Cyber Saturday—YouTube Extremism, Bezos Phone Hacking, Spies at Mar-a-Lago

What causes a person to become radicalized?

This was the subject of a fascinating talk delivered by Tamar Mitts, an assistant professor of international and public affairs at Columbia University, at a “data science day” hosted by the school on Wednesday. Mitts studied the efficacy of Twitter-disseminated propaganda supporting the self-identified Islamic State, or ISIS, in 2015 and 2016. To avoid the “obvious ethical issues” which attend to subjecting humans analysts to ISIS propaganda, Mitts said she used machine learning algorithms to identify and sort messages and videos into various categories, such as whether they contained violence. Then she parsed her dataset to uncover trends.

Mitts’ results were a revelation. Even though people tend to associate ISIS propaganda with heinous acts of brutality—beheadings, murder, and the like—Mitts found that such violence was, more often than not, counterproductive to the group’s aims. “The most interesting and unexpected result was that when these messages were being coupled with extreme, violent imagery, these videos became ineffective,” Mitts said. In other words, the savagery for which ISIS became famous did not appeal to the majority of its followers; positive messaging found greater success.

There’s a caveat though: Anyone who was already extremely supportive of ISIS became even more fanatical after encountering a piece of propaganda featuring violence. So, while violent acts turned off newcomers and casual sympathizers, they nudged ideologues further down the path of radicalization. Extremism begets polarity.

In the wake of the Christchurch massacre, Mitts’ research gains even more relevance. Tech giants are continuing to fail to curb a scourge of violence and hate speech proliferating on their sites. World governments are, meanwhile, passing ham-fisted policies to stem the spread of such bile.

Perhaps Mitts’ discoveries could help society to avoid repeating history’s darkest moments. My appreciation for her work grew after I finished reading In the Garden of Beasts, a gripping journalistic endeavor by Erik Larson, which details the rise of Nazi Germany through the eyes of an American ambassador and his family living in Berlin. Afterward, I watched a YouTube video—an innocuous one—recommended by the author: Symphony of a Great City, a 1927 film that documented the daily life of ordinary Berliners at that time. It amazes me to think how, within a few years, these souls would come under the sway of Hitler’s bloodthirsty regime.

While the Internet makes zealotry easier than ever to incite, today’s tools also make it easier to study.

Robert Hackett


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Welcome to the Cyber Saturday edition of Data Sheet, Fortune’s daily tech newsletter. Fortune reporter Robert Hackett here. You may reach Robert Hackett via Twitter, Cryptocat, Jabber (see OTR fingerprint on my, PGP encrypted email (see public key on my, Wickr, Signal, or however you (securely) prefer. Feedback welcome.

An Open Letter from Steve Jobs to Tim Cook

Time passes quickly and the WiFi is spotty here in Trāyastriṃśaso I apologize for taking so long to check out how you’ve been doing with our company.

Of course, truth be known, Apple was already on that trajectory when I handed you the company, but props anyway.

Beyond that, though, I feel I must ask: Is that ALL you could manage with that money and talent? Seriously?

OK… Let me calm down… Deep breath… Nam Myoho Renge Kyo… Nam Myoho Renge Kyo.. That’s better.

Look, Tim, I don’t want to go all heavy on your case, but here’s what you need to do to make Apple great again:

1. Invest in new technology.

You let our cash on hand get all the way up to $245 billion??? Earning maybe 3% interest? Are you out of your mind?!?!  With those deep pockets, we should be making huge investments and acquisitions in every technology that will comprise the world of the future. You’ve let that upstart Musk make us look like IBM. That’s just plain wrong. 

2. Attack and cripple Google.

Google is our new nemesis, remember? They attacked our core business model with that Android PoC. But, Tim, c’mon… Google is weak. They can’t innovate worth beans and most of their revenue still comes from online ads, which are only valuable because they constantly violate user privacy. You could cut their revenues in half if you added a defaul 100% secure Internet search app to iOS and Mac OS. Spend a few billion and make it faster and better than Google’s ad-laden wide-open nightmare. This isn’t brain surgery.

3. Make the iPad into a PC killer.

WTF? The iPad was supposed to be our big revenge on Microsoft for almost putting us out of business. All it needed was a mouse and could have killed–killed!–laptop sales. Sure, it would have cut into MacBook sales, but that’s the way our industry works. I let the Macintosh kill the Lisa, remember? And the Lisa was my personal pet project. The iPad could have been the next PC… and it still might not be too late.  

4. Give our engineers private offices.

I get it, Tim. You’re not a programmer. You built your career in high tech but it was always in sales and marketing, which are the parts of the business where a lot of talking and socializing make sense. But if you’d ever designed a product, or actually written code, you’d know engineering requires concentration without distractions. Programmers and designers don’t belong in an open plan office. Give them back their private offices before it’s too late.

5. Don’t announce trivial dreck.

A credit card? Seriously? Airbuds with ear-clips? A me-too news service? Is that best you can do? And what was with Oprah And Spielberg at the event? Hey, the year 2007 called and wants its celebrities back. Look, when you gin up the press and the public up for a huge announcement and it’s just meh tweaks to existing products or me-too stuff, it makes us look lame and out of touch. If we don’t have anything world-shaking, don’t have an announcement!

6. Stop pretending we’re cutting edge.

There was a time–I remember it well–when people would line up for hours just to be the first to get our innovative new products. Heck, we even had “evangelists” who promoted our products to our true-believers. But that’s history. Until we come out insanely great new products that inspire that kind of loyalty, dial down the fake enthusiasm. 

7. Make Macs faster, better, cheaper–more quickly.

I’m honestly embarrassed what you’ve done with the Mac. You’ve not released a new design in years. Sure, MacBooks were cool back in the day, but now they’re just average. And where’s our answer to the Surface? Tim, you actually let Microsoft–Microsoft again!–pace us with a mobile product. That’s freakin’ pitiful.

8. Diversify our supply chain out of Asia.

Tim, Tim, Tim…  I love Asia, but you’ve bet our entire company on the belief that there will never be another war (shooting or trade) there. Meanwhile, China has become more aggressive and there’s a madman with nuclear weapons perched a few miles from our main supplier for iPhone parts. Wake up! We need to sourcing our parts in geographical areas where war is less likely.

9. Fix our software, already.

This was the one that surprised me the most. I knew that iTunes, iBooks, Music, and AppStore was a crazyquilt but I figured we could fix that in a future release. But here we are, ten years later, and we’re still asking people to suffer through this counter-intuitive bullsh*t? And what’s with the recent instability with our operating systems? And that wack Facetime security hole? 

10. Make some key management changes.

Delete your account.


China's Tencent raises $6 billion in bond sale; proceeds for general purposes

HONG KONG (Reuters) – Chinese social media and gaming giant Tencent Holdings Ltd said on Thursday it has raised $6 billion in a bond sale, with proceeds earmarked for refinancing and general corporate purposes.

FILE PHOTO: A Tencent sign is seen during the fourth World Internet Conference in Wuzhen, Zhejiang province, China, Dec. 4, 2017. REUTERS/Aly Song/File Photo

The sale was Asia’s largest this year, Refinitiv data showed, exceeding property developer China Evergrande Group’s $2.8 billion issue in January.

Tencent sold $2 billion in fixed and floating rate five-year notes, $500 million in seven-year notes, $3 billion in 10-year notes and $500 million in 30-year notes, it said in a filing to Hong Kong’s stock exchange.

The bonds will carry coupons of 3.280 percent, 3.575 percent, 3.975 percent and 4.525 percent on the fixed rate five-year notes, seven-year notes, 10-year notes and 30-year notes, respectively.

The floating rate five-year note will have an interest rate of LIBOR plus 0.910 percent.

The tech firm earlier this week said its board had increased its Global Medium Term Note Programme limit to $20 billion from $10 billion, with proceeds going towards general corporate purposes.

Tencent had a $6 billion offshore issuance quota from China’s state planner, the National Development and Reform Commission (NDRC), two people with knowledge of the deal said on Tuesday.

Deutsche Bank, HSBC, Goldman Sachs and Morgan Stanley were joint global coordinators for the sale, Tencent said in an earlier filing.

Tencent suffered a rough 2018, as China’s gaming regulator’s nine-month hiatus in approving games for monetization prevented the firm from capitalizing on some of its most popular titles.

Net profit for the last quarter of 2018 fell the most since the firm went public in 2004, by 32 percent, in part due to one-off losses at portfolio companies.

Reporting by Donny Kwok and Julia Fioretti; Editing by Christopher Cushing

South Korean, U.S. telcos roll out 5G services early as race heats up

SEOUL (Reuters) – South Korea’s three mobile carriers and top U.S. telco Verizon Communications commercially launched 5G services on Wednesday, ahead of their initial schedules, as they rushed for first spot in the race to roll out the latest wireless technology.

People take photographs during a launching ceremony for SK Telecom’s 5G service, in Seoul, South Korea, April 3, 2019. REUTERS/Kim Hong-Ji

SK Telecom and two smaller carriers had planned to initially launch 5G in South Korea on Friday with Samsung Electronics’ new 5G-enabled smartphone Galaxy S10.

Verizon was due to roll out the technology in Chicago and Minneapolis on April 11, and said last month customers could use 5G on Motorola’s Z3 and a “Moto Mod”, a physical magnet-like attachment for the phone.

Countries including South Korea, United States, China and Japan are racing to market 5G, hoping the technology will spur breakthrough in fields such as smart cities and autonomous cars.

The technology can offer 20-times faster data speeds than 4G long-term evolution (LTE) networks and better support for artificial intelligence and virtual reality with low latency.

Sometimes it can offer 100-times faster speeds.

South Korea claimed to be the first country to launch 5G, but that was disputed by U.S. carriers who say they rolled out 5G in limited areas as early as last year.

U.S. telco AT&T Inc said it was the first to launch a “commercial and standards-based” 5G network in December 2018. The service, however, was made available to mobile hotspot devices but is not yet on phones.

SK Telecom spokeswoman Irene Kim told Reuters the company had internal discussions and decided to launch the 5G service early as the company had networks and customers ready.

South Korean carriers started offering 5G services at 11 p.m. local time (1400 GMT) on Wednesday.


In South Korea, telcos and smartphone makers are pulling out all stops to market 5G services and devices.

On Wednesday, SK Telecom showed off K-pop stars and an Olympic gold medalist as its first 5G customers.

The company said it was working with its memory-chip making affiliate SK Hynix to build a highly digitized and connected factory powered by 5G technology.

Smaller rival KT Corp said it will offer cheaper 5G plans than its LTE service, with unlimited data and four-year installments to buy 5G devices.

Samsung was the first to unwrap a 5G phone in February when it unveiled the Galaxy S10 5G and a nearly $2,000 folding smartphone, putting the world’s top smartphone maker by volume in pole position in the 5G race, some analysts say.

LG Electronics Inc plans to release its 5G smartphone in South Korea later this month.


While security concerns over 5G networks using telecom equipment made by China’s Huawei Technologies Co Ltd have marred the buildup to the release of these services, South Korean telcos have tried to shrug them off.

“I don’t think we have a security issue in South Korea,” Park Jin-hyo, head of SK Telecom’s information and communication tech research center, told reporters.

Slideshow (2 Images)

He added the company uses advanced technology to block eavesdropping or hacking into 5G networks.

Among South Korea’s three operators, SK Telecom and KT Corp do not use Huawei equipment for 5G. Smaller carrier LG Uplus Corp uses Huawei gear.

But SK Telecom officials said it was likely there will be an open auction for network equipment makers including Huawei if South Korea needs more base stations for higher frequencies. The country has one of the world’s top smartphone penetration rates.

Reporting by Ju-min Park in Seoul and Kenneth Li in New York; Editing by Diane Craft, Sayantani Ghosh and Himani Sarkar

Chinese tech giant Tencent plans $5 billion bond sale: sources

HONG KONG (Reuters) – China’s Tencent Holdings Ltd is returning to the market with a U.S. dollar bond that could raise about $5 billion, two people with direct knowledge of the matter said.

A Tencent sign is seen during the China Digital Entertainment Expo and Conference (ChinaJoy) in Shanghai, China August 3, 2018. REUTERS/Aly Song

The social media and gaming giant launched the sale on Wednesday of five-year, seven-year, 10-year and 30-year dollar bonds, showed a term sheet seen by Reuters.

The term sheet did not detail the amount Tencent is looking to raise.

The bond sale could be Asia’s largest so far this year, Refinitiv data showed, exceeding property developer China Evergrande Group’s $2.8 billion sale in January.

Tencent last tapped the bond market in January last year, raising $5 billion.

The bonds were being marketed with indicative interest rates of 115, 140, 165 and 185 basis points (bps) over U.S. Treasuries for the five-year, seven-year, 10-year and 30-year tranches, respectively, the term sheet showed.

Tencent has a $6 billion offshore issuance quota from China’s state planner, the National Development and Reform Commission (NDRC), the people said, declining to be identified as they were not authorized to speak publicly on the matter.

Proceeds from the sale will be used for refinancing and general corporate purposes, the term sheet showed.

Tencent said in an exchange filing on Monday it had increased its Global Medium Term Note Programme limit to $20 billion from $10 billion and that it planned to conduct an “international offering”, without specifying a size.

Asked for comment on Tuesday regarding the size of the sale, Tencent said it does not comment on market speculation.

The company has hired Deutsche Bank, HSBC, Goldman Sachs and Morgan Stanley as joint global coordinators for sale, Tencent said in Monday’s exchange filing.

Tencent suffered a rough 2018, as a nine-month hiatus in approving games for monetization in China prevented it from capitalizing on some of its most popular games.

Its net profit for the last quarter of 2018 dropped 32 percent, the steepest decline since Tencent went public in 2004, to 14.2 billion yuan ($2.11 billion), in part due to one-off losses at portfolio companies.

Reporting by Julia Fioretti; Additional reporting by Julie Zhu; Editing by Himani Sarkar and Christopher Cushing

The Jeep Gladiator Pickup Is an Off-Roading Tough Mudder

From the top of the mound, I can’t see much. Some trees. A sky mottled with the clouds that over the past few days have soaked this grassy meadow in the Sierra foothills. And a pair of hands, ostensibly attached to a human being with their arms held high, beckoning me forward. Obeying them seems like a terrible idea. About as bad as driving up to the top of this slope in the first place. But orders are orders. I engage my core, clench my cheeks, and push my right foot onto the accelerator pedal. The 3.6-liter V6 engine responds, and the four 32-inch wheels, clad in mud-loving tires, roll forward. And so the Jeep Gladiator pickup truck rumbles down the rock-strewn, 35-degree slope with all the eager, confident spasticity of a big dog bolting down a marble staircase.

A few seconds later, just as I’m starting to wonder if the afterlife really does look like Northern California, my guide turns his hands into fists to signal ‘stop,’ then gives me a thumbs up. “Good job!” I manage a nervous smile, but know not to take any credit. Jeep’s engineers have built the Gladiator for just this kind of folly, and they’ve invited me onto this off-road course because they want to show me just how good a job they did.

At a time when SUVs and pickups have never been more popular, the Gladiator is an about-time return to form for Jeep, which offered pickup versions of its vehicles from the late 40s through the early 90s. The front bit borrows heavily from the Wrangler, but the team insists that they didn’t just slap a bed on the existing ride. “The challenge for us was to develop a truck that’s a truck,” says Pete Milosavlevski, the Gladiator’s chief engineer.

Over the three years they spent developing this ride, Jeep’s engineering team made a series of choices that sought a balance between utility, ruggedness, and creature comforts. It equipped the Gladiator with solid axles, stronger wheels, the largest brakes in the segment, a bigger grille to bring in more cooling air, a “tried and true” steel bed at a time when competitors are going with aluminum and even carbon fiber.

Because they made the doors and roof extra easy to pop off, the Jeep’s designers stuck lockers both behind and under the rear seats, so you have places to store your valuables while you’re kayaking up that waterfall. They included a 115-volt outlet in the five-foot bed and a portable Bluetooth speaker that will survive half an hour underwater. It would take a few weeks of living with the Jeep to verify that all these little touches are good ideas, but a few minutes of bouncing over rocks was enough for me to appreciate the decision to rubber-wrap the armrests and door handles. That and the heated seats.

The four-door Gladiator starts at $33,545 (for the manual transmission Sport edition), but if you’ve got money to spend, a fully specced Rubicon version will run you closer to $60,000. Production at Jeep’s Toledo plant starts in April, with deliveries slated for May. Buy now, and you’ll get that 3.6-liter gas engine, good for 285 horsepower, 260 pound-feet of torque, and an EPA-rated 19 miles per gallon. Wait a year or so, and you can opt for a 3.0-liter diesel that will take the torque up to more than 400 pound-feet.

As I get step on the gas, though, I discover that the 260 figure is more than enough to go bobble-heading over the kind of terrain that in just about any other vehicle (including my feet) would make me say, Whoops, better take the long way ‘round. And by the end of the 30-minute off-road exercise, after watching the vehicle’s pitch and roll gauges whip to and fro like The New York Times’ election needles, I’m wearing a genuine smile. Most buyers won’t get anywhere near the limits of what the Gladiator can do—like happily plow through 30 inches of water—but those who do are sure to be entertained.

More Great WIRED Stories

U.S. Stock Market: Recession Ahead?

On Friday something happened, maybe something big: For the first time since the Financial Crisis, the yield curve inverted. One can argue about the point in time when the yield curve can be described as inverted, but for most experts, the yield curve is inverted when the 10-year treasury yield is lower than the three-month Treasury yield. Last Friday, the 10-year Treasury yield was 2.44% and the three-month Treasury yield was 2.46%. For those who might ask why that is such a big issue, the answer is very simple: Aside from the dark clouds that have already been on the horizon in the last months, we now have one of the clearest warning signs of a recession in the United States.

We take this as a cause for another close look at the US stock market, the US economy and some indicators that might give early warning signals. We will start by looking at the interest rates and the behavior of the Fed in the recent past.

Fed And Interest Rates

On Wednesday last week, the second FOMC in 2019 led to the following press release from the FED which states:

Information received since the Federal Open Market Committee met in January indicate that the labor market remains strong but that growth of economic activity has slowed from its solid rate in the fourth quarter.

As a consequence, the Fed has decided to maintain the federal funds rate at the current level. But aside from that information, the Fed also indicates that it will most likely pass on any rate hikes for 2019 while in December it was still the consensus that at least two rate hikes would follow in 2019.

When assuming the federal funds rate will stay stable for the next few months, we have a pattern that has already been witnessed many times in the past (circled in red). We see strong similarities to the last two recessions (the times between 2000 and 2003 as well as 2007 till 2009). In the last century, we also saw similar patterns: in 1960 and 1970. The Fed always raised rates, stopped raising rates and kept the federal funds rates constant for some time and then lowered rates – often dramatically – and the recession began.

(Source: FRED Economic Data with own supplement)

Of course, this is not a fixed sequence that has to happen every time. We can see examples – especially in the 1970s and 1980s when the Fed continued raising rates even though the recession had already begun. And we can also see patterns – circled in green – when the Fed raised rates and then stopped doing so for some time, and no recession followed within the ensuing few years (we will come back to this in a bit).

When we look not only at the federal funds rate, which is part of the yield curve but at the entire “spectrum” of Treasury rates, we see a picture that is getting worse. In the chart below we have included the spread between the 10-year Treasury yield and the three-month Treasury yield (red line) – the one that dipped below zero last Friday. Now we can see that the Fed not only stopped raising rates before a recession but that every time the spread turned negative in the last 50 years, a recession followed.

(Source: FRED Economic Data)

In the short article Recession Signals: The Yield Curve vs. Unemployment Rate Troughs, Kevin Kliesen points out that every recession since 1969 was preceded by a yield-curve inversion. As the yield-curve inversion has occurred on average about 10 months before the recession has begun, we can conclude that the United States will be in a recession at the beginning of 2020. The combination of the Fed interrupting its rate increases and the yield-curve inversion is a pattern that should be a clear warning signal to all investors.

(Source: Own work)

Unemployment Rate And Initial Claims

A second indicator economists are looking at is the labor market. In its press release, the Fed stated that the labor market is strong, and it is true that the unemployment rate is close to its low point (3.7% in November 2018 vs. 3.8% right now). In his article, Kliesen also mentions the unemployment rate and shows that the unemployment rate trough has always materialized before a recession. On average, the unemployment rate marks its temporary low about nine months before the beginning of a recession. However, the difference in the unemployment rate between the trough month and the beginning of the recession was only 0.37% on average, so the unemployment rate, not a very good early-warning indicator, as it will be really hard to determine the trough within the next few months. When looking at the last four decades, we can see that the unemployment rate has increased when the US economy has already been in a recession. The small increases before are hard to distinguish from the usual fluctuations.

(Source: FRED Economic Data)

In my opinion, it makes more sense to look at the weekly initial unemployment claims, as this indicator is more sensitive to short-term changes and can be used as an alternative early-warning indicator. When looking at the four-week moving average of initial claims, we can see it looks like the trend might be turning, and at least since September 2018, the number has risen than declined.

(Source: FRED Economic Data)

Point In The Cycle

Both the labor market and the bond market can send very clear warning signals for the stock market, and those signals have been very accurate in the past decades. And while the yield-curve inversion is clearly defined and easy to spot, determining the unemployment rate trough is only easy in hindsight. But in my opinion, both are sending clear warning signals right now. These two warning signs are intensified by some other factors I have mentioned several times before, and which we have to keep in mind.

First of all, we have to look at the cycle itself and try to determine the current point in the cycle. The current bull market began 10 years ago – in March 2009. Even if we assume that September 2018 marked the temporary highs and the bull market already ended at that juncture, it was (or is) still the longest bull market in history. And while I won’t argue against anybody who is claiming the bull market could last for a few more months or even a few quarters, long investments with a holding period of two or three years are not a good choice right now. We mentioned above that, in the past, sometimes no recession followed when the Fed also stopped raising rates. The big difference between those times, marked in red in the first chart, and 2019, is the point in the cycle. The two-time frames marked in green in the first chart occurred much earlier in the cycle, with still-low valuations, and the bull market had not stretched to its extremes yet.

We also should consider the stock market valuations. And while I am aware that the current TTM P/E ratio is only 20.0 (which is still above average), the P/E ratio is not really a good indicator for long-term valuations. As it is fluctuating heavily (a P/E number above 100 in 2009 might be an example) and corporate earnings are usually at their highest at the end of the cycle, there are better indicators for stock-market valuations than the P/E ratio.

One option is looking at the 10-year P/E ratio, which signals risk of a crash when the number is extremely high. At the end of February, the 10-year P/E ratio was 29.6, and it was even 33 at the (probable) peak in September 2018. This was the second-highest number since 1870 – only succeeded by the valuation in 2000, but higher than the ratio in 1929 before the Great Depression.

A second way to measure valuation is to compare the stock market’s valuation to the current GDP. In Warren Buffett’s opinion, this might be the single best measure to determine where valuations stand at any given moment. Advisor Perspective only provides data back to 1950, but within those 70 years, the current valuation is once again the second highest, only surpassed by the numbers in 2000 at the peak of the Dotcom Bubble.

We also can look at expected future cash flows and calculate the intrinsic value of a stock on that basis. John Hussman calculated the intrinsic value of the S&P 500 (SPY), assuming a 10% discount rate (red line) and an 8% discount rate (green line). The chart below also shows that stock valuations developed in similar fashion to the intrinsic value, but with huge fluctuations. We can also see that the S&P 500 was fairly valued around 2009, but that it has since slowly moved into the territory of extreme overvaluation again.

(Source: Hussman Market Comment – Ground Rules of Existence)

In my opinion, the current market – and especially the US stock market – can only be described as overvalued, but there certainly are many people who believe that stocks are still a good buying opportunity. (Why else would stocks have climbed in 2017 and 2018 or in the last three months?) One of the arguments mentioned rather often is that low interest rates are forcing people into the stock market. And although the federal funds rate isn’t as low as it was three or four years ago, we are still seeing the lowest interest rates for many decades. People tend to argue that current times are different – as they also did in the late 1990s and in the 1920s – and therefore justify the extremely high stock prices.

We have to be careful with such narratives – ones that lead to “new era” thinking and are the basis for euphoria and stock-price bubbles. Right now, times are often said to be different because the low interest rates will force people to buy stocks. First of all, it isn’t true that interest rates have never been as low as they are in the recent decade, and in the past low interest rates didn’t lead to infinite climbing stock prices (and as the current cycle is the longest bull market in history, past bull markets didn’t even last as long as this one despite interest rates near zero). Second, financial markets are a complex system, and assuming that just one indicator (interest rates near zero) guarantees climbing stock prices is not only dangerous but also rather idiotic. Financial markets, being a complex system, are influenced by the labor market and the economy (which are again influenced by the Fed and the federal funds rate). Financial markets are also influenced by expectations of participants (which are influenced by economic data or interest rates), and the financial markets have to bow to the fear or greed of market participants, making prices rather irrational from time to time.

The chart below shows the P/E 10 and the 10-year Treasury yield since 1960. We can see that the P/E 10 has been higher despite higher interest rates (which points to even more irrationality than what we are witnessing right now), but we also see many dots (blue and purple) that are far below the current valuation and Treasury yield.

(Source: Advisor Perspectives)

Discrepancies And Bear Market Rally

When looking at a shorter time frame, and examining the three months after the last temporary low (from December 24, 2018, till March 24, 2018), we see an interesting development. In these three months, the S&P 500 increased 19.12% (which is an impressive performance over a single quarter). However, the US stock market seems to be one of the few indicators moving into a “bullish direction”. When comparing the stock market performance with the bond market or the labor market, we see some interesting discrepancies.

Equity investors seem to be bullish; bond investors, however, are not sharing that enthusiasm. In January the stock market increased and the spread between short-term Treasury yields (i.e., three-month) and long-term Treasury yields (i.e., 10-year) got wider, but since then the US stock market indices have continued to increase while the spread between the two Treasury yields has moved closer and closer to zero. Last Friday, the spread was negative for the first time since the financial crisis. And as most investors or economists would describe the yield curve as inverted, this is clearly a negative sign for the stock market.

(Source: FRED Economic Data)

But it is not only the S&P 500 and the bond market showing strong discrepancies. The weekly initial unemployment claims and the major indices are also moving in two different directions. In the three months between September and December, the four-week average of initial unemployment claims was rising, and the stock market was falling – which makes sense. But in the three months between Christmas 2018 and now, the four-week average number still shows an upward direction – yet the stock market was rallying, nevertheless. This seems counterintuitive.

(Source: FRED Economic Data)

So valuations that are still extremely high, the inverting yield curve and the discrepancies between the stock market and bond market, as well as the stock market and labor market. When combining these pieces of information, it seems likely that we are actually witnessing a bear-market rally: a short-term bullish rally that is merely a correction within a bear market.

John Hussman shows that such bear-market rallies can last for several months and can seem very impulsive, seeing gains of 20% and more within a short time frame. During the worst crash the stock market has yet lived through – the Great Depression, from 1929 till 1932 – one of those bear-market rallies reached nearly a 50% gain. That by itself is no argument that we are in a bear market. But it is also nonsense to assume that a double-digit gain and a strong bullish moment since December proves we are not in a bear market.

(Source: Hussman Market Comment – Ground Rules of Existence)


John Hussman writes in his latest market comment:

We’ve learned in this cycle that the tenacity of speculators can’t be underestimated, so with market internals at the threshold between speculation and risk-aversion, it’s best not to stand too strong in either direction.

In a recent presentation, “Are Valuations Irrelevant?“, Rob Arnott shows that CAPE can’t be used for market timing, but that it is extremely powerful in forecasting long-horizon returns. The same is true for many other valuation metrics.

(Source: Advisor Symposium 2019)

The high CAPE ratio or the high market-cap-to-GDP ratio is reason enough not to start any long-term investments in the stock market right now. And although it is difficult to time the market, I personally think the market peaked in September 2018 and this bear market rally might have come to an end because of the huge discrepancies between the stock and bond market. A few exceptions excluded, this is not the time to invest in stocks and I will remain on the sidelines.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I own certificates profiting from a declining Nasdaq-100 and a declining Dow Jones Industrial Average.

AT&T Stock Is Nearing A Big Breakout

AT&T’s (T) struggles have been notable, but the stock may finally be about to turn the corner and head higher. An analysis of the technical chart and the options market suggests the stock could be about to break out extending its recent gains to as high as $34.25.

The last time I wrote about the stock was on January 30 when AT&T was Getting Crushed By DirecTV. At the time, I had thought the stock might retest its Christmas Eve lows around a price of $27.40. The stock never got close falling to a low of approximately $28.90.

Nearing A Breakout

Now, the stock is nearing a significant region of technical resistance between $31.20 and $31.80. Should the stock be successful in rising above that zone, it could go on to increase to approximately $34.25, a gain of about 10% from its price of roughly $31.20 on March 28.

Additionally, the relative strength index (“RSI”) is rising and is suggesting bullish momentum is moving into the stock. The RSI is currently around 60, and it would need to rise above 70 before the stock would be considered overbought.

Source: Tradingview

Bullish Betting

Additionally, there has been an increasing number of bullish bets placed in the options market. The open interest levels at the $32 call options for expiration on June 21 have risen to approximately 29,000 open contracts. Meanwhile, the activity at the $32 puts have seen a fewer number of new contracts and have an open interest of roughly 19,000 contracts.

The growing number call bets would suggest that traders are getting more bullish on AT&T and are more willing to bet that shares will rise over the next three months then fall. For a buyer of the calls to earn a profit, the stock would need to increase to around $32.60 by the expiration date.

(AT&T June $32 Calls, TradeAlert)

(AT&T June $32 Puts, TradeAlert)

Additionally, the number of open January 2020 $33 calls have increased to 55,000 contracts. Meanwhile, the $33 puts have seen less activity and have leveled off at roughly 31,000 contracts. Pointing to more bullish bets being placed. For a buyer of the calls to earn a profit, the stock would need to rise to around $34, an increase of almost 9%.

(AT&T Jan. ’20 $33 Calls, TradeAlert)

(AT&T Jan. ’20 $33 Puts, TradeAlert)

Lower Interest Rates

One other significant benefit that may act as a tailwind for AT&T’s stock is falling interest rates. As rates continue to drop, it is likely to make AT&T’s high dividend yield of nearly 6.5% desirable to investors seeking income. Should AT&T’s dividend rate fall, it would help to boost the stock price, given the inverse relationship.

Plenty to Worry About

But that big dividend yield doesn’t come without risk and is nearly 400 basis points higher than the current 10-Year Treasury. The high dividend yield is a warning sign that the market is sending about the safety of the dividend or the potential for fewer future dividend hikes. The company currently has a cash dividend payout ratio of nearly 60%, much higher than what may be considered a comfortable level.

There are still those legacy issues that surrounds AT&T. The most obvious is the loss of subscribers in its DirecTV unit and the performance of its Warner media unit as I have discussed in previous stories.

Momentum is moving in a direction that suggests AT&T’s shares may continue to rise over the next few months. But that doesn’t mean it will be a smooth ride higher.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.

Google's new gaming service will let game makers use rival clouds, executive says

SAN FRANCISCO (Reuters) – A Google executive offered new details on Wednesday about the company’s upcoming video game streaming service, telling Reuters that game makers may use competing cloud providers and must avoid some inappropriate content.

Google vice president and general manager Phil Harrison speaks during a Google keynote address announcing a new video gaming streaming service named Stadia that attempts to capitalize on the company’s cloud technology and global network of data centers, at the Gaming Developers Conference in San Francisco, California, U.S., March 19, 2019. REUTERS/Stephen Lam

Google, owned by Alphabet Inc, unveiled Stadia on Tuesday, saying the service launching this year would make playing high-quality video games in an internet browser as easy as watching a movie on its YouTube service.

The game would operate on Google’s servers, receiving commands from a user’s controller and sending video streams to their screen. Player settings, leaderboards, matchmaking tools and other data related to the game would “not necessarily” have to reside on Google’s servers, Phil Harrison, a Google vice president, said in an interview.

Hosting the data elsewhere, however, could lead to slower loading times or less crisp streaming quality, he said.

“Obviously, we would want and incentivize the publisher to bring as much of their backend as possible” to Google servers, he said. “But Stadia can reach out to other public and private cloud services.”

The approach could limit Google’s revenue from Stadia. It has declined to comment on the business model for the new service, but attracting new customers to Google’s paid cloud computing program is one of Stadia’s aims.

If a game publisher was using Amazon for some tools, “the first thing I would do is introduce you to the Google Cloud team,” Harrison said.

In addition, Stadia will require games to follow content guidelines that build upon the system of Entertainment Software Rating Board (ESRB), a self-regulatory body, he said.

“We absolutely will not have A-O content,” Harrison said, referring to the ESRB’s moniker for the rare designation of a game as adult-only because of intense violence, pornography or real-money gambling.

He said Stadia’s guidelines would not be public.

Asked about growing public concerns about game addiction, Harrison said Stadia would empower parents with controls on “what you play, when you play and who you play with.”

Google views Stadia as connecting its various efforts in gaming, including selling them on its mobile app store, Harrison said. But game streaming, he said, is an opportunity to tackle among the most complex technical challenges around and potentially apply breakthroughs to other industries.

“We think we can grow a very significant games market vertical,” he said. “And by getting this right we can advance the state of the art of computing.”

Reporting by Paresh Dave; Editing by Leslie Adler

SoftBank, Toyota in talks to invest $1 billion in Uber's self-driving unit: sources

NEW YORK (Reuters) – A group of investors led by SoftBank Group Corp and Toyota Motor Corp is in talks to invest $1 billion or more into Uber Technologies Inc’s self-driving vehicle unit, which would value the unit at $5 billion to $10 billion, said two people familiar with the talks.

FILE PHOTO: Uber’s logo is displayed on a mobile phone, September 14, 2018. REUTERS/Hannah Mckay/File Photo

The investment would provide a cash injection for Uber’s self-driving program that is costing the money-losing startup hundreds of millions of dollars without generating revenue.

It could also help underscore Uber’s value as the ride-hailing firm prepares for a stock market debut in which its value could top $100 billion.

Uber and SoftBank declined to comment. A Toyota spokesman said the automaker “constantly reviews and considers various options for investment” but does not have anything to announce.

News of investment talks was first reported by The Wall Street Journal, which said a deal could be reached next month. SoftBank Group shares rose 4 percent in morning Tokyo trade whereas Toyota’s stock was flat.

Japan’s largest automaker Toyota injected $500 million into Uber last year to work on self-driving cars, where both companies are seen as lagging rivals like Alphabet Inc’s self-driving unit Waymo.

Uber, which last year lost about $3.3 billion, is betting on a transition to self-driving cars to eliminate the need to pay drivers.

The nascent technology came under greater scrutiny last year after one of Uber’s self-driving cars struck and killed a pedestrian in Arizona last year. Prosecutors last week declined to pursue criminal charges.

The challenge of developing the technology is leading to previously unlikely alliances, with SoftBank and Toyota partnering up in Japan. SoftBank has invested $2.25 billion in General Motors Co’s self-driving unit Cruise, which has also received funds from Honda Motor Co Ltd.

For a graphic on ties between automakers, ride-hailing firms and technology companies, click here

Reporting by Liana Baker; Additional reporting by Katie Paul in SAN FRANCISCO, Rama Venkat in BENGALURU and Sam Nussey in TOKYO; Editing by Sonya Hepinstall and Christopher Cushing

How the FAA Decides When to Ground a Jet Like Boeing’s 737 MAX 8

When an Ethiopian Airlines Boeing 737 MAX 8 jet crashed shortly after takeoff from Addis Ababa on Sunday morning, killing all 157 people aboard, observers quickly noted that the circumstances resembled those of another flight. In October, Lion Air Flight 610 crashed into the Java Sea, killing all 181 passengers and eight crew. Both flights plummeted a few minutes after takeoff, in good weather. And both were on 737 MAX 8 jets, the plane Boeing started delivering in 2017 to replace the outgoing 737 as the workhorse of the skies. Since 2017, Boeing has delivered 387 MAX 8s and 9s. It has taken orders for 4,400 more, from more than 100 customers.

As of Tuesday evening, various foreign aviation regulators and airlines had decided that after the two crashes, the plane shouldn’t be in the air. Officials in the European Union, China, Indonesia, Singapore, Australia, and the United Arab Emirates have all grounded the planes. Of the 59 operators that fly the new 737, at least 30 have parked it.

In the US, though, Boeing’s plane is free to fly. American Airlines, Southwest Airlines, and United Airlines are still putting their 737 MAX jets—74 in total—in the air. (So is Air Canada.) And the Federal Aviation Administration—the agency that oversees American airspace—says that’s just fine.

Which might seem strange, since the FAA is notoriously safety-conscious. Planes in search of an airworthiness certificate must meet stringent standards; the certification process usually takes years. And it gets results: Just one person has died in American airspace on a commercial airplane since 2009. But, it seems, the agency has not yet found reason to ground the new 737.

In a statement Tuesday, acting FAA administrator Daniel Elwell said the agency is looking at all the available data from 737 operators around the world, and that the review “thus far shows no systematic performance issues and provides no basis to order grounding aircraft.” Elwell said the FAA “would take immediate appropriate action” should such problems be identified. The FAA and the National Transportation Safety Board both have teams at the crash site outside Addis Ababa to investigate and collect data.

The agency did note in a directive published Monday that it would probably mandate flight control system enhancements that Boeing is already working on, come April. And after the Lion Air crash, the FAA made a Boeing safety warning mandatory for US airlines.

“We have full confidence in the safety of the 737 MAX,” Boeing said in its own statement Tuesday. “Based on the information currently available, we do not have any basis to issue new guidance to operators.”

A number of senators, including Ted Cruz of Texas, Elizabeth Warren of Massachusetts, and Dianne Feinstein of California, have called for the US to ground the aircraft. But it’s the FAA chief who has final say. (Elwell has been the acting administrator since January 2018, though Politico reports that the Trump Administration is close to nominating Delta Air Lines executive Steve Dickson as administrator.) He doesn’t make that decision alone, says Clint Balog, a flight test pilot and human factors expert with the College of Aeronautics at Embry-Riddle University. Any grounding goes through a “semi-formal” process, full of discussions with experts on the specific aircraft and crash situation, both in- and outside the federal government.

“The FAA looks at all of this information and decides, ‘OK, if it’s just likely that there’s a significant problem here, it doesn’t matter what the cost to the traveling public is—we have to put safety first and ground this aircraft,’” Balog says. “However, if they look and say, ‘Well, jeez, grounding this aircraft is going to be a monumental cost to the world and we simply don’t have enough information to know what the risk really is with this aircraft, do we really want to ground it at this point in time?’”

The FAA has grounded aircraft before. In 1979, the FAA grounded all McDonnell Douglas DC-10s (and forbid the aircraft from US airspace) after a crash in Chicago killed 273 people. An investigation found the problem was maintenance issues, not the aircraft design, the FAA lifted the prohibition just over a month later.

In early 2013, the FAA grounded Boeing’s 787 Dreamliner, after two lithium ion-battery related fires in the aircraft. “We are issuing this [directive] because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design,” the FAA wrote in its emergency airworthiness directive. It didn’t let the jet take to the sky again until Boeing found and corrected its design issues. (That happened in April.)

So far, though, we have little concrete information on whatever might be going on with the 737 MAX. The investigation into the Ethiopia crash is in its earliest stages. Indonesia’s civil aviation authority has released a preliminary report on the Lion Air crash, but has not issued any findings on what caused it.

Based on its directives, the FAA hasn’t “seen any red flags that are significant enough” to ground the aircraft, Balog says. So he’d have no problem getting on a 737 MAX-8. “More importantly, I would have no problem having my family get on a 737 MAX-8 at this point.”

More Great WIRED Stories

Qualcomm urges U.S. regulators to reverse course and ban some iPhones

(Reuters) – Qualcomm Inc is urging U.S. trade regulators to reverse a judge’s ruling and ban the import of some Apple Inc iPhones in a long-running patent fight between the two companies.

FILE PHOTO: A Qualcomm sign is seen during the China International Import Expo (CIIE), at the National Exhibition and Convention Center in Shanghai, China November 6, 2018. REUTERS/Aly Song/File Photo

Qualcomm is seeking the ban in hopes of dealing Apple a blow before the two begin a major trial in mid-April in San Diego over Qualcomm’s patent licensing practices. Qualcomm has sought to apply pressure to Apple with smaller legal challenges ahead of that trial and has won partial iPhone sales bans in China and Germany against Apple, forcing the iPhone maker to ship only phones with Qualcomm chips to some markets.

Any possible ban on iPhone imports to the United States could be short-lived because Apple last week for the first time disclosed that it has found a software fix to avoid infringing on one of Qualcomm’s patents. Apple asked regulators to give it as much as six months to prove that the fix works.

Qualcomm brought a case against Apple at the U.S International Trade Commission in 2017 alleging that some iPhones violated Qualcomm patents to help smart phones run well without draining their batteries. Qualcomm asked for an import ban on some older iPhone models containing Intel Corp chips.

In September, Thomas Pender, an administrative law judge at the ITC, found that Apple violated one of the patents in the case but declined to issue a ban. Pender reasoned that imposing a ban on Intel-chipped iPhones would hand Qualcomm an effective monopoly on the U.S. market for modem chips, which connect smart phones to wireless data networks.

Pender’s ruling said that preserving competition in the modem chip market was in the public interest as speedier 5G networks come online in the next few years.

Cases where the ITC finds patent violations but does not ban the import of products are rare. In December, the full ITC said it would review Pender’s decision and decide whether to uphold or reverse it by late March.

In filings that became public late last week ahead of the full commission’s decision, Apple for the first time said that it had developed a software fix to avoid running afoul of Qualcomm’s patent. Apple said it did not discover the fix until after the trial and that it implemented the new software “last fall.”

But Apple said that it would need six months to verify that the fix will satisfy regulators and to sell its existing inventory. Apple asked the full commission to delay any possible import ban by that long if the commission reverses the judge’s decisions.

In a filing late on Friday, Qualcomm argued that Apple’s disclosure of a fix undermined the reasoning in Pender’s decision and that the Intel-chipped phones should be banned while Apple deploys its fix.

“Pender recommended against a remedy on the assumption that the (Qualcomm) patent would preclude Apple from using Intel as a supplier for many years and that no redesign was feasible,” Qualcomm wrote. “Apple now admits—more than seven months after the hearing—that the alleged harm is entirely avoidable.”

Reporting by Stephen Nellis in San Francisco; Editing by Lisa Shumaker

American Airlines Just Suffered a Huge Embarrassment. But Is It Really the Airline's Fault?

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

Frequent business flyers can be an insipid, self-regarding bunch.

They watch the masses troop to the back of the plane, sip on their champagne and smugly pat themselves on the back for their evident superiority.

Airlines pander to them, of course. They want their money on a repeat basis. 

Sometimes, though, you have to wonder what goes through fine minds of so-called Elites.

Last weekend saw the release of a video — posted to Twitter by travel blogger Jamie Larounis — that starrred four female American Airlines Flight Attendants.

They were in slightly more alluring Flight Attendant attire than that normally seen on board.

And they were performing a skit in which they fawned all over a First Class passenger. 

You know, um, sexily.

The organizers of this, oh, entertainment, reportedly were some Executive Platinum and Concierge Key customers. Yes, American’s most important passengers.

It was held at a private venue and was supposed to raise money for charity.

Some might be less than charitable on seeing that the performance featured a large American Airlines logo in the background.

It’s not clear who took this liberty, but American did offer a few items for auction at this event.

I feel fairly sure its brand image wasn’t one of them.

Perhaps this was all good clean, humorous insider fun for these privileged types.

The part, however, that may have caused a little more consternation was when the four female Flight Attendants began to dance — with alleged sexy intent — around a First Class passenger.

To heighten the steamy effect, they sang Big Spender.

Yes, of course a Flight Attendant ends up sitting on the customer’s lap. You needed to ask?

The song was first performed in 1966.

And goodness me, this skit wouldn’t have looked out of place then.

These days, however, it might reek to many of bilge-brained sexism.

The fawning Flight Attendants are, reports say, real Dallas-based American Airlines Flight Attendants.

Which led the The Association of Professional Flight Attendants — representing American’s Flight Attendants — to demand an investigation.

There was the suspicion, you see, that the airline had some involvement in all this.

The Transport Workers Union — which also represents many American Airlines employees — saw the invisible hand of American’s management in the show. It claims this is all part of the airline’s strategy: 

Destroy blue collar America and expose air travelers to potential disaster by fixing AA planes on foreign soil, while simultaneously sexualizing and degrading their own flight attendants.

Naturally, I contacted American to ask for its view. It offered me the contents of a memo it sent on Sunday to all its staff. It read, in part: 

This was not an American Airlines event. We did not have any say about the content of the event, nor did we preview any of the agenda. Additionally, we were particularly upset to see our logo on the screen as the skit was performed.

Well, indeed. American also said: “We are as upset as many of you are with the video.”

It didn’t, at least in this memo, specifically rail against its manifest sexism. (Its utter lack of actual humor might have deserved a mention, too.)

Larounis, at American’s request, removed the video. Sadly, thanks to the internet’s cloying immediacy, it soon proliferated far and wide.

Many will hiss and tut at those who performed in this abject display.

Somehow, though, I can’t help but consider those who laughed and applauded. 

Flying regularly in First Class may have its privileges. 

I wasn’t aware that permission to be a sad, myopic, dunderheaded Neaderthal was one of them. 

7 Traits the Most Successful Employees Share (That Can Keep You Ahead of Competitors)

Every mature company I know is looking for more innovation from within. They are painfully aware that tenure on the list of S&P companies is shrinking — from thirty-three years back in 1964, down to twenty-four in 2016, and predicted to be just twelve by 2027.

They need inside intrapreneurs: people who work at the company who think and act like the entrepreneurs who are disrupting their business.

I have seen this happening firsthand from my years of experience in several big-name companies, including IBM and Fujitsu. In my view, success starts with nurturing and bringing in the right people to make it happen, or being one of the right people from within if you want your career to blossom.

I just completed a new book on this challenge, Disrupt-It-Yourself, by Simone Bhan Ahuja, which includes a great summary of the required attributes to maximize your success potential in this area.

I don’t believe that any of these requires a birthright, and all can be adopted or learned by anyone, so I encourage you to take a hard look at your own interests and key team members:

1. Action trumps ideas and more analysis every time.

Real change comes from people who are obsessed with action, not ideas. Thinking and analysis without execution feels like zero cost to existing organizations, but it actually ignores the opportunity cost lost.

If you act, you learn from other people, especially customers, and you build momentum.

2. Focused on progress rather than process.

Most entrepreneurs realize that for early stage startups, process is the enemy of progress, slowing you down when you’re trying to move forward.

But more mature companies have learned that scaling a business requires process, so the focus changes. Intrapreneurs have to always think like entrepreneurs.

3. Relishes the opportunity to learn from problems.

Corporate environments tend to treat problems as failures, rather than opportunities. People are trained to avoid change, and stick with the safer status quo.

True entrepreneurs, like Thomas Edison, realize that the biggest innovations come from solving problems, such as failing light bulb filaments.

4. Loves to “hack” new outcomes from existing systems.

In software, hackers love the intellectual challenge of confronting a system designed to do one thing and cleverly exploit it to achieve something different.

That’s the essence of innovation, and good intrapreneurs need to find new opportunities by bending existing strengths in new ways.

5. Reach out across the aisle for complementary talent.

Smart intrapreneurs know they can’t do it alone, and know how to enlist the help they need by making it clear “what’s in it” for others.

They enjoy engaging in informal partnering and co-design solutions with other stakeholders, while making the total opportunity as much possible about others. 

6. Married to a mission, but not just to one way to do it.

The people you desire know the “what” and the “why,” but don’t want to be told “how.” They are always looking for gaps and misalignments, and thrive on changes, even radical changes, so the organization performs better.

In this context, strategy deviations can keep the company on track.

7. Frugal by nature, and don’t ask for much to proceed.

Even though they see huge budgets all around, they prefer to start on the cheap (like an entrepreneur), reusing existing resources, working on the side, and employing messy, make-do methods over expensive sanctioned systems that have long approval cycles and much oversight.

Because fostering entrepreneurship internally is hard, many companies have now shifted their innovation focus to acquisitions and partnerships.

All have found that this approach can be equally difficult, due to the integration of multiple corporate cultures, processes, supplier dependencies, and management styles.

Thus, I continue to assert that effectively harnessing and building of internal talent to drive innovation from within will continue to be one of the single most important factors for your company’s long-term success.

It starts with a mindset that disrupting your business regularly is necessary, before your competition and new startups do it to you. Measure your tenure from today.

A Passenger on an American Airlines Flight Asked For an Irish Coffee. Then, a Horrific Escalation

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

Anyone can have a bad day.

How bad, though, does it have to be to justify what appears to have happened on an American Airlines flight from Long Beach to Phoenix last weekend?

The story is told by one of the passengers, who presented a detailed account on the FlyerTalk forums.

It all began, he says, with a First Class passenger asking for an Irish coffee while the plane was still on the ground.

At first, it seemed as if the Flight Attendant — the flight was operated by Mesa Airlines under the American Eagle banner — would oblige. Then she came back and said she couldn’t, after all.

When asked why — apparently politely — things began to take a detour.

Said the onlooking passenger: 

She came unglued. Voice raised, ‘Because the FAA won’t let us serve hot beverages on the ground. Are you going to have a problem with that?’ Politely he responded, ‘No, Are you having a good day?’ She responded with something along the lines of, ‘I have to get everyone boarded, and you aren’t my priority. You are holding up boarding. Do you think I’m being combative or simply trying to do my assigned job?’

I fear, should this story be accurately told, that many would think there’s a touch of combativeness going on here.

Next, it seems, the passenger kept trying to be conciliatory while the Flight Attendant reached a new altitude of anger.

Until, the onlooking passenger says, the Flight Attendant declared: 

If you don’t settle down, I’ll have you taken care of. I’m going to speak to the captain now.

Ah, that sweet moment when a Flight Attendant becomes law enforcement.

Soon, the infamous line emerged: 

Are you going to cause problems? if you are, I’ll have the captain come back and take care of you.

This would be care in the not-so-caring sense.

You’ll be stunned into choosing boats for your next vacation when I tell you that the onlooker’s wife tried to intervene. 

It didn’t go well.

The captain arrived and asked for things to be “taken outside.” Which, at least in the bars I occasionally visit, means fisticuffs.

Ultimately, it seems that no one was removed from the flight, though the Flight Attendant kept her distance and even allegedly turned her name tag over, so that her name wouldn’t be noted.

When you’re working in customer service, some days can be hard. You’re simply not in the mood and you have to work. Personally, I find it hard to be pleasant on such days.

But when your job is in the public eye, when you’re supposed to be offering hospitality and when the issue is a mere Irish coffee, perhaps it’s best to walk away for a moment, take several breaths and realize that expressing your frustration isn’t likely to help. 

Perhaps even get someone else to look after the customer, if you feel you might suffer an exploding gasket.

Of course, it could be that the passenger had a difficult look in his eye. So many minute things occur when humans try to communicate with each other. 

The onlooker says he’s now filed a complaint with American Airlines.

I contacted American to ask for its view and will update, should I receive a reply.

Roger McNamee Has Gone From Mentoring Facebook CEO Mark Zuckerberg to Sounding the Alarm

Once a Facebook booster and early advisor to CEO Mark Zuckerberg, well-known tech investor Roger McNamee has changed his tune. Facebook is, in fact, a privacy train wreck, he says, and its leader appears to care more about growth than user privacy.

McNamee is so worried that he wrote a book, Zucked: Waking Up to the Facebook Catastrophe, that debuts on Tuesday. In the book, he details a laundry list of concerns about big tech companies like Facebook and Google, following their many data and privacy scandals and for what McNamee calls their failure to own up to their problems.

McNamee, who has left investing but still owns Facebook shares, says he began his book as a research project in 2016 and then later partnered on it with Tristan Harris, a former Google employee who taught McNamee about how companies leverage psychology to increase use of their technologies. A year later, McNamee was so worked up that he turned from a mere researcher into an activist against the data collection and persuasive techniques that tech companies employ to get people to use their products.

“The problem today is that … the people are not the customers; the people are the fuel,” McNamee said. “We are just a metric. We’re not in any way something they [technology companies] view as human, and that is a huge issue.”

Now McNamee is trying to sound the alarm to as many people as possible about how Facebook and its tech brethren operate—and how consumers can protect themselves.

McNamee talked to Fortune about why he wrote the book and about his experience with Facebook. The responses have been edited for length and clarity:

Fortune: Why write a book now, given your history with Facebook?

McNamee: I’m just a cheerleader, and then all of a sudden in 2016, I started to see things that simply didn’t fit my preconceived notion of the company.

I reached out to Mark and Sheryl [Sandberg, Facebook’s chief operating officer] and said, “Guys, there’s something really wrong here.” What I didn’t realize was how much the culture was a part of that. I was hoping they would take it seriously enough to do internal investigation.

Facebook’s leadership wasn’t interested.

I started researching and met Tristan Harris. When I met him, it was like, “Oh my god.” He’s explaining how Internet platforms use psychology to pray on the weakest aspects of human mind to play on habits and addictions. That’s why the presidential election could be swung, and that’s why the “leave” campaign in Brexit was so much more effective than remain campaign.

The goal was to try to persuade people at Facebook and Google that there was a problem here, and they should fix it. I think it’s safe to say we were unsuccessful in that mission.

What should readers expect from your book?

It’s a narrative, not a business book or tell-all. I use the narrative arch to tell the reader everything they need to know about why I’m an activist and what they can do. It’s about how a toxic mix of uncontrolled capitalism, extraordinary technology, and a culture that says you’re not responsible for the consequences of your actions that can do great harm.

What’s powerful about it is I tell you a lot of things you knew about that you had not connected. Remember, I’m an analyst. My job is to make connections that aren’t obvious, and that’s what I do in the book.

Why do you still own shares in Facebook?

I own shares for a very specific reason. I concluded that I was going to hold my position and ride it out as long as I was an activist. I didn’t want people to think there was some financial motivation. The best way to demonstrate that was to take the same risks Facebook was taking. I wanted to maximize my alignment with the employees.

I think the people at Facebook are good people. I think the combination of the business model, architecture of products, and culture created unintended consequences to well-intended strategies. I can totally imagine how 2016 happened [Facebook’s influence in events like the 2016 presidential election and Brexit] without them being aware. The part that is harder to excuse is the refusal to accept the revelations since and to change the business model-culture arch to protect the people that use the product.

Regardless of Facebook’s scandals, the company’s stock continues to rise. As an investor and now activist, how do you reconcile this?

The world of business has had one rule: The only thing that matters is shareholder value. For a while, there didn’t seem to be downside to that. But now … it’s time to revisit that.

Things are cool … only if you’re shareholder. If you’re a user, things are not cool. Democracy is being threatened by social media. Minds are being messed with.

If we don’t solve this, we’re going to have people with torches and pitchforks knocking the place down.

What was it like serving as a mentor to Mark Zuckerberg?

It was for three years between 2006 and 2009. Zuck had lots of mentors … all more important than I was.

I was brought in to solve a very specific problem. The company was going to be sold to Yahoo for a billion dollars. Everyone around him was telling him to take the money. I helped him get out of it.

That became a very organic relationship. We met monthly for the better part of three years. I really liked interacting with him. If Facebook had sold to Yahoo, we wouldn’t be having this conversation. So I absolutely feel guilty. It’s my job to do what I can to help people see the light.

What was some of the advice you gave him?

I was a facilitator for Mark. I didn’t have any power over him.

Early in our relationship, the issue with the Winklevoss brothers came up [Zuckerberg allegedly stole their ideas to create Facebook]. I helped him get crisis management PR firm to help him learn to deal with legitimate criticism.

I helped him deal with the management team when I first got involved. There was this whole issue of management wanting to sell the company. They weren’t committed to Mark’s mission. So it was about helping him move past those people.

The last thing I did was help him on mobile. His initial instincts were that mobile was kind of a sideshow, and I was pretty confident mobile was going to be the only show. I got to be one of the people to coach him through that.

Do you still talk or maintain a relationship with Zuckerberg?

Hell no. My last communication was Oct. 30, 2016, when I contacted him about the op-ed piece I was going to write [criticizing Facebook]. They both [Zuckerberg and Sandberg] politely and promptly replied. I haven’t heard boo from either one of them since.

Do you think governmental regulation is the solution?

It’s only a partial solution. The point I was trying to make is that humans … have tremendous power—much more power than we realize. But it has to be collectively. If we withdraw a portion of our attention, we can have a really big impact.

Government in Washington, D.C., knows there’s a problem, and they need to know that voters care enough to justify going in and acting. So we also have power to affect political change.

I think we’re going to have to have big changes in how we think data is owned and use, and in antitrust [laws] to create space for new models to come along. This problem can be solved by new businesses.

The Airline Offered a Passenger $800 Compensation If He Gave Up His Seat. Then It Refused To Pay Up

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

He was trying to be nice.

He got to the airport, realized the airline was looking for volunteers to give up their seats on an overcrowded plane, so he decided to be public-spirited.

Ah, if only airlines could manage such human decency.

I only mention this as Daniel Tsai’s story comes across as especially galling.

Air Canada, he says, first offered him $600 in travel vouchers. Then it increased its offer to $800.

Could this really be that decency was being observed all around?

No, it couldn’t. We’re talking about airlines here.

You see, when Tsai finally got home and got some sleep, he said he was awakened by a slight adjustment in his compensation via email. 

Air Canada was now offering him only a promotional code for 15 percent off a future flight. 

Tsai’s reaction wasn’t neutral: 

It was like reading a Donald Trump tweet. It didn’t make any sense.

He admits to being angry. 

Worse, he says that Air Canada claimed he’d caught an earlier flight, when in fact he’d delayed his journey by six hours after giving up his seat.

I contacted the airline to ask for its view and will hope that it replies with at least 15 percent of its story.

Even after Tsai pleaded his case, he says he was only offered $300.

The airline said his original flight wasn’t overbooked, but that it had to switch planes to a smaller one.

To which some might mutter: So what? You offered him $800 to give up his seat.

It was only after the intervention of CBC’s Go Public investigative team that Tsai got his $800 compensation.

What’s mind-numbing, however, is why the airline would make him a verbal offer and then simply renege on the deal.

I thought Canadians were trustworthy sorts. At least, that’s their brand image.

What’s quite comical, however, is that the airline would try something like this on Tsai.

He’s a business lawyer. Oh, and a part-time professor too.

Even he, though, said he had to do quite some research to discover his rights.

In Air Canada’s case, it’s hard to grasp why it would have been so apparently twisted in its attitude toward its customer. 

For a few hundred dollars, it’s earned hundreds of thousands of dollars of bad publicity.

That doesn’t seem like a good deal at all.

Tech Companies Have a Brand Image Problem: Here's How to Solve It

Tech companies everywhere, but especially those in Silicon Valley, have a serious brand image problem. Over the past few years, major tech companies have drawn ire from the public for their lack of diversity, apathy toward privacy issues, as well as their accumulation of wealth.

This isn’t exactly stopping people from using the tech products we’ve come to rely on so heavily, but it is having an effect on share prices–and it’s attracting stricter regulations from governments all over the world. If these corporate juggernauts are going to earn back the trust of consumers, shareholders, and policymakers, they need to take serious strides to change how they’re publicly perceived. There are several ways to accomplish this, but it’s going to take a concentrated effort.

Diversity and Representation

First, Silicon Valley has a major diversity problem–and has had one for many years. The overwhelming majority of tech CEOs (and even tech employees) are white men. This is problematic both for the vision and products of the companies and for the reputation of those companies in the general public. Having a leadership team without representation from women and minority groups means your company is less likely to consider the wants, needs, and perspectives of those groups; it’s why we end up with algorithms that discriminate against women and minorities.

There is a fix, though it’s not necessarily a simple one. The most obvious solution is to hire more people from underrepresented groups, but tech companies don’t always have the luxury of having equal or proportional quantities of applicants from each of those groups; in other words, you can’t hire more women if there aren’t many qualified women applying.

So instead of simply adjusting HR practices to hire more applicants who belong to underrepresented demographics, companies need to take part in programs designed to incentivize people from minority groups to pursue careers in tech. As an example, Women in Technology (WiT) programs are becoming more popular, offering mentorship and guidance for young women looking for careers in fields like software engineering, mechanical engineering, or signal processing. Given a few years of development, enough early-stage outreach programs like these could fill the pipelines with more appliances from diverse groups, and slowly change the overall composition of these companies.

Consumer Privacy and Corporate Transparency

Tech companies have also taken a hit on the consumer privacy front, with Facebook showing up in the headlines many times in the wake of the Cambridge Analytica scandal, when it was a London-based political consulting firm was capable of harvesting the personal data of millions of Facebook users for political manipulation purposes. Apple, Amazon, Google, and other companies have also been called to testify in front of a Senate Committee on consumer privacy protections.

We use devices, software, and digital products capable of collecting and storing ridiculous quantities of data on our lives, from where we are at any given time to what we’re talking about in our homes. With opaque and hard-to-understand terms of service agreements and an increasing diversity of connected devices, consumers and policymakers are more concerned than ever that data could be used for nefarious purposes–and tech brands are getting labeled as malicious, data-hungry consumer manipulators, working in darkness to take advantage of us.

There’s no quick fix to this dilemma, but offering more transparency is a good start. Giving users more options when it comes to their privacy, giving them simpler tools so they can truly understand what’s at stake when they use a product or service, and taking accountability when breaches do occur are the only path to restore trust.

Leadership and a Company “Face”

Tech brands also suffer from being faceless, corporate conglomerates. They’re either so massive they don’t have a public face, or their public face seems too detached from reality to seem relatable. Take, for example, Facebook CEO Mark Zuckerberg; this man serves as the “face” of Facebook, but has become generally disliked and distrusted due to his reclusiveness and seemingly robotic disposition when testifying before Congress. Or take Jeff Bezos, who is periodically caricatured as a cartoonish supervillain due to his similarly reclusive nature, his ambition for growth, and his access to practically unlimited resources.

Having a stronger, more trustworthy public face isn’t going to fix everything, but it would give the public someone more relatable to associate with the brand. And it doesn’t have to be a charismatic, charming CEO either–it can be a handful of PR reps or even customer representatives who make consumers feel like there are “real” people behind these companies, instead of just automated tech and reclusive billionaires. It would be a massive investment, to be sure, but it’s one of the only reliable ways to rebuild public trust.

Become an Armchair Quarterback With These Amazon Alexa Super Bowl Skills

Alexa, who is playing in the 2019 Super Bowl?

For those who are clueless about the big game on Sunday, Amazon’s Alexa is able to help. (In case you were wondering, it’s the New England Patriots and the Los Angeles Rams.)

There are now more than 80,000 skills in Amazon’s Alexa store, according to CEO Jeff Bezos. And thankfully, for football rookies, these will come in handy for game day:

The Rookie’s Guide to the NFL

Go straight to the source with the NFL’s Alexa skill. After enabling this skill, Alexa will be able to help explain everything you’ve ever wanted to know about the game, including rules, penalties, scoring, plays and football lingo. The NFL skill even offers a history lesson previous Super Bowls.

Tom Brady Facts

By now, rookies may have learned that Tom Brady, widely regarded as one of the greatest quarterbacks of all time, will be playing to win his sixth Super Bowl championship ring. Patriots fans may want to consult the “Tom Brady Facts” skill during the big game, so they can attempt to back up any trash talk with facts.

American Football Trivia

Learn something newor test your existing gridiron smartswith the American Football Trivia skill. And then get ready for the big game.

In addition to the ads, Amazon is teasing a new, celebrity-packed commercial this year, showing what might happen when the company puts Alexa in everyday objects. Expect a hilarious cameo from Harrison Ford, who tells his rambunctious dog to stop ordering so much foot by barking at its Alexa-enabled smart collar.

Last year, Amazon had to do some behind the scenes tinkering to make sure customers’ speakers wouldn’t go haywire when the word “Alexa” was mentioned ten times in the company’s 2018 Super Bowl ad. Let’s hope this year’s game plan is equally effective.

How to Write Emails That Super Busy People Will Actually Read

Apart from traffic, stubbed toes and spoiled milk, there are few things in life more frustrating or discouraging than cold email outreach. More often than not, you’ll either rejected outright or receive no response at all.

These outcomes become even more likely when reaching out to key decision makers, public figures or any other busy person , with no reply almost being a guarantee. Yet, while getting a hold of high-profile people is difficult – whether they’re the top influencers in your industry or the publisher you’ve been trying to connect with for years –it certainly isn’t impossible. 

In fact, by applying a handful of simple, battle-tested tips and strategies to your outreach emails and messages, your chances of reaching your prospect will sky rocket.

Here are six of them.

1. Get to the point.

A friend of mine who worked in the sales department at Oracle showed me the sales template they typically use for cold outreach. To my surprise, it was only four sentences long. The same was true for a buddy of mine who works in sales at a well-known Fortune 500 company.

In short, these emails have a quick intro, a sentence explaining why they’re reaching out to the target, a blurb on the value their product or service can bring to their business and wraps up with a question asking to hop on a quick phone call, with a few suggested days and times included.

This was a game-changer for me. Before seeing these templates, I felt compelled to close the deal all within the email itself. Instead, by waiting to do the “selling” on your initial phone call, once you’ve built trust and rapport, my average response rates increased threefold.

2. Prove your the “real deal” right off the bat.

One of my most successful email campaigns (in terms of open rates) included my title as an Columnist in the email subject line itself, and read: “Quick Question From an Columnist”.

No matter if you’re a CEO of a fast-growing startup, an author or someone who’s just getting started, we all have something of value to offer, some form of social proofing, so be sure to make it known right away.

Additionally, include a link to what I call your “home run proof point”. If you’re a blogger trying to get on a top notch publication, this could be an article that drove a ton of comments and shares. By proving you’re not just another spammer, you’ll instantly start to build trust between you and the prospect. 

3. Personalize it.

Remember: busy people are always on the prowl for reasons not to respond to an unsolicited pitch. 

Did this cold email get my name wrong? Is this cold email relevant to my business at all? Was this cold email clearly copy and pasted?

If there’s any semblance of you not doing your due diligence when it comes to research, editing and more, your chances of getting a response are close to nothing. 

The solution? Show you did your homework by personalizing and tailoring your message to fit specifically to the person you’re reaching out to.

4. Timeliness and relevance is key.

Wherever possible, be sure to include some sort of relevant reason as to why you’re reaching out to the person. 

Has your target recently published a book, secured venture capital or received a noteworthy award? Then congratulate them on it. Show them you care. This will warm them up and increase the chance they’re more receptive to what you’re proposing.

5. Self-serving people finish last.

This might be the most important point of all – stay out of it. Meaning, make the email and the reason you’re reaching out all about the contact person. Make sure it’s crystal clear how taking the action with what you’re proposing will add nothing but value to their lives. 

No matter how busy a person is, if there’s enough value at stake, they’ll make the time to respond.

6. Make the options simple.

Within consumer psychology, a common practice to drive customers to take action is to eliminate the number of options they can make in the first place. The same applies to email outreach. By decreasing the number of decisions your target has to make, they’ll be more likely to make the leap.

Is your call-to-action hopping on Skype? Then use a tool like Calendly to eliminate any back-and-forth and streamline the scheduling process.

Is your call-to-action subscribing to your newsletter? Then link it, in bold, at the bottom of your email. 

Getting no response from a noteworthy person can get discouraging – believe me, I’ve been there. Yet, by applying the tips laid out in this article to your outreach, you’ll dramatically increase the chances of reeling them in. Best of luck.

China approves third batch of video games; still no Tencent

FILE PHOTO: People play in a video games hall during a night out in Shanghai February 23, 2008. REUTERS/Nir Elias

SHANGHAI/BEIJING (Reuters) – China’s broadcasting regulator on Tuesday approved the release of a third batch of video games after a freeze for most of last year, with industry-leader Tencent Holdings Ltd (0700.HK) still absent from the list of new titles.

The State Administration of Press, Publication, Radio, Film and Television approved 93 games in its third list since December. It last approved 84 games earlier this month.

Tencent’s domestic rival NetEase Inc (NTES.O) was also absent from the list for the third time.

China is home to the world’s largest video game market, where 620 million players spent $37.9 billion last year mostly on mobile and PC games, showed data from gaming market researcher Newzoo.

But authorities stopped approving the release of new titles from March last year amid a regulatory overhaul triggered by growing concern about violent content and game addiction, particularly among young players.

Tencent’s share price subsequently tumbled, wiping billions of dollars from the stock’s market value. The shares are still down as much as 20 percent compared with before the freeze, and were trading more than 1 percent lower on Tuesday.

Tencent, the country’s market leader in terms of gaming revenue, both produces and distributes games. Its fantasy multi-player role-playing battle game, Honour of Kings, is the top-grossing mobile game in China.

In 2017, it announced it would bring South Korea’s “PlayerUnknown’s Battleground” to China, the world’s best-selling game at the time. However, it has yet to receive a license that would allow it to monetize the game though it has altered the content to meet China’s strict rules on violence and gore.

Reporting by Brenda Goh and Pei Li; Additional Reporting by Beijing Monitoring Slot; Editing by Christopher Cushing

Logitech raises FY outlook after gaming-powered third quarter

FILE PHOTO: Chief Executive Bracken Darrell of the computer peripherals maker Logitech gestures during an interview with Reuters in Zurich, Switzerland March 6, 2018. REUTERS/Arnd Wiegmann

(Reuters) – Logitech International SA raised its full-year profit outlook on Tuesday, after strong growth in its gaming hardware business helped the computer peripheral and mobile speaker maker beat third-quarter expectations.

The Swiss-U.S. company got a boost from strong sales of its gaming products such as superfast keyboards, headphones and computer mouse used in multi-player online games like League of Legends and Fortnite.

Logitech’s diverse portfolio drove double-digit growth across gaming, video collaboration and creativity & productivity, said Chief Executive Officer Bracken Darrell.

The company now expects its fiscal year 2019 non-GAAP operating income to be between $340 million and $345 million, up from its previous guidance of $325 million-$335 million.

Logitech expects sales to grow between 9 percent and 11 percent in constant currency during the fiscal year, which runs to the end of March.

The company had raised its guidance earlier in July, following big increases in sales of its products used in video collaboration, gaming and for computer tablets.

For third quarter ended Dec. 31, net income rose to $112.8 million, beating forecasts of $99.3 million in a Reuters poll of analysts.

Net sales rose 8 percent to $864.4 million in the quarter, traditionally Logitech’s biggest sales period, beating forecasts of $852 million.

Sales from its gaming business rose 23 percent to 213.7 million.

Reporting by Rishika Chatterjee in Bengaluru and John Revill in Zurich; Editing by Gopakumar Warrier

Cyber Saturday—Challenging Facebook’s ‘#10YearChallenge,’ Tim Cook’s Privacy Plea, Mega Password Leak

Dumpster diving. A huge trove of data spilled onto the web and has been helpfully uploaded to HaveIBeenPwned, a leaked password-checking database for consumers, by security researcher Troy Hunt, the site’s proprietor. The leak, dubbed “Collection #1,” contains nearly 773 million unique email addresses and more than 21 million unique passwords—making it Hunt’s largest-ever upload. It’s unclear where exactly the data originated, although the anonymous person(s) who posted them online claim they came from many different sources. Best use the opportunity to clean up your password hygiene.

Be yourself. Facebook is still combatting disinformation. Nathaniel Gleicher, Facebook’s head of cybersecurity policy, said the media giant booted two Russian operations—including one involving Sputnik, a Moscow-based news agency—off Facebook and Instagram on Thursday. Facebook suspended hundreds of accounts and pages that he said engaged in “coordinated inauthentic behavior.” He noted that the fight against fakers is “an ongoing challenge.”

Chinese finger trap. Federal prosecutors are probing Huawei for allegedly stealing intellectual property from U.S. companies, including components from a T-Mobile phone-testing robot called “Tappy,” reports the Wall Street Journal. The investigation is “at an advanced stage and could lead to an indictment soon,” the Journal’s unnamed sources said. Add this development to the mess of controversies entangling the Chinese company.

Demand a recount. The Financial Times said it discovered evidence of “huge fraud” in the Democratic Republic of Congo’s December presidential election. The paper claims that its own independent tally of votes, based on data leaked by an unnamed source close to Martin Fayulu, the contest’s loser (but actual winner?), exposes the fraud. The report corroborates the view of the Catholic Church, which earlier denounced the election’s “results” after conducting its own audit.

Look; don’t touch. A California judge recently ruled that police officers are not authorized, even in possession of a search warrant, to force suspects to unlock their phones using biometrics, like a fingerprint or facial scan, Forbes reports. Judges had already ruled that passcodes were protected against such coercion, meaning people could refuse to supply them, thereby preventing self-incrimination. The judge, who called the original law enforcement request “overbroad,” wrote, “If a person cannot be compelled to provide a passcode because it is a testimonial communication, a person cannot be compelled to provide one’s finger, thumb, iris, face, or other biometric feature to unlock that same device.”

Just your friendly neighborhood NSA

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Why Building a Business Today Is More About Selling Skills Than Selling Products

Most of you who start new ventures don’t think of yourselves as sales experts. In fact, you may feel on the opposite end of the spectrum, more focused on delivering the perfect solution and managing the finances to grow the business.

Yet in today’s competitive and rapidly changing world, top notch sales and marketing skills are critical to the success of every business.

As an advisor to technical entrepreneurs, the most common mistake I see is the “If we build it, they will come” approach with no sales plan, under the assumption that the technology is so spectacular that customers will buy the product.

In todays’ rapidly changing world, there are over 30,000 new products introduced every year, so it’s easy to slip into that unseen majority and fail.

Thus, in my view, it’s never too early to brush up on your selling and marketing skills. Here are the key steps I have found to work from my own experience in large companies, as well as startups:

1. Practice showing some passion in every conversation.

Being positive and excited about what you offer should not be reserved for stand-up pitches and closing large deals.

Everyone inside your company, as well as potential customers, needs to be inspired by your message before they believe it. Stand tall – keep your fears and doubts to yourself.

It always helps to ask questions first, and keying off an element of passion in the other person’s perspective. For example, if they show a passion for fitness and life balance, highlight how your solution shortens the time and pain of solving their business problems.

2. Work hard on perfecting your value proposition.

The value of your solution may be self-evident to you, but everyone has a different perspective.

Make sure you engage fully and often with your ideal customer, to understand what will appeal most to their heart, mind, and pocketbook. Then craft an irresistible pitch, and iterate often to keep tuning it.

Effective value propositions are quantified and personalized for each customer or target segment. For example, “reduces your cost per application by 30 percent” is far better than “easier and faster to apply.” Eliminate the fuzzy hype words from your message.

3. Hone in and capitalize on your best assets.

Your strongest asset may be your personality, expertise, location, or your solution. Highlight what you do best, unique benefits to your customers, and an honest statement of why you do what you do.

Make it real for your customers with professionally prepared collateral based on these assets.

Dale Carnegie, for example, was recently ranked as one of the ten greatest salespeople of all time, by virtue of his presence and conviction, even though his courses on public speaking contained no great innovations or breakthroughs. He was the asset he sold.

4. Build real relationships with people who can help.

Starting and growing a business is not a solo operation. You need all the help you can get, and people will help you if they know and trust you.

These may be partners who can complement your skills, mentors who can show you what you need, or customers who can be your best sales people.

Even the most successful business executives have mentoring relationships with helpful peers. Bill Gates has a long-standing mentor relationship with Warren Buffett, and Mark Zuckerberg openly acknowledges that he was mentored in the early days by Steve Jobs.

5. Don’t forget to ask for the close, with confidence.

You can’t win if you don’t ask, and confidently asking a customer for their decision shows leadership on your part.

The best sales people look for ways to inspire a customer’s emotional involvement, create the urgency to take ownership, and then ask for the decision. Don’t be shy on this point.

Five basic rules for closing include treating closing as a process, setting a closing objective, waiting for the right moment, wrapping a conversation around it, and then celebrating every victory. If you can’t close deals, you don’t have a business, no matter how great the product.

I’m not suggesting that you as the business founder has to do all the selling, but you do have to be the role model that the rest of team follows. You also have to deeply understand what sells to your customers, or you can’t properly lead the other key business areas of development, finance, and operations.

In reality, leadership requires first selling yourself, so these same steps apply.

How to Know If You Qualify for Small Business Tax Deductions This Year

Millions of small business owners will be in uncharted waters this tax season as they try to determine if they qualify for a deduction that could exempt one-fifth of their income from taxes.

Five months after the IRS issued guidelines to help business owners and tax advisers understand how the complex deduction works, accountants and tax attorneys still have questions. Even those who have attended seminars and workshops about the new law have come away scratching their heads, especially about a section that bars service providers like doctors, lawyers and consultants from claiming the deduction. Some of these company owners have businesses that don’t easily fit into the IRS guidelines or proposed regulations the agency has also issued.

“There’s a lot of conflicting advice out there,” says Jeffrey Berdahl, a CPA with RLB Certified Public Accountants in Allentown, Pennsylvania. “It’s going to be like the Wild West.”

The Basics

The deduction is aimed at giving tax breaks to sole proprietors, partners and owners of S corporations; these businesses are known as pass-throughs because company income “passes through” to owners’ 1040 forms, where it is reported to the IRS. Before the law was enacted, many of these owners couldn’t get the more favorable tax treatment enjoyed by traditional corporations, those known as C corporations.

The new law allows many owners to deduct 20 percent of what’s called qualified business income. They can get the full deduction as long as their taxable income doesn’t exceed $157,500 for an individual and $315,000 for a married couple filing jointly. But taxable income includes owners’ and spouses’ earnings from outside the business — for example, being employed in a different field or industry — and earnings from investments.

If taxable income is above the $157,500 or $315,000 threshold, owners may get a partial deduction. There are two critical factors that can limit the size of the break. The first involves the company’s W-2 wages, or how much it pays employees, and the value of some of its property; complex calculations go into assessing the impact of wages and property on the deduction.

The second factor affects owners who are in what’s called a specified service trade or business — for example, health providers, attorneys, accountants or consultants. They have no deduction if their taxable income is more than $207,500 for an individual or $415,000 for a married couple.

More Than One Activity or Business

Owners whose businesses involve a variety of activities may find that income from some qualify for the deduction while others don’t, says Angela Dotson, a CPA with Aprio in Atlanta. An optometrist who treats patients may not be able to claim the deduction for that work. But the same optometrist who also sells eyeglasses and contact lenses may be able to use the deduction for that income.

Another example: A graphic designer who consults with clients but also creates websites. “You’re consulting, but also selling a product,” Berdahl notes.

There might be some unpleasant surprises when owners in such situations get to their CPA’s offices. The new law requires separate records for the different types of work.

“They might find their books may not be in good shape for tax reform — they may not show the data CPAs will need to know,” Dotson says. In that case, either the owner has to go back and change the books, or pay extra to have their tax advisers do the work.

Owners who have more than one business with employees may be able to aggregate, or combine the qualified business income of the companies, and lower the impact of W-2 wages on the deduction, says Miguel Farra, a CPA and tax attorney with MBAF in Miami. But the businesses must be in a related industry.

“If you are a real estate developer and somebody that owns real estate as investment property, you probably can aggregate,” Farra says. But someone who owns a cleaning service and an auto servicing shop wouldn’t be able to aggregate their income.

Questions Awaiting Answers

The guidelines the IRS issued in August aren’t set in stone although the agency said taxpayers could rely on them in compiling their 2018 returns. The agency has issued proposed regulations, and tax professionals have already asked the IRS to clarify a number of issues, including which service providers can claim the deduction. For example, the New York State Bar Association, which asked the IRS for multiple clarifications, said many taxpayers, including those who and rent a small number of real estate properties, may be uncertain about whether the deduction applies to them.

Many of Ed Reitmeyer’s clients don’t like to get extensions of the filing deadlines for the returns. But the uncertainty about the new law is a good reason to get an extra six months to complete and submit returns, he says.

“It may be wise to do so with more clarity coming from Congress or Treasury,” says Reitmeyer, a CPA with Marcum in Philadelphia. However, he says, “with the government shutdown, and the political atmosphere surrounding tax policy, it may take well into the summer to gain any clarity at all.”

–The Associated Press

Samsung, Huawei supply majority of own modem chips, Qualcomm says

SAN JOSE, Calif. (Reuters) – The two largest smart phone makers in the world supply a majority of their own modem chips to help their devices connect to wireless data networks, according to evidence presented at an antitrust trial for chip supplier Qualcomm Inc (QCOM.O).

FILE PHOTO: The logo of Qualcomm is seen during the Mobile World Congress in Barcelona, Spain February 27, 2018. REUTERS/Yves Herman/File Photo

A trial between the U.S. Federal Trade Commission and Qualcomm kicked off in a federal courtroom in California on Friday, with the regulators arguing that Qualcomm engaged in anticompetitive patent licensing practices to preserve a monopoly on modem chips. The case is being closely watched because it may shed light on the likely eventual outcome of the global legal battle between Apple Inc (AAPL.O) and Qualcomm.

Apple has alleged that Qualcomm engaged in illegal business practices, and Qualcomm in turn has alleged Apple violated its patents, scoring victories in China and Germany last month.

Qualcomm has argued its licensing practices follow long-established industry norms and that it charges broadly the same licensing rates that it had for many years before it ever started selling chips.

That has become a big market for Qualcomm, which controlled 59.6 percent of the $15.3 billion market for 4G modem chips in 2017, according to IDC’s Phil Solis, who studies mobile chips for the research firm.

But Bob Van Nest, an attorney representing Qualcomm in the case, also sought to show that Qualcomm is not dominant in the world’s two biggest handset makers.

During opening arguments, Van Nest’s presentation said that Huawei [HWT.UL] internally sources 54 percent of the modem chips it puts in its devices and gets only 22 percent of its modems from Qualcomm, with the remainder coming from other unnamed makers. Samsung (005930.KS) internally sources 52 percent of the modem chips it uses, with 38 percent from Qualcomm and the rest from other makers, according to the presentation.

Huawei and Samsung did not immediately respond to a request for comment. Also, the FTC’s case centers not on the overall modem chip market – which includes slower chips that go into cheaper handsets – but rather the market for speedy “premium” chips where Qualcomm is among the only options.

Huawei and Samsung are both large diversified technology corporations that make many other products aside from premium-priced smart phones. Huawei’s HiSilicon unit supplies the chips for its high-end phones such as its Mate and P series. Samsung’s chip division supplies processors and other components for many of its handsets and is also a dominant global supplier of memory chips beyond its own products.

The two firms are also Apple’s fiercest rivals in the market for premium smart phones costing $700 or more. Apple depends entirely on Intel Corp (INTC.O) and Qualcomm for modem chips, though the iPhones released in 2018 use Intel modems exclusively.

Technology news publication The Information last month reported here that Apple was designing its own modem chip, citing Apple job listings and a source briefed on Apple’s plans. Apple declined to comment on its plans.

For the second quarter of 2018 – the most recent figures available from IDC – Apple was the third-largest smart phone supplier by volume, with Samsung and Huawei in first and second place, respectively.

Reporting by Stephen Nellis; Editing by James Dalgleish

The Simple Engineering That Will Keep NYC's L Train Rolling

Ever since the last of the brackish water slithered out of the Canarsie Tunnel in the aftermath of 2012’s Superstorm Sandy, New Yorkers have been bracing for the pain. Public transit officials have long warned that the water damage to the 94-year-old tunnel, full of just-as-old subway equipment, would eventually require a long, painful, deeply inconvenient rehabilitation. That’s the tunnel that runs under the East River, carrying many of the L subway train’s 400,000 daily riders from popular Brooklyn neighborhoods like Williamsburg and Bushwick into Manhattan.

The surgery was scheduled for April 2019, when the stretch of L train that takes New Yorkers across Manhattan and into Brooklyn was scheduled to shut down for a 15-month repair job. Ahead of what they officially deemed the “L-pocalypse,” local officials created piles of plans to ramp up bus service, encourage biking, and run new ferry routes, and everything else they could think of to keep all those commuters from taking to cars and making already bad traffic fully catastrophic.

Those plans (as well as wilder ones proposed by concerned citizens) became a lot less necessary Thursday morning, when Governor Andrew Cuomo called a surprise press conference to proclaim that no, the L train won’t close completely, and yes, it will still be fixed for the future.

The new plan for the next few years is to keep the train open and running as normal during weekdays, whilst doing repairs on nights and weekends (the details remain fuzzy). The board of the Metropolitan Transportation Authority, which runs the subway, has yet to adopt the new plan, which was proposed by a commission of half a dozen engineers based at Columbia and Cornell Universities that Cuomo assembled last month, two years after the decision was made to close the line. But the agency put out a press release Thursday afternoon saying it “accepted the recommendations.”

Curious politics are clearly at work here, but New Yorkers are unlikely to care, as long as the subway keeps running. And if it does, it’ll be thanks to two bits of subway engineering infrastructure: benchwalls and cable racking.

Let’s start with benchwalls. If the train stopped in the tunnel and you had to get out, these are the stretches of concrete, running along each wall and resembling big benches, that you’d be walking on. Facilitating emergency exits is one of their main functions—without them, you’d have to jump out of the train, onto the ground and risk hitting the third rail. Benchwalls also hold most of the goodies that make the subway work, including the power and communications cables. When workers were building the line, which started service in 1924, putting the cables in the concrete was the best way to protect them from things like hungry rats and water damage.

Over the past century, those benchwalls have started to deteriorate, a process accelerated by the flooding from Hurricane Sandy. Explaining its full shutdown plan in 2016, the MTA said the tunnel’s bench walls “must be replaced to protect the structural integrity of the two tubes [east and west] that carry trains through the tunnel.”

Replacing these things involves jackhammering away concrete, removing the rubble, replacing the cabling inside, setting new concrete, and having it dry. It’s work you can’t do overnight or on weekends, because any one section takes several days. And you can’t run trains without leaving a walkway to lead people to safety in an emergency.

The new plan involves giving those benchwalls a bit of a demotion. They’ll still be used for emergency egress, but they won’t hold the cables anymore. Instead, the L train will use a “cable racking” system, in which new power and comms lines will be strung up and attached to the sides of the tunnel, above the benchwalls. Turns out, their protective jacketing has advanced since the Prohibition Era. “We’ve had tremendous progress in materials,” says Peter Kinget, a Cornell electrical engineer who served on the panel. , If the jacketing catches fire, it doesn’t produce noxious fumes. It’s impervious to vermin and H2O, obviating the need for the concrete armor. The workers will also shore up the sections of benchwall that are crumbling with fiber reinforced polymer, Cuomo says, leaving the old, inactive cables entombed inside.

That decoupling of the benchwall’s duties is a big deal, because it makes the work much easier to execute. You can cut back service at night and on weekends (by running trains in just one of the tunnel’s twin tubes) and have workers slip underground, setting up the racks and new cables segment by segment. During normal hours, the train operates as it usually does, pulling power from the cables already in the benchwalls. Once the work is done, the MTA will switch the trains over to the new set of cords.

Cable racking has been used for new metro lines in London, Hong Kong, and the Saudi capital of Riyadh, Cuomo says. This would be its first use in the US, and the first time it’s been used to fix up an existing line.

“It’s a clever solution,” says Matt Cunningham, a civil engineer and global director of infrastructure for Canadian engineering firm IBI. It’s cheaper and easier than replacing all the cable-filled benchwalls, and it’s a proven method. “It’s going to work.”

Which brings up the unanswered question of why this idea is just surfacing now. Why not before the MTA decided on the full shutdown, then spent two years preparing for it? It makes Cuomo the politician who averted the traffic-spewing L-pocalypse—but it also makes one wonder why he didn’t come to the rescue earlier. (He’s been governor of New York since 2011.) In his press conference, he presented this as new solution, which is true if you compare it to the techniques used to build the subway in the previous century, but not if you take a slightly narrower view. “It’s not new technology that’s only now become available,” Cunningham says.

Of course, limiting service during nights and weekends to make this fix will still inflict some suffering, and the MTA has a terrible record of mismanaging this sort of operation, so any promises about deadlines or costs should be doubted. “You’re not getting a root canal on five teeth, you’re getting a root canal on three teeth,” says Allan Rutter, of Texas A&M’s Transportation Institute. “There’s gonna be pain.”

In infrastructure as well as in dental surgery, you’ve got to accept some drilling and discomfort. But less is definitely more.

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Netflix Just Made a Truly Insane Announcement on Twitter. (But Wait. It Might Actually Be Brilliant)

Now, Netflix has another big tweet — this time making an announcement about the insane social media challenge that the Netflix movie spawned. And if the first time people reacted with disbelief, this time they’re reacting with awe, because it’s truly brilliant.

The movie, if you haven’t seen it, stars Sandra Bullock, and involves some kind of supernatural power that tracks her and her children. The only way to escape it, is to blindfold themselves and rush to safety.

This being 2019 (happy new year by the way), if you combine a viral piece of entertainment with a weird physical twist, you get a challenge that goes viral: people doing (or pretending to do) all kinds of dangerous things while being blindfolded, and posting them to social media. 

Emphasis on dangerous, of course. My colleague Chris Matyszczyk has a perfect example.

Netflix, naturally, took to Twitter (where else?) to warn people to dial it back:

Can’t believe I have to say this, but: PLEASE DO NOT HURT YOURSELVES WITH THIS BIRD BOX CHALLENGE. We don’t know how this started, and we appreciate the love, but Boy and Girl have just one wish for 2019 and it is that you not end up in the hospital due to memes.

Now, here’s the thing. There’s viral, and then there’s “Netflix tweets about it viral.”

Because as The Washington Post reports, some of the #BirdBoxChallenge videos didn’t actually have that many views until after Netflix posted its tweet.

But once Netflix said things were dangerous: Look out.

Within 24 hours after the tweet, the Netflix warning has another 54,000 retweets and 271,000 likes — all of which adds even more publicity to the big hit the company already has. 

It all adds up to something pretty amazing. On the one hand, Neflix has done the super-responsible thing and asked its viewers not to behave dangerously while posting online homages to Netflix’s super-popular movie.

And on the other hand, Netflix is also pouring gasoline on the fire and ensuring that even more people pay attention to the challenge, the movie, and Netflix itself.

I’ve reached out to Netflix to ask for context. No reply yet. While we wait, let’s just reflect on the challenge, the tweet, and the fact that insanity and brilliance so often seem to be two sides of the same coin.

That, and also how whomever posted the tweet for Netflix started out by saying, “Can’t believe I have to say this…” instead of the corporate “we.” I kind of love that.

Saudi Arabia Won't Be the Last Country to Censor Netflix

When news broke on New Years Day that the Kingdom of Saudi Arabia had censored an episode of the Netflix series Patriot Act with Hasan Minhaj that’s critical of Crown Prince Mohammed bin Salman, it wasn’t a surprise. An outrage, yes. But not a surprise.

Saudi Arabia has a long history of censorship and human rights abuses, and the anti-cybercrime law the kingdom says the episode violated dates back to 2007. And though the rise of bin Salman was greeted by the US and Silicon Valley with enthusiasm, his reforms (women are finally allowed to drive) have come alongside continued abuses (hundreds of women “disappeared” for their activism). But the Netflix incident is also indicative of the pressures tech companies face beyond Saudi Arabia amid a global trend toward digital authoritarianism that shows no sign of slowing.

Minhaj, an American comedian, devoted an episode of his show to the Saudi regime on October 28, weeks after the murder of journalist Jamal Khashoggi at its embassy in Istanbul. The CIA later concluded that bin Salman directly ordered the hit on Khashoggi. “But he has been getting away with autocratic shit like this for years with almost no blowback,” Minhaj says during the show, and suggests that after years of human rights abuses, it’s finally time for the US to reassess its relationship with the strategic ally.

The episode was available to watch in Saudi Arabia for two months, until Netflix took it down last week in response to a request from the country’s Communications and Information Technology Commission. Officials allege that the episode broke Article 6 of its anti-cybercrime law, which criminalizes the “production, preparation, transmission, or storage of materials impinging on public order, religious values, public morals, and privacy, through the information Network or computers.” The episode is still available to watch on Netflix outside Saudi Arabia.

“Free speech and the free flow of information are heavily restricted in Saudi Arabia by way of laws, institutional and cultural norms, and various other mechanisms of social control,” says Ellery Biddle, advocacy director at the free speech nonprofit Global Voices. “There have been robust efforts to restrict public knowledge and perception of the Khashoggi case, so it’s not surprising that this happened.”

Critics admonished Netflix for complying with the kingdom’s request to take down the comedy show. “By bowing to the Saudi Arabian authorities’ demands, Netflix is in danger of facilitating the Kingdom’s zero-tolerance policy on freedom of expression and assisting the authorities in denying people’s right to freely access information,” Samah Hadid, Amnesty International’s Middle East director of campaigns, said in a statement.

Netflix defended its action, pointing out in a statement that it only took down the episode after the kingdom sent the company “a valid legal request.” Netflix, like most American tech companies, goes to great pains to comply with local laws in order to operate globally.

The situation with Saudi Arabia is a notable portent for the near future if the rest of the world continues its slide toward digital authoritarianism. That slide, a decade in the making at least, is becoming precipitous. A recent report from the nonprofit Freedom House noted that at least 17 countries have proposed or passed regulations curbing free speech online since June 2017. Egypt passed a law banning any websites “deemed to threaten national security,” and people who visit such sites can be jailed for up to a year. Iran, where Netflix became available only two years ago, strengthened its internet censorship laws last year, too, with new rules about what can be posted in messaging apps. Tunisia introduced a bill to criminalize defamation online. The list goes on. All of this leads to an internet that is less free and more balkanized, where each nation has different rules—and where companies like Netflix will face the question of how, or whether, they can ethically operate in some markets.

“It’s now clear that as digital streaming services launch in new markets, governments will treat them in the same manner they regulate the local film or television industry,” says Adrian Shahbaz, lead author of the Freedom House report. “That means that in countries where the authorities have little regard for freedom of expression, companies will come under increasing pressure to censor political, social, or religious content they wouldn’t normally worry about under US or European law.”

While Netflix’s removal of the Minhaj episode has drawn criticism, it is not the first time the company has taken down shows in certain countries. It removed three episodes of different shows in Singapore that allegedly violated a law against positive portrayals of drug use. But generally, Netflix says, the company makes all its global originals available in every country where it operates and only removes shows if legally required to do so in the jurisdiction.

Shahbaz says that Netflix’s response to the Saudi takedown request was in line with an emerging set of best practices for companies dealing transparently with such censorial pressure. “They should state precisely what law they are complying with, what piece of content is being removed, and what steps they’re taking to ensure the action has the smallest possible impact on human rights,” he says. “From what I can tell, Netflix has done those three things fairly well. They’ve stated the law and episode in question and complied by taking the most minimalistic action available to them—censoring only that one episode and only within Saudi Arabia.” He also notes that the company left the episode up on its YouTube channel.

If Netflix didn’t comply with such requests, the site could be blocked entirely. “Unlike in a democracy, where a company can appeal an unjust order using the courts, companies face far fewer options in a place like Saudi Arabia: essentially, either comply or risk being banned,” notes Shabhaz. That’s obviously bad for the company’s bottom line, but it would also curtail access to information. Saudi Arabia, for instance, had a prohibition on all public movie screenings until just last spring (it lifted the 35-year ban just in time to screen Black Panther), making Netflix a crucial way for people to watch television, movies, and documentaries. “On balance, I think it is more important for Saudis to have some access to the service than none at all,” says Biddle.

That kind of complex trade-off is what companies like Netflix face when navigating local laws around the world. (It’s even trickier for social media companies, who don’t have Netflix’s control over the content uploaded onto their sites, but still have to comply with local laws.) Netflix doesn’t operate in China, since it has not been able to square its platform’s model with China’s strict content rules.

More than an issue of Netflix acquiescing to Saudi pressure, this incident underscores the power and appeal of local laws that determine the kinds of materials allowed online. Although the takedown appears to have drawn more attention to Minhaj’s criticisms—“Clearly, the best way to stop people from watching something is to ban it, make it trend online, and then leave it up on YouTube,” the comedian tweeted—the impact of such laws goes far beyond a single episode of a Netflix show being forced offline. People are thrown in jail, silenced, even murdered; they’re prevented from accessing vital information. “The Saudi government only confirmed what Hasan Minhaj so brilliantly argued—that the crown prince’s so-called ‘reform agenda’ is smoke and mirrors at best, or as is increasingly becoming clear, actually represents a further deterioration of political freedom in the country,” Shahbaz says.

In what would be his final column, published posthumously in The Washington Post, Jamal Khashoggi wrote, “There was a time when journalists believed the Internet would liberate information from the censorship and control associated with print media. But these governments, whose very existence relies on the control of information, have aggressively blocked the Internet.” The title of his column: “What the Arab World Needs Most Is Free Expression.”

Countering oppressive regimes and laws requires collaboration between civil society, tech companies, and democratic nations willing to fight for digital freedoms. For the US to take the lead in advocating for an open internet, it would need to do what Minhaj asked in his show: stop turning a blind eye toward the abuses of an ally.

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