CORNELL BUSINESS

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Johnson on Tap Visits Saranac
In the spring of 2011, the Johnson on Tap beer appreciation
club embarked on its hrst trek of the vear. a visit to the
Saranac brewerv in Utica, NY. A group of about 20 members
foined a private, behind-the-scenes tour arranged bv CEO
Nick Matt (JGSM 73)... pg 4
Johnson Academics
The Johnson School is at a crossroads in its goal
of being recogni:ed as an upper-echelon business
school. Despite a recent fump in graduate school
rankings, there are a few changes that would enable
the school to receive its proper due... pg 2
Johnson Graduate School of Management December 7
th
, 2011 Vol. LXXVI
The Fire Behind the Kindle
Meet Peter Larsen, Director of Digital Services at Ama:on
A 1996 graduate of
Johnson, Peter Larsen has
had a dream technology
career. Prior to Johnson, he
spent four years at a Japanese startup that was
acquired by HP. While at Johnson, he launched
the High Tech Club. Soon after graduating,
he worked at Apple and over time became
CEO of Enpocket, a global mobile advertising
company. After Enpocket was acquired by
Nokia in 2007, Larsen joined Amazon and, in
his most recent role there, launched the Kindle
Fire.
The Cornell Business Journal caught up
with Larsen during a recent trip to Ithaca.
Below are excerpts from the conversation:
Peter, you have an amazing background.
What have been some of your most
cherished lessons over the last 17 years?
Well, I don’t know about amazing but a few
stand out.
My manager at Liberate Technologies told
me to ensure that my work ft in well with, and
was impactful to, the overall business strategy.
That has really stuck with me and is something
I still think about with every job I take. It is
important to look at things from an owner’s
perspective. Individual success is signifcant
only when it translates into overall business
results.
I think the other piece is to really think hard
about how big the market that you’re entering
is. Size matters and bigger is better. I’ve seen
a lot of startups with great people and vision
fail because the market they’re going after is
too small. Small markets leave you no room
for error; you need to execute perfectly and
capture large market shares to be successful.
What are the skills that you recommend
individuals interested in entrepreneurship
or technology pick up while in school?
Since MBAs pick up all the functional skill
sets at business school, let me focus on the less
obvious skill sets, like the ability to evangelize
a vision across functions. This is vital in the
technology arena where teams are typically
working on a handful of projects. Since these
teams are not working for a single manager,
vision helps get everybody excited and pointed
in one direction. Coercion never works in
the technology industry, you have to learn to
motivate & infuence people instead.
The second thing is that you’ve got to really
be curious and have a passion for technology.
In my case, right out of college, I worked
in Tokyo for a company selling networking
equipment. I remember spending countless
weekend hours building an understanding of
technology. PC Magazine and Byte Magazine
became mandatory reading. I took a Java
programming course and taught myself HTML
and JavaScript. Even today, the frst thing I
try to do each morning is open the RSS reader
on my Kindle Fire and pore through all the
technology blogs. If you’re not curious and
passionate about it, you’ll get out of date pretty
quickly.
As the founder of the High Tech Club,
what would you like to see the club do in the
future?
I think one of the really interesting things
about technology startups is their business
models. The club can try to study some of
these innovators, even if they are tiny and
no name guys – latest examples include
Spotify and Zynga. Eventually these digital
models will make their way across many
more traditional industries. A specifc and
methodical study will help supplement the
more traditional business models MBA
students learn at Johnson.
Looking back 16 years, what were some
of your best classes?
I took two courses that stick with me and
I stay in touch with the professors. I was one
of the students that helped set up Professor
Donald Greenberg’s class on ‘Disruptive
Technologies’. I worked round the clock on
a document for Professor Greenberg around
the time cable companies were expanding into
multimedia. But I remember his reaction after
he read my work. He said ‘Peter, I expected
more from you. I’m disappointed. I expected
you to do something really crazy and present
that’. And that’s always stuck with me. I
thought that was really helpful. He was looking
for aggressive ideas; what better time to think
big than grad school?
The second one was a venture capital
fnance course. It went through the nuts and
bolts of venture capital deal valuations and
fnancing. I`ve raised money Iour or fve
times in my career and I used a lot of the IRR
analysis that we learned in that class.
What are some of your favorite Cornell
moments?
Many of them occurred at the Chapter
House. We spent a lot of time there, having a
few brews too many, usually with classmates
on nights when you shouldn’t have been
having so many!
Any concluding advice for students at
Johnson?
Only one thing and it sounds clichéd but I
think the biggest risk to your career is not to
take one. I’ve tried to take a bunch of risks
with the different jobs I have had. Looking
back, I wouldn’t be nearly as effective today
if I hadn’t done sales, product management,
business development, fnance, and general
management. All those experiences were
individually great and collectively really
important.
By Dynan Gomes
JGSM '12
Johnson Graduate School of Management December 7
th
, 2011 Vol. LXXVI 2
Point/Counterpoint
Two current students debate the merits of Johnson’s grading scheme!
Johnson is at a crossroads in its goal of
being recognized as an upper-echelon business
school. Despite a recent jump in graduate
school rankings, there are a few changes that
would enable the school to receive its proper
due as a premier institution. One of these is a
switch from the current letter-grading format to
a pass/fail system. Reasons in support of this
change are highlighted below.
Increased appeal for prospective
students. If a student is deciding between
two comparable business schools,
grading methodology will often be a
deciding factor. Prospective students
attend business school not only to
broaden their fnancial knowledge but,
more importantly, to secure a position at
a top frm. II prospective students realize
that a school creates extra hurdles to
realizing that goal, including the threat of
poor grades, this may prevent them from
attending the institution.
Impact on the recruiting process.
When making hiring decisions, many
frms put substantial stock in frst
semester grades. Given that these frms
have a full resume of work experience
as well as a series of interviews from
which to judge candidates, it seems
that disproportionate emphasis may be
placed on marks from a few classes;
this is especially true of candidates
who are older, more removed from
the classroom, and in need of time to
acclimate to an academic environment.
Furthermore, frms are hiring candidates
from comparable schools without the
same relative grading metric – making it
diIfcult to judge Johnson candidates by
the same standards.
More time for clubs and recruiting.
While academics are an important part
of an MBA student’s time in school,
time spent outside of the classroom may
be more meaningful in the long run. By
devoting excessive time to studying for
classes, students miss the opportunity
to participate in the numerous clubs
available to the Johnson community.
These clubs are great places for students
to make lifelong social and professional
contacts with their fellow classmates.
Furthermore, the recruiting process is
a grueling but necessary experience
for all MBA students. To be successful
in the process, students need ample
time to prepare for interviews, attend
corporate briefngs, and travel to events
related to the job search. There is not
always suIfcient time Ior recruiting
when a student must focus on classroom
performance simultaneously.
Implement an honor roll. While
there are some benefts to letter grades,
including a tangible way to recognize
top achievers in the classroom, Johnson
might instead follow a method similar
to that employed by other top business
schools: the use of a pass/fail system
where the top 10 percent of students is
recognized by an academic honor roll.
This solution still rewards high achievers
without penalizing who choose to focus
on other activities.
Johnson is an amazing institution, which
correctly puts an emphasis on providing a
world-class education to its student body.
However, it appears with a new dean arriving
next year and the goal of rising in the
rankings that now is the time for all necessary
improvements to be made. It is clear that a
modifcation oI the current grading system is
imperative, and will do wonders to increasing
student morale and overall attitudes towards
the institution.
The Johnson grading scheme is a constant
source of debate among students. Many feel
that Johnson should change its grading scheme
to a pass/fail matrix. However, I believe that
Johnson should leave the grading scheme as
it is. There are four key advantages to the
current system that students who are requesting
a change do not see:
Differentiation. Many companies
that run competitive recruiting processes
namely, consulting frms and investment
banks – request transcripts as a way of
directly comparing candidates. If Johnson
suddenly denies these frms the ability to
rank candidates, it would be more diIfcult
them to identify good candidates. This
could potentially lead frms to reduce the
number of Johnson students that they hire.
Indicators of success on the job.
Many of the subjects taught at Johnson
are a good indicator of future job
perIormance e.g. core fnance Ior those
that want to be investment bankers and
core marketing for those pursuing brand
management. If grades were eliminated,
frms recruiting Ior these proIessions
would have less with which to gauge
future job performance. In that case, they
may resort to other (and possibly less fair)
methods for evaluating candidates such as
case interviews, standardized testing, and
technical interviews.
Reduced incentive to perform.
Removing letter grades will potentially
demotivate many students, thereby
limiting the learning process and
academic engagement. It is likely that
the removal of a formal grading system
will encourage many students to do the
minimum amount of work necessary to
pass their courses. Class participation
will likely decline, less thought will go
into deliverables, and students will be
more prone to miss classes.
Measuring academic progress. It
will be much more diIfcult Ior students
to measure their progress in class without
grades. If students are unaware of where
they stand relative to their classmates, it
will be challenging for them to determine
whether or not they are improving in a
given subject. It is essential for students
taking subjects Ior the frst time to be able
to see how they are doing and where they
need to improve – otherwise, they will not
be able to accurately judge how well they
understand the subject matter.
These four factors clearly articulate why
it is essential for Johnson to leave its current
grading scheme in place. Students pushing
for revisions are likely those who have
achieved low grades and would beneft Irom a
system that equalizes the entire class. In my
opinion, any changes that could potentially
reduce hiring rates and learning should not be
implemented.
By CBJ Writer
JGSM '12
By CBJ Writer
JGSM '12
The Best
Advice I
Have Ever
Received
In a recent interview, the
CMC’s Steve Calk shared
with CBJ the best piece of
advice he has ever received.
Below are his suggestions.
****
“Be Constantly Reading”
I received this advice when I was a senior
in college from my mentor, who headed a
private equity frm in New York. I complained
that I did not have the time to read, but he had
a simple answer: if you omit one television
show from your viewing day, then you have 60
minutes. That is 60 minutes, six days a week,
or 360 minutes a week. I read about a page
per minute and hence 360 pages of a book in a
week. For the last 10 years, I have read about
a book a week, and I have a book with me at
essentially all times.
I take a multipronged approach to reading
and rotate among fve or six categories. These
categories include current business books,
history and biographies, philosophy, religion,
D.I.Y., and classics. I maintain a list oI all
the books I want to read and classify them by
categories. Some are worth buying. Some I
borrow. At home, I am reading Endurance by
Alfred Lansing; while driving, I am listening
to Leo Tolstoy; at work, I am reading Timeless
Wisdom from Ancient India by Basant Gupta.
The book on ancient India helps me
understand my international students’
perspectives and the world better. In addition, I
am constantly encountering situations at work,
CMC, or home that I can always relate in some
way to something I have read. Reading has
made me a better overall problem-solver. For
students at Johnson, I highly recommend Dig
Your Well Before Youre Thirstv by Harvey
Mackay. It will be immediate help for your job
search, and it will be solid wisdom for you the
rest of your life.
Well-read individuals make better
connections, giving you more in common with
everyone you meet and the ability to have
intelligent conversations or add thoughtful
ideas to someone else’s problem. Vigorous
readers are also great conversationalists – an
attribute which will impact both your social
life and your interviews in a positive way.
By Manian Krish
JGSM '12
Johnson Advances to
National IPO Challenge Finals
Following a highly
selective qualifying round,
three teams representing
Johnson advanced to the
2011 IPO Challenge Finals hosted by the
Investment Banking Group at the Booth
School of Business.
A total of 15 teams were selected to
participate in the fnal competition on October
29 in Chicago, IL. Johnson talent vied against
MBA students from Booth, Columbia,
Kellogg, and London Business School for the
coveted prize: the mandate to underwrite an
initial public offering.
A performance learning opportunity
simulating the process in which investment
bankers engage, the Challenge gave competing
teams 24 hours to perform and persuasively
present a valuation of Net Learning, a K-12
provider of testing and assessment services,
before a panel of bankers from Credit Suisse,
William Blair, and UBS as well as Booth
faculty. “The Challenge offered the Johnson
teams a unique opportunity to throw ourselves
into a real-world setting before many of us
head to NYC Ior internship interviews,¨ said
Randy Wilson (JGSM ‘13).
Leveraging the strength of the Johnson
community to prepare for the Challenge,
the teams engaged in consultations with
managerial fnance proIessor Ronni Michaely
and sought the advice of second-year students
in the Old Ezra Finance Club. During the
Investment Banking Trek to New York
City, students also benefted Irom alumni
perspectives on how to effectively pitch their
recommendations.
“Students, faculty, and staff always speak
about how collaborative Johnson is, and this
competition showcased that fact,” observed
Andrew Sickinger (JGSM ‘13).
The Challenge brought together frst-year
students with a range of backgrounds, from
banking to private equity to managerial fnance
to marketing. The participants included Ryan
Berube, Zach Canter, Kunal Chakrabarti,
Eric Chan, Patrick George, Joshua Gernold,
Bernard Kaplan, Said Mia, Aditya Nair, Craig
Rosoff, John Schumacher, Andrew Sickinger,
John Stott, Ian Swanberg, and Randy Wilson.
Above all, the Challenge offered students the
opportunity to experience one oI the defning
hallmarks of Johnson: its collaborative ethos.
“Every member of our team is a strong
individual and strong contributor, but our
commitment to succeed collectively allowed
us to unify our efforts and achieve success,”
Sickinger observed.
“It was an honor to represent Cornell’s best
qualities of collaborative teamwork, dynamic
leadership, and thought leadership,” said
Wilson.
By Natalie Lin
JGSM '13
Calling
all writers!
The Cornell Business
Journal is looking for
writers of all types. Please
send and email to nsl39@
cornell.edu if you are
interested!
An Un-Gradeful
Experience
Don't Change that
Grading Scheme!
3 Vol. LXXVI Johnson Graduate School of Management December 7
th
, 2011
Why Top Earners Need to be Taxed More
Last week, the
Congressional Budget
OIfce (CBO), a non-
partisan arm of Congress,
released a study fnding that income grew
by 18 percent for the bottom 20 percent of
households and 275 percent for the top one
percent of households (those earning over
$250,000) in the decade beginning in 1997.
On an infation-adjusted basis, income Ior the
bottom 20 percent declined. CBO also said that
the share of transfer payments, or entitlements,
to the lowest-income households declined.
Unsurprisingly, the overall average federal tax
rate fell during this period. These are pretty
damning statistics that exhibit the growing
income inequality in the United States. This
study, among other data points, makes the
ongoing debate over the need to increase taxes
for households earning over $250,000 seem
almost an insult to arithmetic.
Yes, we need spending cuts Irom the
government, but that cannot be the only
solution to get America growing again. The
current tax policy is unsustainable and if the
representatives don’t address this yawning gap,
sooner or later, the populace will ask harder
questions from the gentry. Occupy movements
are only the beginning. One would think
that leaders would be racing to address this
severe fault line. Instead, we have prominent
members of the Flat Earth Society coming out
with proposals Ior a fat tax so that we can join
exemplary economies such as Kazakhstan,
Bosnia, Russia, and Iraq—some of the
countries where presumably you can fle taxes
on the back on an envelope. But, I digress.
We hear some form of the following
three objections to raising taxes on the top 1
percent. First, higher taxes will dissuade job
creation. Second, top earners spend money,
which creates a trickle-down effect that in turn
boosts the economy. Finally, there is the made-
for-cable, “class warfare” argument. Let us
dismantle these in one fell swoop. It’s actually
rather easy.
All of us can undoubtedly agree that the
secular expansion in the United States, which
began in the 1940s and continued through
the 1980s, was one of the best times for
the country. The marginal tax rate for the
top earners in 2010 was 35 percent. Want
to venture a guess for the average tax rate
of the top-earners from 1940 to 1980? 78
percent. Between 1951 and 1964, this rate
held steady at 91 percent. For these 40 years,
no one stopped investing in America, no one
needed the chimera of trickle-down economics,
and job creation was relatively easy compared
to the bleakness that graduates face today.
As for the class warfare argument, I think the
CBO study says it all, if you really needed it.
Just for fun, want to guess what followed the
last time this country lowered tax rates rapidly
for top earners? It was the Great Depression
(tax rate for top earners was lowered from
73 percent in 1921 to 25 percent in 1925). In
the last three decades, we have seen a similar
order of decline in the tax rate. The middle-
and low-income earners have survived due
to increased use of credit and assistance from
the Great Society programs, which were
expanded by Presidents Nixon and Ford. Now,
as the citizens and the government begin to
retire debt from these unsustainable levels,
it is diIfcult to imagine continued economic
growth without paring income inequality and a
return to taxation at the levels last seen during
this country’s brightest days.
Continued spending cuts are proposed as the
nirvana. I fully agree with the approach, but
this is not enough to balance the budget and
grow America sustainably. Your Iriends sit on
boards oI local nonprofts as Johnson Board
Fellows. They see frst hand what these cuts
have meant to the community. More people
with disabilities are denied service, victims of
natural disasters such as the Owego fooding
have less support for repairs, and victims of
assault fnd Iewer doors through which to
escape everyday brutality. The most vulnerable
Americans have taken it on the chin. Do we
want to double down on that? I’m certain that
none of us wants to be a part of a community
that is unable to put resources behind
compassion.
Tax increases for top earners is bitter, but
needed, medicine.
The title uses a famous quote from John
Maynard Keynes; but this is not a book
about Keynes or Keynesian economics. It is
about a country’s effort to reduce its debt.
Can you guess the name of this country?
Unemployment is around 10 percent, with
30 percent of employment in temporary
work. Personal income has ben stagnant for
decades and the state is saddled with debt
(over 70 percent debt to GDP ratio). In the late
1980s through 1990s, this country – Canada
– was heavily indebted and economically
stuck. Today, Canada is one of the stronger
economies on the globe with minimal debt.
How did the country effect this transformation
and does its story offer the United States a
blueprint for recovery?
It took Canada almost 10 years to control its
debt and, contrary to preconceived notions, the
Liberal Party was in power when the rubber
met the road. Brian Mulroney’s Progressive
Conservative Party, which took power in
1984, started the conversation by presenting
defcit fnance as an enemy oI good economic
performance. It was the Liberal Party, elected
in 1993 with Jean Chrétien as prime minister
and Paul Martin as the fnance minister, that
eventually enacted the reforms.
The process of reforms came in multiple
steps. For readers following the current debate
over the U.S. federal budget, it should come as
no surprise that one oI the frst fxes considered
was the MacEachen tax reform, which would
close tax loopholes for the wealthy and
corporations. These steps aimed to increase the
revenue base, as it remained diIfcult Ior the
government to sell the concept of cutbacks in
government services.
Then came stealth fxes. Social groups are
rarely so marginalized as to be attacked head
on. Arcane technical amendments such as
de-indexing oI infation were used to chop
benefts such as Iamily allowance, children`s
tax exemption, refundable tax credits, and the
personal income tax system.
In the latter half of the 1990s, Martin made
broad cuts in government spending. Some tax
changes were made, but spending items such
as business subsidies, defense, transportation,
and public employment were pared at a rapid
rate.
These fxes helped the fscal house but
took a toll on the economy. Amid economic,
social, and political instability, the Tea Party of
Canada emerged and a rightward shift among
liberals occurred. In Canada, the Reform
Party formed and won several seats west of
Ontario – an outcome reminiscent of the Tea
Party’s success in the recent U.S. congressional
elections.
If Martin’s playbook is any guide, U.S.
defcit elimination will be an exercise in the
strategic withdrawal of the state rather than a
fscal retrenchment: the state will continue to
play the role of a counter-cyclical stabilizer,
but benefts will be less generous; corporations
and consumers will be weaned off of subsidies;
specifc cuts that make the government leaner
will be favored over across-the-board cuts.
We live in interesting times.
By Saurabh Prasad
JGSM '12
By Saurabh Prasad
JGSM '12
Tim Lewis’ In The Long Run We’re All Dead
Book Review
Johnson Graduate School of Management December 7
th
, 2011 Vol. LXXVI 4
In the spring of 2011,
the Johnson on Tap beer
appreciation club embarked
on its frst trek oI the year:
a visit to the Saranac brewery in Utica, NY. A
group of about 20 members joined a private,
behind-the-scenes tour arranged by CEO
Nick Matt (JGSM ’73). During the tour, the
group took an up-close look at all stages of the
brewing operation, including grain crushing,
wort boiling, yeast addition and fermentation,
bottling, and of course tasting for quality
assurance.
The visit was especially helpful for members
of Johnson on Tap who participate in home
brewing. “I really love light beers and getting
to see and taste the effervescent Utica Club
gave me inspiration for new creations,” said
Will Martin. Oregon native Kara Schnoes
“loved the caramel porter” and claimed that
“it might be just as good as something you’d
fnd out west.¨ Many members incorporated
leanings into their beer recipes for the Battle of
the Brews held last April.
At the end of the tour the group visited the
new bottling line, rebuilt after a devastating
fre in 2008. Though the damage was so
extensive that the line was closed for over a
month, the brewery has completely recovered
and is now more fexible and agile. Former
Harpoon marketer and frst-year Schuyler
Blackman commented that “it’s rare to see a
brewery with this much history in such great
shape; they really have taken care of it well.”
While known today Ior the broad favors oI
its Saranac brand, the Matt Brewing Company
has a long history of producing a variety of
beverages. Founded in 1888 by the German
immigrant F.X. Matt I, the brewery quickly
became one of the largest beer producers in
the country. Like many breweries during
Prohibition, the company transitioned away
from alcoholic beverages to produce soft
drinks under the Utica Club brand. After
Prohibition, Utica Club became one of the
fagship beers oI the company and is still
produced and distributed locally.
Today, much of the brewery’s production
capacity is dedicated to outsourcing, as the
Matt Brewery brews and bottles beverages for
companies like Brooklyn Brewery and Pete’s
Wicked Ale, in addition to its Utica Club and
Saranac lines.
Johnson on Tap Visits Saranac
The Canadian Turn to Fiscal Restraint
By Alex Green
JGSM '12
Calling all writers!
The Cornell Business Journal is looking for writers of all types.
Please send and email to nsl39@cornell.edu if you are interested!

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