Vertical Pulse

Water Systems' Vulnerability to Earthquakes

Hurricane’s Katrina, Rita and Wilma are painful reminders of the ruthless destruction that natural events can wreck on crucial infrastructure. Statistically, California is long overdue for another significant earthquake. The impact of a 1906-magnitude earthquake could have catastrophic ramifications for California ’s water purity and deliverability. (It is important to note that California

is not alone in its vulnerability to earthquakes as there have been at least 26 American cities that experienced significant earthquakes and that are at risk for another earthquake.) 

In connection with our Profiting from The Water Industry – Tapping a Reservoir of Wealth Conference which will be held in San Francisco on December 1, we have undertaken quite extensive research into the impact of an earthquake in California on the Golden State’s water infrastructure.

We had the opportunity to interview some of the preeminent authorities on California’s vulnerability to earthquakes and on California’s water systems. These interviewees included Dr. Lucile M. Jones of the U.S. Geological Survey; Arthur G. Baggett, former Chairman and member of the California State Water Resources Control Board; Zane O. Gresham, Partner at Morrison & Foerster; and, Tony Irons, Deputy General Manager of Infrastructure at the San Francisco Public Utilities Commission.

Among the insights elicited from these interviews are the following:

• Because Southern Californiahas over 300 faults vulnerable to earthquakes, that region has about half of the nation's risk from earthquakes. The entire coast of Californiais really made up of a braid of earthquake faults, so there is risk all the way from San Diegoin the south to Crescent Cityin the north.

• California averages, at least, one magnitude 6.0 or greater earthquake every three years. So, the probability that California will have another significant earthquake within five years is between 80% or 90%. California is overdue for another major earthquake as it is rare that there is a five-year period without a magnitude 6.0 earthquake. The last one we had was a magnitude 7.1 in 1999.

• A 1906-magnitude earthquake happens about once every 200 years on average. One can not say it's been 100 years, we still have 100 years to go. It is a long-term average. Silicon Valleycould be paralyzed by such an earthquake.

• All major aqueducts (the California Aqueduct, the Los Angeles Aqueduct and the Colorado Aqueduct) cross the San Andreas Fault. So, when a major earthquake happens, every one of those aqueducts is going to be offset by 20 feet to 30 feet due to earthquake slipping.

• Coupling earthquakes with floods, the levy system would have by far the greatest single impact because of where the federal and state projects are pumping water out of the delta. And if there were massive flooding barriers, the salt water would be intruding all the way into those pumps.

• The consequences of there being catastrophic failure of the water system serving the San Francisco Bay Area are enormous because at present, if there was a major earthquake that severed the only transmission line that serves the Bay Area, it could result in at least two million people having no water for well over a month. Estimates indicate that this transmission line could remain out of service for up to 60 days and the economic impact would be in the range of $28 billion.

• One of the most serious problems lies on the water sewage treatment side. Electricity outages after an earthquake could both prevent the treatment and delivery of drinking water even if the pipes are intact and also will prevent the treatment of wastewater before it is discharged. According to a study that was completed just after the 1989 earthquake, about 20 million gallons of raw sewage simply had to be released into the Oakland estuary in the six-hour period after the earthquake because of a lack of electricity. That of course could happen in Los Angeles at their enormous Hyperion Wastewater Treatment Plant or even in San Diego or similar types of facilities.

• Earthquake preparedness has taken a bit of a backseat because the same emergency managers that are needed to respond to earthquakes are also responding to the terrorism threats.

These are some of the issues that will be addressed at IncreMental Advantage's Profiting in

the Water Industry Conference which will take place in New York City on June 6. Further

information can be obtained at www.incrementaladvantage.com/conferences or by

contacting Neomi Barazani at neomi@incrementaladvantage.com.

Chief Intellectual Property Officers

The importance of intellectual property in enhancing enterprise and shareholder value cannot be over-emphasized. One recent study shows that by 2007, IP will represent 90% of the enterprise value of Global 2000 companies. Another study by the OECD estimates that global licensing revenue will reach $500 billion in the next decade. Despite the tremendous value that IP delivers to corporations, most corporations do not have any one individual dedicated to developing and managing their IP strategy.

   In addition to the lack of attention paid to IP and the poor coordination that exists in executing IP strategy, there exists another trend that calls for the need for monetizing IP. IP is an extremely expensive undertaking for corporations. Research and development, IP legal teams and the costs of litigation are causing many CEOs to demand a return on their intellectual property initiatives.

   We believe that most large companies would benefit from creating a position of Chief Intellectual Property Officer (CIPO) and have thus initiated thorough research into the roles and responsibilities of CIPOs. In going about fostering a greater respect for the importance of IP throughout their organizations, CIPOs must be the evangelists and enforcers of IP corporate policy with their superiors as well as with their peers among the research and development teams, business development groups and legal affairs staff.

Relationship with CEOs and Boards of Directors:   CIPOs must enlighten their CEOs and Boards of Directors as to the enterprise value that IP is capable of delivering. CIPOs should collaborate with their CEOs and Directors to determine their companies’ IP strategies. For example, will the company patent as much as possible? Will the company become an avid licensor? Will the company become a ferocious litigator? What will the company’s policy be with regard to independent asserters (or trolls)

   Once overall corporate strategy is set, the CEO and Board of Directors must agree upon the level of authority that the CIPO has over other important business groups. For example, is the CIPO’s authority limited to making suggestions to the business development team or can the CIPO enforce policy? Can the CIPO veto a business development initiative? Does the CIPO have the authority to develop incentive programs to encourage researchers to generate more patentable discoveries? How much incentive can be offered? The CEO and Board must determine the parameters within which the CIPO must operate in terms of legal strategies. For instance, the CEO may not want the legal team to become excessively litigious because this may damage customer relations and present reputation risk.

   Finally, the CEO and the Board of Directors must impress their policy decisions on the CIPO by creating an incentive scheme for the CIPO that reflects the will of the CEO and Board. For instance, the CIPO might be rewarded if certain measurable licensing targets are met; if a pre-determined level of patent applications are achieved; or, if attractive acquisition targets get folded into the company.

Relationship with Research and Development:   CIPOs must educate their research and development teams in terms of stressing the importance of patenting potent discoveries. CIPOs must run interference for their researchers in terms of reducing as much of the administrative burden associated with filing for patent protection as possible. (It is important to note that in drafting the patent application, it is the researcher that has the real subject matter technical expertise that the patent attorney has to rely on to identify what exactly the invention is; what is the current state of the prior art, and how the company is defining the invention over the prior art. Also, prosecution presents another imposition on the scientists in that very often prior art will show up which will require them to go back and do more lab work to show how their invention is different, or how the prior art is deficient.) CIPOs should be advocates for incentive systems that motivate researchers to patent more discoveries and be promoters of policies that will engender enterprise-wide respect for the work that their researchers conduct. 

Relationship with Business Development Professionals:   CIPOs must also educate their business development colleagues. CIPOs must brief their business development professionals on the royalties that they can expect to receive from licensing initiatives. CIPOs must ensure that their business development associates understand the strategic importance of maintaining an arsenal of intellectual property. CIPOs must help their business development associates determine when it is appropriate to pursue infringers, when to negotiate with them, when to propose cross-licensing, and when to ignore them. CIPOs must help their business development peers understand how intellectual property strategies impact profit margins and market share.

Relationship with Corporate Counsel:   CIPOs must manage their legal teams to ensure that their companies’ IP is thoroughly protected. They must also foster an environment in which the lawyers are proactive in assisting the business development teams pursue business opportunities. Otherwise, business development will perceive legal as just being a force that kills their initiatives. 

Other Roles for CIPOs:   CIPOs will have other missions to accomplish. For instance, in the pharmaceutical, entertainment and nanotech industries, CIPOs can expect to spend considerable time on public affairs initiatives. This is because the consumers of these products need to be reminded that they would not be able to consume medicine and entertainment if the intellectual property rights of the producing firms were not respected. Also, many CIPOs will be required to spend considerable time explaining their firms IP strategy with the financial community. Venture capitalists, investment bankers and institutional shareholders will become increasingly interested in learning about the sometimes elusive IP assets that companies have accumulated.

These are some of the issues that will be discussed in Chief Intellectual Property Officer Digest. These, and many more issues relevant to the Management and Monetization of Intellectual Property, will be discussed at our Intellectual Property Conference – Maximizing Returns on Intellectual Property Portfolios which will be held in San Francisco on January 16-17, 2007. Please contact Neomi Barazani at 609-919-1895 ext. 100 or neomi@incrementaladvantage.com for further details.

To find out more on IncreMental Advantage's Intellectual Property Conference Series, visit www.incrementaladvantage.com/conferences.

Bootstrapping Your Business

I recently read Bootstrapping Your Business by Greg Gianforte and Marcus Gibson. The main premise of the book was to conserve cash at almost all costs and be creative in gaining attention. Among the points made in the book were:

• Beware of "experts". Instead, become the expert yourself in your chosen niche. Experts are expensive and worse yet, they put distance between you and your customers.
• Bootstrappers must give absolute priority to sales. This will validate your business model better than anything else and will produce the revenues needed by your business.
• Do not confuse enthusiasm (on the part of potential customers) with a willingness to pay. The three necessary ingredients for any sale are a true need, the required budget, and the authority to make the decision.
• A manager can relieve stress that exists in any sales environment by encouraging a sales rep to repeat the ridiculous answers he just heard, mimic the voices that he suffered, and laugh about the funny names that crop up.
• It is a good idea to meet the accounts payable department people at customers' offices. These people are typically ignored and undervalued. They may appreciate the gesture which may help expedite receiving payment faster. All billing information should be verified with these people so that there will be no glitches in receiving payment.
• Another idea to accelerate receipt of revenue is to "pre-bill" some of your invoices ahead of the next tax year. This will allow clients to use the current year's remaining budget or increase your clients' expenses for tax planning.
• Be prepared to walk away if customers won't pay for your service. It is much better to be involved in a high-margin, small-volume business than the reverse.
• The bootstrapper must be able to sell. If the salesforce knows the boss can't sell, it won't have any respect for the boss and even less respect for the product. If the boss can sell, there is no excuse for underperformance by anyone on the sales team.
• Employees with bad attitudes are a serious drag on the entire team and can not be tolerated. It is better to have an empty seat than a bad apple.
• As far as trying to generate press coverage, it is better to call journalists before 11:00 AM since their deadlines will usually not be imminent.
• It is good to continually feed the press stories about your company's growing success. The media likes to maintain coverage of companies on the move. This coverage will convey the sense of your company's momentum with the publication's readers.
• At the end of every interview with the media, ask the journalist if he wants a picture. Try to get your company's Web site address in the photo.
• Maintain an exercise regimen. Your mind is much sharper when your body is tuned up. At the same time, exercise has proven biochemical, stress-relieving effects.
• Make a to-do list. This will give you a better perspective of the work you need to accomplish. When you are juggling multiple tasks in your head they can seem overwhelming; just putting them on paper can make them seem more manageable. Checking the small tasks off of your list gives you a feeling of accomplishment. Focus on the most pressing and complicated tasks when your focus and attention is greatest. Take care of the busywork when you are operating at less than optimal levels (e.g. at the end of the day).
• When searching for employees, look for the three "I's": intelligence, integrity, and initiative. You can't put in what G-D left out. When interviewing a potential employee ask yourself: Where is the logic in this applicant's career path? Is the job a natural progression or is the applicant just looking for an income?
• You shouldn't change your way of spending just to get an ex-big-company employee, or you will lose your credibility with the rest of your employees.
• Simply ignore the 2% to 3% of humanity that will never be happy. These people are not worth turning into customers.
• When in doubt, act. Often just doing the next thing will make your continued steps clear. Inaction is the enemy of any business.
• Expect to win. Your attitude will show through and increase your success rate.

Patent Productivity

Some of America's hi-tech companies are extremely prolific patent filers. Jack Straw, the UK's Foreign Secretary, recently said that Hewlett-Packard files more patent applications in an average two week period than the entire Arab world has filed over the past 20 years.

To find out more on IncreMental Advantage's Intellectual Property Conference Series, visit www.incrementaladvantage.com/conferences.

Weapons

I recently heard that the M-16 machine gun replaced the M-14, even though the M-14 was more accurate. The reasoning for the adaption of the M-16 was that it was lighter and easier to use. The M-16 was designed for greater numbers of troups to clear areas as opposed to giving marksman a more accurate weapon. During World War II, it took an average of 20,000 to 25,000 rounds for Amercians to kill each enemy. During the Vietnam War, Americans expended between 200,000 and 400,000 rounds for each kill achieved.

Also, the Kalashnikov automatic rifle was so popular that it was the only weapon to be placed on a flag (that of Mozambique, although I understand that their flag is going through a redesign). Also, the Lebanese Hezbollah have included the AK-47 on their Islamic banner - the rifle forms the "l" of "Allah".

Ease of Exiting Hedge Funds

Hedge fund investors must consider the relative ease or difficulty of exiting a hedge fund when they make their initial investments. They should consider the lock-up periods, when they can actually expect to receive their disbursements, and whether the disbursements will be in cash or securities. Further, investors should try to ascertain whether lock-up periods only apply to the initial investment or also to follow-on investments. When there are soft lock-ups, investors should be apprised of what the penalty rate is and whether the fund or the fund managers receive the penalty. Finally, while initially perceived as unattractive, gates (suspensions on redemptions) may be a positive policy to put in place since they can lead to less rapid withdrawals from the fund. This more measured pace of fund redemptions is especially important when the fund holds illiquid securities. 

These are some of the issues that will be addressed at our Hedge Funds – Due Diligence Conference which will take place in New York City on November 14.

Weapons of Mass Distortion

In the media’s haste to discredit everyone to the right of Michael Moore – most enthusiastically President Bush – the media’s lies are becoming too big to go unnoticed by a critical mass of people. The major media outlets hijacked Hurricane Katrina’s destruction of New Orleans as an excuse to pillory President Bush and his administration. The media incessantly reported that the administration was slow to respond to Hurricane Katrina and was indifferent to the suffering that it caused.

The media greatly exaggerated - many times outright fabricated - the human toll. The media reported that hundreds of deaths occurred at the Superdome when only 10 were documented. The media reported that dozens of murders were taking place in the Superdome when only four victims of gunshot wounds were identified.

If the destruction occurred in an isolated locale or only impacted a few people, the media may well be able to get away with such lies. However, tens of thousands of people were sent within a day or two of Hurricane Katrina hitting New Orleans to assist the victims. These rescue workers will have their stories told which will undermine the media’s unceasing claims that New Orleans was abandoned.

There used to be a time when accuracy was more important than sensationalism. There used to be a time when facts were checked. There used to be a time when there was some effort to present balance in reporting. There used to be a time when the sanctity of life and a scintilla or patriotism (or at least the absence of unmitigated hatred for the United States) was more important than selling a story. However, partly because young people are specifically going into journalism to advance their pet causes, these times have long passed.

I recently read Weapons of Mass Distortion: The Coming Meltdown of the Liberal Media by L. Brent Bozell III. Mr. Bozell made a number of very forceful points to not only document the major media outlet’s extreme liberal bias but the fact that the media is merely being used as a tool to advance hard left causes. Among the points were:

• Of 139 Washington, D.C., bureau chiefs and correspondents surveyed, 89% said they had voted for Clintonin 1992. 50% of the group identified themselves as Democrats and only 4% as Republicans. Furthermore, 61% of the supposedly objective press identified themselves as “liberal” while only 2% labeled themselves “conservative” or “liberal to moderate”.
• In 1997, the media went berserk when Newt Gingrich was offered $300,000 to teach a course on “Renewing American Civilization”. The IRS cleared Gingrich of all allegations that his teaching such a course violated any tax laws. Nevertheless, Gingrich was fined $300,000 by the House of Representatives. Bob Dole offered to loan Gingrich the money to pay the fine. The press was abhorred that a U.S. Representative would receive a loan from someone (Bob Dole) that worked for the tobacco industry. However, when Terry McAuliffe pledged to $1.35 million of his own money to secure a mortgage on the Clinton’s New York home, the media was mute despite McAuliffe paying a fine of hundreds of thousands of dollars to a union pension fund that he was accused to have fleeced.
• Similarly, it became a scandal that Newt Gingrich received a $4.5 million advance for a book deal while Hillary Clinton was lauded for receiving an $8 million advance for her book.
• The press changes reality to make liberals seem more appealing to the public. For instance, in July 2002, VH1 edited out the boos (and changed them to cheers) that accompanied Hillary Clinton’s speech at a New York City concert to benefit victims of September 11.
• Special interest groups have extraordinary control over the media. For instance, the National Lesbian and Gay Journalists Association wields tremendous influence over the major media. This is one of the primary reasons why the Matthew Shepard story (a homosexual teen that was murdered by heterosexuals) received 3,007 stories the month following his death while Jesse Dirkhising (a heterosexual male that was murdered by homosexuals) received only 46 stories in the month following his death.
• The media unconditionally suppresses evidence of the use of guns in preventing crime. According to criminologist Gary Kleck, people used guns to defend themselves against an assailant or burglar as many as 2.5 million times a year. The media refuses to acknowledge that gun control laws are not respected by criminals and therefore will not prevent crime. For instance, the Columbine killers broke eighteen separate federal and state gun laws.
• While the media lambasted Dick Cheney for not including some hard left organizations on his committee reviewing energy policy (they were invited but refused to participate), the media made almost no mention of the fact that a judge fined the Clinton White House in December 1997 for baldly lying about the composition of the Clinton health-care task force, which had planned to socialize one-seventh of the American economy.
• During the 2000 Presidential election imbroglio, Florida’s Supreme Court was extremely activist on behalf of the Democratic candidate, Al Gore. The Florida court acted on its own motion to bar the state from certifying election results. Indeed, the  Florida court had six justices that were appointed by Democrats and the seventh was a coappointment. However, all that the nation heard was that Katherine Harris, the duly-elected secretary of state, was a Republican. In fact, Ms. Harris warned the media not to prematurely announce election results since Florida’s Panhandle lies in the Central Time Zone. The media ignored Ms. Harris’s advice and therefore caused the election fiasco. Several analyses of Panhandle voters indicate that these citizens would have overwhelmingly voted for Bush and thus saved the nation an agonizingly precarious month.
• An interesting aside, while there are credible allegations that Pope Pius XII was anti-Semitic, it is interesting to note that Allied planes dropped 88,000 copies of the pope’s encyclical over Germany, in the hope that Pope Pius’s guarded anti-Nazi message would get through to the people.

Fooled by Randomness

I recently read Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Nicholas Taleb. This book was a tour de force in philosophy, logic and statistics. Taleb makes a strong argument that much of life is random. He cautions the reader to not put too much weight on someone's success because it may have largely been the result of luck. There are two primary ways to prove ones success exclusive of luck.

One of these ways occurs when one takes extreme precaution to avoid dramatically negative events or "blowups". Thus it is better to make small incremental gains while minimizing the downside than it is to take high risks in the attempt to make a massive profit.

The other factor to consider when evaluating one's success is to adjust for survivorship bias. This entails considering the number of players that began their work at the beginning of the period of time under review. If one of five players generated an impressive performance, it is likely to be attributable to skill. If one of one thousand players generated an impressive performance, it is not very impressive because his performance could be simply a random occurrence.

Among the other insights imparted are:

• A mistake is not something to be determined after the fact, but in the light of the information available until that point.
• The firehouse effect holds that firemen with much downtime who talk to each other for too long come to agree on many things that an outside, impartial observer would find ludicrous (they develop political ideas that are very similar).
• It is not how likely an event is to happen that matters, it is how much is made when it happens that should be the consideration. How frequent the profit is irrelevant; it is the magnitude of the outcome that counts.
• It is important to be aware that the following is fallacy: The more information you have, the more you are confident about the outcome.
• Taleb recommends using statistics and inductive methods to make aggressive bets, but not to use them to manage risks and exposure because of randomness.
• It is better to have a handful of enthusiastic advocates than hordes of people who appreciate your work - better to be loved by a dozen than liked by the hundreds.
• It is not the estimate or the forecast that matters so much as the degree of confidence with the opinion. This can be seen with weather predictions. You would rather know which kind of clothing to take on a trip. This requires a high degree of certainty that the estimate will be in a given range rather than a low degree of certainty that the weather will reach an exact temperature.
• Unless the source of a statement has extremely high qualifications, the statement will be more revealing of the author than the information intended by him. This applies to matters of judgment. According to Wittgenstein's ruler: Unless you have confidence in the ruler's reliability, if you use a ruler to measure a table you may also be using the table to measure the ruler. The less you trust the ruler's reliability, the more information you are getting about the ruler and the less about the table. A practical example of Wittgenstein's ruler is: The information from an anonymous reader on Amazon.com is all about the person, while that of a qualified person, is going to be all about the book.
• Research on happiness shows that those who live under a self-imposed pressure to be optimal in their enjoyment of things suffer a measure of distress.

An Empire of Wealth

I recently read An Empire of Wealth: The Epic History of American Economic Power by John Steele Gordon. This book provided an excellent understanding of how America’s history, legal system, financial systems and spirit of enterprise have enabled the US to foster the most vibrant economy over hundreds of years.

The following were among some of the interesting points:

1. An accountant was appointed by Ferdinand and Isabella of Spain to sail with Christopher Columbus on his first voyage to ensure that they got their full share of the hoped-for profits.
2. During colonial times, under the system of indenture, blacks and whites were required to work off their indentures and then were set free. Some blacks became large landowners and even had slaves of their own.
3. While iron is one of the most abundant elements on earth, copper is much easier to work with. Iron is never found in a pure state, is chemically highly reactive (which is why it rusts), and has an extremely high melting point. On the other hand, copper has a melting point, which is easily achieved in an ordinary fire.
4. Charcoal is wood heated in the absence of air until it is reduced to pure carbon.
5. King Charles granted William Penn nearly 30 million acres of land in what is now Pennsylvania, making William Penn the largest private landowner in history.
6. While Canada is rich in land, it had a very short growing season, limiting the number of crops that could be grown.
7. President Jefferson’s Embargo Act forbade American ships from dealing in foreign commerce, and the American navy was deployed to enforce it. In effect, the United Stateswent to war with itself and blockaded its own shipping.
8. Whaling was an important industry in the 1800s. Besides the meat, the blubber produced an oil that was an excellent fuel for lamps as well as a lubricant for machinery. Whalebone was indispensable for corsets and buggy whips.
9. Gold is extremely heavy: A cubic foot of granite weighs about 170 pounds and gold weighs more than 1,200 pounds per cubic foot. Gold is also inert which means that it does not combine with other elements.
10. So many men were attracted to the California gold rush that when California became a state, less than three years after the gold strike, its population was 92% male.
11. Wall Street stock traders employed agents with both the Confederate and Unionarmies during the Civil War to keep them abreast of battles. Wall Street learned the outcome of the Battle of Gettysburg before President Lincoln did.
12. In 1868, the New York State Legislature actually passed a law the effect of which was to legalize bribery.
13. One of the reasons that New York became a commercially successful city is that regular ship departures (to London and Europe) were initially established there. Before the advent of regularly scheduled departures, ships gave estimates of the departure. The ship captains first filled the ships with cargo and then began allowing passengers on board. Typically, passengers had to wait a week until they were allowed on board.
14. The railroads effectively established standardized time zones. Before this occurred the setting of time was determined by local noon, which at the latitude of New Yorkis about one minute later for each 11 miles one travels westward. Thus, when it was noon in New York, it was 11:55 AM in Philadelphia, 11:47 in Washington and 11:35 in Pittsburgh. The state of Illinoisused 27 different time zones and Wisconsin 38.
15. When the first railroad traveled at the then unheard of rate of 16 miles per hour, passengers wrote sentences down to prove that the human mind was capable of thinking when traveling at such rapid speeds.
16. Industrialist Henry Clay Frick was once attacked in his office by an assassin. Despite two bullet wounds to the neck and three stab wounds, Frick fought back ferociously and managed to subdue his attacker with the help of his office assistant. He then refused anesthetic as the doctor probed for the bullets and insisted on finishing his day’s work.
17. In order to tap into the industrial strength of America during World War I, the German government tried to gain control of Bethlehem Steel by offering Charles Schwab, president and principal shareholder, twice the market value of his stock for control of the company.
18. During World War I, the British government made J.P. Morgan its American purchasing agent, which gave the bank enormous influence with many American companies. Its first deal was for $12 million worth of horses. This buying of horses caused the price to rise for horses which was a prime reason that tractors so quickly replaced them on American farms at that time.
19. Corporate logos became important when automobiles began traveling past road signs at 30-40 miles per hour. 
20. Henry Ford was adamant about squeezing costs out of the production of his cars. That is the reason that his Model T’s were only painted black: Black dried faster than other colors and thus contributed to lower production costs.
21. Before the Great Market Crash of 1929, many corporations were involved in lending money to investors trading on margin. Bethlehem Steel had $150 million in the call money market and Chrysler had $60 by the end of the summer of 1929.
22. On inauguration day in 1933, the economy was in such a miserable state that The New York Stock Exchange announced that it would not open that morning and did not state when it would reopen again.
23. One mitigating factor of the Great Depression was that children stayed in school longer. The number of people receiving high school diplomas almost doubled in the 1930s, while those receiving college degrees increased by 50%.
24. During World War II, The Ford Motor Company alone produced more war material than the entire Italian economy. The entire U.S.economy shifted to war production. Between 1943 and 1945, the American automobile industry produced exactly 37 automobiles.

In Negotiations "Start With NO"

I recently read Start With NO by Jim Camp. I also had the pleasure of interviewing Jim and look forward to hosting him at our Mergers and Acquisitions Due Diligence Conference in New York on October 16-17, 2006. Jim believes that the win-win mentality that is popular with amateur negotiators is just a ploy to get the other side to compromise unnecessarily. While sometimes compromise is unavoidable, one should not begin negotiations with compromise which is a central tenent of the win-win mantra.

Among the lessons to be learned from reading Start With NO are:

• Never be obsequious to an adversary since this puts you at an immediate disadvantage.

• Control and lower your voice in times of inner turmoil. Never show the other side that you are feeling pressure.

• Don't fall into the trap of allowing the other side make you feel important because you have access to impressive people at important companies. The threat of losing this access often scares people into making poor decisions out of fear that they will lose such coveted access. Similarly, adversaries often try to befriend their opponents so that they will feel badly about disappointing or losing their friend.

• One negotiating tactic is to let your adversary feel that he is in control by purposely making small faux pax. Your adversary's illusion of being in control, allows you to maintain control.

• Don't let your emotions run ahead of the negotiations. Don't let fantasies of becoming a hero for bagging a major client or generating a large commission force you into unwise concessions.

• It is important to nurture (or, put at ease) your adversary. Such nurturing can be accomplished verbally and by body language.

• Instead of trying to falsely excite your adversaries to close the deal, you should repeat the closing offer several times to ensure that there is genuine buy-in.

• The simple act of note taking is important because it impresses upon your adversaries your sincerity and it focuses you on absorbing what your adversary is saying.

• When negotiating to hire a new employee, it is advisable to tell the candidate that you will not reveal the offer until the candidate gives a commitment to take or reject the offer. Thus, the candidate can not go back to his employer to demand a better deal.

• It is extremely important to frame the scenario that will likely prevail if your deal is accepted. You must be able to convince your adversary that your vision of the future makes your proposal worth accepting. For instance, if you are trying to drive down the price of an acquisition, you may want to try to convince your opponent that not accepting the offer will leave his company in a vulnerable position in an industry that is increasingly inhospitable to small companies.

• Do not let your opponent waste so much of your time contemplating an unattractive offer that you become amenable to such offer because you have already invested too much time and emotional capital.

• Don't let yourself be locked away during negotiations. Take breaks and walks to keep the energy up and the head clear. Alcohol can steal your energy. Beware of social gatherings combined with business.

• Agendas are important because they help maintain emotional control. Every interaction you have with anyone you want to transact business with must be preceded by writing down an agenda for that interaction.

• Be aware that negotiations never end. If your value proposition is not truly adding value to your counterparty, they will try to abrogate it.

To find out more on IncreMental Advantage's Mergers & Acquisitions Due Diligence Conference on April 17-18, 2007 in San Francisco, visit www.incrementaladvantage.com/conferences or contact Neomi at neomi@incrementaladvantage.com or 609.919.1895 x100.