Vanderbilt Business

Category: Departments

From Broadway to Wall Street

The MASIF club can trace its Wall Street roots back to Broadway.

The musical never opened on Broadway, or anywhere else for that matter, and it probably never will. But in a way, the curtains haven’t yet dropped on The Party Girl. Though forgotten by many, the musical continues to make its impact known at the Owen School—just not in a way that you might suspect.

The year was 1977, and Max Adler, a prominent New York businessman, was sitting in his apartment on Fifth Avenue listening to another pitch. As one of the producers of the Tony Award-winning hit Annie, he was often being asked to finance other would-be Broadway musicals, like the one being described to him at that moment. This time, however, something held his attention. It wasn’t the script, which was about a U.S. senator and the mistress who runs his New York power base, or the fact that it was set to star veteran actor Robert Alda (Alan’s father) and an up-and-coming Dixie Carter. What interested him most was the person in front of him—the producer who had optioned the script. His name was Charles Doraine, MMgt’72, and it was his personal story that eventually convinced Max Adler to invest his money. Not in The Party Girl, that is, but in Vanderbilt.

“He said, ‘I don’t like the script, but I’m interested in you because you’re an entrepreneur,’” recalls Doraine. “I explained to him that I had graduated from Vanderbilt’s Graduate School of Management and that we thought of ourselves as managers of change. I told him we stood out because we looked at the world differently. Other schools were interested in people who would stay in the box, but GSM was looking for people who were outside of it.”

That “outside the box” line of thinking appealed to someone like Adler, whose path to success was anything but conventional. A bombardier in the U.S. Army Air Corps, he survived being shot down over the battlefields of Europe and imprisoned by the Nazis during World War II to return to civilian life in the late ’40s. Seeing an opportunity in America’s booming post-war economy, he started a mail-order business selling inexpensive gifts and gadgets. The catalogs were an immediate hit, and soon he expanded into other types of merchandise.

“He always sold these weird kinds of things, but one year he decided he would go into selling animals. He brought little burros across from Mexico, and they sold like fury and actually made the cover of Life magazine. It was amazing,” says Mimi Adler, Max’s widow.

While the burro-as-pet craze thankfully went away, Adler’s mail-order business did anything but. By the early ’60s the demand was so great for his merchandise that he decided to open his first retail store in New Jersey. Called Spencer Gifts, it caught on with customers and quickly drew the interest of Musical Corporation of America (MCA), a large music and television company based in California. Adler sold the business to MCA, which then took the brand nationwide. This windfall enabled Adler to dabble in other things that mattered to him, including Broadway shows like the one Charles Doraine had come to pitch.

But Adler was just as passionate about philanthropy, and when the conversation turned from The Party Girl to Vanderbilt GSM, he was eager to learn more about the school. Doraine agreed to put him in touch with Dean Samuel Richmond, thanked him for his time and went on his way, not realizing the importance of what had just occurred. It was only when Doraine got a phone call several years later that it dawned on him. A representative of the newly renamed Owen School was calling to invite him to a celebration honoring a donation given by Adler.

“Sometimes you can make a difference without even knowing it. I met Max just that one time, and look what happened,” Doraine says.

As it turns out, Max Adler had struck up a friendship with Dean Richmond during those intervening years and had grown so fond of the Owen School that he’d promised a significant sum for the construction of Management Hall. But before he could make good on that promise, Adler died unexpectedly in 1979. The donation that Doraine received the call about was actually given by Mimi in her late husband’s honor.

Mimi’s commitment to Owen, however, didn’t end there. In 1983 she donated an additional $25,000 to the school. The purpose of her gift was two-fold: First, she wanted the students to be able to learn how to manage money by making real-life investments, and second, she hoped the earnings from those investments would someday fund scholarships to the school. Mimi’s gift was named the Max Adler Student Investment Fund, or MASIF for short.

The student club responsible for managing MASIF is today one of the most popular at Owen. In 2007-2008, there were over 50 members, all of whom played a hand in deciding which stocks the club picked. Modeled after an S&P mid-cap index, the fund is divided into different sectors, such as real estate, health care, energy, and technology. Second years serve as the heads of these sectors, while first years act as analysts. Getting the first years involved in this manner was one of the initiatives of former MASIF President Nicholas Zager, MBA’08. Having worked at OppenheimerFunds prior to enrolling at Owen, Zager wanted to expose the club members to something akin to the real-world experience he’d had.

“When you set things up in a team-oriented and professional environment, you see certain people shine. Those of them who grab onto the idea of MASIF can really hit the ground running after graduation,” he says.

Zager’s other initiative as MASIF President was to fulfill Mimi Adler’s original vision by paying the first scholarship. In the 25 years since her donation, the fund had grown to well over $400,000 thanks to the students’ stock picks. With Dean Jim Bradford’s support and Mimi’s blessing, the MASIF club decided to sell off approximately half of that amount and create an endowment for the Max Adler Scholarship. The club members also set about determining the criteria that would be used to award the scholarship. It was agreed that the recipient should demonstrate not only leadership abilities and academic excellence but also a commitment to the school and a career in finance. In the end, several candidates were presented to Dean Bradford, and Bill Lambert, MBA’08, was chosen as the first recipient.

“I think MASIF offers a learning opportunity for people of all different backgrounds. It’s great to be able to pitch your thoughts on a specific stock to members, listen to their thought processes, and then measure those against your own. Not only does the fund create this atmosphere, but we then can act on these situations, and hopefully obtain market-beating returns for the fund in the process,” says Lambert.

Today Lambert is realizing his dream of working in corporate finance at Deutsche Bank AG in New York. His story is similar to those of other MASIF club members who have embarked on Wall Street careers. They all gained valuable experience managing the money that Mimi Adler gave to the Owen School in her late husband’s name. And whether they know it or not, they all owe a debt of gratitude to Charles Doraine and the musical that no one saw.

November 11, 2008
Q & A with Joyce Rothenberg

What services does the Career Management Center provide?

The CMC does not play a traditional placement role in the sense of matching companies and students. Today’s MBA job market is all about fit, and that’s something only the companies and the students can assess; matchmaking is really not part of what we do. Our job is more about helping to develop the job market. Our role with corporate employers is to educate them about the school and to help them attract the talent that they need to run their companies. Our mission with students, on the other hand, is to help them prepare for their job search. It’s not just about finding an MBA job when they get out, although that’s really important to everyone. It’s also about giving them the tools that will allow them to seek jobs for the rest of their lives. We teach them how to pick a direction, match their skills to job requirements, fill gaps if they’ve got them, and then market themselves to companies.

Does the CMC also provide career assistance for alumni?

Yes, there’s a person in my office named Debbie Clapper, who is the Associate Director of Executive and Alumni Career Services. She reviews resumes for alumni and consults with them in developing job-search strategies. For those who live in Nashville, she’s organized a job-seeking group that meets every other week. She’s also started taking her career services on the road to cities where there are larger concentrations of Owen grads. If any of our alumni are interested in career services, all they need to do is pick up the phone and call her. Or they can visit www.OwenConnect.com to find out more.

What advice do you give to students who are searching for jobs during these tough economic times?

Our students need to be a little more flexible about their searches. They also need to be persistent. There are jobs out there. They may not be the dream jobs that the students envisioned when coming to business school, but there are good MBA jobs. In certain sectors and regions of the country, the job market is quite robust. I think finding the right job is just a question of being realistic about what’s available and really matching your skills and interests to something that’s a good first step. Maybe you have to get two-thirds of the way to your dream versus the whole way when times are tough.

How can alumni play a part in the CMC’s success?

We look for alumni to open doors for us at their companies. When we focus on companies we don’t know or the strategic holes in our employer relationships, we turn to alumni to make that connection either through the HR people who do the MBA hiring or through the senior managers who care about MBA talent. We always appreciate it when alumni make us aware of opportunities at their companies. Being an advocate for Owen is something that is really helpful and important to us.

November 11, 2008
A Piece on Peace

A 2,500-year-old text called The Art of War may strike some as an unlikely source of advice for today’s business leaders, but Thomas Huynh, EMBA’04, believes that there are valuable lessons to be learned from Sun Tzu’s masterpiece. Huynh has recently penned a new translation of the work, titled The Art of War: Spirituality for Conflict, with the hope that it will bring the Chinese general’s message to a wider audience.

Although the ancient document sounds as though it might glorify war, Huynh says it’s actually a treatise on peace, offering practical strategies for circumventing and diffusing conflict, whether on the battlefield, in the boardroom or at home. It is required reading for officers in the United States Marine Corps, as well as students at a number of B-schools, because of its innovative, still-relevant strategy for overcoming conflict. Marc Benioff, Chairman and CEO of Salesforce.com, who wrote the foreword to Huynh’s book, uses its classic principles to manage his company in an often hostile, highly competitive technology industry.

The text itself is a lesson in economy: 13 short chapters comprise The Art of War, but each is full of important lessons that teach the reader how to avoid conflict and resolve inevitable hostile situations using self-control, intelligence, courage and benevolence. Huynh’s annotations alongside the translation offer practical application of Sun Tzu’s philosophy.

Huynh enjoys a career in finance as Group Controller for Skyline Steel in Georgia, but has been dedicated to the study of Sun Tzu’s masterwork since he encountered the text as a teenager. In 1999 he launched Sonshi.com to provide Web space for authors, scholars and readers to gather and share information about Sun Tzu’s timeless approach to conflict resolution.

Says Huynh, “Conflict is part of life, but it is our response to the disagreement that has the greatest effect on our inner peace and personal happiness.”

November 11, 2008
An Investment in Experience

Dave and Liz Marchese

Leverage. The power to get things done. That’s how Dave Marchese, BE’95, MBA’00, views his experience at Owen and his ability to switch careersfrom engineering to finance. Currently a Vice President at Haddington Ventures, a Houston-based private equity fund focused on the midstream energy sector, Marchese assists with deal sourcing, transactional work and portfolio company management. Prior to joining Haddington, he was Managing Partner at Eschelon Energy Partners, a company of similar ilk which he co-founded, as well as Reliant Energy, which was the launching pad for his industry changeover.

Marchese credits the late Elizabeth Powitzky, Owen’s beloved Associate Director of Admissions, for helping him shift his focus toward finance. Powitzky, who, sadly, lost her battle to breast cancer in 2001, steered him toward his summer internship at Reliant. “Elizabeth had a huge impact on my career change and helped me leverage my engineering experience and Vanderbilt MBA to get into energy finance,” he says.

His pre-MBA work with Jacobs Engineering translates into his current job, and he often draws on that knowledge in the development and construction of the energy infrastructure companies in Haddington’s portfolio. Additionally, he uses both his finance and engineering backgrounds to assist his wife, Liz, BA’95, in their development of a lakefront community, called The Point at Rock Island, on Tennessee’s Cumberland Plateau.

Marchese chose Owen because of people like Powitzky, as well as the opportunity to work with high-quality students, and says he greatly benefited from the diverse professional backgrounds his classmates brought to the table.

“My previous experiences combined with the people I encountered at Owen have allowed for my current success.”

November 11, 2008
SIRIUS Business

If you are a SIRIUS Satellite Radio subscriber, then you are likely benefiting from savvy strategy developed by award-winning marketing veteran and Owen alumna, Vance LaVelle, EMBA’91. As a Senior Vice President, she is helping SIRIUS grow its subscriber base through service, sales and marketing. She also is helping the company prepare for its recently approved merger with XM Satellite Radio.

A quick glance at LaVelle’s bio shows a career path punctuated by a diverse range of experiences across a number of sectors, including technology, telecommunications, financial services, media and entertainment, and government, but the anchor throughout has been marketing.

Although she began her career at AT&T in operations, she has always been keenly interested in understanding consumers’ needs and building organizations around the experiences those consumers want to have. “I have always had good instincts about consumers and an ability to see the obvious path,” says LaVelle. Indeed, her marketing acumen has enabled her to successfully launch over 100 brands and turn the tide on flagging market shares and profits.

LaVelle’s instincts have been on point internally, too, in terms of recognizing when she has needed to change jobs, and she advises others to be aware of their own internal compasses. “We are the architects of our work life. We can be proactive or reactive, but regardless, change is inevitable.”

LaVelle has chosen the proactive path, joining SIRIUS after serving as Chief Marketing Officer with PNC Financial Services Group. She realized she was ready for a change, but after 10 months of exploring other options, including launching a consulting business, she also recognized her desire to get back into corporate life as an operator, not just an advisor.

She’ll no doubt continue to listen to her own internal cues, but for now, though, it’s SIRIUS business.

November 11, 2008
Banking Is in Her Blood

When asked what put her on the career path to her current position as CEO of Citizens First Bank in Bowling Green, Ky., Mary Cohron, EMBA’88, points to two pivotal factors: family and the Owen School.

Cohron’s predilection for banking comes naturally, by way of paternal DNA. Her father spent his life building a successful community bank in Glasgow, Ky., and she has fond memories of learning the business at his knee, from the ground up. But Cohron also credits Owen with shaping her career. “My MBA is the reason I was hired to run Citizens,” she says.

Interestingly, she did not receive a college degree prior to her graduate work at Vanderbilt. Cohron jokes about “the bad old days” when she was denied a scholarship at another university because her husband was already in dental school. Not one to let adversity hold her down, she worked her way up in a local bank and spent a number of years serving on the Bowling Green Board of Education and the Kentucky School Boards Association, as well as the bank board that would later spin off as the group of investors behind Citizens First.

Cohron made the decision to apply to Vanderbilt, having learned that some B-schools admit non-degree candidates. Her then-role as a Corporate Director made her an appealing candidate to the Executive MBA program, and after clearing a number of required high hurdles, she was admitted.

“Without doubt, Owen has enabled me to leverage my gifts and talents to their fullest potential.”

November 11, 2008
Owen Mergers

If we’re to believe Sigmund Freud, then all that matters is love and work. Certainly everyone endeavors to succeed in both, but far too often one gets in the way of the other. That is, unless you’re like the couples profiled below. Although decades apart, they all have something in common: They have struck a happy balance between their married lives and their careers, and they owe much of that happiness to the place that put them on the path to both—the Owen School.

Minh-Triet Lethi Tucker, MMgt’72,
and Greg Tucker, BA’68, MMgt’71

Little did Greg Tucker know that an admissions brochure he designed would attract an honors student from Vietnam who would later become his wife. Greg was a member of the founding Vanderbilt GSM class, which met in the University Club basement. He remembers the day Minh-Triet’s application arrived at the admissions office, where he worked. “I opened the letter and thought, ‘I have to meet this young lady.’”

Greg was in Dean Igor Ansoff’s office, which overlooked West End Avenue, the day Minh-Triet arrived on campus. “I looked out the window, and coming down the sidewalk was this beautiful creature,” he says. Their initial introduction, however, didn’t go as well as he’d planned. Minh-Triet explains that she had a difficult time understanding Greg’s Southern accent.

After graduation Minh-Triet joined the MITRE Corp. in Washington, D.C., as a consultant. Greg continued at the school as its first Director of Admissions and Placement. In 1976 Greg enrolled in law school in Washington, and in 1977 they married in Constitution Gardens. During the Reagan administration, Minh-Triet was on the White House staff as Senior Policy Analyst for Science and Technology, while Greg practiced law with the Covington & Burling firm.

The couple dreamed of retiring to a farm, and it just so happened that one neighboring Greg’s aunt’s property outside Nashville became available at the same time his client HCA asked him to return to Middle Tennessee. It seemed “divinely planned,” says Minh-Triet. Today they are proud parents of a daughter and son, Brigitte and Burney, who are 2006 and 2008 Vanderbilt graduates, respectively.

Maria Renz, MBA’96,
and Tom Barr, MBA’98

As a Project Manager at Hallmark, Maria Renz was puzzled by a seemingly overconfident Owen summer intern. “I was a bit taken aback … the other two interns contact-ed me when they came to town. They’d say, ‘Oh yeah, Tom Barr is here,’ and I’d think, ‘Who the heck is Tom Barr?’”

Renz tracked Barr down, and they soon became friends. After graduation Tom joined GlaxoSmithKline in Pittsburgh. Renz was then with Kraft Foods in New York City, where GlaxoSmithKline’s ad agency is located. They began dating, even after Renz moved to Seattle to work for Amazon. Tom began taking Friday night flights from Pittsburgh to Seattle and then red-eyes home on Sunday.

“After a year we thought, ‘This is crazy. We have to figure out how to make this work,’” Renz says.

Before they even began exploring opportunities, a headhunter contacted Tom about coming to work for Starbucks Coffee Co. Tom is now the Vice President of North American Marketing for the coffee retailer, while Renz is a Vice President with Endless.com, Amazon’s shoe and handbag Web site.

“Whenever I need business advice or want to talk to my best friend, I turn to Tom. We have a great network of friends through Owen,” she says.

Tom serves on the Owen Alumni Board, and the couple participated in last winter’s Marketing Camp. They also have two children—prospective students for the Owen classes of 2031 and 2032, no doubt.

Donna Zavada Wilkinson, MBA’93,
and Jeff Wilkinson, MBA’92

Donna Wilkinson knew it was true love when Jeff agreed to help her cater an engagement party for Owen’s Director of Corporate Relations, Peter Veruki. The commitment meant that Jeff, a diehard Duke fan, would miss the NCAA regional finals basketball game between the Blue Devils and Kentucky—a game that many pundits consider the best ever played among the college ranks. Donna, at the time, worked with Veruki in the Owen placement office.

“I used to go into the placement office every day ostensibly to find a job,” laughs Jeff.

The two first met during an ethics breakout session Jeff helped facilitate during first-year orientation. He remarked about the prevalence of Duke graduates in the group, and Donna, a Duke alum herself, introduced herself afterwards. Jeff moved to Atlanta to work for Accenture after graduation, while Donna began her career with Sara Lee in Memphis, Tenn.

The couple timed their December 1995 wedding to coincide with the completion of her management training at Sara Lee and a transfer for both of them to Dallas.

The Wilkinsons both serve on the Owen Alumni Advisory Board and live in Indianapolis with their two young daughters. Donna is the Vice President of Human Resources with Pacers Sports & Entertainment, while Jeff is a Partner with Accenture. Says Donna, “We have a special place in our hearts for Owen. I loved my time there, and it was a bonus that I met my husband there.”

Vicki Simons Heyman, BA’79, MBA’80,
and Bruce Heyman, BA’79, MBA’80

When Vicki and Bruce Heyman paired up during a New Venture Creation course, they had no idea how it would change their lives. Taught by longtime Owen Professor Ed Bartee, the course not only introduced them to some of their closest friends but also sparked a romance that would last a lifetime.

“Our first date was Lamar Alexander’s governor’s ball,” says Bruce, a Managing Director for Goldman Sachs, who is the firm’s recruiting captain for Vanderbilt. The Heymans have remained very involved with the university, serving as co-chairs of their 25-year reunion in 2005. Vicki also has served on the Vanderbilt Alumni Board and on the Hillel Board for the Schulman Center for Jewish Life.

“Our participation has been exciting for us because we’ve been part of the upward trajectory of Owen. It’s also come at a very exciting time because our kids have been going through the college process,” she says.

Their youngest daughter, Caroline, is a high school senior, and middle daughter, Liza, is a Vanderbilt junior. Their oldest child, David, is 23 and an analyst in the foreign currency sales and derivatives department at JPMorgan, which, coincidentally, is the position Vicki held for four years after working in recruiting at Bankers Trust.

Elaine Wu, MBA’04,
and Jon Weindruch, BA’98, MBA’04

Elaine Wu and Jon Weindruch’s first date, an informal meet-up at a coffee shop, never happened. “Elaine stood me up,” jokes Jon. In reality, Elaine was a newly trans-planted international student stuck outside of downtown Nashville during a thunderstorm without a car or Jon’s cell phone number.

The two first met during a retreat about ethics sponsored by Cal Turner, which brought together students from Owen, as well as the Divinity School, Vanderbilt Law School, and the School of Medicine. They started dating during their second year, and Jon, who founded the Web-site strategy consulting company Websults while at Owen, followed Elaine to North Carolina, where she worked for Hanes after graduation.

In May 2005, during a return visit to Nashville, Jon proposed to Elaine at Percy Warner Park. They were married six months later in Taipei, Taiwan, by a pastor who had pursued his Ph.D. at Vanderbilt Divinity School. Some of their Owen friends also traveled to the wedding.

Elaine is currently Director of Internet Marketing for Victoria’s Secret, which operates the biggest retail apparel-accessory Web site in the United States. The couple lives in Columbus, Ohio, and Jon travels regularly to Nashville to consult with several clients, including the Owen School, which he has been assisting with Internet marketing.

November 11, 2008
Podcast and Videos about the Owen School

The Financial Crisis of 2008 (video)

Professors Jacob Sagi, Hans Stoll and Craig Lewis offer insight into the reasons for the recent financial crisis.

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Alumni Weekend 2008 Thank You (video)

Alumni share their thoughts about the Owen School.

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OwenUpdate – Winter 2008 (video)

Dean Jim Bradford talks about the recruiting and employment status of the Owen programs, the Vanderbilt Board of Trust visit, and the rumors about a new building.

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Distinguished Speakers Series

George Barrett, CEO of Cardinal Health (audio recording)

Barrett discusses the current state of the pharmaceutical industry and the role of generic drugs.

Vince Manze, President of NBC Creative Services (video)

Manze talks about his experiences in the entertainment industry and the future of global media.

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Rob Matteucci, MBA’77, CEO of Evenflo (audio recording)

Matteucci talks about life within a private-equity firm.

Featured Research

Campaign Contributions Boost ROI (audio recording)

New research by Alexei Ovtchinnikov, Assistant Professor of Management, provides hard evidence of a “positive and significant” relationship between campaign contributions and stock returns.

Managing the Brand: You (audio recording)

Kimberly Pace, Clinical Assistant Professor of Management, discusses the importance of reputation, attitude and identity for individual managers and executives in today’s corporate culture.

Navigating Global Antitrust Regulations (audio recording)

Luke Froeb, the William C. and Margaret W. Oehmig Associate Professor in Entrepreneurship and Free Enterprise, offers his perspective on the state of international antitrust laws.

The Poverty Paradox (audio recording)

Bart Victor, the Cal Turner Professor of Moral Leadership, talks about his research on the benefits of microlending.

Student Life

OwenBloggers – Why Owen? (video)

Student bloggers talk about why they decided to come to Vanderbilt.

Watch the video »

Owen in China (audio slideshow)

This travelogue was recorded during a trip for the Business in China course.

Project Pyramid in India (audio slideshow)

This travelogue was recorded during a Project Pyramid trip to India.

November 11, 2008
Headlines from Around the World

Throwing Caution to the Wind

Yesterday’s stock market tumble is the direct result of the deregulation of the financial system during the ’70s, experts say. “It was another example of an asset bubble that appears periodically. An economy will disregard risk, and when people see another investor making money by investing in an asset, others will throw caution to the wind,” explains Nicolas Bollen, a finance professor at Vanderbilt University’s Owen School.

McClatchy News Service, Sept. 16

Trade Off

International trade remains an evergreen fissure running through U.S. politics. While John McCain has been firm in his defense of the North American Free Trade Agreement (NAFTA), the Democrats have promised, albeit without specifics, to renegotiate treaties to protect U.S. workers. Luke Froeb, a free enterprise expert at Vanderbilt University, identifies this as a key ideological gap. He argues: “Renegotiating NAFTA would make our economy a lot less flexible. It would reduce income and make us all worse off.”

The Guardian (U.K.), Aug. 31

Clinical Trial and Error

Many institutional review boards do an exemplary job, keeping scientists on the ethical up-and-up, but “hyperprotectionism,” according to the Journal of the American Medical Association, “can have a stifling effect on research productivity.” One measure of that might be the number of new compounds approved by the Food and Drug Administration. It averaged an abysmal 19 last year—the fewest since the early 1980s. Or you can measure it by how long it takes a clinical trial for cancer to get off the ground: 171 days of red tape, finds David Dilts of the Owen School.

Newsweek, Aug. 11

Striking Gold

Olympic advertisers will spend more than $1 billion for U.S. airtime alone, although some say they will not get their money’s worth. In a time when it’s harder to win by simply offering a better product, the goal of a lot of advertising is to arouse positive feelings that forge lasting bonds with consumers, says Jennifer Escalas, a Vanderbilt professor. This year’s Olympic ads fit squarely with that goal. McDonald’s, for example, isn’t trying to sell a specific burger but to “build a relationship,” Escalas says. “If you feel good about the Olympics, that good feeling should spill over to the brand.”

MSN.com, Aug. 7

Full Disclosure?

Researchers have found that the Security Exchange Commission’s Regulation Fair Disclosure rule (Reg FD) has curtailed the amount of information that companies disclose to the public. Baljit Sidhu from the Australian School of Business, Tom Smith from Australian National University, and Robert Whaley and Richard Willis from the Owen School studied the effect of Reg FD by comparing cost components of the bid-ask spreads of Nasdaq-listed stocks in the months before and after Reg FD went into effect. “While Reg FD gave everyone the same info at the same time, what it’s done is it has made firms release less information, and it’s driven up the cost of trading,” says Whaley.

CFO.com, Aug. 1

On the Margins

The collapse of SemGroup LP, which filed for bankruptcy after losing $2.4 billion on energy contracts, has focused attention on margin requirements. Financial-market experts point out that while trading firms may struggle with margin requirements, increased margin doesn’t become an issue unless the trade is a loser to start with. “It’s a standard argument” when traders “get into trouble,” says Hans Stoll, a finance professor at Vanderbilt.

The Wall Street Journal, July 29

November 11, 2008
In a Tailspin?

Michael Lapré, an Owen faculty member who studies operations and performance in the airline industry, sees many challenges ahead for the major airlines. Maintaining customer satisfaction will continue to be a problem, he predicts, as fuel costs continue to soar and the industry works to keep costs down.

“Right now the biggest issue is cost,” says Lapré, the E. Bronson Ingram Associate Professor in Operations Management. “They need to figure out an appropriate cost structure that makes it at least appealing to compete with an airline like Southwest. That’s not easy. You want to pay your employees appropriately. But that’s tough because other airlines, the discount airlines, have much cheaper labor. Then there are fuel costs, and figuring out how many different types of planes you can profitably have in the fleet. So there are cost-structure issues, fleet issues, labor issues. It’s not easy.”

Indeed, the airline industry today is facing a triple threat from rising costs, customer dissatisfaction, and an aging air-traffic control system, spurring some industry analysts to compare the current environment to the post-9/11 era of bankruptcy filings and extreme belt-tightening.

While US Airways CEO Doug Parker and others see mergers and acquisitions as an inevitable mechanism for airlines to consolidate costs, it is well known that mergers create problems, at least for the short term, and can create customer dissatisfaction.

“There are going to be more mergers,” Lapré says. “I do know that mergers and acquisitions can be troublesome. For example, the two airlines’ information systems can have trouble communicating. It takes a long time to integrate the information systems. It’s actually much easier to start from scratch than patch different types of systems together.”

Within the next few years, the number of major carriers in the United States will be reduced from the current six—US Airways, Delta, American, Northwest, United and Continental—to four and perhaps fewer, he predicts.

Within the next few years, the number of major carriers in the United States will be reduced from the current six—US Airways, Delta, American, Northwest, United and Continental—to four and perhaps fewer, he predicts.

Lapré, the author of an award-winning paper on performance improvement paths in the U.S. airline industry, focuses his current research on longitudinal data from the industry—data he says is easier to procure than in some other areas of business because the airline industry is so tightly regulated.

“I am focusing on the lessons learned about what worked well,” he explains. “I have found that you really must start with quality first. If you start cutting costs and don’t pay attention to quality, it’s going to be detrimental in the long run.”

Lapré says it’s hard to predict when flying may become more pleasurable and profitable again.

“Security issues are going to make flying a bit of a hassle. And now airlines are playing with charging for baggage. The so-called legacy airlines—those formed before the current era of discount carriers—began their operations in an era when oil was much cheaper and costs were less of an issue. Discount carriers, on the other hand, started from a cost-control position, so they can afford not to trim such services.

“Discount carriers are at an advantage because they turn the plane around so quickly on the ground,” he says.

But even discount carriers experience delays due to the antiquated air-traffic control system. “I think the industry is waiting for some technological advances that will make it easier for more planes to be in the air. Right now it’s almost full in the air. It’s too congested.”

Lapré repeatedly returns to the linchpin that will make or break an airline: quality.

“No airline can forget about quality. And that just means doing the basic things right and making sure customers are happy. Satisfied customers can become loyal customers, who will keep coming back.”

November 10, 2008
Honours Courses

Robert Barrett, left, and Rob Shults founded Honours Golf in 1998.

When the Scottish first pioneered the game of golf all those centuries ago, it’s safe to say that they had no idea what a worldwide phenomenon it would become. Of course the sport has changed considerably since then; some of the modern rules and conventions would be unrecognizable to those ancient Scots. Yet for all the changes, golf today remains rooted in sportsmanship and camaraderie, and it’s these ideals that help to explain its enduring popularity.

Certainly Rob Shults, MBA’96, can attest to this. As the President of Honours Golf, the leading golf course management company in the Southeastern United States, he’s built a business around the idea that the game is as much about instilling core values and forging friendships as it is about competition. This is reflected not just in the company’s name, which hearkens back to the origins of the sport with its British spelling. It’s an inherent part of everything that Honours Golf does to create memorable experiences for its members and guests. From course conditioning to customer service, Shults and his team go the extra mile to uphold the long and noble tradition of the game.

Practice Swings

Though Shults didn’t realize it at the time, the philosophy behind Honours Golf took shape when he was just a school kid growing up in Little Rock, Ark. His father taught him how to play golf at an early age, but it wasn’t only the rules that he learned. The game brought Shults happiness on so many different levels that he came to view it as a life pursuit rather than a simple diversion.

“Golf was a game that I had talent in, and I just fell in love with being outdoors, spending time with good friends and working on a skill over and over,” he says.

Shults’ talent for golf led him to play competitively in high school and at the U.S. Military Academy at West Point, where he earned a B.S. in Management and Systems Engineering. After serving as an Officer in the U.S. Army for four years, he began looking for a way to transition from the military to the business world. The Owen School offered him just such an opportunity. While earning his MBA, he picked up basic business tools that continue to serve him well to this day.

“Owen gets you ready to handle a lot of different tasks simultaneously. It’s good preparation for getting out there in the real world and trying to figure out what direction you’re headed in life and how successful you’re going to be,” he says.

The Drive

Shults’ direction in life didn’t become entirely clear to him until a couple of years after Owen. While working for Wachovia Bank in Atlanta, he started to get the itch to do something that he’d always wanted to do—start his own company before he turned 30. The problem was, he didn’t know what that company would be. At the time, golf wasn’t on his radar screen, except as a hobby. “Frankly, I had never thought about making money or going to work in the golf business,” he admits. But a chance meeting with one of the sport’s premier developers changed all that.

That developer was Robert Barrett, a native of Augusta, Ga. who had been working in the golf industry since the ’70s. Barrett had made a name for himself planning and managing golf operations for a number of well-regarded clubs across the country, including La Quinta Country Club in California, the site of several Skins games during the ’90s.

Despite their different backgrounds, Shults and Barrett hit it off immediately. They found they shared not only similar personalities but also a similar appreciation for the game.

“He was a golf operations guy through and through, and I brought a financial perspective to the table. But we had the same vision for what we wanted to do,” says Shults.

That vision—creating courses that provide something more than just an ordinary round of golf—took root when they decided to form Honours Golf together in 1998. From the very beginning Shults and Barrett found that their partnership was all the more effective because of their different, yet complementary, skill sets. Their roles within the company point to this. As CEO, Barrett handles golf course development and operations out of the Birmingham, Ala. office. Shults, meanwhile, heads up strategic direction and business development in Atlanta.

The Approach

Shults and Barrett’s first business deal was with Highland Park Golf Course in Alabama—the oldest course in that state. Since then, the two have steadily added to their portfolio, which now includes a total of 12 courses located throughout Alabama, Florida, Georgia and Mississippi. Some of these properties were signed through golf course management contracts, as in the case of Highland Park, while others came about through development deals, in which Honours Golf assisted with the design and construction. Shults and Barrett have purchased several golf courses as well.

Whether through management, development or whole ownership, Honours Golf always takes the same disciplined approach. “Every one of our projects, by its nature, has its own unique brand,” says Shults. “That takes a whole host of disciplines. It takes leadership, of course, and it takes putting a good team in place, whether it’s the right team to build the golf course or the right team to run the golf course. And then it takes putting a culture of success in place with good systems and good training.”

Minding the Hazards

Good teams and good systems are especially needed in today’s business climate. The recent downturn in the economy poses a challenge to golf course owners since the sport is a discretionary expense for consumers. There’s also the added pressure of rising fuel costs, which affect everything from the transportation of fertilizer products to the price of food served in their clubs. And to make matters even worse, the industry is already dealing with growing pains brought about by overexpansion during the late ’90s and early ’00s. Today fewer golf courses are being built, and many are being closed.

And yet Honours Golf has reason to be optimistic. As Shults points out, there are an estimated 25 million people in the United States who play the game. Of those, 8.5 million are considered to be core golfers. They spend about 80 percent of the money in the sport and are not likely to give it up, even during times of recession or inflation.

Shults also sees an opportunity for his company in golf’s consolidating market. “Owners and financiers are realizing that golf course management companies are part of the necessary solution to get the golf industry back to health from a supply and demand standpoint, as well as from an operating standpoint. Existing golf courses that are undermanaged are our biggest opportunity,” he explains.

The Bottom of the Cup

Perhaps most importantly, though, Shults knows that the golf industry as a whole is in good hands. There’s a reason, he says, why you never hear of people being forced into his line of work by their fathers: It just doesn’t happen. “People are in the business because they want to be in it,” he says. “So everybody is passionate. It’s an industry that is competitive, but for the most part everyone takes the attitude of ‘Let’s grow this game together.’”

Serving as President of Honours Golf may be a job, but to hear Shults talk, you might just think otherwise. Every day at the office brings challenges, for sure, but there are plenty of rewards, too. Shults has found great satisfaction in sharing his goals and principles with like-minded people, such as Rob Barrett and others on his team, and in the process, he’s made friendships and memories that will last a lifetime.

As Shults puts it, “At the end of the day, pursue something you love. Because if you’re doing something you love, you’ll never feel like you had to work a day in your life.”

November 10, 2008
25 Years of Perspective

This piece is adapted from a speech that Neil Ramsey delivered during Owen’s Alumni Weekend in April.

Looking back at my graduation 25 years ago from Owen, I’m amazed at how much my perspective has changed. Perhaps I could have learned most of what I’m going to describe here by reading, but there’s no way that knowledge would mean anything to me today without the experiences to back it up.

So what have I learned since graduating from Owen?

I’ve learned that most of the lessons my parents taught me were the keys to a happy life. When my dad used to tell me that I would grow up to be exactly the kind of person that I was as a boy, he was right. Ralph Waldo Emerson said, “The only person you are destined to be is the person you decide to be.”

I’ve learned that how I handle my problems is a lot more important than avoiding the inevitable problems that pop up. Unfortunately I haven’t fully learned what Teddy Roosevelt said best: “Nine-tenths of wisdom is being wise in time.”

I’ve learned that it is okay to say what you think, but it is better to do it tactfully. I did not understand this when I was younger. I felt that if what I was saying was true and I meant no harm, it was okay to say it. It took many hurt feelings to learn this one, and I’m still working to be more considerate in my delivery.

I’ve also learned, as a friend of mine said 20 years ago, that “there are no throw-away comments.” The irony of this quote is that when I recently reminded him of the comment a couple of weeks ago, he was surprised I had remembered it. Everything you say and do can touch people in a positive or negative way, and you may never even know it.

I’ve learned to go as far as I can to show people I love what they mean to me. If you find yourself wanting to record your feelings in words, do it.

I’ve learned that substance may be all that matters, but you may not be listen-ed to if you do not pay attention to form. Substance without form serves little purpose.

I’ve learned that having ambitions is much more important than being ambitious. I’m one-tenth as ambitious today as I was 10 years ago, but my ambitions are 10 times greater.

I’ve learned that perseverance is the key to success. Accumulated knowledge and experiences are our most valuable assets.

I’ve learned that you can change the way the world treats you simply by opening your heart, looking for good, and showing more kindness and patience. I haven’t mastered this, but I am better than I used to be, and the world treats me better because of it.

I’ve learned that I would rather be respected than liked. I would prefer both, but given the choice, I’d pick respect.

I’ve learned that the need for my parents’ approval never goes away.

I’ve learned that I could not be successful in my own business until I decided I was just another employee with specific responsibilities.

I’ve learned that my favorite people are very smart, have a good sense of humor, and don’t take themselves too seriously.

I’ve learned to demand much less of most people but demand much more from the people who can handle it.

I’ve learned that my greatest comfort comes from watching my kids find their own way. Nothing makes me prouder than when someone I really respect says something nice about one of my kids.

I’ve learned that nothing makes me happier than having a special moment with one of my children when it is completely obvious they love and appreciate me.

I’ve learned that I should have no faith in objects, little faith in institutions, faith in people I care about, a lot of faith in myself, and complete faith in God.

I’ve learned that one of my biggest sources of frustration and angst is the guilt associated with unreturned phone calls.

I’ve learned that having money is much more important for mental freedom than I ever imagined. I live scared. That is my motivation.

I’ve learned that intelligence can’t be measured accurately. I think maybe intelligence is like what Supreme Court Justice Potter Stewart said about pornography: “I don’t know how to define it, but I sure know it when I see it.”

I’ve learned that intellect and talent sometimes don’t translate from one field or endeavor to another. As an undergraduate, I had very good grades, but the two courses I did poorly in were economics and an engineering science “calculator” module. At Owen I had a difficult time in Professor Blanton’s computer course and Professor Blackburn’s stats course. Now here I am running a statistics-based, research-oriented quantitative hedge fund utilizing econometric models. In my business we always have to say “past performance may not be indicative of future performance.” I guess there’s a reason for that.

I’ve learned not to compete head-to-head with people smarter than me. I try to compete where my strengths are unique.

My wife has been trying to teach me for 25 years that when people seem odd or mean, they are probably just going through something tough. I am beginning to get this one.

I’ve learned that the world would be a much safer place if we all lived below our means.

Along these lines, I’ve learned not to laugh at old men with no hair on their ankles. I am now one of those old men. This is a pretty minor issue but shows that we should be more understanding and compassionate.

I’ve learned that the world would be a much safer place if we all lived below our means.

I’ve learned that inexperienced geniuses are dangerous.

I’ve learned that “value” is very difficult to surmise.

I’ve learned that the stock market is a tricky place to make money.

I’ve learned that most people and almost all politicians take the benefits of economic activity for granted. They forget that this is the core of morality and self-worth and opportunity for society.

I’ve learned that most arguments between people could have been avoided with some initial definitions and that all of the Ten Commandments make sense.

I’ve learned that making things as simple as they should be is very difficult. As Einstein said, “Make everything as simple as possible, but not simpler.”

I’ve learned that perseverance is the key to success. Accumulated knowledge and experiences are our most valuable assets. One of my favorite quotes is from Winston Churchill. He said, “When you are going through hell, keep going.” Conversely I’ve learned that if what I’m doing is not working, I better do something else. Separating hindsight from new insight gained from a setback is the key to perseverance.

I’ve learned that answers and new opportunities wondrously appear when I seem to need them.

I’ve learned that I should be striving more for goodness than greatness.

I’ve learned that when something hurts me or angers me, it’s not a good idea to get philosophical and accept it too quickly. And more importantly, it’s even worse to lose control of my emotions and do damage.

I’ve learned that we have no idea what tomorrow will bring.

While I have no idea what I will learn in the next 25 years, I’m guessing that I will not learn some of the simplest and most basic lessons well enough:

Take care of my family.

Connect to other people.

Treat people kindly.

Be thankful for what I have.

Recognize that my current situation is just a snapshot.

November 10, 2008
Untangling the Knot: Logistics in China

China is undergoing an infrastructure building campaign unrivaled in recent history. When the country first opened its doors to the outside world in fits and starts in the ’80s and ’90s, large transportation providers, like DHL, UPS, FedEx and Exel, began vying for a toehold on the mainland through joint ventures with the various government transportation groups, like Sinotrans, and newly-privatized enterprises. It was as if China had re-awakened when Deng Xiaoping, the late leader of the Communist Party of China, proclaimed, “To get rich is glorious!” during his famed Southern Tour in 1992.

A view of the famous Bund district in Shanghai.

Today the east coast highway and port system has reached or surpassed international standards around the centers of commerce in Beijing, Shanghai and the Pearl River Delta in Guangdong Province, and the government has slowly allowed international firms to operate independently of their joint venture partners. With China’s entry into the World Trade Organization in 2004, restrictions on foreign direct investment were officially loosened, but multi-nationals were still functionally required to navigate the bureaucracy of multiple layers of government.

According to Datamonitor, the Chinese logistics market is projected to grow in the low teens through 2010 after posting a remarkable 22.6 percent compounded annual growth rate from 2001 to 2005. Today China has 16 major ports and a shipping capacity of 50 million tons per year. It also has a network of over 30,000 kilometers of highways, second only to the United States in total kilometers. Despite this phenomenal growth, logistics costs remain high—representing 20 percent of GDP in China versus 11 percent in Japan—when compared to overall production.

Market Remains Fractured

One would expect rapid consolidation among logistics providers seeking to capitalize on China’s growth. Yet in the trucking world, a single provider has yet to emerge with a comprehensive network. There are over 5 million trucking companies, with each owning an average of 1.8 trucks. The top 100 logistics providers only comprise 5 percent of the total logistics market.

These smaller trucking firms are often the lowest cost provider with low overhead and expertise within a single area. Their expertise includes relationships with toll collectors and inspectors that give them an advantage over a trucking firm from another region. With such low barriers to entry and local protectionism, it is hard for larger players to compete. In the case of bulk commodities like cotton, factories will often manage the supply chain between the mill and the port because they can get the lowest prices with their existing carriers.

Level of Automation Remains Low

Although many logistics providers that move high-value merchandise have invested in the latest tracking systems, many of the bulk commodity shippers are not using available technology to provide shipment visibility. Much of the tracking is still done the old-fashioned way with a clipboard and a marker. If cost is the primary buying motivation and labor costs are low, there is not a short-term payoff for investing in automation. Why would you buy a forklift if you can hire a team to stuff a container by hand for a fraction of the cost?

Overloading Persists

In China it is common practice for truckers to overload their trucks by two to three times the legal limit to maximize their asset usage and eke out a profit in a fiercely competitive market. The central government has issued tougher laws to ensure the safety of drivers and reduce damage to roads, but they are lax in the enforcement of these regulations because they know many small truckers would go under if they adhered to the weight limits. Meanwhile the local government has an incentive to allow overloading to continue as tolls are collected on the total weight of the load and they are not responsible for road repairs. This practice reminds one of the Chinese saying, “The hills are high and Beijing is far away.”

What to Do?

There is no “one size fits all” solution. Instead of a China logistics strategy, have a unique strategy or partner for each region. Find logistics providers who have worked with firms that you trust.

Also keep in mind this is not the West. Proceed with caution and realize that corruption is widespread, contracts are hard to enforce, and management talent is scarce.

As in any business, logistics is a game of relationships. This is even more appropriate in China where a long-term relationship may mean the difference in your product being held up in port rather than getting delivered to a factory on time. Invest in a long-term relationship with a company that is willing to establish a mutually beneficial partnership.

Oscar Atkinson traveled with 19 classmates to China as part of Professor Ray Friedman’s Doing Business in China course. The highlight of the week-long trip was a visit to international logistics firm Mallory Alexander with Michael O’Brien, MBA’08, Jen Smith, MBA’08, and Scott Hall, MBA’08. Atkinson now works for SEACAP Financial, an investment bank in Memphis, Tenn. specializing in the sale and acquisition of family-owned companies. Atkinson can be reached at oscar.atkinson@seacapfinancial.com.

November 10, 2008
Headhunter’s Advice: Manage What You Measure

In his book Topgrading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People, author Bradford D. Smart concludes, “With an average base salary of $114,000, the average total cost associated with a ‘typical’ mis-hire is $2,709,000—greater than 24 times the person’s base compensation.”

To rationalize these amounts, think about the opportunity costs that can result from substandard service, inadequate research, missed deadlines, failed marketing campaigns, missed sales targets, flawed accounting or investment strategies and more. Additionally you may directly absorb considerable recruiting expense, invest in orientation and training, or put up with mediocre performance and results for some period of time. And, adding insult to injury, you may have to pay a severance to get the employee to leave. Finally you may also incur hard executive recruiting costs for the replacement employee and absorb various additional costs to train that person.

CEOs agree that hiring and retaining high-quality executive leadership is crucial to achieving strategic business goals. However, very few CEOs have accurate data to openly discuss the true cost of a bad hiring decision. Yet when it does happen, it’s too personal and too painful to study under a financial microscope. But it’s not a question of guilt or blame. The real question is: How could it have been avoided and how can you reduce making mis-hires in the future?

You’re Thinking These Costs Are Overstated?

With more than 12 years in the executive search industry, I believe these numbers are close to the mark. But go ahead and cut these costs in half. Change 24 times salary to 12 times salary. Or if you’re really a skeptic, go ahead and cut them in half again. Even at a mere 25 percent of the researched amount, you’re still looking at a $684,000 cost for a bad hiring decision involving a $114,000-per-year employee. For a $200,000 executive, you’re looking at a $1,200,000 cost for a bad hiring decision. The numbers are too large to ignore.

Over the years I’ve had the opportunity to work with VC- and PE-backed health care companies to Fortune 25 organizations. I’ve found that many corporations avoid the calculation by simply not agreeing on an appropriate formula, despite the fact imperfect information exists in all decision-making processes. It’s too easily dismissed as just another “cost of doing business.” Across industries it’s reported that internal corporate executives consistently recruit and retain the “right” manager or executive for 12 months or longer less than 55 percent of the time. This seems low.

I’m convinced long-term candidate retention can be improved and that mis-hire costs can be materially reduced.

Three Ways to Improve Your Executive Recruiting Outcomes:

1. Recruiting firms are not always the right solution to hiring key leaders. Retained search firms are excellent resources at the right time. However, internal candidates, board members and industry colleagues can be valuable resources. These individuals may be candidates individually; they may be able to open their rolodex; they may provide comments about desired candidate characteristics; and they may recommend retained executive recruiting firms for you to talk with. If you use a retained executive recruiting firm, do appropriate diligence on more than one search firm.

2. Plan a thoughtful and well-prepared interview process. Each interviewer in your company’s process must have a clear understanding of his or her role in the assessment process. The absence of interview structure will be recognized by the candidate and may lead you directly down the path to a costly mis-hire.

3. Ensuring that the new executive is successful requires communication between the hiring executive, the successful candidate and specific, internal colleagues. Managing the individual’s integration into your company for the first 90 days will provide a foundation for long-term retention. Following the first 90 days, ongoing communication develops relationships, provides clear strategic direction and reinforces cross-functional interaction and discussion.

At an average cost of $2,709,000 per mis-hire, I encourage all business leaders to take a closer look at their executive recruiting processes, determine where and how these processes lead to false economies and then take steps to better manage these processes. A bad hiring decision can be a significant drain on the bottom line.

Paul Frankenberg is CEO, President and Co-Founder of Kraft Search Associates. In both 2006 and 2007, Modern Healthcare magazine ranked Kraft Search Associates one of the nation’s Top 25 Healthcare Retained Executive Search Firms. Frankenberg can be reached directly through www.kraftsearch.com.

November 10, 2008
Consumer Price Index: Unreliable Measure of Inflation

When inflation is considered, those who possess a more sanguine outlook relating to pricing pressures have pointed to the Consumer Price Index (CPI) to bolster their view that inflation is not a problem.

The problem with the CPI is that consumer prices themselves transmit all sorts of information unrelated to currency strength. So while rising prices can be a symptom of inflation, they can also result from all manner of things that have nothing to do with the value of the currency.

If hotel rooms in New York City become very expensive, some would consider this an inflationary event despite simple logic showing otherwise. Put simply, if New York hotel rooms suddenly cost $200 per night more than they once did, the broad impact on the price level would be zero owing to the fact that consumers would have $200 less to spend on previously attainable goods.

Furthermore, to the extent that there is a monetary devaluation, it shouldn’t be assumed that a weaker unit of account will immediately be reflected in all consumer prices. This is because there’s a way to increase the cost of a good without increasing the nominal price of that same good. As a recent USA Today story showed, ice cream makers, suffering under rising dairy costs, have in many cases reduced the size of standard ice-cream containers to 1.5 quarts from 1.75 quarts. Frito Lay and Dial have done much the same with bags of potato chips and bars of soap.

Ultimately it has to be recognized that the only true measure of inflation does not involve prices, but instead is transmitted through the value of the dollar itself.

And when we consider the dollar, the most reliable benchmark is not the greenback’s value versus the euro, yen or pound, but the dollar’s value in terms of gold. When the price of gold moves, this is not a signal that gold’s price has changed, but instead tells us that the dollar’s value is rising or falling.

Gold has risen 255 percent against the dollar since June 2001. Whereas a dollar used to buy 1/253 of an ounce of gold, as of this writing it buys 1/900 of an ounce. For those wondering why all manner of commodities, from gasoline to corn to meat have become so expensive of late, look no further than the dollar’s debasement.

And to the extent that some have great faith in CPI-like measures, they need only look at countries outside the United States to see that our version of CPI is greatly understating true inflation. Despite the fact that the euro and pound have crushed the dollar in recent years, government inflation statistics in both show it at 16- and 18-year highs respectively.

So while inflation problems around the world confirm that our government measures of inflation are faulty, the bigger story is what a rising dollar price of gold means for the average American. When gold rises, paychecks are emasculated; investment in innovative, job-creating enterprises subsides; and money flows to the relative safety of the “real.”

Rather than clinging to the CPI as false evidence of light inflation, and worse, targeting consumer prices, monetary authorities should instead target a stable gold price with an eye on bringing it down substantially.

John Tamny is Editor of RealClearMarkets, a Senior Economist with H.C. Wainwright Economics, and a Senior Economic Advisor to Toreador Research and Trading. He can be reached at jtamny@realclearmarkets.com.

November 10, 2008