Seven tricky questions for Mr Buffett

Andrew Hill:

Until this week, only one topic was off-limits for questions to Warren Buffett at Saturday’s annual gathering of Berkshire Hathaway shareholders in Omaha: how serious is the Dave Sokol affair?
On Wednesday, however, the company issued an 18-page report from its audit committee about the former star executive’s trading in shares in Lubrizol, a chemicals group later bought by Berkshire, and declared open season for all questions to Mr Buffett.
Here are my seven:
1. How serious is the Dave Sokol affair?
You are the world’s most famous long-term investor. Recently, Berkshire’s shares have lagged behind the S&P 500, but your record of outperformance over more than four decades speaks for itself. Even big, conservative bets, such as the 2009 investment in Burlington Northern Santa Fe railway, have been well timed. But Mr Sokol was a frontrunner to succeed you as chief executive. You lauded him regularly in your annual letter to shareholders. His abrupt resignation and the circumstances surrounding it seem to suggest that this is more than just a blip.
2. Do you love some of your managers too much?

Obituary: The man who gave the world CDs

Michiyo Nakamoto:

Norio Ohga, who was instrumental in bringing the world the compact disc and the PlayStation and is credited with building Sony into a global electronics and entertainment group, has died of organ failure aged 81.
“It is no exaggeration to attribute Sony’s evolution beyond audio and video products into music, movies and games, and subsequent transformation into a global entertainment leader to Ohga-san’s foresight and vision,” Howard Stringer, Sony’s chairman and chief executive, said in a statement.
“By redefining Sony as a company encompassing both hardware and software, Ohga-san succeeded where other Japanese companies failed,” Mr Stringer said.
A musician by training, who was a close friend of Austrian conductor, Herbert von Karayan, Mr Ohga led Sony during perhaps its most successful years, as president from 1982 until 1995, when the Japanese electronics maker became one of the most admired companies in the world.
It was under Mr Ohga that the name Sony came to symbolise Japanese manufacturing excellence and to define what was “cool” in the world of electronics – an image encapsulated in the catchphrase, “It’s a Sony.”

How Dangerous Is Finland to the Euro?

Sven Böll and Maria Marquart:

Will the election of right-wing populists in Finland derail the euro rescue package? A Helsinki veto would indeed be expensive for the rest of the euro zone, particularly for Germany. Experts are also warning that other European countries may follow suit if Finland decides to pull out of the euro bailout.

Across the 17-member euro zone, government heads had a hunch April 17 might not be a very good day for the future of Europe. The strong ballot box performance of the euroskeptic True Finns means it is very likely the party will be part of the next government. It appears that a country long seen as an EU anchor may soon become a source of irritation for Brussels and in capitals across the bloc.

During the election campaign, True Finn party head Timo Soini lashed out repeatedly against the European Union and bailout plans for debt-ridden euro-zone members. Bolstered by an election that saw the party more than quadruple its standing, with 19 percent of the vote, an emboldened Soini remained vocal on Monday, saying it was unacceptable that Finland “must pay for the mistakes of others.” And that “the content of politics must change. We have been too soft on Europe.”

Lonely Planet’s Ambassador

Amy Yee:

Tony Wheeler, co-founder of Lonely Planet, sits in the lobby of an austere five-star hotel here. Soft-spoken and down-to-earth, the 64-year-old wears a gray dress shirt with dark-blue trousers. He has trimmed gray hair and silver glasses, but his amiable face still hints of the youthful, long-haired traveler featured in photos from the 1970s.
Mr. Wheeler doesn’t need to stay in budget hostels anymore. When traveling to big cities, he checks into luxury hotels. And why not? He founded Lonely Planet travel guides with his wife, Maureen, nearly four decades ago. Since its launch in 1973, Lonely Planet has sold more than 100 million guidebooks to far-off lands, from Antarctica to Zambia and everywhere in between. And this past February the Wheelers sold their remaining 25% stake in the company to BBC Worldwide for £42.1 million (about $69.5 million) after selling 75% in 2007 to the same buyer for £88.1 million. The Wheelers don’t have official roles in the company but will continue as de facto ambassadors for Lonely Planet.

The secret life of the start-up

Gillian Tett

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f you were going to spend $2bn to improve the world, where would you put it? Forty-odd years ago, Ewing Marion Kauffman, a self-made billionaire from Missouri, was faced with just that choice. He took a rather unusual decision. Instead of using his self-made billions to battle homelessness or help the poor, he decided to chase the Great American dream. More specifically, he founded an institute, which takes his name, in Kansas City, to promote entrepreneurs and the entrepreneurial ideal. These days the Kauffman Foundation is one of the largest private foundations in America, topped only by groups such as the Ford Foundation or the giant Bill and Melinda Gates charity.
When I first encountered the Kauffman Foundation – which is barely known outside the US – I must admit I found the whole endeavour a little odd, if not ironic. After all, the usual image of entrepreneurs is that they go forth and boldly strike out on their own, without any paternalistic aid. And America, perhaps more than anywhere else, is supposed to epitomise the entrepreneurial dream; indeed, it is one thing that makes it so attractive.

Oil: We’re Being Had Again

Ed Wallace:

No matter how many of his Fed presidents claim they are not to blame for the high price of oil, the real problem starts with Ben Bernanke. The fact is that when you flood the market with far too much liquidity and at virtually no interest, funny things happen in commodities and equities. It was true in the 1920s, it was true in the last decade, and it’s still true today.
Richard Fisher, president of the Dallas Federal Reserve, spoke in Germany in late March. Reuters quoted him as saying, “We are seeing speculative activity that may be exacerbating price rises in commodities such as oil.” He added that he was seeing the signs of the same speculative trading that fueled the first financial meltdown reappearing.
Here Fisher is in good company. Kansas City Fed President Thomas Hoening, who has been a vocal critic of the current Fed policy of zero interest and high liquidity, has suggested that markets don’t function correctly under those circumstances. And David Stockman, Ronald Reagan’s Budget Director, recently wrote a scathing article for MarketWatch, titled “Federal Reserve’s Path of Destruction,” in which he criticizes current Fed policy even more pointedly. Stockman wrote, “This destruction is, namely, the exploitation of middle class savers; the current severe food and energy squeeze on lower income households … and the next round of bursting bubbles building up among the risk asset classes.”

Is Facebook geared to dullards?

Nicholas Carr:

Are you ashamed that you find Facebook boring? Are you angst-ridden by your weak social-networking skills? Do you look with envy on those whose friend-count dwarfs your own? Buck up, my friend. The traits you consider signs of failure may actually be marks of intellectual vigor, according to a new study appearing in the May issue of Computers in Human Behavior.
The study, by Bu Zhong and Marie Hardin at Penn State and Tao Sun at the University of Vermont, is one of the first to examine the personalities of social networkers. The researchers looked in particular at connections between social-network use and the personality trait that psychologists refer to as “need for cognition,” or NFC. NFC, as Professor Zhong explained in an email to me, “is a recognized indicator for deep or shallow thinking.” People who like to challenge their minds have high NFC, while those who avoid deep thinking have low NFC. Whereas, according to the authors, “high NFC individuals possess an intrinsic motivation to think, having a natural motivation to seek knowledge,” those with low NFC don’t like to grapple with complexity and tend to content themselves with superficial assessments, particularly when faced with difficult intellectual challenges.
The researchers surveyed 436 college students during 2010. Each participant completed a standard psychological assessment measuring NFC as well as a questionnaire measuring social network use. (Given what we know about college students’ social networking in 2010, it can be assumed that the bulk of the activity consisted of Facebook use.) The study revealed a significant negative correlation between social network site (SNS) activity and NFC scores. “The key finding,” the authors write, “is that NFC played an important role in SNS use. Specifically, high NFC individuals tended to use SNS less often than low NFC people, suggesting that effortful thinking may be associated with less social networking among young people.” Moreover, “high NFC participants were significantly less likely to add new friends to their SNS accounts than low or medium NFC individuals.”
To put it in layman’s terms, the study suggests that if you want to be a big success on Facebook, it helps to be a dullard.

Al Jazeera’s Social Media Experiment “The Stream” Launches Online Today

Gregory Ferenstein:

Al Jazeera’s aggressive expansion into cyberspace hopes to empower a new generation of newsmakers, impact the American news market, and capture the attention of young cable cutters.
Fresh off the wild success of Internet-fueled Middle-East revolution stories, Al Jazeera English today is launching the online component to its forthcoming social media-centered news program, The Stream. It’s the most aggressive integration of social media into a live news program to date. And Al Jazeera says it wants to capture a new generation of cable “cord cutters,” push the limits of so-called “citizen journalism,” and inch into American media territory.
A social storytelling service powers the editorially curated content, which is complimented by community commenting before, during, and after the anchored news show. It’s scheduled to start airing May 2nd.

The 30-Cent Tax Premium: Tax compliance employs more workers than Wal-Mart, UPS, McDonald’s, IBM and Citigroup combined.


There is a lot more to taxes than simply paying the bill. Taxpayers must spend significantly more than $1 in order to provide $1 of income-tax revenue to the federal government.
To start with, individuals and businesses must pay the government the $1 in revenue plus the costs of their own time spent filing and complying with the tax code; plus the tax collection costs of the IRS; plus the tax compliance outlays that individuals and businesses pay to help them file their taxes.
In a study published last week by the Laffer Center, my colleagues Wayne Winegarden, John Childs and I estimate that these costs alone are a staggering $431 billion annually. This is a cost markup of 30 cents on every dollar paid in taxes. And this is not even a complete accounting of the costs of tax complexity.
Like taxes themselves, tax-compliance costs change people’s behavior. Taxpayers, whether individuals or businesses, respond to taxes and tax-compliance costs by changing the composition of their income, the location of their income, the timing of their income, and the volume of their income. So long as the cost of changing one’s income is lower than the taxes saved, the taxpayer will engage in these types of tax-avoidance activities.

Chrystia Freeland::

Global capitalism isn’t working for the American middle class. That isn’t a headline from the left-leaning Huffington Post, or a comment on Glenn Beck’s right-wing populist blackboard. It is, instead, the conclusion of a rigorous analysis bearing the imprimatur of the U.S. establishment: the paper’s lead author is Michael Spence, recipient of the Nobel Prize in economic sciences, and it was published by the Council on Foreign Relations.

Spence and his co-author, Sandile Hlatshwayo, examined the changes in the structure of the U.S. economy, particularly employment trends, over the past 20 years. They found that value added per U.S. worker increased sharply during that period – 21 per cent for the economy as a whole, and 44 per cent in the “tradable” sector, which is geek-speak for those businesses integrated into the global economy. But even as productivity soared, wages and job opportunities stagnated.

The take-away is this: Globalization is making U.S. companies more productive, but the benefits are mostly being enjoyed by the C-suite. The middle class, meanwhile, is struggling to find work, and many of the jobs available are poorly paid.

Pro crony-capitalism is different than than pro market.