Apple iPad Adds to Pressure on AT&T

As AT&T prepares to provide high-speed connections for the new tablet-style computer, it’s redoubling efforts to make its network more reliable

By Cliff Edwards and Olga Kharif from BuisnessWeek

As Apple Chief Executive Steve Jobs unveiled the tablet-style iPad computer Jan. 27, many of his pronouncements were greeted with cheers. In contrast, his revelation that AT&T (T) would be the exclusive U.S. provider of high-speed wireless connections for the Internet-capable device was met with audible sighs.

The reaction reflects dismay with the performance of AT&T’s wireless network and concern that adding the iPad will only add to the strain. AT&T is the exclusive U.S. carrier of Apple’s iPhone, a device that already places heavy bandwidth demands on AT&T’s equipment. Even executives of the phone company concede the network isn’t up to snuff in New York and San Francisco. “Consumers may expect more from their iPad than the network can deliver at this point,” says Shira Levine, an analyst with Infonetics, a telecommunications market research firm. “There’s potential for more consumer dissatisfaction.”

If Cupertino (Calif.)-based Apple (AAPL) has its way, iPad users will consume a lot of bandwidth-hogging media. The iPad lets users purchase and download books, movies, and other large files. Marketers may also find ways to deliver multimedia ads and other content wirelessly to the device. If the iPad is successful, “the volume of data would be the same the iPhone consumes plus another 50%,” says Mike Manzo, chief marketing officer at Openet, a maker of software that helps carriers manage network traffic.

Only 25% of iPad Buyers May Get Data Plans

Not everyone who buys an iPad will use AT&T’s network. Three iPad models that work with AT&T’s 3G wireless-phone network will go on sale in April for $629 to $829, with an additional $14.99 or $29.99 a month for a service plan. In all, Apple may sell 3 million to 4 million iPads in the first year, and 8 million in 2011, says Gene Munster, an analyst at Piper Jaffray (PJC) in Minneapolis. As few as one-quarter of new iPad purchasers will add a wireless data plan, predicts wireless-industry consultant Chetan Sharma.

Many iPad users will instead access the Internet using Wi-Fi networks in homes and other locations, AT&T executives said on a Jan. 28 conference call discussing the company’s fourth-quarter results. Three iPad models will be Wi-Fi only. The iPad “will be used a substantial amount of time in a Wi-Fi environment,” AT&T Chief Financial Officer Richard Lindner said on the call. While the iPad’s 1.5-pound frame makes it easy to carry from place to place, the device’s 9.7-inch screen makes it too big to fit into a pocket.

AT&T’s data-plan pricing may go part of the way toward alleviating network strains. Users who pay $29.99 a month can consume unlimited data. That plan “certainly could tax an already taxed network,” says Gerard Hallaren, director of research at TownHall Investment. Those who opt for the cheaper plan may deliberately consume less data for fear of exceeding caps. Because they’ve spent less, they’ll also feel less obligated to use big allotments.

AT&T to Spend $2 Billion on Upgrades

For those who opt for AT&T’s 3G service plans, the company says it’s working on upgrades designed to reduce the number of dropped calls and poor connections. AT&T will spend about $2 billion to improve its ability to deliver wireless calls, John Stankey, CEO of AT&T Operations, said during the Jan. 28 conference call. AT&T is adding twice as much capacity to its network in 2010 as it did last year, he said. The company is also adding 2,000 cell sites, which play a role in delivering wireless calls, and says it will extend 3G coverage by 400,000 square miles through the acquisition of certain wireless assets.

AT&T spent $21 billion improving its network between 2006 and September 2009, Ralph de la Vega, president of AT&T’s wireless division, told attendees of the Consumer Electronics Show in Las Vegas in early January.

Network improvement plans by AT&T have met with Apple’s approval, Tim Cook, Apple’s chief operating officer, said during a Jan. 25 conference call. “We have personally reviewed these plans, and we have very high confidence that they will make significant progress toward fixing them,” Cook said.

Now, AT&T will need to get the message across to users.

Mozilla Finds Malware in Firefox Add-Ons

Mozilla’s open source browser is the latest application targeted by malware purveyors. This time, hackers have stashed away a Trojan in a couple add-ons posted on addons.mozilla.org. eSecurity Planet has the goods on which add-ons users need to avoid and what people already affected can do to rid themselves of the malware.

Mozilla today disclosed that a pair of add-ons hosted on its addons.mozilla.org (AMO) site included Trojans. As a result, if a Windows user installed the add-ons, they would be infected by malware that could potentially steal their information.

The two infected add-ons are Version 4.0 of Sothink Web Video Downloader and all versions of Master Filer download manager.

“This vulnerability is known to affect Firefox on Windows only, if either Master Filer or Version 4.0 of Sothink Web Video Downloader are installed,” Mozilla wrote in a blog post confirming the security issue.

Mozilla recommends that potentially impacted Windows users—who may number in the thousands—run an antivirus program since simply uninstalling the affected add-ons does not remove the Trojans.

According to Mozilla, Master Filer has been downloaded 600 times while the Sothink Web Video Downloader has been downloaded 4,000 times. Mozilla removed Master Filer on Jan. 25, 2010 and Sothink Web Video Downloader on Feb. 2, 2010.

Read the full story at eSecurity Planet:
Mozilla Confirms Security Threat From Malicious Firefox Add Ons

Google Updates Apps for Smartphone Use

Google adds smartphone security features to mobile enterprise apps to make them more mobile IT-friendly. Is this a push to take on RIM in the workplace?

February 4, 2010
By Michelle Megna: form internetnews

Google has made an effort to get its suite of productivity applications into the enterprise for some time. One area that was lacking was support for mobile devices, since IT managers like to lock down their staff smartphones as securely as desktops and laptops, if not more so. Today the search giant is releasing updated apps that will appease management’s concerns.

Google Apps, which includes Gmail, calendar, and documents apps, was recently updated to sync with the iPhone and Microsoft Windows Mobile handhelds, but largely lacking were features that would mitigate IT concerns.

Today Google is rolling out new administrative control features, for instance, remote wipe and more stringent password protocols, for Google Apps Premier and Google Apps Education users managing iPhone, Nokia E series and Windows Mobile devices, according to a Google mobile blog post by Bryan Mawhinney, mobile software engineer at Google.

The new features will let administrators manage a group of phones from one control panel, at which they can do the following: remotely wipe data from lost or stolen smarthpones; lock idle devices after a period of inactivity; require passwords on each handset; set minimum lengths for more secure passwords; and require passwords to include letters, numbers and punctuation.

Read the full story at Enterprise Mobile Today:
Google Makes Online Collaboration Play with Enterprise Apps

The iPad Threat to PCs

Apple’s new computer could erode sales of netbooks and tablet devices sold by PC makers, analysts say

By Arik Hesseldahl from businesweek

Apple’s (AAPL) new iPad, a lightweight device that browses the Web and delivers media, may serve as an alternative to netbooks and pose a threat to PC makers.

While the iPad is not a full-fledged PC, it’s capable of handling many of the tasks consumers deem important in netbooks, stripped-down notebooks that have surged in popularity in recent years. In a lightweight package, the iPad provides access to e-mail, the Internet, and digital media such as electronic books. The cheapest version of the iPad will sell for $499, compared with about $400 or less for many kinds of netbooks. “People who are looking at netbooks will also take a very serious look at the iPad,” says Charles Smulders of market research firm Gartner (IT).

That could spell trouble for computer makers such as Hewlett-Packard (HPQ), Acer (2353:TT), and Dell (DELL), which relied on netbooks for growth in recent quarters as consumers and companies delayed purchases of more expensive machines. The number of PCs shipped rose 15.2% in the fourth quarter, compared with a decline of 0.4% a year earlier, according to research firm IDC. “A substantial portion” of that growth came from the sales of netbooks, says IDC analyst David Daoud.

Silver Lining: Margin Squeeze May End

If there’s a silver lining in the iPad’s introduction, it’s that PC makers may need to boost their reliance on higher-priced devices, analysts say. Sales of netbooks can put pressure on average selling prices that if unchecked can lead to narrower margins. “The netbook market has created a race to zero margins,” Forrester (FORR) analyst James McQuivey says. “It has created a market where higher-priced, higher-margin notebooks have a harder time selling because consumers think they can get essentially the same experience in a netbook with a lower price.”

So if netbook growth slows, PC vendors may need to refocus their efforts on selling higher-margin traditional notebooks, says Daoud of IDC. “It will bring some needed sanity and new alternatives for the PC industry,” Daoud says. “For so long, all they could do was drive down prices. Now they can think outside the box and bring out devices that will compete with Apple at prices they can live with.”

Sumit Agnihotry, a vice-president at PC maker Acer, which sells several netbooks, says the smaller computers will probably keep their place in the PC industry. “The industry has proven that the netbook is an important category,” he says. “We think they’re here to stay.” Still he says Acer is working on a tablet product that will compete head-to-head with Apple’s iPad. It’s due to be announced in the second half of 2010.

iPad Will Tempt PC Tablet Users

Apple’s iPad may also make a dent in sales of existing tablet-style computers, a category that has been available for the better part of a decade but failed to catch on with consumers. Only about 1.03 million tablets were sold in 2009, down from 1.3 million in 2008, according to Gartner. Tablets are generally aimed at businesses that have a specific need for a PC that accepts input from a pen-shaped stylus. Though the iPad doesn’t use a stylus, there’s a good chance that its thin, lightweight body could lure some business users away from their tablets.

Harry Labana is chief technology officer of Citrix Systems (CTXS), which makes software that gives mobile devices, including Apple’s iPhone, the ability to access software and files on other computers remotely. He sees opportunity for sales of the iPad in areas such as medicine. For example, doctors who want to view patient records or X-ray images can do so from a device like the iPad that connects remotely to another computer where patient files are stored. “Not everyone who spends their work day walking around needs a full-power laptop or a PC to read certain data or to send mail,” he says.

Hewlett-Packard introduced a tablet it calls the Slate at the Consumer Electronics Show in Las Vegas in early January. “The slate category is exciting and will be the focus of multiple efforts on several platforms in the industry,” says HP spokeswoman Marlene Somsak. “We’ll have a number of products in this space this year and beyond.” She declined t comment specifically on the iPad. A spokeswoman for Dell declined to comment.

Apple says it expects to start shipping the iPad by the end of March. The company may sell 3 million to 4 million in the first 12 months it’s available, says Gene Munster, an analyst at Piper Jaffray (PJC). It may sell 8 million iPads in 2011, he says

Stock Picks: Yahoo, Amazon

From Businesweeks

Yahoo Inc. (YHOO)

Citigroup reiterates buy; raises estimate

Yahoo Inc., owner of the second-most-used Internet search engine in the U.S., reported fourth-quarter sales that topped analysts’ estimates after the close of trading Jan. 26. Excluding revenue passed on to partner sites, sales were $1.26 billion. The company’s total sales fell 4.1% to $1.73 billion, yet still edged out its own forecast of $1.6 billion to $1.7 billion.

Citigroup analyst Mark Mahaney said on Jan. 27 that Yahoo’s $1.73 billion in gross revenue and $457 million in earnings before interest, taxes, depreciation and amortization, or EBITDA, beat his respective estimates of $1.66 billion and $427 million and Wall Street consensus views of $1.67 billion and $433 million; Yahoo’s GAAP earnings per share (EPS) of 11 cents was in line with his estimate as well as the street consensus view. Mahaney said in a note that Yahoo’s first-quarter guidance was mixed vs. the Street estimate: the company’s midpoint gross revenue forecast of $1.63 billion topped the Street expectation at $1.61 billion, but its midpoint EBITDA forecast of $365 million missed the Street projection at $400 million.

Mahaney said the big story for Yahoo is display advertising, which surged 26% quarter-over-quarter to $503 million. He noted that most (though not all) of the company’s ad verticals are recovering, pricing is “firming up”, and Yahoo has key inventory for advertisers.

The analyst kept his 2010 EPS estimate at 47 cents, but raised his 53 cents forecast for 2011 to 56 cents. He has a $22 price target on the shares.

Amazon.com Inc. (AMZN)

Kaufman Bros. upgrades to buy from hold

Kaufman Bros. analyst Aaron Kessler raised his rating on shares of Internet retailer Amazon.com Inc. on Jan. 27. He said in a note that the stock has corrected 15% from recent highs, and he believes it now offers an attractive risk/reward for investors.

Kessler said he expects Amazon to post strong fourth quarter results on Jan. 28, adding that his GAAP EPS estimate of 77 cents is 7% above the Wall Street consensus view. He also expects Amazon to continue to gain market share, “driven by its value proposition of low prices, free shipping, high trust factor, and added selection”.

The analyst maintained a $155 price target on the stock, indicating “approximately 30% upside” from current levels.

Facebook Redesigns Site, Looks to 400M Users

By Kenneth Corbin from internetnews

As it nears another major milestone, social networking giant Facebook has begun rolling out a set of changes to its home page designed to simplify the site.

Facebook has begun rolling out a site-wide redesign, shuffling the layout of its home page in an effort to simplify the navigation and give prominent placement to some of the most popular features.

The company also marked its sixth anniversary on Thursday, marking the occasion with the announcement that it expects to sign up its 400 millionth user, extending its runaway lead in the social networking space.

The redesign comes after several months of testing various iterations of the home page, Facebook said.

Facebook has a checkered history with its site redesigns and policy adjustments, often drawing the ire of its large and vocal community of users. But the new changes in large measure aim to address one of the primary complaints previous designs, namely that the site was too confusing and cluttered.

The new home page highlights several content-oriented features such as photos, applications and games with links to dashboards in a column on the left side of the page.

The applications and games dashboards will display the content users have interacted with the most recently, and showcase the recent activities of people’s friends.

“You will also start to see counters next to the applications you have bookmarked on your home page,” Facebook engineer Jing Chen said in a blog post. “Counters will notify you when you have a specific action to take, so that you never miss your turn in a game or an update from a friend in an application.”

In a nod to the privacy concerns that have arisen about third-party applications on the site, Facebook has created a new setting that allows users to prevent their activities in games and other apps from showing up on friends’ pages.

“We’re also working on a more granular set of controls for specific applications, so that you can turn off activity for certain applications while leaving it on for others,” Chen said. “We’ll have more information to share on this soon.”

Facebook’s instant messaging product is also getting more exposure. Now, a partial list of a user’s friends who are online appears on the left side of the page. That list is selective, displaying the people the user communicates with the most frequently. The full list of online friends is still available as a pop-up in the chat bar at the lower right-hand corner of the screen.

Alerts about notifications, requests and messages are now consolidated in the top menu, which displays a red bubble that expands to a drop-down menu displaying the information. That information was previously scattered throughout the right side of the screen.

Like clockwork, the more than 4,000 comments appended to the Facebook blog post announcing the changes contain a mixture of enthusiasm for the new look and invective against the company, both for its design choices and the unilateral decision to impose the redesign on its users.

Bing and Yahoo search engine

Yahoo Revenue Dips in Q4, But Shows Signs of Life

Embattled Web firm posts sequential advertising increases as recession woes fade.

By Kenneth Corbin: from internetnews

Yahoo (NASDAQ: YHOO) today reported financial results for the fourth quarter of 2009, posting an overall decline in revenue from the comparable period in 2008, but still meeting Wall Street’s expectations and showing signs that the company’s slumping advertising business is on the upswing.

Yahoo posted earnings of $119 million, or 11 cents per share, in line with analysts’ expectations and reversing a $278 million loss, or 22 cents per share, in the fourth quarter of 2008.

Fourth-quarter net revenue dipped to $1.26 billion from $1.38 billion, but that was slightly ahead of analysts’ expectation of $1.23 billion, according to polling by Thomson Reuters. That figure that excludes the commissions paid to Yahoo’s advertising partners.

In the meantime, Yahoo posted overall revenue for the quarter of $1.73 billion, down 4 percent from the same period in 2008, but still an improvement over the 12 percent annual decline Yahoo has posted over the first three quarters of 2009.

Display revenues on Yahoo properties increased 26 percent over the third quarter, while search revenues were up 4 percent, giving the embattled company hope that the recession is abating and its turnaround strategy is beginning to bear fruit.

“The fourth quarter marked a strong finish to 2009, which was a transformative year for Yahoo,” CEO Carol Bartz said in a statement. “We beat the high end of our revenue guidance, saw demand for premium display advertising improve significantly, and grew owned and operated search advertising revenue sequentially for the first time since the third quarter of 2008.”

Yahoo reported overall revenues for 2009 of $6.46 billion, a decline of 10 percent from 2008 driven in large part by the recession.

But for some analysts, Yahoo was in line to bounce back the strongest as the recession appears to ebb.

“We continue to like Yahoo shares and it remains our top pick for 2010,” Doug Anmuth, an analyst who tracks Internet companies for Barclays Capital, wrote in a research note earlier this week.

“Yahoo is well leveraged to an ad rebound in both display and search, and we believe that display in particular will show stronger trends in 4Q and into 2010.”

In the meantime, Yahoo’s ad mix is in a bit of a limbo as it continues to await approval from the Justice Department, which is conducting an antitrust review of its search-advertising pact with Microsoft (NASDAQ: MSFT), a deal the companies brokered in an attempt to better compete with search leader Google (NASDAQ: GOOG).

Yahoo executives have said they expect the deal to close in the first quarter of this year.

Speaking on a conference call with financial analysts, Bartz said that Yahoo does not expect to begin netting money from the revenue share through the Microsoft deal until 2011, after the companies’ advertising and engineering operations have been integrated.

She reiterated the company’s commitment to continue to compete in search irrespective of the deal, both in terms of growing query volume and improving the monetization rates per search.

But Yahoo may be even more bullish on its fortunes in display.

“While many of you didn’t believe me, I kept saying through 2009 that brand advertising would come back. It always has,” Bartz said on today’s conference call. “You can’t position a brand with keywords.”

She added, “We have some of the best, if not the best, premium inventory on the Internet.”

Over the past year under Bartz’s tenure, Yahoo has redesigned some of its major properties, including its home page, which she said has sold out of inventory on several occasions, and its search and e-mail services.

Last year, Yahoo launched a major global ad campaign that was in large part aimed at advertisers in an effort to remind them that after all the turmoil the company has been through in recent years, it remains one of the most popular destinations on the Web.

Bartz said that the domestic portion of that campaign is now shifting gears to focus more on individual products that the company offers, with less emphasis on re-energizing the Yahoo brand.

As much effort as Yahoo has spent building out its content portfolio, Bartz said the company continues to grapple with the challenge of targeting ads based on users’ interests and preferences.

“Truth be told, no one has uncovered the holy grail of making advertising as relevant as content is 100 percent of the time,” she said. “If we can do this, we can create a better experience for both the advertiser and the user.”

Looking ahead to 2010, she said Yahoo is on a path of investment and growth, seeking to tamp down speculation that she plans to jettison numerous properties that don’t fit with the company’s vision.

Earlier this month, Yahoo unloaded the open source e-mail provider Zimbra to VMware, and Bartz acknowledged that there could be a few more such deals over the coming year, but that Yahoo is not headed for a firesale.

“2010 is not about divestitures for Yahoo,” she said. “For us, 2010 is about acquisition and investments,” she added, though she was quick to caution that Yahoo is not planning any large-scale purchases, but rather smaller, more targeted properties that could fill a niche.

Google’s Display-Ad Sales Should Top $1 Billion

As analysts say rising demand for Internet display ads will begin paying off for Google in 2010, one asks: “Is this a $10 billion business?” Douglas MacMillan

Douglas MacMillan from Businessweek

Google CEO Eric Schmidt hinted in July that display advertising would probably be the next of his company’s businesses to generate $1 billion in sales. Analysts say 2010 is the year he’ll deliver on that prediction.

Display ads are likely to contribute a little more than $1 billion, or about 4% of Google’s (GOOG) total sales this year—an increase of as much 40% over last year—say analysts, including Doug Anmuth at Barclays Capital. That marks an important threshold for Mountain View (Calif.)-based Google, which makes most of its sales from ads placed alongside search results and which has been criticized for not getting more revenue from other businesses. Demand for display ads, which include marketing messages in videos and banner ads adorning Web pages, may rise faster this year than for search-related ads, according to eMarketer. “You have to go somewhere else to get the next legs of growth,” says Jim Friedland, an analyst at Cowen & Co.

In display advertising, Google lags behind Yahoo! (YHOO), which had revenue of $6.5 billion in 2009 that was generated largely from its display ads. Google has tried to catch up in part through acquisitions. Two of the biggest were aimed at the display ad market: The company paid $1.65 billion for YouTube in 2005 and $3.1 billion for DoubleClick in 2007.

Sales of video and banner ads on YouTube, the world’s most popular video site, are expected by analysts at Barclays to contribute the bulk of Google’s display revenue this year, about $700 million. And with DoubleClick, Google acquired a technology that handles the placement of display ads on sites across the Web. “Display is now a key business for us,” says Susan Wojcicki, Google’s vice-president of product management and one of the company’s earliest employees.

Neal Mohan, the executive in charge of Google’s display business, says Google will draw on its strength in search-related advertising to expand in display. It became the leader in search by using algorithms to help it know which ads to place where. “Our goal is to bring the science of search to the art of display,” Mohan says.

TV and print ads shift to Web display

Mohan says the company is developing tools to help marketers create more effective banner ads and automate their placement. To that end, Google in December bought Teracent, which customizes colors, language, and other elements of a banner ad, depending on who is viewing it. Soon, Google will pair Teracent’s technology with DoubleClick’s ad-placement expertise and its own flagship search ad program, AdWords. Mohan is also trying to expand DoubleClick Ad Exchange—a kind of stock market launched last fall for buying and trading display advertising space on the Web—and offer further options for advertisers on YouTube.

Companies tend to use online display advertising to raise awareness of a brand or product while they deploy search ads to encourage customers to take a specific action—for instance, click on a Web site or make a purchase. Because search ads are often cheaper and their effectiveness easier to measure, budget-conscious advertisers flocked to them during the recession. Now, however, display is getting a boost as big advertisers that have traditionally focused branding efforts on TV and print are shifting more ad dollars to the Web. “There’s a lot of money to be tapped that otherwise would be allocated to TV, that will be moved online,” says technology analyst Greg Sterling. This year, online display advertising may grow 8.2% to $7.9 billion in the U.S., from $7.3 billion in 2009, eMarketer says. Search advertising is expected to rise 5.6% to $11.4 billion.

Google is trying to help advertisers better measure the effectiveness of display ads. “One of the challenges we put to ourselves was: ‘What are the ways a brand advertiser would look to measure [ad impact]?’,” Mohan says. The result: Campaign Insights, a tool developed over a year by dozens of Google engineering teams around the world before it was released in December.

Hair-care company Regis was one of the first to test Campaign Insights. It ran banner ads for Hair Club For Men across hundreds of Google’s partner sites while Campaign Insights tracked the number of people who had seen the ads and then performed related Web searches. “Display [advertising] drives searches and Web site visits,” says Luke Hubbard, vice-president of Beverly Hills (Calif.)-based Integrated Media Solutions, the ad agency that coordinated the campaign for Regis. “We knew that effect was there before, but now we are able to quantify it.” Impressed by the results, Regis increased spending on display ads for the brand in 2010, and Integrated Media Solutions has signed up seven other clients eager to tap the analytics.

Yahoo pitching display-ad strengths

Google offers Campaign Insights free to advertisers that spend above a certain amount on other products. It’s inexpensive and easy for Google to comb through search data, compared to the effort required for Yahoo to offer such a service, says eMarketer analyst David Hallerman. “Google has a lot of potential opportunity in that they can add a lot of these analytics that usually cost companies more,” he says.

Competitors say they’re bracing for a fight. During Yahoo’s Jan. 26 earnings call with analysts, CEO Carol Bartz talked up brand advertisers’ increasing interest in getting their ads placed on professional content sites—a strength for Yahoo. “As these marketers look to position new products and brands in the marketplace, they will need display ads to tell their story,” she said.

To succeed in display, Google has also had to hone its ability to market products through a people-friendly sales force. In search, Google has tended to rely more on the technical effectiveness of its products, analysts say. “Advertising is a lot of hand-holding and schmoozing,” says analyst Sterling. “Historically, Google has not been good on managing the people side.”

That’s changing, says Amy Curtis-McIntyre, senior vice-president of brand communications for hotel chain Hyatt. She says Google has begun regularly sending sales reps to her Chicago offices. “When they develop new search tools or new advertising tools, they bring them to us and present them in a usable way,” says Curtis-McIntyre.

With $1 billion in sight, how big can Google’s display business get? “Google is incredibly well-positioned to be a winner here,” Friedland says. The question he’s now asking: “Is this a $10 billion business?”

What MBAs Can Learn from Wall Street

A former investment banker argues that MBAs can learn a thing or two from Wall Street, including the futility of circling the wagons in the face of populist rage

By Alex Chu from buisnessweek

Watching the financial crisis unfold over the last year, I was struck by how utterly tone-deaf the financial-services industry has become to the sentiments of an enraged public. Junior analysts and senior managing directors alike seem to be genuinely perplexed by why their industry is being ambushed about their compensation, lending practices, and political lobbying. However, Wall Street’s obliviousness serves as a cautionary tale for MBA applicants, students, and even alumni.

As a former investment banker, I experienced firsthand how an insular and self-referential culture could lead to a warped sense of reality.

Take the yearend bonuses as an example. To many bankers, the bonus isn’t just a dollar figure, but a symbol of their entire self-worth. Simply put, it is their sole way of keeping score vs. their finance peers. As such, from the fresh-faced Ivy League graduates to the managing directors and partners, it is unacceptable to tell anyone within the firm (or anyone else save your family) that you are “satisfied” with your bonus.

As a result, the crestfallen banker does not feel strange for complaining about his $1.1 million bonus because a less-deserving colleague received $1.11 million. And when an enraged public attacks them for taking gigantic bonuses as layoffs ravage the middle class, they fail to understand why. After all, that banker has spent virtually every waking hour benchmarking himself against other finance professionals. They fashion themselves as Masters of the Universe without realizing that they’ve turned into Marie Antoinettes.

Lack of Empathy

The Wall Street culture becomes so self-referential that investment bankers assume everyone else shares the same level of hypercompetitiveness, nihilism, and preoccupation with money as they do. This insularity makes it very difficult for many in the industry to truly empathize because they genuinely see themselves as aristocrats to a plebeian mass simply because they make more money. That sense of oblivious elitism and earnest belief in their capital “I” importance is what feeds the public anger—not jealousy.

So now the public wants blood. “Off with their heads,” they say, with taxes, fees, fines, regulation, and even imprisonment being the modern equivalent of the guillotine. The attacks only serve to feed the “poor me” syndrome on Wall Street, which in turn further infuriates the public.

Business schools are experiencing a similar (albeit less hostile) reproach—with countless articles lambasting the degree program, making some students and administrators feel ambushed and confused.

When responding to fair or unfair criticism from others, the worst thing MBA students and administrators can do is to follow Wall Street’s example by circling the wagons. Instead, taking the temperature down on both sides starts with a willingness to understand, on an emotional and subjective level, why someone would feel that way. Without having true empathy or compassion for others from different socioeconomic backgrounds, no amount of rational explanation or justification will be heard.

Simply put, MBAs need to be fully aware that not everyone shares the same values, priorities, or points of view. Everyone wants higher pay, a more prestigious job, and a cushy standard of living—but not everyone values these things to the same degree that many MBA students do. That does not make the premium that MBAs place on these values better or worse, wrong or right—just different from the value assigned to them by people in other professions.

B-Schools’ Illusion of Diversity

This blind spot stems from a false sense of diversity within the MBA classroom—the McKinsey consultant in Kenya and the American P&G (PG) brand manager have more in common than either of them do to the autoworker at a Ford (F) assembly plant or the goat herder in rural Namibia. Like the Marie Antoinettes on Wall Street, MBAs are more prone to developing a huge blind spot when it comes to feeling true kinship with people from different socioeconomic backgrounds. Students may even volunteer at local charities, but some may still develop contempt for those they see as beneath them. It’s more a question of attitude, not merely exposure.

Another way for students to avoid becoming cocooned is to make a concerted effort to seek out and participate in activities where there are virtually no other MBAs. There is a tremendous amount of herd mentality in business school. One of the most negative by-products of a collaborative and team-oriented environment is the tremendous peer pressure to conform—what classes to take, what career choices to value, where to live, and so forth.

Why is all of this so important? Because chances are, most if not all working professionals will have to start over in a completely new career at least a few times in their lives (once every 10 to 20 years), whether they are MBAs or former Wall Streeters. The more cocooned one is, the harder it will be to make those nonlinear transitions beyond the business or corporate world.