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PUC opens energy research center
Steel mills, other energy users to get attention.
BY KEITH BENMAN
Times Business Writer
This story ran on nwitimes.com on Saturday, October 23, 2004 12:14 AM
HAMMOND -- Purdue University Calumet plans to put itself at the
forefront of research on industrial electric conservation with a new
Energy Efficiency and Reliability Center.
"This is the right place at the right time for this," said Robert
Kramer, the center's director, on Friday. "So many of our industries
in Northwest Indiana are diversifying. And this can be a driving
force to increase economic development and the viability of industry."
Northwest Indiana, with energy needs ranging from expanding suburbs
to some of the nation's largest steel mills, is the perfect lab for
testing new concepts in electric reliability and efficiency, Kramer
Plans for the center were announced by Nabil Ibrahim, Purdue Calumet
vice chancellor for academic affairs, during a seminar conducted by
the American Association of Blacks in Energy at the college's 16th
annual job fair.
The job fair, also sponsored by Northern Indiana Public Service Co.,
highlighted careers in energy. But it also included about 80 other
employers ranging from the Chicago Police Department to Community
Health Care Systems.
Among the Energy Efficiency and Reliability Center's first projects
will be a combined heat and power project at Purdue Calumet's
Physical Education and Recreation Building, Kramer said. The project
will produce electricity on site and may include solar as well as
The center already is seeking grant money for larger projects,
including increasing reliability and efficiency at area steel mills,
particularly in blast furnace and rolling operations. It also has a
proposal to develop a new process for using Indiana coal in the
production of coke used in blast furnaces.
Steelmaker Ispat Inland and the Steel Manufacturers Association are
participating in the center. So is the Indiana Business Modernization
and Technology Corp., NiSource Inc., Whiteco, Advance Power
Technologies, and Primary Energy.
The University of Notre Dame, University of Denver and other Purdue
campuses will also be collaborating partners.
Purdue Calumet is already involved in steel industry research. A team
headed by Chenn Zhou, a Purdue Calumet professor of mechanical
engineering, has secured a $1.29 million grant to extend the life of
blast furnaces through better erosion detection.
Keith Benman can be reached at kbenman@... or (219) 933-3326.
RNA Treatment Used to Lower Cholesterol in Mice
NPR's Joe Palca
How RNAi Works
1. Scientists create a short, double-stranded RNA with a genetic code
complementary to that of the targeted disease-causing gene -- in this
case, the "bad" cholesterol-causing ApoB.
2. Within a cell, this short, double-stranded RNA unwinds and gets
incorporated into an RNA-protein complex -- in this case, a compound
that resembles cholesterol. Cells that make cholesterol also take up
cholesterol, so adding the cholesterol molecule to the RNA ensures
that the complex is taken up by the targeted cells.
3. Inside cells, the two strands of the targeted RNA unwind and
degrade. This shuts off the production of the targeted protein -- ApoB.
All Things Considered, November 10, 2004 · Researchers have
successfully used a technique that selectively shuts off genes to
lower levels of LDL, or "bad" cholesterol, in mice. The findings,
reported in the journal Nature, suggest that RNA interference may be a
revolutionary development for medical science. NPR's Joe Palca reports.
RNA Interference: An Explainer
Genes are made up of chunks of DNA. Each gene contains the
instructions to make a particular protein. Proteins do the work of our
cells -- digesting food, releasing energy, sending signals to other cells.
To make a protein, another molecule called RNA (ribonucleic acid)
reads the DNA instructions and then directs the protein's assembly.
Think of RNA as a construction worker, who actually builds a house
after reading an architect's drawings.
Most RNA is single stranded. Until 1998, researchers had thought only
single-stranded RNA had an effect on gene expression. But recently,
scientists discovered that relatively short, double-stranded RNA can
be used to turn off certain genes -- without triggering a defensive
response that results in cell suicide. This selective silencing of
specific genes is called RNA interference, or RNAi.
In the Nov. 11, 2004, issue of Nature, scientists report they were
able to use RNAi to lower cholesterol in mice. The researchers,
affiliated with Massachusetts-based Alnylam Pharmaceuticals, used RNAi
to turn off ApoB, the gene responsible for making the "bad"
cholesterol known as LDL.
Data is Daniels' first order of business
EYE ON THE PIE with Morton Marcus
BY MORTON MARCUS
Times Business Columnist
This story ran on nwitimes.com on Sunday, November 14, 2004 12:19 AM CST
Congratulations to Governor-elect Daniels. That's enough of the kind words.
It's time to get to work.
The new governor is picking the members of his team, opening lines of
communication, and all that necessary stuff. But is he considering the kind of
information that the people of Indiana will need to assess change and
Mitch Daniels, Joe Kernan, and every governor before them, have been
stumbling in the dim shadows of reality. They don't know enough about
conditions in Indiana to make informed decisions.
Why are they so ignorant of conditions in our state?
It's simple. Our state agencies do not have the resources, the direction, nor
the incentive to organize, utilize, and analyze the data they already collect.
Let's take an obvious case. What is the average duration of unemployment for
workers in Indiana? Now break that number down into sectors: manufacturing,
retail trade, etc. How about a readout by skill or age of the worker?
Or break it down by county. Excuse me a moment, I'm going online to find
those pieces of information.
OK. I'm back without any of the information.
There are many pieces of data at the Web site of the Department of Work
Force Development, but not what I was seeking. Was I unreasonable in my
choice of data items?
What about the health of our citizens? I'm off to the Department of Health Web
site to find out how many Hoosiers were treated last year for heart conditions.
Back in a moment.
Sorry to have been away so long. I found data for 1996(!) on how many
patients were released from hospitals after various cardiac procedures, but
there was no summary I could find.
Mr. Daniels, sir, you are presumed to be a person who believes in the utility of
good information. Your experience at the Office of Management and Budget
should have strengthened that belief. Now, in your earliest days guiding
Indiana's future, prove it.
I urge you to include in your administrative structure an information "czar" who
will act with your blessings and authority to get you, the legislature, and the
public the data needed not for running the agencies, but for guiding policy.
This person should be professional, not partisan, if there be such a person in
Indiana. This person should not be drawn from the information technology
area, but from the community of information users both within and outside
That community includes newspapers, university researchers, citizens
groups, and even the lobbyists who will be pounding on your door.
The task of this person would be to redirect the internal thinking and
resources of various state agencies so that policy can be made on the basis
of data already collected before any call is made for new data collection.
But new data collection should be encouraged when its costs are low and its
We have made numerous mistakes because we did not consider the data
sufficiently (think about the reassessment of real property and the
irresponsible, hysterical reaction of the General Assembly). Now is the time to
begin a systematic program of change in state government record keeping
and data mining.
Now Mitch can make the pitch to get us out of the ditch.
Morton Marcus is an economist formerly at the Kelley School of Business,
Indiana University. His column solely represents the opinion of the writer and
not necessarily that of The Times.
Maryland's Motto for MBAs
Succeeding in business is all about building relationships," says
Janet Richert, Managing Director of the B-school's Office of Career
Janet Richert is the managing director of the Office of Career
Management at the University of Maryland's Robert H. Smith School of
Business No. 28 on BusinessWeek's 2004 list of top 30 business
schools) in College Park, Md. Before arriving at Smith about a year
ago, Richert was an executive at the pharmaceutical and healthcare
giant Roche for 20 years. As faculty advisor to the
biotech/pharmaceutical club, she says she plans to leverage her
connections to attract more recruiters in those industries. Since
helming career services, she has hired four more staff members to
develop relationships with potential corporate partners.
In 2004, students and recruiters ranked Maryland's placement office
third worst among BusinessWeek's list of top MBA programs. Graduates
criticized the school ineptness in helping first-year students find
summer internships, and said recruiters were indifferent to the
program. But Richert says things are already improving at Maryland's
career-services office. She recently spoke with BusinessWeek Online
reporter Francesca DiMeglio. Here are edited excerpts of their
Q: What's your reaction to the criticism in BusinessWeek's 2004
business school rankings?
A: Frankly, we were surprised at some of the findings, but we do take
these rankings seriously. We need to do away with past perceptions
about our lack of service. We're building an excellent career
program, and the placement data speaks for itself. [About 65% of MBAs
had at least one job offer by graduation, and that number rose to 91%
three months later.]
Q: What are some of the services you offer MBAs?
A: We've forged a number of first-of-a-kind partnerships, including
one with Stanton Chase International, an executive-search firm that
trains Maryland students and introduces them to potential employers.
This week also marks the first Career and Communications Boot Camp, a
series of intensive programs to improve first-year students' business-
writing and oral-presentation skills, personal and professional
polish, and research proficiency. For example, students are
delivering impromptu speeches that we're videotaping for critique
later. All of these workshops are being delivered by outside partners
who usually work with corporations on boardroom-level issues. The
idea is to provide students with survival skills they'll need to
become true leaders.
Q: What's your philosophy on building a career?
A: When MBAs arrive at Smith, they have a lot of preconceived notions
about what they can and cannot do. They need to recognize their
weaknesses and take advantage of every opportunity we offer them to
improve in those areas. Ultimately, they must take ownership of their
job search. They need to take a long, hard look at themselves and be
open to the possibility of change.
Q: How do you market your students to recruiters?
A: We're one of the few schools that weaves supply-chain and
logistics elements into core courses. Also, our marketing department
is world-renowned for being at the leading edge of customer equity
Q: What recruiters are you attracting?
A: Our No. 1 recruiter in 2004 was Avaya, which placed a number of
our students in its leadership-rotation program for tech-savvy MBAs
with the potential to become great general managers. The presence of
a number of manufacturing companies, such as General Electric,
Johnson & Johnson, Philips, and Delta, was new for us. Intel scooped
up a number of our graduates and brought them to the West Coast.
Financial-services employers -- Wachovia, the World Bank, and UBS --
rounded out our list of top 15 recruiters.
Q: Do you offer any perks to recruiters?
A: On-campus recruiters enjoy 16 beautiful, fully networked
interviewing rooms and a separate employer lounge, thanks to a recent
$38 million expansion. We also make every effort to market our
employers to students because we realize that it works both ways.
Q: How did the Class of 2005 fare with summer internships?
A: About 75% had summer internships, according to a recent survey
we're conducting internally. Nearly half of them reported that they
obtained their internship through the career-services office. Those
numbers might be higher, considering not everyone has responded yet.
Q: Do you offer any special services for international students?
A: We focus heavily on the international population [because they
account for nearly 40% of the incoming class]. In addition to
providing specialized workshops for international students, Stanton
Chase, which has offices in China, India, Eastern Europe, and Latin
America, introduces MBAs to potential employers abroad. About half of
our international population chooses to work in their home country.
The remainder were either company-sponsored and have to return to
prior commitments, or are absorbed into U.S. rotation programs for a
year, after which they usually return to their home countries.
Q: What services do you offer part-time students? A: In September, we
rolled out the Smith/DBM Online Career Center, a Web site that
delivers career services to the more than 1,000 part-time MBA
students scattered across four campuses. The virtual center includes
a powerful online job-search engine, and a team of DBM-employed staff
that schedule live Webcast seminars on everything from structuring
your job search to rιsumι writing.
Q: What advice do you hope to pass to graduates? A: Work hard, do
your time, and understand that succeeding in business is all about
Robert H. Smith School of Business
University of Maryland
HP Chairman, CEO, and Smith alumna Carly Fiorina
In this speech before an audience of more than 300 leaders and Smith
MBA students, HP Chairman, CEO, and Smith alumna Carly Fiorina
discussed her experiences at the school, and shared her thoughts on
the qualities of good leadership. She also discussed HP and her
experience with the merger, and offered her thoughts on the past,
present, and future.
Thank you and good morning. It is a great pleasure for me to be back
here at the University of Maryland Business School. I was reminded
this morning by the president here that the last time I came, I
actually was still at Lucent Technologies, so that makes it like four-
plus years ago. I want to talk this morning about both leadership
and technology. First, because I think that's what this place is all
about, and secondly, because as the dean quoted, I think they are
very much linked.
But before I do that, I want to just spend two minutes on a personal
story of how I ended up here and what this place meant to me, because
for those of you who are here or listening in other rooms who are
students who perhaps feel a bit uncertain, a bit unsure of
yourselves, maybe my story can provide you with a little inspiration.
I was saying this morning that I actually almost didn't get into the
University of Maryland at all. I had graduated from Stanford with a
degree in medieval history and philosophy, and I went off to law
school because that's what my father wanted me to do. I thought I was
going to be a lawyer. I hated it. I quit after a semester, and
wandered off into the world to find myself, and did some strange
things.I answered the phone and typed for a year at a commercial
brokerage company. This was in the '70s when young women with degrees
in medieval history probably weren't considered a great bet. And then
I went off to Italy to teach English, and from Italy, I decided to
apply to the University of Maryland Business School. Because it was
in Italy, my application was late. And so the university, not really
getting quite the connection of medieval history, and she's applying
from Italy, and it sounds like she doesn't really know what she wants
to do with her life -- they rejected the application.
Eventually, I made my way to Dean Lamone, who was the dean at the
time, who agreed to change his mind, and they let me in. And
throughout the period that I was here, I can tell you that I had
great interactions with students, but it was deans and professors,
most particularly Dean Lamone, who made a huge difference in my life
by taking a chance on me, by taking me seriously - one of the first
serious people to ever take me seriously - by asking me to do a major
project for him, and by encouraging me every step of the way.
He as a leader saw something about leadership in me and gave me a
different view of what was possible. And that is, in many ways, what
leadership is all about.
I also had wonderful professors like Ed Locke, who actually wanted to
write a paper with me, and eventually we ended up getting it
published together. And once again, it showed me a whole different
point of view about what was possible.
Professors like Bill Nickels for whom I was a teaching assistant and,
frankly, he and I used to argue a lot because we didn't agree on many
things. But that was also a great lesson for me. The truth is, we
agreed on a lot as well, but I learned about discourse and debate.
So my years here were truly formative, not just in terms of the
skills I learned, and the subjects I mastered, and understanding what
marketing was about, and understanding what operations research was
about, and organizational behavior. It wasn't just the skills and
capabilities. Here I learned a different notion of what was possible.
And I think, in very great measure, that is what leadership is about,
and that is what education is about.
Rudy Lamone, in seeing something in me, in letting me see a different
sense of possibility for myself, was exhibiting leadership. And so to
begin by talking about leadership, I think one of the most important
qualities a leader can bring is the ability, the energy, the desire
to unlock potential in others. I think leadership is ultimately about
helping other people achieve more than they think is possible;
helping people see a different set of possibilities for themselves.
Let me also say a couple things about what I think leadership is not.
I don't think leadership is about title. I don't think it is about
stature. I don't think it is about how much money you make, or how
many people work for you, or what your ranking is on any particular
list. I think anyone can lead from anywhere at any time - which is to
say that I believe that first, leadership is a choice; and, secondly,
that leadership is about making a positive impact. And anyone can
make a positive impact.
Some acts of leadership are very large, and happen on a large stage
and a big campus, and some acts of leadership are quite small. But
like a stone you drop in a pond and it has ripple effects, sometimes
even very small acts of leadership can have a huge impact. And of
course, it follows that if anyone can choose to lead at any time from
anywhere, then it is the role of leaders to find leaders and to
unlock for them the possibility that they can make a positive impact.
And, by the way, while it may sound very philosophic in some ways, I
think that is, in many ways, the essence of business, the essence of
entrepreneurship, the essence of moving the ball forward.
Leadership is about fundamentals, as well. The fundamentals of
character counts; the fundamentals of integrity matters, and I think
in many ways, the scandals of the late '90s and the early part of
2000, where we have seen too many CEOs take the wrong path and make
the wrong choices, have been about a failure of fundamentals -
fundamentals like a CEO's job is to manage the company, not manage
the stock prices; fundamentals like it is a CEO's job to balance the
short term and the long term, irrespective of the pressures of Wall
Street. It may not be easy, but it is what we're paid for.
Fundamentals like it is a CEO's job to balance the needs, the demands
of multiple constituencies - investors, employees, customers,
communities. And those four constituencies do not always have aligned
interests, and it is the job of the CEO to balance those requirements
and those interests. That is not an easy job. It is what a CEO is
paid to do. And any time a company, in my judgment, gets one of those
constituencies out of balance with the other, bad things happen over
We have seen in some economies around the world where the interests
of employees become so paramount that a company or a country is
hamstrung and straitjacketed. We have seen as well the dangers when a
company gets so guided by investors alone that the wrong choices are
made for employees, for customers, and for communities. And of
course, it is always true that customers would much rather have as
much as you have for as cheap as possible, and so how do you find the
right notion of value for a customer that also delivers value for
investors and employees, and ultimately, communities, if CEOs are
thinking about a decade - and I do think a CEO has to think about a
decade. Yes, short-term execution is important, but ultimately, I
think short-term execution without a long-term strategy ultimately
leads nowhere, while it is also true that a long-term strategy
without execution leads nowhere.
But communities, if a company leaves a community worse off than when
it found it, that ultimately has a huge negative impact on the
business. Likewise, Hewlett-Packard is a company very engaged in
communities, very engaged in reaching out and finding potential and
talent in underserved and underrepresented and under-accessed
communities all around the world. Many people call this work that we
do philanthropy or charity. I call it smart business, because
ultimately, as a business we think as we reach into these
underserved, under-accessed, underrepresented communities, whether
they are in East Baltimore or whether they are in South Africa -- we
are building, we believe, entrepreneurs of the future, employees of
the future, customers of the future, and partners of the future. So
I think as well that leadership is a journey, not a destination. And
again, it perhaps sounds so obvious, but I think successful
companies - like successful people, like successful leaders - know
you never arrive. You never rest on your laurels. You never stop
learning. You never stop adapting. It is a journey, not a destination.
When I first came to HP, I quoted Charles Darwin, who said, "It is
not the strongest of the species that survives nor the most
intelligent, but those most adaptive to change." And the reason I
quoted Darwin is, first, because HP as a company had a great legacy,
a great history. It was a great company. But in many ways, it had
fallen so in love with its legacy and its past that it had forgotten
to build its future. And the vaunted phrase, "The HP Way," which at
its core is about fundamental values like passion for customers, and
trust and respect, and highest standards of integrity, and
contribution to community, and innovation, and contribution, and
teamwork and collaboration - values that guide our company to this
day. But that phrase "The HP Way" had become a shield against
change.No, we don't do it that way; it's not the HP way.No, we can't
think about something different; it's not the HP way. And so when
people or companies get locked into a certain way of doing things;
that is, when people start to become less successful, then companies
start to lag and ultimately lose.
Someone on my board said something very wise one day. He said, "You
know, Carly, if you look at people when they reach over 40, the thing
that distinguishes people who continue to grow and succeed past 40
and people who stop succeeding, is the ability to learn. And I think
that is so true - the ability to learn and adapt.
And I guess the final thing that I would say about leadership is
power, which always comes, I think, from the connections between
things. In some ways, this school is about the connection between
things. This school is about the connection between technology and
business. In many cases, when we do research and development at HP,
we find our biggest breakthroughs come when we bring disciplines
together that generally have not worked together. Nanotechnology, for
example, is all about bringing computing and biology together in some
really interesting ways. Nanotechnology will, in fact, change the
world fundamentally in our lifetime.
If you think about where we are now in the networked age, why is the
Internet such a powerful tool? Because it connects things, it
connects people, it connects ideas. All of you are familiar, I'm
sure, with Metcalfe's law, which basically says that a network is
powerful based upon the number of connections. And that is true in
leadership as well.
Nothing important, nothing valuable, nothing significant, nothing
happens when a single person acts alone. Nothing. And while I took
the heat during the merger, which is appropriate - that's what CEOs
are paid to do; frankly, I now get way too much of the credit because
like anything else, it was a huge team effort to do what we had done.
Power comes from the connections.the connections between things, the
connections between people, the connections between disciplines. And
in many cases, one of my most important jobs as the CEO of a company
that is now almost $75 billion - we operate in 176 countries; we have
140,000 employees; we spend $4 billion a year on R&D; we generate
five patents a day; our rate of innovation has accelerated 350
percent in the last two-and-a-half years - in many ways, my most
important job is to make the connections between ideas, between
people, between disciplines.
So my view of leadership is it is all about unlocking the potential
in others and getting others to see possibilities they did not think
of before, and helping people achieve more than they thought was
possible. Leadership is about the fundamentals of value and character
and judgment and balance. Leadership is a journey, not a destination,
and those who stop learning and stop adapting start losing. And the
power is from the connections between people and things and ideas,
and frequently a leader's most important job is to connect things.
I want to talk a little bit, of course, about HP as well. The merger
between HP and Compaq was controversial, to say the least. One of the
things that I think leaders have to do also - leading companies,
leading people - is to see things before everyone else sees them.
When something is obvious, it may well be too late. And while I have
the greatest respect for a company like Kodak, for example, I also
believe that one of the reasons that the market has reacted in the
way the market has to Kodak's change in strategy is because it has
become absolutely obvious to everyone that traditional photography is
dying and digital photography is winning.
The time to act is before it's obvious. The time to act is when you
still have time to change. And we acted to have the audacity to say
high-tech mergers can work and we can pull off the largest merger in
the history of the technology industry. But we did it not to break
records, and I wouldn't have wished the fight we had on anyone -
although I would do it again if I had to. But we did it because we
knew that technology was changing, and how customers would use
technology was changing. And, therefore, we had to change, because
leadership was the only goal worth aspiring to for a company with our
Why do I say technology was changing? Well, in some ways, it's
reflected in the quote that the dean honored me with. You know, there
are two schools of thought right now in terms of technology that you
can read. Both of them, in my judgment, are dead wrong, but there's
that famous article from that other business school, which I'm not
associated with. That famous article that was written in HBR: IT is
dead - IT doesn't matter. And basically the thrust of that article,
if you've read it, was it really doesn't matter, I mean, it's totally
commoditized; it can't really drive competitive advantage anymore.
There is another school of thought that says as soon as the economy
turns around, it's all going to just go back to the way it is. We're
going to have, you know, massive growth in the technology industry.
It's going to be a very rapidly growing sector. And in some cases,
you see that reflected in the NASDAQ, where you once again have
technology companies in some cases with PEs of 70 and 80 and 90-plus.
That is wrong as well. We are not going back to the '90s in terms of
the hot box, the killer app, and growth of 30 percent, 50 percent,
Technology has become core to every business. It will be core in
every home. And it is the difference between people who will succeed
in this economy, countries that will succeed in this economy.
Technology and business, technology and life, truly are inextricably
linked. And if you think about the challenges we face in our society,
whether those challenges are education or health care or economic
development, each and every one of those challenges will not be
solved without the application of technology.
And when technology becomes incredibly core to everything that is
going on, the requirements for what technology has to do go up.
Customers - users - become more demanding. Technology is no longer a
science experiment. It is no longer something that only the CIO can
understand. It isn't something for the geeks in the back room. All of
a sudden now technology is really mission-critical.
I like to tell people, because it's true, that CEOs today may be
spending less money on technology, but they understand it better, and
they have much greater demands for it. And, among other things, they
are - and they should if they're not - demanding that an investment
in technology be evaluated like every other investment they make:
clear return criteria, absolute discipline around program management,
and change management. It ain't in the back room anymore. It is in
the front office and is core to competitive advantage.
And so when something becomes critical, core, key, central,
inextricably linked from success in life, or success in business,
then the bar goes up. And we knew we had to build a stronger, more
Now, let me also say in what may sound like a shameless advertisement
for my company, but let me tell you a little bit about what's
different about HP, because we have built a company specifically
designed to respond to the fundamental shifts we see going on in
First, our portfolio is unlike any other technology company's in the
world. We are the leading imaging and printing company in the world.
We are a leading personal systems company. And just to give you a
sense of how consolidated the PC market is today, Dell and HP are
separated today by 500,000 units between number one and number two.
Just to give you a sense, 500,000 units doesn't even represent our
volume in a single month. And the next three players in the PC
industry - IBM, Fujitsu Siemens, Toshiba - have combined, less market
share in the PC space than HP alone. This is a market that is rapidly
consolidating, and it is coming down to a very-few horse race.
We are a leading provider in enterprise systems; the number one
player in Linux servers - we do about $2 billion, which is twice the
next player - Linux servers, NT servers, UNIX servers,
supercomputing, the leading player in storage, the leading player in
management software, and we are now the number three player in
managed services outsourcing. IBM today is number one in terms of
revenue, although they have only nine percent market share.very
fragmented market. EDS is number two. We are currently number three.
We will be number two in several years at the pace that we are
That portfolio -- from imaging and printing, to personal systems, to
enterprise systems, to professional services - there is no other
portfolio like it anywhere in the technology industry.
The second thing that's unique - and by the way, we fought hard to
keep that portfolio together. Many people said, "Why don't you spin
off imaging and printing? Why don't you spin off PC? Take apart this
portfolio." We kept it together because of what we see happening in
The second reason we're unique is because we are the largest consumer
technology company in the world. We are the largest small-and-medium
business technology company in the world. And we are close to, not
quite the largest, enterprise technology company in the world. That
span from consumer to enterprise is unlike any other, as well. Over
one billion customers use HP products. We power 95 percent of the
world's securities transactions. 65 percent of the world's energy
infrastructure is powered by our capability. We are a far-reaching
Now, why did we keep that portfolio together? Why have we built this
company in this way?
First, because in an industry where the bar is very high, and CIOs
and CEOs and Mom and Dad at home have very high requirements for what
technology has to do, if you're not leading, you're losing. So
leadership positions are important in technology now. But it goes
beyond that. We see three really fundamental things going on in
First, every process - and those of you who are CIOs know this -
every process will become digital, mobile, virtual; every process. I
spoke of Kodak earlier. What has happened to Kodak? Traditional
photography, a physical, chemical process of limited flexibility,
time and labor intensity, and in many cases, dissatisfaction - how
many prints do you throw in the bottom desk drawer? That process has
become a digital process. You take a picture. You create digital
content. By the way, what is a camera? It is a computer with a lens.
You create digital content. You manage that content. You network that
content. You manipulate that content. You store that content. You
edit that content. And when you are ready, you transform that content
into something you can hang on your wall or hand to your friend. That
process has been digitized.
Now it is becoming mobile. So I know many of you have probably a cell
phone camera. HP, for example, just announced a collaboration with
Nokia where every Nokia camera cell phone is now print-enabled.all
you have to do is point yourself at an HP printer and it prints.
Now, digital process, mobile process, and virtual in the sense of
anytime, anywhere - that will happen to every process. Every process.
It must happen to the process of healthcare. It is happening to the
process of education. Every physical process will become digital,
mobile, virtual. And when those processes become digitized, what does
a digital process require? It requires computing, storage,
networking, management, services, and yes, imaging, because
ultimately - by the way, we've done a lot of experiments with kids.
We watched kids who are computer literate, and we brought them into
our labs and we watched them use the computer and print. And we asked
them: "Why do you print what you print?" The answer was
interesting: "Because when it's on the screen, it's out there. When I
print it, it's mine."
Think about it. It is kind of how we all operate. When we want it to
be ours, when we want to own it, then we want to touch it. Every
process will become digital.
Second trend: This technology is complicated stuff. The truth is it's
becoming too complicated. And so now the requirement is for
simplicity and manageability, and the requirement for simplicity and
manageability is going to change what technology companies deliver,
and it's also going to change how people work and how people operate.
The biggest barrier to technology adoption today is complexity. It
has to become simple and manageable.
And, finally, it is a horizontal, heterogeneous, connected world. It
is a horizontal, interconnected, heterogeneous world. By the way,
that's a real different point of view for a company. Most companies
had thought about themselves vertically. Most companies had built
their IT systems vertically. They've created stand-alone islands of
automation around specific processes, specific applications, specific
divisions, specific departments. And, by the way, what they have when
they've done all that is something that is too expensive, way too
complex, and they can't make the connections between things, between
people, between processes, between applications.
And so, we believe companies now have to literally think completely
differently about what an enterprise is. An enterprise is to us - by
the way, this is how we have managed our integration; it's how we
manage it, and it's how we deliver technology to our customers.
Enterprises and technologies are no longer about vertical chains of
command and stand-alone islands of automation. Enterprises are
horizontal collections of processes, supported by applications,
supported by technology.
That horizontal, heterogeneous, connected world is why we believe
it's important to have the portfolio we do. It's why all of our
software strategy is focused on management - management of
heterogeneous worlds. It's why we believe we have to lead in Linux
and NT and UNIX. It's why we think our great contribution in terms of
Web services is making .Net and J2EE interoperable, because guess
what? They're both going to be around. And it's also why we believe
that ultimately customers now are unwilling to make any trade-offs.
What do I mean by that?
Customers frankly, again, whether it's Mom and Dad or whether it's a
CIO, customers now - let's go back to the '80s. A CIO in the '80s
said if it's reliable, if it's stable, if it's on budget, that's good
enough. In the '90s, it was: it's got to be fast; it's got to be
flexible; and, by the way, spend whatever you need. Most CEOs,
frankly, were embarrassed that they didn't understand what their CIOs
were asking for, and generally gave them the money. And now - you all
remember the good old days, that's how it was. - And now, people are
saying, "You know what? I need it all. I need lower total cost of
ownership. I need higher quality. I need better reliability. I need
simplicity and manageability. I need security. I need consistent,
sustainable innovation. And I need my technology to help me adapt,
not to hold me back." That is a tall order. But it is what customers
demand, and it is why we have built a company that we think can
And it is the same for consumers, by the way. We just launched our
biggest product launch into the consumer market in the history of our
company - 158 new products in a single day. By the way, think of the
supply chain it takes to do that in 176 countries.
But those 158 products are focused on the experiences of digital
imaging and digital entertainment. And the big barrier to technology
adoption in the home today is it's too complicated, it doesn't work
Every process will be digitized. It is all about simplicity and
manageability. And it is a horizontal, heterogeneous, connected
The last thing I will say - and then I'll stop here and take your
questions - is that, if you think about that list of requirements
that I've just laid out that customers have now that they really
can't compromise on, really can't compromise anymore between lower
total cost of ownership and innovation, or between reliability and
innovation, you really can't compromise anymore. That, for us, has
First, we are building a value proposition. We deliver a value
proposition to our customers that we describe as high tech,
sustainable, reliable innovation, and low cost. We think that cost
structure is a competitive weapon or a competitive vulnerability.
There is no in-between. And when customers demand consistently lower
total cost of ownership, it better be a competitive weapon. And a
best total customer experience. And we use the term "experience" in a
very disciplined way. We measure it. We track it. We have engineers
now who design experiences, not products. And designing experiences
means thinking through the software, the hardware, the networking,
the out-of-box experience -- all of it. High tech, low cost, best
total customer experience.
And the second thing it means for us is when we think about our $4-
billion worth of R&D and our five patents a day, we're really focused
on security and mobility and rich media and management. And we think
about those things, security and rich media and mobility and
management, not this way - a product at a time, but this way - a
process at a time, a system at a time, an application at a time.
So, let me go all the way back to the beginning, which is business
and technology are indeed inextricably linked. I have had a great
privilege to lead a great technology company, and one of the reasons
that I get so excited about what I do is because I talked about
leadership being unlocking the potential in people. I think when
people are animated by the right sense of possibility and the right
goals and they are empowered by the right tools, that everything is
possible. We use that tag line in our ads. I actually believe it. Not
everything's easy. Not everything happens right away. But everything
is possible. And technology is a great tool that unlocks potential in
businesses and in people. And that's what gets me up every day.
DEAN FRANK: We have some written questions. We're going to alternate,
and then take one or two questions from the floor.
This was actually the question I was going to ask, but somebody else
asked it anyway. What challenges did you have to overcome to craft
Compaq's and HP's distinct cultures into one? Where are you in the
process? What challenges are still ahead of you in this respect? And
how did these impact everyday business operations?
MS. FIORINA: Well, let me say first it's a very important question.
We manage HP as a system, and we have something we call the
leadership framework, which describes what makes up our system. And
it's strategy, structure and process, rewards and metrics, culture
and behavior. Strategy is purpose, objective. What are you trying to
Structure and process, and rewards and metrics are in many ways the
hardware of the system. Structure and process - how do you organize,
get work done? Rewards and methods - what do you incent, what do you
measure? And, by the way, if you don't measure it, it won't get done.
Bill Hewlett said it decades ago, and it's still true.
Culture and behavior is the software of the system, and anybody who
tells you, well that's the soft stuff - doesn't get it. The soft
stuff is the hard stuff. And just like a computer system, if the
software doesn't work with the hardware, you're going to have a
So understanding that, one of the first things we did when we took on
the merger was to go through a process that we call cultural due
diligence. You know, you do financial due diligence; you do technical
due diligence, and you do cultural due diligence. And we were focused
on learning two things. We did thousands of interviews of people in
both companies all around the world, and we wanted to know two
things: What do we have in common? And what's different?
Interestingly, what we found was we had a great foundation to build
on because everybody aspired to the same values. And in fact, I
mentioned that the values we are guided by today are exactly the same
values that have guided HP for six decades - with one addition -
addition, not subtraction.Speed and agility, because for a technology
company in particular, you better move at the speed that your markets
and your customers require, not always at the speed that's
comfortable for you.
But that foundation of common aspiration around values, who are we?
What do we stand for? What do we believe? That gave us something to
We also wanted to know however, what's different. Because I think
diversity is a competitive weapon - diversity in all its forms. And
when you have people who all think alike, act alike, look alike, and
do things the same way, you are going to start to have trouble as a
business. And so, we wanted to find the points of diversity, which
for us, were the points of leverage. And we found a couple of really
Example: HP people tended to look to the past for judgment. Compaq
people tended to look to the future. History is important. I was a
history student, after all, but it is not enough.
Another example: HP people tended to be process-intensive, but
sometimes we processed forever and never decided. Compaq people
tended to be faster and more decisive, but they had a lot of do-overs
because they hadn't always thought it through. So they would start
down a path and then have to U-turn. The goal: We are going to
leverage process intensity and thoroughness with speed and
So we were very explicit from day one. In the first six months when
we brought this company together, we put every single employee - it
took us four months - through a one-day, what we called Fast Start
Program, which was all about what are we trying to do, what's the
culture we're trying to build, and we were very explicit about what
do we hold in common, what are our values, what are non-negotiable if
you want to work here, and what are the things that we're trying to
leverage. Bring the best of both, strengthen both. Very important.
The second thing I would say in this regard is the way we integrated
and reinforced this. We used a process - and by the way, when we
first announced the merger, we said we would finish it in 2004 and
take $2.5 billion out of cost structure, and lose between five and
six points of market share. We finished in 2003, we took $3.5 billion
out of cost structure, and we held or gained share in every category.
So we think we did reasonably well against the metrics we set for
ourselves, but one of the principles we used in integration was what
we called "adopt and go." And what we said was, right from the
beginning, we are going to pick the best person, the best product,
the best process from one or the other company. You don't get to take
a little of this and a little of this and mix it together and create
nirvana. It's not what we're going to do. We're going to pick the
best from each, judged by some fairly objective criteria, and we're
going to go.
And the result of that was not only speed and decisiveness, but the
result was an integrated company. If you look at my direct team, it
is 50/50 from both pre-merger companies, not because I set a quota,
but because we said we're going to pick the best person for each job
regardless of where they come from. If you look at our product line,
it is fully integrated. If you look at our processes, about half of
them came from HP, about half of them came from Compaq.
So the integration process itself was truly an integration of the
best of both as opposed to we're right - you're wrong, let's take
Culture, I think, is something you pay attention to absolutely every
single day. It is part of the system. It's the software of the
system, and the software of the system better support the purpose,
the goal, the objective, the strategy, and better be aligned with the
hardware of the system.
DR. AGARWAL: Carly, yesterday at a convention in Washington, D.C.,
Andrew Grove expressed some concern about the migration of technology
jobs overseas and argued that perhaps it's a negative impact in the
U.S. economy and U.S. competitiveness. What are your thoughts on that
MS. FIORINA: So I think the U.S. must invest in its competitiveness,
just like companies have to invest in their competitiveness. The U.S.
cannot invest in protectionism.
We have object lessons of what happens when countries invest in
protectionism. You know, you remember - many of you maybe don't
remember, but in the '80s, Japan was going to take over the world.
And there was a very concerted and collaborative effort between U.S.
industry and U.S. government to invest in U.S. competitiveness. By
the way, it took a collaborative effort. It took investment in R&D.
It took tax credits around certain things. It was a collaborative
investment in competitiveness.
At the same time, Japan began to invest in protectionism, and two
decades later, we know the results. We are the leading technology
country in the world, and Japan struggles in most every other
Germany - we know the object lessons of protectionism. France - we
know the object lessons of protectionism. And I worry right now that
we are forgetting that our great opportunity as a country is to be
competitive. That requires us to continue to innovate ahead. We get
60 percent of our revenues from outside the U.S. It is a huge
advantage to us as a company that we can tap the growth markets in
India, in China - that we can tap the talent in India and China. It
helps our competitiveness. But the U.S. has to say we need to
continue to invest in our competitiveness because the bar is rising.
There are incredibly smart, educated, talented people outside the
U.S. We can't pretend they don't exist and we can't tap their talent.
So what does investing in competitiveness mean? First, I think it
means talking about competitiveness, not protectionism. Secondly, I
think it means a long-term investment in education, and
unfortunately, as a country, we have a very short attention span. But
we have to make long-term investments in math, in science, in
engineering. And it's not just the business schools, it's the K
through 12. Third, I think we do have to have more investment in R&D
and collaborative effort between industry and government. And,
finally, I think we should consider tax incentives for the things
that make this nation competitive.
But we cannot, in my judgment, put our heads in the sand and say the
answer is let's not go tap the talent of these other markets.
California now, it has itself in trouble, and it had a dramatic
recall. But one of the reasons that happened is because California is
losing its competitiveness. And I hope very much that California will
invest in its competitiveness, which means first understanding what
it's competitive in.
QUESTION FROM THE FLOOR: What innovation is HP, in your vision, doing
MS. FIORINA: Okay. So the question is: What innovation is HP bringing
to education? I think many things.
First, we are a very rapidly growing player in the education market
today, and education is a place where this portfolio that I talked
about really matters, because if you think about--think about
education as a physical process becoming a digital process. Think
about education increasingly not only being enabled by technology but
education becoming digital, mobile, virtual. That which, by the way,
it will.it has to, if we're going to solve our problems.
And so, the fact that we have technology that goes all the way from
the handheld device all the way into the heart of the data center,
and as well is around rich media, gives us a sensibility about that
whole process that is making a huge impact in a number of schools. So
that's one area in how we apply our technology to the education
Secondly, one of the things that we believe very strongly in is
partnership. I talked about our $4-billion in R&D - but the way we
describe what we do is focused innovation. And what we mean by that
is we will focus our resources where we can make a unique
contribution and lead - that's a high bar - and we will partner for
the rest. So partnering is a big part of our strategy, and in that
partnering, we are enabling a whole set of education applications
development work that is going on that moves the ball.
And then, finally, we have a program that we call e-inclusion. Our
communities, all of our philanthropic work, as well as all of our
outreach work into underprivileged, under-accessed, underserved
communities, is focused on education - and education specifically in
underprivileged, underserved, under-accessed communities, education
specifically around finding, mentoring, and encouraging math,
science, and engineering.
So, for example, we have an internship program where we bring in
underprivileged minority engineering or math and science students
starting in high school, and we give them internships, we give them
scholarships, and we've been able to change the dropout rate from
sixty-plus percent to less than twenty percent. So all of those
things are part of what we're doing.
You may relay this email to your classmates. I enjoyed meeting with
you and the MBAE6 investments class on Saturday. I hope that you
would agree with me that the program having both strengths and
weaknesses, we find that the strengths exceed the weaknesses. Thus
your class' feedback is essential to a continuing value enhancement
cycle. There are some great webcasts here for those interested in
studying investment valuation:
I had mentioned before that it is important for all of us to learn
and practice social networking. I am glad to see that the school of
management has also offered a negotiations class. In my view,
negotiations and social networking should become standard modules
within the communications class. My reason for this view is the fact
that such an enhancement of the MBA course load would add a value
enhancement to every PUCSOM Graduate. Here is the website for those
wishing to become more involved in MBA networking.
As for CAPSIM, the winning group in our mbae4 class
played "optimally" in all product groups.
As you know my background was in biology and family medicine. Seeking
to explore the world of optimal investment decision making, my senior
thesis project at PUC was to focus study on the "Investment Framing
Process" in my paper entitled "The Compounding Success Theory": (
http://www.frips.com/cst.htm ). It is the basis for my investment
style. In my view, Buffett and Munger overcame the conventional
framing effects thru rational and careful business analysis. Using
this approach, I have succeeded in managing funds for myself and
family members since the recessionary period of 2000, and I have
attained a yearly average return of 24.5 percent for the past 5
Finally for the lady in your class who asked several questions on the
proper approach to investment thinking, pass on my recommendation of
the audio CD version from amazon.com of "Security Analysis" (Benjamin
Graham 1934). As every MBA student learns every model is a
simplified estimation of reality. The best model is the one that
works for you at some period in time. In my view, the "Father of
Value Investing", Benjamin Graham, may also be called the "Father of
Behavioral Finance." Why? Graham described "intelligent" investment
approaches and optimizing behaviors for investors and speculators in
his Intelligent Investor book of 1949 and Security Analysis of 1934.
Graham taught students how to think about a business, and how to
separate their roles as "business analyst" from their roles
as "market analyst". Using the modern finance valuation models
diagram seen at this link http://www.frips.com/val.htm and reading
more Graham, you will see that Graham addressed behaviors from each
of the valuation styles in his writings and lectures.
Best of Luck,
Cesar "Bud" Labitan, Jr. MD, ABFP, FAAFP, MBA
Operating Manager, Labitan Partners LLC
A Private Equity Investment Company
Here is a link to the MBAE4 review xls workbook I put together:
I hope that MBAE6 will download it, enhance different sections, add a
negotiations outline, and share it with us, mbae7, and mba alumni.
I will maintain an updated version at
when they email a new version back to me.
How did Kenneth Chenault get to lead American Express as Chairman &
CEO? I listened to his talk to the students at the Yale School of
Management and realized that he has a clear vision of his role there.
If you have the time, check it out. Otherwise, file this away for
future reference when you decide to work on communication skills and
social/business networking again.
Speakers at Yale School of Management, audio links
Chairman & CEO
Networking for Dummies
By Stacey L. Bradford Published: January 19, 2005
YOU'VE HEARD IT time and time again: Networking is the most effective
way to find a job. Well, it's true. According to employment experts,
career advancement is best achieved by utilizing your circle of
personal and professional contacts. But the latest twist on the age-
old strategy might leave some networkers feeling a bit seasick.
In September, job seekers and curiosity seekers alike will have a
chance to hobnob with 10 cast members from the hit reality TV
program "The Apprentice" during a seven-night Caribbean cruise.
Michael Jacobsen, editor of Trump World magazine, one of the sponsors
of the cruise along with travel Web site Expedia, promises the trip
will be "a phenomenal networking opportunity for anyone coming
onboard." By putting fans of the ultimate job-search show together
with the aspiring entrepreneurs from the cast, says Jacobsen, names
and deals will be flying back and forth all week long.
So if your idea of a good time is rubbing shoulders with the likes of
Raj and Stacie J., two "Apprentice" contenders who've already
committed to the cruise, by all means book your passage now. But if
you're trying to meet valuable contacts and line up a new position
the traditional way, the sea adventure is probably not the best use
of your time or money.
"I have to think that insta-networking is very fragile," says Rich
Thompson, chief learning officer for Ajilon, a Saddle Brook, N.J.,
recruiting firm, of the shallow relationships that would likely be
forged during a brief cruise. "A better opportunity of being put in
the right direction [for a job lead] is through a quality
Indeed, the experts we spoke to agree that nothing beats good, old-
fashioned networking. By that we mean tapping into relatives, friends
and former colleagues, and setting up face-to-face meetings with any
referrals they might offer.
We know, networking can be awkward, but here's why it simply has to
be done: At any given time some 80% of all available jobs aren't
posted in the classifieds or on job boards, according to BH Careers
International, a career-management firm in New York. And 60% of
people surveyed by BH Careers say they landed their last job through
networking. Convinced now? Good. Keep these 10 tips from experts in
mind to make your networking efforts as fruitful as possible.
1. Write an Elevator Speech
Before you start networking, prepare what experts call an elevator
speech. This should be a summary of what you want people to know
about you that can be delivered in less than 30 seconds. Think of it
as a marketing message: who you are, what you do and what you're
looking for. The key is to keep it upbeat, succinct and to the point.
Anything short of that and you risk boring or turning off the
listener, warns Debra Condren, a career coach and business
psychologist with offices in New York and San Francisco. Since you
only get one opportunity to make a first impression, Condren
recommends first practicing your elevator speech in front of a
mirror, and then on friends, before taking it out to a networking
2. Use Your Existing Network
The best way to start networking is to tap into your existing circle
of contacts, including friends, family members and former colleagues.
Simply spread the word that you're looking for a new job and ask if
anyone has a contact of their own in your field that may be able to
offer some advice. Then make sure to ask every person you meet for
two or three more referrals. Once you start the process your network
will continue to grow exponentially. "It's a domino effect," says
Ajilon's Thompson. "Everyone has a center of influence and people
that they touch. This is where the best opportunities come
from...from somebody who knows somebody."
3. Target Trade Groups
It never hurts to expand your network even further. When doing so,
don't waste time going to large events that cater to people in many
different industries. You need to take a more targeted approach. One
of the best ways to accomplish this is to join the dominant trade or
industry organization in your area. Preferably, it should be one that
has some type of barrier to entry, even if it's just a membership
fee. "The higher the level and more targeted the environment, the
more efficient and effective a networking source you will have
found," says Marc Lewis, North America president for Morgan Howard
Worldwide, a Stamford, Conn., recruiting firm. Consider volunteering
on one of the group's committees. It's a great way to meet members.
4. Show Interest in Others
All of the experts we talked to agree: The secret to effective
networking is to stop focusing on yourself and take an interest in
the other person. Not sure how to do this? Simply start asking
questions and get that new contact to talk about himself and his
business experience, recommends Morgan Howard's Lewis. This is easier
than you might think. People love to talk about themselves, Lewis
says. And they're often flattered when others seem genuinely
interested in what they have to say. Another benefit of taking an
interest in someone else is that the job seeker has an opportunity to
pick the other person's brain and learn something about their
industry that they can use later on. "You can't expect every person
you meet to help you, for example, find a job interview," says
Lewis. "But if you are effective at working a crowd, as any good
politician will tell you, you can learn and take something away from
the conversation as knowledge to use elsewhere."
5. Don't Ask for a Job
This may sound counterintuitive, but the worst thing you can do while
networking is ask for a job. Instead, seek advice, says Dan Strakal,
coauthor of "Better Job Search in 3 Easy Steps" and owner of Success
Positioning Systems, an Albuquerque, N.M., career-services firm. Why?
People are more likely to be generous with their time when you ask
for their counsel. Also, Sharee Wells, a regional vice president and
career coach with BH Careers, points out that if you ask for a job
you're often forcing the other person to say no to you. Or, if that
contact doesn't know of an opening, you are giving him an excuse not
to meet with you. Don't worry. If someone likes you and you seem
qualified for an opening, he or she will want to refer you to the
right person to set up an interview.
6. Build Relationships
Strangers aren't going to put their reputations on the line for you.
That's why you have to take the time to build a relationship with any
new person you meet before asking for a favor, says Wells. How do you
do that? Consider dropping a personalized note to any new contact you
meet at an industry event. Then, once you've made the initial
overture, you can follow up by doing anything from sending along a
helpful article to introducing that person to someone in your own
network, recommends Susan Howington, senior vice president and
managing director of Lee Hecht Harrison, a Woodcliff Lake, N.J.,
career-management-services firm. The key is to nurture the contact
until you feel you've secured that person's attention.
7. Don't Be Selfish
No matter how desperate you are, remember that networking is a two-
way street. After every meeting, ask if there's anything you can do
to help the other person. Many job seekers make the mistake of
thinking that they have nothing to offer in return. That's simply not
the case. If you've met with a recruiter, for example, you can always
offer to introduce him to the smartest people you know in your
industry, says Melanie Mulhall, a career coach and corporate
consultant in Broomfield, Colo. Even a young job seeker with little
experience should offer to help the other person. While it's
understood you may not be able to help a CFO land his next position,
you might be able to assist him in other ways. His daughter, for
example, may be applying to colleges and want to hear about your take
on a school.
8. Never Abuse Relationships
Be careful not to overuse your network. Unfortunately, there's no
rule here for how many phone calls are too many. Just try to gauge if
you're coming across as someone who's always looking for a favor. Try
to keep the relationship as mutually beneficial as possible. Even if
you don't have an agenda other than maintaining your network, too
much contact can be seen as a burden to the other person. Unless
you're close friends, try to keep correspondence down to once every
three to six months. "Like everything else in life, effective
networking is a balancing act," says Morgan Howard's Lewis.
9. Always Follow Through
Nothing can kill a relationship faster than not writing a proper
thank-you note. In many cases you can e-mail it, but don't assume the
content of that letter is any less important than if you sent it by
snail mail. A three line message with a smiley face doesn't cut it.
Equally wrong is failing to keep the other person abreast of how your
meeting went with someone he or she referred you to. And don't even
think about not making contact with someone who was referred to you.
It's just rude. Chances are your contact went out of his way to call
that person and mentioned that you're looking for some advice.
10. Maintain Your Network
You've heard it before, but it's worth repeating: Maintain your
network even when you aren't looking for a job. It will make it that
much easier to tap into when you do need a little assistance. It
could also open up doors when you least expect it. Remember, the
majority of jobs go unpublished, so you may hear of an exciting
opportunity even when you aren't looking for it. "A good solid
network will pay dividends down the road, but you have to invest the
time," says Ajilon's Thompson.
Finally, from time to time all of us let a few people slip from our
network. We get busy and lose touch. The best time to reach out and
reconnect is when you aren't looking for a job. Chances are that
former colleagues will be delighted to hear from you especially if
you aren't looking for a favor.
I attended the MBAE6 Saturday afternoon mock labor negotiations on
the third floor of Anderson 311 and enjoyed observing their round one
of mock collective bargaining for Excelon. The Labor side got off to
a slow start, but made up ground after a few suggestions. Like
MBAE4, with 4 weeks to go, they are showing signs of fatigue.
However, I mentioned to them that these last 4 weeks should be the
I had mentioned before that it is important for all of us to learn
and practice social networking. I am glad to see that the school of
management has also offered a negotiations class. In my view,
negotiations and social networking should become standard modules
within the communications class. My reason for this view is the fact
that such an enhancement of the MBA course load would add a value
enhancement to every PUCSOM Graduate. Here is the website for those
wishing to become more involved in MBA networking.
Here is a link to powerpoint tips I compiled for Labor:
They informed me that Lucas will videotape round three in two weeks
as well as edit and add commentary. I am hoping that they will
tranfer this to DVD and make it available to all MBAE plus alumni.
If you are interested in a dvd copy, help me lobby the School of
Management to make this happen.
As you know, one of my goals is to stimulate the PUC SOM MBA programs
into becoming more proactive in win-win networking. The MBAE6 class
is the first to receive additional training in negotiation. In my
view, this will serve the class well as an adjunct or proxy in
advancing communications training.
Here is a set of powerpoints entitled The MBA guide to Emotional
Intelligence and Social Networking. http://www.frips.com/ei.ppt My
buddy Tim Milan and I edited it down from a collection of 65 to 46
slides. Feel free to pass it along.
Here is the answer to my question to team Digby about Optimal Debt
Academic Finance will tell you that the financial manager should seek
that capital structure which maximizes the value of the firm (the
optimal capital structure) reflected by its market price. Followers
of Graham and Buffett take a slightly different position: seek that
capital structure which maximizes the "intrinsic value" of the firm
(the optimal capital structure) reflected by its intrinsic value.
So, what is intrinsic value?
"We define intrinsic value as the discounted value of the cash that
can be taken out of a business during its remaining life. Anyone
calculating intrinsic value necessarily comes up with a highly
subjective figure that will change both as estimates of future cash
flows are revised and as interest rates move. Despite its fuzziness,
however, intrinsic value is all-important and is the only logical way
to evaluate the relative attractiveness of investments and
businesses." Warren Buffett For a free textbook on his ideas,
download this: http://www.frips.com/wbbf.htm
Capital Structure Theory: Leverage and Return/Risk Considerations
A firm's capital structure is determined by the proportions of debt
and equity capital used in financing the firm's assets.
The financial manager should seek that capital structure which
maximizes the value of the firm (the optimal capital structure).
The capital structure decision and the firm's leverage position are
Determinants of the Firm's Optimal Capital Structure
The Tax Deductibility of Interest
The tax deductibility feature of interest expense tends to increase
the use of debt in the firm's capital structure.
The increased financial risk that comes with increased use of debt
tends to moderate the use of debt in the firm's capital structure.
Result: The firm's optimal capital structure should represent a
balance between debt and equity. Such cost advantage that comes from
using cheaper debt is just matched by the increase in the increase in
financial risk that comes with more debt.
Determination of the Firm's Capital Structure in the Real World
It is difficult (or impossible) for the financial manager to exactly
determine the firm's optimal capital structure.
The financial manager needs to consider demand sustainability and
volatility as well as cost stability when making the debt/equity
choice. There probably exists a range of acceptable (optimal)
Want to learn more about Real Estate investing from a fellow PUC grad?
Spend time with Josh and Maggie.
Here is a link to another PUC MBA grad's real estate services venture:
It was good to hear back from Erik Doyle, Vince Williamson, and Ed
Perez. And, I look forward to helping you guys achieve your
different career goals.
- - - - -
Now, it is time to put our MBA Network to the test. Our MBAE4 friend
Tim Milan is looking for a new job. As you know, Tim is a good family
man and a sharp operations leader. So, I posted his resume here:
- - - - -
Travis, if you are looking for something in Oklahoma, contact
Kathy Collins Eisbrenner. Kathy is my classmate from Munster High
School, has a unique combination of brains and beauty, and she works
for a billionaire named George B. Kaiser based out of Tulsa. Tell
Kathy that Cesar Labitan referred you. If she can introduce you to
Mr. Kaiser, opportunities in Oklahoma may become visible.
Excelerate Energy L.L.C.
1330 Lake Robbins Drive
The Woodlands, Texas 77380
- - - - -
Executive Charisma Book Summarized
Executive Charisma is defined as the ability to gain effective
responses from others by using aware actions and considerate civility
in order to get useful things done. The foundations of executive
charisma are integrity, confidence and full disclosure.
Step 1: Be the First to Initiate. Take the initiative and making the
first move. There are numerous opportunities that keep coming and one
cannot just afford to miss them. It is observed that successful
people generally go out of their way to be the first to say hello, to
initiate things even with strangers.
Step 2: Expect and Give Acceptance to Maintain Esteem. The key to
success is to expect and give acceptance to maintain esteem. No
matter what title, position a person holds or does not, we are human
beings. As a human being, one has the right to expect acceptance from
everyone and one has the obligation to give it to everyone.
Step 3: Ask Questions and Ask Favors. Leaders have to get others to
execute and this can be most efficiently accomplished by bolstering
esteem and also by using the technique of asking questions and asking
for favors. Asking questions and favors will transfer positive energy
from the leaders to others.
Step 4: Stand Tall, Straight and Smile. The next step of executive
charisma is to stand tall, straight and smile. This step becomes
important since a leader is always being watched. Never be caught
off guard. It is all about maintaining and conveying a positive
impression of confidence in your appearance, bearing and attitude.
Step 5: Be Human, Humorous and Hands On. `Be Human' is a maxim that
cannot be forgotten. It is the mark of a great leader too. It means
the ability to `touch' with heart, soul and mind regardless of rank,
race, creed, color or power. The key is to develop affinity, share
experiences and build trust.
Step 6: Slow Down, Shut Up and Listen. Most executives are always on
the run. Slow down and not be hasty in actions or decisions. It is
necessary to think before acting and a slow, controlled pace would
help in making better decisions. It is also important to stop talking
and practice active listening.
Here is something funny I put together in June of 2004 to illustrate
some creative business attributes and "out of the box" thinking.
The Nomination of Chuck Berry for "Honorary PUC MBA"
Ten Success Factors worthy of business study.
1.) What can Chuck Berry teach MBA students about communication?
When performing his material Berry made sure to enunciate clearly,
singing outside the standard blues realm, and he improvised lyrics
that caused to audience to pay closer attention. Chuck was the first
rock and roller to write words that were relevant and entertaining to
his young white audience with out alienating his core black audience.
2.) What can Chuck Berry teach MBA students about leadership, change,
research, and customer-focused marketing? He can teach us about
customer-focused research, adaptability, and flexibility in changing
production. His early band played mostly blues and ballads, but
Berry"s joking "hillbilly" songs were the real pleasers and it wasn't
long before a white crowd got word of a black hillbilly and began
coming to his shows. "Curiosity provoked me to lay a lot of our
country stuff on our predominantly black audience and some of our
black audience began whispering "who is that black hillbilly at the
Cosmo?" After they laughed at me a few times they began requesting
the hillbilly stuff and enjoyed dancing to it."
3.) What can Chuck Berry teach MBA students about preparation,
competition, perserverance, social, and environmental analysis? His
mother, Martha, was a schoolteacher; his father, Henry, was a
contractor and deacon of the nearby Antioch Baptist Church. The third
of six children, Chuck grew up in The Ville, an area just north of
downtown St. Louis which was one of the few areas in the city where
Blacks could own property. His father recited poetry at the dinner
table. This is cited as a preparatory influence in Berry's lyrical
development. In 1950's America, imagine the competitive forces that
were stacked against him.
4.) What can Chuck Berry teach MBA students about finance and low-
Later in his career, Chuck travelled to many cities and employed
union musicians for individual concerts, thereby lowering the overall
cost of production and increasing profitability. One night Johnny
Carson had the Rock and Roll legend Chuck Berry on his show, and they
were exchanging laughs prior to Chuck pulling out his electric
guitar, and playing "Johnny Be Goode." Johnny turns his head towards
the band, then back to Chuck as says: "Chuck how come you don't
travel with your own band?" Chuck smiles back and says, "Well Johnny,
the union musicians all know my tunes, so I just hire them for that
gig." Johnny, sensing that he is in the presence of a financial
wizard, asks Chuck "So, Chuck, what is the secret of you success and
having so many hit records?" Chuck smiles back and says "Well Johnny,
all my songs are about three things: cars, girls, and school." You
see, the genius of Chuck Berry is that he understood customer-focused
marketing. He knew that no matter what color or neighboorhood you are
from, most people think positively of cars, their first loves, and
school. ( The Tonight Show Starring Johnny Carson - Show #4088 )
5.) What can Chuck Berry teach MBA students about productive
partnering? In 1952 Chuck Berry began to play professionally at
different clubs in St. Louis. On New Year's Eve Berry joined the Sir
John Trio. The leader of the group was Johnnie Johnson and the third
person was the drummer Ebby Hardy. The Sir John Trio became the house
band at the Cosmopolitan Club in East St. Louis and would be the
start of Berry's long association with Johnson whose piano boogie
riffs would have a great influence on his guitar playing. Johnson's
piano playing, the heavy drums and maracas and Berry's lead style
gave Maybellene the hard rhythm and blues feel that balanced the
6.) What can Chuck Berry teach MBA students about dressing for
success? At outdoor concerts where you often saw people in t-shirts
or shirtless, Chcuk would usually wear a suit or long sleeve shirts
with a vest.
7.) What can Chuck Berry teach MBA students about inspiring younger
lions? January 23, 1986, Chuck Berry is inducted into the Rock and
Roll Hall of Fame at the first induction dinner, held in New York
City. He is inducted by Rolling Stone Keith Richards, who said, "It's
hard for me to induct Chuck Berry, because I lifted every lick he
ever played!" 'Hail! Hail! Rock 'n' Roll', a movie documentary and
concert tribute to Chuck Berry, with Keith Richards as musical
director, debuts. A year later, Berry publishes his autobiography.
8.) What can Chuck Berry teach MBA students about Business Law?
A multi-count lawsuit against Chuck Berry is filed on behalf of
pianist Johnny Johnson. It seeks a share of royalties for Johnson,
who allegedly co-composed numerous hit songs with Berry that have
heretofore been credited to Berry alone. I do not know the status of
9.) What can Chuck Berry teach MBA students about Innovation,
Globalization, and Global competition? Berry gave rock and roll an
archetypal character in "Johnny B. Goode" and was responsible for one
of its most recognizable stage moves, his "duckwalk." All the while,
his repertoire was being mastered by eager apprentices on the other
side of the ocean, such as Keith Richards and John Lennon. The
Beatles, the Rolling Stones and many other British Invasion acts
covered Chuck Berry at a time when the master himself was serving two
years in prison on what now appear to be trumped-up charges.
10.) What can Chuck Berry teach MBA students about work?
Love what you do. Smile. Chuck is still playing concerts at the age
of 76. He will be playing Friday night at the Blueberry Hill Club in
St. Lewis. Chuck Berry is inducted into the Rock and Roll Hall of
Fame at the first induction dinner.
In long-term investment management, I have a lot of time to think
about different ideas. Why? I browse and study a lot of information
with the goal of making one to three good decisions a year. Over the
past 2 years I have occassionally thought about ways to induce
positive changes in our grad school. Then, two weeks ago, the idea
jelled instantly. AMD and a partner company announced the
development of a new "dual-core" 64 bit microprocessor chip. "Ka-
ching Ka-ching", I new instantly that my next laptop would be faster
and cheaper whether it has an AMD chip or an Intel chip inside.
Competition is the catalyst for change, and the competition between
Intel and AMD would result in a benefit to me and you.
And so the process needs to be applied to PUC-SOM-MBA programs. They
need increased competition. In fact, increased competition would
drive all professors to perform better, and increased competition
would drive increased demand for PUC MBA graduates in the marketplace.
Here is an update of the MBAE-6 reception for our class members who
were unable to attend. The reception was held at the Center for
Visual and Performing Arts in Munster, Indiana. Travis Tindle flew
in for the event and along with John Nason, Sharon Asche, Bob
Lauson, Cihan Ozdemir, Marty Keaveney, Pete Skrobot, Carrie
Reynolds, Dan Welch, Tim Milan, Keith Magiera, and myself that made
twelve from our MBAE-4 class. If I forgot anyone, please accept my
sincere apollogy. I am proud of this fact because to me it
demonstrates the strength of our friendship and networking bonds.
Here is a link to Cihan's firm: http://www.portadome.com/
After the reception, a bunch of us went to Whiting to "The Office"
bar and grill being developed by Lynn and Jason Miskus for drinks
and conversation. Lynn and Jason have done a nice job gutting and
redesigning an old bar int a new high tech sports bar with multiple
flat screen tv displays. It will be a good place to watch Bears
At the reception, Lori Feldman gave a well thought out speech to the
version 6 class, and I wish I had a transcript of it to share with
those of you unable to make the event. My take on the sendoff
speech was that it was one that challenged the graduates to achieve
new levels of career goals, social achievements, leadership, and
networking. Reflecting these human bonds, a few members of MBAE-6
were flying of to Las Vegas for 3 days of fun and relaxation.
Their class reps, Eddie Perez and Kendall Polk, along with an
inspired humorous powerpoint presentation by Erik Doyle provided an
uplifting sendoff for the class. Dr. Pat Obi won the Best Teacher
award again this year. He missed the event because of this being
the anniversary of his dad's passing. Despite this, he was able to
send in a funny and parsimonius acceptance speech reflecting a
gentleman of his intellect.
On the networking front, I introduced Dan Welch and Vince Williamson
to each other knowing something of their knowledge in the rail
industry; I introduced Vince and Tim Milan, where Vince will review
and pass along Tim's resume. Also, I introduced Associate Vice-
Chancellor Fred DeHaan to Eddie and Kendall, where they share
interests in advancing our MBA programs and PUC in general. Tim
Milan also got to meet Dr. J. Hussein at our table. Also at our
table was Alan Heintz of MBAE-3 who is also Treasurer pf the PAAC.
I introduced Alan to all the individuals above, and he expressed a
new theme of the PAAC in performing more events of benefit to the
NWI community, and perhaps linking this winter event with a summer
event, so that there will be two opportunnities a year for everyone
to link up. By the middle of the evening, I felt like a politician
warming up for a run for office.
During the evening, I also had a chance to talk with Tim Ponds of
MBAE-5 and Kajia Firlej of MBAE-2, and Josh Lybolt and Maggie
Wozniak of the regular MBA program. Sashi Sekhar, Visiting
Instructor of Management, and her husband Doug Friend were there as
well. Doug played football with my brother Clark years ago. Dr.
Gideon FAlk, Dr. Paul McGrath, Dr. John Lucas, and Dr. Bob Pollak
were there as well. Raida Abuizam and her husband were there as
well, and Raida is on the verge of getting her Phd. In the future,
she also hope s to develop a course in Spreadsheet Modeling and
Decision Analysis for the program.
Dr. Shomir Sil and Nancy Ross did a wonderful job of hosting the
event. And, in my view, it is a shame that this MBAE-6 class did
not give further homage to Dr. Sil for helping Lori in building up a
fine MBA program. However, like other classes, time and scope were
limited to acknowledging their immediate cohorts.
Now, with approximately 160 graduates from the MBA for Executives
program and many more from the standard MBA programs, I believe that
Dr. Sil's new role as Associate Vice-Chancellor for Engagements will
lead to increased networking and prestige for the School of
Here is the other info site:
Here is a link to Cihan's firm: http://www.portadome.com/
Here is a link to my site: http://www.frips.com/labitanllc.htm
The idea of connecting with people to share information and
resources, or networking, is not a new one. Throughout history people
have relied on one another to better themselves in all aspects of
life. By networking you facilitate opportunities for others and
help them achieve their goals, and in return, they support your
goals. The individual who holds the correct answers or knows the
right people just might be one contact away from you. Networking is
an important, invaluable, and essential activity that anyone and
everyone should practice. The value of building personal and
business networks can never be over emphasized. An established
network of connections allows people to cultivate relationships,
which can provide invaluable resources such as ideas, information,
advice, business opportunities, referrals, and personal support. The
value of your network begins to unfold as it expands and reveals the
hidden connections and resources available to you.
7 secrets of effective networking:
For most independent professionals, "effective networking", should be
a driving force, if not the central component of their marketing
efforts. It is not what you know but who you know that gets you in
the door. Over time effective networking can generate a steady stream
of referrals and help your business grow. Your networking strategy
can largely replace cold calling, advertising and other less
productive marketing efforts.
Most people lack an understanding of how to network to fuel business
growth or further their careers. The result is that most people spend
too much unproductive time networking with friends and colleagues and
have little to show for their efforts. If you're an extrovert,
meeting lots of people may be your idea of fun. If you're an
introvert, it can be a struggle unless you understand how to network
to get more clients. For most people, networking without a clear
strategy is like investing by throwing darts at the stock page
The primary objective of networking should be gain an understanding
of others' concerns and problems. Then you can make quick assessments
as to whether they would have any interest in the solutions you
provide. The objective of networking is not to expound on your
credentials. Most people waste the few precious moments they have
with new and existing contacts by focusing on themselves. Better is
to spend most of that time asking questions and collecting
There are many effective ways to network, some far more productive
than the typical personal conversation. Its more useful to Have a
succinct "elevator speech", a 30 second description of the problems
you solve, is an essential networking tool. Use questions to
identify individuals primary concerns and at least one piece of
personal information. Refer your contacts to people in your network
who can solve their problems. The benefit of this approach is
twofold. First, you'll be seen as a problem solver, and second, those
people who benefit from your referrals are more likely to provide you
with referrals in return. Provide valuable information on a regular
basis for free. A weekly or monthly newsletter is one way to
establish your credibility. When this missive provides solutions, it
be shared by people in your network, further lengthening your list of
Most people rely on serendipity for results. It certainly doesn't
hurt to let people you meet know about the types of problems you
solve, but if you want to get better results and increase business,
target your networking. Identify the people you want to make contact
with, whether prospects or potential marketing alliance partners, and
make carefully researched efforts to build relationships. This
approach takes more time on your part, but it gets results.
Your networking efforts be a waste of time without effective data
management. When you meet or contact people, enter the information
you learn into your contact management software; make note of their
interests, what you've shared with them, and when and how to contact
People have short memories. Follow-up regularly with members of your
network or they'll forget you exist and more importantly they'll
forget that you are the best person to solve their financial, legal,
human resource, design, or other problems. Contact the people in your
network in some way at least once a month.
From Effective Networking.
MBA Road Trip
I am organizing a PUC MBA road trip to Omaha, Nebraska and for us to
meet at this fun party on Friday April 29th. See website link:
The main event is on Saturday: 2005 Berkshire Hathaway Annual
If we get enough MBA grads together for a group picture, sometimes
Mr. Buffett will fit that into his very busy schedule. You can get
credentials to attend the meeting by emailing Mrs. Debbie Bosanek at
dabosanek@... or contact me and I will try to round up some
Here are some pictures from a previous trip:
2005 Berkshire Hathaway
Annual Shareholders Meeting
Saturday, April 30
For the past three years our shareholders meeting has been held on the
first Saturday in May. In 2005, the first Saturday in May falls on
Mother's Day weekend. To avoid potential conflicts, we have elected
to hold the 2005 meeting on April 30. The meeting will again be held
Qwest Center Omaha
455 North 10th Street
Weekend activities will begin on Friday evening and conclude with
dinner at Gorat's Sunday evening.
The 2004 Annual Report is currently scheduled to be posted on our
website March 5 and mailed to shareholders mid- to late March.
Attached to the proxy statement will be a postcard that shareholders
will need to complete and mail back to the company to obtain meeting
The meeting credentials are required for entry
to not only the annual meeting and other related events,
but also to receive shareholder discount pricing.
Friday, April 29
Shareholder Cocktail Reception
Saturday, April 30
Doors open 7am
Company Movie 8:30
Question and Answer Session 9:30 3:00pm
Annual Meeting 3:15
International Meet & Greet
There will again be a special reception for shareholders who come from
outside of North America for the meeting. Any shareholder who comes
from other than the U.S. or Canada will be given special credentials
and instructions for attending this function.
Berkshire Backyard Barbecue
Nebraska Furniture Mart
Sunday, May 1
Exclusive Shareholder Shopping Day
Berkshire Shareholder Night
Reservations required (but not accepted before April 1)
SHAREHOLDER DISCOUNT PRICING
You must present your meeting credential in order to receive
shareholder discount pricing
The largest jewelry store in the country
except for Tiffany's Manhattan store -
Borsheim's offers a world-class selection of diamond and gemstone
fine gifts, and watches.
The dates for the Berkshire Hathaway shareholder discount pricing at
Borsheim's will be extended this year. Special pricing will be
from April 25 through May 7.
Nebraska Furniture Mart
NFM's Omaha location offers 450,000 square feet of unbeatable pricing
not only furniture but appliances, flooring, and electronics.
The dates for shareholder discount pricing at NFM is Thursday, April
through Monday, May 2. Please note that this discount is only
the Omaha location.
Meeting credentials will no longer be issued at the Borsheim's
Reception on Friday night.
There will be a Will Call/Information kiosk in the lobby of the Qwest
for those of you who have not previously received your meeting
The hours are Friday from 12-8pm and Saturday from 7:00am.
Proof of Berkshire Class A or Class B stock ownership
and photo identification are required for credentials to be issued.
Contact Carol Pedersen at American Express for hotel and travel
Carol works exclusively on our annual meeting and is our resident
when it comes to air and hotel availability.
402/697.5314 Outside the U.S.
How to Grow a Chain That's Already Everywhere
By Bridget Finn, March 2005 Issue
It took McDonald's (MCD) 25 years to open 6,000 outlets; Gary Heavin,
founder and CEO of the no-frills, for-women-only fitness chain
Curves, achieved that milestone in less than eight years, making
Curves the fastest-growing franchise operation in history. Last
August the privately owned company -- which targets overweight women
who shun mainstream gyms -- surpassed 8,000 locations, and Heavin
says it posted an $80 million profit on franchisee revenues of more
than $1 billion in 2004. Which poses the same conundrum faced by
explosive-growth chains from Starbucks (SBUX) to Krispy Kreme: How do
you boost revenue once you've saturated the market? The answer is
getting people to spend more at existing stores. Here's how Heavin
plans to do that with the millions of exercise-phobic women he has
already persuaded to work out.
When I sold my first franchise in 1995, I learned that fast-food
franchisees paid 6 percent of revenues each month, but that didn't
make sense to me: Why should franchisees that make the most money
have to pay me more? Instead, I charged $20,000 to open a club and a
flat monthly fee of $395. Most of my franchisees were profitable in
90 days and were shouting from the rooftops about their quick
With PR like that, we expanded in small towns and eventually to
cities. But now even metro areas are saturated: There are 100 Curves
in the greater Houston area, for example, and in some parts of
Manhattan, there's a Curves on every other block. To drive sales, we
have to do more with the Curves brand. We ran a $16 million
advertising campaign for the first time in 2003, and last March we
launched a magazine. My fitness and dieting book made the New York
Times best-seller list in 2004.
We also have to launch new services. The purpose of the book was to
get people associating the Curves name with weight management. Last
spring we launched our nationwide weight management program, for
which we charge $59 for a six-week class. My aim is that in the next
few years America's most successful diet centers will be found at
Remarkable Growth Curves
Annual sales growth 58%
Number of new locations per year 1,570
Number of new members per year 731,200
Note: Average, 1999-2004.
With more franchisee demand for fewer potential new locations, I've
also raised the cost of opening a club to $30,000, and new owners now
pay 5 percent of revenues, capped at $795. That lets me finance
research for future offerings. For example, health insurance
companies might one day send us high-risk customers, and with
exercise and diet advice we could reduce their medical costs.
In earlier attempts at running gyms, I expanded quickly, ran out of
money, and was forced out of business. With Curves, now that we've
gotten into profitable locations, the focus is shifting from
expansion to innovation. An innovator looks at the same thing
everyone else looks at and sees something different. No one serves
women the way we do. Now we have to do it even better.
BERKSHIRE HATHAWAY INC.
To the Shareholders of Berkshire Hathaway Inc.:
Our gain in net worth during 2004 was $8.3 billion, which increased
the per-share book value of both our Class A and Class B stock by
10.5%. Over the last 40 years (that is, since present management
took over) book value has grown from $19 to $55,824, a rate of 21.9%
It's per-share intrinsic value that counts, however, not book value.
Here, the news is good: Between 1964 and 2004, Berkshire morphed from
a struggling northern textile business whose intrinsic value was less
than book into a diversified enterprise worth far more than book.
Our 40-year gain in intrinsic value has therefore somewhat exceeded
our 21.9% gain in book. (For an explanation of intrinsic
value and the economic principles, please read the Owner's Manual,
beginning on page 73.)
Buffett The Bond Strategist
by: russ_21401 03/06/05 10:07 pm
Msg: 267305 of 267337
While everybody has been watching (and discussing)
Buffett's "inactivity" in buying whole companies or stocks, he has
been making a killing in various bond, junk bond and currency
markets. Of course, all the Old Possum talks about is how TOUGH it
is out there for him these days. Why? Because he's KILLIN' 'EM in
every OTHER market, but they've barely noticed. Here are some of
Buffett's recent coups which show that he has been, in the last
three years, an amazing bond strategist (bordering on "trader.")
*On 12/31/01 BRK had $8.8B in U.S. government bonds. Now, three
years later, that is down to $1.6B. As he sold, he took $1.5B in
profit in '03 and another $100M in profit in '04. That $1.6B (now in
BRK's pocket) isn't a bunch of bonds coupons. (We cashed those,
too.) That's a bond TRADE for very big bucks. Buffett's position on
U.S. debt is clear: Run for the hills.
*On 12/31/01 BRK had $7.4B in muni binds. Now, it is $3.6B __more
than cut in half. Those also were sold at a profit and we still have
$156M in unrealized cap gains on these bonds.
*On 12/31/01 BRK had $2.5B in foreign bonds. By 12/31/03 it had
doubled to $5B. Now, BRK is up to $7.1B in foreign bonds __so WEB
added $2B MORE in foreign bonds last year. A THIRD of all Berkshire
bonds are now foreign. So, WEB isn't just short the dollar by
$21.4B, he's also holding $7.1B in foreign denominated bonds (which
already have $101M in unrealized cap gains). So, combined, we have
$28.5B that is conspicuously NOT invested in the U.S. or else is
actually bet against the U.S. dollar.
*On 12/31/01, BRK had $5.8B in corporate bonds, including junk
bonds. By the next year, that increased to $10.1B. We still have
$8.4B now, but part of the reason the total is so high is that we
have $1.9B in imbedded cap gains in them! How big a killing did
Buffett make in junk bonds in just a couple of years? It's
incredible. Berkshire BOOKED $1,138M in cap gains on junk in '03 and
another $730M in '04. So, at 12/31/04, Buffett had made AT LEAST
$3.75B in profit on junk bonds since '02!!! And, in some cases, like
the LVLT bonds, we have been getting paid 20% annual dividends on
TOP of those profits.
*On 12/31/01, BRK had a TON of mortgage-backed securities __$11.4B.
Now we are down to just $2B in mortgage-backeds! (We have a $100M
imbedded cap gain in them, too, of course. Buffett is ahead on EVERY
bond position he has taken in recent years. I don't mean the
dividend, I mean the movement in the price of the underlieing bond.)
This week in Barron's a couple of bonds "experts" are warning that
morgage-backeds look very dangerous to them. Warren's already cut
his position by 85% and, by this time, probably even more.
As many of you are aware, Bud Labitan has documented the MBA in
summary format and synthesized the content onto CDs that have been
distributed to the MBA Students.
The content is excellent and a fine refresher of the topics discussed
throughout our 18-month education. It's the kind of thing you may
want to listen to every so often just to keep from losing your "MBA
The voice synthesizer is adequate, but it has been suggested that we
use real human voices in order to maximize the benefit of this tool.
If you would be interested in "lending your voice" to this valuable
project, please let us know and we will work out the details together.
Thanks, and please keep thinking of ways to expand and enhance our
Erik Doyle, MBA
In thinking of ways to expand and enhance our MBA network, I wonder:
Are we mavens, connectors, or salesmen?
Here is an interesting excerpt from an article on social software.
"At the point where social network analysis meets complexity theory,
several writers have attempted to analyse the transmission of ideas
and social epidemics, most notably Malcolm Gladwell in his book "The
Tipping Point." Gladwell seeks to understand why some ideas become
so widespread so quickly, whilst others just fade away. In tracing
the spread of social epidemics, he identifies three psychological
types who play a key role in disseminating ideas: mavens, connectors
and salesmen. He defines Mavens as "data banks, they provide the
message,"whilst Connectors are "social glue: they spread it."Salesmen
are people "with the skills to persuade us when we are unconvinced of
what we are hearing... they are as critical to the tipping of word-of-
mouth epidemics as the other two groups."
Identifying and feeding these people with ideas for mass
dissemination is every marketers dream, and many of them are
continually trying (usually in vain) to create artificial social
epidemics with viral email campaigns and so on. But, how many
organisations or online social networks can really claim to know who
their connectors, mavens and salespeople really are? There are two
potential lessons here for developers of online social applications:
firstly, that these applications should help identify such roles
within their networks; and, secondly, that they should support and
reinforce the behaviour of such people."
"Networking" on the AOL BRK message board got me mentioned
in Andy Kilpatrick's book.
Creative poetry yielded another page:
Combining my hobby with a PUC MBA education yields this:
This article is a good check on our approach and
process. I believe I've read it before, and the fact
that you are in cognizance of the same issues really
supports my earlier idea that we are thinking the same
I believe that the initial stages of this networking
idea will call for significant sales and connecting
efforts. Networking is extremely powerful, but that's
because so few really "get it." We'll need to educate
and sell this thing to our compatriots - perhaps even
bait them with some sort of candy. Many of them don't
even know what to expect of such a tool or the best
means of investing in it. They will need to be lead.
We need to consider a focused strategy in this
endeavor, and this means knowing what we want and
getting into the heads of our target market to make
sure that we are meeting expectations so we don't lose
them before we've been able to create critical mass.
Right now people (especially MBAE6 & 7) will join en
mass out of sheer curiosity and optimism. If we lose
their attention too quickly due to disappointed
expectations, it will be a lost opportunity.
Erik Doyle, MBA
--- "C Labitan Jr. MD MBA" <c_labitan@...>
> In thinking of ways to expand and enhance our MBA
> network, I wonder:
> Are we mavens, connectors, or salesmen?
> Here is an interesting excerpt from an article on
> social software.
> "At the point where social network analysis meets
> complexity theory,
> several writers have attempted to analyse the
> transmission of ideas
> and social epidemics, most notably Malcolm Gladwell
> in his book "The
> Tipping Point." Gladwell seeks to understand why
> some ideas become
> so widespread so quickly, whilst others just fade
> away. In tracing
> the spread of social epidemics, he identifies three
> types who play a key role in disseminating ideas:
> mavens, connectors
> and salesmen. He defines Mavens as "data banks, they
> provide the
> message,"whilst Connectors are "social glue: they
> spread it."Salesmen
> are people "with the skills to persuade us when we
> are unconvinced of
> what we are hearing... they are as critical to the
> tipping of word-of-
> mouth epidemics as the other two groups."
> Identifying and feeding these people with ideas for
> dissemination is every marketers dream, and many of
> them are
> continually trying (usually in vain) to create
> artificial social
> epidemics with viral email campaigns and so on. But,
> how many
> organisations or online social networks can really
> claim to know who
> their connectors, mavens and salespeople really are?
> There are two
> potential lessons here for developers of online
> social applications:
> firstly, that these applications should help
> identify such roles
> within their networks; and, secondly, that they
> should support and
> reinforce the behaviour of such people."
> "Networking" on the AOL BRK message board got me
> in Andy Kilpatrick's book.
> Creative poetry yielded another page:
> Combining my hobby with a PUC MBA education yields
Celebrate Yahoo!'s 10th Birthday!
Yahoo! Netrospective: 100 Moments of the Web
You summarized the ideas better than I could. I agree with a more
focused strategy in this endeavor, and I wonder what Mike thinks
about this. I hope the CD added value to everyone's toolset.
I believe that Eddie and Kendall can add insights into this goal
development process, so as to make sure that we meet expectations so
we don't lose them before we've been able to create critical mass.
On the website, there are added features such as links to
my "Research Tools" and the "School of Management"
There is also a section to add pictures and files and links.
I fear that my salesmanship skills are not that great yet. However,
the one strength I bring to this group is the enjoyment of meeting
and talking with a lot of people. (thanks to medical practice) So,
I probably fall in the connector category. The fellow I want to get
online ideas from is Tim Milan. Tim has superb organizational skills
and a keen attention to details during our Capsim competition. Here
is his cv: http://www.frips.com/milan.htm
I am hoping that we can keep Tim in the Northwest Indiana or
Chicagoland region because he will be a tremendous asset in helping
us build a more robust MBA Alumni network. Let me know when you guys
want to go out for dinner and drinks.
From Rachel Kenney via email ________________
Sure....let me know if I can help. The problem of course being I am
I love Omaha. If you want to take your families and they don't want
to sit in the meetings, you may want to check out the Henry Doorly
Zoo. It has the largest Cat House in the country, the Desert Sphere
has just opened, and the Rainforest is nicely done. Hope you have a
Purdue Club of Chicago
Date: Wed, 09 Mar 2005 01:08:25 +0000
Subject: UPDATED MARCH EVENTS
Please see below for an updated list of upcoming events in the next
Don't miss out!
1. First ever "Big Ten Mascot Challenge"; ESPN Zone (43 E. Ohio
Thursday, March 10; 8 p.m.
"Mascot Mayhem" is headed to ESPN Zone in Chicago! Our beloved Purdue
compete against rival Big Ten mascots in the first ever "Big Ten
Challenge" this Thursday, March 10 at 8 p.m. at ESPN Zone. Come
support Purdue Pete as
he competes for the 2005 Big Ten Mascot Champion trophy and a $1,000
to the winning school's general scholarship fund. Pete will compete
fun challenges against: Minnesota's Goldy the Gopher, Wisconsin's
Michigan State's Sparty, Penn State's Nittany Lion, and
the Wildcat. Contact Tiffany directly at 312-670-5063 for special
pricing for groups of 20 or more.
2. South Side Irish Parade; Sunday, March 13 from 10 a.m. - 4p.m.
Join the Purdue Club of Chicago as we take a Coach Bus from Durkin's
South Side Irish Parade on March 13 from 10 a.m. 4 p.m. Check in is
at 9:30 a.m.
The cost is $25. Beer will be provided on the bus to the parade (you
if you would like other liquor). Reservations Required!!! Please
www.bashevents.com to register online or contact Todd at 312-282-7998
and say you are
with Purdue. You will need a credit card to make a reservation;
pay with cash the day of the event. If you decide not to attend after
registered, please call to cancel your reservation or your credit
card will be
3. Monthly Social Hour, Wednesday, March 16; 6:30 8:30 p.m.
March's monthly social hour will be held next Wednesday, March 16
8:30 p.m. at Durkin's Tavern (810 W. Diversey). As usual, drink
available for all PCC members: $1 for unlimited domestic drafts; $10
any drafts; $10 buckets and $4 bombs. We hope to see you there!
4. Fifth Annual Purdue Club vs. Indiana Club "Battle for Blood" Blood
March 1 - 31
Did you know that 90 percent of the population will need donated
blood in its
lifetime, yet fewer than three percent of eligible donors in the
area regularly donate? Well, this month you can help a worthy cause
participate in the Fifth Annual Purdue Club vs. Indiana Club "Battle
for Blood" Blood
Drive. Although the annual contest is tied at 2-2, the Purdue side
unfortunately come out on the short end the last two years. It's time
to earn back
bragging rights along with the winner's trophy that is shared between
the two alumni
groups. As in previous years, Life Source Blood Centers will service
donation. The onset of inclement weather and the cold/flu season has
had an impact
on blood collections via cancellations, no shows and lack of
year. While the community blood supply is not currently experiencing
shortage, one could be faced if this trend continues. The gift of
life through a
blood donation is simple, quick, and extremely satisfying. If you
donate, plan your giving schedule to include a donation this month.
www.lifesource.org for a location near you.
5. Enjoy Winery Tour and Tasting at Glunz Winery in Grayslake; March
19; 2 p.m.
Did you know there are several wineries and wine shops in the Chicago
Well, we found them! Throughout the year, classes and tastings will
organized and announced. The first visit planned is at Glunz Family
Winery & Cellars in
Grayslake (northern suburbs) on Saturday, March 19 at 2 p.m.
Glunz Family Winery & Cellars
888 E. Belvidere Rd. Ste. #211
Grayslake, Illinois 60030
A tour and wine tasting will be provided at $5/each for club members;
$7.50/each for non-club members (souvenir glass included). Contact
Jon Simpson at
847-242-9156 or suburbs@... with questions, and mail
payment by March 8
Purdue Club of Chicago
RE: Glunz Wine Visit
315 N. Jefferson St. #302
Chicago, IL 60661
Just address an email to PUCMBA@yahoogroups.com
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