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How to Fix America's Schools

2008-12-05T16:56:00.001-08:00

MARCH 19, 2001

How to Fix America's Schools

If you take it for more than a political slogan, President Bush's motto for education reform--"no child left behind"--is a wildly ambitious goal. It is every bit as audacious as Lyndon B. Johnson's War on Poverty or John F. Kennedy's race to the moon. Since the U.S. first embraced universal public education decades ago, there has been a largely unspoken assumption that some children will never earn a high school degree. Now, says National Urban League President Hugh B. Price, Bush is "asking our schools to do something that no society has ever done, to educate all children well, regardless of their circumstances." In effect, Bush is declaring that in the Information Age, a solid education is a fundamental civil right. The President's pronouncement is the culmination of nearly twenty years of mounting efforts to fix America's schools. The educational crusade began in earnest with A Nation at Risk, a 1983 report commissioned by the Reagan Administration warning that "a rising tide of mediocrity [in our schools] threatens our very future as a nation." In 1989, then-President George Bush and the nation's governors held the first-ever national education summit, where they set sweeping goals--from eliminating illiteracy to vaulting U.S. students to No. 1 in the world in math and science.

There has been scant progress toward meeting those goals (tables). Less than half of America's schoolchildren read proficiently at their grade level. U.S. 12th-graders still score well below teenagers in almost every other developed country on mathematics and science tests. The 74% of students who have completed high school by the age of 18 rank the U.S. No. 17 in graduation rates after decades of leading the world, according to the Education Trust, a research group in Washington. "While we've certainly made some improvements, they're not nearly enough to keep up," says Milt Goldberg, who headed the commission that produced A Nation at Risk.

NOT SO GLOOMY. Low-income and minority students fare the worst. Only 29% of all fourth-graders read proficiently at their grade level, but among low-income kids, the figure is 13%. By the end of high school, black and Hispanic children perform only at the level whites do in eighth grade. "This achievement gap is the most important issue of social justice in our society," says Tom Vander Ark, executive director for education at the Bill & Melinda Gates Foundation, which doles out $100 million a year for education reform. The problem is an economic issue, too, since white kids will fill fewer than half of U.S. school seats by 2040, down from 65% today and 85% in 1950.

Still, the prospects are not quite so hopeless as the gloomy report card suggests. Many schools in prosperous, upper-middle-class suburbs have always done a good job, as have certain schools in solid middle-class districts. The real challenge lies with the continuing mediocrity that plagues too many of America's schools--and the disastrous state of education for kids at the bottom. The good news: The past two decades have seen an explosion of local reform efforts aimed at even the most intransigent problems. "We now have abundant evidence that there are strategies that can make a significant difference," says the Urban League's Price.

As discussion begins on Bush's education plan, to be debated in the Senate the week of Mar. 12, BusinessWeek set out to identify the best of these strategies. We posed a simple question: What would it take to achieve the President's goal of "no child left behind"? A broad range of experts and educators helped us draw up seven strategies that, pursued together, would go a long way toward fixing America's schools. The list isn't exhaustive. We left aside such pedagogical questions as how best to teach math or reading. Instead, we focused on changes in the system that would create an environment in which schools could succeed with far more regularity.

In evaluating solutions, we had one basic test: There must be compelling evidence that they work. The ideas that follow have all been battle-tested. In seeking them out, we went to schools, districts, and states that have beaten the odds, often in some of America's toughest neighborhoods. Among them: Humanities Preparatory Academy in New York's Chelsea neighborhood, a high school that often takes students who floundered elsewhere yet sends 91% of its graduates to college, including Harvard University and Northwestern University. At KIPP Academy, which runs middle schools in Houston and New York's South Bronx, more than 90% of students are Latino or African American, and virtually all are poor. Last year, 98% of KIPP's students in Houston passed the Texas Assessment of Academic Skills (TAAS) test, ranking it among the state's best.

Even more impressive are the states that have made large-scale improvements. In the 1980s, Kentucky ranked dead last in the country in its share of adults with a high school or college degree. But 11 years after the courts forced the state to redesign its entire system, 78% of adults now have a high school diploma, up from 53% in 1980. The share holding college degrees has doubled. And the Bluegrass State has leapfrogged other states into the middle ranks of academic performance. Similarly, sweeping reforms have helped North Carolina and Texas make strides, outpacing the gains of all other states on the National Assessment of Educational Progress (NAEP), the primary test used to measure students nationally.

One clear lesson of all the reform efforts is that no single idea can solve the many ills of America's schools. "Schools are complicated institutions, which means you need a comprehensive approach that deals with everything at once," says former Yale University President Benno C. Schmidt Jr., now chairman of Edison Schools (EDSN ), the nation's largest operator of for-profit schools. That's why President Bush's program is just a downpayment on all that's needed.

True, he wants to tackle several areas at once, including technology, school choice, and mandatory testing. But because Washington plays a relatively minor role in education, Bush's proposal doesn't come close to providing the radical action required. Most reforms, from tougher accountability to pay-for-performance for teachers, face stiff opposition that can only be overcome by the states, the highest level of government with leverage over the country's 90,000 schools.

HEFTY OUTLAYS. At the same time, however, the U.S. must also pony up more money for serious reform. Bush wants a $2 billion, or 10%, boost in federal K-12 spending. But that's pennies out of the $360 billion total the U.S. shells out annually on public education. No one has tried to figure out what it would take to provide every child with an adequate education. Wyoming took a shot at it and came up with $7,400 per student a year, or 18% more than what it had been spending. The cost would certainly be higher in many states with big cities and many poor families.

Still, as a starting point, a national increase like Wyoming's would run an extra $60 billion a year. Even half that, if used wisely, could make a dent. But real change will require everyone--Washington, the states, and school districts--to dig deep into their pockets. For that, the political environment has never been more conducive. "Almost every governor has an agenda to improve the schools," notes Ted Sanders, president of the Education Commission of the States. The question now is whether it's enough to give every American child a real education.

1. PAY TEACHERS FOR PERFORMANCE

Few factors affect students' performances more than the quality of their teachers. A Tennessee study in 1996--to cite just one of many making the same point--found that fifth-graders who had three years of effective teaching improved their math scores by 83%, vs. a 29% gain for students with ineffective teachers. Yet many teachers are unqualified. One-third of secondary school math teachers and roughly half of physical science teachers didn't major or minor in the subjects they teach. Often, "the most senior teachers opt for the nicest schools, while we put our weakest teachers in the hardest locations," says Robert T. Jones, president of the National Alliance of Business (NAB), which backs training and education initiatives.

The appalling shortage of quality teachers stems in part from chronically low pay. Any college grad who wants to teach must be willing to endure a lifetime of subpar wages (chart). Now schools face the near-impossible mission of filling the 2.2 million teaching vacancies expected over the next decade.

Aggravating the problem is an outdated salary structure unrelated to what teachers do in the classroom. Most teachers are still paid under the so-called single-salary system developed in Des Moines 80 years ago. Everyone with the same seniority and degree is paid the same. That approach marked a step forward in 1921, when it corrected the practice of paying male teachers more than female ones. But the system has become a straitjacket that's stifling schools, which can't reward the best teachers or pay more to lure math and science graduates. "It doesn't offer teachers any real opportunity for professional advancement," argues Lowell Milken, chairman of the Milken Family Foundation.

The solution: Pay teachers more, and scrap single salaries for a system that rewards teachers for what they contribute to student learning. On Jan. 30, four leading business groups--the NAB, the U.S. Chamber of Commerce, the Business Roundtable, and the National Association of Manufacturers--endorsed a plan along these lines. These groups would, in return for higher teachers' pay, raise the bar for new teachers. Educators would be paid according to how well they perform in class and mentor other teachers, with the chance to reach a max of $100,000. Meanwhile, professional development would be expanded.

Connecticut has shown that such reforms can work. Starting in 1986, it raised teacher salaries by nearly one-third. Today, they're still among the nation's highest, averaging around $53,000 and peaking at more than $80,000. Simultaneously, the state hiked requirements for new teachers, including passing an exam in their subject area. New teachers work with a mentor to improve their technique. Then they are evaluated. The review covers lesson plans and teaching techniques and "evaluates their ability to foster learning," says Raymond Pecheone, who oversees teacher evaluation for the state. Those who don't cut it by their third year are out.

UP THE LADDER. The payoff has been great. It has avoided the teacher shortages of other states. "We turn away three [applicants] for every one we let into our teaching program, and the grade-point average of those accepted is 3.4," brags Richard L. Schwab, dean of the Neag School of Education at the University of Connecticut. Teacher attrition is down, and Connecticut has made huge gains in student achievement, especially in reading, where it ranks first in the nation.

Now reformers elsewhere are adding more rungs to a career ladder teachers can climb. Last fall, Cincinnati negotiated a new system with the local union in which teachers may ascend five rungs in their career--from apprentice to accomplished. Advances are based on a sophisticated measure of performance. Educators will undergo periodic evaluations, "and if you don't measure up, you can drop a rung and actually lose pay," says Kathleen Ware, the city's associate superintendent. Iowa is close to adopting a similar statewide career ladder.

Teachers themselves are one of the most difficult obstacles to such schemes. The country's two teachers unions, the National Education Assn. (NEA) and the American Federation of Teachers (AFT), support higher pay to attract more qualified talent to teaching. And "we support different ways of providing compensation to teachers," says AFT President Sandy Feldman, who notes that her union backed the Cincinnati plan. But the unions are skeptical about some aspects of reform. NEA President Robert F. Chase, for example, opposes paying more to attract math and science teachers. "Is their work really more important than teaching kindergarten or first grade?" he asks. Such thinking ignores the marketplace reality that those trained in math and science have many other opportunities.

Teachers at the Vaughn Next Century Learning Center in Los Angeles even had to withdraw from the union to keep working there after the school adopted a pay-for-performance ladder. In 1990, 70% of Vaughn teachers had less than three years experience. The school serves 1,300 Hispanic elementary kids in one of the city's poorest neighborhoods. Turnover was high, and Vaughn ranked among L.A.'s worst schools.

Three years later, Principal Yvonne Chan converted Vaughn into a charter school (which means it receives public funds but is otherwise largely autonomous). In 1998, she set up a system that bases pay on a teacher's ability to help kids meet California's standards and gives bonuses to high achievers. Top performers can earn $68,000 a year, 20% more than in other L.A. schools. But the local union insisted that Vaughn teachers return to a regular public school. Some did, but after an ugly debate, most left the union and endorsed the plan.

Today, most of Vaughn's 69 teachers seem to enjoy the challenge. "When I was in the union, I didn't feel teachers were being asked to work up to their full potential," says Jose Salas, who quit the union to teach at Vaughn. Now, "there's a feeling of controlling one's destiny." Test scores are soaring, and the state ranks Vaughn in roughly the top 10% of schools serving similar inner-city students.

Improving teacher effectiveness also requires professional development. Today, the average U.S. teacher receives just eight hours of training a year, less than 10% of what teachers get in Japan, for example. But look what happened in New York's District 2, which serves 23,000 students in Manhattan. In the mid-1980s, it began devoting 8% of its budget to teacher instruction, compared with less than 3% spent at the typical U.S. school. At P.S. 130, in Chinatown, Principal Lily D. Woo began holding breakfast meetings, Saturday workshops, and summer sessions to train her staff in more effective methods for teaching literacy. Today, District 2 ranks second among 32 districts in test scores, up from 17th in 1985.

More pay and training cost big bucks. Still, warns the January report by the NAB and the three other business groups, "without high-quality teachers, our efforts to improve student achievement are destined to fail." It's a question of paying now or paying later.

2. MAKE SCHOOLS SMALLER

Two years ago, Yrcania Castillo was kicked out of Hunter College High School in New York. Although the school is highly regarded, Yrcania found it too competitive and impersonal. "My attendance and grades were terrible," she admits. Then she discovered Humanities Prep, a small school in Manhattan that specializes in giving kids a second chance. Yrcania blossomed in the intimate environment of the 175-student school, where she's now a senior. "At Hunter, they didn't care, but here they're really concerned," says Yrcania, 17, who has applied to college. Without Humanities, "I would likely have ended up on welfare," she says.

For decades, U.S. education has operated under the assumption that bigger is better, especially in high schools. After former Harvard President James B. Conant advocated eliminating smaller schools in favor of large, comprehensive ones in the 1950s, most urban high school students began attending factory-like schools with 1,000 students or more. Today, many have become cauldrons of violence, pitiful achievement, and high dropout rates.

It's time for a 180-degree turn. New construction should favor "small neighborhood schools, with 200 to 500 students," says Jack Clegg, CEO of Nobel Learning Communities Inc. (NLCI ), a for-profit school operator. It's too costly to dismantle large dysfunctional schools, but they can be turned into several schools-within-schools, allowing kids and teachers to form closer bonds.

Several cities are already downsizing schools. New Visions for Public Schools, a reform group, has helped to create some 40 small schools in New York, including Humanities Prep. Chicago has 150 small schools after a decade of effort by the Small Schools Workshop at the University of Illinois at Chicago. "None is bigger than 350 kids, and all are run more like communities than factory schools," says Workshop Director Michael Klonsky.

REBORN. The movement is proving that the intimacy long offered by elite prep schools can work minor miracles in disadvantaged districts. Student attendance climbs, and dropout rates fall, according to a new study of Chicago's small schools by the Bank Street College of Education in New York. The schools in the study are located in Chicago's poorest neighborhoods. "It's like a village, where all of the teachers know the students," says Alice Perry, whose daughter, Mary, is a student at Best Practice High, a new Chicago small school.

The school-within-a-school concept makes smallness work even in cavernous buildings. Look at the Julia Richman Education Complex on New York's Upper East Side, or the Cregier Multiplex, a block from Chicago's United Center. As large schools, both had epitomized all that was wrong with urban education. Then they were reborn. Each now houses several specialized small schools, such as Julia Richman's Urban Academy, whose intensive liberal arts program is regarded as among the best in the nation.

There's a similar movement to slash class size. While there has been some controversy about the value and cost of smaller classes, a landmark 1980s study in Tennessee called Project star found that they're especially helpful for young children who often need extra individual attention. Students in kindergarten through third grade were randomly assigned to classes of 12 to 17 pupils, of 22 to 26 pupils, and to large classes with an aide helping the teacher. The result: Those in the small classes did better. The gains persisted even after students left third grade. The star project has fueled efforts to reduce class sizes in the early grades. But overcrowding remains a problem.

3. HOLD EDUCATORS ACCOUNTABLE

Lucy McVey took over as principal of Blanton Elementary in Austin, Tex., in 1996 with one mission: to remove it from the state's list of low-performing schools. Blanton earned the stigma after its mostly Hispanic immigrant students scored poorly on the TAAS. To shake things up, McVey required teachers to attend staff development sessions that ran till 8 p.m. She enticed 600 working-class parents to attend a baked-potato social, where she exhorted them to get more involved. "It was a tremendous struggle," McVey says. Some teachers even quit. But after just one year, math scores jumped by 33%, reading scores by 25%--and Blanton got off the list. Further improvements have landed it on the state's list of blue-ribbon schools.

Blanton is a textbook example of what President Bush believes accountability can do for schools nationwide. His plan calls for annual assessments of students in math and reading from grades three to eight, which would require a huge increase in standardized testing. Today, only 15 states--including Texas--administer such tests in each of these years. His plan would give assistance to low-income schools that fail to make sufficient progress. If a school didn't shape up in three years, its students would get federal funds to attend a better public or private school.

HORNET'S NEST. Critics warn that annual testing would create test mania and divert kids from broader learning. But there's ample evidence that performance can rise with well-designed accountability systems that use tests in addition to other measures. In North Carolina's ABC program, each school gets a target for how much they should improve on the state's test each year. Schools that meet the standard receive a bonus of up to $1,500 per teacher. The neediest schools are assigned a team of top-rated teachers, plus an administrator, that spends a year helping to "conduct staff development and forming action plans for borderline teachers," says Elsie C. Leak, who oversees the program. So far, 85% of schools receiving aid have earned their way off the laggard list. North Carolina, with Texas, has outpaced all other states in gains on the NAEP tests.

Or look at how Texas helped to improve the three districts around El Paso, one of the poorest areas in the U.S. The schools had been dreadful for so long that people assumed nothing could be done, says Susana Navarro, head of the El Paso Collaborative for Academic Excellence, a community group formed in 1991. Then the group set high standards, worked to improve teacher quality, and relied on the TAAS exams to measure progress. Now, 70% of El Paso's children pass the exams, up from about 50% in 1994. "Accountability [has been] the most valuable contribution," says Navarro.

Testing often stirs up a hornet's nest among parents and critics. While there's little opposition in Texas, a backlash is building in states that conduct more difficult tests. In Massachusetts, 45% of high school students have been flunking the test that will be required for graduation starting in 2003. This has parents worried that their kids won't graduate on time--or at all.

Similar tests have driven up the dropout rate in Cincinnati, where kids must pass five Ohio tests to graduate. Last June, 92% of 12th-graders but only 35% of freshmen passed all five, says Kathleen Ware, associate Cincinnati superintendent. Some kids learn enough to bring up their score, which is the goal of the tests. But a bigger reason for the discrepancy is that some 40% of incoming students leave before graduation. "This is a long, tough road," warns Ware. It may be that in states with tough tests, students will need more time to meet the standards.

Another worry: that "schooling tends to get reduced to test prep, giving kids a watered-down curriculum," says Monty Neill, head of the National Center for Fair & Open Testing, a group critical of standardized tests. The best educators resist that impulse. At Blanton, McVey reinstated dance and piano when the school got off the troubled list.

The best way to counter the problem is to develop tests worth teaching to. Unfortunately, quality varies widely. California and others states assess English using dumbed-down, fill-in-the-bubble tests. But tests in Massachusetts and New York require kids to read complex material and write extended analyses. The U.S. needs higher and more uniform standards. There are also more comprehensive ways to assess students. At the Urban Academy, a Manhattan public high school, seniors prepare final projects and present them to outside experts to qualify for graduation.

The entire accountability system remains a work in progress. But it would be wrong to give up on testing, warns Boston Superintendent Thomas W. Payzant. True, 56% of his 10th-graders flunked the state English exam last year and 66% failed math. "But we have to be very clear about what we want our students to learn," says Payzant, who warns that if the tests were abolished, pressure to turn around Boston's long-failing schools would evaporate. Even critics like Neill agree that "kids and their parents have a right to know if school is preparing them for something other than dead-end jobs and prisons." Without greater accountability, schools can continue to fail with impunity.

4. OFFER MORE VARIETY

Most people associate school choice with vouchers, which allow parents to use public funds for private schools. But while vouchers remain stymied in a political and legal quagmire, there has been an explosion of choice in public school systems. Charter schools have multiplied from 100 in 1994 to 2,000 today. They serve a half-million of America's 53 million K-12 students, estimates Jeanne Allen, president of the Center for Education Reform in Washington. Another 1 million or so kids have a choice of schools within the traditional public-school system, she estimates. By contrast, only about 20,000 students in a handful of cities attend private schools using publicly funded vouchers. Indeed, giving students a choice of public schools, where 90% of kids go, is a more realistic alternative than vouchers. It's also a far easier political sell, since the teachers unions support charters.

The rationale for choice lies in the competitive jolt it can give existing schools. "Choice and competition breed innovation and better performance," just as they do in business, argues Edison's Schmidt. Equally important is that "one size does not fit all in education," says John L. Anderson, vice-chairman of New American Schools, a nonprofit that helps schools implement comprehensive reform models.

One example is Perspectives Charter School in the heart of Chicago. It has just 150 students, mostly African American and Hispanic, in grades 6 to 12. All must observe the school's 20-point behavior code known as "The Disciplined Life." The code helps to create a safe environment, in part by training students how to resolve conflicts peacefully. Expectations are skyscraper-high. All students must apply to five colleges and can't graduate "unless they're accepted at a college, trade school, the military, or have a job," says Co-Director Diana Shulla-Cose. It's tough. But since the school opened in 1997, reading scores have doubled, math scores have tripled, and 19 of last year's class of 21 graduated and went to college.

NEW MODELS. To ensure that students have access to educational approaches that best fit their needs, school boards should be overhauled and given the primary responsibility for creating choice in their districts. In effect, boards should help every school become a charter school, with the ability to set its own approach within broad guidelines. Boards would set the guidelines and oversee the results to ensure that schools meet performance standards.

To encourage more variety, educators and some companies are coming up with what amount to national brands for educational methods. Already, more than 3,000 schools in all 50 states have adopted one of New American Schools' models. They range from Success for All, which targets improving literacy, to Co-Nect, which creates high-tech schools. Meanwhile, Edison now runs 113 schools, up from 79 last year, using an approach involving lots of technology and more time in school. KIPP, which stresses rigorous teaching of the basics, is about to roll out its model nationally.

More public districts are moving toward a multiple-choice model, as well. In New York, students can choose among dozens of differing middle and high schools, although there's no guarantee of acceptance at their first choice. Chicago has 15 charters, 12 citywide magnet schools, and 15 international baccalaureate programs and expects to bring in Edison and KIPP to manage some public schools.

One danger in the proliferation of options is that educators may chase fads or fruitless experiments that lead nowhere or even set students back. "We need far more research" on which models work best, cautions AFT President Sandra Feldman. Boards will have to hold schools to high standards and close them if they fail to deliver.

5. PROVIDE ADEQUATE FUNDING

In January, a New York court issued a stinging indictment of the state's funding of New York City's 1.1 million-student school system. A staggering 31% of the city's teachers flunked the basic exam required of new educators on their first try, vs. 4.7% of those in the rest of the state. Hundreds of city school buildings have structural deficiencies. Overall, the state's poorest districts, mostly in the city, spend $2,800 per child less than the richest, mostly located in suburbs and upstate. That works out to some $60,000 less per class.

The result: Just 60% of city students who entered the ninth grade in 1996 have graduated. At every turn, city schools lack the resources to provide the "sound basic education" required by the state constitution, wrote New York Supreme Court Judge Leland DeGrasse, who ordered major funding reforms.

This decision, which the state is appealing, is the latest in a three-decade string of rulings striking down school-funding systems on constitutional grounds. Wyoming and Kentucky have made progress in reducing the disparities between the wealthiest and poorest districts. But there are still gaps in 42 states, according to the Education Trust. "We get killed," complains Chicago Schools CEO Paul G. Vallas, who says some suburbs spend twice as much as Chicago, even though it has half the state's special-ed students.

For years, the solution has been to try to equalize funding, which is most commonly based on property taxes, thus perpetuating the discrepancies between rich and poor districts. But any schemes that include blocking wealthy districts from lavishing extras on their schools breed resentment. Now, some reformers are embracing a more practical approach: adequate, rather than equal, funding. After a court struck down its funding system in 1995, the state of Wyoming took such a tack. It embarked on an extensive study of what makes up an adequate education and calculated that it costs $7,400 per student.

Of course, more money is no guarantee of success: Schools in Washington, D.C., are dreadful, despite annual outlays of $8,000 per kid. And while billions have been dumped into the federal Title I program, which helps the most impoverished schools, many recipient schools remain abysmal.

Still, extra dollars can work wonders. After a court struck down Kentucky's system, the state boosted spending on its schools by 20% in 1990. It targeted the money to backwoods schools such as Roundstone Elementary School in Mt. Vernon, Ky., which serves 270 mostly poor students. Its library was outdated, classes were large, and the building was crumbling. A 150% budget increase let Roundstone remodel the library, cut class sizes, and sharply expand professional development for teachers. The payoff? "We're now considered one of the best schools in the state," says Principal David Pensol. His fourth-graders ranked first in state science scores last year.

Uncle Sam may have to help resolve disparities between states. In 1998, for example, Connecticut and New Jersey spent $9,000 per student, twice as much as Mississippi or Utah. Indeed, the 10 bottom-ranked states spent less than the national average. As courts have made clear, it's unfair to consign kids to inferior schools because of where they live.

6. INCREASE TIME IN SCHOOL

The amount of time kids spend in class has remained largely unchanged since the 19th century, when schools adopted the six-hour day and the nine-month calendar to accommodate farm life. The summer break is especially harmful to minority and poor kids. They enter the first grade half a year behind upper-income children but fall 2.5 years behind by the end of fifth grade, according to a Baltimore study by Johns Hopkins University sociologists Doris R. Entwisle and Karl Alexander. "Almost all of this gap can be traced to the summer vacations, when lower-income kids were treading water and upper-income kids were forging ahead," says Alexander. The reason, he concluded, is that upper-income families do so much better at keeping their kids stimulated during the summer.

"NO SHORTCUTS." The solution--requiring more time in school for kids who need it--is simple to say but difficult to achieve. "Schools have to be in session year-round," argues Chicago's Vallas. One problem, of course, is cost. There's also resistance from teachers, parents, and students, who all like the summer break. In addition, more time isn't as necessary for many affluent kids, giving the concept a penalize-the-poor tinge.

Still, evidence abounds that more hours in class can lift student performance (as well as alleviate child-care problems). It's one reason for the success of the KIPP Academy, which runs its two schools from 7:30 a.m. to 5 p.m., Monday to Friday, plus four hours on Saturday and an extra month in the summer. Arduous? Yes. But all 550 of its pupils in Houston and the South Bronx meet state standards, and many win scholarships to top prep schools. "There are no shortcuts to success," argues founder Mike Feinberg.

Similarly, in Chicago, 250,000 students, more than half of the total, now attend summer school or extended-day programs. They're a key reason why student test scores, though still low, have risen five years in a row.

7. USE TECHNOLOGY EFFECTIVELY

Schools have embraced new technology with fervor in recent years. Some 95% of public schools are wired to the Internet, up from less than 35% in 1994. There has also been an explosion in the digital resources available to schools, from virtual courses and field trips to access to some of the world's great libraries.

Yet so far, technology has done little to improve the national report card. The problem: Most educators don't know how to use it to improve student learning, teacher cooperation, or even school administration. That needs to change, since no other tool offers more potential to transform our schools.

Just look at schools that have begun to tap the potential. Adlai E. Stevenson High School in Lincolnshire, Ill., a suburb north of Chicago, offers students access to the Net from every classroom, office, library, and student common area. German teacher Margaret R. Plank uses e-mail to link her classes with students in Hamburg. The teens from both countries learn each other's language by discussing everything from mad cow disease to Germans' feelings about their country's role in World War II. "This gives the students a reason to improve," says Plank.

GONE FISHING. Similarly, Washington State has created a statewide fiber-optic intranet called K-20 that links every college and school district in the state. Now "we're offering all kinds of virtual courses," says state superintendent Terry Bergeson. Seven districts, from Forks, a fishing town on the Olympic Peninsula, to North Franklin on the Columbia River, have teamed up on a project to help protect salmon. Kids monitor water quality, discuss their findings with each other through teleconferences, and report to their local communities.

A new generation of software is proving far more effective than traditional programs, which are often little more than rote learning dressed up for the Digital Age. Take the Cognitive Tutor, developed by Carnegie Learning in Pittsburgh to teach algebra and geometry. The program uses artificial intelligence to determine what students understand and what they need to tackle next. Rather than drill kids on equations, it requires them to use algebra to solve real problems. Kids using Cognitive Tutor score higher on math tests than students in traditional algebra classes and are more than twice as likely to complete geometry and higher algebra.

Dot-coms may have soured the business world on the Internet's commercial potential, but schools are still experimenting with abandon. Teachers use the Net to collaborate on lesson plans. In some schools, e-mail is being harnessed to expand communication between teachers and parents. The Gates Foundation is helping pilot a new online system for testing kids more frequently and effectively. The goal is to turn today's cumbersome standardized tests into a just-in-time diagnostic tool that would yield results instantly so teachers could address problems quickly. "In five years, we hope several states will have moved their entire testing system online," says the Foundation's Vander Ark.

Technology alone, like more choice or smaller schools, is no panacea for the ills of America's classrooms. But if deployed with the other reforms, it holds the promise of helping to close the yawning gap between schools in rich and poor communities. As with the other measures, it will take tremendous effort to adapt technology effectively. Doing so will require "a national mobilization...similar in scope...to bringing electricity and phone service to all corners of the nation," concluded the Congressional Web-based Education Commission last December. Those are good analogies for what it will take to implement all seven reforms outlined here. If the goal of "no child left behind" is a serious one, nothing less will suffice.

By William C. Symonds
With Ann Therese Palmer in Chicago, Hilary Hylton in Austin, Tex., and bureau reports

Takahashi: Three who had the right idea at the right time

2008-06-07T08:16:00.000-07:00

Takahashi: Three who had the right idea at the right time
By Dean Takahashi
Mercury News
Article Launched: 01/02/2008 01:54:35 AM PST

This column is about people you hate. They're overnight successes in the Internet business and they make the rest of us look dumb and unlucky. Guy Kawasaki, a veteran of many start-ups and Apple's former evangelist, interviewed them at the recent AlwaysOn Venture Capital Summit for a panel titled "Why Take Venture Capital At All?"

Inside the swanky Ritz-Carlton Half Moon Bay resort, Kawasaki talked to entrepreneurs who had the right idea at the right time. Their businesses took off and they barely needed funding at all.

Drew Curtis, the founder of the humor Web site Fark.com, said he has managed to get 52 million page views a month from 4 million unique visitors. I enjoy Fark, which basically is news of the weird that makes you laugh. People submit ideas for funny stories, and he and his crew put the best ones on the site. Curtis lives in Kentucky, drinks beer and plays a lot of soccer to counter the effects of the beer.

He got the idea for Fark.com as a "complete accident" back in 1999. "I did it because I was annoying the people I was sending the stories to," he said. By the time it gathered momentum, the bottom had fallen out of the dot-com market so Curtis didn't raise any money.

"Still, it was basically my own personal Web site," he said. "It's almost on auto pilot."

They get about 2,000 stories a day and then sort through them. He notes that every late-night talk
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show and comedy show uses stuff from Fark.com but they don't credit it. He reads through them from 7 a.m. until 5 p.m., when his soccer game starts. He says he is usually so drunk at night that he signs off early.

"I'm having trouble feeling sorry for you, hanging out in Kentucky," Kawasaki said.

Curtis said that four friends help him do the sorting because they have the same kind of sense of humor that he has. Sometimes he disappears and no one notices.

Markus Frind of Vancouver, British Columbia, runs a free online dating site, Plenty of Fish, out of his apartment. He gets 1.2 billion page views a month from 50 million unique visitors. Frind said he started the company because he needed to learn a new software program dubbed ASP.net.

"I needed to learn so that I could get another job," he said. "I built it in two weeks and it started to get traffic. It never occurred to me to raise money."

He and his girlfriend worked on it and he said, "My girlfriend didn't really want to do anything so I hired an actual employee." Kawasaki asked him, "What is the biggest single check you've ever gotten from Google AdSense?" Frind answered, "$900,000. That was for two months."

Frind said he beats out eHarmony and others thanks to "lots of automation." He said one person goes through the site and "forwards me the police requests." Kawasaki asked how many police requests come in. Frind said about two a week.

The traffic is taking more and more servers. He now has 12 servers in a vault, storing 50 terabytes a month. About 300 million files a day are sent out.

Blake Commagere, co-founder of San Francisco-based Mogad, said he had a "string of unsuccessful companies, none of which you've heard of." But in his last project he created something that is spreading like wildfire on the Facebook social-networking site: the Zombies and Vampires social game. In five months, there have been 20 million users. But there are about 5 million unique visitors who are active and the monthly page views are just shy of 500 million.

"How much?" Kawasaki asked in disbelief. "Half a billion," Commagere replied. That means the players of the game are committed and they're generating hundreds of page views each.

All Commagere was trying to do was annoy and amuse his friends. They were annoyed with him when they found out he disappeared for two weeks to create a dumb game. "It was created as a joke, just to make me laugh," he said. "As it took off, I said, 'Oh god, I have to get resources into this.' "

Commagere said it's a very simple game that is designed to spread from person to person. The reward system gets users hooked so they can get to the next level and see new pictures of zombies. He figured he shouldn't even try to ask for venture capital because he would get laughed out of the room.

"People would probably be terrified if I told them about how off-the-cuff everything was," he said.

Contact Dean Takahashi at dtakahashi@mercurynews.com or (408) 920-5739.

THE STRANGE STORY OF RUBBER

2008-06-02T16:19:00.001-07:00

THE STRANGE STORY OF RUBBER

In midsummer of 1834 a bankrupt hardware merchant from Philadelphia, Charles Goodyear, walked into the New York retail store of the Roxbury India Rubber Co., America's first rubber manufacturer. He showed the store manager a new valve he had devised for rubber life preservers. The manager shook his head sadly. The company wasn't in the market for valves now; it would be lucky to stay in business at all.

He showed Goodyear why: rack on rack of rubber goods which had been melted to malodorous glue by the torrid weather. In the company's factory at Roxbury, Mass., he confided, thousands of melted rubber articles were being returned by outraged customers. The directors had met in the dead of night to bury $20,000 worth of stinking rejects in a pit.

The "rubber fever" of the early 1830s had ended as suddenly as it had begun. At first everybody had wanted things made of the new waterproof gum from Brazil, and factories had sprung up to meet the demand. Then abruptly the public had become fed up with the messy stuff which froze bone-hard in winter and turned glue-like in summer. Not one of the young rubber companies survived as long as five years. Investors lost millions. Rubber, everyone agreed, was through in America.

Goodyear disappointedly pocketed the valve and took his first good look at rubber. He had played with bits of it as a child, but now, at 34, he experienced a sudden curiosity and wonder about this mysterious "gum elastic." "There is probably no other inert substance," he said later, "which so excites the mind."

Returning to Philadelphia, Goodyear was clapped into jail for debt. It was not his first sojourn there, nor his last. He asked his wife to bring him a batch of raw rubber and her rolling pin. Here, in his cell, Goodyear made his first rubber experiments, kneading and working the gum hour after hour.

If rubber was naturally adhesive, he reasoned, why couldn't a dry powder be mixed in to absorb its stickiness -- perhaps the talc-like magnesia powder sold in drugstores? Out of jail again, he tried, with promising results.

He talked a boyhood friend into backing a modest venture. Charles, his wife and small daughters made up several hundred pairs of magnesia-dried rubber overshoes in their kitchen. But before he could market them summer came, and he watched his footwear sag into shapeless paste.

Neighbors complained about Goodyear's smelly gum, so he moved his experiments to New York. There a friend gave him a fourth-floor tenement bedroom for his "laboratory." A brother-in-law came to his squalid quarters, lectured him about his hungry children, advised him that rubber was dead. "I am the man to bring it back," said Goodyear.

He was adding two drying agents to his rubber now, magnesia and quicklime, then boiling the mixture and getting a better product all the time. Impressed, a New York trade show awarded him a medal.

Goodyear lavished all the arts of decoration on his dingy samples, painted them, gilded them, embossed them. Running short of material one morning, he decided to re-use an old decorated sample and applied nitric acid to remove its bronze paint. The piece turned black, and Goodyear threw it away.

A few days later he remembered that somehow the blackened scrap had felt different. He retrieved it from his trash can and found he was right. The nitric acid had done something to the rubber, made it almost as smooth and dry as cloth. This was better rubber than anyone had ever made before.

A New York businessman advanced several thousand dollars to begin production. But the financial panic of 1837 promptly wiped out both the backer and the business. Destitute, Charles and his family camped in the abandoned rubber factory on Staten Island, living on fish he caught in the harbor.

In time, Goodyear got new backing in Boston and again seesawed to momentary prosperity. His partners wangled a government contract for 150 mailbags, to be manufactured by the nitric-acid process. After making the bags Goodyear was so sure of himself that he stored them in a warm room and took the family away for a month's vacation. When he returned, the mailbags were melted. Underneath their "dry-as-cloth" surface lay the same old sticky gum.

After five futile years, Goodyear was near rock bottom. Farmers around Woburn, Mass. where he now lived, gave his children milk and let them dig half-grown potatoes for food.

The great discovery came in the winter of 1839. Goodyear was using sulphur in his experiments now. Although Goodyear himself has left the details in doubt, the most persistent story is that one February day he wandered into Woburn's general store to show off his latest gum-and-sulphur formula. Snickers rose from the cracker-barrel forum, and the usually mild-mannered little inventor got excited, waved his sticky fistful of gum in the air. It flew from his fingers and landed on the sizzling-hot potbellied stove.

When he bent to scrape it off, he found that instead of melting like molasses, it had charred like leather. And around the charred area was a dry, springy brown rim -- "gum elastic" still, but so remarkably altered that it was virtually a new substance. He had made weatherproof rubber.

This discovery is often cited as one of history's most celebrated "accidents." Goodyear stoutly denied that. Like Newton's falling apple, he maintained, the hot stove incident held meaning only for the man "whose mind was prepared to draw an inference." That meant, he added simply, the one who had "applied himself most perseveringly to the subject."

The winter after Goodyear's discovery was the blackest of his life. Dyspeptic and gout-racked, his health broken, he hobbled about his experiments on crutches. He knew now that heat and sulphur miraculously changed rubber. But how much heat, for how long? With endless patience he roasted bits of rubber in hot sand, toasted them like marshmallows, steamed them over the teakettle, pressed them between hot irons. When his long-suffering wife took her bread from the oven he thrust in chunks of evil-smelling gum.

At night he lay awake, afraid that he would die and the secret die with him. He pawned his watch and the household furniture.

When even the dinnerware was gone, he made rubber dishes to eat from. Then the food was gone too.

That spring he went to Boston to look up friends, found none, was jailed for nonpayment of a $5 hotel bill, and came home to find his infant son dead. Unable to pay for a funeral, Goodyear hauled the little coffin to the graveyard in a borrowed wagon. Of the 12 Goodyear children, six died in infancy.

At last he found that steam under pressure, applied for four to six hours at around 270 degrees Fahrenheit, gave him the most uniform results. He wrote his wealthy New York brother-in-law -- who had once lectured him about his parental obligations -- of his discovery. This time the brother-in-law, a textile manufacturer, was interested, for Charles told him that interwoven rubber threads would produce the fashionable puckered effect then much favored in men's shirts. Two "shirred goods" factories were rushed into production and, on the ruffled shirtfronts of dandies, rubber rode to worldwide success.

As soon as he could, Goodyear disposed of the manufacturing interests which might have made him a millionaire and went back to his experiments. He wanted to make everything of rubber: banknotes, musical instruments, flags, jewelry, ship sails, even ships themselves. He had his portrait painted on rubber, his calling cards engraved on it, his autobiography printed on and bound in it. He wore rubber hats, vests, ties.

Goodyear saw rubber as what we know it is today: the first and most versatile of the modern "plastics." He perceived in it a "vegetable leather" that defied the elements, an "elastic metal," a wood substitute that could be shaped in molds.

Some of his ideas still turn up as "new" uses for rubber. Many food packagers, for example, now wrap their products in Pliofilm, a rubber-derived plastic; Goodyear suggested the same application in 1850. Rubber paint, car springs, ferryboat bumpers, wheelbarrow tires, inflatable life rafts, and "frogmen" suits are other recent innovations he described a century ago.

Goodyear's business deals, licensing manufacture under his scores of patents, were ridiculously bad. Shirred-goods rights, for instance, went for royalty of three cents a yard; the licensees made $3 a yard.

Against "patent pirates" Goodyear was forced to prosecute 32 infringement cases all the way to the U.S. Supreme Court. In one famous 1852 case, his advocate was no less a personage than Secretary of State Daniel Webster. Goodyear paid Webster $15,000 for temporarily doffing the robes of Cabinet office -- the largest fee ever paid an American lawyer to that time. In a two-day speech Webster won a permanent injunction against further patent infringements. It made headlines, but it didn't stop the piracy.

Goodyear was slow in filing foreign patent applications. But he had sent samples of his heat-and-sulphur-treated gum to British rubber companies without revealing details. One sample was seen by famed English rubber pioneer Thomas Hancock, who had been trying for 20 years to make weatherproof rubber. Hancock noticed a yellowish sulphur "bloom" on the Goodyear sample's surface. With that clue, he reinvented vulcanized rubber in 1843, four years after Goodyear. By the time Goodyear applied for an English patent he found that Hancock had filed a few weeks earlier.

Offered a half-share of the Hancock patent to drop his suit, Goodyear foolishly declined -- and lost. A friend of Hancock named the contested process "vulcanization," after Vulcan, the Roman god of fire.

At the London and Paris world's fairs of the 1850s Goodyear installed great pavilions built entirely of rubber, floor to roof. When his French patent was canceled on a technicality and his French royalties stopped before he could pay his bills, he was seized by gendarmes and hustled off to a 16-day stay at his familiar "hotel" (as he called it) -- debtors' prison. There he received the Cross of the Legion of Honor, bestowed by Emperor Napoleon III.

When he died, in 1860, he was $200,000 in debt. Eventually, however, accumulated royalties made his family comfortable. His son Charles Jr., inherited something more precious -- inventive talent -- and later built a small fortune on shoemaking machinery.

Neither Goodyear nor his family was ever connected with the company named in his honor, today's billion-dollar Goodyear Tire & Rubber Co., the world's largest rubber business. Goodyear's only direct descendant among modern companies is United States Rubber, which years ago absorbed a small company he once served as director.

Today there is a cultivated rubber tree for every two human beings on earth. Three million tree "milkers" harvest the crop. The United States alone imports almost half of it, and synthesizes as much or more from petroleum. Nearly 300,000 Americans earn their livelihoods in rubber manufacturing, this year will produce $6 billion worth of products.

The whole huge apparatus owes its existence to the invincible little fanatic who might have died a bitter man, but didn't.

"Life," he wrote, "should not be estimated exclusively by the standard of dollars and cents. I am not disposed to complain that I have planted and others have gathered the fruits. A man has cause for regret only when he sows and no one reaps."

REPRINTED FROM THE JANUARY 1958 ISSUE OF READER'S DIGEST. ©

Branson's Next Big Bet

2008-03-06T10:25:00.000-08:00

Having an idea is one thing. Having a successful business is another. With more than 200 startups under your belt, what advice would you give entrepreneurs on making an idea stick?

I made and learned from lots of mistakes. In the end, the key is willpower. It's just really hard work to make sure you can keep paying the bills. But I do think one can have too much respect for bank managers.

When we entered the airline business, the very first plane Boeing (Charts) sent over to us ran into a bunch of birds and lost an engine. Because it hadn't been delivered yet, the insurance didn't cover that, so we were $1.5 million down before we flew our first flight, which took the whole Virgin Group beyond its overdraft facility.

Two days later, as I returned from the inaugural flight, our bank manager was sitting on my doorstep and telling me that he's going to foreclose on the whole business if we don't get the money in by Monday - and that was a Friday.

So I had to scurry around like mad over the weekend to try to get enough money to cover what I owed, which I just managed to do. For most people, bank managers are a bit like doctors - they never leave them because they have too much respect for them.

By daring to be disrespectful, we went from having a $5 million overdraft facility to having a $40 million overdraft facility with a different bank by the end of that week. Where one bank was willing to ruin us based on the assets we had, another bank was willing to give us more credit.

There is a very, very thin dividing line between survival and failure. You've just got to fight and fight and fight and fight to survive.

What was the first business idea you came up with?

I set up this magazine called Student when I was 16, and I didn't do it to make money - I did it because I wanted to edit a magazine. There wasn't a national magazine run by students, for students. I didn't like the way I was being taught at school. I didn't like what was going on in the world, and I wanted to put it right.

Of course, a lot of businesses want to reach students, so I funded the magazine by selling advertising. I sold something like $8,000 worth of advertising for the first edition, and that was in 1966. I printed up 50,000 copies, and I didn't even have to charge for them on the newsstand because my costs were already covered.

So I became a publisher by mistake - well, not quite by mistake, because I wanted to be an editor but I had to make sure the magazine would survive. The point is this: Most businesses fail, so if you're going to succeed, it has to be about more than making money.

Are you saying entrepreneurs should go into business without the bottom line in mind?

Ideally, since 80 percent of your life is spent working, you should start your business around something that is a passion of yours. If you're into kite-surfing and you want to become an entrepreneur, do it with kite-surfing.

Look, if you can indulge in your passion, life will be far more interesting than if you're just working. You'll work harder at it, and you'll know more about it. But first you must go out and educate yourself on whatever it is that you've decided to do - know more about kite-surfing than anyone else. That's where the work comes in. But if you're doing things you're passionate about, that will come naturally.

Business paradigm shifts and free tequila shots

2007-07-16T23:13:00.000-07:00

Yelp has two ambitions: Have fun and seize as much of the $100 billion local ad market as possible. Fortune's Jeffrey O'Brien reports on a hot Web startup.

By Jeffrey M. O'Brien, Fortune senior editor
July 10 2007: 3:30 PM EDT
(Fortune Magazine) -- "I'm making a ton of money from Yelp, and it's freaking me out." Woe is Christopher Hall, the 34-year-old owner of Splitends, a hair salon in Orange County, Calif. Its chic décor is more architectural firm than beauty parlor. He has appeared on a reality show, in the L.A. Times, and on TV news segments. He's photogenic and has a quick wit. He serves beer to customers. So business, unsurprisingly, was decent as soon as he opened the place last December. Until March 6. That's when things got crazy.

Now he's literally in pain from all the coiffing. "I've been doing hair for 16 years, and I'm busier than I've ever been," he says. "Saturday I came in at 6:30 a.m., left at 8 p.m., and did 22 people. I woke up Sunday and my hands were all swollen. I had to put them in an ice bucket."

What happened March 6? That was the day Anita Lau wrote about Splitends at Yelp.com, an online platform for user reviews of everything from dive bars to funeral parlors. Lau has posted 2,036 reviews and 1,340 photos, has collected 790 compliments on her work from fellow Yelpers, and along the way has amassed the power to put bodies into barbershop chairs. She gave Splitends the maximum five stars, praising Hall and saying, "I absolutely love my haircut."

The review started a logroll of new clients for the stylist and a couple dozen subsequent five-star critiques. "I've taken out ten ads in OC Weekly this year and have gotten maybe one call," says Hall. "I get anywhere from five to 15 calls a day from Yelpers. They come in and then write reviews. Then other people see the reviews, think it must be great, and call. It's its own little biosphere. It feeds itself."

For those outside California, let's back up a bit. Yelp is part social network, part localized review site - think Facebook meets Zagat - and it's fast becoming the web's gift to small business. A platform for ratings of anything with a postal address, Yelp offers the service industry new insight into what the chattering masses are saying. The name "Yelp" comes from a friend of the founders who simply liked the word. But it also serves as a nifty contraction of "yellow pages," which reveals the company's ambitions: a land grab on the $100 billion that's spent every year on local advertising.

"There's an information shortage when it comes to local businesses," says co-founder and CEO Jeremy Stoppelman. "If you look at the yellow pages, what are you seeing? You're seeing how much money a business spent to buy a big ad. We're a place for a conversation between the prospective customer and the business owner."

Many well-funded companies have tried to tackle local search over the years, using a mix of strategies. There's the directory model, which involves a massive sales force upselling business owners to ever bigger, flashier ads. There's the Citysearch tactic of creating proprietary content and selling ads against it. And then there's the search-engine route of crawling everyone else's content and automating the ad sales. Yelp is taking a different road: crowd-sourcing. For years Zagat has been compiling anonymous user reviews, but Yelpers get to fully express their feelings and make names for themselves.

Employing the same user-generated content model that powers YouTube or Craigslist, Yelp can reach into a city's every nook to reveal hidden car washes, dentists, plumbers - the sorts of unsexy but necessary services that make up our daily lives. When we discover something wonderful (or horrible), we love to tell our friends about it. We also turn to people we trust when we need a good recommendation. Yelp is enabling those conversations to happen on a massive scale.

There's any number of reasons the site could fail. But so far the enthusiasm Yelp has generated indicates otherwise - usage is up nearly 400% to 1.8 million users a month, according to Nielsen/NetRatings. In San Francisco the dining and nightlife scene has been all but completely trolled, analyzed, and pontificated upon (or "Yelped," for short), and the site has recently caught fire in Chicago, New York, and L.A. In those cities it has begun changing the way local businesses do their marketing.

The word most often used to describe Yelp - other than some variation on the ever-flexible brand itself, which can be intoned positively, as in "I Yelped that awesome crepe wagon," or negatively, "That bitchy waiter totally got Yelped!" - is "addictive." Anita Lau drives around Southern California in an SUV with a vanity plate that reads I [heart] YELP. The plate is unique. The sentiment isn't.

***

A charismatic 29-year-old with a boyish smile and a self-deprecating streak, Stoppelman started the company in 2004 with longtime friend and CTO Russel Simmons, 28. (No, not the hip-hop impresario. This Russel has only one "L.") After their last employer, PayPal, was sold to eBay (Charts, Fortune 500), the co-founders cashed out and began kicking around startup ideas with a former colleague, PayPal co-founder Max Levchin. One day Stoppelman was looking for a doctor but had no clue how to find a good one. That gave him and Simmons an idea for a convoluted automated system in which people could e-mail friends asking for recommendations on, say, local doctors, and the answers would be logged at a communal site for everyone to see. Levchin floated the duo $1 million to build out the plan. It went nowhere. But the co-founders noticed an interesting tendency among the early users. People were writing unsolicited reviews of their favorite businesses just for fun. So Yelp switched tack. "I remember the moment that Russ said, 'There should be a way for you to write your own reviews without asking questions,'" Stoppelman recalls.

Actually, Stoppelman and Simmons weren't just looking for a new doctor. A pair of unrepentant party boys - they did tequila shots during the Fortune photo shoot - they were in a perpetual search for the greatest restaurants and clubs in San Francisco. To get Yelp off the ground, they decided to mix business and pleasure, and started hosting Yelp parties at local establishments. The parties got people talking. (Flickr is littered with raucous snapshots from Yelp events featuring bar dancing and an endless train of women hanging all over the co-founders.) More important, the revelry got people writing reviews, building up the site's content.

Today Yelpers seem to live on the site, messaging one another about their social lives, reacting to reviews, and planning get-togethers. That's the social-networking part. As is the case on most social networks, Yelp is rife with self-conscious patter. But there's a point to all the yammering: finding cool stuff that's not too far away. It's a mission everyone seems to take seriously.

"One of the first surprises was the length of reviews and the attention to detail," says Simmons. "People think they have to write reviews of a certain quality or there's no point. A lot of them are funny. Some are poetry. I saw one review in the form of an IM conversation with Skeletor" (the latter, of course, being the superevil, skull-faced archnemesis of He-Man, Master of the Universe).

In 2005, Stoppelman and Simmons raised $5 million from Bessemer Ventures, the VC firm behind Verisign and Skype, among others, and then last November another $10 million from Benchmark Capital, whose hits include eBay and Red Hat (Charts). The company's strategy is to build a rabid following in any given market. Once an establishment has a good number of reviews, a Yelp salesperson calls to make sure the establishment's owner is aware of all the chatter going on, offers a Yelp window sticker, and, of course, tries to sell an ad. Ads and sponsorship packages range from $200 to $2,000 a month.

Stoppelman is coy about how well Yelp is doing on the business side. The company is generating revenue, though he won't say how much. He does acknowledge that profits are a ways off. "Someday we'll make money," he says, smiling, adding only that Yelp has all the funding it needs.

The obvious question: If the content costs nothing and the marketing is word-of-mouth, where is Yelp spending its $16 million? Well, salespeople are expensive. The company is always adding servers to handle growth and is in a desperate search for more engineers in San Francisco. Given the reputations of Stoppelman and Simmons, it'd be easy to accuse the co-founders of spending their funding on bar tabs. Except that lately an awful lot of their drinks seem to be on the house.

Steve Jobs and Bill Gates at D5

2007-05-31T12:00:00.000-07:00

They take questions from audience:

HP strolls down shopping aisle of the future

2007-05-29T16:39:00.000-07:00

By Erica Ogg

PALO ALTO, Calif.--Despite the digitization of nearly everything in our daily lives, the Sunday circular ad for beef and bags of baby carrots has remained. Hewlett-Packard is developing a technology to bring even the banal task of grocery shopping into the Digital Age. At HP Labs here, researchers are developing an in-store kiosk solution called Retail Store Assistant (RSA) that will make shopping for food, clothes and electronics easier for buyers and make selling things easier for retailers.

This is the same lab that invented inkjet printing technology and pocket-size scientific calculators, and it wouldn't seem in-store kiosks are at the forefront of technology, which HP admits. But it's the combination of several areas of HP's core businesses that's new.

"The technology is available," said Mohamed Dekhil, manager of imaging and printing retail applications at HP Labs. "It's a question of how you connect all this together."

HP's Retail Store Assistant
The idea is this: Imagine walking into a grocery store, and instead of bringing your shopping list along, simply swiping a club card or entering a phone number. Any information you've entered online from home (milk, eggs, pretzels, ground beef, apples) will show up on your profile. There will also be special offers tailored to your shopping habits--your club card already keeps track of the fact that you prefer Diet Pepsi to Coke, and that you buy a carton of eggs every other week. The kiosk simply matches your information with retailers' offers to generate the appropriate coupons.

The RSA kiosk will then create a printed list of special discounts and shopping items. On the back will be a map of the store and the location of all items, eliminating the need to comb every aisle of a store. And instead of fumbling for coupon clippings, a single bar code on the printout will track the customized offers and remove items from the shopping list that were purchased.

If a printed piece of paper is too cumbersome, HP says the list and information could also be transferred via Bluetooth technology to a mobile device, like a phone.

While HP stressed that the intent of the technology is about making shopping "a delight" for customers, it's also a way for the company to sell more of what it's best at. The kiosk service combines HP database technology, servers, mobile products, printers and imaging technology.

The RSA kiosk could also be a boon for retailers and marketers. The kiosks can know by the time a shopper has left the store which discounts a buyer took advantage of. That information is gold for marketers looking for demographic data and ways to sell more accurately to individual buyers.

Though privacy advocates may balk at the idea of a retailer monitoring each shopper's purchases--indeed some already do decry the club card concept--HP says its customers will need to have privacy policies available to shoppers so they know what they're getting themselves into. Eventually the kiosks will let shoppers manage what personal data is kept, said Dekhil. For instance, shoppers can indicate that none of their alcohol or medicine purchases be tracked.

The technology isn't available yet, and likely won't be for some time, but HP says it is talking to major retailers, like supermarkets, electronics stores and discount chains about using the technology to make shopping an experience, one that eliminates the frustration of not being able to find a product or a helpful salesperson, and then build customer loyalty to that store. HP says it is currently "in talks" with major retailers to start pilot programs soon.

Copyright ©1995-2007 CNET Networks, Inc. All rights reserved.

Stardoll.com: From Little Things Big Things Grow

2007-05-18T13:51:00.000-07:00

Stardoll.com: From Little Things Big Things Grow
Duncan Riley
May 9, 04:02 AM
Inspired by a childhood passion for paper dolls, Scandinavian born Liisa started drawing dolls and accompanying wardrobes, uploading them to Geocities. The personal page grew, evolving to Paperdoll Heaven in 2004.

Now calling itself Stardoll.com, the site took $4 million in Series A funding from Index Ventures in February 2006, and $6 million in a B Series round lead by none other than Sequoia in June the same year.

It’s a rags to riches success story that makes Stardoll worth taking a look at, and the space is seeing hyper growth. See our writeup of Zwinky last week.

Stardoll is all about dressing up dolls online.

Stardoll lets users create their own doll or choose from a large collection of celebrity dolls which can then be dressed up in virtual fashions. Every celebrity doll has a wardrobe full of unique clothes and outfits, with new celebrity dolls and outfits released weekly.

Each user is given a page from where they can share the dolls they have created, accompanied with a guest book, diary (blog), friend connections and album.

Most users are girls between the age of 10 to 17 and online safety immediately becomes a consideration. Stardoll adds a layer of anonymity to all accounts. Users can never reveal personal information such as their real name or city of origin on their pages.

Joining the site for the first time, you start with 25 star dollars that can be used to buy accessories for each virtual doll. Accessories range from 1 - 35 star dollars with users able to buy additional star dollars at the rate of 10 star dollars to $1.

They currently sell between 60,000 to 180,000 items per day.

In the background is a team that has grown to 40 people based in Stockholm, with a Los Angeles office on its way. Matt Palmer, former EVP of Marketing for Disney’s Kids Network has been hired to lead the North American push.

Stardoll has 7,144,735 members and is adding 20,000 new members a day, with 5.5 million unique visitors per month.

With its European heritage, languages supported include French, Italian, Spanish, Hungarian and Polish, with a dedicated German .de version recently being launched. 30% of traffic comes from the United States vs. 50-52% from the European Union.

As a destination this won’t appeal to all readers, men in particular working in tech fields, however the numbers speak volumes for their growing success amongst their target demographic. With Sequoia amongst its investors it doesn’t take rocket science to work out that the site looks like a winner.

There’s a positive message as well.

Chasing funding and trying to be the next best thing in Web 2.0 can be hard at times, and even a little depressing. Stardoll shows us that from little things, big things can grow.

http://www.stardoll.com

Hot or Not Tears Itself Apart, Reinvents

2007-05-18T13:50:00.000-07:00

Michael Arrington
Today, 09:00 AM
When James Hong and Jim Young founded HotorNot in October, 2000, they had no real plans for the service to be anything other than a fun site for a few friends. They turned a free low end computer they received for setting up an etrade account into a web server, launched the site from their house in Mountain View, California, and emailed 40 friends. By the end of the day, 40,000 people had visited the site, which now had 30 second load times.

It wasn’t too long before the service was hosted at RackSpace and the users were flooding in to rate user-uploaded pictures of themselves on a scale of 1-10. In January 2001 they added a dead simple dating site. Instead of reading endless profiles and trying to find a connection, users just say yes or no to a given picture. If it’s a yes, the other person is shown your picture the next time they look through profiles. If they like you as well, a connection is made.

The Money Rolls In

Until last month, HotorNot was free until that last crucial stage when two people wanted to meet each other. At that point, one of the members (usually the man, Hong tells me) must have been a paid subscriber, which costs $6/month. Hong says their conversion rate was extremely high - 15% of active users eventually upgraded to premium accounts.

The premium revenue, plus advertising and fees for virtual flowers, soon topped $600,000 per month. Nearly all of that was profit for the two founders, who reportedly pocketed $20 million or so between them over the years. The company has never raised any outside funding.

Hong says they receive 2-3 emails per day telling them about marriages that resulted from an initial meeting on HotorNot.

In the last year though a few competitors have popped up (see yesnomayb, a copy of the business model) and a number of free dating sites also started to eat away at traffic. Traffic started to drift sideways, and the developers were getting bored at doing little more than site maintenance.

Going To A Free Model

That’s when Hong and Young decided to rip apart their business model and remove the requirement for members to have premium accounts to talk to each other. A month ago, the requirement was turned off, and about $500k/month in revenue disappeared overnight. The founders also turned the company into a proper “C” corporation and issued stock options for the first time to all employees.

(I can’t help thinking that if HotorNot took venture financing somewhere along the way, they would not have been able to get their board of directors to agree to this.)

Hong says this lit a fire under the company, which is now running on reserve cash of a few million dollars. So far things look good. Traffic jumped over 60% - 10 million people visited the site in the last month, up from 6 million the month before. Advertising and virtual gift revenue spiked, and the site is now break even even though they killed their largest revenue stream.

Hong and Young aren’t stopping there. They have plans to expand the site greatly and say they will launch new products in the coming weeks.

Whether this works in the long run is yet to be seen. But the company wanted to try something new, and the founders took enough money off the table to be comfortable for life. Entrepreneurs tend to have a screwed up way of measuring risk - the more the better - and these guys are no exception.

Authors like King, Lethem trying comics

2007-05-13T23:49:00.001-07:00

By COLLEEN LONG, Associated Press WriterSun May 13, 11:07 AM ET
Author Jonathan Lethem was a big fan of the comic "Omega the Unknown" when he was a boy growing up in Brooklyn, and he was pretty depressed when the superhero vanished from corner store shelves.

Never fear. He'll see Omega in print again soon, because Marvel Entertainment is reviving the comic after 30 years — with Lethem writing the story.

"I was very devoted as a teenager to comic books," said Lethem, who recently finished a tour for his new novel, "You Don't Love Me Yet."

"I drifted to other kinds of reading, but I never lost interest in the medium."

Lethem joins a growing list of novelists such as Stephen King and Michael Chabon, who have shifted to work on comic books as the medium gains critical and academic respect and becomes more mainstream.

Marvel contacted Lethem after his book "Fortress of Solitude," which had some comic-book reverence, and asked if he was interested in doing work in the medium, said Marvel publisher Dan Buckley.

"We wanted to see what he was interested in, and he brought it up immediately," Buckley said. "Bringing this kind of talent to the room is fantastic. He knows how to tell a story, and his perspective is different from traditional comic writers."

Omega's not your average swashbuckling superhero. He's mute, for starters, and has a sort of psychic connection with a 12-year-old boy named James-Michael Starling, who moved to New York City with his family from "the mountains" to improve socialization skills after years of home-schooling. Trouble ensues, of course, and he meets Omega, the last surviving member of an unnamed alien race.

"It was an interesting challenge," Lethem said. "One of the things I concluded very quickly was that it's not a written form. My primary task was to provide amazing things for artists to draw."

The first six issues are in the can, and the series will have a total of 10, like the original, which debuted in 1976. No official release date has been given.

Suspense writer Greg Rucka works on several series for DC Comics, including "Batman," "Superman" and "Gotham Central." He also did a limited series called "52," about a year when Wonder Woman, Superman and Batman temporarily suspended their crusades, and a new superhero called Supernova takes over to save the world. Best-selling author Brad Meltzer worked on the "Justice League of America," for DC, and excerpts of his 2006 novel, "The Book of Fate," were included in the first issue.

Meltzer and his publishers also put excerpts of "Justice League" into the paperback edition of "Book of Fate," the first time a comic book has appeared in a novel, he says.

He believes the medium shouldn't matter, as long as the story is good.

"There has just been so much snobbery that has existed with comic books," he said. "We've got to prove that these things are equal."

Best-selling writer of "Nineteen Minutes," Jodi Picoult is the current author of the legendary Wonder Woman series at DC. She is only the second woman to ever write the series in its more than 60-year-old history. The biggest challenge for Picoult was tethering the character's lengthy past with contemporary issues and her own writing style.

"You don't want to go down in history as the one who ruined Wonder Woman," she said. "She comes with a history, and a very loyal fan base that doesn't want to see you mess around."

Other authors turned their creations into comic-book heroes.

Chabon, who wrote about cartoonists in his Pulitzer-prize winning novel "The Amazing Adventures of Cavalier and Clay," chose to turn the novel's cartoon "The Escapist" into a a real graphic novel for Dark Horse Comics. His editor, Diana Schutz, helped him modify his thinking from chapters and sentences to panels. Schutz, a longtime editor, also works with authors Glen David Gold and Chris Offutt.

She said there are tremendous differences in the mediums, and writers often aren't used to thinking about the presentation of a story or the physical representation of their characters. But it can be taught.

"A good writer is a good writer," she said. "It really is just a matter of coming to grips with the different form, the different structure of the medium. Some novelists don't make a successful transition into writing screenplays, that doesn't mean they're not good. It means they can't think pictures very well. And comics are basically still movies."

Similarly, King chose to work with Marvel to develop his "Dark Tower" book series, instead of making it into a film or TV miniseries. The story is part Western, part fantasy and part adventure, and the comic centers on the story of Roland Deschain, a man who lives in a futuristic kind of world, and his quest to find the "Man in Black" and later on, the dark tower.

So far, the title has seen significant commercial success. More than 200,000 copies of the first issue, out in early March, were sold, by far the best-selling non-superhero comic in more than a decade. King hopes comic readers will find an exciting new story in the "Dark Tower."

"I'm a big fan of the medium," King said of comic books. "A different way to tell stories is always exciting. It's like being a kid with a chemistry set."

And comic book publishers are fans of authors with a loyal audience.

"The fan base helps grow the market," Buckley said. "It's an important initiative, bringing the best talent you can to the table and also seeing what new readers you can attract."

Marvel executive editor Axel Alonso said he loves working with novelists.

"They're a known quantity to me," said Alonso, who worked with Lethem on "Omega."

"I've read their books, I get a sense of what their dialogue is," he said. "I come to them for their voice. I'm not looking to duplicate comic books they read as a kid or on the racks. I want their unique style to come through."

And Buckley says there's plenty of space in the comic books to go around, so regular comic book writers and writer-artists shouldn't worry that their jobs are being taken away.

"We're publishing more than 70 or 80 titles a month. There's plenty of room for comic writers, TV writers, novelists, you name it," Buckley said. "The other creators are excited — yeah it's competition — but they understand it's great for us to get our name out there into the mainstream."

How Nokia is selling cell phones to the developing world

2007-05-07T01:39:00.000-07:00

How Nokia is selling cell phones to the developing world

by Jack Ewing

Looking for ways to make mobile handsets practical for people living in developing countries, Finnish mobile-phone maker Nokia Corp. (NOK) has trekked to far corners of the globe, from the narrow alleys of Mumbai to the vast slums of Nairobi. The result is a slew of new features especially designed for places with harsh weather and harsher living conditions. One example: The company created dustproof keypads—crucial in dry, hot countries with many unpaved roads, as Nokia executives learned from visits to customers' homes in India. Innovations like those helped generate sales in 2006 of $3.7 billion for Nokia in India, making the company the market leader in the fastest-growing mobile-phone market in the world.

But Nokia's initiatives for emerging markets reach way beyond traditional product innovation. These days, it's also breaking the mold on how it markets, distributes, and sells phones in developing countries. In India, Nokia estimates there are 90,000 points-of-sale for its phones, ranging from modern stores to makeshift kiosks, even more than China's 40,000. That makes it difficult to control how products are displayed and pitched to consumers. "You have to understand where people live, what the shopping patterns are," says Kai Oistamo, executive vice-president and general manager for mobile phones. "You have to work with local means to reach people—even bicycles or rickshaws."

To get a grip on rural India, the company has outfitted a fleet of distinctive blue Nokia-branded vans that prowl the rutted country roads. Staffers park these advertisements-on-wheels in villages, often on market or festival days. There, with crowds clustering around, Nokia reps explain the basics of how the phones work and how to buy them. Nokia has extended the concept to minivans, which can reach even more remote places.

Members of the emerging markets team discovered something on a recent visit to slums outside Nairobi that may help them improve sales to customers without access to credit. Through conversations with slum dwellers, Nokia learned that many people form buying clubs, pooling their money to buy handsets one at a time until every member has one. The members draw lots to see who gets phones in what order. Now Nokia is looking for ways to encourage this form of self-financing. Communal finance is a far cry from manufacturing mobile phones, but Nokia knows it has to try all sorts of ideas if it wants to capture its share of the industry's next 1 billion customers.

Another Rubber Tree Plant

2007-04-30T00:24:00.000-07:00

In the Arizona desert, the start of something big--or anyway something that feels good on your hands.

From: Issue 115 | May 2007 | Page 42 | By: John Rosenthal
Forty minutes south of Phoenix, just past the once-sleepy town of Maricopa and the last bit of suburban sprawl, the Arizona desert gives way to thousands of acres lined with row after row of funny little shrubs. This is guayule (pronounced why-you-lay), a plant indigenous to the southwestern United States, now being cultivated in droves by a company you've never heard of in hopes of revolutionizing the rubber industry.

That company is Yulex (the name is a mash-up of "guayule" and "latex"), founded in 1997 with the intention of making guayule a household name. Or at least a competitive product. And that's the challenge here: Scientists have long known about the natural rubber contained in guayule bark, but they've never figured out how to extract it for less than the cost of importing tropical rubber (Hevea brasiliensis). The United States actually produced rubber from guayule during World War II, when imports from Southeast Asia were cut off. But once the war ended, economics prevailed, and America torched all its guayule fields.

Nobody gave guayule another thought until the AIDS crisis of the 1980s, when a surge in rubber-glove usage revealed how many people were allergic to latex (about 10% of health-care workers, according to OSHA). There are synthetic alternatives, but they're just not as stretchy as natural rubber. Guayule performs like Hevea but contains none of the proteins that cause latex allergies.

"Man has never been able to make rubber as well as Mother Nature," says Jeff Martin, Yulex's CEO. Martin is a career rubber guy, first as a scientist at Johnson & Johnson, then as a sales exec for London Rubber Co. and Safeskin Corp. In 1999, he joined Yulex, which had been formed around the work of Katrina Cornish (now Yulex's head of R&D), a U.S. Agriculture Department scientist who for 15 years led the agency's efforts to develop domestic rubber sources. Martin figured out how to double the latex yield of a guayule plant while screening out the proteins that cause latex allergies.

Since then, Yulex has been stockpiling additional patents and planting 4,000 acres of guayule throughout Arizona. The company has actually been producing guayule latex at its Maricopa facility since December 2006. The operation takes place in a Rube Goldberg-esque mousetrap of a structure that looks like a four-story oil derrick. From newly harvested plants to 55-gallon drums of liquid latex, the whole process is mostly automated; only five humans work amid the whipping desert winds and the pervasive smell of ammonia (a stabilizer and antimicrobial agent).

Seemingly, Yulex has reached its tipping point. It signed an exclusive deal in 2005 to sell its latex worldwide through Centrotrade, an international natural-rubber supplier and distributor. Now, Martin says, manufacturers are just waiting on approval from the Food and Drug Administration, which is expected by July. Assuming that happens, they will target a boutique niche: medical devices such as catheters or angioplasty balloons. In this market, guayule's nonallergenic qualities merit a premium over Hevea, while its greater elasticity and lower resistance make it a better choice than similarly priced synthetics.

Look for guayule surgical gloves, too. They don't cause hand fatigue like synthetic gloves do. The guayule gloves I tried at Yulex's test labs were incredibly soft. (I didn't feel right testing the guayule condoms, but I'm told they're just as effective at preventing STDs.)

Martin estimates the medical niche alone is worth $7 billion. "Our model is not to replace Hevea," he says. "It's to capture the share carved out by synthetics." And really, Yulex has no hope of going mass-market unless tropical rubber prices explode. If that changes (and it could: The International Rubber Study Group forecasts a 50% increase in rubber consumption by 2020), Yulex hopes to meet demand with guayule consumer goods. Utility gloves! Gaskets! Rubber bands! To make that leap, it would have to expand its guayule acreage to 400,000; supplying tire manufacturers, pretty much the holy grail of rubber, would require more like 4 million acres. (Beyond Arizona, Yulex is contracting with farmers in Australia.)

But wait, there's more. What's left from the guayule plant after rubber is extracted can be turned into adhesives, coatings, even termite-resistant particleboard. "Guayule also has a high energy content that has potential applications as a biofuel," says Colleen McMahan, a USDA research chemist. (Hey, guayule could be both a floor wax and a dessert topping.)

Standing amid the Maricopa guayule fields, I feel a profound sense of being in on the ground floor. Martin predicts that in 10 years, Yulex will be known for making a full range of guayule goods. "We're not talking about just coming out with a new product," Martin says. "This is a whole new industry."

Copyright © 2007 Mansueto Ventures LLC. All rights reserved.
Fast Company, 7 World Trade Center, New York, NY 10007-2195

Wanna Buy a Watch?

2007-04-29T23:03:00.000-07:00

The Greatly Improbable, Highly Enjoyable, Increasingly Profitable Life of Michael Kobold

By: Josh Dean

It is quite possible that Michael Kobold is one of those inexplicably lucky people, one for whom good things just seem to happen, the kind of guy who wins the lottery twice. Let me give you an example. One day in 2003 he's sitting at his desk at Kobold Watch, where he and three employees make and sell high-end mechanical wristwatches from a quiet industrial park in Pittsburgh. The phone rings, and Kobold answers it. The man on the line is from New York and he's gruff; he apparently owns a Kobold watch and likes it enough that he wants another one. Kobold, thinking the guy with the gruff New Yorky voice is a cop, offers the guy his standard 10 percent police discount. "Finally," Kobold will later recall, "he told me he was an actor and that he was in something called The Sopranos." Keep in mind here that Kobold does not watch TV. He could not name a single artist in the Billboard Top 20 and would be hard-pressed to recognize a film actor who isn't Tom Cruise or Mel Gibson. Pop culture references sail wildly over his head.

So Kobold says, "This Sopranos thing--is it a musical?" And the guy, who by now recognizes that, for whatever reason, this European fella on the phone honestly has no idea who he's talking to, answers back: "It's a show about a big fat guy, and I'm the big fat guy."

By now you've figured out who the man was: James Gandolfini.

Kobold hand delivered the watch to Gandolfini on set in New York City--a service he sometimes performs for celebrities and other important buyers--and the two hit it off. The first thing Kobold said was, "You're not as fat as I thought you'd be." To which Gandolfini replied, "You're not as old as I thought you'd be." Today Kobold weekends at Gandolfini's Jersey beach house, shacks up at his New York apartment, and refers to him as "one of my best friends." Gandolfini is not an easy man to reach. He loathes the media and doesn't even bother to employ a publicist to reject interview requests. But after six months of cajoling, Kobold finally managed to get him to speak to me for about a minute, by phone from the set of The Sopranos. "I saw one of the watches in a magazine and I called the number," he told me. "I just liked him. He was this odd guy."

Kobold's first call from Gandolfini has since become so much more than a good story; it was the third random but crucial encounter of Kobold's young life and a pivotal moment in the history of Kobold Watch. Because not only does Gandolfini not talk to journalists, he also doesn't endorse products. With one huge exception: He is now Kobold's most famous brand ambassador, as the official faces of the company are known. And, like all the others, he does it for free.

It's a crazy story, but the sort of thing you keep hearing when you spend time with Michael Kobold, 27, of Pittsburgh via Frankfurt. He's a handsome fellow, slim with short hair, good posture, and excellent diction. To hear him talk you'd know he wasn't American-born but you'd have a hard time placing the accent; it might put you in mind of those movie villains who sound like they come from a place where all the European borders come together. Kobold drives a 15-year-old Porsche and lives in a $700 one-bedroom apartment a short walk from the University of Pittsburgh. He is the founder and president of the company that bears his name. As for the watches that bear his name, they now start at $2,450.

I am by no means a watch collector--I own seven watches, not one of them worth more than $200--and so, before I set upon the mission to understand this man and his marque, I had never once heard mention of Kobold Watch. Practically speaking, most Americans have never heard of it either. Kobold is a microbrand, producing a maximum of 2,500 watches per year and residing in the rarified air of mechanical timepieces, a niche of the market based almost exclusively in Europe.

And yet, slowly and almost impossibly, with a number of missteps and a healthy dose of luck and circumstance, Michael Kobold has fashioned a brand that competes with esteemed names such as Omega and Tag Heuer (OTC:LVMUY). Granted, no one at either company is quivering in fear at the name Kobold, but the fact of the matter is that thousands of men willing to spend $2,000 and up (way up) on a watch--a well-studied constituency that does not waste time or money on poor quality--are buying from a quirky immigrant who sells watches from an industrial park in Pittsburgh.

I don't know why watches," Kobold says, by way of explaining of how he got here from there. "But at 12, I got my first good one, from my dad. It was the first year he didn't spend Christmas with us, so he got me a Cartier. I loved that watch. It was mechanical. It was high end. I thought this was my one watch for the rest of my life. But that got me thinking--which is the problem with me. I'm compulsive. I thought it was the perfect product. You buy one for life. I liked that it was built by a human. The robot thing freaks me out."

Young Kobold, whose father ran a powerful company called the Kobold Group and thus was not exactly around to nurture his son's hobbies, set about writing fan letters to watch gurus, saying, essentially, Teach me. Only one responded personally: the legendary Gerd Lang of Chronoswiss. This would be the first Random But Crucial Encounter. "To me, that was like a superhero calling," says Kobold. "Of all the watchmakers, I idolized him most."

It's a hard thing to get your head around, that a teenage boy would obsess over the idea that he had to learn the art of watchmaking. If this were a movie, he'd be sort of pathetic and would live in a tiny room under the stairs. But Kobold was a child of privilege who traveled between homes in Germany and Florida and studied at the best private schools.

"Mr. Lang taught me everything that I know today about design," Kobold says. The boy would drive back and forth to Munich from the family mansion outside Frankfurt whenever he got the chance, shadowing Lang and eventually becoming something of a surrogate son. Lang taught him the basics of watch design and also of running a watch company.

Eventually, Kobold set off for the U.S. to study economics at Carnegie Mellon in Pittsburgh. It was during one of the first summers back home that he had Random But Crucial Encounter No. 2. Because he was schooled in tactical driving--a skill he picked up at his father's request; Herr Kobold feared that Michael or his brother could be a kidnap target--Michael was often asked to pick up VIPs when they visited Frankfurt to lecture at the International School, his alma mater. One day, he was dispatched to pick up the famous English adventurer Sir Ranulph Fiennes, a man the Guinness Book considers "the world's greatest living explorer." It was raining and they were late, so the kid put his skills to the test. As Fiennes recalls, "The person they sent was a 19-year-old who looked smart and drove far too fast and that was Mike.…We just clicked completely." A friendship was born.

The birth of Kobold Watch, on the other hand, was essentially a byproduct of boredom. Kobold so loathed college that he needed a distraction. Lang told him to start a company, and so in 1999 he did, with $5,000 in cash, Lang's personal warrant (particularly useful with suppliers), and the confidence of the well born and likable. He began with a single watch: a simple design, black and sturdy, known as the Professional. On the advice of Jack Roseman, his college entrepreneurship professor, he placed an ad in a watch magazine, registered a URL, and put the Professional online for the price of $575, becoming, accidentally, one of the first--perhaps even the first, as he claims--Internet-based factory-direct watch companies.

Kobold ran the company from his apartment, keeping stock in a tiny safe. If he had an order when he came back from class, he would attach a strap to a watch, box it up, and dispatch it by mail. That first year he grossed $85,000.

The company has since grown exponentially in sales, but only incrementally in terms of personnel and office space. It occupies a single room adjacent to Kobold Instruments, the American office of his dad's company, from which he rents the space for $750 a month and borrows some corners of the factory for storage. There are just three full-time employees: chief operating officer Dan Scioscia, watchmaker Ed Cruz, and bookkeeper and jack-of-all-trades Bryan Satchell. Kobold also relies on a master watchmaker who works when needed and a third watchmaker who can be called into duty when things are especially nuts. (Later this year, Cruz will head to Switzerland to further his studies; eventually he will be certified as a master.) In a pinch Kobold still assembles watches, as he did until he hired his first employee in 2003. He keeps a jeweler's monocle at his desk for visitors who might expect to find someone more befitting the part of watchmaker than a guy in white sneakers and a polo shirt.

"We tell people we're a bunch of misfits cast away on like a desert island," Kobold says, standing outside, in a blacktop parking lot not far from the Pittsburgh airport. Down the hill is a bread company that lets him wander freely on the factory floor, snatching loaves intended for the shelves at Whole Foods (NASDAQ:WFMI). He has memorized the baking schedule, so that he knows what breads exit the oven at what times. (Cranberry pecan arrives Thursdays at 4 p.m.) Food is Kobold's only obvious vice. He is never far from a box of chocolates and at one point, back in college, he often ate a pound a day. Among his many plans is one to launch a line of Kobold chocolate bars.

It's incongruous to picture the maker of expensive watches commuting to work here, in a bland office that doesn't even have a receptionist, but it's core to Kobold's business philosophy. "I don't believe in hiring more, more, more people," he says. "That's the mistake a lot of companies make. They hire people and then lay them off. It's cyclical. I'm against that. Around Christmas, we just work harder."

Kobold pays himself a low-six-figure salary. Everything else goes back to the company. Because so much of the watch business is image and exposure, his ad budget is the largest line item after manufacturing costs. You can find Kobold watches in expensive titles like The Economist, Men's Vogue, and the Robb Report, magazines that get up to $50,000 per page. In 2007, Kobold will spend just over a half-million dollars on advertising.

Perhaps the smartest thing Kobold ever did was to ask his celebrity buyers for permission to list their names on the company website. His friendship with Sir Ranulph Fiennes expanded into business when the explorer agreed to leave Rolex, his longtime sponsor, and become the face of Kobold under its new slogan, "Embrace Adventure." (A roster of adventurers who wear Kobolds, including the likes of mountaineering legend Reinhold Messner, is prominently featured on the website.) Fiennes is not the company's most famous fan, however. Bill Clinton owns at least three Kobold watches and has chosen some very high-profile spots--Larry King Live, a Super Bowl halftime show, the cover of Ladies' Home Journal--in which to wear them. As an ex-President, Clinton cannot officially endorse anything, nor can his likeness be used in an ad, but you better believe it's a topic Michael Kobold loves to bring up.

But Kobold's biggest break of all circles back to Gandolfini. One day in late 2003, the actor was posing for the cover of GQ magazine in a Manhattan studio. Kobold was hanging around with his friend and started to snap a few photos with the idea that maybe one of them would work out as an ad. "Hey, Jim," he said, "look over here." Gandolfini looked over, smiled, and then, as actors often do, he improvised; he raised his middle finger to the camera. That shot would become an ad that has since run in dozens of magazines. The tag line: "James Gandolfini thinks Kobold is No. 1."

One of the first magazines to run the ad was the trade publication International Watch. Editor in chief Gary George Girdvainis was hesitant to take it at first. This is a staid old business; your typical watch ad is just a beauty shot of a timepiece on seamless. You might get a shiny luxury car in the background or maybe Pete Sampras in a blazer. To Girdvainis's surprise, he got no complaints. "People were offended, affronted, amused, whatever," he says. "They paid attention."

Another brand ambassador who turns up in ads is Prince Mongo, a wealthy real estate investor from Memphis who insists he is a 333-year-old envoy from the planet Zambonia. He dresses like a homeless person and never wears shoes. But he does wear a multithousand-dollar watch.

Once, Kobold was in the office alone when the king of a Middle Eastern country that cannot be named rang up. His Eminence had seen an ad for the Phantom--a matte black chronograph created for special ops soldiers--in the back of the DuPont Registry and sought to understand why, exactly, one would need a bezel that turned.

"Do you cook?" Kobold recalls asking the king, who lives in a gilded palace and controls oil reserves that yield tens of thousands of barrels a day. "Okay, ridiculous question." He tried again. "Say you're putting money in a parking meter…Oh, right. Never mind."

The king paid $22,500 for a custom gold version of the Phantom--a good deal, at the end of the day.

"It's customer service," Kobold says. "We have a margin. I'm not going to argue with the king over $1,000."

In the hierarchy of watches, the ultra high end is made up of your Pateks and your Audemars Piguets. Chronoswiss, Jaeger-LeCoultre, IWC, and some others would fall just under the top end. Below that would be the likes of Panerai, Rolex, Omega, and little old Kobold. "Compare us to Rolex," Kobold himself says. "Don't compare us to Patek."

Michael Kobold, though, has very distinct ideas about luxury. He believes in scarcity and in micromanaged quality control. His company does very limited productions. Kobold, he says, will never produce more than 2,500 watches in a year. Rolex, by comparison, makes upward of 600,000, which isn't to say it's not a brand that commands respect. If you were to check the wrists of 100 Wall Street traders, it's a virtual certainty that Rolex would predominate. It is the only watch brand to appear on the Interbrand (NYSE:OMC) "100 Best Global Brands" list.

Kobold admires the company and its watches; he just takes issue with the numbers. That level of production "runs counter to the idea of luxury," Kobold says. "It becomes a commodity. Bigger companies overproduce and discount. We do the opposite." He will build only 250 of a new watch he's developing with British racing car legend Stirling Moss. Another new model will bear the name of Philippe Cousteau, and again, only 250 will be made. With a few exceptions, Kobold retires a watch after a limited production, which not only creates demand but protects the value of his customers' investments.

Virtually every piece of a Kobold watch is made in Europe, but Kobold is proud to base his operations, and most of his assembly, in the U.S. (He's a bit of a patriot--he's stingy about discounts except to law enforcement and military personnel, and nothing makes him happier than selling a watch to a Navy Seal or a Secret Service agent.) The few other notable American watch companies are either much smaller--the tiny Montana Watch Co. and RGM Watch are developing names--or much larger and not purely makers of mechanicals, Fossil (NASDAQ:FOSL) being the most prominent example. "There's really nothing on our level in America," Kobold says. "But my theory is that when a guy collects watches, eventually he's going to end up with one of each. So in a sense there is no competition."

That may be partly true, but it's mostly just indicative of Kobold's optimism. Certainly it's expensive to start a high-end watch company, but in crucial respects the barriers to entry are low. Most important, the movement, the beating heart of a mechanical watch, is available off the shelf. (See "Very Tightly Wound,") "Anyone with a design can make a watch," says Girdvainis, of International Watch. "You can start the project on a napkin and bring it to fruition. It's basically marketing.

"There are 200-plus watch brands at Basel alone," he says, speaking of the annual Basel watch show, the industry's preeminent showcase. "And every year they pop onto the scene and then disappear as though they never existed."

And when Kobold popped onto the scene?

"I was surprised he was still here a few years later."

Just about the only thing Michael Kobold is circumspect about is money. There seems to be a watch-business code of omerta regarding sales figures--extending even to a company that sells direct to the public, publishes its prices online, and rarely discounts. But the math is simple. If you assume (conservatively) that the average sale of a Kobold watch is worth about $2,500, and if the company sold (conservatively) about 1,500 watches in 2006, then Kobold is coming off something like a $3.75 million year.

David Bowling, the associate publisher of WatchTime magazine, likes to call Mike Kobold "Big Fish," after the Tim Burton movie in which a dying father tells his son a string of exaggerated tales. As the father spins outlandish stories, they play out onscreen in wild Technicolor fancy, so that it is never clear where reality ends and fantasy begins. Bowling, who has been observing the watch industry for nearly a decade, says he has never met anyone like Kobold. They first met, he recalls, when Gerd Lang introduced him to the then 19-year-old German at the Basel watch show. Kobold had yet to produce a watch but was not shy about announcing his intentions to do so.

Over the intervening years Bowling has come to know Kobold well, as his magazine has reviewed Kobold products and run the company's ads. (In the trade magazine world, the line between ad and edit is thin and hazy and ultimately matters little since watch people mostly just like to look at the pretty pictures anyway.) Bowling says Kobold used to pop in with a bag of watches, sometimes having sold one out on the street--and often with a fanciful tale or two about his larger-than-life endeavors. Explorer, Nazi hunter, tactical driving instructor--Bowling has heard them all. He'd say, "I'm gonna run a marathon with Ranulph Fiennes…" and Bowling would find himself thinking, "No way. This guy tells some tall tales!"

"Then I turn on the television and there's Michael, and under his talking head, the words 'International Explorer.' I thought, 'Oh, my God. This is just like Big Fish.'"

And by that he means, maybe reality never really ends at all.

"Ever since then, everything he tells me I believe."

Truth be told, it's not that simple. The reason Kobold is now known to viewers of the Outdoor Life Network as an international explorer is that, yes, he did run a marathon with Ranulph Fiennes--the 2003 New York City Marathon. It was Fiennes's seventh marathon in seven days, a remarkable feat for anyone, even the World's Greatest Explorer, but even more so for a man who had undergone double bypass surgery just three and a half months prior. Kobold was by then Fiennes's good chum--he had even helped Fiennes track down a Nazi war criminal. His primary role was as a translator of old German documents, which isn't exactly James Bond stuff, but--you know--Big Fish, right?

Anyway, Kobold ran with Fiennes as an act of camaraderie and probably also, you have to think, as a smart little bit of self-promotion. After the race, the media were clamoring for Fiennes, but he quickly returned to England, leaving Kobold to answer questions. An Outdoor Life producer called Kobold and asked if he could, in fact, stand in for Fiennes for some segments being taped. One, for instance, was about polar exploration. Kobold has never explored a pole, nor seen much of any wilderness, but when asked if he'd ever been anywhere cold or forbidding, he said he had been to Alaska. Good enough! And so Kobold imparted some frosty wisdom and was forever imprinted in television history as an international explorer. He also taped a bit about mountain gorillas. He has never seen one outside of a zoo.

The trip to Alaska? It was a cruise.

This may all sound like extraneous color, the kind of life detail that fascinates mostly magazine writers, but in fact it's entirely central to Michael Kobold's success as a watchmaker. Who Kobold is and claims to be cannot be separated from his product. Without the former, there is no latter. In the opinion of his mentor, Gerd Lang, Kobold's watches aren't really that special. This is not a knock on his watches. It simply means that they aren't any more remarkable than Tag Heuers or Omegas or any other big chunky manly watches crafted of steel, adorned with tickers and dials, and sold for four figures. They all fly high, go deep, and last long. What's remarkable is that most of these companies are gigantic concerns based on the Continent and backed by vaults of cash. Kobold is owned by a 27-year-old who lives in a $700 apartment.

Kobold, of course, doesn't agree with any of this. He'll tell you all about his special Soarway case or the fact that he uses screws where others use pins, but really, what's exceptional about a Kobold watch is the way it is marketed and sold. Companies like Rolex and Omega spend millions on celebrities and ad campaigns and end up with photos of Jim Nantz in a mock turtleneck. Kobold shoots his ads himself and pays nothing to his brand ambassadors. Because he sells mostly over the Internet or by phone (a small network of authorized retailers accounts for 15 percent of sales), nearly every dollar from sales goes to his top line.

It's possible that even Kobold doesn't necessarily think his watches are better than the competition. As long as they're equal and people want to buy them, who cares? Isn't it a reality of marketing that it's all about massaging the truth? Did clutching a Bud Light (NYSE:BUD) ever actually make a man more fun to hang with?

"Some people do think he's a con man," says Jack Roseman, who chuckles at the idea. "But there's always enough truth there that you can't deny him."

Which brings me back to Big Fish. I was talking to Gary George Girdvainis a few days after speaking with Bowling. We got onto the topic of Kobold's elaborate tales, and he said this: "I saw him on TV once commenting on gorillas. I asked him, 'What the hell were you doing talking about gorillas?' He said, 'I'm not sure. They never asked if I was a gorilla expert.'"

By the way: You know what Kobold means in German?

Mischievous little gremlin.

One summer afternoon in Pittsburgh, Kobold stands up from his couch and walks me to the door that separates his company from his father's. On the other side of the wall from Kobold Watch is a large and immaculate room where a woman in goggles is doing something noisy with a pneumatic tool. Around the room are valves and gauges and oddball steel concoctions for trucks, ships, and space shuttles. "A lot of U.S. attack subs have Kobold instruments," Kobold says. "It sounds exciting but it's quite boring. Whereas we sound boring but we're quite exciting."

"I suppose if I stuck with the family I'd be the heir to all this," he says, pointing at a dim room full of doodads and thingamajigs. "I walked away from it. My father was upset. He didn't believe you could sell anything over the Internet or that anyone would buy a Kobold watch."

The only other room in the watch company offices is a space resembling a walk-in closet. It holds a large safe, some file cabinets full of parts, a number of automatic winders running 1,000-hour tests of completed watches, and the workstation of Kobold's in-house watchmaker, Ed Cruz.

Cruz sits hunched over the workstation in a white lab coat, peering through a magnifying device and making delicate modifications to a watch that will go out to a customer later that afternoon.

"Not only assembled in America; modified in America," Kobold says happily.

He opens a drawer filled with movements for the Spirit of America, the newest of his watches. He's about to release it to commemorate the fifth anniversary of September 11. For the first few months, it will cost just over $1,000, making it by far his most inexpensive model. A number will be worn by celebrities like Gandolfini, architect Daniel Libeskind, CNN talking head Glenn Beck, and Bill Clinton before being auctioned off for charity. (Kobold would eventually raise $27,000 for the USO of Metropolitan New York.)

Kobold pulls a blue crocodile band (retail price $330) from a cheap aluminum shelving unit and attaches it to a red-faced Spirit of America. Red is an unusual color for Kobold, whose signature look is solid and masculine, but with the blue band especially, this one really pops.

"This is so sexy," he says, moving the watch around on his wrist. "So beautiful!"

Dan Scioscia summons him to take a phone call and for several minutes Kobold and a customer chat about a watch. It sounds like a discussion between old friends. There is talk of food.

Kobold hangs up and moves to a computer. He clicks on an e-mail and reads it aloud. "Nicolas Cage wants to wear a Kobold in his next movie."

He smiles impishly. "I swear, it's not normally like this."

But it sort of is, even if Cage didn't end up wearing a Kobold. (At any rate, Kiefer Sutherland wore one last season in 24, and Gary Sinise wears one in CSI: New York.) In early December, I hear from Kobold again. He is back in New York to talk some business with Gandolfini, who is busy filming the last season of The Sopranos. When the final nine episodes begin to air in April, it will bring to a close one of the most popular and critically lauded programs in television history. It is sure to be a momentous pop cultural event. Anyway, Gandolfini summoned Kobold to talk shop; he had an idea. He was going to buy watches for the entire cast and crew--400 special edition Soarway Divers in titanium (retail price $3,850) for the crew, 40 of the same watch in gold (retail price $14,500 for the women's white gold; $10,500 for the men's red gold) for the cast. Even at a discounted rate, it's well over a million dollars in watches, and an almost priceless amount of publicity.

Meanwhile, the Spirit of America continued to fly out of Ed Cruz's watch safe. The first 300 for which Kobold had movements were long gone and soon the price would rise to $2,750. Land Rover had just signed for 150 custom watches to hand out at a charity event for dealers.

Kobold is celebrating as he often does--by eating. A TV producer told me that when he took Kobold to a steakhouse, Mike ordered a second cut of meat for dessert, and after I recommended a great bakery for croissants in New York, he called to tell me he'd eaten six. But on this morning, not even huge forkfuls of huevos rancheros at a Tribeca restaurant can cover up his smirk. "This is a monumental order," he says. "On top of our regular orders"--the week before he had shipped 120 watches, mostly Spirit of Americas--"we have to deliver 600 watches by March." I tell him that this all points to blowing past his annual sales cap of 2,500 watches in, like, six months. He extends his hand for a shake. "I tell you now that I will never sell more than 2,500 watches in a year." He says he will raise prices by 8 percent in April. "If I have to, I can stop advertising or put people on a waiting list."

Soon, men with sledgehammers will arrive to quadruple his office space, and none of this is the news that excites him the most. Quite recently, Gerd Lang had asked Kobold to meet him in Los Angeles for a chat. Lang had come into possession of what Kobold says is a 15-year supply of German movements from the 1960s. Kobold is giddy. He says that he can modify them as much as he needs to; each one will be disassembled, cleaned, polished, decorated, modified, and engraved, becoming, in essence, a Kobold movement--which is important not just for prestige but for the company's future. The world's largest maker of movements, ETA, has announced that it will soon produce only for brands owned by its parent company, Swatch.

"You need a couple million to make your own movements," he says. "We just saved a couple million."

Of course, I say, this means he'll have to take "Swiss Made" off the dials--nothing Swiss will remain.

"With the Spirit of America, we said that it's modified and assembled in America--and people loved it," he says. "I did that to commemorate America's resolve in the years after September 11, and also because we're based in America. Customers absolutely loved it."

By 2008, the new Kobolds will begin to appear.

"In the next five years, if predictions are right, several watch companies will go out of business because they can't get Swiss movements anymore. The fact that we have our own movements means that we're safe."

And with that he stands up.

"Let's go get croissants."

Josh Dean is a writer who lives in New York City. He last wrote for Inc. about snowboarding mogul Jake Burton.

Copyright © 2007 Mansueto Ventures LLC. All rights reserved.
Inc.com, 7 World Trade Center, New York, NY 10007-2195.

Thinking Small: VC's are learning that tiny deals can go a long way

2007-04-29T22:40:00.000-07:00

By: Ryan McCarthy

As venture capital deals go, it doesn't seem like much--just $6,000. But that was all Sam Altman needed to get his new business, a cell phone software maker called Loopt, off the ground.

And if the investment seems rinky-dink, the investor certainly isn't. The money came from Y Combinator, a Cambridge, Massachusetts-based venture firm founded by heavy-hitting Internet entrepreneur Paul Graham. What's Graham, who created the seminal Web application that eventually became Yahoo (NASDAQ:YHOO) Store, doing playing with such trifling sums? "It's gotten to the point now where the most important things you need to found a tech start-up are food and rent," he says.

Graham is not the only one who feels that way. A small but growing number of venture firms now provide seed-level funding--thousands rather than millions--to promising young start-ups. The approach differs from the usual venture capital model, in which investors take equity at the outset and demand board seats and input in day-to-day operations. But these smaller deals make particular sense in today's marketplace, the investors say. After all, tech firms now can be launched for peanuts. Thanks to declining costs for servers, more powerful coding languages, and the prevalence of free open-source software tools, brand-new start-ups can attract sizable audiences for next to nothing. And with the market awash in private equity, competition among investors for promising companies and concepts is more heated than ever. As a result, the number of seed-level deals increased almost 50 percent in 2006, according to PricewaterhouseCoopers, the National Venture Capital Association, and Thomson Financial (NYSE:TOC). "The days of throwing huge sums of money at an entrepreneur are gone," says Mark Heesen, president of the NVCA.

Y Combinator is a good example of the trend. Launched in 2005, the venture firm now dishes out between $10,000 and $20,000 per company to fund a three-month stay in Cambridge, where entrepreneurs spend their time perfecting their technology, meeting with mentors, and swapping ideas with peers. In exchange for the cash, Y Combinator takes a small stake in the companies it funds, usually about 6 percent. So far, two of its companies have been acquired, including Reddit, a news-aggregating site recently bought for an undisclosed sum by Condé Nast. Y Combinator is banking on a similar outcome for Sam Altman and Loopt.

Altman, now 22, founded the business in 2005 while he was a sophomore at Stanford. He was looking for a way to keep in touch with his friends on campus and got the idea to write software that would allow all of his friends with GPS-equipped cell phones to find one another. Altman heard about Y Combinator's newly launched program from a classmate and got in touch. Later that year, he got $6,000 from Y Combinator and left school. He spent the summer in Cambridge developing his product, listening to guest speakers, and learning the nuts and bolts of running a business. In return, he gave his investors an undisclosed amount of common stock in his company, which is based in Palo Alto.

For Altman, the trade has been more than worth it. Last September, Loopt launched its cell phone software exclusively with Boost Mobile, a subsidiary of Sprint Nextel (NYSE:S) with 3.8 million subscribers. Boost has since invested several million dollars in a TV advertising campaign to support the launch. Altman also plans to partner with several major cell phone carriers, which will roll out the service in 2007. The company is adding staff and recently raised $5 million in Series A financing from powerhouse VC firms like Sequoia Capital, which helped launch Google (NASDAQ:GOOG), Yahoo, and PayPal (NASDAQ:EBAY). "We have five people on our team, none of whom is over 23 and none of whom has any business experience," says Altman. "Y Combinator really understands what a company needs in its first three months."

Techstars, a Boulder, Colorado-based venture firm, launched a similar program last year, offering start-ups as much as $15,000 and a three-month stay in Boulder, in exchange for 5 percent equity. Charles River Ventures, one of the nation's oldest venture capital firms, has also created a seed-level program, albeit with a slightly different approach. The CRV QuickStart program, launched in 2006, provides tech start-ups with low-interest loans of an average of $250,000 called convertible notes. Should the borrower go on to raise venture capital, the loan can be converted into equity at a discounted rate (a maximum of 25 percent off). The deal also gives Charles River the option to participate in the Series A round. "What we've noticed is that there is often an inverse relationship between the amount of money entrepreneurs raise and the quality of their companies," says George Zachary, a partner at Charles River Ventures.

For entrepreneurs, of course, these deals are a mixed bag. On the plus side, you get to keep more control. Angel investors, for example, often ask for a 20 to 40 percent equity stake right off the bat and will want to have some control of operations. Y Combinator, QuickStart, and other seed investors take much smaller stakes. What's more, there's no haggling over valuation--a process that can take months when dealing with VCs or angels. And getting accepted to these programs can be painless. You simply submit a description of your business or a prototype and sign a contract, a potentially crucial time savings that can help get your product to the market faster. The downside? If your venture hits it big, giving away a sizable stake in your company for a few thousand dollars might seem like a bad deal.

Still, QuickStart was appealing to Mike Phillips, co-founder of Mobeus, a communications software company based in Cambridge. Lacking a prototype or any significant market research, Phillips knew his company would have a hard time attracting VCs or angels. Indeed, without a clear idea of how big his company could become, he was hesitant to talk to any investors, whom he knew would ask him to place a specific value on his company and be eager to start talking exit strategies.

Instead of entering a guessing game about the future prospects of his company, Phillips used $300,000 from QuickStart--a 6 percent loan that he was able to close in just two weeks--to build a prototype and research the market while working closely with Charles River. The relationship has worked well enough that Phillips has just closed a multimillion-dollar Series A round with Charles River and Sigma Partners. The funds will help Mobeus bring its software to the consumer market, which Phillips expects will happen this summer. The ease and relative calm with which the deal proceeded almost made him forget he was dealing with a venture capital firm. "It's just a much simpler deal," says Phillips. "In a way, this is more natural than a typical VC deal because it gives both sides a longer time to get to know each other."

Copyright © 2007 Mansueto Ventures LLC. All rights reserved.
Inc.com, 7 World Trade Center, New York, NY 10007-2195.

What's up pussy cat?

2007-04-29T17:34:00.000-07:00

Hello Kitty, the immortal queen of kawaii, is twenty-five this year. The auspicious day is not actually until November 1 but, in true blood-from-a-stone Sanrio style, the celebrations at their Puroland theme park have already begun. Charles Spreckley pays homage to the world's most profitable pussy.

THE CAT OUT OF THE BAG
There is a shop on London's Oxford Street, shopping Mecca for the mediocre, called Top Man. It used to be a bit down market but recently was born again as a huge style emporium and voted best trendy shop, or something, by FHM magazine. Dragged there by friends on my last trip home I have to admit to being pretty impressed with the transformation. Until, that was, I ventured down to the basement floor. Directly in front of the bottom of the escalator, in a prime position obviously designed to give this product range extra kudos, was a whole section of pink and red, soft and cuddly products sticking out amongst the Milan chic like a cat with no mouth. As I reached the bottom of the escalator, scenes of Shibuya, giggling schoolgirls and glowing orange skin flashed before my eyes. Could it really be? It was. Hello Kitty had come to London.

Shocked as I was that this epitome of all things infantile could possibly have invaded no-nonsense England, albeit swinging London, Kitty's presence really should have come as no surprise. You see, Kitty is from London. Oh yes. Kitty lives in London with her parents, George and Mary White. She likes collecting hair ribbons and baking cakes. (How quaint. You see - she's really as English as a soccer fan with a broken beer bottle.) Although she's pushing twenty-five, Kitty is in the third grade. Always has been and always will be. She is primarily held back by her, let's face it, pitiful class oral participation marks, due to the fact that she has no mouth. She weighs the same as three apples. In the old days it was three Granny Smiths, but after all those cookie endorsements it's now three cooking apples.

Kitty's other main hobby is making friends. Kitty first started making friends in 1975, when she appeared on a small plastic coin purse produced by Sanrio Corporation. The purse was an instant hit and propelled Kitty-chan onto numerous other products, from T-shirts to tennis rackets, coffee beans to cameras, batteries to bandaids. To every Japanese girl growing up in the 1970s, Kitty was her bestest friend. To Sanrio, she was their most profitable creation, helping pull the company from the edge of bankruptcy to become a multi-billion yen super-corporation of cute.

THE COMEBACK CAT
Although Kitty lost her spot at the pinnacle of the make-believe mountain to Doraemon et al. during the eighties and early nineties, like all bestest friends she never completely went away. When the Kitty-boom generation from the seventies reached child-bearing age in the mid-1990s, Hello Kitty staged a comeback the likes of which would have made John Travolta weep.

It started in 1996 on the back of the keitai phenomenon when Yamaguchi Yuko, top cat at Sanrio's design department, launched a range of pink satin keitai cases aimed at high school girls. At that time pink was the nail polish and lipstick color amongst hip highschoolers, and the Kitty-chan model soon became the only keitai cover to be seen with anywhere within a kilometer of the 109 Building. An undoubtedly tickled-pink Sanrio sold 600,000 of the things in a year, meaning approximately one in four of the three million high school girls in Japan owns a pink satin Hello Kitty keitai cover.

Unlike the first boom twenty years earlier, this was a calculated move by Sanrio to infiltrate the herd instincts of fashion-fickle teenagers. "We do a huge amount of research amongst the high school girls in Shibuya and Harajuku," says Sanrio's Nakajima Seiji. "It is incredibly important for selling our products because these girls will leap on any trend, if you get the marketing right. But if you get it wrong, they'll leap off just as fast."

Once her products had appeared in schoolgirls' style bibles like Cawaii!, it became official - feline fashion was back in style. So powerful is the boom-craze mentality amongst teens in Japan that once five percent of the teen-girl market endorses a product, another 60% will almost certainly follow suit in under a month. If a product really hits the kawaii spot it can reach almost 100% market saturation within a week. Hello Kitty hair clips, Hello Kitty pencil cases and Hello Kitty bag accessories all received the blessing of the masses and became, at one time or other, the accessory of choice for a whole generation. When J-Pop star Kahara Tomomi came out as a Kittyholic, sales at Sanrio stores almost doubled within days. "Since then we have been actively searching for every niche Kitty has yet to fill," admits Sanrio's Takahashi Ko.

TOP CAT
But unlike mini-Tetris or Tamagochi, the Hello Kitty boom has proved to have incredible staying power, even second time around. Partly this is due to Sanrio's relentless marketing of anything it can think of on which there are enough square inches to print a little pink expressionless cat. Need some ear plugs? Kitty's got some for you.

The main difference now is that this time Kitty-chan has two generations of feline-friendly females in her claws - the high school girls and their mothers, pussy-power veterans from the '70s experiencing an attack of natsukashii nostalgia. "These people don't consider Hello Kitty to be childish," says Nakajima. "She is part of their memories. Men feel the same, but with Ultraman not Kitty-chan. It's more 'eretro' than childish."

This may be so, but the merging of adult and children's cultures is a phenomenon visible all around us every day and is starkly more apparent in Japan than abroad. Note the ubiquity of cartoon characters guiding us in our daily life, telling us what to do with our gomi, warning us to be careful of those nasty closing train doors and lovingly adorning our bank books and cash cards. Where the impression that having a picture of Pekkle the Duck on your cash card somehow induces you to have confidence in your bank manager comes from is beyond me. Think of the popularity of immature women amongst Japanese men, or dour-faced salarymen unashamedly reading teen comics on their way to work. The consequence of this cross-generation culture phenomenon is that fads which come and go in other countries, if indeed they come at all, can have astonishing staying power in Japan if they possess the right je ne sais quoi. Doraemon's got it. Astroboy's got it. Anpanman... hmm, dubious. Sailor Moon will never have it. But there's only one Hello Kitty.

Sanrio has another theory to explain Hello Kitty's popularity: the fact that she has no mouth. "This is probably the biggest reason Hello Kitty has become so popular," says Nakajima. "Without the mouth it is easier to imagine Kitty-chan shares whatever feeling you have at that moment. If Kitty-chan was smiling all the time, and you'd just broken up with your boyfriend or something and were very sad, the last thing you'd want to look at was a grinning Hello Kitty. Without a mouth you can imagine she is sad with you." Anyone who thinks such a deformity might be a hindrance to success need only look at Kitty. It certainly hasn't stopped her getting a boyfriend, the strong but gentle Tippy the Bear.

Or perhaps people love her for her manifold talent. She started off in the classic Hello Kitty sitting-on-the-floor pose, a position which remained unchanged until the 1980s, when Yamaguchi created the "standing Kitty" and "Kitty playing the piano." In her twenty-five years of unreal life, Kitty has had her own TV animation series, made records, worked for UNICEF as a junior ambassador, starred in comic books, endorsed pretty much any product you'd care to think of and toured the world, making friends everywhere. Kitty ain't no lazy kitchen cat, that's for sure.

But ask her legions of fans for an answer to the what's that cat got that I don't puzzle and you'll get the same, simple insightful reply. "Because she's kawaii." Ingenious.

PUSSY GALORE
As teenagers and their mothers shop for the latest Kitty-chan hair curlers or the limited edition Kitty and Mimi matching novelty chopstick rests, it is Sanrio which has reaped the rewards. The Hello Kitty revival was almost single-handedly responsible for the thirteen-fold hike in Sanrio's profits in fiscal 1997 to JY15.56 billion on 40% increased sales of JY112 billion. There are some 15,000 Hello Kitty products on the market, with 500 new items released each month by Sanrio. Daihatsu even produces a special Kitty-chan car - it may not be quick, but it sure is kawaii. And there's the Hello Kitty motorcycle, for the nineties bosozoku with feelings.

But it's not just Japan that's Kitty-cat crazy. It seems nothing short of world domination will stop this feline. Forty Sanrio stores have opened in the US, and there are subsidiaries selling merchandise in Brazil, Germany, France, Italy and, it seems, Britain too. Mariah Carey is a fan; so are Courtney Love and US punk queen Exene Cervenka. A hint of irony there may be, but irony alone couldn't support forty stores between California and Cape Cod. Kawaii becoming cool stateside?

Kitty's main markets outside Japan are in Asia, where she has become somewhat of a tiger, spearheading the Japanese cultural invasion of the region with everything from Puffy to Pokemon, despite the disapproval of the older generation which still regards all things Japanese with a touch of wartime distaste. Taiwan and Hong Kong have both fallen for Kitty in a big way, and Sanrio stores have opened in Indonesia, Singapore and Thailand too. "Everything is very cute and stylish, that's why we like it," 18-year-old Hong Kong school girl Amanda Yee told Time magazine recently. "Whenever I'm sad, like whenever I do badly on a test, I buy some Hello Kitty things to feel better."

The counterfeiters of Hong Kong's street markets in Mong Kok and Temple Street have taken note. These days, if they're not pushing pirates of hit Japanese TV shows, their stalls will be chock full of Hello Kitty fakes. Last Christmas, Hong Kong police swooped on one supplier of Kitty counterfeits. It wasn't difficult to spot the fakes due to a spelling mistake. They'd missed out the "o," so their T-shirts read "Hell Kitty." Some spelling mistake - or maybe they were just being optimistic?

Hello Kitty's 25th Birthday is being celebrated at Sanrio's Puroland theme park in Tama City. Special events include: Kitty-chan dressed as an angel in "Hello Kitty's Angel Fiesta," until July 13; "The Legend of Sirus," an acrobatic performance show, until November; "A Summer Festival of Hello Kitty," July 20 until August 31.

'Manga' meets 'keitai': a match made in Japanese technology heaven

2007-04-26T00:39:00.000-07:00

Wednesday, April 25, 2007

'Manga' meets 'keitai': a match made in Japanese technology heaven

By DANIEL ROBSON
Staff writer
We've all been there: squashed onto a rush-hour commuter train with barely enough room to breathe, let alone open up a book to while away the journey; trying desperately to crush a book into an overstuffed backpack before a long trip; or cursing our own lack of foresight while bored at school or work with no handy distraction to relieve the tedium. But Japan's enduring love for "manga" and its knack for innovation have led to a convergence so simple as to be self-kickingly obvious: cell phone manga.

High-School Girl Yukari, the titular character from"Rocket Girl," sits on the spacecraft she was chosen to pilot due to her tiny frame. (C)2007 HOSUKE NOJIRI / MUTCHIRI MUHNIH / FUJIMI SHOBO / HAPPINET (C)2007 TWN
Falling somewhere between a traditional manga -- books that are hand-drawn in a variety of styles and covering a diverse range of subjects -- and animation, the stories offer frame-by-frame graphic novels that pan across an image, display cartoon boxes with and without the speech bubble, and emit vibrations from the phone at key moments. It's as subversive as a book but a darn sight more pocketable.

Leading the charge is Takarajima Wondernet, a subsidiary of publisher Takarajima, home to such magazines as Cutie and Smart. The company has licensed around 300 manga and painstakingly scanned every frame of the paper and ink versions, giving users an instant library to download and read anywhere. But more importantly, it has been creating its own original "keitai" (cell phone) manga along with leading manga artists. The first of these, "Rocket Girl," was launched March 22, followed April 16 by "XX." Takarajima Wondernet plans to release a new title pretty much every month until yearend, and beyond.

"Other companies use ready-made manga and transfer them into a file that makes them accessible through your cell phone," K. Kurosaki, the company's auditor, told The Japan Times. "But Takarajima works with animation companies, famous comic artists, scenario writers and directors to produce a whole new product.

"This allows us to develop the stories for theatrical release or to control the merchandise rights for the characters, and to offer the customer something unique."

Each manga is split into chapters -- 24 on average, although it depends on the story. Each chapter costs 50 yen to download, although the total for the whole manga is paid in one lump at the start. Each week, a new chapter is automatically downloaded to the user's phone, ready for reading at their leisure. The manga are available to users on all Japanese cell phone networks.

The stories themselves are a varied bunch. The Japan Times tested the thriller "XX" (pronounced "Ex Cross"), whose happenings were made all the more suspenseful by the phone revealing one frame at a time. It's up to the reader how quickly they advance through the story, just as with a book -- you can savor each frame or rush through with the click of a button. The frame first appears sans speech bubbles, a great little feature, and then one click calls up the left out text.

"We want people to read the stories at their own pace," said Toru Kenjyu, the company's president and CEO. "You can go backward to refer to some small detail in the story, or even bookmark a frame and pick up from there the next time you want to read."

The other title launched so far is "Rocket Girl," which sees Japan's first manned flight piloted by a hapless schoolgirl.

The potential is clearly massive. In Japan, graphic novels have been a major part of society since the late 1940s, and the art form has become a key export to countries both in Asia and the West. But while printed books are costly to translate and distribute, digital propagation could make manga's influence practically limitless. Takarajima Wondernet already has fledgling plans to offer its stories to mobile phone users in the United States or around Asia once it finds partners in those countries, and faces relatively low costs to do so. In addition, it will be easier to tweak the digital content to suit foreign users.

"In America, we need to make sure that parents don't object to the more sensitive material in the stories," Kenjyu said. "So we can change the stories, or make different ones for the foreign market."

Other future innovations for keitai manga include adding sound, giving users one further step of immersion into a fantasy world.

But before all that, the company needs to expand its catalog. Having 300 republished titles is all well and good, but with many of these older titles available only in black and white, with static artwork, the real allure rests with the original creations.

The initial artists include Shou Tajima, a character designer famed for his work on the cartoon segment of Quentin Tarantino's "Kill Bill Vol. 1" as well as various Japanese anime and manga. These "mangaka," or comic artists, work together with storywriters, a director and a production company -- such as Production IG, best known for its work on the 1995 smash-hit anime "Ghost In The Shell" -- to create stories exclusively for Takarajima Wondernet and its customers.

But Takarajima Wondernet is not stopping there; it plans to tap into Japan's budding mangaka and expose new talent alongside its stable of established artists. To this end, the company will hold the Mobile Comic Award 2007, a contest that invites new and established artists and storywriters to submit their creations to a panel of judges. The winner will walk away with a 5 million yen prize, and see their work downloaded onto keitai across the nation. The contest will be held on Oct. 10, with an entry deadline of July 16.

"We expect this contest to generate a lot of great ideas," Kurosaki said.

He's likely to be right. After all, new outlets can inspire renewed creativity in an artist, and this brave new digital world has the potential to open many doors for the humble manga. Who knows what the next frame will hold.

Eri Nosaka assisted with this story.

Inside the $37 billion prison economy

2006-12-15T11:38:00.000-08:00

Inside the $37 billion prison economy
The nation's 2 million inmates and their keepers are the ultimate captive market: a multibillion dollar economy bulging with business opportunity.

By Michael Myser, Business 2.0 Magazine
December 6 2006: 8:50 AM EST
(Business 2.0 Magazine) -- Brian Prins is an affable salesman who touts the benefits of his prepaid collect-calling service in a distinct Long Island accent. He's also an ex-con who served five years in a Pennsylvania state prison for aggravated assault and possession of stolen car parts, so when he explains that he's simply helping families stay in touch, stay together, and stay out of debt, you might want to listen.

"I know how much phone calls from prison cost, and how much an inmate needs to talk to his family and friends," says Prins, who himself racked up $1,000 in monthly phone bills from behind bars.

Upon his release in 2002, Prins founded Outside Connection in a bid to undercut the collect-calling services that contract with prisons. Those contracts create virtual monopolies that charge a big premium - as much as four times the standard rate for collect calls.

With Outside Connection, family members and friends buy discounted phone time, and prisoners are given a direct-dial local number that routes calls straight to a family's chosen phone. Calls can also be sent to cell or Internet phones, which isn't possible with traditional collect calls.

Because it's a prepaid service, Outside Connection is never stuck with the bill, avoiding one of the major reasons traditional services charge inmates exorbitant rates. Inmate calls are a $1 billion market, so wresting just a small portion of that business from the major providers could give Prins's 12-person shop a solid payday.

Although Prins won't reveal his current revenue, he says his customer base has grown 100 percent a year for the past two years, mainly through word of mouth: "If you're helping these families, the inmates are going to pass the word around."

When crimes does pay
Indeed, his Berlin, N.J., company is part of a massive and expanding $37 billion prison economy.

There are more than 2 million inmates serving time in the United States, up from 744,000 in 1985. America has the world's highest incarceration rate, and the revolving door helps keep those prisons packed: A 2002 study by the Federal Bureau of Justice Statistics found that 52 percent of released convicts were back in jail within three years.

"All of these things are terrible, but they are good for business," says Martin Roenigk, CEO of CompuDyne (Charts), a security software and hardware provider to the corrections and homeland security markets.

State prison systems spend more than $30 billion annually, and the Bureau of Prisons budgeted $5 billion for just 182,000 federal inmates this year. That translates into plenty of work for companies looking to crack the prison market.

"Our core business touches so many things - security, medicine, education, food service, maintenance, technology - that it presents a unique opportunity for any number of vendors to do business with us," says Irving Lingo, CFO at Corrections Corporation of America, the largest private prison operator in the country, with 65 facilities.

$14,000 cells: ready to order
CompuDyne broke into the market in the mid-'90s, when the Annapolis, Md., company was just a $20 million outfit, by purchasing two prison security businesses. The company integrated their electronic and hardware security products - lockdown control and perimeter alert systems, closed-circuit television, blast-proof doors, and bullet-resistant windows.

Since then CompuDyne has ridden the prison market expansion and anticipates $60 million in prison-related sales this year on overall company revenue of $140 million. CompuDyne's latest product, MaxWall, is a modular, prefab prison cell (think high-security cubicle). MaxWall can be dropped quickly into an existing building to accommodate a growing inmate population or serve as a building block for new prison construction.

With 2-inch hollow steel walls, the cells feature built-in lighting, beds, and plumbing. MaxWall, which typically sells for $14,000 to $18,000, is shipped like an erector set and stitch-welded together onsite. The cells can save 10 square feet of space each over conventional cell construction techniques, allowing prisons to accommodate more inmates.

That's particularly important to prison administrators as they grapple with overcrowding and limited budgets. For example, California recently declared its prison system in a state of emergency, in large part because of a lack of cells. The feds, meanwhile, expect the Bureau of Prisons to be about 30,000 beds short by 2011.

That certainly bodes well for MaxWall sales. The company has installed 4,500 cells since December 2002 and has contracts to triple that number in the next year alone. "We expect unchecked growth for the next two or three years," says CompuDyne executive Gary Mangus.

From Park Ave. to Penitentiary Row
The burgeoning prison economy was on display in August at the annual American Correctional Association convention, a sort of Consumer Electronics Show for correctional entrepreneurs. Some 400 exhibitors attended the confab in Charlotte, N.C., showing off their wares - everything from "finger-puppet toothbrushes" and suicide-resistant toilets to transport vehicles and uniforms.

Hundreds of companies also pay to advertise thousands of products and services in ACA's annual buyers' guide, which reaches 125,000 readers of ACA's Corrections Today magazine. Corrections Corporation of America, one of ACA members' biggest customers, forecasts a continued boom.

"We feel very, very good about the business prospects," CCA's Lingo says. The company's profit of $47 million during the first six months of 2006 nearly matched that for all of 2005. The Nashville, Tenn., company is currently building new prisons or expanding existing facilities to accommodate nearly 3,700 more inmates by the end of 2007. California, for instance, recently announced plans to send roughly 1,000 of its inmates to CCA prisons.

While many companies go directly to jail operators for their business, others target consumers still outside the system but holding a reservation to check into Club Fed.

Steven Oberfest was working as a personal trainer four years ago when one of his clients' friends was convicted of a nonviolent crime. Though she wasn't facing Oz-like conditions, she asked him to train her to defend herself.

"I thought, 'Why not? This could be a business,'" he says. With that first trainee, Oberfest founded Incarceration Optimization Program International in New York City, offering a 100-hour, $20,000 course that instructs mainly white-collar criminals on the finer points of prison etiquette.

"Prison time for someone who lives in a penthouse on Park Avenue?" Oberfest says with a laugh. "You might as well send them to the moon."

Miss Manners for the slammer set
His timing couldn't have been better: The stock option back-dating scandal may well produce a new wave of executives headed for the Big House. With a limited number of federal prison beds, convicted execs these days face the possibility of serving time with violent offenders.

Oberfest, a tattooed professional fighter who says he has been arrested but never did hard time, met with police officers and former prison guards and tracked down regulations for facilities within the Bureau of Prisons to develop his class. It combines coursework, physical and mental training, self-defense, and role-playing.

Oberfest's clients learn slang terms, how to address guards and other inmates, and generally what daily routines will be like inside. His program is one of the dozens offered by consulting firms on everything from witness preparation and sentence-reduction lobbying to prison inspection and certification.

Oberfest says his business is expanding, and he anticipates 2006 revenue of $600,000 from 30 clients. In 2007, he expects a 25 percent growth in his clientele. "This still has so much potential and the ability to grow in various different ways," he says.

Battling bureaucracy
Despite all that upside, the market isn't always a peaceful stroll in the prison yard. Sometimes it's more like doing hard time.

Outside Connection, for instance, brought in just over $2 million in 2003. But a combination of shaky service and run-ins with carrier MCI and the New York prison system - which was unhappy about the encroachment on its contracts and claimed that call-forwarding services like Prins's are illegal - forced Outside Connection to regroup.

Prins has added security features and filed a pending petition with the FCC to allow him to operate in the prison market without interference. His service is now available in all but a few prisons across the country.

Others point out that fortunes are intimately tied to state and federal budgets and the respective contracting bureaucracies, which made for particularly tough times after the 9/11 terrorist attacks, when money was spent on homeland security projects, not prisons.

According to companies and industry watchers, prisons can also be notoriously slow to adopt new technology and innovative ideas. CompuDyne's Mangus notes that for several years, prisons wouldn't install electronic locks because guards wanted to hear the "clang and clunk" of the old doors when locking down prisoners.

Still, budget, earnings, and prison population trends point to a significant increase in business across the industry. Companies with the patience and products to successfully navigate the prison market should hear quite another sound: ka-ching.

Michael Myser is a writer in New Jersey.

'Mr Walkman' hangs up hat as Sony struggles to find new rhythm

2006-11-11T10:21:00.000-08:00

Nobutoshi Kihara speaks to AFP during an interview at Sony's affiliated laboratory the Sony Kihara Laboratory in Tokyo. Despite a disastrous few years for the iconic Japanese company, the ground-breaking Sony engineer believes the electronics giant still has its spirit of innovation as it marks its 60th anniversary.
Photograph by : AFP/Yoshikazu Tsuno

Hiroshi Hiyama, AFP
Published: Wednesday, November 01, 2006

Times have changed since Nobutoshi Kihara sketched out designs for the revolutionary Walkman on a piece of paper.

But, despite a disastrous few years for the iconic Japanese company, the ground-breaking Sony engineer believes the electronics giant still has its spirit of innovation as it marks its 60th anniversary this year.

A protege of Sony co-founders Masaru Ibuka and Akio Morita, Kihara is the little known face behind Japan's first magnetic tape recorders, portable tape recorders, music stereo systems, Betamax video and digital cameras.

Kihara, who has slipped quietly into retirement after nearly six decades at Sony, also played key roles in improving the company's televisions and mini video cameras.

"We made good, quality products. Our founders also knew the importance of advertising and promotion. That's how the company grew," said the soft-spoken 80-year-old, dressed in a khaki engineer's uniform.

"We did not think about expanding the company for the sake of expansion. It just grew as we worked on our products," he told AFP before retiring as head of a Sony research center where he spent his last working years.

"Back in my days, we had to draw product designs on papers. I would close my eyes and imagine our products. I would imagine joggers with Walkmans to see how the hinges should move or how the products fit into the lives of the users."

Proud to have been a Sony employee and former student of Ibuka, Kihara said he believes the company's rank-and-file engineers will keep pushing the technological boundaries.

"I am confident that our soul as engineers is being passed on to young people. Being unique and creative -- that's the quality of Sony," he said.

Few would dispute that the original Walkman, which went on sale in 1979, changed the way people around the world listened to music.

Ironically, however, US computer maker Apple trumped Sony in the market for new digital portable music players with its phenomenally successful iPod. Sony has also lagged behind rivals like Panasonic in super-thin televisions.

Sony has gone through a turbulent spell in recent years, including recalls of millions of its laptop computer batteries that have dealt a serious blow to its fragile recovery from a profit slump.

As many as 9.6 million Sony batteries could now be recalled and last week the group slashed its full-year operating profit forecast by 62 percent to 50 billion yen (421 million dollars) -- about one-quarter of last year's levels.

On Thursday it posted a second-quarter loss of 20.8 billion yen.

The troubles have hit Sony just as a painful restructuring drive under its first foreign chief executive Howard Stringer had appeared to be paying off.

Sony's woes are seen by many observers as a sign that the modern Sony -- a sprawling electronics, music and entertainment conglomerate -- is losing the determined engineering spirit of Ibuka its legendary co-founder.

Even Japanese Minister of Economy, Trade and Industry Akira Amari said recently: "As a former employee, I feel like, 'What happened to Sony the technology company?'

"I hope the company will regain its brand strength as Sony the technology company by quickly addressing the technical problems," Amari told reporters.

For years Sony was able to set premium prices for its products against rival electronics firms because of its strong brand image, backed by solid engineering and design finesse.

Some analysts believe Sony's decision to branch out into non-core areas such as finance, as well as cost-cutting efforts and outsourcing of parts manufacturing, have weakened the company's engineering prowess.

Born in 1926, Kihara's career with Sony mirrors the firm's rise from a small electronics workshop to an international conglomerate, as the modern Japan emerged from the ashes of war to become the world's second largest economy.

He grew up tinkering with toys, building radio sets and model trains and aspired to become a mechanical engineer.

After Japan's defeat in World War II, he built and sold radios and other electronics from parts to support his family and to pay for his college education.

It was at that time that Ibuka and his associates founded Tokyo Tsushin Kogyo, or Tokyo Telecommunications Engineering Corp, in 1946 as a small shop researching and making telecommunications and measuring equipment.

The Sony co-founders encouraged their young engineers to experiment and learn from the latest Western inventions.

Nicknamed "a treasure of Sony," Kihara played a key role in developing the technology that resulted in the world's first commercially successful transistor radio in the 1950s.

The success gained Sony international acclaim, which was followed by similar successes in household stereo systems, televisions, video recorders, personal computers and professional use broadcasting equipment.

"I have to think that Lady Luck is watching over me," said Kihara.

"When I needed advice, I felt as if someone was guiding me to certain studies or books with hints and answers," he said.

Sony experienced a massive corporate defeat in the battle that erupted in the late 1970s between two types of video cassettes.

Kihara has written in his books that it still boiled his blood to think that consumers have been forced to use the "inferior" VHS over Sony's Betamax.

Sony is preparing for a similar fight now in new high-definition DVDs.

"It's very difficult to make technological advances, however small they may be. People may not know our story -- how we spent money, how we failed, how we had to re-do our work," he said.

"Technological progress ends once we start imitating others."
© AFP 2006

Your business plan is wrong...

2006-10-26T22:39:00.000-07:00

Every business plan is wrong. The moment an entrepreneur hits "save" or "print" the plan is out of date. Things change. In some cases you grow ahead of plan (like portfolio company Jingle Networks whose 1-800-FREE411 service has captured 3% of the US Diirectory Assistance market in one year) and are faced with the challenges of successfully scaling to satisfy user demand. In other cases you find that some of your initial assumptions are no longer valid. A competitor emerges. New technologies emerge. You are unable to build a team as fast as you had planned. Distribution channel deals take longer than expected. Customer adoption is different than what you expected.

Either way - it is critical for an entrepreneur to be able to listen to the market, their team and their customers and make changes to their plan as necessary. I've always said that I'd much rather bet on an entrepreneur who can adapt to change rather than an entrepreneur who is convinced that they have the ability to predict the future. But adapting to change is hard. How do you maintain flexibility yet still preserve a goal oriented culture? What do you say to investors who backed your initial plan? When is a data point an outlier and when is it a warning bell? Munjal Shah, CEO/Founder of Riya is doing a wonderful job blogging about his experiences in transforming Riya.

sent the packet out ahead of time and like a good CEO I called each member to brief them on the issue. I like to structure my board meetings around one big decision for us to make each meeting. I don't feel boards are best served by getting lost in the weeds, but rather focusing on the big company changing decisions and making them.

I presented two main options: Stay focused on face recognition and photo sharing or shift to Visual search. We discussed it for a while and people spoke up in turn.

Some said, "It is too early to take such a turn."
Others said, "Web 2.0 is all about social search are we sure we don't want to focus on that as a third alternative."
Another said, "Why do you think you can do image and face similarity? I thought doing anything globally was harder than local."
Yet another said, "This makes a lot more sense and is worth trying while we have the resources."

We spent almost two hours discussing it. Some of the board members had a major concern with the new strategy: what would people use the visual search for. They weren't asking, would people search, but rather, what were the use cases. Was it just porn, clip art, celebrities, and sporting events like people use Google and Yahoo Images for today? I believed that the applications would be emergent in that the new capabilities of visual search would allow new types of searches that traditional linguistic image search didn't. However, when asked for specifics I didn't have many good answers. Some folks were clearly uneasy about this and they spoke up. They were right. We needed to figure this out, but I intuitively felt that letting people search this way would drive a new class of searches even if I couldn't articulate them all today. Being seasoned board members, however, they stated their concern and backed off enough so that psychologically it became my issue to solve instead of my issue to defend the strategy to them. In the end, despite this concern all of the board members felt going in this new direction was better than staying where we were. We voted one by one and boom we had a decision. Let's do it.

I credit the board for making this decision and making it quickly.

They were supportive and realized that making hard decisions quickly is best. As a group of investors, they didn't hem and haw. They weren't tentative. They didn't let the politics of their firms interfer with Riya. They didn't say, "I told my partners Riya was X three months ago and now how am I going to explain this shift." This is critical and showed their own leadership. It was one of the reasons I chose John, Peter, David, and Neal as investors.

To all those entrepreneurs who look to take on venture capital, I advise you to find seasoned board members who are as supportive as these four. As wrong as it seems, a company is not insulated from the position and challenges of that board member and his VC firm. This is one of the reasons I strongly pefer to have senior guys at the table.

I haven't talked about my board and investors much so here some history.

John Malloy who had been the first investor in Paypal had seen Paypal change ideas three times. He understood better than I did that the most important part of a consumer Internet play was to get into the market and learn. He understood that Riya would take time to develop the technology but he still encouraged us to move fast and get to market. Once we did and we needed to listen and turn right, he was supportive without reservation. I've actually learned the most from John because he has skills in areas in which I know so little. My only regret with John is that I don't listen to him as much as I should and find I kick myself for it later.

David Hayden (who is the CEO of Jeteye ) is my strategic alter ego. He always challenges my core premise and makes sure I've thought it through. David was with me as a board member in Andale when I was a 26 year old CEO. He was the only non-VC on the board. I can't tell you how many times he provided me with aircover and taught what to do and not to do. Being a young CEO is one of the most frightening things you can do at 26. David helped me through it, including at times telling me to grow up and deal with it. Because of this trust between us, he is the most vocal and challenging of my strategies. It is great. I know he is challenging my ideas and not me because of our long relationship.

Peter is the fourth co-founder of Riya. He and I came up with the seeds of the idea. I was afraid he would be the most attached, but frankly he was already one step ahead of me. He was already thinking of the implications and challenges of the new strategy and starting all of talking about specific challenges with this strategy and what we had to do to meet them. I've talked about him a ton and care about him deeply.

Neal Dempsey is my newest board member. Neal and I were just getting to know each other. This was our third board meeting. I was most tenative about his reaction. Having just invested ... would he be pissed? Quite the contrary. You could tell that Neal had done this before and was a pro who had sat on many boards with many changes. He listened carefully watched the debate and weighed in. Neal Sadaranganey (who kept his promise to really dig in and help me build Riya) told me, "This is not a shift from our prespective. We always thought Riya had a bigger opportunity as a web-wide search engine. It was you (the mgmt team) who had said web-wide was not doable for recognition. We had wanted public search all along."

So the decision went forward.

I breathed a sigh of relief after the meeting. Most people think a CEO is at the top an can do whatever he wants. This is just not true. While I don't strictly report to these four, they are my biggest shareholders and it is important that I get their input and support. If they disagree it is important that I hear why and consider it.

That being said, I've realized that all too frequently CEOs, let a board drive decisions and then take no responsibility when it fails. For example, "I told the board not go that way, but they did and so now the disaster is their fault." Or my favorite example, "The board has decided we need to cut staff. Sorry team I fought but I lost."

Both of these are pure crap. A CEO should always keep the business focused on what he believes will make the most money for shareholders and what he believes is right. I realized when running my last company that the most important thing is to guide the company to success not to what you want or what the board wants, but rather what the customers want.

Adobe tries again with e-books

2006-10-25T02:06:00.000-07:00

By Martin LaMonica

Story last modified Tue Oct 24 06:23:29 PDT 2006

Adobe Systems thinks it's time to revisit electronic books.
The publishing software company on Tuesday is scheduled to release a beta of an e-book viewer and manager called Digital Editions at its Max 2006 customer conference in Las Vegas.

The software is meant to be a stripped-down and more flexible e-book reader, compared with its current PDF-based reader, Adobe Reader, the San Jose, Calif.-based company said.

Digital Editions is a 2.5MB free download that works as an add-in to Adobe's Flash Player 9. The software can read PDF pages as well as XHTML-formatted content, which makes it suitable for both longer texts, such as books, and shorter texts, such as magazine articles. Digital publishers can combine text with Flash videos and animations.

Electronic books were touted in the late 1990s as a replacement for paper books, but they have never become widely used. Companies continue to create specialized digital text-reading devices, such as the recently released Sony Reader.

Adobe sees the potential for more mainstream adoption, mainly via laptop PCs or mobile personal digital assistants rather than via specialized readers. More people are consuming digital content online, such as videos, and more publishers are adopting digital formats, said Bill McCoy, general manager of Adobe ePublishing Solutions

"We see there are bright spots in e-book adoption. And consumers, especially the younger generation of digital consumers, expect to get content digitally," he said.

Digital Editions will be able to read PDF files but will not include all the features of the Adobe Reader.

The new format will be able to reformat text according to screen size, instead of keeping to the same pagination no matter what the device. For example, the software will reformat a page across three columns, as opposed to two, when the user expands the viewer size.

The first release of Digital Editions will be a beta test version for Microsoft Windows, Adobe said. It is expected to be released in a final version early next year.

A Macintosh version is due later this year. A Linux version is also planned, but it will not be ready until after the Adobe Player 9 for Linux is released in the first quarter next year.

Adobe expects to create versions of the software for mobile devices as well.

In conjunction with the reader software, Adobe is planning a hosted digital rights management service, called Adobe Digital Editions Protection Service.

The service, expected in a beta form later this year, will allow publishers to impose some access rights on content and give consumers the ability to read that content on various devices, McCoy explained.

Also next year, Adobe will add support for the Digital Editions format in its Creative Suite of publishing tools.

Immigrants Sending $45 Billion Home

2006-10-19T01:43:00.000-07:00

Immigrants Sending $45 Billion Home
By Krissah Williams
Washington Post Staff Writer
Thursday, October 19, 2006; A09

Immigrant workers are sending more money than ever to their families in Latin America, but two new studies show that only a small portion of the billions of dollars directed there has gone to economic development.

A report released yesterday by the Inter-American Development Bank estimates that immigrants living in the United States will send $45 billion to family members this year, representing a steady increase from about $2 billion in 1980.

That money, known as remittances, is five times as large as official development assistance to Latin America and the Caribbean. Remittances have grown as more migrants, often unemployed in their homelands, have come north in search of work. At the same time, governments and international development groups have busily debated how to leverage remittance flows to create jobs and lasting investments.

"We know that this is a very important poverty-alleviation program for 20 million families [in Latin America and the Caribbean]," said Donald Terry, manager of the Multilateral Investment Fund of the Inter-American Development Bank. "The big question is can we turn this into a local economic development program."

About $3 billion in remittances will go to El Salvador this year, or about 15 percent of that country's gross domestic product and more money per capita than flows to Mexico, which will receive $24 billion from immigrants living in the United States.

According to the Inter-American Development Bank, nearly 90 percent of immigrants living in the District, Maryland and Virginia regularly send money to their home countries, totaling an estimated $2.2 billion this year. World Bank researchers, who will release a report later this month, found that the overall impact of remittances on Latin American economies is modest at best. For every one percent increase in the share of remittances to a country's gross domestic product, the fraction of the population living in poverty is reduced by about 0.4 percent.

Humberto Lopez, who co-authored the upcoming World Bank report "Close to Home: The Development Impact of Remittances in Latin America," said the money sent home by migrant workers cannot be seen as a substitute for good economic policies.

"The countries that benefit the most are the countries with the better investment environment and the countries with the better-educated population," Lopez said. Remittances "are probably more an opportunity than any other thing."

To spur greater development and poverty reduction, the Inter-American Development Bank has advocated greater access to savings accounts for remittance recipients and participation in micro-finance institutions, which offer small loans to remittance recipients.

Most of the money immigrant workers send to their families is used for basic needs, such as food, medicine and shelter, but more than half of the immigrants surveyed by the Inter-American Development Bank said that they would like to invest a portion of that money. But the majority of Latin America's financial institutions don't have programs that help the families of migrant workers, who are often poor and rural, open savings accounts or start small businesses.

"Poor people save," Terry said. "Poor people will invest if you give them the opportunity to do that."

The development bank's survey put the percent of remittances available for investment at 15 to 20 percent, or about $12 billion. Nearly 30 percent of people who send money home have used it to buy property, about 1 percent have helped start a business, and less than 5 percent have opened a savings account back home.

Governments have had more success leveraging remittances sent home by community groups formed by immigrants living in the United States. Several years ago, Mexico started a matching grant program, which challenges immigrants to raise money for development and infrastructure projects in their home towns. The government matches the funds three-to-one. The Pan American Development Foundation has a similar program with Banco Agrícola SA, a Salvadoran bank. Next week it plans to begin school repairs in Intipuca, a home town to many Salvadorans in the Washington area. Comunidad del Esteron, a District-based group, raised $9,400 for the project and the bank put up the rest of the money.

Biggest Opening Weekend for Hollywood Simultaneous Release

2006-10-14T13:46:00.000-07:00

A press release from IMAX
(http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=IMAX&script=410&layout=-6&item_id=644530)

Biggest Opening Weekend for Hollywood Simultaneous Release

The First-Ever Hollywood Feature Film in IMAX(R) 3D Opens to Sold Out Shows and Record Advanced Sales

NEW YORK, Nov. 16 /PRNewswire-FirstCall/ - The Polar Express: An IMAX 3D Experience, the first-ever Hollywood feature film converted to IMAX(R) 3D, set the record for the highest opening weekend for a Hollywood simultaneous release with just over $2.1 million in box office in IMAX(R) theatres. The announcement was made today by Warner Bros. Pictures and IMAX Corporation (Nasdaq:IMAX; TSX:IMX). In the first five days, the film grossed $3.0 million in 59 IMAX theatres in North America, with an impressive per screen average of $50,847.

IMAX theatres in all regions of the country reported sold out shows, very strong advanced sales and an outstanding response from audiences to the IMAX 3D format. Some highlights include:

- National Amusements, which opened four new IMAX theatres timed to the film's release on November 10 (White Plains, NY; Buckland Hills, Connecticut; Louisville, Kentucky; Springdale, Ohio), experienced sold out shows in all of their IMAX Theatres as well as record group sales.

- The new release Comcast IMAX 3D Theatre at Jordan's Furniture in Reading, Massachusetts, which also opened timed to the film's release, was the number one performing theatre in the entire IMAX network with an opening gross of $159,000.

- The Henry Ford IMAX Theatre in Dearborn, Michigan reported sold out shows throughout the weekend, and every 10am and 12pm weekday shows through to the Christmas holidays have already sold out.

- In New York, the Loews IMAX Theatre at Lincoln Square grossed $132,000 in the first five days, and all of the 10:30am weekday shows are sold out to school groups through the end of December.

- The Navy Pier IMAX Theatre in Chicago, Illinois sold out every show throughout the weekend.

"We believe that this record-breaking opening weekend is a harbinger of good things to come. The audience response has been exceptional," said IMAX's Co-Chairman and Co-CEO's, Richard L. Gelfond and Bradley J. Wechsler. "In fact, based on preliminary research conducted at select IMAX theatres nationwide, audiences are reporting an incredible 96% satisfaction rate and an equally impressive 93% intent to recommend response, which are the most positive results we've received for an IMAX digitally re-mastered film to date. This is translating into strong box office results and strong word of mouth, which bodes well for the legs of the film."

"The reaction to The Polar Express: An IMAX 3D Experience has been nothing short of outstanding," said Dan Fellman, President of Domestic Distribution, Warner Bros. Pictures. "The IMAX 3D element has brought in new audiences that may not have traditionally gone to see the film, and moreover, has drawn audiences in at a premium price for The IMAX Experience(R). Based on the box office success thus far, we are confident that the film's momentum will continue throughout this year, and become a holiday classic in years to come."

"We are so pleased to share another record-breaking film - our biggest one yet - with Warner Bros. Pictures," said Greg Foster, Chairman and President of IMAX Filmed Entertainment. "The Polar Express: An IMAX 3D Experience was the ideal first film to be converted into IMAX 3D because it represents a convergence of the perfect elements for IMAX's format. With Bob Zemeckis' visionary approach, combined with the talents of Tom Hanks and a wonderful story with wide family appeal, this film delivers everything that The IMAX Experience should be. We believe this is the future of moviegoing as we know it, and is just the beginning of what is to come from IMAX."

The Polar Express has undergone a process by which the conventional 2D, computer-generated film is converted into 3D and then digitally re-mastered into IMAX's larger than life format using IMAX DMR(R) technology. Once the IMAX DMR process is complete, the film format for The Polar Express: An IMAX 3D Experience is 10 times larger than its original. With special IMAX 3D glasses, the movie appears to have depth beyond and in front of the screen - adding to the already stunning visual clarity. When combined with the more than 12,000 watts of digital surround sound in IMAX theatres, moviegoers to The Polar Express: An IMAX 3D Experience are guaranteed an immersive and extraordinary cinematic experience.

Castle Rock Entertainment presents, in association with Shangri-La Entertainment, a Playtone / ImageMovers / Golden Mean Production of a Robert Zemeckis Film: Tom Hanks in The Polar Express. Directed by Robert Zemeckis from a screenplay by Zemeckis & William Broyles, Jr., the film is produced by Steve Starkey, Robert Zemeckis, Gary Goetzman and William Teitler and is based on the book by Chris Van Allsburg. Tom Hanks, Jack Rapke and Chris Van Allsburg are the executive producers.

The production team includes directors of photography Don Burgess, A.S.C. and Robert Presley; production designers Rick Carter and Doug Chiang; and editors Jeremiah O'Driscoll & R. Orlando Duenas. Senior visual effects supervisors are Ken Ralston and Jerome Chen. Co-producer is Steven Boyd. Music score is by Alan Silvestri, and original songs by Glen Ballard and Alan Silvestri.

The Polar Express will be distributed worldwide by Warner Bros. Pictures, a Warner Bros. Entertainment Company. Soundtrack album on Warner Sunset/Reprise Records. This film is rated G by the MPAA.

About IMAX Corporation

Founded in 1967, IMAX Corporation is one of the world's leading entertainment technology companies. IMAX's businesses include the creation and delivery of the world's best cinematic presentations using proprietary IMAX and IMAX 3D technology, and the development of the highest quality digital production and presentation. IMAX has developed revolutionary technology called IMAX DMR (Digital Re-mastering) that makes it possible for virtually any 35mm film to be transformed into the unparalleled image and sound quality of The IMAX Experience. The IMAX brand is recognized throughout the world for extraordinary and immersive family entertainment experiences. As of September 30, 2004, there were more than 235 IMAX theatres operating in 35 countries.

IMAX(R), IMAX(R) 3D, IMAX DMR(R) and The IMAX Experience(R) are trademarks of IMAX Corporation. More information can be found at www.imax.com.

SOURCE IMAX Corporation 11/16/2004 /
CONTACT: Media: IMAX Corporation, New York, Romi Schutzer, (212) 821-0144, rschutzer@imax.com;
Business Media: Sloane & Company, New York, Whit Clay, (212) 446-1864, wclay@sloanepr.com;
Entertainment Media: Newman & Company, Los Angeles, Al Newman, (818) 784-2130, asn@newman-co.com;
Media: Warner Bros. Pictures, Los Angeles, Jan Craft, (818) 954-2279, jan.craft@warnerbros.com;
Analysts: IMAX Corporation, New York, Cheryl Cramer, (212) 821-0121, ccramer@imax.com/ (IMX. IMAX)

Could a 30-in. monitor help you do your job faster?

2006-10-12T20:18:00.000-07:00

Could a 30-in. monitor help you do your job faster?
Todd Weiss, Computerworld - IDG News ServiceWed Oct 11, 12:33 PM ET
Providing employees with 30-in. computer monitors can boost worker productivity at companies where 17-in. or 19-in. monitors are typically used, according to a French consultant hired for a study sponsored by Apple.

The study, which evaluated Apple?s 30-inch Apple Cinema Display, concluded that large screens can offer gains of up to 50 percent to 65 percent in productivity on a variety of specific office tasks and can earn back their extra costs in time savings over several years. The 30-in. display costs $1,999.

But other experts say those conclusions are wrong, arguing that the productivity improvement estimates are too high and that using two monitors side by side would likely be a better productivity booster than one larger monitor. The 40-page study was conducted by Andreas Pfeiffer, principal of Paris-based Pfeiffer Consulting, for Apple, which paid for the research.

Pfeiffer looked at a range of computing tasks, from moving data between Microsoft Word and Excel files to image manipulation using Adobe Photoshop. In addition to studying the 30-in. LCD display from Apple, Pfeiffer also did the comparison using a 17-in. Samsung SyncMaster 172x LCD monitor. The Apple monitor has an optimal resolution of 2560 pixels by 1600 pixels, compared with 1280 pixels by 1024 pixels for the Samsung monitor.

The productivity gains, he said, occur because workers using larger monitors can avoid repetitive tasks such as switching between overlapping application windows. Instead, they can have more windows open side-by-side on a larger monitor.

The time savings are for commonly performed tasks and not meant to indicate overall productivity increases for workers, Pfeiffer said. Using a larger screen will only improve specific tasks where data is moved or manipulated quickly.

Pfeiffer?s testing showed time savings of 13.63 seconds when moving files between folders using the larger screen ? 15.7 seconds compared to 29.3 seconds on the 17-in. monitor ? for a productivity gain of 46.45 percent. The testing showed a 65.09 percent productivity gain when dragging and dropping between images ? a task that took 6.4 seconds on the larger monitor compared to 18.3 seconds using the smaller screen. And cutting and pasting cells from Excel spreadsheets resulted in a 51.31 percent productivity gain ? a task that took 20.7 seconds on the larger monitor versus 42.6 seconds on the smaller screen.

?There?s a very, very clear and strong correlation between screen size and productivity,? Pfeiffer said. ?If you?re used to a having a 15-in. or 17-in. laptop and then go to a smaller resolution laptop, you can realize [the difference]. There are certain things that can really slow you down.?

A larger monitor is as important as higher resolution, which allows more of an image to be shown on the screen, he said. ?Of course individual behavior will impact productivity,? he said. ?A user who insists on using [program] menus will be slower than one who uses keyboard shortcuts, for instance.?

But several personal productivity experts who evaluate how hardware and work habits affect productivity disagreed with Pfeiffer?s findings.

?I can surf the Net on one monitor and do something else on the other,? said Peggy Duncan, an Atlanta-based personal productivity expert and principal of PSC Press. ?It all goes back to seeing more stuff at one time. But, in my opinion, productivity is increased more by using dual monitors.?

Laura Stack, owner of The Productivity Pro consulting firm in Denver, said Pfeiffer?s estimated productivity gains are way too high. She would estimate a maximum 5 percent productivity gain for workers using a larger monitor. ?But you?re not going to see the boost in productivity you?ll see by adding a second screen,? which could increase productivity as much as 30 percent, Stack said.

?People are not robots,? Stack said. ?It?s impossible to see those kinds of productivity gains? as measured in the Pfeiffer study.

Neen James, a personal productivity expert in Doylestown, Pa., who runs Neen James Communications, said a single larger screen could provide health benefits for workers such as less eye squinting, but she agreed that dual monitors would likely offer more verifiable productivity gains. ?Those sorts of claims are fabulous from a marketing point of view,? she said of the study, ?but you can make statistics say anything.?

Another productivity expert, however, said that either solution ? a single large monitor or dual displays ? could help workers, depending on what they do. ?I think it would be a very personal decision,? said Jan Jasper, principal of New York-based Jasper Productivity Solutions. ?There?s no contest to having more space [to work].?

Akilesh Bajaj, an MIS professor at the College of Business Administration at the University of Tulsa, reviewed the Pfeiffer report but said more research is needed before accurate conclusions are reached. ?There?s a lot of image processing [in the study] so it?s easy to see where [the larger screen] would increase productivity,? Bajaj said. But anecdotal remarks from colleagues estimated that they would not see substantial gains in their own work from having a larger screen, he said.

One multiple-monitor fan, Martin Doucet, owner of Vaixe, a small Montreal-based book publishing company, said he uses one primary 19-in. CRT monitor and two additional 17-in. CRT monitors to get his work done more efficiently in his home office. Doucet said he has been using the system for two years, with one screen for manuscript proofreading, another to follow the author?s story plan and the third for communicating via e-mail or instant messaging.

?Having that much room makes it easy,? he said. ?I have everything at a glance. It saves time because you don?t have to ALT-Tab all the time.?

Apple?s 30-in. display hasn?t had much competition in that size range since its introduction, but Samsung Electronics America will debut its own 30-in. LCD monitor later this month at an estimated $1,999, said Andy Weis, a product marketing manager at Ridgefield Park, N.J.-based Samsung. The company has not done any specific research on productivity increases tied to larger screens, he said

Torvalds takes bite of Mac mini

2006-10-11T16:45:00.000-07:00

October 11, 2006 1:16 PM PDT
Linus Torvalds has picked up one of Apple's new Intel-based Mac minis to play with, but the Linux creator still prefers Apple's old PowerPC architecture for his primary desktop machine.

"I'm actually still running a G5, but I also have a Mac mini," Torvalds revealed in an e-mail to ZDNet Australia.

The Linux creator has been running an Apple G5 since at least March 2005, switching from a normal x86-based desktop sometime before that. At that stage he attributed the switch to the importance of IBM's Power architecture as well as a desire to try a new system.

Since then, however, Apple has stopped using PowerPC chips, bringing its machines into line with other vendors by adopting Intel's new x86 multiple-core CPUs.

While Torvalds said he liked the aesthetics of the mini, he still had concerns about Apple's hardware, so the Intel machine remains more of a plaything than anything else.

"I like the design, and it's the right form-factor to be a replacement machine for my wife and daughter, but sadly, Apple screwed up the firmware in various stupid ways," he said.

"I'm not actually willing to really use it myself since it's the old Yonah-based set-up (Intel Core) rather than the newer (and better) Merom (Intel Core 2). So it's kind of a toy to play around with.

"Apple has Core 2-based machines too, but those all have better PC equivalents without the Apple headache, so I'm not interested in them."

Torvalds said Apple had introduced problems by designing its machines in a way that made them different from standard desktop PCs. This had created difficulty getting common open source software (eg X-windows and the GRUB boot manager) to work easily, even using Apple's Boot Camp software to allow multiple operating systems to boot on the same machine.

Apple's decision to use Intel's Extensive Firmware Interface (EFI) has proven particularly problematic. The technology is a replacement for the traditional BIOS PC bootstrapping system.

"They fixed some of it with the firmware upgrade, but it has had various really annoying stupid bugs in it, so quite frankly, I'd rather just have a regular PC in a nice form-factor instead," said Torvalds.

'Office 2.0' start-ups knock on business doors

2006-10-09T21:27:00.000-07:00

'Office 2.0' start-ups knock on business doors

By Martin LaMonica

Story last modified Mon Oct 09 06:33:44 PDT 2006

Attempts to unseat Microsoft Office look more likely to come from an army of ants than from one giant foe.
Several start-ups are developing online services that handle tasks people typically carry out with desktop applications like those in the popular productivity suite. And at the Office 2.0 Conference, set to start in San Francisco on Wednesday, many of those companies will show off their latest crop of products.

One company, SmartSheet.com, is launching an upgrade to its online collaboration software, which is built around a hosted spreadsheet and e-mail. Instead of just mimicking Excel in online form, the company is using familiar tools to make project management better, SmartSheet's president said.

"We're trying to create a combination between the paradigms we all know (with e-mail and spreadsheets) and, where we get the benefits of Web 2.0 collaboration and improved processes," said Mark Mader, president of SmartSheet, which is based in Microsoft's home turf of Seattle. "We're not falling into the camp of simply replicating what there is today online, which doesn't improve things all that much."

Workplace use of Web 2.0--the use of wikis, Internet delivery of applications, and Web-enabled collaboration--is the key way these upstarts hope to distinguish their products, as they try to chip away at Microsoft's franchise. Another benefit they tout is that using hosted services, rather than buying applications, can work out cheaper for customers--or at less expensive up front.

In perhaps as significant a differentiator, many Office 2.0-style companies are steering clear of the traditional sales route used by Microsoft Office. Instead of trying to sell directly to IT managers within corporations, many of these smaller companies, which admittedly have limited resources, are looking to spark grassroots adoption by pitching their products directly at the worker who will be using them.

In a model shown to be successful by Salesforce.com, many hosted productivity applications aimed at businesses are cheap enough to be purchased using a credit card by individuals within a company department.

Paul McNamara, CEO of online services start-up Coghead, says that it's not just the viral marketing aspect of the backdoor sales approach that appeals to him. One of the ideas behind Coghead's approach is to let technically savvy end-users gain more control.

"There is a real groundswell for do-it-yourself Web applications, empowering people closest to the business problem to build the solutions," he said. "A lot of people see the Web delivery model and Web 2.0 as a key enabler to end users."

On Wednesday, Coghead plans to launch an open beta, or test version, of its service, which lets technically savvy people build their own workflow applications. It intends to launch its service in the first quarter of next year and to charge a monthly subscription fee.

Service providers as power brokers
SmartSheet's Mader previously worked at Onyx Software, a provider of customer-relationship management applications, where he saw firsthand how individual business users can have an impact on corporate decisions.

In one situation, Onyx was ready to close a large deal endorsed by the customer's IT department. But that decision was derailed at the last moment by people who were going to use the application.

"Teams will make decisions--if they see value, they will move. We had a wonderful plan, and business (people) overrode it, because they were bringing in the business," Mader said.

SmartSheet charges a monthly per-user fee, with a basic service starting at five users and 50 viewers. The viewers can see common documents and update them, but not author new documents.

Being quick and easy-to-use encourages people to try a new Web application. At the same time, however, it makes it relatively simple for them to try an alternative.

That's why, ultimately, many Office 2.0 start-ups will have to form partnerships with telecommunications companies or Internet service providers, said Ismael Ghalimi, the organizer of the San Francisco conference. Those partners can sell the online service to corporate customers and offer unified billing. Generally, business customers will not want to use ad-supported software, which is common in consumer applications. They would rather have a well-organized purchasing process, he said.

"Even if the Web lowers the barrier to entry, it doesn't mean that customers will come to you in droves. You still have to do marketing and build your channels," he said. "Most of the innovation comes from the smaller players, but they don't have the channel. Even if I'm Google, it's difficult to get people to give me their credit card."

Ghalimi noted that several Office 2.0 companies are selling both to large enterprises and to small and medium-sized businesses, which is a break from the traditional enterprise software business.

"Distribution is everything," said Frank Zamani, CEO of Caspio, an online database company. "With large companies, we could go after them ourselves, but reaching hundreds or thousands or millions of small and medium-sized businesses directly is not practical."

Zamani said that Caspio is seeing more large-scale use of its database application within businesses. He added that the company is looking to form distribution relationships with Internet service providers.

Finding niches
From a product-design point of view, many Office 2.0 companies are starting fresh. They are focusing on the benefits of hosted software, such as mobility, collaboration and easier installation.

SmartSheet is trying to address the management of team projects, a job that is often handled with spreadsheets. The problem is that versions of the spreadsheet get out of sync when people rely on e-mail, and it's difficult to audit the history of changes to jointly authored documents, said John Creason, the company's chief technology officer.

Rather than expecting an outside contractor to check a Web site, an e-mail-based form is sent to that person, which automatically updates common documents stored at SmartSheet.com.

Rather than overtake Office, Ghalimi predicted that many Office 2.0 services will continue to complement Microsoft's software. Over the next few years, businesses may use them more and more at the expense of installed versions of Office, as they experiment and find good uses for alternatives.

"The biggest impact these services might have on Microsoft is that it will make it significantly harder to justify the upgrade to Windows Vista and Office 2007," he said.

"What will happen is what we've already seen with e-mail clients like Gmail and Hotmail, which are very good," Ghalimi said. "They will creep in on an application per application basis."

Computers that read your mind

2006-10-08T21:02:00.000-07:00

Sep 21st 2006

Software: Systems that work out what users are doing, and then respond accordingly, could help people to work more effectively

DO YOU use the internet while watching television, listen to music while working at your computer, or read e-mail while talking on the phone? According to Linda Stone, a former Microsoft and Apple executive, this is the era of â??continuous partial attentionâ?�. People flit constantly between technologies, yet never devote their undivided attention to any of them, she observes. The e-mails, instant messages, text messages, calendar alerts, telephone calls and the occasional, old-fashioned face-to-face conversation are all competing for their share of your awareness. Part of the problem is that today's technologies lack the intelligence to determine when to interrupt peopleâ??and, more importantly, when to leave them be.

Now a new class of technologies is being designed to help users to regain their focus and enjoy more lucidity and concentration. The new field is known as â??augmented cognitionâ?�, and it employs sensors to infer the mental state of someone using a device. Rather than trying to read the user's mind directlyâ??the approach taken in a different field, known as brain-computer interfaces (BCI)â??augmented cognition has a subtly but crucially different aim. BCI devices are used to control things in the physical world, such as a cursor on a screen, a wheelchair or even a prosthetic limb. Augmented cognition, in contrast, focuses on deducing a cognitive state with the aim of somehow enhancing it.

So when someone is overwhelmed with information, an augmented cognition system would try to help him cope by diverting some of it. Naturally enough, augmented cognition has captured the imagination of the armed forcesâ??the Pentagon's Defence Advanced Research Projects Agency (DARPA) is one of its biggest backers. That is because today's military personnel are bombarded not just by the enemy, but also by information, says Dylan Schmorrow, previously the founder and programme manager of DARPA's AugCog programme. (Dr Schmorrow, who now works at the Office of Naval Research in Arlington, Virginia, will also chair an international conference on augmented cognition which takes place next month in San Francisco.)

Fans lift J-culture over language barrier

2006-10-08T21:00:00.000-07:00

By PATRICK MACIAS
Special to The Japan Times
Global interest in Japanese entertainment continues to heat up. Quite literally.

A scanlator who goes by the name of DDRtatsujin is part of a community of fans whose love of Japanese manga drives them to take each page, scan it into their computer, then translate the material from Japanese into English and upload it to the Internet for a wider audience.
Hardcore manga fans around the world are taking their Japanese comics off the shelf and putting them into the microwave.

"They do that so the glue melts, which allows them to take apart the volume page by page so they can be scanned easily," explains Jonathan, 21, a journalism student at West Virginia University who did not want his last name published.

Why would folks do that to their precious and costly imported comic books? Because they are "scanlators," a growing community of fans whose love of Japanese manga drives them to take each page, scan it into their computer, then translate the material from Japanese into English and upload it to the Internet for a wider audience to enjoy for free.

But it is not just Japanese comics that have proven ripe for amateur translations. Homemade English versions of anime shows and Japanese television series (such as "Densha Otoko [Train Man]"), along with plenty of clips featuring comedian Razor Ramon HG -- Hard Gay as he styles himself, are increasingly popping up on the Internet via blogs (www.tvinjapan.com to name one), file-sharing programs known as torrents and especially the phenomenally popular YouTube site.

A little Net surfing is all it takes to suddenly find translations of everything from feature films -- like last year's hit "NANA" -- to annotated versions of ancient Shinto myths (found at www.sacred-texts.com ) readily available.

There are also subbed music videos by girl-group Morning Musume and boy bands like SMAP. U.S. followers of these acts often use the Internet to trade clips and communicate with like-minded fans in Asia in places like Taiwan and South Korea, resulting in translations that are truly international affairs.

Japanese-to-English translations of both professional and amateur varieties are nothing new. But the Net allows publishing, archiving, copying and distribution on an unprecedented scale. As a result, more Japanese pop culture is spread across the globe than ever before.

Even though suburban shopping malls in Middle America are filled with officially licensed J-culture items (manga and anime, especially), Japanese companies that own these products are not keeping up with increasing global demand. Followers want the latest thing from Japan now! The fan translation phenomenon not only fills the gaps, it also shortens the time it takes for Japanese pop culture to journey around the world.

For more:
http://search.japantimes.co.jp/cgi-bin/fa20060907a1.html

Mr BlackBerry sends a message

2006-10-08T20:58:00.000-07:00

Sep 21st 2006
From The Economist print edition

Mike Lazaridis, co-founder of the firm behind the BlackBerry, is a passionate advocate of fundamental scientific research

SOME pocket-sized electronic gadgets are merely successful, but an exalted few become household names. The Walkman, Game Boy and iPod are examples from the consumer market; and in the business world, the BlackBerry has attained a similar iconic status. During meetings and in airport lounges, managers can be seen furtively tapping out messages on this nifty device, which keeps them constantly updated with their office e-mail anywhere they can get a wireless signal. So compulsive is such â€œpush e-mailâ€� that the term â€œCrackBerryâ€� has been coined to describe the addiction.

Yet just a decade ago, the whole idea that adults would happily type e-mails using a keyboard the size of a credit card seemed absurd. It was late one night in 1997, while sitting in his basement, that Mike Lazaridis suddenly glimpsed the future. In a paper he drafted on the spur of the moment, entitled â€œSuccess Lies in Paradoxâ€�, he asked, â€œWhen is a tiny keyboard more efficient than a large one?â€� The answer to his riddle: when you use your thumbs. Mr Lazaridis e-mailed his vision of a new device to colleagues at Research In Motion (RIM), the Canadian company based in Waterloo, Ontario, that he had co-founded in 1984 with Douglas Fregin, a childhood friend. A year later the BlackBerry was born.

Fortune favours the well-prepared mind, and for Mr Lazaridis, the preparation started at school, where he loved to tinker with electronics and ham radios. In a prophetic moment, an electronics workshop teacher told him that the person who combined computers with wireless would be on to something big. Of course, the BlackBerry is not unique in achieving that combination. Rather, it relies on a series of innovations, such as the keyboard optimised for â€œthumbingâ€�, a clickable scroll wheel and menus pared down as much as possibleâ€”all of which are designed to please busy executives.

â€œWe take a very measured, scientific approach to what we doâ€”we're not just chasing what others have,â€� says Mr Lazaridis. His role at RIM, where he is co-chief executive, is to oversee the company's technology development; Jim Balsillie, a Harvard MBA who joined the company in 1992, handles the financial side of the business.

For more:
http://www.economist.com/science/tq/displayStory.cfm?story_id=7904269

A rubbish business model

2006-10-08T20:55:00.000-07:00

Sep 21st 2006
From The Economist print edition

Energy: The dream of turning worthless waste into valuable fuel is as potent as ever. But is the whole idea too good to be true?

WHERE there is muck, goes the old saying, there is brass. Several firms have taken that idea to heart and are seeking profitable ways to turn rubbish into fuel. Startech Environmental, for instance, based in Wilton, Connecticut, uses plasma conversion, superheating rubbish to break down its molecular bonds and create a â€œsynthesis gasâ€� which is then converted into ethanol or biodiesel. â€œWe get 3.7 gallons of ethanol per 20lb tyre. That's serious output,â€� says Joseph Longo, Startech's chief executive.

The idea might sound far-fetched, but there are several ways to convert organic waste into various grades of fuel, at least in the laboratory. You can gasify rubbish by heating it and turning it into synthesis fuel, which is then fed into a reaction called the Fischer-Tropsch process. This technique for converting carbon monoxide and hydrogen into liquid hydrocarbons using a catalyst was invented in Germany in the 1920s and was used by the Nazis to convert coal into fuel during the second world war. An alternative method involves breaking down cellulose using various catalysts to accelerate the decomposition of organic plant residues into ethanol.

Household rubbish presents special problems, since it is an unpredictable mishmash of all sorts of stuff. Allen Hershkowitz, director of the solid-waste programme at the Natural Resources Defence Council (NRDC), says that no technology can take large amounts of mixed household waste and profitably convert it into ethanol or any other kind of fuel. He also notes that, although the country's landfills seem to be overflowing, America in fact produces only about 230m tonnes of municipal solid waste a year, compared with more than 2 billion tonnes of farm waste. The NRDC reports that much of the solid waste in landfills is made up of recyclables like plastic, or food waste that could be used as compost. Burning such things for fuel may not count as a gain for the environment.

By contrast, Startech's Mr Longo says he can produce fuel with almost no emissions and using only 10% of the resulting energy to power the process. Mr Longo is primarily a rubbish manâ€”Startech was formed in the 1990s as a low-emission alternative to landfills and incinerators. Now he is hoping the ethanol craze will convince cities to strike deals with him.

Theoretically, a plant using Startech's process to vaporise 25 tonnes of tyres a day could create more than 8,500 gallons of fuel (the number would be less if it processed other forms of waste). True, America alone consumes more than 20m gallons of fuel a day, but some lucky cities could run their fleets of dustcarts from such a plant with fuel to spare. However, all the 74-year-old Mr Longo has to show for his efforts so far is a small demonstration plant in Bristol, Connecticut. No backer has been prepared to provide the $6m for a Startech system that could convert 10 tonnes of waste a day.

At least Mr Longo has his demonstration plant, though. Not so Masada Resource Group, which in 2004 signed a contract with Middletown, New York, to build a $300m plant to convert waste to fuel. Although the scheme promised 90% efficiency using a vaguely defined â€œOxyNolâ€� process, the firm has yet to lay the plant's foundations. In July Green Power, a start-up from Issaquah, Washington, showed off of a technology for converting waste to oil. The company says it can process any waste that is not glass, metal or radioactive and, using a catalyst, convert it to fuel, with an efficiency of 90%. But the firm's claims were met with scepticism, partly because of a past conviction of Michael Spitzauer, its chief executive, for fraud in his native Austria.

The one American company that has succeeded in building and running a commercial plant to convert waste to fuel is Changing World Technologies. Even then, the company says that, although it can convert solid waste to fuel, the process is not yet economical. â€œPeople's waste material is unpredictable,â€� says Brian Appel, who heads the company.

His firm's first plant processes waste from a turkey slaughterhouse and pig fats, using â€œthermal conversionâ€�â€”heat and frictionâ€”to break down the chemical bonds, followed by heat and water to hydrolyse the material. This mainly yields liquid and solid fertiliser, but also makes gas that is used to power an industrial plant, but could be refined into biodiesel. One problem is that it costs Changing World about $80 a barrel to make the fuel. Another is that the company has had to spend heavily to reduce the smell from the plant, which was briefly shut down because of it.

With oil prices high, Mr Appel and his fellow entrepreneurs must hope that their timing is good. Nancy Floyd, co-founder and managing director of Nth Power, a pioneering energy investor, says that her firm is close to investing in a company that converts waste to ethanolâ€”though she declined to name it. Although the industry has a record of failure, she says, â€œthere is new technology now, and we are seeing it applied.â€� So although profits are hard to come by, optimism is in plentiful supply.

The writing on the wall

2006-10-08T20:50:00.000-07:00

Sep 21st 2006
From The Economist print edition

Technology and society: Is the mobile phone mightier than the spray can? New â€œdigital graffitiâ€� systems are being put to a variety of uses

TXTual Healing in action
http://www.electroniceconomist.com/images/20060923/3706TQ13.jpg

AS IF text messaging were not already ubiquitousâ€”over a billion messages a day flit between the world's 2 billion mobile phonesâ€”it is now moving from the private sphere into the public one. New technologies allow text messages to be displayed on the sides of buildings, on public screens in cafÃ©s or on vast digital displays at sporting events and festivals. Such â€œdigital graffitiâ€� can be used in various ways: to capture the mood of a gathering, boost a brand, or to spark public dialogue. Mobile devices are in a unique position to enable new forms of communication within groups and crowds, since almost everyone in the developed world now carries one, notes Linda Barrabee, an analyst at Yankee Group in Boston. â€œWe are still in an early stage, but there is promise,â€� she says.

The earliest examples of digital graffiti appeared in Europe, where text messaging took off years ago, unlike in America where it has only recently become popular. In 2001, for example, at the Speaker's Corner building in Huddersfield, England, a tickertape-like display showed the results of a text-message poetry contest. Sponsored by the Arts Council England, the contest elicited some 2,000 poems, 100 of which were displayed on the constantly scrolling screen.

The latest digital-graffiti systems are rather more elaborate, thanks to the efforts of companies such as LocaModa, a start-up based in Somerville, Massachusetts. It has installed eight â€œWiffitiâ€� screens (a name derived from â€œwireless graffitiâ€�â€”it has no relation to Wi-Fi networking) in coffee-shops in several American cities, sometimes with the support of sponsors. Between double espressos, patrons send text messages to the 50-inch screens. What they write is also mirrored on the web, so that visitors to wiffiti.com can remotely observe what's going on at, say, the Hurricane CafÃ© in Seattle, the Filter Coffee Lounge in Chicago or Half Fast Subs in Boulder, Colorado.

When Jason Hetherington, a 26-year-old exam instructor, was working in Dubai for six months, he often visited wiffiti.com to see what was up at Somerville's Someday CafÃ© in Somerville, Massachusetts, his old haunt. â€œIt was a great way to get a taste of what was going on back home,â€� he says. Stephen Randall, the boss of LocaModa and one of the founders of Symbian, a company that makes software for smartphones, likens the result to a location-based blog. He plans to have sponsored screens capturing â€œthe word on the streetâ€� in 10,000 places by 2009.

Some of the messages sent to the screens are remarkably banal, but things occasionally get spicy. In March one woman received a marriage proposal via the Wiffiti screen at Toscanini's cafÃ© in Cambridge, Massachusetts. What is more, she accepted via Wiffitiâ€”after a mere 29 minutes of contemplation. Although it might seem to make more sense to talk to, rather than text, the person sipping coffee nearby, â€œpeople are looking for a way to break the ice,â€� says Tamara Mendelsohn of Forrester, a consultancy. Furthermore, systems like Wiffiti are â€œnoncommittalâ€”you're not going to face rejection,â€� she adds.

For others, public texting is a chance to cause a stir. Paul Notzold, a designer based in Brooklyn, has rigged up a system to project blank speech bubbles on to public walls. He generally sets up after sunset for better visibility and passes out leaflets explaining how to send text into the speech bubbles. â€œThere is an element of empowerment in being able to post a message,â€� says Mr Notzold, who just finished a master's degree in design and technology at Parsons The New School for Design in New York. He has done a dozen or so â€œprojectionsâ€� on to buildings: in Brooklyn, along the canals in Amsterdam, in a public square in Hamburg and even on to the Millennium Museum in Beijing. â€œThe police were around, and when they came over I thought they were going to shut it down,â€� says Mr Notzold. In fact, they just wanted to know the phone number to send messages to.

As the photos on his TXTual Healing website reveal, most messages (â€œWhere's my other sock?â€�) lack lyricism. But Mr Notzold expects gravitas will come with time. â€œThe more I can get out there and do this, the more people are going to text politically and socially charged material,â€� he suggests. His text-message graffiti system gives people a way to stay engaged, he believes, â€œinstead of just plugging into games or music on the phone, and disconnecting from society.â€�

Digital graffiti can have commercial as well as political uses. This summer Britvic, a British soft-drinks company, ran a â€œCourt on Cameraâ€� promotion at the Wimbledon tennis tournament. Consumers who were queuing for tickets were encouraged to send photos from their phones to a giant screen adorned with branding for its Robinsons line of soft drinks. â€œIt became a form of co-branding, where the consumers stamped their identity on the event,â€� says Daniel Conti, Britvic's new-media manager. VIP tickets to the centre court were awarded to the senders of the best pictures.

But text-based campaigns are more widespread. Last year Nike, a maker of sports gear, used text messaging to allow people to conjure up images of customised shoes on a giant screen in New York's Times Square. Anyone who did so received a text message in return that contained the address of a website where the design could be confirmed and the shoes ordered. And in July this year Procter & Gamble invited women to text their secrets to Times Square's giant screens, as part of a promotion for its Secret deodorant. (â€œI cut my sister's hair when she was younger and told my parents that she did it herself,â€� ran a typical message.) The messages were also displayed on the secret.com website. â€œBrand awareness has increased dramatically,â€� says P&G.

Similarly, MOVO Mobile, based in Sarasota, Florida, ran a spring-break promotion for Gillette, a maker of grooming products, in which college kids could send flirty messages to a large screen at a night-club. Sending a message, of course, opens the door to follow-up messages from the event's sponsor.

Digital graffiti even have their religious uses. Teen Mania Ministries, an evangelical Christian group based in Garden Valley, Texas, sets up huge screens at its â€œBattle Cryâ€� events, which are attended by tens of thousands of teenagers. Those attending can text personal messages to the screens, or use them to ask the preachers questions. The idea is to train teenagers to use technology â€œfor a higher purpose,â€� says Tocquigny, the advertising agency involved.

Secrets of the digital detectives

2006-10-08T20:48:00.000-07:00

Sep 21st 2006 - From The Economist print edition

Computing: How fraud-detection systems combine dozens of clues to spot suspicious patterns in mountains of transactions
THE pleasure of reading a classic detective story comes from the way that the sleuth puts together several clues to arrive at a surprising conclusion. What is enjoyable is not so much finding out who the villain is, but hearing the detectives explain their reasoning. Today, not all detectives are human. At insurance companies, banks and telecoms firms, fraud-detection software is used to comb through millions of transactions, looking for patterns and spotting fraudulent activity far more quickly and accurately than any human could. But like human detectives, these software sleuths follow logical rules and combine disparate pieces of dataâ€”and there is something curiously fascinating about the way they work.

Consider car insurance. Every Monday morning, telephone operators at insurance firms listen to stories of the weekend's motoring mishaps, typing the answers to several dozen standard questions into their computers. Once, each claim form then passed to a loss adjuster for approval; now software is increasingly used instead. The Monday-morning insurance claims, it turns out, are slightly more likely to be fraudulent than Tuesday claims, since weekends make it easier for policyholders who stage accidents to assemble friends as false witnesses. A single rule like that is straightforward enough for a human loss adjuster to take into account. But fraud-detection software can consider dozens of other variables, too.

If a claimant was nearly injured (because of an impact near the driver's seat, for example), the accident is less likely to have been staged and the claim less likely to be fraudulent, even if it is being filed on a Monday. Drivers of cars with low resale values are proportionately more likely to file fraudulent claims. But that factor is less important if the claimant also owns a luxury car, which suggests affluence. And if the insurance on the luxury car has expired, the likelihood of foul play drops further, since this increases the likelihood a person will drive a cheaper but properly insured car. And so on.

For more:
http://www.economist.com/science/tq/displaystory.cfm?story_id=7904281

Web gives niche interests a chance in the free market

2006-10-08T20:45:00.000-07:00

The Japan Times: Thursday, Sept. 7, 2006
By ALEXANDER JACOBY

Special to The Japan Times
Economists right back to Adam Smith in the 18th century have exalted the concept of the free market, where all commodities can be bought and sold without tariffs or subsidies. In Western neoliberal political thought, market freedom had become viewed by the 1980s as an extension of personal autonomy. But the association operated almost in reverse by the end of the 20th century: With the rise of branding, people seemed to define their identity through what they chose to buy. Lifestyle decisions, political principles and ethical positions all become consumer choices.

In practice, though, consumer choices have always been limited by what the market has chosen to sell. In the late 20th century, retailers had learned that a small number of popular products aggressively marketed would sell in huge numbers. It became superfluous to stock or produce a large variety of products destined for low to moderate sales. The main casualty was niche marketing: The catering to such eccentric tastes as, say, a preference for Studio Ghibli animation over Disney. Instead of tailoring particular products to satisfy individual tastes, companies began to choose products that could be marketed easily, and to neglect the rest.

The growing popularity of phenomena such as "scanlation" and fansubbing is part of a reaction to this tyranny of company decisions. Japanese culture in the West has always been a niche interest. In the 1990s, its devotees were almost starved. Big companies only made available commercially safe bets: films by Akira Kurosawa, for instance. Technology has made this obsolete. DVDs can be burned cheaply; subtitles, often produced for free by fans, can be added at minimal cost; and the Net gives instant access to potential markets. Individual fans are choosing to release what they want to see. In the process, they are rendering the function of companies unnecessary.

The United States has been a fruitful field for amateur subtitling, perhaps because U.S. copyright laws, unlike those in most developed countries, specifically excluded films never before released there. Initially, online retailers took advantage of this fact to copy and release imported, subtitled DVDs, often from Hong Kong.

Increasingly, however, these retailers have begun to copy Japanese source material and to write and attach their own subtitles. Often these amateur releases look as professional as officially licensed copies and, like them, include substantial extras: cast profiles, explanatory essays and so forth. One even offers the option to alter the position of the subtitles to fit whatever size TV screen the viewer has, a feature which few official DVDs can match. The legality of some of these releases is questionable: for instance, films by Nagisa Oshima that once received distribution in the U.S. are now available on DVD. Still, one suspects that Oshima, with his revolutionary contempt for private ownership, might approve.

The main moral argument against this sort of private action is that while it benefits fans, it does nothing for the creators of the work. But in another medium, creative artists are actively exploiting the new weakness of the company, and alternative methods of distribution, for their own advantage.

Publishing has undergone a quiet revolution: the growth of private, once demeaningly termed "vanity publishing," now increasingly seen as a legitimate way to place work in the public arena. Again, this is a response to large publishers and chain bookshops increasingly choosing to publish and stock only likely best-sellers, plus a back catalog of reliable classics. Since new technology allows very short print runs to be produced economically, it has become possible for authors to recover their initial outlay with relatively modest sales.

A Japan-based example is Printed Matter Press. The wide-ranging catalog of this small publisher, covering poetry, fiction and nonfiction, is determined by writers themselves, rather than by commissioning editors. But instead of mediocre or desperate writers, its list of authors includes such illustrious figures as Donald Richie and Edward Seidensticker -- two of the most eminent Japanologists of their generation. Indeed, private publishing may be uniquely suited to such niche writers, who can depend on sales to a small, committed fan base. This makes initial printing costs modest; meanwhile, royalties are considerably higher than in conventional publishing, where the publisher retains most of the profits.

Chris Anderson, in his 2006 book "The Long Tail," has argued that the future of business is "selling less of more," on the basis that a large number of niche products will, collectively, outsell and generate more income than the handful of popular ones. The growth of amateur subtitling and private publishing shows that the future is already here.

Alexander Jacoby writes a monthly column for The Japan Times Weekly and is writing a forthcoming handbook of Japanese film directors.

NTT ensures brewers donâ€™t become has-beans

2006-10-08T20:36:00.000-07:00

By David Turner in Tokyo

Published: September 26 2006 02:01 | Last updated: September 26 2006 02:01
Little companies such as Yamakawa Jozo, a soy sauce brewer in Gifu prefecture some 300 kilometres west of Tokyo, could make the difference to how long Nippon Telegraph and Telephone remains intact as the worldâ€™s largest telecommunications company.

NTT is building out a network that will raise the share of the countryâ€™s population with broadband access from 80 per cent to 100 per cent by 2010 at a cost of more than Y1,800bn ($15.5bn).

Dude, That Is So Not Funny

2006-10-08T20:34:00.000-07:00

Wired Issue 14.10 - October 2006

Eric Bauman made big bucks posting other people's homemade grossout videos to his Web site. Now the geeks whose clips he swiped on the way up are trying to knock him down.
By David Kushner

CLICK. AN OBESE NERD burps a tune into a soda bottle. Click. A gawky teen puts fireworks into his mouth and lights them. Click. A deer suckles a horse. Like millions of young drones, Kelli Rinaudo is spending the afternoon surfing dumb videos on her PC at work. With her next click, Rinaudo uncovers a shot of a dude passed out on a couch, his entire face covered in black Magic Marker by some prankster. "Hey, Eric," Rinaudo hollers, "check out this marker job!"

Over from another cube ambles Eric Bauman. A diminutive, unshaven 26-year-old in a T-shirt and khakis, Bauman has short, dark hair, bushy eyebrows, and a passing resemblance to a Baldwin brother. He expertly assesses the photo. It's original, way more interesting than the usual cock-and-balls and "bitch" scrawls that typically end up decorating the faces of people who pass out on a fraternity couch. It's clear, crisp, well lit. Heck, it's just flat-out hilarious; the dude looks like he crawled out of Bigfoot's ass, Bauman thinks. He pivots and gives Rinaudo the thumbs-up sign. The shot will be posted on eBaum's World, the insanely popular â€“ and profitable â€“ Web site for goofy home-brewed media that has made Bauman the king of dot-comedy.

A lot of people think the stuff on his site is sophomoric, tasteless, offensive, and just plain dumb. And it is. But everyone loves a good sideshow, and Bauman is the master carny of the online world. Every day, Rinaudo, Bauman's content manager (and girlfriend), sifts through thousands of online videos, animations, jokes, photos, and games. She looks for the crÃ¨me de la crÃ¨me of DIY lunacy â€“ or, as she puts it, "idiots doing stupid things." Each week, Bauman carefully selects eight links to add to the site. Then he turns the idiocy into gold.

Viral media is all the rage these days, and Bauman runs one of the few viral sites actually making money. Without spending a penny on direct advertising, he's turned the high school hobby he ran out of his bedroom into one of the Internet's top-ranked humor sites, getting 1.2 million hits a day. There's a television pilot in the can, a book deal in negotiation, and a potential pact to bring eBaum content to cell phones. Annual ad revenue has doubled over the past year to $10 million, and the only overhead is bandwidth and salaries: Bauman is becoming a rich man. He has 30 employees who handle the coding, marketing, financial affairs, and assorted office details. He drives a shiny black Porsche Carrera. Besides gobbling up real estate around town and gas wells in Kentucky, he sponsors heavyweight boxing champ Hasim "the Rock" Rahman.

But Bauman's success hasn't just brought him riches and trips to Vegas. It has also gotten him mired in a messy brawl. His site has been hacked, his office vandalized, and his mug distorted on numerous online sites dedicated to attacking him. "Maybe Zeus and Thor will smite that whore," goes the theme song for the animated site EbaumsWorldSucks. "Oh, eBaum's World is going dowwwwwwn!" Bauman is not laughing. "We get death threats all the time," he says.

For more:
http://www.wired.com/wired/archive/14.10/ebaum.html

My Big Biofuels Bet

2006-10-08T20:30:00.000-07:00

Wired Issue 14.10 - October 2006

The road to energy independence starts in a cornfield in Nebraska. Venture capitalist Vinod Khosla explains why heâ€™s betting on biofuels.

IT MAY SURPRISE YOU TO learn that the most promising solution to our nationâ€™s energy crisis begins in the bowels of a waste trough, under the slotted concrete floor of a giant pen that holds 28,000 Angus, Hereford, and Charolais beef cattle. But for some time now, Iâ€™ve been searching for a renewable fuel that could realistically replace the 140 billion gallons of gasoline consumed in the US each year. And now I believe the key to producing this fuel starts with cow manure â€“ because this waste powers a facility that turns corn into ethanol.

Iâ€™m standing on a grassy hill in the middle of an 880-acre commercial feedlot just outside Mead, Nebraska, which is a long way from my home turf of clean labs and wood-paneled conference rooms in Silicon Valley. In front of me are four open-air cattle sheds. Each is the width of a giant barn and a full half-mile in length. From up here, they look more like jumbo-jet landing strips than animal pens. Beyond the sheds are several hundred acres of cornfields, from which much of the animalsâ€™ feed is harvested.

It may look like a typical, if huge, cattle feedlot â€“ but for the glittering white four-story structure below that resembles the Centre Pompidou in Paris. Indeed, until recently this operation just off Meadâ€™s County Road 10 was not unlike any other finishing ground for Nebraskaâ€™s beef cattle: a last stop before the abattoir. But starting in November, Oscar Mayer will no longer be the marquee product here. A company called E3 Biofuels is about to fire up the most energy-efficient corn ethanol facility in the country: a $75 million state-of the-art biorefinery and feedlot capable of producing 25 million gallons of ethanol a year. Whatâ€™s more, it will run on methane gas produced from cow manure. The super-efficient operation capitalizes on a closed loop of resources available here on the prairie â€“ cattle (fed on corn), manure (from the cows), and corn (fed into the ethanol distiller). The output: a potential gusher of renewable, energy-efficient transportation fuel.

Of course, 25 million gallons of ethanol is a drop in the tanker when it comes to our 140 billion-a-year oil habit. And ethanol itself is a subject of controversy for all sorts of reasons. Many of the criticisms, while true in some small ways, are aggressively promoted by the oil lobby and other interested parties in an effort to forestall change. Most are myths. Challenges certainly exist with ethanol, but none are insurmountable, and â€“ with apologies to Al Gore â€“ the convenient truth is that corn ethanol is a crucial first step toward kicking our oil addiction. I believe we can replace most of our gasoline needs in 25 years with biomass from our farmlands and municipal waste, while creating a huge economic boom cycle and a cheaper, cleaner fuel for consumers.

For more:
http://www.wired.com/wired/archive/14.10/ethanol.html

Concrete possibilities

2006-10-08T20:27:00.000-07:00

Sep 21st 2006
From The Economist print edition

Materials: It has been in use for centuries. But now, tired of being walked all over, concrete is ready for a high-tech upgrade.

THE Wizard of Menlo Park had a magic touch, but it sometimes failed him. In 1906 Thomas Edison declared that he had hit upon the â€œsalvation of the slum dwellerâ€�â€”cheap concrete houses cast from single, reusable moulds. Though his Edison Portland Cement Company went on to supply concrete for New York's Yankee Stadium and the first concrete highway, the great man's dreams for concrete died amid complex, expensive moulds and 11 unsold demonstration houses.

A century later, materials scientists and their business partners have been picking up where Edison left off. In their search for more high-tech concrete mixtures, they have found a fast, innovative way to make cheap, durable housing for both the developing and the developed world. Other researchers have been extending Edison's asphalt altruism in new directions, trying not only to reduce concrete's environmental impact but also to use concrete to clean up the environment.

The recipe for concrete is simple and has been around, in one form or another, since the days of Ancient Egypt. The bulk of the material consists of aggregateâ€”fine particles such as sand and coarse ones such as gravel or crushed stone. When water and a powdered cement are mixed in, they undergo a chemical reaction that hardens and binds the aggregates into a solid mass. To make the cement, materials such as limestone and clay are heated in large kilns to over 1,000Â°C. At such high temperatures, water and carbon dioxide are driven off and the limestone and clay begin to fuse to form new compounds. These are then ground into a fine powder that goes by the name of Portland cement. In America alone over 100m tonnes of the stuff are used each year.

But like good chefs, materials scientists have long known that they can tweak the basic concrete recipe to create any number of desired effects. For example, adding chemicals that encourage the trapping of tiny air bubbles makes concrete more durable, because it gives water room to expand into when it freezes, thereby avoiding tiny cracks. In the late 1990s researchers began to experiment with another additiveâ€”small amounts of electrically conductive steel or carbon fibres. Even though the fibres make up less than 1% of the concrete by volume, they have a large effect: the resulting concrete gains the ability to conduct electricity.

Electric avenues
Such concrete has a range of interesting properties. If you compress electrically conductive concrete, the fibres get slightly closer together, increasing the concrete's electrical conductivity. So if a road is made from conductive concrete, it will be able to monitor and weigh passing traffic.

That is not all a conductive concrete road can do. Passing an electrical current through a wire causes it to heat up, just like the filament in a light bulb. An electric current will heat a road, a bridge, or a runway made of conductive concrete in just the same way. For the past three winters, the Roca Spur Bridge outside Lincoln, Nebraska, has been warming itself using an electric blanket of conductive concrete. Christopher Tuan of the University of Nebraska-Lincoln and his former student, Sherif Yehia, have been carefully monitoring the bridge. Using electrical heating, they can maintain Roca Spur at a toasty 10Â°C above the ambient temperature, warm enough to keep it free of snow and ice throughout the winter.

For more:
http://www.economist.com/science/tq/displayStory.cfm?story_id=7904224