“Astronomers claim to have found a 10th planet beyond Pluto. Though there is some continued debate as to the ‘planet-ness’ of Pluto, astronomers are calling this object a planet since they are confident that this object, dubbed 2003 UB313, is much larger than Pluto. Apparently it’s a good day for Trans-Neptunian Objects (TNOs), since an object, 2003 EL61,70% the size of Pluto was also announced today. Man, two TNOs in one day? It’s like Christmas. Maybe that’s why they nicknamed 2003 EL61 ‘Santa’. Update Astronomer Mike Brown’s webpage about the 10th planet states ‘We have proposed a name to the IAU and will announce it when that name is accepted.’ Hmmm..”

Despite its earlier doldrums, the nuclear industry is still a sizeable business. General Electric’s nuclear division, which designs and builds plants but does not handle fuel or waste, turned over about $1.1 billion last year (its turnover was double that figure if sales of non-nuclear bits of nuclear plants, such as generators and turbines, are included). Westinghouse, an American brand currently owned by BNFL, which recently put it up for sale, had sales of around $2 billion.

Better management allows companies to make existing plants much more efficient. In America, for instance, the country’s 103 nuclear plants are no longer owned by individual municipalities. ?Nuclear consolidators are the key,? argues Michael Wallace of Constellation Energy, a utility that owns several plants and hence can retain good managers, share best practices, gain economies in maintaining parts and inventories and so on. The top ten nuclear firms now own 61% of the sector. Exelon, the largest firm, has a 15% share. American nuclear power plants’ capacity utilisation has risen from 56% in 1984 to more than 90% today.

This is a lesson that France had already learned, says Bernard Dupraz of Electricité de France. EDF is responsible for all the country’s nuclear plants. Unlike America, where no two nuclear plants are exactly alike, France stuck with a few standard designs. ?We standardised nuclear plants like Ford did the Model T.? The results: 20% lower operating costs and 30-40% lower capital costs than those of one-off designs used elsewhere, notably in Britain.

Nuclear Energy Agency, an arm of the OECD, has just released a study done jointly with the International Energy Agency (IEA). After reviewing the economics, it seems to conclude that there is indeed a bright future for nuclear: ?on a global scale, there is room and need for all baseload technologies.? Assuming a discount rate of 5%, it argues that the cost of generating power from new nuclear plants would cost between $21/MW-hour and $31/MW-hour; costs for gas-fired power, it reckons, would range from $37/MW-hour to $60/MW-hour. (The report also assumes high gas prices, which favour nuclear, a view contradicted by the IEA’s official forecast of a medium-term reduction in gas prices.)

But there’s plenty of scope for argument about the economics of nuclear power generation, because they are so sensitive to assumptions about the cost of power from other sources. As Ed Cummins of Westinghouse insists, ?The biggest motivator for nuclear today is $6 [the price per MBtu] natural gas. If gas goes back to $3.50, then nuclear plants aren’t competitive.?

Using cryptic model names is bad for business. Do people go into a store and ask for an iPod or a Sony NW-HD5? An iMac or a Sony VGC-RB42G?

There are exceptions to this, but I’m not sure if they really are exceptions, or the companies think they are exceptions.

One of the main ones is luxury vehicles. European brands (MB, BMW, Saab, Volvo) never named their cars, and stuck to number/letter combinations. When Honda introduced Acura, they kept to the Japanese idea of naming vehicles, but, when Infiniti and Lexus were introduced, Nissan and Toyota, respectively, wanted to emulate the European style of number/letter combinations. Eventually even Acura dumped names for number/letter combos. (As I said, I’m not sure if it makes any difference or not.)

Another example is home appliances. You can go to Best Buy and find the exact same Whirlpool washer that’s at Circuit City and the two of them will have completely different model numbers (which will be long and violently complex.) One hypothesis a friend of mine has, to explain this, is that all appliance stores have policies saying they won’t be undercut on the same model, and the way they can get away with such a a policy is by not selling the same ‘model.’ I can’t see any reason why Whirlpool would build the billions of different types of washing machines that’s offered by the model number combinatorics, so I remain mystified.

“Japanese scientists have unveiled the most human-looking robot yet devised – a ‘female’ android called Repliee Q1.

She has flexible silicone for skin rather than hard plastic, and a number of sensors and motors to allow her to turn and react in a human-like manner.

She can flutter her eyelids and move her hands like a human. She even appears to breathe.

Professor Hiroshi Ishiguro of Osaka University says one day robots could fool us into believing they are human”

Bob Cringely’s latest article shows evidence that some aspects of the 90s bubble are indeed back: Why would Rupert Murdoch think of paying $3billion for a mostly free online service like Skype? But his last line shows a keen understanding of Murdoch’s skills and methods: ‘By putting Skype in play, he distracts for no money at all most of the major media companies. And while they try to figure out how to respond to VoIP, old Rupert will be attacking them on some completely other front. He’ll be stealing their shoes.’

“Some who came to watch were fellow cancer survivors, in Paris to pay tribute to a man they say has been an inspiration to them.

Others were simply fans – admirers of a man whose single-minded will to win has made him a cycling legend. And the fans went wild as Lance Armstrong coasted to his record seventh Tour victory and pedalled into sporting history.

‘He really embodies the American dream – his difficult background, the way he overcame cancer, his total determination to win,’ said one fan who came from Austin, Texas to support the town’s greatest champion.”

The Economist has a column looking at the valuations of some of the Internet’s darlings, with a particular emphasis on Google. From the column: ‘Valuations are, in fact, better founded than many of them used to be. But around 50 times next year’s expected profits is still quite a leap of faith. At the levels seen in recent days, the price of Google’s traded shares implies that it is the world’s most valuable media company, with a market cap comfortably in excess of Time Warner’s $76 billion, even though the latter had $42 billion in sales last year to Google’s $3.2 billion. True, Time Warner’s business is increasing at a snail’s pace compared with Google’s. But putting so high a price on future growth only makes sense if all’s for the best in this best of all possible worlds. And it isn’t.

Looking at the original South Sea Bubble it’s fair to say what predominantly characterizes investment bubbles is unwarranted, great expectations. The expectations are unwarranted in that they can’t be adequately quantified and, thus, rigorously examined.

The Dot Com bubble exhibited the same feeding frenzy behaviour. No one really knew the potential of the web, but every wanted in, and, the more the better. The collapse of the Dot Com bubble reflected, not only unwarranted investment behaviour, but the fact that the web couldn’t deliver in a timely fashion, not too mention the bloated, vapour ware companies backed by wildly speculative VCs.

What we may now have is a Google Bubble. While investors may not be ready to reinflate the Dot Com Bubble and speculate wildly on the web as a whole, they might be ready to invest wildly in a darling of the web like the, do no evil, just too cool, Google company.

In The General Theory of Employment, Interest, and Money, John Maynard Keynes laid out the big picture of ‘value’: When you look at an economy as a whole, you see that money flows from one place to another, then back again, making cycles. The question of value isn’t whether one thing is intrinsically more worthwhile than another, but whether it has the power to pull a higher concentration of money into a given part of the system.

Along with that goes the idea that the overall value of money is based on people’s willingness to use it. There are simple abberations.. put too much currency into an economy and you get inflation, restrict the flow of currency too much and you get a recession.. but even in a more or less balanced economy, people have to decide whether to spend their money on X today or Y tomorrow. Those decisions determine both where the cash goes, and how much buying power a unit of currency has.

Boil it all down, and you get the idea that ‘wealth’ is strongly tied to people’s willingness to invest in the future.

Time Warner may be big, but is business model is old, well, understood, and frankly, not so healthy. Information on the internet competes with information managed by traditional media companies, and the differences in distribution models, usage models, and cost of entry are playing hell with prices in the traditional sector.

Google may be an unknown, but it’s demonstrated its ability to make actual profits while distributing information on the internet. People are willing to invest in that model of the future, and that makes Google valuable.

Are people overestimating the potential value of the internet-information market? Possibly. But this time they’re investing in a company that makes actual profits, as oppsed to the last dotcom boom, where people invested in the idea that ‘branding’ was synonymous with future profits.

If it turns out that Time Warner’s $42B/year market dissolves into an internet information market worth, say, $8B/year, the investors who’ve bet that Google’s cap will reflect current market conditions will lose money, and Google’s stock price will go down. But it will happen slowly, as investors gradually work out the real value of the new information market. It won’t be a cascade-failure like last time. At very least, there’s no reason for Google’s shares to drop below the reasonable value for a company that earns $3.2B/year.

Source: NVCA

The Venture Capital Industry?An Overview

Venture capital is money provided by professionals who invest alongside management in young, rapidly growing companies that have the potential to develop into significant economic contributors. Venture capital is an important source of equity for start-up companies.

Professionally managed venture capital firms generally are private partnerships or closely-held corporations funded by private and public pension funds, endowment funds, foundations, corporations, wealthy individuals, foreign investors, and the venture capitalists themselves.

Venture capitalists generally:

* Finance new and rapidly growing companies;

* Purchase equity securities;

* Assist in the development of new products or services;

* Add value to the company through active participation;

* Take higher risks with the expectation of higher rewards;

* Have a long-term orientation

When considering an investment, venture capitalists carefully screen the technical and business merits of the proposed company. Venture capitalists only invest in a small percentage of the businesses they review and have a long-term perspective. Going forward, they actively work with the company’s management by contributing their experience and business savvy gained from helping other companies with similar growth challenges.

Venture capitalists mitigate the risk of venture investing by developing a portfolio of young companies in a single venture fund. Many times they will co-invest with other professional venture capital firms. In addition, many venture partnership will manage multiple funds simultaneously. For decades, venture capitalists have nurtured the growth of America’s high technology and entrepreneurial communities resulting in significant job creation, economic growth and international competitiveness. Companies such as Digital Equipment Corporation, Apple, Federal Express, Compaq, Sun Microsystems, Intel, Microsoft and Genentech are famous examples of companies that received venture capital early in their development.

Private Equity Investing

Venture capital investing has grown from a small investment pool in the 1960s and early 1970s to a mainstream asset class that is a viable and significant part of the institutional and corporate investment portfolio. Recently, some investors have been referring to venture investing and buyout investing as “private equity investing.” This term can be confusing because some in the investment industry use the term “private equity” to refer only to buyout fund investing. In any case, an institutional investor will allocate 2% to 3% of their institutional portfolio for investment in alternative assets such as private equity or venture capital as part of their overall asset allocation. Currently, over 50% of investments in venture capital/private equity comes from institutional public and private pension funds, with the balance coming from endowments, foundations, insurance companies, banks, individuals and other entities who seek to diversify their portfolio with this investment class.

What is a Venture Capitalist?

The typical person-on-the-street depiction of a venture capitalist is that of a wealthy financier who wants to fund start-up companies. The perception is that a person who develops a brand new change-the-world invention needs capital; thus, if they can?t get capital from a bank or from their own pockets, they enlist the help of a venture capitalist.

In truth, venture capital and private equity firms are pools of capital, typically organized as a limited partnership, that invests in companies that represent the opportunity for a high rate of return within five to seven years. The venture capitalist may look at several hundred investment opportunities before investing in only a few selected companies with favorable investment opportunities. Far from being simply passive financiers, venture capitalists foster growth in companies through their involvement in the management, strategic marketing and planning of their investee companies. They are entrepreneurs first and financiers second.

Even individuals may be venture capitalists. In the early days of venture capital investment, in the 1950s and 1960s, individual investors were the archetypal venture investor. While this type of individual investment did not totally disappear, the modern venture firm emerged as the dominant venture investment vehicle. However, in the last few years, individuals have again become a potent and increasingly larger part of the early stage start-up venture life cycle. These “angel investors” will mentor a company and provide needed capital and expertise to help develop companies. Angel investors may either be wealthy people with management expertise or retired business men and women who seek the opportunity for first-hand business development.

Investment Focus

Venture capitalists may be generalist or specialist investors depending on their investment strategy. Venture capitalists can be generalists, investing in various industry sectors, or various geographic locations, or various stages of a company?s life. Alternatively, they may be specialists in one or two industry sectors, or may seek to invest in only a localized geographic area.

Not all venture capitalists invest in “start-ups.” While venture firms will invest in companies that are in their initial start-up modes, venture capitalists will also invest in companies at various stages of the business life cycle. A venture capitalist may invest before there is a real product or company organized (so called “seed investing”), or may provide capital to start up a company in its first or second stages of development known as “early stage investing.” Also, the venture capitalist may provide needed financing to help a company grow beyond a critical mass to become more successful (”expansion stage financing”).

The venture capitalist may invest in a company throughout the company?s life cycle and therefore some funds focus on later stage investing by providing financing to help the company grow to a critical mass to attract public financing through a stock offering. Alternatively, the venture capitalist may help the company attract a merger or acquisition with another company by providing liquidity and exit for the company?s founders.

At the other end of the spectrum, some venture funds specialize in the acquisition, turnaround or recapitalization of public and private companies that represent favorable investment opportunities.

There are venture funds that will be broadly diversified and will invest in companies in various industry sectors as diverse as semiconductors, software, retailing and restaurants and others that may be specialists in only one technology.

While high technology investment makes up most of the venture investing in the U.S., and the venture industry gets a lot of attention for its high technology investments, venture capitalists also invest in companies such as construction, industrial products, business services, etc. There are several firms that have specialized in retail company investment and others that have a focus in investing only in “socially responsible” start-up endeavors.

Venture firms come in various sizes from small seed specialist firms of only a few million dollars under management to firms with over a billion dollars in invested capital around the world. The common denominator in all of these types of venture investing is that the venture capitalist is not a passive investor, but has an active and vested interest in guiding, leading and growing the companies they have invested in. They seek to add value through their experience in investing in tens and hundreds of companies.

Some venture firms are successful by creating synergies between the various companies they have invested in; for example one company that has a great software product, but does not have adequate distribution technology may be paired with another company or its management in the venture portfolio that has better distribution technology.

Length of Investment

Venture capitalists will help companies grow, but they eventually seek to exit the investment in three to seven years. An early stage investment make take seven to ten years to mature, while a later stage investment many only take a few years, so the appetite for the investment life cycle must be congruent with the limited partnerships? appetite for liquidity. The venture investment is neither a short term nor a liquid investment, but an investment that must be made with careful diligence and expertise.

Types of Firms

There are several types of venture capital firms, but most mainstream firms invest their capital through funds organized as limited partnerships in which the venture capital firm serves as the general partner. The most common type of venture firm is an independent venture firm that has no affiliations with any other financial institution. These are called “private independent firms”. Venture firms may also be affiliates or subsidiaries of a commercial bank, investment bank or insurance company and make investments on behalf of outside investors or the parent firm?s clients. Still other firms may be subsidiaries of non-financial, industrial corporations making investments on behalf of the parent itself. These latter firms are typically called “direct investors” or “corporate venture investors.”

Other organizations may include government affiliated investment programs that help start up companies either through state, local or federal programs. One common vehicle is the Small Business Investment Company or SBIC program administered by the Small Business Administration, in which a venture capital firm may augment its own funds with federal funds and leverage its investment in qualified investee companies.

While the predominant form of organization is the limited partnership, in recent years the tax code has allowed the formation of either Limited Liability Partnerships, (”LLPs”), or Limited Liability Companies (”LLCs”), as alternative forms of organization. However, the limited partnership is still the predominant organizational form. The advantages and disadvantages of each has to do with liability, taxation issues and management responsibility.

The venture capital firm will organize its partnership as a pooled fund; that is, a fund made up of the general partner and the investors or limited partners. These funds are typically organized as fixed life partnerships, usually having a life of ten years. Each fund is capitalized by commitments of capital from the limited partners. Once the partnership has reached its target size, the partnership is closed to further investment from new investors or even existing investors so the fund has a fixed capital pool from which to make its investments.

Like a mutual fund company, a venture capital firm may have more than one fund in existence. A venture firm may raise another fund a few years after closing the first fund in order to continue to invest in companies and to provide more opportunities for existing and new investors. It is not uncommon to see a successful firm raise six or seven funds consecutively over the span of ten to fifteen years. Each fund is managed separately and has its own investors or limited partners and its own general partner. These funds? investment strategy may be similar to other funds in the firm. However, the firm may have one fund with a specific focus and another with a different focus and yet another with a broadly diversified portfolio. This depends on the strategy and focus of the venture firm itself.

Corporate Venturing

One form of investing that was popular in the 1980s and is again very popular is corporate venturing. This is usually called “direct investing” in portfolio companies by venture capital programs or subsidiaries of nonfinancial corporations. These investment vehicles seek to find qualified investment opportunities that are congruent with the parent company?s strategic technology or that provide synergy or cost savings.

These corporate venturing programs may be loosely organized programs affiliated with existing business development programs or may be self-contained entities with a strategic charter and mission to make investments congruent with the parent?s strategic mission. There are some venture firms that specialize in advising, consulting and managing a corporation?s venturing program.

The typical distinction between corporate venturing and other types of venture investment vehicles is that corporate venturing is usually performed with corporate strategic objectives in mind while other venture investment vehicles typically have investment return or financial objectives as their primary goal. This may be a generalization as corporate venture programs are not immune to financial considerations, but the distinction can be made.

The other distinction of corporate venture programs is that they usually invest their parent?s capital while other venture investment vehicles invest outside investors? capital.

Commitments and Fund Raising

The process that venture firms go through in seeking investment commitments from investors is typically called “fund raising.” This should not be confused with the actual investment in investee or “portfolio” companies by the venture capital firms, which is also sometimes called “fund raising” in some circles. The commitments of capital are raised from the investors during the formation of the fund. A venture firm will set out prospecting for investors with a target fund size. It will distribute a prospectus to potential investors and may take from several weeks to several months to raise the requisite capital. The fund will seek commitments of capital from institutional investors, endowments, foundations and individuals who seek to invest part of their portfolio in opportunities with a higher risk factor and commensurate opportunity for higher returns.

Because of the risk, length of investment and illiquidity involved in venture investing, and because the minimum commitment requirements are so high, venture capital fund investing is generally out of reach for the average individual. The venture fund will have from a few to almost 100 limited partners depending on the target size of the fund. Once the firm has raised enough commitments, it will start making investments in portfolio companies.

Capital Calls

Making investments in portfolio companies requires the venture firm to start “calling” its limited partners commitments. The firm will collect or “call” the needed investment capital from the limited partner in a series of tranches commonly known as “capital calls”. These capital calls from the limited partners to the venture fund are sometimes called “takedowns” or “paid-in capital.” Some years ago, the venture firm would “call” this capital down in three equal installments over a three year period. More recently, venture firms have synchronized their funding cycles and call their capital on an as-needed basis for investment.

Illiquidity

Limited partners make these investments in venture funds knowing that the investment will be long-term. It may take several years before the first investments starts to return proceeds; in many cases the invested capital may be tied up in an investment for seven to ten years. Limited partners understand that this illiquidity must be factored into their investment decision.

Other Types of Funds

Since venture firms are private firms, there is typically no way to exit before the partnership totally matures or expires. In recent years, a new form of venture firm has evolved: so-called “secondary” partnerships that specialize in purchasing the portfolios of investee company investments of an existing venture firm. This type of partnership provides some liquidity for the original investors. These secondary partnerships, expecting a large return, invest in what they consider to be undervalued companies.

Advisors and Fund of Funds

Evaluating which funds to invest in is akin to choosing a good stock manager or mutual fund, except the decision to invest is a long-term commitment. This investment decision takes considerable investment knowledge and time on the part of the limited partner investor. The larger institutions have investments in excess of 100 different venture capital and buyout funds and continually invest in new funds as they are formed.

Some limited partner investors may have neither the resources nor the expertise to manage and invest in many funds and thus, may seek to delegate this decision to an investment advisor or so-called “gatekeeper”. This advisor will pool the assets of its various clients and invest these proceeds as a limited partner into a venture or buyout fund currently raising capital. Alternatively, an investor may invest in a “fund of funds,” which is a partnership organized to invest in other partnerships, thus providing the limited partner investor with added diversification and the ability to invest smaller amounts into a variety of funds.

Disbursements

The investment by venture funds into investee portfolio companies is called “disbursements”. A company will receive capital in one or more rounds of financing. A venture firm may make these disbursements by itself or in many cases will co-invest in a company with other venture firms (”co-investment” or “syndication”). This syndication provides more capital resources for the investee company. Firms co-invest because the company investment is congruent with the investment strategies of various venture firms and each firm will bring some competitive advantage to the investment.

The venture firm will provide capital and management expertise and will usually also take a seat on the board of the company to ensure that the investment has the best chance of being successful. A portfolio company may receive one round, or in many cases, several rounds of venture financing in its life as needed. A venture firm may not invest all of its committed capital, but will reserve some capital for later investment in some of its successful companies with additional capital needs.

Exits

Depending on the investment focus and strategy of the venture firm, it will seek to exit the investment in the portfolio company within three to five years of the initial investment. While the initial public offering may be the most glamourous and heralded type of exit for the venture capitalist and owners of the company, most successful exits of venture investments occur through a merger or acquisition of the company by either the original founders or another company. Again, the expertise of the venture firm in successfully exiting its investment will dictate the success of the exit for themselves and the owner of the company.

IPO

The initial public offering is the most glamourous and visible type of exit for a venture investment. In recent years technology IPOs have been in the limelight during the IPO boom of the last six years. At public offering, the venture firm is considered an insider and will receive stock in the company, but the firm is regulated and restricted in how that stock can be sold or liquidated for several years. Once this stock is freely tradable, usually after about two years, the venture fund will distribute this stock or cash to its limited partner investor who may then manage the public stock as a regular stock holding or may liquidate it upon receipt. Over the last twenty-five years, almost 3000 companies financed by venture funds have gone public.

Mergers and Acquisitions

Mergers and acquisitions represent the most common type of successful exit for venture investments. In the case of a merger or acquisition, the venture firm will receive stock or cash from the acquiring company and the venture investor will distribute the proceeds from the sale to its limited partners.

Valuations

Like a mutual fund, each venture fund has a net asset value, or the value of an investor?s holdings in that fund at any given time. However, unlike a mutual fund, this value is not determined through a public market transaction, but through a valuation of the underlying portfolio. Remember, the investment is illiquid and at any point, the partnership may have both private companies and the stock of public companies in its portfolio. These public stocks are usually subject to restrictions for a holding period and are thus subject to a liquidity discount in the portfolio valuation.

Each company is valued at an agreed-upon value between the venture firms when invested in by the venture fund or funds. In subsequent quarters, the venture investor will usually keep this valuation intact until a material event occurs to change the value. Venture investors try to conservatively value their investments using guidelines or standard industry practices and by terms outlined in the prospectus of the fund. The venture investor is usually conservative in the valuation of companies, but it is common to find that early stage funds may have an even more conservative valuation of their companies due to the long lives of their investments when compared to other funds with shorter investment cycles.

Management Fees

As an investment manager, the general partner will typically charge a management fee to cover the costs of managing the committed capital. The management fee will usually be paid quarterly for the life of the fund or it may be tapered or curtailed in the later stages of a fund?s life. This is most often negotiated with investors upon formation of the fund in the terms and conditions of the investment.

Carried Interest

“Carried interest” is the term used to denote the profit split of proceeds to the general partner. This is the general partners? fee for carrying the management responsibility plus all the liability and for providing the needed expertise to successfully manage the investment. There are as many variations of this profit split both in the size and how it is calculated and accrued as there are firms.

According to an article in yesterday’s New York Times, Costco puts Wal-Mart to shame in the arena of low pricing. They steadfastly hold to the rule that nothing shall be marked up more than 15% (compared with competitor’s markup of 25% and more).  They pay their employees an average of $17 per hour… 42% higher than Sam’s Club… and have one of the best health plans in the industry.

Costco’s stock has risen more than 10% in the last year.  Employee turnover rate is nearly non-existent.  Sales revenue for
June of 2005 is up 9% from the same period last year.

What does Wall Street have to say about this?  If you can get their thumbs out of their mouths long enough to tell you, they wail that Joe is too generous.  He just isn’t shaving enough off the top for them to get their greedy little hands on.  An analyst from Deutsche Bank whines, “it’s better to be an employee or a customer than a shareholder.”  “They could probably get more money for a lot of items they sell,” complains another analyst at ThinkEquity.

Wah, wah wah. Jim’s not playing the game by our rules.  He’s too traditional, too old-fashioned. And on top of that (horror of horrors) he only took a $200,000 bonus last year.  We don’t wanna play anymore!

Well, pick up your toys and go home, Boys.  Jim’s not bending to anyone’s pressure.  His response to all the mishigass?

“On Wall Street, they’re in the business of making money between now and next Thursday. I don’t say that with any bitterness, but we can’t take that view. We want to build a company that will still be here 50 and 60 years from now.

This is not altruistic. This is good business.”

My God.  A business that puts its employees and customers before the Almighty Profit does exist.  Isn’t it amazing that a simple thing like that would create cult-like customer loyalty and $40 billion in revenue… with”>almost no advertising?

Harry Potter: In America, 6.9m copies were sold in the first 24 hours after publication on Saturday July 16th. Scholastic, the book?s American publisher, has set a print run of 10.8m, almost equivalent to the total sales in the country so far for volume five. Bloomsbury, the British publisher, said 2m copies had been sold in Britain, some 13% more sales than the previous Harry Potter book registered on its publication day.

The Harry Potter series is a publishing phenomenon by any measure. All told, around 270m Harry Potter books have been sold worldwide. But this type of blockbuster is hardly the norm for publishers that generally struggle to earn decent profits in a business that offers only low growth and slender profit margins.

Publishers lose money on most titles they produce. In America, an astonishing 195,000 new books were published in 2004 (14% more than the previous year) but the big publishers concentrate most of their marketing resources on a few books that they hope will provide returns big enough to pay for all the failures. But gambling so heavily on a small number of titles carries the risk that too few will succeed to repay the hefty outlay. Hence publishing is unlikely ever to be a fast-growing business.

According to PricewaterhouseCoopers, a consultancy, global book sales in 2004 increased by 1.5% over the year before, to $107 billion. The slightly higher growth rate of 3.1% projected for 2005 (see chart) is in part because of the arrival of a new Harry Potter title and an expected growth in textbook sales as a result of George Bush?s ?No child left behind? educational legislation.

New Scientist has a feature on the top ten inventions by Mother Nature — those developments or concepts that have shone through the vast complexity that is life, and made it what it is. Some are concrete and obvious — the eye, for example, first appearing 543 million years ago, and the brain. Others are more abstract and are defining themes among biological organisms: multicellularity, photosynthesis, sex, and parasitism. Read the whole thing for a big-picture view of biology that you didn’t get in ninth grade.

“The Economist has an article about how Google uses its amorphous positioning to gain investor interest. At the current valuation (the P/E is north of 110) this is a winning formula, but the article questions the long-term soundness. The reporter was chagrined that the last press tour focused more on the CFO (Chief Food Officer) and the monthly pasta consumption (500 lbs) than products or financial performance of the company.”

Currently, India’s domestic airlines carry fewer than 20m passengers a year, whilst over 15m people travel by train every day.

That is a pause for thought.

Currently, India’s domestic airlines carry fewer than 20m passengers a year, whilst over 15m people travel by train every day.

That is a pause for thought.

When companies offer us, of all people, something for nothing, we wonder: What’s the catch — or, for that matter, the business plan? So we asked actual experts — Ben McConnell, author of Creating Customer Evangelists (Dearborn, 2002) and Jennifer Rice of Mantra Brand Consulting — to assess a few high-profile giveaways. How do we know they’re working?

Company: Starbucks

Giveaway: Free living room; the opportunity to lounge for hours in comfy armchairs.

Pros: 33 million folks stop in weekly. Average tab for those who buy: $4.

Cons: Open-door policy exposes stores to freeloading riffraff.

Philosophy: “Creating a ‘third place’ away from home and work is intrinsic to who we are; it’s not a marketing add-on,” says a spokesperson.

Expert verdict: Winner. “If all customers wanted was good coffee, Dunkin’ Donuts would be the number-one coffee vendor,” says McConnell. “Starbucks knows it’s about the community experience.”
Company: Tivo

Giveaway: In December, TiVo offered DVRs to customers of rival Comcast who brought cable bills and a gift for charity.

Pros: People came in droves, hauling off nearly 2,000 DVRs.

Cons: TiVo ran out of DVRs and had to turn potential converts away; others got recorders only to find the promised rate wasn’t offered in their area.

Philosophy: Give them the hardware and make them service customers for life.

Expert verdict: “Short-term giveaways generate buzz, trial, and referral,” says Rice. “But they’re only effective when the service is worth talking about and the promotion is done well.”
Company: Skype

Giveaway: Unlimited free Internet-telephony service when calling within the Skype network.

Pros: 38 million users in almost two years — including 1.3 million who pay for premium services such as voice mail.

Cons: Dude, it’s, like, free.

Philosophy: “We want customers to tell their friends, family, and colleagues about Skype,” says a spokesperson.

Expert verdict: “This strategy is often useful in subscription or commodity industries,” says Rice. Skype’s is “a brilliant viral strategy,” says McConnell. “To use the service for free you have to get others to use it.”

The best way to help developing nations is to recognise that development is “of the people, by the people and for the people”, says a Bangladeshi entrepreneur. Iqbal Quadir, Grameen Phone founder in Bangladesh, told experts gathered for TED Global in Oxford that aid strategies for the last 60 years had failed. Technologies such as mobiles empowered people because they connected them. This, he said, fuelled productivity much more than the top-down aid approach.

French scientists Michard and Bouchard spent some time examining the numbers behind phenomena like birth rates, cell phone growth and clapping. Their paper looks at the data in detail to find herding effects. To do this they looked at mathematical theories for magnetic behavior and applied them to social phenomena.

Their model shows that the speed of a trend depends on the levels of influence that people have over one another. Clearly, different cultures and demographic groups exert different levels of influence.

It also shows that shifts in behavior occur faster when people have a strong tendency to imitate each other, again this various by culture and demographic group.

There is also a multiplier effect at work here as these shifts can occur so fast that they appear to happen overnight. As more and more members of the population adopt the new behavior, the behavioral shift accelerates.

To quote the authors “strong social imitation can be the key to success of a brand.”

While we like to think of ourselves as individuals with a unique set of opinions, most of the time we simply respond to the herd. For marketers it’s as simple as what does it take to get the “herd effect” going.

Following the work of Michard and Bouchard, for marketing success you need to:

1. Understand the influence your target has over one another, or find a group like Gladwell’s Mavens, that strongly influences others

2. Know where imitation matters most- youth demographic or different locations, moods and situations

3. Be prepared to do something dramatic to encourage rapid fire early adoption- so the accelerator effect works in your favor.

“People are extremely passive,” James J. Choi, an economist at Yale, said. “They can be pushed around quite a bit, even when there are no formal restrictions on what they can do.”

At McDonald’s, people buy the combo meal when they might rather just have a small order of fries with their Quarter Pounder. Car buyers take the options that come as part of the most heavily promoted package even if they do not want all of them. For their 401(k), many workers simply accept the contribution rate and the investment choices their company picks for them. In countries where being an organ donor is the default choice on driver’s licenses, many more people are listed as organ donors.

The habit is so widespread that some economists have begun making a novel argument. Sometimes, they say, the more severe and the worse that a default option is, the better off people will be. Only then will they take matters into their own hands.

In many cases, obviously, companies have no interest in changing consumers’ behavior. Starbucks, for one, is quite happy to have its customers ordering a tall coffee instead of the little-known short (yes, there is a size smaller than tall at Starbucks).

What science knows it doesn’t know: “Scientific journal Science is celebrating its 125th anniversary by asking 125 big questions that science can’t answer… yet. The ground rule in the selection process was that ’scientists should have a good shot at answering the questions over the next 25 years, or they should at least know how to go about answering them.’ Here are the top 25:

What Is the Universe Made Of?
What is the Biological Basis of Consciousness?
Why Do Humans Have So Few Genes?
To What Extent Are Genetic Variation and Personal Health Linked?
Can the Laws of Physics Be Unified?
How Much Can Human Life Span Be Extended?
What Controls Organ Regeneration?
How Can a Skin Cell Become a Nerve Cell?
How Does a Single Somatic Cell Become a Whole Plant?
How Does Earth’s Interior Work?
Are We Alone in the Universe?
How and Where Did Life on Earth Arise?
What Determines Species Diversity?
What Genetic Changes Made Us Uniquely Human?
How Are Memories Stored and Retrieved?
How Did Cooperative Behavior Evolve?
How Will Big Pictures Emerge from a Sea of Biological Data?
How Far Can We Push Chemical Self-Assembly?
What Are the Limits of Conventional Computing?
Can We Selectively Shut Off Immune Responses?
Do Deeper Principles Underlie Quantum Uncertainty and Nonlocality?
Is an Effective HIV Vaccine Feasible?
How Hot Will the Greenhouse World Be?
What Can Replace Cheap Oil — and When?
Will Malthus Continue to Be Wrong?”

I am just back from a four day trip to Los Angeles and Las Vegas. It was a very memorable experience. I drove from Los Angeles to Las Vegas in a convertible with the wind blowing through my hair, spent time in the many casinos in Las Vegas (even won on the roulette against the house I had rented a hotel room in the middle of the Las Vegas boulevard with an excellent view of the Las Vegas strip.

I had wanted to do this trip for a long time. As the Americans say, “Lets get wasted”. Well, I got wasted

I even drove to Area 51, which is a secret US Military base about 125 miles north of Vegas in the middle of Nevada. It is supposedly the “UFO headquarters”, where alien UFOs are kept. It was featured in the movie Independence Day. If you watch the Discovery channel, you will recognize Area 51 as the place where the U2 spy plane was tested, stealth aircraft SR-71 was built, and where UFO conspiracy theorists say that alien aircrafts land in earth . It is a really remote location in the middle of nowhere in the Nevada desert. Officially, according to US government, Area 51 doesn’t exist. It doesn’t show up in official US government maps (including in USGS). It borders the Nellis Air Force Base in Nevada and uses nearby dry Groom Lake bed in Nevada as the landing strip for aircrafts.

The highway near Area 51 is officially called the ‘Extraterrestrial Highway’. Nevada state has renamed this highway. I will post pictures soon.

I didn’t get to visit Hoover Dam near Las Vegas, though I did want to.

Anyway, I got back to Washington DC and heard the news about MBNA being bought over by BOA. Interesting times indeed. This has a direct bearing on my life

                               Market ShareBank of America/MBNA               20.2%JPMorgan Chase                     19.6%Citigroup Inc.                     16.4%American Express                    9.0%Capital One                         7.5%Discover                            6.5%HSBC Holdings Plc                   3.2%Providian (Wash. Mutual)            2.6%Wells Fargo                         1.9%U.S. Bancorp                        1.5%