When he was 17, Thore Aalvik developed an application that allowed iPhone users to search for flights anywhere around the world. That application was translated into several languages but ultimately did not become available in the Apple Store due to financing problems. Aalvik, now a 19-year-old student with both Spanish and Norwegian citizenship, was undeterred. He ultimately created and introduced other applications into the Apple Store, which today provide him with a steady income stream.

In a conversation with Knowledge@Wharton High School, Aalvik talks about entrepreneurship and what he expects from technology in the future. His story illustrates how far behind the times some Spanish firms are when it comes to developing social media and new platforms for technology.

Below is an edited transcript of the conversation.

Knowledge@Wharton High School: How and why did you become an app developer?

Thore Aalvik: Ever since I was a little boy, I have always been filled with curiosity. I have always tried to do different and new things. I have competed internationally as an acrobat in an equestrian sport knows as Volteo that is not very well known in Spain. It was an Olympic sport in 1920.

I believe that experience taught me to express myself and provided my foundations in the world of the Internet. HTML was a simple language to learn, and software such as Dreamweaver helped me understand designs and structure, and you could even use templates. By the time I was 12 or 13 years old, I already knew a little HTML and I had already done some websites for family friends. It seemed incredible to me that companies charged a thousand euros [about $1,285 USD] for a website that a young person might create in one afternoon.

This was critical for learning about how people make money with domain parking, and about buying and selling parking domains. [I also learned] how having a good domain adds great value to development and positioning. Starting from there, I learned more about web development, the use of scripts and servers. And then mobile platforms emerged, and it seemed like a great opportunity for me, since it was something that grew very rapidly and had arrived to stay. You have to seize the opportunities [that come your way].

KWHS: Describe the process of developing your first app.

Aalvik: The first thing you need is to register yourself as an iOS developer, which costs $99 a year (https://developer.apple.com/programs/ios/). During that period, you can send in as many applications as you want. In order to program, you have to download Xcode from Apple, which can only be installed on [Apple computers]. Once you’ve finished that process, you compile [the application] and send it to Apple via its website. It is also possible to send it for iPads and iPhones. The approval process on the part of Apple takes about a week. Not all of the applications are accepted. The user chooses the price for the application that he wants to sell. [He also decides] when and on what platforms he wants to sell the app. Apple gives you 70% of the profits and it keeps the remaining 30%. Another possibility is for you to create free applications and make money from advertising [that is placed on them].

In early 2010, I developed an air travel application. Although it never wound up in the Apple Store, I tested it on my telephone. The name that they were going to give it was “Flights,” since that name had not been used. Everything was going along well until the company that uses the API [Application Programming Interface] told me that I would have to pay [a fee] based on the volume of requests for searches that were conducted on the app. Usually APIs are free, since both parties benefit from them, but some companies make you pay for them beyond a certain volume of requests [made on those sites by web visitors]. This is one of the flaws in the process — access for youth to sources of funding. In 2010, I also collaborated on a [Spanish-language] business book called The IT Generation.

KWHS: Has your age ever been a problem during your entrepreneurship journey?

Aalvik: Age has never been a problem except with access to financing. Since Apple has a closed system, in which it controls everything, it doesn’t allow you to use other platforms that help you in the programming — except until a short time ago. The rise of HTML5 has allowed the growth of companies like PhoneGap, which was acquired by Adobe. Companies like PhoneGap [a mobile development framework] enable you to create a single HTML and JavaScript code and convert them to different platforms like iOS, Android, Symbian, Windows, BlackBerry, etc.

KWHS: Despite your initial failure, did you keep developing applications?

Aalvik: I wound up sending 10 applications to Apple, but only six are online. My income from them varies from month to month, but it usually averages about 300 or 400 euros [about $450 USD]. The vast majority of the profit comes from the U.S. and Australia. Some [of my apps] in the English language store are San Fermin and iBob Marley Quotes. Another two applications – El Hombre de Negro [Man in Black] and Piropos de Obrero [Worker’s Flatteries] can be found in the Spanish store.

It may seem strange, but in February 2011, I realized that Expansion, one of the biggest financial newspapers in Spain, did not have any web application. So [we created] an application that collected the newspaper articles from its RSS [Really Simple Syndication, an XML format for syndicating and sharing content online]. In one day, that app rose rapidly to ninth spot, and within hours it wound up at number one in Spain’s news category. The legal department [of Expansion] sent me an email saying that the app had to be removed from the Apple Store. I removed the application and offered to collaborate with them, but they didn’t even respond to my proposal to collaborate. Few companies realize how slowly they are moving when it comes to [establishing] social networks and new technology platforms.

KWHS: What are you focused on these days?

Aalvik: I have dual nationality (Spanish and Norwegian), although I was born in Madrid and have lived all of my life there, except for one year of high school when I studied in Michigan. I am currently studying business administration and management at the BI Norwegian Business School in Oslo, Norway. I will finish my courses within a year. Here in Oslo, the coursework lasts three years and is the equivalent of four years of courses in Spain. I work in a social media company, and I’m creating a company that sells T-shirts. I am the public relations and events organizer for the International Student Association at my university. At the moment, I have moved away somewhat from programming applications, although I am contacting companies to make my own high-technology product, which I prefer not to talk about yet. It is in its early stages, so I prefer to say nothing until we have at least some prototypes.

KWHS: Will you stay in this industry?

Aalvik: Yes, but I see my future trying to create services and products that bring technology closer to the humanities. If current trends continue, children will know how to use a tablet before they learn how to write by hand. What’s more, Apple announced recently that we are in the post-PC [Personal Computer] era. Nowadays, we are creating products that are, of course, impressive and that help improve our lives, but sometimes we forget the products that we have always used, and that they also can incorporate technology. I would love to devote myself to something that is between the humanities and technology and has a positive impact on society.

KWHS: Is it a good idea for young entrepreneurs to develop applications?

Aalvik: Yes/ Although it is more difficult because of competition, there are now many tools that facilitate learning and provide opportunities for the vast majority of people. And yes, you can earn an income by selling simple applications that are not the most successful.

KWHS: What recommendations would you make to teens who want to develop applications?

Aalvik: You should pursue lots of the business opportunities that lie ahead, travel and enrich yourselves culturally with all the information that exists today, and believe that you can do whatever you think about doing. Everything depends on how much time you spend on it. Personally, I have learned that I can do more things than I imagined, and I am still young!

Questions

What did Thore Aalvik read about on an airplane and how did that fuel his entrepreneurial spirit?

What was the first app he developed and where did he sell it? Did he develop others?

What has shown this young entrepreneur that businesses, especially in Spain, are behind in the social media revolution?

Let’s Hear Your Comments!

Have you developed an app? Post your comments to the story and on our Facebook page at http://www.facebook.com/whartonhs. 

Related Links

• BI Norwegian Business School International Student Association
• Thore Aalvik’s Blog
• Thore Aalvik and Volteo on YouTube
• New York Times: App Makers Face Holiday Cutoff
• WSJ: Mobile App Talent Pool Is Shallow
• PhoneGap
• KWHS: Boris Silver Scores Big with Sports Apps
• Fast Company: The Young App—rentices: Five App Developers Ages 16 and Under

Jeff DeCelles is the director of curriculum, partnerships and innovation for Grassroot Soccer, an organization in Cape Town, South Africa that uses soccer to teach young people about HIV and AIDS.

The Grassroot Soccer curriculum involves activities and games that provide young people with comprehensive HIV prevention and life skills education. Soccer is the sport of choice because it is an integral part of local cultures across the world – and helps educators get in front of hard-to-reach youth. The organization has found that just arriving at a field with a soccer ball can win instant friendships and access to local communities.

Knowledge@Wharton High School met with DeCelles recently during the Child & Youth Finance International summit in Amsterdam to talk about soccer for social good and his path from the University of Vermont to Sub-Saharan Africa. 

Knowledge@Wharton High School: Hi, Jeff. Thank you for joining us. Tell me a bit about Grassroot Soccer. What is it exactly?

Jeff DeCelles: Grassroot Soccer is a program in Sub-Saharan Africa where we use soccer to teach young people about HIV and AIDS, to give them the knowledge and the facts about HIV/AIDS, but to also empower them with the tools to make healthy decisions in regards to their sexual lives, to avoid HIV.

KWHS: Why soccer?

DeCelles: We use soccer because it’s probably the most ubiquitous or the most widespread form of entertainment in the world. It’s something that kids everywhere like — boys and girls. We started the program in Zimbabwe [in 2002] and we trained famous professional soccer players to come into the schools and not just tell people “This is HIV, this is AIDS,” but actually engage them through sports and games, actually teach them through learning. We found that the combination of using role models and also making education fun seemed to be making a difference.

KWHS: How did you end up working with the organization?

DeCelles: When I was an undergrad at the University of Vermont, I spent a semester in the Dominican Republic. I’m a soccer player, so I brought my soccer boots. The soccer was just terrible because all the best athletes play baseball. They said, “Okay, if you want to play soccer, you need to go to this [Haitian] community.” The Haitians play soccer and the Dominicans play baseball [and there is long-standing conflict between these two nationalities]. One thing led to another and I showed up, I played with them, and they said, “Can you coach us?” I said, “Yes, I can coach you.” People said, “We can’t get into the local league because of racism and all of these issues.” I used some contacts and we got them uniforms and league fees. We basically took a Haitian team that wasn’t allowed into the league and leveraged some contacts to get some donations, got them playing in the Dominican league and then had Haitians and Dominicans interacting in safe, healthy ways through soccer. That was my first exposure to sports for development, or using sports for something beyond just enjoyment or fitness.

After that, I heard of the group Grassroot Soccer. They were a couple of months old [when] I called them up. I said, “Can I come to Zimbabwe and volunteer?” This was my last summer at university, and they said, “Yes, come over.” I got a small fellowship, a couple thousand dollars, to go volunteer. I volunteered for a couple months and then I finished my studies. At the same time, Grassroot Soccer was growing and we were applying for some bigger grants. Some money came in and I was able to work full-time.

KWHS: When was that?

DeCelles: I started in 2003.

KWHS: So how has the organization grown? It sounds like you’ve been there since it has ramped up.

DeCelles: When we started, I would be in the classroom with the soccer players teaching the games. We delivered a pretty high-quality program, but not at scale. We’d bring about 10 coaches in, all famous professional soccer players, and we would teach about 100 kids a month. We did some evaluation, found some results that were encouraging and really felt that we had something good. But we wanted to make it bigger, and there is a finite number of professional soccer players. So we thought, “How can we scale up? How can we grow this?” One area was to see if we could use other role models instead of just famous professional soccer players. A big change is that now we train coaches, we train school teachers and peer educators. Anyone who is a role model in their community can be a Grassroot Soccer coach. We used to do 100 youth a month. By 2014, we hope to graduate 1 million.

KWHS: Is there an anecdote or story that you can tell of a student whom you know you’ve impacted – [someone who] stands out in your mind as special?

DeCelles: There was a kid named Muki in Zimbabwe [who] was first a participant in Grassroot Soccer. The program meant so much to him that it became a big part of his life.  He started telling all of his friends. I came back a few years later, and he was a Grassroot Soccer coach and also a professional soccer player. And then I came back a couple of years later and he said, “I want to move to South Africa.” I said okay and he came to South Africa. This kid went from being in the classroom to being a coach and is now one of the rising stars of the organization. I could see him running his own organization or being a director of Grassroot Soccer one day.

KWHS: What do you think is a young person’s role today in social impact issues?

DeCelles: Whenever I get back to the U.S., I’m always surprised that there are a lot of young people who are thinking about programs in their own communities, but also in Africa. I think kids today with the Internet and with technology have a much more worldly view than I did. I’m amazed at how many high school students in the U.S. know what we’re doing and support us.

I think one great thing is to get involved and learn about what’s going on in Africa. A lot of times growing up in the U.S., I only heard the negative things about Africa. I heard about disease, war and famine, but I didn’t hear a lot about the amazing cultures and all the positive things that are happening. I would really recommend, first of all, just learning about what’s going on. We’ve [also] had some amazing students who have supported us through fundraising efforts — just organizing a small, barefoot soccer tournament with their friends and raising a couple hundred dollars. You raise money that directly helps the organization, but I think raising awareness in the U.S. can really help us out. Not just us, but similar organizations. We do have internship programs [that are] for students who have finished their undergraduate programs, usually at U.S. universities. They’ll raise their own money and come and spend a year with us in Africa helping out with the coaches, with monitoring fundraising, bookkeeping, anything you can imagine.

KWHS: You’ve stayed in Africa a long time. Do you like living there?

DeCelles: I do. I started out in Zimbabwe. Then I lived in Zambia and now I live in Cape town, South Africa. Cape Town is a really great place to live.

KWHS: What do you like about it?

DeCelles: I like that it is still Africa. Cape Town is much more developed than other cities in Africa, but it’s still Africa. You still feel it. It’s still an African culture, but at the same time, you can go surfing and that’s a big thing for me.

KWHS: Thank you very much for joining us.

DeCelles: Cool, thank you.

Related Links

• Grassroot Soccer
• Profiles of Grassroot Soccer Graduates
• International Human Rights News and Information
• New York Times: To Those with Nothing, Soccer Is Everything
• Child & Youth Finance International

Anita Stewart is senior vice president of strategic partnerships and development for Sesame Workshop, the nonprofit organization that produces Sesame Street and other educational programming. Knowledge@Wharton High School caught up with Stewart during the recent Child & Youth Finance International summit in Amsterdam to talk about her money-related role among the Muppets.

Knowledge@Wharton High School: Anita, thank you for joining us today. Describe your role at Sesame Workshop.

Anita Stewart: Sesame Workshop is a not-for-profit that produces children’s programming — educational programming — and we have three different revenue streams. One is what a lot of people know, which is our licensing. The [second] is our content distribution, and the third is what I do, which is getting funding from corporations, private foundations and government to do our programming around the world, whether it’s a TV program, a podcast or an outreach program.

KWHS: Describe your licensing [revenue stream] a bit more.

Stewart: When Sesame started 42 years ago, it was funded by the Ford and Carnegie Foundations. Ford and Carnegie said, “You have to figure out how to sustain yourselves,” and they suggested that we start with publishing. So that was our first kind of licensing agreement. Now we also have major licensing agreements with Hasbro [toys] and with apparel. It’s all of the toys and products that you see in the stores. All that money then goes back to Sesame Workshop to produce programming and all the things that we do around the world.

KWHS: How about the content side of it?  Can you talk a little bit about that as well?

Stewart: We have a model where everything is based on [asking], “What are the things that are impacting children?” For example, six years ago in the United States, we felt that we could have an impact on childhood obesity or at least getting children to eat healthy. And so we worked with our researchers and then our production people to develop a whole programming around healthy habits. I help get the funding for those kinds of programs. So we have had folks like Merck [pharmaceuticals] and different corporations to help us fund the programming in order to bring it to all children, especially the underserved children.

KWHS: You’ve talked about [being] in the United States and elsewhere — it sounds like it’s very global. Can you talk about the global mission of Sesame Street?

Stewart: Basically it’s the same overall mission in that it’s educating children through media, but [we customize our programming depending on the country we are in]. We work with advisors in that country to pinpoint some of the key needs and we [work with] production companies from that country, as well as broadcasters. Our research people develop the content to make sure that it’s relevant, and we have different Muppets around the world. So in South Africa we have Cami, who is HIV positive. We have Hoha in India to look at positive female role modeling, going to school and also having a career. We always look at the whole child, so we talk about the cognitive skills, the social, emotional and the health. Then in each country, [we] hone in on some of the key aspects that we can bring to light.

KWHS: And the name of the show also differs in each country?

Stewart: Yes. In South Africa, it’s Takalani Sesame. In Mexico and Spanish speaking Latin America, it’s Plaza Sesemo. In Bangladesh, it’s Sesampur. We’re in 150 countries, 30 of which have what we call these co-productions where they have different names.

KWHS: Tell us a bit about your career path to Sesame Street. How did you get here?

Stewart: I feel as if I’ve come full circle. I got my degree in education and sociology and my masters in sociology and I taught school, second and fifth grade, when I first got out of school. Then I decided I wanted to try something a little different and I went into the advertising, marketing business, working both on the agency and client sides. After I did that, I was approached by PBS, which is the Public Broadcasting System in the U.S., and they said, “You understand corporate and you kind of understand us” — in my career I’d worked with PBS doing programs with some of the companies I was working with – and they said, “We’d love you to head [our] sponsorship group to get corporate funders for PBS programming.” And with that, Sesame came to me and said, “Would you represent our programming as well?” They then said, “We want to start our own kind of sponsorship group.” So now I’m responsible for getting the funding from government, private foundations [and] corporates.

KWHS: The interesting thing here is that there’s really a lot of business that goes on behind the scenes.

Stewart: Yes.

KWHS: It’s not just the television show we all see, but there’s really a strong business tie.

Stewart: Yes, yes. We’re kind of the envy of a lot of not-for-profits because we do have the licensing business and the sponsorships [where] we’re working with companies. It’s difficult because we are a not-for-profit [which means we are dedicated to the public good]. We have to be careful of the sensitivities and not being too commercial. One of the reasons I’m here at this conference on financial literacy is because we’re doing a major program with PNC Bank in the United States on financial literacy, having the Muppets explain saving, spending and sharing. I love what I do. It’s fantastic because I’m able to use all my talents from teaching and working with our folks who are educators in our organization, as well as working with corporations. I always like to call it “solving the puzzle.” What are the key questions or what are the key areas that our funders are looking at? And how can we help fill that and work together truly as a partnership?

KWHS: I can’t let you go without asking who your favorite Muppet is.

Stewart: I know everyone nowadays says Elmo, but my favorite Muppet is Big Bird. I’m tall, he’s tall. I’m kind of frenetic and he’s very calming, so that’s why I truly like Big Bird.

KWHS: Thank you for joining us today.

Stewart: Thank you.

Related Links

• Sesame Workshop
• Sesame Workshop Promotes Anita Stewart
• New York Times Article Collection: Sesame Workshop
• Child & Youth Finance International

You’ve got to appreciate the candor of some high school students. Let’s face it, when it comes to technology, they love what they love. Take, for instance, Chris Knieste, a junior at Half Hollow Hills High School West in Dix Hills, N.Y. When his school paper, The Roundup, asked him recently to comment on his feelings about Netflix, he said, “Netflix? It’s one of the most worthwhile uses of my parents’ money ever.”

‘Nuff said.

Or is it? It seems the streaming media and DVD rental provider has seen better days. A Forbes.com article published this week asks, “Is Netflix about to be a has-been? Suddenly, problems seem overwhelming.”

Content Partners, Competitors, Customers

Netflix is facing renewed scrutiny over its business model after announcing poor first-quarter results last week. The Los Gatos, Calif.-based company reported a $4.6 million loss in the quarter ending March 31, compared with a profit of $60.2 million in the year-earlier quarter. Its revenues, meanwhile, grew 21% from $718.6 million to $869.8 million. Following the news, the firm’s stock price has fallen. This week, Viacom CEO Phillippe Dauman indicated that Netflix will still carry content from Viacom’s Epix cable channel, but not necessarily on an exclusive basis, which caused shares to drop again.

Clearly, Netflix has yet to recover from its recent 60% price increase and failed attempt last September to spin off its DVD delivery business. The company’s U.S. customer base has eroded from 24.6 million last June to 23.4 million currently. (It also operates in Canada.)

Netflix’s problem is threefold: content partners, competitors and customers, according to Wharton operations and information management professor Kartik Hosanagar. “First, it was obvious that Netflix’s original margins were not sustainable in the long run,” he says. “Netflix secured some of its early [content] licenses at very low costs, and it was clear that the content owners would seek more the next time around.” That explains why the company’s costs have gone up over the last year — and the situation is unlikely to get better, he adds.

Increased competition is Netflix’s second hurdle, says Hosanagar. He points to the likes of Hulu and Amazon and also to streaming services being introduced by cable-TV firms like Comcast. “This competition will only get worse in the next 12 to 24 months.”

Customer loyalty represents Netflix’s third problem, he notes. “Customers used to be Netflix’s biggest strength.” But the past year “hasn’t been great for Netflix” because of several missteps — the most important of which were the debacle with pricing and the spinoff plans, he adds.

Netflix’s solutions lie in continuing to grow its customer base and “up-selling existing customers” — or launching higher-value offerings — to address the partner and competitor issues, Hosanagar says. “Going forward, the key to Netflix’s success will be to win back customer confidence. Investor confidence and Wall Street will follow.”

Filmmaker James Kerwin took a dour view of the business model behind Netflix’s streaming business in an interview with Knowledge@Wharton in January 2011, soon after Netflix announced its offering of streaming movies and videos. The company’s model is not economically sustainable, he noted, because studios will find that streaming rights cannibalize their DVD sales. He also warned that fee increases were inevitable: “Netflix is going to have to jack up the rates that their customers pay and/or they are going to have to limit the number of videos that a customer can stream per month — because the studios are going to start demanding higher rates. Otherwise, this is just going to implode.”

A Whole Lot of Hype?

According to Wharton legal studies and business ethics professor Kevin Warbach, much of the criticism of Netflix “is overblown, just as the company was over-hyped earlier.” Netflix is still fundamentally well-positioned to exploit the ongoing transformation of video, he says. “Ultimately, Netflix will have to provide value-add, whether in its recommendations, knowledge of its users or ability to function as an independent ‘honest broker’ unaffiliated with all the other industry segments involved,” he notes. “The basic function of getting any content users want to any platform, whenever users want it, will become the table stakes.”

Technology companies, including Netflix, are increasingly adopting the concept of customer lifetime value (CLV), Wharton marketing professor Peter Fader noted in a recent Knowledge@Wharton article. CLV is a marketing formula based on the idea that firms should spend money up front, and sacrifice initial profits, to gain customers whose loyalty and increased business will reap rewards over the long term. According to Fader, following a CLV model can keep companies from panicking when making big strategic decisions. An example he offers is Netflix’s move to raise subscription prices as its business focus shifted from offering DVDs by mail to the streaming model. In Fader’s view, Netflix was smart in the way it split its business and pricing, but not so in the way it announced those changes.

Still, for Netflix, such “screw-ups are a blip,” he said. “Dropped subscriptions are likely to be picked up again because Netflix really doesn’t have a comparable competitor.” Will that change as companies like Hulu, HBO, Amazon.com, Google and other start-ups are working on competing services? Netflix fan Rohan Savargaonkar, a sophomore at Half Hollow Hills High School West, certainly hopes not. As he told The Roundup: “I love it, and I’m addicted.”

Questions

What decisions did Netflix make in recent months that caused increased scrutiny – and possibly, net losses.

What are Netflix’s primary challenges?

What is customer lifetime value (CLV), and how does it relate to Netflix’s business model?

Let’s Hear Your Comments!

Do you prefer Netflix, Hulu or another streaming service? Post your comments to the story and on our Facebook page at http://www.facebook.com/whartonhs.

Related Links

• Forbes.com: Is Netflix About to Be a Has-Been?
• Knowledge@Wharton Today: Netflix: Two Companies, Double the Headaches?
• Marketwatch: Netflix Shares Down 7.5% on Viacom’s Epix Remarks
• K@W: Filmmaker James Kerwin on the Future of Independent Film Making

Young entrepreneurs are providing innovative products and services around the world. In this, the first of a series of articles on global entrepreneurship, Knowledge@Wharton High school profiles Matías Doublier, 19 and the co-founder of ElectryAlg, which is creating electrical energy through algae for areas of rural Argentina. 

Matías Doublier, 19, has his own company, has won an award for his invention in sustainable energy, and has had discussions with the U.S. ambassador to Argentina. Before completing secondary school, he already knew what he wanted to do with his life — to develop his own business involved in renewable energy, or energy that comes from natural resources such as sunlight and wind.

“Just after I turned 18, I started to work in a nonprofit organization called Emprear,” notes Doublier, now a student of business administration at Austral University in Argentina. “It was a good field in which to learn, and to look for a way to create my own company. Before that, I had finished an administrative apprenticeship in a company, and I realized that I did not want a working relationship in which I was dependent [on someone else’s company].”

Algae Innovation for Communities and Schools

Emprear is a nonprofit organization that, in part, supports entrepreneurship. In Emprear’s factory for ideas and creativity, Doublier got to know Jorge Fossati, an engineer who had arrived at the nonprofit via another project. Both became enthusiastic about the idea of researching algae and its potential for providing electrical energy, so they put together a working team. “We spent all of 2011 on the research,” says Doublier. “We found out that the United States was trying to get 7% of electrical energy from algae. We wondered if we could do the same thing [in Argentina], but on an individual basis. We saw a way to obtain energy for a community of people and for a school. The idea was to help people who had no [electric] lights.” Because of the worldwide energy crisis, 24 out of every 100 people do not have electricity, either because they can’t afford it or because of other factors in their geographical region, according to Doublier.

Doublier and Fossati’s extensive market research resulted in the launch of ElectryAlg, whose goal is “electrical energy through algae.” The company manufactures a bioreactor that, through the use of biomass (algae), generates electricity for use in homes, schools and small factories. “The unique factor is that the energy is 100% renewable and green,” says Doublier.

In Argentina, algae can be cultivated in swamps, streams or in large basins with water. “After that, they process the algae to obtain oil, and that oil goes into the motor [of the bioreactor]. We also have an opportunity to use laboratory algae. The plants [in the lab] double in size every 72 hours, so you can begin to produce electricity in just a few days,” notes Doublier.

One of the advantages of the prototype invented by ElectryAlg is its low cost in comparison with other alternative energy sources. “Our equipment can cost between $30,000 and $80,000, depending on where it needs to be installed. It costs at least $100,000 to create energy with solar panels and much more [than that] for wind power,” he says.

Energy from algae is also more renewable because it does not use lithium batteries, as do solar and wind power. “The only thing about our bioreactor that creates pollution is the combustion of the motor, but the algae consume carbon dioxide, which reduces the harm done to the environment,” Doublier notes.

Last year, Doublier’s project was introduced at the competition for the Global Student Entrepreneur Awards in the United States. These awards are given to high school and college students who have developed successful businesses. To the surprise of everyone, Doublier – the first Argentine to participate in the competition – won first prize in the category of “Best Social Enterprise” as a result of his goal to help rural communities that don’t have electric lights.

“Some 150,000 people participated, but only 33 were chosen,” notes Doublier. “We were not expecting the prize because other companies were enormous, and they operated on an entirely different level. But this [project] opened a lot of doors for us, and it energized us even more.”

Inside “El Impenetrable”

Even after their prize-winning company was up and running, the founders of ElectryAlg faced a major difficulty: “We realized that customers could not buy our product because it was largely targeted at people who didn’t have a great deal of money. We had to seek out governments and foundations in order to make it viable [as a business]. So we began to contact service organizations, municipal governments and medical centers — especially in the north of the country — about acquiring our solution,” notes Doublier.

A foundation hired ElectryAlg to bring electricity to the aboriginal Toba people in the Chaco province of Argentina, in “El Impenetrable,” or The Impenetrable Zone. The region is characterized by wild, thick vegetation, and it is hard to reach and travel across. “We sold the entire solution from the algae to the [bioreactor] device. In this case, with a single motor we were able to generate electric lighting for a group of 50 people. They will also be able to power a refrigerator, freezer and even computers,” says Doublier. He expects to provide his services to hospitals and schools, especially in such northern Argentine provinces as Formosa, Misiones, Corrientes and Santiago del Estero, where there is a great need for energy.

“According to a study made last year, there are 2,500 schools in our country and 100 health clinics that still do not have [electric] light. There are schools that the government sent laptops to, but they don’t have light,” states Doublier. “That sort of thing also happens when a foundation donates a device to a medical clinic that doesn’t have any electricity. This is contradictory. The government has to take charge, but we can’t wait until they do that. There are companies that are worried about this, and can do something for their localities and the places where they work.” ElectryAlg is developing prototypes in its factory and it is looking for new employees to expand its production capacity.

On March 28, Doublier met with Vilma Martinez, the U.S. Ambassador to Argentina, because “she called me and said that she was impressed by my project.” During his visit to the U.S. Embassy, Doublier also met with Mark Cullinane, an American advisor for environment, science and technology, and Ryan Janda, an official in the economics section of the U.S. Embassy. They promised to help Doublier “get in contact with a private-sector company that could be interested in our work,” he says.

Doublier, who is also a junior advisor for Emprear, offers this advice for his entrepreneurial peers: “The main thing is not to do what people tell you to do, but to do what you believe you need to do. If you want to be a policeman, be an entrepreneurial policeman. You have to do what you like in a responsible way, and if you can help people, so much the better.”

Questions

What is renewable energy?

What has been one of ElectryAlg’s most significant challenges and how did the company address it?

What is a social enterprise and how does ElectryAlg fit into that category?

Let’s Hear Your Comments!

Are you working with renewable energy? Post your comments to the story and on our Facebook page at http://www.facebook.com/whartonhs.

Related Links

• Scientific American: One-Quarter of the World’s Population Lacks Electricity
• Green Clubs of America
• News and Resources on Green Collar Jobs
• Newsweek Solar Energy Education Site
• CGR Energy Education
• CNN Tech: Algae: The Ultimate in Renewable Energy
• Global Student Entrepreneur Awards
• Vilma Martinez Bio

In April, hundreds of people related to the finance sector convened in Amsterdam, the Netherlands, for the Child & Youth Finance International (CYFI) summit. The CYFI event was the first of its kind to bring together youth and senior-level representatives from across various sectors to discuss financial inclusion and education for youth around the world. Some 70 youth summit participants, primarily high school students representing 40 countries, discussed how to shape and define the future of finance. They also engaged directly with policymakers to share their views on youth financial literacy. Their policy recommendations included:

• Create awareness of youth finance. In order to reshape the future of finance, knowledge and education must be spread around the world.

• Provide financial education. Establish a mandatory financial curriculum that is taught in all schools for students age 12 and above.

• Encourage youth-led enterprises. Banks should offer low-interest loans to inspire youth to make money based on their own ideas.

• Child-friendly banking. Youth should be able to open bank accounts without a parent’s signature, and banks should create special child-friendly bank account cards for ATM machines.

During the summit, Knowledge@Wharton High School caught up with Tom Rosen Jacobson, a 16-year-old 10^th grade student at the International School of Amsterdam who participated in the youth policy meetings. Not only did the summit increase Jacobson’s awareness of global child finance issues, but he also learned valuable lessons in teamwork and collaboration.

Below is an edited transcript of the conversation.

Knowledge@Wharton High School: Thank you for joining us today.

Tom Rosen Jacobson: No problem.

KWHS: What brings you to the Child & Youth Finance International Summit?

Jacobson: It started out with my mom [speaking with one of her friends] who is one of the organizers of this summit. She said, “If you know anybody who would like to come, please tell us, because we want to get as many people as we can.” So my mom asked around and eventually, she came to me as well. I thought it would be fun to do. That’s how I ended up here.

KWHS: What did you do here? Tell me a little bit about the summit from a youth perspective.

Jacobson: We started out the first day with getting to know each other, so we played a lot of social games.

KWHS: And who was here? How many students?

Jacobson: Over 70 from [40] countries. It was a lot of different nationalities in one place.

KWHS: You started out talking about financial issues. Tell me a little bit about how the couple days went.

Jacobson: Our groups had to think about very broad questions. An example would be: What is money? or Can money be used or abused? As the day progressed, we started thinking about specific things heading more toward this day, when we would be presenting our thoughts to the [adult policy-makers at the summit].

KWHS: How did you end up defining child finance? That seems like a really big term. What were some of the things that you got into with that?

Jacobson: My main point was: How can we make child savings or child bank accounts more accessible to parents as well as children? And in general, [how do you] make it more common so that children will benefit from the many good, positive options that child saving has to offer?

KWHS: Have you had a savings account before?

Jacobson: Yes, very early. When I was born, my grandfather opened up a savings account for me, and since then, I’ve opened up my own at quite an early age.

KWHS: And continued to put money in there?

Jacobson: Yes, of course. That’s the Dutch habit of always wanting to put more and more into your bank account.

KWHS: What do you feel were the key lessons learned for you during this conference? You were here with a bunch of other youth from around the world and lots of high school students. What do you take away from this?

Jacobson: The most important thing was that we were able to understand each other. There were people coming from very poor environments as well as extremely rich environments — completely polarized people. It was really good to learn that no matter what our financial situation was, [we were able to work things out together].

KWHS: Do you plan to go into a career in finance?

Jacobson: I’m not planning to at the moment. I’m focusing on producing music and mixing music because that’s one of my many interests that I’ve been enjoying since [an early age]. I’ve been playing a lot of instruments.

KWHS: Such as?

Jacobson: Violin and guitar and also drums. So I wanted to take that to the next level and make sure I keep doing what I like because that’s what I believe is the most important thing to do.

KWHS: Find your passion.

Jacobson: Yes.

KWHS: Did you also have fun at this summit?

Jacobson: Yes.

KWHS: It was enjoyable? Not just a lot of hard work?

Jacobson: It was very enjoyable. Of course, the things we discussed are not to get you narrowed down to a career in finance. The things you learn here can be used in any case whatsoever — in daily life as well as in the big decisions you make. For example, [you can apply these lessons when figuring out] what job to take or what university course to take. The things you learn here and the friendships you make will last forever and can be used anywhere, regardless of whether you want to have a future career in finance or not.

KWHS: If you had something that you wanted to say to other teenagers around the world about finance or about what you learned here today and this week, what would it be? What message would you like them to hear?

Jacobson: It would definitely be that even though it might not seem this way, children of our age can [be] a huge inspiration for others whom we might see as inspirations ourselves. And the other thing is that it doesn’t matter where you come from or what you believe in or what’s around you, you will always be able to agree and laugh and talk with others who might be completely different, and come out with one very good final product.

KWHS: Tom, thank you for joining us.

Jacobson: No problem, thank you.

Related Links

• Child & Youth Finance International
• Amsterdam News
• The International School of Amsterdam
• New York Times: Working Financial Literacy into the Classroom

Melvis Mirazi, 17, is a senior at Zwelibanzi High School in Durban, South Africa. She traveled to Amsterdam in April along with other members of the Young Girls Network, a group that promotes financial literacy among young people in South Africa, to participate in the Child & Youth Finance International (CYFI) Summit. The CYFI event was the first of its kind to bring together youth and senior-level representatives from across various sectors to discuss financial inclusion and education for children and youth around the world. Mirazi and her 70 fellow youth summit participants, which represented 40 countries, engaged directly with policy-makers to share their views on youth financial literacy. During the summit, Knowledge@Wharton High School sat down with Mirazi to find out her thoughts on saving, spending and sharing her money.

Knowledge@Wharton High School: Thank you for joining us.

Melvis Mirazi: Thank you.

KWHS: What brings you to the Child & Youth Finance International Summit?

Mirazi: I’m here to represent my country, to gain knowledge and to know more about finance and savings so that I can go back home and let other children know. If it were possible, we would have asked all the youth to come, but I am here to represent all the youth in South Africa and to represent the network that I am a part of.

KWHS: And what is that network?

Mirazi: It’s called the Young Girls Network. When we started, they had a program that they ran in all the schools. It was called Teach a Child to Save. So, they ran the program and got learners to give their ideas on how children could be taught to save. We were also part of an initiative by a local bank. They went into schools, recruiting grade elevens to come up with business ideas and start their own businesses and they would get financial help. I was chosen [to come to Amsterdam] because I participated in all of those programs.

KWHS: Have you done a lot of saving back home and have you done a lot of thinking about why you want to save money?

Answer: Yes, I started saving money when I was in grade 10. But I didn’t have access to a bank account because I didn’t have an ID and I was still under the age of 16. You need to be 16 years old in order to open an account.  So I started, and I save the little I get for basics like things I might need at school. Mostly I save to help other people who can’t afford as much as I can.

KWHS: You use your money in that way?

Mirazi: Yes, I do.

KWHS: Can you give me an example?

Mirazi: I have this friend I go to school with. I met her last year and she wasn’t doing well in school; she was performing poorly. I asked to be her study mate and that’s how we became friends. I basically look after her. She’s my friend, but I feel more like a mother.  Whenever I go to town, I buy stuff for her, [like a pencil bag for her pencils]. I buy lunch for her because she doesn’t really get enough food at her home. So I use my money to help other people, because I feel I can do more to change another person’s life.

KWHS: Tell me what you learned most here at the youth summit that you would like other teenagers to know around the world.

Mirazi: I learned that it’s important that we save. The government should also acknowledge the fact that we as youth need financial inclusion. I learned that saving helps you to be financially stable in the future. And if we start now, we’ll grow into healthy habits. When we grow up, we will be financially stable and we’ll be able to teach our next generation.

KWHS: What is next for you? Have you given any thought to your future and what you might like to do with your savings?

Mirazi: I don’t think I’ve made enough savings to take me anywhere, basically, because I do not have access to an account and the allowance I’m given at home is not that much. But my grandmother saves for me. I’m in the last grade of high school, so I’m looking for scholarships to go study at a university, because the money that my grand saves for me is not enough. It’s barely enough for registration fees. I’m planning to work as hard at school as I’m doing to get good marks in all of my subjects and hopefully get a scholarship and go to university next year. I want to do forensic engineering or forensic sciences because it has not been widely introduced in South Africa as of yet. It’s so in demand, and I want to start my own laboratory. [I want to own] my own business and be able to work in coalition with the government and the justice system of South Africa in order to reduce crime.

KWHS: When you go back home, what are some of the messages that you’ll tell your classmates, your friends, your family about youth finance and saving?

Mirazi: Before we came here, we [went] to radio stations and newspapers because we felt we couldn’t reach everyone. We went to the media and told them about our trip here. When we go back home, we’ll be holding seminars. We’ll go around to schools and talk to our finance minister so that we’ll be able to get sponsorship to go around the province preaching the [message] of saving and teaching children how to save. Hopefully, we’ll go to banks and tell them to go around to schools recruiting learners to have bank accounts.

KWHS: You feel you now have a voice?

Mirazi: Yes. There are some schools we won’t be able to reach, but then we will reach them through media such as newspapers and radio. My friends will start what we call a stokvel, where we all contribute some amount of money. Sometimes people don’t want to save when they’re all alone because [they’re] tempted to [spend the money]. When you do something as a group and as a unit, you have this one understanding. If I feel I’m tempted, my friend might say, “Oh no, look at this. You know we plan to do this with our money.”  They get you back on track.

KWHS: What exactly is a stokvel?

Mirazi: A stokvel is when people come together every month or every day as a group of 10 maybe or as a whole class and put our money in one place. Adults also do it. They come together every month, they put in their money and at the end of the year, they get the money back, so it’s 12 times as much as they put in every month. They take it from their income. It’s really popular, and it has been our culture [in South Africa] to do it that way. I think that’s how we’ve learned to save because we say, “Oh, let’s join the stokvel.” We put in money, we write our names and how much money we save every day, and then every month or every year-end, we get our money back and are free to use it as we like.

KWHS: You’ll do some fun things with your money too, right?

Mirazi: Yes, most probably.

KWHS: Like?

Mirazi: I want to buy a laptop for my studies. I’m not a spending person because I believe I already [have] what I need right now.

Related Links

• Child & Youth Finance International
• South African Language and Culture
• South African News
• South Africa’s Youth Discover a Path out of Poverty
• The Storied Career of a South African Supermarket Mogul
• About Entrepreneur Raymond Ackerman
• The Power of Chicken Feed to Build Wealth in South Africa
• The Economist Country Briefings: South Africa

When Bill Rasmussen launched ESPN on September 7, 1979, he gave the world its first 24-hour television network and changed the way people viewed both television and sports. A life-long entrepreneur and sports fan, Rasmussen’s innovations include the creation of the daily sports news television show “Sports Center,” wall-to-wall coverage of NCAA regular-season and March Madness college basketball, and coverage of the College World Series baseball tournament. Two years ago, he authored a book titled, Sports Junkies Rejoice! The Birth of ESPN. Rasmussen recently talked with Knowledge@Wharton High School about the challenges of founding a 24/7 sports network in the face of nearly universal skepticism, what entrepreneurs need to succeed and why he doesn’t ever plan to retire. 

An edited transcript of the conversation follows.

Knowledge@Wharton High School: We are pleased to have Bill Rasmussen, the creator and founder of ESPN, here to speak with us.

Bill Rasmussen: Thank you. I’m looking forward to it.

KWHS: When you created and launched ESPN, what was your vision at the time, and how close is that vision to what we see today?

Rasmussen: I had this feeling that people were really interested in sports because I was. If I’m interested in it, everybody must be, right? But it turns out that was the case. We had enough evidence that people were interested in sports, and we thought sports 24-hours-a-day addresses a lot of [what] I thought the networks were missing.

In the 1970s, television was New York-centric. They had the news go on at 11 p.m. because they figured everybody would go to bed [after that]. Those who stayed up late could watch the late show. But still, at 1 a.m. in the morning, we signed off. I was working at a local NBC station, and at one in the morning we would say, “You’ve been watching, thank you very much and here’s the national anthem and so on.” But there are a lot of people who work different shifts. They work from 11 to seven. Some people work overnight. Some people work from the middle of the afternoon and they miss all of the things like movies and news and the other good things that people would enjoy, and sports.

In the late 1970s, the three big networks, ABC, CBS and NBC, only did about 25 football games a year. Can you imagine life with only 25 football games televised in a year? We said, “Well, we’re going to do them all the time. We can just do more football than anybody.” As an aside, I raised that question a year ago when I was up at ESPN for one of their anniversaries and reminded them that when we started, that’s what the networks were doing. George Bodenheimer, the president, looked over and nodded at somebody because he knew I was going to [ask] how many they are doing today. That particular year, 2010, they were doing 417 college football games on ESPN alone.

We started off to be a sports source no matter what time of the day anybody wanted to tune in, whether it was for a game or news, sports scores, whatever. The idea was that if you came home at three in the morning and if you had just been out with your neighbors for dinner at 7:30 and didn’t want to watch whatever the networks were offering, you could come and find some sports. And so Sports Center, of course, filled a great need. There have been more editions of Sports Center than any other show in the history of television. People must like the idea. From then to now I don’t think it’s changed really very much at all. What has changed is the technology to deliver the same message that we came up with then, and that is sports, sports and more sports.

KWHS: That was one of those questions that I remember you got [early on]: “Who’s going to watch sports 24/7?”

Rasmussen: It’s just amazing. 24/7. That’s 8,760 hours a year. That’s a lot of sports, especially when the big three networks combined were only doing 1,300 hours back in those days. But then when talk came up of a second ESPN, [some people said], “Oh, now that’s way too much saturation. Now seriously, nobody’s going to watch. How many people are going to watch?” Well, today ESPN alone, not counting all of the other people who do sports, has 52 networks around the world, 24/7. People must like sports.

KWHS: So take me back to the late 1970s. With the media landscape the way it was — there was no 24/7 network at all — what made you think that this could be successful? [How could you] compete against the sports network behemoths?

Rasmussen: The big guys basically dominated television for 28 years. Television sets in those days, and it’s hard for a lot of folks to remember this, only had 12 channels. That’s all you could get. There was no set top box that could magically bring other things from around the world. And because of the FCC regulations of the day, many of those 12 channels were occupied by the big three networks because if any of their signal touched a franchise area, the franchise had to carry it. So it was not uncommon to see two ABCs, three NBCs and two CBS stations. I mean you could just go up and down the dial. So that only left five channels for everybody else. Basically cable television in that era was really nothing more than signal enhancement — taking a signal that they could get at a tower someplace and sending it off to people who couldn’t get a good picture of the three big major networks.

Fortunately for us, the powers that be at the major networks decided that this was it. They had conquered the world, and nothing was ever going to change. Their dominance was there, and it was going to be that way forever. Well, as you and I know, nothing’s forever. Things change. We challenged them. They felt we were crazy. They all said it wouldn’t work. “Who’s going to watch?” Suddenly we found that we were tapping into what I felt then, and obviously has been confirmed over the years, to be the biggest demographic swath you could imagine. It’s not men 25 to 34. It’s not women of a certain age or kids. Our demographic was sports fans. At ESPN to this day, on the back of their card, their mission statement is to serve the fan. So we had a demographic area that [included] north, south, east, west, young, old, male, female, rich, poor, whatever…. If you think about it, that is about the biggest demographic you can find other than being an American, for example. We’re all Americans. Okay, but probably some 90% of us also have a team we root for, and that’s the market that we went after.

KWHS: You were talking about the big three networks back in the 1990s. Why is it that we could not find ESPN in the TV Guide in the early days?

Rasmussen: Because of the development of the network industry, the big three basically controlled TV Guide and Nielson. We couldn’t get Nielson to rate programs, either. They would not go out and audit for viewership until well into the 1980s. We kept after TV Guide, and kept after them and after them [until] the vice president said, “We won’t list you because real networks only have three letters.” How’s that for kind of a jaded view of the world? In other words, the people who are paying our bills are the only ones that count, and they all have three letters. When they finally did list us, they in fact listed us as ESN. They made us a three-letter network for a short while, but of course that turned into ESPN eventually.

KWHS: They finally woke up and smelled the coffee.

Rasmussen: Exactly.

KWHS: ESPN was not your first entrepreneurial venture and has not been your last. What does it take to give an entrepreneurial opportunity the best chance to succeed?

Rasmussen: First of all, being in our country is great. We don’t have to go and ask permission to develop a new idea. My first one was back in 1959. If you’re curious and you ask enough questions, you’ll say, “Wow, nobody’s doing that. How about let’s try this.” The problem with “Let’s try this” is sometimes it doesn’t work. Most times, it doesn’t work.

But if someone wants to be an entrepreneur and they’re not curious and not passionate about what they want to do, they’re not going to succeed. I’ve been curious my entire life, asking questions [about] why doesn’t this work and how does that work and why can’t we do this. The first company was an advertising service company. And [you also need] passion. If an entrepreneur says, “Gee, I’ve got an idea. I think it’s going to work. I think I’ll go ask someone. I’m going to see if Derek would like to invest in my idea.” And then I say, “Derek, well, I think this might work,” you’re probably not going to be too enthused. But if I come to you and say, “Derek, this is just — this idea, I can’t tell you how it’s going to explode upon the landscape.” You might say I’m overreacting a little bit, but you’ll also see I’m pretty passionate about it. So you might say, “I think we’re going to take a ride with this one and see what happens.” All of the sudden we have a success.

I think the culture in which we live let’s that happen. It fertilizes good ideas. Just come up with an idea. Go try it. You don’t have to know everything there is to know about that topic. You don’t have to know any of the facts really. You can find somebody who knows. I don’t know how television pictures fly through the air, but I’ve been fairly successful in television. I don’t have to know all that technical stuff. You just have to have the vision and the passion.

KWHS: I continue to hear this theme of passion from you. And speaking of passion, ESPN is now seen essentially all over the world. So when you look back, 30 plus years after you created this baby, how does it feel to you personally to have created something that is consumed around the world and is part of people’s daily lives?

Rasmussen: That’s an interesting question, and it had never been asked until just recently. I really don’t think about it. Obviously I’m proud of it. It’s been kind of like watching your kids grow up to be successful lawyers, doctors, pollsters (in the case of one of my sons), but it’s amazing. Everywhere I go I see it. You see it in the hotels, you see it in the restaurants, you see it everywhere. People get all excited. They’re talking about ESPN, and I just sit and have my hamburger and don’t say anything. Sometimes I think about, gee, they wouldn’t be here if it wasn’t for that. But I’m not overwhelmed; I’m just kind of incredulous. But I haven’t been there every step of the way.

It was an idea. It’s kind of like asking Edison when he walked into a place with a lot of light bulbs, “What do you think when you look around here and you’re the guy who invented the light bulb?” I don’t know what he would say. And so I don’t really know what to say. But I am proud of it.

KWHS: I was watching ESPN last week, as I do every day, and there was a press conference with Peyton Manning to announce that he was no longer going to be part of the Indianapolis Colts organization. A reporter asked him, “Why are you still going to continue to play? Do you feel that you have something to prove?” Peyton’s response was something to the effect of, “Well, I still like to play. And no, I don’t have anything to prove.” So you’re still an entrepreneur. You’re still involved in new ventures. Why don’t you just retire?

Rasmussen: I tried it once. Retirement’s not much fun. I played golf every day for 21 days and was bored silly. Within a month, I had another company going.

I think if you stop exercising your brain and you stop doing what you’ve been doing along life’s road, you’re probably going to — I don’t know whether you’ll just die instantly. But I’m just curious. I suspect I’m going to be curious about things until I die. I’m fascinated, and I love to see young, enthusiastic men and women getting involved in whatever it is. One of the things that I enjoy is speaking to groups, like the one [I just met with] at Wharton. Meeting the young men and women, [seeing] their enthusiasm, is inspiring to me. So I guess I’ll just keep on doing it. I can’t really tell you why.

KWHS: I’ve taken you forward; now I’m going to take you back to your early days in high school. Were you passionate about sports as a youth, and what led to your passion?

Rasmussen: Long before high school, even in grade school, I was passionate about sports. I could really run. For some reason, I was fast. I don’t look so fast these days, but I was in those days. When the eighth grade team asked me as a fifth grader to play left field because I could run and catch — I had an aptitude for baseball and softball in those days — I was really excited about that. I used to follow the White Sox and the Cubs. My grandfather saw every game of the 1906 Chicago World Series, White Sox and Cubs, the only time they ever played [each other]. He indoctrinated me early on about baseball. I saw Bob Feller pitch on opening day in 1940, and those were exciting things. I was into sports early in grade school, and by the time I got to high school it had long since been a passion. I could tell you about major league rosters and why the Cubs were hated and [why] the White Sox — I lived on the south side of Chicago — were the team of choice.

By the time I was in the third or fourth grade, I was reciting statistics and so on. Luke Appling batted 388 in 1936 and won the title. You probably didn’t realize that, a batting title in the American League. But things like that, they stick. I don’t know why.

But in high school I got to play baseball and just really, really enjoyed it. We played summer leagues and fall leagues. Any time that we weren’t in school, we were playing, right through American Legion and everything. I think people who were involved with sports were very, very active, alive, and they all went on to do great things — not necessarily like ESPN. That even still boggles my mind, as you know, but I think sports spawns competitiveness and makes people want to do things a little bit better. In some cases a lot better. They make it all the way to the major leagues.

KWHS: We’re talking about how you started with your passion in sports as a player, as a participant. Between that time and when you founded ESPN, you were involved in sports from a business perspective. How is it that you became involved in the business of sports?

Rasmussen: I wanted to play baseball, and I had an opportunity at the end of high school. But the very day we graduated, the North Koreans went across the 37th parallel and created a situation where anybody with a college deferment should take that deferment or they would be going into the Army. I wanted to play baseball. I went to college, played some more. Went to the Air Force when I got out, played some more. And by the time I got out of the Air Force, age had started to catch up with [me]. The fact that curve balls are tough enough to hit when you’re young became a factor.

So I said, “Well, I want to be a broadcaster.” I couldn’t do that instantly because in the mid 1950s, radio and television weren’t very much. Each team had its own radio station. New York had three stations, one each with the Giants, Yankees and Brooklyn Dodgers. So there was no opportunity there. I said, “Well, we’ll do something — I’m going to do something in sports before this life passes me by.” On my 30th birthday, I retired from the first company. Retired is a bad word. I just left the first company by agreement with enough money to pursue a broadcasting career. That was one of my first brash steps into the broadcasting business.

I looked in Broadcasting Magazine. They had these little classified ads, station needs sportscaster, call such and such, or newscaster, whatever it was. I found one nearby in Westerly, Rhode Island, and the guy said, “Sure, come on up.” He was looking for a sports director for a new station.

So I went up, and he said, “Well, tell me what station you’ve been at.” I said, “I haven’t.” He said, “Well, what about your background in radio?” I said, “I have none.” He said, “Then what makes you think you can be a sportscaster, and why should I hire you?” And I said, “Because I can [do it], and I’ll be a really, really good one for you.” He said, “You know what, I’m going to hire you.” I started in radio, and that led, within about 15 or 18 months, to television and on and on. One thing led to another, and we did radio networks and a lot of TV broadcasting and then hockey broadcasting. Each step along the way, I was doing independent little networks, trying to figure out how it worked. I didn’t realize that this wasn’t what everybody did. Just seemed it had to be done, so I went and did it.

KWHS: These days, there’s not a lot of mixing between on air personality and suits, the executives behind the business.

Rasmussen: Exactly.

KWHS: But you made a transition, and not a small transition, from on camera or on air to founding a pretty sizable and successful business. What’s the secret to being able to make that type of transition?

Rasmussen: That’s a good question. It just seemed very natural to me. But people say: “Why did you do that or how?” I don’t know how I did it. I was a broadcaster, and I wanted to put a network together that would get the message out to more people than I could do at a local station. The best way to do it is to go hook up some more stations. So I had to figure out how you do that. By the time I was fired from my job at the Whalers, I knew about phone lines and local connections and AT&T and all that. At the same time, RCA Americom had developed and launched the first communications satellite. Not very many people knew about it, and we just almost fell into the idea that we could do something across all of North America with one signal to one point and not have to go through all this television-long-lines business with AT&T.

Back in the 1960s when I was starting in radio and broadcasting and putting networks together, I had learned all that stuff about AT&T. So here was something else to learn — the satellite business. I didn’t even know you called them transponders when we started talking about it, but it doesn’t make any difference as long as you know what it is. It sounds like you’re going to be embarrassed talking about something you don’t know anything about, but you have to ask the questions. And when you’re passionate and they’re telling you, “Yeah, you can do this,” “Okay, we’ll do it,” “Oh, by the way, it’s going to cost a little money,” [then you] just figure that out later. That’s just the way it’s been all my life. I guess I should start to slow down, but I don’t know, it’s too much fun.

KWHS: Going back to your passions, what is your favorite sport and why?

Rasmussen: Baseball, only because I played it forever. ESPN has a great show, Baseball Tonight. Peter Gammons, whom I’ve known for 40 years, does a great job. He has for 40 years, first on the newspaper in the Boston area and now on ESPN.

KWHS: Let’s talk about mentors. Have you had any real mentors in your career, and is there any particular advice that they have given you?

Rasmussen: Back in my undergraduate days, there were a couple of professors who were unique and stood out. Oddly enough, one of them was an American history professor. It was his passion for the Civil War, believe it or not, that led him once a year to hold a two-night class, for want of a better word, where he would do the battle of Gettysburg on two huge relief tables. I mean everything in proper relief and to scale. These tables were 14 to 15 feet long, and he would walk around, his white hair flowing, and you could see his passion oozing everywhere. He knew everything there was to know about it. He had to [hold the class] for two nights because everybody wanted to hear him. This is a history professor. He was just absolutely inspiring.

The other one was a financial organization and investment economics professor. How’s that for an inspiration? He had the same kind of passion. In those days, we didn’t have computers and laptops and all those things. We didn’t have white boards and grease pencils and so on. We had old fashioned blackboards and chalk. He would start by the windows on the blackboard , and he would be going along and he’d ask questions over his shoulder. If he didn’t hear an answer from someone that he had asked [a question to], he would say, “Derek, what about –.” He’s writing and talking, and if you didn’t answer, he would turn around and fire one of those felt erasers. He would hit kids in the shoulder, in the forehead and so on. “Pay attention. Pay attention.” So if this guy is this passionate about numbers and economics, then there must be something to this business of business. I don’t know if you would call these two guys “mentors,” but they were two professors who made monstrous impressions.

KWHS: What’s your advice for young people who may be considering a career in sports broadcasting or, more generally, in the business of sports?

Rasmussen: First of all, sports has to be a passion or they wouldn’t even be thinking about that, whether it’s just they’re curious about being a television producer or an announcer or a lawyer at one of the major networks or whatever it might be. But I think what they have to do is understand, and the best way to understand how sports begins is it doesn’t hurt to start small. Go and be a production assistant someplace. Go to a small radio station and learn all you can learn. Ask all the questions you can ask. And when somebody’s kind of brushing you off and saying, “Yeah, don’t bother me, kid,” just say “Well, I don’t mean to bother you. I really want to know. I have a passion to learn this business, and I want to be doing what you’re doing.” Or I want to do, fill in the blank, whatever they might want to do. And carry that passion into every interview.

And be prepared. If you’re going to ESPN, you don’t want to talk about things that the Cooking Channel has been doing. I’m not putting down the Cooking Channel. If you’re going to the Cooking Channel, you don’t want to be a sports fan. You better know what you’re talking about there. But I’ve just always believed in paying attention, learning as much as you can beforehand. All the facts are not necessary. You’ll learn the facts; you’ll learn the specifics of the business. But whoever it is that you’re applying to has to see the passion, see the desire to be successful. I’m fortunate in that I see a lot of that. You just know they’re going to be successful kids, folks here at Wharton and schools across the country. And then you see others who, you know, they don’t even want to walk across the street unless it’s required. I don’t mean to be putting anybody down, but the people with the passion, the people who ask the questions, the people who are willing and anxious, I guess would be a better word, anxious to learn all there is, they’re the ones who are going to succeed.

What’s amazing [is that] you can pick almost any field and if the youngster has that passion, [he or she] can learn anything. It doesn’t have to be sports. It can be Wall Street. It can be the Cooking Channel. It can be anything. Passion, enthusiasm and never be afraid to ask questions.

KWHS: That is a great note for us to finish up on. On behalf of the Wharton School and the Wharton Sports Business Initiative, thank you so much, Bill.

Rasmussen: Thank you, Derek. I enjoyed it very much.

Clubhouse manager Laurence West

Sometimes a little blurb in the Tuesday paper can change your life.

That was the case for Laurence West, a young Brit who at the age of 24 was working for a business consulting firm in Brighton, in southern England. He was perusing the paper on the bus on his way to work one morning in September 2010, when he happened to see a short article about an NGO called Street Child of Sierra Leone. The organization was doing important work in one of the world’s poorest countries, and they needed some help. West decided to get in touch.

Nine months and several emails later, he stepped off a plane in the small West African nation of Sierra Leone. His job: Use his experience working in the private sector to help Street Child earn some money to support its work with children. West was taking on a brand new position, which meant that he would have to figure things out as he went along. But he was eager for a challenge.

The Suffering of Children

In Sierra Leone, it seems, there are challenges everywhere you look. The country suffered through a horrific civil war that lasted for most of the 1990s, affecting every corner of the nation. Sierra Leone’s children suffered terribly: Many lost their parents or were separated from their families, while some were fed drugs and forced to become soldiers. Thousands of children ended up living on the street, where they started begging, stealing or even selling themselves for sex.

Enter Street Child of Sierra Leone, a charity group that has its headquarters in London. Founded in 2008 by an Englishman named Tom Dannatt, the organization runs support centers for Sierra Leone’s street children — safe houses where the kids can come for food, shelter and training as well as professional help to reunite them with their families. Street Child is also building schools in remote rural areas where many children don’t have easy access to a classroom.

It’s important work, but it requires a steady stream of funding — and that’s where West comes in. To decrease its reliance on money from outside sources, Street Child decided to open up a small network of local business operations — shops, bars and restaurants — whose profits would support the NGO’s work. The new ventures would have a double bottom line: creating financial profits as well as tangible social benefits. While a company’s traditional bottom line measures fiscal performance – profit or loss – a business that seeks a second bottom line wants to measure its performance by the social impact it can make, or how successfully it is giving back.

West’s task was to get those ventures off the ground and make sure that they were well managed. It was a significant undertaking, and it hasn’t always been easy.

Since he arrived in May of 2011, West has spent much of his time managing Street Child’s flagship venture, a bar and restaurant called The Clubhouse, which is located in the booming mining town of Makeni in central Sierra Leone. With its growing population of miners and construction workers — many hailing from places like Australia, South Africa and the United Kingdom — Makeni was ripe for an expat-friendly place to hang out. The Clubhouse is the only restaurant in town where you can buy Western treats like pizza or hamburgers, and it has attracted a loyal crowd of customers since it opened last year.

On a busy night, The Clubhouse can turn over more than four million Leones, or roughly $1,000 U.S. dollars – all in cash. “Because the businesses are cash rich — meaning we have huge amounts of money flowing through them — we have to make sure that we control that tightly on a day-to-day basis,” West says.

‘We Invest in Our Staff’

Back home, cash management and taking stock of inventory would be done electronically, but in Sierra Leone (where electricity is unreliable, if you’re lucky enough to have any at all), it has to be done by hand. So West introduced systems that would allow him and the staff to do just that. At the shops, where they sell things like snacks and toiletries, staff members take inventory once every two days. At The Clubhouse and the other bars, they tally everything up two times each day.

West was also faced with the challenge of training the Sierra Leonean staff — everyone from waiters to cooks to finance managers — to operate at the same standards that he would expect to see in businesses back in Britain. In Sierra Leone, where literacy rates are low and a service industry basically non-existent, this was a tall order. “We invest in our staff, and we train them quite heavily,” West says, noting that all of the hard work has paid off in the form of “absolutely enormous” changes in the staff in the last year. “We got to the point where we were pretty happy with their level of service,” he adds. “It’s just the small details now.”

West, now 26, plans to keep working for Street Child for at least another year. After that, he’s not sure where he will end up. But wherever he is, and whatever job he takes, one thing is for sure: He wants to keep working toward that double bottom line.

Questions

Why was Laurence West a good candidate to work for Street Child of Sierra Leone?

What is a double bottom line?

Why is Sierra Leone an especially challenging place to teach business skills?

Let’s Hear Your Comments!

Have you ever worked for an NGO? Post your comments to the story and on our Facebook page at http://www.facebook.com/whartonhs.

Related Links

• Street Child of Sierra Leone
• About Sierra Leone
• New York Times Topics: Sierra Leone
• Twin Inspiration: A New Magazine Reaches Girls in Sierra Leone
• Economic Community of West African States

During a speech to the National Association for Business Economics in late March, Federal Reserve Board chairman Ben Bernanke said that an improved labor market would depend on stronger economic growth. In other words, the economy has to get better before offers for job seekers start pouring in. Now, more than ever, it is important to get job experience early so that you have a competitive advantage when it comes time to start handing out your career-oriented résumés.

In this essay, guest columnist Casey Slide, who regularly contributes her insights on student life and personal finance to http://www.moneycrashers.com, suggests a number of ways that students can start the job search while still in high school.

Whether you’ve harbored a lifelong dream to be a doctor or a scientist, or enter a university as an “undeclared” major, you are going to have a fairly good idea as to what career you wish to pursue by the time you earn your college degree. However, despite the fact that tuition is increasing, job opportunities are not — unemployment rates for new college graduates are rising, while average student loan debt is now more than $20,000 per student.

With fierce competition in the job market and a need to pay off those hefty student loans, it’s important to take the necessary steps now to ensure that you will stand out from the pack when you apply for highly desirable jobs in your field. Getting job experience while you are young is crucial. By putting forth extra effort to get your foot in the door in your chosen field, you can greatly reduce the likelihood that you will encounter a roadblock that many college graduates must contend with: lack of a track record.

The concept of gaining work experience is often a catch-22: You need work experience to get a job, but you need a job to get work experience. Below, we offer some ways to get around this obstacle.

Start Early

Rachel Miller, 17, has known since fifth grade what she wants to do with her life: “I want to be a nurse and then go on to be a midwife. And I plan to get experience anywhere I can,” she says. Like many high school students, Miller is gaining experience now that will benefit her as she goes through college and eventually tries to land her first job.

High school students have an advantage when it comes to landing a job. First of all, time is on their side. A 17-year-old has more years to gain experience as opposed to someone in his or her 20s. Furthermore, by doing this prior to attending college, a high schooler can know with greater certainty if the career he or she initially aspires toward is truly worth pursuing. Plus, having pertinent work experience can help a student stand out during the college application and interview process.

Volunteer

Many industries welcome volunteers who are willing to help with basic duties. A common example of this is the health care field. In fact, many hospitals offer special summer programs for teens. The tasks are typically non-medical, and include patient transportation, visitor support and visitation coordination. A number of hospitals accept as many as 100 teens for their eight-week summer volunteer programs, such as Children’s Healthcare of Atlanta’s yearly VolunTEEN program.

Complete an Internship

Often, an even better alternative to volunteering is to get an internship. Internships entail more duties than volunteering and often conclude with an evaluation, which reports the progress and success of the student’s work. If positive, this evaluation can greatly enhance a student’s credibility.

While it is definitely a résumé-booster, the downside of an internship is that it requires more of a time commitment than a volunteer position, not only in hours per week, but also in the duration of the program.

Shadow Professionals

An alternative to volunteering and interning is to spend time shadowing a professional. While you won’t be able to put this experience on your résumé, you will be able to network and meet people in your field. Considering that 37% of people found their current jobs via networking — more than any other method — networking is a crucial element to any job search.

Job shadowing also provides a great opportunity to get an inside look at the day-to-day routines and experiences you will encounter in your desired career. This can provide excellent, first-hand insight.

Build a Portfolio

Showcase yourself and your work by creating a portfolio of projects related to your chosen career field. This is an especially useful tactic if you are unable to volunteer or intern in your industry prior to college graduation.

A portfolio can be made regardless of the industry that you aspire to enter, but it is especially important in industries such as architecture, graphic design and art. So start compiling yours early.

Get Involved in Clubs and Societies

When I was in college, I joined Alpha Pi Mu, the honor society for my major, industrial engineering. While a member of this society, I was able to network with many speakers and presenters from my profession. It was also while a member of this group that I met a fellow student who was working as an intern at Walt Disney World and was able to get me an interview. Not only did I land the internship, I walked away with an amazing job experience and was able to network with more professionals. None of this would have happened had I not joined the Alpha Pi Mu society.

Get an Entry-level Position

Sometimes it takes getting your foot in the door at any level to launch a career at a company. For instance, suppose that a job you desire requires two years experience, but you only have one year under your belt. Consider taking an entry-level position with that company to gain the additional experience required for a more desirable position.

Do Temporary Work

In a difficult economy, sometimes it pays to do temporary work. Temp work comprised 26.2% of the private-sector jobs created in 2010, and that number is expected to increase to 36% in 2012. Taking a temporary position gives you and your employer time to test each other out. Sometimes this works well and sometimes it doesn’t. Either way, you’ll gain experience, even if only for a couple of months.

Highlight Your Project Work

If you haven’t worked directly in your industry, you likely have done work in the classroom. Include applicable school experience and projects on your résumé and in interviews. While this does not count as professional experience, it is still valuable and can demonstrate your skills, creativity and leadership.

When it comes to getting a job, often it’s not what you know, but whom you know. Always remember that networking is key, and make every effort to meet and work with as many people in your industry as possible, starting at a young age. By being diligent, enthusiastic and keeping an eye out for every opportunity, you will gain critical experience that will allow you to blossom into a highly desirable professional in the years to come.

Questions

Why is so much emphasis placed on job shadowing, internships and volunteering?

What is temp work?

Why is getting early job-related experience especially important today?

Let’s Hear Your Comments!

Have you had an internship or job shadowing experience? How did you get it? Was it successful? Why or why not? Post your comments to the story and on our Facebook page at http://www.facebook.com/whartonhs.

Related Links

• New York Times: Weighing Costs, Companies Favor Temporary Help
• Money Crashers: 10 Steps for How to Get an Internship or Summer Job for College Students
• Money Crashers: 16 Steps to Find the Right Career
• KWHS: The White House Helps Teens Get Jobs
• KWHS: Conservationist or Venture Capitalist: Internships Help You Choose Your Path
• KWHS: The Fed Revealed: Understanding the Dangers of Monetary Policy
• National Association for Business Economics

Peter Hand is an investment analyst with the North American Equity Team at Aberdeen Asset Management in Philadelphia. Hand joined Aberdeen full-time in 2010 as a graduate business analyst, having interned with the North American Equity Team in 2008. Previously, he worked as an economist for the Department of Homeland Security in Washington, D.C. Hand graduated with an economics degree from Princeton University in 2009. He sat down with Knowledge@Wharton High School editor Diana Drake to discuss financial ratios and how they help to inform investment decisions.

Below is an edited transcript of the conversation. 

Knowledge@Wharton High School: Peter Hand is an investment analyst on the North American Equity Team at Aberdeen Asset Management in Philadelphia. He’s going to help us understand financial ratios, and what investors should watch out for. Peter, thank you for joining us.

Peter Hand: I’m happy to be here.

KWHS: Before we get into the nuts and bolts of financial ratios, tell us a bit about yourself. What is an investment analyst on the North American Equity Team? What do you do?

Hand: We’re about a dozen people, split between managers and analysts. We have meetings with corporate management teams, either over the phone or in our offices. Sometimes we go to their offices, in the hopes of finding out things that you can’t necessarily discover through [the company’s] financial statements. We want to see if we think the business is investable for the long term and if it’s a business that we want to be involved in.

We have multiple meetings with management teams of companies we hold in our portfolios  [collections of varied investments] as well as companies we don’t hold. We occasionally have meetings with sector-specific analysts, who can give us deeper insights into sectors that we don’t know about. [An example is] the health care sector, where it’s very regulatory-driven, or where a specialist might not know what drives the markets. We have meetings and do in-depth research on companies that we think are investable for the long term.

KWHS: Describe your career track. How did you end up at Aberdeen?

Hand: I first discovered Aberdeen when I was a junior in college. I held an internship with the North American Equity Team. I graduated in 2009 and was unable to get a job in the financial markets. I went down to Washington, D.C., to work as an economist for a year and returned to Aberdeen a year later, which eventually led me back to the North American Equity Team.

KWHS: You had an internship as well?

Hand: Yes, I interned originally in 2008. That was my first exposure to the company.

KWHS: Was that useful in helping you figure out what you wanted to do with your life?

Hand: Yes, absolutely. An internship is an invaluable experience. They say entering college that nobody really knows what they want to major in, or what they want to have as a career track. As you progress through college, you start to figure out what you think you might want to do. An internship is an integral process in discovering [whether or not] a career is right for you. Is this something I could see myself doing in the long term? For me, it was. For me, it was a great experience. I had a great time with the people I worked with. I thought it was a great corporate environment, and that’s what led me to come back.

KWHS: Onto our investment lesson. What are financial ratios?

Hand: Financial ratios are what they sound like. They are ratios of two different metrics that can be combined into one metric to give you a sense of how a company is faring, or how a company compares in terms of valuation [an estimate of what a company is worth] to another company. They are metrics that can be used to help you compare companies across sectors, or companies with competitors, or just get a sense of how companies are performing — how companies are evolving and driving profitability [making money after all expenses are paid].

KWHS: What can they tell you about a company’s performance and its health?

Hand: A wide range of ratios covers different characteristics of companies. There are profitability ratios, which tell you how profitable [companies are]; how much profit they make per dollar of sale, or how much profit they make in relation to the assets [property of some kind owned by a company that has value] they hold, or to the equity [the value of an ownership interest in property] that shareholders hold.

There are debt ratios, which tell you how much debt [an amount owed for funds borrowed] they have compared to how many assets they have. This gives you a sense of how companies will be able to meet their financial obligations going forward, whether that is through interest payments, or if they have convertible securities, where debt can become equity. That changes the way the company can be classified in terms of liquidity [a company's ability to pay its bills from cash or from assets that can be turned into cash very quickly].

There are ratios where you can compare companies in the same sector to each other, in terms of whether one company is more profitable than the other, or whether one company is fundamentally becoming better than another, based on how the ratios are evolving. They are a means of comparison, for which you really need a benchmark [a standard against which performance can be measured]. Ratios by themselves are not necessarily useful, unless you have something to compare them to – whether it be historical ratios or ratios of another firm.

KWHS: How do financial ratios help inform investment decisions?

Hand: They play an integral role in not only security analysis, looking at an individual company, but also in comparing company A to company B. They give you that ability to say, “Okay, this is how the company has changed through time.” Is it getting better? Are the fundamentals deteriorating? Are we concerned that the company is taking on too much debt and won’t be able to service its debt load?

You can also compare companies to each other. Is one company more profitable than another? Is one better managed than another? You can tell that, based on a company’s return on assets, or return on equity, or gross profit margins [proportion of money left over from revenues after accounting for the cost of goods sold]. You can see how much space a company has to improve, based on how its competitors are faring. You can get industry trends out of these ratios, but also company-specific trends.

KWHS: Is any one ratio more important than another?

Hand:  It depends on what you’re looking at. We [regularly] look at operating margin, which gives you a sense of how much profit a company is making. For each dollar of sales, how much of that is profit for the company? That is one of the underlying drivers of earnings for a company. That, coupled with top-line revenue growth, or how much sales increase every year, is the driver of earnings for any company.

But then you can also look at the company’s debt-to-equity [ratio], which is the total amount of debt, divided by the total amount of debt plus equity, which tells you how much the company owes, or how much its obligations are in relation to its total equity, or total assets. If you look at that and a company’s income, it’s going to give you a sense of how it will be able, going forward, to pay its debt. The last thing you want to see one of your companies do is go bankrupt — be unable to pay off its debts. Keeping an eye on these ratios can [tell you if] this company is going to stay profitable. Can it stay healthy?

If you are looking at valuations, a very common [ratio] is price-to-earnings, or p-to-e, which takes the price of the stock divided by the earnings-per-share. That gives you what we call a multiple. Certain sectors will have multiples that are considered normal. A company that’s trading above normal, unless they have superior fundamental characteristics, would be expected to regress towards the normal multiple. A company that’s below multiple, or below normal, is considered probably a less well-run company, a lower-quality company. People would look for the company to be improving through time, to move up to that multiple.

KWHS: You’ve talked about some of the strengths. Do financial ratios have limitations, as well?

Hand: Yes, certainly. One of the main limitations is that by themselves, the ratios don’t mean much. You have to have some means of comparison, whether it’s the historical ratios from that same company, or the ratios from another company or a set of companies, by which you can compare. If you want to compare company A to company B, ratios are very useful. But if you just look at company A’s ratios at one point in time, it’s meaningless.

Management can also manipulate certain things on the income statement or balance sheet, so they don’t reflect the true state of being. There are ways to defer revenues or expenses into future periods. Management can manipulate these ratios so they appear better than they are, or even worse than they are. [Ratios] are not a guarantee of the actual state of the company.

KWHS: All of this is a lot of information to process. How did you learn it? You didn’t step into this industry and overnight know everything. Has there been a strong learning curve? Who has influenced your career the most?

Hand: It’s an ongoing learning process. I think that’s true for myself and even for the managers who have been doing it for 25 years. The great thing about the industry is that you never stop learning. Covering a dozen sectors and thousands of companies, there’s always something new that pops up that you didn’t know before. Receiving the tutelage of people I work with — the older managers, but also people my age who know things that I don’t know — has been very beneficial. Doing a lot of work on these companies, and putting time into understanding how the market works and how the market evolves over time, is invaluable. It’s a lifelong learning experience.

In terms of people who have influenced me, there could be any number of answers to that question. All the people we work with are keen to provide knowledge that they have to the younger guys like me. They know that we will be the future of this business going forward. They want us to know everything they know about valuing securities, valuing companies, looking across sectors and how the market works in general.

There’s also a wide world of information out there away from work. The Internet is an invaluable resource. There are so many great websites that you can check out, and learn most of what you need to know — at least the formulas, if not the application, for doing these ratio analyses. It is something that you feel you never can master. Things are constantly changing, and the market is never the same from one year to the next.

KWHS: That also keeps it interesting.

Hand: Absolutely. Every day.

KWHS: Thank you for joining us.

Hand: Thank you.

Want to comment on the content of this video? Use these questions to start the conversation:

What key insights can you gain by analyzing financial ratios?

What is a multiple?

What are some limitations of financial ratios?

Related Links

• The American Association of Individual Investors
• KWHS: What Are the Different Investment Choices: From Condos, to Gold, to Just Plain Cash
• KWHS: The Investor Lifecycle: Changing Priorities, Changing Portfolios
• Financial Rate Information and Financial Education
• KWHS: Understanding Risk and Return: The Roller Coaster Ride of Investing
• KWHS: Why Investors Diversify
• KWHS: Show Me the Money: Analyzing Porter’s Five Forces
• Resource Investing News
• New York Stock Exchange
• Real Estate Investing
• Securities and Exchange Commission: Your Investment Options
• New York Times Topics: Investments
• The Future Investor Clubs of America

Keya Dannenbaum is founder and CEO of ElectNext, a website that matches voters with the most compatible candidates. After working on political campaigns at both the national and local levels, Dannenbaum, a graduate of Stanford University, saw a need to help people become more connected to campaign issues and political contenders. In 2011, she participated in Dreamit Ventures, a Philadelphia venture capital firm that supports start-ups with both office space and investment. From there, she launched ElectNext, which enables people to answer questions about their political views and discuss the issues that they care about, and then matches them with the candidates that best reflect their values. Dannenbaum sat down with Knowledge@Wharton High School’s Leigh Silver to talk election technology and the issues on voters’ minds in this presidential election year.

Below is an edited transcript of the conversation.

Knowledge@Wharton High School: Keya Dannenbaum is founder and CEO of ElectNext, a website that matches voters with the most compatible candidates. Keya calls ElectNext the eHarmony for elections. Keya, thank you for joining us.

Keya Dannenbaum: Thank you for having me.

KWHS: How did you come up with the idea for ElectNext?

Dannenbaum: There’s a long story and a short story. The long story is that in college, I studied international relations and politics. I spent a couple of years after I graduated in South America and India, working on global human rights issues. I started a PhD in international politics. When I got to the PhD, after having spent two years on the ground doing direct service work, that ivory tower academia environment wasn’t for me. I spent two years in the degree program [until] 2007, just on the cusp of the big 2008 presidential election. I left [school] and got my start in politics, working for Hillary Clinton in 2008. When that campaign ended, I spent two years on the ground in New Haven, Conn., doing hyper-local politics  — city council races and mayoral races.

Part of my story is the striking disparity that I saw in knowledge, engagement and participation between how people interact with politics, particularly at the national level, and how they interact with it at the local level. I was running city council races that I won by 12 votes, or lost by 19 votes. And these were people who had real effects on education, crime policy, tax policy — in ways that very closely and intimately affected people’s lives.

[My number one inspiration for ElectNext] was the observation that at the local level, it is incredibly difficult to stay on top of politics. The short story is [that] I had a very personal experience with this. After spending three years on the ground working on campaigns, I moved to Philadelphia to start an MBA at Wharton. It was 2010, a big mid-term election year. I got so busy with my program and my new city, that I missed the voter registration deadline. [I] had no idea who was running, couldn’t vote and didn’t participate. It was such a shocking and personally disappointing moment when I realized that I had missed it. I thought to myself, “If it is this hard for someone who really cares about politics and has been involved, then of course it’s this hard for everybody else. Let’s think of a solution.”

KWHS: Do you consider yourself a social entrepreneur?

Dannenbaum: Absolutely. First and foremost, particularly with ElectNext, we are a mission-driven company. It is our goal to serve every voter in every election, and allow him or her to easily vote his or her values all the way down the ballot. That is the primary driver of this organization. And yes, we are organized as a company. We want to create a sustainable business model to support that mission.

KWHS: How connected are voters to the key ballot issues today?

Dannenbaum: I think voters are most connected to key ballot issues in places where they’re experiencing a personal pain. If you are a head of household whose mortgage is underwater [you owe more money on the house than it is actually worth], you are a student who has just graduated from college and is saddled with debt, or you have a family member who has been sent to war in a foreign country — those are the issues that become very salient. Where it’s harder for voters to stay connected is with all of the other issues that are still very important when it comes to choosing our elected representatives, but may not be as salient in terms of their pain point. That’s what ElectNext is trying to help people do – to keep tabs on that whole array of issues that ultimately you will care about, and that will become relevant within a political term or an election cycle.

KWHS: Are people from the younger generation [focused on] any particular issues in this next election?

Dannenbaum: The number one thing that I’m hearing about is education policy — spanning from the primary and high school levels up to higher education. The charter school movement [a push to have more primary and secondary schools that get public money but are not subject to the same rules and regulations as public schools] is becoming a really hot topic in innovation [and] in public education. When it comes to higher education, there is all kinds of talk, debate, conversation, about, “Is this the right structure? What’s going on with tuition? Is it worth it to have student debt? What are my employment opportunities, and how do I weigh the costs and benefits of these decisions?” So far, that has been the number one topic on the minds of the younger generation today.

KWHS: [ElectNext] helps people create a “political preference profile.” What exactly is that?

Dannenbaum: We are trying to figure out who you are politically. The way we do that on ElectNext is a very straightforward process. We first ask you which issues are most important to you. We allow you to weigh them, so we can get a sense of how important those issues are. Then we ask you some questions based on the issues that you’ve selected, so that we can get a sense for the nuance within each issue, and where you stand on particular questions. Just like you might create a social profile elsewhere, or a dating profile on a dating site, this is your political profile.

KWHS: As momentum builds toward the presidential election later this year, what trends are you seeing?

Dannenbaum: There are two big defining characteristics of this cycle. One is the money. With various rulings on campaign finance in recent years, you’re seeing the ability of corporations and wealthy people to donate unlimited amounts of money, and to not have to immediately disclose those donations. [This has led to] unprecedented levels of spending. Largely, that has manifested in television advertising — negative television advertising in particular. The other [characteristic of the cycle] is data. That’s much more under the surface, and not nearly as apparent to a consumer of this election cycle. Technology is in a place where people are creating profiles on Facebook and Twitter and elsewhere and consuming and sharing information online. [People are] interacting with campaigns, companies and marketers in all of these ways, [which is] allowing political organizations to create incredibly detailed profiles on who you are. That underlying data structure has been a defining characteristic of this campaign. In my opinion, the candidate who wins the data race is going to win this election.

KWHS: Do you think that ElectNext is going to be incorporated with some of the social media platforms people already use, such as Facebook, Twitter or Google Plus?

Dannenbaum: Right now, we’re pretty independent of any existing social platform. But that’s due to the fact that we’re new. What we’ve got out there is what we consider our minimally viable product. It is the level of sophistication that allows you as a voter and user of ElectNext to see the value, but it’s just step one for us. We want to get to a place where we are much more tightly integrated with Facebook, Twitter and Google Plus, and even some of the other platforms that are out there.

KWHS: Are young people engaged in voting and the election process? Or do they have apathy towards these issues?

Dannenbaum: I do think that people are engaged. They certainly want to be engaged. The end of high school and the beginning of college when you’re eligible to vote — in my own personal experience — was a time of engagement and awakening. It was extremely exciting to all of a sudden be paying attention to issues, and to be able to take action based on my opinions and my perspective on those issues. At the same time, there are incredible competing demands on people’s time and attention. Yes, all the information is out there. But lots of distracting information is also out there.

There’s this new book called The Information Diet by Clay Johnson. His basic analogy is [that if] you put all the food that you could possibly eat in front of somebody and they consumed it, then they would be fat, have health problems and really have gotten into a disastrous state. That is the exact same thing that’s going on with information. All this information’s out there and people are consuming it. But, what are they consuming? Are they doing it in a healthy way? And is it resulting in a person who is actually informed and able to engage? The “information diet” is this idea that we should be selective and careful about what we’re consuming, particularly online.

If I could give any piece of advice it would be, think before you click. Think about what you’re consuming and the fact that when you do consume something online, it is much more likely to show up in somebody else’s feed, or at the top of a hot news list. That is affecting what everybody else is consuming, too.

KWHS: Do you think that ElectNext is a filter for the [excess election] information?

Dannenbaum: That is exactly how we see ourselves. I’m not affiliated with that book or that author in any way. But that message resonates with us, because it is so aligned with our purpose.

KWHS: Is it important for teenagers to understand the voting process, including party choice, even before they reach a voting age?

Dannenbaum: Absolutely. The number one predictor about anybody’s political choice is going to be the party identification of [his or her] parents. If your parents are Democrats, you are most likely to continue to vote Democrat. If your parents are Republicans, you are most likely to continue to vote Republican. In other words, our political choices are handed down from generation to generation.

In the 2008 presidential campaign, I observed that flow of political identification totally reverse and flip on its head. Students in high school and in college were, for the most part, getting very excited about Barack Obama’s campaign and convincing their parents to vote the way that they felt inspired, or that they felt their allegiances aligning. It was so incredible to me to watch that happen, because it was such a fundamental shift in a paradigm that political scientists have come to believe in. I would say that even before you, as an individual, can go out to cast a ballot on election day, being informed, being engaged, being able to make interesting, informed arguments and decisions based on the issues, can have an effect on what ends up happening. You are able to talk to and to share your ideas with the people who can vote. And when your turn comes, you are that much more ready, because you have a history of participating.

KWHS: What was the most valuable experience you had while working in politics?

Dannenbaum: The first thing I say is that everybody should do it. It was an incredibly important experience for me. And that doesn’t mean that you have to do it for a year, as a career, or even full-time. Volunteering on a political campaign, whether it’s presidential or your local city council, is a must-do for any American citizen. The number one thing that I got out of it was understanding the extent to which political decision-making has a direct impact on our lives. [It was valuable] watching the way that effect shifts with the level of government. It was one thing to be on a presidential campaign and talking about big ideas like foreign policy and the economy. It was a very different thing to be on a city council race in New Haven, Conn., where the issues were, “Should we paint a crosswalk? How should we fund this school? Should there be an after-school program? Should the police force be doing driving beats or walking beats?” [It was interesting to see] how much of an effect on day-to-day life those political decisions carry. When you watch it on TV, it can be theater. But at the end of the day, it’s about people.

KWHS: Thank you for coming in.

Dannenbaum: Thanks for having me.

Questions

 How is technology affecting the election process?

What do you think about Dannenbaum’s assertion that we should be selective and careful about what we’re consuming, particularly online?

Are you and your peers engaged in the election process? Do you think that young people understand the issues and identify with the candidates?

Let’s Hear Your Comments!

What issue do you care most about in the upcoming U.S. presidential election? Post your comments to the story and on our Facebook page at http://www.facebook.com/whartonhs.

Related Links

• Presidential Election 2012: News, Polls & Candidates
• ElectNext
• Technically Philly: Keya Dannenbaum and ElectNext
• FastCompany: Keya Dannebaum on the Future of Elections
• Amicus: Social Outreach for Cause-based Organizations
• Grassroots Unwired

World Water Day is held annually on March 22 to focus attention on the importance of freshwater resources. Issues like water scarcity, which plagues many underdeveloped nations, lead to famine and disease. Many nonprofit organizations and companies are working to make sure that people around the world have access to clean water in their daily lives. Countries like the U.S., which have more developed water infrastructures, also wrestle with efficiency and quality issues.

Businesses see opportunity in these problems. Entrepreneurs and investors have been attracted to the water industry in recent years to help find and finance solutions for the most pressing water issues in the U.S. and around the world.

A nonprofit organization in San Francisco, Calif., called Imagine H2O encourages entrepreneurs to turn water challenges into business opportunities. It launched a prize competition three years ago to inspire innovative technology solutions to water issues. Imagine H2O offers funding and incubation to help support the most innovative new start-up companies. Kate Gasner, Imagine H2O’s prize manager, spoke to Knowledge@Wharton High School about the organization’s mission and the critical ways that water and business intersect.

Knowledge@Wharton High School: What are the key water issues facing the world today?

Kate Gasner: The big issues around water are scarcity and quality. There’s also a big distinction between the problems that are faced by countries with an existing infrastructure and those that are developing water infrastructure. Imagine H2O has focused thus far on areas where the infrastructure is already in place [but where] the operational components of the water system need improving. World Water Day often focuses on the other end of the spectrum, which is the public health perspective – access to clean water, availability of water. Water encapsulates so many different scenarios. One is that you don’t have enough water to get through the day or grow enough crops. That requires a very different solution than a huge metropolitan city that has enough water, but is not doing enough with it in terms of efficiency, treatment or proper disposal. The companies that Imagine H2O has worked with have been focused on developed countries with infrastructure or industry that requires advanced technological approaches. In the future, we may focus on the other piece of puzzle, which is giving everyone access to enough water.

KWHS: How did Imagine H2O acknowledge World Water Day?

Gasner: In order to celebrate World Water Day, we thought it would be best to highlight the business innovations and the businesses that are focused on solving the problems around water. One of our biggest events of the year is the Water Entrepreneurs Showcase, which we had on Tuesday night. We convened over 200 people in the water industry — including entrepreneurs, investors, experts and students. We announced the winners of our prize. We got a robust group of startups that are doing a variety of cool things in the water space. This year we were focused on wastewater – water that has been somehow contaminated agriculturally, industrially or through municipal waste. [Our big winner] was Bilexys of Brisbane, Australia, [which has a technology that converts wastewater to valuable chemicals].

KWHS: Where do water and business intersect?

Gasner: Water is a mission-critical resource for everything. It’s very hard to appreciate that there is so much water involved in the products that we purchase and in our day-to-day operations. When it comes to industry, agriculture and residences, water is a basic and fundamental component. The water and the business world haven’t overlapped very much so far. There are great examples of very successful water businesses, but in terms of innovative entrepreneurial businesses, we’re trying to bridge a gap.

KWHS: What is the so-called blue tech economy?

Gasner: It’s easy to miss that there is a huge industry around water, in terms of the infrastructure required both in the municipal setting – the miles of pipes and the facilities needed to transport and treat water – in addition to the industrial setting [where products are made]. The food and beverage industry requires a lot of water processing. Energy production also requires a lot of water processing. When I hear blue tech economy, I think of how we are bringing technologies to all [this infrastructure] and these industries that are water-dependent.

KWHS: What is an example of an entrepreneurial venture working on innovative water technologies?

Gasner: One of our first winners was WaterSmart Software. It offers a software platform for the water conservation programs of utility companies. The software ties into the billing system and visualizes water savings for utility customers. Customers can log in and see how much they are saving and how they compare to their neighbors. It’s a user-friendly platform to track water use. Utilities are really interested in it because their conservation [efforts] require consumer education. The people we honor are really good business people and that also makes them good water stewards [good resource managers].

KWHS: How can young people get involved in water-related issues?

Gasner: Awareness is key. The accessibility we have in this country to water insulates us completely from the issues at hand. The fact that we so easily turn on the tap and have so few restrictions or financial consequences for using a ton of water shelters us from the problems [of scarcity]. Keeping an eye out for business solutions is really important. In my education, environmental problems were couched in the handicapped arena where you needed a lot of regulation to make a difference in resource management. That’s not the case. We’re seeing businesses that are very successful because they have an innovative platform, a good strategy and great team, like any other startup. To treat the water industry as a viable business place is going to be really important. It does a lot of good for the world and saves a resource that is incredibly important.

Questions

What are the critical water issues facing the world today in both developed and underdeveloped countries?

Explain some ways that business and industry are water-dependent.

Why is a company like WaterSmart Software so important to the marketplace?

Let’s Hear Your Comments!

Some critics say that teenagers in the U.S. are among the most wasteful when it comes to important resources like water; they are lazy about conservation and they just don’t care. Do you agree? Why or why not? What are you specifically doing to address water issues? Post your comments to the story and on our Facebook page at http://www.facebook.com/whartonhs.

Related Links

• World Water Day 2012
• Imagine H2O
• Water.org
• New York Times: Water’s Scarcity Spells Opportunity for Entrepreneurs

When you are making an equity investment decision, the first place you often turn to is the numbers: how successful has this company been financially? How many shares of stock does it have outstanding? What is the company spending its money on and how much cash does it have on hand?

Sometimes that data doesn’t exist, especially if you want to invest in a private company or a startup. In those cases, you can complete a SWOT analysis to examine the opportunities and challenges that a company faces. A SWOT analysis can also supplement what you learn from the numbers.

‘Numbers Give the Illusion of Security’

SWOT stands for strengths, weaknesses, opportunities and threats, says Ray Baker, a professor of economics, business and accounting at Rockford College in Rockford, Ill. By identifying factors under each of those four groupings, a person can more clearly analyze virtually any business problem. “There is lots of data around, but how do you combine these pieces of information in such a way that you can use it to get a group of people thinking together?” notes Baker. “It’s a way of setting up thinking about internal and external forces so you can formulate a clearer path to an outcome, whether it’s the right one or not.”

For investors, using a SWOT analysis can give insight into a company’s worth beyond what the data shows, says James Early, a former hedge fund manager who is now an advisor to the investor newsletter service run by the Motley Fool, a financial services company. “The great lie of investing is that models are precise. Numbers give the illusion of security,” Early notes. “Having that SWOT analysis is pretty essential in some cases to make sure you don’t miss something about a company. Having some system you go through, having a process you can standardize and apply to all companies, is useful to most investors.

Take the example of Apple. Although gigabytes of data exist analyzing the tech giant’s financial performance, a quick SWOT analysis can give anyone with even a basic understanding of the computer industry a sense of what Apple has going for it and where its weaknesses lie. For example:

Strengths include the well-designed products that the company puts out, such as the iPhone, iPad and Macintosh computers. Apple has loyal customers and the strength of its products allows it to charge more than its competitors.

Weaknesses include Apple’s relative softness in the business market. Most of its products are bought by everyday consumers and aren’t widely used by businesses – PCs are more common computers to find in an office, and Research In Motion, which makes Blackberry phones, has long produced preferred tools for those in the working world.

That market gap is an opportunity for Apple, too. For example, businesses have been using iPhones more frequently for their employees as the device has grown and expanded its features.

Threats include the growing use of the Android platform for smartphones from companies like HTC and Motorola, and the growing tablet computer market — although the iPad reigns supreme for now.

For years, a SWOT analysis was the primary way to analyze how a company was doing financially, says Paul Escobar, an investment consultant and founder of Somerset Financial Partners in Boston. More recently, however, the federal government has changed the rules of how much data a company trading on the stock market must release to the public, giving rise to more sophisticated analytical tools.

‘Touch-feely Stuff’ Not Enough

Plus, Escobar adds, a SWOT analysis is a long, qualitative process, meaning it’s based on a person’s observations and opinions and not as much on data and research. “In the long run, for (people who buy a lot of stocks), that touchy-feely stuff doesn’t work as an investment analysis. No one has time to do it,” he says. “You can argue about whether the accounting is bad or not, but in the modern world, that’s what we need.”

Even so, the SWOT analysis does have value in areas where data isn’t available, Escobar says, and can be used to determine what kinds of new companies and industry sectors are worthy of investment. If an investor wants to put some money into a start-up energy company that is environmentally friendly, for example, a SWOT analysis can help him or her look at all segments of the emerging alternative energy industry — including wind, solar or geothermal — and offer direction on the prospects for each and on specific companies. “If you’re trying to say which of these small companies have an advantage, you may have nothing more to go on than what you would see in a SWOT analysis,” he says.

Want to comment on this article? Use these questions to start the conversation:

What does the advisor mean when he says, “numbers give the illusion of security?” Why is this insight important to remember when researching companies?

How can a SWOT analysis help build on what you learn from a company’s numbers?

Have you ever used a SWOT analysis for research and evaluation? If so, how?

Related Links

• The American Association of Individual Investors
• KWHS: What Are the Different Investment Choices: From Condos, to Gold, to Just Plain Cash
• KWHS: The Investor Lifecycle: Changing Priorities, Changing Portfolios
• Financial Rate Information and Financial Education
• KWHS: Understanding Risk and Return: The Roller Coaster Ride of Investing
• KWHS: Why Investors Diversify
• KWHS: Show Me the Money: Analyzing Porter’s Five Forces
• Resource Investing News
• New York Stock Exchange
• Real Estate Investing
• Securities and Exchange Commission: Your Investment Options
• New York Times Topics: Investments
• The Future Investor Clubs of America

When Scott Bupb started dabbling in the stock market earlier this year, he had a cool $100,000 to play with. Now, he and his fellow stock pickers are a few dollars shy of his initial investment, thanks to a couple of underperforming members of his portfolio. “We invested in some things that were at their 52-week lows, but they kept going down,” he says. “They’re starting to come back up now, so we might start making money soon.”

Alas, the money’s not real — it is part of a stock market simulation game that Bupb, a senior at Mayfield High School in Las Cruces, New Mexico, and his classmates are playing for a class project. But the lessons he is learning are the same as those that professional stock portfolio managers use on a daily basis to manage millions – sometimes billions – of dollars of other people’s money.

Managing the Mix

Portfolio managers make investment decisions for individuals and institutions – including organizations, like pension funds, that pool large sums of money and invest in stocks and other assets. They are charged with matching investments to objectives and balancing risk against performance. The investment portfolio they manage can be a mutual fund or a hedge fund, but the basic theory is the same: They decide what mix of investments is most likely to make money for their clients.

With thousands of stocks available to buy, the first decisions about how to invest have less to do with data and more with strategy, notes James Early, a former hedge fund manager who is now an advisor to the investor newsletter service run by the Motley Fool, a financial services company.

Funds that promise a modest, but steady return on an investment over time will likely invest heavily in stocks with a long history of good performance, Early says. Funds that aim to take on a little bit more risk with the potential for making more money will look for stocks with a lot of room to grow in the market. “Investing is about screening,” he says. “There are 8,000 or 9,000 stocks out there. You can’t buy every one, you can’t analyze every one, so you’ve got to whittle it down to a manageable list and know what you’re looking for.”

Ty Stovall, another senior at Mayfield High who is participating in the stock market game, says his small group of investors has mostly been buying up stocks of familiar companies. “One of our stocks, Apple, we bought because we knew the iPad 3 was coming out,” he says. “We figured [the stock price] was going to go up, and it has, significantly.”

Although the Mayfield students are picking high profile, well-known stocks, Early notes that investment managers usually spread their investments across dozens or hundreds of companies – sometimes even picking companies that don’t have great reputations. “You may want some beaten-down companies that are not very good companies but are priced as terrible companies, he says. “If you know this company has seen declining sales and doesn’t have a very good product, but the stock price has been devalued [the stock price is cheaper than it should be given the company’s bigger picture], you may see a bounce” in the stock price.

‘A Statistical Process over Time’

While portfolio managers have years of schooling and experience to draw on when picking stocks, choosing investments is easier now due to the wealth of information available on the Internet. Jeannette Showalter, a financial columnist and investment analyst from Naples, Fla., says her favorite website is ValueForum, where stock experts offer advice to subscribers about where to invest. “If someone makes a commitment to read the website, they can learn a tremendous amount,” she says. Showalter adds that despite fund managers’ claims to knowing the secret to stock-picking success, about 60% of them don’t make money in the long haul.

The key to successful portfolio management, suggests Early, is less about finding one hot company and more about finding a lot of stocks in which to invest with the goal of having more of them do a bit better than expected over time. “It’s a common misunderstanding that it’s about picking one or two big winners,” he says. “It’s a statistical process over time. Gradually you get better, and hopefully you’ll win at it maybe 60% of the time.”

Want to comment on this story? Answer one or more of these questions to start the conversation:

Explain James Early’s comment that “Investing is about screening.”

Why would you choose to invest in a company with a declining stock price?

ValueForum is one way you can research stocks online. What other resources does the Internet provide to help you make informed investment decisions?

Related Links

• The American Association of Individual Investors
• KWHS: What Are the Different Investment Choices: From Condos, to Gold, to Just Plain Cash
• KWHS: The Investor Lifecycle: Changing Priorities, Changing Portfolios
• Financial Rate Information and Financial Education
• KWHS: Understanding Risk and Return: The Roller Coaster Ride of Investing
• KWHS: Why Investors Diversify
• KWHS: Show Me the Money: Analyzing Porter’s Five Forces
• Resource Investing News
• New York Stock Exchange
• Real Estate Investing
• Securities and Exchange Commission: Your Investment Options
• New York Times Topics: Investments
• The Future Investor Clubs of America
• Value Forum

Paul Atkinson is the head of North American Equities at Aberdeen Asset Management in Philadelphia. In that role, he is responsible for all U.S. equity portfolios and team members. Atkinson joined Aberdeen in 1998 and was originally in charge of  specialist global equity funds before formally joining the U.S. Equity team as senior investment manager in 2005. Prior to working for Aberdeen, Atkinson worked with UBS and Prudential-Bache, both financial services companies. He sat down with Knowledge@Wharton High School editor Diana Drake to offer an overview of investing.

Below is an edited transcript of the conversation.

Knowledge@Wharton High School: Paul Atkinson is the head of North American Equities at Aberdeen Asset Management in Philadelphia. He joins us today to offer an overview of the world of investing. Paul, thank you for joining us.

Paul Atkinson: It’s my pleasure.

KWHS: Help us understand what the head of North American Equities does at an asset management firm.

Atkinson: My job is to be responsible for all aspects of the investment management of North American companies, which are principally U.S. companies and Canadian companies. My team and I do the research on the companies. We decide what goes in the portfolios [a collection of varied investments], and then we have the pleasure of talking to our clients about those portfolios, and the decisions we’ve made.

KWHS: Let’s jump right into investing. What does it mean to invest money, and how does that differ from savings?

Atkinson: I think investment is putting money aside for a longer period of time, but with the capital [cash used to generate income] at risk. That’s the main difference between investment and savings. [With] savings, very typically, you will put your money in a bank and be pretty much guaranteed your money back. In investing, you are putting your money away for a defined period of time, like savings, but the capital is at risk. And hopefully, by your analysis, you can figure out ways to get enhanced returns for lower risk.

KWHS: Why do people invest?

Atkinson: I think people invest for the very fact that they believe, through time, investing can grow their money. And they can use that money for lots of different areas. But if you can grow your money through time, that’s a pretty good way to go forward.

KWHS: What is risk, and why is it important for investors to understand?

Atkinson: Risk can mean lots of things to lots of different people. For us, it means the risk of not getting your money back. If we make an equity investment — we buy a stock for $100 — we want to feel that we will get that $100 back, plus the prospect of capital gain, and possibly some income with it, too

KWHS: How do you make an investment?

Atkinson: There [are] two ways. You can do it yourself, or you can engage a professional. If you do it yourself, you open an account at a brokerage company, and then give them the instruction to buy the company that you want to buy, after the investment work that you’ve done. Secondly, you could employ a professional investor — professional money manager — like Aberdeen Asset Management, and buy collective funds, which are portfolios of companies within the funds. They are more diversified than a single equity investment.

KWHS: What are the primary investment choices? Can you give some examples?

Atkinson: Yes. The primary investment choices are really three main asset types. They would be equities [stocks], fixed income or bonds [debt equity where you are loaning money to an entity, like government, for a set amount of time, at which point you get that money back, plus interest], and also physical assets as well. Within that could be gold or real estate. But when you’re investing, you are investing for a material amount of time. All of those assets can be invested in for that material amount of time. They have different risk characteristics, but they also have different return characteristics. You’re constantly looking for a balance of that prospect of reward as well as risk.

KWHS: Why are companies like Aberdeen important to the investment process?

Atkinson: Aberdeen is a global asset manager whose job it is to take clients’ money,  invest it sensibly,  give them their money back at the end of the period of investment and, hopefully, deliver them some capital gain and income through time. We do that through paying a lot of attention to the investments that we make. A lot of work goes into it, a lot of rigorous analysis. We have what we call an investment process, which sets out how we do things and how we arrive at those conclusions. Then when we’re asked by clients to explain what the return was, or what the risk was, we can relate those characteristics to our method, which is the single most important thing that we do.

KWHS: You’re part of a bigger industry, correct? There are a lot of different companies doing what you do, or similar to what you do.

Atkinson: Yes. Aberdeen’s equity style is one of the many styles out there. We are what we call bottom-up investors, where we focus on understanding the company, its prospects and its risks. And then we try to put a valuation [an estimate of what a company is worth] on that company. Then we try and build portfolios that will outperform the market [do well in both good and bad economic times].

KWHS: What is a research analyst?

Atkinson: [The role of] a research analyst involves lots of hard work — talking to companies, writing reports on those companies, focusing on how that company will grow its earnings through time. What are the risks to growing its earnings through time? Then the analyst, of course, has to communicate his or her findings to the team, or the investment manager, and  then make a recommendation in the context of the rest of the portfolio.

KWHS:  A company like Aberdeen has several research analysts, true?

Atkinson: We have lots of people doing company analysis. I myself do company analysis. The most junior people on the team do company analysis, as well. Aberdeen is slightly differentiated in that we see the research side of our job and the investment side of our job — or the decision-making – as part of the same continuum. So, we don’t necessarily segment the role of the research analyst and the investment manager. We think it’s all part of the same function, which is to find good companies that are getting better at the right valuation and putting them collectively into equity funds that we think will outperform through time.

KWHS: So, research is fundamental to what everybody does.

Atkinson: Research is absolutely fundamental. But it’s also very important that the research has a natural way into the portfolio. We want people who are doing the research also to make those investment decisions.

KWHS:  What are the best ways for new investors to get started and to learn about the world of investing?

Atkinson: That’s a good question. I think the best way to find a product that you’re interested in is to go to the company’s website. Go into the investor relations part of that website. Download the corporate presentation. Find out more about what the company does, what its growth prospects are and what its balance sheets look like — how much cash it can generate. Then back that up with some more work — downloading the annual report or the 10-K [a form that a public company must file to update investors and analysts on the state of the business over the last year]. Find out more about the risks associated [with the business]. If you understand what the company does, what the risks are, you’ve got a sense of how well it can grow its level of profitability [the ability to make money after all expenses are paid] through time. And then with some basic valuation work, you’re most of the way there.

KWHS:  What is valuation?

Atkinson:  Valuation is working out what you think [a company’s] earnings can be in the future, and putting a valuation on those earnings.

KWHS: What was your career track? How did you make your way to Aberdeen?

Atkinson: I have studied economics and finance at undergraduate and post-graduate levels. I then moved into an investment bank in the city of London, which is where I’m from, in the 1990s. And then a colleague at UBS recommended me to Aberdeen in the late 1990s. Since then, I’ve worked for Aberdeen. I started off in company analysis and then worked my way through to presenting to clients about what we do and how we do it, explaining fund performance. Then through time, I have been given responsibility for more people. So I manage equities, but I also manage people, as well.

KWHS: Who has influenced you the most in your career?

Atkinson: I’ve been very fortunate to have a lot of good advice along the way, from both clients and colleagues. No single person. But I think the most important thing about advice is remembering it, taking it on board and doing something about it.

KWHS: How important is business school to becoming an investment manager?

Atkinson: Business school certainly can be a help. It’s not the sole passport to a good career in financial management. I think there are lots of different study areas that can facilitate [this]. Law is a very good background. Even the sciences or engineering are both very good backgrounds for careers in investment management.

KWHS: What personality traits and skills do you think are important to people who work in your industry?

Atkinson: It’s worth remembering that financial management is very much a marathon and not a sprint. So, stamina is good. Patience is essential. And also, a basic set of core principles with which you can really slim down the amount of information that’s out there. The industry churns out a huge amount of information. Only some of that is useful in order to make long-term investments. It’s working out which information is important that can really help you make the long-term investment decisions.

KWHS: Paul, thank you for joining us.

Atkinson: Pleasure.

Want to comment on the content of this video? Use these questions to start the conversation:

How does investing money differ from saving it?

What role does research play in money management?

Why must investment managers be patient? What other traits do you think are essential to this job?

Related Links

• The American Association of Individual Investors
• KWHS: What Are the Different Investment Choices: From Condos, to Gold, to Just Plain Cash
• KWHS: The Investor Lifecycle: Changing Priorities, Changing Portfolios
• Financial Rate Information and Financial Education
• KWHS: Understanding Risk and Return: The Roller Coaster Ride of Investing
• KWHS: Why Investors Diversify
• KWHS: Show Me the Money: Analyzing Porter’s Five Forces
• Resource Investing News
• New York Stock Exchange
• Real Estate Investing
• Securities and Exchange Commission: Your Investment Options
• New York Times Topics: Investments
• The Future Investor Clubs of America

Peter Hand is an investment analyst with the North American Equity Team at Aberdeen Asset Management in Philadelphia. Hand joined Aberdeen full-time in 2010 as a graduate business analyst, having interned with the North American Equity Team in 2008. Previously, he worked as an economist for the Department of Homeland Security in Washington, D.C. Hand graduated with an economics degree from Princeton University in 2009. He sat down with Knowledge@Wharton High School editor Diana Drake to discuss 10-Ks, balance sheets and other important company financial statements.

Below is an edited transcript of the conversation.

KWHS: Peter Hand is an investment analyst on the North American Equity Team at Aberdeen Asset Management in Philadelphia. He’s going to talk with us today about the key to understanding financial statements. Peter, thank you for joining us.

Peter Hand: My pleasure.

KWHS: Before we get into 10-Ks and balance sheets, can you tell us a little about yourself and your job at Aberdeen? What is an investment analyst on the North American Equity Team? What exactly do you do?

Hand: Sure. Our team has about a dozen members split up between equity managers and equity analysts. Basically, all managers are analysts as well. So, what we all do is look at a wide range of companies. Our accessible markets are public securities [shares of companies that trade on the stock market] in the United States and Canada. We analyze companies to create portfolios [collections of varied investments] for our clients that we feel will achieve a sensible but positive return, with the ultimate goal of increasing our clients’ wealth. Daily activities include meeting with management teams from companies in a wide range of sectors, as well as occasionally [meeting with] analysts from other firms who can give us insights into some different sectors and give us in-depth analysis of industry trends. We also meet with clients on a regular basis to update them on the state of the portfolios.

KWHS: Describe your career track. How did you make your way to Aberdeen?

Hand: I started as an intern with Aberdeen in 2008. I was a junior in college at the time, so I did the familiar track of college internship towards future employment. I did graduate in 2009, which was not the most desirable job market. Aberdeen was not hiring at the time. I went down to Washington, and I worked as an economist for a year for [the federal department of] Homeland Security. I got a call from Aberdeen saying it was hiring for a new program, a rotational program that ultimately led me back to the U.S. Equity Team, where I started in the first place.

KWHS: Why did you choose finance?

Hand: I’ve always thought it was an interesting field. I went to Princeton University, where we don’t have a finance department – it’s not a major. So, I majored in economics and took a few financial classes on the side. It had always been something that interested me. I had a number of friends who were older than I, who had gone on to work in various sectors of finance and investment banking, asset management. It’s just something that I always found fascinating — watching CNBC and the financial markets. It was something I thought I’d like to try my hand at. My internship proved to me that it was something that I was capable of doing, but also something that I really enjoyed — and that I think I’d like to build a career around.

KWHS: Okay, now onto financial statements.

Hand: Sure.

KWHS: First of all, what is the U.S. Securities and Exchange Commission?

Hand: The Securities and Exchange Commission, or the SEC, is a government agency that’s based in Washington, D.C., which is tasked with controlling publicly traded securities and the markets in which they are traded. All companies that are publicly traded have to file their reports with the SEC on a regular basis. They are subject to the stringent standards that the SEC imposes … with the overall goal of protecting the investing public.

KWHS:  What does it mean to be a publicly traded company, versus a privately held company?

Hand: The United States has any number of companies — I couldn’t even fathom a guess [as to how many]. Some are privately held, and some are publicly traded. Publicly traded companies are those that list on a stock exchange, and their shares are freely traded among investors – either individual investors, if you trade in your personal account, or institutional investors who trade for clients that are pension funds and endowments. It just means that the shares are freely traded on the open market. If investors think that a share is undervalued — that a company is worth more than the market would suggest — then they will buy the shares in the hopes that the security will appreciate, and they can eventually make money on the long-run return.

KWHS: What are the primary disclosure documents that a company must file, and why do they have to file them?

Hand: There are two or three main documents that companies file regularly with the SEC, that investors like myself generally look at. The first is the 10-K, which is an annual form that’s filed with the SEC, which is an update on the state of the business over the last year. It has to be filed within a certain time frame at the end of the year, after the company’s fiscal fourth quarter, and it includes three basic financial statements: the income statement, the balance sheet and the statement of cash flows [which are defined later in this interview]. It also includes a management discussion and analysis, where the management team will update the reader on what happened over the last year, how the company fared in the markets, how the operations went, any major changes that the company underwent to strategy, or in terms of business operations. It’s an in-depth look at how the company performed, and how the company is positioned to perform, going forward.

The 10-Q is almost the same document, but it’s filed on a quarterly basis, at the end of each quarter. It’s a briefer document that basically goes over the results for the quarter and any major changes. It has consolidated versions of everything I just spoke about for the 10-K. So, it has the financial statements, and it has a brief discussion and analysis. The third document that is filed is the proxy statement, in which the company’s [board of directors] lays out plans for the general meeting of shareholders — which all shareholders are eligible to attend — and certain items that shareholders are eligible to vote on, such as management compensation, the election of directors and any kind of major changes to the business that require shareholder approval.

Those are the three documents that are filed regularly. There are tons of others that are filed with the SEC on an ongoing basis. [For example], any time a director sells a lot of shares, [he or she] is required to disclose that to the SEC. So, there are a ton of these other smaller documents that you can read through to get a sense of where things are in the intermediate term, between the 10-Qs and 10-Ks.

KWHS: These are filed just to make sure that everybody out there knows what’s going on within the company?

Hand: Right. They’re filed for the purposes of transparency and full disclosure. The SEC doesn’t want a disconnect between what management knows and what the investing public knows. Obviously, there will be some disconnect, because otherwise we get into instances of insider trading, where management will know certain things that the public can’t know until a certain date, such as pending acquisitions or transactions. But the general point of these documents is so that the investors and the general public can see how things are going — and management can’t hide anything.

KWHS: Let’s get into some of these specific statements. What is an income statement and what does it tell investors about a company?

Hand: The income statement actually has a couple of names that give insight into what it is. It’s also called the profit-and-loss statement, or P&L. It basically outlines all the income and expenses that the company has incurred or received over the past year. What they call the top line is revenues, and that’s how much money the company [made] in sales over the last year. Then when you subtract out cost of goods sold and general expenses, you get down to a general level of earnings for the company, [also called] a broad profit, or gross profit. Then when you subtract out further line items from there, you get down to the actual net income that the company made, accounting for stuff like interest expense, or how much they have to pay on debt. that brings you down to [the company’s] operating profit for the year.

Operating profit is then divided by the number of outstanding shares for a metric that we call “earnings per share,” which is ultimately what most people look at each quarter [to evaluate how the company is doing]. [Is the company’s] earnings per share increasing at a sustainable rate? That’s the ultimate indicator of how the business fared over the last quarter.

KWHS: What is a balance sheet, and what does it tell investors?

Hand: A balance sheet outlines, at a specific point in time, the assets [property of some kind owned by a company that has value] and liabilities [amounts owed by a business] that the company has to its name. It is required to balance the general equation that assets equal liability plus equity [the value of an ownership interest in property]. The assets and the liabilities, plus the total shareholder’s equity, must always be in balance. Anything that increases assets must have a corresponding increase to liabilities. Shareholders equity is the number of shares outstanding, times the market price, or how much you can buy [the company] for on a stock exchange. The assets that are included in [the balance sheet] include inventory and receivables, which are how much stuff the company has in their books, or in their warehouses, at the end of the quarter. Liabilities include debt, accounts payable, or how much [the company] owes people or other companies or customers. [The balance sheet] is a snapshot of how the company’s assets and liabilities stack up at any point in time.

KWHS: Okay. How about a cash flow statement?

Hand: A cash flow statement is the third financial statement that comes with the filings. It’s a metric to figure out how the company’s cash and cash equivalents change through the quarter — how much actual money the company has on its books. It’s broken down into three parts: cash flow from operations, cash flow from investing and cash flow from financing. There are several intricacies about how things are classified. But generally, cash flow from operations includes any major purchases or transactions the company made during the quarter. It’s anything that happened during the normal course of business. Cash flow from investing involves debt securities and dividends paid. And cash flow from financing includes dividends received, or money that the company received from issuing debt. A broad list of things goes into each of these categories. But generally, it’s how the company’s cash balances changed throughout the quarter, or the year.

KWHS: And it’s important for investors to follow all these statements in order to understand the financial health of a company, correct?

Hand: Yes. Each one ties into the others. There are certain items that flow through multiple financial statements. So, it’s always important to look at all three of them, so you can tell how companies fared overall. If a company did well but it meant that it incurred a lot of debt to do so, then that changes its overall position in terms of its liquidity, or its solvency. You really want to pay attention to how all these things are evolving together to get a true sense of the company’s overall health.

KWHS: It sounds like a lot of statements to keep track of within a company. Who at the business actually handles that?

Hand: Filing the statements?

KWHS: Yes. I mean, is there a department within a corporation that actually [deals with all the financial statements]?

Hand: Yes. Depending on the size of the corporation, it can be one person, it can be outsourced or it can be a whole broad department of people. If you’re talking a very small company, it will be a small operation because the calculations involved are much smaller. If you’re talking a multinational conglomerate, it will be a much more complicated operation. The corporate finance department — or the accounting department, depending on what you’re looking at — will generally handle all of the calculations and all of the filings.

KWHS: Now that we understand financial statements, can you give us a little more insight into the finance world? What personality traits and skills do you think are especially valuable for a successful career in financial management?

Hand: There’s a lot of reading that you have to go through. So, it’s important to be able to pick up on broad trends, but also to read deeper, in between the lines, to pick up on things that might not be publicly stated, but things that you can infer from what management has to say. So, I’d say you have to have a keen eye for detail — but also, the willingness to stay at it and to read through all these statements. Sometimes these are multi-hundred page statements – so, attention to detail, but also the tenacity to stick with reading through all these different financial statements, quarter after quarter.

It is a fun thing to do, learning about all these different companies. It certainly has to be something that interests you. A lot of people aren’t really interested in reading all these documents and running through all these financial filings. I’d say if you have a keen interest in disciplined, focused research – if you have a research-driven mind — that would play as a strength in this business.

KWHS: And you also have to know about various industries as well, right?

Hand: Yes, that’s something that comes with the job. One thing that I’ve certainly benefited from at Aberdeen is that everybody on our team is a generalist. We cover every sector that is in our portfolio. So, you learn a tremendous amount about how integrated the world economy really is, how certain sectors affect other sectors, how certain firms affect other firms and the way that things that seem really different can actually [make an impact] in the same way.

Want to comment on the content of this video? Use these questions to start the conversation:

Why do companies file documents with the SEC?

What can financial statements tell you about a company? Why is it important to read more than one?

How does the research involved in an investment management career differ from, say, research that a biologist conducts in a laboratory? How is it the same?

Related Links

• The American Association of Individual Investors
• KWHS: What Are the Different Investment Choices: From Condos, to Gold, to Just Plain Cash
• KWHS: The Investor Lifecycle: Changing Priorities, Changing Portfolios
• Financial Rate Information and Financial Education
• KWHS: Understanding Risk and Return: The Roller Coaster Ride of Investing
• KWHS: Why Investors Diversify
• KWHS: Show Me the Money: Analyzing Porter’s Five Forces
• Resource Investing News
• New York Stock Exchange
• Real Estate Investing
• Securities and Exchange Commission: Your Investment Options
• New York Times Topics: Investments
• The Future Investor Clubs of America

Sammi Veronie, a senior at Show Low High School in Arizona, has always been an idea person. In order to remember the things that inspired her, she would write thoughts into a notebook or shoot and store inspirational images on her phone.

Six months ago, Veronie, 17, discovered a new way to remember her muses. After seeing the site, Pinterest, show up on her Google image search results, she requested an invitation to join. Pinterest is an online board that allows users to store, organize and share images and ideas. Veronie was instantly hooked.

She uses the site regularly, collecting things such as gift ideas, craft projects, recipes and hairstyles to try. To help organize the creative brainstorm, individual categories are separated onto their own pin-boards and like-minded pictures are ‘pinned’ accordingly. “I love Pinterest so much I’ve even started future boards — for example, a wedding and a future children board — so everything I like is all in one spot for years down the road when they’ll come in handy,” she says.

A ‘Valley’ of Semiconductors

Started by a small team in Palo Alto, Calif., Pinterest is a relatively new company that has catapulted into the public eye. The site reported 11 million U.S. unique visitors in January 2012, according to digital marketing intelligence firm comScore, which only began monitoring Pinterest activity in May 2011, when the number of unique visitors edged above 400,000.

It is another success story to come out of Silicon Valley, a region in northern California – some 40 miles south of San Francisco — known for its technology entrepreneurs. Even before the Internet was a household name, the term Silicon Valley was coined as a tribute to the semiconductor industry that was thriving in California’s Santa Clara Valley. Silicon refers to the material used to make commercially available semiconductors, which conduct electricity and are the foundation of modern electronics, including computers and telephones.

Today, bolstered by eager investors, a strong network of educational institutions and the close locale of thousands of high-technology companies, Silicon Valley has expanded its reputation and influence as a hotbed of technology innovation. Residents run the gamut, from the semiconductor innovators who inspired the name, to software companies, to Internet sites. “The Valley” is a Who’s Who of tech success, including the birthplace and current headquarters of Facebook in Palo Alto, the humble beginnings of Apple in Steve Jobs’s garage in Los Altos and now the headquarters in Cupertino, and the home base of visionary Elon Musk’s Tesla Motors, maker of premium electric vehicles, also in Palo Alto. Not impressed? The list also includes eBay, Google, Yahoo and Zynga.

Perhaps as important as the region’s emphasis on technology is its culture of entrepreneurialism. In Silicon Valley, “entrepreneurs are seen as pioneers and heroes, which is different than many other regions around the world,” says Chris Gill, CEO of SVForum, a nonprofit organization in Redwood City, Calif., that seeks to inspire and support technologists and entrepreneurs through education, networking opportunities and funding.

Gill, who says that “most start-up businesses fail,” believes Silicon Valley is “very forgiving of entrepreneurs and startups not achieving the success they were originally looking for — provided they learn from it.” The business culture within the region encourages new ventures, and since many more people these days are trying to start businesses, inevitably it will “result in more successes,” he adds.

Silicon Valley companies that succeed share some common traits, says Gill. “The hunger and passion of the team seems to be more important than almost anything else, with the possible exception of market timing and luck.”

“The Valley” is also known for its large number of younger workers, which contributes to a relaxed, t-shirt, flip-flop-wearing vibe. This is demonstrated clearly by the median age of employees at top technology companies. According to Payscale.com, the median age of Apple employees is 33, while 26 is the average age of workers at Facebook. Of the top nine companies listed in the survey, seven had a median age of under 40.

Omar Seyal, 31, is a technology entrepreneur operating in Silicon Valley. Nine months ago he co-founded Tagstand, a company that provides Near Field Communication (NFC) tags, labels and stickers. NFC is an emerging technology that allows the exchange of data through a simple tap and not a swipe. An example of an NFC application is touching an NFC-enabled smart phone to an advertisement label in order to retrieve further information.

Seyal was fortunate to get into Y Combinator, a well-respected business incubator in Mountain View, Calif., that is specifically designed to support the development of digital entrepreneurs. Y Combinator is one of many Silicon Valley-focused venture capital firms, which provide money and support to promising start-ups, often for a stake in the companies in which they invest. Founded by Paul Graham, Y Combinator mass-produces start-ups, funding between 40 and 60 ideas every six months, including such successes as Dropbox, Justin.tv and Airbnb. The program provided start-up money and required Seyal to attend a three-month boot camp in the summer of 2011. “They work with you and give you prototype deadlines. They have weekly meetings with you, and then the last deadline is ‘Demo Day’, where you bring your vision to life before a crowd of investors,” says Seyal.

‘It’s Never Too Early’

Silicon Valley has played an instrumental role in the fledging company, adds Seyal. Being located in Silicon Valley is helpful “because so many people are in the same boat with you.” Aside from the camaraderie and immersion in an environment that encourages entrepreneurs, the region has other advantages. “People take you more seriously when you are in Silicon Valley. I think it’s necessary to be where your customers are.”

Seyal started his first company shortly after college and began developing his technology skills while in high school. For high school students who think they may have the next great technology idea, Seyal says, “Do it. That’s literally my advice. If someone thinks they have a great idea, they should start working on it. They should start using their skills. It’s never too early.”

Want to comment on this story? Answer one or more of these questions (using the article and your own insight) to start the conversation:

What is your latest tech passion? Does it have ties to Silicon Valley?

Why is a region like Silicon Valley so valuable to innovation?

What is a business incubator?

Related Links

• Silicon Valley News
• SVForum
• Mashable.com: Tagstand Wants to Make NFC Technology Simple for Businesses
• Y Combinator
• Y Combinator Blog
• New York Times: Rebooting Philanthropy in Silicon Valley
• New York Times Topics: Silicon Valley
• CNN Money: Ron Conway is a Silicon Valley Startup’s Best Friend
• KWHS: The Rise of Tech Teentrepreneurs 

The same year the Titanic sank and a second party of explorers reached the South Pole, a grocer in Hoboken, N.J., spent 30¢ a pound on tin packages of a new cream-filled chocolate sandwich cookie known as the Oreo.

That first sale, made on March 6, 1912, marked the beginning of what would become a cultural icon — and touched off a century-old debate about the best way to eat them: Whole? Cream center first? Or dunked in a glass of milk? As Catharine L. from Belmont, Mass. writes in an essay published in the magazine, Teen Ink: “There’s something inherently magical about Oreos. Everyone has a fond memory somewhere of coming home from grade school and finding a plate of Oreos with a tall glass of icy cold milk.”

Twist, Lick and Dunk

According to Kraft, which bought the Nabisco brand in 2000, about 25 billion Oreos are eaten annually – 70 million per day – resulting in $2 billion in global sales in 2011. Oreo has 23 million Facebook fans, and even set a Guinness World Record as the first brand to attempt – and set – the record for the most “likes” on a Facebook post in 24 hours. On February 16, 2011, fans around the world tallied a total of 114,619 “likes.” The company is celebrating Oreo’s 100^th anniversary in style this week, launching a worldwide marketing campaign and releasing a T.V. commercial – to run in 15 countries – featuring a series of vignettes depicting Oreo’s famous twist, lick and dunk ritual.

Oreos are truly a global passion. Cookie lovers in more than 100 countries can do the Oreo twist, including consumers in Poland, Germany and India, where the Oreo was introduced for the first time just last year.

Oreos have managed to outlast any number of food trends — and even bested the product’s closest competitor, the Hydrox, which was actually introduced first, in 1908. So what has helped the Oreo remain popular? “For a product to stay relevant, it should address a basic need that doesn’t change over time,” says Wharton marketing professor Barbara Kahn. “Also, products that are classically styled rather than fashion forward are almost by definition more likely to become iconic. For example, Burberry’s traditional raincoat is a classic style that has reached iconic status; [same for] the VW Bug.”

Although the packaging has been modified, the distinctive design of the Oreo cookie hasn’t changed much since 1912. Over the years, different countries have put their own spin on the product — a green tea ice cream variety is available in China, for example, and blueberry ice cream Oreos are sold in Indonesia. And the product line in the U.S. has expanded more than once, including the introduction of the Double Stuf Oreo in 1974 and a trademarked brand of cookies and cream ice cream in 1983. Product owner Kraft Foods is selling a limited edition “birthday cake” flavor to mark the cookie’s anniversary.

Corn Flakes, Cheerios and Earbuds

But Wharton marketing professor J. Wesley Hutchinson wonders if Oreos are part of a dying breed. “There are fewer and fewer ‘cash cow’ multigenerational products,” he notes. “Kellogg’s Corn Flakes, along with Post Grape-Nuts and General Mills’ Cheerios are the archetypes. They satisfied a basic but modern human need and use excellent brand management to maintain their positioning in a competitive market.”

Kahn also acknowledges that successfully introducing a product that appeals to a broad audience is tough in today’s crowded marketplace. “But if a product really hits the right note, it can become a classic overnight — think of Apple’s white earbuds,” she says.

As for the Oreo, Kahn thinks the “consumption traditions” that grew around it have helped the product stick around for so long. (According to Kraft, Oreo eaters are split down the middle on the issue of whether to eat the cookie whole or to pull it apart, although women “twist” more often than men.)

Hutchinson adds that one part of the Oreo’s winning strategy is pretty simple: “Have you ever had an Oreo and milk?” he asks. “‘Nuff said.”

Want to comment on this story? Answer one or more of these questions (using the article and your own insight) to start the conversation:

How has Kraft used social media to promote Oreo cookies? Do you know of other ways not mentioned in this story?

According to experts, what has helped the Oreo remain popular over the last century?

Do you think a 100-year anniversary for a product is worth lots of media coverage, like the Oreo has received, or is it just a marketing ploy?

Do you have a cool Oreo story? Maybe you wrote about Oreos in your college essay? Share it with other teens on KWHS’s Facebook page at http://www.facebook.com/whartonhs.

Related Links

• New York Times: Articles about Kraft Foods
• Oreo Sets a Guinness World Record
• Oreo on Facebook
• Classic Oreo Commercial on YouTube
• French Oreo Commercial on YouTube
• Oreo Essay in Teen Ink

“Believe me, it’s not glamorous when it’s midnight on a school night and you’re still up worrying about stocks and other securities and second-guessing yourself,” says Patrick Goldin, the 17-year-old general partner of the Alain Value Fund LP, an investment fund that is made up of several different stocks. Goldin’s hedge fund uses advanced investment strategies to try to get high returns for investors. Pooling together money from multiple sources gives him the ability to make bigger buys, while the investors let Goldin make the decisions about where to put the funds. “To actively manage your investments, you have to train yourself mentally and understand your psychology. You have to realize that sometimes there will be inefficiencies or you will make the wrong move, but if you constantly work at improving yourself, you can be successful.”

Goldin, a home-schooled high school senior from Greensboro, N.C., says his mother introduced him to the stock market in 2005, when he was in the seventh grade. In early 2007, Goldin launched his fund, lining up family and friends as investors. “I was inspired to find out more about the companies that made the products I used, and owning shares of their stock seemed like a good idea,” he says. “I started to monitor their financial performance and from there it just sort of flowed. I progressed slowly, studying the market and reading books — and gradually increased my analysis and investing. I learned from my mistakes.” Some of Goldin’s early investments included Lockheed Martin, Starbucks and Wal-Mart.

‘Not Everyone Is an Expert at This’

Managing a portfolio, or a collection of varied investments, is serious business, involving investment mix and policy, matching investments to objectives and balancing risk and performance. For professional portfolio managers, a key concern involves matching an individual’s risk tolerance with investment performance in a way that achieves the investor’s monetary goals, according to Boris Khazin, investment oversight officer with TD Ameritrade. “Generally, if you’re seeking more performance, there’s going to be more risk,” notes Khazin. “But hedging and other strategies [to decrease] risk mean that the ratio of risk to performance is not necessarily a direct one.”

Not everyone is an expert at this, he adds. “An individual investor who [also] holds down a full-time job may not know what to look at.”

Khazin says that media investment personalities like CNBC’s Jim Cramer suggest that investors spend an hour a week on each of their investments. “So someone who’s got a portfolio of 50 or 60 stocks would not have much time for anything else,” he notes. “A professional portfolio manager, though, maintains full-time analysis as part of his or her job.”

Goldin’s portfolio is made of securities “where the downside is very limited and the upside potential is substantial, creating a very attractive risk/reward proposition,” according to his website.

His investment outlook is centered on a value-oriented philosophy. Value-oriented investors are looking for companies that they think are trading for less than they are really worth. So a company that has a stock price of, say $1.00 a share, but owns land that’s worth $2.00 a share, might be attractive to a value-oriented investor. I look at “smaller companies that are in a situation where an event or other catalyst may drive the realization of value,” says Goldin. Realization of value is a fancy way of saying that market watchers hope the stock price rises above its current level to one that reflects the true value of the company’s underlying assets, or worth. “I’m not really growth-driven, so I’d tend to keep away from an initial public offering of a company like Facebook. There’s no real margin of safety when you’re talking about pricing that’s equal to 100 times earnings [a high earnings per share ratio that is more risky]. Instead, a share price that’s equal to 25 or 30 times earnings makes more sense from a safety point of view.”

Wearing Many Hats as Fund Manager

When it comes to managing an investment portfolio, “you shouldn’t feel rushed,” counsels Rosella Bannister, a consultant with Jump$tart Coalition for Personal Financial Literacy,a nonprofit organization based in Washington, D.C., that supports financial education efforts. “Do your research, but also check your research sources to determine if they are reliable.”

Bannister says she doesn’t believe in “market timing,” or quickly jumping in and out of stocks as a way to capture short-term stock price movements. “I don’t think it pays to try to catch every up and down of the market,” she says. “Instead, invest in something you know about because then you may have a better idea of what products or services will win out in the marketplace.”

The Alain Value Fund has been averaging a gain of about 10% a year, according to Goldin, who notes that the fund isn’t open to the general public. “I find running the fund is a great learning tool, even though there’s a lot of pressure and it keeps me really busy wearing many hats as fund manager,” he adds.

But Goldin admits he’s doing a “precarious balancing act,” juggling schoolwork, fund management and outside activities like soccer. “At times it gets to be very tough, but I have to maintain a balance,” he says. “I guess the solution is intensive time management. Home schooling helps me to accomplish this since I’ve got the flexibility to shift courses around, and I’ve got opportunities that might not be available in a conventional high school setting. It’s not easy by a long shot, but I enjoy the puzzle solving” that’s involved in portfolio management.

Want to comment on this story? Answer one or more of these questions to start the conversation:

How did Goldin build his investment expertise?

What is a value-oriented philosophy and what is realization of value?

Describe some different investment strategies a portfolio manager might take.

Related Links

• The American Association of Individual Investors
• KWHS: What Are the Different Investment Choices: From Condos, to Gold, to Just Plain Cash
• KWHS: The Investor Lifecycle: Changing Priorities, Changing Portfolios
• Financial Rate Information and Financial Education
• KWHS: Understanding Risk and Return: The Roller Coaster Ride of Investing
• KWHS: Why Investors Diversify
• KWHS: Show Me the Money: Analyzing Porter’s Five Forces
• Resource Investing News
• New York Stock Exchange
• Real Estate Investing
• Securities and Exchange Commission: Your Investment Options
• New York Times Topics: Investments
• The Future Investor Clubs of America