Social security

Knowledge@Wharton's first newsletter begins with `What's Hot'. And nothing can be hotter in the US business world than what the Federal Reserve is up to. The newsletter features Fed governor Edward M Gramlich's views on social security and other challenges. Gramlich opposes the Clinton administration's proposal to transfer a significant portion of revenues from the projected budget surplus to the Social Security Trust Fund. Gramlich feels that's not the answer to the impending social security crisis. Thenewsletter says: ``Gramlich prefers to keep social security as a separate account with its own devoted payroll taxes.'' The proposed plan threatens to undermine the current discipline imposed by the social security budget constraint, he says.

Brokers anxious

The next item in the newsletter is about the possibility of the Internet replacing brokers. Although it's being talked about in the American context, it will soon be true in India, too, with e-commerce becoming a full-scale reality. The newsletter has quoted a New York Times article: ``For many people, the Internet could replace the functions of a broker, whose stock in trade is information, advice and execution of transactions, all of which may be cheap and easy to find on the net.'' The newsletter adds that the most visible sign of this transformation took place in the first week of June. After years of holding out, Merrill Lynch declared that it would offer online trading starting this summer.

However, it says that the brokers' anxiety hadbegun much before Merrill Lynch's announcement. Some 30 brokers attended a three-day programme in April, co-developed by the Wharton School and the Securities Industry Association, to enhance the managerial and leadership skills of high-potential branch managers. And according to the newsletter, virtually all the brokers expressed concern about their ability to stand up to the competition of electronic trading, with its low fees, 24-hour access to markets and information, and comparatively unregulated environment. ``The paradigm of investing is shifting,'' acknowledged the president of the Securities Industry Association. But brokers were assured that change represents opportunities as well as challenges. Brokers who get ahead of the electronics game now will survive, Wharton experts said.

Dynamic teams

From the concerns of brokers, the newsletter moves on to how small teams can be effective in making businesses succeed. It says that the business world has been obsessed with all things Internetlately. ``Companies that have attached a .com to their names have seen their market valuations soar almost without regard either to revenues or profitability.''

But it adds that the valuation of these companies depends not on large production facilities, but rather on the effectiveness of a small team of individuals working together to offer products or services through a new distribution channel. It says: ``The success not only of these companies, but increasingly all companies, depends upon the effectiveness of the individuals within the company working together as a dynamic team.'' Then of course, the newsletter goes into the finer details of teamwork, which are universally true.

Elderly paying more

The next topic is purely non-Indian. It's about pharmaceutical companies discriminating against elderly US consumers, charging them higher prices while offering heavy discounts to preferred consumers, such as bulk American buyers as well as to retail consumers in countries such as Canada andMexico. This report is based on two recent studies comparing pharmaceutical prices across different market segments.

Services reign

The sixth article in the newsletter is on services replacing manufacturing-which is again not just applicable in the US context, but to the whole world. This one is drawn from a paper, Pink Collar Stress: Employee Performance, Creativity and Satisfaction in Hair Salons. In the paper, Linn Van Dyne of the Eli Broad Graduate School of Management at Michigan State University and Anne Cummings and Karen A Jehn of the Wharton School at the University of Pennsylvania explain that the service sector accounts for more than 70 per cent of all workers and more than 90 per cent of all new jobs to be created by the year 2000.

Says the newsletter: ``Recognising the importance of service jobs, Van Dyne, Cummings and Jehn analysed the impact of stress on one of the more well-known, though seldom observed, positions in the personal service sector-the hair salon stylist.'' Not onlydo you see the relation between stress and work in this write-up, you also enjoy reading it immensely.

Banking revolution

After that comes a dossier, which is relevant for both Indian businesses and consumers. It's about how new technologies, increasing competition, and rising demand from customers for new services is forcing retail banks to rethink what they sell and how they sell it. The newsletter says: ``While scrambling to offer new products and services from mutual funds to life and health insurance, national banks must also deal with technological advances that open up new ways of bringing these services to customers. This revolution in banking represents an immense re-engineering effort with a vast, often unsettling human impact, not only on customers, but employees as well.'' It adds that to track the impact of such changes, a team of Wharton School researchers, funded by the National Science Foundation, spent much of last year getting a close, inside look at how one nationwide bankchooses the products and services it offers and how it will bring them to customers. The newsletter gives you an overview of the research team's findings with relevant links.

Parent market

The last article in the newsletter is about parenting and clinics marketing in-vitro fertilisation procedures to childless couples. There are two options in the US market these days. ``The first one is a programme in which couples pay $7,500 per attempt at having a so-called test-tube baby. Alternatively, clinics offer a money-back guarantee. Couples pay $15,000 up front for three attempts and if these fail, they get a full refund.'' Many top shot executives will just love it.