To get the right answer, it is first necessary to ask the right question. But what if you don’t know what question to ask?
    The Don Beall Center for Innovation and Entrepreneurship has created a new web-based resource called the Innovation@Merage Knowledgebase for executives seeking to formulate the right questions, and ultimately the right answers, as to how their organizations can sustain competitive advantage through continuous business innovation.
    Focused on serving the needs of C-level executives, the Innovation Knowledgebase is a collection of the most influential, “best of breed” articles, opinions and academic research available on the subject of corporate innovation; pre-selected and reviewed by a team of Merage School PhD candidates under the leadership of Dr.Christine Beckman. It also features a blog that focuses on more timely elements of innovation today. The objective of the Innovation Knowledgebase is to

Learn more at: merage.uci.edu/go/Innovation

create a single location where the best thinking from around the world in the area of corporate innovation can be easily searched by topic and industry.

The mandate was clear: renovate the Merage School’s website to better portray the sense of innovation and excitement that is the Merage School today. In collaboration with WebAdvanced, a web development firm founded by UC Irvine alumni, the new home page uses the latest technologies to present a vibrant introduction to the School. Improved navigationand a more interactive environment highlight the Merage School’s thematic approach to teaching sustained business growth through strategic innovation, supported by analytical decision-making, information technology and collaborative execution.

The incoming Merage School FEMBA Class of 2011 is one of the best ever as measured by academic background and qualifications, professional experience, and interpersonal skills. Out of 288 applicants, the school is welcoming 118 new students,

David Young A few short years after completing his MBA at The Paul Merage School of Business, David Young, CFA, joined PIMCO, one of the world’s leading money management companies. As head of account management in PIMCO’s London office, he was responsible for building a team of relationship managers and helping to grow the client base ten-fold. Following his seven-year stint in London, Young returned to the U.S. to his current role as executive vice - president and account manager in the firm’s Newport Beach office. There he has been instrumental in bringing the skills and experience learned off shore to

Presented by the Center for Investment and Wealth Management, the Exiting Your Business Conference will take place next March. Join in as current and former business owners discuss real world experiences, learn about changes in business valuation in today’s marketplace and the steps you must know to lead your business to a successful exit.
    This conference, specially designed for $4 million to $50+ million business owners, is offered through the Merage School’s Executive

Globalization is a contentious issue in the current political debate. To shed some light on the subject, a group of researchers from UC Irvine’s Paul Merage School of Business took a look at one of the most global of all industries, the production of computers and peripherals.
    Using the iPod as an example of a recent innovation in this industry, the research indicates nearly twice as many jobs are supported offshore as in the U.S., yet wages paid in the U.S. are over twice as much as

Jennifer L. Woolley, PhD ’07, a Merage doctoral program graduate, was awarded the 2008 Heizer Award for Best Dissertation by the Entrepreneur Division of the Academy of Management. After being short-listed with four other dissertations, Woolley’s work titled, “Understanding Organizational Community Creation: The Nanotechnology Community,” was selected for the award.
    The principal focus of the Heizer Award is on research that deals with the founding, financing, management, growth, and development of high potential new ventures, with venture capital investing, or with corporate

A groundbreaking new effort to develop and market the Merage suite of career management training modules, known as MBA Career Power™, has been launched at the Merage School. Nan Stothard, senior associate director of the Merage School MBA Career Center, and MBA Career Center Executive Director Tom Kozicki are leading this new approach to career planning.
    A dynamic set of training modules, MBA Career Power is designed

To enhance the delivery of our high quality programs, compete with peer institutions, and continue to attract and retain the highest quality faculty and students, Dean Andy Policano set his sites on the development of a new building – the first new building to be built for the School since 1989.
    With AC Martin as the program architect, for the new multi-story, 80,000 square-foot structure. Led by Assistant Dean John Clarke, the development team has completed the programming segment of the planning process and the project is now transitioning into the design/build phase. Funded with state money and $20 million in gifts, the $55 million building is expected to be complete by 2012.
    This new facility reflects the Merage School’s emphasis on innovation

What do the Beijing Olympic Village, the rebuilt tower at 7 World Trade Center in New York, and the new Merage building all have in common? Not only are they certified “green” projects, they’re also solid “gold.”
    While already a solid leader in sustainable construction, the Merage building team is seeking LEED Gold certification, which is one of the highest ranks among “green” buildings.
    Planning for the $60 million, 80,000 square foot Merage building project is already in process, in full compliance with some of the strictest environmental guidelines in the world. The criteria, known as LEED

UC Irvine’s School of Law and The Paul Merage School of Business are planning to offer a dual degree program offering graduate students the opportunity to earn a juris doctor and a master’s in business administration simultaneously.
    The four- to five-year program answers a demand in the marketplace for employees with a combination of legal and business knowledge and gives students an opportunity to pursue careers as attorneys, business executives or both. The knowledge of how to handle corporate lawsuits and business issues such as incorporation and, mergers and acquisitions

Unprecedented Times
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painful, will be much less than experienced in the past and certainly much less than what occurred during The Great Depression. Thanks to massive global macroeconomic policy reaction as well as a number of normal safeguards in the U.S. economic system, the unemployment rate, rather than peaking at 25% of the labor force, as it did during the Depression, is likely to hit no higher than 8.0 – 8.5% in the U.S.
    Right now, under current policies the global economy faces two critical challenges: first, there is a widespread lack of confidence and second, a lack of liquidity. Much analysis has been done of these periods; in fact Ben Bernanke himself has studied financial crises and The Great Depression in great detail. The basic lesson learned is that when people need more liquidity, the Fed should give it to them. Simple enough, but the Fed doesn’t drop cash from the sky, although it is likely that right now Bernanke wishes he could. Rather, the Fed traditionally adds liquidity to the economy through open market operations whereby it buys bonds from banks and provides cash in exchange. Banks then lend this cash to both businesses and consumers who increase spending and boost the economy. The problem currently is that banks are reluctant to lend due to very shaky balance sheets and a bleak economic outlook. Rather, they are building their cash position to restore capital adequacy ratios that deteriorated due to poorly performing assets on their balance sheets. Thus, while the Fed has been willingly providing cash to the banking system, the corresponding boost to lending has not yet occurred.
    The inappropriately named “Bail Out Program” evolved as an attempt to remove poorly performing assets from bank balance sheets and allow loans to once again flow freely. While $700 billion is certainly a large number, life (and economics) is always a relative game. Estimates of one of the most significant classes of assets in trouble (credit default swaps) are in the range of dozens of trillions of dollars. The intent, rather than to solve the entire liquidity shortfall, is first to restore confidence. Still, many lenders will continue to increase reserves rather than lend. Rather than removing bad assets, the Treasury has recognized it can have a much more significant impact by adding equity, taking an ownership position in banks and increasing capital adequacy ratios directly. In addition to freeing funds for loans, as an owner, the government can encourage additional lending. Over time U.S. Treasury and Fed actions combined with global central bank infusions should increase liquidity and restore well-functioning credit markets.
    When will the market bottom and what strategy should individual investors follow? Bear markets historically tend to settle at roughly 30% below the market’s previous high. We have already hit the 30% market in both the Dow and the S&P indexes. Now, some math. If you have lost 30% (so every $1 is now worth 70 cents) you will need about a 43% return on that 70 cents to get back to your original $1. How should you allocate your portfolio to do so?
    In money market funds you might take as long as 12 – 15 years to earn 43%; in bonds maybe 7 – 10 years. With equities that have historically averaged 8% returns, the time to recover your losses would be substantially less. As always, diversification is a must; how aggressive you are depends on your attitude toward risk.
    While the U.S. economy will certainly survive the current financial morass, the long-term outlook is not nearly as bright as the period of prosperity that existed during the 1990s. Rather, long-term growth in the U.S. is likely to be slower and inflation and interest rates are likely to be higher during the next decade than in the past ten to twenty years.
    One of the major issues challenging President-elect Obama is that the U.S. debt currently exceeds $9 trillion without including the impact of a significant future shortfall in both the Social Security System and Medicare. The consequence is that over the next decade, we must all face the following realities:

• The growth in government spending must slow (by much more than “earmarks”);
• Income taxes must rise;
• Social Security benefits must fall and/or Social Security taxes must rise, and;
• Medicare benefits must fall and/or taxes rise.

So how can President-elect Obama soften the effects of these realities?
Tax cuts alone are not the answer. Households are unlikely to spend right now and spending is what the economy needs to rebound from the current recession. In a capitalistic economy, two critical roles that the government must take on are to act as first, the lender of last resort (as the Fed and the Treasury are now doing) and second, the spender of last resort. When consumers are reluctant to spend, the government must spend — but it must spend wisely. Now is the time to enact a “new” New Deal. President- elect Obama’s plan, in fact, includes several facets of such a plan. What is necessary is a significant government investment in infrastructure and research; roads, high speed rail, energy, education, communication, research in new and emerging areas of science and technology and other areas that over time provide opportunities for businesses to flourish, for the creation of higher paying jobs and for the development of innovations that continually support sustainable growth.
    These investments and the easing of liquidity along with the resulting effects on growth will take time. So, how should individuals best prepare?
    First, as always, diversify your portfolio based on your attitude toward risk and the time until retirement. Too safe a position will imply that you will miss excellent opportunities that are available right now in stocks that are considerably undervalued. At the same time, be careful not to absorb more risk than you can tolerate — emerging stock markets, for example, can and have fluctuated by 40% or more each year. As one smart investor once said, “You can either eat well or sleep well.”
    Second, increase your savings as appropriate based on a smaller than expected Social Security benefit, a higher cost of long-term health care and slower income growth.
    Third, expect a broad market recovery but think carefully about which sectors may be long-term growth candidates.
    Finally, always be a student of history. The fact that the world economy repeats cycles over and over again provides ample credence to this well known observation by Edmund Burke: “Those who don’t know history are destined to repeat it.”