No Mooning this Saturn...but Wall Street Traders run up the market!

According to the WSJ, GM is going to close its Saturn Operations. "The sudden collapse of the sale puts at risk 13,000 more jobs in the auto sector. It also likely will add Saturn's 350 dealers to the thousands of U.S. auto retailers that are closing in the car industry's worst downturn since World War II.GM Chief Executive Frederick "Fritz" Henderson said in statement that Saturn and its dealership network will be phased out. "This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality," Mr. Henderson said..." GM also is ending its Pontiac brand and selling its Saab and Hummer lines, all part of its bankruptcy reorganization that concluded in July. (WSJ)

DETROIT (AP) -- General Motors Co. will shut down Saturn now that a deal with former race car driver and auto dealer magnate Roger Penske has collapsed, marking the end of a brand that was supposed to revolutionize the way small cars were built and sold in America.

While all this is happening, the stock market has put in a great performance, with gains of more than 15% this quarter. When people spend their working hours trading stocks it is no surprise we have had these catastrophes.

Caffeinated Wi-Fi

This morning, NPR aired a story I have read a lot about- that coffee stores are restricting Wi-Fi use to "manage" the people who come to the store, just get free hot water poured into their cup with their tea bag, and then use the Internet for hours, free of cost. Some stores have even disabled the power ports to restrict Internet use.

On the other hand, Borders has signed a deal with Verizon to provide free Wi-Fi in its stores nationwide.

A question of ethics...

Today, a friend asked me to get Vonage because it was offering an attractive deal for international calling. I replied that I refrain from giving business to firms which have crooks leading them- I was thinking of Jeffrey A. Citron, the founder/ex CEO of Vonage, who was indicted for Securities Fraud in 2003. My friend's reasoning was that all firms are led by crooks, so that should not be a factor in procuring products and services.

Based on my experience there are quite a few decent managers including Mike Birck of Tellabs. People should spend the time and energy to identify such firms and support them with their purchases. Until people display their own ethics and values in purchasing, the managers will not change their habits.

Texting While Driving is Not the Problem, Driving While Texting is...

A number of states including Illinois, Oregon, New Hampshire, Alaska, Arkansas, California, Colorado, Connecticut, Louisiana, Maryland, Minnesota, New Jersey, North Carolina, Tennessee, Utah, Virginia, Washington and the District of Columbia have passed legislation prohibiting texting while driving. However, this misses the key point in today's always-connected world. Is texting an interruption while driving, or is it that driving is interrupting texting? Should we prohibit a number of things people do these days while texting- including walking, driving, interviewing, and eating lunch? Should we prohibit people from being in a number of places while texting, including a classroom, a concert, in a presentation?

Future appears Green...

Today I served as a volunteer at the Cantigny Green Fair, along with a number of our students. It was a great experience- there were many booths with fascinating people displaying amazing products- innovation is alive and well. There were solar ovens and bottle openers made of bicycle chains and many others. What was impressive, however, was the turnout- many young children and adults going around and learning and enjoying. While quite a few ignored basic recycling rules and threw everything into the recycling bins, there were many folks educating themselves on the environmentally friendly products. We can hope that with greater education people will make better choices.

A la carte pricing...

The airlines are going completely crazy with their extra charges- and they are not even honest about them. AA, United and others are charging an extra $10 for tavel on certain holidays, but are calling this a fuel surcharge.

And the FAA and CPSC lets them get away with these claims...

Capitalism: Divine, Amoral, Immoral?

I had blogged just yesterday about Capitalism in a piece titled "Is the Degree of Capitalism inversely correlated with the Level of Ethics?" Today Michael Moore was on TV promoting his new movie "Capitalism: A Love Story." Mr. Moore is sharp, insightful, and thought-provoking, and has an interesting way of telling a story. Part of the discussion about Capitalism revolves around the notion of morality - is Capitalism amoral or immoral or divine? More to the point, should corporations have rights? On many of these issues, Mr. Moore thinks the same way I do. I let my students know that the game of Capitalism revolves around ownership, and that owners maximize their benefit and workers are just tools to be deployed and discarded. The system rewards owners and punishes those who work hard, without ownership.

Is the Degree of Capitalism inversely correlated with the Level of Ethics?

That is an interesting hypothesis to test....

Because regulators and lawmakers are clamping down, the banks are changing some of their most egregious practices. According to the NYT, "...The moves come as lawmakers and regulators in Washington push proposals to reform what critics say are excessive charges of which consumers are unaware. The penalties, known as overdraft fees, bring the banking industry tens of billions of dollars in revenue annually.

Bank of America said it would allow current customers to turn off the ability to spend when their account hits zero, starting Oct. 19. Next June, the bank plans to limit the number of times each year that current customers can overdraw their accounts when using a debit card at a store. It will let new customers choose whether they want overdraft protection when they are opening their account.

Chase plans to eliminate by the first quarter of next year a common industry practice that enraged many consumers. Instead of lumping a day’s worth of debit card and A.T.M. transactions together and then processing the highest amounts first — a practice that has caused large numbers of consumers to overdraw more quickly and pay more fees — it will credit the transactions chronologically. Chase also plans to allow customers to opt out of overdraft coverage...."

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There are some stories of charity during this recession. That represents another side of Capitalism...instead of getting aid from a government supported "socialistic" program, the less well-off have to hope for charity. Business Perks (Must Be Laid Off)

What is Right about Corporate Rights?

A NYT EDItorial highlights a very important case before the Roberts' Supreme Court this year.

The Rights of Corporations

The question at the heart of one of the biggest Supreme Court cases this year is simple: What constitutional rights should corporations have? To us, as well as many legal scholars, former justices and, indeed, drafters of the Constitution, the answer is that their rights should be quite limited — far less than those of people.

This Supreme Court, the John Roberts court, seems to be having trouble with that. It has been on a campaign to increase corporations’ legal rights — based on the conviction of some conservative justices that businesses are, at least legally, not much different than people.

Now the court is considering what should be a fairly narrow campaign finance case, involving whether Citizens United, a nonprofit corporation, had the right to air a slashing movie about Hillary Rodham Clinton during the Democratic primary season. There is a real danger that the case will expand corporations’ rights in ways that would undermine the election system.

The legal doctrine underlying this debate is known as “corporate personhood.”

The courts have long treated corporations as persons in limited ways for some legal purposes. They may own property and have limited rights to free speech. They can sue and be sued. They have the right to enter into contracts and advertise their products. But corporations cannot and should not be allowed to vote, run for office or bear arms. Since 1907, Congress has banned them from contributing to federal political campaigns — a ban the Supreme Court has repeatedly upheld.

In an exchange this month with Chief Justice Roberts, the solicitor general, Elena Kagan, argued against expanding that narrowly defined personhood. “Few of us are only our economic interests,” she said. “We have beliefs. We have convictions.” Corporations, “engage the political process in an entirely different way, and this is what makes them so much more damaging,” she said.

Chief Justice Roberts disagreed: “A large corporation, just like an individual, has many diverse interests.” Justice Antonin Scalia said most corporations are “indistinguishable from the individual who owns them.”

The Constitution mentions the rights of the people frequently but does not cite corporations. Indeed, many of the founders were skeptical of corporate influence.

John Marshall, the nation’s greatest chief justice, saw a corporation as “an artificial being, invisible, intangible,” he wrote in 1819. “Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence.” ....Extract from the NYT.

A Difficult Day...

One of my former students stopped by today to collect the letters of reference I had written for her. She was one of my best graduate students, and is still searching for a job six months after being let go. She was willing to help me with my course work for free, and I don't have students working gratis.

I got an email from another former student who wanted to talk to me about internships and jobs- she is still looking for one. She was an honors graduate from our College.

It is quite rough sledding even for the good ones. Makes life tough for the few faculty who take things seriously.

Women's rising "Unhappiness" Index..

Ms. Maureen Dowd, one of the Op-Ed columnists for the NYT, writes smartly and analytically about social issues. In her recent post titled "Blue Is the New Black" she presents the rising unhappiness of women. She writes "...In the early ’70s, breaking out of the domestic cocoon, leaving their mothers’ circumscribed lives behind, young women felt exhilarated and bold. But the more women have achieved, the more they seem aggrieved. Did the feminist revolution end up benefiting men more than women? According to the General Social Survey, which has tracked Americans’ mood since 1972, and five other major studies around the world, women are getting gloomier and men are getting happier..." She goes on to mention that "...If they once judged themselves on looks, kids, hubbies, gardens and dinner parties, now they judge themselves on looks, kids, hubbies, gardens, dinner parties — and grad school, work, office deadlines and meshing a two-career marriage..."

According to Ms. Dowd, "Women are much harder on themselves than men. They tend to attach to other people more strongly, beat themselves up more when they lose attachments, take things more personally at work and pop far more antidepressants." Based on the very small sample of women I know, the part about women taking things seriously rings true in my experience. That is the primary reason I generally hired women- they paid attention to detail and took things seriously.

My comment on this topic is rather straight-forward. The widening gap between rising expectations (We can have it All!) and downbeat reality (Many of us cannot get much of what we need, and much less of what we want) could be another reason for women's higher "unhappiness" index...

Sizing up an Amazon...

Amazon had been in the news a lot lately...

The WSJ reports that "Amazon.com Inc. is quietly expanding its private-label business in a bid to diversify away from its online bookstore roots and become more like a general retailer.The latest sign: The Seattle-based e-commerce giant -- known for high-tech innovations like one-click checkout and the Kindle e-reader -- last month received a U.S. design patent for a wooden chopping block..."

The NYT Bits Blog reports that " Despite the stagnation of book, music and DVD sales, Amazon.com is gaining momentum as a retailer of almost every other kind of product, as I report in an article in Sunday’s Business section.

Like many general retailers, Amazon seeks to forge direct ties with manufacturers wherever it can so that it can keep a larger percentage of the profits. Just as shoppers might find Safeway cereal, RadioShack batteries andWal-Mart diapers, Amazon has sold such “private label” items since 2004, including Pinzon bath towels and sheets, Strathwood patio furniture, andDenali power tools.

Today, Amazon is expanding its private-label line with AmazonBasics, a new collection of consumer electronics items.

The items are not all that exciting, at least for now. They include HDMI cables, Ethernet cords, and blank CDs and DVDs.

All will be shipped in Amazon’s recycled cardboard frustration-free packaging, which gives people another opportunity to avoid those hermetically sealed plastic clamshell containers from other vendors.

“We think there’s an opportunity to provide really good quality and additional value in terms of lower prices than some other products we see in the market,” said Paul Ryder, Amazon’s vice president for consumer electronics and wireless.

Mr. Ryder explains that Amazon looks to private label in product categories where the big brands are all buying merchandise from one manufacturer, or a cluster of manufacturers in a single part of the world. By sourcing such products directly, he said, Amazon can cut out the intermediary and pass discounts directly to customers.

Of course, such intermediaries also sell their branded products on Amazon.com. Mr. Ryder acknowledged that its move might antagonize some of its suppliers. “I’m sure some vendors of cables and blank media are going to ask us, ‘What just happened?’ We’ll educate them that we saw value available to the customer in the market, and with our relationship with the vendor, we wanted to give that value to customers,” he said.

Mr. Ryder said he expected AmazonBasics to expand into more consumer electronics over time, but he doubted Amazon would start offering big-ticket items like HDTVs anytime soon. He added that Amazon had its hands full marketing its first branded electronic device: the Kindle e-book reader..."

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In an article titled "Can Amazon Be Wal-Mart of the Web?" the NYT reports that "Fifteen years after Jeffrey P. Bezos founded the company as an online bookstore, Amazon is set to cross a significant threshold. Sometime later this year, if current trends continue, worldwide sales of media products — the books, movies and music that Amazon started with — will be surpassed for the first time by sales of other merchandise on the site. (That transition already occurred this year in its North American business.)

In other words, in an increasingly digital age, Amazon is quickly becoming the world’s general store. Alongside the books and CDs and DVDs are diapers, Legos and power drills, not to mention replacement car clutches and more arcane items like the Jackalope Buck taxidermy mount ($69.97).

“Amazon has gone from ‘that bookstore’ in people’s mind to a general online retailer, and that is a great place to be,” said Scot Wingo, chief executive of ChannelAdvisor, an eBay-backed company that helps stores like Wal-Mart and J.C. Penney sell online. Mr. Wingo envisions e-commerce growing to 15 percent of overall retail in the next decade from around 7 percent. “If Amazon grows their market share throughout that period, and honestly I don’t see anything stopping it, that is pretty scary,” he said.

Indeed, Amazon has been gobbling e-commerce market share since 2006, taking away customers from eBay in particular. But its advances are shaking up the entire retail world. Giants like Wal-Mart are warily replicating elements of its strategy, while small independent retailers in sporting goods and jewelry now worry their fate will be similar to that of small bookstores and independent video rental shops (remember those?).

Amazon’s expansion strategy has allowed it, almost alone among retailers, to thrive during the recession, even while its own media business has stagnated. Over the last year, shoppers have bought fewer books, CDs and DVDs, in many cases opting for cheaper digital downloads. In the quarter ending in June, for example, Amazon’s worldwide media sales grew only 1 percent, to $2.4 billion, highlighted by a slowdown in video games.

But during the same quarter, sales of other products, which the company lumps together on its balance sheet in a grouping dubbed “electronics and general merchandise,” grew by 35 percent, to $2.07 billion.

Its relentless ambition to sell more of everything is constantly on display these days. In July alone, Amazon introduced separate hubs on its site for outdoor sporting goods and cellphones and wireless plans. Then it capped the month by buying an emerging competitor, the online shoe and apparel retailer Zappos.com, in a stock exchange now worth more than $930 million.

Aside from using its stock and $3.1 billion in cash and marketable securities to make acquisitions, Amazon has fueled its growth as a general retailer by nudging loyal customers to buy a greater variety of products by offering free shipping and speedy delivery with clubs like the $79-a-year Amazon Prime.

It has also lured an increasing number of small sellers to list their own products on Amazon.com, and takes around a 15 percent cut of each sale. Such third-party transactions now account for 30 percent of all the sales on the site. And Amazon continues to expand its network of more than 25 distribution centers around the world, where it constantly hones the art of getting products to customers as quickly as possible.

Next week, Amazon will take yet another step in this strategy, expanding its private label business with a line of Amazon-branded audio-video cables and blank media discs. Amazon already offers hundreds of private label kitchen products and outdoor furniture, and uses these direct relationship with manufacturers to further undercut prices from the competition.

Amazon executives are nonchalant about the shift to general retailing, regarding the moment as preordained destiny ever since the company announced its ambition to offer the biggest selection of goods on earth, before going public in 1997. But they have reason to feel vindicated: after the dot-com bust, some analysts thought the company could go broke trying to stock such a wide array of merchandise.

“It means we are becoming increasingly important in the lives of our customers, which has been our mission from the beginning,” said Jeff Wilke, Amazon’s senior vice president of North American retail. “We had the chance to earn the trust of the customer beyond media, and we took it.”

INSIDE Amazon’s vast shipping centers, the company’s growing capability as a general retailer is nearly invisible. What is clear is that the normal rules of retail don’t apply here.

Instead of storing similar items next to each other — televisions with other electronics, shampoo with other personal care items — randomness abounds. In the warehouse where Terry Jones loudly roams the aisles, which the company somewhat randomly dubs Phoenix 3, “Star Wars” action figures are stocked next to sleeping bags; bagel chips sit next to the “Beatles: Rock Band” video game.

In one high-risk valuables area, monitored by overhead video cameras, a single Impulse Jack Rabbit sex toy is wedged between a Rosetta Stone Spanish CD and an iPod Nano.

In nearby Goodyear, Ariz., at an even larger distribution center known as Phoenix 5, Amazon stores and ships more unwieldy items. Samsung 54-inch plasma HDTVs are stacked three high on the floor, next to crates of Pampers. Across the aisle, a kayak ($879) sits alone on the floor, wrapped tightly in cardboard and plastic.

Amazon says it stores dissimilar products next to each other on purpose, to minimize the possibility that employees select the wrong item. That seems unlikely: every product, shelving unit, forklift, roller cart and employee badge in these shipping centers has a bar code. Each physical move is orchestrated by software that calculates the most efficient path from shelf to the shipping area, telling employees on their wireless bar code readers which aisle and palette to go to next.

“Imagine how many customers we serve and if they were all here now,” said Bert Wegner, Amazon’s director of North American fulfillment, gesturing over the open space in Phoenix 5. “We are doing the heavy lifting for all of them in a hyper-efficient manner.”

Amazon also benefits greatly from its advanced inventory management methods and ability to negotiate beneficial payment terms with vendors. The company sells such a large volume of merchandise, and can predict customer demand so accurately, that it generally sells products within 65 days, before it has to pay suppliers for them.

That arrangement, which analysts call “negative working capital,” is unusual outside of grocery stores and allows Amazon to avoid the huge capital charges associated with buying and storing such a broad line of inventory. It also boosts the company’s cash flow, which it has used to pay down its debt to $109 million at the end of June from a hefty $2 billion in 2000, and to add more product lines to its Web site.

Amazon’s profit and margins have always been slender; it earned only $645 million in 2008, up 36 percent from the year before, compared to Wal-Mart’s $13.4 billion, up 5 percent. But Wall Street is more enamored by the promise of the online retailer, valuing Amazon at around 60 times earnings and Wal-Mart at 15 times earnings.

“They don’t have to incur huge inventory carrying costs and can add product categories almost ad infinitum,” said Jeffrey Lindsay, an analyst at Sanford C. Bernstein. “Amazon has an almost magical business model in terms of inventory management.”

AMAZON’S incursion into general retail has rivals scurrying to regroup and stop its advance.

In August, Target, which allowed Amazon to run its Web site for the last decade, announced it would end the affiliation when its contract was up in 2011, following other one-time Amazon partners like Borders and Toys “R” Us. This month, Wal-Mart said it would allow other retailers to sell their products on Walmart.com, mimicking Amazon’s third-party marketplace and trying to match its vast selection. Analysts believe Sears, which owns Kmart, is preparing to allow outside sellers on its sites as well.

But the Amazon effect may be most deeply felt by small independent stores, which cannot hope to compete with Amazon’s selection and prices and recall in fear how the company hastened the fate of both independent booksellers and prominent electronics chains like Circuit City.

Like many small business owners, Ken Lombardi, the C.E.O. of his family’s 60-year-old Lombardi Sports in San Francisco, views Amazon as a source of some of his business troubles. Though his store has been hit hard by the recession and the expansion of a sporting goods chain, R.E.I., in the Bay Area, Mr. Lombardi says that it is Amazon that has helped depress profit margins and snagged sales for basics like silicone swim caps, undershirts and running shoes — which, he adds, Amazon can offer without California’s 8.25 percent sales tax.

“People used to come in to buy a pair of running shoes and we would sell them a shirt or a workout outfit. We’re losing that,” Mr. Lombardi, who was recently forced to lay off a quarter of his 75-member staff.

In response to the gathering storm, Mr. Lombardi has overhauled his store, shrinking space for lagging items like Crocs clogs — which are offered cheaply on Amazon. He has added space for newer, hotter-selling items like Sanuk sandals, which are for sale on Amazon at about the same price. He also recently commissioned a new Web site to replace the static old one, which had not changed much over the years

“All we can do is tell a story physically and let people touch and smell and feel the product, which they can’t do online,” Mr. Lombardi said, lamenting his store’s future. “I think we are doing everything we can.”

There may be other ways to beat Amazon at its own game. One strategy discussed by rivals and analysts is to focus on the high-end luxury brands in specific categories, like Ralph Lauren clothes, Chanel fragrances or Wilson Audio speakers. Those companies resist selling on Amazon, fearing the downward effect it has on prices.

In shoes, Nike is perhaps the best example. The shoe giant has steadfastly declined to allow Amazon and most other Web retailers to sell its sneakers, and only late last year allowed some shoes to be sold on Zappos.com, which unlike Amazon does not present itself as a discounter.

Now that Amazon has bought the shoe site, a person familiar with internal discussions at Nike, who was not authorized to speak about the matter publicly, said the company was rethinking its arrangement with Zappos. This may be some comfort to Ken Lombardi, who says Nike shoes are among his store’s top-selling products.

There are similar holdout brands in almost every product category, but Amazon says that number is steadily shrinking. As the number of shoppers using Amazon.com even for basic product research grows, “every year we are able to sign up more and more brands,” said Jon Witham, Amazon’s vice president of toys, sports and home improvement.

Whether Amazon can dominate its newest product categories is another question. In markets like consumer electronics, where Amazon increasingly prevails, products like HDTVs from different companies are usually made by the same Asian factories, with little technical difference between brands. Shoppers then look for the best price and most convenient delivery, which Amazon can offer..."

No Recess from Recession

Quite a few women and families had been spoiled by being cradled in the lap of luxury. These ladies had quit well-paying jobs to start a family and raise children, while their less well-off sisters were struggling to make ends meet.

NYT today reports that "The Great Recession is pushing many highly educated women who had left work to stay at home with their children to dive back into the labor pool, according to several nationally recognized experts on women in the workplace. Many of these women are sending out job applications for the first time in years because their husbands were laid off, fear being laid off or had their salaries cut or because their family’s investments plunged in value..."

Wow...did these people ever think about how the poorer half lived on the planet?

Serving "customers"- not always recommended!

Apparently, the FAA, which is charged with regulating the airlines, will stop calling the airlines its 'customers.' According to AP, "During the Bush administration, the FAA adopted a business model for evaluating its performance and began calling airlines, aircraft manufacturers and others that it regulates "customers." The new term is "stakeholder."..."

It is no surprise that the country is mired in an economic meltdown- the ethics of leaders, both in the private and in the public sector, have fallen to the bottom of the barrel.

Discrimination...

The "news" that was repeated ad nauseam today was former President Carter's argument that racism is still alive in the U.S.. He was referring specifically to the fierce and rather derogatory vitriolic criticism being heaped on President Obama.

An experience in India reveals a population that is far more 'discriminatory" than that of the U.S. More than just a few Indians mistreat and exploit other Indians because the latter belong to a different caste, gender, state, or speak a different language. The tragedy is that the situation has not improved much even over the past three generations, based on the reports that keep coming on. My own experience in India recently confirms this aspect.

There's a long way to go - for Americans, for Indians, and for every one else before we can call ourselves "humane."

Old but current

In today's class a student mentioned the death of Patrick Swayze. QUite a few have seen Dirty Dancing, even though all the students were born in the early nineties.

Equality...just a train ride away

At our lunch party over the weekend, the discussion turned to my summer trip to India. During the conversation one of our guests, who is a senior vice president at a large multinational company, described an Indian feature she really loved- separate lines for women in most places. While there would be a lot of men waiting in line for check-in at the airport, for example, the separate line for women would be much shorter and she would get through quickly.

There is an interesting article in the NYT today- "India’s Railways, Women Find New Peace in Commute." An extract from the article:

"As the morning commuter train rattled down the track, Chinu Sharma, an office worker, enjoyed the absence of men. Some of them pinch and grope women on trains, or shout insults and catcalls, she said. Her friend Vandana Rohile agreed and widened her eyes in mock imitation.“Sometimes they just stare at you,” said Ms. Rohile, 27. Up and down the jostling train, women repeated the same theme: As millions of women have poured into the Indian work force over the last decade, they have met with different obstacles in a tradition-bound, patriarchal culture, but few are more annoying than the basic task of getting to work. The problems of taunting and harassment, known as eve teasing, are so persistent that in recent months the government has decided to simply remove men altogether. In a pilot program, eight new commuter trains exclusively for female passengers have been introduced inIndia’s four largest cities: New Delhi, Mumbai, Chennai and Calcutta. The trains are known as Ladies Specials, and on one recent round trip in which a male reporter got permission to board, the women commuting between the industrial town of Palwal and New Delhi were very pleased. “It’s so nice here,” said a teacher, Kiran Khas, who has commuted by train for 17 years. Ms. Khas said the regular trains were thronged with vegetable sellers, pickpockets, beggars and lots of men. “Here on this train,” she said, as if describing a miracle, “you can board anywhere and sit freely.”..."

Obesity Problem...in Government Figures

Figures on government spending and debt (last six digits are eliminated). The
government's fiscal year runs Oct. 1 through Sept. 30.
Total public debt subject to limit Sept. 11 11,737,418
Statutory debt limit 12,104,000
Total public debt outstanding Sept. 11 11,794,695
Operating balance Sept. 11 207,381
Interest fiscal year 2009 thru Aug 367,839
Interest same period 2009 431,271
Deficit fiscal year 2009 thru Aug 1,378,361
Deficit same period 2008 500,532
Receipts fiscal year 2009 thru Aug 1,885,712
Receipts same period 2008 2,251,414
Outlays fiscal year 2009 thru Aug 3,264,073
Outlays same period 2008 2,751,946
Gold assets in August 11,041

Badly gone wrong...

NYT reports that "Thousands Rally in Capital to Protest Big Government". Apparently " A sea of protesters filled the west lawn of the Capitol and spilled onto the National Mall on Saturday in the largest rally against President Obama since he took office, a culmination of a summer-long season of protests that began with opposition to a health care overhaul and grew into a broader dissatisfaction with government. On a cloudy and cool day, the demonstrators came from all corners of the country, waving American flags and handwritten signs explaining the root of their frustrations. Their anger stretched well beyond the health care legislation moving through Congress, with shouts of support for gun rights, lower taxes and a smaller government."

NYT also reports, in an excellent article titled "Clean Water Laws Are Neglected, at a Cost in Suffering" that "...In the last five years alone, chemical factories, manufacturing plants and other workplaces have violated water pollution laws more than half a million times. The violations range from failing to report emissions to dumping toxins at concentrations regulators say might contribute to cancer, birth defects and other illnesses. However, the vast majority of those polluters have escaped punishment. State officials have repeatedly ignored obvious illegal dumping, and the Environmental Protection Agency, which can prosecute polluters when states fail to act, has often declined to intervene.Because it is difficult to determine what causes diseases like cancer, it is impossible to know how many illnesses are the result of water pollution, or contaminants’ role in the health problems of specific individuals.But concerns over these toxins are great enough that Congress and the E.P.A. regulate more than 100 pollutants through the Clean Water Act and strictly limit 91 chemicals or contaminants in tap water through the Safe Drinking Water Act.Regulators themselves acknowledge lapses. The new E.P.A. administrator, Lisa P. Jackson, said in an interview that despite many successes since the Clean Water Act was passed in 1972, today the nation’s water does not meet public health goals, and enforcement of water pollution laws is unacceptably low. She added that strengthening water protections is among her top priorities. State regulators say they are doing their best with insufficient resources..."

The public, mostly "educated", wants clean water, clean air, affordable health care, safe food supply and so on, but assumes that all these can be obtained simply by saying two magic words- 'charge it.' How can all these services be obtained without paying for them, and who can deliver them without a profit motive except the government or other not-for-profits? The health insurance companies are a shining example of what profit motive does for health care.

Rising from the depths....of the Sub-basement

Today I hosted a get-together with friends who studied with me during my PhD days at Northwestern. Our offices were in the dungeons of the infamous Tech Building of NU- specifically the sub-basement. A big chunk of our lives was spent in this sub-basement labyrinth. Glenn and Xi Ling and their daughter Vivien, Jim and Katrina, Mike and Doris, and Jeff came over for lunch today. Glenn, Mike, Jim and Jeff are the best friends anyone can have- every one of them is quirky, and I am as well. While we did not reminisce about our graduate school days, the bond clearly has survived the assault of time. Our close family friend Navjot joined us and gave us great company and cooking support. As always, the best part of the day was watching the kids- Vivien and my friends Nikki and Dylan and their friend Emily come over and enjoy themselves in the garden.

Making it Easier, or Dumbing Down, for the Customer?

Apparently, marketers of computer products are taking the mantra of "Customer is King" to heart. According to NYT, "Intel, for example, has spent less time talking about its variety of chip brands and more time hawking products under its flagship Core brand...“We have been looking at the automotive industry,” said Ms. Conrad. “Computers have become an emotional purchase like cars. We’re getting very emotional with our marketing and advertising.”And, like carmakers that spend ages fine-tuning the sound of a slammed door, Dell has focused on the touch and sound of its computers. This idea has even carried over to the company’s data-center hardware with replaceable components like fans, which no longer have to just work but must have aesthetic appeal as well. “Things like the feel of a fan module coming out were the things really driving customer perceptions of our products,” said Ken Musgrave, Dell’s head of industrial design. “Was it rattling? Did it drag on the metal?”.."

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If specs confuse a customer, should the specs be eliminated, or should the company demand more of its customers? Isn't an educated consumer a better customer?

Getting "CAR"ried away

GM, with the big bailout from the tax payers, is returning money in an interesting way. According to the NYT article, Buy a G.M., Like It, or Get Your Money Back, "In its first major marketing campaign since emerging from bankruptcy, G.M. is putting its new chairman, Edward E. Whitacre Jr., in the spotlight as the spokesman for its offer to give customers a full refund within 60 days on any G.M. car or truck.

The campaign, called “May the Best Car Win,” is part of G.M.’s effort to change its lingering image as a financially struggling company with substandard products. The first television ads will begin Sunday, featuring Mr. Whitacre, the 67-year-old former AT&T chief who was recruited by the federal government to lead G.M.’s reconstituted board..."

Ford, on the other hand, became the first automaker to endorse a federal ban on sending text messages while driving.

Ford issued a statement in support of legislation proposed by Senator Charles E. Schumer, Democrat of New York, that would cut by 25 percent the federal highway financing given to states that did not comply with a text-messaging ban. Ford also said it supported a similar proposal in the House by Carolyn McCarthy, Democrat of New York.

“The most complete and most recent research shows that activity that draws drivers’ eyes away from the road for an extended period while driving, such as text messaging, substantially increases the risk of accidents,” Susan M. Cischke, Ford’s group vice president for sustainability, environment and safety engineering, said in the statement.

“Ford believes hands-free, voice-activated technology substantially reduces that risk by allowing drivers to keep their hands on the wheel and eyes on the road. Ford supports a ban on hand-held text messaging while driving.”

The ban would not affect use of Ford’s in-car communications and entertainment system, called Ford Sync, which allows most mobile phones to be used hands-free. The system can also read text messages aloud to the driver.

Ford Sync is standard equipment on many models and is available on other vehicles for about $400.

Always In"debit"ed..

One more reason any meaningful recovery is far away...An article in the NYT describes the ways banks are exploiting consumers, educated and uneducated ones.

THE CARD GAME

Overspending on Debit Cards Is a Boon for Banks By RON LIEBER and ANDREW MARTIN

When Peter Means returned to graduate school after a career as a civil servant, he turned to a debit card to help him spend his money more carefully.

So he was stunned when his bank charged him seven $34 fees to cover seven purchases when there was not enough cash in his account, notifying him only afterward. He paid $4.14 for a coffee at Starbucks — and a $34 fee. He got the $6.50 student discount at the movie theater — but no discount on the $34 fee. He paid $6.76 at Lowe’s for screws — and yet another $34 fee. All told, he owed $238 in extra charges for just a day’s worth of activity.

Mr. Means, who is 59 and lives in Colorado, figured employees at his bank, Wells Fargo, would show some mercy since each purchase was less than $12. In addition, a deposit from a few days earlier would have covered everything had it not taken days to clear. But they would not budge.

Banks and credit unions have long pitched debit cards as a convenient and prudent way to buy. But a growing number are now allowing consumers to exceed their balances — for a price.

Banks market it as overdraft protection, and the fees it generates have become an important source of income for the banking industry at a time of big losses in other operations. This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance.

Inspiring Moments

Teaching is a difficult yet rewarding profession. The teaching job, as in other professions, is often lonesome- especially when one is surrounded by coworkers who don't care. The rewards come unexpectedly and make the seemingly futile efforts worthwhile.

This afternoon I was in the middle of our seminar class when a student, AP, came by. She just happened to see me in class and had stopped. Incidentally she was in the same seminar class last year. I asked AP to come in and introduce herself. She did that, and then went on to say how that seminar had changed her life. She added that while it was hard and frustrating at times, it was a great learning experience. I had never expected AP to say that, because I remember her frustrations. It was a pleasant surprise.

After class I went to our Coffee Place and ordered an Iced Chai Latte. I chatted with the student who was making the chai, Monica, and found out that she was a music major. I mentioned a couple of my music students and she knew them. Then she mentioned the name of a student who had graduated a year ago, NK, who was also a musician. Apparently she and NK were really good friends. NK happened to be one of my favorite students of all time. According to Monica NK regarded me as one of her favorite professors. Coming from one of our best students that is high praise.

A double dose of praise- can be unhealthy even for a good teacher.

Not sweet to a consumer's tooth...

The prices of rice, grains, vegetables, and sugar were rising to astronomical levels when I was in India. Global unregulated markets can be a boon and a bane. The poor monsoon season in India means that India has to import large quantities of many basic food ingredients. Even ginger and turmeric, which India used to have in abundance, are in short supply. Sugar prices in the U.S. are also expected to go up sharply, as there is shortage of domestically grown sugar.

Nidhi Nath Srinivas writes an interesting blog, "Something Fresh", in The Economic Times. In her recent piece, Why can’t we buy basmati for Rs 40/kg?, she writes,*** "Rice companies are toasting a reported decision by the government last week to let basmati be exported at a reduced price tag of $800/tonne or close to Rs 40/kg. But if foreign consumers can be supplied this luxury food so cheap, how come you and I are paying through our noses for it?

Logically, if basmati can be exported to Europe, Saudi Arabia, USA and Iran at just Rs 40/kg, we should be able to buy it for even less in local wholesale markets, right? Wrong. Because this price does not exist. Cheap basmati is an oxymoron.

The cheapest basmati variety currently is Pusa and no rice mill in Haryana and Punjab is selling it for less than Rs 60/kg or $1100/t. Add retail margins and you have an MRP of at least Rs 75/kg, which is what we pay mostly. The top-end basmati variety Pusa 1121 is priced Rs 75/kg at factory gate or $1500/t, which makes it the world’s most expensive rice.

Moreover, if Indian consumers are willing to pay two times more for what basmati fetches abroad, surely it would make more sense for our canny brands to concentrate on the more profitable domestic market instead of exports. But they are not. In short, India’s new rock bottom basmati export price is the stuff of consumer fantasies. There is no sign of it in the marketplace.

So why did the government agree to drop basmati's threshold price in the world market for boosting business at a time when the country is short of 15 million tonnes rice?

The answer to that lies in the magic word Pakistan. The rice industry has figured that “threat from Pakistan” is the easiest phrase to motivate or explain away any government decision. And it worked like a charm once again.

Basmati exporters say it is necessary to bring down the MEP to help them wrest back the global market share they lost to Pakistan. Exporters also argue that while some varieties such as Pusa 1121 are incredibly expensive, others such as Pusa Basmati can’t cross the $1100-barrier.

But they omitted to mention three vital facts. One, though they claim to have lost market share, India’s basmati export has actually spurted sharply in the last six months. Two, Pakistan has always priced itself at a 20% discount to Indian basmati. So if the average price in Karachi is $900/t, India at $1100/t is par for the course. Three, there is no basmati available in India for $800/t.

Meanwhile, the decision is certainly troubling for us taxpayers and consumers. For more than a decade now, we have been funding research, export subsidies and legal costs of protecting basmati in the world market all in the name of safeguarding a premium and heritage product.

But now it seems the product has lost its premium positioning. At Rs 40, many other non-basmati varieties cut the grade too. So it’s time taxpayers question government spend on basmati. Availability of rice is an even bigger reason for worry in this drought year. Rice companies have often argued that exporting one tonne of basmati earns enough dollars to import 2.5 tonnes ordinary rice. Not any more. If the Rs 40 price is correct, then exporting one tonne basmati allows India to import less than a tonne long grain rice today. If India turns net rice importer, we won't be able to make good the shortfall.

Consumers have a right to be upset with any export promotion scheme that allows food to leave the country at prices which are not available to them. At a time when parmal rice is retailing for Rs 40/kg in most metro cities, if the government is convinced basmati is also available at the same price, it has been horribly misled. Either that. Or basmati brands are charging us extortionate prices.

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India has a long way to go, and it has not come very far. Especially in the area of ethical human behavior.

Enjoying the garden's humming embrace...

I was working in the garden this afternoon when a couple stopped in front of our house. They were taking a walk and the garden in front of our house had caught their attention. I chatted with them for a few minutes and gave them a tour of the garden. I was aked if I used any bug sprays and I responded that we did not use any chemical or biological weapons.

The WSJ reported recently that "Some small companies seeking an extra benefit for their employees are turning to their backyard for inspiration: a vegetable garden. After laying off an employee, cutting hours and discontinuing raises, Sheryl Woodhouse-Keese, owner of Twisted Limb Paperworks LLC in Bloomington, Ind., invested $600 last fall to create a 1,500-square-foot garden outside the recycled paper-products company's office. Now, her four employees can take home their pick of 10 herbs and 22 vegetables." The garden really is a nice benefit, saving them on their food bills," said Ms. Woodhouse-Keese, who estimates the garden has meted out $2,400 in produce this season, from tomatoes to potatoes. Employer-sponsored gardens can be a cheap and easy way to boost workers' morale, relate better to certain customers and expand a company's health and wellness program. It is unclear how many businesses have them, although the National Gardening Association projects a 19% increase in food gardening this year, as the recession motivates households to trim grocery lists. For a small employer, a garden can encourage camaraderie among co-workers and become "a valuable asset the organization is offering," said Paul Teslak, a professor of organizational behavior and human resource management at the University of Maryland's Smith School of Business. It requires relatively few resources, can help in recruiting and differentiate a small business from its competitors, he said.

Student (mis)behavior

Today's Chicago Tribune has an interesting article on "Rude behavior in college classrooms..."

My experience has been that

a) Quite a few students don't appear to be adequately prepared- for example, I asked students about the material that was used to make the body of a car, and not one had any idea that it was metal.

b) Students are distracted,

c) Students are concerned about the future.

It is not easy being an educator today.

Indian Respect

Teacher's Day is widely recognized and celebrated in India on Sepember 5th, the birth date of Dr. S. Radhakrishnan. It is not as well known in the U.S., surprising because the latter is the home of Hallmark holidays. This year, students from India have been sending me greetings on this day. Calling teachers Sir or Madam and showing respect is quite an Indian trait.

No recovery in sight...ethical recovery, that is.

Yesterday's big news was the report that "the pharmaceutical giant Pfizer agreed to pay $2.3 billion to settle civil and criminal allegations that it had illegally marketed its painkiller Bextra, which has been withdrawn. It was the largest health care fraud settlement and the largest criminal fine of any kind ever...The government charged that executives and sales representatives throughout Pfizer’s ranks planned and executed schemes to illegally market not only Bextra but also Geodon, an antipsychotic; Zyvox, an antibiotic; and Lyrica, which treats nerve pain. While the government said the fine was a record sum, the $2.3 billion fine amounts to less than three weeks of Pfizer’s sales. Much of the activities cited Wednesday occurred while Pfizer was in the midst of resolving allegations that it illegally marketed Neurontin, anepilepsy drug for which the company in 2004 paid a $430 million fine and signed a corporate integrity agreement — a companywide promise to behave...Almost every major drug maker has been accused in recent years of giving kickbacks to doctors or shortchanging federal programs. Prosecutors said that they had become so alarmed by the growing criminality in the industry that they had begun increasing fines into the billions of dollars and would more vigorously prosecute doctors as well...Mr. Loucks, the prosecutor, accused Pfizer of aggressive marketing tactics.“Among other things, Pfizer did the following: Pfizer invited doctors to consultant meetings, many in resort locations. Attendees expenses were paid; they received a fee just for being there,” he said. Such weekend getaways for doctors are still common throughout the drug and medical device industries..."

**********

The article does not even come close to the essential point that is missing in the story. The financial penalty is just taking some cash out of the earnings of the company- a little nick for shareholders who can use a Pfizer band-aid to forget. The managers who committed these crimes have not paid any penalty, and can continue working at Pfizer and commit similar acts again. This is the fundamental issue with Corporate America- no accountability for managers, especially at the top.

Data points...

A few weeks ago I surveyed students in a class in India on their cell phones. More than half had Nokia phones. Samsung and LG were next in popularity. No one in the class had an iPhone or a Motorola phone.

I took a similar survey yesterday in my BUS271 course. 1 out of 17 students had a Nokia phone, 8 had Samsung, 2 had an iPhone, 4 had Blackberries, 1 had Sidekick, and 1 LG. As students on both continents recognized, Nokia phones are rugged.

***

I asked my marketing students yesterday about the material used in cars. Specifically I asked if they knew what material went into the body of the cars, including the doors, engine and so on. Not one of the 24 or so students knew that it was metal- aluminium and steel. The current educational level is scary!

***

We were discussing business models in class, and I asked students about the long-term sustainability of Facebook, YouTube and so on. How will these entities generate sustainable revenues? Today there was a news release stating that "YouTube, the largest video site, is in negotiations with major Hollywood studios for a deal that would let its visitors pay to watch full-length movies, according to two people briefed on the negotiations."

Depressing- but not taken in by Lexapro

Drug makers have long been known to bribe and influence doctors to write Rxs for their pills. An article in the NYT talks about Forest Labs and its effort to increase prescriptions by offering specials to doctors. This is CIP (Common Industry Practice).

September 2, 2009

A Drug Maker’s Strategy Revealed

By GARDINER HARRIS

The pharmaceutical industry has developed thousands of medicines that have saved millions of lives, but it has also used its marketing muscle to successfully peddle expensive pills that are no more effective than older drugs sold at a fraction of the cost.

No drug better demonstrates the industry’s salesmanship than Lexapro, an antidepressant sold by Forest Laboratories. And a document quietly made public recently by the Senate’s Special Committee on Aging demonstrates just how Forest managed to turn a medicinal afterthought into a best seller.

The document, “Lexapro Fiscal 2004 Marketing Plan,” is an outline of the many steps Forest used to make Lexapro a success. Because of concerns from Forest, the Senate committee released only 88 pages of the document, which may have originally run longer than 270 pages. “Confidential” is stamped on every page.

But those 88 pages make clear that one of the principal means by which Forest hoped to persuade psychiatrists, primary care doctors and other medical specialists to prescribe Lexapro was by finding many ways to put money into doctors’ pockets and food into their mouths.

Frank Murdolo, a Forest spokesman, said the company was “aware” that its marketing plan was circulating around the Senate.

“We’re aware of it but I can’t give you any other comment on it,” he said.

In February, federal prosecutors in Boston announced a civil lawsuit against Forest claiming that the company illegally marketed both Lexapro and a closely related antidepressant, Celexa, for use in children and paid kickbacks to doctors to induce them to prescribe the medicines to children.

It is illegal to pay doctors to prescribe certain medicines to their patients. It is not illegal to pay doctors to educate their colleagues about a medicine. In recent years, federal prosecutors have accused many drug makers of deliberately crossing that line.

Lexapro was the sixth drug in a class of medicines that includes Prozac, Paxil, Zoloft, Luvox and Celexa. Forest licensed Celexa from Lundbeck of Denmark and introduced the medicine into the United States in 1998. But because Celexa’s patent life was relatively short, the company quickly developed a new version of Celexa by tinkering with the molecule in a way that is standard in the industry. The company called the new medicine Lexapro and introduced it into the United States in 2002.

Forest’s executives and paid consultants have long implied that Lexapro is superior to Celexa and other antidepressants. But the Food and Drug Administration did not require Forest to test this theory in any statistically valid way. The F.D.A. views the two medicines as so interchangeable that the agency recently approved Lexapro’s use in depressed adolescents based in part on the results of a study Forest conducted using Celexa.

Lexapro had $2.3 billion in sales in 2008 even though generic versions of Celexa and every other drug in the class sell for a fraction of Lexapro’s price. For example, a month’s supply of 5-milligram tablets of Lexapro costs $87.99 at drugstore.com, compared to $14.99 for a month’s supply of a generic version of Prozac. Forest has recently been raising the price of Lexapro to make up for a decline in its use.

Many doctors say they believe that Lexapro is the best antidepressant, so they prescribe the drug despite its cost.

It is impossible to unpack all of the reasons for these prescriptions, but some industry critics say one reason could be the money doctors make from Forest. Psychiatrists make more money from drug makers than any other medical specialty, according to analyses of payment data. And Forest gives more money and food to doctors than many of its far larger rivals. Vermont officials found that Forest’s payments to doctors in 2008 were surpassed only by those of Eli Lilly, Pfizer, Novartis and Merck — companies with annual sales that are five to 10 times larger than Forest’s.

Forest’s 2004 plan for marketing Lexapro offers detailed information about how the company planned to direct this money to doctors.

Under “Rep Promotional Programs,” the document said the company planned to spend $34.7 million to pay 2,000 psychiatrists and primary care doctors to deliver 15,000 marketing lectures to their peers in one year.

“These meetings may be large-scale dinner programs with a slide presentation, small roundtable discussions or one-on-one advocate lunches,” the document states.

Under “Lunch and Learns,” the company intended to spend $36 million providing lunch to doctors in their offices. “Providing lunch for a physician creates an extended amount of selling time for representatives,” the document states.

An entire section of the marketing plan, titled “Continuing Medical Education,” outlines how the company intended to use educational seminars for doctors to teach them about Lexapro. The Senate’s Special Committee on Aging held a hearing in July on whether industry funding of medical education classes leads to tainted talks.

“At our recent hearing we asked the question, ‘Is the line between medical education and marketing blurred?’ ” said Senator Herb Kohl, a Democrat from Wisconsin who is chairman of the committee on aging. His panel was given the Lexapro document by the Senate Finance Committee, which has long been investigating drug maker marketing efforts. “These documents show that for these companies, there is no line,” Mr. Kohl said.