16 JUNE 2002: SENEGAL
2, SWEDEN 1 (OVERTIME)

15 JUNE 2002: THE COMING
OIL PRODUCTION PEAK…

——– Original Message
——–

Subject: Viridian Note 00316: 
Hubbert’s Peak

Date: 11 Jun 2002 23:34:02
-0000

From: Bruce Sterling <bruces@well.com>

(((I have  received
this elegantly composed rant

from Eric Hughes, 
who often favors us with his perorations.)))

Hubbert’s Peak, The Impending
World Oil Shortage

by Kenneth S. Deffeyes

Princeton University Press,
2001

Reviewed by Eric Hughes

One of my favorite Matt Groening
cartoons is near the

beginning of the Love is
Hell series, where he recommends,

next time you are think
about doing something shameless,

just consider “how long
you’re going to be dead”.  Below

that is a timeline, stretching
to infinity in both

directions, with a small
black dot in the middle labeled

“you are here.”

    The same
illustration might well have been captioned

“how long you’re not going
to be mining oil from the

ground.”

    This
last weekend I had the great pleasure of reading

*Hubbert’s Peak*, a book
on the global petroleum industry.

The author is a recently-retired
geologist who taught at

Princeton for thirty years,
worked in the oil industry

before that, and grew up
in the middle of Kansas oil

fields.  The man is
pure oil-intelligentsia, a category I

was not previously familiar
with.  The book contains a

wealth of detail, not exhaustive
and dry detail, but

selective and illuminating
detail.

    The purpose
of the book is to make and justify a

prediction about the year
of maximum world oil production.

His precedent is a 1956
prediction by M. King Hubbert (a

former colleague of his)
that U.S. oil production would

peak in the early 1970’s. 
The actual peak was 1970.

    Let’s
cut to the chase.  Deffeyes’s prediction is

2004.7, plus or minus a
couple of years.  As he says

immediately thereafter:
“There is nothing plausible that

could postpone the peak
to 2009.  Get used to it.”

   I’m not going
to summarize the argument; that’s the

content of the book. 
I will summarize, though, the

subject elements that lead
up to the argument: initial oil

formation, the geology of
its deposits, prospecting,

drilling and extraction,
and the statistics of oil fields

and their discovery. 
He then spends a couple of chapters

on Hubbert’s argument, and
another couple on the future.

It’s a relatively slender
book, only about 200 pages.

It’s plenty to make his
point, without overflowing into

boredom.

    One of
the delights of the book is the author’s sense

of humor.  At one point
in the text he presents a

particular way of doing
a graph that he’s proud of.  Fifty

pages later, in an endnote,
he makes the following

comment: “Here in the back
of the book, where my editor

isn’t likely to look, we
can derive the equation.”  This

combination of enthusiasm
and restraint in the exposition

is one of the charms of
the book.

    Another
appreciation I got from this book is the

difference in the dynamics
between oil and gas production.

They are intertwined in
terms of their discovery and

production techniques, but
their drilling and markets are

divergent.

    Oil is
found primarily in the “oil window” of 7,500

and 15,000 feet; gas is
found below those depths.  Both

are sources of combustion
energy, but they aren’t direct

replacements.  In order
to switch, capital has to be

invested, which takes a
while.  The oil peak really

matters, since it’s not
possible to immediately transition

to natural gas or any other
energy source.

    It is
easy to question individual assumptions and

intermediate conclusions
in the argument.  That’s not

really the point, though. 

The conclusion that Deffeyes

draws is both very narrow
and quite robust.  His only

point is to estimate the
year in which the most oil will

be taken from the ground
worldwide.  He is not making a

prediction about oil prices,
about how many years of oil

there are left, nor of any
number of other questions about

the dynamics.  What’s
interesting is that under many

variations of the model
and permutations of the

assumptions, the peak year
doesn’t really budge.

    The model
is robust against variations in reserve

estimates.  As recently
observed on this list, total

reserves depend a lot on
the prevailing oil price.  This

observation, though, doesn’t
change the estimate of the

peak year of production. 
Discoveries lead production by

about 11 years.  This
reflects the capital investment

cycle and the time needed
to get into production.

    
As oil prices rise, existing reserves come into

economic viability, but
still with a lag time, and that

lag time is longer because
many of these sources require

technology transfer in addition
to the capital spending.

As a result, there may well
be some local upswings in

production after the peak,
but total world production will

never reach its maximum
again.

   Along the lines
of other critiques, Thomas Gold’s idea

of deeply buried hydrocarbons
does not change this

prediction of the oil peak. 
First, Gold is speaking

primarily of methane, the
principal component of natural

gas.  Even the partial
replenishment referenced in

Viridian Note 00314 was
“very light oil and gas.”  The oil

window goes down only to
15,000 feet because below that,

it’s too hot for long-chain
hydrocarbons to be stable.  So

even if Gold is right about
oil and gas being produced by

microbes from raw organic
materials embedded in the earth,

that doesn’t change the
timing of the oil peak.  Deep

drilling for oil is poppycock;
deep  drilling gets you gas, not oil.

    This
is a science book, not an economic or political

tract.  Deffeyes makes
no political predictions, but he

does observe that political
disruption is inevitable.  The

U.S. oil crisis of the early
1970’s was precipitated by

the peak of U.S. oil production
in 1970.  Prior to that,

fluctuations in U.S. demand
could be satisfied by simply

pumping more American oil. 
After the American peak, the

excess demand could only
be met with overseas oil.  Once

OPEC realized this, there
was a “crisis”.

    The disruptions
that will happen after a world oil

peak will be even more interesting,
as in the curse about

“interesting times.” 
Excess demand is going to be met by

rationing; some will simply
have to go without.

Previously, demand could
be met by shifting the source of

supply.  This time
there is no more source of supply

anywhere.  The few
years after the peak will  be particularly

disruptive, since during
that time many  profound assumptions

about the way the world
works will be  proven wrong.

Bad investment decisions
will be revealed  in hindsight,

and one should expect an
orgy of finger-pointing.

    Deffeyes
mentions a potential flashpoint:  “You

guessed it; several islands
stick up in the middle of the

South China Sea, and the
drilling rights are claimed by

six different countries.” 
These, as I recall, are the

Spratly Islands.  The
claimants, just to give an idea of

the touchiness of the situation,
are China, Taiwan,

Vietnam, Malaysia, Brunei,
and the Philippines.  Control

of the islands is currently
divided between the six

disputants.

    After
a world oil peak, oil prices will go inevitably

upward for some years, continuously
increasing the stakes.

This is an unstable situation
that may well lead to war.

If this sounds alarmist,
it’s worth considering the Middle

East, the single largest
oil region in the world.  Ask

yourself if the U.S. would
have much political interest in

a Middle East without oil
fields.

   I have painted
a pessimistic picture of the medium-term

future.  The long-term
future, while not worked out, has

no such negative necessities. 
For one, there’s plenty of

oil left after the peak
of production; it’s just going to

get rarer and more expensive. 
The taps won’t all turn off

at once.  There is
plenty of time to develop a successor

energy infrastructure. 
Note that I didn’t say

“alternative energy infrastructure.” 
There won’t be

anything alternative about
the successor energy regime.

   Right now everything
is an alternative to oil.  Soon

these other sources will
become the main ball game.  I was

gratified to read about
the large remaining natural gas

reserves.  Reformation
of natural gas is the best

immediate source of fuel
hydrogen, and there’s plenty of

it.  Making the transition
to a hydrogen economy will

cost, but it will certainly
be possible.

    On balance,
I’d consider this book a Viridian must-

read.  It’s a wake-up
call, a particular Viridian

competence.  Every
important opinion needs enthusiasts as

promoters.  I’ll be
promoting the lesson of Hubbert’s

peak; please do likewise.

Eric Hughes

14 JUNE 02: YES, DR.
THOMPSON, IT HAS INDEED COME TO THIS.

From June
13 NEW YORK TIMES:

Rolling Stone, Struggling
for Readers, Names Briton as Editor

By DAVID CARR

Rolling Stone, a magazine
that all but defined the American countercultural

epoch, yesterday named a
British managing editor schooled in the racy ways of

contemporary English men’s
magazines. The appointment signals the end of Rolling

Stone’s history as a publisher
of epic narratives and literary journalism, in

part because the owner,
Jann Wenner, believes that today’s young reader has

little patience for long
articles.

    The new
editor, Ed Needham, comes from the English-owned FHM (For Him Magazine),

whose two-year-old American
version is the nation’s fastest-growing magazine.

Its circulation is now more
than a million, bigger than that of Esquire or GQ.

    Rolling
Stone, meanwhile, has struggled to keep its readers and advertisers. in

the face of competition
from magazines like Entertainment Weekly and the music

magazine Blender. Mr. Wenner
has decided on a gamble that his storied magazine ˜

which has published Tom
Wolfe and Hunter S. Thompson among others ˜ can be

reconfigured for a new kind
of reader. The current audience for Rolling Stone

has grown up on “Fear Factor,”
not “Fear and Loathing in Las Vegas.”

    And in
a world saturated with media choices, many editors have concluded that

the words in magazines are
often beside the point, as some of the more

successful publications
like Maxim communicate visually with funny charts,

outrageous photos and articles
that are increasingly little more than captions

on pictures. Mr. Wenner
seems to agree.

    “There
is so much media around,” said Mr. Wenner, who retains the title of

editor.
“Back when Rolling Stone was publishing these 7,000 word stories, there

was
no CNN, no Internet. And now you can travel instantaneously around the

globe,
and you don’t need these long stories to get up to speed.”

    “We cover
change, and we have to change in response to the times,” Mr. Wenner

added, saying that the fundamental
mission of the twice-a-month magazine would

not be altered, but the
execution would.

    While
he said he would not turn Rolling Stone into a a so-called laddie

magazine, Mr. Needham promised
that he would reintroduce the element of surprise

to the 35-year-old publication.
Mr. Needham emphasized that there would still be

feature articles, just that
they would be shorter and better illustrated.

    “All
the great media adventures of the 20th century have been visual,” said
Mr.

Needham, 37, who grew up
in Cambridge, England. “Television, movies, the

Internet, they’re all visual
mediums, and I don’t think people have time to
sit

down
and read. The gaps in people’s time keep getting smaller and
smaller, and

the competition is getting
more intense. It’s one of the facts of media life.”

    Another
editor recently hired by Mr. Wenner, Bonnie Fuller, is applying those

lessons to US Weekly. Ms.
Fuller’s celebrity magazine has become a circus of

photos, gossip and fashion
faux pas, and is finding early success on the

newsstand, according to
officials of Wenner Media.

    In April,
when Mr. Wenner dismissed Robert Love, who had been at the magazine

for 20 years and managing
editor for four and a half years, he made it clear

that he was looking for
a less wordy approach to help stem Rolling Stone’s

slide.

    Its ad
pages fell more than 25 percent from 1999 to 2001, hit hard by the

continuing flight of tobacco
ads from youth-oriented magazines. (Through the

first five months of this
year, however, it has rebounded slightly, by 2.4

percent.) Its circulation
has remained flat at about 1.25 million, but its

newsstand sales ˜ a barometer
of a magazine’s vitality with readers ˜ fell

nearly 10 percent in the
last half of 2002 compared with the period in 2001,

according to the Audit Bureau
of Circulations.

    Some
of those readers and advertisers have moved to magazines like Blender,

which has used short pieces,
provocative writing and humorous headlines and

captions to stand out in
a crowded marketplace with music magazines like Vibe

and Spin. The magazine,
which is owned by Dennis Publishing, which also produces

Maxim, promises advertisers
that it reaches 350,000 paying readers with each

issue. Beginning with its
August issue, Blender’s issues will increase from

every other month to 10
times a year.

    Rolling
Stone is also facing stepped-up competition from Time Inc.’s

Entertainment Weekly, which
recently initiated a monthly music supplement called

Listen2This.

    The issue
of reviving Rolling Stone is a critical one for the privately held

Wenner Media, which publishes
Men’s Journal in addition to Rolling Stone and Us

Weekly. The music magazine
has historically served as a cash machine to finance

Mr. Wenner’s other endeavors.
To fight a growing perception that Rolling Stone

could be the next Playboy
˜ a hugely successful magazine that has lost its

salience in a new cultural
context ˜ Mr. Wenner has decided to embrace changing

readership habits rather
than to outrun or ignore them.

    The magazine
has been graphically updated by its new art director, Andy Cowles,

who previously worked at
Q, a British music magazine. But it still has a

tendency to lavish attention
on aging rockers like Mick Jagger.

    Mr. Wenner
remains unapologetically involved in the editorial affairs of Rolling

Stone, although company
executives and editorial staffers say he has given wide

latitude to Ms. Fuller at
Us Weekly as she remakes the magazine into a

star-driven weekly for women.
Mr. Wenner said that Mr. Needham would be given

similar permissions to remake
the magazine he founded.

    “He has
great qualities. He has a demonstrated track record as a modern magazine

packager and those trumped
everything else,” Mr. Wenner said.

   
Reached in Colorado, Mr. Thompson, whose articles defined the early version
on

the
magazine, was among those surprised by Mr. Wenner’s hiring of Mr. Needham.

“It
seems as if he’s in dire straits. Has it really come to that?” he said.

    Others
think the choice of Mr. Needham makes sense.

    “It seems
when people are trying to develop media vehicles for young people,

they are going for the shorter
attention span,” said Lawrence Teherani-ami a

media director at Wieden
& Kennedy, an advertising agency that represents

companies like Nike. “I
don’t think there is anything inherently wrong with

that. I just hope that Rolling
Stone keeps its heritage of being the source of

great reporting on youth
culture.”

    Mr. Needham
studied American literature at Sussex University but came of age

professionally and personally
in the laddie magazine world of England. After

working as a freelancer,
he became deputy editor of the British FHM in 1996 and

editor in chief in 1997.
The owner of FHM, the British publisher EMAP, then

selected him to edit a new
American version of the magazine.

    Despite
Dennis Publishing’s having a three-year head start with Maxim, FHM has

rapidly found reader and
advertiser acceptance with the classic laddie

fundamentals of pictorials
of relatively obscure celebrities, jokes and

tutorials on how to be a
modern man.

    “The
overlap between FHM is pretty slender ˜ Britney Spears and Jennifer Lopez
˜

but I respect the magazine
enormously,” Mr. Needham said of Rolling Stone. “It’s

a magazine that is very
faithful to its traditions, perhaps to a fault, and

there has to be a bit more
crafting of the magazine to make it a success on a

very brutal newsstand.”

13 JUNE 02: SIMPLY TSFAT!

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Our recordings “Fresh Air”
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Have a SIMPLY TSFAT event
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12 JUNE 02: CORRUPTION,
2002 CORPORATE STYLE

From the 9 June 02 New
York Times:

Heads I Win, Tails I Win

By ROGER LOWENSTEIN

Every year, in an annual
rite of spring, SBC Communications discloses the

principles that it follows
in setting pay for its top executives.

    As with
all companies, this information is contained in the annual proxy

statement, and as is also
common, SBC purports to follow some basic credos of

American business.

    
A sprawling Baby Bell with headquarters in San Antonio, SBC says its aim
is to

attract and retain high-quality
executives, those who will ”enhance the

profitability” of SBC.
And its foremost principle in achieving this goal is to

”align the financial interests
of SBC’s executives with those of SBC and its

shareholders.”

    This
is an all-American notion, just as SBC is an all-American company. Though

not as well known as AT&T
and MCI, SBC provides the dial tone in the Southwest,

California, the Midwest
and Connecticut — that is, to one in three Americans.

SBC is typically American
in one other respect: somewhere along the way, its

stated compensation principles
became little more than platitudes.

    For the
purpose of examining a single C.E.O.’s compensation, I picked SBC for

its unspectacular qualities.
It is profitable and professionally managed, and

its C.E.O. is well regarded
in his industry. Like many C.E.O.’s, he pursued a

bold growth strategy for
much of the 90’s, had some good early years and more

recently gave back much
of his gains. In the last three years, his stock has

fallen 27 percent — more
than either the Standard & Poor’s 500 or the stocks of

his Baby Bell peers. But
the rate at which the boss was compensated kept

growing.

    SBC’s
chief executive is Edward E. Whitacre Jr. A 60-year-old, 6-foot-4 lifer
in

the Bell system, he was
hired by the old Southwestern Bell back in 1963 for a

job that included hammering
fences. He has been the boss since 1990 and now

rakes in an annual sum that
salaried executives a generation ago could scarcely

dream of. Last year, the
third year in a row in which SBC’s share price

declined, Whitacre received
the largest pay package of his career — one with a

present value of $82 million.

    SBC is
not, by present standards, a compensation horror story. Ed Whitacre’s

record bears little resemblance
to the catastrophes overseen by others in his

industry, like the lavishly
paid C.E.O.’s employed by Lucent, AT&T and WorldCom.

Nor did Whitacre preside
over an Enron-style scandal or pocket tens of millions

before taking his company
into bankruptcy, as Linda Wachner did at Warnaco.

    Whitacre
exemplifies how the system itself is shot through with hypocrisy. And

because his tenure is long,
his collected proxies offer a view of the system’s

gradual corruption. Over
his 12 years as C.E.O., while Whitacre reaped a

fortune, his stockholders
have done precisely average. Their return from

appreciation and dividends
is 11.5 percent a year — a notch below the S&P 500,

at 12.8 percent, and a sliver
higher than its peer companies.

    Executive
pay has been soaring for two decades, but over the last couple of

years, as many big companies
have seen their stock pummeled, the

pay-for-performance rationale
that was supposedly driving these packages has

been exposed as a fraud.
Moreover, as executive pay has grown ever more

dependent on share prices,
the incentive to manipulate earning reports and

thereby boost shares has
also increased.

    The superinflation
of executive wages began in the 1980’s. Following a dismal

decade for stocks, corporate
boards began focusing more on their share prices.

This was largely defensive:
low stock prices spawned a takeover wave. The best

defense against a T. Boone
Pickens or a Carl Icahn was to get your stock out of

their reach.

    ”Promoting
shareholder value” became watchwords of corporate America, as if

that hadn’t been the duty
of management all along. Boards wanted to make

executives think like entrepreneurs.
The model became Silicon Valley, where

companies motivated the
troops by liberally dispensing options (and where many

entrepreneurs became fabulously
wealthy). The beauty of options, to corporate

boards, is that they don’t
count against the income statement. They are like

Monopoly money. Of course,
the more you issue options, the more you dilute the

value of existing shares,
but in the bull market of the 1990s, this was neatly

obscured.

    Ed Whitacre’s
cash take, at first, was relatively stable — in 1992, he got $3.1

million; two years later,
$4.4 million. But as SBC grew, Whitacre was rewarded

with options that gave him
the chance to earn a small fortune over many years.

For instance, in 1994 Whitacre
received options entitling him to buy 161,739

shares, at the price prevailing
in 1994, over the next decade. So if, for

instance, the stock doubled,
Whitacre stood to make $6.6 million; if it tripled,

he would make $13 million.

    That
didn’t completely align his interests with those of cash-paying

shareholders, because Whitacre
had nothing to lose if the stock went down. Also,

a 10-year fixed-priced option
— the standard variety in corporate suites —

entails something of a freebie,
because even if Whitacre did only a mediocre

job, the stock was likely
to rise somewhat. (Even a portfolio of Treasury bonds,

vintage ’94, would have
nearly doubled.)

    So Whitacre’s
options would reward him not just for the part of the stock’s rise

that reflected superior
performance, but also for the part that reflected what

might be termed normal business
progress, or progress at the rate of risk-free

Treasury bonds.

    Meanwhile,
in industry circles, Whitacre was winning a name as a tough and

effective leader with an
L.B.J.-like aptitude for cajoling regulators. He was

especially renowned for
his skill at lobbying to keep long-distance companies

out of local services, a
monopoly. He also pushed SBC into sexy new terrain,

like wireless, long distance
and the Internet.

    Profiles
described Whitacre as hard-working, not given to publicity and

uninterested in corporate
frills. While he maintained a ranch near Marble Falls,

Whitacre wore business pinstripes
to work, not cowboy boots.

    He also
developed a strong interest in stock options. In 1994, SBC’s stock price

was virtually flat. But
the following year, Whitacre got a fresh — and

substantially larger —
batch of options. Though the shareholders received a

poor return, Whitacre was
granted a fresh start.

   
Now that he was getting huge annual grants, the arithmetic subtly changed.
To

become
rich, Whitacre merely had to raise the stock above its level of any

particular
year. Since stocks fluctuate, some of his grants would tend to be at

depressed
prices, meaning that his ”option” to get wealthy became a virtual

certainty.
The frequency of the awards thus undermined the principle of pay for

sustained
long-term performance. By turns, a system designed to motivate became

one
to simply enrich.

    In 1995,
SBC shares rose sharply; in 1996, they fell. And in the following year,

Whitacre got what was then
his biggest option grant ever, 345,000 shares. Those

1997 options didn’t merely
give Whitacre a fresh start; they handed him a golden

carrot for getting the stock
back to where it had been. They were paying him for

treading water.

    The other
way his pay changed was that his board began to grant significant

compensation aside from
options. In 1995, Whitacre got $4.9 million. In 1996, an

off year for SBC, he got
$6.6 million. In 1997, the total rocketed to $15.7

million. Including options,
the total for that year was $21 million. These sums

were distributed over seven
different categories: salary, bonus, ”other,”

restricted stock, options,
long-term incentive plan and ”all other.” This

seven-pocket approach served
two purposes. First, the dollars that Whitacre

received in any one category
were only a fraction of the total, minimizing the

appearance. Secondly, the
board determined the total for each category by

different yardsticks, as
if each were independent of the other. He would get

millions out of one pocket
for overall leadership, millions out of another for

directing some special event
like a merger and still more to ”retain” his

future services.

    In 1997,
for instance, Whitacre got $8.7 million as a ”special retention

grant.” The most curious
aspect of that award was that in 1998 Whitacre

received another retention
grant, this time of $12.5 million. He has received

comparable awards in every
year since, as if he were somehow both an

indispensable captain and
a notorious flight risk.

    Whitacre
also benefited from a permissive redundancy. Every year, he got a

”long-term incentive”
— in 1997 it was $2.2 million — rewarding him for the

rise in the stock over a
three-year stretch. This just duplicated the effect of

his options.

    In 1997
as well, the board awarded Whitacre a $3.3 million ”bonus,” largely

for his ”excellent leadership”
in fashioning a merger with Pacific Telesis

Group. This mimicked a national
trend of awarding bonus pay for work once

considered to be part of
the job. After all, if the Telesis merger turned out to

be a success, Whitacre would
presumably benefit via his stock options. And if

the merger was too new to
bear fruit for stockholders, why was the board

rewarding Whitacre ahead
of the people whose returns his were supposed to

reflect?

    His total
package, including the present value of options, soared to $29 million

in 1998 and $25 million
the following year. But in 2000, the board was forced to

admit that various officers,
including Whitacre, had failed to meet their yearly

targets. Accordingly, his
bonus was cut by 25 percent to a mere $4.5 million.

    Nonetheless,
Whitacre got a 32 percent hike in salary. The multipocket approach,

a staple of the consultants
who design packages for SBC and most other big

corporations, thus put the
lie to the appearance of risk; if Whitacre was

punished from one pocket,
he was promptly redeemed from another. Indeed, the

board doubled his options
award, raising the total compensation for 2000 to a

present value of $29 million.
The total kept on rising.

    Increasingly,
the board’s human resources committee, which deals with

compensation, cited metrics
related to SBC’s size or general reputation but not

necessarily to its profitability
or long-term stockholder returns. Though SBC’s

returns had outpaced those
of other Baby Bells in Whitacre’s early years, in the

last five years they were
20 percentage points lower. And that is the period

when Whitacre has gotten
the bulk of his pay. Boards typically take longevity

into account, and SBC is
no exception-almost as if the board felt it had to make

up for some suddenly felt
neglect when Whitacre was just cutting his teeth.

    In any
case, the proxy has found plenty on which to commend the C.E.O. — for

”transforming SBC from
a regional carrier to a national and global

competitor,” for meeting
”extraordinary challenges,” for becoming ”one of

the leading chief executive
officers in the United States.”

    The directors,
who earn $60,000 a year, no doubt believe this; they have been

close to Whitacre and have
been endorsing his pay for a long time. He has also

been endorsing theirs. Two
of SBC’s nominally independent directors — August A.

Busch III, chairman of Anheuser-Busch,
and Charles Knight of Emerson Electric —

run companies for which
Whitacre is a director. Most of the other 18 directors

have either served with
Whitacre for at least 10 years or were directors of

companies that Whitacre
acquired.

    Certainly
there was much to admire in Whitacre’s bold management. With the world

of telecommunications rocked
by technological change and regulatory upheaval,

Whitacre reckoned that to
sit still was to invite slow decimation. He followed

the Telesis merger by acquiring
Southern New England Telecommunications

Corporation in 1998 and
Ameritech, a giant rival, in 1999 — a blockbuster $62

billion combination.

    It is
not clear that the merger strategy was wrong or that a better strategy
was

at hand. But the telecom
industry was increasingly unattractive. Technology was

reducing the cost of service,
and rivals were snapping up slices of SBC’s former

monopoly. While SBC’s revenues
grew to $40 billion, the empire ranging from

Capetown to Hartford with
nearly 200,000 employees, most of its cash flow was

being consumed by reinvestment,
and its growth was starting to sputter.

    For the
last four years, SBC’s net income growth has been anemic. On closer

examination, the picture
was worse. Corporations with overfunded pension plans

are allowed to book some
of the excess as profit, even though the money never

reaches the shareholders.
In the late 1990’s, as the stock market boomed, SBC’s

plan, like many, became
overfunded, allowing SBC to pad its net income. In 2000,

this contributed $1.1 billion,
14 percent of its total. Then, in 2001, SBC’s

green eyeshades raised the
rate at which they assumed that the pension plan

would appreciate in the
future — by a full percentage point. Since the market

was then in meltdown, this
was a curious decision. In fact, according to a study

of 50 big pension plans
by Milliman USA, SBC raised its rate by more than any

other company (most didn’t
raise it at all). In real dollars, SBC’s plan lost

money last year. But since
its assumed rate of appreciation was higher, so was

the contribution to income.
Last year it equaled $1.45 billion — 20 percent of

SBC’s so-called bottom line.
In setting pay levels, SBC says the board

distinguished between telephone
revenue and pension plans. The stock market

presumably did not.

    SBC’s
proxies have repeatedly cited 1996, the year of the Telecommunications

Act, as the start of Whitacre’s
transformation. In 1996, SBC earned $1.73 a

share (split-adjusted).
Even if you accept SBC’s reported profit for 2001 at

face value, its per-share
earnings, adjusting for a stock split, have grown by

only 4 percent per annum
over that entire span.

    So how
did SBC’s board justify an $82 million package for 2001? The proxy cited

Whitacre’s ”solid financial
results,” as well as SBC’s strong balance sheet,

the ”extraordinarily challenging”
market conditions and Whitacre’s status as a

”leading” C.E.O., deserving
of a salary and bonus in the 75th percentile of

his peers.

    There
is nothing unusual in this. Most companies justify their pay levels

according to peer groups;
all believe their own C.E.O. deserves to be in the

upper echelon; and each
thus helps to ratchet up the scale for all. Until

recently, Verizon, a rival
Baby Bell, had two C.E.O.’s, each of whom received

$14 million last year in
addition to at least $14 million apiece in options

value. Whether SBC or Verizon
got more for the C.E.O. buck becomes a senseless

debate; indeed, at such
levels, all attempts to rationalize pay become

meaningless.

    After
reporting this article from public filings, I called SBC for comment. Jim

Ellis, the general counsel,
took strong exception to the idea that his boss is

overpaid. ”If he’s a poster
boy, it isn’t for abusing the system or being off

the reservation,” Ellis
maintained. SBC’s performance, he said, ranked in the

top third of a group of
20 companies examined by the board, yet his pay was less

than the median of that
group. Ellis added that Whitacre ”has done exceedingly

well in positioning the
company not just for growth periods but for down

periods.”

    The C.E.O.’s
most recent package included a Bunyan-size options grant of 3.6

million shares. That was
partly ”to assure his continued presence,” Ellis

said. The present value
of these options, according to the compensation

consultant Pearl Meyer &
Partners, is $61 million. In effect, the board turned

the stock’s decline to Whitacre’s
advantage,
since it chose a time when the

stock was down (and options
were cheap) to give him four times as many shares as

when the stock was at its
peak. Of course, Whitacre will have to turn the stock

around to cash in on the
award. But if he does, he will reap an immense fortune

— tens of millions of dollars
— merely for recapturing the ground that his

shareholders had already
lost.

 

Roger Lowenstein, the
author of ”When Genius Failed,” writes frequently for

the magazine and is working
on a book about the dot-com bubble.

11 JUNE 02: DON’T PIE
FOR ME, ARGENTINA!

Who sold all the pies?  Not Germany
or Argentina that’s for sure.

The Pie World Cup is hotting
up with most of the first round games now

finished and its good news
for the English (Steak & Kidney), Irish (Irish

Stew)and French (Beef bourguignon)
but sadly not such good news for the

Germans (Sour Kraut)and
Argentineans (Corned Beef Hash) who are both

definitely out.

The classic French Beef Bourguignon
side has proved itself the classiest act

so far, thrashing the Uruaguan
rabbit pie & the disappointing Danish bacon

tart and has even overcome
a very strong Senegalese Chicken Yasser which

qualifies in 2nd place from
group A.

England have started strongly
with Steak & Kidney beating both an

experimental Argentinean
Corn Beef line up and an over fancy Swedish Salmon

and Dill combo.  They
play the Nigerian Spinach & Peanut stew tomorrow to

decide who goes through
in first position. England are hot favourites but

the Nigerian is proving
itself one of the tournament surprises, performing

well particularly in front
of the vegetarians who are showing the increased

power in this pie world
cup.

The tournament has been organised
by the Spitalfields based Square Pie

Company who are making special
pies for each of the teams in the world cup.

The national pies are on
sale on the day the teams play in the first round

in the football world cup
with each pie sale counting as goal and the best

two pies from each group
going through to the next round and so on until the

World Pie Final on 30th
June. The company normally offers a range of 12

types of hand made freshly
baked quality pies served with mash and gravy.

The German Sour Kraut &
pickle is booking its flight back to Berlin despite

today’s great victory over
the critics favourite the Cameroon’s Lamb &

quince tart which beats
it into the 2nd round with a better pie difference,

just avoiding the need to
draw shallots to decide who goes through.

Don’t pie for me Argentina.
The gamble on playing a solid but old school

corned beef hash has backfired
on the Argentineans with thrashings by both

England and Nigeria meaning
their competition is over and its just a wooden

spoon playoff with the Swedish
salmon and dill tomorrow.

The experimental Hot Dog
pie from host nation Korea hasn’t really cut the

mustard with only one point
so far and lost surprisingly yesterday to the

USA’s New England Clam Chowder.

The Spanish Chorizo Sausage
is performing well and looks sure to make mince

meat from the expensive
yet under performing South African Wild Boer.

Group H – the so called group
of death – has been the closest fought of the

lot with the unfancied Tunisian
Chicken and Olive Emshel coming from behind

to lead the group with narrow
victories over both the fancied Belgium Moules

& Hoergarden and Russias
Pork Stroganoff. Fridays game against Japan’s Beef

Terryaki wil decide who
goes through .

Full results and qualifying
pies can be seen at www.squarepiecompany.com

which has pie results updated
daily.

“The pie enjoys a long and
illustrious heritage with football and we want to

strengthen that relationship”,
say co-founders Martin Dewey & Sean Hegarty,

“From now it’s not about
‘Who ate Them’ – but more about ‘What’s in Them’

as we only use the best
ingredients in our pies’.

The world cup pies, as well
as the company’s traditional range, are on sale

from the Square Pie Shop,
South East Corner Spitalfields Market, off

Bishopsgate 5 mins from
Liverpool St Tube and are served with quality mash,

peas and gravy if you want. 
The shop open between 11.00 and 3.00pm weekdays

and all day Sunday as well
as early opening for breakfast pies when England

are playing.

The market has put up an
enormous 6 metre screen right next to the shop and

is showing all the games
live.

For more info please email
info@squarepiecompany.com or call Martin Dewey on

0208 980 2051.

Full World Cup Line Up

Argentina              
Corn Beef Hash

Belgium                
Moules in hoergarden

Brazil                 
Fejuda – pork and bean cassoulet

Cameroon       
Lamb & quince tart

China               
Filou parcel of crispy duck

Costa Rica             
Chicken & yellow squash with apricots

Croatia             
Shopski – lamb shank in red wine with sweet peppers

Denmark                
Bacon Tart

Ecuador                
Trout tart

England                
Steak and kidney

France              
Beef bourguignon

Germany                
Bratwurst & Sour kraut

Italy                  
Tricolore tart with avocado, mozarella and tomato

Japan               
Chicken terryaki

Korea                  
Hot Dog Pie

Mexico             
Chilli beef and cheese with guacamole and nachos

Nigeria              

Spinach & Peanut Casserole

Paraguay          
Cruzado – beef and chicken in a piri piri sauce

Poland                  
Ham and cabbage borscht with vodka

Portugal            
Fish & white port pie

Ireland                
Irish stew

Russia               
Pork stroganoff

Saudi Arabia     
Spinach fatayer

Senegal             
Senegalese chicken yasser

Slovenia            

Pork casserole in a dumpling pie

South Africa           
Wild boer

Spain                  
Chrorizo sausage & patatas bravas

Sweden            
Salmon and dill

Tunisia             

Chicken and olive emshel

Turkey              
Iskender – lamb in tomato sauce with garlic & yoghurt

Uruguay            
Grilled rabbit pie

USA                  
New England clam chowder

The Square Pie Company

27 Parmiter Industrial Centre

Parmiter St

London

E2 9HZ

Tel:   020 8980
2051

Mob: 07785 535607

Fax:  0709 200 6145

HATS OFF TO R. TURNER!

10 JUNE 02: “If
we get a draw against Spain I’ll do my Jomo Dance, lots of them.”

‘Black Prince’ dances into history

Saturday June 08, 2002 10:48
p.m. ET

DAEGU, South Korea (AP) —
His girth has thickened and his step has slowed. But the Black Prince is
dancing his way into sporting legend like no other South African before
him.

    South
African coach Jomo Sono performed the self-described
Jomo Dance — a unique combination of shuddering flesh, thrusting hips,
air punches and flexed muscles — when his squad clinched its
first ever World Cup victory against Slovenia on Saturday.

    Sono
longs to perform his Jomo Dance again if South Africa secures a draw against
Spain on Wednesday and defies the odds as Group B outsider to clinch a
berth in the competition’s second round.

    “If we
get a draw against Spain I’ll do my Jomo Dance, lots of them,” he guffawed
after South Africa’s 1-0 victory over Slovenia.

    Whatever
the result — and whatever the dance — Sono’s place in the South African
history books is assured.

    He took
over as coach from Portugal’s Carlos Quieroz in March when the squad was
divided, demoralized and defeated by lowly Mali in the quarterfinals of
the African Cup of Nations.

    Through
a combination of coaxing, cajoling and sheer commanding, Sono licked Bafana
Bafana – The Boys — back into shape.

    He brought
in talent from South Africa’s domestic league, including his own team Jomo
Cosmos, to water down the domination of European-based players. At the
same time he instilled new confidence in talent like Quinton Fortune, who
spent much of his time with Manchester United on the bench but who scored
a last minute penalty in South Africa’s 2-2 draw against Paraguay and set
up the winning goal against Slovenia.

    “The
team was down in Mali, down, down, down,” said Sono after Saturday’s victory.
“I’ve done a pretty good job lifting up the spirit of the players,” he
said.

    “The
team was divided into groups and I tried to make them believe in themselves
that we are all South Africans, no matter what our color, we are all South
Africans.”

    “And
they are starting to believe.”

    In a
country still scarred by apartheid, Sono is insistent that black, mixed
race and white players should blend and mix both on and off the field.
He doesn’t want to interfere in personal friendships and antagonisms, but
at least they shouldn’t be dictated by color, he maintains.

    His multiracial
mix of assistants and advisers echoes that philosophy.

    Above
all, he insists, players must feel free and enjoy their game. When they
“dance” they score goals, he says.

    “Jomo
brings what the players need,” said captain Lucas Radebe after Saturday’s
win. “There’s nothing complicated about him. You just go there and enjoy
the game and play normal football,” said Radebe, who has been capped 69
times and witnessed a long procession of coaches since South Africa rejoined
world sport 10 years ago after ending its policy of racial discrimination.

    During
the apartheid era, Sono was South Africa’s outstanding top player. He started
with the Soweto club Orlando Pirates and went on to play for New York Cosmos,
Atlanta Chiefs, Colorado Caribous and Toronto Blizzard in the now-defunct
North American soccer league.

    His father,
Eric, played with the Pirates, and his son — also Eric — is a South African
under-20 international.

    He set
up his own team Jomo Cosmos 20 years ago — although he has yet to win
any major distinctions with it – and was caretaker coach of the national
squad for a brief period in 1998.

    He invented
the Jomo Dance for the occasions when his club won.

    To this
day, Sono is described as one of South Africa’s best ever players and still
retains his title as the Black Prince for his majestic qualities on pitch.

    Now 46
years old and weighing in at around 130 kilograms (estimates vary), he
prefers to stand on the touchlines rather than race around with his team
on the field – although he did a brief victory run after Saturday’s victory.

    But his
self-deprecating humor, one-line jokes and booming laugh is as lightning
as ever.

    Asked
at a press conference about the problems of the heat in Daegu, he quipped
that South Africa had applied to the sports governing body FIFA to use
caps and umbrellas against the sun.

    And what
would happen if there was a plague of locusts, came the query.

    “We duck.
They fly,” came the reply.

    And what
about the South African player’s speed. Why do they sprint so fast?

    “That’s
what we do back home, we run in the jungle.”

Explorers find lost Inca town in Peru

June 6, 2002 Posted: 1:08 PM EDT (1708 GMT)

LONDON (Reuters) — British and American explorers have found a large Inca town that was lost for more than 400 years after hacking their way through the dense jungles of Peru.

“This is the biggest thing I have come across in 20 years working in the area,” said the team’s co-leader Hugh Thomson, a fellow of Britain’s renowned Royal Geographical Society.

“It felt like a once in a lifetime experience when we found it,” he told Reuters by telephone from Bristol in southwest England.

Working on a tip from a local mule driver and their own knowledge of the area, the four-man team spent three weeks hacking through forests of the Peruvian interior with machetes.

There, completely overgrown and at the bottom of a valley carved by the Rio Yanama river 1,850 metres (6,069 ft) above sea level, they found the ancient city at a site called Cota Coca.

“It was a very privileged moment. This is a very substantial settlement, but you can pass within 10 feet (3 meters) of a ruin in the jungle and not know it is there,” said Thomson who led the expedition with Gary Ziegler.

“Getting there through the jungle is very hard work. The steep valleys combined with the Amazon cloud forest
vegetation are a pretty impenetrable mixture.”

The Cota Coca valley is about 100 km (60 miles) west of the ancient Inca capital Cusco.

Stone structures

But Thomson said he and his co-leader calculated they had probably scaled more than the height of Mount Everest during the mountainous trek because of the undulating terrain.

The team’s report said a preliminary survey showed that Cota Coca contained at least 30 stone-built structures,
including a 75 ft long meeting hall, grouped around a great central plaza.

The Incas once ruled a vast swathe of South America stretching from Colombia to Chile.

The team said the town was probably built during the Inca’s retreat from treasure-hunting Spanish invaders and abandoned after the Conquistadors captured and executed the last Inca leader Tupac Amaru in 1572.

The town lay undiscovered for centuries because of the rapid growth of the jungle.

Thomson said Cota Coca — probably named after the Inca habit of growing large numbers of coca plants in the area — had developed its own semi-tropical climate because of the high wall of the river valley.

He said there was no indication why the town had been abandoned and forgotten.

There was no evidence of battle or looting and the Incas appeared to have simply withdrawn from the area
after the death of Tupac Amaru.

“After finding Cota Coca we will be going back to the area to search for more ruins,” Thomson said. “If this settlement is there, there could well be others.”

08 JUNE 02: A LITTLE
POTASSIUM IODIDE FOR YOUR TROUBLES…

from cnn.com:

County issues thousands
of anti-radiation pills

June 8, 2002 Posted: 10:03
PM EDT (0203 GMT)

YORKTOWN HEIGHTS, New York
(CNN) — A suburban New York county Saturday handed out thousands of pills
meant to give residents limited protection from radiation in case of disaster
at a nearby nuclear power plant.

    Westchester
County officials are giving out free potassium iodine tablets, known as
“KI,” to anyone who lives within 10 miles of the Indian Point nuclear power
plant, about 35 miles north of New York City. About 140,000 people live
in that 10-mile radius.

    People
lined up outside a Yorktown Heights school to pick up the pills, which
can prevent thyroid cancer, if taken within 24-hours of a nuclear exposure.
The pill works by preventing the thyroid gland from absorbing radiation.

    Officials
said the pills would protect people long enough for them to be evacuated
from the area, but they warn that it is not a panacea. Westchester County
spokeswoman Victoria Hochman told The Associated Press that 2,617 people
had picked up 10,533 KI pills by the end of the day Saturday.

    “These
are not protecting against everything in a nuclear accident. I think that
is really important to emphasize,” said Dr. Loren Wissner Greene, a thyroid
specialist at New York University Medical Center. “What it does do is decrease
the ability of the thyroid gland to pick up this radioactive iodine, which
can cause a high instance of thyroid cancer, especially in young children.”

    Indian
Point’s owner, the New Orleans-based Entergy Corp., says that its plant
is designed with multiple safety systems, and the prospect of an accident
that would threaten the public is “unlikely.”

   
Joseph Ruffino, who brought his two young daughters to pick up the pills,
said the whole thing was kind of surreal.

   
“It’s hard to believe this is your daily reality these days, but it is,”
he said.

   
The pill giveaway also attracted anti-nuclear activists who said the only
way to protect the community is to close the plant.

   
Ruffino said he had much more respect for the protesters now than he did
in the past.

   
“I looked at them very differently, no doubt about it,” he said.

    New York
State received 1.2 million pills to give to people who live near the plant.
Twelve other states that have nuclear reactors have also requested the
pills from the Nuclear Regulatory Commission. Maryland and Vermont were
the first states to give them out, The Associated Press reported.

    Dozens
of pharmacies in the county are selling the pills to people who live more
than 10 miles from the plant, according to the county’s Web site.

07 JUNE 02:  PIER
LUIGI COLLINA: THE GREATEST REF IN THE WORLD