The NewsHour with Jim Lehrer

MARGARET WARNER: Good evening. I'm Margaret Warner. Jim Lehrer is on vacation. On the "NewsHour" tonight: Tom Bearden reports on what's ahead for Panama as the U.S. hands over the Panama canal; Paul Solman explores Amazon.Com, and how it's changing business on the Internet; we look again at Jeffrey Brown's portrait of classical percussionist Evelyn Glennie; and Roger Rosenblatt has our millennium essay. It all follows our summary of the news this New Year's Eve.

NEWS SUMMARY

MARGARET WARNER: Russian President Boris Yeltsin has resigned. He made the surprise announcement in a nationally televised speech, and said it would take effect immediately. He named Prime Minister Vladimir Putin as acting president. We have this report from Mark Webster of Independent Television News.

MARK WEBSTER: The shocked television announcement came at midday Russian time. President Yeltsin appeared on state-owned TV, sitting in front of a Christmas tree. In somber mood, he told the nation he was resigning immediately. Prime Minister Vladimir Putin would take over his role and presidential elections would take place in three months' time. The outgoing president said he'd deliberately chosen the last day of the outgoing century to hand over power. It was time for new blood, a new man, strong, clever and energetic he said. Even the person he's favored to take control had little warning. A surprised Prime Minister Putin hurriedly cancelled plans to travel with his family to St. Petersburg where he'd made arrangements to celebrate the new year with relatives and friends. Instead, he is now moving into the President's quarters inside the Kremlin. Putin, the one time head of Russia's security service, inherits a crime-ridden country, economically weak and diplomatically isolated. But the war in Chechnya has won him domestic popularity. The people are behind him even though the West has criticized Russia for attacking civilians. "Yeltsin should have left a long time ago," said this man. "The country needs changes, not a person who knows only how to drink champagne." The Yeltsin era ended tearfully today with the ex-president apologizing to his people. He wished to say sorry to the citizens of Russia for failing to justify their hopes.

MARGARET WARNER: President Clinton had words of praise for Yeltsin after hearing the news. He spoke at the White House.

PRESIDENT CLINTON: I liked him because I think he genuinely deplored communism. He lived with it. He saw it, and he believed that democracy was the best system. I think it was in every fiber of his being. And we had our arguments, we had our fights; we had our genuine disagreements about our national interests from time to time. But I think that the Russian people are well served to have a leader who honestly believes that their votes ought to determine who is running the show in Russia and what the future direction of the country should be.

MARGARET WARNER: The week-long Indian Airlines hostage drama ended today, after India agreed to grant some of the hijackers' demands. The five gunmen who had seized the plane were allowed to leave the airport tarmac in Kandahar, Afghanistan. They took with them three Kashmiri militants, whom India had released from jail and flown to the site of the standoff. The hijackers had originally demanded the release of 35 jailed militants. The 155 hostages were then helped off the captive plane, and flown to New Delhi. Leaders of Afghanistan's ruling Taliban militia said the hijackers had 10 hours to get out of the country, and that soldiers would pursue them after that. An Algerian man living in New York was ordered held without bail today, after being charged with planning to help another Algerian man violate federal explosives laws. Federal prosecutors charged Abdel Ghani-- who was arrested yesterday-- with trying to help Ahmed Ressam, who was arrested earlier this month at a border crossing in Washington State. Ressam was carrying bomb materials in his car. Ghani did not enter a plea in court today. New Year's celebrations began their march around the world today. The first light of the year 2000 appeared shortly after 5:30 A.M. on tiny Millennium Island. It's part of the Kiribati archipelago in the South Pacific. Islanders greeted the sunrise with prayer services and traditional dances. In Sydney, Australia, nearly one million revelers watched a massive fireworks display that bathed the harbor's famous bridge and opera house in white light. Celebrants in Beijing were treated to a New Year's production that featured fireworks and dancing. The Pentagon kept a close watch today on its installations worldwide. A member of the military's Y2K task force said the change to the millennium seemed to be going smoothly so far, but he added this.

OFFICIAL: I think as a caution, though, that I should mention that year 2000 in our experience is not always manifest itself within the first minutes or hours following a rollover event, but rather could be hours or days or weeks from now in terms of manifesting itself, and we'll be diligent not only over this weekend but the coming weeks as well in attempting to determine whether we are seeing problems develop.

MARGARET WARNER: The United States formally handed over the Panama Canal to the government of Panama. Thousands of flag-waving Panamanians broke through security lines after the handover ceremony. The transfer fulfilled a 1977 treaty signed by President Carter. We'll have more on the future of Panama and the Canal right after the News Summary. Former U.S. Attorney General Elliot Richardson has died. He resigned that post in 1973, in a showdown with President Richard Nixon that was dubbed the Saturday Night Massacre. Richardson quit rather than obey Nixon's order to fire Watergate prosecutor Archibald Cox. Archibald was fired anyway by Acting Attorney General Robert Bork. Richardson also had served as Secretary of Defense and U.S. Ambassador to Britain. He suffered a cerebral hemorrhage earlier this week and died today in a Boston hospital. He was 79. On Wall Street today, the exchanges closed early for the holiday, after morning trading that boosted key indexes to record levels. The Dow Jones Industrial Average climbed 44 points to an all-time high of 11,497. The NASDAQ Index was up 32, to close at a record high of 4069. That's it for the News Summary tonight. Now it's on to: Panama after today's handover of the Canal; Amazon. Com; a second look at a different drummer; and a millennium essay.

FOCUS - CHANGING OF THE GUARD

MARGARET WARNER: Major changes ahead for Panama. Correspondent Tom Bearden was there recently and prepared this report.

TOM BEARDEN: At noon today, the U.S.-built Panama Canal, for decades considered a strategic cornerstone for U.S. and foreign policy, became Panama's Canal.

Roberto Eisenmann s a prominent businessman and former newspaper publisher.

TOM BEARDEN: Did you ever think this day would come, and come in this

form, a peaceful transfer?"

ROBERTO EISENMANN: No. No. I...we were all here in this country born with a desire, with a hope that it would happen. But I have to accept I never thought I would see it my lifetime. And as I'm seeing it, such a peaceful transfer with the majority of this country pro-Yankee, pro-American, it's just too good to be true.

TOM BEARDEN: A peaceful transfer seemed very far away back in the 1960's and 70's, when Panamanians rioted in the streets protesting American sovereignty over the canal and the zone that surrounded it. Panamanian Dictator Omar Torrijos threatened to blow up the canal if the U.S. didn't get out. After protracted negotiations, President Jimmy Carter signed a treaty with Torrijos in 1977, setting up a process whereby Panama gradually assumed operational control of the canal, eventually leading to a complete U.S. pullout. The treaty was highly controversial. The Senate ratified it by only a single vote. But the agreement didn't end the long history of U.S. intervention in Panamanian affairs. In 1989, the U.S. sent 27,000 troops to arrest strongman General Manuel Noriega after two U.S. grand juries indicted him for racketeering, drug trafficking, and money-laundering. Noriega was tried and convicted in a U.S. court, and is serving a prison sentence in the United States. But even though it's been 20 years since the Carter-Torrijos Treaty, the canal remains a passionate issue in U.S. politics. That's because it holds a unique place in American history. It is as much a symbol of the emergence of America as a world power as it is a waterway. Using both spades and steam shovels, Americans cut through the spine of the continent between 1904 and 1914, creating one of the world's engineering marvels...a system of locks that raises ships 85 feet above sea level to a vast manmade lake, then returns them to sea level on the other side. In the process, President Teddy Roosevelt practically created the country of Panama by helping the former Columbian province gain independence. Even today some Republicans believe the U.S. has made a serious mistake in giving it all up. Congressman Bob Barr of Georgia.

REP. BOB BARR: This is a momentous foreign policy and international security issue. And it's happening without any input from the American people, any education of the American people, any understanding on the part of a large segment of the U.S. population. And yet we are giving away one of the most important national security and international commerce institutions in the world.

TOM BEARDEN: Barr doesn't doubt that the Panamanians can operate the canal from a technical standpoint...Panamanians have dominated its workforce for more than a decade. He's worried about who will actually control it. Barr and others point to a contract that Panama signed with the Panama Ports Company to operate two ports, one on either end of the canal. Panama Ports is a subsidiary of Hutchinson-Whampoa, a Hong Kong company which Barr says has close ties with the communist Chinese People's

Liberation Army.

REP. BOB BARR: It's a classic example of how they operate. They move in fairly slowly, pass a lot of money around, bring their people in and get them into positions of influence. They're not afraid to pass money under the table to secure contracts such as we believe Hutchinson -Whampoa did in this particular case.

TOM BEARDEN: Barr believes the Chinese will have a lot to say about the sequencing of ships through the canal, including U.S. warships, which have always had precedence in time of war.

REP. BOB BARR: I think we've made a tremendous blunder here. And that will come back to haunt us in years ahead as we see diminished U.S. influence in that part of the world and increased communist Chinese influence in that part of the world.

TOM BEARDEN: Alberto Aleman heads the Panama Canal Commission, a joint U.S.-Panamanian agency that has been running the canal since 1979. He rejects Barr's assertion that the Chinese could control canal traffic.

ALBERTO ALEMAN: That is completely and absolutely false. The only institution that will have and have today and will have in the future, full and complete control of all of the movements in canal waters, even more about the canal because it includes all the ports, it includes our anchorage facilities and anything that moves in canal waters, we are the only ones who have complete and total control.

TOM BEARDEN: Mark Falcoff is a resident scholar at the American Enterprise Institute and has written a book about the Panama Canal transition.

MARK FALCOFF: The fuss that's been raised about this has to do with the fact that since Hutchinson-Wampoa is a Hong Kong-based corporation, its relationship with the People's Republic of China must be something more than platonic. And I'm sure it is. But that's a very long jump to go from there as to say the canal's going to be in the hands of the People's Liberation Army. The way I always feel about it is that Fort Benning, Georgia is a lot closer to Panama than is the People's Republic of China. And I haven't any doubt that if either the People's Republic of China, Hutchinson-Whampoa or the government of Panama try anything imprudent, they would wake up breakfasting with the 82nd Airborne.

TOM BEARDEN: Some observers believe the larger threat to the canal's future lies in whether Panama can insulate its operation from the vagaries of domestic politics. Panama is both a first and third world country, with a vast disparity in income between rich and poor. Panama City has a downtown full of skyscrapers...and dreadfully poor barrios in their shadow. Some Panamanians have long believed that if they controlled the canal, its revenue could lift the country out of poverty overnight...that in fact one of the reasons the United States became a superpower is because it controlled the canal. The reality is somewhat different. The locks and dams are 85 years old, and require constant maintenance. The channels mustbe dredged to prevent their filling up with silt. The U.S. operated the canal on a break-even basis...but expenses often exceeded revenue. The difference was made up by direct congressional appropriations. Falcoff is worried that future Panamanian administrations will be tempted to tap canal revenue for non-canal purposes.

MARK FALCOFF: I think we all agree that they're perfectly capable of running it as well or better than the existing arrangements. The concern has more to do with insulating the canal from politics. And although there are now some elaborate laws on the books in Panama which apparently assure this, nobody's going to believe it until they see it because of the way public facilities elsewhere in Panama have been run in the past as basically employment agencies for the ruling party.

ROBERTO EISENMANN: I think we've covered the Panama Canal with enough legal framework to avoid that. The Panama Canal laws have been included in our Constitution. It has constitutional hierarchy. And the Canal has total independence financially from the main government.

TOM BEARDEN: Poverty poses a physical as well as a political threat to the future of the canal. When the land around the canal reverted several years ago, squatters who practice slash and burn agriculture moved in -- so did extractive industries. When vegetation that anchors the soil is destroyed, silt flowing into the canal increases dramatically. Aleman says the government is working on the problem.

ALBERTO ALEMAN: Making the people who live out of the water sheds to understand their responsibilities, getting new programs to change some of the things on the way they are living -- so that they instead of doing cattle farming, they should go into a type of crops -- those are part of the programs we have put into place.

MARK FALCOFF: I have to be honest. I'm pessimistic. Most of the environmental reports that I've read and most of the people I've talked to on Inter American and Environmental Commission that have worked in Panama are very, very concerned about the environmental future of the Chagres River watershed.

TOM BEARDEN: The Panama Canal Commission is exploring the idea of increasing the canal's water supply by building new dams and reservoirs. The longer-term challenge is to keep the canal economically viable. A billion-dollar modernization program is now underway. The Gaillard Cut, the deepest excavation on the route, is being widened to allow ships to pass through simultaneously instead of single-file. But shippers want to build larger ships to reduce costs. Many modern container ships only clear the sides of the canal's locks by two feet on either side, and supertankers are already too large to use the canal. Building new locks would be enormously expensive, perhaps prohibitively so, because higher tolls to pay for them might drive shippers to use alternative routes. The large container ships already pay over $100,000 in tolls per trip. Taking control of the canal also raises another concern for Panama. It will have to find some way to compensate for the loss of some $350 million a year from the U.S. military. There are fewer than two dozen American military personnel in Panama today, down from a high of ten thousand. With them went thousands of jobs...from boot polishing to secretarial work...and they're jobs that pay far more than the Panamanian civilian economy. Carlos Worrel is a cook supervisor at the Corazol Base near Panama City. He and the other kitchen workers make $5.85 an hour now, but they know they won't be able to find work at anywhere near that outside. The average wage in Panama is about a dollar an hour. Worrel hopes to open his own restaurant.

CARLOS WORREL: We'll try to get a group of friends that are willing to put together so we can open up our business.

TOM BEARDEN: What do you think about the U.S. military leaving?

CARLOS WORREL: Very sad about it. Real sad about it. I wish they could stay and help the Panamanians people that was working for them all these years. A lot of people still without a job right now.

JUAN CARLOS NAVARRO, Mayor of Panama City: I think our biggest problem as a nation is to create jobs and to create economic opportunity.

TOM BEARDEN: Juan Carlos Navarro is the major of Panama City.

JUAN CARLOS NAVARRO: Yes, it has been very difficult to provide jobs for the workers who are leaving the US military installations, but let me tell you we'll finally be free and sovereign over our entire territory is an exquisite moment for Panamanian history and I think that this gives us the willpower to charge ahead and to create economical opportunity and employment that can compensate for this momentary loss.

TOM BEARDEN: In fact, Navarro and others see the handover as the seed of an economic renaissance. For Panama did not just gain the canal.. but also 365-thousand acres land that surrounds it, and about 7,000 buildings on former U.S. military bases. A former Air Force base has already been converted into a domestic airport for Panama City...and its housing has been sold to private citizens who are gentrifying

the area. Developing tourism is a high priority. The former U.S. School of the Americas...a controversial training center for Latin American military...is being rebuilt as a luxury hotel. Construction is underway on the causeway the U.S. soldiers were using as a track. Plans are to build several hotels and a shopping mall to cater to tourists whose cruse ships Panama hopes to lure to a new port facility. In the rainforest near the canal, a former U.S. radar tower has been converted into an ecotourism resort. The "Canopy Tower" sits on the top of a hill, and gives visitors the chance to view wildlife from a vantage point above the rainforest. But Falcoff says not all of the former U.S. properties have fared so well. He says the Trans-Panama Railroad is a case in point. The U.S. turned over the railroad in 1979, only to see the Panamanians drain it of resources.

MARK FALCOFF: The Panamanian army took over that agency. And they took all the money that was to be used to run the railroad and put their relatives on the agency's payroll. They spent enormous amounts of money on consulting firms. The actual rolling stock was neglected. In fact, the railroad virtually ceased to exist as a railroad.

TOM BEARDEN: That is about to change. Panama sold the railroad to a private U.S. company which is preparing to restore rail service. There are several thousand acres that the Panamanians don't want to accept from the U.S....old firing ranges which contain unexploded ordnance.

JUAN CARLOS NAVARRO: I think it is unconscionable for the U.S. to come to Panama, use the military bases for a century and then walk away from them leaving behind a problem that you know we cannot solve and pay for on our own. Therefore I think it is the U.S.'s moral obligation to clean up those military areas which you dirtied and you polluted while you were here.

TOM BEARDEN: Col. David Hunt is in charge of the U.S. handover.

COL. DAVID HUNT: The U.S. Government has done everything that the treaty required in cleaning up the ranges. There are 7600 acres that we have been unable to clean up. And they're in three discreet areas. They're very well defined. Panama knows where they are. We know where they are. They need to be preserved until the day that the technology is sufficient to clean them up completely without doing irreparable damage to the environment.

TOM BEARDEN: While the firing range issue is likely to be a bone of contention for years to come, most Panamanians look on the departure of the U.S. with mixed emotions.

ROBERTO EISENMANN: I sometimes compare this to a twenty-year old boy who has lived all his life with an overpowering father, and suddenly decides it's time to leave home and go independent. And he sits with his father and makes the deal and says next week I'm leaving the house, and so forth. At the end of the conversation he goes back to his room and he worries sick, 'will I make it? I wonder if I'll make it. What happens if I don't make it? How do I come back home?' And the father in the other room is thinking, 'I wonder if he'll make it? How can I help him without helping him?' etc. That's the point we are in right now in the US and in Panama.

TOM BEARDEN: But Juan Carlos Navarro isn't worried; he's brimming with hope. On this day the mayor was participating in a birthday celebration for the Curundo Barrio. He says that even in this poor neighborhood, people are looking forward to independence.

JUAN CARLOS NAVARRO: I think that we're full of optimism. I feel very, very happy that my country's finally becoming whole again, that we're going to be a sovereign, a free nation, that we're not going to have any more foreign troops in Panama, and I think that the future is a challenge, but the Panamanian people are undoubtedly up to it. The future belongs to us. It's just a matter of what we do with it.

TOM BEARDEN: That future officially began today at noon.

MARGARET WARNER: Still to come on the NewsHour tonight, a company reshapes business on the Internet, another look at a unique musician, and the millennium essay.

FOCUS - AMAZON.COM

MARGARET WARNER: Next, Amazon.Com. The company continues to epitomize the dazzling growth of the Internet economy. Earlier this year, correspondent Paul Solomon profiled the company and its founder who was just named "Time" magazine's Person of the Year.

PAUL SOLMAN: "Amazon.com" -- you type in these words on the Internet and go to a website where you can buy almost any book imaginable. Once a pioneer, Amazon has become a symbol of the possibilities and pitfalls of cyberspace economics. Recently, the pitfalls have been getting many of the headlines. AAmazon.bom,@ one journal announced; the firm has yet to show a penny in profits, another pointed out; and on the NASDAQ, the stock exchange for America's fast-growing firms, Amazon=s share price has been on a rocky ride for months now. Is it a sign that the Internet stock craze is over, or just another bump on the road to future riches, since Amazon's shares were still valuable enough, last we looked, to buy all of Borders and Barnes & Noble several times over and still have billions of dollars left to play with? Maybe the way to start is by seeing how Amazon.com got to be such a phenomenon in the first place. One reason; the firm's founder, Jeffrey Bezos, cover boy for Amazon, for Internet commerce in general, for what's been called "the new economics." Lionized in print, Bezos works on a dingy street in Seattle and his company remains immune to profits. But when we made the trek to Amazon, we found ourselves playing ball with the firm=s founder.

If you buy into Bezos' quirkiness, you begin to think he prepares for the future in ways the rest of us don't.

PAUL SOLMAN: What is this?

JEFFREY BEZOS: This is my World Trade Center escape kit. It's a -

PAUL SOLMAN: World Trade Center escape kit.

JEFFREY BEZOS: -- a flashlight and, you know, a honking Swiss Army knife. It even has pliers.

PAUL SOLMAN: He keeps it on hand because when New York's World Trade Center was bombed a few years ago, folks were stuck in the elevators.

JEFFREY BEZOS: And it turned out if you'd had this simple tool you could have carved your way out of those elevators.

PAUL SOLMAN: Carved your way out of the elevators?

JEFFREY BEZOS: Yes. No Problem. So I got my whole family these World Trade Center escape kits. I have this slime dog.

PAUL SOLMAN: Now, to some, Amazon's leader seems, well, a bit off the wall.

JEFFREY BEZOS: And if you throw it against the wall --

PAUL SOLMAN: Look beyond the levity, though, and Bezos' business model for Internet commerce is not only no joke but remarkably resilient. Amazon's main goal has been simple: to cut out the middle man - the expensive American bookstore. Amazon offers more titles than any store could stock, lower prices, customized come-ons when you first visit its website.

JEFFREY BEZOS: It says, "Welcome back Paul. Check our your book recommendations." This is actually my favorite part where it says, "If you're not Paul, click here." (laughing)

PAUL SOLMAN: With recommendations, customer reviews, its own bestseller list, Amazon hooks book buyers at home; even book writers have become dependent on it. Cassandra Tate is a friend of mine who happens to live in Seattle. She's just written a history of the anti-tobacco movement, "Cigarette Wars." Amazon, as it happens, keeps its own, ever-changing list of where any title ranks among the million plus books Amazon sells. Tate, like many an author, keeps track of her ranking.

CASSANDRA TATE: The last time I checked my Amazon.com sales rank, which was last week, I was number sixty-eight thousand something, something. What's happening here? I'm now down to 77,474. This is extraordinarily demoralizing.

PAUL SOLMAN: So, Amazon boasts more information than a physical bookstore, more convenience, and quicker delivery to whomever you want, from low-rent warehouses. Plus there's a last, less obvious edge that may actually be the key not only to Amazon but to Internet commerce in general: It's called cash flow. You see, when you or I order a book from Amazon, it gets money from the credit card company within two or three days. But Amazon has 46 days to pay the publisher for that same book. So the fewer days Amazon can keep the book hanging around in its inventory, the longer it gets to keep and use our cash. In fact, this is a goal of any physical business: to get the goods out the door - to turn the inventory - as fast as possible. The book business was a sitting duck for E commerce, because printing firms and book distributors already stock the industry's inventory. So a firm like Amazon could rely on them to do most of its warehousing for it. Thus, Amazon can keep so few books in its own shipping plants that it clears them out an amazing 20 times a year, versus three times a year for a typical bookstore, where the average book sits around for four months, gathering dusk, taking up pricey space like here at Borders, and already paid for by the bookstore.

JEFFREY BEZOS: So as a result, what happens is our cash flow is much better than the cash flow that you would see in a place that turns its inventory three times a year, and that's abig advantage in any kind of economic model.

PAUL SOLMAN: Stock analyst Michael Mauboussin is an Amazon enthusiast.

MICHAEL MAUBOUSSIN, Analyst, Credit Suisse First Boston: So they get money today, and they pay their bills down the road, which is always a good thing for a business. And most businesses are the other way around, where they pay their bills first and then get their cash later.

PAUL SOLMAN: Is that the genius of this operation?

MICHAEL MAUBOUSSIN: Yeah, I think that's a big part of it, and we think that is precisely what the stock market's picking up on.

PAUL SOLMAN: Now skeptics have long claimed Amazon's stock is wildly overvalued because the firm has no profits. But analysts like Mauboussin have had a good comeback: "profits" are just an accounting technicality. The argument is that when it comes to the actual cost of making a sale in cyberspace, Amazon generates cash, then spends it on investments in its future: software and advertising. In physical firms, more sales mean more costs: more employees, more machinery, more bricks and mortar. By contrast, each new "on-line" sale generates cash up front, but barely raises investment expenses at all.

PAUL SOLMAN: Again, stock analyst Michael Mauboussin.

MICHAEL MAUBOUSSIN: And even if you look at a Wal-Mart or any other sort of traditional company, if they want to grow rapidly, they have to build lots of stores, and they have to have lots of inventory. And Amazon will be able to grow at a much more rapid rate with a much more moderate investment rate than most businesses.

PAUL SOLMAN: Now, you don't have to be a fan of Jeffrey Bezos to think he's a retail revolutionary. Just as, a century ago, the technologies of railroad shipping and telegraph ordering brought us the department store, with its windows of wonders, enabled Sears to pioneer the shopping catalogue, so Bezos has harnessed digital technology to go the catalogue and physical store one better. And he thinks if stores can't come up with fun reasons to visit them, they simply won't survive.

JEFFREY BEZOS: To put it in the extremes, the category that's most threatened is the strip mall because that's no fun.

PAUL SOLMAN: Bezos and I also went to Seattle's fabled independent, Elliott Bay Books, recently sold. I asked customers how much they used to buy here but now buy through Amazon.

CUSTOMER: About 50 percent.

PAUL SOLMAN: 50 percent.

CUSTOMER: Yes.

PAUL SOLMAN: So you must be somewhat ambivalent then.

CUSTOMER: Well, I don't know if that's it. I'd like to have them both. I mean, from a consumer's standpoint, I'd like to.

PAUL SOLMAN: But maybe you won't.

CUSTOMER: That's what concerns me, yes.

PAUL SOLMAN: Author Helen Fremont was at Elliot Bay for a reading, signing her new book, "After Long Silence."

HELEN FREMONT: Well, I have to make a confession. I actually did buy on Amazon.com.

PAUL SOLMAN: What did you buy?

HELEN FREMONT: It was actually a friend's book and - it's Grace Dane Mazur's book. So I have bought at Amazon.com, but I'm ashamed of it.

PAUL SOLMAN: You're ashamed, so why did you buy her book?

HELEN FREMONT: Well, it was easy, it was convenient, and I was online and I could hit a button, and, poof, I got a book.

PAUL SOLMAN: It all has Elliott Bay's manager, Tracy Taylor, depressed enough that she first balked at an interview.

TRACY TAYLOR: Well, it's hard for me to talk about it. I've worked here for nine years; our bookstore has just been sold; and a lot of that is due to competition and not necessarily just competition from Amazon, but it is Internet competition. I'm saying goodbye to somebody who has owned this bookstore for 26 years, that I have a very, very strong tie to, and I do believe that part of that is because of Amazon.

PAUL SOLMAN: Okay, so Amazon's digital dexterity threatens traditional bookstores. But, does it spell their demise? Now to Alvin Domnitz of the American Booksellers Association, who thinks the death of independent bookstores like Manhattan's "A Different Light" - the death of all physical stores - has been greatly exaggerated.

ALVIN DOMNITZ: There are I think going to be people left in this world who still want to touch, and that physical need to be in a place, to be with other people, we are social beings, is going to be met by places they can go to be with those people.

PAUL SOLMAN: But just in case, the ABA's Domnitz has organized his booksellers to compete head-on with Amazon in cyberspace.

ALVIN DOMNITZ: There's a new project from the ABA which is called Book Sense, and booksense.com, and it's going to provide stores exactly like this with a very, very equal footing to compete on the Internet with any other Internet seller.

PAUL SOLMAN: Threats to Amazon may help explain why its stock swooned in the spring. Even individuals, it turns out, can now compete with it. In Iowa, Lyle and Linda Bowlin do their own shipping, contract out credit card billing and the like, charge less than Amazon. But the biggest threat may come from the biggest rivals, as we and Jeffrey Bezos had discovered, at Elliott Bay Books, when a long-time Amazon customer interrupted our lunch to say that just the night before he had finally checked out Barnes and Noble.com.

CUSTOMER: I ended up using Barnes and Noble, which was really difficult because I've got a magnet on my refrigerator from Amazon, I've got Amazon post-its. But I think it's very true that the customer does look ultimately for the things that - the thing that matter are price and speed.

PAUL SOLMAN: And shipping was crucial to you.

CUSTOMER: And shipping was crucial.

PAUL SOLMAN: Barnes and Noble.com's Jonathan Bulkley cites a more dramatic example:

JONATHAN BULKLEY: When the Monica book came out, it was interesting, we had stock to ship in 24 hours. Amazon initially had stock to ship in 24 hours, but they ran out, so they had planned poorly, and their shipping went to two to three weeks on the Monica books after about eight or nine hours of being online.

PAUL SOLMAN: There's an easy fix for this problem, of course, and Amazon's doing it: build more warehouses to stock more inventory. But such costs will hurt cash flow, as Amazon pays a publishers for more books, which it will have to house longer, in expensive bricks and mortar. And this also makes investors worry that many of Amazon's so-called "investments," like warehouses, software upgrades, and advertising all over the Internet, are really just expenses, which rise with sales, just like any physical business. So when Amazon announced it lost more money than ever last quarter, while sales growth slowed, no wonder its stock swooned. And no wonder, perhaps, that when we were at Amazon, Bezos was already intent on branching out from the book business.

JEFFREY BEZOS: There's a part of our website called "shop the web" where we have partnered with a large number of merchants to make their products available to our customers.

PAUL SOLMAN: So for example?

JEFFREY BEZOS: So if you come down and you come in to shop the web, and here you can see clothing and accessories, electronics, computers.

PAUL SOLMAN: Oh, I see. I haven't ever been to this site.

PAUL SOLMAN: In fact, Amazon has just opened up an auction service, no inventory at all, bought a stake in and partnered with Sotheby's, with an electronic pet shop, a home-delivery grocery website, and helped launch Drugstore.com, whose cyber CEO is as gung-ho about the new economics as Bezos.

PETER NEUPERT, CEO, Drugstore.com: I can do a better job than in the real world. I can have three and four times the products of a normal drugstore, so I can improve selection for customers. I can add information in ways that real world bricks and mortar companies can't do.

PAUL SOLMAN: In the end then, Amazon may want to be the Internet store, the Wal-Mart of the web, or simply the innovator which transfers its potent brand name and technology to a host of new ventures, thus cashing in on its advantages while spreading its bets. Investors, meanwhile, are constantly reassessing Amazon's prospects for future profits, buying and selling its stock accordingly. And since those prospects change so quickly, so does the price of Amazon's stock. In fact, Jeffrey Bezos has lost, on paper, and made, billions of dollars while we were doing this piece; doesn't seem to change his routine one iota.

PAUL SOLMAN: And literally you do that every day.

JEFFREY BEZOS: I try to take one every day.

PAUL SOLMAN: Take one picture as a record of the early years at Amazon.com, which could wind up depicting the glories of the new economics in the age of cyberspace, or simply chronicling the physical frustrations of business as usual as we move into yet another century.

PAUL SOLMAN: Well, wait, they're not sticking.

ENCORE - A DIFFERENT DRUMMER

MARGARET WARNER: Now in this encore report, producer Jeff Brown brings us the story of a unique musician.

JEFFREY BROWN: Evelyn Glennie can look like a rock drummer, pounding away under the spotlight. But this is a symphony concert hall, and Evelyn Glennie is a classical music star. At age 33, Glennie is the world's only full-time percussion soloist.

EVELYN GLENNIE: This is all -

JEFFREY BROWN: Born on a Scottish farm, she is today lauded by the critics wherever she goes. And she goes constantly, with enough equipment to keep several shipping companies in business. Composers are writing new works for her. Audiences seem to be thrilled. Conductor Leonard Slatkin.

LEONARD SLATKIN: People have always been attracted to drums. Every person I've ever talked to said, "I want to play the drums." Evelyn now shows you that percussion is more than drums, and it's more than just being able to keep time. It's a whole world of colors, and vitality and energy, and subtlety that perhaps most people didn't know about before. She literally has single- handedly put the concept of a solo percussionist on the map.

JEFFREY BROWN: The concept of a percussion festival was put on the map in Washington recently by Glennie and Slatkin, along with the National Symphony and the group Nexus. Three days, more than 150 different percussion instruments -- new music, much of it quite unusual -- unless, of course, you consider a concerto for snare drum normal fare.

EVELYN GLENNIE: The thing about playing percussion is that you can create all these emotions that can be sometimes beautiful, sometimes really ugly, or sometimes sweet, sometimes as big as King Kong and so on. And so there can be a real riot out there, or it can be so refined.

JEFFREY BROWN: Onstage, Glennie is in constant motion. She plays traditional instruments-- drums, marimba, vibraphone-- but also a slew of lesser-known, even never-known concoctions, all within her broad definition of percussion.

EVELYN GLENNIE: Anything you strike, anything you shake or rattle, or just anything that can be picked up, and you can create a sound.

JEFFREY BROWN: And you can make them up as you go.

EVELYN GLENNIE: You can make them up, absolutely. I subscribe to things like the "Experimental Music Instruments Magazine" and things like that, or journals, and it's so interesting for me to see the shapes and the materials, and all of that, where I can get ideas for my own little things, you know. The first thing I do whenever I enter a room is have a really good look around and, you know, if there's anything I think could be of interest. You know, it'll probably disappear, maybe, but -- no, I'm not saying that. (Laughs)

JEFFREY BROWN: By hook or by crook, Glennie says she's collected more than 1,000 instruments. There's the homemade, nothing but a twig, a string, and a hollow wooden cylinder.

EVELYN GLENNIE: You hear that?

JEFFREY BROWN: Yes. Then there's the ready-made, an old-fashioned mechanical siren. (Siren wailing)

EVELYN GLENNIE: A sound like that, difficult to stop.

JEFFREY BROWN: This is an instrument? But this is an instrument? Or this is a siren?

EVELYN GLENNIE: (Laughs)

JEFFREY BROWN: And there's the custom-made, a rather unique-sounding contraption called a botanka.

EVELYN GLENNIE: It all began when I had my garden dug up and there were some -- they were laying pipes, plastic pipes or something, and they had some piping left over and I thought, ooh. So I asked an instrument maker to create two octaves of this instrument, which he did. So the sound was like -

JEFFREY BROWN: Using that very tubing?

EVELYN GLENNIE: Not that very tubing. It was a bit smelly. But, no -- but the sound of the instrument made a kind of boink-boink sound, and so we came out with the name botanka.

JEFFREY BROWN: The piece for botanka-- and many other things-- is called "Gorilla in a Cage," by composer Stewart Wallace.

STEWART WALLACE: She really has in every nook and cranny of her house and her studio, there's something to play. We would go around the room and she would hit something, or she would play something, and I would say, "Well, what happens if you scrape it?" Or "What happens if you bang it here?" So I really got a chance to see how she played with her instruments, too, in the relationship, and then I think the challenge was to choose. It was a big problem. I mean, there's so many things that she can play.

JEFFREY BROWN: But beyond the number of instruments, beyond the new music, is the remarkable fact that Glennie plays at all. From age 8 to 12, Glennie lost most of her hearing from nerve damage. She is profoundly deaf; that is, she hears some sounds, but the quality is extremely poor.

EVELYN GLENNIE: I suppose I don't hear things, but I listen, if you know what I mean. And there is a big difference between hearing and listening. So it's like a conversation, you know. When you speak to someone, it's one on one, and that's exactly how I play.

JEFFREY BROWN: In fact, in conversation, Glennie reads lips. In performance, she plays barefoot, and hears her own instrument and the orchestra by feeling vibrations through the floor and in her own body.

EVELYN GLENNIE: When a particular sound is made, you can truly, truly feel that in certain parts of your body, and you just have to be so unbelievably sensitive to begin to translate certain sounds.

JEFFREY BROWN: But learning to translate sounds, she says, was not easy.

EVELYN GLENNIE: Before my teen years, I was losing my hearing pretty quickly, and I was getting very, very angry. I was beginning to become an angry person because of that. And my teacher, you know, he said, "Evelyn just put your hand on the ball of the tympani, on the copper ball," and this I did and, you know, I felt something, and so we would go on like that. And then suddenly my hands would be placed on the thin walls of the room, and he would tune the two drums to a very wide interval. And so he would say, "Which drum am I playing?" And I might say, "Oh, the lower drum." "And well, how do you know that?" I said, "Well, I can feel it from here to here." And so he would play the other drum. I said, "Yes, I can tell the difference." And I said, "I can feel that from there to there." And suddenly the intervals would become smaller and smaller, and so the teeny differences were unbelievable.

JEFFREY BROWN: When you say you can feel from there to there, you mean feel somewhere?

EVELYN GLENNIE: Somewhere. I mean, higher sounds are in the higher parts of your body, and low sounds are the lower parts of your body. And so that was the start of all of this kind of truly, truly being involved in the actual sound. (Bagpipes playing)

JEFFREY BROWN: Today, Evelyn Glennie is involved in all kinds of sounds. The newest is the bagpipe, not percussion, just Scottish.

EVELYN GLENNIE: I think that the trait of north-easterners from Scotland is this sheer and utter stubbornness and single-mindedness and, you know, I would desperately try to do this, whatever the cost. So, I think the aim now is to sustain this type of career. It just requires a great deal of imagination.

JEFFREY BROWN: So curiosity, stubbornness, and imagination?

EVELYN GLENNIE: I think so. I think yes, those are the ingredients.

JEFFREY BROWN: And you're a solo percussionist.

EVELYN GLENNIE: Very simple, and you don't even have to enter a practice room.

JEFFREY BROWN: The day we visited, Glennie, conductor Leonard Slatkin, and the National Symphony were indeed practicing, this time a rather familiar tune, Ravel's "Bolero," with Glennie back on a rather familiar instrument. And who would have thought the plain old snare drum would be her favorite?

EVELYN GLENNIE: If I truly had to be stranded on a desert island, then I think the snare drum would be my instrument.

JEFFREY BROWN: Really?

EVELYN GLENNIE: I love the snare drum. Yeah.

JEFFREY BROWN: Just you and the snare drum.

EVELYN GLENNIE: Just me and my snare drum would be fine.

JEFFREY BROWN: Just a young woman and her snare drum. Of course, if you're Evelyn Glennie and you get lonely on that island, you can bring along a conductor, an orchestra, a gang of other drummers, and have your very own percussion festival.

ESSAY - STORIES FOR THE MILLENNIUM

MARGARET WARNER: Finally, a millennium essay from Roger Rosenblatt.

ROGER ROSENBLATT: In the final days of the Warsaw ghetto, the Jews imprisoned there had no doubt that they were going to die. They had seen others taken away to the extermination camps, and they were dying on their own of starvation and disease. Still, in those last days, the people wrote stories: Fragments of autobiography, diary entries, poems, letters, accounts of events. They wrote them on scraps of paper and rolled them into the crevices of the walls of the ghetto. They knew that they were done for. They felt certain that the Nazis had taken over the world; that if their little writings were ever discovered, it would be by the Nazis, who would laugh at their puny efforts and toss the scraps of paper away. Why did they do it? Why bother to tell a story that no one would hear? And whymake the telling of that story their last act on earth? Because it is in us to do so, like a biological fact -- because story-telling is what the human animal does, to progress, to learn to live with one another. Horses run, beavers build dams; people tell stories. Chaucer's pilgrims go back and forth from Canterbury and feel compelled to pass the time by telling tales. The Ancient Mariner, crazy as a loon, grabs the wedding guest and forces him to listen to an incredible yarn. The birth of Jesus, the onset of all of Christianity, is called the greatest story ever told, and it is told several ways. In the Book of Job, the messenger says, "and I only alone am escaped to tell thee," just as Ishmael says at the end of "Moby Dick," says, "and I alone am left to tell the tale." Shakespeare said that life is a story, "a tale told by an idiot." But life the way we live it-is not the tale, but the telling of the tale. There is a story within us, and that story is us, which we tell and we tell until we get it right. In this millennium year, people are making guesses as to what will happen. The only thing certain is that they will make guesses as to what will happen: They'll talk about it, they'll tell stories about it. We like to commend ourselves as a rational species; that lies exposed all the time. But we are a narrative species. Our brains are formed to bind and blend information.

SPOKESPERSON: People on the sidewalk. Oh, Joseph, you know that animal, don't you?

ROGER ROSENBLATT: As children, we learn language to tell stories that are already in us, not the other way around. And we spend the rest of our lives telling, learning, repeating, making sense of stories, which is our way of making sense of us. A law trial, for instance, is a competition of stories. One story is told by the prosecution, one by the defense. The jury chooses which story it likes better. Businesses rely on stories to make money -- stories of former successes and failures direct decisions to buy, sell, merge, expand, downsize, go public. See the story of Big Mac. See the story of the World Wrestling Federation. See the story of Martha Stewart. It's a real good thing. In medicine, the patient tells the story of his or her symptoms. The doctor heeds the story to know what to do. Then the doctor tells another story, of therapy. The doctor tells the patient, this will happen and that will happen, until, one hopes, the story has a happy ending. Everything we do is a story: History, poetry, painting, sports, science, gossip, ourselves, of course. And it is a story told again and again. We tell the same stories over and over, of our strivings for heroism, for honor, for profit, for social progress, and understanding and sympathy and power -- most of all, for love. In one way or another, every story is a love story. Boy meets girl. Boy meets boy. Boy and girl seek bliss. We yearn-- how we yearn-- for improvement. That's what evolution is all about-- refinement, improvement. And evolution itself is a doozie of a story: Little animals beget bigger animals until one emerges with something to say. What do you have to tell me? What do I have to tell you? We stare at each other over the air of the years, and reach to tell the story of a lifetime. We did this thousands of years ago, and, with luck, we will do so thousands of years hence, millennium after millennium, once upon a time. I'm Roger Rosenblatt.

RECAP

MARGARET WARNER: Again the major stories this New Year's Eve. Russian President Yeltsin resigned and named Prime Minister Vladimir Putin as acting president. In the week-long Indian Airlines hijacking ended after Indian freed the militants. The hijackers were allowed to flee and the 155 hostages were flown from Afghanistan to India. We'll see you online and again here Monday evening. Have a great New Year's Eve and Happy New Year as well. I'm Margaret Warner. Thanks for being with us. Good night.