Portfolio.com: Daily Brief

Inside the Clear Channel Trial: What is Unique?

Tue, 13 May 2008 23:25:44 GMT

In the annals of busted buyout deals, the feud among two Boston-based private equity firms and six banks over the financing to take Clear Channel Communications private is one of the few that resemble a Wagnerian opera.

New York Supreme Court Justice Helen Freedman ratcheted up the tension on Monday by postponing the civil trial by a day. That led some news media to speculate about an "imminent settlement" of the suit, which stems from the banks' alleged attempt to walk away from financing the $22 billion buyout.

Despite that, a gaggle of people queued up in the hallway before Justice Freedman's courtroom by 10:45 this morning, holding places for hedge fund managers and arbitragers. Good thing the masters of the universe weren't there themselves: The trial was set to begin at 2 p.m.

The first witness for the plaintiffs, buyout firms Bain Capital and Thomas H. Lee Partners, was John Connaughton, a Bain Capital managing director who was the lead negotiator on the leveraged buyout.

Under methodical questioning by Mark Hansen, a veteran litigator from Kellogg, Huber, Hansen, Todd, Evans & Figel, Connaughton offered a tutorial on the mechanics of leveraged buyouts. Connaughton explained that private equity firms often work with the same banks, even the same bankers. In his tenure, he said, Bain handled 300 deals, with leverage provided by banks.

Has any bank walked away from a commitment letter, after a successful bid with corporate management? "In my experience, in 19 years, that has never happened," Connaughton said. (A virtual drum roll went out in the cramped, poorly ventilated courtroom.)

In fact, he said, the two lead banks in this transaction, Citigroup and Deutsche Bank, were the same banks that had worked with Bain Capital on the largest L.B.O. in history, the $33 billion buyout of Hospital Corporation of America. That deal closed just months before the Clear Channel opportunity arose in November 2006.

In his answers, Connaughton repeatedly described the "unique" aspects of Clear Channel's business: It is the largest radio company in the world, he said.

"They are considered to be one of the most exceptional performers in the media industry," with 30 percent market share, "unique" licenses, and outdoor billboard real estate that cannot be duplicated because the permits for such advertising are no longer granted.

Connaughton called them a "fairly unique property for advertisers." There is that word, unique, again. "If you were to ask any one in the radio business," he said, they would say, "there is no other Clear Channel."

All of this, subtly or not, was meant to establish that Clear Channel is a unique real estate asset. Under New York law, the usual remedy for a broken promise to lend money is to award cash damages rather than compel a lender to actually make the loan. The idea is that borrowers can get money elsewhere and only need to be compensated for their inconvenience. There are, however, some exceptions: One involves unique real estate assets. If Bain can establish that Clear Channel is a unique property, it could persuade the court to order the banks to make the loans as originally agreed.

Connaughton explained that Clear Channel's shareholders did not accept the first deal that Bain reached with the company's executives. That led to questions about the May 17, 2007, commitment letter signed by the banks, providing financing for a richer deal.

And here is where the fun began with wonky clauses loved only by mergers-and-acquisitions lawyers. There was, for instance, no "market MAC" in the financing deal — that would be a clause allowing the banks to get out of financing by a "material adverse change" in the market.

First off, corporate boards are "increasingly sophisticated about what risks they are willing to assume in selling," Connaughton said. And was it important to Bain? "Sure," he said. The buyout firms were expecting a closing date 18 months from the deal, owing to regulatory hurdles.

The banks, he said, gave the buyout firms a very good deal. "Quite unique," he said, enabling the firms to be very aggressive in the price they could offer to shareholders.

In the new deal, there was something called a Delayed Draw Term Loan (a term that seemed to make Freedman wince from behind her glasses), a $2 billion revolving line of credit, and another credit facility called an Accordion.

At this juncture, Hansen made use of his Power Point skills, projecting explanations of these terms on a huge screen. These funds were supposed to be used for "general corporate purposes," and "working capital," among others. He called these provisions "very common."

Clear Channel, at the time of the deal, had $5 billion in existing notes that would come due during the seven-year life of financing deal by the six banks. At the end of the day, Hansen, like any smooth litigator, built his diva moment: He asked Connaughton whether the firms would ever have agreed not to be able to use existing cash, or revolving credit and the like to pay down the company's pre-existing debt. No, came the answer.

The clean-cut Bostonian gave a star performance in his answer: "What is ironic here is, I don't think the banks would have wanted it, because they would not have wanted a liquidity crisis, and I certainly don't think management would agree."

With that, court adjourned, leaving the gallery hankering to hear more about the "poisonous terms" that the banks allegedly forced on the buyout firms after the credit crisis hit and they got lenders' remorse. Stay tuned.

by Karen Donovan

Facebook Loses Face Again

Tue, 13 May 2008 21:19:30 GMT

Early this afternoon, Gawker.com exposed a new (as yet unannounced) feature on Facebook: Put your cursor in the 'search' box, press the down arrow, and a list of five names will appear.

The early speculation was that the list represented the five people who search for your profile most on the site.

Naturally, as with most changes having to do with Facebook, hysteria ensued. More than 200 comments were posted on the original Gawker item and new theories began to surface. Was this the five most recent people to search you? The five people you search for most often? A coding error? A random glitch?

The waking fear sinking into the hearts of Facebook users everywhere was that if the first theory was true and you could see them ... then they could see you. That meant every ex-boyfriend or secret crush that you've been checking on daily is now wise to your level of interest.

"This is going to make seeing the ex more awkward in person," wrote one Gawker commenter.

"CRAPSHITFUCK," wrote another. "Why, Facebook, why? I thought we had a stalkery understanding?"

It's an open secret that the vast majority of Facebook users spend far more time than we would ever admit browsing the personal information provided by friends, whether out of boredom or hidden interest.

Facebook exposing that would mean violating users' trust, significantly discouraging the habit, and seemingly spelling disaster for a social networking website dependant on that activity to generate page views.

But within a few hours, Facebook had pulled the feature, circulating the following explanation to the press:

"Facebook tries to surface the people we think are most important to users to make it easier and faster for them to navigate the site and find what they are looking for. The search drop down is not a list of those that have searched for the user. It is also not a list of people whose profile the user has viewed the most or who have viewed the user's profile the most. To avoid any confusion, this will no longer appear."

Do we believe it? Given the disconnect with Facebook's general privacy policies — users are still smarting over the intrusive Beacon advertising "feature" launched and quickly spiked last December — as well as the obvious risks of the feature, it seems unlikely that Facebook would lift the veil of secrecy on your browsing behavior unannounced.

Crisis averted. Stalk at will.

by Liz Gunnison

Another Municipal Wi-Fi Plan Dies

Tue, 13 May 2008 20:24:18 GMT

Question: What ever happened to municipal Wi-Fi?

Answer: Not much.

Unless you want to count Earthlink's announcement today that it will discontinue its municipal wireless network in Philadelphia, an experiment once touted as a new model of low-cost, public wireless access in cities.

After it became clear that the project would cost more than Earthlink had originally anticipated, the company sought to sell the $17 million network to a nonprofit group.

That effort fell through "due to unresolved issues among the city, Wireless Philadelphia and the nonprofit," Earthlink said. Wireless Philadelphia is the organization in charge of managing the network. Earthlink did not say which nonprofit it had approached.

Earthlink said it would ask a federal judge to allow it to remove its equipment from city streetlights and cap its liability for the failed project at $1 million.

Earthlink's decision to shutter the network is the latest blow to the ailing effort to introduce low-cost or free wireless networks in cities. Last year, the company backed out of a similar program in San Francisco, but that effort has been revived by start-up Meraki, which is partly funded by Google.

Glenn Fleishman, the editor of Wi-Fi Network News, suggested that Earthlink's Philadelphia project was doomed from the start.

"The failure in Philadelphia, and EarthLink's exiting the entire muni-Fi business, represents the end of a bad model in which a company agreed to assume all risk and costs associated with building a public access network," Fleishman wrote today.

"When the assumptions were that networks would be cheaper and easier to build in 2005 and that citizens in many larger cities had few affordable broadband options, it made some sense to build a network on spec," Fleishman added.

"Three years into this, however, it's clear that that capital investment is two to three times higher than what was anticipated to reach a level of service quality that people will expect," Fleishman continued. At the same time, he noted, DSL and cable operators have been willing to slash prices to battle competition.

Besides, Fleishman concluded, "wireless broadband delivered via Wi-Fi isn't the best of ideas for indoor service."

by Sam Gustin

Apple Trademarks the Rectangular Box

Tue, 13 May 2008 18:30:12 GMT

Apple has been granted a trademark for the shape of the iPod, essentially giving it exclusive rights to make a box with a screen and a wheel:

[T]he design of a portable and handheld digital electronic media device comprised of a rectangular casing displaying circular and rectangular shapes therein arranged in an aesthetically pleasing manner. [emphasis added]

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Who decides that last point, we have no idea, but this will mean that Apple is likely to become much more aggressive in going after the knock-off iPod designs out there.

One advantage of a trademark over a patent is that it doesn't expire. However, to keep a trademark, you need to defend it, which means lots of nasty letters to manufacturers. Otherwise, the shape of the iPod could end up like the name "Hoover," which has become a generic word for vacuum cleaner in England.

Ridiculous? Perhaps. But if McDonald's can register "I'm going to McDonald's" and T-Mobile can lay claim to the color pink, then a pretty arrangement of shapes seems almost sensible.

Shape of Things to Come [Wall Street Journal]

by Charlie Sorrel for Wired.com

Peeling the Banana

Tue, 13 May 2008 13:59:07 GMT

A trial pitting Chiquita Brands International against hundreds of Colombian families, who claim Chiquita-backed militias murdered their relatives during a decade of civil conflict, will enter its preliminary phase Friday in a West Palm Beach, Florida courtroom.

"We've been in limbo," says Terry Collingsworth, the first attorney to file a civil suit against Chiquita in the U.S. last year for funding the right wing paramilitary group, Autodefensas Unidas de Colombia, which killed scores of unionists and civilians in Chiquita's Colombian banana growing region. Collingsworth, who has said he would like to drive Chiquita out of business because of its behavior, added "Friday we start having fun."

Chiquita pled guilty in federal court last September to paying $1.7 million, between 1997 and 2004, to the right-wing paramilitary Autodefensas Unidas de Colombia, or AUC, and agreed to pay a $25 million fine. The company said the payments amounted to extortion and that if it had not paid, the AUC would have harmed its workers and its property. Families of the victims feel otherwise. Several lawsuits filed around the country in the past year say Chiquita should be held responsible for the deaths. In late April, a federal judicial panel ordered the various lawsuits, filed in New York, New Jersey, Ohio, Pennsylvania and Washington, D.C., all to be heard in a West Palm Beach court.

This Friday the plaintiff's lawyers will meet with U.S. District Judge Kenneth Marra in West Palm Beach to set the rules for the trial, followed by a period of discovery. The trial, however, could be a year away. "It's an unusual procedure unless there are multiple cases," says Collingsworth. "We're very concerned that the case is going to be slowed down."

In the meantime, Colombia's Attorney General has vowed to seek the extradition of several Chiquita executives implicated, though not named, in a Justice Department filing that outlined Chiquita's illegal activity in Colombia and that lead to the last fall's guilty plea. No individuals from Chiquita have been charged.

On Sunday, C.E.O. Fernando Aguirre defended the company on the CBS show 60 Minutes saying that "the responsibility of any murders are the responsibility of the people that made the killings, of the people who pulled the trigger."

--George Quraishi

The Great Retirement Salad Bar

Tue, 13 May 2008 12:11:50 GMT

Too little spinach, too many of those crispy noodles and bacon bits.

Left to our own devices, most of us are bound to make bad choices, whether at the salad bar or with our retirement plans. So concludes a new report analyzing the investment choices of nearly 1 million 401(k) plan participants.

The godfathers of modern portfolio theory would roll over in their graves — if they weren't all still alive — to learn about the mistakes workers make in selecting from plan investments.

There's the one-over-n strategy, in which diversification is taken to its illogical extreme: equal proportions of every investment option in the plan. Or the barbell — half in the most aggressive holding, and half in the most conservative.

Thirty-eight percent of the plans studied showed very inappropriate levels of risk and inefficiency, according to a study by Financial Engines, a third-party adviser to retirement plans that was founded by one of those portfolio-theory godfathers, William Sharpe.

One-third of employees allocated too little of their salary to earn full employer matching contributions, and more than one-third of the plans allocated at least $1 in $5 to their own company's stock.

"Without help, advice, management, forecasting, expertise, I think it's a very, very hard task to expect someone to do on his or her own," said Sharpe, a Nobel laureate who pioneered the models for calculating risk-adjusted investment returns, and is now an emeritus professor at Stanford University.

In his early research on investment risk, Sharpe said he considered people as rational.

"I've been a student of — not an expert in — cognitive psychology (and) behavioral economics for years," he said. "But my work, the bulk of my formal work, has assumed investors are economic persons as opposed to behavioral persons."

But raw economics can't explain strategies like the one-over-n. Behavioral psychologists know that proportional selection is a common response to overwhelming choice — whether it's at the salad bar or in the retirement plan.

Unfortunately, those kinds of choices can lead to more grave consequences than a few extra pounds. In a plan with four stock funds and one bond fund, a one-over-n choice would give a 75 percent allocation to stocks — far too high for older workers.

A separate study recently published by the Vanguard Center for Retirement Research showed an 8.6 percent increase in early 401(k) plan withdrawals due to economic hardship, a choice that can greatly reduce the growth potential of a nest egg. The firm's analysis suggested the withdrawals were an early warning sign of economic troubles or a result of the subprime mortgage squeeze.

Sharpe says the solution to poor retirement planning isn't to go back to pensions, which have their own problems — largely to do with the allocation of risk between younger and older workers. His company, like other advisory firms springing up, want to give advice no differently than a family physician.

Says Sharpe: "Would you want to do your own medical diagnosis, or would you like to go to a doctor?"

by Daniel Sorid

Back to the Future, Presented by Xerox

Mon, 12 May 2008 23:30:42 GMT

It's the 21st Century, and — as you know — we all have flying cars! I got a ticket form the sky police the other day for not wearing my cloud belt.

Actually, no. I didn't. No flying cars. No food pills. No baby vending machines. But, a recent exposition at Xerox's Palo Alto Research Center (PARC) unveiled a few cool inventions to keep you bemused until the airborne autos arrive.

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Since Xerox owns the place, it's fair to start out with a printing, copying advance. PARC came up with printable paper that wipes itself clean in 24 hours. It does not use ink, so the specially coated paper produces dark tones when exposed to the light the laser printer produces. The tones fade away in 24 hours, allowing the paper to be reused up to 100 times.

A Solar Concentrator sounds like a cool planet-destroying weapon, but it's actually a PARC-perfected miniaturized solar panel that concentrates sunlight 500 times. The invention means improving solar panels, making them a more reliable energy source.

Finally, PARC is looking to upgrade the speed and efficiency of water purification by using simple centrifugal force to separate solids from large amounts of water. The energy-efficient technology could bring cleaner water to both developing areas and large cities of the future — where you'll drive the flying cars.

by John Scott Lewinski for Wired.com

Artwork by Dawid Michalczyk

Michael Jackson's Neighborly Real Estate Deal

Mon, 12 May 2008 21:30:42 GMT

Over the weekend, the King of Pop narrowly averted foreclosure when the billionaire real estate investor Thomas Barrack struck a deal to buy a $23.9 million loan on Neverland Ranch from Fortress Investment Group, which was ready to auction it off.

Just who is this white knight that saved Michael Jackson's notorious property from falling into the hands of some real estate bottom-fisher at the 11th hour?

Turns out it's his neighbor.

Barrack, who has made billions from investments by his private equity firm Colony Capital, is the polo-playing owner of a 1,200-acre ranch that's "[n]estled between the Ronald Reagan estate and Michael Jackson's Neverland" outside of Santa Barbara, according to a 2005 profile of the tycoon in Fortune.

Barrack is no stranger to distressed real estate deals, but he typically has to look farther than his backyard to find them. Neverland, which once featured a Ferris wheel, and roller coaster and a zoo when it was a controversial destination for thousands of children, has reportedly been neglected since Jackson fought molestation charges and moved out of the country several years ago.

So why did Barrack want to let Jackson to keep the ranch? It's not likely because the two are particularly close friends (the two sprawling ranches are 11 miles down the road from one another, making cup-of-sugar borrowing difficult). The distance also means that it's not that Jackson's prolonged absence makes him a quiet neighbor. And it's unlikely that Jackson's ownership boosts the value of neighboring ranches like Barrack's.

A person close to the deal said that, while Barrack and Jackson do know each other, the deal is strictly a business one. "The proximity makes Colony comfortable holding the note," the person said.

It's also possible that Barrack bought the loan from Fortress so that he could have more control over its fate when the financially troubled pop star eventually decides to unload it.

That, and the fact that the real estate savvy Barrack saw a good deal and he seized it.

by Megan Barnett

Photograph by Mark J. Terrill/AP Photo

Sometimes, Experience Can Be a Bad Thing

Mon, 12 May 2008 17:55:24 GMT

When IVAX Corp. chairman and chief executive Phillip Frost named Zachariah P. Zachariah to his company's board, he trumpeted the new director's "great knowledge and experience."

Zachariah did have several decades of experience as a cardiologist, something from which a specialty pharmaceuticals company like IVAX could truly benefit.

Unfortunately, according to federal regulators, Zachariah had experience at something else, and it has come back to bite IVAX and its new owner, Teva Pharmaceuticals.

The Securities and Exchange Commission today sued Zachariah, accusing him of trading on insider information that he obtained as an IVAX director about two months after he joined the board.

At the same time, the S.E.C. accused Zachariah — a political appointee of both President Bush and his brother, former Governor Jeb Bush of Florida — of having engaged in insider trading in shares of another company where he worked as a consultant, Correctional Services Corp.

In the IVAX matter, the S.E.C. says that Frost called Zachariah and other IVAX directors on July 6, 2005, after reaching a deal to sell the company to Teva. Although he was forbidden to trade on the information, Zachariah started doing so "within minutes" of hanging up, the commission contends.

Over time, Zachariah bought 35,000 shares of IVAX stock at an average cost of about $20.86 a share. Teva offered to buy IVAX for $26 a share, netting Zachariah a quick and virtually risk-free gain of almost $180,000.

Zachariah also shared the news with his brother, Mammen P. Zachariah, according to the S.E.C. complaint. Mammen Zachariah bought 2,000 shares of IVAX stock for about $23 a share on the last trading day before the Teva deal was announced on July 25, 2005.

IVAX, however, wasn't the first case in which Zachariah illegally traded on insider information, the S.E.C. added in its complaint.

Before making his IVAX trades, Zachariah had bought up more than $200,000 worth of stock in Correctional Services Corp., where he was serving as a consultant.

His purchases — and others by his brother and by a third Fort Lauderdale-area doctor, Sheldon Nassberg — were made as the company was in talks to be acquired by the GEO Group.

Mammen Zachariah bought $162,000 worth of Correctional Services stock, while Nassberg bought $32,000, the commission said. Correctional Services shares traded for less than $3 before GEO said it would buy the company for $6 a share.

In its suit, the S.E.C. is seeking to force the three defendants to give back any ill-gotten gains, and to pay a fine and interest. It also wants a court to forbid Zachariah to serve as an officer or director of any publicly traded company in the future.

by Mark Stein

Deep in the Valley: Digging and Baby-Sitting.

Mon, 12 May 2008 12:49:44 GMT

Sarah Lacy, a columnist for BusinessWeek, has spent the past several years covering Silicon Valley for insight into the world of web 2.0 startups. Her book, Once You're Lucky, Twice You're Good: The Rebirth of Silicon Valley and the Rise of Web 2.0, which comes out tomorrow, tries to get deep inside the minds of the Valley's new entrepreneurs hammering away at dot-com dreams.

Portfolio.com caught up with Lacy to get a sneak peek of what to expect.

Portfolio.com: How did you go manage to get the level of access that you needed to write this book?

Sarah Lacy: In covering venture capital for so long, I realized the way they are successful is they go based on person not company. So they pick really interesting entrepreneurs who they think will be so ridiculously determined that even if it sounds like the wrong idea, or even sounds like a bad idea, they will eventually work their way to a good idea.

Since it's so competitive to cover start-ups in Silicon Valley, I started really doing that. Every couple months or so I would try meet a couple of entrepreneurs and the ones that I thought were interesting, I'd try to spend a lot of time with and invest a lot of time in developing a the relationship.

With someone like [Netscape founder] Marc Andreessen, who's really untrusting, and really hard to get a relationship with, I spent about three years building trust with him never knowing what it was going to turn into. He was totally off the radar but I knew he was too smart and I knew he was too plugged in and I knew he was doing something interesting and I knew at some point he was going to be a fascinating story again. So it was us sitting in a coffee shop once a month and me asking him questions and him starting every answer with "off the record." It was the most ridiculous investment of time to gain trust. And the stuff he talks about in the book he's never talked about before,

With Mark Zuckerberg I first interviewed him when he was 19 or 20...I called the company and interviewed him and he answered the phone and was so brash and cocky and obnoxious, and bragging how he had gotten these outrageous terms from his investors and how no one could ever replace him as CEO and he was just really obnoxious. I got off the phone with him and thought 'Oh my God, this company's going to go under, this guy is a trainwreck." But I was still really fascinated with him . . . .

The more I started digging into who he was - he's a ridiculous onion, it's really hard to get to who he is - the more I started seeing the phenomenon the Facebook is.

And with [Max Levchin, founder of Paypal and Slide], even at the time I started writing this book, he was the most controversial person I focused on. Digg was kind of hot and Facebook was kind of hot but Slide was nowhere and no one thought it would be an interesting company. Of all the people I spent time with, Max to me was one of the most fascinating. You just don't meet people in Silicon Valley every day who narrowly escaped Chernobyl's radiation cloud. He's so extreme.

Portfolio: Who's the most difficult personality to deal with? Who do you get along with best?

S.L.: That's hard to answer, I have a love-hate relationship with all of them. I always told my husband when I was writing the book, it's like a cross between doing business in Japan and baby-sitting. They're legitimately really busy guys, but all at times were total pains in the asses about either flaking on me or waiting around for them. Marc Andreessen basically decided in 2007 that he wasn't going to leave Palo Alto and so I had to drive down from San Francisco and wait in a coffee shop and call him and be like, 'Hey, can we meet now?"

At one point Zuckerberg and I were at dinner and I asked, 'Can I record this so I don't have to take notes while I eat," and and he said 'No' and asked why, and he said, "You know, you're the only reporter I meet with and I think you should have to work for it." And he was kidding, but it's also this sense that as much as they could be difficult they legitimately were doing far more important things than helping me write this book. And I was the only reporter that got this kind of access, so I couldn't be too demanding. Though I was and they mostly complied. Taking all that into account they were great.

Marc Andreessen can be really difficult, Zuckerberg can be really difficult, Kevin Rose would stand you up constantly, if we have a meeting I'll have to call him up to 5 minutes before and ask him if we're really meeting - they're really, really busy guys.

Portfolio: I have to ask. What exactly happened in the Mark Zuckerberg interview of SXSW?

S.L.: Pretty much for an hour after the interview, Mark and I were looking at each other and 'saying what just happened.' I don't think either one of us is clear to this day on what happened. Mark's really, really awkward on stage, which is why Facebook asked me to do it, because I know him so well and he's so comfortable around me. If you watch, throughout the interview he's laughing, smiling, making jokes - he never does that on stage. And he admitted that Yahoo tried to buy Facebook for the first time, he's never admitted that. And he admitted that he fired people who had a problem with it, and drew a line in the sand and said 'We're not selling this company.' He actually busted out with a lot of news. So he and I are on stage and we think it's going great, and then all of a sudden in last 10 minutes all hell breaks loose. Part of that was an interesting test case on the opinions of the people who are these super technology early adopters. We could have done the same keynote at any business conference and it would have been incredibly successful.

Portfolio: After spending so much time with the Silicon Valley set, how do you think the caricature compares with reality?

S.L.: I think the East Coast/Wall Street idea is these are all guys who want to make a lot of money. I think the Silicon Valley perception is they're kind of brats and obnoxious and have no respect for anyone. It's kind of this idea that these guys have this gimmick, where they can come up with a site, they don't really have to build a business, and in a couple years it's worth lots of money and they've pulled one over on us. I think some of the difference is about what drives these guys, and it's almost never making money. There's such an obsession in Silicon Valley with valuation and what you make, but that has nothing to do with what you're going to buy or the money itself. It has to do with keeping score, because that's the ultimate tally.

These guys are so data driven that they feel this need to keep score. Even Mark Zuckerberg, people always talk about him being so greedy and driven by money, but he's personally turned down deals where he would have made $300 million or more. He's clearly not driven by money, because anyone else would have taken that.

I think there's an overall cocktail of things that drive these guys - legacy, ego, competition - all those things. One of the things that I tried to do in the book was figure out what their base motivation is. One reason Max is such a great example is he is I think he is the single most competitive person who has ever lived. His whole drive for creating Slide is competing with younger self who did Paypal.

Mark Zuckerberg is much less concerned with competition. What motivates him is his own intellectual curiosity about Facebook. He's of these guys who has this vision about what this could become.

Portfolio: What are some of the challenges of being a woman covering Silicon Valley?

S.L.: I started my career in the south covering finance, which is way harder, because being young and female, I couldn't get anyone to take me seriously. When I moved to the Valley I was stunned that there weren't more women, but generally felt more accepted and less like I had to prove myself.

Then Nick Denton was writing for Valleywag when started writing my book and he wrote this sort of famous piece called "Smoking Sarah Lacey" - and it basically said, 'Look, in everything that's been written about Sarah Lacey, it's never been pointed out that she's hot."

That seemed to give everyone permission to talk about appearance all they wanted from then on. It's not what you want. Anything about me immediately gets sexual and it's frustrating. There's never been a scandal about me, and there's absolutely no reason for anything to get sexual about me. But at the end of the day, all the people who are "important" in Silicon Valley, anyone who's a great venture capitalist or great entrepreneur or certainly any of the guys in the book never treat you differently because you are a woman. They've all been counted out for different reasons, and at the end of the day, the Valley is a meritocracy. I've absolutely never been treated differently by any of those people.

Portfolio: Why do you think there are so few women in the industry?

S.L.: Partially because it's so demanding. I don't have kids and I don't know if I'll ever have kids, because my job's really important and no way to stay on top of the Silicon Valley game if you're a woman with kids, I don't think. A lot of people will disagree with that. I'm at dinners or parties or talking to people or working late 4 or 5 times a week, and it's such a dynamic and fast changing seen that that's absolutely necessary.

Also on the startup front, there's not as big a pool of women who are qualified to code a site. There are definitely more men helping men in the Valley, but I think it's just because those are the people they know. It's definitely there and there's a bias but it's not a cruel or intentional bias and it's on the margins.

It'll be an interesting thing to watch because this generation of web entrepreneurs in particular isn't super techie. The web is becoming so standards based, and it's becoming so much more about media and community, the opportunity is really there for more women to take more roles.

Liz Gunnison