New push aims to find cure for Aids virus

More investment is needed to find a cure for HIV, the new head of the International Aids Society has said.

Bertrand Audoin admits this might take as long as 25 years, but he says a cure is the only way to keep ahead of the HIV epidemic in the long term during tough financial times.
Sunday sees the 30th anniversary of the first medical reports of a new illness.
Some experts have warned that talk of a cure could lead to false hopes, and developing a vaccine would be better.
Mr Audoin said: "It is the right moment - from the scientific and financial point of view - to invest more time and money in researching a cure.
"There is already some basic science in this area. We know that some people who are on HIV treatment can contain the virus in a way which makes them unable to infect other people.
"So we think further work could help us develop a functional cure, which would allow the virus to remain latent in the body, without people feeling sick or needing treatment. That's the goal."
Fast epidemic
Mr Audoin ran a French Aids organisation called Sidaction, before heading the IAS - an organisation of 18,000 health professionals and activists.

He said: "At the moment, for every one person beginning treatment in badly affected countries in Africa, two people get infected with HIV in that time.

"So treatment with anti-retroviral drugs isn't the only solution in the long run.
"It could take 25 years before we find a cure - and the hardest part will be convincing donor governments and other funding organisations to put money into research.
"But if we don't invest in the science, the epidemic will go faster than our work on it - and the financial situation will make it more difficult to put people on treatment."
False hopes
The IAS has convened a working group of international researchers to develop a strategy that might lead to a cure. It is due to deliver a draft report at the end of the year.
The group is co-chaired by Professor Francoise Barre-Sinoussi, who won the Nobel Prize in 2008 for discovering HIV.
A virologist at University College London, Professor Robin Weiss, said: "Much as I would love to see one, the word 'cure' can lead to false hopes.
"I don't believe you can cure HIV infection, but you can keep the amount of virus down.
"I would prefer to see a vaccine so we can stop people being infected in the first place. But we're still years away from having one for HIV."
Next week, heads of governments will attend a high-level UN meeting on Aids in New York. Negotiations have already begun to look at the wording of a final declaration.
Mr Audoin said: "Some of us are fighting for very simple words to be put in the declaration - for example, mentioning condoms - but we are not sure if that will happen.
"There is a trend in some governments to think that we've done enough on HIV, or that everything has failed. We need to keep developing our programmes."

Australian economy reports biggest fall in 20 years

Australia has reported its biggest quarterly fall in gross domestic product (GDP) in 20 years.

Its economy contracted by 1.2% in the first three months of the year compared with the previous quarter, the latest government figures showed.
The government said flooding and cyclones in the resource rich states of Queensland and Western Australia had a significant impact on growth.
Australia's economy is heavily reliant on exporting its natural resources.
"The economy has hit a temporary pothole courtesy of the natural disasters this year," said Besa Deda of St George Bank.
'Honeymoon period'

End Quote Matthew Johnson UBS Warburg

Australia has not only had to deal with the twin natural disasters. Other factors have also slowed down its economy.

The country's growth has been powered by a boom in its resources sector.
As economies like China and India grew, the demand for Australia's resources witnessed a massive surge.
However, analysts say the situation is changing.
"We have been in a honeymoon period for a long time," said Jonathan Barratt of Commodity Broking.
"The time has come for realignment. As growth in China and India slows down, the pace of growth in Australia will also be affected," he added.
Relieved market
While the dip in growth was the biggest in two decades, analysts said that the numbers were better than the markets had expected.
"The market was very bearish in the last 48 hours," said Mr Barratt.
"The numbers are not as bad as people were fearing they would be," he added.
The effect of that was evident in the currency markets. The Australian dollar rose by 0.6% against the US dollar after the data was released.
It was trading close to 1.0723 against the US dollar in Asian trade.
Strong rebound
While Australia's growth has been dented due to the twin natural disasters, analysts said they are not concerned about the long term health of the economy.

Click to play

The overall picture for the Australian economy remains rosy, as the BBC's Nick Bryant reports from Sydney

They say that strong fundamentals mean that Australia should be able to absorb the current dip.
"Underlying strengths of the economy, both domestic demand and gross national expenditure look very good," said Matthew Johnson of UBS Warburg.
"The temporary factors have given us the negative, but I am quite confident they'll come back," he added.
Analysts also said that as mining activity gets back to pre-flooding levels and reconstruction efforts take place in affected areas, economic growth will be back on track as well.
"We are looking for the economy to recover as this year progresses, as a rebound in coal exports occurs and we get a boost from construction," said Ms Deda.

Apple to unveil own cloud service

Apple CEO Steve Jobs will announce a range of new products, including a widely anticipated cloud service, at its developer conference next week.

iCloud is likely to offer services rivaling that of Google and Amazon.
Attendees will also see Lion, the latest version of Apple's Macintosh operating system, and an upgraded version of mobile system iOS.
Mr Jobs, who is on medical leave, has not appeared in public since March.
Details of the products on show came via an Apple press release ahead of its Worldwide Developers Conference (WWDC) - an unusual step for a company which is usually very secretive ahead of its flagship event.
Fierce competition
Rumours of the iCloud have been circulating since it was reported that Apple bought the "iCloud.com" domain name in April.

However, it is unclear whether the iCloud will be a purely music streaming tool or if it will be a wider cloud service for storage such as the one offered by, among others, Dropbox.

Amazon and Google have already launched streaming music services, but so far have not managed to get big record labels on board - meaning they can only offer streaming of tracks already owned by the user.
Unconfirmed reports have hinted that Apple have managed to seal deals with several labels.
If true, this would make it a fierce competitor to Spotify, an already well-established music service with over 10m members.
Spotify is not yet available in the United States.
Last year, Mr Jobs said Lion - the eighth version of its Mac OSX operating system - would bring "many of the best ideas from the iPad back to the Mac, plus some fresh new ones".
Also on show will be the fifth version of iOS, the software which powers the iPad, iPhone and iPod touch.
However, official details about the next iPhone have yet to be publicised.

Australia suspends live cattle trade to Indonesia

The Australian government has suspended the live export of cattle to 11 abattoirs in Indonesia, after a TV documentary showed brutal treatment of animals at the facilities.

 

Indonesia is Australia's largest export market for live cattle

The footage, broadcast on ABC, showed cattle being flogged and taking minutes to die after their necks were slashed.
Some MPs have called for a total ban on the trade with Indonesia, worth more than A$300m (£200m; $320m) a year.
But Indonesian officials have asked Australia not to rush into a decision.
The head of animal welfare at Indonesia's agriculture ministry, Sri Mukartini, said: "Animal welfare is a relatively new issue in Indonesia. We're still developing regulations."
'Systemic problem'
Australia's Agriculture Minister Joe Ludwig said he had found the images in ABC's Four Corners programme "shocking in the extreme".
"I have decided to halt the trade of live animals to the facilities identified by the footage," he said.
"Further, I will appoint an independent reviewer to investigate the complete supply chain for live exports up to and including the point of slaughter.
"I reserve the right to add further facilities to the banned list, if required."
The lobby group Animals Australia first uncovered cruel treatment in the abattoirs in March.
The ABC documentary showed cattle being whipped, kicked, slashed with knives and banging their heads against concrete floors.
One official from the animal welfare group, the RSPCA, said some steers might still have been conscious when they were dismembered.
The BBC's Sydney correspondent, Nick Bryant, says that many viewers who saw the gruesome footage said they were physically sick at the sight of Australian cattle being treated so cruelly.
Independent MP Andrew Wilkie said he would immediately introduce a bill to ban the live export of cattle to Indonesia completely.
"We have cattle going to Indonesia which are being mistreated by numerous slaughterhouses on a scale that proves it is a systemic problem, not only in Indonesia... but it's a systemic problem in Australia's whole live-export industry," Mr Wilkie told reporters.
The Australian live-export industry has shipped more than 6.5 million head of cattle to Indonesia for slaughter over the last 20 years.

Moscow Leads Cities With Most Billionaires

New York and Los Angeles are lone U.S. entries among the top 10.

In Pictures: Cities With The Most Billionaires

When the U.S. economy was riding high for most of the 20th century, it would have been impossible to imagine a foreign city--especially one in a Communist country--with more of the planet's very richest than New York, home of old-money Wall Street. But that indeed is the case. Today Moscow is the city with the most billionaire residents in the world.

The Russian capital boasts 79 billionaires, a stunning increase of 21 in just one year. That more than edges out No. 2 New York, with 59 billionaires, and No.3 London with 41. Other cities in the top 15 include such rising stars as Mumbai, Taipei, Sao Paolo and Istanbul. Los Angeles manages a tie for No. 8.

Moscow's most wealthy inhabitants include a number of commodities magnates feasting on the country's natural resources. These include Vladimir Lisin (steel), the country's richest person; Alexei Mordashov (also steel) and Roman Abramovich (oil). The combined fortunes of Moscow's billionaire population top $375 billion, more privately amassed wealth than in any other city in the world.

Nor is Moscow the only city with a Communist heritage gracing this list. Three Chinese cities ranked high: Hong Kong ranks 4th with 40 billionaires; Beijing, 10th with 19; and Shanghai, 13th with 16.
Despite New York's relegation to second place, the city remains a favored locale of billionaires, whose collective net worth is $221 billion. The Big Apple boasts some of the most expensive ZIP codes in the U.S., due in part to the real estate prices paid by billionaires in this city. Indeed, many Moscow residents own secondary homes in New York, including fertilizer and coal magnate Andrey Melnichenko, whose wife recently closed on a $12.2 million penthouse apartment. Even the world's richest man, Carlos Slim (home: Mexico City), snatched up a $44 million mansion on Central Park last year.

To compile our list, we tallied the primary residences of all 1,210 billionaires on the 2011 Forbes World's Billionaires list, our annual assessment of people sporting seven-figure or higher fortunes in U.S. dollars. We did not take secondary homes into account for this list.

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In the U.S. we stuck strictly to city limits. For example, while a smattering of prominent media barons like Viacom ( VIA - news - people ) founder Sumner Redstone and T.V. tycoon Haim Saban reside in Beverly Hills, they are not included in the pile of Los Angeles residents since Beverly Hills is its own city (although largely surrounded by Los Angeles).
The greatest billionaire growth came in the so-called BRIC nations (Brazil-Russia-India-China), countries whose economies are rapidly growing. They produced 108 new billionaires in the past year alone.
While Sao Paolo and Mumbai (formerly known as Bombay) are tied for No. 6 with 21 billionaires each, the collective net worths diverge. Mumbai's totals $107 billion, compared with $85 billion for Sao Paolo. Giving a boost to Mumbai is the 27-story skyscraper home of energy tycoon Mukesh Ambani. At $1 billion it is the world's most expensive home.

Financial Illiteracy Is Killing Us

As Ben Bernanke and the Federal Reserve dither over what to do about the darkening economy, I’m reminded of, and damn near demoralized by, a scene in “I.O.U.S.A.”, the remarkable and terrifying 2009 documentary about the burgeoning debt crisis in America.

In the scene, a cameraman asks a smattering of people to define “trade deficit.” Here was one of the better answers, delivered by a fresh-faced woman who looked roughly 18 years old: “Deficit usually means…disorder or something. Something is wrong with it. It’s not good.”
Ok, maybe the notion of importing more stuff than we export is a tad abstract. How about the notion of debt? Cameraman to passersby: “How big is the federal debt?” Some responses: “I’m guessing quite a bit”; “3 million”; “I know it’s in the billions.” Try $8.7 trillion. (The film was made in 2009–after bailouts, stimulus packages and healthcare reform, that number is now a few trillion higher, and will soon surpass the $14.5 trillion worth of goods and services this country produces annually.)
The point of “I.O.U.S.A.”—sponsored in part by the Peter G. Peterson Foundation (Mr. Peterson is a billionaire investor and former U.S. Secretary of Commerce)—is to scare us stiff about the consequences of mass fiscal irresponsibility. It succeeds. But it also drives at something deeper: our rotting education system that ultimately led to this problem.
That teenagers are allowed to drive, vote and parent, all while not knowing the difference between an asset and a liability, is nothing short of a travesty. Yet that’s what we have–and we are all paying for it.
I’m thinking now about the $1.3 trillion in delinquent consumer debt–$986 billion of it overdue by at least 90 days. One. Point. Three. Trillion. I’m also thinking about the wide-eyed throngs who signed up for no-doc mortgages they could never in their wildest dreams afford. And then there was the obvious mental mismatch between members of Congress and the Hank Paulsons, Ben Bernankes, Lloyd Blankfeins and their pin-striped ilk that led to a “financial reform” bill with so many holes that two institutions–Fannie Mae and Freddie Mac, which now own or guarantee half the entire mortgage market–fell right through. (Does anyone truly believe that was a fair fight?)
Here’s who should be thinking about all of this: the folks who run our schools. If the U.S. aims to compete–for anything–on a global scale, its populace has to be financially literate. And it isn’t. Not even close.
Consider the atrocious findings in a 2008 report  by the Jump$tart Coalition for Personal Financial Literacy (underwritten, ironically enough, by Merrill Lynch). Begun in the 1997-1998 school year, the nationwide biennial survey of 12th graders aimed to determine “the ability of our young people to survive in today’s complex economy.” The 31-question exam touched on topics ranging from credit cards and car insurance to the stock market and home ownership. The results were bad, and are getting worse.
The average grade on the first exam was 57.3%. (You need a score of 60% to pass.) In 2008, it had dipped to 48.3%, with nearly three quarters of the 6,856 students failing. Fewer than 5 out of every 100 earned a “C” (75% or better). While college seniors scored higher on the same exam in 2008, averaging 64.8%, the Jump$tart report points out: “The good news is that most college graduates are financially literate. The bad news is that only 28% of Americans graduate from college, leaving nearly three quarters ill-equipped to make critical financial decisions.”
Here are some more arresting numbers, compiled by the folks at Practicalmoneyskills.com, sponsored by Visa.
–A 2009 Financial Literacy Survey of adults, conducted on behalf of the National Foundation for Credit Counseling, revealed that:
• 41% of U.S. adults, or more than 92 million people living in America, gave themselves a grade of C, D, or F on their knowledge of personal finance.
• One-third of adults report that they have no savings and only 23% are now saving more than they did a year ago because of the current economic climate.
• Among adults who have children under the age of 18 living in their household, 33% want to provide a college education for their child but have not done anything about it yet. Only 21% have established a 529 Plan or other education savings account and expect to be able to pay for four years of college for their children.
–Sallie Mae’s 2009 survey of how undergraduate students use credit cards revealed that:
• 84% of the student population has credit cards; half had four or more.
• Undergraduates are carrying record-high credit card balances. The average (mean) balance grew to $3,173, the highest in the years the study has been conducted. Median debt jumped to $1,645 from $946 in 2004. One out of five undergraduates carried balances between $3,000 and $7,000.
• Only 15% of freshmen had a zero balance, down from 69% in 2004.
• 60% of undergrads experienced surprise at how high their balance had reached, and 40% said they have charged items knowing they didn’t have the money to pay the bill.
• Only 17% said they regularly paid off all cards each month, and another 1% had parents, a spouse, or other family members paying the bill.
• 84% of undergraduates indicated they needed more education on financial management topics; 64% would have liked to receive information in high school and 40% as college freshmen.
–A 2009 survey of America’s “Financial IQ” by Capital One revealed that:
• Nearly half (47%) of those surveyed said they are putting less money into savings and the same percentage report that current economic conditions have caused them to dip into their savings to cover day-to-day expenses.
• While a third of those surveyed said they save regularly every month, only 12% report that they are saving the recommended 10-15% of their income for the future, and another 12% said they are not saving anything at all.
• The majority of Americans (59%) consider themselves to be highly knowledgeable or very knowledgeable when it comes to personal finance, down from 64% in 2007.
• Nearly two-thirds (63%) of those surveyed say they are extremely comfortable or very comfortable managing short-term finances but only half (54%) feel comfortable managing long-term finances.
(On those last points, I can’t help but recall the Lake Wobegon effect, which describes our collective tendency to think that we are all above average.)

The best weapon in the fight against financial illiteracy: education. Consider the results of a 2008 study by the Boys & Girls Clubs of America and the Charles Schwab Foundation of teens participating in the financial education program Money Matters:

• Teens who reported learning a great deal about goal-setting were significantly more likely to also report that they had saved money for something they wanted and then purchased it (79%), compared to those who reported they learned little or nothing about goal-setting (58%).
• Teens who reported learning about managing savings and checking accounts were more likely to report having opened both types of accounts (57% vs. 44% opened a savings account; 36% vs. 28% opened checking accounts).
• Those who reported learning about saving money were more likely to save regularly (72% vs. 57%).
• Teens who learned to track spending were more likely to report having developed a budget (50%) vs. those who learned little or nothing (29%) and also more likely to save money to purchase something (80% vs. 60%).
With that, I have but one message to school principals, headmasters, chancellors, parents, members of Congress, the national business press and anyone charged with nurturing the next generation of consumers, investors and voters:
Help!

The Most Profitable Small Businesses

Remember the dotcom bubble? You know, that wacky window in the late ’90s when profitless technology companies scored billion-dollar valuations like bouquets on Valentine’s Day. This isn’t 1999, but the tech sector is getting frothy. Hot targets of late: Facebook, Groupon, 3Par, Huffington Post, among others. This time, at least, the beneficiaries are generating some profits–and profits are ultimately the basis for what any company is worth to investors in the long run.

To bring things more down to earth, we decided to assess the profit-making ability of small businesses in a variety of more traditional industries.
With the help of Sageworks, a Raleigh, N.C.-based accounting consultancy and private-company data provider, Forbes assembled a list of the 20 most profitable types of businesses, on a pretax basis. At No. 1: offices of Certified Public Accountants, with an average pretax margin of 16.5%. Offices of physicians (except mental health specialists), which clock an average 10.4% margin, brought up the rear.
The data are drawn from financial statements on nearly 300,000 companies, most with under $10 million in annual revenue, and bucketed by five- and six-digit North American Industry Classification System codes. The figures were gathered between Jan 1, 2003 and Jan 1, 2011, to capture an entire business cycle. To be considered, each category included at least 100 companies. (Banks were excluded from the analysis, as their accounting methods are not comparable to other industries’.)
Here is a list of the 20 most-profitable industries and their average pretax margins:
1. Offices of Certified Public Accountants
Average Pretax Margin, 2003-2010: 16.5%
The most profitable niche of the bunch enjoys a nice mix of pricing power (everybody needs accountants, no matter how the economy is doing), low overhead and marketing scale, thanks to plenty of repeat clients.

2. Offices of Chiropractors: 15.3%
Some question the medicinal value of their service. Hard to question their financial performance, though.

3. Freestanding Ambulatory Surgical and Emergency Centers: 15%

Services include orthoscopic and cataract surgery on an outpatient basis; setting broken bones, treating lacerations, or tending to patients suffering injuries as a result of accidents, trauma or other problems that need immediate attention. These facilities include operating and recovery rooms, and specialized equipment, such as anesthetic or X-ray machines. In short: If a big rock falls on your leg, you’re going to find a way to fix it–fast. (For more on the economics of the air ambulance business, check out Rescue Helicopters Elevate Profits.)

4. Other Accounting Services: 14.9%
Various accounting, bookkeeping, billing and tax preparation services in any form, handled not necessarily by a Certified Public Accountant. (See #1.)

5. Offices of Dentists: 14.7%
Dentists enjoy operating scale–that is, they can handle several patients at once. Some of the equipment is expensive, but hygienists don’t cost much. Better yet, a lot of customers pay out of pocket. That gives dentists more pricing power relative to other medical providers.

6. Tax Preparation Services: 14.7%
Who likes paying taxes? Exactly.
7. Offices of Orthodontists: 14.4%
Who likes crooked teeth? Exactly.
8. Offices of Lawyers: 13.4%

Odd that they aren’t higher on the list, given their fees. (For more on how to get the best out of your legal counsel, check out columns by Forbes contributor Robert Bovarnick here.)

9. Sales Financing: 13.3%
These companies are popular in a credit crunch. They lend money for the purpose of providing collateralized goods through a contractual installment sales agreement, either directly from, or through, arrangements with dealers. For more on alternative ways that small businesses can raise quick cash, check out Nine Alternative Ways To Raise Cash Right Now and Where To Find Capital Now.
10. Portfolio Management: 12.2%
11. Drilling Oil And Gas Wells: 12%
12. Offices of Optometrists: 11.5%
13. Lessors of Nonresidential Buildings (except Mini-warehouses): 11.3%
14. Offices of Real Estate Appraisers: 11%
15. Lessors of Miniwarehouses and Self-Storage Units: 11%

16. Insurance Agencies and Brokerages: 11%

17. Other Activities Related To Credit Intermediation: 10.7%

18. Investment Advice: 10.7%
19. Offices of Physical, Occupational and Speech Therapists, and Audiologists: 10.6%
20. Offices of Physicians (except Mental Health Specialists): 10.4%
Thirteen of the top 20 categories involve professional services that require years of training and certification, from healing the sick to balancing financial accounts. Three big perks with professional services: consistent demand, relatively low overhead and what economists call “high switching costs.” (If someone’s been doing your taxes for 20 years, why would you switch?) Little surprise that manufacturing and retail–industries with few economies of scale–didn’t make the cut.
Size matters too, even within the small-company universe. Tiny shops may not require a lot of overhead, but at some point–say, a few million dollars in revenue–the relative level of overhead spikes, crimping margins.
To be fair, these numbers are something of a snapshot, as the profitability of a given industry ebbs and flows with the overall economy. (Some industries get permanently disrupted along the way–just ask those of us in the publishing business.) Another thing to remember about profit margins: A business can appear very profitable on a percentage basis but not generate great piles of money–especially if the principals are pulling out every last dollar to cover private-school tuition fees and summer-home mortgages.
There are also tax reasons to play with recorded salaries. Many small businesses are structured as “pass-through” entities, such as S corps and limited liability companies (as opposed to C corporations, as publicly traded firms are). That means the income “passes” straight to shareholders, who then pay taxes on it at their ordinary income rate, thus avoiding the corporate tax. (Losses flow through, too, allowing shareholders to offset income from other sources.)

For more on understanding the paths (and roadblocks) to greater profitability, check out The 20 Most Important Questions In Business,  The 10 Questions You Should Never Stop Asking and The 10 Ingredients Of A Great Business Plan.

America’s Richest Living Veterans

They flew jets, captained brigades and broke codes. They hailed from all corners of the U.S. armed forces: Army, Navy, Air Force and Marines. They fought in theaters from World War II to Korea to Vietnam.

And when they finished serving their country, they got to work serving customers and amassing billion-dollar fortunes.
On Monday, May 30, the U.S. will celebrate Memorial Day, as it has since the Civil War, in honor of those who have died in the nation’s conflicts. There will be religious services, parades and speeches. But there will never be enough thank-yous–which is why Congress, in 2010, signed into law “The National Moment of Remembrance Act,” creating a commission whose charter is to “encourage the people of the United States to give something back to their country, which provides them so much freedom and opportunity.”
Seventeen veterans from the Forbes list of 400 wealthiest Americans seized on that opportunity to dream big and build bigger. Together, their personal empires were worth a recent $50 billion–nearly 10% of the current U.S. military budget.

Nominate A Contender For Forbes’ Exciting List Of America’s Most Promising Private Companies!

By our count, here is a round-up of America’s 17 richest living veterans. (If we missed a name, please let us know.)

Richard Kinder, est. net worth: $7.4 billion (as of March 2011)

The pipeline prince served as an Army captain in Vietnam War. Saw his fortune surge thanks in part to a strong public offering of his Kinder Morgan in February; IPO raised nearly $3 billion. Quit as Enron president 1996; Kinder formed pipeline company with friend William Morgan.

Jack Taylor (and family), $7.4 billion

Rental-car titan left Washington University to join Navy; served as a fighter pilot on U.S.S. Enterprise during WWII. His fortune is holding steady as Enterprise Rent-A-Car reduces debt and maintains strong cash flow; demand for temporary rentals remains steady so long as people’s cars break down.

Rich DeVos, $4.2 billion

Amway co-founder did a 2-year stint in the Air-Force before opening a drive-in diner with lifelong pal and Amway partner Jay Van Andel (d. 2004). Began selling all-purpose cleaner to friends, family, door-to-door in 1959. Today 3 million salespeople peddle its personal care and home products in over 80 countries. Sales: $8.4 billion.

Paul DeJoria, $4.2 billion

Spent two years in the Navy before teaming with Paul Mitchell to launch the shampoo company with $700 in 1980 while living in car; sales now top $900 million. Started tequila maker Patron Spirits with Martin Crowley 1989; friends like Clint Eastwood and Wolfgang Puck introduced drink to Hollywood crowd. Sells more than 2 million cases annually.

Sumner Redstone, $3.8 billion

Did a three-year stint as an Army code breaker during World War II before taking over family’s Northeast Theater Corp. Acquired control of Viacom 1987, spun off CBS in 2006. Last summer the tabloids gleefully hounded the media maven after a recording of him trying to coax the identity of a source from a Daily Beast reporter leaked on the Internet.

Kirk Kerkorian, $3.5 billion

Eighth-grade dropout trained World War II fighter pilots; launched Trans International Airlines and sold for $104 million profit 1966. Bought and sold MGM Studios three times. The 93-year-old pledged $200 million of his fortune to UCLA this winter. His $8.5 billion gamble, City Center, opened in Las Vegas December 2009; it was the most expensive privately funded real estate deal in U.S. history. Stake in MGM worth $11 billion during 2007 highs; today about $1.5 billion.

Henry Ross Perot Sr., $3.4 billion

Cotton broker’s son joined the Naval Academy in 1949 and served his requisite four years after graduation. Made his fortune selling his first data-processing firm EDS to GM for $2.5 billion in 1984. Sold his data-processing firm Perot Systems to Dell in 2009 for $3.9 billion and pocketed approximately $380 million. The fortune of the former presidential candidate is now mostly in municipal bonds.

Charles Dolan (and family), $3.3 billion

Broadcast billionaire served briefly in the Air Force at the end of World War II. Cablevision’s stock is up 30% this year, boosting Dolan’s fortune by $700 million. Spun off Madison Square Garden in a public offering 2010; the new MSG holding includes Radio City Music Hall, pro basketball’s New York Knicks and hockey’s New York Rangers. Cablevision unit Rainbow Media owns cable station AMC, home of hit series Mad Men.

David Murdock, $3 billion

Dyslexic pineapple king left high school in the 9th grade to work at a gas station before being drafted into the Army in 1943. Developed property in Arizona. In 1985, bought out failing Hawaiian real estate outfit Castle & Cooke, which owned fruit company Dole. Spun off real estate holdings; still owns assets including Hawaiian island Lana’i. Took Dole, now world’s largest fruit, vegetable producer, public in 2009, same year he received his high school diploma.

Frederick Smith, $2.1 billion

Yale grad served as an officer in the Marine Corps. in Vietnam from 1966-1970. Explained vision for integrated network of planes and trucks in college paper about logistics in the computer age. Launched Federal Express 1971 and pioneered elaborate tracking systems. Fred Smith’s FedEx recovered from 2009 with increased shipping demand; stock is up nearly 20% in past 12 months. Owns 10% stake in the Washington Redskins.

S. Daniel Abraham, $1.5 billion

Joined his uncle’s medical supplies company after serving as an infantryman in the Army during World War II. Struck it rich with the Slim-Fast line of diet supplements, starting with shakes and expanding to snacks. He sold out to Unilever for $2.3 billion in 2000. Very involved in Middle East peacemaking efforts, he founded the S. Daniel Abraham Center for Middle East Peace and wrote a book called Peace is Possible.

Henry Ross Perot, Jr., $1.4 billion

Only son of Ross Perot Sr. served in Air Force; at age 23, became first pilot to circumnavigate the globe in a helicopter. Ran Perot Systems until 2009, when family sold company to Dell for $3.9 billion. Joined Dell board and pocketed approximately $400 million in cash. Still runs real estate development firm Hillwood, which he founded in 1988; he and his father each own 50%.

William Moncrief, $1.1 billion

The wildcatter served in the Pacific for the Navy in WWII. Got his first taste of the energy business at age 10 with father W.A. “Monty” Moncrief Sr.; Tex witnessed dad’s discovery of 6-billion-barrel East Texas oilfield. Studied petroleum engineering at U. of Texas and later worked for father’s Moncrief Oil. Made perhaps the biggest find of his life last January with offshore gas field “Davy Jones,” holding up to 6 trillion cubic feet of gas. Production expected to begin in third quarter of 2011.

Kenneth Adams, $1.1 billion

Oklahoma-born oilman served as an aviation engineering officer in the Navy during WWII. Founded ADA Oil Co. in 1946. Later renamed Adams Resources & Energy; public 1974. Owns cattle ranches in Texas, melon, rice, tomato, walnut farms in California. Helped found AFL in 1959; brought pro-football to Houston with $25,000 purchase of Oilers. Moved team to Tennessee in 1997; today Titans are worth $994 million. “Bud” is one of four current NFL owners with 350 wins.

John Orin Edson, $1 billion

Enrolled at the University of Washington but left to join the Army during the Korean War. Upon his return, started building sailboats in his garage; founded Bayliner Marine Corp in 1955, focusing on affordable plywood motor boats. Bought out by the Brunswick Corporation for $425 million in 1986. Donated $5.4 million to an Arizona State University entrepreneurship program in 2005; longtime supporter of Seattle’s Fred Hutchinson Cancer Research Center. Spends time on his 164-ft yacht Evviva (Italian for “long live”).

George Joseph, $1 billion

Piloted a B-17 bomber in WWII. Founded Mercury General Corp. in 1962; had been working as door-to-door insurance salesman before realizing auto companies were not adequately screening customers. Firm was the main supporter of Prop. 17, a California auto insurance ballot that was defeated in June 2010. Opponents said it would punish those without continuous coverage, like disabled or ill drivers. Accused of nepotism last year, employing his nephew as company’s chief actuary; responded that he was within SEC rules.

Charles Munger, $1 billion

The Berkshire Hathaway lieutenant and Omaha native dropped out of University of Michigan to serve as meteorologist in U.S. Army Air Corps; later attended Harvard Law. Pragmatic investor met friend, business partner Warren Buffett at a dinner party 1959. Last summer Berkshire acquired the remaining 20% of Wesco Financial, the holding company Munger ran, to make it a wholly owned subsidiary.

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More Solid Proof That Obamacare Is Working

Recent data provided by the nation’s largest health insurance companies reveals that a provision of the Affordable Care Act – or Obamacare – is bringing big numbers of the uninsured into the health care insurance system.

And they are precisely the uninsured that we want– the young people who tend not to get sick.
The provision of the law that permits young adults under 26, long the largest uninsured demographic in the country, to remain on their parents’ health insurance program resulted in at least 600,000 newly insured Americans during the first quarter of 2011.
Wellpoint, the nation’s largest publicly traded health insurer with some 34 million customers, reports adding 280,000 new members in the first three months of 2011.
Add in the results of some of the other large health insurers including Aetna, who added just short of 100,000 newly insured to their customer base, Kaiser Permanente’s additional 90,000, and Highmark’s 72,000 new customers, and we begin to sense our health insurance pools are filling up with some badly needed young blood.
The Health & Human Services Department had estimated that the changes in the law would result in about 1.2 million new enrollees in 2011. However, according to Aaron Smith, the executive director of a Washington based non-profit that advocates for the young, it now looks as if that number will be exceeded.
This is very good news – particularly for those in the individual and small group markets that tend not to ‘self-insure’ as the larger corporations tend to do.
It is also very good news for those of us who write a large check every  month for our health coverage.
For starters, every one of the young immortals we add to the rolls of the insured is one less young adult who will turn to the emergency room to fix a broken leg and then find themselves unable to pay the bill – leaving it to the rest of us to pay the tab.
And it gets better.
Because the under 26 crowd tends not to get sick, adding them to the insurance pools helps bring the very balance that was intended by the new law.  The more healthy people available to pay for those in the pool who are ill (translation- the older people), the better the system works and the lower our premium charges should go.

One cannot help but notice that the health insurance companies turned in record profits for the first quarter of 2011 due, according the insurance companies, to fewer people seeking medical treatment.

When you add into their customer base a large number of people who are paying premiums but are less likely to get sick (the young adult demographic), this would be the expected result.
The question now is whether we allow the health insurance companies to hold onto the benefits of this reform by keeping the extra money they are pocketing or force them to hold the line on premiums as a result of their good fortune.
I’m betting that the policyholders, with the help of both state and federal governments, will win this battle.
Meanwhile, things continue to improve on the small business front where business owners are being heavily incentivized to offer health care benefits to employees.

As I wrote in January, there has been a significant uptick in small businesses taking advantage of the tax benefits offered by the ACA to provide health insurance to employees where they previously did not do so.

According to a Kaiser survey, there has been a 46% uptick in businesses with less than 10 employees offering health benefits as compared to last year.

That is a big number.
Further improving the outlook, the IRS has, in the past month, issued guidelines for small businesses which very much bolster the tax credits offered.  Included in those guidelines are provisions that clarify that the tax credit will not be reduced by a state health care tax credit or subsidy (except in limited circumstances to prevent abuse of the credit); that small businesses can receive the credit not only for traditional health insurance coverage but also for add-on dental, vision, and other limited-scope coverage; and detailed guidance on how a small business can determine whether it is eligible and how large a credit it will receive.
Health care reform is working, folks – and we have yet to get to the really big benefits which kick in come 2014.
Now that we are seeing some decidedly positive results, I am reminded of the GOP criticism that was leveled at the health care reform effort back when the issue was on the front burner of the national consciousness.
Once we get past the August 2009 era of the townhall meetings where the Republicans were pitching the false “death panel” narrative  to great effect, we see that there are two primary challenges lodged against the law- the cuts to Medicare and the health insurance mandates.
Today, the GOP is pursuing the Ryan budget plan that would destroy Medicare as we know it, turning it into a voucher program that has no chance of keeping up with the rising costs of medical care and leaving seniors to face a future of inadequate and unavailable health care.
It is no secret that polling reveals that Americans are very much not in favor of Ryan’s plan.
So much is this the case, the health care issue that played such a large role in handing the House of Representatives over to the GOP last November, is now the very same issue that has become the focal point of the special election in New York’s 26^th Congressional District where polling shows Democrat Kathy Hochul is leading Republican Jane Corwin in what has long been a safe GOP seat.
The reason Hochul may emerge victorious?
The GOP’s anti-Medicare plan.
The irony is exquisite.
As for the health insurance mandates, reviewing the field of the major GOP presidential contenders, some interesting data begins to emerge.
Newt Gingrich – for mandated health insurance before he was against it (although he may have already switched positions again this morning.)
Jon Huntsman – for mandated health insurance before he was against it. Indeed, mandates were a vital part of the health care reform Huntsman pushed as Governor of Utah before the GOP majority in the state legislature put the brakes on the idea.
Mitt Romney- as the true father of Obamacare, clearly he was for mandates before he was against them.
Only Tim Pawlenty appears to be in the clear on the topic.
The time has arrived for even the most critical to take another look at health care reform. Facts and figures don’t lie – if accurately presented.
And while the full jury won’t be in for a few more years, maybe the time has come for average Americans more interested in what is best for their country rather than grinding a political axe, to reconsider their views.
I think you’ll like what you see.

Six Keys to Managing Your Reputation on the Web

Every startup fears that one angry and unfair customer who can jeopardize the business by a SCREAMING post on Ripoff Report, Yelp, or one of the hundreds of other consumer complaint and review sites on the Internet. Most entrepreneurs don’t even know how to keep track of what people are saying about them on the web, much less how to respond or remove it.

Web reputation management, both business and personal, has become a top priority requirement. On the personal side, these items can kill your career, as I discussed in a prior article “Google Yourself to See How Other People See You.” Luckily, the basic principles for reputation management are the same for both business and personal environments:

1. Your reputation is your responsibility. The first step is to recognize that you alone are responsible for managing the reputation of your business and your life. Doing nothing, or counting on more laws, is not an answer. Due to First Amendment rights, offensive content, once entered, is often untouchable, and the sources are immune from liability.
2. Actively monitor what people are saying about you. You may assert that monitoring the entire Internet space is an impossible problem. Fortunately, there are already tools out there, like Google Alerts (free) and ReputationDefender, which can do the work for you, and send you a daily email report of every link where your name or brand appears.
3. Proactively build a positive reputation. Maintaining a good reputation means you have to build one early and maintain it. There is a big difference between no reputation with one negative comment, versus 1000 indications of a positive reputation and one negative. Most people accept that no person or organization is perfect.
4. Quickly address every negative. Many negative customer experiences can actually be turned into positives, if you quickly and unemotionally acknowledge the problem, resolve it, and spread the positive message before the negative one gets amplified. Don’t emulate the “United Breaks Guitar” experience.
5. Push negative content out of view. In reality, most people will never find negative content, unless a link appears on the first page of search engine results. With the right focus on search engine optimization, or the help of companies like DefendMyName, you can usually push negative links out of sight into the swamp of the Internet.
6. Remove unwanted content, where possible. Removing your content from the Web is not as easy as canceling your accounts, nor is it completely impossible. You can easily remove content you own (comments on your site or accounts). Experts, like Reputation Defender, have proprietary techniques to correct or completely remove other unwanted content.

The upside to the difficulty of removing unwanted content is that it does justice to those who have come by their bad reputations legitimately. For curbing bad guys, the speed and visibility of the Internet can be a very useful thing. For all the rest of us, it’s nice to know that we can shout back quickly and broadly, when someone starts to whisper about us.
As I have discussed in previous articles, social networking sites like Facebook are now the most frequently used websites on the Internet. Unfortunately, they have also become some of the most abused websites on the Internet, due to the emotions of failed relationships and the immature whims of young users.
So the social networks are the early place to start, in learning the discipline of building and maintaining a positive reputation. If you get that right, the transition to your business will be easy. On the other hand, if you let your reputation slide early to be “cool,” it may take a lifetime to recover. It’s easier to make Google remember than to forget.

The Best Way To Innovation? – An Important Lesson from India

Innovation seems to be a prime directive at almost any firm I run into, regardless of industry.  How do you get more of it?  In these tough times the answer is no longer to throw money at it.  What we increasingly need is frugal innovation, what the Indians call Jugaad. It is an idea, whose time has come.

Earlier this year I had the pleasure of traveling to India with 30 McGill MBA and B.Com. students to meet with executives of a number of large companies in New Delhi, Mumbai, and Bangalore as part of the ongoing Hot Cities of the World Tour.  The word Jugaad turned out to be the word of the trip. A word that I believe should be adopted by many firms in the West.
We first ran into the word in London enroute to Delhi.  What would have otherwise been an unfortunate 15 hour layover at Heathrow on the way to India, was made quite enjoyable thanks to a few activities in London, including a visit to the offices of The Economist. We sat down with Adrian Wooldridge, Management Editor and Schumpeter Columnist, who had just returned from India and was glad to share some of his thoughts with us.
One of the hot topics: frugal innovation, the essence of which is captured by the Jugaad mindset, a Hindi word that in a nutshell refers to making do with what one has to solve one’s problems (also implying a certain degree of improvisation). In a business context it means bringing innovative products to market despite limited resources – if not thanks to limited resources, since it is the financial constraints of producers or customers (or both) that drive the innovation in the first place. Frugal innovation results in great value: no-frills, good quality, functional products that are also affordable to the customer with modest means.  If you want to hear more of what Adrian said about frugal innovation, listen to the youtube video below.  It is only a recording, there is nothing to watch due to technical problems.
Throughout the trip’s many discussions three examples of frugal innovation stood out. One that everyone has heard of is the Nano, unveiled by Tata Motors in 2008, which now retails for just over US$ 3,000. Equipped with only the bare essentials, the car is mainly aimed at the domestic market where it is not uncommon to see a family of four crowd onto a motorcycle or scooter. Though it is still too early to say whether the Nano will truly become “The People’s Car”, we were told that it problems with working on really hot days, it nonetheless provides a good example of frugal engineering. New low-cost technology in healthcare also has everyone talking. For instance, GE, which operates tech centers in Hyderabad and Bangalore, has introduced breakthrough items such as an electrocardiogram in a backpack and a computer-based portable ultrasound machine. They sell for only US$ 1,000 and $15,000 respectively (fractions of the usual prices for those devices) and are said to have the potential to revolutionize access to healthcare in developing countries. These products are now also being sold in the US. Interestingly enough, frugal innovation reverses the historical notion that multinationals innovate in rich countries in order to sell their products in poor countries.  Hats off to the late C.K. Prahalad and his book, The Fortune At the Bottom of the Pyramid.

Cover via Amazon

The concept of Jugaad, however, is not just about developing new technology. In fact, we witnessed firsthand the work of the Dabbawalas in Mumbai who demonstrated exactly that. The business model is simple: Dabbawalas collect freshly cooked meals in boxes from the homes of Mumbai residents and deliver them to the workplace for a (very) modest monthly fee (Dabbawala means “one who carries a box” in Marathi). What is not so simple is the delivery process. 5,000 Dabbawalas deliver 200,000 boxes per day using only bicycles and various modes of public transportation. Their supply chain is made up of a complex series of collection zones, sorting points, and delivery zones, supported only by an elaborate manual coding system. The codes are made up of only numbers and colors because 50% of the employees are illiterate. The only modern technology used in the process is are a website and a text message receiving system which allow customers to request deliveries in real time. Forbes Magazine awarded its Six Sigma certification in 2001 to the Dabbawalas based on a 99.999999 percent delivery accuracy rate (1 error for every 16 million transactions).

We spent over an hour at one of the sorting points observing the Dabbawalas, doing our best not to get in the way of the constant exchanges of packets between bicycles, a sort of controlled chaos (which we came to learn describes much of Indian city life). We recounted a few lessons that we took away from the experience. For one, frugal innovation goes beyond clever R&D. It has a lot to do with process – in this case, maximizing the efficiency of the supply chain. Second, sometimes less is indeed more. No fuel, no capital investment, almost no modern technology, and yet a high quality of service: that’s frugality at its best. And third, the circumstances of the operating environment matter a great deal when it comes to frugal innovation. One of the main reasons the Dabbawalas are so successful in Mumbai but haven’t yet expanded to other cities is that their system is built on a combination of characteristics that is unique to Mumbai.

A few days in Bangalore and Mysore allowed us to spend some time with two companies that are at the other end of the tech spectrum: Wipro and Infosys, two of India’s top IT companies. At Wipro, much of the discussion centered around cloud computing which, I must admit, was a indeed a little cloudy prior to this informative session. Cloud computing is frugal because it eliminates the need for expensive local storage on computers, and optimizes the use of remote data servers due to scale advantages.
But how is frugal innovation sustained? A tour of Infosys’s spectacular 335-acre campus in Mysore and a visit to its Leadership Institute made it clear to us that the company doesn’t leave that up to chance. Gone are the days when Indian IT companies could rely on their access to cheap labor to compete on price with foreign multinationals – the fact that IBM is now the second largest private sector employer in India is just one example of why. So the differentiating factor is quality of service, which must be upheld by constant innovation. Much of Infosys’ ability to continually innovate can be attributed to its emphasis on recruitment and training. The campus in Mysore alone produces 10,000 graduates every year while grooming another 500+ employees, chosen from offices around the world, to eventually hold senior leadership positions. Infosys has grown from 7 employees and US$ 250 in 1981 to a truly global company with over 130,000 employees and a market cap of over $US 35B today, so there must be something about its model that works.
How do we use frugal innovation back here in the West? Actually, I think we are doing a lot of it now but given where our economies are I believe we need to use it more.  With one big airline that I am working with I am encouraging senior managers to adopt this approach.
The airline industry today simply does not have money to throw after their problems, if it ever did. There is still room for CEO led big hunkin’ transformational change. But I think the dominate route to corporate transformation is to allow a 1,000 flowers to bloom, fertilize the best and then when they have proven themselves in pilots, scale them up and spread the key few winning innovations across the organization. This connects middle managers that are close to the customers and the day-to-day work of the airline with the real business problems of today’s airline industry. As middle managers they have credibility and access to the senior executives who, correctly, control the purse strings. In my mind, Jugaad is a concept that appears to work in India and back here in the West.
This column was with written with a great deal of input from two McGill students who joined me on the trip to India this year, Veronica Dasovich from St. Paul,  MN,  one of our many wonderful U.S. students at McGill and Daniel Novak, a native Montrealer.

How To Innovate Like Steve Jobs

What does Steve Jobs do, that none of us seem to be able to emulate?

Carmine Gallo has been following Steve Jobs for more than a decade.

He watches all of Steve Jobs‘ presentations. He’s talked to analysts, former employees and other experts to find out what makes Jobs not only the best communicator in the world, but also the best innovator.

He has a new book on the market called, “The Innovation Secrets of  Steve Jobs.”

The book is #1 on Amazon’s Kindle in three categories:  creativity; leadership; and office skills.

There’s a chapter in the book called, “Kick-Start Your Brain.” In it, Gallo explains that what scientists have found is that great innovators practice what’s called “association”. They look outside their industry for ideas they can apply within their organization. Steve Jobs has been doing that his whole life.

Here are two examples:
1) Gallo says Jobs’ inspiration for not having a designated cashier in the Apple Store,  came from the Four Seasons hotel chain, which has a concierge;
2) When Jobs and Steve Wozniak were creating the Apple 2 computer,  which became one of best selling personal computers of its time, Jobs wanted a computer people would have in their homes.  But instead of looking at his competitors, he walked through the kitchen appliance isle at Macy’s for inspiration.
In that same chapter, scientists explain to Gallo that another key to kick-starting your brain and get those creative juices flowing is to try new and novel experiences that push you outside your comfort zone and push your interests.
Take a look at the video below. In it, Gallo shares one BIG key to Jobs’ success:  “Sell Dreams, Not Products.”

The 7 Success Principles of Steve Jobs

As we kick off the New Year, leaders, entrepreneurs and business owners are looking for new and innovative ways to grow their brands. Who better to turn to than one of the most innovative leaders of our time—Apple CEO Steve Jobs?  Through first-person interviews with Apple employees, experts, and analysts, as well as Steve Jobs’ own words over the past thirty years, I discovered that there are 7 principles largely responsible for Jobs’ breakthrough success.  These are described in my new book, The Innovation Secrets of Steve Jobs, and they are principles that I will discuss in blog posts over the coming weeks.  Briefly, here are the principles that anyone can use to “think differently” about their service, product or brand.

Principle One: Do what you love. Steve Jobs once told a group of employees, “People with passion can change the world for the better.”  Jobs has followed his heart his entire life and that passion, he says, has made all the difference.  It’s very difficult to come up with new, creative, and novel ideas unless you are passionate about moving society forward.
Principle Two: Put a dent in the universe. Passion fuels the rocket, but vision directs the rocket to its ultimate destination. In 1976, when Jobs and Steve Wozniak co-founded Apple, Jobs’ vision was to put a computer in the hands of everyday people.  In 1979, Jobs saw an early and crude graphical user interface being demonstrated at the Xerox research facility in Palo Alto, California.  He knew immediately that the technology would make computers appealing to “everyday people.”  That technology eventually became The Macintosh, which changed everything about the way we interact with computers.  Xerox scientists didn’t realize its potential because their “vision” was limited to making new copiers.  Two people can see the exactly the same thing, but perceive it differently based on their vision.
Principle Three: Kick start your brain.
 Steve Jobs once said “Creativity is connecting things.”  Connecting things means seeking inspiration from other industries.  At various times, Jobs has found inspiration in a phone book, Zen meditation, visiting India, a food processor at Macy’s, or The Four Seasons hotel chain.  Jobs doesn’t “steal” ideas as much as he uses ideas from other industries to inspire his own creativity.
Principle Four: Sell dreams, not products.
To Steve Jobs, people who buy Apple products are not “consumers.”  They are people with hopes, dreams and ambitions.  He builds products to help people achieve their dreams.  He once said, “some people think you’ve got to be crazy to buy a Mac, but in that craziness we see genius.”  How do you see your customers?  Help them unleash their inner genius and you’ll win over their hearts and minds.
Principle Five: Say no to 1,000 things.
Steve Jobs once said, “I’m as proud of what we don’t do as I am of what we do.”  He is committed to building products with simple, uncluttered design.  And that commitment extends beyond products. From the design of the iPod to the iPad, from the packaging of Apple’s products, to the functionality of the Web site, in Apple’s world, innovation means eliminating the unnecessary so that the necessary may speak.
Principle Six: Create insanely great experiences.
The Apple store has become the world’s best retailer by introducing simple innovations any business can adopt to create deeper, more emotional connections with their customers.  For example, there are no cashiers in an Apple store. There are experts, consultants, even geniuses, but no cashiers.  Why?  Because Apple is not in the business of moving boxes; they are in the business of enriching lives.  Big difference.
Principle Seven: Master the message.
Steve Jobs is the world’s greatest corporate storyteller, turning product launches into an art form.  You can have the most innovative idea in the world, but if you can’t get people excited about it, it doesn’t matter.
Simply put, innovation is a new way of doing things that results in positive change. Innovation is attainable by anyone at any organization, regardless of title or position.  Make innovation a part of your brands’ DNA by thinking differently about your business challenges.
Carmine Gallo is the communications coach for the world’s most admired brands. He is a popular keynote speaker and author of several books including the bestsellers, The Presentation Secrets of Steve Jobs and The Innovation Secrets of Steve Jobs. Follow him on Twitter: @Carminegallo

Can Anybody Run Microsoft?

Calls for Microsoft CEO Steve Ballmer’s resignation increased several notches in stridency this week.

Although David Einhorn, president of Greenlight Capital, made the most distinct pitch, he was by no means the first.  In a piece written in 2007, my friend Rob Enderle first raised the delicate question of whether Ballmer was the right guy for the job, but gave him a temporary pass.

As I thought more about it this week, I turned to my own experience. Twice, I have had direct conversations with Ballmer.  Each time, he was testy, abrupt, and dismissive.
The first chat was during the period when Microsoft was defending itself against the U.S. Department of Justice in front of Judge Thomas Penfield Jackson in the late 1990s.  It was at a Seattle Mariners game, in the Microsoft box (which offered simple fare, beer and burgers, to analysts and journalists along for the ride).  The plastic seats outside were just like anywhere else in the stadium.  Ballmer was in his “big” phase and took up his chair entirely, flanks plastered sweatily against a buddy on either side.  They were carrying on loudly.
Sitting right behind him, in the next row back, I challenged him on the case, asking what he would do if the company were broken up.
He said, “There is no plan B.  We’re not going to be broken up.” There may have been one or two more exchanges but that was effectively the end of the conversation.
Looking back, Jackson might have been doing Microsoft — and certainly shareholders — a favor by trying to divide the company into parts, each of which could have competed in its own markets without inhibition of the others.  One of many turns not taken.
The other time was in New York, when I asked him a question from the audience of reporters and analysts about the proportion of boxed versions of Vista he expected to sell in retail.  He was quick to admit that 95% of Windows licenses were expected to go out as OEM hardware preloads.  He was in command of his facts, but Vista bombed and, at times, seemed as if it was going to take the company down with it.
Ballmer certainly can’t be blamed for everything that has gone wrong at Microsoft, but Wall Street draws from Aztec culture on this point: when the gods are angry, human sacrifice is required, and who better than the top executive?
And yet Microsoft’s board of directors has not moved.  Who are they, and why not?

Well, there’s Steve Ballmer, CEO, and Bill Gates, chairman.  These two have been the heart and soul of Microsoft for decades.

When Microsoft was in its salad days, it was made up entirely of hackers, good ones.  At some point, Gates decided he needed a business person to help out.  Ballmer, a friend from Harvard days, at the time working in product management at Procter & Gamble, seemed like the right guy.  He made himself incredibly useful, creating a protective cocoon within which the hackers could work.
Over time, he proved his business ability and loyalty and was part of Gates’s “enforcement” team as the company went around collecting licensing royalties for Microsoft software.
This legacy was on display in Ballmer’s address to employees at the company’s new Beijing offices this week, during which he talked about — you guessed it — licensing royalties, and how Microsoft isn’t collecting its normal tithe from the Chinese market.  Licensing has been paying the rent up in Redmond, and Ballmer is a dyed-in-the-wool licensing guy.  It’s hard to look at the world through any other lens when the one you’re looking through has been so sharp for so long.
But that’s just it.  The Zen-like adage holds: Your strength is your weakness.  And it’s true of everyone and everything.  The goodness of Windows and Office has kept the company from moving on successfully to new markets, like smartphones.
So, Gates and Ballmer are the core.  Might anybody else on the board second-guess them?

Dina Dublon, former CFO at JPMorgan Chase, is a retired banker, a professional board member.  Not much resistance likely to come from that quarter.

Raymond V. Gilmartin, former chairman, president, and CEO of Merck, is a retired pharma guy.  Nice business, but a different business.  Not likely to be giving much solid advice on how to run a software company.

Reed Hastings is founder, chairman, and CEO of Netflix.  Hmmmm.  Now, there is someone who could birddog the original pair, a mathematician, entrepreneur, and Internet-savvy player.  The most vociferous objections should be coming from his quarter.

Maria M. Klawe is president of Harvey Mudd College, another mathematician, but with research and academic experience.  Not so much the hands-on type.
David F. Marquardt, general partner at August Capital, is a banker, professional board member, and, formerly, a hardware guy.  Could go either way.

Charles H. Noski, EVP and CFO at Bank of America, is another banker.  More rubber stamp than not, I’d say.

Dr. Helmut Panke is former chairman of the board of management at BMW.  A car guy.  Don’t look for much help there.
Thus, despite the possible independence of a few of these directors, one gets the impression that the board is still ruled by Gates and Ballmer.
But before we push Ballmer off the edge of the pyramid, it’s worth asking whether any executive could run Microsoft.
The company was formed in a once-in-a-century land grab.  Gates had his operating system strung through everyone’s vital organs before anyone knew what was happening.  The Niagara of monopoly profit that thundered down subsequently will never be duplicated in the company’s existence.  Even with huge sums of money to invest, Microsoft is unlikely to realize multibillion dollar businesses that yield such profits ever again.  It can no longer get the jump on everyone else.  The industry and the public have wised up.
And the Microsoft of today is like a city, full of neighborhoods as unlike each other as the Bronx and Manhattan.  Some blocks are rich, others, poor, and many are under construction.  It may not be possible to pull all this together and drive it forward.
Conflicts between groups also inhibit positive momentum.  Business like Server and Tools, which champions cloud computing and wants to move computation to the datacenter, are in competition with Windows, which wants to keep computing on the desktop.  And nothing can be allowed to harm the Windows franchise, sacred cow that it is.
Microsoft’s future is fraught, and a growing pile of evidence indicates that Ballmer might not be the right guy to steer the ship.  Maybe the question we should be asking, though, is, why would he even want to continue arbitrating this unwieldy chaos?  He’s got his billions.  Perhaps it’s time to take a break.
Disclosure: Endpoint’s consulting relationship with Microsoft is under review.

Yahoo Spurned New Offer By Jack Ma For Part of Alibaba Stake

Yahoo early this year turned down a $3.5 billion offer led by Jack Ma for a 15% stake in Alibaba Group, according to two sources familiar with the matter, one of whom said Yahoo solicited the offer in the first place. Investors today get their annual shot at interrogating Yahoo, and to their long list of questions, I add this one: Can Alibaba and Yahoo ever strike a deal that puts a fair price tag on what may be Yahoo’s most valuable asset, its 40% stake in the Chinese e-commerce giant?

I received a copy of the Ma offer, which was made late last year through a vehicle called Neptune Investment Holdings, from one source on the condition of anonymity, and the outlines of the offer were confirmed by a second source. The rejected deal, which appears to have valued Alibaba Group at about $23.5 billion, was the second failed effort at negotiations in less than a year. That might help explain why Ma told me earlier this year that he didn’t trust Yahoo management to ever do a deal.
It is easy to see there is little trust in this relationship. The first meeting in 2009 between Ma and Yahoo CEO Carol Bartz went terribly, as I recounted here. The two companies recently traded blows in public over the transfer of Alipay, China’s PayPal, out of the group to a company controlled by Ma. Add to all this that Ma surely doesn’t want to pay a premium to people he doesn’t like, for a stake he wishes he hadn’t sold at a price that, with hindsight, looks like a steal. Yahoo paid $1 billion less than six years ago for about 40% of Alibaba Group on a fully diluted basis. In the current climate for Chinese Internet stocks, that stake might be worth more than $10 billion now.
The Neptune offer suggests as much. Put together by Ma and Alibaba Group CFO Joe Tsai, the offer included nearly $2.4 billion in cash and $1.15 billion in financing, all backed by a pledge from Ma and Tsai of 120 million Alibaba Group shares valued at $1.065 billion.
The  partners putting up the cash included, according to one source, the Shanghai conglomerate Fosun Group, whose chairman Guo Guangchang is a close friend of Ma’s, other unnamed wealthy allies and Ma’s own private equity group, Yunfeng Capital. Alibaba Group declined comment, and Fosun Group has not responded to a request for comment (disclosure: Fosun publishes the Chinese-language Forbes China under a license agreement).
Did Yahoo solicit this deal, as one source told me, and then walk away? The more pertinent long-term question here is whether Alibaba Group and Yahoo can ever come to an agreement that reduces Yahoo’s stake — and at the same time, puts a real price tag on it. Without a deal, it may be a very long time before Yahoo and its frustrated shareholders realize the full value of this investment. Ma is clearly not inclined to relieve that frustration: He is in no hurry to spin out the group’s crown jewel, the e-commerce giant Taobao, in an initial public offering, at a time when other e-commerce players are rushing to do so.
It is easy to imagine an IPO valuing Taobao, which has close to 80% of the fast-growing Chinese e-commerce market, at more than $20 billion. Since the group owns most of Hong Kong-listed trading platform Alibaba.com (market cap of $8.4 billion), holds a de facto claim on Alipay and a potentially huge data mining business, a bullish investor could value Alibaba Group at $30 billion. That would mean the Neptune offer of $3.5 billion for 15% was $1 billion short of the mark. (Still, it should be noted that Ma’s respectable offer is an indication that Alibaba Group didn’t suddenly lose value after the transfer of Alipay, which took place in 2009 and 2010).
It has literally been years since Yahoo’s investors were bullish about anything, and they certainly haven’t been generous in crediting Yahoo for its Alibaba stake. Investors currently value Yahoo at $21 billion. The combined value of Yahoo’s core business, cash and its stake in Yahoo Japan already comes close to that by some estimates. Then again, it is unclear if Yahoo would be able to find buyers outside of Ma willing to pay close to full price to enter into this dysfunctional relationship. Yahoo’s investors are not buying the huge value of Alibaba Group — and Yahoo, obviously, is not selling.

US sanctions foreign firms trading with Iran

The US has imposed sanctions against seven foreign firms which trade with Iran in breach of an existing US ban.

 

Iran insists its nuclear programme is peaceful in purpose

Venezuela's state oil company, Petroleos de Venezuela (PDVSA), is among those targeted by the measures.
Other companies include firms based in the United Arab Emirates, Israel, Singapore, Monaco and Jersey.
A US official said the sanctions would add "further pressure" on Iran to halt what the US and others believe is a nuclear weapons programme.
The affected companies include Tanker Pacific of Singapore, Ofer Brothers Group of Israel, Associated Shipbroking of Monaco, Petrochemical Commercial Company International of Jersey and Iran, the Royal Oyster Group of the United Arab Emirates and Speedy Ship of the United Arab Emirates and Iran.
"All of these companies have engaged in activities related to the supply of refined petroleum products to Iran, including the direct supply of gasoline and related products," Deputy Secretary of State James Steinberg said.
'Illicit trading'
Mr Steinberg said that the sanctions were tailored to target each individual firm but, in general, would stop the companies trading with the US.

PDVSA, for example, will be barred from any US government contracts, import-export financing and export licenses for sensitive technology.

The company and its subsidiaries, will, however, be permitted to continue selling oil to the United States.
The state department said the company had delivered at least two cargoes of refined petroleum products worth some $50m (£31m) to Iran between December 2010 and March 2011.
Simultaneously, the US administration imposed separate sanctions on more than 15 people and companies in China, Iran, North Korea, Syria and elsewhere.

It said the penalties were being imposed for what it said was illicit trading in missile technology and weapons of mass destruction.

Those companies affected by this set of sanctions will be barred from any US government contracts and US assistance, banned from buying US defence articles and denied licences to sell them for a period of two years.
Also on Tuesday, the UN atomic agency said that member states had given it fresh information alleging that Iran has worked secretly on developing nuclear arms.
The report, drawn up ahead of next month's meeting of the IAEA board, said Iran's stockpile of low-enriched uranium had continued to grow, Reuters reports.

DNA evidence reported to tie Strauss Kahn to accuser

Evidence from the clothing of a hotel maid matched DNA samples submitted by former IMF Managing Director Dominique Strauss-Kahn who has been charged with sexually assaulting her, media reported on Monday.

The test results were consistent with what law enforcement officials have said about the account provided by the woman, The New York Times reported, citing a person briefed in the matter.
The Wall Street Journal also reported that tests matched Strauss-Khan's DNA sample and semen found on the woman's shirt, citing law enforcement officials.
Other test results, including ones on samples taken from the carpet in the hotel suite, were pending, The New York Times said.
Both newspapers said Strauss-Kahn's lead attorney, Benjamin Brafman, had declined to comment.
Asked about the reported DNA results, York Police Department spokesman Paul Browne said: "Experienced NYPD detectives found the complainant's account credible from the outset, and nothing since then has changed their minds."
Strauss-Kahn is facing charges of sexual assault and attempting to rape the maid at the Sofitel hotel in New York on May 14. He is being held in an apartment in Manhattan under armed guard after being freed on bail on Friday.
In a letter to IMF staff circulated on Monday, Strauss-Kahn strongly denied charges against him and called the events around his arrest "a personal nightmare."
In the letter distributed to the fund's staff in an email by IMF acting Managing Director John Lipsky, Strauss-Kahn apologized for the pain his case had caused the global lender and said he was confident he would eventually be exonerated.
The letter reflects on his arrival at the fund in 2007 and explains his reasoning behind his resignation on Wednesday.
"I deny in the strongest possible terms the allegations which I now face; I am confident that the truth will come out and I will be exonerated," he said. A copy of the letter was obtained by Reuters.

Insurers face big losses from weather disasters

Devastating tornadoes, floods, earthquakes overseas and a busier-than-usual hurricane season have U.S. insurance companies bracing for record losses in 2011.

Insurers could suffer as much as $10 billion from weather-related losses in the United States in 2011, which is up from the average of $2 billion to $4 billion, according to EQECAT Inc, which provides disaster and risk models to insurance companies.
On top of the potential U.S. losses, insurers are also reeling from disasters overseas, including large earthquakes across the Pacific Rim. And as if that was not enough, analysts now expect an above-average Atlantic hurricane season.
"This is not a black swan year that is an absolute worst case, but it is significant and it is close to that," said Jose Miranda, director of client advocacy at EQECAT Inc, which provides disaster and risk models to insurance companies.
Globally -- including the major earthquakes in New Zealand and Japan -- U.S. and overseas insurers could post up to $55 billion in losses, EQECAT projects.
Some insurers have already posted large losses due to the Japan and New Zealand quakes.
Berkshire Hathaway Inc (BRKa.N)(BRKb.N) lost $1.07 billion from the Japan earthquake and $412 million from the quake in New Zealand.
During the annual meeting in Omaha, Nebraska on April 30, CEO Warren Buffet said the company would likely post its first full-year loss in insurance underwriting in nine years.
And insurance stocks have lagged the broader market because of investor worries about catastrophic losses.
The S&P Insurance Index .IUX is flat since the beginning of the year, lagging the broader S&P 500 Index .SPX, which has risen 4.7 percent.
ROUGH WEATHER
In the United States, spring storms -- and the billions of dollars in damage left behind -- were the result of a rare confluence of more violent weather hitting densely populated areas, said James Aman, a senior meteorologist with Earth Networks Inc - Weatherbug.
"It has been a particularly devastating year," said Aman.
Over a six-week period this spring, tornadoes ripped through Southeastern and Midwestern states flattening neighborhoods in large Southern cities such as Raleigh, North Carolina and Tuscaloosa, Alabama.
So far, tornadoes have killed 365 people in the United States, a figure nearly six times higher than the three-year average of 64 deaths, according to the National Weather Service.
Already, 1,151 tornadoes have occurred in the United States this year, nearing the 1,282 reported in all of 2010, but below the all-time high of 1,820 in 2004.
The increase in Spring storms has insurers preparing for the worst.
In a recent interview with Reuters, Hartford Financial Services Group Inc (HIG.N) Chief Executive Liam McGee said the company expected second quarter catastrophic losses to rise.
"I don't think there's any question that there will be a bit more to handle," McGee said on May 2 after Hartford reported first quarter results.
Others are increasing the disclosure of their losses. The nation's largest home insurer, Allstate Corp (ALL.N), said last week it would take the unusual step of disclosing any monthly catastrophic loss estimates that exceed $150 million. The company projected the April storms would cost $1.4 billion and totaled more than 100,000 claims.
As tornado season slows this summer, insurers will have to contend with a busy hurricane season, although less active than last year.
The National Weather Service projects as many as 18 named storms this year, compared with the long-term historical average of about 11.
Miranda said insurers avoided large losses last year, despite a record number of hurricanes, because none made landfall in the United States, a lucky break that is unlikely to be repeated.
"Chances of that happening again are definitely slim," he added.

Greek default would hit others in euro zone, banks

 A Greek debt default would hurt other peripheral euro zone states, Moody's said in a statement on Tuesday, becoming the last of the three major rating agencies to say any kind of restructuring would constitute default.
"Moody's believes that a default is likely to have adverse credit rating implications for Greece, possibly some other stressed European sovereigns, and the Greek banks, regardless of the efforts made to achieve an 'orderly' outcome," it said in a statement.

Markets piled pressure on heavily indebted euro zone countries at the start of the week as investors worried not just about Greece but also about heightened risks in Spain, where the government was drubbed in regional elections, and ratings agencies' warnings for Italy and Belgium.
S&P cut its outlook to "negative" from "stable" on Italy, which has the euro zone's biggest debt pile in absolute terms, and Fitch said it may downgrade Belgium's AA+ credit rating. The country has not had a proper government since elections last June but is enjoying an economic boom.
"As for other stressed European sovereigns, Moody's believes that their ratings will invariably be affected, regardless of the myriad forms that a default by Greece could take," the statement said.
"This would in turn lead to increasingly polarized sovereign ratings in Europe, with stronger countries retaining high or very high ratings, and weaker countries struggling to remain in investment grade."
Greece announced on Monday six billion euros worth of new, emergency fiscal measures to shrink its budget hole and jump start privatizations to convince lenders it can pay down debt without a restructuring.
Finance Minister George Papaconstantinou said Greece would not be able to honor its obligations if it does not get the next tranche of a bailout loan and the IMF has made clear it cannot disburse the money if Greece's 2012 EU funding is not assured.
Moody's said a Greek default might take many forms, including changes in the terms and conditions or a selective reprofiling, adding that it would consider all of these as distressed exchanges.
The statement also said the Greek banking sector would need recapitalization in case of a sovereign default, as well as continued liquidity support from the European Central Bank. It warned that a sovereign default was likely to be accompanied by some form of default on bank debt.
Fitch cut Greece's credit rating by three notches on Friday, pushing the country deeper into junk territory, and warned that any kind of debt restructuring would amount to default.
"The longer the current state of uncertainty affecting Greece persists, the greater the temptation on the part of both the Greek and the euro area authorities to try to undertake some form of debt restructuring," Moody's said.