Tuesday, April 28, 2009

Darden Art Project (DART!)

Earlier this month Darden student Chrissa Pagitsas launched the Darden Art Project, suddenly filling the walls of Darden with vibrant photographs from all corners of the world. The artwork is beautiful. For example, there is an incredible shot of Milford Sound in New Zealand by Jason Reese, a classmate on my first year Learning Team.

Another photo I really like is 'Dancers in Bahrain', a shot by Lizzie Breyer from her Global Business Experience. The photo depicts men in the middle of greeting one another--all that is visible is white flowing garments and the traditional red and white keffiyeh.

I was so moved by the exhibit, I decided to interview Chrissa to find out the inspiration behind it. Here is our conversation, roughly transcribed:

Where did you the idea for DART?
I was going crazy… I've wanted to bring more art to Darden ever since my first year because I saw so much talent and experience in our classmates. The truth is that we're such multi-dimensional people, and that doesn’t come out in the first year format. And frankly the bare walls made it look like a sanitarium--they were screaming to be filled--like a kid with a crayon. The artwork is a step above me taking a highlighter to the walls.

How difficult was it to get buy in?
It was easy because I made it easy, and the way I made it easy is that I had a clear plan, and aligned the purpose of the project with the Tayloe Murphy Center's mission of global education (Tayloe Murphy sponsored the exhibition). When you align things, things happen like a hot knife through butter.

Something I appreciated was everyone's enthusiasm to make the place [Darden] better. It was key that it was straight from the heart and there was a business plan behind it.

You wrote a business plan for this?
I wrote it as a final paper for Prof. Horniman's Leadership Learning Lab. [The paper outlined] mission and strategy, timeline, budget, org structure, talked about risks, and how it links to the community, which was an important part of it because of the SHE auction. (Each year the National Association of Women MBAs at Darden holds an auction to support the Shelter for Help in Emergency here in Charlottesville. SHE provides support to women threatened by domestic violence).

How does it link to SHE?
This is a temporary exhibit -- in the sense that new photos will be put up. Important to recognize that the Darden community revitalizes annually with new students, staff asnd faculty. And students head off as alumni into the world and have something new to offer that they didn't have at Darden. Every Spring the exhibit will come down and new photos will be solicited from the community here in Charlottesville and worldwide. The current photos will be sold at next year's SHE auction and all proceeds donated to SHE.

What struck you about the photos?
A staggering number of photos were submitted (400 photos, with roughly 100 unique submissions). Of those 400, twenty were selected, and of the twenty selected three were alumni. The rest were distributed among staff, students and faculty.

People's reaction was the most important experience -- peoples' happiness and surprise at the photos. It seemed to reawaken a part of their soul. Students who felt they were conforming to stereotype business expectations could express another side of themselves.

It was also a way for faculty and staff to connect with students, and important for staff to be seen in another light by students and their peers. It linked groups in new ways.

Why This Project?
Businesses are founded based on creativity and new ideas and inspiration; and inspiration comes from many sources and types of information. Yet you won't hear a CEO visiting Darden say he was inspired to found his business from his spreadsheet. You're inspired by customer needs, by gaps, by art, by traveling, casual observations in conversation. If I had to capture the whole thing, it's another way to insert inspiration into the school -- share experiences, connect people globally, to inspire and to be whole.

More photos to follow. If you were an DART finalist and would like your photo featured in this blog, please send them my way!

Friday, February 13, 2009

Capital Markets Darden Style (with Yiorgos Allayannis)

Yiorgos Allayannis is reason alone to come to Darden. It may be Darden urban legend, but I have heard tell that his classes cure hangovers. From the minute you sit down, you will be on the edge of your seat.

Having worked in sustainable development over the summer on an avoided deforestation project, I couldn't miss Yiorgos' class on cap and trade, which he taught as part of his Capital Markets elective class. I also thought this was an opportunity to try and capture the flow of a case-taught finance class at Darden.

We started from 30,000 feet, and asked 'Is there a problem?' The overwhelming class response was YES, with 60 YES votes and only 3 NOs.

Some of the other comments raised were:
- Even if there is not a problem, business is aligning behind this issue, so get on board!
- Even if we're not sure there is a problem, can we risk doing nothing?
- What happened to the ice over Greenland?

Then we asked, 'Whose problem is it? Developing or Industrialized Economies? Or is it everyone's problem?'

Molly and Gaurav Gupta had a great volley over the contentious issues of externality, equality and leadership. Molly's argument was that China, because of the pollution it creates as the leading producer of GHG emissions, needs to come to the negotiating table. China's pollution is having an effect on the health and well-being of countries outside its own borders, and if not everyone agrees to participate in Cap and Trade, there will be a flight of factories to non-participating countries like China where energy costs are lower.

Gaurav argued that it is the responsibility of developed countries, historically the grossest polluters with the largest demand for products produced in China and the highest GDPs to reduce worldwide GHG emissions.

Next we shifted gears to ask 'What can we do about it?'

Three solutions were discussed to some length--Cap and Trade, Tax, and Investments, with a surprising amount of attention given to the third--investments into the infrastructure to distribute cleaner energy products, such as wind, to the populous areas of the US that need energy (from Nantucket to NYC); and into investments that drive down the cost of new technologies to make them cheaper and thus more available. We also touched on the nuclear debate after a surprising admission came from the back row--Marshall Croft apparently ran a nuclear reactor for a year! An expert in the room!

Here there was a great interruption from Davide. He commented that 80% of our energy use is from non-renewable sources and that in recent years our energy use has doubled. Thus, it is not just a question of clean tech, but a question of reducing our energy consumption and the way that we use resources.

Finally we started talking about the Cap and Trade system. (Let me take a moment to say that I was really impressed by the enthusiasm and intelligence my classmates had brought to the discussion thus far. I think we would have begun discussing the structure of cap and trade far earlier if it were not for the overwhelming participation around the earlier discussion, which I believe was fundamental to talking about this new market mechanism.)

Here is an aggregation of my classmates definitions: In a cap and trade system a Government sets an explicit aggregate limit on the amount of production (of GHG, in this case). There are two companies, A and B. Each receive a certain number of allowances to pollute based on their previous levels of pollution, and based on the. Usually an allowance is some measurable quantity, such as one metric ton of carbon. A invests in technology that reduces their emissions below their previous levels. B does nothing. A can sell its unused allowance to Company B.

Patrick Connell interjected with the concern that Cap and Trade will create a divide between companies that can afford to modernize and those that cannot. This being a capital markets class, this was entertained, but not seriously. We believe in free markets! If a company cannot compete in the market, they will fail (unless of course they are the Big Three...)

Chris Brandriff brings up another great point. He reminds us that the end goal of cap and trade is to reduce the emission of the greenhouse gases that are warming the planet.

There are advantages in taking a leadership role to get us toward this goal. Yiorgos provides California as an example. Investing in the carbon markets can spur growth in clean tech and allow California to be part of the discussion in setting the future standard. He asks, "Do you want to wait and be the last one, or the first and lead the charge to make the market efficient?"

We began talking about the dynamics of the new market -- how can you tell when a carbon credit is real? Has one ton of carbon, that would have otherwise existed in the atmosphere, been removed? How can credits be measured and verified? I was able here to share my experience working with avoided deforestation in Indonesia and my understanding of additionality. A great way to tell whether a project has been successful in reducing the upward trend of CO2 emissions is to understand whether it could have existed in the absence of carbon markets. If it could and would have been taken on anyway (positive NPV, mandatory by law), it should not receive credits.

I recomend that all my classmates or anyone interested in these issues read WRI's short (2-page) fact sheet on cap and trade for more on additionality and other issues discussed above.

It was truly an awesome class. It was informational and encouraging. I'm off to polish my resume and start networking to see if I can find employment doing project finance and project management in the new carbon economy.

Wednesday, January 21, 2009

Losing Your Money to a Guy Named Ponzi

Tom Gilliam who lives here in Charlottesville is talking today about how he almost nearly lost everything in a Ponzi Scheme, “The Great Wine Caper.” Truthfully, I was skeptical about attending the event -- it's hosted by the Darden Christian Fellowship and part of me worries that it will turn into a preachy story of finding God in adverse circumstances. But, in the end, my curiousity got the better of me (postscript: and I am glad it did).

Gilliam gives the appearance of being a serious solid guy, not the type who would get caught up in a giant scam, and I wonder how he feels admitting openly that he was conned--though it happens all the time, most people prefer to keep that private. Let's find out.

He's going to take us back in time to 1971. Apparently he already talked to Darden about this very issue in 1984. I guess he's had a while to get over it.

Here's how it started for Gilliam -- on a tip from a friend/coworker at an Investment Advisor Firm Gilliam worked with, he invested $5K into an 'industrial wine' business. Back came a check for $7200, so he went in for another $10K. Everything was going well.

He met with the principal of the industrial wine business, Bob Johnson. His story was that his brother had been involved in international development and had gained some knowledge about working with wine crops. He kept investing more, getting paid off, getting paid off more. A bank agreed to lend 80% on the deal, then another bank offered to lend 100%. Gilliam got even more involved, he opened an SEC-only brokered dealership and begins raising money that he sends to Johnson. Johnson always returns it with a sweetner on top.

One day he is paid a visit from the SEC. Soon after, he gets a call from one of the banks that has traded $28MM of personal checks with Johnson. Earlier in the morning, Johnson put a $600,000 check into bank which bounced, and they can't find Johnson. In total, six people had $14M invested with Bob, and 5 Virginia bank presidents got caught up in the deal. Gilliam himself had invested the money of 14 different people into Johnson's wine business including money from his own family members. With the 30% returns the Ponzi scheme generated, Johnson had to have been generating $3-4 MM new money each month.

Gilliam started getting sued by everyone. In June 1976, he was tried in a civil suit. Thirty people got on the witness stand one by one to testify that he stole their money. Then Johnson got on the stand and said, "When you're doing a Ponzi scheme, you don't tell your wife, you don't tell your family, and least of all you don't tell the people who are raising money for you." Gilliam was acquitted.

Gilliam lost everything he had except his house through the ordeal. He owed $300K to banks (as culpable as him) who gratefully took 10 cents on the dollar. He moved to Cville. All three of his kids went through UVA and he comes out every 20-25 years to talk about it. Johnson got six years, served four. Then, he started another fraud with guys from Chase-Manhattan bank while he was at Allentown prison. Last Gilliam heard, Johnson was making his living as an accountant.

But how did it start for Johnson? It started simply. He was an accountant with C&P telephone company and had to pay a $600K debt on a margin account. He asked a friend to loan him $700K, paid off his debt, and began to look for someone to lend him the 700K to pay his friend.

Ponzi schemes are flagrantly fraudulent and deceptively simple. I asked Gilliam if there was any better way to spot a Ponzi scheme. The big one is consistent returns--returns too good to be true. Maddoff's returns were always consistent. He was also trading more than was available to trade in the market.

Gilliam did not spend a lot of time talking about his faith. He remembers that, at the time, he told the lord he was going to give him his fair share, and to some extent, inferred that some may (incorrectly) use Christ as an insurance policy. In the end, he says, whether or not you have accepted Jesus Christ as your savior, you have to pay the piper.

What I took away from the talk is one simple non-denominational truth -- do look gift horse in mouth. Both Maddoff and Johnson had this in common -- they were both great at getting a few people to trust them and then by word of mouth extending that trust to countless others.

Tuesday, January 13, 2009

Live Footage - Trash Audit

Two things.

First, I just received the edited footage from the Darden Trash Audit (aka dumpster dive). In May 2008, Darden Dean Bob Bruner announced that he intended to make Darden a ZERO waste institution by 2020. By October of that year, we were diving in the Sponsor's Hall trash dumpster, separating out the plastics, aluminum, and recyclable paper, trying to get a sense of the community's current recycling practices and to find areas where we could improve.

Well, we found there was a lot of room for improvement (the container was ~67% recyclable by volume) and I hope that efforts to increase awareness around this issue and decrease our environmental impact will continue in the future.

Second, I discovered an awesome site online, Xtranormal, where if you can type, you can make movies, and had to pass it on.

OK, three things. I have been thinking about my liveblogging lineup for the Spring, and promise it will come soon. In all frankness, blogging has been put on a backburner to getting a job, which given everything that has happened in the past half a year, is tougher than I thought it would be. If there is an event happening at Darden that you (as a current or a prospective student) would like coverage of, or would like to know more about, please leave me a message and I will do my best to liveblog it.

Wednesday, November 26, 2008

NYC Thanksgiving

At 6:14 am this morning I flew from Cville to NYC, and boy are my arms tired (tee hee). I am spending quality time with my brother and his wife making a wild rice stuffing and a chocolate-espresso cake for the big day tomorrow.

I will not be live-blogging my thanksgiving. I will be giving thanks for all those things like family, good friends, and good health, that, no matter what kind of weather, are so so important in life, and over-eating.

I did, however, find a live thanksgiving blog on the NYT Dining Out Blog, that is happening blocks from where I am now -- somewhere in a brownstone in Brooklyn: http://dinersjournal.blogs.nytimes.com/2008/11/26/live-blog-from-soup-to-nuts/?hp.

Happy Thanksgiving everyone!

Saturday, November 15, 2008

Net Impact National Conference - Day 1

Net Impact held their annual conference to a sold out audience this weekend in Philly. Sustainable business has arrived. The conference was full of optimism that a business case can be made for greening operations, investing in clean tech, and scaling social enterprises, and that the momentum in the business world, together with public sector change, will move us toward to solving today’s most pressing crises.

Here are some quick take-aways from the panels I attended:

Day 1: Finance Goes Green (Panelists: Credit Suisse, Citigroup, Goldman Sachs, HSBC, CCX)

The panel was split between M&A advisory people and internal advisors on ‘green’ issues. Financial institutions have to be ahead of the curve and responsive to change; they are typically some of the most responsive institutions to major paradigm shifts.

Here’s where the panelists see green financing going:

Fuel Cells (1990s) -->Wind, solar equipment and energy generation (present) --> Energy efficiency and water issues (water is still currently in the realm of VC and PE). They see the current economic slowdown creating a blip, but not derailment, in that trajectory, especially with projects that take longer to go online (wind projects take 12-18 from financing to operation) and require greater upfront capital requirements.

And this is how they’re incorporating it into how they do business:

Citi: Dedicating $50 BB over 10 yrs to climate positive activities. 1) GHG reducing, 2) transitional technologies (getting to solutions that reduce GHG) like gasification.

HSBC: won’t loan to those that do not demonstrate an environmental plan, engage in constructive dialog with client companies.

Credit Suisse: Primary mission is to assess whether or not the business is financeable, but they seek to identify climate change and social risks during the due diligence process.

Goldman Sachs: Future pricing of negative externalities will change the structure of finance. Integrate environomental due diligence into all policy units. Work with IB side on natural resources deals, on principaling side on natural resources and renewable deals.

Unconventional Partners: KKR and EDF Join Forces to Drive Results

My favorite panel, this one focused on KKR and EDF applying lessons from their TXU negotiation, to pilot greening KKR’s entire portfolio of companies. Working with a few of KKR’s companies, such as US Food Service, they’re developing a process playbook for companies that seek to create real value by understanding their impacts and what drives excess energy and material usage. I can’t say what they’re like outside of this panel, but they seem pretty chummy.
Sustainability efforts and private equity may seem an unlikely marriage, but maybe it’s not. PE works with private companies that do not have the pressure of quarterly earnings and can afford to go after investments with a longer payback and ROI.

Future of Sustainable Investing (Panelists: Principals for Responsible Investing, Innovest)

Innovest is modeled after bond agencies and provides research/ratings to fund managers on a large universe of about 2300 companies. PRI works with institutional investors and help them consider Environmental, Social and Governance (ESG) issues when refining their portfolios.

This panel got going with a look at what caused the current financial crisis. The panelists highlighted that among the many causes was a breakdown of trust in the financial services sector--people sold products that were difficult for the customers to make sense of or that the sales person knew that their customers could not afford.

Innovest led the session; it was interesting to hear how they rate companies on a sector-by-sector basis, and especially how they rate banks (through who they lend to and underwrite).

The rest of the two-day conference was packed with panels, networking lunches, inspiration from people taking practical steps to respond to climate change, composting, and more.

Friday, October 31, 2008

Darden Business Concept Competition

I just got to the Business Concept Competition, and walked into the second-half of a presentation on a ride-sharing service. Darden students are finding business opportunities by considering sustainability issues. I love it.

This team has their act together—they’re talking about how their internet-based ride-sharing service will give companies flexibility in arranging transportation for their employees and offer employees a way to reduce their environmental footprint. They claim that DC-area employers currently pay ~$60 in transportation subsidy for each employee, and that their service would help companies save money. If this catches on, it could be hot. Great idea, guys!

Unmanned Aerial Vehicles for Peace. An unmanned aerial vehicle collects data, delivers ‘packages’, and navigates autonomously . Usually I guess the ‘package’ detonates, but these guys want to build a company that employs UAVs in civilian activities as a communication hub.

UAV for Peace plan to buy, adapt and lease UAV’s for use in search-and-rescue, disaster recovery and search for survivors. These guys are thinking about of the box – they’re not just talking about planes but about using blimps as mobile communication platform that could host cellular networks, radio antenna.

It may be uphill getting this past the Federal Aviation Regulation, capturing a sustainable competitive advantage, covering that high capital cost. But no one’s doing it. The judges offered some useful encouragement and suggested that the team select one or two mission categories, and work the sensor issue and the deployment issue to better communicate the opportunity.

Clean India introduces their team, which is strong, two MBAs and a Prof. and researcher at Oregon State University in water treatment. The product: low cost waste water treatment using ponds and photo bioreactor to treat water used by industry. Dirty water goes in, is cleaned by algae, and is filtered out as industrial-use water and dry algae. The revenues come from both these outputs--the algae can be used for bio-fuels, animal feed, fertilizer; and the water can be sold back to industry.

Clean India are focusing on the textile industry (4% GDP of India), which requires a lot of water (1 MM liters daily) and is currently shipping it from great distances. My classmate Ravi runs through some solid-looking financials and opens up for questions. The judges are concerned about barriers to entry—but it sounds like this team has an edge both with the algae technology and with their photo-bioreactor/algae hybrid model. Good job, Ravi and Baij!!

Life Flow is a technology that support the left ventricle for the treatment of congestive heart failure . Another super strong team--the presenter is an MD/MBA candidate and he’s working with UVA engineers, doctors and people who want to apply this new technology in patients.

Life Flow runs through some of the existing technology – if one of the main alternatives is a heart transplant (scarce supply, pre and post transplant issues, higher incidence of mortality 5 years out), we (me, you and our baby boomers parents) need more options! Life flow may be an industry first. Its strongest points are that its sensor network and magnetic technology allow identification of thrombosis and its location without messing with the flow of blood. The judges and audience have a lot of questions about IP, the device, and the process that they are using to test this device (in vitro/in vivo). I think that short of winning the prize-money, the feedback from the judges here is the most valuable thing for these teams that typically seek to compete in future competitions.

I could listen to these young, motivated, extremely bright entrepreneurs for hours, but have got to take off. After all, it is a reading-day (read: day-off), Halloween, and I’ve got an octopus costume to finish putting together (photos may follow).

I didn't mention all the entrepreneurs by name and didn't cover all of the event, so for completeness here's a list of all the Business Concept competition finalists. Congrats to everyone who made it and got a chance to present today!

Consumer Goods, Services & General Category:
Clear Money – Kevin Royer (D ’10)
Jay’s Karaoke Lounge and Suites – Jacqueline Grace (D’ 10),
Melvin Pope
Ride Flow – Alexander San Andres (D ’10), Joanne Gotianun (D ’10), Mark Taylor (D ’10)
TeleMed Africa – Scott Emami (D ’09), Keith Florance (D ’09), Manoj Sinha (D ’09), Henri Van Canneyt (Darden Exchange Student)

Life Sciences & Hi-Tech Category:
UAVs for Peace – Thanh Dinh (D ’10)
LifeFlow – Amir Allak (D ’10), Alex Bailey, David Chen (D ’06)
Clean India – Ravi Yekula (D ’09), Baijnath Ramraika (D ’09)
Ganti MurthyBlade Energetics – Scott Kasen, Michael Iger, Adam Malcom