Big Easy vs. The Killer Ap

South African Ernie Els may be the only golfer extant in Tiger Woods's class. He can really play and he can make shots under tremendous pressure. That eight iron at the US Open at Congressional on Sunday may well be one of the greatest golf shots I've ever seen.

When the wind comes up in the afternoon at Doral, which is this week's PGA venue, the Blue Monster course is as hard as they come. Els had a late tee time today and had to play in a 25 mile-per-hour wind. And he shot the lights out to take a 2-stroke lead.

Mr. Woods, who hasn't had a good second round all year, grinded out a 70 (two under), leaving him four shots back. So it looks like we might have ourselves a golf tournament worth watching this weekend. An Els-Woods shoot-out, with the wind howling across the Monster, would be professional golf at its best.

One Last Thing

What is Majority Leader Thomas Daschle (D-SD) thinking? He wants to be president. The biggest problem facing any Democratic presidential candidate can be reduced to two words: "white males." White males support President Bush's handling of the war on terrorism by margins of 20-1. So what is the rationale, exactly, for Daschle's attack on President Bush's handling of the war on terrorism? And why does he choose Joe Biden and Dick Gephardt to be his back-up singers?

One Little Factoid

The woman who writes the media column for Bloomberg (whose name I forget) had an interesting factoid which I copied to a "notes" file on my laptop and then promptly forgot about. I'm on my laptop now and here it is: "Excluding AOL Time Warner's own spending, advertising and commerce revenue at the America Online unit actually declined 27 percent in the fourth quarter." When I get home I'll fix this item and give her proper credit.

Wi-fi Spreads

The thing I still don't understand is why Con Edison and its equivalents around the country don't build out wi-fi networks that wirelessly connect stranded homes on the last mile to the fiber optic networks that run (largely unused) across the country. Con Edison comes to my house every month to read the meters. As long as they're here, they might as well hook up a wi-fi antenna to my roof. With a range of 300 yards, that antenna would service every room in the house and all of my outdoor property. If they did every house in the River Towns, I could go anywhere and hook up to high speed Internet access, which would be nice at the library, the El Dorado Diner, etcetera. I'd be happy to pay them half of what I pay Verizon for a DSL connection. I'd probably pay them the exact same amount.

The impact of wi-fi networks is being felt in places like Aspen, Colorado (which is totally wi-fied), Seattle, Salt Lake City and parts of Boston/Cambridge. There's a good report in today's Seattle Times about the impact of wi-fi on two coffeehouse chains. You can read it here.

Is AT&T the Next IBM?

In the middle of the last recession, everybody and their brother said that IBM was toast. There were articles about it, there were books about it, it was business conventional wisdom squared. Instead of folding, IBM reinvented itself as a information technology services company and regained its place as one of the world's most esteemed (and highly valued) corporations.

The Economist notes that something similar may now be happening at AT&T. AT&T President Dave Dorman is trying to do for his company what Lou Gerstner did for IBM. He just might do it.

Good News on Text Messaging

I'm a Voicestream wireless customer (thanks to a WalMart promotion) which gets me all I need for roughly $40 a month. The phone was free, the first month was free, all the "initiation" and "security deposit" charges were waived, I'm a happy customer, thank you Sam Walton for every-day-low-pricing your partners. Voicestream works pretty well. Not as well as Verizon, but close enough and cheaper.

As it happens, I don't really like talking on the phone, but I'm a huge fan of text messaging. MEET ME ON 1ST TEE AT 12N 2MORO is my idea of wireless communication. And therein lies the problem, because with Voicestream (and Sprint and Verizon), you can only text message wirelessly to same service customers. This problem, happily enough, is about to go away, according to CNET. Which is very good news indeed.

A Kevin Phillips Issue

Federal Reserve Board Chairman Alan Greenspan said yesterday that while the recession appeared to be ending, the recovery would not be robust. The market, hearing the first part first, ran up. Hearing the second part next, it ran back down.

I was watching this on TV when a friend called to announce that he really liked K-Mart. Why not? Declare Chapter 11, break all your leases, close the stores that don’t deliver, stay in the stores that do (at now lower monthly rental rates), stiff your other creditors and in a year’s time, you too could be up 25%, maybe 30%. That was his professional view. "Of course," he said, "it's completely unethical."

These things are connected, politically. First, this recession is not over, not by any means. The dot.com collapse and the telecom collapse and the accounting scandals and deflation and the possibility of another terrorist attack (at any time) have not worked their way across all the dominoes. And the dominoes are leveraged, big time. Consumer debt is enormous. Corporate debt (which fueled the Millennial Boom) is higher than at any time in modern history. The Economist had a very good leader (editorial) on this subject a couple of weeks back (see the last issue in January). Their analysis, if a bit over-gloomy (they’re Brits after all, so they were born to worry), strikes me as basically correct.

Second, you have what can politely be called the corporate ethics scandal that is everywhere, all around you. The New York Times story today about former Global Crossing Chairman Gary Winnick’s $92 million home in the Bel Air section of Los Angeles is obscene. He paid $66 million in cash for a 23,000 square foot home, another $26 million for 2 adjacent properties. He is now proceeding with a $15 million home renovation.

A few years ago Global Crossing, under Winnick’s leadership, acquired Frontier, a telephone company based in Rochester, New York. Now 800 Frontier-turned-Global Crossing employees are being offered buy-out packages of $20,000 (at the most). The $20,000 package is for people who have worked there for more than 20 years. You don’t need to be Kevin Phillips to figure out the politics of that juxtaposition.

Disgust with corporate greed, corporate ethics, corporate malfeasance, corporate dishonesty, corporate felonies is the long political stock of this year. We’re just getting started. The number of companies that have had to “restate” earnings in the last year has doubled. The number of bankruptcies has risen dramatically. The Enron “pump and dump” scam, in which management hyped a $120-per-share price target as they sold their own holdings as fast as they could, will be an ongoing news story, as the SEC investigation tightens the noose. And we haven’t even begun to hear about the “round-trippers” and the “Lazy Susans” and the pension gains being counted as earnings and on and on and on.

And what will turbo-power the issue will be the revelation that all this corporate conduct, or at least most of it, was and is legal. It is indeed legal for IBM and GE to count as earnings the gains of the company’s pension fund. It is indeed within the rules of accounting to book a Lazy Susan deal (I give you $100 million, you give it right back to me and we both book it as revenue), so long as something is done with the money for some insignificant amount of time. It’s perfectly legal to lock down your employees in a sinking stock (as Enron did) by switching 401(K) fund administrators. We could go on for pages here, but you get the idea.

If you don't, just read The Wall Street Journal for a month. It's amazing what you find out. $80 billion in something called "goodwill" can disappear with the stroke of a pen. "Pro forma" earnings can be digitally green while "earnings" can be all red numbers, many digits.

Going into 2002, the Democrats had two issues for their base (gun control and abortion “rights”) and one issue for the larger electorate (health and pension security). If they had any idea what they were doing, they would be leveraging the corporate ethics scandal into a full-blown class warfare attack, which would enlarge their base and resonate across the wider electorate.

But alas the chairman of the Democratic Natrional Committee, Terry McAuliffe, was on the board of Global Crossing and turned a bunch of options into an $18 million profit-taking stock sale. The Democrat's leading spokesman on economic policy is former Treasury Secretary Robert Rubin, now a Vice Chairman at Citibank, who, in a stunningly ill-advised move, tried to get the US Treasury to under-write a federal bailout of Enron. I won’t bore you with the rest of the list. The point is, it’s hard for Democrats to get all lathered up into a populist rage when they've been partnering with the very people who are prime targets for political attack.

But this whole business of corporate conduct is fast becoming a big political issue. You can feel it and it will be felt.

And You Thought iPod Was About Tunes

Yes and no. Yes, most people use it to listen to music but no, not everyone does. Some folks are using their iPods to download software from computers. Thanks to reader Michael H. for the heads-up on this story from Wired News.

The Columnist Kelly

Michael Kelly is the editor of the Atlantic Monthly magazine and writes a weekly column for The Washington Post. He may be the best newspaper columnist around. Today's piece is typically funny and typically true.

Gallup Survey of Muslims; Read It And Weep

Gallup surveyed 10,000 people in nine Islamic countries and the results are disturbing, to say the least. Fully three-quarters of those surveyed believe the US military action in Afghanistan was not justified. While two-thirds said the attacks on the Pentagon and the World Trade Center were morally unjustifiable, the Financial Times reports: "most of those questioned reject the idea that Arabs, specifically Osama bin Laden's al-Qaeda network, carried out the attacks. Significant numbers believe that Israel, or even the US itself, was responsible." You can read the full story by clicking here. The survey is posted on the Gallup site, but you have to pay for it.

CNN's Woes

CNN floated a trial balloon recently about charging a subscription fee for access to CNN.com. Let's see: Washingtonpost.com is free, nytimes.com is free, WSJ.com is $29 per annum (and a good value, that), latimes.com is free, drudgereport.com is free, newsday.com is free (and includes an AP ticker), bloomberg.com is free, abcnews.com is free, msnbc.com is free, foxnews.com is free. Think you can live without CNN.com? Think you'll miss anything?

But you can see their point. In the pre-web days, CNN provided a real service. It was, primarily, a news gathering operation that was always on the air. It enabled people to watch and catch up on "the news" at the their convenience. During the Gulf War, it enabled people to see the news unfold in real time. And it was a monopoly provider of this service; which is to say, no one else (on television) was doing it 24/7. Those were the days.

Today, there are two other cable television news outlets, but if you really want to know what's going on, you fire up the web. Everybody has their own "go-to" sites; mine are washingtonpost.com and wsj.com. About the last place I'd "go to" would be CNN TV, unless it was a disaster, a terrorist attack or an outbreak of chemical or biological warfare and there was some real or imagined advantage to seeing a live feed from the scene. I suppose I might go to CNN.com, but if they charged me one penny for the privilege, I'd never go there, as a matter of principle. I already pay CNN a fee through my DirectTV system (for CNN and CNN Headlines News and CNNfn). Why would I ever pay them twice for the same stuff on the web (and be bombarded with all that AOL synergy for my troubles)?

This is the problem that confronts the new management of CNN. CNN's best customers from the pre-web days have deserted the network for the web. To make matters worse, the news gathering business (which is CNN's primary function) suffers from over-capacity (all-news radio, other cable television news networks, established news organizations with web sites and even infomediary services like Yahoo!). About the only advantage CNN maintains is its reach, but that has been diminished somewhat by AOL-ordered cutbacks. And if you really want richness and reach, you simply can't beat the web. That's how the web changes everything. It eliminates (almost) the tradeoff between richness and reach.

To further complicate matters, Roger Ailes and his team at Fox News Channel (for whom I used to do consulting work and for whom I worked on the Election Night Decision Desk in 1998 and 2000) have chosen not to compete with CNN on newsgathering (taking it as a given that this part of the business has become thoroughly commoditized), but rather on analysis, commentary, opinion and special events. Once you move from the business of news gathering and presentation to the business of analysis, commentary, opinion and special events, you dilute CNN's strategic advantage. They have their talking heads, you have yours.

And at that point, you're out of the game of news "gathering" and into the game of news "programming." Which is where the game now sits. Ailes has targeted the blue states as his growth engines. CNN is sort of feeling its way around the new playing field. They hired Paula Zahn (and that worked out, from a ratings point of view). They hired Connie Chung (that won't work out). Their franchise player is Aaron Brown. Duncan the Wonderhorse he is not.

There's been a lot written about CNN's uncertainty and "mis-steps" in the new environment. But it's not at all clear what Walter Isaacson and his management team should do. It's not in CNN's DNA to become a "talk show" network, which is the tactical genius and strategic limitation of the Fox News Channel. It's not in CNN's DNA to be a celebrity news network (Larry King notwithstanding). CNN "analysis," "commentary" and "opinion" isn't nearly as interesting, or passionate or smart as what is now available on the web 24/7. And as the blogger revolution spreads and major news organizations jump into the Blogging Game, the analysis/commentary/opinion space will get even more competitive.

So they're caught in what used to be called a disintermediating shift. The best they can probably do is just muddle through until they figure out a way to recapture at least part of the strategic high ground they once held. That way will necessarily require a major role for CNN.com. So the idea of restricting access to the CNN.com website (by charging a subscription fee) is deeply stupid. Worth a trial balloon, but nothing more.

Update

According to Drudge, CNN is set to sign up James Carville and Paul Begala as hosts of a revamped Crossfire. Carville would host "from the left" one week, Begala the following three. Columnists Robert Novak and Tucker Carlson would alternate hosting duties "from the right." The show will be expanded to one hour, says Drudge, and be set in front of a live audience at George Washington University. Try to contain your excitement.

As The Future Catches You

Two friends of mine published good books in the immediate aftermath of September 11 and thus received virtually no press attention. The Good German by Joe Kanon I referenced in an earlier post. As The Future Catches You by Juan Enriquez is the best genomics primer you'll read. I highly recommend it.

Juan is now the Director of the Life Sciences Project at the Harvard Business School. He'll be speaking at the Fast Company Real Time Conference in San Diego in early May. If you live out that way, you might want to drop by. Check the Fast Company website for details. And buy the book.

You Say $22 billion, I Say $2 billion

Some of the great buys of all time were picked out of the rubble of the Savings & Loan collapse of 1989-1990. The great Telecom collapse of 2001-2002 presents a similar opportunity. And the bidding down of what were once highly valued assets has accelerated. Today's Wall Street Journal reports that Global Crossing, which listed $22 billion in assets in its filing for bankruptcy protection, is viewed by some to be worth only $1 billion or $2 billion. Since the WSJ site requires a subscription, I'll quote from the article here:

"When Global Crossing Ltd. filed for bankruptcy protection last month, it listed $22 billion in assets -- but the onetime fiber-optic darling may be valued at $1 billion to $2 billion, people familiar with its books say.

"As other telecommunications companies that have filed for bankruptcy protection have learned, the industry as a whole is reeling from a brutal re-evaluation of its worth. In this environment, a number of industry analysts and experts are questioning what the actual value of the Bermuda-based company is, and some of them are arriving at five to 10 cents on the dollar. A big reason is the glut that resulted when firms rushed into the field, spending billions of dollars to build millions of miles of fiber-optic capacity that remain largely unused.

"'For the network itself, the network has little value because there is so much of it everywhere,' says Susan Kalla, an analyst at Friedman Billings & Ramsey in New York. Ms. Kalla points out that while the company has business customers that have value, the network itself costs a considerable amount to operate because it is expensive to maintain."

Miles and miles of unlit fiber in a glutted market are indeed worthless, in the near term. But does anyone doubt that as the "last mile" issues are solved and more and more people use more and more bandwidth, that Global Crossing's fiber network will not be a valuable asset? Of course it will be.

The only offer on the table right now for Global Crossing is for roughly $750 million. If the low bidders win the company at that price, we could be talking about the steal of the century.

Lileks for a Laugh

I don't think there's anyone on the web who is more consistently funny than James Lileks. Here's a link to his "bleats." If you go to the Lileks homepage, you'll find yet more links to other work. Lileks is, as they say, a bookmark site.

Cramer on the Case

There's a case to be made that the collapse of Global Crossing (and what it implies) is a lot more worrisome than the collapse of Enron (and what it implies). I've been researching a column for Fast Company on Wall Street's role in Enron's collapse, but I keep running into people who tell me that Global Crossing is the real nightmare.

Unsurprisingly, New York Magazine columnist and TheStreet.com founder Jim Cramer is out front on this. I'm surprised his column on the subject didn't get more attention. It's excellent.

Signs of Intelligent Life at GM

The lease on the Tahoe is up in August and I've been thinking about the next car. I stopped thinking about it today after receiving a direct mail package from GM that enables me to: (1) get out of my existing lease immediately, (2) receive a $750.00 lease loyalty "rebate," (3) waive my security deposit on the next lease, and (4) have GM pay $150 into my Upromise 529 college savings account. I plan to lease a new Tahoe next week.

I've written a number of columns (here's one) about customer loyalty and spoken to company off-sites on the subject. The theme of these columns and speeches has always been the same: stop treating your customers like morons, understand that branding is interactive, add value. So it was nice to receive something in the mail from GM that treated me with respect, understood that branding is interactive and promised to add real value to my life, not just my commute.

By the way, if you don't know about Upromise, I strongly urge you to visit the site, particularly if you have young children or want to contribute to a child's college education. The Upromise program is very straightforward. Some percentage (between 0.5% and 3%) of everything you buy from participating Upromise partners (like CitiGroup, GM, McDonalds, AT&T, Century 21, ExxonMobil, et alia) goes into a 529 College Savings Account for anyone you designate. Most people do it, obviously, for their kids. But some do it for nieces and nephews and children of friends. It's a great idea and a terrific program.