THE VENICE BEACH Whole Foods rarely experiences scenes more distressing than tanned, beautiful people wandering peacefully through aisles of organic produce. On a recent Monday afternoon, however, an irate man in a Panama hat paces at the store’s customer-service counter, unsettling everyone’s Zen. “Please leave the store, sir,” a manager instructs him. “We’re calling security.”

Nearby stands Max Baumann, a tall, blond, blue-eyed 22-year-old with a lean surfer’s build. Baumann turns to the man, smiles easily, and says, “Just chill, man. Maybe after a few sips of this?” He’s holding a can of a supplement-fortified “relaxation beverage” called, naturally, Just Chill. As if under a spell, the man calms down, and the mild-mannered Baumann goes about his business. Today his business is asking the attendant to restock the shelves with more Just Chill, a lightly carbonated peach and citrus drink dosed with 100 milligrams of the FDA-approved tea- leaf compound L-theanine, which has been shown in clinical studies to reduce anxiety while keeping people attentive.

A Malibu, California, native, Baumann is the creator of the soothing beverage and the CEO of The Chill Group, the young company that manufactures it. His is the latest in a recent surge of relaxation drinks to hit the market, presenting themselves to an overstimulated public as the antidote to the fast-expanding universe of energy drinks, which right now comprise a multibillion dollar global industry, led by the mighty Red Bull and the wildly popular Four Loko, the first version of which combined alcohol and caffeine, inciting various state bans and an FDA ruling last November declaring it unsafe.

Baumann got the idea for Just Chill during a short stint at Santa Barbara City College, which he did following a year of surfing in Indonesia, the Maldives and Australia. “As you travel, you see so many stressed-out people,” Baumann says, cruising along the scenic Pacific Coast Highway in his Toyota pickup truck. “I just looked around and realized people don’t need more energy drinks or caffeine; they need something to chill them out. Stress, nervousness and anxiety do not help you, as we’ve seen with all that jitter juice and snooze booze on the market.”

He started researching natural substances that could serve as the active ingredient in a drink intended to keep you calm and focused, and he discovered L-theanine, which proved effective in research settings. Baumann presented the drink concept to his marketing class and got praise from the teacher, who has since put him on the school’s marketing advisory board. He then took his idea to the beverage consultancy Power Brands, where a “food tech” created the proprietary blend, combining L-theanine with lemongrass, ginseng and gingko, as well as B and C vitamins, zinc, natural fruit extracts and a few grams of natural sugar. “Our active [ingredient] is found naturally in green tea, and, unlike other drinkmakers, we don’t use melatonin or kava, which may be bad for your liver,” Baumann says, while cruising through the rustic- chic Malibu neighborhood where he grew up next door to actor David Duchovny and across the street from Owen Wilson. L-theanine, Baumann explains, increases alpha brain waves, which relax you, and dopamine, the feel-good brain chemical.

Baumann formed The Chill Group in 2009 with Russell Fager, Jeff King and Robert Young, a wealthy software entrepreneur who had been mentoring him as a favor to his father, Peter Baumann, a musician who also launched the record label that introduced the world to Yanni. Getting the drink off the ground took around $250,000, which Baumann drew from savings and hustled from friends and family. “I know that I’m really fortunate to have been born into a position where I could raise the money to kick-start the business,” Baumann says earnestly. “At the same time, my father is pretty stern about how much equity he can help me raise. The next hurdle is to get venture capital to make Just Chill a national brand.”

Just over a year old, Just Chill is already available in 500 stores, mostly in Southern California, although also in Florida and Oklahoma. The company has made about a quarter of a million dollars in revenue (about 25 cents on each $1.69 to $1.99 can), and has had to hire some 15 employees to handle the San Diego, Los Angeles and Santa Barbara markets. Baumann is currently eyeing an expansion of Just Chill into a full-fledged lifestyle brand, complete with merchandise and even celebrity endorsements.

He may not have to go far for the latter. “It’s a funny story,” Baumann says. “The first person to try Just Chill was Owen Wilson. I’d invited him over to use our beach access. He showed up with his brother Luke, another guy, two hot models and a dog. He really loved the drink. I was hoping he could be an endorser. We could call him Owen Chill-son. But I’m not sure he’d be into that. On the other hand, he is pretty mellow…”

Los Angeles–based writer ADAM BAER’s favorite “relaxation beverage” is a revolutionary product called vodka.

Miles to go before we relax

In the U.S., revenues of relaxation drink makers is expected to grow by a whopping

51.4% this year, to $73.7 million which (though very strong) will amount to just 3.7% of energy drink revenues over the same period. Expected total: $1.99 billion
SOURCE: IBISWorld

IT’S FRIDAY NIGHT IN BEIJING, and the arcade is teeming with young people. A half-dozen players hone their hoops skills at a row of pop-a-shots, while others gather around two players battling it out at the wildly popular King of Fighters game. It’s a lively scene straight out of 1980s America, only it’s happening on the top floor

of a shining high-rise mall in China. It’s happening all over China, in fact. And while the sudden popularity of arcades in the emerging economic powerhouse—about 10,000 are currently open, with another 10,000 or so on the way—is a sign of China’s growing prosperity, for a small group of enthusiasts in the U.S., the boom represents something even more significant: the last hope for the fast- fading American pastime of pinball.

Since the game was invented in Ohio in 1871, pinball has had its share of tilts and jackpots. For decades, it was banned in many cities as a form of gambling. Then a 26-year-old pinball phenom named Roger Sharpe landed one nearly impossible shot in front of a room full of New York City councilmen to prove that pinball relied on skill, not chance. After that, it was game on. By 1980, the coin-operated game industry was worth $6 billion a year—more than the film industry— with pinball accounting for around 85 percent of the revenue. As the decade progressed, pinball survived the video game invasion and went on to peak in the early ’90s, when a handful of companies worldwide produced a combined 100,000 units each year.

Two decades later, the industry has, well, tilted. Manufacturers have abandoned the classic game for more lucrative pursuits like video arcade games and casino games like video slot machines. Pinball production has dropped by 95 percent since its peak, with only about 5,000 machines produced annually and all by one company: Stern Pinball in Chicago. “Back in the nineties, pinball was still used in bars and restaurants,” says Jody Dankberg, Stern’s director of marketing. “It used to be you’d go to the pizza place and play pinball while you were waiting. Now you play Angry Birds or check Facebook or post on Twitter.”

These days, Stern’s machines, which retail between $3,700 and $6,000, sell mostly to collectors. “The collecting core is still out there,” says Todd Tuckey of TNT Amusements, an in- home video game and pinball retailer in Pennsylvania, “but the game may be a dying art.” Tuckey usually sells 30 to 40 pinball games during the month of December alone; during the 2010 holiday season he sold zero. “Unless people really push and pinball gets to be popular again,” he says, “it’s going to slip right off the radar.”

Enter China. Though America has lost its zeal for pinball, Stern is hoping to stoke a passion for the game among members of China’s growing middle class. But translating the company’s passion for pinball—its 150 or so employees are required, per orders from CEO Gary Stern, to play the game for 30 minutes per day—will be a major challenge. For one thing, the competition is intense. Chinese arcades are big, clean, well-lit affairs, holding upward of 600 games each, making them about three times the size of your local Dave & Busters. These places often contain rows of as many as 30 of the same game, making it tough for a new product to stake out a large enough footprint to grab attention. For another, Stern needs to find themes that appeal to the overseas players. The usual pop culture–focused games, like Avatar and Iron Man, aren’t sure winners. “We might love Batman over here, but I don’t know how big Batman is in China,” says Dankberg.

Perhaps most critically, pinball is more complicated than most coin- operated video games. It takes a lot more practice and it’s harder to master. Stern had this in mind as it shipped its first batch of games to China in December: 300 NBA pinball machines with a familiar theme and uncomplicated gameplay. “For someone just getting to know pinball, the NBA game is nice and simple,” says Dankberg. “Everyone can understand that concept.”

Time will tell whether the Chinese embrace pinball the way Americans did back in the day, but Sharpe, who made the shot that legalized pinball in 1976 and is now part of the International Flipper Pinball Association, believes that even the simplest pinball machine is well equipped to compete with modern systems. “There’s so much said about the level of interactivity you have with the Wii and the Kinect. With pinball, you have a completely tactile, interactive environment,” says Sharpe. “For the Chinese, I have to believe that discovering something like this is really going to be a phenomenon. I think the Chinese are going to be mesmerized by it.”

Freelance writer BLYTHE COPELAND
wonders what the training regimen is for a We Dancing Online competition.

GAME ON!

Pinball may be new to the Chinese market, but video games are booming. George Petro, founder of Illinois-based developer Play Mechanix, does 22 percent of his business in China, up from zero percent in 2007. So what games are the Chinese playing?

WANGAN MIDNIGHT MAXIMUM TUNE 3 DX A driving game that allows players to compete against the computer, or each other, on 14 different courses, including a metropolitan expressway near Tokyo and the high-speed hills of Nagoya City.

WE DANCING ONLINE Similar to America’s über-popular Dance Dance Revolution, only here players use their hands instead of their feet to execute dance moves. It’s popular enough that a national We Dancing Online competition was held in China last summer.

FISH SEASON While Chinese arcadegoers haven’t warmed to the stateside smash Big Buck Hunter, they are drawn to Fish Season, in which players shoot nets into a simulated ocean to try to catch fish. This would seem to require some kind of skill, but, says Petro, “As far as I have been able to tell, catching is completely random.”

IN LATE 2007 the American advertising agency Crispin Porter+Bogusky launched a campaign for Burger King called “Whopper Freakout.” Shot in grainy surveillance-camera style, the ads depicted actual Burger King customers throwing tantrums after being informed by BK counter help that there would be no more Whoppers. That the spots were

extremely unflattering to BK’s base (and indeed, to humanity) seemed not to matter. They created a buzz, reintroduced an old product to a new audience, and cemented Crispin’s reputation as the reigning rock star in its field.

But when Crispin got together with longtime client Domino’s Pizza in 2009, one thing was clear: There would be no Domino’s freakouts. Years’ worth of focus grouping suggested that while plenty of people ate Domino’s, they did so mainly because it was convenient, not because it was particularly good. The sauce tasted like ketchup, the crust was bland and weirdly pillowy, the cheese could be…unusual. “Domino’s had been getting their butts kicked on their pizza,” says Crispin group creative director Tony Calcao of the focus groups. “They’ve been around for fifty years, and one day they realized, ‘You know what? Our pizza is ranked below Chuck E. Cheese’s.’”

Michigan-based Domino’s had been reformulating its recipe since 2007 and planned to debut a new pizza in 2010 to commemorate its 50th anniversary. It fell to Crispin to devise a campaign to sell the pie. “We realized that we couldn’t just come out and say we have a brand new pizza, because no one’s going to believe Domino’s,” says Calcao. “The first thing you need to do is own up to the fact that you had to make a whole new pizza.”

Honesty, transparency and engagement—real or feigned—are all the rage in advertising right now, in part because people are cynical about corporations and in part because if you try to pull a fast one, you risk incurring the boundless wrath of the internet. So in rolling out its new pizza, Domino’s wanted to “talk to people the way they deserve to be talked to,” says company spokesman Chris Brandon. Crispin agreed, but wanted their client to take it further. How much further? Simple: Make the pizza seem unfit for canine consumption, and issue a mea culpa on a scale never before seen.

It was risky, a violation of nearly every rule of advertising, but that’s exactly what they did. In one early 2010 web spot, excerpts of which ran in TV ads, Domino’s CEO Patrick Doyle appears on screen and, over ominous music, says, “There comes a time when you know you gotta make a change.” This is followed by actual focus group footage of people trashing Domino’s pizza while mortified employees look on. “It’s hard to watch,” says one. “You know what?” says a chef, “when you first hear it, it’s shocking.” Executives read comment cards that say things like, “Worst excuse for pizza I’ve ever had.” Over the next year, additional spots addressed the problem of pizzas arriving mangled in their boxes (“We’re gonna learn; we’re gonna get better,” says Doyle), the practice of using doctored pizza photos in advertisements, and the misperception that Domino’s doesn’t use real cheese. Tapping social media, it also launched pizzaturnaround.com, where fans and foes of the company could post things like, “The only good part of Domino’s pizza is the web pizza tracker.”

By the sheer magnitude of the apology, you would think that Domino’s had done something surpassingly bad—baked plastic into its crust or used an endangered bird to make sausage—but therein lies the genius of the campaign: There was no scandal to atone for, no epic collapse. Market share, stock price and revenues were all strong when the ads were launched. Competition was stiff , but the company was healthy. “Without any massive public backlash, they came out and created more drama than there actually was,” says Tor Myhren, chief creative officer at ad firm Grey New York, whose clients include Captain Morgan, DQ and the NFL.

The risk paid off. While critical reception of the new pizza has been mixed, the market has responded enthusiastically. Domino’s domestic sales jumped 14.3 percent in the first quarter of 2010, 8.8 in the second, and 11.7 in the third. From January to November, its share price nearly doubled from $8 to over $15. Meanwhile, the campaign has established Domino’s as the undisputed champ of the corporate apology, the standard by which all others will be judged. The phrase “to pull a Domino’s” has actually entered the lexicon. The campaign may be stunty, says Myrhen, and it may have alienated some old customers, “but by doing what they did they got that message out better than any other way I can think of.”

“There was a risk,” admits Calcao, “but Domino’s is brave.”

Executive editor JOE KEOHANE professes a special fondness for the pepperoni pie at Alumni Café in Quincy, Massachusetts.

ONE AFTERNOON IN Grand Rapids, Michigan, Dayna Baumeister stands in a room full of Herman Miller employees, next to a trunk filled with seashells, feathers and other natural miscellany, and hands a sea cucumber to Carolyn Maalouf, a blindfolded R&D engineer. Don’t guess what the object is, Baumeister says. Guess what it does. Maalouf takes a shot. Well, it’s spiky, she says. Maybe it needs those spikes to ward off predators? Another blindfolded colleague, meanwhile, is holding a swatch of sharkskin. With some guidance, he eventually deduces, correctly, from the smooth surface that his object is designed to move fast.

That they stumble through the exercise is pretty much the point. By eliminating sight—the sense that would instantly provide the “right” answer—the exercise succeeds in what Baumeister calls “quieting our cleverness.” This is crucial. Baumeister is the cofounder of The Biomimicry Guild, a group that promotes the increasingly popular notion that many of the best solutions to problems facing humanity can already be found in nature. “Biomimicry represents a paradigm shift away from the belief that we humans are the cleverest and most perfectly evolved,” says Baumeister. “When people believe that humans are the cleverest species, they might say, Why would I bother trying to learn from nature?”

At the core of biomimicry is the idea that nature has already solved many of the problems that stump us humans, and that innovators who cheat off biology’s crib sheet stand to gain an edge, since its solutions have been optimized over 3.8 billion years of focus group testing (otherwise known as evolution). “It’s a way to create breakthrough technologies,” says biomimicry mastermind Janine Benyus, who wrote the seminal 1997 book, Biomimicry: Innovation Inspired by Nature, before cofounding The Biomimicry Guild with Baumeister in 1998. (Since then, the group has worked with clients like Boeing, InterfaceFLOR, The Coca-Cola Company and Colgate-Palmolive, recently launching an alliance with global architecture firm HOK.)

Of course, nature-inspired innovation isn’t exactly new. Leonardo DaVinci’s flying machines were informed by bird studies, and the idea for Velcro came in the ’40s when engineer George De Mestral noticed the burrs that clung to his dog’s fur after a walk in the woods. But what Benyus and Baumeister have done with the guild is establish biomimicry as a formal science, creating processes and tools that allow the ideas to be widely adopted. Innovators the world over, and not just clients of the guild, are using nature’s ingenuity to devise game-changing solutions: efficient wind turbines that mimick whale fins, a Japanese bullet train that passes quietly through tunnels at super speeds by emulating the kingfisher’s beak, self-cooling buildings that imitate termite mounds. Three universities—Arizona State, Ontario College of Art & Design and Universidad Iberoamericana in Mexico City—now offer a biomimicry minor, and the guild has begun offering a master’s-level certificate program and soon, online classes through a new “Professional Pathways” program.

Biomimicry success stories abound. When German botanist Wilhelm Barthlott set out to find out how nature cleans itself, he came upon the “superhydrophobic” lotus leaf, on whose surface water beads up and carries away dirt. Partnering with Barthlott to mimic that molecular structure, Sto Corp, manufacturer of specialty construction products, developed its patent-protected StoCoat Lotusan, an exterior coating that effectively makes buildings self-cleaning. Here’s another: When Kaichang Li, a science professor at Oregon State University, discovered that the blue mussel’s sticky fibers resemble soy flour’s proteins, he developed a nontoxic, soy-flour- based adhesive, called PureBond Technology. For Columbia Forest Products, manufacturer of hardwood plywood and veneer, it was the end of a competitive scramble to find an alternative to the pricey, carcinogenic industry standard: urea- formaldehyde-based glue.

Nature-inspired design might even correct our overindulgences. The intemperate use of antibiotics has given rise to drug-resistant bacteria like methicillin-resistant Staphylococcus aureus (MRSA), a “superbug” that causes difficult-to-treat, drug-resistant infections and beleaguers hospitals. In 2005, MRSA killed more than 19,000 people in the U.S., according to the Centers for Disease Control. The cure? Sharks. When scientist Anthony Brennan was researching alternatives to toxic antifouling paints that discourage the growth of barnacles and other crusty life forms on ships, a Galapagos shark swam by. Its skin was squeaky clean. Brennan investigated and discovered that the microscopic pattern on the creature’s naturally bacteria-resistant scales can be replicated. Harnessing that discovery, Sharklet Technologies launched SafeTouch skins last year. Bacteria growth is reduced by 80 percent on these adhesive-backed surface coverings—which can be placed on everything from hospital countertops to bathroom doors—than it does on other surfaces. “Rather than trying to conquer nature, we’re learning from it,” says Sarah Eder, a vice president at Sharklet.

Even nature’s freakier features can serve as inspiration. Take the case of the tardigrade. The microscopic animal enters a state of anhydrobiosis when dehydrated, suspended in a seemingly dead state for years. When exposed to water, however, it revives and walks away. Scientists Judy Müller-Cohn and Rolf Müller founded biostability company Biomatrica in 2006, off ering a suite of products that, mimicking anhydrobiosis, stabilize biological lab samples at room temperature. Why is this important? Scientists customarily preserve DNA and RNA samples in freezers, which can malfunction, wreaking havoc on research. This new approach will preserve them far more effectively—and at less cost. Stanford University estimates that conversion to room-temperature sample stability could save the university $16 million over 10 years.

Practitioners of biomimicry stress that nature, unlike humankind, never does anything unless it’s conducive to life. Nature runs on sunlight, it turns waste into food, its systems include built-in backup plans, and it uses local, nontoxic materials to self-assemble useful things. These principles act as a sustainability filter for biomimetic ideas. In other words, if the factory in which you produce your biomimetic widget discharges carcinogenic slurry, you’ve missed the point. So while biomimicry can drive innovations that prove beneficial to the bottom line, Baumeister says, “the ultimate return on investment is the survival of the human species.”

TIFFANY MEYERS, who writes about design, advertising and business, is presently shopping around for a pet tardigrade.

IN 2002, Klaus Heidegger was an aging former athlete and businessman with back issues when a friend introduced him to a pair of odd-looking shoes from Switzerland’s Masai Barefoot Technology, or MBT. Boasting thick, rounded soles designed to mimic the effect of walking barefoot on uneven ground, the shoes had been used successfully by physiotherapists and orthopedists to treat patients with muscle and back pain. The Los Angeles–based Heidegger, who’d spent years skiing competitively in Austria, tried them out. Almost immediately, his back and knees felt better. In addition to the stated benefits (improved posture and gait, and decreased pressure on the joints), he noticed a side effect: a nice toning and tightening of certain leg and gluteal muscles that had previously gone underused. Interesting, he thought.

Heidegger and his wife, Jami—who had recently sold her family’s skincare company, Kiehl’s, for a rumored $150 million—thought the shoes might play well among Americans, a people with no shortage of enthusiasm for the next big thing in fitness. So they started investing in the company, eventually buying a majority share in 2006.

Within a year of the Heideggers’ involvement, they had placed the $200 to $300 shoes in more than 200 stores in the U.S. Atlanta-based Foot Solutions, the first retailer to bring MBT to the market, saw upward of $5 million in sales that first year alone.

Of course, it wasn’t banged-up athletes who were buying. It was suburban moms, the elderly and anyone else lured by the promise of “toning while you walk,” as the media and retailers began to put it. Tapping into the body image market may not have been MBT’s original intent, but it was hard to argue with the numbers. Toning shoes were shaping up to be a $400 million global business. Still, says Heidegger, “the focus was always wellness and health. Toning is a byproduct, but not what we intended the shoe to be used for.” Indeed, MBT’s early stateside advertising efforts were focused chiefly on explaining the therapeutic benefits of “rocker bottom” technology.

Little did Heidegger know he was creating a monster. As MBT’s sales grew, copycat shoes began turning up, launched by companies happy to exploit Americans’ collective obsession with finding easy ways to get in shape. Reebok, New Balance, Avia, Skechers and Nike, as well as smaller brands such as FitFlops and Flojos, all introduced models that stressed “toning” more than therapeutic function. Today, toning footwear is the most lucrative shoe category in the U.S., with sales expected to clear $1.5 billion in 2010. Thanks in large part to its wildly popular Shape Ups line, Skechers is now the No. 2 best-selling shoe brand in the U.S., behind Nike.

MBT, however, isn’t celebrating. The competition’s focus on using the shoes as a means to a better rear— exemplified by a Reebok EasyTone ad depicting a woman entirely from behind—was not the direction Heidegger saw the genre taking. In fact, he seems to take it personally. “That’s putting the whole category down,” he says. Adds Jami Heidegger, “We never intended to claim the shoe could reduce cellulite”—as Skechers has proposed—“or make you look like Gisele Bündchen. And I do think that’s hindered our growth. We aren’t making these flashy claims.”

Which isn’t to say MBT hasn’t benefited from them, too. Sam Spears, MBT’s vice president of product and marketing, says the competition’s immense marketing push has helped commercialize the look of MBTs and educate consumers about the category. While MBT’s sales are indeed still growing, more powerful brands like Skechers—which spends tens of millions of dollars a year on marketing—are eating into the market at an overwhelming clip. The challenge MBT faces now is to differentiate itself from the crush of lower-priced imitators while sticking to the founding principles of wellness and rehabilitation through quality engineering. “Because of their success, it’s been tempting to market MBTs as a toning product too,” Spears says. “But we’re trying desperately to avoid that.”

Spears points out that unlike the competition, MBT is considered a medical device in 40 countries, meaning that with a prescription they’re covered by insurance. While the FDA hasn’t yet bought in, American doctors, for the most part, back up MBT’s claims. “I use them to help rehabilitate patients who are walking unevenly,” says Dr. Andrew Elliott, an orthopedic surgeon at Manhattan’s Hospital for Special Surgery. “You do use different muscles, and it will help strengthen your core and make you stand up straight.”

But MBT’s biggest problem may go well beyond simply establishing a point of difference with the competition. The sort of customer drawn in by the quick health fix is far more likely to fork out $100 for a pair of Skechers than $300 for a pair of MBTs. And once the less expensive shoes break down—the life span for a pair of Skechers Shape Ups is about a year, according to online reviews, while MBTs are designed to last more than five—the customer will be soured on the market and ready to move on to the next fad. For this reason, experts are warning that the end is near for functional footwear, with an overcrowded market risking a sort of implosion. “The category can’t support the type of growth that’s going on now,” says Ray Margiano, founder and CEO of Foot Solutions.

If a mass extinction is in the cards, MBT plans to go down kicking. The Heideggers have hired a new design team leader with a Prada pedigree to make the shoes “more presentable,” and introduced a “day-to-night” line that professionals can wear to the office. Early next year, the brand will introduce an “introductory” model that’ll sell for around $175. But the quality, Heidegger says, will not suffer. “People ask me, ‘How are you making money? I’ve had the shoe for two years and it still looks the same,’” he says. “It’s a Swiss company! The Swiss don’t just throw things out like we do here in the U.S.” Heidegger shrugs. “But what can you do?”

ALYSSA GIACOBBE promises that reading this while jogging will rid you of cellulite.

SHOE TREE

Revolutionary — and perhaps revolutionarily ugly — shoes throughout the years.

BIRKENSTOCKS

Expected to fail in the go-go ’60s, the shoes launched contoured insole technology and provided the first link between medical specialists and footwear.

CROCS

Fashion guru Tim Gunn may have quipped that this foam-resin clog “looks like a hoof,” but that didn’t stop Crocs from sweeping the globe.

MARC JACOBS HEELLESS SHOES

The talk of Spring 2008 spawned copycats by, among others, Olivier Theyskens, Antonio Berardi and Lady Gaga’s favorite, Noritaka Tatehana.

VIBRAM FIVE FINGERS FOOT SHOE

For modern, outdoorsy types who want to walk barefoot in the sun without the risk of tetanus.

IT’S JUST PAST SEVEN on a Monday morning, and 55 bleary-eyed recruits are sitting in a large conference room in a former Montgomery Ward warehouse in Chicago’s River North neighborhood. As the jittery new hires make small talk about the cat photos that inexplicably line the walls, an unassuming young man in jeans and a tight blue T-shirt walks into the room. His name is Andrew Mason, and he’s the 30-year- old founder and CEO of what Forbes has named the fastest-growing web company in history: www.Groupon.com.

Launched in November 2008, Groupon is on pace to record a billion dollars in sales by the end of this year, reaching that milestone faster than any company before it. (www.Priceline.com, which hit a billion in two and a half years, is number two.) Groupon achieved its startling success with a simple business model that combines the two things it’s named after: groups and coupons. Each day, in its 236 markets around the world, Groupon emails a deal to a list of subscribers who have until the end of the day to buy into it. Offering deep discounts on services like massages and helicopter flying lessons, deals only kick in, or “tip,” if enough subscribers agree to buy them. This happens on 98 percent of Groupon’s deals, leaving everyone happy: The consumer scores a deal, the business attracts new customers, and Groupon makes money-typically 30 to 50 percent of the deal price.

“Welcome to Groupon,” Mason says to the recruits, before launching into a speech about the history and mission of the company. Then he turns to an eight-foot TV screen and introduces a video. “This is really important to what we do here.” He hits play, and a slightly younger, pudgier and scruffier version of himself appears on screen. “Hi, I’m Greg,” it says, “and basically I want to rent you a monkey.” It’s a promotion for “Monkey for a Week,” Groupon’s gag April Fool’s Day deal from this year. After a minute and a half of absurd dance moves and bad sales pitches, the video ends, the newbies clap, and “the tone for the rest of an employee’s time here is set,” says marketing manager Julie Mossler.

“From the beginning we’ve tried to build this company in a way that entertains us,” Mason says, two weeks after that training session. That’s been a theme throughout his life. From an early age, the tall, baby-faced chief executive has always shown twin creative and entrepreneurial streaks. At 15, he started a bagel delivery service in his native Pittsburgh. A few years later, he earned a music degree from Northwestern and spent his early 20s trying to make it big with a band he’s described as part punk, part Beatles, part Cat Stevens. When the band failed to break through, he launched a website called The Point in 2007 with a million dollars in angel capital. The point of The Point, which is still active, is to organize groups of people behind specific charitable causes. Once a certain number of users has committed to donating their money or time to an effort, it’s undertaken.

Unlike Groupon’s deals, however, tips were elusive at The Point. “It was a big, abstract idea that wasn’t getting any traction, so we tried to focus on one specific way that people were using the site,” Mason says. “Group buying seemed the most promising.” So he went down to a pizza place in his building and asked the owner if he wanted to participate in a deal. The deal was for two pizzas-a $20 value-for $10. About 15 people, most of them Mason’s friends, bought that first Groupon, enough to convince him to keep going. He slowly expanded his mailing list and added new businesses.

A few months later, Mason hit send on the deal that made him realize Groupon could be big. “There’s this sensory deprivation tank in Chicago,” he says. “It’s a tub of body-temperature salt water, and you just kind of float in it. We thought it was funny and decided to run a deal for it. Five percent of our mailing list ended up buying it. It was an eye-opener because it made us realize we could use this thing to expose people to new and unusual things in their own cities.” The deal, as it were, tipped.

In the two years since Groupon’s launch, it has grown from seven employees to 2,200. What began as a service only in Chicago has expanded to 236 cities in 29 countries. The 5,000-person mailing list that saw Groupon’s deal for the saltwater tank has exploded into a 18 million–strong subscriber base as of mid-September, at which point that number was growing at the torrid pace of a million per week. Even more impressive, back in April, the 17-month-old company raised $135 million in funding, resulting in a $1.35 billion market valuation. The only company to reach $1 billion faster was YouTube, but Groupon did it during the worst recession in recent history.

“We’re the fastest-growing company ever because we’re the first real revolution in e-commerce since the web has matured,” Mason says, adding that Groupon is to web 2.0 what eBay and Amazon were to web 1.0.

One business that has landed a Groupon deal is State Street Barbers, a small barbershop chain with four locations in Chicago and one in Boston. One day last June, Groupon blasted out a deal offering subscribers a $27 haircut for $13. State Street Barbers netted 2,746 new customers. Ultimately, Brian Collie, a co-owner and founder of the fledgling shops, brought in only $6.50 for each haircut (the other $6.50 went to Groupon), but he considers it money well spent. “We really wanted to use Groupon to drive trials and to introduce our business to new customers,” Collie says. “It’s a great mechanism for getting people in the door for the first time, and it leaves it up to us to give them a good experience so they’ll come back.”

But while Groupon says every business is vetted to ensure it can absorb the sudden surge in demand and the months of potential losses on deeply discounted goods and services, not all partners have been satisfied with their experiences. Posies Cafe in Portland, Oregon, was nearly sunk by a Groupon promotion launched in March of this year. In September, owner Jessie Burke took to her blog to warn other businesses against working with the company. “After three months of [nearly a thousand] Groupons coming through the door, I started to see the results really hurting us financially,” she wrote. “There came a time when we literally couldn’t make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign.” Burke ended up having to dip into her savings to cover the shortfall.

Still, Posies Cafe, it seems, remains in the minority. Many other businesses are clamoring to get a Groupon of their own. State Street Barbers, for one, is currently in expansion mode, and as Collie’s shops hit new cities, he knows of at least one way he’ll bring people in. “We’ll definitely be using Groupon,” he says.

ADAM K. RAYMOND, a writer for MTV’s Clutch blog, wishes he could buy a Groupon for Fruit Gushers.

SIX MEN FILE INTO a conference room in an office building on East Main Street in El Paso. They’re dressed in matching polo shirts with a corporate logo. If you want evidence that the Texas economy is booming, these guys are it. They’ve flown halfway around the globe from the corporate headquarters of their world-famous tech company in Asia to discuss building a new gazillion-dollar facility in town.

It’s Bob Cook’s job to help them make that decision. Cook, 50, is the president of the El Paso Regional Economic Development Corporation. He starts his spiel. He talks about the more than a billion dollars in recent bond issues to build parks, museums and libraries. He mentions that 24,000 new personnel are being deployed to the local army base over the next two years. He says El Paso is home to just the fifth new medical school built in the United States in the last 25 years. The state’s infrastructure is excellent. Labor is cheap. Personal income tax is zero. The regulatory environment is business- friendly. At the climax of his pitch, Cook hits them with an inspirational quote from Conrad Hilton, the hotel magnate who began his empire nearby.

“There is a vastness here,” Cook says, channeling Hilton, “and I believe that the people who are born here breathe that vastness into their soul. They dream big dreams and think big thoughts, because there is nothing to hem them in.”

Everyone knows that Texas is big. Lately, however, Texas has begun to grow into its big reputation where it really counts: the piggy bank. The state has one of the largest and fastest- growing economies in the country.

Aaron Demerson, the executive director of Governor Rick Perry’s Economic Development and Tourism Division, offers a long list of the state’s achievements: Texas is home to the corprate headquarters of 57 Fortune 500 companies, more than any other state; it is the top state in export revenues, with more than $160 billion; from January to July of this year, Texas gained 168,900 jobs; and it’s the only state among the 20 largest in the nation to have maintained a net gain in jobs over the past four years.

It should come as no surprise, then, that people are moving to Texas. The state’s population increased by around 480,000 in the latest census figures, and the cities of Dallas and Houston were numbers one and two, respectively, in population growth for American cities last year.

The state is decidedly urban, with more than 80 percent of the populaton living in cities. “Without a doubt, Texas has the strongest free- enterprise economy of any big state,” says Joel Kotkin, a noted scholar of urban development and a fellow at Chapman University in Orange County, California. “And the Texas economy is based on private sector growth, not an influx of public money.”

Not everyone is so bullish on the state. There are those who warn that Texas will have a hard landing if its priority remains business. Still, there’s a broad consensus among corporate leaders, journalists and academics on what’s driving the Texas economic juggernaut: strong energy prices, low housing costs, a government that encourages economic activity and great public relations.

According to Dana Johnson, the chief economist for the Dallas-based bank Comerica, Texas hasn’t been as affected as the rest of the country by the recession. Job losses didn’t begin until late 2008, he says (the national recession began in December 2007), and Texas started growing again in mid-2009. One reason for this is the relative health of the energy sector.

“The strength in energy prices was giving a nice push to the state economy,” Johnson says. “That gave way last year, when energy prices fell in the recession. But they’ve come back.”

It has also helped that Texas didn’t experience a housing boom and bust. Today the median home price in Texas is just $154,400, says Jim Gaines, an economist at Texas A&M’s Real Estate Center, compared with over $200,000 for other high-growth states like New York and California. “Another reason we are not a high-cost housing state,” Gaines says, “is the regulatory involvement. Texas is notorious for hands-off government.”

Which brings us to the business- friendly attitude in the Texas state capital. “The governor has made jobs and economic development the cornerstone of his administration,” says Demerson. “We just think there is a Texas way to do things that bodes well for us.”

In addition to its cattle and its bootmakers, Texas is famous for having no income tax, no individual capital gains tax, and very little regulation beyond federal mandates. Plus, tort law reforms have accorded corporations better protection against massive lawsuits. Tracye McDaniel, who worked in economic development for the past three Texas governors— the Democrat Anne Richards and Republicans George W. Bush and Perry—says business development is a priority across party lines.

“It’s been consistent,” says McDaniel, now the executive vice president of the Greater Houston Partnership.

Others have noticed. For the past six years, Texas has been named the top state for economic development in a survey of corporate leaders conducted by Chief Executive magazine. “The Texas attitude is considered good,” says J.P. Donlan, the magazine’s editor-in-chief, “and the quality of the workforce is considered good.”

In fact, Texas has been the recipient of a flood of good publicity recently, including a highly influential piece in The Economist. “Texas has all the advantages of being a lean and mean red state,” says Christopher Lockwood, The Economist’s U.S. editor, who wrote the piece, “with all the cool of a blue state in the cities.”

So why is State Senator Eliot Shapleigh so worried? Shapleigh, a fifth-generation El Pasoan, says there’s another side to the Texas miracle. Last year, he produced the fourth edition of his “Texas on the Brink” report, which chronicles the problems he says are caused by what he views as Texas’ lack of investment in education, the environment and healthcare. The report paints a dire picture. Texas is dead last out of 50 states in percentage of population over 25 with a high school diploma; 46th out of 50 in SAT scores; first in uninsured children; third in the percentage of the population living below the poverty level; and first in toxic chemicals released into the water.

Lucy Nashed, a spokesperson for Perry, writes in an email, “Texas has continued to fulfill its commitment to public education by holding high schools accountable for graduating college- and career-ready students and emphasizing an education in the science, technology, engineering and math fields.”

Is Texas going to dominate the American scene the way New York did in the first half of the 20th century and California did in the second half? That remains to be seen. The state could be undone by too much regulation from Washington, too little regulation from within, taxes that are too low, or taxes that are too high, plummeting oil prices, or a growing population of immigrants without access to proper education and other resources.

One thing most observers seem to agree on: There’s an energy in Texas these days. If the state can avoid the pitfalls and build on its strengths, its opportunities are tremendous. If not, there are plenty of other regions of the country waiting to take its place.

“This is why I love America,” says Lockwood, who happens to be an Englishman. “There is always a new model, a new way to expand, and it seems to me that right now Texas has that in spades.”

New York–based writer EDWARD LEWINE is pretty sure his state still dominates the American scene.

A DOZEN YEARS AGO, Tony Malkin, the environmentally conscious owner of the Empire State Building, installed 6,514 dual-thermal-pane windows in his iconic skyscraper. Over time, he was disappointed to find they were only marginally more energy efficient than the single-pane versions they’d replaced.

So last year, when the building became the test subject for a $500 million upgrade program with the goal of reducing energy use by nearly 40 percent, Malkin carefully considered his options. Replacing all of the windows again—this time, with triple-glazed glass—would reduce the heating and cooling costs. But at $2,200 per window, they’d be too expensive to achieve the desired return on investment.

Among those bidding on the job, only Serious Materials, a Sunnyvale, California–based maker of green building materials, had a tenable solution: retrofit the existing glass. “Other windowmakers said, ‘No, you can’t reuse the windows,’” says Kevin Surace, the company’s founder and CEO. “In fact, you can.”

Today, he has a team working around the clock in a 5,000-square-foot processing space on the building’s fifth floor. They take glass from existing frames, separate it and clean it. Then they insert new spacers, a suspended coated film and special gas before reinstalling the now superinsulated glass back into the frames. The new windows provide almost four times the thermal resistance of the old versions, contributing to a reduction in energy costs to the tune of $400,000 per year.

The process is the first of its kind. It’s also a perfect example of what Surace calls “disruptive innovation,” a swing- for-the-fences approach to business typically associated with rock stars like Apple’s Steve Jobs. That attitude defines Serious Materials, an eight-year-old company that’s become a poster child for the opportunities—both in terms of reducing carbon and increasing profits— that exist in building green.

According to the U.S. Energy Information Administration, buildings are a huge culprit when it comes to carbon emissions. The operation of residential and commercial buildings accounts for a whopping 40 percent of the world’s carbon dioxide emmissions. While we’ve been preoccupied with raising fuel efficiency standards and developing alternative energy for vehicles, we’re still building with essentially the same materials we’ve been using for decades.

Serious Materials has developed dozens of patents in a bid to improve these numbers. They’ve won awards for products such as EcoRock, a gypsum drywall alternative made of recycled waste, and been selected as a 2010 Technology Pioneer by the World Economic Forum. Along the way, Surace has been applauded by President Obama and been named Inc. magazine’s Entrepreneur of the Year.

But perhaps the company’s greatest accomplishment is bringing a rapid- fire, Silicon Valley mentality to a sector resistant to change. “As slow as the car industry is, the people who make building materials are ten times slower,” says Surace, 48, chatting on his way to a meeting. “Most of us are from the tech world. We came to the industry and said, ‘There’s change on the horizon, and the change is around saving energy in buildings. If we can rapidly bring the best products in the world in that space, we should be a major supplier.’”

Over the years, the commoditization of building materials has sapped any motivation for R&D, Surace believes, and now “you have 2,400 windowmakers and they all make the same darn window.” In just a few years, Serious Materials has shot up to the top five percent in the residential window category, he says.

“Windows are one of those things that have been lacking,” notes Blake Bilyeu, co-owner of Bilyeu Homes, Inc., an Oregon-based building company that focuses on high-performance residential construction. He says that before Serious Materials came into the market, high-performance windows were available only from Europe, Canada or small domestic boutique shops.

Surace hasn’t always been green (he admits he used to drive an SUV), but he’s always been an entrepreneur. After ventures in wireless, handheld communications and online shopping, in 2002 he reconnected with a former colleague and took over a company that made a liquid polymer to soundproof automobiles. When potential customers called about using the product on their walls, he invented QuietGlue, a substance that dampens sound when spread between layers of drywall. That product evolved into the soundproof drywall sheets still sold by Serious Materials, called QuietRock.

It wasn’t until 2005 that Surace became interested in climate change. And when he saw An Inconvenient Truth in 2006, he says, “It woke me up, and we turned all of our R&D toward saving energy.” Even so, he’s as passionate about the bottom line as he is about the issue. “We have a rule: Green has to mean dollars,” he says. “You have to show a return on the customer’s investment. Once you accomplish that, it doesn’t matter if you’re selling to the staunchest Republican in the world. Saving money isn’t a red or blue issue— it’s a purple issue.”

“The great thing about Serious Materials is this is a real business,” says Malkin. “They have real capitalization— and a real ability to execute. We’re not sitting here with a bunch of starry-eyed, garage-based venture capitalists.”

The political winds are also in Serious Materials’ favor, with about $20 billion in U.S. federal stimulus dollars dedicated to the renovation and construction of government buildings and low-income housing. With so much cash available, Serious Materials now has staff like Robin Roy, a vice president of projects and policy, actively meeting with stakeholders on the local level to spread the gospel about the benefits of the company’s high-performance products.

On a recent summer day, Roy, a fiftyish man with a salt-and-pepper beard and shirtsleeves rolled above his elbow, leads a group of Illinois policymakers on a tour of the 270,000-square-foot Serious Materials window factory on Chicago’s Goose Island—an industrial corridor just northwest of downtown. The site is the former home of Republic Windows, a company that made national news after its 2008 bankruptcy, when 250 workers staged a sit-in. After striking a deal with the local union, Serious Materials scooped up Republic in early 2009 (along with another shuttered window factory in Vandergrift, Pennsylvania) and has been in the process of bringing back employees as work ramps up.

During the tour, workers are busy filling an order made possible by funds from the Department of Energy’s Weatherization Assistance Program, which helps improve the energy efficiency of low-income homes. Large sheets of glass are lowered onto an airflow table as a computer-directed machine punches out glass sizes, which line employees snap at the designated score marks and place into racks.

At the moment, the plant is operating far from peak capacity, but those on hand seem likely to be joined by their former colleagues very soon.

ROD O’CONNOR, a freelance writer based in Chicago, doesn’t do windows.

ON HIS WAY THROUGH the Shinjuku railway station, the world’s busiest, a 28-year-old bond trader named Seiji Okawa stops in front of a shiny LCD placard displaying an ad for a popular Tokyo department store. He checks his watch, and when he looks up again, the billboard is displaying an ad for a nearby men’s shoe store. Okawa does a double take at the loafers and makes a note to himself to check them out.

Welcome to the future, where Big Brother, the shadowy authoritarian know-it-all from George Orwell’s 1984, is more likely to be in league with the grocery store than with the government. In Tokyo, cameras are embedded in the ubiquitous billboards posted around the stations, and they’re giving advertising a personal—and eerily precise—twist, delivering completely different messages based on who’s looking. It is the next generation in digital signage, and it’s being tested in Tokyo’s most heavily populated stations and shopping centers. These signs are just some of the latest precision tools that modern marketing gurus are deploying as a means of getting between a consumer and his or her money.

Here’s how it works: When a commuter like Okawa stops near a sign and pauses for as little as half a second, a digital camera snaps a photo of his or her face; then, using facial recognition technology, the software instantly identifies the buyer’s gender and age (within 10 years) and displays an ad custom-tailored to his or her particular buying demographic. Teen boys might see a promotion for the newest Judd Apatow flick, for instance, while their younger sisters see a pitch for Pixar’s latest. It’s a little like abstract art: Everyone sees what they want to see.

For the advertising world, next generation digital signage is a major breakthrough. It’s not only the first outdoor advertising vehicle that can directly interact with consumers as individuals, it’s also the only technology of its kind that gauges consumer interest by measuring how far viewers stand from the ad and how long they look at it. Though its maker, NEC, insists the signs don’t store photos or save an individual’s personal data, they do give companies the ability to track how many passersby stop and view the ad—data with actual, quantifiable value in the marketplace.

“It’s both cool and creepy, and it’s where the industry is headed,” says Michael Janiak, a lead creative with the New York–based interactive advertising firm Digitas.

Google AdSense invented the concept of “contextualized content,” displaying online ads that change according to the content on a given web page or, for Gmail users, correspond to keywords in their emails. Social networks such as Facebook take the idea one step further by including brands based on a user’s location, profession, interests, even religious beliefs. So-called “organic marketing”—when consumers virally repost ads to their social networks—is now the holy grail of almost every brand. An April study of more than 800,000 Facebook users shows that ad awareness doubles and “intent to buy” (manna for marketers) quadruples when consumers see that an ad is associated with their social circle. The catch with all online marketing, of course, is that viewers need to be signed on to encounter such ads in the first place. With technology like NGDS, consumers no longer need a broadband connection to be exposed to digital interactive advertising.

“With this sort of technology, the point of an ad campaign will no longer be just delivering a message by way of a single medium,” says Joe Laszlo, director of research for the Interactive Advertising Bureau, which monitors trends in interactive media. “With the introduction of tablets like the iPad, we’re starting to see virtual magazines, something that you flip through just like you flip through an issue of Vogue now, but when you come to an ad, instead of a picture, it’s a video, something that moves, something that you can tap to learn more about what that product is and how it’s made.”

The next step will bring the individual consumer into the picture in all sorts of innovative ways. For instance, when you come across a shot of a new shirt you like, an application will locate a photo you’ve stored of yourself and dress up your virtual self, letting you actually see what you look like with the shirt on. No need to line up for a dressing room.

Physical advertising is blending ever more seamlessly with the virtual kind. Iain McCready is the CEO of NeoMedia, an Atlanta firm that’s pioneering interactive barcode ads.

“We’ve done campaigns for companies like Volkswagen and Mazda where we tack a barcode onto an ad you would find in print or outdoors,” McCready says. “Consumers scan it with their smartphones, which brings them to a site where they can set their location, language of preference and age range. After we know that someone’s, say, a middle-aged Spanish-speaking woman in Dallas, we can then offer additional interaction with the product, like a deep discount or loyalty rewards.”

McCready adds that such mobile and barcode marketing may be relatively untested in the U.S., but it’s long been an advertising staple in Asia-Pacific markets, where cell phones now double as everything from credit cards to house keys. In Japan alone, cell phone marketing is a $1.4 billion industry, according to Tokyo ad agency Dentsu. The U.S. is struggling to keep pace, hampered by proprietary software issues and privacy concerns, which are, so far, less prevalent in the Asian market.

“In the U.S., information about where a given phone is located has been available for a long time, but carriers have been wary about giving that information to advertisers,” McCready says. “Here, the line between what consumers find cool and what they find uncomfortable sometimes gets blurry.”

We’ll soon find out whether smart billboards will similarly rankle American consumers. They’re alighting on U.S. shores this fall in San Francisco, Chicago and New York. Indeed, NEC has set a very ambitious goal: to incorporate facial recognition software into 10 percent of all digital billboards within the next three years. So smile, fix your hair, and whip out that credit card of yours: Big Brother billboard is watching.

Sydney-based writer CHRISTINA COUCH is always pleased to be recognized—even by a billboard.

THE PACKAGE ARRIVED.

Kyle Aguilar had been tracking it for the last 24 hours, watching its progress as it snaked its way to him at the Los Angeles offices of Wham-O. It was November 2009, and Aguilar was the new CEO of the 62-year-old company that had given the world toys such as the Frisbee, the Slip ’N Slide and the Hula Hoop. Over the past 10 years, though, Wham-O hadn’t done much in terms of innovating. Rather like an old plaything itself, the company had lost its shine, ceding ground to newer, hungrier rivals. Some said Wham-O was history; Aguilar didn’t think so. He just needed to make the classic toys that had long captivated Baby Boomers relevant and attractive to their kids and grandkids. And what was inside the package was supposed to help him do it.

The solidly built 29-year-old made a beeline to the copy room, where the brown box waited on the floor, just below a framed image of the original Wham-O Hacky Sack packaging from 1983. “Official Footbag!” the thick blue letters cried.

Aguilar crouched down, ripped the box open and reached inside the sea of Styrofoam peanuts. He pulled out three toys—one orange, one baby blue and one yellow. They looked like Frisbees.

Aguilar stood and turned around, raising an eyebrow at a knot of employees who had gathered in silence. This moment wasn’t just about Aguilar; it was about the company’s survival. Aguilar raised the yellow Frisbee into the air. “This,” he told his team, “is going to be the next big thing.” Then he slammed it to the ground.

A few people gasped. Aguilar looked down. Then came the claps and whistles. Though it was at least partially made out of wood (Sprigwood, to be exact, a patented mix of recycled plastic and sawdust reclaimed from furniture companies) the Frisbee hadn’t broken. This despite the unanimous skepticism of Aguilar’s factory managers, who’d all declared it couldn’t be done. Sure the thing would fly, they predicted, but it couldn’t possibly withstand the no-holds-barred play kids might subject it to. They were wrong. Aguilar had transformed the Frisbee—one of the great triumphs of the Age of Plastic—into something made entirely of recycled materials. Better yet, he’d done it inexpensively enough to match the price of the original.

“For so long, I had been wondering, ‘How do you get innovative with a Frisbee?’” Aguilar says later, in his office in Woodland Hills. “I mean, a Frisbee? It’s a flying disc; it is what it is. But then we had the answer. Make it environmentally friendly.”

The boss didn’t stop to give his employees a little speech. He needed to talk with his factory about doing the same thing for the Hula Hoop.

Aguilar grew up in Southern California, where his dad worked in promotional-toy manufacturing. When he was four, he would sometimes accompany his father to the office, where he would sit behind the desk and snap his fingers at employees who walked in. “Hurry up!” the preschooler would tell them, to the embarrassment of his father. The kid didn’t mean any harm; he just liked being in charge.

By the time Aguilar was in his teens, he’d decided to follow his dad into the toy business, and at 23, he began operating a small facility in Mexico that manufactured action figures for various companies. Within a year, he was named CEO and began aggressively acquiring additional toy factories around the globe. He still runs them all under the banner Manufacturing Marvel, which now has eight factories and produces more than two billion toys a year (everything from Bugs Bunny bottle caps to Shrek figurines), thanks to the efforts of 6,000 employees—Aguilar’s dad among them.

Aguilar’s relationship with Wham-O began last year when he called the company to inquire about manufacturing Frisbees for them in the United States. In the discussions that ensued, he learned that its Chinese-based owners were open to selling the entire business. Although Wham-O did $80 million in sales in 2005, its numbers had slipped with the economy, and it had only released one hit product in the last 10 years—the SnowBall Blaster, which packs and launches snowballs as far as 80 feet. Wham-O’s owners at the time were the company’s fourth since 1982, a sign of serious upheaval for a business that spent its first 34 years under the leadership of the same two Californians who founded it. To make matters worse, the toy industry had gone through massive changes since the 1950s, when Wham-O first shook up the toy box. In fact, childhood itself had changed, with kids spending more and more playtime indoors, absorbed by TV, computers and videogames. And recently, the market has grown more competitive as grown-up gizmos begin finding their way into youngsters’ backpacks. “We live in a situation where toy dollars are going to things like iPods and cell phones,” notes Chris Byrne, content director at timetoplaymag.com. “And of course computers.”

Despite these challenges, Aguilar was impressed with the sheer number of classic Wham-O toys that had survived on the market for decades. Silly String. Super Balls. Hula Hoops. Though conceptually simple, these iconic toys could often provide years of fun, not to mention getting kids off the couch and out of doors, where they could socialize and burn off energy. “Wham-O is built around this type of toy culture that brings people together,” Aguilar says. “That’s a great foundation to start building on with a company.” In July 2009, he joined with a group of investors to purchase Wham-O and set about reinvigorating the brand.

A year before taking over Wham-O, Aguilar had begun doing manufacturing work for Sprig Toys Inc., a small Colorado-based company that had developed an inexpensive, eco-friendly material called Sprigwood. Aguilar saw the stuff as a “gold mine,” and he told the owners as much. They said they hoped a big toy company might one day agree and purchase the rights to their material. They had figured on a timeline of 10 to 15 years. A little more than 12 months later, Wham-O’s newly minted CEO gave them a call. The two companies merged, and the new Sprigwood Frisbee will hit stores in time for Christmas.

Aguilar is also aggressively marketing the new Hula Hoop FX, which is more than three times heavier than the traditional Hula Hoop, making it a hit at aerobics classes around the country.

According to Wham-O chief operating officer Mike Rosales, though, not all of the company’s toys are destined for a comeback; the signature 1948 Slingshot, for example, would send company lawyers running for the hills given today’s more litigious climate. “There are some products that, personally, Kyle and I would love to bring back,” he says, “but I don’t think we’d be able to just from a safety standpoint.”

Aguilar’s fine with that, since he knows the company will only thrive if it comes up with innovative new toys to add to its portfolio. To that end, his team is working overtime developing a slew of ideas (Aguilar won’t disclose any for fear they might be copied), and Wham-O is currently accepting submissions from inventors who think they have something that fits the brand. Only toys that function in the real world—as opposed to the digital realm—need apply; Wham-O isn’t interested in the sort of playthings that only give the thumbs a workout. “All of our products are activity-based—that’s how Wham-O was founded and what we continue to do,” Rosales says.

With Wham-O now producing 200 products, Aguilar says he won’t be satisfied until the company is once again considered the ultimate source for active, generation-spanning toys. “Unfortunately, a lot of the younger generation is not as familiar with Wham-O, because the company hasn’t been as innovative in last ten years,” Aguilar says. “I’m taking responsibility for making it happen again.”

In the age of the iPod Touch and the Nintendo DS, it won’t be easy. But it certainly sounds like fun.

ALLISON WEISS ENTREKIN is an Atlanta-based writer and editor whose Hula Hoop record is a pathetic seven seconds.

“THESE TUNNELS only look like they’re underground,” Scott Milligan tells me with glee as we descend a wide concrete staircase. “They’re actually the first story of a building that stretches underneath the entire park.” He stops and makes eye contact, as if he’s just revealed the secret of the mummy’s tomb. “What visitors see is really the second story of a two-story building. The grade around the park was raised to cover it up.”

My bright-eyed, barrel-chested guide smiles as the staircase opens into a tremendous tunnel system bustling with janitors, food servers and fully costumed characters, all capable of popping up in almost any location in the park to restock a restaurant, handle a problem or step onstage. “This is a culture by design, not a culture by default.”

Scott Milligan is not your typical Disney World tour guide. The impressively cordial fiftysomething former human resources manager takes corporate clients on tours of the park’s “living laboratory” as a facilitator for the Disney Institute, an off shoot of the company’s in-house training program, Disney University, which was highlighted in Tom Peters’ 1982 business classic In Search of Excellence.

In the practical sense, Milligan’s role is to help outside businesses—ranging from restaurant chains and hospitals to banks and airlines, including United— introduce some of the company’s innovations to their own operational cultures. The Tourism Business Council of South Africa retained Disney to help prepare more than 250,000 tourism workers, many of them new to the industry, for this month’s FIFA World Cup soccer tournament.

Disney World likes to portray itself as a place where “magic happens.” But for most adult guests at the Magic Kingdom, Animal Kingdom and the rest of the 47-square-mile resort complex in Orlando, the real magic has less to do with the animatronic robots in Pirates of the Caribbean than the park’s staggeringly efficient operations and dedicated staff. However one might feel about Disney’s cultural offerings— from Mickey to Miley—the company knows how to keep the monorails running on time.

So while the institute offers a range of business courses, lectures and consulting arrangements, the most compelling offering is the chance to peer behind the Disney illusion. The experience is a bit like watching Penn and Teller reveal the secrets behind famous tricks and coming away amazed anyway. Somehow, the transparency only makes the feats look that much cleverer.

“The attention to detail backstage is as important as the attention to detail onstage,” Milligan says as he walks me through the tunnels. Called “utilidors,” there are 1.5 miles of them—all with pipes, fiber optic cables and God-knows-what snaking overhead. “A lot of our clients say, ‘Well, it’s easy for you guys— everything is magic at Disney!’ But it takes a lot of hard work. We keep our challenges backstage so you don’t have to see them.”

It’s an eye-opening tour. From computerized “hubs” where employees can get their assignments to boxes in which leaders can place notes praising employees for moments of outstanding service, the whole place is bevy of ideas and efficiencies.

For instance, Disney’s frontline workers—cast members, as they’re called—all wear name tags identifying their hometowns. “Once we added that, guest perception of cast member friendliness went up appreciably,” Milligan says. And the bit of personal information creates an opening for conversation, which can be just the thing to help a line move faster—or seem to.

And about those lines (one of the biggest challenges for any theme park): Disney’s key strategy has been to provide guests with accurate estimates of how long they might wait. The method for doing so is a model of simplicity. Every so often, a cast member hands a time-stamped tag to a guest entering the line; when he or she gets on, another cast member notes how much time has elapsed. The number goes on a sign at the entrance. Not only is it an effective means of calming frayed nerves and preventing logjams, but most guests, especially the younger ones, seem thrilled by the chance to help out.

One of Disney’s great strengths is the way it challenges and empowers employees to cook up such ideas. There’s even an in-house newsletter, Eyes and Ears, that documents ideas from employees that have been implemented successfully. For example, a few years ago guests began complaining that they couldn’t fit their rented strollers onto the little train that goes around the park. So the company tasked its employees with finding a solution. Redesigns of the trains or the strollers were rejected as too expensive, but then one employee hit upon a brainstorm: Let guests turn their strollers in as they board the train and pick up new ones as they disembark at another station. Removable stroller name cards were created, and the problem was solved.

Most of this practical, operational magic was developed long after the company’s famous founder left the scene in the 1960s. By the 1990s, Disney representatives admit, the parks were experiencing something of a crisis. The fruit of Walt’s original genius was going a bit stale, and a host of competitors had begun developing themed experiences of their own to rival Disney’s.

The company hired a seasoned businessman, Judson Green, to reinvigorate the parks. Green figured the best way to do that was to employ some very basic, commonsense procedures to allow cast members to feel more personal responsibility for the guest experience.

Another key to Disney’s success is the “quality service matrix,” which prioritizes customer service in the following order: safety, courtesy, show and efficiency. Out of context, that may sound as ho-hum as most other management schemes. But Milligan, who experienced Disney’s frontline operations himself, serving as a safari driver at the Animal Kingdom for four years, sees it differently, and he invites me to try out the Kilimanjaro Safari as a way of bringing the point home.

We watch our young driver navigate the acres of re-created African range and pass a few grazing beasts. “See the way she’s slowing down now?” Milligan explains as our driver turns a corner through a muddy puddle. “That keeps the rhino from charging the vehicle.”

Charging?

Milligan remembers a close call he had a decade or so ago, when the driver before him had accidentally irritated one of the massive animals and it was Milligan’s turn to ferry his passengers through the rhino’s area.

“When the rhino started to come at us, I had to think fast about exactly what to do,” he explains as our van rounds the very same curve. “I mean, the van is made to withstand just such an impact, but someone could have thought it was a Disney illusion and hung their kid over the side to take a picture—‘Look at baby with the rhino at Animal Kingdom!’”

So Milligan sacrificed “efficiency” and “show” for the top priority, “safety.” His voice speeds up as he reaches the critical moment of decision. “I said, ‘This is not part of the show. Please remain seated in the vehicle.’” For Milligan, breaking character was a very big deal, a decision he might not have made without the matrix firmly in his head.

That such reminders are necessary is testament to the devotion to the “show”—the Disney experience— most cast members feel. Indeed, the company may be unmatched in the world for its ability to engender such dedication. In one of the hotel daycare centers, I saw two thirtysomething employees tearing up at the climax of a Jonas Brothers movie about a sleep-away camp talent show—a movie they had seen dozens of times before. I spoke with a young cast member playing Cinderella for a “character lunch,” and she told me she’d known since she was a toddler that being a cast member was her destiny. And a monorail attendant showed me the mouse ears she had tattooed to her ankle in an effort to prove her dedication to the boss.

Of course, she keeps the tattoo covered when at work, in accordance with company policy.

DOUGLAS RUSHKOFF, author of Life, Inc.: How the World Became a Corporation and How to Take It Back, says the magic of Disney lies in its hotel check-in process.

WHEN TIMES GET TOUGH, investors traditionally look to gold as a safe haven for their capital. That’s the simplest explanation for the surge in gold prices during the economic crisis to an all-time high of $1,225 an ounce this past December. Of course, in real terms this was less than the $599 it hit in 1981, when Russia was in Afghanistan and America’s global dominance was in question. But it does prove that the metal retains its glittery allure for investors and national treasuries alike—especially when they don’t know where else to turn.

Gold’s critics believe the recent pullback from these all-time highs signals the end of a bull market for gold and, therefore, (good news!) the end of speculation over a full-scale economic meltdown. Fans counter that we’re merely seeing a temporary retreat before even greater demand sets in. After all, many governments are still in trouble, and while they can print more paper money, they can’t pull more gold out of thin air. Research firm McKinsey & Company’s new report on the global economic outlook, considered optimistic in most investing circles, paints a best-case scenario that calls for a six-year horizon for the unwinding of the debt crisis. That’s six years of nervous investors. And whenever investors get nervous, gold stands to gain.

In the long term—since 1800, to be exact—the stock market has generally outperformed gold. That’s because most of the time, businesses can actually generate revenue, while gold can only ever store value. (Your gold bricks can’t make chips, for instance— computer, potato or otherwise.) When the economy or geopolitical climate destabilizes, gold tends to shoot up as investors stop risking their money for the sake of growth and start looking instead for a means of capital preservation. “Unlike paper assets, stocks and bonds, gold cannot go to zero,” explains Charles Hugh Smith, author of Survial+: Structuring Prosperity for Yourself and the Nation.

Even so, “gold bugs,” as enthusiasts of the metal are called, sometimes find themselves in a peculiar position when it comes to the fate of the world. While owning a bit of gold has traditionally served as a hedge, the notion of aggressively investing in gold can seem a little like rooting for Armageddon.

Whatever one’s predictions about the fate of the U.S. treasury and/or civilization as we know it, sophisticated investors looking to make gold a part of their portfolio owe it to themselves to distinguish between the monetary and psychological factors influencing gold’s price and to make decisions accordingly. Perhaps the most fascinating thing about gold is its reputation as the ultimate commodity: a real asset because it is actually worth something. The irony is that intrinsically, gold isn’t particularly valuable. It’s just rare. There’s a difference. In antiquity, gold became a great symbol of value because of its scarcity. Aside from being easy to sculpt, gold did not have any particular purpose for the ancients trading it. Instead, its scarcity guaranteed that coinage made with it could not be churned out infinitely. Even paper money was backed by real gold reserves until the World Wars, when nations no longer had enough gold to back all the cash needed to fund their militaries. That’s when “In God We Trust” became the only thing differentiating paper money from, well, paper.

Ever since money and gold were decoupled, they have tended to move in opposite directions. When people see their governments and treasuries as stable, they also maintain faith in their currencies and have little need for an alternative asset class. But during wars and other inflation-inducing crises that cause currencies to lose value, gold tends to sparkle all the brighter.

And of course, when the dollar goes down, everything from oil to ice cream goes up, because it takes more cash to buy anything. Even without the higher demand for gold, then, its price rises when the dollar falls. Stocks also tend to go up when the dollar is down, because most investors would rather own a portion of a thriving company than a stack of depreciating cash.

But in the long term, a financial crisis inevitably impacts the profitability of businesses, and stocks too become dangerous places to be. Investors look for something real. The difference between gold and other commodities, however, is that while things such as oil and copper rarely do well in economic downturns—because a business slowdown usually means less immediate need for real resources— gold has very little real use beyond its function as a financial instrument. Notes Kamal Naqvi, head of Fund Coverage for Commodities at Credit Suisse, “Gold’s value is supported largely by the fact that national banks buy gold and keep it as reserves.” It’s more valuable as a poker chip than as a commodity in its own right, which explains why in challenging times gold starts to look so appealing. The more fretful you are about the fate of the world (or the more fretful you think everyone else is), the more you want to be in gold. Though, as Naqvi cautions, “Gold is better as a nonspecific hedge than the entirety of one’s investment strategy.” Smith agrees: “It’s as easy to lose money speculating in gold as in anything else.”

Then again, if after the turmoil of the past few years you’ve actually got some capital left to invest, chances are you’ve been making the right decisions all along. Listen to your gut.

DOUGLAS RUSHKOFF, author of Life, Inc.: How the World Became a Corporation and How to Take It Back, appreciates gold for being so flexible.

GOING FOR THE GOLD

THE MAIN GOLD INVESTING STRATEGIES AND HOW TO PLAY THEM

GOLD MINING COMPANIES

One of the the easiest ways to get some gold exposure in a portfolio is to buy stock in the companies that mine it, such as Newmont Mining (NEM) and Goldcorp (GG). But a host of factors—such as low reserves, rising production costs and even politics—can negatively impact the stock price even when gold itself is going up.

GOLD BULLION

A number of companies, such as Bullion Vault and Gold Money, offer the ability to buy gold directly, which is then stored in vaults. While Bullion Vault has facilities in the U.S., both companies also maintain vaults in Zurich and England, catering to investors who fear that the U.S. government will one day confiscate gold, as it did in 1933.

GOLD COINS

What good is a piece of a gold brick in a Zurich basement going to do for you in the apocalypse? In the event of economic collapse, some believe that gold coins, such as the South African Krugerrand or Canadian Maple Leaf, would be the only viable currency. Then again, if the worst came to pass, you might have better luck trading batteries or cans of tuna.

GOLD ETFS

Investors can also buy a stake in real gold through an “exchange-traded fund,” which, as the name implies, trades on the stock exchange throughout the day just like a regular stock. The ETF mirrors the spot price of gold and is backed by real gold that the fund buys at the end of each day.

TODAY, WE TAKE for granted the humble snapshot. The digital camera revolution led to ever-escalating Megapixel Wars, and now we are transfixed by the effortless joys of snapping perfect photos with cameras the size of soap bars. It seems we’ve almost forgotten the lost roots of the point-and-shoot.

But not everyone has. Take Florian Kaps, a self-described “crazy Austrian entrepreneur” who became a fervent Polaroid fanatic late in life, in 2004, when he used instant film with a plastic Holga camera. He was so bewitched by the resulting images that he went home, Googled “Polaroid cameras” and stumbled upon an equally devoted fan base. Consisting of photographers, artists, archivists and hobbyists like Kaps, it communicates primarily (and somewhat ironically) by sharing scans of Polaroids on Flickr, the photo-sharing site launched at the height of the digital revolution. Participants gush over the images in the comments section. “It’s a liquidy, dreamy feel,” says one. “The light it captures is really soft and ethereal,” says another.

So when the Polaroid Corporation announced it was discontinuing instant film in February 2008, a great sadness came over Kaps and Co. But in the months that followed, they mobilized. In Iowa, photographer Grant Hamilton began shooting video footage for what he figured would be “a long eulogy” to Polaroid film, a way “to later share the pain with everyone who wasn’t yet feeling it.” In Minnesota, Dave Bias and Sean Tubridy began a website called www.SavePolaroid.com, a collection of stories in pictures and words. And in the Netherlands, Kaps tracked down André Bosman, engineering manager of the last Polaroid film plant, in Enschede. The factory was being shuttered, and Kaps invited him out to commiserate.

Over a beer, Bosman told Kaps that the soon-to-be-dismantled equipment with which Polaroid film was manufactured would cost $130 million to replace. Together, they came up with a plan to save the equipment and continue the operation. Few people thought they would succeed. Hence the name: the Impossible Project.

The fall of film could be seen a mile away. When digital cameras were first introduced in the 1980s, the entire camera industry diverted all research and devlopment funding to the new technology. Polaroid failed to get ahead of the collapsing market, a surprising lapse considering that company founder Edwin Land, who invented instant photography, had always been among the most forward-thinking men in the business. Until the late 1980s, every one of his innovations surpassed its predecessor: The Land Camera begat the Highlander begat the SX-70. Meanwhile, instant film developed alongside it, becoming indispensable: a tool not only for art, insurance and history, but a window onto our personal memories.

Land died in 1991, leaving the company adrift. By the late 1990s, Polaroid had become a corporation with a split personality, on the one hand furiously producing digital cameras, on the other marketing throw-away cobranded cameras for kids, such as the Spice Cam and the Barbie camera.

For the most part, as the decade wore on only a few niches still used Polaroid film: Movie crews used it to block their shots; college campuses and driver’s license offices created IDs with it; police crews used it to catalog evidence; and casting agents snapped aspiring models and actors. But these groups were a dwindling lot. According to Infotrends, between 50 and 60 billion digital images were taken in 2008. By comparison, just 30 million film packs (enough to make 300 million photos) were manufactured in the last full year of production of the Enschede Polaroid factory. That’s one Polaroid taken for every 200 digital images.

What the numbers don’t say is that the instant photographs taken on Polaroid film are all original works of art. “Every single one of them is entirely unique, like a painting,” says Hamilton. Photographer Rich Burroughs adds, “When I hear the sound of the shutter and wait for the image to appear, there is this visceral feeling that blows me away.”

Somehow, the Impossible Project turned out to be possible. Kaps and Bosman, along with dozens of other longtime Polaroid employees, raised enough corporate and private donations to purchase the physical assets of the plant in 2008, and they also raised enough money from fellow connoisseurs to buy all the remaining stock of film—enough to keep customers supplied for up to 18 months. There are still stumbling blocks. For instance, the chemicals used to create the makeshift darkroom contained within a Polaroid picture have been out of production for years, so the crew has lined up new suppliers.

Prospects for the film’s resurrection are so good that Polaroid finally agreed, in October 2009, to license its name to the Impossible Project and to start producing instant cameras again. In March 2010, the old factory lines were restaffed and began turning out black-and-white film; by mid-2010, color film will be added as well. Pop superstar Lady Gaga even signed on as Polaroid’s newest creative director.

This year, says communications director Marlene Kelnreiter, one million packs of “Instant Film by IMPOSSIBLE” will be manufactured; in 2011, that number will ramp up to three million. In a press release, Scott Hardy, president of the company that owns the Polaroid intellectual property, says the project will be “reconnecting consumers to the very soul of the Polaroid brand.”

When Edwin Land first announced his instant film invention in 1948, after years of experimentation, he famously said, “Don’t undertake a project unless it is manifestly important and nearly impossible.”

For Kaps and his team of engineers feverishly working away in the Netherlands, the Impossible Project may have to change its name to something less pessimistic. They pulled it off, but barely—just the way Land would have liked.

SARAH GILBERT has an MBA from Wharton and a Polaroid SX-70 purchased online. She writes and photographs in Portland, Oregon.

LENS CRAFTERS

A snapshot of the long history of the snapshooter

THE BROWNIE
1900-1967
This revolutionary unit introduced the snapshot.

THE INSTAMATIC
1963-1988
The top-selling snapper of all time featured flashcubes.

THE DISC
1982-1999
Noted for its thin profile and distinct disc of negatives

EARLY IN JANUARY, hordes of giddy technophiles arrived at the Consumer Electronics Show (CES) in Las Vegas to gawk at more than 20,000 cutting-edge gadgets (think Winnebago-size TVs) and, perhaps more importantly, to meet people. In an effort to make networking a little easier and a little more innovative, the organizers of CES provided all attendees with a magical plastic card with their name on the front and a magnetic strip on the back. Its purpose: to relay, with a simple swipe, one’s vital details—name, address, hat size—to the occupants of booths touting cell phones, vacuums and cell phone vacuums.

At least that was the idea. “I don’t know what to do with it,” says the woman working a booth for one of the many e-readers introduced at the show. “Do you have a business card?”

She’s wasn’t alone. For all the interest in innovation among the 120,000 buyers, sellers and just plain curious, few in the crowd seemed willing to abandon their three-by-two-and-a-half- inch rectangles of card stock, slinging business cards rather than exchanging digits, um, digitally. No matter that the gadgets on display include countless devices that supposedly allow users to collaborate from opposite ends of the globe via videoconferencing, virtual whiteboards and real-time document editing. CES itself is based on a time-honored model, virtually indistinguishable from trade shows that filled the Las Vegas Convention Center when it arrived in the desert in 1959.

Ironic as it may sound, even technology’s top evangelists prefer tried-and-true methods when it comes to accomplishing their business goals. “Technology makes our lives easier in a lot of ways, but exhibitors strongly believe that in-person interaction is essential,” says Tara Dunion, senior director of communications for the Consumer Electronics Association, the trade organization that puts on CES. But it’s not just exhibitors, it’s business people everywhere. A recent survey of executives by the United States Travel Association found that 28 percent of their business would be lost without in-person meetings. Executives also estimate that face-to-face meetings convert 40 percent of potential customers into actual customers, while meetings conducted electronically convert only 16 percent.

“It’s extremely beneficial to shake someone’s hand and to look them in the eye,” Dunion says. That’s especially true at CES, where the average attendee holds 12 business meetings during each show. After all, are buyers more likely to carry your robot dog after receiving a press release or watching it e-bark?

“You don’t know what you have until you get your product in front of people,” says Kinesis Industries president Tod Wagenhals, who attended the convention for the first time last year. He came to show off a prototype of the K3, a wind-and solar-powered portable electronic device charger. With its two- inch fan blade, the contraption looks more like something meant to keep you cool than power up your phone. But plug into one of its ports, and one thing is clear: If you’re ever stuck in the desert with a dead cell phone, this is the device you’ll want (just watch those roaming charges).

Wagenhals left CES 2009 with a long list of suggestions from attendees—make it lighter, add more connection ports— and changed the device accordingly. “These aren’t the reactions you could get from having people watch videos or look at pictures,” he says. “People need to hold it, touch it, feel it.”

This year, Wagenhals is back with an improved product. Rather than soliciting feedback, he’s cutting deals.

Melanie Pearson, the owner of Liquid Image, a company that manufactures scuba, snorkeling and ski masks with built-in video cameras, is making her third visit to CES. The reason she keeps returning is simple: the crowds. “The sheer number of people gives our products enormous exposure,” she says. “It’s integral to our business.”

Liquid Image introduced its first camera-equipped goggles at CES 2008. Pearson says the ability to show off the product to buyers, distributors and press led to more than a million dollars in sales in the first year. “We started from scratch and instantaneously had orders,” she says. Sales more than doubled after CES 2009 and if all goes as planned, they’ll triple in 2010. “There was no way to do what we did without CES,” Pearson says.

Don’t be fooled though; CES isn’t just about business. Remember the sensory overload and subsequent glee of walking into the carnival? That’s what CES is like, except Whac-a-Mole has been replaced by Halo, and six-year-olds in chocolate-stained overalls by 36-year- olds in chocolate-stained overalls.

The biggest draws and most buzzed- about gadgets at this year’s show included the technologically impressive (a laptop with a transparent monitor, super-light tablet notebooks) and the simply bizarre (a blob of slime used to clean keyboards, a 19-inch high- definition television inside of a stuffed polar bear). But the products that drew the longest lines and loudest chatter were the 3-D TVs.

Some of the credit for the fervor probably belongs to James Cameron’s Avatar, which had been in theaters for a few weeks at the time of the show. Given the demographics of the CES crowd (young, male, nerdy) it was hard to imagine that anyone there hadn’t seen the movie, twice. And by the looks of the TV companies’ overflowing booths, they were eager for more. It took much patient waiting and, when the time was right, aggressive jostling to snag a pair of the glasses needed to partake in the 3-D experience (warning: watching without glasses may cause vertigo). Once the specs were on, it was finally possible to see what the fuss was about. Images popped out of the TV so convincingly that the occasional viewer would reach out and try to grab them. It didn’t work. But for all the splendor of the third dimension, the typical color, sharpness and eye-popping clarity we’ve come to expect from 21st century TVs were mostly lost.

Still, the eager crowds didn’t thin out for the entire four-day festival.

They devoured the 3-D TVs, just as they fiddled endlessly with the digital cameras and pounded mercilessly on the fancy keyboards.

The insistence on touching and tinkering made it clear that there’s really no substitute for being there. Even the companies whose products attempt to make being there unnecessary, like Cisco’s videoconferencing software TelePresence, recognize that nothing can replace the power of touch.

“We’re not at a point where we’re going to substitute for the tactile,” says David Hsieh, Cisco’s VP for marketing and emerging technologies. “It’s much more about having an increasingly blended experience.” What that experience will look like decades hence remains unclear. One thing, however, is certain—it will almost definitely involve business cards.

At his next trade show, associate editor ADAM K. RAYMOND will wear more sensible shoes.

GO AHEAD AND try to name the bestselling car in Japan. Honda Accord? Toyota Camry? Nope. It’s the Suzuki Wagon R, which you’ve probably never heard of and most certainly never seen. In fact, not only has the diminutive Wagon R been Japan’s top car for five consecutive years, Suzuki has built over three million of them—huge numbers for the island nation. Suzuki sold over $30 billion worth of product in 2008— manufacturing 3.5 million motorcycles and ATVs and 2.3 million cars. In the rapidly expanding Indian megamarket, Suzuki controls nearly 50 percent of the passenger car segment. Impressive numbers, no doubt, especially considering the company’s struggles to get a toehold in the United States.

The last time a Suzuki generated any noise in the U.S. was way back in 1988, when Consumer Reports stated that the tiny off-roading Suzuki Samurai liked to roll over. While Suzuki disagreed with CR’s findings (to say the least), the damage was done. Like the Corvair, which had a poor safety record, and the Audi 5000, which was alleged by 60 Minutes to accelerate without warning, the Samurai—and by extension Suzuki—had what a publicist might call “an image problem.” Turns out Americans aren’t so keen on driving cars they perceive to be unsafe, no matter the actual facts. (The Corvair was eventually made safer before it was discontinued. The Audi 5000, it turned out, worked just fine, and 60 Minutes retracted its story.)

Although Suzuki continued to sell cars in the U.S. after the Samurai debacle, the models were dull and forgettable (heard anyone bragging about their Aerio lately?). Then in 2006, it released the SX4, a small, smart, sensible car codesigned with Fiat, which came fully loaded and with all-wheel drive for just under $20,000. Jaded automotive pundits murmured their approval, but Suzuki wanted them shouting the brand’s gospel from the rooftops. For that they’d need a great car. Enter the 2010 Kizashi, a midsize sedan that’s going to sell for less than other cars in its class. It might just be a game changer for the automaker.

The U.S. automotive scene is always in flux. A generation ago, half of Americans were as devoted as golden retrievers to “The General,” a.k.a. General Motors. Imports were for hippies, eccentrics and rich dudes with multiple ex-wives. Today, Toyota is jockeying with Volkswagen for the title of world’s largest automaker, while GM struggles to find its way out of an onerous bankruptcy. Likewise, Chrysler, emerging from Chapter 11 itself, was recently supplanted by Honda as the nation’s fourth-largest automaker.

While brand loyalty still plays a role in car purchases, at the end of the day, Americans are after a good deal. Which explains why Hyundai just built its one millionth car in North America, and why the company’s luxury flagship Genesis was named 2009 North American Car of the Year. Up is down, black is white. So can Suzuki pull a Hyundai? Reilly Brennan, editor-in-chief of AOL Autos, thinks so. “Suzuki is an underachiever in America,” he says. “If they can inject what they do in motorcycles into their car lineup, they have the makings of a product renaissance. The Kizashi moves them in the right direction.”

Roughly translated from Japanese, Kizashi means “great thing coming.” While it may not trip off the tongue, the name is as bold a statement as the car itself. This stylish four-door is aimed straight at the heart of the American car market—meant to compete with powerhouses like the Camry, Accord, Chevrolet Malibu and Ford Fusion, all hugely successful cars backed by the biggest nameplates in the business.

It will also be competing with very competent midsize family sedans from the likes of Nissan, Mazda, Subaru and Hyundai. If all goes according to Suzuki’s plan, even people looking at Acuras and Audis might instead opt for a Kizashi.

The challenge is akin to selling denim against Levi’s and Wrangler.

It’s not going to be easy. As Todd Lassa, an analyst for Motor Trend, points out, “Suzuki’s push for North America ran smack into the worst automotive market since the Great Depression.” However, the Kizashi is a good starting point, he adds, because the price is right. Fully loaded, it costs a full $10,000 less than the Camry—an important discrepancy in a time of 10 percent unemployment.

In December, VW purchased a 20 percent stake in Suzuki—a direct bid to tap into its massive share of the Indian market. But, Lassa says, it’s also a way for Suzuki to grow in the U.S. “I think VW wants to foster Suzuki’s success in America,” he says. “And the long-term plan will likely mean building Suzukis— including the Kizashi—at VW’s new assembly plant in Tennessee.”

VW also senses that Suzuki is picking up on a demographic shift and wants to capitalize on it. While baby boomers drove Camrys and Accords, Suzuki believes their kids may be ready for an alternative.

“We really wanted to move the brand upscale,” says American Suzuki’s Jeff Holland. “If we’ve done everything right, the Kizashi will be a sharp contrast to past Suzuki offerings in that category.”

It’s a risky move, especially considering that Suzuki seems to be wagering all its chips on this one model. (Suzuki hasn’t announced the development of any new products for the U.S. after the Kizashi.) But as bets go, you could do worse.

L.A.-based writer JONNY LIEBERMAN used the Suzuki Method to learn the flute.

THRILL RIDE

What’s so great about the Kizashi, anyway?

THE DASHING KIZASHI IS SURPRISINGLY EASY ON THE EYES. It may not be a bite-the-back-of-your-hand stunner, but considering that it competes against vehicles often described as “appliances,” its tight, sporty lines, solid, confident feel on the road, and chrome detailing set it well apart from the pack. Suzuki has grafted its considerable motorcycle know-how onto the car, creating a highly responsive suspension (tuned on the world’s toughest tracks, like the famed Nürburgring in Germany), surprisingly precise steering, and a 2.4-liter, six-speed engine that punches the air. Very little about this sportster says “basic.”

IN LATE SEPTEMBER, a gaggle of 50-odd bloggers gathered 36 floors above Central Park in a conference room at the Mandarin Oriental Hotel, snapping pics of the dramatic views. The writers were moms and dads mostly, all anxiously awaiting a product that promised to change their lives. “What happens when you try to chop veggies in a food processor?” celeb chef Robin Miller asked the crowd. “Mushy!” someone called back. “Mushy!” Miller agreed, stuffing the Ninja Master Prep with mushrooms. “Look at that! One, two, three pulses. Your mushrooms? Done.” The crowd murmured appreciatively. “Wow, is that going to make my life so much easier!” blogged one mom later that day. “I so want to make the curry chicken salad!” tweeted another.

Infomercial? Sort of. But this isn’t late-night TV. It’s the new reality of parental blogging: shilling for companies in exchange for freebies and trips to fun locales.

It used to be the definition of a mommy (or daddy) blogger was a parent anxious to navigate the tricky shoals of child-rearing by confiding in the outside world, chatting away in the internet’s electronic sandbox. That was before audiences exploded.

With some sites boasting 500,000 readers a month, these bloggers have become coveted corporate mouthpieces, showered in everything from onesies and granola bars to strollers and video game consoles.

That’s not to say every mom blogger has sold out to big business. At this point, conservative estimates place the number of mom and dad bloggers in the millions—and most of them still post about the agonies of potty training and sleep, or lack thereof. But it’s not so much their content as their prospective audiences that have made corporate America take notice. “Moms control about 2.1 trillion dollars in the United States,” says Maria Bailey, whose marketing and consulting firm BSM Media specializes in marketing to mothers, “and about eighty-six percent of all household income.”

More important, the blogs are incredibly influential. “One of the appeals for companies working with bloggers is that it is not advertising,” says Greg Allen, the dad behind Daddy Types, a smart site for new fathers that boasts just under 250,000 unique visitors each month and eschews paid posts. “It undercuts all the suspiciousness about ads because it is ‘real people’ talking about ‘real things.’”

“Initially, we were blogging because we enjoyed the community aspect of it and the feedback, and a lot of us wrote to feel less alone,” says Heather Armstrong of Dooce (a relative old-timer, having blogged the better part of the last decade). With nearly a half-million unique visitors a month, the site carries ads from Verizon and Starbucks and earns enough to support Armstrong’s family. “Public relations reps are now reaching out to women saying ‘talk about this’ and ‘link to this,’ and the bloggers figure, ‘Oh, my God. They think I’m important!’ not realizing they are giving away free advertising,” she says. Armstrong keeps advertising and editorial content separate, but not everyone colors within those careful ethical lines.

Take Amy Clark, who launched MomAdvice almost six years ago. At first she focused on her own family’s techniques for “living well, on less.” Her blog brought in a slew of readers. That’s when Walmart came knocking. “They want moms who live those values,” she says of being frugal, adding, “I only accept campaigns that fit with my audience.” She became one of Walmart’s ElevenMoms—mothers who’ve agreed to endorse Walmart and blog on the company’s website (the number is now well above the initial 11). Clark has also worked with Pantene, the shampoo company, on a challenge to see if home hair can look as good as salon hair, and she’s a spokeswoman for Cascade. But back on her blog, stories are still true to her initial intent: family life on the cheap. “I only want really good-quality content for my readers,” she says. “As long as you’re authentic and you have integrity and aren’t just out to get a freebie, your readers will know that.”

At MommyGoggles, the FAQ page issues requests for sponsorships, conference invites, free family trips and other gimmes. “I put a LOT of energy and thought into my posts,” the author promises corporations seeking reviews of their wares. “I want to promote your product the best that I can.” While she reserves the right not to post about a product that does not seem relevant, she adds quickly, “To date, I have not received an item for review that I did not feel fit my website or my readers.”

“It started with coupons,” says Lynette Young, whose marketing firm, Purple Stripe Productions, focuses on social media. “Then samples. Then it was the full product, and then it went on to sending samples to give away in sponsored contests.” For instance, Nicole Feliciano of MomTrends, a New York City–based shopping site for moms that gets 15,000 visitors a month, has received upward of 60 strollers for review. “Everything I write about, I’ve touched, seen and worked with personally,” she explains.

“I wish that, at this point, I did a little more just writing,” sighs Naomi Shapiro, an attendee of the Ninja Prep demo who writes SuperDumbSuperVillain. “The review part has kind of, over time, taken over the personal blogging more than I would like. We are all reviewing the same things these days.”

Some are taking the idea of “reviews” even further. Over at ClassyMommy, Colleen Padilla’s disclosure page states upfront that posts can be purchased.

Is ClassyMommy, which has received more than 1,500 products for review, still a blog or a new kind of advertising? And what about Frito-Lay’s “Fab15” bloggers and the “Frigidaire Test Drive Moms,” gaggles of hand-selected mom bloggers who regularly receive goods from these brands to post about them?

“It used to be the majority of mom bloggers were really great quality,” says Ellen Diamant, half of the über-successful duo behind Skip*Hop, creators of a ubiquitous diaper bag and other baby gear. “But now we get crazy requests like, ‘Here is my blog. Send me stuff.’ And you go and look, and it’s really poorly done.”

“We vet so many requests a day,” says Tricia Chan, whose PR firm Public Group reps big names including Maclaren strollers. Many a parent, Chan says, salivates at the thought of a free buggy. “It went from ten or twenty requests a month to forty a week.” At the beginning of the mommy/daddy blogging boom the requests were no big deal. “Before, we’d just send it,” she says. “Now you have to look into analytics and see who they’re hyperlinked to.”

The situation has raised eyebrows over at the Federal Trade Commission, which recently announced that it was changing the rules governing blogs (not just the mommy blogs), as well as Facebook and Twitter. Beginning December 1, bloggers must disclose paid posts, sponsored posts and items received for free.

“Is it really possible that someone could attend an all-expenses-paid trip to a desirable location to see a fifty dollar product demonstration, leave and write that they hated it?” wonders Jeremiah McNichols, half of the duo behind Z Recommends, a consumer-advocacy parenting blog. “I suppose it’s possible. But it does not appear to happen.” That’s what worried the FTC: Even if such posts aren’t advertising per se, it can be hard to separate the sponsored from the genuine.

Predictably, the rules change has come under furious assault on First Amendment grounds. But whatever happens with the new mandate, marketers are learning to tread carefully on the info superhighway.

It turns out, not all bloggers are equally malleable. “There are mom bloggers who will go and bash a product, and people are worried about that,” says Diamant.

Take McNichols and his wife, Jennifer, at Z Recommends. The site, which began in 2006 as a way for the couple to discuss the products they were using while raising now-five-year-old Zella, has become the Upton Sinclair of parent blogs, spending months researching, for instance, which companies were using BPA—a compound that has been shown to damage the endrocrine system when ingested in large quantities—in the production of sippy cups and bottles.

The couple found that a number of companies promoted as green were using the chemical and administered a tough-love digital spanking.

Recently, a number of mom bloggers have been promoting a voluntary code of ethical conduct called Blog with Integrity. It reads, in part, “When collaborating with marketers and PR professionals, I handle myself professionally and abide by basic journalistic standards.” Presumably they also play nice and keep their hands to themselves, too, just as mom and dad always said.

SARAH WILDMAN writes for some of the world’s top newspapers, but her baby kind of wishes she got more swag.

MOTHER’S LITTLE HELPERS

A few of the best—and most trustworthy— mommy blogs

COOLMOMPICKS.COM

Kirsten Chase and Liz Gumbinner bring a witty style and real integrity to their posts about indie designers.

DOOCE.COM

Heather Armstrong, listed by Forbes as one of America’s top 50 women in media, offers unadulterated musings on motherhood.

DADDYTYPES.COM

Launched by Greg Allen, a hipster techie with an eye for design, DaddyTypes brings a guy’s eye to the world of baby goods.

SUBURBANBLISS.COM

Detroit mom blogger Melissa Summers launched an online frenzy when she admitted to having a glass of wine during playdates.

NOTESFROMTHETRENCHES.COM

Chris Jordan has won several awards for her blog about her kids—all seven of them.

THE INAUGURAL MONDAY Craft Night in Etsy’s new office has a summer camp feel: Women (and one man, the very enthusiastic Benjamin) pick up cookies to snack on, recipe cards, markers and decorative floral paper. This week’s project is to share recipes and package them into gift-worthy collections.

It’s full of incongruities, this scene-rustic wood tables under industrial fluorescent lights, young, mohawked women with lip piercings sharing chai tea recipes with matrons in silk scarves. Those kinds of contradictions are what define Etsy, the preeminent online marketplace for handmade goods. It’s the quilting bee gone digital, as well as the top place online to purchase a hand-knit jester toy for a new arrival or a necklace with a clay zombie head for, well, whomever. On the site, darkly humorous prints are as easy to come by as felted tea cozies.

With tonight’s event, Etsy is attempting to reconcile perhaps its most thorny contradiction: How does a website with a quarter of a million sellers hawking more than four million items maintain its cuddly ambience? “We have a deeply ingrained set of values, and we’re working hard to make sure those values aren’t lost,” says Matt Stinchcomb, Etsy’s VP of community.

Etsy was founded in 2005 by a 25-year-old painter/carpenter/ photographer named Rob Kalin. His goal was to make a space where he and his creatively inclined friends could sell their wares, free from the commercial goods on eBay and the taint of Craigslist trolls. “We were just in the right place at the right time,” says Stinchcomb, who helped with some initial coding and word-of-mouth marketing, and within a year of Etsy’s launch, left his full-time job as vocalist and guitarist for a rock band, the French Kicks, to become the site’s marketing director. “The fact that Rob hired me to do marketing should tell you something about how we got started,” he says with a laugh.

Kalin used duct tape on the floor of his Brooklyn, New York, apartment to map out how the site would look. Within three months, Etsy was up and running. “We never thought it would get so big,” Stinchcomb says. “We never had a business plan or a business model. We never had projected growth.”

No one would have believed them anyway, given the site’s extraordinary success, which has only been enhanced by the economic downturn. “As the recession set in, Etsy grew,” says Elissa Minor Rust, of Etsy Stalker, an independent website devoted to combing Etsy’s offerings. “It went from a wonderful little niche for handmade lovers to an enormous marketplace so big that it’s almost overwhelming.”

In recent years, the site seems to have benefited from a few key factors, not least among them, the growing digital-age yearning for simple tangible experiences. People are looking for comfort in things they can do and touch. “We’re all stuck behind computers,” Stinchcomb says. “The tactile factor is really important.”

Then, of course, there’s the matter of price. “People are seeing real value in buying handmade items directly from independent sellers,” says Minor. For instance, Kristy Reichert makes wooden bookmarks out of leftovers from her husband’s cabinetry business, stamps them with letters or designs, and sells them for $7. Her business partner Kristen Couse makes table linens by printing on vintage fabrics; a set of her “Tina the Llama” napkins costs $20.

Finally, of course, there’s the incredible influx of sellers-many of whom are former office workers who’ve been downsized and are finding in Etsy a way to start new careers. Etsy makes it easy. Instead of opening a brickand- mortar store or hunting for retail partners, Etsy sellers design their own websites free, paying a 20-cent-per-item listing fee. The company also takes 3.5 percent of each sale, and sells prime showcase spots for $7 to $15. “It was the easiest and best way for me to start my business,” Couse says. “It allowed me to set up shop for free, without having to put together my own web store, and it came with a built-in audience.”

For many participants, the site comes with built-in friendships as well. “It’s a great way to meet people,” says Couse. Minor agrees. “The community that has grown out of Etsy is amazing,” she says. “Etsians are a very dedicated group of people-dedicated to their art and dedicated to supporting one another. Every day in the forums, you’ll see sellers giving pointers to each other about how to take better photographs or market their products.”

Says Stinchcomb, “I think the community is really what differentiates us from other sites.”

Still, as the site has grown, that familial atmosphere has become tougher to maintain, which is why the company has begun working to foster the communal vibe. In addition to the forums, Etsy has introduced “teams”- virtual kaffeeklatsches, organized by location or type of craft-whose members give each other advice and sometimes attend craft fairs together. That is how Reichert and Couse met, as members of the New New Team. And of course there are events like the weekly craft night in Brooklyn (more are planned for other locales).

There have been growing pains. Some buyers have reported frustration at not getting their orders on time, and a small number of sellers have complained about a lack of support from the Etsy team. “We had a lot of technical problems that had to do with the sheer volume,” Stinchcomb concedes. “We never thought it would get so big!” More tech support has been brought on, and Stinchcomb has started a community council to give members a voice.

As for the future, Stinchcomb thinks there might be some room to expand into other areas. “We’re only touching the surface of what handmade art is,” he says. “High-end art, furniture, clothing, music, film-those are all handmade. It depends on who’s making it and how. To me, computer code is handmade.”

Maybe so. But what would Grandma say?

Hemispheres associate editor LAYLA SCHLACK has to finish the sweater she’s knitting before she even looks at Etsy.

SEW BIG

As Etsy grows, some crafters are departing for smaller competitors.

ARTFIRE

ArtFire lets sellers participate in site development and has a marketplace for buyers looking for custom work.

WINKELF

Started by an Etsian, this site allows some nonhandmade items to be sold and also provides a bartering feature.

DA WANDA

Etsy’s biggest competitor, this German company’s ratings system allows buyers to “heart” items they like.

ONE WINTER EVENING in 2003, twentysomething New Yorkers Michael Kirban and Ira Liran were cutting loose in a Manhattan bar, enjoying a few cocktails, eyeing the ladies. The childhood pals—Kirban had started a software company; Liran, a marketer, was between jobs—sidled up to a pair of pretty Brazilian expats. They wanted to know what the women missed most about their homeland. The beaches? The wildlife? The waxes? “Agua de coco,” the women replied; the water inside young coconuts, which Brazilians drink “practically from birth” and revere as the most delicious and nutritious drink in the world.

At the time, the United States was in the throes of a specialty-beverage boom, with customers clamoring for “functional” drinks with ambitious names—SmartWater, Rockstar, Guru— and lofty promises of healthier, brainier, sexier lives. Looking into coconut water, Kirban and Liran learned it would fit in to the category quite nicely: An 11-ounce serving (roughly one coconut’s worth of water, which is not to be confused with coconut milk, which is derived from the meat of the fruit) has more potassium than two bananas and 15 times more electrolytes than the average sports drink. With no fat or added sugar, it averages a mere 60 calories. It was also more rehydrating than anything on the market and, they discovered through diligent testing, a pretty decent hangover fix.

Coconut water was, as the women noted, wildly popular south of the equator, but in the United States it remained largely unavailable. Latin food distributor Goya sold it to bodegas and ethnic groceries, but the company added a preservative and packaged it in a can, which didn’t do much for the taste—already somewhat metallic—or the aesthetic appeal. Kirban and Liran envisioned coconut water in its natural state and, anticipating the bottled-water backlash, packaged in eco-friendly containers.

Six years later, Kirban and Liran’s brand of coconut water, Vita Coco, is sold in more than 10,000 stores across the United States. The competition, unsurprisingly, has increased, and Vita Coco now shares what has become a multimillion-dollar market with two top rivals: Zico, founded in 2004 by New Jersey native Mark Rampolla, and O.N.E., founded in 2005 by Brazilianborn Rodrigo Veloso. The differences between the waters are slight—after all, each company deals in the same product, extracted directly from coconuts—but they’ve carefully targeted different segments of the market: Zico the yogis, runners and triathletes;

O.N.E. the healthy eaters, moms, and the occasional celebrity (Gisele Bündchen is a fan, they’re happy to note); and Vita Coco the younger, workhard, play-hard types, who might enjoy what its website calls a “hydration vacation” where “bikinis are optional.”

O.N.E. makes a big deal about giving back and recently launched O.N.E. Water, a spring water packaged in a paper carton. The profits, says Veloso, will go to charity.

“Education campaigns have been crucial,” adds Veloso, whose company regularly stages demos and samplings at locations throughout the country. For instance, Manhattan’s Crush Wine & Spirits shop recently held a blind tasting for those occasions when you “need something even more crisp than muscadet.” Vita Coco, meanwhile, has deployed splashy vans decorated with beach scenes and no fewer than 2,000 real green coconuts. They prowl the streets of New York, Boston, Miami and Los Angeles, blaring reggae music and braking for dehydrated passersby.

All those efforts are clearly paying off, with increasing numbers of consumers happy to spend up to $3 per 11.2-ounce carton of the stuff. Vita Coco reports that sales have increased at least 200 percent annually, with 2008 revenues hitting $6 million and 2009 revenues predicted to reach $20 million. Every year since launching, Zico has doubled sales, and O.N.E. has tripled them. “Coconut water is one of our fastest-growing beverage segments, especially over the past year,” says Perry Abbenante, global grocery buyer for Whole Foods, which stocks all the brands nationwide. “All three are promoting heavily at retail, and we’ve seen sales increases in the triple digits. Customers are responding very positively.”

While each company attributes its success to an increased interest in healthy living, coconut water brands have something else going for them: the American obsession with the latest and greatest. “The beverage industry lives off of new things happening,” says Harry Balzer, chief industry analyst at market research company NPD and author of Eating Patterns in America. This particular trend, as he sees it, is less about the popularity of coconut water than the enduring appeal of plain old water. “Bottled water—and the fact that we’d be willing to pay for it—was the biggest change the beverage industry has ever seen,” he says. “And along the way there grew a segment that will always be looking for the new version of that.”

As the awareness of coconut water grows, the three brands are rapidly moving beyond natural-foods and specialty markets into more conventional supermarkets and other arenas. Last month, Vita Coco launched an exclusive partnership with airport candy and drink chain The Grove, which has stands in 50 airports across the U.S. It’s now sold in corner convenience stores in most major cities, thanks in part, says Kirban, to flavored versions like mango-peach and pomegranate-açai that appeal to those of us with more “mainstream” tastes. Zico is aligning itself with Bikram yoga, a practice that takes place in 105-degree heat. Rampolla says that he’s worked hard to cultivate a “feeling of relaxation and replenishment on a psychological level.”

For all the new adherents out there singing the praises of coconut waters, the poster child for the elixir’s powers may be Vita Coco’s Liran. The Brazilian hottie he met in the bar? He married her.

ALYSSA GIACOBBE writes for In Style, Nylon, Men’s Health and Boston Magazine. She takes her coconut water on the rocks, with salt.

TESTING THE WATERS

Which coconut water is for you?

ZICO

Yoga fanatics obsess over Zico, but don’t let that scare you. It’s fresh-tasting and has two flavors—mango and passion fruit.

O.N.E.

A consistent taste test winner, O.N.E. comes in a fashionable metallic blue box, and, bonus, it’s Gisele Bündchen’s favorite.

VITA COCO

The industry leader, Vita Coco is also the easiest to fnd at a convenience store near you.

Your new neighbor “Steph” just sent you some cherries and avocados, which will fit nicely in a tidy little plot next to your eggplants. You’ve still got your heart set on growing oranges, baut unless another friend decides to throw some extra inventory your way, they’re still well beyond your means. That is, unless you cheat by enhancing your virtual spending power with actual cash.

After all, this isn’t a real farm, but 
a wildly popular social networking game called FarmVille, which is 
played on Facebook around the world. While the game itself is free to play, real cash can go a long way. Ten bucks gets you 15,800 “coins,” enough for a toolshed, some corn, a bunch of apple trees, a chicken and those oranges. 
Want to invest? Buy a cow with the leftover change, milk it and earn even more coins.

In the wild new frontier of online social gaming, such microtransactions are increasingly big business. And Zynga, the creator of FarmVille (and more than a dozen other games designed to be played on the iPhone and social networks) is shaping up to be a Silicon Valley colossus. Since becoming the top application developer on Facebook last year—with 50 million active monthly users—Zynga has earned as much as $100 million (the company prefers not to disclose the actual figure). Between the various available platforms, 15 million people play the top four Zynga games every day.

That’s a lot of microtransactions. And as the technology pushes social gaming beyond Facebook, Zynga, which already has a hammerlock on more than half the social network gaming market, is only going to get bigger.

The brains behind Zynga is a 43-year-old Harvard-educated entrepreneur named Mark Pincus, who launched the hit social networking site tribe.net in 2003. Whippet-thin, with a shaggy haircut, bushy eyebrows and permanent five o’clock shadow, Pincus holds an ever-present herbal tea in his hands as he paces the corridors of Zynga’s headquarters in San Francisco’s Potrero Hill district. This refashioned potato-chip factory has the freewheeling aura of a dot-com company from the Digital Golden Age, complete with Segways, massages, foosball tables and free meals prepared daily by culinary academy–trained chefs.

Zynga’s games—which include Texas Hold’em Poker (the largest social gaming poker app on the planet), Pirates, YoVille and Scramble—are free to play, which explains their popularity. Mafia Wars is the most outwardly exciting of them all—players start out as Mafia stooges and advance by accruing weapons and whacking rivals. But no matter the game, after a user is hooked, he or she is then often persuaded to spend a dollar here and there on enhancements: a pistol, say, or a schooner. And those dollars add up.

“Microtransactions in a virtual economy represent the third business plan of the internet,” Pincus says, sitting in his airy office. “Web 1.0 was all about e-commerce, banner ads and low margins. Web 2.0 was considered the Google Search Economy with cost-per-click, but it was only a great business plan for Google. Now we’re in what I like to call ‘Web 3,’ where users pay for virtual goods and services, and everyone wins. High margins for all.”

Zynga isn’t the only gaming company reaping high margins from micropayments, and while a virtual pinky ring may sound frivolous, so do many of the goods offered by Zynga’s competitors. In Pet Society, for instance, a game developed by Playfish, users can outfit their free virtual pets with accessories like a hot tub ($1.70) or a chalkboard ($2.55). Remarkably, Playfish is forecast to pull in about $30 million this year. That’s a lot of imaginary chewtoys. Meanwhile, an ecosystem of companies is involved in each microtransaction: PayPal and Paymo handle the money, for instance, and companies such as Blockbuster insert ads and coupons.

Now Facebook, sensing an opportunity, is set to introduce “credits” for purchase that can be used in any Facebook apps to buy virtual goods. That’s a game changer—and it’s not the only one. Apple’s new OS 3 for the iPhone, which arrived this summer, will be a boon for companies such as Zynga. Whereas before you could download its iPhone apps for free, the phone didn’t allow in-game microtransactions; OS 3 does. Want to purchase a new barn for your FarmVille farm? Go ahead. Nick Gibson, an analyst at Games Investor Consulting, says in 2008 the market for social networking games was about $90 million in North America and Europe; with the introduction of the OS 3 iPhone, he predicts the business will triple in 2009.

Pincus is even more bullish. “In the next eighteen months,” he says, “I want to see social gaming become a mainstream activity for the entire Western world.”

To that end, Zynga recently released two new entries: a restaurant game called Café and the breakout hit FarmVille, a nod to Pincus’ interest in sustainable foods. FarmVille isn’t exactly a riveting game. Oftentimes it’s quite literally as exciting as watching grass grow. But no matter how silly it sounds, FarmVille already has two million daily users.

Launched this summer, Café is a throwback to the popular Diner Dash, in which players run a virtual restaurant and expand by satisfying their customers. Combining that concept with a sort of interactive Top Chef, Café pits users’ restaurants against one another and allows participants to interact—hiring friends to work in their kitchens and trading ingredients.

According to Pincus, Zynga’s next frontier is charitable giving. In June, Zynga asked YoVille users to purchase $5 virtual dogs and cats from an in-game SPCA shelter. They made $40,000 in six weeks and donated the money to a real-world SPCA. “I love the idea that what players do on a fantasy level within our games can actually affect what happens in the real world. So if our players purchase virtual farmland and seeds for crops in FarmVille, we can send those proceeds to farmers in Guatemala,” says Pincus.

Still, when it comes to tending to the needs of a flock of peckish hens, most users would probably prefer to keep the action purely virtual.



A contributor to Slate, The New York Times and Fast Company, Diane Mehta has lost 17 fights in Mafia Wars.

Playing chicken

Few things bring as much joy as raising hens—except perhaps virtual hens, which you don’t have to clean up after.

VIRTUAL
Cost of a hen in FarmVille:400 coins (or less than $1)

REALITY
Cost of a hen in real life: $2.32 at purelypoultry.com

THE FIRST THING the women noticed was how small the dock was. Mother, daughter and granddaughter had driven to Portland last year from Pennsylvania to meet the lobsterman who’d been catching their dinner. They were expecting to find him at a large commercial fishing plant. Instead, they arrived at Hobson’s Wharf, a modest wooden pier in the Old Port with a few boats bobbing beside it, and saw a rugged-looking young man named Curt Brown waiting for them in filthy bib overalls.

At first, conversation was awkward. “It’s never easy for a lobsterman to meet someone out of the blue,” says Brendan Ready, one of two brothers whose company, Catch a Piece of Maine, sells shares in individual lobster traps to clients across the country at prices that range from $69 for a share of one day’s catch to $3,000 for an entire season’s haul. “But the ladies and Curt hit it off . He still calls them, and they’re coming to visit him again this year.”

Think of it as a kind of barnacled twist on Michael Pollan’s adoption of a steer in 2006’s seminal organic food bible, The Omnivore’s Dilemma, and the resulting “Yuppie, meet your food” phenomenon. If waiters can tell diners where their steak was raised, the Readys reason, and organic farmers can sell their greens in city squares, why can’t a few crustacean-crazed gourmands get to know their lobstermen? And as long as it sells a few more lobsters, the people in Maine are happy to go along. The truth is, these days the lobstermen need all the help they can get.

You may not realize it from the price of lobster at your local fishmonger, but Downeast Maine is crawling with these extravagant arthropods—literally crawling with them—and that’s a leading cause of a near-cataclysmic recession now hitting the region’s lobster fishery. Times are so tough that the famously stolid lobster industry is resorting to some extreme steps to stave off collapse, in some cases, even borrowing from the more progressive, touchy-feely world of sustainable foods.

“You’re covered in mud and seaweed, and at first you feel a little strange having people taking your picture and asking questions,” says Robert Springer, one of the eight lobstermen who sell part of their haul through Catch a Piece of Maine. “But it doesn’t bother me, and I know people enjoy finding out about the lobster business.”

Brendan Ready, 27, and his brother John, 28, say they had around 3,000 customers in 2008, their first year. The key, they say, is to show that lobster is both a sustainable product and one with real personality. When the Readys’ customers buy into a haul, they’re invited to learn about the actual lobstermen who’ll be doing the hauling. There are pictures and bios up on the Catch a Piece of Maine website: Ted Gilfillan prefers fishing in smaller boats that can navigate shallow waters; Jeb Stuart is a grandfather of four who named his boat Babe, after his mother; Robert Springer is an increasingly rare third-generation lobsterman. It’s sort of like a farmers market meets Match.com.

“We decided to develop the lobstermen themselves as characters,” John Ready says.

Meanwhile, in tiny Port Clyde, Linda L. Bean, who happens to be on the board of L.L. Bean Inc., is taking a very different marketing approach. Rather than elevating the product, she’s taking advantage of the glut by turning lobster into an everyday food. Under her “Linda Bean’s Perfect Maine” banner, she’s started what will by 2010 be an East Coast chain of lobster roll restaurants stretching from Port Clyde to Delray Beach, Florida.

“We’ve got plenty of lobsters these days,” Bean says. “But if we can’t sell them, then it’s the lobstermen who are going to be the endangered species.”

There was a time, not so long ago, when lobsters were so plentiful in Maine that farmers used to mulch them by the wagonload to fertilize more profitable crops like potatoes and corn. There was even an old law on the books forbidding wardens from feeding prisoners too much lobster. In the late 19th century, lobsters started to become a prized catch. Since the 1950s, the number of lobstermen working the Maine grounds has swelled to around 5,800.

For most of the last decade, lobstermen benefited from rising prices. In hindsight, however, says Jeff Holden, from his desk above the factory floor of the Portland Shellfish Company (one of only a handful of Maine businesses— the rest are in Canada—that process lobster meat for shipment), the Great Lobster Price Collapse of 2008 began right after New Year’s. Oil prices soared, raising the cost of fueling a lobster boat and lowering the discretionary spending of the dining public.

“October was the low,” Holden recalls, adding that business at casinos and cruise ships—which account for a significant portion of Maine lobster sales—also bottomed out. “We had people calling us with lobsters for sale at around $2.50 a pound. That’s a mid-1980s wholesale price.”

How is it that as every other fishery is suffering from empty nets, lobster traps are overflowing? According to Carl Wilson, the chief lobster biologist for the state of Maine, the 2008 catch was around 63 million pounds, close to the largest on record. (A standard haul in the 1980s was around 20 million pounds.) The glut, according to Wilson, is the result of three factors: the over-fishing of cod, which is among the lobster’s most important predators; the gradual warming of the water in the Gulf of Maine, which speeds lobster growth; and, ironically, the conscientious conservation eff orts of the lobstermen.

“What a situation,” says Robin Alden, the executive director of The Penobscot East Resource Center, a nonprofit that promotes sustainable fisheries. “The Maine lobstermen have done everything right, and suddenly the business isn’t there for them. Now the foreclosures are starting to happen.”

If the economic downturn persists— and most think it will—a sizable portion of Maine’s lobstermen, lobster dealers and lobster processors will go out of business.

Few people doubt the coming years are going to be painful, but Patrice McCarron, executive director of the Maine Lobstermen’s Association, believes there’s hope. “We sold every lobster in 2008 in the middle of the world economy crashing,” says McCarron, “and that is astounding.”

That’s little consolation to the lobstermen who work from the piers of the Old Port, though. And those are the people Bean and the Readys—and their customers at Catch a Piece of Maine— are concerned about.

“My savings are gone,” says Robert Springer. “I have less help and I run the boat slower to save fuel. It’s been demoralizing, but I see what is happening to people all over the country. I have a job. I’m still standing and I’ll make it through.”

Contributing writer EDWARD LEWINE regrets to say that no lobsters were eaten in the reporting of this story.