andy-serwer-blog

[andy-serwer-blog]

Donald Rumsfeld likes Trump – but not everything he says

Former US Defense Secretary Donald Rumsfeld is unapologetic, and some would say unrepentant. Unlike many of his cohort from the George W. Bush White House who have either denounced Donald Trump or have remained mum on the man, Rumsfeld is a supporter. “I’m Republican, I’m endorsing the Republican nominee, Donald Trump,” he tells me. And the former Secretary of Defense doesn’t truck with those who blame him for the mess that is the Middle East right now. “I simply think that’s not true,” he says.

When pressed about some of Trump’s positions, however, it becomes slightly more complicated. He acknowledges that Trump’s thinking doesn’t always “jibe” (my word, not Rummy’s) with his, saying he doesn’t agree with Trump on everything. Like what exactly? Building a wall with Mexico and making that country pay for it? Banning Muslims from coming into the US? Rumsfeld wouldn’t comment specifically on either.

“I’ve never met him so I don’t know him,” Rumsfeld remarked. He notes that Trump has a singular way of putting things. For instance: “NATO could benefit from some readjustment,” Rumsfeld says. “When I say it that way, people’s eyes glaze over. When he says it his way he gets the Republican nomination.” As for Hillary Clinton, she “has a history of not being believable,” he says. She is an “unacceptable” choice.

What should the next president do? America needs to “act like a superpower,” Rumsfeld says. We’ve created a “leadership vacuum.” Rumsfeld ticks off cyber security, ISIS, Russian aggression and says all these developments would be having different outcomes if the United States would act like a super power again. How do we do that, I asked? “To be proud of what we have achieved as a nation, that we are a model that people all over the world want to replicate, that freedom does have a value. It’s not an accident that this continent, North America, is the most successful continent on the face of the earth. By golly, we oughta be proud of what we’ve got as a nation.”

As for those who blame him for the current situation in the Middle East, he disagrees, saying, “President Bush made a decision on Iraq that was the only decision he could make. The evidence was persuasive to a majority of the member of the Senate and House Democrats and Republicans it strikes me that he made the proper decision based on the facts that he had. Personally I think the world’s a better place without Saddam Hussein.” Rumsfeld says the Obama administration withdrew from Iraq in a way that “contributed to that instability.”

I asked Rumsfeld about leaked emails that reportedly show former Secretary of State Condoleezza Rice criticizing Rumsfeld in messages to former Secretary of State Colin Powell. Rumsfeld deflected his response towards Powell: “Oh, Colin was an equal opportunity critic of everybody,” he says. “The two of them [Rice and Powell] were chatting back and forth, and if I were Colin Powell, I would be pretty embarrassed.”

I noted that it’s kind of tough with all the hacking going on. “It’s not tough for me,” Rumsfeld chuckles. “I never used email when I was in government. We were concerned about hacking as a result – I just didn’t do it.”

So how does he see the election shaping up? Rumsfeld can’t resist referencing his most famous trope. “You have a known known on the Democratic side,” he says. And a known unknown on Republican side,” he says. “It’s going to be a very close contest I think.”

Sounds like an unknown unknown to me.

[andy-serwer-blog]

New York startup king is betting on a local news game-changer

Silicon Valley has all manner of tech impresarios—from Marc Andreessen to Elon Musk to John Doerr to Peter Thiel.

But New York City? Not so much. Despite being “the most important city on the planet” and, yes, an ever-burgeoning tech scene replete with Flatiron District hipsters, the number of big-time tech entrepreneurs in Gotham is surprisingly small.

One of the most important is Kevin Ryan, founder and creator of some of New York’s most high-profile start-ups, including DoubleClick, Gilt Groupe and Business Insider. I recently sat down with Ryan to pick his ever-active brain.

First, I wanted to ask Ryan—who’s never short of strong opinions—about his newest venture, a local news venture called, (for now I would guess), Denverite.

So what the heck is Denverite? “It’s a site that competes with local sites like the Denver Post,” Ryan says. “It’s going after that local market of large cities in the United States, most of them have one newspaper and a website, struggling a little bit financially in all these markets. I think there’s an opportunity the way I thought there was an opportunity for Business Insider to compete with the Wall Street Journal and other large business sites.”

But Ryan himself said these papers and news sites are in trouble. How does he hope to succeed? “Whenever you have a completely focused online player competing against an existing player, say TMZ versus People Magazine, Business Insider and the Wall Street Journal, Huffington Post and the New York Times, they always get much more traffic and become larger because they wake up every day thinking about online, they execute better, they use social media better, they curate other content better and they have lower costs.”

I pointed out that Warren Buffett likes regional newspapers; Ryan corrected me saying that Buffett used to like regional newspapers, and that he was right but that was 20 years ago. Today, he says, Buffett is much less sanguine. Ryan added that he would continue to build out the Denver site for the next six to eight months and then look to expand, targeting cities from number four to 20 in terms of population, say, from Philadelphia to El Paso.

Ryan sold Gilt Groupe—which he founded in 2007—to Saks, or rather to its parent company, Hudson Bay Company, in January for a reported $250 million, which was a bit of a come down, as Gilt once sported a billion-dollar valuation. But Ryan says Saks “brings a lot to the table for Gilt.” He says customers can return items from Gilt to any Saks store and that Saks has relationships with more merchandisers. Plus, he says that Gilt has more online talent than its new parent in some areas, so that the companies fit well together.

I also asked him about Gawker. “It’s an extraordinary story,” he said. “Overall the company has been very successful. Nick Denton built it up without any outside financing. He did it over 10 years, he was there early, it has enormous traffic. It has always made money. It’s a valuable property.”

Did Gawker go too far? “I think so. There were stories that my guess that [Nick Denton] would regret they did,” Ryan says. “There were a couple where they were over the edge.” But Ryan says in general there was a reason they were successful – they broke stories and said things others wouldn’t.

As for Business Insider, Ryan says that he “miss[es] the property.” He acknowledges that while comScore numbers are down a bit lately because of changes by Facebook’s algorithm, the global numbers are doing very well. Overall, Business Insider is a “colossal success,” he says. (Full disclosure: Business Insider is both a competitor and a partner of Yahoo Finance.)

Ryan maintains that the IPO market is “solid,” saying the number of companies going public this fall should be more than the spring. Still, he acknowledges that many businesses are “happier to be private companies.”

Finally, I ask Ryan what he looks for when he’s trying to start up a company. “I want to see an industry that needs to be changed, that can be changed. I want it to be a pretty big opportunity that can be $100 million in revenue in 10 years. And one final thing, I just want to be interested by it. There are some things that I find intellectually interesting and I want to go after. The exciting thing is that opportunities are everywhere. Industries are being transformed. And so it’s a really exciting time.”

Not surprisingly then, there’s no sign that Ryan is slowing down any time soon.

[andy-serwer-blog]

Ford Foundation president: Here's how business can fix inequality

The gap between rich and poor is by some measures as wide as its been in nearly a century. According to tax data tracked by Emmanuel Saez, an economics professor at the University of California, Berkeley, the average income for the top 1% of households in the U.S. climbed 7.7% last year to $1.36 million. That group saw pay climb at almost twice the rate of income growth for the other 99% whose pay averaged a mere $48,768. Pretty stunning, no?

The implications are certainly being felt politically with polarized elections here and around the globe and economically as well with companies for instance changing up what they sell and where they operate.

Many people think that income and wealth inequality is a problem that can only be solved by government. Not Darren Walker, president of the Ford Foundation. Under Walker the Ford Foundation— with some $12.6 billion in assets, making it the nation’s second largest foundation after the Bill & Melinda Gates Foundation—has shifted its focus to addressing and alleviating income inequality around the world.

Walker believes that NGOs like Ford need to pay particular attention to this most pressing issue, but refreshingly perhaps for the head of a nonprofit, he believes the private sector can play a significant and positive role too.

First he says we should acknowledge that a focus on short-termism in business (a focus on only the next quarter’s profit for instance) has implications for income inequality. “Short-termism is a challenge for our culture writ large. And it certainly manifests in the markets in ways that distort the behaviors of corporate leaders, of corporations and business in general. Short-termism favors incumbents. It favors those who are already privileged and it compounds that privilege.

“As Larry Fink [CEO of Blackrock] says in his most recent letter, short-termism is a problem in our economy and we as market makers and market leaders need to take the action to acknowledge this. And I think consumers and investors should be working towards long-term investment. And that our policies should incent long-term and disincentivize short-termism.”

BlackRock CEO Larry Fink

Walker brings a number of perspectives to the debate. As a poor African American boy raised by a single mother in Texas who benefited from Head Start and a Pell Grant, Walker understands the value of investing in deserving individuals. “My background has given me an understanding of the need for investment in human capital and the centrality of private philanthropy making a difference in the lives of people,” he said in a 2013 interview.

After graduating from the University of Texas undergraduate and from UT law school, Walker went to work as lawyer at Cleary Gottlieb. He later worked at UBS for seven years, so he understands the world of Wall Street and business from a practitioner’s prospective.

I asked Walker if it’s just a matter of companies raising wages to address inequality. “Well, I think we have to look at the question of wages,” he said. “I think we also have to look at how business operates. Business actually is essential to solving the problems of our societies today, wherever they operate in the world. And so I’d like to think that the best businesses see themselves, of course, first and foremost committed to shareholder value, to their customers, to their employees, to their communities, and that they see themselves as part of the problem-solving ecosystem in American and the world. The capacity of a business to solve big problems is infinite. And the most visionary of those business leaders we see today, they’re out there doing that. They’re solving problems. They’re generating ideas and solutions to major, major challenges.

Another way businesses can participate in battling social ills in a productive way is through impact investing. I asked Walker about that as well.

“Impact investing is an exciting frontier,” Walker says. “Impact investing is what I call double-bottom-line investing. Some call triple-bottom-line investing. And that is getting a financial return, a social return, and an environmental return. And through a strategy that seeks all three objectives, it’s possible to return money to your investor, to help the planet, and to have a good social outcome and build sustainability into your business model.

“Because ultimately, businesses have two balance sheets. They have the published balance sheet, but then there’s a phantom balance sheet. And that phantom balance sheet is really a set of externalities that we all pay for. And so what I’m hoping is that we can have a balance sheet that actually reflects the material impacts of the business they happen to be in.

“But the good news is, we’ve got policies now. We’ve got policies that can encourage and incent us to do more impact investing. We have structures like B-corps, for example, that allow us to think about businesses in different ways. So the exciting thing is that we’re in this moment of experimentation and innovation that I am really quite enthusiastic about.”

Sounds like Walker believes there’s room for government, NGOs and businesses as well to play a part here.

– Andy Serwer is editor-in-chief at Yahoo Finance.

Read more:

Trump and Clinton agree on this single issue, and it could be a boon to the economy

The scariest day for investors in 17 years

This jarring chart may explain why investors are flooding into the stock market

How Roger Ailes and Peter Thiel reflect GOP angst

Billionaire Bill Macaulay is giving back in a way that should make the wealthy take notice

We’re suffering the consequences of too much democracy

[andy-serwer-blog]

The benefits of the Rio Olympics aren't being shared across Brazil: Ford Foundation president

Darren Walker, president of the Ford Foundation, loves the athletic competition of the Olympics as much as anyone. But as someone keenly aware of economic disparity, he also sees a somewhat less appealing side of the Olympics.

With some $12.6 billion in assets—making it the nation’s second largest foundation after the Bill & Melinda Gates Foundation—the Ford Foundation under Walker has been shifting its focus to addressing and alleviating income inequality around the world. And as the world’s attention has turned to the Olympics in Brazil, Walker spoke to me about the Games.

“As we have seen in our office in Rio, it’s a challenge. On the one hand, what’s happening there, we celebrate because there’s been significant new development,” Walker said. “There’ve been investments in the billions of dollars. The challenge is that it has not shared the benefits of the Olympics broadly with Brazilian society.”

The Olympics will reportedly cost Brazil in excess of $4.6 billion, this in a country with millions living in poverty and with myriad social issues. Walker notes that this fact is not lost on the populace. “People who have been displaced, people who have not been permitted to participate in the bounty of these resources that are now flowing through the Brazilian economy, are in many ways disaffected. And we’re seeing that disaffection on the streets, we’re seeing it in their politics, and we’re seeing it among particular people.”

Walker says this is particularly true of “Afro-Brazilians and indigenous Brazilians who make up over 50% of the population there, and yet are among the poorest and the most left behind in terms of social outcomes, economic power. And so there’s some real challenges in Brazil.”

But Walker, self-described as “bullish and optimistic on our future,” says Brazil has “a bright future.”

“This is a country that, in many ways has overcome in the past challenges like politics and corruption. It’s a very resilient country with a resilient population of people who, I think are gonna be able to weather this storm.”

Spoken like someone who can appreciate both the more difficult and the more uplifting side of things.

– Andy Serwer is editor-in-chief at Yahoo Finance.

Read more:

Trump and Clinton agree on this single issue, and it could be a boon to the economy

The scariest day for investors in 17 years

This jarring chart may explain why investors are flooding into the stock market

How Roger Ailes and Peter Thiel reflect GOP angst

Billionaire Bill Macaulay is giving back in a way that should make the wealthy take notice

We’re suffering the consequences of too much democracy

[andy-serwer-blog]

Trump and Clinton agree on this single issue, and it could be a boon to the economy

NEWSFLASH: There is one single issue where Trump and Clinton completely agree, and it makes tons of sense and could be a massive boon to the economy.

Any idea what that could possibly be?

It’s a massive build-out of our roads, bridges and airports—aka, infrastructure.

Why do Hillary and Donald see eye-to-eye here? Well, as former Treasury Secretary Larry Summers has asked rhetorically: “Are you proud of New York’s John F. Kennedy Airport?”

So, there’s that. Lousy, crumbling, unsafe, overcrowded, inefficient transportation infrastructure. And there’s another reason: jobs. Thousands and thousands of them that would be created building all this out. And then the real goal beyond that, the stimulating effect on the economy that all those jobs and new bridges, airports and roads would have.

“With interest rates so low, the government could borrow massive amounts of money by issuing hundred-year bonds to pay for these projects,” says Peter Borish, who was a founding partner at hedge fund giant Tudor Investment Corp and is currently chief strategist for the Quad Group.

The idea of infrastructure spending is so spot-on that the candidates have been topping each other with dollar amounts in their proposals. In fact, Trump is the one who’s called for the biggest spend—over $500 billion so far, “twice as much” as Clinton’s, he says—and I say “so far” because his aides say he’ll release a plan shortly.

Hillary Clinton’s proposal calls for an estimated spend of $275 billion over the next half decade. This plan would establish a “national infrastructure bank” to support big projects. This is similar to an idea put forth by President Barack Obama that failed due a lack of support by Republicans.

A Bloomberg story notes, “U.S. spending is projected to fall about $1.4 trillion short of the $3.3 trillion needed through 2025 for airports, highways and other infrastructure, according to the American Society of Civil Engineers.”

So why does the GOP oppose infrastructure? Republicans often say that these programs are the stuff of pork barrel and another example of wasteful government spending. Infrastructure projects are also closely tied to taxation, which immediately raises political hackles. And then there is geography. A large portion of these big-spend projects would be designated in blue states, which isn’t popular with GOP leaders who hail mostly from red states. (Republicans didn’t always oppose this kind of spending. Remember it was Eisenhower who created the interstate highway system.)

Meanwhile other countries are plowing ahead. China has averaged spending 8.2% of its GDP on roads, trains and bridges over the past 20 years, according to McKinsey—including $650 billion in 2009 alone. (This while the US has averaged 2.5% over the same period.) A Credit Suisse report notes that “Canadian Prime Minister Justin Trudeau recently introduced a C$60bn [$46.6] infrastructure plan, while “Theresa May, the new UK PM, has called for ‘more treasury backed project bonds for new infrastructure projects.” In the UK too, both parties are calling for more money to build out and rebuild ports, airports and roads.

As anyone stuck in a traffic jam, overcrowded airport or stalled train anywhere in the world this summer can attest, you could make the argument that infrastructure spending is money very well spent.

– Andy Serwer is editor-in-chief at Yahoo Finance.

Read more:

The scariest day for investors in 17 years

This jarring chart may explain why investors are flooding into the stock market

How Roger Ailes and Peter Thiel reflect GOP angst

Billionaire Bill Macaulay is giving back in a way that should make the wealthy take notice

We’re suffering the consequences of too much democracy

[andy-serwer-blog]

Today is the scariest day for investors in 17 years

Today is the scariest day for investors in 17 years.

I remember.

Right at the very top of the tech stock bubble of 1999/2000.

It was December 31, 1999 to be precise — yes the last day of the year, the last day of the decade! The day before Y2K (remember THAT?)

That was the last time all three major stock indexes — the NASDAQ (^IXIC), the S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) — hit a record high on the same day.

Witchy enough for you yet?

What happened after that is well known. The markets all went to hell. But not without a few notable events — or were they telltale signs? — along the way.

First Y2K was a big bust — nothing happened. False alarm. Which maybe added to a sense of complacency.

Except for one thing. In the fourth quarter of 1999, the Fed, anticipating currency runs caused by Americans stocking up on cash because of Y2K, the Fed flooded the bank system with $80 billion in cash. (Just what the crazy markets needed: more money.)

A mere 10 days later — January 10, 2000 — AOL announced it was buying Time Warner (TWX) for $164 billion, a deal that was the ultimate symbol of tech bubble excess and which would go down in history as the worst merger in history. Still.

Three days later, Bill Gates stepped down as CEO of Microsoft (MSFT), turning the reins over to his buddy Steve Ballmer. At that time Microsoft was the biggest, most powerful tech company on the planet. After Gates stepped aside, Microsoft went on a long swoon. In fact after peaking just before Gates departed — in December 1999 at $58 — the stock dropped all the way to $17 in February 2009, and has only just now, yes this week, hit $58.

Traders work the floor of the New York Stock Exchange as indices hit all-time highs.

Still not scared?

On Jan 14, 2000, a day after Gates handed off to Ballmer, the Dow Jones Industrial peaked at 11,722.98. The frothier NASDAQ continued to climb, peaking on March 10, 2000 at 5048. The S&P topped out exactly two weeks later on March 14 at 1,552.87. (Indexes today just for reference: S&P: 2182. Nasdaq: 5221. Dow: 18590.)

And finally I love this one: Super Bowl XXXIV (that’s 34 for the Roman Numeral challenged) was played on January 30, 2000 in Atlanta. (Rams beat Titans 23-16.) But more significantly perhaps, an amazing 16 dot.com companies paid $2 million each for 30-second ads. The following year there were only three such ads.

Be afraid. Be very afraid.

– Andy Serwer is editor-in-chief at Yahoo Finance. Read more:

This jarring chart may explain why investors are flooding into the stock market

How Roger Ailes and Peter Thiel reflect GOP angst

Billionaire Bill Macaulay is giving back in a way that should make the wealthy take notice

We’re suffering the consequences of too much democracy

[andy-serwer-blog]

This jarring chart may explain why investors are flooding into the stock market

Traders work on the floor of the New York Stock Exchange. (REUTERS/Lucas Jackson)

It’s curious right? The stock market (^GSPC) keeps going up—making new record highs even—and yet earnings are weak at best and for some companies profits are actually shrinking. So why in the world are stocks going up if the underlying prospects of companies are so poor?

I’ll explain in a second, but one thing to remember about investing is that it really is a zero sum game. If you sell a stock you are always moving money into something else, even if it’s cash. And investors are therefore always comparing the returns of one investment to another. Historical anomalies or distortions often produce equal and opposite reactions à la Newtonian physics. And that’s exactly what’s going on today in the stock market versus the bond market.

The chart below illustrates this story, graphing the percentage of S&P 500 stocks that have dividend yields greater than the yield on the 10-year Treasury note (^TNX). You can see for years—nay decades—the great majority of S&P 500 companies, like 95% of them, had stocks with dividend yields less than 10-year Treasuries. Things started to go haywire around the financial crisis, when stocks plunged, but companies didn’t cut their dividends, which meant their yields soared relative to Treasuries.

There are a lot of stocks yielding more than bonds. (Image: Bank of America Merrill Lynch)

What’s happening now is that Treasury yields, which many market prognosticators thought couldn’t go any lower, or were convinced would rise soon, just keep on dropping. The 10-year Treasury has now fallen from 2.24% in the first week of January to 1.55% —a huge percentage drop. And of course in other countries, like Germany and Japan, yields are even lower—or negative.

That 1.55% Treasury yield, which looks paltry enough on its own, looks even worse compared to stocks. The dividend yield of the S&P 500 currently sits at 2.04% And that’s what the chart reflects, way more than half of S&P stocks yield more than 10-year Treasuries! So think about it. If you buy stocks, you can get a yield more than Treasury bonds. Furthermore,  you can capture further dividend hikes and also potential capital gains.

No brainer right?

That’s one reason why investors are flooding into stocks (pushing prices ever higher): to capture this anomaly.

Will it all end badly? Who knows. But when things get this out of whack in the market, they usually, somehow, someway swing the other way.

– Andy Serwer is editor-in-chief at Yahoo Finance. Read more:

How Roger Ailes and Peter Thiel reflect GOP angst

Billionaire Bill Macaulay is giving back in a way that should make the wealthy take notice

We’re suffering the consequences of too much democracy

[andy-serwer-blog]

How Roger Ailes and Peter Thiel reflect GOP angst

From Roger Ailes to Peter Thiel

It could be a moment for the GOP.

Two high-profile Republicans, moving in opposite directions. On the one hand you have Peter Thiel, 48, a super-smart, super-successful, gay businessman addressing the convention — his profile on the rise. On the other hand, Roger Ailes, 76, being pushed out for unacceptably boorish behavior. Ailes’ reign as head of Fox News, and as such the Lord Mayor of the Conservative media, is apparently over.

So, is it really the case that the Republican Party has become … gulp … PC? Maybe just a little bit, though I wouldn’t read too much into it. It is true that sexual propositioning by a boss just doesn’t fly anymore in mainstream American business. Most Republicans would agree with that. And it’s even true that same-sex marriage is not the same hot-button issue for many Republicans it used to be, particularly among young Republicans.

But truth be told, both Ailes and Thiel are outliers. Ailes’ alleged sex-for-jobs offer is so blatant that it’s indefensible. You can imagine some old guy still trying to claim that a comment about a woman’s outfit is harmless, but imagine trying to pass off the old sex-for-money ploy. (“Oh come on, what’s wrong with suggesting that someone should have sex with me for a better job?” Um, how about everything.)

As for Thiel, he really is a category of one. Historically a Libertarian who gave tons of money to Ron Paul’s super PAC and supported Carly Fiorina, Thiel is a founder of Paypal and Palantir, and the first outside investor in Facebook. He’s an iconoclast’s iconoclast, advocating offshore communities and suggesting that college is unnecessary, among other “think different” ideas.

He’s also a really interesting guy. A few years ago, I had breakfast with Thiel in his luxurious home in a posh neighborhood of San Francisco. A chef of some sort prepared what Thiel described as “a caveman breakfast,” (I think it was right before the word ‘paleo’ was introduced), which consisted of poached egg over some greens and other raw items. (Um, good!) We talked about everything under the sun, from technology to government (his two favorite subjects) to aging and education.

In another Peter Thiel moment I recall well, Thiel was pitted against Google executive Eric Schmidt at a panel at a Fortune conference. They were arguing whether technology was creating opportunities for all, with Schmidt saying yes and Thiel saying not so much. Thiel soon enough edged the debate towards ad hominem attacks of Schmidt calling him “Google’s minister of propaganda.”  Thiel is of course also now famous — infamous, really —for  funding Hulk Hogan’s lawsuit against Gawker. This, because a Gawker site sought to out Thiel years ago.

As for Roger Ailes, he’s certainly made his own mark too, reinventing and rewriting the rules of cable news for one. Those who know him call him brilliant too. I remember I was at a salon on the Upper East Side of Manhattan with him a few years ago. We were asked to go around the room and introduce ourselves. When it was Ailes’ turn, he paused a moment for effect and said quite loudly, “My name is Anderson Cooper.” Some guests laughed, some looked bewildered, while others rolled their eyes.

So yes, you could argue that Thiel is the wax to Ailes’ wane in the Republican Party. But really the two men are more like one-offs, which if you think about, points to an issue for the GOP. The party is trying to unite right now, but around what can it coalesce?

Andy Serwer is editor-in-chief of Yahoo Finance.

Read more:

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Here’s why the government should give everybody $1,000 a month

Munger: Trump’s behavior represents ‘a form of sickness’

[andy-serwer-blog]

Here's the book every CEO is reading this summer

In at least one way, CEOs are just like the rest of us. They need a good book or two to help them while away those lazy summer weekends. As it turns out, Jamie Dimon of JPMorgan (JPM) is delving into the new biography of Ronald Reagan: “Ronald Reagan” by Jacob Weisberg (Times Books). Meanwhile, Walter Robb, CEO of Whole Foods (WFM), is pouring through Arianna Huffington’s book on sleep, “The Sleep Revolution: Transforming Your Life, One Night at a Time” (Harmony).

But there’s one book that seems to be most popular among CEOs this summer. A book that promises it will not only “change the way you see the world. It will also give you the power to change it.” Wow! What CEO in their right mind wouldn’t want to read that?

The book in question is by Joshua Cooper Ramo, co-CEO of Kissinger Associates, (the consulting firm founded by the former secretary of state) and it’s titled: “The Seventh Sense: Power, Fortune, and Survival in the Age of Networks” (Little, Brown & Company.) Just how popular is the “Seventh Sense”? Sure, it’s the No. 1 bestseller in Amazon’s Business Infrastructure category. And it made the Washington Post’s and New York Times’ bestseller lists, as well.

But even more than that, check out a piece on the McKinsey & Company’s website listing the summer reading lists of 14 top executives: “The Seventh Sense” is cited by by four different top executives — including by McKinsey CEO Dominic Barton and Reid Hoffman of LinkedIn. Overall, “The Seventh Sense” is picked four times out of 45 books named. No other book is tabbed more than once.

“The Seventh Sense” starts off by telling the story of a Chinese Zen master — Ramo works in China and is fluent in Chinese — and then transitions to explaining our modern business world: “The secret to power now is understanding our new age of networks — not merely the internet but also networks of trade and DNA and finance.” Sounds like a must read.

Ramo — who’s also on the boards of Starbucks (SBUX) and Federal Express (FDX) — is naturally delighted the big dogs are reading him: “I’m glad they like the book — or plan to like the book ;),” he wrote me in an email. But there might be another explanation as to why so many CEOs are reading “The Seventh Sense” — or so says one executive who’s also reading Ramo’s work: “Maybe the book was in a hotel room at some conference they all attended.”

As any author would tell you, whatever works!

Andy Serwer is editor-in-chief of Yahoo Finance.

Read more:

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One of the world’s foremost terrorism experts warns there’s ‘angst in the C-Suite’

We’re suffering the consequences of too much democracy

Pitching a product to Walmart even makes Bo Jackson nervous

Here’s why the government should give everybody $1,000 a month

Munger: Trump’s behavior represents ‘a form of sickness’

[andy-serwer-blog]

Billionaire Bill Macaulay is giving back in a way that should make the wealthy take notice

Do you ever wonder how effective philanthropy by wealthy people really is? Do they sometimes throw their money around without much thought? I’m talking about mega-gifts to charities with fuzzy goals and poor track records or giving tens of millions of dollars to the richest universities on the planet.

Not Bill Macaulay. A soft-spoken billionaire who grew up in modest circumstances in the Bronx, Macaulay made a fortune as CEO of private equity firm First Reserve, which does buyouts in the energy sector. Macaulay, 70, has given back in a way that should make wealthy people take notice—finding a raison d’être that makes him extremely proud and arguably has maximum impact on society.

Macaulay, you see, graduated from City College of New York, Class of 1966, (and then went on to receive an MBA from Wharton.)

“I got to where I am today because I went to City College,” Macaulay tells me in a recent interview. “I wanted to give back. It’s that simple. If it weren’t for the City University, I wouldn’t have had the opportunity to achieve what I achieved.”

And so ten years ago, Macaulay gave $30 million dollars to endow the William E. Macaulay Honors College at the university. The program attracts the best and brightest kids in New York City. “They have average SATs of 1400, so it’s like an Ivy League school,” he tells me. “Almost half the kids are immigrants or have parents who were immigrants, and almost half are the first in their families to go to college. We try to give them all the advantages. Not only do they get free tuition and computers, but also a lot of counseling, advising and internships—even money to go abroad. It’s a lot of effort.”

Macaulay, who acknowledges that you can only have so many houses and airplanes, says he has “no intention telling people how they should give money.” But he says giving to City University this way, “is much more impactful to more kids who need it a lot more than another … going to Harvard.”

Macaulay notes that over the past decade students have won 200 prestigious awards, including two Rhodes scholarships, more than 30 Fulbrights, 23 National Science awards and six Trumans. And then there are the stories of kids going to and succeeding at Harvard Medical School and Stanford Law School. “We hit way above a school our size,” he says. “It has been extremely successful, and I’m pretty pleased by that.”

Bill Macaulay has been able to fund and watch the American dream unfold before his eyes. What could possibly be more rewarding than that?

Andy Serwer is editor-in-chief of Yahoo Finance.

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One of the world's foremost terrorism experts says there's 'angst in the C-Suite'

Fred Burton is busy these days — and that’s not such a good thing. As one of the world’s foremost experts on security and terrorism, Burton wakes up just like the rest of us seeing horrible events around the globe on an almost regular basis now. Only unlike the rest of us, for him these events —from Nice, Dallas, Brussels, to Orlando — are a call to action.

Burton, you see, is chief security officer at the global intelligence firm Stratfor. Before that, Burton was deputy chief of counterterrorism at the Diplomatic Security Service, where he was in charge of preventing and investigating attacks against diplomats and embassies and consulates. So Burton knows terror all to well.

(Full disclosure: I went to high school with Burton in Montgomery County, Maryland, where he later worked as a police officer.)

Burton notes that the number of terror attacks has been increasing, and that the FBI can’t stop every one. “We’re living through troubled times, but our nation has been through this before,” he says.

Speaking to me of the attacks in Nice, Burton says: “These attacks can’t be stopped without human intelligence and I expect to see more due to the success.”

Burton, who is the author of a number of books including “Under Fire: The Untold Story of the Attack in Benghazi,” which he wrote with Samuel Katz, sees irony in the fact that several countries, including the Bahamas, Bahrain and the United Arab Emirates, have recently issued travel warnings to their citizens about visiting the United States. “Right, what’s wrong with that picture,” he asks? “The US is usually the one issuing the travel alert.”

Burton doesn’t paint a completely dark picture: “I think that in reality law enforcement in big cities like in New York, do a wonderful job,” he says. “[But] indiscriminate attacks and soft target attacks, is the frightening aspect like we saw at the Pulse nightclub in Orlando. It’s a new normal.”

Businesses are concerned, he says: “There’s a lot of angst, there’s a lot of concern in the C-suite over terrorism and risk assessment — even at corporate offices.” Burton says that he leaves “the why” of terrorism “to the politicians and the academics.” And that, “we try to unpack ‘the how’ of terror attacks, because if you understand how, you can take steps to mitigate risk and do something about it.”

So for now, Burton remains very busy. We would all probably be in a better place if he were a little less so.

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Here’s why the government should give everybody $1,000 a month

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[andy-serwer-blog]

A '90s-era economic story has unified Pokemon, Slurpee and Bernanke this week

What with Pokemon, the biggest tech IPO of the year, the booming Nikkei, a visit by Ben Bernanke and even free Slurpee Day, this seems to be Japan’s week.

Now that’s a line you don’t hear very often — which is a bit of a pun. (I’ll get to that in a minute.)

After its economy peaked in 1990, Japan has long been considered an economic backwater — which never actually has been the case. Even after its decline, Japan had the second-largest GDP in the world (after the US) from 1990 to 2010 until it was eclipsed by China. Japan is still number three ahead of Germany. Japanese companies like Toyota (TM), Hitachi (HTHIY) and Sony (SNE) are still among the biggest in the world, though they too have been overshadowed by new Chinese giants.

But it is true that Japan’s economy has been shrinking, from a total annual GDP of $5.3 trillion in 1995 to $4.1 trillion last year. And even more than that, Japan has lost it mojo. Korean cars (Kia and Hyundai) and electronics (Samsung and LG) have stolen all the thunder, never mind market share, while the global growth story flipped over years ago to its longtime rival, China.

I’m old enough to remember when the Japanese roiled the US economy, snapping up iconic American real estate like Rockefeller Center and Pebble Beach. What’s next, wags asked back then, the Grand Canyon? But years after peaking, the innovation, economic relentlessness and even fear factor that Japan reflected and induced seemed to have been lost.

Until perhaps this week.

The Pokemon Go craze — one of the biggest launches of a consumer product in the history of the planet — has blown up, boosting parent company Nintendo’s stock by 60% in just a few days.

The Nikkei is up over 4% over the past five days, in part because of Nintendo’s gains, but also because of positive reaction to Prime Minister Shinzō Abe’s recent economic moves. (So maybe Abenomics actually does work?) A visit this week by former US Fed Chair Ben Bernanke also seems to have given global perceptions of Japan a boost.

And then there’s the IPO by Japanese messaging giant, Line (that’s the pun I referred to earlier), which is on track to go public this week at a $6 billion valuation. That’s big.

Oh, and let’s not forget the Slurpee! Monday was 7/11 and on that day the venerable convenience store gives out its signature frozen drinks for free. Real Americana right? Not exactly. The US parent company of 7-11 went into bankruptcy in 1990, and a controlling interest was sold to … you guessed it … a Japanese company.

I’m not saying Japan is returning to those halcyon days 25 years ago, but it is true that reports of Japan’s death are greatly exaggerated, as everything from Pokemon to free Slurpees to a mega IPO—all happening this week — shows.

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[andy-serwer-blog]

We're suffering the consequences of too much democracy

Palazzo Madama, Rome

Democracy, you could argue, is pretty much like sunshine, cold beer and ice cream. They’re all great —until you have too much.

Too much democracy? That’s not possible, is it?

In fact it may be. Some economists and political scientists are suggesting as much in the wake of the Brexit vote and the subsequent wave of “Leave the EU” sentiment that’s sweeping across Europe. And you can look to a big honking use case right here in the US to make that argument.

It’s way too early to tell how Brexit will affect the economy of the UK at this point — although early days have been rocky enough with the crashing pound, stumbling stock market, and political chaos. But I would argue the biggest negative of Brexit will be the messiness and uncertainty that ensues. The UK will be forced to rewrite tax rules, as well as draft and implement new legislation. It will have to craft a new relationship with Europe. And the UK will more than likely haggle over referendums in Scotland and Northern Ireland. An OECD report says Brexit could cost the UK 3.3% of its GDP by 2020.

Despite those headaches and risks, “Leavers” across Europe — including those in France, the Netherlands, Italy, Hungary, Austria and Finland— have taken up the call. A Citibank note says “… political risks in Europe are high and probably rising, in our view, and ‘referendum risk’ contributes significantly to these risks …” Those risks include outright withdrawal from the EU, scuttling of EU policies, and shying away from EU-centric policies that could bolster local economies. Citi notes that Italy and Hungary will likely both have referendums on matters pertaining to the EU this year.

So what does this have to do with the US, besides the collateral damage of a potentially basket-case Europe — (no small thing that, by the way)? Because while referendums are actually rare in the UK, (the Brexit vote is only the third to cover the whole UK), they are much more common in the US.

Twenty-six states — mostly Western ones — plus Washington, D.C., allow for initiatives and referendums. And over the years, there have been various successes and failures, never mind wackiness. (One of my favorites was the 2006 Arizona Voter Reward Act which would give a single Arizona citizen $1 million in every general election. It was defeated.) But other ballot initiatives of course are more serious, and in some states referendums and such have had real teeth, nowhere more so than in California, where they have been elevated to a powerful form of governance, with high-profile propositions.

For those of you old enough to remember, the watershed moment of the California Proposition movement was 1978 with the passage of Proposition 13, which capped real estate taxes. (Remember Howard Jarvis — the leader of the movement — on the cover of Time Magazine: Tax Revolt!)

The success of that vote ushered in a golden age of referendums for the Golden State, although that may be a mischaracterization. Since then the state has voted on hundreds of referendums on gun control, abortion, marijuana and the death penalty. But mostly the initiatives have tended towards the fiscal: i.e., taxes, budgets and bond issues. To some this has been a shining era of democracy. Others are not so sanguine, saying Prop. 13, for example, helped lead to the gutting of education budgets.

One thing that is undoubtedly true is that this so-called direct democracy model has made governing more difficult. The Economist delved into this in great length in a 2011 special report:

“This citizen legislature has caused chaos. Many initiatives have either limited taxes or mandated spending, making it even harder to balance the budget. Some are so ill-thought-out that they achieve the opposite of their intent: for all its small-government pretensions, Proposition 13 ended up centralizing California’s finances, shifting them from local to state government. Rather than being the curb on elites that they were supposed to be, ballot initiatives have become a tool of special interests, with lobbyists and extremists bankrolling laws that are often bewildering in their complexity and obscure in their ramifications. And they have impoverished the state’s representative government. Who would want to sit in a legislature where 70-90% of the budget has already been allocated?”

The best evidence of the effects of this dysfunction perhaps is that during this period, California experienced a precipitous decline in its credit rating. In 1980, California had an AAA rating. By the early 1990s it had fallen to single A, and it bounced around that level for decades until as recently as 2014, when it was the second-lowest rated state in the nation. (This is a state, of course, with Silicon Valley, Hollywood, oil and gas, timber, minerals and the richest farmland in the nation.) Say what you will about Jerry Brown (twice!), Arnold Schwarzenegger and Pete Wilson, but it ain’t all the governors’ fault. In fact it may be Jerry Brown’s multiterm experience with government by referendum that has allowed him get a handle on the state’s finances and help boost its credit rating back up to AA (from S&P), its highest rating since 2001. But that’s hardly consolation.

Direct democracy does have a shining example of efficacy, and that is Switzerland, though there certainly are reasons particular to that country — homogeneity being one — that explain why it has worked there.

Otherwise, I would argue that direct democracy is best used sparingly, for local initiatives perhaps. A big drawback of direct democracy is that those who want change — no matter its validity — are much more fired up than those who want to maintain the status quo, and therefore many more of the “Changers” go to the polls, as was perhaps the case in the Brexit vote. Think about the consequences of that.

I know it sounds horribly anachronistic, but checks and balances, branches of government, and slow, messy and deliberate governance actually have their place. It is true that both in the case of Britain’s relationship with the EU and with real estate taxes in California in the 1970s, real change was needed. In cases like this, and probably just in general, politicians need to step up more briskly than they are typically comfortable doing. But putting the onus all back on the people may not be the answer. One thing’s for sure, it certainly has its consequences.

Read more:

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[andy-serwer-blog]

Pitching a product to Walmart makes even Bo Jackson nervous

Football and baseball great Bo Jackson is nervous—and that doesn’t happen often. I’m standing with the sports legend in a culinary test kitchen in Bentonville, Arkansas at Walmart headquarters where company buyers are about to sample some of Bo’s wares.

Let give you some context. Walmart, the world’s largest retailer, sells as many as 142,000 different items in its largest Super-Center stores. Space on their shelves is fought for by thousands suppliers from around the world — including potential suppliers like Bo Jackson. But how do the folks at “the company Sam Walton built” decide what items make the cut?

Well, Walmart has what’s known as their “Open Call” day where the company puts out an ask to any and all vendors, in this case those who sell “Made in the USA” products, to come to Bentonville one day in June. Some twelve hundred vendors make the trip. Each gets about 30 minutes in tiny, bare bones rooms to make their pitch. If the Walmart buyer likes what they hear, they might make space for the new product in one, several or all of the company’s more than 4,000 stores.

Products range from food, like local barbecue sauces, to make-up and hair products, to kayaks. Even a flea and tick remover.

And then there’s Bo Jackson. In 2015 he created V-E-J Holdings with the aim of selling high quality meat and fish at reasonable prices, a business model that would seem to fit nicely with Walmart’s. He pitched in the company’s brand new culinary center with several full kitchens.

“This is the pinnacle, being invited to Walmart corporate, is the pinnacle of retail,” Jackson says to me. Jackson admits to having “butterflies” when he’s pitching to the panel of four Walmart buyers who thoughtfully chew on Bo’s steak burgers and crab. (They’re taking notes too!) “I’m betting on my product selling itself,” says Bo as he keeps an eagle eye on the buyers.

The open call event is a particularly busy day for Walmart buyers who scheduled dozens of supplier meetings. Normally that number is much lower but either way, Walmart’s buyers told me that a successful supplier has passion for the product, quality merchandise and an item that fits a niche they don’t already have in their stores.

After the pitch meetings are over the buyer’s job is to determine whether they can purchase the product at a low enough price to make it affordable for their shoppers while still making enough profit to keep Walmart’s shareholders happy.

Did Bo make the grade? No word yet.

It’s enough to keep Bo Jackson’s — and hundreds of other Walmart’s suppliers’ — nerves on edge.

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