Who's in the News

May, 2003

Getting Comfortable with Philanthropy

WOMEN CURRENTLY control the majority of wealth in the United States, but many of them are not very visible because they are uncomfortable with questions about how they got their money, says Donna Hall, MBA '79, in an interview with the Chronicle of Philanthropy. Enter nine years ago the somewhat secretive Women Donors Network, an organization created in Palo Alto to educate wealthy women on how to give effectively. The national organization has 90 members who give away at least $250 million a year, in the same ballpark as the total grants from the Rockefeller Foundation, says Hall, who is the organization's new executive director charged with organizing it to meet the members' changing needs.

"We now want to go from being a somewhat mysterious, unknown club to a professional organization," she said, because more visibility will help the members achieve their social goals. "The onus will be on me to maintain the intimacy of the organization while it grows."

Hall says many young women who had inherited wealth used to feel "embarrassed to be identified or exposed as wealthy, and unsure how to think about philanthropy." Today they are more sophisticated and interested in learning how to leverage their dollars.

A Good Deed Is a Good Deal

FORBES MAGAZINE LAUNCHED its "Midas List" of venture capital dealmakers two years ago, naming Vinod Khosla, MBA '80, to the top spot. That was for his deal exiting Cerent, an optical networking company he had backed, for $7 billion in Cisco stock.

Since then, the deals have gotten considerably smaller and fewer. A mere 22 venture capital-backed companies went public in 2002, the magazine reported, and the median sale price for 214 other venture-backed firms was $19 million, about $3 million more than the median that investors paid to start those companies. Khosla still tops this year's list for taking Synaptics public. A younger venture capitalist singled out for Forbes' attention this year is David Chao, MBA '93. The cofounder of Doll Capital Management, he invested $1 million four years ago in Recourse, a security software firm cofounded by Business School classmate Frank Huerta. "When Recourse needed more funds at the end of 2000 and outside investors wanted to cut its valuation, Chao called on his limited partners to pitch in another $10 million without chopping the valuation," the magazine said. "This was done in January 2002 and six months later Recourse was sold for $135 million in cash to Symantec." Huerta was named a vice president of the larger company.

A Nation of Cheaters?

MANY AMERICANS BELIEVE cheating is rampant and therefore they must cheat too, Kirk O. Hanson, MBA '71, notes in an essay titled "A Nation of Cheaters" in the Boston Globe. Hanson, who directs the Markkula Center for Applied Ethics at Santa Clara University, suggests ways people can curb cheating. Institutions need tough rules against it, he writes, and individuals can help by turning down the pressure they apply to their own spouse and children. "It is OK if your husband does not get the big promotion; it's OK if your son does not get into the 'best' school," he writes. "Life is about doing your best, not just about winning."

North Dakota Honors Sloan Alum

NORTH DAKOTA GOV. John Hoeven recently presented the state's highest honor, the Theodore Roosevelt Rough Rider Award, to Tom Clifford, Sloan '57. Clifford headed the University of North Dakota for 21 years beginning in 1971, presiding over growth that is exceptional in a Great Plains region that has been steadily losing population for a half century. Under his leadership, university enrollment increased by 3,500 students and 50 buildings were added. Clifford also developed the state's only four-year degree-granting medical school and expanded the law and business schools, the latter of which he presided over as dean when he was only 29, according to the Grand Forks Herald. The award is named for the U.S. president who ranched in the North Dakota Badlands.

Midair Turnabout

UNDER THE LEADERSHIP of CEO Rod Eddington, SEP '91, British Airways in February posted a [use pound symbol]13 million ($21 million) profit for the third quarter of 2002, quite a turnaround for the airline that posted a net loss of [use pound symbol]144 million a year earlier. The company reduced costs by cutting jobs and abandoning money-losing routes, according to the New York Times. Eddington warned that 2003 would be tougher than 2002 because of worries about a war in Iraq.

Program Places Kids on College Track

AFTER VOLUNTEERING as a tutor to high school students, Laurene Powell Jobs, MBA '91, created a different sort of startup in 1997. The former operator of a natural foods company and the wife of Apple Computer's Steve Jobs cofounded College Track, an organization that tutors and mentors economically disadvantaged high school students from East Palo Alto and Oakland. The $800,000 program is planning an expansion this year to San Francisco, according to the San Jose Mercury News.

"We are not cream-skimming. We are choosing average students who want a different future," Powell Jobs told the newspaper. The program "convinces kids they can succeed," observed Norman Colb of Menlo School. Vans pick up 130 youngsters for after-school tutoring and study at renovated warehouses outfitted with computers, books, mentors, tutors, and counselors. The students must commit to earning good grades and participating in extracurricular and volunteer activities. It's a tough program and a few drop out, but others have gone from failing basic courses to succeeding in Advanced Placement programs.

Buy and Hold

THE STOCK MARKET BUBBLE of the late nineties punched a few holes in the arguments of the efficient market theorists of the seventies, according to Fortune. The theorists argued that the best indicator of a stock's real worth was its price, because buyers and sellers took into account all publicly known information. Fortune credits Business School Professor Emeritus Bill Sharpe, the 1990 Nobel Prize winner, with being the messenger who persuaded Wall Street that instead of trying to outsmart the market, investors should diversify to eliminate systematic risk.
Now, however, it seems obvious that investors were irrational enough to get the prices wrong in the late nineties, which raises the prestige of newer theorists in a field labeled "behavioral finance." Fortune tracked down Sharpe and other theorists to see what investment advice they would offer today. It turned out that folks in both camps said pretty much the same thing, which the magazine summed up as "buy and hold." Said Sharpe: "As a practical matter, I still think it's prudent to assume that the market is pretty close to efficient in terms of pricing and risk and return. On the other hand, we've certainly learned from cognitive psychology that ordinary human beings need to have alternatives framed in ways that can help them make right decisions rather than wrong decisions."

Alumni to Know

Faculty

Newsmakers

Aussies Cut Down 'Tall Poppies'

Australians really don't like "tall poppies," Mike Zimmerman, MBA '94, told the magazine MBA Jungle in an article on "lessons from foreign lands." When the veteran of Goldman Sachs and Bain & Co. was asked to evaluate a business plan on a job interview with a venture capital firm in Sydney, he did so with a fervor that his interviewers interpreted as arrogance, the magazine said. Australians have a strong egalitarian streak, Zimmerman said, and take pleasure in cutting down to size those they perceive of as self-promoting strivers, whom they call "tall poppies."

They also don't believe in wrapping criticisms in euphemism. "It's not unusual for colleagues to interrupt each other, state that they completely disagree with a view that's been presented, or tell someone they're not spending their time well," said Zimmerman, who added that he loves the shorter work hours and recreational lifestyle Down Under.

Delayed Justice

IN THE BUSINESS WORLD, Laura Neuman, SEP '00, was known for her aggressiveness and tenacity. When she went home at night, however, she timidly went from room to room checking closets and corners, often carrying a butcher knife. She insisted her brother live with her, refused to go camping, and knew she could never marry.

Neuman's life took an abrupt turn on Oct. 14, 1983, when at the age of 18 she was raped in her bed by a stranger who climbed through a window. It wasn't just the rape that changed her, reported the Baltimore Sun. "Everyone around me acted like it didn't happen," she told the newspaper. "There was no comfort, no acknowledgement that it wasn't my fault. No one understood."

Immersing herself in work, she switched jobs to move up in the world of strategic planning and raising venture capital, and became quite successful financially. "She pulled herself up by her bootstraps. It was her triumph and self-defense," Neuman's therapist told the newspaper.

In January 2002, Neuman saw a TV newsmagazine feature about new DNA testing to check evidence from old rapes in Baltimore. She pursued police contacts and finally found someone determined to help her. Though the only evidence preserved in her case was a fingerprint, new technology in that area led to a man who confessed to the rape.

The arrest and conviction "made the world right for Laura," her therapist reported, but Neuman said there is still work to do. "I can't forgive him until I sit down and look at him eyeball to eyeball," she said, a meeting neither has been ready for yet.

In the meantime, Neuman has been talking to the media, she said, because other rape victims "need to know that if they are proactive, something can be done about their cases too."

Long-term Belt Tightening?

"We are all feeling so downwardly mobile," Gretchen Carey, MBA '76, told Fortune recently in an article on how the bear stock market, layoffs, and pay cuts are wreaking havoc with the retirement plans of many baby boomers. A financial advisor for Morgan Stanley, Dean Witter in Philadelphia, Carey said some of her clients and classmates are "wealthy and retired and living the American dream because they invested in eBay or followed Warren Buffett." Other pursued dreams that failed financially. She said. "They don't have time to rebuild the wealth, and in fact, they are slipping backward. A lot of people are frightened." The divorced mother to two teenagers added that she used to love to dress in designer suits, but now, "every penny I have goes to the kids."

Correction

A Newsmaker item in the February issue mistakenly attributed a quotation about teaching business ethics to Professor James Baron. The quotation was actually by Professor David Baron. The editors regret the error.