What BlackBerry’s Acquisition of Cylance Means for the Cybersecurity Business

BlackBerry is making its biggest acquisition ever.

The once-dominant smartphone maker known for producing mobile devices so addictive people used to call them “crackberries” said Friday it is plunking down $1.4 billion in cash to buy Cylance, a cybersecurity firm that specializes in machine learning-enabled threat detection. Pending regulatory approval, expected by February, the purchase will deplete more than half of BlackBerry’s cash pile.

The acquisition reflects BlackBerry CEO John Chen’s multiyear imperative: a shift from selling phones to enterprise software and services. He first laid out the strategy shortly after becoming CEO in 2013. (BlackBerry stopped making its own phones two years ago, though it continues to license its brand.)

Chen said in a statement that the addition of Cylance would “immediately complement our entire portfolio.” In particular, he said the business, set to run as an independent unit, would bolster BlackBerry’s “unified endpoint management” software, which helps businesses manage devices and applications, and QNX, an operating system used inside power plants and cars.

With Cylance, BlackBerry is seeking a greater slice of businesses’ information security spend, which market researcher Gartner estimates will exceed $114 billion this year. That BlackBerry is putting up triple the amount it paid for ex-rival Good Technology, its last biggest acquisition, made in 2015, demonstrates that it is fully committed to the pursuit of this new business model—best exemplified by BlackBerry Spark, a platform it is pitching as the secure, connective tissue for all sorts of connected devices.

If the deal goes through, BlackBerry’s purchase of Cylance will be the latest in a recent series of cybersecurity acquisitions including Cisco buying Duo for $2.4 billion and private equity firm Thoma Bravo taking over Veracode for $950 million. (Rumors are swirling, meanwhile, that Facebook, beset by propagandists, trolls, and privacy breaches, has been poking around for a major cybersecurity acquisition as well.)

Even as Cylance exits the “unicorn” club, a collection of startups privately valued at $1 billion or more, another company has stepped up to take its place. Earlier this week I broke the news that Netskope, a cloud security startup, had earned its unicorn horn after raising a new round of funding worth $170 million. But these mythical beasts are fleeing the stable quicker than their stock can be replenished.

Market consolidation will continue. Businesses are going to be spending more money on cybersecurity in the years to come, but it’s going to be with fewer vendors.

BlackBerry sure hopes it will be one of them.

Cloud security: The essential checklist

Cloud security is one of those things that everyone knows they need, but few people understand how to deal with. I

The good news is that it’s actually pretty simple, and somewhat similar to security for your enterprise systems. Here’s a checklist of what you may need and how to make these features work.

  1. Directory service. If you use identity and access management, you need a directory to keep the identities. Although Microsoft’s Active Directory works just fine, any LDAP-compliant directory will work. Note that you need to deal with security at the directory level as well, so the directory itself does not become a vulnerability.
  2. Identity and access management. IAM is needed to ensure that you can configure who is who, who is authenticated, and what devices, applications, or data they can access. This gives you complete control over who can do what, and it puts limits on what they can do. These IAM tools are either native to the public cloud platform or come from a third party.
  3. Encryption services. What specific encryption you needwill largely depend on where you are in the world and the types of things you need to encrypt, as well as if you need to encrypt data at rest, in flight, or both. I say “services” (plural) because you’ll likely ise more than one encryption service, including at the file, database, and network levels.
  4. Security ops. Often overlooked, this is the operational aspect of all of security. Security ops, aka secops, includes the ability to proactively monitor the security systems and subsystems to ensure that they are doing their jobs and that the security services are updated with the latest information they need to keep your system safe.
  5. Compliance management. Another often overlooked security feature, this is where you deal with those pesky rules and regulations that affect security. No matter if you need to be GDPR-compliant or HIPAA-compliant, this is where you have a console that alerts you to things that may be out of compliance and lets you take corrective action.

Of course, you may need more security features than these five types, based on who you are, what sector you’re in, and your own enterprise’s security requirements. However, this checklist provides a solid foundation for security success. Chances are that you’re missing one or two of them.

How Did the 'Freedom From Facebook' Campaign Get Its Start?

In July, executives from YouTube, Facebook, and Twitter testified before Congress about their company’s content moderation practices. While Facebook’s head of global policy Monika Bickert spoke, protesters from a group called Freedom From Facebook, seated just behind her, held signs depicting Sheryl Sandberg and Mark Zuckerberg’s heads atop an octopus whose tentacles reached around the planet.

Freedom From Facebook has garnered renewed attention this week, after The New York Times revealed that Facebook employed an opposition firm called Definers to fight the group. Definers reportedly urged journalists to find links between Freedom From Facebook and billionaire philanthropist George Soros, a frequent target of far-right, anti-semitic conspiracy theories. That direct connection didn’t materialize. But where Freedom From Facebook did come from—and how Facebook countered it—does illustrate how seemingly grassroots movements in Washington aren’t always what they first appear.

The point here isn’t to question Freedom From Facebook’s intentions. Their efforts seem to stem from genuine concern over Facebook’s outsized role in the world. But the labyrinthine relationships and shadowy catalysts of the efforts on all sides of that debate show just how little involvement actual Facebook users have in the fight over reining the company in.

Since the 2016 presidential election, Facebook has confronted an onslaught of scandals, many of which drew scrutiny from federal lawmakers. First, Russian propagandists exploited the social network, using duplicitously bought ads to sway US voters. This March, journalists revealed data firm Cambridge Analytica had siphoned off information belonging to tens of millions of users. In the wake of this second controversy, Freedom From Facebook was born.

The initiative wasn’t formed by everyday Facebook users. It’s instead the product of progressive groups with established records of opposing tech companies, whose own relationships illustrate just how tangled these connections can be.

Specifically, Freedom From Facebook is an offshoot of the Open Markets Institute, a think tank that operated under the auspices of the New America Foundation until OMI head Barry Lynn publicly applauded antitrust fines levied against Google in Europe. Google is a major New America donor; Lynn’s entire team studying tech market dominance and monopolies got the ax, and spun out Open Markets as an independent body.

Earlier this year, former hedge fund executive David Magerman approached Lynn’s group with the idea to start to start a campaign in opposition to Facebook. Magerman poured over $400,000 into what became Freedom From Facebook, according to Axios. His involvement wasn’t known until Thursday. The connected between Freedom From Facebook and OMI was also not entirely explicit.

Freedom From Facebook has done more than stage protests on Capitol Hill. During Facebook’s annual shareholder meeting in May, the group chartered an airplane to fly overhead with a banner that read “YOU BROKE DEMOCRACY.” When Sandberg spoke at MIT in June, Freedom From Facebook took out a full-page advertisement in the student newspaper calling for the social network to be broken up. On Thursday, the group filed a complaint with the Federal Trade Commission asking the agency to investigate a Facebook breach disclosed in September that affected 30 million user accounts.

Freedom From Facebook also formed a coalition with a diverse set of progressive organizations, like Jewish Voice For Peace, which promotes peace in Israel and Palestine, and the Communications Workers of America, a labor union that represents media workers. The coalition now comprises 12 groups, who “all organize around this fundamental principle that Facebook is too powerful,” says Sarah Miller, the deputy director of Open Markets Institute. Confusingly, according to Freedom From Facebook’s website, the coalition also includes Citizens Against Monopoly, a nonprofit Miller says was set up by Open Markets itself.

Eddie Vale, a progressive public affairs consultant, also confirmed in an email that Open Markets hired him to work on the Freedom For Facebook Initiative. He led the protest in July featuring the octopus signs.

Definers began lobbying journalists, including those from WIRED, to look into Freedom From Facebook’s financial ties this past summer. The effort was led by Tim Miller, a former spokesperson for Jeb Bush and an independent public affairs consultant, according to The New York Times. “It matters because people should know whether FFF is a grassroots group as they claimed or something being run by professional Facebook critics,” Miller wrote in a blog post published Friday. He added that he believes the push to connect the group to Soros does not amount to anti-semitism, especially if it contains a modicum of truth. Facebook itself asserted much the same in a statement it released Thursday.

The extent of the Soros relationship seems to be that the billionaire philanthropist does provide funding to both Open Markets and some of the progressive groups who constitute the Freedom From Facebook coalition. There’s no indication, though, that he has any direct involvement with the initiative. Open Markets’ Miller says the think tank wasn’t aware Facebook was paying an opposition firm to ask journalists to look into its work. “I just think knowing Facebook as we do, I don’t know that I would say that we were surprised, but I do think the Soros angle was surprising,” she says.

After The Times published its report Wednesday evening, Facebook severed its ties with Definers. “This type of firm might be normal in Washington, but it’s not the sort of thing I want Facebook associated with,” CEO Mark Zuckerberg said on a call with reporters Thursday. Both Sheryl Sandberg and Mark Zuckerberg claim they didn’t know Facebook was working with Definers until the The Times published its story. This is not the first time Facebook has employed an opposition research firm. In 2011, the social network hired a public relations firm to plant unflattering stories about Google’s user privacy practices.

By distancing itself from Definers, Zuckerberg and Sandberg are putting space between themselves and how the sausage gets made in Washington. As they have grown more powerful, tech organizations including Facebook, but also Google, Amazon, and others, have poured millions into lobbying on Capitol Hill. Those efforts include fighting back against well-funded and sometimes secretive campaigns, like Freedom From Facebook. Meanwhile, the social network’s over two billion users mostly sit on the sidelines, watching the high-stakes battle unfold.


More Great WIRED Stories

The Afrotech Conference Captured in One Powerful Quote

One of the biggest discussions came from a Grammy-award winning panel featuring rapper Common, producer Karriem Riggins and musician Robert Glasper, collaborators in the new supergroup August Greene. All of them had outgrown their defining monikers, expanding into acting, music scoring, and so on. Glasper shared his own key to success:

Other people don’t know what your lane is, so they can’t tell you what your lane isn’t.

Sure, it’s about defining yourself and not relying on the acceptance of others. It also means not being afraid to fail until you get it right – even while others are watching. This challenge becomes more important for minority entrepreneurs who may have a vision less understood by the mainstream public.

What is uniquely yours?

I recently interviewed TED Speaker and RETI founder DeAndrea Salvador. She wasn’t focused on engineering, but she saw a need in her community for fair energy use and distribution. That desire planted the seed for RETI, the energy equity company that now educates and spreads insight into low-income communities.

Get comfortable with being a fool

As Glasper mentions, your lane is only defined by you – and, often, is defined by only your own insecurities.  So, the ability to be comfortable with being uncomfortable directly dictates your ability to grow.

Serial entrepreneur Naveen Jain said it recently: When you don’t know, you can ask dumb questions.” And dumb questions allow true breakthroughs. Sitting with Glasper and Riggins, Common shared how coming from a hip-hop background actually helped him make an impact on Hollywood, as he didn’t automatically follow the traditional Hollywood rules or pathway. Instead, he questioned long-held beliefs and was able to bypass the classic barriers to success.

So pay attention when a new arena is calling you. It may not be your lane, but it may be the area where you can make an even deeper impact.

Apple finds quality problems in some iPhone X and MacBook models

The new Apple iPhone X are seen on display at the Apple Store in Manhattan, New York, U.S., September 21, 2018. REUTERS/Shannon Stapleton

(Reuters) – Apple Inc said on Friday it had found some issues affecting some of its iPhone X and 13-inch MacBook pro products and said the company would fix them free of charge.

The repair offers are the latest in a string of product quality problems over the past year even as Apple has raised prices for most of its laptops, tablets and phones to new heights. Its top-end iPhones now sell for as much as $1,449 and its best iPad goes for as much as $1,899.

Apple said displays on iPhone X, which came out in 2017 with a starting price of $999, may experience touch issues due to a component failure, adding it would replace those parts for free. The company said it only affects the original iPhone X, which has been superseded by the iPhone XS and XR released this autumn.

The screens on affected phones may not respond correctly to touch or it could react even without being touched, the Cupertino, California-based company said.

For the 13-inch MacBook Pro computers, it said an issue may result in data loss and failure of the storage drive. Apple said it would service those affected drives.

Only a limited number of 128GB and 256GB solid-state drives in 13-inch MacBook Pro units sold between June 2017 and June 2018 were affected, Apple said apple.co/2AXkeEw on its website.

Last year, Apple began a massive battery replacement program after it conceded that a software update intended to help some iPhone models deal with aging batteries slowed down the performance of the phones. The battery imbroglio resulted in inquires from U.S. lawmakers.

In June, Apple said it would offer free replacements for the keyboards in some MacBook and MacBook Pro models. The keyboards, which Apple introduced in laptops starting in 2015, had generated complaints on social media for how much noise they made while typing and for malfunctioning unexpectedly. Apple changed the design of the keyboard this year, adding a layer of silicone underneath the keys.

Reporting by Ismail Shakil in Bengaluru and Stephen Nellis in San Francisco

A changing New York neighborhood wonders how Amazon would fit

NEW YORK (Reuters) – It was the lunch-hour rush at the Court Square Diner in New York’s Long Island City on Wednesday, and co-owner Nick Kanellos pointed to the elevated subway tracks that rattle overhead as he fretted over the news that Amazon may build a major outpost in the neighborhood.

People wait for the arrival of 7 train in Long Island City, where Amazon.com is reportedly considering as part of its new second headquarters, New York, U.S. November 7, 2018. REUTERS/Eduardo Munoz

Like many long-time inhabitants, he worries how this once-sleepy enclave in Queens would absorb the up to 25,000 people the online retail giant may employ here as it expands outside its Seattle home base.

“It’s a whole soccer stadium at 8 a.m. each day coming in,” Kanellos said, gesturing at the narrow metal staircases leading from the subway platform to the street, already crowded with commuters at rush hour.

Amazon announced in September last year that it was seeking a site for a second corporate headquarters that would eventually employ up to 50,000 people. But it now plans to split its new headquarters between two sites, including Long Island City, according to a New York Times report.

Amazon again declined on Wednesday to comment on its selection process.

Kanellos’ apprehension was shared by other long-time residents interviewed on Wednesday on their home turf, a rapidly gentrifying area that sits just across the East River from Midtown Manhattan.

Few, if any, objected to Amazon.com itself: Many conceded they were happy customers of the world’s largest online retailer, some paying for its Prime membership service. They just fear that their neighborhood is already bursting at the seams, with scores of glass apartment towers transforming an area long characterized by a mismatched jumble of low-rise buildings.

The cost of this rapid development, residents say, is that local hardware stores and pharmacies have been priced out and an aging sewer system is often overwhelmed by the more than 10,000 new apartments and 1.5 million square feet of office space built in recent years, according to city data.

Kanellos, 50, took over the Court Square Diner in 1991, when it was one of the few places where the artists then using old factory buildings as studios could sit down for a cheap meal.

The neighborhood’s cinematic views of Manhattan only heightened the sense it was a quiet village overlooked by the rest of New York City, residents say.

“We felt like we had the place to ourselves,” said Pat Irwin, a musician and composer who for years played with The B-52’s and settled in Long Island City in the mid-1980s.

The 50-story, blue-glass tower that Citigroup built in 1990 was an early harbinger of the transformation. The reports this week that Amazon had decided to build part of its “second” headquarters here, along with an outpost in northern Virginia’s Crystal City, feels to some residents like the death knell for a neighborhood they love.

“It feels like we’re being walled in and it’s out of control and the neighborhood can’t handle it,” Irwin said.

Irwin’s wife, Terri Gloyd, is the co-owner of the LIC Corner Cafe, which sits around the corner from MoMA PS1, a major outer-borough arts museum, and sells coffee, cookies and a pastry confection described as “a guava goat cheese Pop-Tart.”

Some of the residents who moved into the new apartment towers have become welcome regulars, even while some artist friends have been priced out of the area, she said. But construction and the ubiquitous film and television shoots, thanks to the proximity of Silvercup Studios, sometimes make the streets barely navigable to pedestrians.

“It already feels so oversaturated,” said Gloyd, who moved here in 1987.

Even so, if Amazon’s arrival brought with it a decent supermarket or helped bring a much-needed school to an underserved area, then perhaps that could soften its landing, she said.

Slideshow (17 Images)

If there is one constant in the crane-filled neighborhood these days, it is Manducatis, a white-tablecloth, Italian restaurant that Vincenzo Cerbone, 88, has presided over since 1974, after moving to the area in the 1950s. His wife, Ida, still cooks there most days, walking from their home around the corner.

“My husband, in the ‘50s, he predicted this,” she said with a proud smile, explaining their decision to acquire property in an area so close to Manhattan, no matter how unprepossessing it seemed at the time.

As for Cerbone, he shrugged at the Amazon news: New York City has always been changing. “These days, everything is new,” he said. “I don’t know if it’s an upgrade or a downgrade.”

Reporting by Jonathan Allen; Additional reporting by Hilary Russ in New York and Jeffrey Dastin in San Francisco,; Editing by Frank McGurty and Leslie Adler

Amazon plans to split second headquarters in two cities: sources

(Reuters) – Amazon.com Inc is planning to split its second headquarters evenly between two cities, people familiar with the matter said Monday, in a twist to a more than year-long contest that has drawn overtures from locales across North America.

Dallas, Long Island City in New York and Arlington near Washington, D.C. are all among the finalists with which Amazon is holding advanced talks, one of the people said on condition of anonymity. The person would not confirm which two are expected to win or if any others remain in the running.

Amazon declined to comment on the news, first reported by the Wall Street Journal.

The world’s largest online retailer sparked a bidding frenzy in September 2017 when it announced it would invest over $5 billion to create an “HQ2” in addition to its home base in Seattle and hire up to 50,000 people.

One of the major reasons for the decision was for Amazon, which has satellite operations around the world, to recruit top talent. Offering a choice of head offices could help it win new workers in a battle with Alphabet Inc’s Google and others, with which Amazon competes in areas such as cloud computing and voice-controlled technology.

“Amazon is going where it won’t have to jostle with Google and Facebook as much as it would in San Francisco or it does in Seattle,” said Alex Snyder, analyst at CenterSquare Investment Management near Philadelphia.

The HQ2 split also could help Amazon ease the same degree of congestion and jump in costs of living that led to unrest in Seattle. An affordable housing crisis there prompted the city council to adopt a head tax on businesses in May, which Amazon helped overturn in a subsequent city council vote.

FILE PHOTO: The logo of Amazon is seen at the company logistics centre in Boves, France, August 8, 2018. REUTERS/Pascal Rossignol/File photo

It was unclear what incentive packages were offered to Amazon. New Jersey early in the contest proposed $7 billion in potential credits against state and city taxes if Amazon located in Newark and stuck to hiring commitments.

On Monday, New York Governor Andrew Cuomo said the state was in talks with Amazon. “We have a great incentive package,” which was not “crazy” like other states’ offers, he said, according to audio from WCBS 880 Radio.

“I’ll change my name to Amazon Cuomo if that’s what it takes,” he said.

Reporting by Jeffrey Dastin in San Francisco, David Shepardson in Washington; Additional reporting by Herb Lash in New York and Arjun Panchadar in Bengaluru; Editing by Maju Samuel and Lisa Shumaker

Forced Selling Drags GE Down Further

The eagerly awaited first General Electric (GE) earnings call under new CEO Larry Culp did not disappoint. Culp immediately went over almost every major issue and addressed them without sugar coating. He clearly communicated he wants change and the company wants it with him, which I though was a very positive message and takeaway. Finally, he refrained from presenting easy fixes which seemed healthy just 30 days into the job.

I did like the new CEO on appointment (like everyone else) but I didn’t want to buy General Electric at least until this call was behind us. New CEOs have a tendency to put out all dirty laundry on the first one or two calls. As an incoming CEO that’s your chance to show the world what a mess you are left with. It wasn’t as bad as it could have been but the stock dropped big time.

Chart

GE Price data by YCharts

So now it’s getting really interesting. Here are my key takeaways from the earnings call:

Dividend

GE scrapped its dividend. OK, they kept it at $0.01 but that’s probably just to prevent ETFs and funds that require a dividend because of their mandate from selling. This will save GE nearly $4 billion in cash that it can direct toward debt paydown and GE Capital. This was sort of expected and is widely seen as a wise decision. It may still cause some people to throw in the towel and perhaps some forced selling by dividend-focused funds/ETFs that require a higher level. This is good because maybe we can buy cheaper.

Power

Power is where it’s at. There’s going to be a lot of news coming out with respect to this unit. I’m predicting 1) a spin-off or sale of part of the power business and 2) significant layoffs across the entire unit. Here are a few selected quotes from the earnings call:

Second, we will take a materially different approach to running our Power business.

…It has become clear to us that we need to simplify the business structure. Therefore today we are announcing our intent to reorganize Power into two units, both of which will report directly to me.

Likely both headed by a president and able to be sold or spun out more easily. Financials will be easier to understand by potential buyers.

Then an analyst asked a question about the Power reorganization and Culp answered as follows (emphasis mine):

Nicole, I think what we’ve done today is really share both internally and publicly the organizational architecture, if you will, that we have in mind. There are a number of details that Russell, the team and I will be working through in the days and weeks to come. And as those details become more clear, we’ll share those first internally, and then we will share them with you and others publicly.

I think that means lots of layoffs, and they will be concentrated in power.

GE Capital

As expected by the market GE Capital is going to be a drag for years. It will eat up at least $3 billion next year. However, it didn’t sound completely hopeless. I didn’t get the impression this division was about to sink the company. That probably means Culp doesn’t think it will in the long term either. A good sign.

Conclusion

Because the dividend was scrapped combined with the general market environment there may be more short-term selling. Valuation wise it’s getting more attractive. From a tactical standpoint I think it’s better to wait. This comes at the risk you’ll miss out getting GE in the single digits.

I expect harsh cuts in power and that may give the stock a jolt. This will take a few weeks at a minimum.

GE Capital’s restructuring and debt paydowns will eat up lots of free cash flow for the foreseeable future. Until the market is sure these two issues are no longer issues, GE will not get back into favor. This may take 3-4 years. Unless part of the power unit is sold or spun out and/or Baker Hughes (BGHE) puts in a few good quarters and GE can monetize its stake attractively.

Bottom line – General Electric is an attractive deleveraging story with a terrific CEO. Given tactical considerations I wouldn’t build more than a starter position and would slowly build as it slides because dividend funds are selling.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in GE over 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.

This GenZ Entrepreneur Explains How Old People Can Understand The Rising Generation

This moment marks a transition as YouthLogic, the company Blakley founded five years ago at the age of 14…

Focusing on providing information about “Generation Z” and youth culture to larger marketing firms, YouthLogic was acquired by the Campus Agency, a leading college marketing brand agency based in Downtown Boston. This acquisition will better align marketing campaigns with the tastes and needs of the growing Generation Z.

While YouthLogic focused on consumer power among young people, the
combination of an agency specializing in one generational cohort and an agency specializing in marketing to people during one specific life stage promises powerful results.

Blakley’s broader goal is to help older generations understand current culture, which he defines as “coolness plus relevance.” Thus, his new role marks an important transition from YouthLogic and for Blakley himself. He insists that the issue is less about generational differences than the context.

“Culture is what ultimately moves brands, so it is imperative that businesses understand culture.” Blakley’s view of marketing to Generation Z is more holistic than others might expect it to be. While others may just apply the same tactics used for Millennials but tweak them to be more mobile and digital, Blakley insists that there are key differences between the generations that render this strategy ineffective.

For example, he argues that Generation Z is not attention-span deprived, but rather gifted with a well-calibrated “BS meter.” He also underscores the fact that context and experiences strongly inform perception, and this dynamic also informs how people market to different groups.

Blakley’s emphasis on Generation Z should alert all relevant businesses that this emerging demographic is poised to become some of the world’s biggest spenders. Most of human history, dating as far back as.

Socrates, has consisted of intergenerational conflicts in which the older generation assumes that the younger generation is inferior. While this may simply be an aspect of being human, it is critical that companies evaluate their positioning and perceptions of Generation Z.

Even though this generation is our youngest, they develop strong relationships with brands – especially accessible, creative ones that connect with their demographic in particular. For some companies, this might mean a strategic shift away from how things have been done, and for others, it might mean simple tweaking of existing approaches.

In any case, Blakley’s success illustrates how valuable knowledge of Generation Z is and his work represents a powerful conduit for brands to effectively connect with this generation.

Here’s an edited transcript of our conversation:

Why do you think there’s a need for your services?

Brands are failing at marketing to Generation Z. They move too slowly to integrate trends, they try to direct the message when they work with influencers. As with many generations before this, when they use youth culture it seems inauthentic and awkward. The stakes are especially high for Generation Z, because this is a huge generation that is completely tied to the digital world, and we can tell right away if a concept is stale or if someone is not authentic.

So brands’ strategies that might have worked for other generations or other market demographics are not really working anymore. It’s not enough to just hire a consultant; they need a direct conversation with actual young people. More and more companies are learning this the hard way: They need me.

How do you measure the success of an influencer-based marketing campaign?

A successful influencer-based marketing campaign has to retain the influencer’s voice and still get the audience curious about the brand. So measuring its success involves engagement.

How many people liked or commented on the post, or shared it? How many people ended up liking the sponsor’s page?

Questions like that are helpful in beginning to evaluate the success, or lack thereof, of a campaign. People need to remember, the reason these influencers grew large and engaged fan audiences, is because they were being themselves. As a brand, you can’t take that away!

Where’s the growth space in social media today?

Facebook is a joke. Instagram and YouTube are the real growth areas. For marketing directly to Generation Z, the platforms need to be visual. They need to be current and able to move with the trends and integrated into everyday life, so a stale Facebook page is not going to cut it. An Instagram video showing interesting content is better, and synergizing that with a YouTube channel is best of all.

Too many companies have made the mistake of either using these platforms inappropriately or putting too much into platforms that were successful a decade ago. That’s not where you are going to find a Generation Z audience. This is the generation of digital intuitiveness, so it is imperative that platforms be used effectively or at least in a way that dovetails with that intuitiveness.

Where have brands gone wrong in talking to GenZ?

They seem to be driven by a need to control all the messages in communicating to this generation, which you can see when they awkwardly work with influencers. They don’t seem to get that influencers have the power they do because they are authentic.

However, brands seem determined to drain the authenticity away, and they don’t seem to get that Generation Z notices that. Brands think they can impose their message on an influencer, instead of relying on them to use their built-in audience and voice to communicate the brand’s message.

Brands need to be less formal and friendlier, connecting in a way that is not just selling things to people. Everyone hates being sold to. But if a brand engages on a peer level and does not take itself too seriously – Wendy’s Spotify campaign is a great example of this – then it has a chance of cracking this market.

Conclusion

Connor is one of several GenZ entrepreneurs that will be on a panel at the coming Genius Network Annual Event, which is rumored to have some seriously big names at.

I have no affiliative relationship with either Connor or Genius Network. However, I am a member of the mastermind and, as a psychologist and entrepreneur, report on the fascinating things I’m seeing. 

​Red Hat: An independent barony in the kingdom of IBM

When the news broke that IBM was buying Red Hat, staffers were caught by surprise. They were understandably nervous. But, it looks like life will continue on as normal for Red Hat‘s employees, its programs, and open-source projects. The big difference? The company will have IBM’s massive resources behind it.

Under IBM, Red Hat will maintain its autonomy. CEO Jim Whitehurst and his current management team will continue to lead the company. Red Hat will also keep its existing facilities, brands, and its unique Red Hat’s open organization leadership style.

IBM sees Red Hat as the Switzerland of the open-source and Linux enterprise software stack. The last thing IBM wants is to transform Red Hat into just another IBM brand. Arvind Krishna, IBM’s senior vice president of hybrid cloud, said: “Red Hat must, and will, remain independent.”

This idea is not as radical as it sounds. IBM divisions have historically been given a great deal of freedom. It’s only from the outside looking in that IBM appears to be a monolithic kingdom. It’s really more a set of baronies under one name.

For example, all of Red Hat’s open source programs and operating systems–including Red Hat Enterprise Linux (RHEL), CentOS, Fedora, CoreOS, Ansible, WildFly (formerly JBoss) and others–will go on just as they have been. In addition, open-source programs that Red Hat supports, such as the OpenStack cloud, will continue to be supported.

Paul Cormier, Red Hat’s president of products and technologies, said the acquisition will have no impact on Red Hat’s day-to-day activities. “The day after we close there will be nothing different. It will be business as usual with the same roadmaps. We’ll continue to do what’s right for the community,” he said. “There will be no changes. I don’t know how else to say that. There will be absolutely no change in how we work with the upstream Linux community.”

In addition, Red Hat will continue to support all its existing partners. Yes, that includes IBM’s public cloud rivals. “Red Hat’s would continue to support existing partnerships with other cloud providers,” said Cormier. These partners include Microsoft Azure, Amazon Web Services, and Google Cloud.

Make no mistake about it, though, this merger and acquisition is all about the cloud.

What Red Hat brings to the table, said Cormier, is both its OpenShift Kubernetes cloud-platform and its vast Linux experience.

Cormier continued:

We’re not an open source company. We’re an enterprise-software company with an open-source development model. Red Hat’s secret sauce is we’ve put those two things together. And we’ve both done that. IBM has a huge history of enterprise-grade software and open-source development.

The hope is, in what may be more of a partnership than a merger, IBM will continue to be an enterprise software services power and Red Hat will continue to be a dominant open-source player. Together, they hope to become the hybrid cloud powerhouse of the 21st century.

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What It's Like to Fly the WWII-Era Plane That Crashed on LA's 101 Freeway

Watching the flames devour the wing of a World War II-era aircraft that crash-landed on the 101 Freeway in Los Angeles, a few questions come to mind. How did the pilot escape unharmed? How’d he manage not to whack any cars as he came down around 2 pm on Tuesday? Why was the plane, a T-6 Texan, dressed up like a German fighter aircraft (sans swastikas)? And, most pressing of all, what is anybody doing flying a 70-year-old plane over northwest LA?

That last one, at least, is easy enough to answer.

“The T-6, out of all the airplanes I’ve flown, is one of my favorite aircraft to fly. It’s a beautifully handling aircraft, it’s extremely well built, very powerful, and it’s just a lot of fun,” says Dave Whitcomb, a professional pilot who has logged about 500 hours in the T-6 while working with a group called History Flight, which takes members of the public out flying in old-timey planes.

The crashed plane, a North American T-6 Texan, currently belongs to Condor Squadron, KTLA reports. (The Van Nuys-based non-profit’s pilots fly the vintage aircraft for parades and other events, according to its website.) In its previous life, the aircraft saw some combat during World War II and the Korean War, but mostly served as a trainer for pilots preparing to climb into the cockpits of Mustangs and Corsairs. Like a driver’s ed car, the two tandem seats each have a full set of controls. Forty-two feet from wingtip to wingtip, the plane can hit 205 mph at 5,000 feet, thanks to its single engine.

The joy of flying a vintage aircraft is similar to that of driving an old race car, Whitcomb says. Without any of the automated systems that pilots now spend most of their time monitoring, operating the T-6 requires constant adjustments to the stick in your right hand, the throttle and propeller controls in your left.

“You’re always flying the airplane,” he says. “In a smaller aircraft like that, it feels like it’s a part of you. Whereas big heavy jets today, you’re not manipulating the controls as much, because they’re so stable.”

Throw in the joy of reliving history, and it’s easy to see why you’d want to climb into the T-6’s cockpit, slide open the canopy, and slide through the air like the pilots of old.

Most of the folks flying T-6’s today are very experienced, Whitcomb says, largely because insurance companies aren’t in the business of covering rookies who want to zip about in a relatively rare and expensive plane. (Someone in Italy’s selling one for $28,735.) Most of the aircraft now have GPS navigation systems; they all have modern radios.

And while the T-6 is generally reliable, it only has a single engine, meanings that if that one craps out, you’re gonna make like Icarus. (This is why Whitcomb avoided flying the T-6 over large bodies of water or unlandable terrain.) That’s where the experience comes in. When an engine failure turns your plane into a glider, it’s time to look for a long, smooth landing surface—like the 101— steadily drop altitude, float down gradually, and hope everybody in their 21st century car can get out of the way.


More Great WIRED Stories

Their Flight Wasn't Until the Next Morning. Passengers Slept on the Floor. Then Airport Security Prodded Them to Stay Awake

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

Have you ever noticed that there are never enough seats for passengers at airports?

Many are forced to mill around because, well, what else are you going to do?

You don’t expect, however, airport staff to instruct you on the milling-around rules. Nor, indeed, on the sleeping-at-the-airport rules.

Last weekend, though, passengers at Stansted Airport near London had a difficult time.

Some passengers flew in from elsewhere late at night and didn’t have a connecting flight until the next morning.

What are passengers supposed to do all night? Wouldn’t you try to get some sleep?

The UK’s Metro describes how passengers tried to find any perch they could to get a few winks.

But when there are only 50 seats and perhaps 500 passengers, there’s only one option: the floor.

I’ve done it before. Perhaps you have too. You try and find a corner, lie down, grip your valuables and hope no one bothers you.

At Stansted last weekend, however, airport security patrolled the scene.

As one passenger, Ricardo Gavioli, told Metro: 

I even saw a young couple sitting together on the ground and when the woman tried to rest her head on her boyfriend’s chest and stretch her legs security came up and prodded her into an upright position.

Gavioli likened it to “sleep deprivation torture.” He said: 

The security were passing every ten minutes to tell people to sit upright and not to lie down.

Why would the airport behave this way?

The airport offered a simple statement: 

We don’t allow people to sleep on the floor or come with sleeping equipment (camp beds, hammocks, sleeping bags etc), and people sleeping on the floor will be asked to sit up or move if necessary. 

There is a caveat, says the airport:

However, nobody is stopped from sleeping or woken up while sitting in a chair.

How very reasonable when there’s hardly a chair to be had.

Why, in fact, doesn’t the airport start charging for chairs? I’m sure U.S. airlines can offer them software for that.

I wonder how Stansted executives fall asleep in meetings. Does security prod them awake, too?

Stansted has banned sleeping on the floor between midnight and 2 a.m. This, it claims, is to accommodate renovation work and, as the airport told the Telegraph:

Feedback shows passengers don’t like arriving at the airport for an early flight to find lots of people blocking access and getting in the way of both staff and those traveling.

They also don’t like having nowhere to sit.

Still, perhaps many will find this approach reasonable. 

Is it also reasonable, though, to prod people awake when they have nowhere else to go and they’re not doing any harm?

Stansted says too many travelers deliberately decide to sleep on the floor, so they don’t have to pay for a hotel.

On the people’s foghorn, Twitter, passengers offered reasonable arguments. There’s just nowhere to go in that airport.

Of course, the airport says passengers should arrive at a time nearer their scheduled departure. 

Many know, however, that this can also provide a crush not worth tolerating.

This airport security’s prodding behavior isn’t exactly unique.

The airport insisted this was to allow cleaners to do their jobs.

Perhaps one idea for passengers is to avoid Stansted altogether.  

Until, that is, the renovations are done and the reception is gloriously welcoming. 

Should both things ever occur, that is.

Gadget Lab Podcast: Pinterest’s Evan Sharp on What Makes Good Software

Why did Apple’s Jony Ive name Pinterest co-founder Evan Sharp as one of the figures in technology who he believes will change the future?

If you were wondering about that, here’s a great chance to learn a little bit more about Sharp and make the call yourself. During the 25th anniversary festival for WIRED last week, the Gadget Lab team had the chance to interview Sharp on stage, among other high-profile technologists. Over the next few weeks we’ll be publishing these taped conversations as a part of the podcast.

In this particularly interview, Mike and Arielle ask Sharp what it’s like to receive praise from Ive, how machine learning is changing software design, and whether Pinterest can remain once of the internet’s last happy places.

Show notes: Click here to read more about Jony Ive’s nomination of Evan Sharp for our 25th anniversary issue. And here’s Lauren’s WIRED 25 interview with Kevin Systrom, which we mentioned in this week’s show.

Recommendations this week: Lauren recommends the Dakota backpack from Dagne Dover. Mike recommends these awesome smartphone accessory lenses made by Moment.

Send the Gadget Lab hosts feedback on their personal Twitter feeds. Arielle Pardes can be found at @pardesoteric. Lauren Goode is @laurengoode. Michael Calore can be found at @snackfight. Bling the main hotline at @GadgetLab. Our theme song is by Solar Keys.

How to Listen

You can always listen to this week’s podcast through the audio player on this page, but if you want to subscribe for free to get every episode, here’s how:

If you’re on an iPhone or iPad, open the app called Podcasts, or just tap this link. You can also download an app like Overcast or Pocket Casts, and search for Gadget Lab. And in case you really need it, here’s the RSS feed.

If you use Android, you can find us in the Google Play Music app just by tapping here. You can also download an app like Pocket Casts or Radio Public, and search for Gadget Lab. And in case you really need it, here’s the RSS feed.

We’re also on Soundcloud, and every episode gets posted to wired.com as soon as it’s released. If you still can’t figure it out, or there’s another platform you use that we’re not on, let us know.

Jack Dorsey Has Problems With Twitter, Too

It contributes to filter bubbles, he said. It risks silencing people, he said. And when it’s not silencing them, it might be incentivizing them to behave badly, or basely, he said. His biggest criticism of the social media site he runs was that it could be nudging its users in the wrong directions.

“What does the service currently incentivize?” asked Twitter CEO Jack Dorsey on stage at the WIRED25 summit today. It’s the question he and his whole team are asking themselves right now—about every aspect of the site “Right now we have a big Like button with a heart on it and we’re incentivizing people to want it to go up” and to get more followers, he pointed out. “Is that the right thing? Versus contributing to the public conversation or a healthy conversation? How do we incentive healthy conversation?”

When he co-founded the website 12 years ago, it was meant as a place for friends to share pictures of their lunch. “Now it’s become a place to launch nuclear war,” said Wired editor in chief Nick Thompson. That evolution, from innocuous late-night destination for cryptic jokes to lubricator of social movements to a cesspool of outrage and the platform for geopolitical discourse was not a result of Twitter’s code, Dorsey’s argued. But it was inevitable.

From the second it launched, Twitter was a free app with which anyone could text message the entire world. “Once the world saw that, there was no taking it back,” Dorsey said. “Once they saw it, they needed it. Our job now is to make sure we are actually serving that need.” By which he means the need for a global public square, a place for a global conversation to discuss the most important topics—he cited climate change and poverty as topics that can only be tackled in a global discussion—which he feels it is Twitter’s responsibility to facilitate.

If that means not being an absolutist about free speech, so be it. “We can only stand for freedom of expression if people feel safe to express themselves in the first place,” he said, adding, “A lot of people come to Twitter and they don’t see a service. They see what looks like a public square and they have the same expectation as they have of a public square, and that is what we have to get right.”

Twitter CEO Jack Dorsey (right) on stage with WIRED editor in chief Nick Thompson.

Amy Lombard

To get it right, Dorsey indicated everything was on the table. Twitter, he indicated, may need to be radically changed. He noted right now the service only allows you to follow accounts, not topics. It only allows you to like or retweet. What should it allow you to do instead? He’s not sure, but he’s considering every option.

And he’s open to your ideas. “When we started the company, we weren’t thinking about [any of] this at all,” he said. “One of the interesting things about Twitter has been this amazing experiment in creating with others—the hashtag, the thread, the retweet—have all been invented by the people using our service, not us.” So if you have ideas for how to fix Twitter, make it known. Dorsey is listening.


More Great WIRED Stories

OnDeck launches new subsidiary to partner with banks

NEW YORK (Reuters) – OnDeck Capital Inc has set up a subsidiary that will provide technology and other services to banks looking to lend to small businesses online, it said on Tuesday.

Called ODX, the new company will expand OnDeck’s existing business of providing online lending software to banks, such as JPMorgan Chase & Co, the company said.

ODX plans to announce a new bank partnership imminently and has a pipeline of other potential bank partners across the world, the company said.

It believes ODX will make it faster and easier for banks to digitize their lending to small businesses.

“We felt that given the robust demand we are seeing by the largest banks, it is not a question of if they are moving into online lending, but of when,” Noah Breslow, chief executive of OnDeck, said in an interview. “We thought that by creating ODX, we would set ourselves to take advantage of that opportunity.”

New York-based OnDeck is one of the most established companies that extends credit to small businesses through its website and then sells loans to financial institutions such as banks.

It announced a partnership with JPMorgan Chase in late 2015, through which the bank uses OnDeck’s technology to lend to small businesses.

Brian Geary, who served as vice president of OnDeck’s partnership unit, has been appointed president of ODX.

The company also hired financial technology executive Raj Kolluri to serve as ODX’s head of product and technology.

Kolluri joins ODX from financial services software provider SS&C Primatics, where he served as vice president of product and engineering.

Reporting by Anna Irrera; Editing by Peter Cooney

Aphria And Altria: Big Tobacco Enters The Cannabis Industry?

(Google)

On Wednesday, a potential deal was reported between Canadian cannabis company Aphria (OTCQB:APHQF) and tobacco maker Altria (MO).

“U.S. tobacco giant Altria Group Inc. is in talks to acquire an equity stake in Canadian cannabis grower Aphria Inc., multiple sources say.

Details of Altria’s proposed investment in Aphria are still being finalized, said the sources, who asked to remain unnamed because the talks are private. They said Altria has expressed an interest in acquiring a minority stake in the Leamington, Ont.-based grower with the intention of eventually holding a majority of the company’s shares.

The sources cautioned that it could take time for the two companies to strike a deal and that talks could still fall through.”

The Globe and Mail (paywalled article)

Shares of Aphria had been trading at C$17.24 on the Toronto Stock Exchange (TSE:APH), and quickly shot up as high as C$20.36. Shares are currently at ~C$20, as of this writing – up ~16% after being down prior to the news.

For their part, Aphria basically said, “No comment.” Aphria’s response:

“Aphria Inc. today responded to a request from the Investment Industry Regulatory Organization of Canada regarding media reports suggesting the Company is engaged in discussions regarding a potential investment in Aphria. While Aphria engages in discussions with potential strategic partners and/or investors from time to time, the Company notes that there is no agreement, understanding or arrangement in place with a potential investor at this time.

Aphria will advise the investment community of any material changes, if and when they occur, in accordance with applicable disclosure requirements.”

Aphria Press Release

Potential Benefits: Global Expansion

An investment from Altria could pay huge dividends for Aphria. Altria could also benefit from access to the enormous potential cannabis market – worth $200 billion by 2032, according to Canopy Growth – to offset tobacco declines.

From Aphria’s point of view, they would gain access to a large pool of both capital and knowledge. Altria has been operating in a regulated industry for decades and has extensive experience working with regulators worldwide. Altria also has decades of experience in a related industry, and could help Aphria in marketing, supply chains, and distribution.

Aphria is not short on cash. In my recent article on Aphria, I noted that Aphria has a free cash flow deficit of ~C$56 million/quarter and has ~C$335 million in net cash. That free cash flow deficit can be expected to turn positive very soon – recreational cannabis will be legalized next week and Aphria’s expansion projects are set to come online in early 2019. At that point, Aphria will not have much higher operating cash flow and much lower capital expenditures – they should be significantly cash flow positive.

However, Altria could provide a capital injection that will provide Aphria with optionality. One of Canopy Growth’s largest advantages – which I wrote about in Canopy Growth: The King Of Cannabis Doesn’t Come Cheaply – is that they have billions of dollars in the bank. Globally, cannabis laws are rapidly-evolving. As cannabis laws are loosened around the world (e.g., in Germany last year), Canopy Growth will be able to use their capital to expand into any new country that legalizes cannabis:

“So this is really rocket fuel. It does add quite a lot. As we look around the world, we’re going to be expanding production, we’re going to be doing more research, we’re going to develop more intellectual property, we’re going to create more leading brands, we’re going to have more products, and we’re going to be way more global.

If you’re thinking about this it does establish that Canopy is the cannabis platform for Constellation. And that’s a great deal of focus and trust, and we took it seriously as a management team. Everybody on my team was unbelievably excited to take this next step to the place where we could actually go global and do it with and for Constellation.”

Bruce Linton, Canopy Growth CEO, Q1/FY19 CC (August 2018)

While Aphria does not need additional capital to grow their Canadian production to 255,000 kg/year, an Altria investment could give Aphria the “rocket fuel” it needs to think globally and to compete for global cannabis markets as laws liberalize and those markets open to both medical and recreational cannabis.

History of Investments in Cannabis

This is still just a rumor, and the deal could still fall through. If the deal is finalized, it would be another in a line of investments in Canadian cannabis from alcohol and tobacco makers.

Chart

CGC data by YCharts

The most notable investment is Constellation Brands’ (STZ) $4 billion investment in Canopy Growth (CGC). I have previously written about both the Constellation deal (Constellation’s Risky, Leveraged Bet On Canopy Growth) and Canopy Growth itself (Canopy Growth: The King Of Cannabis Doesn’t Come Cheaply) on this platform.

(Canopy Growth/Constellation Presentation)

That investment sounds quite similar to the proposed Altria investment into Aphria: Constellation acquired a minority stake in Canopy Growth and has warrants sufficient to expand that stake into a majority position. Constellation also has the right to nominate a majority of Canopy Growth’s board as a result of the deal.

Shareholders in Canopy Growth were big winners as a result of the Constellation deal. Canopy Growth’s US-listed shares closed at $24.62 on the day prior to the Constellation investment (8/14). Yesterday (10/9), shares closed at $48.72 – up 98% since Constellation’s investment. Aphria shareholders will hope to see similar gains from an Altria investment.

While Constellation’s deal was the largest investment in Canadian cannabis, it is not the only investment.

Back in August, Molson Coors (TAP) entered into a joint venture with HEXO (OTCPK:HYYDF) to form a company which will sell cannabis-infused beverage products. That joint venture now has a name, as of October 4:

“The joint venture, Truss, will be led by former Molson Coors executive, Brett Vye, in the role of Chief Executive Officer. Vye will report to the Truss board of directors consisting of three members appointed by MCC and two members appointed by HEXO.

‘With the backing of two partners with deep Canadian roots, proven success, and market-leading experience in the respective beverage and cannabis industries in Canada, Truss will hit the ground running,’ said Brett Vye, Chief Executive Officer at Truss. ‘When consumable cannabis is legalized in Canada, Truss will be ready to make its mark as a responsible leader in providing high-quality beverages for the Canadian consumer. Why ‘Truss’? We are joining together the extensive experience and excellent practices of each partner to build a powerful foundation for the future.'”

Molson Coors Canada and HEXO Launch Truss

Molson Coors owns 57.5% of the Truss joint venture, while HEXO owns the other 42.5%. As part of the deal, Molson Coors received 11.5 million warrants for HEXO shares with a strike price of C$6 for 3 years. HEXO currently trades at C$8.70, up ~85% from its price prior to the Molson Coors deal.

CannTrust (OTC:CNTTF) also has an exclusive partnership with Breakthru Beverage Group, a larger Canadian alcohol distributor. By dollar value, this deal is a lot smaller than either the Canopy Growth or the HEXO deals. As part of this deal, Breakthru invested C$9 million into CannTrust for ~900,000 shares and Breakthru has options to purchase another 2,000,000 shares for a 15% discount.

There have also been other rumors, such as rumors of a deal between Coca-Cola (KO) and Aurora Cannabis (OTCQX:ACBFF). Nothing has come of those rumors yet. However, given interest in cannabis from alcohol companies (STZ, TAP), a tobacco manufacturer (MO), and potentially soft-drink manufacturers (KO), it may be only a matter of time before other deals are announced. The most likely targets would be other cannabis producers with large production capacity – capable of growing enough cannabis to supply a globally-distributed product, be it CBD- or THC-based.

Takeaways

Two weeks ago, I wrote Aphria: The Best Value Of The ‘Big 5’ Cannabis Producers and put a BUY rating on Aphria. This rating is only strengthened by a potential investment from Altria – Aphria will be able to use any capital it receives to continue expanding aggressively within Canada and to make international expansion deals as well.

That said, this is a very volatile time to purchase shares of Aphria. Shares are up sharply today on a deal that has not yet been finalized. Purchasing based on this rumor may be a risky proposition, given that the deal could still fall through or the rumors could turn out to be false or exaggerated.

Further, any investment in cannabis is going to be a risky investment – this is a speculative, volatile market. For that reason, I suggest that investors diversify their holdings within the industry. Consider an approach like my Model Cannabis Portfolio, available to The Growth Operation subscribers, which holds nine different cannabis companies. There is no need to “pick a winner” as, odds are, there will be multiple winners in this market. Holding a diverse group of companies will allow you to weather storms that might impact single companies and will still allow you to capture the long-term upside of this market.

Aphria may also be volatile this week because they are set to announce first quarter (FY19) results on October 12, 2018. I will write more about those results when they are released later this week.

Aphria remains a part of both my personal portfolio and my Model Cannabis Portfolio, available to The Growth Operation subscribers.

This is an exciting time to be a cannabis investor, but please, invest responsibly.

Members of The Growth Operation, my exclusive community, receive:

  • Exclusive access to my in-depth research articles on smaller cannabis companies.
  • Access to my Model Cannabis Portfolio.
  • Up-to-date news and updates on cannabis companies.
  • Access to my full, live portfolio.

This month only, membership is 25% off for your first year. Prices are going to rise come October, so sign up for a free trial today. (If prices rise later, early members get grandfathered prices, forever.)

Disclosure: I am/we are long APHRIA, AURORA CANNABIS, CANOPY GROWTH, CANNTRUST.

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.

These Parents Are Angry That American Airlines Wouldn't Let Their 5-Year-Old Boy with Autism Board a Flight

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

The disappointment was crushing. Especially after the preparation. 

Adam and Heather Halkuff have five children, two of whom have autism. 

They wanted to take the whole family on a trip to Kansas City. So the Texas family did all they could to make it happen.

As NBC 5 reports, they called American Airlines in advance. The airline has a program that helps kids, including those with autism, become familiar with all the trials and quirks of flying. 

Five-year-old Milo and two-year-old Ollie took part, on September 24, more than a week before their flight. 

Yet on the day of the flight, Milo became distressed — many call it a meltdown — during the boarding process at Dallas/Fort Worth airport.

A meltdown might involve screaming, crying and other expressions of feeling overwhelmed.

The Halkuffs say other passengers were kind, but an American Airlines gate agent was less so.

“Right away she goes, ‘He can’t get on the flight … he’s going to bother the other passengers and then he’ll still be upset during the flight and we’ll have to turn around and escort you off the plane,” Heather Halkuff told NBC.

Some might observe that they’ve seen all sorts of kids get on planes and express upset.

Sometimes, they calm down quickly. Surely everyone has at least once been on a flight when a child didn’t quieten at all. 

At times, ground crew and Flight Attendants can be sympathetic. At other times, not so much.

The Halkuffs depiction of this particular gate agent suggests that she was of the latter variety.

Worse, Heather Halkuff says that the whole family weren’t allowed to board. Even though Adam Halkuff offered to take Milo home, so that at least Heather and the other children could still take the trip.

I contacted American for its view and a spokesperson told me:  

We are concerned to hear about this situation. Our team has reached out to the Halkuff family to gather more information about what transpired at Dallas/Fort Worth. The American Airlines team is committed to providing a safe and pleasant travel experience for all of our customers.

Clearly, the fact that American provides a service to help children — including those with autism — get used to flying means that the airline isn’t insensitive to the potential issues.

Moreover, we have no idea of the level of distress Milo might have undergone.

Yet again, though, we’re in a customer service situation when individuals are involved and initial reactions matter.

If the Halkuffs’ story is accurate, then some might conjecture the gate agent reacted too quickly. 

There could, perhaps, have been an alternative solution. Could anyone really know if Milo might have calmed down, once on the plane?

Not allowing any of the family to fly, however, seems to be the sort of draconian decision still too often taken by airline staff. 

I recently wrote about a dad who says he called American to explain that his three-year-old had a burst appendix and please could the airline rebook their trip.

American, he says, insisted on still charging $200 change fees for both of them. Before, says dad, the decision gained some Twitter traction.

Then the airline made a “one time exception.”

When it comes to boarding passengers, airline employees are graded severely on so-called D0.

This is the measure of whether a plane departs at the very minute and second it’s supposed to.

It could be that thoughts of this may have played upon this particular gate agent’s mind.

Yet as long as customers still see airlines as being in the customer service business — perhaps erroneously — such stories are likely to reach the media and become examples of airline insensitivity.

Airlines employ enormous numbers of people and are therefore at the mercy of each of their employees’ behavior.

The Halkuffs hope that what happened doesn’t cause Milo’s older brothers to resent him.

Perhaps there’s some way that American might provide another attempt for Milo to fly with his family.

Indeed, American told me:

A few members of the American team have been in touch with the family, and yes, we are hopeful they will reschedule and try once again.

Walmart partners with MGM to boost video-on-demand service Vudu

NEW YORK (Reuters) – Walmart Inc (WMT.N) said on Monday it would partner with U.S. movie studio Metro Goldwyn Mayer to create content for its video-on-demand service, Vudu, which the retailer bought eight years ago.

FILE PHOTO: Walmart signage is displayed outside a company’s store in Chicago, Illinois, U.S. November 23, 2016. REUTERS/Kamil Krzaczynski

Walmart has been looking to prop up Vudu’s monthly viewership that remains well below that of competitors like Netflix Inc (NFLX.O) and Hulu LLC, which is controlled by Walt Disney Co (DIS.N), Comcast Corp (CMCSA.O) and Twenty-First Century Fox Inc (FOXA.O).

Media outlets had reported the Bentonville, Arkansas-based company was looking to launch a subscription streaming video service to rival that of Netflix and make a foray into producing TV shows to attract customers.

Walmart is not planning such a move, company sources have told Reuters. The retailer continues, however, to look for options to boost its video-on-demand business and offer programs that target customers who live outside of big cities.

Walmart and MGM will make the announcement at the NewFronts conference in Los Angeles on Wednesday. It will include the name of the first production under the partnership, which Walmart will license from MGM.

“Under this partnership, MGM will create exclusive content based on their extensive library of iconic IP (intellectual property), and that content will premiere exclusively on the Vudu platform,” Walmart spokesman Justin Rushing told Reuters.

The focus will be on family-friendly content that Walmart customers prefer, Rushing said.

The financial deals of the deal were not disclosed.

Licensing content is a cost-effective strategy at a time when producing original content has become a costly venture. As of July, Netflix said it was spending $8 billion a year on original and acquired content. Amazon.com Inc’s (AMZN.O) programming budget for Prime Video was more than $4 billion, while U.S. broadcaster HBO, owned by AT&T Inc (T.N), said it would spend $2.7 billion this year.

Walmart acquired Vudu in 2010 to safeguard against declining in-store sales of DVDs. Walmart bet that customers would continue to buy and rent movies and move their titles to a digital library, which Vudu would create and maintain for viewers.

But the video site has not posed a significant challenge to rivals that dominate the segment even though it is pre-loaded or can be downloaded to millions of smart televisions and video-game consoles.

Vudu offers 150,000 titles to buy or rent, while its free, ad-supported streaming service, called Movies On Us, includes 5,000 movies and TV shows.

There are currently more than 200 video services that bypass cable providers and stream content directly to a TV, laptop, phone or game console. That is up from 68 five years ago, according to market researcher Parks Associates.

Reporting by Nandita Bose in New York; Editing by Peter Cooney

SK Hynix boosts investment in new South Korean chip factory

SEOUL (Reuters) – SK Hynix Inc said it would invest 20 trillion won ($17.8 billion) in a new memory chip manufacturing plant opening on Thursday in South Korea, about 29 percent more than originally budgeted.

FILE PHOTO: The logo of SK Hynix is seen at its headquarters in Seongnam, South Korea, April 25, 2016. REUTERS/Kim Hong-Ji/File Photo

The amount is higher than the 15.5 trillion won investment the company announced in 2015 due to rising equipment costs for its fine technology process used to make smaller chips, the it said. The factory will produce NAND flash chips.

“Timing for equipment installation shall be decided considering market conditions,” SK Hynix said in a statement.

Prices for NAND chips, used for longer-term data storage, more than halved over the past year as supply swamped demand, data from market trackers show.

Those drops are expected to accelerate, while most analysts also predict DRAM prices will begin to decline, analysts say.

A company official said the chipmaker had already spent about 2.2 trillion won on the plant.

Reporting by Ju-min Park; Editing by Stephen Coates

Elon Musk's SEC Settlement Could Have Gone So Much Worse

In early August, Tesla CEO Elon Musk posted a fateful tweet: “Am considering taking Tesla private at $420. Funding secured.” On Saturday, two days after the US Securities and Exchange Commission filed a lawsuit against Tesla CEO Elon Musk for “false and misleading” statements made on Twitter, Musk, Tesla, and the feds reached a compromise—a settlement.

According to documents filed in a New York federal court, Musk and Tesla will have to each write $20 million checks for the misadventure, which will be disbursed to investors harmed during the wild market swings that occurred after Musk’s tweets. (Tesla announced in late August, 17 days after the tweet, that it would remain public.) The electric carmaker will appoint two additional independent members to its board. The company will have to keep firm oversight over Musk’s communications with investors—including by tweet. Most critically: Musk will have to step down from his role as Tesla chairperson for at least three years. He will remain on as the company’s CEO and will retain a seat on its board.

In reaching a settlement with the federal enforcement agency, Musk and the company seem to have reversed course. Last week, Tesla had reportedly been on the cusp of a settlement with the SEC, before backing out.

Despite that waffling, legal experts say the result could have been much, much worse for Musk and his car company, where he has served as chairperson since 2004 and CEO since 2008. “Frankly, I view this as somewhat favorable to Musk,” says Stephen Diamond, a professor of securities law and corporate governance at the Santa Clara University School of Law. “He remains CEO, he’s still the dominant stockholder in the company, and he still remains in place on the board.” (Musk owns about 22 percent of Tesla shares.)

By relinquishing his role as chairperson, Musk does lose his ability to call board meetings, as well as set their agendas. His replacement in that role, whom the SEC demands be “independent,” will break Musk’s symbolic grip on the company, at least a bit. (Indeed, a cadre of the company’s investors have been calling for Tesla to formally separate the roles of CEO and chairperson for years now.) “This will serve as a kind of check on the runaway power of Musk,” says Diamond. As CEO, Musk will retain his control over day-to-day operations of Tesla.

A major question looms: Who will the new chairperson be? Will that pick be a truly independent check on the impulsive Musk, praised often for his marketing prowess and inventiveness, but whose actions have occasionally proved destructive and expensive? Observers have long grumbled that Tesla’s board members are not nearly independent enough. (Brother Kimbal Musk is currently on the board for both Tesla and Musk’s SpaceX venture. Antonio Gracias, a founder of Valor Equity Partners, is a longtime friend of Musk’s and has invested in PayPal and Solar City.)

“If the new chairperson is somebody who is extraordinarily strong and someone who will stand up to Elon, then it will be a change in his life,” says Erik Gordon, a lawyer who studies entrepreneurship at the Ross School of Business at the University of Michigan. “If the person is as independent as the supposedly independent directors of Tesla, then it probably doesn’t change his life very much. He will dominate that chairperson in the way he has dominated his board.”

One big thing that will definitely change for Musk: The settlement instructs Tesla to “implement mandatory procedures and controls to oversee all of Elon Musk’s communications regarding the Company made in any format.” Including—you guessed it—Twitter. “The thing that will be both humiliating for Musk and good for him is that he will be the only CEO I have ever known who will have to get his communications approved before he makes them,” says Gordon. Expect this to be a particular bummer for Musk, who has built a reputation off his irreverent, goofy, startlingly transparent, and lawsuit-spurring social media posts. Professional tweet editors, polish up those resumes.

Not settling with the SEC could have led to a more dire outcome. The SEC’s initial suit sought to bar the CEO from becoming an officer or director for any public company, perhaps for life. A loss against the federal agency in court may have also made it difficult for Musk to raise money for his non-Tesla ventures: rocket-building SpaceX, neurotechnology company Neuralink, and infrastructure venture the Boring Company.

While the settlement neatly ties up Tesla’s current dealings with the SEC, the carmaker still has two more Twitter-related headaches. The first is the reported Department of Justice probe into the “funding secured” tweet, which is being investigated as a possible case of criminal fraud. The settlement here may not have any bearing on that investigation, legal experts say. The second is a series of class-action lawsuits filed by investors who say they lost big money in the market volatility following Musk’s August Twitter statements. Though the $40 million in fines will be used to mollify investors, legal experts expect the plaintiffs to push for even more funds. “Those lawsuits have always been the bigger risk to Musk and the company,” says Gordon.


More Great WIRED Stories

The 5 Biggest Bombshells From the SEC's Lawsuit Against Elon Musk

The Security Exchange Commission filed a lawsuit against Elon Musk in federal court on Thursday afternoon, accusing him of misleading the public when he announced he was taking Tesla private during an August 7 tweet storm. The lawsuit claims that Musk made false and misleading statements that “caused significant confusion and disruption in the market for Tesla’s stock and resulting harm to investors.”

The statements in question began with Musk’s now-infamous tweet: “Am considering taking Tesla private at $420. Funding secured.” Musk went on to double-down on his statement in subsequent tweets, saying that a shareholder vote was the only obstacle remaining before Tesla could go private. 

That, of course, proved to be false. As a result, the SEC is suing Musk directly, requesting that the court require Musk to pay civil penalties and bar him from running any publicly traded company, including Tesla.

I read through the SEC’s 23-page complaint, which you can find here. Here are five big highlights from the allegations.

1. Musk picked the price because he thought it was funny.

The complaint speaks for itself here:

According to Musk, he calculated the $420 price per share based on a 20% premium over that day’s closing share price because he thought 20% was a “standard premium” in going-private transactions. This calculation resulted in a price of $419, and Musk stated that he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend “would find it funny, which admittedly is not a great reason to pick a price.”

2. The company’s chief financial officer, head of communications, and general counsel tried to do damage control almost immediately.

Tesla’s CFO sent a text message to Musk 35 minutes after his tweet went up: “Elon, am sure you have thought about a broader communication on your rationale and structure to employees and potential investors. Would it help if [Tesla’s head of communications], [Tesla’s General Counsel], and I draft a blog post or employee email for you?” Musk replied, “Yeah, that would be great.” Tesla’s Chief Financial Officer then replied, “Working on it. Will send you shortly.” Musk sent out an email providing his rationale for wanting to go private to Tesla employees, which was also posted to the company blog, about two hours later.

3. The questions started almost instantly, but Musk didn’t clarify things for six days.

Within minutes of Musk’s tweets, a Tesla investor texted Musk’s chief of staff, “What’s Elon’s tweet about? Can’t make any sense of it. Would be incredibly disappointing for shareholders that have stuck it out for so long.” Several minutes later, a business reporter texted the chief of staff, “Quite a tweet! (Is it a joke?).” Musk didn’t clarify until six days later, when he revealed for the first time that he was still in the discussion stage about taking the company private and that no official proposal had yet been presented.

4. Tesla’s head of investor relations apparently didn’t know the situation–which made things worse.

According to the complaint, at least three research analysts reached out to Tesla’s head of investor relations within hours of Musk tweeting to ask whether the company had actually secured funding. In all three cases, the exec confirmed that it had. “Firm offer means there is a commitment letter or is this a verbal agreement?” one analyst asked. The investor relations head wrote back: “I actually don’t know, but I would assume that given we went full-on public with this, the offer is as firm as it gets.”

5. The potential deal Musk thought he had with a Saudi Arabian fund might have been contingent on building a factory in the Middle East–but he never confirmed this detail. 

The Saudi Arabian fund first brought up the prospect of Tesla building a facility in the Middle East back in 2017. That possibility was presented again when Musk met with the group on July 31. According to the complaint, Musk showed he was open to the idea but made no commitment. “Musk assumed,” it reads, “that whether a Tesla production facility in the Middle East was a precondition to the Fund’s willingness to take Tesla private would depend on the amount of capital the Fund was required to commit to the transaction. Musk did not discuss his assumption with the representatives of the Fund.”

American Airlines Has Changed Something Very Basic About Its Service. It Just Hasn't Told Passengers Yet

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

Airlines are run with very little room for maneuver.

Once the system breaks down in a single place, it can have a terrible knock-on effect. 

And, of course, every new decision taken at the top has little consequences lower down.

It can all add up.

Have you noticed, for example, that the boarding time on your American Airlines boarding pass doesn’t always correspond with when the plane actually boards?

Yes, sometimes it’s delayed. Because delays are an integral part of flying enjoyment.

Sometimes, though, flights are boarding early. 

After all, there’s only one aisle and scores of fraying tempers.

There’s also the pressure all American employees feel to get the planes out on time.

Still, it can be annoying to turn up at the gate on time for boarding and discover that, oh, it’s already begun.

Cue the involuntary spasms caused by wondering whether there’ll still be overhead bin space.

Why, though, doesn’t American have the correct boarding time on its boarding passes?

View From The Wing’s Gary Leff offers darkly: “This is a known issue at American, and one they’ve chosen not to spend on the IT to fix.”

I asked American the inside story.

An airline spokesperson offered: 

It is not that we don’t want to update our IT. We have many projects we are working on, and we expect the fix will be in place in November.

In essence, then, the airline simply hasn’t got around to it.

Can’t you see that it’s busy?

Actually, I’m sure it is. Management puts all sorts of pressure on employees to deliver on a whole range of new parameters, as the big airlines fight for marginally more business and try to squeeze additional revenue from passengers.

Someone has to implement all that. That’s not always easy.

And have you seen how often airline IT systems break down? Why, American’s last vast issue was only in June.

Honestly, dear passenger, you can be so annoyingly inconsiderate sometimes.

Just wait in line, would you?

Google staff discussed tweaking search results to counter travel ban: WSJ

(Reuters) – Google employees brainstormed ways to alter search functions to counter the Trump administration’s controversial 2017 travel ban, the Wall Street Journal reported on Thursday, citing internal emails.

FILE PHOTO: A Google logo in an office building in Zurich September 5, 2018. REUTERS/Arnd WIegmann/File Photo

Google employees discussed how they could tweak the company’s search-related functions to show users how to contribute to pro-immigration organizations and contact lawmakers and government agencies, the WSJ said. The ideas were not implemented. on.wsj.com/2DePzWh

President Donald Trump’s travel ban temporarily barred visitors and immigrants from seven majority Muslim countries. It spurred public outcry and was revised several times. Trump said the travel ban was needed to protect the United States against attacks by Islamist militants, and the Supreme Court upheld the measure in June.

The Google employees proposed ways to “leverage” search functions and take steps to counter what they considered to be “islamophobic, algorithmically biased results from search terms ‘Islam’, ‘Muslim’, ‘Iran’, etc.” and “prejudiced, algorithmically biased search results from search terms ‘Mexico’, ‘Hispanic’, ‘Latino’, etc,” the Journal added, quoting from the emails.

A Google spokesperson said the emails represented brainstorming and none of the ideas were implemented. She said the company does not manipulate search results or modify products to promote political views.

“Our processes and policies would not have allowed for any manipulation of search results to promote political ideologies,” the spokesperson said in a statement.

Reporting by Rama Venkat in Bengaluru; Editing by Cynthia Osterman

American Airlines Just Raised Its Baggage Fee and Offered an Incredible, Maddening Explanation

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

You knew it was going to happen.

I knew it was going to happen.

American Airlines knew it was going to happen too. 

The only question was how many hours the populace would be waiting before American followed Delta and United Airlines (and JetBlue) in raising baggage fees to $30.

When the announcement was made, I sat and pondered the meaning of life for a while.

Then I did the only thing my Yoda could suggest. I contacted American to ask for its logic in making this unpopular move.

An American spokesman told me: 

Like fares, baggage fees are set by the supply and demand for the product in the marketplace, and today’s changes are in line with what other U.S. competitors are charging. 

I stared at this for quite some time, tried to absorb it thoroughly and only then did I consider its fine logic.

I fear some might observe that if baggage fees are set by supply and demand, does that mean that American will raise them for every flight that happens to have a lot of cargo in the hold? 

After all, there might be less space. Ergo, the price should go up.

Please consider arriving at the ticket counter, to be told:

Yeah, sorry, we’ve got a big shipment of golf equipment in the hold today. So your baggage fee will be $175.

And when baggage fees didn’t exist, did this mean there was simply far too much space in the hold, none of it was precious, so it could be just given away?

I fear what American might actually mean by supply and demand is that when four airlines hold more than 80 percent of all available seats, they have most of the supply.

They therefore have the power to set the price of anything to a considerable extent.

The only thing that might even hold them back even a little is the existence of a budget airline on a specific route or, in this case, Southwest’s insistence that its customers’ bags fly free.

There’s a little more logical consistency, I fear, in the second part of American’s statement: United and Delta have done it, so we will too. What did you expect?

Of course, it’ll be fascinating to see whether the more baggage fees go up, the more people try and haul all their belongings onto the plane, hence delaying departure.

That’s something airlines really don’t like.

The baggage fee hike is merely a fare hike by other means. It also comes with a lower tax rate for the airline, as fees are taxed differently from fares.

I wonder if, for even a nanosecond over a third cocktail, an American executive or two might have considered that not raising the baggage fee might have given the airline a little point of difference.

Ach, but what’s the point of difference when your only true distinction is your network and you can just keep on scooping up (what you think is) your fair share?

Oil prices rise on lower U.S. crude inventories, looming Iran sanctions

SINGAPORE (Reuters) – Oil prices rose on Wednesday following a report that crude inventories in the United States fell and as looming sanctions against Iran raised expectations of tightening supplies, with top producer Russia warning of a “fragile” global crude market.

FILE PHOTO: A pumpjack is seen at the Sinopec-operated Shengli oil field in Dongying, Shandong province, China January 12, 2017. Picture taken January 12, 2017. REUTERS/Chen Aizhu

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $69.81 per barrel at 0047 GMT, up 56 cents, or 0.8 percent, from their last settlement. WTI futures gained 2.5 percent in the previous session.

Brent crude futures LCOc1 climbed 24 cents, or 0.3 percent, to $79.30 a barrel. Brent has climbed for four straight days and gained 2.2 percent in the previous session.

“Oil prices jumped overnight as American Petroleum Institute inventory data showed a large drawdown in inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

U.S. crude stocks fell by 8.6 million barrels in the week to Sept. 7 to 395.9 million barrels, the American Petroleum Institute (API), a private industry group, said on Tuesday.

Official weekly government data will be published by the U.S. Energy Information Administration (EIA) on Wednesday.

Outside the United States, traders have been focusing on the impact of U.S. sanctions against Iran that will target oil exports from November.

Washington has put pressure on other governments to also cut imports, and many countries and companies are already falling in line and reducing purchases, triggering expectations of a tighter market.

“FRAGILE” MARKET

Russian energy minister Alexander Novak on Wednesday warned of the impact the U.S. sanctions against Iran.

“This is huge uncertainty on the market – how the countries, which buy almost 2 million barrels per day of Iranian oil will act. The situation should be closely watched, the right decisions should be taken,” he said.

Novak said global oil markets were “fragile” due to geopolitical risk and supply disruptions, but added his country could raise output if needed.

“It is related to the fact that not all the countries have managed to restore their market and production,” he said, referring to outages and falling production in Mexico and Venezuela.

Should markets overheat and prices spike, Novak said Russia could raise output.

“Russia has potential to raise production by 300,000 barrels (per day) mid-term, in addition to the level of October 2016,” he said.

That month Russia produced 11.247 million barrels per day, a post-Soviet Union record high.

Crude prices were also pushed up by Hurricane Florence offshore the United States amid surging demand for gasoline and diesel. The storm is expected to make landfall on the U.S. East Coast on Friday, and has caused fuel shortages as millions of households and businesses have evacuated.

Front month gasoline futures RBV8 rose 0.5 percent on Wednesday while heating oil futures HOV8 increased 0.4 percent.

Reporting by Henning Gloystein; Editing by Joseph Radford and Christian Schmollinger

If You Don't Bother To Do This With Your New Hires, You're Throwing $10,000 Down The Drain.

You’re not Google. Neither are you Apple. A-players aren’t fighting tooth and nail for a chance to work on your company. So it’s up to you to attract them with a kickass job description and a great company culture.

But here’s the thing:

Hiring isn’t just about attracting rockstar candidates, and conducting interviews. There’s another piece of the puzzle that’s equally important: and that’s onboarding newer hires.

According to a survey by BambooHR, 91 percent of HR managers think their onboarding processes need to be improved. And guess what? 45 percent of these managers believe that their companies waste up to $10,000 per year on ineffective onboarding processes. I mean, $10,000 is a lot of money. And it could be put to better use elsewhere, such as your marketing campaigns. 

Want to work on your onboarding process, and make it more effective? Here are four tips that can help you do that.

1. Explain the big picture and set expectations.

Plenty of employees start off happy, and then get jaded six months in.

How do you prevent this from happening? Simple. Sit them down on Day One, and tell them how their work plays a role in the big picture. This way, they’ll feel like they’re contributing to the company, and that their work is meaningful.

On top of that, make sure you communicate your expectations to your new employee. What’s their scope of work? What’s their KPI? Do they have monthly targets to hit? Lay it all out.

2. Get them involved straightaway.

If you want your new employees to hit the ground running, don’t try to ease them in. Instead, get them to work with your team members on a project, right off the bat.

This does two things: first, it helps your new hire to establish a rapport with the team immediately. It also allows them to learn from your other employees’ guidance.

3. Provide them with all the information they need.

You don’t want your new hire to wander around the office like a lost sheep, so provide them with all the information they need to dive head-first into their job.

That said, don’t just dump a long, boring manual on them and be done with it. Personally, I like to use explainer videos to help new hires learn how to execute processes and get things done.

I also have an organizational chart in the office that lets everybody know who is responsible for what. If the new hire needs something, they can simply check the org chart and look for the relevant person.

4. Closely follow their progress and recognize their work.

Not many business owners realize this, but the first six months of hiring a new employee are pretty make-or-break.

Why do I say so? According to the Aberdeen Group, 86 percent of new hires make their decision to leave or stay within the first six months. And out of those who choose to leave, 79 percent do so because of a lack of appreciation from their manager.

Your job, as an entrepreneur and a leader, is to make sure your new employees aren’t struggling. Track their progress, help them if needed, and appreciate and recognize their work.

Look, onboarding isn’t rocket science, it’s just that entrepreneurs typically focus on their hiring processes, and overlook this other aspect of hiring. To keep your team happy and your retention rates high, make sure you improve upon your onboarding process. Here’s to building a team of rockstars!

Tesla: H1 2018 Update – Impact Of Model 3 On SG&A And Profitability

Two new quarters have gone by since my last analysis of Tesla’s (TSLA) Selling, General and Administrative (SG&A) expenses. The release of the Q2 numbers is now about a month past. In the meantime, not much has happened besides some lawsuits, pedophile accusations, negative reports, positive reports, 86% doubts about Model 3 quality, and the occasional floating and subsequent sinking of the idea to take Tesla private. So really no excuse for this delay, my apologies, I know you have all been awaiting eagerly for an update on the SG&A situation. The first four graphs will simply be updates of the ones I used in my previous analysis. After that I will show two scenarios varying the gross margin for Model 3.

My view was and is that SG&A is one the most important items determining Tesla’s success or failure, while at the same time being the most neglected. (UncleBrian Research is one of the few that did pay attention to it in a recent article.) Up to at least 2017 Q4, SG&A always went up nicely with revenue, thereby assuring no profit would ever be made by Tesla. That is, unless Tesla manages to break that trend and, on a per-car-basis, bring down those costs. Now that the Model 3 is being delivered in sufficient numbers to make an impact, let’s see how things are developing.

I start with my traditional first graph, an overview of SG&A per total revenue:

Nothing dramatic has happened, but there is some improvement on the overall SG&A front. Let’s see how this compares to overall gross margin:

We can see that after deducting SG&A/revenue from gross margin we still end up below zero. In other words, Tesla is still making a loss, even before deducting Research and Development (R&D) and interest expense. On the other hand, glass half full, while SG&A per revenue goes down, gross margin goes up, leading to a nice up-tick in Q2 for the difference between the two.

I continue with SG&A per delivered car. Here we can also see an improvement:

Note that the above three graphs were based on the company as a whole. Non-automotive revenue is about 16% of total revenue, so this may influence results, especially when extrapolating going forward into the future and beyond.

To estimate “automotive SG&A”, i.e., SG&A that has only to do with the automotive part, as opposed to, e.g., solar cells, I have (as before) used the following steps:

  1. Start with total SG&A.
  2. Subtract the SolarCity part. For 2016 Q4 and 2017 Q1, this was explicitly mentioned in the financial reports. For the rest of the 2017 and 2018 quarters, I have made estimates per quarter, using the revenue of SolarCity and assigning a similar percentage to SG&A as in Q1. Note that the further out from 2017 Q1, the more uncertain this becomes.
  3. For all other non-automobile revenue, I have assigned a percentage to SG&A and subtracted that from the total SG&A. I don’t know what the right percentage is, so I have used varying assumptions, ranging from 20% to 70% for SG&A per non-automotive revenue.

This has led to the following estimate for Tesla’s automotive SG&A per car, assuming non-automotive SG&A to be 20% (similar to overall SG&A vs. revenue) of non-automotive revenue:

The change is less pronounced than when looking at overall SG&A, but there is still an improvement, especially in Q2 of 2018.

Profitability based on 2018 Q2 SG&A numbers

I now do two profitability estimates using the range of 20% to 70% as per point 3 above. Now that delivering more cars has actually led to lower SG&A on a per car basis, I figure an extrapolation to a total of 350,000 cars annually based on regression makes sense, using the numbers from 2016 Q3 (first time over 20K cars) to 2018 Q2. The two estimates differ only in the assumed gross margin on the Model 3: 25% (as per Musk) vs. 15% (more conservative).

My assumptions are:

  • Model S and X: 100,000 delivered per year (capped by Musk at that level) at an average price of $100,000, with a gross margin of 25%. Result: 100,000 x $100,000 x 0.25 = gross profit of $2.5 billion per year.
  • R&D: In the first half of 2018, this was about $750 million, so for a full year that is $1.5 billion.
  • Interest: The net amount was about $160 million in 2018 Q2. Times 4, round it down: $600 million for a whole year.
  • Other income and restructuring expense will be ignored.
  • Other lines of business will be ignored.

Add this all up, we get $2.5 billion – ($1.5 billion + $600 million) = $400 million.

  • Model 3: I assume a production rate of 5,000 per week, totaling about 250,000 per year. I will vary the average selling price from $35,000 to $60,000. A gross margin of 25% gives a range of gross profit for the Model 3 of about $2.2 billion to $3.8 billion per year, whereas a gross margin of only 15% gives a range of gross profit for the Model 3 of about $1.7 billion to $2.7 billion per year.
  • SG&A: I use the range of 20% to 70% as per point 3 further above. Now that delivering more cars has actually led to lower SG&A on a per car basis, I figure an extrapolation to a total of 350,000 cars annually based on regression makes sense, using the numbers from 2016 Q3 (first time over 20K cars) to 2018 Q2. This gives a range of ca. $2.0 billion to $3.8 billion per year, where the lower number corresponds to assuming a higher (70% of revenue) SG&A for non-automotive segments, and the higher number corresponds to 20%. Note that range is for all models combined, e.g., S, X and 3 together.

Taken all together gives me a rough estimate of the profitability of Tesla’s automotive business in a year in which the above-mentioned assumptions would be reality.

Assuming a gross margin of 25% leads to:

We can see that if at some point Musk’s expectations regarding gross margins and number of delivered cars come true, and if Tesla manages to bring down SG&A costs as it has towards 2018 Q2, then there is a chance at a modest profit even at lower average selling prices. At the higher prices, profit is “secured”, but the question remains whether there is enough demand at such prices. Another question is whether the profits would be enough to justify the current stock price. The above analysis suggests they wouldn’t be.

Assuming a more conservative gross margin of 15% leads to:

We can see that under this assumption, it is very unlikely to see any profitability, because again, an ASP of $50,000 or more seems doubtful for the number of cars assumed to be sold.

Conclusion:

Tesla has managed to improve SG&A on a per car basis in the first half of 2018. Whether this is sufficient for profitability in the future depends on whether Tesla manages to achieve its aimed for gross margin on Model 3 of 25% and on the exact internal cost structure of Tesla’s SG&A. Even with profitability, the share price seems higher than warranted. Without a gross margin on the Model 3 of 25%, future profitability seems very difficult.

Disclosure: I am/we are short TSLA.

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: I am short TSLA via long-dated, out-of-the-money puts.

JD.com CEO was arrested on allegation of rape: police report

MINNEAPOLIS/SHANGHAI (Reuters) – The founder and chief executive of Chinese retailer JD.com Inc, Richard Liu, was arrested in Minneapolis last week following an allegation of rape, according to a public information report released by police on Tuesday.

FILE PHOTO: Richard Liu, CEO and founder of China’s e-commerce company JD.com, attends a France-Chinese forum on the applications of artificial intelligence at SOHO 3Q in Beijing, China January 9, 2018. REUTERS/Jason Lee/File Photo

Liu, identified in the report by his Chinese name Liu Qiangdong, was released from custody on Saturday without being charged, and he returned to China.

Earl Gray, a Minnesota-based lawyer for Liu, said on Monday that the Chinese businessman has denied any wrongdoing and that he did not expect his client to be charged.

On Tuesday, defense attorney Joseph Friedberg said, “They are not going to charge in this case. There’s no credible complaint.”

Minneapolis Police Department spokesman John Elder said on Tuesday that if there were any charges against Liu they would not be filed until completion of a criminal investigation that would not occur before Friday.

The police report shed a bit more light on the nature of the accusation, which authorities had previously left vague. It said the alleged offense was “criminal sexual contact – rape,” and said domestic violence was not involved.

It gave no further details, but Elder said the alleged attack reportedly occurred at 1 a.m. local time on Friday, and that Liu was taken into custody later that evening.

Elder declined to disclose whether any accuser was cooperating with police. “I wouldn’t address that. That goes to the investigation,” he said.

JD.com Inc’s stock fell as much as 7 percent on Tuesday, hitting an 18-month low, reflecting investor uncertainty. Shares in China’s second largest e-commerce company closed down 6 percent at $29.43 on Tuesday on the Nasdaq and were steady after hours.

JD.com’s rules require Liu, who holds nearly 80 percent of the company’s voting rights, to be present at board meetings for the board to make decisions, although it was not clear if he has to be physically present or could participate by teleconference.

The company counts Walmart Inc, Alphabet Inc’s Google and China’s Tencent Holdings as investors. It faces stiff competition from rival Alibaba Group Holding Ltd at home.

“If this spirals as a media focus, negative attention could offset some of the positives associated with endorsement by Walmart and Google,” analyst Rob Sanderson of MKM Partners said.

“Negative publicity could also compromise JD.com’s ability to attract international brands to its marketplace, which has been a top focus of the CEO over the past two years or so,” Sanderson said.

Liu lost a court battle in Australia in July to keep his name out of a sexual assault trial. Liu was not accused of any wrongdoing in that case, according to a court document.

The case involved a person who had been a guest at a party hosted by Liu at his home in Sydney 2015 who accused another guest of sexually assaulting her at a hotel. The defendant was found guilty of seven offenses.

Reporting by Adam Jourdan and Todd Melby; Additional reporting by Arjun Panchadar; Writing by Frank McGurty; Editing by Toni Reinhold and Edwina Gibbs

Here Are the Tech Stocks That Thrived (and Dived) This Summer

Apple became the first U.S. stock to be worth a trillion dollars. Amazon wasn’t far behind. And Tesla hit the mother of all speed bumps thanks to its CEO’s erratic behavior.

Summer is, by conventional wisdom, a traditionally sleepy time for the stock market. Investors schedule their vacations during the warm months, and volume declines enough that companies hold off until the fall on releasing big announcements. Like, say, a new version of the iPhone, which is coming in September.

Perhaps its a reflection of the work-hard ethic at Silicon Valley companies, but tech stocks didn’t seem to take the summer off. Many tech shares remained volatile, driven by second-quarter earnings or other news. Here is a recap of who won and who lost between Memorial Day and Labor Day 2018.

Apple Is Worth $1 Trillion

Apple made history in the U.S. stock market by becoming the first American-based company to ever earn a market cap of $1 trillion. Apple reached that milestone on Aug. 2.

The first company to ever be worth $1 trillion was Petrochina, which reached the valuation briefly on its first day of trading in 2008, before losing about 80% of its peak value during the following decade.

Unlike Petrochina, Apple has continued to rise after it hit the $1 trillion target. Under Tim Cook’s management, Apple’s shares have since risen another 10% since breaching the $1 trillion watermark, closing Friday with a $1.099 trillion market value. Rumors concerning Apple’s annual September product event, at once among the best- and worst-kept secrets in tech, suggest that the company will unveil new iPhones on Sept. 12.

Apple’s stock rose 22% between Memorial Day weekend and Labor Day weekend. The S&P 500 Index, by comparison, rose 7%.

… And Amazon Is Not Far Behind

Amazon broke above the $2,000 per share barrier for the first time ever this week and finished the week at $2,012.71, its highest ever close. More important to those who follow stock-market milestones, Amazon is now worth $982 billion, just $18 billion shy of that fabled $1 trillion market cap.

Amazon, of course, had a strong second quarter, with overall revenue rising 39%, with more Amazon Prime members than ever, and with segments like cloud computing and online advertising rising 49% and 132%, respectively. If the company founded by Jeff Bezos maintains that growth in the current quarter, it could easily join the 13-digit valuation club.

Amazon’s stock rose 24% during the summer session.

Tesla Was as Volatile as Ever

Thanks to the compulsive tweeting by Tesla CEO Elon Musk, shares of Tesla were as volatile as they’ve ever been. Tesla’s bullish supporters and its bearish skeptics have been waging a war over the direction of the company’s stock price. But this summer, Musk gave his critics more than enough ammunition against him.

Overall, Tesla shares rose 6% during the summer, a period when Tesla needed to prove its ability to deliver on its audacious production goals for making its lower-cost Model 3 cars. While Tesla’s internal metrics seemed to show that production of Model 3s are meeting goals, Musk distracted from that goal by berating analysts in an earnings call and infamously calling a diver who rescued a Thai soccer team a “pedo.”

Perhaps most controversially, Musk tweeted that he had secured financing to take Tesla private. Whatever financing he was thinking of didn’t pan out. Musk this week abandoned his plans to take Tesla private, causing the stock to slump at summer’s end.

Facebook’s Stock Is Having a Bad Summer

Shares of Facebook have fallen more than 8% between Memorial Day and Labor Day. The biggest drag on its share price was the company’s second-quarter earnings, in which the company suffered a slowdown in the growth of active users on its core site and warned that the trend may continue into the future.

Those disappointing metrics followed months of questions and often reluctant disclosures about massive information leaks and about how it handles false information on its site. Facebook keeps saying it’s doing its best to counter the kinds of missteps that placed Mark Zuckerberg in the middle of a Congressional inquiry into Russian meddling in the 2016 presidential election.

California lawmakers send strict 'net neutrality' laws to governor

LOS ANGELES (Reuters) – California lawmakers sent to the governor’s desk for final approval strict “net neutrality” laws on internet providers that would defy sweeping Federal Communications Commission rules seen as a boon for the companies.

FILE PHOTO: California Governor Jerry Brown delivers his final state of the state address in Sacramento, California, U.S., January 25, 2018. REUTERS/Fred Greaves/File Photo

The Democrat-controlled California Senate voted 27-12 to pass the bill, known as SB 822, with just hours left in the legislative session. The measure was approved by their colleagues in the state Assembly one day earlier.

Governor Jerry Brown, also a Democrat, has not yet said if he would sign the bill into law. He has 30 days to act but does not typically signal his intentions before legislation lands on his desk.

Members of the California Assembly voted 58-17 to send the bill to their colleagues in the state Senate, who have until midnight to pass so-called SB 822 on the final day of the legislative session or wait until next year.

If the measure passes both chambers of the Democrat-controlled state legislature it would still require approval from Governor Jerry Brown, a Democrat, who has not said if he would sign it into law.

FILE PHOTO – Supporters of Net Neutrality protest the FCC’s recent decision to repeal the program in Los Angeles, California, November 28, 2017. REUTERS/ Kyle Grillot

“We did it, we passed the strongest net neutrality standards in the nation,” Democrat Scott Wiener, the bill’s author, said in a written statement issued after the vote. “The internet is at the heart of 21st century life – our economy, our public safety and health systems, and our democracy.”

Supporters of California’s proposed regulations contend that net neutrality rules would bar major internet providers from blocking, slowing down or giving preferential access to online content.

Critics say the restrictions limit internet providers’ ability to recoup the costs of network improvements and lead them to curb investment.

In June, the FCC under President Donald Trump repealed rules adopted during the Obama administration that barred internet service providers from blocking content or charging more for access, a move intended to establish a more level playing field or “net neutrality.”

State attorneys general and the District of Columbia asked a federal appeals court earlier this month to reinstate the Obama regulations.

They were joined in that action a week later by a coalition of trade groups representing companies including Alphabet Inc, Facebook Inc and Amazon.com Inc.

The U.S. Senate voted in May to keep the Obama-era internet rules but the measure is unlikely to be approved by the House of Representatives or the White House.

Reporting by Dan Whitcomb; Editing by Kim Coghill