Odds & Ends...

Driving to the office today, I made a quick choice on the radio dial. First option was a NPR segment on the purchase of Countrywide Financial by Bank America and CEO Mozilo's decision to forgo close to $40 million in severance benefits. My second option was the classic, Miles Davis recording, Bitches Brew, featuring an all-star line-up. Easy decision -- enough already about Countrywide.

A couple of weeks back, new Merrill Lynch CEO, John Thain, was quoted saying, "I didn't cause this problem" referencing the investment bank's sub-prime financial woes and balance sheet write-offs. It appears that Thain has already lost the team-oriented, consensus building culture of the Goldman Sachs' partnership. Much better to say, "We will solve these problems" then to say "They caused it...."

Sears is a mess. Once referred to as the next Warren Buffet, Edward Lampert has certainly dispelled any likeness to the "Sage of Omaha" with his Sears Holdings investment. Financial performance, competitive strength and customer satisfaction are all way down since Lampert made his investment. The latest "plan" calls for a re-structuring of Sears into separate operating units such as Craftsman tools and Kenmore appliances. Current CEO Aylwin Lewis is out. Even before Lewis departed, Lampert had the heads of strategy, merchandising and marketing reporting to him. Lampert may be a great hedge fund manager but he is no merchant. Warren Buffet would never make a menu decision at Dairy Queen or advise Coke on its formula.

Celeb Media Frenzy

My youngest son just completed the college application process with all of the typical family tensions. Each evening for the past six weeks, he would be up late finishing his homework first and then composing crafty answers to essay questions. To the question, "What outrages you most" he wrote about the public fascination with celebrities and the media's eager willingness to feed this fascination -- like Burger King serving triple Whoppers to the obese. In his view, what was once a healthy escape in moderation has now become an obsession at the expense of dealing with weightier societal issues.

Having been the General Manager of PEOPLE magazine in the mid-eighties, I read his essay with added interest. PEOPLE was launched by Time Inc. in 1976; its genesis being the two-page "people" spread in TIME magazine. PEOPLE invented celebrity journalism and remains today -- more than 30 years after its launch -- the most commercially successful and profitable magazine in the world.

The idea behind PEOPLE was to apply TIME magazine's successful editorial formula -- quality reporting and writing backed by double fact checking -- to the subject of people. The editorial premise was "ordinary people doing extraordinary things and extraordinary people doing ordinary things." The reader might be inspired by a small town hero and then, turn the page and get satisfaction from knowing that even celebrities had their share of problems and issues. In its early years, the tabloid voltage was kept in check and balance with a mix of human interest stories.

PEOPLE not only created a magazine category now filled with titles such as US, OK!, HELLO, STAR and IN TOUCH -- but also instigated the endless rise of celebrity coverage on TV and the Internet -- including ENTERTAINMENT TONIGHT, THE HOLLYWOOD INSIDER, TMZ, E!, CELEBRITY APPRENTICE and countless other reality shows. As the competition grew and spread across media, so did the level of sensationalism. Any person in the public domain was fair game to be profiled -- and no subject was off limits -- privacy barriers were virtually eliminated.

The obsession with celebrity was at its peak this week with the death of Heath Ledger. The building where Ledger lived is just around the block from my office in SOHO. For over 48 continuous hours, news trucks -- equipped with digital video production equipment and transmission antennas two stories high -- lined the blocks at the intersection of Broome and Lafayette. The morning after the death -- at the early hour of 6am -- I counted 15 of these trucks each staffed with a team of many including on camera reporters, producers, writers, editors and technicians.

After the announcement and before the autopsy report, what more was there to say about the death? The cost of this on-site operation must have been enormous. And there was little journalistic pay-off to justify the expense. I watched a variety of entertainment and "news" shows which featured segments about Ledger and would hardly call the coverage journalism -- speculation, rumor and tid-bits were the means to differentiate the story as opposed to in-depth reporting, research and fact checking.

The coverage was way overboard and made no sense at all -- on editorial, economic or marketing levels. Nothing much more was said yet at a significant cost premium. This is the flaw of modern media -- particularly old media such as television and print --spending considerable money in the hopes of creating a huge audience to generate sufficient advertising dollars to pay for the cost. It's hard to believe that this business formula is sustainable.

And, did the viewing and reading public actually want continuous coverage of Heath Ledger's death? I doubt it. At some point, reason must set in and attention spans must fade.

But perhaps I am wrong. Maybe the "Quadruple Whopper" would be a huge marketing hit. No wonder my son is outraged by the obsession with celebrities.

Redemption of Sorts

William Jefferson Clinton, the forty-second President of the United States, left office in early 2002 impoverished morally and financially. Despite a 65% approval rating -- the highest for any president since World War II -- the Clinton presidency was marred by his affair with Monica Lewinsky and the subsequent impeachment for perjury and obstruction of justice (although he was later acquitted.) Clinton faced huge legal bills accumulated to defend against investigations during his presidency.

Leaving office, Clinton went right to work earning six figure payments for speeches made around the world. For example, Fortune Magazine paid him approximately $125,000 to speak at the Fortune Global CEO Forum in Hong Kong in 2002. These speeches and public appearances earned the former president tens of millions of dollars.

Now, Clinton is poised to reap his biggest payday yet. The Wall Street Journal reported this week that Clinton is severing ties with billionaire Ron Burkle and is redeeming his share in Yucaipa, Burkle's investment firm, for an estimated $20 million. It is not clear what exactly Clinton has done to earn this huge payout. Clinton is redeeming his shares in an effort to protect Hillary's presidential aspirations by steering clear of potential conflicts of interest and politically sensitive issues surrounding Burkle's business interests.

Most certainly, the Clinton's are impoverished financially no more.

Refilling the coffers is easy for a former world leader of Clinton's stature. Much easier than moral redemption.

America's Pastime is Making Money

At Major League Baseball, economics triumphs over morality and legality. Or, more precisely over personal accountability. As a reward for boosting revenues by 400% and setting league attendance records, Baseball commissioner Bud Selig was recently awarded a contract extension through 2012. Mr. Selig is almost guaranteed to make at least what he made last year -- $14.5 million.

That's right, about $15 million a year is going to the man who failed to provide quick and decisive leadership when professional baseball needed it most -- at the earliest stages of the steroids and performance-enhancing drug controversy. Today, Major League Baseball has tough substance abuse policies. The sport banned steroids in 2002 and established testing and penalties in 2004. But nothing was done during the home run boom of the nineties when the realities of player substance abuse moved beyond mere suspicion.

The Mitchell Report, which was conducted at the request of Commissioner Selig, concluded that the MLB Commissioners, club officials, the Players Association, and the players all share responsibility for uncontrolled, illegal use of steroids in professional baseball.

Selig has now vowed to rid baseball of performance enhancing substance abuse and holds himself personally responsible for what was not done earlier. We should all be so lucky as to accept responsibility without corresponding consequences -- which is the implication of Selig's contract extension.

Barry Bonds' home run record deserves an asterisk. So does the revenue line item in MLB's accounting statements.

Good Clean Fun!

The company name -- Wham-O Manufacturing and this photo of its founders -- Richard Knerr and Arthur Melin -- says it all. With a corporate mission based soley on having fun, Wham-O launched such childhood favorites as the Frisbee, Hula Hoops, Super Balls and Silly String. Long before (and continuing after) sex, drugs, rock-n-roll and the digital age permanently shifted pre-adolescent attention, the premise of Wham-O was about active, outdoor fun. Never consistent in its financial or commercial success, Messrs. Knerr and Melin produced sufficient smiles and giggles to earn a spot in the good karma hall of fame. Mr. Knerr passed away this week at the age of 83.

"I am a lucky man..."

Sir Edmund Hillary, shown here with his climbing partner, Tenzing Norgay, passed away this week at his home in Auckland, New Zealand. He was 88.

Hillary and Norgay were the first to scale the 29,036-foot summit of Mount Everest, the world's largest peak. At the top, Hillary left a crucifix on behalf of the expedition leader and Norgay, a Buddhist, buried biscuits and chocolates as an offering to the gods of Everest. Queen Elizabeth II appointed Hillary a Knight Commander of the Order of the British Empire and Norgay was awarded the George Medal of Britain.

Later, Hillary travelled to the North and South Poles, becoming the first person to ever visit the highest peak and both ends of the Earth. In an interview, Hillary once remarked, "I am a lucky man. I had a dream and it has come true, and that is not a thing that happens often to men."

As his long life of accomplishment progressed, Hillary needed less and gave away even more. He preferred to be called Ed rather than Sir Edmund. For many years after the Everest expedition, he listed his occupation as beekeeper. And not until long after Norgay's death did Hillary reveal that he was the first to reach the summit. While both men were alive, Hillary would state that he and Norgay were a team and reached the summit together.

Sir Edmund created the Sir Edmund Hillary Himalayan Trust and raised millions for schools, clinics and other infrastructure projects for Sherpa villages in Nepal. He was also the president of the New Zealand Peace Corps. For a complete obituary, visit the New York Times website. link

Hillary's life is in sharp contrast to the life of another man frequently in the news these days -- Angelo Mozilo, the founder and CEO of Countrywide Financial, the embattled sub-prime mortgage lender. Unlike Sir Edmund, Mozilo wants more for himself even as he accomplishes less. In an earlier post, I commented on the hundreds of millions Mozilo has earned, even as his company has slipped into near bankruptcy. link

Now, Bank of America is set to acquire Countrywide for $4 billion after having already infused the company with $2 billion in emergency funding. Following the acquisition, Mr. Mozilo's exit package is estimated to be more than $70 million before considering perks such as country club memberships and the use of private aircraft.

With all of this money, Mozilo could easily afford to create the Mozilo Homeowners Trust to assist mortgagees in default. A two hundred million donation to fund the trust would still leave Mozilo with plenty of cash to lead a life of luxury.

But don't hold your breadth for Mr. Mozilo to follow Hillary's lead. So far, he has not been seen anywhere near Good Karma base camp.

Rick Wagoner, the CEO of General Motors gave a keynote speech at this year's Consumer Electronics Show, marking the first time ever a leader from the automotive industry joined the likes of Bill Gates, Steve Jobs and other tech luminaries to address this audience.
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The modern automobile is a technology and electronics marvel. The electronics content of the typical car has increased by almost 50 percent over just the last five years. Cars now incorporate such dashboard standards as radios, DVD and CD players, GPS devices, navigation systems and ready-to-deploy airbags. Your car won't start, accelerate or stop without the aid of electronics.

In his remarks, Mr. Wagoner made note of one particular GM innovation which offers unprecedented consumer benefit. OnStar is the most comprehensive in-vehicle security, communications, and diagnostics system — available on more than 50 GM models. The transponder provides 24/7 connectivity to a live advisor, offering such services as vehicle diagnostics, navigation, automatic accident notification, emergency roadside services, stolen vehicle location assistance and remote door unlock.

The next step for OnStar is to use the transponder technology to connect cars with other cars... "to keep them from connecting physically." Today there are sensors and cameras to help keep drivers alert and avoid accidents when backing up, changing lanes or using cruise control. The transponder would do this and more --not only reducing accidents but also better managing traffic flow as your car would automatically communicate with a line of cars (transponder to transponder or V2V) a half mile ahead stuck in traffic.

From the almost here and now, Mr Wagoner then took a big leap into the future imagining a time when electronics and technology would allow for "autonomous" driving -- meaning the car would essentially drive itself. Wouldn't it be great, Wagoner proclaimed, if you could do your email, eat breakfast, apply make-up, read the newspaper or watch a video while commuting to work. Unfortunately, most of this occurs right now in cars unaided by technology, usually between the weekday hours of 6-9. And a low-tech alternative already exists. It has assisted commuters for about a century. It's called mass transit or commuter rail and bus lines...

Back to the here and now, GM is in sad shape today. The once proud industrial giant is about to lose market share leadership to Toyota and due to continuous red ink, its market cap has shrunk to under $13 billion. Will consumers really trust GM to provide the innovation necessary for "autonomous" driving? While OnStar is without a doubt a winner, the evidence is weak that GM could reliably and cost effectively provide the kind of next generation technology Wagoner invisioned.