How to Address Your Shell-Shocked Troops, by Michael Corbat

Vikram Pandit’s chair may still have been spinning on Wednesday when the man chosen to replace him atop Citigroup (C), Michael Corbat, began a conference call with the bank’s managing directors. The abrupt CEO switch one day earlier had been followed by precious little information: short notes from the two men, a conference call with analysts, and a lot of conspicuous silence from the company’s board. Wednesday’s call was Corbat’s first effort to address the most important employees of what is perhaps the most beleaguered bank.

The seven-minute call, a recording of which Citigroup provided to Bloomberg Businessweek, offers a preview of how Corbat will lead—in style, at least. The former Harvard football star, who’s well liked by colleagues and even regulators, followed these tactics:

Be frank. The first thing Corbat did was acknowledge the elephant in the room: the shock of Pandit’s departure just one day after Citi had announced its third-quarter earnings, with not even a hint given that he was on the brink of leaving. Citi employees found out with the rest of the world when the news broke in the media, not via an internal communication. “I know that yesterday’s news came as a surprise probably to many of you,” Corbat began. “Successions are not easy, but I know we can handle this.”

Thread the needle. Pay lip service to both staying the course and the need for change. “I think it’s all-important for everyone to know that I’m going to maintain the company’s fundamental strategy,” Corbat said, while nodding to “today’s challenging environment” and the need for flexibility.

Encourage questions. Pandit, with two engineering degrees and a doctorate, was criticized as a cerebral introvert who was perhaps not cut out to be the face of a global bank, especially one with morale issues. Corbat, who has spent his entire 29-year career at Citi and its predecessor companies, quickly invited the troops to speak up.

Be good-natured when people are too freaked out to ask any. After some silence, an MD asked Corbat when he would choose a new chief of the bank’s Europe, Middle East, and Africa business. After some more silence, it became clear that no one else was going to raise a hand. “So,” Corbat said, “I’m sure there are questions, but I understand potentially people’s hesitancy in asking. So what I’ll say is that if you do have questions, feel free to send an e-mail. … I think that questions are fair. So please feel free to ask them.”

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Amazon's Robotic Future: A Work in Progress

If you were watching Bloomberg TV recently, you may have seen our correspondent, Cory Johnson, standing in the middle of Amazon’s (AMZN) newest distribution center in Arizona. It’s an impressive facility, brand-new and owned by one of the hardest-charging, most-innovative companies to come onto the retail scene since Sam Walton opened a five-and-dime.

So where are the robots?

After all, aren’t robots supposed to be the future of such places as distribution centers and warehouses? Didn’t Amazon buy a robot manufacturer, Kiva, in March? The online retailer announced in October that it was taking on 50,000 additional part-time workers for the holiday season. Shouldn’t some of those spots be taken up by mechanical arms and wheels?

Maybe not. For all the anxiety over robots coming to take jobs, there are still limitations to what they can do—or what they can do well. Bruce Welty is chief executive officer of Quiet Logistics, an order-fulfillment company that manages the online inventory and distribution for retailers like Gilt, Zara, and Bonobos. He uses robots made by Kiva, the company Amazon purchased, but his warehouse in Massachusetts is not bereft of humans. “Robots aren’t very good at picking up things,” he says. “They aren’t very good at looking at a bin of different things and distinguishing one item from another.”

Welty’s robots do one task and one task only: They move racks of merchandise to workers, who then remove the products from the racks and pack them up for shipping. Saving workers the time and effort to retrieve products offers considerable benefit. “In a typical warehouse, that’s about 60 to 70 percent of the labor,” Welty says.

In addition to what the current state of robotic arts does well, there are further reasons for the continued presence of human beings in warehouses. Labor flexibility is one of the larger ones. “Automation won’t help Amazon in periods of peak demand,” says Stephen Graves, a professor of management science at the Massachusetts Institute of Technology. “People are far more flexible.”

The capital expense to add robots means they need to make sense 12 months out of the year, not two. “The only way to handle spikes in demand is by adding temporary workers,” says Jim Tompkins, CEO of supply-chain consultancy Tompkins International. “If you bought a whole bunch of robots to handle the holiday shopping season, you’d have a whole bunch of robots looking at you, come January.”

So if Amazon just spent nearly a billion dollars buying Kiva, but the robots they produce can’t make a huge difference in how the company operates, what are Amazon’s intentions?

For starters, it’s still early. An acquisition like that of Kiva will take a while to digest, during which time new applications for the robots will surely be devised. “They’re really in a test mode,” says Welty. “They’re going to work on getting it right before any major rollout.”

The Kiva acquisition may have had as much to do with software as it does with hardware, adds Tompkins. “Mechanically, there’s nothing that special about Kiva,” he says. “But what they do have is software that makes sure the robots are in the right place at the right time. This was a software play.”

That’s not exactly how most people would view the deal. But it may be just the head-fake that Amazon CEO Jeff Bezos intended. “I bet Jeff Bezos loves that people are running around trying to put more robots in their distribution centers,” Tompkins says.

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Can Business Leaders Promote Inclusive Capitalism?

Capitalism can get a bum rap these days: If free markets are so great, why are there so few jobs, a shrinking middle class, and so many companies that still put profits ahead of the common good?  With all this rhetoric about the “one percent” and the “47 percent” and who pays taxes on what, it’s no wonder that some worry about public faith in the system itself. If that faith were to falter, the result could be policies that truly sabotage growth. That’s the premise of the Henry Jackson Initiative (HJI), a trans-Atlantic group of leaders who are pushing their peers to devote more energy to fixing the system’s flaws.

The group, which is co-chaired by McKinsey chief Dominic Barton and Lynn Forester de Rothschild, held its U.S. launch on Oct. 11 with a gathering of business leaders at Bloomberg’s New York headquarters to talk about priorities. Their message: Let’s focus on the need to increase skills training, support smaller companies, and improve governance so the benefits of capitalism flow to more people. De Rothschild said that unless they start to acknowledge their personal responsibility to share in the bounty,  the offspring of the “greatest generation” will be remembered by their kids as the “greedy generation.” But the motivation for business leaders to take action is not just moral; it includes the specter that politicians might come up with a fix that they don’t like.

At first glance, it would be easy to characterize HJI as an effort to preserve the status quo by stepping up the good deeds of corporations. The task force, after all, lists individuals who have benefited from the status quo, from former Hewlett-Packard (HPQ) chief Carly Fiorina, Accel Partners’ Joe Schoendorf, and Citigroup (C) Vice Chairman Samuel Di Piazza to a set of titled U.K. luminaries. But the initiative points to a growing realization among leaders that the private sector needs to take on more of these issues if it’s going to thrive.

Many of the attendees are already doing a lot, from USA Networks founder Kay Koplovitz, who connects venture-backed companies with large corporations, to former Chrysler chief Bob Nardelli, who has helped the Savannah College of Art & Design establish innovative partnerships with businesses such as Microsoft (MSFT) and Coke (KO).

Is it enough? No. Kathryn Wylde of the Partnership for New York City pointed out that too many of these corporate efforts aren’t taken to a national scale, where they can really move the needle. Many companies, though, are starting to take their hodgepodge of philanthropic initiatives and be more strategic in organizing around a central principle. Time Warner Cable (TWC) CEO Glenn Britt talked about the value of doing that with his company’s “Connect a Million Minds” initiative.

More important, as my colleague Josh Tyrangiel points out in his piece on the inequality incentive, capitalism can’t become truly inclusive until everyone can see a clear path from where they are to where they want to be. The growing income gap doesn’t just tear away at opportunity, it has eroded trust.  As former Treasury Secretary Larry Summers, another task force member, argued to the group, real inclusion can only come if the top tier takes on a higher burden in taxes to help fund investments that promote greater opportunities. In that regard, it’s interesting that on Thursday Goldman Sachs (GS) CEO Lloyd Blankfein told CNBC he would be willing to pay higher taxes if that would cut the U.S. debt.

While the private sector can lobby all it wants, what happens on the policy front is largely out of business leaders’ hands. What they can do is take concrete action to address some of the scariest problems, such as massive youth unemployment. Some of the most intriguing experiments to watch are John Peace’s youth employment fund, which is creating sustainable employment in the U.K., and such innovative high school models as P-Tech in New York. The latter, which stands for Pathways in Technology Early College High School, is a partnership that brings together IBM (IBM), City University of New York, and the New York Department of Education to train kids for careers in information technology. A few years ago, many would have balked at the idea of a corporation getting so involved at the high school level to create the kind of skilled workforce it needs. Today, with so few students equipped to get good jobs, such efforts are welcomed.

If the initiative, named after former Democratic Senator Henry “Scoop” Jackson, does little more than provide a platform for other companies to learn about these kinds of efforts, capitalism may soon get a better name.

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The Corporate Case for Affirmative Action

On Wednesday, Oct. 10, the U.S. Supreme Court will hear arguments on whether universities may favor racial minorities in admissions. The case presents a delicate constitutional question about the meaning of “equal protection” and poses a major test for John Roberts, the Republican chief justice who last June outraged many conservatives by joining four Democratic colleagues to uphold President Barack Obama’s health-care overhaul. Will Roberts again defy ideological expectations to endorse affirmative action in undergraduate admissions? Or, more likely, will he reiterate his past opposition to race-conscious policies—and in the process, make clear that his deciding vote on Obamacare was an anomaly in political terms?

If large corporations have their way, Roberts will lean left and find a way to justify racial preferences. Business, especially big business, began to embrace affirmative action in the 1980s. Corporations do not want the Supreme Court to condemn preferences in broad terms, potentially exposing employers to a new wave of reverse-discrimination suits filed by white applicants and employees.

Business also contends that, constitutional principles aside, affirmative action works. To succeed, corporations “must be able to hire highly trained employees of all races, religions, cultures and economic backgrounds,” asserts a “friend of the court” or amicus brief (PDF) filed on behalf of 57 of the best-known names in industries ranging from manufacturing to insurance, high-tech to retail. “It also is critical” to employers, the brief adds, that “all of their university-trained employees have the opportunity to share ideas, experiences, viewpoints and approaches with a broadly diverse student body.”

The corporations making this plea for racial pragmatism run the alphabetic gamut from Abbott Laboratories (ABT) to Xerox (XRX) and include Aetna (AET), Dow Chemical (DOW), General Electric (GE), Halliburton (HAL), Microsoft (MSFT), Northrop Grumman (NOC), PepsiCo (PEP), Pfizer (PFE), Procter & Gamble (PG), and Wal-Mart (WMT), among many others. “The only means of obtaining a properly qualified group of employees,” the businesses add, “is through diversity in institutions of higher education, which are allowed to recruit and instruct the best qualified minority candidates and create an environment in which all students can meaningfully expand their horizons.” Jenner & Block, a prominent corporate law firm, wrote the amicus brief.

The case, Fisher v. University of Texas, was originally filed on behalf of Abigail Fisher, a white woman rejected by UT. Fisher argued that the school violated her constitutional right to equal protection under the law by considering race as one factor in admissions, a policy designed to boost black and Hispanic enrollment. Fisher’s appeal constitutes an attack on a 5-4 ruling in 2003 in which the Supreme Court said colleges and professional schools could consider race as part of a “holistic” assessment of an applicant’s credentials. Justice Sandra Day O’Connor wrote the majority opinion in the 2003 case; she has since retired and been replaced by Samuel Alito, who, like Roberts, is an appointee of former President George W. Bush. Both Alito and Roberts are outspoken skeptics of racial preferences.

Under Texas law, the university admits most of its freshman class solely on the basis of class rank. As explained by Greg Stohr of Bloomberg News: “Because many Texas high schools are heavily Hispanic or heavily black, the system guarantees admission to thousands of minority applicants.” Roberts “has made clear he sees race neutrality as a constitutional imperative. In a 2007 ruling that put new limits on efforts to integrate public grade, middle, and high schools, he wrote that ‘the way to stop discrimination on the basis of race is to stop discriminating on the basis of race.’”

The University of Texas case elicited an extraordinary 73 amicus briefs backing the school’s attempt to defend its admissions rules, including one (PDF) filed by the Obama administration. Seventeen briefs, from conservative organizations and others, were filed on Fisher’s side. (You can find the entire roster here.)

The Jenner & Block brief notes that in its 2003 ruling, the Supreme Court relied in part on the argument—offered in a corporate amicus brief–that “the skills needed in today’s increasingly global marketplace can only be developed through exposure to widely diverse people, cultures, ideas, and viewpoints.” Nine years later, Jenner & Block adds, that perspective has proved truer than ever.

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China's Rx: Foreign-Owned Hospitals

Dr. Wang Jingming, who runs Chang’an Hospital in Xi’an in Northwest China, is brimming with ideas on how to boost income from the 1,000-bed facility, including wringing more profit from its convenience store, the canteen, and even the mortuary. He’s already installed electronic swipe cards to track patients—and to identify underperforming doctors by gauging their treatment times. If the former People’s Liberation Army senior colonel sounds a lot like a sharp-penciled private equity investor, he should: Chang’an in June sold majority control to Concord Medical Services Holdings (CCM), which is backed by the U.S. private equity firm Carlyle Group. Wang points to how China’s hospitality industry benefited when foreign investment and business know-how was encouraged in the 1980s. “It’s now our hospitals that need to be better managed,” he says.

China’s hospitals may get more of Wang’s brand of management medicine following the government’s announcement in March that it wants 20 percent of the nation’s hospital beds to be privately owned by 2015. With 260 million Chinese suffering from cancer, diabetes, and other chronic diseases, Beijing wants private investors to help upgrade medical services in a hurry. One draw for private operators: 95 percent of Chinese had government-provided health insurance in 2011. Better yet, China’s medical services market is growing 18 percent annually and is projected to reach 3.16 trillion yuan ($500 billion) in 2015, says Deloitte China.

Photograph by Daniele Mattioli for Bloomberg Businessweek

“China’s gross domestic product has grown by leaps and bounds, but the quality of medical care has lagged far behind,” says David Chow, chairman of Harvest Medical Investment and Operation Group, a Taiwanese private equity firm that plans to buy stakes in mainland hospitals this year. “The potential for China’s hospitals to improve is massive, both in the overall number of beds and the fees charged for each bed.”

As of last year, China had 3.7 million hospital beds, up 54 percent from 2005. Besides the big increase in the proportion of beds run by private operators—it was 12 percent last year—the government wants at least one or two hospitals in each of its 2,853 counties by late 2015. The targets could generate 400,000 new private hospital beds a year, says Roberta Lipson, chief executive officer of hospital operator Chindex International (CHDX), based in Bethesda, Md. Annual revenue from private hospitals in China may reach 2.4 trillion yuan by 2015, says Yvonne Wu, Deloitte China’s national life sciences and health-care industry leader.

Photograph by Daniele Mattioli for Bloomberg Businessweek

U.S.- and European-owned companies have only been able to independently invest in hospitals since Jan. 30, when the government took the industry off a restricted list that required non-Chinese investors to have a local partner and capped foreign ownership at 70 percent. Chindex started China’s first foreign-controlled hospital in Beijing in 1997, six years after commencing negotiations with the government, Lipson says. It took only a year to obtain a license for Chindex’s latest hospital, in Tianjin, she says. Construction of a fourth is nearing completion in Guangzhou.

Beijing-based Concord Medical intends to set up as many as eight private hospitals in the next decade, starting in Beijing, Shanghai, and Guangzhou. Kuala Lumpur-based IHH Healthcare, Asia’s biggest hospital operator, also plans to build a hospital in Shanghai, adding to seven clinics it owns in Shanghai and one in Chengdu.

The increase in hospitals is increasing demand for medical gear. General Electric (GE), which makes ultrasound, CT, and MRI imaging machines, opened an innovation center in May in Chengdu to be closer to its rural hospital customers. GE intends to open a second center this summer in Xi’An, near Concord Medical’s Chang’an Hospital. Concord Medical, which operates 131 radiotherapy and diagnostic imaging centers in 24 provinces, signed an agreement with GE last August that includes using the company’s medical products in its treatment centers and promoting GE equipment in rural China.

The bottom line: China could add as many as 400,000 private hospital beds per year. Foreign investors and private equity funds are eying properties.

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Facebook and Newark Schools: About the $100 Million...

Cory Booker, the mayor of Newark, N.J., is a prodigious Twitter user. Not surprisingly, when he arrived at the annual Allen & Co. retreat in Sun Valley, Idaho, in July 2010, he took the time to send out a note to his followers. The conference is a laid-back scene where billionaires like Rupert Murdoch, Warren Buffett, and Bill Gates enjoy the outdoors, trailed by packs of reporters and photographers. “Lots of leaders of industry here,” Booker tweeted. “Very engaging conversations.”

Booker was ostensibly in Sun Valley to talk about the future of American cities with Charlie Rose. Like any politician, he was also prospecting for donors. His friend, Sheryl Sandberg, chief operating officer of Facebook (FB), told him that the company’s co-founder, Mark Zuckerberg, would be attending. Booker was eager to meet him.

Photograph by Charles Sykes/NBC/NBCU Photo Bank/Getty ImagesChristie, Zuckerberg, and Booker

One evening, the guests gathered in a banquet hall for a buffet dinner. Booker helped himself to some vegetarian food and looked for a seat. Much to his delight, there was an empty one next to Zuckerberg. Booker joined him and started chatting about his newest cause: fixing Newark’s failing public schools.

Booker can be very persuasive. He is charming and erudite. It is not unusual for the former high school football star and Rhodes Scholar to underscore his points by quoting Frederick Douglass, Ralph Waldo Emerson, or Alexis de Tocqueville. He exudes optimism and is a man of action. People started referring to Booker as Superman in April after he ran into a burning building in Newark and rescued one of his neighbors.

His greatest power may be his ability to get wealthy people to write him checks. Booker has elicited donations from Steven Spielberg, Chris Rock, Oprah Winfrey, and numerous hedge fund managers and investment bankers by pitching Newark as a kind of petri dish for urban policy experimentation. They can fund similar efforts in a huge place like New York, Booker tells his targets, or they can get a better return on their philanthropic dollar in Newark because it’s a smaller city. The pitch seems to work. In May 2010, when he was reelected mayor, he and his slate of candidates received $7 million in contributions. His closest competitor, Clifford Minor, raised $262,000.

Like the rest, Zuckerberg was enthralled. He told Booker that his girlfriend—now wife—Priscilla Chan, was a teacher. She had gotten him thinking about putting some of his money into education reform, although he hadn’t yet decided where. “I’ve got a city for you to think about,” Booker said, grinning.

In the following weeks, Booker traveled to Facebook’s Silicon Valley headquarters. It turned out Zuckerberg really did have something grand in mind: a $100 million challenge grant that would make Newark a model for the rest of the country. To get it, Booker would have to raise matching funds from Wall Street and Hollywood donors.

Before the deal could be finalized, Booker and Zuckerberg had to consult with Chris Christie, New Jersey’s Republican governor. Newark’s schools had been under state control since 1995, and there was little they could do without state approval. In August 2010 the three men bonded during a secret three-hour meeting at Newark Liberty International Airport. Christie was already planning to replace Newark’s superintendent with a more reform-minded school educator. Zuckerberg pressed Christie for additional assurances. “Listen, his biggest concerns were: Was I committed to this? Was I really committed regardless of the political flack?” Christie says of Zuckerberg. Christie assured him that he wasn’t just willing to fight, he was looking forward to it.

On Sept. 24, 2010, Christie, Booker, and Zuckerberg unveiled their partnership on The Oprah Winfrey Show in Chicago. The following day in Newark, Zuckerberg appeared at a press conference surrounded by many of the city’s political leaders, some of whom looked a bit surprised to be in the company of the young billionaire from Silicon Valley. He assured the local press corps that he had done his due diligence and was confident that he would get the proper return on his investment. “I run a company, and a lot of what running a company is, is building a team, investing in people, and finding the very best people who can get things done,” said Zuckerberg. “Spending time with Mayor Booker and Governor Christie just gave me the confidence that they are leaders who can get the results here.”

He smiled. So did Christie and Booker. At that moment, the three of them looked great. But it may be easier to write code for an Internet service used by 900 million people than it is to fix Newark’s schools.

The halls of Dayton Street School in Newark’s predominately African-American South Ward are regimental green. Chaleeta Barnes, the principal, has offset this by decorating them with dozens of colorful banners from universities like Yale and Princeton. Even so, there is something unsettling about the two-story redbrick building. As she gives a tour, Barnes, a petite 32-year-old who wears the same light blue polo shirt and chinos as her students, explains that it was built in the late 1940s to accommodate 1,200 students. Today, only 293 children attend the school.

Barnes quietly enters a classroom where a teacher is giving a language arts class to 15 students clustered at desks in the middle of the room surrounded by empty space. “That’s half my eighth grade,” she whispers. “We have 23 eighth-graders in all.” Most of the classrooms in the basement are no longer in use. “It’s nice if teachers need to meet with parents,” Barnes says. At the same time, she acknowledges that it’s not particularly cost-effective to have so few students in such a large building with so many teachers, many of whom have been with the district for decades. Nor is it providing the students with a good education. Dayton Street is one of the district’s lowest performers.

Photograph by Robert Sciarrino/The Star-Ledger/CorbisIn March, teachers protest the closing of Camden Street Elementary

The shrinking student population and poor results at Dayton Street are part of a larger legacy in Newark. In 1950 the city had 438,000 residents. When blacks started to arrive, the white middle class decamped to the suburbs. After four days of riots in 1967 that left 26 people dead, the black middle class fled, too. Today, 277,000 people live in Newark. They are disproportionately poor. By many accounts, they are also deeply suspicious of outsiders. “It’s just the nature of the town,” says Clement Price, a professor at Rutgers University at Newark who teaches a course on Newark history. “There is suspicion of change and suspicion of reform.”

Recent history has done little to discourage cynics. In 1995, Republican Governor Christine Todd Whitman took over the district because of its abysmal student test scores, and her administration promised to reform Newark’s schools. The state dissolved the local board of education, whose members had been treating themselves to cars, laptops, and trips to conferences on tropical islands on the district’s dime. Instead, a so-called advisory school board would now represent Newark residents. Its members would still be elected, but if the governor disagreed with their decisions, she simply ignored them.

In the following years, there was little improvement. In 1994, the average cost to educate a Newark student was $8,712. In the state overall, it was $7,378. The district’s graduation rate was 54 percent. In 2009 it spent $19,305 per pupil, more than many suburban districts. But Newark’s graduation rate remained a dismal 54 percent. By then, New Jersey was covering 81 percent of Newark’s $998 million annual school budget.

How could it spend so much and have so little to show for it? Part of the problem is that the school system is the city’s largest employer and a major political force. The median salary for a Newark teacher in 2009 was $84,200, compared with $59,545 for the rest of the state, according to a study by Excellent Education for Everyone, a reform group. And there were plenty of jobs for people with connections. In 2009, 12 percent of Newark Public School District employees were administrators, more than twice the number in Jersey City, a comparable school system.

When Booker was elected mayor in 2006, he helped his citizens dig out their cars after snowstorms and patrolled the streets with his police chief until 4 a.m. as part of his campaign to lower the city’s crime rate. But he felt there was little he could do about Newark’s underperforming public schools. For one thing, as mayor, he had no legal authority over them. The power rested with the governor, then Jon Corzine, a Democrat with intimate ties to New Jersey’s labor leaders. Instead, Booker created a nonprofit foundation to support the city’s growing number of charter schools and raised $20 million to support them. Charter schools operate outside the control of unions. Still, Booker was frustrated. “The majority of my kids were still going to the public school system, which I couldn’t get to,” he says.

Things changed when Christie unseated Corzine in 2009. The new governor was eager to do battle with the unions and their political allies in Newark. Booker found Zuckerberg and turned to the hedge fund guys for the matching grants. Bill Ackman, founder of Pershing Square Capital Management, had raised money and hosted him at his apartment in the Majestic, an Art Deco building overlooking Central Park. He was more than willing to be helpful once again.

Booker takes donations on his handheld; this one's from Twitter founder Jack Dorsey

“It’s your right to have a good education,” says Ackman, who went to public school in Chappaqua, a wealthy suburb of New York. “If you can’t, your government has failed you and the private sector has to get involved to fix the problem.” Ackman’s charity, the Pershing Square Foundation, contributed $25 million. Ackman’s Harvard B-school classmate Whitney Tilson, another hedge fund manager, sits on the Pershing foundation’s board, and explains the decision in terms more worthy of a prospectus: “We see this as a social investment that has a very strong likelihood of a high return, defined as a much-improved educational system for the children of Newark.”

The family of hedge fund manager Ravenel Curry gave $5 million. The Bill & Melinda Gates Foundation gave $3 million. A charitably minded group of Goldman Sachs (GS) bankers gave $5 million. Venture capitalist John Doerr kicked in $10 million. Some of the donors were specific about not giving their money to union schools. Curry and Doerr insisted that their money go only to charters.

Not long after his appearance on The Oprah Winfrey Show, Booker stood on a sidewalk in Manhattan with another technology industry star. “I’m here with one of my heroes, a guy named Jack Dorsey, one of the founders of Twitter,” Booker said in a video posted on YouTube. Dorsey produced his black American Express (AXP) card. “I’d like to make a $5,000 donation,” he said. Booker looked elated. “Now that’s a much larger number than I was expecting,” he said. He used an attachment on his iPod touch to swipe Dorsey’s credit card.

Back in Newark, things weren’t going quite as well. To start with, some locals felt slighted that he announced the Zuckerberg gift in Chicago rather than in Newark. “For a place like Newark, that is the absolute worst way to do it,” Shavar Jeffries, a member of the school advisory board told the Newark Star-Ledger. “It was an absurd spectacle.”

Booker finds such comments puzzling. “If you want to raise $100 million, there’s no better place to make an announcement than Oprah’s couch,” he says.

In April 2011 a group of residents whose children and grandchildren attended Newark schools and who called themselves the Secondary Parents Council requested to see the mayor’s e-mail exchanges with Zuckerberg and the Wall Street funders. When Booker declined to furnish them, the American Civil Liberties Union of New Jersey sued the city on the organization’s behalf. “We want to know what kind of agreement did you make with Zuckerberg,” says Wilhelmina Holder, chairwoman of the Secondary Parents Council. “Are there any conditions?” Booker says there’s “no there there.” Still, New Jersey Superior Court Judge Rachel Davidson asked to see a list of the mayor’s e- mails; she has yet to issue a decision.

Others thought they knew exactly what was afoot. In a two-hour interview in his office in the city’s West Ward, Ronald Rice, a former police officer who is now a state senator, explains that Booker was planted in the city by hedge fund managers whose ultimate scheme is to privatize Newark’s public schools and run them for a profit. “Newark is a target because you have a billion-dollar budget,” says Rice. “That’s why the hedge funds are moving in.”

Joseph Del Grosso, president of the Newark Teachers Union, promotes the same notion. “When has a hedge fund person been philanthropic? I mean, come on,” he says. “They’re in it for money.”

Tilson, for one, finds the charge specious. “None of the people involved in this, myself included, have any economic interest here, whereas the people who are making these accusations have their entire economic interest at stake in defeating reform,” he says. “In my mind, it’s very clear here who is wearing the white hats.” For his part, Booker is dumbfounded by the suggestion that his hedge fund friends are scheming to take over Newark’s schools. “Where’s the upside?” he asks. “I’ve asked some of the people who say these things. They don’t have an answer.”

By the spring of 2011, Zuckerberg was becoming impatient. The Facebook CEO was busy preparing for his company’s eventual initial public offering, but he was also paying attention to what was happening in Newark. Early on he had named Jen Holleran, a Harvard-trained education expert, to represent him on the board of the Foundation for Newark’s Future, the nonprofit group set up to dole out his contributions and the money raised by Booker. “He said, ‘We need to have a leader,’” she recalls.

For school superintendent, Booker suggested Cami Anderson, who’d been superintendent of New York City’s District 79, a citywide alternative education program serving the residents of Rikers Island, among others. Governor Christie had the final decision. He thought Anderson well suited for Newark. “When you have the woman who’s in charge of education for Rikers Island,” Christie says, “you’re not really worried if she’s going to be tough enough.” She started by doing something the union didn’t like one bit. She ended the district’s policy of forcing principals to take teachers they didn’t want. Under Anderson, Newark’s principals would select their own staffs, which, in theory at least, would help them improve results.

By September 2011, 80 teachers found themselves without classroom positions. Anderson put them in an excess pool where they were paid a total of $8.5 million for doing little more than occasional substitute teaching. Anderson says the money was well spent. “You have to let your people pick their own teams,” she says. “Otherwise they will never win.”

Anderson also began to grapple with the district’s budget shortfall. This proved to be more contentious, and it was partially the fault of Newark’s 28 charter schools. In the most recent school year, 7,878 Newark children attended them. The district expects a 25 percent increase in the charter school enrollment in the coming one. When a student switches to a charter school, the district loses 90 percent of the state funds tied to that child. That means Anderson has less and less money to cover the cost of Newark’s 72 public schools. Photeine Anagnostopoulos, the district’s CFO, points out that the number of teachers has declined slightly in recent years but not enough to keep pace with the outflow of children to charter schools. So Anderson came up with a plan that addressed both the district’s decaying finances and the dismal academic performance.

She proposed closing four troubled schools with empty space and moving their students into similarly challenged ones nearby. These schools would be outfitted with new teachers and, in some cases, new principals. Anderson calls them “renew schools.” Booker applauds her strategy, although he would have preferred that they were branded differently. “I’m going to get myself in trouble with my superintendent,” he says, laughing. “I love the word renewal. I need renewal in my life. But I’m a kid who grew up with comics. I want super schools.”

When Anderson unveiled the plan last February, however, she was heckled at public meetings by residents who accused her of trying to rob them of their neighborhood schools. “Cami Anderson, I have not seen such trickery since the devil took over the Garden of Eden,” one of her detractors told her at a budget hearing. Naturally, the teachers’ union has happily stoked the outrage. “I’m all for school reform,” Del Grosso chuckles. “But this is the Dr. Kevorkian approach.”

The budget crunch has also forced Anderson to cut arts and music programs at some schools. Residents find this bizarre at a time when so many philanthropic dollars are flowing into Newark. “I don’t understand why you are doing this,” a frustrated Newarker asked at the budget meeting. “Where’s the Facebook money?” Good question. The money pledged to the Foundation for Newark’s Future is supposed to be spent on “high-impact innovations” rather than plugging holes in the district’s operating budget. Anderson also notes: “The large investments haven’t happened yet. Those require additional matching funds.” Booker has raised $54 million to date. So far, the Foundation for Newark’s Future has committed only $16 million to a variety of small bore projects like $600,000 in small grants for teachers who come up with interesting projects, and $176,000 for elementary school students so they can treat themselves to some books.

The district’s financial troubles will likely deepen. The number of teachers in the excess pool is expected to hit 200 in the coming school year, and the superintendent is reluctant to resort to layoffs. New Jersey’s tenure law has a strict seniority clause that forces districts to let go of new hires first. That means Anderson would lose many of her new recruits before she could dismiss any of the veterans in the pools. That’s the last thing Booker wants. He has talked to Zuckerberg and Christie about using philanthropic dollars for buyouts of teachers in the excess pool. But it might very well exhaust much of the funds he has raised for school reform, and it is sobering to imagine Zuckerberg’s pledge going to pay off the least desirable teachers in the Newark school system. On April 30 the three of them had a conference call to discuss this. “What can I do to help?” Christie recalls Zuckerberg saying.

Christie assured him that he’d done all that he could: “The rest is up to us.”

As of June 2012, no teachers have been fired, and the administrative staff remains the same size.

On a sultry day in late June, Booker speaks at the graduation ceremony for Newark’s Technology High School. He tells jokes about his father, who grew up with little money in South Carolina and went on to become one of IBM’s (IBM) first black executives: “He said, ‘I wasn’t poor. I was po’. I couldn’t afford the last two letters.’?” The seniors in their caps and gowns laugh along with their parents. He quotes Emerson and Douglass. Gripping the microphone, Booker urges them to stand up and be counted. “Let people see your light in the darkness,” he says, his voice cracking with emotion. “Let them see your hope in the despair. Let them realize that even in the depths of the coldest winter you have in your heart an invincible spring.”

Photograph by Emiliano Granado for Bloomberg BusinessweekBooker addresses recent graduates in June

When Booker is finished, the graduates shriek their approval. They have good reason to celebrate. Technology High School happens to be one of the district’s highest performers. Ninety-one percent of these students are college-bound. The district’s average is 38 percent. But then Technology High is a magnet school. It can select its students from a pool of applicants.

As he leaves the auditorium, Booker asserts that Technology High’s success can be replicated. “That’s what we’ve been saying all along,” he says. “We’ve got to take the islands of excellence in Newark and form a hemisphere of hope.”

Of course, this will take Zuckerberg’s money. When will Booker raise the rest of the matching funds? “We are very, very close,” he insists with a rare flash of irritation. “We are going to have it in the next few months. We haven’t even announced some of the stuff we’ve raised. I’d rather not announce it in bits and chunks. I’d rather do it all at once.”

Then he strides out to the parking lot where reporters are waiting to talk to him not about education but his latest heroic moment. Early in the day, he was traveling though the city and came upon a man who had been hit by a car. Booker climbed out of his SUV and came to the man’s rescue. “He was a little out of it,” Booker tells the press corps. “I said, ‘I’m Mayor Cory Booker.’ That seemed to give him some comfort.”

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The SEC Chairman's Crusade for Money-Fund Safety

Mary Schapiro may not be able to fix what she believes is wrong with money-market mutual funds, but she’s not going to leave the Securities and Exchange Commission without trying. The SEC chairman is convinced the $2.5 trillion U.S. money-fund industry is prone to investor runs and poses a threat to the stability of financial markets. At a Senate hearing on June 21, she said that since the 1970s fund companies have acted to help their money-market funds maintain their $1 share price on more than 300 occasions.

Schapiro’s scheme for making funds safer is in a 337-page staff proposal delivered to SEC commissioners on June 25. She would give money funds a choice: Either convert to a floating share price that reveals every fluctuation in the value of holdings or be subject to a combination of capital requirements and redemption restrictions. Getting at least two of Schapiro’s four fellow commissioners to support the plan will be a challenge. The industry is opposed to her ideas—and especially loath to abandon the fixed $1 share price that has defined money funds since the first one was introduced in 1971. “Slim to none are the possibilities there,” says Peter Crane, president of research firm Crane Data. “Three commissioners have signaled they won’t accept anything that changes the fundamental nature of money funds.”

The commission could vote her plan down in July. It also might approve it for public comment, delaying a final vote at least two months and giving Schapiro time to rally support. “The chair will place the issue before the commission and, if the vote fails, contemplate other options,” says Karen Shaw Petrou, a managing partner at Washington research firm Federal Financial Analytics.

For 40 years, money-market funds have offered individuals and corporations a convenient place to park cash, usually offering higher returns than insured bank accounts. They have become the largest collective buyer of U.S. commercial paper, serving the short-term borrowing needs of banks and other companies, from General Electric (GE) to Toyota (TM).

At the Senate hearing, Schapiro recalled how a run on money funds in September 2008, following the collapse of the $62.5 billion Reserve Primary Fund, brought credit markets to “the edge of a cliff.” The panic spurred the U.S. Treasury to temporarily guarantee more than $3 trillion in money-fund assets. Congress has since barred Treasury from issuing such guarantees. “Every morning when I pick up the newspaper and read about an earthquake in Japan or problems in European financial institutions, the first question I ask our staff is ‘What is money-market-fund exposure?’” Schapiro told lawmakers.

A floating share price, Schapiro has argued, would remind investors that money funds are subject to market movements and are not insured savings accounts. It would also reduce the risk of runs by removing an incentive to flee at the first sign of trouble. If the funds strive to maintain a $1 share price in a crisis, fast-moving clients could get out without losses even if the market value of the fund’s holdings has fallen slightly. The departure of those investors concentrates losses in the hands of those left behind.

Funds that want to stick with a steady $1 share price would set aside cash to absorb losses when their holdings fall permanently in value. They also would have to require investors pulling out to leave a small percentage of their money in the fund to cover potential losses. That would remove any reward for fast movers.

Fund companies see the proposals as a threat to their existence. “The goal all along has been to kill money funds,” says J. Christopher Donahue, president and chief executive officer of fund company Federated Investors (FII). He says the new rules would destroy the attraction of money funds by removing their stable value and daily liquidity. That would deprive corporations, municipalities, and many other institutions of a cheap form of short-term financing. Schapiro’s reforms would “severely damage the municipal finance and commercial paper markets” at a delicate time in the economy’s recovery, wrote James Angel, associate professor of finance at Georgetown University, in a June 19 paper financed by the U.S. Chamber of Commerce.

The SEC in 2010 put through one round of reforms designed in part to ensure the funds could raise a lot of cash quickly to meet investor redemptions. As a result, prime funds, or those not limited to government-backed debt, are now able to generate at least $417 billion in cash within seven days as borrowers pay off the debt the funds hold. That reduces the likelihood that the funds would have to sell holdings at a loss during a crisis.

Those reforms proved their worth when money funds weathered the U.S. credit rating downgrade, the debt-ceiling showdown in Washington, and several stages of Europe’s sovereign-debt crisis, says Paul Schott Stevens, president of the Investment Company Institute, a Washington-based trade group. “We feel we were the first part of the financial system comprehensively reformed after the financial crisis and the first part to be severely tested,” Stevens says. “And we came through it very well.”

Schapiro can count on only one supporting vote on the commission, that of Democrat Elisse Walter. Republicans Troy Paredes and Daniel Gallagher have said they oppose the plan. While Democrat Luis Aguilar hasn’t been as explicit, he joined the two Republicans in a May 11 statement objecting to a report from the International Organization of Securities Commissions outlining possible money-fund reforms.

Since that statement the industry has grown confident that it has escaped significant reform, at least this year, two senior fund-company executives and a third person familiar with the industry’s views said in separate interviews. All three asked not to be identified because they weren’t authorized to speak publicly. Not that they feel they are completely out of the woods. Should President Barack Obama win reelection, all three said another push for new rules might come next year.

The bottom line: Schapiro says that allowing money-fund share prices to fluctuate would discourage runs, making the $2.5 trillion industry safer.

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It's My Office and I'll Cry If I Want To

Several years ago, Dr. William Frey met with a team of doctors, scientists, and hospital administrators about plans to “head up a new department,” as he put it. Frey, who is now the director of the Alzheimer’s Research Center at Regions Hospital in St. Paul, Minn., knew that the ambitious medical project required a lot of advance planning. “We’d scheduled this organizational meeting several weeks in advance and we each had agreed to do things to prepare for it,” he says. “I said I’d do X and Y, another physician said he’d do A, B, and C.” But when the group met, the second physician hadn’t done his homework. He tried to pass his unpreparedness off on a subordinate, and berated her in front of the entire committee even though she wasn’t to blame.

“He starts yelling at this woman administrator, saying how come you didn’t do this or that,” Frey recalls, “She was sitting at the table and she was wearing glasses, I remember. As he yelled at her, she didn’t say anything, but you could see these tears coming down her cheeks under her glasses.” As soon as the physician noticed the tears, he stopped. He apologized. He admitted the fault was his. Frey was fascinated. “Clearly these tears communicated something in that workplace situation very effectively,” he says.

Frey remembers the crying administrator so clearly because she was exhibiting something he’d spent years researching: why we cry. Although Frey is now known primarily for his Alzheimer’s work, his first high-profile research subject was the composition and purpose of human tears. Until the 1980s, when Frey published his findings on the topic—along with the 1985 book Crying: The Mystery of Tears, now out of print—scientists knew very little about our sobbing. If someone cried too much, too often, or in an inappropriate situation, he or she was just considered weak. This was a problem for many women who’d entered the workforce.

“When I started my first banking job [in 1977], I was explicitly told, don’t let them see you cry,” says Anne Kreamer, a former top media executive who is now the author of It’s Always Personal: Emotion in the New Workplace. “Countless women I knew were told this, from doctors doing their internships to other women in business. You cannot show this side of yourself. It’ll be considered a weakness.” Back then, Kreamer and her peers were pushing against a glass ceiling significantly lower and thicker than the one today. They tried to conform to the dominant male-oriented work culture that had already been created (case in point: that brief but unfortunate fascination with shoulder pads), but sometimes they just couldn’t help it. They cried.

According to Frey’s research, adult women cry four times as often as men. But it’s not because we’re wimps or because we more clearly grasp the fragility of the human condition. (Or at least, I don’t.) The answer, as with everything, has to do with science.

Men’s and women’s tear ducts are anatomically different. Women also have higher levels of the hormone prolactin, which promotes lactation and has been associated with an increased tendency to cry. Prolactin levels also rise when a woman is menstruating, pregnant, or has recently given birth. Great.

Similarly, testosterone—of which men have more—has been associated with a decreased tendency to tear up. Different people have different prolactin and testosterone levels, which may partly explain why some people are self-described criers, why others can watch Old Yeller tear-free, and why my roommate cried at work last week over Buzzfeed’s “21 Pictures That Will Restore Your Faith In Humanity” list.

“Those lists always get me, I have to keep walking away from my desk so I calm down,” my roommate told me. She agreed to be interviewed for this article but refused to let me print her full name in case someone Googles her and learns how sappy she is. So I’ll just call her by her nickname: Ol’ Weepy-Face. Just kidding, it’s Mazz.

Mazz works in the fashion industry in Manhattan and has cried so many times at work that she’s lost count. “It happens at least once a week,” she admits. Usually her tears are related to something she’s watched or read on the Internet, although breakups and personal drama have been past instigators as well. “I cry when I’m sad and I cry when I’m too happy—basically any emotional extreme and I’ll cry,” she explains. Sometimes she seeks privacy in the bathroom. Sometimes she’ll stay at her desk and hope no one notices. “Yeah, I silently weep to myself in the middle of the office,” she says. “No big deal.”

Despite her overactive tear ducts, Mazz says she’s only had two work-related cries in the six years she’s worked at her company. Once, after a testy client chewed her out, she cried in front of an art director. “I felt like such an idiot,” she says, “I thought he’d view me as weak. But in this weird way, I think it made him feel protective.”

I talked to several women who’ve cried at work, and all of them have stories similar to this. When Angela Rhodes worked as a technician at a medical research lab in California, she cried when a friend died and then later again when her program lost its funding. Rita Arens, senior editor of BlogHer.com, cried at work because she was scared of an upcoming surgical procedure. And in 1993, when Kreamer was working as a senior vice president at Nickelodeon, she had just solidified a high-profile home video deal with Sony when her boss, Viacom’s Sumner Redstone, screamed at her over the telephone in front of her employees. She cried. And then later wrote a book about it.

In all of these stories, the tears happened quickly and almost uncontrollably—a sudden release of emotion brought on by a high level of stress. As it turns out, this is one aspect of Frey’s work that still hasn’t been proven. In his original research, Frey theorized that a good cry helps us release stress, and he also proved that the chemical makeup of emotional tears differs from those caused by an irritation, such as when we chop onions.

We now know that stress-related hormones are present in tear ducts and in emotional tears, but, Frey says, “no one has conclusively proven that the act of crying is removing excess chemicals that have built up.”

But even if it hasn’t been scientifically proven, it’s still the dominant medical theory. And it just seems true. Most people feel calmer after they cry. In that sense, crying at the office can be a healthy thing. If you’re stressed, it may be a quicker and more effective release than if you try to suppress it or self-medicate with drinks after work. And for the administrator who cried in Frey’s meeting, her tears communicated her thoughts more effectively than words.

Thanks partly to the increased presence of women in the workforce and to a growing acceptance of psychological issues such as anxiety and depression, the social stigma against tears in the workplace has severely lessened over the years. At some companies, it’s disappeared completely. But crying at your desk is still a little embarrassing, and it often makes co-workers unsure how to react. Michelle Zuiderweg is a manager at a veterinary hospital in Oregon. She remembers a time when she fired an employee, and the woman just wouldn’t stop crying. “It went on for an uncomfortably long time,” she says. “I didn’t know what to do, so after a while I just turned my chair around and started working at my computer.”

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Sprint, a Distant No. 3, Limps Into the Future

Shed a tear for the late, great unlimited wireless data plan. Neither AT&T (T) nor Verizon Wireless offers it to new customers. AT&T, which ended its deal in 2010, grandfathered in users who had unlimited plans. Verizon stopped offering the plans a year ago. But in March, AT&T began putting speed limits on its heaviest data users. And in June, Verizon announced that upgrading customers would not be eligible for subsidized phones if they stayed on unlimited plans.

That leaves Sprint Nextel (S) as the last refuge for data obsessives. The provider, with 56 million customers, now uses the tag line “Truly Unlimited” in ads and vows to stick to that deal as the industry migrates to speedy next-generation networks based on a technology called 4G LTE. It’s either savvy marketing or a sign of desperation from the perennial No. 3, which has posted five straight years of losses. “They need the subscribers,” says John Butler, a telecom analyst with Bloomberg Industries. “Unlimited is their only hook.”

For Sprint, it’s a make-or-break proposition. To win Apple’s (AAPL) permission to sell the iPhone, the company in September signed a four-year deal to buy at least $15.5 billion worth of the devices. That’s roughly 30.5 million phones, according to news reports. In the first quarter of 2012, Sprint activated 1.5 million iPhones, a pace that would put it dramatically short of its goal. Sprint itself says that it does not expect to profit from the iPhone until 2015. And according to research firm Gimme Credit, the high subsidy that Sprint pays to sign up iPhone customers is the primary reason for a slide of 2 percentage points in its operating profit margin. Sprint spokesman Scott Sloat says the company’s iPhone sales are on track and that it expects the higher up-front costs to be offset by greater customer loyalty and long-term profitability.

The financial hit makes it harder for the company to keep up with its competitors’ network upgrades. Sprint has announced that Atlanta, Dallas, Houston, Kansas City, Mo., and San Antonio will get 4G and “upgraded 3G service” on July 15. Verizon and AT&T, by comparison, have already rolled out 4G to markets covering 200 million and 75 million people, respectively. Sprint says it plans to cover approximately 120 million people with its 4G network by the end of this year, and that its national rollout should be complete by the end of 2013. As of its April earnings report, Sprint had upgraded 600 of the 12,000 sites it is targeting this year—although not all, it says, with 4G LTE.

Craig Moffett of Bernstein Research (AB) says Sprint’s ability to invest in upgrades is hamstrung by its “punishing” contract with Apple. “Sprint doesn’t have enough free-and-clear spectrum to launch a competitive LTE network,” he says, referring to the slices of radiowaves that carriers purchase and use to transmit data. “And it doesn’t have the money to [free up] spectrum that’s already in use.” The result: Sprint’s 4G customers will communicate over a weaker network. The next-generation spectrum Verizon and AT&T are using provide much better service than Sprint’s in buildings, says Moffett. “The first quarter was a quarter in which we were ramping up the pipeline, and we got a huge amount done in terms of zoning, leasing, and launching construction that gives us confidence that we’ll achieve our goals,” counters Sprint’s Sloat.

The company’s network expansion also involves a troubled investment in Clearwire (CLWR). Sprint has a nearly 50 percent stake in the Bellevue (Wash.) company, which is building a next-generation network based on WiMax, a technology that competes with 4G LTE but Sprint believes it can use alongside it. “WiMax,” says Butler, “will turn out to be Betamax. It never really caught on with the phone makers.” In February, Sprint cited as a risk factor “Clearwire’s ability to successfully obtain additional financing.”

The result is that, while Sprint is counting on being able to woo iPhone data hogs with unlimited data plans, it might not be able to provide the speeds and coverage they demand. “Unlimited is Sprint’s only differentiator,” says Jonathan Geller, the tech blogger who goes by Boy Genius. “But if they allow themselves to be known for worse coverage and slower speeds, people won’t make the switch to them for just unlimited.”

The bottom line: Sprint may be stuck between its commitment to sell 30.5 million iPhones by 2015 and its rollout of a competitive next-generation network.

Farzad is a Bloomberg Businessweek contributor.

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The Chip Behind Microsoft's and Google's Tablet Attacks

There’s been a big under-the-radar technology winner in the last couple of weeks: chipmaker Nvidia (NVDA).

A few years ago, the one-time graphics chip specialist started selling Tegra, a general purpose chip for non-PC devices. To date, the Tegra chip has appeared in some Android smartphones and tablets but it’s largely been overshadowed by Qualcomm’s (QCOM) Snapdragon chips and of course, the A4 and A5 chips designed by Apple (AAPL) and Samsung (005930:KS) that go into iPhones and iPads.

Of late, however, Tegra seems to be the darling of the device world. Microsoft (MSFT), for example, will use the chip in its upcoming Surface tablets. Google (GOOG), too, has picked the super-charged Tegra 3 chip for its Nexus 7 tablet. This means that the same Nvidia chip will sit in the $199 tablet from Google that’s a low-end rival to Amazon’s (AMZN) Kindle and in the higher-end, more expensive Surface device from Microsoft.

The Tegra 3 also made its way into the infotainment system of Tesla Motors’s (TSLA) new Model S sedan.

All told, Nvidia expects about 30 Tegra-based devices to appear this year.

The company spent billions of dollars to bring Tegra to life, and its shareholders have been waiting for a big old return on that investment. Of late, it’s looking as if Nvidia might have found its way into products that could be flashy enough to kick Tegra sales into higher gear. (Which is to say that Nvidia has plenty of work and genuflecting to the Fates ahead of it.) If nothing else, the world’s top technology companies—outside of Apple—clearly see Nvidia as the horse to bet on in the near future.

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Career Assessment - To Stay or Go?

How to Deal With a Nosy Co-Worker

My friend Megan has an office stalker. She works at a library in Nashville, where one of her co-workers walks by her desk so frequently that one day, Megan started keeping a tally. “She passed by my cubicle 17 times between 8 a.m. and 10 a.m.,” Megan says, “and almost every time she’ll be like, ‘Hi!’ and pop her head in. I can’t stand it.”

If Megan’s surfing the Web, the co-worker will ask what website she’s visiting. Is that a project Megan’s working on? What is that YouTube (GOOG) video? “She’ll point to the screen and ask, ‘Oh, what’s that?’” Megan says. “And I’ll be like, ‘Uh, databases.’”

Megan has tried everything—averting her eyes, pretending to be busy, acting as if she didn’t hear the question—but the co-worker is both oblivious and persistent. Other people in the office have also fallen victim to the woman’s pop-ins and questions. “Every conversation we have about her always starts with: ‘She’s so nice, but …’” Megan says. “There’s always a ‘but.’”

Megan’s problem is a distressingly common one. Every office has at least one nosy co-worker, and they come in a myriad of irritating forms. Laura in New York once had a colleague ask if she was pregnant. (She wasn’t.) Amy in Michigan has a boss who has asked several times how much she weighs. When I was a teenager, working as a Starbucks (SBUX) barista, a woman asked me—in front of other employees and several customers—why my parents were getting divorced.

Henry Alford likes watching people struggle to find a polite way to ask if he is gay. “I’m someone who radiates an ambiguous sexuality, so all my life people have asked me leading questions about my love life,” says Alford, author of Would It Kill You to Stop Doing That, a book that’s less a manners guide than it is a manners rant. “Over the years, I have developed a series of mysterious and ambiguous comments meant to lead people off the scent.” If you don’t want people to know your sexuality at work, Alford suggests saying something stereotypically straight, “and then talk about your handbag collection. It will totally mess with their antennae.”

But why do we have to mess with them to begin with? Don’t they realize what they’re doing, how much social anxiety they’re causing the rest of us as we struggle to figure out the most polite way to ask them to shut up? What is wrong with these people?

“People get very comfortable in a work environment,” explains Diane Gottsman, national etiquette expert and owner of the Protocol School of Texas. “We spend so much time with our co-workers that we sometimes develop a sense of trust that really isn’t there.” Gottsman is right; when you see someone every day, you often find yourself creating a false sense of intimacy. “It’s not necessarily a negative thing,” says Gottsman, “but if you feel that someone is crossing a boundary, don’t be afraid to put them in their place.”

“Believe me, I’ve tried,” says Tika, who works in a hospital in Southern California. Tika is 31, and although she and her husband have been married for nine years, they don’t have any children. “People at work ask me all the time, when will I have kids?” she says. “I tell them that’s none of their business, but they keep asking.” Eventually, Tika admitted that she didn’t know if she wanted kids. “Then they just asked me how my husband felt about that, if he ‘approved’ of my decision.” One time, she admitted that maybe she’d want to adopt. “I thought that would shut them up but instead the woman I was talking to looked at me and said: ‘There’s nothing like the joy of your own child.’ I stared back at her and said, ‘Well, I wouldn’t know,’ then walked away.”

At other jobs, Tika made friends easily and hung out with her co-workers outside of work. She’s been at her current job for three years, but the constant questioning has made her feel like an outsider. “I don’t know if it’s because they’re older, so they think they can comment on my life like I’m still a kid,” she says. “They even try to tell me what foods to eat.” Tika is very petite and thin, and whenever she eats something healthy, her co-workers say something. “I eat oatmeal every morning. That’s not that strange, right? But someone always talks about it. It’s oatmeal.”

“There are a lot of weird girl politics tied up with what you eat,” my friend Megan says. “If I get breakfast in the morning, there’s a woman here who hops up out of her seat like she’s standing to attention and peers at my food and exclaims, ‘Ooh, what’d you get?’” And I’ll have to say, ‘A muffin.’ Sometimes she’ll comment further and say something like, ‘That looks really filling.’ What the f— does that even mean? Why are you talking about my muffin? Just ignore the fact that I have food.”

Gottsman laughed when I told her this story. “She’s probably just uncomfortable with herself and her diet,” she says. “The next time someone says you’re eating a lot of food, ask what they ate today. Turn it on them.”

Alford takes a different approach. “Pattern yourself after Bartleby, the Scrivener. If you’re asked a question that you don’t want to answer, just say: ‘I would prefer not to.’” Alford says one of his favorite responses is to tell people, “I wish to remain mysterious.” To be fair, that line only works if when you say it, you happen to be wearing a cape.

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A Sick Rally, So to Speak, for Hospital Stocks

Conventional wisdom says a bigger government hand in health care means more scrutiny of outlays to highly profitable pharmaceuticals, insurers, and medical device makers. Indeed, with the Supreme Court voting 5-4 to uphold the Affordable Care Act, these sectors are all down today, amid a broad market pullback.

But it is telling that shares of hospital companies are simultaneously up big—making them the biggest immediate beneficiary of the ruling, next to, perhaps, the Foggy Bottom liquor store that supplies celebratory kegs to the White House. The upheld health-care law is expected to insure millions of patients who otherwise would have entered hospitals without having any coverage. Since most hospitals cannot simply turn away the uninsured, they must invest a good deal of labor and expense into recouping costs, especially those related to emergency room admissions.

The landmark law endeavors to expand coverage to at least 30 million people, chiefly by expanding Medicaid and establishing a competitive online marketplace for consumers to more easily buy coverage. All of which means potentially far less hassle getting paid if you’re a large hospital chain like HCA Holdings (HCA) and Tenet Healthcare (THC): Their shares shot up 10 percent and 7 percent, respectively. Meanwhile, executives from Medicaid insurers were likely sending Chief Justice John Roberts ginormous Hug-Grams. Molina Healthcare (MOH), for example, jumped 7 percent.

“No one in the hospital land really expected the entire law to be upheld,” says Sheryl Skolnick, a health-care analyst at CRT Capital Markets in Stamford, Conn. “They expected something in the muddy middle. And with surprise, you get big swings.”

Time for one more “Harry and Louise” reshoot?

Farzad is a Bloomberg Businessweek contributor.

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Obamacare's Here to Stay. What Do Business Leaders Do Now?

(Updated to correct the spelling of Sheldon J. Blumling’s name.)

Long before the Supreme Court ruling that upheld the Patient Protection and Affordable Health Care Act, the political battle lines appeared pretty clear. With lobbies like the National Federation of Independent Business (NFIB) acting as plaintiffs in the case, it was easy to assume the business community was solidly aligned in the “against” category on Obamacare, too.

But business reaction has been more mixed, even at the small business level.  After all, the legislation addresses much more than the question of whether individuals should be forced to have health insurance. The June 28 decision also upheld a 2.3 percent tax on the revenue of medical device companies. And it offers intellectual property protection that was considered critical by many in the biotechnology sector. So while some see the specter of higher costs, others salivate at the prospect of a wider insured pool that spurs demand for everything from broader hospital services to more mobile health apps.

Some small businesses even love the so-called individual mandate—the one the NFIB warned in a statement after the ruling will lead to “an onslaught of taxes and mandates, resulting in job loss and closed businesses.” The reason: It frees them from the shackles of having to compete in a world that revolves around employer-based coverage. (Does innovation really thrive in an environment where job applicants aspire to be coffee baristas mainly so they can get health-care coverage?)

Now that the high court has spoken, businesses of all sizes are grappling with how to adjust. Even opponents of the legislation can’t cross their fingers and hope that a President Romney will repeal the whole thing. With 18 months before the provisions go into effect, and much less time before companies must design new plans and offer them to their employees, they have to now treat the law as a business reality.

The changes are large. In January 2014, employers will have to either pony up a plan that meets the requirements of Washington or opt out and pay a penalty in terms of both costs and employee morale. In large corporations, there’s probably not that much to be done. Most may already offer a broad menu of benefits through their existing health plans. They’ve already been pushing more costs onto their employees and cajoling higher-risk ones into wellness programs to keep those costs down. If anything, the fierce debate around health care has offered large companies cover to make these shifts by drawing attention to soaring health costs and the burden employers bear.

What such companies now need to assess is how many of those employees may be covered under their plans, thanks to automatic enrollment provisions for businesses with more than 200 employees. In everything from e-mail marketing to pension plans, adopting an “opt in” or “opt out” strategy can make a critical difference. Inertia is a powerful force, especially for busy employees who don’t always take action. Defaulting to automatic coverage means a higher percentage of those workers could end up on their companies’ plans.

Another potential hurdle is the non-discrimination requirements of the act. Employers can no longer slice and dice their offerings to design gold-plated plans with lucrative benefits for the most-valued employees at the top of the wage pyramid, while tossing some scraps of basic coverage to the proletariat. As a result, warns Sheldon J. Blumling, an attorney in the employment benefits practice of Fisher & Phillips, “they’ll either have to bring up the lower-subsidized segments to the highest common denominator or bring everyone down to the lowest common denominator.” With talent scarce in some categories and plentiful in others, that’s not an easy decision.

Still, the really tough choices lie with smaller employers. Those with health programs may have designed them in such a way to offer basic, lower-cost coverage. Faced with the prospect of higher costs to comply with the law, they may choose to stop offering coverage altogether if they decide the penalties are cheaper than the administrative costs of running a broader plan. Even that assessment isn’t an easy one, says Blumling. You could just send everyone—including yourself—out into the open market to buy coverage on a health insurance exchange. “Nobody really knows yet what kind of coverage you’ll get there for your money.”

Workers could end up paying more than if premiums are negotiated as part of group coverage. Or they could end up paying less as insurers compete for business. Employees could be happy to get a bigger paycheck or resentful at being forced to foot the bill for their own coverage. Many more people may even feel comfortable working on a contract or freelance basis because they no longer feel the lingering insecurity of being uncovered in the event of an illness or accident.

So, even with the act essentially upheld, plenty of uncertainty remains. Critics fret that consumers may spend less on other goods and services in reaction to new costs, but others argue they’ll spend more as their out-of-pocket medical costs fall. Job growth may be curbed by new costs, or helped as a higher proportion of the population flows into a modernized and more efficient health-care system. What is clear: Obamacare is a reality that every business leader has to confront now.

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Diller Duels With TV Networks at SXSW

Sept. 21 (Bloomberg) -- Montblanc North America CEO Jan-Patrick Schmitz talks about the demand for luxury products. He speaks with Deirdre Bolton on Bloomberg Television's "Money Moves." (Source: Bloomberg)

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Briefs

News Corp.’s (NWS) board is expected to approve a plan to break up the company into two entities, freeing up its profitable entertainment business from the slower-growth publishing unit. Rupert Murdoch, chairman and chief executive of the $53 billion media company, bowed to pressure to accept the split, after a phone-hacking scandal last year at one of its U.K. tabloids, said a person with knowledge of the matter. News Corp. derives at least 70 percent of its profit from television, yet its shares have long traded at a discount to those of media peers. The stock jumped 8.3 percent on June 26, when news of the possible restructuring broke.

Best Buy (BBY) founder Richard Schulze is exploring taking the electronics retailer private and possibly selling his 20 percent stake, according to a person familiar with the matter. Schulze stepped down as chairman on June 7 after an internal probe found he failed to inform the company’s board about allegations that then-CEO Brian Dunn was having an inappropriate relationship with a female employee. Best Buy posted a net loss of $1.23 billion last year, its first annual loss since 1991.

Billionaire hedge fund manager Philip Falcone faces a showdown in court with the Securities and Exchange Commission over claims he improperly borrowed $113 million in client money in 2009 to pay his taxes. The SEC said in its suit that the founder of Harbinger Capital Partners also favored selected investors and manipulated bond prices. Matthew Dontzin, an attorney for Falcone, said that any allegations by the SEC are “neither supported by the facts or the law,” and that any suit “will be contested vigorously.”

Glencore International’s (GLEN) $26 billion offer to buy mining company Xstrata (XTA) is on shaky ground, after Qatar Holding asked Glencore to raise its bid by 16 percent. The move by Qatar’s sovereign wealth fund, which owns an 11 percent stake in Xstrata, comes after two other shareholders voiced criticism of the deal in February. Switzerland-based Glencore’s purchase of Xstrata would create the world’s fourth-largest mining company. Xstrata shareholders are scheduled to vote on the merger on July 12.

London-based Barclays (BCS) bank was fined ?290 million ($453 million) by regulators in the U.S. and U.K. after admitting it submitted false interbank interest rates. Authorities say that to boost its financial condition during the credit crisis, the bank reported artificially low figures to the British Bankers’ Association, whose surveys of lenders are used to set the Libor rate, a widely used benchmark. Barclays declined to comment on the authorities’ statement. CEO Robert Diamond and three lieutenants will forgo their bonuses as a result.

— Facebook: COO Sheryl Sandberg joins the board of directors

— National Bank of Greece: Chairman Vassilios Rapanos resigns

— Indiana Pacers: Larry Bird steps down as president of basketball operations

Boudway is a reporter for Bloomberg Businessweek. Winter is a reporter for Bloomberg Businessweek in New York.

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DoCoMo Looks for Growth Among Japan's Elderly

The iPhone has become the must-have smartphone for young and hip consumers around the globe. Not for Kazuko Ohara. The 81-year-old Tokyo resident is planning to buy her new handset from NTT DoCoMo (DCM), the only major Japanese carrier not selling Apple’s (AAPL) hit product. “I’ve been planning to get a smartphone and try the voice app since I saw it on TV,” says Ohara, who doesn’t own a personal computer. “My eyesight is weak because I had a cataract operation. The voice app might help me write e-mails, and I want to use the map function to go places.”

That’s music to the ears of DoCoMo, which has rolled out specially designed phones and its own voice-recognition software to woo Japan’s fastest-growing demographic: the elderly. The country’s biggest mobile-phone company is counting on older subscribers to regain market share lost to iPhone-peddling rival SoftBank in the $110 billion local wireless market. Two million users have downloaded DoCoMo’s app called Shabette Concier, which, like Apple’s Siri, lets users control their phone by voice—a big selling point among elderly subscribers who struggle with keypads. And a specially designed phone DoCoMo unveiled this spring features on-screen buttons to handle common actions such as writing an e-mail.

DoCoMo is targeting older customers for growth as Japan ages faster than any other developed society, with 23 percent of the population 65 or older. Oldsters there are ripe for updated handsets: Only about 6 percent of Japanese consumers in their 60s had a smartphone as of February, compared with 51 percent of people from 20 to 29, according to Tokyo-based mobile-advertising agency D2C. “Growth for a consumer business in the coming decade relies on cultivating the elderly market,” says Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute in Tokyo. “They tend to be affluent and loose on their purse strings.”

Elderly Japanese kept spending money last year while younger people pulled back in the aftermath of the earthquake and tsunami. Spending by those older than 69 gained 0.4 percent in 2011 while spending by all other age groups declined, according to the Ministry of Internal Affairs and Communications.

DoCoMo’s share of the 125 million mobile-phone subscriptions of Japan’s three biggest carriers fell to 48 percent as of May 31 from 52 percent four years earlier, while SoftBank’s share jumped to 24 percent from 18 percent, according to the Telecommunications Carriers Association. “DoCoMo has been struggling because of the expansion of iPhones in Japan,” says Shinji Moriyuki, an analyst at SMBC Nikko Securities. “Introducing handsets targeted at the elderly will probably help DoCoMo win back share.”

To stimulate demand among the growing demographic, DoCoMo is holding seminars to teach older customers how to use a smartphone—it held 1,100 training sessions in the year ended March 31—and is offering discounts on handset models aimed at elderly users.

As early as July, DoCoMo plans to offer a smartphone version of Fujitsu’s hit handset called Raku-Raku, or “Easy Easy,” which has won over more than 21 million users with simplified functions, larger fonts, and a button to connect to a help desk. DoCoMo’s voice app, whose name translates as “Talk to Me, Concierge,” was introduced on March 1 and is available for 38 handset models using Google’s (GOOG) Android software.

People 60 or older account for 24 percent of DoCoMo’s customers. Although the carrier is ahead of rivals in terms of marketing to the elderly, SMBC’s Moriyuki says, “the other two carriers will probably follow DoCoMo. It’s a big business opportunity.”

SoftBank doesn’t offer handset models or services targeted specifically at the elderly, says Natsuko Kameda, a spokeswoman for the Tokyo-based company. Yet KDDI, which holds about 28 percent of Japan’s wireless market and has sold the iPhone since October, says serving seniors is a priority. “We’re trying to lure elderly customers from the NTT group by offering discount rates for those who use both our group’s fixed-phone and mobile-phone services,” says spokesman Keiichi Sakurai.

DoCoMo hopes to raise its total share of smartphone subscriptions back to at least 50 percent in the fiscal year that began on April 1, says Chief Financial Officer Kazuto Tsubouchi. “You can see possibilities of handsets tailored for old people stimulating demand,” says Dai-ichi’s Nagahama. “Japan’s elderly are young in spirit.”

The bottom line: People 60 and older make up 24 percent of customers at DoCoMo, Japan’s No. 1 wireless carrier. It’s pushing senior-friendly phones.

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M&M's and Dirty Doodles: How to Survive a Boring Meeting

I’m writing this sentence while stuck in a meeting. I’m standing by a glass wall, scribbling onto my notepad but making sure that every few minutes I look up and make eye contact with the person who’s speaking so it appears as if I’m paying attention. You can’t tell, but the original version of this paragraph is adorned with several ridiculous doodles. I just drew a puppy.

To be fair, sometimes a group discussion is necessary. At one weekly gathering, we go over the story list for the next Bloomberg Businessweek issue—a process I genuinely like. I get to hear other writers’ ideas and our editors’ reactions to them. And I have to pitch my own articles, which can be both fun and nerve-wracking, especially when a reporter has just explained a possibly groundbreaking story about the euro and then I come along and say, “So a bunch of people think Alexander Hamilton is hot.”

But useful meetings are rare. More often than not, they’re too long, too dull, and when they’re over, my notepad is covered in pictures of animals and flowers. But none of my meetings are nearly as tedious as the ones Jennifer Heller endured. Before she founded her own Web design company, ArtsyGeek, Heller worked at a nonprofit in Berkeley, Calif., that had a regular planning meeting which lasted up to six hours. She quickly learned how to amuse herself by using Google Chat on her phone, pretending to take notes, and drawing. “Once I doodled a caricature of a fellow board member,” she says. “He was this older guy who had a very funny, old-fashioned hat and a full beard. He looked over in the meeting, saw what I was doing, and said, ‘I love it!’ Luckily I don’t think he realized it was of him.” One of Heller’s co-workers used the meetings to knit an entire sweater.

The six-hour marathon meeting may be extreme, but the boredom Heller felt is pretty common. SalesCrunch, an online network for sales professionals, estimates that a useless meeting can cost companies $250-$1,100 a week, depending on the number of attendees and their salaries. Maybe that’s why there are programs such as Meeting Ticker, MEETorDIE, and The Cost of Meeting App that allow you to calculate just how much money you’re wasting when you’re stuck in a conference room.

That’s the key word: stuck. If you’re not running the meeting, there’s very little you can do to improve a discussion’s productivity level. But you’re not completely powerless, says Northwestern University’s Kellogg School of Management professor Bill White, who’s also author of the career advice book From Day One: CEO Advice to Launch an Extraordinary Career. “If you have a good relationship with the meeting’s leader, you can ask them, ‘How can I help?’” White suggests. “Ask them, ‘Can I work on the meeting agenda?’ and then you can streamline the process.” Most people can tell from their listeners’ body language that they’re leading a terrible meeting and will welcome any advice to fix it.

“I had colleagues who just refused to attend a meeting, even if it was mandatory, if they weren’t given the proper materials to prepare for it ahead of time,” says Marcy, who until recently worked for the federal government in Washington. Of her 10-hour workdays, Marcy says she often spent six or seven hours in back-to-back meetings. “It’s the federal government,” she says, “so we had meetings, meetings to prepare for meetings, debriefing on meetings we’d just had, even meetings about how to conduct more meetings.” Marcy had to develop tricks to help her cope with the mind-numbing tedium of her daily schedule—enjoying a piece of chocolate during a boring presentation, counting the number of meaningless phrases the speaker used, writing grocery lists—but her favorite one is a game she and a colleague played with M&M’s.

“The M&M game is designed for a large-scale, all-hands-on-deck type meeting where you’re not expected to participate,” she explains. She and her friend would each get a packet of peanut M&M’s and then sit on opposite ends of the conference room, but within eye contact of each other. “We’d pick a set of buzzwords ahead of time—like ‘mission-driven,’ ‘nonproliferation,’ ‘efficiency,’ or ‘the president’—and then whenever one was used, we’d eat an M&M. If you finished your bag of M&M’s, you won.” This, my friends, is the American government in action.

Marcy’s M&M game is more creative than anything I’ve ever done in a meeting. I wondered, what other tricks do people have? I e-mailed friends and asked people on Facebook and Twitter how to cope with a boring meeting, and this is what they said:

• Bring a phone and browse the Web.

• iPad. Get an iPad.

• New York Times crossword app.

• Interrupt with a bad pun based on whatever was just said.

• Draw a picture of the speaker and put thought bubbles over his head with inappropriate comments.

• Imagine sexual pairings between other meeting attendees.

• Live-tweet the stupid things that are said. (Uh, these suggestions are anonymous, right?)

• I examine people’s hair very, very closely.

• I once made a short comic with talking clouds.

• Leave.

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