Jeff Cunningham is former publisher of Forbes Magazine and founder of Directorship Magazine, the leading publication for corporate directors. During his 40-year career, he served as an adviser to many Fortune 500 CEOs and boards on corporate governance issues, leadership and crisis management. Jeff served on the board of several technology and multinational corporations.
In addition to having his own extensive boardroom experience, Jeff has also interviewed some of the biggest names in business, including Berkshire Hathaway’s Warren Buffett, Hewlett-Packard’s Meg Whitman and Goldman Sachs’ Lloyd Blankfein.
Jeff is a faculty member at Arizona State University’s W. P. Carey School of Business and the Walter Cronkite School of Journalism and Mass Communication.
He and Richard Torrenzano met recently to discuss the evolution of the media and its impact on CEO communications and corporate governance.
Richard Torrenzano: Can you tell us a little about your background and how your career evolved?
Jeff Cunningham: I was publisher of Forbes magazine. When the Internet started, the popular thing was to put it down. We all learned a lesson of what happens when someone is innovating.
As I watched what was happening at Forbes over the years, you had to take one of two paths. You either concluded that the others would never match what I was doing, because I am so smart. Or, you went the other way and said maybe the market would be satisfied with something less if it were free.
Around 1996, I thought things were not looking so good at Forbes. I concluded that print wasn’t going to come out very well and that’s when I said I’ve got to get into the Internet. I joined an incubator called CMGI, which at the time was worth 40 billion dollars. This move taught me, everything I know about disruption and innovation.
After CMGI, I went into venture capital and invested in Internet companies. Today, I have a portfolio of 200 early stage startup companies and I’m a professor at Arizona State University’s Thunderbird School of Global Management.
RT: Everyone thought by now that most print would be gone. Will print be around in five or ten years? If so, in what form?
JC: I am reminded of MacArthur’s expression, “old soldiers never die, they just fade away.”
Print is still very effective. Digital content is ineffective as an advertising medium. It’s just cheap, frankly. You are not selling a lot of product through digital content and I’m not referring to search spending, which is totally different. Today, native advertising and digital media are really just ad agencies in disguise creating content to promote advertisers. So, that leaves print as the last pure form of traditional advertising, so there is a place for it. I think readers respond to it. It will never be a major advertising vehicle, but I think it will stabilize.
RT: Recently, there was a milestone, which went unnoticed. While Forbes has an exceptionally fine website, Forbes did something interesting that was that they started posting content on Twitter and Facebook and LinkedIn before it was posted on their website. Is this a trend that will emerge in 2017?
JC: I think you could argue that the end of the website is analogous to the end of print. Websites are a gross misspending of financial resources – nobody’s going to a website anymore. Facebook, Twitter and the swarms of social media platforms have done to the website what online banking has done to the teller.
Now the question we have to ask is – are they throwing fuel on the fire that is burning it, because a magazine without a website, without traffic to the website, is just a hollow brand. I think they are being realistic that all their traffic is coming in through social media. That is where they are getting their clicks. But the more that they play the social media game, the less reason there is to go to the website. I think they are being realistic, but I do not know that they have an endgame.
RT: Let’s change subjects and talk about corporate leadership, particularly CEOs. You do many interviews of CEOs through your interview program at Arizona State University. If you looked at CEOs today, what do you think are the two or three things that they’re most concerned about going forward?
JC: When I interviewed Jeff Immelt, he had said this is the most anti-business period he’s known in his 30-year career at General Electric. He has seen it all and from a perspective that frankly, is very credible.
I would say that chief executives have to recognize disruption. Their businesses are being disrupted, but just as importantly, their employee base is being disrupted and their relationship to the centers of power, governments, bureaucratic organizations around the world – those relationships have been disrupted.
A company can be successful in the United States and have trouble in China, trouble in Europe. When you’re running a global organization, you’re taking on a degree of complexity like never before. I think the challenges for CEOs are one that they have to have incredibly good people on the ground in various parts of the world and a reporting relationship that is stronger than command and control. A CEO today is really a coach of a team of CEOs.
They have to understand their employee base. They are hiring millennials and the rules are different. If they expect the same kind of commitment they had twenty or thirty years ago – that is going to change. I think those millennials and diverse employees are committed, but they are committed in a different way.
Finally, they have to be mindful of regulators who are in the most anti-business mood imaginable, but they also see business as a fund for their pet projects. You saw this in the financial crisis; you have $250 billion of fines, and an equal amount in legal fees that the major banks had to pay to the Department of Justice. Those were shareholder dollars that paid for mistakes that were, to a certain extent, caused, or at least contributed to by the very government that’s supposed to oversee the banks. The relationship to those centers of power is so incredibly complex ... Jamie Dimon said that their biggest branch office now is in Washington, DC.
RT: If you look at the disruption that is coming to Washington, we are going to see a paring back of many regulatory apparatus, and many regulatory rules from taxes to banking oversight, healthcare and so forth. This seems to be setting a stage. If we have this pushback in regulation in the United States, what sort of pushback do you see in the regulatory apparatus, perhaps in Europe and Asia?
JC: I think you’ll see increasing regulations in the developing world, China, sub-continent India, parts of Asia, but I think in places like Japan, EU and the United States there has to be regulatory reform because regulation has impeded growth. Some of the regulations that we have put into place have made no difference in terms of the environment, climate change, humanitarian issues, and yet they have been tremendously costly. And that’s where the media has really failed. The media has jumped on the bandwagon of regulation and my perspective on the media is that they’ve recognized that government is a power player and to maintain their relationships with government, they’ve simply become more of a parrot.
I remember the days when media and government were antagonistic. You go back to the administrations of Richard Nixon, or Jimmy Carter, Ronald Reagan as well; they despised the media. The Obama administration has been very cozy with the media, and I think the media in their own self-interest found that it payed to play the government’s game.
RT: Donald Trump, love him or hate him, has about 40 million social media connects, friends – 18 million on Twitter alone. 40 million impressions are two and a half times today what the nightly news shows have as eyeballs each night. There is a shift coming and I’m wondering if Trump is showing the way for other CEOs to build a following in social media and using that to grow the company, perhaps in a different way.
JC: It is a slippery slope. If you were an industrial CEO and I were on your board and advising you ... and you said should I go on Twitter, the answer would be yes and the discussion would be around how to do it without doing something stupid, which is so easy to do.
Trump is clearly a perfect example of a disruptor. He bypasses the gatekeeper, which is the media, and he speaks directly to constituents. The downside is it is hard to convey nuances, and so he’s constantly having to walk back comments because of misinterpretation.
A CEO today who does not use social media is no different from the CEO in 1960 that did not know how to speak in public. CEOs have to be adept at social media. I think the question is how; and there aren’t many that are good at it.
RT: Let’s switch to corporate governance a little bit, and let’s talk about boards. If you talk to some of the key recruiters around town, they’re always complaining that they are having trouble finding qualified board members; or people that are qualified just don’t want to serve on boards anymore because of the nature of lawsuits and other things that we’ve seen over the years. You advise many boards and you have served on several boards. What do you think the field is today in terms of board governance and board members serving? Do you see this becoming harder and harder to do? Do you see people stepping up to the plate? Do you see people not wanting to put their long hard life savings on the line of deep pockets from some investors who might want to sue them? What do you see in the next couple of years in the governance and board area?
JC: The board is a very complicated place. I will use the example, when you are growing up, you probably had a pool in your backyard, or a neighbor’s pool. For the most part, the parents around the pool watched over the children, and if some child was in trouble, they stepped in and saved them.
The example of the board today is the regulators come in and say no, no, no; we need a lifeguard with twenty years lifeguarding experience. We call it Sarbanes-Oxley, and Dodd-Frank. We changed the dynamics of who is in the boardroom and we worship to the god of expertise. The problem is we stopped worshipping to what Warren Buffett described as business savvy. So, board directors are not advising their chief executives anymore, they are monitoring.
The key problem is time. There are five times a year when board members step into what might be the most complicated organization in the world and given reams of information you cannot possibly digest and being told things you cannot check. It’s all being confirmed by lawyers and accountants who don’t work for the company, but are paid by the company. And you’re expected to be an effective steward.
That is the problem. The solution is board diversity. The example I just gave you of the tyranny of expertise is what is preventing significant numbers of women and minorities from serving on boards. Because they have not been in the game long enough to have risen up through the chief financial office, to be able to serve on boards.
If we simply wanted people with common sense to advise the CEO on what is happening in the world and in their world, the numbers of candidates for boards would increase dramatically.
The reasons boards do not make these changes is the liability question. The plaintiff bar is the largest contributor to the Democratic Party, so the Party must support laws that enable the Plaintiff Bar to pursue class action lawsuits against directors. People who have never stepped in a boardroom will tell you that, well, there have only been a handful of cases where directors have been personally liable, and that is true. The problem is saying a heart attack isn’t dangerous because most people survive it.
A class action lawsuit against the board may last for three years or more, and every day the director is burdened by this could force them to disgorge all their personal wealth. At the end, if it went to the jury, they would disgorge. That’s why there’s always a settlement, but the settlement is never clear, and the plaintiff bar, knowing that you have to have a settlement, has all the leverage, so they’re getting enormously wealthy. That is one reason boards will not be bringing on many new, inexperienced – meaning not having deep C-suite expertise – board directors. They cannot take the liability.
RT: Like we did with the CEO, let’s look at boards. What trends do you see may be emerging that we have not seen yet for boards?
JC: There was a trend towards smaller boards after DoddFrank. That is probably the biggest reason we don’t have sufficient diversity. Obviously, if you are downsizing your board, only new directors are filling in retired places, and they are seldom. When I first started serving on boards, the first committee you went on was audit because you saw the whole company. That stopped after Sarbanes-Oxley. It now requires an advanced level of financial expertise to be on audit. It treated audit committee members as if they were jet pilots, not as if they were in the cockpit learning how to fly. And so that reduced the number of board members, but I think boards actually have to increase.
Otherwise, women are 21.5 percent of an S&P 500 board of directors right now. In ten years, they will be at 28 percent. I think women are saying they are not going to stand for that. So, that’s going to be a problem. Minorities, Hispanics, African Americans, Asian Americans, or even a lesser minority, are going to want to have larger, dominant roles on boards. That is not going to happen unless we find a way to bring people on.
Ken Chandler is executive editor at Newsmax Media, a leading independent online news site and magazine. Before joining Newsmax, Chandler spent 29 years at News Corp. in the United States, where he was editor-in-chief of The New York Post and editorial director of the Boston Herald.
He and Richard Torrenzano met recently to discuss how journalism and media have evolved and what it’s like to operate in the current political environment.
Richard Torrenzano: You are well known for being the publisher and a journalist for The New York Post for many years. Can you tell us about your news career before the The New York Post?”
Ken Chandler: As you’ll probably discern from my accent, I was born in London and I spent my first 27 years of my life there before coming to the States.
I was in the newspaper business from a very young age. I started as a training reporter when I was 18 years old on a suburban community weekly newspaper. And I finished up on Fleet Street, went to work for Rupert Murdoch, he owned a newspaper there called The Sun. It’s the biggest selling newspaper, was those days, selling five million copies a day ... one of the largest newspapers in the English-speaking world.
In 1974, he asked me to come to the United States. He’d begun to make investments in the newspaper business here. He started off with a small newspaper in San Antonio, Texas, eventually bought The New York Post, The Boston Herald, The Chicago Sun Times, then Fox.
RT: Did you start at The New York Post as a journalist?
KC: Yes, I started as an editor and then became managing editor. I then went to The Boston Herald as editor-in-chief in 1986.
I came back to New York and did a little work with Fox television. I was the executive producer of a show called “A Current Affair,” which was like the granddaddy of the tabloid TV shows. So, blame me for tabloid television.
I came back to The New York Post as editor-in-chief then I became a publisher. I retired from News Corp in 2002.
RT: How did you end up at Newsmax?
KC: I was fortunate enough to reconnect with Chris Ruddy, founder and CEO of Newsmax. He and I had worked together at The New York Post, he’d been a columnist when I was the editor. So right now, we have a little role reversal. Chris founded Newsmax in 1998. And it’s been profitable, ever since. And there’s not a lot of web news organizations that can say that.
RT: Tell me about what you do as editor-in-chief of Newsmax? Is it print, is it television, is it a combination of things?
KC: One of the fortunate things about this job, which I really love, is the fact that it’s a bit of everything.
We have a monthly news magazine, we publish about 17 newsletters every month on financial and health issues.
We also have a huge website that reaches almost sixty million Americans every month with political news, health news, financial news, and we’ve just recently started a 24-hour TV channel.
So, I’m lucky, I have my foot in everything. As executive editor of “Newsmax,” I’m responsible for the editorial content across all those platforms.
RT: What are the opportunities for Newsmax in the next five years?
KC: There are other opportunities that are going to be out there and we probably don’t know what they are at this point because technology’s evolving so fast.
RT: In the last five years, we’ve seen a lot of pressure on journalism as a business. Margins, advertising, technology, journalism ethics. You were the editor and publisher of The New York Post in its heyday. What has changed with print? Is there a role for it going forward?
KC: I think that newspapers will continue. But will be severely diminished. I don’t think there’ll be so many of them.
But, you know, it’s like when television came along, people said well, that’s the end of movies. Well guess what, movies still survived. They had to adapt, they changed, they had to be more targeted in who they were appealing to, but they are still there.
Newspapers, if they’re smart, will be able to adapt. But it will be much more challenging, because traditionally newspapers had two forms of revenue. They had the 50 cents, the subscription that you forked over, and they had advertising. Advertising has pretty much gone away.
RT: Well, as newspapers are changing, is the influence they have greatly changing?
KC: It is, and unfortunately, it’s a generational thing.
People of our age may still be clinging onto the habit of reading a print newspaper. Most young people read it online, but they never read the print edition.
RT: Let’s talk a little bit about the influence of media. What Donald Trump has done is dramatically change the influence through the use of technology, through things like Twitter, and so forth. Is that something you see? Will that change? Will it continue to move in that direction?
KC: In different ages, Presidents have looked for a way to communicate directly to the citizens – remember the Fireside Chats with Roosevelt.
Donald Trump realized how useful it could be, because you get the message out there, it doesn’t get filtered by the media, it doesn’t get edited, and it’s out there for what it is.
RT: If you go back in American history, you see this kind of mudslinging that’s really gone on. During the Burr era, we had fake print news, but today we have fake Internet news, which obviously can be seen by many more people. What should journalists be doing now to address this, and how are they going to recapture perhaps some of the credibility loss in terms of the American people?
KC: You just used the very important word, credibility. And maybe I’m old school but to me credibility counts for an awful lot. It’s really the only currency we have as journalists.
You can fool people once, maybe fool them twice, but the third time they’ll say that that website doesn’t know what it’s talking about.
So, for an organization like Newsmax, credibility is absolutely crucial. And when we see a story like the one that came out with Trump and security services, we take a very cautious approach to stories like that, because there’s just no prize for being wrong.
One of the issues for me with the Internet is that it’s a work in progress. It’s very democratic, anybody can get on there. In the old days, you used to have to own a newspaper and buy the ink by the gallon, and you had to be rich. Anybody can get on the Internet now and say what they want. There will be a sorting out process.
And so you can’t get caught up in this fake news stuff. I mean everybody makes mistakes, but you know, fake news is a danger.
RT: One commentator was recently talking about the spiral down of CNN. They’re obviously in their crush years right now. What should the editor do, or what should a newsperson do, to try to give credibility back to CNN, rather than just a new ad campaign?
KC: Once you make a mistake it sticks for a while. They’ll get over it, and CNN’s a pretty good news organization.
Let’s go back to when I came to the States 40 years ago, when you really just had CBS, ABC and NBC. And let’s suppose a story like the Trump security services story had come up then. You know, there’s no way that Walter Cronkite would have broken that story without being 100% sure of it. And he would of sat on it and sat on it, because he knew that the other two wouldn’t do it either.
These days, you don’t know that if you sit on a story, somebody else isn’t going to break it. So you have competitive challenges that didn’t exist previously. And there’s a lot of so- called journalists, who really aren’t journalists and do not have any journalistic background or journalistic training. They don’t really understand what they’re doing in some cases.
RT: All of these new websites, whether they be as elaborate as yours or as small as maybe a blog by somebody, are beating out newspapers and television to a great extent, perhaps even radio, because they have the ability to post things quickly, if indeed they check out. Can traditional outlets play?
KC: It’s really very simple. When I was editor of The New York Post in the 1990’s, before the Internet really took off, every morning you paid me 50 cents to buy the paper and I told you what happened 24 hours earlier.
There has been a sort of see change in the way we consume news. Now, I pull out my phone, I can see what happened 24 minutes earlier or 24 seconds. And I don’t have to give you 50 cents.
The whole thing has changed and it’s one of the reasons why newspapers are not doing well, because it’s old news by the time you get it.
RT: It seems newspapers and magazines are becoming more analytical than the news itself. The news is out there for sometimes six, eight, ten, twelve hours, it’s been announced, and they need to go in and analyze it and provide a different service than just giving me the news I was able to read on my phone. Is that reasonable?
KC: That’s true, the Internet has been this huge disrupter. It used to be we’d all come home at night and watch Walter Cronkite. We no longer do that, then we viewed CNN, MSNBC or Fox for breaking news, but we really don’t do that anymore, because we get this breaking news on our phone.
So the cable news networks have had to adapt. If you remember CNN originally, it was really just rolling news, and remember they had that channel “Headline News,” nobody needs that anymore because it’s on your phone. So they’ve had to change – that’s why you have so much analysis and commentary in the evenings, because by the time people turn on TV at night, they know the news, they want to hear people’s opinions of the news.
I was talking to someone the other day who works for one of the news stations in New York. Their ratings are suffering because it used to be people would turn on the news in the morning to find out the weather and the traffic and stuff like that, and then maybe they’d go to an FM station for music. But they’d go to the AM station to start with. They don’t need to do that anymore, because they look on their phones. Their phone is their alarm, it goes off, it tells them what the weather is, and tells them if the world has exploded overnight while they were sleeping.
RT: Let’s look into your crystal ball. Where do you see all this going over the next few years?
KC: The big players will be around, especially those that have big corporations behind them, because they have the means to withstand the ups and downs and they can rebrand themselves, and if they get into trouble, they’ve got the resources to get out of trouble.
You will see a lot of consolidation among the smaller players on the Internet. And of course, we don’t really know what’s going to happen to the Internet, how it’s going to be regulated, what the future is for that – that could have an impact.
RT: Given the changing landscape and some recent incidents, is there a discussion amongst the journalist community about ethics and credibility and an approach?
KC: I would say that there is discussion, but it’s not a very effective discussion. People who are in this business, are fearful of losing their jobs particularly in the print business, there are cutbacks all the time. We’ve talked about the Internet’s effect on print, but let’s talk for a moment about the Internet’s effect on broadcast television, because broadcast stations are in a squeeze at the moment, because they’re seeing their advertising revenues move to the Internet. A lot of local news stations are questioning the need to have expensive news operations, although traditionally they were profit centers, but maybe not so much now with the Internet and video-on-demand and YouTube. So there’s always been a lot of sort of navel gazing in the business about ethics. People think that – I want to keep my job – is now more of a concern than it’s ever been. Because there are not a lot of good journalism jobs. There are a lot of entry level positions, but if you’re an experienced journalist, your options are very few and far between at the moment, because newspapers are not hiring. And they were traditionally, the biggest employers of journalists. TV stations may still be hiring but, as we know from the TV business, your journalism experience isn’t necessarily what counts to getting in front of the camera.
RT: Today you can go online almost immediately and listen to a presidential speech or something similar without having to listen to much additional commentary. What effect did this change have?
KC: I’m actually convinced that that was a contributing factor to the growth of Newsmax because when I came onboard here, six years ago, we had a very small group of people who would video record interviews with politicians, and we would post the video on the website, together with the story. So people could read the story, but they could also watch the video. And the video is unfiltered – and we always made a point at Newsmax of not interrupting politicians, letting them say what they wanted to say, whether they were republicans or democrats. So they knew, the reason they would come on Newsmax is because they knew they were going to get a fair shake, and they would be able to get their message across. And I think the public really appreciated the opportunity to see politicians talking without being interrupted by some smart-aleck overpaid, over pampered, overdressed reporter in an elite New York Studio.
RT: Who do you compete with at Newsmax?
KC: There’s no one competitor, because we’re in print, we’re in television and we’re a website. What makes Newsmax a little different is that we identified a market that we feel is underserved, and that’s age 45 and older – the baby boomers. Madison Avenue has typically been obsessed with 25 year olds through advertising. Chris Ruddy, the CEO and founder of Newsmax, looked at this baby boomer generation and said here is a group of people that have a lot of disposable income, they’re not being catered to, and we see a real opportunity in the market. So, that’s why our political coverage is very popular. As I said, we’re reaching up to almost 60 million Americans every month now on our website.
ComScore, which rates websites, rated us as the third biggest conservative news website in the country. So, we’re reaching that demographic. But, of course, they’re also interested in health, it’s a big issue for baby boomers now, as is financial issues, retiring, planning, investing, and stuff like that.
So, we are absolutely laser focused on appealing to that demographic, that’s what we do, and that’s who we do it for. And you know, I like to describe “Newsmax” as sort of a one stop shop to come to for the baby boomers where they can find out what’s going on, and they can find out lifestyle stuff that’s of interest to them.
RT: As the baby boomers get older, and as a new generation moves into that space, will you try to change your format to engage that new generation?
KC: We will adapt, we’ll have to. I think traditionally, when people do get to that age group, they all have the same interests. Our parent’s generation probably had the same interest at that age, health – different times but the same interest so that won’t change.
RT: Let’s talk about, the difference in the way news is delivered today. Many, are reading the news digitally on their iPhones, on their iPads, on their computers, versus the way we all grew up reading an actual newspaper, getting our hands dirty. Talk about your experience with this, and where this trend is going?
KC: Well, I had this sort of hallelujah moment about four years ago. I commute to New York City on the train from the northern suburbs. I was on the train one morning with my armful of four or five newspapers that I buy at the newsstand. As I was looking for a seat I just happened to notice, probably a couple hundred people in the car on the train, there was only one other person reading a newspaper – he was older than me. And I thought to myself, oh my God, I’m a dinosaur. I don’t want to be a dinosaur. So I got to the office, I got out my iPad, and I started subscribing to newspapers online. I don’t think I’ve picked up a print newspaper maybe a couple of times since then.
When you get your news online, you tend to bookmark stuff that’s interesting to you, so you’re kind of in your own bottle. If you buy a newspaper and you flick through pages, you’re going to come across stories that you didn’t know you were interested in and things you didn’t even know existed. So to me, the print newspaper reading experience is a great experience, and I’m very sad that the younger generations aren’t going to have that experience.
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Norman Pearlstine is chief content officer and executive vice president of Time, Inc. and oversees editorial policies, works closely with all Time, Inc.’s editors and seeks growth opportunities for brands across all platforms.
Pearlstine served as Time Inc.’s Editor-In-Chief from 1994 through 2005; was senior adviser to Time Warner Inc. and to the Carlyle Group’s telecom and media team before joining Bloomberg in 2008 as its chief content officer.
Pearlstine began his career at The Wall Street Journal and was executive editor, Forbes magazine. At the Journal, he served as managing editor (1983-1991) and executive editor (1991-1992).
Pearlstine authored OFF THE RECORD: The Press, the Government, and the War over Anonymous Sources, published by Farrar, Straus and Giroux in June 2007.
He and Richard Torrenzano met recently to discuss the state of journalism and what the future holds.
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NP: I think we’ve had to really understand the promises we make to sources when we take information from them, given the laws on the books and the fervor with which they’re being pursued. For example, as I learned, in 2005, when the Valerie Plame case led to the calling of a special prosecutor who wanted our sources that the Supreme Court had ruled in the early 70s in a case called Branzburg that when it comes to testifying before a grand jury, there’s no First Amendment privilege enabling a reporter to keep sources confidential. Most journalists don't think about that when they’re talking to a source who says, “Are you going to protect me on this story?”
It’s especially difficult when you’re not only saying, “OK, I’m willing to go to jail but am I also willing to have 40 people who might see your name in an email go to jail as well? Am I willing to submit my company – subject my company – to fines that could very well put it out of business?”
It’s an important question. There are certain times when the answer is yes and you would say, “The information I have is in the public interest. The person I’m trying to protect, their life or livelihood may be at stake. And this information is so important that I’m willing to grant that level of confidentiality.”
I think Snowden’s a really interesting case because while Snowden did a lot of things that were probably illegal, I don’t know that it was necessarily treasonous.
He thinks he was a great public citizen. There’s no doubt that if a journalist gets the information about something like PRISM, it is in the public interest to publish. Our government was doing a level of eavesdropping that goes far beyond anything that I think most citizens were aware of. And I could see as a journalist that you might want to grant confidentiality in a circumstance like that.
At the same time, I think in most cases, the argument is not a compelling one. That you really have to say to your source, “Look, I’m willing to grant anonymity, willing to fight for that. But I’m not going to break a law to keep this information anonymous because it doesn’t rise to that level.”
RT: You faced these issues all the time in Fortune and other publications, particularly on national security and other important issues. What rules do you have? What discussions go on about these kinds of issues?
NP: In the year I’ve been back, I’ve been focused on some other issues but it certainly has come up. There have been a number of stories, particularly in Sports Illustrated, where I’ve sat with counsel and with editors and said, “OK, we’re going to grant anonymity,” one where we did grant confidentiality. “And we’ll take that risk that the district attorney might call a grand jury and if so, we’ll have to go through that battle. But, if we think that the story is in the public interest, we’re going to go with it.”
Government has every right in the world to try to prevent leaks. What complicates it is that there are so many cases where the government actually wants the leak, to put out a trial balloon, embarrass an adversary.
Well over a million people have some kind of classification as a “classifier.” So with that ability to deem information classified almost on whim, it becomes harder to say, “Well, we’re never going to take any information that’s classified,” because often the person leaking it to you is a high government official that’s happy to get that out.
RT: Perhaps for his own agenda…
NP: Yes, for his own agenda. And that’s a separate issue
There is this tendency among journalists to assume information given on a not-for-attribution basis is more credible than information that is put out where a name is attached to it. The idea is that well, you’re spinning me if you’re going to put your name on it. But if you actually have something good, you’ll want to go on record. So trying to train reporters to say, “Look, you really need to be on the record about this. There’s no reason not to be. My readers are going to treat this story as being far more credible if it has a name attached to it than if I have to say that it is an anonymous source.” And you have to push really hard to do that.
At the same time, one of the things you do have to train reporters is to not put yourself in a position where you’re actually abetting criminal behavior on the part of someone to give you information. And we’ve had cases where we’ve gotten awful close to crossing that line.
RT: If you look at the credibility of the media, you know, as the American public today, like most institutions out there, it’s way down. The recent USA Today Gallup show only 36 percent of Americans believe news organizations get it right, where in 1989, 54 percent. How do you regain some of that public trust?
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NP: Well, it’s difficult. Some is a function of performance that isn’t as good as it ought to be. Some of it is that as a society, we’re far more polarized than we were 20 years ago and, if you will, ideology has really replaced reporting in an awful lot of places.
So when Fox talks about it’s always being fair and balanced and it keeps saying it’s fair and balanced enough, the people who like what Fox does come to believe it is fair and balanced and everything else should be distrusted. And then MSNBC comes along and it has a different definition but it really wants to be a counterpoint to that. And CNN finally gets up, put in the middle, and says, “Well, if we’re more sensationalists, maybe we’ll get more ratings, more traffic.”
But second, there’s just such a proliferation of information.
And I’m one of those people who think that bloggers should have all the protections that professional journalists have. I don’t think the First Amendment was written for big media companies. It was written for somebody in pajamas writing for the penny press. But the reality is that there’s so much information now and frankly, so much misinformation that it’s very easy to lose faith in the press, or media.
I was listening to a radio station in San Francisco, a talk show about Ebola. And the misinformation out of the host was just staggering. I mean, beginning with saying that Lagos was the capital of Liberia and then it went on from there to how the CIA had actually created Ebola as a way of poisoning missionaries who were undermining their efforts in developing Africa. I mean, it was just like whoa, where does that come from? And I’m sure there were a number of people listening to it who were shaking their heads saying, “Yeah, yeah that’s absolutely right.” While I’m saying, “No wonder nobody trusts us.”
RT: It all looks the same. How do you break through some of that?
NP: With great difficulty, truly. People magazine invests very heavily in its reporting. It will not run a story that it can’t confirm. It has a lot of competition that, frankly, doesn’t really think truth is particularly important.
RT: TMZ, some of the other daily shows?
And they look at me like, “Surely you jest. You don’t understand that truth has nothing to do with what we put on our cover.” Now if you’re People and you’re one of six weekly magazines that cover celebrity and entertainment, at some point, the public has trouble distinguishing one from the other. Despite that, one of the reasons we’re able to charge as much as we do and that we’re as successful as we are is that brand still does mean something.
RT: People is your most successful publication?
NP: It is. It is certainly, financially, our most successful publication. A Time cover still has a weight to it that is different from other publications. But what you point to is that there’s not only a proliferation of content but there’s an absence of standards. The proliferation is healthy. There was a time when you had three TV networks and a couple national newspapers and they were very responsible but they were also pretty dull. If you think back to the history of journalism in this country, a hundred years ago, there were 30 daily newspapers in Chicago alone.
Some of them were fact based, a number of them were really publications of opinion. And people tended to gravitate to the ones that reflected who they were.
RT: There are really only two, truly, national publications in the United States – The Wall Street Journal and USA Today. Do you see these hundreds of other publications ever emerging and going in that direction?
NP: But you look at something like the Mail Online, which is a British paper but it has as big an audience in the U.S. as any national paper.
The The New York Times is today as much a national paper as the Journal. The demographics might be a little different and it may not quite read the same, but it certainly thinks of itself in terms of its editorial product as being national.
It remains to be seen what Jeff Bezos does with the Washington Post, but my presumption is that if not the print product, then digitally, it would also be a national or an international product.
RT: Lastly, if you look at, say, the bylines of The New York Times today – just choosing one publication – almost 70 percent of those are male bylines today. If you look across most other publications that are similar, while there may be some differences I suspect it is still male-dominant. There was a time when many women wanted to come into journalism. Is that changing? Is that going to change back? Is there a problem there that you see?
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NP: Well, it depends. I mean, here, we have a number of publications that are lifestyle publications geared toward a female audience and those are predominantly women running them.
If you think about the weekly publications, we’ve had women editing People. The current editor of Time, Nancy Gibbs, is female. My predecessor, Martha Nelson, was the first woman Editor-In-Chief.
For me, the bigger issue is that diversity, whether it’s by gender, by race, by sexual orientation, is a place where mainstream media is not reflective of the public it serves. There are very few exceptions to that. Certainly, it’s a place where we need to do more than we have.
NP: He was someone who did a lot of extremely good work for us. He was not on assignment for us at the time he was taken in Syria, but we did very much feel he was part of our family and it was a great loss and a horrifying episode.
There was a time when journalists worked in relative obscurity, meaning if you were working in Vietnam as a reporter, it wasn’t necessarily known what you were doing in the country where you were working. Also, you were perceived as that neutral observer who, in fact, might write a story that would not necessarily be of interest to the government of the country the publication was based in.
Today, with the Internet, with global video, an ISIS is not only trying to shock and horrify Americans for reasons specific to them, but they also recognize the beheading of a journalist is actually going to get even more attention than, say, a contract reporter or something like that.
A second thing that I’ve questioned is whether the practice of having journalists imbedded with the U.S. military may not have, at least in the eyes of the people the U.S. military is confronting, meant the journalists are somehow identified with the U.S. government and whether that played a role. I don’t know that but it’s crossed my mind.
Michael Dowling recently sat down with Richard Torrenzano, Torrenzano’s CEO, to discuss the future of healthcare and North Shore-LIJ's place at the leading edge.
Richard Torrenzano: Leadership. People say they have it. When is someone a leader?
Michael Dowling: The best definition of leadership I ever came across was someone who said leadership is about managing the present, selectively forgetting the past and creating the future.
One of the core essences of leadership is looking at everything with a new perspective, looking at everything you do to figure out how you can do it differently. We are engaged in a whole series of entrepreneurial efforts.
For example, relationships with physicians. We have physicians in this community who were at one time all small mom and pop businesses, increasingly coming into large groups. We decided we would have affiliations and relationships with them.
We would hire and create a large full-time staff of physicians. We have one of the largest groups in the United States. I think it is the sixth or seventh largest medical group in the country.
We are now also doing joint ventures. We do joint ventures with physicians and with other companies. We just did a joint venture on central sterile with a company out of England called Synergy and another joint venture with DaVita on dialysis. We are doing joint ventures for new ambulatory surgical center with orthopedic surgeons.
We are talking to many organizations, including many outside of healthcare.
RT: Can you name some of the companies outside of healthcare that you are talking to?
MD: We have worked with the Ritz Carlton, with JetBlue, with Toyota and with GE. I sent people to look at Tiffany.
You might ask why I would go to Tiffany? My wife thought it was because I was buying something for her but I went because I wanted to know, because of the way we transport very delicate materials, how they transport and track very expensive equipment and very expensive jewelry, as well as how their back office warehouse works. We looked at Wal-Mart.
We developed a relationship with Cleveland Clinic around innovation. We have a new part of our organization, under a person we hired from the Cleveland Clinic. They were hired to take advantage of our commercial real estate, academic and intellectual assets and to figure out how to create new businesses. For example, we have about a dozen in the formative stages at the moment.
We have physicians and others coming up with ideas. We have the right people here that say, “That idea is a potential revenue generator. It is a potential business.” You go out and you get partners. You create a new business and over time it will generate new revenue.
We have a very positive top-flight record in cardiac surgery. One of our hospitals is number one in New York State in cardiac surgery. Another is number one in New York State in angioplasty.
Cleveland Clinic has a phenomenal brand. It does terrific work in cardiac. They have reviewed our cardiac outcomes and found there is real synergy between what they do and we do.
We just developed an exclusive relationship with the Cleveland Clinic here in New York. We will work together, trying to figure out how to do things better, market together, sell insurance products together and more. It will lead to initiatives in other clinical areas, like orthopedics, neuroscience or maybe childhood surgery.
When you start one thing, you are never sure where it leads. You do not always wait around and figure out, “If I do this, I know that I can do the following ten things.” You are probably going to be wrong. You do this and then it leads to other things.
The fact that we started an insurance company now means that I have to develop a broader network and bigger distribution systems in geographies that we are not in. I probably would not have been thinking about that as clearly if I had not done the insurance company.
One action begets another. When you strategically work it through plans evolve. The overall strategy stays the same but the tactical plans evolve.
RT: How do you keep that type of momentum? How do you prevent complacency?
MD: You have to continually figure out how you push the edges of the envelope, to fight tradition.
You just cannot be a hostage to the present. I personally always resist people who say, “We’ve always done it this way.” Healthcare has to look at other industries and all the changes going on in the industry in total. We innovated in medical education. We have created a medical school that is quite different than most other medical schools.
RT: How has that philosophy played out in practice?
MD: Let me give you an example. We started by asking two simple questions. It was relatively easy, because we did not have tradition. We were starting with a clean sheet of paper.
We asked, “What is a physician’s practice going to look like 20 years from now? What should the physician of 2020 or 2025 be good at?”
They have to work as a part of a team, something doctors have traditionally been very good at. They have to take orders from somebody higher than they are. If you are an EMT in an ambulance, you have to take an order from the head EMT in the ambulance. It changes the whole mindset.
We have them out in the physicians’ offices and in ambulatory sites. The tradition was to spend two years, typically for most medical schools, in the classroom and then in year three be put into a tertiary campus, a hospital. That is not where the bulk of care is going to be delivered in the future.
By being entrepreneurial in the way we develop the curriculum, I believe very strongly we also attract an entrepreneurial type of student, somebody who wants to take risks and wants to push the edge of the envelope, someone who wants to do something in a different way.
RT: You run a large hospital with a lot of employees, and a lot of risk. What are the one or two things that trouble you, which you worry about, and you do not sleep well over?
MD: The things I worry about? Everything is a progression. I am impatient. I worry about not being able to make progress as fast as I would like to make it. Then I realize that if you go too fast in certain areas, you can also get yourself into difficulty. Every time you go into something new, you are experimenting. I also worry about complacency.
When you sit and look in the mirror, and think you are successful, that is a very dangerous place to be. You should always look in the mirror and say to yourself, “Yes, we did pretty well, but we can do a heck of a lot better tomorrow. There are an awful lot of things we did yesterday that are not good enough.” That keeps you fresh.
It is like the athlete who wins a championship and decides not to train anymore because they are obviously good. They do not win it the second year in a row. You find very few professional teams that win the championship every year.
When you are successful, or are perceived to be successful, other people want to bring you down a notch. You have to have that edge, that desire to drive yourself a little bit faster, better, improve and never be completely satisfied with what you are doing. When I meet with all new employees every Monday morning I tell them that there is a benefit to being a little bit unhappy. When you are unhappy, you do something about it.
It’s like the guy who looks in the mirror and says: “I am a gorgeous looking human being.” If that’s you, you will never go to the gym and work out, right? If you look in the mirror and you say, “Oh crap,” you are going to do something about it, potentially, or at least enhance your interest in doing something about it. It is the same overall globally. You have to be on edge all the time.
RT: If you look back at your career, who are the one, two or three people you admire because they had that edge? Maybe they played a role in how you think about the world.
MD: If I go way back, I think one of the people, and this would appear to be very Irish, but one of the people who had a huge influence on me was my mother. She did not have a professional career. She did not have any formal education, but she was always pushing. She would say, “You can do it. Read this.”
I remember when I grew up in Ireland, we did not have much materially. I read Shakespeare. I read books by Zane Grey. I read Churchill. For whatever reason, she was able to make those available. She was helping to expand my mind.
When I read books by Zane Grey, I could visualize the United States, the western part of the United States, even though I had never been there. When I now go to the western part of the United States, I am thinking, “Oh yes, he wrote about this.” This is where that gives you that extra drive to continue to educate yourself.
The other person I worked with for years and years, who was somebody who pushed and pushed, was Governor Mario Cuomo. When you work closely with him, you had better be on edge all the time. If you go to sleep for five minutes, he will find that five minutes, especially when you are young and you do not have an awful lot in your portfolio before that, and he throws you into something and you say to yourself, “I never did this before.” You knew that he understood that you could do it, even though you had never done it.
This is why in this organization, I often put people into roles who have never done it before.
I recently appointed a person to head up all of our human resources, and I chose somebody who has never done HR before. They come into it fresh. They are not constrained by the so-called HR traditions. They look at it from the operating point of view and they say, “This does not make any sense.”
When you are put into different roles, you dig deep down and you pull it out. You figure out how you can get it done. You should never be completely comfortable when people put you into a new role. Mario Cuomo did that.
There were many others. You are influenced by every interaction you ever have. You are a combination of all the interactions you have had with the multitude of people that come in contact with you. You do not realize it at the time. You meet with employees and you are affected by it. You learn something. You meet with different and diverse groups of people, and we are now in one of the most diverse communities in the world, so you meet with people from all different parts of the world.
All of those interactions affect you. They influence you. You can use it in a positive way. Many people use some of those interactions in a negative way. That is unfortunate. That has been part of the problem we have with some things going on in society. Let us use it in a positive way. Let’s take the good that comes from all of these interactions and figure out how we can benefit from it all.
There is not a day that goes by that I do not go home thinking about something that somebody said to me, that makes me think about something I had not thought about before. You have to stay mentally alert and fresh to be able to utilize all of that information.
Michael Dowling recently sat down with Richard Torrenzano, Torrenzano’s CEO, to discuss the future of healthcare and North Shore-LIJ's place at the leading edge.
Richard Torrenzano: As you look at hospitals and hospital systems, what are the two or three things, the two or three big challenges, facing them today?
Michael Dowling: There is a changing culture, a change in the understanding
that hospitals are not the center of the universe, the way hospitals were a decade or 15 years ago. You have to think of the delivery of healthcare very differently than thinking about it from a hospital perspective.
There is a practical/tactical aspect of how you address that, but just as important there is the cultural aspect, the thought processes. You get people who have been trained and worked in hospitals for the last decades, many people their entire careers, to think different about what healthcare really is, and not confine it to something that happens inside the four walls of a hospital.
RT: Let’s talk about this health care delivery change taking place: consolidation, dilution, delivery in non-traditional venues and others. What role will big central hospitals play in the next five to ten years ?
M. Dowling: Big systems, which include hospitals, will be a lot more than hospitals. I would not define them as hospital systems. I think in the next five years, you will see an increasing transition of care outside hospitals.
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The big systems, over the next five years, will evolve into figuring out how to coordinate care better and how to deliver care using health care terminology, in the least restrictive settings.
They will figure out how to coordinate care among the various disciplines because what has happened over all of these decades, partly as a result of educational influences through traditional medical schools, we have created professional silos.
The customer is not carved up into silos. One of the biggest problems is to figure out how you have the seamless provision of care, not just by silo. That is a psychological issue and a cultural issue, as well as a practical issue. Traditional hospitals are all about silos. That will be changing, because it has to change.
MD: It is total focus on the customer, and it is not just about the provision of care once people are sick. It will be increasingly about the provision of care to try to keep them healthy, moving, as is often used as terminology, from a sickness care to healthcare. Quite frankly, if we are honest, we do not deliver healthcare. We are very good at delivering episodic medical care and there is a big difference between the two.
RT: Talk about what some of these entrepreneurial areas will be in the next couple of years, and how you approach them differently than other healthcare systems.
MD: We are very innovative in education and in research. On the educational front, we created an in-house university.
We use simulation more so than most…been doing it for ten years. Today, you will see many systems using simulation. We modeled this after the aviation industry.
We innovated in creating freestanding emergency rooms. We opened up the first one in New York, the first freestanding emergency room is a 24/7 and comprehensive, facility not simply an urgent care center. When we proposed it five years ago, everybody said, “This is crazy. This does not work. You cannot have an emergency room without beds.” We asked the question, “Why not?” We have done it. It is working.
Now, interestingly enough, all of the people that said to us, “You are crazy and this is nuts,” are now all proposing the same thing. I sit back and I say, “That is nice.” They are now following what we did, even though they criticized it at the beginning.
We also innovated in putting together one of the few really and truly integrated systems, where multiple hospitals and ambulatory facilities are all interconnected. We have similar standards of care across them. People will tell you that when you see one health system, you see one health system. You see very few purely clinically integrated health systems. But we are one of those. Innovation has to be a core part of your DNA. You have to be challenging the preceding all the time.
RT: One of the really important things for your future in areas of innovation has been CareConnect, your new insurance company. Tell us where it is today and where it is going over the next couple of years.
You have to learn how to manage the continuum of care better. When you are an insurance company, it forces you to think that way. The other thing is that you want to get control of the full premium dollar.
If I get the full premium dollar as distinct from being able to negotiate with an insurance company and get 10% of the premium dollar, if I have the full premium dollar, now I can sit back and say, “How do I want to spend it? Where do I want to put my emphasis? How do I keep people healthy? How do I prevent people, potentially, from getting ill? How do I get people to take responsibility for their own actions, since the bulk of healthcare problems are the result, in part, of lifestyle, behavior and social circumstance.”
People do things to themselves, which causes an awful lot of problems. Now you can refocus the whole thing. It also focuses the whole organization thinking differently. Our insurance company has only been in business six or seven months. Right now, we have over 10,000 members.
We anticipate having almost 40,000 by the end of 2015. We have been growing it relatively slowly, because you want to make sure you make these transitions carefully. Great new ideas, if you move too fast sometimes, disrupt the core business too and can cause some severe problems. We have to avoid those.
RT: You talked a lot about how that is going to benefit the overall hospital. Now explain how it is going to benefit the individual member of that insurance company, the person who pays their monthly or annual premium.
MD: If you do it right, you are able to use the network of services of the health system. We have all of the various components of healthcare delivery. You are able to use all of those to work with the individual to provide the care in a much more coordinated way, focus on health and not just only illness, focus on health education and focus on getting the person to engage more in working on the improvement of their own health.
It changes the whole dynamic. Remember, we have always only gotten paid after somebody got sick. If somebody got sick, they showed up at a facility, we did something to them and we got paid.
There is no focus on the overall holistic nature of dealing with individuals.
RT: Clearly, there has been a lot of debate about the healthcare systems in England and Canada. Some people love it, others hate it. These are old systems. What’s good, what’s bad ?
With that understanding, in those other systems which I am somewhat familiar with because as you can tell, I grew up in Ireland and we have a system like that over there, and I am involved in it today, in trying to figure out how to make some changes, they have universal coverage. Everybody has coverage. Everybody has insurance. Having insurance is not the same as having access. I will come back to that point. They are two completely different things.
Everybody says they want universal insurance coverage. That is fine. That does not mean anything if you do not have access to care when you need it.
They are very primary care focused. In general, because there are outliers here, they are more primary care focused. The problem with those systems is that, in many ways, they limit innovation and entrepreneurship because they are government micromanaged.
Those systems are in a straightjacket with very little freedom for the practitioners of care and the people who administer the local care, to be able to be innovative and doing things differently, because they are going outside the rule book.
You need guidelines, but you do not need to be rule constrained.
I am afraid in the United States we are moving toward that kind of an orientation, which I do not think is the best thing for healthcare in the long run. I think in part, that is an outgrowth of recent legislation that was passed in the U.S., where everything is by the rules.
If you run a hospital these days, even here, you are inundated with new rules every day. Most of them do not make a heck of a lot of sense. Many are conflicting. In those other countries, if you talk to a local hospital administrator like I have spoken to many times, they have very little flexibility about who to hire.
They have very little flexibility about who to let go. In fact, they cannot let people go in general. They have very little flexibility about capital budgets.
I often wonder, when I talk to them, what they do. They cannot do too much. They are totally constrained. Government has a role in setting rules, which it should do on the roads. You can only drive on one side of the road, if you are going east, you can only drive on the other side coming west, you cannot let the people drive whatever the heck they want to drive.
But the government should not be driving the car. Set the rules, but do not drive the car.
RT: As all these changes happen, and because you are an entrepreneurial environment, there are going to be core areas of medicine where the emphasis will change over the next couple of years. What are one or two areas, core areas of medicine, that are going to be very important to Northshore LIJ over the next five to ten years? What areas may not be as important as they are today ?
MD: It depends on the particular areas you look at, because technological advancements and advances in medical science will increasingly dictate changes in how we do things.
For example, let’s take cardiac care. It was not that many years ago, and it is interesting to go back and look at a number of decades, if you suffered from severe heart disease 30 years ago or 40 years ago, there was not much we could do for you. Then new technologies came in and we could have a lot of interventions like stents and surgery.
Today, a lot of the change is where there is going to be less and less of that potentially, and there are more medical treatments and more lifestyle treatments. Those kinds of developments are going to be occurring more and more.
One of the biggest challenges will be the population aging issue, the aging or the greying problem.
I have made this point many times: while everybody focuses on the failure of healthcare, you cannot pick up a newspaper today without talking about how things do not go right, and how the cost of healthcare is too high, in many ways we are suffering from a crisis of success, not only from a crisis of failure.
If we had not been so successful in keeping people alive so long, we would not have the problem of figuring out how to take care of people and the expense of taking care of them, if we had not been so successful in extending the life cycle.
We have added 35 years to life in the last 100 years. You have this increasing and growing, aging population where comorbidities and chronic illness are going to be a huge challenge. It does not necessarily mean this care is always going to have to be delivered in a hospital. The role of home care will increase dramatically, as well as the role of ambulatory care.
The tradition has always been if an older person gets sick, put them in a hospital or put them in a nursing home. Now you can actually do an awful lot in the home.
Neurosurgery and neuroscience is going to become huge, just like cardiac was years ago. I think neuroscience is a growing area because of the advances in science. We know more about what we can do. We can do things today we could not even imagine doing years ago.
Behavioral health, mental health issues, which is an unbelievably large unmet need, and we are one of the largest providers of behavioral health in this region. This is going to be a major thing. There is a mental aspect to so many of the things we deal with, but we have not been very good at integrating them into the health part of the business, along with the medical. I do not think we have figured that one out yet.
General Hayden recently sat down with Ed Orgon, Torrenzano’s president, to discuss threats facing our nation, our businesses, and each other.
Ed A. Orgon: General Hayden, we really appreciate your time for this important discussion on national security, business security and personal security. Given what we all hear --- relentlessly --- about threats to our national security and personal safety, how do you see the landscape, what do you see as the greatest threats and what can we personally do to protect our businesses and ourselves?
Ed A. Orgon: General Hayden, we really appreciate your time for this important discussion on national security, business security and personal security. Given what we all hear --- relentlessly --- about threats to our national security and personal safety, how do you see the landscape, what do you see as the greatest threats and what can we personally do to protect our businesses and ourselves?
General Hayden: Ed, for the first time this past year when people in government, in the kind of jobs I used to have, testified in open session to both Congressional Intelligence committees, called the World Wide Threat Briefing all of them said cyber was the greatest threat. And I agree.
EAO: When you consider cyber danger, is that range from criminals for monetary gain to the vulnerability of the electrical grid?
General Hayden: Actually, all of the above, unfortunately. And the way I generally outline the taxonomy is: a series of cyber sins and a series of cyber sinners.
Let me give you a sense, first, of all the sins. Overwhelmingly --- right now --- the primary sin is people out there stealing your stuff. It is your pin number, it is your credit card number, if you are an industry it is your intellectual property, it is your trade secrets. If you are a state actor, it is going after another state’s secrets and so on. Fundamentally, the evil going on out there right now is just theft of thought, theft of intellectual property, in one form or another. But there is also another series of bad things happening out there.
And here you have bad actors, either instead of or in addition to stealing your stuff they want to disrupt your network, for whatever reason, they want to punish you. They want to take your network down, they want to manipulate your data, and they want to delay, destroy, degrade or deny you your information. So you have got theft, disruption, and then we, as a species, we have just got our toe or maybe a whole foot in the water to actually use cyber-weapons to create effects, not on the network but to create effects in physical space. In other words, to use a cyber-weapon to create physical destruction.
The best example of that is something called Stuxnet, which was almost certainly done by a nation state because it is just too hard to do from your garage. It caused 1,000 centrifuges at Natanz in Iran to self-destruct. So those are the sins.
EAO: There were news reports that were driven by the CIA, under your direction. Is that true?
General Hayden: Actually, the best answer to that question is that it would be irresponsible for somebody of my background to even speculate on that.
So we have theft, disruption and destruction. Now who does that? There are three layers. First layer, nation states, China, and you can lash China up to the threat. When in doubt, it is the Chinese coming after your intellectual property, alright.
EO: Now when they are coming after intellectual property, that applies probably as much to our nation or it applies to businesses?
General Hayden: Oh no, and that is the point. See here is the reality – what is the right word, the real conundrum here, the real difficulty, it is – you have a nation state actor, China, going after secrets. And they are not my secrets, me being the CIA. My secret is kind of okay; I can take on a nation state. The Chinese are not doing that, well they might be trying but they are not being successful. But the Chinese, a powerful nation state, are not attacking just the U.S. Government; they are going after U.S. enterprise. That is not a fair fight. That playing field is not level and you’ve now got the resources of a nation state coming after private American businesses.
EAO: So what’s the answer for American business then? Should they expect the American Government to protect them or do they have to go it alone?
General Hayden: They should expect the American Government to protect them but let me assure you it won’t.
This is a really fundamental issue of American political values. We, as a people, have not yet decided what it is we want the government to do or what it is we will let the government do to protect us in the cyberworld.
EAO: Please expand on that.
General Hayden: I’ve headed up a couple of intelligent agencies and even in physical space there’s still some rough edges as to what it is we want the government to do…or what it is we’ll let the government do. In cyberspace there’s no precedent. We’ve got no rules.
I use this example. I’ve got a backpack and I carry my materials in…so I go to a speech and I get to this point in my speech and I say…you know if I walk out of here when we’re all done and I’ve got my backpack and I’m in front of the hotel waiting to be picked up to go to the airport and a local police car comes screeching to halt in front of me and the policeman jumps out and says hey, open that bag, I tell audiences I would probably respond with the two word monosyllabic English phrase, which probably translates to "I think not."
General Hayden: But if I had gotten in a car and gone on to the airport and gone through the TSA checkpoint the kid there says hey sir, open your bag, guess what? We all open our bag…my point being…although some of this sometimes gets contentious we’ve kind of figured it out. Government can’t do that. The government can do this.
We don’t have that in the cyber domain. So here’s the punch line, our government is late to need; it will be permanently late to need. The kinds of things we have a right to expect our government to do to protect us in physical space, it will not do in cyberspace.
EAO: That’s a pretty bleak assessment…
General Hayden: It is.
EAO: What’s the solution?
General Hayden: Step up private industry. You’re far more on your own here than maybe you should be or certainly you expect it to be. In this domain, individuals, institutions, enterprises are going to have to defend themselves far more than we think we have to defend ourselves against physical threat. Look you have a foreign power come up the Houston Ship channel with a submarine, I’m betting on the Navy. You’ve got a foreign power coming up the Houston Ship channel on that fiberoptic cable at the bottom of the channel, the Navy isn’t coming.
EAO: With your deep experience in intelligence agencies you now advise companies and corporations, specifically on these types of issues. What are the two or three things you can enumerate that have to be considered?
General Hayden: What I do is I generally put on a white board the traditional risk equation, folks like you and me with military experience, we know about this.
Risk is equal to the threat times your vulnerability to the threat, times the consequence of a successful attack. (R = T x V x C). And then I tell the audience…practically the entire history of cyber security has been in V. Now just think back to your own experience. All the things you know about in cyber security, firewall, patches, McAfee, Symantec, Shrink-wrap products…
EOA: Go on...
General Hayden: …you go ahead and load good passwords, cyber hygiene it’s all about V all right. It’s about reducing your vulnerability. The phrase experts use is --reduce your attack surfaces.
Well here’s the story. If you and I are perfect and I mean 1.0 perfect in V we will keep out of our system the lower 80% of those people who are attacking it. Guaranteed we don’t keep the higher 20% out, V is not sufficient. So the history of cyber defense has been in V. The present of cyber defense is in C, consequence or put more accurately consequence management and here the premise is we’re not betting the farm on the perimeter defense and preventing someone from coming in --- they’re getting in.
I work with the Chertoff Group, occasionally, clients come in and say, “Hey you know…another industry, another company in our industry just got a phone call from the FBI, oh, really bad stuff and we want to engage you guys to see if we’ve been penetrated.” And Ed, the answer we give them is, you’ve been penetrated, let me give you an address so you can write us our check.
Seriously, current thought is you’re penetrated. Get over it. Survive while penetrated. Operate while under attack. Wrap your most precious data more tightly then your less precious data. Respond to the attack. Under V it’s prevention. Under C and this is where we are now it’s resiliency. All right. They’re in but it’s okay. I know they're in, I’m boxing them off, I’m continuing to work. Right now a tremendous amount of private sector energy is in consequence management.
Now there’s one other factor T, threat. In the physical world you push T down by saying touch me, I’m going to hit you so hard your whole family is going to fall down…
It’s a little harder to do in cyberspace. So where the energy in T now in cyberspace, and this is quite remarkable, the energy is in threat intelligence, and I’m not talking about the government. I’m talking about private companies and it’s remarkable. This is cyber threat intelligence. It is not intelligence-light. It is intelligence. You’ve got private companies out there…web crawling, port scanning, having foreign national employees assume personae in Ukrainian chat rooms in order to find out what’s going on. So what happens if you engage one of these cyber threat intelligence companies they can actually tell you who’s most likely to come after you for what purposes and what tools they have generally been associated with, which then makes it…
EAO: Which makes it easier for you to do V and C…?
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General Hayden: Right. Because you’re now not trying to defend yourself against all abstract threats for all abstract purposes. You’ve got some specifics here. It’s been an epiphany for me, I’ve been out of the government almost exactly five years. The amount of energy now in the private sector for cyber security is just amazing.
God Bless the American system. Here we have a reality where the government’s not going to show up and guess what? American business is stepping in.
General Hayden: Yep…and let me do it on two levels. Let’s talk about the terrorism threat in physical space and then the terrorists who are in cyberspace. The terrorist threat in physical space, frankly the reason we’ve been successful—if you ask me was it the TSA line, ah, it’s okay. Was it the 215 program, yeah, it’s not bad okay but fundamentally Ed, the reason we’ve been successful is we are one mean enemy.
EAO: Please expand on that thought.
General Hayden: Well, I don’t think the people who attacked us 12 years ago expected us to do what we did. We’ve come after them with a vengeance. There’s quite a bit of scholarly research that says when you really anger a democracy it really gets tough…and they angered this democracy. We have had a relentless campaign against the Al-Qaeda group responsible for 911. That’s what I call Al-Qaeda Prime, in Pakistan and Afghanistan. Two incredibly different presidents I might add.
EAO: So when President George W. Bush stood at the World Trade Center and said The World Will Hear Us…that was not only his…but a commitment the current President has also continued…
General Hayden: There’s a wonderful quote in Der Spiegel, with this latest kerfuffle about American surveillance and so on. At the height of all this, there the German Magazine expressing great disappointment and dismay. They said something along the lines this was George Bush. And that they always thought that there was another America, a better America and now they knew there is only one America. Personally, I actually felt good about that.
EAO: Well it’s similar to when 9/11 occurred you know. We were in the city and I still remember standing outside and…watching the news board coming around Time Square, the news reader and we would be standing there with all sorts of different people, different races, ages, whatever and it was unity…
General Hayden: Yes. Now let me talk a little more about terrorism…and terrorists.
In cyber, there aren’t any, and I can’t explain it. There is no evidence of terrorist groups and we’re talking primarily Al-Qaeda here…
There’s no evidence of them attempting to use a cyber weapon to create the effects they want to create. I can’t explain it. They are not cyber stupid. They use the Web. They use the Web to recruit, to train, to raise money, to proselytize but so far they’ve not used the Web to try to create that disruption or destruction that we talked about.
EAO: Is it coming?
The World Trade Center again and again. The Pentagon. Airliners and so on. They may just not find it theologically satisfying to shut down the eastern power grid…again, pure speculation.…but they haven’t done it…
Now keep in mind. These guys are planning this from a cave. This is not the most sophisticated enemy in the world.
EAO: That said, that’s a very good point because we tend to give them super human powers because of what they did achieve a few times.
In sum, what would you advise people like myself, our clients, our people who may be reading this interview, the average everyday American, what are you going to advise for him or her?
General Hayden: Let me focus on the cyber question because in a very real way that is the one threat that actually gets to you personally.
Now look, sooner or later, if the Iranians get a nuclear weapon, that's a big deal. It’s going to affect you and me but it’s a bank shot and it’s going to take multiple caroms before it affects your life.
But the cyber thing, that’s that E-mail that you thought was from your daughter-in-law with the hyperlink that you’re not quite sure whether you should click on or not click on, that’s you, that’s personal and that’s now…
We all just have to get a lot smarter on cyber defense. Look there’s no perfect defense but…like the old joke, two men running away from the bear saying we’ll never out run this bear and the guy says I’m not trying to outrun the bear, I’m just trying to outrun you…
… in other words we’ve got to make ourselves tougher targets than the next guy.
Frankly, as selfish as that seems, if we’re all doing that we’re raising the water level of defense and making it more difficult for adversaries to come after us. I should add that for the most part this cyber weapon has been a sophisticated worm or bug or Trojan horse. That’s no longer the case.
The real cyber weapon now, unfortunately, against you and me…is you and me. What cyber adversaries are doing is social engineering you and me. I mean there’s so much of you and me out there in ones and zeros, they can discover fairly intimate details of who we are and then they can craft an E-mail and look, I’ve gotten this. I got an E-mail that for all intents and purposes looks like it’s come from my daughter-in-law and says, “awesome check this out” and then there’s a hyperlink. Well that hyperlink’s a weapon.
I click on it, I’m done. We all have to be very, very careful that we don’t allow these adversaries to turn ourselves into their unwitting accomplices. You do that—you really do begin to sweep away an awful lot of the dangers.
©The Torrenzano Group 2014
Following is a conversation she had recently with Richard Torrenzano:
Richard Torrenzano: Why did you decide to go into journalism -- and then investigative journalism -- which is a real specialty?
Before that point, I thought I would be a psychologist or a lawyer. The old guy who was our overseer – the TV listings editor – found a spot for me in the newsroom to do some revisions on a story I was working on. It was right in the slump between the afternoon paper being put to bed and the morning paper starting to gear up. As I was working at this big old oak desk with one of those huge typewriters that rolled up out of the desk, the newsroom came alive around me. The teletype machine was dinging. The pneumatic tubes were thumping. Kids in newsrooms today have no idea what I am talking about when I describe these things. I fell in love. I just fell in love with that environment. It seemed like the most exciting place I could possibly spend time.
RT: Those exciting sounds are all gone now.
DH: I know. Newsrooms now sound like insurance company offices. It is grim! But you know, I did a fun thing with a kindergarten class once to show them what old newsrooms were like. I had them tap on chair backs to mimic the typewriters. We rang little bells to make it sound like the teletypes. It was a symphony, really -- the symphony of the newsroom.
Once I got into newspapering, it was just really serendipity that led me into the investigative side. I had a very supportive editor at the Trenton Times in New Jersey. We received a news tip that none of us could understand…about a local revenue bond authority and perhaps some political skullduggery going on there. That editor encouraged me to pursue it. I was hooked. That more or less became my brief for the rest of my life. Really, that was my first taste of what I did not even know at the time to call white-collar crime. Now white-collar crime is really my franchise.
RT: Let’s stay with investigative journalism just a tad longer. When you began a lifetime ago, how has investigative journalism changed during that time?
DH: That is a great question. It was created very self-consciously. That kind of enterprise reporting obviously has been done for 150 years. Ida Tarbell and her groundbreaking work on Standard Oil back at the beginning of the twentieth century was investigative reporting.
There was a time in the ‘70s when investigating bad guys began to seem really dangerous. In fact, Don Bolles, a reporter out in Arizona, was killed while working on an investigative story that appeared to have links to organized crime. In the aftermath of that, reporters and editors across the country decided quite self-consciously that if we did not step in and continue Bolles’s work that we were all vulnerable.
It would seem like all you have to do is eliminate the reporter and you have eliminated the story. We were determined not to have that happen. The organization Investigative Reporters and Editors, IRE, was formed in the aftermath of that. While not a charter member, I think I was a second year member. I have been active in it ever since.
It started with a very utilitarian self-protective idea. In one way, it has become much easier. The Internet, for all the damage it has done to the organizations that sponsor and pay for investigative journalism, has really made it so much easier.
When I first started out in this business, if you wanted to get the goods on a publicly traded company, the New York Times was rich enough to have an account with one of the vendors who could deliver boxes of paper financial statements to you. I would spend about $5000 a month on my NYT column just ordering documents.
Most organizations could not do that. They could not afford it. It was a rich paper’s game. It really required an investigation effort that was expensive and time-consuming. Now that playing field has been totally leveled. That has made it easier.
RT: You see the personal pressure – the violence – on investigative reporters, but also in smaller cities, smaller newspapers are underfinancial pressure publications in today’s economic climate.
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DH: That is true. The financial pressures that hit the industry have hit especially hard at investigative reporting. It would be easy. Believe me, for several years we all were on the brink of despair about what would happen to this crucial watchdog function of journalism. I am somewhat encouraged, Rich, to see what is happening. The emergence of non-profit organizations, foundation-sponsored research, organizations that are partnering with existing news organizations do really top flight investigative reporting. One of them, ProPublica, was honored with a Pulitzer Prize. If you told me ten years ago that there would be a website – a nonprofit investigative website that did not even have a regular place to publish its stuff – that would win a Pulitzer Prize. I would have said, oh you are dreaming. That is ridiculous. We are there. We have gotten there very quickly.
RT: What is the biggest story you’ve chased in your career?
DH: I think the Bernie Madoff case obviously has to rank near the top just because of the sheer scale of the betrayal ... the emotional impact it had on the country, and really, the world.
It came at a time when everyone was feeling betrayed by Wall Street. Wall Street is an abstraction. Then this guy betrayed everyone he knew and everyone who loved and trusted him. He is the poster child for what seemed like a whole era of betrayal on the Street.
RT: Let us talk about The Wizard of Lies, your best-selling book on the subject. When you tackle a book you have to be inspired. You have to have something inside you, which is saying “I have to do this.” What was your “I have to do this”?
DH: From the very day that story broke, by nightfall we knew that Bernie Madoff had betrayed everyone who trusted him and was turned in by his own two sons. He had trusted them to sit quietly until he executed some more chores, and then would quietly turn himself in through his lawyer. That was Shakespearian. It really was almost biblical the level of personal betrayal. I think it was the family drama from the very first moment that hooked me.
I could see that this fraud was different. I covered dozens of Ponzi schemes. I mean one of the fun parts of my business is I get to meet a lot of Ponzi schemers. This was different.
RT: Is it scale and magnitude?
It was an unusual Ponzi scheme in that it did not promise sky-high returns, which is what we always think of as a Ponzi scheme. Double your money in 20 days. They were nice steady returns. But most of Madoff’s victims would have done better in the Magellan Fund. It was not one of those red-flag-waving Ponzi schemes. In many ways, it was intellectually interesting as a fraud and as a Ponzi scheme. It broke new ground. But it was the personal story that held me.
It was the personal art of this man who had been so respected on Wall Street. I had known him. I quoted him. I interviewed him on stories about the changing market structure back in the eighties and the nineties. He was a key advocate of the modernization forces that helped reshape NASDAQ. He was a regular consultant to regulators. I had interviewed him or his brother, Peter, two or three times over those years. He was in my Rolodex.
When I saw that he had been arrested and that the fraud was of enormous magnitude, it was just a total disconnect for me. Then the personal pieces began to fall into place: His sons turning him in; his wife standing by his side and thereby becoming estranged from her sons.
The sons and the wife becoming these utter pariahs in the social setting…that typically did not happen to white-collar criminals. In the past, you left the family alone. Even the families of organized crime figures were generally left alone by the media. This was, again, new ground but new ground in a very personal and very dramatic way.
RT: If you take a step back, what effect do you think this had on the American culture and the American scene? What effect did it have on Wall Street? Most importantly, did it have any effect on regulators?
For Wall Street, my hope would have been that they would have emerged from this experience with a better understanding of the need to blow the whistle on their own members. After Madoff’s arrest, countless private fund managers, business consultants, and private bankers came forward. They said, “Oh, I knew all along about Bernie. I kept my clients out. I never believed in him.” I am saying, “And you kept quiet? You got your clients out and let everybody else’s clients go down?”
That failure to police itself, that failure to blow the whistle not just on Madoff suspicions, but for Heaven’s sake, on ridiculously risky mortgage-backed securities, on sloppy foreclosure practices and on dubious accounting. People all knew these things were going on. There was no big secret about what was happening in the lead-up to the financial crisis of 2008. Yet, Wall Street felt no obligation.
RT: If you go back 20 years, a generation to the mid-eighties, we saw similar issues with Boesky and Levine, with Drexel Burnham going down. It was a tragedy then. Madoff being the head of a firm was the same kind of tragedy in some ways.
DH: It was a tragedy certainly for the Madoff family, for all of the employees who worked there and had built their careers around that organization, as with Drexel and as with the Boesky shop.
What is troubling to me is not that you have these outliers. You always have. There have always been the people on Wall Street who are going to push the envelope. They are going to figure that that particular law does not apply exactly to this specific circumstance and to me.
It’s the cultural climate that scares me. What we saw in the decade before the crash of 2008 seems to me far more systemic. It is far more structural. There was a culture that took over…one that valued market share and profit above morality and ethics to a degree that I had never seen before in my personal career or read about in modern history. You have to go back to the Gilded Age, the Robber Barons, to see the kind of structural misbehavior that has emerged today.
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DH: One of my concerns is that despite the obvious failures of deregulation, the lunacy of thinking that sophisticated institutional investors could look out for themselves and regulators could focus on other things. That idea was blown out of the water in 2008. But it still raises its ugly head. I mean it is like you need to drive a stake in the heart of this notion that the markets will police themselves. The markets apparently think that that is somebody else’s job. I tend to agree with them. I think it is somebody else’s job. It is the regulator’s job.
What I see regulators doing as they have just done is making fraud easier. It is just that simple. The JOBS Act, for example, supposedly “jump-starts” our small businesses … That invites small flimsy companies that may exist nowhere but on paper to use the Internet -- oh, man, the powerful Internet, the global worldwide web -- to raise money. From whom? It is from people who surf the net. It is fraught with opportunities for mischief. Frankly, I am waiting for the frauds to evolve. I will be looking closely for them.
RT: The fraud, like our society, has gone global.
DH: It has gone global, and it has gone high-tech. I mean, the penny stock frauds – Heavens, we have had those since the 1950s. They cycle in and out. You have the boiler rooms and those pump and dump schemes. I have covered dozens and dozens of those. Take that out of the old cold calling, phone bank, boiler rooms out on Long Island or out in Denver. Now, turn that into an internet-driven sales pitch. It puts penny stock fraud on steroids. I am afraid that is what we are going to see with these new changes.
RT: Could you see this happening in another industry?
DH: Do not forget how interconnected Wall Street and Main Street have become. I mean we are all our own pension fund managers now with our 401K plans. The idea that investing on Wall Street is an elite activity, an activity for specialists like brain surgery or nuclear physics, is gone. We all have to find our way around the markets. To me, that means the markets must be more intelligently regulated. It is not that they should be less regulated.
The fact is that the average middle-class saver who hopes for a retirement, the working class employee who works for a retirement, has to be involved in the market. To me, it is the perfect storm. You have a market that demonstrated in 2008 a massive failure of not just self-regulation but self-control and self-restraint.
Then you have millions, hundreds of millions of people around the world – the emerging middle classes in the UK and China – you have people who are desperate to save and put their money to work for them just as they are working hard. They encounter this culture. We have to do something about that.
I wish I could be more cheerful about where we go post-Madoff and post-2008. But it amazes me, frankly, how quickly the demand for investor protection and the political concern about investor protection has evaporated. All you hear now in Washington is cut the budget. Cut the budget. De-regulate. I saw that movie. I know how it ends. It does not end well. I think we really need to change the conversation and change the script so that individual investor protection has a much higher priority and a much bigger share of the conversation.
RT: Tell me about your next book?
DH: I am “not at liberty to divulge” yet! There are actually a number of issues that have emerged out of my Madoff research that intrigue me. One of them is this “blowing the whistle” idea. This is the reluctance of Wall Street to blow the whistle, the role of whistle-blowers, and how it is changing. I find myself fascinated by the whistle-blower world and some of the issues it poses for society. Do not be surprised if you see me looking around in that area.
©The Torrenzano Group 2013
Mark can be heard on WOR in New York weekdays from 10 a.m. to noon.
Following is a conversation he had recently with Richard Torrenzano:
Richard Torrenzano: Tell me a little bit about some of the trends happening in broadcasting and radio right now.
Mark Simone: Well, first of all radio is not dead as people think it is. I know digital is taking over everything on earth, but if you were around during Hurricane Sandy, when the lights went out, nobody said, ‘quick put on Pandora.’
There is always, always a place for radio. It is the only live medium that works … in fact; it worked during Hurricane Sandy when nothing else did. No TV station on the air only AM radio. FM went off the air, because most of their antennas are in the middle of Manhattan, so it was the AM that stayed on the air.
A portable battery radio is sometimes all you have in the most extreme of emergencies. That always keeps radio alive … that and cars. As long as you are in a car, it is very hard to watch TV even with the Google Glasses, if you are watching anything visual while you are driving, there is going to be a lot of accidents, so that technology would end very fast.
There are trends in normal circumstances to listen online. More and more people listen on their cellphones. I would say half our audience is listening on a cellphone right now or smartphone or on a table. TuneIn radio is a great app, iHeartRadio is probably the best one. You put that on your phone with all your favorites and you have your whole radio dial there.
Most people don’t even own a standard radio anymore. If you go to Radio Shack and ask for a radio, they will look at you funny and go ask a manager what that thing is. But radio connects you to the best content provider -- whether through the traditional set or via your smartphone.
RT: Now you just changed stations. Some of your listening audience will follow you and some of it will be new, what are your listeners most concerned about in their lives today? What do you think they want to hear more about today?
MS: Well, let’s start with what they do not want to hear about. We just went through a long cycle of political talk, Rush Limbaugh was the king, Sean Hannity. These two guys are still great and their audiences are so huge they will last forever. All those other shows have crumbled and died. It is now an era where people do not want nonstop political talk, they don't want nonstop arguing, they don't want a lot of shouting, they don't want to go into the minutia of every issue.
It is like any market. You have a bubble that bursts at some point and talk radio just zeroed in on politics. That bubble went for about 20 years or something, so now that bubble has kind of burst. The new talk radio has to talk about everything else in the world. You still do politics, obviously people care about the big issues, but that is 5 to 10 minutes of every hour. They also want to know where to eat, what is on television, they want to know how to get along with their wife and everything else, lifestyle and everything else has become important.
RT: How do you make those judgments? How do you determine what you put on the show each day? You have a pretty large show to produce every day.
MS: Gut instinct is the most important thing. You have to think of what is interesting to everybody and sometimes it can be the simplest thing, a rude waiter story in the newspaper. Sometimes you just see something online about…just something you know would annoy everybody or interesting information. People love details. They like to know how things happen, the inside story of any little thing.
RT: So gossip has gotten bigger?
MS: Gossip is big, but they have to learn something while they are listening, so it is not just the gossip, but they have to find out some inside details, like the inside scoop. If you are going to talk about some celebrity that did something, give them some details, some real information, the juicy stuff.
RT: How do you balance what you think your audience wants with what you feel they should be hearing about?
The layout of a show has changed. In the old days you actually did a radio show: beginning, middle, end. You cannot do that anymore. In the digital world there is no beginning, middle or end. You used to start a show by going through a five minute laundry list of what was on the show. You would tell them that coming up at 4:30 we are going to have this guy on, and then at 5:30 we are going to have this guy on and at 6:00 we are going to talk about this. You cannot do that anymore.
In the digital world the second that show starts, you better start talking about something. People don't care what you have an hour and a half from now and nobody cares what is on in 20 minutes. All they want to know is what you got right now. A lot of this is due to the DVR world … where it is up to you what you want to watch and you do not wait for anything. Even in the Hulu world and the Netflix world, people are watching without commercials, without interruptions, they are clicking on whatever they want to watch, they are shutting it off as soon as it is boring.
RT: What impact has social media had on somebody like yourself who is a known personality or on the stations for that matter?
MS: Social media has had a big effect on a lot of media. All the music stations have to really get busy with their social media; TV shows have to get busy making social media part of the show. In talk radio it is not that necessary, because no one ever stopped to realize, talk radio is the original social media. It is the original Facebook. It is the original Twitter. It is people calling up talking about…just the same as Facebook…what they had for lunch, telling you about their trip, what they are mad about, commenting on politics.
RT: Talking over the neighbor’s fence or down the hall.
MS: Yes, exactly. I have never seen anything on Facebook that was not traditionally a talk radio caller.
RT: What topics do you think are important that the mass media have not covered enough?
MS: Well, the inherent problem with mass media is just that … it is too mass. They look for something that applies to everybody. It is one of the problems with talk radio becoming national. Every show is syndicated, every show is national with the exception of what we do now at WOR. Go back to local radio, so suddenly we can talk about what is going on in SoHo or how bad the Long Island expressway is and the traffic. One thing about Rush Limbaugh and all these shows they have to worry about making sure the issue applies in Oklahoma, applies in Texas, applies in New York City and nothing always does.
RT: How do you determine if there is something on the show you do not want to talk about?
MS: There are certain little tricks to decide if something is relevant for air. There was one of the greatest programs of all time that had a rule, everything was in threes. For instance, any topic had to appeal to three totally different demographic groups or three different types of groups.
Let’s say there is a guy that lives right in the middle of Manhattan; a woman on the South Shore of Staten Island and another guy that lives way off in the suburbs of Connecticut. Connecticut’s not so worried about the problems at PS89 or gang violence in the city like the other two may be, so you try to find something that applies to all three groups.
RT: It is basically about life.
MS: Yeah, and if you are talking about the hottest club in the Meatpacking district, you have now a 25 year old who will be right there with you, but a 45 year old has limited interest. And the 65 year old is probably not interested at all. So, you better tackle it from an angle that could appeal to all three groups.
RT: You’ve booked a broad array of people from all walks of life in the last year or two. Who are your one or two most favorite guests?
But there are certain guests who are just natural born guests. Regis Philbin for example. You just say hello and it is going to be funny. Don Rickles is another like that. He just takes off. Larry King says hello and you will get a hundred great stories.
Politicians are the worst if they hold office at that moment, because every word they say is triple - vetted before it comes out of their mouth.
The worst guest in the world was Ed Koch as mayor, because he was so careful about everything he said.
RT: Now you were one of the last guys to interview Ed Koch.
MS: Yes, Ed Koch, when he left office, suddenly was the most fascinating guest ever, because it was like he’d finally taken a dose of truth serum. He could say everything he wanted to say.
RT: As you look at this year, anything popping out at you in terms of politics or pop culture or sports that you think will become a normal part of your show for the next couple of months?
MS: Everybody is now sick of every politician, Republican, Democrat that we…both sides … have come to realize that. Because we are so tough on anybody trying to get elected ... the press would go after them, they would dig into them, they would tear them apart...we scared away all the greatest talent from politics.
Steve Jobs’ dream was to go into politics. If you read Walter Isaacson’s book it was finally explained to him, he would never survive. They would go after him, his terrible relationship with his daughter, the bad things in his life, so we lost him. I know Lee Iacocca did not go into politics, because he did not want his personal life torn apart. Jack Welsh did not want to go through it.
Because of this we lost all the greatest talents in America. We now in politics you have Anthony Weiner. You now have Mitch McConnell. Would anybody hire John Boehner to run their company? Would anybody hire Harry Reid or Nancy Pelosi to run their company? You have the worst collection of mediocrity in politics and everybody is now starting to realize this, so I think everybody will rise up now and want to do something about this.
RT: With the gridlock in Washington, the state of politics, do you see people getting more involved in government issues?
MS: Not so much on the issues, people just get angrier and angrier and will show that at the polls. I think you will see people imposing term limits and starting to throw out everybody. A lot of people watch CNBC or Bloomberg and they watch these CEOs -- all day long they are interviewing CEOs -- and they're just amazed at how smart these people are, how bright these people are, how competent these people are. Then you switch over to FOX or MSNBC and the politicians come on and you are amazed at how stupid these people are, how mediocre these people are, how untrustworthy these people are and you start to realize we gotta to do something about this.
RT: Does that frighten you?
RT: And Weiner is changing the shape of the election dramatically at least on the democratic side.
MS: Look at Anthony Weiner. It used to be you had to do something and turn your life around to come back from scandal. Nixon took years. Jimmy Carter…just to make up for his bad presidency was out there with a hammer building houses for five years. Weiner stays at home for a year and thinks that’s all he has to do. Babysit for a year and a half and he’s paid his price and now he can come back.
RT: And say, “I made a mistake and I am sorry.” Without doing anything he has a very good percentage of the vote. Most of it is name recognition I suspect.
MS: It is name recognition, but if you think about that, for two years nobody on this earth would hire Anthony Weiner. He could not find any kind of job. Nobody would hire him and now he comes to us and we are supposed to hire him for Mayor of New York.
RT: Well, no one has hired him yet.
RT: One last question. Is there anything that you want to talk about I have not asked you?
MS: I think you are going to see talk radio have a big resurgence on the radio dial, because most of the music listeners are leaving. They are the ones going to Pandora; they are the ones going to iTunes. So, more and more morning shows…and even some afternoon shows…are now completely talk.
©The Torrenzano Group 2013
Lord Bell is a world renowned advertising and public relations executive. He worked in several advertising agencies before helping to found Saatchi and Saatchi in 1970, where he was Chief Executive. He then set up Lowe Bell Communications in 1987 and became Chairman of Chime Communications in 1994.
Instrumental in Conservative election campaigns, he is seen as a founder of the modern PR industry. Lord Bell was knighted in 1990 and made a life peer as Baron Bell of Belgravia in the City of Westminster in 1998.
Following is a conversation he had recently with Richard Torrenzano:
Richard Torrenzano: Tim, tell me a little bit about the current economic conditions in the UK and Europe. What are you anticipating for 2013?
Lord Tim Bell: Economic conditions in 2012 were truly terrible with much gloom, doom and poor statistics. So much rubbish about the Eurozone: who was going to default and who was not. In the end, the Germans would bail everybody out.
The stock market and business prospects were very negative.
Most companies were saving money and keeping it … rather than investing. Those companies which were making profits had very low cash conversion rates. Everybody just basically closed their shutters. They stopped hiring new people. They stopped growing. They stopped expanding. They stopped investing in their business and just walked around moaning.
RT: What do you foresee for ’13?
The leaders of British economic life - the banks - are in total disarray. Everybody thinks they are completely corrupt. Nobody is being punished for the appalling things they did in the 2008 financial crisis. Everybody is very dissatisfied by it.
I think it will get better in 2013, but not a lot ... unless one or two of the things that people have pushed very hard for actually do come to fruition. For example, shale gases.
We have enormous reserves of shale gas in the British Isles. We have extracted them easily through fracking. But, the government is very timid. Finally, at the end of last year it approved a start again to fracking, but only on a very limited basis. If we got on it, we actually could produce 25 percent of our domestic gas consumption.
There are a lot of things like that. They have issues about airport capacity. There is the very constant, long-term debate going on about whether we should have more runways at Heathrow or build a new airport. It is completely obvious that we need to build a new airport.
But, this is a government that does not want to upset anybody. In the words of the immortal Lady Thatcher, “You cannot make an omelet without breaking eggs.”
RT: You took your company private last year. Did that action work well?
LTB: It has worked extremely well, in three ways.
First, we managed to keep virtually all the business of the company we bought except one account. The only account we lost we replaced a week later. That went very well.
We run the company much more efficiently. We have a very high cash conversion rate. We have already paid off a million British pounds of the ten million pounds we borrowed.
We did that by spreading our wings. We went overseas a lot: to Africa and the Middle East, and to Asia.
In a world where you can fly and communicate on mobile phones and through the computer...you do not need all these great physical presences. We have a sort of commando team, which we fly into different places. That has been very successful.
RT: What markets in Asia? Why are you attracted to the Asian market at this time?
We were attracted to this region for three reasons:
First, it is an area of fast growth in all of those markets.
Second, it is extremely immature in its communications’ capabilities.
Third, is in this particular case, Piers is very knowledgeable and experienced doing business in the Asian market.
RT: The UK won’t conduct an election until 2015. Do you see any early opinions forming?
LTB: Well, at the moment if you look at the opinion polls, you would assume there is going to be a landslide victory for the Labor Party. But you can never really tell. There is a very important difference because every single British government since World War II has won the next election. Not necessarily the same prime minister, but the same party.
This is a coalition government that will not be standing at the next election. There is only one government that was not reelected, which was Ted Heath’s government in 1970, which was a terrible government. Probably the worst we have had in my lifetime.
At the moment, it would be clearly a Labor victory. However, not a Labor victory with any enthusiasm. But a Labor victory because the other two parties will be criticized for what has happened during the period of coalition.
RT: Tell us a little bit about the changes you have seen as a giant global pillar of communications. What are you predicting for the next couple of years?
LTB: Well, the diversity of the media, both online and offline, make it more and more difficult to achieve any significant impact. You cannot reach a large chunk of the audience at the same time. You have to do it over a long period across a whole range of distribution channels, including a hell of a lot of Internet channels. It is difficult to produce the kind of ideas that capture people’s imagination.
Communication practitioners have to learn to develop high impact campaigns based around a very core idea that they can execute in all sorts of different ways. Somehow make it have a cumulative effect; which used to only be achieved by running a commercial at all times. Now, you have got to program lots of different things.
No one really knows how many times it takes to have an impact. One of the core parts of that now is public relations. You are able to sell an idea to the media and pay for it through websites and advertising, and so on.
Advertising on the mobile platform will grow dramatically. The quality of the advertisements hopefully will improve. At the moment they are nearly all rubbish.
We will see a lot more sports sponsorships because everyone realizes that sports is one of the most important things in people’s lives. Associating ourselves with it gets you huge credibility with the consumer audience. However, people will attend less sporting events. We have just too many world championships – too many rugby matches, and football matches, and American football matches, and tennis matches, and so on.
RT: Other than the media, what do you foresee for the next few years in business?
LTB: The problem is the digital world has not learned the difference between volume and quality. The digital world adds everything up in numbers, how many hits and all that stuff. What they do not measure is whether or not it has any effect on their audience. It is not doing that well. They do not want to be good at doing that ... because it would spoil an awful lot of their cost calculations.
The digital world speaks only to itself. It does not speak to anybody else. It has even invented a new language so that nobody else can talk to them.
Inevitably, that means that there are myths and strange things. Companies end up participating in the digital world simply because they feel they have to be current -- their competitors do it -- not because it produces measurable results. That has always been one of the most important motivations in growing the activity of the business.
But, people will start to see through the digital experience. I am sure that offline media will diminish. I do not think viewing will diminish, but the number of television stations may because there is not enough money to support them.
Almost all of these great big digital businesses, whether it is Twitter or Facebook are really not buoyant. They are regarded as disappointing. That is because it is all measured by quantity and not by quality.
RT: Changing subjects; give us a view today of the United States from England’s or Europe’s perspective?
They do not argue that core values of America are small government, and low tax, individual liberty, and so on; which is what Romney should have been talking about. Not the ridiculous nonsense that he went through trying to rubbish a bloke who is admired.
I think from here what we see is an American loss of self-confidence. I think the sort of failure to properly resolve Iraq, and Afghanistan, and so on has been very unhelpful. We think America does not really know what its place in the world is anymore.
It does not know whether it is a free market, individual liberty, entrepreneurial country; or if it has turned slowly into one of those countries where 50 percent of the population lives off handouts from the other 50 percent.
RT: The UK will see an extension of the Royal Family this year. Any views or thoughts on that?
LTB: Well, I find all of that stuff utterly boring, and dull, and irritating. I know I am going to have to put up with months of pictures of the baby, intimate details on how it was conceived, and born. It is utterly and excruciatingly boring.
RT: Has there been a different approach by the media since Diana, Princess of Wales died?
LTB: What changed it was the Jubilee, the sheer quality of the Queen.
The Diana period was a very bad period. Of course, the Labor government and the appalling Tony Blair fed the country some kind of loathing of the Royal Family over their supposed ‘getting rid’ of Princess Diana. It is very difficult to answer why people become famous, is it not? Most people are only famous for 15 minutes as Andy Warhol said. But some people, just simply because of the role they occupy, stay famous for a long time. She has managed to stay famous even after her death.
RT: Have you been active in the House of Lords? What are the two or three key issues they are going to face in the next year or so?
It is a pity, too. It was a great institution which was ruined by Harold Wilson and then damaged even further by subsequent prime ministers.
RT: What is something you find interesting today?
LTB: Sky Television is running a series of promos. Like little bits and pieces during the programs instead of commercials. Two of them are the economic editor of Sky talking about the state of America in which he says America used to be the great bastion of free enterprise, and success, and power. Now, it is rundown, and broken, and in sharp contrast to the Clinton years, perhaps. I slightly disagree with that.
The only question being asked is how is Obama going to fix America? I’ll be amazed if the American ambassador -- when we get one -- does not go trudge to the Sky’s headquarters and shout at them. It is doing terrible damage to the reputation of America. It is like every day there is a commercial running saying America is broke. It is extraordinary that nobody is doing anything about it.
There are things going on, but people are just not interpreting them properly.
America is the most important country in the world from my way of thinking and my life. There could not be a better place to prosper. That is no longer as true as it was, but it is still true. But I do think it is tragic watching the Americans not understand their strengths; playing to the wrong things. I think it is very sad.
©The Torrenzano Group 2013
Alan Capper is a leading international journalist and the president of the Foreign Press Association of New York.
Following is a conversation he had recently with Richard Torrenzano:
Question: How much input do you have with U.S. business leaders in terms of your importance as a foreign journalist?
Question: What is the biggest challenge foreign media faces operating in the U.S.?
Alan Capper: To understand the country is the first thing. You can’t just come here with a small briefing. You need to understand the political structure of the U.S. which is very hard to understand for most foreign journalists. The strengths and weaknesses of the economy, the vast differences in the U.S. by geography, East Coast – West Coast, states, and so on. It is so much bigger than most of the countries where the journalists come from, with the exception of India or China obviously.
There’s also a need to understand U.S. history. Some foreign journalists, especially from Europe, would say “Oh it doesn’t have any history; it’s only 300 years old.” That isn’t true. It has a very rich and diverse history. Look at the role of African Americans alone, for example.
Question: Do you think social media impacts the way the foreign media covers the U.S.?
AC: It’s been massive. Absolutely massive. And also we are seeing a change in some of the correspondents that we’re having here now. We have bloggers who are foreign correspondents; they are not what we would have had 20 years ago. Also in terms of information to the foreign press when they are here, it’s essential. It’s an essential information source, the whole viral nature of it.
Question: What’s your viewpoint of citizen journalism? I know you have talked about Occupy Wall Street, but let's discuss the whole concept of citizen journalism.
Question: As in the old days?
AC: As in current days. We, the Foreign Press Association, give five scholarships a year to foreign students, studying journalism in the United States. And so, you know if you visit the Columbia School of Journalism, or NYU or any of them there’s a whole range of disciplines being taught to make you professional.
It’s art, it’s a craft. It also has issues of integrity, huge issues at that. And just to say “I’m a journalist. I’m setting myself up to be this.” I don’t think that cuts it in an increasingly complex and difficult world.
We have news hitting us from a thousand different sources that we didn’t have before. So we don't have to watch the evening news anymore, but what is the most dependable news? The most dependable news must be from people who are professionally able to find it, assess it and deliver it.
Question: Speaking of the evening news, why do you think so little time is spent covering international news and business on the evening news?
AC: It’s very much a peculiarity of the American evening news. If you go to any other country, half the news broadcast is going to be about foreign news, because they – at least in Europe for example, they want to cover other European news outside their own – Germany, France, etc. So here, this world unto yourself is so huge that that is the prime consideration. What’s happening here? And indeed, very often they are the biggest stories.
Question: What do you think is going to be the biggest international story for 2012?
The U.S. economy of course is the huge subject because it affects everyone else. So goes the rest of the world. I did some television reporting to an Iranian station, with Press TV and they didn’t censor anything that was said but what was interesting was that they would normally start with a question that was potentially critical like “Mr. Capper, the Daily Telegraph in London says that the American economic juggernaut has now passed its prime and America is in steep decline. Do you agree with that or not?” That kind of thing.
I would come back and say, “You know the American economy is like a 22 wheel truck going down a highway. It thunders down and occasionally has to slow down or even pull over, but it’s always going to be there and it’s a monster. And it’s going to still be the most important economy in the world.” You know that was the thing. They really didn’t want to hear that.
But that was what I gave to them. What would be interesting would be if it were an Iranian journalist doing that and saying that. Would they want to publish that view? I’m not sure. I managed to get it across but the interest was – the economy, the economy.
Question: What are the differences about a story that would appeal to a non-U.S. reader – someone who’s reading in Germany, or someone who’s reading in New York. From an editor’s point of view?
AC: The Chinese are going to be just as interested in the U.S. economy as anyone here is when we open WSJ in the morning. So I think that the “only in America” stories are very popular in foreign media, especially in Europe because in some sense it gives a kind of superiority, you know? Because America is so huge and so dominant -- and the British are the worst of all -- or the best of all at this. Like, I’m trying to think of a trivial example. Oh let’s say the Coney Island hot dog eating contest.
That might make a paragraph in a column called “Only in America".
Question: Do members of the foreign press receive briefings on U.S. government policies or operations issues on a regular basis?
Question: So foreign reporters get the same considerations as U.S. journalists?
AC: Yes, if you are registered. Which by the way, being a citizen journalist is a lot more difficult actually. Because you don’t have any official accreditation.
Question: There’s no accreditation? You don’t have a press pass or anything.
AC: No, you can be a freelance, nothing wrong with that, as long as you can provide proof of published material or radio broadcast tapes, that kind of thing. You can be accredited, but obviously if you are attached you do have somewhat more prestige and credibility.
Question: A collective opportunity...
AC: Yes, it’s more valuable for the CEO. Their time is extremely valuable and we respect that. We’ve had some very successful meetings.
Question: Now what would you say, in all your years in journalism, was your favorite, or most challenging, interesting assignment?
It was a moment in history anyway. I’d flown on Concorde a few times – I was very fortunate. I had a call from the studio that I was working with – that was LBC and ITN – and they said, “I want you to cover the last flight of the Concorde.” Right? “Okay what do you want? Do you want nostalgia?” “Well, it’s a news story, you know.” And I said, “I’d like to do it on the basis of comparing the nostalgia about it ending with the hostility of its arrival in the first place,” that would be the way to do it.
And so, I duly went out to JFK. They laid on some terrific facilities for us but we were on the roof of the building at five in the morning, freezing cold. There was a whole mixture of people – former aircrew, lots and lots of press, we had a chance to see the VIP guests going in. And there I was, waiting for the take off. “Yes she’s going to begin to taxi now”. The plane was in front of us, the pilots leaning out with Union Jacks, everyone waving. And you felt quite something, like this was a moment.
Especially being British. I found myself, almost in the Hindenberg school of broadcasting, you know saying, “Now she has finally lifted off, she’s winging her way westwards over New York, the city that never wanted her to be here is now mourning her,” and thinking, “actually this is quite historic.”
Question: What is your perspective on the state of journalism today?
AC: I’m optimistic when I talk to students. But we’re going through such a profound change of everything. Everything in our lives is changing, it’s almost impossible to see. There’s no doubt there’s been a dumbing down; there’s been a falling of standards and I see that continuing.
Question: Do you attribute that to 24/7 – get it first – type reporting?
AC: Yes, we always had that but I do see that more so now. Journalistic ethics have suffered with all of this. I worked for the Daily Express and they had a big sign in the newsroom, it said: “Make it fast, make it accurate, and make it right.” That’s simple stuff but now, look at what’s happened with News International, what’s come out from that. It’s so competitive, if you are going to stay alive as a news organization you are going to have something special - you’ve got to get the extra, you’ve got to get the story. If you can’t get it, you are pressured to make it up or whatever; those ethical breaches have come in big time. We’ve always had bad journalism. But I think now we’re also losing a lot of the good stuff.
©The Torrenzano Group 2012
Nouriel Roubini is the co-founder and chairman of Roubini Global Economics, an independent, global macroeconomic and market strategy research firm, has extensive policy experience as well as broad academic credentials. He is a professor of economics at New York University's Stern School of Business. Roubini.com, has been named one of the best economics web resources by BusinessWeek,Forbes, The Wall Street Journal and The Economist.
Following is a conversation he had recently with Richard Torrenzano:
Richard Torrenzano: Does being named one of the 100 Top Global Thinkers by Foreign Policy magazine put added pressure on you to consistently provide accurate, "prophetic" analyses?
Nouriel Roubini: My role is not one of a traditional forecaster, as I see myself as someone who can thoughtfully analyze the global economy and markets and make assessments about the direction of the global economy over the medium to long term. I'm not in the business of day to day forecasting. I enjoy what I do. Therefore, I feel comfortable with having had many honors and discussing the big policy issues of the time.
RT: You were dubbed "Dr. Doom," when you predicted the housing bubble and the recession. When you made that prediction, did you think it would create such uproar?
NR: No. At that time I was starting to analyze the global economy. I talked about emerging markets, the financial crisis in the U.S. I made mention of many vulnerable policies, macro-financial and otherwise. Therefore, I was not fully aware of the consequences of making that particular call. In this line of business you're as good as your last prediction. It's not just me. I have a team of almost 100 people working with me all over the world. We analyze what's going on in the global economy, financial markets and link it to our assessment of geo-political risk as well. This is teamwork and something we do all the time.
NR: There are many things we need to do. On one side we need fiscal discipline over time because these budget deficits are unsustainable.
Paradoxically, in the short term the economic recovery is weak and anemic we need to shorten stimulus somehow to spread the need for a shortened stimulus within the purpose of consolidation. If you can commit to that fiscal consolidation over the medium term, then if you need to borrow stimulus in the short term, no one's going to punish you. Second, I would say that the conditions of the labor markets are still very weak with the unemployment rate almost close to 9%. Anything we can do to jump start hiring by firms is going to be useful.
RT: In a recent interview with CNBC-TV you said, "It's pretty clear the housing market has already double dipped." How can the housing market recover? What needs to be accomplished there before we see a full recovery in that marketplace in the U.S.?
NR: The biggest and most critical thing in the housing market is that there are still millions of households who cannot pay their mortgages. The more homes that go into foreclosure the more the supply, the more prices go down, and the more people are in negative equity. There will be more people walking away from their homes and losing them. One way to deal with the housing problem is to reduce the face value of the mortgages as a way of maintaining people in their homes. Of course, that would imply losses for the banks who made the loans and for the investor who bought the debt. The alternative will be one of further defaults in the millions of foreclosures and ongoing housing and real estate recession.
RT: If we look to another part of the world, particularly China, India and Brazil, you predicted they will collectively grow at 6% this year. That is more than triple the 21/2 plus % for developing economies. What are the emerging economies doing that the U.S. can learn from?
NR: First of all their potential growth is much higher than advanced economies because they're starting with a lower level of per capita income so traditionally emerging markets grow faster. However, I think these emerging markets learn from their own crises as well as crises in Asia and Latin America by fixing their financial system, cleaning up their banks and better supervision and regulations of the financial system.
RT: Let's stay with China and India for a second. In a recent Bloomberg interview you stated India's economy may expand more than China's in the next decade. Why are you so bullish on India versus China?
China depends very much on the U.S. being able and willing to be the consumer of personal assets or expending more of its income running ever larger surplus deficits so that China could be the producer of first and last resort surplus options.
Now this model of growth of China is broken. Because of the excess debt of the U.S. we need to spend less, consume less, import less to deleverage. China depends on the growth of the U.S. and exports. While in India you have more domestic demand that is dynamic and growing very fast. Over the next decade actually the big challenge that China is going to face is to switch demand from export towards domestic consumption.
RT: In terms of economic crisis you wrote, "Traders and bankers must be compensated in a way that aligns their interests with those of shareholders." How would you accomplish that?
NR: I think about the system where your bonus is not given to you right away, but it's accrued to you. Then two or three years down the line we'll see whether under this adjustment basis whether the investments you made were profitable, in which case you get your bonus. If you don't because you took much risk, then your bonus doesn't come.
RT: Talk to me a little bit about the American economy and how you see things unfolding over next two to five years.
The ideal scenario is one in which we deal with our fiscal problems; we deal with cleaning up the financial system. We invest in our people, education and skills. We invest in the infrastructure. We become more productive; we become more efficient. We become more competitive. The dollar probably has to weaken.
With historic economic growth after we have cleaned up our balance sheet in the private and public sector, there are a lot of opportunities: entrepreneurship, private development, venture capital and start-ups. The leadership in the U.S. has many factors that can lead to robust economic growth potentially in a few years. Also our political system is blocked – the gridlock in Congress. There is division and lack of bi-partisanship which may lead to another outcome, where we don't have the right policies where we may have a decade of mediocre economic growth.
RT: If we were to do the right policies, do you think we're going to revert back at least economically to where we were? Or do you think the new level of the economy with a higher level of unemployment, people saving more, people not spending as much where we're going to be for the next two to five years?
NR: For the next two to five years probably economic growth is going to remain anemic because we did all this balance sheet repair; spend less, consume less in the private and public sector to save more and to reduce our debt ratio. Without the balance sheet repair, then the basis for strong economic growth down the line is there. But I'll say that, yes, we're in the new normal which at best is going to be for economic recovery.
Whenever you have a crisis driven by finance, too much debt and leverage, the recovery tends to be for a number of years relatively below trend, subpar, anemic because you have this painful process of a balance sheet repair and leveraging. Probably, that's unavoidable, but it puts the basis for a strong and resilient recovery further down the line if the right policies are implemented.
©The Torrenzano Group 2012
Alan Guarino leads the Global Financial Technology and Electronic Trading Practice at Korn/Ferry International. He graduated from the US Military Academy at West Point and has an MBA in Management. He is the author of, "Smart is Not enough!" (Wiley 2007). The book challenges conventional wisdom on what it takes to be an outstanding executive.
Following is a conversation he had recently with Richard Torrenzano:
Question: With the myriad of leadership theories out there, which is most relevant today?
AG: Transformational Leadership (TL) is the best theory for today’s environment. TL focuses on appealing to the heart of the employee to inspire achievement. This approach pulls out what I call the employee’s discretionary energy - the energy employees possess in excess of the minimum needed to keep their jobs. When employees are effectively led, they give all they have, not just what is needed to stay employed.
RT: Leaders: born or made?
AG: Leaders are made from the stuff they were born with. Most people can be effective leaders but few can be exceptional. Like any other talent, those born with leadership potential must learn to use it effectively; so in this way leaders are “made” from the sum of their experience and, hopefully, good training.
RT: What is the most important trait a leader must possess to achieve long-term success and why?
AG: Integrity. Dishonesty is eventually exposed! Dishonest people also lack strength of character and no one can lead without strength of character. Employees and boards of directors all need to be able to trust the organization’s leadership. When people learn that a leader is not direct, honest and forthcoming, all is lost and people begin to hold back, develop cliques, and form dysfunctional alliances designed to create security.
RT: In your public appearances you’ve asserted CEOs need to behave in an unimpeachable manner. Isn’t that holding them to a higher standard than society in general?
Bad CEO behavior creates a dysfunctional environment that leads to employee defections, a lack of pride in the organization, and a general breakdown of leadership. When these things happen, the numbers quickly tank. Great CEOs are people of character and any deviation results in eventual decline of the organization. Look at the public examples of what happens when leaders behave badly – Nixon, Spitzer, etc.
RT: It seems the U.S. military is far ahead of corporate America when it comes to cutting-edge leadership development? Why is that?
AG: The U.S. military, the individual services and their educational institutions, such as the United States Military Academy were remade from the crisis of Vietnam when the military lost its sense of integrity and needed to re-think its leadership model.
From this the all-volunteer military, specifically the Army, was born.
Volunteers need to be led in ways that will inspire them to continue in the military as a career. They also require more autonomy and more opportunities to grow than do enlistees who were forced into service. As such, the Army built a significant honor/integrity education program and delivered it across the force with a leadership model oriented on individual decision making and getting authority and decision making to the lowest levels of the organization. They called this “power down.” What’s amazing is that this was happening in the mid-1970s and 1980s when corporate America was still fairly bloated with the “organization man” and extremely hierarchical.
Volunteer soldiers don’t just follow orders – if you are to lead them toward a career of military service, they need to be inspired.
RT: Which are the toughest organizations to lead?
AG: Peer organizations are toughest to lead. If you can get your peers to follow you, you are gifted. This applies to volunteer organizations as well - charity boards, industry groups and the like. In business, professional services businesses are the toughest – leading consultants is often referred to as cat herding. It takes a special leader to muster these individual thinkers to a common pursuit.
RT: What are the critical skills needed for 21st century business leaders?
RT: Can large company CEOs learn from entrepreneurial leaders?
AG: Yes. They can learn how to build cultures of action, invention, pride, and customer focus. Smaller companies get people to work harder and for less money than they would accept in a larger company. Why? Because the employee feels another form of currency – I call this Triple E-P, employees feel: Engaged, Empowered, Excited, and Proud.
RT: You’ve run start-up businesses, commanded a company as an Army Captain and currently chair the board of a not-for-profit here in New York. Please comment on the leadership experience you have most enjoyed and their differences?
RT: How can you tell if someone is truly a successful leader? Does charisma play any role in leadership?
AG: Charisma is a raw material that has a role in success, but becomes empty if other abilities are absent. A successful leader is measured by the results he/she gets from others and from the following of loyal employees they gather over their years of leadership. Every other measure is fleeting - numbers, market leadership, products invented etc. Leaders bond with and build people. The people who respect and learn from them are the measure of the leader.
©The Torrenzano Group 2012
Frank Zarb served as "Energy Czar" during President Ford's administration, holding dual appointments in the Energy Resources Council and the Federal Energy Administration. He later became chairman and CEO of the National Association of Securities Dealers (NASD) and head of the NASD's stock exchange, the NASDAQ Stock Market. Currently he is a Managing Director of Hellman & Friedman.
Following is a conversation he had recently with Richard Torrenzano:
Richard Torrenzano: What's been right, what's been wrong with U.S. energy policy over the last 10 to 20 years?
Frank Zarb: There has not been an energy policy in the U.S. in over two decades. That’s the biggest public policy failure in our lifetime, because the public sector refuses to face up to the needs of U.S. energy.
While I can't tell you anything good about U.S. energy policy, I can tell you some good things about the marketplace that has raised prices, increased production, and encouraged alternative energy sources, but not nearly fast enough. So despite the lack of a government policy, the marketplace has done okay.
RT: Is there excessive profiting in the energy business?
FZ: Talk of excess profits during peak periods for the most part is driven by politics, not by economic analysis. It's been cyclical, with pricing of crude oil, particularly. That drives the rest of the energy sector and for the most part that pricing is in the hands of non-U.S. producers and the world economy. I think there has been a reasonable job done of taking the high-end profits and putting them back into new capital. That's exactly what you want.
RT: What percentage today of our oil comes from North America and what percentage comes from overseas?
FZ: 40% - 60%. Sixty percent from non-North American sources.
FZ: We are very vulnerable. Just consider -- we now import nine million barrels a day, half of it from unfriendly parts of the world. Think about some kind of military action in the Straits of Hormuz that would reduce the amount of oil available to this country by one and a half to two million barrels a day. That in itself could produce enough economic disruption, particularly on the East and West Coasts to substantially hurt global economic peace.
RT: What kind of reserves exist today that could be put into the hands of people and business? How long would those reserves really last?
FZ: Strategic reserves probably have 90 days worth of production. We started that in 1975 when I was in government to ensure our military had access to fuel in the event of a disruption in Middle Eastern oil flow. Keep in mind, however, that oil has to be piped to a refinery, refined and piped to where it's needed, and it's only a small backstop; an important one, but small.
RT: What are the objectives of a good U.S. energy policy?
FZ: Several. In the short term you have the energy security question. You have to have a plan that will reduce oil imported from unfriendly parts of the world as soon as you can. That should be articulated in barrels per day. If we import nine million barrels per day now, a reasonable objective would be to import only six million barrels per day in ten years.
RT: Ten years is a long time away.
FZ: It's a long time away, but it's energy. You have to think in terms of 10 or 20 years, because in 20 years you have to be moving toward alternative forms of energy. Non-oil and natural gas based energy will be taking on a substantially higher burden of our energy needs. On the other hand, for tomorrow and the next several years, the only organization ensuring energy security is our military. Like it or not, that's what it is.
RT: What are those competing factors to energy policy? How do you view them?
FZ: Competing factors have been there all along. The consumer wants cheap energy and a lot of it. The producer wants to get paid and wants the ability to produce where he can produce. The environmentalist wants to preserve the environment. The politician wants to tell the voter that they can have cheap energy and not destroy the environment in any way, shape, or form. Then you've got the extreme producer who wants to dig holes wherever they want. It's a mess of individual interests without leadership.
RT: Do you think any President or administration can provide that leadership?
RT: How long would it take to implement a sound strategic policy?
FZ: Twenty years, if we started right now. It would be over several administrations. The current administration is talking about going forward with some nuclear power and building one or two nuclear plants. But if you're going to do that, you've got to approach nuclear power on a much broader base than this administration, although I applaud what it has done.
RT: Some of the risks are obvious, but what are the long-term risks of not having a workable energy policy?
FZ: The short and long term risks are substantial harm to our economy, affecting the ability to grow and increase productivity. Energy is economic blood. If energy isn't available at a reasonable economic cost, then you can't grow an economy.
RT: What role do you really think all these new clean energy technologies can play in taking us off our oil reliance? Obviously, there are a lot of technologies in many different areas. What seem to be the most important areas to you?
FZ: The electric current today consumed in the United States is something like 3.7 trillion kilowatt hours. Solar energy is probably 23 percent of that. Wind power is probably 8 percent of that. We have a long way to go before these other technologies take over. The electric car is a great step forward, but it reduces an insignificant portion of the gasoline usage. It's going to take 20 to 30 years for that evolution to take.
RT: They could make some real dents, I would think, over the next five to seven years in solar energy and wind power, no?
FZ: It depends on how big a dent you're talking about. If you're talking about going from 1 percent to 3 percent; sure, but not much more than that. First of all, the economics doesn't usually work. The economics of solar and wind, which are terrific, are currently heavily subsidized.
RT: Is that because the technology is not really advanced enough?
RT: How safe do you think nuclear power is today versus how plants were built 20 or 30 years ago?
FZ: A lot safer. The French have done it right for years. A very high proportion, if not 100%, of their electricity comes from nuclear power plants. The federal oversight has gotten extremely good in that sector. It's always a concern, but I think it is well under control. Keep in mind that people complain about nuclear waste, but the military probably produces more nuclear waste than all the utilities put together.
RT: How many more nuclear plants in the United States do we need and how long does it take a plant to come online once the shovel is in the ground?
FZ: Under current conditions, it's an eight to ten year project, including getting the shovel in the ground and fielding your first lawsuit. It's still a very messy procedure.
RT: What kind of issues or surprises do you think the U.S. energy industry is going to face in the next five years?
FZ: You will again have a spike in prices or several spikes in prices. They'll come about by any number of things. It could be a terror attack on some oil fields somewhere in the world. I worry a lot about disruption in the U.S. oil flow, particularly from the Middle East, which if you're a terrorist; you've got to be thinking about how you get that done.
On the upside, you'll see some interesting breakthroughs in the advancing technology, such as nuclear, solar, and wind power.
©The Torrenzano Group 2012
Sal Sodano, former chairman and chief executive officer of the American Stock Exchange (Amex) and vice chairman of the National Association of Securities Dealers (NASD), possesses a deep interest and appreciation of business education. He served as Dean of Hofstra University's School of Business from 2006-2010. He remains active at the university as the Senior Executive Advisor to the President and the Arthur Sorin Distinguished Teaching Fellow in Business.
Following is a conversation he had recently with Richard Torrenzano:
Richard Torrenzano: Why the renewed focus today on business education?
With the change in the environment and all the failures, certainly in the financial services industry, we have to reexamine what potential leaders and managers need, in terms of tools to be able to lead in today's economic environment.
RT: Do businesses and business schools need to communicate better?
SS: For a business school to really be successful they have to balance traditional academics with business practitioners. Many business schools do not openly embrace practitioners in the classroom as teachers. There has to be a better balance between academia and practice. Schools ought to employ the executive-in-residence concept, using someone who is viewed as successful in what they do in business. Have someone spend a semester, even a year or two in the school, working with the faculty to give them a better understanding of what is happening currently in the business world, and more importantly, get them in the classroom. Let the students have access to real decision-makers and achievers.
RT: What important skills do today's MBAs need to learn?
There are very few schools right now that focus on the soft skills as part of the curriculum. We're just now focusing on a formal approach to bringing these soft skills into the curriculum, so that when someone has completed their graduate program it's not just a technical program. Then they will have a complete portfolio of skills.
Our Management Department and I try to get students to understand there's a big difference between teaching management and teaching leadership. You can manage and not be a good leader. You can lead and not be the best manager. They're not the same thing. The goal is to blend those two concepts into one person. An outstanding leader is someone who can motivate, take charge, someone people want to follow and hopefully manages well.
RT: Let's talk about the Zarb School of Business at Hofstra. What did you do there that was new and innovative? How is that helping an MBA student get a job and be better positioned for that job?
SS: We anticipate what direction and curve business is taking to provide programs for students so they're ready to take advantage of those opportunities.
For example, we have new programs such as an MBA in Sports and Entertainment Management. There aren't many of those around. We think there will be some opportunities in those fields coming up, so we have put programs in place within the past few years.
A perfect example of trying to anticipate and be ahead of the curve is a program that's gaining traction at the university now. We have a Master of Science in Quantitative Finance. It sounds pretty fancy. It focuses on quantitative methods, math and statistical analysis in the understanding of finance. Now what does that mean?
It means students who complete this program will be very qualified to do what's required not only in a Wall Street type job, but in government regulatory agencies, risk management industries, compliance officers, as well as a trader dealing with whatever security or commodity you're interested in.
RT: You have a trading floor at Hofstra?
We have 35 trading posts, access to the latest information in all the markets like equities, fixed income, commodities, and money markets. We have mock trading systems built into our trading room with professional money managers and traders from Wall Street who work with our faculty and students, perform trading contests and mock trade programs right in the business school.
When our students compete in open outcry and electronic trading they regularly rank as the top 10 students in the country. The reason is the competency of our faculty, as well as the success of our alumni in the Wall Street world and their ability to be on the campus trading floor with our students. This is world class, so you put that all together and it's a tough combination to beat.
RT: Executives complain about MBA's graduating business school as weak writers. Do you agree with that and are you doing anything to address this issue?
SS: I absolutely agree with that and I think it has to do with two main factors. Today's generation is very different, in terms of communications style, than current business leaders. We would write memos to communicate with one another. We would be in front of each other with eye-to-eye, communications, but students today live in a world of the iPhones and tablets, and texting.
The language is different and the words are different. The ability of students to be at ease with someone face-to-face is markedly less because they just don't do it. Leaders today are concerned that the new graduates are not as comfortable and capable in all aspects of communication; primarily because young kids text.
On top of that, the outstanding graduate education that's in this country has given rise to a huge influx of students from other countries enrolling in U.S. graduate programs. That, in and of itself, gives rise to cultural differences. Their command of the English language may not be as strong. All these can cause significant challenges for students entering today's job market and their employers.
RT: How much demand do you see for MBA law degrees?
SS: Not as much as you would think. You would think that everyone, including attorneys, would want to have the best skill set to make them the most valuable to their firms. You want to round out your legal education with a business education. There is a program that does exist currently, but we have only seen modest growth in that area.
RT: There have always been MBAs in the entrepreneurial world. With the lack of demand for jobs in the corporate arena, as well as the problematic job market, is there more interest in entrepreneurship?
As a matter of fact, in a class I taught I asked students that question and to my amazement more than one-third of them told me they were going to work in their family businesses or start their own.
That is vastly different from when I graduated in the late 70s. You almost automatically assumed everyone who graduated was going to Wall Street or a company like IBM. It's a very different mindset today. Young students see a lack of loyalty in employers, and in many instances, the harshness of economic realities where you can just be cut without reason or loyalty. Many people are not happy with that, or quite frankly; do not want to be involved in that type of environment.
RT: As you look out over the next three to five or seven years at the better business schools in this country, what are the surprises you're going to see?
SS: You're probably going to see a change in mindset from purely professional training.
You'll see more integration of pure, analytical thinking skills, almost the type of skills you would develop in a liberal arts school by taking general type courses that develop your curiosity and your general analytic ability. Without a doubt, there needs to be a lot more work done on the interpersonal skills, communication and team work.
©The Torrenzano Group 2012
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