A New Start

FT: Books - Crash Course

shift from technology to marketing and design ... and sizzle

provincialism

exploited by unions during the good times of the 50s/60s

poor management (Honda proved that) + failure to tackle hard problems head on

==

Crash Course

Review by John Gapper

Published: January 22 2010 23:20 | Last updated: January 22 2010 23:20

Crash Course: The American Automobile Industry’s Road from Glory to Disaster
By Paul Ingrassia
Random House $26, 320 pages

Japanese car companies, which overtook US ones in the early 21st century, leading to the bankruptcy of General Motors and Chrysler last year, used a method of industrial innovation called kaizen, usually translated as “continuous improvement”. From a humble start, the Japanese companies had got better and better at making cars that were economical and reliable.

Meanwhile, Detroit perfected the technique of occasional improvement. As the Big Three – GM, Ford and Chrysler – slid deeper into trouble over decades of complacency, union obstructionism and mismanagement, they would occasionally stage a temporary recovery, with some new car or initiative prompting books and magazine articles about a Detroit revival.

This all proved to be illusory, with Detroit’s detour from making cars (ground that it had in effect ceded to foreign rivals by the mid-1990s) to producing “light truck” sports utility vehicles as the biggest deception of the lot. These were just upward blips on a long, steady descent from technological dominance to global laughing stock.

This is a familiar story adroitly retold by Paul Ingrassia, a veteran Wall Street Journal reporter who has written about Detroit over the years but maintains his sympathy for the human beings whose lives were crushed by this vast systemic failure.

In his effort to isolate what went wrong, Ingrassia goes back to the early 20th century, when Detroit was a “Mecca for automotive entrepreneurs” such as Henry Ford. Things had clearly gone downhill by the 1970s, when Detroit’s quality standards suffered: cars such as the Chevrolet Corvair and Ford Pinto had reportedly broken down and exploded.

There were, however, warning signs before that, when Detroit’s early focus on technology began, by the 1950s, to give way to an obsession with marketing and design. Ingrassia makes an entertaining journey into the history of tail fins. In 1948, these were borrowed from a Lockheed fighter by Harley Earl, GM’s chief designer, leading to a stylistic arms race.

One could trace it back further. Ingrassia’s account led me to wonder if GM was an aberration from the start. It sounds like heresy to even suggest it: business schools still study how Alfred Sloan turned Billy Durant’s rag-tag collection of brands into the epitome of the professionally managed US corporation.

A 1964 advertisement for General Motors’ new Cadillac

Sloan was, as Ingrassia says, “low-key, methodical and prudent” and shaped GM into a portfolio of car brands, including Oldsmobile, Cadillac and Buick, intended to serve “every purse and purpose” in the US postwar market. He also pioneered techniques of marketing and design – the latter under Earl – that lured customers away from the boring, technology-oriented Ford, with its black-only Model Ts. GM overtook Ford and became the car industry’s dominant institution.

Yet Sloan’s vision of turning cars into dream machines, embodiments of their owners’ aspirations, left a gap that the Japanese, and later Korean, automobile companies later exploited. Unfortunately, Detroit came to believe that sizzle sold, while technology and reliability were of secondary importance.

Two other factors made Detroit vulnerable. One was its provincialism. Michigan became a one-industry state, dominated by the Big Three and hundreds of auto parts suppliers. It became unthinkable that auto companies could be run by anyone but Midwestern “car guys”.

A second vulnerability was the grip of the United Auto Workers (UAW) union, led by Walter Reuther, who exploited the complacency of the Big Three in the 1950s and 1960s, when money was flowing, to hammer out labour deals that later produced vast pension and healthcare liabilities.

Such forces not only made Detroit underestimate the Japanese invasion but also prevented it from responding effectively when it woke up. The Big Three maintained the comforting mantra that the plain, reliable cars being built by Nissan and Toyota – the Model Ts of their day – were alien to American tastes.

Ingrassia describes the moment in 1979 when Detroit should have ceased kidding itself: when Honda built its first US plant in Ohio and showed that American workers could make high-quality cars. It was not a matter of nationality, it turned out, but of good management.

The SUV boom of the 1990s brought a stay of execution, allowing the Big Three to prosper by switching from a losing struggle to produce decent cars and instead make bulky, highly profitable, light trucks. Eventually this avenue would be closed off by surging oil prices.

The tragic figure in this account is Rick Wagoner, an amiable, intelligent executive who was appointed chief executive of GM in 2000 and eventually led it to near-bankruptcy. Wagoner baulked at confronting GM’s structural problems head-on, and instead tried to make the best of them.

Such complacency in the face of trouble finally backfired at last year’s disastrous hearings in Washington at which the Big Three’s chief executives – and the head of the UAW – arrived on private jets to plead for a bailout of $25bn and were unable to answer even basic questions.

Despite this, GM’s board continued to back Wagoner until he was fired by Barack Obama as the price of a government bailout. “GM executives had come to believe that solving their problems was impossible and living with them was inevitable,” Ingrassia writes.

The question now is whether outsiders, helped by debt-shedding bankruptcy (resisted by Detroit until the end) can do better. Fritz Henderson, Wagoner’s successor, has been pushed out by Ed Whitacre, a former chief executive of AT&T and now GM’s chairman. Ford is being run by Alan Mulally, a former Boeing executive, and Sergio Marchionne, the head of Fiat, has taken over Chrysler. The line-up in Detroit, redoubt of the Midwestern “car guys”, is now one telecoms guy, one aerospace guy and one Italian.

A changing of the guard may not be enough. Ingrassia shows convincingly how Detroit’s problems built up, even during decades when it seemed to be doing well. It allowed Asian and European companies to shove it aside in its own heartland, and now the Chinese are coming.

Detroit was not always a basket case. It was the Silicon Valley of the early 20th century, a crucible of US product innovation and flair. All good things, however, come to an end.

John Gapper is an FT columnist

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FT: Thailand: Faded smiles

Thailand: Faded smiles

By David Pilling and Tim Johnston

Published: January 13 2010 19:59 | Last updated: January 13 2010 19:59

Like Banquo’s ghost, Thaksin Shinawatra still hovers at Thailand’s dinner tables, boardrooms and cabinet meetings. Few discussions about the social and political direction of the once-miracle economy are complete without a heated debate over the ousted prime minister’s influence – past, present and, quite conceivably, future.

The charismatic Mr Thaksin burst on the scene in 2001 when his party won a landslide. He went on to become the first prime minister in modern Thai history to serve a full term. Wildly popular among the poor but mired in persistent allegations of corruption and tax evasion, his government was ejected from power in 2006 when the military mounted its 18th coup d’état since the country became a constitutional monarchy more than 70 years ago.

Yet the discarded leader, whose appeal to millions of marginalised rural voters uncorked the genie of social aspiration, has hardly vanished from the scene. Though living in exile in Dubai, mainly to escape a two-year jail sentence imposed in absentia over a conflict of interest, he has continued to exert a powerful influence through two proxy governments and the “red shirt” demonstrators who regularly take to the streets in his name.

This week those supporters promised to resume indefinite protests until the fall of the latest government, this one headed by Abhisit Vejjajiva, a sharp critic of Mr Thaksin.

EDITOR’S CHOICE

Thai officers charged over Saudi gems - Jan-13

Thai ultimatum to Cambodia over Thaksin - Jan-10

Thai court rules 65 projects remain suspended - Dec-02

Thailand charges two over rumours about king’s health - Nov-02

Thai king's health woes upset markets - Oct-16

Editorial: Facing the facts - Oct-18

Indeed, recent months have been dominated by clashes between Mr Thaksin’s red shirts and the yellow shirts, supporters of the monarchy who nearly brought the country to a standstill in 2008 when they occupied the international airport for a week just as the tourist high season was about to start.

Further violence around the Association of South East Asian Nations summit last April damaged Thailand’s international reputation still more when demonstrators stormed a conference centre in the resort town of Pattaya. Regional leaders including a bemused Wen Jiabao, China’s premier, were hurriedly evacuated from the Land of Smiles.

The debate about the direction of democracy is being closely watched by many in the region. The interest goes beyond that of investors such as Toyota, Tesco and Seagate, which have looked on nervously as political instability has gathered force. In a region where fully democratic systems in Taiwan and South Korea are exceptions, Thailand is being seen as a telling example of a fragile democracy struggling to breathe.

Political analysts are predicting that the street demonstrations could erupt into even worse violence when the six-decade reign of King Bhumibol Adulyadej comes to an end. Of the king’s protracted illness and fears of what might happen when his mediating presence is gone, Mr Abhisit says in an interview with the Financial Times: “When you have had a very strong, inspirational leader for six decades, there is always going to be a sense of anxiety about change.”

Thitinan Pongsudhirak, associate professor at Bangkok’s Chulalongkorn university, goes further, describing Thailand as a “tinderbox”. He regards the government of Mr Abhisit, nominated by parliament in late 2008 after two prime ministers loyal to Mr Thaksin were removed by the constitutional court, as a dam against the flood waters of social change.

“Abhisit is their last hope,” he says, referring to the monarchists, members of the armed forces and well-to-do who benefit from the present social arrangements. “He is the last democratic stop to put a lid on the forces unleashed by Thaksin.”

Mr Thitinan does not dispute there were negative aspects of Mr Thaksin’s populist administration, which was dogged by accusations of crony capitalism and, in its war on drugs and southern rebels, of extra-judicial killings. But he also points to Mr Thaksin’s introduction of a popular “30-baht healthcare” scheme – allowing a hospital visit for less than a dollar – and his championing of infrastructure and lending policies aimed at improving opportunities for the rural poor. These, he says, began to address the social and political demands of millions of Thais that had gone unheard for decades.

“They should see this as a wake-up call instead of smearing or demonising Thaksin,” he says of those in Thai society who would like to put the Thaksin years behind them. “Thaksin was a catalyst for what needs to happen.”

The present government has sought to borrow Mr Thaksin’s political robes and win over his north-eastern voters by continuing his progressive social programmes. Yet in spite of Mr Abhisit’s attempt to shut Mr Thaksin out, the ex-leader’s influence has, if anything, intensified. Provocatively, last year Mr Thaksin accepted the position of economic adviser to Cambodia, sparking a diplomatic standoff between the neighbouring countries. In a rhetorical flourish, he even suggested he stood ready to counter any intervention from the military by marching on Bangkok at the head of an army of loyal north-easterners.

Thai leaders have consistently paid lip service to the creation of a stable liberal democracy. Few have given much shrift to talk of “Asian-style democracies” proffered by the likes of Singapore, dominated by one political party since independence. Nor do many Thais, in spite of the hyperactive role the military has played in politics, countenance the idea of authoritarianism.

The sputterings of Thai democracy have also become intimately bound up with analysis of the country’s economic development. In 1995, after a decade of growth that outstripped even China’s, commentators began to chatter excitedly about Thailand joining the ranks of the world’s top 10 economies within a generation. The reality has been otherwise. Thailand’s development has stalled. Income inequalities have widened.

True, the economy has regained a modicum of traction since the Asian financial crisis of 1997 slashed 15 per cent off its gross domestic product in 18 disastrous months. But even before last year’s global crisis lopped off a further 3.5 per cent, it had been struggling to grow above 4-5 per cent a year. That puts it towards the bottom of regional league tables, outstripped by countries such as Vietnam and Singapore, let alone China. Thai GDP per capita, at some $3,850 (£2,360, €2,640), remains less than one-quarter of that of Taiwan, an economy with which not long ago it was being compared.

Tarisa Watanagase, governor of Thailand’s central bank, lays the blame clearly on political turmoil. Private investment, growing at 12 per cent a year earlier this decade, has ground to a halt, she says. Bank lending to businesses languishes at two-thirds of 1990s levels, while the economy has become far more dependent on exports than it was before the 1997 crisis. “The biggest problem is the political situation,” she says. “With that, neither the private nor the public sector can really focus on what needs to be done.”

Foreign investment

After the airports paralysis, ground is fast lost to regional rivals

Thailand’s political turmoil has come at a high price, with foreign direct investment tumbling in the short term. But given the worries for investors, FDI has been notably resilient over the longer term.

“It is still coming in,” says Tarisa Watanagase, governor of the Bank of Thailand, the country’s central bank. “We thought that last year, with the global situation and the political situation, FDI would dry up, but it still came in.”

The fall was steep, however. In the first 11 months of 2009, FDI disbursements were some Bt266bn ($7.7bn, €5.6, £5bn), down 43 per cent on the same 2008 period. The slide was much greater than Vietnam’s full-year fall of 13 per cent or Indonesia’s 28 per cent drop.

Analysts are reluctant to attribute the entire fall to political turmoil, pointing out that Vietnam has benefited from being a low-cost producer and Indonesia from its natural resources. Another factor in the mix was that Japan and Europe, Thailand’s main foreign investors, were themselves hit disproportionately hard, with Japanese FDI falling 75 per cent.

Long-term investors in Thailand are a hardy bunch, acclimatised to the unpredictable rise and fall of governments and the enthusiastic participation of the military in running the country. In the past, these upheavals had little practical effect on the business environment.

That changed in December 2008, when thousands of anti-government protesters took over Bangkok’s airports for a week, trapping tourists and businessmen and blocking air freight export routes. The Bank of Thailand estimated that the siege cost some $8.5bn.

Analysts say the problem is not so much that Thailand’s allure has declined in absolute terms, though it has, but that it has declined so much relative to rivals.

The reasons for Thailand’s disappointing performance go deeper than that. Stimulated by US capital inflows during the Korean and Vietnam wars and, in the 1980s, by a wave of foreign investment from Japan, Thailand’s economy grew beyond the tourism and agriculture on which it had traditionally relied. But it never fully developed an indigenous capitalist class able to compete internationally. Instead, local entrepreneurs – of whom Mr Thaksin was one – prospered by forging close relationships with politicians, carving out monopolies in service industries such as telecommunications and construction.

In Thaksin: The Business of Politics in Thailand, their book on the populist mogul, Pasuk Phongpaichit and Chris Baker write: “Big business was closely connected to politics. The businessmen shared some of their profits with the generals, who in return constructed a friendly environment for business, and rewarded their particular friends with contracts, favours and other profit-sharing advantages.” As well as stalling the creation of world-class businesses, that cosy arrangement also held back the social transformations, particularly land reform, that underpinned rapid take-off in Japan, Taiwan and South Korea.

Much of the Thai elite is fearful of the aspirations stirred by Mr Thaksin. Even Anand Panyarachun, a former prime minister associated with more inclusive social policies, insists Thailand should shun the blind pursuit of economic growth. “We have ambitions, but we don’t have exaggerated ambitions,” he says.

Playing down social needs, he adds: “Here we are lucky in the sense that we have such a temperate climate, and you don’t need much shelter, and you don’t need much clothing and everywhere you go you can always get people to give you food.”

But Mr Thaksin has shaken those paternalistic convictions. Political analysts say it is not clear whether the status quo will survive the death of King Bhumibol, now 82, who is widely credited with using his moral suasion to keep Thailand’s delicate social peace – and that given that his unique role depends more on the man than the institution, he will be all but irreplaceable. Mr Abhisit says of the king’s unifying role: “Thai society has got to mature to a point where we can sort out our own problems.”

Some are less coy, predicting outright social conflict when the king dies. Mr Thitinan, implying some constitutional questions have been postponed out of respect for the king, says: “Some of the vestiges of latent feudal society will have to give way.”

Whether those vestiges go rapidly or gradually and whether they do so with or without the direct involvement of Mr Thaksin is anybody’s guess. But many Thai activists are braced for what they are certain are coming political convulsions.

“Even if you remove Thaksin, there are still a large number of people left to fight for democracy,” says Chaturon Chaisang, one of 111 opposition MPs banned from politics. “In certain aspects, Thai politics have gone far beyond Thaksin.”

AS KING BHUMIBOL AILS, THAIS CONTEMPLATE A MORE FRACTURED FUTURE

The formal title of Bhumibol Adulyadej, Thailand’s king and the world’s longest reigning monarch, runs to 35 syllables of exaltation, but for most Thais he is simply “Por”: father, writes Tim Johnston.

The king’s formal powers are circumscribed by the constitution, which says that the monarchy is above politics, but 63 years of hard work and astute positioning have earned him what is in practice almost absolute moral authority.

He has become the centre of gravity around which the dysfunctional political firmament orbits; the source from which the unelected power elite aspires to draw its legitimacy; and the revered embodiment of the qualities that most Thais want to preserve in the face of huge social and economic upheaval: community, charity and serenity.

But political divides that have recently widened seem immune to the traditional appeals for unity that the monarch has used in the past to bring the country together. The colour-coded battle between the red shirts and the yellow shirts – both sides say they are fighting for the soul of Thailand – is threatening to pull the “high institution”, as the Thais tend to refer to it, into the middle of the conflict. Palace insiders say the king is unhappy with the way his name is being invoked by different factions but is wary of intervening lest it be interpreted as being too overtly political.

King Bhumibol inherited the throne in 1946 from his brother, who died from a pistol shot to the head. The institution was already on its knees and the generals were firmly in charge.

During the following six decades, the king has criss-crossed the country dispensing largesse and comfort to the poor, and has provided a stable pivot in a country that swings erratically between democracy and military rule. His constancy has earned him undying love in a nation that has been serially failed by both its politicians and its generals.

But King Bhumibol is now 82 and in uncertain health. He has been in hospital since mid-September, originally with inflammation of the lungs and – although the palace says he has now recovered and is merely receiving rehabilitation care – it has rattled the population, most of which has never known the country without him. More than 1.8m people have signed a get-well book outside the Bangkok hospital where he is a patient.

Many people here say privately that the country is moving on from the patriarchal style personified by the king and needs to have a more open debate about the role of the monarchy in a post-Bhumibol Thailand. However, ill-defined lese majesty laws, which are supposed to shield the royal family from insult but more frequently are used by politicians to attack their opponents, have muzzled any substantive discussion

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

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FT: Tales of hostage negotiators

===

 

Tips to avoid kidnap

*Do not wear or carry anything with a company name. Make reservations and buy tickets in your name and use a personal credit card. When registering in a hotel, use only your name. Do not identify your company to immigration or customs officials.

*Travel in casual clothes.

*On immigration forms, say the purpose of your visit is to attend a local conference.

*Carry your own luggage and take the next taxi in line.

*Book a hotel room between the third and 10th floors - first and second are accessible to criminals, anything above 10th may not be accessible in case of emergency.

*Avoid leaving a hotel at the same time or taking the same route every day. Do not respond to hotel loudspeaker calls unless you are expecting a call.

Source: Clayton Consultants

Tales of the hostage negotiators

By James Boxell

Published: January 21 2010 02:00 | Last updated: January 21 2010 02:00

Donald Palmer is a quiet, unassuming man, which he explains is typical for his profession. For the past 18 years, he has been part of the select band of former law enforcers, soldiers and secret service agents who make their living negotiating the safe return of kidnap victims.

Mr Palmer, who gained his expertise in military intelligence in Northern Ireland, is proud that none of his clients has ended up dead. In spite of his forces background, it is rare that he calls for an armed rescue: a negotiated ransom is always preferred.

"We had one example where a young child had been kidnapped, and we were buying intelligence from a disaffected gang member," Mr Palmer says. "It was obvious the child knew one of her kidnappers, who had worked for the family. She would probably have been killed if a ransom was paid so we sent in a special weapons team. Fortunately, the girl took cover, though both minders were killed. That is obviously traumatic and a huge risk, which is why force is used only as a last resort."

As Somali pirates wage a lucrative campaign of terror off the Horn of Africa and brutal Mexican gangs target the country's wealthiest families, demand for the services of Mr Palmer and his ilk is as strong as ever.

Some within the kidnap negotiation industry - but not all - say kidnappings are on the rise, with an estimated 15,000 incidents reported in 2008. Latin America remains the most dangerous region - with Venezuela currently gaining in notoriety - but Africa, south Asia and the Middle East are catching up.

"It's not explosive growth, but we are clearly seeing an increase in kidnappings," says Armand Gadoury, managing director of Clayton Consultants, a hostage negotiation business owned by Triple Canopy, the US private security company. "And we are seeing more insurance providers looking to get involved."

Clayton operatives have been at the sharp end of negotiations with Somali pirates. "We have been going eyeball-to-eyeball," says Mr Gadoury. "Our own guy has executed a money drop."

The company, which has an exclusive deal to provide "kidnapping and ransom", known as "K&R", to AIG, the US insurer, says it has five times as many cases now as when it started in 2002. Chubb, another insurer, estim-ates its business has risen by 15 to 20 per cent in three years.

The way this secretive industry works is that insurers provide specialist cover to businesses operating in the most lawless countries and to wealthy families seeking protection. The first policy was written in 1932 after the aviator Charles Lindbergh's baby was kidnapped and murdered, but the market mat-ured in the late 1970s and early 1980s after a spate of kidnappings in Colombia.

The insurers have exclusive ties with security companies or bring in individuals such as Mr Palmer, who has just been hired by G4S, the security group, to revamp its kidnapping service. The Insurance Information Institute estimates global premiums for kidnapping and ransom policies are worth $300m (€209m, £184m).

Hiscox, a specialist British insurer, is the biggest provider, claiming to account for about two-thirds of the market. It is tied to Control Risks, a London-based security group. Guillaume Bonnissent, kidnap and ransom underwriter at Hiscox, says his business has expanded modestly over the years, stressing that the market is "not cyclical - there is not a sudden peak one year, despite the headlines".

Countering extortion is an equally important part of the Hiscox business, with Control Risks regularly advising consumer goods companies on how to deal with threats to poison well-known brands with minimal publicity.

Mr Bonnissent suspects the current flurry of interest from rivals in kidnap cover is more to do with other underwriting business drying up than with a long-term market change. "Many do it for a year and give up," he says. "We are in a soft insurance market so there is a lot of spare capacity. People fail to realise that you don't insure this in the same way as a building - a loss may be very high and we are dealing with the lives of people."

Kidnap consultants are reluctant to reveal trade secrets because hostage-takers then use them to drive up ransoms. Indeed, they are unhappy that the sums paid to Somali pirates have been publicised. This week it was disclosed that pirates received as much as $7m for releasing the Maran Cen-taurus, a big inc-rease on the $3m paid for the Saudi-owned Sirius Star last year.

The vast majority of companies working in difficult countries take out insurance but keep it secret for fear of advertising their staff's attractiveness to local gangs. At one point, expatriate oil and gas workers in Nigeria became such popular targets that they were dubbed "ATMs", often changing hands for $250,000. The country remains very risky, although kidnappings dropped after companies stopped sending foreign staff.

Consultants, who can also be hired directly when there is no insurance, usually do not talk to the kidnappers but fly in to give direct advice to emp-loyers of captured staff or families of hostages. Their first priority is to establish "proof of life", asking questions only the hostage could answer, and checking there have been no amputations. "Wise kidnappers won't take a frail hostage," Mr Palmer says.

There is then a process of "nibbling down" the initial cash demand, in case the hostage-takers demand a second ransom, which is a common problem. "But you also need to convince the relatives you are not just a loss adjuster," says Mr Palmer, who adds that it is easier working with companies than families. "This is how this business was first set up, so we need to show we are not reducing demands just to mean a lower policy payout."

As well as ransoms, insurance policies also cover psychological counselling for victims and families, media consultancy on reputation risk and the salary of replacement workers.

The companies say police forces and governments are starting to accept private consultants' methods after recognising they are more likely to keep hostages alive than rescue attempts. Out of every 100 kidnappings, about two or three hostages are killed (after stripping out the distorting effect of Iraq). The average case lasts two or three months.

"Most gangs realise that if they start knocking off hostages, police and the military will clamp down really hard and they'll find it harder to make money," says Mr Palmer.

It is "far worse" dealing with political hostage-takers than with those seeking pure financial gain, says Francisco Quinones, head of crisis res-ponse at Clayton Consultants. Political kidnappings are a problem in the Philippines, Afghanistan, Iraq, Pakistan and India. But he points out that "a lot of political kidnappings are es-sentially financial under the surface".

Those in the profession estimate there are probably no more than 30 people active in ransom negotiation who have more than 10 years' experience. Mr Palmer says if you sat them all together in one room they would share the "same character ticks", with the ability to "show compassion" uppermost. "We genuinely believe in what we are doing," he concludes. "And, of course, the pay is good."

 

 

FT: Tales of hostage negotiators

===

 

Tips to avoid kidnap

*Do not wear or carry anything with a company name. Make reservations and buy tickets in your name and use a personal credit card. When registering in a hotel, use only your name. Do not identify your company to immigration or customs officials.

*Travel in casual clothes.

*On immigration forms, say the purpose of your visit is to attend a local conference.

*Carry your own luggage and take the next taxi in line.

*Book a hotel room between the third and 10th floors - first and second are accessible to criminals, anything above 10th may not be accessible in case of emergency.

*Avoid leaving a hotel at the same time or taking the same route every day. Do not respond to hotel loudspeaker calls unless you are expecting a call.

Source: Clayton Consultants

Tales of the hostage negotiators

By James Boxell

Published: January 21 2010 02:00 | Last updated: January 21 2010 02:00

Donald Palmer is a quiet, unassuming man, which he explains is typical for his profession. For the past 18 years, he has been part of the select band of former law enforcers, soldiers and secret service agents who make their living negotiating the safe return of kidnap victims.

Mr Palmer, who gained his expertise in military intelligence in Northern Ireland, is proud that none of his clients has ended up dead. In spite of his forces background, it is rare that he calls for an armed rescue: a negotiated ransom is always preferred.

"We had one example where a young child had been kidnapped, and we were buying intelligence from a disaffected gang member," Mr Palmer says. "It was obvious the child knew one of her kidnappers, who had worked for the family. She would probably have been killed if a ransom was paid so we sent in a special weapons team. Fortunately, the girl took cover, though both minders were killed. That is obviously traumatic and a huge risk, which is why force is used only as a last resort."

As Somali pirates wage a lucrative campaign of terror off the Horn of Africa and brutal Mexican gangs target the country's wealthiest families, demand for the services of Mr Palmer and his ilk is as strong as ever.

Some within the kidnap negotiation industry - but not all - say kidnappings are on the rise, with an estimated 15,000 incidents reported in 2008. Latin America remains the most dangerous region - with Venezuela currently gaining in notoriety - but Africa, south Asia and the Middle East are catching up.

"It's not explosive growth, but we are clearly seeing an increase in kidnappings," says Armand Gadoury, managing director of Clayton Consultants, a hostage negotiation business owned by Triple Canopy, the US private security company. "And we are seeing more insurance providers looking to get involved."

Clayton operatives have been at the sharp end of negotiations with Somali pirates. "We have been going eyeball-to-eyeball," says Mr Gadoury. "Our own guy has executed a money drop."

The company, which has an exclusive deal to provide "kidnapping and ransom", known as "K&R", to AIG, the US insurer, says it has five times as many cases now as when it started in 2002. Chubb, another insurer, estim-ates its business has risen by 15 to 20 per cent in three years.

The way this secretive industry works is that insurers provide specialist cover to businesses operating in the most lawless countries and to wealthy families seeking protection. The first policy was written in 1932 after the aviator Charles Lindbergh's baby was kidnapped and murdered, but the market mat-ured in the late 1970s and early 1980s after a spate of kidnappings in Colombia.

The insurers have exclusive ties with security companies or bring in individuals such as Mr Palmer, who has just been hired by G4S, the security group, to revamp its kidnapping service. The Insurance Information Institute estimates global premiums for kidnapping and ransom policies are worth $300m (€209m, £184m).

Hiscox, a specialist British insurer, is the biggest provider, claiming to account for about two-thirds of the market. It is tied to Control Risks, a London-based security group. Guillaume Bonnissent, kidnap and ransom underwriter at Hiscox, says his business has expanded modestly over the years, stressing that the market is "not cyclical - there is not a sudden peak one year, despite the headlines".

Countering extortion is an equally important part of the Hiscox business, with Control Risks regularly advising consumer goods companies on how to deal with threats to poison well-known brands with minimal publicity.

Mr Bonnissent suspects the current flurry of interest from rivals in kidnap cover is more to do with other underwriting business drying up than with a long-term market change. "Many do it for a year and give up," he says. "We are in a soft insurance market so there is a lot of spare capacity. People fail to realise that you don't insure this in the same way as a building - a loss may be very high and we are dealing with the lives of people."

Kidnap consultants are reluctant to reveal trade secrets because hostage-takers then use them to drive up ransoms. Indeed, they are unhappy that the sums paid to Somali pirates have been publicised. This week it was disclosed that pirates received as much as $7m for releasing the Maran Cen-taurus, a big inc-rease on the $3m paid for the Saudi-owned Sirius Star last year.

The vast majority of companies working in difficult countries take out insurance but keep it secret for fear of advertising their staff's attractiveness to local gangs. At one point, expatriate oil and gas workers in Nigeria became such popular targets that they were dubbed "ATMs", often changing hands for $250,000. The country remains very risky, although kidnappings dropped after companies stopped sending foreign staff.

Consultants, who can also be hired directly when there is no insurance, usually do not talk to the kidnappers but fly in to give direct advice to emp-loyers of captured staff or families of hostages. Their first priority is to establish "proof of life", asking questions only the hostage could answer, and checking there have been no amputations. "Wise kidnappers won't take a frail hostage," Mr Palmer says.

There is then a process of "nibbling down" the initial cash demand, in case the hostage-takers demand a second ransom, which is a common problem. "But you also need to convince the relatives you are not just a loss adjuster," says Mr Palmer, who adds that it is easier working with companies than families. "This is how this business was first set up, so we need to show we are not reducing demands just to mean a lower policy payout."

As well as ransoms, insurance policies also cover psychological counselling for victims and families, media consultancy on reputation risk and the salary of replacement workers.

The companies say police forces and governments are starting to accept private consultants' methods after recognising they are more likely to keep hostages alive than rescue attempts. Out of every 100 kidnappings, about two or three hostages are killed (after stripping out the distorting effect of Iraq). The average case lasts two or three months.

"Most gangs realise that if they start knocking off hostages, police and the military will clamp down really hard and they'll find it harder to make money," says Mr Palmer.

It is "far worse" dealing with political hostage-takers than with those seeking pure financial gain, says Francisco Quinones, head of crisis res-ponse at Clayton Consultants. Political kidnappings are a problem in the Philippines, Afghanistan, Iraq, Pakistan and India. But he points out that "a lot of political kidnappings are es-sentially financial under the surface".

Those in the profession estimate there are probably no more than 30 people active in ransom negotiation who have more than 10 years' experience. Mr Palmer says if you sat them all together in one room they would share the "same character ticks", with the ability to "show compassion" uppermost. "We genuinely believe in what we are doing," he concludes. "And, of course, the pay is good."

 

 

FT: The internet: A missing link

profile - younger, poorer, less educated

navigates almost entirely by mouse

more comments

food

viral marketing taken off more rapidly

===

The internet: A missing link

By Kathrin Hille

Published: January 19 2010 22:59 | Last updated: January 19 2010 22:59

The flowers left by free-speech advocates have gone; in their place has come disillusionment. “We came here because we believed that the internet could help open China up. But now we’re effectively giving up,” says an employee at Google China – which last week threatened to quit the country in protest over a wave of cyber-attacks – who has started looking for a new job. “We are saying here’s the global internet, and there’s China, and that’s two different things.”

To many internet industry executives, that is old news. “We have a very differently flavoured internet here,” says Calvin Chin, the Chinese-American founder and chief executive of Qifang, a student loan website in China. “Things ... are going to remain different and mature differently. So it’s like different islands at Galapagos.”

Since China allowed the first internet connection to be established 16 years ago, global attention has been focused on how the web is changing the country. To those in the west who saw the web as an inherently open and free medium, it could only be a matter of time before the reactionary forces of censorship and authoritarian control succumbed to the inevitable.

At the forefront was Google, the world’s richest media and internet company. Justifying their decision to bow to censorship four years ago, its executives argued that this was the first step towards a freer Chinese web, with their local search service one of the main forces helping break down barriers to the flow of information.

They were wrong. Instead, China has developed its own cyberspace. It is growing less like the internet in the rest of the world, not more like it. And it is not just the baleful presence of a vast, assertive and highly flexible censorship apparatus that accounts for this evolution: the formative forces of “.cn” also include cultural preferences and social structures that are very different from those of the west. Google itself has often struggled to adapt to these differences.

That makes the search company’s fight with censors and threatened withdrawal pivotal in the development of the Chinese web. If Beijing calls Google’s bluff and it leaves the country, it could hasten the online divergence between China and the rest of the world already taking place.

With 384m internet users, the country already accounts for more than one-fifth of the 1.73bn global internet population. For multinationals, that means adapt or lose a substantive market. Just like Google, many western internet companies have struggled to make that call.

Only after years of suffering in China did Yahoo decide to sell its operations there to Alibaba, China’s leading e-commerce company, and take a stake in Alibaba in return. Yahoo China has since withered further, and the group has put the brakes on any future investments.

Alibaba triumphed in China over Ebay, the US-based company that is the world’s largest online auction site, by building the world’s largest online marketplace for trade among businesses. It is building Taobao, its consumer e-commerce site, into a similarly formidable force.

Google itself took years to find out that Baidu – its Chinese rival, which has more than 60 per cent of the domestic market in online search – offered a search box formatted in a way much better suited to Chinese characters than its own. The US company was also slow to tackle one of Baidu’s main strengths in attracting user traffic: its free music download service. Only last year did Google launch an equivalent.

One reason for these difficulties is that US companies took a long time to realise that Chinese people use the web differently from their counterparts in other markets. Simply put, they tend to roam the web like a huge playground, whereas Europeans and Americans are more likely to use it as a gigantic library. Recent research by the McKinsey consultancy suggests Chinese users spend most of their time online on entertainment while their European peers are much more focused on work.

Behind this difference is the fact that Chinese internet users are comparatively young, poor and less educated – a result of the fact that the country is moving online at the same rapid pace as it is expanding its economy. According to China Internet Network Information Center, 61.5 per cent of users are below the age of 29, and only 12.1 per cent have a university degree or higher. Some 42.5 per cent have a monthly income of Rmb1,000 ($146, €102, £89) or less. As the government is encouraging rural computer and handset sales, and mobile operators move beyond saturated urban markets in search of new subscribers, even larger numbers of low-income users are expected to join in the years ahead.

But there are also cultural differences. Foreign companies have taken a long time to figure out – then adapt to – one of the key features of Chinese consumers: they do not like to type. “Typing is a pain in Chinese,” explains Zhang Honglin, demonstrating how he has to enter a search word in Latin transcription, then pick the right character scrolling through sometimes dozens of different choices in a pop-up window. This is because Mandarin has many thousands of characters. So when 35-year-old Mr Zhang sneaks away from his family’s tobacco and liquor shop in Beijing to an upstairs internet café for hours on end, he navigates almost entirely using the mouse.

Most portals have reacted by filling their pages with hundreds of colourful links competing for attention – creating a cluttered and disorderly view to the western eye but making life easier for Chinese users.

Beyond aesthetics, Chinese web users are much more lively than their western peers – a characteristic that forms consumption preferences. “The amount of comments posted per user in China is double that of other geographies,” says Dan Harple of GyPSii, a mobile social networking application that allows users to post recommended places and events, and comment on them. One Chinese GyPSii user posted 300 places and 7,000 comments within a few months.

Just as in “offline” China, food is a particular focus. “Typically when a GyPSii user signs up in China, they’ll take a picture of what they’re eating at that point in time,” says Mr Harple.

The government has skilfully used the preference of its internet users for entertainment. Loose enforcement of intellectual property rights means that – despite pledges from Beijing that say otherwise – Chinese consumers can easily find the latest music and movies for free on a host of websites, a situation that helps keep the minds of many off topics that could prove inconvenient to their rulers.

When controversial debates arise anyway, the authorities use an army of “internet commentators”, paid to speak up in online forums to keep sensitive comment in check and support the government’s stance. The standard technique is to invoke nationalism as a conduit for dissatisfaction.

Overall, the censorship machine has had only patchy success. All but the most sensitive information on absolute political taboos – such as the 1989 massacre that ended the Tiananmen student movement – falls within easy reach of internet users.

Sun Yunfeng, Baidu’s design chief, summed up the uneasy acceptance most Chinese feel towards this censorship regime. In a blog post, now erased, he said: “For the normal man on the street, the most crucial information is not secrets from Zhongnanhai [the residence of Communist party leaders] but normal economic, cultural and technology information ... In China, every company and every individual must dance in shackles.”

In addition to censorship, politics has formed the distinct character of the Chinese web user, and created habits that matter for marketing.

In spite of heightened censorship in the past year – leading to Google’s complaints – the internet is still the freest space in Chinese society. So blogs and social networks, though dominated by gossip, rumour and light-weight comment, can become a crucial source of information suppressed in the traditional media.

“The internet in China has too much responsibility. In the US or the UK, it is just one more communication tool or platform. But in China, it got an enlightenment role,” says Alex Lin, chief executive of ChinaValue, a business portal.

Raised on a diet of propaganda in real life, many are mesmerised by the feeling of authenticity that comes with user-generated content. “I get most of my news from Kaixin and Renren, items passed on by friends there,” says Ma Rutao, a 19-year-old estate agent who spends most of her daily two or three hours online on the two Facebook equivalents.

Uncritical adoption of information from unchecked sources makes it easier to create a herd effect on the internet in China than elsewhere. Over the past few years, “human flesh search engines” have become all the rage. The targets have included a woman filmed stomping a kitten to death with high heels and a local official accused of corruption because he was pictured wearing a luxury watch and smoking expensive cigarettes.

Such manhunts have introduced public opinion into stale authoritarian politics. They have been matched by similar developments in the commercial realm, where viral marketing has taken off much more rapidly than in western markets.

Consumers are increasingly using blogs and other user-generated consumer reporting when deciding what to buy, according to McKinsey. “In an environment where word of mouth is more trusted than advertising, internet marketing is moving from an opportunity to a critical necessity,” says Yuval Atsmon of McKinsey in Shanghai, who has researched web habits across China.

He adds that consumer product companies will increasingly need to target “key influencers” – people whose online comment is widely read and trusted – and spend much more effort on forms of marketing that might not be deployed in the west.

“Some of the best media companies in China now are developing software that allows you to find not only the key bloggers but the bloggers that everyone else reads and copies,” says Mr Atsmon. “Some people talk about paying them, obviously, but the preferred way ethically is to invite those people, and educate them about the company and the product.”

The habits of China’s users are already making an impact beyond the web. Samsung, the Korean technology group, is working on a handset with an extra keyboard that allows users to play online games and take calls at the same time. The company concluded that Chinese internet users want such functions because they are obsessed with online games and increasingly use their mobile phones to go online, says Gregory Lee, Samsung’s marketing chief.

“The Chinese consumer,” he explains, “is the most important consumer in the world.”

Additional reporting by Richard Waters in San Francisco

ALIBABA: ‘WE WILL GIVE AMERICANS THE MEANS TO SET UP THEIR OWN BUSINESSES’

Ebay “believed they were smarter than Chinese local people”, Jack Ma (below) once said. The founder of Alibaba, which operates the world’s largest internet marketplace for trade among companies, never tires of lecturing that western companies such as Ebay and Yahoo failed to thrive in China because they tried simply to transplant business models from their home markets.

Now Alibaba has set out to master the same challenge. The company, which began in 1999 as a Yellow Pages-style service for Chinese would-be exporters, has grown into a sophisticated site offering dozens of services, such as helping small enterprises gain working capital bank loans. It now has more than 45m registered users, 6m virtual storefronts and 580,000 paying members, most of them Chinese companies offering everything from machines to nail polish for export.

Alibaba has now launched an aggressive push to sign up foreign customers . In November 2008, as the world descended into financial crisis, it drastically cut fees. Extra services were offered to those paying for Gold Supplier membership. In addition, it launched a starter pack for less than half the normal price.

Last year the company budgeted $30m for a marketing push outside China. It also approached companies such as Google and Ebay to discuss co-operation. In September it opened a headquarters in the UK, followed by a transaction platform in the US. It is in talks about setting up a joint venture in India.

Mr Ma’s push for expansion was because of the crisis rather than in spite of it. As Chinese small and medium-sized enterprises seeking to sell overseas form the backbone of Alibaba’s paying customer base, he saw that, with the country’s double- digit falls in exports, the company would be in trouble unless he helped support his customers and found new ones. The new ones are SMEs overseas. “Many people in Europe and America will be out of a job. Now we give them the means to set up their own businesses,” he says. He also argues that Alibaba should help foreign SMEs unlock the Chinese market.

So far, the numbers look good. At the end of September 2009, Alibaba had more than 18,000 Global Gold Suppliers, 24 per cent more than a year ago. Registered users in the US rose 32 per cent to 1.66m in the first three quarters of 2009. But the real test – under way right now – is whether the customers attracted by discounts retain their storefronts when fees rise after the first year.

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

FT: How to be a top female boss

How to be a top female boss

By Lucy Kellaway

Published: September 27 2009 23:11 | Last updated: September 27 2009 23:11

On Saturday, the FT published a list of the top 50 women chief executives in the world and, loving such lists, I settled down over breakfast to study it. First, I admired the double string of pearls worn by the CEO of Avon; the pearly white teeth of the Sara Lee chief and the spookily perfect skin of Yoshiko Shinohara, founder of Tempstaff in Japan – who looks younger than I do but turns out to be 74.

Next I read the secrets of their success. The number one woman, PepsiCo’s Indra Nooyi, says you must work hard and have fun. Irene Rosenfeld of Kraft says you must follow your passion. The others talk about the importance of having a mentor, of being yourself, of work-life balance, of teamwork and of being humble.

Reading this, I felt I was sinking into a low-slung foam chair from which I couldn’t get out. It wasn’t that there was anything in particular to disagree with. It was that these women, all of whom have achieved exceptional things, mindlessly repeat the caring, sharing views that every modern CEO – male and female – is now required to have.

There was only one discordant note. This was sounded by Dong Mingzhu, who runs a Chinese manufacturer of air conditioners and is rated the ninth most important businesswoman in the world. “I never miss,” she says. “I never admit mistakes and I am always correct.”

For 20 years, this woman has hung on at the top of her business, while most CEOs – male and female – last four or five years before they are spat out or squashed

I read this and laughed. It was so bracing, so shocking, so out of line that I thought it a joke. This is the management equivalent of saying one is into incest or has a lot of respect for paedophiles.

Yet Sister Dong, as she is sometimes known, has achieved results. Gree Electric Appliances has achieved total shareholder returns in the past three years of 529.5 per cent. Compare this with Avon, say, where Andrea Jung boasts that her biggest inspiration is the 6m strong sales force. Alas, it seems that listening to 6m ideas may have distracted her from the bottom line. Her return over the same period is a poor -10.5 per cent.

One might argue that the Sister-Dong-never-wrong school of management is something that only works in China, where the fondness for autocracy is considerable and theory of management is still about making money and hasn’t evolved to include such soppy practices as mentoring or 360-degree feedback.

Yet last week I went to see The September Issue, a documentary about life at American Vogue, and can confirm that the Sister-Dong-never-wrong approach can work quite brilliantly in the most highly evolved and most competitive of industries: fashion.

Anna Wintour, the magazine’s editor, is Sister Dong’s Manhattan soulmate. In the course of the film, one of her staff comments that working for the magazine is “like belonging to a church”. Does that mean Wintour is the high priestess, she is asked. “No,” she replies. “More like the Pope.”

For 90 minutes, we see a not very personable, deeply repressed woman who never praises anyone and hardly ever smiles, getting into or out of chauffeur-driven cars and telling her underlings their work is ugly or boring. Yet for 20 years, this woman has hung on at the top of her business, while most CEOs – male and female – last four or five years before they are spat out or squashed.

Alas, Wintour did nothing as vulgar in the film as to reflect on her own success as a dictator. So I’m going to attempt to do it for her and explain how a tyrant can rule in the west.

Step one. Have a genius as number two who dares to purse their lips disapprovingly when you get out of line. Wintour’s greatest asset is Grace Coddington, her flame-haired creative director, who has lasted 20 years too.

Step two. Make decisions. Most CEOs consult, dither, look over their shoulders, fret about upsetting people and change their minds. Wintour simply decides. And when she’s decided, that’s it.

Step three. Command respect. Watching the film makes one realise what an enormous deal respect is and how it is not won by being nicey-nicey. One luckless underling who had been given a frosty bollocking said to the camera: “I am going to kill myself.” But the next time we saw her she was still alive and had redoubled her efforts to do better next time. Praise, it seems, is far less effective as a motivational tool than the desire to please the Pope.

Step four. Be right. Like Dong, Wintour thinks she is never wrong. But in Wintour’s case the extraordinary thing is that she almost never is wrong. Partly this is because she is very clever, very experienced, very hard-working and minds more than seems reasonable. But it is also because she has been so right for so long that she is now right by definition. If Anna says fur is in, it’s in. If she says Sienna Miller’s hair is lacklustre, then it’s lacklustre.

Pulling off the same feat with air conditioning must be harder. For Sister Dong, and for all the other CEOs who run complicated, global businesses, it is terribly hard to tell if they are actually wrong or not. And in the meantime they have a choice. Either rule by fear – which still works in China and in fashion – or rule by banging on about passion and mentors and hoping that if you are wrong, no one will notice.

lucy.kellaway@ft.com

Read and post comments at www.ft.com/kellaway

Copyright The Financial Times Limited 2009. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

Beloit Mindset

http://www.beloit.edu/mindset/2013.php

If the entering college class of 2013 had been more alert back in 1991 when most of them were born, they would now be experiencing a severe case of déjà vu. The headlines that year railed about government interventions, bailouts, bad loans, unemployment and greater regulation of the finance industry. The Tonight Show changed hosts for the first time in decades, and the nation asked “was Iraq worth a war?” 

Each August since 1998, Beloit College has released the Beloit College Mindset List. It provides a look at the cultural touchstones that shape the lives of students entering college. It is the creation of Beloit’s Keefer Professor of the Humanities Tom McBride and Emeritus Public Affairs Director Ron Nief.  It is used around the world as the school year begins, as a reminder of the rapidly changing frame of reference for this new generation. It is widely reprinted and the Mindset List website at http://www.beloit.edu/mindset/ receives more than 300,000 hits annually.

Time: Facebook Gives Birth to the Retrosexual

Monday, Sep. 21, 2009

Facebook Gives Birth to the Retrosexual

By Claire Suddath

Elise Garber married the first boy she ever kissed. She met him at an Outward Bound–style summer-camp program when she was 15, she "sort of dated" him for the summer, and then, like most teenage romances, it ended. Twenty-two years later, they met again on Facebook.

"I don't know why I looked him up," says the 37-year-old former advertising-agency executive in Chicago. Garber was showing a co-worker how Facebook works, and to demonstrate the search function — a feature that allows users to search for the names of people they know — she entered Harlan Robins, the name of the first boy she kissed. At the prodding of her co-worker, Garber sent Robins a message. And then she waited. Would he respond? Would he accept her friend request? Was it weird to contact an old summer-camp boyfriend? (See five Facebook no-nos for divorcing couples.)

As Facebook users have begun to skew older — the website is now as popular with 30-, 40- and 50-somethings as with the college students who pioneered it — they have found ways to reconnect with one another. And who better to get in touch with than an old flame? "Facebook makes it easier for you to take that first step of finding someone again," explains Rainer Romero-Canyas, a psychology research scientist at Columbia University. "It has finally provided a way for people to reach out to someone without fear of rejection." The Boston Phoenix even coined a term, retrosexuals, for people who are taking the plunge into recycled love.

"It was like opening a time capsule," says Drew Peterson, a 34-year-old former IT worker from Long Island, New York. Peterson's retrosexual experience occurred a few years ago when he found his high school girlfriend on MySpace — "You know, before it became the cyberghetto of the Internet." The two dated during junior and senior year of high school; the last time the two saw each other was on the day they graduated. Sixteen years later, they exchanged MySpace messages, and then Peterson flew from New York to San Francisco to see what had become of the woman who had once captured his teenage heart. "I knew it wasn't going to turn out like some Jennifer Aniston romantic comedy," Peterson says. "I just wanted to see her again." The pair still got along, although this time just as friends. (See the top 10 celebrity Twitter feeds.)

Most retrosexual experiences seem to spring from an intense, almost uncontrollable mixture of nostalgia and interest. "You get a thrill out of finding an old girlfriend just to see if she still likes you," says W. Keith Campbell, a University of Georgia psychology professor and co-author of The Narcissism Epidemic. "You're curious to see what she looks like, and it's easy to fantasize about alternative courses your life might have taken." It's the same feeling that compels people to attend high school reunions. In a way, these meet-ups are the same thing, especially for people like Los Angeles film developer Jillian Stein, 30, who traveled to her hometown of Tampa, Fla., and had three Facebook- and MySpace-inspired reunions within 72 hours.

She met up with her 12th-grade boyfriend, who is happily married and wanted her to meet his kid. Then she reconnected with her first crush, "the embarrassing kind where I couldn't even talk to him, I liked him so much." He had liked her too; they confessed their old crushes on each other through MySpace and arranged to meet in person the next time Stein was in town. But when she met him at a bar, she was immediately disappointed. He had gained weight, worked in a dead-end job and had already been engaged three times. "I was like, um, no," she says.

The third meeting — with a boy whom Stein would occasionally meet after high school for what she describes as a "behind-the-bleachers sort of thing" — went differently. He found Stein on Facebook, and they began talking. Stein added him to her list of people to see. They met for dinner, but "it was beyond awkward," and their conversation felt forced. So they left and went to a pool hall.

Several hours and drinks later, the former flings were kissing. Then Stein went home with him. In the morning, she made the drive of shame back home to her parents' house. "Here I was, almost 30, and my mom was so pissed at me," Stein says. She felt as if she were back in high school.

Stein doesn't know what inspired her to do something like that. They knew each other. They had talked extensively through Facebook, and their fling felt like more than a one-night stand. But it was definitely less than a real relationship. They had a history, a rapport. They weren't just hooking up; they were doing something they had always wanted to do but had been too young to try. "It was fun," says Stein. "I got this really great closure, and it felt safe in a weird way."

And what about Elise Garber and her first kiss, Harlan Robins? For them, life really did resemble a romantic comedy. Robins remembered his summer-camp girlfriend and replied to her Facebook message. They agreed to meet for drinks the next time he was in Chicago. When they saw each other, something clicked. They talked into the night, went out the next day, then decided to give their long-distance retrosexual romance a try. Surprisingly, it worked. Garber quit her advertising job and moved to Seattle to be with him. On Sept. 6, they married. "And to think," says Garber, "I worried that we'd spend the whole evening talking about summer camp."

(See the top 10 social-networking applications.)

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