Category Archives: Zicklin Defines…

The Zicklin Defines a Decade Series started by asking the Baruch College Zicklin School of Business community what are the top five business/organizations that defined the 2000s.  We end the series by asking the community to identify the top five people that define the decade in business.

As we entered the decade, many continued to be amazed at the incredible wealth that Bill Gates was continuing to amass.  As we leave the decade, we are amazed at how he is giving it away.  In 2000, we were two years removed from the repeal of Glass-Steagall and Sandy Weill was creating the great global banking supermarket in CitiGroup.  As we enter 2010, Citi has had multiple leaders since Mr. Weill and many are questioning the decision that created the banking supermarket.  In May of 2001, the BusinessWeek cover praised Dennis Kozlowski, then CEO of Tyco.  He is currently serving up to 24 years in prison. And then of course there are the two Stanford graduate students who created the preeminent search engine and a verb to go along with it.  Did anyone Google anything in 2000?

The 2000s were shaped by many people.  Some who dominated the headlines 10 years ago still do so today, albeit in a much different capacity.  And, there were others who were relatively unknown ten years ago, but who are now shaping the way we do business.  The following are proposed by members of the Zicklin community as the shapers of the decade in business.  The lists are both global and distinctive with only Steve Jobs on all four.

 John Elliott, Dean Zicklin School of Business

1. Warren Buffet
2. Steve Jobs
3. Sergey Brin, Larry Page, and Eric Schmidt
4. Lakshmi Mittal
5. Ratan Tata

Jason Cohen, Full-time Honors MBA Class of 2007

1.   The Consumer
2.   Sergey Brin, Larry Page and Eric Schmidt
3.   Steve Jobs
4.   Jeff Bezos
5.   Hank Paulson

Kishore Tandon, Department Chair Economics/Finance

1. Sergey Brin, Larry Page
2. Steve Jobs
3. Warren Buffet
4. Richard Branson
5. Ambani Brothers (Reliance, India)

Ashok Kamal, Full-time Honors MBA Class of 2010

1) Bill Gates – advocate of capitalism 2.0 who transitioned from leading one of the world’s most successful companies to heading the world’s largest philanthropic foundation
2) Muhammad Yunus – micofinance pioneer and Nobel Peace Prize winner as the founder of Grameen Bank, Yunus is at the forefront of social business in the 21st century
3) Steve Jobs – the king of innovative consumer products and cult hero for one of the world’s most revered brands
4) Ratan Tata – engineered the Tata Group’s growth from India’s most storied industrial company to one of the world’s most diversified conglomerates
5) Dr. Shi Zhengrong – visionary founder and CEO of Suntech, the world’s largest solar energy company

On Tuesday, October 3, 2000, I took the Number 1 Train, using a subway token that cost $1.50, to Tower Records on 66th and Broadway. The purpose of this journey was to purchase Radiohead’s newest studio release Kid A. When I arrived, I noticed the line was fairly long. So I rummaged around my pockets for a quarter and set off for the nearest pay phone to call a friend, who was to meet me at Tower Records, and warn him that the line would take at least an hour. I went back to Tower Records, stood in that line, talked to some fellow fans about their expectations for the album, finally got to the register, paid for my Radiohead CD (and one for my friend) and headed back home on the subway, listening to the album from front to back on my CD Walkman.

Our grandparents proudly recount their five-mile treks in three feet of snow to get to their one-room schoolhouses. In 2009, my journey of only 10 years ago to get that Radiohead CD seems equally as absurd as my grandparents’ daily trips to school.  The subway token was phased out in favor of the Metrocard in 2003.  While mobile phones have been around for years, I, and many there are many like me, was a bit of a laggard in this regard and didn’t get one until 2001.  The Tower Records would close its doors in late 2006; it would be the last of the Tower Records in Manhattan as many of its former customers would use I-Tunes, Amazon.com or one of the many other on-line venues to purchase their music from the comforts of their couch.  The clunky CD Walkmans would be replaced by the ubiquitous MP-3 player, most notably the I-Pod.  Conversations about your favorite musicians would no longer take place while waiting to purchase the product, but in on-line chat rooms and ultimately through Facebook fan pages or other social media.

The three-four hour process it would take to buy your favorite music is now instantaneous.  You have probably heard each track before you purchased it.  You no longer need to actually purchase the entire album for the sake of one song or a group of songs.  In fact, in some cases, you no longer even need to purchase the album; the artists are just giving it away.  Radiohead did just that in 2007 when they released their most recent studio album for free through their website and asked their fans to pay what they felt the album was worth.  When the album was released through more traditional channels the following year, it would reach number 1 in both the U.S. and the UK and sell over 3 million copies by the end of 2008.  Another innovation of the 2000’s: free drives revenue.

The decade has given us many new tools with which to work and play. Hybrid cars, hybrid debt instruments, outsourcing, crowdsourcing, web 2.0, 140 characters: there are many ideas and innovations that shaped the past decade.   We asked the Zicklin community to give us their list.  Here it is.

Bill Ferns, Professor of Computer Information Systems

1. The Institutionalization of ‘Moral Hazard’ as a Business Model:
‘Moral Hazard’ means, in essence, that one party of a transaction will take more risks or be less careful because he knows the other party will cover the losses. The Savings & Loan crisis of the 1980s, which followed the de-regulation of the S&L industry, gave us a whiff of this problem; de-regulation allowed the S&Ls to profit from more risky investments, but the US taxpayer had to cover them when the investments went bad. The repeal of the Glass-Steagall Act in 1999 iced the deal, setting the stage for the federal government’s acceptance of moral hazard as a business model—banks could acquire high-risk financial ventures, and the FDIC would back the risk. Moral hazard as a business practice spread through the first decade of this millenium:

• The collapse of Fannie Mae because of high-risk loans made by mortgage companies such as Countrywide;
• The student loan scandal in which lenders would bribe college loan officers to direct students to the lender, the lender would give high-interest loans to students with funds guaranteed by the US Department of Education, and then have the risk covered by the US taxpayer;
• The entire collateralized debt obligation meltdown and the bailout of Wall Street.

As long as we allow ‘Too Big to Fail’ situations to exist, we will be promoting moral hazard in our business practices, and along the way, undermining the validity of “the markets”.

2. The Election of Barack Obama
By electing Baruch Obama, the United States has crossed a racial Rubicon. No, we’re not post-racial, and we are nowhere close to repaying the ‘sweat equity’ that slaves contributed to America’s quick rise as a wealthy young nation; in 2002, median net worth of white households was over 15 times greater than that for black Americans (US Census Bureau, 2008). Still, every step in the direction of justice—the ending of ‘Jim Crow’ laws, Brown v. Board of Education, and the Civil Rights movement culminating in the Civil Rights Act of 1964—brings slightly increased opportunities for Blacks to accumulate wealth, brings a change in society, and hence, brings a change to business. Just view a couple of early episodes of Mad Men to get a hint of what white society and business was like in the 1960s, and then watch for the targeted marketing during Black History Month in February to see how business has changed its view of its markets (if not the people actually running the business).

3. The Divergence of Content from Carrier
Marshall McLuhan update–the medium is not the message, the message is the message. We are no longer dependent on a specific medium for our informational needs: one hears music either on analog media (tape, CD, vinyl), from files residing on digital devices in various data formats, or through streamed data that comes to us on wires or on waves. Same with video. We read newspapers on our computers, our phones, our Kindles, and in paper. Now our big problem is that the message is often meaningless (The Real Housewives of New Jersey? Really?!?).

4. The Ubiquity of Technology in Our Work Processes:
How we work has been changed radically by technology. The list of examples would be exhaustive and tedious, but those of us who have been in the workforce for more than 10 years can vouch for how differently we did our work processes back in 1999. I am still waiting for the online ‘change of grade’ form, however.

5. The ‘Green’ Market:
Twenty-five years ago, the environment was an issue left for hippies and tree-huggers, and “sustainable development” wasn’t even in our lexicon yet. Now, it is a top strategic issue for many countries and businesses, and a major bone of contention within our Congress and other governments. Who knew?

What Didn’t Make My List:

• “The War on Terror”: 9/11 was horrendous, but in the long term, the war on terror is business as usual for the US—politicians make their bones on rattling sabres, the working stiffs go fight the wars and come home scarred forever, the defense industry rakes in oodles of bucks, and the government forgets all fiscal principles to make it all happen. This is not a new development for this decade; war profiteers (see ‘Blackwater’ and ‘Halliburton’) are the third oldest profession (politicians hold the #2 spot);
• The Sarbanes-Oxley Act: SOX would have made my list, but it looks like it is on its way to being gutted, just in time to make it irrelevant;
• Hurricane Katrina: Like 9/11, the impact of Katrina was enormous, but the US government’s race-based callousness and the insurance companies’ scramble to not honor policies was nothing new in the two-thousand-aughts. Both poxes have been around for decades, and unfortunately, will probably stick around for some time longer.
• Healthcare Reform: It’s not here yet, so it will have to go into the next decade’s retrospective.

John Albanese, Director of the Full-time Honors MBA Program

Most of what I considered centered on the global financial crisis, and some of the unscrupulous activities that got us here.  Also, I continue to see students and prospective students reflecting the greater society’s interest in and desire for a corporate sector more responsive to social and environmental needs.  To that end, it seems that the most inspiring answer to the question “What are the five innovations/ideas that define the decade in business?” is to refer to the six principles of PRME (Principles of Responsible Management Education), for therein lies the radical innovation to business that we need:

http://www.unprme.org/the-6-principles/index.php

Jay Dahya, Faculty of Economics and Finance

Concepts:

1. GPS (U.S. government allows civilian use in 2000)

2. Text Messaging (AT&T introduces texting for mass appeal in the U.S. in 2000)

3. File Sharing, digital music devices and the rise of MP3 (after Napster was sued in 2001, a number of companies offered pay-to-share services, such as Hulu and iTunes)

4. Social Networking and Blogging: Friendster, Facebook, Twitter (from 2004 onward)

5. Smart Phones (Apple introduced the iphone in 2007 to much frenzy. The market had been previously dominated by Blackberry and confined to business use.)

(In general, a reduction in the production costs associated with the manufacture of electronic products, such as cell phones, digital cameras, computers and peripherals)

6. On-line bill payment

Products:

1. iPod (introduced in the U.S. in 2001)

2. Prius (Toyota introduces hybrid in the U.S. for mass market appeal in 2000)

3. Wikipedia (introduced in the U.S. in 2001)

4. Youtube (launched in 2005)

5. Nintendo Wii (launched in 2006)

6. Google search

7. Craigslist

Two items that you might not yet have come across

1. Camera Pill (Camera pill is swallowed by the patient. A physician can move the camera pill by remote control. The camera pill comprises a camera, a transmitter that sends images to the receiver, a battery and several light diodes which flare every time a photo is taken.)

2. Bionic Lens (A contact lens embedded with solar-powered LEDs and a radio-frequency receiver. Applications include medical use and virtual displays. For example, drivers or pilots could see a vehicle’s.

Shaun So, MBA Student

1. ITunes: When media companies sued and fought the public against downloading illegal music, Apple fully embraced the digital world and opened the door for a new model in media distribution.

2. Online Social Networking: Facebook, Myspace, Twitter, Digg… these have all changed how we communicate, network and socialize.

3. Hybrid Cars: The 2000’s saw the mass commercialization of the hybrid car with Toyota’s Prius. The public had long been waiting for a means of transportation using alternative forms of energy.

4. Digital Video Recorder (DVR): Television viewers have long obsessed about fast-forwarding through commercials. This has revolutionized how we watch television, and more importantly in the marketing industry, how we now receive our advertisements.

5. “Texting”: Introduced by AT&T in 2000. Where would we be without it?

Sharon Belden Castonguay, Director of the Graduate Career Management Center

1. Career education in business schools
After the dotcom bust at the start of the decade, business schools realized that their role was not just to educate students and provide them access to companies, but to teach students to manage their careers in an ever-changing employment environment. Savvy programs realized that while hiring would eventually rebound, their alumni were more than likely to face another downturn before their careers were through (hello, 2008!). Campus career centers at many business schools are now seen as educational departments, tasked with teaching students what they need to know not just to get a job today, but to stay employed tomorrow. Savvy students do not wait for employers to find them through traditional routes, and smart schools use their resources to train students to handle their own searches. Neither wait for companies to show up with PowerPoint slides.

2. The rise of behavioral economics
Once a backwoods “soft” specialization of a quantitative discipline, behavioral economics has emerged as the homecoming queen of social science, influencing our understanding of everything from spending behavior to voting habits.

One phenomenon experts in the field have identified is herd behavior. One example well known to business schools is the career decision making of students. Former Harvard Business School professor Mark Albion has estimated that upwards of 95% of MBA students enter their programs with little or no idea of what they want to do when they graduate. Yet career services offices know that by their second year the majority end up applying to jobs in finance and consulting—regardless of their personal interests or professional preparation.

3. The use of social networking web sites in job hunting
CareerBuilder recently reported that of 2,600 hiring managers surveyed, 45% used social networking sites like Facebook and LinkedIn to screen potential employees—up from only 22% last year. But only 16% of workers have used such resources for their job searches. Job seekers would do well to clean up their online presence, and only have available online content about themselves that support their employment candidacy: detailed, accurate, up-to-date professional profiles, positive references from reliable sources, and a demonstration of impeccable communication skills. Job hunters can also use these sites proactively by seeking out others who may be able to provide information about their fields or companies of interest, such as through alumni or professional interest groups. The greater New York area has the largest LinkedIn membership rate in the US, and the top ten industries represented include financial services, marketing/advertising, banking, accounting, and real estate.

4. The increasing importance of emotional intelligence at work
While the concept can be traced all the way back to Darwin, the past decade saw the rise of the idea that emotional intelligence, not just IQ or “hard” skills, was necessary for success in management. First published in 1995, Daniel’s Goleman’s Emotional Intelligence: Why it Can Matter More Than IQ (his follow-up Working with Emotional Intelligence followed in 2000) changed the way managers thought about hiring. No longer satisfied with high GPAs, employers now want to know how potential employees handle difficult situations on the job, what motivates them to succeed, and how well they will work with others and fit their corporate culture.

5. The complexity of compensation packages
Many job seekers are so concerned with finding a position that they find themselves unprepared to evaluate an offer when they finally receive one. Over the last decade, increases in health costs, shifting bonus structures, and changes in legislation have made compensation packages increasingly complex. Some companies also require the signing of non-compete and confidentiality agreements. When job seekers are successful in their searches, they must take the time to understand what they are offered and seek advice about how to negotiate their compensation.

Don Schepers, Professor of Management

1. The shrinking of personal computing devices (ipod, iphone, netbooks, Kindle, etc.).

2. The rise of financial engineering and quants, bringing with them derivatives, CDOs, etc.

3. Social networking.

4. DNA sequencing and the Human Genome project.

5. The rise of voluntary self-regulatory systems.

Again, we thank all those in the Zicklin community who shared with us their lists of what innovations and ideas define the decade.  Tomorrow, the final edition of Zicklin Defines… will look at the people who shaped the decade.

As we approach the end of the third millennium’s first decade, it is the perfect time to reflect on the events of the past ten years.  Before the world could recover from the Y2K hangover, it was treated to one of the most notorious mergers ever.  The decade was not even two weeks old when AOL and Time Warner announced their marriage.  That merger set the tone for the decade ahead for as tumultuous as that relationship would turn out, so too has been the decade in business.  It has been a decade that has endured two recessions, accounting scandals, credit crunches, and bubble bursts.  It is also a decade that marveled at the emergence of China, new peaks in the stock market, and the power of You.

The Zicklin Defines a Decade series will look at the organizations, the stories, the ideas, and the people that defined the 2000s.  Each day, members of the Zicklin community will help define the decade by creating their Top 5 list for that day’s category.  Today’s topic will be the companies, the non-profits, the NGOs, and other organizations that made the 2000s what they were.  Tomorrow, we will look at the top business stories that monopolized the headlines over the last 10 years.  Then on Thursday, we will identify some of the most important ideas and innovations that emerged.  And, finally, on Friday, we will talk about the people that shaped the decade in business.

While today’s question asks our community to extend their list beyond publicly traded companies, we thought it would be fun to reflect back on the Fortune 500 list published in 2000.  That year, General Motors stood proudly on top of the list, boasting six billion in profits on 189 billion in revenue.  CitiGroup reported nine billion in profits that year; Ford reported seven and AIG five.  Enron and MCI Worldcom were in the top 25.  Fannie Mae trailed only slightly coming in 26th with nearly four billion in profits on 36 billion in revenue.  

Total profits reported by the Fortune 500 in 2000 was $409 billion.  Only nine percent of the Fortune 500 reported losses in 2000, with the largest reported loss coming from Nextel ($1.3 billion).  In 2009, the Fortune 500 are reporting in total only $98 billion in profit; 26% of the companies on the list are reporting losses, 48 of whom are reporting losses larger than Nextel did in 2000. Of course, AIG is leading the pack in that regard, knocking them from 19th in 2000 to 245th in 2009.          

But, it hasn’t been all bad news.  Apple has seen its profits increase $4.2 billion between 2009 and 2000.  Other tech companies like Microsoft, Oracle, and Hewlett-Packard are also reporting significantly stronger profits than they did in 2000.  But, none of them compare to Exxon Mobil, who is reporting $37 billion more in profit than in 2000 on $279 billion more in revenue.  And, of course, there are the companies that were not even on the list in 2000: Google, Amazon.com, Starbucks, DirecTV Group, EBay, and NewsCorp.

The following are the lists of companies that various members of the Zicklin community believe define the decade.  After their lists, a study of the Fortune 100 from 2000 and where they are today follows.

Ozgur Demirtas, Professor of Finance and Economics
1.) Google
2.) Apple
3.) Facebook
4.) Cisco Systems
5.) Goldman Sachs

Tom Lo, Associate Director of Zicklin Graduate Admissions
1.) Walmart
2.) CNN
3.) Apple
4.) Facebook/other social networking sites
5.) Microsoft

Paquita Friday, Professor of Accountancy and Taxation
1.) Arthur Andersen
2.) AFLAC
3.) Google
4.) KPMG
5.) General Motors

Myung-Soo Lee, Associate Dean and Professor of Marketing
1.) Google
2.) Enron
3.) European Union
4.) UN
5.) Microfinance Institutions

Marios Koufaris, Faculty of Computer Information Systems
1.) Google
2.) Apple
3.) Facebook
4.) U.S. Government
5.) U.S. Financial Industry

Frank Fletcher, Executive Director of Graduate Programs
1.) Walmart
2.) Enron
3.) AIG
4.) Google
5.) Halliburton

Raj Nahata, Faculty of Finance and Economics
1.) Google
2.) Apple
3.) Toyota
4.) Walmart
5.) US Government

As we approach week two of the UN Climate Conference in Copenhagen and anxiously await the arrival of the world’s heavy hitters, Lexington 24:25 asked the Zicklin community, “How do you define success in Copenhagen?”  The following are the responses we received.

Don Vredenburgh

Donald Vredenburgh, Professor of Management
While the conference participants will likely successfully enjoy the interesting city of Copenhagen, they and the rest of us should focus on the conference’s outcomes.
This conference represents an event in a process of social change, and in the geopolitical realm change carries considerable complexity.   Developed and lesser developed countries must address an uncertain, long run health condition whose treatment includes economic, technological, and moral implications. 
With the effects of Kyoto having proven disappointing, the objectives for Copenhagen should focus on acquiring some measure of consensus about the nature of the problems and the alternative opportunities for confronting them.  The conference’s audience sits all over the world, and this audience needs evidence based education about the issues.  Influential leaders demonstrating readiness for change based on acceptance of well formulated problems as well as plans for establishing an international research and policy structure would constitute realistic, meaningful outcomes.  It’s too early in the process to expect concrete actions in cooperative pursuit of costly, specific objectives, but articulating a vision for change would be contributory.

Kevin Ng, MBA Student
If leaders of all the major industrialized nations can personally attend the conference and fully commit to developing a universal environmental policy, incorporating a specific action plan that encompasses responsibility and accountability, the summit will leave a lasting impression for a global movement toward sustainability. Furthermore, BRIC (Brazil, Russia, India, & China) other and developing nation leaders should be invited to participate because of their significant influence in the global economy. If at all possible, decisions should be made to support developing nations’ efforts in the form of subsidies and in-kind assistance. The policy should set discrete and measurable goals to strive toward by a specific date, which would also act as a catalyst for legislation in each country.

 Myung-Soo Lee, Associate Dean and Professor of Marketing
“To consider the Copenhagen Conference a success,” I think that a concrete agreement should be reached among the nations to fairly share the burden of making climate change under control. Given political pressure to create more jobs (including green jobs, of course) in their home countries, many developed countries are reluctant to agree with any immediate measures to curb carbon emissions by a huge magnitude. President Obama will commit significant contribution in our standard (17% down in greenhouse gas emission) but that may not be enough from the perspectives of other countries since the United States emit the largest amount of greenhouse gas. Based on the principles agreed upon at the conclusion of the Copenhagen Conference, the UN member countries should be able to sign a legally binding treaty as an ultimate outcome. If that happens, the Conference in 2009 may be recorded as a historic moment when the global warming trend has reversed.

Varun Kumar Vummidi, Full-time Honors MBA Class of 2010
In the last week India, a nation under pressure to reduce greenhouse emissions, had issued a statement saying that it will take steps to reduce emission levels over the next decade but, like China, was against developed nations imposing a strict guideline on its emissions. This is seen as a set back to the outcome of the summit but there is some truth to India’s & China’s stance to the growing concern of climate change.
In the backdrop of such a stance from India & China, I hope that developed countries, who already possess technology that can help factories emit lower levels of pollutants, must pledge to facilitate the flow of such technology to developing nations quickly. This would rapidly reduce the learning curve for factories among these nations and help reduce the growth in greenhouse gas emissions and cause them to fall from around 2015 to 2020. The COP15 will most keenly be watched by politicians, businesses and world citizens as it also takes place in the light of the controversy surrounding the revelations of “climategate.”

John Elliott, Dean Zicklin School of Business and Professor of Accountancy
When I think about Copenhagen, success takes many forms.  The USA has already succeeded because we changed our approach and are treating climate change as a real problem for which the science is compelling and concerted effort is required.  I hope we commit the US fully to reducing greenhouse gases consistent with existing and expanding efforts by other developed nations.  Equally important is an agreement by developing nations to slow their emmission growth rates.  A great outcome of this conference would be to validate and add momentum to President Obama’s agenda for green technology as a spoke in our wheel of economic growth.

Barry Rosen

Barry Rosen, Professor of Marketing
Of all the major developed western economies, the U.S., through both the Clinton and the Bush years was the lone holdout in making any serious moves towards CO 2 reduction. Although we led the way on ozone layer protection, we have done very little in terms of CO2 and methane which are the leading climate change factors right now along with tropical deforestation.
As unfortunate as it was, the recession and high gas prices last year did some of the job but I believe that if gas prices went down we would see a return to the old situation. Thus I think that the US has to commit to a binding carbon reduction plan, preferably based on carbon taxes, at Copenhagen in return for the developing countries agreeing to work more aggressively on deforestation questions. The Europeans will fall in behind on this.
 The Chinese have already committed to green development and green exports although they have a huge amount of work to do.  The Indians will follow them so as not to be marginalized in future international trade patters.  Unfortunately, I don’t think that any of this can happen right now beyond broad generalized statements as Obama is now engaged in the health care fight. However, next year, if Obama is successful in getting health care through and reducing unemployment, he may have the political capital to do something forceful about climate change. We’ll see.

Ryan O’Connor, Full-time Honors MBA Class of 2010
The law needs to change in favor of innovation over the status quo. The COP15 is not just an opportunity to implement social responsibility on a global scale, it’s a window for the United States to lead the development of policies that will position our country to take advantage of lucrative business ventures in rapidly developing alternative technologies. We are, and must remain, a beacon for the entrepreneurial spirit. Entrepreneurship is the main cylinder driving our economic engine; it is the cornerstone of our capitalistic ideals and through the vicissitudes of our economy, it is what will guarantee our prosperity.