November 2004

Who's in the News

Opportunity Maker

Alex Cranberg, MBA ’81, has pledged to put 550 Denver middle schoolers from financially poor homes through college if they graduate from high school, the Denver Post reports. Cranberg, who earned his own college financing with scholarships and a summer job as a roustabout in oil fields, sees outside support as critical to his own motivation. He founded Aspect Resources, an independent oil and gas producer that has made millions as a result of early investments in three-dimensional seismic technology.

Explaining his rationale for the $5 million pledge to Horace Mann School pupils, Cranberg told the newspaper: “Education is not just about gaining skills. It’s also about inspiration. The most important thing anybody can get out of education is the motivation to make the most of himself or herself.”

49ers Draft Alum to Tackle Debt

The San Francisco 49ers got away with it for a while—robbing Peter to pay Paul, so to speak. Paraag Marathe, MBA ’04, has been hired as an assistant to the 49ers general manager with the task of rescuing the team from the financial mess it created by borrowing on its future in order to comply with the National Football League’s salary cap.

In the past, the team tried to restructure player contracts to delay expenses. This time it is bidding farewell to veteran players, including seven of last year’s offensive starters, and signing new contracts with young players, according to the San Jose Mercury News.

“The whole point is to be a consistently good team without having these one or two down years where you suck it up,” said Marathe, who took sports management courses at the Business School. “We just wrote a check to pay off all of our credit cards. When we’re actually clean, we’ll be able to go buy what we want to buy with cash.”

CEO Drives the Stage from the Stage

“It’s a very short move from Who’s Who to who’s that,” Richard Kovacevich, MBA ’67, quipped to a reporter recently. The CEO of Wells Fargo has become a media darling of late because Wells has outperformed larger competitors. Said Forbes: “Wells boasts the highest return on assets of the five largest banks (1.7 percent) and the fattest net interest margin (5 percent).” Since Kovacevich, a former General Mills executive, became CEO more than 11 years ago, added the Minneapolis Star Tribune, “the bank’s shareholders have enjoyed a compounded annual rate of 18.9 percent—far outpacing the S&P 500 Index’s 10.7 percent.”

Kovacevich’s success is attributed to his eye for acquisition bargains, his willingness to buck banking trends such as closure of branches, and his instillation of a hokey but strong sales culture. He calls his branch banks “stores,” lets employees try out new ideas, and offers them bonuses for cross-selling products. At a sales meeting, he treated his best cross-sellers to “the spectacle of the boss lip-synching to the Beatles in a mop-top wig. It was apropos of nothing,” Forbes reported, but “the crowd howled and cheered anyway.”

Said Kovacevich: “I hate doing it, but I know it influences my company more than sitting in my office thinking of the next big idea.”

Lights, Camera, Allentown?

Dialing for the Arts

It may seem old fashioned to market by telephone, but Sara Billmann, MBA ’95, finds the phone useful as director of marketing and promotion for the University Musical Society of the University of Michigan. The oldest college-related performing arts presenter in the country places a high priority on developing new audiences by appealing to diverse communities, including a large Arab American community in the Ann Arbor area. It also is leading a trend to extend concert performers’ stays so they participate in community education and social events, according to International Arts Manager, a business magazine for the performing arts. These efforts require “mass customization” marketing, Billmann told the magazine, which involves finding out when and how individuals prefer to be contacted. “Some of our greatest moments have come from those occasions when we’ve ignored [new] technology,” she said, “and picked up the telephone to talk directly to our audiences.”

Investors Grow Small Businesses

Venture capitalists on Main Street? You may ask why. Dan Levinson, MBA ’88, asked why not. The former Wall Street banker started Main Street Resources in Westport, Conn., with $22 million from 90 entrepreneurs and executives interested in his idea of investing $2 million to $10 million in existing small businesses that could be grown. The U.S. Small Business Administration has since kicked in $44 million, according to Fortune Small Business. “Most financial firms view themselves as four people sitting in a room writing checks,” Levinson said. “We view ourselves as a real company, with a strategy of taking care of our CEOs and our investors.”

Managing Risk During the Enron Hangover

Mayo Shattuck, MBA ’80, deals with the specter of Enron despite his recent successes using risk management in the energy industry, according to the Economist and SmartMoney magazines. The former investment banker became chief executive of Constellation Energy Group in late 2001, not long after Enron brought disrepute to the power-merchandising business. Constellation is the energy-trading arm of BGE, the regulated utility in Baltimore. Shattuck increased the capacity of power plants and raised the trading business revenue to nearly three-quarters of the company’s total, up from 30 percent in 2000, when the regulated electric and gas revenues dominated.

Using futures, options, and derivatives, he hedges every type of risk from interest rates to weather, the publication said, but that didn’t stop Standard & Poor’s from downgrading Constellation’s debt largely on the belief that risk management is a risky business. Shattuck disputes this but acknowledges that energy companies need to repair lost confidence. He may be reading the third edition of the book Managing Energy Risk, published by Risk Books, which features a chapter on volatile energy prices coauthored by Business School finance professor Darrell Duffie.

Alumni to Know

Faculty

Newsmakers

Trivia Has Been

Attention hoop fans: Who is the highest National Basketball Association draft pick in Stanford Cardinal history? If you answered Josh Childress, the sixth player to be drafted this year, you are correct, but Business School alums will get an A if they said Rich Kelley, MBA ’89. Kelley now scouts for the Utah Jazz, the team that drafted him seventh in 1975 when it was still in New Orleans. Just before this year’s draft, Kelly mused to the San Jose Mercury News, “I guess I’m a trivia question that’s about to be obliterated.”

Members Only, Cyber Style

What is the theory behind Orkut.com, a Google networking website that requires an invitation to join? “There are lots of old-style country clubs that operate in exactly the same way,” Business School professor Chip Heath told Psychology Today. That doesn’t mean such websites will be as successful as their creators hoped. “An important part of real networking is vouching for somebody who is introduced,” explained the social psychologist. “By automating that process, you make it less effective.” And then there is the fact that some Orkut memberships have made their way to auctions on eBay.

No Ties Required

Some folks think the Silicon Valley’s tieless culture is a relatively recent phenomenon, but George “Skip” Battle, MBA ’68, the executive chairman and former CEO of search engine company Ask Jeeves in Berkeley, reminds us that it dates back at least to the 1960s. After growing up in rural Rhode Island and attending pastoral Dartmouth, Battle chose the Stanford Business School because it was the only top business school where students didn’t have to wear a tie every day, he recently told the Oakland Tribune.

Battle tied his neck up, however, by making partner at Arthur Andersen and helping launch the consulting branch that has since become Accenture. After his first retirement, he joined the no-ties-required search engine company to help it stave off collapse during the dot-come bubble.

Protecting Treasures

If you don’t want your life upset, beware of who you hike with. Jeff Morgan, Sloan ’98, was hiking on Santa Cruz Island when a friend who had directed the California Nature Conservancy ambushed him. “Jim, you’ve sure got a lot of energy. Why don’t you do something to help the world out?”

Once a software sales executive, Morgan now travels one month out of three to places that often lack air conditioning, according to the San Jose Mercury News. He is the founder of the Global Heritage Fund, which tries to save archeological treasures. Projects with philanthropic partners and volunteers include preservation of an ancient town in China, royal tombs in Pakistan, and a Mayan civilization in Guatemala. Donors quoted by the newspaper say Morgan is not just trying to preserve ancient history but also trying to help local people reap the benefits through eco-tourism or other strategies.

Behind the Headlines

Don Graham, SEP ’83, who has headed the Washington Post Co. since 1991, “just might be the nation’s most underrated CEO,” Fortune editor Andy Serwer said in a recent column. The company’s stock is up more than 50 percent over the past two years. Mentored by his mother, the late Katherine Graham, and investor Warren Buffett, Don Graham is a “model of integrity, modesty, and professionalism,” but also “guarded and measured to a fault,” the editor said. Buffett, the Post’s lead outside director, said one of Graham’s strengths is his redeployment of capital, because all newspapers will gradually see their competitive positions erode. The Post’s fastest growing business is Kaplan Inc., the company that offers test preparation and other supplementary education services.