Lead Forward

The Week from AxSA, 19 January 2012

2012-01-19T14:16:00.002-05:00

Dateline: 19 January 2012

AxSA Factoid of the Week

13 January 2012

The calendar year 2011 saw disaster-related losses hit their costliest level on record. From tornadoes and floods in the United States to the earthquake and tsunami in Japan, the total of losses are estimated at $350 billion. Interestingly enough, insurers are not fretting. That is because only $108 billion of those losses were actually insured.

From the "Monday Morning Memo"...

16 January 2012

"Whatever your life's work is, do it well. Even if it does not fall in the category of one of the so-called big professions, do it well. As one college president said, 'A man should do his job so well that the living, the dead, and the unborn could do it no better.' If it falls your lot to be a street sweeper, sweep streets like Michelangelo painted pictures, like Shakespeare wrote poetry, like Beethoven composed music; sweep streets so well that all the host of Heaven and earth will have to pause and say, 'Here lived a great street sweeper, who swept his job well.'" ~Dr. Martin L. King, Jr.

News & Commentary

Business

Why U.S. Gun Sales Are Shooting For the Moon

Forbes

Manufacturers of the weapons call President Obama their best salesman to date...Read More

Economy

Nearly 1 Million Workers Vanished Under Obama

Investor's Business Daily

Before you cheer the recent declines in the nation's official unemployment rate, consider this uncomfortable fact...Read More

Marketing

Location, Location, Location

Harvard Business Review

Whether expanding a business across town or across the globe, decision-makers often enter new markets haphazardly, and that approach can be problematic...Read More

Category Creation

Fast Company

Contrary to popular belief, innovative ideas don't guarantee good fortune for businesses. In order to seize their spots in the marketplace, these businesses must consider product positioning and market receptiveness...Read More

Energy

Keystone XL Oil Pipeline Not Finished Yet, Company Plans to Reapply for Permit

International Business Times

A move by the Obama administration to block the construction of a controversial pipeline will not upend efforts by TransCanada...Read More

Will Natural Gas Price Bears be Disappointed This Year?

Rigzone

Growing domestic production of natural gas has resulted in a supply glut and lower prices, but this year, new drilling could fall off...Read More

Technology

Why Most Online Communities Are Failures

Fortune

Many of the companies and organizations building virtual hubs for their customers and constituents are badly missing the mark...Read More

SOPA, Internet Regulation & the Economics of Piracy?

Wired

What is SOPA, and why should you care about it? Read More

Can Touch Screens Hurt You?

Technology Review

As it turns out, strangely enough, prolonged use and the position of the screen harbors "hidden dangers"...Read More

Sustainability Nears a Tipping Point

Sloan Management Review

More and more companies are recognizing the benefits of greener business practices...Read More

The Week from AxSA, 11 January 2012

2012-01-11T09:53:00.004-05:00

Dateline: 11 January 2012

AxSA Factoid of the Week

06 January 2012

The calendar year 2011 began with strong fears that inflationary pressure would take hold in our slowly recovering economy, but those fears did not prove true. Concerns about U.S. debt also faded, as investors maintained a strong attraction to Treasurys in the face of concerns over Europe and the ebbing of hyperactive growth in Asia. In fact, as investment assets, U.S. bonds like the 10-year finished the year with 16.7% returns - a performance that outmaneuvered oil and gold, both of which returned only returned 13.9% and 8.9%, respectively.

From the "Monday Morning Memo"...

09 January 2012

"Every morning, in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion, or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle, or it will starve to death. It doesn't matter whether you are a lion or a gazelle. When the sun comes up, you'd better be running." (Unknown author)

News & Commentary

Pricing Strategies

Why Do All Movie Tickets Cost the Same?

The Atlantic Monthly

Uniform pricing buy theater owners does have its pros and cons...Read More

New Internet Pricing Rules Spark Jump in Customer Bills

The Globe & Mail

In Canada, regulators have opened a Pandora's Box on the issue of bandwidth, and now Internet customers are experiencing increased costs for usage...Read More

Leadership & Management

Nine Things Business Owners Should Never Say

Inc. Magazine

There are certain conversations that you should only have with yourself, and here's why...Read More

Passion: The Fuel of Persistence

The John Maxwell Co.

Passion enables leaders to carry out their dreams, and it is a quality that must be harnessed...Read More

Marketing

Too Much Buzz

The Economist

Though it is an excellent tool for reaching your customers, social media does offer the risk of overexposure...Read More

Economy

ECB Needs to Do More to Prevent Euro Collapse

Financial Post

The ratings agency Fitch is predicting a "cataclysmic" collapse of the euro, if the central bank does not take action...Read More

AxSA's Reading Forward

Brandwashed: Tricks Companies Use to Manipulate Our Minds and Persuade Us to Buy

By Martin Lindstrom

Book Description:

Marketing visionary Martin Lindstrom has been on the front lines of the branding wars for over twenty years. Here, he turns the spotlight on his own industry, drawing on all he has witnessed behind closed doors, exposing for the first time the full extent of the psychological tricks and traps that companies devise to win our hard-earned dollars.

Picking up from where Vance Packard's bestselling classic, The Hidden Persuaders, left off more than half-a-century ago, Lindstrom reveals:

• New findings that reveal how advertisers and marketers intentionally target children at an alarmingly young age - starting when they are still in the womb!
• Shocking results of an fMRI study which uncovered what heterosexual men really think about when they see sexually provocative advertising (hint: it isn't their girlfriends).
• How marketers and retailers stoke the flames of public panic and capitalize on paranoia over global contagions, extreme weather events, and food contamination scares.
• The first ever neuroscientific evidence proving how addicted we all are to our iPhones and our Blackberry's (and the shocking reality of cell phone addiction - it can be harder to shake than addictions to drugs and alcohol).
• How companies of all stripes are secretly mining our digital footprints to uncover some of the most intimate details of our private lives, then using that information to target us with ads and offers 'perfectly tailored' to our psychological profiles.
• How certain companies, like the maker of one popular lip balm, purposely adjust their formulas in order to make their products chemically addictive.
• What a 3-month long guerilla marketing experiment, conducted specifically for this book, tells us about the most powerful hidden persuader of them all.
• And much, much more.

This searing expose introduces a new class of tricks, techniques, and seductions - the Hidden Persuaders of the 21st century- and shows why they are more insidious and pervasive than ever.

WSJ: 10.25.2011 (Posted for Joe V.)

2011-12-26T11:59:00.002-05:00

FRANCHISING
OCTOBER 25, 2011

Executive and Author Shares Dos and Don'ts of Starting a Business

Luke Johnson, chairman of private-equity house Risk Capital Partners, has made a success of businesses as varied as the Pizza Express restaurant chain, the Riva chain of bingo clubs and dental-surgery group Integrated Dental Holdings. Mr. Johnson, the author of "Start It Up: Why Running Your Own Business is Easier Than You Think" shares his 10 key tips for getting a business off the ground.

Before leaving your job for a new venture, consider moonlighting or going part-time. A steady income to cover personal overheads can be a life-saver while you develop your concept. Few new companies can afford to pay their founder a decent salary at the beginning. It will mean working on your new project at weekends, evenings and holidays—but then no entrepreneur ever made it without trade-offs.

Always write a comprehensive business plan. Even if you don't need a business plan to raise cash, it's worthwhile to express your thoughts in a coherent way in written form. A plan should include a timetable, a description of the product and potential customers, the capitalization, biographies of the key management, and financial projections—as a minimum. The plan shouldn't be longer than 20 pages, but it must include all the key details.

If you haven't already recruited a partner, look into it. Teams are generally more likely to succeed than one-man or -woman bands. A partnership will be seen as a better proposition by capital providers, and a combination of skills and resources is more likely to overcome the inevitable challenges facing any new firm. I have always worked with partners—being a sole trader can be a lonely occupation, and the journey is always more enjoyable if you have a colleague with whom to share it.

Never give a bank or landlord a personal guarantee. There is almost always another source of funding, or another property to occupy. When you sign a personal guarantee to a lender, you risk being made bankrupt if the business fails. Too many first-time entrepreneurs agree to such bank demands when they should say no. Sometimes the bank will still extend the facility, but sometimes it will be necessary to look elsewhere for financing.

Do what you know. Don't plunge into a new sector without having done extensive homework—or preferably having worked in the field. Most entrepreneurs who do well have studied the technical aspects of the industry by working in it before breaking off on their own. That way they gain contacts, credibility and an understanding of customers and the particular economics of their preferred niche.

It's the execution, not the idea, that counts most. Lots of would-be millionaires believe they have a world-beating business concept. But a dream is just that, unless it is translated into concrete and practical action. Passion matters, but commerce is at heart a pragmatic exercise, not an emotional one. Before deciding to become your own boss, be sure you are willing to do the gritty essentials, like selling and bookkeeping. It is not a career for the faint of heart or the chronically shy—or indeed the idle.

Don't take a franchise. Very few franchise offerings represent good value, and those that do, like McDonald's, are generally oversubscribed. Many franchises don't deliver on their promises, and have an obvious formula and a mediocre brand—for which franchisees pay through the nose. The point about working for yourself is that you enjoy freedom and independence—it's hard to do that as a franchisee.

Creating a real business takes time. Few companies do well quickly—most take years to cultivate their customers, perfect their services and generate sustainable profits. This means entrepreneurs need both a sense of urgency, in order to make things happen, and a degree of patience. Many start-ups have to reinvent themselves to discover the right business model—often several times. All this requires perseverance and flexibility over the long haul.

It's not just about the money. Few entrepreneurs start a business just because they want to be rich. They do it because they want to build something, because they see an unexploited gap, because they have no choice, because they have a point to prove, because of the thrill of making something from nothing.

Of course, positive cash flow and the profit motive are integral—no business survives that loses money. But the high achievers know that being vitally engaged in something worthwhile is what really counts.

Be prepared to make sacrifices. Quite a few entrepreneurs I know reckon they earn less working for themselves than they could as an employee. They do it because they love the life, and couldn't bear the bureaucracy and office politics so prevalent in so many large organizations. But be sure your family support you in your adventure, and that you have the stamina and desire to see it through. It is unlikely to be an easy ride, but I have found the rewards to be worth the price.

—"Start It Up: Why Running Your Own Business is Easier Than You Think" was published in September by Portfolio Penguin.

From The Economist (12.23.2011)

2011-12-22T08:34:00.001-05:00

Africa’s population

Miracle or Malthus?

Some Africans think they face demographic disaster, others that they could reap a demographic dividend. They will probably get neither

Dec 17th 2011 | OUAGADOUGOU | from the print edition

THE Marie Stopes clinic on the outskirts of Ouagadougou, capital of Burkina Faso, recently performed the country’s first vasectomy. It stirred a public outcry. One man said Daoude Zia, a 41-year-old teacher with four children, had let himself be “castrated”. “We must sleep with women without using contraceptives,” wrote another, “and women should throw away family planning because children are a gift of God and we must create more and more.”

African demography is unique. It is the only continent that will double in size, reaching 2 billion people by 2045 at current rates. Some countries, such as Liberia and Niger, are growing faster still, doubling in size in less than 20 years—a stunning increase that is causing forecasts of Malthusian disaster for countries that cannot feed themselves. With 12% of the world’s population, sub-Saharan Africa has 57% of the deaths of mothers in childbirth, 49% of its infant mortality and 67% of HIV infections.

Yet Africa is also showing signs of embarking on the same transition towards smaller families that has occurred everywhere else. In north Africa families of two are the norm. Even if you exclude that region, the sub-Saharan part includes areas of relatively low fertility such as southern Africa, where families of three prevail. Big cities, such as Zambia’s Lusaka and Congo’s Kinshasa, have fertility rates below four; the rate in Ethiopia’s Addis Ababa is probably just two. Evidence of lower fertility is raising hopes that Africa can reap a “demographic dividend”, the economic benefit countries get when the share of the working-age population rises relative to children and old people.

Which, then, is more likely, dividend or disaster? Start by comparing Africa with other parts of the world. When fertility started to fall in Asia after 1960 and Latin America after 1970, it did so quickly, ineluctably and universally. The number of children a woman could expect in her lifetime fell from six to two in a generation. The fertility fall was continuous. And contraceptive use spread rapidly. Family planners were amazed to discover that only a year or two after contraceptives had appeared in cities, illiterate women were using them in remote villages. The pattern of swift, uninterrupted decline is now taken as the norm: the UN uses it to project a worldwide convergence towards the replacement rate of fertility (2.1, the rate at which a population stabilises in the long term).

But convergence is not happening in Africa. In a few countries, including Niger and Uganda, the fall in fertility has barely begun. Where it has started, the decline is usually slower than it was in Asia. East Asian fertility fell by more than half in the 20 years to 1985. In Cameroon fertility has fallen only one point (from 5.7 to 4.7) in the past 20 years. And in eight African countries, including Ghana and Kenya, the decline has stalled—that is, after falling for a while, the rate got stuck at about five. Fertility stalls are not unknown elsewhere: Argentina’s fertility remained at three for decades; South Korea and Costa Rica also experienced hiccups. But no continent has experienced so many stalls, or so early in the process of decline, as Africa.

In the 1970s the main explanation for the continent’s high fertility was cultural. The extended family plays a bigger role in African life than elsewhere; children are often brought up by cousins or aunts. This reduces the burden of child-rearing on the parents and cuts the implicit cost of children. As fertility has begun to fall, though, other explanations have come to the fore.

Family planning is much less readily available in Africa than it was in Asia. By some estimates, a quarter of married women want contraceptives but cannot get them. That reflects reduced aid for family planning in the past 15 years and political ambivalence about cutting fertility in Africa itself. Uganda’s president once told a student gathering “your job is to produce children”; a Ugandan village chief says “to avoid having intruders grab our land we must keep producing many children.”

But cultural resistance, lack of contraception or weak political will cannot be the sole explanations. Malawi increased modern contraceptive use from 17% of women in 1998 to 42% in 2010 but fertility fell only a bit, so something else must be going on. To generalise wildly, there are two ways to control fertility: to have children quickly and then use contraception to stop having more, or to space out births, leaving longer intervals between each. Many Africans have traditionally used the second method—and may now be using contraception to make birth intervals even longer. The average lapse between first and second births in South Africa is almost four years. This method of control does cut fertility, but not as much as the other.

Mortality also plays a role. The demographic transition is the shift from high mortality and high fertility to low mortality and low fertility—and infant mortality in Africa remains stubbornly high: 85 babies die for every 1,000 live births. True, that is half the level of the 1950s, but more than four times East Asia’s current rate. By increasing mortality, the spread of HIV/AIDS probably kept fertility higher than it would have been. Last, female education in Africa, like contraceptive use, has lagged behind the rest of the world, and there is a close connection between educating girls and having fewer children.

All this explains why the fall in African fertility has been modest so far. It implies the decline could accelerate if Africa were to get the conditions right. But it also suggests Africa’s demographic transition may end up different from the “gold standard” of Asia: it will be patchier (with occasional fertility stalls) and led by cities and a few countries (South Africa, Rwanda). It also means that until Africa reduces rural fertility, it will not reach replacement levels.

That could take years, but attitudes are starting to change. In rural Senegal women say they would never use contraceptives—yet everyone knows what is available and how to get it. In Burkina Faso the vasectomy row did not put everyone off. The clinic performed two more procedures the next day. One was for a 52-year-old farmer.

12.13.2011: From the Economist

2011-12-13T23:29:00.002-05:00

Hong Kong in Honduras

An ambitious development project aims to pull a Central American country out of its economic misery. Can it work?

Dec 10th 2011 | from the print edition

TRUJILLO is a sleepy backwater, but one with a lot of history. The beautiful bay surrounded by lagoons and mountains on the northern coast of Honduras was where Christopher Columbus set foot on the American continent during his fourth voyage in 1502. But in a few decades, it might be known for something entirely different: being the Hong Kong of the West. Scores of skyscrapers and millions of people could one day surround the natural harbour. The new city could dominate Honduras, today one of the poorest and most crime-ridden countries in Central America, becoming a magnet for most of the region’s migrants.

The prospect may sound fantastic, but this is the goal of an ambitious development project that Honduras is about to embark upon. In a nutshell, the Honduran government wants to create what amounts to internal start-ups—quasi-independent city-states that begin with a clean slate and are then overseen by outside experts. They will have their own government, write their own laws, manage their own currency and, eventually, hold their own elections.

This year the Honduran legislature has taken the first big steps towards the creation of what it called “special development regions”. It has passed a constitutional amendment making them possible and approved a“constitutional statute” that creates their autonomous legal framework. Mauritius has just announced that it will allow its supreme court to hear cases from the new entities (beyond that, in a relic of colonialism, is Britain’s Privy Council, to which the decisions of the island state’s supreme court can be appealed). And on December 6th Porfirio Lobo, the Honduran president, appointed the first members of the “transparency commission”, the body that will oversee the new entities’ integrity.

Finding new worlds

The road to a Honduran Hong Kong will be long and rough. Forming the transparency commission proved more difficult than expected. It has taken longer to find candidates with the right skills. Then Honduran officials seemed to have second thoughts about the commission. But for enthusiasts, the progress so far is still thrilling. The development regions, they say, will allow policies to be tested on a small scale. If their laws and institutions make them an attractive place to live and do business, people will move there. They could also provide healthy competition for the government and spur reform.

The Honduran regions are modelled on a concept called “charter cities” developed by Paul Romer, an economics professor at New York University. The principle is simple: take a piece of uninhabited land big enough for a city of several million, govern it by well-tried rules and let those who like the idea move there. The aim is to replicate the success of such places as Hong Kong, not as colonial outposts but as models of development.

Mr Romer is best known for his insights about technology, not as a constitutional theorist. But the project stems naturally from his research, chiefly the “new growth theory” that he helped develop in the 1990s. This adds ideas—particularly technological know-how—to the inputs of land, labour and capital that in traditional economic theory are needed for growth. More recently he has focused on the rules of open science and governance systems, which help people to deal with each other and think up ideas.

Today his main interest is “meta-rules”: how to move from bad rules, which keep people in poverty, to the sort that lets them thrive. These, he reckons, matter just as much as the better-studied questions around technological change. “What types of mechanisms will allow developing countries to copy the rules that work well in the rest of the world?” he asks.

Changing such bad rules singly is hard enough. But insider interests and institutional inertia make reforming an entire country at best excruciatingly slow. Coercion offers a tempting shortcut, but it usually backfires. Outside help, whether in the form of cash, advice or “nation-building” efforts, has a generally poor record too.

The idea of setting up a charter city echoes the way that big companies adapt to change. They often set up new divisions unencumbered by old rules. These can be dramatic successes. Target, America’s second-largest discount retailer, began life as an internal start-up but eventually took over its parent company, Dayton Hudson.

A clean slate allows government authorities to experiment with laws and governance or copy those that have worked elsewhere, says Mr Romer. A further spin-off, potentially of great interest to rich countries such as America struggling with illegal migration, is that the new entity’s open door gives the huddled masses an alternative: instead of risking their lives on perilous journeys to cross borders illegally, they can move legally to a charter city.

Boots not ballots

More fundamentally, Mr Romer argues, when people vote with their feet to come and live in a charter city, they opt in to its rules, in a way that makes possible a new form of governance: neither authoritarian nor (at least initially) fully democratic. Migration to Britain gives the legal system there legitimacy in the eyes of those who move there, even if they cannot vote. If the English legal system were enforced on the same person in his home country, Mr Romer notes, that would be colonial rule.

For this reason he wants rich countries to oversee the administration of charter cities, in particular the judicial system and the police. This would not only protect them from interference by the host nation but avoid a common problem in poor countries: that elected leaders, once in office, abuse their power to entrench their rule and enrich themselves.

Honduras has not adopted Mr Romer’s ideas wholesale, although the project as planned still enjoys his strong support. Doing away with new autonomous entities or even changing their framework will require a two-thirds majority in the country’s congress and the passage of a referendum by the cities’ inhabitants. But the Honduran charter cities will remain legally intertwined with the local judicial system. Although nominated by the cities’ governing authorities, judges must be approved by a two-thirds majority in the Honduran legislature. Lawmakers will also need to ratify the region’s laws, albeit only by a simple majority to say yes or no.

Perhaps the most important feature of the new venture is the “transparency commission”, a kind of board of trustees that appoints the governors, supervises their actions and is meant to make sure that the entities are beyond reproach, not least when it comes to the corruption (often fuelled by the drugs trade) that plagues the region. “It is easier to create a board of trustees than to give control of part of your territory to a foreign nation,” says Octavio Sánchez Barrientos, the presidential chief of staff. A role for foreign government is still an option, but only Mauritius has so far signed on—as part of its push to become a global provider of legal services.

In other areas, Mr Romer’s original ideas have prevailed. At least one new region will be big—about the size of Hong Kong (some 1,000 square kilometres). Most revenues will not come from taxes (which are capped at 12% for individuals and 16% for corporations) but from leasing land to investors. And democracy will be introduced gradually. Only when the transparency commission deems that the time is ripe will citizens be able to elect the members of the “normative councils”—in effect, local parliaments.

This aspect of the plan is just one of those attracting heated criticism. Some find the explicit (if temporary) rejection of democracy repellent. Others detect a whiff of neocolonialism: gimmicks dreamed up in rich countries being foisted on poor ones. They believe that the project is especially misplaced in Honduras, a country crippled by weak state machinery and courts that flounder in the face of organised crime. The new entity may suck tax revenues and talent away from the rest of the country, critics fear. Another worry is that the new entities may prove more like Macau than Hong Kong: easy prey for gangsters, money-launderers and other shady characters.

Much will depend on the transparency commission. The first batch of members appointed this week comprises George Akerlof, another economist and Nobel laureate; Nancy Birdsall, formerly at the Inter-American Development Bank, who now runs the Centre for Global Development, a think-tank; Ong Boon Hwee, a former senior executive at Temasek Holdings and Singapore Power; and Harry Strachan, an investor who used to run INCAE, a leading Latin American business school, with Mr Romer himself in the chair.

The commission’s first job is to fill all of its nine seats. Then the hard work will start, first on investigating whether any foul play has already taken place: rumours are circulating that insiders have bought land in or near Trujillo and other potential sites. Next comes helping pick the regions’ locations and choosing developers in a way that inspires confidence not suspicion. The Honduran agency for public-private partnerships has already signed several memoranda of understanding with firms including South Korea’s Posco and two start-ups with libertarian leanings (see article).

Wanted: people

Then there is the general population. The regions are supposed to be open to anybody, but the inflow of people may have to be controlled. What is more, success or failure will depend not just on good rules, as in laws, but on the social norms that are established by its first inhabitants, explains Mr Romer. The key, he says, is to begin with a core of people who share certain new norms—rather as when William Penn attracted people to Pennsylvania who were committed to his charter’s legal promise of freedom of religion. Once the norms are well established in a community, subsequent immigrants will adapt to them.

Last, but not least, comes security. Private security firms will have to protect the population in the new cities. Honduras is one of the world’s more corrupt countries, in 129th place out of 183 in a survey of outsiders’ perceptions by Transparency International, a Berlin-based lobby group. It also has the region’s highest murder rate. The local police have a poor reputation. Last month 176 police officers were arrested in a corruption crackdown.

Many uncertainties remain about both the theory and the practice of charter cities, and about whether a small and troubled country like Honduras is the right place to start. Mr Romer’s response is that if his ideas can work there, they can work anywhere. Even if no charter city ever rises in the country, the project has helped to refine and promote his ideas. Other countries have already shown some interest in the concept (among the locations talked about are north Africa and Asia Minor).

It is not just the connection with Columbus that makes Trujillo a suitable site for the first charter city. It was there in 1896 that the pseudonymous American writer O. Henry wrote “Cabbages and Kings”, a derisive tale of torpor, in which he coined the term “banana republic”. Skyscrapers would be a suitable riposte.

From the Asia Times

2011-12-10T09:52:00.001-05:00

Wall St likes your amnesia
By Ellen Brown

On November 27, Bloomberg News reported the results of its successful case to force the Federal Reserve to reveal the lending details of its 2008-09 bank bailout. [1] Bloomberg reported that by March 2009, the Fed had committed US$7.77 trillion in below-market loans and guarantees to rescuing the financial system; and that these nearly interest-free loans came without strings attached.

The Fed insisted that the loans were repaid and there have been no losses, but the Bloomberg report said the banks reaped a $13 billion windfall in profits; and "details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger."

The revelations provoked shock and outrage among commentators. But in a letter to the leaders of the House and Senate Committees focused on the financial services industry, Fed chairman Ben Bernanke responded on December 6 that the
figures were greatly exaggerated. He said the loans were being double-counted: short-term loans rolled over from day to day were counted as separate cumulative loans rather than as a single extended loan.

Bloomberg was quick to rebut, denying any exaggerated claims. [2] But either way, the banks were clearly getting perks not available to the rest of us. As former congressman Alan Grayson observed in a December 5 editorial:

The main, if not the sole, qualification for getting help from the Fed was to have lost huge amounts of money. The Fed bailouts rewarded failure, and penalized success. ...

During all the time that the Fed was stuffing money into the pockets of failed banks, many Americans couldn't borrow a dime for a home, a car, or anything else. If the Fed had extended $26 trillion in credit to the American people instead of Wall Street, would there be 24 million Americans today who can't find a full-time job? [3]

All in the name of liquidity
It was all explained, said Grayson, with "the Fed's all-time favorite rationale for everything it does, 'increasing liquidity'." In 2008, bank liquidity dried up after Lehman Brothers collapsed, and the banks could not get the cheap, ready credit on which their lending scheme depends. The Fed then stepped in as "lender of last resort", doing what it had to do to keep the banking scheme going.

Left unexplained is why the banks' need for "liquidity" justifies such extraordinary measures. Why do banks need cheap and ready access to funds? Aren't they the lenders rather than the borrowers of funds? Don't they simply take in deposits and lend them out?

The answer is no. Today when banks make loans, they extend credit first, then fund the loans by borrowing from the cheapest available source. [4] If deposits are not available, they borrow from another bank, the money market, or the Federal Reserve.

Rather than loans being created from deposits, loans actuallycreate deposits. They create deposits when checks are drawn on the borrower's account and deposited in another bank. The originating bank can then borrow these funds (or others created by the same process at another bank) at the Fed funds rate - currently a very low 0.25%. In effect, a bank can create money in the form of "bank credit", lend it to a customer at high interest, and borrow it back at very low interest, pocketing the difference as its profit.

If all this looks like sleight of hand, it is. The process has been compared to "check kiting," defined in Barron's Business Dictionary as:

[An] illegal scheme that establishes a false line of credit by the exchange of worthless checks between two banks. For instance, a check kiter might have empty checking accounts at two different banks, A and B. The kiter writes a check for $50,000 on the bank A account and deposits it in the bank B account. If the kiter has good credit at bank B, he will be able to draw funds against the deposited check before it clears, that is, is forwarded to bank A for payment and paid by bank A. Since the clearing process usually takes a few days, the kiter can use the $50,000 for a few days and then deposit it in the bank A account before the $50,000 check drawn on that account clears.

Setting things right
As suspicious as all this appears, the economy actually needs an expandable credit system, and an expandable credit system needs a lender of last resort. What is wrong with the current scheme is that it discriminates against Main Street in favor of Wall Street. Banks can borrow very cheaply, while individuals, corporations and governments pay "whatever the market will bear". The banker middlemen take their cut in a scheme in which money is actually manufactured in the process of lending it. The profits are siphoned off to the 1% at the expense of the 99%.

To fix the system, the profits need to be returned to the 99%. How that could be done was suggested by radio host and political commentator Thom Hartmann in a recent editorial:

Have the central bank owned by the US government and run by the Treasury Department, so all the profits ... go directly into the Treasury and you and I pay less in taxes... [6]

For a model on the local level, he pointed to the Bank of North Dakota:

The good people of North Dakota ... established something very much like this - the Bank of North Dakota - and it's kept the state in the black, and kept its farmers, manufacturers and students protected from the predations of New York banksters for nearly a century. It's time for every state to charter their own state bank, just like North Dakota did, and for the Treasury Department to either buy the Fed from the for-profit banks that own it, or simply nationalize it.

We have been distracted here and in Europe by a sudden panic over our "sovereign debt" crises, when the real crisis is that our debt is not sovereign. We are indentured to a Wall Street money machine that creates our money and lends it back to us at interest, money our sovereign government could be creating itself, with full democratic oversight and accountability to the people.

We have forgotten our roots, when the American colonists thrived on a system of money created by the people themselves, debt-free and interest-free. The continued dominance of the Wall Street money machine depends on that collective amnesia. The fact that this memory is surfacing again may be the machine's greatest threat - and our greatest hope as a nation.

Notes
1. Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress, Bloomberg News, November 28, 2011.
2. Bloomberg News Responds to Bernanke Criticism of U.S. Bank-Rescue Coverage, Bloomberg News, December 8, 2011.
3. The Fed Bailouts: Money for Nothing, Huffington Post, December 5, 2011.
4. Bank Management & Financial Services, McGraw-Hill/Irwin, 2009.
5. Loans Create Deposits -- how banks actually work, Winterspeak.com.
6. $7.7 Trillion to Wall Street - Anything to Keep the Banksters Happy!, Truthout.org, December 3, 2011.

Ellen Brown is an attorney and president of the Public Banking Institute In Web of Debt, her latest of 11 books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are WebofDebt.com and EllenBrown.com.

From the Atlantic Monthly (12.02.2011)

2011-12-02T10:20:00.001-05:00

Be a Jerk: The Worst Business Lesson From the Steve Jobs Biography

Apple's founder and CEO could be a cruel and nasty guy. He was also the greatest chief executive of our time. Don't go thinking those two things are related.

AP Photo/Jeff Chiu

Steve Jobs was a visionary, a brilliant innovator who reshaped entire industries by the force of his will, a genius at giving consumers not only what they wanted, but what they didn't yet know they wanted.

He was also a world-class asshole.

Walter Isaacson's best-selling biography of Jobs offers a revealing look at what the author has called "good Steve" and "bad Steve." Good Steve was brilliant, charismatic, a champion for excellence, an alchemist who turned a moribund computer company into gold. Bad Steve was petulant, rude, spiteful, and controlling, a man who thought nothing of publicly humiliating employees, hogging the credit for work he hadn't done, throwing tantrums when he didn't get his way, or parking his Mercedes in handicapped spots. For several years, he even denied the paternity of his daughter so that the child and her mother had to live on welfare.

The ease with which people can possess astonishingly contradictory qualities is one of the mysteries of human nature; indeed, it's one of the things that separates humans from, say, an Apple computer. Every one of the components that makes up an iPad is essential to the work it produces. Remove one part and the machine no longer performs its job, and not even the Genius Bar can fix it. But humans are full of qualities that are in no way integral to their functioning in the world. Some aspects of personality have little or no bearing on whether a person performs well, and not a few people succeed in spite of their darker qualities. You can be a genius and an asshole, but the two aren't necessarily causally linked. In fact, there's a strong body of evidence to suggest that there are plenty of assholes who aren't geniuses at anything other than ... being assholes.

The next batch of business books: The 7 Habits of Highly Effective Assholes, The One-Minute Asshole, and Who's The Asshole Who Moved My Cheese?

But such subtleties may be lost on CEOs, middle managers and wannabe masters of the universe who are currently devouring the Steve Jobs biography and thinking to themselves: "See! Steve Jobs was an asshole and he was one of the most successful businessmen on the planet. Maybe if I become an even bigger asshole I'll be successful like Steve."

This sort of flawed thinking -- call it asshole logic -- isn't something that's necessarily endorsed by Jobs's biographer.

"(Jobs) was not the world's greatest manager," Walter Isaacson said in a recent interview with 60 Minutes. "In fact, he could have been one of the world's worst managers."

But asshole logic, not surprisingly, tends to ignore facts that don't sanction one's own assholery. This distorted reasoning was already prevalent before Steve Jobs's death, and is only likely to spread as Isaacson's biography closes in on becoming the best-selling book of 2011. Five years ago, when Stanford professor of management science and engineering Robert Sutton was researching his book, The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn't, he ran across a disconcerting number of Silicon Valley leaders who believed that Steve Jobs was living proof that being an asshole boss was integral to building a great company.

Sutton's counter-thesis was that assholes--which he defined as those who deliberately make co-workers feel bad about themselves and who focus their hostility on the less powerful--poison the workplace and induce qualified employees to quit and are therefore bad for business, regardless of the asshole's individual talent or effectiveness.

When Sutton published an article in the Harvard Business Review advancing his theory, he was amazed at the reaction. He had published other articles in the Review, many of them longer and better researched, but nothing provoked the response that his asshole article did. Sutton received well over 1,000 emails, and gathered countless horror stories, including one about a worker undergoing chemotherapy whose boss told him he was "a wimp and a pussy."

What an asshole!

Sutton decided to expand the article into a book, and wound up interviewing dozens of Silicon Valley leaders and insiders. When Sutton would advance the notion that assholes are bad for business, one person after another had the same reaction: "What about Steve Jobs?"

"Even people who worked with Jobs told me that they'd seen him make people cry many times, but that 80 percent of the time he was right, " says Sutton. "It is troubling that there's this notion in our culture that if you're a winner, it's okay to be an asshole."

So many people advanced Steve Jobs as evidence that asshole CEOs build better companies that Sutton somewhat reluctantly included a chapter in his book on "The Virtues of Assholes," with Steve Jobs as Exhibit A. There is some evidence that "status displays" by aggressive bosses can motivate workers and give slackers a kick in the pants. And effective jerk bosses usually aren't assholes all the time, they're able to turn on the charm when the situation demands it, something Steve Jobs, by most accounts, was very good at doing. And it helps for companies to have skilled subordinate executives that are good at cleaning up after the Asshole-in-Chief, much like the sad-faced men carrying shovels who walk behind circus elephants.

But Sutton's book makes clear that for the most part, assholes are bad for the bottom line, to say nothing of the human toll they exact. There are plenty of very successful companies that aren't led by assholes - Google, Virgin Atlantic, Procter & Gamble and Southwest Airlines among them. Likewise, there are legions of assholes who lead companies that aren't successful, in part due to their own bad behavior.

With the death and canonization of Steve Jobs and the emergence of the Jobs biography as a kind of sacred text for managers, the ranks of bosses who see Bad Steve's nastier traits as something to imitate is liable to swell. It's unlikely the book will make despots out of thoughtful, fair-minded middle managers. It's far more probable that it will turn bosses who are already assholes into even bigger assholes, raising the temperature of the worst actors so that they become that most combustible of workplace figures, the flaming asshole.

Already, the web is full of articles that hold up Steve Jobs as the model of how to lead and succeed in life, with titles such as "Ten Leadership Lessons from the Steve Jobs School of Management" and "21 Life Lessons from Steve Jobs." Most of these works prefer to focus on Good Steve, but it may not be long until business book authors hone in on the timeless lessons to be drawn from Bad Steve's asshole ways. The titles write themselves: The 7 Habits of Highly Effective Assholes. The One-Minute Asshole. Who's The Asshole Who Moved My Cheese?

The fact is, Steve Jobs didn't succeed because he was an asshole. He succeeded because he was Steve Jobs. He had an uncanny sixth sense about what consumers wanted, an unmatched ability to adapt existing technology and turn it into something new, and a commitment to quality that turned ordinary Apple customers into fans for life. Being an asshole was part of the Steve package, but it wasn't essential to his success. But that's not a message most of the assholes in the corner offices want to hear.

WSJ: 25 November 2011

2011-11-25T12:46:00.000-05:00

POLITICS
NOVEMBER 25, 2011

Herman Cain's Political Education

By DOUGLAS A. BLACKMON And NEIL KING JR.

When Herman Cain entered Atlanta's Morehouse College in the fall of 1963, Martin Luther King Jr. had just delivered his "I Have a Dream" speech. During his first semester, four black girls were killed in a Birmingham, Ala., church bombing. Young African-Americans flocked to Dr. King's call for nonviolent action or its more radical offshoots.

ZumaPress

Herman Cain at Morehouse in 1966.

Mr. Cain steered clear of the strife boiling around him. The son of a chauffeur to the former chairman of Coca-Cola Co., Mr. Cain pursued his own self-advancement with steady focus.

"I wasn't determined to make social change," Mr. Cain said in an interview. "I wanted to earn some change…I wanted to make some money."

Mr. Cain's plain-spoken charm has shaken up the Republican presidential nomination contest and pushed him high in the polls, a surprise success diminished only slightly by allegations of sexual harassment relating to his lobbying work in the 1990s. Yet for many, he remains an enigmatic figure defined by his time as a businessman and talk-radio host. Left unclear is how the events of his life shaped his political beliefs.

The answer, based on interviews with Mr. Cain and his classmates at the historically black Morehouse, can be found in a value system common among an older generation of African-Americans: work hard, seize every educational opportunity, always go to church, never get arrested and rely on no one but yourself.

Mr. Cain's closest brush with the turmoil of that era, based on his own recollection, was when he and a group of high-school friends almost refused an order to go the back of a bus, but ultimately complied.

ZumaPress

Mr. Cain with fellow high-school senior Martha Jones in 1963.

For many who suffered some of the worst of the South's racial abuses, blocked economically by Jim Crow laws and excluded from the state Democratic parties in the region, that single-minded preoccupation with self-improvement was a defining characteristic.

Until the middle decades of the 20th century, African-Americans in the South who found ways to vote were generally aligned with the Republican Party—the party of Abraham Lincoln.

By the end of the 1960s, the vast majority of African-Americans had become committed Democrats in response to the national party's embrace of civil-rights legislation. But vestiges of the GOP tradition remained, especially in urban areas such as Atlanta.

"A lot of us in the South at the time were Republicans," said Ed Rutland, a classmate of Mr. Cain's. "My father was a Republican. In fact, I was a Republican."

ZumaPress

Mr. Cain at age 5 in Atlanta, where his family moved in the late 1940s.

Mr. Cain's credo of self-determination is the core message of his campaign—a promise to solve the country's most complex problems with what he sees as uncomplicated common sense, such as his 9-9-9 tax plan. He believes that, with hard work, every person can become a "CEO of self" and achieve great personal wealth.

On the campaign trail, he has defied what he perceives as political correctness, sparring with critics who questioned his lack of involvement in civil rights and battling reports that he sexually harassed several women in the late 1990s, some of whom were employees. Giving no quarter, he has castigated his accusers and the journalists who dug into the claims.

"The media's rules say you have to act in a certain way," Mr. Cain wrote in a blog posting earlier this month, referring to how he had responded to the accusations. "I am well aware of these rules. And I refuse to play by them."

When asked during a lengthy interview in late October to describe his moment of political awakening, Mr. Cain turned the conversation to his economic aspirations. He was 16 years old and learned he would have to earn at least $10,000 a year to qualify for an American Express card.

Morehouse College archives

Mr. Cain in his college yearbook in 1965.

"And I remember thinking to myself, 'One day, I want to make $20,000 a year,'" he said. "So my goal materialistically was I wanted two American Express cards."

By his own account, Mr. Cain didn't formulate his political views until he was in his late 50s, after two decades working his way up the career ladder at Coca-Cola, Pillsbury Co. and Godfather's Pizza. From there he became a restaurant-industry lobbyist, a motivational speaker and a talk-radio host.

Mr. Cain said he can't recall being in discussions about civil-rights activities while at Morehouse, or attending sit-ins and demonstrations in Atlanta during his high-school and college years. The presidential contender said he can't remember whom he voted for in some presidential elections from the 1970s, and that he didn't register as a Republican for another three decades.

"I didn't even know what a conservative or liberal was," he said of his college years.

"Herman was a good student," said one of his classmates, William Howard, now a Baptist pastor in Newark, N.J. "But he was not particularly outspoken on any of the great issues that were confronting us at the time."

ZumaPress

Mr. Cain at Disney World in 1971.

Both of Mr. Cain's parents left poor farms in the Tennessee and Georgia countryside at 18 years of age. His father, Luther Cain Jr., moved the family from Memphis to archly segregated Atlanta in the late 1940s, when Herman Cain was two years old.

His mother worked as a maid. His father got jobs as a janitor, a barber and finally as the driver and personal assistant to Robert W. Woodruff, the legendary Coca-Cola executive and one of the most powerful business figures in the South until his death in 1985.

That job changed the family's fortunes. It also had a formative impact on the young Herman Cain.

Mr. Woodruff periodically made gifts of cash and Coca-Cola stock to Luther Cain, who worked for the Coke magnate from the late 1950s until around the time of his own death in the 1970s. Breaking into a bass imitation of the CEO, Mr. Cain describes how the family got help paying for his college education: "Luther, I hear your son is over at Morehouse. Here's a little something to help you out with that tuition." Some close relatives of Mr. Woodruff said in interviews they are supporting Mr. Cain's presidential campaign.

Mr. Cain said Mr. Woodruff's wealth impressed on him how powerfully the free market rewards success. His dad's work as a well-paid servant also left its mark. "I wanted to be comfortable differently," he said. "That's what inspired me to make good grades. That's what inspired me to go to college."

During Mr. Cain's high-school years, Atlanta was ablaze with civil-rights demonstrations, the most dramatic of which were student marches and sit-ins aimed at desegregating lunch counters and department stores. Large numbers of young people were arrested, but Mr. Cain said his parents told him to stay away—guidance many young African-Americans got from their parents and teachers at the time.

In the city-bus incident, Mr. Cain recalls, he and some high-school friends were told by the driver to move to the back as white passengers piled aboard.

"We were just old enough to be belligerent enough to refuse," Mr. Cain said. "But we decided we didn't want to go to jail. One day we wanted to get a good job. We didn't want to give the cops an opportunity to shoot one of us saying we were being disorderly…So reluctantly we moved to the back of the bus."

By the time he was at Morehouse, Mr. Cain worried he might disappoint his father's boss. "Mr. Woodruff wouldn't have been too pleased if Luther's son was in jail because he was throwing bottles and demonstrating," he said.

Mr. Cain realized he had arrived less well equipped for college than many other students, despite having graduated second in his high-school class. He took remedial reading and worked weekends at an auto-repair shop and stocking shelves at a grocery store his dad opened as an investment. He earned a reputation as a striver who was sensitive about his economic status but largely indifferent to the civil-rights drama around him.

"Herman's thoughts were always about making himself better than he was," said Walter Burns, a classmate who is now a pastor at a Baptist church outside Atlanta. "He abhorred his economic station."

Roswell Jackson, a retired book salesman in Teaneck, N.J., and Mr. Cain's closest friend at Morehouse, recalls a man who was gregarious, friendly and a moderate drinker. "Herman would be among the first on the dance floor, whether he happened to be a good dancer or not," he said.

Some Morehouse graduates have criticized Mr. Cain for being disengaged from the civil-rights movement. Horace Bohannon Jr., who sometimes shared lecture notes with Mr. Cain as an underclassman and later became a follower of Stokely Carmichael and his "black power" movement, said he perceived in Mr. Cain a disdain for students who became more deeply involved in the turmoil of those days. "We were hellbent on changing this society and the structure of the South," he said. "There was sort of a resentment toward us by Herman."

But others from that era say that many students at the school focused on preparing for careers, and that some faculty members discouraged open participation in marches and similar activity.

"Most of the Morehouse fellows did not participate," said Wesley D. Clement, a classmate of Mr. Cain who is now an eye surgeon in Charlotte, N.C. "Your main target and goal was to prepare yourself for business and life. Not that we were ignorant of what was going on or didn't favor what was going on. But we were not involved in the things that some people would have called more radical at that time."

Mr. Cain said he was far from oblivious to the country's racial inequities and that without the civil-rights movement his career options would have been limited.

Mr. Cain avoided some of the most heated moments of the 1960s, and he said his recollections of that era are hazy. He said he doesn't recall being aware of Dr. King, a 1948 graduate of Morehouse, ever visiting the campus, including a convocation during Mr. Cain's senior year at which Dr. King was the featured speaker and the glee club performed. Mr. Cain sang baritone for the glee club all four years at Morehouse.

In his 2011 book, "This is Herman Cain!", the candidate appears to mix up facts relating to the desegregation of the universities of Georgia and Alabama. Mr. Cain also mistakenly said in the October interview that a high-profile protest against a restaurant owned by Lester Maddox, a white supremacist and later Georgia governor, occurred before he arrived on campus, rather than while he was there.

"All of that preceded me being in college," Mr. Cain said. "I never participated in anything like that."

A spokesman for Mr. Cain said later that Mr. Cain stands by his recollections.

After Morehouse, Mr. Cain took a job as a civilian ballistics analyst with the Navy. While working there, the federal government paid for him to pursue a graduate degree at Purdue University, where he earned a master's in computer science.

Five years after graduating, he returned to Atlanta and entered corporate life with a lower-management job his dad helped secure for him at Coca-Cola. Fearing he would forever be known there as the son of Mr. Woodruff's chauffeur, Mr. Cain followed his boss to a job at Pillsbury in 1978.

He was soon running a division of Burger King, then was put in charge of reviving Pillsbury's wobbly subsidiary, Godfather's Pizza, which he eventually went on to buy with a number of partners.

Mr. Cain was such a rarity as a black man in the upper echelons of the restaurant business that a 1989 article in Restaurant News called him "the Jackie Robinson of the food-service chain industry."

He said he drew few political interpretations from his career, except that his success demonstrated to him that racial barriers for African-Americans had largely fallen away. He regarded his achievements simply as proof of what personal focus and hard work could accomplish. "I was totally apolitical," he said.

That began to change when he was living in Omaha, Neb., where Godfather's is based. In 1988, Mr. Cain believed a push in Congress to raise the minimum wage imperiled his efforts to rescue the company. "I'm going, 'Wait a minute. I fixed all the stuff inside the company that I can fix, and now I'm going to get hit upside the head by the government?'" he said.

Then came 1994, the year after Democrats passed an income-tax surcharge to reduce the deficit. He says he was stunned when his personal tax bill increased. "It was just a sneak-a-tax,'" he said. "It only affected people of a certain category…That's why I became a conservative."

Mr. Cain said he remained a registered independent until three years later, when the late Republican leader Jack Kemp of New York invited him one afternoon to a political event at Sylvia's, the famed soul-food restaurant in Harlem.

When the group arrived, Mr. Cain said, "this big muscular black guy yelled, 'Black Republicans? You guys must be Uncle Toms.'"

"That statement haunted me for days," he said. As soon as he got back to Omaha, he registered as a Republican for the first time.

America Lost a Prescient Financier

2011-11-22T21:22:00.000-05:00

REMEMBRANCES
NOVEMBER 21, 2011

THEODORE FORSTMANN 1940-2011

Pioneer of the Big Buyout

Private-Equity Icon Later Shifted Focus to Philanthropy

By GREGORY ZUCKERMAN And MATTHEW FUTTERMAN

Theodore J. Forstmann, a pioneer in the leveraged-buyout business who shifted his focus to sports, media and philanthropy in recent years, passed away Sunday morning after battling brain cancer. He was 71.

Mr. Forstmann, known as Ted, was a longtime bachelor and built a fortune amid the buyout wave of the 1980s and 1990s, even as he railed against the so-called junk bonds used in many deals of that period.

Reuters

Theodore Forstmann, then-chairman of Gulfstream Aerospace, with one of the company's jets in 1997.

The second of six children, Mr. Forstmann grew up in a mansion in Greenwich, Conn., the grandson of the founder of a textile company. After graduating from Yale University and dabbling in various jobs, including teaching gym at a reform school, Mr. Forstmann enrolled in law school at Columbia University. By then, his family's company had failed and Mr. Forstmann relied on high-stakes bridge and golf games for cash.

In 1978, he helped launch Forstmann Little & Co., an early leveraged-buyout firm. The company led lucrative takeovers of Dr Pepper Co., Gulfstream Aerospace Corp., Topps Co. and others, helping Mr. Forstmann become a billionaire.

With his love of the spotlight, his outspoken opinions and shock of thick, white hair, he graced magazine covers and issued broadsides at his competitors.

Buyouts surged in size in the late 1980s, and rivals completed huge deals using junk bonds—those rated below investment-grade—and riskier debt as currency. Mr. Forstmann lashed out, predicting the deals would end badly.

"It's funny money. It's wampum," he was quoted as saying in the 1990 book "Barbarians at the Gate," which chronicles the takeover fight for RJR Nabisco, a battle Mr. Forstmann's firm lost to rival Kohlberg Kravis Roberts & Co. after declining to raise its acquisition bid.

He is credited with coining the famous phrase that gave the bestselling book its title. According to co-author John Helyar, Mr. Forstmann's RJR Nabisco bid would involve taking on those who would fund their bids with junk bonds. The image formed in his mind.

"The junk bond hordes are at the city gates ...This is where we could stand at the bridge and push the barbarians back. Wouldn't that be phenomenal?"

When the economy slowed in the early 1990s and junk bonds fell in value, Mr. Forstmann looked prescient. Later in the decade, he jumped on the telecom bandwagon, suffering big losses in the early 2000s. He never selected a successor at his firm and chose not to raise a new buyout fund.

By then, Mr. Forstmann had begun to spend more time on charitable efforts, such as education reform and children's causes in Africa. He eventually adopted two young boys from South Africa.

He also made appearances in the gossip pages, being seen with high-profile women including Diana, the former Princess of Wales, actress Elizabeth Hurley and, most recently, television personality Padma Lakshmi.

Bloomberg News

Theodore Forstmann, right, in 2004

In 2004, Mr. Forstmann purchased the talent agency IMG, then know as International Management Group, for $750 million. He shifted the focus at IMG, which had been geared toward representing sports stars, to also market major sports and nonsporting events and their content.

He remained a big sports fan but was embarrassed a few years ago when it was revealed that he had wagered on a French Open final involving two clients, Rafael Nadal and Roger Federer.

After being diagnosed with cancer earlier this year and receiving medical treatments, Mr. Forstmann continued to come into the office regularly, expressing interest in expanding IMG so he would have more to give away. He signed the Giving Pledge, a campaign to get the superwealthy to give away the bulk of their wealth, founded by Bill and Melinda Gates and Warren Buffett.

In 2008 he gave interviewer Charlie Rose his diagnosis of the financial system's problems: "You shouldn't loan money when it can't be paid back."

Email remembrances@wsj.com

Write to Gregory Zuckerman at gregory.zuckerman@wsj.com