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[Spring 2009. Volume 46. Issue 1]



Sprituality at Work Overbearing bosses are so passé. Explore the ways that bringing a touch of humanity into the work environment can actually increase profit. [Article by Mashi Rahmani]

34 Paul Volcker

Obama Boy

A student recalls his experience raising voter awareness in Ohio in support of Barack Obama. [Article by Zach Kwartler]

A reflection on the current economic crisis and the measures being taken to curtail it from the former Chairman of the Federal Reserve and a member of Obama’s new economic team. [Interview by Will Beuttenmuller]

Organs Trafficking Take a glimpse into the black market trade in human organs: a manifestation of growing global economic polarization.


The Crisis Explained

[Article by Nancy Scheper-Hughes]


Inside Intel

What made Intel one of the most powerful brands in the tech industry? And how is it surviving the current crisis? Get an overview from Ravi Jacob, VP and Treasurer. [Interview by Carmen Maria Sanchez]

28 A reader-friendly breakdown of the major events that led to the current global recession, and what’s being done to reverse the trends. [Article by Will Beuttenmuller]


Strip Tease

Cyber Knife

Cancer treatment meets the 21st century. Cyberknife laser therapy is a new, tested way to shrink malignant tumors. [Article by Caroline Clark]


The UN is playing a game of charades in Gaza. A resigned UN official issues a written condemnation of UN performance as a peacekeeper in the PalestinianIsraeli conflict. [Article by Carmen Maria Sanchez]



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RNZ Business Today is Americaâ&#x20AC;&#x2122;s largest student-run publication, reaching 200,000 readers nationwide. Published at Princeton University, the magazine is distributed at over thirty of the top schools in the country and has extensive online readership at our website, Business Today is dedicated to presenting the opinions of students and business leaders. By examining controversial issues facing our world and exploring life after college, we hope to help readers prepare for their futures. The magazine has been published by Princeton University undergraduates since 1968.

THE MAGAZINE BJ Sullivan Editor-in-Chief Micahel keaton Publisher MiLES WU Design Director Editorial Will beuttenmuller Executive Editor Eileen Chen Caroline Clark ELIZABETH KOHANSEDGH MIHEER MHATRE MATT PHILLIPS CARMEN SANCHEZ HANNAH SACHS Design

amit mukherjee President clayton sachs Vice President bj sullivan Editor-in-Chief michael keaton Publisher merritt hummer Regional Conference Director remy greeno Seminar Series Director rob ostrowski International Conference Director remi meehan Executive Relations Jim connelly Online Journal Director rohan patil Corporate Contacts Director conor sutherland Finance Director

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

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



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No other word—or at least none that I would feel comfortable printing here—can fully express what has transpired not only in the business community but also in the world since we published our last issue of Business Today. The collapse of the world economy, the dramatic new tenor of government with the Obama Administration, and the scandal and corruption so manifest in criminals like Bernie Madoff—all of these compounding factors will create a dramatically different workplace as we prepare to take the major leap from academia to business. The only positive I see in this mess is an editorial calendar that essentially wrote itself. The topics covered in this issue of Business Today attempt to elucidate the student experience amidst the current trends in business and politics. Instead of adding to the hundreds of thousands of news analyses and reflections already written about everything from Wall Street to the new President, we have tried to present you with a unique blend of articles that resonate with young people, budding professionals. But our issue does not focus solely on the present. Looking beyond the grimness and immediacy of the currently changing world order, our science and technology section investigates some of the trends in Silicon Valley as well as at major research universities in the United States. The dynamics between corporations and universities are deep-rooted and often ill-understood. Our section also features an anecdotal look at the global black market organ trade, which offers a thought-provoking insight on the implications of reducing human bodies to an economic unit. In the meantime, let’s hope that our next issue heralds an upswing in the economy.

BJ Sullivan



Comments? Feedback? Story ideas? Email SPRING 2009 BUSINESS TODAY 9

[A personal assistant at your fingertips]


[Your life in 140 characters or less]

MINT IS THE NEWEST web-based tool for financial management. Not only is the site user friendly and completely secure, the service is completely free. Here’s how it works: you register anonymously with your email address and then add the log–in information for the online bank, credit card, and investment accounts that you want Mint to use. With access to over 7,500 US financial institutions, Mint is able to update nearly every account worldwide on a daily basis. After updating your account, Mint then automatically categorizes all your purchases, showing you how much you spend on items ranging from gas to DVD rentals. If you plan to be the next Warren Buffet, Mint can also analyze and graph your investment performance, showing you both how your portfolio is doing and how high your fees are in each of your accounts. Mint will also email or text you (your choice) if it finds any unusual activity, low balances, or upcoming bills. Finally, the service is completely safe. Even if it were hacked, you cannot move money on Mint, and all of your information is anonymous. Most of us would be satisfied with just the reporting and budget tracking tools that Mint offers, but Mint offers plenty more. Using a patent-pending search algorithm, Mint is constantly searching through thousands of offers from hundreds of providers to find you the best deals on literally everything — bank accounts to credit cards to brokerage accounts and more. Moreover, Mint bases the suggestions on your individual spending patterns, so that ita advise is completely unique to you. Even for the lazy college kid like me, Mint just could not get any better. ~W.B. [Share Your Life Through Music] WHAT IS THE STORY of your life through music? That song that accompanied your sexual awakening, the set played at your first concert, the band that defined the sound of your adolescent angst, these are the unique musical experiences and memories that seeks to capture in its fresh take on the social music network. Driven by the[xx] inspiration that the value and meaning of music extends beyond mere melody and lyrics, offers an extensible technology platform and a suite of applications for anyone to share and engage in their love of music. On the community, you can post music-related memories, review albums, songs and concerts, dedicate a song to someone special, create and debate top-5 music lists, play games to test your music knowledge, and read the online magazine for original columns, podcasts, and news from the perspective of fans. Since launching last year, the Houston-based media company has worked closely with major music labels and artists to connect them to their fans. They offer contests and promotions that encourage music lovers to share their memories of artists and albums, including Bob Dylan, Jimi Hendrix, Natasha Bedingfield, and the Clash. The company expects to release several fun games for the iPhone in March as well as roll out other engaging music applications and web properties. Through its diverse content, from a “26 Songs about Butts” list to commentary on the intersection of politics and music to a personal eulogy via Death Cab for Cutie, takes music beyond notes and words to the intricacies of our emotions, relationships, and lives, making the shared experience of music that much more personal in an impersonal medium. ~ L.Y.

IT’S YOUR FACEBOOK MINIFEED on steroids. It’s the future of blogging. It’s called Twitter, and it’s quickly becoming the favorite site of social networking junkies. With roughly five million users, Twitter ranks behind MySpace and social networking behemoth Facebook. For those who always need to be in the know, Twitter is essentially a way to send the world (or your closest circle of friends) constant status updates. Users make text-based posts to update people on their lives and are received by others through the Twitter website, SMS, or phone applications such as Tweetie, Twitterific, and Feedalizr. These updates are called “Tweets”, and some Twitter addicts will literally text what they’re eating, byte by byte. The idea for Twitter developed in 2006 and is encapsulated by comedian Josh Marino’s backronym Typing What I’m Thinking To Everyone Reading. So far, Twitter does no advertising and generates no revenue, but venture capitalists appear optimistic about Twitter’s ability to create a profitable business model: Twitter has raised tens of millions of dollars from investors. While it has yet to be seen whether Twitter is a fad or is here to stay, it’s a company to keep your eye on and a service to try out for those who are glued to their friends’ status updates. Start Tweeting at ~ M.K.


[“your life, your way”]


DO YOU EVER WISH you could be another person for a couple hours? Change your appearance? Your personality? Your friends? For those tired of reality, welcome to Second Life. The virtual world known as Second Life, launched by Linden Lab in 2003, lives up to its slogan. In a nutshell, this online program is a massive multiplayer virtual environment, called a Grid, with over 300,000 users and a “real” economy complete with its own currency and IP rights that extend to virtual property. Users can journey into cyberspace and choose their appearance, build houses, make a living, and even get an education. Exploring The Grid with “avatars,” users can interact with other users and engage in conversations or other activities such as dancing, dating, and more. Beyond being used as a medium to construct fantasy lives, Second Life can also offer business operations improved organization performance and reduced operating costs. International corporations such as Michelin, IBM, and Xerox have established significant presences on the Grid, holding “in-person” meetings, using 3D collaboration, conducting oneon-one employee training, meeting with global partners, and receiving product feedback from clients through avatar interactions. From social activities to business interactions, Second Life takes online communication to a whole different dimension, literally. Instant messaging? Please, that is so last year. ~ E.C.

hulu [tv on your time]

WHO IS HULU? The latest development in streaming video content is transforming the way we watch television. Launched in the spring of 2008, this joint venture of NBC and Fox Broadcasting Companies allows viewers to watch TV shows and movies with limited commercials from the convenience of their desktops. Programs from networks like Bravo, E!, Comedy Central, and USA are all available, and many can be watched in High Definition. As opposed to popular video sharing websites that place their content online illegally, offers viewers a clear conscience, not to mention improvements in quality and reliability of content. In one short year, Hulu has become the fourth most popular video-sharing site, topped only by YouTube, Google Video, and MySpace Video. In an age where everything from newspapers to social interaction has become digital, Hulu may just be the future of television. ~ K.M.



Photo by Edgar H.

[but we promise it doesn’t actually taste like crap]

A COW HORN might not be the first item that comes to mind when thinking about wine, but maybe it should be. Proponents of biodynamics, the latest winemaking craze, advocate methods that embrace the harmonization of nature. In normal terms, this means that today’s trendy wines are organic plus—rather than focusing purely on the grape, winegrowers take the entire environment into account, mixing science with superstition. Yes, sometimes this involves burying a cow horn filled with manure under the soil, but before you smirk, realize that legitimate vineyards are heading in this direction. One of the most respected biodynamic wineries is Quivira Vineyards, a family-owned business located in famed Sonoma County, California. Quivira is unique in that all of their estate vineyards practice this type of production. Following the standards set by the biodynamic regulatory organization, Demeter, Quivira manages to create delicious red and white wines that respect and enhance the local surroundings at the same time. The commitment to sustainability continues beyond the vineyard, with a solar powered winery and a salmon spawning stream running through the estate. All this attention to the environment pays off: connoisseurs adore the “dangerously drinkable and fruity zinfandel and the red blend Steelhead Red.” Through a more natural approach that unites terroir with taste buds, Quivira is a biodynamic winery to keep an eye on. ~ C.P. SPRING 2009 BUSINESS TODAY 11

BEIJI >> The Post-Olympic Economy [by Eileen Chen]

ACCORDING TO HISTORICAL PATTERNS, the Olympic Games have not only been a grand celebration of sports but also a source of importantly unimaginable publicity and business activity for the host city and country. For the People’s Republic of China, the July 13, 2001 International Olympic Committee (IOC) announcement that Beijing would host the 2008 Olympic Games marked China’s emergence as a major global player. Just as the 1964 Tokyo Olympics and the 1988 Seoul Olympics propelled Japan and South Korea onto the global stage, the 2008 Beijing Olympic Games was China’s “coming out” party, an event that showcased China’s


maturation into a great economic and, to a lesser extent, political power. As Chinese Premier Wen Jiabao noted on April 24, 2008, the Beijing Olympics presented an opportunity for China to show the world how “democratic, open, civilized, friendly, and harmonious” it is. After winning its 2001 bid to host the Olympic Games, China launched a massive seven-year effort to prepare for the event. The huge inflows of investment to support the Olympics and recreate Beijing have had an important ripple effect on economic growth.

: ING Sports Facilities In conjunction with foreign architects, China planned and built the Olympic Park and the 37 stadiums and venues that hosted the Olympic events. These include 32 buildings in Beijing—nineteen new and 13 refurbished—and venues in five other Chinese cities—a sailing center in Qingdao and soccer stadiums in Tianjin, Qinhuangdao, Shenyang, and Shanghai. China also constructed 59 training centers and infrastructure projects for the Paralympic Games, held in Beijing in September 2008 following the Olympics.

Beijing’s stadiums, in particular the National Stadium (or “Bird’s Nest”), are state-of-the-art, well designed facilities that are now available for use. The area around Beijing’s massive Bird’s Nest stadium will be turned into a shopping and entertainment complex in three to five years. Plans call for the $450 million stadium to anchor a complex of shops and entertainment outlets in three to five years. They will continue to develop tourism as a major draw for the Bird’s Nest, while seeking to host sports and entertainment events.



Transportation and Infrastructure According to Liu Zhi, deputy director of the Beijing Municipal Development and Reform Commission, from 2002 through the beginning of the games, Beijing spent $1.1 billion on transportation improvements, such as building and extending Beijing’s subway system, completing the city’s light rail system, and constructing and refurbishing more than 318 km of city streets—including 23 roads in and around the Olympics sites, two new ring roads around the city, and high-tech traffic control systems. The city also built an enormous new airport terminal at the Beijing Capital International Airport and extended the toll road to the airport. Urban Renewal According to Beijing’s eleventh FiveYear Plan (2006-2010), Beijing spent more than $200 million demolishing dilapidated housing and urban buildings, refurbishing 25 historic areas, including many of the city’s landmarks, old streets, and beautiful four-corner residences that date back to the imperial period, and restoring Beijing’s many historic places, including the Forbidden City. High Tech China’s capital budget includes $3.6 billion spent transforming Beijing into a “digital” city, with widespread use of digital and broadband telecommunications, wireless transmission and networking technologies, and “intelligent technologies,” including smart cards. Tourism The number of tourists in Beijing has risen rapidly, a result of the increased visibility that the Olympics have brought to the host country. Though estimates of the number of people who visited China during the Olympics—or even the number of people who visited China in 2008—vary significantly, it is clear that the games were a magnet for tourists. Chen Jian, president of the Beijing Olympic Economic Research Association, estimated in the spring that Beijing would receive roughly 600,000 foreign visitors and 2.5 million domestic Chinese tourists during the Olympic games and that the number of foreign tourists in Beijing would grow 8 to 9 percent annually in the decade following


the games. Foreign students studying in Beijing who experienced the Olympic summer craze were awed by the improvements in commercial services and infrastructure that took place within the weeks leading up to the Opening Ceremony in early August. A Princeton student who arrived in Beijing in midJune reported being surprised during the first week of August when she frequented the bars in Beiing’s p o p u l a r Sanlitun neighborhood only to find a three-story mini-mall on the same corner where two months earlier had stood a brick building on the verge of collapse. Most impressive was Beijing’s newly-built network of commercial villages, all named Soho, erected by a Beijing-based industrial development company of the same name. The leaders of SOHO China have undertaken a number of high-profile architectural enterprises under the slogan “building city center prosperity.” From these projects have emerged shop-towns throughout Beijing, housing top brand names such as Gucci and Chanel, and giving the unmistakable impression of a new era of Chinese consumerism. The openness of China to foreigners was made apparent not only by the governmentsponsored “Beijing Welcomes You” banners, but also by the friendly gestures of shop-keepers and cab drivers, all eager to do business and exchange “Ni hao” with foreign passers-by’s. The number of hotels in Beijing has also jumped in recent years. Since China entered the WTO and won its Olympic bid, the country has reduced the number

of ownership restrictions. Starting in 2002, foreign investors could own a majority stake in hotels, and in 2006, wholly foreignowned hotels were permitted. These moves cleared the way for an extensive expansion

of foreign-owned hotels and other tourism facilities. Environmental Improvements Every Beijing resident is keenly aware of the city’s environmental challenges. Air quality, particularly in the summer, can be less than optimal, with particulate matter at alarmingly high levels. Though Beijing has taken steps to improve air quality, such as ordering coal-burning power plants to reduce emissions, halting construction projects during the period around the Olympic games, and forcing 200 heavily polluting factories to move out of the city, air quality remained a worry for the athletes who participated in the games. Under the Beijing Sustainable Development Plan, China launched twenty projects to improve the quality of Beijing’s environment, with an overall investment of $12.2 billion. The city established new wastewater treatment plants, solid-waste processing facilities, and green belts, and built a fleet of clean buses for the games.

Beijing phased out ozone-depleting substances ahead of schedule, made use of water and air-source heat pump systems to save energy in Olympic stadiums, replaced 47,000 old taxis and 7,000 diesel buses, and required vehicles to meet EU emissions standards. In addition, natural gas (use of which is up tenfold), geothermal, and wind power are gradually replacing coal. Much of Beijing is now covered by trees, bushes, and lawns—a radical departure from the past—and Beijing has set up twenty natural reserves to protect forests, wild plants, animals, wetlands, and geological formations, according to an October 2007 report on Beijing’s environmental record. In fact, the 2008 games were one of the most environmentally friendly Olympics ever, despite concerns about Beijing’s air pollution.

[The Power of Now: A Guide to Spiritual Enlightenment] IN HIS 1997 BOOK, The Power of Now, the contemporary spiritual teacher Eckhart Tolle delivers a life-changing message: there is a way out of suffering and into peace. Through simple and clear language, Tolle promises a profound transformation of human consciousness that is available now, whoever and wherever you are. Although not aligned with any particular religion or doctrine of faith, Tolle draws freely from many belief systems to provide a path to spiritual enlightenment that is practical and accessible. He shows you how to free yourself from “enslavement to the mind,” the constant state of dwelling on or regretting the past and anticipating or fearing the future, in order to enter a new and higher state of consciousness, by finding the “essence of our Being,” and how to sustain this state throughout your daily life. Caught in this perpetual cycle of regret and fear, past and future, we are not able to live in the now. Tolle’s mission is to give us the spiritual tools to take back our lives. By crafting the book’s ten chapters in a question and answer format, he anticipates the forms of resistance that he believes the human

mind will immediately leap to, which, if not countered, impede our progress towards a happier and more satisfying life. The Power of Now is a quick and inspiring read, which, in the eleven years since its first printing, has been translated into over thirty languages, selling more than two million copies. To explain his discovery, Tolle recounts his own experience during a time of deep despair. As he thought about his life, he realized that there seemed to be two “beings,” the “I” who performed certain actions and the “I” who talked in his head non-stop. Tolle believes that our identification of ourselves through the internal, talking “I” gives a false picture of the self. We are not, Tolle claims, our minds; rather, each human being has a unique spiritual identity, an essence of Being, that transcends the human mind, which we can tap into when practiced in the art of doing so. Ultimately, The Power of Now is a guide to psychological wholeness, achieved by separating one’s identity from the human mind, and instead, surrendering to, in Tolle’s terminology, the presence of now, the presence of Being. ~EMH

DON’T GET MAD. GET GLADWELL. 10,000 hours. That’s the time, on average, it takes a person to become a virtuoso—from Bill Gates to the Beatles. At least that’s what Malcolm Gladwell posits in his third bestseller, Outliers. And while this may seem like a whopping number, this is only the primer of success. Success arises when you couple this immense preparation with luck, good fortune, and timing—forces often overshadowed by a singular focus on talent


Economic Development The huge inflows of investment to support the Olympics and recreate Beijing have had an important ripple effect on economic growth, not simply in Beijing but in areas surrounding the capital. It is estimated that spending on the Olympics added 2.5 percent annually to Beijing’s overall economic growth since 2002. Furthermore, the recruitment of Beijing Olympic partners, sponsors, suppliers, and many other companies that want to take advantage of the Olympic “buzz” in Beijing has helped to boost advertising sharply. Advertising spending in China, 42.5 percent of which is focused on television, will likely rise from $14.7 billion in 2007 to roughly $18.4 billion this year, and spending on Internet advertising may rise by as much as thirty percent, according to an October 2007 advertising expenditure forecast. Similarly, China’s sports industry, immature in 2001, is growing rapidly. The Hong Kong Trade Development Council estimates that China’s sports industry, though tiny now, has a market potential of $250 billion. Driven by major international sporting events held in China, such as the Beijing 2008 Olympic Games, FIFA’s Women’s World Cup 2007, and the Guangzhou Asian Games in 2010, China’s sports industry will soon grow by twenty percent a year, particularly in Beijing, Guangdong, Liaoning, and Zhejiang. BT



or drive. What Gladwell explores in this book—which, like his others, can be read in two hours—is how little control we have over our futures. Preparation and intelligence form the baseline pool from which only a few grow to be superstars or titans of industry. Success, he concludes, is rooted in advantages—“some deserved, some not, some earned, some just plain lucky—but all critical...” ~BJS SPRING 2009 BUSINESS TODAY 15

Spirituality in the workplace grab bag


by Mashi Rahmani, CEO, MMC, Inc.


People aren’t profit-generating machines. But throwing a little TLC on your professional relationships might actually make them work harder. Yes, smiling, laughing, and expressing sincere care might do just as much for the balance sheet as it does for the soul.


pirituality in the Workplace” is a concept that evolved over my many years of experience managing a thriving corporation. I believe the intentions and motives behind every decision made on behalf of a business, its leadership, and its employees manifest into positive or adverse consequences based on the purity of the original intentions and motivations with which such decisions are made. In short, ill intentions result in negative consequences. Pure intentions result in positive consequences or success, even if the only positive is a successful learning experience. Employee morale has a direct influence on productivity, which is why organizations spend large sums of money trying to make working environments comfortable, pleasant, and even luxurious.

When sincerity and pure motives are combined with highly developed business leadership and consistent decision making skills, the outcome is a powerful and highly motivated organization. In searching for business solutions, one must be innovative in developing ways to positively impact not only the client but also co-workers and peers. “Spirituality in the Workplace” is more than just a concept; it is a practical method for attaining business success. Nowadays, it is a proven fact that a strong connection exists between mind and body. Studies reveal how many people who have illnesses, like heart disease or cancer, also suffer from depression as part of a vicious cycle. Physical ailments create emotional depression, which in turn produces stress that worsens the underlying physical condition. Fascinatingly, modern science shows conversely that a positive attitude

can improve health which in turn can increase longevity. What a powerful panacea. Extended scientific observations and experiments have also shown that alternative medicine techniques such as meditation, guided imagery, and, even more effectively, prayer can also alter the course of terminal illness, reduce medical treatments, and even minimize hospital stays. Indeed, spirituality and all that it encompasses is critical to good health. If we subscribe to the theory that “all created matter has a Creator” and “The source of all creation is a higher power which exudes positive energy,” rather than a negative force, we will develop ways to attract the higher energy to fuel our positive mind, soul, and spirit. As business people seeking success, we should consider new methods and techniques which connect with a Higher



Power. Organizations which practice positive psychology and invest in employee motivational programs have been shown to reap rewards in the form of improved employee performance and self-reported employee satisfaction. These results generally translate into increased sales and ROI (Return on Investment). This is the philosophy that has become a part of my corporate culture at MMC. We have seen the positive results demonstrated through measurable benchmarks for managers and staff alike as “Spirituality in the Workplace” exudes strong work values and moral


when we are on the receiving end of the treatment we wish all would aspire to. A supervisor’s ego should never become an obstacle to developing mutually respectful employee/employer relationships. And managers should never lose sight of the fairness of demands imposed on employees who are being driven to maximize profitability. If managers or business owners considered subordinates’ positions before making decisions that would impact them, decisions might be made differently. Decisions might be made to guarantee

on shaping the organization and the larger community, by contrast, exudes confidence and pride that makes his or her contributions to the organization invaluable. The organization that empowers the employee to be a source for delivering fairness, equity, and respect has a major advantage over the organization that limits the employee to merely waiting to receive fairness, equity, or respect from others. Leaders in corporate America, from the budding business to the most complex, well-established enterprise, need to take


Our attitudes and entitlement take on a different shape only when we are on the receiving end of the treatment we wish all would aspire to.

ethics. When their best intentions direct their efforts, employees do not have to engage in conduct that repents for errors in their work performance. Practicing “Spirituality in the Workplace” creates win/win results for everyone involved. Employers, employees, and even customers no longer have the need to question the motives of service providers. This brief evaluation of a strategy that has evolved over the past 25 years in my organization is proof that a simple, inexpensive management tool has helped MMC to gain tremendous financial rewards and to train highly motivated employees who genuinely exhibit great respect for one another. Many organizations spend millions of dollars to develop a work environment purportedly designed to nurture the minds of employees for the benefit of maximizing productivity. The claim, of course, is that the millions invested will lead to higher profitability and an edge over competitors. Human beings want to be treated fairly, equitably, and respectfully. We are quick to demand respect when we believe the treatment we receive runs contrary to that paradigm. However, our attitudes and entitlement take on a different shape only


fairness and equity that would increase levels of trust and improve interactions between manager and employees. The two would work more like partners focused on the business of producing results. Now, if the level of mutual respect and love were enhanced, interactions between managers and employees could only result in successful collaboration. Under these conditions, it becomes unnecessary for management to spend valuable time evaluating the sincerity of subordinates, or for employees to question the sincerity of their supervisors’ motives. The time saved from practicing “Spirituality in the Workplace” can assure time for creativity, innovation, and higher productivity with great success. Work places are socio-economic chambers and silos. The environment that an employee arrives to on a daily basis in order to perform and create output for monetary gain can be seen as a vacuum. If an individual arrives at work with the thought that she or he is there to be treated and used as a tool rather than as a contributor to the advancement of the greater community, the results are unpredictable. An employee who feels their performance has an impact

a fresh look at organizational goals. Is it the happiness of the employee or the quest of reaching output goals and quotas that drives their business culture? Put plain and simply: happier employees perform better. It behooves managers and business owners then to recognize how spirituality affects the workplace. If we tie personal attributes and abilities to our spirit, which is a driving force for emotions and personal interactions, managers and business owners can begin to open new channels for greater positive energy from an inexhaustible source. One spiritual commentator describes prayers and mediation as remedies for clearing the clogged arteries of our soul. Because individual needs differ, just as our appetite for food and its consumption varies, I will leave you with this proverbial food for thought. At the end of the day, we are all human beings with hearts and souls. Everyone has different lives and different issues; however the one thing that unites us – especially in the workplace—is that we are all trying to do our best and to have our work appreciated, for the benefit of making the world a better place to live. Contentment in the workplace, bred by a sense of spiritual fulfillment, is every bit a valuable commodity. BT

Andrea Jung International Conference Keynote


udden, unexpected new dynamics are changing the business environment substantially. Now just one crisis, such as the credit debacle, can wipe out a company, and cripple entire industries. No company is immune, no matter how established they are. So we truly live in a time of extraordinary

and unprecedented change. As leaders, there is no rulebook we can follow. And no safe harbor. No one, regardless of his or her industry, can become complacent. Companies must learn to constantly reinvent themselves by the day to stay competitive and leaders must continually reinvent themselves as well, never accepting the status quo, but always striving to be better. Continual reinvention has certainly been the hallmark of my career at Avon. This year marks my tenth as CEO of Avon, and the last decade has been an exciting roller coaster ride. The adventure has opened my eyes to many things: …the increasingly complex demands of running a business today, my own skills and competencies, and about the need to constantly challenge


[CEO of Avon Products, Inc.]

and renew my own commitment to being a better leader during transformational times. During my tenure as CEO over the last decade, the company has undergone a significant transformation in every aspect of the business. We have built and continue to grow a wonderfully diverse team. And it’s through the strength of this team, that we have reinvented and transformed the company from top to bottom, building on the considerable power of our core equities but modernizing them for a new generation. We’ve taken a brand that was always well respected and made it modern, hip, and relevant to today’s consumer – this includes investing in world-class innovation for our products and forging alliances with global celebrities and leading fashion designers. As a result, Avon has been named one of Business Week’s top 100 global consumer brands for eight straight years. We’ve also transformed our channel. Yesterday’s Avon Ladies have evolved into today’s modern entrepreneurs. These smart, savvy professional women are a far cry from the famous “ding dong” Avon Ladies of years past. The high-touch is still there, but now they also sell high tech, running modern, web-based businesses. They have emerged as business leaders in their own communities in every corner of the world. In addition, we have transformed our operating model and cost structure. In the last decade, our business has expanded across the globe and more than doubled in size. In response to this exponential growth, we have had to transform the way we go to market, including leveraging our assets more strategically to gain cost benefits from our global scale. I’ll never forget the day I was doing The New York Times crossword puzzle and came across the clue, “The company for women.” And the answer, of course, was Avon. In years past, the clue would most certainly have been “Ding Dong.”

Throughout my career, I have tried to embrace every challenge as openly and honestly as possible. Along the way, I’ve come to believe that there are really eight qualities that define outstanding leadership in today’s complex environment. I’d like to talk about each of these leadership qualities, and what I have learned during the course of my career – my tales from the front lines of leadership, if you will. First, and for me most important, is to have Passion. To love what you do. For me, Passion as been at the foundation of all my most critical career decisions. Sometimes leaders have to make tough decisions. But even as we make these decisions, compassion and the protection of the human spirit and dignity must always be the first concern. A business is nothing more and nothing less than its people. And caring about your people is the hallmark of great leadership. And it’s ok to cry – even in business settings – and to express your feelings for the people you care about. This was brought home to me in a very personal way in late 2005, when we made the very difficult decision to cut the number of layers of management in half. Our goal was to eliminate bureaucracy and streamline decision making. It was the absolute right thing to do, but it meant that over the course of four months, we actually eliminated 30% of the senior management ranks. Many of these people were my close friends. I had walking pneumonia at the time, but I got on a plane and traveled around the world and spoke personally to our thousand top leaders. I looked them in the eye and explained why we had to eliminate 1/3 of all positions. I assured them that no matter what, we were going to be fair, honest and open throughout the entire process. Following these meetings people sent me emails of encouragement, telling me that my message was really difficult to hear but that they were glad I had taken the time to come and explain it to them in person. They told me I was doing the right SPRING 2009 BUSINESS TODAY 19


thing for the company. Their feedback and support was incredibly energizing. The quality of Compassion enabled all of us to get through a difficult time and emerge even stronger. With apologies to Eleanor Roosevelt, the third defining leadership quality for me is Courage. I think I was a little lucky in that I was born without the fear gene. No matter what field of endeavor, the challenges are complex, and the ability to transcend fear and take calculated risks distinguishes those who succeed. For me, leading a multinational corporation in today’s increasingly globalized business world has been a true adventure in fearlessness. The change is constant and the scrutiny is intense. And every time I think I’ve reached the summit, it turns out to be only the bottom of the next hill. I talked to you about the difficult management cuts we made in 2005. Until that time, the company had been flying high, delivering five years of record-breaking growth. But as 2005 progressed, it became clear we were headed for some challenges. Courageous moves were required. In addition to reducing management layers, we embarked on the most comprehensive restructuring in Avon’s history. This meant radically transforming the company from top to bottom so that we could effectively operate as the global giant we had become. We took bold actions, and put the company back on a strong growth track. And now, again, as we navigate through this newest period of challenge, having courage­—and not letting fear trump the fundamentals—remains key to staying the course. Closely related to Courage is Humility, and that’s the fourth quality that I believe distinguishes leaders today. No one person, no matter how capable, has all the answers. Having the humility to be able to continue to learn and to be able to change your own decision based on new information is the key to continual renewal and growth. As I was deciding back in 2005 to undertake the boldest-ever restructuring of the company, I had a frank conversation with a friend to whom I turn for advice from time to time. He reminded me that most people who successfully orchestrate significant corporate turnarounds come from outside, because they have no vested 20 BUSINESS TODAY SPRING 2009

interest in the company or its people. It was 8 P.M. on a Friday night, and he challenged me. Could I, he asked, go home over the weekend and fire myself as the CEO who had presided over five years of explosive growth, and then rehire myself Monday morning as the turnaround specialist who would lead the company into the next era? It meant totally reinventing myself from the leader I had been to an entirely new type of leader who would be right for the next chapter in the company’s history. It was a very humbling experience, but ultimately very liberating. The fifth leadership quality I want to talk about is Pride. I firmly believe that no matter where we were born or how we were raised, it is important to have pride in your heritage. Our personal heritage gives us a unique toolbox of strengths we can draw on throughout our life and career. For me, my Chinese heritage has been a


My brother and I smile today when we reminisce about growing up in our house. Because in our house, everything important in life came from China, was invented in China and owed all to the Chinese. When I first became Avon’s CEO, Dan Rather interviewed my dad and asked him if he always knew I would be successful in business. No, he said, quite to the contrary: he worried for years that raising me to be a respectful Chinese daughter would hinder my ability to compete in a world with what he considered aggressive, cutthroat traits of typical American CEO’s. In fact, he passed on a letter to me that I keep, translated from Chinese to English, in my desk drawer. The letter reads: “Remember, there are distinctive qualities that set apart the successful Chinese: strive to excel in all you do; be a superb parent willing to curtail your own pleasure for the sake of better nurturing your children; be

I think I was a little lucky in that I was born without the fear gene. No matter what field of endeavor, the challenges are complex, and the ability to transcend fear and take calculated risks distinguishes those who succeed.

wonderful compass, a fortuitous gift, and an enormous source of strength. I was raised in a traditional Chinese family where achievement was not demanded, but expected. My father, born in Hong Kong, was a successful architect. My mother, born in Shanghai, was the first female chemical engineer in her graduating class. They arrived in America not speaking a word of English but through hard work, both were able to reach their full potential, and their success has set a wonderful example for me. My brother and I were given all the opportunities as our American friends— the same schools, the same tennis lessons, the same piano teachers. But we had a wonderful advantage—we had a cultural heritage that we were always taught to be proud of.


generous, fair, tolerant, eager to learn from other cultures while sharing your own. But beyond these attributes, remember to have an absence of arrogance and boastfulness; have unfailing courtesy, forbearance, sensitivity to others’ feelings, and above all, the ability to diffuse your anger and grievance not by suppressing them but by transforming them into helpful, positive emotions. In an age and environment of pretension, you have a precious Chinese cultural heritage which we are proud to pass down to you…” I have my Chinese heritage to thank for teaching me the next important quality of leadership I want to talk about. Perseverance. When I graduated from Princeton, my very first job was as an executive trainee at Federated Department Stores. The


traineesâ&#x20AC;&#x2122; responsibility was simpleâ&#x20AC;&#x201D;we had to put clothes on hangers in a stock room store. As you can imagine, this was not exactly what I envisioned Iâ&#x20AC;&#x2122;d be doing with my college diploma. So one day I decided to quit, and I called my parents to tell them so. I assumed that, naturally, my parents would understand my predicament.


one of us is held accountable to a higher purpose. And as a leader, I strongly believe that contributing to a greater social good will become a key barometer for success, and the hallmark of distinguished leadership in this next century. And thatâ&#x20AC;&#x2122;s a very good thing, because making a difference in the communities

you with a quote which inspires me every day. Itâ&#x20AC;&#x2122;s written by Jim Collins, a renowned business consultant and author of the bestselling book, Good to Great. I have read this book, cover to cover, many times. Jimâ&#x20AC;&#x2122;s business perspective is certainly invaluable. But the part of his message that always speaks to me the most is the very last

Could I, he asked, go home over the weekend and fire myself as the CEO who had presided over five years of

explosive growth, and then

rehire myself Monday morning as the turnaround specialist who would lead the company into the next era?

Instead, motherâ&#x20AC;&#x2122;s response was: â&#x20AC;&#x153;Quit? You canâ&#x20AC;&#x2122;t quit. Jungs donâ&#x20AC;&#x2122;t quit.â&#x20AC;? So I didnâ&#x20AC;&#x2122;t. I persevered. And as a result, I ended up falling in love with the consumer business and the course of my future career was set. And this brings me to the final leadership quality I want to talk about today. Itâ&#x20AC;&#x2122;s the most important leadership quality of all â&#x20AC;&#x201C; Make a difference. At the end of the day, each and every

we serve has never been more important than it is today. While the annual numbers for charitable giving havenâ&#x20AC;&#x2122;t come in yet, nonprofit organizations are bracing themselves for less donations in light of todayâ&#x20AC;&#x2122;s economic crisis­­â&#x20AC;&#x201D;and this is during a time when needs have never been greater. In closing, I want to thank you for inviting me to be with you to share this wonderful program. And I want to leave


paragraph of the book: â&#x20AC;&#x153;It is very difficult to have a meaningful life without meaningful work. Perhaps then, you might gain that rare tranquility that comes from knowing that youâ&#x20AC;&#x2122;ve had a hand in creating something of intrinsic excellence that makes a contribution. Indeed, you might even gain that deepest of all satisfactions: knowing that your short time here on this earth has been well spent, and that it mattered.â&#x20AC;? BT


For more information:


on campus


he word hospitality derives from the Latin verb hospitare, meaning “to receive as a guest.” Hospitality may bring to mind the times your relatives stayed over at your home, or the times your family went on vacation and stayed at a resort or hotel. As a guest, what do you need? Traditionally, the requirements of a guest are food, drink, and shelter. If the word hospitality refers to the provision of these three necessities to travelers, then the industry consists of businesses that do this. Some hosts, however, also provide entertainment for their guests, like on a cruise ship or a casino. The entertainment industry is farreaching, including everything from theme parks to sports events. Unlike hospitality, entertainment is not associated with the provision of a traveler’s basic needs, and is a separate industry altogether. The hospitality industry is, by itself, a giant $3.5 trillion service sector and comprises hotels, resorts, clubs, restaurants, catering, and meeting and event planning. According to the International Hotel & Restaurant Association, the hospitality industry includes 300,000 hotels, 8 million restaurants, and employs 60 million people worldwide. Hotel Babylon The hotel, arguably the most basic element of the hospitality industry, is a commercial establishment that offers lodging to travelers, usually on a shortterm basis. The differing costs of a hotel room are indicative of the location of the property, quality of furnishings, and range of amenities and services available. We’re all familiar with the one to five star rating system, where more stars indicate greater luxury, more amenities, and more personalized service. Instead of stars, the American Automobile Association (AAA) uses one to five diamonds to rate hotels. But the correlation between ratings and guest experience is loose at best. The market research company JD Power has surveyed US hotel guest satisfaction since 1996. It ranks hotel chains in six segments: luxury, upscale, mid-scale full service, midscale limited service, economy/budget, and

extended stay. A 2008 study found that satisfaction is down overall in the North American market as compared to 2007 levels, primarily due to guest complaints regarding amenities and room features. From a JW Marriott to a Doubletree, there are a variety of hotels on the market with different price points to choose from. Most hotels are independently owned but are often managed by a subsidiary of a global giant like the InterContinental Hotels Group (IHG), which owns the Holiday Inn franchise as well as Starwood Hotels and Resorts, the parent company of world-renowned chains such as Sheraton and Westin. In recent years, the boutique hotel concept has become increasingly popular. The concept is typically used to describe independent establishments that are more intimate and authentic in their approaches, and larger hotel companies have created internal boutique brands, like Starwood’s W chain or Marriott’s Edition, in order to capture market share. That said, finding affordable luxury often does not require looking further than the Four Seasons. Budget travelers might consider staying at a Microtel, which according to the JD Power study, has ranked the highest in guest satisfaction in the budget segment every year since 2001. In this world of lodging, however, there exists much more than standalone hotels and motels. Island in the Sun Attach shopping and sport to a hotel and it can be classified as a resort, a place for both recreation and vacation. Resorts are more often establishments operated by a single independent company, although resort chains like Aman Resorts or Club Med are common. Not surprisingly, a hotel is frequently the central feature of a resort, like at the Atlantis in the Bahamas. A self-contained resort, such as the one at Walt Disney World, attempts to provide everything a guest might want, so that guests need never leave the resort for any reason. Some resorts boast activities such as golf, watersports, winter sports, spa facilities, or luxury safaris. For example, within South Africa’s famous Sabi Sand Reserve, the Sabi Sabi Private Game Reserve offers a blend

of luxury accommodation, personalized service, extraordinary wildlife encounters, and delectable cuisine. In Las Vegas, casinos like Wynn and the Venetian are classified as destination resorts, to which visitors flock, disregarding the other attractions in the area. Their counterparts in Macau, China, offer the same experiences with a distinctive touch of Asian hospitality. Home Away from Home When travelers stay for extended periods of time, they might opt for a serviced apartment, which is furnished to resemble a home, with the provision of cooking and dining facilities, more closet space, and other such comforts. Such apartments are often cheaper than hotel rooms, and are popular with families looking to “live” rather than “stay” somewhere, albeit for a short time. Many hotels have an apartment arm adjacent to it, like the Residences at the Ritz Carlton New York in Battery Park. The hotel staff is usually at the disposal of apartment residents, combining the flexibility of apartment living with the services of a hotel. Luxurious amenities like 42-inch plasma TVs and king-size beds with 400-count sheets are not unheard of. Not your average dorm room! Food, Glorious Food The Food and Beverage (F&B) component of the hospitality industry involves a mix of different establishments, devoted to menu type, dining style and pricing. The F&B industry includes everything from Polish sausages, to pretzels sold from a cart on a street corner, to delicatessens, to Mickey D’s, to fine dining venues within or without hotels. The Michelin Guide is a contemporary restaurant reviewer that is popular in Europe. Their incognito inspectors accord one to three stars to restaurants that they regard as having high culinary merit. A good example of a three star Michelin restaurant is Restaurant Gordon Ramsay at Royal Hospital Road in London, which is frequently rated as one of the world’s best restaurants. Here in the US, Mobil rates restaurants on a 1-5 star scale, in contrast to AAA’s 1-5 diamonds. Both Mobil SPRING 2009 BUSINESS TODAY 23


THEREâ&#x20AC;&#x2122;S ROOM AT THE INN [


by Andrew Lo, Stanford University

A brief overview of the hospitality industry, and why you might just want to consider a career in it.


and AAA dispatch checklist-wielding inspectors to evaluate establishments, leading some restaurants and hotels to improve by working to the checklist, rather than improving their overall performance. Students may be more familiar with the popular Zagat Survey, which compiles individual comments about restaurants and does ratings on a 30-point scale. In Perspective In the current global market, operating hotels face significant challenges. Even after the economy recovers, some aspects of the crisis will continue to linger. The factors that will most impact the hospitality industry include elevated food and fuel prices, troubled capital and credit markets, and excessive consumer debt levels. Other issues include a shortage of skilled labor, changing demographics, and, in certain parts of the world, security concerns. Itâ&#x20AC;&#x2122;s All About the People The hospitality industry is serviceoriented and labor-intensive by necessity.


The problem of attracting and retaining qualified workers is becoming a human resource challenge for hotels worldwide. The hospitality industry has long been criticized for offering compensation levels below those common in other lines of business. Robert Whitfield, general manager at the Four Seasons Hualalai in Hawaii, recognizes that the industry is notorious for long hours and weekend shifts. These working conditions induce college students to seek other careers with better hours and/or better starting salaries. In this current economic turmoil, employee training continues to be important as hotel brands attempt to meet high customer expectations while exercising prudent fiscal responsibility. Changing Demographics The impact of changing demographics on travel trends leaves no sector in the hospitality industry unaffected. Whether it is the gradual retirement of baby boomers, rampant globalization, or the newly-rich entrepreneurs pouring out of China, the

dramatic worldwide shift in demographics presents a multitude of obstacles for the industry. Hoteliers need to begin offering services and products that address multigenerational needs and desires. Hoteliers must cater to the special needs of older consumers (like our parents), as well as younger travelers (students like us), who have very different expectations relating to design and technology. Traditional practices of brand standardization go out the window as hoteliers look for ways to enhance the experience of guests of all ages. Profiits The current economic environment makes it increasingly difficult to sustain profit growth and improved return on investment for several reasons. First, the early months of the new year will see drops in revenue per available room (RevPAR), a primary indication of the overall financial performance of a hotel. PKF Hospitality Research forecasts as much as a 7.8% fall in RevPAR for the domestic lodging industry.


Second, there are a large number of fixed costs of operation that hotel owners have to pay regardless of occupancy levels. Industry analysts are predicting a decrease in 2009 occupancy levels, which does not bode well for hotel returns. Third, as hotels conform to green culture, higher energy costs can affect profits. According to Donald Lim, vice president at the Hotel Equatorial Group in Malaysia, sustaining profitability has to come from controlling costs. The single largest component of cost will be labor, followed by food costs in those properties where food & beverage accounts for a substantial part of revenues. Security With regard to security, the post 9/11 environment presents hoteliers with the difficult task of having to balance accessibility with increased levels of protection for guests. Governments have stepped up security at key locations such as airports and embassies. Therefore, hotels, with their relatively lax security, have become alternative targets for terrorists, as seen in the Marriott bombing in Pakistan last September and the recent attacks at the Taj and Oberoi hotels in Mumbai. Not only must there be increased expenditure for equipment (e.g. CCTV building access controls), but there has to be substantial investment in the training of all hotel staff to be more vigilant and security-conscious. Short of deploying armed guards and metal detectors outside lobby entrances, as many hotels in the Philippines and Indonesia have done, it is crucial that hotels re-evaluate their security protocols. Only then can guests be assured of their personal safety.

interesting lifestyle. It surprises me to find that there are relatively few future hoteliers, compared with future doctors, lawyers, bankers, and engineers, in liberal arts colleges and universities. Perhaps this is due to the incorrect assumption that one needs to have a degree from a hotel school in order to break into the industry. While there are specialized hospitality-related skills that one is not likely to pick up from an Ivy League school, the truth is that a hotel is like any other commercial organization. It is a business that requires people skilled in management, accounting and finance, marketing, sales, and communications. The unfortunate reality is that many students in elite schools do not consider careers in hospitality, as other professional options

start as an assistant manager making about $40,000 per year. It may not seem like much to begin with, but with promotion come notable gains. It is not unusual for hotel general managers to live at the hotel with their families in addition to receiving private school tuition for their children and a personal chauffeur, Such benefits are provided alongside salaries of $200,000 $300,000. In the summer after my freshman year at Stanford, I interned at the Four Seasons Hong Kong, spending time in both the accomodations and finance departments. As an international relations major, I thought I would be at a disadvantage to the rest of my intern class who all hailed from different hotel schools all over the world. Over the course of my internship, I learned

So, imagine yourself in an occupation with all the usual challenges...that gives you the chance to meet people from all walks of life, from John Doe to leaders in business, politics, entertainment and sports. Is it saying too much to suggest that this sounds kind of fun?

Checking In The hospitality industry provides all the usual challenges of running a business, along with the perks. Opportunities to travel and interact with people from different parts of the world, unpredictable twists and turns—they make for an

are more obviously attractive. As a result, there is a dearth of graduates from elite universities entering the industry, industry where talent is very much in demand. Another problem is that many college graduates look at the industry and think, “Well, there are food servers and housekeepers,” and forget that positions exist in senior management and corporate development as well. Each hotel is a mini company, and each chain is a multinational corporation. According to Randy Goldberg, executive director of recruiting for the Hyatt chain, many students don’t realize that a job in hospitality can be a lucrative way to avoid the dreaded office cubicle. He says that a front-office manager at the Hyatt Regency Chicago can be making between $60,000 or $70,000 a year, and a general manager can expect an income in the six-figure range, depending on the size of the hotel. At the Four Seasons, a recent graduate will likely

that the traits required to succeed in this industry are good interpersonal, problemsolving, and time management skills— combined with reliability and the capacity to take initiative and work under pressure. These skills are really no different from those required in banking or consulting. Not surprisingly, many senior executives in hotel holding companies have had experience in hospitality, travel, and leisure consulting. Frits van Paasschen, Starwood CEO, spent eight years at consulting firms McKinsey and BCG before assuming his current position as leader of one of the world’s iconic hotel companies. So, imagine yourself in an occupation with all of the usual challenges, but one that knows no geographical boundaries and gives you the chance to meet people from all walks of life—from John Doe to leaders in business, politics, entertainment and sports. Is it saying too much to suggest that this sounds kind of fun? BT SPRING 2009 BUSINESS TODAY 25

n o l a r e b i L g in o G What do you do with a B.A. in English?


he liberal arts in America were originally thought to be highly appropriate for preparing young people to engage all aspects of a democratic society. It is we who in later generations have lost this acute appreciation--much to our country’s disadvantage. Our founding fathers thought that a liberal education was the most useful source of knowledge and skill for engaging occupations in law, commerce, military, theology, teaching, and the arts. This is still the case despite those who wish to distort history and provide us with but narrow learning for fleeting occupations.” This is what Dr. William Durden, president of Dickinson College, a small liberal arts institution in the heart of Pennsylvania, had to say when asked about the relevance of a liberal arts education in the complex world of quantitative finance. While the issue is not likely to be resolved in the near future, I think it fair to say that, like most scenarios, a liberal arts education has its advantages and disadvantages. One of the major pluses of a nontechnical education is the emphasis on inter-personal skills. Students in liberal arts take courses in diverse fields like History, Political Science, and English. It enables them to engage in meaningful conversation on a variety of social,


economic, and political issues. In a world defined increasingly by its ‘flattening’ landscape, these are skills that can be invaluable in any setting. In an April 2005 BusinessWeek article, Jonathan Jones, co-head of U.S. Campus Recruiting at the global investment bank Goldman Sachs, commented that “interpersonal and communications skills, as well as a hunger for knowledge, are enormously important. None of these things necessarily have to do with a course that the student is studying.” Patti Harley, who oversees training for analysts and associates at Citigroup, agreed. “The way we train people takes everybody’s skills and gets them to an even playing field.” The initial training program at Citigroup consists of all the basic accounting and finance concepts that are required to do the job. Numerous top executives in major financial institutions hold liberal arts degrees. Hank Paulson, former Chairman and CEO of Goldman Sachs, is a perfect example. Paulson, an English major in college, was also the United States Treasury Secretary under the Bush administration. Another great advantage of a liberal arts education is the emphasis on a broader perspective. David Creelman, in his article ‘The Liberal Arts and Business,’ says, “The liberal arts teaches people to deal with ambiguity, emotion, complexity, and


by Jojo Mukherjee Dickinson College


interpretation. These are critical issues in business, particularly as you move higher up in the organization.” He goes on to quote Northorpe Frye: “the kind of problem literature raises is not the kind that you ever solve.” It is precisely the kind of skill that one requires in an upper management position. Leo I. Higdon Jr., former president of the College of Charleston, believes that “a good liberal arts education teaches a student how to deal with enormous amounts of data, how to consider the sources of information and the inaccuracies, biases, perspectives, and blind spots those sources might harbor.” This is particularly relevant in light of the present economic crisis. He also believes that liberal arts students not only learn to analyze data but also present it in a manner that is logical and facilitates easy comprehension. These are invaluable and extremely marketable skills. However, not everyone agrees that liberal arts is the best way to break into quantitative finance. Jeff Leech, International HR Manager at Raytheon in Saudi Arabia points out that “most employers want more than ‘well read’ candidates. They want specific skill sets.” Places like Wharton and Sloan have career centers focused specifically on finance, where students are encouraged to start their job search at a very early stage. In fact, many students look for relevant internships


right after freshman year. When compared to most liberal arts colleges’ philosophy of exploring various fields before picking a major, students in technical schools have a distinct advantage. Business focused colleges also tend to have more alumni in the field. It therefore helps students network with a significant number of professionals in their chosen area. Alumni can not only help students understand various developments in the business world but also answer any questions or doubts that they may have. They can also keep students updated on any internship or job positions that open up in their department. Another advantage that technical colleges have over their liberal arts peers is campus recruitment. Major finance companies tend to hire most of their candidates from places like Wharton and Stern as opposed to some of their lesser known liberal arts counterparts. Many companies don’t even visit liberal arts colleges, barring a few top ones. Consequently, it becomes extremely

difficult for most liberal arts students to get an opportunity to market their skills. Timothy Dann, Director of Interest Rate Derivatives Trading at the global financial services firm Société Générale, believes that “a liberal arts education enables one to know a little bit about a lot as opposed to a lot about a little.” When asked if liberal arts students were at a disadvantage while vying for quantitative finance positions, Dann said, “absolutely positively yes.” He went on to add that “while this broad base of knowledge is excellent preparation for a role in senior management on Wall Street, new hires obviously lack the appropriate experience credentials for such roles. Instead the inexperienced new hire is usually deemed attractive for his specific technical skills, such as facility with contemporary software or mathematical finance excellence.” Such skills are obviously not the prerogative of a liberal arts education. In these tough times when everyone is looking to cut costs, it would make sense for employers to hire candidates who would require

Paid for Personality


minimal training and could be on the job as soon as possible. Dr Steven Erfle, Associate Professor of International Business and Management at Dickinson College, offers a slightly different perspective. Dr Erfle, who got his PhD in economics from Harvard University, asserts that “liberal arts students are only at a disadvantage in applying for quantitative positions if they have not undertaken quantitative coursework during their college careers. There are plenty of ways to show quantitative literacy beyond simply taking a finance class at a business school.” Irrespective of their educational background, students can do a lot by themselves to distinguish them from their peers. Whether it is taking a Finance class for a liberal arts student or an English or Political Science class for a quant, I believe the onus is on students to go beyond the prescribed learning material and widen their horizons. That, more than anything else, will help them succeed in Wall Street and indeed in life. BT

Profiting from YouTube

[ by Elizabeth Kohansedgh, Princeton University ]

ouTube has long been used as a means for people to present their personalities to the world with just the help of a webcam. Some savvy users, however, utilize the video-sharing site for more than just sharing quirky talents and funny pranks. Business-minded Internet users have adopted the Web 2.0 site as a business partner who covers marketing, publicity, customer service, and public relations. Comedian Gary Scott, for example, uses the YouTube as a medium between him and his fans. By distributing links to videos of his work on the videosharing site via AIM away messages, Scott’s friends instantaneously have direct access to all his past routines. After watching the videos, users, including complete strangers, can rate or comment on Scott’s routines, offering valuable feedback on his work. “These opinions are especially valuable,” tells Scott, “because I as a comedian need to know what people think of my material in order to improve it.” Consequently, Gary has continuously increased attendance at his live performances by employing YouTube. Recently, though, YouTube has been doing the employing. Through a newly instituted Partner Program, YouTube places advertisements around the videos of users who continuously post content with large followings and then gives these users a percentage of the profits made from their particular pages. Because more viewers translates to more cash, the Partner Program gives

these users an incentive to go through extra efforts to improve the quality of their videos and to enlarge their already massive fan bases. As users must own the rights for all of their posted material to qualify, the Program promotes the distribution of original content and intellectual property rather than pirating or illegal circulation. BT Partners in the new YouTube program can make anywhere from four to six digit salaries based solely on their posted content. Michael Buckley, host of a celebrity gossip show that attracts hundreds of thousands of viewers, even left his job as an administrative assistant to work on his YouTube channel full-time and reports earning a six digit salary from his YouTube partnership. Being that Buckley signed a contract with HBO to cultivate his series, the decision seems to have been a wise one. Sixteen-year-old Mac, a younger YouTube personality, has even expanded beyond the popular video-sharing forum to create his own website, where fans can buy branded clothing, all centered on his series of videos, titled Waste Time Chasing Cars. Still a high school student, he has taken in over $10,000 as a YouTube Partner and an additional $2,000 through his own merchandising. For Mac, though, who hopes to pursue a career in film making, it’s not all about the money. “I have thought of YouTube as great practice and experience for my future career,” he says, “and also as a way to get a college to notice me.”





the economy


ouis Winthorpe III: “Think big, think positive, never show any sign of weakness. Always go for the throat. Buy low, sell high. Fear? That’s the other guy’s problem. Nothing you have ever experienced will prepare you for the absolute carnage you are about to witness. Super Bowl, World Series—they don’t know what pressure is. In this building, it’s either kill or be killed. You make no friends in the pits, and you take no prisoners. One minute you’re up half a million in soybeans and the next, boom, your kids don’t go to college and they’ve repossessed your Bentley. Are you

The Background You may remember something about a stock market crash in the early 2000’s­ —you were only in your early teens at the time, so I won’t hold it against you if you don’t. In this particular crash, all value of any stock with a “dotcom” in the name was obliterated overnight, and our Fed Chairman, Alan Greenspan, was concerned that this crash would spark a nationwide recession. In a bold attempt to prevent such an event from occurring, Greenspan lowered interest rates, or in layman’s terms, made money very “easy.” Though this decision may have prevented a

whose income is $50,000 per year, $400,000 dollars to buy a $450,000 house. And then letting her take about a second mortgage for $40,000 more. Doesn’t sound like a great plan, does it? Talking on a more personal level, think about your friend who always asks you to buy him the cheesy gordita crunch at Taco Bell. How many times does he pay you back? Exactly. But there was money readily available to finance those mortgages because money was cheap and easy. So now we have a lot of mortgages written to people who can barely afford to make the interest payments. We still are doing fine, however,





by Will Beuttenmuller, Princeton University

with me?” Billy Ray Valentine: “Yeah, we got to kill the motherf... - we got to kill ‘em!” Does this quote from the timeless film, Trading Places, sound familiar? It should. Today, instead of frozen orange juice concentrate or soybeans, it is subprime mortgages and collateralized debt obligations that make up the battleground. Bentleys, however, are still Bentleys, and I’m sure some of those have been repossessed. In the last nine months, trillions upon trillions of dollars of monetary equivalents around the world have vanished. Some of it was stolen. A lot more just evaporated. You may be wondering, “What the hell happened?”

wider downturn, it fueled the fire for what was to come. With “easy” money for the better part of the first decade of the 21st century, people moved from investing in technology stocks to investing in real estate, and real estate throughout the nation became seriously overvalued. What became particularly overvalued within real estate were “subprime” mortgages. “Subprime” basically means the borrower has very little to no shot at paying back the loan because the borrower’s income is too low or because the borrower has a history of defaulting on loans. In our infinite wisdom, however, we decided to lend these borrowers a lot of money anyway. Think of lending a successful librarian,

because housing prices are increasing. With increasing house prices, the borrower can “refinance” his or her mortgage and get more money or a better rate. Think of the librarian example. If the price of the house increases to $500,000, the librarian’s house, which the lenders can take away if she doesn’t make her payments, can support even more loans or the same loan at a better rate. If our librarian is in trouble, she can always “refinance,” and her problem goes away for a while. In the cheesy gordita crunch paradigm, maybe you made your drunken friend give you his shoe as collateral before you gave him the food and then hoped that the shoe went up in value.



Subprime and CDOs So now things get a bit more complicated. The banks weren’t completely clueless and knew that these “subprime” borrowers didn’t have a great shot at paying them back. Operating on the very bold assumption that housing prices would not slump simultaneously nationwide, the banks made lots of loans to “subprime” borrowers all across the country. The thought process went something like this: “If prices go sour in one region of the country, we will still make money from all of the other regions.” The thought process probably should have been: “Hey, if this

is a piece of crap in one part of the country, it is probably a piece of crap in another, and if we add up a bunch of pieces of crap, we just have a lot of crap.” Also the banks were still a lot more cautionary than I have given them credit for; they hedged their bets. They sold off a lot of the subprime mortgages to investors in pools, taking the risk off the banks and shifting it to the investors. Here is how they did it. The banks combined large groups of these loans into assets called “collateralized debt obligations.” It’s more complicated than what I describe, but think of combining loans from similar librarians across the country into one big megaloan. Or, think of pooling all the money that friends across the country borrowed to buy those cheesy gordita crunches. If 30 BUSINESS TODAY SPRING 2009

these poolings, or securitizations as they were called, had not been possible, the banks would never have generated anything like the dollar volume of

mortgages that they did. After combining the loans into one big loan, the banks then divided up this megaloan into repayment tiers, known as “strips” or “tranches”. More concretely, the librarian had a pretty good shot at paying interest on the $400,000 first mortgage— even if the property was foreclosed, its resale would bring the money to pay the interest. So the banks sold the right to receive the interest on the mega-loan as

a separate tier known as interest-only tranches. This tier was the first part of the mega-loan to be repaid, so it was less risky and was sold with the investment-grade rating of “AAA.” During our drunk trip to Taco Bell, for example, your friend might have had a nickel and some lint in his pocket, so he could pay you something to buy more time to pay you back the whole $2; there was low risk in getting paid the first nickel. The most risk adverse investors in CDOs bought the rights to the interest tranches. The tranches went down in quality from

{ } Maybe on a more personal level, think about that your friend who always asks for you to buy him the cheesy gordita crunch at Taco Bell. How many times does he pay you back? Exactly.


there, but even many of the lower-tier tranches received a coveted investment grade rating on the theory that most of the subprime borrowers would muddle through somehow. The lowest tranches were not rated initially, but then someone had the idea of pooling them and getting someone to guarantee a certain return on that pool of sludge. Some of that stuff (combined with the credit enhancements) even got an investment grade rating. If you were buying this stuff at that time, all that you looked at is the rating and the amount that you got in interest on the deal. No one looked at the underlying assets. That is what the rating agencies were paid to do. Usually, to warn investors that buying assets like CDOs is a risky venture, we rely on credit rating agencies like Moody’s and S&P. However, in recent years, while the bankers were living the “bottles and models” lifestyle, the people at these rating agencies must have had too many shots of SoCo, blacked out, and gone to Taco Bell with us—sober people could never have assigned these CDOs the highest possible credit rating of “AAA.” Eventually, however, when housing prices began to slump nationally, the weak mortgage borrowers started to default, and the value of the CDOs plummeted. The rating agencies then “adjusted” their ratings to meet the new reality. It got to the point where there were no buyers for CDOs, and the market for existing and new CDOs froze up like a cheesy gordito crunch in Taco Bell’s walk-in. This is the beginning of what has been called the “Credit Crunch.” Unless you spend all of your free time playing World of Warcraft or you literally live under a rock, you have probably read or heard about it. The Credit Default Swap At the same time as the CDO markets were plunging into turmoil, problems started to surface in another large market segment: the credit default swaps, or CDSs. A CDS is a contract under which one market player sells “protection” to another player against losses that might arise on a debt security if the borrower on the debt security defaults. For example, let’s say that you had bought a bunch of CDOs and had some concerns that they might not pay out as agreed. You could buy a CDS that covered you against the possibility of

default on the CDOs that you own. In fact, CDO investors frequently “hedged” their investments in the debt obligations with CDSs. The wrinkle here is that CDSs were entirely unregulated and that you did not have to own the underlying debt security to get protection for that security. If you bought the CDS only, or owned it “naked,” then you were speculating (betting) that the debt obligation would go into default so that you could sell the CDS for a profit. If you sold that CDS, you were betting that the underlying debt would not default and were hoping for improvement in the borrower’s credit condition. Let me use another simple example here to illustrate a naked CDS. Let’s say your best friend, Billy, just bought a Bentley. Now let’s say that you made a bet with your other best friend, John, that the signature wings on the front of Billy’s Bentley would fall off within the first week. Your side of the bet is that the wings will fall off. First, we have to recognize that this sort of bet is pure speculation. Second, we have to look at the incentive structure that this bet has just created. To win the bet, all you have to do is rip the wings off the front of the Bentley. As crazy as it sounds, naked CDSs suffered from both of these problems. There was actually market incentive for the holder of a naked CDS to make bad things happen to the company that originally issued the debt insured by the CDS. Naked CDSs were pure speculation, and instead of hedging risk, they merely intensified it. It also turned out that the dollar amount of CDS protection bought and sold for any given debt instrument in many cases far exceeded the total amount of the debt instruments that had been issued. For example, you might have $10 billion of CDS protection covering $2 billion of outstanding debt. People were trading CDS protection back and forth like baseball cards. But as the CDOs went south and the credit crunch kicked in, folks started to worry about the CDSs for obvious reasons. There was concern whether massive defaults on CDS obligations would follow CDO defaults, and

there were asset write downs because of the risk that the seller of the CDS protection would default. There was concern and uncertainty about how CDS contracts would be settled where there was far more CDS protection than underlying debt in the marketplace.  Somehow, however, the CDS market continued to function, despite deep concerns that it magnifies risk to the point of creating systemic risk. The CDS market is also so opaque that no one knows exactly how or why it has survived. Marky Mark and the Funky Bunch: Mark to Market Accounting and the Fall of Bear Stearns There is also one other ingredient to this witchy brew, an accounting principle that all financial services firms must follow called “mark-to-market.” This principle refers to the rule that all financial assets held by firms following generally accepted accounting principles have to be written down from cost to the value that the financial assets will bring in an immediate sale. The mark-to-market process must take place as often as daily. The mark-to-market rule is fine when markets are functioning efficiently—and not so fine when securities will only sell at fire-sale prices. As the CDO and subprime markets went dysfunctional, huge charge offs of asset values rolled across the financial landscape, leading to staggering losses on the income




statements for the largest financial firms. Financial firms also had to adjust their balance sheets to reflect changes in their exposure under the CDS contracts that they had purchased or sold. The changes in credit markets became critical during early 2008, causing the biggest business failure of all time, at least up until then. Bear Stearns had huge exposure to the CDO and the CDS markets. During the course of 2007, two large investment funds sponsored by Bear had gone belly-up because of this exposure, to the detriment of Bear’s client relations. Everyone knew about Bear’s problems, so Bear was having trouble getting credit. The key turning point was on Thursday, March 13, 2008: at 7:30 a.m., the next day, Bear would have to begin paying back billion dollars of loans in what is known as the “repo market.” The idea of repos is that I sell you a security (or a Taco Bell gift card) for a certain price, with the agreement that I will buy it back from you at a slightly higher price at the end of a short period (as short as the next day). If for any reason I fail to honor my agreement, you will resell the security (or the Taco Bell gift card) in the open market and look to me to cover the difference between what you were supposed to get and what you got. The repo market is really just another way to borrow money and is a lifeline for all banks. They use this market to extend and receive short-term funding necessary for day-to-day operations. If Bear couldn’t meet its commitments in the repo market on March 14, 2008, its creditors could start selling the securities that Bear had sold to them. Unfortunately, Bear could not raise the liquidity needed to meet its repo obligations. For many years the Federal Reserve Banks have had the power to lend to most commercial banks at a place called the “discount window.” The discount window seems to be the place where lost and lonely banks short on cash go when none of their 32 BUSINESS TODAY SPRING 2009

friends will loan them any money. (I bet you wish there was a Taco Bell discount window for your moneyless and cheesygordita-crunch-craving friend). In any event, Bear was an investment bank and did not qualify for loans at the discount window, but it was lost and lonely and none of its friends would loan it any money. To fix this problem, the Fed decided to create a new program under which Bear could borrow at the discount window through

a commercial bank, J.P. Morgan Chase. To some this looked like slight of hand, because J.P. Morgan really had no exposure on the loans the Fed was making to Bear. Still, this shows that desperate times call for desperate measures. The lifeline thrown to Bear from the discount window, however, was not enough, and Bear’s stock was hammered all throughout that week. On Saturday, it became clear that the firm would unravel when the Asian markets opened on late Sunday if a deal wasn’t reached, so J.P. Morgan agreed to buy Bear for $2 per share (ironically slightly more than the price of a cheesy gordita crunch), provided the government gave Bear a huge financial assistance package. The $2.00 price per

share was later renegotiated to large combo meals for two at McDonald’s. Thus, we witnessed the first shotgun sale of a bulge bracket investment bank to a commercial bank. During July of 2008, a huge thrift institution, IndyMac out of Los Angeles, was placed into federal receivership. IndyMac was a huge originator of mortgage loans, and its demise was the fourth largest failure of a financial institution in history. IndyMac’s shareholders drew a goose egg, and the televised images of depositors lining up to withdraw their federally insured funds after the institution was closed put the whole country’s depositors on edge. All hell really did not break loose, however, until September of 2008. As foreclosures across the country rose, Fannie Mae and Freddie Mac, entities that are privately owned but that are sponsored by the U.S. government, were hurt badly. Fannie and Freddie had substantial subprime and CDO exposure, but this exposure was probably not what caused their downfall so much as falling real estate values across the country. Another critical factor was that these entities, controlling at least 70% of the U.S. mortgage market, had lost the confidence of the marketplace. The entities had recently been the subject of very public accounting scandals, and they had too many bad mortgages on their own balance sheets and too many bad mortgages that they had guaranteed. People started to worry about whether they would be able to cover their own obligations, which are huge debt and guaranties secured by mortgages against American houses. Because Fannie and Freddie are “government-sponsored entities,” and because their failure would have stopped home mortgage lending as we know it in the United States, the government took them over, putting an end to the debate of what it meant to be a “government sponsored entity.” The Cataclysm In the fall of 2008, problems in the mortgage markets spread throughout the economy, affecting big financial firms’ ability to borrow. Another venerable


international investment bank, Lehman Brothers, was in deep trouble in September, and the government and a couple of possible buyers looked it over. Apparently they all decided that Lehman was a hopeless cause. The Fed could not even find enough good assets to make loans to Lehman at the discount window, so Lehman Brothers was allowed to fail, directly causing the failure of other funds that had money tied up with Lehman. Just as Lehman was going into Chapter 11, an enormous insurance company, AIG, found itself in serious straits, the main reason being that it had huge amounts of CDSs insuring against Lehman’s failure. The government had to step in and loan it $85 billion just to tide over its crisis. AIG was deemed too big to fail, but as part the deal, the government ended up with 80% of the company’s ownership as an equity kicker. AIG was in effect nationalized. AIG executives later found themselves in hot water for having a big retreat at a resort right after the bailout, apparently to celebrate the company’s survival, at a cost of a mere $440,000. Next, as September of 2008 continued, one of the world’s largest investment banks, Merrill Lynch, convinced Bank of America to buy it for what turned out to be a great price for Merrill Lynch shareholders and a not so good price for Bank of America shareholders. As of this writing ,Bank of America’s stock is hovering at about $4 per share. Merrill Lynch’s CEO, who put the B of A deal together, was later dismissed from his position because he had spent over $1.2 million redecorating his office in early 2008, including $87,000 for an area rug. As the Dude would say more than once, “That rug really tied the room together, man.” Shortly after the Merrill takeover was announced, a huge thrift named Washington Mutual failed, was placed into receivership, and then sold to J.P. Morgan. With that transaction, the memorable month of September 2008 came to a less than illustrious end. There was a carryover, however: in early October, a huge southern bank in distress, Wachovia, merged into Wells Fargo (this merger notably without government assistance). Since the disastrous month of September 2008, we have seen a seemingly endless series of government efforts to provide

direct and indirect federal government assistance to banks, bank depositors, insurance companies, car companies, state and local governments, small businesses, social welfare organizations and just about everyone else who has his or her hand out to Washington for help. There seems to be no limit to the Fed’s and the Treasury’s willingness to borrow money to cover all of this assistance, and we have become, in the words of Larry Kudlow of CNBC, “Bailout Nation.” Of course, as this fiasco has gone on, employment losses suffered by average Americans have been staggering. New home construction has basically stopped, real estate prices have continued to fall, new car sales have been terribly slow, the stock market continues to explore new low territory, and America’s financial services companies continue to deteriorate. Two of the world’s largest bank holding companies are now trading at penny stock levels. These two banks are also too big to fail. Not a pretty picture. The Take Away We are diverging from the main topic, which is what brought us to our current sad state, as opposed to how the government plans to fix it. No one knows whether the government’s current efforts will help or hurt. Some day in the not too distant future, you may again be asking “What happened?” after the recession hit. Then I will have another story to tell. What else do I want you to take away from this read? I hope that you have been mildly entertained, and though I have written a lot of this with tongue in cheek, I have a serious question that many will be asking for years to come: whose fault was it? Should we blame the greed of the Wall Street bankers? Should we blame the distracted regulators behind the wheel? Should we blame the Democrats that pushed for universal home ownership? Should we even blame our librarians or our cheesy-gordita-crunch-loving friends? Well, all of the above certainly had their role to play, but it’s tough to make the case that any one of these groups is “responsible” for the crisis. Though it seems easy enough to pin the blame on the bankers who make what seems like a trillion dollars a year, the fact of the matter is that we need wealthy people

to make our economy work. The top five percent of taxpayers pay more than half of the nation’s taxes, and taxpayers who rank in the top fifty percent pay virtually all income tax. Obviously, blaming the regulators is another way out, but it is hard to say that if they had been more numerous or more diligent, we could have avoided this mess. Similar arguments exist for our other two groups of players: it’s hard to pin this problem on people trying to live a better version of the American dream or those trying to help others achieve it. Whom can we blame for the fact that we don’t have jobs? There is plenty of blame to go around, so each of you can pick your favorite scapegoat. The more important question is how can we prevent this from happening again. We clearly need an extreme makeover edition of what we might call the “U.S. Financial Services Regulatory System.” What we need is a goal-oriented system, in which certain financial regulatory entities work toward a specific goal as it affects all “financial institutions” in a broad sense, rather than having jurisdiction only over specific institutions. The Fed’s powers should be extended so that it can look after all sources of systemic risk. The SEC might be combined with its sister regulator the Commodity Futures Trading Commission and their powers expanded to ensure that information in trading markets is valuable and clear even where the markets are established among dealers rather than on an exchange. To accomplish this task, the SEC/CFTC need expanded powers to regulate over-the-counter derivative securities (like our friends the CDSs) and to require clearinghouses for any and all exchanges. More specifically, the SEC should reinstate the rule that requires an up-tick in the stock price before an investor can short the stock, and naked shorts and naked credit default swaps should be made outright illegal. Finally, while FDIC’s responsibility should remain with insured institutions, FDIC should focus on reducing the level of acceptable risk in the profile of all insured financial institutions, as well as enhancing the capital standards of insured institutions. If we could do all of that, then maybe I could get a job—at least sometime in the next few years. BT





PAUL VOLCKER by Will Beuttenmuller, Princeton University

Business Today: In a 1989 Time magazine interview, you said that in the late 1970’s, “The [Carter] Administration [was] deeply concerned …. [about] … exploding inflation and was willing to stand still for stronger measures than would ordinarily be the case. And that is a great advantage. If you can walk into a situation that is felt to be so severely out of kilter, you have greater freedom of action.”   Today the problem is not inflation, but do you see parallels between the crisis that the Carter Administration faced in the late 1970’s and the challenges we face today?   Are your comments from that time germane? Paul Volcker: Yes. The point I was making is that when people are concerned about what’s going on, they are fearful, they want something done. You’ve got a constituency for action that you don’t have when everything is going fluidly. Let me illustrate this with what’s happened recently. This crisis was building up for a long period of time. The US as a whole and consumers in particular were spending more than they were earning. And this, along with subprime mortgages, when no one wants to do anything about it, seems very comfortable. There is no sense of crisis or concern. It is only when you have the crisis that people are ready to take firm action. BT: Staying on the subject of the bubble for a moment, how much do you attribute America’s proclivity to consume more than she produces and China’s readiness to supply the country with easy money? PV: Those were two underlying factors that were very important. They were an extreme manifestation of a somewhat broader problem. We weren’t the only ones overspending but we were the big boys. China was not the only country with a

big export surplus, but they were, again, the big boys. So what you incite seems appropriate. BT: In your recent testimony before the congressional Joint Economic Committee, you said, “the first and most fundamental lesson of the crisis is that future policy should be alert to, and take appropriate measures to deal with, persistent and ultimately destabilizing economic imbalance.” There seems to be a debate here about whether or not the government should be in the business of popping bubbles. Would you say that those comments were weighing in on that debate? PV: Talk about popping bubbles is relative. You can have equilibrium and disequilibrium and it’s not always apparent. A bubble may be the culmination of some of these imbalances. I’m worried about the disequilibrium before it reaches the point of an extreme bubble. BT: In that same speech to the Joint Economic Committee, you also made some comments that suggest that commercial banks should be more clearly differentiated from financial institutions that engage heavily in capital market transactions. To some extent, this suggests that our total dismantling of Glass-Steagall structure was a mistake.  Do you envision some compromise solution to protect commercial banks short of the bright lines developed in the Glass-Steagall era? PV: I just issued a report on the subject and it goes into some detail. It describes to some extent my position. I believe there should be a differentiation between commercial banking function, which is designed to serve individuals, businesses, governments, either in safeguarding their

funds or providing loans and other services. And that shouldn’t be mixed up with extremely risky capital market activities like venture capital funds and equity funds and a lot of proprietary trading. We ought to keep those separate, so that the first part, the banking part, gets protected as well as regulated. BT: You have a reputation as a fierce opponent of inflation, which at least in the late 1970’s was seen as the greater of two evils.   Where does the threat of doubledigit inflation create a stopping point for the ongoing government intervention? Do you fear that the recent stimulus will eventually lead to hyper-inflation? PV: Oh, boy. I worry about inflation as soon as it is noticeable. But, I don’t think the stimulus is likely to or will necessarily lead to hyper-inflation. It takes care to make sure that we reverse direction when it’s appropriate. BT: In October 2008, you and a few colleagues wrote an article in the WSJ expressing support for resurrecting the Resolution Trust Corporation. Under this solution, you propose that the government buy and warehouse paper that otherwise is effectively not trading, lessen the number of foreclosures, and assist the FDIC in resolving sick institutions. Do you still see this as a viable solution, and if so, would the sickest of institutions be put into government receivership as they were under the RTC in the 80s? PV: That is too complicated a question, because that’s only a part of a solution. You can certainly develop parts of that solution by putting companies into receivership. Now those issues are being greatly debated and it’s still on the table now. BT


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MY JOB, MY PRESIDENT Reflections from the Obama Campaign in Ohio [ by Zach Kwartler, Princeton University ]




ow I ended up in Ohio registering voters one week before the presidential election was essentially a matter of chance. Three months earlier, I had been in New York meeting my friend Jeremy, a former Princeton student, for coffee. Jeremy mentioned a fundraiser that he was planning to attend that afternoon for Vote From Home, a voter registration group that one of his classmates had helped to create. On a whim, I chose to accompany Jeremy to the fundraiser, which was being held at a lounge across town. En route to the event, Jeremy explained the origins of Vote From Home. During the 2004 presidential election, George Bush won the state of Ohio by a 2.11 percent margin of victory. On Election Day, there had been lines out the door at numerous polling locations, leaving many eligible and eager voters unable to cast their votes before the polls closed. In response to this problem, Ohio passed a new election law in 2006 authorizing early voting at specific locations across the state beginning one month before the 2008 election. Additionally, voters that lived in state but who were worried about the long lines expected on Election Day could request an absentee ballot up to a month in advance of the election. These voters could then fill out the absentee ballot from the comforts of their own living room to completely bypass the usual hassle of planning, travelling, and waiting to vote. A group of American graduate students at Oxford recognized that with this law arose new opportunities for pre-election voter mobilization and decided to create Vote From Home. As a base of operation, they decided on Franklin County, primarily because Columbus, the capital city of Ohio and home of Ohio State University, was located within the county. The reason for focusing on Columbus was that the city contained two demographics: college students and inner-city lowincome families, population segments which traditionally have low voter turnout and skew noticeably Democrat. The goal of Vote From Home was to register as many of these voters as possible for early voting. However, as a non-partisan

voter registration group, no member of the organization could make any effort to influence the ultimate decision of their early registrees. Underlying this practice was the idea that simply by getting these voters to the polls, statistics would work in Vote From Homeâ&#x20AC;&#x2122;s favor. The target was to register 10,000 new voters before Election Day and then make sure that all these people actually voted. The fundraiser I attended in July was not your typical gathering of political donors. Most of the people there were friends of the organizationâ&#x20AC;&#x2122;s founders. The average age of people in the room could not have been much more than twenty-five. We reached the fundraiser as it was winding down, just in time to hear Ross Baird, one of the founders of Vote From Home, make his pitch for money. As Ross spoke


and political organization. I arrived in Columbus on a Saturday afternoon, less than two weeks before Election Day. Ross arrived to pick me up at the airport, and we drove to the two-story house a Columbus couple had rented to Vote From Home for the months leading up to the election. Ross and a few of the groupâ&#x20AC;&#x2122;s other founders had been living in Columbus since August, and I arrived there to see operations in full swing. There were fifteen people living in the house, making accommodations not so much like a college dormitory as a throwback to summer camp. In one room, four volunteers had set up shop on two bunk beds. As a latecomer, I was assigned an Aero-mattress and a spot on the basement floor. Not bad, considering the limited amount of spacing options available in this average-sized


For a single mother of four children who works three jobs, dedicating an entire morning to waiting in line at the polls is not an option.

to the room full of college students and young employees, he remarked about the group taking a fresh outlook on registering voters that older people were not likely to understand. A man over sixty, one of the few of his age in attendance, jokingly took offense. I was intrigued by the opportunity Vote From Home presented. Knowing that I had the week before the election off from school, I e-mailed Ross expressing my interest in volunteering for Vote From Home in Ohio over break. Ross responded with inviting enthusiasm, and three months later, I bought a plane ticket and was off to Ohio for a week of volunteer work. Though I was a token member of the Princeton College Democrats, I had no history of political action of any kind and did not know what to expect as I boarded the plane for Columbus. What I got was an unforgettable course in voter outreach

American home swelling with the craze of mass political mobilization. Over the next week I participated in a range of activities typical of most voter registration groups. My first Saturday in Columbus, I was immediately put to work making phone calls to local residents using a database that Vote From Home had acquired over the past three months. As I struggled to become acquainted with the call script, what immediately struck me was the enthusiasm that each volunteer displayed while working. Part of this enthusiasm I attributed to Election Day being less than two weeks away. With no more time to put off the work that needed to be done, many volunteers functioned according to the mantra that rest and recovery would be contemplated after November 4th. At the same time, I began to feel that the other part of the pervasive enthusiasm fluttering around the house was



due to the affectionate sense of ownership that grew from the hours of labor that Vote From Home’s founders had put into

their polling site. The first man I picked up that morning had a prosthetic leg and must have been nearly sixty years old. As I drove him to the Franklin County

task that had to be prearranged. When I became eligible to vote during my senior year of high school, I drove my car to the local elementary school, waited in a short line, cast my ballot for Robert Menendez in the 2006 Senate elections, and drove to school in time for my first class. Canvassing in Columbus, I visited a homeless shelter, a halfway house, and a nursing home in the span of two days in search of voters that Vote From Home had already registered but not yet secured. One house I approached had piles of garbage almost entirely covering the front lawn. As I rang the doorbell, a spirited elderly man eager to talk politics opened the front door. After discussing how excited he was to be voting for Barack Obama, he asked me for my name and signature so that he could remember I stopped by his house when I became a famous doctor or lawyer in the future. I remember leaving this house beaming, not so much because of the unwarranted compliments I had received, but as a result of the unhabitated joy and anticipation I had just witnessed. Another day I spent driving the “vote taxi,” Vote From Home’s solution to the problem that many registered voters did not have any means of transportation to

Veterans Memorial to cast his early ballot, he mentioned that this was the first time in his life he had voted. A woman I picked up later in the day from a nursing home on the outskirts of the city gladly waited in the three-hour line that had accumulated at the voting site rather than ask to bypass the line or come back another day. What I realized, then, was that for many people in the United States, voting requires a profound commitment and the means of executing that commitment. For a single mother of four children who works three jobs, dedicating an entire morning to waiting in line at the polls is not an option. By giving this mother the option to fill out an absentee ballot from her house, we were making it possible for her to experience the civic pride associated with voting without forcing her to sacrifice precious time spent at work or with her family. One of Vote From Home’s most unique and endearing characteristics was the college-like camaraderie between all the volunteers living in the Columbus house. Each night, Heather, one of the organization’s founders, who we looked upon as the surrogate housemother, cooked a dinner large enough to feed at least fifteen people. Afterwards, many


every day in their effort to make it to the polls. Growing up in an affluent suburban neighborhood, I looked at voting as a universal rite of passage, not as a difficult


I feel that it was individual actions like mine, and the sense of enthusiasm purveyed by groups like Vote From Home, that when amassed, made such a remarkable dent on the election.

getting the organization up and running. Whether this enthusiasm was typical of the campaign trail across the country was impossible for me to determine. All I can say is that only a few days into my stay, I had already begun began to feel an acute sense of guilt when I overslept ten minutes and showed up just a little bit late to each morning’s team meeting. Before long I had canvassed in the most destitute areas of Columbus, driving voters from their homes to the early voting site in Franklin County and even found time to make it to the Horseshoe to watch Penn State beat Ohio State in a Saturday night college football game. What I gathered from these experiences, football aside, were vivid memories of the constraints that potential voters in Columbus faced 40 BUSINESS TODAY SPRING 2009


people in the group spent the next two hours watching the Daily Show and Colbert Report, talking about the day’s political developments. One night, all the

volunteers participated in a scavenger hunt that took us across Columbus. Another night, a group of us went to the movies to watch W. Activities like these added to the appeal of working for Vote From Home, creating a group structure in which I, as the youngest and one of the newest additions

to the group, felt comfortable making suggestions to anyone I was working with. On the drive to the airport for my return flight home, I had become enough of an insider to discuss with Ross what I thought were the strengths and weaknesses of Vote From Home. This d y n a m i c of genuine openness to i m p r o v e m e nt is one that I feel confident does not exist in many other political organization groups. Aside from a rigorous, disciplined approach to political activism, it is this commitment to progress which has ultimately made Vote From Home so successful. During its time in Franklin County, despite limited funding and resources, Vote From Home registered more new voters than the Obama and

McCain campaigns combined. When I returned to school the following week, Election Day was only a day away. As I watched the election results come in Tuesday night, with a group of friends, they joked that I had single-handedly influenced the outcome of the election. I laughed at these remarks and then began to consider what impact I actually could claim as my doing. From a statistical standpoint, my influence was miniscule: counting the vote I cast on Election Day and the thirty or so people I personally brought to the polls, my work was hardly ground-breaking. Even the 11,000-plus voters that Vote From Home registered in Franklin County were only a statistical blip in the more than 250,000 person differential by which Obama ultimately won the state. But after further reflection, I have come to feel that it was individual actions like mine, and the sense of enthusiasm purveyed by groups like Vote From Home, that when amassed together, made such a remarkable dent in the election. A single person’s isolated effect may have been small, but the sense of accomplishment and pride associated with being a part of the vast network of political volunteers in the 2008 election was worth every moment. BT

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Instant Message The Obama Campaign and Dawn of the Internet Presidency


by Xenofon Kontargyris, Vrije Universiteit Brussel


s I sit down to write this article, I can hear a commercial for the Obama pre-inauguration ceremony at the Lincoln Memorial running on my TV. Moments later, the station broadcasts another announcement touting live coverage of the upcoming inauguration ceremony. Just a few hours ago, I received

with an e-mail signed by the president-elect himself containing thoughts and words of gratitude ahead of the big day. The media craze surrounding Obama’s election has excited Obama’s constituents in all 50 states: Even I, a supporter watching halfway around the globe in Greece, am hooked. Looking back on this election, I am convinced that the remarkable ability


of President Obama to connect with voters during the campaign period was founded upon his campaign managers’ success in keeping them plugged into the personality and policy of the tech-smart candidate that will define a new era of political know-how. President Obama’s candidacy took off thanks in no small part to innovative use

of the Internet, e-mail, and other new technologies to connect with networks of voters across the country and around the world. Media outlets, historians, and other social commentators have taken to repeating with gospel-like certainty that his presidency promises to invite an unprecedented tech-savvy approach to shaping national and global politics. Yet for all the talk about potential rewards, this “e-originality” has also given rise to concerns about the risks embedded in such a promising portfolio.

Virtual Commitments and E-Accountability This particular concern should primarily bother members of the President’s Cabinet yet also carries wider social implications. Promoting entire political agendas over the Internet and, even more, concluding gentlemen’s agreements with voters on blogs or personal websites, ultimately means that these commitments will leave permanently accessible e-traces. Consequently, it is not inconceivable that Mr. Obama might in

Blogging and Rich Media President Obama and his team proved during the presidential campaign that they have a winning formula for using YouTube, Facebook, and blogs to generate buzz and promote critical policy positions. What, pundits wonder, will happen if they decide to take advantage of the accumulated database of supporters (a veritable goldmine complete with personal data, including e-mail and address details) and mass-mail them on a regular basis with videocasts featuring the President or commentaries published online? As failproof as the idea may seem, there remains the question of whether the government can legitimately use people’s private data to serve political ends. Equally pressing is the logistical question of whether Mr. Obama, once engrained in the midst of his traditional presidential duties, will have the time to blog or post videocasts himself. If these messages were communicated to Obama supporters by hired typists, would they lose their impact of “change”? political commentators have taken to repeating with gospel certainty, his will certainly be the most tech-savvy White House ever

Social Networking The Obama campaign wisely chose to use social networking sites to attract public attention to his platform and address controversial issues in the techlanguage of the new voter generation. Some critics have claimed that Obama’s dependence upon these networks to secure public approval for his desired policies is an unwarranted attempt to bypass proper Congressional processes. On the other hand, Mr. Obama could persuasively respond that such methods actually fulfill the pressing demand for all democratic politicians to stay in touch with citizens.

the future face a public outcry fueled by his virtual footprints, should these turn out to mark empty words and broken promises. On a related note, is the White House truly ready to face civic criticism in the raw and blatant form that many citizens routinely dish out? One look at the negative comments posted under any political ad available on YouTube reveals that relying on the average Internet user for civil feedback is rather optimistic. Yet paradoxically, the Obama campaign’s very use of the Internet has reshaped people’s perception of their own political effectiveness. Thus in the fine tradition of political innovations coming back to bite their inventors, President Obama can surely expect to face strong political pressures online.

Security Devising new ways to attract citizen involvement through a 21st century, digital platform for government is all well and good. Nevertheless, concerns over the security of this platform and the efficacy of the defenses fortifying it have already been voiced. How secure is it, for example, to post projected tactics on Facebook and organize public polls on them or openly talk about them via YouTube or videos streaming directly to thousands of your supporters’ Blackberries? President Obama’s office will also have to calm critics who feel that it is not the most clever tactic to publicly announce renewed targeting of Al Qaeda, because you ring the alarm for them to be on alert. Additionally, being a pioneer in Internet politics, the Obama White House will need to ease both domestic and foreign concerns that—since technologies such as the Blackberry are being developed by ‘their own guys’— they will not exploit the know-how they possess in order to compromise the use of these technologies by other governments worldwide. The French government has already panicked and blocked the use of Blackberries by its officials. As I conclude this piece, the inauguration party for President Obama is well underway with a group of highprofile Americans praising his virtues and promised change in front of the Lincoln Memorial. Undoubtedly just hours from now, this footage will be available online for anyone across the globe to see and judge, watch and criticize, approve or condemn. Whether the promised change truly materializes, we’ll be able to tell in four years. We can already say, though, that Barack Obama has through his campaign inagurated a new mode of participatory politics by tapping into a wealth of now ubiquitous communication forms including e-mail and text messaging. Whether this new concept of politics can legitimately lead to change, however, is up for you, American voters, and the citizens of the world to decide. You are unavoidably the target of many of these messages: as citizens of the 21st century you should also seize on the privilege to broadcast a response. BT


Strip Tease In Gaza, Armored Cars for UN Officials are Imperative, but Humanitarian Relief is Conditional

[by Carmen Maria Sanchez, Princeton University]


he former Personal Representative of the Secretary General for the Palestinian Authorities issued a failing grade to the United Nations as an objective facilitator in the Israeli-Palestinian conflict. In his end of mission report, Alvaro de Soto virulently condemned the United Nations for playing second fiddle at the negotiating table next to the United States and for implicating itself in the pursuit of a undemocratic roadmap for peace. Mr. de Soto composed his damning verdict in May 2007 after resigning

from his two-year post as UN special envoy in the disputed territories. He retired to New York City, where he resolved to write about his experience as a UN representative in Gaza. The devastation caused by the recent three-week conflict between Israel and Hamas has highlighted the gravity of humanitarian conditions in Gaza, a region quickly becoming one of the poorest in the world. Director of the United Nations Works and Reliefs Agency (UNWRA), John Ging, called for the opening of crossings into Gaza, saying that the economic blockade by Israel, now over a year and a half old, was choking the entry of basic necessities such as food, medicine, blankets, and school supplies. Over 1300 Palestinians, mostly civilians, died as a result of Israeli attacks on Gaza, and the UN has anticipated more deaths in the post-conflict period if relief supplies do not arrive in time.

According to Mr. de Soto, the ability of the UN to protect the safety of the Palestinian people had been compromised long before the war that began in December 2008. “The best thing we could have done when Hamas was elected, given that they had a clear majority, was to engage them and work with them,” said Mr. de Soto in a phone interview. “Instead the people were punished.” Mr. de Soto recalled that in September 2005, faced with the approaching parliamentary elections, Mahmoud Abbas—current leader of the Palestinian Authority and head of the dominant Fatah party —had decided to pursue a strategy of inclusion. Following a series of skirmishes between government forces and Hamas militants, Mr. Abbas’ intention was to invite Hamas into the political system and legislate the group’s disarmament. Mr. de Soto recommended Mr. Abbas’ strategy to the United Nations, urging higher




Tech Tac tics S cience S olutions


How Obama’s Science and Technology Policies Will Shape America’s Future

[ by Stephanie Sher, Princeton University]

got a crush on Obama…” The been tempted by actress/professional music video had a grammatically hottie Amber Lee Ettinger’s provocative incorrect title, shaky lyrics, and gyrations in the hit YouTube video “I Got scenes that made me feel like I was a Crush on Obama” as well. Released by watching soft-core political porn. Terrible. Ben Relles of on June But I watched it. And as I processed the 13, 2007 and with vocals by the talented lyrics in my mind, my interest in the Leah Kauffman, the video attracted over presidential race, specifically my interest two million views in just two days. Though in Obama’s campaign, grew a little bit. not originally conceived as a pro-Obama Unless you are one of the precious few media montage, the video—an incidental, possessing admirable immunity to grade-A influential on-screen demonstration of the political seduction, you have likely Obama ‘hot factor’—was instrumental in raising the democratic candidate to the pedestal of international celebrity. Although Relles’s video was not officially part of the Obama campaign, its impact on net-surfing voters serves as a valuable indicator of both the shortterm and long-term effects of Obama’s innovative and unprecedented campaign strategy. To thoroughly analyze the role of technology in Obama’s breathtaking crusade to victory and to find out what role technology will play in his presidency, it is prudent to look at both the means utilized and the goals achieved (and yet to be achieved) by the Obama campaign. As Barack Obama announced Senator Joseph Biden as his running mate on August 23rd, 2008, over 3 million people across America signed up to receive news of the decision on their cell phones via text, adding even more excitement to the publicity generated by the Obama campaign’s website, A simple registration and a straightforward Photo:


donating process on this website planted the seed for what became a $750 million campaign fundraising success. Using the worldwide web to contact and mobilize a large network of supporters was brilliant according to Internet expert Phil Noble, who estimates that 80% of Obama’s campaign funds—the vast majority of which were under $100—came from online donors. Ultimately, about 3 million people participated in advancing the campaign in one way or another through Obama’s affiliated websites. What began as a campaign with few resources and little name recognition fed on its networking potential to quickly develop into a dream shared by millions throughout the nation and the world. Touted by some media observers as “revolutionary,” Obama’s use of technology is just as much the result of the politician’s distinctive understanding of voter demographics as it is an avant-garde, ground-breaking strategy. Faced with the daunting task of reaching a critical segment of the population that a) had a bad history of showing up at the polls and b) was more likely to vote for Obama than McCain, the President saw the Internet as the obvious answer. Disregarding stereotypes, most people in the historically Democratic urban areas of the nation especially those who use mass-transit, are in tune with the latest technologies and have much less time, compared to those in more suburban/rural areas, to listen to Sean Hannity and Rush Limbaugh on the radio on the way to work. The Obama campaign was distinguished by a flash of political common sense—a flash not unprecedented but nonetheless significant. Just as Kennedy utilized public television—by that time familiar to most Americans—to invigorate his presidential leadership, it was logical on Obama’s part to incorporate today’s everyday technology into a sophisticated and ultimately triumphant presidential campaign strategy. The integration of technology into the Obama campaign represents quite accurately the high level of applied science that will be central in the execution of this new presidency. From the White House, Obama’s Internet strategy will allow him to bypass mainstream media outlets in his quest to connect with the American


officials to pledge their support. The UN leadership responded positively to Mr. de Soto’s appeals late that year, but weeks later when Hamas emerged victorious, the UN’s position had changed. “Suddenly they had lost their taste for democracy,” said Mr. de Soto. Directly following the victory of Hamas, Western powers suspended the flow of aid to the Palestinian government. By mid2007, Israel had sealed off its borders to impede the trade of basic goods in and out of Gaza. Instability in the region mounted with the boycott of Hamas by the international community, as the winning party became increasingly defiant in the face of a pro-Israeli internationalist coalition. According to de Soto’s report, the rejectionist trend was initiated by members of the influential ‘Quartet’ of Middle East


will of the United States. The US, he said, has historically refused to exert significant pressure on Israel and has impeded the achievement of mutual recognition and respect between representatives on both sides of the Gaza border. According to Mr. de Soto’s report, the UN was “among the led” in 2006. Israeli authorities have told US envoy George Mitchell and other Western leaders that they will not lift the economic embargo until the return of Gilad Shalit, a soldier captured by Palestinian militants in June 2006. To this date, Israel has refused to work with Hamas in coordinating reconstruction efforts. Secretary General Ban Ki-moon has urged Israel to act responsibly and recognize the need for humanitarian assistance in Gaza. Aside from the Secretary General’s decision in January to launch a general

“The US holds the key,” and the UN has followed the US through its preferred backdoor to an unjust and unattainable peace...

peace players—the US, the EU, Russia, and the Secretary General—all of whom refused to recognize the legitimacy of Hamas as the majority-holding party. “This is not something the UN something should be associated with,” said Mr. de Soto, referring to the boycott. Traditionally, he added, the UN has boasted a “towering position” in Gaza as well as in the West Bank, primarily thanks to its provision of aid and education services to Palestinian refugees through the UNWRA. To many in Gaza, Mr. de Soto said, the UN presence was a reminder that democracy had a home in Palestine. Popular regard for the UN fell following the elections. “This began a very awkward period for the UN, in particular for me,” said Mr. de Soto. Mr. de Soto’s report supported the Quartet’s pursuit of a two-state solution to the Israeli-Palestinian conflict, but criticized the grouping’s submission to the

content to conform to the consensus of the “the powers that be,” and in so doing has risked not only its reputation as a peacekeeping multilateral organization, but also the lives of innocent Palestinians who had—until 2006—anchored their dreams on the vision of a fair election and a nation

Photo (above):


investigation of violent acts committed by both of the warring parties, the UN has expressed no intention to reprimand Israel for the destruction of schools and hospitals within a major UN compound that resulted from Israeli airstrikes in early January. “The UN isn’t really that big a player in the Israeli-Palestinian conflict,” said Mr. de Soto. “The US holds the key,” he added in his report, which explained how the UN had followed the US through its preferred back door to an unjust and unattainable peace, guided by the notion that Israel can do no wrong and that the Palestinians, under the hospice of an illegitimate ruling party, are solely to blame for their current plight. “It has never been the strong suit of the United Nations to evaluate missions or draw lessons from them,” Mr. de Soto stated in the first line of his report. In an interview, he added that the UN has been

Photo (above):

united. According to Mr. de Soto, his report was filed in May 2007 as a confidential document directed at the UN’s highest officials. Months later, the contents of the report appeared in a news feed published by the British newspaper The Guardian. BT



economy, and combatting global climate change—scientific and technological ingenuity are indispensable. Holdren’s early appointment, just one month after Obama’s win, solidifies Obama’s promise to make decisions based on science and facts rather than ideology and gives great hope for the future security and prosperity of America. Yet another feature of the techsmart Obama presidency is the federal government’s new “smartphone” application, which will allow those with cell phones or home computers to easily access government services and to check campaign finance documents at their leisure. This innovative practice dates back to July 2008, when Obama’s staff released an iPhone application that tapped into users’ contact lists and sent notifications urging them to call friends in battleground states. Privacy issues were raised by critics concerning Obama’s eerily omnipresent, arguably invasive tactics. Still, those individuals most greatly influenced by Obama’s methods remain a fairly selfselective group. The Obama administration promises to double federal funding for basic scientific research with the objectives of fueling American innovation and promoting competition between U.SOne people. Obama has even promised to based technology companies. give the public an online “comment of Obama’s numerous plans to invest period” before he signs all non-emergency in science and technology during his legislation. This is all in an effort to create presidency is to implement a “gold“a new level of transparency, accountability, plated” patent system in which qualified and participation for America’s citizens.” applicants would have access to a more And let’s face it: America is desperate to be a part of the club. We are going to eat this up. Good thing President Obama has so far shown a solid record of leadership by keeping his promises. In appointing John Holdren to the office of Assistant to the President for Science and Technology, Obama declared that “promoting science… is about protecting free and open inquiry… because the highest purpose of science is the search for knowledge, truth, and a greater understanding of the world around us.” To competently address both national and international concerns—protecting our troops, confronting bio-terror and weapons of mass destruction, covering energy costs, improving healthcare, enhancing education, stimulating the


As Barack Obama announced Senator Joseph Biden as his running mate, over 3 million people across America signed up to receive news of the decision on their cell phones via text


rigorous and efficient patent review. This process would render patents much less vulnerable to court challenge, reducing instances of impractical litigation that are currently slowing the pace of innovation. In addition to creating jobs and bringing back the economy, Obama looks forward to creating green technologies and developing renewable resources such as biodiesel, solar- and wind-powered energy as a means of meeting increased fuel efficiency standards. Will President Obama see these projects through to completion? How exactly will these plans be implemented? Will these plans work? Promises, regardless of initial attractiveness, are only meaningful when carried out. The mass-scale integration of technology into society was long anticipated by experts and laymen alike before the Obama campaign fulfilled the prophecy. If the past decade can be compared to the shy, tentative moments preceding a first kiss, then 2009 is most definitely the second in which two mouths—technology and the politics of change—finally connect to experience the pure bliss, the ethereal sense of rightness that comes with the unification of two entities that were always meant to be together. The Obama administration will break norms and set new standards by mounting the first wired, networked presidency. And if American management of science and technology continues to blossom at the current rate, the next four years are bound to be as fruitful as change could ever be. BT



by Carmen Maria Sanchez Princeton University


science and technology

A conversation with

Ravi Jacob

BT: How would you explain in layman’s terms, what makes Intel different from the other semiconductor sellers in Silicon Valley? RJ: Well, we make something that is kind of unique. It is the brains of a computer, or any other sort of device like the computer. The main processing intelligence is provided by the products that we make. Other people make products that work with the microprocessor and have crucial functions to play, but are different from the microprocessor. And we also have a unique position in the sense that we invented the microprocessor, and we own many of the patents relating to that invention, and consequently we have a fairly enviable position in the industry. We enjoy about an 80 percent market segment share, in our business. BT: What is Moore’s law exactly, and how has it played a role in Intel’s production? What types of R&D pressure does a concept like this impose on the company? RJ: Moore’s law in layman terms came from Gordon Moore, the founder of Intel, and he was chairman and CEO, and he has since retired. But in 1965, I think even before he created Intel, he wrote a paper which he suggested that the pace of development in the electronics industry would allow a doubling of the number of transistors about every two years. And that has kind of proven to be right over the last 40 years. Today, our next set of products that will be released in a few months from now, the 32-nanometer process which is our latest technology, will have something like 1.9 billion processors on a small little chip. So what that really means, in layman’s language, is that it enables greater and greater functionality and power to be put on a chip, it reduces the cost of that functionality, and it creates

| Vice Presdient and Treasurer, Intel

more efficiency. BT: And these are the chips that are going inside the new ‘netbook,’ as we move beyond the notebook to a product with lower cost, lower power consumption, and higher efficiency? RJ: Yes, that is a different product line which has been developed in the context of the requirements of a netbook. It’s somewhere between a smartphone and a small phone factor notebook, so it has different kinds of requirements. It needs a high battery life, because people will carry it around only if it was a day or two of battery life, which means it must consume a lot less power. But at the same time you don’t want to spend three or four hundred dollars on a device that doesn’t give you full internet capability and so on. The atom processor was designed particularly with the requirements of that market in mind, and low power is clearly one aspect of it, a very important aspect of that processor line. BT: On a related note, if today a single integrated circuit can contain tens of billions of memory transistors, do you think, as a result of this fast-paced design, the moment will arrive when it is no longer economical or perhaps just impossible to pack more and more memory into less and less space? Is there an upper bound, or do you think it can just keep going? RJ: For many years now people have been predicting the demise of Moore’s law, but it hasn’t happened so far. This is really a problem of physics, less than economics. And my understanding is that at least for the next decade or so, they see that they can continue to get the benefits of Moore’s law every couple of years. BT: In the past and now, how has Intel

managed to research and develop new chip lay outs that promote innovation throughout the industry while keeping an eye on profit? Is there an optimum point between investing in the future and securing returns for current investors? RJ: In this industry it’s all about innovation and technological leadership, and scale. You spend a lot of money on R&D. Intel spends roughly 15 percent of its revenue every year on research and development. That’s a very high percentage. In addition to high R&D costs, we have very high capital costs. Our factories are expensive to build and a factory today takes roughly $3 plus billion to build, so the combination of the two makes it such that you have to have a very robust business model that will obviously provide a decent return to its shareholders, and fortunately for us, because of the innovation that we have brought to this industry we have also been fortunate to have a fairly large business segment share. So our business model has worked for us, in the last 30 years now. It generates significant amounts of cash, and has a very high gross margin in the high 50 plus percentage points, which is kind of unusual in the industry—unusual in any industry generally, not just the technology industry. So far we’ve been able to clearly provide returns to our shareholders. I would say that the last five or seven years since the bust of the internet and technology boom around 2001, since then our returns have not been very high, but prior to that they has been phenomenal. We think we can continue this pace of R&D and capital because that’s the only way to keep ahead. If you slow down your investments, you’re only going to make it even worse, and so this is the path that we are on for the foreseeable future and we are very mindful of spending this money in the most efficient way, so that we can provide a decent return to our shareholders. SPRING 2009 BUSINESS TODAY 49


BT: So given that Intel plans to adopt an offensive production strategy in the coming months, how inextricably linked do you think Intel is to the global economic climate? Has Intel’s response to the global recession differed significantly from that of other semiconductor companies? In this climate for example, what are the advantages and disadvantages to an economy of scale such as that which Intel has? RJ: Clearly, we are just as affected by the slowdown that we are now seeing across the globe because we are a global company. We derive 80 percent of our sales from outside the United States. All of the markets around the globe from Western Europe to Eastern Europe to Asia and China and India and Latin America, are important to us. Because the slowdown initially happened in the US and in Western Europe, our sales have not been significantly impacted until the most recent quarter. The impact of the recession has now spread to China and other emerging markets, so we’ve seen a significant slowdown in the demand for our products. We are not quite sure how 2009 is going to shape up, and so we have not given precise guidance to our investors and analysts so far for 2009, but I would say that we are well-positioned to weather the storm because we have a very healthy balance sheet, with almost no debt. We have a great line of very competitive products, which we think will stand us in good stead. Our main competitor doesn’t have the breadth of products we do, has a significantly smaller market segment share, has been bleeding cash quarter after quarter, and it doesn’t have the strength on its balance sheet that we do. BT: That sounds great. We hear that some competitors are looking to produce graphic processing units. Are there other sectors of the industry that Intel is looking to explore further? RJ: Yes, we have a division called consumer electronics that is making some headway into getting designs to traditional consumer electronics manufacturers, like TV manufacturers for instance. We have 50 BUSINESS TODAY SPRING 2009

efforts in what I call embedded product areas, so there are efforts across a variety of other sectors of the industry. Graphics is another area; we already do have integrated graphics that we sell, but we have plans to come out with another product, code name Larraby, that will give us a significantly more comparative product in our arsenal, which is probably about a year down the road. So there is a lot of R&D that happens beyond our core microprocessor business and hopefully we’ll have much wider range for products two or three years down the road. BT: How is Intel’s relationship with its ultimate customer, namely the PC user?

probably would prefer to promote their brand rather than promote ours. We have to communicate directly with the consumer so that the consumer demands a PC product with an Intel processor in there, and not a competitor processor. If you look at it from the point of view of Hewlett Packard, you know it would be in their best interest to sell as many computers as they can in the most cost efficient way. They would prefer to be indifferent as to whether they can sell an Intel microprocessor or an AMD (Advanced Micro Devices) microprocessor or somebody else’s microprocessor, so we have for the last 20 years, had a direct reach to the consumers through our ‘Intel Inside’ advertising programs, where we educate the consumer on our technology, on the safety and reliability performance that our products bring, and that they will be better off using our product than somebody else’s. Consequently, today I believe we are among the top ten brands in the world. BT: What about Intel’s relationship with Apple? How would you say the partnership has affected the image of both companies as leading providers of information technology? Would you say both companies have benefited equally, or has Apple been the one to gain from the reliability that everyone knows Intel chips offer?

What has compelled Intel to spend so much on promoting its name and becoming this internationally recognized super-brand? How is it that people who don’t necessarily know what a CPU (central processing unit) is, still know what Intel is? RJ: You’ve got to remember that we are what you call an ingredient brand. We sell a component to somebody called Apple, or Dell, or HP, or another PC manufacturer. They make the PC, or the laptop, put their brand on it. Inside, the main component is the Intel microprocessor. We are one step removed from the consumer. If we left it to the people who actually touched the consumer, who are our customers, they

RJ: I’d say it has been a great relationship for both companies. Apple was running out of steam on the microprocessors that they used for their PCs. Coming out to the Intel architecture, which gives them the same capability as their competitors, has helped quite a bit in growing their market segment share. For us it has been good because they are a new customer, they own five to seven percent of the market and, clearly, that means greater sales for us and greater profits for us. We think that we have benefited from our relationship with Apple because they are an extremely innovative company, leading edge in terms of the design and capability that they bring to the consumer. It’s forcing us to look at the way that we design our products, and help Apple bring latest-edge technology to the marketplace faster. It has enabled


us to change the way we work internally to some extent, responding better to what the consumer needs, and it is keeping us on our toes. I think both of us have benefited equally from this relationship. BT: Would you say that troubling economic times like these are actually an invaluable moment for companies like Intel and Apple to re-invigorate their production scheme? Is the industry going to come out of this Dark Age, so to speak, stronger and better than ever? RJ: We have always believed at Intel that you don’t save your way out of a recession. You have to invest, and continue to invest and stay on the technology treadmill. You need to make sure that you have a more competitive product offering when the recession is over and people start buying. Our industry has gone through several mini recessions in the last 25 years, so we’re sort of used to that. Having said that, clearly we have to take some action because we have excess capacity; we perhaps have an overhead structure that cannot support the current level of sales. And that is also quite traumatic for us because it involves reducing the number of employees that we have. And anytime you have to reduce your workforce, it is extremely difficult. It’s difficult for the employees that are impacted by the action. It’s difficult for their co-workers who see them go. It’s difficult for moral across the company. We will deal with it, but hopefully through a combination of investing in new technology and getting more efficient. We’ll be better positioned. One day the recession will be over and demand will pick up for our products, and we hope that we will be able to gain even more market segment share when that happens. BT: With upwards of 80,000 employees, how does a company like Intel approach staff hierarchy? Is it true that, regardless of rank, all members of the Intel team work in a cubicle? RJ: We have since our founding in 1968 been a very egalitarian company. We operate in cubes which are primarily grey in color and they look the same no matter where in

the world you are. If you go to China the cubes look about the same as they do over here. And if you are on a high rise in Western Europe or in Bangalore, India, you couldn’t tell from the office where you are because the cubes all look the same. We similarly have the same expense guidelines when we travel, for everybody, whether it is the CEO or a junior supervisor. We all stay in similar hotels and we all travel in the same economy class. Our benefits are similarly egalitarian. Obviously senior people make more money than the people who are relatively junior in the hierarchy, but the structure of our benefit programs is the same. BT: Given Intel’s strong domestic presence as an industrial employer as well as its global reach, can you talk a little bit about

Western Europe is a bigger market for us than the United States today. In the US, we sell roughly 20 percent of our total revenues. Western Europe accounts for a percentage or two more, snd Asia accounts for about half of it. You’ve got to realize that the way manufacturing has evolved in this industry, most of the manufacturing happens in Asia, and computers that are made in Asia come back to the US and Europe and so on. Our customers tend to be in Asia and other parts of the world, not in the United States, so outsourcing has not been a recent phenomenon for us. As the Internet came along and it helped communications across long distances, we decided to go to places where there was great talent. That’s sort of our philosophy about outsourcing: go and set up facilities where we have customers, get closer to the customers, and set up facilities where we have talent. BT: What do you think the tech landscape will look like in 20 years when students in our generation will be promoted to executive roles? Looking to the future of Intel and other technology giants, what knowledge and skills would you say are essential to college graduates who are seeking to work in the industry?

Intel’s attitude toward outsourcing. How does Intel decide when it is efficient to transfer manufacturing operations abroad? RJ: I would say that Intel’s been a global company for 25 plus years. We have always operated on the basis of locating our facilities based on where our customers are and where the skills are. We have had R&D facilities in Israel, where there is tremendous talent, since 1984 or so. We have had R&D facilities in China for over a decade and similarly in Russia. Our factories, the front end manufacturing, which is called fabrication facilities or ‘fabs,’ are hugely capital intensive. Most of them are in the United States but we have factories in Ireland as well as in Israel because they’re closer to our markets.

RJ: The best minds in computer science and software engineering and electric engineering will drive this industry to greater heights. However, this industry is not necessarily going to be driven based out of the US. Silicon Valley is a great innovator, but there are lots of places around the globe where there is innovation happening. Samsung is one of the world’s giants in the semi-conductor business. TSMC in Taiwan is a manufacturing powerhouse. There are efforts in China and other parts of the world. Every country wants leadership in technology because they know that technology drives productivity and productivity drives economic growth. It is going to be a globally competitive industry. It already is in many ways. It will probably be more competitive, but the opportunities are going to be just as well global and most of you will have the opportunity to live and work outside. This industry will be bigger and better and more competitive and provide more challenges down the road. BT SPRING 2009 BUSINESS TODAY 51



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CyberKnife Stanford, California



Slicing Through Cancer [by Caroline Clark, Princeton University ] sat in front of the blinking screen, staring at seemingly endless images of a patient’s pancreas. Slide by slide, I drew with my mouse the boundaries of the tumor as seen on the computer—the grey foggy shades within the pancreas that contrasted with the pure white of the other organs indicated cancerous activity. It was important that I encircled all the grey matter, as it was going to have a direct impact on the patient’s Cyberknife radiotherapy treatment. What is the Cyberknife? It is a novel new technology, developed over the past

smooth application of radiation onto the body. To predict motion, markers are placed inside and outside of the patient. These makers allow a computer algorithm to accurately predict the subtle physical changes of the patient while breathing. Once this is determined, the radiation emitted from the Cyberknife onto the tumor is extremely accurate by mirroring the rising and falling of the patient’s chest. I worked on the “Synchrony” tracking system two summers ago during my internship with Dr. Albert Koong, a

into the life of his ever continuous lab work on ways to prevent the rapid growth of malignant pancreatic cancer cells—as of then, he had already discovered promising patterns evident in this process. He was working on inhibitors that would later be found to dramatically decrease their rate of growth. The challenge is the real world application—would it be effective on actual human beings affected by cancer? What are the side effects? Would these inhibitors, for some reason, inadvertently trigger some other chain reaction that would leave the individual worse off than when he or she came into Dr. Koong’s office? Thus, his life as a researcher was divided between two different worlds: a world of

decade, that presents an advanced way of treating cancer via radiotherapy. Owned by Accuray, the most compelling attribute of this inventive new method is that it is a non-invasive treatment—in other words, it does not disrupt key elements of the immune system or functioning of organs while simultaneously being aggressive with malignant tumorous cancer cells. Its computerized, robotic arm pinpoints these cells within the patient’s body without destroying important white cells that are key to the patient’s recovery. Furthermore, the Cyberknife is able to accomplish this impressive feat with the help of digital tracking systems across as many as three computers. These tracking systems, in turn, increase accuracy of the radiation emitted onto the tumorous site. Each individual tracking system is defined by what kinds of cancers it treats. The “6D Skull” system displays suggested radiation application to brain cancers, while the “Xsight-Spine” specializes in spinal tumors. The “Synchrony System” is best for tumors that are manifested in lung and pancreatic cancers. The “Synchrony System” is unique. It is able to be used when the patient is moving during treatment. One drawback to lung and pancreatic cancers, by being centered in the middle region of the body, is that the patient’s chest rises and falls in accordance to their breathing patterns, disrupting the

research fellow at Stanford University. He specializes in pancreatic cancer, which is one of the most fast-acting and lethal of all the different types of cancer. For this particular kind of cancer, the typical prognosis is a span of three to four months of life once diagnosed. Each year in the United States, about 37,680 individuals are diagnosed with pancreatic cancer, and 34,390 die from it within the same year. Thus, approximately 91% of those diagnosed with pancreatic cancer die from it in a very quick span of time—the same amount of time it would take to complete a semester of college, and only if you are lucky. Once a patient hears that he or she has this diagnosis, the usual response would be despair about his or her inevitable death that will surely follow quickly. It’s not just pancreatic cancer that has an alarming mortality rate; it’s all cancers combined. Indeed, as Dr. Koong told me, cancer is predicted to overcome cardiovascular disease as the leading cause of death in the United States. During my time at Dr. Koong’s lab, the majority of my lab work and activities was centered around investigating and (hopefully) manipulating the molecular makeup of pancreatic cancer, as well as improving the quality of life of those afflicted with it. Besides assisting and observing Dr. Koong with his Cyberknife treatments, I was also able to catch a glimpse

patient-physician interaction and the ability to see real world results of his research, and a world of constant experimenting and grueling research in mostly closed off and intense quarters. For three months, my world vaguely mirrored these bilateral worlds of Dr. Koong. However, I came into his lab with almost no knowledge about pancreatic cancer, much less about what temperature a culture of cancer cells had to be stored in. But over time, I learned not only about the small details that are essential to carrying out a successful and informative experiment, but also about the importance of medical devices on healthcare— especially their socioeconomic effects on the overall patients’ treatment experience. I was especially intrigued by the interpersonal doctor-patient aspect of cancer therapy. As pancreatic cancer charts its course so rapidly, in a span of three months I was able to see the entire cycle from the patient’s first diagnosis to resolution, whether it be (hopefully) his or her discharge from the hospital or the more likely, yet unfortunate, outcome of death. But as much as my observations provided me with valuable insights on the current state of healthcare and medical technology, as well as those treated by it, I couldn’t help but ask myself: How much does the technology of the Cyberknife impact the treatment these cancer patients? For




example, if they were not being treated by the Cyberknife and instead were subject to the usual regimen of simply chemotherapy and generalized, non-specific radiation, how would their experience have been different? Besides perhaps having been not as effective (which is a large difference in

itself ), would it have left the patient with a more controlled, almost voyeuristic, attitude? Fortunately, I had the chance to catch up with Dr. Koong recently and address these questions. I was able to hear from the researcher himself his thoughts about the over-arching theme at stake here: the influence of technology on medicine, and its impact on the patient experience. “Most records will be maintained digitally. We will officially enter the age of molecular medicine in which the diagnosis of various diseases will be made using novel molecular diagnostic tools,” said Dr. Koong.   “Treatment will be individualized and based upon gene expression patterns.   Surgery will become less and less invasive.  Imaging advances will allow earlier and more accurate diagnosis of diseases.” The Cyberknife is an example of one such technology that is becoming less invasive— but what does he mean by “individualized treatment”? As I was wondering what this term meant, it occurred to me during my internship that the Cyberknife approach allowed for every patient to have an extremely specific treatment plan based on the results of computerized analysis—a plan that even the most qualified of doctors, Dr. Koong, couldn’t have envisioned without the assistance of this technology. Dr. Koong expanded on this: “[Individualized 56 BUSINESS TODAY SPRING 2009

medicine] is the trend.” And a trend that is sure to continue and expand in the future. But who can receive the benefits of this individualized care? As medicine and technology become more and more advanced, it can be argued that in some ways it will become more and more scarce to those who cannot access it. Currently, the Cyberknife system itself costs about three million dollars, while a typical treatment for a patient costs around $20,000 dollars. While this is less expensive than an invasive surgical treatment (which can cost up to $100,000), it would be hard to install a Cyberknife system in, say, in a hard-to-access region of a developing country. This problem is also extended to developing drugs, as Dr. Koong mentioned: “[new drugs] are expensive because companies need to recoup their development costs…the vast majority of drugs never get approved so the few that do make it must generate enough revenue to offset all of the earlier failures.” However, while these new treatments may not reach those who need it, Dr. Koong did remind me that the fundamentals of basic sanitation can do wonders for public health. While on this topic, he mentioned the importance of vaccines: “It’s generally cheaper to prevent disease than to treat disease. For example, vaccine programs deployed in the right populations could make a huge impact on improving health in a cost effective manner.” Thus, small steps in creating a higher level of sanitation, as well as deploying vaccines, can make a large difference in the health care of developing countries that don’t have access to the Cyber­ knife, or any other advanced medical technologies. That, however, doesn’t mask the significance or impact of the Cyberknife on a potential flood of patients that will surely come

in the future. As baby boomers age, the incidence of cancers will increase dramatically. However, not only will our expanding population continue to follow the usual demise of (mostly) natural causes of death, but life expectancy due to better diets and ever continuing more discoveries in medicine will increase as well. Thus, the baby boomer influx combined with longer life spans mean that the technologies developed now are to have an even more momentous impact on health in the future. While medicine and the endless quest for finding cures for diseases have existed since the first fruits of civilization, the growth of technology has dramatically changed the landscape of medicine. What once were staples of basic hospital procedure will no longer exist fifty years, maybe even ten years, from now. As Dr. Koong said, “I think that it will be safe to assume traditional paper electronic records will be a thing of the past.” Probably an assumption that most have figured out by now—that medical procedure will not be the same due to the increasing power of technology—but one that we need to fully grasp when we are considering what to invest in for future industries. We will always age and our bodies will always deteriorate to the point of needing outside assistance, whether it be a good old-fashioned doctor or a robotic arm. But once we start to rely on those robotic arms more than ever before­—and we are likely to rely on it even more in the future—then we need to consider the consequences, both good and bad. What they will be, and where they will emerge; only time will tell. BT

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eet Tom. Tom is like one of us, but living in the not so distant future. Today, he wakes up and yawns, bumping his head into a wall in the process. He shuffles slowly towards the bathroom, yanking the door open and stares blankly at the mirror. Suddenly, the mirror springs to life, a Heads Up Display (HUD) popping up displaying all of Tom’s vitals (Blood Pressure, Body Temperature, Heart Rate). His eyes sweep quickly across until it stops at on a flashing red 523, below a caption reading “RNA copies/mL plasma.” He sighs and presses the red number, at which point the mirror dispenses a hypodermic needle with a clear fluid inside. Tom injects himself and watches the number drop from 523 to 50. This number tracks the viral load of HIV in Tom’s blood. Tom is 78, and has been HIV+ for 52 years. The fluid he injected into his system contained customized serum, directly attacking his specific strain of HIV that not only disables 90% of the viral load in his blood stream, but also deactivates the ability of transmission for the virus. The ability for Tom to survive indefinitely, even with HIV, stems from the field of personal genomics. Since the conclusion of the Human Genome Project and the first complete sequencing of the human DNA, the field of genomics has rapidly expanded into one of the most hotly researched (and contested) areas of therapeutic biology. The field of genomics is actually a compilation of a series of disciplines (experimental biology, computational analysis, and statistical evaluation), working in perfect harmony to cure diseases that were formerly dismissed as “incurable.” For Olga Troyanskaya, the Principal Investigator at the Princeton Laboratory for Bioinformatics and Functional Genomics, a typical day “involves research discussions of both computational aspects of [her] work ... and [the] experimental aspects of the questions [being asked].” Olga firmly believes that genomics “is inherently an interdisciplinary science that requires constant iterations and communication between ‘computationalists’ and experimentalists.” Although there are hundreds of different areas of research within genomics, the one that has garnered the most attention from the scientific community, the media, 58 BUSINESS TODAY SPRING 2009

and even the general public is the area of “personal genomics.” Personal genomics has wide reaching consequences in the medical field, redefining the idea of personalized healthcare, enabling healthcare providers to give patients treatments that are truly specialized to their specific genetic makeup and the genetic structure of their individual diseases. But in conjunction with attracting popular international attention (even inspiring entire TV series based on the topic, such as the popular Canadian programme “ReGenesis”) genomics has created a whole new world of business and investment opportunities in a search for customized cures for a wide variety of ailments such as cancer, diabetes, and genetically inherited diseases. Currently, a variety of different methods are being explored in order to advance the field of “personal genomics.” The first, and perhaps most familiar, is the research being conducted on single nucleotide polymorphism (SNP) genotyping. SNP genotyping is commonly recognized as the application of genomics toward analyzing different genetic markers in the search for inherent diseases being carried within each individual (and therefore curing them before they even happen). In addition to SNP genotyping lies the broader field of genomic pharmaceuticals, the development of novel therapeutic agents utilizing functional genomics. Currently, research in this area is still heavily based upon previously discovered drug “targets” (points in which current drugs already attack). By using the sequenced human genome, researchers partake in “gene-family mining”—the identification of extra “targets” in the human genome than can be successfully

“attacked” by drugs, allowing for the future development of significantly more effective drugs due to their ability to attack new sites. Concurrently to the development of “gene-family mining”, researchers have begun analyzing gene function. Scientists have been able to produce fully sequenced cDNAs, or complementary DNA, which has allowed scientists to better understand gene expression. With this understanding, scientists can identify quite accurately the function of genes throughout the human

body and their effects on our health. These three uses of genomics are widely publicized, but several other research areas also exist, including proteomics, RNA profiling, and oligonucleotide analysis—all of which have significant implications towards discovery drugs that can effectively treat or even cure some of our most devastating diseases. Even though genomics is an area of science with great potential for improving the lives of millions of patients, it is, as all areas of developing sciences are, limited by funding, business strategy, and strategic development. Due to the high capitalization that is needed in order to


sustain genomics operations (a single Genome Sequencer FLX by 454 Life Sciences and Roche Applied Sciences runs for about $500,000) as well as the constant need to understand the competitive structure within the genomics market, such biotech firms or pharmaceutical firms must generate creative business strategies in order to make such research a reality. Small


with intimate knowledge in how to bring an idea to bear. This allows them to pursue aggressive avenues for drug development, such as the purchasing of chemical expertise. As market conditions improve, we may observe a resurgence in LBO and acquisitions of smaller biotech firms by these larger pharmaceuticals, increasing the efficiency of the biotech sector as well

interest of Asian biotech firms (in this case, GenCore BioTechnologies). These acquisitions have allowed for American firms to generate large profits from the research being done there as well as outsource projects to China that would be more highly regulated domestically. With the explosive growth of practical knowledge that is being generated everyday in the field


Personal genomics has extremely wide reaching consequences in the medical field, redefining the idea of personalized healthcare, enabling healthcare providers to give patients treatments that are truly specialized to their specific genetic makeup and the genetic structure of their individual diseases.

to medium cap biotech firms rely heavily on creative financing strategies, often in the form of venture capital firms and primary and secondary equity offerings, and convertible debt offerings. However, with the poor performance of equity markets, along with the seizing up of bond markets, it will become significantly harder for such companies to attain funding through these venues. Therefore, much of the genomics development that will be conducted in the next few years will rely on large-cap pharmaceuticals. Such pharmaceutical firms are not only well-capitalized, but also have a well-established marketâ&#x20AC;&#x201D;along

as increasing profits and valuable resources for the acquiring firms. Asian biotech firms are especially benefiting from the blossoming of genomics research due to a general lack of regulation (in both the biotech/healthcare sector as well as in capital markets), which allows for firms in emerging Asia to be highly competitive in advancing genomics research. In fact, there have been millions of dollars in FDI (foreign direct investments) from the US being siphoned into biotech companies in Asia. Companies such as Celera Genomics, based out of Rockville, MD, have directly acquired a majority

of genomics coupled with the (relatively) free flowing movement of international capital, we can expect to see that biotech will continue being one of the leading investment sectors for businesses. The field of genomics will soon become a key part of our lives as researchers rapidly develop personal devices to solve some of mankindâ&#x20AC;&#x2122;s most pressing medical needs. This will not only provide hope to the millions of sufferers of chronic illnesses that are currently untreatable by conventional methods, but will also provide a multitude of profitable investment areas for businesses. BT




and doggedly coaxed the science and technology of the time to meet his challenge. Sure, he wasn’t the first to dream of a world with incandescent light bulbs; Alessandro Volta demonstrated the technology of a glowing wire nearly eighty years before Edison. Thomas Edison was the first to imagine, act decisively, and create the system of innovation and distribution that made the electric light bulb viable. Edison had the strength of character to say: “We will make electricity so cheap that only the rich will burn candles,” and then follow through with it. In some ways, Steve Jobs and his corporate manifestation, Apple, is a contemporary example of Edison’s ethic. The Economist recently cracked open an iPhone to examine the nature of its origins. What they found was not necessarily surprising: “[T]he components are almost entirely Asian: the screen is mostly from Japan, the flash memory from South Korea, and it was assembled in China.” What is note-worthy: “Apple’s contribution is the design and software—and, importantly, integrating the innovations of others [emphasis added].” People are starting to fear America’s fall as the leader in science and technology innovation, but Mr. Amar Bhidé of



he world is changing. I can see it around me: my friends debating the merits of various schools of yoga over cocktails in Boston, colleagues relaying stories of China’s latest obsession with their version of The American Idol. In the past year, I have heard “change” chanted as a perverted mantra across the country. The question is, What is the nature of this transformation and what does it mean for you, the ambitious college student? Change is nothing new. It is almost a natural litmus test of our ability to adapt and survive in uncertain climates, be it political, economic, or atmospheric. So, what are you going to do about it? How do you create a strategy to weather successfully the storms ahead? Change manifests itself in many forms. It can be external: to sit and wait as present conditions complete their final metamorphosis, and then react to the new reality as it unfolds. Or it can be internal: to proactively transform yourself, create a personal reality that makes you happy, and then exploit opportunities that align with your objectives. You have a simple choice: Be changed, or change yourself. Thomas Edison is a great example of pro-action. The modern-day Prometheus saw a world illuminated by electricity

[by Joynita Sur, Johns Hopkins University]

Columbia Business School challenges this notion in The Venturesome Economy. He argues that in addition to its scientific advances, America’s robust business models and “venturesome consumers,” who are more willing to try new things compared to their foreign counterparts, are what, in total, create the necessary environment for innovation to thrive. “Edison did not invent the light bulb and Ford did not think up the motor car, but both came up with the business-model innovations required to profit from those marvels.” Furthermore, advances in technology are not a zero-sum game. If people in Asia are becoming more adept in certain skills, why is that necessarily a threat? Perhaps, it is a chance to create a symbiotic partnership instead. What is innovation? Where does it occur? How does one measure innovation and what is its source? Some conjecture that innovation occurs as a national enterprise,


and that a proper metric of measurement is the amount of money spent on research and development. The Economist juxtaposed R&D spending between 2001 and 2006 in China, which skyrocketed 23%, to spending in America and Europe, which crept up by 1-2%. But clearly, while China is increasingly becoming a leader in manufacturing and production, it still lags in true innovation, defined as creating something new. I spoke with Aris Melissaratos, Senior Advisor to President William Brody of Johns Hopkins University, who echoed the sentiments of The Economist. Mr. Melissaratos espouses a grand, national policy for innovation and progress— similar in size and scope to the interstate highway project—to be spearheaded by our guru of change, Barack Obama. In his book, Prosperity thru Innovation: Technology’s Impact on America’s Role in the 21st Century Global Economy, Mr. Melissaratos calls for the federal government to double current R&D spending as a solution for the U.S. to regain and retain its position as a world leader. But is R&D spending the sole metric of innovation? I posed the question to Michael Rosen, currently Senior Vice President of Business Development with Forest City. Mr. Rosen has over 30 years of experience in the biotech and life sciences industry, as part of Pfizer, Bristol-Myer, and as CEO of various biotech ventures in the U.S. and E.U. Mr. Rosen deviated from spending as the sole metric and introduced two other points of assessment: intellectual properties and scientific journal citations. The U.S. is still a leader in patent filing, he said. If the measurement is per capita, Israel is catching up, and the Japanese and Koreans are not too far behind. Following the reform of its IP laws, India is catching up. But don’t look to China as much of a competitor in the near term; the entire concept of intellectual property is new there. Moreover, it is important to make a distinction between copy-cat technology, reengineering, and true innovation. “Disruptive technologies are key,” Mr. Rosen said, “[and] these historically occur within America.” The bottom line: Think for yourself There is a fundamental difference

between how Americans typically approaches innovation, versus the philosophy of “innovation” of many of the Asian countries. Most engineers in Asia focus their energies on perfecting the mouse trap, striving to make the existing technology as efficient possible. The American attitude is to strive create a reality where mouse traps are obsolete. These differing views on “innovation” are not necessarily contradictory; and in fact they are complimentary. The attention engineers in South Korea put

In the end, David did defeat Goliath, and he did not need a National Plan. He used a sling shot and the faculties of his own mind. towards efficiency, as an example, allows American innovators to devote their energy towards something novel. Thus the claim that innovation is slipping away from America is not entirely justified. Free trade of goods and ideas is a positive value and should be embraced as such. As a student the world is your playing field. Mr. Melissaratos advises, “Be a life-long learner; pick the most difficult technology, understand it, master it, and package it into a product that can change the world.” Helen Montag, Corporate Relations Manager of Johns Hopkins University, also offered some valuable advice. “Get a broad education…spend time abroad at some point…fluency in 2nd and/or 3rd languages is also useful. I believe that the ability to understand and work with colleagues from all over

the globe is crucial and will be more so in the future. I also recommend that students find mentors along the way, and that they use and continue to create such relationships as their careers advance.” In my experience and observation of others’, today what we face is a battle of potentially epic proportions on the field of innovation. On the left you have the malignant cancer of big government. On the right you have the benign, yet potentially malignant cancer of bureaucratic corporations. And then, in the middle, there you are, within the cloistered confines of the bureaucracy that is Academia. Each entity, with its own goals and desires, attempts to provide a solution all too similar to what started stifling innovation in America to begin with. What is good for GM may not necessarily be good for America, and we will probably experience some degree of creative destruction. But of course, you have options. You can either join one of these lumbering giants, or you can choose to create your own entity to innovate on your own terms. The question is what is your objective? If you are looking to discover something in the basic sciences that may not be applied in your life time, then working within the confines of a large entity has its pluses— greater resources, for one. On the other hand, if your goal is to create a disruptive product and to see the transition from lab to consumer, you need to take care in the decisions you make. Money is not free. The sources of capital—government grants, corporate partnerships, venture capital equity, or (at one time) debt—are not equal. Whatever your choice, make sure you know who your benefactor truly is and make sure that your goals are aligned. Of course, there is hope. All of this mess is not a permanent state, and in the end, as long as there are people thinking, nothing is entirely loss. But remember, while collaboration occurs between individuals, thinking is solitary. Because, in the end, David did defeat Goliath, and he did not need a National Plan. He used a sling shot and the faculties of his own mind. But what do I know? Who is John Galt, anyway? BT



Face to Face with

Gaddy Tauber Organs Trafficker

Holocaust Survivor

by Nancy Scheper-Hughes Professor of Anthropology University of California, Berkeley Article based on a chapter, “Schindler’s Other List,” in her forthcoming book A World Cut in Two: The Global Traffic in Organs (University of California Press).


hat journalists benignly call ‘transplant tourism’ involves more than consenting individuals engaged in intimate bodily exchanges and backdoor transplants that are privately arranged. Each illicit transplant involves an extensive and highly-organized criminal network of well-placed intermediaries with access to leading transplant surgeons, excellent public and private hospitals, laboratories, offshore bank accounts, police protection, and sometimes even the tacit approval and blessing of government officials. Nonetheless, it is a dangerous game and the high risk players in the global ‘transplant mafia’, who think they are invincible and above the law, can suddenly find themselves shoved up against a wall with handcuffs slapped on their wrists. What motivates an intelligent person of high professional standing to enter an illicit human trafficking scheme that pits stranded kidney patients in one country against desperate peasants from demolished agricultural villages in Moldova and hungry men from the decaying slums of a Brazilian port city? What kind of moral worlds do kidney brokers and their clients inhabit? How do they justify their actions? These intimate exchanges of life-giving body parts concern more than medical necessity and individual life-saving. As evidenced in the complicated narrative I am about to tell, these exchanges can be tainted by complicated histories of bondage, and debt peonage, and even link themselves to genocide, racial hatred, and mass death. In the case of Gadalya Tauber, a retired Israeli defense officer and the chief of operations in an extensive human trafficking scheme that brought slum dwellers from Brazil, rural workers from Moldova, and Russian immigrants from Israel to Durban, South Africa to supply the kidneys needed by international transplant tourists (mostly Israelis), a lot more was at stake than

large sums of money. Greed, yes, but Brazilian journalist Julio Ludimir also revenge, restitution, and reparation who, like me, was investigating the for the Holocaust played a role in these international organs trafficking ring that unconventional transnational transplant had operated out of Recife during 2002– proceedings. Redemption and resurrection 03. Truly global in its scope, the multion the one hand; organ theft, blood libels, million dollar scheme originated in Israel and seething resentment on the other make and was active in several sites in Eastern the global trafficking of human organs Europe, Turkey, Brazil, South Africa and a volatile and dangerous proposition, the United States. Ludimir and I were a political tragedy of truly epic and both fascinated by Tauber, the hyperShakespearean dimensions: “I haven’t much intelligent, complex, and wily 70-year-old to complain about.” Gadalya “Gaddy” former officer in the Israeli Defense Force Tauber did indeed look more fit and relaxed (IDF) who was widely rumored in Brazil than he had during my first encounter with him at the Henrique Dias military police brigs in 2005. Then, he was still recovering from the shock of his conviction the previous year on W. Shakespeare, charges of organized The Merchant of Venice, crime, racketeering, Act IV, Scene I human trafficking and commerce in human organs and his subsequent imprisonment in Recife, Brazil. On this visit, in July of 2006, I was accompanied by

“The pound of flesh, which I demand of him, Is dearly bought; ‘tis mine, and I will have it…”


to be a spy, a drug trafficker, an arms dealer, and a member of Mosad, Israel’s ultra-elite military force. As we settled into a corner of the prison yard, Gaddy made a confession: “Last time I told you that I never killed a man. That was untrue. This time I will tell you the truth, all of it.” This was Gaddy as Scheherazade, luring visitors back for another installment in a story that seemed to have no end. At the start of every prison visit he would correct a detail from the previous meeting and he would end with a promise: “Next time I’ll tell you about ‘the boss’ of the organs trafficking ring.” Or: “Next Sunday come again when Terezinha, my wife, is here [for a bimonthly conjugal visit from Bom Pastor, t h e

women’s prison].”

After retiring from the military, Tauber began traveling the world, selling his skills in police and security training. He met Captain Ivan Bonifacio da Silva, a retired Brazilian military police officer, in 1997 at a SWAT training class in Miami. They got along well, and da Silva invited Tauber to Brazil where they set up a consulting firm specializing in security training.They also tried to break into the legal weapons trade selling arms to the military and police in Pernambuco and were awarded an $8.5 million contract by the governor, Miguel Arrais. But that deal collapsed when Arrais and his party lost the next election. During this time Gaddy fell in love with Brazil and with Terezinha Medeiros, an attractive and sophisticated lawyer in her

something to save the world’s Jews, even if it meant finding kidneys for them in the slums of Brazil.” This time Gaddy returned to Brazil on a mission. Once again he teamed up with Captain Ivan da Silva, and in no time at all, a new criminal network had formed. It was a pyramid structure with Ilan Perry at the top, and everyone got a cut. Gaddy, who was in charge of financial operations in Recife, made $10,000 on each successful transplant. Captain da Silva, who recruited donors though local “kidney hunters,” received $5,000 for every kidney procured. Silvio Bourdoux, a military police doctor and colonel who handled medical screening and blood matching, was paid $500 for every donor

Together, Gaddy and his team rounded up more than 50 donors to send them to South Africa, where 38 of them were relieved of a “spare” kidney. The meninos (or “boys” as the kidney sellers were called) were easy prey.

“I should have died 70 years ago,” Gaddy began. When he was three years old, his parents fled the Nazi invasion of Poland; they went to Russia, sending Gaddy to live with a Catholic peasant in the Ukraine who hid the little boy and several other Jewish children in his cellar. Although Tauber was not mistreated, neither was he protected. When the German police arrived, the boy was handed over, but he was described as an orphan. “Luckily,” he said, “I was fair and had Aryan features. I was brought to a camp for war-displaced children somewhere in the Ukraine where we were to be adopted by German families.” Gaddy, who was five years old at the time, says he remembers hunger, sickness, and many deaths in the camp. He eventually managed to escape and, after the war, was reunited with his parents. In 1947 the family relocated to Israel where Tauber finished school and did his required military service. As a young man he showed proficiency in science and math but was never encouraged to continue his studies. He became a professional soldier, “the only job for which I was well suited.” 64 BUSINESS TODAY SPRING 2009

fifties. When the arms deal fell through, Gaddy had no way of making a living in Brazil and was forced to return to Israel. There, in 1999, he was approached by Ilan Perry, a businessman with a background in medical insurance who was engaged in organizing a global transplant scheme among paid living donors. Perry offered Tauber a way to return to Recife as a local agent for his “company.” All Tauber had to do was to find someone in Recife who could recruit people willing to travel abroad and sell a kidney to Israeli transplant patients. “I refused outright,” Gaddy said. “I had no idea that such things were possible, and I found it distasteful.” Three years later, in 2002, Tauber was approached again, this time by the wife of an old friend. Her description of the pressing need of Jewish transplant patients who were suffering and dying on dialysis machines while waiting for transplants caused Tauber to rethink his position. Now he was prepared, he said, “to do

screened. Captain da Silva’s wife was also involved; she traveled with the donors to South Africa where they were taken to a safe house to await their operation. A parallel structure existed in both Durban and Johannesburg run by other Isrealilinked on site brokers and handlers. Gaddy received the money needed to organize the trips directly from Perry and deposited it under the name of his Brazilian wife, Terezinha, who served as the “accountant” for the scheme. Together, Gaddy and his team rounded up more than 50 donors to send to South Africa where 38 of them were relieved of a “spare” kidney. The meninos (or “boys” as the kidney sellers were called) were easy prey. As soon as the first two or three returned safely from Durban and began flashing wads of hundred dollar bills, the word was out, and the kidney hunters didn’t have to do anything but take down names — more than a hundred of them. The meninos had spent their lives in Recife’s rundown,


working- class neighborhoods, in concrete Gaddy, Federal Police Chief Karla Gomes media as a “monster, an Israeli Mengele” slab houses whose roof tiles shook every Matos Maia. “Don’t be fooled by Tauber,” and the anti-Semitic slurs he suffered few minutes as planes roared overhead. she had said. “He is a trickster, a liar and from police. “Everyone hates Jews; even They wanted to travel, too, to see the world a dangerous sociopath. He will play with Brazilians are anti- Semites,” Gaddy said and to come back, their pockets bulging. you, charm you, even amuse you, but he bitterly. He seemed startled when I asked It was a buyers’ market, and the price for is totally capable of killing you.” Indeed, him why, then, had he participated in a a “fresh” kidney fell almost immediately while he was awaiting trial, Tauber had scheme that had done such great damage from $10,000 to $6,000 and then down sent “feelers” from his prison cell at the to Israel. to $3,000. Even so, there was no lack of state penitentiary, Aníbal Bruno, into the He evaded my question, instead seeking enthusiasm among the unemployed and slums of Recife looking for a hit man to to portray himself not only as a victim indebted. knock off Gomes and the judge, Amanda of the Holocaust and the savior of sick When several transplants were derailed Torres de Lucena. When an informant told Jews but also as the patron saint of the because the donors did not pass the police about Gaddy’s search for a pistoleiro impoverished kidney sellers. He challenged Durban team’s medical screening, Perry (a hit man), the prisoner was removed to me to consider the poverty of the meninos, urged Tauber to set up their willingness, a transplant center in indeed their eagerness Recife. Flying Israeli to sell, and their right to patients to Brazil, dispose of their bodies where a steady supply as they saw fit. No one of kidney donors was was forcing them to do close at hand, would be anything, he charged. more convenient and In fact, they were less expensive than flying begging to be part of both patients and donors the group. “I was saving to South Africa. lives in both countries, It was a risky business, in Israel and in Brazil,” but da Silva assured he argued. It was a Gaddy they could get defense I had heard away with it. Brazilian many times before from laws against organ body brokers in the selling were weak, and da Philippines, Turkey and Silva’s connections to the Moldova. But it was police and judiciary were only in Brazil where strong. All they needed many of the sellers was a “five star hospital” agreed with their Nancy Scheper-Hughes with Alberty and a competent brokers. da Silva of Recife, Brazil. Alberty was surgical staff. Both were As Gaddy prepared trafficked from his slum located a located. But just a few lunch for us on a few miles from Recife’s international weeks before the first little camp stove — airport. He ended up in Durban, South “transplant tours” were homemade soup made Africa, where he sold his kidney to an to arrive in Recife, federal from skinny chicken American woman from Brooklyn, New police in Brazil arrested wings, wilted celery, York, in 2003. The deal was organized 11 members of the organs onions, cilantro and a by an international criminalnetwork of trafficking ring. Several single, dirt-encrusted organs brokers headquartered in Israel. of the principal figures carrot — he spoke were convicted and given heatedly about his jail sentences ranging rescue of my own field from one to 11 years, with Gaddy and Henrique Dias, a higher security prison at assistant, Geremias (“Gere”) Belarmino, da Silva receiving the stiffest penalties. military headquarters. one of the kidney sellers. Out of a job and On our next visit, Gaddy’s jailers did not Ludimir, a tough investigative reporter, unable to pay his rent, Gere was facing bring him out as usual but invited us to pass did not hesitate for a second, and when homelessness. He was about to take his the day with the prisoner in his cell. The he eagerly entered Gaddy’s locked cell, wife and three small children to live in a visit would be private and only cursorily I followed suit. Energized by having cardboard shanty when Gaddy offered him supervised by a military guard who might his visitors entirely to himself, Gaddy the “opportunity” to travel to Durban. pass by to check on us from time to time. I launched into the story of his arrest and “I tried to protect the boy at first; I told balked, remembering the warning given me the abuses he had endured. Above all, he him he was too smart to sell himself this by the undercover agent who had nabbed was furious about his portrayal in the local way; I felt like a father toward him, and





so I turned him away,” Gaddy claimed. Geremias was insistent, and he offered to do anything at all for the “company,” including cleaning Gaddy’s apartment, shining his shoes, translating and interpreting Portuguese, whatever was needed. Gaddy relented,and Geremias got to sell his kidney. When he returned, Gere agreed to work for Tauber as a part-time interpreter, and he hoped to be included as an official guide and translator for the new Recife transplant tour scheme. Gaddy’s version of the story coincided with what Geremias himself had told me. And I recalled the transcript of Gere’s deposition to Judge Torres de Lucena: “What father, seeing a bullet headed straight for his children’s heads, wouldn’t throw his own body in front of the gun to defend them?” When the judge countered that Geremias’ ch ildren were not facing a death threat, Gere responded: “No, you are right. But they were facing something even worse, a life threat. And to save them, your honor, I would have sold not only a kidney, but an eye, a liver, or even my heart, and I would have died happy to see them safely housed.” Geremias had even come to Tauber’s defense during his trial, saying that Gaddy was the only person to help him when every social agency in Recife had turned him down in his time of dire need. “Gaddy Tauber may have been a crook who was taking advantage of the desperation of the poor, but even so, we all gained something out of it as well. I don’t regret anything.” Despite the open, foul-smelling toilet located a few feet from the camp stove, despite the dirty vegetables and the greylooking chicken wings, the savory aroma coming from the cooking pot made my empty stomach rumble. As he carefully spooned soup into two little plastic containers, one for me and one for Julio, but none for himself, I protested: “Oh 66 BUSINESS TODAY SPRING 2009

please, Gaddy, you first.” Tauber demurred, grinning like a Cheshire cat: “I’ll eat later, after you leave.” Pouring a little whiskey into his coffee mug [how did he ever get that, I wondered?], he lit another cigarette. “ Oye, Julio,” I said, “I think this is a test.” But Julio had already dug in and was slurping loudly. Hunger, as they say, is the best sauce, and we both ate greedily, even taking seconds. As we ate, Gaddy asked me how I had come to Brazil. Since he had revealed his secrets to me, I told him briefly about my years living in a rural shantytown as a Peace Corps volunteer in the mid1960s and my return in the 1980s as an anthropologist studying mother love and child death. Gaddy listened intently, and he asked intelligent questions. When I described the way some infants, lacking what shantytown mothers called “a knack for life” were let go, not only allowed to die but helped to die, Gaddy nodded his head knowingly. “Do you know what they were?” Gaddy asked. “No, what?” “Those babies were little Musselmen.” I was taken aback. A few years after the publication of my book, Death without Weeping,I had thought of that same analogy while re-reading Primo Levi’s description of the living dead, the Musselmen, the sub-population of camp victims whose exhaustion was so great, whose despair was so palpable that they looked and behaved like walking mummies. These men and women were avoided and stigmatized as having succumbed, as having “given up” all hope and with it, their humanity. Thus, were they also “given up on” by those around them. “Yes, those angel-babies were little Musselman.” Before we left his cell, for what was to be my final visit to the prison on this trip, Gaddy took my hand and kissed it and, without giving it a second thought, I reciprocated. I asked if there was anything he needed that I could provide. He had only one request: “Whatever you do, promise not to turn me into a monster.” “I promise; and you take care of yourself,” I said, on taking leave. “I survived Hitler, I survived Stalin. I can certainly survive this.” BT

Business Today: Who is behind the globalized organ trafficking network? Nancy Scheper-Hughes: The people who do this pose as businessmen—people who have contact with medicine at a fairly high level in their country, maybe a head of insurance claims. Governments where these groups have grown up often turn a blind eye because, in effect, it solves their problems. We have this problem of people stranded on waiting lists. The discourse is that twenty people a day die waiting for an organ. Well, you do die waiting for an organ if it’s a heart. But with other organs that are shareable— especially the kidney— or when you have a relative to help you, it’s slightly different. You are not waiting for a person to become deceased. You can turn to living donors. With kidneys, the fact is that people can have their problem temporarily taken care of by dialysis. In my travels, now in more than a dozen countries, there are hundreds of dialysis units, not to mention transplant units, and I have met people who have survived quite well for 22-23 years on dialysis. BT: Are extended periods of treatment via dialysis more expensive than procuring an organ illicitly? NSH: It depends on the country. You have very inexpensive dialysis in Brazil, where it is a kind of a cash cow for the economy. Brazil has a unified national healthcare. They do it in a way that works and it’s not terribly expensive. In the US, it’s much more expensive to have dialysis treatments than to have a transplant. Aside from Medicare, the only nationalized healthcare we have is oddly enough for dialysis and transplants. But what it doesn’t cover are the anti-rejection drugs, which can be over a thousand dollars or more every month. You can make these calculations, and they mean different things in different places with different organized healthcare systems. In many advanced industrial societies, you are right, it is cheaper to have a transplant. But then some parts of the transplant are not covered and can be quite onerous and result in inequitable distribution of transplants. But the problems are ethical in a global sense.


BT: Who are the donors that are manipulated? Are they predominantly in developing nations? NSH: Well, people are manipulated in the United States, too. But what is really exploitative is when you get these international brokerage firms, who then recruit through the newspaper and through visits to hospitals and set these deals up. The donors are from very poor countries, and they are literally trafficked—meaning that they are contacted by kidney hunters who are employed in the criminal network. It’s just like a pyramid scheme. At the very top you have these very smart, very savvy, very well-connected businessmen working with hospitals and doctors. They are looking at places of extreme economic collapse, or looking at vulnerable groups or populations—like undocumented workers, political refugees, people in jail. BT: In combating this multi-faceted problem, is the best way a top-down approach that first punishes these corrupt businessmen, or do we go to the bottom and educate the people who are in these developing nations and who are sacrificing their bodies for commercial gain? NSH: I think absolutely both. There was a reluctance when I was trying to inform transplant societies. Surgery is very corporatist, it’s very closed, and it’s like a fraternity. They go to the same meetings, they read the same books, exchange the same information. They didn’t want to make this public. They also didn’t want to out the individuals that they knew were guilty, so the transplant organizations treated the trafficking people for organs the way the Catholic Church treated priests who were sexually exploiting their young parishioners. They would say, “Get out of here” with very public censure and that person would set up a private practice. The most extreme thing was to say, “You can’t practice medicine anymore in our country, but what you do in the next country doesn’t matter.” Rather a kind of “don’t ask don’t tell” policy. “We’re not detectives” was the thing I was often told when I talked to hospital administrators about what went on under their very eyes. BT: What about the role of governments?

The Chinese government, for example, recently banned the sale of organs to organ tourists coming from Japan to protect Chinese patients waiting for organs. How effective is this supervision? NSH: People travel from all over to get kidneys, and Japan is a big buyer, and Israel is another. Half of all the people in Israel walking around with a fresh kidney, meaning a transplanted kidney, bought it overseas. Israel has finally passed laws against it, but they have to be supervised to make sure that people don’t find ways to get reimbursed In China, it’s an old story, which it began with executed prisoners. I mean

procuring people. you always have procurers, and the transplant professionals are so uncomfortable with that. They are also uncomfortable with the idea of poor people whose fate in life destines them to supply life to a better… What I’m saying is there really is a distinct class difference. In Brazil, they’re water carriers, or they’re stevedores

S o

Transplant Tourism: a global look lots of people have been going to China because it was cheap, they have very good technology, and, above all, the organs were fresh. People would be organized by travel tours, and arrive on the dates when there would be executions. Even American citizens were willing to say, “Well, we don’t care. They’re going to be dead anyway. So I might as well go and get myself a fresh organ.” The concern is that in China there seems to be a parallel growth in the number of executions relative to the number of transplants [tourists] that are willing to come. Some in China would argue criminals are paying their debt to society, and, of course, we have to grant people who are doing these things that they do have a cultural logic that may be quite different than our own. BT: You mentioned in one of your articles that you wanted Organs Watch to be superseded? What sort of international surveillance team do you envision? NSH: It’s really a global traffic, but it’s a very different kind of a global traffic. It involves medicine, it involves people at very high levels, and it does involve a good in the end—that is that some people get to live. The main problem is the brokers. No doctor is going to go out looking or

in the watery slums of Manila, or they’re welders in rural Moldova. Sometimes they’re a cut above, like mechanics, or people who work in markets. The point is to say is that the brokers will send anybody, even somebody with one kidney—even though they state that they have screened them before sending them abroad. At an incredible meeting last May in Istanbul, transplant surgeons unanimously accepted a declaration saying, “Let’s tell it like it is. Transplant tourism is transplant trafficking.” This is not good for transplant medicine, not good for the providers of kidneys. The only people that benefit from this are the hospitals, the brokers, and the surgeons. We are not comfortable with that. So we’re going for prohibition rather than regulation. So now the problem is that laws have been passed even though there still isn’t an organization that can be permanent. I’m calling this entity a secretariat. It has to be multi-lateral, international, transnational, global. But it can’t be run by the transplant profession and their friends. It has to involve human rights activists, the UN Office on Human Trafficking, bioethicists who are appropriately critical, and, of course, transplant professionals, and transplant nephrologists, and people from international law. BT SPRING 2009 BUSINESS TODAY 67


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Business Today Spring 2009  

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Temporarily Cancelled: Running of the Bull