Betting on the Future

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					              w i n t e r   2 0 0 8

a l u m n i    m a G a Z i n E

                                      Betting on the Future
                                      What’s Ahead for Hedge Funds?

                                      Also: Mayor Michael Nutter’s
                                      Vision for Philadelphia
           the Kite & Key Bar, which is relaxing and low-key.

I enjoy the convenience of   THE PENN CLUB.
It’s the perfect place to stay when I’m in New York.”
                                    – Jaya Kirtane, W’00, WG’08 – Current Graduate Students



Connect today at
                                        Where real movers and Quakers connect.
                                                                                                                     Winter 2008

            A      l       u   M      N         i   M       A         G         A         Z        i       N     E

                                                    Betting on the Future                                                     10
                                                    From investment choice of the rich and informed to fixture on the
                                                    investing scene: What’s ahead for the fast-growing hedge fund industry?

             10                                     Philadelphia’s New Mayor                                                  18
        Victims of their
         own success?                               Michael Nutter, W’79, is serious about doing the right thing.

                                                    Providing Answers                                                         24
                                                    Wharton’s Joel Waldfogel on why free markets aren’t always best.

                                                    Wharton Now                                                               2
                                                    New Alumni Affairs Director
                                                    Prof. named top sports educator
                                                    The new face of business in India
                                                    Events Calendar

                                                    Next Up at Wharton School Publishing                                     28
                                                    New titles on competing in a flat world and the power of identity.

                                                    Knowledge@Wharton                                                        30

18   Michael Nutter’s Philadelphia
                                                    When it comes to global entrepreneurship, one small initiative can
                                                    make a big difference.

                                                    Alumni Association Update                                                34
                                                    Club news: New York, Minneapolis, Houston, and more.

                                                    Class Notes                                                              40

                                                    Wharton Leaders
                                                    Jeremy Rifkin, W’67                                                      42
                                     Are free
                                                    Sharon Fordham, WG’77                                                    50
                                                    Leadership Spotlight                                                     81
                                                    Judith L. Bollinger, WG’81

                                                    Cov E r i l lu st r at i o n by t h E h E a d s o f stat E
                   Wharton Now                                                                                                              School News

                                                                                                                                Wharton Research Scholar,         “Joyce really represents
    john Carlano

                                                                                                                                said she is excited to study   the best of Penn,” Provost
                                                                                                                                at Oxford University, where    Ron Daniels told the Daily
                                                                                                                                she plans to earn two mas-     Pennsylvanian. “She’s a
                                                                                                                                ter’s degrees in economics.    high achiever, she has a
                                                                                                                                   Meng, who is captain of     wide range of interests and
                                                                                                                                the debate team, plays ice     she cares so much about
                                                                                                                                hockey and is involved in      making the world a bet-
                                                                                                                                several Wharton clubs, is      ter place.” To apply for the
                                                                                                                                the only Penn student to       Rhodes Scholarship, stu-
                                                                                                                                earn a Rhodes Scholarship      dents must be nominated
                                                                                                                                this year. After her fresh-    by their universities. This
                                                                                                                                man and sophomore years,       year, 764 students were en-
                                                                                                                                the Huntsman Program in        dorsed by 294 different
                                                                                                                                International Studies and      colleges and universities.
                                                                                                                                Business student worked at
                                                                                                                                international finance firms    – Reported by The Daily
                                                                                                                                in Taiwan and Hong Kong,         Pennsylvanian
                                                                                                                                respectively. Last summer,
                                                                                                                                after interning for Goldman
                   J I L L I A N M C G oWA N
                                                                                                                                Sachs, Meng worked for         Finance
                                                                                                                                FINCA International, a         Minister Says
                   New Alumni                                relationship between the
                                                             School, our alumni and our
                                                                                                                                microfinance firm.
                                                                                                                                   Along with four others      Now Is the
                   Affairs Director                          student population. I wel-                                         — Wharton seniors Jason
                                                                                                                                                               time to Do
                                                             come input in that process.”
                   Named                                         Before joining Trinity
                                                                                                                                Mischel and Julie Pearne,
                                                                                                                                                               Business in
                   Jillian McGowan is                        College, McGowan held a
                                                             number of marketing po-                                                                           India
                                                                                             photo Cou rtE sy of joyCE m E nG

                   Wharton’s new Director of
                   Alumni Affairs and Annual                 sitions within the Hong
                                                             Kong & Shanghai Banking                                                                           The new face of Indian
                   Giving. McGowan joins the                                                                                                                   business is mature, con-
                   School from Trinity College               Corporation (HSBC) and
                                                             its subsidiaries in the UK.                                                                       fident, strong, hun-
                   Dublin, where she served as                                                                                                                 gry for growth and ready
                   the institution’s first Director          She holds a BA degree in
                                                             European Studies from the                                                                         to be among the best in
                   of Alumni beginning in                                                                                                                      the world, India Finance
                   1999. At Trinity, she success-            University of Limerick and an
                                                             MBA from Trinity College.                                                                         Minister P. Chidambaram
                   fully planned, implemented,                                                                                                                 told a standing-room-only
                   and managed its first alumni                                                                                                                crowd at the first of
                   relations program including                                                                                                                 Wharton’s 2007-2008
                   the university’s first alumni             Wharton                                                                                           Leadership Lectures last fall.
                   annual giving effort.                                                                                                                          Addressing an audience
                       “A priority for me will be            Undergrad                                                          J oyC e M e N G , W ’ 0 8      in Wharton’s Dhirubhai
                   to partner with alumni to
                   develop even stronger links
                                                             Named rhoades                                                                                     Ambani Auditorium,
                                                                                                                                                               Chidambaram highlighted
                   between the School and                    Scholar                                                            Wharton and Engineering
                                                                                                                                sophomore Alexander Yen        a range of topics including
                   our graduates,” McGowan                                                                                                                     India’s surge in economic
                   said. “Alumni can benefit in              Wharton senior Joyce                                               and 2007 Wharton alumna
                                                                                                                                Clara Chao — she found-        power, the importance of a
                   many ways from continued                  Meng was among 32
                                                                                                                                ed Youth Bank, a micro-        global economic commu-
                   interaction with Wharton                  American students to
                                                                                                                                business incubator in Lagos,   nity and the need to main-
                   and indeed with each oth-                 receive the Rhodes
                                                                                                                                Nigeria, that works to pro-    tain a healthy relationship
                   er. I look forward to devel-              Scholarship last fall. Meng,
                                                                                                                                vide financial opportunities   with its world partners.
                   oping a strategy to establish             a Joseph Wharton Benjamin
                                                                                                                                for urban youth.                  “In recent years you’ve
                   a strong, mutually beneficial             Franklin scholar as well as a                                                                     invited the CEOs of the

2    . W i N t E r         2 0 0 8 . W h A r t o N   N o W
                                                                                                       teams from INSEAD                          in a group study room in
jim Graham

                                                                                                       Singapore) played                          Fontainebleau or Singapore
                                                                                                       four markets games —                       strategizing as well, and the
                                                                                                       Product Quality, Quantity                  only way we could get to
                                                                                                       Competition, Advertising,                  know them was through an
                                                                                                       and Spatial Location. Each                 input of some numbers.”
                                                                                                       representing one firm, the                    Now in its second year
                                                                                                       teams tried to maximize                    of play across the schools,
                                                                                                       their firms’ profits.                      the game was rolled out as
                                                                                                           “The thing that I found                a pilot program to a limited
                                                                                                       interesting was the intel-                 number of teams last year.
                                                                                                       lectual exchange that oc-                  The two professors who ini-
                                                                                                       curred over each round,”                   tiated this collaboration
                                                                                                       said Heeyoon Chang,                        — Wharton management
                                                                                                       WG’09. “It was surreal to                  professor Keith Weigelt and
                                                                                                       think that there was an-                   INSEAD economics pro-
                                                                                                       other group of four or five                fessor Tim Van Zandt —
                                                                                      tommy lEonardi
                                                                                                       ‘friends’ who were sitting                 said that the simulation was

             M I N I S t e r P. C h I D A M B A r A M

             best U.S. businesses,                      a recession in the United
             Microsoft and Starbucks,                   States and Europe, the
             Tyco and Intel, to speak at                “sub-prime mortgage prob-
             this series,” Chidambaram                  lem” and what he called
             said. “What do they have                   “bellicose speeches” in the
             in common? Each one is a                   United Nations.
             child of an innovative idea
             and a leader in its busi-
             ness. There are many Indian
             business leaders who would                 Playing
             qualify to speak at this series            Across three
             on the grounds of innova-
             tion, and I am here today to               Continents                                     W h A r t o N P r o F e S S o r K e I t h W e I G e Lt D e B r I e F S W I t h
             speak on their behalf.”                                                                   the “ProoF” LeArNING teAM IN PhIL ADeLPhIA.
                He also emphasized that                 Last fall, Wharton MBA
                                                        students in the microeco-
                                                                                      tommy lEonardi

             Indian business must go
             from local to global, qual-                nomics core course matched
             ifying India’s recent 9.4                  wits with INSEAD MBA
             percent GDP growth by                      students in France and
             saying, “If that growth does               Singapore through a cross-
             not impact the global com-                 continent computer simu-
             munity, it’s not sustainable.”             lation. Playing the MGEC
                Despite his outward                     Markets Games, students
             confidence, Chidambaram                    tested their understanding
             acknowledged that he has                   of how to build cooperation
             worries, particularly about                and trust in business
             events that are outside of                 relationships.
             his control. He listed po-                    A total of 234 teams
             tential problems includ-                   (144 teams from Wharton,
             ing a sharp rise in crude                  60 teams from INSEAD
                                                        Fontainebleau and 30                           I N S e A D P r o F e S S o r N I K o S V e t tA S D I S C U S S e S S I M U -
             oil or commodity prices,                                                                  L At I o N r e S U Lt S W I t h h I S C L A S S I N F o N tA I N e B L e AU .

                                                                                                                       W h A r t o N   N o W . W H A r t O N   A l u M N i   M A G A Z i N E .   3
         very effective this year, with               and the role of corporate

                                                                                        n. KhEtiWE riChards
         66 percent of the students                   governance in oversee-
         choosing the best perform-                   ing and regulating this ac-
         ing strategy.                                tivity, according to Laufer
            “This teaching experi-                    and CPA executive director
         ment is a great example                      Bruce F. Freed.
         of the innovation coming                         “Too little attention has
         out of this partnership,”                    been paid to this subject,”
         said Wharton management                      Freed said. “Growing com-
         professor and Wharton/                       pany involvement in the po-
         INSEAD Alliance                              litical process through direct
         Executive Director John                      and indirect spending signif-
         Kimberly. The Wharton/                       icantly raises the risks faced
         INSEAD Alliance is a                         by companies and share-
         partnership that expands                     holders. It also has an impact
         the knowledge resourc-                       that extends well beyond the
         es and global reach of                       corporation. All of this has
         both schools across their                    important implications for
         four collective campuses                     corporate governance that
         in the U.S. (Philadelphia                    the new CPA-Zicklin effort
         and San Francisco) Europe                    will examine.”
         (Fontainebleau), and                             Several new initiatives are
         Asia (Singapore).                            planned including a confer-
                                                      ence and on corporate gov-
                                                      ernance corporate political
                                                      accountability in February.
         Initiative                                   Upcoming research includes
         tackles                                      a study of how directors car-
                                                      ry out their oversight re-
         Corporate                                    sponsibilities of company
         Political                                    political spending and activ-
                                                      ity, a survey of the codes of
         Influence                                    conduct of S&P 500 com-
                                                      panies and how they regulate
         In the wake of a sea change                  political spending, and an
         about how corporations                       examination of existing re-
         think about ethics, compli-                  gimes for political disclosure
         ance and governance, the                     and accountability of the                               KeNNeth MoeLIS, WG’81
         time has come to wrestle                     U.S. and a range of foreign
         with corporate political influ-              countries and companies.
         ence, says Wharton professor
         William S. Laufer, the direc-
                                                          For more information
                                                      on the initiative or the con-
                                                                                                              Finance                      ing mortgage-related secu-
                                                                                                                                           rities losses happen? Two
         tor of Wharton’s Carol and                   ference, visit the Zicklin                              Conference:                  Wall Street titans — Lloyd
         Lawrence Zicklin Center for                                                                                                       Blankfein, chairman and
         Business Ethics Research.
                                                      Center’s website at <www.
                                            >.                                     Wall Street                  CEO of Goldman Sachs,
            A new collaborative ef-
         fort by the Zicklin Center
                                                                                                              risks,                       and Kenneth Moelis,
                                                                                                                                           WG’81, of Moelis & Co.
         and the Center for Political                                                                         rewards and                  — addressed that ques-
         Accountability (CPA) aims                                                                                                         tion at last fall’s Wharton
         to do just that. The effort                                                                          opportunities                Finance Conference in New
         will focus much greater at-                                                                          If the capital markets are   York City.
         tention on company polit-                                                                            models of efficiency, how        Despite having different
         ical spending and activity                                                                           could the recent stagger-    perspectives — Blankfein

4   . W i N t E r   2 0 0 8 . W h A r t o N   N o W
                                                                                                       Editorial Staff

                                                                                                       interim Editors
                                                                                                       Kelly J. Andrews
                                                                                                       Nancy Moffitt
rose through Goldman’s
fixed income, currency and
                               Major Indian                    among the myriad topics
                                                               discussed during the 34th               Business Manager
commodities divisions,         Bank Partners                   annual Whitney M. Young                 Joanne Spigonardo
while Moelis is a veteran                                      Jr. Memorial Conference
M&A investment bank-           with Wharton                    held last November and
                                                                                                       Editorial Board
                                                                                                       Michael Baltes
er — Moelis and Blankfein      India’s second-largest bank     December in Philadelphia.               Karuna Krishna
agreed that risk manage-       has partnered with Wharton          Student and corporate               Meghan laska
ment is a corporate cul-       Executive Education to          attendees also addressed the            tracy Simon
ture issue. To manage risks    launch a landmark lead-         state of private equity and             Mukul Pandya
effectively over time, em-     ership development pro-         how credit market turmoil               Cynthia russell
ployees must put the firm’s    gram in India. In October,      may affect minorities in pri-           robbie Shell
welfare and the preserva-      Wharton faculty deliv-          vate equity to raise capital,           Peter Winicov
tion of important client       ered the custom program to      building a business from
relationships ahead of ev-                                     the ground up, and what it              Contributing Writers
                               ICICI Group senior execu-                                               Kate FitzGerald
erything else.                 tives at the company’s train-   takes for African American
    In October, said Moelis,                                   candidates to climb to the              Susan Scerbo
                               ing center near Mumbai.
“firms got hit from The        The intensive, eight-day        top of the corporate ladder             Editorial assistants
Blind Side” — a refer-         leadership program worked       in today’s increasingly com-            Erica tobin
ence to a recent bestsell-     with 60 senior executives       petitive business environ-              James Yu
er by Michael Lewis about      there. “Indian companies,       ment, among other subjects.
professional football —                                            The Whitney Young                   design
                               especially more progres-                                                Warkulwiz Design Associates
“and a number of Wall          sive ones such as ICICI,        Conference began as a lec-
Street leaders suffered ca-    have very advanced learn-       ture series in 1973 and                 editorial office
reer-ending injuries.” Said    ing and development inter-      has evolved into an annu-               1030 SH/DH, 3620 locust Walk
Blankfein, “Risk is risk,      nally,” said Sandhya Karpe,     al three-day event consist-             Philadelphia, PA 19104
and you can’t be perfect at    senior director at Wharton      ing of a career fair, panel             215.898.7967 (phone)
managing it.”                  Executive Education. With       discussions, workshops and              215.898.1883 (fax)
    The annual Wharton         a presence in 17 coun-          receptions, all produced      
Finance Conference brings      tries, ICICI Group has been     and administered by the                 <
together industry prac-        named among the top 20          African American MBA                    alum_mag/index.html>
titioners, government fi-      companies in the world for      Association, a Wharton                  advertising inquiries
nance officials, alumni,       leadership development in       student-run organization.               215.573.8599
students and faculty to        a recent ranking by Fortune                                   
discuss issues in finance      magazine. “Indian compa-
and present new ideas
and research. This year’s
                               nies are now looking to take    Prof. Bradlow                           adMiniStration
                               their executive education to
conference featured pan-       the next level,” Karpe said.    Becomes editor                          thomas S. robertson
                                                                                                       Dean and Reliance Professor of Management
el discussions on top-
ics including mergers and                                      of Marketing                            and Private Enterprise;Professor of Marketing
                                                                                                       and Management, The Wharton School
acquisitions, the chang-
ing face of private equity     Whitney young                   Science                                 adviSory Board
and investment banking,
and whether emerging           Conference                      Marketing profes-
                                                               sor Eric Bradlow, the
                                                                                                       Joan Walsh Cassedy, WG’82
                                                                                                       Executive Director, American Council of
markets are indeed still
emerging. For complete
                               tackles                         K.P. Chao Professor and                 Independent Laboratories

                                                               Academic Director of the
coverage of the Wharton        Global health                   Wharton Small Business
                                                                                                       Jay A. Dubow, W’81
                                                                                                       Partner, Pepper Hamilton
Finance Conference, vis-
it Knowledge@Wharton           Partnerships                    Development Center, be-
                                                               came the editor of the
                                                                                                       Ellen Yin, W’87, WG’93
                                                                                                       Proprietor, Fork Restaurant
at <knowledge.wharton.         Global health partnerships      leading marketing jour-                 For Change of Address: the Wharton School>.                    between pharmaceutical          nal Marketing Science this              Office of Development and Alumni Affairs,
                               companies and NGOs and          January. Bradlow, who                   Alumni Address update, 344 Vance Hall,
                               the realities of selling med-   has been widely pub-                    3733 Spruce Street, Philadelphia, PA 19104-6360
                                                                                                       • telephone: 215.898.8478 • Fax: 215.898.2695 •
                               icines across borders were      lished in leading market-               Web: <>

                                                                           W h A r t o N   N o W . W H A r t O N    A l u M N i      M A G A Z i N E .   5
                                                               each day with her kids and
                                                                                               Alumni Gift for                  Business Journalists came

                                                john Carlano
                                                               her husband Mark, W’80/                                          together to discuss these
                                                               C’80, and has never missed      entrepreneur                     and other issues, including
                                                               a play, concert or parent/                                       the impact of blogs and cit-
                                                               teacher conference.             in residence                     izen journalism, how glob-
                                                                  Lerner shared her wis-
                                                               dom on balancing a hectic
                                                                                               Program                          al expansion has affected
                                                                                                                                the standards of news or-
                                                               career and family life at the   In recognition of a gen-         ganizations and whether
                                                               29th Wharton Women in           erous gift from Robert           a place remains for labor-
                                                               Business Conference, held       Haft, W’74, Wharton              intensive investigative re-
                                                               last fall in Philadelphia. A    Entrepreneurial Programs         porting in today’s age of
                                                               keynote speaker at the con-     has re-named its popular         shrinking budgets. Media
                                                               ference with Travelocity        Entrepreneur in Residence        outlets in attendance in-
                                                               president and CEO               program the “Robert Haft         cluded CNN, Marketplace,
                                                               Michelle Peluso, W’93,          Entrepreneur in Residence        Les Echos, CNBC, Financial
          ProFeSSor                                            Lerner urged conference at-     Fall Series.” At the same        Times, Nikkei, New York
          e r I C B r A D LoW                                  tendees to pursue their pas-    time, the Robert Haft            Times, Nightly Business
                                                               sions and prioritize what’s     Entrepreneur in Residence        Report, Reuters and the
         ing journals and is a fellow                          most important to them.         Fall Series has announced        Associated Press. The sem-
         of the American Statistical                           She also offered some of the    another semester of one-         inars were sponsored by
         Association, is also a sta-                           helpful details that have al-   on-one sessions with the         more than 20 companies
         tistical fellow of Bell Labs                          lowed her to be present at      founders of successful           and organizations such as
         and was named DuPont                                  home and at work, such as       growth firms. This year          Alcoa, Cephalon, Freddie
         Corporation’s best young                              packing her children’s lunch    the program includes en-         Mac, Johnson & Johnson,
         researcher while work-                                boxes in the morning while      trepreneurs such as David        Merck, NASDAQ, the
         ing there in 1992. An ap-                             talking to her traders to       Brailer, PhD’92, of Health       National Press Foundation,
         plied statistician, Bradlow                           agree on the day’s strategy.    Evolution Partners, Joel         Novo Nordisk, Southwest
         uses high-powered statistical                            WWIB conference pan-         Cantor, WG’89, of Cantor         Airlines, Tyco International
         models to solve problems                              els and workshops also ad-      Development and Jeff             and Verizon.
         on everything from Internet                           dressed entrepreneurship,       Fluhr, W’95, of StubHub.
         search engines to product                             globalization, non-profit       Entrepreneurs in Residence
         assortment issues.                                    and socially responsible ca-    meet with students for 30-
                                                               reer alternatives, techno-      minute sessions at which         Prof. Mitchell
                                                               logical advancements and        time a student can discuss       Wins two
         Wharton                                               women and Wall Street, as       ideas, opinions, and strate-
                                                               well as negotiating to win      gies for potential or actual
         Women in                                              and managing personal fi-       business ventures.
                                                                                                                                Olivia S. Mitchell, the
         Business                                              nances. Conference organiz-
                                                               ers also awarded the WWIB                                        International Foundation
                                                                                                                                of Employee Benefits Plans
         Conference                                            Kathleen McDonald
                                                                                               the State                        Professor, is the 2007 re-
                                                               Distinguished Alumna
                                                                                                                                cipient of the Carolyn
         Tracy Shanbrun Lerner,
         W’81, has worked until the
                                                               Award to Eileen Naughton,
                                                               WG’87, Google’s director of
                                                                                               of Business                      Shaw Bell Award. The
         day she delivered each of                             media platforms. Naughton       Journalism                       award is given each year by
                                                                                                                                the American Economics
         her four children and im-                             develops and executes cross-
         mediately after their births.                         platform solutions for          Consolidation, cutbacks          Association’s Committee
         So it’s not surprising that                           sales, marketing and opera-     and competition from the         on the Status of Women in
         the founding partner of                               tions across Google’s non-      web — these are the reali-       the Economics Profession
         Chesapeake Partners L.P.,                             search businesses, including    ties facing journalists from     (CSWEP) to an individual
         a Baltimore-based hedge                               Google’s content network        all over the world. Thirty-      who has “furthered the sta-
         fund, has delegated the food                          and YouTube, and its new-       nine business journalists        tus of women in the eco-
         shopping. But Lerner also                             er efforts in audio, mobile,    attending last fall’s 39th an-   nomics profession, through
         eats breakfast and dinner                             print and TV.                   nual Wharton Seminars for        example, achievements,
                                                                                                                                Continued on page 8...

   . W i N t E r   2 0 0 8 . W h A r t o N   N o W
events Calendar
JANUAry 2008                                                   February 29
January 14-18                                                  MBA Student Conference: Media and Entertainment Conference
Executive Education: Women in leadership –                     location: New York City, leonard N. Stern Business School,
legacies, Opportunities and Challenges                         New York university
location: Philadelphia                                         <>
                                                               MArCh 2008
January 1                                                     March 10-13
Wharton leadership lecture: Doug lattner,                      Executive Education: Strategic Persuasion Workshop –
Chairman and CEO, Deloitte Consulting                          the Art and Science of Selling ideas
location: Jon M. Huntsman Hall, Philadelphia                   location: Philadelphia
<>                      <>
January 18                                                     March 12-14
Wharton Private Equity and Venture Capital Conference          Global Alumni Forum: New Directions for latin America
location: Philadelphia                                         location: lima, Peru
<>                                <>
January 24                                                     March 14-15
Wharton leadership lecture: richard Zannino, CEO,              Executive Education: Governing the Corporation –
Dow Jones & Company                                            Global Perspectives in the indian Context
location: Jon M. Huntsman Hall, Philadelphia                   location: Mumbai, india
<>                      <>
January 28, 2008                                               March 2
Wharton Seminars for Business Journalists                      Breakfast Series Speaker: J. Alexander M. Douglas, Jr.,
Wharton West, San Fransciso                                    President and COO, North America Group,
<>                the Coca-Cola Company
                                                               location: Atlanta, Buckhead Club
FeBrUAry 2008                                                  <
February 4-8                                                   jsp?chapter=8>
Executive Education: Creating Value through
Financial Management                                           APrIL 2008
location: Philadelphia
<>                        April 24
                                                               Breakfast Series Speaker: Entrepreneurship Panel
                                                               location: Atlanta, Buckhead Club
February 21                                                    <
Wharton leadership lecture: Gary Hirshberg, Chairman,          jsp?chapter=8>
President & CE-Yo, Stonyfield Farm
location: Jon M. Huntsman Hall, Philadelphia
<                       MAy 2008
                                                               May 1-18
February 21-22                                                 Wharton reunion Weekend
MBA Student Conference: Wharton Healthcare                     location: Philadelphia
Business Conference                                            <>
location: Philadelphia, Park Hyatt at the Bellevue
<>                                     May 30-31
                                                               Global Alumni Forum: Vietnam – Star on the rise
February 25                                                    location: Ho Chi Minh City, Vietnam
Green Business Summit: Managing risks, Seizing Opportunities   <>
Wharton DC Club’s 6th Annual Conference
location: Washington, DC, World Bank                           JUNe 2008
                                                               June 2-2
                                                               Global Alumni Forum: the importance of leadership
                                                               location: Cape town, South Africa

For updated information visit <>

                                                                           W h A r t o N   N o W . W H A r t O N   A l u M N i   M A G A Z i N E .   
         Continued from page 6...

                                                                Pyramid Prize is given year-

                                                 john Carlano
                                                                ly to the author of pub-
                                                                lished research the Institute
                                                                believes best helps improve
                                                                the lifelong financial well-
                                                                being of Americans.

                                                                hosts over 120
                                                                Participants                    ProFeSSor KeNNeth ShroPShIre
                                                                More than 120 Wharton
                                                                Research Data Services          Prof.                                           books such as The Business
                                                                                                                                                of Sports, The Business of
                                                                (WRDS) users visited
                                                                Wharton’s Philadelphia          Shropshire                                      Sports Agents, The Sports
                                                                                                                                                Franchise Game, In Black
                                                                campus in early October for
                                                                the Second Annual WRDS
                                                                                                Named                                           and White, Sports and the
         ProFeSSor oLIVIA
                                                                Users Conference. The           top Sports                                      Law, Basketball Jones, and
                                                                                                                                                most recently, Being Sugar
                                                                Wharton-developed WRDS
         increasing our understand-                             program provides research-      educator                                        Ray: The Life of Sugar Ray
         ing of how women can                                   ers worldwide with in-                                                          Robinson, America’s Greatest
                                                                                                The Institute for Inter-                        Boxer and Celebrity Athlete.
         advance in the economics                               stant access to 12 terabytes    national Sport recently
         profession and the mentor-                             of financial, economic and                                                      The Wharton Sports
                                                                                                named Professor Kenneth                         Business Initiative recently
         ing of others.” In addition                            marketing data through a        Shropshire, director of the
         to her participation in com-                           uniform, web-based inter-                                                       hosted 36 NFL athletes, in-
                                                                                                Wharton Sports Business                         cluding Drew Brees, Ahman
         mittees and task forces re-                            face. The WRDS commu-           Initiative, one of the “100
         lated to women in business,                            nity today includes more                                                        Green, Takeo Spikes and
                                                                                                Most Influential Sports                         Troy Vincent, in a business
         Mitchell’s influence as a                              than 200 organizations          Educators in America.”
         mentor “has extended itself                            such as the business schools                                                    program to assist athletes in
                                                                                                Shropshire is the author                        transitioning into the busi-
         beyond her own students;                               of Stanford and Harvard,        of several award-winning
         she has given many her at-                             the Federal Reserve Bank                                                        ness world. ◆
         tention willingly and with                             of New York, and the
         enthusiasm,” CSWEP offi-                               Securities and Exchange
         cials wrote in announcing                              Commission.                     Association Marketing
                                                                                                                               tommy lEonardi

         the award.                                                                             Research Conference. The
            Mitchell also won the
         2007 Pyramid Prize, with
                                                                Profs. Bradlow                  award recognizes exempla-
                                                                                                ry performance and lead-
         colleague Annamaria                                    and Fader                       ership in online research,
         Lusardi of Dartmouth                                                                   and it highlights innovative
         College. The $50,000                                   Win Marketing                   applications in online re-
         award was given for
         Mitchell and Lusardi’s ar-
                                                                Awards                          search and the most inno-
                                                                                                vative uses of technology in
         ticle “Baby Boomer retire-                             Professors Eric Bradlow         applications that advance
         ment security: The roles of                            and Peter Fader, with PhD       research, online or other-                      P ro F e S S o r P e t e r FA D e r
         planning, financial literacy,                          student Sam Hui and Herb        wise. At the same confer-
         and housing wealth,” which                             Sorensen of TNS-Sorensen,       ence, Peter Fader also won                      zine that was chosen as best
         was published in the Journal                           won the EXPLOR Award            the David K. Hardin Award                       of the year by the maga-
         of Monetary Economics. The                             in September at the             for an article published in                     zine’s editor and a commit-
         Fidelity Research Institute                            American Marketing              Marketing Research maga-                        tee selected by the editor. ◆

8   . W i N t E r   2 0 0 8 . W h A r t o N   N o W
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                                                                                     S t o r y   t I t L e . W H A r t O N   A l u M N i   M A G A Z i N E .   9
                   What’s Ahead for the

               Hedge Fund Industry?

B Y RICHARD BEALES        :: Not long ago, the idea that hedge funds were “generally run for rich
people in Geneva, Switzerland, by rich people in Greenwich, Connecticut” captured the indus-
try neatly. The funds attracted little attention, and the relatively few managers operated under
the radar. Investors were wealthy individuals and families, themselves eager for privacy.
Just over three years ago Clifford Asness, W’88, co-founder of           Last summer’s turmoil in financial markets may yet prove
giant hedge fund AQR Capital Management, LLC and the man             to have been something of a watershed. While few are blam-
who coined the Geneva-Greenwich quip, was still wondering            ing hedge funds directly for causing the volatility, their activ-
whether hedge funds could, in part at least, be a fad. “They are     ities contributed to it at times, experts agree. In any event, the
generally perceived to be the investment of choice of the rich and   shock rattled regulators, investors and the funds themselves,
the informed, and they are more interesting and fun to discuss       perhaps catalyzing shifts in the industry.
than your Vanguard index fund,” he wrote in the first of a pair of
2004 papers discussing the role of hedge funds in investing.
    Now, though, few would say hedge funds are anything but          Hedge Funds 101
a fixture on the investing scene. The industry has doubled           What exactly is a hedge fund? Jack Gaine, president
in size in the few short years since Asness wrote his papers.        of the Managed Funds Association (MFA), a lobbying group
By last fall, the private investment vehicles managed more           for hedge funds, puts it this way: “A pragmatic definition would
than $1.8 trillion of investors’ money globally, up from less        be a private investment pool with a limited number of high net
than $40 billion in 1990, according to Chicago-based Hedge           worth individual and institutional investors on the one hand
Fund Research, Inc. Meanwhile, the number of funds has ris-          and, on the other, a manager with the utmost flexibility.”
en from about 500 in 1990 to 7,500. Asness’s Greenwich-                 Gaine’s definition doesn’t do much to narrow down what
based fund group is one of the biggest, managing some $35            exactly a hedge fund actually does, and that reality is a key
billion as of early 2007.                                            feature of the industry. So is a measure of secrecy, although
    And hedge funds and their “alternative investment”               some fund managers are realizing that their increasing influ-
cousins, private equity funds, are increasingly common-              ence demands more openness. Ironically, U.S. regulations
place investment choices, not only for wealthy individuals           sometimes discourage this, because investment funds targeted
and families but also for university endowments and pen-             only at the wealthy aren’t allowed to advertise more broadly,
sion plans, thus following in the footsteps of early investors,      and fund managers risk being accused of doing so if they say
some of whom have achieved spectacular returns on alterna-           too much publicly.
tive investments. Aside from returns, many hedge fund in-               Subject to the constraints agreed to with investors, hedge
vestments aren’t too closely related to the ups and downs of         funds can operate in almost any market — equities, corporate
traditional markets, something especially attractive to inves-       credit, oil, gold, timber or insurance. As well as borrowing
tors still smarting from losses on stocks in 2000-2002.              money, they can invest “long,” like a traditional mutual fund
    “There’s been tremendous growth,” says Richard Marston,          manager, or “short,” profiting if the value of the underlying
Wharton’s James R.F. Guy Professor of Finance. “I don’t see it       asset falls. With rapid trading, they often punch above their
slowing down.”                                                       weight in terms of market influence.
    This headlong growth may prove to be an Achilles’ heel for          Then there are the famous fees hedge funds charge.
some hedge funds. Outsized returns could be harder to come           “They are generally characterized by a fixed fee on the as-
by in the future, with ever increasing amounts of hedge fund         sets under management and an incentive fee,” Gaine says.
money crowding into similar trades. And even as fund groups          The archetypal hedge fund’s annual fee structure is 2% of
get bigger and become more institution-like, some may find it        investors’ assets plus 20% of any gains the fund managers
tough to stay nimble.                                                generate, a regime known as 2-and-20. Funds don’t usually
    At the same time, lawmakers and the media are increas-           give fees back to investors when they lose money, although
ingly taking notice. The chance that big market-wide dangers         most have a “high water mark” arrangement by which they
— known as “systemic” risks — could originate with hedge             have to recoup any losses before they can collect perfor-
funds is one reason regulators around the world are scrutiniz-       mance fees again.
ing the industry. More prosaically, while hedge funds’ high             With so much variety in what funds do, this type of fee
fees — and stories of their billionaire founders — attract tal-      structure may, in fact, be what sets hedge funds apart. “It’s
ent to the industry, they also catch the attention of politicians    probably the most accurate definition you can come up
and the press. Hedge fund managers aren’t used to dealing            with,” says Marston. “It comes down to being able to charge
with the glare of publicity, in fact quite the reverse.              an asymmetric fee.”

                                                                     B e t t I N G   o N   t h e   F U t U r e . W H A r t O N   A l u M N i   M A G A Z i N E .   11
                                                      rEduX piCturEs
             Asymmetric and high,                                                                                             are trying to replicate what
          hedge fund critics say                                                                                              some call “hedge fund beta”
          — among them Warren                                                                                                 at lower cost using carefully
          Buffett, the legendary in-                                                                                          designed portfolios of read-
          vestor and chairman of                                                                                              ily available financial in-
          Berkshire Hathaway, who                                                                                             struments — potentially
          thinks hedge funds and pri-                                                                                         the exchange-traded funds
          vate equity firms take a slice                                                                                      of the hedge fund world.
          of returns so large that it                                                                                         So-called 130/30 funds are
          will hurt investors, at least                                                                                       also a step from a long-only
          in the long run.                                                                                                    approach towards a hedge
             That leads to one peren-                                                                                         fund model, with managers
          nial question over the future                                                                                       allowed to sell some stocks
          of hedge funds: whether the                                                                                         short within a primarily
          2-and-20 fee structure can                                                                                          long portfolio.)
          survive. In some ways, that’s                                                                                           Industry insiders agree
          a question in its own right.                                                                                        that hedge funds are the
          But industry insiders see it                                                                                        victims of their own suc-
          as related to whether hedge                                                                                         cess, with good opportuni-
          funds can deliver good re-                                                                                          ties likely to be spotted by
          turns, after fees. For funds                                                      CliFFOrD ASNESS, W ’88
                                                                                                                              more funds and exhausted
          that perform well for inves-                                                                                        more quickly. “It’s harder;
          tors, “if anything fees are                                                                                         it’s more competitive,” says
          going up, not down,” says                                                                                           Karen Finerman, W’87,
          the manager of a prominent                                   “They [hedge funds] are generally per-                 president of Metropolitan
          multibillion-dollar fund.                                                                                           Capital Advisors in New
             Some funds charge well                                    ceived to be the investment of choice                  York City.
          above the average. Take,                                                                                                Michael Steinhardt,
          for example, SAC Capital                                     of the rich and the informed, and they                 W’60, managing member
          Advisors, the Greenwich                                                                                             of Steinhardt Management
          hedge fund firm founded by
                                                                       are more interesting and fun to dis-                   LLC and a hedge fund
          Steven Cohen, W’77. The
          firm manages about $15 bil-
                                                                       cuss than your Vanguard index fund,”                   manager from the early days
                                                                                                                              of such enterprises in 1967
          lion, and charges fees closer
          to 3-and-40 than 2-and-20.
                                                                       says Cliff Asness, W’88.                               until 1995, agrees that this
                                                                                                                              is probably the case. But he
          But few investors are com-                                                                                          also doesn’t think today’s
          plaining — the fund has reported returns, net of fees, averag-                   investors push their fund managers hard enough.
          ing more than 30% annually since it started in 1992. In fact, the                   “[Some funds] could not exist without the softness, the
          fund rarely accepts new money, so investors are waiting to get in.               weak nature, of so many of their institutional clients,” he
             A key question, however, is whether past returns can be                       says. “I say that because they are sheep-like in their choices.
          sustained. The average hedge fund’s performance, as mea-                         They are not demanding enough in terms of return expecta-
          sured by HFR’s fund-weighted composite index, seems to                           tions, particularly [with] hedge funds and private equity.”
          have declined while becoming more consistent. In the last                           His comment goes partly to what investors, and fund
          five years, returns have been 20%, 9%, 9%, 13% and 9%                            managers, have come to see as normal. “In those days,
          (the last through September last year). Through the 1990s,                       when the egregious 1-and-20 I was making was truly a rar-
          annual returns above 20% and even better than 30% were                           ity, I felt this extraordinary compulsion to be the best per-
          more common, interspersed with the occasional low single-                        forming person in the world,” he says. But he feels it’s a
          digit return.                                                                    different business now. “I think it’s now a superior meth-
             The question is whether what hedge fund managers call                         od of compensation for anyone who can do it — without
          “alpha” — returns over and above those on the broad market                       much pretense even of achieving rates of return that re-
          in which they operate, presumably due to skill exploiting in-                    motely, in my mind, justify the kind of compensation that
          efficiencies in that market — is becoming harder to come by                      hedge funds charge.”
          with so many funds chasing similar strategies. Asness of AQR                        If returns do come under pressure across the board, inves-
          and others have observed that some hedge funds may even be                       tors may eventually force fees down. But average hedge fund
          achieving only market returns, or “beta,” albeit in non-tradi-                   fees have been remarkably stable for years. Some observers
          tional investment areas.                                                         suggest this is partly because better performing funds keep
             (There is a nascent but as yet unproven spin-off indus-                       charging their 2-and-20 or more, while those that don’t deliv-
          try in which academics, Wall Street banks and fund groups                        er good enough net returns quietly close up shop.

12   . W i N t E r   2 0 0 8 . B e t t I N G   o N   t h e              F U t U r e
Investor be Wary                                                     ficer David Swensen, who has pioneered alternative invest-
                                                                     ments with great success — has the scale and experience to
With so many funds to choose from, picking the                       have a reasonable chance of picking winners. Yet according to
winners is becoming all the more challenging. Aside from             its 2006 update, the Yale endowment expects just a 6% an-
achieving good enough returns, avoiding fund blow-ups —              nual return after inflation on hedge fund investments, or less
the inevitable occasional consequence of risk-taking by hedge        than 10% in absolute terms.
funds — is a key objective of many investors, especially as              “That ought to be an eye-opener for investors,” says
more endowments and pension funds with responsibilities to           Marston. “They’re going to earn something between fixed in-
their beneficiaries move into hedge fund investing.                  come and domestic equity … [with returns] not correlated
   In the mutual fund world, a single percentage point diver-        with domestic long-only equity.” In other words, that non-
gence from a benchmark annual return — say the S&P 500               correlation, which applies most of the time, should be as
stock index — is considered relatively large. In hedge funds, and    much of an attraction as the size of the expected returns.
even among funds that claim to pursue a similar strategy, the re-
turn difference between a fund that does well and one that does
poorly can be 10 or 15 percentage points or even more.               Scale versus Agility
   That’s why investors queue up to get into funds with              among the most poWerful trends in the industry
track records like Steven Cohen’s at SAC. But it’s also why        is a developing bifurcation, with the largest funds accumulat-
Marston says hedge fund investments are not for everybody.         ing assets and the smaller ones becoming niche players. As the
“Somebody with one or two million dollars ought to think           industry matures and the nature of its investors changes, some
twice before they get into this business,” he says.                                      hedge funds are becoming at least as in-
                                                                                         terested in size as in returns. Finerman at

                                                                                            shiho fuKada
                                                                                         Metropolitan Capital says that, for some,
                                      KArEN l. FiNErMAN, W ’87, ruNS HEr OWN
                                           HEDGE FuND, MEtrOPOlitAN CAPitAl.             “the business model has changed from the
                                                                                         goal being superior returns to the goal be-
                                                                                         ing an asset-gathering machine.”
                                                                                            If anything, hedge fund data groups
                                                                                         say, this has accelerated since last summer’s
                                                                                         market turbulence, with bigger funds seen
                                                                                         by some investors as better positioned to
                                                                                         weather such periods.
                                                                                            The trend partly reflects the increas-
                                                                                         ing significance of relatively risk-averse en-
                                                                                         dowment and pension fund investors in
                                                                                         hedge funds. With their own fiduciary re-
                                                                                         sponsibilities to worry about, they often
                                                                                         demand scale, stability, comprehensive
                                                                                         computer systems, increased transparency
                                                                                         and other features that can be difficult for
                                                                                         smaller funds to manage, or even afford.
                                                                                            It also owes something to the natural ac-
                                                                                         cumulation of assets by bigger funds, both
                                                                                         through returns on investment and new
                                                                                         money coming in. After all, they are large
                                                                                         partly because of strong historical returns.
                                                                                            With many funds now managing bil-
   Gaine at the MFA also emphasizes that investors should be       lions after only a decade or so in business, there’s also the
wary. His organization doesn’t view hedge funds as a retail prod-  question of turning what in some cases began as a business
uct. He cautions that smaller institutional investors, too, need   based on one person’s reputation into an enduring institu-
to do plenty of research to assess hedge funds before they invest. tion — a process that also calls for giving the original princi-
   One way to do so is by entrusting money to funds of             pals a chance to partially cash out. Hence the public sale of
funds, through which HFR reckons more than 40% of hedge            shares in some hedge fund and private equity firms, includ-
fund investments have been made. In exchange for more fees         ing Fortress Investment Group LLC and Blackstone Group.
— themselves sometimes a target of criticism — these groups        At the time of writing, Och-Ziff Capital Management Group
screen individual funds and help investors select and gain ac-     LLC, a big hedge fund manager, was readying an initial pub-
cess to a portfolio of funds that suits them.                      lic offering. Reports have also surfaced in recent months sug-
   Even after careful selection, investors shouldn’t expect too    gesting that funds such as AQR and SAC have considered
much, Marston says. He notes that with about $20 billion in        IPOs or sales of stakes to other, larger financial institutions.
assets, Yale’s endowment — headed by chief investment of-          Neither fund would comment for this article.

                                                                     B e t t I N G   o N   t h e           F U t U r e . W H A r t O N   A l u M N i   M A G A Z i N E .   13
               T OP H E D G E FU N D S T R AT E G I E S
               Hedge funds can have a single broad strategy or operate several different strategies under one roof, as so-called multi-strat-
               egy funds do. Most can use borrowed money to leverage up their investments. “Quant” funds, which use quantitative
               computer models to select investments and often trade at very high frequency, employ versions of the same strategies —
               picking stocks for equity-market-neutral portfolios, for example, or identifying relative value opportunities.

                 ST R AT E GY                           S U M M A RY                                          AS S ETS            S HAR E O F ALL
                                                                                                              ($bn)*              F U N D AS S ETS

                 Equity hedge or equity                 Holds long equities hedged with various kinds of      501                 28%
                 long/short                             short positions

                 Relative value arbitrage               Uses various techniques to identify relative          258                 14%
                                                        pricing discrepancies between equities, debt,
                                                        options and futures

                 Event-driven                           Aims to profit from corporate events such as          239                 13%
                                                        mergers and acquisitions, spin-offs, bankruptcy
                                                        and so on

                 Macro                                  Invests across markets and in a range of securi-      195                 11%
                                                        ties based on “top-down” analysis of economic
                                                        and other trends

                 Distressed securities                  Takes long or short positions in corporate            97                  5%
                                                        stocks, bonds and other instruments around
                                                        distressed situations such as bankruptcy

                 Sector-specific                        Focuses on investments in securities of companies     95                  5%
                                                        in specific sectors such as energy and finance

                 Emerging markets                       Specializes in corporate debt and equity and gov-     81                  5%
                                                        ernment debt in emerging economies globally

                 Others                                 Includes other equity strategies, fixed income,       344                 19%
                                                        convertible and merger arbitrage, etc.

                 Total hedge funds                                                                            1,810               100%

                                                                                                     * At September 2007. Source: Hedge Fund Research, Inc.

               – Richard Beales

             This “institutionalization” can suit both the founders of                       Growing and more accessible global markets have made
          funds and many of today’s investors. IPOs tend to open a                        big bets easier to make, and large funds can and do make
          window into the often-secretive world of hedge fund invest-                     good returns. But Finerman, who manages about $500 mil-
          ing, another source of comfort to some investors and even                       lion of investor money, still believes smaller funds have
          to regulators. Another outward sign of this shift is the long-                  some advantages. “For us, the advantage of our size is our
          term debt some funds, including Chicago-based Citadel                           nimbleness and the ability to be in so many names that for
          Investment Group, have put in place to reduce their depen-                      us have adequate liquidity — we can be in and out without
          dence on collateral-based loans from Wall Street.                               really moving the price,” she says. Larger funds need to put
             But where does this trend leave the smaller funds?                           more money into trades and that may close some options to
          Steinhardt says that when he ran his hedge fund, “there was                     them, she adds.
          a clear diseconomy of scale.” He says fund managers in the                         Finerman says providing an adequate operational infra-
          1970s or 1980s would not have wanted to manage more than                        structure for her fund is not a problem, but concedes that in
          $100 million or $250 million, because the scale would make it                   the hunt for talented people it can be hard to win against big
          harder to find opportunities with big enough return prospects.                  fund groups with deep pockets.

14   . W i N t E r   2 0 0 8 . B e t t I N G   o N   t h e   F U t U r e
   Gaine adds a personal concern about this trend. If you’re     do, especially over matters such as the valuation of illiquid se-
“the little guy in the garage with the dog and the neighbor”     curities — one of the issues at the root of last summer’s cred-
and a great investing idea, how do you get started when many     it crunch.
investors want scale, carefully monitored processes and hefty        Various industry groups have proposed ways to improve
disclosure from day one?                                         and standardize practices. But many managers agree with
                                                                 Herring’s view that it’s not clear what kind of prescriptive ap-
                                                                 proach would actually be helpful to investors. For example,
Tougher Talk about Regulation?                                   he says, “The intensity with which they trade means a bal-
regulators are increasingly keen on similar-                     ance sheet disclosure is temporarily meaningful at best.” He
ly institution-like behavior. The MFA and other hedge fund       adds that some hedge fund strategies are proprietary and
alliances recognize the need for consistent standards and        won’t work if they become publicly known.
practices. Generally, funds see this as helpful provided it is       It’s unclear whether regulators will push this agenda, espe-
voluntary — although many funds are, in fact, regulated by       cially since funds, egged on by investors, are already largely
the SEC in the U.S. or the Financial Services Authority in       disclosing more and following better-defined processes than
the UK, sometimes to a greater extent than is realized, in       they used to.
some cases under laws that are decades old. Even back in the         And regulators are likely most interested in potential sys-
early 1990s, former fund manager Steinhardt and others had       temic risks. The New York Federal Reserve, for instance, en-
a brush with U.S. regulators over Treasury bond trading.         gineered a bailout of the Long-Term Capital Management
    Regulators tend to champion high levels of disclosure to     (LTCM) fund in 1998 because its losses threatened banks
protect investors, although this applies primarily in the re-    and other lenders, an event regulators are keen to avoid
tail arena, where most hedge funds don’t operate. “In gener-     looking ahead.
al, as long as you can be sure it’s only big guys playing with       Herring says that, on the one hand, hedge funds can have
big guys, there’s not an awful lot of reason to have the range   the flexibility and often the courage to take the other side of
of regulation we often see,”                                                                         markets when traditional in-
says Richard Herring, the                                                                            vestors are selling. “That’s
                                                                                                     a very good thing” for the
                               marina GarniEr

Jacob Safra Professor of
International Banking at                                                                             health of the system, he
Wharton. “It starts to get                                                                           says. The danger is anoth-
tricky when retail investors                                                                         er LTCM — in the form of
are involved.”                                                                                       trouble at a big fund or a
    That’s not yet happen-                                                                           group of funds all with simi-
ing in the U.S. Indeed                                                                               lar market bets.
the MFA wants to raise                                                                                  This could have hap-
the minimum net worth                                                                                pened last summer when
threshold for investment in                                                                          credit briefly all but dried
hedge funds — but this is                                                                            up — something that could
more of an issue in parts of                                                                         have triggered major prob-
Europe. Finerman thinks                                                                              lems for hedge funds, be-
retail investors will eventu-                                                                        cause many of them rely
ally want to invest in U.S.                                                                          heavily on borrowed mon-
hedge funds, too.                                                                                    ey. But as it turned out, the
    Meanwhile, Herring says                                                                          bigger losses appear to have
hedge funds need to be alert                                                                         been taken by banks and
to what he calls “back door                                                                          Wall Street brokers.
retailization.”                                                                                         For now, that tends to
    “What do you do when                                                                             vindicate the U.S. regulators’
a group of state policemen                                                                           strategy to date, which is to
invest the life savings of the                                                                       scrutinize regulated banks
troop and the thing crash-                                                                           and brokers that lend to
es?” He says managers need                                                                           hedge funds, indirectly con-
to think carefully about en-                                                                         trolling the funds’ borrowing
suring that investors are                                                                            and risk-taking capacity.
suitable for their funds, or                                                                            Nonetheless, “If we have
they may find regulation                                                                             another blow-up that has
“will be thrust upon them.”                                                                          the systemic implications of
                                      StEVEN COHEN, W ’77, FOuNDED SAC CAPitAl ADViSOrS,             LTCM, I think there’s going
    Regulators also want              A GrEENWiCH, CONN. HEDGE FuND tHAt MANAGES
hedge funds to be more                                                                               to be tougher talk about reg-
                                      ABOut $15 BilliON.
transparent about what they                                                                          ulation,” Herring says.

                                                                   B e t t I N G   o N   t h e   F U t U r e . W H A r t O N   A l u M N i   M A G A Z i N E .   15
          “Some funds could not exist without the softness, the weak nature, of so many
          of their institutional clients,” says Michael Steinhardt, W’60. “I say that because
          they are sheep-like in their choices. They are not demanding enough in terms of
          return expectations, particularly [with] hedge funds and private equity.”

          An Alluring Career Option                                                               For some, the thrill of making money for investors and
                                                                                               themselves and the belief that they fuel the capitalist engines
          for those Within it, the hedge fund industry can be a                                of growth and prosperity are satisfying enough. Steinhardt
          pot of gold. In 2006, three top fund managers each took home                         says he persuaded himself he was doing something of eco-
          more than $1 billion, according to Alpha magazine. The top                           nomic importance. Now, with the benefit of hindsight, he
          25 earners garnered more than $14 billion among them.                                isn’t so sure. “I would grudgingly think hedge funds are not
             Indeed, for those who enjoy money and investing, work-                            in any way ennobled in their effort to get rich.”
          ing for a fund is an alluring option. Finerman, for in-                                 Even so, there’s no denying that his hedge fund days have
          stance, always knew she wanted a career in investing; thus,                          made him wealthy enough to devote plenty of money and
          Wharton was the only school she applied to. “For someone                             much of his time to philanthropy from his office overlooking
          with laser-like focus on being in capital markets there was                          New York’s Central Park.
          no other alternative.”                                                                  Of course, there’s a danger that the recent accumulations
             Finerman is one of just a few women heading hedge funds.                          of wealth in hedge funds and private equity provoke a back-
          “It’s really only a handful,” she says, adding that she believes                     lash — something Gaine of the MFA says he has so far seen
          the balance will change over time. “It’s a very male-dominat-                        mostly in the form of calls for higher taxation on alternative
          ed world, but I’m comfortable in it. I can be a little different,                    investment managers, whose compensation, particularly in
          and that can sometimes work to my benefit.”                                          the case of private equity, is often taxed at the capital gain rate
                                                                                               rather than the higher income tax rate.
                                                                              tommy lEonardi

                                                                                                  But even if higher taxes come to pass, they aren’t likely
                                                                                               to dent the attractiveness of the industry much, whether for
                                                                                               budding hedge fund managers or for investors, experts say.

                                                                                               A Bumpy Road Ahead
                                                                                               Back in 2004, Asness pointed out that in considering then
                                                                                               novel-seeming hedge funds, investors should consider that at
                                                                                               one time, they might have asked: “Why mutual funds now?
                                                                                               Why money market funds now? Why index funds now?”
                                                                                                  “Why hedge funds now?” is a question that isn’t asked
                                                                                               much any more, but the industry is still maturing and shift-
                                                                                               ing. Investor expectations may need to adjust, as may fund
                                                                                               managers’ hopes of collecting generous fees without having to
                                                                                               divulge much about their methods, industry observers say.
                                                                                                  “The road will not be short, and certainly not free of bumps,”
                                                                                               Asness says. He added that “bump” was a euphemism for “some
                                                                                               people losing a lot of money at some point.” But investors
                                                                                               shouldn’t be surprised by the occasional hedge fund blow-up,
                                                                                               provided they were told about the kind of risks being taken.
                                                                                                  Herring has another view of the future, with some big
                                                                                               funds diversifying into other financial services as Citadel, for
                                                                                               example, is doing. “We may see some of them reinventing
                                                                                               themselves as other kinds of institutions,” he says. Does that
                                                                                               mean even high-flying Goldman Sachs bankers need watch
                                                                                               their backs? Herring puts it this way: “It’s not just commercial
                                                                                               banks that may need to worry about disintermediation.” ◆

                                                                                               Richard Beales is associate editor at Breakingviews, an online fi-
                                                                                               nancial comment site. Breakingviews articles are available at
                                                                                      and also appear in the Wall Street
                                                                                               Journal and a range of European newspapers.

                                                    riCHArD HErriNG,
1            JACOB0 SAFrAe PrOFESSOr OFh iNtErNAtiONAl BANKiNG
     . W i N t E r2  0 8 . B t t I N G o N t e F U t U r e
As part of the University of Pennsylvania’s Making History capital
campaign, with a goal of $3.5 billion, the Campaign for Wharton
has a fundraising goal of $550 million to be raised by June 30, 2012.

The capital campaign will con rm Wharton’s position as the
preeminent business school in the world, and we invite you
to become a part of the excitement.

Please review the enclosed overview on the School’s top priorities.
We encourage you to speak with a Wharton representative about
your part in the Campaign for Wharton.
Nutter greets his supporters
after giving his primary
election-night victory speech
at the Warwick Hotel.

       Michael Nutter A Man With a Vision for a New Philadelphia

                                      B y N a ta l i e P o m p i l i o , P h o t o s b y R ya n D o n n e l l

 18   . W i N t E r   2 0 0 8 . M I C h A e L   M U t t e r
The day started around 9 a.m. at the Philadelphia Zoo. The
Man Who Would Be Mayor pulled a free t-shirt over his long            S eriouS A bout D oing                                the
sleeve shirt and tie, stepped to the microphone, and wel-             r ight t hing
comed walkers to the charity walk-a-thon.
    Two hours later, he was on Independence Mall, one of the        Nutter grew up in West Philadelphia, attended prestigious St.
many politicians on hand for the groundbreaking of a new            Joseph’s Preparatory, and arrived at Penn in the mid-1970s
museum. An hour after that, he was in South Philadelphia,           with an eye on a pre-med degree. Instead, he ended up at
standing in the pulpit of a church, asking the congregation         Wharton, graduating in 1979 with a degree in entrepreneur-
for their votes — and their prayers.                                ial management.
    And so it went one Sunday one month before the election             “My Wharton experience helped shape my view of run-
that would propel Michael Nutter, W’79, into City Hall.             ning this city as a corporation,” Nutter said. “It’s a $4 billion
    In truth, he didn’t have to work this hard. His post was as     corporation called the City of Philadelphia: 22,000 employ-
good as won: Democrats have helmed the city since 1952,             ees, 17 members of City Council as a board of directors,
and the party enjoys a 5-1 voter registration advantage. Post-      and I have a million and a half shareholders, the citizens of
primary analysis showed Nutter’s victory over four other            Philadelphia, who work hard, pay their taxes and expect a
candidates was also notable because he garnered more white          return on their investment.”
votes than any other African American in city history.                  He wasn’t a great student, he admits. “I kind of split my
    But Nutter, 50, a married father of two, said he campaigns      time between going to class and working in a nightclub. Some
on two speeds — “fast and faster.”                                  days and many nights the club was more interesting than the
    “I don’t take anything for granted,” he said. “Everything       library… Like Mark Twain, I was a very firm believer in not
that got me here, it doesn’t make sense to slow down now.”          letting my schooling get in the way of my education.”
    What got him here are dozens of handshakes and photo                An investment broker when he won his Council seat in
ops, hours on the telephone seeking contributions, speaking         1991, Nutter was known as a smart, outspoken politician. He
appearances and debates and policy meetings. He resigned            was the guy who did his homework, asked tough questions,
his seat on the Philadelphia City Council a year ago to             wasn’t afraid to be a lone voice in the woods. Often consid-
focus, a bold move considering many thought he had no               ered a “reformer,” Nutter and another City Councilman led
chance. He had to.                                                  the fights to establish the Tax Reform Commission and to
    “I have to give 100 percent to what I’m involved in. The        reduce wage and business taxes.
only way for me to do this and do it well and do it right was           He tackled controversial issues, like a citywide smoking
not to have any other responsibilities,” he said.                   ban and ethics reform bills that would eventually shape the
    Then he put it in business terms: “This is all about risk       race he won. “A one man city council,” is how one admirer
and reward. In terms of what I accomplished, it was a good          described him in a 2005 article.
business decision. In terms of having money in my pocket,               He was also considered a little too boring, a little too
it was not a good business decision. When you’re passionate         serious. The word “wonk” was — and is — often used to de-
about something, you often have to make these tradeoffs.”           scribe him.
    Few thought he would pull it off. At one point last year,           Supporters say Nutter’s focus in a good thing. He may be
it seemed Tom Knox, a businessman who spent more than               serious, but he’s serious about doing the right thing. Stalberg
$10 million of his own money on his mayoral campaign,               — chairman and CEO of the Committee of Seventy, a non-
was headed towards a Democratic primary victory. Knox had           profit, non-partisan organization dedicated to improving life
started advertising on television and radio in August 2006,         in the Philadelphia region — recalled the morning Nutter
the first candidate out of the box, and never stopped. Knox         called him at 5:45 a.m.
portrayed himself as a political outsider in a city where politi-       “I thought it was some emergency,” Stalberg said. “He just
cal insiders were under fire.                                       starts to talk about an issue he cares about and finally I said,
    He finished second.                                             ‘Michael, it’s not 6:00 yet. Can I shave before I talk about
    And, if not Knox, then it seemed the likely winner would        this?’ I think he knew it wasn’t 6:00 yet, but he wanted to
have been U.S. Rep. Bob Brady, the city Democratic chair-           talk about it.”
man with the strongest union support, or U.S. Rep. Chaka                And he is funny, those close to him say. “He was al-
Fattah, an early front-runner who had name recognition and          ways hysterical in high school,” said City Councilman Jim
an unrivaled election machine. Or, if not them, then State Rep.     Kenney, who knows Nutter from St. Joe’s Prep. “He’s fun-
Dwight Evans, who had earned the praise of Ed Rendell, the          nier than people give him credit for. We used to call each
popular Pennsylvania governer and former Philadelphia mayor.        other from across the room during Council. I would call
    But Nutter? He was respected by some City Hall watchers         him up and say ridiculous things to make him laugh in the
and had the endorsements of the city’s two mainstream news-         middle of the debate and he would text message back. It was
papers, but two months before the primary, a poll showed            like being in a classroom.”
that almost half of Philadelphians had never heard of him.              How Nutter communicates what he does is not as impor-
    “Three weeks or four weeks out,” City Hall watcher Zack         tant as what he’s saying, observers say. Nutter, political con-
Stalberg said, “no one would have predicted Nutter would            sultant Larry Ceisler said, understands nuances, that issues
be the winner.”                                                     are not just two-sided, and he presents himself clearly.

                                                                              M I C h A e L   N U t t e r . W H A r t O N   A l u M N i   M A G A Z i N E .   19
             “Even though he has sort
          of a monotone speaking
                                                        “This is all about risk and                                    That ad campaign may
                                                                                                                  have turned voters’ heads,
          voice and isn’t the most in-
          spiring person in the world,
                                                        reward. In terms of what                                  but the 30-second spot that
                                                                                                                  had people talking was the
          Michael communicates very
          well and people understand                    I accomplished, it was a                                  one featuring the candidate’s
                                                                                                                  daughter, Olivia. (Nutter
          where he’s coming from,”
          Ceisler said. “I watched the                  good business decision. In                                also has an adult son.) In it,
                                                                                                                  the smiling 12-year-old, who
          forums and Michael was
          the only one who truly en-                    terms of having money in my                               bears a strong resemblance
                                                                                                                  to her father, gives viewers a
          joyed campaigning and un-                                                                               tour of her life, including an
          derstood why he was there.                    pocket, it was not ... When                               introduction to her dog, her
          He would get to an event                                                                                favorite food and the pub-
          early, he’d enjoy the people                  you are passionate about                                  lic school where her father
          and he actually understood                                                                              drops her off every day. “My
          the process.”                                 something, you often have                                 dad’s pretty cool for an old
             Indeed, on that fall day                                                                             guy,” she says. Nutter speaks
          a month before the elec-
          tion, Nutter worked the
                                                        to make these tradeoffs.”                                 once, to wish his daughter a
                                                                                                                  good day as she gets out of
          crowds like the profes-                                                                                 the car.
          sional politician many consider him to be. He signed auto-              “That sort of humanized Michael,” Oxman said. “The
          graphs, posed for pictures, drew people into conversations.         only thing people really knew about him was his comments
          Many people assumed he was already mayor, calling him               from City Council. He wasn’t well known. He’d never
          by the title.                                                       run citywide. He had a particular problem with African
             “Do you enjoy your job, Mr. Mayor?” Shaleeta Pressley,           American women voters. And when we put that ad on, his
          20, asked Nutter after he’d signed her t-shirt.                     polls shot up.”
             “I do. I’ll like it even more when I get down there,” he said.       Nutter’s personal touch also helped. Limited by campaign
             At another point in the day, a man called out to Nutter.         finance rules he’d helped craft, Nutter raised his money the
             “Mayor, mayor, mayor,” he said, “just do me a favor. Just        old-fashioned way.
          do a better job than Street. Please.”                                   “He would spend six hours a day on the telephone doing
             Nutter smiled. “That won’t be hard,” he said.                    it and that made the biggest difference,” Stalberg said. “He
             Voters’ dissatisfaction with Mayor John Street played a big      touched a lot of people individually. After they give money,
          part in the Democratic primary. A federal investigation of          they’re more likely to vote for him. They’re also impressed by
          pay-to-play politics in city contracting resulted in two dozen      his work ethic, and it takes a lot of work ethic to ask for $50,
          convictions. Although an FBI bug was placed in Street’s of-         $100 at a time.”
          fice, he was not indicted.                                              On the night he won the May primary, Nutter stood with
             Still, the convictions tainted Street’s administration. Those,   his wife and daughter by his side and addressed a packed ball-
          coupled with the city’s rising murder rate — some national          room of supporters at a downtown hotel. He put his achieve-
          media have called it “Killadelphia” — and Street’s general          ment modestly.
          aloofness — one political insider called him “a Sphinx” — had           “We had a really decent couple of weeks,” he said. “We
          quashed the mayor’s popularity. A 2007 poll showed that 77          had a really good day.”
          percent of voters wanted the city to go in a different direction.
             Nutter’s camp used that dissatisfaction — and television
          advertising — to his advantage. Although Knox was the first            A Cheerleader for the City
          to hit the airwaves — and the other candidates followed
          — Nutter’s campaign was strategic, holding its ads until
          the seven weeks before the election and then buying airtime         Now Nutter the councilman must become Nutter the mayor.
          consistently until the end. One newspaper headline said             He’ll go from running a council office to running a city.
          of his victory: “A perfect storm of ads, timing, issues fuels          “It’s a different mind set,” Kenney said. “He’s going to
          Nutter win in Philly.”                                              have to allow people around him to deal with problems and
             One of the first ads told voters that City Hall needed           challenges. He has to avoid the temptation of all intelligent
          cleaning out and Nutter was the person principled enough            people to micromanage. A big part of the mayor’s job is being
          to do it. Neil Oxman, Nutter’s media consultant, said some          a cheerleader.”
          people were shocked by the message and the implied attack              Economic leaders like Joseph Zuritsky, CEO of the
          on Street, who wasn’t in the running. Still, they responded         Philadelphia-based Parkway Corporation, hopes that cheer-
          to it, he said.                                                     leading will bring new jobs to the city.
             “That propelled us from last place to second place within           “He’s a good representative of the city of Philadelphia,”
          ten days,” Oxman said.                                              Zuritsky said. “A new mayor will improve public relations

20   . W i N t E r   2 0 0 8 . M I C h A e L   N U t t e r
in the last few days leading
up to the Mayoral primary,
Nutter makes his case to
the news media.

                               M I C h A e L   N U t t e r . W H A r t O N   A l u M N i   M A G A Z i N E .   21
          and I think we’re going to see a resurgence of people wanting   and reduce the net income portion. He also wants to see
          to do business here.”                                           a reduction in the city’s wage tax, which affects not only
             Nutter knows business: He served as Chairman of the          residents but people who work in the city and live in the
          Pennsylvania Convention Center Board from February 2003         suburbs. The combined business tax burdens currently
          to April 2007, leaving the unpaid position to focus on his      mean it costs more to do business in Philadelphia than
          mayoral campaign. While there, he helped craft a pivotal        in six other major cities, including Boston, Los Angeles
          labor-management agreement and spearheaded the Center’s         and Washington, according to a 2006 study done by the
          $700 million expansion.                                         Philadelphia Business Journal. Only New York places a high-
             In addition, Nutter said he wants to eliminate the gross     er burden on its businesses.
          receipts portion of the business privilege tax over time           “Michael recognizes that the city can’t take care of its ser-
                                                                          vices unless there is a growing job base and the attraction of
          “Much too often here in                                         new businesses to the city,” Zuritsky said. “His attempts to
                                                                          reduce the business privilege tax and wage tax will have an
          Philadelphia, we’ve been                                        excellent impact on attracting and holding existing jobs.”
                                                                             The only danger, Zuritsky said, is that people may expect
          ready to accept any old                                         too much.
                                                                             “There are limitations in what Mike can do,” Zuritsky
          thing, second or third                                          said. “If he handles himself in the right way and works with
                                                                          City Council, he can do a lot and overcome a lot of the prob-
          best, because we have this                                      lems he’s inherited.”
                                                                             Working with the council could be a challenge. Indeed,
          c o l l e ct i v e s e l f - i m a g e ,                        Nutter was often the one to butt heads with Street, earning
                                                                          him a reputation as a lone wolf and a voice in the darkness.
          self-esteem, problem that                                       Nutter said he has learned to compromise, but there is only
                                                                          so far he’ll give.

          somehow we are not worthy                                           “I don’t believe that ultimately having anything is better
                                                                          than nothing. In the political environment, people will often
                                                                          say, ‘I’ll settle for the sake of getting something’ and I think
          of better.”                                                     that undermines the point,” Nutter said. “Much too often
                                                                                                                  here in political life, here
                                                                                                                  in Philadelphia, we’ve been
                                                                                “Michael recognizes
                                                                                                                  ready to accept any old
                                                                                that the city can’t take
                                                                                                                  thing, second or third best,
                                                                                care of its services
                                                                                                                  because we have this collec-
                                                                                unless there is a grow-
                                                                                                                  tive self-image, self-esteem,
                                                                                ing job base and the
                                                                                                                  problem, that somehow
                                                                                attraction of new busi-
                                                                                                                  we’re not worthy of better. I
                                                                                nesses to the city.”
                                                                                                                  want to change those stan-
                                                                                                                  dards and set high expecta-
                                                                                                                  tions for ourselves: the public
                                                                                                                  officials and our public.”
                                                                                                                       Kenney predicts Nutter
                                                                                                                  will have a workable ma-
                                                                                                                  jority of Council support.
                                                                                                                  Although he backed Brady
                                                                                                                  during the primary, Kenney
                                                                                                                  said he was looking forward
                                                                                                                  to working with a Nutter
                                                                                                                  administration “with an
                                                                                                                  enthusiasm I haven’t had in
                                                                                                                  the last few years.”
                                                                                                                       “We can’t be obstruc-
                                                                                                                  tionists or naysayers,”
                                                                                                                  Kenney said. “The Council
                                                                                                                  and the Mayor need to
                                                                                                                  show a united face. Sadly,
                                                                                                                  over the last four years, we
                                                                                                                  haven’t done that.”

22   . W i N t E r   2 0 0 8 . M I C h A e L   N U t t e r
                                                                                                                           Nutter heads down
                                                                                                                           his driveway at the
                                                                                                                           start of the day.

   The fact that Nutter often did stand alone works for him            “They’ll find the same challenges here,” Nutter said.
now. During his first year, he faces tough negotiations with       “While the financial rewards might not be comparable, I
the city’s four largest unions when their contracts expire in      think the human rewards are almost immeasurable.”
June. The final contracts will shape the city’s financial future       He also wants to turn Philadelphia into what he called “an
for years to come, and Nutter will likely seek significant con-    education city.” Two numbers, he said, are key to the future
cessions on health benefits and pensions.                          of the city: 45 and 18. The first number refers to the percent-
   “He wasn’t supported by anybody with the exception of           age of public school students who drop out. The second is the
the papers and the people. He had no unions, no elected offi-      percentage of residents that have a four-year degree.
cials, nobody,” Ceisler said. “It’s actually an advantage to him       “We cannot survive as a city … if those two numbers stay
because he goes into office owing no one.”                         the same,” Nutter said.
   Asked about what changes to expect during the first                 And, he said, he wants to make the city fun again. He
year of his administration, the first thing Nutter says is: “It    wants city dwellers to be proud of their home. Part of do-
will be cleaner.” Literally, in that he’ll call for a citywide     ing that will fall to him: Philadelphians love a leader who is
clean-up.                                                          out there embodying the spirit of the city. Ed Rendell did
   And figuratively, as he attacks the crime problem and           it. John Street did not. The city needs someone who fits its
further cleans up the mess that was City Hall in the Street ad-    view of itself.
ministration. During the primary season, he proposed police            Stalberg thinks Nutter may have the goods: “I think
use “stop and frisk” procedures in high-crime areas, a concept     there’s a good chance Nutter will grow into that role and re-
that worried some civil libertarians. To rebuild confidence in     ally present a great positive image for Philadelphia and make
government, he wants to crack down on no-bid contracts and         Philadelphians feel good about themselves again.” ◆
bring new blood into politics. Part of that, he said, would be
introducing graduates of Wharton and other area colleges to        Former Philadelphia Inquirer reporter Natalie Pompilio writes
public service.                                                    and lives in Philadelphia.

                                                                            M I C h A e L   N U t t e r . W H A r t O N   A l u M N i   M A G A Z i N E .   23
                PhotoS . toMMy lEonardi

         photo . tommy lEonardi

24   . W i N t E r   2 0 0 8 . P r o V I D I N G   A N S W e r S
Wharton’s Joel Waldfogel’s Views on New
Economic Research — and Why Free
Markets Aren’t Always Best By Meghan Laska
Can watching soap operas                                “My job is to take it and translate it in a way
                                                        that’s faithful to the research, but write about
improve women’s rights in                               it in a way that is interesting and hits on
developing countries?                                   some important topics,” he says.
                                                            The soap opera paper, he says, is a great
    This is just one of the diverse topics that         example. Titled “TV is Good for You,” the
business and public policy professor Joel               August 2007 column discussed a new study
Waldfogel tackles in a monthly column he                that showed that cable television — which
writes for “I think of myself as             has recently come to remote Indian villag-
an empirical economist who works on in-                 es and airs Indian soap operas — was helping
dustrial economics and law and econom-                  to shape women’s attitudes there in positive
ics, and then I have interests that are just for        ways with regard to autonomy, violence to-
fun,” says Waldfogel. In the column, which              ward women and male gender preferences in
falls under the “fun” category, Waldfogel               children. “The soap opera study was fascinat-
typically explores new economic research                ing to write about. If those results hold up
that is both interesting and provides com-              then that is a really important finding that
pelling answers to a real question.                     could help women’s rights in India,” he says.
    This ability to provide such answers,
whether for readers or schol-
ars and executives looking for provocative
                                                        "Bread and Butter" Interests
new ideas, is one reason colleagues across              When he’s not writing for Slate, Waldfogel
the country describe Waldfogel as “one of               spends most of his research time on what he
America’s most interesting economists.”                 calls his “bread and butter” interests, one of
The chair of the Business and Public Policy             which he recently turned into a book pub-
Department since 2006, Waldfogel’s cur-                 lished in October by Harvard University
rent academic interests tend to fall into two           Press and depicted by one reviewer as “a pro-
main categories: the effects of agglomera-              vocative statement on why free markets don’t
tion on product availability and intellectu-            necessarily make everyone better off.”
al property piracy issues. He also recently                In describing The Tyranny of the Market,
finished a book, The Tyranny of the Market:             Waldfogel explains that about 10 years ago,
Why You Can’t Always Get What You Want,                 he began looking at radio listening across dif-
which debates long-held arguments that free             ferent-sized cities. He found that “bigger
markets are best for everyone.                          markets have more stations and more variety,
    For his column, Waldfogel                 so there is something closer to what everyone
pores over recent working papers in eco-                likes. In general, people benefit one another
nomics and asks himself how many of those               by consuming in the same market, which is
papers would interest a general audience.               an agglomeration effect.”

                                         P r o V I D I N G   A N S W e r S . W H A r t O N   A l u M N i   M A G A Z i N E .   25
              But people don’t benefit equally, he found. When he divid-      to get direct flights between smaller cities. One technolog-
          ed the population by demographic groups, different patterns         ical change was regional jets that have become more com-
          emerged. In cities with larger black populations, a higher          mon, making regional air travel more feasible, but there also
          share of blacks listened to the radio. And likewise, those cities   are subsidies that were left intact when the airline industry
          with higher white populations had higher concentrations of          was deregulated for smaller markets that help cover the costs
          Caucasian listening. So, he says, the bigger one’s own group,       of air travel for intercity service. Similarly, there are orphan
          the greater the tendency for members of that group to listen        drug laws that subsidize the development of drugs for small
          to the radio.                                                       disease populations.”
              “If members of different groups turn out to have differ-            So what is the right balance between a free market and
          ent preferences, then you won’t be helped by people who             government interventions? Waldfogel maintains that “there
          don’t share your preferences. You are only helped by people         has almost been a religious faith in the market and I agree
          like yourself who share your preferences. The question is, are      that the market is wonderful, but what the market does on
          there stations near what you like? I call this the ‘Who bene-       its own does not define the limits of what we want done
          fits whom’ phenomenon. As there are more people who share           in our society. Economic theory predicts that markets will
          your preferences, you derive more benefit from products.”           ‘get it wrong’ sometimes, and so we can’t dismiss all sorts
              In other products like daily newspapers, there’s typical-       of government intervention out of hand. A decision to use
          ly only one product, he says. It can be positioned to appeal        the market versus government interventions will have con-
          to one group or another. The larger one group is, the less the      sequences and we ought to be open to a discussion about
          product is targeted to the other.                                   what set of outcomes we prefer. We shouldn’t always just
              Waldfogel says this is the product market analog to what        leave it up to the market.”
          John Stewart Mill called the “tyranny of the majority” in the
          voting context. “If you decide what kind of product you will        a LOVe Of MusIc
          have by voting, then you will have a product that appeals to
          the median person. As you are farther away from that median         Waldfogel has also tackled intellectual property piracy is-
          person, the less happy you will be,” says Waldfogel.                sues, an interest born of his love of music. As he watched the
              “So a big part of Milton Friedman’s argument in                 Napster era unfold, he began to wonder how music produc-
          Capitalism and Freedom is that markets are great because they       tion might be affected if people stopped paying for it. Would
          avoid the strains on social cohesion that government entails.       certain types of music stop being made?
          But markets don’t actually avoid that problem. When there               “I wasn’t all that concerned about classical music because
          are big fixed costs, markets only bring forth products with         I figured those guys weren’t downloading it,” he quips, not-
          large followings.”                                                  ing that he personally likes traditional alternative pop and is a
              For example, Waldfogel says, “if you are unlucky enough to      self-described “Radiohead guy.”
          have a terrible disease, you would be much better off having            “But I wondered just how valuable music was to people
          one that affects many people because the costs according to the     and how much social welfare we would forgo if the music in-
          drug industry are such that it costs almost a billion dollars to    dustry suffered. From an economist perspective, there was all
          bring a drug to the market. You can’t bring a drug to the mar-      this area under the demand curve and I wanted to know what
          ket unless there are a lot of people who also need that drug.”      would happen if all this music went away,” he says.
              What consumers get depends on how many people share                 Waldfogel observes that most people in the music indus-
          what they want, which is not the traditional way that econ-         try say with certainty that free music sharing is harmful to
          omists have thought about markets, he notes. “Most people           them, but he points out that there is an active academic de-
          have said that we can get what we want because we want it,          bate about this. “It’s been relatively hard to document the
          but that is only true in theory and when production can take        harm and some prominent studies actually don’t find harm,”
          place on a relatively small scale and without big fixed costs.”     he says.
              There are a few solutions, including increasing markets             In his own research on the issue, Waldfogel has found that
          through international trade or the Internet, as well as tech-       people who download more unpaid music tend to buy less.
          nological progress to lower fixed costs. Waldfogel explains         “I see some behavior that would be harmful to the industry,
          that if the market is enlarged people need not rely on near-        but at the same time a lot of what is downloaded is stuff that
          by buyers to provide the demand to bring things to market.          consumers would not otherwise have purchased. So there is
          Waldfogel addresses this issue in The Tyranny of the Market,        something for everyone in those findings.”
          using research from a paper he co-authored with Wharton                 “If you look around at the number of people wearing iPods
          real estate professor Todd Sinai. The paper looked at African       all the time, you’d think we are at an all-time high in how use-
          Americans’ tendency to use the Internet, finding that in            ful music is to people and how much value people are getting
          general, “there is a digital divide in which black people over-     out of it, yet at the same time revenue to the music industry is
          all use the Internet less. However, that divide is smaller in       way down,” he says, adding that the music industry is working
          places where blacks are more isolated, as they go online to         on figuring out a clever solution to this discrepancy.
          find the products they want.”                                           While his research shows both positive and negative con-
              Another solution is government intervention. He points          sequences arise from music downloading, his work on free
          to regional air service as an example. “It used to be tough         movie viewing shows very different results. Unlike music

2   . W i N t E r   2 0 0 8 . P r o V I D I N G   A N S W e r S
jim Graham

                                                                          “A decision to use the market versus
                                                                          government interventions will have
                                                                          consequences and we ought to be
                                                                          open to a discussion about what set
                                                                          of outcomes we prefer. We shouldn’t
                                                                          always just leave it up to the market.”

             where a person can download hundreds of songs and listen                 So in the early 1990s, he began surveying his students at
             to them all day while doing other things, movies require un-         Yale, where he was teaching at the time. What he discovered
             divided attention. So even if they are free, people still need       was that the difference in what the giver spent and what the
             blocks of time to enjoy them.                                        receiver valued was a “dead-weight loss.”
                “Even students have limited time they could spend watch-              “If I go out and buy a $100 sweater for you, and it’s only
             ing movies, so maybe it’s not surprising that in data I’ve           something that you would value at $30, then I have essen-
             gathered, people who watch one more movie without pay-               tially destroyed $70 worth of value and that is a dead-weight
             ing watch about one less paid movie. It’s literally a one-for-       loss,” explains Waldfogel.
             one displacement, which is a really high rate,” he says, noting          He maintains that the gifts that really concern him are
             that for music, one unpaid song reduces by only a quarter the        those given under circumstantial obligations like birthdays
             number of paid songs, a one-for-four displacement.                   where you have no idea what the person really wants. “I think
                And last spring, Waldfogel surveyed Penn students about           a gift card or gift to a charity in that person’s name would be
             their Internet television viewing from sites like        a really good idea.”
             as well as network-authorized websites like to see if            Over time, Waldfogel has done more surveys, which have
             people who spent more time on such sites decreased the time          confirmed those results. Not surprisingly, he’s found that in
             they spent watching traditional television. “I found that peo-       doing this type of research, he’s gotten a lot less gifts over the
             ple who have increased web consumption across the past two           years. “Maybe that is payback for not appreciating their gifts
             television seasons have very little in the way of decreased con-     or maybe it’s payback for my bad behavior in writing about
             ventional TV consumption, and if you consider web viewing            it,” he quips.
             of network authorized sites like, then the overall
             viewing of network controlled distribution channels actually         a VIBrant cOMMunItY
             goes up,” he says.
                An explanation for the difference between outcomes for            While Waldfogel’s PhD is in economics from Stanford
             movies and television consumption is that the Internet has           University and he began teaching economics at Yale
             become a “giant Tivo,” says Waldfogel. “You can go to the            University, it was his business interests that brought him to
             web any time and watch almost any TV show on your com-               Wharton in 1997.
             puter any time you want. This makes it possible to watch                 “The first five years of my career were spent working on
             programming you otherwise would not have been able to                law and economics, and I still have some interest in that,”
             watch, then whetting your appetite to watch other episodes of        he says. “But I also became interested in industrial econom-
             that show. Where with a movie, once I see a movie I typical-         ics and how businesses and markets work. Wharton has much
             ly don’t want to see it again or go out and buy it. It’s plausible   more of a focus on actual phenomena as opposed to ideas di-
             that free distribution of TV shows could actually stimulate          vorced from phenomena.”
             interest in traditional TV.”                                             “My colleagues at Wharton have a vibrant applied econom-
                                                                                  ics community that stretches across its departments — Real
                                                                                  Estate, Insurance, Operations and Information Management,
             YuLetIde ecOnOMIcs                                                   Finance. It’s a fun place to be and is very active.”
             While Waldfogel spends most of his time on more serious                  His closest colleague at Wharton, of course, is his wife
             topics such as markets and IP piracy issues, he does have a          Mary, an assistant professor in the Management Department.
             favorite pet project that began with his introduction to the         “Mary is important to me in many ways, but one of those
             gift-giving rituals of Christmas.                                    ways is that she has a different academic discipline. Her area
                “I’m Jewish, and I first encountered Christmas through my         is organization theory, and because of her I benefit from a lot
             wife, [Wharton management professor] Mary Benner, and                of different perspectives about economics and business.” ◆
             her very generous family. I ended up getting a lot of well-
             intentioned gifts, but they weren’t things I would have chosen       Meghan Laska is a senior associate director in Wharton’s Office
             for myself, which got me wondering if this was a widespread          of Communications.
             phenomenon,” he recalls.

                                                                                       P r o V I D I N G   A N S W e r S . W H A r t O N   A l u M N i   M A G A Z i N E .   2
       NeXt UP At
       Wharton School Publishing                                                            

          replacing old-Fashioned Infrastructures
          and the Power of Identity
          two new titles from marketing pioneer yoram (Jerry) Wind and organizational
          design guru John Kimberly

           Competing in a Flat World:                                 with fluid, ever-changing networks that
                                                                                                                      take advantage of
                                                                      can design, manufacture, and deliver
           Building Enterprises for a                                 almost anything, anywhere.                  Wharton School Publishing
           Borderless World                                              The authors provide specifics from        alumni discounts – visit
                                                                      the company that pioneered “flat
           By Victor K. Fung, William K.                                                                           <>
                                                                      world” success, Li & Fung, which pro-
           Fung and Yoram (Jerry) Wind                                duces more than $8 billion in garments
           In the “flat world,” success is less about                 and other goods for the world’s top
           what the company can do itself and                         brands and retailers — without owning     dustries, and make the case that net-
           more about what it can connect to. In                      a single factory.                         worked, global enterprises — from
           Competing in a Flat World: Building                           Success in this world is based on a    Wikipedia to open-source software to
           Enterprises for a Borderless World, Victor                 set of principles that are based on Li    manufacturing supply chains — are
           and William Fung team with Jerry                           & Fung’s “network orchestration,” de-     fluid and complex. These network or-
           Wind, author of the best-selling The                       scribed for the first time in Competing   chestration principles are what holds
           Power of Impossible Thinking, to reveal                    in a Flat World. The authors examine      these loosely linked enterprises to-
           how “old-fashioned” infrastructures and                    how these principles can be applied in    gether, allowing companies to balance
           huge employee bases can be replaced                        manufacturing, services and other in-     firm-centric and network-centric views
                                                                                                                and build value through specialization.
                                                                                                                   Li & Fung’s experience with com-
                                                                                                                panies such as Ecko Unlimited, The
                                                                                                                Limited and Gymboree are highlight-
                                                                                                                ed throughout the book as exam-
                                                                                                                ples of how to employ this strategy.
                                                                                                                Examples from companies such as eBay,
                                                                                                                Wikipedia, Boeing, and Build-A-Bear
                                                                                                                Workshop further demonstrate the
                                                                                                                orchestration model.
                                                                                                                   Co-author Victor K. Fung is the
                                                                                                                Group Chairman of the Li & Fung
                                                                                                                group of companies, which includes
                                                                                                                major subsidiaries in trading, dis-
                                                                                                                tribution and retailing, including
                                                                                                                publicly listed Li & Fung Limited,
                                                                                                                Integrated Distribution Services
                                                                                                                Group Limited and Convenience
                                                                                                                Retail Asia. He also is chairman of
                                                                                                                the Greater Pearl River Delta Business
                                                                                                                Council, the Hong Kong Airport
                                                                                                                Authority and the Hong Kong
                                                                                                                University Council.

28   . W i N t E r   2 0 0 8 . W h A r t o N   S C h o o L   P U B L I S h I N G
   William K. Fung is Group                   able asset, it can also become a huge li-                    Company (BP) and its top man-
Managing Director of Li & Fung                ability if not managed well. Using the                       agement to a storm of criticism
Limited, and has held key positions in        strategies illustrated by the authors,                       since the 2005 explosion at the
major trade and business associations.        managers will discover how their or-                         Texas City, Texas, refinery where
He is the past chairman of the Hong           ganization’s identity is related to and                      15 workers lost their lives.
Kong General Chamber of Commerce,             different from its organizational cul-                     • Ensure the consistency of corporate
the Hong Kong Exporters’ Association          ture, brand positioning and reputation.                      branding efforts targeted at vari-
and the Hong Kong Committee for               Methods for managing the unconscious                         ous stakeholders. The risk of adapt-
Pacific Economic Cooperation Council          shared beliefs that give an organization                     ing each message to its recipients is
(PECC). Fung is a member of the               coherence as well as how to face the                         that multiple, and sometimes con-
Trade Development Council.                    identity challenges that arise in merg-                      flicting, images may be projected,
   Yoram (Jerry) Wind is the Lauder           ers, alliances, spin-offs and acquisitions                   leading to confusion in the mar-
Professor and Professor of Marketing          are also addressed.                                          ketplace.
at Wharton. He joined the Wharton                                                                        • Carefully align your own behavior
faculty in 1967, with a doctorate from                                                                     and decisions with the organizational
Stanford University. He is found-                                                                          identity claims you make inside and
ing director of the SEI Center for                                                                         outside the firm.
Advanced Studies in Management,                                                                          • Strive to realize synergies between
the founding academic director of                                                                          handling identity at the level of the
the Wharton Fellows Program and                                                                            organization as a whole as well as at
founding editor of Wharton School                                                                          the level of individual brands under
Publishing. He has published more                                                                          which your firm’s products and ser-
than 250 papers and articles and over                                                                      vices are marketed.
20 books including The Power of                                                                          Co-author Hamid Bouchikhi is a
Impossible Thinking in 2005. Wind has                                                                 professor of strategy and management
consulted and conducted research for                                                                  and the director of the New Business
more than 100 companies.                                                                              Center at ESSEC Business School
                                                                                                      in Cergy-Pontoise, France. John R.
                                                                                                      Kimberly is the Henry Bower Professor
The Soul of the Corporation:                                                                          of Entrepreneurial Studies at Wharton
                                                                                                      as well as professor of management,
How to Manage the Identity                                                                            health care systems and sociology. ◆
of Your Company
By Hamid Bouchikhi and
John r. Kimberly
In the burgeoning Age of Identity, com-
petitive advantage is shifting from what
a product is to the identity of the firm         The Soul of the Corporation offers
that markets it. More than ever, a firm’s     business leaders a set of actionable ideas
identity shapes the results it can achieve.   and guidelines that can be used to en-
The Soul of the Corporation: How to           hance their ability to diagnose and
Manage the Identity of Your Company           manage identity issues. Business lead-
by Hamid Bouchikhi and John R.                ers should be aware of the following,
Kimberly offers managers a systematic,        for instance:
accessible, management-oriented way to           • Be sure that the organizational
understand, control and leverage their             identity projected through branding
organization’s identity.                           efforts is real. If it is not real, if it is
   Drawing on stories from organi-                 mere sloganeering, competitors or
zations such as McDonald’s, Lenovo,                other unfriendly stakeholders may
Ford and the Catholic Church, The                  turn these branding efforts against
Soul of the Corporation argues that while          you. Failure to observe this rule
identity can be an extraordinarily valu-           has exposed the British Petroleum

                                                                W h A r t o N   S C h o o L   P U B L I S h I N G . W H A r t O N   A l u M N i   M A G A Z i N E .   29

          In Global entrepreneurship,
          one Small Initiative Can Make one huge Difference

                  ntrepreneurs love to grumble about                                                                       Join more than 1,000,000
                  the roadblocks and delays created by                                                                 Knowledge@Wharton subscribers:

                  bureaucrats. Government officials,                                                                   <>.
                                                                                                                              registration is free.
           they say, are slow, bumbling and concerned
           only about hewing to their rules and clock-
           ing out at 4:55 p.m.                                                                                    three months in some places to register
                                                                                                                   a new company vs. doing it in 10 min-
                                                                                                                   utes on a website. An electronic registry
             But in a study of global entre-                       critically in determining a country’s           removes all the intermediaries and the
          preneurship, Raffi Amit and Mauro                        level of entrepreneurship. Specifically,        need to pay bribes.”
          Guillen, both Wharton management                         countries that created electronic busi-             In other words, bureaucrats are ob-
          professors, have found that a simple, if                 ness registries saw far higher levels of        structionist — at least until they start
          smart, bureaucratic initiative mattered                  new business formation than those with          operating a server.
                                                                                      traditional paper ones.          In cooperation with two staff-
                                                                                      Even the announce-           ers from the World Bank — Leora
                                                                                      ment that a country          Klapper and Juan Manuel Quesada
                                                                                      planned to establish         — Amit and Guillen gathered data
                                                                                      an online log led to a       from 84 countries in every region of
                                                                                      jump in business regis-      the world. Their goal was to gauge lev-
                                                                                      trations.                    els of entrepreneurship and, as much
                                                                                        How could such a           as possible, explain why developed
                                                                                      small change make            countries exhibit much higher levels of
                                                                                      such a big difference?       entrepreneurship than developing ones.
                                                                                      “It represents the re-       Their research is summarized in a pa-
                                                                                      moval of red tape,”          per titled, “Entrepreneurship and Firm
                                                                                      says Amit, an expert         Foundation Across Countries.”
                                                                                      in entrepreneurship              Economists, starting with the famed
                                                                                      and academic direc-          father of entrepreneurial studies, Joseph
                                                                                      tor of the Goergen           Schumpeter, have long understood that
                                                                                      Entrepreneurial              entrepreneurs contribute a great deal to
                                                                                      Management Program.          economic vitality. John Maynard Keynes
                                                                                      “Red tape is the big         even chalked up economic surges to their
                                                                                      barrier to entrepre-         “animal spirits.” But explaining why
                                                                                      neurial activity. It takes   some countries produce so many more of

30   . W i N t E r   2 0 0 8 . K N o W L e D G e @ W h A r t o N
these critical economic actors than others   are costly to launch — in both time and          from the informal sector — some-
has proved tougher. Solving that riddle      money — you see fewer of them. An                times referred to as the underground
could be a key to jumpstarting growth in     electronic registry helps to cure these          economy — to the formal one. (Once
the developing world.                        sorts of headaches.                              it becomes easy to register, informal
    “One of the reasons why people at            In many countries, registries serve as       firms decide to do so.) Amit and
the World Bank are interested in this        more than just public databases. They            Guillen argue that this sort of nitpick
is that they believe one of the most         become the nexus of policies relating            misses the point. If a government
effective ways to reduce poverty is to       to entrepreneurship. “The business               manages to encourage existing firms to
encourage entrepreneurship,” says            registry is at the frontline in the effort       register by cutting red tape, then it has
Guillen, who is director of the Joseph       to assure that businesses operate trans-         still improved its entrepreneurial eco-
H. Lauder Institute for Management           parently and within the bounds of the            system. And chances are, a friendlier
& International Studies. “The rich           law,” the scholars write. “It acts as a          environment will lead to the formation
countries in the world, for two or three     guarantor of a solid, legal business en-         of more companies.
decades after World War II, made many        vironment by fostering transparency.”                While the study devotes much atten-
attempts to help development. Their          Its information can also help to shape           tion to business registries, it examines
programs were mainly about investing         economic policy by giving policymak-             other drivers and obstacles to entrepre-
in big infrastructure projects and they      ers scads of data about employment               neurship, too.
mostly failed.” The hope is that foster-     and the strengths and weaknesses of                  Not surprisingly, the authors find
ing entrepreneurship will succeed where      an economy’s sectors. And of course,             that corruption saps business forma-
investing in fish farms didn’t.              it better enables governments to levy            tion just as surely as red tape does. In
    Differences in the rates of entrepre-    taxes on businesses.                             countries with corrupt governments,
neurship around the world are stark.             Improvements brought by electron-            bribery becomes a hidden tax on entre-
At one extreme, Asia produces only 1.6       ic registries show themselves quickly.           preneurship. “In corrupt countries, ev-
businesses per thousand people, while at     Guatemala, Sri Lanka and Jordan each             erybody in government is on the take,”
the other, industrialized nations create     saw more than 20% increases in their             Amit says. “If somebody doesn’t have
64.2 per thousand, Amit, Guillen and         number of new business registrations             the resources to provide for that, he
their co-authors say. On top of that,        within just a few years of implement-            can’t move forward with his business.”
new businesses continue to enter the         ing their electronic systems. “In Jordan             Political turmoil, often accompa-
economy at a faster rate in developed        and Guatemala, the growth of new                 nied by corruption, plays much the
countries than in developing ones.           firms begins before the implementa-              same role. Amit, Guillen and their co-
Industrialized countries see average en-     tion of the reform, usually about four           authors use the example of Peru, which
try rates of more than 10% a year, while     years earlier when the modernization             has ridden a political rollercoaster
developing ones see an average of about      plan was announced and initiated,” the           since the late 1990s. “What we see
7% to 8.5%.                                  scholars write.                                  is that firm registrations are incred-
                                                 A criticism of this study might be           ibly sensitive to swings in the political
                                             that electronic registries don’t actually        cycle,” Guillen notes. In years of up-
                                             capture levels of entrepreneurship but           heaval, like 1999 when then-President
More than Public                             merely the movement of businesses                Alberto Fujimori tried to overrule
As the scholars dug deeper, they found
that the bureaucratic hurdles business
people love to hate explained these              “the fewer procedures required to start
regional differences. “The fewer pro-
cedures required to start a business,
the greater the number of registered
                                                 a business, the greater the number of
firms — and the higher the entry rate,”
they write. “There is also a significant         registered firms — and the higher the
relationship between the cost of start-
ing a business (as a percentage of gross         entry rate,” the authors write.
national income) and business density
and the entry rate.” Where businesses

                                                                       K N o W L e D G e @ W h A r t o N . W H A r t O N   A l u M N i   M A G A Z i N E .   31
                                                                                                              dominates. Governments, or people
                                                                                                              closely tied to them, typically control
                                                                                                              those resources, limiting the opportu-
                     “the business registry is at the                                                         nities for entrepreneurs to start firms
                                                                                                              aimed at exploiting the continent’s
                     frontline in the effort to assure that                                                   resource wealth.
                                                                                                                  Amit and Guillen point out that
                     businesses operate transparently and                                                     this paper is merely the first step in a
                                                                                                              multi-year effort with the World Bank
                                                                                                              to assess entrepreneurship around
                     within the bounds of the law,” the                                                       the world. As they work toward that
                                                                                                              goal, they hope to incorporate even
                     scholars write. “It acts as a guarantor                                                  more indicators into their assessment
                                                                                                              of countries’ entrepreneurial environ-
                                                                                                              ments. Amit, for example, knows
                     of a solid, legal business environment                                                   from his work around the world that
                                                                                                              culture, tough as it can be to quantify,
                     by fostering transparency.”                                                              plays a critical role in people’s willing-
                                                                                                              ness to take the risks required to be
                                                                                                              an entrepreneur.
                                                                                                                  “There are countries in Asia that say,
                                                                                                              ‘We want to be entrepreneurial,’ but
                                                                                                              also say, ‘If you fail, you’re doomed for
          the constitution and stand for a third                   Service vs. retail                         life.’ I just spent two weeks in Korea,
          term, the number of business forma-
          tions sank. But in years of stability, like              Businesses                                 and if there’s one issue that hinders
          2001 when the country elected a new                                                                 entrepreneurial activity there, it’s the
          leader, they soared.                                     Although Amit, Guillen and their co-       social fear of failure. In the U.S. and
             “Like several other countries in                      authors found many common themes           Canada, you’re rewarded for trying and
          Latin America, southern Asia and                         throughout the countries they studied,     attempting to succeed, and the idea is
          Africa, Peru hasn’t figured out yet                      they did observe a difference in the       that you learn from that.” ◆
          what kind of political institutions it                   sorts of companies that entrepreneurs
          wants to have,” he adds. “They’ve had                    are starting in the developed and          Originally published October 31, 2007
          short periods of very open, transparent                  developing worlds. In industrialized       in Knowledge@Wharton.
          policies and then suddenly the govern-                   countries, service businesses predomi-
          ment gets corrupt. This is reflected in                  nated among new firms, but in the de-
          the data. You can see it over a relative-                veloping counties, wholesale and retail
          ly short period and with minimal time                    trading outfits did.
          lags. It’s reassuring to see that it mat-                   Amit chalks up the difference
          ters who’s in charge and what kinds of                   to varying stages of economic
          policies they introduce.” Guillen says                   maturation. For decades, developed
          that Peru’s example confirms the large                   economies have been shifting from
          and growing body of evidence that                        manufacturing to services. So in plac-
          good governance helps to propel eco-                     es like the United States and Europe,
          nomic growth.                                            you would expect to see entrepreneurs
                                                                   gravitating toward the growing service
                                                                   sector. Developing countries don’t
                                                                   just lag behind that shift — China,
                                                                   for example, is only hitting its manu-
                                                                   facturing heyday now — but also face
                                                                   obstacles to starting firms in some
                                                                   sectors. In much of Africa, for ex-
                                                                   ample, the natural-resource sector still

32   . W i N t E r   2 0 0 8 . K N o W L e D G e @ W h A r t o N
“As students, we really value our
experience at Wharton, which
would not have been possible
without continued alumni
support via            e Wharton Fund.”
    David Larson,WG’09
   Student financial aid recipient and
   beneficiary of alumni generosity

• Wharton would not be what it is today without The Wharton Fund, a critical funding source for the School's priorities.

• The Campaign for Wharton has been designed to sustain the Wharton community by strengthening the people and
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Your participation in The Wharton Fund throughout the ve-year campaign is especially important to the School as it
demonstrates to your fellow alumni and other potential donors the importance of giving back.

                                                  We encourage you to make your gift today via the envelope
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           Alumni Association Update
                                                                        of $3.5 billion, The Campaign for             in so doing, strengthen the currency
                                                                        Wharton has a fundraising goal of $550        of your Wharton degree. We encour-
                                                                        million. The Campaign for Wharton is          age you to make a gift to The Wharton
                                                                        focused on the following three areas.         Fund in this fiscal year, ending June
                                                                           1. Driving Innovation through re-          30, 2008, and to continue to do so on
                                                                              search and programs and the creat-      an annual basis.
                                                                              ing of three new institutions: The
                                                                              Global Leadership Institute, The        How Has Wharton Made a
                                                                              Entrepreneurship Institute, and         Difference in Your life —
                                                                              The Business Institute for Global
                                                                              Good to promote social, environ-        Share Your Story
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                                                                              faculty support                         world. We want to hear how Wharton
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          tAMA L. SMIth, WG’90                                                technology.                             perience has been instrumental in shap-
                                                                        For more information on the campaign          ing their careers, global perspective, and
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          DEAr AluMNi                                                                                                 versations, we have created a new series,
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                                                                        ForWharton/campaign.html>                     Wharton Connections in Action, that will
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          and confirm its position as the preem-                        community must give in greater num-           Board Chairwoman, Wharton
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                                                                        to claim its world-class position and,

                                                                        Caren S. Franzini, C’80, WG’84,               chair was Wharton alumnus Robert
            New york Club holds                                         CEO of the New Jersey Economic                Wolf, W’84, chairman and CEO of
            Joseph Wharton Awards                                       Development Authority, and Aditya             UBS Americas, and the president of the
                                                                        Mittal, W’96, CFO of ArcelorMittal.           Wharton Club of New York is alumnus
                                                                        The awards, which recognize exception-        Kenneth Beck, WG’87, president of
          On September 27, the Wharton Club
                                                                        al leaders within the alumni commu-           Beck Enterprises.
          of New York drew its active mem-
                                                                        nity, began in 1972 and served as the            Huntsman was presented the
          bership to honor four of Wharton’s
                                                                        premier business gala in New York until       Joseph Wharton Award for Lifetime
          most prominent alumni at the Joseph
                                                                        1991. The event was revitalized in 2006       Achievement. This award recogniz-
          Wharton Awards Dinner. The guests of
                                                                        with a successful sold-out dinner at the      es alumni who have had a tremen-
          honor were alumni Jon M. Huntsman,
                                                                        Rainbow Room.                                 dous positive and sustained impact on
          W’59, chairman of Huntsman Corp.,
                                                                            This year’s dinner, held at the Pierre,   business and society over the course of
          Steven A. Cohen, W’77, chairman and
                                                                        built on last year’s success. The event       their careers.
          founder of SAC Capital Advisors LLC,
                                                                                                                      Continued on page 37...

34   . W i N t E r   2 0 0 8 . A L U M N I   A S S o C I A t I o N   U P D A t e
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Publishing provides timely, practical knowledge from some of the
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faculty review board ensures that all titles are timely, important,
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                                                                       S t o r y   t I t L e . W H A r t O N   A l u M N i   M A G A Z i N E .   35
                                                                             W     A    N

        Global Alumni Forums

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  March 12-14, 2008                    May 30-31, 2008                     June 26-27, 2008

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photos . b E n a s E n photoG raphy

                                                                                                                                              Wharton Club of
                                                                                                                                              Minnesota hosts
                                                                                                                                              Governor tim Pawlenty
                                                                                                                                            Minnesota Governor Tim Pawlenty ad-
                                                                                                                                            dressed 90 alumni at the Wharton Club
                                                                                                                                            of Minnesota’s annual luncheon on
                                                                                                                                            October 3. Governor Pawlenty, who suc-
                                                                                                                                            ceeded in bringing the 2008 GOP con-
                                                                                                                                            vention to Minneapolis-St. Paul and is
                                                                                                                                            rumored as a potential Vice Presidential
                                                                                                                                            running mate, mingled informally with
                                                                                                                                            alumni over lunch. He then present-
                                                                                                                                            ed his vision for education, health care
                                                                                                                                            and the environment — three sources of
                                                                                                                                            both pride and concern for Minnesotans.
                                                                                                                                            After a thoughtful question and answer
                                      JoSh KoPeLMAN, W’93, the 200 reCIPIeNt oF the JoSePh WhArtoN AWArD For yoUNG LeADerShIP,
                                                                                                                                            session, the club presented the Governor
                                      WIth ADItyA MIttAL, W’9, the 200 reCIPIeNt oF the SAMe hoNor
                                                                                                                                            with a donation to the Minnesota
                                                                                                                                            Helps Bridge Disaster Fund, a chari-
                                                                                                                                            ty he praised for assisting victims of the
                                                                                                                                            August I-35-W bridge collapse.
                                                                                                                                                The club is especially thankful to Jeff
                                                                                                                                            Greiner, WG’83, for introducing his
                                                                                                                                            friend Governor Pawlenty at the event
                                                                                                                                            and to Meredith Peetz-Larsen, Associate
                                                                                                                                            Director of Alumni Affairs, who flew
                                                                                                                                            in from Philadelphia to attend the lun-
                                                                                                                                            cheon and meet with local club leaders.
                                                                                                                                                This was one of many fantas-
                                      LIFetIMe AChIeVeMeNt hoNoree JoN M.            KeNNeth BeCK, WG’8, PreSIDeNt oF the                  tic events that the club sponsored in
                                      hUNtSMAN, W’59, AND FeLLoW WhArtoN             WhArtoN CLUB oF NeW yorK, WIth JoSePh                  2007 for Minnesota’s 450 area alum-
                                      oVerSeer ALVIN V. ShoeMAKer, W’0, At the      WhArtoN AWArD For SoCIAL IMPACt reCIPIeNt              ni. The Wharton Club of Minnesota
                                      JoSePh WhArtoN AWArDS DINNer                   CAreN FrANzINI, C’80, WG’84                            held its annual economic preview in
                                                                                                                                            February with Gary Stern, President
                                                                                     Continued from page 34...                              and CEO of the Federal Reserve Bank
                                                                                         Cohen was presented the Joseph                     of Minneapolis. The following month,
                                                                                     Wharton Award for Leadership, which                    alumni enjoyed a tour, private recep-
                                                                                     recognizes alumni who embody the                       tion and performance of The Merchant
                                                                                     highest standards of leadership in both                of Venice at the new Guthrie Theater,
                                                                                     business and society.                                  the first U.S. architectural master-
                                                                                         Franzini was presented the Joseph                  piece by Jean Nouvel. This popu-
                                                                                     Wharton Award for Social Impact,                       lar event was made possible by Janet
                                                                                     which recognizes alumni who have had                   Kinzler, WG’92, who is also the
                                                                                     the greatest impact in public service, so-             Chair Emeritus of the club. Karen
                                                                                     cial enterprise or philanthropy.                       Listgarten, C’86, G’92, WG’92, ar-
                                      JoSePh WhArtoN AWArD For LeADerShIP                Mittal was presented the Joseph                    ranged a celebration of Earth month
                                      hoNoree SteVeN A. CoheN, W’, AND DeAN        Wharton Award for Young Leadership.                    in April through a tour and discussion
                                      toM roBertSoN                                  This award recognizes alumni who, ear-                 with Dominique Conseil, President
                                                                                     ly in their careers, have demonstrated                 of Aveda, Minnesota’s pioneer in en-
                                                                                     the greatest potential for leadership and              vironmental stewardship. Summer
                                                                                     lasting impact.                                        events took advantage of Minnesota’s

                                                                                                      A L U M N I   A S S o C I A t I o N   U P D A t e . W H A r t O N   A l u M N i   M A G A Z i N E .   3
           Alumni Association Update
          balmy climate, featuring annual favor-                                                                                     Prime Solutions, LP, soon led to a dis-

                                                                     tommy lEonardi
          ites such the MBA Alliance boat cruise.                                                                                    cussion of the need for marketing and
          The Wharton Club’s family-friend-                                                                                          sales talent. Krummel recognized the
          ly tent at the Polo Classic benefiting                                                                                     opportunity to make an introduction
          the Children’s Home Society & Family                                                                                       to a talented individual named David
          Services of the Twin Cities, was once                                                                                      Pierce, W’50, who had just the right
          again sponsored by Lowry Hill, thanks                                                                                      kind of professional experience to as-
          to Tom Hull, C’70, WG’78.                                                                                                  sist Fraser. Pierce and Fraser met and
              The Wharton Club of Minnesota has                                                                                      Pierce is now working full-time for the
          been active for decades, thriving due to                                    the VeNtUre CAPItAL For eNtrePreNeUrS          Spectrum-Prime Solutions.
          the continued dedication of Wharton                                         PANeL CoNVeNeD ALUMNI Michael aronson,             Former Board Member Alvin
          alumni, including past club presidents                                      WG’8, MANAGING DIreCtor, MeNtorteCh;          Rucker, WG’98, was looking for a
          Jim Ulland, WG’66, Jon Goetze,                                              alex Ferrara, e’9, VICe PreSIDeNt, BeSSeMer   business to acquire when he volun-
          WG’77, Robert Frost, WG’99, and Gail                                        PArtNerS; BoB Greene, W’82, Co-FoUNDer,        teered on the WCH’s Entrepreneurship
                                                                                      CoNtoUr VeNtUre PArtNerS; AND Michael
          Baumgart, WG’99. Many club mem-                                                                                            Committee. Through the club’s activ-
                                                                                      KopelMan, C’9, WG’05, eDISoN VeNtUreS.
          bers are attracted to this region by cor-                                                                                  ities, he met Charles Boyd, WG’91,
          porate giants such as 3M, General Mills,                                                                                   and began evaluating franchise oppor-
          Medtronic, Target, and UnitedHealth.                                        antiquated anti-scalping laws. As those        tunities. After considering several op-
          The mission of the Wharton Club of                                          laws were revised, StubHub benefited,          portunities, the pair acquired a group of
          Minnesota is to strengthen the Wharton                                      with the operation becoming profitable         ten Popeye’s restaurants — and found
          community here and to enhance the                                           and attracting major sports teams and          funding for the deal from a fund man-
          Minnesota experience — fostering friend-                                    top performing artists. StubHub also           aged by another WCH member.
          ships and invaluable contacts along with                                    attracted acquisition interest, includ-
          lifelong learning opportunities.                                            ing from eBay. In February it bought                              – Evan Betzer, WG’99
                                                                                      StubHub for $310 million.
                               – Carolyn Magill, WG’04                                   The evening before the conference,          Wharton Club of the Middle East
                                                                                      David Marshall, W’61, a Wharton                members welcomed prospective students
                                                                                      alumnus and real estate entrepre-              in Kuwait when Wharton’s Director of
           Second Annual Alumni                                                       neur, presided as Keynote of Wharton           MBA Admissions and Financial Aid,
                                                                                      Entrepreneurial Programs’ second annu-         Thomas Caleel, WG’03, held an infor-
           Dinner Brings entrepreneurs                                                al Alumni Dinner which was held at per-        mation session for the second year in a
           to Philadelphia                                                            haps Marshall’s most dazzling property,        row in Kuwait’s Four Points Sheraton
                                                                                      the Rittenhouse Hotel. Dean Thomas             Hotel. Speaking to a diverse group
                                                                                      Robertson offered the School’s vision for      of approximately 50 prospective stu-
          Philadelphia’s Union League may date                                        a Wharton Entrepreneurship Institute           dents, Mohammed Alshaya, WG’84,
          to the Civil War but as the location of                                     before nearly 70 alumni ranging from           Chairman of MH Alshaya Co Retail,
          this year’s Wharton Entrepreneurship                                        Class of 2008 to Class of 1959. Many           began the information session by urg-
          Conference, the buzz was focused on                                         also attended a lively pre-dinner session      ing the young audience to show passion
          the new and innovative.                                                     focused on building connections among          and zeal, and later spoke about his per-
             The conference featured pan-                                             the entrepreneurial community.                 sonal experiences as a Wharton alumnus.
          els, workshops and one-on-one ses-                                                                                         Next, Caleel detailed the admissions pro-
          sions aimed at educating entrepreneurs                                                                                     cess and emphasized its transparency.
          on how to build successful businesses.                                       Club News in Brief
          Wharton alumni were everywhere and                                                                                                       – Hassan El Houry, WG’07
          especially visible as panelists for sessions                                The Wharton Club of Houston
          related to such topics as emerging econ-                                    (WCH) has been a hotbed of connec-
          omies, social entrepreneurship, venture                                     tions and deals lately. At the WCH’s
          capital and real estate.                                                    UBS Speakers’ Forum Luncheon fea-
                                                                                                                                      Connections in Action
             The conference’s keynote, M&T                                            turing Frontier Oil CFO Michael
          alumnus Jeff Fluhr, E’96, W’96, im-                                         Jennings, Wharton School alumnus               david niu, WG’02, and andy liu,
          parted inspiration by describing how                                        Bill Fraser, WG’93, was introduced             WG’02
          he surprised even his parents in launch-                                    to Chris Krummel, WG’03, by Club               For David Niu and Andy Liu, Wharton
          ing StubHub, an online ticket market-                                       President Evan Betzer, WG’99. Fraser’s         connections began before they were even
          place. Fluhr told of traveling to state                                     description of his risk management             officially Wharton students. The two
          capitals successfully lobbying against                                      software business known as Spectrum-           men met in 1999 as admitted applicants

38   . W i N t E r   2 0 0 8 . A L U M N I   A S S o C I A t I o N   U P D A t e
during Wharton Welcome Weekend.               WhArtoN ALUMNI ASSoCIAtIoN BoArD oF DIreCtorS
At the time, neither knew whether
they would attend, much less that they
would end up as business partners on
                                               ChAIr                                                   ChAIrMAN eMerItUS
two successful Internet companies. The
                                               tama l. Smith, WG’90                                    Vige Barrie, CW’74, WG’76
latest, BuddyTV, is a two-year-old web
                                               President                                               Media relations, Hamilton College
community where TV fans read and ex-
                                               tama Smith and Associates, inc.                         198 College Hill road
change news and commentary.
                                               1800 Century Park East, Suite 600                       Clinton, NY 13323
    “We end up sleeping on the couch-
                                               los Angeles, CA 90067                                   B: 315-859-4623
es of two other students who were gone
                                               B: 310-229-5951                                         F: 315-859-4648
for the weekend,” says David of their
                                               E-mail:                         M: 315-725-7597
first meeting. “Both of us were consid-
ering deferring at that time. We both
ended up attending, and we bumped              PreSIDeNt
into each other in the fall at a Preterm       Craig Enenstein, WG’95, G’95                            WhArtoN eXterNAL AFFAIrS
lecture by Professor Peter Fader.”             Chief Executive Officer                                 Jillian McGowan
    The two were intrigued by Fader’s          Corridor Capital llC                                    Director, Alumni Affairs & Annual Giving
research, and eventually turned it into        11611 San Vicente Boulevard, Suite 800                  Wharton External Affairs
a business called NetConversions that          los Angeles, CA 90049                                   344 Vance Hall
they honed with the help of Wharton            B: 310-442-7001                                         3733 Spruce Street
Business Plan Competition and oth-             F: 815-301-2786                                         Philadelphia, PA 19104
er Wharton resources. With Fader and           E-mail:                           B: 215-898-0219
his PhD student, Wendy Moe, plus in-                                                                   E-mail:
terest and advice from Wharton alumni
and other VCs who visited campus, the
                                               Cameron Adair, C’69, WG’70                              leslie Morgan Steiner, WG’92
venture, which applied Fader’s research
                                               theresa Boyce, WG’85                                    Navin Valrani, W’93
toward increasing sales at web compa-
                                               Ellen Marie Desmarais, WG’02                            ronica Wang, WG’90
nies, showed so much promise that the
                                               Faquiry Diaz, C’97, W’97                                Adam Weisman, G’78
fledgling entrepreneurs dropped out of
                                               Adam Fein, GrW’97
school to pursue the company full-time
                                               Christian Hernandez, WG’03                              StUDeNt rePreSeNtAtIVeS
in Seattle, Andy’s hometown.
                                               Stuart B. Hill, W’82                                    Val Bauduin, WG’08
    Then the tech boom blew up, and
                                               Anne E. M. Kalin, WG’91                                 Craig isakow, WG’08
the two moved back to Philadelphia
                                               lorrie King, WG’91                                      Nichole Jordan, WG’08
to finish up their Wharton educa-
                                               Janet K. Kinzler, WG’92                                 Jeffrey livingston, W’08
tions. They brought NetConversions
                                               rocky lee, WG’95, GrW’07                                Dana Wade, WG’08
with them.
                                               Eddie Monteiro, E’01, W’01                              Brian Welch, W’08
    “We actually operated the headquar-
                                               l. David Mounts, WG’04
ters of NetConversions from a Chestnut
                                               rob Newbold, WG’99
Street apartment for a year,” says David.                                                              eMerItUS SoCIety rePreSeNtAtIVe
                                               Franck Noiret, WG’95
    With another year’s worth of edu-                                                                  Milton Silver, EE’50, WG’52
                                               Khadir richie, WG’02
cation tailored towards their entrepre-
neurial venture, David and Andy had
their degrees in hand, and a company        where we thought there would be op-                       BuddyTV now averages more than
that was in better shape than ever. They    portunities.” Three or four months                     3 million unique users per month, and
returned to their Seattle operations,       later, Andy and David had founded                      in 2007 it attracted a $3 million in-
then sold the company in 2004 to            BuddyTV. The new company didn’t                        vestment that was led by Gemstar-TV
aQuantive (which was recently acquired      take long to get off the ground either.                Guide. Andy and David still wear many
by Microsoft) for up to $7 million.            “Everything is much easier the sec-                 hats, but their site officially proclaims
    After the acquisition, they stayed on   ond time around. The experience of the                 Andy as the site’s publisher, David as
as senior executives for 18 months be-      labor pains and growing pains at Net                   the editor-in-chief, and their team in-
fore they were ready for the next chap-     Conversions was something we were                      cludes about a dozen staffers.
ter in their business lives.                able to leverage for BuddyTV to jump-                     “Whenever I talk to people about
    “We tried to take off some time to      start the growth and maturation of the                 what’s been helpful, I always mention
think about what we wanted to do next,      company. It was easier to recruit people,              the experience and the people I met dur-
what we enjoyed and what we didn’t,         it was easier to talk to VCs.”                         ing my time at Wharton,” David says. ◆

                                                             A L U M N I   A S S o C I A t I o N   U P D A t e . W H A r t O N   A l u M N i   M A G A Z i N E .   39
            Jan VanAmerongen retired to                Later Jake was Commander of          Wharton Leader                                                became active in the peace movement, helping to organize         the second industrial revolution, or do you want to be in a
         Amelia Island, FL, after 37 years             U.S. Naval Forces based in                                                                         the 1968 March on the Pentagon against the Vietnam War,          transition to the sunrise energies of the third industrial rev-
         in various VP positions for Best              Japan. He retired in 1996 but has    Jeremy Rifkin, W’67                                           before tackling broader power relations in a world driven by     olution?’ It becomes very clear when business leaders hear
         Foods International. When in his              continued to work in govern-                                                                       techno-capitalism.                                               that. It’s about their bottom line, but they’re beginning to

         last few years with the company,              ment-related and other ventures            eremy Rifkin wants to focus on his message, not             “I’ve been very critical of technology,” said Rifkin.        realize the bottom line is about their children too. There has
         Jan spent 65% of his time travel-             since then.                                himself as the messenger. When the topic is as criti-   “There are some technologies I like and some I don’t. I look     to be a balance between margins now and the future of the
         ing for Best, he decided enough                   He visited the campus last             cal as the future of the human race, it’s no wonder     at technologies in terms of the human story. This third          human race.”
         was enough. So, Jan turned to                 October and, like all of us who            that the influential economist/philosopher would        industrial revolution is a human story.”                            The long-time activist sees a change in business culture
         golf, and is president of his                 return after a long absence, finds   rather disarm his critics and focus on the bigger picture.        The third industrial revolution to which he refers is the    since he graduated from Wharton and Tufts University’s
         club’s golf association. To his               the campus startling and dynam-         “It’s a race against time,” he said, referring to the      adoption of a distributed renewable energy network that          Fletcher School of Law and Diplomacy, where he earned a
         surprise, Jan has two holes-in-               ically different.                    issue of climate change during a wide-ranging conversa-       uses hydrogen fuel cells for energy storage, as described in     master’s degree in international affairs.
         one to his credit. A force four                   Some of you know that as a       tion. He spoke with Wharton Alumni Magazine at the            his 2002 book, The Hydrogen Economy. Rifkin believes that           “Then, there were very few people challenging the cor-
         hurricane would put severe                    part-time preacher I am some-        Steinberg Conference Center, the home of Wharton              history’s most significant changes occur when societies          porate framework. There was Ralph Nader, and later there
         stress on the golf course and the             times called upon to present a       Executive Education, where he has been a fellow and           rework their energy regimes and reorganize their communi-        was me with biotech,” he said. “Now things have changed.
         island. A force five would put the            homily at a memorial service. I      lecturer in the Advanced Management Program since             cation systems around them.                                      Younger business people have grown up with the idea of
         island under water.                           prepare for it by listening to the   1994. Rifkin is also the president and founder of the             “The convergence of new energy and communications            sustainable business and corporate social responsibility.
            Jan met his wife, Pat, at the              deceased’s relatives and friends.    Washington, DC-based Foundation on Economic                   systems are pivotal points in human history,” he explained.      Now the idea of challenging the conventional wisdom is
         Port Washington (Long Island)                 I am struck by how much I really     Trends, the bestselling author of 17 books on technolo-       He believes the distributed communication system of the          coming from the business community itself. We have corpo-
         Yacht Club when they were                     never knew about his or her          gy, labor, and globalization including The End of Work,       Internet must now be translated into a distributed energy        rate leaders who realize that business is embedded in all the
         teenagers. Her college life at                abundant life. I close the piece     The Age of Access, and The Biotech Century, and a colum-      regime.                                                          relationships that make up human civilization.”
         Mary Washington and Katy                      by challenging the congregation      nist whose views are published worldwide in The Los               “What is a distributed energy compared to the elite
         Gibbs never kept her away from                and myself to find out about         Angeles Times, The Guardian, Süddeutsche Zeitung,             energies, oil, coal, gas, and uranium? Elite energies are the                                                        — Kelly J. Andrews
         a good party at Penn.                         each other’s lives today and not     L'Espresso, and El País. The National Journal named           ones you don’t have in your backyard, so they require huge
            Pat and Jan have a daughter, a             wait for others’ memorial ser-                                                                     geopolitical organizations and military investments,” he said.

                                                                                                                                                                                                                                                                                                         TOMMY LEONARDI
                                                                                            Rifkin as one of 150 people in the U.S. who have the
         son (C’87), and four grandsons.               vices to find out about them.        most influence in shaping federal government policy.          “Distributed energy is found in your backyard – the sun, the
            Jan recommends A Good Walk                     I found out a lot about Dick        Rifkin cited the Intergovernmental Panel on Climate        wind, hydro for dams, garbage that can be turned into ener-
         Spoiled for all frustrated golfers.           Gibson, a fellow I hardly knew at    Change, the group of 2,500 scientists that shared the         gy, agricultural or forestry wastes if you’re in a rural area,
            Jake Tobin entered the Navy                Penn. Talk about an abundant         2007 Nobel Peace Prize with former U.S. Vice                  ocean waves if you’re on the coast, geothermal deposits.
         Aviation Officer Candidate                    life! Dick spent a year or so in     President Al Gore, “By their calculations the whole               “When you and I and millions of people generate our
         School in October, 1960. In Jake’s            Greece, opened a bond depart-        world has seven years to get the right game plan to           own power with renewable energy, we store it using fuel
         36 year career, he rose to the                ment for Dean Witter back in the     deal with climate change, and there can be no mistakes.       cells, and then the surplus we don’t need we send back to
         rank of Rear Admiral.                         States, and returned to sail         We have to think of this as a global emergency and            an inter-grid, just as we produce our own information and
            Sally, Jake’s wife, says they              Aegean’s wine-dark sea with his      ourselves as homo sapiens and not let geopolitical forces     share it on the Internet.”
         dated ever since seventh grade.               girlfriend on a 36-foot Dutch        get in the way.”                                                  In the U.S., Rifkin was instrumental in founding the
         She graduated from Cornell in                 sloop. Ever the accomplished            So first, Rifkin wants to make it clear that he’s not a    Green Hydrogen Coalition, a group of 13 environmental
         1960 and remembers the one                    sailor, Dick made a modest living    technophobe. How could he be, when he believes that           and political organizations (including the Sierra Club and
         time she visited Penn, October                on Chesapeake Bay for five           technological innovation is the only means to solve the       Greenpeace) committed to renewable hydrogen. In Europe,
         19, 1959, for the Navy game,                  years chartering and sailing his     pressing issues of fossil fuel dependence, global warming,    he helped build consensus among European Parliament
         which we won, and for the frater-             own 34-foot sloop. Somewhere         and famine?                                                   members, leading to a 2005 commitment to convert the
         nity pin, which Jake gave her.                along the way Dick wrote a              Rifkin first became prominent in the 1970s as a vocal      European Union to a green hydrogen economy. One
         She also remembers 30 moves                   novel, a coming-of-age story         opponent of recombinant DNA research and genetic              notable convert is German Chancellor Angela Merkel, who
         during their 36 years with the                about two teenage alcoholics.        bioengineering; his 1977 book on the subject, Who             Rifkin helped convince to create a 500 million euro pro-
         Navy. And along the way she                   He also made documentary films       Should Play God?, seeded skepticism against the industry,     gram to move Germany into the lead in the third industrial
         christened the USS Pioneer, a                 for four years. How, you wonder,     which led to increased regulation. A 2000 article in the      revolution. He has also advised the current president of the
         mine-countermeasures ship.                    could he maintain a wife and         Virginia Journal of Law and Technology tracing Rifkin’s       European Union, Prime Minister Jose Socrates of Portugal,
            Now I have to tell you, I pull a           keep making these career             impact claimed that he “arguably single-handedly raised       Prime Minister Romano Prodi of Italy, Prime Minister Jose
         lot of my material out of some                moves? Simple: he didn’t get         the consciousness of the American public, and indeed          Zapatero of Spain, and members of the U.S. Senate.
         very modest people like Sally                 married until 1990, when he          the world, to potential risks of the technology.” His             Rifkin circled the conversation back to the custom exec-
         and Jake. We are all from that                found Elizabeth, a South African     activism can be traced back to his time at Penn during        utive education class he was teaching to a group of high-
         generation where we don’t like                who has made her way up many         the mid-1960s when the Wharton student/fraternity             level automotive executives. “I asked my class today, ‘Look,
         to toot our horns in public. But              Fortune 500 executive ladders in     member/cheerleader protested against the University’s         where do you want to position your company in 15 years?
         then how can I not tell you that              the U.S. By 2000, Dick had           participation in germ warfare research. From there, he        Do you want to be in the sunset energies and industries of
         Jake’s specialty was anti-subma-              earned a Master’s in Social Work
         rine warfare during the Cold War.             from Rutgers. Today he’s a

42   . W I N T E R   2 0 0 8 . C L A S S   N O T E S                                                                                                                                                                                   C L A S S   N O T E S . W H A R T O N   A L U M N I   M A G A Z I N E .            43
                           Wharton Leader                                                                 In 1994, she took on the task of reinvigorating the ailing
                                                                                                      LifeSavers subsidiary, where profits and sales volume had dipped.
                           Sharon Fordham, WG’77                                                      Fordham tackled the company’s supply-chain problems and intro-
                                                                                                      duced multiple new hit products, such as Ice Breakers gum and
                                                                                                      CremeSavers candy. Within three years, profits had more than dou-

                                         hese are the best of times for Sharon Fordham. When
                                         Wharton Alumni Magazine spoke to Fordham in                  bled, net sales had increased significantly, and the
                                         October, 2007, she was basking in the glow of the criti-     website was launched.
                                         cal and audience success of a “Tale of Two Cities,” a            As president of LifeSavers, Fordham believed that “destination”
                           major new musical she helped produce in Sarasota, FL, and hopes            or content sites would hold visitors and bring them back far more
                           to bring to New York’s Great White Way this coming season. She             frequently than websites filled with “brochureware,” which offer lit-
                           was even more optimistic about her “day job” – launching a new             tle more than product descriptions and company histories. Instead,
                           online community cofounded by her venture fund, The Fordham                the Candystand site offered free state-of-the-art games.
                           Group.                                                                         “When you think about the amount of time you spend playing
                                Fordham’s optimism is backed up by a long line of successes           one of our games, the brand message is constantly on the screen
                           online and off. She was the driving force behind the launch of the         helping to propel brand awareness and image in a way we’ve never
                           mini snack category with many blockbuster products from                    seen before, even in the off-line world,” Fordham said. “We felt that
                           Nabisco, including SnackWell’s, Teddy Grahams, and Ritz Bits, she          we wanted something that would bring people back. When we
                           resuscitated the LifeSavers Candy Company, directed global                 tried to envision the future, we felt the Internet was going to evolve
                           e-business strategy for Nabisco, and oversaw            along the lines of the TV economic model, so we were sure that
                           into a profitable online community in the early 2000s when other            providing content (much like a TV show) was the way to go.”
                           e-commerce ventures were crumbling.                                            Nabisco rewarded her with a new challenge as its president of
                                “I follow the opportunities,” she said. “I don’t really worry about   global e-business. She built, another very suc-
                           if I have the skill sets or knowledge because at the end of the day,       cessful industry-leading website, during her tenure as president for a
                           business is business and skills are skills. Marketing and sales are fun-   year and half until Kraft bought out Nabisco in a wave of industry
                           damentally the same even when the delivery may be different.               consolidation. Fordham moved on to become chief executive at
                           Good business people will find their way in the environment.”     , Inc., turning the pre-revenue early stage
                                Fordham made her name as senior marketing leader for Nabisco,         company into a profitable subscription site.
                           first during the 1980s when she launched a successful soft-cookie line          “I wanted to get experience in the venture industry,” she said. “I
                           amid a fierce competition with Procter and Gamble and Frito-Lay,            wanted to get experience in running a multinational company, and
                           known as the “Cookie Wars.” After moving on to launch ground-              we [] added several subsidiaries in major
                           breaking products including Teddy Grahams and Snackwell’s, she             European countries during my term as CEO, and of course I want-
                           parlayed her marketing knowledge into e-commerce first as the presi-        ed to firm up my e-commerce experience.”
                           dent of LifeSavers during the phenomenal launch of             “It was tremendous experience overall. The company was very
                                                                                                      successful, and the buyout was very successful,” she continued, refer-
                                                                                                      ring to the buyout of by the licensor, Weight

                                                                                                      Watchers International, at a hefty multiple that she helped orchestrate.
                                                                                                          Next Fordham took the opportunity to pursue her own promis-
                                                                                                      ing venture idea until she uncovered intractable legal issues. “I knew
                                                                                                      enough about new businesses to know when you should hold and
                                                                                                      when you should fold,” she said.
                                                                                                          The insight gleaned from her meetings with investors and fellow
                                                                                                      entrepreneurs led her into the next act of her career as a venture cap-
                                                                                                      italist with The Fordham Group, founded in 2005.
                                                                                                          “I’m not a pure entrepreneur,” she said. “I’m more comfortable on
                                                                                                      the investor side and as a cofounder. It’s been a fascinating transition.
                                                                                                      You really see the future in many of these little startup companies.”
                                                                                                          The company has a portfolio of seven companies, including two
                                                                                                      in water drilling and another in microbe testing that reduces the cycle
                                                                                                      time and increases the accuracy in testing for food contaminants.
                                                                                                          Fordham is devoting much of her energy to a project that is closest
                                                                                                      to her expertise – an online entertainment and social community.
                                                                                                      “We’re about halfway built at this point and marching toward market
                                                                                                      entry in the foreseeable future. That’s consuming a huge amount of
                                                                                                      my time, and I’m cautiously optimistic about our prospects,” she said.
                                                                                                          For Fordham, the best of times are always yet to come.

                                                                                                                                                         — Kelly J. Andrews

50   . W I N T E R                  2 0 0 8 . C L A S S   N O T E S
          JUdith l. BolliNGer, WG’81

          Judith Bollinger (née Comeau) has enjoyed
          plenty of successes in her long career as
          an equity analyst and current chairman
          for ABG sundal Collier. But first she landed
          a dream job with CBs News as a brand-
          new college graduate. the only problem:
          it wasn’t her dream.

             “it was very glamorous because i was in produc-
          tion working with the stars, and i really didn’t like it,”
          says Bollinger, who grew up in oreland, PA, outside
          Philadelphia and earned her bachelor’s degree in english
          from Kalamazoo College. “i felt that the news was all            photo courtesy of Judith Bollinger

          about filling up the half-hour as opposed to providing any
          intellectual or insightful analysis.”                               with the issue of corporate social responsibility from a
             one of her coworkers on the business side told her she           european perspective, and along with her fellow board
          wasn’t suited for production, and she should go to Wharton          members, supported an initiative on that topic. she also
          for business school.                                                became a Penn trustee in January, 2008.
             “i got in, fortunately,” she laughs.                                 in 2007, the Bollingers gave Wharton $6 million to sup-
             once she was admitted to Wharton, she didn’t make the            port scholarships and fellowships with preference to interna-
          mistake again of being swayed by glamour or trends.                 tional students. half of the Bollingers’ gift was to establish
             “i graduated with my MBA in 1981 before the bull mar-            the Judith and William Bollinger endowed scholarship for
          ket,” she says of her career path. “the idea of becoming            undergraduates, and half was designated for the Judith and
          a security analyst in the equity market wasn’t something            William Bollinger endowed Fellowship for MBA students.
          anyone was interested in. the equity markets were very                  “A whole lot of international students wouldn’t even
          lackluster and in poor condition. i interviewed with all the        look at American universities because it just seems so
          consulting companies, but i felt a longing to get my hands          expensive,” she says. “We wanted to make it easier for
          dirty and dig very, very deep in one particular sector,             those students who didn’t have the financial means.”
          which of course is what equity analysts do.                             she continues, “My husband and i find it very reward-
             Bollinger worked at Goldman sachs for 13 years — first           ing and satisfying to meet with the young people who are
          11 years in the New york office, where she was ranked by            just entering Wharton today. they have the energy, and
          Institutional Investor Magazine as one of the top three ana-        with the education and experience, they have the oppor-
          lysts covering the aerospace and defense electronics sectors,       tunity to make the world a better place. We provide the
          then for two years in the london office, where she served as        financial help so they can provide the solutions.
          head of european and UK research. in 1999, Judith joined ABG            Bollinger, the mother of two, is deeply involved with
          securities, a small swedish brokerage firm, first as research       educational and children’s charities in the UK including
          director and later as Ceo. As Ceo of ABG, she executed its          independent opera, tommy’s (a nonprofit that supports pre-
          merger with sundal Collier in 2001. today, Bollinger is chair-      natal and infant health), and the latymer school. Now with
          man of the board of ABG sundal Collier, a full-service invest-      the Campaign for Wharton underway, Bollinger’s latest goal
          ment bank listed on the oslo stock exchange.                        is to help her fellow alumni reconnect with the school.
             Bollinger was still in New york when she and her hus-                “there are 1,200 Wharton alumni in london,” she says.
          band, a hedge fund manager, endowed a professorship                 “it’s my objective that by the end of the campaign in five
          focused on international issues. After the couple moved             years, that we can touch every single one of them.” ◆
          to london, Bollinger joined Wharton’s executive Board for
          europe, Africa, and the Middle east. she became involved            – K e l ly J . A n d r e w s
80   . s p r i n g   2 0 0 4 . s t o r y   t i t l e

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