The Day the Earth Was Almost Destroyed

[NOTE: Now that I’m on winter break, I’m taking a partial hiatus from writing Stanford GSB related blog entries, at least until the term starts back up in January]

As a fan of Science Fiction movies, I couldn’t resist going to see “The Day the Earth Stood Still” – the new version with Keanu Reeves, on opening weekend. I’m a big fan of the old version from the 50’s, despite its dated cold war themes, and generally can’t stay away from anything Sci Fi related.

So what did I think of the new movie? I’d love to give it an enthusiastic thumbs up, but can only manage a “so-so” review.

The old and new films are both about the arrival of an alien visitor (who looks human, to make us comfortable, and whose name is Klaatu) who lands in a major American city (Central Park in the new one, and if I’m not mistaken Washington, DC in the old one). One thing that hasn’t changed from the old Cold War theme: The government tries to take possession of the alien, and shoots him. They won’t even consider allowing him to speak to a gathering of World leaders at the UN.

Are we really that parochial? If an alien really visited the Earth and landed in the US, is this the attitude that we would take?

Unfortunately, I think they got this one right, in both versions. I’d like to think that if the representative of an advanced civilization were to arrive to deliver a message to the Earth, just happens to land in the USA, that we would let him speak to the UN – to all the nations of this planet. But I can just see our military whisking away the alien away to Guantanamo as a presumed “enemy combatant” and commandeering his ship as “foreign technology” that we want to re-engineer.

A neat new twist in the movie is the reason for the alien’s visit. In this version, Klaatu is not just the representative of alien civilizations watching the Earth; he says he is a friend of the Earth (though as we learn, this doesn’t mean he’s necessarily a friend of the human race).

He’s here to decide whether we are killing the planet or not. This green theme is a pretty good new spin, if somewhat overused these days. Klaatu tells us that there are only a few habitable planets out there, and he can’t allow us (humans) to kill this one. Quoting Klaatu (Keanu Reeves): If the earth dies, humans die too. If only the humans die, then the earth still lives on. A fair, logical argument.

Like most good science fiction, the first part of this movie actually makes you think about larger issues. It certainly made me think about habitable planets and how many there might be out there. There’s a famous equation, the Drake equation if memory serves, that takes assumptions of the number of stars, the number of planetary systems, the number of habitable planets, and the number of advanced civilizations. If you work out the numbers with only 1% for each variable, you come up with a large number of inhabited worlds.

What would happen if the probabilities were so small that there only a few habited planets out there, as is the case in this movie?

And of course, this movie does make you think about what would really happen if an alien spacecraft were to visit our planet and why.

Those are the positives. Jennifer Connolly does a pretty good job as an astro-biologist (is there such a thing? How much biological material have we actually found in outer space?). She’s also the step-mother of 11-year old Jacob, whose army engineer father she married a few years ago, but who passed away.

This is where, in my opinion, the movie starts to fall apart. Why does this have to be the case with almost all science fiction movies?

They start with an interesting concept that actually makes you think; but, as they try to bring the movie into the standard hollywood three-act script, they all end up with some variation of the standard formulas, ruining the originality of the film and making the second half into a dumb thriller or action or preachy lesson.

I don’t think I’m revealing much when I say that that at first Klaatu decides to destroy humans off the face of the earth, because he views us as a destructive force (which the government cronies and the Secretary of Defense, played excellently by Kathy Bates, do a very good job of convincing Klaatu of).

Eventually, he comes to realize that humans are more than just a destructive force. That we have strong emotions and that they include compassion and longing, etc. This in-and-of-itself is not a problem - The problem is how he comes to this realization; It’s done through the 11-year old Jacob, who single-handedly destroys this multi-million dollar Hollywood production. Well done, kid. At least you saved the Earth, sort of.

So, OK, I have to admit, as a kid, I loved it when kids played an important role in science fiction. E.T. involved kids and aliens. Wesley Crusher had an interesting role in Star Trek the Next Generation.

But this one just doesn’t work. The 11-year old snot-nosed kid, not only disobeys his mother every chance he gets, sporting an “oh I’m so cool” braided hairstyle that’s well beyond his years, but he also tells the government exactly how and where to find Klaatu, leading to the abduction of his step-mom by the government in the process. We're then led to believe that this might have been a good thing becuase he got to spend more time with the Alien.

I have to say I wanted to smack the kid off the screen so that we could get on with a real science fiction movie. Alas, it was not to be.

After seeing the movie, I looked up some reviews to see if I was alone in this sentiment and was just being a cruel, heartless adult. Here’s my favorite part of the CNN review: “Jacob is a whiny, obstinate, and disobedient little boy that would lead most extraterrestrials – and not a few of the rest of us – to reach for the destruct button.” Amen.

For other science fiction fans out there, think Jar Jar Binks. Now I wish someone would get a-hold of this flim and create a phantom edit (for those of you who don’t know someone created an edit of Star Wars: The Phantom Menace which digitally editout out Jar Jar Binks, without whose annoying antics the film might have been a relatively good film). Unfortunately you’d have to chop off the whole third act of the movie to do this. Oops.

Note: As a film-maker myself, I’m not supposed to be suggesting that anyone do anything that infringes on the copyright of Hollywood films, so I can’t really condone a phantom edit. (BUT IF YOU HAVE ONE, LET ME KNOW, I’D BE HAPPY NOT ONLY TO WATCH IT BUT TO WRITE ABOUT IT HERE IN MY BLOG. EVEN BETTER: what if someone were to edit out the kid and put in Jar Jar Binks, the movie might be actually be more fun and less annoying!).

Court of Appeal: No Defense Attorneys' Fees for Frivolous Claims?

The Court of Appeal agreed with the district court that Laura Young's FEHA claim for harassment against her former supervisor was frivolous, vexatious, etc. The trial court, however, awarded only one dollar in attorneys' fees against Young. The court's rationale was that since employer Exxon was going to pay the supervisor's fees, and since Exxon did not complain that the action against Exxon itself was frivolous, the court should not award fees that Exxon would ultimately recover.

Does that make a lot of sense? Yes, but only if you're gutting the attorneys' fees statute. Employers are responsible to pay for employees' defense costs under Labor Code section 2802, unless the employee is found to have engaged in actual unlawful harassment. So, a frivolous claim against an employee by implication is part of the claim against the employer, no? And given most claims against individual managers are barred as a matter of law, and given awards of attorneys' fees are as rare as hen's teeth anyway, one would think that a court would want to give effect to the Legislature's decision to permit an award of attorneys' fees when claims are frivolous. Right?

No. The court of appeal agreed with the trial court and held that where, as in this case, the employer is paying an individual employee's defense costs, the trial court need not award attorneys' fees if the claim against the employer is not frivolous. You don't believe me? Here's the quote:

In short, despite its finding that Young’s case against Lopez was frivolous and vexatious, the trial court had the discretion to deny attorney fees to Lopez. Because the award would benefit only Exxon, a defendant which was not otherwise entitled to an award and which did not show it incurred any significant fees on Lopez’s behalf that it would not have incurred in any event, we see no abuse of discretion in the trial court’s decision.

By the way, the attorneys' fees statute, Government Code section 12965(b) is very simple and says nothing about differing standards for employers and employees.

In actions brought under this section,the court, in its discretion, may award to the prevailing party reasonable attorney's fees and costs, including expert witness fees, except where the action is filed by a public agency or a public official, acting in an official capacity.

The statute says nothing about basing awards on who pays the fees. I know it says "discretion," but the courts have held that prevailing plaintiffs are generally entitled to fees as a matter of right, while prevailing defendants have a heavy burden to establish the claims were "frivolous, unreasonable, or without foundation." I think the courts may have lost sight of the plain language of the statute over the years.

While I'm complaining, the Court of Appeal also decided not to publish its analysis of Young's claims on the merits. That means the bar will not benefit from the court's detailed analysis of Young's claims for discrimination, harassment, retaliation, etc. The decision should be published if only because Young claimed a mental disability and that her outbursts and conduct in violation of policy were attributable to the disability. The Court distinguished Gambini v. Total Renal Care, discussed here, and held that Young's disability did not exempt her from termination for her misconduct.

Anyway, I'm sure Exxon is happy to have won the case. But there was a dark lining in a silver cloud that may affect employment litigation for the rest of us. The opinion in Young v. Exxon is here.

Court of Appeal: Summary Judgment Against Plaintiffs Challenging Starbucks' Application

California employers cannot ask applicants to disclose certain convictions for marijuana-related misdemeanors that are more than two years old. Starbucks knew that, and included a disclaimer on the back of its application, viz:

CALIFORNIA APPLICANTS ONLY: Applicant may omit any convictions for the possession of marijuana (except for convictions for the possessions of marijuana on school grounds or possession of concentrated cannabis) that are more than two (2) years old, and any information concerning a referral to, and participation in, any pretrial or post trial diversion program.”

Although that may read like a proper disclaimer, it was included in a larger paragraph of disclaimers located away from the general convictions question, which did not exclude such marijuana convictions. So, the California disclaimer did nothing to stop Erik Lords and his band of merry putative classmembers from filing suit, claiming the application form was defective. Erik and co. wanted about $26 million in penalties. Aggrieved applicants get a penalty of $200 or actual damages for faulty applications.

The court of appeal agreed with the trial court and the plaintiffs that the general disclaimer was improperly placed away from the general convictions question. Had the properly worded disclaimer been placed next to the conviction question, it would have been legally correct, the court said.

But the court of appeal detected a couple of problems with Lords' prayer. [I kill me]. First of all, none of the named plaintiffs had a marijuana conviction. Second, all had read the allegedly hidden language. Third, none was denied employment because of a wrongfully disclosed conviction.

So, the court said:

We see nothing in the statute to support plaintiffs’ claim that the Legislature ntended to protect the privacy interests of job applicants who had no marijuana convictions in their background. As we explain below, we decline to adopt an interpretation that would turn the statute into a veritable financial bonanza for litigants like plaintiffs who had no fear of stigmatizing marijuana convictions.

The case is Lords v. Starbucks and the opinion is here.

Stanford Business, Entry 15: The Last Class, Finals, and Clint Eastwood

We finished classes on Thursday of last week, and this week is Finals Week. It’s hard to believe that a third of the school year is already over, and very soon after we start back up in January, the program will be half over. I guess that’s both part of the upside and the downside of being in a one-year program: it goes very quickly.

The Last Day Of Class.
On the last day of class, we had Strategy (which was as short half-term class, which I enjoyed, unlike many of my classmates judging from their comments), Finance (which was perhaps too long of a class), and Economics.
I have to admit that I was sad to end our Economics class. We’ve had this class since the pre-term, and I think I’ve only missed it only once (when, for some odd reason, we had it at 8:30 am, rather than it’s usual 1:15 pm time slot). OK OK, if you read this blog, you’ll notice that at the beginning of the term, I wasn’t so hot on this class.

But it has grown on me, especially since we started discussing Macroeconomics. Given the events going on in the US and World economies, this class may have become (in my opinion) our most interesting class, and professor Flanagan seems adept at teaching us how to think about obscure concepts like the marginal product of labor, potential GDP, and the reserve requirements of the Fed, very clear. So much so that I think I’ll actually miss not having econ moving forward! Who would’ve thunk it?

Clint Eastwood rides onto campus.
On the evening after the last day of classes, many of the Sloans went to a local hockey game (the team was the San Jose sharks), organized by one of our classmates who’s a hockey aficionado. For many of our international students, this was their first time ever seeing hockey. I ended up not going because there was another event on campus that I found interesting: A showing Clint Eastwood’s film, Letters from Iwo Jima, followed by a discussion with Mr. Eastwood himself. I guess he doesn’t live that far away (Carmel) so it’s not too long of a trip, but this seemed like a pretty unique opportunity, not to be missed.

The movie itself was pretty dramatic– it was about the “defense” of Iwo Jima from the American invaders (and was a counterpart to Eastwood’s earlier movie, Flags of our Fathers). The movie was almost entirely in Japanese with English subtitles. Even though I speak some Japanese, I couldn’t understand a word and had to read the English.

Clint (may I call him Clint??) was introduced by a professor at Stanford who had written a book or two about history and the movies. This seemed like a good idea, but ended up being painful because the guy went on with a very lengthy introduction of Eastwood, while Clint sat there on stage, patiently waiting for his chance to well, say something.

This guy quoted lines from his Dirty Harry movies, and otherwise demonstrated his excellent knowledge of Clint Eastwood’s career. More than a few of us in the audience were thinking: “OK dude, so you’re a smart professor. Now shut it and let Clint Eastwood talk, which is why we came here tonight”.

In some ways, this event was a great example of what’s good and bad about academia. On the one hand, we had an Oscar winning director come to show his movie and discuss it with us. That doesn’t happen every day in the real world. On the other hand, we had a know-it-all professor who was trying to show how he “knew it all” and wanted to demonstrate his knowledge about the subject, when we, the audience, were primarily interested in the subject itself and not the professor’s take on it!
In his defense, the professor (I forget his name) did ask some good questions and eventually let Clint answer them, which was interesting. At the end of the discussion, the professor started to close down the event with: “Well, thank you Clint Eastwood for coming here to Stanford tonight.”

Clint smiled his one sided smile and asked, very calmly, in that soft but authoritative voice cut him off: “Well, don’t they have any questions?”and gestured at us, the audience. It was probably the defining moment of the night, and left the professor a little flummoxed. The good news is that we the people got to ask Clint questions; I asked him about the budget on Iwo Jima ($13 million) and how he funded it (He made a call to Warner’s and got his Japanese distributor to put up some money; the movie has brought in ) and advice of funding indie movies (find someone with money and pitch it to them; this last part wasn’t that helpful but technically accurate). It was definitely the highlight of last week for me.

Final Projects and Exams.
Early this week, we had two final projects due, and two final exams.
For our modeling class (another class that I’ll miss, particularly Professor Moore’s very vivid lectures), we had a final regression analysis project. My team’s project was an analysis of the variation of Linden Dollars (The virtual currency used in the online virtual world, Second Life) vs. US Dollar exchange rate, to see if it could be explained by a variety of other factors.

For our strategy class, each group had to do a “strategy audit” of a real company. The companies ranged from online travel to sports aircraft companies, and this was our first experience in reaching out to companies outside the b-school for a b-school project. Our team did a project on TCHO, a hip new chocolate company located in San Francisco (Yes, we did get free chocolate each time we visited them).

We had our first of two final exams on Monday: Economics. Even though I think I’ve gotten good at econ, this was a much tougher exam than I’d anticipated. The fact that it was Open Book didn’t help much; we’d spent much of macro talking about employment, inflation, and GDP, and almost no time talking about deflation, which ended up being a big part of the exam. Even some of my classmates who were econ majors in undergrad weren’t totally sure about their answers. Oops. Did I say I’d miss econ and I was sad that it was over? Let me reconsider that…

We now have only one more exam before the end of the term – Finance. This class has been a tough one for many of my classmates, particularly those who have never been exposed to financial or investing topics before. It must’ve also been a tough one to teach, because we have a variety of people ranging from finance experts (people who have traded options and worked for investment banks) to finance novices (who had no idea what a call or a put were before this class).

For me, I’m somewhere in the middle – I traded options for fun many years ago so know what they are (and might I add am pretty good at losing money trading options which is why I don’t do it anymore). But I’ve had very little exposure to the theory behind them. And I definately don’t buy the finance class’s conclusion that taking on debt can be a good thing for the company. Isn’t that what got GM and other automakers in trouble in the first place? Toyota (to the chagrin of many Japanese bankers, and I would add to many b-school finance professors) has zero debt, and no one is talking about them going out of business!

Speaking of finance, the test is coming up in less than 48 hours. I really should have been studying rather than watching the Humphrey Bogart double-feature at the Stanford Theater in Palo Alto this evening. Oops. Too late to study now, will have to cram tomorrow for the test on Thursday.

No Punitive Damages for Meal and Rest Period Violations

While the wage and hour world waits for the Walmart decision, in which the court awarded roughly $170 million in meal period premiums, penalties and punitive damages. the other courts are working away.

Wait no longer. Ms. Brewer is a waitress at Cottonwood golf resort's restaurant. She sued for meal and break violations among a smorgasbord of other employment claims. She lost on her age discrimination claims. But she won on some Labor Code violations. The jury also awarded her punitive damages, over and above the meal and break premiums, penalties for improper wage statements, etc. (I bet you thought I was going to make food puns throughout this post, didn't you?)

The court of appeal reversed on punitive damages. The court decided that the Labor Code creates new rights not available at common law. Therefore, their remedies are exclusive. The court also held that a claim for unpaid meal periods and other Labor Code violations "arise" out of contract - the employment relationship. As such, punitive damages are not available as a matter of law.

Here's a long quote from the opinion to prove I read it, or at least that I know how to cut and paste:

We agree with Cottonwood’s contention, which Brewer does not dispute on appeal, that the Labor Code statutes regulating pay stubs (§ 226) and minimum wages (§ 1197.1) create new rights and obligations not previously existing in the common law. Moreover, those same statutes provide express statutory remedies, including penalties for the violation of those statutes that are punitive in nature, that are available when an employer has violated those provisions. Section 226, subdivision (e), provides that any employee “suffering injury as a result of a knowing and intentional failure by an employer to comply with [the pay stub requirements] is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not exceeding an aggregate penalty of four thousand dollars ($4,000), and is entitled to an award of costs and reasonable attorney’s fees.” Similarly, section 1197.1, subdivision (a) provides that any employer who pays or causes to be paid to any employee a wage less than the minimum wage “shall be subject to a civil penalty as follows: [¶] (1) For any initial
violation that is intentionally committed, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee is underpaid[;]
[¶] (2) For each subsequent violation for the same specific offense, two hundred fifty dollars ($250) for each underpaid employee for each pay period for which the employee is underpaid regardless of whether the initial violation is intentionally committed.” Here, Brewer sought and recovered the maximum $4,000 penalty available for Cottonwood’s pay stub violations, and the judgment contained an additional penalty of $15,300 pursuant to section 1197.1 for the overtime violations. We are not persuaded by Brewer’s argument that the remedies set forth in the statutory scheme were not intended to be the exclusive remedy available for statutory violations, and Brewer does not articulate any basis for concluding those penalties are so inadequate that other remedies should be permitted. Similarly, the
regulations requiring employers to provide meal breaks (§ 512) and rest breaks
(Cal. Code Regs., tit. 8, § 11090, subd. 12(A)), and providing numerous forms of
remedies for their violation, also appear to have created new rights and obligations not previously existing in the common law, and the statutory scheme provides “a comprehensive and detailed remedial scheme for its enforcement.” (Rojo v. Kliger, supra, 52 Cal.3d at p. 79.) Those remedies include an award in the nature of liquidated damages under section 226.7 (cf. Murphy v. Kenneth Cole
Productions, Inc. (2007) 40 Cal.4th 1094, 1112 [because “damages [from missed
meal and rest breaks] are obscure and difficult to prove, the Legislature may
select an amount of compensation [for the violation] without converting that
remedy into a penalty” for statute of limitations purposes]), injunctive relief
(see generally § 1194.5), and potential statutory penalties (see § 558). We are convinced that, because the meal and rest break provisions of the Labor Code “established a new and comprehensive set of rights and remedies for [employees]… [and] [n]o such specialized rights and remedies existed at common law… the remedy provided in the statute ‘is exclusive of all others unless the statutory remedy is inadequate.’ [Quoting Turnbull, supra, 219 Cal.App.3d at p. 827.]” (De Anza Santa Cruz Mobile Estates Homeowners Assn. v. De Anza Santa Cruz Mobile Estates, supra, 94 Cal.App.4th at p. 916.)

* * *
We are also convinced that, even were the remedies provided by the statutory scheme not the exclusive remedies for the new rights, punitive damages would nevertheless be unavailable because punitive damages are ordinarily limited to actions “for the breach of an obligation not arising from contract” (Civ. Code, § 3294), and Brewer’s claims for unpaid wages and unprovided meal/rest breaks arise from rights based on her employment contract. Brewer argues, without citation to relevant authority, that Cottonwood’s breach of its statutory obligations under the Labor Code is a “breach of an obligation not arising from contract,” thereby supporting the award of punitive damages.

However, in analogous situations, the courts have recognized that, when a statute imposes additional obligations on an underlying contractual relationship, a breach of the statutory obligation is a breach of contract that will not support tort damages beyond those contained in the statute.(See, e.g., Kwan v. Mercedes-Benz of North America, Inc. (1994) 23 Cal.App.4th 174, 187–192 [breach of Consumer Warranty law obligations is breach of contract and does not support tort damages for emotional distress].) We apprehend the Labor Code provisions governing meal and rest breaks, minimum wages, and accurate pay stubs constitute statutory obligations imposed only when the parties have entered into an employment contract and are obligations arising from the employment contract. The breach of an obligation arising out of an
employment contract, even when the obligation is implied in law, permits contractual damages but does not support tort recoveries. (Cf. Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 700.) Although Brewer relies on language from Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137, 1147 to assert prompt payment of wages involves sufficiently fundamental public polices that the willful failure to make such payments will support punitive damages, the court in Gould expressly recognized that, although a claim for wrongful discharge in violation of public policy would state a tort claim, a claim seeking tort recoveries based on the allegation the employer otherwise breached the employment contract agreement was barred by Foley. (Gould, at p. 1155.)

The case is Brewer v. Premier Golf Properties and the opinion is here.

IRS Standard Mileage Rate for 2009: $0.55 Per Mile

The IRS announced the standard mileage rates for 2009. Effective January 1, 2009, the reimbursement rate will be $0.55 for business use of a vehicle, $0.24 for moving and medical expenses, and $0.14 for service to charitable organizations. For the second half of 2008, the reimbursement rate actually was higher, at $0.585.

The IRS's announcement is here.

DGV

Stanford Business, Entry 14: Nike, PACCAR, Boeing, Amazon and Costco: Our Northwest Study Trip

Keeping up with our breakneck pace, we had our first out-of-town study trip last week, followed by the Stanford Thanksgiving break. I think I like the Stanford thanksgiving break a lot better than I liked the MIT break during my undergrad days; at Stanford, we got the whole week off.

This was (no doubt) so that we could catch up on the work for our final projects, since there's only one week of class left in the Quarter before... (drumroll)... Final Exams.

Of course we all studied very hard during this break (Well, honestly, most people started their vacation last weekend and took the whole week off; now we're struggling to get caught up on everything by Monday morning).

In the case of the Sloans, we left for Portland the week before Thanksgiving (for our international readers, Thanksgiving is a very big holiday in the US, and occurs on the last Thursday of November). On Wednesday morning, we got up very early (pre-dawn), flew up to Portland, Oregon, where we visited the headquarters of Nike.

On Thursday, we rode in a bus from Portland to Seattle and visited PACCAR (originally stood for the Pacific Car and Foundry Company), and then on Friday we visited three companies in the Seattle area: Boeing, Amazon.com, and finally Costco. Many of us spent the weekend in Seattle, our first real break since the term started.

Study trips like this are, in my opinion, one of the more fun aspects of business school. OK well maybe it's not exactly fun to get up before dawn, get dressed up in business suits, and spend the whole day listening to corporate executives talk about how great their businesses are.

But relatively speaking, it's much more fun than being in a classroom talking about these same things. On the positive side, we (usually) get to meet with high level executives of (usually) well-known companies, they give us a schpeal about Leadership, with copious amounts of company history thrown in for color, and we (usually) ask them lots of (usually) intelligent questions. And that beats studying about the derivation of the Black-Scholes option pricing formula any day!

So here’s my brain-dump from what I recall of our Northwest Study Trip:

The Cult-ure of Nike

We were welcomed to Nike headquarters near Portland by a number of executives, including the head of Nike HR, a woman in charge of retail aspects of Niketown, and a guy named Nelson, who was one of the first employees of Nike when it started back in the 70’s. His official title is now something like “Keeper of the Nike Culture”; kind of a cool title – what it seems to involve, as far as I can tell, is displaying knick-knacks that he has collected along the way, and telling stories about Nike’s history, which he did with great aplomb and fanfare.

Nelson shared with us that you could understand Nike by looking at the primary personalities around which the company was built - Phil Knight (who was CEO for a long time, not to mention a Stanford business school alum; also a multi-billioinare who donated enough money to Stanford that the new GSB campus will be called the Knight Management Center); a very famous mid-distance runner in the 1970’s named Steve PreFontaine (known to the initiated simply as Pre), and Bill Bowerman, who was a legendary track and field coach for both Knight and Pre at the University of Oregon.

Does this history matter? Well from what I could tell, these stories reflect the culture of Nike quite well to this day; and of the companies we visited, Nike had the most in your face culture: Everyone at Nike seemed to be 1) passionate about sports, and 2) passionate about the history and culture of Nike, and 3) very, very competitive, as if business was sport.

I love Nike’s products and they’ve certainly developed one of the top consumer brands of the last 30 years, but the visit was a bit strange for me. It kind of felt like I was going on a guided tour of a Scientology shrine. I felt, I don’t know how else to put it, like I was one of the un-initiated.

But it’s probably because 1) I’m not a sports fanatic, and 2) Before our visit, I had no idea who Pre was, 3) I didn’t know that Coach Bowerman was a legend in the running world, and 4) I knew that the new Stanford Business School campus was named Knight, who must've been a very rich guy for Stanford to name a campus after him, but that was about it.

We also had the former head of Nike Golf give us a presentation about leadership. Speaking of Golf, did I mention the meeting was in the Tiger Woods shrine, er, i mean, building? This building is basically a memorial to Tiger's career, including some of his trophies, memorabilia, and a timeline showing everything Tiger has done in his career. For golf fans, this building must be like dying and going to heaven.

Many of the Nike buildings are named after famous athletes. At the moment I can’t remember any of them, except for Tiger Woods and Michael Jordan (probably the last Nike product that I know by name was the Air Jordan when it was introduced in 1984, and I was on junior high school basketball team).

Nike even had an athletes walk of fame – kind of like the Hollywood Stars. I could hear my colleague’s sounds of recognition as they saw the name of their favorite 70’s or 80’s football or baseball or basketball player.

It felt like a trip into the “Cult of Nike”; I don’t mean that Nike is a cult in a bad sense; the most effective organizations with the most passionate members usually have this kind of quality to them.

Another thing I noticed about Nike culture: I found them to be brutally honest. Maybe too much so, which I kind of appreciated.

For example, why did they start the non-profit Nike foundation? Honstely, because they were getting a lot of heat over bad working conditions in their off-shore factories. Why did they want us to go the Nike store? To spend lots of money on their products so their profits will go up. Why were they being so nice to us? Because they hoped we might want to work for Nike someday. What is Nike's biggest weakness today as a company? That they're a bunch of old white guys with very little diversity. Actually it was kind of refereshing to get such direct answers.

Of course, being ignorant about sports didn’t stop me (or my classmates) from spending at the famed Nike Store. I usually buy a pair of sneakers once every five years; I bought two pairs that day!

PACCAR: The Lexus of Heavy Duty Trucks

On Thursday, we visited PACCAR outside of Seattle. According to Wikipedia, they are the third largest manufacturer of heavy-duty trucks in the world. I hadn’t heard of them before the Sloan program (one of our classmates is from PACCAR), though I had heard of their truck brands – Kenworth and Peterbilt in the US and DAF in Europe. There’s a famous gun-battle scene in the movie Heat, which was one of my favorite movies of the 90’s.

Although I grew up in Detroit, I'd never been to an automotive assembly line, so this was fun for me to see. In fact, between Nike, PACCAR, and Boeing, it was fun to see companies that made actual things.

This might seem like a trivial point, but I was discussing this with another software guy in our class, and he remarked that we weren’t used to building actual physical objects – our products are usually just bits and bytes on a computer.

At PACCAR, we had a former Sloan and (currently EVP of something), give us a talk about the company and its history. Inevitably, the question about why GM and the other US car companies were doing so poorly and why PACCAR wasn’t in danger came up. The answer was interesting – having to do with being hamstrung by unions, quality of products, and providing what customers wanted.

Of course, the world wide recession was affecting them too – demand for trucks was down considerably, their plant was running at less than maximum capacity.

The first thing that struck many of us about the assembly line was that it was spotless; as one of our colleagues from Japan told us, just like Japanese assembly lines, you could eat food off of the floor (No not literally!).

The second thing was how automated the whole process was – PACCAR was a poster-child for efficiency. Each piece of the assembly had it's own barcoding and in some cases RFID so they could track exactly where the parts or the assembled trucks were.

In fact, PACCAR is one of the few companies that Toyota allows to use one of its internal suppliers, notably the Lexus supplier for interiors, PACCAR trucks are known as the high end of trucks, often called the “Lexus of Trucks”.

When we sat inside the cab of one of their finished trucks, I could see why. As the owner of three Lexus vehicles (the only car I’d ever owned before buying a Honda hybrid a few years ago), I can confirm that the interior looked and felt kind of like I was sitting in a Lexus!

The Bigness of Boeing

On Friday we visited Boeing – this was fun. One of the EVP’s (also a Stanford Sloan alum) gave us a talk about Boeing’s line of aircraft, including the new model of the 747 (which is being used for freight primarily) and the new 787 dreamliner, of which lots of airlines have ordered, but which is behind schedule.

Of course the conversation naturally turned to Airbus and Boeing’s recent rivalry – the A380 (the very large plane that Airbus released recently) vs. the 787 dreamliner. Airbus’s plane is bigger. Does that matter? On any visit to Boeing, the conversation inevitably turns toward size.

We saw brand new 747’s being produced on the assembly line and all I can say is that they are BIG. We visited the BIGGEST building in the world. It’s so big that it has it's own fire-station, birds live in rafters, and Boeing employees hunt the birds now and then to clear them out. The building can house something like 70 football fields. The engines of the Boeing 767 are so big that it’s the same size as the fuselage (i.e. the body) of the 737 (which is the airplane that airlines like southwest use for point to point flights).

How does Boeing feel about Airbus plane being bigger than theirs? Boeing makes the point that they tried to go out to sell a larger plane, but came back with a different set of customer requirements - more fuel efficient planes. Boeing says that the two new planes are not really direct competitors – the A380 was meant for a hub and spoke model, where large numbers of passengers are going from hub to hub. The 787 dreamliner, a much more fuel efficient plane, is meant for point-to-point travel and so Boeing will sell alot more of them.

Like PACCAR, Boeing seems to be affected by the recession. Unlike PACCAR, they seem to have a very large union workforce. Unlike PACCAR, you can’t order a plane from Boeing before 2015, because all of the planes coming off the assembly line are already accounted for by “firm orders” from airlines around the world. Why would the recession affect them if planes are full until 2015? Don't know but they were certainly of the opinion that the recession would be bad for them.

We then drove by Boeing’s own little airport, which is just outside this building. When the planes are built, they are then flown off to the ordering airlines right from Boeing field. Oops...did I say "little" airport? I stand corrected. The Palo Alto airport is a little airport. Compared to this, the Boeing field is freaking huge.

Kindlin at Amazon

We then shuttled off to Amazon.com, to meet a GSB Alum who is in charge of corporate development. For me personally this was a fun visit, because of the internet angle (the lobby with articles from the nineties was like a trip down memory lane back to the dot com boom). It was also fun because as writer, I’m all into books. One of the things he spent a lot of time talking about was the Amazon kindle e-book reader.

The Kindle has been under development for a while – as it seems have many other non-successful ebook platforms. This one, though was endorsed by Oprah, who gave away kindles to all the members of her studio audience recently. And, just like that, Amazon sold out of all of it’s kindles.

With over 200,000 books available on it, this might be the ebook reader that actually works. What makes this one different? The Power of Oprah.

Costco-land

We ended our visit with a trip to Costco. The CFO it turns out is also a Stanford GSB Alum, and he came prepared with lots of slides about Costco’s past and future performance.

Speaking of cults, Costco is fascinating not because of the cult-like nature of employees, but because of the attitude of customers. It turns out I was the only US resident in the audience who’d never been inside a Costco. I remember last year, when I was part of a California company that was being acquired by EMC (which is a Massachusetts company). During the HR question and answer session (in California), the only question that the employees seemed to care about, really care about, even in this age of inflated health care prices, was whether the new company was still going to pay for employee’s Costco membership cards!

When I moved to California about a year ago, I happened to be going to a store which shared a parking lot with a Costco on the weekends. It was a madhouse… with kids and entire families jumping with excitement as if they were going to Disneyworld! There was an electricity there. Think of a 21st century version of the Brady Bunch dressing up in their sunday best to go to Sears.

We learned a lot about the history of Costco; about the founding of the company; they did close to $100 million in their very first year. They’re the third largest retailer in the industry (after Walmart and Target, I believe). The founders are still around, and the culture is very no-frills, keep costs low kind of culture.

The bottom line: Costco sells a lot of stuff at very low, wholesale prices. In fact, the CFO showed us all manner of pics and figures of the amount of various products they sell, ranging from hot dogs to diamond rings.

One dynamic that he mentioned was that Dads who spend time with their kids on weekends and aren’t sure what to do, take the kids to Costco. The kids pig out on the sugary sweets and greasy food (well he didn’t say that exactly but he did say that Costco wasn’t into healthy food) while the Dad shops, the perfect win-win situation.

Unlike PACCAR and Boeing, though, Costco doesn’t seem to be suffering from the downturn. Even more people are looking for ways to save money. In fact, he said that many "premium" brands who would not even talk to Costco in the past are now approaching Costco to get rid of excess inventory. Soon we may all be dancing in the Costco parking lots looking forward to seeing Mickey Mouse!