Value Added: Online, the art of the deal

Tim O'Shaughnessy, chief executive and co-founder of LivingSocial, started with other businesses before hitting on this idea. (Bill O'leary/the Washington Post)

By Thomas Heath
Monday, May 31, 2010; A10

I am not on Facebook. I have never bought anything on eBay. My Amazon account is retired and my LinkedIn activity lapsed long ago.

I regularly tweet on Twitter. So at best, my online social activity is at the low end of the scale.

But I am fascinated by the marketing opportunities the online world presents. Every business under the sun, including newspapers such as this one, is trying to figure out how to make money through the Internet.

It looks as if one Washington enterprise might have cracked the code.

LivingSocial is a start-up run by some online entrepreneurs, led by Georgetown University graduate Tim O'Shaughnessy, 28.

The company has a simple online model: It has a deal of the day, in which participants use a credit card to buy, for instance, $50 of goods or services from a local company for $25. LivingSocial customers punch in their credit-card information and receive a code (or coupon) redeemable at the restaurant, spa or retailer participating in the offer. LivingSocial keeps 30 to 50 percent of each transaction and passes the rest to the deal-of-the-day business.

The May 19 deal of the day was a $40 voucher for food at Georgetown's Il Canale that sold for $20. O'Shaughnessy said 1,373 people bought in. That means LivingSocial took in around $27,460. At a hypothetical 50-50 split with Il Canale, LivingSocial's cut was $13,730.

Not bad. Throw in the fact that the company is operating in 20 cities, with dozens more on the horizon, and LivingSocial looks like a nice business indeed. It expects to gross $50 million this year; its net profit should be around 10 to 15 percent of that. One big competitor is Groupon, a company with a similar concept.

LivingSocial raised $40 million from venture firms such as Vienna-based Grotech Ventures and from former AOL mogul Steve Case this year. O'Shaughnessy, the son-in-law of Washington Post Co. Chairman Donald E. Graham, invested some of his own cash during the fundraising to increase his stake in the business. The four founders still own a significant portion of LivingSocial, though it is less than half of the company.

O'Shaughnessy is a busy man these days. I caught up with him on the telephone after a long day of meetings in San Francisco, and before he jumped on a red-eye flight back to Washington.

Business is in his blood: His father runs a trucking firm in Minneapolis. O'Shaughnessy joined AOL after graduating from Georgetown's undergraduate business school in 2004. Two years later, he left the Internet giant to join Case's Revolution Health, an online site designed to help people take better care of themselves. O'Shaughnessy ran a 20-person products team in charge of the entire site, which offers a variety of things, from a calorie calculator to a listing of symptoms for diabetes.

Revolution Health paid the bills, but O'Shaughnessy and three buddies had been noodling for years over the business possibilities of online social networking. Specifically, they were trying to figure out how to use the social side of the Internet to get people to buy stuff. After a day at Revolution Health, they would head to the nearby Brickskeller Saloon on 22nd Street NW, where they would bounce around business ideas.

In July 2007, O'Shaughnessy and his pals resigned from Revolution Health the same day. Soon they had used Legal Zoom to incorporate as Hungry Machine: "We were hungry to do a lot in the technology world."

By then, Facebook had opened up a platform that allowed companies to build products that worked with the hugely popular social networking site. Hungry Machine noticed.

They found space above a Georgetown antiques store and started doing two things. First, they built their own product, a book-review site called Visual Bookshelf, which they offered to Facebook's millions of users.

Second, Hungry Machine picked up consulting gigs for companies such as ESPN. That covered operating costs while they beavered away at Visual Bookshelf. Visual Bookshelf would attract readers through its reviews, then take a fee from retailers such as Amazon for every customer sent their way. By 2009, it was grossing $2 million a year.

They experimented, inventing an application called "Pick Your Five." The advertising-based site posed fun questions to Facebook users: "What are your five favorite movies of all time?" "What five people you don't want to wake up and see standing at the end of your bed?"

The group shut down its consulting business in 2008 and decided to build on Visual Bookshelf and Pick Your Five. O'Shaughnessy went to the D.C. venture capital market, and in June 2008 they received $5 million from Grotech.

They closed down Hungry Machine and launched the LivingSocial brand, which concentrated on one question: How do we bridge the gap between knowing what beer people drink, what they eat and what they like to do -- and driving them to the businesses that offer those things?

"It seemed like a really big nut to crack," O'Shaughnessy said.

They experimented more.

"Hot Potato," an online game in which people could compare one another's success at passing a potato, taught them loads.

"We learned that if you put up a leader board, people wanted to win," he said.

When LivingSocial built a leader board in Visual Bookshelf, where people competed to see how many books they could review, the number of reviews jumped 30 percent. The result was more online traffic and more advertising.

A key move came in early 2009 with the acquisition of BuyYourFriendADrink. Beer, wine and liquor companies paid LivingSocial to steer its online audience to bars and restaurants where they could buy the clients' products.

"It was pay for performance," O'Shaughnessy said. "Participants would get a code that you would bring into a bar, and [the bar] would then plug it into their point-of-sales system like a credit-card number. For every person we brought in, we would get paid. There would be a specific list of participating bars."

By last summer, LivingSocial had moved into its current 7th Street NW offices and began running with the coupon model from BuyYourFriendADrink.

The "aha" moment came last fall, when they offered $8 one-way bus tickets from Washington to New York. They sold 2,500 tickets in a single day, filling up 50 buses.

LivingSocial now sells coupons for restaurants, spas, sky diving, cooking classes, boat cruises, hot-air balloons, golf lessons and bed-and-breakfasts, to name a few things. The company employs 120 people and is growing by the month.

I haven't bought anything on LivingSocial, but I'm thinking of it.

Anyway, I am not a complete online dinosaur: O'Shaughnessy and I follow each other on Twitter.

You can follow me on Twitter at addedvalueth.

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Immigrants invest in U.S. businesses in exchange for visas

Image by yewenyi via Flickr

By N.C. Aizenman
Washington Post Staff Writer
Sunday, January 10, 2010; A06

The number of foreigners willing to invest $500,000 to $1 million in a U.S. business in exchange for a visa roughly tripled in the past fiscal year, as dozens of cash-strapped enterprises and local governments scrambled to attract wealthy foreign backers through a previously obscure provision of immigration law.

Under the EB-5 visa program, immigrants who can demonstrate that their investment created or preserved at least 10 U.S. jobs after two years are granted legal permanent residency along with their spouses and children.

Although immigrants are allowed to establish businesses under the program, most prefer to invest in "regional centers" -- public or private enterprises that are certified by the government to receive funds from EB-5 investors and that can count jobs indirectly created by the investment toward the 10 required.

The minimum outlay mandated is $1 million, but immigrants can reduce that to $500,000 by investing in a regional center or establishing businesses in areas designated as economically disadvantaged.

The program was established in 1990, but potential investors and businesses were often dissuaded by the U.S. government's slow and inconsistent administration of the complex rules. In the past year, however, a gradual streamlining of procedures coincided with the recession and credit crunch to dramatically boost interest in the program.

In a matter of months, more than 50 private and public enterprises were certified as regional centers, increasing the total from 23 to 74. Three are in the Washington area.

With so many more investment opportunities to choose from, the number of immigrants (including investors and their immediate family members) who obtained EB-5 visas jumped from 1,443 in fiscal 2008 to 4,218 in the 2009 fiscal year that ended Sept. 30, according to the State Department.

Most were granted to people from Asia, particularly China and South Korea. Several scholars said they expect the number to double again this year.

"What happens with programs like this is that sometimes, all of a sudden they get discovered, and then intermediaries begin to really promote them both here and internationally," said Demetrios Papademetriou, president of the Migration Policy Institute, a Washington think tank that recently released a report about the trend.

Statistics on the total invested through the EB-5 program are not available, but the capital infusion has been a boon to Washington area businesses. The Capitol Area Regional Center, a real estate investment fund based in the District, has been working to raise a projected $250 million from immigrant investors for use in Washington area construction projects.

Perhaps the greatest potential beneficiaries are nonprofit agencies such as the District's Anacostia Economic Development Corp., which was approved as a regional center in June. Over the next three years, the group hopes to raise $50 million from immigrant investors to develop real estate projects and small businesses in wards 7 and 8 -- a princely sum compared with the $2 million in private capital it raised for its last major building project in Anacostia.

"Normally, to get equity capital to these areas is almost impossible," said Michael Wallach, chief operating officer of the corporation. "These two wards have the highest unemployment rate in the city and the lowest incomes."

But because the primary motivation of the immigrant investors whom Wallach is wooing is to create enough jobs to meet the visa requirement rather than to maximize the return on their investment, they might prove less skittish.

'It was worth it to me'

Program participant Eric Canal-Forgues, a law professor and businessman from France, is a case in point. In 2007, he invested $500,000 in a regional center that funded construction of Comcast's headquarters in Philadelphia.

He said it is unlikely that he will get more than a 1 percent return by the five-year point at which he will be allowed to withdraw his money. That will barely cover the roughly $50,000 in administrative costs of his investment, let alone the loss of value because of inflation.

But Canal-Forgues, 47, who has moved with his wife and two children to Miami, said he has no regrets. "I knew the conditions going in, and it was worth it to me," he said. He said that Miami was attractive because of its financial opportunities and that he plans to open a franchise of children's clothing stores.

But more than anything else, he said, "we really wanted our children to be raised in a dual culture, French and American, especially because I think the educational system at the university level is much stronger here than in France."

Statistics suggest that many EB-5 applicants might also find the program appealing because it is considerably speedier than other options: Nearly 70 percent of immigrants granted investor visas in fiscal 2009 were from China or South Korea, countries whose nationals face decade-long waits for family-reunification visas because of quotas on the annual number allowed in from any one country.

Concerns about fraud

That immigrant investors are more focused on obtaining visas than maximizing profits -- combined with the government's limited capacity for oversight -- has caused even some avid proponents of the EB-5 program to worry that a profusion of fraudulent or ill-advised ventures might soon flourish alongside legitimate ones.

"The thing that concerns me most is that some fly-by-night [operation] will lose a large group of investors' money, and it will poison the well for the rest of us," said David Morris, founder of EB-5 America, a Washington regional center that invested $20 million to refurbish the Sugarbush ski resort in Vermont in past years and is now raising money for construction projects in the District.

Yet Morris also notes that some of the stricter rules of the EB-5 program -- including the rigid timeline by which the job creation requirement must be met -- do not always mesh with the realities of the business world, with consequences for both immigrant investors and potential business ventures.

For instance one of Morris's clients, Rodrigo Martinez, a Mexican immigrant who lives in Arlington County, was initially keen to invest in a project to renovate the historic O Street Market at Seventh and O streets NW. "The fact that you are helping to have a positive effect on the community that you're joining, I really liked that idea," said Martinez, 27.

But fearing that construction delays would prevent that project from creating sufficient jobs in time, Martinez, who attended law school in the United States and now works as a business consultant, switched his money last year to the Sugarbush resort instead.

Supporters of the EB-5 program also complain that the government's review process for approving potential regional centers is still too slow, especially at a time when a similar Canadian visa program is attracting three times as many immigrant investors.

Stephen Yale-Loehr, a professor at Cornell University's law school and executive director of a trade association of regional centers, said the number of EB-5 visas being granted falls well short of the maximum 10,000 allowed each year.

"There's a lot more that we could be doing to promote the EB-5 program so that it can achieve its true potential in this economic recession," he said.

Bipartisan support

Powerful members of Congress on both sides of the aisle agree. In a rare bipartisan convergence on an immigration issue, Sens. Patrick J. Leahy (D-Vt.), chairman of the Judiciary Committee, and Jeff Sessions (R-Ala.), the ranking member, recently joined forces in an effort to make the regional centers permanent. (The centers were established under a pilot program that has been extended several times since the 1990s).

Leahy said he was impressed by the millions of dollars that EB-5 visa holders have invested in ski resorts such as Jay Peak and other projects in the distressed northeastern region of Vermont.

Because of legislative wrangling unrelated to the EB-5 program, Leahy had to settle for a three-year extension in the fiscal 2010 Homeland Security Appropriations bill adopted in the fall.

Still, Leahy predicted that not only will all aspects of the program soon be made permanent but also that the annual number of visas might be increased.

"Once it's permanent, I think we're really going to see the true value of this," he said. "At a time when we're seeing so many of our jobs exported out of the country, this creates jobs in the United States."

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N. Korean currency crackdown fuels inflation, food shortages

Image by yeowatzup via Flickr

By Blaine Harden
Washington Post Foreign Service
Thursday, January 7, 2010; A11

TOKYO -- Strong-armed currency reform in North Korea, which has confiscated the savings of small businesses and forbidden the use of foreign money, is now causing runaway inflation and contributing to food shortages, according to several reports from inside the closed state.

Currency reform is part of an aggressive crackdown on free markets by North Korean leader Kim Jong Il.

His government has ordered the closure by the end of March of a large wholesale market in the northeastern port city of Chongjin, according to Good Friends, a Seoul-based aid group with a network of informants inside the country. Another major wholesale market near the capital, Pyongyang, was shut down in June.

After a decade of explosive growth, markets have substantially supplanted the central government as a means of employing and distributing food to North Korea's 23.5 million people. The kudzu-like spread of grass-roots capitalism -- and the government's inability to control it -- has angered Kim and his top lieutenants.

To hobble traders who acquire goods from neighboring China, the government has imposed controls on travel and lodging in border areas, ordered the public not to use the large suitcases that are popular with traders and increased punishment for illegal border crossing.

Image via Wikipedia

North Korea is "not moving toward a free-market economy, but will further strengthen the principle and order of social economic management," an official of the North Korean central bank recently told the Choson Sinbo, a Tokyo-based newspaper that is a mouthpiece for Kim's government.

But reining in the markets is a formidable task, even for North Korean authorities, who preside over what is often described as the world's most repressive police state. United Nations officials estimate that half the calories consumed in North Korea now come from food bought in private markets. Recent surveys of defectors have found that as many as 75 percent of them were involved in market activities before fleeing the country.

At the end of 2009, North Korea moved suddenly to wipe out the wealth of all those who had profited from market trading. It revalued the local currency, the won, while sharply restricting the amount of old won that could be traded for new. The rules, as first announced, made it illegal for citizens to possess more than $40 worth of local currency.

The revaluation triggered widespread anger and rare public protests. The government, as a result, eased exchange limits and increased cash payments to farmers and some workers, according to several accounts from inside the country.

Besides penalizing traders, an apparent goal of the currency revaluation was to slow inflation, which has plagued North Korea for years. But the government's action appears to have backfired, with potentially disastrous consequences in a country that is chronically short of food.

The black-market value of "new" won has reportedly plummeted against Chinese currency, spooking private traders, who have pulled their goods out of markets. Outside economists say suspicion about the value of the won has made residents wary, increasing economic stagnation and worsening food shortages.

The central government held a teleconference in late December with officials in every province, city and county "to discuss how to supply consumer goods to residents in the aftermath of the currency exchange," according to Good Friends.

At year's end, the government also announced a ban on the use of foreign currency. The North's richest private traders kept their savings in foreign currency and used it to import Chinese and South Korean goods for sale in North Korean markets.

But euros, dollars and Chinese yuan are also the preferred currency of the North Korean elite, who used them at state shops to buy luxury goods unavailable to most of the population. The survival of Kim's government, many analysts say, depends on catering to the needs of a few thousand elite officials in government and the military.

The consequences of crimping their lifestyles are difficult to predict, but the South Korean government has expressed concern.

"It is difficult to estimate the threat to us that will arise in the aftermath of the currency reform," South Korean Defense Minister Kim Tae-young said in a year-end message to his country's armed forces.

Uncertainty, inflation and shortages triggered by currency reform come at a time when Kim, now 67 and recovering from a stroke in 2008, is laying the groundwork for a successor.

The rollout of his third son, Kim Jong Eun, 26, as the heir apparent may be gathering momentum, according to the North Korea Intellectuals Society, a defector group in Seoul.

Citing sources inside North Korea, it said that his birthday on Jan. 8 is the subject of a Workers' Party decree calling for a commemoration of Kim Jong Eun as "the other leader of us and our future."

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The Accidental Hero - BusinessWeek

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Subway's $5 footlong, the brainchild of an obscure Miami franchisee, is the fast-food success story of the recession

By Matthew Boyle

Stuart Frankel isn't what you'd call a power player in the world of franchising. Five years ago he owned two small Subway sandwich shops at either end of Miami's Jackson Memorial Hospital. After noticing that sales sagged on weekends, he came up with an idea: He would offer every footlong sandwich (the chain also sells 6-inch versions) on Saturday and Sunday for $5, about a buck less than the usual price. "I like round numbers," says Frankel, a brusque New Yorker who moved to Miami in 1972 and owned a drugstore before opening his first Subway outlet in 1988.

Customers liked his round number, too. Instead of dealing with idle employees and weak sales, Frankel suddenly had lines out the door. Sales rose by double digits. Nobody, least of all Frankel, knew it at the time, but he had stumbled on a concept that has unexpectedly morphed from a short-term gimmick into a national phenomenon that has turbocharged Subway's performance. "There are only a few times when a chain has been able to scramble up the whole industry, and this is one of them," says Jeffrey T. Davis, president of restaurant consultancy Sandelman & Associates. "It's huge."

In fact, the $3.8 billion in sales generated nationwide by the $5 footlong alone placed it among the top 10 fast-food brands in the U.S. for the year ended in August, according to NPD Group. That puts the $5 menu's success just a notch behind KFC (YUM) and ahead of Arby's and Domino's Pizza (DPZ). It helped privately held Subway, of Milford, Conn., lift U.S. sales 17% last year at a time when most restaurant chains, save for industry leader McDonald's (MCD), struggled. Actually, make that soon-to-be-former industry leader McDonald's. Subway's low-cost franchising model and mainstream appeal have allowed it to add 9,500 locations in the past five years, for a total of about 32,000 outlets. At its current growth rate of 40 new stores a week, Subway is poised to surpass McDonald's in worldwide locations sometime early next year. (Measured by total sales, McDonald's $30 billion still dwarfs Subway's $9.6 billion, although Subway has now supplanted both Wendy's (WEN) and Burger King (BKC) in market share.)

"A LIFE OF ITS OWN"

Frankel's $5 footlong idea illustrates how a huge company can wake up and eventually seize on a good idea that's not generated at headquarters. Frankel, along with two other local managers in economically ravaged South Florida, ceaselessly championed the idea to Subway's corporate leadership amid widespread skepticism. Once it was approved, Subway's marketing team quickly generated a memorable campaign that firmly established the $5 footlong nationwide. The promotion's success spawned imitators and created an unprecedented demand for staple ingredients such as turkey, ham, and tuna. "The whole thing took on a life of its own," says Jeff Moody, CEO of Subway's franchise-owned advertising arm, the Subway Franchisee Advertising Fund Trust.

The fact that a sandwich, the quintessential American food, has grabbed the spotlight right now comes as no surprise to some. Its appeal goes beyond the low sticker price—you can share a footlong with a co-worker or a friend (something that's not quite as easy with a Big Mac). "People are not eating out as much anymore, so anything that brings people together through food is much more compelling nowadays," says Michelle Barry of the Hartman Group, a Seattle consultancy that employs anthropologists and sociologists to ferret out consumer perceptions for such companies as Kraft Foods (KFT) and Wal-Mart Stores (WMT).

For Frankel, the biggest surprise from his $5 promotion was that his profit margins didn't decline. Many promotions are so-called loss leaders designed to draw customers in the hope they'll buy higher-margin items alongside the featured special. That's one reason most offers have a time limit. Frankel's food costs did rise as a percentage of sales, but that was offset by the overall boost in volume and the increased productivity of his employees, who had less down time. Even after adding two new staffers, Frankel made money on each $5 sandwich.

Frankel kept the weekend promotion going for more than a year. At the same time, Subway's top brass was growing tired of a national ad campaign that featured spokesman Jared Fogle, who had lost 245 pounds almost a decade earlier by eating Subway six-inch subs for lunch and dinner. Company insiders envied the success of McDonald's dollar menu and wanted a "value" offering of their own. In September 2007, Steve Sager, a Subway development agent who oversaw about 225 franchises across South Florida, heard about the success of Frankel's $5 deal. He decided to try it in a troubled Fort Lauderdale outlet on Commercial Boulevard, a gritty thoroughfare dotted with strip malls. On the first day of the promotion, the store nearly ran out of bread and meat. Sales doubled.

Sager called Subway co-founder Fred DeLuca, who lives in the vicinity, and excitedly shared the news. An intrigued DeLuca came by the shop and, Sager says, "saw the potential instantly." (DeLuca declined to comment.) Charlie Serabian, the owner of 50 South Florida Subways, decided to launch the promotion in some of his stores. To advertise, he slapped crude homemade signs in the windows that spelled out "ALL FOOTLONGS $5." DeLuca joked that they looked like ransom letters. It didn't matter: Sales rose as much as 35%. Some locations, such as those housed inside Wal-Mart stores, did even better.

Moody, the marketing chief, hopped a flight to Fort Lauderdale a month later. He arrived at one store at 11 a.m. to find a line out the door. Frankel and Sager, who accompanied him, jumped behind the counter to help make sandwiches, while Moody talked to customers. Most were buying footlongs, and some were saving half for later.

Clearly, the South Florida crew was onto something. The question was whether it would resonate elsewhere. "Unless it was in your store, you were skeptical," Moody says. At a meeting of the franchisee marketing board that fall, Frankel presented his idea. Many owners thought the promotion would send food and labor costs soaring, erasing any hope of profits. A motion to roll it out nationally failed.

ANNOYING JINGLE

But others picked up on Frankel's idea and tried it in locations ranging from Washington to Chicago. Right before Christmas 2008, the board voted again, and the motion passed. (Franchisees still had the option to not do it.) Moody pushed ahead with a national campaign, despite having no market research to back up the idea. "It violated all our normal processes," says Moody, whose annual ad budget is around $500 million.

Subway soon brought in its ad agency, MMB of Boston. "Let's not overcomplicate this," MMB managing partner Chad Caufield recalls thinking. The idea was to use hand gestures and an irritatingly addictive jingle to convey both the price (five fingers) and the product (hands spread about a foot apart). MMB also shot on a soundstage, giving the commercial a stylized, campy look. "We wanted to create the feeling that this was a movement taking hold," Caufield says.

The campaign was launched on Mar. 23, 2008—the same month that Bear Stearns collapsed into the arms of JPMorgan Chase (JPM). "The timing could not have been better," says Dennis Lombardi, executive vice-president at restaurant consultancy WD Partners. Over the first two weeks, franchisees reported that sales shot up 25% on average. Within weeks, 3,600 videos of people performing the jingle appeared on YouTube (GOOG). Fogle, attending the NCAA Final Four college basketball tournament soon after the launch, was serenaded with the song by students. The $5 footlong was mentioned on ESPN, The Tonight Show, and celebrity gossip site TMZ (TWX). The North Carolina State Fair even held a $5 Footlong Song Challenge—an American Idol-style event for the 4-H crowd.

The franchisee marketing board quickly voted to extend the four-week promotion to seven weeks. When that ended, Subway kept it going but limited the number of $5 sandwiches to just eight, removing items with high ingredient costs, such as the Chicken & Bacon Ranch sandwich.

Suddenly Subway needed 50% more food supplies. Bread shortages became a problem, as the ratio of six-inch sandwiches to footlong orders, normally 2 to 1, flipped. Subway's franchise-owned Independent Purchasing Cooperative, or IPC, had to scramble to find new sources of bread. Even mundane items, such as plastic sandwich bags from China, nearly ran out. "I was in a panic," recalls IPC CEO Jan Risi, who furiously worked the phones, cajoling her network of suppliers to run extra shifts.

EVEN CHEAPER

Soon, copycat offers emerged. Boston Market offered 11 meals for $5 each, while Domino's sold sandwiches for $4.99 and KFC launched $5 combo meals. T.G.I. Friday's began selling $5 sandwiches. "Five dollars is the magic number now," says restaurant consultant Malcolm Knapp. "It's become a price point that consumers respond to," says Judy Cantrell, Boston Market's chief brand officer.

The question now is when the campaign will run out of steam. MMB's Caufield admits the issue keeps him up at night: "Are we riding this pony too long?" Tony Pace, a senior executive who works with Subway's marketing arm, replies bluntly: "If you had a brand that represented nearly $4 billion in sales, would you plan an exit strategy for it?"

Pace says the footlong will remain "as long as it makes good economic sense," so a decline in footlong sales could force price hikes, or limits such as $5 after 4 p.m. (Serabian has gone the other way as the South Florida economy has worsened, offering footlongs for $4 in his stores.) There are also concerns that Subway's focus on the footlong could distract it from new growth areas, such as a planned push into breakfast items or international expansion. (Save for some tests in Australia and Canada, the $5 footlong hasn't gone beyond the U.S.)

Meanwhile, Frankel has moved on to a new idea. Now he's pushing for Subway loyalty cards that let purchasers accrue points toward free sandwiches. Driving down Interstate 95 toward Jackson Memorial on a cloudy autumn day, Frankel chronicles the frustrations he's had convincing DeLuca and others that this could be a hit. Maybe now that Frankel is the Father of the $5 Footlong, they'll listen.

Gelato U. - Time

Image via Wikipedia

By Nina Burleigh / Bologna

Some students arrive in Bologna, Italy, with just a secret indulgence — without shop locations, business plans or $70,000 on hand for must-have machinery. They head to Carpigiani Gelato University to learn how to turn sacks of sugar and crates of oranges, kiwis, lemons and persimmons into spoonfuls of earthly bliss.

Gelato is the ultimate refinement of a Mediterranean flavored-ice tradition that supposedly dates back to the ancient Egyptians. In the past half-century, Italians have designed machines — engineered and produced in the same region as Ferraris and Lamborghinis — that can produce ever tinier crystals of ice, allowing for less water, less air and more taste. (See pictures of Gelato University.)

For three weeks every month, 20 to 30 students from the world over gather in Bologna inside a tiered lecture room in a Jetsons-style building erected in the early 1960s for the brothers Carpigiani, who perfected the first electric gelato machine. There, a gelato maestro shows them how to transform lowly buckets of cream or bags of fruit into cold, concentrated flavor that often has half the fat of American ice cream.

Besides the secret of perfect gelato, many students are attracted by the sweet dream of self-employment. Gelato is a major growth business worldwide, a cheap luxury defying the recession as people turn to smaller pleasures. And despite the $1,052 tuition for a weeklong session, so far this year enrollment at Gelato U is up 87% compared with the same period in 2008. Who's signing up? "Mostly 40-year-olds looking for a new life," says Patrick Hopkins, director of the six-year-old educational offshoot of the Carpigiani company, which produces a majority of the world's gelato machines. (See gelato recipes from a Gelato University maestro.)

"About eight years ago, I got the idea" to become a gelato artisan, says a 45-year-old student, a European executive who asked not to be identified by name or even home country for fear of tipping off employers to a possible midcareer switch. "I figure I have about 15 years of energy left. Do I want to spend it climbing the corporate ladder? Or do I finally do this?"

Maestro Gianpaolo Valli whips such students into shape. "You need to know what makes a strawberry!" he shouts. His lively lectures, delivered in deliriously Italian-cadenced, non sequitur — studded English, cover such topics as how to identify a fruit's sugar content and how to do the surprisingly complicated math of balancing sugar (an antifreeze) and fat (the opposite): "You increase the fat content, but it freezes. So you need to compensate with sugar. You say, 'Maestro, not possible!' Yes, it is possible! I show you!"

Students attending Gelato U aim to build their gelaterias in far corners of the globe. They know that real gelato is a delicate thing that cannot survive being taken out and put back into a freezer, that it is best consumed where it is made. That's what Melissa Green, 36, an HR manager in Tampico, Ill., learned in September during her first trip to Italy, when she consumed her first gelato. After a few bites of green apple, a light went on, illuminating her future: "I tasted this, and I was like, We have got to bring this back home."

See pictures of Italian coffee.

See the top 10 food trends of 2008.

California: Golden State Is Thriving, Despite Its Woes - TIME

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by Michael Grunwald

California, you may have heard, is an apocalyptic mess of raging wildfires, soaring unemployment, mass foreclosures and political paralysis. It's dysfunctional. It's ungovernable. Its bond rating is barely above junk. It's so broke, it had to hand out IOUs while its leaders debated how many prisoners to release and parks to close. Nevada aired ads mocking California's business climate to lure its entrepreneurs. The media portray California as a noir fantasyland of overcrowded schools, perpetual droughts, celebrity breakdowns, illegal immigration, hellish congestion and general malaise, captured in headlines like "Meltdown on the Ocean" and "California's Wipeout Economy" and "Will California Become America's First Failed State?" (

Actually, it won't.

Ignore the California whinery. It's still a dream state. In fact, the pioneering megastate that gave us microchips, freeways, blue jeans, tax revolts, extreme sports, energy efficiency, health clubs, Google searches, Craigslist, iPhones and the Hollywood vision of success is still the cutting edge of the American future — economically, environmentally, demographically, culturally and maybe politically. It's the greenest and most diverse state, the most globalized in general and most Asia-oriented in particular at a time when the world is heading in all those directions. It's also an unparalleled engine of innovation, the mecca of high tech, biotech and now clean tech. In 2008, California's wipeout economy attracted more venture capital than the rest of the nation combined. Somehow its supposedly hostile business climate has nurtured Google, Apple, Hewlett-Packard, Facebook, Twitter, Disney, Cisco, Intel, eBay, YouTube, MySpace, the Gap and countless other companies that drive the way we live. (See pictures of California First Lady Maria Shriver.)

"Whenever we have a problem, everyone makes a big drama — 'Oh, my God, it's the end. California is over,'" Governor Arnold Schwarzenegger told me. "It's all bogus." Schwarzenegger likes spin and drama too — he's issued warnings about a "financial Armageddon" — and he literally blew smoke in my eyes while we spoke. But his belief in the anything-is-possible dream of California is more than spin; he is, after all, its ultimate embodiment. (See how marijuana is taxed in California.)

California, to borrow a phrase, will be back. It's been stuck in an awful recession — not quite as awful as Nevada's — but it's getting unstuck. It's made nasty cuts to close ugly deficits, but it hasn't had to release prisoners or close parks, and its IOUs are being paid. Its businesses aren't fleeing to Nevada or anywhere else; Jed Kolko, an economist at the Public Policy Institute of California, has shown that fewer than one-tenth of 1% of its jobs leave the state each year. Even California's real problems tend to get magnified by its size. If it were a country, it would be in the G-8. So, yes, California has the most foreclosures and layoffs. With 38 million residents and a $1.8 trillion economy, it also has by far the most homes and jobs.

It can be perilous to generalize about a place this gigantic, an overwhelmingly metropolitan state that leads the nation in agricultural production, a majority-minority state with a white-majority electorate. There are real differences between (crunchy, techy) Northern and (hipster, surfer) Southern California, and especially (richer, denser, bluer) coastal and (poorer, sparser, redder) inland California. But one generalization has held true from the Gold Rush to the human-potential movement to the dotcom boom: California stands for change, for disruption of the status quo. "California is not another American state," concluded Carey McWilliams in his 1949 history California: The Great Exception. "It is a revolution within the states."

Today, it's still the home of the new new thing. It is electric-vehicle start-ups like Tesla, Fisker and Better Place taking on the Big Three, or the local-organic foodies behind California cuisine going after Big Ag. It's Kaiser Permanente, the HMO whose model of salaried doctors in group practice may be the future of health care, or the University of California at Irvine's law school, which opened this semester with free tuition and was instantly more selective than Harvard or Yale. It's SpaceX, the private rocket-launching company, or Kogi, the Korean taco truck that announces its location over Twitter to flash mobs of Angelenos. "The beauty of California is the idea that you can reinvent yourself and do something totally creative," says Kogi's Roy Choi, a former chef at the Beverly Hilton. "It's still the Wild West that way."

California is a state of early adopters — not only in fashion, technology and design but in politics too. Its voters approved huge bonds for stem-cell research, high-speed rail and repairs to aging infrastructure while Washington was dragging its feet; its politicians adopted first-in-the-nation greenhouse-gas regulations, green building codes and efficiency standards for automobiles and appliances that have rearranged the national energy debate. Yes, it was also an early adopter of subprime mortgages — Countrywide, Golden West and IndyMac were all California-based — but life on the frontier has always been risky. "This is the most dynamic place for change on earth," genomic pioneer J. Craig Venter said on a recent tour of his San Diego labs, where researchers are studying ways to convert algae into oil, coal into natural gas and human wastewater into electricity. "That's why we're here." Dressed in shorts, flip-flops and a crazy-loud floral shirt on a typically perfect day, Venter noted that California's quality of life isn't bad either: "It is pretty nice not to have to wear pants."

California has long inspired its own premature obituaries. The 1855 book The Land of Gold dismissed it as "lawless, penniless and powerless." TIME published a woe-is-California issue called "The Endangered Dream" in 1991 after the aerospace industry collapsed. But even with 12% unemployment, California still has an enviably young and productive workforce. And it's still a magnet for dice-rolling dreamers who want to start anew, make money and change the world, with or without pants. "I see my own pattern repeated again and again — people who want to invent the future and aren't afraid to fail," says billionaire Silicon Valley financier Vinod Khosla, an Indian immigrant who helped found Sun Microsystems and recently unveiled a $1.1 billion venture fund for investments in clean technology.

Which just happens to be the next California gold rush.

The New Gold Rush
Tom Dinwoodie is standing on a roof, staring at the future. The roof covers Richmond's grand "daylight factory" overlooking San Francisco Bay, where Ford built Model A's before World War II and then the iconic Rosie the Riveter built jeeps and tanks during the war. Now SunPower Corp. uses it to assemble the world's most efficient solar panels, including a sleek array on its roof. That's where Dinwoodie, SunPower's chief technology officer, likes to go to look across the bay at a collection of hulking tanks in which Chevron stores fossil fuels. If we don't stop global warming, he says, that water will rise. But if solar and other renewables keep growing as fast as they are in California, "we'll turn those tanks into hot tubs."

If you think solar is an eco-fantasy, you probably don't live in California, where rooftop installations have doubled for two years in a row, to 50,000, heading to the state goal of 1 million by 2017. The San Francisco utility Pacific Gas & Electric, which recently bolted the U.S. Chamber of Commerce over climate policy, has 40% of the nation's solar roofs in its territory. SunPower now has more than 5,000 employees. It's building massive power plants for utilities, as well as roof panels for big-box stores, complete subdivisions and individual homes. Prices are plummeting, and competition is fierce, most of it from California firms like BrightSource, Solar City, eSolar, Nanosolar and Solyndra. "The scramble is on, and California is leaps and bounds ahead of the rest of the country," says Dinwoodie. "That's true of all energy issues." (Read a 2003 profile of Arnold Schwarzenegger.)

When it comes to energy, California is not just ahead of the game; it's playing a different game. Its carbon emissions per capita are less than half the U.S. average. And from 2006 to '08, it attracted $3 of every $5 invested in U.S. clean tech — five times as much as the No. 2 state. It's by far the national leader in green jobs, green patents, supply from renewables and savings from efficiency. It's also leading the way toward electric cars, zero-emission homes, advanced biofuels and a smarter grid: its electric utilities plan to install smart meters in every California home. It's even launched a belated battle against car-dependent sprawl, with unprecedented rules forcing communities to consider carbon emissions in their land-use plans.

California has been preparing for its clean-energy future for a long time. Starting in the energy crisis of the 1970s, California revamped its electricity markets so that utilities could make more money by helping their customers use less power. It also began enacting groundbreaking efficiency standards for buildings, appliances, pool heaters and almost anything else that needs juice. It just proposed the first standards for flat-screen TVs. As a result, per capita energy use has remained stable in California while soaring 50% nationwide, saving Californians an estimated $56 billion and avoiding the need for 24 new gas-fired power plants. On the supply side, the state has required utilities to provide one-fifth of their power from renewables by 2010, which will jump to one-third by 2020. And California's soup-to-nuts effort to slash emissions — including a cap-and-trade regimen in 2012 — is the blueprint for federal climate legislation. (Download a PDF on California's industries, labs and technologies.)

This public-sector foresight has created alluring opportunities for the most tech-savvy private sector on earth. The venture capitalists behind the high-tech and biotech booms see clean tech as the next big score. The necessary engineers, scientists, accountants, lawyers, marketers and other knowledge workers are already there. "We've already turned industries on their heads, so we assume we can do it again," says Steve Dolezalek, VantagePoint Venture Partners' managing director, who oversaw the firm's software and life-sciences investments before heading its clean-tech group.

The lines between sectors are blurring fast. As its name suggests, eSolar is essentially a software play; its added value is advanced code that positions vast arrays of mirrors to the millimeter to maximize their exposure to sunlight. The company was spawned by IdeaLab, a Pasadena incubator that developed NetZero, Picasa, pay-per-click ads and online car-selling. "We only do ideas that challenge the status quo, and California is the only place we'd do it," says CEO Bill Gross. (See pictures of San Francisco.)

Chip-industry veterans are also drifting into solar, as well as LED lighting and green materials, while Cisco, which made the guts of the Internet, is pivoting to make the guts of the digitized grid. San Diego's cluster of more than 500 biotech companies is now the world capital of algae-to-fuel experiments, including a new $600 million joint venture between ExxonMobil and Venter's Synthetic Genomics. Khosla's investments include Calera, a carbon-capturing-cement start-up founded by a Stanford expert in medical cement; Amyris, which has Berkeley malaria researchers working to turn sugar into diesel; and Soladigm, which exploits semiconductor-industry expertise to make energy-efficient windows.

California scores poorly in most "business friendly" ratings, which tend to focus on tax rates and wage levels rather than on, say, worker productivity or creativity. And the state has more than its share of no-no-no types protesting nanotechnology, synthetic biology and even some SunPower solar-energy projects, which could possibly imperil kangaroo rats and fairy shrimp. But the state's business culture fetishizes long-shot ventures and game-changing ideas. Failure is appreciated, not stigmatized, and an entrepreneur without a few busted start-ups on his résumé is almost suspect. (See TIME's City Guide: Los Angeles.)

Guido Jouret, who oversees Cisco's emerging technologies, explained this creative destruction when we talked over TelePresence, an ultra-high-definition substitute for the hassle, expense and carbon footprint of business travel. We were 3,000 miles (4,800 km) apart, but I kept forgetting we weren't at the same conference table. One of Steven Spielberg's cinematographers helped Cisco get the illusion of intimacy just right. "California has a very welcoming attitude, but it's a Darwinian society," Jouret said. "Companies come and grow and die, and no one sheds a tear. And there's a real sense that it isn't worth doing if it won't change the world."

California's high-tech community has concluded en masse that the next Google guys are going to be the visionaries who figure out how to harness the sun, build a battery to store the wind or engineer the renewable fuel that won't compete with the food supply. (It could be the actual Google guys, who have launched an aggressive clean-energy initiative.) "Inventing a better gadget isn't enough anymore. We're trying to reshape the way people live," says SolarCity CEO Lyndon Rive, a South African who went to California for the world underwater-hockey championships, got caught up in the Internet boom and never left. He built and sold an IT-support company; now he's reshaping its software to monitor solar panels.

The State of Progress
So why all the end-is-nighism? Schwarzenegger thinks California gets slagged nationwide for the same reason the U.S. gets slagged worldwide: it's natural to resent the big kahuna. (He should know; his approval rating has dipped below 30%.) In a poolside interview after hosting a global climate summit in Century City, he suggested that outsiders envy California's immense resources — beaches, mountains and redwoods; Hollywood, Napa and Disneyland; the best in stem-cell research, fruits and vegetables, entertainment and fashion. (He was sporting a suit with a zebra-print lining.) "We're all about the cutting edge," he said. "I mean, come on. California is wild!" He's right about the schadenfreude, and it was fun to hear him say the word. It is easy to gloat when the cool jock with the hot girlfriend wrecks his sweet car, especially if he seems kind of smug. I was reminded of this during Rob Lowe's talk at the summit, when he declared that everyone has an obligation to join the fight against global warming, then continued, "For my part, I'll be doing The Ellen DeGeneres Show."

Then again, California has legitimate problems that inspire legitimate criticism: gangs, sprawl, disturbing dropout rates, water shortages that don't seem to stop farmers from irrigating rice and cotton in the desert, the crazymaking traffic that Hollywood immortalized in Falling Down. It's still sitting on a fault line. Its expensive housing, even after the real estate crash, poses a real obstacle to the dream of upward mobility. So do its public schools and other public services, which have been deteriorating for years — in part because older white voters have been reluctant to subsidize younger minorities.

This gets to the one area where California really is dysfunctional: its budget. Californians generally enjoy government spending more than they enjoy paying for it, which is a national problem, but they've also straitjacketed their politicians with scads of lobbyist-produced ballot initiatives locking in huge outlays for various goodies, as well as the notorious Proposition 13, which has severely restricted local property taxes since 1978. California is also one of only three states that need a two-thirds supermajority to pass a budget or raise taxes, a virtual impossibility in its ultra-partisan legislature. So it relies on a boom-and-bust tax base that even many liberals admit is overreliant on the rich. The state's economy actually grew last year, but its revenues crashed because its top earners had lower incomes and capital gains. That meant sharp cutbacks, especially in education, which in California is unusually dependent on state cash. "We have an incredibly dynamic economy, but we'll still end up in federal receivership if our government can't pay its bills," says historian Kevin Starr, a prolific chronicler of the state.

Fortunately, help may be on the way. Nonpartisan groups like Repair California and California Forward have built momentum for sweeping reforms that could stop the unsustainable chaos — including an end to the two-thirds rule, limits on ballot initiatives and a new system of taxation. Schwarzenegger is pushing for a gargantuan water-sharing agreement that could help prevent the state from running dry. And his potential successors are also formidable go-getters with forward-thinking credentials — including former governor and current attorney general Jerry Brown, golden-boy San Francisco mayor Gavin Newsom and former eBay CEO Meg Whitman. Brown, the early front runner, was widely mocked as Governor Moonbeam back in the 1970s, but some of his ideas — including energy efficiency, as well as the emergency-communications satellite that inspired his nickname — no longer seem so flaky. (Download a PDF on California's industries, labs and technologies.)

But the krazy-Kalifornia criticism is likely to continue regardless of the facts on the ground — not just because of envy, but because of ideology as well. The collapse of the Golden State provides an irresistible parable for hippie-lefty vegan politics, the failure of a quasi-Scandinavian progressive experiment symbolized by MoveOn.org, Daily Kos and the Sierra Club; yoga, crystals and medical marijuana; "Hollywood values" and "San Francisco values." California has a tradition of activist government, and public support for the University of California, federal energy labs and the military-aerospace-industrial complex played a huge role in creating Silicon Valley, San Diego's biotech cluster and the state's other private-sector centers of innovation. So it's been a juicy target for right-wingers who consider Schwarzenegger a squishy sellout. If a low-carbon, Big Government, change-obsessed state with high taxes on the wealthy, draconian environmental regulations, a porous border and the nation's most vibrant labor movement were imploding, what would that say about the age of Obama?

Then again, the home state of Richard Nixon and Ronald Reagan has been a conservative trendsetter as well, leading the backlash against taxes, affirmative action and illegal aliens and enacting the first three-strikes law against career criminals. Its economy is much closer than the nation's to a true model of free-enterprise capitalism, in which government sets rules and enforces a level playing field but declines to pick winners. And what could be more Californian than the conservative megapastor Rick Warren urging his multimedia flock to make a fresh start with a forgiving God? "A clean slate is possible!" he wrote in his best seller God's Power to Change Your Life. "It's a lot like my son's Etch A Sketch."

In any case, California is not imploding, which ought to be heartening to Americans regardless of ideology or geography. Because America is essentially the land of the Etch A Sketch, and California is America but more so, beckoning dreamers who want to cook Korean tacos or convert fuel tanks into hot tubs. It's progressive more in the literal than in the political sense of the word. And it's where America is going: a greener, more advanced and more global economy; a browner and more metropolitan population; and, yes, some staggering debts and other governance problems that need to be resolved. It's expensive and crowded — because people still want to be there! — and it's recovering from an economic earthquake. But it continues to have a powerful claim on the future. "In the depths of the breakdown, you can see the next narrative," says Mark Muro of the Brookings Institution's metropolitan-policy program. "It's California. The next economy is already in place there, and it's amazing."

Ethnic restaurants struggle to attract customers

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Eateries aim to draw in locals as well as far-flung foodies to sample their cuisine

by Amber Parcher | Staff Writer

It's 2 in the afternoon on a Thursday, and Maria Peredo is cleaning up from the lunch crowd that rushed in and out of her small Wheaton restaurant, Kantutas, on Ennalls Avenue.

She and her mother and niece lift, rinse and wipe the four tables that are covered in replicas of original Bolivian weaves, scurrying past the green-tiled walls outlined in yellow and orange in preparation for the dinner rush that will inevitably hit. And the weekends?

"There's a line out the door," she says in Spanish.

Kantutas is a true hole-in-the wall, dishing up the kind of cuisine that metro-area foodies dream of stumbling across. Peredo, a former house cleaner and Bolivian immigrant, started the restaurant several years ago with her family. She and her mother do the cooking themselves, and a whiteboard sign outside the one-room restaurant details in black marker the delicacies of the day. Inside, a machine humming in the background churns out mogonchinchi, an indigenous drink resembling soda water, and a loud radio pitches the afternoon talk show on the local Spanish station.

But 90 percent of the "foodies" that frequent Kantutas are Peredo's countrymen, yearning for flavors of home, she said.

Neither Peredo's place nor any other Hispanic restaurant in Wheaton has yet attracted a diverse, sustainable clientele, according to local eatery owners. And as talk solidifies among county planners to market Wheaton as an international food venue for the rest of the world, many ethnic restaurant owners say Wheaton has a long way to go for that title: They can barely bring in a mix of customers from the nearby neighborhoods.

"Everyone who comes in here already knows what a ‘pupusa' is," said Yessenia Remedes, a worker at Irene's Pupusas on University Boulevard, in Spanish. The restaurant inside a railcar specializes in the El Salvadorian dish, and it's become a local chain almost entirely through Hispanic customers.

Some of Wheaton's Latino diners don't even have the support of their own.

"The Hispanic restaurants have a problem, because no Americans come," said Javier Herrera, a chef at El Pulgarcito Del Callao, a Peruvian seafood restaurant on Elkin Street.

Waving his hand over the empty dining room, Herrera rattled off in Spanish the fundamental differences in the ways Latinos and the rest of the world eat. Many Wheaton restaurants have chosen to cater to the Latino way of food—loud music, a prominent bar and futbol— not football—blaring on TV.

The result has severely limited many restaurants' customer base.

Linda Amendt, a Wheaton resident and activist, said it took her a while to get used to being the only person in the restaurant who was not of the same heritage as everyone else.

"The first couple times, ... I felt uneasy if there were no other local Caucasians there," she said.

And the language barrier is a huge obstacle to developing a strong-enough relationship with the restaurant to feel comfortable inside it, she said.

"It made you uncomfortable if they had a hard time speaking English to you, your customer," Amendt said.

Learning English isn't always easy, but some figure there's got to be something that is.

"We don't know how to approach them, how to get close to them, how to make them come in," said Julio Cruz, the owner of Sergio's Place, a Peruvian and El Salvadorian fusion restaurant on Fern Street.

Cruz said he's considering passing out fliers personally among the rows of homes on Kemp Mill Road just behind his restaurant.

"I wish we could get people who live around Wheaton," Cruz said.

There are 117 restaurants listed in Wheaton's downtown area. Thirty-one are Hispanic, 20 are Asian, three are kosher, seven are Italian and four are pubs or sports bars, according to www.wheatonmd.org, the urban district's official Web site.

Palestinian Brewer Leads Struggle for Economic Progress - washingtonpost.com

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Beermaker Draws Crowds to Town of Taybeh But Sees Roadblocks to Progress, Prosperity

By Howard Schneider
Washington Post Foreign Service
Monday, October 5, 2009

TAYBEH, West Bank, Oct. 4 -- There's more than a bit of Sam Adams in David Khoury, the mayor of this tiny Christian village in the occupied West Bank. Along with being a politician and patriot, he is a brewer, and he sees the craft as a symbol of the Palestinian state he hopes will emerge here one day.

To the usual images of conflict, checkpoints -- and in the case of areas influenced by Islamist groups such as Hamas, an intolerance of alcohol -- Khoury and his family-owned Taybeh brewery have added an Oktoberfest, a weekend of music, dancing, local crafts and free-flowing suds, just to the east of Ramallah and across the valley from nearby Israeli settlements. To the usual lineup of traditional products like olive oil and honey, he has added a lager that has caught on in Japan and been franchised for production in Germany.

"This is the other side of the coin," Khoury said of the two-day festival held this weekend outside his office. "It shows political freedom and democracy. It is resisting occupation by showing that we can grow the economy and build it."

It is a theme that is being heard more often among Palestinian officials and businesspeople these days. Prime Minister Salam Fayyad has issued a two-year plan to build the institutions needed for a Palestinian state and has argued that Palestinians should work toward that goal as if Israel were no longer present in the West Bank, rather than wait for an uncertain peace process to change the facts on the ground.

The few thousand people that migrated to Taybeh this weekend might seem a small contribution to that end. But it shows some of the larger dynamics at work in the West Bank, as the small and somewhat off-the-beaten-path village has put its stamp on Palestinian society.

Taybeh is by reputation the only village in the West Bank without a mosque, and its thousand or so year-round residents are dominated by two families, the Khourys and the Khouriehs.

The brewery was started in 1995 by David Khoury and his brother Nadim, who had returned from the United States with his head full of ideas about hops and German beer-purity laws as well as his own recipes. They almost went broke during the intifada that erupted in 2000, and while never directly challenged by Islamist groups, they feared that the enterprise would be pushed to the fringes of Palestinian society.

That has changed. The brewery now turns a profit, the beer is widely available at restaurants in the West Bank and Israel, and the Oktoberfest, now in its fifth year, is helping brand the town as a once-a-year destination.

Along with a handicraft bazaar, falafel stands and plenty of beer taps, the stage acts brought a sense of the West Bank's diversity -- traditional dubka dance groups alongside Palestine rock-rappers CultureShoc and the hip-hop band Ramallah Underground.

"It has been great," said Manar Naber, a handicrafts salesman who said that, beyond the occasional busload of Christian tourists coming to look at the local churches, there was rarely a crowd in Taybeh before the Oktoberfest.

The growing sense of normalcy in the West Bank has been important, Khoury said, though he added it should not be misunderstood.

As a businessman, he notes that his trucks of draft beer still have to travel to a special industrial checkpoint far to the south before crossing into Israel for delivery to restaurants in Jerusalem, turning a half-hour trip into a four-hour excursion.

As a politician, he sees the limits of what Israeli Prime Minister Binyamin Netanyahu has done so far in pursuit of what he calls economic peace. Checkpoints and barriers have been removed, people are moving more freely into and around the West Bank, and the economy is picking up as a result. But industrial development, capital projects and private-sector risk-taking remain at a minimum, he said, something also noted by World Bank and other studies which have concluded that the West Bank economy remains heavily dependent on public spending and money from donor nations.

But as a brewer, he has to say that life is good. The Taybeh Brewing Co. sold more than 150,000 gallons last year and has been marketing a nonalcoholic "halal" beer to extend its reach to Muslims.

And just like Sam Adams, he has his eye on Boston. He has children in graduate school in New England, and the hope is to use a family-owned liquor store in the Brookline area as a takeoff point for U.S. distribution.

"It is life, liberty and the pursuit of good beer," Khoury said.

For Salon Owner, It's All About Roots - washingtonpost.com

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A Virginia Businesswoman Helps Other Hispanic Hairstylists Gain Confidence and Experience

By Dagny Salas
Washington Post Staff Writer
Tuesday, September 22, 2009

Corina Cornejo never forgets how she got her start: as a "shampoo girl" in a beauty salon in Arlington. In the mid-1980s, the owner of the salon put the Salvadoran immigrant in charge of washing hair and sweeping clippings while she studied for her cosmetology license. A few years later, Cornejo and her sister saved enough to open their own salon.

Now Cornejo is a mentor to stylists throughout Northern Virginia's Hispanic community. Her salon in Manassas and her sister's in Arlington, where Cornejo worked before selling her share to her sister, have served as training grounds for several aspiring salon owners to gain entrepreneurial confidence and experience before branching out on their own. "We have to share what we know," Cornejo said in Spanish. "God puts people that help you in your life. Now I can give it others."

With more than 500 foreign-born, self-reported Hispanic hairdressers in Virginia, mostly concentrated in Northern Virginia, salons are a popular choice in the immigrant-heavy region for newcomers who want to avoid low-paying, day-labor jobs in favor of a career. Hair salons require little overhead, have relatively fewer bureaucratic hurdles than some other businesses and tap into skills that many immigrants cultivated in their home countries.

Cornejo opened the salon, expanded and hired other immigrants who later took off on their own, a path not unlike that followed by Korean and Vietnamese nail salon workers and other new arrivals. Her shops helped train Ignacio Rodriguez, who operates in Alexandria; Yesenia Galdamez, who took over one of Cornejo's salons in Warrenton; and others whose intertwined histories demonstrate how many immigrants settle and prosper.

Cornejo's deep ties in the local community have paid off during the economic downturn. Although her annual revenue dipped from a high of about $200,000 in the late 1990s and early 2000s to $100,000 last year, Cornejo said she has not had to cut hours or employees. Her Manassas shop employs six stylists and an assistant manager.

But the economy has affected how often patrons frequent the shop. "You can say 'I don't have the money, I'll wait another week,' " but she expects customers to return as the economy improves. Freddy Ventura, a longtime Manassas business owner, remembers when Cornejo opened her Manassas salon in the early 1990s. There weren't many Spanish-speaking businesses in the area. Corina's Hair Design was a hit.

"That place was packed. I never went because of the long line," Ventura said. "But everyone knew the name of the business."

The Mid-Atlantic Hispanic Chamber of Commerce counts 400 businesses as members in the D.C. region, said Jacqueline Krick, vice president of the Northern Virginia regional office. The chamber opened its first office in Northern Virginia in January and a second last week in Arlington. Cornejo's client list has been built largely on word of mouth. Many of her future employees found her that way too.

In the early 1990s, Rodriguez walked into a well-known salon in the Culmore area of Fairfax County. The salon where Rodriguez had been working had just closed. He struck up a conversation with a stylist who knew Cornejo and her sister and learned that they had an open chair in their Arlington shop. Once he passed the in-person test, he was hired. When Cornejo opened the second salon in Manassas, Rodriguez followed her there.

During an interview he gave in Spanish, Rodriguez credits his time working for Cornejo as instrumental in opening his own salon.

"A lot of people come here without papers and have to clean bathrooms, but I got to work in my chosen profession," said Rodriguez, whose father had owned a barbershop in Mexico. Rodriguez picked grapes and strawberries in California when he first emigrated to the United States in the 1980s. "You open with a vision of what you'll do and you're excited about having your own business."

Other shop owners say that Cornejo gave them a chance when they didn't have much else. After losing two houses to foreclosure in 2006, Galdamez was in no position to open a business when Cornejo approached her last year about taking over her Warrenton shop where Galdamez worked. She had already tried running a house-cleaning service in Arlington, a lunch-truck serving pupusas along Route 1 in Woodbridge, and a hair salon in Herndon. But Cornejo told Galdamez that she believed in her and would support her.

"I always said to myself 'I just need one more opportunity,' " Galdamez said in Spanish. "When I started, I said: 'This is mine; this is what I want to do. I won't leave this.' " She said she still regularly calls Cornejo with questions about treatments, prices, how to treat a particular client.

After nearly two decades, Cornejo's reputation remains strong. A few weeks ago, Doris Morales burst into Cornejo's Manassas shop. She was on a mission to find the salon a friend had recommended for her granddaughter. Was this the right place? The granddaughter was guided to a stylist's chair as Morales sat to relax.

A ramp agent at Dulles International Airport, Morales sees what Cornejo has done for herself -- and for others -- as setting the kind of example the Hispanic community needs.

"A woman who has her own business has to want to fight to come out ahead," Morales said. "She gives opportunities to people who want to learn. That's how the community grows."

E-commerce Fever Makes Taobao China’s Newest Internet Darling

By DAVID BARBOZA

YIWU, China — In the months leading up to his college graduation in June, Yang Fugang spent most of his days away from campus, managing an online store that sells cosmetics, shampoo and other goods he often buys from local factories.

Today, his store on Taobao.com — China’s fast-growing online shopping bazaar — has 14 employees, two warehouses and piles of cash.

“I never thought I could do this well,” said Mr. Yang, 23, who earned $75,000 last year. “I started out selling yoga mats and now I’m selling a lot of makeup and cosmetics. The profit margins are higher.”

Taobao fever has swept Mr. Yang’s school, Yiwu Industrial and Commercial College, where administrators say a quarter of its 8,800 students now operate a Taobao shop, often from a dorm room.

Across China, millions of others — recent college graduates, shopkeepers and retirees — are also using Taobao to sell clothes, mobile phones, toys and just about anything else they can find at neighborhood stores and wholesale markets or even smuggle out of factories.

Internet analysts say this booming marketplace — reminiscent of the early days of eBay, when Americans started emptying their attics for online auctions — has turned Taobao into China’s newest Internet darling.

Though just six years old, Taobao (Chinese for “to search for treasure”) already has 120 million registered users and 300 million product listings. Its merchants produced nearly $15 billion in sales last year.

The company claims that sales through its Web site are already larger than any Chinese retailer. And, Internet analysts say, sales on its site this year will surpass Amazon.com’s expected sales of about $19 billion.

“This is the next big segment for China’s Internet,” said Jason Brueschke, an Internet analyst at Citigroup in Hong Kong. “It’s their Amazon and eBay combined.”

Like eBay, Taobao does not sell anything itself; it simply matches buyers and sellers. It has a firm foothold in China because many parts of the country still have poor transportation and some local authorities favor their own government-owned outlets, making the retailing system inefficient.

The global recession also left once-booming factories overflowing with goods the rest of the world does not seem to want.

The so-called Taobao addicts are helping to pick up the slack in a sluggish economy. “I can’t live without Taobao,” said Zhang Kangni, a graduate student in Shanghai. “First, it’s cheaper. I found a dress at a store in Shanghai. It’s a Hong Kong brand that sells for $175. I found it on Taobao for $33.”

But skeptics ask: Can Taobao actually make a profit and emerge as a true Web powerhouse?

The company is not publicly traded and therefore does not disclose financial information, but listings are free on Taobao and the company makes no money from online transactions. Almost all Taobao’s $200 million in revenue comes from advertising, which the company says covers virtually all its operational costs.

The company has been criticized, however, for contributing to a flourishing trade in counterfeit goods. Taobao brushes aside such criticism, saying it has a new program that is effectively cracking down on counterfeits.

Company executives also say Taobao is poised to earn huge profits, but that their first priority is creating an online community.

“Our vision for Taobao is to build a consumer’s paradise, where people can shop online and have fun,” Jonathan Lu, Taobao’s president, said. “If you make the company better and better, profits will naturally follow.”

His confidence in Taobao’s future comes from the company’s lineage. It is a division of the Alibaba Group, which was founded by Jack Ma. In the past decade, Mr. Ma has created an Internet conglomerate with strong financial backing from Yahoo, Goldman Sachs and the Softbank Group of Japan. Yahoo owns about 40 percent of Alibaba.

Alibaba.com — the conglomerate’s flagship Web site — connects small businesses from around the world with Chinese exporters. Taobao.com does something similar for consumers who want to sell to other consumers.

When Taobao was founded in 2003, it appeared to have no chance. EBay and its Chinese partner, EachNet, controlled 90 percent of China’s online shopping. But Mr. Ma, a former English teacher, quickly undermined eBay’s fee-based service by offering free listings on Taobao, essentially giving away ads to anyone who wanted to sell.

At the time, eBay executives ridiculed the strategy, with many repeating that “free is not a business model.”

But almost immediately, the site took off, and in 2006, eBay pulled out of China, citing dwindling market share and large losses. Today, it is Taobao that commands 80 percent of China’s e-commerce market, according to iResearch.

“Taobao is dominant,” said Richard Ji, an Internet analyst at Morgan Stanley in Hong Kong. “They’re like an online Wal-Mart.” Mr. Ji says Taobao is a threat not only to traditional retailers but also to big Chinese Internet companies, like Baidu, a leading search engine, because they are competing with Taobao for many of the same advertisers.

Taobao has thrived, Internet analysts say, because people do not need much capital to start online stores. This year, Taobao says its site could help create half a million new jobs, mostly among young people opening new online stores.

Bao Yifen, a 23-year-old recent college graduate, opened her clothing shop with a $5,000 investment in 2007. Today, her Taobao store has sales of about $4,000 a month.

“Three times a week I go to the wholesale market,” Ms. Bao said. “It’s a huge market. About 70 to 80 percent of the stuff is factory leftovers. There are even some brands, but they just cut the labels off.”

Items smuggled into China from Hong Kong, Europe or the United States are also sold on Taobao, evading high import duties and enabling sellers to profit by undercutting the prices of merchandise in regular stores. An Apple MacBook Air that sells for $2,225 in Beijing, for instance, costs just $1,508 in Hong Kong, a difference of 33 percent.

Counterfeit goods are also readily available, even though Taobao claims to have removed two million “fake branded goods” from the site.

Nevertheless, many Taobao sellers acknowledge dealing in illegal goods.

“I work in an O.E.M. factory that produces laptops and electronic devices for Sony,” said one such seller, who identified himself Mr. Feng, referring to an original equipment manufacturer that produces goods for global companies. “We have Sony’s core technology and exactly the same raw materials and components, so we set up our own store selling netbooks and laptops on Taobao.”

A spokesman for Sony, Takashi Uehara, said the company had no comment but was looking into the matter.

Here in Yiwu, which claims to be the site of the world’s biggest wholesale market, Taobao has started to change the look of Yiwu Industrial and Commercial College.

The school’s vice dean, Jia Shaohua, points out an area designated as a start-up site for students seeking to get rich. He points to students taking orders by computer, packaging products, sorting inventory and taking photos of the items for display online, then adds, “Around the school now, there is a whole Taobao industrial chain.”

Every afternoon, even this summer, when the school should be relatively empty, one can hear the ripping sounds of tape being wrapped around boxes in a building that could pass for a United Parcel Service shipping terminal.

“The students don’t need a lot of money,” Mr. Jia said. “They just get orders and go find the items at local factories.”

Mr. Yang, the cosmetics seller, has become a campus hero. He operates his own warehouses a few miles from the school, in the basements of a pair of residential buildings.

Standing in his crowded warehouse, near boxes of Neutrogena sun block, hairpins, toothbrushes and a wide assortment of cosmetics, Mr. Yang says business could not be better.

“Soon, I’ll reach $150,000 a month in sales,” he said, flashing a big grin.