Archive for June 9th, 2009
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S.I. Newhouse Jr., chairman of Condé Nast, falls in love with his editors. His romance with Joanne Lipman began over lunch at his U.N. Plaza apartment, with its beige carpets—no red wine allowed—and paintings by Warhol, de Kooning, Cézanne. Lipman, 47 years old, who’d spent her entire career at The Wall Street Journal, is a serious journalist with a serious mien, and long legs, which she likes to show off with short-skirted power suits. Lipman is “attractive,” in Newhouse’s vernacular—“He uses the word like others use the word spiritual,” says a former editor. The two brainstormed at a small dining-room table. Newhouse, in his standard worn New Yorker sweatshirt, told her he had an idea for a business magazine. Newhouse didn’t say much more; he rarely does. He asks questions. But Lipman excitedly filled in the details.
Newhouse’s pursuit of Lipman was unusual. In most cases, someone else winnows future editors, presents the possibilities to Newhouse, shapes the conversations. But Newhouse, this time, made a point of doing it himself—Portfolio was very much his thing. And by the end of the day, he’d decided he wanted her to be editor of the magazine he planned to launch, which would be called Condé Nast Portfolio. Newhouse pledged patience and breathtaking resources—said to be more than $100 million over five years.
It was a great romance even if, like many great romances, others shook their heads about it, wondering whether Newhouse’s passion for Lipman was entirely rational. Business magazines were, after all, in decline. And soon, turmoil in Portfolio’s offices, along with incessant leaks to blogs and tabloids, made Lipman seem a caricature of the imperious Condé Nast editor, ruling from on high, out of touch. Even factions within the Newhouse family believed Si was blind to the real situation at Portfolio—“a good idea, badly executed,” was how one person described the magazine.
Finally, Newhouse himself couldn’t ignore the economic realities. Portfolio was on track to lose $15 million in a year; the total cost may have ballooned to as much as $150 million. On April 27, Newhouse summoned Lipman, this time to his eleventh-floor office, with its giant Andreas Gursky photograph of the NASDAQ sign on the outside of the Condé Nast building, to deliver the difficult news. In the past, Newhouse’s breakups had been unsentimental. The past was over—he moved on. His editors sometimes saw it on TV or heard it from others. This one was different. “I love Portfolio,” he told Lipman, with obvious feeling.
“I love it too,” Lipman replied.
A star-crossed romance. “It was painful,” says one person close to him. “It wasn’t just a financial investment. He had great hopes for it.”
Newhouse has never been one to show much emotion. But in the last two years, he has had to close Jane, House & Garden, Men’s Vogue, Golf for Women, Domino, and finally Portfolio. At Condé Nast, the rumor mill, accurate or not, continues to grind. Which will be next? Wired? Architectural Digest? Does the company really need two food magazines? The grim work has taken a toll. His own personal wealth has declined by half, to some $2 billion, but personal wealth was never the point. “Without Condé Nast, he would cease to exist,” says a person close to him. “It’s where he comes alive.”
So when it dies a bit, he does, too. “I’ve never seen him so depressed,” says one person on the publishing side. On his next birthday, he’ll be 82, and Portfolio may have been his last great fling. Who knows whether he’ll get to launch another magazine?
Newhouse: The Old Last Media Tycoon – Steve Fishman, New York Magazine
June 9th, 2009
So while the stock market was buoyed by May’s less-than-expected overall job losses, many saw the report as grim. “The concern is that we’re replacing $25-an-hour jobs with $12-an-hour jobs,” says Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland. Morici says this trend has been going on for decades in the U.S., but that “the recession is exacerbating this weakness in the economy.”
How Many Well-Paying Jobs Persist?
There are many reasons the U.S. manufacturing sector has been in decline. In GM’s case, the cuts reflect the long slide in the company’s sales and market share. Job automation and competition from countries with lower wage rates contribute to the general problem. And economists such as Morici also cite the low valuation of China’s currency, which makes it much cheaper to produce goods in China than in the U.S. “Manufacturing, including the auto sector, has been clobbered by China’s [monetary] policy,” says Morici, who is critical of President Barack Obama’s policy toward that country. “The U.S. is appeasing, not challenging China.”
Tig Gilliam, CEO of the North American group of temporary-help giant Adecco (ADEN.VX), disputes the notion that just because the service sector is doing better than manufacturing, growth will come only in low-wage jobs. “Some of the strongest industries for job growth are bookkeeping, finance, health care, and education,” he says. “They’re not all graduate-degree jobs, but they’re well-paying jobs.”
Jobs: Even Less Are ‘Made In America’ – Moira Herbst, Business Week
June 9th, 2009
With the economic downturn squeezing budgets, college tuition and child care are becoming unaffordable for an increasing number of families. For many, the American dream is seeming more like, well, just a dream. But while you’re dreaming, imagine a kid from rural Montana who, after scoring high on the SAT, has investors clamoring to finance his college education. Imagine General Motors investing in Detroit public schools as a long-term survival strategy. Imagine America’s largest corporations and investors, after generations of putting fiduciary responsibility before social responsibility, suddenly finding the two to be inextricably intertwined. Imagine that we realize it is insufficient to be a stakeholder society; that we must also be a shareholder society. It seems far-fetched, but we could make this vision a reality by creating an equity market for human capital.
It starts with a number: 17. A 17 percent compound annual growth rate, to be precise. That’s the astronomical potential return on investment of educational intervention on young children, according to the Nobel laureate economist James Heckman. The return manifests itself in increased future earnings and reduced social costs. Today, that 17 percent compound annual growth rate is inaccessible to investors, but if people could issue shares of their future cash flow, it would unleash that potential, initiating a massive influx of investment in children.
Consider a situation that is, unfortunately, all too common. A mother works two jobs, dropping her toddler off at a friend’s house early each morning and picking her up late at night. The mother can’t afford high-quality child care and, because of that, statistics show, years from now that child will be more likely to repeat grades, become pregnant while a teenager, commit crime, visit the emergency room and depend on welfare. One day that child will probably earn less than people with similar backgrounds who did receive high-quality child care.
But what if that toddler had something to offer investors? If she could sell a percentage of her future income in exchange for a coupon to receive child care and if the government offered tax credits to investors to compensate them for the decreased social cost that they finance, investors might compete to pay for her education. Millions of children would gain access to the financing that they need to reach their full potential, the government would reap significant savings and investors would profit handsomely. Furthermore, such a system would have revolutionary side effects.
Just as the stock market has allowed the invisible hand to guide funds to stocks that have promising growth potential, a human capital market would guide funds to people with promising potential to increase earnings and cut social costs. This is where the human capital market would transform society, because Heckman’s research shows that the 17 percent compound annual growth rate is restricted to the poorest members of society. Think about it in reference to the law of diminishing returns: Investments make the biggest impact on investees with the most to gain. Now add the fact that children from wealthy families wouldn’t need to issue shares, and we arrive at a solution to deficient human capital development; a solution to the problem of educational inequity.
But the market wouldn’t just help the poor and their investors. Markets are information factories. They aggregate huge amounts of dispersed data to create a coherent picture of the value of investments. In exchange for shares, investors could offer coupons that could be redeemed for value-adding services such as early-childhood education, supplemental educational services, proper nutrition, specific curricula, school supplies or vocational training. Just as share prices in the stock market teach us over time what works in business, share prices in the human capital market would teach us what works in human capital development — what works in education (a hotly debated issue). And learning what works would help everyone, regardless of income. But we need the information factory to learn, so we need a market.
Of course, daunting logistical and moral questions would have to be answered. But before we rule out this proposal on logistical or moral grounds, let us also consider the millions of Americans who will suffer inequity and injustice as a result of our inaction.
There is also reason for skepticism. Maybe it’s too hard to believe that a capitalist strategy could promote equity. If so, keep in mind that the potential of the underlying asset — the human — is far more consistent across district borders and tax brackets than is the quality of education.
Research proves that there is untapped potential hiding in the shadows of society. It is imperative that we find answers to overcome our skepticism and that we find courage to overcome our caution so that we may tap that potential for our collective benefit. But to do it we can’t just be a stakeholder society; we must also be a shareholder society.
The writer is an analyst and advocate for federal and state early childhood education policy for Knowledge Learning Corp., a national provider of early childhood education. The views expressed here are his own.
Moving Toward a Shareholder Society – Daniel Epstein, Washington Post
June 9th, 2009
