Foster Business Magazine Spring 2010

foster

Michael G. Foster school of business

Think differently.

Make a difference.

It’s the Washington Way.

University of washington

spring 2010

You don’t have to be chairman of the board to change this enterprise.

Whether you want to shape our institution or a single student, Foster School philanthropy comes in many shapes and sizes.

A retired Boeing employee, Jerry Bowers (BA 1973) and his wife Carol wanted to help others access

Scholar in Foster’s Undergraduate Program for the life of our great university.

alma mater, put Michael or another member of our team to work for you.

Philanthropy Officer Michael Eisenhut with Jerry and Carol, “Co-Chairs” of the Bowers Scholarship Endowment

Think differently.

Make a difference.

It’s the Washington Way.

We’ll help you create a meaningful legacy you can be proud of. foster.washington.edu/invest (206) 543-0304

contents

Cover story, page 10

Foster Innovation: The Business Start-up Engine 12 The Guru:

Wisdom is the beginning of a successful entrepreneurial journey. Effective entrepreneurs are more sage than maverick.

13 The Capitalist:

Dollar figures make headlines, but the art of the deal lies in what happens before and after the deal.

16 The Catalyst:

See how the New Venture Group puts the Inc. in incubation.

19 The Upstart:

There’s more than the idealism of youth at work in upstarts who take the LEAP (Lavin Entrepreneurial Action Program).

15 The Academic:

Think innovation can’t be taught? Try taking classes from Professors Castle, Dooley, Kotha, Shah, Young, and other Foster powerhouses.

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contents

Dean

James Jiambalvo Executive Director Marketing & Communications

7

Pamela McCoy Managing Editor

Renate Kroll Contributing Writers

Jocelyn Milici Ceder, Jake Ellison, Ed Kromer, Andrew Krueger, Eric Nobis

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27

Photography Matt Hagen (principal), Paul Gibson Cover Illustration Cognition Studio, Inc.

Departments

4 In the News

EIC, Finishing Touches, Meet the Donors, Dean of Distinction, Helping Haiti, Forward Looking, Foster Alumni Panel, Legacy of Diversity, Global Health, Management Giant, Leadership U, Bye Bye Balmer, Financial Predictions: Reloaded, PACCAR Hall Picnic

21 Program Profile

Foster Leadership Fellows Program

22 Faculty

Nature v. Nurture, Smart Money, Research Briefs, Notable Contributions, Scandal Scholar

27 Alumni

Marcus Charles, Trevor Cobb, Carl Hogan, Alumni Events, Will Felps, Tracy Turnure, Charlotte Guyman

32 Opinion

Calling All Leaders

2 fo s t e r BUSINESS

Design a.k.a. design Foster School of Business Marketing & Communications University of Washington

Box 353200 Seattle, WA 98195-3200 206.543.5102 206.221.7247 (fax) On the Web

foster.washington.edu

Foster Business is published twice a year by the University of Washington Foster School of Business. The publication is made possible by donations from alumni and friends. No state funds are used in its production.

Change of Address?

fans@uw.edu Comments?

bizmag@uw.edu Think differently. Make a difference.

It‘s a Privilege to be Public In the last issue of Foster Business, I began describing what it means for Foster to be the best public business school. Focusing on the “best” part of the equation, I touched on our success in case competitions, reputation with recruiters, esteem with alumni, and, of course, media rankings. To open this issue of the magazine, I’d like to say a few words about being a “public” university.

It wasn’t that long ago that being “public” simply meant that the majority of our funding came from a state budget. But, steadily decreasing dollars from the state make us increasingly reliant on private giving and revenues generated by programs that receive no state support— and that’s not likely to change anytime soon.

Today, being “public” is more about recognizing our responsibility to advance the economic welfare of the residents of Washington. This is not to say that the borders of Washington state define our reach. We’re extremely proud of the impact made by our alums in other states and other countries, and our research is recognized far and wide. Still, the economic welfare of Washington is a priority, and we are an integral part of the state’s financial and intellectual ecosystem.

Achieving our vision requires that we measure how the state benefits from our efforts.

How many businesses are started? How many jobs are created? How effectively is our research being used to improve the way businesses operate and the way leaders function? What is the impact of bringing so much intellectual capital into our community and how many opportunities are created as a result?

A survey of more than 8,000 Foster alumni revealed the founding of more than 2,400 Washington-based companies, creation of 181,000 jobs and the addition of $51 billion in annual revenue to the Washington economy. Part of this success is fueled by the Foster School’s Center for Innovation and Entrepreneurship (see cover story on pg. 10).

Another way we impact the state’s economic health is our Business and Economic Development Center, which links our students and faculty to Washington’s minority businesses and nonprofit organizations. Since 1995, we’ve enhanced the educational experience we deliver to our students while helping to create 1,000 jobs in inner-city communities and generate more than $56 million in new revenues for the companies we’ve assisted.

Add to this the hundreds of Foster alumni who are helping Washington’s companies become industry leaders. In turn, these executives return to mentor our students, participate in our business competitions, provide internships, and hire graduates. It’s a virtuous cycle.

Foster’s challenges are increasing as state dollars dwindle, but our commitment to the public part of that virtuous cycle is as strong as our commitment to be the best.

I feel privileged to be part of it.

Sincerely,

James Jiambalvo Dean, Michael G. Foster School of Business Kirby L. Cramer Chair in Business Administration

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in the news

Interdisciplinary Teams, Planetary Challenges Environmental Innovation Challenge sees second successful year So, an engineer, an entrepreneur, and an environmentalist walk into a vacated airplane hangar…. Or, in the case of the University of Washington Environmental Innovation Challenge, hundreds of them.

That’s what happened in April when 19 interdisciplinary student teams, representing eight colleges, arrived at Hangar 30 in Seattle’s Magnuson Park to demonstrate their clean-tech innovations to a Who’sWho list of industry judges.

“I was looking for fresh ideas, for solutions that can make a lasting impact and for teams that can make it happen,” said Loretta Little of WRF Capital. She didn’t have to look far.

EnVitrum, a duo of UW mechanical engineering students, won the $10,000 UW Center for Commercialization Grand

Prize for their novel manufacturing process utilizing crushed, 100% post-consumer glass, regardless of color and contaminants.

The EnVitrum process is one positive step toward addressing the problem of glass that continues to reach US landfills, an estimated 11.6 billion tons in 2009.

And when that process is combined with techniques such as casting, extrusion, and molding, a variety of objects can be produced, including the one above— “VitroBrick,” a building material that requires 60% less production energy than masonry and could have major impact on the green building industry.

The $5,000 Fenwick & West Second Prize went to Triangle Energy for their mobile bioreactor that utilizes super-critical water gasification to convert solid biomass

into synthesis gas. The UW team includes students pursuing degrees in engineering, biochemistry, and business.

Three honorable mention prizes of $2,500—sponsored by Siemens, Keeler Investments Group, and Starbucks— were awarded to Idyll Energy Solutions, iDriveSmart, and Nano-Wave. Their innovations include an intelligent power strip that regulates appliances based on human movement, a system providing real-time fuel economy information via Smartphones, and a highly efficient lighting solution for nurseries and indoor growers.

The Challenge was organized by the Foster School’s Center for Innovation and Entrepreneurship in partnership with the College of Engineering and College of the Environment. n Learn more and watch a video of the event.

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Finishing touches

Meet the Donors

PACCAR Hall construction is in the home stretch

Always an occasion for inspirational stories and life-changing personal connections, the Foster School’s annual Scholarship Breakfast was the venue for an especially meaningful connection this year.

For Barbara and Walter Tomashoff, it was “exciting and thrilling, truly,” to discover that Angelo Ongpin (BA 2003), a past recipient of the scholarship named in memory of one of their twin sons, had joined them at their table. The Conrad Tomashoff Endowed Accounting Scholarship was established to support an undergraduate accounting major and a twin when possible. Angelo and his twin brother, Victor (BA 2004), had received the scholarship in 2002.

“As we learned about what he has been doing and what he is doing and his plans for the future,” she said, “it was just wonderful. And the idea that he credits our scholarship in any way was great.”

Bringing scholarship recipients together with the families, individuals, and companies dedicated to helping Foster students afford their education makes the breakfast one of the school’s premier events. This

It’s down to drywall. Okay, that may be an oversimplified status report for the construction of PACCAR Hall, but that’s about the shape of it. The soaring brick and glass exterior of the new $95 million home of the Foster School of Business is in fine form and nearly complete. Inside is still bustling, with more than 100 workers daily painting walls, hanging doors, laying flooring, and installing AV technology.

“All of which is to say that the job is almost done,” says Pete Dukes, the Durwood L. Alkire Endowed Professor of Accounting and chair of the Foster School’s Building Committee.

The PACCAR Hall project, the first on campus to be financed solely by private philanthropy, is on track for “substantial completion” June 28, a technical event that means all of the necessary safety systems are installed and operating so the building can be entered without a hard hat. The building’s systems will be commissioned in July and August. After a two-year construction process that has remained on time and on budget, the building is well on schedule to be ready for fall classes and its grand opening in October.

“It’s really going to be cool,” Dukes says. “When you walk into the building it feels so open, so interactive. The classrooms are roomy, the breakout rooms are bright and inviting, the technology is incredible.

PACCAR Hall is turning out even better than we envisioned.” n

Annual scholarship breakfast celebrates connections that change lives

year, more than 300 students, donors, faculty, and staff attended the breakfast and celebrated the powerful impact of 273 Foster students receiving scholarships totaling $1.4 million.

For the Tomashoffs, the scholarship named for Conrad (BA 1986) is a constant reminder of the great impact their son was having on the world before he tragically died in 1994, just three weeks shy of his 30th birthday.

“It’s a great feeling and comfort to know that we have been able to accomplish what we think our son had in mind,” Barbara said when reflecting on the many years Conrad’s scholarship has been improving the lives of Foster students. n

Dean of Distinction Jiambalvo cited in “best of” 2009 lists Foster School Dean Jim Jiambalvo was named “Best Leader in Education” by Seattle Business, and “Most Influential” by Seattle magazine.

“Jiambalvo has been instrumental in improving the school’s ranking on the U.S. News & World Report list of full-time public school MBA programs, up from 13th in 2008 to eighth in 2009,” noted Seattle Business in its “Best and Worst of Business 2009” listing in December.

In its 2009 “Power List,” Seattle magazine described the dean as having “re-energized the [Foster School’s] capital campaign, pulling in some $65 million in major gifts during the campaign’s final year in 2008.” The magazine also credits him with re-envisioning the business school’s new home—PACCAR Hall and the replacement of Balmer Hall—though the dean is quick to share credit with President Mark Emmert and the Foster School Advisory Board for these successes. n

Visit the PACCAR Hall Web page S prin g 2010

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IN the news

Helping Haiti

Forward Looking

TMMBA student trip to post-quake Chile & Argentina also benefits Haiti

MBAs, PhDs drop in on Microsoft’s vision of the future

In March, 16 Technology Management MBA (TMMBA) students embarked on an international study tour to South America.

The 10-day trip to Chile and Argentina was packed full of meetings with local agencies, company visits, and cultural excursions.

In Chile, they visited Un Techo Para Mi Pais (“a roof for my country”), an NGO dedicated to improving the quality of life of impoverished Latin Americans through transitional housing and social inclusion programs.

Amid relief efforts to the areas impacted by the recent 8.8 earthquake in Chile, Un Techo Para Mi Pais (UTPMP) remained committed to its work in Haiti and wanted to ensure that relief efforts there remained topof-mind. To that end, students met UTPMP Director of Development Mariso Alarcon for a briefing on the temporary housing needs of displaced Haitians.

Following the meeting, TMMBA students divided themselves into two groups: costcutting and revenue-building, and began strategizing. Twenty-four hours later, the students presented their ideas.

“Your students did more than I could have imagined,” said Alarcon in a conversation with TMMBA Director Tracy Gojdics. “I can’t wait to share this with my colleagues—it is fantastic for us.”

While the TMMBA International Study Tour was a success, the students also plan to get their entire class involved to raise funds to provide a temporary house for a needy family. n

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The promise of high-tech domesticity enjoyed by “the Jetsons” has yet to be fully realized in the American suburban home.

But Microsoft is working on it. The company’s Home of the Future and Envisioning Center provide an amazing preview of everyday life in coming years and…are generally off limits to all but C-level executives and senior government officials.

Thanks to Dmitry Risukhin, a Foster Evening MBA who organizes high-level visits to Microsoft’s Executive Briefing Center, the MBA and PhD students in Sonali Shah’s innovation strategy class got a rare all-access-pass to Microsoft’s skunk works—and the innovators shaping the future of better-living-through-technology.

The Home of the Future delivered some serious wows. Integrated environment controls, voice and touch screen interfaces, and 3-D imaging are embedded throughout the home. A personal health console is built into the fridge. A watch placed on a sensor plate tells you whether you need to drink some water. A kitchen display catalogs available ingredients and a light bulb beams a recipe onto the kitchen counter.

Dustin Miller, a bioengineering doctoral student in the Foster School’s Technology Entrepreneurship Certificate program, found a wall-sized projection touch screen to be particularly intriguing.

But more valuable than whiz-bang prototypes was the access to some of the corporate world’s leading innovators, including Microsoft’s director of intellectual property strategy.

“Going to Microsoft added that real-world, tangible experience to the classroom component of innovation strategy,” adds Miller, the co-founder and chief technology officer of Nanocel, winner of the 2009 Foster Business Plan Competition. “For me, understanding how Microsoft differs from IBM or 3M in how they go about the strategy of innovating is incredibly valuable as I try to set up my own company to be innovative.” n

Alumni Panel Takes Shape To aid in curriculum development and advance research, the Foster School is developing a standing panel of alumni who will be asked to weigh in on timely business-related subject matter and current research initiatives.

The panel was conceived by Bruce Avolio, the Marion B. Ingersoll Professor of Management and executive director of Foster’s new Center for Leadership and Strategic Thinking. “The panel will provide ongoing opportunities to learn what our alumni are thinking and doing in their careers, which we intend to feed back to current students.

It will also provide valuable and timely information to faculty to guide their research.

We’re going to share the results of the projects we do with the panel—something we think that participants will find very interesting,” says Avolio.

Building the panel started with an e-mail request sent to alumni last fall, and nearly 700 volunteered to be surveyed three to four times per year.

Now, Avolio and the Foster alumni engagement team are continuing to develop the program and hope to grow the panel.

Foster alumni who would like to join the panel or receive more information are encouraged to contact Laura McCloud Mathers, associate director, Alumni Engagement, at 206-543-1573 or via email at lauramm@uw.edu. n

Legacy of Diversity New multicultural mentorship award named for Spratlen

Thaddeus H. Spratlen, professor emeritus of marketing at the Foster School, was recently honored by the American Marketing Association Foundation (AMAF) when they established an annual award bearing his name.

The Williams-Qualls-Spratlen Multicultural Mentoring Award of Excellence is named equally for Spratlen, Jerome D. Williams of the University of Texas at Austin, and William Qualls of the University of Illinois at Urbana-Champaign.

According to the AMAF, the award will be given to individuals who have a long-standing commitment to mentoring multicultural students and junior faculty, and have advanced research on issues of racial, ethnic, and cultural diversity and their effect on the practice of marketing. Given the qualifications for receiving the award, it’s not surprising that Spratlen’s name is attached.

Spratlen came to the UW in 1972 and was founding faculty director of Foster’s Business and Economic Development Program. During his tenure, Spratlen focused his research on urban,

racial, ethnic, and social policy aspects of marketing and related business disciplines. He also wrote numerous articles on enterprise and economics in the African American community.

In 1994, and again in 1999, he received the Andrew V. Smith Faculty Development Award for outstanding service to the school, and in 2004 was recipient of the Dean’s Citizenship Award.

The $5,000 award bearing Spratlen’s name will be given annually at the American Marketing Association’s Summer Marketing Educators’ Conference beginning in 2010.

“We look forward to rewarding top mentors and hope the award helps to inspire others to develop their own programs to the benefit of all students and the practice of marketing,” said Lisa Chernick, executive director of the AMAF. n

Global Health Teams bring sustainable solutions to address poverty in annual international competition As the world’s top athletes departed the 21st Winter Olympics in Vancouver BC, a global competition of another kind was getting under way in Seattle—the sixth annual Global Social Entrepreneurship Competition (GSEC).

Held March 1-5, eleven student teams from Bangladesh, Canada, China, India, Rwanda, and the US arrived at the University of Washington to pitch business ideas that address issues of poverty and global health in the developing world. They competed for $21,000 in prize money.

Plans were judged on three criteria: effect on the quality of life and poverty alleviation in the developing economies; financial sustainability; and feasibility of implementation.

Nuru Light received the $10,000 Microsoft Grand Prize. The pedal-powered LED lamp system offers a safe, clean alternative to kerosene as a light source in Rwanda and was a big hit with the judges.

Nuru Light also won the Global Health Second Prize, People’s Choice Award, and Investors’ Choice Award. The Nuru team consists of students from Adventist University of Central Africa and the University of Massachusetts Medical School.

The $5,000 Global Health First Prize went to TouchHb, an affordable, prick-less anemia scanner designed for use in rural India where the disorder is a major cause of maternal and infant mortality. The TouchHb scanner was created by two medical

students from India’s Maharashtra University of Health Sciences.

GSEC was organized by Foster’s Global Business Center with the support of Microsoft and the UW Department of Global Health. n Learn more and watch a video of the event.

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IN the news

Management Giant Mitchell honored by Academy of Management for lifetime achievement

Terence Mitchell, the Edward E. Carlson Distinguished Professor in Business Administration and faculty director of the Foster School’s PhD Program, has been named recipient of the 2010 Lifetime Achievement Award from the Organizational Behavior Division of the Academy of Management.

The award is the highest honor of

the Academy’s largest division. It annually recognizes one outstanding scholar whose research and service have made an indelible contribution to the discipline of organizational behavior throughout his or her career. Only six people have won this prestigious award.

“We’re still hitting the cream of the

crop, the absolute pioneers of the field,“ says Blake Ashforth, a professor of management at the University of Arizona and past chair of the Organizational Behavior Division. “Terry fits that description perfectly.”

Mitchell joined the University of Washington in 1969 after earning his PhD from the University of Illinois at UrbanaChampaign. Over the decades at the Foster School, he has authored groundbreaking research in the areas of leadership, motivation, decision making, and, most recently, employee turnover.

A three-time winner of the Foster School’s Best Scholar Award, Mitchell is ranked 35th among the world’s most influential management scholars in a 2008 study published in the Journal of Management.

“It’s deeply satisfying to know that the Academy of Management has formally recognized what we have known for decades at the Foster School,” says Dean Jim Jiambalvo. “Terry Mitchell is one of the world’s premier thought leaders in the field of management. This award is a fitting testament to his outstanding career and major impact on generations of scholars and students.” n

Leadership U Newest UW regents are products of the Foster School Washington Governor Chris Gregoire has appointed Orin Smith (BA 1965) and Joanne Harrell (MBA 1979) to serve five-year terms on the University of Washington board of regents.

Smith joined Starbucks as vice-president and CFO in 1990 and retired as president and CEO in 2005, having grown the company from 45 to 9,000 stores. He has served on the Foster School’s Advisory Board and chaired the boards of the UW Foundation and the UW Medical School, as well as the Starbucks Foundation board.

Harrell is the chief of staff for the Original Equipment Manufacturing division at Microsoft, where she has worked for the past eight years. She previously served in senior management at InfoSpace and US West Communications, as well as president and CEO of United Way of King County.

On the UW board of regents, Smith and Harrell join fellow Foster alumna Kristianne Blake (BA 1975). n 8 fo s t e r BUSINESS

Orin Smith

Joanne Harrell

Bye Bye, Balmer

Financial Predictions: Reloaded

Legislature approves Phase II construction

Revisiting the Foster finance faculty’s predictions for the year ahead

Want to visit Balmer Hall one more time?

Better hurry.

In April, the Washington state legislature authorized the Foster School to replace the aging classroom building. Demolition begins in July, and construction on Phase II of the school’s new facilities project begins in October, just after Phase I—PACCAR Hall—opens for fall quarter classes.

As with PACCAR Hall, Foster is working again with LMN Architects on design and Sellen Construction as its general contractor for the $42.8 million project which is slated to be complete in May of 2012.

The new building will create 60,000 square feet of classroom space, in addition to PACCAR Hall’s 135,000 square feet of new classroom, office, and common space.

Most business courses will take place in PACCAR Hall during the Phase II construction, with the rest held elsewhere on campus.

Phase II will be financed by the UW, using its debt capacity, augmented by private support. “We’ve been going 90 miles an hour on Phase II,” says Pete Dukes, the Durwood L. Alkire Endowed Professor of Accounting and chair of the Foster School’s Building Committee. “The design phase is virtually complete, so the transition in construction products will be as seamless as possible. We’re ecstatic to still be working with LMN and Sellen. They know what we want and have been great to work with.” n

In the Spring 2009 issue of Foster Business, nine finance faculty opined on the future state of the economy. Mind you, a cadre of top professors steeped in research is not about to jump headlong into the cruel waters of prognostication, but we did manage to get predictions for three key metrics: • At the end of 2009, will the DOW be above or below 8,000?

• At the end of 2009, will unemployment be above or below 10 percent?

• Most everyone believes inflation will be below three percent in 2009, but how about for 2010?

Professors Dewenter, Gilbert, Hajimichalakis, Harford, Karpoff, Kolasinski, Rice, Siegel, and Young all weighed in on these predictions, under the watchful eye of Foster Dean Jim Jiambalvo.

They delivered a balanced, if understandably dire reading of the market, more than a year ago. The results? The panel came to a 5-4 decision that the DOW would be below 8,000 at the end of 2009. The close on December 31, 2009 saw the DOW at 10,428.05.

Another 5-4 vote predicted that unemployment would be below 10%. 2009 ended with the mark at 10%.

While it’s too early to weigh in definitively on where inflation will head in 2010, the panel predicted (5-4) that it would stay below 3%. As of this reporting, inflation is holding at 2.6%. As for where it will be at the end of the year…well, that’s anybody’s guess. n

Mark Your Calendar Saturday, July 17th at 12:30pm in Denny Yard, UW Campus, Seattle

2nd Annual PACCAR Hall Picnic for Foster School Alumni, Friends, and Families

Join us this summer for food and tons of fun at the foot of the UW’s new “headquarters” for business education.

Enjoy cotton candy, sno-cones, giveaways, and games for the young (and young-at-heart)—all with the opportunity to connect OR reconnect with other Foster School alumni.

More information and registration available at foster.washington.edu/picnic Register Today!

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10 fo s t e r BUSINESS

In the beginning, there is a giant, swirling, entrepreneurial vortex. If it sounds like the creation of the world, that’s because successful start-ups are formed amidst conditions that elicit Big Bang-like imagery. There’s the big idea, the thrill of creation, the randomness of the process, the cosmic energy of the participants, the arbitrary collision of “yeses” and “nos,” and the indefinable purity of luck.

T

he swirling mass is a mental picture sketched by Connie Bourassa-Shaw, director of Foster’s Center for Innovation and Entrepreneurship (CIE).

“The elements and the people required for start-up success are so varied, and the luck factor so unpredictable, that you have to be ready for a wild ride, keeping yourself poised for the moment when the right entrepreneurial forces take off,” observes Bourassa-Shaw. Having served as the executive director of the Northwest Entrepreneur Network, directed CIE for a decade, and recently been named to 100 Top Women in Seattle Tech, she’s spent most of her career immersed in entrepreneurship.

Bourassa-Shaw’s mission is to help students by connecting the dots that transform ideas into business plans and start-up ventures. One of the ways she does this is by using the center as a focal point for innovation, so that good ideas don’t get isolated across the breadth of UW and beyond. As a result, CIE brings business and scientific minds together in the classroom, draws on relationships with angel investors and venture capitalists, and provides the framework and incentives that can transform student ideas into thriving businesses.

While there isn’t an equation for successful start-ups, CIE represents the union of the right components. There are 35 entrepreneurship courses, 450+ students involved in CIE competitions, and more than 70 businesses that have launched as a direct result of the center’s academic and practical experience programs.

In the stories that follow, you’ll get a closer look at the forces at work inside the innovation engine. Along the way you’ll meet the Guru, the Upstart, the Capitalist, the Academic, and the Catalyst. As for Connie, she’s the Conduit, of course.

Learn more about CIE and its myriad offerings at: foster.washington.edu/cie.

The Conduit: Connie Bourassa-Shaw

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The Guru If you step into the start-up arena, you had better believe, you had better have the passion to get up after the first or second or third knockdown, and you had better have someone on your side who knows what you’re up against.

You had better have a start-up guru.

“There is a myth that entrepreneurs are mavericks or lone wolves,” says Connie Bourassa-Shaw, director of CIE, “but an early-stage entrepreneur who truly goes it alone is rare—and in my opinion, brainless.”

A start-up guru is someone who not only has the contacts you need, but is someone willing to tell it to you straight, while ruthlessly poking holes in your plans, because they want you to succeed.

“A good advisor can save the entrepreneur time, money, and heartache,” Bourassa-Shaw says. “He can pave the way by helping with technical problems, making the connections that lead to sales or investors, giving advice on the literally hundreds of decisions an entrepreneur has to make—or just listen.”

The Rolodex galaxy

One of the most respected and successful start-up gurus in the Northwest is Christopher Porter, says Bourassa-Shaw, an entrepreneur with 34 years of experience who now devotes most of his efforts to helping early-stage companies and mentoring. He has also coached students at the Foster School and Seattle University who want to test their mettle in business plan competitions.

Porter’s list of achievements include holding 38 US patents, playing a leading role in bringing more than 30 medical products into the market, and generating in excess of $2 billion in shareholder value. He has created medical device companies and started three divisions within major corporations. He also has a Rolodex that links out to a galaxy of experts and connections with money to invest in great ideas.

But, it’s the sum of these parts that makes Porter a guru to go to if you have a start-up idea. Porter, who has a PhD in chemical and material engineering, has boiled his experiences down to a model of the start-up process that captures the crucial proof points and pitfalls an entrepreneur must be ready to avoid or confront.

“If I’m going to invest in a business, what are things that I’m going to want to know?” Porter says. “They are going to be these things, and until you can give me good answers to these things, I’m probably not going to be an investor. You have to give me some satisfaction that these things are under control. If they are not, they are deal killers.”

Prove it

Porter’s model maps out what he calls Proof of Concept stages: • Run experiments to show your idea or technology works.

• Validate your idea for yourself and for potential investors by 12 fo s t e r BUSINESS

“Being in love with your own idea is necessary, but not sufficient.

You have to have other people in love with your idea, too.”

Christopher porter

talking to experts in the field and potential customers.

• Show that there is a big market, that you know how to get your product into it, and that you can beat the competition.

• In the medical fields, outline clinical regulatory issues and reimbursement strategies, such as whether the product will be covered by insurance.

• Get a patent and show you have the freedom to operate, whether because your product doesn’t rely on any other patented products, or you can license them if it does.

• Enlist competent management, from the CEO and team members, to directors and advisors.

“People invest in people as much as they invest in ideas,” he says. “There are a lot of good ideas out there that don’t get developed because the right people aren’t working on it. They aren’t going the fastest way possible, or they go down blind alleys, and then they run out of money and are dead.”

In many of these proof-of-concept stages, it’s Porter’s Rolodex—a main tool of the guru—as much as his technical experience that helps the new entrepreneur get from idea to a viable start-up.

“Being in love with your own idea is necessary, but not sufficient,” he says. “You have to have other people in love with your idea, too.”

The capitalist In the pop-culture perception of modern-day entrepreneurship, ideas are cool but capital is king. In reality, while venture capital funding is essential to many ambitious new ventures, it’s hardly the beginning or ending of the story.

“The deal is what makes the headlines,” says Chris Howard (MBA 2007), a senior associate at Ignition Partners, a Bellevue-based VC firm. “But to investors, it’s all about what happens before and beyond the deal—ultimately helping a company deliver a great product to customers.”

Good thing for Howard, whose foundation is in marketing.

After earning a bachelor’s degree in psychology he worked in advertising, marketing, e-tail, even started up his own design firm. But it wasn’t until he stepped back, nearly ten years into his career, that the narrative became clear: launching new businesses and developing innovative products and brands was his thing.

He entered the Foster MBA Program intent on spinning up businesses at a greater scale and scope than before. “I liked the idea of being able to invest in and shape multiple companies instead of just one at a time,” he says. “So I set my sights on venture capital.”

Howard started, appropriately, with networking. He got 30 minutes with Greg Gottesman, the managing partner of Seattle’s Madrona Venture Group, who hit him with some cold-hard truth: the barriers to entry in venture capital are formidable—especially coming straight out of b-school.

“He advised me to do anything and everything I could to get involved,” Howard says. “And I did exactly what he said.

I decided to make my own luck here and dove in.”

So began an all-points engagement with the Center for Innovation and Entrepreneurship. Howard jumped into Foster School ENTRE courses, networked, attended events, networked, recruited mentors, networked, entered the Business Plan Competition, networked, and, early in his first year, landed a spot on the team that would win the 2006 international Venture Capital Investment Competition.

It was there that he met Bill McAleer.

Real world in real time

McAleer is a pioneer in the Pacific Northwest venture industry, having co-founded Voyager Capital in 1997 to fill a void and fuel the boom that would place Seattle in the high-tech big leagues. He’s also chair of CIE’s advisory board, and an early and influential supporter of its student programs. “This market needed an organization like CIE to help students understand how to build and run a business,” McAleer says.

Likewise, CIE needed professional investors—along with successful entrepreneurs—to drill some reality into the exercise of student start-ups, competitions and simulations. When asked, they came in droves from the newly burgeoning venture

Ignition Partners senior associate Chris Howard, left, and Voyager Capital co-founder Bill McAleer—two generations of VC expertise helping Foster students.

“The deal is what makes the headlines. But to investors, it’s all about what happens before and beyond the deal.”

Chris howard

community—Madrona, Voyager, Ignition, Maveron, OVP, Alliance of Angels, to name a few—funding events, speaking in classes, judging competitions, mentoring students, even hiring interns.

“We’re exceptionally lucky to be in Seattle, where there is such a vibrant community of early and seed stage investors,” says CIE director Connie Bourassa-Shaw. “Angels and VCs understand the dynamics of college students trying to make their ideas a reality, and they have a strong desire to lend their experience and knowledge to the process.”

McAleer’s version of venture capital would make a useful textbook. Voyager has offices in Seattle, Portland, and Menlo Park, and manages just under $400 million in three funds, investing in early stage software, digital media, and wireless companies. He boils down the process into three simple Fs: finding (looking for new opportunities), funding (structuring the investment), and feeding (serving on boards, developing strategy and business).

The particular expertise that McAleer, and other Seattle investors, bring to CIE comes from considering hundreds of business plans a year—and investing in only a few. He can tell student ventures what flies and what dies in the market.

And, on occasion, he can also spot a promising entrepreneur or potential investment, or even a suitable candidate for his S prin g 2010 13

“We present the frameworks so students can take them out into the world and understand how things really work—see the forest for the trees.”

Lance Young

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own industry. “While some schools crank out students with a corporate mentality, the Foster School offers a broader array of opportunities to look at,” McAleer says. “Seattle is such an entrepreneurial place. We’ve always seen a high interest in the entrepreneurship side of things. What’s changed is that we’re seeing a lot more people saying this venture thing is intriguing.”

The door swings open

Chris Howard was as intriguing as he was intrigued. McAleer first met him while judging and mentoring the VCIC team, an annual bit of pro bono with the added benefit of exposure to CIE’s top students.

Having hired Foster grad Elizabeth Morgan (MBA 2001) to Voyager after witnessing her skill on the school’s first VCIC team, McAleer saw similar qualities in Howard, and offered

him an internship at Voyager: “Chris had a strong operating background and all of the qualities we like to see: great interpersonal style, intense curiosity, ability to multitask.”

Howard absorbed all he could from invaluable months shadowing McAleer, which led to a follow-on internship at Ignition via Adrian Smith, a partner at the firm he had also met through CIE. This led to a full-time position when Ignition raised a new fund in 2007. Today the devout networker blissfully works with early stage firms on recruiting, product development, marketing, and business development, with his sights set on driving successful outcomes for the companies and the fund.

“I love being a venture capitalist,” Howard says. “I work with incredibly passionate entrepreneurs who are building the next big thing. I run to work every day.”

© iStockphoto.com/FANDER09, ODV, blackred, joshblake. ®Veer/Fancy Photography

The academic When Sonali Shah worked for an investment bank in the late 1990s, she often traveled with company founders on IPO road shows, invariably filling the gaps between meetings with queries about where they got the ideas for their companies. “I noticed,” she says, “that the answer usually began with, ‘I had a need’ or ‘my clients had a need.’”

That simple question, asked repeatedly, launched a promising career in the study of entrepreneurship. From her doctoral work at MIT to her assistant professorship at the Foster School, Shah has developed some important insights into the process of innovation and the origins of new products, firms and industries.

We usually think of innovation in the domain of firms and universities. But it turns out that a significant amount of innovation comes from regular people addressing a need in their personal or professional lives. Shah finds that many of these people spin their innovations into small businesses. “User entrepreneurs,” she calls them, even drive some industries (think the legion of enterprising parents and “mompreneurs” that founded 85 percent of the businesses that sell new juvenile products).

What’s more, Shah says, user entrepreneurs frequently collaborate in communities marked by a free exchange of ideas and information. And we’re not just talking open source software emancipators. This phenomenon predates the Internet or even the assembly line. There’s the Homebrew Computer Club that gave rise to the PC. But Shah has found the spirit of open source central to the development of skateboards and windsurfing. The MRI. The affordable telescope.

The early automobile. Taken together, instances of open source produce massive innovation in the economy.

“Innovation communities occur in so many contexts,

Foster faculty Sonali Shah, Lance Young, and Suresh Kotha stoke the innovation engine.

historically and today,” Shah says. “By studying them, we’re beginning to map patterns of behavior and understand where and how these types of innovation systems work.”

Innovative research

Popular interest in entrepreneurship has certainly spiked since the dot-com boom of the late 1990s. In the same time frame, academic research in the area has become dramatically more revealing. “For a long time research in entrepreneurship followed a ‘Great Man’ philosophy, viewing entrepreneurs as special people with special personality traits,” Shah explains.

“But when you examine the data, what you see is that all kinds of people found companies—with a little greatness, perhaps, but also a lot of context, connections, luck, and timing.”

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Innovative curriculum

The growing body of research is gradually demystifying the process of entrepreneurship, and reinforcing CIE with intellectual rigor. But so much of the center’s mission is geared toward teaching students from Foster and around the UW how to launch new ventures. And here’s where theory meets reality—in popular courses such as John Castle’s Creating a

Company, Emer Dooley’s Entrepreneurial Decision Making and Shah’s Innovation Strategy.

Lance Young’s Entrepreneurial Finance has become nothing short of a phenomenon, where rich content hits the road. It has to be. His students are members of Venture Capital Investment Competition teams, MBAs interning at VC firms, doctoral students commercializing their inventions, a crab boat captain looking to expand, a 21 year old trying to do Hulu in Japan.

“Many of them need to know this right now,” Young says.

“They’re absolutely riveted.”

He gives them reason. He works the classroom like a hyper-animated talk show host, engaging, challenging every last student. And hour by hour, he translates the principles of finance into the ambiguous and exacting reality of venture funding. And his students undergo a transformation.

“In the beginning they don’t know how contracts work and they feel like entrepreneurs are getting badly ripped off by these guys,” Young says. “It takes some time to understand that, in new venture financing, it’s all about aligning incentives. By the end of the course they rise to the level of understanding why the form of these contracts and investments follows their function.

“You can’t see that in a basic finance class. But here we leave the vacuum of theory, loosen up some of our more restrictive assumptions. That’s the value of these kinds of practical entrepreneurship classes. We present the frameworks so students can take them out into the world and understand how things really work—see the forest for the trees.”

The catalyst With its handful of entrepreneurs-in-residence and 20-35 interns per quarter, the New Venture Group in the UW Center for Commercialization (UWC4C) is where ideas are made strong enough to weather the treacherous journey into the world of start-ups or sent back to the drawing board.

In many cases, the New Venture Group is the first place a new technology meets a Foster MBA or where a founding team with an MBA student already onboard meets an experienced entrepreneur who knows the ropes and has the connections to attract money and generate buzz.

“When we identify a promising technology,” says Jim Roberts, business development officer in the New Venture Group, “we bring in the entrepreneur-in-residence and the students to help find out what the marketing opportunities are and what some of the applications might be for the new technology.”

And, those students almost always have some connection

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Foster Evening MBA graduate Daniel Rossi, right, and UW mechanical engineering PhD candidate Dustin Miller are the co-founders of Nanocel.

© iStockphoto.com/SKrow, GeoffreyHolman, geopaul, hidesy

“The personal traits literature has not given us a lot of insight into who or what is an entrepreneur,” adds Suresh Kotha, CIE’s research director and the Douglas E. Olesen/Battelle Excellence Chair in Entrepreneurship. “Now people are looking beyond the entrepreneur at the environment and opportunity as well.”

In his own prolific scholarship, Kotha has studied innovation, corporate investment in new ventures, and the role of entrepreneurial passion versus preparedness in convincing investors. He facilitates a strong cohort of entrepreneurship researchers at the Foster School—among them Shah, Warren Boeker, Kevin Steensma, Xiao-Ping Chen—as well as a thriving doctoral program in technology entrepreneurship.

But one of his most visible contributions is in founding and co-directing the West Coast Research Symposium on Technology Entrepreneurship. This annual symposium, a partnership of the Kauffman Foundation and entrepreneurship centers at the UW, Stanford, Oregon, USC, and UC Irvine, connects young scholars with established researchers, and develops doctoral students doing work in entrepreneurship—contributing to a vanguard of innovative thinkers.

“Early on the question we asked was, ‘What don’t we know that could ruin us down the road?’”

Daniel Rossi

S prin g 2010 17

They obtained a business license and built a Web site. Then in May 2009, the pair drained their respective savings accounts and transferred $1,400 to a Turkish manufacturer they had never met.

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to Foster’s Center for Innovation and Entrepreneurship (CIE), Roberts says. He works closely with CIE to get interns and help build founding teams that can meet the start-up challenges.

“The technology is the foundation for the new product or service,” Roberts says. “However, you need the business side to put the business model around that, put the product package together, and get the financing to make it, market it, and sell it.”

The revamped and supercharged New Venture Group, formerly called Launch Pad, is one of several key changes undertaken at UWC4C, formerly the Office of Technology Transfer. Linden Rhoads, the vice provost for UWC4C, said she hopes the new name will convey that the center has a proactive, full-service group of commercialization experts committed to long-term relationships with UW researchers.

Cooling technology

One founding team duo with a promising new technology who met through CIE and continued to grow because of the New Venture Group, is Nanocel, the winner of the 2009 Business Plan Completion and recipient of a $50,000 grant from UWC4C. Nanocel is based on a process developed by Dustin Miller, a PhD student in mechanical engineering at UW, which uses liquid in a technologically advanced plastic to cool computers and other devices better and less expensively than metal or silicon or other current methods.

“Early on, the question we asked was, ‘What don’t we know that could ruin us down the road?’” says Nanocel co-founder Daniel Rossi, a 2009 Foster Evening MBA graduate. Rossi credits UWC4C staff, mentors, and interns with helping him and Miller develop a winning business plan and a shot at launching Nanocel into the marketplace.

“The beauty is we are not doing this alone,” Rossi says.

“We are doing this with the advice from people who have

been there and done it. That’s the Center for Commercialization. They want it to work as much as we do.”

Finding the market

Rossi’s involvement in Nanocel began two years ago when Miller, who knew Rossi from his supporting role in a different Business Plan Competition team and CIE courses, approached him with the thought of taking the new process out into the world.

“We were acquaintances. He knew what I did,” Rossi says.

“He was a technical guy who needed a business guy, who happened to be a seller.”

And that was Rossi, who worked days selling advertising and nights building his future dream career through Foster’s Evening MBA Program. However, before he would sign on to working on the project full time, Rossi wanted to make sure the idea would work and that there was a market for it.

“So, I made a lot of phone calls and saw that there really were a lot of people interested in solving the heating problem in computing,” he says. UWC4C had a lot of those contacts.

“That was really helpful because you don’t have to reinvent the wheel. You can move forward and keep going.”

That momentum is paramount to a fledgling start-up. The intense pressure on an early-stage technology is the need to get done what has to be done … before running out of money.

Rossi said the plan at Nanocel is to go after angel investment or venture capital by May or June. He added that no matter how his ride with Nanocel turns out, developing the business plan, competing with it, and working with the entrepreneurs-in-residence and others at UWC4C has been the best experience so far in his professional life.

“What I am doing now is exactly what I wanted to do when I enrolled at Foster,” he says. “I like the chaos of the early start-up times. I want to be a start-up guy.”

© iStockphoto.com/zentilia, solarseven, brysia, borisyankov. ©Monkey Business/Fotolia

The upstart The call from US Customs was a shock to Jake Director. He and his business partner, Riley Goodman, expected that the crew socks they ordered—1,000 pairs from a manufacturer in Istanbul—would simply be delivered to his home, just like an order from Amazon. Wrong. Navigating the US Customs process took them five hours. And that was one of the last hurdles on the path to launching Sea Town Lax. Director and Goodman conceived the idea of Sea Town Lax in April of 2009, just two months prior to graduating— from high school. The pair, best friends since the third grade, had always discussed going into business together. A lifethreatening accident involving one of their friends was the spark they needed to ignite their entrepreneurial passions.

“Why wait?” they thought. Life is too short.

They spent the evening of the accident in Goodman’s car brainstorming business ideas. The barrier to entry for the clothing and accessories market seemed penetrable, so they started at the top of their heads—literally—and worked their way down. Hats were the first business idea to consider.

Nothing stuck. Shirts? Belts? Shorts? Socks? Yes. Socks.

“We’re both lacrosse players and we knew crew socks were a popular way of expressing style on the field,” says Goodman. “And we knew we had a readily accessible target market.”

Armed with the product idea, they spent hours online in search of a manufacturer. They crafted “a very official sounding e-mail” query and sent it to companies around the globe. They designed a Seattle skyline graphic for the socks

S prin g 2010 19

Jake Director and Riley Goodman launched Sea Town Lax, their first business (for now), as high school seniors.

that would appeal to both local lacrosse players and the general public. They obtained a business license and built a Web site. Then in May 2009, the pair drained their respective savings accounts and transferred $1,400 to a Turkish manufacturer they had never met.

With the socks finally in their possession (after the Customs hurdle), Director and Goodman were ready to make sales. And sell they did: at lacrosse tournaments, to local retailers, and via the Web. The first 1,000 pairs were gone in three weeks. More were ordered. By the end of the summer, the duo had sold more than 2,500 pairs and grossed $11,000.

They even secured a partnership with Seattle’s new professional lacrosse team, the Washington Stealth.

Taking the LEAP

High school students learning to deal with cash flow, customs, and closing sales may sound surprising to some, but not to Pam Tufts, assistant director of Foster’s Center for Innovation and Entrepreneurship and coordinator of the Lavin Entrepreneurial Action Program (LEAP).

Named for Leonard Lavin, founder and chairman emeritus of the Alberto-Culver Company (think Alberto V05 hair conditioner), LEAP is an “honors program” in entrepreneurship open to UW freshmen. Admittance requirements aren’t focused on the students’ GPA or SAT scores, but rather on their level of entrepreneurial drive. In fact, the program application includes questions such as, “What company do you wish that you had started, and why?” and, “What product, service, or technology do you wish you had invented?”

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Like Director and Goodman, both freshman admits to LEAP in 2009, many of the students started their first companies in high school.

“Of the 18 students that we admitted to the Lavin program this year, a third of them had some entrepreneurial experience before coming to the UW,” says Tufts. “In fact, some of them are already thinking about their next start-up or innovation.”

Take Edward Jiang. While in high school, he started a Web site featuring online games.

“It wasn’t like I had a business model, but I thought, hey I’ll throw up this site for fun. People started coming to it and then advertisers followed,” says Jiang. “And I started making money. I felt like a pretty rich high school kid.”

Jiang’s Web site still exists, but he hasn’t updated it in months. Why? He’s moved on to another venture.

Late last year Jiang formed StudentRND, a non-profit organization with a mission to inspire teens to learn more about science and technology. The immediate goal is to open a space where high school students can gain access to tools and equipment that enable experimentation in areas such as robotics, electronics, and computer technology.

“Basically, think of it as a community center for people who love science and technology,” says Jiang. “Just like libraries are there for people who love books, and sports fields are there for people who love sports, our space will provide access for students who are interested in science and tech to get hands-on experience.”

Building on the foundation

While there are bound to be some young entrepreneurs that simply take their existing skill sets to the marketplace and never look back, LEAP exists for students like Jiang, Goodman, and Director who want to benefit from business education as well as networking within CIE’s established ties to the local entrepreneurial community.

For instance, at the CIE winter board meeting, board members and LEAP students began “mentor speed-dating,” with 10-minute intervals for striking up new conversations.

“I’d expected the students to be a little reticent, a little shy,” said Lisa Hjorten, founder of Informia, “but there was none of that. The Lavin students had business cards ready to hand out. And had come to the meeting knowing which of us they wanted to meet. I never could have done that as a freshman or sophomore!”

During that meeting, Director and Goodman focused their sights on Scott Lipsky, who co-founded Avenue A | Razorfish and is currently working on his latest start-up, PhotoRocket.

“Looking over his bio, at everything he’s done was amazing,” says Director. “And, not that we’re ready to talk about it yet, but Riley and I have a new business idea we want to discuss with him.”

Spoken like a true upstart. n

program profile

Foster Leadership Fellows Program

Pay it forward

Peer-to-peer leadership: Observe. Coach. Repeat.

Nothing beats honest feedback or colleagues who honestly listen. This ethos is at the heart of the Foster School’s Leadership Fellows Program, a peer coaching and leadership development program that has expanded to become one of the most extensive of its kind in the country.

The concept is simple: Select second-year MBA students receive a $1,000 stipend per quarter to advise first-year students. In the process, they strengthen their own leadership skills.

Fellows join the program with one goal: to help individuals and teams succeed. Emphasis is on creating a safe and trusting environment for collaboration. MBAs refine their leadership skills when stakes are relatively low, learn from their mistakes, and prepare for career success.

Craig Wiley (MBA 2009), a vendor manager at Amazon.com, feels that this was the biggest benefit of the program. “In the real world, feedback is so rarely given; it’s hard to talk about.

The Leadership Fellows Program demystifies the giving and receiving of feedback. By making it such a day-to-day thing, I’ve become confident sharing things that other people may not be.”

The Center for Leadership and Strategic Thinking (CLST), led

by Professor Bruce Avolio, is at the helm of the Foster School’s focus on developing those two key skills. Five years from now, Avolio wants the Fellows to be one of the school’s attractions for prospective MBAs. Twenty years from now? The Rhodes Scholars of the business school environment, national acclaim for leadership and strategic thinking development, integration with the entire curriculum, and Foster alumni sought by businesses for their ability to lead up, down, sideways, and within teams.

Teamwork is at the core of the Leadership Fellows Program, and Avolio believes students’ collaborative spirit is part of the Foster School DNA. “There’s a culture here of not getting in each other’s way in terms of achieving. In other places, people have a much more limited view of the ladder going up. Here, it’s a scaffold and lots of people can climb the scaffold to the top.”

His vision for Leadership Fellows comes from years of leadership research and work in the community, something he’s continuing at Foster, testing models that work in the research field and applying them to the curriculum. CLST staff collectively bring over 100 years of practical experience to building the program.

Leadership Fellows take a 500-level management class devoted to peer coaching. Judi Kalitzki, Fellows founding coordinator, teaches the course with her CLST colleagues, where students study leadership through cases and exercises, listen to C-level guest speakers, share challenges, support each other, and learn about their own leadership styles, all while being coached and coaching first-year MBA teams.

Beatrice Au (MBA 2009), a senior financial analyst at Amazon.com said of the program, “I learned to be an observer. Sometimes you shouldn’t solve problems. You can guide them, but you can’t dictate interpersonal dynamics. And dynamics change from group to group.”

Carl Steinke, Harvard physicist turned Peace Corps volunteer turned MBA student, specifically chose Foster for its emphasis on leadership development and teamwork. He hopes his technical background combined with a Foster MBA will move him into a finance career (he’s already landed a job with Intel upon graduation this year).

As a Fellow, Steinke learned the delicate balance of guiding a group without controlling it. “Through Leadership Fellows, you learn to read a group really quickly and develop high emotional intelligence to address issues. It’s not analytical. It’s about people, and that was a real growth opportunity for me.”

Foster advisory board member Ed Fritzky recently established an endowment fund to support Leadership Fellows in perpetuity. Peer coaching as part of Foster’s leadership development now has wings to grow and evolve. n Learn more about the Leadership Fellows Program

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faculty

Correlations by Genetic Similarity 0.80 Identical Twins Non-identical Twins – All Random Sample

0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00 Stock Market Participant

Share in Equities

Volatility

Nature v. Nurture Genetics play the leading role in financial behavior Irrational exuberance or irascible austerity.

Bull, bear, or barely even aware of alternatives to the trusty savings account. What are the primary forces that shape each person’s distinct financial behavior? Are investors born or made?

A new study by Stephan Siegel of the Foster School finds that simple genetic variations explain a major portion of an individual’s investing behavior, eclipsing the negligible impact of environment and overshadowing the role of age, gender, wealth, and education. In economic matters, nature trumps nurture almost completely.

“People assume that investing is mainly an information or cultural issue, where the parenting environment matters a lot,” says Siegel, an assistant professor of finance.

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“But on average, whatever parents teach their kids about investing has no impact.

Everything comes from the genes.”

Twin truths

For the study, Siegel and co-authors from Claremont McKenna College cross-referenced nearly 38,000 twins in the Swedish Twin Registry (the world’s largest) with comprehensive personal financial data— stocks, bonds, real estate, cash—collected by the Swedish government prior to the 2006 abolition of its wealth tax. This data set-of-dreams yielded a robust measure of genetic versus environmental impact on investing and personal finance.

To discern genetic from environmental drivers of financial behavior, the researchers

compared each twin pair’s stock market participation, asset allocation, and portfolio risk. In all three measures, the data indicates a significantly higher correlation between identical twins (who share 100 percent of genetic material) than nonidentical twins (who, on average, share 50 percent of genetic material). Correlation of a random sample of the population is close to zero.

This stark difference between the identical and non-identical twins relative to the general population is strong evidence that investing behavior is, at least in significant part, hereditary. To put it into perspective, while previously studied factors such as age, gender, education, wealth, and home ownership together explain only five to 10

percent of investor behavior, Siegel says that genetic variations account for one-third, on average, and as much as 45 percent.

Further evidence

Separating the twin population into age groups demonstrated that genetic influence does not disappear with age and the acquisition of personal experiences. A common familial environment did have a limited impact on the financial behavior of young twins, but that impact disappeared as individuals aged— unless they remained in close contact, creating a new common environment.

Finally, the researchers considered 716 twins from the Swedish registry who were raised apart, and found their average correlation in investing behavior to be virtually identical to those raised together, adding more evidence that genetic drivers of investor behavior are both influential and ever-present, from first job to last will and testament. “We find that a simple genetic factor explains much more than anything else that people have proposed to explain differences in investor behavior,” Siegel says. “Genes matter all the time, even in old age.”

He concedes that the findings can be difficult to accept—even by the study’s authors.

“Education, and financial education in particular, can be limited by the fact that people have strong genetic predispositions for one behavior versus another,” he says. “I would not go so far as to say that education and parenting are ineffective in molding investor behavior, because a substantial part of it is personal and idiosyncratic. It’s also possible that there are important genetic-environment interactions that we cannot capture.”

“But as far as we can see, nurture or parenting are not major components in determining an individual’s investing behavior. There is always going to be some part of you that is predetermined at the moment you are born.

And this also affects the way that you invest.”

Siegel collaborated on “Nature or Nurture: What Determines Investor Behavior?” with Amir Barnea and Henrik Cronqvist, both assistant professors of financial economics at Claremont McKenna. The paper is forthcoming in the Journal of Financial Economics. n

Smart Money Finance professor teaches kids personal finance through Koski Bank Jennifer Koski’s kids may be genetic heirs to their mother’s impeccable financial sensibility.

But she isn’t taking any chances.

Six years ago the Foster School professor of finance created a home-based savings bank for her son and daughter when they were ages 8 and 11, respectively. Koski Bank is a fundamental operation: weekly allowance is deposited directly into each child’s account (which resides on a tidy Excel spreadsheet). A portion is earmarked for charitable contributions. The kids can choose to save or spend, as their balance allows (Koski Bank is not a savings & loan).

Since Koski’s primary objective was to teach the time value of money, she set the bank’s initial interest rate at 20 percent, compounded weekly.

This exaggerated APR adds up quickly. And her kids took to the notion.

Took it a bit too far, really.

“They quickly figured out that it made more sense to put money in Koski Bank than to leave it under their mattresses,” she recalls. “So they raided their piggy banks and dresser drawers to boost their balances.

And they became absolute misers. It was more than a year before their pent-up desire to buy things finally outweighed their will to earn interest.”

Koski is a remarkable educator, the only two-time winner of the Foster School’s prestigious PACCAR Award for Excellence in Teaching. After years of teaching finance to undergraduates and MBAs, she knows the power of experiential learning. So as her kids have grown, Koski Bank has evolved and expanded. The interest rate has gradually migrated toward reality. Koski’s daughter, now in high school, carries a credit card and an additional modest allowance to cover all of her clothing—all tied to the bank’s exacting balance sheet.

“Learning to live on a limited budget is the second valuable lesson I want my kids to experience,” Koski says. “I’m hoping that, by the time they’re making bigger expenditures and are solely responsible for paying for things, the message will be clear.”

At the very least, Koski’s efforts have elevated personal finance to a household topic, with sometimes comic results. Like the time her daughter learned the family mortgage rate was just over five percent and suggested that she borrow money from the lender and invest it at Koski Bank. “Her own little arbitrage strategy,” Koski laughs. “I said, ‘Sorry. Koski Bank is for allowance and gifts only, and allows no margin accounts.’ ” n

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faculty RESEARCH BRIEFS Financial Profiling

Non.Conformity.com

The Emotional Leader

F-Score can detect accounting fraud

People seek to appear independent when communicating online

Is positivity or sincerity more effective?

How do investors, auditors, analysts, and regulators detect accounting manipulations? Not easily. But now Weili Ge, an assistant professor of accounting at the Foster School, has integrated the disparate warning signals of fraudulent accounting into the F-Score, a scaled probability that a firm is cooking the books.

Ge and three co-authors analyzed the aberrant accounting behavior of 676 firms alleged by the SEC to have misstated financial statements between 1982 and 2005, then transformed the data into a straightforward measure: Enter data on a firm’s accrual quality, financial performance, non-financial measures, off-balance sheet activities, and market-based incentives, and you get a numerical value that suggests whether there is cause for concern. The average compliant firm scores a 1. The higher the number, the higher the probability of accounting misstatements (Enron in 2000, for example, registered a 2.2).

Ge cautions that a high F-Score is not proof of wrong-doing; it’s merely cause for further investigation. But it could become an invaluable tool for investors and regulators: “The F-Score can be a first-pass screening device for detecting possible misstatements,” she says. n

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Social science tells us that, in face-to-face meetings, people tend to modify their true opinions in order to preserve group harmony. Many have presumed that the Internet, a more distantly social medium, fosters just the opposite—an airing of genuine opinions and attitudes, the antidote to groupthink.

Yes and no, according to research by Ann Schlosser, an associate professor of marketing and Evert McCabe Faculty Fellow at the Foster School. Schlosser finds that people do indeed respond more independently in computer-mediated discussions. But their responses are no more authentic and no less filtered than in face-to-face meetings.

“People are more likely to conform to face-to-face groups,” Schlosser says. “But on the Internet, they’re also managing their impressions to an opposite end: to appear more individual and unique—but unique in a desirable way.”

Another intriguing finding: Add a thumbnail picture of each participant in the online group and the conversation resembles a face-to-face group: responses migrate toward conformity. The slightest hint of visible social connection—even over the Internet—can foster a sense of “we.” n

People may be moved by the positive or negative emotions expressed by their leaders, but they also view those manifest emotions with a critical eye.

This is the initial finding in a series of new studies on the effect of the emotional leader by Marion Eberly, a doctoral student at the Foster School, and Christina Fong, an assistant professor of management and organization at Foster.

While existing research has explored the ways that followers passively “catch” a leader’s emotion via social contagion processes, Eberly and Fong find that people also actively consider the emotions their leaders express, and question their sincerity.

According to initial studies, when leaders emote negatively, followers are more suspicious of their sincerity. When leaders are positive, there is less suspicion of sincerity. And, not surprisingly, leaders considered to be sincere are also more effective at motivating followers to work toward a common goal.

“Followers play an important role in the effectiveness of leaders,” Fong says. n

Click on any Research Brief headline to read the full article.

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Influential Indicators

Notable Contributions

Timing and value of macroeconomic data trump precision

The International Association for Business and Society (IABS) awarded its 2009 Best Paper honor to Thomas Jones, the Boeing Company Endowed Professor in Business Management at the Foster School; former Foster PhD student Will Felps (now an assistant professor of organizational behavior at Erasmus University’s Rotterdam School of Management); and Greg Bigley, an associate professor of management and the Longbrake Endowed Professor in Innovation at Foster. The award recognizes their landmark creation of an ethical continuum of corporate stakeholder culture that ranges from selfish to selfless.

The Institute of Industrial Engineers honored Ted Klastorin, the Burlington Northern/Burlington Resources Professor of Operations Management at the Foster School, with its 2009 IIE Transactions best paper award in the operations area. The award recognizes the impact of his project management paper, written with former Foster doctoral student Gary Mitchell (now an assistant professor at the University of Portland). The paper introduces a new method of allocating resources and prioritizing tasks in order to complete a project more quickly and at the lowest total cost—an outcome vital to the financial health of a firm.

CIO Insight named a new title by Richard Nolan, the Philip M. Condit Endowed Chair in Business Administration at the Foster School, among its best books on IT management for 2009. “The Adventures of an IT Leader,” written with Rob Austin and Shannon O’Donnell and published by Harvard Business Press, is the product of a novel experiment in serial case studies. The suite of chapter-cases invites the reader to walk a year in the shoes of Jim Barton, the newly promoted chief information officer at a financial services firm, as he learns, under considerable duress, to be an effective leader in the most volatile job in business.

Xiao-Ping Chen, a professor of management and organization at the Foster School, has been appointed incoming editor-in-chief of the journal Organizational Behavior and Human Decision Processes, considered by the Financial Times as one of the top 40 business research journals in the world. Chen, an Evert McCabe Faculty Fellow, is a prolific researcher and author of four books. She currently serves as president of the International Association for Chinese Management Research and chair of the Foster School’s Department of Management and Organization. Currently 12 Foster faculty members serve as editors of scholarly journals. n

With breathless anticipation, the markets and media await the release of each new economic indicator. Unemployment.

Consumer confidence. Housing starts. Retail sales. Durable goods. But which of the 30 or so major monthly macroeconomic indices have the greatest impact on asset prices?

And why?

New research by Thomas Gilbert, an assistant professor of finance at the Foster School, finds that investors value timing (how early data is released) over precision (how much the data will be adjusted). Almost as important as timing is the intrinsic value of macroeconomic data, which Gilbert measures as its ability to accurately forecast the Fed’s quarterly interest rate decisions as well as the nation’s GDP growth and inflation in real time.

So what is the most influential indicator? Not the monthly unemployment report, as many have asserted. Instead, Gilbert finds it’s the lesser known NAPM/ ISM Index, a measure of new purchasing orders, that moves markets the most.

The reason? It contains macroeconomic information of similar value to the unemployment report, but it is released a few days earlier. n

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faculty

Scandal Scholar Karpoff’s most significant scandals of the decade—and why Jonathan Karpoff is no stranger to scandal. Not that he’s done anything wrong. It’s just that the Foster School’s Washington Mutual Endowed Professor in Finance is one of the nation’s foremost experts on corporate crime and punishment, recently publishing landmark findings on the serious and unexpected cost to firms and executives for cooking the books. Foster Business asked him to weigh in on scandals of the past decade.

What are the most significant cases of financial fraud?

Á la David Letterman, in increasing order of importance: 5. HealthSouth (2003) – The prototypical financial scandal in which CEO Richard Scrushy directed underlings to literally make up numbers (and fictitious transactions) to the tune of $1.4 billion from 1996 through 2003.

4. Tyco International (2002) – CEO Dennis Kozlowski symbolizes the excesses of executive compensation at shareholders’ expense, typified by a $2 million birthday he threw for his wife on the company dime.

3. Bernie Madoff (2008) – The largest Ponzi scheme in history is notable for the sheer size of fraud—$65 billion from clients’ accounts—and its discovery at the tip of the 2008 financial crisis, fueling public perception that something was terribly and fundamentally wrong with the world’s financial system.

2. WorldCom (2002) – Resuscitated a languishing piece of legislation known as the Sarbanes-Oxley Act which introduced the most sweeping set of new business regulations since the 1930s.

1. Enron (2001) – The granddaddy of them all. The “It” company of the new millennium oozed wealth, smarts, and power—until it collapsed in six weeks following an earnings restatement. Thousands of employees and investors saw their retirement savings vanish with the company.

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Why is Enron the biggest?

Enron’s fraud included both complex financial maneuvering and simple fabrication of numbers. But the reason it tops the list is because of its impact on our view of the American economic system.

The scandal shook many people’s trust in the economy and fed a popular cynicism toward business that permeates many aspects of our politics and culture.

What did we learn from Enron?

The most amazing aspect of the scandal is not how the system broke down, but rather, how it worked! Enron had many legitimate businesses. But once investors, customers, and suppliers found out about the fraud, they rapidly changed their willingness to do business with the firm. Even its legitimate activities suffered. This—and not the financial misconduct in and of itself—is the main reason Enron’s value dropped so much and so quickly and the firm declared bankruptcy.

Is corporate behavior evolving or devolving ethically?

We can only observe the perpetrators of bad business behavior when they get caught. But despite fluctuations over time, we do know—and here’s the surprising thing—that the rate at which opportunistic cheating occurs almost certainly has declined over time, and declined substantially! We have international evidence that fair dealing and honesty increases as a community becomes wealthier, as has the United States.

Is regulation or reputation the most effective deterrent to fraudulent behavior?

When we measure the costs imposed on firms and individuals for various types of bad behavior, we find that, in general, reputation losses—the lost value from losing customers, suppliers, and investors— are several times greater than all their regulatory and legal penalties, including class action settlements. This is an important takeaway for managers: the big hammer for bad behavior typically is not the fine from such regulators as the SEC. Instead, it is the higher costs and lower sales your firm will have as others find out that you are willing to act opportunistically and you lose their trust. n View the full article.

alumni

The Rebirth of Cool Marcus Charles resurrects one of Seattle’s cultural icons

To some, the old Crocodile Café was as essential a Seattle icon as Pike Place Market, the Space Needle, Safeco Field, or the Ballard Locks. The venerable rock club gave rise to “grunge” and helped put Seattle on the map, then became the local music scene’s living room for nearly two decades.

And then, in late 2007, the Croc closed—abruptly and without ceremony.

There were no takers to resurrect the cultural landmark. Until the former owner approached one last candidate.

Marcus Charles (EMBA 2008) had been in the entertainment business since high school, when he’d organize massive parties for classmates. While earning a degree in communications at the UW, he created and test-piloted a management internship at Anthony’s Homeport, learning the ins and outs of the restaurant trade. When he was 23, he opened Marcus’ Martini Heaven, a Pioneer Square club that cashed in on the retro swing craze of the mid-1990s. He opened the bad juju lounge, then Jack’s Roadhouse, then Neumos, then Spitfire. With

a partner in 2000 he took on the nascent Capitol Hill Block Party, turning a little do-ityourself event into a full-on music festival, drawing 20,000 music fans to hear 50 bands last summer.

But the life of an impresario is not without its downside. ”Ten years is a long time in the rock and roll business,” Charles says. “I was (and still am) married, collaborating with longtime partners, and no stints in rehab—monumental achievements in our world. But I was ready to change directions.”

He sold all of his properties except the Block Party, and enrolled in the Foster School’s Executive MBA Program. Despite being one of the least corporate types in the room, he flourished, and graduated adept at checking his intuition through a formal, strategic framework.

But the nightclub business called him back. A terrible job market in 2008 made a small property for sale in Belltown look pretty attractive. Charles recalls: “I told myself, ‘You can do one little bar and the Block Party and still get a job.’”

He opened a bar called Juju. But before his job search could continue, came the irresistible offer to buy another languishing property just up the street. Charles negotiated down the Croc’s selling price, assembled ten investors to finance the renovation, then spent months overhauling systems, reconfiguring the space, hiring the right “taste makers” to bring back the crowds. He cleaned up the place, but not too much. “It had to be a rock club,” he says.

Now, past the one-year anniversary of its rebirth, the Croc is solvent and as popular as ever. “We’ve re-energized the brand, as they like to say in business school,” says Charles.

“We’ve lost so many Seattle institutions in the past few years and acted too late to salvage them (think the Sonics). A lot of people didn’t want the Crocodile to go away. And sure, I felt the pull of nostalgia, too, a sense that this was a place worth preserving. But I also knew that this history was the thing that would make the new business viable.” n

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alumni

Warrior Financier Trevor Cobb brings battlefield leadership to wealth managment It’s 2 a.m. on October 3, 2003, and Army Ranger Trevor Cobb (MBA 2009) is leading a convoy down Iraq’s Highway 1, also known as the Highway of Death, when he notices a movement at the top of a hill.

At the moment the firefight breaks out, several key elements have come into play and top among them are Cobb’s leadership training at the US Military Academy at West Point, the way he loads tracer bullets into his rifle’s magazine, and his father’s advice about following gut feelings.

It is a war story that Cobb tells with the kind of frankness and clarity he has when talking about his current role advising high net worth individuals as an associate at J.P. Morgan and the important role that the Full-time MBA Program at the Foster School played in bridging those two epochs in his professional life.

“What’s great about the MBA Program is you get the management leadership side, you get this sort of educational wrap to the experiences you’ve already had,” Cobb said. “Marrying experience to education, that’s what it’s all about.”

And, it was during his last few months at Foster that one of the other key elements of the MBA Program shined through: networking. Cobb credits the culture of mentorship at Foster and the generosity of the business leaders themselves with building the “triangulation of referrals” that helped him land his position at J.P. Morgan, where he helps clients think strategically about their entire wealth portfolio.

Strategic thinking and leadership … under fire

One of the small details of Cobb’s strategic thinking in Iraq was the decision that every other bullet in his rifle’s magazine be an illuminating tracer round. So when the situation called for Cobb (as leader of 2nd Platoon within the 1st Brigade Combat Team) to shoot, everyone would know to direct their fire to the same place.

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On that night in October, Cobb’s platoon was called to a location that required traveling on Highway 1. After a short distance, Cobb says, “I tell everybody, ‘Listen. I don’t have a good feeling right now. So, put your night vision goggles on. I want everybody to adjust.’”

If something feels wrong, something is wrong, his father, a Vietnam War veteran, had told him before he left for Iraq. That turned out to be a prescient bit of wisdom.

Shortly after putting on his night vision goggles, Cobb saw the movement on the hill followed by a rocket propelled grenade slamming into the ground in front of them.

Because he had followed his father’s advice on gut feelings, he had spotted the attackers and knew where to fire his rounds of tracers.

The platoon’s machine-gunner, responding to Cobb’s actions, un-strapped himself from the back of the Humvee, crawled across the top of the vehicle with his large caliber machine gun and began firing in the same direction as Cobb, effectively pinning down the assailants. Then, a broken radio got fixed in time for Cobb to

call in an attack helicopter, ending the fight.

The attackers hit a couple of the vehicles with small arms fire, but not a single one of his men was hit during the attack. Because of his actions during that nighttime battle (in which, he said, the real hero was the machine-gunner), Cobb was awarded the Bronze Star.

The military drove home for Cobb the lesson to never forget about the people affected by decisions. “It is important in business to remember that business is not about dollars,” he says. “It is about decisions, and those decisions affect people.”

For Cobb, the most rewarding moment of his leadership in war came in early 2004 “when we were coming home and every single one of my soldiers got off the plane.

As a leader in the military, you can’t have a better success than that.”

As a leader in finance, Cobb has plenty of opportunity to follow gut instincts informed by the experience of leading teams under fire and the knowledge gleaned from a education at West Point and the Foster MBA Program. n

Fair Business

EVENTS CALENDAR

Carl Hogan is ensuring Puyallup Fair’s bright future

Some of the rides at The Puyallup Fair might be broadly described as movers and shakers, and so could one Foster School alumnus on the fair’s board of directors. Carl Hogan (BA 1959) has been a board member since 1987. He is an engaging conversationalist who enjoys telling a story and sharing his passion for the fair—one of the top ten attended fairs in the world—and working for its even brighter future.

And that’s where the moving and shaking comes in.

Where other highly successful businessmen with dozens of years of service in many organizations and boards might be tempted to retire from a time-consuming duty for a large and complex organization, Hogan is spearheading a campaign to make The Puyallup Fair even more popular and successful.

“It’s kind of a passion. I enjoy it,” Hogan says with characteristic understatement.

Not only has he headed five committees over the years, but he has been board treasurer twice, secretary twice, vice president twice, and president in 1996 and 2005. Now, Hogan and the fair’s leadership are evaluating its brand and how best to carry the legacy into the future. To help them in the project, Hogan invited Foster’s Gordon Neumiller, director of the Field Study Program, to discuss the project with interested Foster MBA students.

“We are fortunate to have a solid foundation of 100 years of rich history and tradition to build upon and enrich for future generations to enjoy,” says Tracey Wittenfeld, marketing manager for the fair.

That’s a tradition Hogan is especially qualified to speak to.

“I think Carl’s unrelenting passion for The Puyallup Fair began when he was a small boy, watching his father serve on the fair’s board—and of course, attending,” says Kent Hojem, the fair’s CEO. “Carl treats the fair community like close personal relations— from fellow board members and staff, to vendors, concessionaires, and guests.”

The Hogans are no stranger to Puyallup.

Carl’s father opened the family’s first grocery store, Hogan’s Food Center, in downtown Puyallup in 1942. About that same time, Carl says, his father was elected to serve on the fair board, which he did until a few years before Carl was elected to the board. Carl and his twin brother, Charles (BA 1959), grew up working in their father’s store.

“When we were in high school,” Carl said, “that’s what we did on Saturdays, stock shelves, box groceries, clean the floors.”

The brothers eventually took over the family business, expanding the number of stores in the Puget Sound region to 14.

Then in 1996, seeing opportunities for their real estate in other arenas, the brothers sold the grocery stores to QFC and started developing shopping centers, a business they still operate. In Carl Hogan’s business career, change has been rapid and wholesale. And, he says, it’s how one manages the need for change that makes the difference.

“People have to learn to adapt to change,” he says. “A lot of people don’t like change. They fight it. But you can’t take the need to change as a sign of failure, you have to adapt and see it as a sign of success.”

And this is a lesson Carl will keep top of mind as he and the board examine ways to make the grand old Puyallup Fair even grander. There will be those who are hesitant in the face of proposed changes, and then there will be Carl, adeptly leading the way. n

May 14 Financial Reporting Conference 20 Defining Leadership: Carol Bartz, CEO of Yahoo 25 13th Annual Sales Program Business Partners Appreciation Breakfast 27 Business Plan Competition Final Round and Dinner & Awards Ceremony June 6 Foster BA Graduation Keynote: Ken Denman (MBA 1986) CEO, Openwave Systems 7 Foster EMBA & TMMBA Graduation Keynote: Dawn Lepore CEO, Drugstore.com 12 UW Commencement Ceremony Foster Full-time MBA, Evening MBA & PhD Graduation 13 Foster MPAcc Graduation Keynote: Robert Carlile Partner, KPMG July 17 PACCAR Hall Picnic October 8 – 10 MBA Reunion Weekend for classes of ‘85, ‘90, ‘95, ‘00 and ‘05 9 EMBA Alumni Residence featuring Karma and other favorite EMBA faculty Visit foster.washington.edu/events for details and more events.

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alumni

Beyond the Bad Apple Will Felps forges ahead after doctoral work tops the pops One day in February of 2007, not long before completing his PhD studies at the Foster School, Will Felps (PhD 2007) got the profoundly surreal news that a synopsis of his doctoral dissertation had unseated the untimely death of Anna Nicole Smith as the most e-mailed story on Yahoo! News.

Felps’ study-heard-round-the-world identified three types of workplace “bad apples”—the jerk, the slacker, and the depressive pessimist—whose mere presence can derail the performance of a group. The idea came from his wife, who observed that her usually dysfunctional office environment transformed into a pleasant and productive place whenever a certain caustic co-worker was absent due to a chronic illness.

This didn’t square with what Felps had been reading in grad school. The individual was supposed to bend to group culture, not the other way around. So he challenged that theory, hiring an actor to inject bad apple behaviors into otherwise healthy task teams. The result: not only did group productivity suffer, but the bad apple behaviors became contagious.

The bad apple phenomenon touched a universal nerve. The study was published in the journal Research In Organizational Behavior. But it was an innocent press release from Foster that made Felps a celebrity. Suddenly his first academic work was everywhere: AP, CNN, BBC, NPR, USA Today, ESPN, even Cosmo.

“The attention was a little embarrassing,” admits Felps. “But it was also deeply gratifying to see this paper shared so broadly outside of the parochial walls of academia. I chose to study organizational behavior because I wanted to make a positive impact on society.”

He had arrived at the Foster School fresh from undergraduate studies at the University of Texas and brimming with idealism, ambition, and intellect. What he needed was context. “As a doctoral student, you’re hugely ignorant,” Felps says. “You need a 30 fo s t e r BUSINESS

great mentor who can tell you whether a contribution is novel and important.”

At Foster, he found two: Terry Mitchell and Tom Jones. “Two intellectual fathers of mine,” Felps says, “but completely different in their approach to research.”

Jones is a specialist whose oeuvre is an elegant intellectual framework to explain the relationship between acting ethically and making a profit. Mitchell is a generalist, with volumes of work on a wide range of subjects, from leadership to motivation, decision making to job turnover.

The positive presence of both shaped a promising young intellect, helped him land a dream faculty job at the Rotterdam School of Business in the Netherlands, and even sparked his next big topic of research: whether it’s better to be a specialist or a generalist.

For the next few years, funded by an EUR Fellowship, Felps will map the professional behaviors of individuals to identify their place on the continuum between specialist and generalist, and then compare career outcomes. Once established, he says the same process could study executives, physicians, attorneys, virtually any profession.

As with the bad apple study, Felps will attempt to apply academic rigor to personal experience. “My next area of research is really inspired by Terry and Tom and their impact on me as I searched for the kind of scholar and teacher I want to be,” Felps says. “I’ve been incredibly fortunate to have such great mentors. The Foster School was an amazing place to grow up as a person and as a thinker.”” n

Trump, Tiaras, and Tracy Foster graduate James Sun (BA 1999) enjoyed 15 minutes of fame as runner-up in Season 6 of The Apprentice. Now another recent Foster School graduate is finding a novel way to potentially advance her real estate career by gaining an audience with “the Donald.” Tracy Turnure (BA 2008) is applying her marketing degree and sales certificate to a product she knows quite well—herself.

Named Miss Washington 2010, Turnure will meet Mr. Trump in May, competing with 50 other hopefuls for the Miss USA crown. Will her Foster education provide an edge? “Absolutely,” says Tracy.

“Pete Dukes has been a mentor to me, and the communication skills and business etiquette I picked up in Jack Rhodes’ classes are huge assets. There’s also a lot of market analysis and strategy in competing. Many candidates will base their strategy on the reigning Miss USA. I’m looking ahead rather than basing my decisions on last year’s trends.”

Although last October’s state pageant was Tracy’s first, she knows some people view these endeavors as superficial. But Tracy sees it as an opportunity to travel, meet people, and promote her charitable passions, including education and helping children with disabilities.

If she wins Miss USA, then it’s on to Miss Universe—and launching a real estate company from New York’s Trump Tower. n

All A-Board Director for Berkshire Hathaway Inc., Charlotte Guyman (MBA 1987) talks about shareholders as partners, how sailing can lead to selling minicomputers, and why silence is golden.

First things first, how does one get to be a director for Berkshire Hathaway?

Is it rude to ask what you’re compensated as a director for Berkshire?

Well, Warren Buffet calls you up and says, “I want you to be on my board.”

Not at all. I think it’s $6,000-$7,000 per year. Most corporate directors get paid a lot more than that—in fact, when I was talking to some Foster MBA students recently, Dean Jiambalvo was shocked to hear BH board compensation was negligible. Warren’s philosophy is that having a board of highly paid directors is a conflict of interest for board governance. I tend to agree.

What is Warren like?

He’s like your favorite teacher. It’s in his personality, and you can see it in the time he spends with business students, in how he gives interviews. As everyone knows, he is truly an expert business leader and has a deep grasp of economic issues. He is also brilliant, ethical, and fun and I feel very fortunate to be on his board.

As of this interview, Berkshire stock (BRK.A) is at $124,878/share. What kind of pressure do shareholders exert to maintain the stock’s high returns?

Well, you often hear stories about how investors are so dialed in to short-term gains that long-term thinking is all but history. The thing is, corporations have to be complicit in that—Berkshire isn’t like many corporations. Warren, in his “Owner’s Manual” states: “Our long-term economic goal (subject to some qualifications mentioned later) is to maximize Berkshire’s average annual rate of gain in intrinsic business value on a per-share basis. We do not measure the economic significance or performance of Berkshire by its size; we measure by pershare progress.”

So as you can see, he isn’t focused on stock price. If what you want to do is turn a stock for profit, Berkshire Hathaway isn’t for you. He and Charlie (Munger, Vice Chairman of Berkshire) definitely see it as an investing partnership and that’s the tone they set.

You also chair the UW Medicine board and are a trustee for Save the Children.

How do you manage it?

My phone—it tells me where I need to be.

Seriously, I am extremely passionate about all three of these boards, so I have a lot of energy to give them. I’ve also learned to find focus and clarity through prioritization.

If you’re careful what you commit to, you can stay focused on what’s important.

What is important to you, personally?

Family is huge for me, and friends, but also solitude. I aim for one silent retreat per year—basically two days spent in silence.

In the company of others or by myself, silent meditation helps me step back and see how I’m framing the world. I’m also in love with nature, from sailing to biking, hiking to climbing, marathons, skiing (water or snow), you name it.

You are sought out by boards for your business acumen, but you started out in science, right? What got you into business?

Right. I graduated from UW with a BS in zoology and a love of science. I wanted to get deeper into marine biology and become a trainer for aquatic animals, so I moved

to San Diego with an eye to working at Sea World, which I did. It sounds lazy…but, I grew tired of research, and one day I took out these executives from DEC (Digital Equipment Corp.) on a sailboat (my other job) and they got me excited about minicomputers. I went back to Seattle, took FORTRAN at a community college, worked as an elevator operator at the Space Needle while doing information interviewing, and after four months landed a job at HewlettPackard. Then, in 1985, I left HP on an educational leave of absence to earn my MBA and I joined a small company in Redmond out of business school. I had a great career for 12 years at Microsoft.

Would you share a key business lesson you’ve learned along the way?

It’s not unique to me, by any means, but I would say I’ve learned that intellectual curiosity and passion for doing a good job are among the most important assets you can bring to any enterprise. When I set out to get my MBA, it wasn’t because I had a clear career application for it, but I recognized that I was engaged in areas of business about which I wanted to learn more. To make a difference…there’s a quote I like about the need for more people to be truly alive. I think being alive is the point where your gifts and passions meet a need. n

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opinion

Calling all Leaders

by Don Nielsen (BA 1960) Would this be acceptable if you were recruiting a new CEO to run your company? I think not—and it shouldn’t be acceptable for recruiting people to run our government.

This country needs leaders who understand our economic system. The Foster School has recently initiated a major effort in leadership development. Foster students, already considered A-list hires, are being asked to take academic rigor and real world relevance even further. While most of our graduates will go into business, I hope some will think about public service, if not at the outset, then later in their careers. And while many of our alumni are doing great things in the world of business, I hope they too will consider lending their expertise to righting the “ship of state.”

We need leaders who run for office as a public service and who run for office to preserve this wonderful republic that we all love. Leaders, not politicians, will make sure that happens.

Please consider running for public office and serving a few years in a public service position as a part of your career plans. Give voters the chance to choose the best officials who can help make the tough decisions needed to solve this nation’s problems. n

Don Nielsen is a member of the Foster School Advisory Board, and chairman and CEO of Light Doctor, LLC.

We love to hear from our alums! To that end, we occasionally feature a Foster Opinion—a forum for exploring issues and ideas relevant to the world of business. This material is not intended to represent the views of the Michael G. Foster School of Business. We welcome your comments and feedback on our blog at depts.washington.edu/foster/category/alumni.

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© iStockphoto.slowgogo

Normally, I am a very optimistic person, but I am concerned with what I see taking place or, perhaps not taking place, in all facets of our government. Federal government programs are not working as predicted, and many of them have failed. Looking at the list of bankrupt programs—Social Security, Medicare/Medicaid, the Post Office, Amtrak—is depressing.

Most of our states are in serious debt—California could declare bankruptcy in the not too distant future—and finances at the city level are no better. Debt is piling up in all sectors.

One striking statistic, which I think contributes to these failures, is the fact that many of our top-level national and local government officials have never worked in the private sector. Today, we have developed an entirely different occupation—career elected official—that is the norm for those in most of our elected offices.

However, our founders never anticipated that serving in an elected position would be a career choice. It was intended to be a public service. It was something you did to make your contribution to the society in which you lived.

How many times have you heard someone compare the voting process to deciding between the lesser of two evils?

Defining Leadership 1st in a Series

Mark Your Calendar May 20, 2010, Kane Hall Join us for a new speaker series that features peer-to-peer discussion between top corporate leaders. From early lessons to business philosophies, timely topics will be explored with help from a panel comprised of business executives and Foster School professors.

Carol Bartz, CEO of Yahoo!, is the featured guest for May 20th, with former Microsoft COO Bob Herbold as moderator.

Fritzky Leadership Chair Dorrit Bern (BA 1972) and Dr. Charles Hill, strategy professor, will join the discussion.

More information and registration available at foster.washington.edu/definingleadership Register Today!

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