Daniel McGinn

Stories by Daniel McGinn

  • A COSTLY DIVESTITURE

    Jack Welch has always admitted that his guilty pleasure is reading the gossip pages. Now the former General Electric chairman's exploits are giving New York's tabloids unusually juicy fodder. Jackpot: GE tycoon's scorned wife seeks half his fortune, trumpeted a headline last week. The troubles began last fall when Welch, 66, was interviewed by the editor of the Harvard Business Review, Suzy Wetlaufer, 42. Soon afterward they commenced what management theorists might call an unusually friendly "horizontal integration." Jane Welch, 49 and Jack's second wife, learned of the relationship in December. The rest of the world found out this month, when The Wall Street Journal tucked news of the affair into a broader story about the turmoil it caused at Harvard. Last week brought a new excuse for high-minded publications (like NEWSWEEK) to air this laundry: the Welches say they're divorcing. So if you choose to read on, it's because you're interested in the legal angle, not the tawdry stuff....
  • Go East, Young Man

    Bo Feng, 32, is an unlikely mogul of the Internet age. He was born in China and didn't use a telephone until he was 14. A decade ago he worked in Chinese restaurants in the Bay Area while studying to be an art-film director. Then, through a friend, he met Silicon Valley power broker Sandy Robertson, cofounder of the investment bank Robertson Stephens. Feng convinced Robertson that despite his lack of business experience, his knowledge of China's culture would make him useful to American moneymen looking for a toehold in the world's most populous market. In the blink of an Internet minute, Feng was transformed from dumpling dispenser to venture capitalist.He quickly became part of a cohort of young Chinese-born, American-educated friends who've spent the last few years flying between San Francisco and Shanghai, trying to launch the Chinese equivalents of Yahoo, eBay and Microsoft. In the process, they hope to transplant the Valley's entrepreneurial magic to their homeland. And for...
  • The Ripple Effect

    ;Forgive Michael Useem if he sounds a bit gleeful when he talks about Enron. Where other observers see a tragic tale of executive avarice, Useem, a management professor at the University of Pennsylvania's Wharton School, sees the case study of a lifetime. Indeed, Enron is fast becoming as useful to Useem and his colleagues as "Hamlet" is to the English department. "From a teaching standpoint this has everything," Useem enthuses, describing how he's using the scandal to lead classroom discussions about leadership, auditing, executive compensation and culture. At law schools, too, Enron seems destined to land on syllabuses for years to come. "I think it's as fascinating as the Watergate hearings," says Duke University law professor James Cox, who's using Enron to teach about conflicts of interest and the obligations of directors. "Every day there's a new revelation." ...
  • Betting Big On Lousy Stocks

    When Jim Chanos and his friends go on spring break, there's no time for golf. Or the beach. Or fun of any kind-- unless your idea of a good time is sitting in a conference room talking about lousy investments. Each February, Chanos, a veteran Wall Street investor, picks up the tab to bring 20 of his professional-investor buddies to a luxury Miami hotel. Most of the group specialize in "short selling," in which they bet on stocks to fall, so most of their picks are companies they see heading for hard times. At last February's gathering, Chanos pitched the group on a stock you may have heard of: a high-flying energy firm called Enron. Where most investors saw a sensational investment, Chanos saw Enron as a company with a murky business model, deteriorating profit margins and some cryptic accounting footnotes. "There was no question he was on to something," says Bob Holmes, an investor who attended the conference. ...
  • What's Life Worth?

    Lawrence Singer always figured life insurance was a bad bet. "Statistically it doesn't pay off," says the 33-year-old dentist. "You're better off socking the money away in the stock market." But since September 11, Singer has had a change of heart. He works near the White House and Pentagon--daily reminders, he says, that life feels more risky now. So he recently purchased a $3 million policy. He's glad his fiancee and 3-year-old son are protected, but he laments the price. Because of his medical history, his monthly premium is a hefty $559. "It's a big expense," he says. ...
  • Betting On A Recovery

    Alan Greenspan isn't the type to give high-fives or dance in the end zone. But if his Federal Reserve colleagues were an NFL team, they might be sending the waterboy to the locker room to ice the champagne. One year after chairman Greenspan began the most aggressive recession-fighting offensive of his tenure, the economy is showing early signs of an upturn. Despite huge layoffs, two years of stock-market declines and the momentary paralysis that hit the economy after September 11, experts and the public are growing optimistic. Economic data is always confusing and often contradictory, but many of the latest stats are encouraging. Consumer confidence is rising. Job losses are slowing. From Silicon Valley to Wall Street, there's a growing consensus that a rebound is in sight. A few economists already talk about this recession in the past tense. Even more cautious ones, like Allen Sinai of Primark Decision Economics, expect growth to return by summer vacation. "The worst of the slide...
  • Meet The Bin Ladens

    Boston real-estate agent Ellen Signaigo Brockman was paging through the newspaper one day in the early 1990s when a story about a little-known terrorist named Osama bin Laden caught her eye. A few days later, she showed the article to a business acquaintance. "Isn't this name similar to yours?" she asked Mohammed Binladin. Yes, he told her. The man in the newspaper was his brother. Osama, he explained sadly, was the black sheep of their wealthy Saudi family. Many of the clan's 54 children, heirs to a vast construction fortune, traveled the world, studied abroad and developed a taste for American food, music and clothing. But Osama had chosen a much different path. He became a radical Islamic fundamentalist, hid in mountain caves, obsessed endlessly about destroying Western infidels. Many of the other brothers and sisters used their inheritances to buy businesses to fund lavish lives. Osama used his to buy businesses to fund suicide bombers. Osama "had gotten a little out of control,...
  • 'We'll Pull Through'

    Sitting in her darkened Bronx apartment, watching a video of her missing father salsa dancing, Michelle Nieves is grieving--and thinking about money. Her father, Juan Nieves, a 56-year-old Puerto Rican immigrant, worked as a salad maker at Windows on the World and was the sole provider for her mother and younger sister. When he died in the Sept. 11 attack on the World Trade Center, "we went from having something to having nothing," says Michelle, 23. Juan had just $15,000 in union life insurance; the family's medical benefits could expire as early as next month. He leaves an ill wife who's never held a job, $7,600 in savings and a beloved 1968 Mustang that the family may have to sell. Two adult Nieves children, Michelle and John, 25, who had their own apartments, may be forced to move back into their mother's two-bedroom, $521-a-month rental with their two younger siblings. Christine, 15, is already looking for a part-time job to help out. And the older siblings will dip into their...
  • Screeching To A Halt

    Shhh. it's supposed to be a surprise. On Oct. 4, Terri and Ed Trombley planned to wake their two daughters--Kathleen, 5, and Laura, 10--and announce: "Come on, we're going to Disney World!" They'd board a plane and be hangin' with Mickey by nightfall. But their plans changed on Sept. 11. "I don't want to be near a plane," says Terri. "I don't want to be away from home. And part of me would feel guilty about having a lot of fun." The family hopes to take the trip next June. "Losing a family vacation is minute compared to what some people have lost," says Terri.It's a sentiment that can't be overstated: amid unimaginable bloodshed, it's hard to feel too upset about red ink. But as the nation got back to work last week, it became clear just how dramatically the economic landscape has changed. Nervous investors dealt the stock market its biggest one-day point drop in history, with the Dow down 14 percent for the week. America's economy has been in slo-mo, teetering near recession for...
  • Maxed Out

    A Nation Of Shoppers, We Financed The Boom Of The '90S With A Heavy Reliance On Credit. Now, With The Economy Slowing, The Bill For Our Record Borrowing May Finally Be Coming Due
  • Ceos Sound The Warning

    Every newspaper reader has a first stop, whether it's the sports page, the funnies or a gossip column. For business types, it's the front-page "What's News" summary of The Wall Street Journal--and as 2001 turns into an annus horribilis for corporate America, that section of newsprint is becoming more depressing than the obituary page. Last week, after tallying their second-quarter numbers, a host of blue chips--Compaq, Corning, Xerox--spilled their red ink down Wall Street. Even worse than the numbers were the forecasts, as industry leaders such as Microsoft warned that the third-quarter revenues won't be any prettier.Economy watchers looking for the full half of the glass may soon be squinting to find it. We're not in an official recession, and unemployment remains historically low. Consumer spending, although slowing, hasn't tanked just yet. But the view from corner offices has rarely been this bleak. Corporate profits in the second quarter were down 18 percent from last year--the...
  • Married To Nascar

    John and Nancy Andretti sit with their three children in the fifth row, listening to hymns, Proverbs and the sermon. It would be an ordinary Sunday scene if the chapel weren't a converted garage, if race-car engines weren't rumbling outside and if the word "safety" didn't dominate the prayers. Just two hours after the service the men in these makeshift pews--NASCAR drivers Andretti, Jeff Gordon and a few dozen others--will circle Michigan International Speedway at 170 miles per hour. And Nancy Andretti and the rest of the NASCAR wives will cheer, worry and pray.There's much to celebrate this racing season. NASCAR is getting more network TV exposure than ever and seems poised to win new fans. But since Dale Earnhardt's death in February, the Winston Cup circuit has become a traveling shrine. Earnhardt was the fourth driver to die in just nine months, fueling new concerns over racing safety that cloud even jubilant moments like Dale Earnhardt Jr.'s triumph at Daytona this month. The...
  • A Grim Job Snapshot

    It's every carpenter's favorite aphorism: measure twice, cut once. In the corporate world, that advice applies to workers, not wood. Better to execute layoffs quickly and decisively, experts say, and let the workers who remain get back to business. The alternative--the drip-drip-drip of repeated downsizings--is a Chinese water torture that kills morale and productivity. But as America's slowing economy continues to downshift, many employers are deciding they have no choice.Dozens of big companies have already laid off workers this year, and now a growing number--Polaroid, Dell, 3Com and Nortel among them--are swinging the ax again. And they're aiming not just at factories, but at their white-collar workers. Executives blame false optimism and the murky nature of this slowdown, which has been characterized by a wild mix of up-and-down economic stats. "When they looked in their crystal balls several months ago, they were hoping for a V-shaped turnaround--a quick downturn and a quick...
  • A 20-Year Toll

    We'd been seeing patients with fevers and weight loss, and by the spring they'd developed an unusual pneumonia. All were homosexual. A colleague and I wrote an article. Then other doctors started calling. They had cases, too.When it appeared in children and transfusion recipients, that was a turning point in public perception. Up until then it was entirely a gay epidemic. Now everyone could relate. Suddenly TV crews wanted interviews. I thought: "Where had these people been for the last year?"It seemed obvious this was a transmissable disease that spread through exchanges of bodily fluid. But condoms weren't popular--these were very liberated sexual times.One night a guy showed up at our house who said he had the cure for AIDS in an old Johnson's shampoo bottle. Ryan said: "I ain't taking that"... Was I tempted? I was more tempted by the things I was hearing in the media about new drugs... Ryan said, "Mom, they're working so hard, by the time I get really sick there will be a cure....
  • More Than Just Hot Air

    Except during hurricane season, folks in Greenville, S.C., don't worry much about power outages. But the current energy crisis has still had an impact on many of the city's 98,000 residents. That's because Greenville is home to a bustling General Electric factory that produces gas turbines. They're a key component in powering the 1,300 new power plants the Bush administration says need to be built over the next 20 years. Just a few years ago the GE plant--the only one of its kind in the nation--was a sleepy place; even the local paper rarely gave it a mention. Now, as GE scrambles to ramp up production, its work has taken on national importance--and every extra turbine it produces will help the cause. Says Mark Little, a GE vice president: "We're going to put more units online this spring than we did all last year." ...
  • Trying To Outfox Uncle Sam

    Jamie and Christina Lancaster were perfectly happy with their accountant. Then the couple, both Virginia Beach real-estate agents, attended a seminar by Sanford Botkin, president of the Tax Reduction Institute. For seven hours Botkin, a former IRS attorney, paced the ballroom inside a Norfolk, Va., hotel, rattling off ways self-employed people can dramatically cut their tax bills. Botkin's techniques--totally legitimate, he insists--help people find new write-offs for cars, restaurant meals, haircuts and even vacations. The Lancasters loved what they heard. They're already planning to deduct up to $7,000 for their two Ford Expeditions, thanks to an arcane rule about depreciation schedules for extra-heavy vehicles. And they've rearranged a trip to London to make it tax-deductible. They also fired their accountant for failing to show them these loopholes. Says Jamie: "Now we're going to go to Disneyland and find a way to write that off, too." ...
  • Weathering The Storm

    After One Of The Worst Weeks Ever For Stocks, Hopes For A Quick Economic Recovery Are Fading. What Consumers Do Next Could Cause-- Or Avert--A Recession.
  • A Mom For Massachusetts

    When Jane Swift ran for lieutenant governor of Massachusetts in 1998, she faced tough questions that had nothing to do with her record. How's that morning sickness? Would she breast-feed? How would she govern and take care of Elizabeth, the daughter she'd delivered just two weeks before Election Day? "Her uterus [received] more attention than her politics," wrote Boston Globe columnist Ellen Goodman. Last week Swift--and her maternal duties--regained the spotlight when the Bush administration tapped her boss, Gov. Paul Cellucci, to become ambassador to Canada. That will make Swift, 36 this week, the nation's youngest governor--and, if all goes well, in June she'll be the first ever to deliver twins.Working mothers are nothing new in the corporate world. But Governor Mom will be a test case of how well a female elected official can juggle work and family. Swift has dropped some balls before. As lieutenant governor she used state employees to baby-sit her daughter, took a state...
  • How Safe Is Your Job?

    Pink Slips Are Suddenly Flying Again, As Employers Show A New Willingness To Cast Off Workers At The First Hint Of Trouble. Why This Wave Of Layoffs Is Different, And What Workers Can Do To Prepare For The Worst.
  • A Recession, Virtually

    If the U.S. economy were a patient in a hospital, its doctor might be admitting it for close observation.This week's release of the gross domestic product figures for the fourth quarter showed the economy growing at an anemic 1.4 percent, the lowest growth rate in five years. The stats confirmed what Alan Greenspan told Congress just a week earlier: that the economy has undergone a dramatic slowdown in the last four months, and may be idling at close to zero growth.The low number, combined with a striking drop in consumer confidence and continued layoffs at companies like DaimlerChrysler and Amazon.com this week, have lots of folks wondering: Are we entering a recession?We're not there yet. The classic definition of a recession is six months of economic contraction, which means that 1.4 percent number would have to dip into negative territory before the R word applies. "We limit the concept of a 'recession' to something where there's been an actual decline, a substantial decline,...
  • Jack Welch Goes Surfing

    General Electric chairman Jack Welch doesn't have a little black book. Instead, he keeps two enormous black binders--GE's operating manual, filled with reams of minutiae about company operations--on his credenza. And when Welch talks about the Internet, his current passion, he flips madly through those binders, showing off how GE is using the Net to reduce phone bills and transaction costs, increase sales and energize its work force. Welch, 65, came late to the Internet revolution, but he's driving so aggressively to wire his Old Economy behemoth that InternetWeek magazine recently named GE--not some hot dot-com--as America's top e-business. Welch preaches that after all the hype, it's really big, old companies like GE (revenues: $112 billion) that will reap the biggest benefits of the Internet. He told NEWSWEEK's Daniel McGinn why: ...
  • What's A Shopper To Do?

    When it comes to the slowing economy, Ellen Spero isn't biting her nails just yet. But the 47-year-old manicurist isn't buffing, filing or polishing as many nails as she'd like to, either. Most of her clients spend $12 to $50 weekly, but last month two longtime customers suddenly stopped showing up. Spero blames the softening economy. "I'm a good economic indicator," she says. "I provide a service that people can do without when they're concerned about saving some dollars." So Spero is downscaling, shopping at middle-brow Dillard's department store near her suburban Cleveland home, instead of Neiman Marcus. "I don't know if other clients are going to dump me, too," she says.Even before Alan Greenspan's admission that America's red-hot economy is cooling, lots of working folks had already seen signs of the slowdown themselves. From car dealerships to Gap outlets, sales have been lagging for months as shoppers temper their spending. For retailers, who last year took in 24 percent of...
  • Anything Jack Can Do...

    Jack Welch wanted everything to be perfect. The celebrated chief executive has spent 20 years turning General Electric into America's most admired company, and as the clock ticked toward his retirement next year, the race to succeed him had become the most closely watched CEO sweepstakes in history. So Welch waited until the quiet Thanksgiving weekend to secretly convene GE's directors and anoint Jeffrey Immelt, the head of GE's medical-equipment business, as the CEO-in-waiting. To prevent leaks, Immelt used a pseudonym ("Mr. Cathcart") to fly to Florida for a celebration dinner. Then Welch surprised his own pilots with last-second orders to fly his corporate jet to Ohio and New York so he could tell the runners-up they'd fallen short. Everything went smoothly until last week's press conference, when Immelt coincidentally wore the same blue shirt, blue blazer and gray slacks as the boss.Investors hope the similarities go beyond their wardrobes. Immelt, who played Ivy League football...
  • Scouting A Dry Campus

    They are stories that make every parent's heart ache. On Nov. 10, University of Michigan sophomore Byung Soo Kim celebrated his 21st birthday by trying to drink 21 shots of whisky. He downed 20, then passed out, turned blue and stopped breathing. As Kim lay dying in a Michigan hospital later that next night, seven college students hopped into a Jeep 500 miles away on the campus of Colgate University. Moments later, the driver, a Colgate student who authorities say was dangerously intoxicated, veered off the road and struck a tree, killing four of the passengers. And by the time Monday classes began, five proud families who'd sent their children away to school were busy planning their funerals.As tragedies like these fill the evening news, they're increasing the anxiety for parents of college-bound students. While this year's seniors winnow through applications, experts see families beginning to consider campus alcohol abuse as a factor in college selection. Surveys show that just...
  • A Ph.D. Hits The Road

    For more than a decade, Pleun Bouricius spent summers prepping for classes as a doctoral student and lecturer at Harvard University. But last August, after a fruitless, four-year search for a university teaching job, she began a different course of study, at the United Tractor Trailer School in central Massachusetts. Now alongside her Harvard Ph.D., she has a Class A commercial driver's license--a diploma that's guaranteed to land her a job. "After years of being met with rejection, it's nice to be in an industry where they really want you," she says, icing her knee after hours of clutching during parallel-parking practice. After she passed her driver's test, nobody asked to see her vitae, her 368-page dissertation on a 19th-century Southern sentimental writer or her adviser's recommendation ("the perfect candidate," he wrote). Trucking companies don't ask about education. No felonies? No accidents? Bouricius is ready to ride.It's an extreme story in these boom times. We're living...
  • Not The Retiring Kind

    When Harvard business School instructs students on how a company should choose a new CEO, professors use a favorite case study: General Electric's famous face-off in the late '70s. Back then, GE chairman Reg Jones put a half-dozen underlings through a fierce contest for the top slot. The winner was John F. Welch Jr., who's now widely regarded as America's best-ever chief executive. And as Welch, now 64, nears his own retirement next April, it looks like GE will give the Harvard profs a new-and-improved benchmark for succession planning. Welch and GE's board have spent years screening potential replacements in what's been called the most hotly watched CEO search ever. But the M.B.A.s may have to make do with the old, outdated case. Last week, as part of GE's $45 billion deal to buy Honeywell, Welch announced he'd postponed his retirement. Says Harvard professor Jay W. Lorsch: "It illustrates how easy it is for events to screw up a well-planned process."In the corporate world,...
  • There's Just No Substitute

    It's 6 a.m., and Piper Haywood is dialing for subs. She and her colleagues at Chicago Public Schools Substitute Teacher Center place 2,200 subs a day--and their job is getting tougher. Ideally, Chicago should have a pool of 10,000 substitutes ready to go, but it now has just more than 3,000. That causes audible distress in administrators' voices. "You'll get someone?" asks a worried principal on a recent Wednesday. "We'll try," Haywood says. By 9 a.m., her team has replaced 92 percent of the absent teachers. Principals or librarians will supervise the 88 teacherless classes.At a time when recruiting full-time teachers is hard enough, finding substitutes is harder. More than 86 percent of the nation's school districts have problems finding subs, according to the Substitute Teaching Institute. Much of the shortage is Economics 101. With unemployment at record lows, fewer people will take no-benefits temp work--especially when it involves dodging spitballs for $65 a day. But there's...
  • Failing Grades: A Small College Hits The Skids

    Mattie Pontecorvo should be a walking advertisement for Trinity College of Vermont. For the last two years she's thrived at the tiny women's Roman Catholic college: class president, resident adviser, campus tour guide and all-round Trinity booster. But as she walked across campus last month, the back-to-school buzz was absent. Instead, moving boxes sat outside offices and dorms were being repurposed as homeless shelters. After 75 years, Trinity is closing its doors this month--and Pontecorvo begins her junior year at a college across town.This is a strange time to shutter a campus. A record 15.1 million students will enroll in college this fall; meanwhile, the strong economy has swollen endowments. But prosperity isn't uniform. While large, well-known institutions count their blessings, times are tough for many small, less-famous schools. Bradford College, a 197-year-old institution north of Boston, graduated its final class this summer after trustees found no escape from deep debts...
  • The Making Of A Fad

    Elementary schools have long been the perfect place to study how contagion spreads. So let's focus our microscope on Palisades Elementary Charter School, just west of Los Angeles. Last November Walker Baron, 11, became the first Palisades student to possess a lightweight, foldable scooter called the Razor, and he began riding it to school. The Razor had no marketing campaign and could be found in few stores, but word of its wonders spread, mouth to mouth, from classroom to classroom. Before long, one entire class was Razoring to school. "The trend grew at an alarming rate--the scooters started to reproduce," says Palisades principal Terri Arnold. By spring Arnold had banned them from campus, holding firm even in the face of petition-signing fifth graders. "I can totally relate to the Razor's appeal--they're so much fun," says Diana Baron, Walker's mother. "They're greased lightning."They're selling like it, too. This new breed of collapsible scooters, which include models like Razor...
  • Waterworld

    For the people of Gloucester, Mass., it's an eery sight, akin to a ghost ship. Floating dockside is a 72-foot boat christened the Andrea Gail, a Warner Bros.-owned replica of the local fishing vessel that sailed into a storm with a crew of six in October, 1991--and never came back. Six years later, journalist Sebastian Junger's tale of the tragedy became the runaway bestseller "The Perfect Storm." The movie, starring George Clooney, Mark Wahlberg and Diane Lane, sails into theaters on June 30..Clooney plays ship captain Billy Tyne, a down-on-his-luck fisherman who leads a crew of six (including Bobby Shatford, played by Wahlberg) into the Atlantic for a month of dangerous "long-line" sword fishing. Their timing couldn't have been worse: miles from land, they get caught in a once-in-a-century storm. While shore-bound family and friends (including Christina Cotter, Shatford's girlfriend, played by Lane) gather at a Gloucester bar to commune, watch the news and worry, the crew tries to...
  • When Teachers Are Cheaters

    This spring has been a season of embarrassment for the nation's public schools. In suburban Potomac, Md., an elementary-school principal resigned last month after parents complained their children were coached to give the right answers on state tests. In Ohio, state officials are investigating charges of cheating by teachers at a Columbus elementary school that was recently praised by President Clinton for raising test scores. And in New York City, more than four dozen teachers and administrators from 30 schools stand accused of urging their students to cheat on various standardized city and state tests.It's bad enough when kids get kicked out for cheating. But as the school year ends, an alarming number of teachers and principals face charges of fixing the numbers on high-stakes tests that determine everything from whether an individual kid gets promoted to an entire district's annual budget. Although there are no firm statistics, school officials agree that the problem has become...
  • Dot-Coms To M.B.A.S: Help Us!

    Last month an envelope arrived at the office of Air Force Capt. A. J. Leone. The enclosed orders had nothing to do with the C-141 aircraft Leone helps fly. When he's off duty in Mt. Pleasant, S.C., Leone studies for an M.B.A. through Auburn University in Alabama, participating in classes via videotape and e-mail. Before graduating, he and 83 classmates (including a NEWSWEEK reporter) had to complete Auburn's Case Study Competition. The envelope contained their mission: a case study. They had to help ValueFind.com, a tiny, stagnant Web site, become a force in e-commerce.Case studies have been an integral part of business school for decades. At Harvard, students dissect 800 cases during the two-year program. "The magic in this school is when I take a case into the classroom and 90 really smart people spend two hours debating what to do," says Harvard Dean Kim Clark. Increasingly, they're debating Internet strategy: up to half of the 750 new cases created annually are focused on e...