The Low-Down

Gas Bags: Why US Presidents Cannot Do a Thing About Oil Prices

2012-02-26T11:30:00.000-05:00

Gas prices are inching up towards the $4 a gallon level. Which is the traditional fault line beyond which its economic impact becomes a topic of dinner table conversation and a staple of political bloviation.

President Obama has already taken the first rhetorical shot at what is sure to be a central theme in this year's US Presidential election. The conversation rarely breaks new ground: its bases are invariably what to do - and who to blame.

The problem, however, is that US Presidents have about as much power to affect gas prices as they do the weather.

The issue, of course, is that pesky global economy. We love it when other countries buy our stuff, but we resent it when their growth causes demand to grow and prices to rise. China, India, Brazil and a host of other economies are getting wealthier and then doing what comes unnaturally: buying cars. For convenience, for increasing business opportunities and for prestige. All of which drives up the need for gasoline. And despite oil shale, fracking, natural gas finds and other latter day sources of energy, supply is not keeping up with demand.

It would be useful if policy planners, business strategists and even Presidential candidates could agree that global problems require global solutions. And that the most sensible answer to such problems is to redefine the parameters in order to consider alternatives, like wind, solar and so forth. But this debate is emotional and political, not rational. So consumer behavior will have to serve as the leading indicator. Car purchases as a percent of population among potential new drivers in the US are already down - and heading lower - as young people realize they cannot afford the upkeep and running costs. It may take a while for the political class to catch up with these trends. But then it is not clear these days that Americans really count on them to lead. JL

Bryan Walsh reports in Time:

Of course in modern American politics, every day is really Presidents’ Day — so central is the occupant of the White House to the perceived state of the nation. Good news or bad news, foreign or domestic, the President gets the credit — and he gets the blame, whether he actually deserves either.

That goes for one of the most importantly economic indicators — psychologically at least — that’s out there: gas prices. A gallon of gas now costs an average of $3.53, already up 25¢ from the beginning of the year, and the highest price it’s even been at this time of the year. (Gas prices are usually lower in the winter, when the cold weather and lack of holidays curtails some driving.) With the U.S. economy strengthening — driving up demand for gasoline, and price as well — and the situation in Iran and the rest of the oil-producing Middle East looking uncertain, analysts believes gas could be well over $4 a gallon by the prime driving months of the summer.
You can bet that gas prices will be a major campaign issue during the 2012 presidential election, just as they were in 2008 — better known as the summer of “drill, baby, drill.” Republican candidate Newt Gingrich — who wants to “drill here, drill now” — has been promising that he could bring gasoline to $2.50 a gallon or less if he takes office, while the other candidates are concentrating their fire at President Obama, blaming his policies for the pain at the pump. But does a President really have that much control over how much it costs for you to fill your car?

The short answer is: not really. One way to understand that is to look at how gas prices have fared under President Obama. When he entered office in January 2009, gas cost $1.81 a gallon. Now it’s nearly $2 a gallon higher, an increase of 95%. That sounds bad, but the main reason gas had become so cheap at the start of the Obama Administration was that he was took office during the heart of the worst global recession since the Great Depression. Recession depress economic demand, and when demand is depressed, fewer people drive — which in turns leads the price of gas to fall like any other commodity would when demand falls. As the economy recovered and economic activity picked up — both in the U.S. and elsewhere — the price of gas rose as well. If future President Gingrich were to somehow be able to deliver $2.50-a-gallon gas, it would probably mean the economy had tanked again.

But what about encouraging more production of oil, both in the U.S. and in friendly nations like Canada, with its vast oil-sands reserve? For one thing, domestic oil production has increased under President Obama, thanks largely to the new unconventional reserves in states like North Dakota. Does Obama deserve much credit for that increase in domestic oil? Probably not. Though Obama has put some additional regulations on the oil industry in the wake of the Deepwater Horizon disaster, it’s hard to imagine that oil companies wouldn’t have been just as eager and able to tap those new resources under a Republican as they have been under a Democrat. And more to the point, that additional domestic oil has done little to alleviate gas prices, in part because oil functions on a global market, and extra American crude is just a drop in that much larger bucket.

Republicans will counter by charging that Obama blocked the Keystone XL pipeline, which would have transported over 800,000 barrels a day of oil-sands crude into the U.S. They’re on firmer ground here — the oil sands are a potentially massive resource, and if that crude can flow unimpeded to the U.S., there’s every reason to expect it would help reduce gas prices somewhat. (That’s ignoring the very real environmental and climate risks presented by the oil sands.) But even so, Keystone would have little immediate effect, especially since there’s already sufficient pipeline infrastructure in place for the next few years. The extra oil brought in by the pipeline might — might — reduce gas prices a few cents a gallon.

In truth, gas prices have increased largely because the U.S. economy is doing better, raising demand for gas along with everything else. Europe’s economy has remained sluggish and risks falling apart completely, which has acted as a drag on oil, but China has kept chugging along — chances are it will use 5% more oil this year. And then there’s Iran, which exports 2.2 million barrels of oil a day. That’s just a tiny part of the 89 million barrels of oil that are consumed globally, but if something goes seriously wrong in Iran — imagine an Israeli attack on the country’s nuclear facilities or even a total ban on exports — the impact on oil markets and gas prices would be ugly.

Can the President of the United States control exactly what happens inside Iran or the rate of Chinese economic growth? Obviously not — and one would hope that, as important as gas prices may be to his re-election campaign, President Obama has other priorities in mind when he’s dealing with the Middle East. Gas prices should be largely a byproduct of presidential policy—not its aim.

In fact, it’s not the price of gas the President should focus on — it’s the effect high gas prices can have on the economy. A more energy-efficient economy — from gas mileage on up — is naturally more resilient to high energy prices. That’s one area the President can help shape — and it’s an area President Obama has found quiet success. The White House has pushed through measures that will mandate significant increases in the Corporate Average Fuel Economy rules, which means in the future, American drivers will be better protected against the next big hike in gas prices. And that’s not something one hears often from the Republican presidential field.

Is Eight Hour Sleep a Myth?

2012-02-26T09:21:00.000-05:00

Lying awake at 4 AM worrying about, whatever?

Humans co-evolve with their work-life environment. Fewer than 3 percent of the population of most post-industrial western countries remain farmers - and thar urbanization is one of the world's 'mega'trends.' Our sleep patters now reflect that.

But it may be that the unsettled sleep-wake patterns about which so many complain are vestiges of ancient, deeply imbued traits that are not only natural, they are good for us. JL

Stephanie Hegarty reports on the BBC:

We often worry about lying awake in the middle of the night - but it could be good for you. A growing body of evidence from both science and history suggests that the eight-hour sleep may be unnatural.
In the early 1990s, psychiatrist Thomas Wehr conducted an experiment in which a group of people were plunged into darkness for 14 hours every day for a month.

It took some time for their sleep to regulate but by the fourth week the subjects had settled into a very distinct sleeping pattern. They slept first for four hours, then woke for one or two hours before falling into a second four-hour sleep.

Though sleep scientists were impressed by the study, among the general public the idea that we must sleep for eight consecutive hours persists.

In 2001, historian Roger Ekirch of Virginia Tech published a seminal paper, drawn from 16 years of research, revealing a wealth of historical evidence that humans used to sleep in two distinct chunks.

His book At Day's Close: Night in Times Past, published four years later, unearths more than 500 references to a segmented sleeping pattern - in diaries, court records, medical books and literature, from Homer's Odyssey to an anthropological account of modern tribes in Nigeria.

Much like the experience of Wehr's subjects, these references describe a first sleep which began about two hours after dusk, followed by waking period of one or two hours and then a second sleep.

"It's not just the number of references - it is the way they refer to it, as if it was common knowledge," Ekirch says.

During this waking period people were quite active. They often got up, went to the toilet or smoked tobacco and some even visited neighbours. Most people stayed in bed, read, wrote and often prayed. Countless prayer manuals from the late 15th Century offered special prayers for the hours in between sleeps.

And these hours weren't entirely solitary - people often chatted to bed-fellows or had sex.

A doctor's manual from 16th Century France even advised couples that the best time to conceive was not at the end of a long day's labour but "after the first sleep", when "they have more enjoyment" and "do it better".

Ekirch found that references to the first and second sleep started to disappear during the late 17th Century. This started among the urban upper classes in northern Europe and over the course of the next 200 years filtered down to the rest of Western society.

By the 1920s the idea of a first and second sleep had receded entirely from our social consciousness.

He attributes the initial shift to improvements in street lighting, domestic lighting and a surge in coffee houses - which were sometimes open all night. As the night became a place for legitimate activity and as that activity increased, the length of time people could dedicate to rest dwindled.

In his new book, Evening's Empire, historian Craig Koslofsky puts forward an account of how this happened.

"Associations with night before the 17th Century were not good," he says. The night was a place populated by people of disrepute - criminals, prostitutes and drunks.

"Even the wealthy, who could afford candlelight, had better things to spend their money on. There was no prestige or social value associated with staying up all night."

That changed in the wake of the Reformation and the counter-Reformation. Protestants and Catholics became accustomed to holding secret services at night, during periods of persecution. If earlier the night had belonged to reprobates, now respectable people became accustomed to exploiting the hours of darkness.

This trend migrated to the social sphere too, but only for those who could afford to live by candlelight. With the advent of street lighting, however, socialising at night began to filter down through the classes.

In 1667, Paris became the first city in the world to light its streets, using wax candles in glass lamps. It was followed by Lille in the same year and Amsterdam two years later, where a much more efficient oil-powered lamp was developed.

London didn't join their ranks until 1684 but by the end of the century, more than 50 of Europe's major towns and cities were lit at night.

Night became fashionable and spending hours lying in bed was considered a waste of time.

A small city like Leipzig in central Germany employed 100 men to tend to 700 lamps "People were becoming increasingly time-conscious and sensitive to efficiency, certainly before the 19th Century," says Roger Ekirch. "But the industrial revolution intensified that attitude by leaps and bounds."

Strong evidence of this shifting attitude is contained in a medical journal from 1829 which urged parents to force their children out of a pattern of first and second sleep.

"If no disease or accident there intervene, they will need no further repose than that obtained in their first sleep, which custom will have caused to terminate by itself just at the usual hour.

"And then, if they turn upon their ear to take a second nap, they will be taught to look upon it as an intemperance not at all redounding to their credit."

Today, most people seem to have adapted quite well to the eight-hour sleep, but Ekirch believes many sleeping problems may have roots in the human body's natural preference for segmented sleep as well as the ubiquity of artificial light.

This could be the root of a condition called sleep maintenance insomnia, where people wake during the night and have trouble getting back to sleep, he suggests.

The condition first appears in literature at the end of the 19th Century, at the same time as accounts of segmented sleep disappear.

"For most of evolution we slept a certain way," says sleep psychologist Gregg Jacobs. "Waking up during the night is part of normal human physiology."

The idea that we must sleep in a consolidated block could be damaging, he says, if it makes people who wake up at night anxious, as this anxiety can itself prohibit sleeps and is likely to seep into waking life too.

Stages of sleep
Every 60-100 minutes we go through a cycle of four stages of sleep

Stage 1 is a drowsy, relaxed state between being awake and sleeping - breathing slows, muscles relax, heart rate drops
Stage 2 is slightly deeper sleep - you may feel awake and this means that, on many nights, you may be asleep and not know it
Stage 3 and Stage 4, or Deep Sleep - it is very hard to wake up from Deep Sleep because this is when there is the lowest amount of activity in your body
After Deep Sleep, we go back to Stage 2 for a few minutes, and then enter Dream Sleep - also called REM (rapid eye movement) sleep - which, as its name suggests, is when you dream
In a full sleep cycle, a person goes through all the stages of sleep from one to four, then back down through stages three and two, before entering dream sleep

Russell Foster, a professor of circadian [body clock] neuroscience at Oxford, shares this point of view.

"Many people wake up at night and panic," he says. "I tell them that what they are experiencing is a throwback to the bi-modal sleep pattern."

But the majority of doctors still fail to acknowledge that a consolidated eight-hour sleep may be unnatural.

"Over 30% of the medical problems that doctors are faced with stem directly or indirectly from sleep. But sleep has been ignored in medical training and there are very few centres where sleep is studied," he says.

Jacobs suggests that the waking period between sleeps, when people were forced into periods of rest and relaxation, could have played an important part in the human capacity to regulate stress naturally.

In many historic accounts, Ekirch found that people used the time to meditate on their dreams.

"Today we spend less time doing those things," says Dr Jacobs. "It's not a coincidence that, in modern life, the number of people who report anxiety, stress, depression, alcoholism and drug abuse has gone up."

So the next time you wake up in the middle of the night, think of your pre-industrial ancestors and relax. Lying awake could be good for you.

Oscar Obsessions Online: I Would Like to Thank My Twitter Followers

2012-02-25T09:07:00.002-05:00

And the Oscar for most creative social media strategy goes to...

Katherine Rosman reports in the Wall Street Journal:

With a slate of small, arty movie nominees and an old-school host who is more reliable than buzzy, this year's Academy Awards broadcast may not set any television ratings records. But it's poised for a shot at another title: It could be the biggest night yet for social media.

The awards show is working hard to pump up its social-media clout as it tries to leverage a growing phenomenon: More and more viewers are supplementing the experience of merely watching their favorite TV shows by joining in simultaneous running commentaries on Twitter and Facebook.
ABC, which will broadcast the awards Sunday, will have at least two people tweeting about what is happening backstage, including Shira Lazar, a Web-broadcast personality. The preshow red-carpet hosts will be asking celebrities questions that viewers have posted to Twitter. The Academy of Motion Picture Arts and Sciences, which presents the awards, has a new feature available on Facebook that lets users choose which films and actors they expect to win, and share their picks with friends.

In addition to the official cameras trained on the stage and audience, 20 cameras will be stationed in the red-carpet area and throughout the theater, including one at the lobby bar and a backstage "Thank You Camera" where winners can extend their acceptance speeches. Video from these cameras won't be part of the TV broadcast but will be streamed on Oscar.com and the free mobile Oscars app. A ticker on the site and app will let followers know in real time who is appearing on which camera. The idea is to give people more access to live celebrity footage that they can chat about online.

During the broadcast, viewer tweets using the hashtags "#oscars," "#redcarpetqa" and "#bestdressed" will appear on Oscar.com and the Oscars app. Karin Gilford, ABC's senior vice president of digital media, says an outside company has been hired to monitor the tweets that will appear on the Oscar site to weed out spam and offensive content.

Even snarky comments from viewers can be used to the network's benefit. "If everyone is going crazy about one event or moment of the telecast, we know what video clips to post to the site," Ms. Gilford says.

Last year during the telecast, tweeters took to the Web to discuss Oscar co-host James Franco's dazed and uncommanding comportment. Joy Behar, a co-host of "The View," tweeted about Mr. Franco and his co-host Anne Hathaway: "I'm surprised Anne Hathaway didn't get a hernia from carrying James Franco all night. #Oscars."

Last year's Oscar broadcast had 966,000 social-media comments, and overall, the social-media Oscar chatter was positive, according to Bluefin Labs, a social-media analytics company. During the Oscar telecast, 87% of all social-media comments were about the Academy Awards, and the third most frequently used term was "love" (after "#oscars" and "Oscars"). "Dress" was fifth. The vast majority of measurable "social-media mentions" are culled from Twitter because—unlike Facebook status updates, which often are visible only to a user's friends—most tweets are publicly posted.

Other big TV events have seen huge jumps in social-media activity lately. The Super Bowl garnered 12.2 million comments on social networks like Twitter and Facebook during the game's recent telecast, up 578% from last year's game, according to Bluefin Labs. The Grammy Awards racked up 13 million social-media comments during the broadcast, up 2,280% from last year. (The show also had a surge in TV viewers, likely due in part to the death of Whitney Houston the day before the awards.)

Media executives say they don't yet have the data to directly measure the correlation between volume of social media mentions and actual viewership ratings. "But we do know that social media drives engagement and can help sustain viewers' interest in what they're watching," says Albert Cheng, executive vice president for digital media of Disney-ABC Television Group.

For this year's Oscars, Twitter Inc. has lined up a group of TV and music personalities to tweet throughout the ceremony, including "Desperate Housewives" star Eva Longoria, "American Idol" judge Randy Jackson and comedian Whitney Cummings, the star of NBC's "Whitney."

Suzy Soro, a blogger, comedian and actress in Los Angeles, will live-tweet the Oscars from her feed @HotComesToDie. She says she appreciates the way that Twitter can level the playing field on a night when Hollywood celebrates its glamorous A-list. "It all goes back to Andy Warhol," Ms. Soro says. "When you live-tweet, you're onstage, too."

Even the after-show party-scene glamour will be socially leveraged. Vanity Fair, which famously throws an Oscar party, will have a staffer tweeting from the party, and video footage of the celebration will go online hourly throughout the party, says Chris Rovzar, Vanity Fair's digital editor.

He says the videos and tweeting will let readers experience the party without totally compromising the privacy of the A-list guest list. "It's a delicate balance of letting people know what is going on and not spoiling anybody's fun," he says

Data Dilemma: There Is No Ethical Smart Phone

2012-02-25T08:50:00.000-05:00

Apple has taken the most heat, but it turns out they live in a tough neighborhood.

Where no one occupies the moral high ground. And all the choices spiral downward, even, for those wishing or hoping there might be a conscionable alternative.

The issue of working conditions for workers manufacturing smart phones and other electronics has become a prominent source of commentary since the revelations about uber-contractor Foxconn first surfaced. It seems they have plenty of company. In fact, it may be impossible to find any device or gadget made in circumstances that would allow the purchaser to feel the slightest twinges of moral superiority.

Despite disputed reports about whether the Apple initiatives will be effective or not, the situation has raised questions about sourcing that are sure to linger. Not just because consumers may demand better worker treatment and greater transparency - but because it may provide a competitive advantage opportunity for some new entrant. Who knew that ethics could be a disruptive innovation? JL

Andrew Leonard reports in Salon:

John Wood, self-described phone geek, had a problem. He couldn’t “upgrade with confidence,” he confessed on his blog. The “ethical implications” of the globalized, labor-exploiting manufacturing process confounded him. The more he knew, the more constrained he felt. In his capacity as campaigns and new media officer for the Trades Union Congress in the United Kingdom, it was his job to be a voice for the labor movement online. But in his personal life, just getting online meant trampling all over the workers of the world.

Wood’s dilemma extended far beyond the well-publicized abusive working conditions at Foxconn, the Taiwanese manufacturing giant that assembles Apple’s iPhone, along with countless other consumer electronic devices. Labor and environmental abuses are endemic throughout the global electronics industry, from the mining of the minerals used to make the basic components, through their assembly and all the way up to (and beyond) the disposal of last year’s obsolete model. There’s no getting around the hard truth: right now, there is no such thing as an “ethical smartphone.” Or, for that matter, an ethical flat-screen TV, digital camera or any kind of personal computer.
Wood embarked on a quest to see if he could find, at the very least, a smartphone that wasn’t quite so badly compromised as all the others. He started contacting major smartphone manufacturers — Apple, HTC, Samsung, Nokia — to ask what their policies were regarding labor abuses and supply-chain monitoring. He pondered East Asian government reports detailing labor law violations at individual links in the outsourcing chain. He weighed whether to reject Nokia for also outsourcing production to Foxconn, or to give the Finnish company points for thinking more deeply about sustainability issues than its competitors. He wondered whether he should cut Samsung a break because the company kept more of its manufacturing in house in South Korea — where the labor laws were better enforced than in China or Vietnam.

He finally settled on a Samsung Galaxy Note, primarily on the basis that Samsung had managed to steer clear of a Taiwanese LCD screen component manufacturer under investigation for multiple labor law violations. But barely a week after purchasing the phone (which, of course, he loves) he discovered that Samsung has been criticized as both a union-buster and for failing to protect its workers from dangerous industrial chemicals.

In his attempt to find nuance that would salve his conscience, all Wood discovered were varying “shades of gray.” As he conceded in an email, there is “no ideal solution.” For every smartphone manufacturer, “the model of globalized production is fundamentally similar.”

So if you are looking for shopping recommendations, you will be disappointed. But that doesn’t necessarily imply despair — or that there isn’t any chance at all of improving working conditions for electronics workers around the world. If enough people organize and apply pressure, anything’s possible. And ironically, billions of people around the world are now in possession of the most powerful tools for facilitating grass-roots organization ever invented: ethically compromised smartphones!

The implied paradox is a head-scratcher, to be sure.

“It seems odd to me that the devices that empower us so much,” Wood says, “should themselves be the products of alienation. But it’s even more interesting to think that they could be one of the first cases that can actually help overcome the gulf between the different worlds of producers and consumers. A demonstrator in Taiwan can film an action at HTC on their smartphone, and upload it to Facebook, where six degrees of separation can see it viewed by half the people on the planet. And if you can’t forget it and do want to find out more, a couple of clicks can make direct contact and link your device with that of people on the other side of the planet, whose existence you’d never given a second thought about before.”

Welcome to the fundamental contradiction of the age of the smartphone. The same gizmos that enable the ultra-efficient globalized exploitation of labor — computers, broadband networks, digital communication devices — are the tools that we must use to address and overcome those inequities. Sounds crazy, but it’s true: If you want an “ethical iPhone,” you’re going to have to use your unethical iPhone to get it.

At the website for MakeITfair, a “European project” dedicated to exposing labor abuses and environmental problems in electronics manufacturing (the “IT” stands for “information technology”), curious visitors can delve as deeply as they like into reports documenting woes at every step of the global supply chain. Mistreatment of coltan miners in the Congo. Labor abuses in the production of game consoles in China, mobile phones in India, and digital cameras in Vietnam. To close out the cycle, there is even an investigation of the health hazards involving in dumping old computers and other e-waste in Ghana.

Reviewing the information is a troubling experience. As Auret van Heerden, president of the Fair Labor Association has said, “none of us want to be accessories after the fact in a human rights abuse in the global supply chain.” But escaping from the crime scene is hard. No matter how enlightened a consumer you might intend to be, outside of retiring to a cave and subsisting on a diet of nuts and berries there is virtually no way to avoid getting trapped in the web of global exploitation complicity. Phones, video games, TVs — heck, there’s a non-negligible chance that your coffee maker has a circuit board connected to Congo coltan mining profits that subsidize rape and murder in Africa and sweatshop child labor somewhere in Asia. How’s that for a wakeup call?

Disturbed by your contemplation of these inconvenient facts, you might feel impelled to see what options there are for action, as suggested by MakeITfair.

Activities YOU can do:

•Join our makeITfair Facebook group and support the cause
•Support the cause by changing your facebook profile picture to the makeITfair logo
•Follow us on Twitter. Retweet our messages or send your own ones. Post everyday a few messages to get the buzz going on.
There are other action items, but that’s how the list begins. And at first glance, in comparison to the horrors that you have just been mulling over, the recommendations seem ludicrous. The cognitive disjunction between what’s happening to workers all over the world and the effort necessary to retweet 140 characters on Twitter is a cruel joke. Teenage Chinese workers are pulling double shifts and I’m clicking the Facebook “like” button for a link to “This American Life’s” report on Mike Daisey’s monologue about Apple? Is this what Karl Marx meant by solidarity?

Well, actually, maybe, in the sense that a key part of solidarity is the simple expression by the privileged that they are on the same side as the exploited. But there’s more to the social media phenomenon than just its utility as an echo chamber. As we follow the daily zigs and zags of current events in today’s world, it’s becoming harder and harder to deny the real, physical impact of social media hubbub. We don’t have to look far, especially in the last couple of months. We see this in the skyrocketing fame of a New York Knicks point guard or the successful grass-roots mobilization against new copyright laws and bank fees. Just two weeks ago, you might have read a tweet about the Susan G. Komen Race for the Cure Foundation withdrawing breast cancer screening funding from Planned Parenthood and without taking your thumbs off your iPhone, you might have sent a donation to Planned Parenthood and called your congresswoman to express your outrage.

And change happened. Just because action is easy doesn’t make it irrelevant. It’s not really an exaggeration to say that Planned Parenthood raised $3 million in three days because of a tweet heard round the world. So now we have a new challenge: What’s it going to take to get that crowd-sourced funding fire hose pointed at workplace auditing programs or union-organization efforts?

Last week, Apple announced that it had asked the Fair Labor Association, a nonprofit dedicated to “improving working conditions in factories around the world,” to audit conditions throughout its immense supply chain. There are plenty of reasons to look askance at Apple’s move. The Fair Labor Association is a voluntary organization whose members include many of the companies whose supply chains require a close investigation. At a talk at the TED conference in 2010, founder and president Auret van Heerden made it clear that he saw multinational corporations as the only vehicle capable of ensuring lasting improvement in workplace conditions in the developing world — “the only transnational actor with real power to affect people’s lives” — something that may seem strange to those who see multinational outsourcing and offshoring strategies as one of the major forces undermining the standards of living for workers in the developed world. (And indeed, Heerden immediately surprised and dismayed Apple’s critics by gushing about how great Foxconn’s factories were.)

But Apple’s move still represents a step in the right direction. As Mike Daisey, the monologist whose “The Agony and Ecstasy of Steve Jobs” is probably the most compelling exploration of the challenge posed by the unethical iPhone, wrote on his blog, Apple’s action provided “a testament to so many who have made their voices heard.”

Arguably, Daisey’s monologue, reinforced by some blockbuster reporting from the New York Times, are the proximate causes of Apple’s move. But let’s not underestimate the public relations impact of the hundreds of thousands who have signed petitions calling for Apple to manufacture an ethical iPhone, or the protests in Apple’s stores, or the way that a report on NPR or in the New York Times can get rebroadcast and reinforced and amplified when millions of Facebook and Twitter users start liking and retweeting and posting recommendations. Is it really that much of a stretch to imagine that what happened to Bank of America or Susan G. Komen might happen to Apple? Indeed, the more we see the power of social media-facilitated organizing demonstrated, the more we’re likely to push harder.

When we look back at the events of the last couple of months it is beyond obvious that social media is starting to wag the dog. The mainstream media is taking its cues for what to cover from what people are mouthing off about online. Brands that have been built up over decades and are worth hundreds of millions of dollars can be destroyed in a blinding flash. Even a force as mighty as globalization may finally have met its match — in the network and devices that link the entire world into one we’re-not-going-to-take-it-anymore collective.

“Up till now,” says Wood, “the only people who had a big picture on globalization were the corporations that made the deals and kept them hidden from people at both ends of the equation. But now potentially ordinary producers and consumers have a tool to help us understand how globalization works, and to seek to do something about it. Smartphones and tablets could be a breakthrough product that then gets us thinking about the influence of globalization in manufacturing more widely.”

Right now, it’s a loser’s game to try to find a more ethical smartphone. Everything and everyone is compromised. But it’s a winner’s game to figure out how to use what we’ve got to bring progressive change. We have computers in our pockets that not only connect us more easily and effortlessly to information about what’s going on in the rest of the world than ever before, but also connect us to each other. We might (and we should) feel guilty and ashamed when we stop to think about the suffering of the workers who built those devices, and it sure seems like there’s a hell of a market opportunity for someone who figures out how to build these devices through a clean and green, worker-friendly supply chain, but in the meantime, our best option is to use our devices to learn more, donate money where it is most effective, and make our voices heard. In this crazy ultra-connected world, we might end up surprised at how fast things can turn around.

Crash and Burn: Nascar Researches Its Market As Popularity Wanes

2012-02-24T13:57:00.000-05:00

Is nothing sacred?

Race-car circuit Nascar embodied the essential elements of mid-century American culture: speed, violence and high powered automobiles. And in a setting where noise and drunkenness were not just tolerated, they were celebrated.

What could go wrong? Well, when your market is made up primarily of white, blue-collar workers whose jobs have been cut, incomes decimated and whose ages are advancing, it tends to have an impact on their ability to pay and therefore, on your bottom line.

But give the drivers, team and track owners credit: they saw it happening and they acted. As the following article spells out, they spent over $5 million on market research to identify the issues and begin prescribing solutions. For instance, the recent Nascar announcement that Confederate battle flags are no longer welcome at their events was not simply a politically correct sop to some vast liberal conspiracy: Nascar needs, desperately, to attract Hispanics and euphemistically titled 'urban youth' if it hopes to grow and regain a bigger slice of the entertainment and sporting markets.

When it comes to car racing, culture still counts. But business is business. JL

Ken Belson reports in the New York Times:

When the royalty of Nascar gathered last June in a hotel in Charlotte, N.C., the meeting had the feel of an urgent summit. Once a seemingly unstoppable juggernaut, Nascar suffered during the recession as attendance and television ratings fell and sponsors, who once flocked to the sport, held back.

Brian France, Nascar’s chairman, flanked by his top lieutenants, came armed with more than a year’s worth of research on what ailed Nascar and shared it with Roger Penske, Jack Roush and other race team executives. Drivers, the lifeblood of the sport, were too predictable; race teams and Nascar were slow to embrace social media; track owners were not doing enough to make attending races easier; not enough was being done to attract Hispanics and urban youths to offset the decline in older fans
“Our success covered up or accelerated good and bad things going on,” France said recently. “It’s better to be on the offensive and put a tail wind behind it.”

France’s message was based on the first comprehensive study of Nascar, ordered in 2010 to come up with a five-year plan for fixing the sport. The Nascar Sprint Cup Series opens its 2012 season Sunday with the Daytona 500 after the corporate soul-searching resulted in a set of measures, compiled late last year, aimed at revitalizing the way the sport does business.

After the recession slowed years of meteoric growth, Nascar’s leadership, from France on down, realized that the build-it-and-they-will-come model that propelled it through the 1990s and the first half of the last decade was no longer a solid business strategy. More than most sports, Nascar relies on older, white male fans. The study found that those fans were, because of the recession and their advancing age, going to fewer races and spending less at the races they did attend. According to the research, the growth in the number of single-parent families had also made it harder for fathers and mothers to take their children to races.

Because fans flocked to races for years, Nascar did not have to work hard to find newcomers. Now, younger fans are more likely to learn about a sport online than from a father or uncle, and Nascar feels it has to speak more directly to them.

The car culture that nourished Nascar has also been changing. Fewer Americans are tinkering under the hood, which makes them less likely to appreciate stock cars. Brand loyalty to automobile manufacturers has eroded, undermining another cornerstone of the Nascar fan experience: rooting for a Chevy, a Dodge, a Ford or a Toyota. (The latest racecar design, introduced in 2007 to criticism from drivers and fans alike, did not help. The four manufacturers are designing cars that look more like the models they represent, and they will be on the track next year.)

“There was a lack of understanding about what Nascar was trying to accomplish,” said Steve Phelps, Nascar’s chief marketing officer, who hired Taylor, a communications firm, to conduct the study. “Like any business, you have to take stock of where you are.”

To review how the sport communicates with fans new and old, Nascar interviewed nearly 40 of its executives and 151 industry stakeholders, including drivers, race teams and sponsors. More than 1,000 casual and avid fans completed online surveys. News media coverage of Nascar during the past decade was analyzed to see how it could be improved.

It was a no-holds-barred look at the sport done at breakneck speed. The results were “a real eye-opener,” said Mike Helton, Nascar’s president. The findings showed what many in the sport sensed, but were unable to correct: Nascar spoke in many voices, often at once. Drivers said one thing, race teams said another. Nascar promoted the sport as the organizing body, and the broadcasters and sponsors pumped the races in their own way. Track operators across the country had their own interests to pursue.

“The media landscape has changed so much and we were slow to change to it,” Phelps said. “We need to have a bonfire instead of 10 campfires” if Nascar wants to speak effectively to attract new fans.

After spending more than $5 million on the research, Nascar spent millions more buying back its digital rights in 2013 from Turner, which had paid Nascar a fee to run its Web site. This will help resolve conflicts that have hampered Nascar’s exposure. For instance, a television station currently can shoot video at a track and broadcast it, but it has not been allowed to post the video on its Web site because it competes with Turner’s Web site. That will change next year.

Nascar also hired nine new staff members, in part to help market to Hispanic, urban and young fans. Drivers were also encouraged to use Twitter and Facebook to communicate because, the research showed, fans are more likely to get hooked on the sport if they can root for a specific driver. Sponsors that provide the financial fuel for race teams also want more for their advertising dollars.

“I was fighting against social media because am I going to walk down the street to get a burger and tweet that?” said Jeff Gordon, the four-time Cup Series champion who now has 129,000 followers on Twitter. “But when I met with sponsors, they asked me about my social media. It really got me to look at it more.”

To attract new fans, Phelps commissioned an ethnographic study that gauged how fans navigate racetracks. This included 64 hours with focus groups. At nine tracks, 650 fans were interviewed and 55 hours of video footage shot. More than 70 first-time fans were given tickets and spending money to attend one Nascar race, one other sporting event and one nonsporting event like a concert or circus, and asked to record everything they did.

The video revealed a wealth of details. Some new fans discovered that many things required cash. Few tracks offered services for children. While most tracks did a good job of ushering cars into their parking lots, few of them directed traffic after races ended. Tracks sold tickets in a variety of formats.

“We all fell into a rut because we assumed all fans were professionals,” said Joie Chitwood, the president of Daytona International Speedway. “We didn’t assume there would be some rookies.”

But first and foremost, fans want to follow tight races and fresh faces, two things they got last year. After Jimmie Johnson won five consecutive championships, Tony Stewart edged Carl Edwards for the title in the final race of the season. Not surprisingly, television ratings rose.

“I don’t think it’s good for one driver to win five championships in a row,” said R. Jon Ackley, who teaches a class on the business of Nascar at Virginia Commonwealth University. “That’s why Nascar saw a resurgence last season.”

If nothing else, the research was so comprehensive that executives in the sport who normally talk to one another about cars and track conditions are now swapping ideas on how to work together to better reach fans and sponsors.

“It would be difficult to envision a day when I was happy about someone else’s success on the racetrack,” said Marshall Carlson, the president of Hendrick Motorsports. “There was a real shift in that we started to use the word ‘we’ a lot more.”

Adam Smith Amended: Has Connectivity Rendered Traditional Economics Obsolete?

2012-02-24T08:20:00.000-05:00

Formulas that no longer work based on assumptions that no longer apply.

Markets are efficient distributors of value in the long run, just as in the long run, we are all dead.

Connectivity and transparency have rendered obsolete many of the theories on which modern economics is based. The problem is that such efficient transfers of knowledge render localized impacts irrelevant. And the result is that instead of spreading risk, it becomes concentrated, making it even more dangerous. As we learned during the financial crisis in 2008 and are almost certain to be reminded of again fairly soon.

The very notion of 'externalities' is almost comical in a world in which most decision-makers are connected and knowledge is shared instantaneously. One person's externality is a linked colleague's centrality. Like the old line goes, 'who ya gonna believe; me, or your lyin' eyes? JL

Bill Davidow comments in The Atlantic:

Bookstores, newspapers, travel agencies -- add economists to the list. What do many economists have in common with these enterprises? They have clung to beliefs and strategies that no longer work in an overconnected world. Much of the economic theory that guides government policies and the actions of business -- developed when the world was far less connected than it is today -- is out of date. Theories that were once right are now wrong.

Adam Smith's "invisible hand" provided invaluable guidance to markets and did an excellent job of allocating resources in a less connected world. As long as the markets were local, externalities less important, and moral and government authority policed unsavory behavior, there was no better system.
Moral authority is the powerful thumb of the invisible hand.

In Smith's time such authority was exerted by the church, local institutions, government, and citizens. Most people conducted their business affairs in the communities in which they lived. As a result, control rested with one's neighbors, the people one saw in church, local business organizations, and local and national government.

During the Depression, Smith's invisible hand functioned in the following way: The mortgage business began in 1932, in response to a liquidity crisis. Back then, a 20 percent down payment was considered the minimum a bank would approve. And for this, the largest investment of their lives, borrowers would travel to their local bank and sit down with a loan officer who probably knew them, whose kids played baseball with theirs.

In those days, the banks owned the loans. If the loan went bad, the banks lost the money. If you knew the man and he fell on hard times, it was difficult to put his wife and kids out on the street on Friday, only to see him in the next pew that Sunday. Faced with that potential embarrassment, bankers were careful to make only those loans borrowers could afford. When customers had problems, the bank was much more likely to work with them to find a solution.

In today's overconnected world, banks externalize the costs of bad loans by creating Collateralized Debt Obligations and passing the losses off to endowments and pension funds. Some shadow entity takes the losses, the banks make a profit on the transactions, and bankers get the added benefit of never having to look the bankrupt person in the eye.

John Maynard Keynes's ideas worked splendidly when the world was less connected. Economic and fiscal policies that stimulated demand created local factory jobs. When those workers spent their paychecks, other jobs were created -- the multiplier effect. Today, stimulus creates more spending but the jobs and the trickle-down are in China.

The mathematically elegant formulas that win Nobel Prizes for modern economists are based on assumptions that no longer apply, and on historical data that is no longer meaningful in our overconnected environment. Unfortunately, those formulas are shaping much of the advice being dispensed. They were right for a less connected world but are wrong now.

Consider Robert Merton, who won the Nobel Prize in economics for his work on the Black-Scholes Model. Merton's model enabled people to assign the appropriate value to exotic financial instruments such as futures contracts and plain vanilla stock options. Merton became a victim of his own invention. He was one of the founders of Long Term Capital Management, which based its derivative trading strategies on the Black-Scholes Model. In 1998, "fat tails" that the model failed to take into account caused the bankruptcy of the firm and nearly triggered an international financial contagion. The slavish devotion to the model persists; it raised its ugly head again during the 2008 financial crisis.

The improper application of the theory is one of the things that fueled the spectacular growth in over-the-counter derivatives, from $60 trillion in 2000 to more than $600 trillion in 2008. This growth took place while the economists and regulators using bricks and mortar logic were arguing that derivatives distributed risk, when in fact massive amounts of derivatives concentrated risk.

The fat tails played a starring role in the bankruptcy of Lehman Brothers and the $182 billion bailout of AIG. Merton's theory was right when certain assumptions held, and wrong when they were applied in an overconnected environment.

Economists, policy makers, and presidential advisors have to get it right. Their influence is so great that when they get it wrong, tragedy often ensues. As Robert Heilbroner explained in his classic book, The Worldly Philosophers, the impact of Adam Smith, Karl Marx, John Maynard Keynes, John Stuart Mill, Thorstein Veblen, and Joseph Schumpeter has been immense. Heilbroner argued that "he who enlists a man's mind wields a power greater that the sword or the scepter" and that they "left in their train shattered empires...undermined political regimes: they set class against class and even nation against nation...because of the extraordinary power of their ideas."

The crisis in Greece offers convincing evidence that the "shattered empires" and events that "set class against class and even nation against nation" has not come to an end. Greece was a victim of the bricks and mortar design of the euro and is about to suffer the pain of a bricks and mortar solution.

Today's brilliant economists still exercise Heilbroner's extraordinary powers. All too often, they are enlisting politicians' minds based on a great deal of theory that was right then and wrong now.

Amazon has already killed off Borders, as well as thousands of independent booksellers. Blogs and online news outlets are replacing print media. Expedia and Orbitz are reinventing the travel business. Increased levels of connectivity are rendering economic rules obsolete. In posts to follow, I will be discussing some of the new rules for a virtual world.

It is time for the worldly philosophers who advise us give up their obsolete bricks-and-mortar ideas and develop economic theory for an overconnected world. President Obama and the Republican presidential candidates alike would be well advised to demand a different way of thinking.

Say Goodbye to Blockbuster Stores and Hello to Blockbuster Branded Web Services

2012-02-24T07:52:00.000-05:00

The king is dead, long live the king.

Perhaps you thought you wouldnt have Blockbuster to kick around anymore. Going to the video store and paying cash to rent a movie? About as contemporary as Mylie Cyrus. (Who?).

But there's life in the old brand yet. Which just goes to show that the internet economy is a lot like the film industry; nothing ever disappears, it just goes into rewrite.

In this case, we have a brand with strong name recognition and positive, if dated, associations. And where there is undervalued intellectual property there is opportunity. Dish Networks, the number three paid TV service in the US senses that the market for those services is plateauing. The future? Streaming video and other web-hosted entertainment. So what better brand to buy out of bankruptcy. And then employ to promote your new web strategy? It's clever marketing, it's cost-effective - and it just might work. JL

Daniel Frankel reports in PaidContent:

The Blockbuster brand emerged from the ashes of bankruptcy to have an impact on the bottom line of its new owner, Dish Network (NSDQ: DISH). The satellite TV service provider reported its first subscriber uptick in about two years, growth that was driven, it said, by the addition in October of Blockbuster’s branded streaming service. But say goodbye to Blockbuster as we’ve known it—Dish also said it will close a third of the once formidable chain’s 1,500 brick-and-mortar outlets while hinting that more shutterings are on the way
The No. 3 paid TV service in America behind Comcast (NSDQ: CMCSA) and DirecTV (NYSE: DTV) reported earnings of $313 million for the October-through-December period, up from $252 million a year prior. Revenue was also up 13 percent to $3.63 billion. And Dish added 22,000 subscribers in the quarter, ending a lengthy customer drought. Dish now has about 14 million U.S. subscribers. All of these metrics met or beat the forecasts of analysts.

“By introducing new Blockbuster-branded services, we’ve begun to turn the tide in subscriber losses while continuing to face increased competitive pressures,” Dish CEO Joe Clayton said in a statement. Dish paid $228 million in cash last April to acquire Blockbuster out of bankruptcy. It then launched a Blockbuster-branded streaming service in October, bundling it with its satellite video service and diversifying its business in the face of a maturing U.S. pay-TV subscription market.

Dish’s competitors are also getting into the internet movie-streaming game, with Comcast announcing a new service called Streampix earlier this week. While Dish seems pleased with the competitive juice that Blockbuster’s streaming operation is giving it, the satellite company seems determined to slowly back away from Blockbuster’s physical rental-chain roots. Citing competition from kiosk operators like Redbox, Dish said it’s closing around 500 Blockbuster stores with expiring leases. It also said it “may close” additional stores. With Dish proving successful so far in its objective to transition Blockbuster into a brand for streaming video content, it seems unlikely the company will have any interest in operating the remaining brick and mortar stores beyond the lifespan of their lease agreements.

Meanwhile, Dish chairman Charlie Ergen said the company eagerly awaits the Federal Communication Commission’s approval decision on its $1.4 billion acquisition of bankrupt wireless spectrum company TerreStar. With spiraling programming cost cutting into the margins of the pay TV business, cable has found relief in broadband services. For its part, Dish is looking to augment its portfolio with a new wireless broadband service, too. The FCC has set a March 12 deadline for its decision.

“It would transform not only our company but the way people use wireless in the United States,” Ergen told investors Thursday. “The business we’re in today and wireless (broadband) are a package deal. Right now the cable industry is best positioned to take advantage of that. I hope the administration wants some competition to that.”

Americans Now Holding On To Their Cars for Almost Six Years

2012-02-23T16:40:00.003-05:00

Levittown, Howdy Doody and a new car every two years.

Those images, representing a home of one's own, television and an endless stream of aerodynamic marvels in the driveway, were quintessential elements of The 1950s and 60s American Dream. But rising gas prices, lower incomes and a lingering recession have put the kabosh on two of those three. Television is the survivor, for those who may wonder, and even it has undergone permutations that would have made the heads spin of Don Draper and his Mad Men confreres.

For the auto industry - and for the environment - the message is mixed. Higher quality has combined with financial pressure to keep turnover down. But lower turnover based on better mileage and environmental safeguards has reduced pollution while raising the prices at which the newer models can be sold. The downside from a macro economic standpoint is the reduction in high-paying auto industry jobs. It may be, however, that money saved on what was in essence a vain and inefficient tradition will help fund a more productive and sustainable legacy. JL

Stephen Williams reports in Advertising Age:

Americans are sticking with their automobiles for almost six years before getting a new one.

Longer vehicle warranties, improved reliability and a downward economy are some of the factors cited by automotive data researcher R.L. Polk to explain why new-car owners are staying with their vehicles for 71 months. That's an all-time high, according to the researcher, as is the 50-month period for used-car purchasers keeping their vehicles.
While the findings of Polk's report -- based on vehicle-registration data through last September -- is buoyant news for auto-parts retailers and independent repair and service shops, it's not particularly good for automakers who market new cars.

Polk researcher Mark Seng writes that pent-up demand for new cars will boost sales somewhat, and that the market could return to pre-downturn annual sales levels of 16 million cars and light trucks by 2015. "However, this doesn't mean that the average length of ownership will immediately start to decline." Sales of cars and trucks in 2011 reached almost 12.8 million units, according to Automotive News.

Polk suggests that marketing and advertising managers monitor the length of ownership "to determine when consumers may come back to market."

Alan Baum, a Michigan-based automotive industry analyst, agrees that the economy is dissuading new-car buys. "The automakers themselves are changing their business models. They've reduced their incentives and production volume, and found this isn't a bad thing. It allows them to increase net prices and not tax factories to the limit."

The Changing Role of Brand in the Not for Profit Sector

2012-02-23T11:23:00.000-05:00

The missions are getting broader due to government cutbacks and the money is getting bigger thanks to the growing involvement of society's wealthiest.

As this evolution occurs, the role of brand is changing with it. Not for profit managements and boards are discovering that just as brand is a promise to the consumer which build equity in the private sector, so it has a similarly important role to play in charities.

The economic impact of the not for profit sector on public policy and business decisions will continue to grow. Post industrial consumers are making as many purchase decisions based on values as on price. Not for profits have a role to play in shaping perceptions of corporate behavior and government actions. The challenge is determining how to identify appropriate roles and activities that support and extend the brand without diluting or subverting it. JL

Nathalie Kylander and Christopher Stone in the Stanford Social Innovation Review:

Nonprofit brands are visible everywhere. Amnesty International, Habitat for Humanity, and World Wildlife Fund are some of the most widely recognized brands in the world, more trusted by the public than the best-known for-profit brands.1 Large nonprofits, such as the American Cancer Society and the American Red Cross, have detailed policies to manage the use of their names and logos, and even small nonprofits frequently experiment with putting their names on coffee cups, pens, and T-shirts.

Branding in the nonprofit sector appears to be at an inflection point in its development. Although many nonprofits continue to take a narrow approach to brand management, using it as a tool for fundraising, a growing number are moving beyond that approach to explore the wider, strategic roles that brands can play: driving broad, long-term social goals, while strengthening internal identity, cohesion, and capacity
The Bill & Melinda Gates Foundation, for example, recently appointed Tom Scott as director of global brand and innovation. Oxfam International embarked on a confederation-wide “global identity project.” And GBCHealth was one of several organizations completing a rebranding process. Brand managers in these pioneering organizations were focusing less on revenue generation and more on social impact and organizational cohesion. Indeed, some of the most interesting brand strategies are being developed in endowed, private foundations with no fundraising targets at all.

“We’re catalysts,” says Scott. “Could we have greater impact if we leveraged our brand in different ways? What difference could it make to attach our logo to things to move conversations forward or elevate certain issues? Can we use our brand to elevate other brands?” The questions Scott asks aren’t about raising money. Instead, they are about how to leverage the Gates Foundation brand in the cause of greater public discourse and social impact.

Although the ambitions of nonprofit brand managers are growing, the strategic frameworks and management tools available to them have not kept up. The models and terminology used in the nonprofit sector to understand brand remain those imported from the for-profit sector to boost name recognition and raise revenue.

Nonprofit leaders need new models that allow their brands to contribute to sustaining their social impact, serving their mission, and staying true to their organization’s values and culture. In this article, we describe a conceptual framework designed to help nonprofit organizations do just that. We call this framework the Nonprofit Brand IDEA (in which “IDEA” stands for brand integrity, brand democracy, brand ethics, and brand affinity).

The framework is the result of an 18-month research project we led with colleagues at Harvard University’s Hauser Center for Nonprofit Organizations and collaborators at the Rockefeller Foundation. Building on previous work in the field, we conducted structured interviews with 73 nonprofit executives, communication directors, consultants, and donors in 41 organizations. Then we analyzed these interviews to learn how leaders in the field are thinking about nonprofit brands today and how they see the role of brands evolving.2

The Nonprofit Brand IDEA emerged from the distinctive sources of pride that nonprofit leaders expressed in what they do—pride in the social mission, participatory processes, shared values, and key partnerships—and from the distinctive role that they said brand plays to create greater cohesion inside their organizations. We developed this framework to capture the most striking things we heard in our interviews, but we’ve found that it also gives nonprofit leaders a vocabulary with which to manage in the new brand paradigm. Before we explain the framework in more detail, it is important to be clear about what we mean by brand and how the use of brand is evolving.

ROLE OF BRANDS
A decade ago, the dominant brand paradigm in the nonprofit sector focused on communications. Nonprofit executives believed that increased visibility, favorable positioning in relation to competitors, and recognition among target audiences would translate into fundraising success. Branding was a tool for managing the external perceptions of an organization, a subject for the communications, fundraising, and marketing departments.

In contrast, the emerging paradigm sees brand as having a broader and more strategic role in an organization’s core performance, as well as having an internal role in expressing an organization’s purposes, methods, and values. Increasingly, branding is a matter for the entire nonprofit executive team. At every step in an organization’s strategy and at each juncture in its theory of change, a strong brand is increasingly seen as critical in helping to build operational capacity, galvanize support, and maintain focus on the social mission.

By now it should be clear that we are defining brand quite broadly. A brand is more than a visual identity: the name, logo, and graphic design used by an organization. A brand is a psychological construct held in the minds of all those aware of the branded product, person, organization, or movement. Brand management is the work of managing these psychological associations. In the for-profit world, marketing professionals talk of creating “a total brand experience.”3 In the nonprofit world, executives talk more about their “global identity” and the “what and why” of their organizations. But the point in both cases is to take branding far beyond the logo.

When we asked leading nonprofit practitioners, management scholars, and nonprofit brand consultants what a brand is, the responses were not any different from what those in other sectors might say. Some described brand as an intangible asset, and a promise that conveys who you are, what you do, and why that matters. Others felt that a brand captures the persona of an organization and represents its very soul or essence. Yet others identified brand in terms of not only what is projected but also what is perceived. Last, brand was seen as a source of efficiency because it acts as a time-saving device, providing a shortcut in the decision making of potential investors, customers, clients, and partners.

When we asked what a strong brand can bring to an organization, the similarity across sectors was again apparent. Peter Walker, director of the Feinstein International Center at Tufts University, speaks for many of his peers when he says, “A strong brand allows you to acquire more resources and gives you the authority to have more freedom over how you use them.” Strong brands in all sectors help organizations acquire financial, human, and social resources, and build key partnerships. The trust that strong brands elicit also provides organizations with the authority and credibility to deploy those resources more efficiently and flexibly than can organizations with weaker brands.

It should be no surprise that nonprofit executives define brand in for-profit language. Business language is spreading in part because it is proving useful to nonprofit executives in communicating with board members and donors whose own roots are in the for-profit world, and because many of the people managing brands in the nonprofit sector have themselves come from for-profit businesses. Indeed, we were struck to find that the majority of the nonprofit brand managers we interviewed during our research had worked first in the commercial world.

Even with this convergence between the nonprofit and for-profit sectors, the nonprofit brand managers we interviewed said that brands do play distinctive roles in the nonprofit sector. These differences relate to the role of brand in driving broad, long-term social goals, the role of brand inside nonprofit organizations, and the multiplicity of audiences that nonprofits must address. These differences may come down to questions of emphasis and focus, since brands in the for-profit world also contribute to long-term business purposes, play internal roles, and speak to multiple audiences. Still, we believe the greater weight given to these roles in the nonprofit sector is fundamental, rooted in the fact that each nonprofit advances a multiplicity of value propositions, irreducible to a single monetary metric, most of which can be advanced only if the other organizations in its field also succeed.4

“Brand becomes critical when you’re seeking to create partnerships, when you’re seeking other funders, and when you’re looking to associate yourself with people in the field,” explains Diane Fusilli, a global brand consultant and former communications director at the Rockefeller Foundation. “A strong brand helps bring greater credibility and trust to a project quicker, and acts as a catalyst for people to want to come to the table.”

ENGAGING BRAND SKEPTICS
The Nonprofit Brand IDEA is based on two themes that we discovered during our research: the distinctive sources of pride that nonprofit leaders have in their organizations, and the distinctive roles that brand plays inside these organizations to create cohesion and build capacity. We turn first to the sources of pride.

Interestingly enough, the way that we identified the sources of pride was by first listening to nonprofit leaders express their skepticism about the role of branding in the nonprofit sector. It turns out that the old brand paradigm has produced a deep current of skepticism about branding within nonprofit organizations, making many nonprofit leaders ambivalent about both the concept of brand and the terminology of branding. Although some branding professionals urge nonprofit leaders to push past this skepticism, we believe the skepticism suggests how nonprofit brands might be managed differently from their for-profit counterparts. Our interviews surfaced at least four legitimate sources of skepticism.

First, many nonprofit leaders still widely associate branding with the commercial pursuit of monetary gain. Brand skeptics think of the premium prices that for-profit firms charge for brand-name products and worry that this elevation of brand over substance will debase their work. They worry that the names of their organizations will be inflated beyond what the quality of their work alone would support, as the pursuit of revenue becomes a goal in its own right. They also worry that their organizations will be “selling ideas the way you sell cereal,” as Mahnaz Afkhami of the Women’s Learning Partnership for Rights, Development, and Peace puts it. Scholars studying nonprofit branding similarly worry about the “overcommercialization of the [nonprofit] sector and misappropriation of techniques developed specifically for the commercial environment.”5

The second source of skepticism is that brand management is sometimes seen as a top-down shortcut to avoid a participatory strategic planning process—an effort by top management to impose greater conformity in goals and priorities. Indeed, many people we interviewed drew contrasts between rebranding efforts and strategic planning. Because rebranding is usually staffed differently and organized with less participation than strategic planning, the new brand can feel peremptorily imposed from above. These concerns can be especially great when a new leader initiates a rebranding as part of an aggressive effort to change the way an organization works.

Third, brand skeptics sometimes worry that a focus on branding is grounded in the vanity of an organization’s leadership rather than the needs of the organization. “I’ve seen situations in foundations where the brand, the reputation, has become an end in itself, or just too personal to the leadership, rather than a tool for fulfilling the mission,” says Katherine Fulton, president of the Monitor Institute. We also found a broader concern that branding was sometimes driven by values that are antithetical to the organization. “Campaigns like “save a slave” seem to exploit suffering or marginalization to grab people’s attention,” says Afkhami. Beneath both these examples lies distrust of the value that is motivating what might be an otherwise well-intended branding effort.

The fourth concern skeptics have, particularly in organizations that work regularly in coalitions and collaborations, is that one organization’s powerful brand will overshadow weaker brands, reinforcing, rather than correcting, imbalances of power among partners. When large nonprofits insist that joint activities conform to their idea of quality, brand management by the larger organization can feel to the weaker organization like bullying, and these bully brands give brand management a bad reputation. As Ramesh Singh, former chief executive of ActionAid and now with Open Society Foundations, notes: “There’s a tension between bigger brands and smaller brands. The bigger international NGOs and philanthropies can (sometimes) push their own brand more, to the detriment of other organizations that can become invisible, and it’s always resented.”

Viewed more positively, each of these four strands of skepticism reveals a corresponding source of pride in the nonprofit sector: pride in the mission of an organization, pride in participatory planning, pride in the values that define organizational culture, and pride in supportive partnerships. The Nonprofit Brand IDEA builds on these four sources of pride, as well as on the distinctive role that brand plays in the nonprofit sector, to which we now turn.

BRANDS BRING COHESION AND CAPACITY
Just as the brand skeptics led us to the four sources of pride, the brand enthusiasts we interviewed focused our attention on the important role that brand plays inside nonprofits to create organizational cohesion and build capacity.

Many of our interviewees felt that a brand plays different roles with different audiences. Internally, the brand embodies the identity of the organization, encapsulating its mission, values, and distinctive activities. Pip Emery, who co-led the most recent global identity project at Amnesty International, puts it this way: “If you don’t know where you’re going and why you’re relevant, you don’t have a brand.” Externally, the brand reflects the image held in the minds of the organization’s multiple stakeholders, not just its donors and supporters but also those it seeks to influence, assist, or reach.

A nonprofit brand is most powerful when the organization’s internal identity and external image are aligned with each other and with its values and mission. As brand consultant Will Novy-Hildesley describes it, “Brand is an exquisite bridge between program strategy and external communications.” Indeed, it is often a misalignment between internal identity and external image that is the impetus for rebranding efforts in nonprofit organizations.

The result of alignment in mission, values, identity, and image is a clear brand positioning and increased cohesion among diverse internal constituencies. When an organization’s employees and volunteers all embrace a common brand identity, it creates organizational cohesion, concentrates focus, and reinforces shared values. As Marcia Marsh, chief operating officer of the World Wildlife Fund (WWF) in the United States puts it: “Our brand is the single greatest asset that our network has, and it’s what keeps everyone together.” The result of this alignment and clarity in positioning is greater trust between the nonprofit and its partners, beneficiaries, participants, and donors. Because nonprofit organizations rely on establishing trust with many external audiences, doing what you say you do and being who you say you are is crucial.

Strong cohesion and high levels of trust contribute to greater organizational capacity and social impact. A cohesive organization is able to make more efficient and focused use of existing resources, and high external trust attracts additional talent, financing, and authority. This increase in organizational capacity enhances an organization’s social impact. By leveraging the trust of partners, beneficiaries, and policymakers, an organization can make greater strides toward achieving its mission. On the flip side, those organizations that face challenges in terms of internal organizational coherence, or the erosion of trust held by external constituencies (either because of scandals or misperceptions), struggle to build organizational capacity and impact.

The role of brand within nonprofit organizations is therefore cyclical and can be captured in a model we call the Role of Brand Cycle. In this model, brand is nested within organizational strategy, which in turn is nested within the mission and values of the organization. Brand plays a variety of roles that, when performed well, link together in a virtuous cycle. A well-aligned identity and image position the organization to build internal cohesion and trust with external constituents. Organizations can leverage these to strengthen internal capacity and achieve impact in the world. The resulting reputation then enhances the identity and image of the brand with which the cycle began. (For a diagram of this model, see “The Role of Brand Cycle.”)

THE NONPROFIT BRAND IDEA
Having explained the distinctive sources of pride that nonprofit leaders have in their organizations, and the important role that brand plays in building organizational cohesion, we turn now to explaining the Nonprofit Brand IDEA framework. The four principles of Nonprofit Brand IDEA are brand integrity, democracy, ethics, and affinity.

Brand integrity means that the organization’s internal identity is aligned with its external image and that both are aligned with the mission. We use the word integrity to mean structural integrity, not moral integrity. Internally, a brand with high structural integrity connects the mission to the identity of the organization, giving members, staff, volunteers, and trustees a common sense of why the organization does what it does and why it matters in the world. Externally, a brand with high structural integrity captures the mission in its public image and deploys that image in service of its mission at every step of a clearly articulated strategy. Singh talks about brand identity and image as “two sides of the coin,” and explains that in his experience, their alignment “allows us to focus, to be brave … to speak out.” At ActionAid, he says, brand integrity allowed the organization to create relationships with people in the peasant movement “without which we wouldn’t have been able to work.”

Brand democracy means that the organization trusts its members, staff, participants, and volunteers to communicate their own understanding of the organization’s core identity. Brand democracy largely eliminates the need to tightly control how the brand is presented and portrayed. The appetite for brand democracy among nonprofit leaders is largely a response to the growth of social media, which has made policing the brand nearly impossible. Alexis Ettinger, head of strategy and marketing at the University of Oxford’s Skoll Centre for Social Entrepreneurship, puts it bluntly, “Given the rise of social media it would be insane to try to single-handedly control the brand.”

Brand ethics means that the brand itself and the way it is deployed reflect the core values of the organization. Just as brand integrity aligns the brand with mission, brand ethics aligns both the organization’s internal identity and its external image with its values and culture. This is about more than being known as an ethical organization, but extends to the organization’s use of its brand in ways that convey its values. We heard many stories of lapses in brand ethics, such as using pitiful photographs of an organization’s beneficiaries to motivate donors. Yasmina Zaidman, communication director at Acumen Fund, contrasts these exploitive images with Acumen’s tagline “Seeing a world beyond poverty.” Acumen avoids “images of poverty that … dehumanize the people whom we want to actually help,” she says, instead promoting images of “pride and dignity.”

Brand affinity means that the brand is a good team player, working well alongside other brands, sharing space and credit generously, and promoting collective over individual interests. An organization with strong brand affinity attracts partners and collaborators because it lends value to the partnerships without exploiting them. “We came to view ourselves not as being the leader, but as a partner of choice,” explains Peter Bell, former CEO of CARE. Organizations with the highest brand affinity promote the brands of their partners as much as or more than they promote their own brands, redressing rather than exploiting the power imbalances that inevitably exist in any partnership or collaboration.

PUTTING IDEA TO WORK
In the section that follows, we explore ways that nonprofit leaders can use the four principles not only to enhance their brand, but to improve the effectiveness of their entire organization as well.

Nowhere is the practical value of brand integrity more evident than in the relationship of brand to an organization’s theory of change. At WWF, for example, part of the theory of change depends on the organization’s ability to persuade some of the biggest multinational corporations to enter into partnerships that lead the companies to change their business practices. WWF’s strong global brand is crucial to its ability to establish these partnerships. “You’re big, we’re big, so we understand each other,” as Emily Kelton, director of corporate relations at WWF US, puts it. Having a strong brand establishes a kind of parity between WWF and the companies they want to influence. By starting with a theory of change, and looking for the contribution that brand can make at each step, it keeps the brand tightly aligned with mission and strategy.

Brand democracy requires a fundamental shift in the traditional approach to brand management. Organizations aspiring to brand democracy do not police their brands, trying to suppress unauthorized graphics or other representations of the organization, but strive instead to implement a participatory form of brand management. They provide resources, such as sample text and online templates, that all staff can access and adapt to communicate the mission, strategy, work, and values of the organization. As part of an effort to strengthen the brand at WWF US, for example, what began as an internal competition among staff to craft a single “elevator speech” revealed the greater power of personal statements over uniform corporate slogans. Instead of picking one winner, they selected three entries as samples to encourage everyone to personalize the brand. “One single company line doesn’t work,” says Kerry Zobor, vice president of institutional communications at WWF US. “It just doesn’t ring true.”

For brand democracy to produce a consistent image, however, requires strong organizational cohesion supported by a strong internal brand identity. Brand democracy is not brand anarchy. Organizations need to establish parameters for a brand, even if the space within these limits is large. Rachel Hayes, senior director of communications and community engagement at Oxfam America, describes this as “creating bookends.” “These are the boundaries of our brand. And within those boundaries, each affiliate will have the ability to dial up and dial down certain messages to meet their local market, but they will be unified in overall look, in overall voice, and in graphic standards so that we do convey one brand.”

Embracing brand democracy leads to the need to manage brand ethics. The risk here is not brand anarchy, but rather any individual expression of the brand that offends or contradicts organizational values or culture. Traditional values statements seem inadequate to this task, for the values made explicit in such statements tend to be at a high level of abstraction. The brand images that cause concern for brand ethics often are themselves the catalyst for making tacitly held values explicit. For example, when one chapter of Amnesty International developed a video game designed to engage young people in the movement to abolish the death penalty, others in the organization became uncomfortable. There was nothing about the game that deviated from the mission, but some people thought making a game out of something deadly serious violated organizational values. The organization’s value statements provided a starting point for serious debate about how the game would shape Amnesty's image. The result was a robust discussion in which the chapter leaders convinced others of the value of the game, so that it was retained.

The practical implications of a commitment to brand affinity are especially clear in coalitions, where multiple organizations join in a common cause that has its own image and identity. Nonprofit leaders in such coalitions often worry that the collective identity will overshadow their own brand, and we heard stories of coalitions—such as the “Make Poverty History” campaign—that collapsed because of this concern. The TckTckTck campaign, in contrast, deliberately allowed the brands of individual members to remain prominent. In this coalition, each organization retained its own identity and logo, which Christian Teriete, communications director for the Global Campaign for Climate Action, describes as a flotilla of ships with distinct brand flags. “Everybody [has] this little additional flag on the top mast that [has] the [coalition identity]. So, in a way, we are all different groups, but we are all united.”

FURTHER IMPLICATIONS
In addition to providing a framework for nonprofit managers and organizational strategists to better manage their brands, the Nonprofit Brand IDEA may also prove useful in managing other tasks, such as board governance, global operations, and risk management.

The emerging brand paradigm suggests a new role for directors and trustees of nonprofit organizations in the governance of brand. Rather than asking how brand management is contributing to revenue, boards (like managers) are beginning to ask how the brand is aligned with the mission, values, and strategy of the organization. They are asking about the alignment of image and identity, and they are asking about the contribution of brand to internal cohesion as well as to external trust. Perhaps most importantly, boards are asking about the role of the brand in enhancing operational capacity and driving social impact. Boards looking for metrics of effectiveness of brand management might measure increases in commitment and pride among staff and directors, and those conducting qualitative evaluations might probe for signs that mission drift has been reduced and that choices about which projects, resources, and partnerships to pursue have been easier to make. A strong brand should increase both the speed and the breadth of consensus decisions in governing bodies.

Brand management is especially challenging for organizations working globally. Because language and symbols vary from country to country, equating brand with specific words or images can be perilous for global organizations. These organizations will find it particularly important to build their brands around mission, values, and strategy, leaving it to the local affiliates operating in particular countries or cultures to represent these ideas in their own way.

An organization with a low profile and very little reputation may be willing to take great risks, but once the organization has established a trusted brand it may be hesitant to pursue projects that could put the brand at risk. We explored this issue in our interviews and were impressed at how often the inevitability of this dynamic was rejected. Nonprofit leaders acknowledged that there can be tension between brand protection and the risks inherent in innovation or advocacy, but these are tensions that good management should be able to handle. Indeed, it appears that high brand integrity may, by strengthening internal cohesion and trust among partners, enable an organization to do more, which may translate into a greater willingness to experiment, take risks, and drive innovation.

Looking ahead, we expect nonprofit executives, boards, and staff to become increasingly confident about managing their brands in distinctive and powerful ways. Just as the specification of theories of change has given nonprofit strategy a distinctive feel, brand integrity, democracy, ethics, and affinity can help distinguish brand management in the nonprofit sector

Executive Accountability? AT&T CEO Docked $2 Million for Failed T-Mobile Merger

2012-02-23T08:12:00.003-05:00

Wow. It's like a sighting of the Loch Ness monster, or Sasquatch, or some equally rare and thought-to-be-extinct species.

A gen-u-ine example of pay-for-performance citing specific managerial accountability issues has not been seen in these parts for some time. Maybe decades. But before we begin to weep bitter tears of sympathy for AT&T CEO Randall Stevenson, let's address any concerns about the dude's health and welfare: his pay package for 2011 was still a tasty $22 million. That is approximately $5 million less than he made in 2010 - so we're sure there will be some thoughtful belt-tightening in the Stevenson household - but we suspect he'll manage to put this behind him and get on with his life.

From a governance standpoint this is both good news and a rather cynical denial of responsibility by the company's board of directors. The good news is that CEOs are almost never penalized for anything short of, in former Louisiana governor Edwin Edwards' pungent phrase, 'being caught in bed with a live boy or a dead girl.' So kudos to the board for actually taking action, however insignificant in the greater context of runaway executive compensation.

The cynical denial comes from the board's evident refusal to take any responsibility itself. Mega-mergers like AT&T's attempted takeover of rival cell phone provider T-Mobile never happen without board approval of the decision and monitoring of the tactics involved. From an anti-trust standpoint, there was never any doubt that this was a long shot. That Stevenson is taking the hit, however light, suggests that the board is a tad out-of-touch with its competitors' determination and the state of regulatory approval processes in the US: moribund, yes; brain-dead, no.

But cognitive dissonance being a dominant feature of this economy, let's not get ahead of ourselves. A CEO was actually docked real money for something he did or in this case, didn't do. Duly noted. JL

Stacy Cowley reports in CNNMoney:

What's the cost of a $4 billion gamble gone wrong?

For AT&T CEO Randall Stephenson, the answer is, "$2 million." That's the sum by which AT&T's board cut his 2011 compensation as a direct response to the failed T-Mobile takeover bid Stephenson led last year.
AT&T offered $39 billion for T-Mobile, a deal that would have eliminated the fourth-biggest wireless carrier in the U.S. and made AT&T the nation's biggest by far. But the arrangement was a risky one that all sides knew would face heavy regulatory scrutiny.

To entice T-Mobile to roll the dice, AT&T (T, Fortune 500) offered a whopping breakup fee: It agreed to pay T-Mobile $3 billion if the deal didn't go through, plus hand over another $1 billion worth of spectrum.

That's exactly what happened. After the Federal Communications Commission and the Department of Justice both moved to block the deal, AT&T withdrew its bid in December. It then turned its spectrum, plus billions in cash, over to T-Mobile parent Deutsche Telekom.

Stephenson swung for the fences -- and missed.

AT&T's compensation committee took that into consideration for his 2011 pay package, AT&T said Tuesday in a regulatory filing. Despite a "strong operational performance," Stephenson's compensation was slashed by "more than $2 million" as a reflection of the heavy toll T-Mobile took on the company's bottom line, AT&T said.

Stephenson still took home a pretty rich package. On top of a base salary of $1.6 million, he received a $3.8 million "incentive award" and stock compensation worth an estimated $12.7 million. AT&T valued his total 2011 compensation at $22 million -- a 20% drop from the $27 million he collected a year earlier.

Exit Strategy; Wealthy Chinese US Immigration Applications Up 1000%

2012-02-22T17:45:00.002-05:00

Their ancestors must be laughing.

A century ago the US adopted draconian immigration policies to keep out 'undesirables,' and no people were deemed less desirable than the Chinese. Despite the fact that they died by the thousands building cities, ports and transcontinental railroads, then building a life in a country that barely tolerated their presence. And now?

The US is happily selling immigration access to wealthy Chinese who have at least $1 million to invest. And the market is huge. Chinese applications to live in the US are up over 1000% in the five years since 2007. Quality of life, educational opportunities, freedom from corruption and a host of other opportunities are the lure. And America gets inexpensive investment capital in return for selling something whose cost basis is apparently considered minimal.

The Chinese government can not be happy about the loss of entrepreneurial talent and the wealth they have created. But the influx may positively influence US policy towards China while creating a cadre of sympathetic, soon-to-be-influential friends. Win-win? Not yet clear, but the fact that neither government has clamped down suggests the positives are perceived to outweigh any other consideration. JL

Jeremy Page reports in the Wall Street Journal:

This time last year, Shi Kang considered himself a happy man. Writing 15 novels had made him a millionaire. He owned a luxury apartment and a new silver Mercedes. He was so content with his carefree life in Beijing that he never even travelled overseas.

Today, a year later, Shi is considering emigrating to the US—one of a growing number of rich Chinese either contemplating leaving their homeland or already arranging to do it.
"Things are real there," said Shi, who has been trying to learn English by listening to language CDs in his car. "Here you don't know what to believe." He added: "I like China a lot. But if I have kids, I wouldn't necessarily want them to live in China."

With a fortune of at least $1.6m, Shi is part of the wealthy elite that benefited most from the Communist Party's brand of capitalism. He is riding the crest of arguably the biggest economic expansion in history.

And yet, while the party touts the economic success of the "Chinese model," many of its poster children are heading for the exits. They are in search of things money can't buy in China: Cleaner air, safer food, better education for their children. Some also express concern about government corruption and the safety of their assets.

The movement represents the fraying of an unwritten social contract between the Communist Party and China's citizens that has held the nation together through wrenching changes since Deng Xiaoping launched market reforms in 1978: The rulers deliver economic growth; the ruled make few political demands. The underlying message seems to be that after three decades of rising prosperity, wealthier Chinese are either looking beyond their economic gains, or taking them for granted, and now crave improvements in their quality of life.

It is happening just as the ruling Communist Party prepares for its once-a-decade leadership change in October or November, when a generation of leaders led by current president and party chief Hu Jintao is expected to start retiring.

The elite exodus is a potentially troubling development for party leaders, many of whose relatives have long since chosen to live or study overseas. Vice president Xi Jinping, who is expected to succeed Hu and who visited the US last week, has a daughter at Harvard, an ex-wife in Britain and a sister in Canada.

So what changed Shi's mind? A year ago, for the first time, he traveled outside China. Initially he just planned to visit a girlfriend studying in New Jersey, but he ended up buying a BMW X3 sport-utility vehicle and doing a 40,000-mile road trip around the US.

His first impressions weren't good: He lost a bag at a New York City airport and thought New York was a "trash city" at first. But when he headed into the countryside, with Beethoven blaring on the stereo, he had something of an epiphany.

"As soon as you leave the city, the US is really a big garden," said Shi. "It's like a symphony: When Chinese people listen to these idyllic pastoral tunes, they can't picture it, because China just doesn't have these things."

Shi, 43 years old, is famous in China for novels like "Loafing Around," documenting the dissolute lives of young Beijingers in the 1980s. His 2007 book "Strive" was turned into a hugely popular television series.

As he toured the US, he wrote about it on his micro-blog - a Chinese version of Twitter - which now has more than 800,000 followers. He dwelt in detail on the relative affordability of a large house with a garden.

Some readers accused him of being anti-Chinese. But his sentiments are common among China's wealthy, now estimated to include about one million millionaires, in dollar terms, and 150 to 300 billionaires, according to various studies.

A survey published in November found that 60% of about 960,000 Chinese people with assets over 10 million yuan ($1.6m) were either thinking about emigrating or taking steps to do so. The US was the top destination, followed by Canada, Singapore and Europe, according to the survey by the state-run Bank of China and Hurun Report, which analyses trends among China's wealthy.

Most people cited their children's education as the main reason, followed by concerns over air quality, food safety and financial security. Another survey last year, by management-consulting firm Bain & Co. and state-run China Merchants Bank, showed similar results.

Recent statistics show rising demand for "investment immigration" visas to the US, Canada and other Western countries. The US program, EB5, can grant up to 10,000 visas annually to people who invest $1m and create at least 10 jobs in the US, or invest $500,000 in a rural or high-unemployment area.

In fiscal 2011, the US received 2,969 applications (each of which can cover several family members) from China for EB5 immigration, compared with just 787 two years earlier, according to the US immigration agency. Chinese applications accounted for 78% of the global total in 2011.

Canada received 2,567 Chinese applications for a similar program in 2011, up from just 383 in 2009, according to its immigration authorities. Demand has been so strong—particularly from China—that Canada imposed a cap of 700 applications per year, starting 1 July 2011. That quota was filled within a week, with 697 of 700 applications from China.

China's officialdom has taken notice. "Without doubt, the skyrocketing living costs, worsening environment, poor social welfare and growing tax burden in China are partly responsible for this loss," wrote Zhang Monan, an economic researcher with the official State Information Centre, in a recent commentary in the state-run China Daily.

"It is natural for people to choose a place to live where they think they will enjoy the best quality of life," she wrote. "Only by making the country more attractive to its talent can China keep them and their wealth from leaving."

Party leaders have begun pledging to focus more on quality-of-life issues. Last year, for instance, they promised to pay more attention to improving public services and solving environmental issues in the current five-year plan that runs until 2015.

But some millionaires aren't hanging around until then. Su Bin is sending his wife and son to Vancouver this year and aims to head there himself soon afterward. The son of an army officer, he started his career in 1986 working in an aircraft-design institute in Beijing. He recalls passing through Tiananmen Square on his way back from work in June 1989—just before China's historic crackdown on protesters there—and being hustled away by Liu Xiaobo, who would later win the 2010 Nobel Peace Prize.

Su was no dissident, though. Like many of his generation, he turned his attention to getting rich. Today, at 46, Su runs his own aerospace technology company and estimates his own net worth, including the various properties he owns, at around 80 million yuan, or close to $13m.

His main reason for leaving, he said, is the business environment. "The government has too much power," he said. "Regulations here mean that businessmen have to do a lot of illegal things. That gives people a real sense of insecurity." He said four of his distributors have also applied for investment immigration to Canada.

The second reason he lists is the education of his son, whom he wants to learn to speak English and think more freely.

Su said he was struck by this when the boy first came home from his state-run primary school wearing the red scarf of the "young pioneers," a Communist equivalent of the scouts that recruits most children between the ages of 7 and 14, and requires them to sing revolutionary songs and pledge allegiance to the party.

"I told him to take it off, but I couldn't explain to him what it meant," he said.

Su lived briefly in Canada in 2003, but returned after just a few months, in large part because he discovered the only job he could find was as a car salesman. A decade on, he worries not about earning money but preserving it.

"The problem is that government power is too great," Su said. "When the economy is going up, they think that everything they are doing is right." If they don't change, he worries, "another revolution will come soon."

Of course, some people who say they want to migrate may never do so. And some analysts point out that the movement of wealthy people from China may also be a natural consequence of three decades of China's high growth, mirroring the outflow from Hong Kong and Taiwan from the 1960s onward.

Nonetheless, there are signs the exodus has touched a nerve among Chinese leaders. State-media mouthpieces including People's Daily and the Xinhua news agency have published a series of articles warning that applicants for investment immigration to the US could lose their money. China Youth Daily warned that "this free lunch could be a trap."

Migration has long been a sensitive political issue in China and a telling indicator of the national condition. The Qing dynasty, which ruled China from 1644 to 1912, was so opposed to Chinese living abroad that it banned citizens from settling in foreign countries. (The penalty was beheading).

Despite that ban, in the 1840s tens of thousands fled to the US to escape the chaos that followed China's defeat by Britain in the First Opium War. Many ended up joining the California Gold Rush or helping to build the first transcontinental American railroad.

More recently, the Communist Party also banned emigration when it took power in 1949; that ban was lifted only in the 1980s. After that, a new generation of migrants came to the US, this time to study or earn money, although many chose to return to the booming China in the 1990s and 2000s.

The current migrant wave is different in that they are escaping neither poverty nor political unrest—and many say they are leaving for good. The Hurun survey showed that the average respondent had 60 million yuan in assets and was 42, old enough to remember the 1989 Tiananmen crackdown, but young enough to have learnt how to prosper in a market economy.

Deng Jie fits the profile. Twenty-seven years ago, in the fledgling years of China's market reforms, he began his career in a state-run ceramics factory in Beijing, sharing a cramped dormitory with colleagues and earning 50 yuan a month (about $13 in those days).

Today, at 48, he runs his own chemical pigments business and lives with his wife and daughter in one of the three luxury apartments he owns. In dollar terms, he is a millionaire several times over. His properties alone have appreciated by 800% in a decade.

Yet the hope he felt for his country in the 1980s, he said, has "been doused with bucket after bucket of cold water." He cited a host of concerns, including rampant corruption among the officials he deals with, and new labour regulations that he said have made his work force too costly and demanding.

"I'm representing a lot of other people like me," he said. "We used to want to contribute to the nation. But now we just feel so disappointed. China cannot continue like this. It has to change."

This year Deng plans to move to Canada, where his 18-year-old daughter is applying to Brock University, near Toronto. He intends to live nearby. "I want her to have an international education, and eventually to live in Europe," he said.

Mobile Payments Revolutionize Individual Transport Options

2012-02-22T16:52:00.001-05:00

Mass transportation coevolved with the industrial age. An inexpensive and scalable solution had to be found to get the increasingly concentrated workforce to the job and back.

And for over a century it has worked. But in the post-industrial era, in which affluence is sufficiently widespread, the relatively cheap - and status enhancing - auto has been supplanting public transport. The impact is manifold: traffic jams waste time and contribute to stress; increased auto usage affects the environment, requires dedication of greater public and private sums to energy costs and is hugely inefficient.

This means there are compelling economic and public policy reasons for wanting to encourage greater support for mass transit. But they bump up against one of the strongest behavioral drivers in our era: convenience.

Who wants to worry about change (let alone exact change) or having to walk for more than ten minutes to catch a bus, train, subway or cab? Some people, of necessity, must. But many opt out. The advent of mobile payments may, among its many strategic business attributes, ironically contribute to a revival of public transport precisely because of its ability to enhance the convenience of that experience. JL

Samantha Murphy reports in Mashable:

If modern technology is a universal language, the world is getting schooled in innovation, especially in the public transportation sector.

The global transportation industry has become a testing ground for new payment systems, as cutting-edge technologies have been introduced to taxis, buses and trains worldwide to streamline your jaunts around town. From reserving and paying for a cab with an app to purchasing train tickets via an iPod, various countries are experimenting with new ways to reach out to travelers and make payment and transport a whole lot easier. Israel is already making an impact on the mobile payment industry with an app called Get Taxi, which coordinates cab pickups and payments. Without making a phone call, Get Taxi — which is available for Android, BlackBerryand iPhone devices — allows consumers to get a taxi at the click of a button in less than 30 seconds, as though it were an OpenTable reservation.

Once ordered, users can watch and track the reserved taxi on a smartphone’s map as it comes to pick them up — Get Taxi estimates the time of arrival and displays motion in real time. Much like airline travel, passengers can collect miles for free rides or prizes, and payment can be streamlined by saving your credit card information in the app.

The app has been hailed by Time Out Tel Aviv as app of the year, and the host of popular show Big Brother, Israel Assi Azar, tweeted on Friday that after several failed attempts to hail a taxi, he ordered one through the app that showed up just minutes later.

“We’ve had hundreds of thousands of downloads since the app launched, and the news of the service has gone viral,” says Nimrod May, vice president of offline marketing and strategic partnerships for Get Taxi. “Since you get the driver’s contact information ahead of time, parents feel safe sending their kids in Get Taxi cabs, and passengers also feel less frustrated when waiting for it to arrive since they can see where exactly the taxi is headed from.”

Get Taxi’s innovative concept also benefits the driver, bypassing the need for a dispatcher and welcoming cash, credit cards and business accounts for payment. Drivers are also assigned pick-ups close to their last drop location, so they don’t have to waste time or gas getting to their next location. A five-inch device — which is free for drivers and resembles a GPS system — can be installed in taxis to keep track of the latest reservation requests.

“A main component of the success is that the app is simple, it allows users to get full control over something they didn’t have control over before, and that the experience is optimized and seamless,” May says. “We couldn’t be happier with the results so far.”

Founded in 2010, Get Taxi seeks to reinvent the taxi market in Europe, which is valued at about $22 billion, according to the company. In addition to having a presence in Israel, the app is also available in London. Get Taxi plans to roll out the app in Moscow in March and then has its sights set on Paris, Spain, South Africa and eventually the U.S.

To spread more global awareness, Get Taxi is launching a Guinness Book of World Records initiative called “It’s on the Meter,” which will follow a taxi as it travels three continents, 39 countries, 10 time zones and more than 31,000 miles. Right now, the taxi is in San Francisco and will be headed to New York before it takes a ferry to Europe, Russia and then Sydney, Australia.

“We have already tremendously and positively disrupted an industry that wasn’t being tapped with cutting-edge technology,” May tells Mashable. “We think in the next five years that businesses will either have to keep up with the innovation or cease to exist.”

In addition to being an early adopter to the GetTaxi app, London is no stranger to being at the forefront of other emerging technologies. In fact, taxi drivers in London were incentivized last year with nearly $5,000 to trade in their old models for newer vehicles that are more eco-friendly and boast state-of-the-art technology, such as back-seat TV sets and mobile payment machines powered by San Jose-based VeriFone that let you swipe or tap credit cards.

VeriFone is one of the most innovative mobile payment providers currently testing the waters with new technologies worldwide. Beyond its experimentation in London, the company recently deployed validator technology on bus systems in Turkey, allowing travelers to tap a pre-paid contractless card, issued by the country’s transportation authority to make jumping on board buses easier and more efficient. VeriFone is also using GPS-tracking on buses, so people waiting at a bus stop know in real-time how soon a bus will arrive.

“The buses in Turkey are equipped with GPS tracking and are constantly reporting their location to Verifone’s system in the cloud,” says VeriFone’s senior vice president of marketing, Paul Rasori. “VeriFone then sends messaging to signage at various bus stops to inform travelers that their ride is only four minutes or so away.”

High-Tech Subway Payment

Taxis and buses aren’t the only modes of transportation getting a taste of new tech. Austrian railway WESTbahn recently rolled out new payment technology onboard its trains with the help of the Apple products and mobile technology provided by VeriFone.

“There is a general trend in mobility with companies taking advantage of consumer mobile devices, such as iPhones, iPads and iPods,” Rasori says. “Customer service representatives on WESTbahn trains carry iPods that fit into a cradle to enable easy payments. It takes the customer service windows away, and it also allows people with near field communication-enabled (NFC) mobile phones to tap their devices to make a payment.”

Wireless carrier China Telecom Beijing Limited Company is also testing a new way to pay for its bus and subway systems with its “e-Surfing Traffic Card” program. The service incorporates a radio frequency user identifier module (UIM) card that integrates with China Telecom’s 3G mobile network and Beijing’s transport cards. To pay for a ride, users just need to swipe their mobile phones at designated spots. It can also be used to pay for products at participating merchants.

“Mobile payments technology has made advancements in the past few years across the globe, and it’s only expected to grow,” Rasori says. “What’s happening overseas will eventually come to the U.S. and in some cases, it’s already started.”

Rasori notes that just five years ago, New York City taxi cabs were cash only. Now with the incorporation of credit card systems attached to TV systems, 60% of fares are now electronic, and there could be more innovation on the way.

“In the future, you will even be able to buy lottery tickets from the back seat of a taxi,” Rasori says. “The capability exists and so does consumer interest, so it’s only a matter of time before we see more innovative technology in the public transportation industry.”

Location, Location: Major Brands Shutting Facebook Stores Due to Disappointing Sales

2012-02-22T11:46:00.000-05:00

F-Commerce gets an F.

At least so far. Major retailers who were willing to experiment with the notion that Facebook's seemingly steroidal ability to aggregate fans on its site would translate into sales are finding that not to be the case. Consequently, they are shutting their sites. As one observer said, 'it was like trying to sell stuff to people while they're hanging out with their friends at a bar.'

Gamestop, Nordstroms, JCPenney and Gap are among those who are finding that social networking may not be compatible with retail sales and have closed their sites. This has not meant a diminution of advertising expenditures, which continue unabated. But it does suggest that they are going to have to rethink their social sales strategy.

It it worth keeping in mind that social media is less than ten years old. Technology adoption can take decades. The long term implication is uncertain because it will take time to determine how best to optimize the commercial potential Facebook offers. And a solution may well emerge over time.

Or, maybe not. Which brings us to the short term and Facebook's eagerly awaited IPO. Questions have already been raised about Facebook's fan and friend numbers, suggesting they are exaggerated. This latest blow adds to the growing concern that the site/service/channel still has a ways to go in figuring how to monetize their potential. JL

Ashley Lutz reports in Bloomberg:

Last April, Gamestop Corp. (GME) opened a store on Facebook to generate sales among the 3.5 million-plus customers who’d declared themselves “fans” of the video game retailer. Six months later, the store was quietly shuttered.

Gamestop has company. Over the past year, Gap Inc., J.C. Penney (JCP) Co. and Nordstrom (JWN) Inc. have all opened and closed storefronts on Facebook Inc.’s (FB) social networking site. Facebook, which this month filed for an initial public offering, has sought to be a top shopping destination for its 845 million members. The stores’ quick failure shows that the Menlo Park, California-based social network doesn’t drive commerce and casts doubt on its value for retailers
“There was a lot of anticipation that Facebook would turn into a new destination, a store, a place where people would shop,” Mulpuru said in a telephone interview. “But it was like trying to sell stuff to people while they’re hanging out with their friends at the bar.”

A year ago, investors hailed so-called F-commerce as the next big thing, speculating that the company had potential to threaten Amazon.com Inc. (AMZN) and PayPal Inc. Facebook is the most- visited website in the world. Some people thought that persuading visitors to shop would be easy, Mulpuru said.

David Fisch, Facebook’s director of business development, said in June that the site would make shopping online, previously a solitary experience, more social.

Hanging Out
“This is where people are hanging out,” Fisch said at the Internet Retailer Conference & Exhibition in San Diego.

Facebook planned to profit from retailers buying ads to drive traffic to their on-site stores. Business consultant Booz & Co. predicted in January 2011 that physical goods sold through social commerce would balloon to $30 billion from $5 billion by 2015, with Facebook contributing a majority of sales.

Even as some businesses shut storefronts, many companies continue to devote advertising dollars to the social network. Facebook’s sales surged 55 percent to $1.13 billion in the fourth quarter. The company aims to use e-commerce more as a way of getting users to stay longer than as a way to boost revenue, said Krista Garcia, an analyst at EMarketer Inc. in New York.

Chris Kraeuter, a Facebook spokesman, declined to comment.

Customers had no incentive to shop at Gamestop (GEM)’s Facebook store rather than the company’s regular website because purchasing online is already convenient, said Ashley Sheetz, who is the Grapevine, Texas-based company’s vice president of marketing and strategy.

Shut Quickly
“We just didn’t get the return on investment we needed from the Facebook market, so we shut it down pretty quickly,” Sheetz said in a telephone interview. “For us, it’s been a way we communicate with customers on deals, not a place to sell.”

Gap (GPS), which has 5.6 million Facebook fans from its namesake, Banana Republic and Old Navy pages, opened and discontinued a storefront last year, said Liz Nunan, a company spokeswoman. The San Francisco-based company also discovered customers preferred shopping on its own sites, she said.

“We will continue to evaluate if this is something we want to bring back in the future,” Nunan said in an emailed statement.

Nordstrom tested ways to make shopping “seamless through Facebook” and decided on a broader social media focus, Colin Johnson, a spokesman, said.

J.C. Penney featured assortments in a Facebook “shop” tab beginning in 2010, and took it down in December 2011, Kate Coultas, a spokeswoman said in an emailed statement.

Cracks in Model
Wade Gerten, chief executive officer of social media developer 8thBridge, previously known as Alvenda, opened a Facebook store for the florist 1-800-FLOWERS. Minneapolis-based Gerten went on to develop commerce strategies for Delta Air Lines Inc. (DAL), Diane Von Furstenberg Studio LP and denim-maker Seven for all Mankind.

Cracks in the model showed quickly, Gerten said in a telephone interview. Clients “have taken a different approach,” shutting stores or scaling back their offerings.

“It was basically just another place to shop for all the stuff already available on the retailer websites,” Gerten said. “I give so-called F-commerce an ‘F.’”

The Business of Beauty: Brains and BRICs Replace Brats and Brits

2012-02-20T15:50:00.000-05:00

The dedicated follower of fashion understands that tastes change.

And among the influences driving such perceptions are the harsh realities of global economics. The women and men who can afford to both pay attention and pay retail have always been wealthy. There are just more of them now, which makes the market for clothing and accessorizing them that much more attractive. Education, familiarity with the basics of art and design, on top of a well-traveled sense of sophistication are driving styles, including the people who model the end products.

Thin is still in, despite the uproar over body image and eating disorders. But half-starved teens are no longer the beau ideal. They dont look like the people who are going to be wearing whatever it is they are selling and they are not disciplined enough to put enough with the increasingly competitive market they have unwittingly entered (does your teen ever show up on time?).

Smart sells in tech, in banking and, it follows, in fashion. On top of that, the allure of Brazil, India, China - with their growing wealth - as opposed to the allegedly fading glory of Euro-American dominance has led to demand for differing shades and body types. This industry has become, to some extent, a bell-wether for more extensive global trends. Beauty may be skin deep, but in the attention economy, that can sometimes be enough. JL

The Economist reports:

London’s spring fashion week begins. Across the capital, young women in vertiginous shoes and skimpy dresses will be teetering along catwalks. And thousands of young doughnut-dodgers will be inspired to queue outside agents’ offices for the slim chance of becoming the next Kate Moss.

Careers in modelling are typically short-lived, badly paid and less glamorous than pretty young dreamers imagine. Yet the business is changing. For one thing, educated models are in. This may sound improbable. In the film “Zoolander”, male models are portrayed as so dumb that they play-fight with petrol and then start smoking. But such stereotypes are so last year.
Lily Cole, a redheaded model favoured by Chanel and Hermès, recently left Cambridge University with a first-class degree in history of art. Edie Campbell, a new British star, is studying for the same degree at the Courtauld Institute in London. And Jacquetta Wheeler, one of Britain’s established catwalkers, has taken time out from promoting Burberry and Vivienne Westwood to work for Reprieve, a charity which campaigns for prisoners’ rights.

Natalie Hand of London’s Viva model agency, who represents Ms Campbell, says there has been a shift away from the “very young, impressionable models”, who were popular in the past ten years, to “more aspirational young women”. “There is an appetite now for models to be intelligent, well-mannered and educated,” says Catherine Ostler, a former editor of Tatler, a fashion and society magazine.

This is new. The best-known models of yesteryear often led rags-to-riches lives, courtesy of the rag trade. Twiggy, a star of the 1960s, was a factory worker’s daughter. Ms Moss’s mother was a barmaid.

But the big fashion houses and leading photographers are tiring of the drama that comes with plucking girls as young as 15 from obscurity and propelling them to sudden stardom. Too often, models were showing up to photo-shoots hours late or drug-addled. This wasted a huge amount of time and money. Fashion houses are now keen to avoid trouble. Many find that educated models show up to work on time and don’t go doolally as often.

Trends in the modelling business also follow those in the global economy. From the 1960s to the 1990s, America reigned supreme. The hottest “supermodels” were Americans such as Cindy Crawford and Christy Turlington. They were figures whose glossy confidence mirrored America’s. They never woke up for less than $10,000. They were cultural icons, too, celebrated in songs such as Billy Joel’s “Uptown girl”, the video of which starred Christie Brinkley, who became his wife.

As in so many fields, the rewards for a handful of stars have shot up. Contracts are wrapped in secrecy, but sources say that a one-off deal for a shoot with a top model can begin at $75,000, rising to $1.5m for a global advertising campaign. For advertisers, the right face is lucrative. Procter & Gamble’s campaign featuring Gisele Bündchen is said to have raised sales of its Pantene shampoo in Brazil by 40%.

The stars pull in more from sidelines such as franchising goods in their own name (Elle Macpherson’s underwear, Kate Moss’s lipstick). Heidi Klum, a German model, serves as a judge on “Project Runway”, a televised fashion-talent contest.

Pay for lesser models has fallen sharply, however. This is partly because the labour pool has globalised and therefore grown much bigger. International agencies now scout for talent in emerging economies. In the 1990s they hired hordes of high-cheeked Slav teenagers. Now the hottest hunting-ground is Brazil, which produces Amazonian height and athletic looks.

Ashley Mears, an American sociologist and author of “Pricing Beauty”, a study of the economics of modelling, says that although the industry has grown in the past decade, individual contracts have shrunk. Too many faces are chasing too few lenses.

Television fees have fallen, not least because technologies like TiVo allow audiences to skip commercials. One British model told your correspondent that rates for the major fashion shows have roughly halved in recent years, and that many careers are now over in two seasons (a calendar year) rather than around six. The Model Alliance, an outfit that agitates for higher wages, estimates that the average regularly-employed model makes $27,000 a year. Part-timers and men make less.

The juiciest prize is to become the face of a luxury brand such as Dior or Burberry. To have any chance, a model must first have magazine shoots under her designer belt. This fact allows fashion magazines to pay peanuts, even for a cover-shoot.

There remains an iron divide between “editorial” models, who appeal to the expensive designers, and “catalogue” models, who are often slightly larger and more conventionally pretty. The catalogue models pose in normal clothes, which is less glamorous. But they earn a steadier income, and are less likely to be dropped by the time they reach their late 20s.

Agents take around 20% of a model’s fee, plus another 20% from the client. Despite these high levies, agencies struggle. Since the financial crash, clients have been scrimping. And agencies must find models whose faces somehow capture the Zeitgeist, as defined by the big brands and their capricious artistic directors.

Large agencies are competing with a crowd of smaller upstarts, such as Viva London and DNA in New York. The giant Elite Model Management agency lost an American antitrust case on price-fixing in 2004 and drowned in a sea of recriminations. It has since been refounded under new ownership, though its Dutch branch faces a fresh lawsuit, brought by the winner of a contest who claims the agency sacked her for putting on weight.

The sheer randomness of fashion makes it a tough business. Change is more predictable in other industries. IT firms, for example, can safely assume that computers will keep getting faster. But foreseeing next year’s hot look is impossible. No one could have anticipated Kate Moss’s early “grunge” look, which set a fashion for tangled long hair, boyish hips and pale complexions. Now the fashion is for models who look a little healthier, such as Doutzen Kroes, a former speedskater.

The exquisitely sensitive Karl Lagerfeld

Despite angry campaigns against the cult of “Size 0”, skinny models are still in demand. This is partly because designers think clothes look better when there is no distracting flesh beneath them. Ms Mears adds that the industry keeps models thin to “signify elite luxury distinctiveness”. Rough translation: if normal women have curves, then the elite want something different. This infuriates those who blame fashion for fostering eating disorders among the young. But the attitude shows little sign of shifting. Karl Lagerfeld, a designer, made headlines this week by describing Adele, a pop singer, as “fat”.

Power in the fashion business depends on fame. “Super-brands” such as Gucci and Burberry don’t hesitate to throw their weight around. Gucci flustered London’s fashion week last autumn by ordering a clutch of the “mega-girls” to leave London early and fly to Milan for a more commercially important show.

Marc Jacobs, a prominent New York designer, caused a further shortage of models for British shows by detaining some prospective bookings in New York. Agents complained, but Mr Jacobs is bigger than any of them. “Where’s the camaraderie?” asked Carole White of Premier Model Management, a London agency. On the catwalk, you walk alone.

Economic Crisis Stalls US Population Growth

2012-02-20T10:54:00.000-05:00

Fertility and finance.

Babies can seem a lot less cute when you dont have the wherewithal to support them.

Fewer jobs and lower income mean more concern about how to pay for growing families and the homes they live in, the clothes they wear, the food they eat...ad infinitum. And if you are contemplating spending thousands of dollars - while risking your life - to try to enter the US as an immigrant, particularly an undocumented one, you would probably be less inclined to do so if you were hearing that opportunities are less plentiful than they once were. Especially if you are also hearing that the natives have gotten very tetchy about all this and view you as competition rather than help.

The US experienced significant population growth from the Great Depression until 2009. Since then, it's been a different story. Understandable, perhaps. But what has been a point of pride - and economic stimulation - has become a reminder of how perceptions change. Young adult unemployment is up. Births are down (and those born out of wedlock are now in the majority). So are marriages, to the lowest levels in history. Prospects are not perceived to be advantageous for family formation. Nor for immigration, legal or otherwise.

If levels stay down, the longer term implication is that there will be fewer active workers to support those retiring in the future, unless, of course, immigration is encouraged. Which would require a significant change in political attitudes about that and about public spending to spur growth and encourage those families-in-waiting.

That could well happen - necessity has been known to make public policy positions much more flexible. The harsh reality is that a consumer-driven economy needs new citizen-consumers to drive demand. Ideology may turn out to be an unaffordable luxury.JL

Haya El Nasser reports in USA Today:

The U.S. population is growing at the slowest rate since the Great Depression after two decades of robust increases.

For two consecutive years since 2009, the population has grown just 0.7% a year, down from annual increases around 1% in previous years and the lowest since the late 1930s.
The U.S. gained 2.2 million people from 2010 to 2011 — fewer than the 2.8 million added a decade earlier — reaching a total of 311.6 million.

"Almost anybody who observes these things over the years can say this is almost all recession-related," says Carl Haub, demographer for the Population Reference Bureau.

The government says the recession ended in June 2009. Although the economy has improved, the downturn's effect on birth and immigration lingers. The number of babies born from July 1, 2010, to July 2011 dropped 200,000 from the same period in 2008-09. The number of additional immigrants fell 150,000.

"It's an indicator of an unhealthy economy," Haub says. "People are obviously still delaying births, and immigration has continued to drop because job opportunities are not there."

The U.S. fertility rate — which has been close to the replacement level of 2.1 children per woman in contrast to many developed nations that are well below that level — now is estimated to have fallen to 1.9, says demographer Joseph Chamie, former director of the United Nations Population Division and more recently research director at the Center for Migration Studies.

Demographers expect population growth to pick up when the economy rebounds fully, but a bounce-back in births is likely to lag.

"Many — but likely not all — of the postponed births can be expected to be made up," Chamie says. "Even with the slight current downturn in births, the U.S. population will very likely reach 400 million midcentury."

For much of the nation's history, a booming population symbolized economic vitality and growing influence in the world. But environmental groups have questioned how many more people the nation can support, fueling a push for "sustainable" communities that encourage conserving green space and relying less on autos.

"Population does not necessarily equal economic growth anymore," says Bill Fulton, vice president for policies and programs at Smart Growth America, a coalition of environmentalists, planners and others working to slow sprawl.

He points to Las Vegas' population boom, which created low-paying jobs that disappeared when the housing market collapsed. By contrast, he says, cities such as Pittsburgh lost population but household wealth went up.

"We're still talking about adding a lot of people," Fulton says. "We know we can't environmentally sustain those people living in sprawled locations. … Local governments are not going to be able to afford sprawl anymore."

HP To Embed Search Capability Into Printers and PCs

2012-02-20T08:52:00.003-05:00

It's easy to make fun of HP's new concept. What's next, toasters that search?

But give them credit for resilience and for continuing to push the competition. The optimal application is probably not going to be using your office printer to find the nearest sushi joint.

But there may be a market for devices that not only copy but organize your information for future access. Printers, copiers and other connected electronics already do limited search; they have to conntect to your network, for instance. But one can imagine intelligent equipment managing complex tasks related to data storage and retrieval. Commercial printers already do this, but making the technology available to small businesses and consumers on a broader scale - with HP providing the cloud and the upkeep - could open new markets.

From a competitive standpoint, this signals that HP is not going away. While Apple, Google and Facebook may be The Anointed to some, there appears to be plenty of innovative moxie - and fight - left in their allegedly moribund predecessors. JL

Maija Palmer reports in the Financial Times:

Hewlett-Packard is planning to launch a series of printers and computers embedded with Autonomy’s search software, bringing the group more directly into competition with companies such as Microsoft and Google.

Mike Lynch, who sold Autonomy to HP last year and now runs HP’s information management business, said Autonomy software – best known for catching insider trading at banks and monitoring call-centre phone calls – would be coming into the hands of ordinary consumers later this year as HP launches a number of “intelligent” computers and printers embedded with the technology.
“What we have done with people from HP is give them assets and technology to do things with,” Mr Lynch said. “We have the luxury of very high margins that allow them to be experimental. I think they are enjoying that.”

Mr Lynch gave no further detail on devices, but a mobile phone or tablet computer with Autonomy’s augmented reality software, for example, would be able to search for information and internet links after simply being pointed at an image.

Frank Gillett, analyst at Forrester, the technology research group, said Autonomy software, which is able to extract meaning from unstructured data such as audio, video, social media, email and web content, could also turn HP printers into intelligent storage devices. These might not only scan documents but also organise them based on the information they contained.

“It would create an electronic document storage system that could be linked to an online HP service,” Mr Gillett said. “The printer might even be able to say ‘hey that looks like an insurance document and the last date of the insurance is coming up, do you want to renew?’”

Autonomy could also give HP additional tools for mobile phone software and services, an area that the computer company has so far had little success in. Production of the company’s TouchPad tablet was aborted after poor sales last year, but Meg Whitman, HP’s chief executive, has recently been promoting HP’s mobile operating system, WebOS, which it has made into an open-source platform.

“What is on your smartphone is not structured data,” HP’s Mr Lynch said. “On a mobile the system needs to understand the context, such as where you are now. Mobile is going to be a primary platform for Autonomy.”

Such moves could help HP justify the $10.3bn it paid for Autonomy last year, a deal that ultimately cost HP’s then chief executive Léo Apotheker his job. HP has so far integrated the Autonomy software into some of its servers, but using the technology for consumer products could extract further value.

However, Forrester’s Mr Gillett warned that the move would also push HP into more direct competition with companies such as Microsoft, Google and Apple. All three already offer online storage and management of documents and media, and voice-recognition technology such as Apple’s Siri is building on an ability to understand human data such as speech.

Adrian Drury, analyst at technology research group Ovum, is concerned that HP would struggle in a consumer market where other big technology companies have already staked their claims.

“Pushing some kind of smart document management system into the consumer market might be too radical a proposition,” Mr Drury said. “We are looking for HP to get its strategy back on track by focusing on the enterprise market, not overstretching itself by becoming a consumer devices company of a consumer cloud services company.”

HP, which has seen sales of its PCs suffer as customers switched to using tablet computers, has already started fighting back against Apple in a number of ways, including the launch of a range of thinner, lighter notebooks and a series of HP “Total Care” centres, which are like Apple’s Genius Bars, physical stores where computer experts are at hand to help customers

Storm Warnings: The Battle Over Climate Science

2012-02-19T16:10:00.000-05:00

According to the philosopher Arthur Schopenhauer, "All truth passes through three stages. First it is ridiculed. Second it is violently opposed. Third, it is accepted as self-evident."

He may have missed a stage. He was writing in the 19th century when people were more respectful of each other's arguments. The absent stage - place it where you will - would be that the truth is denied and an alternative reality is proposed. All while the intelligence, integrity and motivation of the proponents is denigrated.

One is reminded of the advertisements run by upstart ice-cream purveyor Ben & Jerry's when confronted by the scorched earth tactics of Pillsbury, its corporate competitor. The punch line asked, "What's the dough boy afraid of?"

The super major oil companies are enjoying record profits. The rising cost of energy has enabled the exploration and production of new sources that were previously ignored due to their prohibitive costs. Even within the industry, there are executives - Texans, no less - who claim that Peak Oil has been reached, the point at which new finds will begin to decline in volume. And yet, any suggestion that the benefits of exploring alternatives is, as Schopenhauer noted, violently opposed.

We will pay eventually. The question is why we should not be responding to data rather than denying it. And preparing for the inevitable. Scientists who have attempted to raise these issues have been castigated for doing so. By companies, as this article points out, receiving billions in federal subsidies. If capital profits from the random walk of information disclosure and markets inevitably provide the best solution, the larger question is why science is not allowed to pursue the truth wherever it may lead. JL

Suzanne Goldenberg and James West report in Mother Jones:

It is almost possible to dismiss Michael Mann's account of a vast conspiracy by the fossil fuel industry to harrass scientists and befuddle the public. His story of that campaign, and his own journey from naive computer geek to battle-hardened climate ninja, seems overwrought, maybe even paranoid.

But now comes the unauthorized release of documents showing how a libertarian think tank, the Heartland Institute, which has in the past been supported by Exxon, spent millions on lavish conferences attacking scientists and concocting projects to counter science teaching for kindergarteners.
Mann's story of what he calls the climate wars, the fight by powerful entrenched interests to undermine and twist the science meant to guide government policy, starts to seem pretty much on the money. He's telling it in a book out on March 6, The Hockey Stick and the Climate Wars: Dispatches From the Front Lines.

"They see scientists like me who are trying to communicate the potential dangers of continued fossil fuel burning to the public as a threat. That means we are subject to attacks, some of them quite personal, some of them dishonest," Mann said in an interview conducted in and around State College, home of Penn State University, where he is a professor.

Mann, who seems fairly relaxed, has just spoken to a full-capacity—and uniformly respectful and supportive—crowd at the university.

It's hard to square the surroundings with the description in the book of how an entire academic discipline has been made to feel under siege, but Mann insists that it is a given.

"It is now part of the job description if you are going to be a scientist working in a socially relevant area like human-caused climate change," he said.

He should know. For most of his professional life has been at the center of those wars, thanks to a paper he published with colleagues in the late 1990s showing a sharp upward movement in global temperatures in the last half of the 20th century. The graph became known as the "hockey stick".

If the graph was the stick, then its publication made Mann the puck. Though other prominent scientists, such as NASA's James Hansen and more recently Texas Tech University's Katharine Hayhoe, have also been targeted by contrarian bloggers and think tanks demanding their institutions turn over their email record, it's Mann who's been the favorite target.

He has been regularly vilified on Fox News and contrarian blogs, and by Republican members of Congress. The attorney general of Virginia has been fighting in the courts to get access to Mann's email from his earlier work at the University of Virginia. And then there is the high volume of hate mail, the threats to him and his family.

"A day doesn't go by when I don't have to fend off some attack, some specious criticism or personal attack," he said. "Literally a day doesn't go by where I don't have to deal with some of the nastiness that comes out of a campaign that tries to discredit me, and thereby in the view of our detractors to discredit the entire science of climate change."

By now he and other climate scientists have been in the trenches longer than the US army has been in Afghanistan.

And Mann has proved a willing combatant. He has not gone so far as Hansen, who has been arrested at the White House protesting against tar sands oil and in West Virginia protesting against coal mining. But he spends a significant part of his working life now blogging and tweeting in his efforts to engage with the public—and fending off attacks.

On the eve of his talk at Penn State, a coal industry lobby group calling itself the Common Sense Movement/Secure Energy for America put up a Facebook page demanding the university disinvite their own professor from speaking, and denouncing Mann as a "disgraced academic" pursuing a radical environmental agenda. The university refused. Common Sense appeared to have dismantled the Facebook page.

But Mann's attackers were merely regrouping. A hostile blogger published a link to Mann's Amazon page, and his opponents swung into action, denouncing the book as a "fairy tale" and climate change as "the greatest scam in human history".

It was not the life Mann envisioned when he began work on his postgraduate degree at Yale. All Mann knew then was that he wanted to work on big problems, that resonated outside academia. At heart, he said, he was like one of the amiable nerds on the television show Big Bang Theory.

"At that time I wanted nothing more just to bury my head in my computer and study data and write papers and write programs," he said. "That is the way I was raised. That is the culture I came from."

What happened instead was that the hockey stick graph, because it so clearly represented what had happened to the climate over the course of hundreds of years, itself became a proxy in the climate wars. (Mann's reconstruction of temperatures over the last millennium itself used proxy records from tree rings and coral).

"I think because the hockey stick became an icon, it's been subject to the fiercest of attacks really in the whole science of climate change," he said.

The UN's Intergovernmental Panel on Climate Change produced a poster-sized graph for the launch of its climate change report in 2001.

Those opposed to climate change began accusing Mann of overlooking important data or even manipulating the records. None of the allegations were ever found to have substance. The hockey stick would eventually be confirmed by more than 10 other studies.

Mann, like other scientists, was just not equipped to deal with the media barrage. "It took the scientific community some time I think to realize that the scientific community is in a street fight with climate change deniers and they are not playing by the rules of engagement of science. The scientific community needed some time to wake up to that."

By 2005, when Hurricane Katrina drew Americans' attention to the connection between climate change and coastal flooding, scientists were getting better at making their case to the public. George W. Bush, whose White House in 2003 deleted Mann's hockey stick graph from an environmental report, began talking about the need for biofuels. Then Barack Obama was elected on a promise to save a planet in peril.

But as Mann lays out in the book, the campaign to discredit climate change continued to operate, largely below the radar until November 2009 when a huge cache of email from the University of East Anglia's Climatic Research Unit was released online without authorization.

Right-wing media and bloggers used the emails to discredit an entire body of climate science. They got an extra boost when an embarrassing error about melting of Himalayan glaciers appeared in the UN's IPCC report.

Mann now admits the climate community took far too long to realize the extent of the public relations debacle. Aside from the glacier error, the science remained sound. But Mann said now: "There may have been an overdue amount of complacency among many in the scientific community."

Mann, who had been at the center of so many debates in America, was at the heart of the East Anglia emails battle too.

Though he has been cleared of any wrongdoing, Mann does not always come off well in those highly selective exchanges of email released by the hackers. In some of the correspondence with fellow scientists, he is abrupt, dismissive of some critics. In our time at State College, he mentions more than once how climate scientists are a "cantankerous" bunch. He has zero patience, for example, for the polite label "climate skeptic" for the network of bloggers and talking heads who try to discredit climate change.

"When it comes to climate change, true skepticism is two-sided. One-sided skepticism is no skepticism at all," he said. "I will call people who deny the science deniers…I guess I won't be deterred by the fact that they don't like the use of that term and no doubt that just endears me to them further."

"It's frustrating of course because a lot of us would like to get past this nonsensical debate and on to the real debate to be had about what to do," he said.

But he said there are compensations in the support he gets from the public. He moves over to his computer to show off a web page: I ❤ climate scientists. He's one of three featured scientists. "It only takes one thoughtful email of support to offset a thousand thoughtless attacks," Mann said.

And although there are bad days, he still seems to believe he is on the winning side.

Across America, this is the third successive year of weird weather. The US Department of Agriculture has just revised its plant hardiness map, reflecting warming trends. That is going to reinforce scientists' efforts to cut through the disinformation campaign, Mann said.

"I think increasingly the campaign to deny the reality of climate change is going to come up against that brick wall of the evidence being so plain to people whether they are hunters, fishermen, gardeners," he said.

And if that doesn't work then Mann is going to fight to convince them.

"Whether I like it or not I am out there on the battlefield," he said. But he believes the experiences of the last decade have made him, and other scientists, far better fighters.

"Those of us who have had to go through this are battle-hardened and hopefully the better for it," he said. "I think you are now going to see the scientific community almost uniformly fighting back against this assault on science. I don't know what's going to happen in the future, but I do know that my fellow scientists and I are very ready to engage in this battle."

The Arctic Century

2012-02-19T10:50:00.000-05:00

It's everywhere you want to be.

That advertising slogan was devised for an American insurance company, but it might just as well describe China's strategy for global engagement.

If your economy is dependent on exporting products and on importing the natural resources required to manufacture them, then shaving significant amounts off the time it takes to reach your most important markets - or to have your supplies reach you - than you would be justified in exploring those options. And if they also included potential access to as yet untapped oil or mineral reserves, then so much the better.

As climate change has brought to life the centuries old lure of a northern route to 'the Orient' and back, one that would substantially shorten the trip, countries not previously known for their arctic interests are suddenly mounting 'research expeditions' to the region and making noises about global access to its resources.

The US has announced that in the wake of its withdrawl from the Middle East, it is refocusing on a Pacific Strategy. But as details emerge, it is increasingly clear that the Arctic may hold the key not just to the Pacific, but to commercial geo-political success. JL

Isabella Mroczkowski reports in The Diplomat:

The United States is shifting its focus from the Atlantic across to the Pacific. However, if an Arctic century is on the horizon, then China is at the forefront of it. While Washington enhances its relationships across the Asia-Pacific basin, Beijing is busy engaging Arctic Ocean coastal states en masse. The Middle Kingdom is apparently interested in the commercial viability of new shipping lanes and developing the resources that lie underneath and along the Arctic seabed Ostensibly to achieve its objectives, China is engaging the region at an unprecedented pace. Beijing’s comprehensive engagement of Arctic states demonstrates that China’s ambition isn't just to be a Pacific power, but a global one. Questions that remain are: what is Beijing’s intention in the Arctic, and by extension what type of global power will China be?

China has been in the Arctic since the early 1990s, but only recently began seeking to enhance its engagement there as a permanent observer in the Arctic Council. The Arctic Council is a high-level intergovernmental forum that addresses issues such as the management of resources, climate change, and Arctic environment maintenance. The Council has eight voting member states—Canada, United States, Russia, Denmark (Faroe Islands and Greenland), Norway, Iceland, Sweden, and Finland—all of which share a border with the Arctic Ocean. There are six permanent observer states—all of which are European—and multiple ad-hoc observer members, among them: Japan, South Korea, and China. While permanent observer status would grant China unrestricted access to Arctic Council meetings (as an ad-hoc member it must apply for admission each time), under the current system, China’s accession would serve more as a symbolic gesture than one that grants China tangible authority.

One example that demonstrates a Chinese approach to the Arctic is Chinese tycoon Huang Nubo’s bid to purchase 300 square kilometers of land in northeast Iceland (roughly .3 percent of the country) for an eco-resort. While his efforts are allegedly unaffiliated with the Chinese government, the deal would grant China a significant foothold in the Arctic. The land in question is strategically located near one of Iceland’s largest glacial rivers and several potential deepwater ports. As Arctic ice recedes, this area is destined to become an important port center on a new maritime transport route between East and West. The government of Iceland ultimately rejected Nubo’s resort proposal, but not first without stirring a heated debate between Icelanders about China’s growing influence.

In contrast, Copenhagen and Beijing elevated their relationship to that of a “strategic partnership” in 2008 to include cooperation in technology, science, and trade. Denmark made the tactical decision to prioritize its economic relationship with China while turning a blind eye to issues such as human rights. To be sure, this burgeoning bilateral relationship holds enormous economic benefits, not only for Denmark, but also for Greenland, which remains under Denmark’s jurisdiction.

Greenland is endowed with substantial deposits of minerals including rare earths, uranium, iron ore, lead, zinc, petroleum, and gemstones. Currently, 80 percent of Greenland is covered by an ice sheet. However rising temperatures have exposed numerous mineral belts. One such area, the Kvanefjeld deposit, is estimated to produce 20 percent of the global rare earth supply, making it the world's second-largest deposit of rare earths. With limited fiscal resources, Greenland depends on outside investment to develop its mineral reserves. While the Australian-based Greenland Minerals and Energy Limited has been operating in Greenland since 2007, new entities seek to tap into Greenland’s emerging minerals industry. China’s Sichuan Xinye Mining Investment Co. recently held preliminary discussions on investing in an iron ore deposit site and Jiangxi Union Mining has explored for copper in central Greenland. While the two entities are in the first stages of negotiation, a cooperative agreement is on the horizon.

Unlike the transitory eco-resort proposal and emerging investments in Greenland’s mineral reserves, China’s Yellow River Research Center in Ny- Ålesund, Norway represents a different type of Chinese footprint in the Arctic. For almost a decade, the station has been collecting environmental, oceanic, and scientific data for research primarily on climate change. However, while Norway hosts China’s Yellow River research station, it has not bought into China’s Arctic courtship. Ever since the Norwegian Nobel Committee awarded the 2010 Nobel Peace Prize to Chinese dissident Liu Xiaobo, diplomatic and trade ties have stagnated. Today, Norway remains one of the most vocal Arctic Council members against Chinese membership on the Council.

Another important player in China’s future position in the Arctic is Canada. In 2013, Canada will take over the chairmanship of the Arctic Council and thus set the Council’s agenda for the following two years—including which members to admit. Thus far, China – Canada relations appear to be on an upswing. In early February, PetroChina China’s largest oil and gas producer and distributor, purchased a 20 percent stake in Royal Dutch Shell’s Groundbirch shale-gas asset in Canada, granting it vast access to Arctic fossil fuels. While Groundbirch will continue to supply customers in North America, in the future, (perhaps as Arctic ice recedes and sea lanes open up) PetroChina seeks to export the fuel to Asia in the form of liquefied natural gas (LNG).China’s value to Canada has increased, especially with the U.S.-Canada Keystone stall. Prime Minister Stephen Harper has reaffirmed his intentions to pursue potential energy partners in Asia and notably, energy has been the focal point in Prime Minister Stephen Harper’s February visit to China.

China’s approach to the Arctic is comprehensive. While Beijing continues to seek a role in the region’s governance with membership in the Arctic Council, it's also engaging with Arctic stakeholders bilaterally on a gamut of issues that includes: trade, culture, investment, tourism, and technology. This begs the questions, what are Chinese intentions in the Arctic and what does Beijing’s approach suggest about the strategy toward the Arctic?

In the preliminary analysis, Chinese interests and strategy in the Arctic appear at odds. Ruan Zongze, a research fellow with the China Institute for International Studies—a Ministry of Foreign Affairs think tank—asserts that as a country outside the Arctic, China has no “special interests” in the Arctic.

On the other hand, retired Rear PLA Navy Adm. Yin Zhuo believes that the Arctic belongs to all people and that China must have a share in the region’s resources. While China’s intentions remain at odds, this fact remains: Arctic ice cover is vanishing with astonishing speed; ice melt will open up valuable shipping lanes, possibilities for hydrocarbon extraction, and economic opportunities ranging from fishing to tourism. Meanwhile, Beijing’s ambitious plans for three Arctic expeditions and a second polar ice-breaker ship by 2015, confirm that China is in the Arctic to stay. The economic giant’s reach into the Arctic suggests that China is not just a Pacific Power but a global one.

Has the Web Changed Fame?

2012-02-19T09:00:00.000-05:00

Andy Warhol was right.

Sort of. As we contemplate the 24/7 coverage of Whitney's Houston's death and funeral we are left to wonder, who's next? Not who's going to die. But who will be the next to go viral, the next to grab Warhol's 15 minutes of fame? To indelibly imprint themselves on our consciousness, despite what may be our personal lack of interest in singers from the 1980s, or Asian-American basketball players, or swimsuit models, or some dude's Youtube video of his beer-drinking record post-party purge.

There is no doubt that the web has both amplified and democratized the notion of fame. It is no longer decided by advertisers or PR firms or even movie studios and record labels. We, The People, are deciding what fascinates, titillates or motivates us. And there is no shame in self-promotion. In fact, that lies at the heart of the change. 'Why not me?' seems to be the mantra driving the process.

So let's take a stand. We vote that this is a good thing. Traditional notions of modesty may have been cast aside, but in their place is a freer, more honest expression of what matters to all and sundry. Because it is a reflection of who we are as a civilization whether we like it or not. And feel free to disagree, that's part of the deal. The more information a person or a society has, the better decisions it makes - and from that we all benefit. JL

David Weinberger comments in CNN:

A year ago, Kate Upton was a pretty young woman. Perhaps not typically model-pretty as The New York Times has noted, but certainly fetching. In the old days, to go from, well, hot to famous, Upton would have needed not just looks but a truckload of luck, for fame was something bestowed by capricious media out to sell their next movie or magazine.

But in the Age of the Internet, all it took was a YouTube video of Upton doing "the Dougie" at a Los Angeles Clippers game. It went viral, and now Upton is on the cover of the Sports Illustrated swimsuit issue. Fame isn't what it used to be.
In the old days, fame was controlled not by the famous and certainly not by the audience, but by the owners of the media. It was so foreign and artificial a construct that we thought that fame made you special. The rules didn't apply to you. You had a certain ethereal glow. A glow of fame.

Now that the Internet has pulled fame inside out, you don't need to be blessed by the mass media to become famous. To paraphrase Andy Warhol, on the Internet, everyone will be famous to 15 people. In fact, everything important about fame has changed.

To begin with, it used to be that the famous were foisted on us. If they wanted to make "Rosie the Waitress" famous for mopping up spills with a paper towel, they could. If they wanted to make talentless dream boys famous, they did. Now fame is something we do -- we the audience, we the people on the Web.

There's nothing very complicated about how we do it: We create links, and we pass them around. That is the most basic and natural thing to do with a Web like ours.

So, if you happen to come across a video of a fan-made Harry Potter musical spoof, in which you are struck by the presence of a young man named Joe Moses playing Snape, of course you'll tell your friends using your social media of choice: You tweet, you post on Facebook or you might go old-fashioned and send out some e-mails. Some of your friends will share your enthusiasm, so they retweet, repost, resend.

With astonishing rapidity, the Harry Potter musical accumulated more than 3 million views on YouTube, and young Moses has 41,651 followers on Twitter. Moses, a bartender in Brooklyn, is famous on the Internet.

After winning the Internet, Kate Upton takes SI's swimsuit cover

This is possible because the basic idea of media has been transformed. In the days of broadcast, a medium was a channel through which messages were passed, connecting the publisher with the audience. Not on the Internet.

On the Web, the medium isn't the message. The medium is the audience. So, when someone becomes famous on the Internet, it's because We the Medium decided to move that person's message along. And this gives rise to two odd Web phenomena.

First, on the Web we sometimes make people famous for inexplicable reasons. For example, one of the first Web-famous people was Mahir Cagri, a Turkish photographer whose home page (remember them?) welcomed viewers with a big "I KISS YOU!!!!!" message.

Mahir's page was the opposite of slick, and his enthusiastic explanation of his interests was in less than perfect English. There was absolutely no reason in 1999 for his page (which had been slightly "enhanced" by hackers) to go viral. But it did. Certainly some who passed around the link did so to make mean-spirited fun of a man who turned out to be something of a sweetheart.

But many who shared the link to Cagri's page did so in part because it asserted that we the audience could make an obscure person famous overnight. It was "sticking it to the old media" that had for so many years rammed commercial nonentities into our brains. And it's happened countless times.

That we can now can make people famous also explains the deglamorization of fame on the Internet. The people we make famous and sometimes rich are usually people like us. They're flawed. They make spelling errors when they tweet from their mobile phones. They treat us with a rough but real respect.

They are people such as comedian Louis CK, who used the Web's power to bypass the standard marketing machinery and offer his standup video for download on his own site (he made $1 million in 12 days). He is loved by his fans not despite his flaws, but because those flaws show that he is one of us. And don't even ask about what happens when a celebrity ventures onto the Web thinking fame makes him not one of us. (Amirite, Woody Harrelson?)

Now, all of this is complicated because we are in a hybrid culture that is shaped both by the broadcast media and by the Internet. Internet celebrities cross over into the mainstream, and the traditional mainstream star-making machinery still works. Just look at the Web's complex relationship with Justin Bieber and Rebecca Black.

Nothing is simple, especially fame, now that the audience is the medium and fame is of, by, and for us.

Lintellectual Property: Jeremy Lin Files to Trademark Linsanity

2012-02-18T16:16:00.000-05:00

This could be like one of those Sports Illustrated magazine or sports video game titles: get selected and lose.

Jeremy Lin has filed to trademark the phrase 'Linsanity' associated with his meteoric rise to stardom in the National Basketball Association. Needless to say, his team lost for the first time a few days after he filed, so he was probably smart to try to cash in quickly.

Two other random dudes apparently had the same idea (he's famous, I'm gonna be rich) and filed similar applications. Illegal tee shirts are already appearing outside stadiums and on the internet.

A reading of the law suggests that Lin has a reasonable chance of winning. The interlopers? Not so much. Check out law firm Mintz Levin's Copyright and Trademark Matters blog if you want all the excruciating details and if you have trouble falling asleep. JL

Ron Dicker reports in the Huffington Post:

Jeremy Lin is going on offense to protect Linsanity. The Knicks sensation this week applied for trademark rights to Linsanity, The Huffington Post learned late Friday after obtaining his application. One of Lin's attorneys confirmed it. "We're prepared to protect his intellectual property rights," said Pam Deese at the Washington, D.C., law firm of Arent Fox. She declined to comment further.

Lin paid a filing fee of $1,625 to cover use of the trademarked term on all manner of apparel, including underwear. In a detailed listing of goods, the filing seeks to protect its use on everything from action figures to beverage sleeves and backpacks.
According to the document, Lin filed his application on Feb. 13, several days after two California men entered the cash-in derby to trademark Linsanity. But Washington, D.C., trademark attorney Josh Gerben told The Huffington Post that those claims will likely turn into a procedural air ball, costing the two men time and money.

Lin's move with the U.S. Patent and Trademark Office could also jeopardize an online venture of one of the men, Andrew Slayton. By selling "Linsanity" T-shirts on his Linsanity.com website, Slayton is playing fast and loose with certain protections, Gerben said. He believes the marketing tactics of Slayton and his website potentially violate the trademark rights of the New York Knicks and the publicity rights of Lin, whose sudden success with the Knicks has generated the term Linsanity.

Slayton reportedly bought the domain name Linsanity.com in 2010, but the goods he's selling appear up-to-date. Some of the T-shirts have similar blue and orange coloring like that of the Knicks' uniforms. (The colors of the website are also blue and orange.) The #17 that appears on one of the shirts is Lin's number for the Knicks. And the site's copy mentions the "Garden," common shorthand for Madison Square Garden, where the Knicks play. "It's clear that he is trying to sell merchandise using the New York Knicks brand," Gerben said. "He should be very careful."

In addition to possible trademark violations, Slayton, a Los Altos, Calif., resident who once coached at the high school where Lin played, is also in danger of infringing on California's "right to publicity" law. The law protects celebrities from the commercial use of their names without their consent. Slayton told the New York Post that he believed Lin did not know of his Web ventures.

An attempt to reach Slayton through the website resulted in the following email message: "We would be happy to clarify any facts for you about the site on background, but are not interested in doing on the record interviews at this time."

Ayala Deutsch, NBA senior vice president and chief intellectual property counsel, wrote in an email on Saturday: "The NBA is pursuing enforcement -- in the US, China and other countries -- to address the sale of counterfeit 'Lin' jerseys and other unauthorized merchandise using NBA intellectual property. We also are coordinating with Jeremy Lin's representatives regarding their efforts to enforce against the unauthorized use of his name and image."

Slayton's inventory listed on the site includes $20 shirts emblazoned with LINsanity, LIN.Y.C., LIN YOUR FACE #17, I <3 LIN and just LIN baby. "Legally, he's on shaky ground," Gerben said. Now that Lin is defending his name, perhaps even more so.

Interracial Marriage is Rising; And Those Couples Make More Money

2012-02-18T09:37:00.000-05:00

OK, we're not suggesting that the reason interracial marriage is on the rise can be solely or even primarily attributed to the fact that those families have higher incomes.

But it can't hurt.

Trends are built on changing mores, perceptions, circumstances, demographics and tastes. And they also say something about a society's visions of the future. There is a reason why the fastest growing language study programs in the US are Mandarin. Just as there is a reason that centuries of insular biases against marrying people of different religions and races are breaking down in the face of, well, reality. Educational attainment is the primary predictor of future economic success. And people are inclined to marry those who they believe share their goals and values. Women now comprise 60% of students in US colleges and universities. In other words, unless you are willing to think more broadly about who's eligible, your options are more limited than they used to be, whoever you are.

Try plugging all of this into your eHarmony profile. JL

Catherine Rampell reports in the Economix blog:

The share of American newlyweds in interracial couples has more than doubled in the last 30 years, to 15 percent in 2010 from 6.7 percent in 1980.

That’s according to a new Pew Research Center report, which also looked at how interracial couples compare to same-race couples when it comes to income. On its face, it looks as if couples who married out of their own race are socioeconomically similar to those who married in: in 2008-10, the median combined annual earnings of interracial newlyweds was $56,711, compared with $55,000 for same-race newlyweds.
The numbers vary tremendously, though, depending on the combination of races involved. Here is a list of newlyweds from 2008-2010, sorted by different racial combinations of husbands and wives:

New marriages with an Asian-American groom and a white bride earned the most money, with the median such couple bringing in $71,800 between the two of them. Note, though, that such pairings represent less than 1 percent of all newly married spouses of any racial combination, so the sample size is small.

The converse of that group — new spouses in which the husband is white and the wife is Asian-American — earn almost as much, with a combined median income of $70,952. They are followed by newlyweds who are both Asian, who typically earn $62,000 in total.

So basically, what these numbers are reflecting is that Asians earn more money, period, which is generally true across the population of Asian-Americans and has been the case for a while.

At the bottom of the income list is new marriages in which both spouses are Hispanic. Given the share of Hispanics who are recent immigrants from poor countries, this is probably not surprising.

Number of Workers in Tech Fields Declines for First Time Since 1950

2012-02-18T08:57:00.000-05:00

It seems counterintuitive.

Apple is the most valuable corporation in the world, having surpassed Exxon. Yes, Exxon (Steve Jobs has to be having a chuckle about that one). Facebook is about to launch the largest IPO by dollar value in history. The apps revolution is generating new companies with unpronounceable names every day. Even Wall Street, with it penchant for ever more complex financial engineering instruments, is a contributor. So how could all of this activity not be generating new tech jobs?

The problem is that those Silicon Valley software and hardware engineering positions are just a fraction of the total in this category. Most of the tech jobs in America and the rest of the world reside in large and medium-sized corporations. Instead of inventing cool new products, they have traditionally testing, evaluating and, occasionally, experimenting with extensions of legacy systems. Exactly the sort of positions that financial managers like to eliminate to 'streamline' in order to 'enhance productivity.'

So the implication of this trend is emblematic of a larger truth. That, as an economy and a society, the US has been undermining its own future competitiveness in order to support an unsustainable system now. Cartoon character Popeye the Sailor had a sidekick named Wimpy who used to say, "I'll pay you back on Tuesday for a hamburger today." Welcome to his world. JL

Conor Dougherty and Rob Barry report in the Wall Street Journal:

The share of American workers in the science and engineering professions fell slightly in the past decade, ending what had been a steady upward trend in the proportion of workers in fields associated with technological innovation and economic growth.

Workers in technical fields ranging from architecture to software design accounted for 4.9% of the labor force in 2010, according to a new analysis of Census data being released on Friday, down from a peak of 5.3% in 2000. Before 2000, the share of these knowledge workers had increased in every 10-year Census since 1950
according to the Population Reference Bureau, a nonprofit demographic research group in Washington that conducted the study. While the total number of workers in these fields continued to grow in the 2000s, along with the rise in total population, they now account for a relatively smaller slice of the work force.

The drop could result from a number of factors, said Mark Mather, a demographer at the PRB, including a decline in manufacturing in the past decade. Factories often employ large numbers of engineers in their design and production processes.

There are only about five million to eight million U.S. workers in technical fields, depending on how broadly the group is defined. The PRB pegs it at 7.6 million, including everything from Ph.D.s to support workers whose jobs might not even require a bachelor's degree, such as laboratory technicians and computer support workers.

Other organizations, such as the National Science Foundation, tend to define knowledge jobs as those that require a bachelor's degree or higher.

Regardless of how the group is measured, it is considered crucial to an advanced economy—commanding higher pay than many other groups of workers and frequently associated with the creation of new companies and industries. The PRB report is likely to provide fodder to politicians and analysts who argue that the U.S. needs to expand the share of workers who have these advanced skills, as well as find ways to encourage investment in the industries that will employ them.

"If there's no demand for those workers, then accelerating growth in supply is not going to have any effect," said Michael Teitelbaum, a demographer and fellow at Harvard Law School.

At a time when eight-year-old Facebook Inc. is being pegged as a $100 billion company and Apple Inc. has edged out old-industry stalwart Exxon Mobil Corp. as the nation's most valuable company by market value, it might seem counterintuitive that technical jobs have become a smaller share of the labor force. But while there have been huge gains in jobs like software design and applied mathematics, technical workers in older-line industries have suffered.

For instance, there were fewer mechanical engineers in the labor force in 2010 versus a decade earlier, as manufacturing industries declined.

Workers in technical fields also are aging along with the rest of the American population. The number of scientists and engineers aged 55 or older increased 32% between 2005 and 2010, while those under 35 fell 1%, according to the PRB analysis.

Meantime, foreign-born workers have grown. In 2010, about one in five workers in the technical labor force was foreign-born, compared with one in six in 2000.

To be sure, with the economy beginning to show more signs of sustained growth, and technological advances touching every part of the economy, the number of workers with technical skills is expected to grow in the long term.

And those workers are still more likely to find jobs than workers in many other fields. According to the PRB data, from 2007 to 2010, the unemployment rate for science and engineering workers increased from 2.6% to 5.6%—a sharp upturn, but still below the above-9% national average that prevailed in 2010

Why SmartGrid May Deliver in Ways That Green Tech Has Not

2012-02-17T16:32:00.000-05:00

It has never really been a question of 'if.' It was more a question of 'how' and 'when.'

And the answer to that question may be closer than we might have supposed. Green tech has been taking its lumps as the cost of investment and the pace of competition have tempered the excitement that greeted the early announcements about is promise.

The problems had to do, at least in part with the expense and complication of retrofitting what amount to new technologies on old structures and the grids that link them. But without much fanfare, smartgrids are gaining adherents on a scale that suggests the economics may cost out. What makes this easier is that it addresses a need - reducing energy costs at a time of rising prices - by applying technology and knowledge in ways that reduce the disruption, complication and expense.

Like any new tech adoption cycle, there were going to be challenges and false starts when it came to energy saving. It was just a matter of time. Logic and cost-effectiveness are a tough combination to beat. JL

Greenbang blog reports:

The City of Big Shoulders will be doing some heavy smart-grid lifting in the near future, as its main utility company embarks on a 10-year, $2.6 billion upgrade to the electricity system.

Commonwealth Edison (ComEd) says the project will deliver something like a local economic stimulus to Chicago, generating up to 2,400 full-time equivalents jobs at the construction peak.
ComEd led a hard-fought battle to get its Infrastructure Investment Plan approved by the state, finally winning legislative approval last October despite vehement opposition from some, including Gov. Pat Quinn. The utility is now getting ready to roll out smart-grid improvements to nearly 4 million homes and businesses.

While ComEd awaits a final go-ahead from the Illinois Commerce Commission, the project is already generating new economic activity in Chicago. Smart-grid firm Silver Spring Networks, which will deploy its Smart Energy Platform to create a connected network of homes, businesses and distribution automation devices as part of the improvements, has announced plans to open a new office in the city. It also expects to establish a local network operations center to support the buildout.

ComEd is planning to open at least two new training facilities in the region as the program gets under way. It will also establish a smart-grid “test bed” to give innovative entrepreneurs a place to test their technologies and services in a utility-scale environment. The test bed is expected to be located along ComEd’s “Smart Grid Innovation Corridor,” which extends across parts of Chicago and nine suburbs.

ComEd president and COO Anne Pramaggiore calls the massive project a “road map for improved system reliability, enhanced customer service and a 21st century electric distribution system that will support the digital economy and the greener economy of the future.”

The Power of Habit: How Companies Learn Your Secrets - and Use Them

2012-02-17T09:38:00.000-05:00

Knowledge is power.

The more companies know about a customer - actual or potential - the better they are able to anticipate, design, price and market offers to appeal to that customers needs or desires.

Doing so enables them to reduce uncertainty, better manage supply chain costs and increase profits.

The problem, to the extent that there is one, lies in the way that data is collected, how it is used and whether it affects the dynamic tension between consumer and company. When I was pitching consulting projects to a leading financial services provider a few years ago I asked what the 'Holy Grail' of business information was for them. They replied that it would be having sufficiently powerful data to anticipate the purchase decisions of an individual consumer. As the extraordinary article from the New York Times' Charles Duhigg suggests, it would appear that for some companies the Grail is within reach. JL

Charles Duhigg reports in the New York Times:

Almost every major retailer, from grocery chains to investment banks to the U.S. Postal Service, has a “predictive analytics” department devoted to understanding not just consumers’ shopping habits but also their personal habits, so as to more efficiently market to them. “But Target has always been one of the smartest at this,” says Eric Siegel, a consultant and the chairman of a conference called Predictive Analytics World. “We’re living through a golden age of behavioral research. It’s amazing how much we can figure out about how people think now.”

The reason Target can snoop on our shopping habits is that, over the past two decades, the science of habit formation has become a major field of research in neurology and psychology departments at hundreds of major medical centers and universities, as well as inside extremely well financed corporate labs.
Andrew Pole had just started working as a statistician for Target in 2002, when two colleagues from the marketing department stopped by his desk to ask an odd question: “If we wanted to figure out if a customer is pregnant, even if she didn’t want us to know, can you do that? ”

Pole has a master’s degree in statistics and another in economics, and has been obsessed with the intersection of data and human behavior most of his life. His parents were teachers in North Dakota, and while other kids were going to 4-H, Pole was doing algebra and writing computer programs. “The stereotype of a math nerd is true,” he told me when I spoke with him last year. “I kind of like going out and evangelizing analytics.”

As the marketers explained to Pole — and as Pole later explained to me, back when we were still speaking and before Target told him to stop — new parents are a retailer’s holy grail. Most shoppers don’t buy everything they need at one store. Instead, they buy groceries at the grocery store and toys at the toy store, and they visit Target only when they need certain items they associate with Target — cleaning supplies, say, or new socks or a six-month supply of toilet paper. But Target sells everything from milk to stuffed animals to lawn furniture to electronics, so one of the company’s primary goals is convincing customers that the only store they need is Target. But it’s a tough message to get across, even with the most ingenious ad campaigns, because once consumers’ shopping habits are ingrained, it’s incredibly difficult to change them.

There are, however, some brief periods in a person’s life when old routines fall apart and buying habits are suddenly in flux. One of those moments — the moment, really — is right around the birth of a child, when parents are exhausted and overwhelmed and their shopping patterns and brand loyalties are up for grabs. But as Target’s marketers explained to Pole, timing is everything. Because birth records are usually public, the moment a couple have a new baby, they are almost instantaneously barraged with offers and incentives and advertisements from all sorts of companies. Which means that the key is to reach them earlier, before any other retailers know a baby is on the way. Specifically, the marketers said they wanted to send specially designed ads to women in their second trimester, which is when most expectant mothers begin buying all sorts of new things, like prenatal vitamins and maternity clothing. “Can you give us a list?” the marketers asked.

“We knew that if we could identify them in their second trimester, there’s a good chance we could capture them for years,” Pole told me. “As soon as we get them buying diapers from us, they’re going to start buying everything else too. If you’re rushing through the store, looking for bottles, and you pass orange juice, you’ll grab a carton. Oh, and there’s that new DVD I want. Soon, you’ll be buying cereal and paper towels from us, and keep coming back.”

The desire to collect information on customers is not new for Target or any other large retailer, of course. For decades, Target has collected vast amounts of data on every person who regularly walks into one of its stores. Whenever possible, Target assigns each shopper a unique code — known internally as the Guest ID number — that keeps tabs on everything they buy. “If you use a credit card or a coupon, or ﬁll out a survey, or mail in a refund, or call the customer help line, or open an e-mail we’ve sent you or visit our Web site, we’ll record it and link it to your Guest ID,” Pole said. “We want to know everything we can.”

Also linked to your Guest ID is demographic information like your age, whether you are married and have kids, which part of town you live in, how long it takes you to drive to the store, your estimated salary, whether you’ve moved recently, what credit cards you carry in your wallet and what Web sites you visit. Target can buy data about your ethnicity, job history, the magazines you read, if you’ve ever declared bankruptcy or got divorced, the year you bought (or lost) your house, where you went to college, what kinds of topics you talk about online, whether you prefer certain brands of coffee, paper towels, cereal or applesauce, your political leanings, reading habits, charitable giving and the number of cars you own. (In a statement, Target declined to identify what demographic information it collects or purchases.) All that information is meaningless, however, without someone to analyze and make sense of it. That’s where Andrew Pole and the dozens of other members of Target’s Guest Marketing Analytics department come in.

“It’s like an arms race to hire statisticians nowadays,” said Andreas Weigend, the former chief scientist at Amazon.com. “Mathematicians are suddenly sexy.” As the ability to analyze data has grown more and more fine-grained, the push to understand how daily habits influence our decisions has become one of the most exciting topics in clinical research, even though most of us are hardly aware those patterns exist. One study from Duke University estimated that habits, rather than conscious decision-making, shape 45 percent of the choices we make every day, and recent discoveries have begun to change everything from the way we think about dieting to how doctors conceive treatments for anxiety, depression and addictions.

This research is also transforming our understanding of how habits function across organizations and societies. A football coach named Tony Dungy propelled one of the worst teams in the N.F.L. to the Super Bowl by focusing on how his players habitually reacted to on-field cues. Before he became Treasury secretary, Paul O’Neill overhauled a stumbling conglomerate, Alcoa, and turned it into a top performer in the Dow Jones by relentlessly attacking one habit — a specific approach to worker safety — which in turn caused a companywide transformation. The Obama campaign has hired a habit specialist as its “chief scientist” to figure out how to trigger new voting patterns among different constituencies.

Researchers have figured out how to stop people from habitually overeating and biting their nails. They can explain why some of us automatically go for a jog every morning and are more productive at work, while others oversleep and procrastinate. There is a calculus, it turns out, for mastering our subconscious urges. For companies like Target, the exhaustive rendering of our conscious and unconscious patterns into data sets and algorithms has revolutionized what they know about us and, therefore, how precisely they can sell.

Inside the brain-and-cognitive-sciences department of the Massachusetts Institute of Technology are what, to the casual observer, look like dollhouse versions of surgical theaters. There are rooms with tiny scalpels, small drills and miniature saws. Even the operating tables are petite, as if prepared for 7-year-old surgeons. Inside those shrunken O.R.’s, neurologists cut into the skulls of anesthetized rats, implanting tiny sensors that record the smallest changes in the activity of their brains.

An M.I.T. neuroscientist named Ann Graybiel told me that she and her colleagues began exploring habits more than a decade ago by putting their wired rats into a T-shaped maze with chocolate at one end. The maze was structured so that each animal was positioned behind a barrier that opened after a loud click. The first time a rat was placed in the maze, it would usually wander slowly up and down the center aisle after the barrier slid away, snifﬁng in corners and scratching at walls. It appeared to smell the chocolate but couldn’t ﬁgure out how to ﬁnd it. There was no discernible pattern in the rat’s meanderings and no indication it was working hard to find the treat.

The probes in the rats’ heads, however, told a different story. While each animal wandered through the maze, its brain was working furiously. Every time a rat sniffed the air or scratched a wall, the neurosensors inside the animal’s head exploded with activity. As the scientists repeated the experiment, again and again, the rats eventually stopped snifﬁng corners and making wrong turns and began to zip through the maze with more and more speed. And within their brains, something unexpected occurred: as each rat learned how to complete the maze more quickly, its mental activity decreased. As the path became more and more automatic — as it became a habit — the rats started thinking less and less.

This process, in which the brain converts a sequence of actions into an automatic routine, is called “chunking.” There are dozens, if not hundreds, of behavioral chunks we rely on every day. Some are simple: you automatically put toothpaste on your toothbrush before sticking it in your mouth. Some, like making the kids’ lunch, are a little more complex. Still others are so complicated that it’s remarkable to realize that a habit could have emerged at all.

Take backing your car out of the driveway. When you ﬁrst learned to drive, that act required a major dose of concentration, and for good reason: it involves peering into the rearview and side mirrors and checking for obstacles, putting your foot on the brake, moving the gearshift into reverse, removing your foot from the brake, estimating the distance between the garage and the street while keeping the wheels aligned, calculating how images in the mirrors translate into actual distances, all while applying differing amounts of pressure to the gas pedal and brake.

Now, you perform that series of actions every time you pull into the street without thinking very much. Your brain has chunked large parts of it. Left to its own devices, the brain will try to make almost any repeated behavior into a habit, because habits allow our minds to conserve effort. But conserving mental energy is tricky, because if our brains power down at the wrong moment, we might fail to notice something important, like a child riding her bike down the sidewalk or a speeding car coming down the street. So we’ve devised a clever system to determine when to let a habit take over. It’s something that happens whenever a chunk of behavior starts or ends — and it helps to explain why habits are so difficult to change once they’re formed, despite our best intentions.

To understand this a little more clearly, consider again the chocolate-seeking rats. What Graybiel and her colleagues found was that, as the ability to navigate the maze became habitual, there were two spikes in the rats’ brain activity — once at the beginning of the maze, when the rat heard the click right before the barrier slid away, and once at the end, when the rat found the chocolate. Those spikes show when the rats’ brains were fully engaged, and the dip in neural activity between the spikes showed when the habit took over. From behind the partition, the rat wasn’t sure what waited on the other side, until it heard the click, which it had come to associate with the maze. Once it heard that sound, it knew to use the “maze habit,” and its brain activity decreased. Then at the end of the routine, when the reward appeared, the brain shook itself awake again and the chocolate signaled to the rat that this particular habit was worth remembering, and the neurological pathway was carved that much deeper.

The process within our brains that creates habits is a three-step loop. First, there is a cue, a trigger that tells your brain to go into automatic mode and which habit to use. Then there is the routine, which can be physical or mental or emotional. Finally, there is a reward, which helps your brain ﬁgure out if this particular loop is worth remembering for the future. Over time, this loop — cue, routine, reward; cue, routine, reward — becomes more and more automatic. The cue and reward become neurologically intertwined until a sense of craving emerges. What’s unique about cues and rewards, however, is how subtle they can be. Neurological studies like the ones in Graybiel’s lab have revealed that some cues span just milliseconds. And rewards can range from the obvious (like the sugar rush that a morning doughnut habit provides) to the infinitesimal (like the barely noticeable — but measurable — sense of relief the brain experiences after successfully navigating the driveway). Most cues and rewards, in fact, happen so quickly and are so slight that we are hardly aware of them at all. But our neural systems notice and use them to build automatic behaviors.

Habits aren’t destiny — they can be ignored, changed or replaced. But it’s also true that once the loop is established and a habit emerges, your brain stops fully participating in decision-making. So unless you deliberately ﬁght a habit — unless you ﬁnd new cues and rewards — the old pattern will unfold automatically.

“We’ve done experiments where we trained rats to run down a maze until it was a habit, and then we extinguished the habit by changing the placement of the reward,” Graybiel told me. “Then one day, we’ll put the reward in the old place and put in the rat and, by golly, the old habit will re-emerge right away. Habits never really disappear.”

Luckily, simply understanding how habits work makes them easier to control. Take, for instance, a series of studies conducted a few years ago at Columbia University and the University of Alberta. Researchers wanted to understand how exercise habits emerge. In one project, 256 members of a health-insurance plan were invited to classes stressing the importance of exercise. Half the participants received an extra lesson on the theories of habit formation (the structure of the habit loop) and were asked to identify cues and rewards that might help them develop exercise routines.

The results were dramatic. Over the next four months, those participants who deliberately identified cues and rewards spent twice as much time exercising as their peers. Other studies have yielded similar results. According to another recent paper, if you want to start running in the morning, it’s essential that you choose a simple cue (like always putting on your sneakers before breakfast or leaving your running clothes next to your bed) and a clear reward (like a midday treat or even the sense of accomplishment that comes from ritually recording your miles in a log book). After a while, your brain will start anticipating that reward — craving the treat or the feeling of accomplishment — and there will be a measurable neurological impulse to lace up your jogging shoes each morning.

Our relationship to e-mail operates on the same principle. When a computer chimes or a smartphone vibrates with a new message, the brain starts anticipating the neurological “pleasure” (even if we don’t recognize it as such) that clicking on the e-mail and reading it provides. That expectation, if unsatisfied, can build until you find yourself moved to distraction by the thought of an e-mail sitting there unread — even if you know, rationally, it’s most likely not important. On the other hand, once you remove the cue by disabling the buzzing of your phone or the chiming of your computer, the craving is never triggered, and you’ll find, over time, that you’re able to work productively for long stretches without checking your in-box.

Some of the most ambitious habit experiments have been conducted by corporate America. To understand why executives are so entranced by this science, consider how one of the world’s largest companies, Procter & Gamble, used habit insights to turn a failing product into one of its biggest sellers. P.& G. is the corporate behemoth behind a whole range of products, from Downy fabric softener to Bounty paper towels to Duracell batteries and dozens of other household brands. In the mid-1990s, P.& G.’s executives began a secret project to create a new product that could eradicate bad smells. P.& G. spent millions developing a colorless, cheap-to-manufacture liquid that could be sprayed on a smoky blouse, stinky couch, old jacket or stained car interior and make it odorless. In order to market the product — Febreze — the company formed a team that included a former Wall Street mathematician named Drake Stimson and habit specialists, whose job was to make sure the television commercials, which they tested in Phoenix, Salt Lake City and Boise, Idaho, accentuated the product’s cues and rewards just right.

The first ad showed a woman complaining about the smoking section of a restaurant. Whenever she eats there, she says, her jacket smells like smoke. A friend tells her that if she uses Febreze, it will eliminate the odor. The cue in the ad is clear: the harsh smell of cigarette smoke. The reward: odor eliminated from clothes. The second ad featured a woman worrying about her dog, Sophie, who always sits on the couch. “Sophie will always smell like Sophie,” she says, but with Febreze, “now my furniture doesn’t have to.” The ads were put in heavy rotation. Then the marketers sat back, anticipating how they would spend their bonuses. A week passed. Then two. A month. Two months. Sales started small and got smaller. Febreze was a dud.

The panicked marketing team canvassed consumers and conducted in-depth interviews to figure out what was going wrong, Stimson recalled. Their first inkling came when they visited a woman’s home outside Phoenix. The house was clean and organized. She was something of a neat freak, the woman explained. But when P.& G.’s scientists walked into her living room, where her nine cats spent most of their time, the scent was so overpowering that one of them gagged.

According to Stimson, who led the Febreze team, a researcher asked the woman, “What do you do about the cat smell?”

“It’s usually not a problem,” she said.

“Do you smell it now?”

“No,” she said. “Isn’t it wonderful? They hardly smell at all!”

A similar scene played out in dozens of other smelly homes. The reason Febreze wasn’t selling, the marketers realized, was that people couldn’t detect most of the bad smells in their lives. If you live with nine cats, you become desensitized to their scents. If you smoke cigarettes, eventually you don’t smell smoke anymore. Even the strongest odors fade with constant exposure. That’s why Febreze was a failure. The product’s cue — the bad smells that were supposed to trigger daily use — was hidden from the people who needed it the most. And Febreze’s reward (an odorless home) was meaningless to someone who couldn’t smell offensive scents in the first place.

P.& G. employed a Harvard Business School professor to analyze Febreze’s ad campaigns. They collected hours of footage of people cleaning their homes and watched tape after tape, looking for clues that might help them connect Febreze to people’s daily habits. When that didn’t reveal anything, they went into the field and conducted more interviews. A breakthrough came when they visited a woman in a suburb near Scottsdale, Ariz., who was in her 40s with four children. Her house was clean, though not compulsively tidy, and didn’t appear to have any odor problems; there were no pets or smokers. To the surprise of everyone, she loved Febreze.

“I use it every day,” she said.

“What smells are you trying to get rid of?” a researcher asked.

“I don’t really use it for specific smells,” the woman said. “I use it for normal cleaning — a couple of sprays when I’m done in a room.”

The researchers followed her around as she tidied the house. In the bedroom, she made her bed, tightened the sheet’s corners, then sprayed the comforter with Febreze. In the living room, she vacuumed, picked up the children’s shoes, straightened the coffee table, then sprayed Febreze on the freshly cleaned carpet.

“It’s nice, you know?” she said. “Spraying feels like a little minicelebration when I’m done with a room.” At the rate she was going, the team estimated, she would empty a bottle of Febreze every two weeks.

When they got back to P.& G.’s headquarters, the researchers watched their videotapes again. Now they knew what to look for and saw their mistake in scene after scene. Cleaning has its own habit loops that already exist. In one video, when a woman walked into a dirty room (cue), she started sweeping and picking up toys (routine), then she examined the room and smiled when she was done (reward). In another, a woman scowled at her unmade bed (cue), proceeded to straighten the blankets and comforter (routine) and then sighed as she ran her hands over the freshly plumped pillows (reward). P.& G. had been trying to create a whole new habit with Febreze, but what they really needed to do was piggyback on habit loops that were already in place. The marketers needed to position Febreze as something that came at the end of the cleaning ritual, the reward, rather than as a whole new cleaning routine.

The company printed new ads showing open windows and gusts of fresh air. More perfume was added to the Febreze formula, so that instead of merely neutralizing odors, the spray had its own distinct scent. Television commercials were filmed of women, having finished their cleaning routine, using Febreze to spritz freshly made beds and just-laundered clothing. Each ad was designed to appeal to the habit loop: when you see a freshly cleaned room (cue), pull out Febreze (routine) and enjoy a smell that says you’ve done a great job (reward). When you finish making a bed (cue), spritz Febreze (routine) and breathe a sweet, contented sigh (reward). Febreze, the ads implied, was a pleasant treat, not a reminder that your home stinks.

And so Febreze, a product originally conceived as a revolutionary way to destroy odors, became an air freshener used once things are already clean. The Febreze revamp occurred in the summer of 1998. Within two months, sales doubled. A year later, the product brought in $230 million. Since then Febreze has spawned dozens of spinoffs — air fresheners, candles and laundry detergents — that now account for sales of more than $1 billion a year. Eventually, P.& G. began mentioning to customers that, in addition to smelling sweet, Febreze can actually kill bad odors. Today it’s one of the top-selling products in the world.

Andrew Pole was hired by Target to use the same kinds of insights into consumers’ habits to expand Target’s sales. His assignment was to analyze all the cue-routine-reward loops among shoppers and help the company figure out how to exploit them. Much of his department’s work was straightforward: find the customers who have children and send them catalogs that feature toys before Christmas. Look for shoppers who habitually purchase swimsuits in April and send them coupons for sunscreen in July and diet books in December. But Pole’s most important assignment was to identify those unique moments in consumers’ lives when their shopping habits become particularly flexible and the right advertisement or coupon would cause them to begin spending in new ways.

In the 1980s, a team of researchers led by a U.C.L.A. professor named Alan Andreasen undertook a study of peoples’ most mundane purchases, like soap, toothpaste, trash bags and toilet paper. They learned that most shoppers paid almost no attention to how they bought these products, that the purchases occurred habitually, without any complex decision-making. Which meant it was hard for marketers, despite their displays and coupons and product promotions, to persuade shoppers to change.

But when some customers were going through a major life event, like graduating from college or getting a new job or moving to a new town, their shopping habits became flexible in ways that were both predictable and potential gold mines for retailers. The study found that when someone marries, he or she is more likely to start buying a new type of coffee. When a couple move into a new house, they’re more apt to purchase a different kind of cereal. When they divorce, there’s an increased chance they’ll start buying different brands of beer.

Consumers going through major life events often don’t notice, or care, that their shopping habits have shifted, but retailers notice, and they care quite a bit. At those unique moments, Andreasen wrote, customers are “vulnerable to intervention by marketers.” In other words, a precisely timed advertisement, sent to a recent divorcee or new homebuyer, can change someone’s shopping patterns for years.

And among life events, none are more important than the arrival of a baby. At that moment, new parents’ habits are more flexible than at almost any other time in their adult lives. If companies can identify pregnant shoppers, they can earn millions.

The only problem is that identifying pregnant customers is harder than it sounds. Target has a baby-shower registry, and Pole started there, observing how shopping habits changed as a woman approached her due date, which women on the registry had willingly disclosed. He ran test after test, analyzing the data, and before long some useful patterns emerged. Lotions, for example. Lots of people buy lotion, but one of Pole’s colleagues noticed that women on the baby registry were buying larger quantities of unscented lotion around the beginning of their second trimester. Another analyst noted that sometime in the first 20 weeks, pregnant women loaded up on supplements like calcium, magnesium and zinc. Many shoppers purchase soap and cotton balls, but when someone suddenly starts buying lots of scent-free soap and extra-big bags of cotton balls, in addition to hand sanitizers and washcloths, it signals they could be getting close to their delivery date.

As Pole’s computers crawled through the data, he was able to identify about 25 products that, when analyzed together, allowed him to assign each shopper a “pregnancy prediction” score. More important, he could also estimate her due date to within a small window, so Target could send coupons timed to very specific stages of her pregnancy.

One Target employee I spoke to provided a hypothetical example. Take a fictional Target shopper named Jenny Ward, who is 23, lives in Atlanta and in March bought cocoa-butter lotion, a purse large enough to double as a diaper bag, zinc and magnesium supplements and a bright blue rug. There’s, say, an 87 percent chance that she’s pregnant and that her delivery date is sometime in late August. What’s more, because of the data attached to her Guest ID number, Target knows how to trigger Jenny’s habits. They know that if she receives a coupon via e-mail, it will most likely cue her to buy online. They know that if she receives an ad in the mail on Friday, she frequently uses it on a weekend trip to the store. And they know that if they reward her with a printed receipt that entitles her to a free cup of Starbucks coffee, she’ll use it when she comes back again.

In the past, that knowledge had limited value. After all, Jenny purchased only cleaning supplies at Target, and there were only so many psychological buttons the company could push. But now that she is pregnant, everything is up for grabs. In addition to triggering Jenny’s habits to buy more cleaning products, they can also start including offers for an array of products, some more obvious than others, that a woman at her stage of pregnancy might need.

Pole applied his program to every regular female shopper in Target’s national database and soon had a list of tens of thousands of women who were most likely pregnant. If they could entice those women or their husbands to visit Target and buy baby-related products, the company’s cue-routine-reward calculators could kick in and start pushing them to buy groceries, bathing suits, toys and clothing, as well. When Pole shared his list with the marketers, he said, they were ecstatic. Soon, Pole was getting invited to meetings above his paygrade. Eventually his paygrade went up.

At which point someone asked an important question: How are women going to react when they figure out how much Target knows?

“If we send someone a catalog and say, ‘Congratulations on your first child!’ and they’ve never told us they’re pregnant, that’s going to make some people uncomfortable,” Pole told me. “We are very conservative about compliance with all privacy laws. But even if you’re following the law, you can do things where people get queasy.”

About a year after Pole created his pregnancy-prediction model, a man walked into a Target outside Minneapolis and demanded to see the manager. He was clutching coupons that had been sent to his daughter, and he was angry, according to an employee who participated in the conversation.

“My daughter got this in the mail!” he said. “She’s still in high school, and you’re sending her coupons for baby clothes and cribs? Are you trying to encourage her to get pregnant?”

The manager didn’t have any idea what the man was talking about. He looked at the mailer. Sure enough, it was addressed to the man’s daughter and contained advertisements for maternity clothing, nursery furniture and pictures of smiling infants. The manager apologized and then called a few days later to apologize again.

On the phone, though, the father was somewhat abashed. “I had a talk with my daughter,” he said. “It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.”

When I approached Target to discuss Pole’s work, its representatives declined to speak with me. “Our mission is to make Target the preferred shopping destination for our guests by delivering outstanding value, continuous innovation and exceptional guest experience,” the company wrote in a statement. “We’ve developed a number of research tools that allow us to gain insights into trends and preferences within different demographic segments of our guest population.” When I sent Target a complete summary of my reporting, the reply was more terse: “Almost all of your statements contain inaccurate information and publishing them would be misleading to the public. We do not intend to address each statement point by point.” The company declined to identify what was inaccurate. They did add, however, that Target “is in compliance with all federal and state laws, including those related to protected health information.”

When I offered to fly to Target’s headquarters to discuss its concerns, a spokeswoman e-mailed that no one would meet me. When I flew out anyway, I was told I was on a list of prohibited visitors. “I’ve been instructed not to give you access and to ask you to leave,” said a very nice security guard named Alex.

Using data to predict a woman’s pregnancy, Target realized soon after Pole perfected his model, could be a public-relations disaster. So the question became: how could they get their advertisements into expectant mothers’ hands without making it appear they were spying on them? How do you take advantage of someone’s habits without letting them know you’re studying their lives?

Before I met Andrew Pole, before I even decided to write a book about the science of habit formation, I had another goal: I wanted to lose weight.

I had got into a bad habit of going to the cafeteria every afternoon and eating a chocolate-chip cookie, which contributed to my gaining a few pounds. Eight, to be precise. I put a Post-it note on my computer reading “NO MORE COOKIES.” But every afternoon, I managed to ignore that note, wander to the cafeteria, buy a cookie and eat it while chatting with colleagues. Tomorrow, I always promised myself, I’ll muster the willpower to resist.

Tomorrow, I ate another cookie.

When I started interviewing experts in habit formation, I concluded each interview by asking what I should do. The first step, they said, was to figure out my habit loop. The routine was simple: every afternoon, I walked to the cafeteria, bought a cookie and ate it while chatting with friends.

Next came some less obvious questions: What was the cue? Hunger? Boredom? Low blood sugar? And what was the reward? The taste of the cookie itself? The temporary distraction from my work? The chance to socialize with colleagues?

Rewards are powerful because they satisfy cravings, but we’re often not conscious of the urges driving our habits in the first place. So one day, when I felt a cookie impulse, I went outside and took a walk instead. The next day, I went to the cafeteria and bought a coffee. The next, I bought an apple and ate it while chatting with friends. You get the idea. I wanted to test different theories regarding what reward I was really craving. Was it hunger? (In which case the apple should have worked.) Was it the desire for a quick burst of energy? (If so, the coffee should suffice.) Or, as turned out to be the answer, was it that after several hours spent focused on work, I wanted to socialize, to make sure I was up to speed on office gossip, and the cookie was just a convenient excuse? When I walked to a colleague’s desk and chatted for a few minutes, it turned out, my cookie urge was gone.

All that was left was identifying the cue.

Deciphering cues is hard, however. Our lives often contain too much information to figure out what is triggering a particular behavior. Do you eat breakfast at a certain time because you’re hungry? Or because the morning news is on? Or because your kids have started eating? Experiments have shown that most cues fit into one of five categories: location, time, emotional state, other people or the immediately preceding action. So to figure out the cue for my cookie habit, I wrote down five things the moment the urge hit:

Where are you? (Sitting at my desk.)

What time is it? (3:36 p.m.)

What’s your emotional state? (Bored.)

Who else is around? (No one.)

What action preceded the urge? (Answered an e-mail.)

The next day I did the same thing. And the next. Pretty soon, the cue was clear: I always felt an urge to snack around 3:30.

Once I figured out all the parts of the loop, it seemed fairly easy to change my habit. But the psychologists and neuroscientists warned me that, for my new behavior to stick, I needed to abide by the same principle that guided Procter & Gamble in selling Febreze: To shift the routine — to socialize, rather than eat a cookie — I needed to piggyback on an existing habit. So now, every day around 3:30, I stand up, look around the newsroom for someone to talk to, spend 10 minutes gossiping, then go back to my desk. The cue and reward have stayed the same. Only the routine has shifted. It doesn’t feel like a decision, any more than the M.I.T. rats made a decision to run through the maze. It’s now a habit. I’ve lost 21 pounds since then (12 of them from changing my cookie ritual).

After Andrew Pole built his pregnancy-prediction model, after he identified thousands of female shoppers who were most likely pregnant, after someone pointed out that some of those women might be a little upset if they received an advertisement making it obvious Target was studying their reproductive status, everyone decided to slow things down.

The marketing department conducted a few tests by choosing a small, random sample of women from Pole’s list and mailing them combinations of advertisements to see how they reacted.

“We have the capacity to send every customer an ad booklet, specifically designed for them, that says, ‘Here’s everything you bought last week and a coupon for it,’ ” one Target executive told me. “We do that for grocery products all the time.” But for pregnant women, Target’s goal was selling them baby items they didn’t even know they needed yet.

“With the pregnancy products, though, we learned that some women react badly,” the executive said. “Then we started mixing in all these ads for things we knew pregnant women would never buy, so the baby ads looked random. We’d put an ad for a lawn mower next to diapers. We’d put a coupon for wineglasses next to infant clothes. That way, it looked like all the products were chosen by chance.

“And we found out that as long as a pregnant woman thinks she hasn’t been spied on, she’ll use the coupons. She just assumes that everyone else on her block got the same mailer for diapers and cribs. As long as we don’t spook her, it works.”

In other words, if Target piggybacked on existing habits — the same cues and rewards they already knew got customers to buy cleaning supplies or socks — then they could insert a new routine: buying baby products, as well. There’s a cue (“Oh, a coupon for something I need!”) a routine (“Buy! Buy! Buy!”) and a reward (“I can take that off my list”). And once the shopper is inside the store, Target will hit her with cues and rewards to entice her to purchase everything she normally buys somewhere else. As long as Target camouflaged how much it knew, as long as the habit felt familiar, the new behavior took hold.

Soon after the new ad campaign began, Target’s Mom and Baby sales exploded. The company doesn’t break out figures for specific divisions, but between 2002 — when Pole was hired — and 2010, Target’s revenues grew from $44 billion to $67 billion. In 2005, the company’s president, Gregg Steinhafel, boasted to a room of investors about the company’s “heightened focus on items and categories that appeal to specific guest segments such as mom and baby.”

Pole was promoted. He has been invited to speak at conferences. “I never expected this would become such a big deal,” he told me the last time we spoke.

A few weeks before this article went to press, I flew to Minneapolis to try and speak to Andrew Pole one last time. I hadn’t talked to him in more than a year. Back when we were still friendly, I mentioned that my wife was seven months pregnant. We shop at Target, I told him, and had given the company our address so we could start receiving coupons in the mail. As my wife’s pregnancy progressed, I noticed a subtle upswing in the number of advertisements for diapers and baby clothes arriving at our house.

Pole didn’t answer my e-mails or phone calls when I visited Minneapolis. I drove to his large home in a nice suburb, but no one answered the door. On my way back to the hotel, I stopped at a Target to pick up some deodorant, then also bought some T-shirts and a fancy hair gel. On a whim, I threw in some pacifiers, to see how the computers would react. Besides, our baby is now 9 months old. You can’t have too many pacifiers.

When I paid, I didn’t receive any sudden deals on diapers or formula, to my slight disappointment. It made sense, though: I was shopping in a city I never previously visited, at 9:45 p.m. on a weeknight, buying a random assortment of items. I was using a corporate credit card, and besides the pacifiers, hadn’t purchased any of the things that a parent needs. It was clear to Target’s computers that I was on a business trip. Pole’s prediction calculator took one look at me, ran the numbers and decided to bide its time. Back home, the offers would eventually come. As Pole told me the last time we spoke: “Just wait. We’ll be sending you coupons for things you want before you even know you want them.”

Is Any CEO Worth $189,000 Per Hour?

2012-02-17T08:49:00.001-05:00

Maybe that's not the right question.

Maybe the question should be whether the nation's major companies have outperformed their global competitors to the extent that their returns exceed expectations and that, as a result, the economy has grown to the benefit of the nation that has supported them via monetary and fiscal policy?

Or maybe we should just ask whether current compensation levels make sense as a rational system?

The answer to all three is probably no. The problem is what to do about it. Because there is not even agreement about whether or not this is a public policy question. Conservatives claim corporations have the right to set compensation levels. Others point out that corporations receive a grab-bag of benefits from tax policy to import controls to regulatory easements that lessen their financial burden, all of which makes them beneficiaries of public largesse and therefore liable to public scrutiny.

But however this is decided, it is clear that trickle down economics is not working. Neither for the companies in question, nor for their shareholders, nor for the citizens of the country in which these businesses are domiciled. There is one pie and for the past few years, it has not been growing. If one small group gets a big slice, everyone else gets less. JL

Roger Lowenstein reports in Bloomberg Businessweek:

Chief executive officers are not the only highly paid people in America. It’s just their misfortune that, thanks to disclosure rules, they’re among the most visible. This proxy season coincides with an electoral cycle in which income inequality has become a populist issue for candidates in both parties, which means CEO paychecks will be scrutinized as never before. And what can’t evade discovery is that, even among the very rich, CEOs have been consistently overpaid.

By overpaid, I don’t mean merely highly paid. We live in a capitalist country, and talent is entitled to fetch its price. But to take just one shining example, Larry Ellison, CEO of (ORCL)Oracle, has gorged himself on more than $60 million in stock options every year since 2008. Even if Ellison did groundbreaking work and was a juggernaut of management brilliance, abusive would not be too strong a word. Fixing CEO pay—making it more reflective of what executives are truly worth—would go a long way toward restoring America’s faith in business, and in equal treatment. How, is the $60 million question.
One myth should be cleared at the outset. In 2008, the CEOs who run companies in the Standard & Poor’s 500-stock index earned, in total, less than 1 percent of what everyone who’s a 1 percenter earned. So it’s unfair to blame CEOs alone for fostering inequality. Defenders of the system cite such data to advance a larger claim. Pay for public company CEOs has risen, they say, for the same reasons it has for movie stars, real estate moguls, and private entrepreneurs: Globalization and technology has created a wider market. Even President Obama, no friend of the very rich, acknowledged in December that “over the last few decades, huge advances in technology have allowed businesses to do more with less, and made it easier for them to set up shop and hire workers anywhere in the world.” Read thoughtfully, that implies that 1 percenters are taking home more because, in an economic sense, they’re earning it.

“The system has worked,” says Steven Kaplan, a professor at Chicago Booth School of Business. From 2000 to 2010, compensation for the median CEO in the S&P 500 rose from $5 million to just over $8 million. (Those figures represent actual dollars received; when calculated by the value of options at the time of grants, pay over the period began and ended at $8 million.) Kaplan asserts that CEOs are “paid for performance.” In a literal sense this is true; CEOs did earn more when their companies succeeded. But they earned so much, as well, for ordinary and unquantifiable performance as to undermine the intended effect. (AAPL)Apple’s new CEO, Tim Cook, may turn out to be every bit as good as Steve Jobs, or he may not. Apple’s board did not wait to find out. In his very first year as CEO, Cook was awarded a pay package worth $378 million over 10 years.

The real explanation for sky-high pay lies in the “agency” problem. Agents exploit their role as intermediaries. They thrive in imperfect markets in which pay scales do not respond quickly, if at all, to results. Hedge fund managers who deliver mediocre returns get rich thanks to their role as agents. Mortgage traders employed by banks got huge bonuses in the fat years but ducked responsibility for losses; they got a free ride on their employers’ capital.

So do some CEOs—though certainly not all. (Steve Ballmer of (MSFT)Microsoft, for example, gets no options and total compensation of $1.4 million.) But all CEOs compete in a warped marketplace. How often does the head of Company X leave for Company Y? How often does a corporation sack its head? It happens more than it used to, but the market remains inflexible, and firings are rarely for reasons of expense. Consider that Philippe Dauman, the chief executive of (VIAB)Viacom, speared $84 million in 2010, and that Eugene Isenberg of (NBR)Nabors Industries was awarded $100 million last year for agreeing to relinquish his job. These may be anomalies, but it’s hard to imagine them happening in any rational marketplace.

The agency problem in the corner office is as old as public ownership, though it was most famously brought to light in the 1980s by Harvard Business School professor Michael Jensen, who observed that CEOs, unlike private entrepreneurs, owned little stock and had scant stake in the common corporate purpose. In a 1989 Harvard Business Review article, “Eclipse of the Public Corporation,” Jensen suggested that public shareholders had become passé. Of course, there was nowhere near enough private capital to replace the mass of public investors. For the public companies that remained un-eclipsed, Jensen reckoned, the next best thing would be to shower stock options on the executives, endowing them with the same incentives as their peers at private firms.

If Harvard Business School thought stock options were good for America, corporate executives were perfectly willing to take them. “Pay for performance” was the mantra, but in the aftermath of the dot-com bubble it became abundantly clear, not least to Jensen, that options had not performed as hoped.

Executives who were shielded from losses chased the upside and exposed their firms to excessive risk—Bernie Ebbers at WorldCom and Ken Lay at Enron being just two examples. When bucketfuls of options were awarded year after year, executives had nothing to lose. In 2008, after promoting Vikram Pandit to CEO, (C)Citigroup gave him $29 million in stock awards plus $8.4 million in options. Alas, the stock cratered. Compensating Pandit (but not, of course, the public shareholders) for this bad luck, Citi’s directors last year agreed to 500,000 more stock options and a $10 million stock award. These will reward Pandit for earning back the capital that, under his tenure, Citi had previously lost. The problem is systemic. From 2000 to 2010, shareholders lost 14 percent playing the S&P 500. But CEOs kept raking it in.

Jensen, still looking for solutions, has only gotten more outraged. In a blistering new paper, “CEO Bonus Plans: And How to Fix Them,” co-authored with Kevin Murphy, he observes that “almost all CEO and executive bonus plans have serious design flaws.” The pair find, across the board, that bonuses are ripe for gaming and executives benefit from too much upside with little downside. Jensen and Murphy propose that guaranteed salaries be lower and bonuses higher—with bonuses deposited into a notional bonus “bank” and paid out over time. Poor performance would reduce the exec’s “deposit.”

That’s a fine start, but why stop there? It also makes sense to reduce the number of overlapping incentives. (Oracle paid its new president, Mark Hurd, in six different ways in 2011, totaling $78 million.) As Murphy says, “It was never our intention that companies would layer options for free on top of all these other forms of pay.” Stock grants and options should be dished out only at far less frequent intervals. Otherwise, execs get a bump merely for recouping prior losses. Also, huge exit packages, which make a mockery of Kaplan’s claim that failed CEOs suffer real punishment, have to be curbed. The best way to ensure such reforms is for Congress to legislate binding shareholder votes on any package worth more than, say, $5 million. Let shareholders be their own agents.