(FORTUNE Magazine) – MANAGING/COVER STORY 44 BRAINPOWER Intellectual capital is becoming corporate America's sharpest competitive weapon. The challenge is to find what you have -- and use it. by Thomas A. Stewart

THE ECONOMY 63 HOW LONG A SLUMP? Skeptics say that once the recession ends (no time soon), it may come back. by Louis S. Richman

BANKING 69 IT'S BANQUET TIME FOR BANKAMERICA The California behemoth dominates a huge market and is hungrily eyeing the 187 million customers now beyond its reach. by Gary Hector

TRAVEL 79 SMART WAYS TO CUT TRAVEL COSTS The trick is to save money without making travel more of a hassle. by Alan Deutschman

ASIA 83 YOU CAN'T GROW IF YOU CAN'T MANAGE Asian businesses are expanding so fast they can't find enough people to run them. by Ford S. Worthy

THE ENVIRONMENT 91 THE BIG MUDDLE IN GREEN MARKETING Companies are making products they claim will spare the environment. Trouble is, the definition of what's good keeps changing. by Jaclyn Fierman

CORPORATE PERFORMANCE 103 IF IT'S HOT, THEY'VE GOT IT Merry-Go-Round knows what young trendsetters wear. (It's not in your closet.) by Susan Caminiti

104 COMPANIES TO WATCH

MANAGING 111 CHAMPIONS OF COMMUNICATION Smart managers stay in touch with employees. It pays off, particularly in tough times. by Faye Rice

MONEY & MARKETS 123 BANKRUPTCY'S SPREADING BLIGHT Companies are failing in record numbers. The system just doesn't work. by Stratford P. Sherman

TECHNOLOGY 138 THE MARVELS OF 'VIRTUAL REALITY' A new technology that can mimic real life offers riveting commercial possibilities. by Gene Bylinsky

TECHNOLOGY 153 THE NEXT WAVE IN CASSETTE TAPES Audiophiles say Sony's DAT is a hot number. But Philips's entry may drown it out. by Andrew Kupfer

INNOVATION 160 PRODUCTS TO WATCH

FORTUNE BOOK EXCERPT 163 THE INSIDE STORY OF THE RISE OF KKR A new book tells how Kohlberg, Kravis, and Roberts created the leading buyout firm -- then fell out.

COMPETITION 175 EUROPE COOKS UP A CEREAL BRAWL Kellogg created the market. Then General Mills, with Nestle's clout, moved in. An object lesson in global marketing. by Christopher Knowlton

SPECIAL REPORT 180 NEW WEAPONS IN THE CRIME WAR Some imaginative ideas may do more to hold down crime than prison has. by Brian Dumaine

191 THE U.S. GUN BUSINESS Which guns are hot, how they're bought, and why they're shot. by Alan Farnham

DEPARTMENTS 4 EDITOR'S DESK

8 INDEX

12 NEWS/TRENDS CEOs seek help on health costs, when Americans work out, investment advice from the Pope, mortgage help as a job benefit, and more.

21 FORTUNE FORECAST Why state budgets are a mess. Plus a table of proposed state tax increases. by Vivian Brownstein

33 PERSONAL INVESTING How six hot hands are playing the stock market now. by John J. Curran

211 FORTUNE PEOPLE Buffett's tuffest critic, Perot on his good luck, Duracell's charged-up CEO, Kravis lassoes Bricklin's spread, and more. by Mark M. Colodny

215 BOOKS & IDEAS Will the European economic model leave U.S. companies eating dust after 1992? by Shawn Tully

221 LETTERS TO FORTUNE

247 KEEPING UP A test for bus drivers, a socially responsible ice cream, and other matters. by Daniel Seligman

THE SERVICE 500 253 SLOUCHING INTO THE 1990s For the eight industry groups represented in the Service 500, the Nineties began the way the Eighties ended -- wretchedly. Profits were down 12% from 1989. And investors were not well served. A cuff from the invisible hand was richly deserved. by Antony J. Michels and Tricia Welsh

260 THE 500 LARGEST SERVICE CORPORATIONS 280 DEFINITIONS AND EXPLANATIONS

280 INDUSTRY MEDIANS

282 ARRIVALS, DEPARTURES, AND MONEY LOSERS

284 ALPHABETICAL INDEX TO THE SERVICE 500

ABOVE: Polaroid CEO Mac Booth, photographed by John Abbott with the output of the Helios medical imaging system his company developed in record time.

COVER: Abbott also shot this picture of Vagelos, at Merck's corporate headquarters in Rahway, New Jersey.