Sunday, 29 April 2012
Saturday, 28 April 2012
Obama Wants to Trademark the GI Bill. Good Luck With That
President Obama descended on Fort Stewart in Georgia on Friday to announce that his administration is cracking down on for-profit colleges that allegedly target veterans solely for their GI bill money. Iraq and Afghanistan vets have complained of enrolling in online colleges, only to find out they have to take out sizable loans because their GI Bill money doesn’t cover the cost of the private schools. They say they expected to graduate with improved job prospects but ended up with debt and no job prospects.
“Sometimes you’re dealing with folks who aren’t interested in helping you,” Obama told veterans, soldiers, and their families. “They don’t care about you, they care about the cash.”
Under an executive order Obama signed, colleges will have to provide vets with more information about the cost of their programs, and the Defense Dept. must issue rules on school recruitment at military bases. As part of his effort to protect veterans (whose votes he needs), Obama also ordered the Department of Veterans Affairs to trademark the term “GI Bill.”
Trademark a law? Can you do that?
It’d be an unprecedented step, say intellectual property attorneys in Washington. And one that smacks of better PR than policy. “It’s nonsense,” says William Pecau, partner at Steptoe & Johnson.
Trademarks are for goods and services. They indicate a place of origin. “The GI Bill isn’t selling anything,” says Edward T. Colbert, partner at Kenyon & Kenyon. That’s the first problem. Second problem: Trademarks are for the exclusive commercial use of their owners. The GI Bill—which dates to World War II—”has been used by everybody for a long time,” says Colbert.
The administration says it wants the rights to “GI Bill” because for-profit schools and recruiting websites are using the term to “deceptively and fraudulently” market bad programs to veterans. If that’s the case, attorneys say, officials have another recourse: state and federal laws.
“The Federal Trade Commission could step in. The state attorneys general could step in. You could sue them under the Lanham Act … part of it prohibits false advertising,” says Pecau. “There are a number of ways you could go after deceptive advertisements, but trademarking the GI Bill is not the way to do it.”
Alternatively, Congress could pass a law giving the VA the sole right to use “GI Bill” for commercial purposes. The U.S. Olympic Committee, the American Red Cross, and the Boy Scouts of America all enjoy that privilege, thanks to a federal statute designating them “patriotic and national organizations,” says Colbert, and the same statute could apply to the GI Bill. “It’s rarely used, because it has to be for something of a patriotic nature,” says Colbert. “Clearly our veterans—people who fought and died for our country—clearly they would fit within that category.”
Microsoft's Design Drive
In 2010, Jon Bell was an interaction designer in the Seattle office of Frog Design, the company that created the beige cases for some of the iconic early Apple (AAPL) computers. Like many of his colleagues—and most of his profession—he worshiped Steve Jobs. While he’d owned a series of iPhones and MacBooks, he’d never purchased a Windows PC.
Still, in November 2010 curiosity led him to the mall to check out a Samsung phone running Microsoft’s (MSFT) brand-new Windows Phone software. It looked different from anything else on the market, a lively grid of different-sized rectangles with smooth transitions between apps. “I just had this spidey-sense that I couldn’t put into words,” says Bell. He bought the phone. Minutes later, he texted a friend at Microsoft to ask about jobs there. Bell, 33, joined in January 2011 and is now a Windows Phone design lead. His colleagues were aghast. “Unanimously, they said, ‘They’re doomed, that’s it, turn out the lights,’” he recalls.
Over the last few years, Microsoft has been working to replicate Bell’s conversion on a broader scale. From its start, the company reflected founder Bill Gates’s engineering mind-set, resulting in functional, unsexy products that Apple lampooned in its “I’m a Mac/I’m a PC” ads. Microsoft could use some pizzazz: Sales of its consumer software have struggled as buyers swoon over iPads and shun notebooks. Revenue at the Windows division has fallen short of analysts’ estimates in four of the five quarters through December 2011. In mobile, the hottest segment of the tech sector, the situation is far more dire. According to researcher Gartner (IT), not only do Apple’s iOS and Google’s (GOOG) Android operating systems have greater U.S. market share than Windows Phone, so does Samsung’s Bada—a piece of software few Americans can even name.
To win, or even just to survive, in what has become a consumer-driven industry, products need to be eye candy that force shoppers to take a second look. Microsoft has roughly doubled its design ranks to 600 employees over the past five years and lured talents like Albert Shum, who developed technology-centered products at Nike (NKE) before becoming Windows Phone design chief in 2008. The company has also rethought how it builds things. Steve Kaneko, a top Microsoft designer, says engineers and executives have ceded more authority to designers. They’re organized in small teams under the belief that democracy is the enemy of good design, and regularly switch groups to allow ideas to percolate. “It’s a huge, dramatic change compared to five years ago,” says Sarah Rotman Epps, an analyst at Forrester Research (FORR). “They’re realizing design is absolutely essential to the experience.”
Photographs by Kyle Johnson for Bloomberg Businessweek
The primary evidence of this amassing of talent is Metro, a new way for interfacing with Microsoft products, from phones to PCs. The design is influenced by the fonts of the Swiss typography movement and stylings of airport and road signs. While many software products strive to resemble digitized versions of real-world objects—think of the curling pages in Apple’s iBooks app—Metro does away with the faux realism. Users navigate the touch-based interface through colorful blocks, which display live information such as the weather and new Facebook updates and, at a touch, expand into full-screen apps. The visual reference points that have defined Microsoft software for decades are gone: There are no frames, no desktop, no drop-down menus, no X’s to close out of programs.
Microsoft has been gradually rolling out Metro on its major platforms over the past few years. It arrived on Windows phones in 2010, when it caught Bell’s eye, and took over the Xbox interface in 2011. Earlier this month it got its most public outing yet with the highly publicized debut of Nokia’s (NOK) Lumia 900 phone. In the fall, it’ll come to computer and tablet screens everywhere with the launch of Windows 8. Young Kim, an industrial design manager for Microsoft, says the company is taking cues from Metro for future hardware products as well, including the next Xbox. To Gadi Amit, principal designer at NewDealDesign, the San Francisco-based agency behind products like the Fitbit activity tracker, Metro is the best design work Microsoft’s ever done. “From a purely design standpoint, it’s really superior to Apple,” he says.
Microsoft may have picked the right moment to push Metro. Some of its design elements were pioneered in the Zune, the Microsoft music player that flopped in the marketplace but won accolades—including a 2010 International Design Excellence Gold Award. According to Amit, when Zune came out in 2006 people didn’t want a new idea; they wanted an iPod. That’s changing, he says, and many users are bored by Apple’s ubiquity.
Changing the perception of Microsoft as a fusty software company will take time. That’s as true of professional designers as it is of consumers. “Microsoft doesn’t have a big presence in the student brain around design,” says Bill Burnett, executive director of the Design Program at Stanford University. He calls Metro an example “of Microsoft getting it right,” but adds that his students still think “Microsoft is so their parents’ company. They don’t have any Microsoft products in their life.”
Metro is a big enough break with Microsoft’s past interfaces that it may jar some users and software developers, says Mark Rolston, the chief creative officer at Frog Design. Microsoft is “sort of trapped by their own aesthetic,” he says. To keep the experience consistent for users, app developers have less flexibility on Windows Metro than they do on platforms such as iOS, making the software far more uniform. “It’s like country music,” says Rolston. Vary the composition slightly and “it starts to look like something else.”
The real test for Microsoft is whether it remains committed to the changes. Microsoft recruited designers from places such as MTV to build the Zune; when the device failed to catch on, the division was cleaved in two and its workers shunted off to different parts of the company. Microsoft’s top-secret design incubator in downtown Seattle created an early tablet computer, but the company canceled the project in 2010 and shuttered the studio. Ralston says the company hasn’t always responded well to setbacks. “If the market says, ‘Hey, we like it, but we need some changes,’ do they move on that, or do they flinch and go back to the drawing board?”
The bottom line: Microsoft has doubled its design staff to 600. While its new Metro interface gets high marks, it hasn’t fully been tested in the marketplace.
Ren Ng: Focused on Reinventing Photos
When Ren Ng unveiled his Lytro camera last year, he got the kind of response entrepreneurs dream of: breathless write-ups from the press and, more important, an invitation from Steve Jobs to demo the device at his Palo Alto home. “It was really inspiring,” says Ng, who considered Apple (AAPL) a role model while he was secretly developing the Lytro from 2006 to 2011. “He was so clear-thinking.”
The Lytro, which became available in February for $399, is the first commercially available camera to harness technology known as light field photography, Ng’s specialty as a computer science graduate student at Stanford University. Its lens actually consists of thousands of microlenses, each of which captures a slightly different slice of light. As a result, users of the harmonica-box-size Lytro can take pictures that once required a bag full of camera equipment. One shutter-snap records so much information that a user can readjust the photo after it’s been shot in various ways, such as shifting the focus from foreground to background. “The light pouring in that lens can form any picture,” Ng says.
Ng, 32, was born in Malaysia and grew up in Australia. He came to the U.S. in 1997 to attend Stanford, where he studied mathematical and computational science and dreamed of becoming a professor. While in school, he and his rock-climbing buddies became infatuated with photography: “We were doing a lot of hanging off cliffs and taking pictures to try to make one another look cool,” he says. The blurry photos from those climbing trips to Yosemite and Lake Tahoe later got Ng thinking there must be a better way to freeze time. “Catching the right fleeting moment, with the right focus, is a very difficult thing to do,” says Ng, whose research on light field photography received Stanford’s award for best Ph.D. dissertation in 2006.
Ng won’t discuss Lytro’s initial sales figures and says he’s focused on the consumer market for now. His challenge is to get more people to see the camera as an essential tool, rather than a cool but expensive toy. “From a marketing standpoint, they need to put some serious money behind it to educate the consumer,” says Tim Bajarin, president of Creative Strategies, a Silicon Valley consulting firm. The Lytro’s focus-shifting ability requires special software, and users must install an app to post photos on Facebook; Lytro operates its own site for snapshots.
“The big end-game play for this company is broadly licensing and near ubiquity in high-end smartphones,” says Peter Gotcher, chairman of Dolby Laboratories (DLB) and a Lytro board member. Ng says Hollywood studios have asked how Lytro could be applied to moviemaking. “The merging of science and art is at the core of what we do,” he says.
Won a Stanford award for best Ph.D. dissertation
He and his rock-climbing buddies fell for photography
Lytro may partner with smartphone makers and Hollywood
Facebook Snaps Up Instagram
Facebook just shocked Silicon Valley, acquiring the photo-sharing service Instagram for $1 billion in cash and stock. The two-year-old company makes photo-sharing applications that allow smartphone users to snap photos in a variety of retro styles and share them with friends on the service, over e-mail, or on a variety of other social networks.
The acquisition is more evidence that we live in “bubblicious” times: The startup makes no money and has 13 employees, all of whom work out of Twitter’s original offices in San Francisco’s South Park neighborhood. Of course, that didn’t matter to Facebook Chief Executive Mark Zuckerberg: “For years, we’ve focused on building the best experience for sharing photos with your friends and family. Now, we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests,” Zuckerberg wrote on his Facebook page this morning.
Photograph by Justin Sullivan/Getty Images
The rocket trajectory of Instagram shows how fruitful it can be on the Internet these days to reinvent the wheel for the dawning age of smartphones and social networking. There was no dearth of photo-sharing apps when Kevin Systrom, a former Google product manager, started the company in early 2010, originally targeting and quickly abandoning the check-in field dominated by Foursquare. Sites such as Ofoto, Shutterfly, Yahoo’s Flickr, and Google’s Picasa were firmly entrenched.
But Instagram gave the well-worn photo-sharing concept a half turn, tailoring its service for the limitations of smartphone cameras and mobile networks, and for people’s growing desire to share their pictures. The app was fine-tuned for the iPhone and made it simple to enhance one’s typically lousy cell phone photos by applying a variety of filters that give shots a fresh look. The app also compressed a photo’s digital file to upload it more quickly over limited mobile networks. By early 2011, when Bloomberg Businessweek covered the booming service, the app had been downloaded 1.75 million times. It now has about 15 million users.
Instagram’s new app for Android phones, released last month, was downloaded by a million users in less than a day. I actually downloaded the app yesterday and, after taking a few photos of the kids, was surprised to see more friends commenting on my photos on Instagram itself than on Facebook, where I also posted the shots. Zuckerberg and company may have recognized an incipient competitor—and a way to enhance the volume and quality of photo sharing on its own service. In a blog post, Systrom said the companies will continue to develop Instagram separately. Now Facebook can enjoy that growth, instead of fearing it.
GE's Billion-Dollar Bet on Big Data
The Steinmetz barn housed GE's first laboratory
General Electric’s (GE) first research laboratory was housed in a barn in upstate New York; its newest is going up in Silicon Valley. In a vivid illustration of how the locus of U.S. innovation has shifted from the East to the West Coast, GE is pouring $1 billion into a facility in San Ramon, Calif., that will be staffed with as many as 400 people.
San Ramon will be home to the new Global Software Center
New hires for the Global Software Center, which is set to open in June, are coming from Oracle (ORCL), SAP (SAP), and Symantec (SYMC). Bill Ruh, the vice president running the venture, was lured away from Cisco Systems (CSCO) last year. The tech industry veteran says persuading developers to forgo windfalls from initial public offerings to come work at an industrial stalwart is not as difficult as one might think. “They want to be in on the Next Big Thing,” he says.
The big thing Ruh is referring to is called “big data,” the fast-growing market for information technology systems that can sift through massive amounts of data to help companies make better decisions. Just as information on millions of Facebook users is prized by advertisers, the details companies amass from their operations can be used to cut costs and boost profits. Norfolk Southern (NSC), which buys diesel locomotives from the Fairfield (Conn.) company, uses customized software to monitor rail traffic, reducing congestion and allowing trains to move at higher speeds. The fourth-largest U.S. railroad estimates that making trains run an average of 1 mile per hour faster will save more than $200 million.
The potential for such technologies is so huge that it’s impossible to come up with an estimate of how much the market is worth, according to Michael Chui, a senior fellow at McKinsey. “It’s just too big,” he says. That doesn’t mean there’s room for all comers, according to Ping Li of Accel Partners, a venture capital firm investing in big-data startups. “If you’re not getting in right now it’s hard to see how you can keep up with the pace of innovation,” he says.
GE’s annual revenue from software already is about $3 billion and on pace to grow to $5 billion in the next couple of years, Chief Executive Officer Jeffrey Immelt told investors in December. Ruh says he wants to marry big data with some of GE’s biggest businesses. He sees an opportunity in helping airlines that buy GE jet engines monitor their performance and anticipate maintenance needs, reducing costly flight cancellations. The technology could also help companies that lease commercial vehicles from GE Capital to optimize delivery routes and provide early warning that a truck may need a trip to the repair shop. “If I can begin to see that something is starting to deteriorate and get out there and fix it before it breaks, that’s a foundational change,” Ruh says. “In the end, what everybody wants is predictability.”
When it comes to big data, GE is playing catch-up to IBM (IBM). The world’s biggest computer-services company is working with energy companies to extend the lives of oil and gas fields by improving oil recovery through analytics. IBM also is working with Vestas Wind Systems (VWS) to find better locations for wind farms. Newer entrants are jumping in as well. Splunk (SPLK), a San Francisco-based startup that just went public, says its customer rolls exceeded 3,700 as of the end of January.
GE is counting on its expertise making industrial equipment—from gas-fired electrical turbines to locomotives—to give it an advantage over rivals focused on exclusively providing data solutions, says Ruh. “If you don’t have deep expertise in how energy is distributed or generated, if you don’t understand how a power plant runs, you’re not really going to be able to build an analytical model and do much with it,” he says. “We have deep insight into several very specific areas. And that’s where we’re staying focused.”
The bottom line: GE is establishing a foothold in Silicon Valley as it targets $5 billion in software sales by 2014.
John Dabiri Unlocks the Mysteries of Jellyfish
While an undergraduate at Princeton, John Dabiri spent a summer at the California Institute of Technology, filming jellyfish at a nearby aquarium and trying to write mathematical models to describe their movement. “Initially I hated the idea, because my opinion of biology was that it was all memorization and stamp-collecting,” Dabiri says. “But it became clear that the jellyfish had a lot to teach me.”
After graduating with degrees in mechanical and aerospace engineering, he headed to Caltech for good. Dabiri earned his Ph.D. there in 2005 and became a tenured professor before age 30. Along the way, Dabiri, now 32, unraveled some of the mysteries of the jellyfish and how they propel themselves by creating whirling vortexes in the water. The U.S. Navy is funding development of underwater craft that employ his mathematical models to move using 30 percent less energy than existing options.
Dabiri says his goal is “to tap the inexhaustible supply of inspiration found in nature” in the name of innovation. At the moment, he’s applying a lot of his findings to renewable energy. Dabiri realized that one major problem on wind farms is interference between neighboring turbines. When placed close together, they funnel wind into each other, reducing energy output and increasing wear and tear. To avoid this, wind farms space turbines hundreds or even thousands of feet apart.
Dabiri found an analogous problem in the ocean. When fish move as a school, they push water against each other, potentially slowing the whole group. But they’ve found ways of moving together more efficiently and with less energy. Dabiri modeled their motion mathematically and used the results to develop software to define the optimal placement of wind turbines. He says his math makes it possible to squeeze more turbines onto a given plot of land and yield 10 times more energy. He started the company Scalable Wind Solutions to commercialize the software and plans to start selling it in the next two years. “He was the first person to think of” modeling wind farms on fish schools, says Alexander Smits, one of Dabiri’s engineering professors at Princeton. “It’s a game-changer.”
Before being smitten with jellyfish, Dabiri had planned to return to his hometown of Toledo and work, like his father, in the auto industry. Biology-inspired engineering captivated him, though. The underwater propulsion system he’s building will sit on the back of a ship and modify a propeller’s backwash so that it takes the shape of a vortex, jellyfish-style. “The first time I mentioned this to a Navy officer, he laughed,” Dabiri says. He’s testing the gadget in a 130-foot-long water tank in one of his labs and hopes to have it ready in 12 to 18 months.
One drawback of his work: “I very often get jellyfish gifts,” Dabiri says. His office is filled with tentacled stuffed animals, blown glass figurines, and drawings of the creatures.
Filming jellyfish at the Aquarium of the Pacific
Became a tenured professor at Caltech before age 30
Can get a wind farm to yield 10 times more energy
Miles Barr: Printing Solar Cells on Paper and Clothes
Forget about putting solar panels on the roof. Miles Barr wants to make curtains, cell-phone cases, and even shirtsleeves that generate electricity from the sun.
Barr, who earned a chemical engineering Ph.D. at Massachusetts Institute of Technology, is an expert in chemical vapor deposition. That’s a process in which two vapors are piped into a sealed chamber, where they react, creating a thin, solid film around an object inside. The technique isn’t new; it’s been used to add a waterproof layer to fabric, for example. Barr successfully adapted the technology to “print” an electrically active solar cell coating onto ordinary materials, starting with a sheet of paper in 2010. “When we first did that, it really sparked a lot of imagination,” says Barr, 28. “If you can put a solar cell on paper, what else can you put it on?”
Chemical vapor deposition changes the quality of a surface without using extreme temperatures or solvents that might cause damage. When Barr’s team at MIT figured out how to use the process to make solar cells, he says, they went to an office supply store and loaded up on stuff to test it on: “Saran Wrap, copy paper, tissue paper, almost anything you can imagine,” he says. Barr maintains the technique could be adapted for mass production. Because it relies on abundant organic molecules, rather than heavy metals or rare elements, it could be cheap, too. Right now, Barr’s solar cells convert only about 2 percent of the energy in light into electric power, compared with 10 percent to 20 percent for conventional photovoltaic panels, though he thinks he can eventually raise the efficiency to 10 percent.
As a high school student in Kansas City, Mo., Barr built a walking robot monkey for a science project, using a salvaged windshield wiper motor to power the monkey’s steps. At Vanderbilt University as an undergraduate, he majored in chemistry, math—and music. He still plays trombone and piano. Music and engineering share some common threads, he says: “You’re combining individual elements—different instruments, different harmonies, different melodies—to make something better.”
Last year, Barr co-founded Ubiquitous Energy to embed solar technology into everyday objects such as windows or cell phones, which could be particularly suited to people living off the grid. The Cambridge (Mass.) startup is doing “something very different from what other people are working on in solar,” says Arunas Chesonis, chief executive of the biofuel company Sweetwater Energy, who led a $1 million angel investment in Barr’s company. “It has a real opportunity to help not just the developed world but the developing world,” he says, by letting people in remote villages, for instance, easily charge cell phones with the sun.
The cost of installing panels keeps many people from adopting solar power, Barr says. By integrating it into ordinary materials, he thinks he can clear that hurdle. “You’re already hanging a curtain in your house,” he says. “Why not add some energy to that?”
Developed a method to print solar cells on paper and fabric
Majored in chemistry, math, and music at Vanderbilt
Startup Ubiquitous Energy has raised $1 million in funding
Finland Imagines Life Without Nokia
When your country is closely aligned with a single company, there can be wonderful highs. In 2000, Nokia (NOK) was the world’s dominant cell-phone manufacturer. When paradise ends, though, the consequences are brutal. Nokia’s 94 percent share-price plunge from its 2000 peak has left thousands of engineers looking for work now that Nokia is curtailing local development and moving production to Asia. Nokia’s share of gross domestic product probably shrank to 0.8 percent in 2011 from as high as 4 percent in 2000, according to Jyrki Ali-Yrkko, an economist at Helsinki-based researcher ETLA. By the end of this year, Nokia’s Finnish staff will have fallen 40 percent in six years, according to the Economy Ministry.
Nokia’s smartphone business is being eaten up by Apple’s (AAPL) iPhone and the Android handset makers. Its affordable phones for emerging markets are being undercut on price by Chinese rivals. Finns have shown their faith by buying Nokia shares. Finland’s households now hold about 10 percent of Nokia stock, up from 5.4 percent two years earlier.
Yet there’s a definite sense that Finland is over the worst of its Nokia shock. “Nokia has overshadowed the other industries here for years,” says Petri Peltonen, who runs the innovation unit at the Economy Ministry. “It was sucking all the resources from the country. Now the presence is diminishing a bit.”
One way for Finland to keep its reputation for cool stuff is through mobile games. Angry Birds took iPhone users by storm, and its creator, Rovio Entertainment, could be Finland’s next big tech initial public offering, with a possible valuation of more than $1 billion. Total staff at Finland’s 100 game companies will more than quadruple, to 6,500, by 2020, says Sonja Kangas, head of the Finnish branch of the International Game Developer Association.
The government is trying to attract data centers to old paper mills, touting an electricity grid that suffered downtime only once in 30 years. Google (GOOG) was the first taker, and IBM (IBM) has followed. Intel (INTC) this month opened a research facility near the capital city. Despite Nokia’s cuts, the jobless rate fell from 8.5 percent in 2010 to 7.9 percent last year.
What’s needed are businesses that can’t be duplicated elsewhere or moved to Silicon Valley. Nickel miner Talvivaara Mining is among the new stars. The chemical industry accounts for about 20 percent of total exports, up from 10 percent in 2000. One company, Kemira (KRA1V), has come up with compounds that make tainted water drinkable.
Finnish shipbuilders have developed a niche making Arctic exploration vessels, icebreakers, and the world’s biggest luxury cruise liners. Allure of the Seas, built in Turku and delivered in 2010 to Royal Caribbean Cruises, features a Central Park with 12,000 plants and trees, a surf simulator, and a 3D movie theater. The Nordic nation will bounce back, says ETLA’s Ali-Yrkko. “Finland’s future growth will be like small streams merging into a river.”
The bottom line: Nokia has dominated Finland’s economy for years. Now other industries are gaining in importance as the phonemaker cuts back.
Pohjanpalo is Helsinki bureau chief for Bloomberg News. Ben-Aaron is a reporter for Bloomberg News in Helsinki.Frankenstein's Fraudster Sentenced to 6.5 Years in Prison
If there is one thing that scares collectors of classic horror-movie memorabilia, it’s getting scammed. Kerry Haggard is being called the “Bernie Madoff of the movie-poster industry.” The 47-year-old con man paid an unnamed New York City printing company to make high-quality ink-jet copies of vintage monster-movie posters to sell online, and traded the fake one-sheets with friends and fellow collectors for authentic ones, reported the New York Post.
On April 9, in Manhattan federal court, the Commerce (Ga.) resident was sentenced to the maximum 6.5 years in prison and ordered to pay $1.38 million to his victims.
Haggard engaged in the fraud for more than three years, from January 2006 to August 2009, according to the U.S. Attorney’s Office. Several lawsuits were filed against him starting in 2009, though he filed for bankruptcy that December, slowing the proceedings. In April 2010, he was arrested in Georgia by federal authorities and released on $100,000 bond within a week, reported the Athens Banner-Herald. The tenacious fraudster did not stop there. In March 2011, Haggard was arrested again after FBI agents discovered he had asked an acquaintance to hide items that were involved in the fraud. He also enlisted help to sell 81 movie posters, of which 80 were authentic, while he was out on bond. On Oct. 24, 2011, he pleaded guilty to one count of mail fraud.
His counterfeit lobby cards and posters included The Mummy, Frankenstein, The Mummy’s Hand, Murders in the Rue Morgue, and Werewolf of London, which were airbrushed and otherwise altered to appear authentic. Using sites like EBay (EBAY), Haggard sold posters for $500 (for a Mummy’s Tomb lobby card, for example) to $5,000 (for Son of Frankenstein) to about 25 victims.
Two victims in the complaint against Haggard said they had consigned fake posters to Heritage Auctions, which discovered the fraud. “The fakes were very clever and difficult to detect in this instance,” says Grey Smith, director of movie posters at Heritage Auctions. Black light and backlighting were used to determine they were forgeries. “The obvious marks of a fake? Paper stocks, i.e., quality of paper, was an obvious sign that tipped us off. Clarity of the reproduced image was also a factor in denoting the fakes.”
David A. Lieberman, owner and founder of Cinemasterpieces.com, a movie-poster dealer in Scottsdale, Ariz., says a client had sent him one of Haggard’s fake posters for the 1943 film Frankenstein Meets the Wolf Man on consignment over two years ago. “I have a good eye, and it did fool me,” he says. He sent it back when he heard about the fraud. A real version of the poster is on sale on Cinemasterpieces.com for $15,995. “It’s very clever; he fooled the best people in the business. Thank God I didn’t get taken for any money,” says Lieberman.
Vintage movie posters fetch huge sums from collectors. The most expensive movie poster features the 1927 sci-fi film Metropolis; it sold for $690,000 in 2005, reported Vanity Fair. The second-highest price was for a poster for the 1932 film The Mummy, which went for $452,000 in 1997.
Smith adds, “I was sent a Dracula title card and, with that copy, was able to determine it was a forgery. Another authentic copy sold through us in November of 2007 for $65,750.”
Lieberman says Haggard is getting what he deserves. “But hey, he was good at it,” he says. “He was a great counterfeiter.”
How Tupac Became a Hologram (Is Elvis Next?)
Tupac Shakur played the Coachella Valley Music and Arts Festival last weekend—at least, a computerized likeness of him did. A hologram of the rapper, who was killed in 1996, appeared on stage and performed two songs 2 Of Amerikaz Most Wanted and Hail Mary, alongside his still-living contemporaries Dr. Dre and Snoop Dogg. At the end of the act, hologram Tupac exploded into an impressive light display.
The performance was the result of a four-month collaboration between Dr. Dre’s production company, James Cameron’s Digital Domain, and two hologram-imaging companies, AV Concepts and U.K.-based Musion Systems. (The latter is responsible for the Gorillaz’s cartoon holograms that performed with Madonna at the 2006 Grammy awards.) Although Tupac is not the first performer to have been posthumously turned into a hologram—in 2009, a digital Frank Sinatra sang at Simon Cowell’s 50th birthday party—he is the first to give a performance that wasn’t rendered while he was alive.
“This is not based on archival footage,” says Ed Ulbrich, chief creative officer at Digital Domain. “This is not him performing at some point. This a completely original, exclusive performance only for Coachella and that audience.” In other words, it’s a digital likeness of Tupac designed to interact with his co-performers and the crowd. At one point, Tupac even shouts “What the f— is up, Coachella!” even though the music festival didn’t exist until three years after his death.
The idea for the Tupac hologram came from Dr. Dre, who at this time is not granting interviews about the project (which means we’ll have to wait to find out how he got Tupac to say “Coachella”). Dre approached Digital Domain—which won an Oscar for its lifelike interpretation of an 85-year-old (and 25-year-old) Brad Pitt in 2008?s The Curious Case of Benjamin Button—about how to employ the company’s technology for a live venue.
“We tried to make him aware of how hard it was going to be,” says Ulbrich. “No one has ever seen Brad Pitt at age 85, so there was room for error there; we could interpret him a little bit.” But Tupac had been a real person. And while living artists can pose for measurements before they’re turned into holograms, “we don’t have the benefit of Tupac to help us inform and guide the performance of him,” says Ulrich. The company created the digital Tupac from video footage and photos of the rapper. “And quite honestly, it was Dre and Snoop who had to guide us. He is their friend and they know him,” says Ulbrich.
Neither Digital Domain nor AV Concepts would divulge how much the project cost, although previous endeavors, such as when the Black Eyed Peas performed at a French awards show in 2011, have cost several hundred thousand dollars. The extra work built into this project likely means that Tupac cost a bit more. Still, that’s much less than the well-over $1 million that a living, breathing festival headliner would have demanded from concert promoters.
Deploying a hologram in an outdoor concert presents a number of problems that can be avoided amid a more traditional environment, says Nick Smith, president of AV Concepts, the company that helped stage the actual performance. “You can’t fight daylight. It’s not a controlled environment, and there are some outdoor conditions and ambient light” that aren’t conducive to something like this, he says. Plus, there’s always the chance of rain.
There’s a significant weird-out factor to holograms. The public seems both fascinated and confused by them. When CNN introduced its hokey hologram of a news reporter during Wolf Blitzer’s 2008 Election Night coverage, the technology was universally mocked. The Chicago Tribune even called it “a little bit creepy.” When the TV network used hologram stick figures in its coverage of the 2012 Iowa Caucus results, Anderson Cooper made fun of them live, on air. Compared to this, those were just crazy special effects. The Tupac hologram is as close as we’ve come to raising the dead. How long will it be before we send Elvis Presley back to Vegas?
“While we’ve demonstrated that we can certainly do that,” says Ulbrich, “that’s not really our business model.” Instead, he’s more excited by the fact that such a realistic hologram was created in just a few months. “It took us two years to do Benjamin Button,” he said. “Now that we’ve developed the tools to do this, we can start to look at other applications—advertising, commercial work; until now things like this haven’t been feasible.” As technology advances, Ulbrich thinks digital projections of living, dead, and fictional people may become more common. His goal is to one day create a hologram that people won’t realize is fake. “Nothing is real and everything is possible,” he says.
How to Find Out Anything About Anyone: Alan Huffman and Michael Rejebian
Official documentation is the closest society comes to establishing the truth, and most of it is public record. Think tax histories, property registries, and lawsuits. Clerks are more likely to overcome their mistrust early in the morning. Be nice but confident, and if this doesn’t work, play dumb and impervious. We try not to be a nuisance until it’s clear that anything we say is seen as a nuisance. — As told to Karen Weise
Huffman and Rejebian wrote We're With Nobody: Two Insiders Reveal the Dark Side of American Politics.HP Innovation, One Pricey Giant Screen at a Time
With a tsunami roaring toward Sendai, Japan, Hewlett-Packard’s (HPQ) Photon Engine software directs the response at a nearby command center. Collecting data from traffic cameras, first-responder vehicles, smartphones, and satellites, the software displays information on a huge touchscreen. It lets emergency personnel have what military types call “full situational awareness,” and quickly suggest escape routes.
It’s only a simulation, one that took place recently on HP’s Cupertino (Calif.) campus. Todd Bradley nods approval. The executive vice president of printing and personal systems at the computer giant’s newly merged PC and printer business says Photon Engine is a step toward renewing the company’s “heritage of innovation” and silencing critics who say its best days have passed. Bradley and Chief Executive Officer Meg Whitman say they plan to reverse the decline in research and development spending that occurred under previous CEOs. Last year, HP spent 2.6 percent of sales on R&D, down from more than 4 percent seven years ago. “We underinvested in innovation,” Whitman says.
Photograph by David Paul Morris (Hurd)
The popularity of mobile computing—and HP’s inability to adapt to this new world—has left Bradley’s group producing commoditized gear with dwindling profits. Operating margins have fallen from 8 percent a decade ago to 5.2 percent in January. The increasingly paperless offices that mobile devices make possible have weakened HP’s once highly profitable printer business. The company’s attempt to enter more lucrative markets by spending $1.2 billion on mobile device maker Palm in 2010 fell flat. HP stopped making devices using Palm’s webOS software in 2011.
Bradley acknowledges that the company is behind in integrating hardware and software into “really compelling packages that can compete with Apple (AAPL) and anyone out there.” Photon Engine is an early attempt at catch-up. The package varies, but typically includes projectors, screens, and a high-powered PC and costs $10,000 to $125,00. At the heart of it is software called Pluribus, which is geared to taking disparate forms of data—video streams, GPS coordinates overlaid on a map, Web pages, even 3D footage—and then instantly formatting high-resolution versions for screens of any size. The data can come from iPads, traffic cameras, or other sources, and the output can be displayed with cheap projectors or on $100,000 screens appropriate for concert stages.
Thanks to Photon Engine, HP is “years ahead” of rivals in the so-called immersive displays business, says Richard Doherty, co-founder and director of consulting firm Envisioneering Group. “It should be named the emotion engine because it gives people the ability to see motion, and process information, with the same depth and connection that you’d get from looking at something with your naked eye,” he says.
Fashion house Marchesa recently used Photon Engine at a Bergdorf Goodman store in Florida. Shoppers wore glasses to watch 3D images of models wearing Marchesa’s spring line saunter across a huge screen. Marchesa marketing director Allison Lubin credits the technology with doubling sales that weekend. IMS Research expects the immersive displays business to grow 40 percent annually and reach $7 billion worldwide by 2013. Photon Engine could also help HP sell monitors, projectors, and high-powered PCs, lines that brought in $3 billion in sales last year.
HP is waiting for the fall launch of Windows 8, with its new touch-optimized Metro interface, to have another go at the consumer mobile market. Bradley hints a big emphasis will be on convertible laptops—lightweight PCs with swiveling or detachable touchscreens—to compete with Apple’s iPad and other tablets. Whitman says HP’s turnaround will take three to five years. “It took us a while to get into this, and it’s going to take us a while to get out,” she said in February.
The bottom line: HP says Photon Engine shows it can integrate hardware and software. It’s waiting for Windows 8 to prove it can do the same in mobile.
Hilary Mason: From Tiny Links, Big Insights
When a restaurant opened near her New York City apartment, Hilary Mason found its menu uninspired: salmon, arugula, and all the other culinary keywords without any of the risky dishes that make for great dining. “I thought, ‘This must be the median West Village restaurant; it’s just so boringly average,’” she says. Most people would have written a tepid Yelp (YELP) review and left it at that. Mason looked to the data for truth. The 33-year-old wrote a program to crawl the Web and download menus from New York eateries. It took her down a rabbit hole of restaurant exploration. She didn’t figure out the perfectly average spot, but she learned that there are 173 different burgers to order in the West Village—but 363 in the East Village, and at lower prices.
Mason, a self-described nerd, calls this “menu hacking,” and it’s one of her many geeky side projects. Her day job is chief scientist at Bitly. The startup is best known as a link-shortening service, a way of making obnoxiously long URLs more compact for sharing on Twitter or anywhere else. This year, Bitly is introducing a suite of data products for professionals developed in part by Mason and her team of six scientists and engineers. One, dubbed Bitly Realtime, tracks terms that receive sudden bursts of attention. Another is a reputation-monitoring system. The goal of the products is “to give people a Spidey sense about what’s going on on the Internet that’s relevant to them,” says Mason.
Plenty of other companies promise to cut through the noise of the social Web: Mass Relevance and Dataminr license data from Twitter and other sources and sift it for meaning. Mason says Bitly is different, because it doesn’t just track what’s being shared but also records which links people actually click on. That’s “valuable information that today is underanalyzed,” says Nick Gall, a vice president at researcher Gartner (IT).
Bitly is not Mason’s first startup experience. She studied computer science at Brown and started teaching at a small university in Providence in 2004. While there, she researched virtual worlds such as Second Life and formed a company to track how users behave in them. She sold it for “beer money” a few years later. “If I knew then what I know now, there would have been another zero on the end,” she says. In 2008 she moved back to her hometown of New York and joined Path 101, which analyzed data gleaned from resumes to help people figure out the right career steps to their dream jobs. The company “failed miserably” in 2009, she says. “It turns out it’s important to build a product and not just a bunch of data models.”
Mason still finds time to pursue her own projects. She created one batch of code to filter bombastic, self-promoting messages from her Twitter stream. When she demonstrated it at a conference, it labeled a friend—who was in the audience—as a narcissist. He didn’t seem to mind, she says. After all, you can’t argue with the data.
Became a machine-learning expert at Brown University
Leads a team of six data scientists at link-shortener Bitly
“Menu hacking” and building Twitter narcissism filters
Pay-Per-View Wrestles With Bar Owners
On the evening of May 8, 2010, Juan Castillo walked up to Plaza Mexico Bar & Grill in a strip mall in Laredo, Tex., paid the $5 cover, then went inside and ordered a Coors Light. He began watching the televised Ultimate Fighting Championship bout between Josh Koscheck and Paul Daley. In the 25 minutes Castillo was in the restaurant, he counted 80 patrons enjoying the action, including Koscheck getting kicked in the eye during the mixed martial arts fight. He also took three photographs to chronicle his visit.
That description by Castillo in court documents led to a federal court order for Plaza Mexico to turn over $32,500 to the UFC’s sales agent for not paying the $1,100 commercial fee to show the pay-per-view event. Promoters such as Joe Hand Promotions, UFC’s exclusive commercial pay-per-view licensee in the U.S., the UFC itself, and J&J Sports Productions, which promotes boxing matches, have filed thousands of suits against bars, restaurants, and other U.S. businesses to punish such video “pirates,” claiming they and residential cheaters cost them millions of dollars in lost revenue. Many suits are based on the work of undercover investigators armed with cameras. “These types of lawsuits are part of our comprehensive antipiracy efforts,” says Lawrence Epstein, general counsel for Las Vegas-based Zuffa, which owns Ultimate Fighting Championship.
The price for watching a pay-per-view bout at home might be $50, while businesses typically pay $1,500 to $3,000 or more, depending on the size of the venue, according to J&J Sports President Joseph Gagliardi. Many commercial establishments look for ways to illegally use a lower-priced residential signal.
The pain to the pocketbook can be harsh if they’re caught, however. Under federal telecommunications and copyright laws, showing a boxing match, soccer game, or mixed martial arts event without paying the required commercial fee could potentially result in a bar or restaurant owner getting hit with up to a $260,000 bill.
UFC, which claims to be the largest U.S. commercial pay-per-view provider with 5,000 to 6,000 venues signed up for its events, and other promoters have not been shy about going to court. Last year, J&J Sports filed 708 lawsuits; Joe Hand filed 515; and UFC itself 41, according to court dockets. The legal offensive not only guards his own revenue but also that of venues that pay the required fee, says Gagliardi. “It’s the protection for the guy who honestly puts up his money,” he says. The sport’s promoters are even enlisting paying customers to help them ferret out pirates. The UFC’s Epstein says bars that pay up are given a list of other area establishments that also have paid, and the recipients often report venues that are not on the list but advertise that they’ll be showing the event.
Pirates typically violate the law by paying the residential rate and then using coaxial cable or a wireless receiver to redirect the signal from a neighboring residence to their establishment, or ordering the event for their home TV and then taking their cable or satellite box to their business, according to court papers. Others simply improperly register for a pay-per-view match, claiming that their business locations are actually private homes.
The federal law against satellite interception allows a judge to award damages of up to $10,000 per violation, with a penalty as high as $100,000 if it was done “willfully” and for “commercial advantage.” If the proprietor wasn’t aware of the law, the judge can lower the award to $250. The law against cable broadcast intervention also allows for up to $10,000 per violation and an enhancement of up to $50,000. The copyright owner can sue for infringement as well, tacking on another penalty of up to $150,000. So a maximum award for a combined satellite and copyright violation would total $260,000.
Some piracy judgments can indeed be big: In October 2009 a federal judge ordered Rio De La Plata Bakery Shop in Queens, N.Y., to pay $110,000, plus $540 in attorneys’ fees, to Setanta Sports North America for showing the March 2009 World Cup qualifying soccer match in which Argentina beat Venezuela, 4-0. (Carlos Gimenez, the bakery’s owner, didn’t return a call for comment on the lawsuit or the damages award.) Attorneys say most are settled out of court for as little as $5,000, or are subject to a default judgment because the defendant didn’t respond to the lawsuit.
UFC says that from 2006 through January 2012, it collected $4.7 million in settlements from commercial cases. Paul Overhauser, an Indianapolis lawyer who has represented hundreds of restaurants in piracy suits, says sports promoters use the large amounts of past awards to pressure other defendants to settle. “They’ll say, ‘You better settle with us right away for $10,000 because this other one paid $150,000,’” he says. “If you’re a business owner and you get a letter like that, it’s pretty compelling.”
The bottom line: Facing a maximum fine of $260,000, many bar owners are settling suits that claim they improperly showed sports pay-per-view events.
The DeLorean's Time Leap
It’s been 30 years since DeLorean Motor Co. closed its factory in Belfast, Northern Ireland. The sports car it produced is an antique now, anachronistic, but its role in the three Back to the Future movies has turned it into a beloved icon for car nuts, film buffs, and fans of flux capacitor jokes. And its cultural endurance has inspired Stephen Wynne, a former car mechanic, to bring the car back. In 2013 the reincarnated DMC will produce a new line of DeLoreans. The cars will have the same stainless steel body and signature gull-wing doors as before, only now they’ll be electric. “I would delight in being able to resurrect the DeLorean car,” John DeLorean, the vehicle’s creator, wrote in his 1985 autobiography. He’s finally going to get his wish—even if he’s not around to see it.
Photographs by Landon Nordeman for Bloomberg BusinessweekStephen Wynne and his eco-friendly DeLorean
DeLorean was a tall, tanned auto executive working in Detroit when the city still had swagger. He joined the Pontiac division of General Motors (GM) in 1956, later headed Chevrolet, and ultimately became one of GM’s top vice presidents. He owned several homes, wore his silver hair long, and is said to have dated Candice Bergen and Bond girl Ursula Andress. Before his death in 2005, he would marry four times.
DeLorean left GM in 1973 and a few years later started his own company to mass-produce cars, even though no American had successfully done so since Walter Chrysler in 1925. The U.K. agreed to invest nearly $160 million if DeLorean built his cars in Belfast, then wracked by violence and high unemployment. He joined with Italian car designer Giorgetto Giugiaro, known for his work with Maserati, to create a sleek two-seat coupe called the DMC-12 with a target price tag of $14,000 (about $44,000 today) that would make it an affordable rival of the Corvette. The car’s signature feature was its winglike doors that DeLorean liked because “they add sex appeal.”
By the time the first cars rolled out of the factory in spring 1981, their price had nearly doubled. DeLorean’s goal of selling 30,000 vehicles per year was laughable; when the company briefly recalled the cars to fix a safety hazard in November 1981, only 1,700 had been sold. They didn’t go very fast and had several design flaws, although defenders maintain that had the company stayed in business, such kinks would have been worked out.
By early 1982, DMC had run out of money, slipped into receivership, and laid off much of its 2,600 factory workforce. The same day the company closed for good, the FBI arrested DeLorean for alleged cocaine trafficking; authorities believed it was his last-ditch effort to raise money for his floundering company. He had managed to produce only 9,000 cars. The resulting court case lasted for two years and offered enough salacious details—Swiss bank accounts, misappropriated money, and a tape of DeLorean allegedly boasting about his (nonexistent) ties to the IRA—to keep the story on the front pages. The publicity helped the cars sell. When DeLorean was acquitted in August 1984, the New York Times reported that DMC-12 sales were “going right through the roof.” But by then only one distributor still sold them.
“It gave the name ‘DeLorean’ a rebel mystique,” says movie producer Bob Gale, who, with director Robert Zemeckis, wrote the script for Back to the Future during DeLorean’s trial. “We originally had the time machine as a refrigerator strapped to a pickup truck. One morning Bob Zemeckis says, ‘Wouldn’t it be cool if it was a DeLorean instead?’?” They wrote the car into the script—along with the joke that its stainless steel exterior “somehow made time travel work better,” says Gale. “And the gull-wing doors gave us the opening to do the gag where the people in the 1950s think it’s a flying saucer.”
Photographs by Datsun; Corbis
DeLorean’s newfound popularity boosted business for Wynne, then an auto mechanic who specialized in DeLoreans. “The strange thing about DeLorean is that he ramped up production right as his company ran out of money, so they had this massive stockpile of parts,” Wynne explains. In 1994 he opened his own DeLorean repair and restoration facility in Houston, which he renamed DeLorean Motor Co. “Surprisingly, they let me have that name,” he says. Today, he says, he has purchased enough of the original DMC inventory to produce between 450 and 500 cars.
An estimated 6,000 DeLoreans still exist. The DeLorean Owners Association, formed in 1983, currently has 500 active members. Last year 100 of them traveled to Belfast to see the original factory. “I go to a DeLorean car show once every two years,” says Gale. “Their owners are a crazy bunch.”
For a movie franchise more than 25 years old, Back to the Future has a remarkable hold on the DeLorean community. “In the past few years, there’s been a huge demographic shift in people who own these cars,” says the association’s president, Ron Ferguson. “People who weren’t even around when the car was originally produced are buying these cars from older people because of the movie.”
Adam Stadnick, 24, is one of those people. He saw Back to the Future as a teenager and couldn’t stop staring at the time machine. “When I figured out that it was an actual vehicle and not something made for the movie,” he says, “I had to have one.” Four years ago he bought a dilapidated DeLorean for $15,000. “I still lived at home so I didn’t have many expenses. For two years I basically handed over my paycheck every month,” he says. Stadnick lives in Vero Beach, Fla., and runs his own computer repair service named Just in Time. He makes house calls in his DeLorean. That is, when it works.
In the 30 years Wynne has been in the DMC business, he says demand has never been stronger. “People ask me all the time, ‘Where can I get a DeLorean?’?” he says. A few years ago, he began to think, “I have the parts. Why don’t I make them?” Wynne’s DeLoreans are a mixture of old and new, the original body fitted on a new, lighter chassis. A believer in alternative fuel, Wynne decided if he was going to remake the car, he might as well make it electric. Its 35-kilowatt-hour lithium-ion phosphate battery is made by Flux Power. “We had to go with them, even if just for the name,” he laughs.
One electric prototype of the new DeLorean has been completed so far. It takes 14 hours to fully charge through a normal wall socket (or 3.5 hours on a 240-volt charging station) and can go up to 100 miles before it needs recharging. The car’s top speed is 120 mph. At a surprise appearance at the New York International Auto Show this month the DMC drew crowds of giddy onlookers. Surrounded by next year’s car models, the DeLorean’s boxy shape and rectangular headlights looked dated, more memorabilia than gateway to the future.
Sit in a DeLorean and one thing will immediately strike you: It’s roomy. Low but wide, the car has enough legroom and seats that recline to accommodate the tallest of passengers (John DeLorean was 6 feet 4 inches). The parking brake is to the driver’s left and the new car can be put into gear by turning a round knob where the manual gearshift used to be.
The electric DeLoreans will have the original leather interiors and be fitted with modern amenities such as an iPod dock and Bluetooth capability. Eventually, Wynne wants to sync the car’s navigation system to work with drivers’ smartphones. Unlike John DeLorean’s mass-production model, Wynne wants to keep his initial run to just 75 cars, with plans to make no more than 300. At $95,000 each, “they won’t be for everyone,” he says.
“I can’t wait to ride to work in stainless steel electric glory,” says Dallas lawyer Quitman Stephens, 40. Stephens has made a deal with Wynne to purchase the first car when it’s ready. “I’m an ’80s child,” he says. “For those of us who grew up in that era, the possibility of having a car with that design but with electric power is ultracool.” It’s almost like combining two time periods in one.
The Sliming of Pink Slime's Creator
Thirty-one years ago, a young man with no college degree and the restless mind of a tinkerer started an unusual meat-processing company. Eldon Roth’s Beef Products Inc. (BPI) bought tons of fatty scraps left over after cattle were carved into steaks and roasts. Roth concocted a way to use centrifuges to spin the fat away and quick-freeze the remaining meat into a pink pulp that made ground beef leaner when it was mixed in. He called it “lean finely textured beef.” McDonald’s (MCD), Wal-Mart Stores (WMT), Burger King, Kroger (KR), and Taco Bell (YUM) used it. Roth opened plants in Texas, Kansas, Iowa, and Nebraska, employing about 1,500 workers. He was inducted into the Meat Industry Hall of Fame last fall in a ceremony that brought him to tears.
Courtesy BPISeeking to avoid food contamination, BPI founder Eldon Roth added ammonium hydroxide as a safety measure
Then last month a news article referring to Roth’s product as “pink slime” caught the attention of food blogger Bettina Elias Siegel. She launched an online petition to have it banned from the federal school lunch program. As ABC News and other media jumped on the story, portrayals of BPI’s product as gross and unsafe rippled through the blogosphere. With his customers abandoning him, Roth on March 26 suspended production at three plants, laid off almost half his workers, and now faces a struggle to keep BPI alive.
“It’s gotten to the point of absurdity,” says Craig Letch, 39, Roth’s son-in-law and BPI’s chief of safety and quality, as he wends his way through a warren of stainless-steel pipes and whirring grinders at the company’s plant in South Sioux City, Neb. “Have you had a hamburger in the last 20 years? Odds are lean finely textured beef was a part of that.”
BPI’s predicament is unusual because it wasn’t precipitated by an outbreak of food-borne illness, and its product has never been directly linked to one. Plaintiffs attorney Bill Marler, noted for suing Jack in the Box (JACK) and other companies over unsafe meat, says the rap against Beef Products is overblown. “BPI’s product is no more or less safe than other parts of hamburger,” he says. “There’s a lot of scraps that get put into hamburger because that’s what the hell hamburger is.”
Photograph by Nati Harnik/AP PhotoIowa Governor Terry Branstad, foreground, wants Congress to investigate the anti-BPI 'smear campaign'
Why the outrage around BPI? The Web petition? The TV coverage? “That’s the wrong way to think about this,” says Matthew Salganik, an assistant professor of sociology at Princeton University. “Imagine a forest fire. No one thinks, ‘Which lightning strike did it?’” More telling are the scant rainfall and hot weather that set the stage for a blaze. The meat industry has been taking heat in books, films, and news stories for years. Add a catchy phrase, schoolchildren, and the prospect that some icky-sounding stuff is in Junior’s Whopper, and you have a PR disaster. “Social media is something that adds oxygen to the environment,” explains Salganik. “It increases the chance that a small spark will turn into a big fire.”
Associates describe Roth, 69, as heartbroken. He declined to be interviewed. He’s paying sidelined employees through May, but is facing the real possibility that he may be forced to permanently ditch them. Blogger Siegel says the job losses are “tragic.” But she notes that BPI “should have had no hesitation to inform consumers that [its product] was in the ground beef from the beginning,” perhaps through labeling. “I have never expressed anywhere a desire to drive this company out of business,” she says.
Roth grew up poor in South Dakota, where his company is now headquartered in Dakota Dunes. He became fascinated with refrigeration while working at an ice cream plant, and in 1971 started a refrigeration company that worked with meat processors. Seeing beef trimmings going to waste, he experimented with ways to harvest the bits encased in fat. Slicing it out by hand was costly. So Roth figured out how to cull the meat by warming ground-up scraps to about 100F—the approximate body temperature of a steer—and spinning them in industrial centrifuges at thousands of revolutions per minute. The meat was frozen on a 14-foot drum Roth developed, then chopped into chips or compressed into 60-pound blocks that look like Spam.
Photograph by Nati Harnik/AP PhotoSheets of 'lean finely textured beef' on the factory's 14-foot drums
He started BPI in 1981 with a plant in Amarillo, Tex., selling to processors that blended the product with other beef. At more than 90 percent lean, BPI’s product is usually added to make fattier grinds leaner, mostly in packaged ground beef and hamburger patties but also taco meat and low-fat hot dogs. At peak production in the last decade, BPI churned out 500 million pounds a year.
After four children died of E. coli poisoning from Jack in the Box burgers in 1992 and 1993, Roth began looking for ways to avoid similar tragedies. In 2001, he received U.S. Department of Agriculture approval to treat his product with a puff of ammonium hydroxide after the fat was spun out. Ammonia occurs naturally in beef and other foods and has long been approved as an additive in many products, from cheese to pudding. BPI’s puff treatment raises the meat’s pH to a level that can kill bacteria. Every carton of BPI’s beef is tested for E. coli and other pathogens before going to customers. “Eldon Roth basically is a genius,” says Steve Kay, editor of newsletter Cattle Buyers Weekly. “BPI has been in the forefront of food safety in the beef industry for a decade or more.”
BPI has had detractors, however. About a decade ago, a USDA microbiologist coined “pink slime” in an e-mail about BPI’s product. The term surfaced publicly in a prize-winning New York Times story about BPI in late 2009, quoting the e-mail as saying the microbiologist didn’t consider treated trimmings to be actual ground beef. The story said that E. coli and salmonella had shown up in beef trimmings destined for school lunches, but never reached kids’ meals. A year ago, celebrity chef Jamie Oliver mocked BPI’s product on his Food Revolution TV show, sloshing household ammonia over a mound of beef. Also in 2011, McDonald’s, Burger King, and Taco Bell quietly stopped using textured beef in their meat. McDonald’s says it wanted to standardize its global beef supply. Burger King says its move “wasn’t related to safety concerns.” Taco Bell didn’t return calls. Letch says no customers have expressed safety concerns.
'I have never expressed anywhere a desire to drive this company out of business,' says blogger Bettina Elias Siegel
Cattle Buyers Weekly reported the defections on Jan. 2, saying they had cost BPI about 25 percent of its business and forced the company to reduce production to four days a week from five. A few short stories about McDonald’s shift ran in mainstream media later that month.
Then blogger Siegel, who monitors food coverage from her Houston home, got involved. The 46-year-old Harvard law graduate started her blog, The Lunch Tray, in 2010 after working on the Houston school district’s parent advisory committee on food. That July, her blog reported that the Department of Agriculture had announced tougher testing standards for school lunch beef. Siegel says she thought it meant lean finely textured beef would no longer be used.
So she was surprised to read on March 5 of this year a story about BPI’s product on the website TheDaily.com, owned by News Corp. Headlined “Partners in ‘Slime,’” it was accompanied by a photo of chef Oliver wielding a bottle of ammonia. The story said the USDA planned to use 7 million pounds of BPI’s treated meat in school lunches. The next morning, Siegel started a petition at Change.org, asking Agriculture Secretary Tom Vilsack to “put an immediate end to the use of ‘pink slime’ in our children’s school food.” Explains Siegel: “The contrast was stark to me, that McDonald’s was responding to consumer concern, I believe in part. And yet schoolchildren have no say.” The next evening, ABC News aired its first of at least six reports including material previously reported by TheDaily.com and the Times. TheDaily.com wrote several follow-up stories, and Siegel blogged, tweeted, and Facebook-posted about her petition to great effect: On one weekend, more than 137,000 signed it, Change.org says.
On March 15, the USDA, while insisting BPI’s product was safe, said it would let schools choose whether to buy meat with or without textured beef. BPI started a website, pinkslimeisamyth.com, and ran full-page newspaper ads in which Roth bemoaned a “campaign of lies and deceit.” But one by one, Kroger and other customers said they’d stop using the product, while Wal-Mart and others said they’d offer a choice of beef with and without it. Three weeks after TheDaily.com’s first story, Roth closed all but one of his plants.
Other companies have been affected as well. Cargill, which makes a similar product using citric acid instead of ammonia, has cut production. Meat processor AFA Foods cited “ongoing media attention” that hurt beef demand when it filed for Chapter 11 bankruptcy on April 2. Tyson Foods (TSN) and others are seeking USDA permission to list beef trimmings on package labels in the hope of calming consumers.
Iowa Governor Terry Branstad, whose state hosts a BPI plant, is seeking a congressional investigation of what he calls a “smear campaign” against BPI. Letch and other meat industry executives still profess bafflement at why this story went viral. “It’s emotional, it’s concrete, it’s easy to tell someone about,” says Salganik, the sociologist.
“The most painful part,” Letch says, “was looking 700 [employees] in the eye, and them asking why and not having a good answer.”
The bottom line: BPI ran into a Web petition buzz saw that’s helped lead to the closure of three of its plants and the idling of almost 700 workers.
Gruley is a reporter-at-large for Bloomberg News in Chicago. Campbell is a reporter for Bloomberg News.Amazon vs. Publishers: The Book Battle Continues
There’s a glaring anachronism at the center of most Amazon.com (AMZN) fulfillment centers: aisle after aisle of old-fashioned books. Amazon stocks these volumes for the many customers who still favor the tangible pleasures of reading on paper. Yet the company is relentless about increasing efficiency and has at the ready an easy way to remove some of those bookshelves: on-demand printing. With an industrial-strength printer and a digital book file from the publisher, Amazon could easily wait to print a book until after a customer clicks the yellow “place your order” button. The technology is championed by those who want to streamline the book business—and it might turn out to be a flash point in the hypertense world of publishing.
The book industry isn’t eager to embrace any more wrenching changes. The introduction of the Kindle in 2007, and Amazon’s insistence on a customer-friendly $9.99 price for new releases, has set off a multifront fracas. Efforts by the largest publishers to sidestep Amazon’s pricing strategy attracted the attention of the U.S. Department of Justice, which recently filed an antitrust lawsuit against Apple (AAPL) and five book publishers over their alleged collusion to raise e-book prices. (Three publishers have settled the lawsuit.) The issue of print on demand has taken a backseat as this e-book drama plays out.
Yet executives at major New York-based book publishers, who requested anonymity because of the legal scrutiny of their business, say Amazon regularly asks them to allow print on demand for their slower-selling backlist titles. So far they’ve declined, suspecting that Amazon will use its print-on-demand ability to further tilt the economics of book publishing in its favor. Asking publishers to move to print on demand “is largely about taking control of the business,” says Mike Shatzkin, founder of Idea Logical, a consultant to book publishers on digital issues. “It adds some profit margin, but it also weakens the rest of the publishing universe.”
Print on demand has been around for more than a decade. In 1997, the largest book wholesaler in the U.S., now known as Ingram Content Group, started a division called Lightning Source to serve publishers who wanted to print limited copies of certain books. In 2005, Amazon acquired a rival print-on-demand provider, BookSurge, and began offering publishers the option of supplementing inventory with print-on-demand copies when physical volumes of a title sell out. Now called CreateSpace, the Amazon subsidiary mostly caters to small publishers and self-published authors. The technology has gotten better over time, and print-on-demand books are now indistinguishable from most paperbacks.
Publishers worry that a widespread shift to print on demand could, like the advent of e-books, disrupt their century-old business model. Companies such as Random House and Simon & Schuster have spent decades investing in their own supply chains, storing books in giant warehouses and developing the transportation infrastructure to ship those volumes to stores within days. If print on demand became widespread, publishers could cut their fixed costs and solve the perennial problem of stores returning unsold books. But that would throw into doubt almost everything else about the way big publishers conduct business, since they’re compensated based on the range of services they provide, from editorial guidance to storage and distribution. Print-on-demand technology would make it harder for the publishers to justify keeping a large majority of a book’s wholesale price.
One of the New York publishing chiefs says that even allowing titles to be printed on demand by Amazon when shortages occur is a bad idea, since it might encourage the company to order fewer printed books. And having a limitless inventory would give Amazon yet another edge over retailers such as Barnes & Noble (BKS), which publishers want to keep in business as a counterweight to the e-commerce juggernaut. Another top executive of a major New York publisher says there’s too little trust in Amazon to consider its print-on-demand services.
Amazon is not the only company trying to usher reluctant big publishers into a print-on-demand future. In the late 1990s veteran Random House editor Jason Epstein had a vision of an ATM-like machine that could produce hard-to-find books, and in 2003 created the company On Demand Books to develop the idea. Today its Espresso Book Machine, manufactured by Xerox (XRX) and costing about $100,000, sits in a few dozen bookstores around the country. It takes about four to five minutes to download and print a high-quality paperback. Last fall, HarperCollins Publishers, a division of News Corp. (NWSA), became the first major publisher to make part of its catalog available to On Demand Books, offering about 5,000 older volumes. Yet the machines still offer an extremely narrow selection of popular titles, which has limited their appeal. “The catalog is huge, but it’s overwhelmingly public domain,” says On Demand Books Chief Executive Officer Dane Neller, referring to older books no longer under copyright. “That’s a function of publishers’ reluctance to upset their existing supply chain, though we hope and believe that will change.”
As the digital transition upends the industry, resistance to on-demand printing may fade. Smaller publishers that have already made the switch away from printing and storing their own books say it’s well worth it. “Instead of putting all those books in a warehouse, you free up cash flow to invest in R&D,” says Laura Baldwin, president of O’Reilly Media, a publisher of technical books that moved to print on demand last year and shed $1.6 million in inventory cost. “You can invest in the technical future of publishing as opposed to printed books that are sitting in the warehouse.”
The bottom line: Publishers are reluctant to allow on-demand printing for fear of empowering Amazon, though smaller publishers enjoy the cost savings.
One Man's Quest to Make Information Free
Carl Malamud once told a senior official at the Securities and Exchange Commission that he wanted to put the agency’s filings online. “I just don’t think people who use the Internet are going to be interested in this stuff,” Malamud remembers the official saying in 1993. Malamud bought all the filings and put them online anyway, using a computer borrowed from his friend Eric Schmidt. (Yes, that Eric Schmidt.) About a year later, he took them down. That prompted more than 17,000 day traders, investment clubs, and business school professors to beg the agency for free Web access to its records. You might know it today as the SEC’s “Edgar” database.
More than 15 years after that stunt, Malamud is still making the same argument: If you make government information free and easily accessible, there’s no telling who’ll start using it or what good ideas will spring up. “Every time I put something online there’s a huge audience,” says Malamud, founder of Public.Resource.Org, a nonprofit that advocates for government transparency. “The industry guys think the only audience is industry types and Ralph Nader.”
Now Malamud’s taking on the best practices for construction, industry, and manufacturing. They’re written by hundreds of nonprofits known as “standards development organizations.” About 3,000 of these standards are referenced but not fully spelled out in federal law. Let’s say you’re building a hospital for the Department of Veterans Affairs. Federal law says you need to follow the “Life Safety Code,” a set of rules on how to prevent fire, smoke, and toxic fumes from injuring tenants. To get a print copy of the code you’d have to send a payment of $82.95 to the National Fire Protection Association, which wrote it. Malamud argues that the code is a law—and therefore part of the public domain—and should be distributed freely. NFPA maintains that it holds a copyright on its standard.
Malamud is forcing the issue. Last month he bought and copied 73 different standards and boxed them with American flag packing tape. He sent the packages to the 10 organizations that wrote the standards to “put them on notice” that he plans to publish the specs online beginning in May. He’s been doing something similar over the last five years with state building codes, gradually uploading them to the Web after a federal appeals court ruled they’re part of the public domain. Not one standards organization has sued him to uphold its copyright on those codes. Malamud is hoping for the same result with the federal standards. “We are very serious about doing this and intend to see it through to completion,” he says.
Sound arcane? Malamud’s mission will spur investment, says Stephen Schultze, the associate director of Princeton University’s Center for Information Technology Policy, who’s worked on similar projects with him in the past. “You’ll have a round of innovation,” says Schultze. “Other people will find ways to make [the information] easily searchable and create guides for businesses—plumbers and electricians.” Or how-to apps on building to code for homeowners.
There’s an economic case for copyrights. It’s expensive to develop good standards—you need panels of engineers, industry representatives, and consumer advocates weighing in. Some organizations recoup their costs by charging to test products for manufacturers and granting their seal of approval; others rely on selling standards to make ends meet. “This source of revenue gives us great independence,” says Jim Shannon, president of the NFPA. “We don’t want the industries to pay for standards. Then there will be industry-dominated standards.”
Malamud doesn’t argue with that. But charging for public information “comes up against this brick wall,” he says, “which is the U.S. Constitution.”
The bottom line: An activist for open government says unlocking the paywall on open information will spur innovation.
The Rise of the E-Jukebox
Jason Eisenhauer thinks Adele has a lovely voice. But he can only take so much of the ubiquitous British singer. The owner of two Irish sports bars in Columbus, Ohio, had to listen to Adele endlessly on the jukeboxes in his drinking establishments. Then, in January, Eisenhauer installed a new model called the TouchTunes Virtuo in both bars. He says his vending machine distributor told him he’d love it: “??‘It’s like an iPad on steroids,’??” Eisenhauer recalls him saying.
While customers were at first leery of the sleek, wall-mounted touchscreen device, they started warming to it as they discovered even a snippet of lyrics is enough to find a song. They can download an app on their phones and control the jukebox from their bar stools, or even queue up a song from afar. Eisenhauer was thrilled that his patrons could choose from 400,000 songs on broadband-connected Virtuo, compared with 20,000 on his old jukeboxes. “You can come in on a Friday night and not hear the same song twice,” he says.
New York-based TouchTunes introduced the Virtuo last year. The machine, which sells for $5,495, was developed by the company’s chief executive officer, Charles Goldstuck, former chief operating officer of music industry giant BMG. The South African-born executive is intent on reviving a barroom fixture that many people fondly recall primarily as a way to spin vinyl. Since his arrival at the privately held company in 2009, he has integrated social networking into its products, added new features such as cameras and wireless printing capabilities, and increased the number of songs available to customers. “We’re revolutionizing the original social experience, which is going out and drinking in a tavern,” Goldstuck says.
The jukebox industry is hardly flourishing. Fifteen years ago there were 150,000 machines in the U.S., according to Vending Times, a trade magazine. Now there are 90,000. People aren’t as compelled to pump quarters into a machine to hear their favorite songs when they can carry their entire music collection on their smartphones. Some bartenders even host iPod nights where customers plug their MP3 players into the tavern’s sound system and listen for free. The remaining jukeboxes in use generate less money as each year passes, and revenue is divided between manufacturers, bar owners, and the distributors who purchase and control the devices. The average weekly income per box dwindled from $148 in 2005 to $113 in 2010, according to Vending Times. “This is an industry that has been living from hand to mouth for the last decade,” says Managing Editor Nick Montano.
TouchTunes has bucked the downward trend—it expects to grow from 52,000 machines in use to 60,000 this year—by embracing high tech. Founded in 1998, the company introduced the first Internet-connected jukeboxes that year, primarily using a pokey dial-up connection, which meant few people used them to download new songs. When Goldstuck was hired, he began shifting the devices to broadband.
Last year, Goldstuck unveiled the Virtuo to an audience of vending machine distributors with a flashy presentation at the Hard Rock Hotel & Casino in Las Vegas that included a performance by rock band Jimmy Eat World and American Idol runner-up Crystal Bowersox. “These were vending company guys,” says Joel Katz, a prominent entertainment industry attorney who sits on TouchTunes’ board. “They’d never seen anything like that.”
The Virtuo looks—and in some ways acts—like a large iPad. It has an operating system called OpenStage that enables TouchTunes to add services through the Internet. In March the company unveiled PhotoBooth, which lets people take pictures, print them, and share them on Facebook. It also premiered a karaoke service enabling bars to run singalong nights, and announced an exclusive, multiyear deal to include the Beatles’ catalog on TouchTunes’ jukeboxes, the first time it has been available on such devices. The new features and content seem to work: Goldstuck says Virtuo’s average weekly income is $320, nearly three times the industry norm. Songs typically cost 50? on Virtuo; they go for twice that amount for karaoke.
Goldstuck hopes to introduce the Virtuo overseas, and says it could be a way for the music industry to make money in countries where piracy is rampant, including China.
While the Virtuo has solved bar owner Eisenhauer’s Adele woes, it’s introduced new ones. Using the jukebox’s remote-queueing feature, some of his customers activate the Virtuo from the parking lot so they can arrive with the proper music blaring. “There’s a bunch of guys who work at Chase,” says Eisenhauer. “They come in at lunch for a burger and a few beers. Every day, they pick a song. All of a sudden, the jukebox turns on. It scares the crap out of me.”
The bottom line: TouchTunes’ Virtuo bucks the downward trend in jukebox popularity by focusing on apps and exclusive music.
James Cameron's Trillion-Dollar Question
(Updated with more details.)
Today an all-star cast of adventure capitalists and space entrepreneurs—James Cameron, Larry Page, Eric Schmidt, Charles Simonyi, Peter Diamandis (creator of the X Prize), and others—announced the creation of Planetary Resources, an asteroid-mining company. (The announcement will be live streamed Tuesday off the company’s website at 1:30 p.m. ET.) In theory, asteroid mining is an enormously lucrative endeavor: a single small asteroid has been estimated to contain trillions of dollars in gold, platinum, iron, zinc, aluminum, and other minerals. The first step, its founders say, will be to launch a telescope into space to search for asteroids suitable for mining, something they claim they’ll do within two years.
Still, once suitable candidates have been identified, how would one go about getting all those minerals? As skeptics of the new company’s mission have pointed out, the challenges are enormous, and with current technology, the cost of bringing minerals back from an asteroid to Earth are so great as to dwarf the considerable market value of the minerals themselves.
There’s another, less discussed hurdle, though: figuring out whether it’s legally possible to stake a claim to an asteroid in the first place. Property rights, after all, are often a contentious issue for miners here on Earth, where we have a well-established set of laws governing the question. What would that look like in the wild west of space?
The legal framework governing space behavior is the Outer Space Treaty of 1967, which the U.S. has signed. The exact language of the relevant passage is: “Outer space, including the moon and other celestial bodies, is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means.” Whether this means that private companies can mine asteroids is up for debate—the passage clearly bans national governments from claiming territory in space, but it doesn’t mention private actors. Because the treaty holds nations responsible for the space-related activities of their own citizens, many space lawyers (the field does exist) argue that the treaty effectively bans private “appropriation” of property in space.
Others, however, argue that there is already precedent for treating things in outer space as property. The example they point to is moon rocks—specifically the fact that the U.S. and Soviet governments traded moon rocks with each other. To trade something, after all, one has to first of all own it. Whether mineral-rich asteroids will come to be seen as enormous orbiting moon rocks in the eyes of the law remains to be seen. Meantime, some private citizens are taking the matter into their own hands, and not in the way James Cameron, et al., are. In 2001 a Nevada man named Gregory Nemitz claimed he owned the asteroid Eros and sued NASA when one of its robotic spacecraft landed on it. He asked for $20 in parking and storage fees—20? a year, payable in hundred-year installments. A federal judge threw out the case.
How to Design a Logo: Sagi Haviv
A great logo is not about what one likes or dislikes. It’s about what works. And what we want to determine is: What problem is our client trying to solve? Often a company might want a new logo to freshen up its image, when really it should keep its logo but change its marketing. Look at Pepsi (PEP). It’s been years, and I bet few people could draw the new logo from memory. The old one they could, instantly. It was a perfectly good mark. Coke (KO), meanwhile, has had more success keeping its wordmark the same but constantly changing its packaging and marketing. When you want a new logo is when your current trademark is too complex, no longer relevant to your brand, or you want to unite various sub-brands. A new mark should be an uncomplicated form that can work anywhere, from a billboard to an app tile. It must be appropriate and relevant to the company and its field. And it must be memorable. Of course, the simpler the form, the less special it tends to be, so the challenge of designing an iconic logo becomes: How memorable can a design be while remaining simple? — As told to Brad Wieners
Watch Sagi Haviv explain how to design a logo at www.businessweek.com/howto/logo or in our iPad and iPhone apps
Illustration by Neal Fox; Earth: Getty ImagesHaviv is a partner with Chermayeff & Geismar, which designed the NBC peacock, Chase octagon, and National Geographic rectangle.