The Search Engine Wars ( In the News )

It's not often that a brand new search engine enters the fray against the super search giant Google. But that's what happened Monday, July 28, with the birth and arrival of Cuil (pronounced Cool ), the newest and, according to them, the largest search engine on the internet. Cuil indexes 122 billion web pages; at least that's their goal.

The awkwardly named Cuil is gaelic for knowledge according to founders Tom Costello and Anna Patterson. Cuil is a new business start up funded at the 33 million dollar level mostly by venture capital from Madrone Capital, Tugboat Ventures and Greylock Partners. The founders and their chief associates are all veterans of the search engine wars, having worked on Google's major search indexes, Ebay search, AltaVista and AltaVista's Babelfish ( their translation engine ). The founders believe their contribution to search is a focus on relevance and comprehensive content and not simply page counts. They argue their search results will be more meaningful to users. So far, that remains to be seen.

Announcements of Cuil and its taking on of Google heightened expectations of all trying to use Cuil Monday. Birth of the site was not without considerable pain. The site stalled, often froze, and when results were returned they were often irrelevant and sometimes even bizarre; hardly a notable beginning for a major search engine. The initial response was overwhelming. There were an estimated 50 million hits the first day. Servers had to be upgraded right away to accept the traffic. Inc Magazine staff blogger, Jason Del Rey, reported that a search for "Inc Magazine" could not find its web site ("site not found"). By the time of this posting Inc Magazine returns the correct results, although there are still problems; many of the results are not relevant.

Search results still leave a lot to be desired. We tried searching "fannie mae", knowing that Congress and the President had signed new legislation ostensibly propping up Fannie Mae and Freddie Mac. Cuil's "relevancy" search only returned the Fannie Mae home page, but no news about Fannie Mae or the crisis it was undergoing on a daily basis in the stock market, housing market, or in Congress. Indeed, the results were the "public" face of Fannie Mae on which there was little or no news about what it was going through. In other words if you wanted to know "about Fannie Mae" and its context and problems, you could not find that through Cuil. Hence no knowledge! A Google search on "fannie mae" returned in depth information about the company and what was happening to it. So much for Cuil's "comprehensive" search capacity.

Google has not become the gold standard of search by sitting on its laurels. Throughout the years it has put considerable effort into bettering and expanding its search capacity. But Cuil has identified vulnerability in Google and its data collection sometimes invasive approach. For example Cuil guarantees a non invasive privacy policy, focusing on the search not the searcher. But it will have to get much better in returning relevant search results before it can be considered a first rate contender with Google. Right now it can't be considered a first stop for search. It is a start up with lots of growing pains to be gotten through quickly if it is to be a contender. Beyond search it will have to work on its business model to develop a strong revenue base. Cuil has much talent and promise. It will be worth watching as will be Google's response.

For books on Google and its significance see David A Vise's The Google Story, John Battelle's The Search: How Google and its rivals rewrote the rules of business and transformed our culture, and Building Your Business With Google For Dummies by Brad Hill, all available at the Berkshire Athenaeum or your local library.

The Big Green Books (Essential Business Tools)

That's how people referred to the Thomas Register, long the principal business and information source for industrial suppliers, manufacturers, purchasers, and businesses nationally and, recently, worldwide. Published in book form by the Thomas Publishing Company from its inception in 1898 until 2006, the Thomas Register once consisted of 34 1000 + page books, known by their distinctive green covers bordered in black, and listed any product manufactured from the smallest part to the largest assembly, an all inclusive catalog of the industrial manufacturing process. It was also part of every public library's core business reference collection.

In 2006 Thomas Publishing stopped publishing the Thomas Register in book form and became an online only exhaustive survey of manufacturing, calling itself ThomasNet.com. The website is very deep in content, a veritable one stop shop for buyers and manufacturers. Here's how ThomasNet describes itself:

"From a single search box users can search over 607,000 industrial suppliers, indexed by 70,000 product and service categories, and have access to thousands of industrial product catalogs and over 20 million CAD drawings. ThomasNet.com also offers a library of over 800 white papers and case studies on product applications, processes and technologies." Other features include daily industrial news blogs, extensive information on industry trends, discussion forums, RSS feeds and alerts in all areas. If you are looking for news and intelligence on industry ThomasNet should be your first stop.

ThomasNet sees its main function as putting buyers and suppliers in contact with each other. Suppose you are looking for adhesive tape suppliers in Western Massachusetts, ThomasNet's indexing supplies quick links to dozens of local suppliers and manufacturers, together with links to their catalogs, specifications, CAD drawings and websites. ThomasNet also offers a free website evaluation service and free purchasing tools, where purchasers can place Requests For Proposals (RFPs), suppliers place bids for contracts, and bids may be tracked.

ThomasNet also allows companies to register a free profile and to place their catalogs and specifications on their site. Individual users may set up their own free MyThomas accounts, subscribe to industry alerts and news and customize according to their interests. ThomasNet sees itself as covering everything from "actuators to zirconium"

If you are in business and you are looking for parts suppliers ThomasNet is your starting point. Government agencies, Fortune 500 companies, large and small businesses, use ThomasNet. For libraries ThomasNet is still a core reference source; only it is now online. Its indexing is excellent. You can find what you're looking for very quickly. CAD ( computer assisted design ) drawings, often in 3 dimensional display allow engineers and architects the opportunity to select and preview a critical part. White papers allow shared intelligence in critical areas. ThomasNet free tools facilitate the contracting process.

All in all ThomasNet is an essential business tool, a qualitative expansion of the Thomas Register into an online utility. It's even maintained its distinctive green coloring and black accented borders in the online version. And, if that were not enough, Thomas Publishing has expanded its supply/purchasing catalog worldwide through ThomasGlobal.com, modeled after ThomasNet. ThomasGlobal allows you the opportunity to make contact with suppliers/manufacturers in 28 countries, including China and India, the world's fast growing markets.

You will want to Bookmark the ThomasNet site for your business.

Fannie Mae, Freddie Mac, IndyMac ( In the News )

Everywhere you turned during the last week, you could not avoid bumping into these acronyms. Just who or what is Fannie Mae, Freddie Mac, and IndyMac? In what ways are they related if any? What is their relation to the current economic crisis? Where can I learn more?

Let's start with Fannie Mae, also known as the Federal National Mortgage Association(FNM on the New York Stock Exchange). The Federal National Mortgage Association was formed in 1938 during President Franklin Roosevelt's second term. From 1938 to 1968 Fannie Mae was a government agency. In 1968 under President Lyndon Johnson, it was privatized, becoming a government sponsored agency( GSE ), owned by private shareholders. From 1938 to 1970 it controlled the secondary mortgage housing market. In 1970 to provide competition congress formed Freddie Mac, also known as the Federal Home Loan Mortgage Association ( FLMA on the New York Stock Exchange). Both Fannie Mae and Freddie Mac are Government Sponsored Enterprises. Together they control the secondary mortgage market in the United States. They are regulated by Housing and Urban Development's Office of Federal Housing Enterprise Oversight.

What is the secondary mortgage market and how does it work? Fannie Mae and Freddie Mac purchase housing loans/mortgages made by US banks. ( They do not deal in individual loans to homebuyers.) They then bundle those loans into securities for sale on Stock Exchanges. Typically banks, national and international investors purchase these securities which represents, currently, 5 trillion dollars of debt. This is the significance of these two large banks. Should they
fail a worldwide economic crisis would be precipated. So Fannie Mae and Freddie Mac promote the American dream of home ownership by purchasing and selling housing debt.

What if the debt that is being sold is bad debt and not secured? An unknown percentage of their holdings is bad debt caused by individual bank's subprime loan practices. These are essentially unsecured mortgages lent to individuals who could not pay their loans as mortgage prices increased. Unpaid mortgages have led to foreclosures, and compounded foreclosures have led to liquidity crises for banks. In the case of the Pasadena, California bank, IndyMac, these bad loans led to a 1.5 billion dollar loss in five days, a run on the bank by panicked depositors, declaration of bank failure by the the Treasury Department's Office of Thrift Supervision and Federal takeover by the Federal Deposit Insurance Corporation ( FDIC ). another Great Depression agency founded under Franklin Roosevelt's auspices 75 years ago in 1933 to restore confidence in banks after their widespread failure.

IndyMac as of Monday, July 14, became IndyMac Federal Bank. Shareholders lost everything. Depositors of 100,000 dollars or less and IRAs of 250,000 or less are guaranteed. Uninsured depositors such as mutual funds may receive up to 50% as IndyMac's assets are sold off. IndyBank has billions of dollars in assets much of it gained through their subprime loans. As a side note, Sheila Bair, Chairman of the FDIC, is former professor of financial regulation, Islenberg School of Management, University of Massachusetts, Amherst, with many years of experience as a regulator. She is actively involved in the IndyMac takeover.

On Sunday July 13, the Federal Reserve acted to guarantee support for Fannie Mae and Freddie Mac, whose stocks had fallen below $10 a share. Should they need it Fannie Mae and Freddie Mac will be able to obtain direct assistance from the Reserve. The Berkshire Eagle interviewed several local bankers who saw little or no effect locally.

There has been extensive coverage of the financial crisis in the business media. Particularly noteworthy are thorough reports in Money Magazine online and Business Week. Where these crises are heading is still to be determined. Investigations have started and legislation is being developed.

The Berkshire Athenaeum has several books in its collection that can be helpful in understanding these important trends. Here are some: Surviving Financial Disasters by Tiffany R. Love; The Fed: the inside story of how the world's most powerful financial institutution drives the markets by Martin Mayer; The Foreclosures.com guide to advanced investing techniques you won't learn anywhere else by Alexis McGee; The Everything Guide to Buying Foreclosures by George Sheldon, and, for a historical perspective, Conrad R. Stein's The New Deal: pulling America out of the Great Depression.

Investing the Templeton Way ( On Our Bookshelf )

For many the stock market is a mystery. With its current volatility what is the best strategy? How can anyone predict it or make money? How can you reduce risk? Can you handicap the market as you would a horse? Just as there are race track scholars, so, too, you have your students of the market. These are the successful investors. And each has a philosophy that guides them. One of the market's most successful investors, John Templeton, died Tuesday, July 8 in his adopted country, The Bahamas, at the age of 95. Among investment circles John Templeton was as well known as Warren Buffett of Berkshire Hathaway, and his secrets have been sought by those who would emulate his success.

In her book, Investing the Templeton Way: the Market Beating Strategies of Value Investing's Legendary Bargain Hunter, Lauren C. Templeton dispenses the wisdom and experience of her great-uncle. His basic philosophy was to "buy low and sell high"; not an unusual idea for investors. However his approach was distinctly contrarian, not going according to the crowd or market panic.

Templeton's approach is Value not Price. When the price of a quality good is discounted, purchase it at a price you determine is beneficial to you. Never pay full price for the good. Weigh the value of the good over time. He developed the idea of "Maximum pessimism". A crash is a good time to buy ( good value stocks available cheaply due to mass downward turns ) . Conversely when there is mass euphoria with stock prices going up and up, Templeton argues that is the best time to sell your stock; that is take advantage of overvalue.

A recent article in Forbes magazine, reflecting on Templeton's death, said the rampant pessimism in today's stock market, was Templeton's kind of market. He would be seeking bargains and buying.

To be the success he was Templeton had to have other tools in his toolbag. He formed the Templeton Funds in the 1950s and was investing globally when no one else was. He invested in Japan in the 1960s. He developed the concept of a diversified portfolio. A cardinal investing sin would be to put "all your eggs in the same basket". His funds were so successful over a 40 year span, that when he sold his fund in 1992 it was for 440 million dollars.

During his lifetime Templeton gave freely of his advice. Another recent Forbes artice provides 8 essential lessons for the investor from him. And on the Franklin Templeton fund website there is a lengthy article by Templeton, 16 Rules for Investment Success. In all Templeton offers a strategic, disciplined approach to market success. His great-niece's book offers vivid testimony to the continuing value of Templeton's approach.

Lauren C. Templeton's book is available at the Berkshire Athenaeum, where you will also find a wide selection of books on personal finance and investing.

The Wal-Mart Effect ( On our Bookshelf )

How do they do it?

How does Wal-Mart (recently changed to Walmart) have such low prices? How did it become the largest retail store in the world? How did it become the world's largest, most often visited, grocery store in the world? And, how do they, year after year, in all kinds of economic conditions, maintain their low prices, high volume, and continue to grow and expand?

Charles Fishman, senior editor at Fast Company magazine, set out to answer some of these questions, producing what Economist magazine called the best business book of 2006, The Wal-Mart Effect - How the World's Most Powerful Company Really Works - How it's Transforming the American Economy. A paperback edition came out in 2007 with a new chapter and as Walmart is always in the news, his book remains timely and up-to-date.

Fishman, who is an investigative reporter, researched his book without the cooperation of Walmart, which at the time of his research was notably secretive about its practices. Nevertheless, Fishman wrote a balanced book, seeking to understand Walmart without condemning or glorifying. Some things he found:

Walmart employs 2 million plus people in the United States alone. Walmart also has the highest employee turnover rate, nearly 50%. Despite this it is the major employer in most states in the United States. Shopping at Walmart for groceries, you will save 15% over any other grocery store, supermarket or otherwise. Walmart has 1 billion dollars in sales per day. When Walmart opens a Supercenter, it adds 500 jobs to an area. However, within that area over 5 years 450 non Walmart retail jobs are lost. Walmart sticks closely to its "Always Low Prices. Always" motto even though their own profit margins are notoriously low at 36 cents on a $10 sale.

Walmart makes its money based on volume. Suppliers want that volume. Walmart buys to supply all their stores. To contract with Walmart brings sales to suppliers but also lower prices to Walmart as they persistently drive prices down as the cost of doing business with them. Low prices this year are expected to be lower still the next year. Fishman explores clearly the effect of this low price strategy on consumers, suppliers, local businesses and communities, national and global economies.

Walmart's emphasis has resulted in major changes in the packaging industry. In fact there are few industries that have not been impacted by Walmart's emphasis. It's made its suppliers much more efficient. Its distribution and inventory systems have helped its own efficiencies and Walmart's practices have been seen as a major counter in combating inflation.

Since Fishman's book came out, Walmart has been changing. It has announced a "green" or sustainability initiative. It is now supporting purchases with local farmers. It has become a major pharmaceutical provider and initiated $4 per generic drug prescription. This has forced other pharmacies to follow suit. Also many employee suits are wending their ways through the court system and Walmart is having to settle.

If you want to understand the Wal-Mart Effect, Fishman's book is for you. If you are planning to do business with Wal-Mart, this book will be an eye-opener. Also Walmart has not only changed its logo, but its motto. While the "low prices always" is the back drop, its new motto is "Save Money, Live Better".

The Wal-Mart Effect is available at the Berkshire Athenaeum and other public libraries.