July 1, 2008 6:00

Sheldon Adelson finally begins to penetrate the national consciousness

I belatedly got around to finishing Connie Bruck's epic and much-discussed profile of Sheldon Adelson Monday night. It is, like most of Bruck's work, loaded with an almost-but-not-quite-numbing amount of detail. But the essential points are these:

1) Sheldon Adelson is the third richest man in the U.S.
2) These riches flow from his hotel/casinos in Vegas and Macau.
3) He's not always pleasant.
4) He has become a big backer of the Republican Party.
5) He's an even bigger force in Israeli politics, and really wants to put Bibi Netanyahu back in charge.
6) He can type 90 words a minute.

Items 4-6 were the main news in the article for me (I ooze with envy and admiration for fast typists), but for most readers the big revelation seems to have been No. 1. I spent part of last week at a Century Foundation media workshop on the rise of billionaires, and several people expressed surprise that this guy they'd never heard of was so near the top of the rich list. (Knowledge boy that I am, I kept correcting everybody's pronunciation: It's Add-elson, not Ade-elson.)

Which just goes to show that more people ought to be reading Forbes, Fortune ... and the Curious Capitalist, which ran an EXCLUSIVE interview with Adelson way back in 2006, when I was still working at Fortune. The post began:

Sheldon Adelson is really into lists. On a visit to Fortune yesterday, he spent several minutes reeling off the (impressive) academic and other accomplishments of his two daughters--much to the embarrassment of one of them, Sivan, who was sitting next to him. [Correction: He actually has three stepdaughters; but he only discussed the two daughters of his second wife Miriam.]

Before that Adelson (the "ad" is pronounced like advertising, not lemonade) had named all the countries whose populations he expects to draw on to fill the spectacularly immense new hotel/casino/shopping/entertainment complex his company, Las Vegas Sands, is building in Macau, the former Portuguese colony near Hong Kong. He listed the populations, too: Japan, 128 million. South Korea, 44 million. Taiwan, 24 million. And so on.

Adelson paused after mentioning India's 1.1 billion inhabitants--whom he said he really isn't counting as part of his potential customer base. My boss, Eric Pooley, started asking a question. "No, I'm not done yet," Adelson interrupted. "I was having a sip of coffee." He continued: "I forgot about the 1.3 billion in China."

Then it was time for the punch line. "Do you know how many people I need to come each year to make my 20,000 rooms 100 percent occupied? Two million." That's if they stay an average of three-and-a-half nights. Then Adelson started going through the other permutations: What if people stay two nights? Or one night?

"The numbers of people I need to make it work are almost infinitesimal," he said. "It's almost a no-brainer. What bewilders me is that no one else could see it."Read more.

One of the main things I came away from that meeting with was the sense that Adelson has got to be one of the least polished billionaires on the planet. I mean, T. Boone Pickens acts colorful and all, but it's clear he knows exactly what he's up to. With Adelson it seems different. He's very rough around the edges, and completely incapable of staying on message. Which I guess is why he refused to talk to Bruck. (Actually, it sounds like he talked to her repeatedly, but only about how he didn't want to talk to her.)

Update: I think I like Andrew Leonard's shorthand version of Bruck's article even better than mine:

So here's how the world works, today. Americans spend their cash at Wal-Mart buying goods made in China. The Chinese take that cash and gamble it away in Macao. And then Sheldon Adelson spends it trying to defeat Barack Obama in the U.S. and get Ehud Olmert ousted as prime minister of Israel.

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July 1, 2008 2:23

Howcast tries to make a living in the media torso

I had nothing to do with instructional-video site Howcast making it onto TIME.com's list of the 50 Best Websites of 2008. But I do know the company's CEO, Jason Liebman. I met him last year when he was still working at Google, trying to sell professional videomakers on the merits of YouTube.

This was at a time when Chris Anderson's Long Tail was still Topic A. As I wrote in March 2007:

The tail refers to one end of a statistical distribution, at the other end of which (the head) are the blockbuster hits that defined late-20th century media. But while the long tail has been very, very good to Google, the company is now too big and too ambitious to settle for the nickels to be mined among the Web searchers and bloggers and small businesses of the world. It has been moving its attentions up the curve, along what Google insiders call the "torso"--a territory of professionally-made content geared to niche audiences--toward the hit-filled head long dominated by Big Media.

Jason Liebman

Liebman came to the conclusion that this underserved torso represented a business opportunity, which is why he and a couple of colleagues left Google last year to start Howcast. When I paid a visit to the company's Soho HQ a few weeks back (which is where I took the lovely photo at right), he described to me a company trying to build a profitable middle ground between Big Media and user-generated content.

The first few hundred Howcast videos were made in-house, at a cost of $800 to $1,000 each. In an effort to bring that expense down (the goal is "a couple hundred dollars a video," Liebman says), the company has switched to a new production model in which staffers in New York do the research and write the scripts for the videos, then hand them over to a growing network of wannabe directors (semipro directors, if you prefer) who actually film the things. Oh, and the New York crew has also lined up the rights to a bunch of music that their directors can use in the videos. "The whole question we're trying to solve is how to scale with quality," Liebman says.

The directors do get paid, so it's not quite the Huffington Post model. But Howcast seems to be plowing similar ground between amateur and pro, old media and new. Which seems to be about the most fertile ground in the media business these days.

Not that Howcast has figured out everything just yet. As Liebman put it when I asked him about the touchy subject of, uh, making money, "This quarter is the quarter to think through monetization."

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July 1, 2008 10:45

What counts as gentrification?

In response to what I wrote about gentrification not driving low-income minorities from their neighborhoods, the reader tegwar raises a very good point: What exactly do we mean by "gentrification?" He writes:

I'm a touch underwhelmed on first glance. They define gentrifying neighborhoods as those which were in the bottom quintile by income in 1990 and experienced an increase of $10k in average income by 2000. That is an impressive step in income, but I'm not sure that's what we mean by gentrification. That increase would appear to have only moved a neighborhood up to somewhere near the 40th percentile of neighborhoods at best. My question: Do we think of gentrifying / gentrified neighborhoods as those still below the median income? Is that really when we see the white yuppie class flowing in?

I guess I'm just not sure they set their marks on gentrification quite right. Does gentrification involve the poorest neighborhoods simply becoming less poor or do we mean taking the neighborhood more toward 'upper middle class'?

It is a very sticky wicket, the business of defining gentrification. McKinnish, Walsh and White do use a pretty broad definition. I'd agree with that. Trying to narrow it down further, though, can raise other problems.

In Lance Freeman's 2005 study, a neighborhood had to meet the following criteria to be considered gentrifying:

1. Be located in the central city at the beginning of the intercensal period.

2. Have a median income less than the median (40th percentile) for that metropolitan area at the beginning of the intercensal period.
3. Have a proportion of housing built within the past 20 years lower than the proportion found at the median (40th percentile) for the respective metropolitan area.
4. Have a percentage increase in educational attainment greater than the median increase in educational attainment for that metropolitan area.
5. Have an increase in real housing prices during the intercensal period.

That combination of characteristics is definitely more thorough—and may better fit a gut understanding of gentrification—but the problem with it is that when you line everything up, "gentrifying" neighborhoods between 1990 and 2000 actually saw a slight decrease in median household income. That doesn't feel right either.

I think part of the issue is that we already have a vivid, anecdotal understanding of what gentrification is, and that every time we say that word we summon a host of politicized connotations. I wonder how the debate would change if we instead started calling it "localized economic betterment."

And in direct answer to your question, tegwar, yes, McKinnish, Walsh and White did see an inflow of white, college-educated people to the neighborhoods they defined as gentrifying. Three different cohorts—20-to-40-year-olds with no children, 20-to-40-year-olds with children, and 40-to-60-year-olds—all moved into gentrifying neighborhoods at significantly higher rates than they did into similar neighborhoods not considered to be gentrifying.

Barbara!

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July 1, 2008 9:23

Edward Glaeser proposes the advent of the semi-profit corporation

So my column about John Mackey, Kip Tindell, and their ideas about what Mackey calls "conscious capitalism" turns out to have been moderately timely after all. Yesterday Michael Kinsley and Conor Clarke threw open the doors to a group blog that they and a few economists and journalists have been filling with posts for the past week. The subject: "Creative Capitalism"--the not-entirely-profit-motivated approach that Bill Gates outlined in a speech at Davos in January. Or, as Clive Crook sardonically puts it in a post on the blog, “Do as I say, not as I did.”

Milton Friedman's famous essay, "The Social Responsibility of Business is to Increase Its Profits," is a big part of the discussion. I've long been fascinated by this piece, originally published in the New York Times Magazine in 1970, and its impact. My very first post after moving this blog to Time.com was on the topic, and it plays a significant role in my not-so-soon-to-be-published book. Any discussion of "creative capitalism" has to confront Friedman's argument.

So far the most interesting attempt to do so on the Creative Capitalism site has been made by Edward Glaeser, a youngish Harvard economist very much in the Friedman tradition:

Anyone who manages in a university or foundation or hospital knows that one of the comparative advantages of the non-profit sector is that our co-workers believe that we are doing good in the world. Cash can certainly motivate people, but so can other ideals. Just as armies moved from being purely mercenary affairs to being forces dedicated to honor and patriotism, I expect to see more and more companies embrace complex objectives that go beyond making money.

None of this negates Friedman's essential point that under current contract law, for-profit firms have a fiduciary duty to their shareholders that creates an overwhelming legal and moral obligation. If more corporations are going to be creative capitalists, then we surely need to consider new contractual forms that reflect the fact that firms may want to do other things as well as making money for their shareholders. For example, firms can certainly have two types of voting shares, one of which goes to investors and the other of which goes to workers. The legal obligation of the firm under this structure would be to return a decent profit to shareholders and to cater to their empowered workers' desire to do something good. This dual responsibility is certainly messier than pure profit maximization, but if the legal form clearly empowered voters who didn't get dividends, then many of Friedman's objections would disappear. After all, shareholders always knew that they weren't going to get aboard with only money on its mind.

This sounds a little bit like German companies with their worker representatives on the board of directors. This practice seemed terribly retro a decade ago, when shareholder value was conquering the world. But now here we've got an American economist of generally conservative leanings proposing a variant of it as the next big thing. Times would seem to be changing. (And then, in a few decades, they'll change back again, right?)

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