A panel held at Google on the future of work, Nov 5, 2009
Panelists were Fabio Rosati, CEO Elance; Michelle
Fowler, Principal, Flexperience and Maynard Webb,
CEO LiveOps; Elizabeth Corcoran moderator
Georgetown Tech Alliance - The New Way To Work from Georgetown Tech Alliance on Vimeo.
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By Elizabeth Corcoran 10.28.09, 12:01 AM EDT
MOUNTAIN VIEW, CALIF.--
In 2005, Bronx middle school IS 339 was a wreck. A slim 9% of the students could do math at their grade level. Classes were regularly locked down to dampen conflicts. Ambulances and police cars frequently vied for parking spots with school buses.
Four years later, IS 339 is a very different school from the one principal Jason Levy inherited several years earlier: 62% of the students are at grade level in math now. Teachers share lesson plans with one another and are inspiring students to take on complex challenges, including interviewing city planners about what it would take to create something like Times Square in the Bronx.
What did Levy do?
Turning around IS 339 took tremendous--and in some instances, radical--efforts that included changing more than half the teaching staff. From Levy's vantage, however, he couldn't have done it without an infusion of technology--including giving laptops to every student and training teachers to use
Levy shared his story at a day-and-half conference, ''Breakthrough Learning in a Digital Age,'' hosted at Google's headquarters and sponsored by a trio of organizations long involved in education: the MacArthur Foundation, Joan Gantz Cooney Center at Sesame Workshop and the San Francisco-based Common Sense Media organization. Questions were also moderated online. ''We have the leaders of industry, education and philanthropy in the room. This is our moment,'' declared James Steyer, founder of Common Sense Media.
The undercurrent of the meeting: The Internet has changed most of the business world and lives--but for the most part, it hasn't touched public education. That means the chasm between what students experience in and outside the classroom is widening--so much so that 1.2 million teenagers quit school every year, a rate that translates to one kid dropping out every 26 seconds.
Apart from agreeing that education is fraught with problems, educators have long argued about where to start: Improve teacher pay? Get rid of tenure? Get rid of school boards? Add more standards or set schools and teachers free to experiment with novel teaching techniques? Add computers? Get the parents more involved?
Even as policymakers, educators and philanthropists debated the different approaches, a handful of speakers shared inspiring stories about individual projects that are working, much like Levy's school in the Bronx. A number are bubbling up in New York City: Geoff Canada, who runs the Harlem Children's Zone, described how his project offers educational, social and medical services to thousands of children--and has turned out nationally ranked teams of chess champions. There are plans to try to build similar projects elsewhere around the U.S. Last summer, New York also sponsored a unique experiment called School of One (see "Tools For Learning") that used computers to create personalized learning programs for individual students. Test scores jumped; New York hopes to expand that program too.
In Chicago, Nichole Pinkart, who founded the Digital Youth Network, described how her team has created a space where urban kids can experiment with digital media tools as well as become experts in constructing multimedia projects that tie into school curriculum.
And in Maine, Susan Gendron, commissioner of the Maine Department of Education, discussed how all middle school students in her state are given laptops. The students ''are networking and doing research all over the world,'' Gendron said. ''The ways they're presenting what they learn is much like how people present information in companies every day.''
There were also hints of projects to come: Slated for released in 2010 is Waiting For Superman, a movie that lays out the heartbreaking frustration of bright, economically disadvantaged kids struggling to get a good education. The film is produced by Internet executive Jeff Skoll's movie production company, which also sponsored An Inconvenient Truth. Former chief of Lotus Development Corp., Mitch Kapor, who now runs the Level Playing Field Institute in San Francisco, suggested that he's seen prototypes of a new class of low-cost, handheld devices like netbook computers that will debut in 2010.
Yet as educators and teachers shared their stories, one thread ran through many of the comments: In spite of the spread of Internet technology, few teachers, administrators or even parents have found easy ways to share the technologies and best teaching practices that have worked in classrooms. ''I'm a little unhappy because we're not addressing the issue of how you scale what kids need,'' said Mike S. Smith, a senior counsel at the U.S. Department of Education.
Twenty years ago, when the National Writing Project began offering teachers workshops on how to teach writing, ''we'd see innovations in teaching practices that would spread,'' noted Elyse Eidman-Aadahl, who directs national programs and site development for the NWP. ''I'd say in the last 10 years, it has been harder to do that.''
Exactly how to get the best ideas to spread hasn't been worked out yet. But the need has never been stronger. ''In every other sector, technology has been an essential part of how to do more with less,'' noted James H. Shelton III, an assistant deputy secretary in the U.S. Department of Education. ''Pressure, relentlessly applied, causes change.''
Elizabeth Corcoran was an editor and writer for Forbes for 10 years. She left recently to create a start-up devoted to sharing best practices for technology in education.
http://www.forbes.com/2009/10/27/google-computers-internet-technology-personal-education.html
For the past 14 years, Andrew F. Mathieson has run Fairview Capital Management in Greenbrae, Calif., a $400 million investment fund. It's been a nice investment opportunity for those well-heeled enough to get in Fairview's front door: Mathieson has insisted that anyone who wants to become a client plunk down $1 million for the privilege.
Mathieson is now one of the "genius" investors using a start-up Web site called kaChing to chronicle some of his trades. Starting Monday, adults with $3,000 (and adequate net worth) can now register an account that will "mirror" the trades that Mathieson will make. Past performance is no guarantee that a trader will make money in the future, of course. But along with other investors, Mathieson plans to share some of his investing research and rational--all of which should give even modest-size investors a detailed picture of what is happening to their money.
The devil may truly reside in those kinds of details. The burning ambition of the people behind kaChing is a radical one: The company wants to use Internet technology to upend the $3.7 trillion mutual fund business. What was once adequate disclosure--say, quarterly mutual fund reports--now seems as antiquated as smoke signals, suggests Andy Rachleff, chief executive kaChing and a co-founder of venture capital firm Benchmark Capital. "You have no idea what you're buying when you buy mutual funds," he declares. Instead, Rachleff and kaChing propose to use Internet technology to let small-dollar investors perch on the shoulder of their investment gurus and not only watch where every penny goes but assess whether those choices were thoughtful or simply lucky.
Like many newly hatched start-ups, kaChing got its start in 2007 as a game-like application on Facebook. Founder Daniel Carroll created the virtual investing site. Those who wanted to play got $10 million in virtual dollars to invest in whatever equities caught their fancy. The site tracked their performance and asked them to share their reasons for making investments. Carroll himself began investing under the watchful eye of his mother at age 15; he says he eventually made enough money to help pay his college bills.
Carroll connected with long-time venture capitalist Rachleff, wooed $3 million in funding from investment heavyweights including Internet guru Marc Andreessen and OpenTable Chief Executive Jeff Jordan. With Rachleff as CEO, the kaChing team built a stand-alone site that started letting people manage fantasy accounts online last December. Altogether, there are 400,000 registered users and about 150,000 active accounts.
It's hardly the first online investing site. In early 2000, Ken Kam, a portfolio manager with Firsthand Fund, created Marketocracy.com, a site that gives registrants $1 million in "virtual funds" and then lets them go at it. Some investors have boasted double-digit returns--at least on the Web. (See: "The Oracle of Manitoba") Marketocracy current has about 70,000 managers. Potential investors can mimic those managers' trades, provided they begin by investing $50,000. They also pay an annual management fee of about 1.9% of assets under management. (Editor's note: Forbes, too, runs a similar program with its affiliate, Investopedia, at stocks.forbes.com). Still others include Cake Financial (See "Piece of Cake,") and Covestor.
To become a manager whom others can mirror on kaChing, investors must establish an investing track record of at least one year's worth of trades. Investors must also publish information that explains the rationale they use for trading and must score at least 140 points on what kaChing calls its "investing IQ" scale. KaChing developed the algorithm inspired by the kinds of assessments that Ivy League endowment funds use to rate their money manager. The algorithm includes the risk-adjusted returns of investments, the investment rationale of managers (namely how well they can describe the reasons for their top positions) and a measure of how consistently they keep to their strategy.
Hitting 140 points qualifies an investor as a "genius" (and, not accidentally, would be a fine score on an old-fashioned IQ test, too.) So far, 10 people have earned that rank on kaChing. Not everyone is comfortable with the label. "My personal favorite definition is that a genius is merely a talented person who's done all his or her homework," says Fairview's Mathieson, who commands a 142 rating on the kaChing scale. (KaChing calculated that based on five years of data for one "typical" client account submitted by Mathieson.) KaChing founder Carroll is a 148. Both Mathieson and Carroll are outranked, however, by a few amateurs including top-scoring Min Thang (172), who works in health care at Stanford Hospital and Ryuto Andrew Kawai (154), a systems engineer.
Traders earn money on kaChing when other investors mirror their trades. Traders and kaChing split a management fee that is largely set by the traders but that Carroll expects will average about 1.25% of assets under management. (KaChing pockets about 25% and the investor scoops up the rest.)
When the real-dollar investing portion of the site goes live, Carroll and Rachleff figure that there will be about $2 million in real dollars invested. (The site does not accept 401K funds). Since kaChing lacks the cachet of a big brand-name mutual fund, Carroll contends that he's going after investors who will roll up their virtual sleeves and pay attention to the details. "We're going after people who are frustrated with their mutual funds and swayed by data," he says. "If they're ignorant enough to be swayed by a brand, they'll lose money." Of course, there will be plenty of folks looking for a quick buck, too. Wrote one recent poster: "Hi. I am new to this application help me out how to invest money."
Carroll says that kaChing has safeguards to protect against abuse and fraud. Investors have to share details about accounts that they're managing that they are not documenting on kaChing. Fairview's director of research, John Rutledge, says that the kaChing account will be treated with the same care as any other client--and that his firm already has rules in place to ensure that trades for one client do not unfairly disadvantage another.
Mathieson sees kaChing as providing the infrastructure that will let investors too small to qualify as his clients have the opportunity to use his investment services--if they like Fairview's investing philosophy. "Service businesses should be bought, not sold," he declares, meaning that rather than woo people with slick advertising, he'd rather let clients show up because they like the service he provides.
Even if Mathieson is averse to advertising, kaChing already has the kind of Web 2.0 swagger that attracts attention. The dozen-person operation recently moved into what was formerly a dry cleaner's store not far from Palo Alto's downtown strip, an area that has been home to the likes of Facebook and Ning. Carroll and Rachleff clearly like cheeky names and lack long-time Wall Street traders' superstitions (why else plan a launch for Oct. 19, a day that still makes old-timers remember the 1987 "Black Monday" plummet of the Dow Jones average?)
"Radical transparency is the only way to avoid some of the problems" of fraud that have wracked the investing world, declares Rachleff. But kaChing isn't just cleaning up investing. Grins Rachleff: "How often do you get to disrupt and improve an enormous industry?"
http://www.forbes.com/2009/10/18/mutual-funds-investors-technology-personal-kaching.html
Tech journalism loses Corcoran and Anders
It's a sign of the times that two of the tech world's finest, most seasoned, intelligent and nicest journalists no longer are plying their trade for the mainstream media. That they're also married means an entire household's prodigious output isn't finding its way anymore into the pages of two important business publications.
Elizabeth Corcoran and George Anders, she formerly of Fortune competitor Forbes and he formerly of The Wall Street Journal, are on their own these days.
Anders, a bigshot columnist and book author who spent years at the Journal in multiple postings, left a while ago. He reports that he's working on a book on talent. He writes: "It's a panoramic look at all sorts of fields ranging from venture capital to pop music, sports, teaching and medical-school admissions.
"The core idea is that the people who do it really well have a surprising amount in common. The book will explain why picking talent is so hard for most organizations, how some folks get it right — and what the rest of us can learn from them."
His editor is Adrian Zackheim of Penguin Group's Portfolio imprint, the same fellow who edited Anders's previous book, Perfect Enough, about former HP (HPQ) CEO Carly Fiorina. Anders says the book will be done within the next year.
Corcoran is a keen science writer who worked at the Washington Post and other places before joining Forbes. She's leaving the writing trade altogether to do an education-oriented startup. "The goal," says Corcoran, who, like her hubby, I'm proud to call a friend, "is to help teachers find and share the 'best practices' for using technology in the classroom so that they are freed up to inspire kids and help get them ready for the challenges of the future." The startup is called Lucere, and it's tagline is "Learn. Share. Teach. Inspire!" Look for its Web site, lucere.org, soon.
Daily and bimonthly journalism's losses are the book writing and startup world's gains. Good luck, George and Betsy.
http://brainstormtech.blogs.fortune.cnn.com/2009/10/06/tech-media-power-couple-moves-on/
Children who marched into their grade school classrooms this autumn found the usual assortment of crayons, glue sticks and light-up globes. Thousands found something else: large interactive screens affixed to a classroom wall, known in playground lingo as "Smart boards."
When attached to the Internet, these boards are a portal to the digital world. Students can manipulate what's on the screen with a finger or a stylus. Changes get saved to a laptop computer and then printed or sent home via e-mail. Teachers like the boards. They're cool and digital--but if you want to use them like a blackboard, you can do that, too.
Sales of wall screens, which cost between $700 to $4,500, have zoomed from 170,000 units in 2004 to 700,000 worldwide this year, mostly to schools. Almost a third of k--12 classes in the U.S.--and three-quarters of the schools in the U.K.--now have one. "This is the first tool that's transforming our classrooms and showing how they're different from the past hundred years," says Diane A. Garber, principal of Lincoln Elementary School in Burlingame, Calif.
To see interactive boards in action, see: "Chalkboards Get Smart."
The leader of this spurt of silicon is not in Silicon Valley. More than half of the world's interactive whiteboards (and 63% of those in the U.S.) are made by Smart Technologies, a 22-year-old privately held company in Calgary, Alta. run by husband-and-wife cofounders David A. Martin, 60, and Nancy Knowlton. "We think these need to go into every classroom," says the soft-spoken Knowlton, 55, the company's chief executive. "There's no silver bullet in education, but we see these increasing student enjoyment and decreasing behavioral problems, and that translates into better student achievement."
Many of the past efforts to load classrooms with electronic gadgets have been bitter disappointments. U.S. school districts have spent billions on technology over the past two decades. Test scores haven't budged. Broken, dusty computers languishing in corners of classrooms and school libraries are as commonplace as skinned knees on the playground.
For many reasons, including the erratic budgets of school districts, selling educational technology is a treacherous business. No one knows that better than Knowlton, who jokes that she and Martin have been so intensely devoted to building Smart that if they had married anyone else, their spouses would have long ago quit on them.
Their story began 20 years ago. Martin, who has a bachelor's degree in applied mathematics from Concordia University and had started an earlier company, got rights to LCD-panel technology developed by itt. Knowlton, who earned an M.B.A. at St. Mary's University in Halifax, N.S., had been hankering to run a company. In 1987 they became the Canadian distributor for
At the time that took some powerful imagination: LCD screens were expensive, clunky and limited to black-and-white. Research groups such as the
In 1991 Martin and Knowlton built their first Smart board and hauled it to Comdex, the big tech trade show. Their demo caught the eye of a wandering executive from
Martin poured his efforts into the unglamorous underpinnings of interactive board technology. The screens were based on resistive technology: They used two conductive layers separated by a few thousandths of an inch of air. Applying pressure to the board--with a stylus or a finger--connects the layers and sends data or commands to a computer. Martin's most important patent involves software that registers the location of that pressure in an x-y grid and calibrates the image even if it's not neatly aligned. (Smart holds 29 U.S. patents and has 200 applications pending.)
Knowlton's and Martin's budget was gaunt. They had lost the right to sell InFocus supplies in 1991 after a reorganization--and without that, 97% of their revenue. Most of what they built they sold to schools. They scraped by on bank loans.
As they teetered on the edge of insolvency, Knowlton remembers their lawyer advising them to pack it in. The couple reflected on their motives. "One of us said: 'We want to change the way the world works and learns. And we're not done.'" Knowlton pauses. "It was such a preposterous statement that we both laughed out of control for 10 or 15 minutes." The next day they were back at it.
Other technologies were catching up. By the late 1990s the cost of flat-panel screens was plummeting. Screens grew thinner. The Web and wireless connectivity were both booming. Those changes made the boards not just fancy blackboards but interactive tools that students use even more than teachers. Smart racked up sales of $21 million in 1999.
In 2004 the British government decided to spend $90 million on interactive whiteboards for grade school classrooms. The main suppliers: Smart,
The future for digital suppliers to the classroom looks pretty bright right now. "Technology is becoming so ubiquitous outside the schools that it's requiring us to rethink technology inside the schools," says Steven Hargadon, founder of a popular social networking group devoted to education, Classroom 2.0. "As digital tools permeate the classroom, kids get more actively involved with learning," adds Scott McLeod, a professor at Iowa State University. "They become doers."
http://www.forbes.com/forbes/2009/1005/technology-smart-technologies-getting-to-top-of-class.html
San Francisco inventors revolutionize the video camera industry and sell the company for $590 million.
Has Digg lost its buzz? Does buzz even matter? Digg CEO Jay Adelson works to get his social news site back to the top of everyone's list
Episode 6 "Cheap Computers" Part 1
Facebook steps into controversy over who owns what on its popular service.
Transistors soak up much limelight in the digital world. But the backstage heroes are lasers: Red lasers brought us compact discs and cheap long-distance communications. Blue lasers, which cram even more data into a small spot, became a hit around 1999 and have made possible Blu-ray DVDs.
Now comes the third color needed to create a vibrant picture: green. In early May
Existing video projectors are already marching down the well-trod path of miniaturization: In the 1990s projection video displays were clunky. They used liquid crystal display and so-called DLP technology to generate and manipulate the three colors (red, green, blue) that are the palette for many video displays. (The RGB format is dictated not so much by the physics of light waves as by the physiology of the eye.) Advancements in lamps, optics and imager technology reduced size and cost and perked up performance. Using red, green and blue leds as a light source, for instance, let manufacturers squeeze projectors smaller. Projector prices also dropped and are now only a few hundred dollars.
Coloring the dreams of technologists now, however, are exquisitely tiny low-cost projectors, ones small enough to tuck inside a mobile phone or even a pair of glasses. To affordably make projectors on that scale, the industry is pushing technology further--including turning to lasers that will emit green light.
Corning started making lasers in earnest in the late 1990s as an element of its fiber-optic telecom business. The firm scooped up some of the technical talent that had created the optical amplifiers and other components that made long-distance lines cheap: scientists who had previously worked for Bellcore and AT&T Bell Labs during those labs' heyday.
When the telecom boom went bust in 2001, Corning scrambled to find another business that needed semiconductor lasers. "We were looking for an opportunity to create a half-billion-dollar-a-year business," says Mark A. Newhouse, senior vice president for business development at Corning.
Big business tends to blossom around new wavelengths of lasers. Light with a wavelength of 620 to 660 nanometers is red; 450 to 480 is blue. Any company that wanted to make a laser-based projector would need green light with a wavelength near 520nm. A potential customer asked Corning to build a green semiconductor laser for a microprojector. "At the time, we were not convinced about the application," concedes Newhouse. "This was before video iPods, so the spread of video wasn't as obvious." But Corning believed that a new laser color could catalyze big business, so it plunged ahead.
That was in early 2003. That initial customer dropped out of the business, but Corning carried on with its green-laser research. "Nature is fickle and makes certain wavelengths easier than others," Newhouse notes.
Here was the problem: Pump certain compound semiconductors with electrons and they will spit back photons that travel in waves of a certain length. An exotic sandwich of semiconductors--some combination of aluminum, gallium, indium and nitrogen--will emit green light. But so far those designs consume far too many electrons, making them grossly inefficient for commercial devices. By contrast, a commercial red laser has a conversion efficiency between 20% and 40%.
That pushed Corning to make a so-called "synthetic" green laser instead. The trick in this case is to shoot infrared laser light (a wavelength of 1060nm) through a frequency-doubling crystal that takes two photons of infrared light and combines them to create a single photon of green light (with a wavelength of 530nm).
By 2006 Corning scientists were showing off their synthetic green lasers in the lab. Making them viable for commercial products, however, turned out to be a Herculean task. Since tiny lasers would be embedded in mobile devices, Corning had to ensure they would work when jiggled, heated up or chilled.
Another challenge: getting the lasers to turn off and on with exquisite precision. The kinds of projection devices that would use Corning's components switch red-blue-green lasers off and on 100 million times per second (100 megahertz). Telecommunications lasers switch faster--at up to 1 gigahertz. But that light does not travel through a doubling crystal or come out of a device that gets dropped into a purse and left in a hot car.
Corning spent another three years refining its green lasers. The development effort has absorbed tens of millions of dollars, says Newhouse. "Keeping a laser fab is not inexpensive," he says. Competitors are afoot: A few high-end synthetic green lasers exist. Germany's Osram is close to finishing its own version of a synthetic green laser intended for mass production.
Meanwhile, with support from the Defense Advanced Research Projects Agency, a handful of researchers are trying to build "native" semiconductor lasers that will spit out green light without the help of a doubling crystal. "Over the long term I believe green lasers will be possible to make. The question is how soon they will reach high enough powers for this kind of application," says Newhouse. Corning can make a 1-milliwatt native green laser, he says. (Its synthetic green laser pumps out 60 milliwatts of light.) Industry would like 100-milliwatt devices.
Demand for these devices is expected to be voracious. Market research company Insight Media predicts sales of embedded tiny projectors (i.e., small enough for a cell phone) could be $1.1 billion by 2012. Stand-alone "pico projectors" that plug into a laptop may hit $2.5 billion, notes Insight President Christopher Chinnock. At the Consumer Electronics Show in January a half-dozen companies, including cell phone and laptop makers, showed off gadgets with embedded projectors. In April Samsung said it was shipping a mobile phone with an embedded projector to customers in Korea. (That phone uses ti's DLP projection technique.)
"How many times are you looking at the information on your cell phone and you say, 'If I could have a larger screen this would be so much more enjoyable'?" asks Microvision Chief Alexander Tokman.
Tokman rattles off the specs of Microvision's widget, which he says will be shipping by late summer. It will measure 5 cubic centimeters, the volume of a teaspoon. Its power draw is modest, making it possible for a device the size of a smart phone to project a 90-minute movie on one battery charge. The picture it displays is bright and clear, casting a crisp 1-foot-diameter image on a wall 1 foot away and an equally sharp 6-foot-diameter image on a wall 6 feet away. Once Microvision is making large volumes of its component, Tokman believes, the devices will cost equipment makers $100 apiece. Carriers might even choose to subsidize that expense to spur consumers to spend more on movies and photos, he says.
American consumers, it seems, began feeling more confident about the economy in early April. That raises a multibillion-dollar question: If our confidence in the economy continues to grow, do we need the federal government to stimulate us with $787 billion? Won't the market heal itself?
Ignoring the economic role of fickle consumer confidence helped get us into our economic mess, contend economists George Akerlof and Robert Shiller. And so if we are to get out of it, we need to take the economic models out of the exclusive realm of economists and add a healthy dose of psychology.
"You have to have the right structure, and you have to have modeled the markets right," notes Akerlof, who coauthored with Shiller the recently published book Animal Spirits. "If you leave something out [of the model] that's important, then there will be errors."
Mainstream economic models assume that consumers are "rational" actors. That's not good enough, retort Akerlof and Shiller. Irrational choices frequently rule: Confidence, outright lies and the stories we tell about past decisions all play big roles in the choices we make.
Putting psychological components into economic models, however, amounts to an insurrection in the ranks of the dismal scientists. Akerlof, 68, is an unlikely rabble-rouser. He is soft-spoken, with a spare frame--a legacy of a sickly childhood--and a distractingly cluttered office. Even so, his shadow looms big among economists. Akerlof was awarded a Nobel Prize in 2001 and has served as president of the American Economics Association. His wife of 30 years is Janet Yellen, formerly head of the Council of Economic Advisors and now president of the Federal Reserve Bank of San Francisco. (The two share common economic perspectives and have collaborated on papers. That means Akerlof shies away from questions on government policy.)
Last autumn, as the financial markets began to melt, Akerlof and Shiller rushed to finish Animal Spirits, which they had decided to write in 2003. For 15 years the pair have been running workshops on "behavioral" macroeconomics. "Science has to proceed from observation," notes Shiller, a Yale professor. Such choices weren't exceptions to the rule but fundamental patterns.
John Maynard Keynes coined the term "animal spirits" to describe irrational choices in his now canonical General Theory of Employment, Interest and Money. That part of his work got short shrift, however, as economists employed exotic mathematics to add a whiff of scientific rigor to their work. By the 1970s it was accepted wisdom that computers could model the economy and governments could fine-tune demand.
That doesn't mean that Akerlof wants to lessen economists' reliance on math. Quite the contrary: He complains that the math most economists wield is not particularly sophisticated. When he and Shiller wrote Animal Spirits, however, they left out the math in hopes of wooing as broad a readership as possible. Lurking behind the embrace of more sociology is a twist on one of the backbone formulas of macroeconomics: the demand function that describes what goes into determining how much of a good people want (starting with the price).
As a graduate student at MIT in the early 1960s, Akerlof saw Robert Solow galvanize economics by adding a role for technological change to a different equation, the one that explains growth. (Solow would get a Nobel for that work in 1987.) In 2001 Akerlof won his own piece of a Nobel for describing asymmetric markets, those whose players do not have the same information. What fascinated him most, however, was involuntary unemployment, or why the market fails to provide a job for everyone who wants one and who is willing to cut his wage low enough.
In the mid-1990s Akerlof and Shiller began running workshops to ask such fundamental questions as why unemployment exists and what causes economic depressions. The pair suspected that the most widely used models omitted factors as critical as Solow's technological change. Eventually they distilled a halfdozen contributing factors to what they, like Keynes, called animal spirits. These include consumers' confidence, fraud, fairness, delusions about the value of money and the stories that people tell about how the economy works.
Of these, "confidence" is both the most fundamental and the trickiest to evaluate. Economists have only partially captured what's meant by confidence, or trust, says Akerlof. A classical economist, for instance, would suggest that confidence is rational--a reflection of the idea that people use the information at hand to make a prediction about what will happen.
Instead, Akerlof and Shiller argued that high levels of confidence warp judgment: When consumers feel supremely confident, they suspend disbelief and invest with gusto. They believe stocks are sure to provide outsize returns over time, that houses will become more valuable every year and that some magical investors can make double-digit returns year after year. There's a multiplicative factor, too: More trust begets more economic activity. A strongly confident atmosphere also brings out the scam artists. The success of fraudsters like Madoff is a symptom of consumers' overconfidence, Akerlof says.
A big slide in confidence, on the other hand, has a disproportionately powerful negative affect. Diminished trust freezes markets. It can consequently dilute the effectiveness of classic stimulus tools that the government uses to spur spending.
The monthly Reuters/University of Michigan index of consumer sentiment, the best-known measure of "confidence," rose to 61.9 in April from 56.3 in February. That rise suggests confidence is building--but Akerlof isn't expecting a torrent of investing anytime soon. People's sense of history--the stories that they tell about past economic events--also strongly influences the decisions they make. "A major crisis will damage confidence, and the effects can persist for decades," suggests Shiller. Behind the rhetoric of Animal Spirits, consequently, is the skeleton of a mathematical model that includes distinct elements such as confidence. Accurately calculating those elements, however, is tricky.
Economists who neglected to include the confounding influence of confidence and scam artists and such in their models were caught off guard by the self-destructiveness of the markets. Alan Greenspan wrongly figured that the markets would police themselves. There's no way they will do that, says Akerlof. A capitalist economy doesn't just produce what people want (subject to firms making a profit), he says; such an economy produces "what people think they want." If people want magic fix-it pills, some entrepreneur will whip them up--unless regulators step in and spot the fraud.
The generic prescription for an overconfident era that Akerlof and Shiller offer includes a big role for someone--likely the government--to rope in overzealous economic actors and cheats. "When we're overconfident, we're prone to buying snake oil," Akerlof says. "And so you need consumer protection."
Akerlof parries questions about whether government regulators can be smart enough, diligent enough and honest enough to watch consumers' backs. Although increased regulation has a cost, so too does fraud, he says. Much of our life is regulated. "Capitalism works because within the market there are all kinds of regulations," Akerlof says.
Can the Internet play a role here? After all, the watchword among many technologists is "transparency." Entrepreneurs boast that they can build organizations that show consumers exactly how decisions are made--and so give consumers ways to monitor activities far more closely than ever before.
Case in point: a fledgling online trading site called Kaching, whose backers include Silicon Valley heavyweights Andrew Rachleff of Benchmark Capital and Marc Andreessen, cofounder of Netscape Communications. In Kaching, stock investors agree to publish online all their trades and the research behind their decisions. Fans can sign up to ape the trades of investors who impress them.
Akerlof and Shiller aren't ready to let the Internet provide all the checks on the system. "My whole life I've worked on the economics of how people should be able to get a job," Akerlof says. "Having a job is often the chief difference between being happy and not being happy. So getting the macroeconomic model right is really important."
Theodore Gray would be quite a kick to have at a party. He knows how to salt his popcorn using poisonous gas and a how to make a metal explode when it gets wet. He makes metal spoons that dissolve a few seconds after you stir them in water. And he really likes things that explode, burn or otherwise self-destruct in some spectacular fashion.
Hey, it's all just science.
Just not exactly the kind of science that you learn in school these days.
Gray has just published a book chock full of genuinely dangerous science experiments, Mad Science--Experiments You Can Do at Home--But Probably Shouldn't. The book is based on more than 50 columns Gray has written since July 2003 for Popular Science magazine.
Want to check out a few? See "In Pictures: Don't Try This At Home!"
And yes, these truly, really can hurt you--if you don't pay attention.
In his day-to-day life, Gray writes computer programs at the software company he co-founded, Wolfram Research. He developed a determination to collect every raw element listed on the Periodic Table--or at least as many of them as is humanly possible to have (some can exist for fleeting moments in time or are wildly radioactive).
Gray started photographing his collection, and wound up building what is truly the world's most beautiful Periodic Table. The entrepreneur in him seized command, and he built a modest business selling posters, place mats and cards of his table. That led to his Popular Science column, "Gray Matter," and now to the book.
Gray also has a theory about why kids today are bored with science: hamstrung by safety and liability concerns, the world has squeezed all the fun out of experimenting. Mixing up vinegar and baking soda creates a little fizz, but hardily the thrill of, say, exploding gunpowder. Ask any scientist who grew up in the 1950s what got him or her interested in science, and most wind up recounting childhood adventures where they blew things up or otherwise got hands-on with dangerous chemicals.
Even the best-selling Dangerous Book For Boys "is completely devoid of danger!" marvels Gray. "My 10-year-old son got completely bored with it."
No one should be bored by Gray's Mad Science. The columns are packed with handy facts--chlorine gas, for instance, was the nasty stuff used during World War I to decimate troops. Mix it with a chunk of highly flammable sodium metal and--poof!--you have an explosion that creates table salt--and thus, salted popcorn, if you hang a bag in just the right spot.
In the wrong spot--bang!--a lot more than the popcorn will blow up.
"Real danger alert: This is the most dangerous experiment in the book," proclaims a box embedded in the article about how to make salt (and salty popcorn). Elsewhere, Gray includes a picture of a doll who got a bit too close to the excitement. (To see a non-Barbie doll figurine get roasted, click here.)
There's nothing inherently dangerous about telling people how to use a Snickers candy bar to make rocket fuel or cast a silver bullet or set bubbles on fire, Gray insists. "You have to accept that there is dangerous stuff in the world. That doesn't mean you're going to tell people to do it." Gray never got hurt doing the experiments in the book. But he did take plenty of precautions (starting with wearing the omnipresent safety glasses.) "What is irresponsible is pretending that there's nothing dangerous in the world."
Or insisting that everything is dangerous--that kind of overdramatization winds up making people numb to the times when they truly need to be careful. "There's so much hyperbole wrapped around things that aren't dangerous," Gray complains. False warnings cause people to tune out real problems. "That's why I had to burn" the doll, he said--to get through people's blasé attitudes toward appropriate safety precautions.
By showing people that science can be dangerous, Gray aims to put some of the pizazz back into the profession.
"People in science do exciting and dangerous things," Gray says. "That's what our message to kids should be: If you want to do exciting and dangerous things, go into science."
| Scott McNealy |
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Only a few companies know how to manufacture new CEOs. Scott McNealy has done it again and again. More than 75 people--including a number of women--who have wound up as chief executives at
Only a few companies know how to manufacture new CEOs.
More than 75 people--including a number of women--who have wound up as chief executives at technology companies trace their managerial roots back to time spent with McNealy, who was one of Sun Microsystem's four co-founders in 1982.
Currently McNealy is chairman of Sun as well as deeply involved with the nonprofit Curriki.org, which makes grade-school curriculum available for free on the Internet.
McNealy has long been a study in contrasts: He has a blue-blood education pedigree that includes an undergrad degree from Harvard University and an MBA from Stanford University, but he delights in an aw-shucks demeanor and named his children after models of American cars, like "Maverick" and "Dakota."
His managers by and large admired him--in no small part because he trusted them. "We weren't punished for making mistakes. We were encouraged to try bold moves," recalls Laurie Yoler, an investment banker at GrowthPoint Technology Partners who worked at Sun in the 1990s.
Carol Bartz, who has just taken on the top job at
Forbes spoke with McNealy recently about how to hire talent, how he advises managers and what he thinks of Carol Bartz and Eric Schmidt.
Forbes: What was different about how you managed Sun in contrast with other Valley companies?
Scott McNealy: I tended to manage by clear delegation. People got to be in charge of things. My decision-making process was not to make the decision but to decide who got to decide. And therefore I'd say, "Alright, Eddie, you're in charge of this decision. Go off and run a process and come back to us with your decision." If you hire really, really great people, they're going to know more about the problem they're dealing with than you will.
What did that leave for you to do?
I spent a lot of time helping and coaching people. When you make a decision, you have to, first of all, outline the problem. Then you have to consider the alternatives. You then have to be incredibly participative in the problem definition and problem proposal--get everybody's input--and then you have to decide quickly. You can't just grind it out and think about it and wait until it becomes explicitly obvious what the answer is. You've got to come up with the answer before the competition does. And so I put a lot of pressure on my managers to be quick decision makers.
Is that "consensus" management?
I call it participative but not consensus. One thing I always told them is: Everybody shouldn't necessarily agree with your answer. And nobody should be surprised. I always said, "I'll be very upset if you don't know how people are going to react to your decision." So that forces them to go out and talk to a lot of people.
How did you make people accountable?
We had a very strong annual planning process where we had a set of deliverables … including … an "interdependencies" section. It said: To make my plan I need to do the following but here's what I need out of my peers.
A lot of negotiation and conversation happens when you have an interdependencies sheet. And when [a manager] didn't make the plan, they'd go back and say, "Well, so-and-so said he was going to deliver on this and he didn't." That would provide some fairly interesting accountability inside the organization.
We had a million little management tricks and techniques that we used [in growing Sun from zero to more than $10 billion in revenues run rate]. You require some management tricks--structure, process, culture--to do that. And good feedstock. We made sure we were hiring good people and doing good reference checks … We had a thing called "sunscreen" that was our process for checking whether the resume facts were correct and whether someone had a police record. Just simple things like that. It's a really good idea.
What if a hire didn't work out?
It doesn't mean they're not good people. They were all good people when we hired them. Sometimes they'd leave on their own if they didn't feel that they were being appreciated. Sometimes they'd settle into a role more attuned to what they were doing. Sometimes we had to let them go because it wasn't working out right. But we never mistreated anybody out the door.
When was the last time you heard someone got "fired" at Sun? If they break the law, they're fired like crazy. But our view is that everybody is trying hard, everybody's working hard, everybody's talented in their own way … and if they're not in the right role we should treat them with respect.
You might remember a situation where a company missed a quarter and publicly fired a couple of people on the earnings call. And laid the blame right at their feet. And the CEO says, "We're getting stuff done here. We're delivering accountability." That's just not the right way to go do it. Can you image the next staff meeting? You bring in the two new executives and say, "Here's a towel. Wipe the blood off. Have a seat, and, you know, good luck. Have fun."
How did you pick who to hire?
My interview process … wasn't very scientific. Usually by the time they got to me they were pretty talented people. I would interview the person and--unless it was such a brain-dead obvious decision--I wouldn't let the moment get me. I'd let my mind process it while I was asleep. I'd wake up the next morning, and if I was thinking about the person that next day at work, I'd hire them. If I went two days, and [someone] came back and said "What did you think of so-and-so?' and I said 'I haven't thought about 'em for a nanosecond. I'm not interested' [then they weren't hired].
I know that's a weird way ... and I wouldn't say it was 100% but whether they were on my mind the next day would have a huge impact on whether I hired someone or not.
What's Carol Bartz like?
She's tough, she can make a decision, she knows what she wants to get done. She's got a big smile, a big laugh, but she can be tough, too. (See "When Scott Promoted Carol.")
She'll have a lot of competitors--including Eric Schmidt at Google.
Oh yeah.
How do you think that's going to play out?
[McNealy laughs.] I don't know. [Laughs again] Eric's super bright, too. Eric's got an intellect that goes forever. But you know, there's two kinds of smarts: There's intellectual and then there's street smarts. Carol's a real street smart person--not that she's not smart intellectually. She makes really smart moves. Eric makes very intelligent moves. It's very funny to watch. They have very different styles.
What else has been a key to Sun's culture?
We always had a cause. We always had a clear set of enemies. We always wanted a diversity of backgrounds, ideas and cultures. But we wanted to have commonality of purpose. A lot of those good leaders who came out of Sun understood and knew what I was trying to do when I picked an enemy, or when I picked a cause or when I put all the wood behind one arrowhead. It was about trying to align a bunch of really different people around a commonality of purpose. That's what really great leaders do. Steve Jobs does that with insanely great products. We did it with our commitment to eliminating the digital divide without doing harm to the planet and our focus on sharing. Those are very powerful ideas that can align a lot of different people with different backgrounds.
You were famous for "top 10" lists. What are your top 10 rules for managers?
I'll give you a few:
--Kick butt and have fun
--Be participative but not consensus
--To ask is to seek denial
--The right answer is the best answer, the wrong answer is second best. No answer is the worst.
--Yes or no?
I used to beg people to answer a yes or no question with a "yes" or a "no." If you watch any CEO ask a simple yes or no question of somebody on their staff, I don't care who they are, 999,999 out of a million won't say "yes," or "no." They'll launch into an answer. I used to laugh and say, "I'll take that as a 'no.'" or "Was that a 'yes'?
Until the past few weeks, the corporate headquarters of Satyam Computer Services was an island of calm a short drive outside the bustling city of Hyderabad, India. Flags of countries representing Satyam's customers line the driveway leading to the front door. Visitors to its center were treated to a multimedia display that showcased what Satyam felt were its core values: efficiency, flexibility, trust, reliability.
That facade dissolved Wednesday.
It was a horrifying turn for a man long considered one of India's self-made success stories--and active philanthropists. Other Indian executives are quick to contend this is an isolated case. Even so, a few quietly note that it's hard to imagine how a publicly traded company, which must comply with U.S. Sarbanes-Oxley disclosure rules, could have been mislead for so long by one or even two individuals.
"This is almost unthinkable," adds Manish Dugar, chief financial officer at
Raju had been a one-of-a-kind man, deeply loyal to his family, patriarchal toward his employees, benevolent to the poor. And yet, suggest some who have known him, Raju grew up in an environment that enjoyed gambling and so ran his career with the bravado of a gambler.
He was born in a tiny village Jalli Kakinada (population: 1,652), 250 miles southeast of Hyderabad. Jalli Kakinada didn't get electricity until 1965; phones came in 1991. A water purification plant for the whole village just got started within the past few years.
Within the village hierarchy, Raju's family was relatively well-to-do. His father juggled multiple businesses, ultimately moving the family to Hyderabad in the 1960s to cultivate grapes and start a string of construction businesses.
By the 1980s, Raju had earned a master's degree in business from Ohio University and began providing back-office support for
Raju figured that the work could be done by well-qualified Indian engineers, but Deere was wary of outsourcing. In an interview, Raju recalled how he made a bet with Deere: If he couldn't get the work done at high quality yet more cheaply than Deere itself, the corporation wouldn't have to pay him.
Raju set up an office just down the street from Deere staffing it with a handful of Indian expatriates and ran it on Hyderabad time. They even ordered in curry. He won the bet.
By 1987, Raju returned to India and co-founded Satyam with one of his two younger brothers. The name means "truth" in Sanskrit. Deere was an early big customer.
Satyam's timing was flawless. The combination of newly available satellite-based broadband communications and corporations' need to have programmers work out the kinks in old software programs threatening to go haywire as the end of the millennium approached helped fuel Satyam's rise.
The company became a skyrocket success, debuting on the Bombay Stock Exchange in 1991. It would acquire a company with a New York Stock Exchange listing in 2001. Raju built his generous corporate campus outside Hyderabad, which included sports pavilions, a swimming pool, a nine-hole golf course, dormitories and apartments for either single or married workers with families (the complex could hold up to 600 people) as well as a few animals in the equivalent of a mini petting zoo.
Even though public, Satyam remained a company dominated by Raju and his family. His brothers ran different groups within Satyam. In 2001, Satyam took a drumming for how it merged Satyam Computers and Satyam Solutions, and for patchy disclosure of employee stock options.
Around the same time--and also coincident with their father's death--Raju and his two brothers started a philanthropic foundation aimed at improving life in rural villages such as the one where they were born. Their Byrraju Foundation broadcasts English and math classes via satellite links and radio towers to more than 200 government-run schools. It has put computers in rural schools and supports vocational programs for plumbers, electricians and dressmakers.
The good-works list is long: Byrraju helped build toilets and water purification systems, fund health clinics, create an emergency response program and teach children.
In tiny villages such as Jalli Kakinada, Raju became a legend. When a reporter visited three years ago, the village elder shook his head, wondering why his children hadn't followed in Raju's footsteps. One of Raju's most creative initiatives was called GramIT. It involved "outsourcing" some of Satyam's work to centers in villages where there was little turnover and wages that were lower than the meanest rate in Hyderabad.
When Raju described the program, he became passionate about the positive implications of creating more jobs in the countryside. He was also clearly happy about the idea of saving on his labor bill.
In 2006, Satyam had about 23,000 employees and was reporting $1 billion in revenue. By 2008, the company was claiming it has surpassed $2 billion in revenue and had bulked up to 53,000 employees. Coincidentally, Raju now says that there is a $1 billion gap on Satyam's balance sheet, which "has arisen purely on account of inflated profits over a period of the last several years ..."
The risk-taker had taken one too many risks: "Every attempt made to eliminate the gap failed. ... It was like riding a tiger, not knowing how to get off without being eaten," Raju wrote.
Visible cracks began to appear in December. Satyam agreed to pay $1.6 billion to acquire two construction companies, in which Raju and his brother hold stakes, run by Raju's sons. Investors hammered the stock. Four directors resigned. The World Bank blacklisted Satyam in late December, suggesting it had offered bank employees bribes (or "improper benefits").
Whether Raju could have pulled off a multi-year deception single-handedly continues to torment Indian executives. "This kind of deception is beyond my imagination," says Wipro's Dugar.
PriceWaterhouseCoopers was the company's auditor. Satyam has issued a terse statement pledging to check its books. On Thursday, Indian government officials pledged to investigate as well.
Some observers suggest that Raju wrote the note to try to shield as many family members from the scandal as possible.
Indian executives insist that Satyam, once the country's fourth-largest outsourcing firm, is now in a class by itself. "Just like Enron or Madoff aren't representative of business, most people believe Satyam is not representative of India's IT business," says Jessie Paul, chief marketing officer for Wipro Technologies, who is working on a book on branding. "How could he go to bed every night with a company whose name means truth?" she asks.
Other Indian companies are preparing to share more information to reassure their clients. "Companies will have to be ready for greater due diligence, should be willing to share relevant data or answer questions to reassure customers and investors," notes Infosys' Gopalakrishnan.
Verghese Jacobs, who runs the Byrraju Foundation, hopes that his programs will continue. "I have never dealt at all with Raju the businessman, who has definitely dropped in global esteem today. But I still have great faith in Raju the social entrepreneur," Jacobs wrote in an e-mail to Forbes. He credits Raju with being an inspiration "not only to 1,500 employees of our foundation, but to the 1 million people we impact in our 200 adopted villages."
Sharath Choudary, who headed the GramIT program for the Byrraju Foundation and now runs an independent petroleum business, says he is shocked and disappointed. He figures that close to a million people will feel the aftermath of Raju's revelation--from employees and their families to customers to others touched by Satyam and Byrraju's work.
But Choudary believes Satyam can survive. "It wouldn't be a bad idea to let in clients to be a part of the process to ensure that they are confident that their money is not going to fill old holes," he notes. "The situation is terrible, but good leadership and grit can salvage it."
http://www.forbes.com/2009/01/08/fraud-satyam-raju-biz-logistics-cx_ec_0108satyam.html
