Headhunter - Confluence Bridge Search

Reckitt poaching key executives from HUL as India turns SE Asia headquarter

2012-01-15T20:28:00.001-08:00

14 Jan, 2012, 07.00AM IST, Chaitali Chakravarty & Ratna Bhushan,ET Bureau

NEW DELHI: Reckitt Benckiser, one of the world's largest consumer goods companies, has upgraded India to its regional headquarters for southeast Asia, covering a swathe of 12 nations representing a market of 1.8 billion people.
Reckitt India Chairman & Managing Director CM Sethi will oversee this new domain, which has been carved out of the Asia operations, people familiar with the development said.
Singapore, traditionally the regional base for most multinational companies (it used to be Reckitt's headquarters for Asia), will now become one of the territories controlled from India. The other countries are Vietnam, Thailand, Myanmar, Cambodia, Laos, Malaysia, Indonesia, Brunei, the Philippines and East Timor. China will be the hub for the rest of Asia.
In strengthening India, Reckitt could also cause severe discomfiture to its biggest rival, Hindustan Unilever, as well as Unilever offices in other countries. In its search for the best managers to fill key positions here and in the southeast Asian region, Reckitt has been poaching key executives from HUL, regarded as a veritable fount of management talent that has produced stalwarts such as Harish Manwani, the global chief operating officer of Unilever.

The country's elevation comes four months after India-born Rakesh Kapoor took over as the chief executive of the UK-based company, whose products include Dettol antiseptic and Mortein mosquito repellent. India's widened role is also being perceived as a ringing endorsement of the country both as a market and a source of talented managers.
Reckitt confirmed the ongoing restructuring but declined to provide details. Pinakiranjan Mishra, a partner at consulting firm Ernst & Young, said Reckitt probably wants to create new markets for the brands it bought when it acquired Paras Pharmaceuticals in December 2010 for Rs 3,260 crore.

The Ahmedabad based company's brands include Moov pain reliever, D'Cold flu and cold drug and Krack foot cream. "In fact, the acquisition itself was aimed at making India a much more important market for Reckitt globally," Mishra said. The unlisted Indian arm of Reckitt contributes just 3% to the company's global revenue of £8.4 billion (Rs 67,000 crore). But India revenues are estimated to be growing at 20%, more than twice the industry average.

S Raghunandan, the former chief executive of Paras Pharma, will become the CEO of Reckitt Benckiser India. From HUL, Reckitt will hire the human resources head ( Anish Singh) and the finance head (Gopal Mishra). The head of the supply chain for southeast Asian region, Pankaj Gupta, has already joined the company from Unilever Singapore.
"In all, some 10 executives are likely to join Reckitt from Hindustan Unilever in the short term," a person close to the developments said.

A HUL spokesman declined to comment on specific managers and said its attrition rate, at 5%, is below industry levels. "Some attrition will always be there, which is healthy for all organisations in terms of both talent management and development."

the next pixar - At Moonbot's Louisiana Studio, Hollywood Vets Dream Up Magical, Interactive Stories

2012-01-11T04:34:00.001-08:00

By: John Pavlus

January 9, 2012

With Moonbot Studios, a children’s animation star remakes the cinematic experience. And that’s just his first trick.

WHAT'S GOING ON HERE? Brandon Oldenburg, who cofounded the studio with William Joyce, explains the space his staff works in. CLICK TO EXPAND | Photo by Daymon Gardner

William Joyce once helped design Woody and Buzz Lightyear. But now he's taking on giants like his former employer, Pixar, from an unlikely base: Shreveport, Louisiana, where he and his team at Moonbot Studios are intentionally acting nothing like a typical studio.

"We don't have a core business," says Joyce.

"Storytelling," adds another cofounder, Brandon Oldenburg.

"Make cool shit," says the third cofounder, veteran movie and TV producer Lampton Enochs.

Why would anyone in the entertainment industry take this kind of talk seriously? It's hard not to. Moonbot's first project came out last year; it was The Fantastic Flying Books of Mr. Morris Lessmore, a short film followed by an interactive iPad children's book of the same name. The app sold more than 90,000 copies, briefly unseating Angry Birds as the best-selling app, and the short film earned Oscar consideration.

Now there's a list on a whiteboard in Enochs's office, which includes the names of an A-list film director and a legendary pop star. Written above it all is the word inquiries.

Moonbot opened in 2009 in Shreveport, Joyce's hometown, in part for the economics: A bevy of local tax incentives allowed the founders to staff up quickly, and a local tech foundation built them a dazzling office space for free. But being "away from the noise" of Hollywood, as Oldenburg puts it, had a deeper payoff. It let Moonbot focus its priorities, without worrying about building buzz.

"Pixar had to make commercials for years before Toy Story; Blue Sky Studios had to feed the beast for 12 years before they had the time and technology to produce [Oscar-winning short film] Bunny," says Joyce. "We decided to make our passion project the very first thing we did."

That thing was Lessmore. It was to be an animated short and, later, a children's book--but during production in 2010, the iPad came out. "I remember saying to Brandon, 'Fuck, this is going to change everything,'" Joyce says. "The iPad was the missing third way of expression."

At age 54, Joyce had largely conquered those other modes of expression. He's written and illustrated more than 50 children's books, been the subject of a traveling art exhibition, created Christmas window displays for Saks Fifth Avenue, helped design characters for Pixar, and is currently codirecting an animated DreamWorks feature.

The team pivoted, imagining every way possible for how to interact with the device. Out of that came what Moonbot calls "story apps," designed to be more movielike than e-books, more interactive than films, and more immersive than interactive games. Lessmore is just that--a movie with pages to turn and detours directly into its world. "It went further emotionally than even we thought it would," Joyce says.

A scene from Lessmore, in which Morris discovers a house full of living, eager books.

Business exploded--as has its office. "During story development, we pride ourselves on how messy the room gets," Oldenburg says, in paper-covered space that clearly makes him proud. "You know things are being drawn and discarded, drawn and discarded. We don't treat anything too precious up front."

In Moonbot's cavelike animation department, Oldenburg says, a "very Tony Stark-like" game experience is being designed for Ford. (Moonbot isn't above work-for-hire projects; it helps keep the lights on, and the studio treats them as R&D experiences for its young staff.) And in the high-ceilinged story room where Moonbot develops and refines its own properties around an L-shaped conference table with a monster-size bite missing from it, the walls are covered in concept art for a dozen new story apps--including more adult fare like Specters, a mystery-horror novel set in a New Orleans populated by well-heeled ghosts.

"Imagine someone reading a novel on their iPad and seeing something out of the corner of their eye that makes them scream out loud," Joyce says. "How fucking cool will that be?"

Joyce has heard it before: Could Moonbot be the next Pixar? He'd rather it not. "I was at Pixar when they were still small," he says. "Chris Wedge [director of Robots, a 2005 film that Joyce cocreated] once told me, 'Small is the future.' I'll get worried after we hire our 100th employee."

Right now, Moonbot's staff is at 35--a nice fit for the studio's beanbag-chair-strewn screening room. One day in November, the crew is critiquing a clip from The Numberlys, a story app (embedded with 18 educational games) being developed in time for Christmas. On screen, bug-eyed characters react in exaggerated horror to an unseen calamity. Joyce belly-laughs. A young animator worries about the way light strikes a character's head. The tweak is noted, queued for revision. In 20 minutes, they're all back to work.

Moonbot moves fast--sometimes from a sketch to a finished product in six months (as with The Numberlys, a project hastily launched after Michael Tchao, Apple's vice president of product marketing, casually asked Enochs what the studio had planned after Lessmore).

To stay nimble, it recruits young, multitalented creatives (average age: 25) who veered from the typical studio machine. "This is not a place for specialists," says Adam Volker, who graduated from art school in 2008 and was hired after chatting with Joyce about video games. Since then, he's designed characters, concepted stories, art-directed, and helped lead the studio's interactive division. "If I worked for a studio in California, my whole job would be animating a background character's shoes."

Joyce believes a company like Moonbot wouldn't have been possible five years ago--but thanks to ever-cheaper production tools and computing power (Moonbot's "render farm" is just one server rack), "there will be a lot more companies doing what we're doing five years from now."

Which means that, in five years, Moonbot will be doing something different. Enochs expects to have finished an animated feature, produced entirely in-house. Oldenburg would like to design live events: "An opening ceremony for the Olympics--that'd be perfect."

Joyce knows the lessons of the land he's on. His dad was a geologist who advised Louisiana's oil wildcatters in the 1960s. "You'd have a one in 100 chance at best of striking oil. It's all about intuition," he says.

"There's a gambling spirit in this part of the country. What's the iPad of five years from now going to be? I don't know. Big studios are afraid of that because it threatens their business model, but we don't have one. So we don't have to be afraid."

A version of this article appears in the February 2012 issue of Fast Company.

The art of listening

2011-12-14T02:10:00.001-08:00

It is through this creative process that we at once love and are loved

I want to write about the great and powerful thing that listening is. And how we forget it. And how we don't listen to our children, or those we love. And least of all - which is so important, too - to those we do not love. But we should. Because listening is a magnetic and strange thing, a creative force. Think how the friends that really listen to us are the ones we move toward, and we want to sit in their radius as though it did us good, like ultraviolet rays.

This is the reason: When we are listened to, it creates us, makes us unfold and expand. Ideas actually begin to grow within us and come to life. You know how if a person laughs at your jokes you become funnier and funnier, and if he does not, every tiny little joke in you weakens up and dies. Well, that is the principle of it. It makes people happy and free when they are listened to. And if you are a listener, it is the secret of having a good time in society (because everybody around you becomes lively and interesting), of comforting people, of doing them good.

______________________________________________________

Who are the people, for example, to whom you go for advice? Not to the hard, practical ones who can tell you exactly what to do, but to the listeners; that is, the kindest, least censorious, least bossy people you know. It is because by pouring out your problem to them, you then know what to do about it yourself.

When we listen to people there is an alternating current that recharges us so we never get tired of each other. We are constantly being re-created.

Now, there are brilliant people who cannot listen much. They have no ingoing wires on their apparatus. They are entertaining, but exhausting, too.

I think it is because these lecturers, these brilliant performers, by not giving us a chance to talk, do not let this little creative fountain inside us begin to spring and cast up new thoughts and unexpected laughter and wisdom. That is why, when someone has listened to you, you go home rested and lighthearted.

When people listen, creative waters flow

Now this little creative fountain is in us all. It is the spirit, or the intelligence, or the imagination - whatever you want to call it. If you are very tired, strained, have no solitude, run too many errands, talk to too many people, drink too many cocktails, this little fountain is muddied over and covered with a lot of debris. The result is you stop living from the center, the creative fountain, and you live from the periphery, from externals. That is, you go along on mere willpower without imagination.

It is when people really listen to us, with quiet, fascinated attention, that the little fountain begins to work again, to accelerate in the most surprising way.

I discovered all this about three years ago, and truly it made a revolutionary change in my life. Before that, when I went to a party, I would think anxiously: "Now try hard. Be lively. Say bright things. Talk. Don't let down." And when tired, I would have to drink a lot of coffee to keep this up.

Now before going to a party, I just tell myself to listen with affection to anyone who talks to me, to be in their shoes when they talk; to try to know them without my mind pressing against theirs, or arguing, or changing the subject.

Sometimes, of course, I cannot listen as well as others. But when I have this listening power, people crowd around and their heads keep turning to me as though irresistibly pulled. By listening I have started up their creative fountain. I do them good.

Now why does it do them good? I have a kind of mystical notion about this. I think it is only by expressing all that is inside that purer and purer streams come.

It is so in writing. You are taught in school to put down on paper only the bright things. Wrong. Pour out the dull things on paper too - you can tear them up afterward - for only then do the bright ones come.

If you hold back the dull things, you are certain to hold back what is clear and beautiful and true and lively.

Women listen better

I think women have this listening faculty more than men. It is not the fault of men. They lose it because of their long habit of striving in business, of self-assertion. And the more forceful men are, the less they can listen as they grow older. And that is why women in general are more fun than men, more restful and inspiriting.

Now this non-listening of able men is the cause of one of the saddest things in the world - the loneliness of fathers, of those quietly sad men who move along with their grown children like remote ghosts.

When my father was over 70, he was a fiery, humorous, admirable man, a scholar, a man of great force. But he was deep in the loneliness of old age and another generation. He was so fond of me. But he could not hear me - not one word I said, really. I was just audience. I would walk around the lake with him on a beautiful afternoon and he would talk to me about Darwin and Huxley and higher criticism of the Bible.

"Yes, I see, I see," I kept saying and tried to keep my mind pinned to it, but I was restive and bored. There was a feeling of helplessness because he could not hear what I had to say about it. When I spoke I found myself shouting, as one does to a foreigner, and in a kind of despair that he could not hear me. After the walk I would feel that I had worked off my duty and I was anxious to get him settled and reading in his Morris chair, so that I could go out and have a livelier time with other people. And he would sigh and look after me absentmindedly with perplexed loneliness.

For years afterward I have thought with real suffering about my father's loneliness. Such a wonderful man, and reaching out to me and wanting to know me! But he could not. He could not listen. But now I think that if only I had known as much about listening then as I do now, I could have bridged the chasm between us. To give an example:

Recently, a man I had not seen for 20 years wrote me. He was an unusually forceful man and had made a great deal of money. But he had lost his ability to listen. He talked rapidly and told wonderful stories and it was just fascinating to hear them. But when I spoke - restlessness: "Just hand me that, will you? ... Where is my pipe?" It was just a habit. He read countless books and was eager to take in ideas, but he just could not listen to people.

Patient listening

Well, this is what I did. I was more patient - I did not resist his non-listening talk as I did my father's. I listened and listened to him, not once pressing against him, even in thought, with my own self-assertion.

I said to myself: "He has been under a driving pressure for years. His family has grown to resist his talk. But now, by listening, I will pull it all out of him. He must talk freely and on and on. When he has been really listened to enough, he will grow tranquil. He will begin to want to hear me."

And he did, after a few days. He began asking me questions. And presently I was saying gently:

"You see, it has become hard for you to listen."

He stopped dead and stared at me. And it was because I had listened with such complete, absorbed, uncritical sympathy, without one flaw of boredom or impatience, that he now believed and trusted me, although he did not know this.

"Now talk," he said. "Tell me about that. Tell me all about that."

Well, we walked back and forth across the lawn and I told him my ideas about it.

"You love your children, but probably don't let them in. Unless you listen, you can't know anybody. Oh, you will know facts and what is in the newspapers and all of history, perhaps, but you will not know one single person. You know, I have come to think listening is love, that's what it really is."

Well, I don't think I would have written this article if my notions had not had such an extraordinary effect on this man. For he says they have changed his whole life. He wrote me that his children at once came closer; he was astonished to see what they are; how original, independent, courageous. His wife seemed really to care about him again, and they were actually talking about all kinds of things and making each other laugh.

Family tragedies

For just as the tragedy of parents and children is not listening, so it is of husbands and wives. If they disagree they begin to shout louder and louder - if not actually, at least inwardly - hanging fiercely and deafly onto their own ideas, instead of listening and becoming quieter and more comprehending.

But the most serious result of not listening is that worst thing in the world, boredom; for it is really the death of love. It seals people off from each other more than any other thing.

Now, how to listen. It is harder than you think. Creative listeners are those who want you to be recklessly yourself, even at your very worst, even vituperative, bad- tempered. They are laughing and just delighted with any manifestation of yourself, bad or good. For true listeners know that if you are bad-tempered it does not mean that you are always so. They don't love you just when you are nice; they love all of you.

In order to listen, here are some suggestions: Try to learn tranquility, to live in the present a part of the time every day. Sometimes say to yourself: "Now. What is happening now? This friend is talking. I am quiet. There is endless time. I hear it, every word." Then suddenly you begin to hear not only what people are saying, but also what they are trying to say, and you sense the whole truth about them. And you sense existence, not piecemeal, not this object and that, but as a translucent whole.

Then watch your self-assertiveness. And give it up. Remember, it is not enough just to will to listen to people. One must really listen. Only then does the magic begin.

______________________________________________________

We should all know this: that listening, not talking, is the gifted and great role, and the imaginative role. And the true listener is much more beloved, magnetic than the talker, and he is more effective and learns more and does more good. And so try listening. Listen to your wife, your husband, your father, your mother, your children, your friends; to those who love you and those who don't, to those who bore you, to your enemies. It will work a small miracle. And perhaps a great one.

Brenda Ueland, a prolific Minnesota author and columnist, died in 1985 at the age of 93. Her father was a lawyer and judge, her mother a suffrage leader. From a collection of her essays, "Strength To Your Sword Arm: Selected Writings by Brenda Ueland." Copyright 1992 by The Estate of Brenda Ueland. Reprinted on this webpage by permission of Holy Cow! Press, Box 3170, Mt. Royal Station, Duluth, Minn. 55803. Phone/Fax: 218-724-1653

The Art of Listening

2011-12-13T17:53:00.001-08:00

Opinion

By HENNING MANKELL

Maputo, Mozambique

I CAME to Africa with one purpose: I wanted to see the world outside the perspective of European egocentricity. I could have chosen Asia or South America. I ended up in Africa because the plane ticket there was cheapest.

I came and I stayed. For nearly 25 years I’ve lived off and on in Mozambique. Time has passed, and I’m no longer young; in fact, I’m approaching old age. But my motive for living this straddled existence, with one foot in African sand and the other in European snow, in the melancholy region of Norrland in Sweden where I grew up, has to do with wanting to see clearly, to understand.

The simplest way to explain what I’ve learned from my life in Africa is through a parable about why human beings have two ears but only one tongue. Why is this? Probably so that we have to listen twice as much as we speak.

In Africa listening is a guiding principle. It’s a principle that’s been lost in the constant chatter of the Western world, where no one seems to have the time or even the desire to listen to anyone else. From my own experience, I’ve noticed how much faster I have to answer a question during a TV interview than I did 10, maybe even 5, years ago. It’s as if we have completely lost the ability to listen. We talk and talk, and we end up frightened by silence, the refuge of those who are at a loss for an answer.

I’m old enough to remember when South American literature emerged in popular consciousness and changed forever our view of the human condition and what it means to be human. Now, I think it’s Africa’s turn.

Everywhere, people on the African continent write and tell stories. Soon, African literature seems likely to burst onto the world scene — much as South American literature did some years ago when Gabriel García Márquez and others led a tumultuous and highly emotional revolt against ingrained truth. Soon an African literary outpouring will offer a new perspective on the human condition. The Mozambican author Mia Couto has, for example, created an African magic realism that mixes written language with the great oral traditions of Africa.

If we are capable of listening, we’re going to discover that many African narratives have completely different structures than we’re used to. I over-simplify, of course. Yet everybody knows that there is truth in what I’m saying: Western literature is normally linear; it proceeds from beginning to end without major digressions in space or time.

That’s not the case in Africa. Here, instead of linear narrative, there is unrestrained and exuberant storytelling that skips back and forth in time and blends together past and present. Someone who may have died long ago can intervene without any fuss in a conversation between two people who are very much alive. Just as an example.

The nomads who still inhabit the Kalahari Desert are said to tell one another stories on their daylong wanderings, during which they search for edible roots and animals to hunt. Often they have more than one story going at the same time. Sometimes they have three or four stories running in parallel. But before they return to the spot where they will spend the night, they manage either to intertwine the stories or split them apart for good, giving each its own ending.

A number of years ago I sat down on a stone bench outside the Teatro Avenida in Maputo, Mozambique, where I work as an artistic consultant. It was a hot day, and we were taking a break from rehearsals so we fled outside, hoping that a cool breeze would drift past. The theater’s air-conditioning system had long since stopped functioning. It must have been over 100 degrees inside while we were working.

Two old African men were sitting on that bench, but there was room for me, too. In Africa people share more than just water in a brotherly or sisterly fashion. Even when it comes to shade, people are generous.

I heard the two men talking about a third old man who had recently died. One of them said, “I was visiting him at his home. He started to tell me an amazing story about something that had happened to him when he was young. But it was a long story. Night came, and we decided that I should come back the next day to hear the rest. But when I arrived, he was dead.”

The man fell silent. I decided not to leave that bench until I heard how the other man would respond to what he’d heard. I had an instinctive feeling that it would prove to be important.

Finally he, too, spoke.

“That’s not a good way to die — before you’ve told the end of your story.”

It struck me as I listened to those two men that a truer nomination for our species than Homo sapiens might be Homo narrans, the storytelling person. What differentiates us from animals is the fact that we can listen to other people’s dreams, fears, joys, sorrows, desires and defeats — and they in turn can listen to ours.

Many people make the mistake of confusing information with knowledge. They are not the same thing. Knowledge involves the interpretation of information. Knowledge involves listening.

So if I am right that we are storytelling creatures, and as long as we permit ourselves to be quiet for a while now and then, the eternal narrative will continue.

Many words will be written on the wind and the sand, or end up in some obscure digital vault. But the storytelling will go on until the last human being stops listening. Then we can send the great chronicle of humanity out into the endless universe.

Who knows? Maybe someone is out there, willing to listen ...

Henning Mankell is the author of many books, including the Wallander novels. This article was translated from the Swedish by Tiina Nunnally from the Swedish.

Cargill: Inside the quiet giant that rules the food business

2011-12-01T05:04:00.001-08:00

By David Whitford with Doris Burke

Just-harvested soybeans are stacked high at a Cargill grain elevator in Albion, Neb.

FORTUNE -- Greg Page's only misgiving about the job offer he received from Cargill in 1974 was that it was from Cargill. He had grown up in tiny Bottineau, N.D., six miles from the Canadian border. His dad was the local John Deere dealer, who also owned an 800-acre hobby farm with 40 cows. "Cargill has historically had probably mixed sentiments about it out on the prairie," says Page. "That's who you sold your grain to." Farmers knew that if they didn't keep their wits about them, they might well get squeezed by the food giant. You knew to "keep a weather eye out," he says.

Page took the job anyway. He labored happily "in close proximity to livestock" for his first 24 years at Cargill, beginning with the feed division, then in meat, at home and abroad, until he was picked for bigger things. Eventually he was promoted all the way, in 2007, to chairman and CEO of the country's largest private company. Today he runs a business that is vastly larger and more influential than the Cargill of his youth.

CEO Greg Page has spent his entire 37-year career at Cargill. The business he runs today is vastly larger and more influential than when he started.

With $119.5 billion in revenues in its most recent fiscal year, ended May 31, Cargill is bigger by half than its nearest publicly held rival in the food production industry, Archer Daniels Midland (ADM, Fortune 500). If Cargill were public, it would have ranked No. 18 on this year's Fortune 500, between AIG (AIG, Fortune 500) and IBM (IBM, Fortune 500). Over the past decade, a period when the S&P 500's revenues have grown 31%, Cargill's sales have more than doubled.

But those numbers alone don't begin to capture the scope of Cargill's impact on our daily lives. You don't have to love Egg McMuffins (McDonald's (MCD, Fortune 500) buys many of its eggs in liquid form from Cargill) or hamburgers (Cargill's facilities can slaughter more cattle than anyone else's in the U.S.) or sub sandwiches (No. 8 in pork, No. 3 in turkey) to ingest Cargill products on a regular basis. Whatever you ate or drank today -- a candy bar, pretzels, soup from a can, ice cream, yogurt, chewing gum, beer -- chances are it included a little something from Cargill's menu of food additives. Its $50 billion "ingredients" business touches pretty much anything salted, sweetened, preserved, fortified, emulsified, or texturized, or anything whose raw taste or smell had to be masked in order to make it palatable.

Despite Cargill's extraordinary size, strength, and breadth, it has long been remarkably successful at keeping out of the public eye. But the days when the company could get away with saying nothing and revealing less are over. "I think the world has curiosity about where its food comes from that is more earnest than it's been in the past," says Page, who earlier this year took the unprecedented step of allowing Oprah's cameras inside a Cargill slaughterhouse. (No video of the actual slaughtering, however.)

The simple fact is that the bigger Cargill gets, the more attention it draws. Timothy Wise, research director at the Global Development and Environment Institute at Tufts University, points to several factors that have increased concerns about Cargill's rising power, including recent wild gyrations in commodities markets, "sticky-high" prices at the supermarket, and the ever deeper integration of Big Ag with global financial markets. Perhaps the most hot-button issue of all is food safety. In August, Cargill announced the largest poultry recall in U.S. history -- 36 million pounds of ground turkey linked to a salmonella outbreak at a factory in Arkansas that sickened 107 people in 31 states and killed one. "The public is justified in being wary of having any part of our food system controlled by a small number of large corporations," says Wise.

With wariness comes intense scrutiny of Cargill's motives and its means: from organizations like Rainforest Action Network, worried about Cargill's impact on Indonesian and Brazilian ecosystems; from Congress, concerned about antitrust issues and speculative trading strategies; and from the international community. Food security -- the challenge of feeding the world -- has recently risen to the top of the G20 agenda. The UN says that a billion people go to bed hungry every night, and that we need to double food production by 2025 just to keep up with population growth and better diets in the developing world -- grim truths that concern Cargill deeply, whether Cargill believes that solving world hunger is its job or not. "We're not a philanthropy," says Page, in one of a series of rare interviews that Cargill granted to Fortune over the past several months. "I think we have to be careful not to lay claim to an altruism that doesn't exist."

And then there's climate change. It's hard to think of an organization anywhere in the world with a bigger stake in understanding potential disruptions to the food supply wrought by global warming than Cargill. Page does not disagree, although his take may surprise you. "Clearly the volatility can be an opportunity," he says, acknowledging that sharp price swings can play to Cargill's vaunted trading expertise. Then he adds, "The big part of our business is the physical handling of tens of millions of tons of food. If we believe the world is headed toward a varied weather pattern, those services become more important."

In other words, signs point to Cargill's influence -- and profits -- continuing to grow. But is what's good for Cargill good for the world?

Keeping it in the family

At 60, even in a clean white shirt and rimless spectacles, Page still looks like a farmer. He's tall and angular with thick silver hair, ruddy skin, and a chin like a block of wood. His accent is pure nasal prairie. I met him at Cargill headquarters, in Wayzata, Minn., just west of Minneapolis, in the Founders Room, surrounded by oil portraits of CEOs past. No matter what Page does to distinguish himself, his portrait will never hang here. The Founders Room is only for Cargills and MacMillans, the two families joined by marriage at the turn of the last century; they built Cargill and ran it as a family business until CEO Whitney MacMillan's retirement in 1995.

Page is the third CEO in a row to come from outside the family. Today not a single Cargill or MacMillan remains in a senior executive position at the company. Outsiders (six) and managers (five) outnumber family members (five) on the board. What hasn't changed is ownership. Cargill introduced a limited employee stock ownership plan in the '90s that allowed some family members to cash out. However, roughly 100 descendants of the founders still own around 90% of the stock, worth some $52 billion as of the last official tally. Generally, they've been content to plow profits back into the business and watch the value of their asset grow. Dividends are calculated on a rolling two-year cycle and paid at a rate that Page describes as de minimis. "The capital's not only private," he says, "it's patient and permanent."

Cargill's roots lie in the ancient, risky business of buying, storing, and selling grain. William Wallace Cargill, the second son of a Scottish sea captain, started with a single warehouse in Conover, Iowa, in 1865. Conover is a ghost town now, but Cargill still deals heavily in grain. Wherever it grows and wherever it goes.

Cargill ships other commodities too: soybeans and sugar from Brazil; palm oil from Indonesia; cotton from Asia, Africa, Australia, and the Deep South; beef from Argentina, Australia, and the Great Plains; and salt from all over North America, Australia, and Venezuela. The company owns and operates nearly 1,000 river barges and charters 350 oceangoing vessels that call on some 6,000 ports globally, ranking it among the world's biggest bulk shippers of commodities. "In one sense, you can think of Cargill as just a big transportation company," says Wally Falcon, deputy director at the Center on Food Security and the Environment at Stanford University. "Their game is: extremely efficient, high volumes, low margins, and just being smarter and quicker than anybody else."

Sometimes the same ship that picks up a load of soybeans at Cargill's deepwater Amazon port in Santarem, Brazil, after unloading in Shanghai, will carry coal from Australia to Japan before rinsing out its holds and returning to Brazil for more beans. In fact, Cargill's ocean-transport business moves more coal and iron ore for third parties than it does foodstuffs, oils, and animal feeds for itself, by a factor of two. "From places of surplus," to quote the Cargill mantra, "to places of need."

Cargill reluctantly sold its 64% stake in fertilizer manufacturer Mosaic (MOS, Fortune 500) for $19 billion earlier this year, and it exited the seed-engineering business long ago. But farmers in many of the 63 countries where Cargill operates -- 60% of earnings are generated outside the U.S. -- can still buy everything they need to plant their crops and feed their livestock from a local Cargill rep, as well as crop insurance, hedging instruments, and marketing advice.

The company has a long, if underappreciated, tradition of developing innovative new businesses. Cargill was the first commodities trader to set up shop in Geneva in 1956; others followed, and today Geneva is the center of the commodities-trading universe. In 2003, Cargill created an independent subsidiary called Black River Asset Management, a $5.6 billion hedge fund that leverages the company's unmatched global intelligence-gathering capability to make big bets on commodities and land on behalf of pension funds and university endowments. Among Cargill's many units is one, growing 15% a year, that's dedicated to replacing petroleum-based oils and lubricants with products made from plants. And the company recently brought to market a new no-calorie sweetener, Truvia, made from the white-flowered stevia plant, that has quickly become the No. 2-selling sugar substitute in the U.S. "We like to add new capabilities in the same way that we like to expand into new geographies," says Cargill's British-born vice chairman, Paul Conway.

One business Cargill is not in, curiously, is farming. With the exception of two large palm plantations in Indonesia, Cargill does not own land. That's partly a capital-deployment choice, much like its decision to charter, not own, ships. (Cargill has owned ships in the past, though, and may own them again soon. Cargill's former head of ocean shipping, Gert-Jan Van den Akker, who now runs the company's energy, transportation, and industrial businesses in Asia, told me he sees a "pure trading opportunity" developing in the next four or five years and has set up a partnership to buy distressed shipping assets: "We will buy when things are looking bad and at times sell when things are looking better.") But it's more fundamental than that. "They're not corporate farmers," says Shonda Warner, a former Cargill trader who went on to Goldman Sachs (GS, Fortune 500) and now runs an investment firm, Chess Ag Full Harvest Partners, that buys farmland. "Farming is not their business. Grain handling and grain trading -- trading the produce -- is their business."

That means stimulating new markets, opening new trade routes, matching producers with consumers, and, above all, ensuring steady flows of agricultural commodities in a changing global environment. "As far as how our corporate strategy works," says Conway, "we don't say, 'We think the world's going to look like this, let's define our strategy for that world.' We say, 'We don't know what the world's going to look like. We need a strategy or a set of strategies that can be successful almost irrespective of what the world looks like.'" Which helps explain how Cargill got into the cocoa business in Vietnam.

Bringing Cocoa to Vietnam

Seventy percent of the world's cocoa grows in West Africa, and most of that in one country, Ivory Coast. Since 1999, Ivory Coast has been through a bloody succession of military coups, rigged elections, and civil wars. "We were concerned about running into a ceiling on production there," says Harold Poelma, managing director of Cargill Cocoa. So Cargill began looking for other options. The solution that it came up with perfectly illustrates the company's global reach and long view.

Cocoa trees look like something Dr. Seuss would draw, with clusters of hard-shelled pods, as big and colorful as Halloween gourds, sprouting directly from the trunk and limbs. They don't grow just anyplace. They need shade, warmth, and humidity, as well as deep, rich soil -- conditions generally found within a band 20 degrees north and south of the equator. That band passes through Vietnam.

Cargill was one of the first U.S. multinationals to return to Vietnam when President Bill Clinton normalized relations with the government in Hanoi in 1995. Today it is the country's largest domestic producer of livestock feed and a central player in Vietnam's fast-moving shift from a state-controlled agricultural economy to one where small farmers are encouraged to work private plots for private gain. The effect of that shift has been transformative. Not long ago, Vietnam was importing a million tons of rice a year. Last year it became the world's second leading rice exporter. "Same people, same land," Vietnam's director of crop production, Dr. Nguyen Tri Ngoc, told me in his Hanoi office, speaking through a translator. "Before, farmers were not really farmers. They were workers in the fields, and they worked under the supervision of the government." And the difference now? "Free markets!" he says in English.

In 2004, Cargill launched a public-private partnership with one of its biggest customers, chocolate giant Mars, and the governments of Vietnam and the Netherlands. The aim: to create something that had never before existed in Vietnam, a cocoa-export economy.

First, Cargill had to convince a front line of growers to switch to cocoa from well-established crops like coffee, black pepper, and cashews. Two years before the first harvest (it takes at least that long for cocoa seedlings to produce fruit), before there was anything to buy, Cargill opened two fully staffed cocoa buying stations on major roads, in Ben Tre and Dak Lak provinces. It made an early commitment to transparency, posting on the Cargill website and offering by text message both the daily international price on the London market and what Cargill is paying locally; growers can lock their price for three weeks, the time it takes to ferment and dry the beans after harvest. Cargill also built a network of more than 100 demonstration farms, where curious growers can learn from their neighbors. And in February 2011 the company took delivery of the first Vietnamese cocoa beans to carry UTZ certification -- an independent sustainability program through which growers can earn an extra $100 per ton.

This year Vietnamese farmers will produce about 2,500 metric tons of cocoa, 70% of which will go to Cargill. That's a tiny sliver of the 3.4 million-ton global market, but the growth trend is impressive: 40,000 acres under cultivation in 2010, compared with 1,200 in 2003, and already 32,000 active growers in 12 provinces. Poelma sees the potential for 100,000 tons by 2020. Instead of shipping all of that to Cargill's North Sea Canal processing plant in Wormer, the Netherlands -- a voyage that takes 24 days -- Cargill hopes to have a Cargill factory in Vietnam by then, processing cocoa liquor, cocoa butter, and cocoa powder for export to growing markets in China and India.

None of that happens without the eager participation of thousands of small growers. One I met last summer was Trinh Van Thanh, a smooth-cheeked 43-year-old with a wife, three daughters, and roughly four acres of land in Baria-Vungtau province, a two-hour drive southeast from Ho Chi Minh City. Five years ago Thanh was growing pepper and coffee and raising pigs, and he was struggling. His pepper trees were afflicted by blight. The yield from his mature coffee trees was declining year by year. He says he was $5,000 in debt.

Thanh planted his first cocoa saplings, as Vietnamese farmers often do, in the shade of his coffee trees. He enrolled in an agricultural extension program in Ho Chi Minh City, where he learned how to build a specialized slow-drip irrigation system based on technology invented on an Israeli kibbutz. When the first crop came in, Thanh made the ambitious choice to ferment and dry the cocoa beans himself. Ultimately, he built more fermentation boxes and drying tables than he needed for his own crop, which meant he could perform those value-adding services for other growers. Soon he wasn't just farming, he was running a collection station. Next he planted a cocoa-tree nursery. Then he launched an irrigation consulting business. (The man gets the concept of a virtuous cycle.) Thanh still sells all his beans to Cargill but maybe not for long. What he really wants to learn how to do next, he told me, is make and sell chocolate.

Thanh's success so far almost defies belief. He says his mini cocoa conglomerate will gross more than $850,000 this year. And if his daughter, who's about to graduate from high school, wants to go to college in America -- and he hopes that she will -- he can easily afford it.

Later in Hanoi, I tell Ngoc all about my visit to Baria-Vungtau province. When does a farmer like Thanh, I ask him, become too much of a capitalist for the Socialist Republic of Vietnam? Ngoc beams. "No limit!" he says. Again in English.

No slowing down

As mighty as Cargill may be, it is not immune to setbacks. In fact, the company's fiscal 2012 is off to a dismal start. Revenues rose 34% in the quarter ended Aug. 31, but earnings were down 66%. That after earnings rose more than 60% in the first quarter of fiscal 2011.

Page blames a perfect storm of unforeseen events: spring flooding in the Midwest (Cargill spent $20 million to prevent the Missouri River from washing out its corn-milling plant in Blair, Neb.); the salmonella outbreak in its turkey plant, which led to a partial shutdown and layoffs ("instead of a business that was making money, we have one absorbing the costs of the recall"); a significant wrong bet on a single, unnamed commodity; a "risk-on, risk-off" market environment that otherwise neutralized Cargill's vaunted trading expertise; and, above all, the global recovery that wasn't. "We underestimated the degree to which the world was gonna back up," says Page.

Remarkably, though, Cargill didn't slow down. The company maintained what Page calls a "big acquisition agenda," completing deals for a Central American poultry and meat processor, a German chocolate company, an Italian feed company, and the grain business of AWB Ltd., formerly the government-owned Australian Wheat Board. (Page says the $1.3 billion AWB purchase fills a hole in Cargill's global grain network: "We're in Russia," says Page, "we're in the Ukraine, we're in Canada, we're in the U.S., we're in Argentina, and we just didn't have as vibrant a footprint there.") Cargill also has a pending $2.1 billion offer for Provimi, a global feed company with 7,000 employees in 26 countries; that deal is expected to close by year-end. Few public companies could be that aggressive after bad results. "People always ask, 'Why is Cargill private?' " says Page. "This is probably one of those moments."

Page may not be under pressure from the family shareholders, but that doesn't mean that he is unworried about the future. The real threat to Cargill's long-term prosperity, Page says, is that forces beyond the company's control will infringe on its freedom to operate across markets. Cargill is clearly concerned with the way the global conversation is bending on food security. "You don't want to end up with policies that are counterproductive to feeding everyone," says Page, "and we don't want to end up with a business model that doesn't have any freedom to operate."

Trust us, he's saying, to feed the world, to keep our food safe, to respect the environment, and, by the way, to not gouge farmers or food shoppers at the supermarket. That's asking a lot. Greg Page is keeping a weather eye out. We'd better do the same.

This article is from the November 7, 2011 issue of Fortune.

TED Talk by Morgan Spurlock

2011-11-19T06:24:00.001-08:00

The Rare Find: Reinventing Recruiting

2011-10-15T04:29:00.001-07:00

October 13, 2011, 5:00 PM EDT/ Companies like Google and Facebook are downplaying résumés and identifying talent in unusual ways.

By George Anders

In late 2006, 22-year-old Adam D’Angelo confronted a serious problem. Facebook, then a small Silicon Valley startup, had picked him to be its chief technology officer. He was bursting with ideas about how to make the social-networking site bigger, faster, and more appealing. To make those dreams come true, Facebook relied on a couple dozen scruffy young engineers, crammed together in a graffiti-covered office. Reinforcements were desperately needed. D’Angelo and his colleagues refused to settle for any available programmer, fearing that lax standards would destroy the company’s innovative culture. Facebook was scrambling to master on-campus recruiting and to lure stars from Google (GOOG) and Microsoft (MSFT), but those old-fashioned hiring channels weren’t paying off fast enough. Something quicker and more nimble was needed.

D’Angelo proposed that Facebook publish gnarly programming challenges and invite engineers anywhere to solve them. These wouldn’t be the superficial brainteasers that some companies used, like estimating the number of piano tuners in Chicago. Instead, Facebook’s website would issue multi-hour tests of coding prowess. With a bit of wit, these puzzles would find and deliver the right kind of people to the California startup.

Facebook engineer Yishan Wong volunteered to draft puzzles so hard that he couldn’t solve them. Before long, Wong and D’Angelo realized that their whimsy might serve a bigger purpose, too. “We developed this theory that occasionally there were these brilliant people out there who hadn’t found their way to Silicon Valley,” Wong recalled. “They might be languishing in ordinary tech jobs. We needed a way to surface them.” Goofy puzzles—some involved dinosaurs or gamblers—looked like the perfect bait.

Meanwhile, in Portland, Me., on a cobblestoned road known as Milk St., Portland Webworks was cranking out corporate websites for lawyers and consultants. Among the programmers there was Evan Priestley, a large, round-faced fellow in his early twenties. He was building expertise in Web applications development while growing tired of humdrum tasks—such as adjusting shades of blue for individual customers who weren’t sure what they wanted. “They were always saying: ‘Can you build us some Internets?’” Priestley later remarked.

No big-league recruiter was likely to rescue Priestley. “I had a pretty terrible résumé,” he later observed. He had quit high school a few weeks before graduation because classes became unbearably tedious. He switched majors three times at the University of Southern Maine for similar reasons. Eventually he left college without a degree. Most people pegged Priestley as a slacker.

One afternoon, Priestley had finished early, so he started reading an online news site, reddit.com. One posting alluded to Facebook’s puzzlers. Welcoming the mental workout, Priestley began wrestling with ways of automatically seating a clique of people in a movie theater, given that best friends want to be side by side and rivals need to be far apart. The puzzle looked hard and shapeless at first. After 45 minutes, Priestley cracked it. He double-checked his programming solution, decided it worked, and e-mailed it 2,500 miles west, to Facebook headquarters.

Impressed with Priestley’s approach, Facebook flew him to Palo Alto for a job interview. Engineer Marc Kwiatkowski tested the newcomer, face-to-face, on a trickier problem. As Priestley later recalled, “I told Marc what answer he probably wanted—and I explained why it was a badly constructed problem. You were supposed to speed up one piece of the code. But it didn’t address the fact that 98percent of the time was being wasted on network requests.”

Kwiatkowski smiled, and then decided Priestley was right. A week later, Facebook hired the man from Maine.

A new era of talent hunting has begun. It’s happening not only at high-tech companies such as Facebook, but also at Army bases, ad agencies, investment banks, Hollywood studies, corporate boardrooms, college admissions offices, and even at nanny agencies. In all these fields, experts don’t just sort résumés. They pick people and build teams in a profoundly different way. Traditional measures of past achievement, such as test scores and academic degrees, are losing power, and companies are getting better at looking for those future superstars who deliver many times the value of someone who is merely good.

At Google, Todd Carlisle is director of staffing. In 2005, he began an experiment, collecting factors that might distinguish between hiring great employees and picking the wrong people. Within a few months, Carlisle had some answers. Most supposed markers of success turned out to be mirages. When all the number-crunching was done, several dozen factors—including tidbits like the age when a recruit got into computers—emerged as ones that could help predict candidates’ chances.

What Google learned was that it had been looking at résumés far too narrowly. The company had started out by focusing inordinately on candidates’ education, grade-point averages, and even SAT scores. The thinking was that high-IQ people would do best at Google, and that the best way of gauging brainpower was to look at classroom records. Google ended up with lots of PhD holders from Stanford, MIT, Caltech, and top Ivy League schools. But by the time Carlisle got to work, Google was finding that some of these geniuses weren’t quite as effective as it had hoped. Even more important, company insiders worried that they might be turning away a lot of talented people whose true abilities surpassed their academic credentials.

“Take the wide view” became the overriding lesson of Carlisle’s experiment. There was room at Google for people whose grades had faltered because they were working 30 hours a week to pay for college. There was room for highly competitive people who had chased an athletic dream when they were younger—and now were applying that same relentless energy to professional goals. There was room, especially in nonengineering fields, for people who weren’t great students but had been running businesses, tutoring, volunteering, and otherwise being civic leaders from their teenage days onward.

Such candidates would stay invisible if Google rigidly scanned résumés the traditional way, from top to bottom; as many as 75,000 a week streamed into Google’s offices. So many candidates chased so few openings that if reviewers didn’t see some “Wow!” factor right away, they hit the “Reject” button. The best hope of spotting these hidden winners, Carlisle came to believe, was to steal a quick peek at the bottom of the résumé. He became known as the man who analyzed them “upside down.” Now, when Carlisle pulls one up on his laptop—which happens dozens of times a day—he begins by tapping the “Page Down” key a couple times until he reaches the final entries.

Then he scrutinizes the loose ends of candidates’ bios. “I want to know their stories,” Carlisle explained one morning. “I want to know what these people are all about.” In a moment, he might start hunting for the classic markers of competence: work history, education, credentials, and the like. But first he wants to see if some special, rare attribute could point the way to greatness.

Far more than the search for programmers and tech execs has changed. The U.S. Army’s Special Forces size up candidates in a 19-day selection process in which no bullets are fired. The Army isn’t looking for the world’s best shooters; it can teach that. What it wants are resilient soldiers who can tackle unpredictable challenges. One test is to ask a group of prospects to move a trailer that’s missing a wheel 2.5 miles. The soldiers have some pipes, rope, and other objects at their disposal. The bare axle can never touch the ground. What they don’t know is that there isn’t a good way to put the elements together to get it done. A sergeant watches not to find who has the best solution but who best handles the fact that there is no answer. The winning candidates may not be honors graduates of West Point, but they have the grit that can pay off in tough, isolated assignments overseas. Likewise, at a test facility known as the Shooting House, at the FBI’s main training site in Quantico, Va., recruits are watched as much for when they don’t fire as for when they do.

The art of talent scouting also involves knowing what shortcomings don’t matter, which flaws can be overlooked. In sports, for instance, where talent spotting has been developed into a high art, it often means discounting size, strength, or an odd delivery. Baseball scout Herb Raybourn made the best call of his career many years ago in a small town in Panama, while watching a 21-year-old converted shortstop trying to make it as a pitcher. The prospect’s fastball clocked in at an undistinguished 84 to 87 mph. But Raybourn loved the pitcher’s loose, easy motion—and saw lots of room for improvement. For a base payment of just $2,500 cash, Raybourn signed future Hall of Famer Mariano Rivera to a contract with the New York Yankees. Likewise, many of the scouts who first saw Tim Lincecum pitch in college knew that he had first-pick statistics, but couldn’t get over the fact that he was short and slight for a pitcher. The San Francisco Giants picked him tenth, and he won a Cy Young Award two years later.

Corporate directors are also taking fresh looks at the process of picking chief executive officers. Recent academic studies show that charisma and affability may be overrated as traits that lead to CEO success. Efficiency, problem-solving, and hard-nosed accountability appear to be more valuable. If directors aren’t confident they can pick out the winning elements, consultants such as Randy Street are devising new interviewing techniques and simulations meant to establish which highfliers deserve a shot. He spends four hours at a minimum discussing each candidate’s life. He is looking for details that can’t appear on a résumé.

Priestley’s first few months at Facebook were impressive. He started on a team of programmers figuring out how to speed up Facebook’s underlying computer infrastructure. Then he helped develop a framework that made it easier for users to add games, maps, and other applications to their Facebook experience. He was a computing polyglot, switching from PHP to Ajax to other programming languages as needed. He worked days; he worked nights. Whatever Priestley didn’t know, he learned in self-run tutorials. One time, Facebook’s site stopped working for a small group of users. It turned out their computers were burdened with an obscure, out-of-date security program. No one at Facebook knew what to do. At 11p.m., Priestley rustled up the Internet’s only publicly available information about this security program—written in Danish. By daybreak, Priestley and a partner had gained familiarity with Danish terms such as foutmelding and beveiliging. They rejiggered Facebook’s internal code, and the problem was fixed.

Priestley wasn’t the only genius from nowhere to arrive on Facebook’s doorstep. As the company’s puzzles became well-known, programmers spent as much as 40 hours trying to devise solutions. Most of their efforts didn’t work. About 10 percent of the submissions amounted to accurate, viable programs. Within that pool, a much smaller number of the solutions displayed true elegance. The standout candidates earned job interviews at Facebook. Contestants who passed all regular screening tests were invited onboard.

Among these new hires was Jonathan Hsu, a graduate of Harvey Mudd College in southern California. He joined Facebook’s engineering team in July 2007 and began working on online ad software. Soon a beguiling extra job opened up. The original puzzle creator, Yishan Wong, left for paternity leave. Facebook needed someone new to oversee its growing collection of software quizzes. At a minimum, that meant sizing up candidates’ attempted solutions.

Hsu became the Puzzle Master. Each time Hsu posted a new puzzle, he added mischievous details that typified Facebook’s jaunty culture. In one problem, contestants were asked to help identify intoxicated users who couldn’t type properly anymore. It was repackaged as the “Breathalyzer.” To deal with this imaginary scenario, contestants needed to catch flurries of typos in unfamiliar texts, while absolving passages with rarer errors. Solving this challenge required shrewd use of a sophisticated look-up function. Hsu’s version made this task seem like a late-night dorm game.

Even the Puzzle Master’s identity and contact information became a baffler. The puzzle site’s opening picture never showed Hsu or any other individual. Instead, visitors saw an odd version of a lowercase f, consisting of many brightly colored rectangular slivers, all pressed together. Most viewers thought it was abstract art. The right ones realized that the f was a puzzle in its own right, written in Piet. Piet is a computer language in which all terms are represented as rectangles in the style of abstract artist Piet Mondrian. Thousands of people looked at the f each week. During a 30-month span, only 42 figured it out. The program yielded a secret e-mail address at Facebook, so solvers could alert the social networking company to their prowess.

From 2008 to 2010, outsiders e-mailed as many as 200 attempted puzzle answers a day to Facebook headquarters. It didn’t matter if the vast majority of submissions were clumsy or wrong. It was so easy, fast, and cheap to evaluate entries automatically—and then have Hsu take a closer look at the best submissions—that puzzle solving became a valuable tool in Facebook’s hunt for new engineers. Mainstream candidates were also encouraged to try the puzzles. Willingness to spend hours on a puzzle helped establish who really wanted to work at Facebook; clever solutions sharpened Facebook’s ability to spot the best coders. As of February 2011, Hsu estimated, some 118 engineers, or 20 percent of Facebook’s technical workforce at the time, had solved puzzles as part of their path into the company.

One of Hsu’s favorite discoveries was David Alves, a 2001 high school graduate who was still working his way through San José State in 2009. Alves’s college wasn’t known as a computer-studies citadel. Once Alves solved a puzzle and caught the eye of Facebook’s recruiters, however, the sidelights of his résumé commanded attention. He regularly earned top-10 recognition in programming contests pitting as many as 600 entrants against one another. He was president of San José State’s computer science club. Alves might have come from an obscure school, but he was ready to contribute.

These days, Facebook has a big, polished recruiting department, led by Lori Goler, a former Walt Disney and EBay executive. Many of the gung-ho engineers who championed offbeat programming challenges during Facebook’s coming of age, including Puzzle Master Hsu, have moved on; puzzles now are more tightly integrated into other recruiting methods. Last month, Facebook installed a new batch of puzzles, involving variables such as k and n, to replace the old bafflers involving dinosaurs and Red Bull.

Even so, Facebook keeps hunting for engineers without staring at résumés. At least five times a year it stages free-wheeling coding contests either at university campuses or Facebook headquarters. These events, known as hackathons or Hacker Cups, take on a carnival-like quality, as contestants race to complete programming challenges within a matter of hours. At one contest last year, Facebook offered a prize of $500 and a chance to meet company founder Mark Zuckerberg. The winning entry was a smartphone app called Airchalk that lets users wave their phones and create images on a whiteboard. It delighted Facebook’s judges so much that they decided the creators deserved even more. The contest champions, brothers Hani and Islam Sharabash of the University of Illinois, were hired on as summer interns.

Excerpted from George Anders's The Rare Find: Spotting Exceptional Talent Before Everyone Else, to be published by Portfolio on Oct. 18.

Anders is the author of four books and the former West Coast bureau chief of Fast Company magazine.

Betting on the Blind Side

2011-03-30T00:46:00.001-07:00

Michael Burry always saw the world differently—due, he believed, to the childhood loss of one eye. So when the 32-year-old investor spotted the huge bubble in the subprime-mortgage bond market, in 2004, then created a way to bet against it, he wasn’t surprised that no one understood what he was doing. In an excerpt from his new book, The Big Short, the author charts Burry’s oddball maneuvers, his almost comical dealings with Goldman Sachs and other banks as the market collapsed, and the true reason for his visionary obsession.

By Michael Lewis•

Photograph by Jonas Fredwall Karlsson

Dr. Michael Burry in his home office, in Silicon Valley. “My nature is not to have friends,” Burry concluded years ago. “I’m happy in my own head.”

In early 2004 a 32-year-old stock-market investor and hedge-fund manager, Michael Burry, immersed himself for the first time in the bond market. He learned all he could about how money got borrowed and lent in America. He didn’t talk to anyone about what became his new obsession; he just sat alone in his office, in San Jose, California, and read books and articles and financial filings. He wanted to know, especially, how subprime-mortgage bonds worked. A giant number of individual loans got piled up into a tower. The top floors got their money back first and so got the highest ratings from Moody’s and S&P, and the lowest interest rate. The low floors got their money back last, suffered the first losses, and got the lowest ratings from Moody’s and S&P. Because they were taking on more risk, the investors in the bottom floors received a higher rate of interest than investors in the top floors. Investors who bought mortgage bonds had to decide in which floor of the tower they wanted to invest, but Michael Burry wasn’t thinking about buying mortgage bonds. He was wondering how he might short, or bet against, subprime-mortgage bonds.

Every mortgage bond came with its own mind-numbingly tedious 130-page prospectus. If you read the fine print, you saw that each bond was its own little corporation. Burry spent the end of 2004 and early 2005 scanning hundreds and actually reading dozens of the prospectuses, certain he was the only one apart from the lawyers who drafted them to do so—even though you could get them all for $100 a year from 10kWizard.com.

The subprime-mortgage market had a special talent for obscuring what needed to be clarified. A bond backed entirely by subprime mortgages, for example, wasn’t called a subprime-mortgage bond. It was called an “A.B.S.,” or “asset-backed security.” If you asked Deutsche Bank exactly what assets secured an asset-backed security, you’d be handed lists of more acronyms—R.M.B.S., hels, helocs, Alt-A—along with categories of credit you did not know existed (“midprime”). R.M.B.S. stood for “residential-mortgage-backed security.” hel stood for “home-equity loan.” heloc stood for “home-equity line of credit.” Alt-A was just what they called crappy subprime-mortgage loans for which they hadn’t even bothered to acquire the proper documents—to, say, verify the borrower’s income. All of this could more clearly be called “subprime loans,” but the bond market wasn’t clear. “Midprime” was a kind of triumph of language over truth. Some crafty bond-market person had gazed upon the subprime-mortgage sprawl, as an ambitious real-estate developer might gaze upon Oakland, and found an opportunity to rebrand some of the turf. Inside Oakland there was a neighborhood, masquerading as an entirely separate town, called “Rockridge.” Simply by refusing to be called “Oakland,” “Rockridge” enjoyed higher property values. Inside the subprime-mortgage market there was now a similar neighborhood known as “midprime.”

But as early as 2004, if you looked at the numbers, you could clearly see the decline in lending standards. In Burry’s view, standards had not just fallen but hit bottom. The bottom even had a name: the interest-only negative-amortizing adjustable-rate subprime mortgage. You, the homebuyer, actually were given the option of paying nothing at all, and rolling whatever interest you owed the bank into a higher principal balance. It wasn’t hard to see what sort of person might like to have such a loan: one with no income. What Burry couldn’t understand was why a person who lent money would want to extend such a loan. “What you want to watch are the lenders, not the borrowers,” he said. “The borrowers will always be willing to take a great deal for themselves. It’s up to the lenders to show restraint, and when they lose it, watch out.” By 2003 he knew that the borrowers had already lost it. By early 2005 he saw that lenders had, too.

A lot of hedge-fund managers spent time chitchatting with their investors and treated their quarterly letters to them as a formality. Burry disliked talking to people face-to-face and thought of these letters as the single most important thing he did to let his investors know what he was up to. In his quarterly letters he coined a phrase to describe what he thought was happening: “the extension of credit by instrument.” That is, a lot of people couldn’t actually afford to pay their mortgages the old-fashioned way, and so the lenders were dreaming up new financial instruments to justify handing them new money. “It was a clear sign that lenders had lost it, constantly degrading their own standards to grow loan volumes,” Burry said. He could see why they were doing this: they didn’t keep the loans but sold them to Goldman Sachs and Morgan Stanley and Wells Fargo and the rest, which packaged them into bonds and sold them off. The end buyers of subprime-mortgage bonds, he assumed, were just “dumb money.” He’d study up on them, too, but later.

He now had a tactical investment problem. The various floors, or tranches, of subprime-mortgage bonds all had one thing in common: the bonds were impossible to sell short. To sell a stock or bond short, you needed to borrow it, and these tranches of mortgage bonds were tiny and impossible to find. You could buy them or not buy them, but you couldn’t bet explicitly against them; the market for subprime mortgages simply had no place for people in it who took a dim view of them. You might know with certainty that the entire subprime-mortgage-bond market was doomed, but you could do nothing about it. You couldn’t short houses. You could short the stocks of homebuilding companies—Pulte Homes, say, or Toll Brothers—but that was expensive, indirect, and dangerous. Stock prices could rise for a lot longer than Burry could stay solvent.

A couple of years earlier, he’d discovered credit-default swaps. A credit-default swap was confusing mainly because it wasn’t really a swap at all. It was an insurance policy, typically on a corporate bond, with periodic premium payments and a fixed term. For instance, you might pay $200,000 a year to buy a 10-year credit-default swap on $100 million in General Electric bonds. The most you could lose was $2 million: $200,000 a year for 10 years. The most you could make was $100 million, if General Electric defaulted on its debt anytime in the next 10 years and bondholders recovered nothing. It was a zero-sum bet: if you made $100 million, the guy who had sold you the credit-default swap lost $100 million. It was also an asymmetric bet, like laying down money on a number in roulette. The most you could lose were the chips you put on the table, but if your number came up, you made 30, 40, even 50 times your money. “Credit-default swaps remedied the problem of open-ended risk for me,” said Burry. “If I bought a credit-default swap, my downside was defined and certain, and the upside was many multiples of it.”

He was already in the market for corporate credit-default swaps. In 2004 he began to buy insurance on companies he thought might suffer in a real-estate downturn: mortgage lenders, mortgage insurers, and so on. This wasn’t entirely satisfying. A real-estate-market meltdown might cause these companies to lose money; there was no guarantee that they would actually go bankrupt. He wanted a more direct tool for betting against subprime-mortgage lending. On March 19, 2005, alone in his office with the door closed and the shades pulled down, reading an abstruse textbook on credit derivatives, Michael Burry got an idea: credit-default swaps on subprime-mortgage bonds.

The idea hit him as he read a book about the evolution of the U.S. bond market and the creation, in the mid-1990s, at J. P. Morgan, of the first corporate credit-default swaps. He came to a passage explaining why banks felt they needed credit-default swaps at all. It wasn’t immediately obvious—after all, the best way to avoid the risk of General Electric’s defaulting on its debt was not to lend to General Electric in the first place. In the beginning, credit-default swaps had been a tool for hedging: some bank had loaned more than they wanted to to General Electric because G.E. had asked for it, and they feared alienating a long-standing client; another bank changed its mind about the wisdom of lending to G.E. at all. Very quickly, however, the new derivatives became tools for speculation: a lot of people wanted to make bets on the likelihood of G.E.’s defaulting. It struck Burry: Wall Street is bound to do the same thing with subprime-mortgage bonds, too. Given what was happening in the real-estate market—and given what subprime-mortgage lenders were doing—a lot of smart people eventually were going to want to make side bets on subprime-mortgage bonds. And the only way to do it would be to buy a credit-default swap.

The credit-default swap would solve the single biggest problem with Mike Burry’s big idea: timing. The subprime-mortgage loans being made in early 2005 were, he felt, almost certain to go bad. But, as their interest rates were set artificially low and didn’t reset for two years, it would be two years before that happened. Subprime mortgages almost always bore floating interest rates, but most of them came with a fixed, two-year “teaser” rate. A mortgage created in early 2005 might have a two-year “fixed” rate of 6 percent that, in 2007, would jump to 11 percent and provoke a wave of defaults. The faint ticking sound of these loans would grow louder with time, until eventually a lot of people would suspect, as he suspected, that they were bombs. Once that happened, no one would be willing to sell insurance on subprime-mortgage bonds. He needed to lay his chips on the table now and wait for the casino to wake up and change the odds of the game. A credit-default swap on a 30-year subprime-mortgage bond was a bet designed to last for 30 years, in theory. He figured that it would take only three to pay off.

The only problem was that there was no such thing as a credit-default swap on a subprime-mortgage bond, not that he could see. He’d need to prod the big Wall Street firms to create them. But which firms? If he was right and the housing market crashed, these firms in the middle of the market were sure to lose a lot of money. There was no point buying insurance from a bank that went out of business the minute the insurance became valuable. He didn’t even bother calling Bear Stearns and Lehman Brothers, as they were more exposed to the mortgage-bond market than the other firms. Goldman Sachs, Morgan Stanley, Deutsche Bank, Bank of America, UBS, Merrill Lynch, and Citigroup were, to his mind, the most likely to survive a crash. He called them all. Five of them had no idea what he was talking about; two came back and said that, while the market didn’t exist, it might one day. Inside of three years, credit-default swaps on subprime-mortgage bonds would become a trillion-dollar market and precipitate hundreds of billions of losses inside big Wall Street firms. Yet, when Michael Burry pestered the firms in the beginning of 2005, only Deutsche Bank and Goldman Sachs had any real interest in continuing the conversation. No one on Wall Street, as far as he could tell, saw what he was seeing.

He sensed that he was different from other people before he understood why. Before he was two years old he was diagnosed with a rare form of cancer, and the operation to remove the tumor had cost him his left eye. A boy with one eye sees the world differently from everyone else, but it didn’t take long for Mike Burry to see his literal distinction in more figurative terms. Grown-ups were forever insisting that he should look other people in the eye, especially when he was talking to them. “It took all my energy to look someone in the eye,” he said. “If I am looking at you, that’s the one time I know I won’t be listening to you.” His left eye didn’t line up with whomever he was trying to talk to; when he was in social situations, trying to make chitchat, the person to whom he was speaking would steadily drift left. “I don’t really know how to stop it,” he said, “so people just keep moving left until they’re standing way to my left, and I’m trying not to turn my head anymore. I end up facing right and looking left with my good eye, through my nose.”

His glass eye, he assumed, was the reason that face-to-face interaction with other people almost always ended badly for him. He found it maddeningly difficult to read people’s nonverbal signals, and their verbal signals he often took more literally than they meant them. When trying his best, he was often at his worst. “My compliments tended not to come out right,” he said. “I learned early that if you compliment somebody it’ll come out wrong. For your size, you look good. That’s a really nice dress: it looks homemade.” The glass eye became his private explanation for why he hadn’t really fit in with groups. The eye oozed and wept and required constant attention. It wasn’t the sort of thing other kids ever allowed him to be unself-conscious about. They called him cross-eyed, even though he wasn’t. Every year they begged him to pop his eye out of its socket—but when he complied, it became infected and disgusting and a cause of further ostracism.

In his glass eye he found the explanation for other traits peculiar to himself. His obsession with fairness, for example. When he noticed that pro basketball stars were far less likely to be called for traveling than lesser players, he didn’t just holler at the refs. He stopped watching basketball altogether; the injustice of it killed his interest in the sport. Even though he was ferociously competitive, well built, physically brave, and a good athlete, he didn’t care for team sports. The eye helped to explain this, as most team sports were ball sports, and a boy with poor depth perception and limited peripheral vision couldn’t very well play ball sports. He tried hard at the less ball-centric positions in football, but his eye popped out if he hit someone too hard. He preferred swimming, as it required virtually no social interaction. No teammates. No ambiguity. You just swam your time and you won or you lost.

After a while even he ceased to find it surprising that he spent most of his time alone. By his late 20s he thought of himself as the sort of person who didn’t have friends. He’d gone through Santa Teresa High School, in San Jose, U.C.L.A., and Vanderbilt University School of Medicine, and created not a single lasting bond. What friendships he did have were formed and nurtured in writing, by e‑mail; the two people he considered to be true friends he had known for a combined 20 years but had met in person a grand total of eight times. “My nature is not to have friends,” he said. “I’m happy in my own head.” Somehow he’d married twice. His first wife was a woman of Korean descent who wound up living in a different city (“She often complained that I appeared to like the idea of a relationship more than living the actual relationship”) and his second, to whom he was still married, was a Vietnamese-American woman he’d met on Match.com. In his Match.com profile, he described himself frankly as “a medical resident with only one eye, an awkward social manner, and $145,000 in student loans.” His obsession with personal honesty was a cousin to his obsession with fairness.

Obsessiveness—that was another trait he came to think of as peculiar to himself. His mind had no temperate zone: he was either possessed by a subject or not interested in it at all. There was an obvious downside to this quality—he had more trouble than most faking interest in other people’s concerns and hobbies, for instance—but an upside, too. Even as a small child he had a fantastic ability to focus and learn, with or without teachers. When it synched with his interests, school came easy for him—so easy that, as an undergraduate at U.C.L.A., he could flip back and forth between English and economics and pick up enough pre-medical training on the side to get himself admitted to the best medical schools in the country. He attributed his unusual powers of concentration to his lack of interest in human interaction, and his lack of interest in human interaction … well, he was able to argue that basically everything that happened was caused, one way or the other, by his fake left eye.

This ability to work and to focus set him apart even from other medical students. In 1998, as a resident in neurology at Stanford Hospital, he mentioned to his superiors that, between 14-hour hospital shifts, he had stayed up two nights in a row taking apart and putting back together his personal computer in an attempt to make it run faster. His superiors sent him to a psychiatrist, who diagnosed Mike Burry as bipolar. He knew instantly he’d been misdiagnosed: how could you be bipolar if you were never depressed? Or, rather, if you were depressed only while doing your rounds and pretending to be interested in practicing, as opposed to studying, medicine? He’d become a doctor not because he enjoyed medicine but because he didn’t find medical school terribly difficult. The actual practice of medicine, on the other hand, either bored or disgusted him. Of his first brush with gross anatomy: “one scene with people carrying legs over their shoulders to the sink to wash out the feces just turned my stomach, and I was done.” Of his feeling about the patients: “I wanted to help people—but not really.”

He was genuinely interested in computers, not for their own sake but for their service to a lifelong obsession: the inner workings of the stock market. Ever since grade school, when his father had shown him the stock tables at the back of the newspaper and told him that the stock market was a crooked place and never to be trusted, let alone invested in, the subject had fascinated him. Even as a kid he had wanted to impose logic on this world of numbers. He began to read about the market as a hobby. Pretty quickly he saw that there was no logic at all in the charts and graphs and waves and the endless chatter of many self-advertised market pros. Then along came the dot-com bubble and suddenly the entire stock market made no sense at all. “The late 90s almost forced me to identify myself as a value investor, because I thought what everybody else was doing was insane,” he said. Formalized as an approach to financial markets during the Great Depression by Benjamin Graham, “value investing” required a tireless search for companies so unfashionable or misunderstood that they could be bought for less than their liquidation value. In its simplest form, value investing was a formula, but it had morphed into other things—one of them was whatever Warren Buffett, Benjamin Graham’s student and the most famous value investor, happened to be doing with his money.

Burry did not think investing could be reduced to a formula or learned from any one role model. The more he studied Buffett, the less he thought Buffett could be copied. Indeed, the lesson of Buffett was: To succeed in a spectacular fashion you had to be spectacularly unusual. “If you are going to be a great investor, you have to fit the style to who you are,” Burry said. “At one point I recognized that Warren Buffett, though he had every advantage in learning from Ben Graham, did not copy Ben Graham, but rather set out on his own path, and ran money his way, by his own rules.… I also immediately internalized the idea that no school could teach someone how to be a great investor. If it were true, it’d be the most popular school in the world, with an impossibly high tuition. So it must not be true.”

Investing was something you had to learn how to do on your own, in your own peculiar way. Burry had no real money to invest, but he nevertheless dragged his obsession along with him through high school, college, and medical school. He’d reached Stanford Hospital without ever taking a class in finance or accounting, let alone working for any Wall Street firm. He had maybe $40,000 in cash, against $145,000 in student loans. He had spent the previous four years working medical-student hours. Nevertheless, he had found time to make himself a financial expert of sorts. “Time is a variable continuum,” he wrote to one of his e-mail friends one Sunday morning in 1999: “An afternoon can fly by or it can take 5 hours. Like you probably do, I productively fill the gaps that most people leave as dead time. My drive to be productive probably cost me my first marriage and a few days ago almost cost me my fiancée. Before I went to college the military had this ‘we do more before 9am than most people do all day’ and I used to think I do more than the military. As you know there are some select people that just find a drive in certain activities that supersedes everything else.” Thinking himself different, he didn’t find what happened to him when he collided with Wall Street nearly as bizarre as it was.

Late one night in November 1996, while on a cardiology rotation at Saint Thomas Hospital, in Nashville, Tennessee, he logged on to a hospital computer and went to a message board called techstocks.com. There he created a thread called “value investing.” Having read everything there was to read about investing, he decided to learn a bit more about “investing in the real world.” A mania for Internet stocks gripped the market. A site for the Silicon Valley investor, circa 1996, was not a natural home for a sober-minded value investor. Still, many came, all with opinions. A few people grumbled about the very idea of a doctor having anything useful to say about investments, but over time he came to dominate the discussion. Dr. Mike Burry—as he always signed himself—sensed that other people on the thread were taking his advice and making money with it.

Once he figured out he had nothing more to learn from the crowd on his thread, he quit it to create what later would be called a blog but at the time was just a weird form of communication. He was working 16-hour shifts at the hospital, confining his blogging mainly to the hours between midnight and three in the morning. On his blog he posted his stock-market trades and his arguments for making the trades. People found him. As a money manager at a big Philadelphia value fund said, “The first thing I wondered was: When is he doing this? The guy was a medical intern. I only saw the nonmedical part of his day, and it was simply awesome. He’s showing people his trades. And people are following it in real time. He’s doing value investing—in the middle of the dot-com bubble. He’s buying value stocks, which is what we’re doing. But we’re losing money. We’re losing clients. All of a sudden he goes on this tear. He’s up 50 percent. It’s uncanny. He’s uncanny. And we’re not the only ones watching it.”

Mike Burry couldn’t see exactly who was following his financial moves, but he could tell which domains they came from. In the beginning his readers came from EarthLink and AOL. Just random individuals. Pretty soon, however, they weren’t. People were coming to his site from mutual funds like Fidelity and big Wall Street investment banks like Morgan Stanley. One day he lit into Vanguard’s index funds and almost instantly received a cease-and-desist letter from Vanguard’s attorneys. Burry suspected that serious investors might even be acting on his blog posts, but he had no clear idea who they might be. “The market found him,” says the Philadelphia mutual-fund manager. “He was recognizing patterns no one else was seeing.”

By the time Burry moved to Stanford Hospital, in 1998, to take up his residency in neurology, the work he had done between midnight and three in the morning had made him a minor but meaningful hub in the land of value investing. By this time the craze for Internet stocks was completely out of control and had infected the Stanford University medical community. “The residents in particular, and some of the faculty, were captivated by the dot-com bubble,” said Burry. “A decent minority of them were buying and discussing everything—Polycom, Corel, Razorfish, Pets.com, TibCo, Microsoft, Dell, Intel are the ones I specifically remember, but areyoukiddingme.com was how my brain filtered a lot of it I would just keep my mouth shut, because I didn’t want anybody there knowing what I was doing on the side. I felt I could get in big trouble if the doctors there saw I wasn’t 110 percent committed to medicine.”

People who worry about seeming sufficiently committed to medicine probably aren’t sufficiently committed to medicine. The deeper he got into his medical career, the more Burry felt constrained by his problems with other people in the flesh. He had briefly tried to hide in pathology, where the people had the decency to be dead, but that didn’t work. (“Dead people, dead parts. More dead people, more dead parts. I thought, I want something more cerebral.”)

He’d moved back to San Jose, buried his father, remarried, and been misdiagnosed as bipolar when he shut down his Web site and announced he was quitting neurology to become a money manager. The chairman of the Stanford department of neurology thought he’d lost his mind and told him to take a year to think it over, but he’d already thought it over. “I found it fascinating and seemingly true,” he said, “that if I could run a portfolio well, then I could achieve success in life, and that it wouldn’t matter what kind of person I was perceived to be, even though I felt I was a good person deep down.” His $40,000 in assets against $145,000 in student loans posed the question of exactly what portfolio he would run. His father had died after another misdiagnosis: a doctor had failed to spot the cancer on an X-ray, and the family had received a small settlement. The father disapproved of the stock market, but the payout from his death funded his son into it. His mother was able to kick in $20,000 from her settlement, his three brothers kicked in $10,000 each of theirs. With that, Dr. Michael Burry opened Scion Capital. (As a teen he’d loved the book The Scions of Shannara.) He created a grandiose memo to lure people not related to him by blood. “The minimum net worth for investors should be $15 million,” it said, which was interesting, as it excluded not only himself but basically everyone he’d ever known.

As he scrambled to find office space, buy furniture, and open a brokerage account, he received a pair of surprising phone calls. The first came from a big investment fund in New York City, Gotham Capital. Gotham was founded by a value-investment guru named Joel Greenblatt. Burry had read Greenblatt’s book You Can Be a Stock Market Genius. (“I hated the title but liked the book.”) Greenblatt’s people told him that they had been making money off his ideas for some time and wanted to continue to do so—might Mike Burry consider allowing Gotham to invest in his fund? “Joel Greenblatt himself called,” said Burry, “and said, ‘I’ve been waiting for you to leave medicine.’” Gotham flew Burry and his wife to New York—and it was the first time Michael Burry had flown to New York or flown first-class—and put him up in a suite at the Intercontinental Hotel.

On his way to his meeting with Greenblatt, Burry was racked with the anxiety that always plagued him before face-to-face encounters with people. He took some comfort in the fact that the Gotham people seemed to have read so much of what he had written. “If you read what I wrote first, and then meet me, the meeting goes fine,” he said. “People who meet me who haven’t read what I wrote—it almost never goes well. Even in high school it was like that—even with teachers.” He was a walking blind taste test: you had to decide if you approved of him before you laid eyes on him. In this case he was at a serious disadvantage, as he had no clue how big-time money managers dressed. “He calls me the day before the meeting,” says one of his e-mail friends, himself a professional money manager. “And he asks, ‘What should I wear?’ He didn’t own a tie. He had one blue sports coat, for funerals.” This was another quirk of Mike Burry’s. In writing, he presented himself formally, even a bit stuffily, but he dressed for the beach. Walking to Gotham’s office, he panicked and ducked into a Tie Rack and bought a tie. He arrived at the big New York money-management firm as formally attired as he had ever been in his entire life to find its partners in T-shirts and sweatpants. The exchange went something like this: “We’d like to give you a million dollars.” “Excuse me?” “We want to buy a quarter of your new hedge fund. For a million dollars.” “You do?” “Yes. We’re offering a million dollars.” “After tax!”

Somehow Burry had it in his mind that one day he wanted to be worth a million dollars, after tax. At any rate, he’d just blurted that last bit out before he fully understood what they were after. And they gave it to him! At that moment, on the basis of what he’d written on his blog, he went from being an indebted medical resident with a net worth of minus $105,000 to a millionaire with a few outstanding loans. Burry didn’t know it, but it was the first time Joel Greenblatt had done such a thing. “He was just obviously this brilliant guy, and there aren’t that many of them,” says Greenblatt.

Shortly after that odd encounter, he had a call from the insurance holding company White Mountain. White Mountain was run by Jack Byrne, a member of Warren Buffett’s inner circle, and they had spoken to Gotham Capital. “We didn’t know you were selling part of your firm,” they said—and Burry explained that he hadn’t realized it either until a few days earlier, when someone offered a million dollars, after tax, for it. It turned out that White Mountain, too, had been watching Michael Burry closely. “What intrigued us more than anything was that he was a neurology resident,” says Kip Oberting, then at White Mountain. “When the hell was he doing this?” From White Mountain he extracted $600,000 for another piece of his fund, plus a promise to send him $10 million to invest. “And yes,” said Oberting, “he was the only person we found on the Internet and cold-called and gave him money.”

In Dr. Mike Burry’s first year in business, he grappled briefly with the social dimension of running money. “Generally you don’t raise any money unless you have a good meeting with people,” he said, “and generally I don’t want to be around people. And people who are with me generally figure that out.” When he spoke to people in the flesh, he could never tell what had put them off, his message or his person. Buffett had had trouble with people, too, in his youth. He’d used a Dale Carnegie course to learn how to interact more profitably with his fellow human beings. Mike Burry came of age in a different money culture. The Internet had displaced Dale Carnegie. He didn’t need to meet people. He could explain himself online and wait for investors to find him. He could write up his elaborate thoughts and wait for people to read them and wire him their money to handle. “Buffett was too popular for me,” said Burry. “I won’t ever be a kindly grandfather figure.”

This method of attracting funds suited Mike Burry. More to the point, it worked. He’d started Scion Capital with a bit more than a million dollars—the money from his mother and brothers and his own million, after tax. Right from the start, Scion Capital was madly, almost comically successful. In his first full year, 2001, the S&P 500 fell 11.88 percent. Scion was up 55 percent. The next year, the S&P 500 fell again, by 22.1 percent, and yet Scion was up again: 16 percent. The next year, 2003, the stock market finally turned around and rose 28.69 percent, but Mike Burry beat it again—his investments rose by 50 percent. By the end of 2004, Mike Burry was managing $600 million and turning money away. “If he’d run his fund to maximize the amount he had under management, he’d have been running many, many billions of dollars,” says a New York hedge-fund manager who watched Burry’s performance with growing incredulity. “He designed Scion so it was bad for business but good for investing.”

Thus when Mike Burry went into business he disapproved of the typical hedge-fund manager’s deal. Taking 2 percent of assets off the top, as most did, meant the hedge-fund manager got paid simply for amassing vast amounts of other people’s money. Scion Capital charged investors only its actual expenses—which typically ran well below 1 percent of the assets. To make the first nickel for himself, he had to make investors’ money grow. “Think about the genesis of Scion,” says one of his early investors. “The guy has no money and he chooses to forgo a fee that any other hedge fund takes for granted. It was unheard of.”

By the middle of 2005, over a period in which the broad stock-market index had fallen by 6.84 percent, Burry’s fund was up 242 percent, and he was turning away investors. To his swelling audience, it didn’t seem to matter whether the stock market rose or fell; Mike Burry found places to invest money shrewdly. He used no leverage and avoided shorting stocks. He was doing nothing more promising than buying common stocks and nothing more complicated than sitting in a room reading financial statements. Scion Capital’s decision-making apparatus consisted of one guy in a room, with the door closed and the shades down, poring over publicly available information and data on 10-K Wizard. He went looking for court rulings, deal completions, and government regulatory changes—anything that might change the value of a company.

As often as not, he turned up what he called “ick” investments. In October 2001 he explained the concept in his letter to investors: “Ick investing means taking a special analytical interest in stocks that inspire a first reaction of ‘ick.’” A court had accepted a plea from a software company called the Avanti Corporation. Avanti had been accused of stealing from a competitor the software code that was the whole foundation of Avanti’s business. The company had $100 million in cash in the bank, was still generating $100 million a year in free cash flow—and had a market value of only $250 million! Michael Burry started digging; by the time he was done, he knew more about the Avanti Corporation than any man on earth. He was able to see that even if the executives went to jail (as five of them did) and the fines were paid (as they were), Avanti would be worth a lot more than the market then assumed. To make money on Avanti’s stock, however, he’d probably have to stomach short-term losses, as investors puked up shares in horrified response to negative publicity.

“That was a classic Mike Burry trade,” says one of his investors. “It goes up by 10 times, but first it goes down by half.” This isn’t the sort of ride most investors enjoy, but it was, Burry thought, the essence of value investing. His job was to disagree loudly with popular sentiment. He couldn’t do this if he was at the mercy of very short-term market moves, and so he didn’t give his investors the ability to remove their money on short notice, as most hedge funds did. If you gave Scion your money to invest, you were stuck for at least a year.

Investing well was all about being paid the right price for risk. Increasingly, Burry felt that he wasn’t. The problem wasn’t confined to individual stocks. The Internet bubble had burst, and yet house prices in San Jose, the bubble’s epicenter, were still rising. He investigated the stocks of homebuilders and then the stocks of companies that insured home mortgages, like PMI. To one of his friends—a big-time East Coast professional investor—he wrote in May 2003 that the real-estate bubble was being driven ever higher by the irrational behavior of mortgage lenders who were extending easy credit. “You just have to watch for the level at which even nearly unlimited or unprecedented credit can no longer drive the [housing] market higher,” he wrote. “I am extremely bearish, and feel the consequences could very easily be a 50% drop in residential real estate in the U.S.…A large portion of current [housing] demand at current prices would disappear if only people became convinced that prices weren’t rising. The collateral damage is likely to be orders of magnitude worse than anyone now considers.”

On May 19, 2005, Mike Burry did his first subprime-mortgage deals. He bought $60 million of credit-default swaps from Deutsche Bank—$10 million each on six different bonds. “The reference securities,” these were called. You didn’t buy insurance on the entire subprime-mortgage-bond market but on a particular bond, and Burry had devoted himself to finding exactly the right ones to bet against. He likely became the only investor to do the sort of old-fashioned bank credit analysis on the home loans that should have been done before they were made. He was the opposite of an old-fashioned banker, however. He was looking not for the best loans to make but the worst loans—so that he could bet against them. He analyzed the relative importance of the loan-to-value ratios of the home loans, of second liens on the homes, of the location of the homes, of the absence of loan documentation and proof of income of the borrower, and a dozen or so other factors to determine the likelihood that a home loan made in America circa 2005 would go bad. Then he went looking for the bonds backed by the worst of the loans.

It surprised him that Deutsche Bank didn’t seem to care which bonds he picked to bet against. From their point of view, so far as he could tell, all subprime-mortgage bonds were the same. The price of insurance was driven not by any independent analysis but by the ratings placed on the bond by Moody’s and Standard & Poor’s. If he wanted to buy insurance on the supposedly riskless triple-A-rated tranche, he might pay 20 basis points (0.20 percent); on the riskier, A-rated tranches, he might pay 50 basis points (0.50 percent); and on the even less safe, triple-B-rated tranches, 200 basis points—that is, 2 percent. (A basis point is one-hundredth of one percentage point.) The triple-B-rated tranches—the ones that would be worth zero if the underlying mortgage pool experienced a loss of just 7 percent—were what he was after. He felt this to be a very conservative bet, which he was able, through analysis, to turn into even more of a sure thing. Anyone who even glanced at the prospectuses could see that there were many critical differences between one triple-B bond and the next—the percentage of interest-only loans contained in their underlying pool of mortgages, for example. He set out to cherry-pick the absolute worst ones and was a bit worried that the investment banks would catch on to just how much he knew about specific mortgage bonds, and adjust their prices.

Once again they shocked and delighted him: Goldman Sachs e-mailed him a great long list of crappy mortgage bonds to choose from. “This was shocking to me, actually,” he says. “They were all priced according to the lowest rating from one of the big-three ratings agencies.” He could pick from the list without alerting them to the depth of his knowledge. It was as if you could buy flood insurance on the house in the valley for the same price as flood insurance on the house on the mountaintop.

The market made no sense, but that didn’t stop other Wall Street firms from jumping into it, in part because Mike Burry was pestering them. For weeks he hounded Bank of America until they agreed to sell him $5 million in credit-default swaps. Twenty minutes after they sent their e-mail confirming the trade, they received another back from Burry: “So can we do another?” In a few weeks Mike Burry bought several hundred million dollars in credit-default swaps from half a dozen banks, in chunks of $5 million. None of the sellers appeared to care very much which bonds they were insuring. He found one mortgage pool that was 100 percent floating-rate negative-amortizing mortgages—where the borrowers could choose the option of not paying any interest at all and simply accumulate a bigger and bigger debt until, presumably, they defaulted on it. Goldman Sachs not only sold him insurance on the pool but sent him a little note congratulating him on being the first person, on Wall Street or off, ever to buy insurance on that particular item. “I’m educating the experts here,” Burry crowed in an e-mail.

He wasn’t wasting a lot of time worrying about why these supposedly shrewd investment bankers were willing to sell him insurance so cheaply. He was worried that others would catch on and the opportunity would vanish. “I would play dumb quite a bit,” he said, “making it seem to them like I don’t really know what I’m doing. ‘How do you do this again?’ ‘Oh, where can I find that information?’ or ‘Really?’—when they tell me something really obvious.” It was one of the fringe benefits of living for so many years essentially alienated from the world around him: he could easily believe that he was right and the world was wrong.

The more Wall Street firms jumped into the new business, the easier it became for him to place his bets. For the first few months, he was able to short, at most, $10 million at a time. Then, in late June 2005, he had a call from someone at Goldman Sachs asking him if he’d like to increase his trade size to $100 million a pop. “What needs to be remembered here,” he wrote the next day, after he’d done it, “is that this is $100 million. That’s an insane amount of money. And it just gets thrown around like it’s three digits instead of nine.”

By the end of July he owned credit-default swaps on $750 million in subprime-mortgage bonds and was privately bragging about it. “I believe no other hedge fund on the planet has this sort of investment, nowhere near to this degree, relative to the size of the portfolio,” he wrote to one of his investors, who had caught wind that his hedge-fund manager had some newfangled strategy. Now he couldn’t help but wonder who exactly was on the other side of his trades—what madman would be selling him so much insurance on bonds he had handpicked to explode? The credit-default swap was a zero-sum game. If Mike Burry made $100 million when the subprime-mortgage bonds he had handpicked defaulted, someone else must have lost $100 million. Goldman Sachs made it clear that the ultimate seller wasn’t Goldman Sachs. Goldman Sachs was simply standing between insurance buyer and insurance seller and taking a cut.

The willingness of whoever this person was to sell him such vast amounts of cheap insurance gave Mike Burry another idea: to start a fund that did nothing but buy insurance on subprime-mortgage bonds. In a $600 million fund that was meant to be picking stocks, his bet was already gargantuan, but if he could raise the money explicitly for this new purpose, he could do many billions more. In August he wrote a proposal for a fund he called Milton’s Opus and sent it out to his investors. (“The first question was always ‘What’s Milton’s Opus?’” He’d say, “Paradise Lost,” but that usually just raised another question.) Most of them still had no idea that their champion stock picker had become so diverted by these esoteric insurance contracts called credit-default swaps. Many wanted nothing to do with it; a few wondered if this meant that he was already doing this sort of thing with their money.

Instead of raising more money to buy credit-default swaps on subprime-mortgage bonds, he wound up making it more difficult to keep the ones he already owned. His investors were happy to let him pick stocks on their behalf, but they almost universally doubted his ability to foresee big macro-economic trends. And they certainly didn’t see why he should have any special insight into the multi-trillion-dollar subprime-mortgage-bond market. Milton’s Opus died a quick death.

In October 2005, in his letter to investors, Burry finally came completely clean and let them know that they owned at least a billion dollars in credit-default swaps on subprime-mortgage bonds. “Sometimes markets err big time,” he wrote. “Markets erred when they gave America Online the currency to buy Time Warner. They erred when they bet against George Soros and for the British pound. And they are erring right now by continuing to float along as if the most significant credit bubble history has ever seen does not exist. Opportunities are rare, and large opportunities on which one can put nearly unlimited capital to work at tremendous potential returns are even more rare. Selectively shorting the most problematic mortgage-backed securities in history today amounts to just such an opportunity.”

In the second quarter of 2005, credit-card delinquencies hit an all-time high—even though house prices had boomed. That is, even with this asset to borrow against, Americans were struggling more than ever to meet their obligations. The Federal Reserve had raised interest rates, but mortgage rates were still effectively falling—because Wall Street was finding ever more clever ways to enable people to borrow money. Burry now had more than a billion-dollar bet on the table and couldn’t grow it much more unless he attracted a lot more money. So he just laid it out for his investors: the U.S. mortgage-bond market was huge, bigger than the market for U.S. Treasury notes and bonds. The entire economy was premised on its stability, and its stability in turn depended on house prices continuing to rise. “It is ludicrous to believe that asset bubbles can only be recognized in hindsight,” he wrote. “There are specific identifiers that are entirely recognizable during the bubble’s inflation. One hallmark of mania is the rapid rise in the incidence and complexity of fraud.… The FBI reports mortgage-related fraud is up fivefold since 2000.” Bad behavior was no longer on the fringes of an otherwise sound economy; it was its central feature. “The salient point about the modern vintage of housing-related fraud is its integral place within our nation’s institutions,” he added.

When his investors learned that their money manager had actually put their money directly where his mouth had long been, they were not exactly pleased. As one investor put it, “Mike’s the best stock picker anyone knows. And he’s doing … what?” Some were upset that a guy they had hired to pick stocks had gone off to pick rotten mortgage bonds instead; some wondered, if credit-default swaps were such a great deal, why Goldman Sachs would be selling them; some questioned the wisdom of trying to call the top of a 70-year housing cycle; some didn’t really understand exactly what a credit-default swap was, or how it worked. “It has been my experience that apocalyptic forecasts on the U.S. financial markets are rarely realized within limited horizons,” one investor wrote to Burry. “There have been legitimate apocalyptic cases to be made on U.S. financial markets during most of my career. They usually have not been realized.” Burry replied that while it was true that he foresaw Armageddon, he wasn’t betting on it. That was the beauty of credit-default swaps: they enabled him to make a fortune if just a tiny fraction of these dubious pools of mortgages went bad.

Inadvertently, he’d opened up a debate with his own investors, which he counted among his least favorite activities. “I hated discussing ideas with investors,” he said, “because I then become a Defender of the Idea, and that influences your thought process.” Once you became an idea’s defender, you had a harder time changing your mind about it. He had no choice: among the people who gave him money there was pretty obviously a built-in skepticism of so-called macro thinking. “I have heard that White Mountain would rather I stick to my knitting,” he wrote, testily, to his original backer, “though it is not clear to me that White Mountain has historically understood what my knitting really is.” No one seemed able to see what was so plain to him: these credit-default swaps were all part of his global search for value. “I don’t take breaks in my search for value,” he wrote to White Mountain. “There is no golf or other hobby to distract me. Seeing value is what I do.”

When he’d started Scion, he told potential investors that, because he was in the business of making unfashionable bets, they should evaluate him over the long term—say, five years. Now he was being evaluated moment to moment. “Early on, people invested in me because of my letters,” he said. “And then, somehow, after they invested, they stopped reading them.” His fantastic success attracted lots of new investors, but they were less interested in the spirit of his enterprise than in how much money he could make them quickly. Every quarter, he told them how much he’d made or lost from his stock picks. Now he had to explain that they had to subtract from that number these … subprime-mortgage-bond insurance premiums. One of his New York investors called and said ominously, “You know, a lot of people are talking about withdrawing funds from you.” As their funds were contractually stuck inside Scion Capital for some time, the investors’ only recourse was to send him disturbed-sounding e-mails asking him to justify his new strategy. “People get hung up on the difference between +5% and -5% for a couple of years,” Burry replied to one investor who had protested the new strategy. “When the real issue is: over 10 years who does 10% or better annually? And I firmly believe that to achieve that advantage on an annual basis, I have to be able to look out past the next couple of years.… I have to be steadfast in the face of popular discontent if that’s what the fundamentals tell me.” In the five years since he had started, the S&P 500, against which he was measured, was down 6.84 percent. In the same period, he reminded his investors, Scion Capital was up 242 percent. He assumed he’d earned the rope to hang himself. He assumed wrong. “I’m building breathtaking sand castles,” he wrote, “but nothing stops the tide from coming and coming and coming.”

Oddly, as Mike Burry’s investors grew restive, his Wall Street counterparties took a new and envious interest in what he was up to. In late October 2005, a subprime trader at Goldman Sachs called to ask him why he was buying credit-default swaps on such very specific tranches of subprime-mortgage bonds. The trader let it slip that a number of hedge funds had been calling Goldman to ask “how to do the short housing trade that Scion is doing.” Among those asking about it were people Burry had solicited for Milton’s Opus—people who had initially expressed great interest. “These people by and large did not know anything about how to do the trade and expected Goldman to help them replicate it,” Burry wrote in an e-mail to his C.F.O. “My suspicion is Goldman helped them, though they deny it.” If nothing else, he now understood why he couldn’t raise money for Milton’s Opus. “If I describe it enough it sounds compelling, and people think they can do it for themselves,” he wrote to an e-mail confidant. “If I don’t describe it enough, it sounds scary and binary and I can’t raise the capital.” He had no talent for selling.

Now the subprime-mortgage-bond market appeared to be unraveling. Out of the blue, on November 4, Burry had an e-mail from the head subprime guy at Deutsche Bank, a fellow named Greg Lippmann. As it happened, Deutsche Bank had broken off relations with Mike Burry back in June, after Burry had been, in Deutsche Bank’s view, overly aggressive in his demands for collateral. Now this guy calls and says he’d like to buy back the original six credit-default swaps Scion had bought in May. As the $60 million represented a tiny slice of Burry’s portfolio, and as he didn’t want any more to do with Deutsche Bank than Deutsche Bank wanted to do with him, he sold them back, at a profit. Greg Lippmann wrote back hastily and ungrammatically, “Would you like to give us some other bonds that we can tell you what we will pay you.”

Greg Lippmann of Deutsche Bank wanted to buy his billion dollars in credit-default swaps! “Thank you for the look Greg,” Burry replied. “We’re good for now.” He signed off, thinking, How strange. I haven’t dealt with Deutsche Bank in five months. How does Greg Lippmann even know I own this giant pile of credit-default swaps?

Three days later he heard from Goldman Sachs. His saleswoman, Veronica Grinstein, called him on her cell phone instead of from the office phone. (Wall Street firms now recorded all calls made from their trading desks.) “I’d like a special favor,” she asked. She, too, wanted to buy some of his credit-default swaps. “Management is concerned,” she said. They thought the traders had sold all this insurance without having any place they could go to buy it back. Could Mike Burry sell them $25 million of the stuff, at really generous prices, on the subprime-mortgage bonds of his choosing? Just to placate Goldman management, you understand. Hanging up, he pinged Bank of America, on a hunch, to see if they would sell him more. They wouldn’t. They, too, were looking to buy. Next came Morgan Stanley—again out of the blue. He hadn’t done much business with Morgan Stanley, but evidently Morgan Stanley, too, wanted to buy whatever he had. He didn’t know exactly why all these banks were suddenly so keen to buy insurance on subprime-mortgage bonds, but there was one obvious reason: the loans suddenly were going bad at an alarming rate. Back in May, Mike Burry was betting on his theory of human behavior: the loans were structured to go bad. Now, in November, they were actually going bad.

The next morning, Burry opened The Wall Street Journal to find an article explaining how alarming numbers of adjustable-rate mortgage holders were falling behind on their payments, in their first nine months, at rates never before seen. Lower-middle-class America was tapped out. There was even a little chart to show readers who didn’t have time to read the article. He thought, The cat’s out of the bag. The world’s about to change. Lenders will raise their standards; rating agencies will take a closer look; and no dealers in their right mind will sell insurance on subprime-mortgage bonds at anything like the prices they’ve been selling it. “I’m thinking the lightbulb is going to pop on and some smart credit officer is going to say, ‘Get out of these trades,’” he said. Most Wall Street traders were about to lose a lot of money—with perhaps one exception. Mike Burry had just received another e-mail, from one of his own investors, that suggested that Deutsche Bank might have been influenced by his one-eyed view of the financial markets: “Greg Lippmann, the head [subprime-mortgage] trader at Deutsche Bank[,] was in here the other day,” it read. “He told us that he was short 1 billion dollars of this stuff and was going to make ‘oceans’ of money (or something to that effect.) His exuberance was a little scary.”

By February 2007, subprime loans were defaulting in record numbers, financial institutions were less steady every day, and no one but Mike Burry seemed to recall what he’d said and done. He had told his investors that they might need to be patient—that the bet might not pay off until the mortgages issued in 2005 reached the end of their teaser-rate period. They had not been patient. Many of his investors mistrusted him, and he in turn felt betrayed by them. At the beginning he had imagined the end, but none of the parts in between. “I guess I wanted to just go to sleep and wake up in 2007,” he said. To keep his bets against subprime-mortgage bonds, he’d been forced to fire half his small staff, and dump billions of dollars’ worth of bets he had made against the companies most closely associated with the subprime-mortgage market. He was now more isolated than he’d ever been. The only thing that had changed was his explanation for it.

Not long before, his wife had dragged him to the office of a Stanford psychologist. A pre-school teacher had noted certain worrying behaviors in their four-year-old son, Nicholas, and suggested he needed testing. Nicholas didn’t sleep when the other kids slept. He drifted off when the teacher talked at any length. His mind seemed “very active.” Michael Burry had to resist his urge to take offense. He was, after all, a doctor, and he suspected that the teacher was trying to tell them that he had failed to diagnose attention-deficit disorder in his own son. “I had worked in an A.D.H.D. clinic during my residency and had strong feelings that this was overdiagnosed,” he said. “That it was a ‘savior’ diagnosis for too many kids whose parents wanted a medical reason to drug their children, or to explain their kids’ bad behavior.” He suspected his son was a bit different from the other kids, but different in a good way. “He asked a ton of questions,” said Burry. “I had encouraged that, because I always had a ton of questions as a kid, and I was frustrated when I was told to be quiet.” Now he watched his son more carefully and noted that the little boy, while smart, had problems with other people. “When he did try to interact, even though he didn’t do anything mean to the other kids, he’d somehow tick them off.” He came home and told his wife, “Don’t worry about it! He’s fine!”

His wife stared at him and asked, “How would you know?”

To which Dr. Michael Burry replied, “Because he’s just like me! That’s how I was.”

Their son’s application to several kindergartens met with quick rejections, unaccompanied by explanations. Pressed, one of the schools told Burry that his son suffered from inadequate gross and fine motor skills. “He had apparently scored very low on tests involving art and scissor use,” said Burry. “Big deal, I thought. I still draw like a four-year-old, and I hate art.” To silence his wife, however, he agreed to have their son tested. “It would just prove he’s a smart kid, an ‘absentminded genius.’”

Instead, the tests administered by a child psychologist proved that their child had Asperger’s syndrome. A classic case, she said, and recommended that he be pulled from the mainstream and sent to a special school. And Dr. Michael Burry was dumbstruck: he recalled Asperger’s from med school, but vaguely. His wife now handed him the stack of books she had accumulated on autism and related disorders. On top were The Complete Guide to Asperger’s Syndrome, by a clinical psychologist named Tony Attwood, and Attwood’s Asperger’s Syndrome: A Guide for Parents and Professionals.

“Marked impairment in the use of multiple non-verbal behaviors such as eye-to-eye gaze … ” Check. “Failure to develop peer relationships … ” Check. “A lack of spontaneous seeking to share enjoyment, interests, or achievements with other people … ” Check. “Difficulty reading the social/emotional messages in someone’s eyes … ” Check. “A faulty emotion regulation or control mechanism for expressing anger … ” Check. “One of the reasons why computers are so appealing is not only that you do not have to talk or socialize with them, but that they are logical, consistent and not prone to moods. Thus they are an ideal interest for the person with Asperger’s Syndrome … ” Check. “Many people have a hobby.… The difference between the normal range and the eccentricity observed in Asperger’s Syndrome is that these pursuits are often solitary, idiosyncratic and dominate the person’s time and conversation.” Check … Check …Check.

After a few pages, Michael Burry realized that he was no longer reading about his son but about himself. “How many people can pick up a book and find an instruction manual for their life?” he said. “I hated reading a book telling me who I was. I thought I was different, but this was saying I was the same as other people. My wife and I were a typical Asperger’s couple, and we had an Asperger’s son.” His glass eye no longer explained anything; the wonder is that it ever had. How did a glass eye explain, in a competitive swimmer, a pathological fear of deep water—the terror of not knowing what lurked beneath him? How did it explain a childhood passion for washing money? He’d take dollar bills and wash them, dry them off with a towel, press them between the pages of books, and then stack books on top of those books—all so he might have money that looked “new.” “All of a sudden I’ve become this caricature,” said Burry. “I’ve always been able to study up on something and ace something really fast. I thought it was all something special about me. Now it’s like ‘Oh, a lot of Asperger’s people can do that.’ Now I was explained by a disorder.”

He resisted the news. He had a gift for finding and analyzing information on the subjects that interested him intensely. He always had been intensely interested in himself. Now, at the age of 35, he’d been handed this new piece of information about himself—and his first reaction to it was to wish he hadn’t been given it. “My first thought was that a lot of people must have this and don’t know it,” he said. “And I wondered, Is this really a good thing for me to know at this point? Why is it good for me to know this about myself?”

He went and found his own psychologist to help him sort out the effect of his syndrome on his wife and children. His work life, however, remained uninformed by the new information. He didn’t alter the way he made investment decisions, for instance, or the way he communicated with his investors. He didn’t let his investors know of his disorder. “I didn’t feel it was a material fact that had to be disclosed,” he said. “It wasn’t a change. I wasn’t diagnosed with something new. It’s something I’d always had.” On the other hand, it explained an awful lot about what he did for a living, and how he did it: his obsessive acquisition of hard facts, his insistence on logic, his ability to plow quickly through reams of tedious financial statements. People with Asperger’s couldn’t control what they were interested in. It was a stroke of luck that his special interest was financial markets and not, say, collecting lawn-mower catalogues. When he thought of it that way, he realized that complex modern financial markets were as good as designed to reward a person with Asperger’s who took an interest in them. “Only someone who has Asperger’s would read a subprime-mortgage-bond prospectus,” he said.

I the spring of 2007, something changed—though at first it was hard to see what it was. On June 14, the pair of subprime-mortgage-bond hedge funds effectively owned by Bear Stearns were in freefall. In the ensuing two weeks, the publicly traded index of triple-B-rated subprime-mortgage bonds fell by nearly 20 percent. Just then Goldman Sachs appeared to Burry to be experiencing a nervous breakdown. His biggest positions were with Goldman, and Goldman was newly unable, or unwilling, to determine the value of those positions, and so could not say how much collateral should be shifted back and forth. On Friday, June 15, Burry’s Goldman Sachs saleswoman, Veronica Grinstein, vanished. He called and e-mailed her, but she didn’t respond until late the following Monday—to tell him that she was “out for the day.”

“This is a recurrent theme whenever the market moves our way,” wrote Burry. “People get sick, people are off for unspecified reasons.”

On June 20, Grinstein finally returned to tell him that Goldman Sachs had experienced “systems failure.”

That was funny, Burry replied, because Morgan Stanley had said more or less the same thing. And his salesman at Bank of America claimed they’d had a “power outage.”

“I viewed these ‘systems problems’ as excuses for buying time to sort out a mess behind the scenes,” he said. The Goldman saleswoman made a weak effort to claim that, even as the index of subprime-mortgage bonds collapsed, the market for insuring them hadn’t budged. But she did it from her cell phone, rather than the office line. (Grinstein didn’t respond to e-mail and phone requests for comment.)

They were caving. All of them. At the end of every month, for nearly two years, Burry had watched Wall Street traders mark his positions against him. That is, at the end of every month his bets against subprime bonds were mysteriously less valuable. The end of every month also happened to be when Wall Street traders sent their profit-and-loss statements to their managers and risk managers. On June 29, Burry received a note from his Morgan Stanley salesman, Art Ringness, saying that Morgan Stanley now wanted to make sure that “the marks are fair.” The next day, Goldman followed suit. It was the first time in two years that Goldman Sachs had not moved the trade against him at the end of the month. “That was the first time they moved our marks accurately,” he notes, “because they were getting in on the trade themselves.” The market was finally accepting the diagnosis of its own disorder.

It was precisely the moment he had told his investors, back in the summer of 2005, that they only needed to wait for. Crappy mortgages worth nearly $400 billion were resetting from their teaser rates to new, higher rates. By the end of July his marks were moving rapidly in his favor—and he was reading about the genius of people like John Paulson, who had come to the trade a year after he had. The Bloomberg News service ran an article about the few people who appeared to have seen the catastrophe coming. Only one worked as a bond trader inside a big Wall Street firm: a formerly obscure asset-backed-bond trader at Deutsche Bank named Greg Lippmann. The investor most conspicuously absent from the Bloomberg News article—one who had made $100 million for himself and $725 million for his investors—sat alone in his office, in Cupertino, California. By June 30, 2008, any investor who had stuck with Scion Capital from its beginning, on November 1, 2000, had a gain, after fees and expenses, of 489.34 percent. (The gross gain of the fund had been 726 percent.) Over the same period the S&P 500 returned just a bit more than 2 percent.

Michael Burry clipped the Bloomberg article and e-mailed it around the office with a note: “Lippmann is the guy that essentially took my idea and ran with it. To his credit.” His own investors, whose money he was doubling and more, said little. There came no apologies, and no gratitude. “Nobody came back and said, ‘Yeah, you were right,’” he said. “It was very quiet. It was extremely quiet.”

Java's founder goes Google

2011-03-29T07:20:00.001-07:00

Posted by Seth Weintraub /March 28, 2011 1:13 PM

James Gosling joins Google as it fights Oracle over Java patents.

Gosling in 2008, CC License

Google (GOOG) has picked up a major player in the history of Java in James Gosling today.

Gosling left Sun/Oracle (ORCL) in April, saying on his blog,

"As to why I left, it's difficult to answer: Just about anything I could say that would be accurate and honest would do more harm than good. The hardest part is no longer being with all the great people I've had the privilege to work with over the years."

Outgoing Google CEO Eric Schmidt also played a big role in the early days of Java at Sun.

However, that work was while employed at Sun and, unfortunately for Google, makes little difference in the ongoing legal battle with Oracle over Java patents.

The Google hiring announcement was also made today on his blog. Gosling said, "I don't know what I'll be working on. I expect it'll be a bit of everything, seasoned with a large dose of grumpy curmudgeon."

Perhaps Android could use him as an "adult in charge". He told eWeek in 2009 that leadership was needed in that area (though I can think of a lot of people who'd disagree).

And what's going on in the Android world is there's kind of no adult in charge. And all these handset manufacturers are doing whatever they damn well please. Which means that it's just going to be randomness. It could be let a thousand flowers bloom, but it also could be a dog's breakfast. And I guess having been around the track a few times, it feels like it's going to be more of a dog's breakfast.

Gosling joins other Internet engineering luminaries on Google's payroll including Vint Cerf, Stu Feldman, Peter Norvig, Al Spector, Udi Manber, Tim Bray, and even Eric Schmidt.

How entrepreneurs really succeed.

2011-02-28T05:24:00.001-08:00

By Malcom Gladwell / NewYorker

In 1969, Ted Turner wanted to buy a television station. He was thirty years old. He had inherited a billboard business from his father, which was doing well. But he was bored, and television seemed exciting. "He knew absolutely nothing about it," one of Turner's many biographers, Christian Williams, writes in "Lead, Follow or Get Out of the Way" (1981). "It would be fun to risk everything he had built, scare the hell out of everybody, and get back in the front seat of the roller coaster."

The station in question was WJRJ, Channel 17, in Atlanta. It was an independent station on the UHF band, the lonely part of the television spectrum which viewers needed a special antenna to find. It was housed in a run-down cinder-block building near a funeral home, leading to the joke that it was at death's door. The equipment was falling apart. The staff was incompetent. It had no decent programming to speak of, and it was losing more than half a million dollars a year. Turner's lawyer, Tench Coxe, and his accountant, Irwin Mazo, were firmly opposed to the idea. "We tried to make it clear that—yes—this thing might work, but if it doesn't everything will collapse," Mazo said, years later. "Everything you've got will be gone. . . . It wasn't just us, either. Everybody told him not to do it."

Turner didn't listen. He was Captain Courageous, the man with nerves of steel who went on to win the America's Cup, take on the networks, marry a movie star, and become a billionaire. He dressed like a cowboy. He gave the impression of signing contracts without looking at them. He was a drinker, a yeller, a man of unstoppable urges and impulses, the embodiment of the entrepreneur as risk-taker. He bought the station, and so began one of the great broadcasting empires of the twentieth century.

What is sometimes forgotten amid the mythology, however, is that Turner wasn't the proprietor of any old billboard company. He had inherited the largest outdoor-advertising firm in the South, and billboards, in the nineteen-sixties and seventies, were enormously lucrative. They benefitted from favorable tax-depreciation rules, they didn't require much capital investment, and they produced rivers of cash. WJRJ's losses could be used to offset the taxes on the profits of Turner's billboard business. A television station, furthermore, fit very nicely into his existing business. Television was about selling ads, and Turner was very experienced at ad-selling. WJRJ may have been a virtual unknown in the Atlanta market, but Turner had billboards all over the city that were blank about fifteen per cent of the time. He could advertise his new station free. As for programming, Turner had a fix for that, too. In those days, the networks offered their local affiliates a full slate of shows, and whenever an affiliate wanted to broadcast local programming, such as sports or news, the national shows were preëmpted. Turner realized that he could persuade the networks in New York to let him have whatever programming their affiliates weren't running. That's exactly what happened. "When we reached the point of having four preempted NBC shows running in our daytime lineup," Turner writes in his autobiography, "Call Me Ted" (2008), "I had our people put up some billboards saying 'THE NBC NETWORK MOVES TO CHANNEL 17.' "

Williams writes that Turner was "attracted to the risk" of the deal, but it seems just as plausible to say that he was attracted by the deal's lack of risk. "We don't want to put it all on the line, because the result can't possibly be worth the risk," Mazo recalls warning Turner. Put it all on the line? The purchase price for WJRJ was $2.5 million. Similar properties in that era went for many times that, and Turner paid with a stock swap engineered in such a way that he didn't have to put a penny down. Within two years, the station was breaking even. By 1973, it was making a million dollars in profit.

In a recent study, "From Predators to Icons," the French scholars Michel Villette and Catherine Vuillermot set out to discover what successful entrepreneurs have in common. They present case histories of businessmen who built their own empires—ranging from Sam Walton, of Wal-Mart, to Bernard Arnault, of the luxury-goods conglomerate L.V.M.H.—and chart what they consider the typical course of a successful entrepreneur's career. There is almost always, they conclude, a moment of great capital accumulation—a particular transaction that catapults him into prominence. The entrepreneur has access to that deal by virtue of occupying a "structural hole," a niche that gives him a unique perspective on a particular market. Villette and Vuillermot go on, "The businessman looks for partners to a transaction who do not have the same definition as he of the value of the goods exchanged, that is, who undervalue what they sell to him or overvalue what they buy from him in comparison to his own evaluation." He moves decisively. He repeats the good deal over and over again, until the opportunity closes, and—most crucially—his focus throughout that sequence is on hedging his bets and minimizing his chances of failure. The truly successful businessman, in Villette and Vuillermot's telling, is anything but a risk-taker. He is a predator, and predators seek to incur the least risk possible while hunting. …. to read the entire article please read http://www.gladwell.com/2010/2010_01_18_a_surething.html

Motorola Mobility (NYSE: MMI) has acquired Three Laws Mobility

2011-02-15T21:08:00.001-08:00

Motorola Mobility (NYSE: MMI) has acquired Three Laws Mobility (3LM), a provider of security solutions for phones running the Android mobile operating system. No financial terms were disclosed. 3LM had raised seed funding from Accel Partners and individual angels. www.motorola.com

Coupa Software, a San Mateo, Calif.–based provider of cloud spend management solutions, has raised $12 million in Series D funding. Mohr Davidow Ventures led the round, and was joined by return backers El Dorado Ventures, Battery Ventures and BlueRun Ventures. It previously raised around $15 million. www.coupa.com

Betting on News, AOL Is Buying The Huffington Post

2011-02-06T21:09:00.001-08:00

By JEREMY W. PETERS and VERNE G. KOPYTOFF

Published: February 7, 2011

The Huffington Post, which began in 2005 with a meager $1 million investment and has grown into one of the most heavily visited news Web sites in the country, is being acquired by AOL in a deal that creates an unlikely pairing of two online media giants.

Andrew Harrer/Bloomberg News

Arianna Huffington said that as she began talking to Tim Armstrong of AOL, “it was really amazing how aligned our visions were.”

Andrew Harrer/Bloomberg News

On Sunday, Tim Armstrong said the deal fit “right into our strategy.”

The two companies completed the sale Sunday evening and were expected to announce the deal Monday morning. AOL will pay $315 million, $300 million of it in cash and the rest in stock. It will be the company’s largest acquisition since it was separated from Time Warner in 2009.

The deal will allow AOL to greatly expand its news gathering and original content creation, areas that its chief executive, Tim Armstrong, views as vital to reversing a decade-long decline.

Arianna Huffington, the cable talk show pundit, author and doyenne of the political left, will take control of all of AOL’s editorial content as president and editor in chief of a newly created Huffington Post Media Group. The arrangement will give her oversight not only of AOL’s national, local and financial news operations, but also of the company’s other media enterprises like MapQuest and Moviefone.

By handing so much control over to Ms. Huffington and making her a public face of the company, AOL, which has been seen as apolitical, risks losing its nonpartisan image. Ms. Huffington said her politics would have no bearing on how she ran the new business.

The deal has the potential to create an enterprise that could reach more than 100 million visitors in the United States each month. For The Huffington Post, which began as a liberal blog with a small staff but now draws some 25 million visitors every month, the sale represents an opportunity to reach new audiences. For AOL, which has been looking for ways to bring in new revenue as its dial-up Internet access business declines, the millions of Huffington Post readers represent millions in potential advertising dollars.

“This is a statement that the company is making investments, and in this case a bold investment, that fits right into our strategy,” Mr. Armstrong said in an interview Sunday. “I think this is going to be a situation where 1 plus 1 equals 11.”

Ms. Huffington and Mr. Armstrong began discussing the possibility of a sale only last month. They came to know each other well after they both attended a media conference in November and quickly discovered, as Ms. Huffington put it, “we were practically finishing each other’s sentences.” She added: “It was really amazing how aligned our visions were.”

One of The Huffington Post’s strengths has been creating an online community of readers with tens of millions of people. Their ability to leave comments on Huffington Post news articles and blog posts and to share them on Twitter and Facebook has been a major reason the site attracts so many readers. It is routine for articles to draw thousands of comments each and be cross-linked across multiple social networks.

Mr. Armstrong and Ms. Huffington say that AOL’s local news initiative, Patch, and its citizen journalist venture, Seed, stand to thrive when paired with the reader engagement tools of The Huffington Post.

AOL’s own news Web sites like Politics Daily and Daily Finance are likely to disappear when the deal is completed, and many of the writers who work for those sites will become Huffington Post writers, according to people with knowledge of the deal, who asked not to be identified discussing plans that are still being worked out.

Although AOL is publicly traded, The Huffington Post is a private company and does not disclose its financial data. But Ms. Huffington, who co-founded the site with Kenneth Lerer in 2005, said it had its first profitable year in 2010 and was poised to continue growing. . Huffington Post executives estimate that the Web site will generate $60 million in revenue this year, compared with $31 million last year.

The sale means a huge payout for Huffington Post investors and holders of its stock and options, who stand to profit earlier than if the company had waited to grow large enough for an initial public offering.

While Huffington Post has been growing — it now employs more than 200 people, a threefold increase in just the last few years — AOL has been shrinking. Last year it eliminated close to 2,500 positions, roughly a third of its staff. Although its most recent earnings estimates beat Wall Street expectations, revenues for the fourth quarter were down 26 percent from a year earlier as dial-up customers continued to disappear. Ad revenue, which is seen as the company’s main business going forward, was down 29 percent from the year before.

Since 2009, the company has untangled itself from its ill-fated merger with Time Warner, a legacy media company with print magazines, a film studio and television channels. AOL, not fully a media company, not fully a technology company, never melded with its corporate partner.

As its own company, AOL has emphasized editorial content, a strategy that is intended to keep it competitive in an Internet marketplace dominated by Google. AOL is betting that it can sell, alongside that content, local advertising and display advertising, areas that Google does not dominate.

Last year, AOL acquired the influential technology news blog TechCrunch for more than $35 million to supplement its technology coverage, which already included the blog Engadget.

While AOL has invested heavily in creating content through enterprises like Patch, the initiative meant to fill the void in areas where struggling local newspapers have cut back on reporting, much of their writing and news gathering is not up to the standards of what consumers get from their traditional news sources.

The Huffington Post, too, has faced criticism over its content, much of which is aggregated from other news sources. But it has started to invest more in original reporting and writing, hiring experienced journalists from The New York Times, Newsweek and other traditional media outlets. By acquiring The Huffington Post’s reporting resources, AOL hopes to counter the perception that it is a farm for subpar content.

“The reason AOL is acquiring The Huffington Post is because we are absolutely passionate, big believers in the future of the Internet, big believers in the future of content,” Mr. Armstrong said.

In that sense, the deal carries a risk for The Huffington Post, which has had none of AOL’s troubles and is widely viewed as a business success with its own unique voice and identity. Now that it is to become part of a large corporate entity, what becomes of that unique character is an open question.

“The potential is great; it’s almost overwhelming,” said Howard Fineman, The Huffington Post’s senior political editor. “But the key will be to engage people who really want to be engaged, and make it hospitable to them, draw them in and expand the sense of community without losing them at the same time.”

Nokia Likely to Sack Several Executives: Report

2011-02-05T05:59:00.001-08:00

Published: February 5, 2011

FRANKFURT (Reuters) - The world's biggest cellphone maker Nokia is likely to sack several executive board members in a management shake-up, a German weekly reported.

As rival companies have been eating into Nokia's market share, Chief Executive Officer Stephen Elop, who took over last September, is due to unveil a revamp of the company's strategy, which could include organizational changes, on February 11.

Citing company sources, German weekly Wirtschaftswoche reported on Saturday that Mary T. McDowell, the executive in charge of Nokia's mobile phones unit, may have to leave the company along with Niklas Savander, the manager of the markets unit.

Chief Development Officer Kai Oistamo may have to go, too, as may Tero Ojanpera, the manager responsible for services and mobile solutions, the weekly reported.

Elop has ordered headhunters to look for top people with good software expertise, the report said.

A Nokia spokesman declined to comment.

Elop has been widely expected to make big changes to the top management team. So far, only one former leader, Anssi Vanjoki, has left the company.

Nokia has been left in the shade by high-end competitors such as Apple and Google and is now also suffering a drop in sales of its stronghold of traditional phones as Chinese manufacturers muscle in to take advantage of the growing market.

(Reporting by Arno Schuetze and Tarmo Virki; Editing by Susan Fenton)

Buyouts, Takeovers and Exits

2011-01-20T21:30:00.001-08:00

Amazon.com (Nasdaq: AMZN) has acquire Lovefilm, a UK-based video and DVD rental service known as Europe’s Netflix. No financial terms were disclosed, but reports suggest the deal is valued at over $300 million. Lovefilm investors include Index Ventures, DFJ Esprit and Balderton Capital.

This comes one day after Amazon gave a huge boost to new portfolio company LivingSocial, by agreeing to sell one million $20 gift cards at $10 per card. Got to wonder how long it will be until LivingSocial is offering Lovefilm discounts?

Boston Scientific Inc. (NYSE: BSX) has agreed to acquire Atritech Inc., a Plymouth, Minn.-based maker of medical devices for the prevention of atrial fibrillation-related strokes. The deal is valued at upwards of $375 million, including a $100 million up-front cash payment and up to $275 million in milestone-based payments. Atritech had raised more than $90 million in VC funding from Thomas, McNerney & Partners, Split Rock Partners, Prism VentureWorks, Tullis-Dickerson and Vector Group. www.atritech.com
One Equity Partners is in talks to sell or float Austrian aluminum company Austria Metall GmbH, according to Bloomberg. A sale could be worth more than €1 billion. www.oneequity.com

Palmfund Management has sold Legal Publishing Group, a provider of information solutions to the Argentinean and Chilean legal markets, to Thomson Reuters. No financial terms were disclosed. www.thomsonreuters.com

Samsung Electronics has acquired Liquavista BV, a Dutch developer of electronic paper technology. No financial terms were disclosed. Liquavista has raised VC funding from Amadeus Capital, GIMV and Prime Technology. www.samsung.com

SolarWinds (NYSE: SWI) has acquired Hyper9 Inc., an Austin, Texas-based provider of management information for virtual infrastructures. The deal is valued at up to $30 million, including a $23 million up-front payment. Hyper9 had raised around $17 million in VC funding from Venrock, Matrix Partners, Silverton Partners and Maples Investments. www.solarwinds.com
Trilantic Capital Partners has agreed to sell Spumador, an Italian maker of private-label carbonated soft drinks and mineral, to Refresco Group BV. No financial terms were disclosed, except that Spumador generated €170 million in revenue in 2009 revenue. www.spumador.com

Senior Research Scientist, Explorative User Research–Urgent role

2011-01-19T05:15:00.001-08:00

Main purpose of the job

Explorative user researcher will be the center-point of the team in coming up with aspects that need to be considered concerning users, usage, and the environment and ways to gather insights on them. You are also expected to come up with research themes that are timely, contextually and culturally relevant and would have impact on the lives of people in the future that will require a breakthrough from research. The explorative researcher acts as intellectual stimulant and sparring partner for the team members and is able to reflect on various dimensions of the global and local cultures. At the same time, you provide the motivation, context, and continuity to the research projects of the team by documenting the process, results, and insights in presentable forms both internally and externally. Furthermore you are always up-to-date with the trend forecasts in design, business, and society.

For day-to-day work, you have passion for fieldwork and are experienced in planning and executing the field research work locally and internationally. You have the inquisitive mind in observing and experimenting with human behaviors and discovering insights how technology could be adopted in positive manners. You are experienced in running a technology pilot where participants try out new product or service at the early phase of research and development. You are comfortable working with a multidisciplinary team of designers and engineers. You translate the research data into insights that can be utilized in design and technology implementation and into vision that can have impact on company's strategy. You are excellent communicator and enticing presenter to share the outcome and convince the internal and external audience to understand your vision. You love traveling for fieldwork and have network of people to build a local support team in various locations.

Responsibilities

Acts as inspiring scientist and world-class role model for explorative user research
Drives the research projects towards completing their mission by
- Identifying research opportunities and creating project plans that will have high impact on Nokia's future strategy based on understanding major business, social, and technology trends
- Execution of research, gathering user insights and translating them into system requirements encompassing the mobile terminal, the server, and other enablers in the eco-system
- Running pilots with concept prototypes while actively looking for novel approaches to do so especially in the context of emerging markets
- Deliverying to-the-point, effective analysis reports on the pilot and user research
- Working with design and implementation team maximizing the synergy of multidisciplinary research team
- Actively seeking technology transfer opportunities within Nokia by communicating the research outcome and vision backed up by research
- Publishing the relevant knowledge in respected academic venues
- Establishing close collaborative relationships with other teams in NRC Beijing and NRC worldwide
- Coordinating and mentoring subcontractors and intern students for the project
Acts as NRC's spokesperson for explorative user research
Understands academic, business and technology landscapes of mobile solutions industry, playing an active role in identifying the potential technology transfer options by advocating and choosing the right research themes at the right time for the team

Minimal requirements for eligibility

Masters or PhD or equivalent academic degree in cognitive or social psychology, anthropology, HCI, interaction design, or sociology. Please note that those who do not meet the degree qualification should have alternatively minimum of 5 years of professional experience as user researcher in technology and relevant industry with strong publication portfolio.
Existing academic publications in recognized venues in India and/or internationally (files of publications required upon applications)
Minimum 4+ years of professional experience of leading at least 2 projects running technology pilots in the early phase of solution development, being responsible for planning, execution and delivery of insights, working with technology implementation team and design team to utilize user insights in a convining, collaborative manner - demonstratable by portfolio of work or academic publications
Publications or portfolio demonstrating the creative adaptation of known research methods based on the target users or the context of the user research
Ability to conduct interviews independently in various Indian contexts including rural India
Ability to travel for field research
Fluency in at least one of the Indian languages
Track record of public presentation as engaging speaker and communicator of the user research insights (samples will be required for the visual & aural presentation material)
References from previously affiliated organizations made available on request

Social Magazines: What's Their Business Model?

2011-01-18T21:48:00.001-08:00

By RICHARD MACMANUS of ReadWriteWeb

Yesterday we looked at the latest "social magazine" app to hit the iPad, called NewsMix. It's very similar to Flipboard, the innovator and leader in this small but rapidly evolving market. Social magazines is a term that Flipboard came up with. It's come to mean a News Reader type application for the iPad that has the visual appeal of a magazine, along with the social media features common to this era of the Web (integration with Facebook, Twitter and other social apps). Social magazine apps will become a key application for tablets over the next couple of years. Also we will see existing magazines on the iPad, such as Wired and TIME, evolve to become more like Flipboard - with better customization of magazine sections, whizzier UI, more social media functionality, and so on.

An important question for Flipboard, NewsMix and other such apps is: how will they make money? Wired, TIME and other specialist magazines will rely on the subscription model (once it gets sorted out for the iPad). However, Flipboard and its ilk face the same issues with monetization as RSS Readers did in the previous Web era.

Tough to Monetize

A big part of the reason why the consumer RWW Reader market never took off was that it was almost impossible to monetize. Users balked at ads inside their RSS Readers, so the main RSS Reader companies ended up turning to the enterprise market for the bulk of their revenues. Newsgator is a great example. It owns a range of sophisticated RSS Reader products, but it shuttered its browser-based RSS Reader in mid-2009 and now appears to focus mostly on SharePoint integration (i.e. the enterprise market).

Flipboard and other social magazines can of course choose to make money by being a paid app in iPad and other app stores. NewsMix has headed in this direction, charging $2.99 for its app. Flipboard has chosen to remain free, a sensible move given that it wants to maintain its first mover advantage and ramp up its user numbers.

Likewise, if the App Store ever allows iPad magazine apps to provide a decent subscription service, Flipboard would be wise to hold off on that too. Not just because publishers will probably complain, but again it's an impediment to user growth - which is surely Flipboard's primary concern, given that it has defined a new market.

Flipboard's Plan For Adverts

Flipboard co-founder and CEO Mike McCue told Robert Scoble when Flipboard launched in July last year that they were planning a "new, design-centric, advertising that could possibly fill a page or a portion of a page." That same month, McCue told Business Insider that "when we build our business model [...] it's not going to be on the backs of the publishers, it will be with the publishers." He went on to say that Flipboard plans to introduce "a totally new form of advertising."

It's clear that Flipboard is looking at (or at least talking about) a predominantly advertising based revenue model, much like traditional magazines have. It thinks that the visual appeal of advertising that magazines have enjoyed, will translate to its product too. The contentious issue will be how it gives a cut to publishers, since - unlike Wired and TIME - Flipboard is not a publisher.

That's essentially the same problem that RSS Reader Bloglines grappled with in 2004-05. Bloglines didn't launch advertising at that time, due to the outcry from publishers. Flipboard hasn't yet broached the subject with publishers - and there's no rush. Flipboard bought itself some time to figure out a solution, by taking $10.5 million in initial funding.

If Flipboard is serious about this new form of advertising, then it's a tall order. Any publisher that is even moderately successful relies heavily on brand advertising. Many publishers will be skeptical of a profit-sharing arrangement outside of their own sites.

Acquisition May Be Flipboard's Answer

Flipboard was the first mover in the social magazine space, so the reality is that it's going to be an attractive target for acquisition - much as Bloglines was, Flickr was, Delicious was, and so on. My bet is that Flipboard continues to ramp up its user base, with scant regard to business model.

It may still experiment with a new form of publisher-friendly, design focused advertising. But it will be a risky experiment. Nobody has yet figured out how to share advertising revenues with publishers from within a news reader-type application.

Adobe Beefs Up Its Ad Targeting by Acquiring Demdex

2011-01-18T21:45:00.001-08:00

By ANTHONY HA of VentureBeat /Published: January 18, 2011

Adobe may be best-known for its media creation software like Photoshop and Flash Builder, but it’s showing more interest in the advertising market — it just announced the acquisition of a data startup called Demdex.

Adobe acquired analytics company Omniture for $1.8 billion in September 2009, explaining the move as a way to give Adobe customers the tools they need to make money from their content. By July of last year Adobe said Omniture was already accounting for 10 percent of its revenue.

Demdex’s technology will be added to Adobe’s Omniture products. Demdex pulls audience data from a number of sources, including your website, advertising campaigns, and data sellers, so that advertisers can target their ads to a specific group. In its press release, Adobe emphasizes how important this kind of audience targeting is becoming for publishers and advertisers.

“With the addition of Demdex, the Adobe Online Marketing Suite will enable advertisers to be smarter with their advertising spend and publishers to leverage their audience data to generate more revenue,” said Brad Rencher, vice president and general manager of Adobe’s Omniture business unit. “With audience optimization, Adobe is literally changing how online ads are bought and sold.”

The terms of the deal were not disclosed. Demdex last raised $6 million in funding from Shasta Ventures, First Round Capital, and Genacast Ventures.

Silicon Valley's Other Craig (Barratt) Cashes In Wireless chipmaker Atheros is sold to Qualcomm for $3.1 billion

2011-01-10T01:12:00.001-08:00

Semiconductors January 5, 2011, 11:01PM EST text size: T T

By Ashlee Vance

If conventional wisdom had its way, Atheros Communications (ATHR) would have ended up as yet another mound of chip startup roadkill. Not only did it seek to do something new, risky, and expensive with its wireless chip offerings, but it brushed up against Intel (INTC) and its near-bottomless coffers. Far from going on life support, Atheros survived—and did well enough to tempt Qualcomm (QCOM) into acquiring it for $3.1 billion in cash.

After a day of rumors, Qualcomm confirmed the purchase on Jan. 5. It paid $45 per share, a 29 percent premium over Atheros' average trading price during the last month. The deal is Qualcomm's biggest ever and gives the mobile technology giant a direct path to expansion in a number of growing markets, including Wi-Fi, Bluetooth, GPS, and systems that let Internet data flow through home electrical networks, known as powerline networking.

In announcing the acquisition, Qualcomm's chief executive officer, Paul E. Jacobs, noted that Atheros delivers a sales force and wealth of products aimed at consumer electronics and home networking. He says such technology will complement Qualcomm's Snapdragon chip, which sits inside many of the flashiest smartphones based on Google's (GOOG) Android software, and create demand for new devices based on the chip.

Like so many Silicon Valley startups, Atheros can trace its roots to the engineering department at Stanford University. Professor Teresa H. Meng and Stanford's current president, John Hennessy, formed the company in 1998 to build chips capable of shuttling information across wireless spectrum.

Intel Competition

Atheros found itself as a leader in the burgeoning market for Wi-Fi communications. That was the good news. The bad news was that Intel came to see Wi-Fi as a way to build demand for laptops running its chips. Intel started bundling Wi-Fi functionality with existing chips through its Centrino brand, undercutting Wi-Fi specialists such as Atheros in part by pouring hundreds of millions of dollars into marketing.

That looked like "it was going to kill us," said Craig H. Barratt, Atheros' CEO, during a recent interview before the acquisition was announced. "Here was the world's biggest chip company saying they would take their versions of your technology and bundle it."

An Australian-born alum of Stanford, Barratt has spent years suffering through jokes about his standing as the "lesser" Craig in the chip game. Intel's former chief executive and chairman, Craig R. Barrett, who led the company's assault on Atheros, stole much of the attention. (The ultimate indignity came when, because of a publisher's mixup, Craig Barrett started receiving royalty checks for a book penned by Craig Barratt. "He figured out the problem and sent the checks back to me," Barratt said.)

Atheros survived Intel's notoriously aggressive campaigns by staying at the cutting edge of the ever-evolving Wi-Fi technology and piggybacking on Intel's marketing heft. The upstart consistently rolled out new chips offering the latest speed advances while Intel moved at the slower pace of a mammoth integrator. Intel's Centrino marketing blitz depicted, among other things, people blissfully checking e-mail from the beach. They trained consumers and hotels, coffee shops, and airports to crave Wi-Fi—and unintentionally built a bigger market for Atheros. "The irony is that Intel made Atheros in a way," Barratt says.

Intel has since pulled back from its Centrino program and turned its attention to areas such as security and graphics. Barratt sees it as a concession of sorts. "Even the biggest chip company in the world cannot afford to give away products forever," he says. Today, chips from Atheros sit inside computers from all of the major PC makers, particularly in lower-end and midrange machines.

Consumer Electronics Wave

Atheros also has ridden the latest consumer electronics wave by adding wireless functions to products ranging from Amazon.com's (AMZN) Kindle to home routers and cell phones. In recent years, the company has started to diversify away from Wi-Fi by designing its own Bluetooth technology for short-range communications and making acquisitions in the GPS and Internet-over-powerline markets. It's part of a big bet on the so-called Internet of Things in which all manner of devices, from laptops to washing machines and even shoes, will broadcast their whereabouts and activities to the network.

Even before the acquisition rumors, Wall Street was enthusiastic about the changes: Atheros shares surged from $24.58 last September to $35 earlier this month. In its third quarter, Atheros posted a 58 percent year-over-year rise in revenue to $247.1 million.

For Qualcomm, which has also benefited as the market for smartphones exploded, Atheros is a means of expanding into new businesses. "There is not a whole lot of overlap," says Tore Svanberg, the senior chip analyst at Stifel Nicolaus Research (SF). "All of the areas Atheros is playing in could be instrumental to Qualcomm's growth. They are very complementary."

With Ian King. Vance is a reporter for Bloomberg News.

Bruce Berkowitz: The megamind of Miami

2011-01-08T04:29:00.001-08:00

Posted by Scott Cendrowski,

He may be the most driven investor on earth. And now the founder of the $17 billion Fairholme Fund is making the boldest bet of his career.

Berkowitz in his home office in Coral Gables, Fla., with his beloved poodle, Jazz. He struggles to sustain interest in anything besides investing. "You do what you enjoy," he says.

Bruce Berkowitz is starting to sweat. It's just after 5 a.m. on a Thursday, and the man who is arguably the top mutual fund manager on the planet is briskly walking his usual morning route on the mansion-lined streets of his gated neighborhood in Coral Gables, Fla., just outside Miami. Alongside him is his investing partner, right-hand man, and next-door neighbor, Charlie Fernandez, who is furiously scrolling through e-mails on his BlackBerry as the two bat around ideas for the portfolio of Fairholme, (FAIRX) the $17 billion fund Berkowitz started 11 years ago. "Out here you can actually think," says Berkowitz, explaining the appeal of an hour of daily pre-dawn speed-walking to a visitor hustling to keep pace.

As he charges through the darkness in shorts, running shoes, and a black University of Miami zip-up hoodie, Berkowitz bounces from topic to topic in his typical scattershot way. He and Fernandez have just returned from an eight-day fact-finding trip to China -- he's bullish but wishes he'd gotten in 10 years ago -- packed so full of meetings that, Berkowitz says, they slept a mere 24 hours total. Next he jumps to the bold investments that he and Fernandez have made -- hedge-fund-like maneuvers involving both equity and debt -- in subprime lender AmeriCredit and then-bankrupt mall owner General Growth Properties (GGP), moves that have netted his fund a profit of $2 billion.

Finally, on the fourth or fifth pass down his block, Berkowitz, 52, gets around to the biggest and most public wager of his life: his $5 billion bet on the resurgence of Wall Street. Fairholme is now the largest shareholder of AIG (AIG) after the U.S. government, with a $1.5 billion position in the insurance giant. And Berkowitz has also taken huge stakes in Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS), and Bank of America (BAC). "We're going to make more on these names than we have on anything," he declares, as the sun begins rising behind the palm trees.

Berkowitz may not be a household name to most investors, but he should be. During the past decade, Fairholme has produced an annualized return of 11.6% over a span in which the S&P 500 (SPX) has risen a paltry 0.7% a year on average. Since the fund launched in 1999, Berkowitz has beaten the market every year except one (when Fairholme was up 24%, vs. the S&P's 29% rise in 2003), and he's on track (up 17% through early December) to easily beat it again in 2010. "The highest compliment I can give," says hedge fund billionaire Leon Cooperman, who got to know Berkowitz when they both invested in telecom stocks earlier this decade, "is if he called me up to recommend a stock, I would pay attention."

The fund's outstanding returns -- along with Berkowitz's being crowned U.S. stock manager of the decade this year by investment research firm Morningstar -- have attracted a flood of new money to Fairholme. Investors have poured in more than $4 billion over the past year. And they've added $330 million more to his Fairholme Focused Income Fund, which launched in January. He plans to open a third fund, one that focuses on smaller opportunities, early in 2011.

Berkowitz welcomes the influx of money. (He says his target is for Fairholme to reach $25 billion in assets.) For now, though, much of the new cash remains just that -- cash. Rather than put it all to work in active investments, Berkowitz has an unusually high 25% of Fairholme's portfolio in cash or short-term debt. It's a huge reserve of liquid funds, and Berkowitz wants it for a couple of reasons, both of which suggest that he sees a rocky road ahead for the U.S. economy. First, if a falling market scares his investors into withdrawing funds, the extra money means that he won't be forced to sell stocks he believes in.

Second, stockpiling cash is in keeping with Berkowitz's plan to evolve Fairholme from a regular, stocks-only mutual fund into a more versatile distressed-asset investment vehicle, and to profit from the coming wave of corporate restructurings he anticipates. He believes that dozens of overleveraged companies will need to fix their balance sheets in the next couple of years -- commercial real estate is one industry ripe for it, he says -- and he wants Fairholme to be ready to step in as a Warren Buffett-style lender of last resort, with highly favorable terms for his investors, of course. As Berkowitz puts it, "There aren't many people in the world you can call who can write a check for $1 billion today."

Wall Street's history is filled with stories of money managers who have become superstars after a spectacular run, only to struggle once investors flocked to their funds. Bill Miller famously guided his Legg Mason Value Trust (LMVTX) to a 15-year winning streak over the S&P 500 before going into a deep slump beginning in 2007. Ken Heebner of the CGM Focus Fund (CGMFX) was riding high in 2008 (when his success earned him a cover story in this publication) but has since struggled mightily.

Can Berkowitz continue to beat the odds? Can a single investor, even one with singular focus and discipline, successfully manage a portfolio the size of Fairholme? "It's a challenge for any manager to take in that kind of inflow and repeat," says a large Fairholme investor. Says another: "You hope that when you buy a manager, it's a seasoned team. Having a one-man band can be risky."

Berkowitz acknowledges the concerns with his usual candor. "Right now," he says matter-of-factly, "we're at an interesting junction point where people can't decide whether we're about to blow up."

Getting away from Wall Street

For its first six years Fairholme was run from an office in Short Hills, N.J. Then, in 2006, Berkowitz uprooted the firm and his family to move to Miami. The warm weather in southern Florida was certainly a factor in the decision, as was the absence of a state income tax. But Berkowitz says the biggest reason was that he wanted to put some space between himself and Wall Street. In Short Hills, his office was in a building with several other money-management firms. And no matter where he went in town, he was in danger of running into know-it-all investors who might pollute his thinking. "I had to get away," he says.

Fairholme's Miami offices occupy a single floor in a nondescript office building. There are 20 or so full-time employees to handle compliance, investor relations, and trading. But there are no teams of research analysts. And most of the time there is no Berkowitz either.

That's because he spends almost all his time working at home. Berkowitz bought his current 14,500-square-foot mansion for $14 million in 2008. He and his wife, Tracey, gutted it -- he says it was filled with gaudy marble and chandeliers -- and remodeled in a low-key modern style. Berkowitz's spacious office has dark wood floors and Barcelona chairs. Massive windows offer a perfect view of the Atlantic Ocean. On his desk is a blanket for his beloved 12-year-old white poodle, Jazz.

Berkowitz is about 6 feet tall and lanky, and looks young for his age. He keeps his dark hair brushed back and usually wears blue oxfords with loose slacks or jeans. Despite his obvious wealth, Berkowitz doesn't have a fancy-car fetish. Unless he has to take the highway, his vehicle of choice is a tiny Mercedes-Benz Smart Car.

At Tracey's urging, Berkowitz has been attempting to acquire a hobby for years. A few years ago he tried golf but gave it up. ("I just couldn't hit the ball straight," he says.) He talks excitedly about scuba diving but admits he's been only twice. Next to the door of his office are two guitars, a Fender Stratocaster and a vintage Rickenbacker. Berkowitz says he tried to learn the instrument last year but couldn't stick with it.

His office shelves are filled with some 2,000 vinyl records that he bought in bulk a year and a half ago. When asked for a favorite, though, he struggles to come up with a name. He has to remind himself to use his $80,000 McIntosh sound system. "I get really upset when I don't put it on for a week or two," he says. "It's something I'm trying to do for 15 to 20 minutes a day to relax." In truth, he doesn't think he's missing out on much. "People do what they enjoy," he says. For him, it's investing.

Early to rise, early to bed

Berkowitz works seven days a week and often starts sending e-mails before 4 a.m. After his power walk with Fernandez each morning, Berkowitz works out in his basement gym with a personal trainer and is at his desk by 8:15. When the market closes, he meets again with Charlie for an hour, then spends an hour or two with his family. (He has three children, the youngest a senior in high school.) He's usually in bed by 9 p.m., reading annual reports or other filings. Once his eyes get tired, he puts on Bowers & Wilkins headphones to listen to conference calls. "They pick up voices really well," he says, before pausing. "This is really sick, isn't it?" (Berkowitz says he listened to Bank of America's recent earnings call over and over -- nine or 10 times -- to understand how new CEO Brian Moynihan is handling financial reform: "I'm impressed," he says.)

While he may not employ a full-time team of analysts, Berkowitz often hires experts to challenge his ideas. When researching defense stocks a few years ago, he hired a retired two-star general and a retired admiral to advise him. More recently he's used a Washington lobbyist to help him track changes in financial-reform legislation. When asked about the SEC's investigation of "expert networks" in relation to insider trading, Berkowitz says that he has never employed any of the firms implicated, and that the consultants he does use don't provide company-specific information.

Most mutual fund managers practice diversification -- they buy 50 or more stocks and thus spread the risk. But since his early days managing money in the 1980s, Berkowitz has run concentrated portfolios. Currently the Fairholme Fund holds only 25 stocks, and 38% of the money is in the top five names. When asked why, Berkowitz responds by echoing Berkshire Hathaway's Charlie Munger: "Why would you want to put money into your 35th-best idea?" He then pulls a book from his shelf: The Science of Hitting by Ted Williams. On page 37 there's a graphic showing the strike zone sections where Williams hit for his highest averages. "We're operating in our sweet spot," says Berkowitz with a smile.

That sweet spot is financial stocks.

Berkowitz has always specialized in understanding banks and other financial companies -- and has often made huge returns in them. In the early 1990s, for example, he purchased beaten-down shares of Wells Fargo when short-sellers were arguing that commercial real estate loans would cripple the bank, and watched the stock rise ninefold over the next nine years.

Berkowitz's bet on banks now comes down to this: He's convinced that the worst is over. And his certainty is all the more compelling because he sensed disaster coming early. In 2006, Berkowitz sold his stakes in mortgage lenders Countrywide Financial and Freddie Mac after he noticed a proliferation of overleveraged balance sheets, aggressive lending, and exotic mortgage securities in the financial sector. "Worldwide, financial institutions may ultimately write off hundreds of billions and are being forced to raise equity to survive -- if they can," he wrote in Fairholme's 2007 letter to investors. Shortly after, he put much of the fund's money in defensive stocks like Boeing (BA) and Pfizer (PFE).

Berkowitz moved to Miami from New Jersey to isolate himself from other investors who might pollute his thinking.

When the markets subsequently collapsed in 2008, Berkowitz saw it as a once-in-a-generation opportunity. The one mistake he didn't want to make was to plunge in too early. Cultivating a healthy paranoia is a hallmark of his investing approach. As he is fond of saying, "The first rule is: Don't lose money. The second rule is: Follow the first rule." So, he says, he spent nearly every day of 2008 and 2009 studying the banks. He combed through congressional testimony from Wall Street executives. He studied TARP filings and loan data from the Federal Reserve. All the while he monitored balance sheets. And only when he was convinced that it was impossible to lose money did he plunge in.

Fairholme's $450 million investment in Citigroup in the fourth quarter of 2009 was his first sizable bet. Citi lost almost $30 billion in 2008 alone, and its shares fell more than 90% during the credit crisis. But by the fall of 2009, Berkowitz could see that good, conservative loans were replacing bad ones in Citi's lending businesses -- and even its so-called toxic assets were yielding more than 5%. "You have to normalize the environment -- that's the arbitrage," he says. "Are they going to make it through the tough times? And what are they going to look like in more normal times?" So far in 2010, Citi shares are up 34%, and Berkowitz believes they could easily double from here.

Berkowitz on AIG: Treasury will profit big

His boldest, least understood investment by far is his huge position in AIG -- the single largest holding in his fund. Conventional wisdom on Wall Street said AIG would never repay the government the $180 billion in bailout money it was extended after its London-based credit derivatives group posted billions in losses on bad mortgage bets. Institutional investors have shunned the insurer, and last year more than one Wall Street analyst wondered whether the stock was worthless. By early 2010, it was down 98% from its pre-crash level.

But when Berkowitz dissected AIG's businesses, including its core property and casualty insurance arms in the U.S. and its Asian life insurance unit, he found that cash flows were positive, even as mark-to-market losses in other parts of the company continued to cause billions in losses. "All of my most intelligent friends in the insurance world think I'm an idiot," he says of his AIG stake. "These are CEOs of insurance companies. But it's just right there."

After restructuring charges, the giant lost $11 billion in 2009, but "at its core, their intact franchises make money," says Berkowitz. It's those core businesses that Berkowitz is betting on. After sketching the value of its operations, some of which would be sold off to pay back the government, Berkowitz predicts that U.S. taxpayers will eventually get repaid, although he admits that is still a ways off.

Berkowitz started buying AIG bonds and preferred stock as well as common equity in February. Since then the stock has risen more than 75%. "The good thing about AIG is that it's just so complex," he says. "For a mere mortal with an average intelligence, it takes a long time to try to put all the pieces together. It's all there to be put together, it's just that you need to have no social life and not too many investments."

An early lesson in odds making

Berkowitz grew up in Chelsea, Mass., a gritty suburb of Boston. His father Barney was a part-time taxi driver who ran a bookmaking operation out of his corner convenience store, and his mother, Hennie, was a homemaker. When Bruce was 15, his father had a heart attack. Berkowitz quit high school for two months to take over the bookmaking operation while his dad recovered.

Creating betting lines for horse races and baseball games gave him his first lessons in odds -- and how most people don't understand them. "I learned hope and dreams and the perverse psychology that makes people make stupid decisions," he says.

An indifferent student, Berkowitz managed to get into the University of Massachusetts Amherst despite mediocre high school grades, becoming the first in his family to attend college. Once on campus, he found his motivation -- not to end up a taxi driver like his dad, he says -- and discovered he had a talent for math. He also met Tracey, who was a year older and living in the same dorm. They got married the week he graduated.

Berkowitz and his wife both found jobs with the Strategic Planning Institute in Cambridge, Mass. An offshoot of General Electric, the consulting group analyzed data for Fortune 500 companies to give them insight into what drove profitability. The couple was transferred to the group's office in Manchester, England, in 1981, but Berkowitz soon found the job boring. In his spare time he began trading stocks through the local Merrill Lynch office. He ended up joining Merrill's London brokerage office in 1983.

Berkowitz quickly emerged as the office's top salesman in fixed income, which was in a raging bull market. He bought BusinessWeek's international subscription list from McGraw-Hill and spent Sunday afternoons stuffing envelopes with letters of introduction to potential customers. American banks were new to England, and people were interested.

"Clients just loved him," says former partner Pascal Besman. "He had a great personality, and he was brilliant. He devoted all his time to work. We would work 14 hours a day, then we'd hang out another three or four."

Berkowitz became a hot commodity. By 1987 he had a core group of 200 wealthy clients, and Lehman Brothers recruited him to start its new high-net-worth office in London. He moved back to the U.S. with Lehman in 1989, then was recruited to Salomon Smith Barney in 1993 -- always retaining his core group of clients.

He began to chafe, however, at the oversight of working inside big firms. His bosses criticized him for running highly concentrated portfolios, even though, Berkowitz says, his returns regularly trounced the market. In 1994, for instance, he owned only two stocks: Berkshire Hathaway (BRKA) and the Fireman's Fund Insurance Co. "I was bumping up against constraints," he says. He also liked the idea of having a public record of his stock picking. So in 1997 he departed with all 200 of his original clients and about $400 million in separate accounts, and opened his own firm. He recruited two stock pickers -- a star Paine Webber broker named Larry Pitkowsky and a value investor named Keith Trauner -- to help generate ideas. Fairholme, named for the street where Berkowitz lived in London, launched in December 1999.

His biggest project so far

Over lunch at a small Italian restaurant in Coral Gables in November, Berkowitz takes a call from activist hedge fund manager Bill Ackman of Pershing Square Capital in New York City. Ackman is congratulating Berkowitz on the day's news: General Growth Properties, the country's second-biggest mall owner, has officially emerged from bankruptcy after a year and a half under court supervision.

The call lasts only a minute, and afterward Berkowitz asks Fernandez how much Fairholme shareholders are making from their investment in GGP. Fernandez quickly responds: $1.4 billion. It's a huge return, and, as Berkowitz quickly says, it wouldn't be possible without Fernandez.

Berkowitz runs Fairholme with Charlie Fernandez, his right-hand man and next-door neighbor, seen here on a sofa in Berkowitz's home office.

Fernandez, 48, joined Fairholme in 2007, shortly after marrying Berkowitz's cousin. To outsiders it smelled of nepotism, but Berkowitz says he had been looking for someone like Fernandez for a long time. Even though Fairholme posted 20% annualized gains in its first five years, by 2005, with the fund at $1.5 billion in assets, Berkowitz thought it needed a change. He wanted someone with the right experience to help him branch into opportunities outside public securities. Fernandez was a restructuring whiz who had worked at companies controlled by pharmaceutical billionaire Phillip Frost. Soon after Fernandez's arrival, Pitkowsky and Trauner left Fairholme. Berkowitz then changed Fairholme's charter to allow the fund to invest in debt for the first time and take larger stakes in companies. Shortly thereafter Berkowitz insisted that Fernandez move into the house next door to his, the better to work on deals.

Their biggest project so far has been General Growth Properties, and it's a good example of the types of transactions Berkowitz wants to do more of. Soon after the largest real estate bankruptcy in history made headlines in April 2009, Berkowitz and Fernandez began reading through the court filings. Aided by a veteran bankruptcy lawyer in New York, they determined that some of the company's battered debt could be paid off with the rent checks still coming in. Fernandez called more than 100 holders of GGP bonds and made bids over the phone. After six weeks he had accumulated bonds with a face value of $1.8 billion.

At that point Ackman, who had acquired a huge equity position in GGP, and property owner Brookfield Asset Management invited Fairholme to join them in recapitalizing the company's stock. "We set it up so there was room for others, and Bruce was my first call," says Ackman, who made a huge return when the stock rose from 50¢ to more than $15. "The guy is the most stand-up investor I've ever worked with."

Why not move to hedge funds?

Not all of Berkowitz 's interactions with the hedge fund world have been quite so favorable. In October he and noted short-seller David Einhorn faced off in the media over St. Joe, a Florida real estate developer that has been battered by falling land prices. Berkowitz, with a nearly 30% stake, is the largest shareholder in the company. After Einhorn, who is short the stock, gave a negative presentation at an investor's conference, driving down the price, Berkowitz thanked him for raising the company's profile. "I want to send him a box of chocolates," he told Reuters. He says he's confident he'll make a bundle on St. Joe eventually.

As Berkowitz moves more and more into these types of distressed investments, a natural question arises: Why not become a hedge fund manager himself, and take a hedge-fund-size cut for his services? For one thing, says Berkowitz, he isn't eager to deal with high-maintenance hedge fund investors. But more important, he doesn't view himself as the fast-money type.

As he nears the end of his morning walk, Berkowitz begins musing on his aversion to losing money. He is not, he insists, interested in taking risks. His contrarian investments may look perilous to outsiders, but to him they are the safest opportunities he can find. He stops and shuffles to the dotted yellow line in the center of the street and points down: "This is where we can make our shareholders plenty of money." For Berkowitz, out of the ordinary is middle-of-the-road.

Direct Observation: Some Practical Advice

2010-12-18T02:26:00.001-08:00

Originally Published in Marketing News, Fall 1999

Organizations working to better understand their customers would do well to employ direct observation techniques. But how do these techniques actually work? Here are some guidelines for the novice practitioner.

Authors

Dev Patnaik Robert Becker

Marketing professionals have long held the role of keeping tabs on “the pulse of the customer.” On product development teams, this role involves conducting market research to identify people’s preferences and needs—information used to guide the team in creating new offerings.

Quantitative methods such as surveys and conjoint analyses test people’s responses to new concepts and prototypes, allowing researchers to optimize the feature set of a product according to people’s preferences. Focus groups provide more qualitative feedback on product concepts—primarily when the new concepts are simple enough or similar enough to what currently exists that consumers can understand them in a typically short focus group period of time. Focus groups also can be used to explore people’s unmet needs. However, they rely on people’s awareness, memory, and descriptive ability away from the context of those needs, making it difficult to get at the complexities of the issues.

Recently, direct observational methods used in product development have received a great deal of attention. Companies such as Motorola, Gillette, Steelcase, and Xerox have used observational research to identify opportunities for entirely new products. Researchers go to customers’ environments to watch and interview people in context. Directly observing people and asking questions that refer to objects and actions at the site gives researchers a rich understanding of the issues customers face.

Hewlett-Packard, for example, frequently uses observational research to identify unmet customer needs. In one instance, the company’s medical products division sent researchers to hospitals to watch surgeons operate. During the operations, surgeons would watch their scalpel movements on a television monitor, but other staff members repeatedly walked past the monitor while conducting their duties, blocking the doctors’ view. The doctors didn’t complain about the problem, but based on this insight—something that would be difficult to identify without direct observation—H-P developed a surgical helmet with goggles that cast images right in front of a surgeon’s eyes.

Organizations working to better understand customers in the process of product development would do well to employ direct observation techniques. But how do these techniques actually work? The points below outline basic guidelines for approaching direct observational research.

Watch first. Then ask. When studying people in the field, the tendency can be to buffet them with questions to get as much information as possible. The intrusiveness of these questions may inadvertently cause the person to change behavior. To prevent this, begin with silent observation. After the activities are completed, follow up with questions to understand why the person acted in a certain way and what he/she felt during the situation being observed.

Look for needs, not solutions. Customers often express their needs by describing a solution they hope might be implemented, precluding other solutions that they may not exist yet. Therefore, always state the need independently of how that need might be served. One method to achieve this goal is to state needs in terms of a verb rather than a noun. For instance, it would be preferable to note, “The user needs to reach items on the top shelf” rather than, “The user needs a ladder.”

Avoid intrusions to keep behavior natural. People alter their behavior when they know they’re being observed, changing their workflow and reconsidering their actions. To minimize these effects, limit intrusions into their environment and actions. Stay out of people’s way as much as possible, and don’t direct their actions. When taking pictures, shut off the flash. Wear clothes and use language that matches what’s typical in the environment.

Look for non-verbal clues. Facial expressions and body language convey a great deal of information about people’s attitudes and feelings. This nonverbal data becomes especially crucial when people won’t articulate their emotions—either because they don’t feel comfortable discussing their feelings or because they have difficulty explaining their responses.

Record even the obvious or the seemingly unimportant. What’s obvious to one researcher might offer insight to another. Seemingly unimportant details sometimes turn out to be the key to a person’s needs. Don’t just wait for the “great” observations.

Beware of leading questions. Avoid multiple choice questions or statements phrased as questions. They presuppose the range of answers, which can prevent one from seeing entirely new answers. Instead, use open-ended questions to allow the customer to phrase issues in his/her own words.

Record information in the customer’s terms. When documenting a discussion with a customer, record the person’s statements in his or her own words as much as possible. Their choice of words can carry meaning that would be lost if it were paraphrased.

Look beyond the immediately solvable problem. Record even complex issues that are beyond the scope of the immediate project or the team’s current abilities. Recognizing and dissecting these deeper problems allows the company to plan for the issues that should be fixed down the road, even when they are not currently solvable.

Customer research has to be rooted both in these basic principles and in other rigorous data gathering and analysis methods. With such tools, marketing professionals can drive innovation in their organizations and steer product development teams toward better meeting the needs of everyday people

Dell Inc. has agreed to acquire data storage company Compellent Technologies Inc

2010-12-13T20:28:00.001-08:00

Dell Inc. (Nasdaq: DELL) has agreed to acquire data storage company Compellent Technologies Inc. (NYSE: CML) for approximately $900 million (including $80m in cash on hand). The $27.75 per share offer represents a 3% discount to Friday’s closing price for Cmpellent shares, but more than a 40% bump since press reports of a possible deal began circulating in October.

GE said that it will offer to acquire Wellstream Holdings PLC (LSE: WSM), a maker of flexible pipeline products for oil and gas transportation, for approximately $1.3 billion. www.ge.com

Thermo Fisher Scientific (NYSE: TMO) has agreed to acquire Dionex (Nasdaq: DNEX), a sunnyvale, Calif.-based maker of ion chromatography systems, for approximately $2.1 billion. The $118.5 per share offer represents a 21% premium to Friday’s closing price for Dionex stock.

VC Deals

Semprus BioSciences, a Cambridge, Mass.-based developer of products to treat infection- and thrombus-complication costs from vascular access products, has raised $18 million in Series B funding. S.R. One and Foundation Medical Partners co-led the round, and were joined by return backers 5AM Ventures and Pangaea Ventures. The company previously raised $10.5 million. www.semprusbio.com

QuantaLife Inc., a Pleasanton, Calif.-based developer of a technology that quantifies DNA molecules, has raised $17.2 million in Series B funding. Paladin Capital Group led the round, and was joined by Merieux Developpement and Vital Financial. www.quantalife.com

Media6Degrees, a New York-based provider of behavioral advertising technology, has raised $17 million in Series B funding. Menlo Ventures led the round, and was joined by return backers U.S. Venture Partners and Venrock. www.media6degrees.com

AltoBeam, a Beijing-based developer of DTV demodulators, has raised $6 million in Series C funding. U.S. Venture Partners led the round, and was joined by return backers DFJ DragonFund, Tano Capital, and PYJ-Dynasty Venture Fund. www.altobeam.com

Hivest.com, developer of a cloud-based application development platform, has raised $500,000 from Russian VC firm Runa Capital. www.hivext.com

Private Equity Deals

Apollo Management, The Blackstone Group and KKR are among several private equity firms interested in acquiring Beckman Coulter Inc. (NYSE: BEC), according to Reuters. Bain Capital and TPG Capital also could be suitors. Beckman is a maker of scientific lab equipment with a market cap of nearly $4 billion. It is being advised by Goldman Sachs. www.beckmancoulter.com

Partners has acquired OnCore Manufacturing Services, a Springfield, Mass.-based provider of electronics manufacturing services. No financial terms were disclosed. www.oncorems.com

Kohlberg & Co. has acquired Phillips Plastics Corp., a Hudson, Wis.-based manufacturer of injection-molded plastics. No financial terms were disclosed. www.kohlberg.com

Term sheet by Dan Patrick

SalesForce.com has agreed to acquire Heroku

2010-12-08T20:46:00.001-08:00

SalesForce.com (NYSE: CRM) has agreed to acquire Heroku, a San Francisco-based provider of a cloud application platform for writing Ruby-based applications. The deal is valued at $212 million in cash. Heroku had raised $13 million in VC funding from Ignition Partners, Redpoint Ventures, Baseline Ventures and Harrison Metal Ventures. www.heroku.com

VC Deals

DocuSign, a Seattle-based provider of an electronic signature cloud platform, has raised $27 million in Series C funding. Scale Venture Partners led the round, and was joined by return backers Sigma Partners, Ignition Partners, Frazier Technology Ventures and SalesForce.com. www.docusign.com

Waze, a Palo Alto, Calif.-based social mapping company, has raised $25 million in Series B funding. BlueRun Ventures led the round, and was joined by Magma Venture Partners, Vertex Venture Capital and Qualcomm Ventures. www.waze.com

Scivantage, a Jersey City, N.J.-based provider of front and middle-office tech techn solutions to the financial services industry, has raised $22 million in private equity funding from Brown Brothers Harriman Capital Partners. It also secured $6 million in senior debt from Provident Bank. www.scivantage.com

TYRX Inc., a Monmouth Junction, N.J.-based provider of medical devices that help reduce surgical-site infections associated with implantable pacemakers and defibrillators, has raised $20 million in new VC funding. HLM Venture Partners led the round, and was joined by return backers Clarus Ventures and Pappas Ventures. The company also secured $4 million in debt financing from Comerica Bank. www.tyrx.com

Nimble Storage, a San Jose, Calif.-based provider of converged storage and backup solutions, has raised $16 million in Series C funding. Return backers include Accel Partners, Lightspeed Venture Partners and Sequoia Capital. www.nimblestorage.com

Giveo, developer of an SaaS platform for social cause marketing, has raised $1.5 million in Series A funding, as reported by TechCrunch. Access Venture Partners led the round, and was joined by Grotech Ventures and Sentinel Trust. www.giveo.com

Juniper Networks has acquired Altor Networks

2010-12-07T22:41:00.001-08:00

Juniper Networks (NYSE: JNPR) has acquired Altor Networks, a Redwood Shores, Calif.-based provider of virtualization security technology. The deal is valued at $95 million in cash. Altor had raised around $16 million in VC funding, from Accel Partners, DAG Ventures and Foundation Capital. www.junipernetworks.com

BMC Software (Nasdaq: BMC) has acquired GridApp Systems Inc.

2010-12-06T22:04:00.001-08:00

BMC Software (Nasdaq: BMC) has acquired GridApp Systems Inc., a company focused on automating database provisioning, patching and administration. No financial terms were disclosed. GridApp has raised over $5 million in VC funding from Advantage Capital Partners, Ascend Venture Group, Gefinor Ventures and Rand Capital. www.gridapp.com

Google has acquired WideVine Technologies Inc., a Seattle-based provider of digital entertainment delivery solutions. No financial terms were disclosed. WideVine had raised over $67 million in VC funding from Liberty Global, Samsung Ventures, Constellation Ventures and VantagePoint Venture Partners. www.widevine.com

VC Deals

FleetMatics, a Boston-based provider of GPS tracking applications for commercial fleets, has raised $68 million in growth equity funding. Institutional Venture Partners was joined by New World Ventures and return backer Investcorp Technology Partners. www.fleetmatics.com

Shoutlet Inc., a Madison, Wis.-based social media marketing platform, has raised $6 million in Series B funding. American Family Insurance led the round, and was joined by return backers shareholders Origin Ventures and Leo Capital Holdings. www.shoutlet.com

Monetate, a Philadelphia-based provider of testing, targeting, and personalization for website, has raised $5.1 million from firms like First Round Capital and Floodgate. www.monetate.com

Taulia, a San Francisco-based provider of dynamic discounting solutions and self-service vendor portals, has raised $3.2 million in new VC funding. Matrix Partners and Trinity Ventures were joined by return backer The Angels’ Forum. www.taulia.com

PacketMotion, a San Jose, Calif.-based provider of user activity management solutions for IT audit and compliance efficiency, has raised $2.7 million in new Series C funding. The round now stands at $7.7 million, including a $5 million first close last month. Athenian Venture Partners led the new infususion, and was joined by return backers Reservoir Venture Partners, Intel Capital, Mohr Davidow Ventures and Onset Ventures. www.packetmotion.com

Zynga has acquired mobile social game developer Newtoy Inc. No financial terms were disclosed. Zynga has raised around $390 million in total VC funding, from Softbank, Digital Sky Technologies, Andreessen Horowitz, Tiger Global, Institutional Venture Partners, Kleiner Perkins Caufield & Byers, Union Square Ventures, Foundry Group and Avalon Ventures. www.zynga.com

Private Equity Deals

The Blackstone Group is expected to bid on Spanish can-maker Mivisa SA, according to Dow Jones. The comp any is expected to generate bids of approximately €1 billion, with Crown Holdings (NYSE: CCK) also reported to have interest.

Choice Cable, a Puerto Rican cable operator owned by HM Capital Partners and Spectrum Equity Investors, is launching a $105 million dividend recap loan, according to S&P. www.choicecable.com

EQT Partners has acquired a 30% stake in Modern Metal & Precision Holdings Ltd., a Chinese aluminum die casting manufacturer. No financial terms were disclosed. Modern Metal had approximately $75 million in sales for the fiscal year ending March 31, 2010. www.eqt.se

EQT Partners and Nordic Capital are among possible bidders for Dometic Group, a Swiss maker of portable refrigerators, according to Dow Jones. The deal could be valued at around $1.6 billion. Dometic was a BC Partners portfolio company that last year was taken over by its lenders.

Permira is the leading suitor for Israel’s Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), according to Globes Online. Apax Partners also is reported to have interest. www.permira.com

Gilde Buy Out Partners is in talks to buy listed Dutch conveyor belt maker Gamma Holdings NV, according to Bloomberg. The deal could value Gamma at around €218 million. www.gilde.nl

Phones 4U, a UK mobile phone retailer owned by Providence Equity Partners, is expecting first-rounds takeover bids next week, according to The Financial Times. BC Partners is among potential bidders, with offers expected to come in between £ 600 million and £ 700 million. www.provequity.com

PE-backed IPOs

Sagent Pharmaceuticals Inc., a Schaumburg, Ill.-based developer of injectible drugs, has filed for 1 $100 million IPO. It plans to trade on the Nasdaq under ticker symbol SGNT, with Morgan Stanley, BoA Merrill Lynch and Jefferies & Co. serving as co-lead underwriters. The company reports a $20.88 million net loss for the first nine months of 2010, on over $40 million in revenue. The company has raised over $150 million in VC funding from Vivo Ventures (43.4% pre-IPO stake), Morgan Stanley (20.8%), Key Gate Investments (16%), CNF Investments (5.4%) and Zhejiang Hisun Pharmaceutical Co. www.sagentpharma.com

Fluidigm, a South San Francisco-based provider of integrated fluidic circuits for the life sciences market, has filed for an $86.25 million IPO offering. It plans to trade on the Nasdaq under ticker symbol FLDM, with Deutsche Bank Securities and Piper Jaffray serving as co-lead underwriters. The company originally filed for an IPO in early 2008, but canceled the offering later that same year. It has raised over $200 million in private financing, from firms like Bio*One Capital, Versant Ventures, EuclidSR Partners, InterWest Partners, Alloy Ventures, InterWest Venture Partners and Lilly Ventures.www.fluidigm.com

Exits

BroadSoft Inc. (Nasdaq: BSFT), a Gaithersburg, Md.-based provider of VoIP application software to the telecom industry, has filed for a secondary offering of five million common shares. It closed trading last Thursday at $24.70 per share. The company raised $67.5 million in an IPO earlier this year, at $9 per share. Specific selling shareholders are not listed, but existing backers include Bessemer Venture Partners, Grotech Ventures, Charles River Ventures and Columbia Capital. www.broadsoft.com

Groupon, a Chicago-based group buying site, reportedly has rejected a $6 billion buyout offer from Google. Groupon will remain a private company, having raised over $165 million in VC funding from Digital Sky Technologies, Battery Ventures, Accel Partners and New Enterprise Associates . www.groupon.com .

One Equity Partners is planning to sell Columbian Chemicals Co., a Marietta, Ga.-based manufacturer of carbon black used in tires and synthetic rubber, according to Bloomberg. The deal could be valued at more than $500 million, with possible bidders including Germany’s Evonik Industries and India’s Aditya Birla Group. www.oneequity.com

Other Deals

DigitalTown Inc. (OTC BB: DGTW), a Burnsville, Minn.-based developer of a nationwide social media network of local online communities, has secured $10 million in equity financing from Boston-based Auctus Private Equity Fund. Northland Capital Markets advised DigitalTown on the deal. www.digitaltown.com

Firms & Funds

Apollo Global Management has formed a strategic partnership with Lighthouse Investment Partners, a fund-of-hedge funds manager with $4.5 billion in assets under management. As part of the deal, Apollo will make a $75 million convertible note investment into HFA Holdings Limited (ASX: HFA), the parent company of Lighthouse. www.lighthousepartners.com

Razor’s Edge Fund, a new venture capital group, is raising upwards of $40 million for its debut fund, according to an SEC filing. So far it has secured more than $23 million in capital commitments. The Razor’s Edge management team comes from Blackbird Technologies, a company that helps “solve challenging problems for customers in the defense, intelligence and law enforcement communities.” www.blackbirdtech.com

AOL mulls breakup, then merger with Yahoo

2010-12-05T23:59:00.001-08:00

NEW YORK | Mon Dec 6, 2010 2:28am EST

(Reuters) - AOL Inc, undergoing a radical transformation into the king of content on the Internet, is actively exploring a breakup involving a complicated series of transactions that may lead to a merger with Yahoo Inc, sources close to the plans told Reuters.

The plans are still in the exploratory stage and Yahoo has not been contacted, the sources said. The plans are also fraught with complications involving myriad moving pieces.

In many respects, the latest discussions are derivative of plans contemplated in 2008 and 2009 before Time Warner spun off AOL to Time Warner shareholders.

At the time, the media conglomerate had explored the option of breaking apart AOL's two main businesses. Its legacy dial-up Internet service would have been sold to or spun off into EarthLink or United Online. Its display advertising business would have been merged into Yahoo, the sources said.

FleetCor Technologies Inc - has set its IPO terms to nearly 12.68 million being offered at between $23 and $26 per share.

2010-12-01T22:54:00.001-08:00

The Big Deal

FleetCor Technologies Inc., a Norcross, Ga.-based provider of branded fuel cards, has set its IPO terms to nearly 12.68 million being offered at between $23 and $26 per share. It would have an initial market cap of over $2 billion, were it to price at the high end of its range. FleetCor plans to trade on the NYSE, with J.P. Morgan and Goldman Sachs serving as co-lead underwriters. Shareholders include Summit Partners (37.4% pre-IPO stake), Bain Capital (18.4%), Advent International (6.6%), Advantage Capital (3.1%), Performance Equity Management (1.7%), HarbourVest Partners (1.1%) and Nautic Capital.

This is the big deal -- even though it hasn't priced yet -- because FleetCor is one of the largest PE-backed companies that no one seems to be paying attention to (at least judging by media coverage). It would have a market cap in excess of $2 billion, were it to price at the high end of its range, and could provide a nice last-minute boost for Summit Partners' fundraising efforts. Expect more about FleetCor later today on the Term Sheet blog.

VC Deals

Yammer Inc., a San Francisco-based provider of social communication and sharing solutions for within enterprises, has raised $25 million in third-round funding. U.S. Venture Partners led the round, and was joined by return backers Emergence Capital, Charles River Ventures and Founders Fund. The company previously raised $15 million. www.yammer.com

Rackitivity, a Redwood City, Calif.-based developer of energy and uptime management solutions for data centers, has raised $8 million in Series B funding. Partech International led the round, and was joined by return backer Big Bang Ventures. www.rackitivity.com

FamilyFinds, an online daily promotions site focused on services and experiences for families, has raised $5.75 million in Series A funding from Split Rock Partners. www.familyfinds.com

Pacific Catch, a fish-focused casual restaurant chain in California, has raised $4 million in equity funding from Pacific Community Ventures. www.pacificcatch.com

FindTheBest, a Santa Barbara, Calif.-based comparison shopping engine, has raised an undisclosed amount of Series A funding from Kleiner Perkins Caufield & Byers. www.findthebest.com

Objective Logistics, developer of an on-demand SaaS platform for sales performance management in the restaurant vertical, has raised $500,000 in angel funding. Bacvkers include Richard Darer (former Gomez CFO), Greg Pesik (CEO of Passkey) and Nigel Machin. www.objectivelogistics.com

Private Equity Deals

Clayton, Dubilier & Rice has completed its acquisition of a 42.5% stake in Dutch specialty and commodity chemicals company Univar, at an enterprise value of $4.2 billion. CVC Capital Partners will retain a 42.5% position. www.cdr-inc.com

Court Square Capital Partners has completed its acquisition of a control stake in broadband provider Fibertech Networks from Nautic Partners and Ridgemont Equity Partners. The deal reportedly was valued at around $500 million. www.fibertech.com

EQT Partners has agreed to acquire Koole Tanktransport BV, a Dutch independent storage terminal operator for edible oils. No financial terms were disclosed. www.koole.com

Greenbriar Equity Group has raised its offer for Dynamex Inc. (Nasdaq: DDMX) from $21.25 per share to $24 per share, in order to top a third-party bidder. Dynamex is a Dallas-based provider of same-day delivery and logistics services in the United States and Canada. Under the revised offer, it would be valued at approximately $234 million. www.dynamex.com

IK Investment Partners has agreed to acquire Clyde Process Solutions PLC (LSE: CPSP), a British provider of raw material handling systems, for £33.3 million. www.clydeprocesssolutions.com

Littlejohn & Co. has acquired Henniges Automotive Holdings Inc., a Farmington Hills, Mich.–based provider of sealing and anti-vibration systems for automotive applications. The seller was Wynnchurch Capital Partners. No financial terms were disclosed. www.hennigesautomotive.com

MidOcean Partners has acquired a “significant interest” in Olympus Media, an outdoor advertising company with around 3,800 billboards in the Southeastern and Midwestern U.S. In related news, Olympus Media has acquired Collins Outdoor Advertising Inc. www.olympusmediallc.com

Partners Group and Alothon Group have invested an undisclosed amount in Casadoce Industria e Comercio des Alimentos SA, a Brazilian maker of powdered beverage products. www.partnersgroup.com

Trading Emissions PLC (AIM :TREM),, said that it has received a takeover offer from an undisclosed private equity firm. The UK-based group invests in a variety of tradable environmental permits, with a focus on carbon units. www.tradingemissionsplc.com

PE-backed IPOs

iSoftStone Holding Ltd., a Beijing-based provider of IT consulting and software services, has set its IPO terms to around 10.83 million American depository shares being offered at between $11 and $13 per share. The company plans to trade on the NYSE under ticker symbol ISS, with Morgan Stanley, J.P. Morgan, and UBS serving as co-lead underwriters. iSoftStone has raised funding from AsiaVest Partners, Infotech Ventures, Mitsui & Co. and Fidelity Asia Ventures. www.isoftstone.com

Exits

Barclays Private Equity has sold its remaining 12.6% stake in LSL Property Services (LSE: LSL), a British provider of residential property services, for £27 million. www.lslps.co.uk

Glencoe Capital has sold ACE Bakery Inc., a Toronto-based artisan bakery business, to Weston Foods (Canada) Inc. The deal was valued at C$110 million. www.glencap.com

Gores Group has sold Vincotech Holdings to Mitsubishi Electric Corp., for an undisclosed amount. Vincotech is a German maker of power modules that are used in inverters for general industrial applications and power conditioners for solar power system applications. It was acquired by Gores from Tyco in late 2007. www.gores.com

Lion Chemical Capital has sold Excel Polymers LLC, a Solon, Ohio-based merchant supplier of elastomeric solutions, to Sweden’s Hexpol AB. The deal was valued at approximately $220 million. www.excel-polymers.com

Other Deals

Rogers Communications is in talks to acquire the Toronto Maple Leafs for more than C$1 billion, according to a local press report.

Orix Corp. (Tokyo: 8591) has agreed to acquire a 25% stake in Vietnam-focused fund management firm Infochina Capital. No financial terms were disclosed.

Firms & Funds

Electra Private Equity, a UK-listed investment trust, plans to raise upwards of £100 million via a new issuance of 5% subordinated convertible bonds (due 2017). www.electraequity.com

JMI Equity has closed its seventh fund with $875 million in capital commitments. The Baltimore-based firm focuses on growth equity opportunities in the software, Internet, business services and healthcare IT sectors. www.jmiequity.com

KKR has held a $500 million interim close on its debut infrastructure fund, according to Reuters. The firm is planning to raise upwards of $2 billion in total commitments for the vehicle. www.kkr.com

Rockley Group has expanded its China-focused private equity fund to $200 million, with a continuing focus on expansion capital for Chinese tech companies in the energy, environmental, ICT and health and safety sectors. www.rockleygroup.com

Moving In, Up and On

Beth Burrus has joined Navigation Capital Partners as director of investor relations. She previously was with firms like Sciens Capital and Apax Partners. www.NavigationCapital.com

Jimmy Delshad, the mayor of Beverly Hills, has joined Los Angeles-based Pacific Capital Group as vice chairman and managing director. www.pacificcap.com

William Eisenbeis has joined Welsh Carson Anderson & Stowe as a senior industry executive, with a focus on the financial technology and services sector. He previously led the principal strategic investments group at Citadel LLC. www.wcas.com

Colin Powell | Soldier and Statesman–His rules

2010-11-23T23:35:00.001-08:00

1. It ain't as bad as you think. It will look better in the morning.

2. Get mad, then get over it.

3. Avoid having your ego so close to your position that when your position falls, your ego goes with it.

4. It can be done!

5. Be careful what you choose. You may get it.

6. Don't let adverse facts stand in the way of a good decision.

7. You can't make someone else's choices. You shouldn't let someone else make yours.

8. Check small things.

9. Share credit.

10. Remain calm. Be kind.

11. Have a vision. Be demanding.

12. Don't take counsel of your fears or naysayers.

13. Perpetual optimism is a force multiplier.

Medronic Inc. (NYSE: MDT) has agreed to acquire Ardian Inc

2010-11-23T21:32:00.001-08:00

Medronic Inc. (NYSE: MDT) has agreed to acquire Ardian Inc., a developer of catheter-based therapies to treat hypertension and related conditions. The deal includes an $800 million up-front cash payment, plus unspecified earnouts.

Medronic already held an 11% stake in Mountain View, Calif.-based Ardian. Other backers include Morgenthaler Ventures, Emergent Medical Ventures, Advanced Technology Ventures and Split Rock Partners.

Ardian raised over $64 million in VC funding, including a $47 million Series C infusion in early 2009 at a $229 million post-money valuation. www.medtronic.com

VC Deals

Scale Computing, a maker of midmarket clustered storage solutions, has raised $17 million in Series C funding. Scale Venture Partners led the round, and was joined by Northgate Capital and return backers like Benchmark Capital. www.scalecomputing.com

Better Advertising, a New York-based provider of an interest-based advertising self-regulatory program, has raised $9.5 million in a VC funding round led by Warburg Pincus. www.betteradvertising.com

MyThings, a provider of retargeting technology for European online retailers and marketers, has raised $6 million in third-round funding. T-Venture led the round, and was joined by Accel Partners, Carmel Ventures, Dot Corp and GP Bullhound. www.mythings.com

Yardsellr, a Palo Alto, Calif.-based company that aims to become eBay for Facebook, has raised $5 million in Series A funding led by Accel Partners and Harrison Metal. www.yardsellr.com

Private Equity Deals

Bain Capital is losing interest in acquiring hard-drive manufacturer Seagate Technology PLC (Nasdaq: STX), according to Reuters. TPG Capital remains interested, while fellow suitor KKR has already moved on. Seagate announced last month that it had received preliminary buyout interest, and that it had hired Morgan Stanley and Perella Weinberg Partners as advisers. www.seagate.com

The Carlyle Group and Accel Partners have acquired a minority stake in OzForex Group, an online foreign exchange platform. No financial terms were disclosed. www.ozforex.com

Hovde Private Equity Advisors has invested $11 million into Jacksonville, Fla.-based bank FirstAtlantic Financial Holdings Inc., with the possibility of another $14 million in future investments (not to exceed 24.9% ownership).

Harbour Group has completed its acquisition of Hardware Resources, a Bossier City, La.-based maker of cabinetry hardware, from The Riverside Company. No financial terms were disclosed. Harris Williams & Co. managed the sale process.

HSBC Private Equity has acquired Venture Aircraft Inc., a Compton, Calif.-based manufacturer of machined components for the aerospace industry. No financial terms were disclosed. www.hsbcprivateequity.com

Lockheed Martin Corp. (NYSE: LTM) has completed the sale of its Enterprise Integration gRoup to Veritas Capital for $815 million.

Macquarie Infrastructure Partners has acquired two landfill gas-to-energy (LFGTE) facilities from Ridgewood Renewable Power. The facilities are located near Brea, Calif. and Johnston, Rhode Island. No financial terms were disclosed. www.macquarie.com

NEP Broadcasting, a portfolio company of American Securities, has completed its acquisition and merger of Sweetwater and American Hi Definition, provides of theater-scale digital projection, remote video production and display services. No financial terms were disclosed. www.nepinc.com

PAI Partners has agreed to acquire the Hunkemoeller lingerie retailer from Maxeda Retail Group, a portfolio company of KKR. No financial terms were disclosed.

Reed Elsevier has halted preliminary talks about selling its events group to private equity firms Apax Partners and Cinven, according to a British press report. www.reedelsevier.com

Riverside Partners has invested $34 million into Welocalize, a Frederick, Md.-based provider of content translation, localization and internationalization of online content. www.welocalize.com

Rockbridge Growth Equity has invested an undisclosed amount in One on One Marketing, an American Fork, Utah–based provider of sales leads to online educational institutions. www.1on1.com

TPG Capital and Leonard Green Partners are in advanced talks to acquire clothing retailer J. Crew (NYSE: JCG) for $2.8 billion, according to The New York Times. The $43.50 per share price represents a 16% premium to yesterday’s closing trade. www.jcrew.com

PE-backed IPOs

CNIA SAADA Assurance, Morocco’s largest auto insurer, has completed an IPO on the Casablanca Stock Exchange. Selling shareholders included Kingdom Zephyr Africa Management Co., which had invested $27.5 million into the company four years ago. www.kingdomzephyr.com

Exits

Arbor Investments has sold National Deli LLC, a Miami, Fla.-based maker of deli meats and all-beef franks, to River Associates Investments. No financial terms were disclosed, except that Arbor reports a 30% IRR and 2.7x cash return on the deal. www.arborpic.com

The Carlyle Group has agreed to sell Philosophy Inc., a skincare and cosmetics company, to Coty Inc. No financial terms were disclosed, but Reuters values the deal at approximately $1 billion. www.carlyle.com

Concentrix Corp., a business process outsourcing unit of Synnex Corp. (NYSE: SNX), has acquired Encover Inc., a Mountain View, Calif.-based provider of service sales automation software. No financial terms were disclosed. Encover had raised around $32 million in VC funding, from Baird Venture Partners, DCM and Sigma Partners. In other Concentrix news, the company also has acquired London-based Aspire Technology. www.concentrix.com

HiSoft, an IT outsourcing company in the Chinese cities of Beijing and Dalian, has filed for a secondary public offering of five million American depository shares. The company raised $74 million in an IPO earlier this year at $10 per share, and was up to $27.49 per share as of market close last Friday. The company itself is selling 500,000 ADS, while the remainder will be sold by backers like Granite Global Ventures, International Finance Corp, Draper Fisher Jurvetson, Intel Capital, Jafco Asia Technology Fund and Sumitomo Corp. www.hisoft.com

IK Investment Partners has agreed to sell Welzorg Group BV, a Dutch distributor of mobility aids for elderly and disabled people, to the Louwman Group. No financial terms were disclosed. www.ikinvest.com

Laird PLC has agreed to acquire Cattron Group International Inc., a Sharpsville, Penn.–based provider of wireless control and automation products and aftermarket services for the industrial, rail and mobile markets. The deal is valued at $90 million. Sellers include RFE Investment Partners, Weatherly Group, and Argosy Investment Partners. www.cattrongroup.com

Onex Partners has sold CSI Global Education Inc., a Canadian provider of financial education and testing services, to Moody’s Corp. for C$155 million. www.onex.com

Propel Investments has agreed to sell New Zealand funeral operator Bledisloe Group to Australian rival InvoCare, for A$114 million.

RealD Inc., a Beverly Hills, Calif.-based licensor of stereoscopic (aka 3-D) technologies, has filed for a secondary public offering of around 7.8 million common shares. The company raised $200 million in an IPO earlier this year at $16 per share, and was up to $27.30 per share as of market close last Friday. Most of the offered shares are currently held by Shamrock Capital Growth Fund. www.reald.com

Welsh Carson Anderson & Stowe has agreed to sell Concentra Inc., an Addison, Texas-based healthcare provider with affiliated clinicians in more than 300 medical centers in 42 states, to Humana Inc. (NYSE: HUM). The deal is valued at $790 million. Welsh Carson paid $1.1 billion to acquire Concentra in 1998. www.humana.com

Other Deals

News Corp. has agreed to acquire a 90% stake in Wireless Generation, a provider of education technology, for around $360 million in cash.

The Term Sheet by Dan Primack / Fortune Magazine

The Big Deal–Novell acquired by Attachmate

2010-11-22T20:35:00.001-08:00

Attachmate Corp. has agreed to acquire Novell Inc. (Nasdaq: NOVL) for $2.2 billion. The $6.10 per share offer represents a 28% premium to Novell’s closing price on March 2, which was the last trading day before Elliott Associates’ offer to buy the company for $5.75 per share was publicly disclosed.

Attachmate is owned by Francisco Partners, Golden Gate Capital and Thomas Bravo. www.attachmate.com

VC Deals

Nlyte Software (f.k.a. Global DataCenter Management), a Menlo Park, Calif-based provider of provider of data center infrastructure management solutions, has raised $12 million in Series C funding. NGEN Partners led the round, and was joined by return backers like Baldterton Capital. www.nlyte.com

Smartdate.com, a Paris-based online dating site, has raised $5 million in new Series A funding. PriceMinister co-founders Pierre Kosciusko-Morizet and Pierre Krings co-led the round, and were joined by return backers 360 Capital and International Business Angels. www.smartdate.com

Lionside, a San Francisco-based developer of social games for sports fans, has raised $1.6 million in first-round funding, according to a regulatory filing. Backers include Sherpalo Ventures and Ron Conway. www.lionside.com

Private Equity Deals

The Carlyle Group has sold Britax Childcare, a British maker of children’s car safety seats, to Nordic Capital for an undisclosed amount. Carlyle acquired Britax Childcare in October 2005 from Britax International. www.carlyle.com

American Securities has acquired a control stake in Arizona Chemical, a biorefiner of pine chemicals with offices in Florida and The Netherlands. No financial terms were disclosed. www.american-securities.com

Centerview Partners has agreed to acquire Richelieu Foods Inc. from Brynwood Partners for an undisclosed amount. Richelieu is a Randolph, Mass.–based maker of premium private label pizza, salad dressing and other pourable products. It reports around $250 million in annual revenue.

The Gymboree Corp. (Nasdaq: GYMB) said that it did not receive any alternative takeover offers during its 40-day “go-shop” period. Last month it agreed to be acquired for $1.8 billion, or $65.40 per share, by Bain Capital. www.gymboree.com

Stant Corp., a Connersville, Ind.-based manufacturer of vapor and fluid control components, has acquired Shelby Enterprises Inc., a Romeo, Mich.-based provider of filler pipe and vapor line products. No financial terms were disclosed. Stant is a portfolio company of H.I.G. Capital. www.stant.com

UPS (NYSE: UPS) has agreed to sell its Logistics Technologies business to Thoma Bravo. No financial terms were disclosed. The Baltimore-based business employs around 145 people, and develops transportation routing and fleet management systems. www.thomabravo.com

PE-backed IPOs

Clarus Therapeutics Inc., a Northbrook, Ill.-based developer of an oral testosterone replacement product, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol CLRS, with Piper Jaffray and Wells Fargo serving as co-lead underwriters. Shareholders include Thomas, McNerney & Partners (70.9% pre-IPO stake) and H.I.G. Ventures (25%). www.clarustherapeutics.com

Peregrine Semiconductor Corp., a San Diego-based provider of RF CMOS and mixed-signal communications ICs, has filed for a $100 million IPO. It plans to trade on the NYSE, with Deutsche Bank Securities, JPMorgan and Jefferies & Co. serving as co-lead underwriters. It reports a $2.5 million net gain on over $67 million in revenue for the first nine months of 2009, compared to an $8.3 million loss on around $49 million in revenue for the year-earlier period. The company has raised over $120 million in VC funding since 1990. Current shareholders include Morgenthaler Ventures (14.2% pre-IPO stake), Ridgewood Partners (12%), Advanced Equities (11.1%), Wasserstein Ventures (8.6%), Palisades Ventures (6.24%) and Technology Venture Partners (6.08%). www.peregrine-semi.com

Sky-mobi Ltd., a Chinese mobile apps store, has filed for a $150 million IPO. It plans to trade on the Nasdaq under ticker symbol MOB, with Citi serving as lead underwriter. The company reports nearly $90 million in revenue for the fiscal year ending March 31, 2010. Sequoia Capital holds more than a 28% ownership position. www.sky-mobi.com

Tranzyme Inc., a Durham, N.C.-based developer of small-molecule drugs for gastrointestinal and metabolic diseases, has filed for a $75 million IPO. It plans to trade on the Nasdaq under ticker symbol TZYM, with Citi serving as lead underwriter. The company has raised around $53 million in VC funding since 1999, from firms like H.I.G. Ventures (21.4% pre-IPO stake), Thomas, McNerney & Partners (21.4%), Quaker BioVentures (21.4%), Desjardins Venture Capital (12.4%) and BDC Venture Capital (12.1%). www.tranzyme.com

UCI International, an Evansville, Ind.-based provider of replacement parts for light and heavy-duty vehicles, has set its IPO terms to 13.33 million common shares being offered at between $14 and $16 per share. It would have an initial market cap of approximately $671 million, were it to price at the high end of its range. UCI plans to trade on the NYSE, with BoA Merrill Lynch and Deutsche Bank Securities serving as co-lead underwriters. The Carlyle Group holds a 90.8% ownership position.www.ucinc.com

YouKu, a Chinese video sharing site, has set its IPO terms to around 15.37 million American depository shares being offered at between $9 and $11 per share. It plans to trade on the NYSE under ticker symbol YOKU, with Goldman Sachs (Asia) serving as lead underwriter. The company has raised $110 million in venture capital funding, from firms like Brookside Capital, Chengwei Ventures, Maverick Capital and Sutter Hill Ventures. www.youku.com

Exits

Boston Scientific Corp. (NYSE: BSX) has agreed to acquire Sadra Medical, a Los Gatos, Calif.-based developer of therapies to treat aortic valve disease. The deal could be valued at upwards of $450 million, including a $225 million up-front payment and up to $225 million in earn-outs. Sadra Medical has raised around $58 million in VC funding, from firms like Boston Scientific, Accuitive Medical Ventures, Finistere, Firstmark Capital, Oakwood, ONSET Ventures and SV Life Sciences. www.bostonscientific.com

ZJF Group of China has acquired Firecomms, a Cork, Ireland-based maker of transceivers for consumer plastic optical fiber (POF). No financial terms were disclosed, except that the deal includes a €5 million investment for future R&D. Firecomms had raised VC funding from Atlantic Bridge, ACT Venture Capital, Swisscom Ventures, Alps Electric and Enterprise Ireland. www.firecomms.com

Other Deals

K&S, a German potash miner, has agreed to acquire Canadian rival Potash One (TSX: KCL) for C$434 million.

The Term Sheet by Dan Primack – Fortune Magzine

Tumblr dives into a boatload of money

2010-11-22T04:03:00.001-08:00

Posted by Dan Primack / November 19, 2010 9:58 am

Tumblr, the lightweight blogging company, has raised between $25 million and $30 million in new VC funding, Fortune has learned. The valuation is in the ballpark of $135 million.

BusinessInsider first reported on the existence of a new round last week (sans financial details), and said that Sequoia Capital was the lead investor (Update: Seems Om beat them to the first part). I'm told it was a highly competitive auction, with at least ten firms involved.

New York-based Tumblr previously raised just over $10 million from Spark Capital and Union Square Ventures. I'd assume they both re-upped, although USV has a habit of holding back once later-stage valuations hit the stratosphere.

You might recall that Spark and Union Square also invested together in a little something called Twitter. I'm not saying that Tumblr is the next online revolution, but the two companies do have some qualitative similarities:

1. Like Twitter, Tumblr's main selling point is its ease of use. If it takes you more than five minutes to set up a Tumblr blog, then it probably also takes you more than five minutes before your dial-up Internet access kicks in.

2. Tumblr took some time to achieve mass adoption, but now its traffic looks like a rocket trail.

3. Tumblr has yet to find – or at least implement – a significant revenue strategy. But, like with Twitter, no one seems too worried about it. The users are engaged, which is (mostly) all that matters at this point. It will be interesting to see how the company looks to scale with its new windfall...

IDFC Chief Says Power is 'the Next Telecom'

2010-11-04T06:06:00.001-07:00

By ERIC BELLMAN

/ Bloomberg News/

Rajiv Lall, chief executive officer of Infrastructure Development Finance.

MUMBAI—Indian borrowing to build infrastructure has rebounded and will continue to expand as the government and companies build bridges, roads and power plants at an unprecedented pace, confident that the worst of the global debt crisis has passed, said the chief executive of India's largest infrastructure-financing company.

In an interview, Rajiv Lall, chief executive of Infrastructure Development Finance Co., said much of the surge in business is coming from the power sector.

"The pipeline for privately sponsored power-generation projects is absolutely humongous," he said. "We are generally conservative as an organization, [but] I think we have now come to the conclusion that power generation is going to be the next telecom of the Indian infrastructure story."

India has experienced a revolution in its telecommunications infrastructure over the last five years as billions of dollars of investment in cellular networks has brought phone service to hundreds of millions of Indians who never had phones.

In an interview with WSJ's Eric Bellman, Rajiv Lall, managing director and CEO of IDFC, speaks on how infrastructure development in India is leading to more business and what government needs to do to speed up the process.

The energy industry in India has at last reached a tipping point, said Mr. Lall, with better government regulations, smart financing and private companies that can build the megaprojects lined up to bring a wave of new generation capacity to the subcontinent. He estimates $20 billion a year will be spent on new power plants over the next four years, adding at least 30% to India's power generating capacity.

From almost no net-profit growth in the fiscal year ended March 31, 2009, IDFC expects about 20% growth this year and 30% next year, he said.

The country's return to a rapid buildup of infrastructure is crucial. The growth India needs to lift more of its citizens out of poverty is getting choked by regular blackouts and clogged roads, as well as lack of schools and hospitals for its population of more than one billion.

When the global debt crisis forced IDFC to almost freeze new lending in late 2008, IDFC's profit growth decelerated to next to nothing. In the third quarter ended Dec. 31, its net profit soared 46% from a year earlier to 2.7 billion rupees ($58.5 million).

To keep the momentum going, IDFC and its Indian infrastructure peers need the government to become more efficient at executing big projects, Mr. Lall said. One area they need deregulated further: all the rules connected to acquiring land for infrastructure projects.

"How land is aggregated, how it is made available for the purpose of infrastructure development. There's a huge amount of murky, political economy that underlies, underpins the whole process," he said. "Simplification of that—which is a very difficult thing to do, given the political economy of that process—is something that we really, really need to work on."

—Arlene Chang contributed to this article.

Write to Eric Bellman at eric.bellman@wsj.com

US firm to buy RFCL from ICICI Venture for $100 mn

2010-11-04T05:48:00.001-07:00

Thu, Nov 04, 2010 | Updated 01.34PM IST

MUMBAI: ICICI Venture, No 2 Indian lender ICICI Bank's private equity arm, has sold its 85 percent stake in biotech firm RFCL to US-based Avantor Performance Materials Holdings for what sources said was $100 million.
Avantor in a statement said that it entered into a agreement to buy RFCL from ICICI Venture, but did not disclose the price.

"With this transaction, we have effected a complete exit from our investment in RFCL," ICICI Venture Executive Director Prashant Purker said.

Three sources with direct knowledge of the matter confirmed the price to Reuters. The sources said Lazard India was advising Avantor in the transaction, while ICICI Venture was being advised by NM Rothschild & Sons.
Avantor is a unit of New Mountain Capital LLC, the statement said. The Business Standard newspaper reported on Thursday that ICICI Venture was selling its RFCL stake to Avantor for 5 billion Indian rupees ($113 million).

In January, ICICI Venture CEO Vishakha Mulye had said the fund was planning to exit some of its earlier investments, and over the last year it has sold off a string of businesses. Last year, RFCL sold its animal health business to Pfizer Pharmaceuticals India Private Ltd, the local arm of US-based drugmaker Pfizer Inc.

In June, ICICI Venture sold its stake in Mumbai-based Metropolis Healthcare to US private equity giant Warburg Pincus for $85 million.

The King of the sports deal making

2010-10-29T04:05:00.001-07:00

By David Whitford,

(Fortune) --

When Steve Greenberg was trying to launch Classic Sports Network (CSN) in 1993, he and his partner, Brian Bedol, hit nothing but roadblocks. Neither had any experience running a cable network. Some people thought their idea to rebroadcast archival footage of big games was interesting, but nobody wanted to give them money. Then Greenberg went to see Herbert Allen Jr. at Allen & Co., the fabled investment-banking boutique.

Greenberg was 44 years old and feeling restless. He had recently resigned as deputy commissioner of Major League Baseball. His old boss there, Fay Vincent, who had gone to Williams College with Allen and had run Columbia Pictures when Allen & Co. owned it in the late '70s and early '80s, set the meeting up. Allen was happy to talk to young Greenberg. He had known his dad, Hank. Not AIG Hank; Hammerin' Hank, the slugging first baseman for the Detroit Tigers in the '30s and '40s.

Allen asked Greenberg what his plans were. Greenberg told him he was considering two opportunities: Mets owner Fred Wilpon, a good friend, had approached him about working for the team in an executive position. But what really interested him, Greenberg said, was the idea Bedol had brought him for the Classic Sports Network.

"Can you get the rights?" was Allen's first question.

"Yeah," said Greenberg, "I think we can."

"Are you gonna run it?"

"Yeah, with Brian."

"That'll be the only thing you do day to day?"

"Yeah, that'll be my job."

"Are you looking for money?"

"Well, we need some seed capital to launch it."

"How much?"

"Six million dollars."

"Would it help or hurt if Allen & Co. put in $2 million?"

Greenberg paused. "I think that would probably help."

"Okay, we're in for $2 million. Call our CFO this afternoon. Tell him where to wire the funds."

That's the real-time account of what happened, not the condensed version. Only after Allen had agreed to pony up did he ask what percentage of the company he was getting. Greenberg told him 25%; Allen said that would be fine. Greenberg offered to show him a business plan, but Allen waved him off. "I have a bunch of very smart Harvard MBAs running around here who think their job is to protect me from myself," Allen said. "Don't ever show anyone here your business plan." With Allen's backing secured, it took Greenberg and Bedol about a week to raise the other $4 million, and two years to get the network up and running. In 1997, when ESPN bought CSN for $175 million, Allen & Co. realized a 600% return on its investment. Later Allen & Co. would invest in a second Bedol-Greenberg collaboration, College Sports TV (CSTV), and the results were again spectacular. It was sold to CBS in 2006 for $325 million, and Bedol went along to continue running it.

And Greenberg? Having proven his worth, he was made partner at Allen & Co. in 2002 -- and over the past decade he not only has made sports dealmaking a signature of the firm but has become arguably the most important dealmaker in sports. "Completely changed the game for us internally," says the current president, Herbert Allen III. "One of the leading -- if not the leading -- person in the firm today," says Herbert Allen Jr. "Clearly in the center of the universe," says MLB commissioner Bud Selig. Think about that. Hank Greenberg is in the Hall of Fame. Steve Greenberg, his son, is also a star -- in business.

0:00 /2:57Cell phone sports still challenged

Greenberg, now 61, doesn't get a lot of press. Allen & Co. doesn't even have a website: that's how much it values discretion. And Greenberg makes a point of not returning reporters' phone calls. He's the ultimate backroom player, never one to steal headlines from his clients. But consider: Greenberg was the force behind the creation of MLB Network, widely regarded as the most successful cable launch in history. He created regional sports channels in Chicago for Jerry Reinsdorf, who owns baseball's White Sox and basketball's Bulls, and in New York for the Wilpon family; then he got the Wilpons a record $400 million for the naming rights to Citi Field. He advised the Selig family on the sale of baseball's Milwaukee Brewers and counseled entrepreneur Dan Gilbert on the purchase of basketball's Cleveland Cavaliers. Right now he's working with former AOL (AOL) vice chairman Ted Leonsis, who's buying the NBA's Washington Wizards, together with the Verizon Center, from the estate of legendary team owner Abe Pollin. Leonsis already owns the NHL's Washington Capitals, which means that when the deal closes he'll become the only individual to own both big-league winter sports teams in a top-five market (Washington and Baltimore combined), plus the arena where they play. That's a big deal.

"He's Keyser Söze," says John Ourand, a reporter for Sports Business Journal, comparing Greenberg to the elusive but omnipresent kingpin in the 1995 cult film The Usual Suspects. "He seems to be everywhere." The analogy isn't perfect. Söze's a thug, whereas Greenberg is preternaturally, embarrassingly charming. "Immensely attractive as a human being," says Herbert Allen Jr. "Able to get good results without making enemies," says Reinsdorf. "Always keeps his cool," says Wilpon. "Incredibly knowledgeable and connected," says Jim Delany, commissioner of the Big 10 Conference. (Greenberg made a cable network for him too.) Have we mentioned yet that in his seventh decade he's still got a full head of hair, minimal gray, and no paunch? "Able to eat three, four, five desserts every meal," says Gilbert, unhappily, "and never gain any weight." His nickname, bestowed upon him by his daughters, is Mr. Perfect.

Funny thing about his famous dad, says Greenberg, lifting his eyebrows: "He was a great disappointment to his family." Hank Greenberg was first generation in America, born to Romanian Jewish immigrants who settled in the Bronx. His parents' dream -- the American dream -- was to send all their kids to college. Three of the four graduated. "My dad went for a semester to NYU, then went off to play ball," says Greenberg. "It was almost an embarrassment."

Steve had to balance a more complicated set of expectations. He grew up privileged and rich (Hammerin' Hank married a Gimbel heiress), attending St. Bernard's in Manhattan, then Hotchkiss, then Yale, where his brother, Glenn, had preceded him and where Steve was captain of the baseball team. (Glenn is now a money manager in New York; their younger sister, Alva, owned an art gallery.) Steve graduated in May 1970, got married a few days later, and while he was on his honeymoon he got drafted by the Washington Senators. The team gave him a $5,000 signing bonus and $500 a month and sent him to Geneva, N.Y., home of the Class A Geneva Senators of the New York--Penn League.

"It was something I really loved to do and I was pretty good at," says Greenberg, over a Cobb salad at Michael's restaurant in Manhattan. He's at table 27 in the front room, back to the wall, as powerful a perch as any in New York -- yet his voice carries a tinge of regret. "The fact that he" -- his father -- "had done it, I think if anything, foolish as it may sound, gave me the encouragement that I could do it too. I never had any illusions that I would be a Hall of Famer. But I knew there were a lot of gradations of major leaguers below Hall of Famer, and I thought that I would slot in there somewhere."

The younger Greenberg was a slick-fielding, right-handed first baseman with occasional power who got "every inch out of his ability," says Hal Keller, the farm director who drafted him. But he never got the call, and after five seasons, the last three at AAA, he quit to go to law school at UCLA. Greenberg insists it was an easy transition. ("I loved everything about law school.") But it was a year before he could bring himself to attend a big-league game. "I couldn't go out to Dodger Stadium," Greenberg says. "Just couldn't do it." He still gets wistful about what might have been. Wouldn't it be "kind of cool," he says, "to have a line in the Baseball Encyclopedia under my dad?"

All his life, people have been asking Greenberg, "What was it like to grow up as Hank Greenberg's son?" He doesn't know how to answer that. Hank Greenberg retired in 1947. Steve was born in 1948. "I never saw him play a game. I didn't know him," he says the next time we meet, pointing at one of many photographs of his father among his office memorabilia -- Hank Greenberg with Babe Ruth, Hank Greenberg with Joe DiMaggio. "I read about him. The guy I knew was a baseball executive [with the Indians and the White Sox], an avid tennis player. My dad taught me how to hit a tennis ball and comb my hair. But I didn't know this icon."

Indeed, tennis, not baseball, is what finally brought father and son together. During the years that Steve was practicing law in Los Angeles, they used to play two or three days a week at the Beverly Hills Tennis Club -- Hank had by then moved to L.A. -- and afterward they'd have lunch. Johnny Carson, Neil Simon, and Walter Matthau would sometimes stop by their table. As a Jew of a certain generation, Matthau grew up worshipping Hank Greenberg. The reason he joined the club, he later claimed, had nothing to do with tennis. He didn't even play. It was so he could eat lunch with Hank Greenberg.

Another frequent lunch companion in those days was a young associate at the law firm where Steve worked named Arn Tellem. Like Matthau, Tellem idolized Hank Greenberg. He says he joined Manatt Phelps & Phillips specifically for the chance to work with his son. ("I used to hang out outside his office, hoping to get an assignment," Tellem says.) Together they began representing athletes in contract negotiations.

Greenberg had already started making a name for himself as a dealmaker, with an evenhanded, respectful style that foreshadowed his career in investment banking. "He taught me a way to try to enlist the other side to view it as a shared experience, looking for the right result," says Tellem. "To be principled and strong, but to always put yourself in the other person's shoes and understand where they're coming from. He was a huge influence on me."

Tellem went on to become one of the top agents in sports (his clients include L.A. Angels slugger Hideki Matsui and the Chicago Bulls' Derrick Rose), but Greenberg, even as agenting was becoming obscenely lucrative, grew restless. His father died in 1986. His favorite clients, friends he had played with in the minor leagues, were retiring. There was a bitter dispute with one ex-teammate he had represented, Bill Madlock, that led to a lawsuit and lingering ill will. (They haven't spoken since.) Then one day in early September 1989, a letter arrived from Bart Giamatti, the commissioner of baseball.

Giamatti had taught Greenberg when he was a professor at Yale -- an English class on Spenser. Now, with labor troubles brewing, Giamatti and his deputy, Vincent, needed someone on their team who had credibility with the union. "We have to hire Steve Greenberg," Giamatti said to Vincent one day. "Doesn't he belong with us?" Vincent, who had served with Greenberg on the board at Hotchkiss, agreed, but only a day after Giamatti wrote Greenberg ("Would you like to move East? I kid not"), he suffered a heart attack at his home on Martha's Vineyard. "By the time Steve got the letter," says Vincent, "Bart was dead."

Greenberg came East anyway, as the new deputy to Vincent, the new commissioner. It was a big promotion for a 41-year-old ex-ballplayer turned agent. Many owners doubted his loyalty. But Vincent believed, "and I was only 100% right about this," he says, "that the only way to make progress with the players was to bring someone onboard for whom they had total respect and whose honesty they could not question." In fact it was Greenberg, working behind the scenes with union chief Donald Fehr, who negotiated an end to the 1990 baseball lockout, which had wiped out spring training and delayed opening day. "When it got down to the last week or two, we didn't have formal meetings," says Reinsdorf, who was on the owners negotiating committee. "The two of them made the deal." Four years later came the strike that canceled the '94 World Series, but by then Vincent had been canned by owners eager for a fight, and Greenberg the conciliator had moved on.

Ted Leonsis learned of Abe Pollin's death two days before Thanksgiving last year in a phone call from a reporter. He was shocked, but he wasn't surprised. Leonsis, 53, and Pollin, who was 85 when he died and had been an NBA owner for nearly half a century, had long been partners in the Wizards and the Verizon Center. Their agreement was that when Pollin died, Leonsis would have the exclusive right to negotiate with Pollin's estate for Pollin's majority share in both properties. If they could agree on a price within 10 days, great. If not, they'd bring in an appraiser.

A couple of years ago, with Pollin in failing health, Leonsis had gone looking for a banker to help him prepare for the inevitable. Leonsis talked to Goldman Sachs (GS, Fortune 500), which wound up representing Pollin, but quickly settled on Allen & Co. He had dealt with Greenberg once before, when AOL was considering buying CSN, and remembered him as "thoughtful, with a high level of integrity. He struck me as someone who would not oversell and under-deliver."

The choice paid off well before the Pollin talks arose. Last summer Greenberg invited Leonsis to the Allen & Co. conference in Sun Valley. Dinner on day one was under the stars, everybody together. Leonsis sat at a table with Greenberg's other guests -- Reinsdorf, Gilbert, and the Wilpons, Fred and Jeff -- and he had a memorable time. ("Just a wonderful sports night!") Day two, around dinnertime, Leonsis fell into a walking conversation with American Express (AXP, Fortune 500) CEO Ken Chenault. He followed him across the grounds, through the back door of someone's house (it turned out to be Herbert Allen's), and into the dining room. Bill Gates was there. Also Rupert Murdoch and LeBron James. Leonsis sat down next to Chenault. He wasn't supposed to be there, but he didn't know it, and the others were too polite to tell him.

All night long Leonsis talked to Chenault about a technology company he had started with Steve Case called Revolution Money. Chenault was intrigued. Next day, he collared Leonsis to find out more. Later they would meet in New York, but that was just the icing on the deal; the cake was baked in Sun Valley. Three months later, in one of the biggest tech buyouts of 2009, American Express acquired Revolution Money for $300 million -- with Allen & Co. advising the seller, naturally.

That deal closed just as the Pollin negotiations were heating up. Greenberg was determined to reach an agreement without resorting to an appraisal. Not that he didn't like his chances if it came to that; he thought it would be nearly impossible for an outside party to put an inflated price on any asset during what still felt like a recession. But he couldn't be sure. And when Greenberg himself looked closely, all he could see was the upside.

Fixing the Wizards -- who lost their star player, Gilbert Arenas, for most of the season on a gun conviction and failed to make the playoffs for the 17th time in 22 years -- would not be easy. Arenas is still owed $80 million. But Greenberg had watched while Leonsis transformed the lowly Capitals into one of the top franchises in the NHL and was willing to bet he was up to the challenge. Greenberg was bullish on the long-term prospects for the league. He was dreaming about the potential for a new TV deal down the road. "Both the teams are subject to existing arrangements with Comcast, but one always plans for the future," says Greenberg. "Obviously when you control two major-league teams in a four-team market, and both winter teams, you're thinking about bringing all that together." And he was mindful of the way sports franchises have performed as investments; barring mismanagement, they only go up. To which Leonsis, who was among the largest private owners of AOL stock before its ill-advised merger with Time Warner, can attest: "I don't have a single investment that performed as well or better in the last 10 years than my sports teams," he says.

The two parties started out "11 time zones apart," says Greenberg. The deadline passed. But with both parties reluctant to call in the appraisers, they kept talking. Finally, in late March, they settled on a number: $550 million for the team and the building, total value. The deal is expected to close in June. "Some people will say we overpaid," says Leonsis. "I might think we underpaid." Greenberg might think so too, but he's not saying. Next deal

Cos re-hire staff on sabbatical

2010-10-27T22:55:00.001-07:00

Thu, Oct 28, 2010 | Updated 06.39AM IST

BANGALORE: Kshira Muthana hit the pause button in her career as mechanical engineer with a Bangalore-based firm in 1991 due to family commitments, and went into a 14-year hiatus. When she thought of starting up again, she hit a lucky spot — GE spotted her resume and hired her. “I was a little slow at first, but things soon fell into place,” says the lab manager at GE’s Global Research Centre in Bangalore.
Muthana gradually roped in more women who had let their careers take a back seat for a while. That’s when GE realised this could be a trend that worked to its advantage.

In 2008-end, the company started a programme called ‘Restart’ that was meant to re-hire employees on a sabbatical. GE is all set to re-launch it this year, with the global slowdown preventing its earlier take-off. Under the program, re-hired employees will be given the option of working on a part-time basis. If the employee agrees to the working conditions, he or she can be absorbed into the regular work force.

“We decided to look at a sufficient talent pool, which was skilled but had not been given the platform to perform,” says Raj Raghavan, GM, HR for GE India Technology. GE is also on the lookout for employees in other companies who are on a sabbatical.

GE set out on a path that Corporate India has increasingly chosen to walk on. Companies are seeking out people on sabbaticals, and wooing them with incentives like never before — flexible working hours, the work-from-home option, maintenance of Esops and gratuity benefits.

Employees who return after a break help fill the talent pool, in the process saving companies the cost of hiring afresh. These are people who do not need a fresh orientation of the work culture. Besides, post-sabbaticals, employees work with a renewed zest, which their counterparts who have had a long innings without a break often cannot match.

“Now that the markets are opening up, companies are facing a talent crunch. Therefore the need to look at people on a sabbatical,” says Elango R, HR head of EDS. The chances of people on a sabbatical returning to their old employers and succeeding at their jobs is almost 70% more than the success rate of new talent, he says.

The Tata Group of companies came up with ‘The Second Career Option’ in 2009 for women employees of Titan who are ready to work on particular projects or assignments. Given the track record of employees who have held top posts after sabbaticals, the company is looking to get more such employees on board, says chief human relations officer S Ramadoss. “Besides being open to new approaches, salary negotiations are not a hassle with them,” he adds.

The firm’s head for new business development in both organic and inorganic growth is someone who came in after a sabbatical. So is the global marketing head for the Titan brand of watches. While the former had worked earlier with Titan, the latter was with the Tata Group.

IT bellwether Infosys is on the verge of rolling out a policy for young mothers who have been on a sabbatical. The firm realised that women employees who have children aged between 3 and 4 years may find it difficult to work as full-time employees. From November onwards, the company will allow them to work either three full days or five half days a week. “These employees were anyway on our head count and we have requested our clients to start billing them. As of now, the reaction has been positive,” says Nandita Gurjar, VP and group head, HRD.

MindTree, from this year, has announced a policy called “Part pay, part work,” where employees are being given the option of working on reduced hours. Employees are given all the benefits the regular workforce receives, says Babuji Abraham, head of people function at MindTree. Companies have a minimum sabbatical period to prevent people from showing time between jobs as a ‘break.’ In GE, for instance, the minimum sabbatical period before being hired is at least a year.

But would it not take a large risk appetite to hire people who have lost touch with the world of work? Raghavan of GE doesn’t agree. Most of the re-hired people are engineers and researchers whose basics are sound, he says. No one knows that better than the hirers themselves.

The New Blog –Through Heaven’s Eye

2010-10-21T06:41:00.001-07:00

I liked the song in the movie “Prince Of Egypt” and published the lyrics on my blog huntingtalent.blogspot.com and I saw many comments like “keep updating” and “I am encouraged”. This motivated to commence this new blog on Faith, Life Principals and Living beyond what eyes can see. The New blog is Throughheavenseye.blogspot.com

Happy reading!!

A single thread in a tapestry
Through its color brightly shine
Can never see its purpose
In the pattern of the grand design

And the stone that sits on the very top
Of the mountain's mighty face
Does it think it's more important
Than the stones that form the base?

So how can you see what your life is worth
Or where your value lies?
You can never see through the eyes of man
You must look at your life

Look at your life through heaven's eyes
Lai-la-lai...

A lake of gold in the desert sand
Is less than a cool fresh spring
And to one lost sheep, a shepherd boy
Is greater than the richest king
If a man lose everything he owns
Has he truly lost his worth?
Or is it the beginning
Of a new and brighter birth?

So how do you measure the worth of a man
In wealth or strength or size?
In how much he gained or how much he gave?
The answer will come
The answer will come to him who tries
To look at his life through heaven's eyes

And that's why we share all we have with you
Though there's little to be found
When all you've got is nothing
There's a lot to go around

No life can escape being blown about
By the winds of change and chance
And though you never know all the steps
You must learn to join the dance
You must learn to join the dance
Lai-la-lai...

So how do you judge what a man is worth
By what he builds or buys?
You can never see with your eyes on earth
Look through heaven's eyes

Look at your life
Look at your life
Look at your life through heaven's eye

by Brian Stokes Mitchell

Eurocopter forms subsidiary

2010-10-20T22:44:00.001-07:00

NEW DELHI, October 20, 2010

K. V. Prasad

AFP TAPPING THE POTENTIAL: Eurocopter India Chief Executive Officer Marie-Agnes Veve (left) and Executive Vice-President (Commercial Helicopters) Joseph Saporito, at a press conference in New Delhi on Wednesday.

Eurocopter, which belongs to European consortium EADS, on Wednesday, announced the setting up of a new subsidiary in India, sensing a huge business potential and aiming to capture 50 per cent of the market share in helicopters.

Established as the 25th worldwide subsidiary and 10th in Asia, Eurocopter India Private Ltd. has decided to take an aggressive plunge. It hopes to expand its market share from the current 30 per cent to 50 per cent by 2015.

“The Indian helicopter sector has been growing at an annual rate of 20 per cent and our ambition is to become the country's number one supplier for the civilian, government and para-public markets,'' Executive Vice-President (Commerical Helicopters) Joseph Saporita told a news conference here.

Eurocopter is also competing for the Indian Army/Air Force bid to procure 197 light utility helicopters. Mr. Saporita said Eurocopter had taken part in the trials and awaits the process to be completed. However, the Indian subsidiary would not been associated with the bid since the military affairs were handled by the main company.

At present, Eurocopter said, its AS365 Dauphin was serving for off-shore, para-public and government transport, while it offered the EC135, EC145 and AS350 Ecureuil for medical emergency and law enforcement duties including in naxal-affected areas.

Eurocopter India CEO Marie-Agnes Veve said the company was the world's first major helicopter manufacturer to establish a subsidiary in India. She said Eurocopter had now 23 civil and government customers and had been operating in the country for the last four decades.

Ms. Veve said at present Eurocopter had 30 per cent market share with U.S. Bell having majority 50 per cent. However, over the next five years, Eurocopter India aimed to increase its share to 50 per cent. The company estimated to sell at least half of the 50 helicopters that the civil sector was expected to buy each year.

Through the Indian subsidiary, the company hopes to address current and future operators' needs for maintenance and support by offering cost-effective solution for spares management and technical documentation and develop a country-wide maintenance, repair and overhaul network. The company plans to expand industrial cooperation building on the 40-year relationship with Hindustan Aeronautics, which has produced 600 of its Lama and Aloutte III helicopters under licence.

India to get $10 bn offset works from defense deals

2010-10-20T20:58:00.001-07:00

Thu, Oct 21, 2010 | Updated 08.57AM IST

BANGALORE: The multi-billion dollar defence deals under negotiations are expected to give Indian firms offset works worth around $10 billion (Rs 45,000 crore) over the years, Minister of State for Defence Production M.M. Pallam Raju said here on Wednesday.

"Defence offset projects worth Rs 45,000-crore ($10-billion) are being negotiated, which will benefit India in terms of business and development of defence technology," said Raju, releasing the KPMG-AMCHAM report on "The Indian Defence Sector: The improving landscape for US business and Indo-US commercial enterprise".
According to the global consulting firm KPMG, the increasing convergence between Indian and US defence establishments is manifested in signing of major procurement contracts.

These include deals such as 12 P-8I (Poseidon maritime reconnaissance aircraft) worth over $3 billion, ultra-light howitzers worth $647 million, F414-GE-INS6 engines for the Light Combat Aircraft (LCA) worth $650 million, Harpoon anti-ship missiles worth $170 million and six Martin C-130 J super Hercules aircraft for the Indian special forces worth $1 billion.
"The offset provision is a great opportunity to develop long-term partnership in various areas, which can be utilised by the US industry to identify Indian partners and establish a long-term supply chain," Raju said in his keynote address to the Indian Aerospace and Suppliers' Conference, organised by KPMG and the American Chamber of Commerce (AMCHAM).
Under the renewed defence procurement policy (DPP), it is mandatory for overseas firms securing Indian defence contracts to outsource 30 percent of the deal to state-run Indian enterprises and private firms as offset works.

"The procurement contracts indicate that the US defence industry players are increasingly looking towards East to establish manufacturing bases," said Martin W. Philips, KPMG global head of aerospace and defence.
Endorsing Philips' view, Richard Rekhy, KPMG advisory head, said a business of $10-billion was a big number for the Indian defence industry.

"The benefit to the Indian industry will be in the form of upgrading domestic infrastructure, capacity addition and research development and activities," Philips noted. Raju also told the industry representatives that the government was conscious of the benefits of the offset policy and would tweak it to incorporate best global practices.

What Does working at Rajasthan mean

2010-10-20T05:12:00.001-07:00

Hello friends,

It has been a while since my last post. I had lost my live writer facility when I had upgraded to Windows 7. It is just today that I download the Windows Live Essentials 2011, and Bingo I commenced blogging.

Please find a PDF enclosed (the hyperlink mentioned with CDP tag)to understand the work I have been doing at Udaipur.

Wins Ninan

CDP

Through Heaven's Eyes

2009-10-08T01:36:00.001-07:00

by Brian Stokes Mitchell

[Jethro]
A single thread in a tapestry
Through its color brightly shine
Can never see its purpose
In the pattern of the grand design

And the stone that sits on the very top
Of the mountain's mighty face
Does it think it's more important
Than the stones that form the base?

So how can you see what your life is worth
Or where your value lies?
You can never see through the eyes of man
You must look at your life

Look at your life through heaven's eyes
Lai-la-lai...

A lake of gold in the desert sand
Is less than a cool fresh spring
And to one lost sheep, a shepherd boy
Is greater than the richest king
If a man lose ev'rything he owns
Has he truly lost his worth?
Or is it the beginning
Of a new and brighter birth?

And that's why we share all we have with you
Though there's little to be found
When all you've got is nothing
There's a lot to go around

No life can escape being blown about
By the winds of change and chance
And though you never know all the steps
You must learn to join the dance
You must learn to join the dance
Lai-la-lai...

So how do you judge what a man is worth
By what he builds or buys?
You can never see with your eyes on earth
Look through heaven's eyes

Look at your life
Look at your life
Look at your life through heaven's eye

With joy from Udaipur

2009-04-07T04:30:00.001-07:00

My bundles of Joy - Rohan and Ann

SPILT MILK AND THE HOLY SPIRIT

2009-04-03T03:56:00.001-07:00

The daily challenges of motherhood show that a clean conscience is better than a spotless floor.

In 1951, my husband, Bill, and I leased a home one block from the UCLA campus. Students poured into our home like it was Grand Central Station, and I subconsciously equated my busyness with commitment to Christ. I continued to be faithful with my prayer and Bible reading, but I was not seeing spiritual fruit in my life. In my spiritual immaturity, I didn't understand the importance of responding to His voice as soon as I heard it. I had complete confidence in my salvation, but I did not understand that the Holy Spirit, the third Person of the Trinity, wanted me to surrender my life totally to Him.

That summer I attended a Christian women's retreat. There, I felt like I needed to apologize to a few people about some situations from years past. The matters seemed trivial, and so much time had passed since the incidents that I tried to brush off the gentle nudging I was feeling. But I had a nagging thought that God couldn't really use me until I was obedient to what I knew He wanted me to do. Finally I sat down to write the letters of apology. That nudging was the Holy Spirit working in my life.

I soon received wonderful responses to the letters, bringing me great relief. The incidents could now be forgotten. I had been obedient to God, and I was beginning to understand the presence and work of the Holy Spirit.

John 16:13 records, "When the Spirit of truth comes, He will guide you into all truth. He will not be presenting His own ideas; He will be telling you what He has heard. He will tell you about the future" (New Living Translation).

The Holy Spirit is the One who dwells in us, guides us and convicts us of sin. We couldn't live a holy life without His power. However, we cannot experience His power without totally yielding to Him.

From the moment of spiritual birth, the Holy Spirit indwells every Christian. But to be controlled by the Holy Spirit, we must, as an act of our wills, completely surrender our lives in obedience to Christ.

One afternoon years ago, I had happily mopped the kitchen floor. While the floor was drying, our younger son Brad came running into the house with a group of little boys trailing behind him. They wanted some milk, so Brad, without asking, decided he would get it. But while he was pouring the milk, he spilled it on my shiny floor.

When I saw the spill, I snapped loudly, "Get out of the kitchen! I just mopped the floor!"

All the boys scurried out wide-eyed, scared because Brad's mother had spoken harshly. I felt terrible.

Where was the Holy Spirit in this? He was still in my life, but I was not yielding to His control. I had exerted my will over His. My attitude was wrong.

To avoid such incidents, Bill and I began to practice what we call the "throne check." It is based on the idea that in each life there is a throne, or control center. When we yield to the Holy Spirit, our ego or self is dethroned. But self can steal control at any moment, as it did in my floor-mopping incident. This doesn't mean the Holy Spirit leaves us; it means at that moment we have taken Christ off the throne, thereby limiting the Holy Spirit's influence in our lives.

When we allow Christ to be in control, we experience harmony and peace. When we try to put self in control, we suffer with discord and frustration.

We taught this concept to our boys from early childhood, and we all practiced it. Every once in a while, when dispositions were not very pleasant, someone would ask, "Who is on the throne?"

I remember vividly an incident when Brad was about 4 years old. I had fixed a special breakfast dish I called "egg in a bonnet": a fried egg in a piece of toast with a hole in the center.

Brad complained, "I don't like my egg like that, and I'm not going to eat it." He manufactured tears in a second. Bill dealt with the situation by asking Brad, "Who is on the throne this morning?"

Brad responded in his preschool language, "The debil (devil) and me."

"Who do you want on the throne?"

"Jesus."

"What do you do?"

With the wisdom of a child, Brad responded, "Pray, 'Dear Jesus, please be on the throne and help me eat this egg.'"

At 4 years old, Brad knew that putting Jesus on the throne of his life would allow him to overcome his own will and attitude.

Any sin in our lives can prevent the Holy Spirit from exercising His influence in us, so I have tried to develop the habit of keeping a short account with God. As I walk closely with Him, my acts of disobedience become less frequent. The more I obey Him, the more the Holy Spirit strengthens me to resist the temptations.

My husband called this corrective action "spiritual breathing." Consider the process of taking a breath—we exhale and inhale. Spiritually, we exhale by confessing our sins and inhale by appropriating God's promise of filling. I can claim God's marvelous promise of forgiveness and filling, and know that He hears me. As a result, I am able to continue in unbroken fellowship with God. When we walk in the Holy Spirit, God can begin building in our lives the skills necessary to be an instrument for Him.

Just like when I was at the conference, you may have felt the gentle nudging of the Holy Spirit and ignored it. It seems easier to pray about major decisions and overwhelming challenges, but the real joy and true blessings that God promises are realized when we obey Him in anything, anytime, anywhere. Obedience is a lifestyle. When we learn to live an obedient lifestyle, our perspective on every challenge becomes one of peace and confidence.

Vonette Zachary Bright is the co-founder of Campus Crusade for Christ along with her late husband, Bill Bright. They have two married sons and four grandchildren. She gives a daily radio message (visit www.womentoday.org), and has authored or co-authored 15 books.

Turning from Guru to God

2009-03-13T00:54:00.001-07:00

Michael Graham was a leading disciple of one of India's most famous holy men, and then an international teacher of New Age spiritualities. Now he is a Christian. It's an enthralling story that will challenge all spiritual seekers. This article was originally published in the October 1999 issue of Alive magazine.

Many of the young Western spiritual seekers who flocked to Indian religions during the idealistic 1960s and 1970s became familiar with a mild-mannered Australian named Michael Graham. For Michael, who had embarked on an intense and far-reaching spiritual journey from the time of his graduation from elite Geelong Grammar School in the mid-1960s, came to find himself at the forefront of the great migration to the West of Indian religious teachings and practices.

As one of the first Western disciples of Swami Muktananda Paramanansa, who was to become a leading figure in America and elsewhere with his teachings of Siddha (perfect being) yoga, Michael helped manage his ashram (spiritual centre) in India, with up to 2,600 Westerners there at one time. He also became deeply involved in Muktananda’s American activities and energetically promoted his teachings in Australia and elsewhere.

Yet today Michael, 52, is on a different mission. In 1997 he became a Christian, after being convicted with the realisation that his 28 years of spiritual practices and experiences amounted to, in his own words, “a big fat zero”—and he is now working to persuade other idealistic spiritual seekers that their needs are simply met by the figure of Jesus, “the fulfilment of all spiritual paths”.

Michael’s story is a remarkable one. Born and raised in Melbourne, his father a doctor and psycho-analyst, he spent three years studying and practising yoga while still in his late teens, then took his motorcycle by ship to Colombo, and rode around Ceylon (now Sri Lanka) and India. After a trip to England he returned to India in early 1969 and spent six months in Muktananda’s ashram. And it was during this period of intense spiritual discipline that he experienced a dramatic spiritual “awakening”.

“The theory is that within everyone there is an unawakened divine potential,” says Michael. “By the intent or touch of a guru like Muktananda it can be awakened. I experienced this in a very powerful form.”

In an interview with Rowan Forster on Melbourne’s Triple 7 radio in April 1999 he recounted the experience:

“I was just sitting there, meditating, and all of a sudden my body started to gyrate in a circular motion. And then each day it began to sway more and more vigorously, even violently. I’d stop it, saying: ‘What’s this? How extraordinary. What an extraordinary phenomenon.’

“Hitherto, I’d always moved my body, but never before has it happened spontaneously. All sorts of dynamic and palpable activities started to take place under the influence of this spontaneous force. There’d be laughing one moment and crying the next, with nothing funny or sad in attendance—there’d be vigorous breathing rhythms, sounds of birds and animals coming from my mouth and speaking in tongues. It was fascinating. My body would start to move in classical dancing postures, I’d hop around the floor, I’d see inner lights, particularly blue, and sometimes torrents of peace would overcome me, even journeys out of the body.”

It was a tantalising experience for the young Australian. “I was totally seduced by this awakening. It is so engaging and seductive. It was real, with no suggestion or hypnosis involved. And it had a huge promise attached to it. It promised a final merging with the divine.”

Michael, with Muktananda’s Siddha yoga as his core practice, returned to India several times, but studied and practised under other gurus also, some of whom were to become famous (and in some cases, infamous) in the West, such as Bhagwan Shree Rajneesh.

In 1977 he rejoined Muktananda in America, and, as one of his renowned disciples, spent some years working and touring with him and his successors. Muktananda was attracting huge numbers of followers, including famous names like John Denver—whom Michael remembers coming daily to the Santa Monica ashram and often singing for all the students—along with Diana Ross, actors Raul Julia and Olivia Hussey, and former California Governor Jerry Brown.

In the words of former Los Angeles Times journalist Russell Chandler, in his book Understanding the New Age, “Perhaps more than any other guru except Maharishi Mahesh Yogi of transcendental meditation fame, Muktananda made yoga meditation accessible and fun to Westerners—particularly the Hollywood set.”

But despite the exhilarating phenomena of Indian religious practice, Michael found that it was not bringing forth the life changes he desired.

“I remained the same at heart. It was always the same old me. There was no change of heart and mind. I was a young man, a modern man, with a philosophical bent. I had no affinity for major elements of the teaching. It was all the amazing experiences that kept me there, and what they were supposed to lead to. So I looked for something to supplement it, in the New Age movement. I became involved in various New Age mind dynamic techniques.”

For a time he was active in corporate consulting, designing and delivering a wide range of personal and organisational development strategies. He then discovered the US-developed Avatar® programme, an inventive way of creating a preferred reality through the management of one’s beliefs. He became one of the most successful teachers of this programme, delivering it in Australia, the US, New Zealand, Singapore and Switzerland.

“Avatar teaches that your beliefs determine your life’ experience. The point was that you could re-engineer your life by changing your beliefs. So you chose your desired outcome, then re-engineered your beliefs to create that reality. I explored it all assiduously, and drew as much from it as possible. But people’s deep-rooted beliefs are not amenable to change through strategic means. I decided ultimately that the programme’s impact was minimal.”

From around 1993 he started developing his own training courses. But increasingly, over several years, he felt frustration. His work was not developing to expectations. More significantly, he felt his spiritual life somehow in stagnation.

He resolved to intensify his spiritual practices, such as starting each day with 2½ hours of spiritual disciplines. Then he decided to embark on a series of 10-day meditations, in isolation, and it was during one of these that he had his encounter with Christ.

“At the time it happened I was in isolation,” he recalls. “But I wasn’t meditating; I was in a completely plain state of mind. All at once an image of Christ formed up in my chest cavity. Along with this image came a recognition of who He was. What followed was beyond conception. But to indicate using mere words…there was an openness to me from Christ of cosmic proportions, and an invitation and welcome, as if to say, ‘Give me your life and breath and I will take care of you.’ It was a personal invitation. It was equal to the deepest spiritual experience I’d ever had.”

But despite the marvel and intensity of the encounter, there was a problem. So entrenched was he in his existing spiritual ways, that Michael simply did not know how to respond. He carried that memory of meeting Jesus with him for one year, when he happened to be in Berkeley, California. And there, in 1997, he had what for him was another profound experience.

“I was overcome by the conviction that my lifelong spiritual quest added up to a big fat zero. It was a powerful sense. I was reduced to nothing.”

At the time he was driving 45 minutes each day, and as he drove he listened to evangelical Christian radio, which was building in him an understanding of the first principles of the Christian faith. “I started to get very excited by the promise of Christianity,” he remembers.

A prominent young Indian swami was visiting California at the time, and he was looking for 20-30 experienced people to be trained as gurus and healers in their own right. Michael was not in the least interested, but when three friends, separately, urged him to attend, he took that as some sort of sign that he should be there.

He went, and was not impressed by what he saw and heard. But one thing he noted deeply. The instructor reminded him that to achieve anything it was necessary to have faith. Thus reminded, Michael clearly recognised that it was only in Jesus Christ and His promise that he could ever have faith.

But there was for him one more step in becoming a Christian. “I knew about the importance, power and place of decision. I’d created a course on it called ‘The Decision Principle Training’. I knew that becoming a Christian would be the biggest decision of my life. I wanted to make a marker of it—an event. It so happened that Billy Graham was coming to San Francisco. So I went to that meeting for the express purpose alone of making this decision clearly, cleanly, surely, with no turning back, in front of 22,000 witnesses.

“And since that day I’ve never been the same. I knew absolutely what it was to be renewed, to be reborn. I was a new creation. It was a silent indwelling of the holy spirit. I started to be led in my Christian walk.”

Returning to Melbourne, he sought out a strong biblically-based church and found it in South Yarra Presbyterian Church, a short walk from his home, and a building he had strolled past numerous times previously with barely a glance.

Now after two years of dedicated Bible study he is eager to reach out to others with the story of his transformation. Exceedingly articulate, he has already addressed audiences at Christian colleges in Sydney and was a guest of Gordon Moyes on an Easter television special, and spoke to 25,000 Christians in India. He has also been working with the Community of Hope Christian mission in its outreach to the New Age movement.

He also tells the full and fascinating story of his 28-year spiritual odyssey in his book The Experience of Ultimate Truth.

In addition, he talks to friends and acquaintances who have been on a similar journey to his own, some of whom have also become disillusioned with the Eastern promise. “People I’m getting through to would normally never listen to a Christian,” he notes.

What would he tell today’s young spiritual seekers who are leaning towards Eastern religions?

“I’d tell them my story,” he says.

“Fulfilment is found in Christ. He is the embodiment of Truth, in whom is contained all the treasures of wisdom and knowledge. The point is that the salvation He offers doesn’t come through signs and wonders, though they may be appended to it, but from a turning to Him in acknowledgment of His pre-eminence and His lordship, and as the medium through which total release can be known.

“In my experience the best the higher other ways can offer is amelioration of the human condition, coupled with large promises and tantalising effects. But they cannot penetrate to the very core, which is the call to utter renewal and the discovery of our sufficiency in Christ.

“Jesus doesn’t simply show us the way, or the truth. He is the way, the truth. He’s not another guru, or preceptor, or avatar, or holy man, or prophet. He’s God Himself stepped down into human flesh to die, identified with the consequences of our decision to turn from God, and thus eternally to reconcile us. The Christian revelation is the end of the end game, not the marvellous scenery on the way.”

And now that he is reconciled with Christ, how does Michael sum up his past? He smiles as he answers: “I was a dead man walking. I can’t believe I’m saying that. Because I thought I was so alive.”

Paying Entrepreneurs to Find the Right Business

2009-03-11T22:43:00.001-07:00

March 12, 2009 / By BRENT BOWERS

JIM ELLIS and Kevin Taweel used a search fund to acquire a $6 million roadside assistance company with 45 employees that they built into the nation’s largest provider of insurance products to cellphone companies.

Jim Southern, a Boston investor, said his search funds had generated 14 times the capital he placed in 20 companies over an average holding period of eight years, while Dave Carver, the co-founder of Search Fund Partners in Menlo Park, Calif., said his company was also achieving strong results with the same investment model.

While most people have never heard of them, search funds are attracting increasing attention as a way for small businesses to beat the usual odds of success, even in the midst of a deepening recession.

This is the way a search fund typically works: One or two ambitious graduates of a top-tier business school, who want to run their own business but recognize they lack practical experience, offer themselves as fledgling entrepreneurs who can make some tough-minded investors a lot of money.

These investors put up about half a million dollars for the pair to spend up to two years scouring the marketplace for a promising business with $10 million to $30 million in revenue. If satisfied with the choice, the investors help finance the acquisition of the business, join its board and give their young partners a crash course in hands-on management. If all works out, the venture grows and makes everybody richer.

H. Irving Grousbeck, co-founder of Continental Cablevision (later Media One) and now a consulting professor of business at Stanford University, helped originate the business model a quarter of a century ago and has been studying it ever since.

Mr. Grousbeck says studies by the Center for Entrepreneurial Studies at Stanford, which he co-directs, show average annual returns by search funds to their original investors of well over 30 percent.

The results are skewed by the big winners, which constitute about a fourth of the total. Another fourth fold without making a purchase, a fourth lose money for their investors and a fourth provide a middling return, according to Mr. Southern, the Boston investor. Still, taken as a whole, search funds can be a winning proposition.

The funds do have drawbacks, of course. The same recession that has attracted search fund buyers has scared off sellers, for example, Mr. Grousbeck said.

Moreover, major successes are rare.

One was Road Rescue Inc., a Houston venture that Mr. Ellis and Mr. Taweel acquired in 1995 for $8 million and built into the insurance giant Asurion Inc. In that case, the original investors in Road Rescue received more than a 100-fold return on their stakes.

Asurion provides a case study of the power of the search fund model in the right circumstances. The founders, who had studied under Mr. Grousbeck at Stanford, said they liked Roadside Rescue because it was not a towing company. Instead, it sold roadside assistance insurance through local wireless carriers to their users. The venture grew by 50 to 100 percent a year in its first four years.

Then the two men had an epiphany: they were not in the roadside-assistance business; they were in the cellphone services business. In 1999 they expanded into insurance for loss or damage to cellphones. After making three major acquisitions in recent years, Asurion, based in San Mateo, Calif., has grown into a $2.5 billion company with 10,000 employees, more than 70 million wireless customers and a growing presence in Asia.

Mr. Ellis, who stepped away from an active role in the company several years ago (though he still sits on its board as a nonvoting director), now divides his time between lecturing at Stanford and investing in small and medium-size businesses.

He acknowledged that he and Mr. Taweel had the good fortune of choosing an industry on the cusp of an explosion in consumer demand. “If we had grown more slowly than we did, we would have been losing ground,” he said. Still, he said, the leap to $2.5 billion in revenue, from $6 million, in 13 years “is the biggest multiple any search fund company has had.”

Mr. Southern, the Boston investor, made a small fortune in a niche printing business that he acquired in 1984. Through dividends and the sale of the company 10 years later, his investment returned 35 times the original capital, for an average annual yield of 60 percent.

“For years, I was the most successful search fund entrepreneur,” he said. “But Asurion knocked the cover off the ball.” He has put money behind more than 40 search funds, with results that he said have been “better than those in the Stanford study.”

“The reaction I get when I tell a business owner or an investor about search funds is, ‘I wish I had thought of that,’ ” he said. For aspiring entrepreneurs who embrace the search fund model, he said, the likelihood of a big payoff is much greater than “the gamble of trying to do a start-up.”

Mr. Southern says more business school graduates are being drawn to search funds, in part because of Asurion’s success and in part because the recession has diminished prospects on Wall Street and in corporate America. Nearly 25 would-be search fund entrepreneurs have approached him since November alone, he said, compared with fewer than 10 in a full year in the past. He plans to back nine funds this year, the same as in 2008 and 2007 but significantly more than the one or two a year he helped finance before that.

Mr. Carver, co-founder of Search Fund Partners, has noticed a similar trend, with 14 candidates approaching him in the first five weeks of 2009, double the number in previous years. He says he has also seen “a strong increase in investor interest in them,” he said.

He and his business partner, Rich Kelley, a former Utah Jazz basketball player, founded Search Fund Partners five years ago. He describes it as the only private equity firm to invest exclusively in search funds.

So far, the firm has raised close to $25 million from individuals and invested in 22 search funds, half of which have acquired companies. “We’ve never had any shortage of terrific entrepreneurs to invest in,” he said. He would not divulge specifics, but said all the capital invested in the firm’s initial round of six investments was paid back by just one of them.

Mr. Grousbeck, the Stanford professor who nurtured the first fund in 1984 when he was teaching at Harvard, says the business model has spread to Europe, Latin America, Asia and even South Africa, if only by a trickle.

Still, search funds occupy a tiny niche of the investment world. Mr. Southern estimates that only 160 or so have been created, all looking for companies with less than $50 million in revenue. He estimated that about 60 search fund companies were active today.

Even so, Mr. Grousbeck said, investors who back a portfolio of search funds stand a good chance of beating the returns in other markets. “I can’t tell you how many investors have asked me, ‘Why should I pay somebody to hunt for a company when entrepreneurs are knocking on my door all the time to invest in theirs?’ ” he said. “I tell them, ‘You’d be taking a very small risk for the chance to ride the coattails of some very bright and talented people.’ ”

EMC Tightens Its Embrace of VMware

2009-03-10T23:20:00.001-07:00

March 10, 2009, 1:10 pm/ By Ashlee Vance

If EMC does plan to sell off its controlling stake in VMware, the company is maintaining a spectacular poker face.

On Tuesday, EMC held its first broad strategy update in almost three years. The company’s chief executive, Joe Tucci, presided over the affair, more than half of which centered on the virtualization software sold by VMware.

“We have no intention of separating these two companies,” Mr. Tucci said during his opening speech in Boston, which was also Webcast.

It has been more than five years since EMC acquired VMware for $635 million. As a result, the maker of data storage systems would face minimal tax implications if it decided to sell off its close to 85 percent stake in VMware.

Analysts have argued that VMware could perform better as an independent entity, particularly since much of the company’s business comes through EMC competitors like Hewlett-Packard and I.B.M. Cisco Systems, which owns 2 percent of VMware, is often mentioned as a potential suitor.

VMware, however, stands as one of the sexiest parts of EMC’s business. Its software gives EMC serious leverage in data centers, which have moved more and more towards virtualization software that allows more applications to run on each physical server and allows applications to move between physical systems.

EMC’s two-hour strategy session was divided equally between Mr. Tucci and VMware’s chief executive, Paul Maritz, emphasizing just how important virtualization has become for EMC.

Mr. Maritz, once a top executive at Microsoft, boasted that VMware has shifted towards building a virtual operating system that runs not just servers but also storage and networking gear. Meanwhile, he said, competitors like Microsoft and Citrix continue work on their base virtualization products.

“It’s not for lack of focus or will,” Mr. Maritz said. “It is just hard stuff to do.”

VMware has thrown 2,000 people at its upcoming vSphere suite that will ship this year. That’s more employees than Microsoft put behind its Windows NT operating system, according to Mr. Maritz.

VMware’s competitors have tried to undercut the company on price by giving away their basic virtualization software. Still, in its most recent quarter, VMware posted revenue of $515 million, up 25 percent from a year earlier, and net income of $111 million, up from $78 million.

During the precious few moments not dedicated to talk of virtualization, Mr. Tucci also discussed EMC’s intentions to grow its flash-based storage business. EMC has been aggressively pursuing flash memory systems, which bring higher prices and deliver higher performance than traditional spinning disks.

When EMC first started selling flash systems, the disk drives cost 40 times as much as standard drives while running 30 times faster. About one year later, the price of the flash drives has fallen by 76 percent, Mr. Tucci said.

“They’re still 30 times faster but now it’s only 8 times the cost,” he said. “In the last two quarters, we sold every flash drive we could get our hands on.”

EMC plans to roll out new flash storage systems “in the very near future,” he said.

Ben Dunlap's Lecture of a Lifetime

2009-03-04T04:01:00.001-08:00

I was his professor. But my 90-year-old student taught me more than anyone I'd ever known.

By Ben Dunlap from www.ted.com

From Reader's Digest

There's not a drop of Hungarian blood in my veins, but at every critical juncture in my life, there has been a Hungarian friend or mentor beside me. I even have dreams that seem to take place in Hungarian landscapes.
How do I explain this mysterious affinity? Maybe it's because my native state of South Carolina, which is not much smaller than present-day Hungary, once imagined a future for itself as an independent country. And as a consequence of that presumption, my hometown was burned to the ground by an invading army-an experience that has befallen many a Hungarian town and village throughout the country's long and troubled history. Though this presence in my life is difficult to account for, ultimately I ascribe it to an admiration for people with a complex moral awareness, their heritage of guilt and defeat matched by defiance and bravado.

Case in point: On the first day that I began teaching an interdisciplinary course in literature and culture at Wofford College in South Carolina, I was reassured to find, among the auditors in my classroom, a 90-year-old Hungarian. This man was surrounded by a bevy of middle-aged European women who seemed to function as an entourage of Rhine maidens. His name was Sandor Teszler, and he was a puckish widower whose wife and children were dead and whose grandchildren lived far away. In appearance he resembled Mahatma Gandhi—minus the loincloth, plus orthopedic boots.

He was born in 1903 in a province of the old Austro-Hungarian Empire, part of which would later become Yugoslavia. He was ostracized as a child, not because he was a Jew—his parents weren't very religious anyhow—but because he had been born with two clubfeet, a condition that, in those days, required institutionalization and a succession of painful operations.
He went to the commercial business high school as a young man in Budapest. There, he was as smart as he was modest, and he enjoyed considerable success. After graduation, when he went into textile engineering, his success continued. He built one plant after another. He married and had two sons. And he had friends in high places who assured him that he was of great value to the economy.
Once, as he had left instructions to be done, he was summoned in the middle of the night by the watchman at one of his plants, a hosiery mill. The watchman had caught an employee stealing socks. Apparently, this employee had simply backed up the truck to the loading dock and shoveled in mountains of socks.

Mr. Teszler went down to the plant. He confronted the thief and said, "But why do you steal from me? If you need money, you have only to ask." The night watchman, observing how things were going and waxing indignant, said, "Well, we're going to call the police, aren't we?"
But Mr. Teszler answered, "No, that will not be necessary. He will not steal from us again."

Well, maybe he was too trusting, even after the Nazi Anschluss in Austria and the arrests and deportations began in Budapest. And in a twist you would not believe in a Steven Spielberg film, local townspeople who were sympathetic to the Germans held a rampage against the Jews-and the leader of that gang was the very same thief who had stolen socks from Mr. Teszler's hosiery mill. This man, however, spent all night standing guard in front of the Teszler home to make sure Sandor and his family weren't harmed.
The situation continued to worsen. Mr. Teszler took the precaution of having cyanide capsules placed in lockets that could be worn about his neck and those of his family. And then, in time, it happened. Teszler and his family were arrested and taken to a death house on the Danube.
In those early days of the Final Solution, it was handcrafted brutality. People were beaten and shot to death, their bodies tossed into the river. None who entered that death house had ever come out alive.

Teszler and his family endured a brutal beating at the hands of a young Nazi officer. The next day, as they were being taken to the river, one of Mr. Teszler's sons, Andrew, looked up and said to him, "Papa, is it time to take the cyanide now?" The same Nazi officer who had administered the beatings overheard this and whispered to Teszler, "No, do not take it. Help is on the way."
A car soon arrived from the Swiss embassy, and the Teszler family was spirited to safety. For the duration of the war, they managed to stay one step ahead of their pursuers. Probably Mr. Teszler had gotten some money into Swiss bank accounts; he also used his good connections to get his family to Great Britain, and then to Long Island, and then to a major center of the textile industry in the American South, which, as chance would have it, was Spartanburg, South Carolina, the location of Wofford College.
There, Teszler began all over again. Once again he achieved immense success, especially after a new fabric called double knit was introduced.

In the early 1960s, in the aftermath of Brown v. Board of Education, when the Klan was resurgent all over the South, Mr. Teszler said, "I have heard this talk before." He asked a top assistant, "Where would you say, in this region, racism is most virulent?"
"I reckon that would be Kings Mountain, Mr. Teszler," the man said, referring to a nearby area in North Carolina.
"Good. Buy us some land in Kings Mountain, and then announce we are going to build a major plant there." The man did so, and shortly afterward Mr. Teszler received a visit from the white mayor of Kings Mountain—at that time, the textile industry in the South was notoriously segregated.
The white mayor said, "Mr. Teszler, I trust you're going to be hiring a lot of white workers."
Teszler told him, "Why are you saying this? Did you think you were coming here to help me?" It had been Teszler's intention from the start to hire the best workers, regardless of race or color.

He also received a visit from a member of the black community, a minister, who said, "Mr. Teszler, I hope you're going to hire black workers for this new plant." And Teszler gave this answer: "When the time comes, I will call you, and you will recommend to me high school graduates—boys and girls—from honest families."

In the end, Mr. Teszler hired 16 workers: eight white, eight black. They were to be his seed group, his future foremen. In an abandoned store in the vicinity of Kings Mountain, Teszler had installed the heavy equipment needed for the new double-knit manufacturing process. For two months, these 16 employees would live and work together, mastering the new procedures.

After an initial tour of the facility, he gathered them all together and asked if there were any questions. There was hemming and hawing and shuffling of feet. Then a white worker stepped forward and said, "Well, yeah. We looked at this place, and there's only one place to sleep, only one place to eat, only one bathroom, only one water fountain. Is this plant going to be integrated, or what?"
Mr. Teszler replied, "You are being paid twice the wages of any other textile workers in this region, and this is how we do business. Do you have any other questions?"
"No, I reckon I don't."
And two months later, when the main plant opened and more than one hundred new workers, both white and black, poured in to see the facility for the first time, they were met by the 16 foremen, white and black, standing shoulder to shoulder. The group toured the facility and were asked if there were any questions, and inevitably, the same question arose: "Is this plant integrated, or what?"
One of the white foremen stepped forward and said, "You are being paid twice the wages of any other workers in this industry in this region, and this is how we do business. Do you have any other questions?" And there were none.
Mr. Teszler was one of the first to integrate the textile industry in that part of the South. It was an achievement worthy of Mahatma Gandhi-handled with the shrewdness of a lawyer and the idealism of a saint.

In his 80s, Mr. Teszler, having retired from textiles, adopted Wofford College, auditing courses every semester. Because he had a tendency to kiss anything that moved, he became affectionately known by all and sundry as Opi, which is Magyar (Hungarian) for "grandfather." Before I got there, the library of the college had been named for Mr. Teszler, and after I arrived, in 1993, the faculty decided to honor itself by naming Mr. Teszler "professor of the college." This was done partly because he had taken all the courses in the catalog by then; but mainly it was done because he was so conspicuously wiser than any of us. To me, it was immensely reassuring that the presiding spirit of this little Methodist college in upstate South Carolina was a Holocaust survivor from Central Europe.

Wise he was, indeed, but Mr. Teszler also had a wonderful sense of humor. Once, for an interdisciplinary class I was teaching, I was screening the opening segment of Ingmar Bergman's great 1957 film The Seventh Seal. As the medieval knight Antonius Block returns from the wild-goose chase of the Crusades and arrives on the rocky shore of Sweden only to find the specter of death waiting for him, Mr. Teszler sat in the dark with his fellow students.
And as Death opened his cloak to envelop the knight in a ghastly embrace, I heard Mr. Teszler's tremulous voice. "Oh, oh," he said. "This doesn't look so good."

Music was his greatest passion, especially opera. On the first occasion that I visited his house, he asked me to choose the piece of music we would listen to. I delighted him by rejecting Cavalleria rusticana in favor of Béla Bartók's Bluebeard's Castle. I love Bartók's music, as did Mr. Teszler, and he had virtually every recording of Bartók's music ever issued. It was at his house that I heard for the first time Bartók's Third Piano Concerto and learned from Mr. Teszler that it had been composed in nearby Asheville, North Carolina, in the last years of the composer's life. He was battling leukemia, and he dedicated this concerto to his wife, Dita, who was herself a concert pianist.
Into the slow, second movement, marked adagio religioso, Bartók incorporated the sounds of birdsong that he heard outside his window in what would be one of his last springs. He was imagining a future-for her-in which he would play no part. Clearly, this composition was his final statement to her. It was first performed after his death and, through her, to the world. Just as clearly, it is saying, It's okay. It was all so beautiful. Whenever you hear this, I will be there.
After Mr. Teszler's death, I learned that the marker on Bartók's grave in Hartsdale, New York, was paid for, in part, by Sandor Teszler.

Not long before Mr. Teszler's own death at age 97, he heard me deliver a lecture that described history as a tidal wave of human suffering and brutality. With gentle reproach, Mr. Teszler said to me afterward, "You know, human beings are fundamentally good." And I made a vow to myself then and there that if this man who had such cause to think otherwise had reached that conclusion, I would not presume to differ.

What he showed me in the brief time I knew him was the secret of his success. It was an insatiable curiosity, an irrepressible desire to know—no matter what the subject, what the cost, even at a time when the keepers of the Doomsday Clock are willing to bet even money that the human race won't be around to imagine anything in the year 2100, a scant 91 years from now.

"Live each day as if it is your last," the saying goes. "Learn as if you'll live forever." That's what I'm passionate about. It is an inextinguishable appetite for learning and experience, no matter how risible, esoteric, or seditious it might seem. And this truly defines the Sandor Teszler I was lucky enough to know.

Here I stand

2009-03-03T07:04:00.001-08:00

I have borrowed this title from the diet of worm’s speech of Martin Luther.

Unless I am convinced by proofs from Scriptures or by plain and clear reasons and arguments, I can and will not retract, for it is neither safe nor wise to do anything against conscience. Here I stand. I can do no other. God help me. Amen."

I Tim: 1: 13 “Even though I was once a blasphemer (speaking against God, blasphemous; insulting, slanderous) and a persecutor and a violent man (insolent person, person of insulting behavior), I was shown mercy because I acted in ignorance and unbelief.”

In this day of presidential elections and elections in general, there is zeitgeist, the “politics of proclamations or showcasing”. It is a age where everybody standing for office will struggle to tell you why they are fit, why they are the best and what their strengths are, what their talents are any why they should be chosen or elected. Indeed we ignore someone who does not do this, this is the day/ age of the maverick, or strong man… a day when perception value rules supreme. There is no space for the weak, regular or meek. It almost puts to shame and even mocks the principle that the meek shall inherit the earth.

But I have always been amazed the way the Holy Spirit chooses to treat this predicament. His treatment is always contrary, contrasting and opposite to the world. It makes me stop and forces me to look closer at the perspective, so different from the world and that around me.

Man is incurably religious. We worship something. If we are not worshipping the authentic god, then it is almost certain we have a substitute deity. The bible does not rue against atheism. It is a small and a puny adversary to idolatry. It is natural for our mind to have strong and passionate affections, and the will to love, so that for the want of true objects of worship, we attach ourselves to false one.

These substitutes deities need not be supernatural; money power, expertise, belief in progress, scientific advancement of the age etc. another chief idolatry is that of the self, where the self is a powerful as an organizing center strong, no stronger! Than anything else that vies for your affection.

But is it natural for us to break the mould. Can we replace it or should it be replaced by for us?

I would say it is a journey with the Holy Spirit. It begins with the basics correct, the vision of who God centered worship and who he really is.

Isaiah 6: 1- 5

1. In the year that King Uzziah died, I saw the Lord seated on a throne, high and exalted, and the train of his robe filled the temple.

2. Above him were seraphs, each with six wings: With two wings they covered their faces, with two they covered their feet, and with two they were flying.

3. And they were calling to one another:
"Holy, holy, holy is the LORD Almighty;
the whole earth is full of his glory."

4. At the sound of their voices the doorposts and thresholds shook and the temple was filled with smoke.

5. "Woe to me!" I cried. "I am ruined! For I am a man of unclean lips, and I live among a people of unclean lips, and my eyes have seen the King, the LORD Almighty."

It is important to get the basics right. It basics is grasp the distinctiveness between the creator and creature. If this is embedded thus and it will not leave us for an eternity

Isaiah 6 positions this journey with the vision of heaven where his see the worship session.

A couple of insights

· There is a throne in heaven, and the LORD God sits upon it as the sovereign ruler of the universe! This is central fact of heaven; that there is an occupied throne in heaven. God does not sit on a chair in heaven. Anyone might sit on a chair. But sovereign kings sit on thrones. Judges sit on thrones. Those with proper authority and sovereignty sit on thrones.

The Almightiness of God

· Isaiah was not alone in seeing God’s throne. Almost everyone in the Bible who had a vision of heaven, was taken to heaven, or wrote about heaven spoke of God’s throne. The prophet Michaiah saw God’s throne (1 Kings 22:19), Job saw God’s throne (Job 26:9), David saw God’s throne (Psalm 9:4 and 7, 11:4), the Sons of Korah saw God’s throne (Psalm 45:6, 47:8), Ethan the Ezrahite saw God’s throne (Psalm 89:14), Jeremiah saw God’s throne (Lamentations 5:19), Ezekiel saw God’s throne (Ezekiel 1:26, 10:1), Daniel saw God’s throne (Daniel 7:9), and the Apostle John saw God’s throne (Revelation 4:1-11). In fact, the book of Revelation may as well be called “the book of God’s throne,” because God’s throne is specifically mentioned more than 35 times in that book!

· The superlative of Kadosh – The otherness of God

· The fear in the seraphim ( The burning ones) they cover they feet

· The presence throws open the” falleness of man”, highlights sin and our “creatureliness “

· It burns and pushes to repentance, forces us to surrender and establishes God sovereignty and there is aloud confession.

My personal experience also testifies to the same…. When I was initially baptized with the Holy spirit, I carried in me a revelation of How great my God is and how gracious he is by being mindful of me. And almost always when in worship, the common reaction is confession and coming right with God.

The greatness need today is a true vision of god in his incomparable holiness, his eternal majesty, his burning otherness, purity, and his utterly undeserving grace towards us.

The journey of growth continues when the vision when the self is denied & discipleship is initiated

Luke 14:26 "If anyone comes to me and does not hate his father and mother, his wife and children, his brothers and sisters-- yes, even his own life-- he cannot be my disciple.”

There is an altercation between reality and desire to serve. There is an altercation between flesh and spirit.

The word hate “miseo” describes an emotional response or attitude towards person or things. The hated thing is decisively rejected and it is detested and the individual wants no contact or relationship with it. There is awareness in the despising.

Faith as said by Najma in Derek prince book “appointment with Jerusalem”, faith is a thing of the will and not of feelings.

But Paul in this declaration is actually I believe beyond that. Many years of ministering and he has done much for Christ, suffered much, quickened the church and edified it with his life and lifestyle.

To a person drenched by the dew of grace every day, the person who is brimming with the streams of living water because he has believed Christ as the scriptures says is captivated by the suffering savior, then he becomes Christ centered, his desire is Christ alone, everything else is periphery. His desire is God and additionally there is a contrast in the self, he is dominated by his unworthiness. This is not a delusion, it is a living testimony. He will be like the Luke 17:10 “So you also, when you have done everything you were told to do, should say, 'We are unworthy (worthless) servants (slaves); we have only done our duty.” This is the attitude of the “they were aliens and strangers (sojourning in a strange place) on earth” (Heb 11.13).

Let me close with the story of Richard Carmen, a leader of the covenanters, in the history of the Scotland where the supremacy/ Head of the Church would swing between the Christ and the Crown. He led a covenanticals (the Sunday worship held in caves). Persecutions were plenty and many were executed, burned at the stake or drowned. The Crown was so adamant that only the re-canters survived.

One day he received a packet. He opened it and it was pair of hands, freshly cut. He said… it is my… my ..my son’s; soon followed his son’s head.

But beloved take heart, great is your reward in heaven for theirs is the kingdom of god. May the lord bless us with this word.

Lenovo's Amelio resigns, Yang returns as CEO

2009-02-05T03:17:00.001-08:00

By SUMNER LEMON, IDG News Service\Singapore Bureau, IDG

Lenovo Group President and CEO William Amelio resigned Wednesday as the company reported a US$97 million quarterly loss.

Amelio, a former Dell executive who led a broad restructuring of Lenovo's worldwide operations, is the second American CEO to step down since Lenovo completed its acquisition of IBM's former PC division in 2004. Amelio's predecessor, Stephen Ward, who became CEO immediately following the acquisition, resigned in late 2005.

Amelio will be replaced as CEO by Yang Yuanqing, Lenovo's chairman.

Rory Read, Lenovo's senior vice president of global operations, will take over as president and chief operating officer.

Lenovo said Amelio resigned because his three-year contract was over. He will remain as an advisor to the company through the end of September, the company said in a filing with the Hong Kong stock exchange.

"Mr. Amelio confirmed that he has no disagreement with the Board and there are no matters in respect of his resignation that need to be brought to the attention of the shareholders of the Company," the filing said.

Still, Amelio's departure comes at an awkward time. Moments before announcing his resignation, Lenovo reported a quarterly loss of US$97 million that it blamed on slowing Chinese demand for computers.

I.B.M.’s ‘Sequoia’ Supercomputer to Shatter Speed Records

2009-02-05T02:59:00.001-08:00

February 3, 2009, 4:48 pm

By Ashlee Vance

I.B.M. remains intent on producing the biggest and baddest supercomputers on the planet.

In 2012, Lawrence Livermore National Laboratory will fire up an I.B.M. BlueGene machine expected to reach 20 petaflops of performance. That means the system — called Sequoia — will handle a quadrillion mathematical operations per second and run about 10 times faster than today’s top supercomputer at Los Alamos National Laboratory, which was also built by I.B.M.

The United States Department of Energy continues to finance these behemoths, using them to model the decay of our nuclear weapons arsenal. Such modeling is required given the ban on nuclear weapons testing, and as far as we know, the massive computers predict how weapons age just fine. Fingers crossed.

For the United States, the giant computers also give the government an excuse to boast about the country’s high-tech leadership.

The I.B.M. BlueGene designs remain unique in the computing industry. Most large supercomputers are constructed by melding together thousands of standard computer servers. BlueGene, by contrast, relies on custom chips and what amounts to hand-crafted innards. The specialized design caters to the types of operations handed by national labs and other scientific bodies.

The BlueGene systems cost more upfront than the large clusters of servers, but also have some benefits, like lower power consumption and very high performance. As a result, I.B.M. argues that it can help organizations save on energy costs and real estate with BlueGene.

I.B.M. goes so far as to argue that the age of clusters will start to fade, with labs and businesses paying more attention than ever to energy costs.

“I think the era of the slap and dash guys is changing, if not coming to an end,” said David Turek, I.B.M.’s vice president for deep computing.

Mr. Turek’s comments point to a growing dissatisfaction with the large clusters, which are also difficult to manage.

That said, I.B.M. has not exactly turned the exotic BlueGene systems into a booming mainstream business.

Researchers at I.B.M., however, have projects under way to explore running standard business software, instead of scientific code, on the BlueGene machines in the hopes of opening up the systems to new markets.

Silicon Valley hit by mass layoffs

2009-01-26T22:12:00.001-08:00

27 Jan, 2009, REUTERS

Recession turned up late on Silicon Valley's doorstep but is likely to stay awhile, as technology companies slash thousands of jobs and rein in costs to make up for shrinking earnings and tight-fisted customers.

Job cuts in the technology sector have trailed other industries until recent weeks. Now they are coming fast and furious as the economic downturn grips the Valley, the strip of land in northern California that is home to household names like Google Inc and Amazon.com Inc units.

Tech giants like Intel Corp and Microsoft Corp are laying off thousands of employees, while start-up companies are firing in smaller numbers as they struggle to survive with fewer customers and venture capital dollars.
And this is just the start, analysts say, expecting thousands more to lose their jobs this year as the recession forces the industry to slash marketing and capital spending.

"Organizations are saying, 'What is the absolute nuclear winter? Let's plan for that,'" said Adam Charlson, senior partner at executive search firm Korn/Ferry International Inc, who works closely with the recruitment divisions of top tech firms. "What you're seeing now is organisations putting those plans into reality."

Last year, Silicon Valley lost 11,700 jobs, according to Steve Levy, senior economist at the Center for the Continuing Study of the California Economy (CCSCE).
The number is small compared to the 200,000 jobs lost after the dotcom bubble burst in 2000, but that is because the 2008 numbers don't reflect recent layoffs yet, he said.
"The headline is that the recession has hit Silicon Valley," Levy said. As a result, he said he was "substantially revising downward" employment predictions for 2009.
California's jobless rate hit a 14-year high of 9.3 per cent in December, significantly above the national average of 7.2 per cent, according to state officials.

Once bitten, twice prepared. Some analysts said they are reading the mass layoffs as preemptive acts by tech companies. When the last recession hit, tech companies were too slow in cutting costs and laying off workers, said Andy Miedler, a senior technology analyst at Edward Jones. But not this time, he said. "Layoffs and cost-cutting are unfortunate, but companies have to make tough decisions in a rough economy to preserve their own financial position."
Mark Cannice, a professor of entrepreneurship at the University of San Francisco, said Silicon Valley has been "inoculated to some degree" after the dotcom bust.

"Many firms didn't survive .... The ones that survived are much more efficient and resilient and were funded on sounder business models," said Cannice, who publishes a quarterly Silicon Valley Venture Capitalist Confidence Index.
But he said Valley companies are not entirely immune -- especially venture capital-funded start-ups. As large companies like Microsoft and Google cut back on spending, start-ups that supply them with software and other IT could run into trouble.
With venture capital funding falling 71 per cent in the fourth quarter of 2008 from a year ago, start-ups could be forced to fold up if they can't sustain their business and investors cannot fund them any longer. But mass layoffs in the tech sector need not necessarily be all doom and gloom. They could actually boost innovation as laid-off engineers, scientists and other highly skilled individuals decide to pursue their own ideas. Calling it "forced" entrepreneurship, Cannice said he was optimistic that the current layoffs would "unleash the next wave of creative, thoughtful entrepreneurs."

Layoffs in the traditional tech sector could also spur employment in the alternative energy sector, recruiters said.
Neil Sims, managing director of executive search firm Boyden's technology practice group, said the so-called "cleantech" sector -- which employs environmentally friendly technologies -- will continue to grow and offer jobs. "It's not that the sky has fallen entirely," he said.

Barack Obama's Inaugural Address: The Full Text

2009-01-21T23:30:00.000-08:00

20th Jan, 2009

My fellow citizens: I stand here today humbled by the task before us, grateful for the trust you have bestowed, mindful of the sacrifices borne by our ancestors. I thank President Bush for his service to our nation, as well as the generosity and cooperation he has shown throughout this transition.

Forty-four Americans have now taken the presidential oath. The words have been spoken during rising tides of prosperity and the still waters of peace. Yet, every so often the oath is taken amidst gathering clouds and raging storms. At these moments, America has carried on not simply because of the skill or vision of those in high office, but because We the People have remained faithful to the ideals of our forbearers, and true to our founding documents.

So it has been. So it must be with this generation of Americans.

That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.

These are the indicators of crisis, subject to data and statistics. Less measurable but no less profound is a sapping of confidence across our land — a nagging fear that America's decline is inevitable, and that the next generation must lower its sights.

Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America — they will be met.

On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.

On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn-out dogmas, that for far too long have strangled our politics.

We remain a young nation, but in the words of Scripture, the time has come to set aside childish things. The time has come to reaffirm our enduring spirit; to choose our better history; to carry forward that precious gift, that noble idea, passed on from generation to generation: the God-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness.

In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of short-cuts or settling for less. It has not been the path for the faint-hearted — for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk takers, the doers, the makers of things — some celebrated but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom.

For us, they packed up their few worldly possessions and traveled across oceans in search of a new life.

For us, they toiled in sweatshops and settled the West; endured the lash of the whip and plowed the hard earth.

For us, they fought and died, in places like Concord and Gettysburg; Normandy and Khe Sanh.

Time and again these men and women struggled and sacrificed and worked till their hands were raw so that we might live a better life. They saw America as bigger than the sum of our individual ambitions; greater than all the differences of birth or wealth or faction.

This is the journey we continue today. We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions — that time has surely passed. Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.

For everywhere we look, there is work to be done. The state of the economy calls for action, bold and swift, and we will act — not only to create new jobs, but to lay a new foundation for growth. We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do.

Now, there are some who question the scale of our ambitions — who suggest that our system cannot tolerate too many big plans. Their memories are short. For they have forgotten what this country has already done; what free men and women can achieve when imagination is joined to common purpose, and necessity to courage.

What the cynics fail to understand is that the ground has shifted beneath them — that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end. And those of us who manage the public's dollars will be held to account — to spend wisely, reform bad habits, and do our business in the light of day — because only then can we restore the vital trust between a people and their government.

Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control — and that a nation cannot prosper long when it favors only the prosperous. The success of our economy has always depended not just on the size of our Gross Domestic Product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart — not out of charity, but because it is the surest route to our common good.

As for our common defense, we reject as false the choice between our safety and our ideals. Our Founding Fathers, faced with perils we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations. Those ideals still light the world, and we will not give them up for expedience's sake. And so to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman, and child who seeks a future of peace and dignity, and that we are ready to lead once more.

Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.

We are the keepers of this legacy. Guided by these principles once more, we can meet those new threats that demand even greater effort — even greater cooperation and understanding between nations. We will begin to responsibly leave Iraq to its people, and forge a hard-earned peace in Afghanistan. With old friends and former foes, we will work tirelessly to lessen the nuclear threat, and roll back the specter of a warming planet. We will not apologize for our way of life, nor will we waver in its defense, and for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you.

For we know that our patchwork heritage is a strength, not a weakness. We are a nation of Christians and Muslims, Jews and Hindus — and nonbelievers. We are shaped by every language and culture, drawn from every end of this Earth; and because we have tasted the bitter swill of civil war and segregation, and emerged from that dark chapter stronger and more united, we cannot help but believe that the old hatreds shall someday pass; that the lines of tribe shall soon dissolve; that as the world grows smaller, our common humanity shall reveal itself; and that America must play its role in ushering in a new era of peace.

To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect. To those leaders around the globe who seek to sow conflict, or blame their society's ills on the West — know that your people will judge you on what you can build, not what you destroy. To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history; but that we will extend a hand if you are willing to unclench your fist.

To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to suffering outside our borders; nor can we consume the world's resources without regard to effect. For the world has changed, and we must change with it.

As we consider the road that unfolds before us, we remember with humble gratitude those brave Americans who, at this very hour, patrol far-off deserts and distant mountains. They have something to tell us today, just as the fallen heroes who lie in Arlington whisper through the ages. We honor them not only because they are guardians of our liberty, but because they embody the spirit of service; a willingness to find meaning in something greater than themselves. And yet, at this moment — a moment that will define a generation — it is precisely this spirit that must inhabit us all.

For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies. It is the kindness to take in a stranger when the levees break, the selflessness of workers who would rather cut their hours than see a friend lose their job which sees us through our darkest hours. It is the firefighter's courage to storm a stairway filled with smoke, but also a parent's willingness to nurture a child, that finally decides our fate.

Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends — hard work and honesty, courage and fair play, tolerance and curiosity, loyalty and patriotism — these things are old. These things are true. They have been the quiet force of progress throughout our history. What is demanded then is a return to these truths. What is required of us now is a new era of responsibility — a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character, than giving our all to a difficult task.

This is the price and the promise of citizenship.

This is the source of our confidence — the knowledge that God calls on us to shape an uncertain destiny.

This is the meaning of our liberty and our creed — why men and women and children of every race and every faith can join in celebration across this magnificent mall, and why a man whose father less than sixty years ago might not have been served at a local restaurant can now stand before you to take a most sacred oath.

So let us mark this day with remembrance, of who we are and how far we have traveled. In the year of America's birth, in the coldest of months, a small band of patriots huddled by dying campfires on the shores of an icy river. The capital was abandoned. The enemy was advancing. The snow was stained with blood. At a moment when the outcome of our revolution was most in doubt, the father of our nation ordered these words be read to the people: "Let it be told to the future world ... that in the depth of winter, when nothing but hope and virtue could survive ... that the city and the country, alarmed at one common danger, came forth to meet [it]."

America. In the face of our common dangers, in this winter of our hardship, let us remember these timeless words. With hope and virtue, let us brave once more the icy currents, and endure what storms may come. Let it be said by our children's children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God's grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations.

What do you do at Udaipur is the question I am asked by many?

2009-01-15T20:48:00.001-08:00

This picture should say it all !!!

A CEO masters micro-credit

2009-01-15T03:20:00.001-08:00

Ex-ABB chief (and GM board member) Percy Barnevik is making a different kind of subprime loan: to India's very poor.

By Geoff Colvin

January 12, 2009: 6:01 AM ET

(Fortune Magazine) -- Most retired CEOs don't really retire. They serve on boards, teach at business schools, fund charities. Percy Barnevik's retirement plans are more ambitious: He intends to lift millions of people out of the world's deepest poverty.

Barnevik, 67, is best remembered as the star CEO of ABB, the giant Swiss-based electrical engineering company, from 1988 to 1996; he was then chairman of Investor AB, the business vehicle of Sweden's Wallenberg family, for another five years. He still holds a few retired-CEO jobs - including the unhappy one of being a General Motors director - but his passion is an organization called Hand in Hand International, which he came to four years ago, when it had 30 employees; today it has 6,000, plus 20,000 volunteers.

Barnevik bills himself as its "advisor," but he is its main benefactor and driving force. He spends about 80% of his time on Hand in Hand and its mission of raising living standards among the poorest of the poor, starting in the South Indian state of Tamil Nadu. As he made clear when I spoke with him recently in New Delhi, he isn't just helping poor people, he is building businesses. "Everything I learned as a CEO applies in this world as well," he says.

Hand in Hand's model is microfinance, but with several important differences. Like Grameen Bank and others, it makes tiny loans (average size: $125) to groups of women who are starting or running businesses. Unlike most of those lenders, Hand in Hand insists on extensive training for the borrowers before advancing the money, because those little businesses need to succeed. Hand in Hand targets the very poorest; most have never operated in the cash economy at all and aren't ready to run even a simple business. "We teach 75,000 women a year to read, write, and do basic math in 150 days," says Barnevik.

Then comes training in finance, entrepreneurialism, and basic operations in one of many possible businesses, such as baking or making jute bags. Only then, after three to four months, does cash follow, and it must go directly into the business; some microlenders don't monitor the cash, which may then go into consumption.

The model is different in other ways as well. Beyond microlending, it focuses on improving health, cleaning up village environments, involving the poorest in democracy, and getting children (more than 30,000 at last count) out of jobs and into school. Those elements reinforce one another to create a system Barnevik insists must become self-sustaining; Hand in Hand may bring in new schoolteachers, for example, but the villagers must pay them. Otherwise he's just creating dependency, not prosperity.

Hand in Hand reaches about 350,000 Indian women in 200,000 small businesses, and while continuing to grow in India, it is also expanding into Afghanistan, South Africa, and China. The great promise, Barnevik says, is helping the billion people globally who live on less than a dollar a day. Consider the math: He figures it costs $200 on average to create a job in the developing world, and the developed world currently spends about $110 billion a year on aid. No, it can't all be redirected into programs like his, but divert just a bit of it, and in ten or 20 years you've made a huge impact.

A couple of timely thoughts inspired by Barnevik's story: First, "subprime" is a cultural notion, not just a financial one. By conventional criteria, no one would ever lend a cent to illiterate women in South Indian villages, but Hand in Hand says its repayment rate is 99.7%.

Second, as we leave the season of giving and enter a challenging new year, we're reminded that the most valuable thing each of us has to give isn't money. Barnevik has given about $17 million to Hand in Hand, but that isn't what has made it so effective. For him and for the rest of us, the most serious gift - arguably the only serious one - is our knowledge, abilities, and passions.