and skills outpaced project growth (identified by the “knock off ” baskets in the local market) and resulted in unexpected secondary economic growth. During our final discussion in Madagascar, I realized that I was involved in global business with a special aim- socially focused globalization. The collaboration between MBG, BBP, and Washington University utilized business principles on a global level to address a social need. The project promoted an alternative form of globalization. Although Mr. Webster defined globalization as economic development marked by “free trade,” our project experienced a different sort of globalization – a globalization in which economic development was marked less by the cutthroat competition of “free trade” and more by the social responsibility of “fair trade.” I would never change my experience in Africa. During the project I gained valuable and irreplaceable functional experience. I saw economic forces at work. I witnessed grass roots global business activities directly benefiting those most in need. In the villages of Madagascar, I experienced globalization at its finest, a different form of globalization, a socially BT responsible globalization.


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OLYMPICS As the world awaits those signature fireworks announcing the beginning of weeks of Olympic fanfare, lagging construction, raging pollution, and countries toggling diplomacy and the health of their athletes threaten the fate of this year’s summer Games. When the lights around the National Stadium stop dancing, how will the world measure the 2008 Olympics in Beijing? Will it live up to its billing as, “The Greatest Show on Earth” or will Beijing drop the torch in a flashy yet flawed Olympics? Time, or the lack thereof, will tell. by Michelle Annel Peña, University of Houston 54

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75973410 Feng Li/Getty Images

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the 2008 Games, darker even than the smog that visibly hovers over Beijing’s National Stadium. In August 2006, the Chinese Embassy in the United States reported that Beijing would spend $59.5 billion to improve infrastructure in the Olympic City between 2006 and 2010. While this improvement is not expected to be completely finished completely before the Olympic Games in August, Chai Xiaozhong, deputy head of Beijing’s development and reform commission claims that “projects to ease city traffic, improve energy and water supply, and better the city environment will be completed before.” Beijing’s infrastructural problems arise from the city’s overcrowding and continued rapid population growth – with a population of 15 million and an annual birthrate of 50,000. These numbers will

make it difficult for the Olympic City to accommodate the estimated two million additional visitors this summer. A related problem that concerns the city’s tourists is the matter of airport transportation and air traffic. China’s airport traffic has been growing at 17% annually for the last five years and on January 14, 2008, Forbes Magazine ranked the Beijing Capital International Airport the second worst in the world in terms of delays, reporting that only 33% of flights were on time in 2007. However, Chinese officials reveal extremely ambitious reforms for air traffic during the Olympic Games. Last year, Beijing opened a third runway to diffuse aircraft traffic, and in March, the city opened a third terminal to tackle passenger traffic. In addition to these changes, the number of domestic flights between Beijing and Shanghai have been reduced. Another bold move is the opening of a new subway rail line from the airport to the center of the city, which is 12 miles away. Another line will connect the center of the city to the Olympic venues. Whereas Beijing may have solved the transportation problem, at least on paper, one thing the Olympic City may not be able to remedy in time for the games is the exorbitant level of pollution. Almost a year before China won the Olympic bid, Li Tiejun, the Deputy Head of the Pollution Department of Beijing, told the BBC that China was planning a two-pronged attack against pollution. First, it would phase out coal use, which was responsible for fueling 75% of China’s energy in 2000. Second, it would impose harsh measures on companies whose factory environmental standards did not meet the country’s new laws. Unfortunately, Tiejun’s hopes for a clean China by 2008 never materialized. It seems taking on multi-million dollar steel corporations on environmental issues proved too difficult. Coal still fuels major Beijing factories and the city’s dependence on petrol has actually increased. In February, Chinese media reported that over 150 gas stations and oil depots in Beijing would be closed before June. However, this effort is unlikely to have much of an impact when one considers that 1000 new cars are bought every day in the Chinese capital. Still, the local authorities are hopeful. International ath-

letes, on the other hand, are not. American athlete Deena Kastor, who was a bronze medalist in the 2004 Olympic marathon, is concerned about the effect air pollution in Beijing will have on her respiratory system. “Breathing in that pollution is going to be hard on everyone’s lungs,” she says. According to Chinese doctor Pan Xiaochuan, athletes like Kastor may experience a very wide range of symptoms due to pollution, beginning with coughing and shortness of breath at the low end of the spectrum and moving up to asthma attacks and serious heart complications. For this reason, many countries have set up training camps in nearby Japan and Macau. Some have even considered the use of masks to protect their athletes, a measure that would greatly hurt China’s image in the international community. Britain has already stated that its athletes will have the option of wearing masks during competition. Simon Clegg from the British Olympic Association said the British government needs to “put in place whatever strategies are appropriate to ensure that we give our athletes the best chance of delivering.” The United States, on the other hand, is more concerned with not offending its Olympic host. “We have decided that we will not run the risk of creating bad relations with China by creating embarrassment by wearing masks during competition,” says Dr. Randy Wilber, the United States Olympic Committee senior sports physiologist. The United States will allow their athletes to wear masks if necessary, but only outside the competition. Despite all the controversy, and the health hazards to the athletes, the Beijing Organizing Committee is not planning to hold the marathon outside of Beijing. The Chinese authorities are hoping that their current measures to fight pollution, coupled with their plan to prohibit 3.3 million vehicles from running during the Games, will be enough to make a considerable improvement. This Olympic Games will be the single most important event for China’s international image in recent history, but giving a bright image to the country will take more than building a few roads and dusting the city.

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WORLD This was made apparent by Steven Spielberg’s resignation as Beijing’s Artistic Adviser because of disagreement over China’s policies regarding Darfur. “Sudan’s government bears the bulk of

“Although our sponsors are under pressure, none have withdrawn,” Yuan Bin, head of marketing for the Beijing Organizing Committee, reports. The 63 sponsors, led by Coca Cola, re-

Neither China nor the IOC, however, is worried about the threat of a boycott. “All of the heads of state have said [they] will be present and are not in favor of a boycott. Neither are the athletes,” writes Jacques

“I THINK BOYCOTTS ARE A THING OF THE PAST, NOT OF THE PRESENT NOR THE FUTURE. THE OLYMPIC GAMES ARE STRONGER THAN ANY ONE PERSON.” the responsibility for these ongoing crimes, but the international community, and particularly China, should be doing more” Spielberg urges. China currently buys two thirds of Sudan’s oil and sells weapons to the country’s government. “I find that my conscience will not allow me to continue business as usual,” Spielberg said. While many public figures like Spielberg have called for an Olympic boycott, the financial aspect of the Olympics, at least, remains strong.

main firm in their desire to participate in the 2008 Olympic Games. In fact, some firms are paying up to $200 Million to be called “an organizing committee partners,” the highest sponsorship rank available. While a financial boycott does not seem plausible, some, like Joel Vooderwind, a Dutch lawmaker, have called for smaller scale boycotts and asked world leaders to follow them. “It is possible to take part in the games but skip the party beforehand,” Vooderwind says. “Such a ceremony is only intended to glorify the host, China.”

Rogge, the current IOC President. “I think boycotts are a thing of the past, not of the present nor the future.” After explaining that he respects Spielberg’s decision to withdraw from the Games, Rogge adds, “The games are stronger than any one person.” China says that everything is under control, but only time will tell how true that claim is. The international community is eager to see whether China will take this unique public relations opportunity to change its global image. That said, the critBT ics will be waiting to pounce.

A SMOG CAMPAIGN? “Olympics Highlight Beijing Water Woes” —FOX NEWS

“China in Olympics pollution drive” —BBC

“Olympic Teams Vying to Defeat Beijing’s Smog” —NEW YORK TIMES

“As China Rises, Pollution Soars” —INTERNATIONAL HERALD TRIBUNE

“Beijing Closes Plants to Clean Air for Games” —WALL STREET JOURNAL

“UK Olympians to ‘camp‘ in Macau” —CNN 56

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10118198 Pete Turner/courtesy Getty Images

On the Rise China and India are proving that the Ancient World’s greatest economies are quickly growing into today’s greatest economies. How high can they rise? by Hayan Wang and Anil K. Gupta, Professor, University of Maryland 58

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THE FIRST DECADE of the 21st century will go down as representing a strategic inflection point in the global economic landscape. For the first time in almost two hundred years, it is in this decade that the combined GDP of the emerging economies will catch up with and race ahead of the developed ones. China and India - the biggest contributors to world economic growth - are the flag bearers of this transformation. Twenty years from now, when today’s college students are in the prime of their careers, the global economy will be radically different. In order to stay ahead of the coming changes and profit from them, it is critical that students make learning about China and India (and their transformational impact on the world) a core part of their ongoing educational agenda. In this article, we provide an overview of where China and India are coming from and where they are headed. At the outset, it is important to remember that the rise of China and India is a case of renaissance, of re-birth. Other than economic historians, few people know that, for much of the last two thousand years, China and India were the two largest and, by the standards of those times, among the most scientifically and technologically advanced societies in the world. China invented paper, gunpowder, and the compass, among other revolutionary innovations. In turn, India brought to the world abstract mathematical concepts such as the number zero, negative numbers, decimals, and fractions. As recently as 1820, China and India accounted for almost 50 percent of world’s GDP. Barely a hundred years later, the tables had turned. By the early twentieth century, China and India added up to only about 15 percent of the world’s GDP. By 1950, the giants had become pygmies accounting for less than 10 percent of the world economy, even after adjusting for purchasing power parity. What happened? The industrial revolution of the nineteenth century that made first Europe and then America rich simply passed over China and India. When the British became India’s de-facto rulers in the late eighteenth century, India’s per capita income was roughly the same as Britain’s. Given that India had significantly bigger population, however, India had a far larger economy. Unfortunately for India, the British had the benefit of good timing. India’s emperor was weak and the country was po-


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WORLD litically divided. This situation created a very opportune time for a smart foreign ruler who knew how to colonize India and use its resources to fuel its own industrial development. China was a somewhat similar story of internal fractions, a weak emperor, and

even among the BRIC countries, China and India are not just the two largest but also the two fastest growing economies by far. Thus, they are likely to move up the rankings at a faster pace than other countries. Fourth, the population size of China and India is several

In more specific terms, most economic observers (such as Goldman Sachs, McKinsey & Company, and BusinessWeek) predict that China will overtake Germany in 2008, Japan around 2012, and the US around 2035 to become the world’s largest economy

START LOOKING FOR OPPORTUNITIES TO SPEND AT LEAST SIX MONTHS TO ONE YEAR IN EACH OF THESE TWO COUNTRIES. NOTHING CAN SUBSTITUTE FOR EXPERIENCE THAT COMES FROM ON-THE-GROUND IMMERSION. control by foreign powers. The First Opium War of 1840 pitted China – whose emperor had recently issued an edict banning thde addictive drug – against Britain which wanted to continue its opium trade. China lost and was forced to cede Hong Kong to Britain and sovereignty over various other occupied “concessions” to foreign powers including the United States, France, Russia, Germany, and Japan. What is happening now in both China and India is the delayed industrial and technological revolution. Technology and capital move much faster now than they did two centuries ago. Thus, it is not surprising that economic growth that took one hundred years to make Europe and America rich may now take only twenty to thirty years. The evidence regarding the much faster pace of economic growth induced by the current wave of industrial and technological revolution is already here. In the nineteenth century, it took Germany, Britain, and America fifty years of industrial revolution to double their per capita incomes. China and India are now doing so in around ten. Statistics of the world’s twelve largest economies show interesting trends in composition and growth. First, the ranks of the twelve largest economies include four emerging countries: Brazil, Russia, India, and China (or, as Goldman Sachs famously coined, “BRIC” for short). Second, with the exception of Brazil, economic growth in China, India, and Russia vastly outpaces that in the other eight rich countries. This is why most analysts predict that the BRIC economies will rapidly start overtaking the developed ones over the next twenty years. Third,

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times larger than that of any other country. As a result, their growth will have a much greater impact on the world economy than was the case with the rise of Japan or could be with the rise of Russia. Because of rising costs, it is very hard for a country to keep delivering rapid economic growth once its per capita income achieves parity with that of the other rich countries. Since Japan’s population is about 40 percent that of the US, its economy had to peak at much lower level. Short of unimaginably catastrophic mismanagement of the US economy, there is almost no way Japan’s economy could become the largest in the world. Consequently, as Japan grew, it joined the rich people’s club but did not transform the world’s economic structure. In contrast, China’s per capita income only has to reach about one-quarter that of the US for its economy to become the world’s largest. Even then, China will still have a few more decades of rapid growth in front of it. Similar arguments apply to the case of India. To sum up, unlike Japan, both China and India will almost certainly overtake the US economy and, in the process, fundamentally transform the world’s economic structure. As the U.S. National Intelligence Council noted in its December 2004 report to The White House on the likely state of world in 2020: “The likely emergence of China and India, as well as others, as new major global players—similar to the advent of a united Germany in the 19th century and a powerful United States in the early 20th century— will transform the geopolitical landscape, with impacts potentially as dramatic as those in the previous two centuries.”

in less than thirty years. India is predicted to be about 10-15 years behind and is predicted to become larger than the US economy (and the world’s second largest) by around 2045. To extrapolate from and summarize these projections, we can think of the world economy in 2050 as consisting of four major economic blocks – China, India, the US, and the EU – each accounting for about 15-25 percent of world GDP, with all other countries accounting for the remaining 15-25 percent. The decision-makers in both China and India are well aware of these projections. As they look at the history of the last two thousand years and the fact that it is the delayed industrial and technological revolution that is propelling current growth, they believe firmly that the rise of their countries is inevitable and that it is their destiny to be superpowers again. We conclude with four key implications of these developments for today’s college students. First, as you decide which company to work for or which candidate to vote for, have a bias for those whose strategies and policies build on the fact that the world is becoming rapidly multi-polar. Second, like the founders of Google, Skype, and Joost, try to figure out how you can exploit the fact that the world is also becoming much more integrated. Third, start investing in becoming more knowledgeable about the past, present, and future of China and India. Last but not least, start looking for opportunities to spend at least six months to one year in each of these two countries. Nothing can substitute for experience that comes from BT on-the-ground immersion.


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Sinful Subsidies $190 Billion Farm Bill Hurts American Consumers

sb10066019b-001 Will & Deni McIntyre/courtesy of Getty Images

by Michael D. Coe, University of Colorado

WITH THE 2008 election campaigns in full swing, no candidate would dare to run on a platform of raising taxes for the average American. Yet no candidate has addressed one of the largest taxes that affects nearly everyone: farm subsidies. As you read this article, Congress is nearing ratification of a $190 billion Farm Bill that will cost the average American nearly $6,000 in inflated food prices and extra taxes over the next decade, according to the Heritage Foundation. This legislation is cause for concern because it will raise taxes on every American, redistribute money to corporate farms, and harm the world’s poorest people. Between 1995 and 2005 alone, the U.S. government’s Farm Bill paid corn farmers subsidies of $51.3 billion in direct

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payments, loan deficiencies, market loss assistance, and related transfers. This figure does not include subsidies for other cash crops such as soybeans and cotton. The latest Farm Bill proposes an additional $190 billion in taxes on American families and more than $271 billion extra in inflated food prices over the next decade. Despite the perception of subsidies reaching small family farms, the vast majority of subsidies make their way toward large agricultural corporations, such as Archer Daniels Midland and Cargill, which produce record-breaking profits from taxpayer dollars. According to the Environmental Working Group, the top 10 percent of recipients received 67 percent of the latest Farm Bill’s nearly $200 billion—$377,484

per corporate farm for the first three program years. In contrast, the average food stamp recipient receives less than $1 of assistance per meal. The data also confirms that subsidies are highly concentrated geographically. Specifically, only 19 congressional districts (of 435) accounted for half of federal crop subsidies paid between 2003 and 2005. Many of these funds were placed in congressional districts pivotal to elections. Holding the first presidential primaries in the country in the rural states of Iowa and New Hampshire compounds the issue. No candidate dared to denounce subsidies for fear of losing these states early in the race. Protectionist agricultural tariffs are also a major component of federal taxation. They result in higher prices to consumers


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WITH THE PRIMARY ELECTION SEASON THIS YEAR KICKING OFF IN IOWA, NO CANDIDATE DARED TO MENTION THIS TAX, AN ADDITIONAL 190 BILLION DOLLARS ON ALL AMERICANS. and hurt developing economies with a comparative advantage in agriculture. Biofuels are a key example. With the push to reduce greenhouse gas emissions and switch to an oil-alternative, the U.S. government has allocated billions annually to biofuel production from corn. Yet cornbased ethanol is roughly two-thirds as efficient as gasoline, requiring more at each fill-up for a shorter driving distance. In contrast, ethanol made from sugar cane, much of which comes from Brazil, contains more octane and is more efficient and less expensive than regular gasoline. The cost of growing sugar cane in Brazil is far less, not even counting the billions paid in federal subsidies to American farmers. Supporting Brazilian ethanol would be a major boost to a developing economy and democracy. Ironically, the United

States places a tariff of 31 cents per gallon on imported ethanol, making it almost impossible for the developing world to compete with domestically-produced biofuels. When the primary election season kicked off in Iowa, no candidate dared to mention this tax on all Americans. The same trend occurs for countless other agricultural goods worldwide and political races domestically. Farmers have moved away from growing other more nutritious crops with the push to develop ethanol from corn. This, in turn, has caused shortages of these crops worldwide and has increased food prices to unprecedented levels, hurting the world’s most vulnerable and famine-prone areas. According to the United Nations World Food Program, people in poorer countries typically spend 60 percent of their incomes

on food. Worldwide, 850 million people are chronically hungry while 1.1 billion are obese or overweight. With food price increases of 50 percent over the past five years, many of the world’s poorest are being priced out of basic foodstuffs. Instead of dumping corn in the world’s poorest countries and calling it “aid,” American policy makers can take significant steps to help the world’s poorest countries—many of which are fledgling democracies—by reducing trade barriers and federal subsidies on agricultural goods. The International Monetary Fund estimates that abolishing farm subsidies in rich countries would add $100 billion to global income in gains to consumers and poorer nations. Unfortunately, as the November election approaches, the Farm Bill nears BT approval unnoticed and unchanged.

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Timing The Trends by Meade Curtis and Amanda Garfinkel, Washington University in St. Louis

Economic secrets to navigating through business cycles AS STUDENTS ENTER their senior year of college, their focus turns from the immediate demands of classes to their prospective futures beyond the walled sanctity of a college campus. Our own Olin Business School at Washington University in St. Louis reported that nearly 40 percent students of the class of 2007 had received their job offers by the end of October of 2006. By the end of the year, over 70 percent of students had an offer, and 98 percent of students had jobs by graduation. With offers bestowed earlier each year, students are forced to decide their ideal career path with increasing celerity. While many are able to test their ambitions with a prestigious internship after their junior year, others must blindly follow their classmates into the more prominent and “ideal” fields of investment banking, consulting, and other service-related industries. The authors of this article are no exception, but we have come to realize the importance of researching industries in which you are interested and the prominent firms within them. While most students are interested in entering whatever industry promises to fulfill even their most outrageous ambitions, realistically the industry in the spotlight today will soon take a backseat to a more promising sector tomorrow. The cyclical nature of the industry has been a rule of thumb for the U.S. economy for sometime, but job seekers often neglect it. In turn, students should be aware of the available research on the cycles of individual industries. Research allows them to decide both which industry is the most attractive and in which they have the prospect of learning the most.

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In introductory economics students study the principles of supply and demand, economies of scale, and Porter’s five forces outlining a competitive environment. However, an individual firm’s prospects for success expand beyond the framework for these elementary models. In their paper “The Evolution of Markets and Entry, Exit, and Survival of Firms,” Rajshree Agarwal and Michael Gort argue that “in the context of a neoclassical model, the probability of a firm’s survival for a given interval of time is a function of a vector of market attributes and a set of attributes

that relate the individual to the firm. Our departure from this framework is that we introduce the stage of development in a market’s evolution as an additional factor in explaining entry, exit, and survival.” A market’s stage of development directly affects not only the variables we have traditionally included in our models, but also how these variables interact with firm’s entry and exit decisions. In other words, the industry life cycle can either aid or counteract the individual competitive advantage of the firm. The pioneers of this stream of


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ON CAMPUS economic theory, Michael Gort and Steven Klepper, will not be found in your standard microeconomics textbook, but their 1982 paper, “Time Paths in Diffusion of Product Innovations,” will be more meaningful to you as a future business leader than a marginal cost curve. The model details how an industry grows over time – both the driving factors of growth in demand as well as the increasing need for efficiency. Focusing on net entry, the Gort-Klepper Model outlines five stages of development: Stage One: This is the ramp-up stage of an industry. With only a few players in the market, initial entrants can seemingly earn substantial, perhaps near-monopolistic profits. However, before you go to work for that internet start-up remember that the sizeable rewards embedded in your stockoptions package are there for a reason, namely the risky nature of innovation. Infospace was one of the biggest disappointments of the dot-com bust, and employees saw unrealized gains, namely stock options, disappear almost overnight. Stage Two: Consistent with the standard supplydemand model, the existence of profits and market potential leads to a stage of rapid firm entry, at first with accelerating and then decelerating speed. This stage is also characterized by fundamental innovations. While AOL and Yahoo were the clear incumbents of the Internet search industry, Google has overtaken them, out-innovating them year in year out. Stage Three: With net entry leveling off in stage three, the number of sellers remains relatively constant as firms actively enter and exit the industry at roughly the same pace. Stage Four: In this stage, entering firms are imitators, making minor adjustments to previous

innovations. New entrants, however, are overshadowed by the increasing number of market participants no longer able to survive in the competitive environment and are either forced out or absorbed by a more efficient entity. This is similar to a fashion major trying to compete with the likes of Gucci and Ralph Lauren. Although a few, like new entrant Zac Posen, will have what it takes to make the cut, most will fall victim to this shakeout stage. Interestingly, Agarwal and Gort argue that since this is the most competitive stage, only the firms with the best initial endowments will enter. Stage Five: The industry has fully matured by stage five, reaching a plateau with no clear pattern of entry or exit. This is a period of stability with a few large firms dominating the market. Applicants interested in stage five industries should have little cause for concern, as potential employers are mostly successful incumbents. It is not difficult to think of companies that failed during the last 20 years, although victims of the dot-com bust are probably the most memorable. Many firms enter an industry with seemingly innovative or imitative ideas but are unable to survive due to limited market share, high costs or too much competition. One example of a firm with an innovative idea but poor timing is Webvan, rated as the top dot-com company bust by CNET.com. An online grocery delivery website, Webvan raised $375 million in an IPO within 18 months, expanding from San Francisco to eight other cities. It built its enormous infrastructure from scratch, including $1 billion in high tech warehouses. At its peak it was worth $1.2 billion and had a 26-city future expansion plan under way. What Webvan did not consider was the extremely thin grocery margins and the already stable and mature industry. Though innovative, Webvan tried to expand too quickly to compete

with large, incumbent grocery chains, spending more than was profitable. Two years after it launched, Webvan closed in 2001, leaving 2,000 people unemployed. Internet businesses, such as an online grocer, often replicate the roles already played by brick-and-mortar operations. One could argue that the dot-com boom and bust followed a similar life-cycle to the stages outlined above. The main difference, however, was that this industry has matured at a ferocious pace, with dotcoms immediately facing competition from already mature incumbents. The success stories, the E-bays and Amazon.coms, are far outweighed by the drastic number of failures, only characteristic of a stage four industry. So how does this affect you? It is difficult to predict what the future may hold for an individual firm, never mind the characteristics of an industry life cycle as a whole (and if you happen to hold this crystal ball, there are plenty of hedge funds in demand for your skills). More importantly, however, students must come to appreciate the existence of these cycles. As students, our industry analysis is relatively limited in time horizon. Industry life cycles typically span decades, act independently of macroeconomic cycles, and are paramount to the survival of a firm. It is not enough to just recognize current economic recessions or expansions; we must understand the history of the industry and how it progressed to its current state. By paying attention to entering and exiting firms and following key players, it may be possible to estimate which stage and behavior the industry is exhibiting. Reading daily business publications such as the Wall Street Journal will help expose consolidation and expansion trends, clear signs that the industry is moving across stages. It seems that the best way to prepare for your future is to realize that cycles exist and to understand that with every downturn comes the opportunity BT to take advantage of a revival.

THE INDUSTRY LIFECYCLE CAN EITHER AID OR COUNTERACT THE INDIVIDUAL COMPETITIVE ADVANTAGE OF THE FIRM. 66

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ON CAMPUS

Not Making the Grade Why Students Make Bad Research Subjects by Jennifer Lloyd, University of Texas

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COLLEGE PROFESSORS ARE increasingly using their students as subjects for research studies. Perhaps they ask pupils to join a consumer behavior study about eating habits or take part in a marketing study about product preferences. Sometimes students are even lucky enough to receive money or extra credit as compensation. This system may be an easy way to improve one’s grade point average while helping out a researcher, but according to Robert Peterson, a marketing professor and the John T. Stuart III Centennial Chair in Business Administration at the McCombs School of Business, using college students as research subjects may not be the best way to unlock valuable information about human behavior. Peterson, also Associate Vice President for Research at The University of Texas at Austin, has been studying researchers for years. His findings suggest that university researchers rely too heavily on college student subjects and that results from one

group of students are likely to be inaccurate when applied to non-student populations. For instance, recent research from the University of California, Los Angeles supports the idea that women prefer muscular men. However, reports about the study and quotes from the study’s author generalize the findings to apply to all men and women instead of acknowledging the fact that the researchers interviewed only college students in this particular experiment. “The study said women like men with good physiques,” Peterson describes. “Well that’s according to college students. Do 50year-old women prefer something like that or do they like somebody that’s a little more comfortable?” Peterson observes that the volume of research based on the mental workings of students has increased during the past 30 years. He identifies a greater number of researchers, more outlets for publication, and added pressure to “publish or perish” as the causes behind this flood of student-based studies.

“People will use students because they’re convenient and they’re cheap,” he says. “But, where do you draw the line? Can you study a 2-year-old’s mental processes and generalize from that? Can you generalize from a geriatric’s mental processes? The cautionary note is that you should not be generalizing from your one sample of students at a particular university at a particular point in time, often from a particular course, to all people.” Peterson has also found that research results can differ widely between students majoring in the same subject at various universities. In order to balance differences between student populations, he suggests that researchers should collaborate with those at other colleges. His latest research, including data from over 60 undergraduate business schools across the country, uses this method to examine student attitudes on business ethics and capitalism. At some schools, he found that students’ strong attitudes toward business ethics were correlated with negative attitudes toward capitalism. At other universities the opposite was true: these views were correlated with positive attitudes about capitalism. “The conclusion you arrive at is a function of what particular set of students at what particular university you surveyed,” explains Peterson, who hypothesizes that the varying results may be due to differences in geographical location, student populations, and university cultures. If researchers take Peterson’s suggestions to heart, perhaps the new trend in mining resources for studies will no longer be limited to canvassing college campuses, but instead include a wider population. After all, with a little more effort to collect comprehensive data, everyone would benefit from BT more accurate results.

STUDENTS ARE LIKELY TO BE INACCURATE WHEN APPLIED TO NON-STUDENT POPULATIONS. 68

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Final Word

This is a subject close to my heart actually. By way of background, in the middle of my business career (in my 50’s) I left the executive ranks and returned to study the “Great Books” at St. John’s College, completing another Master’s in the Liberal Arts. So, you will not get a business book as the most influential in my case but rather a classic: The History of the Peloponnesian War by Thucydides. In my view this text addresses issues most germane to life, community and business. It presents conflicts of morality vs. power, the growth of factions, the transformation of a “just” society (and by implication any organization) into one of narrow interest, the breakdown of the community commonweal and the tests faced by individual men in such situations. I return to this book often, marveling at its applicability to modern society in spite of having been written roughly 2500 hundred years ago during the Athenian-Spartan conflict.

[ ][ Micromotives and Macrobehavior has colored the way I’ve seen the world ever since I was a graduate student. Its scope, for a short book, is phenomenal; there is no better eye-opener to the practical economics of human behavior. It took the Nobel committee another 21 years to recognize that this kind of eye-opening has been Schelling’s seminal role in our modern age.

MICHAEL N. POCALYKO MANAGING DIRECTOR AND CEO, MONTICELLO CAPITAL

Spring 2008

MICHAEL E. UREMOVICH CHAIRMAN AND CEO, PACER INTERNATIONAL

]

WHICH

BOOK HAS MOST

INFLUENCED YOU?

[

]

[

]

One of the most influential books I have read is out of fashion today. It is Revolt of the Masses by the 20th century Spanish philosopher Jose Ortega y Gasset. Written in 1928, this book not only foresaw the rise of Nazi and Stalinist totalitarianism, and the horrors of World War II well before they happened, but also presented a long-term blueprint of history that seems to anticipate history as it unfolds today. At one time, this book was required reading for most college students in Eurpoe and the U.S. Today, it has become the most unread masterpiece of non-fiction of the past century. BARRY CASSELMAN CEO, PRELUDIUM NEWS SERVICE

Lone Survivor written by Navy SEAL Marcus Luttrell provides a deeply moving account of an incredibly well-trained, four-man SEAL Team’s close-quarters combat mission in Afghanistan. Their heroic actions in the face of a vastly larger combat force are inspirational.

sb10066915i-001 flashfilm/courtesy of Getty Images

NORMAN C. CHAMBERS CHAIRMAN, PRESIDENT AND CEO, NCI BUILDING SYSTEMS, INC.

A number of books have influenced me over the years and at certain moments in my life a particular book has been especially resonant. When I became President of PBS two years ago, the book that most influenced me was Doris Kearns Goodwin’s Team of Rivals. In this biography Goodwin focused on Abraham Lincoln’s leadership style and his ability to bring together into his cabinet a disparate group of men, all of whom were his opponents for the Presidential nomination. Lincolnrecognized these were the strongest people for key roles in his administration and he worked to not only win their respect, but also build a team focused on a common purpose. It was this leadership that held our country together during the most difficult and challenging period in our history and I believe it serves as a powerful model for today’s leaders in both the public and private sector.

[

PAULA KERGER PRESIDENT AND CEO, PBS

]


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Business Today Spring 2008  

The Spring 2008 edition of Business Today magazine. The largest student-run publication in the United States. Business Today was founded t...

Business Today Spring 2008  

The Spring 2008 edition of Business Today magazine. The largest student-run publication in the United States. Business Today was founded t...

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