Topics in the News
The American Economy
The second half of the 1990s marked the longest sustained stretch of economic growth in U.S. history. Unlike other periods of long-term economic expansion reversed by rising inflation, growth continued and even accelerated as inflation declined. The combination of rapid technological change, rise of the services sector, and emergence of the global marketplace had experts convinced that the United States was in the midst of "a second industrial revolution." Despite the historical inaccuracy of the label (the second industrial revolution took place during the latter half of the nineteenth century), there can be no denying that a new U.S. economy began to take shape—One that defied many long-standing economic axioms. Since 1980, for example, the economy lost approximately 43 million jobs through restructuring and downsizing. Economists called them "sunset jobs." In their place, as analyst Horace W. Brock pointed out, that same economy created seventy-one million new jobs, a net gain of twenty-eight million positions. More important, economists regarded these slots as "sunrise jobs" in industries that had a future. The majority of economists attributed these developments to a restructuring of companies and an economy abetted by such governmental policies as the North American Free Trade Agreement (NAFTA), enacted in 1994. NAFTA created a continental economy, so the argument ran,...
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Banking, Money, and Finance
Seven Days That Shook the World.
One week in April 1998 rocked the financial world. On 6 April the huge insurance and brokerage firm Travelers Group announced plans to merge with Citicorp, then the second largest bank in the United States, The new company was capitalized with assets of $76 billion and immediately became the largest financial-services company in the world. By including nonbank assets, Citicorp-Travelers was valued at $697.5 billion. One week later, on 13 April, the chairman of Banc One, John B. McCoy, announced the merger of his company, valued at $116 billion, with First Chicago NBD Corporation, valued at $115 billion. On the same day, Hugh McColl Jr. of NationsBank engineered a merger with BankAmerica, creating a new conglomerate with deposits of $346 billion, the second largest bank in the United States and the fifth largest in the world. These mergers were part of a complex, ongoing revolution that by the 1990s had already begun to transform banking, finance, and investment. At the center of this revolution was a conflict between what bankers call "consolidation" and "disintermediation," the latter meaning the removal of intermediaries, for example banks, from financial transactions. The advocates of "disintermediation," such as computer-software giants Microsoft and Intuit, believe that the future belongs to companies that can master new technology and give customers and...
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Riding the Bull.
It is an understatement to say that during the 1990s the stock market was volatile. On 17 April 1991 the Dow Jones Industrial Average closed above three thousand points for the first time in history. By 1995 the Dow had gained 33.5 percent in value and passed the four thousand mark. In 1997 it reached a high of eight thousand, but began to fluctuate wildly and unpredictably. In late October 1997, for instance, the stock market came as close to crashing as it had in the decade when the Dow plummeted a record 554 points in a single day, equaling 7.2 percent of its total value, only to rebound with a record 337-point rise the following day. At the end of the week the market ebbed and flowed its way to a mark of 7,442.08, a loss of a mere 4 percent in value. Even as it declined, however, the value of stocks remained far greater than it had been at the beginning of the decade. By 1998 the Dow reached nine thousand; it closed the decade near eleven thousand points, with no apparent limits on its ascent. The problem was that no one really knew how the market would perform over the short or long term. Chairman of the Federal Reserve Board, Alan Greenspan, periodically tried to slow economic growth and bring the soaring stock market back to earth by raising interest rates as a hedge against inflation. Greenspan interpreted the "correction" in 1997 as a "salutary event" for a market...
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Business and Crime
Corporate Crime Wave.
American business, which shattered many records for growth and profits during the 1990s, also made its contribution to the annals of corporate crime. In one of the most publicized corporate crimes of the decade, the Archer Daniels Midland Company (ADM) agreed in 1997 to pay a record fine of $100 million for price fixing on two commodities: lysine, a feed supplement for livestock, and citric acid, an ingredient used in soft drinks and detergent. In exchange for the guilty plea and a promise to aid the Justice Department in its ongoing investigation, the government granted ADM immunity from prosecution on charges of fixing the price of high-fructose corn syrup, one of the two leading products the company manufactures. (Fuel ethanol is the other). The insurance industry also provided ample opportunity for criminal activity. In 1994 Metropolitan Life was fined $20 million for cheating its customers and Mutual of New York paid $12.5 million to policyholders in Alabama whom the company had bilked in what The Wall Street Journal characterized as only "the latest in a series involving deceptive sale practices of the nation's biggest insurers." In 1996 Prudential, the largest insurance company in the United States, was fined $35 million and ordered to pay an additional $1 billion in restitution to policyholders it had defrauded. "Churning" was the name given to the racket...
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The rapidly changing economy of the 1990s demanded that companies large and small alter their modes of operation. The first popular managerial fad of the decade was known as "reengineering." James Champy, cofounder of the consulting firm CSC Index, and Michael Hammer, an electrical engineer and former professor of computer science at the Massachusetts Institute of Technology (MIT), conceived of "reengineering" and brought it to international prominence. Champy and Hammer defined the concept as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance such as cost, quality, service and speed." Central to reengineering is the tenet that companies identify their essential activities and processes, and then make them as efficient as possible. Operations or individuals on the periphery, therefore, had to be discarded. Reengineering thus provided the theoretical rationale for much of the corporate downsizing that took place during the decade. "Don't automate, obliterate," Hammer insisted. In Champy's and Hammer's view, however, reengineering amounted to more than merely altering, refining, and streamlining processes. As they envisioned, it was nothing less than a formula for corporate revolution. If revolution it was, then reengineering failed. There are three basic reasons to explain its breakdown....
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Asea Brown Boveri.
A distinctly new breed of corporation emerged during the 1990s. The largest engineering firm in the world, employing more than 213,000 persons in fifty countries, Asea Brown Boveri (ABB) was the product of a merger between the Swedish company Asea and the Swiss company Brown Boveri, which was completed in August 1987. To manage such a vast organization with as minimal a bureaucracy as possible, ABB chief executive Percy Barnevik introduced a complex managerial structure. An executive committee supervises all facets of the operation while the company itself is broken into thirty-five business sectors with an additional five thousand profit centers. The objective was to combine the benefits of being a large, international organization with the advantages of a small business. Although it has proven highly effective, the intricate managerial structure and practice of ABB has thus far not provided a model for other companies to imitate. Business experts suggest that few companies can combine the global vision with the local presence that has defined ABB, Analyses indicate that the company is free of pointless and destructive infighting, while constructive criticism and debate is welcomed from any quarter. Managers from different countries communicate with each other and work together. Corporate decisions are thought through, supported by information and analysis, and carried...
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Changing Face of Business
Throughout the 1990s business offered women a mixture of advances and disappointments. Increasing numbers of women entered the workplace and moved into traditionally male-dominated occupations. At the same time, women were paid on average 30 percent less than their male counterparts doing the same job. The National Committee on Pay Equity found that women lost an average $12,573 per year, or as much as $440,047 during the course of a life-time because of unequal pay practices. Yet, as the decade drew to a close, women themselves noted the positive changes taking place in the office and boardroom. "In the past decade," observed Renee Amoore of Amoore Health Systems Inc. in 1997, "the work place has become more dynamic. Women are now able to compete aggressively at the same level as men. I have found over the years that men are now more receptive to including us at the executive-management level" E. Lee Beard of First Federal Savings Bank of Hazelton, Pennsylvania, added "there are more women in management and executive positions. This has provided more peers with whom to network who have many common bonds in terms of career challenges." Finally, Katherine Bishop of Lebanon [Pa.] Seaboard Corporation noted that "there are more women in responsible positions and therefore greater acceptance of women managers by both men and other women." Although acknowledging how far they had come,...
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What is Corporate Welfare?
During the second half of the 1990s, in the midst of one of the most sustained periods of economic growth and prosperity in U.S. history, the federal government paid out approximately $125 billion per year to corporations. Advocates applauded these payments as promoting "economic development" or as evidence of "public-private partnership." Critics denounced them as "corporate welfare." From the debates involving this issue there emerged no consistent definition of "corporate welfare," although a commonly accepted one is "any action by local, state or federal government that gives a corporation or an entire industry a benefit not offered to others." These advantages can come in many forms: governments regularly extended significant tax breaks to corporations, for example, including deals that permitted them to pay only 25 percent of their assessed property taxes, granted them the right to make purchases without paying sales tax, and reduced or eliminated taxes on corporate profits. Governments extended partial tax immunity if companies located in certain areas and allowed executives to write off as business expenses some of their perquisites. Corporate welfare also came in the form of low-interest loans from municipalities and states at interest rates cheaper than banks charged. In addition, government funds were used to advertise products, build new factories, and...
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Implications of Globalization.
A small group of countries, principally those whose economic policies were integrated under the auspices of the Group of Seven (G7), played the leading role in the process of economic globalization. The overwhelming majority of nations, meanwhile, had to adapt to economic conditions shaped almost entirely without their participation. At the same time, globalization began to undercut the economic primacy of the nation-state. The power and influence of multinational corporations grew during the 1990s, so much so that they rather than nation-states became the driving force of globalization. Eight of the top twenty-five economic entities in the world, measured in terms of market value, were corporations. According to figures compiled for 1999, the economy of the United States continued to dominate the world, with a market value in U.S. dollars of $15.013 trillion. Japan ($4.244 trillion) was a distant second, followed by the United Kingdom ($2.775 trillion), France ($1.304 trillion), and Germany ($1.229 trillion). Seven U.S. companies and one Japanese company ranked in the top twenty-five. Microsoft occupied tenth place, with a market value of $546 billion. General Electric ($498 billion) was twelfth, ahead of Australia ($424 billion) and Spain ($390 billion), Cisco Systems ($355 billion) was fifteenth, leading Taiwan ($339 billion) and Sweden ($318 billion). Intel...
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Dawn of the Internet Age.
In October 1969 two teams of computer scientists, one at the University of California, Los Angeles, and the other at the Bell laboratories in Menlo Park, California, linked computers over telephone lines to operate as a single system. The U.S. military had sponsored the research, seeking to establish a national communications network that would continue to operate even if part of the system were disabled or destroyed in a nuclear attack. Such was the genesis of the "Internet Age." During the 1990s the Internet became a force that transformed every aspect of life. Anyone with a computer, telephone, and modem literally had at their fingertips a staggering quantity and variety of information. As the decade drew to a close, the possibilities of the new technology seemed endless. Certainly the initial impact of the Internet has been profound, especially for business. Upstart on-line companies humbled corporations that once seemed unassailable. Financial markets became more accessible and efficient for those who wished to raise or invest money. Accessibility and efficiency, in fact, may be the lodestone and the polestar of the Internet. The Net broke down bureaucracies; challenged corporate, governmental, and intellectual orthodoxies; and, as some argue, encouraged a stronger sense of democracy and community. For good or ill, such developments have led to revolutions in...
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Love, Business, and the Law
The Discovery of Sexual Harassment.
During the late 1970s and early 1980s the concept of sexual harassment existed only in the mind of a young legal scholar named Catherine A. MacKinnon. By the 1990s MacKinnon had become a prominent law professor at the University of Michigan and 15,000 sexual harassment complaints were being filed annually with the federal Equal Employment Opportunity Commission (EEOC). Now it is impossible for even the most diligent of executives to stay current with the vast and diverse body of precedent and law that sexual harassment cases have generated. Few, though, can afford to ignore the numbers, such as the record $34 million payment that Mitsubishi Motor Corporation made in 1998 to settle an EEOC investigation of alleged harassment taking place at their plant in Normal, Illinois. The legal system has also disciplined companies for an apparently too rigid enforcement of sexual harassment policies. When the Miller Brewing Company fired a manager for telling his secretary about a lurid and salacious episode of Seinfeld, a jury awarded him $26 million in damages and lost wages and ordered the company to give him back his job. To avoid finding themselves, and placing their companies, in similar jeopardy on either side of this inflammatory issue, many executives and managers, such as those at Aerotek, a high-tech temp agency, simply adopted a policy that...
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Mergers and Monopolies
For three consecutive years, between 1995 and 1997, the value of mergers and acquisitions in the United States increased to record levels. Some 27,600 companies joined forces, more than in the entire decade of the 1980s. In 1999 even more companies hastened to unite into behemoth corporations created by the "merger mania."
When in December 1998 Exxon and Mobil agreed to merge, pundits immediately labeled the $86.355 billion deal "Rockefeller's Revenge." Both companies originated as part of John D. Rockefeller Sr.'s Standard Oil monopoly, together accounting for more than half of the Standard Oil Trust until the Supreme Court disbanded it on 15 May 1911. In 1998 as well, Amoco, also a scion of Standard Oil, agreed to be purchased by British Petroleum (BP) for $55 billion. The following year, BP acquired the Atlantic Richfield Company (ARCO), another successor of Standard Oil, for $33.7 billion. Initially, the U.S. assets of BP derived in large measure from the absorption of another offspring of Standard Oil, Sohio. What the judiciary put asunder at the beginning of the twentieth century, entrepreneurs have been busy putting back together at its end. During the 1990s "Big Oil" got even bigger. Historical analogies, however, only go so far. At the zenith of its power, Standard Oil controlled 84 percent...
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Religion in the Workplace
Since 1993 three hundred employees of the Xerox Corporation, from managers to clerks, have participated in "vision quests," a $400 million program designed to revolutionize product development. Alone for twenty-four hours in the New Mexico desert or the Catskill Mountains, workers communed with nature, seeking insights to help the struggling copier company. Many within and outside the company snickered and scoffed, but, says John F. Elter, the Xerox chief engineer who headed the project, "for almost everyone, this was a real spiritual experience." The outcome was one of the most surprising corporate success stories of the 1990s: the production of the 265DC, a 97 percent recyclable copier-fax-printer. Word of this venture attracted senior executives from companies as diverse as Ford Motors, Nike, and Harley-Davidson to Xerox design offices in Rochester, New York, in September 1999, not only to see the machine but also to discuss the program that inspired it. Executives of other companies, such as Taco Bell, Pizza Hut, and Wal-Mart, were also unashamedly bringing spirituality and/or religion into the workplace. If they had attempted to do so during the 1980s, they would have inspired ridicule, ostracism, and perhaps even a lawsuit. By the 1990s, however, a spiritual revival had swept corporate America as executives of all faiths mixed religion and management,...
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Does Size Really Matter?
With multibillion-dollar corporate mergers dominating the business news throughout the 1990s, it is counterintuitive to think of small companies flourishing and prospering. Most did not; approximately three out of five (60 percent) small businesses begun in the decade failed. Those that did thrive were often the targets of corporate takeovers or buyouts. Yet, by the end of the decade, small businesses accounted for 99 percent of the 23.3 million nonfarm businesses in the United States, according to statistics compiled by the Small Business Administration (SBA). Sole proprietorships made up 16.7 million of these small businesses, while 1.6 million were partnerships and 5 million were corporations. The SBA noted that these figures were based on tax returns, so the number of sole proprietorships may be inflated by artists, freelance writers, and other self-employed persons who were not technically businesses. As of 1996, the last year for which complete statistics are available, small businesses employed 53 percent of the workforce in the private sector, made 47 percent of the sales, and accounted for 51 percent of the total private sector output. According to the Department of Labor, approximately 750,000 small businesses were created each year; about 10 percent, or 75,000, of them failed within the first ten to twelve months of operation. Those that succeed, however,...
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In the wide open, freewheeling job market of the 1990s the mantra became "Me First!" Employers may have welcomed or lamented the newly emboldened U.S. workforce, but they accepted it as a fact of life. As the economy prospered the unemployment rate fell to less than 5 percent. With fewer workers entering the job market and competing for more jobs, prospective employees had greater leverage than they had enjoyed at any time since the 1960s. "In 35 years in the recruiting business I have never seen the equal of these times/' said Alan Schonberg, president and CEO of Management Recruiters International in Cleveland, Ohio, "This is the most pervasive, job-candidate-driven market possibly ever." A survey released in April 1997 by the American Management Association found that nearly half of the four hundred human-resources executives polled from medium and large companies said skilled workers were in short supply. Sixty-seven percent of the executives in mining, manufacturing, and construction, as well as business and professional services, predicted that the situation would intensify by the year 2000. Although few experts believed the hiring bonanza would last forever, virtually all agreed that it had already brought revolutionary changes to the workplace that will redefine work, and attitudes toward it, well into the twenty-first century. If the Great Depression of the 1930s produced...
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Barad, Jill 1951-
PRESIDENT AND CEO OF MATTEL INC.
Jill Elikann Barad's life was not always focused. Born in Queens, New York, Barad grew up in a creative household. Her father was a TV director and her mother, an artist and pianist. By the time she was in her teens, her life appeared dominated by show business and fashion. She tried college for three years, but then decided to take a job selling cosmetics. After a year she returned to school and got her degree in 1973. "I had no clue what I wanted to do. I just saw jobs as fun. I had no goals," she later admitted. She tried her hand at several jobs: modeling, acting, and as a traveling cosmetician-trainer for Coty Cosmetics. In 1979 she married Thomas K. Barad, an aspiring movie producer. The couple moved to Los Angeles. Soon after the birth of her first child, Barad landed a job in Mattel's novelty development unit in 1981. Her first project, "A Bad Case of Worms," flopped, but Barad's enthusiasm and energy got her noticed.
Fight for Your Point of View.
Soon Barad pushed for better assignments. Finally she was moved in 1985 to the Barbie Division as one of two product...
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Bezos, Jeff 1964-
CHAIRMAN OF AMAZON.COM
The Bezos family can trace its American roots to Colonel Robert Hall, who at the beginning of the nineteenth century moved to San Antonio, Texas, from his home in Tennessee. Bezos's great-great grandfather, Bernhardt Vesper, acquired a 25,000-acre ranch in Cotulla in the southern part of Texas, where young Jeffrey Preston Bezos spent summers with his grandparents. The pioneering spirit seems to be part of the family bloodline, even if the new frontier lies in cyberspace. Born on 12 January 1964, when his mother, Jackie Bezos, was only seventeen years old, Jeff Bezos never knew his father. "I've never been curious about him," he explains. "My real father is the guy who raised me." Yet another pioneer, Mike Bezos, a Cuban refugee who came to the United States by himself at the age of fifteen, married Jeff's mother and raised Jeff as his son.
Biggest Store on Earth.
Bezos had a simple ambition. He wanted to own and operate the biggest store on earth, one that sold everything from cars to food, "anything except firearms and certain live...
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Bible, Geoffrey C. 1937-
CHA1RMAN AND CEO OF PHILIP MORRIS
Born in Australia in 1937, Geoffrey C, Bible worked his way up the corporate ranks and eventually became CEO of one of the largest U.S. tobacco firms. One of his most formative experiences, however, took place far from corporate headquarters. From 1959 to 1964 he lived among Palestinian refugees while working for a United Nations relief agency, an experience that left a deep and lasting impression. "I've seen a lot of misery in my life," he recalled in an interview with Business Week in 1998. "If you see these little toddlers with flies all over their eyes, a rag over them and nothing else in 100-degree heat, you sort of get a real taste of what hunger is." He joined Philip Morris in 1968. In charge of overseas tobacco operations between 1987 and 1990, Bible championed the acquisition of local cigarette companies in former communist countries, a bold but risky venture that paid off, enabling Philip Morris to command the tobacco markets throughout Eastern Europe. Named CEO in 1994, Bible by the end of the decade had spent thirty-one years with the company. He had intended to retire in 1997 but agreed to stay on to guide Philip Morris through the most tumultuous period in its history. Not inclined to respond passively to conflict and controversy, Bible has come out fighting, consistently aggressive not only...
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Buffett, Warren 1930-
CHAIRMAN AND CEO OF BERKSHIRE HATHAWAY INC.
The Oracle of Omaha.
Without a doubt Warren Edward Buffett is the greatest stock investor in modern times, and perhaps the most prescient oracle in the history of the stock market. If an individual had invested $10,000 in Berk-shire Hathaway when Buffett purchased a controlling interest in 1965, by 1999 that individual's portfolio would have been worth $51 million. Had that same individual invested $10,000 in the Standard & Poor's 500-stock index, their portfolio would have been worth a mere $497,431. Yet, Buffett has not added a major position to the stock portfolio of Berkshire Hathaway since amassing 4.3 percent of McDonald's Corporation in 1995. During the second half of the 1990s he transformed what had previously been a sideline at Berkshire Hathaway into a main focus: the acquisition of entire companies. Between 1996 and 1999 Berkshire Hathaway, located in Omaha, Nebraska, spent $27.3 billion to purchase seven companies in industries as diverse as aviation, fast food, and home furnishings. The effect was immediate and dramatic. The shift in emphasis transformed Berkshire Hathaway from a closed-end fund...
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Chenault, Ken 1951-
CEO OF AMERICAN EXPRESS
Man of Destiny.
Born in 1951 in New York City, Chenault, one of five children, was the second son of Hortenius and Anne Chenault. Coming of age during the Civil Rights era made its mark on the young Chenault. "My father's basic view was that you really needed to concentrate on the things you can control, and what you can control is your own performance." Chenault took his father's advice seriously. In school he demonstrated poise and leadership qualities that would later impress others as he moved through the corporate world. He studied at Bowdoin College and then enrolled in Harvard Law School. Still, Chenault admits that he was a late bloomer in school; the thought of studying business did not occur to him until he was in his twenties, after realizing that he did not want to practice law.
Trying Something New.
In 1981 Chenault accepted a job with American Express. Starting in the strategic planning department, Chenault advanced to vice president in charge of marketing, where he convinced company officials that the merchandise-services division, a foundering arm of the AmEx company, was...
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Cohen, Abby Joseph 1952-
CHIEF MARKET STRATEGIST, GOLDMAN, SACHS & CO.
Substance Over Style.
Born in Queens, New York, in 1952 to a Polish-immigrant mother and a father whose parents had come from Poland in 1913, Abby Joseph Cohen received a B.A. in economics and computer science from Cornell University in 1973 and an M.S. in economics from George Washington University in 1976. In 1973 she married David M. Cohen, director of labor and employee relations at Columbia University. Since 1983, when they moved back to New York from Baltimore, where Cohen had been working for T. Rowe Price Associates Inc., she and her family have lived in the same Queens neighborhood where Cohen grew up. She commutes to work on the bus. "We are not a Wall Street family," she says, "a Wall Street career is not the end-all and be-all for us." Cohen began her career in the mid 1970s as a research assistant at the Federal Reserve Board in Washington, D.C., where she learned "to be flexible in my analysis and to look beneath the usual rules of thumb to the underlying dynamics." It is, indeed, the depth and extent of her research that set Cohen apart from other market analysts. Along with her colleague, Gabrielle U. Napalitano, Cohen rigorously examined every quarterly earnings report of every major company on the Standard & Poor's (S & P) 500 list. This task was labor-intensive and time-consuming, but Cohen...
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Gates, Bill 1955-
CHAIRMAN OF MICROSOFT
Critics' grievances notwithstanding, William Henry "Bill" Gates III has compiled an impressive resume. Born in 1955, Gates and his two sisters grew up in Seattle, the children of William Henry Gates II, an attorney, and Mary Gates, a schoolteacher, regent of the University of Washington, and chairwoman of United Way International. Gates began programming computers at the age of thirteen. In 1973 he entered Harvard University, where he developed the programming language BASIC (Beginner's All-purpose Symbolic Instruction Code) for the first microcomputer, the MITS Altair. In 1975, during his junior year, Gates left Harvard and moved to Albuquerque, New Mexico, to head a company that he called "Microsoft." In 1978 the company, now spelled minus the hyphen, relocated to Seattle, Washington. As of 1999 the Microsoft Corporation, with a market value of $546 billion, was the wealthiest company and tenth largest economic entity in the world. For the fiscal year ending in June 1999, Microsoft posted revenues of $19.75 billion. Gates credits his own "foresight and vision regarding personal computing" as essential to the...
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Greenspan, Alan 1926-
CHAIRMAN OF THE FEDERAL RESERVE
Eclectic Talents, Diverse Careers.
Born in New York City on 6 March 1926, the son of a stockbroker and a retail salesclerk, Alan Greenspan early displayed impressive mathematical skills. In fact, many considered him something of a mathematical prodigy. After finishing high school, however, Greenspan enrolled in The Juilliard School and played saxophone and clarinet with a touring swing band during the 1940s. In 1945 Greenspan's musical career came to an end when he enrolled in New York University to study economics. He completed a B.A. in 1948, graduating summa cum laude, and earned an M.A. in 1950, He then entered the doctoral program at Columbia University. In the early 1950s Greenspan dropped out of Columbia and went to work for the National Industrial Conference Board (NICB). In 1977 NYU conferred his Ph.D. without requiring Greenspan to complete a dissertation. After leaving the NICB in 1954, Greenspan and bond-trader William Townsend founded Townsend-Greenspan & Company, Inc., a consulting firm that offered economic forecasts to corporations and banks. He served as...
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Welch, Jack 1935-
CHAIRMAN AND CEO OF THE GENERAL
Shaken, Not Stirred.
At forty-five, John Francis "Jack" Welch was the youngest chief executive officer that the General Electric Corporation (GE) had ever had. When Welch took control of the company in December 1980, GE was the model American corporation. It was a juggernaut: conservative, staid, cautious, prudent, unexciting, and reliable. Its net income in 1980 was $1.7 billion, with a steady and healthy growth rate of 9 percent a year. Like most GE executives and CEOs, Welch was a company insider who had risen through the corporate ranks. No other corporation has been as successful at recruiting and nurturing talent from within or has managed to sustain such a consistent performance over such an extended period of time. Everyone anticipated that GE would continue to chart its smooth course once Welch took the helm. They could not have been more wrong. Welch had no plans of settling quietly into the executive suite. Steady but unspectacular progress, he believed, was no longer acceptable in the increasingly competitive economy. To the astonishment of all and the dismay of many, Welch shook up GE as the...
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People in the News
On 1 February 1992 Ron Carey was sworn in as the first Teamsters (International Brotherhood of Teamsters) president elected by the rank and file of the union.
In 1993 James Champy's and Michael Hammer's book, Reengineering the Corporation: A Manifesto for the Business Revolution was published; it quickly became the "downsizer's bible."
In April 1998 Robert L. Crandall retired as president of American Airlines; during his eighteen-year tenure the airlines initiated such innovations as frequent-flyer miles and super-saver fares.
In 1995 Millard S. Drexler took over the clothing chain Gap, Inc.; by 1999 he had turned the once-stagnant company around, posting profits around 30 percent above average, at a time when many retail stores were only averaging 5 percent above normal profits.
On 16 March 1992 Robert J. Eaton, head of the profitable European operations of General Motors Corporation, joined auto manufacturer Chrysler Corporation as successor to Chairman Lido Anthony "Lee" Iacocca.
In 1997 New Jersey businessman Charles F. Feeney reportedly had in the last decade given away more than $600 million to charity; another $3.5 billion, almost the entire sum of Feeney's estimated wealth, had also been turned over to his two charitable foundations....
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Carl Ally, 74, advertising executive whose aggressive style included naming rival companies in ads, 15 February 1999.
R. Stanton Avery, 90, businessman and inventor of the self-adhesive label that bear his name, 12 December 1997.
César Estrada Chavez, 66, labor activist, founder of the United Farmworkers of America, 23 April 1993.
Jack Kent Cooke, 84, owner of newspapers, sports teams, and television stations, 6 April 1997.
Max Factor Jr., 91, cosmetics mogul and inventor of the smudge-proof lipstick and waterproof mascara, 7 June 1996.
Avery Fisher, 87, founder of electronics company and philanthropist, 26 February 1994.
Julio R. Gallo, 83, cofounder and president of E & J Gallo Winery, one of the largest wineries in the world, 2 May 1993.
Harold Sydney Geneen, 87, British-born U.S. businessman who transformed ITT from a small company into an international conglomerate, 21 November 1997.
Thomas W. Gleason, 92, labor union officiai, former president of the International Longshoreman's Association, 24 December 1992.
Robert Klark Graham, 90, developer of plastic shatterproof eyeglasses, 13 February 1997.
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David Bach, Smart Women Finish Rich: 7 Steps to Achieving Financial Security and Funding Your Dreams (New York: Broadway, 1999).
Marcus Buckingham and Curt Coffman, First, Break All the Rules: What the World's Greatest Managers Do Differently (New York: Simon & Schuster, 1999).
James C. Collins and Jerry I. Porris, Built To Last: Successful Habits of Visionary Companies (New York: HarperBusiness, 1994).
Stephen R. Covey, The 7 Habits of Highly Effective People: Restoring the Character Ethic (New York: Simon & Schuster, 1989).
Diane Coyle, The Weightless World: Strategies for Managing the Digital Economy (Cambridge, Mass.: MIT Press, 1998).
Michael A. Cusumano and David B. Yoffie, Competing On Internet Time: Lessons From Netscape and Its Battle With Microsoft (New York: Free Press, 1998).
Bob Davis and David Wessel, Prosperity: The Coming Twenty-Year Boom and What It Means to You (New York: Times Business, 1998).
Philip Evans and Thomas S. Wurster, Blown To Bits: How the New Economics of Information Transforms Strategy (Cambridge, Mass.: Harvard Business School Press, 2000).
Bill Gates and Collins Hemingway, Business @ the Speed of Thought: Using a Digital Nervous...
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Important Events in Business and the Economy, 1990–1999
- On January 1, 60 percent of U.S. women with children under age 6 work outside the home.
- On January 1, unions represented only 16 percent of 101 million U.S. workers.
- On January 2, the Dow Jones Industrial Average reaches a record high, closing at 2800.15.
- On January 10, Warner Communications and Time Inc. complete a $14.1 billion merger, establishing the world's largest media conglomerate.
- On January 31, McDonald's Corporation opens its first fast-food restaurant in Pushkin Square, Moscow.
- On February 13, Drexel Burnham Lambert declares bankruptcy in the largest securities company failure ever.
- In April, Congress raises the minimum wage to $3.80 per hour.
- On April 18, bankruptcy court forces Frank Lorenzo, who earned notoriety for slashing jobs, pay and benefits throughout the airline industry, to leave Eastern Airlines.
- On May 23, reports indicate that the cost to taxpayers of rescuing the savings and loan industry may be as high as $130 billion.
- On June 1, the Dow Jones Industrial Average hits a record high, closing at 2900.97.
- On June 4, bus company Greyhound Lines Inc. files for bankruptcy.
- On November 21, a federal court sentences...
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