10 Big Thinkers for Big Business
June 13 issue - PIERRE OMIDYAR
There's a reason Silicon Valley was known during its go-go years as a place of "deep pockets and short arms." Most Internet lottery winners spent more on outlandish excess than philanthropy, and of the young millionaires who did set up charities, many have since run out of money—or lost interest. Pierre Omidyar is an exception. At 37, the man who built the online auction house eBay plans to devote the rest of his life to making sure that his $10 billion fortune goes to helping others "discover their power to make good things happen."
Last year Omidyar shook up the philanthropic world by converting the foundation he and his wife, Pam, established in 1998 into the Omidyar Network, which will direct money not only to traditional nonprofits, but to profitmaking businesses as well—as long as those enterprises create what Omidyar calls "positive social impact."
Omidyar says he was inspired by the lessons of eBay, which "taught 150 million people that they can trust a complete stranger," and also by his work on the board of Meetup.com, the online service that allows members to connect over some shared interest. "It occurred to me that there's a type of business that can only be financially successful if it helps make the world a better place," says Omidyar.
Unlike traditional charities dedicated to curing diseases or building museums, the Omidyar Network is a curious hybrid: part philanthropy, part venture capitalism. "It's not about giving away money or providing aid or help," says Omidyar. "I like to think of it as an investment." During the past year the Omidyar Network has invested sums ranging from $75,000 to $1 million in for-profit ventures. They include Socialtext, software that allows users to collaborate on group documents, and Grassroots Media, a Web site to promote community journalism. On the nonprofit side, it's made grants to support organizations that promote greater openness in government, voting rights and campaign-finance reform. While most of the investments have been relatively modest, they will increase as ventures prove to be profitable, says Omidyar Network president and COO Iqbal Paroo. "At that point, we will open the fire hose," he says. The network will spend $400 million over the next five years.
Omidyar has made his largest investments so far in the field of microfinance, which empowers the poor around the world by granting tiny loans (often as small as $50) to poor people who want to become entrepreneurs. By helping a woman buy a sewing machine so she can start a clothing business or buy chickens to sell eggs, lenders not only profit from interest payments on the original loans, but also build a base of small-business owners who will continue to bank with them. "It's a perfect match for the way we look at the world," says Omidyar.
Last week the Omidyar Network made a $4 million grant to the nonprofit Grameen Foundation USA, which underwrites more than a million loans in developing countries. Later this year, says one of Omidyar's advisers, the Network will disburse "a significantly larger" amount, intended to be the largest private investment ever in microfinance. In coming years, says Grameen's Alex Counts, "Pierre will become to microcredit what Bill Gates is to global health and vaccines." For a man who changed the world by helping people discover their own entrepreneurial power online, it's a passion that makes perfect sense.
—Karen Breslau
JUDITH REGAN
Judith Regan has never played by the rules. She entered the genteel world of book publishing 18 years ago, a Vassar grad fresh from her gig as a reporter for The National Enquirer, and brought her nose for the sensational and salacious with her. She has offended the tony tastes of her peers ever since, and she's made a fortune doing it. So far this year, four books bearing her ReganBooks imprint have hit No. 1 on The New York Times best-seller list (three related to the Scott Peterson trial, one by former baseball star Jose Canseco). An equal-opportunity provocateur, she has published Rush Limbaugh and Michael Moore, Howard Stern and Eminem, porn star Jenna Jameson and Gen. Tommy Franks. She's responsible for last year's hot erotic memoir "The Surrender" and the "Wizard of Oz"-inspired novel "Wicked." ReganBooks generates a reported $120 million in revenue per year for its parent company, HarperCollins. But Regan's still not sated. "I'm like the rogue warrior of publishing," she says, laughing. A warrior with plans to become the queen of all media? "Well, princess of all media," she says.
In April, Regan announced that she plans to move her company, including about half her 40-person staff, from New York to Los Angeles before the end of the year, and is expanding into television and film. "Who reads?" Regan asks. "The biggest book-buying audience is over the age of 50. I've been screaming to the publishing community about this for years. I mean, hello, this industry is going to have to change!" Raising a son and daughter helped her see the future. "Anyone who has watched children grow up in the last 20 years knows they don't go to bookstores," she says. "Technology is allowing people to get their information in a variety of ways, so why would I limit myself to just books?"
In some ways, it's surprising Regan didn't make this move sooner. "In an industry that has seen flat to declining sales, and where it's very hard to make money on a book, she's probably one of the most profitable publishers ever," says Michael J. Wolf, who heads the media and entertainment practice at McKinsey Co. "More than that, she's been able to take ideas for books and make them into true multimedia concepts." Like Us Weekly or Fox News, Regan has succeeded by giving the American public what they want instead of what they say they want. (Not that she's without standards. She passed on the chance to publish a book by W. Mark Felt, a.k.a. "Deep Throat," because she worried the 91-year-old wasn't of sound mind.) Her brash style has earned her as many enemies as friends over the years, but she chalks most of that up to envy. "You're not supposed to be the valedictorian and have cleavage," she says. It's hard to argue with her record. Finding and making best sellers, she says, is like "good sex. You have to get someone's attention, you have to know what to say to them, you have to know how to touch. It's like a dance."
The challenge before her now is completing the seduction in television and film. Cable channel A&E recently ordered an extra 40 episodes of "Growing Up Gotti," the Mafia-princess reality series that Regan executive-produces. Regan has eight movies in development, including "The Day the World Came to Town" about a small town's response to 9/11. Of course, film-industry lore teems with tales of hotshots in other fields who have had their hats handed to them by Hollywood, but Regan has been thinking like a film exec for years. "I used to say, 'Hey guys, why am I sitting here acquiring rights and editing and rewriting these authors, and spending years developing them, so that the movie people can come in and exploit all my creative work?' " she says. Now she'll be able to exploit herself, so to speak, snatching up book, TV and movie rights to a single project. And, on a personal level, she's sure to fit in more on the Left Coast than on the Right. "Wherever there's money or glamour, you're going to get some crazy people," she says. "At least in L.A., the crazy people are creative." For this NEWSWEEK photo, Regan suggested that she slip on a ball gown and pose atop one of the famed lion statues in front of the New York Public Library. The library nixed that idea. As if she needed more proof that she's too big for that town.
—Sean Smith
KEN LOMBARD
Ken Lombard doesn't aspire to produce music or make movies or hobnob with celebrities. He's a proud "suit" and enjoys the discipline and structure of corporate America. Fun for Lombard? Investing in real estate. In short, Lombard seems the antithesis of the typical entertainment wheeler-dealer. So why are so many industry bigs clamoring for a moment of his time? Lombard is Starbucks Coffee Co.'s first president of entertainment, which means he is the gatekeeper to endless lines of adults with enough disposable income to drop $4 on a latte and, presumably, $15 on a new CD or DVD.
The 50-year-old former investment banker hopes to make the coffee chain an entertainment destination as well, by dangling the profit potential of the 33 million people who pass through Starbucks stores around the world each week. That's a tempting business opportunity for entertainment executives who are seeing profits erode from illegal computer downloads. The current music-industry model provides few chances for "mature" listeners to discover new music. And Lombard says Starbucks has credibility with consumers; they know it would never expose them to bad music. "The commitment that Starbucks is making to the industry is a real opportunity to change the game," says Lombard.
Before joining Starbucks, he was cofounder of Johnson Development Corp. with his friend Earvin (Magic) Johnson. The two convinced Starbucks that there was a market for high-priced coffee in inner-city neighborhoods. "The forcefulness of Ken's conviction is important," says Starbucks chairman Howard Schultz, who spent many months wooing him to Seattle. "He is not afraid to stand up to the status quo."
Of course, it helps when the status quo is faltering. A CD at Starbucks can ring up big numbers. A recent Ray Charles release sold more than 730,000 copies. In the wake of that and other successes, Lombard now holds some hefty bargaining chips. Competing music retailers threw a fit—to no avail—when they learned that Starbucks would be selling a new release by singer Alanis Morissette exclusively for six weeks. And when Atlantic Records chairman Jason Flom, hoping to get an exclusive, held a private performance of his promising all-girl band Antigone Rising for Starbucks executives, Lombard's team liked it but thought the group's album was a bit too edgy. So Flom promptly agreed to re-record a live, all-acoustic version that is now sold exclusively at Starbucks. "The potential impact is significant," Flom says. Starbucks already has one of the biggest wireless networks around, and Lombard can envision a time not too far from now when coffee drinkers worldwide can fill up their computers or cell phones with music every time they visit. Movies, too. Earlier this year Lombard and Schultz trekked to the Sundance Film Festival for a private meeting with Robert Redford. "We all walked out of there thinking that there should be a way for us to work together," says Lombard. And, yes, he admits, he was just the tiniest bit star-struck.
—Jennifer Ordonez
LINDA CHATMAN THOMSEN
It wasn't the call Linda Chatman Thomsen wanted to get just after her appointment as enforcement chief for the Securities and Exchange Commission. For much of the previous three years, Eliot Spitzer, the New York attorney general, had done his best to try to make the SEC look bad, bringing case after case against firms regulated by the federal agency known as Wall Street's "top cop." Spitzer, who once told an audience he wouldn't let the SEC "do a house closing for me," wasted little time getting to the point: " 'I'm filing a case this morning'," Thomsen recalls him saying. "Is this a securities case?" she asked. Spitzer said it was "a major case" before telling her he was "just kidding" and congratulated her on her new job.
That may be the last nice thing Thomsen will hear for some time as she settles into one of the toughest positions in Washington. It used to be that the SEC was an agency independent from political pressures. After all, its mandate—to regulate securities markets and protect small investors from fraud and abuse—appears to be the most bipartisan of issues. But since the stock-market bubble burst in 2000, the SEC has become a political football of sorts, attacked by Democrats like Spitzer for not being vigorous, and some Republicans for clamping down too much.
In an era when wanna-be Eliot Spitzers (and the man himself) publicly attack potential targets even before filing charges, Thomsen is certainly a throwback; her new way of thinking is one that relies on old standards. "I'm a big believer in due process," she says. "A lot of people get worked up about the pace of investigations, except when it's you or your brother or husband who finds himself in the cross hairs. Then you want due process."
Thomsen is in a particularly tough spot. The Enforcement Division she runs has racked up an impressive array of victories in recent years, including its investigation of Enron, which Thomsen led. But just last week, SEC chairman William Donaldson, the man who appointed Thomsen to the job last month, resigned amid intense pressure from business groups over his aggressive agenda. President Bush has nominated a conservative, Rep. Chris Cox, who is known for his pro-business attitudes.
Thomsen, 50, has spent 10 years at the SEC, where she has held a number of top gumshoe positions. She serves "at the pleasure" of the chairman, but most SEC watchers say the odds are unlikely that Cox, if he is confirmed, will find someone better suited for the job. Former SEC chairman Harvey Pitt, President Bush's first SEC chief, describes her as "tough as nails, but in a good way."
If Thomsen is worried about a shift in the way the SEC does business, she doesn't show it. In a series of interviews with NEWSWEEK last week, Thomsen conceded that the Enforcement Division might have to adapt to new leadership. But, she quickly added: "I believe the core business of what law enforcement does is something people rarely disagree with. And we will continue to call them as we see them."
—Charles Gasparino
ALEX BOGUSKY
Among the many movie tie-ins that the new "Star Wars" episode has spawned, one stands out as particularly inventive: sithsense.com, where you can play 20 questions with Darth Vader. "Think of an object," he commands in his baritone. Then, between much heavy breathing, he asks his questions, and you click on answers like yes, no, sometimes, etc., as he taunts you: "I have searched the depths of your mind. It did not take me very long." Every now and then, the eponymous Burger King emerges to whisper suggestions in Vader's ear. So far, the site has logged more than 3.7 million hits.
Score another success for the creative team at Crispin Porter + Bogusky—the ad agency behind the effort—and executive creative director Alex Bogusky, 41, whose surfer-dude facade masks one of the most visionary minds in advertising. Since he joined the agency in 1989, he has helped transform CP+B from a backwater shop into a $500 million powerhouse. At a time when clients are finding it tougher than ever to connect with consumers, he's invented new ways to reach and titillate elusive audiences. "Alex has thrown out the rules," says Rick Boyko, managing director of Virginia Commonwealth University's Adcenter.
For Bogusky, the medium should match the message. To promote the unconventional Mini Cooper, the agency placed the car in stadium seats on game days and fastened it to the top of an SUV to tour the country. For Virgin Atlantic Airways, which sought to revive its cheeky and sexy personality, CP+B targeted business travelers with a parody of a porn video offered in the adult menu of hotel pay-per-view.
Bogusky wants to engage brands with popular culture. It seems to have worked: the Burger King has lately been appearing on "The Tonight Show." Sometimes, the agency goes even further, venturing to make a brand shape culture. In its 1990s antismoking effort—branded "Truth"—CP+B set out to change teen culture around smoking, forsaking the preachy "Just Say No" for a hip, nonjudgmental campaign that conveyed the dangers of smoking in raw and edgy contexts. More recently the agency took on America's infatuation with big cars in its Mini campaign (one billboard: THE SUV BACKLASH OFFICIALLY STARTS NOW).
For all the flux in the industry, Bogusky believes that things will eventually settle down and a new advertising model will emerge. But "we're not worried about what the answer is," he says. "We're just going to deal with the current, completely screwed-up environment." An environment that seems to suit him just fine.
—Arian Campo-Flores
MYLES KOVACS
As he cruises through his old 'hood in East L.A. in an "inferno red" Dodge Charger, Myles Kovacs marvels at all the everyday cars riding on 20-inch rims known as DUBs. Once street slang for a double dime bag of pot, the term DUB became the name of the hip-hop car magazine Kovacs founded five years ago that has transformed the car-tuner subculture into Main Street fashion. "This is not just urban culture," he says, sporting baggy jeans and a $14,000 diamond-encrusted watch. "This is pop culture."
No longer fearful of the street life DUB glamorizes, Detroit is now looking to Kovacs to pimp its rides. His stars-and-their-cars glossy—a kind of "MTV Cribs" meets InStyle—has become the place automakers go for validation and advice on the elusive youth demographic. Since Latrell Sprewell graced the first cover in 2000, Kovacs has built a $50 million empire that now includes toys, rims, concerts, car shows, MTV "Whips, Rides & Dubs" specials and the hot-selling Midnight Club 3: DUB Edition videogame. Along the way, the 31-year-old has become a star maker in Detroit. That Charger he's in comes compliments of Chrysler, which hopes he'll do for it what he did for its 300C last year. Kovacs hooked up 50 Cent with a 300C, who cast it in a video, making it a monster hit. "If your car is in DUB, it has street cred," says Chrysler marketing exec B. J. Birtwell. "Myles doesn't just put any whack car on the cover."
With car execs now talking like Snoop Dogg (a sure buzz kill), Kovacs is tutoring them on the difference between posing and getting real. At a Detroit auto confab last month, Kovacs lectured a room full of suits on the need to get out of their comfort zone. "I've never seen so many American cars on the road in my life; it's like you're living in your own world here," Kovacs told them. "I'm trying to educate people about getting closer to young consumers without going 'Yo, yo, yo'."
Kovacs embodies the idea of blending different worlds. Three quarters Japanese and one quarter Hungarian, he grew up speaking Spanish in tough East L.A. His first brush with cars and stars came as a high-school delivery boy at a rim shop frequented by Tupac. On runs to wheel makers, Kovacs nosed around for tips he uses now to design his own line of rims. Says former boss Diko Sulahian: "Myles always had that vision for what's hot on the street."
The idea for DUB came as Kovacs watched a car auction on TV in 1999 when country singer Alan Jackson's Mercedes fetched an extraordinary price. "At first I thought, 'Who's Alan Jackson?' " he recalls. "Then I went, 'Wow, there's that much value in celebrities?' " By that time Kovacs had parlayed an interest in the club scene into a gig editing an entertainment magazine. He persuaded two colleagues to jump ship and use their celebrity connections to start DUB. Unlike typical car mags, there are no reviews or criticism. Kobe Bryant and Mike Tyson have been cover boys, with nary a mention of their legal difficulties. "We treat people like human beings," says Kovacs, "and give them the privacy they deserve."
To the establishment car media, Detroit's fixation with DUB will fade. "If your magazine is strictly tied to this big-wheel fad," says Car and Driver editor Csaba Csere, "it makes your longevity fairly difficult."
Kovacs, though, is gunning to make DUB the next Playboy, a launching pad for a lifestyle. That's why he's now working with companies like Procter Gamble and PepsiCo. He's teaching corporate America Street Cred 101, telling them it's old school to portray urban culture with ghetto imagery. Preppy is the new urban trend, so Kovacs says the next wicked whip will be the Range Rover Sport. "It's all about aspiration," he says. "Instead of chain-link fences, they need to show the Hamptons." Like Kovacs, the street is heading uptown.
—Keith Naughton
SUSAN DECKER
Years before she became Yahoo's chief financial officer, Susan Decker, 42, wrote the book on the company. In 1996, as a media analyst for Donaldson, Lufkin & Jenrette, Decker visited the start-up and wrote a lengthy report that became a case study at Stanford Graduate School of Business. Decker helped take Yahoo public and struck a friendship with its founders. So perhaps it wasn't surprising that when she solicited cofounder Jerry Yang's career counsel in 2000, the conversation "very quickly felt like an interview rather than an exchange," she says.
As Yahoo's new chief numbers cruncher, Decker stepped almost immediately into a hornet's nest. Soon after she joined, Yahoo's revenue plummeted by 40 percent in the dot-com crash. While the rest of Yahoo's top brass left, Decker acted as a steady hand. She pushed to expand Yahoo's advertising base and emphasized transparency with Wall Street. Even in the worst of times, she says, "I never lost faith. We had millions of visitors to the site every month. There were always lots of ways to make this a profitable advertising model."
With new CEO Terry Semel, Decker also brought the company back into the search business, which it had outsourced to Google. She calculated that every percentage point of market share in search translated into $200 million in revenue (that number is closer to $400 million today, she says). She pushed the company to acquire search firms Inktomi and Overture, without which Yahoo would almost certainly be doomed. She also guided the acquisition of 21 other firms over the past five years.
Decker is a rising star not just at Yahoo but in the Silicon Valley business community. Last year she was appointed to the board of directors at both Pixar and Costco after turning down a handful of similar offers. Former associates rave about her. Mary Meeker of Morgan Stanley calls her a "financial taskmaster, but she does it with a wink and smile." Jack McDonald, the Stanford business professor who once taught her at Harvard, says, "She thinks deeply about business strategy. She knows how to create value in the Warren Buffett sense." And industry analysts agree: if Decker ever wants it, a CEO chair is waiting somewhere for her.
—Brad Stone
ROGER MCNAMEE
He's not your typical middle-aged rock-and-roller. On a late sunny afternoon last week in San Francisco's Union Square park, Roger McNamee's band, the Flying Other Brothers, serenades an audience with earnest original songs and lively covers. But a closer look at the guitarist and lead singer reveals an unusual pedigree. His hair isn't quite as long as his band mates', and—the biggest giveaway—he's still wearing a pair of well-pressed khakis.
McNamee has another life far from the elevated soundstages and Best Western motels where his band spends 40 nights a year. He's one of the best-known venture capitalists in Silicon Valley, with a record of straying from the pack and placing prescient bets. Back in 1997, McNamee worried about the future of the dot-com boom and returned money to investors from his private-equity firm, Integral Capital Partners. In 1999, McNamee cofounded Silver Lake Partners to bet on unpopular, undervalued firms like disk-drive maker Seagate. "If you want to be really successful in the investment business, you have to spend a material amount of time swimming against the tide," McNamee says from his nonmusical stage—the office of his third investment firm in 15 years, Elevation Partners.
McNamee cofounded Elevation with five other business veterans—as well as U2 frontman Bono—to invest in media firms like videogame companies and music labels, at precisely the moment that the Internet is demolishing traditional media-business models. McNamee says Elevation's strategy is to buy media companies and position them to thrive in an age when audio and video are transmitted over the Internet and anyone can become a musician or filmmaker. Hollywood, he says, has been too defensive about Internet copying and distribution. "They are going to miss a massive period of creativity and will have to buy the companies that get this at a very high multiple," he says.
McNamee and his partners want to invest and actively guide media companies for periods of seven to 10 years. That tune isn't in the typical songbook used by media investors. But McNamee credits a major health crisis for his long-term perspective. In 2001, he had a stroke. He was just 45. Doctors discovered the cause was an inch-and-a-half-wide hole in his heart and performed open-heart surgery to repair it. McNamee spent a year recuperating and re-evaluating his life. He recommitted to his music and funneled his new revelations into a 2004 book, "The New Normal: Great Opportunities in a Time of Great Risk." McNamee now preaches unconventional wisdom not just about managing companies, but managing life in an increasingly stressful world. "The key piece of advice I'm giving people is that 98 percent of the stuff in their in box doesn't matter," he says. Now that's a catchy tune.
—Brad Stone
ED IACOBUCCI
Around the halls of DayJet, Ed Iacobucci is called "George"—as in George Jetson. Iacobucci, after all, wants to make the car-size jets imagined in the cartoon a reality, with an air-taxi service for short business trips that he's trying to launch next spring. Iacobucci (pronounced YAK-ah-boochee) sees a future in which people can hail one of his DayJets on short notice to go where and when they want, without the hassle of changing planes or navigating big hub airports. What will make this a reality is the expected arrival next year of a new class of aircraft called "very light jets," or VLJs. Other companies are also planning to launch air-taxi companies, but Iacobucci, the former chairman of software company Citrix Systems, says proprietary software his company is developing—called Advanced System Technology for Real-time Operations, or ASTRO (after Jetson's trusty dog)—will give him an edge over the competition. "It couldn't have been done five years ago," he says.
Iacobucci's inspiration wasn't sci-fi books, but the drudgery of business travel from his days as an IBM engineer. "The busier I got, the harder it was to do my job," says Iacobucci, who lives in Delray Beach, Fla. When Iacobucci made some $100 million as cofounder of Citrix Systems, which pioneered remote computer access, he bought himself a Learjet. "It was a revelation—not the luxury, but the convenience," he says. He wondered why on-call jets were only for CEOs.
There were, of course, 4 million reasons. Private jets cost at least that much. But next March, if the FAA approves it, a new mass-produced plane called the Eclipse 500 will start zooming around the skies at 420mph. His jets will not only be cheaper to buy ($1.3 million) but also to fly, since the lightweight craft uses less fuel than typical jets. After two years, DayJet expects to be in 35 underserved cities, primarily in the Southeast. Its typical customer will include midlevel managers who can afford the 25 to 75 percent premium over regular full coach fares.
Since DayJets are not flying into crowded hubs, Iacobucci doesn't think air-traffic-control hang-ups will ground them. When he first met with FAA officials, however, they told him he couldn't do what he proposed. "Because we're not allowed or because it can't be done?" he asked. It can't be done, they said. "That's what I like to hear!" he says. He hopes that in the future, DayJet can do for people what Citrix did with telecommuting: help them spend more time at home with their families—or just watching "Jetsons" reruns.
—Martha Brant
STEVE CASE
It's easy to forget how pie-in-the-sky Steve Case must have sounded 20 years ago when he gushed about how consumers would someday travel the "information superhighway" with a consumer-friendly tollbooth he would call America Online. Now, two years after he was forced out of the company following AOL's disastrous merger with Time Warner, Case plans to apply his consumercentric vision to the American health-care system.
It's an obsession provoked in part by tragedy: when his brother Dan was diagnosed with brain cancer in 2002, Case and his family couldn't find a specialist who could save him. But Case's everyday frustrations as a parent also play a role. "Why is it that if your kid is sick over the weekend, you have to either go to the emergency room or wait until 7:31 on Monday morning to call the doctor, when it's harder than getting through to Ticketmaster for seats to a U2 concert?" he asks. "It's because consumers are in the back seat."
Case aims to change that. Two months ago, he launched Revolution, a venture designed to provide consumer-friendly health-care services, both online and retail. Case, now 46, has invested $500 million to buy controlling interests in companies that cater to the holistic tastes of boomers: Wisdom Media Group, Inc., a cable and radio outlet focusing on "wellness"; Miraval, an upscale Arizona spa, and Exclusive Resorts, a high-end second-home membership club.
Revolution's biggest challenge, says Case, is to "empower" consumers, who will increasingly control more of their health-care dollars through price-sensitive tools such as health-care savings accounts. Given the choice, consumers might pay for "wellness" services like nutrition advice and exercise, Case says. There are plenty of naysayers, but Case says he's unbothered by them. He says Revolution isn't his attempt to "prove something" after his travails at AOL. "It's about trying to make a difference." If he succeeds, Case will have done both.
—Karen Breslau
© 2005 MSNBC.com
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