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ADAM SMITH'S MONEY GAME Missed the show? Get a phone call half way through? Fail to catch the name of a stock in "Personal Best"? In case you did, we are happy to provide you with a transcript. If you would like a transcript from a previous season, please visit 800-All-News at www.800-all-news.com or call them at (800) All-News. ANNOUNCER: [voice over] This program is made possible by a grant from MetLife, helping people become financially secure for 130 years. Funding has also been provided by the Roy R. and Marie S. Neuberger Foundation. ADAM SMITH: [voice over] What is this man's secret for running the world's most glamorous magazine empire? How will TV mogul Ted Turner make good on his pledge to give away a billion dollars? And bestselling author Suze Orman on how to build your fortune with your IRA. Next.
Face to Face ADAM SMITH: Hello, I'm Adam Smith and welcome to The Money Game. We all know the mantra ``new media are hot.'' It has become an overworked cliche, but did you know that some very old fashioned media are hot too? None more so than glossy magazines. Take Conde Nast, the company that publishes Vogue, Vanity Fair and the New Yorker. Privately owned by reclusive billionaire SI Newhouse and the Newhouse family, Conde Nast may not be number one in sales _ that's Time Warner _ but it is definitely number one in buzz. The man charged by Newhouse with managing this hothouse of oversized egos is Steve Florio, Conde Nast president. Meet Steve Florio, face to face. STEVEN FLORIO, President & CEO, CONDE NAST Publications: People ask me all the time how you get this great, glamorous job. You run Conde Nast. You deal with all these star editors. You get to meet all the super models and the great photographers of the world _ you know, the Dick Avedons _ and all those things are true. And it is a wonderful way to spend your life, but it isn't easy. ADAM SMITH: [voice over] The world that Steve Florio runs has its headquarters in the Conde Nast building on New York's Madison Avenue. Here, editors and publishers are famous, among other things, for their high six-figure salaries and generous perks. It is said that when Florio took up the reins four years ago, the line of limos outside the door, sometimes stretched around the block. [on camera] Steve, you took over this company, which had then nearly a billion dollars in revenue, flashy magazines and outside there were parked 60 limos. And then what happened? STEVEN FLORIO: They went. ADAM SMITH: That's it? STEVEN FLORIO: The 60 limousines went. It wasn't the 60 limousines so much. What it was, was a way of doing business whose time had passed. And it was incumbent upon me as the new CEO back in 19_ January of 1994, to maximize the bottom line of this company. And I saw T&E budgets that bore no relation to the task at hand, so to speak. And there were a lot of people that were_ ADAM SMITH: Limousines, Concorde _ that kind_ STEVEN FLORIO: Yeah, limousines, Concordes, you know, fancy restaurants delivering sandwiches at lunchtime. There was a sense of obligation that the staff felt the company had towards them. Well, what we tried to do here at Conde Nast and what hasn't changed is to create the best possible environment to produce the best possible magazines. As a result of that, we have had a number of very good years back to back. SCOTT DONATON, Managing Editor, AD AGE: His biggest accomplishment has probably been bringing a financial discipline that has seen Conde Nast_ they don't report their revenues and their profits, but in the industry's eyes go from a company that was seen as having very small profit margins, very low profit margins and profits to very respectable profits. ADAM SMITH: [voice over] The Conde Nast empire includes Architectural Digest, Glamour, Mademoiselle, Brides, Self and GQ; 16 titles in all and 17 with the recent acquisition of Wired. But the titles that get most of the attention in the press are Vogue, The New Yorker and Vanity Fair. Their editors-in-chief have become celebrities, especially Anna Winter at Vogue and Tina Brown at The New Yorker, marketed and promoted almost like movie stars. I dropped in on another of those Conde Nast stars, Vanity Fair's editor-in-chief Graydon Carter, who showed me pictures planned for a piece on TV tycoon Merv Griffin for the June issue. What role, I wondered, does Steve Florio play in the running of his magazine. GRAYDON CARTER, Editor, VANITY FAIR: Most of the times I deal with Steve I'm going to ask him for something and that's unfortunate. And I mention that to him a lot. It's because I have a budget here that I rarely ever quite stay to by the end of the year. But when I have a big idea that's going to go outside the budget, I go to him and I say to him, ``I'm going to do this. Do you mind?'' And I think in 100 percent of the cases it's been fine. ADAM SMITH: In this company, unlike many other magazine companies, your editors become stars, bigger than the writers they publish. Is that a deliberate policy? How do you create a star? STEVEN FLORIO: You create a star editor by creating a star magazine. The New Yorker has won more national magazine awards than the next three magazines combined. That made Tina Brown a star. She's been there five years and she's done a very good job. At Vanity Fair, the same thing has happened. We have a terrific team. We have Graydon Carter as our editor-in-chief. We have Mitch Fox as the publisher. And there again, a great team producing an extraordinary magazine, lots of advertising, lots of awards, readers responding to it, record circulation. That makes stars. ADAM SMITH: [voice over] And stars love nothing more than one another's company. So when Carter hosted this year's Vanity Fair Oscar night party in Los Angeles, most of the Hollywood elite showed up. But things weren't always this rosy. When he first took over as editor for Tina Brown, Carter had a hard time finding his feet. GRAYDON CARTER: When you first take over a magazine it takes, depending on the size of the magazine, it's either harder or easier than your previous job. And my first couple of years here was tough. STEVEN FLORIO: I took Graydon to lunch and I told him to stop trying to doing Tina's magazine and that he should start to do his magazine. And that if he brought his voice to it, as all great editors do, and it worked, then he would take the bow. GRAYDON CARTER: At Conde Nast, an editor is encouraged to put their stamp on a magazine, to make the magazine reflect their personality. STEVEN FLORIO: What I said to him, in fact, was Gray, you have something that I will never have as hard as I try _ you have WASPy good taste. Stop doing Roseanne on the cover, covered in mud. Use your good taste. Is that a magazine you like? Graydon shook his head. The next issue we had Meg Ryan on the cover looking absolutely beautiful, looking like a movie star and a wonderful issue that really fulfilled the promise of what Graydon Carter's Vanity Fair would be. GRAYDON CARTER: That I will forever be appreciative to Steve and SI for because they were only supportive. And I haven't had that much. In fact, I find it_ the only time that Vanity Fair wasn't making money they sort of left you alone a lot more than when you are because all of a sudden there's budget meetings to go to now. Before there weren't any budget meetings. ADAM SMITH: [voice over] Conde Nast is a hard driving, take no prisoners kind of place, especially on the publishing side where Steve Florio began, first at GQ and then for nine years as president of The New Yorker. However, at the end of the day there are no public shareholders to answer to, only SI Newhouse and the rest of the Newhouse family. [on camera] Do you spend a lot of time together? Do you work together? STEVEN FLORIO: With Mr. Newhouse? He's in the office right next door to me. We spend the day together. We no longer have meetings, we just spend the day together. He wanders in and out of here probably 10 times a day. I wander in and out of his office probably 10 times a day. He never drops the gavel and says ``I'm the owner and that's how we're doing it.'' I've never seen him do it once. SCOTT DONATON: SI is someone who, if you're sitting right next to him, you have to strain to hear him. Steve is someone you can hear from a hundred yards away pretty easily. So Steve probably carries out and executes the strategy that SI dreams up. But Steve is also his own player. He came in with very strong views about what Conde Nast should be, and that's also something that has probably stood him in good stead with SI Newhouse, which is that he doesn't back down to him. He's not a ``yes'' man. And I don't think SI Newhouse is looking for a ``yes'' man. ADAM SMITH: [voice over] To get away from the feverish intensity of what cynics call Conde Nasty, Florio likes to spend some time in boats. He recently took charge of a new one which he designed himself. He is the eldest of three brothers and grew up in New York City in a close-knit Italian-American family. To remind himself of his roots and how far he has come, he keeps a framed cartoon on his office wall. [on camera] ``My God, Buffy! He's Italian!'' Is it an advantage being an Italian in this business? STEVEN FLORIO: I don't know if it's an advantage or disadvantage, but that was given to me anonymously my first week at The New Yorker. There were some folks there that were concerned that I might not have the Mayflower background that they expected in the president of The New Yorker. And so this was given to me as a great insult. I took every picture off of the wall in my new office and hung it up. And it has been in every office since. When I first started Esquire magazine in the early '70s, I was paraded around as someone of ethnicity that they were very proud to have there. The business has changed so much that I don't think anybody notices anymore. I really don't. ADAM SMITH: [voice over] Steve is not the only Florio at Conde Nast. Kid brother Tom works there too, until recently as president and publisher of The New Yorker. The weekly is said to be losing $11 million a year despite a leap in circulation since Tina Brown arrived. Some say the red ink is due to high editorial costs said to be $30 million a year; others, that the persistent losses are due to Conde Nast's circulation strategy based on increasing the circulation guaranteed to advertisers while charging them more to advertise. Either way, Tom Florio recently left The New Yorker to return to his old job as publisher of Conde Nast Traveler. Did he leave of his own accord or was he pushed? And what of the rumors that Tina Brown's contract as editor may not be renewed? So far no one is talking. I spoke to Steve Florio about sibling rivalry at Conde Nast a few days before the news about his brother broke. STEVEN FLORIO: We talk to each other all the time. As far as meeting socially, well, he's a pretty busy guy; I'm a pretty busy guy. We don't see each other that often on weekends. He lives in New York. I live out on Long Island. We spend holidays together, as most brothers do. ADAM SMITH: So you've worked out the competition for your mother's affections? STEVEN FLORIO: We have indeed. My mother loves me best. ADAM SMITH: Very good. [Graphic: Circulation The New Yorker Source: Audit Bureau of Circulation] Back to top
On the Spot ADAM SMITH: There was a time when ad agencies didn't have public stock. Wall Street said how can you sell something on a permanent basis, a company, when the assets _ people _ go down in the elevator every night? Gradually, Wall Street realized that the people went down in the elevator but advertising in our society is part of daily life and it isn't going to go away. So ad people found they could capitalize their own earnings. Young & Rubicam, 75 years old, is just public. And Bob Garfield is here to put this giant institution on the spot. BOB GARFIELD, Columnist, AD AGE: It's a very large _ fifth largest in the world _ very large, very competent advertising agency, an agency that actually was known for its research until maybe 10 years ago and now isn't really known for anything but being kind of a discount shop. It has gotten enormous account wins by working for lower commissions and fee structures than other agencies and hasn't been all that profitable. On the plus side, though, creatively it has really improved quite dramatically I would say in the last four or five years. ADAM SMITH: Let's take a look at one of the Y&R commercials. They sent us a reel and there is an AT&T campaign that I think is on now. BOB GARFIELD: It is on now and it's one of the nicest things on the air from any agency or any client, anywhere. It's really quite magnificent. ADAM SMITH: Let's take a look. [Excerpt from AT&T commercial] DAUGHTER, Driving to College Campus: What? MOTHER: I was taking you to kindergarten last week. DAUGHTER: Mom, I was born 18 years ago. MOTHER: Yeah, I know. I was there. I read somewhere that a lot of kids stay home the first year of college and commute. DAUGHTER: Mom. You ready? MOTHER: On three. DAUGHTER: One, two, three. MOTHER: Wait for three. [voice over] FRANK SINATRA, Singing: It's very clear, our love is here to stay. Not for a year, but ever and a day. In time the Rockies may crumble, Gibraltar may tumble, they're only made of clay, but our love is here to stay. MOTHER: Just checking. HELLO? DAUGHTER: Just checking. ADAM SMITH: It's a whole story. I don't know whether to cry or sign up for a cell phone. BOB GARFIELD: Well, either way would be fine with AT&T. The whole idea here, of course, is that they show how these various kinds of telecommunications technology can fit into your lifestyle. And in this entire campaign, they have shown these various kinds of rights of passage _ one's a teen date; one is a Mom who has given up a day at work to go to the beach with her kids _ and all highlighting the AT&T products, but most importantly, showing that this big monolithic corporation understands how you live. ADAM SMITH: I love the head turn for the nude guy with the towel wrapped around him. BOB GARFIELD: What a perfect take. And one of the things that's great about this campaign is that there's little moments, wonderful acting, beautifully directed, beautifully edited, that just captures these little itsy bitsy slices of reality that you seldom see in these so-called slice of life commercials. ADAM SMITH: Is there anybody for whom this doesn't bring a lump in the throat? BOB GARFIELD: You know, I think the answer is no. I've seen some pretty hardbitten people kind of choked up by the poignancy of these spots. And they're not mawkish. They're not sentimental. These are clearly not utterly dysfunctional families, but they're also not overly idealized family situations. These are real people in real-life situations reacting more or less as real people do. And it has really been very well done from the beginning.
In Focus ADAM SMITH: When TV mogul Ted Turner took everyone's breath away last year by announcing he intended to give away a billion dollars to the U.N., we wondered how do you do that? I mean, when you or I decide to give $100 to our favorite charity, we just write a check and mail it. Right? But a billion? Giving away that much has to be different, maybe even difficult. Has the cash-starved U.N. seen any of the money yet? If not, when? We invited Mr. Turner on to our show to enlighten us, but he declined. Nonetheless, with the help of those who claim to know, my correspondent Adele Malpass has the story of Ted Turner's billion, in focus. ADELE MALPASS, Correspondent: [voice over] He dropped his bombshell at a United Nations dinner. TED TURNER, U.N. Dinner: I'm going to try my dead level best to donate a billion dollars to the U.N. causes myself. TED TURNER, Larry King Show:I got the idea 48 hours ago. LARRY KING: And it came how? TED TURNER: First of all, I looked at my monthly statement, showed the first of the year. It's got as of January_ December 31st, I was worth $2.2 billion. And I looked at it that morning real quick, because I don't have a lot of time to look at my own statement, and it was up to $3.2 because the stock went up so much during the year. So I made it in nine months. I'm only giving up nine months' earnings. It's not that big a deal. I'm no poorer than I was nine months ago and the world is a lot better off. ADELE MALPASS: [voice over] Turner's donation is the largest single charitable pledge ever made and it grabbed headlines around the world. It was in character _ impulsive, rand and flashy. This is a man who has been both Time magazine's Man of the Year and called ``Captain Outrageous'' while winning the America's Cup. He, of course, is best known for transforming his family's billboard company into CNN. Turner and his wife, Jane Fonda, have been longtime supporters of the U.N. His original idea was to not make a donation but to force the U.S. to pay its debts to the world body. PORTER BIBB, Banker Ladenburg Thalmann & Co.: We originally went in last summer and sat with Kofi Annan, the secretary general, and put an extraordinary proposal on the table. And that proposal was I'd like to buy the note, the debt, that the United States to the United Nations so I can walk into the White House and demand immediate payment or foreclose on the United States. That wasn't entirely feasible, but it was typical Turner. ADELE MALPASS: [voice over] As it turns out, Turner is not going to write a billion dollar check. What he's going to do is donate Time Warner stock, giving the U.N. $100 million a year over 10 years. [on camera] The big unknown is how Ted Turner will sell a billion dollars of his Time Warner stock and how it will affect his position in the company. PORTER BIBB: He's not going to sell the shares; that would cost him hundreds of millions of dollars worth of taxes, capital gains. He's not going to give the shares to the United Nations, in my opinion, outright because that would diminish his role as the largest shareholder in Time Warner. So it's going to be some form of trust or a shadow trust where the stock appreciation value is matched with cash from his other funds or other foundations that he has. ADELE MALPASS: [voice over] So far, not a dime of Turner's money has actually reached the United Nations. Yet, his impending donation has already caused unintended consequences. Some say it's a first step towards privatizing the U.N. ALVIN ADAMS, President, U.N. Association: It's maybe a note about the future that the work of the United Nations is not necessarily totally the preserve of governments and only governments. ADELE MALPASS: [voice over] Even former Senator Tim Wirth, now head of Turner's new foundation, is skeptical about privatizing all U.N. functions. TIMOTHY WIRTH, President, U.N. Foundation: I think there are a number of things that government should and would continue to do. There's no question about the fact that basic refugee programs and feeding hunger programs and so on are political responsibilities. These are caused by political problems and ought to be solved by governments. ADELE MALPASS: [voice over] If Turner were a country, the sheer size of his donation would rank him as the fourth largest U.N. donor nation and larger than all of the African states combined. [Graphic: ADELE MALPASS: [on camera] Do you think a large donation by someone like Ted Turner weakens the U.N.'s democratic mission? JAMES PAUL, Executive Director, Global Policy Forum: I could see easily that donations of this kind could push the U.N. in certain directions that really wouldn't be in accord with the feelings of the member states. And therefore it, I think, is fundamentally problematical from a democratic point of view. TIMOTHY WIRTH: Ted Turner doesn't have a vote. The U.N. foundation doesn't have a vote. We're doing only what the secretary general wants to see done. ADELE MALPASS: With all these difficulties and controversies, could Ted Turner change his mind? PORTER BIBB: I don't think there's a snowball's chance in hell that if the bottom fell out of Time Warner stock tomorrow and it was worth $10 a share instead of $75 or $80, that he would renege on his investment. It's just not his nature. [Graphic: Turner's Gift in Context The average annual individual charitable contributions: $1,017. Total U.S. annual charitable contributions: $143 billion. Source: Independent Sector; Philanthropy in America.] Back to top
Personal Best ADAM SMITH: We have heard from many of you about IRAs, Keough plans and other forms of tax-favored retirement options. Julie Mitchell from Deep Haven, Minnesota, wonders ``I'm recently married and my husband and I would like to know the best strategy for saving with IRAs. Should we both have one? Should we combine our savings? What is the right thing to do?'' Julie, your signed copy of my book, The Money Game, is in the mail. And with me now to discuss Julie's question is Suze Orman. We're happy to welcome Suze to the program to help you do your personal best. SUZE ORMAN, Author, ``The 9 Steps to Financial Freedom'': Should you and your husband have an IRA? Absolutely. What kind of an IRA? I love these new Roth IRAs. I'm telling you, you can put money in there. So here, Julie, this is what you need to know. You and your husband, if you qualify for the income levels and I'm sure you do because they're quite up there, take your $2,000 a year, put it into a Roth IRA. Now you're not going to get a tax deduction for it, but this is what you need to know. In a Roth IRA, you can take that $2,000 out any time you want without penalty and you don't have to be 59-1/2. You simply have to leave the earnings of that $2,000 in the account until you're 59-1/2 or at least five years. So if you get in a bind, if you need something, you can get at that money. So here you can start saving for your retirement, you can make it be tax-free as the years go on because Roth IRAs, remember, you don't get a tax deduction, but when you go to take the money out it's tax-free. Save for it now. I'm telling you, the money will compound like you could never believe. ADAM SMITH: In a Roth IRA, can you put it into whatever you want? SUZE ORMAN: Absolutely. You would look to put, especially at Julie's age _ if you're in your mid-20's, again, go for aggressive growth. Look for good, no-load mutual funds; ones that don't have a commission on it. And put your money in there. A quick example. If you were to put even just $100 a month at the age of 25 and you did that every single month, so let's say you funded your IRA with only $1,200 a year, do you know that, Julie, by the time you were 65 you would have $1 million if that fund returned 12 percent for you? Wait just 10 years _ don't waste these years, Julie _ wait just 10 years to start, you'd have only $300,000 when you were 65. Don't wait. Time is of the essence. [Graphic: Suze Says: If your yearly income is $100,000 or less, you are allowed to convert all or some of your traditional IRA into a Roth IRA. Should you convert? To find the answer on-line, contact: STRONG FUNDS - www.strongfunds.com T.ROWE FUNDS - www.troweprice.com] ADAM SMITH: What question would you like answered to help you do your personal best in the money game? Get in touch with our e-mail address, letters@adamsmith.net. Or write to us the old-fashioned way at Adam Smith's Money Game, 885 Third Avenue, Suite 2800, New York, New York 10022. We look forward to hearing from you. And if we answer your letter on the air, I'll be sending you a personally signed copy of my book, The Money Game. What an age we live in. There was a time when the phrase ``millionaire'' and the songs of Cole Porter denoted lavish wealth. But a million dollars these days isn't what it used to be. And now we've seen someone decide to give away a billion dollars because his stock had gone up by that amount in less than a year. The bull market in stocks has created a wealth effect, but the gap between the really rich and the rest of us is widening. Where is that going to take us? I'm Adam Smith. See you next week as the Money Game continues. ANNOUNCER: For more of the Money Game, visit us in cyberspace at www.adamsmith.net. ANNOUNCER: This program is made possible by a grant from MetLife with over $330 billion in assets under management. Funding has also been provided by the Roy R. and Marie S. Neuberger Foundation. Back to Top CREDITS Produced by ADAM SMITH EDUCATIONAL PRODUCTION Thanks to: Special thanks to: 3-D Models Provided in Part by 3-D CAFE For a VHS cassette send $19.95 or $5.00 for a printed transcript to: Copyright _ 1998 Adam Smith Educational Productions Ltd.
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