The Wall Street Journal Education Program
Weekly Review & Quiz
Covering front-page articles from Feb 25- Mar 3, 2006
Professor Guide with Summaries Spring 2006 Issue #8
Developed by: Scott R. Homan Ph.D., Purdue University
Questions 1 – 12 from The First Section, Section A
I, Jimmy
By JEFFREY A. TRACHTENBERG
February 25, 2006; Page A1
http://online.wsj.com/article/SB114083821465183359.html
PLAINS, Ga. -- As a president, Jimmy Carter was famous for being a micromanager,
fussing over the day-to-day details of his administration. Three decades later, as a book
author, those same qualities have helped him to become a publishing juggernaut. Since
leaving office, Mr. Carter has written 18 books. The most recent, "Our Endangered
Values," debuted Nov. 20 on the New York Times best-seller list at No. 1. Five of his last
six titles have also hit the list. One, his memoir of growing up in rural Georgia, "An Hour
Before Daylight," was one of three finalists for the 2002 Pulitzer Prize in
biography/autobiography. His secret in cracking the famously cutthroat and unpredictable
publishing industry: He is a versatile writer and a relentless marketer. He has even
figured out the best way to handle book signings, using the shorthand signature "J Carter"
-- an economy that saves him several seconds per customer. All this has enabled him to
expand far beyond his liberal base, striking a chord with readers disappointed in his
presidency. Several U.S. presidents have carved out literary legacies. Ulysses S. Grant's
"Personal Memoirs of U.S. Grant," a blunt Civil War account published in 1885, is often
cited as one of the best-written presidential accounts. John F. Kennedy's "Profiles in
Courage," written when he was a young senator, won a Pulitzer in 1957. Theodore
Roosevelt and Richard Nixon were prolific writers. But none committed themselves to
book-writing with the intensity of Mr. Carter. There are now nearly 1.4 million hardcover
books in print of his last three titles, including 750,000 hardcover copies of "Our
Endangered Values." In an interview at his home, Mr. Carter, 81 years old, said he thinks
sales of his new book, which casts a critical look at the marriage between politics and
religious fundamentalism, could eventually top one million. He is already working on his
next book, a look at the Middle East peace process. Although a spokesman for CBS
Corp.'s Simon & Schuster declined to comment on the book's financial results, one
industry veteran suggests that Mr. Carter and his publisher each stand to earn more than
$2.5 million on hardcover sales and ancillary rights in the first year. Like other successful
scribes in today's publishing world, Mr. Carter has learned how to play the game. Book
retailers love him, in part because he works so hard at book signings and understands the
"retail politics" of the publishing business. Disdainful of "handlers," the former president
is all business and insists on sticking to a tight schedule. Once, he almost left a laterunning publicist behind in a store.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 1 of 28
At book signings, where thousands of fans often turn up, some stores distribute
wristbands for crowd control. Mr. Carter autographs as many as 800 books an hour. He'll
occasionally sign his full name when asked, but tries to "conceal that from the next guy in
line" to avoid similar requests. He speaks to everybody who comes through, making
contact with his friendly blue eyes. "I tell the little girls they're pretty and ask the little
boys how old they are," he says. Such personal attention has endeared him to booksellers
-- not just the national chains, but small independents as well. Nancy Olson, who owns
Quail Ridge Books & Music in Raleigh, N.C., says she sold more than 2,000 copies of
Mr. Carter's "An Hour Before Daylight: Memories of a Rural Boyhood" when he visited
her store in January 2001. What most impressed her was his attitude toward her staff,
which he asked to meet before the signings. "We lined up and he welcomed everyone and
looked everyone in the face," says Ms. Olson. Though he grew up an avid reader ("War
and Peace" at age 12) Mr. Carter hardly fancied himself to be a wordsmith. "Did I want to
be a writer? No. I wanted to be a naval officer and go to the academy and stay 30 years
and that's all I thought about.... Even at 10 years old if someone asked me what I wanted
to do I said 'Annapolis.' " After the White House, the former president returned home and
was surprised to discover that the family's peanut warehouse business was deeply in debt.
Financial pressures made his own presidential memoir, "Keeping Faith: Memoirs of a
President," published by Bertelsmann AG's Bantam Books in 1982, an extremely
important project. It was also critical to Bantam, a paperback publisher then trying to
establish itself as a publisher of hardcover titles. "People weren't knocking on our doors,"
says Jack Romanos, a former Bantam executive who is now CEO of Simon & Schuster,
Mr. Carter's current publisher. Mr. Carter's literary agent, Lynn Nesbit, included Mr.
Romanos in the bidding for the book, and he made a hefty offer. "They took a chance on
us, and we took one on them," Mr. Romanos recalls. When it came time to publish
"Keeping Faith," it quickly became clear that booksellers nationwide were cool to the
idea. In those early Reagan years, history wasn't viewing the Carter presidency kindly.
Mr. Carter himself says he left the White House "in political disgrace" after being
defeated by President Reagan. Stuart Applebaum, then a public relations executive at
Bantam, says the publishing house was so concerned about its acquisition that it asked
Mr. Carter to address the annual booksellers convention in Anaheim, Calif., in hopes of
generating some excitement. "Mr. Carter spoke for 20 minutes without notes about his
desires and expectations for the book, what he planned to put in the book, and why he
was taking it as seriously as any aspect of his presidency," says Mr. Applebaum, who
today is a spokesman for Bertelsmann's Random House Inc. "It was the single best
motivational speech I've heard in more than 30 years in this business. In that speech, Mr.
Carter told his listeners that he wanted his readers to know exactly what it felt like during
some of the critical moments of his presidency, including the crucial meeting at Camp
David between Israeli Prime Minister Menachem Begin and Egypt's President Anwar
Sadat. The trio "stayed there 13 days and I found Begin and Sadat, in spite of my efforts,
were absolutely incompatible," Mr. Carter told booksellers. "For the last 10 days they
never spoke to one another about anything concerning the talks.... Sadat threatened on
two occasions to leave and once packed his bags. . .. I prayed, first, and then changed into
more formal clothes before I went to talk to him. It was one of the most serious
conversations of my life."
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 2 of 28
After his talk, "you couldn't get into our booth," says Mr. Applebaum, who estimates that
the book later sold more than 300,000 copies. Like many authors and presidents, Mr.
Carter is usually convinced he knows best. For example, he dismissed the original cover
art for his novel "The Hornet's Nest," about the American Revolution, as unacceptable.
His publisher, Simon & Schuster, initially suggested an image by the artist N.C. Wyeth.
Mr. Carter gave it a look and then rejected it.
1. Former President Jimmy Carter has written ______ books since leaving office.
a. 10
b. 12
c. 18 Correct
d. 22
2. Growing up, Jimmy Carter’s life ambition was to be
a. a naval officer Correct
b. President of the United States
c. a writer
d. a peanut farmer
China Is Set to Spend Billions On Wireless Upgrade
By JASON DEAN
February 27, 2006; Page A1
http://online.wsj.com/article/SB114100558767883898.html
BEIJING – China is preparing to invest billions of dollars over the next several years on a
massive upgrade of its cellular-phone system, and the prospect of grabbing a slice of the
new business is fueling intense competition among global telecommunications-equipment
vendors. After years of deliberation, analysts and industry executives say, Beijing
probably will start awarding licenses for so-called third-generation, or 3G, networks in
the next six months or so, to give state-owned phone companies time to prepare services
for the 2008 Olympics in Beijing. China already is the world's largest mobile-phone
market, and the upgrade will create what is likely to become the world's biggest 3G
wireless network. With 3G technology, users can send and receive data with their
cellphones and other mobile gadgets far more quickly than they could before, enabling
services like wireless video and music downloads, instant messaging and high-speed
Internet surfing. The technology already has been rolled out elsewhere, mainly in Europe
and in other parts of Asia, while a few companies are beginning to introduce it in the U.S.
China's adoption of 3G will bring cutting-edge wireless technology to a market that
already boasts more mobile phone users than any other -- 398.8 million subscriptions at
the end of January, far more than the population of the U.S. In 2005, China added nearly
59 million new wireless subscriptions, more than the entire population of Italy.
The world's telecommunications-equipment vendors, including Telefon AB L.M.
Ericsson, Nokia Corp., Motorola Inc., Nortel Networks Corp., Siemens AG, Alcatel SA
and Lucent Technologies Inc., are jostling for position ahead of the move to 3G, which
executives say is likely to cause significant changes in the competitive landscape in
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 3 of 28
China. Chinese companies Huawei Technologies Co. and ZTE Corp. also are expected to
be aggressive competitors.
3. China's adoption of 3G will bring cutting-edge wireless technology to a market that
already boasts more mobile phone users than any other --_______ subscriptions at the
end of January.
a. 258.5 million
b. 300.2 million
c. 398.8 million Correct
d. 451.7 million
4. After years of deliberation, analysts and industry executives say, Beijing probably will
start awarding licenses for so-called third-generation, or 3G, networks in the next six
months or so, to give state-owned phone companies time to prepare services for the
___________ in Beijing.
a. 2009 G8 Summit
b. 2008 Olympics Correct
c. 2008 Worlds Fair
d. 2009 WTO Summit
Chinese Consumers Overwhelm Retailers With Team Tactics
By JAMES T. AREDDY
February 28, 2006; Page A1
http://online.wsj.com/article/SB114106170222284388.html
SUZHOU, China -- Seller beware: Some of China's 1.3 billion consumers are angling for
group discounts. Chinese shoppers have long been known as hard-nosed bargainers.
Now, to the dismay of merchants, some have started shopping in teams to haggle for
bigger markdowns. The practice, called tuangou, or team purchase, begins in Internet
chat rooms, where like-minded consumers hatch plans to buy appliances, furnishings,
food, even cars, in bulk. Next, they show up en masse at stores like Suzhou Zhongyi
Kitchen Co. to demand discounts. On a recent Saturday, Zhang Qinyong, who owns the
kitchen-cabinetry shop in this city near Shanghai, found himself cornered against his
display cabinets by a team of more than a dozen shoppers. "In Suzhou, no other products
are better than ours, I bet," he told the crowd. He insisted that craftsmanship and German
materials made his cabinets worth more. "Forget quality. Let's talk about price," snapped
one member of the buying group, 36-year-old Guo Yong, an electrical engineer. For the
next hour, the shoppers turned aside Mr. Zhang's sales pitches with an unbending
response: "Thirty-five percent off!" Successful haggling is a point of pride in China,
where even shoppers in department stores treat price tags as mere starting points. The
practice is gaining popularity at a time of unprecedented change in China's retail sector.
Name-brand consumer goods now fill the nation's stores, giving Chinese consumers more
choice than ever before. In an increasingly competitive marketplace, merchants are
quietly bending to consumer demands. Group purchasing is catching on in booming cities
such as Shanghai. On the Web site 51tuangou.com -- in Chinese, the name sounds like "I
want to team buy" -- consumer teams formulate plans to bargain for products ranging
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 4 of 28
from Buick automobiles to Panasonic television sets and refrigerators. Dozens of other
Chinese Web sites offer similar services. EBay Inc.'s Chinese site offers potential bulk
sellers of goods an option to solicit team bids. Zhang Guohua, the 34-year-old founder of
51tuangou.com, says he decided to launch his Web site after saving money two years ago
on bathroom fixtures for his new apartment. He arranged those purchases, he says, by
posting messages in general-interest Internet chat rooms, listing the brands he planned to
buy. "Let's meet at the shop," he wrote. Many did. "I was really shocked by the power of
ganging up," Mr. Zhang says. Last year, he says, 380,000 consumers registered to use his
Web site, free of charge, to organize group purchases. He says he gets his profit from ads
and commissions from companies that offer discounts on the site. In the U.S. and Europe,
several Web-based businesses were set up in the late 1990s to arrange discounts on group
purchases of consumer goods. But customers were turned off by the amount of time it
took to complete transactions and other complications, and many of the Internet
businesses failed. China's version of team buying, however, leads to face-to-face
negotiations. "That's a little scary, the mob mentality," says Tom Van Horn, former chief
executive officer of Mercata Inc., whose now-defunct Web site attempted to negotiate
bulk discounts for U.S. consumers.
5. China’s version of team buying is called _______
a. caikun
b. tuangou Correct
c. teumbuy
d. guohua
6. Team purchases in China often begin with people discussing their ideas in _______.
a. factory lunch rooms
b. Internet chat rooms Correct
c. coffee shops
d. tea rooms
Detroit's Symbol of Dysfunction: Paying Employees Not to Work
By JEFFREY MCCRACKEN
March 1, 2006; Page A1
http://online.wsj.com/article/SB114118143005186163.html
FLINT, Mich. -- In his 34 years working for General Motors Corp., one of Jerry Mellon's
toughest assignments came this January. He spent a week in what workers call the
"rubber room." The room is a windowless old storage shed for engine parts. It is filled
with long tables, Mr. Mellon says, and has space for about 400 employees. They must
arrive at 6 a.m. each day and stay until 2:30 p.m., with 45 minutes off for lunch. A
supervisor roams the aisles, signing people out when they want to use the bathroom.
Their job: to do nothing. This is the "Jobs Bank," a two-decade-old program under which
nearly 15,000 auto workers continue to get paid after their companies stop needing them.
To earn wages and benefits that often top $100,000 a year, the workers must perform
some company-approved activity. Many do volunteer jobs or go back to school. The rest
must clock time in the rubber room or something like it.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 5 of 28
It is called the rubber room, Mr. Mellon says, because "a few days in there makes you go
crazy." The Jobs Bank at GM and other U.S. auto companies including Ford Motor Co. is
likely to cost around $1.4 billion to $2 billion this year. The programs, which are up for
renewal next year when union contracts expire, have become a symbol of why Detroit
struggles even as Japanese auto makers with big U.S. operations prosper. While GM
often blames "legacy costs" such as retiree health care and pensions for its troubles, its
Job Bank shows that the company has inflicted some wounds on itself. Documents show
that GM itself helped originate the Jobs Bank idea in 1984 and agreed to expand it in
1990, seeing it as a stopgap until times got better and workers could go back to the
factories. "The bank was designed for a different time, a time when we were growing,"
says Pete Pestillo, a former Ford executive who oversaw union talks. The Jobs Bank has
failed to stop the outflow of jobs at Detroit's unionized auto makers. Since 1990, GM's
union payroll including former subsidiary Delphi Corp. has fallen to about 137,000 from
358,000. Many have retired, died or found other jobs. The rest are in the Jobs Bank.
Mr. Mellon, a 55-year-old father of two, was born in Flint. He joined GM in 1972,
following his grandfather and his father, a plant foreman who spent 37 years at GM.
Through the 1980s and 1990s, Mr. Mellon held jobs designing electronic systems for
vehicle prototypes. In 2000, GM merged two engineering divisions, and he wasn't needed
anymore. Since then, except for a period in 2001 when he worked on a military-truck
project, GM has paid him his full salary for not working. That is currently $31 an hour, or
about $64,500 a year, plus health care and other benefits. About 7,500 GM workers are
now in the Jobs Bank, more than double the figure a year ago. The bank added 2,100
workers last month when the company closed a truck-assembly plant in Oklahoma City.
Each person costs GM around $100,000 to $130,000 in wages and benefits, according to
internal union and company figures, meaning GM's total cost this year is likely to be
around $750 million to $900 million. One way employees in the Jobs Bank can fulfill
their requirements is to attend eight- or 12-week classes offered by GM. In these classes,
Mr. Mellon has studied crossword puzzles, watched Civil War movies and learned about
"manmade marvels like the Brooklyn Bridge," he says. One class taught him how to play
Trivial Pursuit. More recently, he attended an institute in Flint called the Royal Flush
Academy. It is designed for those seeking work in casinos -- the Detroit area has several - and teaches students to deal blackjack and poker. Mr. Mellon says he isn't interested in
casino work and left the academy after they docked his pay because he was 10 minutes
late coming back from lunch. With that he arrived at the rubber room. It is on the site of
the famous Flint Sitdown Strike of 1936, a 44-day walkout that helped get the United
Auto Workers union recognized at GM. The rubber room and neighboring buildings that
house a technology center are off-limits to outsiders. Every day for a week Mr. Mellon
got up at about 4:30 a.m. to make the 45-minute commute to the rubber room from his
home in Otisville, Mich. At first he read the newspaper or magazines lying around, such
as Reader's Digest. He talked some with acquaintances. After conversation dried up, he
says he spent hours staring at the wall, hoping time would move faster.
One day he asked a supervisor if he could bring in a cot. The supervisor said no, so he
pushed together four padded chairs and slept across them for several hours. He had
stayed up late the night before, anticipating this nap.
The waiting "makes you want to bang your head against the wall," Mr. Mellon says. "I
couldn't take it. I need to be doing something. And there is a supervisor who walks
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 6 of 28
around staring at everyone. It's worse than high-school detention." Mr. Mellon thinks a
"line-worker mentality" keeps people going back to the rubber room. "A lot of guys sit
in that room and just collect their paycheck because they don't know what else to do,"
he says. "They've spent 20 years tightening a nut as it came down the line. They are
faced with this harsh reality, and they are just happy the paycheck still comes so they
can put their kid through college."
A Way to Escape
Mr. Mellon soon found a way to escape the room, through volunteering. That is what
many of his fellow workers do. Dean Braid, 50, worked at GM as an engine and
transmission tester for 21 years. Today, GM pays him $30 an hour as he helps a highschool friend, Doug Kahn, who is confined to a wheelchair. Mr. Braid is installing ramps
in his friend's family farmhouse and has repaired the engine of the 1984 Ford van Mr.
Kahn uses. "Dean being here has been like a little miracle for me," says Mr. Kahn, who
was injured 38 years ago in a swimming accident and now lives by himself. "It has made
my life better. Just having him come by forces me to get up and get out of bed."
GM employees constitute slightly more than half of the 14,700 auto workers in the Jobs
Bank. In second place with 3,600 Jobs Bank workers is auto-parts maker Delphi, which
filed for bankruptcy-court protection last October. The Chrysler unit of DaimlerChrysler
AG has 2,500 and Ford 1,100. Executives expect the total to rise to more than 17,000
next year, as the Detroit companies prepare to shed more than 60,000 jobs. Mr. Pestillo,
the former Ford executive, and others see the Jobs Bank as a corrosive influence with
significant indirect costs because it encourages auto makers to build more vehicles than
consumers want. Companies figure it is better to build cars with little or no profit margin
than to pay people not to work, he says. They also may keep rote work in-house even
though it would be cheaper to outsource. The system gives older union workers little
incentive to move to other plants, find jobs at other companies or retire. There is no limit
on how long a worker can stay in the Jobs Bank. They don't have to look for work at their
company. Contracts allow workers to turn down any job offer at a site farther than 50
miles from their home plant. The Jobs Bank has its origins in the tough times Detroit
faced in the late 1970s and early 1980s. A spike in oil prices, a harsh recession and the
first major assault from fuel-efficient Japanese cars hammered the Big Three and cost
tens of thousands of union jobs. The UAW agreed to its first concessionary contracts in
1982 with the Big Three, which then made three out of every four vehicles sold in
America. Battling the new competition, GM developed a plan to spend $24 billion
improving factory automation and copying Japan's efficient production methods. "Our
workers were frightened -- scared, of course, of robots," says former UAW President
Douglas Fraser, who retired from the union in 1982 and continues to teach labor history.
That was the backdrop when the UAW contract at GM came up for renewal in 1984.
Papers in the Walter Reuther Library at Detroit's Wayne State University, an archive of
labor materials named for the famed UAW leader, document what happened next. At
about 4 p.m. on Aug. 8, 1984, GM put forward a one-paragraph memo proposing the
creation of an "employee-development bank." The idea was to help train or find jobs for
senior UAW employees who would "otherwise be permanently laid off" because of better
technology or higher productivity. Once the idea was on the table, GM agreed to expand
it as the UAW ratcheted up pressure for a deal. A strike at a few locals was gradually
spreading to engulf more than half the company. GM's first proposals, noted in
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 7 of 28
documents from early September 1984, described a three-year program for employees
with 10 years of experience costing no more than $500 million in total. The union sent
back a demand that the program cover workers with six years on the job, run for six years
and cost as much as $1 billion. GM agreed, and later said even one-year workers could
join.
Reaching a Deal
The two sides reached a deal to end the strike on Sept. 21, 1984. The UAW told its
workers their jobs were "more secure than ever in history." The UAW view, which
continues to this day, was that the Jobs Bank would force GM and other auto makers to
find work for union members because no company would keep paying people not to
work. Ford made a similar deal shortly afterward. A former Ford executive in labor
relations, John Slosar, recalls: "We just focused on matching each other back then, not
'Hey, this will disadvantage us to the Asian auto makers.' " Letters between GM Vice
President Alfred S. Warren and the union show GM was confident it could afford the
Jobs Bank and fight off its Japanese rivals because it had new versions of the Pontiac
Grand Am and Buick Riviera in the works as well as plans to introduce the Saturn line of
cars. Most of these products fell short of their targets, however, while the Jobs Bank got
bigger and more expensive. When the six-year pact expired in 1990, GM and other auto
makers expanded it to include not only those workers affected by technology
improvements but also those affected by slow sales. GM boosted funding to $1.7 billion
for three years. Workers whose plants shut down don't immediately go into the Jobs
Bank. They first receive unemployment benefits supplemented by the company. When
the cumulative length of shutdowns during a contract reaches 48 weeks, they switch to
the bank. The car companies sometimes recommend volunteer projects for people in the
bank to work on, although workers are welcome to submit their own projects for
company approval. Workers at the Jobs Bank site in Lansing, Mich., the state capital,
spent last summer fixing up a county park. Others in the Jobs Bank go to school.
Electronic technician Tom Adams is working toward a doctorate in history at Michigan
State University and is writing a dissertation of more than 300 pages. He has been in the
bank since 2001, except for an 18-month stint working on a truck project. His dissertation
topic: GM, the UAW and the city of Flint. Mr. Adams's grandfather, Frank Adamec,
came from what is now the Czech Republic around 1910 and took a plant-floor job at
Flint Wagon Works, which later became Chevrolet. Mr. Adams's father spent 37 years as
a die maker at Chevrolet in Flint. Mr. Adams started at Buick in Flint in 1976 working on
transmissions for the Buick LeSabre. He later moved up to an electronic technician's job
and started work on an engineering degree in the 1990s so he could become a salaried
engineer. He dropped that idea after seeing salaried colleagues laid off. Mr. Adams, a
short, intense man who says he has run 37 marathons, has also raised money for a food
bank he runs during his Jobs Bank time. Once he was assigned to set up cable television
at the Flint rubber room so "the workers there could watch cartoons." He says the Jobs
Bank "has been wonderful for me. It's doing what it is supposed to do, which is make it
so I won't be a burden on society." But based on his studies, he has a low opinion of GM:
"They took the Toyota concept of lifetime employment and applied it to the GM culture
and what they did was create a bureaucracy. That's what GM does." These who can't find
an outside activity -- or don't want to -- end up in rubber rooms and the like. Despite the
cable TV, these rooms are usually less than luxurious. Ford buys uncomfortable chairs
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 8 of 28
for its facilities. One GM official says the company has turned down the air conditioning
in the summer at bank sites. Outside of Michigan, major sites include Baltimore;
Indianapolis; Lockport, N.Y.; and Rancho Cucamonga, Calif. In their 2003 national
contract, GM and the UAW agreed that "unproductive assignments are contrary" to their
agreements about the Jobs Bank, but workers say that had little effect on the program.
Tom Gonzales, a Ford employee of 13 years, sat in an Edison, N.J., room for two months
in late 2004 before Ford found him a job in Ohio. "It sort of felt like high-school
detention. We sat in a big office with table and chairs and did nothing except maybe
read," he recalls. The room was on the site of a closed-down truck plant. About 200 idled
workers would read books or work on computers while five or six salaried supervisors
enforced rules including a ban on card-playing.
Seeking Reductions
Detroit's Big Three auto makers are likely to seek reductions in the program when they
renegotiate their contracts with the United Auto Workers next year. It may be difficult for
the UAW to keep the Jobs Bank intact, not only because of the public-relations problem
but also because it is hindering a settlement to get Delphi out of bankruptcy-court
protection. The parts maker has said in court filings that it wants to reduce its hourly
work force 30%, or about 8,000 people. The union would like GM to hire these people
but that may be difficult because the company already has a surplus of employees in the
Jobs Bank.
7. The "Jobs Bank" is a two-decade-old program under which nearly 15,000 auto workers
continue to get paid after their companies stop needing them. To earn wages and benefits
that often top $100,000 a year, the workers must perform some company-approved
activity. These activities include ______.
a. volunteer work
b. going back to school
c. spend time in the “rubber room”
d. all of the above Correct
8. Some activities that take place in the “rubber room” include _____.
a. card playing and off track betting
b. video games and sleeping
c. reading and staring at the walls Correct
d. pilates and knitting
Stocks and Souks In Quest to Build A Financial Center, Hurdles for Dubai
By BILL SPINDLE and YASMINE EL-RASHIDI
March 2, 2006; Page A1
http://online.wsj.com/article/SB114127075876387300.html
DUBAI, United Arab Emirates -- Four years ago, Sheik Mohammed Bin Rashid alMaktoum, then crown prince and now emir of Dubai, stood overlooking 110 acres of
fallow land and unveiled an astonishing plan: Turn Dubai into an international financial
hub that would rank with Tokyo, London or New York.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 9 of 28
How Dubai pursued that goal offers a vivid look at the tiny emirate's outsize ambitions on
the world economic stage -- ambitions that now have created a political furor as Dubai
accelerates a push into global port operation. It was just months after the Sept. 11, 2001,
attacks, and Dubai's financial system was suspected of being a conduit for some of the
funds behind the plot. The United Arab Emirates, of which Dubai is a part, had been one
of only two countries to recognize the Taliban government in Afghanistan that sheltered
al Qaeda. And yet, surrounded by an entourage clad in traditional white gowns known as
thobes, Sheik Mohammed invited the financial industry's elite to set up shop in one of the
world's most turbulent corners. It was a region where business often works by the murky
rules of the bazaar, not by open, internationally recognized standards. Today, the budding
Dubai International Financial Center occupies those same 110 acres, which now are
landscaped and filled with buildings, including a tall office tower. Morgan Stanley is
moving much of its growing Middle East operations to the center. Global banks including
HSBC Holdings PLC and Standard Chartered PLC are expanding regional operations
here. Within the center, trading has begun on the Dubai International Financial Exchange,
which has hopes of riding the region's tidal wave of oil money to a position as a major
bourse someday. It is far from that now. While it is already attracting money from across
the Persian Gulf region, and plans to expand into a broad range of financial trading and
products, so far it trades a mere handful of securities. Moreover, it faces competition
from other prospective regional financial centers that also are appealing to global
financial firms with somewhat more-open and Western-friendly regulatory frameworks.
Qatar is wooing financial firms with the lure of the huge financing needed for giant
natural-gas projects planned in that country over the next decade. Bahrain, long an
offshore financial hub for neighboring Saudi Arabia, has taken the lead as a center for
Islamic finance. And Saudi Arabia itself has strengthened its regulatory infrastructure and
has slowly begun opening its financial industry to foreign competition. Increasingly it is
the Persian Gulf, rather than the older financial centers such as Lebanon, where
significant financial reform is taking place in the Middle East. Dubai's new center has
made the boldest step toward a more transparent and Westernized way of doing business.
It is already helping to lead a financial renaissance in the region, fed by petrodollars and
by the desire of many Middle Eastern investors to keep their money closer to home since
Sept. 11. But developing the financial center has been a bumpy learning process for
Dubai -- just like its controversial plan to acquire Britain's Peninsular & Oriental Steam
Navigation Co. and operate five U.S. ports. The financial center, as it bids for a lucrative
piece of the global economy, has had to go the extra mile to try to convince the world that
the emirate is serious about playing by international rules and standards.
Whether it succeeds matters beyond the emirate. If Dubai works as a hub where oil
wealth can be recycled into long-term Middle East investments, it could help integrate
into the global economy a region that has been left behind in recent years. Dubai's
historic links to places such as Pakistan, Iran, Saudi Arabia, Egypt and East Africa -while raising concerns for some about terrorism or money laundering -- could help seed
opportunities in lands soon to be swamped by waves of young people entering moribund
job markets. Without such opportunities, the new generation could be prime recruiting
ground for extremists. For centuries, Dubai has been a trading hub, a crossroads linking
South Asia, the Middle East and Africa. Its gold and diamond souks, houses of barter and
informal cash-transfer storefronts have long formed an opaque business world based on
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 10 of 28
connections and clan allegiances. Black-market operators, arms dealers, terrorist
financiers and money launderers have taken advantage of the freewheeling environment,
even if the vast bulk of business is legitimate. Dubai's legal system in some ways
amounts to a set of codes and courts superimposed on a clan-based power structure. For
foreign investors, none of this has engendered much confidence or even understanding.
Starting about 15 years ago, the emirate began building something few other places in the
region have managed: a vibrant modern economy not dependent solely on oil. With
Dubai lacking the large oil and natural-gas reserves common elsewhere in the Persian
Gulf, Sheik Mohammed and his circle of Western-educated advisers built Dubai's port
into one of the world's biggest and turned the emirate into a major transportation hub.
Then they made the emirate a tourist destination, with a mix of Western glitz, Middle
Eastern atmosphere and duty-free shopping. They hired British, American and other
foreign executives to lead these efforts and provide experience that Dubai lacked.
Dubai also built specialized development zones to attract foreign technology, media and
health-care companies with tax exemptions and other advantages. It did it all with its own
brand of over-the-top panache: The emirate is erecting what it bills as the world's tallest
skyscraper and the largest aquarium. It features an indoor ski slope, despite temperatures
that can reach 130 degrees Fahrenheit in the summer, and a property development built
on land shaped into a map of the world. Sheik Mohammed, a horse-racing enthusiast who
is a fixture at tracks in Australia, Kentucky and England, was the force behind most of
this development, even while his older brother served as the emir. When the brother,
Sheik Maktoum Bin Rashid al-Maktoum, died two months ago, Sheik Mohammed
became emir. In the latest phase of its development, Dubai sought to lure global financial
firms to its soil. And if they wanted international legal and regulatory standards, Dubai
was determined it would provide them -- at least inside one section of downtown. After
some wrangling with the U.A.E.'s central authorities, Dubai won permission to exempt its
financial center from nearly all of the federation's commercial laws.
9. Sheik Mohammed and his circle of Western-educated advisers built Dubai's port into
one of the world's biggest and turned the emirate into a _____.
a. major ship builder
b. major natural gas producer
c. major transportation hub Correct
d. major oil producer
10. In Dubai when, Sheik Maktoum Bin Rashid al-Maktoum, died two months ago, Sheik
Mohammed became the _________.
a. President
b. King
c. Prime Minister
d. Emir Correct
Thanks to Mexican Shoppers, Retail Booms on Texas Border
By AMY CHOZICK
March 3, 2006; Page A1
http://online.wsj.com/article/SB114135484445188361.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 11 of 28
MCALLEN, Texas -- Hidalgo County, in the southernmost tip of
Texas, is the poorest county of 250,000 or more people in the U.S.,
with nearly half its families living below the poverty line. Vendors
hawk bootleg DVDs and homemade tacos out of the back of
pickup trucks. Stray dogs roam the scrubland along highways.
Hidalgo is also home to one of America's highest-grossing
shopping malls, the sprawling La Plaza Mall of McAllen, Texas.
Owned by Simon Property Group Inc., the nation's No. 1 mall
developer, La Plaza features valet parking, trendy clothing chains
like Abercrombie & Fitch Co. and Banana Republic, and high-end
jewelers Swarovski and Helzberg Diamonds. La Plaza generates
monthly sales of well over $450 a square foot, compared with a
national mall average of $392. Next year, Simon, of Indianapolis,
plans to open the 600,000-square-foot Palms Crossing shopping
center a half-mile away. In nearby Mercedes, Simon is opening the
$68 million Rio Grande Valley Premium Outlets, a 400,000square-foot, upscale outlet, in November. The reason: Mexican
shoppers, both rich and poor, are pouring into the area, making it the equivalent of
Madison Avenue for northern Mexico's consumer class. Border agencies tally nearly 40
million legal visits a year by Mexicans coming to Texas for leisure activities. The Federal
Reserve Bank of Dallas figures they spent $3 billion on merchandise in Texas border
counties in 2004, the latest data available, up from around $1.6 billion a decade earlier. In
the past 10 years, retail sales in McAllen have risen more than 75%, nearly double the
nationwide pace of 40%. Per-capita sales here are twice the national average, according
to the census. The activity demonstrates an unexpected development in American
retailing. While Mexican money has long flowed north, the current upsurge has turned
South Texas' poor borderlands into the latest, and one of the last, ripe frontiers for big
retailers. At a time when major retail chains are facing declining market share and tepid
sales in America's affluent suburbs, they are finding unexpected hope in the Mexican
consumer. Forty of the nation's top 100 retailers have recently staked their claim here.
When Guess Inc. launched its new clothing boutique, Marciano, in 2004, the company
chose Los Angeles, Toronto and McAllen as its three test cities. Foley's, a chain of
department stores in Texas owned by Federated Department Stores Inc., Cincinnati, says
operations in McAllen and nearby Laredo are its fastest-growing locations. J.C. Penney
Co., Plano, Texas, says about three quarters of customers at its McAllen store are from
Mexico and last year the chain allowed Mexican shoppers to apply for its gift registry and
credit card. The store offers bilingual gift cards and an in-store beauty salon popular with
Mexican women.
11. Hidalgo County, in the southernmost tip of Texas, is the poorest county of 250,000 or
more people in the U.S., with nearly ______ its families living below the poverty line.
a. 30%
b. 50 % Correct
c. 60 %
d. 70%
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 12 of 28
12. The La Plaza Mall of McAllen, Texas generates monthly sales of ____ a square
foot, compared with a national mall average of $392.
a. well over $450 Correct
b. under $150
c. well over $850
d. $391
Questions 13 – 17 from Marketplace
Firms in China Think Globally, Hire Locally
February 27, 2006; Page B1
http://online.wsj.com/article/SB114099511085483717.html
BEIJING -- Du Limin is living the American Dream -- in China. A decade ago, Ms. Du
joined Wal-Mart China as an accountant. Today, she is a director overseeing three Sam's
Club supercenters and more than 1,500 employees in China for the U.S. retailer, WalMart Stores Inc. Ms. Du's rise has been replicated across China as multinational
corporations fill management positions with local talent. According to Taihe Consulting
Co., of Beijing, about 70% of foreign firms' top positions today are filled by Chinese
workers. In the mid-1990s, almost all such posts were filled by non-locals. In recent
years, more Chinese have studied or worked overseas, strengthening their Englishlanguage and leadership skills and making them more suitable for management positions,
executives at multinationals say. "My first choice will always be local," says Niklas
Lindholm, human resources director for Nokia Corp.'s Chinese investment unit in
Beijing. "We are an international company and we need the variety." Multinationals in
other developing countries also have localized their staff after establishing themselves in
a market. Many locals, for example, have moved up through the ranks of foreign
corporations in India. These kinds of developments have uncovered a wellspring of new
managerial talent and are changing the way global corporations do business locally.
Executives at foreign companies in China say local hires cost less to employ than
expatriates and often have a better understanding of the Chinese market. A Chinese
manager, on average, has a total compensation package that is only 20% to 25% of that of
a hire from a Western country, says Taihe Consulting. Having a local boss also serves as
a morale booster, giving career hope to ambitious junior employees. When multinationals
first opened in China in the early 1990s, expatriates filled most mid-level and senior
management posts. Locals settled for junior positions. The expats, usually from the
company's home country, were valued for their knowledge of corporate culture. Some
multinationals would tap managers from Singapore or Hong Kong where they were
already established, before they would consider developing local talent. Chinese
managers began gaining ground in the late 1990s. Expats usually had costly relocation
expenses, and often they proved less effective than locals as a result of cultural and
language differences. Meanwhile, changes in China's labor market -- such as the reform
of state-owned businesses and restructuring of government offices -- freed many
experienced managers to take jobs at multinationals.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 13 of 28
13. According to Taihe Consulting Co of Beijing, about ___ foreign firms' top positions
today are filled by Chinese workers. In the mid-1990s, almost all such posts were filled
by non-locals.
a. 20%
b. 50%
c. 70% Correct
d. 90%
Market Is Hot For High-Skilled In Silicon Valley
By PUI-WING TAM
February 28, 2006; Page B1
http://online.wsj.com/article/SB114109073448184889.html
Five years after the dot-com bubble burst, job growth has returned to Silicon Valley. But
it's a different kind of growth than in past recoveries, favoring higher-skilled workers.
Netflix Inc.'s hiring shifts are typical. During the tech boom, the online movie-rental
service created 100 customer-service jobs near its Los Gatos, Calif., headquarters in the
heart of Silicon Valley. After the tech bust in 2000, Netflix eliminated half of those
positions. But the total headcount at Netflix's Silicon Valley offices has grown 20%, to
nearly 200 staffers in the last few years.
14. Five years after the dot-com bubble burst, job growth has returned to ____.
a. Los Gatos Valley
b. Net Valley
c. Silicon Valley Correct
d. Dot-com Valley
In Tight Spaces, Wal-Mart Adds Second Floors
By KRIS HUDSON
March 1, 2006; Page B1
http://online.wsj.com/article/SB114118123242686154.html
EL CAJON, Calif. -- The most revolutionary part of the Wal-Mart store here is found at
the top of the escalator: a second floor. Over the past couple of decades, Wal-Mart Stores
Inc. has made its sprawling single-story stores the most feared force in retailing. But as
the company tries to penetrate urban areas that have lofty land prices and entrenched
antidevelopment movements, it's increasingly building up, not out. Wal-Mart now
operates roughly 20 multilevel stores, many of them housed in buildings vacated by other
retailers. Over the next five years, the company is planning to open an additional 50 to 60
on lots one-third the size of its traditional 25-acre swaths. Many of these stores will be
"supercenters," which often measure 200,000 square feet and offer a full complement of
groceries in addition to the apparel, toys and other general merchandise found in WalMart's traditional discount stores. The multilevel stores are just a tiny portion of the 3,900
U.S. stores operated by the world's biggest retailer. But they represent a significant shift
for a company that has long thrived by sticking to a cookie-cutter store format designed
to minimize costs and coax the most sales out of every single square foot. Here in the El
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 14 of 28
Cajon store, which opened in October 2004 as Wal-Mart's first multilevel store built from
the ground up, store managers had to wrestle with issues like which departments to locate
on each floor and how to lure shoppers to the second floor. Wal-Mart even trained
workers to help shoppers confused by the device next to the escalator that lifts shopping
carts from one floor to the other.
15. In El Cajon, California the most revolutionary part of the Wal-Mart store is a ___.
a. second floor Correct
b. basement
c. parking lot golf driving range
d. parking lot putting green
How Jewelry Followed Fashion's Lead
By CHRISTINA PASSARIELLO
March 2, 2006; Page B1
http://online.wsj.com/article/SB114125904973886996.html
This week in Paris, a giant screen inside the Louvre has been showing video of Swiss
jeweler Chopard & Cie. SA's glittering watches, rings and necklaces. On Sunday in Los
Angeles, Bulgari is hoping that Oscar nominee Charlize Theron will walk the red carpet
adorned in its bling. In January, Cartier jockeyed behind the scenes at the Golden Globe
Awards to make sure that Ms. Theron, as well as Keira Knightley, wore vintage Cartier
pieces. Luxury jewelry houses once took an understated approach to marketing. But
increasingly, jewelers such as Italy's Bulgari S.p.A. and Cartier, a unit of Swiss
Compagnie Financière Richemont SA, are acting like fashion designers, embracing
trends and courting celebrities. And like fashion houses, they are speeding up design and
production cycles and introducing the idea of seasonality, in some cases launching
several new collections a year. Some jewelers are also introducing, or re-introducing,
fashion accessories such as handbags, sunglasses and perfume as they align their images
more closely with those of apparel designers. The trendy turn comes at time when fashion
designers are expanding their own lines into expensive jewelry. Among the fashion
houses to do so are Chanel SA, Louis Vuitton, a unit of LVMH Moët Hennessy Louis
Vuitton; Gucci, a unit of PPR SA's Gucci Group and Christian Dior SA. At the fashion
shows in Milan last week, Giorgio Armani hung weighty red-and-purple brooches on his
blazers, while at Gucci's Bottega Veneta, a plain brown dress was topped off with a gold
chain with a diamond clasp and a price tag of €80,000, or about $95,000. Bulgari, in turn,
has launched a line of logoed handbags in colors ranging from mauve to pale-green and
prices ranging from about $820 to over $1,057. The jeweler also has expanded into
sunglasses. The latest shades, encrusted with Swarovski crystals, are priced between $255
and $570. The increasing overlap between the worlds of fashion and jewelry is reflected
in their advertising. Jewelers traditionally eschewed supermodels and celebrities, instead
running ads filled with sparkling product closeups. Chopard is breaking with that
tradition this month, when it starts running print ads featuring the supermodel Eva
Herzigova. Italian jeweler Casa Damiani SpA has tapped Gwyneth Paltrow and Jennifer
Aniston for its campaigns.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 15 of 28
For an exclusive gem piece, jewelers are recognizing that instead of a photograph of a
diamond ring, "the mystery is around the coveted piece on the red carpet," says Tom
Julian, strategic director of trends at ad agency McCann-Erickson, a unit of Interpublic
Group. "That picture is what seems to [create] the cachet and attract the customer, who
will buy right from the red carpet the next day."
16. Luxury jewelers are acting like fashion designers in the following ways
a. courting celebrities
b. reintroducing fashion accessories such as handbags, sunglasses and perfume
c. launching several new collections a year
d. All of the above Correct
Ikea Hits Home in China
By MEI FONG
March 3, 2006; Page B1
http://online.wsj.com/article/SB114132199911087764.html
BEIJING -- When Ian Duffy was first put in charge of Ikea's
China stores four years ago, he spent hours at the checkout line
observing customers. He didn't see many. Instead, he saw plenty
of people crowding the Beijing store for freebies -- air
conditioning, clean toilets and even decorating ideas. Adding
insult to the injury: Shops right outside were offering copies of
Ikea's designs at a fraction of the cost. So, to lure shoppers, the
Englishman launched what could be the cheapest Ikea nonsale
item in the world: a scoop of vanilla ice cream in a cone for 12
cents. Thus began Ikea's strategy to beguile the finicky Chinese
consumer by slashing prices in China to the lowest in the world -the opposite approach of many Western retailers. Although China
boasts the world's fastest-growing economy as millions join the
ranks of the middle class, the Chinese are famous for their
reluctance to spend their money, saving on average 30% of their income, one of the
highest savings rates in the world. By increasingly stocking Ikea's Chinese shops with
China-made products, Mr. Duffy pushed prices on some items as low as 70% below
prices in Ikea outlets outside China. For example, an Ikea's single-seat Ektorp armchair
retails for $112 in China, 67% cheaper than one sold in the U.S. The gamble seems to
have worked. Next month, Ikea will up the ante in its low-price strategy by opening a
store in Beijing that will be its largest store in the world outside of its flagship store in
Stockholm. The big boxy building in Ikea's traditional blue and yellow colors will be
roughly 42,000 square meters, or close to the size of eight football fields, only about 20%
smaller than Ikea's Stockholm store. The Beijing behemoth is meant to cater to large
volumes. Ikea expects to sell enough furniture to fill about 5,000 40-foot containers in the
store each year, double what it sells in other stores. Weekend crowds at Ikea's three other
Chinese stores are already so big -- more than 20,000 customers a day -- that employees
need to use megaphones to keep them in control.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 16 of 28
Though no stranger to large crowds, Ikea is expecting even more people will flock to its
new Beijing store. To accommodate them, its building aisles are half a meter wider than
normal. The store is expected to draw six million visitors annually, compared to two
million for Ikea outlets elsewhere. Ikea -- whose name in Chinese, "Yi Jia," means
"comfortable home" -- is anything but comfortable on weekends, as thousands of Chinese
crowd in to find goods to outfit their new homes and apartments. Over the past eight
years China has seen a huge surge in homeownership as Chinese authorities have done
away with state-allocated housing and subsidized rentals. Since many apartments are
typically empty shells sold without paint, lighting or even flooring -- a practice called
"mao pi," or semi-furnished -- the market for home furnishings has taken off. In cutting
prices so deeply, Ikea is bucking the trend. Typically, Western brands in China price
products such as makeup and running shoes 20% to 30% higher than in their other
markets. That's partly to make up for China's high import taxes on foreign goods and
partly to lend their products an added cachet in Chinese eyes, an important branding
strategy in developing markets. Ann Chen, retail analyst at Bain & Co., a Boston-based
consultancy group, says foreign retailers in China "don't feel that they have to compete on
price," because they are offering a wider selection of goods and a more pleasant shopping
experience than domestic competitors. Mr. Duffy has a different take. "I had to make a
break, change [Chinese] perceptions that Western-branded goods are normally more
expensive."
17. Chinese are famous for their reluctance to spend their money, saving on average
_____ of their income, one of the highest savings rates in the world.
a. 5%
b. 15%
c. 25%
d. 30% Correct
Questions 18 – 23 from Money & Investing
Latest Twist in Vacation Homes
By MICHAEL CORKERY
February 25, 2006; Page B1
http://online.wsj.com/article/SB114081964601082908.html
Hoping to cash in on Americans' appetite for vacation properties, hotels are increasingly
selling something new: a piece of the hotel. In the past few years, developers have started
aggressively marketing "condo hotels," which look and feel like regular hotels with one
difference -- you can buy an individual room. Owners can use that room whenever they
want, and they also share in any income when the hotel rents it out to other guests.
Properties like these aren't entirely a new concept: Real-estate mogul Donald Trump
developed an early one 14 years ago. However, today the number is rising. As of
December, condo-hotel rooms made up 11% of the roughly 113,170 new hotel rooms
under construction in the U.S., according to Smith Travel Research, based in
Hendersonville, Tenn.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 17 of 28
At one San Diego property, the Hard Rock Hotel, scheduled to open next year, all 420
units will be condo-hotel rooms. Last summer, developers Mr. Trump, Bayrock Group
and New York developer Roy Stillman announced they are building a 298-unit condo
hotel in Fort Lauderdale, Fla. Actor George Clooney is a co-developer with Related Las
Vegas in a project to build a casino and 926 condo-hotel units. Projects like these are
different from timeshares, which typically don't generate income, and limit owners to
only a few weeks' use a year. Condo-hotels are popular among developers because selling
units to individual buyers lets them cut the cost of maintenance and utilities. Prices of
units at the San Diego property range from a $400,000 "studio suite," with a kitchen area
and one bathroom, to a $2.3 million two-bedroom property that's more akin to an actual
condo than a hotel room. For investors, the advantages aren't as clear-cut. The owner gets
income only if their room is rented: If bookings at the hotel drop, so does the room
owner's income. Meantime, the owner still has to cover real estate taxes and often a
mortgage, as well as monthly maintenance fees. Those fees -- much like regular condoassociation assessments -- cover things like maintenance and general repairs to the
building. Resale values are also uncertain. "We have no data on whether you can sell it
for more in five to ten years" says John Vogel Jr., a permanent adjunct professor at the
Tuck School of Business at Dartmouth College. It's a particular concern amid signs that
the overall real-estate market may be cooling. Condo-hotels are "a complicated and riskfilled asset class" that lack a long-term track record, says Mark Lunt, a lodging analyst at
Ernst & Young in Miami. On top of everything, for a room owner, it can be tricky to
decide when to rent it out and when to use it yourself. After all, if you use your room
during peak vacation season -- the time you'd most likely want to -- you can miss out on
earning the highest seasonal room rates. Proponents of condo hotels say one advantage is
that the owner can use the property more often than a typical timeshare or fractionalshare property. Since condo-hotels also have prospects for generating rental income,
some are also purchased as investments. "We thought of it as the best of both worlds -having other people's money buy our second home," says Kimberly Hartke, who three
years ago bought a $700,000 unit with one bedroom and a living area at the
Fontainebleau resort on the oceanfront in Miami Beach. Ms. Hartke, who lives in Reston,
Va., says her family used it about 30 days last year. She and her husband paid for most of
the unit up front and took out a relatively small mortgage. She says on average the rental
income has covered about 35% of their expenses, but she expects the income will
increase as the hotel gets more popular. Some experts warn that condo hotels shouldn't be
viewed as simply an investment. "I would be very cautious about buying," says Ken
Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the
University of California, Berkeley. "It is certainly not the best way to invest in real estate.
You should buy it to use it; if the investment works out, even better."
Condo hotels are the latest attempt by developers to slice and dice the second-home
market.
18. A key issue associated with condo-hotels include__
a. owner can use the property less often than a typical timeshare or fractional-share
property
b. projecting rental income can be surprisingly easy
c. it can be tricky to decide when to rent it out and when to use it yourself Correct
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 18 of 28
d. All of the above
Home Woes
By JUSTIN LAHART
February 27, 2006; Page C1
http://online.wsj.com/article/SB114100487884983888.html
For the past several years, the big regret among home buyers was that they hadn't bought
sooner, when houses were cheaper. But some people who bought in the past several
months probably may regret not waiting until prices got cheaper. Today's report on newhome sales from the Commerce Department should give some indication of just how hard
those recent buyers are kicking themselves. Economists polled by Dow Jones Newswires
and CNBC estimate sales bumped up slightly in January, to an annualized 1,270,000
from December's 1,231,000. That lines up with homebuilder surveys from research firm
ISI Group. January's warm weather was one reason for the pickup in sales -- but not the
only one, according to Oscar Sloterbeck, head of ISI's survey group. Many builders have
been throwing in sweeteners, like flat-panel TVs and better floors, to push sales without
having to lower prices. Even so, Mr. Sloterbeck believes some builders have lowered
prices to bring customers in. That is in keeping with what was happening in previous
months. In December, the average price of a new home was $272,900, according to the
Commerce Department. That was 8.9% below September's $299,600 -- the biggest threemonth percentage drop on record. The median price (as opposed to the average price) fell
by a slightly smaller 7.7% to $221,800. That is an indication that more expensive homes
have seen the steepest price declines. Prices for existing (that is, previously owned)
homes, on the other hand, have registered only slight declines. One reason is that builders
are much more motivated sellers than the average homeowner is. But even if prices for
existing homes stay put, that may present other problems, says Lehman Brothers
economist Joe Abate. Homeowners have used rising home values to fuel their spending,
usually extracting money through mortgage refinancing. If home prices aren't rising, that
spending spigot could run dry. Moreover, long-term interest rates are expected to rise,
which could further crimp the refinancing game. The big unknown, says Bollinger
Capital Management head John Bollinger, is what will recent buyers -- many of whom
have put down little or no cash to buy their homes -- do if the real-estate slowdown
steepens. They may not be as motivated to hang on to their homes as traditional
homeowners, he thinks, and many may end up simply handing lenders their keys.
19. In December, the average price of a new home was ____ according to the Commerce
Department.
a. $72,900
b. $172,900
c. $272,900 Correct
d. $372,900
Smaller Airlines Show Zip, But For How Long?
By SUSAN CAREY
February 28, 2006; Page C1
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 19 of 28
http://online.wsj.com/article/SB114109403408584939.html
Shares of regional U.S. airlines have been doing well for investors. But some are coming
back down in a shakeout that could offer new opportunities for their rivals -- and for
discerning stock pickers. As big U.S. carriers hemorrhaged money, investors drawn to the
airline industry found a haven in regional carriers, the smaller airlines that operate feeder
flights on behalf of larger partners. Protected by contracts guaranteeing a fixed operating
margin even if their planes flew empty, regional airlines kept expanding and reaping
profits as their partners outsourced more flying to them. For some of these smaller
carriers, a day of reckoning could be near. In bankruptcy-court proceedings, UAL Corp.'s
United Airlines extracted concessions from its regional suppliers. Northwest Airlines and
Delta Air Lines, both in Chapter 11, are looking to do the same. Even Continental
Airlines, which hasn't resorted to a bankruptcy filing, is pressuring its regional partner,
ExpressJet Holdings Inc. Some regional carriers face such problems as uncertain growth
prospects, a glut of 50-seat jets as larger planes are gaining favor and labor contracts for
big-carrier pilots that limit the outsourcing of flights. Some of the largest regional
players, including SkyWest Inc., Mesa Air Group Inc. and Republic Airways Holdings
Inc., are weathering the storm. Others have taken a hit. Shares of ExpressJet, which
works exclusively for Continental, and MAIR Holdings Inc., parent of Northwest partner
Mesaba Aviation, are trading near 52-week lows. In 4 p.m. composite trading yesterday
on the New York Stock Exchange, ExpressJet was up six cents at $7.56, while MAIR's
stock rose three cents to $5.35 on the Nasdaq Stock Market. "Regional flying is now open
for bid," says Doug Abbey, a partner in the Velocity Group, an aviation-consulting
company in Washington. "The majors are playing their partners off against each other."
As the larger airlines passed them more work, the regional carriers, with lower costs and
smaller aircraft, expanded significantly. They now carry one of every five domestic air
travelers on more than 14,000 daily flights. Their share of industry revenue is $4 billion,
or 13% of the total. Investors have responded, boosting the stocks of many of these
lesser-noticed airlines and buying up shares in initial public offerings by three regional
airlines between 2002 and 2004. But the tailspin following the Sept. 11, 2001, terrorist
attacks that hit many bigger airlines has taken its toll. A month after Northwest sought
court protection, Mesaba followed it into Chapter 11. Northwest has taken back some
planes it leases to Pinnacle Airlines and Mesaba, and a few months ago it put the business
those carriers do for it out for bid. Both Mesaba and Pinnacle fly solely for Northwest
and obtain all their planes from the company. Pinnacle's shares plunged after Northwest
filed for Chapter 11, but the stock has recovered. In 4 p.m. composite trading yesterday
on the Nasdaq, the stock was down 15 cents, or 1.9%, to $7.76. Although Pinnacle
remains profitable, its auditor, Ernst & Young LLP, has told the company that it expects
to include in the annual report uncertainties over its status as a "going concern" stemming
from Northwest's bankruptcy and Pinnacle's future relationship with Northwest.
20. As the larger airlines passed more work to regional carriers, with lower costs and
smaller aircraft, they expanded significantly. Regional carriers now carry ____ domestic
air travelers on more than 14,000 daily flights.
a. 1 of every 5 Correct
b. 1 of every 10
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 20 of 28
c. 1 of every 15
d. 1 of every 20
Like a Lion
By JUSTIN LAHART
March 1, 2006; Page C1
http://online.wsj.com/article/SB114117045005985886.html
People ate a bit more of their seed corn in January. Considering how good the weather
was, who can blame them? The Commerce Department will likely report today that in
January, for the fourth month in a row, Americans increased spending at a faster pace
than their incomes rose. Economists surveyed by Dow Jones Newswires and CNBC
estimate that consumer spending rose by 1% in January from the prior month, while
income rose by 0.6%. That means that the savings rate -- the amount of their monthly
income people haven't spent as a percentage of their total income -- probably drifted
deeper into negative territory. Critics complain that the Commerce Department's measure
of savings is too limited -- it doesn't include realized capital gains, for instance -- but
even so the savings rate's decline from around 2% five years ago to a negative 0.7% in
December suggests that people are banking fewer of the dollars they earn. But it's
possible January will have marked the savings rate's low point. January's warm weather
had shoppers crowding into stores. In February it looks as if they pulled back. Saturday,
Wal-Mart estimated its February sales at U.S. stores that have been open for a year or
more would be up by 3.1% above the year-ago period. That compares with a 4.7% gain in
January. It looks as if many other stores' sales stumbled even more -- retailers report
February figures tomorrow. With the car companies trying to wean consumers off
incentives, February automobile sales, which get reported today, also may have sagged.
So long as the job market held up in February -- and it seems to have -- the drop-off in
spending probably means the savings rate ticked higher in the month. Another of today's
economic reports is the Office of Federal Housing Enterprise Oversight's home-price
index, which is generally viewed as the best measure of U.S. house prices. Economists at
UBS estimate that it probably was flat in the fourth quarter vs. the third quarter. That
would be the smallest quarterly change in over 10 years. If people can't count on rising
real-estate values to bail them out of retirement, that will provide another reason to start
socking away more of their cash.
21. Economists surveyed by Dow Jones Newswires and CNBC estimate that consumer
spending _______ in January from the prior month.
a. rose by 1% Correct
b. fell by 1%
c. rose by 5%
d. fell by 5%
Honeywell Sets Out To Reclaim Its Stature
By ANDY PASZTOR
March 2, 2006; Page C1
http://online.wsj.com/article/SB114126897709287245.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 21 of 28
Honeywell International Inc. is betting that an assortment of new aviation-safety
technologies will help boost the company's stature, profits and stock price. But that
strategy faces some potentially stiff head winds because Honeywell International has lost
a string of core commercial-aircraft contracts, and cash-strapped U.S. airlines remain
especially leery of discretionary spending. Knocked off its perch as the premier supplier
of standard cockpit equipment for the newest Boeing Co. airliners, Honeywell wants to
excite investors at least in part by reclaiming its position as a leader in developing and
selling aviation-safety equipment. From more-precise onboard weather radars to cuttingedge systems designed to prevent runway collisions and fuel-tank explosions, the
company is hoping for a world-wide resurgence in spending on such devices by airlines
and operators of business aircraft. Rolling out safety enhancements first can generate
significant momentum and positive attention on Wall Street, while also nurturing closer
ties to customers. But even under the most optimistic scenarios, safety products aren't
expected to account for substantially more than the current 6% of the Morris Township,
N.J., company's total aerospace revenue, projected to be about $11.1 billion this year.
Whatever the final figure, it is certain to remain a tiny fraction of the overall $15 billion
in long-term supplier business that several Honeywell rivals already have snared on
Boeing's newest jetliner, the twin-engine 787. Honeywell's share price is up about 9%
from a year ago, with nearly all the improvement coming in the past month or so. Its
chief rivals, Goodrich Corp. and Rockwell Collins Inc., have seen double-digit jumps in
their stock prices since last March. Honeywell's stock, which rose yesterday 32 cents to
$41.27 in 4 p.m. composite trading on the New York Stock Exchange, has lagged even
further behind the roughly 25% year-over-year gains racked up by shares of larger, more
defense-oriented aerospace companies such as Lockheed Martin Corp. and Northrop
Grumman Co. Honeywell's trailing price/earnings ratio is 21.2. That compares with 23.2
for Rockwell and 19.8 for Goodrich. Investors tend to watch Honeywell's aerospace and
defense operations closely because of the company's long pedigree in aviation-safety
technologies. "Safety continues to be a top concern everywhere," Chairman and Chief
Executive Dave Cote told an investor conference last week. Robert Gillette, the head of
Honeywell's aerospace unit since early 2005, said at the same conference that in addition
to the expected boost in new equipment for large air carriers, there also "may be more
and more safety-system requirements for business and general aviation aircraft" in
coming years. But the ramp-up in safety spending is likely to be gradual, and regulatory
mandates can be notoriously hard to predict. Without being required to do so by the
Federal Aviation Administration, U.S. carriers remain reluctant to buy additional safety
equipment, particularly since the past three years have been among the safest ever for
passenger flights in the U.S. Many analysts are enthusiastic but tend to see the benefit
from the safety initiative as limited. Paul Nisbet, an analyst with JSA Research, says
Honeywell "has been steadily building this part of its business," and expects to see
improved profit margins as the latest devices are rolled out. Still, he says the competitions
Honeywell lost last year on the 787 Dreamliner "certainly will have more of an impact
for the longer term."
22. Honeywell International Inc. is betting that an assortment of new ______
technologies will help boost the company's stature, profits and stock price.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 22 of 28
a. automobile-safety
b. aviation-safety Correct
c. SUV-safety
d. home-safety
Big Enron Witness Waits on Deck
By JOHN R. EMSHWILLER and GARY MCWILLIAMS
March 3, 2006; Page C1
http://online.wsj.com/article/SB114135223811088294.html
HOUSTON -- Here comes Andrew Fastow.
After a smattering of lower-profile witnesses, the prosecution in the Enron trial is
expected to call the failed energy firm's former chief financial officer to the stand next
week. Mr. Fastow's testimony is part of a prosecution strategy that aims to build the case
against Enron Corp.'s former top executives, Jeffrey Skilling and Kenneth Lay, brick by
brick, rather than relying on a smoking gun. Mr. Fastow's testimony will almost certainly
provide a high point to the fraud and conspiracy trial of Messrs. Skilling and Lay, now in
its second month. Mr. Fastow was the young protégé of Mr. Skilling who rose to the top
of the company and was in the middle of its most controversial financial deals. When Mr.
Fastow reached a plea agreement with the Justice Department in 2004, the government
said he would provide a "window into Enron's executive suite."
People familiar with the matter say that while Mr. Fastow could damage his former
bosses, he isn't expected to provide any fatal blows to either defendant's case -- which
would make him much like the lesser-known figures who have already testified.
One of those lower-profile figures created a stir just before court ended yesterday. Jurors
heard a senior executive place Messrs. Lay and Skilling at a high-level meeting called to
discuss an investment report that challenged Enron's financial results and prospects. The
former operating chief of Enron's telecommunications unit, Kevin Hannon, said Mr.
Skilling fretted that "they're on to us" in response to an investment boutique's criticism of
Enron's complex profit-making activities. Mr. Hannon said that he took Mr. Skilling's
remark to mean that the investment community was beginning to understand the
machinations Enron used to report steady profit growth. The report argued that Enron's
stock price, then at about $60 a share, should have been less than half that. Mr. Hannon
has pleaded guilty to an Enron-related crime and is testifying under a cooperation
agreement with the government.
23. The prosecution in the Enron trial is expected to call the failed energy firm's former
chief financial officer, _________ to the stand next week.
a. Andrew Fastow Correct
b. Jeffrey Skilling
c. Kenneth Lay
d. Kevin Hannon
Questions 24 – 26 from Personal Journal, Section D
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 23 of 28
The New Face of Multiple Sclerosis
By AMY DOCKSER MARCUS
February 28, 2006; Page D1
http://online.wsj.com/article/SB114109312200184919.html
Multiple sclerosis, a potentially devastating disease that affects the central nervous
system, has long been considered an adult condition. But doctors are increasingly
diagnosing the disease in children and teens -- and they believe that thousands more
young people may have symptoms that are going undetected. As a result, medical
researchers are beginning to study MS specifically in young people. The hope is that a
better understanding of pediatric MS will not only help children -- for whom the disease
poses a number of unique issues -- but also yield insights into the causes of multiple
sclerosis generally. Some research indicates that MS may be related to an environmental
trigger early in life, so researchers are looking for clues in children that could lead to
better diagnosis and treatment for everyone. A diagnosis of MS in kids is rare: Most of
the approximately 400,000 patients in the U.S. are adults, usually diagnosed between the
ages of 20 and 50. Just 10,000 children, mostly age 10 to 17, are believed to have MS.
But doctors also say that as many as 15,000 more kids may experience signs of the
disease, such as blurry vision, numbness and fatigue, that go unrecognized. Because the
disease is largely found in adults and symptoms can come and go, doctors typically don't
suspect MS. Doctors have known for many years that the disease can occur in children,
but diagnosis was rare. Now, improvements in diagnostic imaging tests, a broader array
of drugs available to slow the disease, and growing anecdotal evidence that many adult
patients had symptoms when they were younger are all helping fuel a drive to diagnose
the condition early. There is no cure for MS, an autoimmune disorder in which immune
cells enter the central nervous system, causing inflammation that damages myelin, the
protective coating around nerve cells. The disease isn't usually fatal, except in rare cases.
But it can scar the brain, spinal cord and optic nerves with lesions that leave people with
varying degrees of physical and cognitive problems. Some patients become disabled and
wind up in a wheelchair. To help slow the progression of the disease, patients are usually
on medication for the rest of their lives. To further understanding and awareness of
pediatric MS, the National Multiple Sclerosis Society is providing $13.5 million over the
next five years to six regional pediatric MS centers that will focus on treatment and
research. The centers, at the University of Alabama in Birmingham, State University of
New York at Buffalo, the Mayo Clinic in Rochester, Minn., Stony Brook University
Hospital in Long Island, the Massachusetts General Hospital for Children in Boston, and
the University of California in San Francisco, will pool their data in an effort to establish
the first national database of pediatric MS cases. Researchers say the database will lead to
more clinical trials involving children, who are often treated for multiple sclerosis with
medicines that are approved for use in adults but haven't been rigorously studied in
children. Medications to treat MS include the injectable drugs Avonex, Betaseron,
Copaxone and Rebif, as well as Novantrone, which is given intravenously. The drugs can
cause flulike symptoms, and are usually given to children in smaller doses than for adults.
Another promising treatment, Tysabri, was pulled from the market last year over safety
concerns, but it is now going back into clinical trials.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 24 of 28
No one knows the exact cause of multiple sclerosis, but it is believed that a combination
of genetic factors and environmental triggers are at the root. Narrowing down what those
triggers might be is a huge challenge. By the time patients are diagnosed as adults,
"people have been exposed to hundreds of thousands of infectious agents, viruses,
bacteria, allergens, you name it," says John Richert, vice president for research and
clinical programs for the National Multiple Sclerosis Society in New York. Finding the
environmental trigger "is virtually impossible at that point."
Looking for Triggers
In pediatric MS, however, the amount of time between the environmental trigger and the
onset of disease may be much shorter. Studying children with MS "will give us a clearer
view of what the likely important exposures have been that trigger the disease," says Dr.
Richert. A better understanding of the causes of pediatric MS might also offer insights
into other autoimmune diseases, such as lupus or rheumatoid arthritis, adds Lauren
Krupp, director of the National Pediatric Multiple Sclerosis Center at Stony Brook
University Hospital. Studies so far of children with multiple sclerosis have generally been
small, making it difficult to draw broad conclusions. But pediatric MS appears to differ
from the adult disease in some respects. Just like in the adult population, more females
than males get pediatric MS. But while adults with the disease tend to be Caucasian
women, in children doctors are seeing greater numbers of patients from minority
populations, such as African-American, Latino, Asian and Middle Eastern.
Cognitive Problems
Doctors believe that hormones in growing children may make them more prone to
relapses than adults. Cognitive problems in children, such as memory lapses or reading
difficulty, may have a profound impact because children are still learning and developing,
researchers say. No one knows yet whether children may experience permanent cognitive
damage. It also takes children longer to reach a stage of the disease where they start
experiencing disabilities, such as needing a cane or other assistance to walk. But because
they get the disease at an earlier age, they can also become disabled at a much younger
age than adults. This is one of the reasons why doctors say it is critical to identify MS in
kids as early as possible and begin treating it. It isn't easy to diagnose multiple sclerosis
because there is no single test yet for the disease. Instead, doctors rely mainly on imaging
tests taken over time and observed for growing numbers of lesions. In children, it is even
more difficult because there are no published guidelines on what constitutes pediatric
MS. In addition, there are other more-common conditions in children that doctors are
likely to think of first when presented with MS-like symptoms. For instance, acute
disseminated encephalomyelitis, which can occur after a virus, can produce vision,
balance or strength problems. For children who are diagnosed with MS, suffering from
the disease is often a lonely and isolating experience. Unlike other chronic conditions that
affect children, such as diabetes, children with MS usually don't know anyone else with
the condition. At the age of 13, Amanda Driscoll, now a high-school freshman in
Tewksbury, Mass., came downstairs before school complaining that her vision was blurry
and she felt dizzy. The school nurse told Amanda's mother to take her to the doctor for an
eye exam. This led to further tests, including an MRI, which turned up lesions on
Amanda's brain. Eventually, she was diagnosed with MS, the only one in her school with
the condition.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 25 of 28
Sitting in her doctor's office one day in February for a regular check-up, Amanda, now
age 15, explained that she tries not to think about having MS because "I've heard that
people with MS are in wheelchairs, and I don't want to think about that happening to me."
Tanuja Chitnis, director of the Partners Pediatric Multiple Sclerosis Center at
Massachusetts General Hospital for Children in Boston, told Amanda that medications
like the one she is taking are able to slow down the course of the disease, and that fewer
people end up with severe disabilities.
24. A diagnosis of MS in kids is rare: Most of the approximately 400,000 patients in the
U.S. are adults, usually diagnosed between the ages of 20 and 50. Just _____ children,
mostly age 10 to 17, are believed to have MS.
a. 1,000
b. 5,000
c. 10,000 Correct
d. 15,000
Apple Goes Hi-Fi
By NICK WINGFIELD and DON CLARK
March 1, 2006; Page D1
http://online.wsj.com/article/SB114115059908785532.html
Trying to capitalize on the success of the iPod, Apple Computer Inc. is now aiming to
make its technology the centerpiece of home-entertainment systems. Yesterday, the
company introduced two products that directly challenge consumer-electronics giants,
including a $349 speaker-system device that turns its digital-music player into a highquality home-stereo system. While competitive products are already on the market, the
iPod Hi-Fi marks the company's first serious attempt to tap into the growing ecosystem of
iPod accessories. Apple also released a new version of its least-expensive personal
computer -- the Mac mini -- that features a remote control that lets users navigate and
display digital photos and videos on a television screen. The new Mac minis contain new,
more powerful chips from Intel Corp., including a $599 model that contains a "singlecore" chip and a $799 "dual core" model that contains the electronic equivalent of two
brains. Both went on sale yesterday. The products, introduced by Apple Chief Executive
Steve Jobs, suggest the company is finally mounting a push to move beyond consumers'
dens, tangling more directly with consumer-electronics companies and others that hope to
play a role in managing music, movies and other digital media in the home. The success
of the iPod has made Apple one of the most influential companies in the technology
industry. The company has sold more than 42 million iPods in the four years since the
device went on the market, and its iPod sales alone over the holiday quarter were $2.9
billion. It recently sold its one billionth song on its online iTunes Music Store, which
sells digital music and videos. Though Apple never talks about unannounced products,
Gene Munster, an analyst at Piper Jaffray, predicts Apple within a year or so will come
out with a high-definition television set capable of displaying content stored on other PCs
throughout the house and an "iPhone," a cellular handset that will play music.
The home-stereo product, with a white plastic case about the size of a breadbox with a
black speaker grille on the front, is far from the first stereo system for the iPod. Bose,
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 26 of 28
JBL and other companies have created popular products -- essentially speakers with
docking stations for iPods -- that allow users to play music stored on their iPods at parties
or in dorm rooms, rather than limiting them to the ear buds that come with iPods.
At an event at Apple headquarters in Silicon Valley yesterday, Mr. Jobs said the sound
from the iPod was good enough that it could be used as a substitute for home-stereo
systems that cost several hundred dollars to $1,000. With the iPod Hi-Fi, Apple will now
be competing with some of its hardware partners, who have become a source of revenue
for the company. The company authorizes third-party makers of iPod accessories to carry
a "Made for iPod" logo. Apple won't say how much it charges its partners to be a part of
the program, but Mr. Munster estimates Apple gets roughly 5% of the retail cost of such
accessories. The market for third-party manufacturers that make accessories for the iPod
amounted to an estimated $400 million in sales last year.
25. Trying to capitalize on the success of the iPod, Apple Computer introduced two
products that directly challenge consumer-electronics giants, including a _____ speakersystem device that turns its digital-music player into a high-quality home-stereo system.
a. $249
b. $349 Correct
c. $599
d. $799
Losing Well: How a Successful Man
Dealt With a Rare and Public Failure
By JEFF ZASLOW
March 2, 2006; Page D1
http://online.wsj.com/article/SB114126481693787132.html
One day last July, in a hotel lobby in Singapore, several hundred people turned their eyes
to Dan Doctoroff to see how a hugely successful man reacted at the moment he was
branded a failure. Mr. Doctoroff, a New York deputy mayor, had spent 11 years trying to
land the 2012 Olympics for his city. A wealthy former investment banker, he used $4
million of his own money, traveled 500,000 miles, worked 100-hour weeks and staked
his reputation on a quest that his critics dismissed as foolish and unattainable.
He had come to Singapore with Muhammad Ali, Hillary Clinton and other dignitaries to
make a final presentation to the International Olympic Committee. When news broke that
New York was out of the running (London got the Games), Mr. Doctoroff was standing
in that lobby with the American delegation. The announcement, he says, left him feeling
"knocked over" and "emotionally paralyzed." But knowing everyone was looking at him,
he held himself together as he accepted hugs and condolences. For anyone who has taken
a high-profile risk that ended in defeat, Mr. Doctoroff's very public failure offers insights.
How does a person so accustomed to winning deal with a crushing disappointment? And
before Mr. Doctoroff decides to try again -- he doesn't rule out a bid for the 2016 Games - what soul-searching questions must he ask? Researchers have advice for high achievers
who fail: Try self-deprecating humor. Do extensive postmortems. Allow yourself to
dream big again. If you fear being a two-time loser, create a team strategy, so others
share the risk. And ask yourself: What was your failure? Was it not reaching your goal, or
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 27 of 28
not giving your all? After Peter Ueberroth engineered the 1984 Olympics for Los
Angeles, he was Time magazine's Man of the Year. Mr. Doctoroff admits such glory
would have been nice, but he has learned to identify other satisfactions from his Olympic
quest. He's proud that billions of dollars in projects under way in New York grew out of
the Olympics bid, from an extended subway line to an expanded convention center to
new parks. Identifying such silver linings is appropriate, says Rosabeth Moss Kanter, a
Harvard Business School professor who studies leadership. "Many successful people set
the bar so high that they don't achieve the distant goal. But they do achieve things that
wouldn't have been possible without that bigger goal." Mr. Doctoroff, 47 years old, made
his fortune running a private-equity firm. Back then, he had few failures, but they
haunted him. One investment in a drugstore chain lost $20 million, and for two years
afterward, he couldn't bring himself to enter any drugstore. "It was too painful," he says,
so he bought his toiletries at supermarkets. He first dreamed of bringing the Olympics to
New York while watching a 1994 World Cup soccer match at Giants Stadium. He spent
years hashing out logistics, as critics argued that the Games would be a nightmare for an
already gridlocked city. There was nasty bickering over the building of a stadium, and
Mr. Doctoroff was called arrogant by adversaries. (Mayor Michael Bloomberg named
him a deputy mayor in 2001. Both men take $1 a year in salary.) Mr. Doctoroff says the
Olympics process changed him. He had been a hothead, who compensated by counting
how many days he could go without losing his temper. But wooing Olympic decision
makers in 78 countries, he learned to listen more and talk less. Dealing with critics, he
had to recalibrate his brashness. It made him more patient, he says. After the Olympic
defeat, Mr. Doctoroff sensed that some people pitied him, or feared approaching him
because they didn't know what to say. "In a perverse way," he says, "having had both my
parents die recently prepared me for this. I understood the rhythm of loss." The losing bid
also allowed him to see how supportive his wife and three teenage children could be. His
absences from home had been stressful for his family. But on the plane back from
Singapore, his daughter, then 14, was "so incredibly sensitive," he says. "Her affection
and obvious pride were very powerful for me." The next month, he took his wife on
vacation to Elba, the Italian island where Napoleon was exiled in 1814. In December, his
wife gave him "the one pass after 25 years of marriage," and allowed him to travel by
himself for five days to Chile. Wanting to think through his life, and challenge himself
physically, he took a 200-mile solo bike ride. On one 12-mile uphill climb, he doubted he
had the strength to finish, but he did. After not reaching the Olympic finish line, this was
a meaningful victory. He gave himself another test when he traveled to Turin for the
Winter Olympics. Just a spectator, he wondered if he'd feel resentful or depressed. He
was relieved that he enjoyed being there.
26. Researchers have advice for high achievers who fail :
a. Avoid drugstores
b. Allow yourself to dream big again
c. create a team strategy so others share the risk
d. Both b & c Correct
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 28 of 28