A New Start

FT: Tough on costs and the causes of costs

Tough on costs and the causes of costs

By Stefan Stern

Published: June 12 2008 03:00 | Last updated: June 12 2008 03:00

First, a salute to the ingenuity of the publisher. With oil and other commodity prices rising, and consumer demand falling, what businesses need is some clear guidance on managing costs.

As luck would have it, here is a crisp new book on that very subject. Its author, Andrew Wileman, is a seasoned management consultant - a veteran of Booz Allen, BCG and OC&C. In recent years he has worked as an independent consultant while dabbling in journalism.

This book combines all the virtues and vices of those two trades. Mr Wileman's text is irrepressible: jaunty, energetic and allknowing. The reader gets a clear sense of what it would be like to be cornered in a meeting room for a couple of hours with Mr Wileman the consult-ant.

That is mainly a good thing. The author knows his subject. He has been cutting swaths through flabby balance sheets and cost structures for three decades. He has heard all the excuses why certain costs are untouchable or unmanageable. He does not accept a word of them. And he urges his readers to be equally unflinching and persistent in their attack on costs and the causes of costs.

The book is refreshing in many ways. Rightly, the author points out that good cost managers are the "unsung heroes" of business. We all prefer to talk about strategy or growth or culture. "You can read Fortune or Forbes or The Economist for a year and not come across an article that's mainly about cost management," he says.

In fact costs are the biggest drain on businesses that would otherwise be much more successful. Without good cost control, Mr Wileman says, you are like a potential champion golfer, who hits beautiful shots getting the ball on to the green but keeps failing to hole the putts.

Why do costs spring up and get out of control? Partly, Mr Wileman says, it is down to the over-matrixed organisations in which so many of us work. "Every cost initiative you come up with ends up having three or four names tagged to it as 'responsible'," he says. When everyone is responsible, no one is.

Then there is the problem of that seductive word, "strategy". "The one common characteristic of strategic partnerships is that they seem to cost a lot of money with no concrete return," Mr Wileman says. Here he is echoing the Financial Times columnist John Kay, who has observed that "strategy" usually turns out to be synonymous with "expensive" (q.v. "a strategic investment", "strategy consultant").

A basic grasp of balance sheet realities can also help in the quest to control costs. Mr Wileman is merciless on Ebitda (earnings before interest, tax, depreciation and amortisation). "Taking out depreciation is just absurd," he says, offering an alternative acronym, Ebapta: earnings before any payments to anybody. Strangely it is yet to catch on.

Although he is evangelical about managing costs, Mr Wileman remains realistic. He is guided in this realism by that great management guru, Dilbert. Or rather, by Dilbert's boss, who observes: "Hmmm. If I cut costs enough, I can make money on no revenue."

Mr Wileman is tough on headcount, suppliers, outsourcing and timeframes for action, but he is neither vandal nor sadist. He just hates unnecessary cost.

The book is not perfect. In a final chapter on managing costs in the public sector, Mr Wileman displays the characteristic swagger of the (over-)confident consultant. "I have not personally worked much in the public sector," he admits. "So . . . I am arguing from logic and research, not from the deep first-hand experience of the rest of the book."

He then breezily trashes the public sector for its outrageous flabbiness and waste, without properly engaging with the complexity of its work, or why the size of different public sectors varies from country to country.

Never mind. You can take or leave Mr Wileman's advice - and if you choose to go your own way, there will be other clients grateful for his distinctive blend of candour and can-do.

Copyright The Financial Times Limited 2008

FT: Banks must learn to trust the word of humans too

Banks must learn to trust the word of humans too

By Gillian Tett

Published: July 4 2008 03:00 | Last updated: July 4 2008 03:00

A few years ago, Ron den Braber, an outspoken Dutch mathematics geek, was working in the risk department at Royal Bank of Scotland when he became alarmed about the models being used to price collateralised debt obligations.

Most notably, he concluded that the so-called Gaussian Copula approach then in use at RBS (and many other banks) significantly underplayed risks attached to the most senior pieces of debt - creating a danger of future, large losses.

So he duly tried to raise the alarm. But, as he tells the tale, he faced hostility. "I started saying things gently - in banks you don't use the word 'error', but the problem is that in banks . . . people just don't want to listen to bad news," Mr den Braber recalls.

Now, every corporate tale has many sides - and RBS, for its part, vehemently denies that it ever ignores challenges or stifles debate. It says it could not find any record of strong warnings about the Gaussian Copula model, is aware of its shortcomings, and, while it has recently suffered CDO losses, these relate to products acquired after Mr den Braber's time.

However, the story is worth noting since echoes of this saga now seem to be emanating from numerous banks. In particular, many other bankers have also recently told me that they knew that structured finance models were mis-pricing risk at an early date - and yet in many cases the attempts to raise the alarm were crushed.

Or as one senior risk manager writes (anonymously since he remains employed): "[My] institution has now taken multibillion writedowns - job losses result and significant share price erosion - and I wonder how this can have happened? Upfront we did express to senior management that we lacked the analytical skills . . . and highlighted deep concerns about the approach colleagues in the market risk area had taken . . . I feel responsible for not doing more, but I really did push my views, risking my immediate career."

So can anything be done to redress this? (Or prevent it playing out again now in the commodities world, say?)

Perhaps not.

Few bankers want to hear dissent about the models when they are enjoying a profit bonanza. Greed is what drives much of the modern financial world - combined with fear of getting sacked.

But, if nothing else, this saga shows the great blind spot that still haunts many banks. This decade, financiers have invented so many brilliantly clever mathematical tools to repackage risk that the industry has slipped, almost unthinkingly, into an assumption that "credit" is a collection of abstract equations, stripped from any human context.

Thus banks have become so dazzled with their powers that they have ignored how they interact with the rest of society - or how the tribal aspects of their own institutions can create dangerous traps.

Meanwhile, the cult of models has become so extreme that banks have believed them even when this collides with common sense. Yet, as any Latin scholar knows, the word "credit" hails from credere: "to trust". It is, in other words, also a social construct.

And bankers forget this human dimension to their cost - no matter how impressive the abstract numbers might seem. Or as the same risk officer says: "The billions involved were so hard to contemplate that we almost certainly lost sight of the possible consequences [of our credit business] until it was too late."

So, as the banks nurse their credit losses, they certainly do need to review why some of their clever mathematical models failed. That geeky Gaussian Copula stuff, in other words, matters hugely.

But, most important of all, they need to work out why the human processes around the models failed, too. Not just in the eyes of Mr den Braber, but also in the experience of numerous other junior employees who are now hugging their war stories, but are far too nervous to speak out.

* In the coming weeks I will be on sabbatical writing a book (about CDOs, modern banking tribes and much else.) I will return to the column after the summer.

gillian.tett@ft.com

FT, Economist etc: Celebrated Indian field marshal with a razor-sharp wit

Manekshaw himself once remarked on the fine line between being a field marshal and being fired. Yet his approach never wavered. "A yes man is a dangerous man," he once said. "He will be despised by his subordinates and used by his superiors."

= = = =

Celebrated Indian field marshal with a razor-sharp wit

By Stephen Fidler

Published: July 5 2008 03:00 | Last updated: July 5 2008 03:00

It was February 1942 on the Sittang River in Burma. Sam Manekshaw had already lost half his men as they fought to take Pagoda Hill from the Japanese invaders. He rallied what was left of his company, urging them to continue the advance.

Then, just as they captured the hill, a burst of machinegun fire hit Manekshaw in the stomach. As he lay there he was spotted by Major General David Cowan, who had seen the young captain's bravery but feared his wounds might be mortal. Kneeling beside him, Cowan took off his own Military Cross ribbon and pinned it on Manekshaw's chest, saying: "A dead man cannot be awarded the Military Cross."

[from The Economist: Another story has it that a surgeon was going to give up on his bullet-riddled body, until he asked him what had happened and got the reply, "I was kicked by a donkey." A joker at such a time, the surgeon reckoned, had a chance.]

The general was wrong to doubt the officer's powers of survival but right about his valour. The courage of Sam Manekshaw, who has died a field marshal at the age of 94, was to help make him one of India's most successful military leaders. His seminal victory over Pakistan's forces in 1971 led to the creation of Bangladesh and turned Manekshaw into a national hero. One biographer described him as having "charm and persistence, an irreverence towards red tape, an iron determination, an eye for details plus a strategic mind that embraced all". He also had a razor-sharp wit.

A man with an eye for the ladies, his relationship with one lady in particular, Indira Gandhi, India's prime minister during the 1971 war, defined his career. When she asked him before the conflict if he was prepared, he replied: "I'm always ready, sweetie." Unlike politicians and top bureaucrats, he refused to call her madam, saying it was a term "better suited to a brothel keeper".

He was one of those men whose personality leaps out of his photograph. There is one of him sitting at a military parade in 2004. He is 90 and his back is not as straight as it was, but his eyes look directly at the camera and, beneath the military moustache, there is the hint of a smile. His left breast is bedecked with medals, his feet with shiny black brogues and he holds an elaborately carved swagger stick in his right hand. Manekshaw was fastidious about his appearance but his uniform, typically, did not conform to regulation.

For a man to become a myth in his own lifetime, it helps to live for a long time, not least because many of his rivals will not. It helps if he fosters a reputation for straight talking and to have a sense of humour - not least about himself. Yet Manekshaw never seemed to be consciously managing his own image.

Sam Hormusji Framji Jamshedji Manekshaw was born in 1914 in the age of the Raj. His parents were members of the Parsi community - Zoroastrians who immigrated from Persia 1,000 years ago and who have occupied some of the highest positions in modern India in the military, the law, the arts and business.

The young Sam grew up in Amritsar, capital of the Punjab, and attended the British-style boarding school, Sherwood College. He had wanted to study medicine but instead joined the first ever cohort of officer cadets to attend the new Indian Military College at Dehradun. Commissioned as a second lieutenant in 1934, he was for a time attached to Britain's Royal Scots regiment. In 1939 he married Siloo Bode, and the couple had two daughters.

During the second world war he served twice in Burma. Having recovered from his wounds at Pagoda Hill - the official citation for his MC said the success of the attack was "largely due to the excellent leadership and bearing of Captain Manekshaw" - he was sent back to Burma and was wounded a second time. At the end of the war, he showed his talent for planning and organisation first in rehabilitating 10,000 prisoners of war and then in the run-up to the partition of India and Pakistan in 1947.

In 1971, it was the crisis between east and west Pakistan, created as two unconnected territories at the time of partition, that was to prove Manekshaw's finest moment. The rout of Pakistan's forces under his leadership was a strategic coup for New Delhi. It split east from west Pakistan and led to the creation of the independent state of Bangladesh. This meant that never again would India have to fight its rival on two fronts at the same time. The rapid victory erased memories of the humiliating defeat in a border conflict with the Chinese in 1962 and the stalemate of the 1965 war with Pakistan over Kashmir.

With millions of refugees pouring over the border, some of the politicians had wanted to go to war in April but the key to victory was to wait until December to engage with the Pakistanis. This ensured the monsoon season had passed and the plains of Bengal were drier. By then, too, snow in the Himalayas blocked off any prospect of Chinese intervention. It was Manekshaw who was credited with standing up to the impatient politicians and his resistance made him a hugely popular figure. Some have subsequently questioned his role. General Jacob-Farj-Rafael Jacob, chief of staff for India's eastern command in 1971, became the brunt of fierce criticism last year when he said it was he and not Manekshaw who had refused to attack in April. Moreover, he added that Manekshaw's military plan did not include taking Dhaka, the fall of which was essential to victory. Ramachandra Guha, a leading historian of modern India, has also claimed that the archives suggest that Manekshaw did not play that primary a role.

Whether a revision of Manekshaw's place in history will follow his death is uncertain. But his death is significant perhaps in other respects. It sym-bolises the passing of the generation of officers that served in both the British and Indian armies. Their legacy remains. "Indian generals still feel more comfortable with their British counterparts than with those from the US," says Professor Guha.

Manekshaw himself once remarked on the fine line between being a field marshal and being fired. Yet his approach never wavered. "A yes man is a dangerous man," he once said. "He will be despised by his subordinates and used by his superiors."

Stephen Fidler

Copyright The Financial Times Limited 2008

Sam Manekshaw

Jul 3rd 2008
From The Economist print edition

EPA

Sam Manekshaw, soldier, died on June 27th, aged 94

HIS most famous remark was not, strictly speaking, true. On the eve of the war with Pakistan in December 1971 that led to the creation of Bangladesh, India's prime minister, Indira Gandhi, asked her army chief, Sam Hormusji Framji Jamshedji Manekshaw, if he was ready for the fight. He replied with the gallantry, flirtatiousness and sheer cheek for which he was famous: "I am always ready, sweetie." (He said he could not bring himself to call Mrs Gandhi "Madame", because it reminded him of a bawdy-house.)

Yet General Manekshaw himself recounted a cabinet meeting in Mrs Gandhi's office in April 1971. To forestall secession, the Pakistani government had already cracked down in what was then East Pakistan. Hundreds of thousands of refugees had crossed the border into India. Mrs Gandhi wanted the army to invade Pakistan. General Manekshaw resisted. The monsoon, he pointed out, would soon start in East Pakistan, turning rivers into oceans. His armoured division and two infantry divisions were deployed elsewhere. To shift them would need the entire railway network, so the grain harvest could not be transported and would rot, bringing famine. And of his armoured division's 189 tanks, only 11 were fit to fight.

He was not, in other words, ready. But, as he put it, "There is a very thin line between being dismissed and becoming a field-marshal." Mrs Gandhi rejected the resignation he offered, and acceded to the delay he wanted. His job, he told her, was to fight to win. In December he did, cutting through the Pakistani army like a knife through butter, and taking Dhaka within two weeks. Quibblers later noted that this was not one of his original war aims. He had the most important attribute of any successful general: good luck.

That was not the only time he threatened to quit. Mrs Gandhi once questioned him about rumours that he was plotting a coup. In response, he asked if she wanted his resignation on grounds of mental instability. Yet if she and other politicians were in awe of him as a professional soldier and grateful for his lack of political ambition, his men loved him for his willingness to take on their civilian bosses and stand up for the army's interests.

He had shown this in the Indian army's darkest hour, the abject defeat in 1962 by China. Already a general, he had the previous year quarrelled with India's defence minister, V.K. Krishna Menon, about national security. He was vindicated when the Chinese army swatted aside Indian resistance and briefly occupied what is now the state of Arunachal Pradesh. Mr Menon resigned. General Manekshaw was rushed to the front to rally the demoralised troops. His first order was: "There will be no withdrawal without written orders and these orders shall never be issued."

General Manekshaw was able to demand courage from his soldiers because his own was not in doubt. Known as Sam "Bahadur", or Sam the Brave, an honorific given him by the Indian army's Gurkhas, the first of his five wars was for the British in Burma, where he was seriously wounded. Assuming he would die, an English general pinned his own Military Cross on Captain Manekshaw's chest, since the medal could not be awarded posthumously. Another story has it that a surgeon was going to give up on his bullet-riddled body, until he asked him what had happened and got the reply, "I was kicked by a donkey." A joker at such a time, the surgeon reckoned, had a chance.

Stiff but hairy

There was something of British military tradition in his stiff upper lip, the lavish handlebar moustache in which he cloaked it, the dapper little embellishments to his uniform and his partiality for Scotch whisky. Yet he was born into a very particular and tight-knit community: India' s small and dwindling Parsi minority, which has produced a disproportionate number of leading Indians, such as the members of the Tata and Godrej business dynasties. Sam Manekshaw was another Parsi overachiever. He was the first of only two field-marshals ever created in the army.

Yet his retirement since 1973 was not one long bask in glory. Former deputies felt he had monopolised the credit for various victories. Then last year his name was linked to bizarre allegations, by the son of a former Pakistani president, against an unnamed brigadier who had once sold Indian war plans to Pakistan. All nonsense, said those who knew him. Already in hospital, General Manekshaw was in part shielded from controversy.

After his death, anger at the slur, and at the lack of proper honour for one of India's true heroes, rumbled on. The prime minister, along with the army, navy, and air-force chiefs, all missed his funeral—which was a modest one held in Tamil Nadu in the south, not a grand one in the capital. His friends grumbled that even foreigners such as Lord Mountbatten were afforded greater respect in death. Bangladesh, however, paid grateful tribute to his part in the nation's foundation.

He too might well have been disappointed that his obsequies were not grander. His last words were "I'm OK", though he had rehearsed a better line nearly 37 years earlier. For death at least, the brave soldier had indeed shown himself "always ready".

Copyright © 2008 The Economist Newspaper and The Economist Group. All rights reserved.

http://www.india-today.com/itoday/millennium/100people/sam.html

BUILDERS & BREAKERS Prophet of Hate Sam Manekshaw By A S Kalkat
1914: Born in Amritsar. 1933: Joins the Indian Military Academy. 1934: Commissioned into the army. 1947: Pakistan invades Kashmir. Is colonel in charge of operations. 1962: Sent to NEFA to check further Chinese intrusion. 1965: Commander, Eastern Command during the Indo-Pak war. 1969: Appointed chief of the army staff. 1971: Indo-Pak war. Steers India to victory. and Bangladesh is created. 1973: Given the rank of Field Marshal.

In 1942 at the height of the World War II a fierce battle was raging in Myanmar, then Burma, at the Sittang Bridge. A company of the Indian Army was engaged in hand-to-hand combat with the invading Japanese forces for the capture of a position, which was critical for the control of the bridge. The young company commander was exhorting his troops when his stomach was riddled by a machine gun burst. Afraid that his company would be left leaderless if he were evacuated, he continued fighting till he collapsed.

His company won the day and the general commanding the Indian forces arrived at the scene to congratulate the soldiers. On seeing the critically wounded commander, he announced the immediate award of the Military Cross -- the young officer was not expected to survive much longer and the Military Cross is not awarded posthumously. Thus began a historic military career that spanned the Indo-Pak wars and the Sino-Indian conflict, the wounded captain surviving to become India's first field marshal.

In 1947 when Pakistan invaded Kashmir, Sam Manekshaw was the colonel in charge of operations at the Army Headquarters. His incisive grasp of the situation and his acumen for planning instantly drew the attention of his superiors and Manekshaw's rise was spectacular, though not without controversy. He was outspoken and stood by his convictions. This, coupled with his sense of humour, often got him into trouble with politicians.

In 1961, for instance, he refused to toe the line of the then defence minister V.K. Krishna Menon and was sidelined. He was vindicated soon after when the Indian army suffered a humiliating defeat in nefa the next year, at the hands of the Chinese, resulting in Menon's resignation. Prime minister Jawaharlal Nehru rushed Manekshaw to nefa to command the retreating Indian forces. This had an electrifying effect on the demoralised officers. In no time, Manekshaw convinced the troops that the Chinese soldier was not "10 ft tall". His first order of the day characteristically said, "There will be no withdrawal without written orders and these orders shall never be issued." The soldiers showed faith in their new commander and successfully checked further ingress by the Chinese.

The Indo-Pak war of 1965 saw Manekshaw as army commander, Eastern Command. When India was forced to launch operations in the west, Manekshaw was against attacking in the east since the main sufferers would be the people of East Pakistan. The wisdom of his advice dawned when the Indian forces fought the Pakistan army in East Pakistan in 1971.

This was Manekshaw's finest hour. As army chief and chairman, Chiefs of Staff Committee, he planned the operation meticulously refusing to be coerced by politicians to act prematurely. His strategic and operational finesse was evident when Indian pincers cut through Pakistani forces like knife through butter, quickly checkmating them.

When the prime minister asked him to go to Dhaka and accept the surrender of the Pakistani forces, he declined, magnanimously saying the honour should go to his army commander in the east. He would only go if it were to accept the surrender of the entire Pakistan Army.

Manekshaw's competence, professional standing and public stature was such that the politician and the bureaucrat alike crossed his path only at their peril. On one occasion, he found that the defence secretary had penned his own observations on a note he had written to the prime minister and defence minister. Infuriated, Manekshaw took the file and walked straight into Mrs Gandhi's office. He told her that if she found the defence secretary more competent than him to advise her on military matters she did not have a need for him. The defence secretary was found a new job.

As a commander, he was a hard taskmaster. He encouraged his officers in the face of adversity but did not tolerate incompetence. That is perhaps Manekshaw's greatest contribution, to instil a sense of duty, efficiency, professionalism in a modern Indian army and to stand up to political masters and bureaucratic interference.

In a way, he was following the path of other army chiefs, K.S. Thimayya K.M. Cariappa. A holy terror, there are many tales of the power of his whiplash. Following Pakistan's surrender in the east, Manekshaw flew into Calcutta to compliment his officers. The ceremonial reception over at Dum Dum airport, he was escorted to a car -- a Mercedes captured from the enemy. Manekshaw refused to sit in it, leaving the officers red-faced.

On another occasion, a general accused of misusing funds was marched up to him. "Sir, do you know what you are saying?" asked the general. "You are accusing a general of being dishonest." Replied Manekshaw: "Your chief is not only accusing you of being dishonest but also calling you a thief. If I were you I would go home and either shoot myself or resign. I am waiting to see what you will do." The general submitted his resignation that evening.

Lt-General A.K. Kalkat is a former army commander and belongs to Manekshaw's regiment, 8 Gorkha Rifles.

ST; TABLE TALK: WITH FAREED ZAKARIA Political leadership for a new global order

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July 5, 2008
TABLE TALK: WITH FAREED ZAKARIA Political leadership for a new global order
How might Singapore deal with a world in which people are richer than ever before and many players are jostling for supremacy? The editor of Newsweek International, Dr Fareed Zakaria, proffers his thoughts
By Cheong Suk-Wai, Senior Writer
A SINGAPOREAN taxi driver's chance remark set Dr Fareed Zakaria thinking how best he might write about a world in which people are richer than ever before and many players are jostling for supremacy. Meeting The Straits Times in his London hotel suite earlier this week, the editor of Newsweek International recalled how the cabby pointed to the Republic's new ferris wheel, the Singapore Flyer. 'I looked at it and I said - I suppose in a somewhat patronising voice: 'How nice, you have a ferris wheel.' 'And he turns around and says: 'Sir, that's the largest ferris wheel in the world'.' A month later, he was being shown around the South China mall in Dongguan, when his host told him that the 9.6 million-sq ft complex was the world's largest. Dr Zakaria did not buy that at first. He thought The Mall of America in Minnesota still held that title. (Actually it is only the 18th largest these days). Dr Zakaria recalled: 'At that point I decided I had learnt my lesson. I began to realise these anecdotes I had been hearing about this country growing and that country growing were adding up to something quite significant.' So he decided his new book - his second after the best-selling The Future Of Freedom - would examine how the world's new thriving countries will change the character of international economics, politics and culture. Dr Zakaria's big, hawk-sharp eyes, which are very alert indeed, give the lie to his relaxed demeanour. His laptop pings away with news updates on a side table while we talk. Everything about him tells you he is his own man - from his powder purple polo T-shirt, an unusual colour choice, to his Indian-accented English, although he has been a naturalised American citizen for many years now. He was in London for the launch of his new weekly current affairs show on CNN. Called Global Public Square, it premiered on June 1, and the first episode saw him interviewing British Prime Minister Gordon Brown and the Conservative Party leader David Cameron. The son of an Indian politician and a newspaper editor, Dr Zakaria is a Harvard political science alumnus. He had the ear of such luminaries as former US secretary of state Henry Kissinger from early in his career. But he really made his mark with his 2001 essay, Why They Hate Us, which he wrote just after the Sept 11 terror attacks on the US. His weekly column in Newsweek is now required reading for anyone interested in global affairs. The way forward THIRTY years ago, if anyone from Brazil, India or Mexico had predicted his country would soon be revving the world's economic engines, he would have been brushed off as a wishful thinker at best. But today, these countries are charging into the future after having embraced capitalism. As a result, three billion new players are competing for the world's ever-dwindling resources. Indeed, as Dr Zakaria points out in his new book, The Post-American World, the economies of 124 countries, including 30 African states, are now growing at the rate of at least 4 per cent a year. Compare that with the only 35 countries that enjoyed that sort of growth 30 years ago, he says, and what you have is 'the birth of a truly global order'. Singapore, he adds, is handling this brave new order very well. 'What Singapore has done very adroitly is to have moved up the value chain - to have said that 'okay, we can't compete with other countries in cheap labour, and so we're going to do value-added products, we're going to try services, we can compete (in) these areas, we're going to move to the next level'.' He applauds the Republic's 'very clever' forays into such areas as tourism, film-making and software design. And all this, on top of managing good relations with both the United States and China, he notes admiringly. But he adds that Singapore is the only rich country in the world without a fully functioning multi-party democracy. That will hobble its advance in the long run, he believes, because people 'want not only economic rights, but also freedom of association, freedom of speech and freedom of thought'. 'You may get lucky with a particular autocrat, but what happens after him?...If you could guarantee me in advance that you'll get Lee Kuan Yew, that's a whole different thing. But there's no way beforehand to know that you're going to get a leader like Lee Kuan Yew.' He adds wryly, wondering whether this would get into print: 'I think that the political system is rigged in favour of the People's Action Party (PAP). Some of it is formal...Some of it is informal. But all of it is largely unnecessary.' Singapore is already 'a very open society in many ways', he points out. 'I often say this to people because they have an image of Singapore which is essentially incorrect...It is a place where you would certainly feel as if you had many, many freedoms and liberties...It has been lucky in having very wise leadership.' But it has to widen its political outlook much more, he insists. 'Singapore's leaders have succeeded more than they realise. They created a modern society, and in creating that modern society, they must now also trust it more than they do.' He adds: 'That, in some ways, is the genius of democracy. It turns the relationship between governed and governors into a two-way street, and that will make for a much greater degree of sense of loyalty and pride in Singapore for the next generation.' He muses: 'It's funny: Whenever I meet senior Singapore government officials, I will sometimes mention this. And they'll go: 'Oh, no, no, it's not a real problem, don't worry.' And I'll say: 'You know, younger Singaporeans do feel frustrated.' And they'll say: 'Oh, I don't know if you are right about that.' 'And then, as I'm escorted out by one of the young aides to the senior government officials, they will tell me: 'By the way, Dr Zakaria, you are 100 per cent right. We are very frustrated'.' 'And these,' he notes, 'are people in the heart of the political structure.' Dr Zakaria is quite sure that if the PAP held what he calls 'open competitive elections', it would do 'quite well'. And as for Minister Mentor Lee's view that a non-PAP government would act irresponsibly by exhausting Singapore's coffers, Dr Zakaria says: 'You can produce checks and counter-checks. Nobody's talking about giving day-to-day control of Temasek (Holdings) and the Government Investment Corporation to Parliament. You can create institutions that are independent and therefore somewhat sheltered from day-to-day political control.' Tackling global crises AND political control, by the way, is what he feels the new global order needs in a big way. Great global growth brings with it great global worries. And therein lies the rub. The current lone superpower, the US, is not only being outstripped by new players on the economic front, it has also lost its intellectual and moral high ground since it invaded Iraq in 2003. On top of that, though food, fuel and weather woes have spilled over into the international arena, most countries are still thinking of how to solve these problems locally, when what is really needed is greater global consultation, cooperation and compromise. 'We have crises now. The question is whether we have the leadership.' China, he feels, is not ready to fill the vacuum America has left for two reasons. First, there is considerable scepticism about China, particularly in India, Japan and Indonesia. 'It's not as if the world is hungering for Chinese leadership.' Second, if China or any other Asian economic dragon wants to lead the world in the way the US has in the past 60 years, it would first need to present 'a compelling vision for other people to buy into and say, 'You know, we like the way Asians think about the world'.' 'It's not just about money,' Dr Zakaria insists. 'It's about setting an agenda, making people feel that there's a vision that you want to work towards.' For that reason alone, he thinks the US can still play a pivotal role. It can bring the world together to work out solutions to problems like energy and global warming. Asked which US presidential contender is better poised to lead in a post-American world, he plumps firmly for the Democrat, Senator Barack Obama. He finds Mr Obama's willingness to challenge settled wisdom in Washington - like his willingness to talk to US 'enemies' - 'refreshing'. 'And though he was criticised for it, he stuck to his guns,' notes Dr Zakaria. 'I think that was very impressive.' Mr Obama's rival, Senator John McCain, on the other hand, is 'a Cold Warrior', says Dr Zakaria, referring to the Republican's less than friendly references to Russia and China. 'That is just the wrong vision for the future.' Dr Zakaria himself is a long-term optimist about the post-American world. 'At the end of the day, the power of two to three billion people for the first time consuming, investing, producing, dreaming, inventing and problem-solving is very, very powerful,' he proclaims. suk@sph.com.sg

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July 5, 2008
Dr Zakaria on...
FIRM GROUND: PAP supporters pitching in during the 2006 election campaign. OPPOSITES?: US presidential candidates John McCain (left) and Barack Obama. -- PHOTO: THE BUSINESS TIMES PHOTO: AP   View more photos Economic and political rights: People want economic rights but they also want political rights. They want property rights but they also want freedom of association, freedom of speech, freedom of thought. You may get lucky with a particular autocrat, but what happens after him? The great problem with the idea that an autocracy is a good idea is that most people don't end up with Lee Kuan Yew. They end up with Mobuto or Marcos or Mugabe. If you could guarantee me in advance that you'll get Lee Kuan Yew, that's a whole different thing. But there's no way beforehand to know that you're going to get a leader like Lee Kuan Yew. I think that for societies that are not yet at an advanced industrial state, there are considerable questions as to whether introducing multi-party democracy right away produce stability. In places like Iraq we should have had a much greater emphasis on stability and order, rather than holding as we did four or five different elections. But in the long run, for a rich country, there are very few alternatives. Singapore is the only rich country in the world that does not have a fully functioning multi- party democracy. And Singapore is a very unusual case. First of all, it is a very open society. It is also a very small country that has been very lucky in having very wise leadership - and there's no way to guarantee that. One-party rule in Singapore The system needs more checks and balances. You need the prospect of losing power to produce a certain degree of discipline. The Singapore Government They've done a very good job, but younger Singaporeans do feel frustrated. They feel the society, the political system is too closed and it's too much of an insider's club. A sense of belonging What makes somebody a Singaporean in a world in which you are going to need people who have come two years, three years ago? How do you make them think of themselves as Singaporeans? Part of it has to be, I think, that they feel they are full participants in the destiny and political structures of the country. I can tell you that Prime Minister Lee Hsien Loong thinks a lot about this, because he and I have had several conversations about this. China Whenever you talk about the rise of Asia, you're really often talking about the rise of China. But the rise of China produces very complicated feelings in India and Japan. So there might actually be forces within Asia that can act and counteract these things. India I feel very frustrated watching India, because I think it has extraordinary potential. Indian society is so ready for globalisation (but) the Indian state is so scared and backward-looking and corrupt and caught up with its own phobias and ideologies from a different era. The 2008 US presidential race One of the advantages of this (long) process this time around is that the crazies are out of the race. There were a lot of candidates that had very disturbing views about the world, very confrontational, very nasty and would have taken America down a very dark road. And they were all thoroughly rejected by the American public. Mr Barack Obama He's a creature of the world as well as a creature of America...So this world is not a completely alien and slightly menacing thing to him, it's something that's part of him. Mr John McCain He remains a very old-fashioned figure. He has an almost Victorian view of the world.

NY Times: On Day Care, Google Makes a Rare Fumble

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July 5, 2008

Talking Business

On Day Care, Google Makes a Rare Fumble

By JOE NOCERA

Two months ago, Google held a series of secret focus groups with employees who have children in Google's day care facilities. The purpose was to gauge their reaction to the company's plan to raise the amount it charged for in-house day care by 75 percent.

Parents who had been paying $1,425 a month for infant care would see their costs rise to nearly $2,500 — well above the market rate. For parents with toddlers and preschoolers, who were charged less, the price increases were equally eye-popping. Under the new plan, parents with two kids in Google day care would most likely see their annual day care bill grow to more than $57,000 from around $33,000.

At the first of the three focus groups, parents wept openly. As word leaked out about the company's plan, the Google parents began to fight back. They came up with ideas to save money, used the company's T.G.I.F. sessions — a weekly meeting for anyone who wanted to ask questions of Google's top executives — to plead their case, and conducted surveys showing that most parents with children in Google day care would have to leave Google's facilities and find less expensive child care.

Do you think you know how this story ends? You're probably guessing that because it involves "do no evil" Google, Fortune magazine's "Best Company to Work For" the past two years, this is a heart-warming tale of a good company reversing a dumb decision.

If only. Although Google is rolling back its price increase slightly and is phasing in the higher price over five quarters, the outline of the original decision remains largely unchanged. At a T.G.I.F. in June, the Google co-founder Sergey Brin said he had no sympathy for the parents, and that he was tired of "Googlers" who felt entitled to perks like "bottled water and M&Ms," according to several people in the meeting. (A Google spokesman denies that Mr. Brin made that comment.) On Monday, Google began the first phase of its new day care plan, letting go of the outside day care firm it had been using.

In recent months, Google has hit the first rough patch in its short, magical life as a public company. From November to April, Google's once high-flying stock dropped 44 percent, to $412 from $744. (It has since gained some of that back, closing on Thursday at $537.) It may be a stretch to equate the day care fiasco with the fall in Google's stock. But maybe not.

When a stock was rising as fast as Google's once was, it was easy to buy the view that there was something truly special about Google. But when the stock is falling, overlooked problems start to loom large. Having discovered that Google is not, in fact, the promised land, a number of Googlers have left recently to join start-ups, hotter companies like Facebook — and even Microsoft.

"There are many things about Google that are not great, and merit improvement," blogged Sergey Solyanik, who recently returned to Microsoft after a stint at Google. "There are plenty of silly politics, underperformance, inefficiencies and ineffectiveness, and things that are plain stupid." Starting, it would appear, with day care.

•

Google first began offering day care three and a half years ago, and perhaps it is only coincidence that this occurred not long after a woman named Susan Wojcicki returned to the company from maternity leave. Ms. Wojcicki is a figure of significant stature at Google; hers was the garage that Mr. Brin and Google's other founder, Larry Page, rented while starting up Google. Today she is the company's vice president for product measurement, though as I discovered in talking to unhappy Google parents this week, not many Googlers seem to know what her exact duties entail. Everybody, however, knows that she's Mr. Brin's sister-in-law.

From the start, Ms. Wojcicki has been a passionate advocate for Google's day care efforts, though there is some dispute about how much decision-making authority she has. Parents who know her point out that the company's day care approach is very much aligned with her views; for its part, a Google spokesman insists that "these decisions were not made by her; they were made by the executive management team."

Google's first facility, called the Kinderplex, was run by the Childrens' Creative Learning Centers, or C.C.L.C., which, according to its Web site, offers "learning in a play-based, developmentally appropriate environment that incorporates a variety of activities and multicultural aspects in a thematic style." That sounds perfect for Silicon Valley, doesn't it? One of C.C.L.C.'s longtime Silicon Valley clients, Electronic Arts, sent me an e-mail statement telling me how happy it has been with C.C.L.C.'s services.

According to Google, there were numerous complains about C.C.L.C., but the Google parents I spoke to disagree. They say that at the Kinderplex, teacher-child ratios were low, teachers were first-rate, the facility was clean and upbeat, and the food — organic, naturally — was terrific.

But at least one parent wasn't happy: Ms. Wojcicki. She is a proponent of a preschool philosophy called Reggio Emilia, the hot kiddie philosophy of the moment, which stresses even small children's ability to chart their own learning paths.

A year after the Kinderplex opened, Google opened its second day care center, called the Woods, which Google ran itself. The Woods was an expensive undertaking; in terms of the square footage per child, the aesthetics of its toys, and the college degrees of its teachers, it put the Kinderplex to shame. It also used the Reggio Emilia philosophy.

With the Woods open, Google decided to upgrade the Kinderplex to match the salaries and the teacher-student ratios of the Woods. Google now had 200 day care spots — and such wonderful day care at that! — and was promoting this new perk as a recruiting tool. The company was growing like crazy — its work force now numbers 19,000 — its young employees were starting to have babies, and well, you can just picture what happened next. The wait list ballooned insanely, finally reaching over 700 people. New employees who arrived at Google thinking they were getting in-house day care were stunned to discover that it could take up to two years to land a coveted spot.

Meanwhile, someone at Google woke up one day and realized that the company was subsidizing each child to the tune of $37,000 a year — which nobody had noticed up until then — compared with the $12,000-a-year average subsidy of other big Silicon Valley companies like Cisco Systems and Oracle. Faced with this dilemma, Google decided that the way to solve the dual problems of a too-long wait list and a too-large subsidy was — are you sitting down for this? — to get rid of C.C.L.C. and make the Kinderplex more like the Woods! (Google says it was always planning to replace C.C.L.C.) Given that decision, the only possible way to reduce the subsidy was to raise prices through the roof.

If you are shaking your head at this point, that's because you lack the proper understanding of Google's culture. Having conquered the Internet, Google's executives tend to believe that they can do pretty much everything better than everybody else — even day care. When I spoke to Laszlo Bock, the company's vice president for "people operations" (a k a human relations), he told me that "what is really driving the cost is eliminating the two-year wait list while focusing on providing really high quality."

Google can't just have low teacher-child ratios — it has to have the lowest of anybody. Its teachers have to be the best. Its toys have to be the most advanced. If it costs a lot of money to provide the Greatest Day Care on Earth, well, that's life.

Plus, the high price of Google day care solves the waiting list problem. Indeed, getting the waiting list down was a huge priority for Google; the spokesman told me that forcing people to wait two years for day care was "inequitable." And maybe it is.

But parents who talked to me said that several times during the six-week-long day care brouhaha, Mr. Brin made comments indicating that he viewed the whole thing as a giant economics experiment. "This is a supply-and-demand issue," he told one group of parents — adding that Google needed to charge what the market would bear. (Through a Google spokesman, Mr. Brin denies making such a statement.) Given that Google has lots of pre-I.P.O. millionaires, it can clearly charge a lot.

Indeed, at one meeting, Ms. Wojcicki, a multimillionaire herself, told the parents that she planned to keep her own children in Google day care, despite the higher cost. "I've had firsthand experience with the great care provided by these centers and I want as many other parents as possible to have access to it," Ms. Wojcicki noted in an e-mail message.

Google has also started charging people several hundred dollars to stay on the waiting list; as a result the list has dropped to around 300 parents. By next fall, Google plans to open new facilities with another 300 places. See? No more waiting list.

Google, I should note, believes that it has handled the day care issue in a "Googly" way and object strongly to the criticism by the parents. The company points out that the prices are somewhat lower than originally planned, that it is expanding its day care operation, that its facilities will be state of the art and that it will be giving scholarships to parents who can't afford to keep their children in Google day care. (Although yet to release the details of the scholarship plan, the company says that employees will have to show proof of household income to qualify.)

But here's the real problem: providing day care isn't an economics experiment, nor should it be just another Google perk, alongside organic food and free M&Ms. Day care matters to people's lives in a way that few other perks do. There are many people in this country — including, I'll bet, many Googlers — who believe that employer-provided day care, at affordable prices, ought to be like health insurance, a benefit that every company provides as a matter of course. Yet as the technology blog Valleywag noted recently, Google doesn't even advertise day care as a benefit for its employees anymore. That's the real shame.

Google may be providing the greatest day care ever, but so what? It doesn't matter how good the day care is if only its wealthiest employees can afford to use it. If Google had really wanted to do something path-breaking about its day care crisis, it would have spent less time creating elitist day care centers and more time figuring out how to "scale" day care for everybody no matter what their salaries.

Instead, Google has shown that it thinks about day care the same way every other company does — as a luxury, not a benefit. Judging by what's transpired, that's what Google is fast becoming: just another company.

E-mail: nocera@nytimes.com

FT: Bank leaders are a disgrace to capitalism

Bank leaders are a disgrace to capitalism

By Luke Johnson

Published: July 2 2008 03:00 | Last updated: July 2 2008 03:00

If you want to get a British entrepreneur worked up, one topic is bound to raise their temperature to boiling point: the behaviour of the clearing banks.

To ordinary business owners, it appears as if these organisations are the institutional equivalent of Jekyll and Hyde. In the space of a year they have gone from being rampaging expansionists to capital-starved risk-avoiders. Everyone in business is being battered by the blowback from the credit crunch. What on earth is going on in the financial services industry?

The UK high street banks are in effect an oligopoly that provides the loan capital to industry that in turn creates the wealth and jobs that keep the country going. They are vital to our capitalist infrastructure.

Their health matters - not just to their shareholders and staff, but to the business customers who rely on them to provide loans, overdrafts, credit card processing and myriad other money-related services that every company needs to function.

Cut off that flow of funding and you step on industry's windpipe and starve the brain of oxygen. And the sort of arbitrary and brutal credit decisions being dished out to customers mean parts of the banking system are breaking down.

Some of the Big Five UK banks appear to be behaving worse than others. In several incidents I know about they have been unnecessarily short-term and unpredictable, ignoring long-term relationships and using excuses to withdraw facilities summarily or charge usurious fees. In some cases this knee-jerk nastiness will help drive companies to bankruptcy, destroy jobs and damage the economy and society - while the banks will not even get much of their money back.

Part of the problem stems from the scale and complexity of banks' activities. In Barclays' 2007 annual report there are more than 100 notes to the accounts. How many of the board, or indeed the senior management, have studied that dense document and understand it all? Who really knows those risks? The auditors? The risk committees? The Financial Services Authority? I have my doubts. The balance sheet shows that at December 31 2007 it had £345bn of loans to customers - what one might consider the core business of a bank - but also £193bn of trading portfolio assets and £248bn of derivative financial instruments. What are they all? Are those items worth what the accounts say? And why does Barclays own them?

All banks have a core product - money - that is a fungible commodity, yet bankers are obsessed with suggesting their service is different from anyone else's. In reality they take deposits and lend money, but even in that simple game it seems they are forgetting first principles, such as trust, transparency and consistency. They expect these from their commercial borrowers. But do we get it from them? Not recently, I would argue. The banks have been in denial about their financial condition, and have misled shareholders, the markets and their customers.

Bank directors are not under-rewarded. The six executive directors at Royal Bank of Scotland, for example, took home £16m in cash last year - on top of their accumulated pension entitlements of £26m. These are not entrepreneurs who risk their own capital in life - they are just bank employees. That sort of cash should buy geniuses who never fail. It should pay for leaders who understand the larger role RBS plays in the system, and the vital contribution it makes in financing the private sector, since it claims it has the number one brand in corporate banking.

Yet in undertaking the "largest banking acquisition ever" by buying ABN Amro after the market had begun to turn, RBS has destroyed value and its management credibility on a breathtaking scale. How can they dare to withdraw facilities and berate borrowers when no one has been sacked for such gargantuan incompetence? How do the bosses retain the confidence of their staff, clients and stockholders? RBS was forced into a rescue £12bn rights issue in spite of saying it did not need one. The arrogance of certain of our top bankers is a disgrace to capitalism, while many of the board members of the Big Five appear to have been asleep at the wheel in the past couple of years.

lukej@riskcapitalpartners.co.uk The writer is chairman of Channel 4 and runs Risk Capital Partners, a private equity firm

Copyright The Financial Times Limited 2008

FT; Coca-Cola

Coca-Cola

Published: July 1 2008 09:33 | Last updated: July 1 2008 19:31

Muhtar Kent should not take it personally. On his first day behind the desk as Coca-Cola’s new chief executive, shares in the drinks group sank to their lowest point in just over a year. Much like a new president inheriting a disastrous legacy, however, that trough ought to play to Mr Kent’s advantage. Not because he can blame his predecessor – he enjoys a good relationship with Neville Isdell, who remains as chairman. And the transition has been smooth, exceptionally so by Coke’s standards.

Rather, Mr Kent inherits a group that has recovered well but now faces headwinds largely beyond his control. In the US, structural decline in sales of carbonated soft drinks has been reinforced by an economic slowdown forcing Americans to trade down to cheaper brands and eat out less often. Meanwhile, investors are nervous about the impact of rising prices on consumers in faster-growing emerging markets, their concerns heightened by gloomy outlooks from some of Coke’s bottling partners.

Such pessimism, with Coke’s stock now trading at a lower multiple of earnings than during its meltdown of 2004, ignores Coke’s defensive qualities – and the role Mr Kent can play. Only a fifth of Coke’s operating profit is derived from North America, considerably less than for arch-rival PepsiCo. While Coke does not enjoy Pepsi’s exposure to snacks, the flip side is less pain from rising crop costs. Similarly, the warnings from Coke’s bottlers have more to do with their exposure to plastic and aluminium costs than slumping sales.

Mr Kent’s background in bottling provides the first chance to make his mark. Low-margin bottlers are in the business of picking up pennies. Applying that mindset more rigorously to Coke’s marketing-led model should yield efficiencies.

Longer-term, Mr Kent’s strategic challenge is like that faced by Microsoft – what to do when you sell the soft drink equivalent of Windows in a mature market? Fortunately, Coke’s strong balance sheet and free cash flow provide the necessary tools. In the meantime, streamlining the existing operation should give investors a short-term rush.

FT: Steady footing on Cirque's high wire

Steady footing on Cirque's high wire

By Bernard Simon in Montreal

Published: July 1 2008 03:00 | Last updated: July 1 2008 03:00

When Guy Laliberté thought workers at Cirque du Soleil's Montreal headquarters were taking their jobs too seriously, he hired a professional comedian to liven things up.

Madame Zazou spends 20 hours a week popping in and out of offices. She has carte blanche to interrupt meetings - briefly - with witty questions and comments, and is a regular heckler at Cirque's annual "creative summit", at which 100 senior employees exchange ideas on present and future shows.

While her presence may brighten employees' mood, it also attests to some important challenges facing the fast-growing international circus and entertainment group.

Mr Laliberté, Cirque's founder and controlling shareholder, remains the organisation's dominant force even though he relinquished the chief executive's job two years ago. He now spends only about half his time on Cirque business. Much of the rest is devoted to One Drop, the charity he set up last year to improve third world water supplies.

The need to leaven the work atmosphere also underlines the difficulty of keeping the creative juices flowing in an ever-expanding troupe of acrobats, costume designers and musicians unaccustomed to a corporate regimen.

From its origins 24 years ago as a small group of stilt-walkers, jugglers and musicians in Baie-Saint-Paul, Quebec, Cirque has grown into a far-flung enterprise with almost 4,000 employees and annual revenues of about $800m.

It will stage 18 different shows this year, including several permanent ones at resorts in Las Vegas, Disneyworld in Florida, and in Tokyo and Macau. It is seeking partners to build sites for permanent productions in London, Paris and Spain.

Cirque also holds about 80 events annually for corporate and other customers. Fiat paid $2m last year for a spectacle to spice up the unveiling of its Bravo hatchback near Rome's Forum. A small Cirque troupe is performing daily this summer at a festival in Zaragoza, Spain. Daniel Lamarre, a former journalist and television executive who took the CEO reins from Mr Laliberté, expects Cirque's revenues to double in size over the next five years.

From top to bottom, Cirque's management style is unusual. There is no board of directors. The top decision-making group on creative activities, known as le noyau créatif (the creative nucleus), comprises Mr Laliberté, Mr Lamarre, another Cirque founder, and the senior director of creation. A six-member executive committee oversees business operations.

A group of four prominent Quebec executives, including the heads of Bombardier, the train and aircraft maker, and Power Corporation, one of Canada's most powerful family-controlled companies, meets four times a year to offer advice on running the business.

Productions have a long lead time. A Cirque show typically takes three years to develop from conception to opening night. It is built on two main legs: creative and business. The creative side starts with an over-arching theme, often suggested and refined by Mr Laliberté. Cirque 2009, a show now taking shape, centres on biodiversity and the world of insects.

A three-person team, comprising stage director, creative director and production director, is then set up. Its first task is to devise what Pierre Phaneuf, vice-president for creation, describes as a "light skeleton", outlining the type of show, size and composition of cast, the mix of live and recorded music, and so on.

The team reports to an executive producer in charge of the business side. The budget for a permanent show is typically $40m, or $20m-$25m for a touring show such as Varekai, Quidam and Corteo.

"We demand that they come up with a product that is profitable," Mr Phaneuf says. Cirque employs about a dozen business analysts to crunch the numbers. Mr Lamarre declines to disclose profits but says that the company has not received a penny in government aid for more than 15 years.

Many of Cirque's creative staff, including all stage directors, costume designers, composers and choreographers, are freelances. "We try to make them feel part of the company without making them feel part of the business," Mr Phaneuf says. Cirque pays for them to attend its own shows as well as others that might have a bearing on their own projects.

Meanwhile, a 60-strong casting team, including 20 talent scouts, criss-crosses the globe for performers (see below left). To help mould its recruits and established artists into a functioning team, Cirque has a 100-person residence across the road from the head office.

The casting website is in seven languages, but Cirque offers free English lessons to employees. Interpreters are routinely assigned to some performers - Chinese, eastern Europeans and Brazilians, among others - though even their services do not prevent the occasional misunderstanding. "When you work at Cirque, you're doomed to work in a team at any level," says Mr Phaneuf.

Still, the unrelenting pressure for fresh shows and bigger thrills is pushing Cirque in some unaccustomed directions.

It will put the spotlight on a single individual for the first time this September in a show starring Criss Angel, an American magician. Mr Angel's act is aimed at broadening Cirque's appeal to a younger audience.

Meanwhile, Cirque faces the challenge of dimming the spotlight on its biggest star, Mr Laliberté. Aged 48, he cuts a larger than life figure. While he has relinquished the title of chief executive, the credits for every Cirque show still list him as "guide".

Chosen by Ernst & Young as its World Entrepreneur last year, Mr Laliberté has a personal jet painted to look as if it is dripping with chocolate.

His office parking spot is separated from the others by an avant-garde sculpture commemorating Rosa Parks, the US civil-rights campaigner. Mr Laliberté, declined, as he usually does, to be interviewed for this article.

"We often ask, what do we do if he is hit by a bus?" says Mr Lamarre. A big increase in creative staff, from 50 to 250 over the past five years, is proof that Cirque can survive its founder, he adds.

Still, Joanne Fillion, senior brand director, says that "it's like a tribe. The culture is transmitted from generation to generation." Still, she acknowledges that "it takes a lot of people and a lot of processes to replace Guy's intuition".

Ringmasters who round up top athletes

Many of Cirque de Soleil's 1,000 performers are former athletes. The company recruits by sending a team of 20 talent scouts to talk to coaches as well as visit university athletic meetings and national championships. Cirque has recently stepped up recruiting efforts in China and Japan with the help of local partners.

Cirque scouts attended the Sydney and Athens Olympics. However, the company does not feel the need to be in Beijing next month because it has now built up a database of 7,000 prospective performers and artists.

"We're not looking for Olympians so much," says one manager. "We're looking for people who are open. They have to be willing to try something new. We bring them somewhere they didn't think they could go."

Turning an athlete into an artist is not always easy. Performers rolling on large exercise balls up and down at gyms in Cirque's head office have to be told not to worry if they fall off the ball.

Athletes, who are accustomed to a strict regimen and typically train for a single sport, can find Cirque's encouragement to take risks and work in teams a challenge.

Copyright The Financial Times Limited 2008

FT: NOL is weighing up anchorage in Hamburg

NOL is weighing up anchorage in Hamburg

By Robert Wright and John Burton in Singapore

Published: July 1 2008 03:00 | Last updated: July 1 2008 03:00

It was one of the highest compliments a senior executive could pay a rival.

In a private letter to senior staff sent late last year, Eivind Kolding, chief executive of Denmark's Maersk Line, the world's largest container shipping line, exhorted them to improve profitability.

If Maersk Line had the same cost structure as APL - the container line owned by Singapore's Neptune Orient Lines (NOL) - filled its ships as fully and carried the same types of cargo, it would be two-and-a-half times as profitable, he wrote in a letter seen by the Financial Times.

This admiration for NOL is widespread throughout the highly cyclical container shipping industry, where few operators have proved as adept as APL at ensuring ships are consistently full and the rates charged to customers consistently high. NOL made pre-tax profits of $586m on $8.16bn turnover for the year to December 28 last year.

Yet NOL is now the frontrunner to take the risk of acquiring Hamburg-based Hapag-Lloyd from Germany's Tui, Europe's largest travel group, to combine it with APL, according to people involved.

The deal would create the world's third-largest container fleet. Most observers think that NOL's only realistic competitor is a group of businessmen associated with Hamburg, Hapag-Lloyd's base, who would like to buy it to keep it German.

Although NOL is two-thirds owned by Temasek Holdings, the cash-rich Singapore state investment company, analysts warn that NOL may be taking on too much debt if it concludes the deal.

NOL has a market capitalisation of S$4.8bn (US$3.5bn), while Tui is believed to be seeking at least $6bn for Hapag-Lloyd. "This would imply NOL assuming a net debt/equity of 1.9-2.6 times," said Citigroup in a report.

Vincent Fernando, a Citigroup analyst, questions NOL's eagerness for the deal when the shipping industry is weakening. "There is no urgency in NOL buying Hapag-Lloyd. There are not a lot of companies chomping on the bit to buy it," he says.

Other potential buyers, including Mediterranean Shipping Company of Geneva, Taiwan's Evergreen Marine and Hong Kong's Orient Overseas prefer organic growth. Meanwhile, France's CMA CGM says it wants to buy only niche regional lines. Maersk Line is still recovering from its botched integration of P&O Nedlloyd.

Raymond Lim at CIMB-GK Securities in Kuala Lumpursays: "The market will pay more attention to whether NOL can get Hapag-Lloyd at an attractive price rather than the debt level, but Tui is driving a hard bargain."

Analysts say shareholder concerns about NOL's move would be eased if Temasek helped to finance the bid or decided to renew its 2004 effort to take NOL private by buying out minority shareholders as part of the deal.

NOL has not commented on whether it is preparing a bid, but the company is known to have been looking for economies of scale by growing bigger.

A takeover of Hapag-Lloyd would give the Singaporean group access to the important German export business that is vital to Hapag-Lloyd.

Such traffic would provide balance to a business that has been dominated by Asian exports since NOL's founding in 1968, says Mark McVicar, transport analyst at Dresdner Kleinwort.

Hapag-Lloyd has one of the best balances of any container line between the volumes of cargo it carries in each direction on its voyages.

Many other lines carry almost exclusively empty containers or only low-value waste products on their return journeys to Asian exporters.

Mr McVicar says: "If I'm Siemens and I've just sold a whole load of power equipment to Asia, I only make one call about shipping it.

"It's to Hapag-Lloyd and I know they will give me incredible levels of service."

Hapag-Lloyd is far stronger than NOL on routes between Asia and Europe, across the Atlantic and in trade to and from Africa. NOL's main strength is in transpacific trade between Asia and North America.

However, Thomas Held, NOL's German-born chief executive, will have to handle the integration carefully to protect the Singapore group's profitability. As a larger line, NOL would face a greater challenge balancing the need to keep its ships full with the risk of taking too much low-value freight at cheap rates.

Copyright The Financial Times Limited 2008

Humanitarian Company

http://blog.kapor.com/?p=65

“And is there a more canonical boomer’s tale than that of Mitch Kapor (born 1950), who majored in psychology at Yale, was heavily involved in the campus radio station, and after graduation became … a teacher of Transcendental Meditation. But ever since he’d come across a copy of “Computer Lib” in a Harvard Square bookstore, he was fascinated by computers, particularly the promise they had to empower ordinary people. He began designing software, and then, around the time the IBM PC was launched, came out with an idea to make spreadsheets more powerful. His product was Lotus 1-2-3, and when he sought funding for his company, in a long letter to venture capitalist Ben Rosen he presented his idealistic vision of a humanitarian company. There are things as important to me as profit, he wrote. Now, he says, “It was my equivalent of ‘Don’t Be Evil’ ” [the unofficial Google motto].”