Want Your Brand to Explode? Focus on Your Fans

There’s been a conventional school of thought that tells marketers to go after new potential customers. Track them down, inundate them with reasons to buy your product and push media spend against this objective is the only way to grow. However, there’s another approach that involves a different methodology altogether: focusing on what you’ve got, including your employees. If you focus on making your fans your superfans then your brand will flourish in a way that feels organic and is genuinely sustainable.

La Croix, the famed sparkling water brand took this approach to enviable success. Through Instagram, they noticed they had some fans: students and writers who were likely to stay up all night, drinking La Croix and studying or writing late into the night. They sent their existing fans cases of free product, which quickly converted them into raving fans, keen to tell their friends all about the wonder of La Croix. Such word of mouth marketing is more powerful and potent than any influencer post. And best of all, it’s replicable and sustainable. Here are 5 tips for getting your strategy right. Here’s how to get it right.

1. Find Your Fans

It starts by honing in on who your superfans are. Follow them on social media, find what they’re posting, befriend them and invite them into your brand. Notice how they are interacting with your brand and be ready to pivot your marketing strategy towards that. For example, Yelp noticed their superfans deemed themselves to be food critics, so started treating them accordingly. They even call them ‘Yelp Elites’.   Many brands give their superfans an affectionate handle, like Zipcar’s Zipsters or the Grateful Dead’s Deadheads.

2. Invite Them To Participate

Friendships are built on trust. That means sparking a dialogue and involving your fans in decisions. This can go deeper than offering freebies, you can ask them about your product pipeline, packaging ideas or even what other ideas they might have for your brand. Make it clear how they can and should engage with your brand.

3. Own Your Mistakes

When you make a mistake (and if you’re committed to fearless marketing, you will), don’t hide it. Own it, apologize for it and, just like a friend, ask for a second chance. This can be in the form of a public acknowledgement on social media or a letter to your fans. Naked Wines do a brilliant job of this with the email they send to fans who unsubscribe. They use language like ‘Where did we go wrong?’ ‘We’re guessing it was us’ and when they ask for feedback, the request is “Give it to us straight’. The verbiage feels intimate, friendly and unlike the usual ‘your feedback is important to us’, it actually motivates you to respond.

4. Give Them Exclusive Access

Like most friendships, things get better the more time you spend together. If someone is spending great amounts of time with your brand, reward them for it. Again, this can go beyond freebies; think about giving them insider access to things that are normally off limits. This could be an exclusive event, or even inviting them to see your work in action. Beverage company Innocent Smoothies invite 6 superfans to their annual AGM (A Grown-Up Meeting) where the upcoming product pipeline is reviewed.

5. Shine The Spotlight

While extrinsic rewards, like freebies, are important, intrinsic ones are just as meaningful. This means saying thank you to your fans, publicly acknowledging what they mean to you and heroing your fans who are doing an exemplary job of upholding and espousing your community. Tribute them with a profile on your social media, publicly acknowledge them on your blog or send them a personalized note from your team.

Three Ways Business Leaders Can Use AI Right Now

AI has enormous potential to reshape business, as most business leaders recognize. In a global study published by the Boston Consulting Group and MIT Sloan Management Review, 84 percent of the 3,000 business leaders interviewed expect AI to give them a competitive advantage.

Despite the anticipation, though, AI is still vastly underutilized in many of today’s industries. Only 23 percent of the leaders surveyed had already incorporated AI into their business models. This could put businesses that aren’t utilizing AI at a huge disadvantage compared to companies that have already adopted the technology and excelled at its integration.

Each industry has unique uses for any technology, including artificial intelligence. By understanding those uses and investing in the appropriate AI solutions, businesses that lag behind can still catch up in time to participate in the AI revolution.

Three Techniques For Any Business To Utilize AI

Much of what we hear about AI is presented in a futuristic manner, but the technology is already becoming a vital part of numerous industries. While a majority of business leaders have yet to implement it, many others are already taking advantage of the edge that AI gives them in several different ways.

1. Using anomaly detection to monitor equipment health

The focus of maintenance has always been prevention. Routine, often redundant, service schedules have been necessary for companies to avoid equipment failure. But routine maintenance also produces a lot of waste, and it isn’t always successful.

Instead, companies now are turning more toward cognitive anomaly detection and prediction, which utilizes AI to harness terabytes of real-time data about a machine’s operations. DataRPM, a Progress company, which provides predictive maintenance solutions and products that help detect anomalies through Cognitive Anomaly Detection and Prediction (CADP), explains that data collected from machinery can indicate when performance is declining. That means a technician can get involved before the equipment fails or shuts down.

Consequently, companies can address anomalies long before they lead to equipment crashes, lengthy downtimes, and lost productivity and revenue.

2. Managing IT security intrusions

Computers interact best with each other, and the IT realm uses that fact for a variety of IT security and support functions. As hackers and bad actors from around the world continue ramping up cyberattacks, IT teams can use AI to more easily track hackers’ movements within a system and shut them out faster.

As reported in Harvard Business Review, a 2017 global study by Tata Consultancy Services found that 44 percent of companies surveyed were using AI “in detecting and fending off computer security intrusions in the IT department.”

As one of the most significant technological advances in modern times, AI has–not surprisingly–made the biggest impact on IT professionals. In addition to its cybersecurity applications, AI also helps resolve tech support issues, makes it easier to adopt new technologies, and ensures that no unsafe machines are connected to corporate networks.

3. Engaging better with customers

At first glance, marketing may not seem on par with manufacturing and IT security when it comes to AI adoption. Yet marketers and brands are beginning to use the technology to greatly enhance how they interact with consumers.

AI helps companies create the products and services that customers want, and it enables them to improve customer relationships in a world where interactions are increasingly digital.

How does AI do this? Dara Treseder, CMO for GE Ventures, discussed AI during a presentation at MediaLink + CDX Brand Innovation Salon in January, explaining that CMOs can start to leverage data to better understand who their customers are and adopt a deeper, more personal approach to customer engagement.

Like Amazon and Netflix, which use AI to personalize recommendations based on user activity, other companies can leverage the technology to keep their consumers engaged as well. Treseder mentioned the San Francisco Museum of Art, which uses an AI bot to serve up art on demand, as a prime example of this engagement.

Art lovers can text a keyword–even an emoji–and receive a text back directing them to a piece of art in the museum’s collection that matches what they sent. Treseder also pointed to Nike’s AI-driven interactive design experience, which uses motion capture and projection mapping to allow customers to customize their shoes in-store.

When we think of artificial intelligence, many of us still consider it somewhat of a sci-fi notion or even a threat that should be avoided at all costs. The truth, though, is that AI is a current technology, not a future concept. Business leaders must start recognizing its importance, or their consumers will migrate toward businesses that do.

YouTube and Facebook Trending Tools Highlighted Parkland Conspiracy Theories

It takes a special sort of heartlessness to create a conspiracy video about a teenage survivor of one of the deadliest school shootings in US history. But it takes a literally heartless algorithm to ensure that thousands, or even millions, of people see it.

For a brief period on Wednesday, YouTube awarded the top spot in its Trending section to a conspiracy video claiming that 17-year-old David Hogg, a survivor of the Marjory Stoneman Douglas High School shooting that killed 17 students, was in fact an actor. The prime placement of the video, which has since been removed, shocked YouTube users and members of the media alike. It shouldn’t have. YouTube’s screwup is only the latest to highlight the fundamental flaws of the algorithms that decide what gets surfaced across all social platforms.

On Trend

YouTube, Facebook, and Twitter all have a section designed to surface the most newsworthy, relevant information in the midst of a vast sea of content. But time and again, they have utterly failed. In the worst cases, the algorithms backing these trending sections drive bot-fueled hashtag campaigns promoting gun rights to the top of Twitter Trends, and fake news stories about former Fox news anchor Megyn Kelly into Facebook’s Trending Topics portal. Human curation hasn’t worked out much better. Reports that Facebook’s curators suppressed news from conservative outlets in trending topics set off a two-year cascade of crises for the social network.

But even at their most benign, these algorithmically derived trends rarely serve their expressed purpose. Based largely on conversation volume, trending tools naturally drive the public consciousness toward topics of outrage; an outrageous topic trending only adds to the outrage. How many times have you clicked on a trending topic on Twitter, only to see an endless scroll of Tweets decrying that the topic is trending in the first place? The conversation about the trend becomes the trend itself, an interminable loop of outrage that all started because some line of code decided to tell millions of people that topic was important.

The Parkland video topping YouTube’s trending page seems especially galling because it appears to have gotten there not by accident, but as the result of an attempt on YouTube’s part to fix fake news. YouTube says its system “misclassified” the conspiracy video “because the video contained footage from an authoritative news source.” Whatever minimal nuance was needed to block the Hogg conspiracy, algorithms lack it.

Though YouTube got most of the blame on Wednesday, Facebook ought to have shared it. David Hogg’s name also appeared in the company’s Trending Topics section. As of Wednesday afternoon, the first story that surfaces when users clicked his name was a news clip debunking rumors Hogg is an actor. But just three results down sat another video, showing a visibly nervous Hogg stumbling over his words with the caption, “This one is David hogg, the video that keeps coming down on YouTube. Seems like he’s been scripted #davidhogg #actor #falseflag #censorship #floridashooting #florida.”

Top videos under the trending topic “David Hogg,” as seen on Facebook on February 21, 2018.

Facebook

Below that, Facebook ranked another conspiracy post by former Sports Illustrated swimsuit model Amber Smith as the top Public Post on the topic, above legitimate news sources like the Toronto Star and CBS Boston. Smith’s post reads in part, “Fascist-Book will take this down soon so view quickly.. David Hogg just 6 months ago was in an anti-gun rally (pictured, gee, no kidding!), he is not a student at the recent false flag event in Florida that was staged to take away your rights. Please, fight for your rights!”

Top public posts under the trending topic “David Hogg,” as seen on Facebook on February 21, 2018.

Facebook

In a statement, Mary deBree, head of content policy at Facebook said, “Images that attack the victims of last week’s tragedy in Florida are abhorrent. We are removing this content from Facebook.”

It’s a standard response that does little to prevent future disinformation campaigns from spreading on the platform, and does nothing to mitigate the damage that has already been done.

Half-Measures

The system is broken. It directly contributes to the spread of fake information that has plagued social media platforms for years. So why not scrap it? Why have a trending module at all? It’s largely because of money, says Dipyan Ghosh, a fellow at the think tank New America who recently left his job on Facebook’s privacy and public policy team. “The Facebook of 10 years or five years ago isn’t the Facebook of today,” says Ghosh. “This Facebook has grown tremendously in its size and influence around the world, and part of that is because of the promotion of particularly engaging content that attracts eyeballs and keeps them on the screen for long periods of time.”

Facebook and YouTube’s best answer so far, other than vague promises of algorithm improvements, has been for each to pledge to build a team of 10,000 moderators to take down problematic content. But more than 400 hours of content gets uploaded to YouTube alone each minute. Ten million humans would have a hard time keeping up, much less 10,000.

Twitter, meanwhile, announced Wednesday that it was making changes to the way automated accounts, or bots, are allowed to operate on the platform, which could have important repercussions for Twitter Trends, arguably the most easily gamed of all of the platforms. These coordinated networks of bots sync up to promote the same hashtag in rapid succession in order to get a given topic trending.

As Clint Watts, a fellow at the Foreign Policy Research Institute and a former FBI special agent, recently put it during a congressional hearing on terrorism and social media, “The negative effects of social bots far outweigh any benefits. The anonymous replication of accounts that routinely broadcast high volumes of misinformation can pose a serious risk to public safety and, when employed by authoritarians, a direct threat to democracy.”

Twitter has stopped short of banning bots entirely, but it will drastically limit the ways in which they can interact with each other. In a blog post, the company detailed a number of new limitations for third-party developers designed to stop users from posting or liking simultaneously from multiple accounts, or to rally multiple accounts behind a single hashtag all at once.

It remains to be seen how effective any of these changes will be at cleaning up these trending tools. Hoaxers and trolls have, after all, found a way around almost every obstacle these platforms have put in their way up until now. Why should this time be any different?

By introducing the concept of what’s trending, tech companies told their billions of users they were going to show them the news they needed to know. And yet at a time when social platforms have repeatedly fallen down on the job, it’s worth wondering whether the public really needs their help.

Trending Machine

'Black Panther' Discussion: This One's Gonna Be Fun

In case you haven’t been near a theater, TV, mall, or interstate overpass, and haven’t seen the news, Black Panther opened this weekend. And it opened big. Like, history-making box office numbers big. With good reason—T’Challa (aka Black Panther) is a hero fans have been anticipating for a long time. As WIRED’s Jason Parham noted last week before Marvel’s latest movie “black superheroes were never afforded the same deification” as their white counterparts, but now Panther director Ryan Coogler has made a movie that shows what a superhero movie can truly be. A lot of us here at WIRED saw the movie over the weekend, and now that the worries of spoilers have receded (yes, this post will have them, continue at your own risk), it’s time we finally talk about it at length. Here we go—Wakanda forever!

Angela Watercutter: OK, I’m not going to say too much right off the bat because I want to know what my colleagues thought, but I will just say that Black Panther lived up to the hype. Like, the anticipation for this movie had been building for months and I was starting to worry that nothing could live up to what fans were hoping for with this movie, no matter how talented everyone working on this film is, but judging from the reaction at the screening I saw, people are thrilled. Did you guys have the same experience? How did you feel walking out of the theater? Did you sense that your fellow theater-goers were satisfied?

Peter Rubin: Angela, we were both in Hall H for Marvel’s panel at Comic-Con last July, and after Ryan Coogler surprised the crowd with some BP footage, we both know what was possible. The mood in that room—among attendees, Comic-Con staffers, and the crew itself—was not your usual “ah, this looks cool!” anticipation. Something cathartic happened in there. And even though I had the opportunity to go to a press screening earlier last week, I skipped it, because I wanted to see it for the first time in a theater full of people who were invested in it.

I wasn’t disappointed. Not by the movie, and not by the feeling of joy and lightness (and yes, Oakland pride) that was occupying every chair at in that theater. Two seats over from me was a young kid, seven or eight years old, in a full-on T’Challa suit; in the 24 hours since I saw the movie, I haven’t been able to stop thinking about the T’Challas (and Okoyes and Shuris) all over the country, stepping out into recess feeling like heroes. Justice, you’ve already seen it twice, right? What kind of differences did you notice in the two screenings—either in the crowd’s reception or in your own enjoyment?

Justice Namaste: The first screening I went to (second one is today!) was in Oakland on opening night. The only screening I’ve been in that nearly matched the energy in the theater during Black Panther was during the opening weekend of Get Out, when one of my friends actually fell out of their chair during the pivotal scene.

Visually, no other Marvel movie has ever come close to Black Panther—the lush Wakandan landscapes, the vibrantly colored costumes, even the wearable tech was beautiful. And that moment where the Royal Talon Fighter dips below the veil and we get an aerial look over the Golden City? Jawdropping.

But even with all this to mull over, when I left the theater, what was left ringing in my ears was Erik Killmonger’s last words: “Bury me in the ocean with my ancestors who jumped from ships, ‘cause they knew death was better than bondage.” In my opinion, the driving relationship in the film was that between T’Challa and Killmonger. (Or, thought of another way, the one between T’Chaka and N’Jobu, but realized through their sons.) T’Challa and Killmonger didn’t spend much time together on screen when they weren’t trying to murder each other—their lack of real dialogue was one of the movie’s more disappointing choices—so the tension between them was largely ideological, but it still drove the story. The “son reckoning with his father’s legacy” trope is a staple of the MCU, but it’s a limited one. Using a villain like Killmonger to complicate the idea of what heroism actually looks like, though? That’s a much more fascinating story.

Phuc Pham: As much as I enjoyed watching T’Challa grapple with both his opponents and his emotional demons, I couldn’t shake the sense that his heroic arc was a copy-paste of the superhero’s journey that Marvel has come to rely on. I mean, this is the fourth guy that has had a plot twist regarding his father upend his world.

Killmonger, on the other hand, was much more interesting to me. While T’Challa does his whole superhero thing, his archenemy points to actual systemic oppression, grounding Marvel’s universe in the real world in a way that feels new and bold. His motivation, essentially, is black liberation the world over—which to me qualified as the biggest heroic endeavor in the film. (At least until you realize that the means to achieve that end are vibranium weapons and a high body count.) Like you, Justice, I wish T’Challa and Killmonger had spent more screen time hashing out their ideological differences. The scenes when they engage in ritual combat are visceral—no Black Panther powers allowed!—but also seemed like wasted opportunities for some fight chatter about how best to rule Wakanda as well as improve the lives of the African diaspora.

Watercutter: Totally. I also wanted Killmonger and T’Challa to have more time to actually talk about their differences. Because, unlike almost every other Marvel villain before, Killmonger didn’t just want to rule to be a ruler. He wanted liberation, and in that he and T’Challa weren’t too far apart—they just had different ideas of how to achieve it. In that final scene that Justice mentioned, I truly didn’t want Killmonger to go. I wanted him to join T’Challa and stay in Wakanda. That, to Jason’s point, doesn’t happen often in these films. Maybe it happened a bit with Loki, but he’s always been a character with many allegiances. (And yes, Peter, I remember that Comic-Con Hall H panel—I’ve never felt anything like that a SDCC, and doubt I ever will again.)

Jason, in your great review last week you talked about how Black Panther showed what a superhero movie could do. What do you think it demonstrated in how it portrayed both its heroes and villains?

Parham: I didn’t think Michael B. Jordan’s acting was particularly strong, but I do agree that Killmonger as a character was perhaps the film’s most compelling—because he really wasn’t your typical antihero. I think Jelani Cobb at The New Yorker was correct in that the real villain was history itself. Killmonger’s rage was merely a product of the times, and all the despair he’d seen firsthand around the world. That’s a heavy burden to reckon with, but not an untrue one. In doing this, Coogler positioned the film in a really smart way, giving it historical currency but also contemporary heft, and all without feeling like he was trying to make some obvious political statement.

One of the more brilliant aspects of the movie—a credit to Coogler and Joe Robert Cole’s fine script—was its insistence on complicating character arcs, especially with people like W’Kabi and M’Baku, who expertly straddled the line between good and bad. Then there’s someone like Okoye, who is fiercely loyal to Wakanda in every regard. Her inner confliction felt so palpable—being forced to serve an unfit king and wage war against her lover (Danai Gurira’s Okoye was maybe my favorite character, along with Shuri and M’Baku). Everyone felt like they were doing what was best for Wakanda, which you can’t really fault them for. It felt like a truer reflection of what it means to be alive in the world today. Black Panther succeeds on so many levels. I’m curious: what did everybody think were some of the stronger aspects of the film?

Namaste: This is the obvious answer, but I just have to say it—the women. The strongest part of the film was undoubtedly all of the women characters. And that extends to the women behind the scenes as well. Lupita Nyong’o’s Nakia, Angela Bassett’s Ramonda, Letitia Wright’s Shuri (and of course Okoye and the rest of the Dora Milaje) were complex characters whose identities and motivations did not revolve solely around men. The audience saw Okoye as both a warrior and a lover, Nakia as an undercover spy who’s more concerned with protecting human rights than gathering intelligence, and Shuri as a younger (and better?) Tony Stark.

Not to mention the fact that their actions and beliefs are key to driving the story forward. Nakia is the first character who really pushes T’Challa to consider what Wakanda’s responsibility is to oppressed people across the rest of the world. And T’Challa would likely be dead 10 times over without Shuri’s engineering brilliance. Speaking of which, I’ve seen Letitia Wright being called the breakout star of the film, a title she most certainly deserves. As Shuri, she delivers some of the funniest lines, while also masterfully navigating a series of tense and heart-wrenching moments. Sure, T’Challa might be the Black Panther, but these women are far from secondary characters.

Pham: I’m so glad the writers decided to adapt Nakia and the Dora Milaje away from the ways they’re set up in some of the older comic book runs, where Nakia has an unrequited crush on T’Challa and the Dora Milaje—in addition to their role as royal guards—are a pool of potential queens. So extra kudos to film-Nakia for asserting she doesn’t want to be a Dora.

There hasn’t been an MCU film that’s as focused on technology since the Iron Man trilogy, and I was struck by how hopeful Black Panther, both the movie and the character, are how a future shaped by it doesn’t have to be dark and bleak. Production designer Hannah Beachler has said how Blade Runner inspired her vision of Wakanda’s capital Birnin Zana, and it shows. The dense urban landscape, replete with pristine skyscrapers and dusty merchant stalls, certainly hearken to traditional cyberpunk environments. Here, though, Afrofuturism shines figuratively and literally. Wakanda forgoes the dim and damp settings of futuristic cities (why are the streets always slicked with rain?) for a warm glow that almost makes you root for Killmonger’s vision of an empire upon which the sun never sets.

Thematically, the film also bucks the trend of Marvel movies in which new technology always begets catastrophe. Tony Stark’s bleeding-edge armaments always seem to end up in the hands of terrorists while Chitauri tech enables a middle-aged megalomaniac to hunt high schoolers in his spare time. Meanwhile, T’Challa not only prevents vibranium from being weaponized but also closes the film with plans to open a Wakandan outpost in Oakland—a city adjacent to Silicon Valley wealth yet wracked by a 20 percent poverty rate—to share and exchange knowledge. In an age when technology is often abused for nefarious and disruptive ends, the Black Panther’s techno-optimism seems to be a call for fewer divisions, not more.

Rubin: The rest of you have already ticked off just about everything that made this movie so appealing, so in hopes of adding something new to the mix, I’ll close with the idea that Black Panther created an entirely new lane for the MCU. After all 4,000 characters band together to (presumably) defeat Thanos in the two Avengers: Infinity War movies, Marvel is going to need a way to move forward, and Wakanda’s entry onto the global geopolitical stage is one of those ways. The MCU has its cosmic arm, its street-level arm, its mystical arm—and now Wakanda links the political intrigue of the Captain America movies with the deeply personal stories of a fully-fleshed world.

Does that mean we’ll see a Dora Milaje prequel movie in 2021? An M’Baku standalone? Only time will tell, but with a roster of new characters, ready-made internal conflict, and a rising cadre of filmmakers who are ready and able to tell these stories, the MCU’s prospects as a long-range paracosm have never been better.

Retirement Strategy: Inflation Is A Scourge On Retirees' Well-Being

Photo Source

Rarely do I write an article such as the one I am penning right now, but I think it is important to put inflation in perspective for regular folks, along with my opinion.

It seems that while the prices of everything we actually spend money on have never stopped increasing, the government numbers are finally showing signs of what it considers inflation. The Producer Price Index shot up in January, indicating that overall inflation is heading up. This is what the actual report had to say (emphasis added):

The Producer Price Index for final demand increased 0.4 percent in January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in December and moved up 0.4 percent in November. (See table A.) On an unadjusted basis, the final demand index rose 2.7 percent for the 12 months ended in January.

You can read the report yourself and get as confused as I was, but the bottom line is that inflation is heading up, officially, even though we all knew that prices have gone up basically every day for as long as we have lived, “unofficially.” The hardest hit are fixed income folks, as well as the poor.

The value of the fixed amount these folks receive becomes less with every day that goes by, and it is simply an awful fate to have to face, and it just keeps getting worse.

Photo Source

What Is Inflation Anyway?

As described right here, the brief overview is as follows:

Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 2%, then a pack of gum that costs $1 in a given year will cost $1.02 the next year. As goods and services require more money to purchase, the implicit value of that money falls.

While Central banks use all sorts of ways to reduce or contain inflation, it usually is just the raising or lowering of our interest rates. Hardly a panacea for those who are just trying to make ends meet.

How Inflation Eats A Portfolio

I found this interesting article with a very straightforward chart of what various levels of inflation can do to the amounts needed to spend to maintain the same lifestyle.

What starts out as $40,000/year spending can wind up anywhere between $70,000/year and $164,000/year after 30 years, just to maintain the same standard of living, depending on whether inflation averages just 2%/year or is as high as 5%/year.

Obviously, this can impact a portfolio of just about any size.

As A Fixed Income Retiree, We Can Run But Cannot Hide

I don’t need to tell anyone that, as a retired person, we have limited choices when directly facing inflation. We can avoid buying things, change brands to lower-priced ones, or simply go without. Not a pretty picture. Also, quite unrealistic.

The ONE way for a retiree to fight inflation is to play their own game. Let me explain:

  • While inflation affects consumers, it can actually help public companies, savers, and investors. Companies gain pricing power, which enables them to raise prices to cover costs, as well as adding a few points for pure profit (administered price inflation). This goes straight to the bottom line and increases earnings. I found this report on inflation to be revealing.

  • Companies will make more money and as a result become more profitable. By using interest rates as an inflationary guide, this article shows the relationship via a chart at different environments. For dividend growth investors, this should translate into continued dividend payments as well as higher increases by aristocrats and kings.

  • By investing in dividend paying blue chip dividend kings that have paid and increased dividends paid for a minimum of 50 consecutive years, an investor should be able to AT LEAST stay within “fighting” distance of the overall inflation rate by having their income stream from dividends continue to rise as long as the companies invested remain profitable and viable. The following chart and dividend growth facts show a typical look at how dividend growth stays up with, and even surpasses, average inflation of 2.4%/year:
Chart

PG Dividend data by YCharts

The Dividend King Retirement Portfolio Might Help Us Stay EVEN

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I am not saying that this approach is without risk or is foolproof, but it has seemed to work for many who follow this approach and should be at least considered by the average person as an investment approach. Not just for an income stream, but to keep up with inflation over the long term, when we need it the most!

The model Dividend King Retirement Portfolio currently consists of Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), Johnson & Johnson (NYSE:JNJ), 3M (NYSE:MMM), Emerson Electric (NYSE:EMR), Cincinnati Financial (NASDAQ:CINF), Lowe’s (NYSE:LOW), Hormel (NYSE:HRL), Colgate-Palmolive (NYSE:CL), Dover (NYSE:DOV), and AT&T (T).

These stocks are not the high growth stocks they once were, and there is no way of telling if they ever will be again. That being said, these stocks have shown that through both good and bad times, low and high inflation, they have been able to pay and increase dividends continuously for over 1/2 century. It does not mean all of them will continue, but I like the history myself and feel my risk is being mitigated.

Take a look at each stock and see for yourselves. You CAN fight inflation! Simply by owning Dividend King stocks, if you so choose.

What is YOUR approach to inflationary pressure?

The Bottom Line

Nothing is risk-free, but inflation can eat away at our purchasing power. To me, dividend growth investing helps offset some of the disastrous effects of inflation during retirement.

Not To Bore You, But…

Knowledge is power, and many folks shy away from the investing world because that very world makes it more confusing each and every day in an effort to sell you something: stock picks, technical strategies, books, videos, subscriptions with “secret ideas,” gadgets, and even snake oil.

My promise to you is that my work here will remain free to all of my followers, with the hope of giving to you some of the things that took years for me to learn myself. That being said, let me reach out to you with my usual ending:

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Disclaimer: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him, and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance. The long positions held are based upon what the model portfolio holds, and I personally could have held all of the stocks noted at one time or another.

Disclosure: I am/we are long CINF, CL, DOV, EMR, HRL, JNJ, KO, LOW, MMM, PG, T.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: The portfolio is for educational purposes only and not an actual portfolio. The long positions are based on the model portfolios.

Airport Controllers Trade the Tower for a Screen-Filled Room

The next time you fly into Florida’s Fort Lauderdale airport, look out the window and see if you can spot what’s missing. The answer? A 160 feet high tower.

That’s what airport officials at the airport say would have been necessary for them to be able to safely control the movement of planes on the ground, taxiing to and from gates and runways at the recently expanded airport. That would be doing things the old fashioned way, by line-of-sight—aka looking at the planes. Instead of an elevated perch, ground controllers at FLL have an even better view from inside a nearby squat, building.

“They have no windows in their building,” says Mike Nonnemacher, the chief operating officer for Broward Country Aviation Department, which controls FLL airport. “It’s all done by radar, and augmented by a system of CCTV and infrared cameras.” A new computer system takes the data from those cameras, and other sensors, and stitches it together into one giant virtual vista.

Controllers sit in front of a video wall, which shows them what’s happening in real time. The infrared images offer improved visibility at night and in the fog. Wearing headsets, they calmly issue cryptic sounding instructions to pilots, and then track the plane moving. It’s the first of its kind in the US, and could set the bar for other airports around the country.

Gregory Meyer/Broward County Aviation Department

In the US, the FAA runs air traffic control, which sees planes safely onto the tarmac. But responsibility for moving these huge machines around on the ground falls on the airport or airline. Their wingspans, which look so elegant in the air, are just a protruding hazard on the ground. Pilots don’t have great visibility out of the cockpit windows, so they rely on ground controllers to tell them which gate to taxi to, where to hold, which path to take, and to warn them of other vehicles like fueling trucks or passenger busses crossing active taxiways. It’s a complicated dance, becoming ever more so as air travel booms and airports expand, allowing takeoffs and landings with barely 30 seconds between them. Airfields usually have one or more towers, so ground controllers can see everything that happens from the runways to the gates.

The layout of the Fort Lauderdale airport makes it a great test case for something new. One row of gates is hidden from direct view of ground controllers, so they used to send someone on foot to scout the scene, report back, and help them keep track of aircraft on a dry-erase board. Tired of all the back and forth and eager to avoid the cost of building a looming tower, they went the virtual route.

The result is that windowless building, inside which ground controllers take in feeds from 66 CCTV cameras, and FAA radar data that includes each plane’s location and call sign. “We take a lot of information, from lots of sources,” says Betros Wakim, the head of Amadeus Airport Technology in the Americas, which designed the software to stitch all that together and present it to controllers in useful ways.

When a plane is ready to leave its gate, ground controllers first make sure it’s safe to move. With their virtual views, they can train cameras toward the plane, check its flight number, and then check the surrounding area. Pushback can be rather hazardous.

“You always have construction and maintenance people who need to be on the runway to do repairs,” says Patti Clark, aeronautics professor at Embry Riddle University, and a former airport manager. Wild animals might be taking a stroll through the grounds. By combining cameras with the radar data, ramp controllers should be able to spot all that, and ward off disaster. “The human factor is always involved, but the more useful and reliable tools you can provide to the human, the better the situational awareness is,” says Clark.

No surprise then, that Nonnemacher says he has already had phone calls and visits from other airports interested in recreating the system, including Tampa, Dallas, and Toronto.

One day, virtual airfield control could remove ramp control centers from airports altogether, freeing up space for terminals or cargo handling areas. It’s all just data, it can be piped anywhere. There’s precedent in Europe; London City airport has just replaced its air traffic control tower with a remote system, and controllers sitting 120 miles away. That same tech is being used in Australia, Sweden, Norway, and Ireland.

So the next time you come in to land at FLL, don’t bother looking for that non-existent tower. Instead, see if you can spot the little building, with the folks inside making your path to the gate—to freedom—quicker and safer.


At the Airport

After Rocky Year, CEO Evan Spiegel Is Still Happy Snap Went Public

Snap CEO Evan Spiegel says he doesn’t mind having to report quarterly financial results to pesky investors, whose disappointment could send the company’s stock plummeting.

“We love it,” the young executive enthused Thursday during a Goldman Sachs technology conference in San Francisco on Thursday.

Snap’s (snap) first three quarters as a public company last year were tough. The messaging company consistently reported disappointing user growth along with sales that failed to meet Wall Street’s expectations, causing its shares to fall.

Earlier this month, however, Snap shared some good news —that it now has 187 million daily active users, which beat analyst projections of 184.2 million, while its sales jumped 72% year-over-year to $285.7 million. After the report, investors sent Snap’s shares up nearly 30%.

For six years as a private company, Snap was insulated from fickle investors and could concentrate on developing its Snapchat messaging app without much distraction. Now that the company is public, however, all eyes are on Snap to show huge growth, especially as Facebook’s (fb) competing Instagram service consistently debuts copycat features and tries to steal users.

Spiegel said that it’s “been energizing” for Snap since going public, and said the company is at an interesting intersection of still being a young company spending lots of cash for growth while being scrutinized each quarter by Wall Street.

Working at Snap is not for the faint of heart, Spiegel said. He likened the company’s tough work culture to how water appears calm right before it boils, using an obscenity in front of the audience of bankers and financial officers.

“For people that are excited about pushing themselves, I think it’s a great place to be,” Spiegel said.

To keep up growth, Spiegel said Snap is focusing on expanding the service outside of the U.S. and Europe, and partnering with wireless carriers worldwide to bundle the Snapchat app into various packages that they in turn sell to their customers. Spiegel previously discussed these carrier deals during the company’s last earnings call with analysts, saying that these partnerships with unspecified carrier companies in “over a dozen markets” would “begin reducing cellular bandwidth costs for Snapchatters around the world.”

He didn’t say how much Snap spent on these types of carrier partnership deals.

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About the big cloud computing bills Snap pays to companies like Amazon and Google to run its service, Spiegel argued that it would have to spend even more and if it had to build and operate it’s own data centers. Snap has agreed to pay Amazon $1 billion over the next five years for cloud services, and another $2 billion to Google over the same time.

Lately, some Snapchat users have been complaining about a recent redesign that splits the disappearing videos their friends from videos shot by celebrities and media companies. Some investors and analysts fear the redesigned app could cause Snap’s users to disappear.

But Spiegel said it’s the right decision because it makes a clear distinction between the private communications of users and their friends, and those of broadcasting networks and big-time stars.

To people who feel that the new Snapchat makes them feel less connected to celebrities who may have appeared to be their friends in the app, Spiegel said “Exactly!”

“They’re not your friend!” he said.

Toshiba says to appoint ex-banker as next CEO

TOKYO (Reuters) – Japan’s Toshiba Corp said on Wednesday it is appointing Nobuaki Kurumatani, a former executive of Sumitomo Mitsui Financial Group, as its chairman and chief executive.

Incumbent CEO, Satoshi Tsunakawa, will become chief operating officer and retain his role as president, the company said.

Kurumatani, currently the president of the Japanese arm of European private equity firm CVC Capital Partners, is a former deputy president of Sumitomo Mitsui Banking Corp, one of Toshiba’s main lenders, which often have a strong influence on its management decisions.

Reporting by Makiko YamazakiEditing by Muralikumar Anantharaman

Coincheck heist sheds light on Japan's rush to create cryptocurrency rules

TOKYO (Reuters) – After the Mt. Gox cryptocurrency exchange was stung by a half-billion dollar theft in 2014, Japanese regulators swung into action.

Their goal was to craft rules that both protected traders and allowed a promising sector to flourish. By last April, thought they had arrived at a set of guidelines that did just that.

Japan’s national system to oversee cryptocurrency trading was the world’s first, rolled out even as policymakers elsewhere grappled with how to deal with the sector. Under the Japanese framework, some exchanges would be allowed to operate – even though they hadn’t yet won regulatory approval.

One of those was Coincheck Inc. Last month, hackers stole about $530 million from the Tokyo-based exchange, a theft rivaling Mt. Gox’s as one of the biggest ever for digital currency.

The Coincheck heist exposed flaws in Japan’s system. And for some experts, it raised questions over the country’s dash to regulate the industry – a sharp contrast to clampdowns by countries like South Korea and China.

Interviews with a dozen government officials, lawmakers and cryptocurrency industry leaders depict a regulator that opted for relatively loose rules to help nurture an industry largely populated by start-ups.

Japan’s Financial Services Agency declined to comment.

But proponents of its regulatory approach say the system and the hack were not connected.

“It’s too much to say that the FSA or institutional design was lax because there was one hack,” said former information technology vice-minister Mineyuki Fukuda, previously a supporter in parliament of promoting and regulating cryptocurrencies.

“IT‘S NOT MONEY”

In the wake of the Mt. Gox bankruptcy, Japan didn’t know what to make of bitcoin – or even who should be in charge.

“It’s not money,” Finance Minister Taro Aso told reporters days after the exchange collapsed. “Does the Financial Services Agency have jurisdiction? The Finance Ministry? The Consumer Affairs Agency? The Ministry of Economy, Trade and Industry?”

Amid the vacuum of oversight, the governing Liberal Democratic Party, seeing the fintech sector as a way to stimulate growth, initially called for the cryptocurrency industry to form a body to regulate itself.

That led to the formation of the Japan Authority of Digital Assets (JADA), comprising blockchain and cryptocurrency start-ups and entrepreneurs.

When the FSA was later tasked with creating regulations for cryptocurrencies, it turned to JADA for help. The group lobbied for rules friendly to start-ups, like low capital requirements.

“We had constant discussions with the FSA, giving technical information and ideas,” said So Saito, a founding member of JADA and now general counsel of its successor, the Japan Blockchain Association (JBA).

The FSA’s rules required exchanges to register, operate robust computer systems and address risk management.

But they left the storage of assets to a set of non-binding guidelines. Exchanges should keep the encrypted keys needed to access digital money in “cold wallets” – for example, USB drives not connected to the internet – only if doing so didn’t overly inconvenience customers, the guidelines said.

In effect, the clause left no obstacle to Coincheck’s holding $530 million worth of NEM crypto-coins in an online “hot wallet” – essentially a digital folder stored on a server – from which the funds were stolen.

“The FSA was quite relaxed on protecting consumers on things like cold wallets and hot wallets,” said the chief financial officer of a major Japanese cryptocurrency exchange.

JAPAN VERSUS THE WORLD

Policymakers across the world have grappled with how to deal with cryptocurrencies. Most have been skeptical about trade in digital assets.

U.S. regulators may ask Congress to legislate more oversight of digital money, the head of the Securities and Exchange Commission said this month.

In Asia, South Korea is embracing strong oversight of cryptocurrency trading, at one point saying it might shut down local exchanges. China, concerned about financial stability, last year ordered some exchanges to close. India this month vowed to stamp out use of cryptocurrencies altogether.

Statistics on cryptocurrencies are patchy because their trading is unregulated in most countries. But Japan accounts for between a third and half of all global bitcoin trade, exchange operators say – a share of the market that has grown as other jurisdictions have cracked down.

As Japan’s rules came into effect last April, exchanges were given six months to register.

But even those that registered but weren’t approved could continue to operate.

Coincheck was among the exchanges that didn’t win approval. By the time it filed its application in mid-September, bitcoin was surging towards a record high of $19,458, which it hit in December.

The exchange had grown to one of Japan’s biggest amid a sharp increase in trading, moving to a new headquarters from a dingy backstreet office. Its share of domestic bitcoin trades soared to 55 percent in December from only 7 percent a year earlier, data from Jpbitcoin.com show.

In an interview with Reuters last year, Kaga Kawabata, Coincheck’s business development manager, was dismissive of the FSA’s oversight, even as the exchange prepared to register.

“They have no knowledge. Every year someone moves, and it’s a big pain to educate them,” he said.

The FSA said last week it didn’t approve Coincheck partly because of worries about weaknesses in the exchange’s systems, declining to give further details. It allowed Coincheck to continue operating, calling for improvements without a specific timeline.

The regulator was in a bind, industry insiders said: Coincheck had grown so big that the FSA couldn’t reject its application.

“Consumers would be upset. It was politically difficult to close down Coincheck,” said Masakazu Masujima, a lawyer and adviser to the Japan Cryptocurrency Business Association, an industry body. “So they kept requesting it to improve its systems.”

Reporting by Thomas Wilson and Takahiko Wada; Additional reporting by Minami Funakoshi, Ami Miyazaki and Taiga UranakaEditing by Gerry Doyle

Qualcomm, Broadcom plan to meet on February 14: sources

(Reuters) – Qualcomm Inc (QCOM.O) and Broadcom Ltd (AVGO.O) plan to meet on Wednesday to talk about the latter’s $121 billion acquisition offer, the first time the semiconductor companies will discuss the potential deal, people familiar with the matter said.

The meeting comes after Broadcom raised its cash-and-stock offer last week from $70 to $82 per share, and made other concessions, including offering to pay Qualcomm an $8 billion breakup fee should antitrust regulators block the deal.

Qualcomm said last Thursday that Broadcom’s new offer still undervalues it and falls well short of the firm commitments on regulatory issues it expected. However, it offered to meet Broadcom to see if it can address what it called “serious deficiencies in value and certainty in its proposal.”

As part of its bid to take over Qualcomm, Broadcom has also launched a campaign with Qualcomm shareholders to replace Qualcomm’s board. Both companies are due to meet proxy advisory firms ISS and Glass Lewis before their Feb. 14 meeting to argue why Qualcomm shareholders should back them in a vote scheduled for March 6.

Broadcom had requested last week to meet over the weekend, but has now agreed to meet on Wednesday instead, the sources said on Sunday, asking not to be identified because the meeting’s details are not public.

A sign to the campus offices of chip maker Broadcom Ltd, is shown in Irvine, California, U.S., November 6, 2017. REUTERS/Mike Blake

Qualcomm and Broadcom did not immediately respond to requests for comment.

The takeover battle is at the heart of a race to consolidate the wireless technology equipment sector, as smartphone makers such as Apple Inc (AAPL.O) and Samsung Electronics Co Ltd (005930.KS) use their market dominance to negotiate down chip prices.

Singapore-based Broadcom is mainly a manufacturer whose connectivity chips are used in products ranging from mobile phones to servers. San Diego-based Qualcomm primarily licenses its technology for the delivery of broadband and data, a business that would significantly benefit from the rollout of 5G wireless technology.

Broadcom’s antitrust counsel, Daniel Wall of Latham & Watkins LLP, said in a filing with the U.S. Securities and Exchange Commission last week that Broadcom was willing to sell two Qualcomm businesses to resolve any antitrust problems. These are its Wi-Fi networking processors and RF Front End chips for mobile phones.

Qualcomm responded on Thursday that unless Broadcom will agree to do whatever is necessary to ensure the deal closes, a commitment to divestitures without restrictions often referred to as “hell or high water”, it would have to be extremely clear and specific about what actions it would refuse to take.

Broadcom CEO Hock Tan told Reuters in an interview last week that Broadcom decided not to offer hell-or-high-water provisions to Qualcomm because it does not view them as a very well defined legal standard.

Reporting by Greg Roumeliotis in New York; Editing by Alistair Bell

The *Waymo v. Uber* Settlement Marks a New Era for Self-Driving Cars: Reality

The sun had only just come up Friday, but the young self-driving car industry had already moved into a new era. From the bench, federal Judge William Alsup, recovering from a sore throat, called it: “This case is now ancient history.”

Waymo v. Uber, the first great legal fight over autonomous vehicles, ended in a peace treaty Friday morning: Uber gave Google’s sister company a 0.34 percent stake in its business (worth $245 million or $163 million, depending on how you count Uber’s worth), and pledged not to use any of Waymo’s software or hardware in its vehicles. “I want to express regret for the actions that have caused me to write this letter,” Uber CEO Dara Khosrowshahi wrote in a statement posted on the ride-hailing company’s website.

Waymo had alleged that when longtime Google engineer Anthony Levandowski resigned to start his own company, he took thousands of vital technical documents with him, including blueprints for the lidar laser sensor he had helped develop. Uber bought Levandowski’s startup a few months later for almost $600 million in equity and put Levandowski in charge of its struggling self-driving R&D effort. In Waymo’s telling, Levandowski and Uber used Waymo trade secrets to accelerate their efforts.

In large part, the lawsuit encapsulated the stakes in the early days of an industry that’s now booming. Back then, a good lidar system was so rare and coveted that it might be worth stealing. A single engineer like Levandowski, who helped found Google’s self-driving car team a decade ago, could merit a palace coup. And just two companies—Google, the progenitor of self-driving tech, and Uber, the virile challenger eager to convert its millions of human-operated cars into much more profitable robots—command nearly all the headlines and attention of anyone eager for a world where human drivers are a lol-worthy memory.

That world looks different now. More than 20 companies are currently developing lidar, making the sensor more necessary commodity than secret sauce. A pedigree like Levandowski’s loses its luster as a new generation of engineers, trained in robotics and machine learning, emerges. At least half a dozen companies not involved in this brouhaha have proven they can make cars drive about without human help. Waymo v. Uber was a fight over a once jealously guarded technology that today verges on commonplace. And now that the suit is settled, everyone can turn to the next chapter in the textbook, the one where all the companies grow up and figure out how to deploy the thing they’ve all created.

“This is evidence that the autonomous driving problem is not going to be solved by a single silver bullet,” says Shahin Farshchi, a partner at the venture capital firm Lux. “It’s a matter of building many things and getting many things to work together.”

As any good historian will tell you, a moment like the Visigoth-induced fall of Rome in 476 or Judge Alsup’s decree that “there’s nothing more for me to do here” doesn’t really trigger an epochal shift. It’s just a convenient marker. The transition from developing self-driving technology to actually deploying it happened independent of this case. Even before Waymo filed its lawsuit, others were turning a horse race into a stampede: General Motors acquired self-driving startup Cruise. The mysterious startup Zoox started testing in San Francisco. Waymo alum Bryan Salesky decamped for Argo AI and partnered with Ford. Former Google self-driving chief Chris Urmson founded Aurora and is now working with Volkswagen, Hyundai, and Chinese automaker Byton.

Of course, the settlement has tangible effects. First, Uber lives. The threat of a billion-dollar penalty or an injunction that could shut down its entire self-driving program has evaporated. As Uber co-founder and former CEO Travis Kalanick testified, the company sees autonomous vehicle tech as vital to its existence. If someone else figures out how to run a taxi service without a driver before Uber does, then Uber loses.

Uber wins that second life pretty cheaply, too. No money changes hands as part of this deal; Waymo receives a mere 0.34 percent stake in the ride-hailing company. Each party in the lawsuit will pay its own lawyers. And with that, Khosrowshahi ticks another box off his lengthy Fix Uber list, which also included a house cleaning after the company revealed it had paid off hackers following a 54-million-account security breach and an apology tour in London for safety infractions.

Waymo, meanwhile, maintains its position at the head of the self-driving pack, and shows competitors it’s willing to bleed a bit to stay there. “It was great from Waymo’s perspective to put everyone on notice: ‘We take our leadership position seriously and we will go hammer and tong after anyone who will upset that,”’ says Reilly Brennan, cofounder of the transportation-focused venture capital firm Trucks.

That goes for its own engineers, too. Pierre-Yves Droz, Waymo’s current lidar technical head, testified Thursday that, OK, yes, he had taken an outdated version of one lidar setup to Burning Man. And yes, he had taken two other versions home (with his bosses’ permission). Uber lawyers seemed prepared to argue that this wanton toting-about of self-driving tech proved that Waymo’s lidar wasn’t a trade secret after all. You have to hide stuff for it to be a secret.

So expect no more lidar shows at Burning Man, and no more carelessly protected servers. It’s time for the self-driving space, Waymo included, to grow up and be diligent about keeping their tech in-house. This is a real industry now. The money is still theoretical, but the autonomous vehicle market could be worth $7 trillion by 2050, according to a 2017 Intel report.

Protecting intellectual property means telling employees what is and what isn’t secret—especially if they’re about to leave. “The critical juncture to reinforce those expectations is in the exit interview,” says John Marsh, a lawyer with the firm Bailey Cavalieri. “The employer says, “Hey, by the way, you signed this agreement about trade secrets when you started here; if you have questions, come see me. I expect you’re going to abide by this.’”

In the abridged trial, an Uber lawyer asked Waymo hardware engineer Sasha Zbrozek whether anyone at Google looked for activity that signaled someone was downloading huge numbers of files.

“No,” Zbrozek responded. “But nobody monitors when you get water from the fridge either.”

The time for such freedom could be ending. As autonomous driving technology approaches reality—the you give someone money to ride in this thing kind of reality—expect better defined policies and lots more rules. And maybe a camera watching the water dispenser, too.

Waymo’ Autonomy

Alibaba kicks off sponsor deal in Pyeongchang

PYEONGCHANG (Reuters) – Alibaba Group Holding Ltd (BABA.N) is launching a project that will create a “smarter” and more connected athletes’ village and stadia and make all Olympics stakeholders “more money”, its executives said on Saturday.

Many of Alibaba’s plans are still concepts since it has not had enough time to implement its technology after signing a deal last year worth hundreds of millions of dollars as a cloud and e-commerce partner with the International Olympic Committee.

But IOC president Thomas Bach said some of Alibaba’s plans “can become operational pretty soon” while Alibaba founder Jack Ma said they expected to be realized at the next Winter Games in Beijing in 2022.

“We want to make the Olympic Games so everyone can make more money,” Ma said, adding that “everyone” meant groups such as host cities’ organizing committees, athletes and sponsors.

Alibaba is one of the few top Olympics sponsors signed with the IOC until 2028.

It has said it wants to upgrade the technology that keeps the Games running.

It also unveiled its “sports brain,” on Saturday, a suite of software products designed to improve the back office of how sports events are run.

Ma, who appeared onstage with Bach, said he was moved by North Korea and South Korea marching together in the opening ceremony on Friday since it reflected “peace and prosperity”.

Former NBA player Yao Ming was in the audience at the media conference, which featured an interpretive dancer and a magician pulling a bird out of a hat.

Alibaba has about 200 to 300 employees on the ground in Pyeongchang to study how the games run and help find ways to save future host countries money.

Alibaba’s Tmall and Taobao shopping platforms dominate online retail in China. But it is not well known in many parts of the world, including in the United States where Amazon.com Inc is the e-commerce leader.

It is using an international branding campaign focused on the Olympics to help introduce it to markets such as the United States and Great Britain.

Editing by Greg Stutchbury

An Investigative Analysis Suggests Realty Income Is Now Declining Organically And Faces 30%-45% Downside Risk

Report Entitled “O No, Growth Gone Negative”

Spruce Point Capital Management is pleased to announce it has released the contents of a unique research report on Realty Income Corp. (NYSE:O) (“O Realty” or “the Company”). Spruce Point has conducted a critical business and financial review and believes that Realty Income’s same store rent metrics overstate its image as a healthy, growing enterprise. Based on our industry normalized approach, which includes vacancies, we believe that Realty Income is in fact declining organically. We believe the overstatement of approximately 2%, makes the difference between the cosmetic appearance of a growing enterprise vs. a declining one.

As a result, based on our case study analysis of similar REITs that have swung to declining growth, and a detailed valuation analysis, we have issued a “Strong Sell” opinion and a long-term price target of approximately $28-35 per share, or approximately 30-45% downside risk. Please review our disclaimer at the bottom of this email.

Executive Summary

The Allure of Rising Magic Dividends: Realty Income (“O Realty” or “the Company”) promotes itself as “The Monthly Dividend Company®” and preaches “The Magic of Rising Dividends” – it even goes so far as to market itself differently to retail investors vs. sophisticated institutional investors. The Company is very dependent on issuing stock at inflated prices to fund its acquisitive growth strategy, keep its cost of capital low, and consistently raise its dividend. The model has worked well for years when times were good, but we believe this magic cycle is about to break down as investors reassess O Realty’s growth profile amidst deteriorating tenant quality, rising interest rates, and a more volatile and discerning capital market backdrop

O Investors Not Getting The Complete Picture on Same Store Property Reporting: Our forensic accounting work indicates that the true underlying economic performance of O Realty’s properties, as measured by Same Store Rents (SSR) are declining vs. the appearance that it is growing. The Company disclosed its SSR growth rate of 1.2% in 2016. Our industry normalized definition of same store property performance suggests that that SSR declined by 0.8% in that period – an astounding 2.0% overstatement. Once investors come to grips with our differentiated point of view, we expect a major revaluation in O Realty’s share price. There are ample case studies to show 40-50% share price declines when investors revalue a REITs declining performance. For example, Wall Street has penalized a few REITS (DDR (NYSE:DDR), Brixmor Property Group (NYSE:BRX), Kimco Realty (NYSE:KIM)) that own retail properties where the same store growth profile has swung from positive to negative growth. We believe that O Realty is the next REIT that is going to be penalized for a deteriorating growth profile by investors.

Dispositions And Vacancies Are Rising And Likely Aiding Occupancy And SSR Metric Inflation: We believe that dispositions and vacancies are likely managed to cosmetically inflate occupancy and aid O Realty’s SSR metric. We show dispositions on the rise as well as a larger percentage of property sales coming from vacancies. These trends may indicate more competition from malls as well as the limited alternative use for many of O’s real estate properties.

Investors Should Be Concerned By Background of Management and Audit Committee Oversight By Board: We find that O Realty’s executive management team is comprised almost entirely of ex-investment bankers, trained in the art of financial engineering. It should, therefore, come as no surprise that O Realty could use financial magic to embellish its performance. We have little faith in the Company’s audit committee raising any objections or concerns about management’s practices. We find that the audit committee is comprised of a PGA golf professional, and former executives from Wells Fargo and KPMG, two scandal-ridden financial and accounting organizations. Given all the factors we have noted, it makes sense that insider ownership trends are at all-time lows and lowest amongst its REIT peers.

Tenant Quality Deteriorating As Retail Landscape Changes: We conducted a deep dive into the tenant quality and found that O Realty has outsized risk exposure to drug stores, grocery stores and movie theaters -three retail subsectors facing disintermediation. Drug stores (O’s largest sector exposure) are consolidating their retail footprint (i.e. Walgreens (WBA) purchase of +2,000 Rite Aid (RAD) stores), while SSS performance at the store front is down. Even worse, headlines such as Amazon (AMZN) teaming up with Berkshire Hathaway (NYSE:BRK.A) and JPMorgan (JPM) to disrupt the healthcare business present a now tangible long-term risk that the traditional drug delivery value chain through a retail footprint could move increasing online. The Amazon risk extends also to the grocery store vertical given its recent acquisition of Whole Foods. We believe that any retail transaction that is done repetitively and frequently (i.e. grocery and drug store) is ripe for online disruption and, therefore, poses significant risk to the traditional brick and mortar chains and their related real estate profiles. Lastly, movie theater trends (both box office sales and attendance) likely peaked in 2015, and theater chains are not expanding screens. Physical movie theater locations are at increasing risk of disruption as Hollywood and media companies (e.g. Netflix (NFLX), Amazon, Hulu) are spending money to produce original content for their own “at home” media streaming offerings, and new releases that skip the movie theater completely.

Interest Rate Tightening Cycle Another Major Negative Backdrop For O Realty: We expect REITs such as O Realty to remain under pressure. Consensus expectations is that the 10 year treasury will surpass 3.0% by 1Q’19 and O Realty’s historical stock performance exhibits negative correlation with increases in interest rates. We expect O Realty to underperform the REIT sector (IYR) given our newly documented growth concerns and premium valuation enumerated below

Operating Metrics Have Deteriorated While O Realty’s Valuation Remains Sky High: O Realty has lured a dizzying array of analysts to relentlessly promote its story and make it the most expensive triple net lease retail REIT by a wide margin. Analysts see an average of 18% upside to $59/share, yet seem to ignore glaring signs of weakness. Even Janet Yellen warned that commercial real estate prices are “quite high relative to rents.” O Realty has the lowest occupancy rate of 98.3%. If it had not sold 91 vacant properties since the beginning of 2016, the occupancy metric might be as low as 96.6%. Furthermore, O Realty essentially has the lowest remaining lease term of 9.6 years amongst its peers and the highest amount of leases expirations (7.8%) versus their peers over the next two years. In that context, we created a dividend sustainability index where we incorporate average remaining lease duration in order to assess O Realty’s sustainable dividend paying ability vs. prior year periods. This index now stands at its lowest level since the beginning of our data set in 2005. Metrics like this can be an early warning sign that the underlying fundamentals are not as safe as they had been historically. We expect that once investors come to grips with the fact that O Realty’s true growth rate is negative, its multiple will re-rate in line with historical precedents, and its share price will decline by approximately 30-45% or $28-35 per share.

Quick Overview of Key Tenants of the Short Thesis

Capital Structure and Valuation Overview

Source: Bloomberg and Company Filings

(1) Data presented for 2017 is as of September 30, 2017

(2) Implied Cap Rate = NOI/Enterprise Value

O Realty’s Virtuous Circle Showing Cracks

Entering a negative feedback loop: We believe that O Realty is highly dependent on keeping its stock premium inflated to lower its cost of capital to pursue growth. However, we will illustrate that its growth is declining, which will lead to a lower stock price, higher cost of capital and lower investment spreads.

Source: 3Q17 Investor Presentation

Same Property Revenues Are Declining, Not Growing As O Realty Portrays

Our definition represents the true economic performance of the property base and therefore does not ignore vacancies. The magnitude of the overstatement is 2%, which is the difference between growth vs. decline

Source: Company Filings (4Q16 Supplement) and Spruce Point Methodology

Interest Rate Cycle is A Macro Negative: O Realty Stock Price vs. 10 Year Yield

Consensus expectations imply a 3% yield for the 10 year by 1Q19 and 3.5% by the 2Q20. As interest rates rise, O Realty’s stock price exhibits a negative correlation.

Source: Bloomberg

Dividend Sustainability Index At Its Lowest Level

O Realty’s share price enthusiasm has been historically aided by its ability to consistently raise its dividend over time. However, when comparing the duration of the remaining lease terms and current run rate FFO, the dividend sustainability index now stands at its lowest levels since our dataset began in 2005.

Source: Company Filings, Spruce Point Estimates

(1) Dividend Sustainability = (Run Rate FFO x Remaining Lease Term)/Run Rate Dividend

Peer Group – Triple Net Lease Retail

We question why the street is valuing O Realty at the highest amongst its peers when its occupancy, lease duration, and near-term lease renewals all reflect a status at the bottom of its peer group. Further, we will show later in this presentation why the growth profile should be questioned.

Case Studies: 40-50% Downside When Growth Goes Negative For REITs

Spruce Point has identified three example of REITs recently revising growth estimates from positive to negative (DDR, BRX, KIM). In each case, the share prices corrected by 40-50%

A Closer Look Into O Realty’s Same Property Analysis

We believe that the underlying economic performance of a REIT should encompass a “Same Store” metric for all properties owned regardless of whether they are occupied or vacant. O Realty excludes vacancies from their same store pool. This is not standard industry practice as we find a majority of retail peers include vacancies.

Source: 3Q17 Supplemental, Page 21

(1) O Realty’s same store pool also excludes properties under development or involved in eminent domain

Our definition represents the true economic performance of the property base and therefore does not ignore vacancies. The magnitude of the overstatement is 2%, which is the difference between growth vs. decline.

Source: Company Filings (4Q16 Supplement) and Spruce Point Methodology

We rebuilt the 2016 SSR pool by beginning with 2015 SSR pool and then adjusting for acquired properties and properties released after a period of vacancy to arrive at proper comparison to the prior year.

A Closer Look Into Asset Dispositions

We believe that dispositions can be managed to cosmetically enhance aggregate occupancy rates across the portfolio as well as selling properties that may result in re-leased recapture rates that would dilute O Realty’s SSRs.

Vacancy trends indicate a tougher triple net lease environment for landlords. Have the recent vacancies issue at malls begun to bleed over to the stand-alone boxes? Are malls and shopping centers now offering leases that typical triple net lease tenants cannot refuse?

O Realty’s Tenants’ Exposed To Systemic Disintermediation

Amazon has been rumored to enter the pharmacy business (Bloomberg.com), and the Whole Foods acquisition implies that the expansion of the Amazon ecosystem could pose secular risks to a significant portion of what historically has been deemed safe haven real estate assets for the triple-net lease space. We believe that any retail transaction that is done repetitively and frequently (i.e. grocery and drug store) will move online and poses significant threat to the traditional brick and mortar chains and their related real estate.

Walgreens’ (O Realty’s #1 Tenant) U.S. store foot print is suffering with SSS down since the end of 2015. Further, we see looming risk from store closures from their recently closed deal to acquire 2,186 stores from Rite Aid. In October 2017, Walgreens announced a store optimization program where they will close approximately 600 stores.

CVS (NYSE:CVS) (O Realty’s #11 Tenant) store foot print is suffering with SSS at the store front down since the end of 2012. Further, CVS’s announced acquisition of Aetna is likely competitive positioning in advance of Amazon’s entry in the pharmacy business. We believe omni-channel competition poses severe risk for the traditional brick and mortar pharmacy retail footprint.

Industry Box office and attendance trends are both suffering from systemic issues in the exhibitor business. The shrinking window where content can been seen exclusively in a movie theater versus at home has narrowed significantly. Furthermore, some movies are released via an on demand device at the same time as the theater release. Perhaps, even more alarming Netflix, Amazon, Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), and Facebook (NASDAQ:FB) all are devoting more capital to original content. We believe as these trends become more pronounced that they will pose risk to all of the movie theater chains, which have not been investing in new screen growth (bottom right chart). Lastly, there is limited alternative use for movie theater real estate, so releasing to a new tenant will be challenging without significant capital outlays.

Movie Theaters: 5.1% of O Realty’s Rent

Source: boxofficemojo.com and National Association of Theater Owners

AMC Theaters: #6 Tenant

AMC‘s EBITDAR to Rent is well below O’s corporate average of 2.7x and has weakened significantly in the most recent YTD period. The equity markets have already identified the theater level risk: AMC’s stock is down ~64% from January 2017

O Realty Obscures Tenant Level Disclosure

Investors have asked for tenant level disclosure and now a majority of the retail triple net lease peers are providing detail at the tenant level. Why is O hesitant to provide this level of disclosure?

National Retail (NYSE:NNN): Tenant Level

Spirit Realty (NYSE:SRC): Tenant Level

STORE Capital (NYSE:STOR): Industry only

Vereit (NYSE:VER): Tenant Level

Realty Income: Industry only

Governance and Management Concerns

Investors should not be surprised by our findings that O Realty portrays its results in the best light possible with aggressive presentation of its SSR metrics. O Realty’s management team is comprised of a diversified group of investment bankers – skilled in the art of financial engineering. Prior to joining O Realty, none of its top management team have had much experience rolling up their sleeves and managing real estate at the ground level.

Investors should strongly evaluate O’s Board of Directors, and in particular, its audit committee members tasked with overseeing management’s accounting and financial policies.

Director

Committee

Background

Spruce Point Concern

Greg McLaughlin

Audit/Compensation

Currently, the President, PGA TOUR Champions and a Senior Vice President with the PGA TOUR in Ponte Vedra Beach, Florida (2014-present).

A golfing pro with no stated corporate or real estate experience on his bio

Ron Merriman

Audit (Chair)/Corp. Governance

Retired Vice Chairman and partner of KPMG LLP, a global accounting and consulting firm (1967-1997). At KPMG LLP, Mr. Merriman served as Vice Chairman of the Executive Management Committee.

Merriman was a high level executive at KPMG. In recent years during his departure, KPMG has repeatedly been sanctioned by the DOJ for criminal violations (“Largest ever tax fraud” and “Fraudulent Scheme to Steal Confidential Info“). We do not have direct evidence tying him to either of these investigations.

A. Larry Chapman

Audit/Technology Risk

Retired 37-year veteran of Wells Fargo, having served most recently as Executive Vice President and the Head of Commercial Real Estate from 2006 until his retirement in June 2011, and as a member of the Wells Fargo Management Committee.

In recent years, Wells Fargo culture of greed has been exposed through its fake account scandal. A Vanity Fair article explores the issues:
How Wells Fargo’s Cutthroat Corporate Culture Allegedly Drove Bankers To Fraud

We do not have any direct evidence to suggest Mr. Chapman has done anything bad.

Kathleen Allen

Audit and Technology Risk

Professor at Marshall School of Business and the founding director of the Center for Technology Commercialization at the University of Southern California.

No real estate experience

Insider Ownership Declining, While Passive Index Buying

Insider ownership levels are at the lowest since inception, while index buyers such as Vanguard represent a disturbing trend of increased ownership. We suspect Vanguard might be taking O Realty’s SSR growth figures at face value and plugging them into their financial models to calibrate the share price. We hope our evidence suggesting declining SSR will help to correct the over-valuation issue.

Valuation and Downside Case

O Realty’s bullish analysts point to its advantageous cost of capital, and relative balance sheet strength. We believe that the analyst community needs to spend more time analyzing the core “organic” growth profile of the Company.

We also believe that the underlying systemic pressures in some of its major retail sub-sectors needs to be a risk that investors are appropriately compensated for. We applaud Goldman Sachs for being the lone skeptic and below market price target on O Realty.

We expect many analysts to cut their price targets as O Realty’s business and financial challenges become much more evident.

Source: Bloomberg
(1) Includes analysts that provide price targets
(2) Based on $50/share

O Realty looks priced for perfection. O trades at the highest multiple within their retail triple net lease peers. As highlighted below, when the growth profile of a REIT begins to decline, the AFFO multiple compresses significantly.

We question why the street is valuing O Realty at the highest amongst its peers when its occupancy, lease duration and near-term lease renewals all reflect a status at the bottom of their peer group. Further, we will show later in this presentation why the growth profile should be questioned.

Source: Bloomberg, Company Filings and Spruce Point Estimates

(1) We adjust the occupancy for the 91 vacant property sales since the beginning of 2016

(2) Relative Rank from 1 (best) to 5 (worst)

Spruce Point Estimates 30% To 45% Downside In O Realty

We arrive at our price target by applying a range of AFFO multiples commensurate with precedent REIT stocks going into financial decline (DDR, Brixmor, Kimco)

Please review our disclaimer at the bottom of this email.

Disclaimer

This research presentation expresses our research opinions. You should assume that as of the publication date of any presentation, report or letter, Spruce Point Capital Management LLC (possibly along with or through our members, partners, affiliates, employees, and/or consultants) along with our subscribers and clients has a short position in all stocks (and are long/short combinations of puts and calls on the stock) covered herein, including without limitation Realty Income Corp. (“O”, “O Realty” or “the Company”), and therefore stand to realize significant gains in the event that the price of its stock declines. Following publication of any presentation, report or letter, we intend to continue transacting in the securities covered therein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. All expressions of opinion are subject to change without notice, and Spruce Point Capital Management does not undertake to update this report or any information contained herein. Spruce Point Capital Management, subscribers and/or consultants shall have no obligation to inform any investor or viewer of this report about their historical, current, and future trading activities.

This research presentation expresses our research opinions, which we have based upon interpretation of certain facts and observations, all of which are based upon publicly available information, and all of which are set out in this research presentation. Any investment involves substantial risks, including complete loss of capital. Any forecasts or estimates are for illustrative purpose only and should not be taken as limitations of the maximum possible loss or gain. Any information contained in this report may include forward looking statements, expectations, pro forma analyses, estimates, and projections. You should assume these types of statements, expectations, pro forma analyses, estimates, and projections may turn out to be incorrect for reasons beyond Spruce Point Capital Management LLC’s control. This is not investment or accounting advice nor should it be construed as such. Use of Spruce Point Capital Management LLC’s research is at your own risk. You should do your own research and due diligence, with assistance from professional financial, legal and tax experts, before making any investment decision with respect to securities covered herein. All figures assumed to be in US Dollars, unless specified otherwise.

To the best of our ability and belief, as of the date hereof, all information contained herein is accurate and reliable and does not omit to state material facts necessary to make the statements herein not misleading, and all information has been obtained from public sources we believe to be accurate and reliable, and who are not insiders or connected persons of the stock covered herein or who may otherwise owe any fiduciary duty or duty of confidentiality to the issuer, or to any other person or entity that was breached by the transmission of information to Spruce Point Capital Management LLC. However, Spruce Point Capital Management LLC recognizes that there may be non-public information in the possession of Realty Income Corp. or other insiders of Realty Income Corp. that has not been publicly disclosed by Realty Income Corp.. Therefore, such information contained herein is presented “as is,” without warranty of any kind – whether express or implied. Spruce Point Capital Management LLC makes no other representations, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use.

This report’s estimated fundamental value only represents a best efforts estimate of the potential fundamental valuation of a specific security, and is not expressed as, or implied as, assessments of the quality of a security, a summary of past performance, or an actionable investment strategy for an investor. This is not an offer to sell or a solicitation of an offer to buy any security, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction. Spruce Point Capital Management LLC is not registered as an investment advisor, broker/dealer, or accounting firm.

Disclosure: I am/we are short O.

Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Why More Than Half of American Employees Are Afraid to Take a Day Off. Here's Whats Keeping You From Checking-Out

Checking email on the subway, answering phone calls in the evening, staying up until ghastly hours swimming through seas of paperwork.

If you can relate to any of the above, then you’re probably trapped on the hamster wheel of productivity. Being productive is fine, but when you can’t get off, that’s where the problems ensue.

Smartphones have effectively killed off boredom, ushering in a new era of ubiquitous opportunities for self-distraction.

If you’re always either working or being fed a relentless stream of entertainment, how is it possible to get in touch with your own inner thoughts and feelings? The cyber age has turned us into input-output machines, and experts mince no words when it comes to the deleterious effects of technology.

To top it all off, a recent Glassdoor survey bears the grim tale that 54 percent of Americans let their vacation days go by unused.

But why are we so busy all the time? Why do we leave no room for respite? Why would over half of American employees squander perfectly good vacation days?

What Terrifies Us.

Fear is a very powerful and dominant force in our lives. People will do anything to avoid the potential disastrous catastrophes that a fear dictates. So when it comes to the career force, which can be intensely competitive nowadays, it’s only natural that fear should enter the picture.

But what is the main reason for these unused vacation days? According to Scott Dobroski, career trends analyst at Glassdoor, it’s simple:

“Fear,” Dobroski answered in this Market Watch report. “That’s the underscoring theme.”  

People fear getting behind on their work (34%), believe no one else at their company can do the work while they’re out (30%), they are completely dedicated to their company (22%), and they feel they can never be disconnected (21%).

The Remedy to Fear.

Fear generally capitalizes on doubt. What if you don’t make the next deadline? What if people call you unreliable? What if an emergency happens while you’re offline and unreachable?

All the aforementioned worries are merely assumptions, but if you’d like to kick that fear in the butt then you’ve got to take away the grounds for the doubts. So here’s a tip: plan ahead.

Are you going on a vacation next week? Make it your duty to plan for and preempt any possible situation that might need your attention. Let all your colleagues know your schedule. Set aside a specific time of day that you will be available to answer phone calls. Set up your email auto-responder. Write up a list of instructions you can leave by the secretary so that if anything unexpected comes up, there is no confusion.

Now, Time to Relax.

Mindfulness expert Dana Zelicha and CEO of Organizational Well Being Agency recommends to take a moment to reflect on how you woke up this morning. Were you excited to start your day, or did you feel overwhelmed, anxious, or even physically ill by the amount of tasks that awaited you?

If this scenario sounds familiar, you are not alone. What you are experiencing is stress, and this rote routine has become a common side-effect for many employees as the result of the US’s growing workplace stress epidemic. 

Zelicha says that the good news is that meditation can be effective in just a few short minutes when you find a spare moment or in between tasks. Think about all the times you idly scroll through your Facebook newsfeed or browse the internet for the same (if not more) amount of time. Using those pockets of downtime for meditation could be just what the doctor ordered to get you refocused and back on track.

Instant Downtime.

Here are some ideas for you to incorporate instant mindfulness into your life.  Create an island in time by setting an alarm for as little as one minute, and doing one of the following:

  • Focus on your breathing. Inhale, exhale. Go slow. Close your eyes.

  • Spend a few minutes listening to music to lower your heart rate.

  • Sketch on a napkin. Draw whatever’s on your mind.

  • Keep a gratitude journal — every day, write down three things you are grateful for.

  • Pay attention to the sounds around you.

  • Allow yourself to just be. Do nothing. Give yourself a mental reset time to empty your brain of all thoughts and worries.

Drop the excuses; step away from the computer and recharge your life. You’ve only got a limited amount of time on this planet. Make it count.

**Liba Rimler contributed to this article.

Why Didn’t a Planned Safety System Stop Sunday’s Amtrak Crash?

In the wake of Sunday morning’s news about a fatal collision between Amtrak and CSX trains in South Carolina, you may have felt a sense of deja vu. That’s because the crash is the third Amtrak accident in as many months.

In late December, three people were killed when an Amtrak train derailed onto a highway in Seattle. Then in late January, a chartered Amtrak train carrying Republican lawmakers collided with a garbage truck and derailed, causing one fatality.

These recent accidents are part of a longer string of serious passenger train wrecks, the most dramatic of which was the 2015 derailment of a commuter train in Philadelphia, which killed eight. It’s important to point out that traveling by train is still far safer than driving in the U.S., but the rash of accidents demands the question — what’s going wrong?

There are at least two parts to that answer: human fallibility and systemic failures that reach all the way up to the federal government.

A common factor in many recent Amtrak accidents, including both the Seattle and Philadelphia derailments, has been trains exceeding posted speeds through curves or other low-speed areas, in some cases due to driver negligence. Way back in 2008, Congress mandated that passenger and freight railways reduce the risk of speeding by implementing a system called Positive Train Control, which would automatically intervene if trains were going too fast or at risk of collision.

The immediate cause of today’s accident, according to a National Transportation Safety Board press conference, was a switch that routed the Amtrak train onto a siding occupied by a CSX train, and an NTSB spokesperson made clear that a PTC system, if it were working as intended, should have prevented just this sort of crash. The status of PTC installation on the particular track in question isn’t yet clear, but according to the latest data CSX, which owns the track, has only installed PTC on 39% of its track.

Amtrak is actually doing a lot better than that, with PTC installed on 69% of its track. That’s despite the fact that the 2008 PTC mandate came with no funding for Amtrak, which relies on federal funds for system maintenance, to install the technology. Even highly profitable private freight lines argued that the original 2015 deadline was unrealistic, since the technology was still being developed when the original law passed. For its part, Amtrak has partly blamed the slowness of PTC implementation on difficulties obtaining wireless spectrum.

In 2015, Congress voted to extend the deadline for nationwide PTC implementation to the end of 2018, and some transit commentators are already blaming deadline waffling and failure to fund the system for the latest crash.

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The slow and inconsistent implementation of PTC is only one part of the infrastructure issues facing Amtrak, though. Its rails are also aging, and lack of maintenance has played a role in some recent derailments. Amtrak told the New York Times last December that it only realized the severity of track deterioration around New York’s Penn Station after a derailment in April of last year.

Amtrak’s infrastructure woes are part of a much broader decline in spending on airports, roads and rails across the U.S. since the early 1990s. President Donald Trump made major new infrastructure spending a plank of his 2016 campaign, but his newly unveiled plan has been criticized for being vague and underfunded.

Meanwhile, despite the administration’s rhetoric on infrastructure, Trump’s 2018 budget proposal cut federal Amtrak funding by 13%. And in December, the Trump administration pulled $13 billion in funding for Amtrak rail maintenance that had been earmarked by the Obama administration.

American investment in rail projects lags substantially compared to other developed nations. In recent years there has been hand-wringing that America is falling behind not only Japan and France, but even Turkey, China, and Russia in development of high-speed rail. Now, it seems we’re failing to even maintain our aging, inadequate rail systems to an acceptable level of safety.

​Open source is 20: How it changed programming and business forever

Every company in the world now uses open-source software. Microsoft, once its greatest enemy, is now an enthusiastic open supporter. Even Windows is now built using open-source techniques. And if you ever searched on Google, bought a book from Amazon, watched a movie on Netflix, or looked at your friend’s vacation pictures on Facebook, you’re an open-source user. Not bad for a technology approach that turns 20 on February 3.

Now, free software has been around since the first computers, but the philosophy of both free software and open source are both much newer. In the 1970s and 80s, companies rose up which sought to profit by making proprietary software. In the nascent PC world, no one even knew about free software. But, on the Internet, which was dominated by Unix and ITS systems, it was a different story.

In the late 70s, Richard M. Stallman, also known as RMS, then an MIT programmer, created a free printer utility based on its source code. But then a new laser printer arrived on the campus and he found he could no longer get the source code and so he couldn’t recreate the utility. The angry RMS created the concept of “Free Software.”

RMS’s goal was to create a free operating system, Hurd. To make this happen in September 1983, he announced the creation of the GNU project (GNU stands for GNU’s Not Unix — a recursive acronym). By January 1984, he was working full-time on the project. To help build it he created the grandfather of all free software/open-source compiler system GCC and other operating system utilities. Early in 1985, he published “The GNU Manifesto,” which was the founding charter of the free software movement and launched the Free Software Foundation (FSF).

This went well for a few years, but inevitably, RMS collided with proprietary companies. The company Unipress took the code to a variation of his EMACS programming editor and turned it into a proprietary program. RMS never wanted that to happen again so he created the GNU General Public License (GPL) in 1989. This was the first copyleft license. It gave users the right to use, copy, distribute, and modify a program’s source code. But if you make source code changes and distribute it to others, you must share the modified code. While there had been earlier free licenses, such as 1980’s four-clause BSD license, the GPL was the one that sparked the free-software, open-source revolution.

In 1997, Eric S. Raymond published his vital essay, “The Cathedral and the Bazaar.” In it, he showed the advantages of the free-software development methodologies using GCC, the Linux kernel, and his experiences with his own Fetchmail project as examples. This essay did more than show the advantages of free software. The programming principles he described led the way for both Agile development and DevOps. Twenty-first century programming owes a large debt to Raymond.

Like all revolutions, free software quickly divided its supporters. On one side, as John Mark Walker, open-source expert and Strategic Advisor at Glyptodon, recently wrote, “Free software is a social movement, with nary a hint of business interests — it exists in the realm of religion and philosophy. Free software is a way of life with a strong moral code.”

On the other were numerous people who wanted to bring “free software” to business. They would become the founders of “open source.” They argued that such phrases as “Free as in freedom” and “Free speech, not beer,” left most people confused about what that really meant for software.

The release of the Netscape web browser source code sparked a meeting of free software leaders and experts at a strategy session held on February 3rd, 1998 in Palo Alto, CA. There, Eric S. Raymond, Michael Tiemann, Todd Anderson, Jon “maddog” Hall, Larry Augustin, Sam Ockman, and Christine Peterson hammered out the first steps to open source.

Peterson created the “open-source term.” She remembered:

The introduction of the term “open source software” was a deliberate effort to make this field of endeavor more understandable to newcomers and to business, which was viewed as necessary to its spread to a broader community of users. The problem with the main earlier label, “free software,” was not its political connotations, but that — to newcomers — its seeming focus on price is distracting. A term was needed that focuses on the key issue of source code and that does not immediately confuse those new to the concept. The first term that came along at the right time and fulfilled these requirements was rapidly adopted: open source.

To help clarify what open source was, and wasn’t, Raymond and Bruce Perens founded the Open Source Initiative (OSI). Its purpose was, and still is, to define what are real open-source software licenses and what aren’t.

Stallman was enraged by open source. He wrote:

The two terms describe almost the same method/category of software, but they stand for

views based on fundamentally different values. Open source is a development methodology; free software is a social movement. For the free software movement, free software is an ethical imperative, essential respect for the users’ freedom. By contrast, the philosophy of open source considers issues in terms of how to make software ‘better’ — in a practical sense only. It says that non-free software is an inferior solution to the practical problem at hand. Most discussion of “open source” pays no attention to right and wrong, only to popularity and success.

He saw open source as kowtowing to business and taking the focus away from the personal freedom of being able to have free access to the code. Twenty years later, he’s still angry about it. In a recent e-mail to me, Stallman said, it is a “common error is connecting me or my work or free software in general with the term ‘Open Source.’ That is the slogan adopted in 1998 by people who reject the philosophy of the Free Software Movement.”

Philosophical conflicts aside, open source has indeed become the model for practical software development. Larry Augustin, CEO of SugarCRM, the open-source customer relationship management (CRM) Software-as-a-Service (SaaS), was one of the first to practice open-source in a commercial software business. Augustin showed that a successful business could be built on open-source software.

Other companies quickly embraced this model. Besides Linux companies such as Canonical, Red Hat and SUSE, technology businesses such as IBM and Oracle also adopted it. This, in turn, led to open source’s commercial success. More recently companies you would never think of for a moment as open-source businesses like Wal-Mart and Verizon, now rely on open-source programs and have their own open-source projects.

As Jim Zemlin, director of The Linux Foundation, observed in 2014:

A

new business model has emerged in which companies are joining together across industries to share development resources and build common open-source code bases on which they can differentiate their own products and services.

Today, Hall looked back and said “I look at ‘closed source’ as a blip in time.” Raymond is unsurprised at open-source’s success. In an e-mail interview, Raymond said, “Oh, yeah, it *has* been 20 years — and that’s not a big deal because we won most of the fights we needed to quite a while ago, like in the first decade after 1998.”

“Ever since,” he continued, “we’ve been mainly dealing with the problems of success rather than those of failure. And a whole new class of issues, like IoT devices without upgrade paths — doesn’t help so much for the software to be open if you can’t patch it.”

In other words, he concludes, “The reward of victory is often another set of battles.”

These are battles that open source is poised to win. Jim Whitehurst, Red Hat’s CEO and president told me:

The future of open source is bright. We are on the cusp of a new wave of innovation that will come about because information is being separated from physical objects thanks to the Internet of Things. Over the next decade, we will see entire industries based on open-source concepts, like the sharing of information and joint innovation, become mainstream. We’ll see this impact every sector, from non-profits, like healthcare, education and government, to global corporations who realize sharing information leads to better outcomes. Open and participative innovation will become a key part of increasing productivity around the world.

Others see open source extending beyond software development methods. Nick Hopman, Red Hat’s senior director of emerging technology practices, said:

Open-source is much more than just a process to develop and expose technology. Open-source is a catalyst to drive change in every facet of society — government, policy, medical diagnostics, process re-engineering, you name it — and can leverage open principles that have been perfected through the experiences of open-source software development to create communities that drive change and innovation. Looking forward, open-source will continue to drive technology innovation, but I am even more excited to see how it changes the world in ways we have yet to even consider.

Indeed. Open source has turned twenty, but its influence, and not just on software and business, will continue on for decades to come.

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Hiring? Why "Ban the Box" Makes Sense — Even If Not Legally Required

Each year brings an assortment of new hiring laws and local and state regulations for HR pros to navigate. 2018, in particular, is seeing the widespread emergence of laws designed to help even the playing field for job candidates who are typically at a disadvantage. In an effort to combat discrimination and pay inequality, for example, some states no longer allow employers to ask about salary history. Anticipating adoption in other locations, companies like Amazon have moved to enact this as company-wide policy.

California is the latest state to enact a form of “ban the box” legislation, which in California’s case restricts employers from asking about criminal convictions during the application process — until a conditional employment offer is ready to be made. While controversial in some quarters (more on that in a moment), some major employers like Starbucks and Facebook are picking up on the practice even before they are legally required to do so, much as Amazon did with salary history.

According to the National Employment Law Project (NELP), over two-thirds of the American population lives in an area currently covered by some sort of ban-the-box policy. What are legislators hoping to accomplish, and why should businesses think about adopting the practice — like Starbucks did early on — even if they aren’t legally required to do so?

Candidates can’t get past the checkbox.

A single checkbox about criminal history offers little room for context. Answering “yes” to having committed crimes in the past puts a job seeker on a fast track to the rejection pile, regardless of the nature of the offense and its relevance in relation to the job opening. Candidates who acknowledge their criminal history are approximately 50 percent more likely to be declined.

It’s hard enough to get hired even without a knockout question eliminating half of the open opportunities right out of the gates. A study funded by the National Institute of Justice showed that candidates with criminal history fared better when they had an opportunity to directly engage with the hiring managers — but that opportunity isn’t being presented when employers disqualify a “yes” answer immediately. It’s little wonder that these candidates can feel that the system is stacked against them.

“For hard-working and well-intentioned individuals, a criminal history can make the opportunity to find a job and move forward almost impossible to achieve,” said Starbucks CEO Howard Schultz in a 2015 letter to Senator Cory Booker.

A related piece of legislation, the Fair Chance Act, brings ban-the-box policies to the federal government (with exemptions for security and law enforcement positions), and has enjoyed bipartisan support.

Employers are missing out on great candidates.

In such a competitive hiring market with low unemployment, employers often feel the strain of diminished candidate pipelines. Mega-corporations like Starbucks aren’t entirely driven by altruism when they ban the box; they also want improved access to great candidates.

To his credit, Schultz admitted as much in his letter: “None of this is charity. We are simply giving people an opportunity–sometimes a second one–to prove themselves while helping to grow our company.”

This is true at smaller companies as well. The New York Times reported on a 250-employee organic bread company called Dave’s Killer Bread that says 30 to 40 percent of its employees have a criminal history. “We know we get the best possible candidates and employees when we get to have a conversation with them about their background and what happened to them,” executive director Genevieve Martin told the Times.

Just because the box is “banned” doesn’t mean that employers are kept in the dark. The specifics of ban-the-box policies vary, in terms of when or how criminal records can be requested, or background checks performed. The goal is not to sugarcoat history, but to insist that candidates are seen more holistically. This can indeed require more work from hiring managers. But companies like Starbucks and Dave’s have reported being better for it.

Bias still exists, with or without the box.

Of course, changing a field on a job application does little to address underlying systemic problems around incarceration and recidivism. The National Bureau of Economic Research offered some alarming evidence to show that as a result of being unable to block candidates with a criminal record en masse, hiring managers are instead discriminating against the demographic groups they believe are likely to have records.

There are also mounting success stories. NELP notes that job applicants with criminal records were recommended for jobs three times more often in Durham County, NC, after a ban-the-box enactment. Not only are employers getting better candidates, but there are ramifications in everything from public safety to the U.S. GDP.

Most Americans wary of self-driving cars: Reuters/Ipsos poll

(Reuters) – Two-thirds of Americans are uncomfortable about the idea of riding in self-driving cars, according to a Reuters/Ipsos opinion poll, underscoring one of many challenges for companies spending billions of dollars on the development of autonomous vehicles.

While 27 percent of respondents said they would feel comfortable riding in a self-driving car, poll data indicated that most people were far more trusting of humans than robots and artificial intelligence under a variety of scenarios.

The Reuters/Ipsos poll found a wide disparity of opinion by gender and age, with men generally more comfortable than women about using self-driving vehicles and millennials more comfortable than baby boomers. (tmsnrt.rs/2DD4h4W)

Among men, 38 percent said they would feel comfortable riding in a self-driving car and 55 percent said they would not. Among women, only 16 percent said they would feel comfortable and 77 percent said they would not.

Among those skeptical of driverless cars was California resident Phoebe Barron. “I don’t want to be the first guinea pig,” she said in an interview.

Colorado resident Sonja Coy told Reuters she had a more positive view. Self-driving cars “are a great innovation and technology with a lot of potential,” she said.

“However, I‘m concerned with how liability will fall in the case of accidents, where there are both self-driving and regular cars on the road,” Coy said.

FILE PHOTO: Waymo unveils a self-driving Chrysler Pacifica minivan during the North American International Auto Show in Detroit, Michigan, U.S., January 8, 2017. REUTERS/Brendan McDermid/File Photo

Like most people, she said she had not yet ridden in a self-driving vehicle. Companies testing the vehicles in the United States and elsewhere have provided limited public access so far.

“We’re talking about abstract things that many people have not experienced firsthand,” said Jeremy Carlson, principal automotive analyst with IHS Markit.

Automotive and technology industry executives are pushing U.S. lawmakers to pass legislation that would loosen restrictions on testing and deploying self-driving cars. However, the legislation is currently stalled in the Senate.

In the meantime, companies from General Motors Co to Alphabet Inc’s Waymo are planning to deploy the first wave of self-driving vehicles over the next three years.

Industry officials and analysts have said providing convincing reassurances about safety is an urgent task for advocates of autonomous vehicle technology.

The Reuters/Ipsos poll was conducted in mid-January and collected responses from 2,592 adults.

Other recent surveys have also highlighted widespread doubts among U.S. consumers about self-driving cars, in the absence of any direct experience with them.

Reporting by Paul Lienert in Detroit; Additional reporting by Chris Kahn in New York; Editing by Tom Brown

The Cars We'll Be Driving (and Not Driving) in 2018

January has so far proven to be one of the busiest months for the transportation industry. CES in early January was flooded with car news, including the debut of a new $45,000 electric SUV by a Chinese Tesla competitor called Byton. Then, just days after CES wrapped, we had the Detroit auto show, where America’s largest car-makers trot out their designs for the next year. WIRED transportation editor Alex Davies pays close attention to all of these announcements and developments. He joins us this week to discuss the latest in autonomous car tech, electric driving, and why China is the future of the auto industry.

Some notes: What we’ve already learned about the future of cars in 2018. Jack Stewart on Byton’s launch at CES. How automakers getting into self-driving tech are turning to a new breed of manufacturing partners. Recommendations this week: Wormwood on Netflix, Future Home of the Living God by Louise Erdrich, and Electric Dreams on Amazon.

Send the hosts feedback on their personal Twitter feeds. Arielle Pardes is @pardesoteric, Alex Davies is @adavies47, and Michael Calore is @snackfight. Bling the main hotline at @GadgetLab. Our theme song is by Solar Keys.

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Ford Paves a Path From Big Automaker to Big Operating System

In its 114-year history, Ford has been many kinds of automaker. A manufacturing innovator, a hawker of Mustang muscle, a pickup powerhouse. Now the company that helped put a car (or two) in every garage wants to be something else altogether: an operating system.

“With the power of AI and the rise of autonomous and connected vehicles, for the first time in a century, we have mobility technology that won’t just incrementally improve the old system but can completely disrupt it,” CEO Jim Hackett said in a keynote address at this year’s Consumer Electronics Show, trumpeting the pivot. “A total redesign of the surface transportation system with humans and community at the center.”

As Ford executives move to execute the plan, they unveiled yesterday a reorganization of the automaker’s young mobility business, with two acquisitions to help it along. It’s all in service of a new, very 21st century goal. Ford will put less effort into convincing people to plunk down their credit cards for personal cars (though that’s still important) and more into moving them from A to B, with a little Ford badge tacked onto whatever gets them there.

It’s a turbulent time for traditional automakers, which have to keep making money today while aggressively prepping for the market changes—carshare, ridehailing, self-driving—that will happen tomorrow. Ford’s news comes eight months after the company dismissed CEO Mark Fields in favor of Hackett, a former furniture exec who oversaw the formation of Ford’s mobility subsidiary—and promised a greater vision for the future. Earlier this week, the Detroit automaker posted disappointing quarterly profits. Ford blamed rising metal prices while CFO Bob Shanks said, “We have to be far fitter than we are.”

In lean times, every expenditure merits extra scrutiny. And while Ford Mobility President Marcy Klevorn did not disclose how much it spent on its new companies, she says they’re important steps on Ford’s path to becoming more than a big ol’ automaker. “We did an assessment of our strategy and what our gaps were and the speed we wanted to go,” she says. “We looked at where we thought we needed a really fast infusion of help.”

Still, it’s all a little woolly. The thing about being a platform that connects the world is that others have to agree to come aboard. So while Ford tries to woo partners—other carmakers, mobility companies like Uber or Lyft, carsharing companies, bikesharing providers, entire cities—the carmaking continues. Make money now, prep for tomorrow.

OK, let’s look at the details of this new arrangement for tomorrow. Acquisition A is Autonomic, a Palo Alto–based company with a cloud-based platform called … wait for it … the Transportation Mobility Cloud. Autonomic seeks to build a kind of iOS for cities, managing data and transactions between city-dwellers and agencies and companies that provide payment processing, route mapping, mass transit, and city infrastructure services. That sounds vague, because it is.

“By making all these different services available we have no idea what’s going to come so we’re super excited,” Autonomic CEO Sunny Madra told Fortune Thursday. Autonomic seeks to be the go-to platform for other car manufacturers, too, and Klevorn indicated Ford hopes to monetize its cloud service quickly. Somehow.

Acquisition B is TransLoc, a 14-year-old Durham, North Carolina–based company that makes software to help cities, corporate campuses, and universities manage their transportation systems, from traditional fixed-route service to on-demand ridehailing apps like Uber and Lyft. “Ford is interested in taking the streets back in the city, and getting more people out of single occupancy cars,” says CEO Doug Kaufman. “I think one of the reasons that we ended up with Ford and not some other suitor is because our missions are so aligned.” Ford’s execs said they would lean on TransLoc’s existing sales relationships with hundreds of cities and transit agencies to accelerate its platform plan.

Meanwhile, the company is restructuring its Ford Mobility subsidiary. Autonomic is moving into a new accelerator section called Ford X. The Mobility Business Group will handle microtranist service Chariot, car services app FordPass, and digital services. Mobility Platforms and Products will cover autonomous vehicle partnerships and transportation as a service. And a new mobility marketing group will sell it all to the world. (Argo AI, the autonomous vehicle developer that Ford plunked $1 billion into last year, is still technically an independent company.)

It’s close to a throw-it-all-see-what-sticks move, but it does show Ford is charting a different path into this new world than its great rival. General Motors, which acquired startup Cruise Automation in 2016, is all about the autonomous and electric vehicle, with self-driving Chevy Bolts testing on roads in Phoenix and San Francisco. It’s even starting to think about making actual, honest-to-goodness driverless vehicles, this month showing off a design for a steering wheel– and pedal-free EV, and touting plans to get the thing on the road by 2019. The company’s Maven service, which provides car rental and sharing in 11 American cities, could be a great, data-hoovering starting point for a delivery and ridesharing service. And GM employees in San Francisco are using Cruise Anywhere, an Uber-like platform, to catch rides in self-driving testing vehicles. But GM hasn’t as overtly attempted to partner with cities yet, and its broader mobility strategy is hazy. Will GM provide transportation services and not just an excellent autonomous, electric car? Can any American automaker do that?

Ford has been pretty consistent about its admittedly hazy vision for the future of mobility. (At least, consistent with its messaging.) “The bigger risk is doing nothing,” executive chairman Bill Ford told WIRED back in 2015, as he outlined a future where a single, digital ticket could buy you a ride on a car, taxi, subway, bus, or bicycle. “I am very confident that we can compete and morph into something quite different.” Now it’s time to deliver.


Pivot! Pivot!

Burger King Just Made a Commercial About Net Neutrality…Using Whoppers?

Burger King premiered a new Whopper commercial that advocated for net neutrality more than its signature burger.

You may have heard about “net neutrality,” especially since the Federal Communications Commission categorized broadband as a public utility during the Obama Administration in 2015. This meant Internet service providers couldn’t create an Internet fast lane by prioritizing certain online content.

The FCC repealed net neutrality in late 2017, under FCC Commissioner Ajit Pai, who was appointed to the commission by President Obama, but was made chairman by President Trump.

The Burger King commercial, titled “Whopper Neutrality,” explains what could happen without net neutrality. But instead of the Internet, it uses burgers to spread the message.

In the commercial, frustrated Burger King customers choose between the Whopper fast lane vs. slow lane—depending on how much they’re willing to pay. In doing so, they learn that certain non-Whopper menu items are prioritized over others.

For example, people who order a chicken sandwich get their meal quicker. And even though burgers are cooked, assembled, and ready, a Burger King employee explains that policy dictates a very slow handoff.

“I didn’t think ordering a Whopper would really open my eyes to net neutrality,” one customer exclaims in the video.

“We believe the internet should be like Burger King restaurants, a place that doesn’t prioritize and welcomes everyone,” global chief marketing officer Fernando Machado, said in a statement. “That is why we created this experiment, to call attention to the potential effects of net neutrality.”

While this may be true, it’s also still an ad meant to catch the eyes of millennials. Though the video directs customers to an online petition to support in net neutrality, tech news site Recode found no evidence that the burger behemoth has gone to the additional step of supporting net neutrality through lawsuits or lobbying like some major tech companies have done.

Did Mnuchin Signal A Policy Shift Today?

Did US Treasury Secretary Mnuchin signal a change in the US dollar policy? Probably not. As Mnuchin and President Trump have done before, a distinction was drawn between short- and longer-term perspectives. In the short-term, Mnuchin says weaker dollar is good for US trade and “other opportunities”. In the longer term, Mnuchin explicitly acknowledged, “The strength of the dollar is a reflection of the strength of the US economy.”

The market chose to focus on the first part of the comment because it was already selling dollars and this offered justification at an important inflection point. The dollar has strung together a 4-5 week slide despite macroeconomic conditions, including strong growth, tax cuts, the relative and absolute increase in interest rates, and the anticipation of additional Fed tightening, usually associated with a stronger dollar.

Mnuchin unknowingly pushed on an open door. “Unknowingly” because it did not break new ground, and Commerce Secretary Ross tried clarifying the statement relatively quickly. Mnuchin may have been the most surprised by the impact of his comments. One gets a sense that he is still learning the nuances of his position and, perhaps, the disdain with which the administration holds mainstream media, obscured by how the media and markets hang on every word of the Treasury Secretary, especially regarding the dollar.

In some ways, Mnuchin’s precise meaning is unimportant. The point is that they were said within an important context. The Trump administration just levied protective tariffs on solar panels and washing machines. It is expected to decide soon on steel and aluminum. President Trump has threatened action on China’s intellectual property rights violations as well.

The US is blocking the appointment of judges for WTO panels, which will jeopardize the conflict resolution mechanism (the teeth) of trade practices. Although President Trump has suggested that the NAFTA talks are progressing, many still fear that the talks will collapse due to US demands or withdrawal, as the president has threatened.

Through the mid-1990s, the US and other countries habitually wanted to directly influence the foreign exchange market. Countries sought competitive advantage. However, beginning with Rubin’s “strong dollar policy,” best practices evolved toward letting markets determine exchange rates. This is now the official position of the G7 and G20. In effect, the foreign exchange market was de-weaponized.

That is the real meaning of the much-maligned strong dollar policy. The US would not use the dollar’s exchange rate to secure some trade or policy concession or purposely seek to depreciate the dollar to reduce its debt burden. With the disruption potential of the US administration, investors and allies are rightfully and genuinely concern that this is another part of the modern liberal global order that may be abandoned. It may be abandoned, but it is not being abandoned today.

As we noted, the dollar has been falling persistently since the middle of December. It looked as if there may have been a window of opportunity for it to stabilize this week. The technical conditions were stretched, market positioning extreme, and the Bank of Japan and European Central Bank would likely push against speculation of a near-term change in their respective policies.

Perhaps, concerned about triggering the ire of the mercurial US administration, European and Japanese officials have been particularly circumspect in their remarks about their currencies strength. The new head of the Eurogroup (eurozone finance ministers) Centeno did not express concern about the euro’s strong appreciation. The ECB’s Constancio’s remarks were a bit more pointed but simply noted that premature tightening would jeopardize the inflation target. Japan’s Finance Minister Aso saw no problem with the dollar approaching JPY110 but sought a gradual adjustment.

There is another reason that Mnuchin most likely did not announce a weak dollar policy today. A week from now, the US Treasury will announce its quarterly refunding plans. Mnuchin has previously acknowledged that there will be a substantial increase in Treasury issuance this year. Last year’s net sales were around $550 bln. This year, net issuance is likely to be double that if not a bit more. A third or so will be T-bills when the debt ceiling is eventually lifted.

The increased supply meets unknown demand in the sense that the Federal Reserve will be buying progressively less as it does not reinvest the full amount of maturing paper. In the first half, the Fed will not replace $150 bln, and in the second half, it will not replace $270 bln.

China and Japan, the two largest holders of US Treasuries, were net sellers in November, the latest TIC data showed. As the dollar falls, other central banks in Asia appear to be inclined to buy Treasuries. Europe seems cool to Treasuries. Germany still offers negative yields out six years and France out four years, but investors seem to be more attracted to the periphery of Europe than the US bond market.

The point is that it beggar’s belief that Mnuchin was talking the dollar down, introducing new currency risk, ahead of the quarterly refunding and a significant increase in the supply of Treasuries in the months ahead. Understanding what Mnuchin really said will not stop the dollar from falling. Many momentum players have their sights set on $1.25-1.26 for the euro, $1.45 for sterling, and JPY108.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Intel Says the Patch Designed to Fix Flawed Chips Is Faulty

Intel Corp (intc) said on Monday that patches it released to address two high-profile security vulnerabilities in its chips are faulty, advising customers, computer makers and cloud providers to stop installing them.

Intel Executive Vice President Navin Shenoy disclosed the problem in a statement on the chipmaker’s website, saying that patches released after months of development caused computers to reboot more often than normal and other “unpredictable” behavior.

“I apologize for any disruption this change in guidance may cause,” Shenoy said. “I assure you we are working around the clock to ensure we are addressing these issues.”

The issue of the faulty patches is separate from complaints by customers for weeks that the patches slow computer performance. Intel has said a typical home and business PC user should not see significant slowdowns.

Intel‘s failure to provide a usable patch could cause businesses to postpone purchasing new computers, said IDC analyst Mario Morales.

Intel is “still trying to get a handle on what’s really happening. They haven’t resolved the matter,” he said.

Intel asked technology providers to start testing a new version of the patches, which it began distributing on Saturday.

For more on the chip security flaw, watch Fortune’s video:

The warning came nearly three weeks after Intel confirmed on Jan. 3 that its chips were impacted by vulnerabilities known as Spectre and Meltdown, which make data on affected computers vulnerable to espionage.

Meltdown was specific to chips from Intel, as well as one from SoftBank Group’s ARM Holdings. Spectre affected nearly every modern computing device, including ones with chips fromIntel, ARM and Advanced Micro Devices.

Problems with the patches have been growing since Intel on Jan. 11 said they were causing higher reboot rates in its older chips and then last week that the problem was affecting newer processors.

The Wall Street Journal first reported Intel asking customers to halt using the patches.

Rocket Lab Test Flight Launches Three CubeSats to Orbit

The launch company Rocket Lab has amusing names for its missions. The first, in May, was called “It’s a Test” (it was). When the staff debated what to call the second launch of their diminutive Electron rocket, so sized (and priced) specifically to carry small satellites to space, they said, “Well, we’re still testing, aren’t we?”

They were. And so “Still Testing” became the name of Rocket Lab’s second launch, which took place on January 20, at around 8:45 pm Eastern Standard Time. In December, the company canceled multiple attempts before rescheduling the launch window for 2018. The livestreamed rocket lifted off from the Mahia Peninsula in New Zealand, headed for someplace with an even better view.

Despite the uncertainty surrounding the launch (or any test launch, for that matter), the rocket was carrying real payloads for real customers: three small satellites, one for a company that images Earth and two for one that monitors weather and ship traffic. But why on Earth would a satellite company choose a rocket-in-progress when there are so many reliable launchers out there? After all, even established rockets blow up sometimes.

Rocket Lab

The short answer is that smallsats—which the Electron was built to transport, exclusively—are by nature expendable. Smallsat makers like Planet and Spire, the two clients on this mission, have ever-growing, genetically similar populations of orbiters. So losing one or two in a less-than-successful test flight? Probably worth the risk. Smallsat companies are willing to put their hardware on this particular liftoff line because the Electron is poised to be the first commercially bookable rocket built specifically for small payloads, which typically have to piggyback on big, expensive rockets with big, expensive payloads that don’t launch often enough and aren’t always headed to their orbit of choice. In the next decade, 3,483 small satellites (between 1 and 100 kilograms) will go to space, generating just over $2 billion of launch revenue, according to the Small Satellite Markets, 4th edition report, which research and consulting firm Northern Sky Research released last month. In this future world where thousands more smallsats provide environmental, economic, and even political intelligence, as well as Earth-covering internet, the test-steps necessary to get on up to space quickly, cheaply, and precisely seem worth the risk not just to Planet and Spire but, perhaps, to you and me.

But boy, was there risk. While Rocket Lab’s first Electron didn’t explode and did reach space—and so gets at least an A- for its first attempt—“It’s a Test” didn’t quite get to orbit. After an investigation, Rocket Lab determined that, four minutes post-blastoff, ground equipment (provided by a third party) temporarily stopped talking to the rocket. When communication breaks down, Official Procedures demand that safety officials stop the flight. And so they did..

But the rocket itself, according to the same investigation, was sound—so the company moved on to a test delivery. “It’s really the next logical step,” says Peter Beck, Rocket Lab’s founder.

Beck seems uncannily logical about the risks his young company is taking. When asked about his feelings about launching actual stuff on “Still Testing,” he replied that doing so certainly involved extra actual tasks. “I’m not sure if you can become extra nervous or extra excited,” he said. That sentiment fits with the launches’ pragmatic names. And those fit with New Zealanders’ general pragmatic streak, says Beck (he cites some of the country’s names for flowing water: “River One,” “River Two,” “River Three”).

For their part, Planet and Spire are here for that no-nonsense-ness. Planet already has around 200 satellites in orbit, so adding one to its flock of so-called “Doves” would be good but not critical. Besides, says Mike Safyan, Planet’s director of launch, “we picked one we wouldn’t miss too much”: a sat named Pioneer. It’s a double meaning, says Safyan. First, it’s an homage to NASA’s old missions, on whose shoulders they stand.

Second meaning: They are pioneers. “There is this New Space wave that Planet is very much at the forefront of and Rocket Lab is very much at the forefront of,” says Safyan.

This is what the forefront looks like, by the way: You can book space on an Electron rocket online—just click the size of your smallsat!—the same basic way you’d book a bunk on Airbnb.

Spire, too, is into it. Jenny Barna met Peter Beck before she had her current job, as the director of launch at Spire, whose satellites aim to keep track of aeronautical and nautical-nautical traffic, as well as weather. Back in her days at SSL, which makes spacecraft and communications systems, a coworker invited her to a presentation Beck was giving on-site. She listened to Beck describe Rocket Lab’s technology, and his vision for a vehicle that provided frequent, affordable launches just for little guys—in an industry that caters to huge sats, and makes smallsats second-class passengers—and she was intrigued. “I remember sitting there thinking how lucky I am to be working at this industry at this time,” she says. And after she moved to Spire, she led the company to sign on as one of Rocket Lab’s first customers. It’s currently contracted for up to 12 launches.

That’s a lot! But Spire has to launch a lot. The company wants access to space every month, so they can produce their satellites in small batches, send them up, iterate, and launch the next generation. So far, Spire has launched 40 satellites. They’ve done it on the rockets of Russia (Soyuz and Dnepr), Japan (H-IIB), and India (PSLV), and the rockets of the US’s Orbital (Antares) and ULA (Atlas V). And now, they’ll ride with Rocket Lab, picking on a rocket of their own satellites’ size.

But that doesn’t mean they’ll ever only use Rocket Lab. Or Orbital. Or ULA. They plan to keep their eggs distributed—partly because even when it’s not just a test, rockets still blow up, the eggs breaking along with them. “It’s just part of the industry,” says Barna.

When Barna spoke of “Still Testing” a few days before the initial launch window, she was straight-up about the possibility that this particular rocket wouldn’t carry the eggs safely to space. “We know that a million things have to go perfectly for this to be successful,” she said. “We hope they make history.”

They did, and deployed the three-satellite payload into orbit. And pending analysis of this seemingly successful test, Rocket Lab will skip its planned third test and jump straight into official operations, in early 2018. “We’ve got a lot of customers that need to get on orbit,” says Beck.

Suggestion for the third flight’s name: “This Is Not a Test.”

Before You Even Think About Scaling Your Business, You Need To Figure Out These 5 Things

Every entrepreneur wants to know how to scale.

The challenge, however, is that scaling requires both an unrelenting ambition to grow, and simultaneously, an extreme amount of patience. Scaling is not as easy as throwing money at a problem, or hiring as many people as possible. If anything, those kinds of decisions end up running you into the ground. 

Instead, I like to think of scaling as the result of your foundation. The stronger the foundation, the easier it is to scale.

What does a strong foundation look like?

The easiest way to determine whether you have a strong business foundation is to look at your churn rate. How long do your customers stick with you? Do they leave immediately? Or are they loyal–and more importantly, do they bring their friends to your business over time?

When a business has a shaky foundation, they’re stuck in a vicious cycle of constantly replacing the clients they’re losing. You don’t build a business by selling, selling, selling. You build a business by selling, and then retaining. And you exponentially build a business when those clients you’re retaining end up attracting new clients for you–because your product or service is that good.

So, here are the five things you need to have figured out before you can scale your business effectively.

1. It’s all about the customer.

One of my favorite quotes is by Sam Walton, founder of Walmart and Sam’s Club. He said, “There is only one boss, the customer, and he can fire everybody from the chairman on down by simply bringing his business somewhere else.”

That’s the absolute truth.

This is something I talk about extensively in my book for emerging entrepreneurs, All In. If you don’t have your eye on the client experience every minute of every day, you’re completely missing the point of why you are in business. Without them in your corner, any venture you start may as well be a very expensive vanity project–because you’re only doing it for yourself.

If you want to be a huge hit out of the gate, you need to work on creating an army of raving fans. Look at a company like Apple. Once people buy their Mac or iPhone, they’re hooked. You rarely see people go back to PCs, even though Macs have their flaws too. Why? Because Apple isn’t just selling products to their customers–they’re a lifestyle choice. Even now, after the golden Jobs era has passed, their customers still love them in an almost irrational way. They don’t just want them; they think they need them.

That’s the kind of fervent loyalty you want to inspire in your customers. Make them so crazy for you that they can’t live without you.

2. Fix mistakes fast.

If you can’t fix the small errors now, how do you expect to fix the big errors later on?

Repeat after me: it’s never the customer’s fault. When trouble hits, don’t be defensive about it. Don’t run around trying to assign blame. Just fall on your sword and do whatever it takes to fix it fast.

More than anything, this is a habit. It’s a conscious decision you make as an entrepreneur, the leader of your company, to do right by your customers. And if you can’t get it right when you’re still small, then scaling isn’t going to make those issues go away.

Take the time to get your processes in place now.

I don’t count the screw-ups that happen in my companies as much as I keep tabs on how quickly problems are resolved. I always tell my people, “We’re all human, and we’re going to make mistakes. But the customer is going to remember how fast you fix the problem more than they’re going to remember the mistake itself.”

3. Underpromise, overdeliver.

You may demand perfection from yourself, your partners, and your employees, but you can’t let that carry over to how you talk to your customers. 

Don’t promise perfection to them. Just don’t. 

I know in this modern age, ideally, everything should be perfect all the time, right? But nobody is doing things perfectly all the time. It’s never happened din the history of business (it’s never happened in the history of anything).

Especially if you’re looking to scale a high-volume business–which I went through when I was scaling Wilmar Industries–then you have to determine a perfection ratio that works best for you. The smart thing to do is to make reasonable promises to your customers and then over-deliver on your promise. There is something about human nature that loves the pleasant surprise. 

When you do it even better than what they expected, they love you for it.

4. Tailor your experience to the customer–don’t expect them to adjust to you.

This is a hugely important lesson in today’s market.

You can’t make customers adjust to you. You have to tailor your experience to them, and make them feel like they’re part of your family.

When new companies first attempt to scale, this tends to be the first thing thrown out the window. Suddenly, customers start getting treated like commodities, and what once was a personalized experience becomes a copy-paste interaction.

Let me tell you: that’s one of the fastest ways to show your customers you don’t care (and remember, it’s all about the customer).

I remember back in the 90s, once we had our Houston branch up and running, we noticed Texans didn’t like talking to our New Jersey-based customer service representatives. Want to know why? Because they thought we were a bunch of carpetbagging Yankees. (Some traditions die hard.)

Texans, by and large, wanted to hear a Southern voice when they called us. Being fanatical about customer service, I decided to create regional customer service centers all over the country. This is done all over the place today, but we were way ahead of the curve back in the ’90s. I even invested a million dollars in a phone system that would funnel calls to the appropriate region–so when somebody called from a specific area code, it went to their regional office. And in Houston, we hired locals to answer the phones so their background and accents were familiar to our Texas clients.

I know what you might be saying: “You really spent a million dollars on a phone system?”

No, I spent a million dollars on customer service.

5. You have to believe in yourself.

Call it cliche, but there is a big difference between an entrepreneur running a company with the belief he can scale it to the moon, and one who still isn’t sure if he can or not.

The head coach of the New England Patriots, Bill Belichick, has a way of motivating his players, and raising their expectations so they believe that they will win–every single time. The same goes for business. If you really want to become that Super Bowl team, that multi-million dollar (or even billion dollar) company, then you’ve got to start expecting big things from yourself.

At a certain point, you can’t just look the part. You have to be the part, feel it in everything you do, and know deep down that what you’re doing today is going to get you to where you want to be tomorrow.

End of a chip boom? Memory chip price drop spooks investors

SEOUL (Reuters) – After a blistering year-and-a-half long surge, a sudden drop in some memory prices, followed by Samsung Electronics Co’s disappointing profit estimate, is causing jitters among investors who had bet the chip boom would last at least another year.

Amid news that the market has started losing some steam – prices of high-end flash memory chips, which are widely used in smartphones, dropped nearly 5 percent in the fourth quarter – some analysts now expect the industry’s growth rate will fall by more than half this year to 30 percent.

That led shares in Samsung to dip 7.5 percent last week, while its home rival SK Hynix fell 6.2 percent. But analysts say that there is unlikely to be a sudden crash, and that 2018 should be a relatively stable year for chipmakers.

The $122 billion memory chip industry has enjoyed an unprecedented boom since mid-2016, expanding nearly 70 percent in 2017 alone thanks to robust growth of smartphones and cloud services that require more powerful chips that can store more data.

Supply also has become more disciplined following years of consolidation that reduced the number of manufacturers to a handful from around 20 in mid-1990s.

“Memory chips will likely see a gradual price decline in 2018 if demand remains strong and appetite from servers holds,” said Lee Jae-yun, analyst at Yuanta Securities Korea.

But growth of 30 percent is a strong gain in an industry known for volatility, and the market is still on course for its longest ever boom after shrinking 6 percent in 2016.

Last year’s explosive growth gave chipmakers cash to reinvest and boost output, analysts said. The supply of NAND flash memory chips, in particular, will grow 43 percent this year, up from last year’s 34 percent, causing prices to drop by about 10 percent, brokerage Nomura estimates.

Nomura expects growth in output will be largely led by the likes of Western Digital, Toshiba Corp and Micron Technology Inc as they seek to catch up with top-ranked Samsung, which controls about 40 percent of the flash memory chip market.

NO DOOM SEEN

Smartphone vendors have been including more memory in their phones and charging more for them, allowing them to weather last year’s price surge, analysts say.

Average DRAM memory of new models launched last quarter increased by 38 percent from the second quarter of 2016, while NAND content measured by gigabyte jumped 84 percent, according to an analysis by BNP Paribas.

Such solid demand will keep the industry’s margin healthy this year, and chipmakers’ investment in more advanced technology will help them cut production costs and stay profitable even as prices ease, analysts say.

Macquarie estimates Samsung’s chip division’s operating profit margin jumped to 47 percent last year from 26.5 percent in 2016, and will rise further to 55.5 percent this year.

While the NAND flash market may soften somewhat, the DRAM memory chip market, which is about $20 billion bigger than the NAND industry, is seen as much tighter. Prices are expected to gain nearly 9 percent because of a severe supply shortage.

With DRAM manufacturers’ rushing to ramp up production – they are likely to nearly quadruple capital spending for 2017 and 2018 combined to $38 billion from 2016’s $10 billion – prices may decline as much as 18 percent next year, according to Nomura.

That gives some investors confidence in the industry’s long-term future.

”Besides some minute adjustment, I am currently holding Samsung shares almost without change,” said Kim Hyun-su, fund manager at IBK Asset Management. “I don’t think the share price is expensive as they have recently been increasing dividends a lot – and as of now, the expected profit levels are very high.”

PRESSURE FROM CLIENTS

Smartphone makers account for about one-third of global memory chip demand, and many have been pressing suppliers to lower prices.

In late December, state-run China Daily reported China’s National Development and Reform Commission (NDRC) was paying close attention to a surge in the price of mobile phone storage chips and could look into possible price fixing by Samsung and others that make them.

More than 50 percent of Samsung’s 2017 memory business revenue came from China, according to chip price tracker DRAMeXchange.

“Although supply-demand dynamics are still solid, clients’ pressure to lower prices make it hard to predict” what will happen, said MS Hwang, an analyst at Samsung Securities, which is an affiliate of Samsung Electronics.

Reporting by Joyce Lee; Editing by Miyoung Kim and Gerry Doyle

Trading The Coming Earnings Hit On Apple

By now, you are all long up the wazoo with shares of Apple (AAPL). How would you respond if I told you that Steve Jobs’ creation is about to take a gigantic $33 billion earnings hit? My guess is that you’d jump off the nearest bridge, slit your wrists, or at the very least, come down with a severe case of Montezuma’s revenge.

I can pretty much guarantee you that such a blockbuster announcement is headed your way in the coming weeks, if not days. What the heck happened? Wasn’t the dream scenario playing out for big tech? It is. But these days, things are complicated. Very complicated.

Buried in the tax bill passed with great haste at the end of 2004 is a provision that allows US companies to repatriate profits they have held overseas for the past 14 years. We’re not talking small beer here.

The latest estimate for this figure is some $2.8 trillion, which is stashed away in the bank accounts of subsidiaries in Switzerland, the Cayman Islands, and Liechtenstein.

Five companies account for about one third of this total, including Apple, Microsoft (MSFT), Pfizer (PFE), Cisco (CSCO), and Oracle (ORCL).

Oil companies, and other companies with major international business, like Johnson & Johnson (JNJ), Morgan Stanley (MS), and Procter & Gamble (PG), account for much of the rest.

Until now, if management wanted to bring this money back to the US, they would have to count it as regular income and pay a stiff 35% tax rate. As of January 1, they can repatriate the funds and pay as little as 8%.

And here’s the problem. These one-time-only tax payments have to be counted as a current expense. The amounts are so huge that they would be enough to wipe out all present operating earnings.

For example, in Apple’s case, one estimate has the tax bill as high as $33 billion as the company brings home money from dozens of different foreign domiciles.

The writing is already on the way. Goldman Sachs (GS) has already said that it expects a tax hit of $5 billion, while Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) has come in at $2.3 billion.

The logic behind the tax cut is that repatriated money would be used to build more factories and hire more people in the good old USA.

Past repatriations prove that nothing of the sort will take place. In 2004 the Bush Administration engineered just such a break. Some $312 billion was brought back and almost entirely invested in share buybacks and dividend payments.

This all goes back to my argument at the end of 2017 that one way or the other the entire $1.5 trillion tax package will end up in the stock market one way or the other. The market action since then totally vindicated that view.

So what to do about Apple? Here’s where it really gets complicated.

Going forward, multinational companies now have to pay only 10.5% on their foreign earnings and 21% for domestic earnings. It is a big incentive to close down US production facilities and ship them, and their jobs, overseas. You really have to wonder who thought this stuff up.

After all, does Apple want to pay the $14 an hour it gives low-end workers in the US now, or $1 an hour to workers in India where its next big growth market is located?

Apple has been expecting a reoccurrence of exactly this sort of tax windfall for at least a decade and has been reserving for it annually. But it thought the tax rate would be much higher, around 13%.

The net result is that by underestimating the generosity of future administrations it has over reserved for the prospect, meaning that instead of generating a monster $33 billion loss repatriation, it could create a surprise $3 billion profit.

So the bottom line here for Apple is that you hang on to the stock, where I have a price target of $200, and is now looking exceedingly conservative.

If for some reason the tax announcement DOES generate a big drop in the shares, jump in with both hands and buy it.

There are other weird quirks to the new tax law. Foreign companies operating in the US also are entitled to use the break. This means that if your US operations have been running at a loss, which is the case with Daimler Benz (OTCPK:DDAIF) and BMW (OTCPK:BMWYY), it generates a surprise $1 billion profit.

Tax breaks for Germans. Who ever thought of that? Talk about unintended consequences with a turbocharger.

In the meantime, attorneys and accounts are pouring over the new code harvesting hundreds of new tax loopholes no one ever thought possible. We will stay tuned and keep you informed of the important ones, as taxes are a regular part of the coverage of this letter.

My bet is that unintended consequences are creating entire new industries that no one imagined possible. That is how an innocent tax break to help new technology startups with carried interest turned into the gargantuan trillion-dollar private equity industry of today.

Here’s another unintended consequence for you. The combined tax paid this year by repatriating companies should total around $235 billion. That will slow the current meteoric growth in the US budget deficit and it means your short position in the bond market may take a little longer to play out.

Don’t we live in a bizarre, upside down Alice in Wonderland world these days?

In the meantime, I’ll be checking out commercial real estate in Switzerland, the Cayman Islands, and Liechtenstein.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

YouTube Hints at ‘Further Consequences’ for Logan Paul After Controversial Suicide Video

YouTube responded to a controversial video uploaded by video blogger Logan Paul of an apparent suicide victim last week, saying that it’s taking steps “to ensure a video like this is never circulated again.”

The response comes after the popular YouTube star apologized for and removed a video of himself and his friends taken in Japan’s notorious Aokigahara forest, which is known as a magnet for suicides.

Although Paul initially said the video was intended to raise awareness about suicide, critics slammed him for seemingly making light of a serious situation. At the time, YouTube issued a short statement saying that it “prohibits violent or gory content posted in a shocking, sensational or disrespectful manner,” but it did not say whether it would take any action against Paul or if it would delete his account.

In Tuesday’s statement, YouTube elaborated by saying it is “looking at further consequences” against Paul, although it didn’t specify what those would be or why it has waited a week to react beyond the original short statement. It acknowledged that it failed to communicate quickly enough with users about the incident, saying: “Many of you have been frustrated with our lack of communication recently. You’re right to be.”

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YouTube also expressed shock at the video and added that “suicide is not a joke, nor should it ever be a driving force for views.”

Paul, who has over 15 million YouTube followers, has not uploaded a video to YouTube since last week when he apologized in a separate video.

YouTube has faced criticism that it fails to properly screen its service for inappropriate content. In November, several big-name advertisers like Adidas and candymaker Mars said they would suspend advertising on YouTube because their online ads sometimes appeared next to videos that appeared to exploit children.

The streaming service has been trying to crack down on inappropriate content by hiring more human reviewers and using technology to automate the process of flagging offensive videos.

“Now, we are applying the lessons we’ve learned from our work fighting violent extremism content over the last year in order to tackle other problematic content,” wrote YouTube CEO Susan Wojcicki in a blog post in December. “Our goal is to stay one step ahead of bad actors, making it harder for policy-violating content to surface or remain on YouTube.”

Denmark's GN takes aim at Apple with wireless earbuds

COPENHAGEN (Reuters) – Denmark’s GN Store Nord is aiming to win a bigger slice of the rapidly growing market for wireless earbuds by introducing a new product challenging Apple’s popular Airpods.

Wireless is expected to account for an increasing share of the $9.6 billion global earphone and headphone market and that means intense competition between tech companies keen to cash in on the trend.

Integrating Amazon’s voice control system Alexa and halving the price are among the steps taken by GN to attract new customers with its latest product.

“We’re expanding our brand to deliver products aiming for a broader segment dominated by Apple,” René Svendsen-Tune, chief executive of GN’s audio division, told Reuters.

GN is better known as a hearing aid maker but draws on a Danish tradition of innovation stretching back to 1869 when it started life as a telegraph company.

In fact, its hearing aid division has benefited from working closely with Apple for years by using bluetooth-like technology that, installed in the ear, allows users to stream voice and music from their iPhones.

It will continue that cooperation while competing with the tech giant on the wireless earphone market, Svendsen-Tune said.

GN launched its first wireless earphones in November 2016. The following month Apple launched its Airpods after dispensing with the plug-in for jack cables in its iPhone 7.

GN’s original earphones, tailored for athletes with features to track progress and measure heart rate, sold for $370, twice as much as Apple’s equivalent.

“Apple has helped develop this market with great speed but now we’re launching a new generation,” Svendsen-Tune said, speaking ahead of the launch of the product at the Consumer Electronics Show in Las Vegas.

In the first half of 2017 around 900,000 wireless headphone units were sold in the U.S. alone, and since the launch in 2016, Apple has accounted for 85 percent of the sales, according to data from the NPD Group.

GN said it was in second place but had only a single figure market share. But the market is still evolving and competition is fierce.

“If we can maintain a second place in 2018, I believe we will have done very well,” Svendsen-Tune said.

GN’s audio division accounts for 40 percent of the company’s revenue, while the hearing aid division contributes 60 percent.

($1 = 6.1815 Danish crowns)

Reporting by Julie Astrid Thomsen; Editing by Keith Weir

Google Spent Years Studying Effective Teams. This Single Quality Contributed Most to Their Success

The best companies are made up of great teams. You see, even a company full of A-players won’t succeed if those individuals don’t have the ability to work well together.

That’s why not too long ago, Google set out on a quest to figure out what makes a team successful. They code-named the study “Project Aristotle,” a tribute to the philosopher’s famous quote, “the whole is greater than the sum of its parts.”

To define “effectiveness,” the team decided on assessment criteria that measured both qualitative and quantitative data. To do this, they analyzed dozens of teams and interviewed hundreds of executives, team leads and team members.  

The researchers then evaluated team effectiveness in four different ways:

1. Executive evaluation of the team

2. Team leader evaluation of the team

3. Team member evaluation of the team

4. Sales performance against quarterly quota

So, what did they find?

Google published some of its findings here, along with the following insightful statement:

The researchers found that what really mattered was less about who is on the team, and more about how the team worked together. 

What Mattered Most

So what was the most important factor contributing to a team’s effectiveness?

It was psychological safety.

Simply put, psychological safety refers to an individual’s perception of taking a risk, and the response his or her teammates will have to taking that risk.

Google describes it this way:

“In a team with high psychological safety, teammates feel safe to take risks around their team members. They feel confident that no one on the team will embarrass or punish anyone else for admitting a mistake, asking a question, or offering a new idea.”

In other words, great teams thrive on trust.

This may appear to be a simple concept, but building trust between team members is no easy task. For example, a team of just five persons brings along varying viewpoints, working styles and ideas about how to get a job done.

In my forthcoming book, EQ, Applied: The Real-World Guide to Emotional IntelligenceI analyze fascinating research and real stories of some of the most successful teams in the world. 

Here’s a glimpse at some of the actions that can help you build trust on your teams:

Be authentic.

Authenticity creates trust. We’re drawn to those who “keep it real,” who realize that they aren’t perfect, but are willing to show those imperfections because they know everyone else has them, too.

Authenticity doesn’t mean sharing everything about yourself, to everyone, all of the time. It does mean saying what you mean, meaning what you say, and sticking to your values and principles above all else.

Set the example.

Words can only build trust if they are backed up by actions.

That’s why it’s so important to practice what you preach and set the example: you can preach respect and integrity all you want; it won’t mean a thing when you curse out a member of your team.

Be helpful.

One of the quickest ways to gain someone’s trust is to help them.

Think about your favorite boss. Where they graduated from, what kind of degree they have, even their previous accomplishments–none of this is relevant to your relationship. But how about the time they were willing to take out of their busy schedule to listen, help out, or get down in the trenches and work alongside you?

Trust is about the long game. Help wherever and whenever you can.

Disagree and commit.

As Amazon CEO Jeff Bezos explains, to “disagree and commit” doesn’t mean ‘thinking your team is wrong and missing the point,’ which will prevent you from offering true support. Rather, it’s a genuine, sincere commitment to go the team’s way, even if you disagree.

Of course, before you reach that stage, you should be able to explain your position, and the team should reasonably weigh your concerns.

But if you decide to disagree and commit, you’re all in. No sabotaging the project–directly or indirectly. By trusting your team’s gut, your people gain confidence, and you give them room to experiment and grow.

Be humble.

Being humble doesn’t mean that you lack self-confidence, or that you never stand up for your own opinions or principles. It does mean recognizing that you don’t know everything–and that you’re willing to learn from others.

It also means being willing to say those two most difficult words when needed: I’m sorry.

Be transparent.

There’s nothing worse than the feeling that leaders don’t care about keeping you in the loop, or even worse, that they’re keeping secrets.

Make sure your vision, intentions, and methods are clear to everyone on your team–and that they have access to the information they need to do their best work.

Commend sincerely and specifically.

When you commend and praise others, you satisfy a basic human need. As your colleagues notice that you appreciate their efforts, they’re naturally motivated to do more. The more specific, the better: Tell them what you appreciate, and why.

And remember, everyone deserves commendation for something. By learning to identify, recognize, and praise those talents, you bring out the best in them.