Will Your Company Get Hit by Russians Hacking the Election?

Whether or not you believe that Russia tried to influence the 2016 election seems to have entered the twilight zone, where the same shred of concrete evidence is simultaneously elevated to “indisputable fact” status by Trump detractors and questionable propaganda by Trump supporters.

And while there are doubtless those who will claim that the United States Cyber Command is a tool of the deep state and that precious little comes out of Washington without political intent, most of us are content to believe that the Trump appointee Paul Nakasone, head of Cyber Command and the National Security Agency, would not be focused on Russia if it was in any way avoidable.

Coverage in the New York Times was unable to pinpoint how the message was delivered to individual Russian operatives thought to be involved in influencing the outcome of U.S. elections, but according to the Times in this the first known U.S. intervention overseas in connection with cyber, the operatives were informed that they had been identified and tracked.

Recent news that the justice department was bringing charges against the chief accountant of an organized attempt to sway the 2018 midterm elections are probably related to this latest news item. In those charges, Russians working for a close ally of President Vladimir V. Putin were charged with “engaging in an elaborate campaign of ‘information warfare’ to interfere with the American midterm elections next month,” according to another Times story.

In those charges, Elena Alekseevna Khusyaynova is accused of sowing division and discord in the U.S. political system by creating an online presence that spread disinformation and promoting that content on social media platforms, including Facebook , Twitter and Instagram. 

Cognitive Security is Cyber Security

You’ve probably heard of information security–or INFOSEC for short. That’s a growing area. If you get it wrong, you get hacked or suffer a data compromise.

If the Justice Department is correct that there has been Russian-backed interference in next month’s midterm election, the cause of that will be something many people concerned with the issue have started to call cognitive security, or COGSEC, borrowing a term from AI developers working on machine-based cyber security solutions.

In this definition of the term, COGSEC refers to the battle over what people think is true. Adolf Hitler wrote in Mein Kampf (often wrongly attributed to Joseph Goebbels), “If you tell a big enough lie and tell it frequently enough, it will be believed.” The disinformation campaigns that are thought by many to have swayed the 2016 elections and that the Justice Dept believes were once again in play in the midterm elections are based on repetition of lies.

Facebook, Instagram and Twitter have all said that they are concerned about the issue of COGSEC and elections, and they have each in their own way made meaningful steps toward reducing that amount of unreliable and disreputable information targeted at what we might call high credence, disinformation vulnerable voters. But is it enough?

How It Could Hurt Business

If these destabilizing campaigns work, if the disenfranchisement of the truth comes to pass, why wouldn’t unscrupulous entrepreneurs use the same tactics to hurt competitors?

While there are certainly pundits who would argue that is precisely what President Trump did with the help of Russia in 2016, that’s not what I am getting at. One thing is clear: disinformation technology created by state spying agencies is at least as effective as the best marketing algorithms. In fact, given the likelihood that commercial marketing efforts are bound by rules and regulations, it is possible the state-sponsored versions of persuasion are much more effective.

So what happens if that technology leaks into the private sector where semi-criminal business interests can get their avaricious paws on it?

There is every reason to believe that the individual operatives targeted by Cyber Command have side gigs. Why wouldn’t they use their proven tactics to help businesses beat their competition? They would, and the fallout would be considerable.

Consider how consumers will react when it is revealed that the election-grade disinformation campaign now being targeted by Cyber Command was deployed in a consumer product campaign. Consumers will lose confidence in information promoted via social media–and this will for sure diminish the effectiveness of social in marketing campaigns.

Disinformation is about to be transformed from a political football to a marketing disaster. There is a solution, and one can only hope that the first volleys in the war that needs to be waged were just released by Cyber Command–and that whatever they’re doing to combat this threat to our nation works.

Shopify posts surprise third-quarter profit

(Reuters) – Canada’s Shopify Inc reported a surprise quarterly profit on Thursday as more subscribers and merchants signed up to use its platform, sending its U.S. listed shares up 4 percent before the bell.

The logo of Shopify is seen outside its headquarters in Ottawa, Ontario, Canada, September 28, 2018. REUTERS/Chris Wattie

The Ottawa-based company, whose software enables merchants to sell everything from infant formula to cosmetics online, said total subscription revenue in the quarter rose 46 percent to $121 million.

Expenses jumped 61 percent to $181.1 million as Shopify spent heavily to boost its market share in a competitive e-commerce industry, even opening its first bric-and-mortar store to sign up more entrepreneurs.

The company said gross merchandising volume (GMV), or the total sales by all vendors using Shopify’s software, rose 55 percent in the third quarter compared with the prior year. However, it is lower than the 56 percent jump in the second quarter.

The company, which helps e-commerce companies build their online stores, said net loss widened to $23.2 million, or 22 cents per share, in the third quarter ended Sept. 30, from $9.4 million, or 9 cents per share, a year earlier.

Excluding items, the company posted a profit of 4 cents per share, compared with a loss of 2 cents per share that analysts were expecting, according to Refinitiv data.

Revenue rose to $270.1 million from $171.5 million.

Reporting by Shanti S Nair in Bengaluru; Editing by Supriya Kurane

Wary of crypto, UK government blocks Royal Mint's digital gold

LONDON (Reuters) – Britain’s Royal Mint has frozen plans to launch a digital gold token after a partnership with U.S. exchange group CME failed and the government vetoed a plan to have the tokens trade on a cryptocurrency exchange, three sources told Reuters.

FILE PHOTO: A tray of bullion grade 2017 Sovereigns are seen at The Royal Mint, in Llantrisant, Wales, Britain, January 25, 2017. REUTERS/Rebecca Naden/File Photo

The demise of the potentially ground-breaking project, named Royal Mint Gold (RMG), highlights the wariness of governments to become involved in the largely unregulated world of cyptocurrencies, which exploded into the public eye last year with the stellar rise of bitcoin.

As other mints and fintech startups race to set up similar products, it could squander the chances of Britain’s Mint leading the field to build gold into a multi-billion dollar digital asset class.

It also reflects a cooling of enthusiasm towards digital assets at the CME, three sources said.

The project would have been the first time a government of a developed economy had become directly involved with a crypto currency exchange, analysts and traders said.

The 1,100-year old Mint announced its plan to issue tokens worth up to $1 billion on a blockchain-based trading platform run by CME in 2016, saying they would give investors an easy way to buy and trade physical gold held in its vaults.

Royal Mint Gold was to launch in the autumn of 2017, but CME decided at the last minute to pull out, leaving the Mint without a trading venue, sources said.

“CME’s management changed, and they walked away, didn’t want to get involved,” one of the sources said.

When a blindsided Mint sought to save the project by partnering with a cryptocurrency exchange, Britain’s finance ministry in early 2018 refused to permit it, seeing the union as too big a gamble with the reputation of the government and the Mint, the sources added.

The Mint is 100 percent owned by the government.

Asked for comment, the Mint said its digital gold had been due to launch in spring this year. “Sadly, due to market conditions this did not prove possible at this time, but we will revisit this if and when market conditions are right,” it said.

A Treasury spokesman referred Reuters’ questions to the Mint. CME said it was “continuing to assess client demand with our partner and have nothing new to report at this time.”

Governments are wary of cryptocurrencies, and few international standards have emerged to tame extreme price volatility, regular thefts from exchanges and the risk that digital currencies could be used to launder money or finance terrorism.

In Britain cryptocurrency exchanges remain unregulated. Its finance ministry, central bank and financial watchdog are looking at whether rules are needed for cryptocurrencies and the use of blockchain technology in finance.


Gold is seen as a natural fit with cryptocurrencies because both assets attract investors looking for alternatives to state-sponsored monetary systems which they distrust.

The Mint’s plan was similar to a type of digital money known as stable coins that are pegged to major currencies or other assets to avoid the volatility suffered by bitcoin and others.

The Mint had hoped to appeal to investors wanting digital assets but with the reassurance of a trusted issuer and to create a new revenue stream as use of mass circulation coins, its core business for more than a millennium, dwindles.

Royal Mint Gold also fit into a push by CME to develop digital asset classes and blockchain technologies. CME launched bitcoin futures contracts last year, one of the first to do so, and has invested in digital technology startups through a ventures arm.

But CME’s priorities shifted after CEO Phupinder Gill retired in late 2016 and Sandra Ro, CME’s head of digitization, left in July 2017, sources said.

“There was a change in strategy,” said one source, adding that digitization was de-emphasized.

Asked to comment, CME said: “It is not correct to say we have ‘de-emphasised’ digitization and remain committed to pursuing our digitization strategy.”

After the government vetoed the plan to trade Royal Mint Gold on a crypto exchange, the Mint’s new chief executive Anne Jessop, appointed in February 2018, decided to shut the project down, the sources said.

Around four staff in London were fired in March and a further 7-8 were made redundant in Wales, where the Mint is also based, in May. The project is now frozen, the sources said.

Meanwhile, others are launching rival products.

Australia’s Perth Mint and the Royal Canadian Mint are involved with digital gold products that launched this year and trade using technology supplied by fintech startups. Both mints declined to say how much gold had been bought through these platforms.

Gold-backed cryptocurrencies have also proliferated, though none has yet achieved the success of cryptos such as bitcoin, Etherium and Ripple, which have attracted hundreds of billions of dollars in investment.

Reporting by Peter Hobson; Additional reporting by Thomas Wilson; Editing by Veronica Brown and David Evans

Toshiba Memory to go public as soon as next autumn: Kyodo

TOKYO (Reuters) – Toshiba Memory Corp, the world’s No. 2 producer of NAND flash memory chips, will go public as soon as the autumn of next year, Kyodo News reported on Wednesday.

Toshiba Corp sold Toshiba Memory in June to a consortium led by Bain Capital LP, which also included Apple Inc, South Korean chipmaker SK Hynix, Dell Technologies and Seagate Technology.

When asked about the Kyodo News report, a spokesman from Toshiba Memory said there is no change to its plans to go public in the next two to three years and that it has not made a decision on when specifically it will launch its initial public offering.

The sale of the chip unit helped save Toshiba Corp from years of financial crisis brought about by accounting scandals and billions of dollars in cost-overruns at its U.S. nuclear unit Westinghouse.

Reporting by Yoshiyasu Shida, writing by Stanley White; Editing by Vyas Mohan

AT&T misses Wall Street profit estimate, shares fall

(Reuters) – AT&T Inc posted a surprise gain in U.S. wireless subscribers on Wednesday but quarterly profit rose less than expected, held back by its declining satellite TV business, sending its shares down more than 3 percent before the bell.

An AT&T logo is pictured in Pasadena, California, U.S., January 24, 2018. REUTERS/Mario Anzuoni

The second-largest U.S. wireless carrier has been reducing its dependency on the phone business with its $85-billion acquisition of Time Warner this year, but is struggling to grow in the TV market as viewers ditch satellite and cable for cheaper online packages.

AT&T gained a net 69,000 phone subscribers in the United States who pay a monthly bill, compared with analysts’ estimates of a net drop of 22,000 subscribers, according to research firm FactSet.

Wall Street analysts watch the so-called “postpaid” subscriber figure because those customers pay a monthly bill and are more valuable to the company.

AT&T lost more satellite TV customers than Wall Street expected, shedding a net 359,000 subscribers, as viewers continue to get rid of pricy TV packages in favor of cheaper streaming video services like Netflix and Hulu. It lost 251,000 in the same period last year.

Analysts expected AT&T to shed 245,000 satellite subscribers, according to FactSet.

The new WarnerMedia segment, which includes Turner and premium TV channel HBO, reported revenue of $8.2 billion during the quarter. It did not provide a year-ago figure.

AT&T closed its purchase of Time Warner on June 14 after winning a court battle against the U.S. Department of Justice, which argued that AT&T-owned DirecTV would use Time Warner content to raise costs for pay TV rivals.

A U.S. appeals court said last week it will hear oral arguments on Dec. 6 for the Justice Department’s appeal against the merger.

DirecTV Now, the company’s streaming video service that was launched to lure back viewers who had dropped more expensive satellite TV services, added only 49,000 net subscribers, much lower than the 296,000 it added last year. Analysts had expected the service to add 287,000 net customers, according to FactSet.

WarnerMedia recently announced it will introduce a new subscription video service by the end of 2019, anchored by HBO. Within a year, the service will also include original content, WarnerMedia Chief Executive John Stankey previously told Reuters.

Third-quarter net income attributable to AT&T rose to $4.7 billion, or 65 cents per share, from $3.0 billion, or 49 cents per share a year earlier.

Excluding some items, the company earned 90 cents per share, missing analysts’ estimate of 94 cents per share, according to Refinitiv data.

Total operating revenue rose 15.3 percent to $45.74 billion, beating analysts’ expectation of $45.65 billion.

Reporting by Sheila Dang in New York and Akanksha Rana in Bengaluru; Editing by Supriya Kurane and Bill Rigby

Canadian Startup North Made Alexa Smart Glasses That Actually Look Like Glasses

Stephen Lake was never much of a fan of Google Glass.

Shortly after his startup Thalmic Labs announced Myo, a gesture-control armband, in 2013, Lake and his co-founders, Matt Bailey and Aaron Grant, began to mess around with an early version of Google Glass. They tried pairing the smart glasses with the armband, seeing if there was a way to make the two work in concert. Instead of reaching up to swipe at the touchpad on the side of the glasses, you could gesture with your arm to respond to a notification that appeared before your right eye on Google Glass.

Lake and his team tinkered with other early prototypes of smart glasses, too, hoping to come up with some kind of interaction that flicked at the future of computing. The problem, they found, wasn’t in the communication method between human and lenses. The problem was that smart glasses freaked people out. They had overtly angular designs, obvious optical displays, or worse, built-in cameras.

“We tried to wear them in public,” Lake told me over the phone, in the months leading up to the launch of his newest product. “Matt and I actually tried to force ourselves to wear them out for a whole day, and we felt self-conscious. People were staring, and we didn’t really want to wear them.”

“So if we felt that way as early tech adopters,” Lake continued, “Then what did that mean for consumers?”

The following year, Lake, the company’s CEO, decided to wipe the slate clean. Thalmic’s next big product would be smart glasses that people would actually want to wear. They would be designed first as glasses, and secondarily as a tech product. Thalmic completely shifted its strategy, laying off some employees who had been working on the Myo armband in the process.

Four years and $140 million in funding later, the company is launching its answer to Google Glass. They’re called Focals, and they work with Alexa, Amazon’s popular voice assistant. The Focals are part of an insanely ambitious plan to launch a custom-made, smart eyewear product that’s only sold through the company’s own boutiques. The armband-startup-turned-smart-glasses-company is trying to be a brick-and-mortar retailer, as well.

Thalmic has also rebranded itself. It’s now called North—named so partly because the Waterloo, Ontario-based company is situated well north of Silicon Valley, which the founders believe give them a different perspective than other companies with face-computer aspirations. The other reason for going with the name North is equally as optimistic: Lake considers the human experience, and not technology, to be the company’s “north star.”

The first time Lake walked into WIRED’s office, back in June, he was wearing an early version of the Focals. I identified them right away as something other than fashion eyewear, maybe because I was especially attuned to his glasses—or maybe because the arms of the glasses are thick. When the light hit the right lens just right, I could see a blue orb glowing in the lens. This, it turns out, is the holographic element of the Focals.

I tried on a stock pair of the Focals myself that day, and walked away feeling slightly disappointed. They were wide-framed and heavy, with unfinished software. Everytime I blinked, my eyelashes cut across the projector embedded on the right side of the frames, which interrupted the holographic image in front of me.

This kind of experience is typical with prototypes. But my first Focals try-on underscored how challenging it is to make tech that you wear on your face, as opposed to something you hold in you hand, browse from the couch, or stick on your kitchen counter. If the company planned to make smart glasses that worked for everyone—or at least for more people than a small group of engineers—they still had a ways to go.

The second time Lake stopped by, he brought along Marie Stipancik, North’s head of eyewear design, and Ian Spence, a support specialist. This was just a week before the Focals would become available for pre-order, and things had to be just right. Lake was obviously wearing his Focals, but it was several minutes before I realized that Stipancik was also wearing a pair. Hers were round, tortoise shell frames, and her hairstyle hugged the sides of her face in such a way that the sides of the glasses weren’t visible. From the front, they looked…like glasses. Stylish ones.

“Tech can be intimidating, I think,” Stipancik says. “We wanted to take inspiration from silhouettes that are in some ways nostalgic.” At launch, Focals will ship in a classic square shape, but the round frames she wears are on the roadmap for next year.

The arms of the glasses are made of die-cast, matte finish aluminum. The rest of the frames are made of a premium nylon thermoplastic. This looks similar to acetate, another kind of plastic that’s often used in eyewear, but it holds up to heat better than acetate. The last thing you’d want in glasses packed full of technology was for them to bend, Stipancik explained.

The arms are still the most inelegant part of the Focals, but that’s where most of the magic happens. Lake and his team wanted to avoid putting a little micro-LED in front of people’s eyes, a technique that other smart glass makers have employed. Instead, they wanted to use direct holographic projection technology. They consulted with a company that makes pico projectors, hoping to outsource some of the manufacturing, but according to Lake, the pico manufacturer told them it was impossible to make a projector as tiny as he wanted. North decided to make it themselves.

This custom-built projector sits on the right inner arm of the glasses. It projects light onto the right lens, where it bounces off and is reflected back into your eye. The right lens has a photopolymer film inside it, which makes the light reflect in a precise way; this is the “holographic” element. One of the challenges with this approach, Lake said, is making this light refraction work with curved lenses. Flat glasses are a dead giveaway for nerdy smart glasses (or, maybe the cheap kind you get in swag bags).

Real glasses, on the other hand, have a curve to them. And if you plan to sell prescription lenses—which North plans to do next year—you need to design for curved lenses.

“We had to create a whole process for molding the lenses right around the holographic materials,” Lake says. “We curve the hologram first, and then correct the distortion, and then cast a prescription around that.” Another consideration is the battery, which accounts for a good portion of the weight of the glasses. Lake said wearers can expect up to 18 hours on a charge.

The accompanying ring lasts three days on a charge. This ring is North’s solution to replace a touch-sensitive swipe panel on the glasses. Swiping and swatting at the side of your face is weird, Lake says. “You want it to be discreet and not go against social norms, and a touchpad on the side of your face is completely counter to that.”

So they designed a ring, a chunky thing made of a combination of stainless steel and thermoplastic, that pairs with your glasses. It comes in 10 sizes, ranging from 5 to 15. It has a tiny joystick. It’s supposed to go on your forefinger. You control the little nub with your neighboring thumb. This nub is the thing that will allow you to look a co-worker directly in the eye and nod as though you’re listening to him while you’re actually sending an emoji via a text messaging app.

Focals run on the company’s custom software, built on top of Android. The software interface is simple, almost primitive, in its early stages. Download the Focals app and pair it with your glasses to see the weather, receive and respond to text messages, view your calendar appointments, and call an Uber. Another feature, called Go, relies on maps from Foursquare to either guide you to a specific location, or create a walking experience based on nearby points of interest. You navigate all of this by nudging and pressing on the tiny joystick on the ring.

You can also use Alexa. Long-pressing on the joystick summons Alexa, which hears your voice commands and responds to you through the glasses. The speaker and microphone are built into the right arm of the Focals, along with a Qualcomm Snapdragon processor. You can ask Alexa on Focals to do nearly anything that the virtual assistant can do on another Alexa-equipped devices, except it won’t play long strings of audio, and it won’t show you videos.

My second experience trying on Focals was dramatically different from the first. The glasses still weren’t custom-fit to my face, so I sometimes felt cross-eyed while I tried to focus on the floating interface. And as much as North refers to the light reflection as a hologram, there isn’t any volume or depth to the image being projected into your eye. It’s a flat image, one that lands somewhere between the chin and the shoulder of a person you might be talking to.

But I started to get a better sense of what North hopes to accomplish with these anti-smart-glasses glasses. The tiny joystick was strangely satisfying to use, and each selection with the joystick is accompanied by a delightful little click in your ear. I had the sense that I could probably get away with responding to a text or dismissing a notification while still looking interested in a meeting.

Then Lake told me that Focals cost $999 a pair and can only be purchased at the company’s two physical retail locations, in Toronto and Brooklyn, NY. This is so the company can guarantee the best possible fit and experience. North may want to create something much more accessible than the smart glasses Silicon Valley companies have produced so far, but to start, it sure isn’t opening itself up beyond a crowd of early enthusiasts in two specific geographies.

For all of Lake’s quibbles with Google Glass, Google was one of the pioneers in leveraging mobile technology to present information directly in front of our eyes. Its cost was prohibitive, its design distinctly cyborg, and it unnerved people in bars. Early adopters who wore them were labeled “glassholes.”

But the concept of allowing people to view bits of digital information with a quick glance, rather than pulling a glass slab out of their pocket and staring down into the vortex? That remains a powerful one. It’s as if Google knew early on that its very own mobile platform would become so addictive that we’d have to rely on other technology to somehow keep us more engaged with the world around us.

The problem is that the road to smart glass success, so far, has been littered with all kinds of failed or nearly-failed experiments. The products that have managed to capture some of the public’s attention are usually aimed at very specific customers, like heads-up displays for drone-flyers or athletes. Google Glass somehow lives on, but in areas like manufacturing and healthcare, not the broader consumer market. Intel showed off a somewhat promising pair of smart glasses earlier this year. They looked just like glasses, worked with Alexa, and used a low-power laser to beam images directly into your retina. Two months later, Intel shuttered the division that had been working on the smart glasses project.

Snap’s Spectacles are designed for a specific audience—young-ish Snapchat users—but to call those “smart glasses” is a stretch, since they capture video and stills but don’t display information from a smartphone or run any standalone apps. Microsoft’s HoloLens is perhaps the most complete example of a “computer on your face,” since the standalone AR headset runs full Windows 10. But that’s a giant headset that won’t be mistaken for fashion glasses anytime soon.

Somewhere in the in between, North thinks there’s a market for regular glasses that just happen to have tech smarts in them. And they might be right, but the same roadblocks still exist: comfort, cost, access.

“When it comes to wearables, fashion and design take priority, especially when it’s something you have to wear on your face as opposed to under a sleeve,” said Jitesh Ubrani, a senior researcher at IDC who focuses on the wearable tech market. “Outside of design, the story around content and services is also important. But another challenge faced by any company is price and distribution. Regardless of the features built into the glasses, it’s inevitable they’ll be tied to a smartphone in some way and because of that, the price of the glasses has to be relatively low.”

In other words, it’s really tall ask for customers to pay $999 for a pair of smart glasses when high-end smartphones are now pushing the $1,000 mark as well.

Not surprisingly, some of North’s backers are bullish on Focals. Paul Bernard, a director at the Amazon Alexa Fund, which contributed to North’s significant funding, said he believes North has brought together all the pieces of smart technology in such a way that it could be part of a next-generation computing platform.

“When we met with Stephen, there were two things that became clear,” Bernard said in a phone interview with WIRED. “First, they have the potential to make heads-up computing approachable, because of their optical technologies, miniaturization of electronics, and vision of voice as a key part of the interface. And, frankly, I think Stephen himself stands out as a secret weapon. What he built with a small team in a relatively short period of time is just impressive.”

The truth is this: Every smart glasses maker has suggested it could be the next-generation computing platform, and if not be it, then at least augment it in some way. So far, that hasn’t happened. But this is also true: We are a modern society obsessed with looking down, and some technologists are still hopeful that smart glasses can help us look up more. Lake is one of those technologists.

“One the one hand we live in a world now where you can call a car with the tap of a button,” Lake says. “But a more dystopian view is that we’re getting pulled away more and more, spending more time looking at our screens, less time in the real world.” As Lake was speaking to me, I thought I saw him look just beyond my left shoulder, into the hologram that was floating in front of his right eye. But it was a barely perceptible flicker.

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Verizon beats Wall Street estimates for profit, phone subscribers

(Reuters) – Verizon Communications Inc (VZ.N) on Tuesday beat Wall Street estimates for profit and net new phone subscribers, helped by the popularity of its promotional offers subsidizing Apple Inc’s (AAPL.O) latest iPhones.

The Verizon logo is seen on the side of a truck in New York City, U.S., October 13, 2016. REUTERS/Brendan McDermid

The largest U.S. wireless carrier knocked up to $750 off the price of some of Apple’s new phones, launched in September, as it looks to gain more share in a saturated market.

Verizon shares rose slightly to $55.20 in pre-market trading.

The company said it added a net 295,000 phone subscribers who pay a monthly bill during the third quarter, beating the estimate of 161,000 provided by research firm FactSet.

Revenue from Oath, Verizon’s digital media subsidiary that owns websites AOL and Yahoo, was $1.8 billion during the third quarter, down from $2 billion a year before. Verizon said it now does not expect Oath to reach its previous target of $10 billion in revenue by 2020.

That sparked talk that Verizon may dispose of the unit.

“I would expect the next move will be that the business is jettisoned entirely,” said Jonathan Chaplin, an analyst with New Street Research.

Net income attributable to the company rose to $4.92 billion, or $1.19 per share, in the quarter ended Sept. 30, up from $3.62 billion, or 89 cents per share, a year earlier.

Excluding some items, Verizon earned $1.22 per share, beating analysts’ average estimate of $1.19 per share, according to Refinitiv data.

Verizon, which has been focused on cost-cutting, said it is on track to reach $10 billion in cumulative cash savings by 2021.


Verizon launched home 5G internet service on Oct. 1 in parts of Houston, Indianapolis, Los Angeles and Sacramento. The next-generation wireless network is expected to bring faster data speeds, which Verizon hopes will help it compete with competitors like cable company Comcast Corp (CMCSA.O).

It has, so far, concentrated on investing in its wireless network rather than deal-making. Its next-largest competitor AT&T Inc (T.N) bought Time Warner in an $85 billion deal that closed in June, betting it could attract more customers with media content.

Verizon said it lost 63,000 Fios video subscribers during the quarter, more than the 18,000 it lost last year, as viewers continue to favor cheaper TV services delivered over the internet, over paying for pricier cable packages.

It added 54,000 Fios internet customers, fewer than the 66,000 Verizon added a year earlier.

Total operating revenue rose 2.8 percent to $32.61 billion during the quarter, beating analysts’ average estimate of $32.51 billion, according to Refinitiv data.

Reporting by Akanksha Rana in Bengaluru and Sheila Dang in New York; Editing by Supriya Kurane and Bill Rigby

PayPal backs emerging markets lender Tala

LAS VEGAS (Reuters) – PayPal Inc Holdings Inc has made a strategic investment in Tala, a financial technology startup that lends to underserved consumers in emerging markets, the companies said on Monday.

The PayPal app logo seen on a mobile phone in this illustration photo October 16, 2017. REUTERS/Thomas White/Illustration

The companies declined to disclose the amount of the investment, but Tala said it will use the funding to further develop its product and broaden its reach.

Based in Santa Monica, California, Tala lends to individuals in Kenya, Tanzania, the Philippines, and Mexico through its smartphone app. The company has lent more than $500 million to customers and has more than 300 employees around the world.

It is among a growing cohort of new entrants in finance that take advantage of digital technologies to service individuals that have been excluded by the traditional banking sector because they were considered too risky or too unprofitable to serve.

More than two-thirds of adults across the world lack a formal credit bureau record, making it challenging for traditional financial firms to lend to them, the companies said.

To service these consumers, Tala analyzes device and behavioral data to underwrite them and disburse loans of between $10 and $500 on mobile wallets or other methods. More than 85 percent of customers receive a loan in less than 10 minutes.

PayPal and Tala said they shared a commitment to serving this consumer segment.

“We see we are all very mission aligned, both Tala and PayPal,” Tala CEO and founder Shivani Siroya, said in an interview. “It’s been clear through the due diligence process that we share the commitment to building the financial health of the underserved.”

Since splitting from ecommerce platform eBay in 2015, PayPal has been seeking to transform itself into more than a payments processor. It has been expanding through a string of partnerships and acquisitions.

Its suite of products included remittances business Xoom, which it acquired in 2015.

“Tala shares our vision of reimagining financial services, especially for the unbanked and those underserved by the traditional financial system,” Mark Britto, senior vice president and general manager of global credit, at PayPal said in a statement.

Reporting by Anna Irrera; Editing by Simon Cameron-Moore

7 Ways to Get Employees to Prefer Commuting to Telecommuting

Most employees hate open plan offices, which accounts for part of the growing demand (among workers) for the right to work from home. However, many companies (e.g. Yahoo, Bank of America, Aetna, IBM) are now forcing employees to commute to work by canceling or limiting their work-from-home policies.

This is stupid for a number of reasons: 1) telecommuters are more productive, 2) open plan offices actually reduce collaboration, 3) commuting accelerates global warming, 4) open plan offices discourage diversity, etc., etc. What’s abysmally stupid, though, is cramming a commute down the employees’ throats.

Rule of thumb: any “productivity improvement” that requires punishing non-compliance is idiotic by definition. A case in point is CRM, which companies have been strong-arming salespeople to use for decades and which still (and consequently) has the highest failure rate of any form of office automation.

But that’s not what this column is about.

Let’s suppose, just for the sake of argument, that there might actually be some substantial value to having your employees working in the same physical area. If that were true, what steps could a company take that would cause employees to willingly prefer commuting over telecommuting?

Three basic strategies come to mind:

  1. Replicate in the office the positive things that people like about working from home.
  2. Provide positive things in the office that people can’t get from working at home.
  3. Remove from the office the negative things that make people want to work from home.

Note that none of these strategies involves throat-cramming. And it should go without saying that any policy that REQUIRES commuting (“Achtung! No more verk from home!”) will fail to make commuting more palatable.

With the above in mind, how might a company implement those three strategies? Here’s my list:

1. “Pixar plan” offices

Let’s start with the big ticket item. Open plan offices–which employees universally hate–are a primary reason employees want to work from home. Employees want a private, distraction-free place to work; open plan designs don’t cut it.

What DOES work, however, is the design that’s worked for Pixar which consists of private, self-decorated offices along with a common area that’s primarily recreational. Yes, it will cost more than your bargain basement open plan. But it will be worth it.

2. Highest quality, ergonomic chairs

Most people (and companies for that matter) scrimp when it comes to office chairs. That’s “penny-wise and pound-foolish” because the inevitable back problems will cost more than the extra cost to buy a top-line ergonomic chair.

A Herman Miller Aeron chair ($500-$1,000) is a pleasure to sit it and helps your back relax–an incentive to commute, especially if all you have in your home office is the typical $100 piece of crap bought on sale at Staples.

3. Fire all the assh*les

A big reason people like working from home is the distance isolates them from the bullies, harassers, and whiners that make office work so unpleasant. An assh*le in the workplace isn’t a “bad apple” that can be ignored. He’s more like a dead mouse in the milk jug.

When a company gets rid of the assh*les (especially the bossholes), those who remain are more likely to become friends who enjoy working with and around each other. Humans love being part of a community… as long they aren’t forced to cope with jerks every day.

4. Short, focused meetings

A huge advantage of working from home is the ability to avoid boring meetings or, worst case, monitor those meeting whilst doing something else, like watching Netflix in a window with a single earpod. (On your camera, you’ll appear *really* interested in the meeting!)

Keeping meetings brief, infrequent, and to the point removes a major motivation to work at home. This isn’t brain science: no meetings without agendas, no PowerPoint (ever), start every meeting with everyone reading a document, etc.  Just do it.

5. Make naps OK

The beneficial effect of power naps, like greater creativity and better focus when working–is well-documented. What may be more important, though, is that one measure of success and happiness is the ability to take a nap whenever you want one.

Allowing and even encouraging people to take a mid-afternoon nap (like siesta time in Iberia) makes it easier for them to put in long hours during crunch time… and gives them one less reason to desire to work from home.

6. Liberal personal day policies

Let’s face it: the ability to run a quick errand or take mid-day doctor’s appointment is a huge advantage to working from home. It’s far easier to achieve some level of work/life balance if you have more control over how you use your time.

Giving employees the flexibility to take a few hours off when they feel the need gives them more control over their lives and therefore less likely to crave the freedom of working from home. 

7. Spectacularly good (free) coffee

Since I started with the big ticket item, I’ll end with the cheap and easy. In the US, at least, coffee is a big deal. Heck, many people spend upwards of $1,200 a year to drink a Starbucks every workday morning.

Since coffee vastly improves employee performance, it’s absolutely insane to provide crappy coffee (e.g. anything that comes pre-ground in a cartridge) when you can offer coffee that’s geometrically better than the stuff they can make at home.

I’ll end with a confession. If a company offered all of the above, even somebody like myself (who swore two decades ago I’d never work in an office again) would be tempted to start commuting again.

Amazon's HQ2–Is the Choice Already Made? Here Are Some Clues

Amazon’s year-long saga of choosing its second headquarters city–“HQ2“–should coming to an end soon. The company has promised it will make an announcement by the end of 2018, which means it has just over two months left. 

Today, The Wall Street Journal reported that Amazon officials paid return visits to several of the 20 finalists, including New York City, Chicago, and Newark, New Jersey. In New York City, the site under consideration appears to be in the up-and-coming area of Long Island City, in Queens. 

Of course, the inside sources who shared this information with the Journal emphasized that the choice has not been narrowed to these three locations and that Amazon will likely check in with some of the other contenders as well. The inside sources even noted that Amazon might (somewhat sadistically) carry out negotiations with several different cities until a deal is all but complete, letting them think they’re still in the running just to avoid tipping its hand too soon.

But many expert observers are predicting a different choice, and they have logic on their side. They also have the bookmakers on their side. As The New York Times observed this week, Northern Virginia seems to be the likeliest option. For one thing, Northern Virginia already hosts the largest and fastest-growing offices outside of Seattle for Amazon Web Services (AWS), the company’s highly successful cloud-hosting division. Then there’s the fact that Jeff Bezos has been talking with with local developer JBG Smith which owns large portions of a neighborhood called Crystal City, which just happens to be right across the Potomac from Washington, D.C., where Jeff Bezos just happens to be spending $12 million to renovate the $23 million mansion he bought two years ago. He also owns The Washington Post. Of course, D.C. itself is one of the 20 finalists as well, but given the congested traffic in the city already and the fact that it can only provide the space Amazon wants across multiple locations, most don’t see it as a truly serious contender.

The Seattle-based tech site GeekWire just provided another big clue to where HQ2 may wind up. Consider that Amazon has said it will open the first phase of HQ2–at about half a million square feet–sometime in 2019. That’s a lot of office space, which suggests Amazon will need people to occupy those offices. A lot of those people will be software engineers, and software engineers are notoriously in high demand and difficult to hire. A smart company, good at looking ahead–which Amazon unquestionably is–might be working on hiring those engineers right now. So GeekWire did something brilliantly simple: It looked at how many engineers Amazon appeared to be hiring in all 20 of the finalist locations (they all have some Amazon presence already). Northern Virginia had the most jobs to fill by a wide margin.

With that in mind, consider something very interesting about Amazon’s list of 20 finalists. Nineteen of them are either a specific city or (in the case of Montgomery County, Maryland) a specific county. Only in Northern Virginia’s case is a finalist identified as an entire portion of a state. As it turns out, among the 238 proposals the company received, at least two separate pitches came from Northern Virginia–a joint proposal by Fairfax and Loudoun Counties, and another joint proposal by Arlington and Alexandria Counties. If Amazon had treated those the same way it did all other proposals, it would have identified one pair of counties or the other as a finalist, or perhaps both pairs as two finalists. Does listing Northern Virginia in general as a finalist mean it’s considering even more proposals from other counties or towns? Or was it that Amazon didn’t want to zero in too quickly on the geography it already favored for HQ2?

There could be a simple explanation for Amazon’s Northern Virginia hiring spree. Back in 2017, the company announced it would build a new AWS campus in Northern Virginia, although it offered very few specifics beyond saying that new campus would add 1,500 jobs to the 7,000 already there. So maybe Amazon is building its big new offices in Northern Virginia at the same time as it is also building a much larger HQ2 in some completely different location. Or it could be that HQ2 is in Northern Virginia. And that it’s been hiding in plain sight for more than a year.

I Flew Delta Air Lines One Way and United Airlines Back. There Was 1 Huge Surprise

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

I tried to be fair.

I booked flights at more or less the same time, in the same class.

In the case of Delta Air Lines, it was its Delta One Class. In United’s case, it was Business Class.

How similar would they be? Would Delta confirm its reputation as the best and most comfortable of the big airlines? Would United take one look at me and decide I was an undesirable?

The route was San Francisco to New York and back again.

Delta One Means You’re All Alone.

I began with Delta and an early-morning flight.

Delta suffers in San Francisco from having to endure a dingy, desperate Terminal 1. It’s the terminal that time didn’t merely forget, but never liked at all.

At the first coffee place I stopped at, they serve only black coffee. They claimed not to even have milk.

I noticed also that the cabin crew seemed to arrive very shortly before passengers began boarding. Where had they been? Would they have time to prepare themselves?

Yet when I boarded the flight, I had a very pleasant surprise. 

My seat was by a window and there was no one seated next to me. Because there was no seat next to me.

In this Boeing 767 configuration, window seats are lone seats with a substantial area to the side for placing your laptop, books, magazines, knitting, emotional support squirrel or whatever you happen to enjoy on a plane.

This is, of course, wonderful if you’re flying alone, as I was. It’s less wonderful if you’re traveling with someone, as neither of you will be able to have a window seat. 

You’ll have to sit in the middle.

I’d pre-ordered breakfast, which was a simple, pleasant, cold affair with generous helpings of cheese and fruit.

The service, though, was efficient rather than warm. 

The entertainment system offered a large screen and the lie-flat bed was, well, who doesn’t want a lie-flat bed on a cross-country flight? This one was perfectly comfortable.

The flight, though, had one little drawback. 

There was a family of three. Dad was right behind me. Mom and highly entitled child were in the middle seats in his row.

Their form of communication involved shouting to each other across the aisle. Yes, they were from New York.

It’s easy to forget that the behavior of just one passenger can affect your flight. The only thing that saved me here was putting on my headphones and watching episode after episode of a wonderfully improbable and suitablly dramatic BBC series called The Split.

The flight was on time. Delta stuck to its promise of getting the bags out quickly. The whole thing was really quite pleasant.

United Airlines. Wait, What Just Happened?

There’d been a little hiccup the day before my flight back home.

United had emailed me to tell me my flight might be delayed by up to 30 hours. The email arrived the night before the flight.

So my biggest concern was whether the flight would be on time. 

Arriving at Newark at an ungodly hour, I was met by an extremely pleasant United Airlines check-in agent. Far more friendly, indeed, than the one I’d encountered at Delta. 

Yes, she said, the flight was on time. 

It did, indeed, board on schedule. Moreover, United’s terminal at Newark is curiously bright and airy place. I confess I rather liked being there. 

Yet United’s Business Class isn’t quite Delta One. On this Boeing 777, there were eight seats across the plane.

I was seated next to someone who, if he hadn’t been a decent human, might easily have taken over the whole armrest we shared.

He was a decently large human, you see and the armrest wasn’t too wide. 

The proximity was jarring when compared with Delta. 

The biggest surprise, though, was the service. The attitude of the Flight Attendants — one woman in particular — was a marked contrast to Delta’s slightly chilly efficiency. 

United’s Flight Attendants offered a rare warmth. It was as if they’d just come out of remedial training and had been infused with the need to project humanity. 

For first thing in the morning, their attitude came across as genuine. 

At one point, the female Flight Attendant saw that I was finished with my New York Times and said, with wit infused: “You haven’t done the crosswords, have you?”

Crosswords? Me? Lord, no. I have enough words in my regular life.

She was relieved, as she was one of those crossword people and really needed my paper. 

This was my biggest and most pleasant surprise.

From check-in to in-flight, United’s personnel exuded far greater warmth than Delta’s. It made the experience just that little bit more pleasant.

In customer service, it’s always the little things.

Uber Now Wants to Take Over Yet Another Massive Industry (And Nobody Even Noticed)

For a while there, you could probably get a meeting with a lot of potential investors by saying you had a plan to create “the Uber of X.”

We’re building the Uber of private jets. The Uber of trucking. The Uber of real estate.

In Chicago and Los Angeles, the company we once thought of as being in the transportation industry is testing a pilot program where it provides waiters, security guards, and other 1099 independent contractors–all on demand, to businesses.

With about 2 million drivers worldwide, Uber would be arguably be the world’s fourth-largest employer if its workers were true employees as opposed to independent contractors.

For context, the largest employer is the U.S. military; tied at No. 2 are the Chinese army and Walmart, each with about 3.2 million people on payroll.

So how much bigger can Uber get? Tough to say for sure, but it’s a safe bet it’s all about diversifying ahead of the company’s expected IPO next year.

At least Uber wait staff will be able to travel to their Uber events in an Uber car.

Here’s what else I’m reading today:

A giant data mining company might go public

Palantir Technologies Inc., is reportedly eyeing an initial public offering for the second half of 2019, with a possible $41 billion valuation. Cofounded by Peter Thiel in 2004, the data mining company is secretive and influential. Its analytics were credited with helping the government track down Osama bin Laden, and it also has massive contracts with intelligence, defense, and police agencies around the world. (Rob Copeland, The Wall Street Journal)

Here’s how online brands can go brick-and-mortar

It’s been a sad but not unexpected week for retail, with the news that the iconic brand Sears is in bankruptcy. The silver lining for commercial landlords (like malls) is that smaller stores can bring in six times the revenue of big, legacy anchor stores. Now several new startups are trying to find ways to get smaller, online brands into newly free physical spaces. (Michelle Cheng, Inc.com)

In this entire scenario, you don’t actually own anything

Rent the Runway this week announced a new partnership with WeWork. For now, it’s just a matter of installing drop-off boxes at 15 WeWork pilot locations. This means that women customers can rent clothes, likely have them delivered a rented city apartment, and then drop them off at a workspace that they (or their company) also rents. (Marc Bain, Quartz)

Taking on the ‘Pink Tax’

The shaving brand Harry’s launched a line of women’s products recently under the name Flamingo, with a radical pitch: It says it will charge men and women the same amount for similar products. Of course that’s only radical because of the fact that pricing for women’s products is often higher than for men’s, even when the products themselves are exactly the same. This “pink tax” leads women to wind up spending about $100,000 more over a lifetime than men do for similar products. (Sonia Thompson, Inc.com)

Panasonic’s dystopian new office product

They must have done some market research, but it’s hard to imagine what Panasonic thinks of the world with a new product called Wear Space, which is intended to help people stay focused at work, but really just looks like horse blinders made for humans. What’s more, this multibillion dollar company with 250,000 employees is running a crowdfunding campaign to bring the product to life. But they do seem serious. (James Vincent, Circuit Breaker

TSMC third-quarter profit slips 0.9 percent amid trade war uncertainty

TAIPEI (Reuters) – Taiwan Semiconductor Manufacturing Co Ltd (TSMC) (2330.TW), the world’s largest contract chipmaker, reported a 0.9 percent fall in third-quarter net profit, amid worries over trade tensions that could undermine global technology demand.

FILE PHOTO: A logo of Taiwan Semiconductor Manufacturing Co (TSMC) is seen at its headquarters in Hsinchu, Taiwan August 31, 2018. REUTERS/Tyrone Siu/File Photo

TSMC, whose clients include iPhone maker Apple Inc (AAPL.O), said July-September profit was T$89.07 billion ($2.9 billion). That compared with the T$89.0 billion average forecast drawn from 23 analysts, according to Refinitiv data.

Revenue rose 1.9 percent to $8.49 billion, compared with the company’s own estimate of $8.28 billion-$8.38 billion and the average $8.4 billion estimate of 25 analysts, according to Refinitiv data.

The results come weeks after rival GlobalFoundries announced that it would not compete in the latest generation of chip-making technology, a move analysts said will further consolidate TSMC’s technological leadership advantage.

And semiconductor industry bellwether ASML Holding NV (ASML.AS), a supplier to TSMC, posted better-than-expected third quarter results and gave a bullish outlook on Wednesday, helping assuage fears of slackening demand.

But an intensifying trade spat between the United States and China could also be a near-term risk for TSMC, whose semiconductors are widely used in electronics devices made in China.

KGI analyst Benjamin Chiang said in a report prior to the results in early October that near-term demand for products such as servers will be affected by the trade spat, but TSMC’s leading position in foundries could help it partially offset that.

Analysts said solid demand for Apple’s new iPhone models, estimated from contract electronics maker Foxconn’s revenues for September, will also support TSMC’s growth in the fourth quarter, a crucial year-end holiday season for smartphone makers.

Shares of TSMC, which rivals Intel Corp (INTC.O) as the world’s biggest semiconductor firm by market value, closed down 0.8 percent at T$236.50 on Thursday ahead of the financial results, compared with a 0.3 percent fall for the benchmark index .TWII.

($1 = 30.9330 Taiwan dollars)

Reporting By Jess Macy Yu and Yimou Lee; Editing by Muralikumar Anantharaman

Uber considers minority investors for self-driving car unit: FT

(Reuters) – Uber Technologies Inc [UBER.UL] is considering selling minority stakes in its costly self-driving car unit as the ride-hailing company tries to address rising cost pressures ahead of its initial public offering, the Financial Times reported on Wednesday.

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

Uber received interest from potential investors and could spin off its Advanced Technologies Group into a separate business unit with its own valuation and equity, FT reported, citing people familiar with the matter.

Uber will retain operational control and majority ownership of the unit, but external partners could share the cost of developing and eventually commercializing self-driving technology, the newspaper said.

Uber did not immediately respond to an email seeking comment.

Uber Chief Executive Officer Dara Khosrowshahi said last month there was no plan to sell the self-driving car research arm. The company will not sell its Advanced Technologies Group “at this time,” he told Reuters in an interview.

The unit will “absolutely” be a part of Uber after the initial public offering, but it will partner with other companies that are building self-driving technology, Khosrowshahi said.

Uber had suspended its self-driving car business after one of its autonomous SUVs killed a pedestrian in Tempe, Arizona, in March. Uber quickly removed its robot cars from the road, laid off hundreds of test drivers and shuttered operations in Arizona, its autonomous testing hub.

The company is planning to go public next year and could be valued at $120 billion, according to a Wall Street Journal report.

Uber and smaller rival Lyft’s initial public offerings, both expected in 2019, will test investor tolerance for money-losing technology unicorns.

Khosrowshahi said in September he was not concerned if Lyft went public first because he expected enough demand for both companies.

The company has been expanding its portfolio and seeking new avenues of growth, including food delivery services, even as it battles intense competition in its core business of ride hailing.

Reporting by Rishika Chatterjee in Bengaluru; Editing by Gopakumar Warrier

It Was Exactly the Donald Trump Product America Needed. Then the Unthinkable Happened

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

We all need our safe spaces.

For some, it might be bars or man caves. For others, it might be book clubs or yoga studios.

You want to be with people who make you feel warm and cuddly. Even if, for some, the only person who can do that is themselves.

It has an arresting motto: Make America Date Again. 

I hadn’t been aware that Americans had ceased dating. I merely thought they’d changed the phraseology to Netflix-and-Chilling. Or Bumping-and Grindring

DonaldDaters.com, though, wasn’t created for adult Donald Duck fans, too shy to confess their penchant. Instead, this is a Donald Trump-supporters dating site.

It’s an excellent business idea.

Our nauseatingly polarized ambience has caused schisms in families and personal relationships. Atmospheres in offices, too, have become strained.

DonaldDaters.com was, therefore, a perfectly safe space.

French security researcher Elliot Alderson looked at the app’s security systems and seems to have purloined the names, profile pictures and private messages of Trump supporters looking for love.

This is manifestly disturbing. 

Many people are concerned about confessing to their true political predilections. They worry that, in the wrong place and at the wrong time, these predilections will incite scorn. 

Love doesn’t require utter commonality. A little understanding, though, does help.

In our current times, there’s little to none.

Like gravitates to Like. Love, on the other hand, is a far more startling, magical essence, one that comes at you when you least expect. 

There’s little more magical than that random moment on Tinder when someone attractive actually swipes in your direction.

That’s surely all these Trump supporters aspired to. A place where they could audaciously hope to find change they could believe in, in the privacy of their own app.

I contacted DonaldDaters.com to ask for its reaction and will update, should I hear.

Privacy breaches are, like friction, raging and Kanye, everywhere these days.

Nothing is safe. Nothing is sacred. We’re all exposed. 

Now that we are, will anyone love us again?

TomTom reports better-than-expected third-quarter core earnings

AMSTERDAM (Reuters) – TomTom (TOM2.AS), the Dutch maker of digital mapping software, on Tuesday reported better-than-expected third-quarter core earnings of 62.4 million euros ($72.2 million), compared with 35.5 million euros a year earlier.

FILE PHOTO: TomTom navigation are seen in front of TomTom displayed logo in this illustration taken July 28, 2017. REUTERS/Dado Ruvic

Company-compiled consensus had seen earnings for the quarter before interest, taxes, depreciation and amortization (EBITDA) at 41 million euros.

The company raised its full-year revenue outlook to 850 million euros from 825 million euros, but said a contract announced in 2016 to provide location and navigation services to Volvo had been ended.

Reporting by Toby Sterling; Editing by Subhranshu Sahu

Anand Giridharadas on Saudi Money and Silicon Valley Hypocrisy

Silicon Valley’s deep financial ties to Saudi Arabia illustrate “the hypocrisy behind the ‘change the world’ fantasy” pushed by tech companies, said journalist Anand Giridharadas. Saudi backing for popular apps like Uber, Slack, and Wag offers proof that “the most idealistic companies on earth—in rhetoric—are very happy to take the dirtiest money on earth to grow and grow and grow,” he said.

Giridharadas, author of Winners Take All: The Elite Charade of Changing the Word, spoke at the WIRED25 festival on Sunday, on a panel about the trouble with techno-utopianism. He argued that the uproar around the disappearance of journalist Jamal Khashoggi, who was allegedly killed by Saudi agents last week, forces the tech industry to face the reality of the Saudis.

The relationship has worked well for the Saudis, Giridharadas said, who have financed popular apps as “a form of influence peddling” to distract people from things like the way oil contributes to climate change.

However, in light of the graphic details that have emerged about Khashoggi’s alleged murder, Silicon Valley can “no longer hide behind an idea that it’s another player in Davos in the Desert,” he said, referring to an upcoming festival in Riyadh arranged by the Saudi government. Several tech luminaries scheduled to speak at the summit have dropped out following Khashoggi’s disappearance and possible murder. But there’s been no reckoning with the billions the Saudi government has funneled into tech companies through its Public Investment Fund.

Anand Giridharadas

Amy Lombard

The panel was moderated by Virginia Heffernan, an author and contributor to WIRED, who quickly challenged Giridharadas on the idea that anyone came to Silicon Valley to associate themselves with repressive regimes. Heffernan offered her own brief experience with the Saudi government as an instance of good intentions. Years ago, Heffernan said she was paid about $24,000 for two speaking gigs in Saudi Arabia, even though the sessions were later cancelled. Perhaps receiving such a large sum, roughly a quarter of what she made while she had been on staff at the New York Times, colored her view of the regime. “I suddenly thought Saudi Arabia is not that bad,” she said.

“I think that that’s what the VCs think,” Heffernan said. “Suddenly the money’s flowing and yet we’re beholden to them.”

Giridharadas agreed. “The winners of our age are not bad people. They’re not evil people. They are there people motivated, as they ought to be under the system that we have, by the pursuit of profit. And that makes them very good at a bunch of things like building businesses and creating things and inventing things,” he said. But what his book Winners Take All explores is the way that pairing the pursuit of profit with the rhetoric of social change has led us to a place where we look to the same tech leaders funded by the Saudi to save the world.

“How did we decide to outsource the improvement of the human condition to those people?” Giridharadas asked. “The Saudi thing and your experience illustrate [that] it’s not bad people, but it’s just people who are ill-positioned to balance the voice of greed with the voice of the good.”

More Great WIRED Stories

Snapchat Adds Cat Lenses So You Can Put Filters On Your Cat

Snapchat has had its signature filters to make selfies pop a little extra for awhile, but now even pets can take advantage of the fun.

The messaging app just unveiled its new Cat Lenses feature. Cat Lenses allows you to put filters on your cat, which was previously reserved only for human faces, of course. You can even include yourself in the photo and use matching filters on both you and your cat. Snapchat announced the update on Twitter with the caption, “Lenses. For cool cats and their cool cats Try them meow.”

The update builds on the object recognition software added to the app last year, according to TechCrunch. That technology allowed you to identify or bring up a sales page for an object.

Cat Lenses are just the latest of Snapchat’s seemingly unending ideas. Earlier this week, Snap said it would bring original programming to its signature app including scripted shows and docuseries.

Google Fuchsia: Here's what the NSA knows about it

More Google

A while back, Google told us Fuchsia is not Linux. There have also been endless rumors, with little hard proof, it will eventually replace Android. Other than that, we don’t know much. But the National Security Agency (NSA), of all groups, has been checking into Fuchsia and revealed its findings at the recent North American Linux Security Summit in Vancouver, B.C.

Also: Pixel 3, Google Home Hub and Pixel Slate: Everything Google just announced CNET

Fuchsia is a modular operating system

James Carter and Stephen Smalley of the NSA showed off some Fuchsia secrets. Their focus was on security in Fuchsia and Zircon, its underlying micro-kernel.

Zircon started as a fork from the Little Kernel, the Android bootloader. It’s been heavily modified to become a micro-kernel operating system. It now includes a small set of userspace services, drivers, and libraries. These are used to boot the system, talk to hardware, load userspace processes and run them, and not much more. The kernel manages several different object types. Those that are directly accessible via system calls are C++ classes. Fuchsia is built on top of this.

It’s a modular operating system. This implies you’ll be able to use it on low-powered, minimal-resource devices all the way up to PCs. You simply add the object modules for more functionality.

It looks like Unix/Linux

Fuchsia also supports a subset of Portable Operating System Interface (POSIX) conventions.

This means, from a developer’s viewpoint, it looks like Unix/Linux. Fuchsia uses Google’s Flutter as its software development kit (SDK). With it, you can build Chrome OS and Android apps. Fuchsia also supports Apple’s Swift language .

Also: Google Home: A cheat sheet TechRepublic

Numerous security issues

Smalley and Carter’s job is to investigate operating systems and software for potential use in national security jobs. In short, to see if it’s easy to break. The NSA doesn’t want the government using fragile systems.

Carter also helped create SELinux, the most secure approach to running Linux. In checking out Zircon and Fuchsia, they shared their discoveries about the operating system.

First, they found that Zircon is the only part of Fuchsia that runs in supervisor mode. Everything else — drivers, filesystems, network, etc. — run in user mode. This means programs on Fuchsia will take a very different approach than they do on most operating systems.

While looking deeper, they also found numerous security issues. For example, Carter said, “You can acquire a handle to anything in that job or any child jobs,” and, naturally enough, “a leak of root job handle is fatal to security.”

Much work needs to be done

Fuchsia’s issues are big enough that, as of this summer, it was far from being ready for production. As Carter explained, Fuchsia is very much a “work in progress” system and “a lot of work needs to be done” before Fuchsia is secure.

Compared to Linux, the still-immature Fuchsia is far from secure.

But, Carter remarked, while “much work” needs to be done, it can be made secure, and he encourage open-source developer to help Google lock Fuchsia down.

Immature or not, Fuchsia might soon be running on the forthcoming Google Home Hub.

Also: Google Home Hub says no to smart-home cameras in your bedroom CNET

Is Fuchsia inside Google Home Hub?

Home Hub is a new Internet-of-Things (IoT) device. It’s essentially a Google Home with a 7-inch touchscreen. It includes a fabric-encased full-range speaker, a light sensor, and two far-field microphones. It doesn’t include a video camera. But, under the hood, it will sport a Amlogic S905D2 CPU instead of a Qualcomm SD624 SoC.

The good people at 9to5Google, who have been covering Fuchsia like hawks, put two and two together and started digging into the Google Home Hub’s source code. They found traces of Fuchsia. Now, this doesn’t mean it will arrive under your Christmas tree running Fuchsia, but it might!

Will you want to? No, based on what the NSA found, I’d say not. But, if you want to tinker with Fuchsia, it might be worth getting the new Google Home Hub.

Related stories:

Why Someone Put a Giant, Inflatable Bitcoin Rat on Wall Street, Facing the Federal Reserve Bank

Bitcoin was created in part out of a distrust of centralized authorities like the Federal Reserve. Now a symbol of the cryptocurrency’s growing threat to the Fed stands on Wall Street: a giant, inflatable rat covered in crypto code.

The bitcoin rat, first noted on Reddit, was created by Nelson Saiers, an artist and former hedge fund manager, according to Coindesk. The art installation, which appeared earlier this week and is temporary, is intended as much as a tribute to bitcoin’s creator Satoshi Nakamoto as much as it is a condemnation of the Fed and critics of cryptocurrencies.

“The sculpture’s supposed to kind of reflect the spirit of Satoshi and what he’s trying to do,” Saiers told Coindesk, who noted the rat image was inspired in part by another titan of traditional finance. “Warren Buffett called bitcoin ‘rat poison squared’ but if the Fed’s a rat, then maybe rat poison is a good thing,” he said.

Fed officials have made comments on cryptocurrencies that range from the critical to the conciliatory. Last December, former Fed Chair Janet Yellen called it a “highly speculative asset” that “doesn’t constitute legal tender.” In April, one Fed official claimed bitcoin couldn’t replace the dollar, while another conceded it’s “like regular currency” in that it has no intrinsic value.

Inflatable rats have become a staple of union protests during the past quarter century, so much so that a few companies specialize in renting them out to organizers. “Rat” is not only an epithet thrown at nonunion contractors, it symbolizes greedy, unscrupulous behavior ascribed to companies opposing unions.

“This is a very iconic image for protest,” Saiers told blockchain news site Breaker. “Somewhere in the heart of bitcoin is a bit of protest of big bank bailouts.”

That idea appeared to be lost on some Redditors, who claimed they spotted the bitcoin rat in the wilds of Wall Street but didn’t immediately see its significance. “I walked past it today,” one wrote. “Had no idea it was about Bitcoin.” “It’s cool, but people walking by won’t understand it,” said another. “I don’t even understand it. Needs a BTC logo or something.”

Soyuz Rocket Failure Jeopardizes Future ISS Missions

A NASA astronaut and a Russian cosmonaut were forced to make a dramatic landing after their ride to space, a Russian Soyuz rocket, failed minutes after takeoff. The incident caused the crew to initiate emergency abort procedures, landing a few hundred miles away from the launch site. Both Nick Hague and Alexey Ovchinin are safe.

The crew launched from the Baikonur Cosmodrome in Kazakhstan at 4:40 am ET and was scheduled to dock at the ISS six hours later. But about two minutes into the flight, the Soyuz suffered an unspecified failure and the onboard computer initiated the abort. “There was an issue with the booster from today’s launch,” a NASA spokesperson says. “The Soyuz capsule returned to Earth via a ballistic decent, which is a sharper angle of landing compared to normal.”

Dmitry Rogozin, head of Roscosmos (Russia’s space agency) has announced that all crew missions will be put on hold for the foreseeable future while the agency investigates the failure. The Russian state corporation, along with NASA are already analyzing data to determine what caused the anomaly. “NASA Administrator Jim Bridenstine and the NASA team are monitoring the situation carefully,” the space agency said in a statement following the mishap. “NASA is working closely with Roscosmos to ensure the safe return of the crew. Safety of the crew is the utmost priority for NASA. A thorough investigation into the cause of the incident will be conducted.”

This incident marks the first failure for the Russian human spaceflight program since 1983 when a Soyuz exploded on the launch pad. (The two Soviet cosmonauts on board, Vladimir Titov and Gennady Strekalov, were able to jettison to safety). But it’s also the second mishap in recent months for Russia’s trusty Soyuz. In August, the crew members onboard the space station discovered an air leak originating from one of the Soyuz capsules that was docked with the orbital outpost. The leak was eventually traced to a tiny hole in the Soyuz’s orbital module. Crew members were able to repair the ship and no one was in any danger, however, the leak has been a source of controversy as officials work to determine how the hole was made. Russian media outlets have tried to suggest on-orbit sabotage, implying that one of the crew members on board ISS intentionally drilled the hole. NASA has refuted those claims and Bridenstine is currently in Russia for the launch as well as to meet with Russian space officials.

Currently, the Russian Soyuz spacecraft is the only vehicle capable of ferrying crews to the ISS. In 2011, NASA’s fleet of space shuttles was retired, leaving the agency (and others around the world) dependent upon Russia for access to space. Commercial companies like SpaceX and Boeing are building NASA’s next generation space taxis, but they are not yet ready to fly. (The first flights of SpaceX’s Crew Dragon and Boeing’s Starliner crew capsules are expected to take off next year).

This failure raises serious questions about the future of the International Space Station, as the Soyuz spacecraft (and rocket) are the only means by which crews can reach it. It is not clear how long the Soyuz vehicle will be grounded, or how long the current crew—American astronaut Serena Auñón-Chancellor, German Commander Alexander Gerst, and Russian cosmonaut Sergey Prokopyev— can remain in orbit. They’re scheduled to come home on December 13, although it’s likely their mission will be extended.

Their scheduled replacements (cosmonaut Oleg Kononenko, Canadian astronaut David Saint-Jacques and NASA astronaut Anne McClain) were slated to launch on Dec. 20, but as of now their flight is uncertain pending the outcome of this investigation. NASA is still working out the plans going forward concerning both the crew and space station. While the agency can run the space station from the ground, agency officials prefer to have crew onboard, resulting in an extended stay in space for Auñón-Chancellor, Gerst, and Prokopyev. Supplies on board are ample so the crew is in good shape in terms of consumables.

Transportation, however, may be a bit trickier. Each Soyuz spacecraft is only certified to stay docked to the space station for approximately 200 days. With their lifeboat’s shelf life set to expire in January 2019, the crew could either be stranded or forced to abandon the space station. Both the rocket and the spacecraft to be used for the next launch are nearly ready to fly, however, so it’s entirely possible that the next Soyuz could launch without people on board, serving as an extra lifeboat to fetch the current crew.

More Great WIRED Stories

Microsoft's patent move: Giant leap forward or business as usual?

When Microsoft surprised everyone by releasing its entire 60,000 patent portfolio to the open-source community, someone asked me if I thought the move would finally convince everyone Microsoft is truly an open-source friendly company.

“Oh no,” I replied.

Must read: Microsoft open-sources its patent portfolio

Sure enough, some folks are still convinced that Microsoft is intending to “embrace, extend, and extinguish” open source. Many others believe, however, that Microsoft has truly evolved and has become an open-source company.

Is it a trap?

On the purely positive side, we have Jim Zemlin, The Linux Foundation‘s executive director:

“We were thrilled to welcome Microsoft as a platinum member of the Linux Foundation in 2016 and we are absolutely delighted to see their continuing evolution into a full-fledged supporter of the entire Linux ecosystem and open-source community.”

Patrick McBride, Red Hat‘s senior director of patents added, “What a milestone moment for open source and OIN! Microsoft is joining a unique shared effort that Red Hat has helped lead to bring patent peace to the Linux community. Developers and customers will be the beneficiaries. Now is a perfect time for others to join as well.”

On the haters’ side, there is Florian Mueller, editor of the FOSSPatents blog, who thinks:

‘Microsoft loves Linux’ is a lie. And now Microsoft wants us to think that Microsoft battles patent trolls. This too is a Microsoft lie.”

He also said joining the OIN, which Mueller considers a pro-patent IBM front group, “imposes no actual new constraints on them.” This is just a cynical PR move from Mueller’s viewpoint.

Also: Open source: Why it’s time to be more open

Other anti-Microsoft die-hards on Reddit, Twitter, and other social networks also insist that this new Microsoft is the same as the old Microsoft. Or, as one person, harking back to Star Wars, remarked: “It’s a trap!”

Microsoft finally gets open source

At Microsoft, the company insists that it has been changing its open-source ways for years. In a recent Open Source Virtual Conference keynote, John Gossman, a distinguished Microsoft Azure team engineer, described former Microsoft CEO Steve Ballmer’s 2001 comment that Linux was “a cancer” as being ” a fundamental misunderstanding of open source.”

Also: Open-source licensing war: Commons Clause

With Satya Nadella as CEO, Microsoft finally gets open source.

What the patent experts are saying…

But it’s not just Microsoft staffers who are saying Microsoft’s attitude toward open-source has evolved. Andrew “Andy” Updegrove, patent expert and founding partner at the Boston-area law-firm Gesmer Updegrove, said:

“While this may seem surprising to those who have not followed Microsoft’s evolution in recent years, it is in fact more a formal recognition of where they, and the realities of the IT environment are today.”

Daniel Ravicher, executive director of the Public Patent Foundation (PUBPAT), whose work was once used by Ballmer against Linux, wasn’t surprised by this move:

“With the

acquisition of GitHub and other things the company is done they’ve really changed their tune in the past 15 years. They also hired as an in-house attorney a former staff attorney of the Software Freedom Law Center (SFLC). It may be like the Korean War that doesn’t have a formal end date, but I think now Microsoft and open-source software are on the same page and working together.”

Prominent open-source attorney and Columbia University law professor, Eben Moglen, also sees this as a move towards patent peace. Moglen remarked:

“Microsoft’s decision signals the transition from the period of patent war to the making of industry-wide patent peace for free and open-source (FOSS) software. Microsoft’s participation in the OIN licensing structure will be the tent pole for the extension of OIN’s big tent across the world of IT. For SFLC and other parties whose job it is to secure the interests of individual FOSS programmers and their non-profit projects, this is also the moment of opportunity to ensure their safety and respect for their mode of development across the entire industry, including by companies who continue to engage in patenting their own R&D.”

Also: Open source is 20: How it changed programming

Why is Microsoft doing this when it makes money from patents?

Scott Guthrie, Microsoft’s executive vice president of the cloud and enterprise group, described the decision as a “fundamental philosophical change” — resulting from an understanding that open-source is inherently more valuable to Microsoft than patent profits.

John Ferrell, chair at the Silicon Valley technology law firm Carr & Ferrell, thinks there may be a more pragmatic reason behind Microsoft’s move:

“Microsoft’s gesture to donate 60,000 patents to the OIN is indeed a philosophical change for this giant, but the change likely is rooted in the realization that the Company is much better suited to fight in the marketplace rather than to fight in the courtroom. Virtually every patent-owning company that gets into a patent battle with Microsoft is fighting from a position of asymmetrical advantage. Where damages are based on a percent of sales, Microsoft almost always has more to lose. Especially companies that leverage open-source software, these companies tend to be small and patent infringement for Microsoft is difficult and expensive to police.”

Ferrell, the litigator, continued:

“From a defensive standpoint, small companies with one or two patents arguably infringed by Microsoft are especially annoying and potentially damaging to this goliath. Microsoft is a huge target and is constantly barraged with patent lawsuits by small and large companies trying to gain a foothold or monetize their development efforts at the expense of Microsoft’s deep pockets.”

An additional reason for Microsoft’s change of heart, according to Rafael Laguna, CEO of Open-Xchange, an open-source network services company, is:

“Microsoft boss Nadella wants to buy new credit in the open-source industry, distancing the company from the business model and practises of his predecessors, i.e. Gates’ and Ballmer’s sincere dislike of open source developers” Nadella, however, “recognizes that Microsoft’s future revenue will come from providing cloud services, rather than selling operating system licenses. And for cloud services, Linux is now the operating system of choice – underpinned by the fact that already

half of the Microsoft Azure services are based on Linux today.”

Also: Open-source vulnerabilities which will not die: Who is to blame?

Will this bring peace to our time?

Bradley Kuhn, president of the Software Freedom Conservancy (SFC), appreciates Microsoft joining OIN patent non-aggression pact, noting: “Perhaps it will bring peace in our time regarding Microsoft’s historical patent aggression.”

Microsoft needs to do more, Kuhn added, “We call on Microsoft to make this just the beginning of their efforts to stop their patent aggression efforts against the software freedom community.”

Specifically, he said, “We now ask Microsoft, as a sign of good faith and to confirm its intention to end all patent aggression against Linux and its users, to now submit to upstream the exfat code themselves under GPLv2-or-later.”

Exfat, a file system, was open-sourced by Samsung with the SFC’s help in 2013. But Kuhn said, “Microsoft has not included any patents they might hold on exfat into the patent non-aggression pact.”

In general, it should be noticed, when asked about FAT-related patents, Erich Andersen, Microsoft’s corporate vice president and chief intellectual property (IP) counsel, has said:

“We’re licensing all patents we own that read on the ‘Linux system.'” And, in addition, all of Microsoft’s 60,000 granted patents relating to the Linux system are covered by the OIN’s requirements.

In a subsequent e-mail Kuhn noted, “Ultimately, the OIN license agreement is quite narrowly confined to the ‘ OIN Linux System Definition‘ and therefore doesn’t assure that patent aggression must stop immediately; rather, Microsoft is only required to stop for those patents that read on technologies in the OIN Linux System Definition.”

So, for example, BSD specific code, wouldn’t necessarily be covered.

Therefore, Kuhn suggested:

“Expanding the ‘Linux System Definition’ would be a useful way to solve this problem through OIN.”

Historically, OIN has been expanding the Linux System Definition.

Kuhn concluded:

“More importantly, Microsoft can help solve it unilaterally by submitting patches that implement technology from their patents into upstream projects that are already contained in the Linux System Definition. I suggest they start with upstreaming exfat in Linux themselves.

Also: Hollywood goes open source


So, while there are a few people who think Microsoft is up to no good, the experts agree that this is a laudable move by Microsoft to show its open-source bona fides. That’s not to say some still want to see more proof of Microsoft’s intentions, but overall, people agree this is a major step forward for Microsoft, Linux, and open-source intellectual property law regulation.

Related stories:

5 Easy Microsoft Excel Tips That Can Save You 10 Hours a Week

What are your thoughts on Microsoft Excel? In most cases, people would say they either love it, hate it, or are too intimidated to delve into it.

Thanks to the influx of more user-friendly cross-platform applications for data storage, many would also argue that Excel has become far too dated for regular use. However, Excel continues to dominate the business world.

It’s often used for complex analyses, in addition to forecasting models and storing vast amounts of data into a single file. And while there are plenty of applications designed to replace spreadsheets, they often fall short on different arenas, which leaves you with limited options. As simplistic as it may appear, Excel usually offers you more usability and data control.

With a little bit of practice, it’s perfectly possible for most anyone to squeeze the most out of Excel. It’s come a long way since the 80’s. These five tips can be used personally and professionally, and some of them don’t even call for endless rows of digits:

1. Create a custom calculator.

The capabilities of calculations in Excel go far beyond simply adding subtotals to view the grand total. If you find yourself running the same complex calculations over and over again, let Excel deal with it so you can toss your old calculator:

  1. Open a new file, and label fields for what interests you. This can include rate, quarterly periods, present/future value, and payments.

  2. Select the cell you want the result of each of the labeled fields to go to. Click Insert, select Function to open the Insert Function window. Then select “Financial” to view all the functions in the financial calculation.

  3. Double click the labeled field of choice, which will open a function arguments window. Fill in the field numbers as how you labeled them. Click OK and you’re done with the calculator for that label.

  4. Continue with all other labels.

2. Make use of accounting functions.

Excel is fully equipped for loan calculators, financial reports, expense tracking, forecasts, and budget plans. Spare meeting with the accountant and view metrics like revenue, operating profit, interest, depreciation, net profit, and quarterly trends at a glance. Pivot tables can help you create dynamic summary reports from raw data very easily, all in a drag and drop interface:

  1. If you’re doing this on a new spreadsheet, click on cell 1A, then click on the “Number” tab at the top of the page. Under “Format Cells,” select the “Accounting” option. Unless you wish to make additional adjustments, select “OK.” You can deselect showing the currency symbol if you wish at this point.

  2. You can apply this format to a range of cells by selecting the range of cells with a format painter tool.

  3. Built-in formulas that can be applied and tweaked to customize include cash flow and asset depreciation. After applying the formulas, continue creating other formulas that branch off into new column headings, such as date, balance, and amount.

3. Transform numbers into charts and graphs.

All it takes is a few clicks to transform rows and columns of numerical data into charts and graphs, which are far more visual and digestible. It’s a major time-saver for data analysis:

  1. Enter your data into the spreadsheet. For example, A1 could say “Date” and B1 could say “Number of Signups.” A2 and B2 downwards would have the data as it corresponds with one another.

  2. When done, select the top left cell, then while pressing “Shift,” click on the bottom right cell. This will highlight all the data.

  3. Click the “Insert” tab up top, select “Chart” and “Recommended Charts.”

  4. Click a chart option, or click on “All Charts” for additional options.

4. Map out daily calendars and schedules.

You already have software for daily calendars and schedules. Sure. But why turn to many individual pieces of software when one can handle it all?

Use Excel to map out a content calendar for your website and blog. Use it to maintain a PTO schedule of all your employees. Color-coordinate for different categories, so you can get a quick grasp of areas that may need more focus. It’ll help you monitor progress more efficiently:

  1. Conduct a search on schedule templates. This varies greatly depending on which version of Excel you’re using.

  2. Preview the schedule templates, and download the most suitable one to open into a new worksheet.

  3. Alter text/colors as needed and desired, and get right into inputting the data!

5. Fetch live data from the internet.

Excel can automatically update figures–stock prices, FX rates, results of sports games, flight data of airports, and any info in a shared database–from a live data source. It sure beats tedious manual entry on a daily basis.

Note that this functionality, which is called “Get & Transform/Power Query” isn’t available in the 2007 version. Only 2010 and later:

  1. If you’re using 2010, download and install the Power Query Add-In. This is already built into 2013 and later.

  2. Click “Power Query,” (or “Data” > “New Query” > “From Other Sources” > “From Web”)

  3. In the “From Web” box, enter the URL. Provide user credential info if needed from the website itself. Click “OK.”

  4. Power Query will scan the web page, and load the data in the “Navigator Pane” under the “Table View.”

  5. Select the table you want to connect to by clicking it from the list.

  6. Click “Load,” and the web data will be seen on your worksheet.

Exclusive: EU privacy chief expects first round of fines under new law by year-end

BRUSSELS (Reuters) – Regulators are set to exercise their new powers by handing out fines and even temporary bans on companies that breach a new EU privacy law, with the first round of sanctions expected by the end of the year, the bloc’s privacy chief said.

FILE PHOTO: An illuminated Google logo is seen inside an office building in Zurich September 5, 2018. REUTERS/Arnd WIegmann/File Photo

The European Union General Data Protection Regulation (GDPR), heralded as the biggest shake-up of data privacy laws in more than two decades, came into force on May 25.

The new rules, designed for the digital age, allow consumers to better control their personal data and give regulators the power to impose fines of up to 4 percent of global revenue or 20 million euros ($23 million), whichever is higher, for violations.

Enforcers have since then been deluged by complaints about violations and queries for clarification, with France and Italy alone reporting a 53 percent jump in complaints from last year, European Data Protection Supervisor Giovanni Buttarelli said.

“I expect first GDPR fines for some cases by the end of the year. Not necessarily fines but also decisions to admonish the controllers, to impose a preliminary ban, a temporary ban or to give them an ultimatum,” Buttarelli told Reuters in an interview.

FILE PHOTO: The Facebook logo is shown at Facebook headquarters in Palo Alto, California, U.S., May 26, 2010. REUTERS/Robert Galbraith/File Photo

Data controllers, which could include social networks, search engines and online retailers, collect and process personal data while a data processor only processes the data on behalf of the controllers.

Fines are levied by national privacy regulators in the various EU member states. While Buttarelli does not personally impose fines, he coordinates the work of privacy agencies across the bloc.

Fines could be imposed on any company that operates in Europe, no matter where it is headquartered.

“The fine is relevant for the company and important for the public opinion, for consumer trust. But from an administrative viewpoint, this is just one element of the global enforcement,” Buttarelli said.

He said the sanctions will be imposed in many EU countries and will hit many companies and public administrations but declined to provide details because investigations were still ongoing.

Complaints filed against Google (GOOGL.O), Facebook (FB.O), Instagram and WhatsApp by Austrian data privacy activist Max Schrems on the same day the GDPR rules were implemented are not expected to be among these cases as they are still at a preliminary stage, he said.

Buttarelli also urged EU countries and lawmakers to bridge their differences on overhauling the e-privacy directive which aims to create a level playing field between telecoms operators and online messaging and email services such as WhatsApp and Microsoft (MSFT.O) subsidiary Skype.

Hailed by privacy activists but criticized by tech companies and some EU countries as being too restrictive, the e-privacy proposal aims to extend tough telecoms privacy rules to the tech giants.

“E-privacy is simply indispensable. It is essential, it is a missing piece in the jigsaw of data protection and privacy. It would be really a dereliction of duty if the EU cannot update soon before the (European Parliament) elections its rules on confidentiality of communication,” Buttarelli said.

Parliament elections are in May 2019.

“I think there is a margin of maneuver for sustainable compromise although there are points which cannot be negotiated. For instance the scope of application of e-privacy to over-the-top, beyond the telcos, the tech giants,” he said.

Over-the-top refers to content delivered via the internet. It usually applies to companies like Google and Skype which offer services similar to telcos but are not telcos.

Consumer lobbying group BEUC said EU countries should stop dragging their feet.

“This law would be a much needed upgrade of current rules to safeguard consumers’ privacy when they go on the internet or use mobile apps as well as protect the confidentiality of their online communication,” BEUC spokesman Johannes Kleis said.

Reporting by Foo Yun Chee; Editing by Adrian Croft

Google unveils new Pixel phone, adds tablet in Apple challenge

SAN FRANCISCO (Reuters) – Alphabet Inc’s Google unveiled on Tuesday the third edition of its Pixel smartphone, a Google Home smart speaker with a display and its first tablet computer, as it makes a come-from-behind push into hardware.

The Google Pixel 3 third generation smartphones are seen on display after a news conference in Manhattan, New York, U.S., October 9, 2018. REUTERS/Shannon Stapleton

The company’s Android software has gone from being an also-ran to the brains of most of the world’s smartphones, and Google topped Amazon.com Inc in smart speaker sales in recent quarters.

Pixel phones, though, have been a tougher sell, garnering less than 1 percent of the global market by shipments in Google’s first two years of trying, according to research firm Strategy Analytics, and launching with glitches.

The Pixel 3, priced at $799, and larger sibling Pixel 3 XL, priced at $899, mark Google’s latest entries into a phone lineup it hopes will someday be as popular as Apple Inc’s iPhone.

The new Pixel Slate tablet runs Google’s beefier Chrome OS laptop operating system rather than Android and is priced at $599, putting it in competition with Apple’s iPad Pro tablet series.

Shares of Alphabet barely moved on the release. Financial analysts said it is difficult evaluate Google’s hardware business as it is overshadowed by profits from search ads.

Google branched into hardware three years ago so that, like Apple, it could have full control of the performance of its applications and the revenue they generate. Other phone makers sometimes crowd out Google’s apps with their own or take a share of ad revenue.

The Google Pixel 3 third generation smartphones are seen on display after a news conference in Manhattan, New York, U.S., October 9, 2018. REUTERS/Shannon Stapleton

Expanding geographic distribution is likely to boost Pixel’s fortunes. The Pixel 3 will launch in 10 countries, up from six for the Pixel 2 a year ago. New additions include France, Ireland, Japan and Taiwan.

Also helpful could be a new artificial intelligence tool sure to generate buzz among consumers. The software, launching in the United States only, answers phone calls, requests information about the nature of the call and shares it as text with the recipient.

“We’ve built the first phone that can answer the phone,” Rick Osterloh, Google’s senior vice president for hardware, told media on Tuesday.

Google shipped 2.53 million Pixel 2 and 2 XL devices through the nine months ended June 30, Strategy Analytics said. The first Pixel devices hit 2.4 million shipments in the nine months ended June 30, 2017, the firm said.

Limited adoption has reflected Google’s hesitancy to go as wide and big in distributing and marketing the Pixel as Apple, which launched its last two iPhone line-ups in about 50 countries.

Going from a small experiment to a polished product that works in various languages and is backed by large sales, support and technical teams has been part of Google’s challenge.

Last year’s Pixel 2 arrived with bugs that prompted user complaints about unwanted noises during calls, a crashing camera app and an unexpected screen tint. Google doubled warranties to two years in response.

Google Assistant, the signature virtual helper feature on the Pixel, was available in six languages a year ago and now supports 16.

Slideshow (12 Images)

In turn, Google hosted 10 unveiling events across the world on Tuesday, including in New York, London, Paris, Tokyo and Singapore, spokesman Kay Oberbeck said.

Still, the Pixel 3 could see limited uptake in the United States as Google again signed an exclusive distribution deal with wireless carrier Verizon Communications Inc that means the device will get little marketing from other carriers.

Google said it would augment distribution by opening on Oct. 18 two temporary stores in popular neighborhoods of Chicago and New York and putting up displays at U.S. retailers B8ta and Goop.

Google’s new smart speaker, which has a display to show visual responses to voice commands, mostly matches offerings from Amazon.com Inc and Facebook Inc.

But unlike its competitors, Google said its Home Hub, priced at $149, does not have a video conferencing camera.

The nod to privacy concerns comes as Google and other big U.S. tech companies try to bounce back from recent data breach scandals.

Amazon shipped 21.5 million smart speakers, including those with displays, in the year ended June 30, compared with 18.3 million for Google, according to research firm Canalys.

Google said in a blog post on Tuesday that it recently delivered some Google Home speakers within 10 minutes of ordering using drones from Alphabet’s Project Wing.

Shares of speaker maker Sonos Inc were down 5.6 percent on Tuesday.

Reporting by Paresh Dave and Arjun Panchadar; Editing by Leslie Adler, Peter Henderson and Meredith Mazzilli

U.K. High Court Blocks Class Action Against Google Over User Privacy

A class action lawsuit brought against Google with the goal of collecting £3 billion ($3.5 billion) in compensation was blocked in the U.K. high court on Monday.

Google was accused of bypassing default iPhone privacy settings between August 2011 and February 2012, allowing the company to collect data from people in the U.K. who used the Safari browser, Wired reported. The lawsuit was brought to the High Court by a group called, Google You Owe Us led by former Which? director Richard Lloyd and represents more than 4 million iPhone users.

High court judge, Mr. Justice Warby in London announced the decision to block the lawsuit on Monday. In his ruling, he said, “it is arguable that Google’s alleged role in the collection, collation, and use of data obtained via the ‘Safari workaround’ was wrongful, and a breach of duty,” but added that Google did not cause damage to users, according to the Guardian.

The information collected by Google was allegedly used for its DoubleClick service, a tool that allows advertisers to use personal data to target people based on race, sexuality, political leanings, and social class, the Financial Times reported. The court in May heard in a hearing from Lloyd’s lawyers that the information was later used to create groups like “football lovers.” They added that Google also was able to collect information about a user’s financial situation, shopping habits, and geographical location.

Lloyd called the High Court’s decision “extremely disappointing” and added that it leaves people without any avenues for seeking justice. “Closing this route to redress puts consumers in the UK at risk and sends a signal to the world’s largest tech companies that they can continue to get away with treating our information irresponsibly,” Lloyd said in a statement reported by the Guardian.

Google, on the other hand, dismissed the claims. “The privacy and security of our users is extremely important to us. This claim is without merit, and we’re pleased the court has dismissed it.”

Google+ Will Shut Down After Security Breach Exposed User Data to Outside Developers, Report Says

A Google+ security breach gave outside developers access to the private data of hundreds of thousands of the social network’s users between 2015 and March 2018, according to a Wall Street Journal report. Google neglected to report the breach to the public, allegedly out of fear that the company would face regulations and damage to its reputation, according to sources and documents obtained by the Wall Street Journal.

In a memo cited by the Wall Street Journal, Google’s legal and policy staff warned against disclosing the breach, fearing it would draw comparisons to Facebook’s mishandling of user data, when more than 50 million Facebook users had their personal information leaked to the data firm Cambridge Analytica.

The information exposed in the Google+ data breach included full names, email addresses, birth dates, gender, profile photos, places lived, occupation, and relationship status.

Google has recently been at the center of a number of privacy breaches. The company was the target of a massive class action lawsuit in the U.K. after 4 million users had their personal data collected and allegedly used for targeted advertising. The lawsuit was blocked in the High Court on Monday.

The Google+ data breach was discovered in March of this year during an audit of the company’s APIs, conducted by a privacy task force codenamed Project Strobe. A bug in the API could have allowed outside developers to access the data of 496,951 users who had only opted to share their private profile data with friends.

Google is expected to announce the breach on Monday, as well as its plans shut down Google+, according to the Wall Street Journal.

How To Protect Your Portfolio In A Bear Market

Economic uncertainty in emerging markets and steeply rising interest rates in the U.S. created plenty of concerns among global investors in the past week. Nobody knows for certain how these factors will affect stock markets in the coming days, but the fact remains that the stock market is inherently volatile and unpredictable.

A bear market is coming sooner or later, that’s just the way financial markets work, and investors need to be prepared for all kinds of scenarios.

Even the smartest professionals with massive amounts of intellectual and financial resources fail miserably in their attempts to forecast bull and bear markets.

As opposed to making market predictions, relying on objectively quantified variables with a solid track record of performance is a far sounder approach to protecting your capital through the ups and downs in the markets.

The following paragraphs will introduce 3 different quantitative systems based on trend following, earnings expectations, and relative strength. None of these systems is perfect or infallible, but the evidence shows that they can be remarkably effective at providing market protection through all kinds of environments.

Importantly, these systems are entirely rules-based, and they don’t involve any kind of market forecast or prediction whatsoever. The main idea is that you can reduce your downside risk in bear markets by relying on cold-hard data and observable indicators.

The Trend Is Your Friend

One of the most popular sayings in the market is “the trend is your friend”. Even if that is a cliché, that doesn’t make it any less true. There is plenty of statistical evidence proving that investors can optimize the risk vs. return equation in their portfolio and avoid big drawdowns by following the main trends in asset prices.

The following system is remarkably simple, yet effective. The market is considered to be in an uptrend if the slope in the 200-day moving average in the SPDR S&P 500 (SPY) is positive in the past 10 days. Conversely, if the slope in the 200-day moving average is negative in the index-tracking ETF over the past 10 days, then markets are considered to be in a downtrend.

The system only buys the SPDR S&P 500 when it’s in an uptrend, and it remains in cash when the ETF is in a downtrend. The system makes any buy or sell decisions every 4 weeks, so it doesn’t require a lot of work, and trading expenses should be negligible.

how to protect your portfolio in a bear market

Data from S&P Global via Portfolio123

Since January of 1999, this system produced an annual return of 8.55% versus an annual return of 6.35% for a buy and hold strategy in the market-tracking ETF over the same period.

In other words, a $100,000 position invested in the trend following system in January of 1999 would have a current market value of $505,100 and the same amount of capital allocated to a buy and hold position in the SPDR S&P 500 would be worth $337,500.

Even more important, the maximum drawdown for the trend following system was 20.57% during the backest period versus a much larger drawdown of 55.42% for the buy and hold strategy.

The backest is indicating that this remarkably simple trend following system produces both higher returns and much smaller downside risk than a buy and hold strategy in the SPDR S&P 500 ETF.

Market Timing Based On Earnings Expectations

There is an almost infinite amount of fundamental variables to consider when making investment decisions, but earnings are clearly one of the most important return drivers for stocks. At the end of the day, a stock is simply a share in an ownership of a business, so earnings have a huge impact on stock prices.

This system basically buys and sells the SPDR S&P 500 Trust ETF based on earnings estimates for companies in the S&P 500 index. Since earnings estimates can be quite volatile, the system uses moving averages in earnings expectations to smooth the data and evaluate the main trends in those estimates.

Specifically: When the 5-day moving average of earnings estimates is above the 20-day moving average, meaning that earnings estimates are on the rise, the system is fully invested in the SPDR S&P 500 Trust ETF. On the other hand, when the 5-day moving average is below the 20-day moving average in earnings estimates, the system is completely allocated to cash.

Data from S&P Global via Portfolio123

Since January of 1999, this system gained nearly 429.75%, while the buy and hold strategy in the ETF gained a much smaller 237.52%. Even better, the maximum drawdown for the system was around 25.44% during the backtest period, while a buy and hold strategy in the SPDR S&P 500 Trust ETF had a maximum drawdown of 55.42%.

Earnings expectations have a big impact on stock prices, and the data indicates that investors have a lot to win in terms of increasing returns and reducing drawdowns by incorporating earnings expectations into their toolbox for investing decisions.

Asset Class Rotation Based On Relative Strength

Trend following is about evaluating the main price trends in an asset, so you are looking at the current price versus previous price levels for such asset in particular.

On the other hand, relative strength is about comparing different asset classes. Even if both stocks and bonds are in uptrends, we can compare the two asset classes in terms of their risk-adjusted returns to evaluate which one has superior relative strength.

Combining trend following and relative strength means investing only in assets that are rising in price over the long term, and also picking only the strongest names among the ones that are rising in price.

The following system rotates between 9 ETFs that represent some key asset classes.

  • SPDR S&P 500 for big stocks in the U.S.
  • iShares Russell 2000 ETF (IWM) for small U.S. stocks.
  • iShares MSCI EAFE ETF (EFA) for international stocks in developed markets.
  • iShares MSCI Emerging Markets ETF (EEM) for international stocks in emerging markets.
  • Invesco DB Commodity Index Tracking ETF (DBC) for a basket of commodities.
  • SPDR Gold Trust ETF (GLD) for gold.
  • Vanguard Real Estate ETF (VNQ) for REITs.
  • iShares 20+ Year Treasury Bond ETF (TLT) for long-term Treasury bonds.
  • iShares 1-3 Year Treasury Bond ETF (SHY) for short-term Treasury bonds.

In order to be eligible, an ETF has to be in an uptrend, meaning that the current market price is above the 10-month moving average. If no ETF is in an uptrend, the system goes for the safest asset in the group, which is the iShares 1-3 Year Treasury Bond ETF.

Among the ETFs that are in an uptrend, the system buys the top 3 with the highest relative strength. Relative strength is measured by a ranking system that considers volatility-adjusted returns over 3 and 6 months.

Since 2007 the system gained a cumulative 325.2%, more than double the 136.5% generated by a buy and hold strategy in SPDR S&P 500. The maximum drawdown for the system is around 14% versus more than 55% for a buy and hold position in the ETF that tracks the S&P 500 index.

Source: ETFreplay.

These three systems show how different quantitative methods can provide downside protection in a bear market without making any kind of market prediction or speculation whatsoever.

Even if you don’t replicate these kinds of systems, the information that these systems provide can be enormously valuable at analyzing market conditions and adjusting your portfolio risk level accordingly. At the end of the day, information is power, and the information provided by these kinds of quantitative systems can make a big impact on your capital over the long term.

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.

15 Columbus Day Sales on Tech We Love: Instant Pot, Apple, Vizio, Amazon Echo

Whether you observe Columbus Day or Indigenous People’s Day, this is a weekend with a few extra tech and gaming sales. We’ve highlighted some discounts for tech we really like. We’ve tested many of these items, and the rest look like they’re well worth your hard-earned money.

New this Week

  • New Fire TV Stick 4K for $50 (Was $70). We haven’t yet tested the latest Fire TV, but it doesn’t appear to pack a lot of surprises. It should still work well for Amazon content as well as other streaming apps. This model has a voice remote for Alexa and is significantly cheaper (and trimmer) than last year’s 4K Fire TV. It will likely show up in our Best TV Streaming Devices sometime soon.

  • Super Mario Party for $60. The latest Mario Party title is getting good reviews, and has tons minigames that are as unique and fun as the Switch itself. It’s a terrific way to kill time with some friends.

  • 6 Months of Kindle Unlimited for $30 (Was $60). Kindle Unlimited gives you access to more than a million books on the Kindle app or a Kindle ebook reader at no extra charge, with some magazines thrown in, too. This discount lasts until Oct. 20.

  • Marvel Thanos Gauntlet Mood Lamp for $40. It won’t give you the ability to erase half of the sentient beings in the universe, but this Infinity Gauntlet lamp is colorful and a lot of fun.

Apple Discounts

Best Buy has a big Apple Shopping Event going on. Not everything is actually on sale, but here are three picks that might be of interest.

Tech Deals

Columbus Day Sales pages

There are plenty more TVs and PC deals available through Columbus Day, and some appliances and tools on discount. Below are some major retailer sales pages, if you’re in the mood to peruse.

When you buy something using the retail links in our stories, we may earn a small affiliate commission. Read more about how this works.

Tesla's Achilles' Heel?


Tesla’s (NASDAQ:TSLA) drive to sustainable profitability has passed through the “production hell” phase and is now in the “delivery hell” phase. Incumbent automakers have a much simpler delivery problem because they need to ship produced cars to a variety of local dealerships rather than a multitude of home addresses. This article will examine dealer networks, sales per dealer, and compare the delivery logistics of selling to a few hundred to a few thousand dealers versus the direct sales model that Tesla is using. We will also examine additional implications on sales to non-early adopters, as well as the future potential for “service hell” (once there are several hundred thousand cars in the hands of consumers).

Dealer Networks

The US is covered by close to 40,000 auto franchise establishments (see Figure 1).

Figure 1: Number of Auto Franchise Establishments in the US

(Source: Franchise industry: automotive establishments U.S. 2018 | Statista)

These include dealers, repair shops, and parts shops. Many of these are multi-make shops, in that they sell, repair or service more than one make of car. Some services, like tire repair/replacement, body work, glass repair, battery replacement, etc., can be done without regard to the make of the car, while some others may require parts to be ordered from manufacturers or auto parts suppliers. If we focus on new car dealerships only, this number is known to be roughly 17,000 (Source: Fed Paper)

Figure 2 shows the density of auto dealerships around large and mid-sized cities in the US. In addition, many smaller cities and towns also have auto dealers.

Figure 2: Auto Dealership Density in the US

(Source: Map Link)

This geographical dispersion of dealerships serves two important functions for consumers:

1. Sales – Most consumers will not buy a car without a test drive and some amount of comparison shopping (possibly test-driving multiple makes and models). Auto dealerships are where you go for a test drive. In particular, if you live in a smaller city or town, the presence of a multi-make dealer would allow you to test drive a Volvo, Audi, VW or Subaru all by just walking a few hundred feet from one showroom to another within the same larger dealer facility.

2. Service – The presence of a diffuse dealer network also means that every city and many towns have a location where customers can go for in-warranty repairs, or after the warranty period if a repair requiring consultation with the manufacturer or parts supplier is needed.

On the auto producer side, this dealer network has advantages as well.

1. Inventory Management – Each dealer manages its local inventory. The car is sold (and booked) when it is delivered to the dealer. Costs of land, buildings, local advertising and inventory depreciation are passed onto the dealer network in exchange for the differential between price to dealer and retail price.

2. Delivery Logistics – Auto producers need to get their cars to a relatively smaller number of locations which have specialized on the local/consumer interaction side, including registration, sales tax payment, contract signature, signing of loan documents and insurance. This is considerably simpler than delivering cars to customers’ doors, and much cheaper.

3. Sales Exposure – As mentioned on the customer side, the presence of multi-make dealers allows a producer’s cars to be exposed to a much wider set of towns and smaller cities than having exclusive showrooms confined to a few large cities (due to economies of scale on the dealer side) would.

4. Service – Once cars are sold, dealers are only on the financial hook for warranty repairs. Other than that, they are completely out of the service business, and this keeps their organizations much simpler than having direct sales and service staff would. As with the sales side, service is also a multi-make function: if one day service staff have fewer Audis to repair, they can be moved over to Volvo. An experienced technician can easily work on 5-10 different makes and any model from that make.

Capital Requirements

Figure 3 shows that on average, dealers keep about 70 days of sales inventory.

Figure 3: Inventory Kept by Auto Dealers in Days Supply Units

Figure 4: Vehicles Sold Annually per Dealership

(Source: Fed Auto Inventory Paper)

Figure 4 shows that the average dealer is selling about 1000 units per year; combining 3 and 4, we can back out that they are keeping on average 192 cars in inventory, which is roughly $4.8 million of inventory. Adding in the average cost of land, buildings, working capital requirements for sales and service employees, we get a conservative estimate of $7 million per dealer. Therefore, across 17,000 dealers, the US dealer network is saving the auto industry the use of at least $119 billion in working (and other) capital in exchange for the dealer/retail price differential (essentially in perpetuity, subject to renewals). Indeed, the concept of a dealer network was invented by none other than Henry Ford in 1903 as he was trying to build up his car production and running into capital constraints (Source: Henry Ford Org).

The margin that the average dealer earns on new car sales is 1-2% (pre-tax profit margin), whereas service margins and used car sales are reported to be much better; the average dealer gets 44% of its profits from service and 26% from used car margins, with the balance coming from sales of financial products associated with new vehicle sales, such as extended warranties, lending products, etc. (Source: Edmunds).

So, in summary, almost all car producers have outsourced the sales and service function of their vehicles in exchange for the loss of the retail/dealer 1-2% margin. They incur none of the service costs nor revenue, and do not deal with the sale of affiliated financial products such as extended warranties or loans.

How About Tesla?

Figure 5 shows the locations of Tesla showrooms and service centers (red dots) in the southwestern US (for the full map, which does not show well in this article, please go to the source map using the link). Their geographic reach is quite limited at the current time, and outside of CA and FL, many states, such as Nevada and Arizona, have a single sales center (the emptier states have none). Even in a large-population state like NY, there is not a service center outside the NYC metro area.

Figure 5: Tesla Sales & Service Centers

(Source: Find Us | Tesla)

While the ramp-up of Tesla sales to early adopters did not present a challenge (especially given the percentage of sales in CA) using this distribution model, the “delivery hell” that the company is now stuck in may be a function of not having leveraged the existing capital of the US dealership network in pursuit of a different business model.

While company data does not allow us to definitively back this out, it is highly probable, in my opinion, that the distribution, sales and service model Tesla has chosen constrain the size at which SG&A margin becomes sufficiently positive for the company as a whole to remain cash flow-positive and profitable. We reason as follows: instead of renting the existing infrastructure of the US dealership network (which could probably accommodate Tesla sales and service with small marginal capital expenditures, funded out of existing positive dealer cash flow), Tesla is in the process of trying to build a more efficient version of the same infrastructure (a capital-intensive process) in addition to the extensive capital required to build a new auto manufacturing process. Other auto car companies are relying on all their dealers to obtain loans from their local banks to carry inventory and build the retail side of the business. Tesla is trying to do both.

As we can see from comparing the map in Figure 5 to that in Figure 2, it is perhaps 25% of the way to having a sufficiently dense network of sales and service centers in order to become more than a small niche player selling to early adopters in top metro areas. Given the amount of capital (at least $120 billion) embedded in this network, assuming a 10% market share, this means Tesla would need to spend $12 billion in total on the sales/service infrastructure (not accounting for any hypothetical long-term differences in service costs of EVs versus legacy vehicles, for none of which data exists in reliable numbers) versus having let the existing dealer network finance these parts of the retail side of the business.

Investment Implications

Tesla has made it through production hell and reached a level of production approaching 5,000 cars weekly (Source: Company news release). Fundamental questions that remain include Q3 margins and whether Tesla can begin to produce lower-cost (35k) Model 3s at positive margins prior to demand for the higher-end (46k-75k) Model 3s all having been met. Additionally, even delivering all the higher-priced units requires them to manage through delivery hell (a shortage of car carriers is not the issue, not having infrastructure is). Furthermore, upcoming debt maturities require those high-end car margins to be sufficiently profitable (or an equity raise will be required). As Figures 7 and 8 show, neither annual nor quarterly margins (whether Gross, EBITDA, Operating or Pretax) show any obvious pattern thus far as a function of number of units produced.

Figure 7: Annual Margin Measures

Figure 8: Quarterly Margin Measures

(Source: Bloomberg)

I believe the dealer and service center network question has a direct bearing on how likely Tesla is to get to the point of 35k car profitability. We do not see a sufficient reduction in costs coming from materials (steel and aluminum), labor (minimal) or improvements in batteries (they eventually will fall, but this requires technological breakthroughs that take years, not months); in fact, the likely operational leverage would come from not needing to continue increasing spending on replicating dealer infrastructure via direct selling sites and service centers (whether mobile or stationary). This is a problem that a car producer that leverages the capital already invested in the extensive national dealer network likely would not be having.

It appears that Tesla has gotten itself into the position of juggling multiple balls while standing on a paddle board; now, hammerhead sharks are beginning to circle the paddle board (competition). The question that needs to be asked: Is selling direct to consumers an innovation to a long-tested process that has been subjected to 100 years of evolution on the battlefield but somehow been missed by all the other players that have struggled with profitability in a capital-intensive, cyclical industry? Or, is it a strategic blunder of the first order that will be seen to be Tesla’s Achilles’ heel when the history of the company is written? Tesla investors would be well advised to ponder this question.

Disclosure: I am/we are short TSLA.

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

Additional disclosure: We have both long and short positions in both stock and options which change regularly but are net short on a long-term basis.

Zunum Aero’s Hybrid Plane Uses a Helicopter Engine Cut Fuel Use in Half

If you’ve flown a drone, you know that battery life is a problem. Be extra careful when flying over water or your kid’s birthday party, because you’ve got something like 20 minutes of flight time before the thing comes down. And you needn’t have learned that lesson the hard way to get nervous about the idea of battery-powered aircraft with people inside.

Yet going electric could make commercial aviation—a significant source of humanity’s greenhouse gas emissions—greener, as well as cheaper and quieter. It could open up routes to and from regional airports, a clean alternative to high speed inter-city trains. Those are the flights Zunum Aero hopes to make happen. The Kirkland, Washington-based startup is developing small electric planes that carry 10 to 50 passengers and could fly 700 miles between charging stops. Their trick is powering the plane’s motors with electricity that comes from a jet fuel-burning generator as well as onboard batteries, like a Chevy Volt that’s taken to the skies.

Today, Zunum is announcing that it has found the engine it needs to make that vision take off. The gas turbine is a modified version of the Ardiden 3Z engine made by Safran Helicopter Engines, here coupled to a generator that will deliver 500 kilowatts of electric power—enough for a couple of powerful motors. It’s a crucial step, since today’s batteries are far too big and heavy to make long-distance commercial flights even remotely possible.

Zunum will use a modified version of the Ardiden 3Z engine made by Safran Helicopter Engines, here coupled to a generator that will deliver 500 kilowatts of electric power—enough for a couple of powerful motors.


Even fulfilling a basic FAA safety requirement—that you be able to fly for 45 minutes longer than it takes to reach your destination—would be a problem with burning some sort of fuel. “That would need a prohibitive amount of battery right now,” says Zunum founder and CTO Matt Knapp. “Not to mention actually going somewhere.”

Zumum’s first aircraft, the ZA10, will be a sleek white machine with slender wings, two ducted fans mounted at the back, and room for up to a dozen passengers. But it’s starting with a more mundane looking flying test bed, a modified Rockwell Turbo Commander 840, a small plane with two, three-blade propellors and usually eight seats. Zunum will start by replacing the 840’s left engine with its own electric motor, sticking a bunch of batteries in the fuselage, and testing at altitude next summer. By the end of 2019, Knapp expects to install the generator and test the hybrid system. Last, it will replace the propellors with ducted fans (a shrouded propeller that can develop more thrust), to test the entire powertrain. If all that goes well, the team will put all the elements into that new plane, of its own design.

Knapp says that with the hybrid system, its plane will need half the fuel that a comparable conventional plane burns. Unlike the plug-in hybrid Volt, where the engine cuts in when the batteries run out, Zunum will flit between the two depending on the flight profile. The generator spins up for power-hungry takeoff, or maybe if the pilot’s fighting headwinds. For cruising, though, the batteries can do much of the work, before bringing the aircraft back to earth for a quiet, electric landing.

Zunum, which has financial backing from Boeing’s HorizonX venture arm, isn’t not alone in trying to fill the skies with e-planes. Airbus is working with jet engine maker Rolls-Royce and Siemens on a hybrid-electric flight demonstrator called the E Fan X. Siemens showed it can make the tech work way back in 2011. Israel’s Eviation showed off its “Alice Commuter” at the Paris Air Show last year, a fully electric, Tesla-style plane running off a 980-kWh battery pack—enough for 10 Teslas. NASA’s X-57 is an all-electric affair, with 12 small motors and propellors lining the wings. NASA’s always wants the lessons it learns in the X-plane program to trickle down into commercial aviation. But with the taxiway already full of companies lining up to launch on electrons, that may not take too long at all.

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