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CNN IN THE MONEY

Economic Globalization Is Not Working in The Middle East; Who Cares When Independent Films Turn in Economic Blockbusters?; Does Ethanol Have Drawbacks?; Entrepreneur Makes Fertilizer from Trash; Study: Teamwork Stifles Innovation; Bill to Change Retirement Plans

Aired August 19, 2006 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


JACK CAFFERTY, CNN ANCHOR: Welcome to the program. I'm Jack Cafferty. Coming up on today's edition of IN THE MONEY: Up in smoke, globalization, it's supposed to make us one big happy family. See why that vision isn't working, at least, in the Middle East.
And rebel in an Armani suit. Today's risky little indie movie probably came from a big Hollywood studio. We'll look at whether independent film really means anything anymore.

And a thankful of trouble: Ethanol is supposed to get us out of the fossil fuel bind. Well we're going to talk to one environmentalist who says it might create more problems than it will solve.

Joining me today a couple of IN THE MONEY veterans, Jennifer Westhoven, Allen Wastler.

Well it looks like Ben Bernanke is flirting with maybe getting it right. He took a pass on the last Fed meeting. The inflation numbers, PPI, CPI, wholesale/retail came out this week, showed signs of moderation; rally in stocks, rally bonds, going into the end of the week.

What do you think? Is the inflation model suggesting that maybe there's a slowdown coming and that we've got enough rate hikes?

JENNIFER WESTHOVEN, CNN FINANCIAL CORRESPONDENT: To me, it's almost so coincidental it's hard to imagine. The inflation numbers broke his way. Wal-Mart, Home Depot, both had numbers that suggest that -- you know, with gasoline and housing doing what they're doing, the consumers are also cooling off. It looks really good for him.

I almost wonder does he get to see those numbers early?

CAFFERTY: Ah!

ALLEN WASTLER, CNN FINANCIAL CORRESPONDENT: Ooh!

I'll be the inflation hawk here. It's not dead. It's percolating out there. It's going to jump back out. If you look at unit labor costs, over time, you'll see they're going up. Look back at the revised numbers, not the first read, you'll see inflation is right out there, ready to go in. He's going to have to raise the rate again, he's going to have to jump back in there. CAFFERTY: How soon?

WASTLER: I think he'll have to do it before the November election.

CAFFERTY: Really?

WASTLER: Which could make things really interesting. So, you know, I just tend to think inflation is not something that has been kicked yet. It's one of those monsters, you want to stay out in front of it, the moment it's past you, boom, you're dead.

CAFFERTY: Oh, yes, that was the late '70s, remember?

WASTLER: Right, right.

WESTHOVEN: Yes.

CAFFERTY: All right. We will watch it for you.

Back in 1999, "New York Times" Columnist Tom Freidman pitched what he called the Golden Arches theory of conflict prevention. Freidman argued, basically, that no two countries that had McDonald's had ever gone to war against each other, at least since the Golden Arches had arrived on the scene. The idea was that globalization brings peace and prosperity.

Well, tell that to Israel and Hezbollah. They both have McDonald's, Lebanon and Israel. And of course you know the rest of that story.

So a look now at why globalization has not paid off at least in the Middle East. We're joined by Mark Levine, who is a professor of Middle East history at the University of California in Irvine.

What's the wild card in the Middle East, Mark, that makes Tom's theory not hold water here?

MARK LEVINE, PROF., MIDDLE EAST HISTORY, UNIV. OF CA, IRVINE: (INAUDIBLE).

Just to make this a little bit more personal, when we're thinking of, you know, people who are around sipping lattes, in America, supposedly the idea is with capitalism, that when you see someone with all these extra benefits, that you'd want to work harder and that wanting those things, security, a better life for those children is why people work and it helps people forget their differences.

But you're saying that in a place like Israel you have poor people like the Palestinians seeing that happen and instead of being inspired, they're resentful, or that it can actually create more fractures between the groups. How do you change someone's personal reaction, to something like that? How do you change people's filters when they see capitalism? (INAUDIBLE).

WASTLER: So, Mark, if you're right, this is less about nationalistic divisions and more about economic class divisions. What does that mean for American aid programs, for how America deals with the situation? What should change about what we're doing?

LEVINE: (INAUDIBLE) together. The problem I think with America is that America approached this through this philosophy process of creative destruction. You know, creative destruction is a popular term in the Bush administration. Bush advisers and thinkers like Michael Ledine (ph) have talked about creative destruction being our middle name. America is a revolutionary force.

This goes back, economists have been using the term for over 50 years, to talk about how capitalism -- not only destroys the old but creates something new in it's place that creates more profits and more wealth, especially -- not surprisingly -- for capitalists.

But of course, if most people are not owners of the capital, they don't participate in it. And what you see in the Middle East, the Bush administration, and Iraq, is the classic example, was very creative about how it destroyed things. It went into Iraq, invaded it, destroyed a lot of the country. I saw it with my own eyes when I traveled there after the invasion.

It was much less successful and much less creative in how it rebuilt it. And the new Middle East that was envisioned is very much this kind of Middle East. Hezbollah, however, has understood what creative destruction means. We have seen Hezbollah fighters literally exchanging guns for bulldozers, and hard hats, going from fighters ...

WESTHOVEN: Mark?

LEVINE: Yes?

WESTHOVEN: We have to wrap it up, but thank you so much, because we're running out of time.

LEVINE: Sure.

WESTHOVEN: I just want to throw in, 101 most dangerous academics in America's in America. What do you make of that? A badge of honor or insult?

LEVINE: I think it's quite amusing to someone like me who it can't hurt, but I think to some people who are not tenured and are much less secure, it can actually can be very dangerous.

WESTHOVEN: Oh, well. Thank you very much for joining us and for helping us sort out what's going on in the Middle East.

LEVINE: Thank you. Thank you for having me.

WESTHOVEN: You're welcome.

When we come back, little stories from big studios. Indie films like "Little Miss Sunshine" are scoring at the box office. Find out if the independent film business has sold out and gone Hollywood on us. Also ahead, you drive, they starve. Ethanol could wean us off gasoline but someone is going to pay for it?

And herd instincts: Find out how teamwork can kill a company's best ideas.

(COMMERCIAL BREAK)

WASTLER: From "The Blair Witch Project" to "Fahrenheit 9/11", (sic) independent films are known for edgier themes and lower budgets. The Internet is now buzzing about one film coming out this weekend, where the audience can choose to be trapped on a plane with a screaming Samuel L. Jackson and a whole host of killer snakes. But can "Snakes on a Plane", being put out by New Line Cinema, a subsidiary of Time Warner, CNN's parent company -- all hail -- really be called an indie?

New Line is just one of a number of independent movie studios owned by the big boys. Here to answer just what is an independent films these days is Paul Dergarabedian, he's president of Box Office Tracker, Exhibitor Relations.

Paul, welcome. "Snakes on a Plane", it's already being called a cult hit. This is something you see with the indie type films. Can you explain what's going on here?

PAUL DERGARABEDIAN, PRESIDENT, EXHIBITOR RELATIONS: This is a very interesting phenomenon. I mean, "Snakes on a Plane" for months has been talked about, blogged about. It's all over the Internet. You rarely see this buildup of a film on the Internet for this many months.

I mean, in other words, months ago this was being touted as the next big thing, yet it wasn't going to be released for another five or six months. Also what was very interesting is how people via the Internet affected change in the movie's content from their home. Literally, sitting in front of their computer, blogging about it, talking about it. I've really never seen this kind of interactivity between the people on the Internet and the filmmakers, and the filmmakers actually making those changes.

WESTHOVEN: It seems like the bloggers really did a good job with this one, almost not allowing -- despite their best efforts -- the Hollywood types to screw it up. It seems they almost did.

DERGARABEDIAN: Yeah. It was kind of cool. Because even the title was supposed to be "Pacific Air 121". And New Line supposedly was going to change the title back to that. The bloggers went crazy. Samuel L. Jackson, I think, did not like the idea of changing it to "Pacific Air".

And that title is really, I think, what has -- you know, I've really never seen a title bring this much attention to a movie before. "Snakes on a Plane", it's a no-brainer. It says exactly what the movie is. People really fixated on that and grabbed onto that notion. CAFFERTY: But the test marketing that's been done suggests that it's probably not going to be a huge, huge hit. It's a $30-million movie. Despite the title and Samuel L. Jackson, who is obviously a big draw, this thing is probably not going to go through the roof. Why not?

DERGARABEDIAN: That's the interesting thing, some of the tracking has indicated that. But, you know, lately there have been stories in the trade press about the fact that a lot of this tracking has been underestimating opening weekend.

So, maybe "Snakes" will surprise us. I think the key factor here is that there's a lot of awareness for this movie. There's a couple things in movie marketing, there is awareness, and then there is that definite interest in wanting to go see the movie. What you have to do is convert those people who are aware of the movie into moviegoers and get them into the theater. And that's going to be the real trick this weekend.

WASTLER: I mean, Paul, I never miss a chance to knock some part other part of the company. New Line describes itself, on its Web site, as the oldest and most successful fully integrated independent film company. OK? Now, this is New Line, bringer of the "Lord of the Rings" and "Austin Powers". Yeah. Are we seeing these big companies trying to take advantage of the indie panache to sort of market their films? Because there are some independent films out there that seem to be doing quite well this year.

DERGARABEDIAN: The lines are being blurred between what is an indie and what is major. I mean, New Line, you're right, with "Lord of the Rings" and "Austin Powers", it's kind of hard to call that an indie. In fact, on our release schedule, we count New Line as a major studio. Given their market share, especially in the years where they had "Lord of the Rings", it's hard not to call them that.

But the line is getting blurred. It used to be that indie films were like art house films, or foreign films, boasting no major stars and really tiny budgets, that would get into the art house theaters, make a little bit of money, and not cost a lot to produce, so they did OK.

But, for instance, "Little Miss Sunshine", which is a movie in theaters right now, that film is being rolled out in more and more theaters every week. That could turn into a hit similar to "Greek Wedding". And "Greek Wedding", wound up earning $241 million at the box office. That's a movie that started out as an indie, quote, unquote. When you have a film wind up with $241 million, how do you call that an indie? It's very interesting.

WESTHOVEN: OK, a minute ago you were talking about tricks that a studio could use, or things that they want to do, to convert people who have heard about his movie, into moviegoers.

Right now, one of these tricks, was a message I got on my answering machine which was Samuel L. Jackson screaming me, personally, with my name, tell with me to go with my homeboy, Greg, my friend who filled out the form. He had all kinds of personal reasons to telling me why I needed to see this movie. It was hilarious.

Have you seen a movie studio use this before?

You can just go to the Web site, apparently and you can fill in all the details and you can send this message.

Have Web sites used this successfully before and what other kinds of tricks are there out there?

DERGARABEDIAN: If you talk to most movie marketers at the studios, the jury is still kind of out on effective marketing via the Internet is. I love this idea of the personalized phone message from Samuel L. Jackson. That's terrific.

I think what this does is create a lot of innovative marketing strategies. You can be innovative like crazy. But if you doesn't bring those people into the theater, if it doesn't make them want to see the movie, they are just having fun with the marketing, more than wanting to see the film. That could be a problem.

But, you know, the Internet has been used for many years. "The Blair Witch Project," back in '99 was one of the first films to really use the Internet. That was back when people were a little more naive with regard to what was on the Internet and thought all the stuff about the movie was true. That created the buildup for that film. It film wound up with $140 million, domestically. Maybe one of the most -- well it is one of the most profitable movies of all time.

CAFFERTY: Yes, and you mentioned by "Big Fat Greek Wedding." The odds against that happening, most of these independent films are awful. They have subtitles and they're poorly lit, and poorly shot, and poorly acted, the scripts aren't great and you see them on cable TV late at night and they're dreadful things.

DERGARABEDIAN: It's funny you say that. Because in a given year, there are about 400 films that are released. And of those, probably 250 of them are the small indie films, many of which like you're talking about, are not really that good. They're just released into the marketplace. It's the standouts that really creates this idea that the indie films are doing very well. And you know, they do.

These breakout hits, even if you look back to 1994 when "Pulp Fiction" was released, that film from Miramax, independent distribution company and studio, that film made $107 million. It had John Travolta in it, and of course, Samuel L. Jackson. And again, when a film hits $100 million, how do you call that an indie? But it still is.

I think it's also about the spirit of the movie and the spirit behind the movie. Independent films are not necessarily about big budgets and big stars, but they're about taking more chances, more risks in terms of their content.

CAFFERTY: You know what they ought to do with this thing, the ought to show this on all the commercial flights in the country.

(LAUGHTER)

CAFFERTY: Paul Dergarabedian, thank you for being with us.

DERGARABEDIAN: Thank you.

CAFFERTY: President of Exhibitor Relations, nice to see you.

Now our look ahead segment. Two important housing reports due out next week. We'll find out whether the market is slumping or not. And if so, how much, existing home sales will be released on Wednesday, new home sales out on Thursday. Both for the month of July. We'll talk more about these numbers and what we can expect in the housing market going forward on next week's program. You'll want to set your TiVo for that.

Coming up next, after the break, bringing up E-Trade. See how the company ditched the dot.com attitude. Picked up some old-school chops.

Also ahead, fuel for thought. Ethanol has been touted as the future of alternative energy. We're going to talk to one environmental activist who says it actually could make things worse.

And keeping them honest. The rules have changed when it comes to pensions. We'll learn about who is going to benefit, and who might be left out as we move forward.

(COMMERCIAL BREAK)

WASTLER: Remember back in the late '90s when it was really cool for companies to use lower cased letters or symbols in their names. Well, a lot has changed since then. Many of those companies aren't even around anymore to fix their punctuation. E*Trade Financial is, though. Sure, it's still got an asterisk in its name. But since the heyday of day trading, the company has had to reinvent itself.

The vacation, Andy Serwer, has the story.

(BEGIN VIDEOTAPE)

ANDY SERWER, CNN FINANCIAL CORRESPONDENT (voice over): Mitchell Caplan works hard to erase the go-go image his predecessor pushed during the dot.com glory days. Single-theme commercials touting a get-rich-quick mentality are a relic of the past.

MITCHELL CAPLAN, CEO, E*TRADE FINANCIAL: They are coming to us for a deeper and more complete relationship.

SERWER: E*Trade Financial today is a little grayer and a lot wiser. This now maturing company is repositioned itself and acquiring new assets to reach different clients and bulk up businesses.

Last year it purchased the brokerage firms Harris Direct from Bank of Montreal and Brown & Company from JP Morgan, a firm serving experienced online traders. Clearly, trading is still important, but it's one of the many offerings many E*Trade provides. These days the heavy emphasis is on everything from banking to retirement planning to home refinancing.

CAPLAN: Eighty percent of our revenue really comes from things totally outside of trading. If you had looked at the company, five or six years ago, it would have been the exact opposite.

SERWER: The change in direction is paying dividends. In earnings released last month, E*Trade reported its profits rose 54 percent from the same quarter in 2005. And its stock has clawed its way back into the 20s. Caplan sees continued growth as he targets wealthier investors and maneuvers his company into international waters.

CAPLAN: In the fall, already, I'm going to Europe. I'm going back to India. I'm doing all of China. I'm going to stop in our offices in Hong Kong and I may stop in Singapore.

SERWER: Ironically, E*Trade's expansion poses somewhat of a dilemma for the CEO, who joined the firm in 2000, after serving as CEO of Telebank, which was acquired by E*Trade.

CAPLAN: We've evolved as a company. It's clear that we are so far beyond just the word "trading". One of the concerns that I voiced was thinking about our name. Was it the best possible name we could use for who we are on a global basis? And, frankly, we have done research now three times. Every time we do it, it comes back and says you should not change your name. You have incredible brand recall, both aided and unaided. And that frankly, things that I worry about, the retail consumer isn't concerned about at all.

SERWER: As E-Trade celebrates its reversal of fortune, and works hard to maintain momentum, Caplan is quick to deflect credit for his company's success.

CAPLAN: Probably the most strategic thing that we've done is make sure we have a great team. And that we all believe in what we're trying to achieve. We work together in tandem, in a way which everybody understands what their responsibility is. Everybody wants to see the business success, succeed. And they want to see each other succeed. And I think that's been a big part of the driving factor.

(END VIDEOTAPE)

WASTLER: Coming up on IN THE MONEY, a little bit of Saudi Arabia and a whole lot of Iowa. Found out if ethanol blended fuel is really the answer to all our energy problems.

Plus, pay dirt, meet the former ivy leaguers who built a business on worm waste. We'll have the weird story of Terracycle. And net gains, that safety net called the pension plan became a little more secure this week. Find out who ought to be celebrating.

(COMMERCIAL BREAK)

FREDRICKA WHITFIELD, CNN NEWS ANCHOR: Hello. I'm Fredricka Whitfield in Atlanta. Here's what's happening right now. The man suspected in the murder of six-year-old JonBenet Ramsey is expected to arrive in Los Angeles as early as tomorrow night. John Mark Karr is being deported by authorities in Thailand. A U.S. warrant calls for his arrest on suspicion of murder, kidnapping and sexual assault.

Lebanon's prime minister is condemning an Israeli military operation in the Bekaa Valley. He's calling the raid a violation of the U.N. cease-fire. The operation was aimed at disrupting weapons transfers from Iran and Syria to Hezbollah. One Israeli officer was killed in the raid.

President Bush is renewing his vow to defeat terrorism and help establish democracy in Iraq and Lebanon. In his weekly radio address, Mr. Bush says it's no coincidence that two nations trying to build free societies in the Middle East, Lebanon and Iraq, are the targets of the most violent terrorism.

And there may be a break in the highway sniper shootings in Indiana. Officials report no injuries the latest shootings in Lake County yesterday. But a motorist, who saw one of the shootings, gave officials a description of the shooter and the pick up truck being driven. Windows on 13 different vehicles have been damaged or shattered in the shootings, which started last month.

Coming up, at the top of the hour, an in-depth look at developments in the JonBenet Ramsey murder case. In our "Legal Briefs" segment, what we know about the suspect, John Mark Karr, and the facts surrounding the nearly 10-year-old murder.

Now back to more of IN THE MONEY.

WESTHOVEN: In you listen to the some of the hot air blowing out of Iowa, Washington, Wall Street, you'd think an ear of corn may soon solve all of our political problems and some of our geopolitical ones, too.

Our next guest, though, says not so fast. He says using ethanol creates some new problems you might not have thought of. Lester Brown is the president of the Earth Policy Institute, and he wrote an article in this month's "Fortune" magazine, also on CNNMoney.com.

Lester, welcome to the program.

You're saying ethanol really just isn't the be-all, end-all to the energy crisis here, and that if we go that route and make those plans, that down the road we're going to have a big fight on our hands. What do you mean by that?

LESTER BROWN, PRESIDENT, EARTH POLICY INSTITUTE: Well, initially, it seemed like such a great idea. And if we don't use too much grain to produce ethanol, it's still not a bad idea.

But the problem is it's become so hugely popular now as the price of oil has climbed to $60 and then $70 per barrel, that there are literally billions of dollars going into the construction of ethanol distilleries.

One economist at Iowa State University pointed out that if all the ethanol distilleries in Iowa that are now in production, plus those that are being planned are completed, it will take the entire grain harvest, the entire corn harvest in Iowa just to feed the distilleries, leaving no corn at all for feeding or for food processing or what have you.

So we're -- we're facing a new situation here where what was once a government-supported program and rather modest is now being driven -- driven by the run-away price of oil.

CAFFERTY: It's also being driven by the fact that we've got 135,000 kids in Iraq and a war going on for three and a half years over there, and allegedly, at least part of the reason is so that we have access to the thing that we need. Forty percent of the oil we consume comes from abroad.

Ethanol provides, if my reading is correct, an opportunity to at least supplement that, begin to wean the country off imported oil. It's cheap. It works. We can do it in this country. And -- and I fail to see why that's not a good idea.

Don't we have, like, surplus harvest of all these grains every year in this country now?

BROWN: We used to have. We used to have a commodity set aside program where farmers were paid to limit production in order to be eligible for price supports. That program ended in 1995.

We do now have a program where farmers with highly erodable land are paid to plant that land in grass or in trees. Most of it is in grass. That could be used, but it has -- it's a very limited potential.

I mean, the thing to keep in mind is the perspective here. If we were to convert our entire grain harvest into ethanol, it would satisfy about 15 percent of our gasoline needs. So -- and obviously, we can't do that. We can't even think about that. So there are real limits to how far we can go here. And there are alternatives.

WASTLER: But Les, I'm a big believer in markets, and if corn is getting a lot of money, aren't the farmers going to grow more corn and people rush to the market to feed that need? I mean, that's basic supply and demand economics; let's make a buck. Right?

BROWN: That's Economics 101. The problem is that we don't have a lot of land to bring into corn, unless we take it out of wheat or soy beans or something else. There's not a lot of new land in this country that's productive land that's waiting to be plowed.

CAFFERTY: How are they doing this in -- is it Brazil, where they've had a very successful ethanol program?

BROWN: Right. They're using sugar cane, which incidentally, is the best crop for producing ethanol. It's much more efficient than corn. They are producing roughly the same amount we are, at least they were last year, about four billion gallons. That supplies 40 percent of their automotive fuel needs. For us, that same quantity supplies less than three percent of our needs.

WESTHOVEN: And you say is Brazil a good example of where we can see this sort of future fight out there. Because they put so much sugar into ethanol, they had sugar shortages or the sugar prices rocketed? Tell us about that?

BROWN: Brazil is the world's largest producer and exporter of sugar. It is now using half of its crop to produce ethanol. And this has contributed to a doubling of world sugar prices over the last year and a half or so. The risk is that the same thing could happen with corn.

WASTLER: Let's get...

BROWN: And if it does, it won't affect us very much. I mean, if a loaf of bread cost 20 cents more or a box of corn flakes costs more, that's not the end of the -- the end of the world for us.

But for people in developing countries, if grain prices were to double, as sugar prices already have, they're in serious trouble. And the political instability could disrupt economic progress for the -- for the entire world. That's -- that's the big risk of -- risk of soaring grain prices in the developing countries.

WASTLER: Les, let's get back to your argument that the ethanol demand would crowd out corn crop growth. I mean, we just finished a big trade discussion with other countries where they were all banging on us that they had all this agriculture that they wanted to trade with us and that we wouldn't let them in.

It seems to me -- I understand the American market. Yes, more corn might get grown instead of wheat. But there's a whole world out there that can also grow these kind of these kind of vegetation to feed the demand. I mean, isn't that the case with globalization?

BROWN: The problem is, there's not a lot of surplus capacity to produce more grain. Most developing countries are pushing the limits now. China, for example, has tripled its grain yields over the last 40 years. India has more than doubled its. So it's not as if they were starting from square one. In fact, India's importing quite a bit of wheat this year to satisfy its needs.

The commodities where the big trade issues have come up for the developing countries have been cotton and sugar. These are two commodities where they have an advantage. And we ought to be giving them an opportunity to produce more cotton, particularly in the central African countries, for example. But they can't produce a lot of grain. In fact, a lot of them are importing grain.

CAFFERTY: A couple seconds left, and you alluded to it earlier, and we didn't follow up. And I want to get you to elaborate a little bit. You said there are alternatives. What are they? BROWN: I think the most exciting option we have, the alternative to creating a food crisis in the world, which is where we go if we keep converting more and more grain into ethanol, the alternative is to switch to plug-in hybrid cars, the Toyota Prius with a second battery and a plug-in capacity would enable us to do all of our short distance driving, the daily commute, grocery shopping and so forth, with electricity.

If we then invest, not in hundreds of wind farms across the country but thousands of wind farms, we're running our cars on cheap wind energy, which is priced at the gasoline equivalent of less than $1 a gallon.

These technologies are already available. We don't have to wait 20 years for them. They're here and they're ready to go. It just takes a little bit of leadership now to get this -- get this moving.

WESTHOVEN: Lester Brown from the Earth Policy Institute. Thank you so much for joining us. And certainly we'll hope that in coming years we can find a way to have all that energy and potentially all that food that we need. Thank you.

BROWN: My pleasure.

WESTHOVEN: Imagine if a company could help save the environment and make a lot of money at the same time. In this week's "Brainstorm" segment, we meet a company trying to do just that.

Allan Chernoff reports.

(BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): For Tom Szaky, landfills are lands of wasted opportunity.

TOM SZAKY, FOUNDER & CEO, TERRACYCLE: Garbage is all opportunity. Garbage is great, because it's stuff that you can do something with.

CHERNOFF: At age 24, he's the founder and CEO of Terracycle, a company that makes organic plant fertilizer entirely from trash. His product is made by feeding garbage to millions of worms. The worm's castings, or feces, which are a natural, powerful fertilizer, are then filtered and liquefied.

SZAKY: Brewing worm poo.

CHERNOFF: The final product is completely organic and costs less than many chemical-based competitors.

The idea to mass produce the stuff came to Szaky at age 20 while he was a student at Princeton University. Szaky and his best friend turned business partner, John Vier (ph), drew up a business plan, forked over their savings, maxed out credit cards, even borrowed their friends' bar mitzvah money to get the company off the ground. SZAKY: Being 20 and having a worm poop start-up, we still had no success raising any money from any venture capitalist or anything like that.

CHERNOFF: Strapped for cash, Szaky and Vier needed a cheap packaging solution.

SZAKY: Solutions at Terracycle have always come out of necessity.

CHERNOFF: The answer, package garbage in garbage. Terracycle bottles are reused soda bottles, many actually collected by school children and organizations all over the country. The spray tops are leftovers from other companies. And the shipping boxes, other corporations' misprints.

In the two years that followed, Terracycle raised over $4 million from private investors. And the plant food can now be found in the world's largest retailer retailers, like Wal-Mart, Home Depot and CVS.

The company has recruited a team of experts. Many have more years of industry experience than Szaky has had on the planet.

SZAKY: Everyone here knows more than I do about what they do. And I'm more here just to challenge them and think differently.

CHERNOFF: And his youthful creativity permeates the whole office, from the graffiti on the walls to the ex-dorm room furniture that, you guessed it, was once garbage.

Szaky hopes his eco-friendly business model can set an example for other companies. But it's not all sunshine and chlorophyll. Szaky admits there's still room to grow. Purchasing more machines could seriously speed up production.

SZAKY: I can't wait for the day we get our auto-tightening (ph) machine for these tights.

UNIDENTIFIED MALE: Please.

SZAKY: It will save some blisters.

CHERNOFF: Terracycle has yet to make a profit but expects to break even by next year, with projected sales estimated at about $5 million.

As for the company's future...

SZAKY: The goal for Terracycle is to make $100 million business that's based on ecocapitalism, where you can make lots of money and save the world at the same time. And to do it in a really big way.

CHERNOFF: A pretty lofty goal, but if you buy into a business model where trash is opportunity, the sources for success are practically limitless.

Allan Chernoff, CNN.

(END VIDEOTAPE)

WASTLER: There's lots more to come up here on IN THE MONEY.

Up next, flock stars. People who are great at teamwork can actually hold a company back. See why corporate America has got the wrong idea about creativity.

And later, a new law will require private companies to pump up their pension plans. CNNMoney.com's Jeanne Sahadi will tell us what it means for you.

(COMMERCIAL BREAK)

CAFFERTY: Want to get ahead? Play nice. Remember when we were in school the teacher always wrote that on the report card: plays well with others. They never wrote that on my report card, but that's one of the things that got checked off on.

That's the message corporate America is sending out to its workers, but Does the emphasis on teamwork and getting along at the office suppress creativity? Our next guest thinks so.

He's Jack Goncalo, who's professor of organizational behavior at Cornell University, co-author of a new study that teamwork can stifle innovation.

Good to have you with us, Jack. Why doesn't teamwork work?

JACK GONCALO, PROFESSOR, CORNELL UNIVERSITY: Thanks. Well, what we found is it doesn't work for everything. As you know, there's been this enormous shift toward teamwork over the last 20 years. And there are literally hundreds of book titles purporting to show people how to be better team players, including a guide for parents.

Employees at work now believe that being a team player is even more important than job related knowledge, skill and ability. And there hasn't been much thought given to the potential downsides of this shift.

And in our article we called attention to one potential downside, which is that this focus on collectivity and being a team player stifles creativity. And...

WESTHOVEN: OK. So you took -- oh, pardon me.

GONCALO: All right.

WESTHOVEN: You took a bunch of undergraduates. You threw them into a room. What happened, in a nutshell?

GONCALO: Well, we led part of the participants to think individualistically about focusing on why they're different, why they need to stand out and remain independent from the group. We took another set of participants and led them to think collectivistically about why the group is important and why they should fit in, as opposed to standing out.

And what we found was that when creativity was a desired outcome, the collectivistic groups did not do well at all. They generated fewer ideas. The ideas they generated were less novel. They were also less able to select their most creative idea from the list. And so overall, their creativity was stifled by this focus on teamwork and collectivism.

WASTLER: Well, I kind of wonder, Professor, because, you know, we deal a lot in the corporate environment with different teams and things. And there are some cases where there's just some jerk standing up spouting off and they're not thinking about the different parameters and the problem the group is trying to solve. And you just have to tell him to shut up and sit down.

Are you saying that we should just give free reign to these people?

GONCALO: No. I think you should engage them in a debate. I mean, part of the problem is -- is that we're labeling these people jerks when we should be welcoming dissenting opinions and engaging them in a debate.

WASTLER: Well...

GONCALO: Because in the end, they will spark us to think differently. And that's what's required for creativity. We're not saying that creativity is the only outcome of concern. I mean, sometimes when you're in a corporate environment, you want people sort of marching in a line and doing what they're told. And so you should, by all means, encourage collectivism.

But if its creativity you want to stimulate, then you want to encourage individualism and you want to listen to the jerks who are holding the group up but they're making you think.

CAFFERTY: Some of them are jerks, though, aren't they?

GONCALO: That may be.

CAFFERTY: In any group of people, you've got a few. Professor Jack Goncalo is professor of organizational behavior at Cornell University. You're all in this alone, I guess. Thanks for being with us. Nice to see you.

GONCALO: Great. Thanks.

CAFFERTY: All right. Coming up next on IN THE MONEY, a move that could save the traditional pension or kill it. We'll check on the impact of a recent change in the pension reform bill.

It's time to hear from you. We'll read some of your e-mails from the past week. You can send us an e-mail right now. We're at InTheMoney@CNN.com. Stay with us.

(COMMERCIAL BREAK)

WASTLER: President Bush signed a new bill into law this week designed to shore up many of the nation's pension plans and boost all kinds of retirement savings.

CNNMoney.com's Jeanne Sahadi joins us now to talk about what that means to you.

And Jeanne, I get the sense from this legislation that it's sort of a big shift from pension plans to 401(k) plans. Is that -- is that right?

JEANNE SAHADI, CNNMONEY.COM: That's what analysts are saying this bill was going to do. Originally, it was intended to shore up the system. There are a lot of pension plans that are underfunded.

But it's also intended to boost worker savings, which is -- there's been a trend towards 401(k)s all along. People are saying this might accelerate that trend because the bill makes the funding requirements for plans much more stringent.

So for companies that have already been thinking about freezing their plans or for companies that don't have enough cash on hand to meet the new requirements, this might push them in the direction of pushing their workers towards 401(k)s over the pensions.

CAFFERTY: Does this thing help me or does it help Time Warner at the end of the day?

SAHADI: Well, let's see. I think that there's something in this bill for everyone from what I've seen and from what I've heard from people. Certainly, you know, mutual fund firms and corporations can benefit from this, but so can workers.

The reason is this. Worker savings have been woefully low.

CAFFERTY: True.

SAHADI: The majority of people over 45 have less than $50,000 in savings. So one of the best parts about this bill is that -- I'm hearing from analysts --- is the auto enrollment feature, which is companies now have clarity, legal clarity, about setting up their plans so that they can automatically enroll workers who are eligible for the plan.

Most workers who are eligible don't sign up, right? So they're not saving any money. What does that do when they're auto-enrolled? A little bit of their paycheck will be taken out and put in the account. Plus, they'll be getting a match. So they'll be building a balance as they go. And chances are, they'll be just as inure as they were before the bill passed. So they will build savings.

It will also create an opportunity -- it's true -- for the plan providers to sell more investments to workers. CAFFERTY: That would be the part that benefits the others.

SAHADI: That's correct. Yes, that's correct.

In terms of the switch out of pensions, what I've been hearing is that a lot of companies, it's not necessarily as much a cost saving issue, although it is, but it's not as much a cost saving issue as a volatility issue when they transition out of pension plans.

Because the way the rules are coming down they're going to have less ability to predict what's going to show up on their income statements, what they're going to have to -- and then there's the whole demographic issue, of predicting how long the workers are going to work and so on.

CAFFERTY: Sure.

SAHADI: So there's a -- there's a lot for everyone and there's a lot here that people don't like. On all sides of this.

WESTHOVEN: Does the max stay at, I think, what, $15,000 a year for 401()k forever now?

SAHADI: Well, it's adjusted for inflation. It did make permanent all the contribution limits that were set by the 2001 Tax Relief Bill.

Critics of that provision say, you know, that's just going to benefit this many people who have the income to save. It's not really going to benefit.

WESTHOVEN: Rich people.

SAHADI: Well, it depends how you define rich. I mean, it's people who make more than $90,000 plus.

However, there are also provisions in there like the savers' credit, which was made permanent, also from the 2001 Tax Act, that are designed to help low income savers save. They will basically give you a tax credit of up to $2,000 in contributions to your 401(k) or your IRA if you meet the income limits.

Again, critics are saying good move. It should really be extended to middle income people, too, because they, too, are having a hard time saving.

WESTHOVEN: All right. Thank you very much.

SAHADI: Thank you.

WESTHOVEN: Jeanne Sahadi.

In this week's "Life After Work", if you've ever had these tiny little mini donuts, you've got to watch this. A business teacher follows his own lesson plan. He invested $8,000 in hits own start-up.

Now Andy Serwer's on vacation, but he reported this story for us.

(BEGIN VIDEOTAPE)

MICHAEL VALE, ACTOR: Time to make the donuts.

ANDY SERWER, CNN CORRESPONDENT (voice-over): In this well-known commercial, the baker looks less than enthused to start his day. But for 50-year-old Dick Schindel, donuts are making retirement that much sweeter.

DICK SCHINDEL, OWNER, DICK'S MINI-DONUTS: Would you like a sample of a donut, ma'am?

SERWER: The former teacher retired in 2004, thanks to his school pension, and now runs Dick's Mini-Donuts full time. Schindel sells them at fairs and markets around his hometown of Aurora, Illinois.

He was drawn to the treats nearly 20 years ago at a Colorado festival.

SCHINDEL: There was a long line of people by this food booth. And so we got in the line and purchased these donuts. Never seen anything like this before.

SERWER: Eight years later, he bought the equipment and started making donuts. He has no employees, but hires former students to help work events. Schindel says he makes a modest profit, but he does it more to keep active and meet people.

SCHINDEL: They really love the product. And that's given me a lot of satisfaction. If I don't come to the farmer's market, I hear it from people: "Where are you? How dare you not be here?"

SERWER: And, as popular as the donuts are, some of the appeal is just watching the machine.

SCHINDEL: Normally, I have a sign up that says "Cheapest Entertainment in Town". And people will stand and watch, because it's fascinating.

Thank you very much. Enjoy them.

SERWER: Andy Serwer, CNN, New York.

(END VIDEOTAPE)

WESTHOVEN: If you have ever had those, they are so good, those little donuts. I buy them every time.

We'll be right back with more IN THE MONEY. Stay tuned.

(COMMERCIAL BREAK)

CAFFERTY: Welcome back. Time now to read your answers to our question about how you plan to cope with longer lines and tougher security rules at the airports. Dan wrote this, "I'm going to drive. Sure, gas prices are high and it takes longer than flying, but the three hours I now have to wait at the airport can net me 180 miles on the road. And having control of my life is worth the extra pain at the pump."

Steven said, "I plan to cope by making two announcements to America in this e-mail. First, pack as lightly as possible and move as quickly as you can when you're in the security line. Second, hey airlines! You need to do a better job handling bags. Most people carry on bags because they don't trust you."

And Thomas wrote, "The only thing I can do is quit my job. I actually work for a major airline and I'm being forced to throw out my liquid carry-ons, too. Now I have to buy milk and water at overpriced airport vending machines. I wonder how many of your viewers get frisked before they're allowed to go to work."

Here's next week's e-mail question of the week. Do you care if the economy is slowing down if it will mean lower gas prices and lower interest rates? Send your answers to InTheMoney@CNN.com. And you should also visit our show page. That's CNN.com/InTheMoney.

On that note, thank you for joining us for this week's edition of IN THE MONEY. My thanks to Headline News correspondent Jennifer Westhoven and CNNMoney.com managing editor Allen Wastler.

We'll see you back here next week, we hope: Saturdays at 1:00, Sundays at 3:00 Eastern. Until the next time, enjoy the rest of your weekend.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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