Martha’s Bark is Like Her Bite

From testimony today during the ongoing Martha Stewart trial. Emily Perret, ImClone CEO Sam Waksal’s one-time assistant, is testifying under direct examination. She says that Martha Stewart called ImClone offices and demanded Sam call her back and tell her what was going on with ImClone stock:

“She seemed very hurried and harsh and direct,” Perret said. However, under cross examination by Robert Morvillo, Stewart’s lawyer, Perret was asked if this tone was different than from other calls she had fielded from Stewart.

“Most of the time it was that way,” Perret said.

Dan Gillmor & Wal-mart’s Economics

Let me get this straight. According to San Jose Mercury-News columnist Dan Gillmor, Wal-mart is an evil company. But here are just some of the accolades he drive-by proffers the retailer:

  • It offers great variety at low prices
  • It brought competition to many small towns dominated by a small number of businesspeople charging higher prices
  • It is a genuine innovator in using information technology to handle inventory and purchasing

So, what are his beefs? The usual Seattle-WTO laments, like that the company outsources, that it doesn’t pay as much of employees’ health care benefits as he would like, and that, darn it all, the 1950s were just so much fun.

Dan, consumers are smart people. If they thought that the better service and kitschy buildings in the downtown of your choice were worth paying a higher price, they would pay it. But they demonstrably don’t think brick buildings and local storeowners are always worth the (generally) higher price, and so they don’t pay it. Markets work — even when some people don’t want them to.

Update: For those of you interested in more light and less heat, consider reading some of the following papers:

Dumbest Moments in Business: 2003 Edition

Business 2.0 has out its annual list of the 101 dumbest moments in business from the prior year. Here are a few:

1 (TIE) Two greedy Richards.

Richard the First In August, the board of the New York Stock Exchange decides to give CEO Dick Grasso his $139.5 million pension up front, ostensibly to save the estimated $10 million it would cost to deliver the payout at retirement. Grasso offers a succinct if not altogether satisfying explanation: “I’m blessed.” When a firestorm erupts over Grasso’s payday, he graciously agrees not to take another $48 million he has coming to him. Then, a week later, Grasso “resigns”—and quickly claims he was fired, which entitles him to another $58 million, including the $48 million he had promised to forgo.

20 Hmmm. Maybe you should’ve gotten the hint by the 3,168,453rd time we closed one of your pop-ups without reading it.

After years of bombarding Web surfers with annoying pop-up ads, wireless camera maker X10 files for bankruptcy in October, listing debts of more than $10 million. Among the parties stiffed: AOL, Google, Yahoo, and, which won $4 million in a lawsuit against X10 shortly before the bankruptcy filing.

26 Next time, try lifestyle-oriented and emotional and cool — and creditworthy

After marketing its sporty Eclipse coupe to 20-something slacker types through a mix of ultrahip ads and zero-percent financing, Mitsubishi Motors announces a $469 million loss from loan defaults. New CEO Rolf Eckrodt says the company’s mistake was “aiming at customers interested in products which are lifestyle-oriented and emotional and cool.” The fix? Aiming at customers with money. The move looks good on paper—just not the paper on which the company’s books are kept. After tightening up credit requirements, Eclipse sales fall by 48 percent, forcing Mitsubishi to spend another $432 million to clear out unsold inventory.

Things Worth Scanning

From my RealMoney Weekend Reading column, here are a couple of interesting things I cite from this week’s business & finance press:

When Endangered Species Attack

A fabulously ironic headline from the current issue of Nature:

There are few things more frustrating than saving an animal’s life — only to have it attempt to kill you. If only life were more like Zoboomafoo.

Drug Approvals on the Mend?

The current issue of Nature Drug Discovery contains the following interesting graph:

The author of the piece argues that the minor improvement in the absolute number of approvals in 2003 masks some important (and positive) changes at the FDA:
  1. Regulatory review of monoclonal antibodies and protein therapies in the United States was transferred to the Center for Drug Evaluation and Research (CDER) in an effort to speed things up.
  2. More importantly, 2003 marked some innovative approvals, including enfuvirtide (Fuzeon; Trimeris/Roche), bortezomib (Velcade; Millennium) and gefitinib (Iressa; AstraZeneca). Enfuvirtide, is the first HIV drug in a new class for around a decade. Bortezomib is the first proteasome inhibitor to be approved for multiple myeloma. Finally, Gefitinib is the first in a new class of targeted cancer therapies, one which inhibits the activity of the skin’s growth receptor and is being prescribed for lung cancer.
All of this is good, of course, but the cynic in me says that part of the reason the FDA has become somewhat faster at approving some biopharmaceuticals is that there are so darn few such products in the approval cycle. After all, even with the slight pick-up in submissionsin 2003, we are still sitting near decade lows.

My WSJ Editorial on Mydoom

In case you have a copy of the Wall Street Journal handy, you’ll find an editorial by me in it today about the Mydoom virus/worm outbreak. Playing provocateur, I name names, and lay blame.

Update: Lots of interesting email on the above column (called by the WSJ “You’ve got Mydoom!”), but only the odd academic taking issue with my main point, that current approaches to Internet security more or less guarantee future, higher infect-rate worms.

External Economies, Plagiarism Detection, & the Spleen

What rights do students have with respect to the commercial reuse of their class assignments? That question, in part, has come up in Canada in the context of, an online plagiarism detection tool. Turnitin relies partly on searching the Internet for similar texts, but it also uses its growing database of other submitted student papers to detect plagiarism.

Last fall a Montreal student refused to enter his assignments into, and his professor gave him a failing grade. Now the academic senate at McGill University, where this all happened, has decided that the student’s assignments are to be graded nevertheless. Contrary to some reports, there is no clear final decision yet at McGill about the use of Turnitin.

What intrigues me is the claim that Turnitin makes money from these papers, meanwhile making students unwilling content providers. While Turnitin doesn’t resell individual papers, it does make money from them in the sense that the papers, in aggregate, become a signature database that can be used to assess the uniqueness of new papers submitted. In effect, students become unpaid employees of Turnitin.

Some critics argue that students should be allowed to opt out, thus ceasing to be unpaid workers. In the alternative, students should be paid for their content, perhaps a flat rate of pennies per page per paper.

Turnitin wants none of that, of course, arguing that it doesn’t use individual papers per se, just all the submitted papers in aggregate. Compensating every student would, in that argument, be nonsensical, creating an economic relationship where no such relationship exists.

It is intriguing. And it is also different from eBay’s policy of reselling data created by transactions on that auction site. After all, no-one is forcing you to use eBay — if you don’t like its policy of reselling transaction information you create, then you shouldn’t use eBay. Students, however, are compelled to use Turnitin, so they contribute without receiving the economic benefit.

So what is the solution? A controversial case from almost two decades ago — “The Strange Case of John Moore and the Splendid Stolen Spleen” — suggests that in a legal challenge students will lose. In the Moore case a cell line was created using T-lymphocytes from a patient’s cancerous spleen. That cell line was patented, and, unbeknowst to Moore, it became a profit-generating venture for the cancer researcher involved.

The defendant’s lawyer argued that the researcher acted in bad faith, and did not obtain informed consent. After much wrangling, it was decided, in effect, that patient Moore did not have explicit and complete rights to all byproducts of his spleen. In other words, Moore was not entitled to receive royalties from the cell lines involving his own spleen — and students are likely to do no better with term papers.

Greenspan Names That Tune too Soon

The Wall Street Journal had a nice graphical “diff” today of the minor text changes from last Federal Reserve meeting to the one yesterday. Fed Chairman Greenspan going from “considerable period” to “patient” cost some investors billions of dollars.

Ah, the power of words — I bet some traders wish they could have bought back a few vowels.

S&P’s Swinging Prices

There is funny business going on at the close for various Nasdaq stocks that are part of the S&P 500. According to Gretchen Morgensen at the New York Times, these companies’ stocks are blipping up at the close on unusual buying patterns. That bugs S&P, of course, so it is going to start pricing some of its stocks on their closing price on Amex rather than Nasdaq.

Traders call this sort of thing — hitting a stock with multiple buy orders near the close — “spraying the market”, and it can be effective. Even mighty Microsoft, with its centi-billion market capitalization, may have been hit. For example, back on June 20th Microsoft shares jumped up 31 cents, or about 1 per cent, in the final five seconds of trading.

For its part Nasdaq says it has a solution in the works. Starting in March, ten minutes before the close it will begin publishing order imbalances, thus giving traders an opportunity to buy or sell stocks, as necessary, in the stock that would otherwise close with too many (or not enough) orders of one sort or another.

Much of this, of course, is competitive posturing. Amex will benefit if S&P moves closing prices from Nasdaq to the Amex, and they are making the most of the opportunity to slag the way that Nasdaq closes its market. For more on Amex’s spin, check this wonderfully snide letter to the SEC from Amex’s Michael Ryan.