The Economics of a Four Year Degree

By Bob Gariano

Last week the Federal Reserve Bank of New York reported that total outstanding student loans have now reached $956 billion in the United States and that debt is growing. Later this year for the first time in history, American students will owe more than one trillion dollars for student loans. Student debt has tripled in 8 years and the delinquency rate now exceeds 11%.  Many of these loans were extended with only the most cursory review of the capability to repay the loans.

This level of student debt is reverberating throughout the economy as new graduates with large outstanding educational loans are much less inclined to purchase homes or automobiles immediately after graduation.  This traditionally fertile market for big ticket consumer goods has dried up as new graduates delay purchases while they try to pay down their college loans.

Even though the unemployment rate for college graduates is one third of that for high school graduates, it is appropriate to ask whether the escalating cost of an undergraduate degree is a financially astute investment. From a purely arithmetic standpoint, the answer may be surprising.

In order to analyze the value of investments, financial people use an idea called net present value or NPV. This is simply a method for expressing the current value of some amount that will be paid in the future in return for some investment made today. For instance, consider an investment that promises to pay $106 at the end of a year and where there are other low risk ways to earn 6% on those funds. In that case, the net present value of $106 paid in one year would be $100 today.

Such an analysis of net present value can be applied to the costs and returns associated with an undergraduate education. This year, the average cost of a four year degree in a private college in the United States is $240,000 and at a public institution is $140,000. This is a minimal estimate for several reasons. Those investment amounts do not count inflation which drives these numbers inexorably higher, even during the time spent in school. College costs over the last three decades have been increasing at a 6.6% annual rate, roughly double general economic inflation in the United States.

Neither do these costs reflect lost earnings from an occupation that might have been pursued during those four years. Additionally, this cost does not consider that the average time to get an undergraduate degree is now 4.6 years. This added time adds 15% onto the initial investment estimate.

Even ignoring these considerations, any calculation of return on educational investments should at least include tax affects. The $140,000 or $240,000 numbers are after tax amounts. Parents or students must earn $200,000 to $320,000 before taxes to have enough after tax money to pay for these college costs.

On the payoff side, the numbers are also obvious and compelling. The US Census Bureau reports that the average wage earner in the United States makes $41,000 annually and a college graduate with a four year degree earns an average $14,000 more than that average each year. Post graduate education adds another $24,000 each year but that is another analysis. As an aside, these census numbers strongly reinforce the importance of high school education. A wage earner without a high school diploma will earn on average only $17,000 annually or $24,000 less than the national average.

But to return to our undergraduate college investment, fortunately there is some standard software that calculates the net present value of future payouts. Most spread sheets have such built in formulae. Using such tools, a person can calculate the value of the additional $14,000 of yearly earnings for a college graduate over a 45 year career. Using the student loan rate of 6%, the net present value or NPV of the $14,000 increased earnings each year over 45 years is $210,648.  This can be compared to the investment of $200,000 to $320,000 initially. It seems that we are reaching a so called tipping point where even an optimistic evaluation of the investment in an undergraduate education may not represent an attractive payoff in future earnings, especially at a private college.

None of this arithmetic argues for less education. Instead, it may suggest that we begin to approach undergraduate education in a more efficient manner. These improvements may also create a more egalitarian system that promises the availability of higher education to many more people around the world.

Such renovation is already underway and will only accelerate with these economic catalysts. Programs like the Massive Online Open Courses offer courses from the most respected educational institutions and from elite professors to people around the world via the internet. MOOC allows the best teachers to lecture huge numbers of students while avoiding infrastructure and other costs associated with a university system that was, after all, developed and has remained largely unchanged since the middle ages.

The economics of higher education will accelerate these new learning models. Traditional issues like enabling credentials and testing capabilities of students enrolled in these programs will be solved. Both the economics of higher education and the hunger of more people to access college level learning will promote these developments. The future of these programs is already being designed and implemented by forward thinking educators.

Cell Phone Towers

 Bob Gariano

One of the best places in Lake Forest to sit on an early November afternoon is on the benches in front of Sweets Candy and Ice Cream Store. The benches on the Deerpath Road side of the store face south and, in the early afternoon, their position perfectly captures the warmth of the late autumn sunshine. Looking south from that point even a casual observer will notice the cell phone antenna array over the Deerpath Inn several blocks away. Cell phone towers are an integral part of our digitally formatted and tightly connected life style.

New Engineering

The theory of cell phones is as old as Marconi’s two way radio technology, but the practical engineering considerations of such networks is substantially more recent and the challenges more exigent. Cell phone engineering relies upon digital signals and sophisticated software. It took engineers more than three decades to develop cell phone systems that work as well as they do today.

Just as radio broadcasting companies are assigned specific frequencies to transmit music and news, so cell phone companies have certain frequencies assigned for their use in connecting their customers with voice and data communications. However, cell phone networks are much more complicated and delicate.

Different commercial radio stations in different cities can use the same frequency. They do not interfere with each other because they are spaced far enough apart. The cells in a cell phone network are much closer, generally only one to two miles across, so the opportunity for interference is heightened. In some high density areas, where demand for service is intensive, there may be cell phone towers only 1000 feet apart.

Assigned frequencies are expensive and their cost induces wireless network companies to continuously improve their network technology. The companies try to fit more conversations and data into the same frequency range while still providing reliable service. Of course, unlike radio broadcasts, cell phones must transmit and receive, so the same frequency range does double duty, using capacity for both up links and down links, that is, talking and listening, on the same call.

Signal Codes

One way to get many unencumbered conversations through simultaneously on the same frequency is by using coding like CDMA or code division multiple access. This coding means that several customers can be using the same frequency but each person’s phone only recognizes signals that have that subscriber’s special code.

To over simplify, a digital signal on a particular frequency is a stream of numbers. My call only reacts to the numbers on the frequency that end with the number 8 and my neighbor’s call recognizes numbers that end with a 3. This code is assigned for each call as the particular signal becomes available. Calls are kept separate through coding the signal. Everything is kept straight using software embedded in the phone and coordinated with signal processors in the tower.

There are other coding methods. It is now common for a single frequency to handle scores of telephone calls simultaneously. Compare this with the system in the early 1980s when only ten or fifteen people in an area as large and as populated as Manhattan could access a cell phone connection at the same time.

The engineering challenges of wireless communication do not end with multiple access and coding. Cell phone connections must be reliable in spite of inclement weather conditions, through walls and around corners, and in various terrains. The phones themselves have to be small. There is little room or weight allocated for circuitry or batteries, but the phones must have the functionality and power to win over customers.

Mobile Phones

It is also obvious that cell phones have to work when the customer is moving. That is what mobility is all about. When a transmitter moves, it pushes the waves together in front and stretches them out behind, changing the frequency. This is called the Doppler Effect. It is why a train horn sounds higher pitched as it approaches an observer and then sounds lower pitched as it speeds away.

This change in frequency due to speed could raise havoc with a cell phone signal emanating from a car as the vehicle moves down the highway, changing frequencies or pitch according to the direction of travel. Modern cell phone software corrects for these anomalies without any effort from the caller.

Another challenge of mobility involves hand offs. As a moving cell phone customer in mid conversation starts to leave one cell and enter another, the phone switches signals to the new tower. The first tower automatically hands off the call to the new tower. The cell towers must be positioned and powered so that overlap of signals is precise to enough prevent call interruption during hand offs, but not cause interference during calls.

Even when a cell phone is not being used, it registers with each new cell that it enters by sending that local tower a message. The customer does not have to worry about this automatic function. The processors in the tower communicate back to the subscriber’s base station about that phone’s presence in that cell. That is how a caller can find and connect to a cell phone customer who is traveling outside of their home area.

Future Engineers

This Saturday afternoon, as I was enjoying my Sweets ice cream cone and observing the cell phone tower with its antenna array, signal processors and controls, power backups, and transmitter equipment, a group of junior high school girls walked by. They were busy sending text messages, both thumbs typing away, while talking non stop to each other.

I wondered whether they had any idea of the decades of engineering that enabled each of them to access the wireless system at their finger tips. One of them might become enthralled with the technology and go on to study the systems and network engineering. Perhaps one of these young people will help develop the technology that will lead to future advances in digital communications.

Bob Gariano is President of RGA, an executive search firm that recruits senior executives and board members for public and private companies. Bob can be reached at rgariano@robertgariano.com

Football and Concussions

By Bob Gariano

When the Indianapolis Colts play football against the New Orleans Saints in Super Bowl 44 in south Florida on February 7, 2010, the game will mark the penultimate event in a sport that is most reflective of our national personality. While baseball may be our national pastime, professional football is certainly our most archetypal sport as a country. Married to the medium of television, football’s combination of pageantry, velocity, scale, and, yes, violence, seems to be a perfect fit to the speed, diversity, and color of modern American life.

This enthusiasm for the game of football is reflected in all ages and at all skill levels. More than five million young people play football in grade schools and high schools in the US each year. Colleges finance major expansion programs on the back of alumni support and television revenues derived from the sport. Football transcends race, economic condition, and locale. The sport’s natural meritocracy is reinforced by uniforms that eliminate personal characteristics and reinforce team identity. When the helmet is on, no one knows what a player looks like, just how many yards he has carried the ball.

Collision Sport

The football field is what some sports injury specialists call an impact rich environment. Vince Lombardi said that football is not a contact sport, it is a collision sport. Whether tackling, blocking, or running with the ball, the basic posture is the same. The player drives through the numbers on the chest of the opposing player’s jersey, often being coached to use the hard helmet as a battering ram to concentrate the speed and mass of the collision. At the skill level of the professional player, these impacts create the spectacle of the sport. But even at the grade school and high school level, football is a violent impact sport.

Concussions are defined as a jarring blow to the head where energy is transferred to the brain through the energies of sudden deceleration or acceleration. The resulting symptoms are stunned senses and sometimes unconsciousness. These events and injuries were usually deemed to be transitory. In no sport, with the possible exception of professional boxing, are concussions more common than in football. New evidence from engineers and doctors who are studying football head injuries and the incidence of concussions in players are starting to change our ideas that these symptoms are innocuous.

The brain is difficult to study in a living organism and especially so in human beings. This most complex and valuable organ can not be adequately analyzed through modern medical imaging like CAT scans or MRI techniques. The soft tissues that make up the brain do not easily yield to modern medical imaging. This

is changing through the work of skilled doctors and engineers at universities and helmet companies around the US. The results are surprising sports injury specialists who thought that they understood head injuries in contact sports.

Studying Players’ Brains

Some of this pioneering work is being conducted by the Center for the Study of Traumatic Encephalopathy at the Boston University School of Medicine. The CSTE studies brain tissues dissected posthumously from football players whose families agreed to donate their brains to this project. Doctors have found that brain tissues from a 45 year old former NFL player had permanent scarring from multiple concussions and that the scarring and damage closely resembles the tangled cells of 80 year old patients who are suffering from Alzheimer’s disease and other forms of dementia.

 More alarming, the researchers later found such damage in the brain tissues of an 18 year old varsity football player who had incurred multiple concussions during his high school playing career. Every player studied exhibited some level of such damage.

Researchers at the CSTE have studied the brain tissues of approximately 100 former football players whose families have agreed to donate the player’s brain tissues post mortem. In every case, the researchers have found such concussion based scarring and brain damage. The CSTE has found that this damage is permanent and most often affects the parts of the brain that control emotion, rage, hyper sexuality, and even some basic functions like breathing. The CTSE has determined that much of the observed brain damage is permanent and may even be progressive.

Dr. Ann McKee, co- director of the CSTE and a neuropathologist who works at the Veterans Administration Hospital in Bedford, Massachusetts said, “I knew what traumatic brain disease looked like in the very end stages in severe cases. To see this kind of change and damage in younger people was simply unheard of.”

Designing Better Helmets

Engineers and helmet designers are studying these phenomena in real playing conditions. Last year, researchers at Indiana University outfitted their football players with sophisticated helmets that help trainers and team physicians track head injuries and impacts. Called the “sideline response system”, the researchers use helmets that are fitted with sensors that detect impact G-forces and transmit these data to the side line via a wireless network. Indiana is the only Big Ten school and only one of ten Division I schools in the country to use this expensive system to supply information about the force and frequency head impacts. Next year, a similar study will be conducted with high school players at Lafayette High School in Indiana.

The system measures how fast the player’s head moves inside the helmet during impact. This deceleration is measured in G-force units. The NFL has determined that 98 G’s is the cut off point. The NFL has found that 50 per cent of players who are subject to a 98 G-force impact suffer a concussion. The scale is easy to understand when one considers that an unrestrained occupant of an automobile that hits a stationary and immovable barrier at 35 miles per hour sustains a 65 G-force impact.

In the course of this instrumented study, the Indiana University research has revealed another surprising issue. Head impact is not an acute problem occurring only when the two players meet in a violent collision in front of 100,000 fans on game day. Football players are subjected to damaging impacts many times during the course of normal practice sessions. Some researchers are claiming that such routine head impacts are resulting in cumulative, chronic brain damage.

Continuing Research

Intensive research continues. This last autumn, The National Center for Medical Rehabilitation Research at the National Institute for Health commissioned a $3.6 million study to examine the underlying causes and results of mild traumatic brain injuries in football players. The biomechanics of the impact event is a special concentration of this work. Already, the Center has published a series of papers based on their new library of data from more than 600 amateur and professional football players. The library documents more than 400,000 collisions and impacts.

NFL players have joined the supporting voices encouraging such work. Troy Aikman, the former Dallas Cowboys quarterback, retired from the game at age 34 after sustaining his tenth concussion. Aikman has been vocal in his support for better rules and equipment to protect players at all levels.

Helmet specifications developed in the 1970s have made football at all levels a safer sport. Nevertheless, new advances are underway which will make football a safer sport for players while not, hopefully, eliminating any of the spectacle and excitement of this uniquely American game.

When we see that thrilling tackle or exciting goal line running play on Super Sunday, it might be worth reflecting for a moment on the dynamics of a violent game and the researchers who are trying to make it less damaging to the people who play it.

   

Bob Gariano is President of RGA, an executive search firm that recruits senior executives and board members for public and private companies. Bob can be reached at rgariano@robertgariano.com

Youthful Expectations

By Bob Gariano

Two weeks ago a good friend of mine who lives in Dallas was visiting Lake Forest. Her daughter is a boarding student at Lake Forest Academy and the student had a leading role in this year’s LFA class play, a production of Stephen Schwartz’s melodic play, Pippin. My friend asked me if I would like to join her for the Saturday performance and I was pleased to accept her invitation.

I was swept away by the quality and energy of this high school production. Even though the LFA play was done on a small auditorium stage with minimal accompaniment, the players sang and danced their parts with an energy and expertise that belied the young age of the high school cast. I have seen plays on Broadway that were not as well presented.

The quality of the production came through the intersection of three happy attributes. The play itself has the hopeful, youthful lyrics and melodies that perfectly fit the young actors. The actors themselves were disciplined and skillful in both solo performance and in chorus. Finally, the adroit management and coaching of the LFA teachers showed through. These teachers got the best out of the young actors because they expected the best. This theme of high expectations is one that runs through the LFA student experience.

Youthful energy

The character of Pippin accurately represents the hopefulness and naiveté of youth. Right before intermission, Prince Pippin does away with his father who had ruled his country with an iron hand in a war like and feudal state. Pippin’s first act as ruler reflects his sense of justice and egalitarianism. He issues a decree to redistribute land to the peasants. He empties the treasury to redistribute wealth to the middle class and the poor. He seeks to create utopian fairness in his country. No sooner were the decrees issued than foreign invaders appear at the city gates. Pippin realizes that an army requires funding and he reverses his utopian dreams to deal with the real politik of the world.

The poignancy of the lyrics, especially Pippin’s solo where he sings “Gotta find my corner of the sky” is all the more touching when we realize that the words were written by a young student composer about to begin his career in the demanding world of the theater. These were words that came from the heart.

Composer Stephen Schwartz

The youthful exuberance of the play does not come by chance. The lyrics and music for Pippin were written by acclaimed American musical theater composer Stephen Lawrence Schwartz. Schwartz wrote the play as a 19 year old undergraduate studying musical theater at Carnegie Mellon University in Pittsburgh. The play was originally performed by CMU’s student actors’ workshop, “Scotch ‘n’ Soda.” I remember seeing that student production when I was an undergraduate student at CMU some 40 years ago.

Carnegie Mellon at that time, and for some decades since, has emerged as the preeminent dramatic arts school in the country. Even though this Midwestern technical school was the first college in the US to offer an undergraduate in drama in 1917, it was not until the last 40 years that the school has gained real prominence in the dramatic arts. Now the school’s reputation in this field is well established. CMU alumni include Ted Danson of Cheers and Damages, Steven Bochco of NYPD Blues, John Wells of ER, Paula Kauffman Wagner of Mission Impossible, Zachary Quinto of Star Trek, Tamara Tunie of Law and Order, and Cherry Jones of 24. Bud Yorkin, who won an Emmy for All in the Family studied engineering at CMU.

Stephen Schwartz graduated from Carnegie Mellon in 1968 with a BFA in Drama. He had studied as a high school student in New York’s esteemed Julliard pre college program. His career as a lyricist and composer for Broadway and Hollywood spans four decades and includes such popular hits as Godspell, Pippin, Wicked, Pocahontas, The Prince of Egypt, and Enchanted. Steven Schwartz has won the Drama Desk Award for Outstanding Lyrics, three Grammy Awards, three Academy Awards, and he has been nominated for six Tony Awards.

 Great expectations

Such a career is launched with high expectations at an early age. A well respected professor that I know at Northwestern once told me his secret for teaching freshman engineering undergraduates. “I expect a lot form them and they deliver.” This professor had carried an automatic weapon as a squad leader in the Israeli militia when he was 19 years old, so he also learned responsibility early. He went on, “We are in the habit of treating the students as children when they are really adults. We should expect so much more from our young people than fraternity parties and video games. If we expect great things, they will live up to those expectations.”

High expectations are what created the marvelous performance at LFA on that Saturday night. The brilliant singing and dancing on stage that evening was a public example of the pride and energy that comes from young people who are expected to perform and who live up to those high expectations to be the best. High expectations is a theme that is a systemic part of the LFA experience.

At LFA the students are expected to dress properly for class. They are required to come prepared with homework completed so that they can fully participate in class discussions. The boarding school and day students at LFA are held to a high standard of behavior outside of the classroom as well. Every student has a full schedule of extra curricular activities including varsity sports and club activities. There is a zero tolerance policy regarding alcohol use and other substance abuse by students. Expectations are high and performance and student pride match the expectations. I personally saw an example of that excellence on stage at Lake Forest Academy on that Saturday evening two weeks ago.

Bob Gariano is President of RGA, an executive search firm that recruits senior executives and board members for public and private companies. Bob can be reached at rgariano@robertgariano.com

A Fresh Coat of Paint

By Bob Gariano

Robert Cumberford, writing in the May 2008 issue of Automobile Magazine, describes his recent road test of the new Bentley Brooklands. He calls the coupe a magnificent absurdity, as incongruous as “the ballerina hippos in Disney’s Fantasia”. Nevertheless, in this article, he gives the designers of this automotive behemoth their due.

This new luxury automobile, which weighs close to three tons, can out accelerate and out handle many sports cars that are less than one third as heavy. The big coupe can reach speeds over 180 miles per hour on the tires and suspension that it arrives with in the showroom. The fit and finish of this remarkable vehicle are exemplary. This luxury comes at a price. It appears that the vehicle will have a retail price of over $350,000, that is, if a potential buyer can find one to buy at all. The yearly production of Bentley Brooklands coupes will total only 550 vehicles for the entire global demand. For the first year of production, 500 cars have already been assigned to committed buyers.

What impressed me even more about this description of a car which few will ever see, let alone own, is that two of this limited supply of vehicles will not be sold at all. These two production cars are reserved for use by the senior management inside the car company. One is for Martin Winterkorn, head of the Volkswagen Group, the current owner of Bentley, and one is for Franz Josef Paefgen, the head of the Bentley Group itself. It is clear to Cumberford that one reason that German engineered automobiles are revered throughout the world is because the senior executives of the companies who own the brands drive the cars themselves. No limousines and drivers for these car company executives. As Cumberford writes, “Most of the reason for the impressiveness of German cars is because their executives drive their products and drive them hard.” This gives the executives a first hand view of the products they are sending into the market place.

The ability to see through the haze of everyday business activities and to find out the real characteristics of people and products in an organization is a crucial skill for CEO’s and other business leaders. As companies get bigger, there are more and more barriers to the flow of accurate and timely information whether intentional or not. There are myriad motivations to tailor what arrives at the CEO’s desk. The well, and sometimes not so well, intentioned information doctoring creates an atmosphere of uncertainty and incomplete information which makes decisions significantly more difficult. Implementation of management decisions is then again altered as the decisions are relayed through out the organization for action.

In 1986, I was Director of Planning for GE’s European businesses. My responsibility was to prepare briefings and investment proposals for several important GE businesses on the continent. It was a plum foreign service assignment and it allowed me inner access to the workings of several of GE’s most impressive businesses in Europe. The proposals and reviews that we assembled were presented to GE’s iconic Chairman and CEO, Jack Welch, when he visited our European production facilities on a regular basis. On one such visit, we scheduled Jack to meet with the plastics group business team and hear the review at the magnificent new GE plastics manufacturing plant at Bergen Op Zoom, the Netherlands.

On two square kilometers of Dutch reclaimed land or polder, GE had invested over two billion dollars of plant and equipment that would produce engineering plastics for the European and central Asian market. This was done right in the backyard of German competitors Bayer and BASF. The factory was indeed a testament to modern engineering as the entire plant was built on land that the Dutch had reclaimed from the North Sea. From the second floor of the central office building, we could see several hundred meters past the earthen dikes to the surface of the sea that was 3 meters above the ground floor level of the plant. Only these dikes separated all this expensive chemical processing equipment from becoming so much rusty and submerged debris at the bottom of the blustery North Sea.

As I was leaving the meeting room after the presentation that day with the entire entourage, on our way to a plant tour, I found myself walking out onto this imposing plant site right next to the Chairman himself. Jack Welch was obviously proud of the hard work and courageous investment decisions that had been behind the facility. As a graduate chemical engineer himself, I knew that he was appreciative of the complexity of making sophisticated polymers of high quality in such a demanding environment. Nevertheless, I wanted to probe into the perspective that Jack Welch brought to these meetings and particularly to the plant tours themselves.

I turned to him and asked an obvious question. “GE makes aircraft engines, plastics, washing machines, locomotives, and light bulbs. We make them at many different factories around the world. What’s the common trait in all the GE plants that you visit?”

I wanted to hear how the GE culture of meritocracy and quality was built into every GE facility around the world. Or I wanted to hear about the pride of GE manufacturing people who belong to a world class organization and who share their stories with each other at management conferences at Crotonville or Boca Raton.  I wanted Jack to tell me that the GE way was firmly embedded in all our facilities, regardless of local culture or national requirements.

Instead of such an articulate and complex observation, Jack’s answer was more pragmatic. “What’s common about all the GE plants that I visit? The smell of fresh paint.” He smiled and then took off on his tour surrounded by his phalanx of advisors and operating executives.

With this brief answer, Jack Welch gave me a glimpse into the real challenge of running a far flung global enterprise with facilities and people on every continent. It was a lesson of great value to any young person who aspires to be a business leader, even if not at the scale of running GE. Jack had concisely conveyed to me how hard it is for the boss to see what is really happening on the ground and in the market. Everyone is preparing the site, painting the equipment, or massaging the numbers right before they are presented to the Chairman. It is the rare business leader who can dig through to the underlying facts and who can peak around the curtain to get a real sense of what is going on in the business.

The executives who run the Bentley organization get their look at the real world by driving two of their very limited number of production coupes. These car enthusiasts want to see exactly what they are asking their customers to pay a third of a million dollars to buy. Jack Welch understood the difficulties of getting such accurate information about the products that a diverse company like GE was offering throughout the world. The skill to dig below the surface and see real business situations without the fresh coat of paint is an invaluable ability. Every young aspiring business leader should practice and develop the ability to uncover the real business facts in their company.

Rolls-Royce Wraith

by Robert Gariano

Visiting Steve Foley's car dealership in Northbrook, a customer walks past the row of Cadillac sedans and sport utility vehicles to a special showroom where the Rolls-Royce automobiles are exhibited. Off to the left is the front room of the dealership with its select inventory of muscular Bentleys. The middle is reserved for the Rolls-Royce.

It is quiet and subdued in that room with mirrored walls that reflect the shiny vehicles on display. Even if a person is not interested in cars, they would want to stop and look at the new 2014 Rolls-Royce Wraith Coupe in the showroom. It is a piece of rolling sculpture. In a world already filled with hyperbole, the Rolls-Royce Wraith (the name means specter or spirit) is an immediate classic.

The Wraith's numbers are astonishing, even if statistics hardly tell the whole story, any more than a chemical description of pigments describes the Mona Lisa. This vehicle weighs 5200 pounds and is over 17 feet long but can reach 60 miles per hour from standstill in 4.4 seconds. Top speed is governed at 155 miles per hour. With 624 brake horsepower generated by the 6.6 liter twin turbo V-12 engine, the Wraith is loafing along at that speed. The eight speed automatic gear box guided by a satellite interface and the intelligent four corner air suspension means that the four lucky occupants of the Wraith are treated to the legendary Rolls-Royce magic carpet ride.

The ZF eight speed transmission is the first to use a satellite uplink to provide the mechanism with information about the terrain and road configuration coming up. This allows the car to alter the shifting points to accommodate and predict torque requirements allowing an unprecedented level of ride quality and responsive performance. This is a car that can literally see around the next corner.

Larry Balkin, Foley's Rolls-Royce special accounts manager is responsible for helping customers specify and commission their new Rolls-Royce vehicles. Balkin met with me and showed me the stunning new Wraith. “My father died when I was five years old and my mother did not have a driver’s license. Growing up I fell in love with cars even though our family never owned one. I bought my first car, a Ford Mustang, when I was a teenager. After college, I became an accountant, but never had I stopped being a car enthusiast. Two years ago I met with Steve Foley, Jr. when I was returning a leased car. We talked about the dealership and the Foley family's commitment to luxury vehicles. I joined the dealership two weeks later."

The Wraith joins the other two Rolls-Royce platforms, the Phantom introduced in 2004 and the Ghost introduced in 2010. The Wraith is available only as a coupe (pronounced in the British fashion 'coo-pay"). Rolls-Royce introduced a whole new vocabulary in advertising the new vehicle. Balkin quoted some of that copy, "With the Wraith, it’s not how fast you go, but how you go fast." The words "power, style and drama" are prominent. Exclusivity should also be added. So far Foley has delivered four Wraiths that have been commissioned since the new model's introduction. The dealership has been allocated only five more Wraiths through the end of the year. The craftsmen at Goodwood are not targeting volume production, only to build the finest cars in the world.

Each Wraith is commissioned with a broad expanse of options so each vehicle must be custom built. The Wraith combines such contemporary technical advances as active cruise control, heads up display, night vision, and 360 degree awareness camera vision. That's not to say that the car ignores traditional Rolls-Royce craftsmanship. The Rolls- Royce tradition of excellence continues with 60 skilled workers lavishing 450 hours on each vehicle, fashioning the aluminum, steel, wood, and natural grain leather into a unique personalized vehicle.

The Wraith is the first modern Rolls-Royce to be designed as a driver’s vehicle and that means that the market is aimed at younger drivers. The four Wraith automobiles delivered by Foley this year all went to buyers under 40. These are affluent people who can afford the purchase price which, with options, usually amounts to more than one third of a million dollars. These are not vehicles that compete with any other cars. The buyer is usually adding to a stable of other vehicles and the Wraith becomes a keystone in that garage. To introduce such a driver's car, Rolls-Royce has allowed Foley to use several vehicles for driving tests this spring for potential buyers. These factory vehicles include a Wraith and a Phantom drophead coupe.

Standing in front of a new silver and black Wraith with its inimitable coach doors and iconic "Spirit of Ecstasy" hood ornament, I was impressed with the fluid lines and the beautiful proportions of this latest Rolls-Royce. It is a vehicle that embodies a history of craftsmanship and design. The Wraith will make a statement of success and achievement for its new owner. Photos of the new Wraith and other vehicles at the dealership can be seen in person or at the Steve Foley website which is www.stevefoley.com.

Technical Leaders as Business Leaders

by Bob Gariano

Twenty five years ago a company’s Chief Technology or Information Officer was a specialist who helped the enterprise in particular circumstances where the emerging technology of information science could be applied. It was a limited role. In contrast, information technology permeates every contemporary business process from internal communications to customer contact to supply chain management to financial reporting. The Chief Information Officer in a modern corporation has become a keystone figure in the overall business leadership team.

Two years ago the Cutter IT Journal published an article entitled "The Right Way to Recruit a Chief Information Officer." The article described a study of two dozen public companies who were replacing their CIOs. The study described the need for technology leaders who are better leaders and business people as well as technical experts. Today, cutting edge technical expertise is considered to be table stakes for senior technology executives. It is leadership skill and business acumen that differentiates successful technical executives from those who are not successful. The Cutter article goes on to describe how such skills can be evaluated in interviewing candidates for these senior roles. That selection recipe has been embraced in most high performance companies.

One of the CEOs in the study put the matter in simple terms, "Our business needs much more than technical skills in our CIO. We need a technical leader who knows how to build shareholder value from their function. We need a CIO who makes IT an integral part of our business activities. And our CIO must have the leadership skills to make the people around her more successful."

Professor Chung-Chieh Lee, who teaches at Northwestern University's McCormick School of Engineering, recognized the growing importance of CIO leadership. He founded the Master of Information Technology Program in the mid 1990s to offer a program that combines engineering and business education. It is an intensive graduate level training program for senior technology executives who want to develop their business skills in the context of the most contemporary technological advances.

Dr. Lee, who grew up in Taiwan and now lives in Buffalo Grove, saw first hand the positive and high velocity effects of technical entrepreneurism. Immigrating to the United States in the 1977, he earned his post graduate degrees in electrical engineering at Princeton. He soon became recognized as one of the leading experts in designing digital networks for sophisticated wireless communications. He has consulted with such diverse industry leaders as Juniper Networks, GE Medical, and Raytheon.

In collaboration with Professor Abraham Haddad, also a Princeton PhD and current head of the program, Dr. Lee and his colleagues designed the Master of Science in Information Technology program. The MSIT program combines training in the latest engineering aspects of information technology with the best business classes from the Kellogg School.

Dr. Haddad says, "Technology moves at a rapid pace. There is a need not only to keep up with these technologies, but for technical leaders to better understand the business principles behind corporate decision making. Before our program, there were few programs that bridged the worlds of technology and business. Our MSIT program incorporates 70% technical courses and 30% business courses. What ties all of our graduates together is a common interest in connecting the technical needs of an organization with overall business strategies."

None of this suggests that the technical content of the MSIT program is anything less than daunting. For example, the first course of the program, still taught by Dr. Lee, is a fundamental analysis of how information systems and digital networks function. The mathematics are not for the faint of heart. When asked about the critical concepts of this first MSIT course, Dr. Lee replied succinctly, "This course teaches the relationship between bit rate, baud rate, and bandwidth. If you understand this relationship, you will pass the course."

It is a simple but exigent set of mathematical and engineering concepts. The first lecture was sprinkled with terms like Nyquist bandwidth, orthogonal subcarriers, and Fourier transforms. Still, because the economics of a wireless network are based on the cost of bandwidth, this course immediately connects the technology of channel capacity, multilevel modulation, and encryption with the most important cost associated with a network, the cost of bandwidth. It is an intimate connection between technology and business economics that carries through the entire MSIT program.

Over the last 15 years Northwestern's MSIT program has graduated more than 360 executives from a variety of functional backgrounds including information technology, finance, operations, marketing, and project management. Through time, the program has continually evolved. Recent additions include courses in virtualization and nanotechnology, information security, and intellectual property and technology law.  The foundation remains the teaching of business acumen and leadership along side a demanding technical and engineering curriculum.

An example illustrates the scale of the challenge. Today, text messaging is the single most widely used data application in world with over 3.6 billion users. Almost 80% of all cell phone users in the world use texting. Last year, more than 7 trillion text messages were sent and the revenues for interconnection services for these messages totaled more than $150 billion. It is an exploding business opportunity almost without precedent.

The technology executives who manage these systems must have more than an understanding of the engineering context of the networks connecting these users. These executives must understand the customer requirements and the competitive vulnerabilities of the market. Northwestern's MSIT program provides technical leaders with the advanced skills and training to meet these new challenges. They are skills which place them in high demand as the technical leaders of the future.

Bob Gariano is President of RGA, an executive search firm that recruits senior executives and board members for public and private companies. Bob can be reached at rgariano@robertgariano.com

Retired Lawyers

by Bob Gariano

The most important trait that a good general counsel must possess is not technical skill or business acumen. These abilities are table stakes if one wishes to be successful as the top lawyer in a large public company. The most important attribute for such an executive is the quality we call character. Character is a combination of integrity, tenacity, loyalty, and sense of what is right and fair. It is a trait that is as hard to define as it is easy to observe in action. Winnetka resident, Jim Baisley, is a lawyer with character.

Baisley retired as chief legal counsel at Lake Forest based Grainger in 2000. While at Grainger he was a part of a team that helped lead the most rapid expansion in that company's history. He was also the point person when Grainger decided to expand their corporate headquarters and relocate to their new building in Lake Forest. The Grainger employees who have an opportunity to work in that marvelous modern building should know that it was Jim Baisley and a small team that got approval for it to be built.

After retiring, Baisley, who was 80 years old this year, devoted his life to traveling and "living well" as he puts it. And he says that he was "busy, but not happy". He reflected that during his time as a company counsel he found the most rewarding times were those when he was not just making sound commercial decisions and helping his employer make money for the shareholders, but when he was helping people. He said that his path to fulfillment started in 2005 when he got a call from one of his and Barbara Baisley's seven children, Charlie.

Jim Baisley was a US marine before he went to law school. He joined the corps in 1952 and served in Korea. Charlie Baisley took a somewhat different route. He attended law school first and then joined the Marines as a JAG lawyer. As a lawyer, Charlie did not have to serve in Iraq. His phone message that day showed a higher sense of duty, "Dad, don't tell mom, but I have just volunteered to go to Iraq. If you are a Marine, that is where you should be." Charlie was showing the character that his parents had taught him his whole life. He was stationed at Camp Fallujah for the next two years, while his parents prayed every day for his safe return. Little did Charlie know that his courageous decision would change his father's life and ultimately benefit scores of our veteran warriors.

Jim Baisley's work started small. Charlie introduced him to a young Marine veteran who needed help with some family and employment legal issues. With little in the way of financial resources, many of these young heroes must literally beg for assistance. Jim Baisley stepped in and helped. While assisting this Marine, Jim began meeting other wounded veterans who needed similar representation. He began networking with some of his friends in the legal community and soon there was a whole constellation of pro bono assistance from generous attorneys.

Meanwhile, Charlie Baisley left the corps and joined AC Nielsen where he on presentations work for the Marine Corps. Jim attended one of his trade shows. He was so well received that he is now a regular at presentations at Camp Pendleton, Camp Lejeune, and Quantico. Based on this reception and with Charlie's help they alignhed with the Semper Fi Fund. "We have raised more than $400,000 to help our veteran Marines. We could use more but it's not a bad start for a team of 45 Marines (there is no such thing as a former Marine) who average 75 years of age."

Baisley went on, "This is just the beginning of our efforts. In a sense, we have just begun to fight. I did do want to simply go to companies, foundations, and wealthy private citizens that I know to ask for contributions. I wanted to get our hands dirty and to get things started first. Now we have a record of success to talk about. We are launching our first real fund raising effort this year." Further information and contributions can be made by visiting the fund’s website at www.glenviewmarines.com

Baisley reports that last week he spoke at a luncheon for North Shore legal counsels and senior lawyers. The title of his talk was "What do General Counsels do after they retire?" Before the lunch, he went for his annual physical examination. His doctor said that age 80, he is in great shape. The doctor went on to say that he often sees such energy and physical well being in his retired patients who are actively engaged in helping other people. The conversation gave Jim Baisley a perfect sequitor for his speech at the luncheon. Baisley says "As I sit at my desk today, at age 80, busy with this work on behalf of our young veterans, I am the happiest person in the world." This might just be the best definition of the word, character, and the best definition of a successful retirement.

Corporate Board Service

By Bob Gariano

Sometimes we seek to avoid jury duty because it requires us to be away from our jobs and personal obligations. Jury duty is never accompanied by suitable compensation or appreciation. Nevertheless, like voting, serving on a jury is one of the two most profound responsibilities that any citizen holds. Our system of government could not function without informed citizens who vote for their representatives and our system of jurisprudence could not function without citizens willing to serve on juries. It is fundamental to our legal system that the accused has a right to be judged by a jury of his peers. The jury system requires citizens to volunteer for that service.

The analog in the corporate world involves service on a corporate board. Fundamental to our capitalist system is the idea that people from various locations and backgrounds can invest their hard earned savings in enterprises of their choice. To access this source of invested capital, companies must ensure that this money is treated with due care and vigilance. The members of the board of a company have the responsibility, as elected representatives of the shareholders, to make sure that this stewardship is maintained.  Like voting or serving on a jury, being a director of a company is a solemn responsibility and such duty requires knowledge, effort, and stubborn commitment to the shareholders’ welfare.

Like jurors, the best directors go about their roles quietly and unappreciated. One such corporate director is Bill Hall. Bill lives in Winnetka and works out of a modest office suite in Skokie. Bill’s professional background includes running businesses at Cummins, Farley, and Eagle Industries. An incurable entrepreneur, Bill later founded Falcon Products, a building products company. He now is Chairman of Procyon Technologies, an aerospace and defense components company that he founded.  Bill earned his degree in aeronautical engineering from the University of Michigan and his Masters degree in statistics from Michigan. He would later add an MBA and a PhD in business strategy from the same school.

Beyond running businesses, Hall has represented shareholders as a director of some of the best managed companies in this area. He has served as a director on the boards of some fifteen companies. Currently he is an independent director of Grainger, Stericycle, Actuant, and CellTrak. He volunteers as a trustee for the Rush University Medical Center, the Illinois Biotechnology Industry Association, the Healthcare Information and Management Systems Society, and the Chicago Council on Global Affairs. Hall also is a trustee with the Northwestern Settlement Association, an inner city youth education and social services foundation.

Hall commented recently, “A board’s most important role in being a steward of the shareholders’ investment. The directors make sure that the enterprise has the right strategy, the right operational intensity and the right CEO. Leadership is what makes companies successful.” One can add that great boards develop great enterprise leadership.

Anyone with Hall’s schedule and record of accomplishment could be excused for taking the weekends off. Instead, Bill Hall has elected to take up one other challenge, to pass his wisdom and expertise on to the next generation of business leaders. Hall teaches entrepreneurial leadership and the management of biotechnology to students at the University of Michigan. He divides his teaching time between Ross School of Business and the College of Engineering. As a member of the advisory committee for the Center for Entrepreneurship and the Zell-Lurie Institute at the University, Hall helps new companies become established. His work at Michigan was recognized recently when he received the Bert F. Wertman Distinguished Service Awarded from the Ross School of Business.

Bill Hall’s work as an executive, entrepreneur, and director has been rewarding to investors for decades. His expertise in running both large established businesses and smaller startups is now being transferred to a new generation of commercial leaders who can observe the kind of service and shareholder stewardship through the experiences of this accomplished executive. It is the kind of commitment and responsibility that makes our capitalist system successful.

Bob Gariano is President of RGA, an executive search firm that recruits senior executives and board members for public and private companies. Bob can be reached at rgariano@robertgariano.com