shorenstein paper and miscellaneous interviews with professors

The other side of the profit equation
National Post
Saturday, December 17, 2005

CAMBRIDGE - Actor Paul Newman's food company, Newman's Own,
is an example of social entrepreneurship. The movie star has built a
financially successful enterprise, which gives away all its profits
to charities.

"The public didn't know about the charities at first when he
started to come out with products. He just offered a high-quality
product, but its charitable aspect was useful early on to get
suppliers and distributors," said Harvard professor Jane
Wei-Skillern.

"So far it's given away more than US$175-million."

There are also many examples of not-for-profit social
entrepreneurship and the professor has spent a number of years
teaching and researching this field.

"I'm interested in social value creation," she said. "This about
organizations or individuals mobilizing resources to create value
whether they are operating in the non-profit, corporate or
government sectors."

Newman's company is unique inasmuch as it has two mandates: to
build a corporate entity with brands in order to maximize profits
and also to share all proceeds with society. "One example of an
outstanding not-for-profit success is Habitat for Humanity in
Egypt," she said.

Habitat for Humanity operates in dozens of countries and each
country creates affiliates. Currently, there are roughly 2,500
affiliates who mobilize volunteers to provide materials, build
low-cost housing and provide interest-free mortgages. "In Egypt, the
director has forgone the traditional model of affiliates," she said.

Instead, Habitat Egypt decided rather than spending money creating
an organization of affiliates it would tap into and partner with
some of the existing non-governmental agencies. Some of these groups
had little or no housing experience but were involved in economic,
education or health development projects. So Habitat provided
expertise.

"Habitat plugged in where it was needed," she said. "It seeded
others and is one of the most successful Habitat for Humanity
organizations in the world."

By keeping overheads low, and leveraging resources that are already
there, Habitat has built 6,000 homes within six years in Egypt
alone. By comparison, Habitat has built 200,000 houses in 30 years
or roughly 6,600 per year worldwide.

Another interesting social enterprise is KaBOOM! which has
harnessed corporate partners like Home Depot to build playgrounds
for children across the United States. The sponsoring corporations
have benefited beyond developing goodwill and positive public
relations by being able to provide meaningful volunteer activities
for their employees.

Timberland, the shoe and apparel retailer, is involved in a Boston
youth organization designed to provide teens with one year off
school in order to do community service. Starbucks has become
involved in helping social entrepreneurs work with farmers in
developing countries to grow coffee for export. This is part of its
fair enterprise initiative.

Another case in point is Women's World Banking in New York, which
provides micro loans to women in developing countries. These loans
are used to buy livestock or a sewing machine and are widely
recognized as an extremely successful form of economic development.

"It was started by a Harvard Business graduate, Nancy Barry," said
professor Wei-Skillern. "It has scaled up with little cost and has a
budget of US$10-million and 40 employees who reach 10 million
borrowers a year."

Like Habitat in Egypt, Ms. Barry has become a catalyst for other
lenders around the world rather than a hands-on bank.

"The bank has created a network, with mainstream banks and newer
members, who ascribe to its quality standards, mission statement for
lending and values," professor Wei-Skillern said.

These social entrepreneurial activities are very different from
corporate ones even though disciplines and skills are similar among
practitioners. Their job is not to build a brand, become a market
leader or outpace the competition.

"They are not proprietary about their information. They are happy
if others take their ideas and run with them. This is one of the
hallmarks of these organizations. The bank doesn't care if it gets
credit but is pleased with its role as a facilitator, catalyst or
builder of networks."

Likewise, Habitat Egypt's success is based on seed funding and
technical advice and has leveraged efforts mightily by using others.
It has only five staff.

"This also created self sustainability and has enabled its partners
to independently run their housing programs and allow Habitat to
pull out and work with new communities to meet its goal, which is to
provide housing for up to 10% of the population in need of housing
in Egypt. The national director hopes that by working closely with
its partners to develop the local capacity to address the poverty
housing issue, its partners can spread their knowledge and expertise
to neighbouring communities and create a movement to serve the
remainder of the population in need, independent of Habitat," she
said. "This is really entrepreneurial."



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Dr. Summers has big plans for Harvard: President builds
partnership with MIT
National Post
Thursday, December 15, 2005

CAMBRIDGE - Larry Summers is Harvard University's
controversial president. And despite several years of incidents,
books and protests, he has kept his prestigious position.

An economist and former Secretary of the Treasury in the Clinton
administration, Dr. Summers is well known as the man who bailed out
Mexico and several countries when they hit the debt wall in the
1990s.

Last week at a breakfast meeting, he spoke about economic and
educational issues.

"The U.S. trade deficit is unsustainable and I'm worried. But I was
saying these things a year ago and the dollar's gone up by 15%," he
said.

"Growth has been pretty smooth. So there's a little bit of a crying
wolf problem for those who worried last year and thought a
disruptive correction was imminent," he said.

"But it's like the guy waiting for the bus and it doesn't come,
doesn't come, doesn't come. There are two explanations for this:
Either the bus is around the corner or you don't understand the
schedule.

"This is how I feel about calling the hard landing, but I bet,
two-to-one, it will happen within three years. What's also worrisome
is that we have become as dependent as we are on the Chinese banks
rolling over 30-day treasury bills. This is a degree of dependence
that has geopolitical consequences."

This answer, 10 minutes in its entirety, was vintage President
Summers. He is a person of impressive intellect who answers
questions academically, by responding carefully, then adding
footnotes that further drill down to sources and related aspects of
the same question. He doesn't converse. He conducts seminars or
doctoral examinations.

In fact it is this expansive and musing style that got him into
near-fatal trouble this year.

Background was the skirmishes he's had with faculty since becoming
president in July, 2001, over the push to bolster the school's
high-tech and bio-tech presence.

He was immediately accused by liberal arts faculty of trying to
"MIT-ize" the school -- trying to turn Harvard into its
technologically superior neighbour, the Massachusetts Institute of
Technology.

There have been staff departures and other dust-ups involving
affirmative action, but this year's gaffe was a doozie. He
suggested, at a closed-door conference on science with faculty, that
there were some innate differences which might help explain why
fewer women have become professional scientists or engineers.

His remarks created a firestorm. A "dumb mistake," he said
recently, but added that he was taken out of context,
misinterpreted, inaccurately portrayed and amplified out of
proportion.

But some offended Harvard donors withheld funds, the faculty
overwhelmingly voted non-confidence and the press ranted and raved.
Then in July, Harvard's seven-member governing Corporation (which
includes the president) was rocked by the resignation of its only
African-American member, a New York lawyer named Conrad Harper.

His letter of resignation appeared in The New York Times and was
highly critical of Dr. Summers' tenure and remarks about women. He
suggested the president should not only be denied a rise in pay but
should also be shown the door.

But Dr. Summers has survived -- thanks mostly, say his detractors,
to his friend and benefactor, Robert Rubin, who is on Harvard's
Corporation. Dr. Summers worked for him when Mr. Rubin was Clinton's
Secretary of the Treasury then succeeded him. Mr. Rubin is also
chairman of the executive committee of Citigroup Inc.

While the dust has settled, and Dr. Summers has been duly battered,
he and Harvard's Corporation last week veered dramatically in the
direction of political correctness: They named Patricia King, an
African-American woman who is a legal expert on science and a
professor at Georgetown University in Washington, D.C., to the
Corporation's board of directors.

"She has great experience and wisdom and is a person who can bring
a valuable perspective that is now missing, thanks to her ethical,
scientific and legal training," said the president.

The message delivered was certainly clear: Women and minorities
need apply.

The Boston Globe pointed out that Ms. King eagerly defended
affirmative action in her testimony before the Senate opposing the
appointment of arch-conservative Supreme Court Justice Clarence
Thomas in 1991.

She said she benefited from affirmative action in her admission to
Harvard's law school. "Somehow, Judge Thomas seems not to remember
those he must have encountered along the way who were lost to the
darkness simply because there was no help for them," she said.

This would appear to seal the deal for Dr. Summers, who is
continuing a gigantic push, in partnership with MIT, to create the
world's greatest scientific cluster on hundreds of acres beside the
business school campus.

"There are currently 14 football fields' worth of laboratories
under construction," he said. "We have more intellectual talent in a
five-mile radius of here than anywhere else on earth. It's very
exciting."


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A scion-tific look at family enterprise: Professor explains
why private firms often outperform public companies
National Post
Tuesday, December 13, 2005

CAMBRIDGE - Family-controlled corporations dramatically
outperform widely held companies, according to two recent studies of
the S&P 500 in the United States.

"The reason why these family-controlled businesses do so much
better is because the ownership group is stable and allows the
management team, family and non-family, to plan long term and act
aggressively at the same time. At best, they can be a wonderful
combination of patience and aggressiveness," said Harvard's John
Davis who specializes in studying and consulting family businesses.

By contrast, widely held businesses tend to be very focused on the
short term, or three to six months.

"Long term for them is the tenure of the president, which is about
six years on average," said professor Davis.

Some 40% of S&P 500 companies are family-controlled, as are more
than 50% of companies on the NYSE and Nasdaq.

The professor conducts courses and workshops for families to help
them deal with relationship dynamics, wealth, succession and
governance issues.

He said the expression "shirtsleeves to shirtsleeves in three
generations" has an element of truth, he said.

"Most family-controlled businesses don't survive for more than two
generations. And most families that become successful cannot remain
successful for more than two generations," he said. "There are ways
of beating those odds and that's my job."

He says every family, and enterprise, has a unique culture. Some
work better than others in sustaining success.

"As a business goes from the strong father-leader to the next
generation, they have the father's model of leadership. The next
generation thinks it can remain, but Dad didn't have to listen to
anybody. Now they had better listen to a lot of people, to one
another.

"Because the sibling running it doesn't control it, he or she had
better listen to managers, the board, etc. The situation is much
different than the father was in, and if they don't understand that,
it's a recipe for a mess," prof. Davis said.

Family members should be "acculturated" to be dutiful and
perpetuate the business, the family and the reputation of both, he
said.

Children should be realistic about their potential, along with
parents. There must also be room for individual choice, including a
decision to not participate in the family business directly.

The family leader must also carefully choose among children or
relatives to pick talent.

"In the best family companies I've seen, there's a real effort to
put the best talent at the top of the business, regardless of birth
order, gender or experience," he said.

"Sometimes they go for a change agent, favouring the daughter who
wants to do things differently and is more invested in innovation
than the son who wants to keep everything the same."

"Making those choices takes real discipline and backbone because it
potentially disrupts family harmony in the interest of the greater
good."

Sometimes choices meet with resistance such as the squabble over
succession that divided the McCain brothers of New Brunswick fame.

"You can see family companies weather big strains for a long time
like the McCains. Sometimes family squabbles tear a business apart
or weaken it to the point where they can't make important decisions.
Other times, the business is large enough and buffered enough from
family issues that it continues to make money and grow."

He said he knows a number of private equity investors who have made
their fortunes off families that couldn't get along in business.
These companies were bought, fixed and taken to the next level.

Family enterprises must be run like meritocracies and, if so, will
have no problem with the current regulations designed to crack down
on cronyism and directors linked to owners.

"But nepotism is an inherent characteristic in family companies.
It's often used in a pejorative way but it simply means the showing
of favouritism to one's relatives," he said.

"This is a completely natural characteristic from single-cell
organisms to human beings. We favour those most genetically like us.
We're programmed to do that. And favouritism is shown in most
organizations. CEOs hire their buddies, alumni, same gender, same
race, so it's ludicrous and hypocritical to accuse only families of
doing this."

Hiring sons and daughters in a company also promotes ownership
stability, which is beneficial to managers. Also, if family members
don't feel they are contributing, or are wanted, the family pride
tends to diminish causing problems.

The professor believes that the best family business he has come
across is S.C. Johnson & Son of Racine, Wis., which is a private,
fifth-generation giant producing Johnson's Wax, Raid, Glade, Pledge
and many other consumer products.

"The four siblings in the fifth generation are running the business
and it has a clean public record, is philanthropic, an environmental
leader and has a very progressive workplace. It's a truly noble
organization."

=====================================================================

Prescription for better health care: Consumer-driven model
advocated by professor
National Post
Saturday, December 10, 2005

CAMBRIDGE - Soaring medical costs in the United States
represent the country's biggest competitive disadvantage going
forward. The country spends 15% of its GDP on health care, compared
with Canada's 9.5% or Europe's range of 6% to 10%.

This cost doesn't include the cost of massive amounts of litigation
involving medical expenses or the loss of productivity because there
are millions of uninsured or uninsurable.

Costs are unsustainable as General Motors has found. Its range of
"legacy entitlements," mostly health care top-ups for workers and
retirees, adds an estimated US$1,500 to the cost of every vehicle.
And now that it's teetering, there are negotiations to axe benefits.

Similarly, airlines, steel companies and other corporations with
unionized workforces are feeling the burden and reneging on benefits
promised years before in order to survive.

The concern is that businesses may go bust under the burden and
others are increasingly scrapping medical benefits, leaving more
Americans exposed to soaring medical costs because governments won't
fill the vacuum.

Despite the problems, Americans simply are not interested in a
European or Canadian system. They trust the invisible hand of the
market as much as Europeans or Canadians trust their governments.

"There will never be a government monopoly over health care in this
country. A one-payer system like Canada's is not going to happen,"
said health care expert Regina Herzlinger, a Harvard Business School
professor.

That being said, she is the pioneer and leader in another, better
solution -- one that could benefit either publicly run or privately
run schemes. She calls it "consumer-driven health care" and it
involves deploying market disciplines on the medical world.

In 1998, she launched a one-woman crusade, by organizing a
high-level conference involving the country's most prominent
health-care executives, to hoist her plan on to the public agenda.
And it's starting to gain traction.

She defines the problem the same, no matter whether the system is
managed by the private or public sector: The consumer is lost in the
shuffle and the health care professionals have never had to fix
their increasingly cumbersome, inefficient and expensive system.

In essence, she wants to do for the health care system what the big
box stores have done for retailing.

She cites the fact that, between 1995 and 1999, 40% of the
productivity gains in the United States were in the difficult sector
of retailing due to economies of scale, specialization and other
efficiencies, she said.

"This can happen in health-care services too. But it's against the
grain of the health-care community to permit consumerism to
flourish," she said in a recent interview. "Their mindset is they're
smart and you're not."

She said there are three steps to drive down costs of any service
or product: Create competition for services, which leads to
innovation and productivity; allow suppliers to innovate; and
provide information to consumers so they can make astute choices.

This doesn't mean people can take doctoring into their own hands.
But they can make more astute decisions. For instance, one American
health-care provider has an online portal for health-care consumers
where they can get real-time information about a specific procedure,
such as the percentage of failures, injuries, infections,
recurrences or deaths by hospital, and also based on the patient's
age, medical history and gender.

Another needed reform is tailor-made insurance for healthy
individuals with differing needs as well as for those with chronic
problems such as diabetes, heart disease or HIV.

"A healthy person may want a policy which gives them minimum
coverage during their working life but has comprehensive nursing
home coverage at the back end," she said. "But now employers provide
a one-size-fits-all coverage."

Specialized insurance will create efficiencies.

"Diabetes is an epidemic in the United States and the health-care
expenditures of US$132-billion are roughly the same as the American
food industry. HIV medical costs are US$56-billion a year, or the
size of the metals and minerals mining industry in the U.S.
Congestive heart disease is about the same size," she said. "In a
consumer-driven system, a diabetic would get insurance to choose
among competing diabetic teams."

This would lead to the creation of health-care "factories" to meet
specialized needs, thus lowering costs and providing better care or
service. Governments could help by providing tax breaks to help the
minority of people with chronic diseases. But this cost to
government coffers would be more than recouped by an overall
lowering of costs to the economy.

Roughly four million consumers have these unique insurance policies
and large underwriters are moving into the field. So changes are
happening, thanks in no small measure to professor Herzlinger's
efforts.

"Everything else has been a failure and this will work," she said.

=====================================================================

What people don't know they know: Professor's seven 'deep
metaphors' probe the psyche of consumers
National Post
Thursday, December 8, 2005

CAMBRIDGE - Nearly 80% of new product or service offerings
fail because marketers don't dig deeply enough into the underlying
thinking and behaviour of customers.

"Advertising reinforces the deep metaphors, or basic frames of
thinking. It doesn't instigate thoughts," said Gerald Zaltman,
professor emeritus at the Harvard Business School.

He combines social science with business as co-director of
Harvard's Mind of the Market Laboratory, and has written 14 books,
the latest of which is How Customers Think.

He also co-founded Olson Zaltman Associates in Pittsburgh, which
deploys and licenses its unique market research techniques in order
to define the underlying mental models of customers. Its licensee in
Canada is a company called Innerview in Toronto.

The likes of Coca-Cola, Nestle, Procter & Gamble, Motorola, Reebok,
IBM, Microsoft, Intel, Citibank, Hurrah's, CapOne and General Motors
have trekked to his firm to find out how to re-think product
development or how to reinvent their marketing strategies.

"We deal with the deep metaphor, which is a basic frame of
thinking. It's automatic and people are typically not aware of it,"
he said. "It's more powerful than facts, context or self interest.
There are seven deep metaphors. They guide, in subtle and overt
ways, how customers and managers process information about any
product, service or activity and event."

The metaphors strike a universal chord and his researchers or
interviewers conduct "innerviews" with a dozen or so people in order
to see how they feel about a product or service on the deepest
psychological level. Interviewees are asked to bring in a couple of
dozen photographs that relate to the topic. These provide the
interviewers with non-verbal clues, which become the basis for
two-hour question sessions.

(His "deep metaphors" are: transformation, balance, containment,
connection, force or movement, nature, and orientation and journey.)

"I can't imagine a single consumption experience that isn't driven
by two or three deep metaphors," he said. "They exist and influence
what we say and do below the level of awareness. That's why we need
new techniques to get at what people don't know they know."

His firm was brought in at an early stage in the development of an
air freshener.

"We found that the deep metaphor is connection: People don't want
to be alienated from others by odour in their home or on their
clothes. It's also about the metaphor of balance: They did not want
a strong replacement odour like pine because that would look like a
cover-up. It was also about nature: They wanted something close to
nature, or natural, he said.

The result was "Breeze" air freshener.

"The product has been hugely successful and the product's launch
was based on some of these fundamental insights," he said.

Another example involved Motorola, which was doing research on a
new, high-tech security system. To understand the non-verbal, or
metaphorical, meanings attached to such a product, they used
Zaltman's techniques of photographs, interviews and analysis.

The subjects happened to bring in lots of pictures of dogs. This
underlay the deeper meaning of dogs, which is protection for their
owners. So instead of launching the product with a high-tech name,
the product was simply called "The Watchdog."

Another study involved pantyhose and the Zaltman research showed
that women felt taller and thinner, therefore more sexually
appealing to men, when they put on pantyhose. The result was that
the manufacturer reinforced long legs, thinness and sexiness in its
advertising and marketing of the product.

Another cognitive reality that Zaltman has researched and written
extensively about is memory reconstruction or "memory morphing."

"Memories are always changing. You can even implant false memories.
You can rewrite history. Memories are not like photographs. Memories
are always in a state of change. They recede or change as people
find different ways of seeing things," he said.

One experiment he conducted involved asking people about their
attitudes toward exercise. Two days later they were shown an ad that
celebrated the benefits of exercise. Two more days later they were
quizzed and asked to remember what they said about exercise in the
initial interview.

Those that saw the ad in between the first interview and second
interview had poor memories, or completely forgot, about their
original opinions about exercise. Those who were not shown the
advertisement in between the two interviews remembered exactly what
their original attitudes were. Conclusion: The ads altered attitudes
and memories.

An example of an ad that plants a new attitudes, and tries to erase
slightly critical memories, is McDonald's "I'm Lovin' It" campaign.

Professor Zaltman has also pioneered neuro-imaging as a market
research technique. This involves photographing brain activity while
people are using a product or service.

"But this is still in its infancy," he said.

=====================================================================

Is RIM a victim of U.S. patent chaos?: Professor says
interpretation of NTP patent is too broad
National Post
Tuesday, December 6, 2005

CAMBRIDGE - Canada's Research in Motion, maker of the popular
Blackberry, is simply the latest "victim" of America's patent chaos,
said expert Josh Lerner of the Harvard Business School.

"It is a victim of a patent system gone awry," he said. "I'm not a
lawyer but it seems pretty clear that NTP [the company that sued RIM
for patent infringement] got an extremely narrow patent but during
the litigation process, it got a judge that broadened out the
claim."

The problem in the United States is that while a company may wait
for an appeal, there is the threat of injunctive relief. "This
forces settlements," he said.

It also makes it easy to shake down unwitting companies with
frivolous actions.

One such specialist is a businessman called Ron Katz whose company
has raked in an estimated US$1-billion in royalties because it has a
batch of patents for call centres, or the combination of phones and
computers.

"The injunction threat is a problem for call centres so Citigroup
and others selling financial services cannot afford to have their
call centres shut down for a minute. So they have paid him lots of
money," said professor Lerner.

There are some bizarre examples of other types of patent problems.
For instance, a large food manufacturer patented the
peanut-butter-and-jelly sandwich a few years ago and began suing
caterers for royalties before a judge called a halt to it. Another
individual got a patent for swinging on swings sideways and
attempted to sue playground manufacturers for royalties.

"Smuckers [the food manufacturer] had its patent for sandwiches
narrowed by a judge who realized the patent was too broad," said
professor Lerner.

These and other examples of dysfunction flow throughout his book,
Innovation and Its Discontents.

These practices of patenting inventions that already exist are
known as "patent trolling." One famous case involved Henry Ford's
battle with a man called Selden, who had a very broad patent on the
internal combustion engine for the automobile. Ford won his battle.

Similarly, the world's greatest inventor, Thomas Edison, had to
fend off many litigants to protect his patents, the most any
individual has ever held.

Another more recent example involved a Harvard Nobel Prize winner,
and colleague of prof. Lerner's, who won his prize in the 1970s for
option pricing. Patents were rare for financial products in those
days but times have changed.

An MBA student came across the option pricing, filed a patent, got
one and then licensed it for use to the Philadelphia Stock Exchange.
The professor threatened to sue but did not.

The problem lies in the nature of the patent process, he said.

There are currently 5,000 people in the U.S. Patent Office and
examiners spend 12 to 16 hours on each application, which isn't
enough time for some and too much time for others, he said.

"The best example of the difficulty of the patent-awarding process
is that Albert Einstein worked in the Swiss patent office, while he
worked on his theory of relativity. And he was always accused of
awarding patents that were too broad or of awarding patents that
were too narrow. If Einstein couldn't get it right then how can the
typical patent examiner?"

Prof. Lerner believes that multiple examiners in an open public
process is a better method of awarding patents and that, once
granted, they should be tested rigorously and adversarially.

Patents are a critical cornerstone to wealth creation and currently
last 20 years, unlike copyright protection which has been extended
through lobbying by the music and software industries to death plus
70 more years.

"Patents are a trade-off: You grant a monopoly to provide an
incentive to invent," he said.

That's why the continuous extension of copyright protection,
retroactively, is totally unjust. The "invention" has already been
invented and capitalized on through monopoly protection and yet
companies like Disney continue to agitate for extensions.

In future, the biggest challenge involves biotech patents.

"After the genome was defined, people were filing gene patents by
the truckloads, literally. Hundreds of thousands of pages of raw
sequences of genes were being brought in for patenting," he said.

Both the United States and Britain passed laws that genes could not
be patented because they were essential to the public good.

"The publicity brought that policy about so there are no patents on
gene sequences, but people have gotten around this. There are
patents on proteins which coat genes," he said. "These and other
issues should be addressed because the system is really in a mess."

=====================================================================

U.S. needs to rein in executive pay: Professor says it's
excessive and bad for shareholders
National Post
Thursday, December 1, 2005

CAMBRIDGE - Executive compensation is still out of control in
the United States. "It's currently 431 times the average
production-worker pay," said professor Jay Lorsch in a recent
interview in his Harvard office.

"Everyone's having trouble getting control of it."

Last year, the median chief-executive compensation in Standard &
Poor's 500 index increased by 30.2% to US$6-million, double the
increases in 2003, according to Corporate Library. These levels of
pay bear little, or no, relationship to share appreciation.

Another study by the Institute for Policy Studies tracked the ratio
of executive pay to average workers' wages. In 1990, executives made
100 times the average wage; in 2000 this soared to 500 times; in
2002 the tech bust brought it down to 300 times; and in 2004 it had
recovered to 431 times.

Salaries in Canada and Europe lag, but these obscene amounts are
used by execs to get raises.

U.S. Congressman Barney Frank of Massachusetts has proposed a bill
aimed at making executive compensation more transparent and giving
shareholders the right to vote on compensation matters.

"It won't pass," said Lorsch, "but it puts pressure on to CEOs and
lets them know something's got to change. They've got to change
attitudes. It may be necessary to have more fuss about it."

Much of the problem is compensation consultants who push salaries
annually.

"No self-respecting firm wants its CEO paid in the lowest quartile.
This puts upward pressure on salaries. It's nuts and doesn't reflect
performance," he said. "These surveys give them all the ammunition
they need to get raises."

Fortunately, high-profile scandals and lobbying by heavyweights
like Warren Buffett have put an end to the stock option bonanza of
the 1990s. Changes to the accounting for such options have forced
most companies to expense options, which is, after all, what they
have always been -- an expense against the treasury of the
corporation.

The root of the problem is poor corporate governance and the
composition of boards of directors. Professor Lorsche has
specialized in this area and says that progress is uneven.

"Some boards have improved and some haven't," he said. "It' a
matter of one board at a time."

Enron was a wake-up call for those who spurned transparency or
indulged in cronyism or conflicts. The result was a mountain of new
filing requirements and regulations by the government.

"Listing requirements changed, which forced boards to do things
differently," he said. "The audit, compensation and corporate
governance committees must all be manned by independent directors."

In his book, Back to the Drawing Board: Designing Boards for a
Complex World, professor Lorsche explains the culture of boards.

"Boards are social systems," he said. "You can have a lot of rules
but at the end of the day it revolves around what goes on at the
board table."

"Sometimes prickly directors do a good job," he said. "You don't
want the majority ganging up on the minority."

But pension funds have little business putting representatives on
boards because it constitutes a conflict of interest: Their director
has insider information but cannot share it with the fund's traders
who may wish to buy or sell some stock.

"I think cronyism is dying," he said. "Some boards are friends of
the CEO, but everybody is bothered by that sort of thing now. Such
boards are criticized."

One of the worst examples was Disney Corp. former CEO Michael
Eisner who appointed his lawyer and the principal of his children's
school on the Disney board.

Another issue is that females remain under-represented. Canada is
worse than the United States.

"Part of the problem in Canada is that so many companies are still
controlled by families and the old boy's network is not concerned,"
he said.

But at the end of the day, shareholder activism must push for
improvements in boards and salary policies.

=====================================================================

Baby business raises ethical questions
National Post
Tuesday, November 29, 2005

CAMBRIDGE - Children are being sold by the tens of thousands
every year in the United States and Canada and a new book called The
Baby Business by Harvard Business Professor Debora Spar documents
the nature of this fascinating, somewhat frightening industry.

"I look at how people buy their children," she said in a recent
interview. "One out of every five fertilizations is assisted and the
fertility business has grown like wild in the last 10 years. The
technology is better than ever."

Biggest drivers are infertile and same-sex couples who want their
own biological children.

"In the U.S., 20,000 children are adopted from around the world
every year," she said. "There are about 1,000 surrogate mothers per
year and between 1996 and 1998 in-vitro fertilization (IVF) went
from 59,000 to 81,000 procedures per year. The number of clinics
grew from 281 to 360. In 2001, 41,000 IVF babies were conceived.
This year is probably 45,000."

One of the most controversial procedures is PGD or pre-implantation
genetic diagnosis. Embryos are created but at the eight-cell stage,
a single cell is removed and tested for "horrific genetic diseases."

The alternative in the past was in-vitro testing then abortion.

"A number of clinics are offering gender selection, but what's
interesting is that the number choosing girls outnumbers those
choosing boys," she said.

The current price in the U.S. for in-vitro fertilization is
US$12,400 and for genetic diagnosis, another US$4,500.

"People are not screening babies for traits. About all you can
screen for is hair colour, eye colour and height," she said.

In Britain it is illegal to test for anything other than family
diseases.

The frightening Boys from Brazil sci-fi scenario, where traits are
chosen for political or other reasons, does not exist, she said

"But we are selling babies. We must acknowledge this, then figure
out what kind of regulations would be useful. At the moment, we are
leaving it up to the market."

Some restrictions should be considered. She cited the recent case
of a surrogate mother who waived her US$10,000 fee when it was
discovered that all five of the embryos that had been implanted in
her on behalf of a couple of modest means were going to be born.

The five were implanted in case some failed. The couple only wanted
two babies.

"This is a serious medical issue that is unaddressed. How many
embryos can be implanted," she said.

"In this case, there were lots of embryos put in because the couple
could only afford one implantation. Then all five took."

"These are children this couple cannot afford. There is also the
cost of labour and delivery for quintuplets who are premature. This
would have cost the community millions of dollars. And these
children will likely have medical problems all their lives and will
be learning-disabled because they were very premature," she said.

"It's completely irresponsible to implant five embryos."

Another area of concern is cloning, which is illegal in the United
States and most other countries.

"There will be demand for cloning of pets and there have been five
cats cloned. The Koreans just did dogs, and cows and sheep are
relatively easy. Cloning laboratory mice will be a big market and
will make medical sense," she said.

But the error rates for cloning are high, resulting in spontaneous
abortions, deformities and premature deaths.

"In 10 years there will be human cloning, but only for infertility
or extremely tragic circumstances where a couple has lost their only
child and cannot have more," she said.

"And we will be wrestling with the issue of designer babies."

Other countries are doing different things. Canada is following the
U.S. model, but Denmark allows heterosexual couples three free
in-vitro fertilization attempts under its health policy.

Professor Spar is examining the new baby business suppliers that
are springing up, such as a New York firm that removes and freezes
female eggs or male sperm for use later in life or for sale to
others.

"An average donor egg in New York is worth US$7,500, in Chicago
US$4,500. Sperm is worth US$200 to US$300 a vial. There's not as
much variation in sperm prices," she said.
=====================================================================

Why Hanks pulls in the big bucks: Professor analyzed stars'
box-office draw in 500 movies
National Post
Saturday, November 26, 2005

Making a movie with Tom Cruise usually leads to a box-office
bonanza, but matching the appeal of more than one cast member makes
even more business sense, says Anita Elberse who teaches at the
Harvard Business School and researches Hollywood's marketing, along
with other creative industries.

She examined the financial results of 500 movies since 2001
involving 600 stars to determine whether there was a payoff for the
enormous amounts that movie stars earn.

"There is," she said. "On average, a major star is worth
US$3-million revenues."

For part of her research, she consulted a virtual stock market
called the Hollywood Stock Exchange (www.hsx.com), which anyone can
play. Participants get US$2-million of play money and buy and sell
movie "stocks." Roughly 500,000 players are in this game at any
given time.

"The exchange is a good predictor of movie success," she said. "So
the fact that the announcement that Tom Hanks will star in the movie
version of The Da Vinci Code sent the movie's virtual stock up
probably is a reliable indicator of his worth -- US$40-million in
this case."

Casting announcements involving Mike Myers, Tom Cruise, Johnny Depp
or Johnny Knoxville can send these virtual stocks soaring.
Conversely, an announcement that Leonardo DiCaprio or Jim Carrey
have turned down films drives down prices.

"My research also showed that matching the strength of cast members
leads to better results than simply investing a lot in one star,"
Ms. Elberse said, citing as an example the successful film Mr. and
Mrs. Smith starring Brad Pitt and Angelina Jolie.

Hollywood includes production, distribution and exhibition
industries. Exhibitors are increasingly under pressure, thanks to
the growth in consumers buying or renting DVDs.

Revenue from domestic theatrical screenings typically represent 20%
of overall proceeds for a film, with another 20% for foreign
theatrical, 40% for worldwide video sales and rentals and the rest
from television rights or merchandising deals.

Movies typically hang around in theatres for weeks rather than
months, and movie producers are increasingly making films
specifically intended for the DVD market -- especially those aimed
at children. "In some respects, theatres have become a loss leader
for the DVD market," she said. "It is hard to be in cinemas these
days."

The biggest-grossing movie to date is Titanic (correcting for
inflation, it would be Gone With The Wind). Box-office blockbusters
typically are big-budget productions with huge marketing efforts.
But there is no single formula for success.

For instance, Mel Gibson's hugely successful The Passion of the
Christ, which has earned more than US$400-million in revenue in
North America, was initially intended to be marketed as a "sleeper",
Ms. Elberse said.

"Newmarket Films, which distributed the movie, did a tremendous job
marketing this movie," she said. "They cleverly used prescreenings
to build buzz and used that to advertise the movie with a relatively
modest budget."

But such enormous hits are few and far between.

"Many insiders say that only one in 10 bets pays off in movies,"
she said. "If you are looking for a sure return to your investment,
you should not invest in movies."

Even so, the movie industry as a whole seems healthier than the
music industry, which is plagued with piracy issues. She doesn't see
that as a crippling problem for Hollywood. But there are challenges
coming. "It's quicker to download a three-minute song than to
download a 90-minute film," she said. "But as broadband expands it
will become easier to download movies."

Hollywood is also wrestling with the switch to digital filmmaking,
which creates significant benefits for studios -- it is cheaper and
provides better picture quality -- but will require more attention
to the risk of piracy.

Most attention has been paid to music, in which litigation has shut
down file-sharing operations and in which Apple's iPods and iTunes
now are quickly gaining share in the marketplace.

"This has changed how and what consumers are buying," she said.
"Record companies may eventually move away from producing full
albums because people just want to buy specific songs. Or they may
switch to other bundling solutions, release more and more live
recordings of concerts, or make more, but smaller, bets on new
performers."

Other areas of interest for Ms. Elberse are television and video
games. The recent decision by ABC Television to sell its two top
shows (Lost and Desperate Housewives) on Apple's video iPod will be
worth watching, she said. If this experiment takes off, selling
individual shows may become a new source of revenue.

Video games, which can easily cost US$50 apiece, involve complex
layers of plot and brain twisters in a graphically rich context. In
the United States, total revenue from video games is higher than
theatrical revenue from Hollywood movies.

"There are challenges facing all these industries," she said. "And
it's hard to predict where it will all be in 10 years."

=====================================================================

The secret to successful marketing
National Post
Friday, November 25, 2005

CAMBRIDGE - It's a misconception to think that marketing is
about advertising and brands: It's not. It's really about an
enterprise's entire culture.

"Students and others believe that marketing is a functional area.
Marketing is really a way of looking at your business and your
customers that every one in the business must practise," said Marta
Wosinska, an assistant professor at Harvard Business School. "Peter
Drucker said that businesses have only two assets: innovation and
marketing and everything else supports those two."

She teaches marketing to the MBAs here who become involved in
dozens of case studies that illustrate how various companies have
dealt with marketing matters in wildly variant ways.

There is no formula that can be applied across the board because
all products, services and customers have different needs and
attitudes, she said. One interesting case in point involved the
brand name Black & Decker.

The highly successful tools manufacturer was growing nicely, but
its market research showed one part of its customer base was not
growing as rapidly as another. The company's executives began to
realize it had two markets for its tools and needed to segment, and
treat, them differently. About half of their customers were
hobbyists, do-it-yourself homeowners who puttered around using the
company's various tools. The other customers were tradesmen who made
their livelihoods using the tools.

One of the problems was the tradesmen had different needs and
wanted to be set apart from the hobbyists. "The Black & Decker brand
was too much of a consumer brand for them," she said.

"So the company re-launched a tradesman's brand, called de Walt,
painted the tools yellow and promoted reliability of service. They
launched the brand in the early 1990s on job sites, opened more
service centres to cater to industrial needs and boasted that they
would guarantee no downtime by providing loan tools during repair
periods."

Interestingly, the executive responsible for creating this
differentiated brand took the concept to another company where it
didn't work and one where it did, she added. "He thought he had a
formula but every business is different."

Another interesting marketing strategy involves a small, upscale
electronics retailer in the U.S. called Tweeter.

"It came up with a gimmick called APP, or Automatic Protection
Program, which guaranteed to match any price from another retailer
if the price was advertised in 10 credible newspapers within 30 days
of purchase from Tweeter," she said. "Most students thought this was
a suicidal strategy."

But it was a "clever" way to take the issue of price point off the
marketing table. Tweeter was perceived to be the most expensive
source for electronics equipment.

"It suffered from a price misperception," she said. "It took the
price issue off the table with its gimmick because it was losing
one-third of its customers to other stores. They would shop at
Tweeter's and go elsewhere to stores, which billed themselves as
discount outlets, because they assumed they could get it cheaper
elsewhere. But this wasn't true."

It wasn't true because Tweeter knew that only 1% of its product
lines overlapped with its competitors' lines.

"The strategy was interesting and was based on the need to change
the customer perception. The big takeaway for students is perception
is reality and you have to deal with it," she said. "It was also a
sustainable, not temporary sale price strategy because it knew its
prices were the same or lower if compared and most of their lines
were exclusive and couldn't be shopped around anyway."

Another great marketing success story she has examined is Starbucks
coffee, but there are some problems starting to appear, ironically
as a result of revenue-enhancing innovation.

"Starbucks' success was due to three factors: It offered
higher-quality coffee. It became the third place for people to hang
out besides work and home. And its baristas, or servers, were
important because the outlets were small, they talked to you and got
to know the customers," she said.

But Starbucks' added offerings to its limited menu and has created
problems.

"There are new tensions among staff. Innovation has created many
more complicated drinks. There is more traffic and as a result the
atmosphere is less personal. They need more baristas," she said.

"This points out the holistic nature of marketing which is that
employee satisfaction is important, too, because it can lead to
customer satisfaction."

=====================================================================

The art of the message in politics: Former Bush advisor
outlines winning formula
National Post
Tuesday, November 22, 2005

CAMBRIDGE - Mark McKinnon was chief communications advisor to
the Bush Presidential campaign, and came to Harvard last week in his
black jeans, leather jacket and tooled cowboy belt to explain how to
get a message across.

"In business we call this branding. In politics we talk about
message," he told a breakfast gathering.

Mr. McKinnon is president of Maverick Media, vice-chairman of
PublicStrategies Inc. and vice-chairman of the Lance Armstrong
Foundation. But he started off as a reporter in Texas and even
peddled songs for his pal Kris Kristofferson.

"Campaigns and the media have changed. The average sound byte used
to be 47 seconds. Today it's seven seconds," he said.

A message must be clear -- Bush's theme was simply "trust."

"The best messages tell a story. Stories are the architecture of
communication. So is metaphor. In each story there is a 'narrative
arc' and this must include a threat or opportunity; a victim; a
villain, a hero and a solution," he said.

The best example of this was in 1984 when the Ronald Reagan
re-election campaign released its famous "Bear in the Woods"
commercial lasting 30 seconds. It did not show the candidate, but
showed a grizzly lumbering through a forest, with close-ups of its
teeth and claws. The bear was a metaphor for the Soviet Union and
the voice-over talked about how the bear could be dangerous, but how
dangerous nobody really knew.

Reagan's platform was heightened military preparedness during the
Cold War so the commercial ended with "Prepare for peace. The Reagan
campaign."

Other keys to successful messages are brevity, emotion and
relevancy

He told the story of Paul Begala, advisor to Bill Clinton, who
couldn't get his candidate to briefly explain complex policy
matters. So he read to him a famous passage from the Bible, John
3:16 to illustrate how complexity could be condensed.

"For God so loved the world that He gave His only begotten son so
that whosoever believeth in Him should not perish but have
everlasting life," he said. "This passage tells the whole story of
Christianity in 6.8 seconds. Clinton got the idea and became a
master at brevity."

Emotion or passion helps people identify with a message as does
relevancy and repetition.

Mr. McKinnon showed a clipping from Clinton's speech at the 1996
Democratic Party convention where the former president, in one
30-minute speech, repeated the word "bridge" at least 25 times. He
said America should build a "bridge to the future", "bridges between
Americans,'' "bridges" to the world and so on. "Bridge" was chosen
by the Clinton team as a metaphor for making the changes that were
needed for improvements or to avoid problems, but in a
non-threatening way.

Messages, like brands, must be disciplined. This means not veering
into confusing or mixed messages. In politics, this means not being
led astray and off topic by media or others.

"This involves the art of turning a question, from what the
interviewer is asking, into what you want to talk about," he said.

He illustrated this by showing a film clip of an interview with
boxer Evander Holyfield immediately after he won an upset victory
for the Heavyweight Championship from a younger Mike Tyson.

A devout Christian, Mr. Holyfield answered every question about the
fight and how he won it by saying it was all about God. The
interviewer got frustrated several times because he wanted strategy
or other analytical information from the exhausted fighter, but
Holyfield stuck to his message that this was all God's work.

Mr. McKinnon commented on the low polling popularity of his
candidate, George Bush, bogged down in Iraq and dogged with
speculation that the intelligence reports were rigged to make a case
for the invasion.

"Bush is perceived as honest but the Democrats have had some
success in selling that the intelligence was flawed or tampered
with. He's been a little late in pushing back but he has to and is
saying we all saw the same intelligence," he said. "There has to be
an acknowledgment that the pre-war intelligence was wrong."

But Mr. McKinnon is unlike other Republicans and doesn't see the
U.S. press as liberal-biased. "They are enormously biased toward
conflict."

They are fight promoters because the story is more interesting that
way.

"But there is a physics of the press and in three months, write
that down, there will start to be Bush Comeback Stories," he said.

At present, however, the White House has to face the reality that
things in Iraq are not going well. There are 30,000 more American
troops there to help during the December election but this is
temporary.

"But there will be troop reductions this year," he said.

=====================================================================

The power and perils of blogs
National Post
Saturday, November 12, 2005
Page: FP2

CAMBRIDGE - Some call it death by blog. Online triumphalists
call it the end of journalism, others the end of public relations.
But whatever the view, the bloggers have recently claimed another
"scalp" -- advertising executive Neil French.

Mr. French had to resign his position two weeks ago as worldwide
creative director at WPP Group, the world's second-largest
marketing/advertising firm. He made insulting remarks about women at
a closed session of professionals and thought his remarks were
protected from the press.

They were, but that didn't matter. Same thing happened to Harvard
University's President Larry Summers at a meeting with faculty two
years ago that nearly cost him his job.

On Oct. 6, Mr. French said at an industry event in Toronto that
women "don't make it to the top because they don't deserve to"
because they put their roles as caregivers and childbearers before
their careers.

Nancy Vonk, the co-chief creative officer of Ogilvy Toronto, a unit
of WPP Group, was infuriated and wrote a column for a Web site
denouncing his comments.

"I kind of felt that Neil was saying out loud what a lot of people
were feeling," she said in an interview with a newspaper later.
"It's undeniable that women aren't getting far enough in the
creative part of agencies, and I thought we were looking at the
reason why."

Mr. French is a top copywriter and has had a colourful past as
nightclub owner, bullfighter and manager of heavy metal group Judas
Priest.

Based in Singapore, his position was part-time and the audience in
Toronto paid $100 a plate to hear him. He said he thought the event
was private and that he was also trying to be entertaining.

Mr. French said he did not regret his remarks, but he thought the
reaction to them was "lunacy."

He and Mr. Summers are not the first, nor the last, to be toppled
or crippled by remarks that ended up being posted on some blog then
exploding onto the blogosphere.

Dr. Summers made similar remarks when asked why there weren't many
female faculty members in mathematics and science.

He said they didn't have the same aptitude for it as males and all
hell broke loose.

Other blog "scalps" include Dan Rather, whose flawed research about
President Bush's military service was unravelled by blog; Senator
Trent Lott who made a racist remark at a private party and had it
posted by an attendee; and Bill Clinton's secret sex life. All were
exposed by Internet bloggers, not the mainstream media.

Rather's nightmare began when his program 60 Minutes flashed a copy
of a letter claiming President Bush was a shirker in the army
reserves during Vietnam. But bloggers began to knock holes in the
story and one came up with the fact that the letter's typeface
hadn't been invented at the time it was to have been written. It was
a forgery.

But Rather and CBS were able to stonewall for days until Rather's
nemesis was created: a blog dedicated to the scandal called
"Rathergate," which pulled together all the various blog scoops.

It was created by Mike Krempasky who has made a name for himself as
a right-wing blogger at a site called redstate.org. He is now
vice-president for public relations firm Edelman Group in
Washington, D.C.

"There was all this material flying around and we just started a
blog called Rathergate which collected and linked to all the other
sites," he said in a session about political blogs.

Redstate.org is one of the most popular right-wing blogs in the
U.S. Its lefty version is Americablog.com.

Others with high traffic include instapundit.com, dailycoast,
powerlineblog.com, littlegreenfootballs.com and the Huffingtonpost.
These blogs are essentially electronic newsletters about politics
with large, open-ended letters to the editor pages where everyone's
"letter" gets published, or posted.

Anyone can set up a blog and there are estimated to be around 19
million in the United States. But the vast majority are just
open-ended diaries kept by love-sick or Britney-crazed tweenies or
hobbyists who want to compare notes with other knitters, dog lovers
or chess players.

The political ones are mostly mindless rants that encourage more
rants. But some have risen above the fray and built up pretty
sizeable audiences. Some even make profits, through donations or
advertisements.

Businesses have begun to notice that word-of-mouth via the blog
world can be very valuable advertising and public relations. So they
set up their own blogs and "seed" the blogosphere with plugs or
product mentions.

The purists see it more positively.

"The blogs, of all kinds, represent radical change to social
communication," said one blog triumphalist at a conference. "It's
democratizing and will stop the rain of bullshit that descends on
the public from the biased mainstream media."

=====================================================================

We need to learn to play the U.S. system
National Post
Thursday, November 10, 2005

CAMBRIDGE - Canadians are condemned to repeat history when it
comes to understanding how to play the American system like a
fiddle.

This is all one need know about the U.S. system:

The U.S. is a very different structure from a Parliamentary
government. Its federal government is co-managed by both Congress
and the executive branch, which is controlled by the President.

Americans are just as protectionist as Canadians or everyone else
and this populist sentiment has surfaced throughout their history,
mostly in Congress.

A foreign government is persona non grata and its needs or desires
are irrelevant and completely ignored by Congress. It doesn't matter
how much smoked salmon or wine the Canadian Embassy provides to
Senators or Congressmen. They're interested only in their
constituents' issues.

Throughout U.S. history, the only successful lobbyist, on behalf of
a foreign country, is the executive branch and the President. For
instance, FDR circumvented the isolationist Congress, and issued an
executive order, to help Britain during the Second World War through
the lend-lease program years before the U.S. entered the conflict.

How to play the American game is well known in Britain and
Australia. So why is Canada so ignorant? With the exception of Brian
Mulroney, Canadian prime ministers haven't had a clue how to keep
U.S. protectionists at bay.

And until the Liberals get it, or their replacements, this country
will continue to be buffeted by Congressional edicts that sideswipe
exports such as softwood lumber or cattle.

Compare our woes, partially self-created, with Australia's splendid
relationship with the United States.

The Aussies just signed a new free trade deal, a new preferred
immigration deal and have had nothing but a love-in with Washington
for the past few years. The White House wades into their trade
problems immediately and resolves them quickly.

Is this merely because Australia stood by the Americans in its War
on Terror and joined the Iraq Coalition of the Willing by sending
troops?

Yes and no.

They sent troops but played their cards better.

Canada has contributed far more to the war on terrorism than any
other nation, save Britain, and played its cards so badly that it's
gotten absolutely no credit for it.

More Canadian troops have been collectively deployed in
Afghanistan, the Persian Gulf region and even the second Iraq war
than Australia has deployed. An estimated 20,000 tours of duty have
taken place in these theatres, including rotations. Technically,
Canadians were combatants during the Iraq invasion because we
commanded the Persian Gulf fleet and had soldiers on loan to the
U.S. in Iraq.

Despite our commitments, the Liberals, under both Jean Chretien and
Paul Martin, have managed to turn this allied silk purse in a sow's
ear.

Both have allowed public name-calling, pouting, threats and
tantrums. Both have told the Americans they would join forces with
them (Chretien with the Coalition and Martin with the ballistic
missile defence systems) then both reneged.

In both issues, Canada's federal government could have neatly
finessed involvement by boasting about deployment, citing friendship
as the reason for joining, then shipping off a few hundred medics or
other non-combat personnel as did Japan, which is now touted as a
good friend of the Americans. Even tiny Norway, which sent a few
dozen guys to dig up land mines, has curried the favour of the White
House as a Coalition member.

It's too late for Canada. Ottawa has completely lost any leverage
until a new guy gets into the White House or a smarter one in 24
Sussex Drive.

But even that's no guarantee.

As long as prime ministers always come from Quebec they will be
more concerned with headlines in Le Devoir or La Presse than with
preventing erosion of the $2-billion-a-day trade relationship by
U.S. protectionists.

In the past, Canadian soft diplomacy brought about brilliant
results like the Auto Pact or Free Trade Agreement. Now it has
mutated into some form of Quebec machismo based on standing up to
the big Anglo Saxon country despite an inability to live without it.

Canada had better smarten up.

Our only bodyguard is the President of the United States whose
lobbying efforts in the past have kept Congressional protectionists
at bay.

And that's the way it is. Like it or lump it.

=====================================================================

Businesses need to focus on legal issues: Professor provides
checklist to avoid legal problems
National Post
Tuesday, November 8, 2005

CAMBRIDGE - Professor Constance Bagley practised corporate
law for 13 years before joining Harvard Business School and is
convinced that the law is too important to be left to the legal
profession.

"Business needs to be legally literate," she said in a recent
interview in her office.

Her new book, Winning Legally, contains a number of ways to change
the business culture so that legal issues become built into
strategic planning and operations.

"A principal theme of my book is that legal matters should be dealt
with in the beginning, not at the end," she said. "If legalities are
involved in the framing and implementing, the risk of getting into
trouble is reduced."

For instance, she said Pizza Hut's promise of half-hour guaranteed
delivery, or money back, was legally risky because it guaranteed
that delivery personnel would break speed limits, possibly causing
accidents.

"The Pizza Hut people were not off the hook when they told
employees not to speed," she said.

Highly competitive industries, where commoditization has occurred,
often lead to price-fixing and employees must be trained and warned.

Another pitfall is relying solely on legal counsel or outside
counsel.

"I tell business people, don't sign agreements without reading
them. They often are startled when I say that," she said.

In one high-profile case, the legal agreement wasn't read by anyone
on a board of directors and opened them to lawsuits because the deal
denied them the right to obtain a higher price for the assets they
were selling. The independent directors later said that their right
to obtain a higher price was enshrined in securities laws and
therefore trumped the agreement.

Not so, said Professor Bagley.

"The law won't skate you onside. Anyone can sign away their rights,
so make sure if your agreement says so, that's what you want. In
other words, always read it first," she said.

One problem many encounter in reading over legal documents is that
they are difficult to comprehend. She addresses that issue.

"If it doesn't make sense, ask the lawyer what it means. Then,
after the explanation, ask the lawyer why it couldn't be drafted
more clearly," she said. "This is the litmus test on legal advice.
If it's gobbledy gook to you, there may be a problem."

When litigation occurs, managers must be on top of the case to
manage the lawyers. Costs are not only judgments or legal fees but
can involve other "soft" costs.

Take the McDonald's restaurants scalding coffee case. An elderly
woman received third-degree burns after she opened her coffee lid
and spilled the contents. She asked McDonald's for payment of her
medical bills and a change in policy so that the coffee in future
wasn't so hot. (McDonald's coffee until then was 15 degrees hotter
than others, according to testimony, to insure it kept warm longer.)

There had been a series of other scalding incidents due to the high
coffee temperature and the company offered her a standard US$800
settlement. She sued and won millions from a jury that wanted to
teach McDonald's a lesson.

"McDonald's executives should have built into their settlement
policy the negative publicity, and high award, that could result
from treating customers in this way," she said.

Litigation and settlements are business, not legal, decisions, she
said. For instance, Citigroup settled the WorldCom fiasco for
US$3.54-billion because, as the CEO said, "it was to avoid a roll of
the dice" by going before a jury.

"The question you must ask yourself is do you want to bet the
company on a court case?" she said.

Her book describes a checklist for managers, which incorporates
legalities, when dealing with strategic or operational decisions.

"The first question, not the last one, should be to ask your
lawyer, is it legal? Are their legal ramifications? Secondly, does
it maximize shareholder value?" she said.

"This requirement, by the way, is only pre-eminent in case of
change of control or the break up of a company. Is it ethical and
how does it affect other constituencies?"

One company has maximized shareholder value by selling old
computers to China which are manually dismantled, thus possibly
exposing Chinese workers and their environment to toxic materials.

"Is it worth dumping of products, which can be dangerous, into an
ecosystem ?" she said. "The other considerations are reputation,
protection of the brand and the need to attract good, ethical
employees."

Her book describes nine steps for decision makers:

- Start with ethics from the top down.

- Understand responsibilities and risks.

- Impose controls.

- Prevent securities fraud.

- Compete hard but fairly.

- Look for ways to prosper from constraints.

- Play it safe.

- Educate all employees and distribute written policies.

- Be prepared to deal with failures.

=====================================================================

Lawrence report might help Goodale: Offers equitable solution
to taxing income trusts
National Post
Saturday, November 5, 2005

The backlash against any changes to the tax treatment of
income trusts is a welcome demonstration of shareholder democracy.

But a thoughtful and equitable solution for the government to
consider has been written by Marc Robinson and Ravi Sood with Bay
Street money manager Lawrence & Co.

The controversy began when Finance Minister Ralph Goodale announced
his department would no longer provide advance tax rulings for
income trusts due to "tax leakage" of about $300-million a year. The
income trust index plummeted and letter-writing campaigns began.

The Lawrence report defends income trusts, addresses the tax
inequities (income trust distributions versus dividends and capital
gains) and provides an elegant, compelling solution for everyone.

"Historically, Canadian companies have been subjected to several
competitive disadvantages: capital markets that lack depth and
liquidity, a paucity of capital for mid-market companies, a
disappointing track record of corporate governance and a domestic
corporate tax regime that disadvantages Canadian companies compared
to their international peers," the report says.

Of the 200 Canadian income trusts, about 70 have a market cap of
less than $200-million, Mr. Robinson said in a phone interview
yesterday.

The report questions the "leakage" of $300-million a year as stated
by Goodale. "Personal income tax paid by Canadians increased by
almost 12% in the last year, despite that personal income rose by
only 4.5%. Part of this discrepancy results from income trust
distributions being taxed as personal income. Had such distributions
instead been retained by companies, this income would have been
taxed at the lower corporate tax rate, resulting in less tax
collected by the government," the authors said.

Tax revenues also increased because of capital gains earned by
income trust investors. The trust index outperformed all major North
American indexes every year since 2000.

The government received more tax revenue because the income trust
sector in Canada has attracted new, U.S. companies to its ranks,
thus distributing their cash flow to Canadian unitholders who are,
in turn, taxed. "There are currently 16 non-Canadian income trusts
that have their head office located in Canada," the report said.

The trust phenomenon has also helped reverse the migration of
Canadian companies to U.S. listings, also a net benefit. "At
present, there are 40 income trusts with at least 20% of their
revenues in the United States. This U.S.-based cash flow is
distributed to Canadian unit holders and taxed as income in Canada,"
said the report.

However, Mr. Robinson said there is tax leakage in terms of foreign
investors, who pay withholding taxes of 15% to 25% depending on
their residency, compared with 46% taxes paid by high earners in
Canada on their income trust distributions.

Tax inequities are also a porblem, which is why pension funds and
RRSPs are disproportionately invested in income trusts. For Ottawa,
this means income trust distributions are not taxed for years until
pensions are distributed or RRSP funds withdrawn.

The report recommends the government level the playing field,
taxation wise, concerning income trusts (taxed at 46% for high
earners); capital gains (taxed effectively at 51% when corporate
taxes are included) and dividends (taxed at 56%).

They say near parity can be reached by lowering the corporate tax
rate to 33% from 36%; then lowering the shareholder's tax on
dividends from 31% to 23%.

That would mean both capital gains and dividends would be taxed
only slightly more than income trusts (48% versus 46%). This would
stop marketplace distortions and have other benefits.

"Because the effective tax on dividends and capital gains are on
par at 48%, managers should now be indifferent from a taxation
perspective between capital reinvestment and declaring dividends and
should no longer be motivated to buy back shares for a tax
advantage," the report says. "Capital expenditure decisions will be
strategic rather than motivated by tax avoidance."

This recommendation would create a dramatic drop in tax revenues,
so the report suggests a 5% to 10% tax be collected at source by the
income trusts. This would tax foreign investors more fully as well
as pension funds. For individuals Lawrence & Co. suggests a tax
credit.

"Here's how it would work. If Joe Investor was to get $100 from an
income trust, he would only get $90 and a tax credit for $10. So
when he filed taxes that year he would get his $10 back if he had
taxed income."

=====================================================================

'My job in life is to provoke debates': Alan Dershowitz
opines on current U.S. policies
National Post
Thursday, November 3, 2005

CAMBRIDGE, Mass. - Alan Dershowitz is the controversial
Harvard University law professor who doesn't shrink from a fight and
has been involved in some of the highest profile cases in the United
States, such as the successful defences of Claus von Bulow, Mike
Tyson and O.J. Simpson.

"My job in life is to provoke debates," he said chirpily in an
interview last week. "Like my piece about whether we should be
issuing torture warrants. That sparked a debate and two books
resulted."

Professor Dershowitz is a tireless worker. He carries a full load
of teaching, writes a book a year and does lots of interviews.

His home, in this leafy suburb of Boston, is out of place. Most are
clapboard Victorian, but his house has sharp angles, 1970s-vintage
cathedral ceilings, skylights and a thoroughly eclectic collection
of furniture, paintings and sculptures. On a side table near the
entrance is a picture of his youngest child, a daughter, with former
U.S. President Bill Clinton and the late King Hussein of Jordan.
These represent his two passions: American liberalism and Middle
East issues.

He's changed our appointment and shoe-horned me in early because
the media is besieging him with interview requests in the wake of
the withdrawal of Harriet Miers as a Supreme Court nominee.

"It's a phony withdrawal based on phony reasons. It's an excuse for
the fact the extreme right wing of the Republican Party wanted her
out," he said between phone interviews. "It's not about credentials.
The right would vote for a chimpanzee on the Court if it was
reliable ideologically speaking."

Not all Supreme Court appointments have been ideologically biased,
he said. Clinton appointed moderates, Reagan did not (Clarence
Thomas), while Harry Truman was the worst.

"He appointed three poker buddies," he said.

The latests of 24 books he has authored, Pre-Emption: The Knife
that Cuts Both Ways, will be out in January.

"There is a paradigm shift since 9/11 which is transforming
everything," he said. "Pre-emption is taking action before something
happens to you. Israel has been doing pre-emptive attacks since
1967.

"There is a need to regulate this because there is no jurisprudence
under common law for when it's appropriate to pre-emptively lock up
people, which we're doing lots of, or to attack other countries,
which we're doing more and more of."

Pre-emptive actions have taken place in most democracies such as
the incarceration without charges of suspected IRA members in
Britain, the FLQ in Canada or Algerians in France.

"As for pre-emptive attacks, a lot of people wish that Britain and
France had attacked Hitler early on," he said.

Iraq, said Prof. Dershowitz, was not pre-emptive. "It turned out to
be a mistake. There was nothing imminent about to happen because the
weapons weren't there. He had components but no weapons," he said.

"I was 51% in favour of it at the time, and I don't think it was a
matter of the President lying. But it wasn't pre-emptive. It was a
long-term preventative action."

A better example is Iran's nuclear program, which has been
documented, and has been undertaken by a regime that this week
clearly threatened a neighbour.

"The new president said that Israel must be wiped off the face of
the earth," he said. "This may involve the issue of pre-emption.
Under the law, if you think somebody is about to shoot you, you are
entitled to shoot first."

There are ways to weigh probabilities to decide whether pre-emptive
action is needed and these methods will be dealt with in his
upcoming book.

In business, Jack Welch of General Electric fame set up a stealth
squad of executives whose job was to come up with ways to replace or
destroy its profit centres so he could come up with pre-emptive
actions to avert such attacks. Prof. Dershowitz said he prefers to
weigh probabilities about future actions, and reactions, through the
adversarial method.

"When I take a case I assign a group of students to figure out how
to beat me," he said. "I learn from controversy and believe in the
adversarial system."

Most people don't challenge their thoughts or plans in this way in
order to weigh probabilities.

"Most people aren't trained. Personally, I always try to anticipate
issues in advance and think through all possible implications. But I
do this very well for my clients. Unfortunately, in my own life I
can't weigh probabilities because I'm too emotional. I always take
other people's advice about my own life."

Then added: "As Abraham Lincoln once said 'a lawyer who represents
himself has a fool for a client.' "

=====================================================================

In marketing, choice raises consumption: Trust is also key to
building brand loyalty: Professor
National Post
Saturday, October 29, 2005

CAMBRIDGE - John Quelch is an expert on marketing and brands
and has written 20 books on these subjects plus countless op-ed
pieces for newspapers around the world.

He also teaches an advanced management program at the Harvard
Business School for executives from 30 countries and serves as a
director on many boards, including WPP, the second-largest marketing
entity in the world.

Not surprisingly, at my appointment is with him on Thursday at 8
a.m. I'm bleary-eyed but he's already been in his office for a while
returning e-mails and calls without any manifestations of jet lag
following a trip back from Europe the evening before.

"I have about six million air miles and am taking my family to the
Caribbean for Christmas at long last," said the personable Professor
Quelch.

He's British and attended Oxford University before immigrating to
the U.S. to do post-graduate work. He earned a doctorate from
Harvard, returned home for three years to the London Business
School, then returned to Canada for two years as a Professor at the
University Western Ontario.

"I originally came to study finance. To me, marketing was those
salesmen selling vacuum cleaners at your door that were annoying,"
he said. "But marketing is people-oriented and more interesting than
just numbers.''

His doctoral thesis in 1974 was on branding strategies in the
breakfast cereal industry.

"The controversy was about nutritional content at the time and
studies showed that in some cases, the box containing certain
cereals had more nutritional value than the cereals themselves,'' he
said. "My paper looked at how consumers chose brands.''

The world has certainly changed since then, with globalization and
the Internet, but branding has not.

"When there is more choice, consumers need a trustworthy handrail
[a brand name] to guide them through the complexity,'' he said.
"Also, in emerging economies consumers are more interested in
trusted brand names because they are subjected to many local brands
that are not governed by the same regulations or standards as global
brands."

The implications of the Internet for advertising and marketing are
profound.

"I could say hundreds of things but the most important is that
marketers still want to be as sure as they can that their resources
are optimally allocated,'' he said. "The industry is changing with
more media buying companies. The problem is, with the exponential
increase in the number of media available through the Internet, it
is more difficult to optimize than if I had only 60 channels of
television.''

This is because analysis techniques are not precise enough yet to
measure, for instance, the value to an advertiser of a 30-second
television spot versus a pop-up ad on the internet.

Traditional media must adapt, along with advertisers, but reports
of the demise of traditional media outlets are exaggerated, he said.

"In marketing, choice increases consumption,'' he said. "People who
used to watch television six hours a day and now have Internet are
cutting back on television to three hours but are possibly spending
four or more hours on the Internet, too. They are increasing their
total consumption of media."

Professor Quelch has also studied the NGO, or non-governmental
organization, branding phenomenon. Of particular interest have been
regular surveys by Edelman International, a public relations giant,
that shows organizations like Greenpeace have bigger brand
recognition and admiration in Europe than McDonald's or European
corporate entities.

"Edelman's research shows that these brands have become powerful
even though they have spent very little on marketing themselves," he
said.

"With a colleague I studied 10 NGOs to figure out how they became
successful."

The "trust factor'' was key because people who donate to these
organizations aren't the end consumer themselves. "Giving to Unicef
means you trust your money will be spent helping people thousands of
miles away who need it.''

Likewise, private-sector brands must also earn trust to succeed
but, like NGOs, there has arisen another factor that Professor
Quelch uncovered in a recent study of global brands in 12 countries.

"We found there is a 13% segment of all consumers in each country
who were anti-global and avoided global brands,'' he said. "There
was another large percentage of consumers who were willing to pay a
premium for a global brand, who expected the company to adhere to
higher social services. This is their quid pro quo."

This is why British Petroleum, for instance, has launched a
campaign for some time called "BP: Beyond Petroleum'' which promotes
and invests in "cutting-edge alternative, non-fossil fuels," said
the Professor.

Naturally, psychology plays a role in all marketing efforts, but
not to manipulate people, he said.

"You can manipulate someone once into buying something, but you
cannot manipulate them into repeat buying which is the only way to
build a business."

=====================================================================

Reporters, the CIA and Dick Cheney
National Post
Thursday, October 27, 2005

CAMBRIDGE - Those of us who live in the world of journalism
have been captivated by the saga of New York Times reporter Judith
Miller, who went to jail this summer to protect a source, and by
columnist Robert Novak, who did not.

What started out as court challenges and hand-wringing about
off-the-record protection by journalists has cascaded into a damning
indictment of Vice-President Dick Cheney. It appears Dick, Darth to
some, hyped up the intelligence reports about Iraq to justify a war
he wanted from the get-go, then used staff to seed journalists with
damaging information to undermine the credibility of a detractor.

It began on July 6, 2003, when the detractor, a retired ambassador,
wrote an op-ed piece in the New York Times saying that there had
never been any truth to the White House claim that Saddam Hussein
had been trying to buy uranium for bombs in Africa. He said he knew
that because he had investigated the matter for the government.

The op-ed piece was hugely embarrassing for the White House even
though it had already retracted that piece of "evidence" which the
President had given in his State of the Union address in 2003 in the
lead-up to the Iraq invasion.

That should have ended the matter. The White House had made a
retraction. But the retired ambassador raised the question as to why
it should have been trotted out as a reason in the first place,
given that he had found no evidence and told government officials
that was the case.

Enter Mr. Cheney who, we now learn, quarterbacked most of the
"intelligence-gathering" exercise in the lead-up to the war.

What happened next was a column written by Robert Novak which
appeared a few days after the op-ed piece and attacked the retired
ambassador's credibility by saying his wife was an undercover CIA
operative and had sent him to Africa to check out the uranium
allegation. (The implication was that the CIA, credited with
intelligence-gathering, was distancing itself from the matter or
playing games to get Cheney.)

What happened next has brought the story to the Vice-President.

By disclosing that the woman was a CIA operative, Mr. Novak's
source or sources had broken the law because it was classified
information. President Bush was outraged and said he would fire
anyone responsible. Then he appointed a Special Prosecutor and
ordered all staff to co-operate fully by surrendering documents and
by testifying.

The Prosecutor has succeeded in prying open the cozy, questionable,
relationships between the journalists involved and their sources,
key White House advisors.

Tomorrow is the Prosecutor's deadline and the buzz is that charges
of some kind may be laid against Cheney's top advisor, I. Lewis
Libby, and possibly against Bush's top advisor, Karl Rove.

Both are implicated, according to news reports, as being authors of
the whispering campaign designed to attack the detractor and "out"
his CIA spouse.

Interestingly, Mr. Novak co-operated immediately with the
Prosecutor while Judith Miller, and another reporter at Time
magazine, did not. At the end, Time magazine surrendered its
reporter's notes and e-mails, which have implicated Rove. But Miller
went to jail to protect her source, before being relieved of that
obligation by the source himself, Mr. Libby.

But no matter what happens, the biggest fish caught appears to be
Vice-President Cheney. For two reasons.

He signed off on research about Iraq's nuclear ambitions that were
not only proven wrong, but that he should have known were wrong at
the time he fed the lines to his President. How can I say that?
Because the guy who was sent there to investigate it found nothing
wrong at the time and said so when he wrote the op-ed piece that
started this whole mess.

Second, it appears as though Vice-President Cheney misled the
public when he said on a Meet the Press show in September, 2003,
that he knew nothing about the detractor's research in Africa or
that his wife had been a CIA operative.

How can I say that? Because Cheney's advisor, Mr. Libby, told the
Prosecutor that he learned she was CIA from Mr. Cheney himself weeks
before it was leaked to Mr. Novak.

Adding to Cheney's credibility problem was a public statement this
week by a military officer, who had been an advisor to former
Secretary of State Colin Powell. He claimed that everyone should
have known that Cheney's regime-change case was based on flawed
research concerning both the nuclear ambitions of Saddam Hussein as
well as the Iraq link to Al-Qaeda.

Despite the sweeping implications involved -- that principal
reasons for the war were fabricated or badly formulated -- the story
is mostly for those denizens inside the Beltway and around newsroom
water coolers.

Until tomorrow, perhaps.

Witness, a poll by Zogby International this week shows the
President's approval rating has climbed back to 45% from its low of
41% now that the Iraqis have approved their constitution.

=====================================================================

Human rights for carnivores
National Post
Wednesday, October 26, 2005

The National Post is conducting a search to find Canada's
most important "public intellectual." In today's instalment, Diane
Francis profiles Harvard human-rights scholar Michael Ignatieff.
Other profiles, as well as contest rules, appear at
www.nationalpost.com/beautifulminds.

- - -

Michael Ignatieff's corner office at Harvard's John F. Kennedy
School of Government is uncharacteristically tidy. Most academics'
desks, tables, and even floors, are decorated with piles of books
and papers.

Then again, Michael Ignatieff is not most academics.

He is a successful novelist, journalist and book author. His
specialty is human-rights issues, but he tackles many other topics
as well.

"I don't like to be called a public intellectual. That term gives
me the creeps. It's pompous. It's European," he said last week. "I'm
a writer and a teacher. I come from a line of teachers."

Ignatieff traces his roots to Russia and Canada, both of which he
has turned into objects of study. In the 1980s, he wrote a
successful book called Russian Album about his family on his
father's side. He is now about to embark on a two-year leave of
absence from Harvard to write a book about his Canadian roots.

His move back home to Toronto, after decades of absence, has led a
few disenchanted Canadian Liberals to hail him as Paul Martin's
successor. Some speculate he will run in 2006. But Prof. Ignatieff
isn't willing to comment either way.

In January, he will take up his duties as the Chancellor Jackman
Visiting Professor in Human Rights Policy at the University of
Toronto. He will also work on completing Ocean to Ocean, a book
about his famous great grandfather, George Munro Grant, who was part
of the official expedition that crossed the nation to mark the best
route for a national railway.

Prof. Ignatieff's father, George, was born in St. Petersburg in
1913, the youngest son of Count Paul Ignatieff, Tsar Nicholas II's
last minister of education. George became a Rhodes Scholar, then
came to Canada and rose through the ranks as a Cold War diplomat and
then a U of T Chancellor.

Growing up in Toronto, Prof. Ignatieff attended the tony Upper
Canada College, then the University of Toronto, followed by Harvard
University, where he earned a PhD in History. He taught at the
University of British Columbia for three years until 1978, then left
Canada for Cambridge University as a Senior Fellow at King's
College, until finally ending up back at Harvard.

Prof. Ignatieff's re-entry to leadership-starved Canada became
highly publicized in March, when he delivered the keynote address to
the Liberal convention in Ottawa. But his message was neither
Liberal nor even American liberal. That was somewhat predictable --
for the man has become the Cold Warrior of the human rights movement
and has gotten into some dust-ups internationally as a result.

"Liberals [in the American sense] can't bring themselves to support
freedom in Iraq lest they seem to collude with neoconservative
bombast," Ignatieff wrote in The New York Times Magazine on the
occasion of the recent Iraqi election. "All this makes you wonder
when the left forgot the proper name for people who bomb polling
stations, kill election workers and assassinate candidates. The
right name for such people is fascists."

In his 2004 book, The Lesser Evil, he opens with: "When democracies
fight terrorism, they are defending the proposition that their
political life should be free of violence. But defeating terror
requires violence. It may also require coercion, deception, secrecy
and violation of rights."

"Liberal societies cannot be defended by herbivores," he adds. "We
need carnivores to save us."

Most notorious was a May 2004 piece in The New York Times Magazine,
in which he argued in favour of certain types of torture:
"Permissible duress might include forms of sleep deprivation that do
not result in lasting harm to mental health or physical health,
together with disinformation and disorientation (like keeping
prisoners in hoods) that would produce stress."

He also supported the U.S. intervention in Iraq and the proposed
missile defence shield, both of which the Liberals rejected. To
further underscore his policy differences, he told the Liberals in
March to spend more money on defence and to recognize that we live
next door to "the primary target of global terrorism."

To be fair, Prof. Ignatieff has also been consistently critical of
the United States on certain issues, such as its permissive attitude
toward human-rights violations when they are committed by allies,
and the country's enormous wealth inequality.

Such refreshing heterodoxy likely disqualifies Ignatieff from the
parochial and stultified Canadian political scene. But it certainly
guarantees that during his stay in Canada, whether long or short, he
will breathe fresh air into our stale discourse by at least giving
credit to the Americans where credit is due.

=====================================================================

The case for disruptive innovation: Companies that cannot
adapt ultimately fail
National Post
Tuesday, October 25, 2005

CAMBRIDGE - It's called "disruptive innovation" or "creative
destruction,'' or the Darwinian nature of business these days that
requires companies and individuals to be not only flexible but fast
in adapting.

My favourite example of this phenomenon is Nokia, which just 30
years ago manufactured rubber boots. Its management saw the writing
on the wall and reinvented the company by deploying capital to buy
the cellphone technology, which was invented by Israelis, and the
rest is history. Nokia is the world's biggest cellphone
manufacturer.

It's interesting to note that those already in the communications
businesses, such as Bell Canada, Bell South or AT&T, didn't do the
same until much later.

This is what Clark Gilbert, assistant professor at the Harvard
Business School, ponders.

"Why do great companies that once dominated, and led an industry,
miss out on innovation or even disappear and fail?" he said in a
recent interview.

"When the telephone overtook the telegraph, Western Union didn't
invest in telephone companies. And when the cellphone overtook
traditional phones, AT&T did not invest in the cellular phone
business at first," professor Gilbert said.

His research focuses on corporate innovation and the impact of
technological change. He consults to media, healthcare, and
technology clients such as Guidant, Knight Ridder and Johnson &
Johnson. He also sits on the board of several start-up companies,
including Innosight, a research and consultancy firm focused on
disruptive innovation.

The example he has studied in depth involves the computer.

"DEC [Digital Equipment Corporation] made the first minicomputer,
which was the forerunner of the personal computer. It was a huge
advance over the gigantic mainframe computers that few companies or
governments could afford," he said.

"IBM [which dominated the mainframe market] said these computers
were terrible, there was no market opportunity. They based their
opinion by interviewing their core customers. Meanwhile, DEC's
business exploded."

Only a few years later, the same thing happened to DEC as happened
to IBM.

"By the late 1980s, the PC [personal computer] came along and DEC
missed the PC. Its president said at the time, 'who would ever want
a computer in their home?' "

Both companies made the mistake of relying on their current
customers for information about new technologies, rather than talk
to the "new" pioneering customers or otherwise evaluating the
innovation.

Besides inadequate market research, these firms were not hungry.

"Incumbent firms will always miss these innovations because they
are making huge profits," he said. "Mainframe margins were 65% and
minicomputers, 40%," he said.

Another problem that overtakes existing firms is they become rigid
in the face of new entrants or approaches and spend too much time
trying to fix their old technology through mergers or marketing
expenses.

But a paradigm shift has to be made because, for example, phone
users cannot be restricted to traditional phones, nor can news
consumers be forced to buy newspapers. So companies must adapt.

"You cannot change the customers. Your customers' changes have to
be understood," he said. "The Internet is a huge disruption. Firms
are recognizing the disruption but not doing anything about it. If
they see disruption as a threat they become focused on their core
business," he said.

There are three phases of disruptive technology, according to
professor Gilbert.

"It's not an all-at-once phenomenon," he said. "First, the
innovation creates a new, noncompetitive market independent of
established businesses. Then the new market expands and slows the
growth of the established business. In the third phase, the
disruptive innovation, having improved greatly over time, begins to
significantly reduce the size of the old market."

The innovators find a different set of customers that the old ones
don't know about while the old businesses find their customers
splitting between using their products and using new ones.

A case in point is the newspaper business where online editions,
blogs and search engines are fighting paper versions for "eyeballs"
and ad revenue. The industry is in the second phase, where growth
has slowed and profitability has only been maintained through
mergers or cost-cutting measures.

"Newspapers have a long way to go as an industry and the clock is
ticking," he said.

For instance, Google provides a search service that allows readers
to create their own newspaper and alone takes in more advertising
dollars than does The New York Times, The Washington Post or The
Wall Street Journal. It also makes money in other ways.

Getting back to the computer disruption, the mainframe business 35
years later remains very lucrative, but has not grown in scale.

"In an era of more rapid change, companies no longer have the
luxury of spending 35 years in search of the opportunities made
available by disruption," he said. "But they have more time than
they think provided they look where new customers are finding
solutions to formerly unmet needs."

=====================================================================

Great leaders don't take yes for an answer
National Post
Saturday, October 22, 2005

CAMBRIDGE, MASS. - Any leader who is surrounded by "yes men"
is doomed to fail, according to Harvard Business School Assistant
Professor Michael Roberto.

"They don't hear news until it's too late. They get groupthink, not
reality. They think they've achieved consensus, then find their
decisions undermined by colleagues who never really bought in. They
become isolated," Prof. Roberto writes in his new book, Why Great
Leaders Don't Take Yes For An Answer.

The team-building book is divided into four sections: leading the
decision process; managing conflict; building consensus and leading
with restraint.

Putting a motivated and secure team in place is only the beginning,
he said in a recent interview in his Harvard office.

"You have to decide how to decide," he said. "There are two classic
examples -- the Bay of Pigs invasion of Cuba by the United States
and the Cuban Missile Crisis. The invasion was a disaster and
[President] John Kennedy asked for a review of what went wrong. He
then used corrective decision-making measures during the missile
crisis and it was handled very well. The Russians backed down."

One of the problems in the Bay of Pigs process was that the
President and his men heard only the CIA's case, the CIA assumed
everyone agreed and so it kept the State Department and others at
bay.

"After that disaster, JFK decided that in future it was important
for him to be out of the room for some meetings so people could
freely talk. They also divided into sub-groups and he assigned two
people to serve as devil's advocates, questioning all the
recommendations from the CIA, State Department and others," he said.
"They didn't do that in the first instance but only consulted the
CIA."

Prof. Roberto, like others at the business school, teaches the Case
Method, which develops judgment in MBA students by examining in
detail 500 examples of corporate or institutional success or failure
over a two-year period.

He has developed two fascinating cases -- what went wrong at NASA
which led to the space shuttle catastrophe in 2003 and what went
wrong in the 1996 ascent of Mount Everest which led to many deaths.

Both tragedies reveal a number of flaws that organizations must
overcome all the time.

One of the biggest problems was that both NASA and the Everest team
had encountered very few difficulties in the past. This meant they
didn't imagine, much less discuss, that there could be
life-threatening conditions such as weather, equipment failure or
human misjudgment.

"Both groups had a history of good fortune. The Everest team had
experienced good weather for five years in a row and the shuttle had
some problem with its foam but always managed to bring the aircraft
back to Earth safely. This history was extrapolated and
overconfidence resulted," he said.

There were mistakes.

"The Everest case was a matter of what is called the 'sunk cost
effect,' " he said. "People had invested weeks into the climb and
didn't want to walk away despite the terrible weather and forecasts.
The 'sunk cost effect' is why people put good money in after bad in
ventures or investments; it's why people keep waiting for a bus they
know may not come; it's why people keep holding a stock that's gone
down in value and it's why they kept climbing up the mountain until
they died."

The "sunk cost effect" is reflected in the business world all the
time. For instance, studies have shown that chief executives who
make acquisitions never divest them, even if they begin to lose all
kinds of money. The next CEO has to do the selling. The one who made
the acquisition believes that he is in "too deep" to give up.

Leadership in both cases also failed.

"In the case of Everest and the space shuttle disaster, dissenting
views were not welcome by decision-makers," he said

Prof. Roberto's book contains a great many examples and insights
into organizational processes. One chapter is titled "The Myth of
the Lone Warrior" and debunks the notion that the buck always stops
with the most powerful person in an institution because they know
all the ramifications and answers.

"A leader must downplay status to free people to talk and share
ideas," he said. "And they must consult. If we reach decisions by
ourselves, our own heads play tricks with us. That's called
cognitive bias."

He teaches regular workshops to executives with Morgan Stanley, The
Home Depot, Mars, Novartis and the World Bank. He has also consulted
with Johnson & Johnson, Lockheed Martin and other giants.

"Good process tends to produce better outcomes," he said. "A
leader, or his organization, has to stimulate constructive conflict
and simultaneously build consensus. It's not about reaching
unanimity, but about reaching commitment and a shared understanding
of the decision reached. Organizations must create a process of
collective inquiry."

=====================================================================

The end of television as we know it?: 'I wouldn't want to be
owning TV stations right now,' Harvard prof says
National Post
Thursday, October 20, 2005

CAMBRIDGE - Tom Eisenmann has been a highly paid consultant
to entertainment, media and cable companies for a few decades and
says that reports of the death of television are exaggerated.

"But I wouldn't want to be owning television stations right now,"
said the Harvard Business School associate professor in a recent
interview. "Television isn't going to disappear overnight. The pace
of change is never quick."

But the transformation of the media world is irreversible, he
added.

Professor Eisenmann has been a director on a number of media
startups over the years. Before joining Harvard, he spent 11 years
as a management consultant at McKinsey & Co., where he directed
teams addressing issues for clients in broadcasting, cable
programming, newspaper, magazine and book publishing, and motion
picture production.

He said the biggest issues facing broadcasters are IPTV (Internet
Protocol television) and DVRs (digital video recorders), which will
destroy the current broadcast business model.

"The fundamental issue is what happens with IPTV and who delivers
it? A business-as-usual scenario has people with cable and satellite
getting most of TV the same way," he said.

With the advent of IPTV, television content can be transmitted via
the Internet and electrical wires, thus circumventing broadcast,
cable or satellite delivery systems.

The other problem is the DVR. Users can easily order the recorder
to tape shows, series or categories, regardless of when the programs
appear. It can also search archives for past broadcasts. For
instance, a user can merely state he wants all the Late Show with
David Letterman or Seinfeld reruns indefinitely.

This is an advance over the VCR, which requires users to pinpoint
specific dates and times, rather than programs or subject matter.

"Half the people who get DVRs change the way they view television,"
he said. "They turn on the TV, go to the DVR menu and see what the
DVR grabbed for them."

This undermines the broadcasters' traditional cross-promotion
model.

"TV lives off the lead-in, or scheduling," he said. "They create a
must-see television night on Thursday with hit shows, attract lots
of lucrative advertising and also increase the success of lesser
shows if they throw them in during a lineup. With a DVR, it all goes
away."

"Most cable and satellite companies offer this service for only $5
to $10 a month -- and in 20 years we will all have them," he said.

The DVR, with its fast-forward features to zap out commercials,
also undermines the advertising model.

"I think advertising will grow along with the economy. The bottom's
not going to fall out of everything. But advertising has to be
fundamentally rethought," he said. "As someone in that world once
said, 'Half of advertising is wasted. We just don't know which
half.' "

Advertisers will have to pinpoint their targeting, and slice and
dice their messages to apply to all potential consumers. This means
the preparation of 30-second commercials or 30-minute
mini-documentaries to explain a new product, service or technology.

Advertising revenues are also being diverted to new media such as
Yahoo and Google, he said.

This year their combined advertising revenue will rival the revenue
earned by the three major U.S. TV networks combined during prime
time. Google also takes in more ad dollars than The New York Times,
The Washington Post and The Wall Street Journal combined.

Google advertising is very targeted. It "sells" key words to
interested advertisers.

"My brother buys and sells used forklifts all over the world and
Google has revolutionized his marketing," he said. "You bid against
others for the keyword. If the word is yours, then when someone uses
the word 'forklift' in their e-mail, my brother's advertisement
appears on the top right hand-side of the user's screen."

Professor Eisenmann believes the introduction of satellite radio,
the iPod and other technologies will eventually overwhelm the
traditional radio business model.

"Two-thirds of radio is listened to in cars, and satellite radio
has six million subscribers already," he said. "I think radio is a
horribly broken medium. Listeners are abused by having to listen to
too much advertising."

The motion picture industry is also being roughed up by the
pirating of DVDs and films via the Internet.

"Hollywood will be off balance for 10 years. It is a content
provider, but it must deal with the drop in advertising and wonder
which way to distribute its content," he said.

The use of the cellphone to broadcast mini soap operas or other
programming may be successful only in places like Japan, where
people spend many hours daily waiting and commuting on buses,
subways or trains.

"The cell won't cannibalize or replace TV," he said. "It's a
shoulder shrug. The screen's too small."

=====================================================================

Not just another BRIC in the wall: Brazil, India, China,
Russia the future powerhouses
National Post
Tuesday, October 18, 2005

CAMBRIDGE - By 2020, China will be as big economically as the
United States, at current growth rates, and by 2050 there will be a
G6 economic club with China, the U.S., India, Japan, Russia and
likely Brazil as members.

"Lumped together the so-called BRIC countries [Brazil, Russia,
India and China] are enormous presences. They represent 50% of the
world's people, in terms of population and geography," said Harvard
Business professor Krishna Palepu, who studies the BRIC phenomenon.

He said he arrived at these estimates based on pure extrapolation
of these four giants' recent growth rates of between 6% and 9% a
year. While such rapid increases will be difficult for all to
maintain, the sheer size of these four countries means even if they
grow at slower rates their increasingly prosperous populations will
become important consumers and huge economies.

"Per capita income in 2050 will still in China be one-third of the
West's income," he said. "By 2050, U.S. incomes will reach US$90,000
a year and China's, US$30,000 annually. They will not be rich
consumers but collectively important ones."

This will shift trade patterns. These four will no longer merely be
exporters of goods and resources to the wealthy countries, but will
be huge consumer collectives. This means their demand for goods and
services will help create new internal industries as well as export
opportunities for the wealthy countries.

"The habits of companies and product decisions or technology
changes and business models will be driven by these countries and
their sheer numbers," he said. "They will begin to set the tone
about design and ways of running businesses. The old mentality was
that innovation was exported. That will continue but innovation will
flow in the other direction too."

Much has been written about China versus India, but professor
Palepu describes it not as a rivalry but an economic development
partnership because they have different advantages.

Most interestingly, India and China are inspiring other developing
nations by showing that unique business models honed in poor
countries are capable of becoming world-beaters.

"It's not India versus China in future. It's India and China," he
said. "The fact that these two countries are doing so well is making
other countries want to learn better practices. In the past, they
were lectured to by the West as to what they should be doing, and
there was political resistance."

He said a recent initiative by Egyptian software engineers is a
case in point.

"In Cairo, for instance, their engineers asked, 'how come India is
so advanced when we have many engineers too?' So they sent a
delegation. This is lateral learning which could help others," he
said.

The four BRIC nations have different assets and all four can
prosper in the increasingly global economy.

"India has been open to capital for 50 years and has an advantage
in terms of available management, professionals and financial
markets. India has the third-biggest stock exchange in Asia with
good governance, transparency and in English. India is not as far
behind China as people think," he said. "China's financial system is
not very good and it relies on foreign direct investment, but China
is really Taiwan and Hong Kong which gives China every advantage
India has."

India also indirectly benefited from 9/11, he added, because the
U.S. enlisted Pakistan as a key ally in its pursuit of terrorists.
It's also recognized India as a key ally which has helped the two to
end tensions over the disputed territory of Kashmir. "9/11 got
Pakistan off India's back," he said.

The other two BRIC countries, Russia and Brazil, have massive land
and resource bases, which give them unique advantages over Europe or
other nations going forward, he said. But all four countries have
impediments too. "Russia's per capita income is higher than India's
or China's, but its infrastructure is as bad as theirs. The rule of
law is worse. India has due process. China has predictability
[political agreements] and Russia neither," he said.

"Brazil is benefiting from the fact that resources are hot and the
agribusiness is benefiting by the rise of India and China and there
is some innovation," he said. "Brazil's problem is that it is not
engineering for producing new industries. There are education and
inequality issues. Brazil is more feudal like Russia with oligarchs
running things."

As always, the biggest problem will be political leadership and
public opinion about shifts in policies or traditional behaviour. In
this aspect, India and China have better prospects. "This is the
first generation in India and China who truly feel very optimistic
about their lives and the last thing they want is stupid political
or policy behaviour," he said.

=====================================================================

Glitter trumps political issues
National Post
Saturday, October 15, 2005

CAMBRIDGE - It was a Very Kennedy Night on Tuesday with a
star-studded cast gathered to commemorate the 10th anniversary of
the founding of George magazine by the late John F. Kennedy Jr. JFK
Jr. co-founded the magazine as a cheeky periodical that exploited
the intersection between celebrity and politics in order to appeal
to a female and under-30 audience. It earned a respectable 400,000
readers in its short lifespan.

His sister, Caroline, led off the evening with a few touching
memories of her daredevil brother and ended with her uncle, Senator
Ted Kennedy, shedding a tear.

"Launching the magazine was a bold move," said Caroline, a New York
lawyer. "My brother was always doing bold, new things. He went to
Brown not Harvard. He loved Ronald Reagan. He preferred to start a
business rather than run for office. And he also believed in the
Institute of Politics as an incubator for leaders and ideas."

The Kennedy School of Government grew out of the Institute of
Politics which was set up by the Kennedy family. KSG, as it's
called, is comprised of a dozen research centres with 200 fellows
and a two-year masters degree program in public policy attended by
900 full-time students.

"It's an important centre of excellence and has trained many
leaders," said retired television anchor Tom Brokaw who emceed a
distinguished panel and conducted two satellite interviews on a
gigantic screen with former president Bill Clinton and California
Governor Arnold Schwarzenegger, who is married to a member of the
Kennedy clan.

"You are the apotheosis of the intersection of politics and
culture," he said to the Governator.

"I think it's good that celebrities are involved because that makes
more people interested in the campaign and in the issues," said
Schwarzenegger.

"The way I announced my candidacy was entertainment. I announced it
on the Tonight Show with Jay Leno. It brings more people into the
political process and we had record turnouts."

However, former Clinton advisor and CNN Crossfire pitbull, Paul
Begala, said Hollywood's near-blanket endorsement of the Democrats
is troublesome.

"The problem with celebrities endorsing the Democrats is that many
people consider that it makes a party for elitists. It's a political
problem," he said.

Roger Ailes, chairman of Fox News and Fox Television Stations,
thought the celebrities of old were wise to stay out of politics.
"Sinatra used to say, 'no one ever paid me to talk' but now
celebrities are breaking the rules by getting involved in politics,"
he said.

Mr. Ailes added that the use of glitter marketing in politics
distracts the media and voters from issues. "The media tends to
cover the surface only," he said. "Only 19% of people under 35 years
of age read a newspaper. And if schools are not teaching civics by
the time they are old enough to vote it's too late. They don't
understand very much about issues or government."

The average age of the television news viewer is 60 years of age,
he said. "For 18 to 30-year-olds, the television is as irrelevant as
the newspaper."

Jehmu Greene, president of online voter registration not-for-profit
Rock the Vote, said deploying celebrities and MTV commercials helped
her organization sign up 1.4 million new, young voters for last
fall's Presidential election.

Her group also broadcasted a number of issues-oriented messages
delivered by celebrities to educate young voters.

One of the most successful celebrity-politicians is Ireland's Bono
of the U2 group who has singlehandedly convinced wealthy countries
to forgive billions of dollars in debts owed by the poorest
countries. "Bono is an exceptional person and has used his celebrity
to advance an important cause," said Clinton. The former president,
in his interview with Brokaw, decried the polarization in the U.S.
and the often ugly tenor of political debates by
celebrity-journalists.

"People like Rush Limbaugh or Anne Coulter set up fake straw men
and then knock them down, feeding on people's resentments," he said.

=====================================================================

Raising the volume on cyber theft
National Post
Thursday, October 13, 2005

CAMBRIDGE - John Palfrey is the soft-spoken executive
director at the Berkman Center for Internet & Society at Harvard
University. Housed in a Victorian mansion, the Center is one of many
cyber-champions that have been raising the volume on the debate
about the future of the Internet and intellectual property rights.

At stake is the system of gigantic corporations and individuals --
who own rights to everything from music to software or movies --
against computerized hordes of "geeks" and young people who get hold
of these products without paying any fees, rents or royalties.

Besides the issue of piracy, there are also the legal concerns
about lobbying by the intellectual property corporate interests to
get Congress to continue extending their patent and copyright
protection. To critics, it's a multi-trillion-dollar grab beyond
what, many believe, inventors should be allowed to recoup in
royalties for their inventions.

"There have been 17 extensions by Congress," said Mr. Palfrey in a
recent interview. "Initially, protection lasted only 14 years.
Creators should be paid for their work. They need to make a living.
But the monetizing of intellectual property has made this a serious
business, and legal, matter."

(Intellectual Property is a term less than 100 years old. Copyright
laws first appeared in Britain in the 18th century, but were
enshrined in the U.S. Constitution. Patent and trademark legislation
was created 50 years ago.)

The Berkman Center does research about technology and its effects,
but also gets involved in litigation.

Its lawyers were involved, with others, in an attempt to convince
the U.S. Supreme Court to knock down Congressional approval a few
years ago to extend patent and copyright protection by another 20
years, Mr. Palfrey said.

They lost. The U.S. Supreme Court ruled seven to two in favour of
more protection. Now corporations enjoy 95 years worth of patent
protection and inventors, their lifetime plus 70 years after their
deaths.

The Center has also waded into the issue of piracy or Internet
exchanges of music, movies and software.

The first public skirmish was in 2000 and involved Napster versus
the music industry, plagued by people sharing digitized music
without paying royalties to artists or their masters.

"Hollywood is embattled and sees the writing on the wall. They have
watched the music industry be clobbered. The only difference between
movies and the music business is that the files are bigger, which
means they take longer to download and can be more easily caught,"
he said.

Individuals are prosecuted every day in the U.S. for this
infringement and are caught by "police" hired by Internet Service.

"They [the police] can also restrict the bandwidth so movies take
five hours to download instead of one hour. This is called bandwidth
shaping," he said.

Berkman enjoined the most recent lawsuit about this issue, which
was launched by movie studio MGM against Grokster and others who run
what are euphemistically called "peer-to-peer sharing services." To
movie studios, these peers are simply pirates.

The Berkman Center sided with Grokster, which based its argument
against MGM on a 1984 case involving Sony Corp., inventor of the
VCR. Back then, the television and movie industries felt threatened
by the VCR's ability to tape content for free and sued Sony. But
they lost.

The U.S. Supreme Court voted five to four in favour of Sony on the
basis that the VCR could be used to illegally tape content but it
could also be used legally for people's own personal use.

The Court went further arguing that if Sony lost its case, then the
photocopy machine industry would also be guilty of widespread
copyright infringement, Mr. Palfrey said.

"Grokster won in lower courts based on Sony's defence," he said.
"But the change occurred because the industry is threatened. All
content companies are."

Grokster's other problem was its aggressive marketing, which
encouraged people to grab content from elsewhere without paying for
it.

"The second line of reasoning by MGM was that if marketing of the
product induced violation of copyright then the copier was guilty,"
he said. "Apple with its iPod used to advertise 'rip, mix and burn',
but after pressure backed off that right away."

The Center is also committed to helping keep the Internet as open
as possible in order to encourage innovation, education and
democratization.

"The Open Net Initiative tries to stop China's efforts to block or
slow surveillance of Internet communications. The Internet has a
democratizing effect. We are also interested in enhancing that."

=====================================================================

Nuclear attack 'preventable catastrophe'
National Post
Saturday, October 8, 2005

HARVARD UNIVERSITY - This week's news that a terrorist threat
to New York City's subway system has set the city on edge will be
the kind of anxiety Americans will have to live with for some time,
according to terrorist expert Graham Allison who runs Harvard
University's Centre on Science and Government.

Among other accomplishments, Professor Allison coined the term
"loose nukes" to describe the Soviet's missing nuclear weaponry that
many fear could fall into the hands of Al-Queda. His latest book,
Nuclear Terrorism: the Ultimate Preventable Catastrophe, dealt with
the issue of the proliferation of nuclear weapons in the hands of
terrorists. He also teaches, advises governments and worked in the
Clinton administration. Following is an excerpt from an interview
with him in his office at Harvard this week:

Q. How serious is the threat of a nuclear attack?

My thesis is that this is a preventable problem. But it's not
preventable if we continue the status quo. There is a greater than
51% chance there will be a nuclear attack in the U.S. within the
next decade, or by 2014. The most probable targets are New York City
and Washington D.C.

The good news is an attack capable of killing one million people is
preventable. This is now being done by concentrating on the supply
side, there are strategic narrows or choke points through which
materials or weapons must pass which can be closed.

Q. Did Saddam Hussein have weapons of mass destruction?

A. We knew in 1991 he had chemical and biological weapons of mass
destruction and he used them. That was for sure. But sanctions
worked and inspections worked. Nobody knew that he did not have
nuclear weapons. President Bush did not and President Clinton did
not either.

Q. Do you think he wanted everyone to think he had them?

A. Yes, he did. He played a pretty good bluff game. We don't know
if he got rid of his chemical and biological weapons. But he never
had nuclear weapons.

Q. Is the recent agreement with North Korea good news?

A. It represents an important positive step along a very long road.
In football terminology, we're on the 10th yard line and have 90
more to go. But at least we have the ball. A huge positive in this
was China's involvement.

The Bush second-term government is doing a better job. Bush and
[Russian President Vladimir] Putin reached a responsible agreement
in February and the U.S. is working with the European Union
regarding Iran.

Q. How many loose nukes are there?

A. I don't know. On the one hand is the Russian problem with 20,000
nuclear weapons and 20,000 more nuclear-equivalent weapons with only
half adequately secured. On other other hand, 14 years after the
collapse of the Soviet Union we have not found one weapon that has
been stolen or lost.

Q. You talk about creating a safer world by imposing the Three Nos:

A. These are: no loose nukes; no new nascent nukes and no new
nuclear weapons states.

No loose nukes means we must round up all weapons and materials and
put them into a gold-standard Fort Knox type storage facility.

No new nascent nukes speaks to the fact that the current
Non-Proliferation Treaty allows non-nuclear states to legally
develop facilities for enriching uranium to produce fuel for
civilian nuclear reactors which can be reprocessed into plutonium.
This allows the production of ingredients for nuclear weapons and
should be banned.

No nation, other than then current eight nuclear powers, should be
allowed to go nuclear.

Q. You also talk about the Seven Yeses:

A. Making the prevention of nuclear terrorism a national priority;
fighting a strategically focused war against terrorism; conducting a
humble foreign policy; building a global alliance against nuclear
terrorism; creating intelligence capabilities to fight the war
against nuclear terrorism; dealing with dirty bombs and constructing
a multilayered defense.

Q. Do suitcase bombs exist and are they in the hands of terrorists
yet?

A. They exist because we made them and so did the Soviets. One bomb
in a suitcase, weighing 74 kilograms, was called the W54 Special
Atomic Demolition Munition. It was roughly one-twelfth as powerful
as the bombs dropped in Hiroshima. Others, not in suitcases, were
more powerful. All were destroyed by the U.S. government.

The Soviets had 250 of these and say they have been destroyed but
in 1997 General Alexander Lebed, the national security advisor in
Moscow at the time, said on American television that more than 100
of these weapons were not under the control of the armed forces.

Q. What is Washington doing now to avert a nuclear attack?

A. There are sensors in ports and elsewhere to detect
radioactivity. There is also NEST (Nuclear Emergency Support Teams)
which check out leads or rumors all the time. They go around
carrying something like a golf bag or drive around in vans.
Unfortunately, the technology to hide nuclear weapons is better than
the technology to find them. Satellites don't work either.

=====================================================================

Best leaders are more like mentors than moguls
National Post
Thursday, October 6, 2005

CAMBRIDGE - David Garvin is Professor of Business
Administration at the Harvard Business School and author of
Education for Judgment, among several other books, which describes
the significance of the school's rigorous Case Method.

Harvard MBA candidates must absorb, analyze and deconstruct 500
cases during the two-year course, individually then in teams and
class.

Their study is based on actual information -- such as interviews
with players, to letters or e-mails -- involving corporations that
faced a crossroads or crisis and that failed or succeeded.

Class participation comprises half their marks and the method is
designed to create good judgment, not scholars who can spout facts
and figures, said Professor Garvin in a recent interview. "The art
of management is the art of making meaningful generalizations from
inadequate facts," he said. "A successful student [or manager] must
develop skills at pattern recognition; must know what is an anomaly
and what is not.

Situations often look the same but there isn't a pattern. Third,
they must develop the courage to act despite limited information.

The professor is a master of the business world, having joined
Harvard's faculty in 1979 and consulting over time to more than 50
organizations, including Biogen Idec, Booz-Allen & Hamilton, BP,
Frito-Lay, Gillette, KeySpan, L. L. Bean, 3M, Morgan Stanley,
Novartis, Time-Life, and the U.S. Forest Service.

Given his experience, I asked him, what traits did he believe the
best leaders shared? "They have an extraordinary ability to adapt,
to perform a balancing act and to not deal in blacks and whites, but
greys," he said.

He articulated the juggling act. "Simultaneously, a business leader
must consider both short-term and long-term goals. He or she must
simultaneously encourage creativity without losing control and must
simultaneously keep costs down and yet invest whatever is required
in research for the future,"he said. "This is hard to do."

Another trait the best leaders possess is one few would guess: They
must have an ability to act more like mentors than moguls.

"They must have the ability to lead the [organization] learning,"
he said. "Leaders must have a skill at asking questions, not
necessarily leading. They must create a culture that permits dissent
in order to arrive at better decisions."

The metaphor for good management, in other words, is Harvard's Case
Method where future managers are shown how to orchestrate group
participation in order to reach sound decisions, given known facts
at the time.

Professor Garvin said former American Express Co. CEO Harvey Golub
was one of the finest examples of an effective manager in recent
U.S. business history.

Mr. Golub turned around the financial giant during his seven-year
tenure by jettisoning some businesses and restructuring the rest.
Under his leadership, AMEX returned to impressive profitability and
soaring share prices.

"When dealing with strategic issues his process was interesting,"
he said.

Professor Garvin told me that when Golub's executives made
strategic proposals he would first ask them how they came to think
of their proposal. Then he would ask them to explain how different
their initiatives would be if they thought about them in another
way.

"If the executive had fully thought out the strategy, and could
explain it, Golub would approve it. If not, he'd get out the chalk
and flipchart and discuss it," he said.

He organized those discussions like classroom discussions. For
instance, he organized a three-day strategic session, which was to
devote time to discussing the raising of merchants' fees. On the
second day of discussion, Mr. Golub threw a spanner into the works
by asking his executive team to seriously consider, and discuss the
ramifications of, lowering merchants' fees. At the end of the third
day, the decision was collectively made to raise them as originally
proposed.

He understood that it's important for a leader to create a
decision-making process that includes conflict, debate, assent and
minority views, he said.

However, the devil's advocate approach can be counterproductive if
the role falls to the same person by choice or by assignment, said
Garvin. "People who are always the devil's advocate become
marginalized and ignored by other people. So rotating the role of
devil's advocate or skeptic in a discussion works well."

Another benefit of such free and open discussion is that it
mitigates risk by eliminating the pitfalls of either ill-informed
group-think or a failure to imagine worst-case scenarios.

=====================================================================

History's best CEOs revealed
National Post
Tuesday, October 4, 2005

CAMBRIDGE - There's IQ or Intelligence Quotient, EI or
Emotional Intelligence and now there's CI, or Contextual
Intelligence, which is possibly more important than the others in
terms of success.

That's why the Leadership Initiative at Harvard Business School has
made context a key criterion in selecting the 1,000 top CEOs
profiled in its newly released book, In Their Time: The Greatest
Business Leaders of the Twentieth Century.

"Contextual intelligence was coined by a psychologist to measure
developmental aptitude in school children," said Tony Mayo,
co-author with Professor Nitin Nohria of the new book which took
four years to research and write. "It is the ability to make sense
of one's time and to adapt successfully to it. We basically chose
people who dealt well with the cards they were dealt."

CEOs are lumped into three categories: entrepreneurs, managers and
leaders. "Entrepreneurs were people who found something new,
managers were those who improved a company that had already been
formed and leaders were mostly turnaround artists," he said.

The Leadership Initiative, which Mayo serves as executive director,
culled the century's list of business greats down to 1,000, then
asked 7,000 American CEOs to select the top 100. The five most
influential are Samuel Walton, Walt Disney, Bill Gates, Henry Ford
and J.P. Morgan.

"Using the 21st-century politically correct lens means that a lot
of these leaders wouldn't pass muster today," he said. "We did
eliminate those who went to jail like Martha Stewart and the Mattels
who invented the Barbie.

Despite mostly dire circumstances, the Depression decade gave rise
to a surprising number of successes. These included the founders or
leaders of engineering giant Bechtel, Fisher-Price Toys, most major
airlines, advertiser Leo Burnett, Max Factor, Hewlett-Packard
Company, Polaroid, B.F. Goodrich, Procter & Gamble, Walgreen's,
Johnson & Johnson, Sunbeam, Greyhound, Colgate-Palmolive, Eli Lilly,
Rockwell International and Mellon Bank.

"The airlines began in the '30s because the technology was there
and the U.S. Post Office subsidized travel by giving them huge
airmail contracts," said Mayo.

Selection criteria varied but all CEOs had to be innovative given
the context of their time, had to be U.S.-based, and/or had to be
successful for at least five years.

The list includes 19 Canadian-born CEOs, representing the largest
number of foreigners. Among them Elizabeth Arden; Herbert Dow of Dow
Chemical; Alfred Fuller of Fuller Brush Company; Peter McColough of
Xerox Corporation and John Smale of Procter & Gamble Co.

Most CEOs listed ran gigantic companies, but the book unearths a
few exceptional, unknown, entrepreneurs such as an African-American
woman who invented the house party to sell cosmetics or the broker's
wife during the Depression who founded Pepperidge Farm because she
baked special bread for her allergic son, took back bread that was
no longer fresh and was able to charge a hefty premium despite
hardship all around.

There are also other exceptions. Walt Disney is included even
though he was not a financially successful CEO.

"His big hit in 1937 was Snow White but Pinochio, Fantasia, Dumbo
and Bambi were flops. His next hit was in 1950 with Cinderella. His
Disneyland, controversial but innovative, was built in 1955. He was
an innovator who produced the first talking cartoon feature (1928
Steam Boat Willy) and was a master at branding."

The book also debunks the Horatio Alger success story because most
were white male Presbyterians from the U.S. northeast. Education was
not a factor with a few drop-outs as CEOs such as Bill Gates,
Michael Dell and Stephen Jobs.

=====================================================================

'Nerds' v. phone utilities: Web pioneer Scott Bradner is
trying to keep his high-tech baby free of government control
National Post
Saturday, October 1, 2005

CAMBRIDGE, MASS. - Scott Bradner is one of the Internet's
pioneers and is the Senior Technical Consultant at Harvard
University as well as an investor and advisor to a number of private
technology companies.

He's central casting's idea of a tech-genius: bearded, bespectacled
and a college dropout.

So it was with much trepidation that I approached him for an
interview to talk about issues that tech-peasants like myself need
explained: How did the Internet come about, what's the big debate in
the U.S. Congress about the Internet's future, what are his latest
projects and what role, if any, did Al Gore play in developing the
system that's changed the world?

"The Internet began in the 1960s when the Rand Corporation was
conducting research for the Pentagon, which was worried about how
the country's communications infrastructure could survive a nuclear
attack in a city or a region," he said in an interview this week at
a fancy campus restaurant that he partially owns.

Simultaneously, another research group was looking into how large,
expensive computers (this was in the days before personal computers)
owned by a handful of wealthy universities could be shared by
schools that didn't have computers.

The two groups joined the Advanced Research Project Agency of the
U.S. Department of Defense and created a system that insured message
delivery in the event of an attack plus a system which allowed
everyone to connect computers. Thus was born e-mail.

"They created a pure research network between university centres.
They also solved the nuclear attack problem by using redundant
pathways, or alternative ways, to deliver a message from one place
to another. This meant that if a city or system was blown up, the
message could still get through because it would have alternative
ways to deliver," he said.

The next advance came in the early 1990s when the U.S. National
Science Foundation created regional networks.

"That drove the development of commercial networks or backbones,
now called service providers," he said. "The first was MCI."

Along the way, Harvard and others were also creating internal
university networks, which created demand among alumni for
high-speed connectivity after graduation. That's where Al Gore came
into the picture as a Congressman.

"Al Gore was extremely important because he helped get the money
that enabled the creation of the expanded Internet as we know it
today," he said. "The students understood high-speed networks and
wanted to use them after graduation. He put together the first
proposal for a high-performance computer network. Without that
money, we would not have what we have."

So the Internet was created by taxpayer investments but was
unregulated.

Congress is now considering regulating the sector and battle lines
are being drawn. It's the "nerds" versus the phone utilities, which
face extinction as a result of the next technology breakthrough --
the transmission of voice by computer.

"There is a bill pending in Congress, that will pass, which would
require the 6,000 Internet service providers to register with the
government. This will lead to taxes, higher rents for phone
companies and ultimately controls over content," he said.

The telephone lobby is behind this push to restrict and tax the
Internet providers even though the phone giants get rent from
Internet providers.

But now they want more money because they say the Internet is
renting their lines to put them out of the voice business.

"There are around US$300-billion worth of phone calls made in the
U.S., but this will be free over the Internet for consumers. The
phone companies are saying it's their wires and the providers are
not paying for it. These carriers are just trying to get more
revenue," he said. "The phone companies believe it is their manifest
destiny to control all telecommunications. But consider their
inefficiency. A few years ago their cost in providing long-distance
calls was only two-tenths of one cent and they sure charged lots
more than that."

"I can see regulations because of health or safety issues, but not
in the case of telecommunications. Regulation means the government
will start to have a say over the services provided over the
Internet," he said. "This will slow down innovation. For instance,
if government had regulated the cellphone industry from the start
and imposed quality requirements on day zero, we would never have
had cellphones."

Scott wades into the battle regularly as a much-followed
e-columnist but also continues to contribute toward technological
advances through his membership on the prestigious Internet
standards board. He also holds a patent with two others regarding
speech-recognition technology.

"My latest project was in the development with others of the next
generation of Internet protocol called IPV6," he said. "The military
has driven this because it wants to uniquely identify every person
and item in its inventory by having an address for the gun, the
soldier, his backpack, his Jeep. The current system, IPV4, provides
four billion hosts, with nearly three billion utilized. But we
realized that wasn't enough to identify everything in the world,
much less to accommodate China and India coming completely on-line.
Now we have that capacity."

The new IPV6 has boosted the number of addresses to four billion
times four billion.

"This is enough to identify every known atom in the universe. Some
think this capacity is overkill but it's the next logical step," he
said.

Scott's career began in pre-med at university and then veered
sharply into the new world of technology.

"I dropped out of Boston University because you had to learn a
foreign language to earn your degree. I'm dyslexic and there's no
way to learn a language out of books if you're dyslexic, so I
dropped out," he said.

He did medical research, then became a programmer. "I was hired
even though I had no experience with computers," he said.

In 1966, he joined Harvard to help develop systems for its Centre
for Cognitive studies run by the famous behavioural psychologist
B.F. Skinner and others.

Then he created Harvard's network, now one of the world's most
comprehensive and efficient.

"It's been a very challenging job and one I still enjoy," he said.
"But I'm also an investor and advisor. I did well in the middle of
the tech boom in the mid-1990s because five of the companies I
advised were purchased or went public."

He currently invests in several private companies he advises or in
technology mutual funds. And he is also very involved in the
governance of the Internet through its standards boards and through
his columnizing. The biggest worry for the future, he said, is that
regulation of the Internet may leave the United States behind.

"It will be like stem cell research," he said. "Korea's doing
better in stem cell research than the U.S. because they have no
government restrictions. We do and that's not a good thing."

=====================================================================

Bush faces a new source of opposition: Fiscal factor may
force pullout from Iraq
National Post
Thursday, September 29, 2005

HARVARD UNIVERSITY - The blame game over the Katrina disaster
continues to fill U.S. papers and airwaves, but most of the mud is
sticking to George Bush and his Iraq strategy.

Polls this week show that those who disapprove of his leadership
have jumped from 40% to 58%. Another poll shows that the number of
Americans who would describe him as a "strong leader" has slumped to
49% from 62%.

There's also a perceived shift in foreign policy support. Some 54%
said in a poll they believe the best way to pay for the cost of
rebuilding New Orleans would be to cut back spending in Iraq.

What's interesting is how all this is playing out -- despite a poll
of 680 Katrina evacuees in Houston conducted by the Harvard School
of Public Health and the Washington Post.

Most victims said they were rescued by federal operatives such as
the military or coast guard, not by state or local officials. They
had little praise for New Orlean's Mayor Ray Nagin.

This week, the feds struck back.

They blamed the state and city for ignoring demands that an
evacuation be ordered well before the storm. The city, in turn,
blamed its police force. On Tuesday, the police chief resigned after
it was announced that 15% of his force would face discipline for
abandoning their posts before and after the storm.

Louisiana's governor also came under fire.

"The National Guard should have been there immediately and they
must be invited in by the governor, not the federal government,"
said former New Hampshire governor Jeanne Shaheen in a panel
discussion here.

Clearly, the lower levels of government seem as culpable, if not
more so, than Washington. So why the decline in the President's
popularity?

His slide has less to do with Katrina and more to do with fiscal
rectitude.

It's a good guess that those who have swung away from him are
mostly rich white Republicans who are upset that Bush is morphing
into a big- spending Democrat.

The worry is that Bush is aping Democrat Lyndon Johnson, who waged
a war abroad and rolled out enormous Great Society entitlements back
home, thus plunging the American economy into a decade of
stagflation.

Fiscal conservatives believe that at least one of the three
discretionary chunks of spending in the U.S. budget -- tax cuts,
Iraq or post-Katrina relief -- has to go. Obviously, ignoring New
Orleans is not an option. And Bush has designated Iraq policy as
untouchable.

So these Republicans are concerned that Bush will probably be
forced to back off his tax cut or, ironically, that he won't back
off his tax cut and that this will harm the U.S. economy.

Still others, newly disillusioned, have hoisted President Bush by
his own petard. In George Bush's world of extremes (black or white;
good or evil) the victims of Katrina are the good guys, which makes
him and other politicians the bad guys.

This mentality has even infected the arch-conservative Fox Network,
whose anchors have been blasting the administration.

Naturally, the liberal press -- from the New York Times to Newsweek
-- have delighted in piling on.

So it's another good guess that the Bush polling numbers will
remain the same unless he makes the obvious and tough choice by
pulling out of Iraq. And he is likely to do it close to next fall's
mid-term elections.

Strategically, he can't announce this now, lest it encourage the
insurgents even more. But Washington is pushing the Iraqis hard to
approve their constitution then will insist that elections take
place in January.

This is all the more likely given the fact that Katrina has also
given the anti-war lobby a reason to bring the troops home without
appearing to be unpatriotic.

They are zeroing in on the fact that 3,200 National Guardsmen from
Louisiana were deployed in Iraq, which lessened emergency response
capability at home or that 34% of their equipment was shipped to
Iraq, including high-water vehicles that were unavailable after
Katrina.

Try as he might to wriggle out from under his falling numbers, Bush
faces tougher criticism from the usual suspects as well as a new
opposition from his core supporters concerned about the country's
finances.

Both camps now seem to be saying the same thing: It's about Iraq,
stupid.

=====================================================================

Professor debunks U.S. stereotypes
National Post
Tuesday, September 27, 2005

CAMBRIDGE, Mass. - Richard Parker is a Harvard University
professor and author of best-selling biography John Kenneth
Galbraith: His Life, His Politics and His Economics.

Prof. Parker has a mind like a mainframe computer and a body to
match.

He's also a man of many "parts" -- Oxford University PhD from
California, newspaper proprietor in his native state, founder of
Mother Jones magazine and a former advisor to John Kennedy and
George McGovern, among others. He's also an expert on religion and
politics in the United States.

"I have never had a career, only interests and passions," the
rumpled, 50-ish professor said in an interview this week.

He met Prof. Galbraith at Harvard and decided to write about the
Canadian economist's impact as a thinker, but also to chronicle 75
years of U.S. economic history, with its wildly variant, and mostly
buried, theologies from supply-side to Laffer Curves or George W.
Bush's expansive tax-cuts-with-overspending agenda.

The book received rave reviews and is selling briskly. It took
eight years to write and is 800 pages long.

"It was a ton of work. He wrote 48 books and his files went on
forever. I taped him for 200 hours," he said.

Lately, he's been busy flogging his book across the continent, but
when he's not doing that he's teaching a course at the Kennedy
School of Government on religion and politics in America.

"Americans are very religious compared to Europeans. About 90% say
they believe in God," he said. "But Europeans or Canadians should
not make the mistake of thinking that 90% of us are fanatical or
Opus Dei stalwarts or anything."

American church-going, he said, is often social.

"People go to church to teach their children values, to find dates,
to sanctify marriage vows or baptisms and look to it when their moms
get sick and they need someone to call at the church to help out
because they live out of town," he said.

Mobility and urban loneliness drive church membership. So does
dysfunction.

"Lots of people say they are religious because of social pressures
and also out of a hunger for community," he said.

The result is 400,000 congregations in the United States
representing 1,200 denominations.

This religious fragmentation came about as a result of the
country's history as a refuge for religious dissidents. Its founding
fathers revolutionized the world by de-linking church from state for
the first time, which fostered competition among denominations to
keep or woo believers.

"After the Revolution, immigrants who came and couldn't speak
English also identified with their churches or synagogues and so did
African Americans whose only institutions were their churches," he
said.

Of the 90% of Americans who believe in God, about 85% describe
themselves as "Christians" and are divided into the following
groups: 25% Roman Catholics; 25% white evangelical Protestants; 25%
mainline Protestants (Presbyterians, United Church, Episcopalian)
and 10% African American evangelical Protestants. Another 5% who say
they believe in God would include Jews at 2%; Mormons 2% and 1%
Buddhist or Eastern Orthodox, he said.

These religious groups, or sub-sets, cluster in one of the United
States' two parties, which are simply gigantic coalitions.

Roughly speaking, Democrats count on 60% of those attending
mainline churches; 80% of evangelical African-Americans; half of
Roman Catholics (the Europeans not the Hispanics) and 20% of white
evangelicals.

The Republican coalition includes whites in the south, 80% of white
evangelicals throughout the country and 65% of Hispanic Roman
Catholics, plus everyone else.

"That's your politics right now," Prof. Parker said. "But the
religious right within the Republican Party is problematic."

"The Republicans won't deliver what the religious right want such
as faith-based funding and a ban on abortion or homosexuality," he
said. "If they do, the party will become a regional party."

This is why the politics of religion should not frighten. In fact,
he said extremists like Pat Robertson or Jerry Falwell have little
following, he said.

There are also other factors besides religion such as race, gender,
region, education and income, but patterns are more easily
detectable in terms of religious affiliation.

"There is no fanatical, huge religious group that controls the
political agenda because America is all about coalition politics by
definition because we will only have two parties," he said.
"Europeans and Canadians who think so are just using stereotypes,
just as Americans stereotype Europeans and Canadians. It's a
short-hand that makes managing the world's complexities simpler.
Everyone uses stereotypes."

=====================================================================

A tale of three health-care systems
National Post
Thursday, September 22, 2005

CAMBRIDGE, Mass. - Harvard Professor Bob Blendon would give
Canada a grade of B-plus for its health-care system and the United
States an A-minus, and also an F.

"The U.S. has two grades because it has two systems, one for the
insured and one for the uninsured," he said in an interview this
week in his office at Harvard's Kennedy School of Government.
"Canada used to get an A, but not anymore because there are long
waiting times for some procedures and it's difficult to see some
specialists."

Prof. Blendon specializes in health policy and political analysis.
He teaches and also supervises ongoing polling initiatives sponsored
by a foundation in co-operation with major U.S. media outlets.

What's puzzling is that health care is not a major issue here.
Costs to consumers are rising, employees are losing benefits and the
situation represents the United States' biggest competitive
disadvantage. Even so, Republicans are not interested in reforms and
Democrats are not making it a priority.

In 2002, Americans spent an average of US$5,267 per person for
health care, or 53% more than any other country. Second-highest was
Switzerland at only US$1,821 per capita. The average among the 30
wealthy Organization for Economic Co-operation and Development
countries is US$3,074.

America's health-care bill represented 14.6% of its gross domestic
product that year. In contrast, Canada spent US$2,931 per capita, or
9.6%, of GDP.

The average cost of a hospital day in the United States in 2002 was
US$2,434, compared with US$870 in Canada and less in Europe and
Japan.

Paradoxically, the U.S. business community is unconcerned about
such relative inefficiency.

"The American political culture is dominated by business people.
They have no personal problem with medical care and are
philosophically opposed to government involvement," Prof. Blendon
said.

Besides that, businesses solve the problem by cutting back on
medical entitlements to employees or retired workforces. For
instance, a survey found that insurance coverage by firms with fewer
than 200 employees had dropped to 60% from 69% in 2000.

Despite the fact more people are feeling the pinch, public opinion
has not shifted dramatically: The majority of Americans are happy
with their care.

A recent survey by Prof. Blendon showed that eight of 10 were
satisfied with the system, even though 23% said they had had trouble
paying medical bills within the past year.

(Some 16% of Americans are completely uninsured. Those on welfare,
veterans and the elderly get care. But even those who are insured
incur additional costs for drugs or because of large deductibles in
their policies.)

"You need a middle-class switchover in attitude to change health
care here," he said. "The costs are growing and are starting to
affect that $50,000-a-year or less income group. It's not affecting
the decision-making group, and the Democrats' unionized supporters
have good care. However, union membership is dropping."

He also polls attitudes around the world and has found that
Scandinavians are most satisfied with their system. The recent
stalemated German election was waged, in large part, over the issue
of user fees for medical services.

"Canadians complain about their system and not their care.
Americans complain about their system and not their care. What
differs is the risk factor. Americans worry about being uninsured
and that something could happen to them. Canadians worry about
getting to a specialist in time for their problems," he said.

The United States' patchwork quilt of care has led to another
economic cost in the form of litigation and malpractice lawsuits as
people who are injured must win huge court awards to pay for future
medical procedures or income maintenance.

The United States had 1.8 lawsuits over health care per 10,000
population, compared with Canada's 0.4 per 10,000, the lowest rate
among the world's 30 richest countries. U.S. court awards are
considerably higher to defray higher medical costs.

Litigiousness has also led to the practice of defensive medicine,
in which doctors order excess tests and procedures in the hope of
protecting themselves against the risk of being sued. This adds to
the overall tab for health care.

Another factor is the unusually high salaries and fees that health
professionals earn in the United States, Prof. Blendon said.

"Doctors, nurses, technologists and hospital directors are overpaid
compared to other countries," he said. "Those who run hospitals have
salaries that look like CEOs' salaries."

With such vested interests, it will take a groundswell of outrage
by the public before the United States adopts a Canadian or European
system. "If the uninsured could make the decision, we'd have
Canada," he said.

But Canada's far from perfect.

"I don't accept waiting long periods of time in a wealthy country
like Canada or Britain," he said. "They both have the money to
reduce the queues. Or alternatively, in Canada, you could create a
private supplemental system for people not used to waiting for
services in their lives."

=====================================================================

Education powers Boston economy: Patents and licences
generate billions in revenue news overline: Area hosts 75
post-secondary institutions
National Post
Tuesday, September 20, 2005

BOSTON - The first thing that strikes this
Yankee-gone-home-for-awhile is how "Canadian" this part of the
United States is. Or, conversely, how "American" Canada is. If
that's confusing, join the club.

Boston is, in effect, Toronto with a good baseball franchise. It's
pretty, clean, and safe. It's filled with people from all over the
world. Americans call it the melting pot and Canadians,
multiculturalism.

It all amounts to the same thing: great restaurants, great culture
and interesting people in all walks of life.

But Boston also resembles Vancouver, or Vansterdam as the potheads
call it.

This weekend Boston might have been on Canada's West Coast as
potheads from all over Massachusetts gathered for their annual
Freedom in Boston Common ... starting at "high" noon of course. They
want marijuana use legalized.

As if that isn't Canadian enough, consider the fact that last week
Massachusetts' Supreme Court upheld legislation making gay marriages
legal.

In other words, Boston is a very Blue or Democrat place, as is
Canada where social liberalism reigns, marijuana has been
decriminalized and gay marriages blessed with little or no
opposition.

However, what distinguishes Boston from every other place in the
world is this city's principal industry, which happens to be higher
education.

There are 75 post-secondary institutions, including two of the
world's finest, in close proximity to the city.

Every fall, there's an influx of 300,000 or so people to the
metropolitan area to attend or teach at its top schools, such as
Boston University, Wellesley, Tufts, Brandeis, Harvard University
and MIT.

A national study estimated that in 2000, the eight research
universities in Boston contributed US$7.4-billion to its economy and
generated 264 patents plus 280 licences to private companies.

By far, the highest educational octane in the world is refined in
Boston's leafy suburb of Cambridge, named by the Puritans in honour
of Britain's great university.

Harvard and MIT were cited this month as the world's first and
fifth-greatest universities respectively by Shanghai's Jiao Tong
University, based on objective criteria such as Nobel Prizes,
scientific patents and articles in prestigious journals.

Both universities are staggeringly wealthy, which certainly helps,
but they have also earned alumni loyalty and international kudos for
decades, even centuries. Harvard is North America's oldest
university and was founded in 1636. (One guesstimate is that the
combined revenues generated by patents or by companies run by alumni
from these two would add up to the world's seventh-largest economy,
which is Canada.)

Harvard's endowment is the world's largest, at US$45-billion. The
Harvard Business School alone has annual revenue that rivals that of
many listed Canadian corporations, or US$309-million a year. This
includes tuition, royalties from the Harvard Business Review and its
publishing arm, as well as receipts from its own endowment of
US$2-billion.

Such wealth means that Harvard's 19,000 students (which includes
those taking extension courses) may mostly live in modest
dormitories but thrive intellectually in an enriched,
technologically advanced environment.

The whole town is wireless, which means that cafes and park benches
alike are populated by students tapping away on their laptops,
accessing the world's greatest university library system.

At every student's fingertips is an ability to drill down to the
most obscure documents, journals, periodicals and 14 million books
from all over the world. The only library bigger than this is the
Library of Congress in Washington.

Despite such reach and excellence, Harvard has in recent years come
under criticism for diluting the quality of the undergrad population
by favouring alumni offspring, as well as by inflating grades.

That's why its controversial president, Lawrence Summers, has gone
to war with faculty and some students by removing many tenured deans
and revamping admission procedures and reviewing curriculum
policies.

He's also come under fire for dismantling some affirmative action
programs but earned praise for imposing a graduated tuition
exemption system beginning with students whose family incomes are
US$60,000 a year or less. For the wealthier, fees are US$40,000 a
year plus living costs.

The result is that the campus population is more varied than ever.
This is reflected, for instance, at the Kennedy School of
Government, which is a graduate program for 900 students and
fellows.

"Our mix is 50-50 female to male with minorities above the national
average and 43% international students," said Academic Dean Steve
Walt in an interview this week.

Of course, Republicans need not apply.

"There's no official ideology but this is a liberal place, like
most U.S. universities," he added.

"Some joke we need an affirmative action program for Republicans.
But they are here. Four of our faculty are on leave to work in the
Bush government right now."

While Harvard is thoroughly impressive, the facts are that it
hasn't always earned straight As. After all, the world's richest
man, Bill Gates, dropped out of the school after only a year, citing
boredom. And Enron's infamous CFO Jeff Skilling graduated from its
business school. There's also President George W. Bush, who earned a
Harvard MBA.

"That's not something we like to talk about that," said an insider.

=====================================================================

China, India in innovative power play
National Post
Thursday, September 8, 2005

The biggest business story in the world is that India and
China have devised a brilliant and historic countervail to OPEC,
which could provide a brake to slow down escalating oil prices.

The two have agreed to join forces in terms of acquisitions.
India's brilliant Oil Minister Mani Shankar Aiyar conceived the idea
in February saying: "We are always pitted against each other to the
advantage almost always of the third country [bidding]."

Their agreement will stop the bidding wars but also create a
powerhouse asset purchaser that will be able to bid for any oil or
gas target, no matter how big. Even one of the fabled Seven Sisters
such as Royal Dutch Shell or any Canadian or Australian oil
companies could be added to a future combined takeover target list.

The mechanics are going to be worked out in coming months.
Memorandums of understanding are to be signed between the two
countries' biggest oil companies which will include the three
Chinese monopolies -- Sinopec Corp., China National Petroleum Corp.
and CNOOC -- and India's Oil and Natural Gas Corp., its foreign
subsidiary ONCG Videsh, Oil India Ltd., Indian Oil Corp., Bharat
Petroleum Corp. Ltd. and Hindustan Petroleum Corp. Ltd. The combined
financial firepower is enormous, and way beyond the "mere"
US$18-billion bid for Unocal Corp. that was rejected due to American
protectionism.

Most of the Indian corporations are privately held unlike the
Chinese ones, which are partially privatized but controlled by
Beijing.

The two nations have been aggressively acquiring assets in the past
few years in order to meet the energy requirements of their rapidly
growing economies and populations. About 40% of the world's
population live in India and China, or two out of every five human
beings on the globe.

Ironically, the two were forced to cooperate in terms of joint
ventures in Sudan after an Indian company acquired Talisman Corp.'s
troublesome assets there following a frivolous and extraterritorial
lawsuit that was waged against the company by the Presbyterian
Church in a New York court.

(Talisman made a huge profit on the sale but it underscored the
fact that state-owned oil entities have huge competitive advantages
over private-sector ones because they enjoy sovereign immunity from
pesky U.S. courts and other lawsuits as well as subsidies in order
to overpay if necessary for assets.)

The partnership has evolved from recognition that a range of
cooperative measures will benefit both from joint-venture bids to
farm-ins, farm-outs, sharing of leases and infrastructure-financing
projects.

They may also adopt the Japanese model. Japan built the world's
second-largest economy despite an absence of resources by getting
into the business of bankrolling projects globally through the
auspices of their giant trading companies such as Mitsui, Marubeni
and Mitsubishi in the key areas of petrochemicals, refineries,
mines, power, pipelines and transportation.

The American model, by contrast, was to use cheap domestic oil to
subsidize economic growth. Unfortunately, Washington has yet to
realize that won't work any longer and impose fuel-efficiency
measures on transportation fuels and power usage as the Japanese and
Europeans have done. A big chunk of the frightening U.S. trade
deficit is oil imports alone.

The Indians and Chinese are smarter if they pull this off. In fact,
if they expand this into a counter-OPEC buying cooperative they will
end up dampening prices, too, thus sticking it to OPEC's members.

The key chip in this Grand Grab for Oil and Leverage will be
Canada's oilsands, where four million barrels a day of oil for
export may be available by as early as 2020. So far, India has only
bid for foreign assets owned by Canadians or other foreign companies
that were deemed surplus, such as Talisman's Sudan assets. Another
example is that India's Oil and Natural Gas Corp. was also beaten
out, thus far, by China National Petroleum Corp. to buy Calgary's
PetroKazakhstan Inc., worth US$2.4-billion, with assets in the
former Soviet republic.

But China is already heavily investing in Canada's oilpatch and
India is busily tire-kicking.

And both are exploiting hostility by some OPEC countries toward
their energy arch-rival, the United States. China signed an
exclusive deal with Venezuela, and India recently signed a
US$40-billion liquefied natural gas deal with Iran, making eyebrows
rise in the otherwise pro-India Bush White House.

The alliance is needed to counteract the hegemony of the Americans,
the Europeans and OPEC nations. It is also a welcome development,
historically speaking, because it will counteract OPEC's power. And
it will help secure supplies and growth for two nations that look
after 40% of the world's population who are not being trained to
destroy us but to compete, and prosper, along with us for the
betterment of all.

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The other side of the profit equation
National Post
Saturday, December 17, 2005

CAMBRIDGE - Actor Paul Newman's food company, Newman's Own,
is an example of social entrepreneurship. The movie star has built a
financially successful enterprise, which gives away all its profits
to charities.

"The public didn't know about the charities at first when he
started to come out with products. He just offered a high-quality
product, but its charitable aspect was useful early on to get
suppliers and distributors," said Harvard professor Jane
Wei-Skillern.

"So far it's given away more than US$175-million."

There are also many examples of not-for-profit social
entrepreneurship and the professor has spent a number of years
teaching and researching this field.

"I'm interested in social value creation," she said. "This about
organizations or individuals mobilizing resources to create value
whether they are operating in the non-profit, corporate or
government sectors."

Newman's company is unique inasmuch as it has two mandates: to
build a corporate entity with brands in order to maximize profits
and also to share all proceeds with society. "One example of an
outstanding not-for-profit success is Habitat for Humanity in
Egypt," she said.

Habitat for Humanity operates in dozens of countries and each
country creates affiliates. Currently, there are roughly 2,500
affiliates who mobilize volunteers to provide materials, build
low-cost housing and provide interest-free mortgages. "In Egypt, the
director has forgone the traditional model of affiliates," she said.

Instead, Habitat Egypt decided rather than spending money creating
an organization of affiliates it would tap into and partner with
some of the existing non-governmental agencies. Some of these groups
had little or no housing experience but were involved in economic,
education or health development projects. So Habitat provided
expertise.

"Habitat plugged in where it was needed," she said. "It seeded
others and is one of the most successful Habitat for Humanity
organizations in the world."

By keeping overheads low, and leveraging resources that are already
there, Habitat has built 6,000 homes within six years in Egypt
alone. By comparison, Habitat has built 200,000 houses in 30 years
or roughly 6,600 per year worldwide.

Another interesting social enterprise is KaBOOM! which has
harnessed corporate partners like Home Depot to build playgrounds
for children across the United States. The sponsoring corporations
have benefited beyond developing goodwill and positive public
relations by being able to provide meaningful volunteer activities
for their employees.

Timberland, the shoe and apparel retailer, is involved in a Boston
youth organization designed to provide teens with one year off
school in order to do community service. Starbucks has become
involved in helping social entrepreneurs work with farmers in
developing countries to grow coffee for export. This is part of its
fair enterprise initiative.

Another case in point is Women's World Banking in New York, which
provides micro loans to women in developing countries. These loans
are used to buy livestock or a sewing machine and are widely
recognized as an extremely successful form of economic development.

"It was started by a Harvard Business graduate, Nancy Barry," said
professor Wei-Skillern. "It has scaled up with little cost and has a
budget of US$10-million and 40 employees who reach 10 million
borrowers a year."

Like Habitat in Egypt, Ms. Barry has become a catalyst for other
lenders around the world rather than a hands-on bank.

"The bank has created a network, with mainstream banks and newer
members, who ascribe to its quality standards, mission statement for
lending and values," professor Wei-Skillern said.

These social entrepreneurial activities are very different from
corporate ones even though disciplines and skills are similar among
practitioners. Their job is not to build a brand, become a market
leader or outpace the competition.

"They are not proprietary about their information. They are happy
if others take their ideas and run with them. This is one of the
hallmarks of these organizations. The bank doesn't care if it gets
credit but is pleased with its role as a facilitator, catalyst or
builder of networks."

Likewise, Habitat Egypt's success is based on seed funding and
technical advice and has leveraged efforts mightily by using others.
It has only five staff.

"This also created self sustainability and has enabled its partners
to independently run their housing programs and allow Habitat to
pull out and work with new communities to meet its goal, which is to
provide housing for up to 10% of the population in need of housing
in Egypt. The national director hopes that by working closely with
its partners to develop the local capacity to address the poverty
housing issue, its partners can spread their knowledge and expertise
to neighbouring communities and create a movement to serve the
remainder of the population in need, independent of Habitat," she
said. "This is really entrepreneurial."

=====================================================================

The end of television as we know it?
National Post
Thursday, October 20, 2005

CAMBRIDGE - Tom Eisenmann has been a highly paid consultant
to entertainment, media and cable companies for a few decades and
said that reports of the death of television are exaggerated. "But I
wouldn't want to be owning television stations right now," said the
Harvard Business School associate professor in a recent interview.
"Television isn't going to disappear overnight. The pace of change
is never quick."

But the transformation of the media world is irreversible, he
added.

Professor Eisenmann is a consultant and has been a director on a
number of media start-ups over the years. Before joining Harvard, he
spent 11 years as a management consultant at McKinsey & Company
where he directed teams addressing issues for clients in
broadcasting, cable programming, newspaper, magazine and book
publishing, and motion picture production.

He said the biggest issues facing broadcasters are IPTV (internet
protocol television) and DVRs (digital video recorders), which will
destroy the current broadcast business model.

"The fundamental issue is what happens with IPTV and who delivers
it? A business-as-usual scenario has people with cable and satellite
getting most of TV the same way," he said.

Another scenario is that television content can be transmitted via
the Internet and electrical wires, thus circumventing broadcast,
cable or satellite delivery systems.

The other problem is the DVR. This process allows users to easily
tape shows, series or categories well in advance of airing and
regardless of when the programs appear. It can also search archives
for past broadcasts. For instance, a user can merely state he wants
all the David Letterman Shows or Seinfeld reruns indefinitely.

(This is an advance over the VCR, which requires users to pinpoint
specific dates and times, rather than programs or subject matter,
and limits tapings to specific programs.)

"Half the people who get DVRs change the way they view television,"
he said. "They turn on TV, go to the DVR menu and see what the DVR
grabbed for them."

This undermines the broadcasters' traditional cross-promotion
model.

"TV lives off the lead-in, or scheduling," he said. "They create a
must-see television night on Thursday with hit shows, attract lots
of lucrative advertising and also increase the success of lesser
shows if they throw them in during a line-up. With a DVR, it all
goes away," he said.

"Most cable and satellite companies offer this service for only $5
to $10 a month and in 20 years we will all have them," he said.

The DVR, with its fast-forward features to zap out commercials,
also undermines the advertising model.

"I think advertising will grow along with the economy. The bottom's
not going to fall out of everything. But advertising has to be
fundamentally rethought," he said. "As someone in that world once
said, 'half of advertising is wasted. We just don't know which
half.' "

Advertisers will have to pinpoint their targeting, and slice and
dice their messages to apply to all potential consumers.

Advertising revenues are also being diverted to "New Media" such as
Yahoo and Google, he said.

This year their combined advertising revenue will rival the revenue
earned by the three major U.S. TV networks combined during prime
time. Google also takes in more ad dollars than The New York Times,
The Washington Post or The Wall Street Journal combined.

Google advertising is very targeted. It "sells" key words to
interested advertisers.

"My brother buys and sells used forklifts all over the world and
Google has revolutionized his marketing," he said. "You bid against
others for the key word maybe 50 cents or $1. If the word is yours,
then when someone uses the word forklift in their e-mail my
brother's advertisement appears on the top right hand-side of the
user's screen."

Professor Eisenmann believes the introduction of satellite radio,
the iPod and other technologies will eventually overwhelm the
traditional radio business model. "Two-thirds of radio is listened
to in cars and satellite radio has six million subscribers already,"
he said. "I think radio is a horribly broken medium. Listeners are
abused by having to listen to too much advertising."

The motion picture industry is also being roughed up by the
pirating of DVDs and films via the Internet.

"Hollywood will be off balance for 10 years. It is a content
provider but it must deal with the drop in advertising and wonder
which way to distribute its content," he said.