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1106 of 1231 DOCUMENTS

The New York Times
February 4, 2008 Monday

Correction Appended

Late Edition - Final
Campaign Conflicts Are Not Over Core Goals, but How to Get There
BYLINE: By ROBIN TONER
SECTION: Section A; Column 0; National Desk; POLITICAL MEMO; Pg. 18
LENGTH: 1296 words
DATELINE: WASHINGTON
Although the surviving presidential candidates furiously attack one another over the details of their tax, health and Iraq proposals, there is more consensus in the parties these days than disagreement.

Democrats would roll back the Bush administration's tax cuts for wealthy Americans, for example, while Republicans would extend them. Republicans would try to make private health insurance more affordable through tax incentives, while Democrats would use subsidies and new government programs to try to cover every American.

Much of the conflict within the parties revolves around the candidates' character, leadership skills and consistency -- rather than the big questions of taxing, spending and foreign affairs. In contrast to some primary elections, like 1968 for the Democrats or 1976 for the Republicans, these are not parties fundamentally in conflict over core principles.

Still, the candidates do disagree over means, if not ends. They do differ over the priority given problems. And given that several candidates have ''evolved'' on issues as the campaign has progressed, they do challenge one another's commitment and sincerity.

Health Care

Some of the sharpest recent exchanges on the Democratic side have come over health care.

Both Senator Barack Obama and Senator Hillary Rodham Clinton have proposed multibillion dollar plans to expand coverage to the 47 million uninsured people in the United States, financed in part by rolling back Mr. Bush's tax cuts for those making more than $250,000 a year.

Both would expand coverage by a combination of subsidies for families and employers and the creation of public and private programs through which Americans can buy affordable coverage. But while Mrs. Clinton would require everyone to acquire coverage, Mr. Obama would require insurance only for children.

The Obama campaign argues that Mrs. Clinton's requirement is onerous and unfair; Clinton forces counter that unless Democrats start with the goal of universal coverage, they will never come close to achieving it.

The debate over details troubles analysts like Robert D. Reischauer, president of the Urban Institute, who argues that it obscures the overwhelming challenge of passing any big health plan. ''Laying out the vision is fine, but facing the reality of how difficult fundamental change will be for a sector that represents 16 percent of our G.D.P, has to be front and center,'' Mr. Reischauer said, referring to the health care industry's prominence in the economy.

While Democrats argue over universal coverage, Drew E. Altman, president of the Kaiser Family Foundation, a health care research group, said Republicans ''are articulating a different priority.'' The Republicans present their goal as ''creating a more efficient and therefore more affordable health care marketplace,'' Mr. Altman said.

Senator John McCain of Arizona, for example, proposes a new system of tax credits to encourage people to buy insurance in the private marketplace.

Mitt Romney emphasizes giving states more flexibility with federal health money, encouraging deregulation of private health insurance markets and increasing the deductibility of medical expenses. This represents an evolution for Mr. Romney; the plan he signed into law as governor in Massachusetts included a requirement that everyone obtain insurance, which drew fire from some conservatives and from the McCain forces as a ''big government mandate.''

Mike Huckabee, a former governor of Arkansas, promises to expand coverage with ''market-based, consumer-based policies'' like tax credits to buy private insurance.

Taxes

Here again, the distance between the parties is vast. Grover Norquist, president of Americans for Tax Reform, notes that while the Republican candidates ''didn't start in the same place'' on the Bush tax cuts, ''they've all moved in the same direction.'' The main Republican candidates support the idea of making permanent the Bush administration's tax cuts, which will otherwise soon begin to expire, and adding cuts for businesses and individuals.

As Mr. McCain puts it on his Web site, ''Entrepreneurs should not be taxed into submission.''

Even so, this subject has led to some sharp exchanges between Mr. Romney and Mr. McCain, who initially voted against the Bush tax cuts on fiscal grounds. Mr. Romney has argued that Mr. McCain's initial votes throw his conservatism into question.

The Democrats would roll back the Bush tax cuts on the most affluent, and replace them with an array of tax cuts for middle- and lower-income Americans. Mr. Obama, for example, would expand the earned-income tax credit for low-income workers and create a ''Making Work Pay'' tax credit of up to $1,000 per family. ''When you work in this country, you should not be poor,'' Mr. Obama said Sunday.

Mrs. Clinton has proposed middle-class tax cuts for health care, caregiving, energy efficiency and college costs, as well as what aides characterize as the ''most aggressive matching tax cuts for savings'' that could produce nest eggs of hundreds of thousands of dollars by retirement.

Both Democrats are also pushing major plans to stimulate the economy. Mrs. Clinton proposes aggressive action to deal with the home mortgage crisis, including a 90-day moratorium on foreclosures and a freeze in rates on many subprime loans. She cited her housing proposals as one of the big differences in economic policy between her and her opponent in last week's debate.

''I think it's imperative that we approach this mortgage crisis with the seriousness that it is presenting,'' she said. ''There are 95,000 homes in foreclosure in California right now. I want a moratorium on foreclosures for 90 days, so we can try to work out keeping people in their homes, instead of having them lose their homes.''

On the Republican side, there is one huge distinction among the candidates: Mr. Huckabee has proposed scrapping the income tax system and replacing it with a national sales tax.

Social Security

The looming strains in the nation's entitlement system -- especially Medicare, the health program for the aged, and to a lesser extent Social Security -- are likely to be one of the most difficult domestic challenges the next president will face. But the issue has come to the forefront only briefly in the primary season, in a skirmish among the Democrats.

Both Democrats oppose the creation of private investment accounts in Social Security, which Mr. Bush sought in 2005. Both have expressed support for a bipartisan commission to look at the long-term financial health of the program. But Mr. Obama has expressed interest in raising the cap on income subject to the Social Security tax -- currently $97,500 -- while Mrs. Clinton has stopped short of that.

Iraq

On the Democratic side, the debate over Iraq has revolved around one big difference between Mr. Obama and Mrs. Clinton: Mr. Obama, who was not in the Senate at the time, opposed the war in Iraq from the beginning, while Mrs. Clinton voted for the resolution authorizing the use of force. Obama allies argue that his stance underscores his good judgment and should override any fears about his lack of foreign policy experience.

Both candidates opposed the Bush administration's troop buildup. And both have proposed phased withdrawals of combat troops from Iraq. Mr. Obama has promised to have combat troops out of Iraq 16 months after taking office. Mrs. Clinton has said her goal is to remove most troops in her first year.

On the Republican side, Mr. McCain has been a forceful advocate for the troop buildup in Iraq and has opposed a timeline for withdrawal. In recent weeks, he has tried to portray Mr. Romney as occasionally wavering in his support, a charge fiercely denounced by Mr. Romney.

URL: http://www.nytimes.com
SUBJECT: US FEDERAL GOVERNMENT (90%); POLITICAL PARTIES (90%); PRESIDENTIAL ELECTIONS (90%); LEGISLATIVE BODIES (90%); US PRESIDENTIAL CANDIDATES 2008 (90%); POLITICAL CANDIDATES (90%); US DEMOCRATIC PARTY (90%); TAX INCENTIVES (90%); US REPUBLICAN PARTY (90%); TAX LAW (90%); TAXES & TAXATION (90%); US PRESIDENTIAL ELECTIONS (90%); HEALTH CARE (89%); ELECTIONS (78%); HEALTH CARE POLICY (78%); CAMPAIGNS & ELECTIONS (78%); FAMILY (78%); HEALTH INSURANCE (78%); HEALTH CARE COSTS (78%); PRIMARY ELECTIONS (73%); WEALTHY PEOPLE (73%); FOUNDATIONS (65%)
PERSON: HILLARY RODHAM CLINTON (83%); BARACK OBAMA (83%); MITT ROMNEY (50%); JOHN MCCAIN (50%)
GEOGRAPHIC: ARIZONA, USA (79%); GEORGIA, USA (79%) UNITED STATES (96%); IRAQ (92%)
LOAD-DATE: February 4, 2008
LANGUAGE: ENGLISH
CORRECTION-DATE: February 5, 2008

CORRECTION: An article on Monday about the presidential candidates' stances on health care, taxes and other issues misstated the cap on income subject to the Social Security tax. It is now $102,000 -- not $97,500, the cap for 2007.
GRAPHIC: PHOTO: Mike Huckabee tossing a torn-up tax form at a rally in Macon, Ga., on Sunday. Mr. Huckabee has proposed scrapping the nation's income tax system and replacing it with a national sales tax. (PHOTOGRAPH BY ERIK S. LESSER FOR THE NEW YORK TIMES)
PUBLICATION-TYPE: Newspaper

Copyright 2008 The New York Times Company

1107 of 1231 DOCUMENTS

The New York Times
February 3, 2008 Sunday

Late Edition - Final

Yahoo Sale Could Be Bad for Minnows
BYLINE: By BRAD STONE and MIGUEL HELFT
SECTION: Section BU; Column 0; Money and Business/Financial Desk; Pg. 1
LENGTH: 1634 words
DATELINE: SAN FRANCISCO
-- FOR decades, Silicon Valley has been the land of eternal optimism and high anxiety, traits that pitch into overdrive anytime a seismic business event washes across the corporate and entrepreneurial landscape here -- like, for example, Microsoft's blockbuster $45 billion bid for Yahoo on Friday.

The legions of high-tech entrepreneurs who have set up camp here with clever ideas, a willingness to scramble for financing and the energy to weather round-the-clock days have typically tethered their dreams to a singular outcome: getting fabulously rich by selling to one of the three Internet giants, Microsoft, Google or Yahoo.

But if Microsoft's takeover bid for Yahoo succeeds, that calculus becomes more harrowing because of a simple reality: the field of large, lushly endowed suitors will narrow by one. And that is a fact sure to jangle nerves already strained by growing fears of an economic recession.

''From a start-up and investor perspective, if there are more companies trying to vie for the same businesses, there are more exits,'' said Bismarck Lepe, a former Google employee and now chief executive of Ooyala, a year-old video host and advertising company. ''It's not great for competition if there are only two acquisition targets instead of three.''

To be sure, a Microsoft-Yahoo deal could be good for Silicon Valley, funneling money into the economy and triggering a round of copycat deals as other players like Google and the News Corporation look to keep up.

But Microsoft is buying Yahoo because it has steadily fallen behind Google in the lucrative online search market and because the future of computing may not be forever linked to the desktop market that Microsoft now dominates. Apparently unable to keep up with Google through internal efforts, the legendary software giant in Redmond, Wash., has gone outside to solve its problems by trying to buy Yahoo.

So the rationale for Friday's proposed mega-deal is based on Microsoft's own particular corporate needs and may not be a harbinger of rampant deal-making in the Valley.

Moreover, with an economic recession looming nationally, the unsolicited bid for Yahoo comes at a difficult time for the normally cocksure world of high tech. Visibly, much of the region maintains an almost obstinate belief that it can weather any economic storm that emerges. Consumers are still flocking online, advertising is following, and the current generation of start-ups has been built frugally -- with lessons from the dot-com bust of several years ago still very much in mind.

Venture capitalists also raised nearly $35 billion last year, more than at any other time since before the dot-com crash, according to the National Venture Capital Association. Those financiers are ready to make bets on countless entrepreneurs who hope to build the next Google, Facebook or YouTube.

But as the stock market lolls and an outsider, Microsoft, bids to gobble up a company that once was one of Silicon Valley's crown jewels, the region's innovators and corporate stewards appear to be growing ever more anxious. That trait is most visible in the top executives at public companies whose eyes are trained on parallel declines in consumer confidence and public equities.

Shares of Google had dropped nearly 20 percent since the beginning of the year -- and then they fell an additional 8.6 percent on Friday after Microsoft made the play for Yahoo. Apple has dropped 33 percent since the start of the year. That was enough to prompt Steven P. Jobs, Apple's chief executive, to send a reassuring memo to options-sick employees last week that concluded: ''Hang in there.''

Many in the typically overconfident venture capital world say it is foolish to believe the technology sector is somehow sheltered from the storm.

''All markets are linked,'' says Peter Rip, a general partner at Crosslink Capital, adding that the pain might trickle down from the public markets to large private companies and eventually to smaller start-ups. ''We just asked every one of our companies to take a sharp pencil to their hiring plan this year. It is going to be a bumpy ride for a while.''

IN a blog posting this week titled ''Downturn, Now What?,'' Will Price, a partner at the San Francisco venture capital firm Hummer Winblad, said the recession could punish technology investors for succumbing yet again to investment fads and high valuations for companies without proven business models.

He calls these companies ''Field of Dreams'' start-ups, because their entrepreneurs believed that if they built popular online services, advertisers would inevitably come. Now that might not necessarily be the case.

''There's been a suspension of belief'' at Internet companies without a proven way to earn money ''that the market is going to let you off the hook,'' Mr. Price said. ''These companies are going to have a hard time getting past experimental interest from advertisers when they want to start attracting really big spending.''

MOST Valley residents, including even the most pessimistic venture capitalists, are quick to say that the Internet economy would be in an enviable position if there were a recession. Mutual funds, media companies and private equity firms are all trying to get in on the Internet action. The online advertising market is booming.

This is where true believers are likely to ward off recessionary fear with two numbers: 21 and 7. Twenty-one percent of the average American's media-consumption time is spent online, analysts say, yet only 7 percent of all advertising is online. The hope is that advertising will inevitably shift online and close this gap, whatever the economic outlook.

''Consumer eyeballs are flooding from traditional media to the Internet,'' said Seth Sternberg, chief executive of the online chat company Meebo. ''Recession or not, big companies have to figure out how to do really great brand advertising on the Web to keep their brands in front of users.''

For that reason, many Internet executives say that traditional media companies -- not Web properties -- are likely to be the first victims of any advertising pullback. ''If our advertisers cut their marketing budget by 15 or 20 percent, that will hurt,'' said John Battelle, who ran the Industry Standard magazine during the first dot-com boom and now runs the online ad network Federated Media. (The New York Times Company has invested in Federated.) ''But my guess is that they will cut it first in print or TV and not online.''

Still, the dot-com bust -- and its destructive reverberations -- continues to cast a shadow over even the most optimistic Internet evangelist. In 2000, as the stock market cratered and fear spread, venture capitalists pulled the plug on hundreds of start-ups and wrote off millions of dollars in losses.

Frank Addante's online advertising company at that time, L90, went public and reached a tantalizing market capitalization of $500 million before the dot-com bubble popped and L90 was forced to sell its technology to a rival and file for bankruptcy protection.

Not surprisingly, Mr. Addante is keeping one eye on the economy.

Now the chief executive of another online advertising company, the Rubicon Project, Mr. Addante, like other entrepreneurs, is confident that the tech sector would survive an economic downturn.

But he is also hedging his bets. Earlier this month, the company raised $21 million in venture capital before it needed a cash infusion, in part, Mr. Addante said, because such capital may not be available in the coming year.

''When money is on the table and it's a decent deal, sometimes you have to go and take it,'' he said. ''You never know what's going to happen in the markets.''

LIKE Mr. Addante, Max Levchin, the chief executive of Slide, says that the United States is on the road to recession and that Silicon Valley start-ups could be headed for a venture capital-mandated round of belt tightening. So Mr. Levchin, who co-founded PayPal, a company that successfully weathered the dot-com crash, decided to take the money while the going was good: He recently raised $55 million in additional financing for Slide, a company that makes video- and photo-sharing tools.

''We determined that if we were going to raise money, we would have a much easier time of it at the end of 2007 than at any time during 2008,'' he said. ''I don't think I was the only guy in town who thought that.''

Mr. Lepe of Ooyala recalls his drives to Mountain View, Calif., in 2001, when he would see a new empty billboard off Highway 101 each week as pessimism spread through the community.

The lesson: Economic downturns have a way of fostering panic and transforming a community's collective consciousness. ''So much in the Valley -- whether a company gets funded or not -- happens on gut instinct,'' Mr. Lepe said. ''If someone's house isn't being sold and they can't go out and buy their yacht, it does have an impact on their psychology.''

And what psychological impact could a potential Microsoft-Yahoo deal have on Silicon Valley's heady business environment? While he worries about the reduced number of potential acquirers, Mr. Lepe also speculates it could have a positive outcome, if it stimulates a flurry of deal-making in the industry.

But not many entrepreneurs are holding their breath -- for a new round of deals or for a sea change in the current business climate -- because of a possible megamerger of Microsoft and Yahoo. Mr. Sternberg of Meebo said a marriage of the two Internet titans could benefit start-ups like his if Yahoo and Microsoft were able to deliver on the promise of a more efficient online advertising system. But that could be years off.

''Does this impact our world overnight? Definitely not,'' he said, ''at least as far as I can see.''
URL: http://www.nytimes.com
SUBJECT: ENTREPRENEURSHIP (90%); VENTURE CAPITAL (89%); TAKEOVERS (89%); INTERNET & WWW (89%); RECESSION (88%); ECONOMIC NEWS (88%); ONLINE ADVERTISING (75%); ONLINE MARKETING & ADVERTISING (75%); SOFTWARE MAKERS (73%); MARKETING & ADVERTISING (67%); MARKETING & ADVERTISING AGENCIES (66%); DESKTOP COMPUTERS (63%); PERSONAL COMPUTERS (64%); COMPUTER SOFTWARE (77%); INTERNET SOCIAL NETWORKING (70%)
COMPANY: GOOGLE INC (90%); MICROSOFT CORP (90%); NEWS CORP (66%); FACEBOOK INC (50%); YAHOO INC (95%)
TICKER: GOOG (NASDAQ) (90%); GGEA (LSE) (90%); MSFT (NASDAQ) (90%); NWS (NYSE) (66%); NCRA (LSE) (66%); YHOO (NASDAQ) (95%); YAH (LSE) (92%); NWS (ASX) (66%); NWS (NASDAQ) (66%)
INDUSTRY: NAICS518112 WEB SEARCH PORTALS (95%); SIC8999 SERVICES, NEC (90%); SIC7375 INFORMATION RETRIEVAL SERVICES (95%); NAICS511210 SOFTWARE PUBLISHERS (90%); SIC7372 PREPACKAGED SOFTWARE (90%); NAICS518111 INTERNET SERVICE PROVIDERS (95%); SIC7373 COMPUTER INTEGRATED SYSTEMS DESIGN (95%); NAICS519130 INTERNET PUBLISHING & BROADCASTING & WEB SEARCH PORTALS (95%); NAICS517110 WIRED TELECOMMUNICATIONS CARRIERS (95%)
GEOGRAPHIC: BISMARCK, ND, USA (70%); SAN FRANCISCO BAY AREA, CA, USA (93%) WASHINGTON, USA (79%); NORTH DAKOTA, USA (70%); CALIFORNIA, USA (93%) UNITED STATES (93%)
LOAD-DATE: February 3, 2008
LANGUAGE: ENGLISH
GRAPHIC: PHOTO: Max Levchin, a PayPal founder who now runs Slide, says he expects that investors in start-ups will rein in spending. (PHOTOGRAPH BY DAMON WINTER/THE NEW YORK TIMES) (pg.BU7) ILLUSTRATION (ILLUSTRATION BY CHRISTOPHE VORLET)
PUBLICATION-TYPE: Newspaper

Copyright 2008 The New York Times Company

1108 of 1231 DOCUMENTS

The New York Times
February 3, 2008 Sunday

Late Edition - Final

Eureka! It Really Takes Years of Hard Work
BYLINE: By JANET RAE-DUPREE.

Janet Rae-Dupree writes about science and emerging technology in Silicon Valley.

SECTION: Section BU; Column 0; Money and Business/Financial Desk; UNBOXED; Pg. 4
LENGTH: 1066 words
WE'VE all heard the tales of the apple falling on Newton's head and Archimedes leaping naked from his bath shrieking ''Eureka!'' Many of us have even heard that eBay was created by a guy who realized that he could help his fiancee sell Pez dispensers online.

The fact that all three of these epiphany stories are pure fiction stops us short. As humans, we want to believe that creativity and innovation come in flashes of pure brilliance, with great thunderclaps and echoing ahas. Innovators and other creative types, we believe, stand apart from the crowd, wielding secrets and magical talents beyond the rest of us.

Balderdash. Epiphany has little to do with either creativity or innovation. Instead, innovation is a slow process of accretion, building small insight upon interesting fact upon tried-and-true process. Just as an oyster wraps layer upon layer of nacre atop an offending piece of sand, ultimately yielding a pearl, innovation percolates within hard work over time.

''The most useful way to think of epiphany is as an occasional bonus of working on tough problems,'' explains Scott Berkun in his 2007 book, ''The Myths of Innovation.'' ''Most innovations come without epiphanies, and when powerful moments do happen, little knowledge is granted for how to find the next one. To focus on the magic moments is to miss the point. The goal isn't the magic moment: it's the end result of a useful innovation.''

Everything results from accretion, Mr. Berkun says: ''I didn't invent the English language. I have to use a language that someone else created in order to talk to you. So the process by which something is created is always incremental. It always involves using stuff that other people have made.''

The innovator Jim Marggraff, creator of an interactive world globe called the Odyssey Atlasphere, the LeapPad reading platform for children and LeapFrog's Fly talking pen, explains that each creation built on the work that went into making the previous one. That same process of accretion holds true for the Pulse Smartpen, introduced last week by his new company, Livescribe; he hopes that the product, which records audio while it tracks what the pen writes, will bring back computing to its pen-and-paper roots.

''The aha moments grow out of hours of thought and study,'' he says. ''If you look at my innovations, there's a common theme. I take something familiar, intuitive and ubiquitous and recast it in a manner that will redefine its use to drive profound change.''

The Atlasphere grew from his dismay that one in seven American adults could not find the United States on an unmarked world map, and that one in four couldn't find the Pacific Ocean. He sees geographic illiteracy as a big obstacle to world peace, so he packed his interactive globe with games and tens of thousands of geographic and cultural facts, all available at the touch of a stylus.

The ''near touch'' technology that went into the Atlasphere might have other educational benefits, Mr. Marggraff realized. A self-described ''student of learning and learning systems,'' he had been puzzling over how to help his 4-year-old son understand reading.

''I was pointing to the words on the page and trying to explain what a word was, but I'd watch him and realize that he didn't have any idea what I was talking about,'' he says. ''This black-ink thing here is called a letter -- I realized this was all very abstract.''

Mr. Marggraff likes to go to bed with one or more problems on his mind. ''Typically, I'll fall asleep chewing on it and then I'll wake up at 4 in the morning with some sort of solution,'' he says.

That's a common theme in innovation, according to Mihaly Csikszentmihalyi, a psychologist at the Claremont Graduate University in California. ''Cognitive accounts of what happens during incubation assume that some kind of information processing keeps going on even when we are not aware of it, even while we are asleep,'' he writes in ''Creativity: Flow and the Psychology of Discovery and Invention.''

This time, Mr. Marggraff awoke at 4 in the morning determined to ''flatten out'' the globe so he could use the Atlasphere's near-touch technology on a single page and, ultimately, within a specially designed book to help children learn how to read. Though some would call this an epiphany, it took years of trial and error to make the LeapPad a reality.

''There's an aha moment followed by a ton of work to figure out what it is that's actually going to work,'' agrees Douglas K. van Duyne, co-founder of Naviscent, a Web usability consulting firm. ''It goes back to that old saw that invention is 1 percent inspiration and 99 percent perspiration. The idea of epiphany is a dreamer's paradise where people want to believe that things are easier than they are. It takes a huge amount of determination and effort to follow through.''

Businesses want to believe that a brilliant mind or a brilliant idea can make or break their innovation efforts, Mr. Berkun says. The myth of epiphany has a long history because it's appealing to believe that there is a short, simple reason that things happen. The myth has staying power because there is a tiny core of truth within it.

''But as soon as you dig into what happened five minutes before that magic moment, or a day, or a week, or a month,'' he says, ''you realize that there is a much more complicated story in the background.''

THAT more complicated story most often begins and ends with a determined, hard-working and open-minded person trying, and failing, to find a solution to a given problem.

''Successful entrepreneurs do not wait until 'the Muse kisses them' and gives them a 'bright idea': they go to work,'' Peter F. Drucker says in ''Innovation and Entrepreneurship.'' ''Altogether they do not look for the 'biggie,' the innovation that will 'revolutionize the industry,' create a 'billion-dollar business' or 'make one rich overnight.' Those entrepreneurs who start out with the idea that they'll make it big -- and in a hurry -- can be guaranteed failure.''

It's not that these magical moments of epiphany don't happen. In small ways, they happen all the time. But they're not nearly as important as what the innovator did before -- or ultimately does after -- the magic light bulb goes on. As the French scientist Louis Pasteur once said, ''Chance favors the prepared mind.''

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