2019 – The Game Changers

Looking back is not always that easy and sometimes painful. Your vision may not be 20/20 but reasonable clarity may be had by sticking to the facts and the actual data. Having said this, looking forward is a much tougher proposition. You are looking into the unknown. We haven’t gotten there yet.

However, staring into the future is a task that must be undertaken from time to time. I stare hard at pending “Risks.” Others stare hard at pending opportunities. “Preservation of Capital” demands that “Risks” come first, as “avoidance” is often the key to success. If you can stay out of the potholes, you can keep going and proceeding ahead is what gives us all the ability to win at the “Great Game.”

One of the biggest “Game Changers” is the breakage of a fifty year cycle where the United States, and Europe, had to depend upon hostile nations for oil and natural gas. We were hemmed in by them and many political decisions and economic decisions were based upon the fact that we needed their energy. With fracking and re-fracking and horizontal drilling, this has all changed and to the significant benefit of the Western world.

Last week the United States Geological Survey (USGS) announced a groundbreaking oil and gas discovery in the West Texas Permian Basin. According to the organization’s statement, 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids are now believed to lie untapped in the Texan and New Mexican Permian Basin. The figures in last week’s announcement are more than double the previous resource assessment.

“Christmas came a few weeks early this year,” said U.S. Secretary of the Interior Ryan Zinke in response to these rather incredible numbers.

American strength flows from American energy, and as it turns out, we have a lot of American energy. Before this assessment came down, I was bullish on oil and gas production in the United States. Now, I know for a fact that American energy dominance is within our grasp as a nation.

Dr. Jim Reilly, the Director of USGS, a part of the U.S. Department of Interior, highlighted how remarkable the discovery was in the larger context of the industry.

In the 1980’s, during my time in the petroleum industry, the Permian and similar mature basins were not considered viable for producing large new recoverable resources. Today, thanks to advances in technology, the Permian Basin continues to impress in terms of resource potential. The results of this most recent assessment and that of the Wolfcamp Formation in the Midland Basin in 2016 are our largest continuous oil and gas assessments ever released. Knowing where these resources are located and how much exists is crucial to ensuring both our energy independence and energy dominance.

What this all means is that we are now capable of breaking OPEC’s back. They have lost control. The United States has gained control. We can now tell them to “Stuff It,” as we not only gain energy independence but a whole new source of revenues, and taxes, that can be used to our advantage, as we export oil and natural gas to both Europe and Asia.

Any fool can know. The point is to understand.

– Albert Einstein

The next, far less pleasant “Game Changer” is the Democrats taking over the House. This is going to cause all kinds of turmoil, in my estimation. They are likely going to try to impeach President Trump and the markets may take a bath if this happens. Bonds or equities, the rancor of serious political infighting is never good news.

Then we have Brexit becoming quite unwieldy, Italy still fighting over its budget with the European Union and the economy of China slowing down as both their internal and external debts rise to record levels. Then there is the Chinese currency, which could get “re-evaluated” several times during the next year. The tariff stand-off with the United States is, in fact, a “Game of Thrones” as each nation vies for global power and influence. All of these issues could change the Game and cause roller coaster rides in the markets.

Next, there is the Fed. They are the central bank of the United States and the continual raising of interest rates is not helping the economy of the country. “Will they stop or will they go on,” is the central question. The Governors have 14 year terms and they can brandish their “Independence” as they wish, but the Fed was created by the Congress in 1913 using the Federal Reserve Act and what is given can be taken away, or muted, if the Congress does not feel that the Fed is acting in the best interests of the country. The Fed is NOT a Constitutional mandate, I remind all of you.

Then there is the CLO market. There are some large financial institutions that are worried that the bottom is about to drop out of this market. As an observation, the total outstanding volume of leveraged loans is about $1,130 billion or 5.5% of the U.S. GDP. CLOs, which are repackaged corporate debt, has made up most of the appetite for these loans.

These instruments hold approximately half, or $600 billion, which is roughly 3.0% of the U.S. GDP. The catalyst for the concern is not so much the drop in prices as the fund flows, with Lipper reporting that loan funds saw a record outflow of $2.53 billion in the week ended December 12, as we are now in the fourth consecutive week of selling. A significant “Game Changer” could be happening here.

The road to success is dotted with many tempting parking spaces.

– Will Rogers

“Game Changers” now abound all around us. Look closely, think, plan, execute, don’t slow down. Stay out of harm’s way. Avoid the Risks. Choose wisely!

YouTube Posted a Video on the Official YouTube Channel. It Quickly Became the Most-Hated YouTube Video of All Time

This is a story about the most-hated YouTube video anybody ever posted to YouTube. In fact, it might just be the most-hated video anybody ever posted anywhere.

Even more embarrassing: it’s a video that YouTube itself posted to the official YouTube Spotlight channel. And people really don’t like it. (It’s embedded below.)

The irony is, this was was supposed to be a big, easy win for YouTube. It’s the YouTube Rewind 2018 video, which is intended to be a feel-good, end-of-year, wrap-up video about YouTube moments and personalities. YouTube has posted a version every year since 2010. It’s usually a fan favorite.

Only, not this year. This year, they blew it big time.

11 million dislikes and counting

After just over a week, the official YouTube Rewind 2018 video now has more “down votes” or “dislikes” than any other video in YouTube history. As of this writing, nearly 130 million people have watched it, and 11 million gave it a thumb’s down.

Compare that to just 2.2 million who clicked that they liked it.

We’ll get into why the video bombed so badly, along with a lesson or two for anyone trying to cultivate an audience. But first, let’s put those numbers in context.

Because until this week, the most-hated video of all time was the video for Justin Bieber’s “Baby,” which has 9.9 million dislikes.

It took eight long years for that many people to vote down “Baby,” and meanwhile the Bieber video also has 10 million likes, so it’s slightly net positive.

YouTube could only dream of hitting those kinds of numbers. 

It’s so bad! (How bad is it?)

Again, the video is below, so you can judge for yourself. I recommend you watch it in Chrome with video speed controller enabled and tuned to 180 percent or so. That’s what I did.

It was still interminable, although I admit I’m not exactly the demo they’re looking for. Anyway, it starts with Will Smith (fair enough), saying that for the 2018 video, he’d like to see lots of Fortnite and YouTube personality Marques Brownlee.

He gets his wish as it cuts to a Fortnite Battle Bus full of YouTubers–including Brownlee.

And from then it goes through a frantic, massive series of jump cuts and quick edits, moving from one YouTuber and scene to another, with almost no context or way to follow what’s going on.

Worse in the minds of many viewers, is that the video ignores many popular YouTube stars in favor of people who aren’t even really YouTubers–like Stephen Colbert, John Oliver and Trevor Noah, for example. And that really created some controversy.

‘A a chaotic barrage of clips’

Don’t just take my word for it, or the thousands of YouTube users who left negative comments, or the millions who down-voted it. Instead, for a fantastic explanation, I’d go to Brownlee, the YouTube personality whom Will Smith wanted to see.

Sure enough, he created a response video (despite the fact that he briefly stars in the original), where he explains the production process and agrees with millions of other people that, yes, it’s pretty horrible.

The problem, he thinks, is that the millions of YouTuber viewers who watched it were expecting what YouTube used to give them in its year-end Rewind videos: a collection of top moments starring the most popular creators.

But YouTube wants something different, as Brownlee puts it: a safe sizzle reel that it can demo for advertisers. So it can’t feature creators like say, PewDiePie, who has the most-subscribed channel on YouTube and sort of represents the site’s original organic creators–but who has also been tied to white supremacists

The result, as Brownlee puts it, is “a chaotic barrage of clips that’s just really hard to watch,” since YouTube wants to give the appearance of including tons and tons of video personalities–without including the ones like PewDiePie that will turn off big advertisers. But that only makes more obvious the omission of some big YouTube stars that YouTube isn’t particularily happy to have.

If YouTube wants to fix the video for next year, Brownlee suggests: “You’ve got to leave some stuff out. You can leave me out. I don’t mind.”

Here’s the infamous YouTube Rewind video–followed by Brownlee’s response. Let me know what you think in the comments.

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California is Considering Taxing Texts. Here's the 1 Insane Detail Hardly Anyone Has Noticed

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

It sounded bad. 

So bad, in fact, that it was just the sort of thing you’d expect from California.

My home state has a certain reputation —  especially among those who don’t live there — for taxing its inhabitants,

This week, there came news of a potential new tax, one that sounded so Californian as to border on parody.

And a million accusing Eastern fingers pointed toward the west and its serial predilection for socialized nonsense. (I’m not sure how many of those fingers came from East Coasters, how many from Russians and how many from Russians who had emigrated to the East Coast.)

The essence of the tax lies in the fact that people have stopped talking on the phone so much. 

Yes, California currently taxes phone calls. It dedicates the revenue raised to providing the least fortunate with some sort of telecommunications service.

It does the same with other utilities, too.

The phone call revenue has, naturally, fallen as telephonic talking has fallen, so the state proposes taxing texts. Doing this, says California’s Public Utilities Commission, could raise $44.5 million.

Which leaves one small, painful detail: Not many people send text messages.

You might think you do, because texting has become a generic term for constantly saying things in writing to people via your phone — only to occasionally be misunderstood.

Yet the majority of people use iMessage, WhatsApp or even Facebook Messages. These are sent over the internet. 

And, if California suddenly decided it now wants to include these over-the-web services in its tax proposals, does that mean it can start taxing every email? 

Now there’s a delicious revenue-generating idea that could instantly finance so many Californian projects and deter people from sending those dreary reply-all emails that plague business life. 

Naturally, phone industry lobbyists are drinking — I mean, working — late into the night to prevent California’s proposal from being instituted in a vote on January 10.

Should it pass, there might be enormous confusion, with users assuming that all their phone messaging is being taxed? 

What if they stopped texting altogether? 

That simply wouldn’t be the modern world anymore.

Apple to push software update in China as Qualcomm case threatens sales ban

SHANGHAI/SAN FRANCISCO (Reuters) – Apple Inc, facing a court ban in China on some of its iPhone models over alleged infringement of Qualcomm Inc patents, said on Friday it will push software updates to users in a bid to resolve potential issues.

An Apple company logo is seen behind tree branches outside an Apple store in Beijing, China December 14, 2018. REUTERS/Jason Lee

Apple will carry out the software updates at the start of next week “to address any possible concern about our compliance with the order”, the firm said in a statement sent to Reuters.

Earlier this week, Qualcomm said a Chinese court had ordered a ban on sales of some older iPhone models for violating two of its patents, though intellectual property lawyers said the ban would likely take time to enforce.

“Based on the iPhone models we offer today in China, we believe we are in compliance,” Apple said.

“Early next week we will deliver a software update for iPhone users in China addressing the minor functionality of the two patents at issue in the case.”

The case, brought by Qualcomm, is part of a global patent dispute between the two U.S. companies that includes dozens of lawsuits. It creates uncertainty over Apple’s business in one of its biggest markets at a time when concerns over waning demand for new iPhones are battering its shares.

Qualcomm has said the Fuzhou Intermediate People’s Court in China found Apple infringed two patents held by the chipmaker and ordered an immediate ban on sales of older iPhone models, from the 6S through the X.

Apple has filed a request for reconsideration with the court, a copy of which Qualcomm shared with Reuters.

WHERE’S THE HARM?

Qualcomm and Apple disagree about whether the court order means iPhone sales must be halted.

The court’s preliminary injunction, which the chipmaker also shared with Reuters, orders an immediate block, though lawyers say Apple could take steps to stall the process.

All iPhone models were available for purchase on Apple’s China website on Friday.

Qualcomm, the biggest supplier of chips for mobile phones, filed its case against Apple in China in late 2017, saying the iPhone maker infringed patents on features related to resizing photographs and managing apps on a touch screen.

Apple argues the injunction should be lifted as continuing to sell iPhones does not constitute “irreparable harm” to Qualcomm, a key consideration for a preliminary injunction, the copy of its reconsideration request dated Dec. 10 shows.

“That’s one of the reasons why in a very complicated patent litigation case the judge would be reluctant to grant a preliminary injunction,” said Yiqiang Li, a patent lawyer at Faegre Baker Daniels.

HIT LOCAL SUPPLIERS

Apple’s reconsideration request also says any ban on iPhone sales would impact its Chinese suppliers and consumers as well as the tax revenue it pays to authorities.

The request adds the injunction could force Apple to settle with Qualcomm. But it was not clear whether this referred to the latest case or their broader legal dispute.

Qualcomm has paid a 300 million yuan ($43.54 million) bond to cover potential damages to Apple from a sales ban and Apple is willing to pay a “counter security” of double that to get the ban lifted, the copy of the reconsideration request shows.

Slideshow (2 Images)

Apple did not immediately respond to questions about the reconsideration request and Reuters was not independently able to confirm its authenticity.

Lawyer Li said the case would undoubtedly ramp up pressure on Apple, especially if a ban was enforced.

“I think that Qualcomm and Apple, they always have those IP litigations to try to force the other side to make concessions. They try to get their inch somewhere. That’s always the game.”

Reporting by Adam Jourdan in Shanghai and Stephen Nellis in San Francisco; Editing by Himani Sarkar

Japan rules out asking private firms to avoid telecoms gear that could be malicious

FILE PHOTO: Japan’s Chief Cabinet Secretary Yoshihide Suga attends a news conference at Prime Minister Shinzo Abe’s official residence in Tokyo, Japan May 29, 2017. REUTERS/Toru Hanai

TOKYO (Reuters) – Japan’s government has no plan to ask private companies to avoid buying telecommunications equipment that could have malicious functions, such as information leakage, its top spokesman, Yoshihide Suga, said on Thursday.

The comment suggests Japan does not intend, for the moment, to extend to private firms a policy of not buying such equipment for the government, after it issued a policy document on Monday on the need to maintain cybersecurity during procurement.

While China’s telecoms equipment supplier Huawei Technologies, and ZTE (0763.HK) are not explicitly named, sources said last week the change aimed at preventing government procurement from the two Chinese makers.

Reporting by Chang-Ran Kim and Sam Nussey; Editing by Clarence Fernandez

Tesla To 90,000: Delivery Forecasts For The Fourth Quarter

Tesla is on track to deliver more than 61,000 Model 3s in the fourth quarter.

Summary

Much is written about Tesla (TSLA) and Elon Musk on this platform and elsewhere. The circus that surrounds Tesla is well-known and heavily-covered on this platform – so I won’t write about any of that here.

Instead, this is simply an attempt to forecast Q4/18 vehicle deliveries based on the best available data. Overall, I estimate that Tesla will deliver ~91,085 vehicles – up 9% from last quarter, including over 61,000 Model 3s. This estimate implies that Tesla will meet their 2018 target for 100,000 Model S and X delivered with a bit of breathing room to spare.

Given analyst revenue estimates of ~3.5% sequential growth, Tesla will need to keep ASPs from slipping more than 4.5% to meet those top-line targets, assuming my estimates are close and assuming the Tesla’s non-automobile units are flat sequentially. Tesla has raised prices several times over the last few months, which should help prevent too much price erosion on their vehicles, although this will be offset by the introduction of the $46,000 Model 3 MR.

In my view, Tesla has a good chance of beating its Model S/X delivery target and a reasonable chance of beating analysts’ top-line estimates. I will continue to hold my Tesla shares.

Model S Delivery Estimate: 14,907 Vehicles

Each of the estimates herein is based primarily on three pieces of data.

Each estimate is based on Tesla’s actual delivery information from past quarters. This data is available in Tesla’s quarterly update letters delivered on earnings day. Tesla also provides estimates of this data in an 8-K filing within a day or two of the end of a quarter. This data provides Tesla’s actual deliveries but is only available quarterly – unlike many manufacturers which provide similar data every month.

This data provides Tesla

(Inside EVs Monthly Plug-in EV Sales Scorecard)

Estimates are also based on monthly estimates for Tesla’s American sales from Inside EVs Monthly Plug-in EV Sales Scorecard. Inside EVs only includes sales in the United States but is updated each month, usually within a few days of the end of the month.

This data is a bit incomplete for the most recent month, as shown above: Spanish Model S registration results are not yet available.

(Tesla Motors Club)

Estimates are further based on European vehicle registration date from Tesla Motors Club. A post on TMC’s forum contains European sales data from each European country, with data updated as it becomes available. This data is a bit incomplete for the most recent month, as shown above: Spanish Model S registration results are not yet available.

Compiling these three data sources into one for the Model S, and combining the data into quarters rather than months, I arrive at the following table:

Compiling these three data sources into one for the Model S, and combining the data into quarters rather than months, I arrive at the following table

(Author based on data from Inside EVs and Tesla Motors Club)

Here, the “Model S Registrations, Europe” is data from Tesla Motors Club, by quarter. “Model S Sales, United States” is data from Inside EVs, also organized by quarter. Total Model S Sales is simply the addition of those two lines and Tesla Deliveries refers to Tesla’s published total Model S deliveries in a given quarter. Most of this data comes from 8-Ks, as Tesla doesn’t usually break down S vs. X deliveries in its quarterly update letters.

As shown, over the past year, sales in Europe and the United States have made up ~85% of sales of Model S vehicles over the past year, with the remainder of sales primarily occurring in APAC and Canada.

We could simply multiply sales by ~1.5x to move from the two-month Q4/18 sales to three-month sales, but history tells us this would be very inaccurate. Why? Because Tesla tends to sell the fewest vehicles in the first month of each quarter and more vehicles in the last month of each quarter:

Tesla Monthly Sales for the Model S and X show monthly seasonality

(Author based on data from Inside EVs and Tesla Motors Club)

As shown, Tesla has had six months where they sold more than 10,000 Model S and X vehicles combined: 9/16, 12/16, 3/17, 9/17, 12/17, 3/18, and 9/18. All of those months are the third month of a fiscal quarter. Indeed, since the start of 2015, Tesla has always delivered the most vehicles in the third month of the quarter.

Thus, simply multiplying the first two-month results by 1.5x will yield inaccurate delivery estimates: Those estimates would have been too low in each of the past 15 quarters.

Tesla will sell nearly 15,000 Model S vehicles in Q418

(Author based on data from Inside EVs and Tesla Motors Club)

To remedy this problem, the above chart includes only the first two months of European registrations and Inside EVs sales estimates from every quarter. For example, last quarter, Insides EVs showed Tesla having Model S sales of 1,200 in July, 2,625 in August, and 3,750 in September. Thus, the above chart shows 3,825 (1,200 + 2,625) Model S vehicles sold in the United States in Q3/18 – excluding the 3,750 reported September sales.

The Tesla deliveries above are actual deliveries for the quarter, and the percentage of sales is sales in the first two months divided by total sales. As shown, last quarter, U.S. and European sales in the first two months of the quarter accounted for 37% of total Model S deliveries in Q3/18.

For Q4/18, I estimate that Tesla will deliver ~14,907 Model S vehicles. This is based on assuming that reported deliveries in the first two months will be 39% of total quarterly deliveries – the average percentage of the last two quarters. Averaging the last two quarters here is conservative compared to using the 37% metric from Q3/18, which would yield an estimate closer to 16,000 Model S deliveries.

Model X Delivery Estimate: 14,923 Vehicles

Tesla Model X is the best-selling SUV EV.

(Author based on data from Inside EVs and Tesla Motors Club)

Last quarter, Tesla delivered 13,190 Model X vehicles. Thus far in Q4/18, Tesla has delivered 5,683 vehicles, although data from Tesla Motors Club is again missing Spain for November. That is a very minor exclusion though, given that Spain is averaging 15.9 Model X registrations/month. Given the level of error inherent in these estimates, the absence of this data is trivial.

We will again take the first two months’ data rather than full-quarter sales data to form estimates: Sales of the Model X show a lot of seasonal variability as in the chart above.

Tesla could deliver nearly 15,000 Model X vehicles in the next quarter.

(Author based on data from Inside EVs and Tesla Motors Club)

Last quarter, first two-month sales in the United States and Europe represented 38% of total Model X deliveries. If we estimate that the same percentage of Model X deliveries occurred in those regions in those months, this suggests that Tesla may deliver ~14,923 Model X vehicles in the fourth quarter.

Notably, while Tesla did not provide a Q4/18 forecast for Model 3 deliveries (or production), Tesla did forecast deliveries for the Model S and X (combined):

In each of the last four quarters, Tesla has suggested that Model S and X deliveries should total 100,000 or more. If Tesla meets my estimates, they would beat this target with a little bit of breathing room to spare:

Tesla Deliveries Q4/17 Q1/18 Q2/18 Q3/18 Q4/18E
Model S/X Deliveries 28,425 21,815 22,319 27,710 29,830?
Cumulative, 2018 21,815 44,134 71,844 101,674?

That said, the margin of error on this estimate is quite high. Notably, this estimate excludes China, which may have seen sales fall off in the fourth quarter. Tesla has denied reports that sales in China fell 70% in October:

“‘While we do not disclose regional or monthly sales numbers, these figures are off by a significant margin,’ a Tesla spokesperson told MarketWatch in emailed comments.”

MarketWatch, Nov 27, 2018

However, even with less dramatic declines than 70% it is possible – perhaps even probable – that these estimates will be too high as Tesla’s U.S. and European sales may make up a higher proportion of total sales given tariffs in China. We’ll find out in January.

Model 3 Delivery Estimate: 61,255 Vehicles

According to Autoweek, the Tesla Model 3 will roll out in Europe in February 2019

(Author based on data from Inside EVs)

The Tesla Model 3 is not available in Europe. According to Autoweek, the Tesla Model 3 will roll out in Europe in February 2019 – well after the end of Q4/18. Because of that, Model 3 deliveries are based solely on data from Inside EVs.

Aside from the United States, the Tesla Model 3 is only available in Canada – it is also not yet available in APAC. Thus, American sales represent the vast majority of Tesla Model 3 deliveries. Last quarter, for example, Inside EVs reported Model 3 sales equal to 97% of total Model 3 deliveries.

in Q2/18, Model 3 sales were higher in the second month of the quarter (May 2018) than in the final month of the quarter (June 2018).

(Author based on data from Inside EVs)

Sales of the Model 3 have not been going on long enough to draw as strong of conclusions as for the Model S and X. Sales appear to show some monthly seasonality: Last-month-of-quarter sales were the highest in four of the five quarters that the Model 3 has been offered. However, in Q2/18, Model 3 sales were higher in the second month of the quarter (May 2018) than in the final month of the quarter (June 2018).

Overall, the trend here is that last-month-sales are becoming decreasingly over-sized for the Model 3. This is based up by first two-month data:

I estimate that Tesla will deliver ~61,255 Model 3 vehicles in the fourth quarter of 2018

(Author based on data from Inside EVs)

As shown, over the past four quarters, first two-month sales have made up an increasing proportion of total sales – from 31% in Q4/17 up to 57% in Q3/18. As the quarters pass, Tesla’s monthly Model 3 sales are becoming flatter and flatter, with respect to in-quarter seasonality.

Because of flattening monthly variations, I will estimate the first two-month sales make up 59% of total Model 3 sales – continuing the 53%, 55%, 57% trend of increase by 2 pp each quarter. Thus, I estimate that Tesla will deliver ~61,255 Model 3 vehicles in the fourth quarter of 2018.

Tesla to 90,000: Total Deliveries Estimate is ~91,085

Tesla will deliver an amazing 91,000 electric vehicles next quarter: More than every before

Tesla will deliver nearly a quarter-million electric vehicles in 2018 - more than twice as many as last year.

(Author based on Tesla filings and own estimates)

In total, my estimates would result in 91,085 Tesla deliveries in Q4/18. This would be a record for the company. This estimate implies ~9% sequential growth in automobile deliveries.

Given 9% sequential growth in deliveries, Tesla should break their own record for the most automotive revenue in a quarter, set last quarter at $6.1 billion. Given the relatively small size of Tesla’s other segments, Tesla would also be very likely to beat their Q3/18 revenue as well.

Last quarter, Tesla earned $6.82 billion in revenue. Analysts at Yahoo Finance expect Tesla to generate $7.06 billion in revenue next quarter, up 3.5% from Q3/18. If automobile sales rise 9% in Q4/18, that may be an achievable target: Tesla would need to prevent automobile ASP from falling more than ~4.5% to beat this revenue target, assuming they ship 91,085 automobiles and assuming that non-automotive segment revenue is flat from Q4/18.

The primary driver for falling ASPs in Q4/18 will be the introduction of the less-costly Model 3 mid-range. Depending on product mix, this $46,000 vehicle could reduce average sales prices substantially, although that decline may be offset by waves of price increases on Tesla vehicles, beginning in the middle of last quarter. Given those price increases, Tesla may have a good shot at beating top-line revenue estimates. We will find out in ~early February.

Happy investing!

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Disclosure: I am/we are long 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.

Kubernetes etcd data project joins CNCF

techrepublic

Kubernetes: The smart person's guide

Kubernetes: The smart person’s guide

Kubernetes is a series of open source projects for automating the deployment, scaling, and management of containerized applications. Find out why the ecosystem matters, how to use it, and more.

Read More

How do you store data across a Kubernetes container cluster? With etcd. This essential part of Kubernetes has been managed by CoreOS/Red Hat. No longer. Now, the open-source etcd project has been moved from Red Hat to the Cloud Native Computing Foundation (CNCF).

What is etcd? No, it’s not what happens when a cat tries to type a three-letter acronyms. Etcd (pronounced et-see-dee) was created by the CoreOS team in 2013. It’s an open-source, distributed, consistent key-value database for shared configuration, service discovery, and scheduler coordination. It’s built on the Raft consensus algorithm for replicated logs.

Also: Kubernetes’ first major security hole discovered

Etcd’s job is to safely store critical data for distributed systems. It’s best known as Kubernetes’ primary datastore, but it can be used for other projects. For example, “Alibaba uses etcd for several critical infrastructure systems, given its superior capabilities in providing high availability and data reliability,” said Xiang Li, an Alibaba senior staff engineer.

When applications use etcd they have more consistent uptime. Even when individual servers fail, etcd ensures that services keep working. This doesn’t just protect against what would otherwise prove show-stopping failures, it also makes it possible to automatic update systems without downtime. You can also use it to coordinate work between servers and set up container overlay networking.

In his KubeCon keynote, Brandon Philips, CoreOS CTO, said: “Today we’re excited to transfer stewardship of etcd to the same body that cares for the growth and maintenance of Kubernetes. Given that etcd powers every Kubernetes cluster, this move brings etcd to the community that relies on it most at the CNCF.”


Must read


That doesn’t mean Red Hat is walking away from etcd. Far from it. Red Hat will continue to help develop etcd. After all, etcd is is an essential part of Red Hat’s enterprise Kubernetes product, Red Hat OpenShift.

Moving forward, etcd will only grow stronger. It being used by more and more companies, as Kubernetes is adopted by almost every cloud container company. In particular, Phillips said, he expects far more work to be done on etcd security.

Related stories:

Only Chumps Work More than 40 Hours a Week

Last month, I pointed out that Elon Musk was horribly wrong when he stated that “nobody ever changed the world on 40 hours a week.” That column got more than the usual amount of pushback, half of which seemed to come from worker-bees inside high-tech firms and the other half from people who are starting their own business. Both groups of critics are wrong but for different reasons. Allow me to explain:

If You’re Employed by Somebody Else

Not to put too fine a point on it, if you’re working 100 hours a week while being paid for 40 hours, you should listen carefully for the sound of a power tool and trumpet fanfare, because you’re being royally screwed.

Let’s suppose you’re an entry level programmer in Silicon Valley who makes the industry average of roughly $100,000 a year. Pretty good money, eh? Well, let’s see.

If you’re working 100 hour weeks and take two weeks off for vacation (good for you!), you’re spending 5,000 hour a year at work, which means you’re making $20 an hour, which is about what you’d make if you were doing auto body repair. And you wouldn’t have any student loans.

Now let’s suppose you’re an entry level marketer making $50,000 a year. (Note: in high tech, women are MUCH more likely to land a job in marketing than in programming.) In that case, if you’re working 100 hour weeks, you’re making $10 an hour, which is less than you’d make working as a cashier at WalMart. And again, you’d have no student loans.

So even though your salary looks as if you’re firmly in the middle-class, you’re really working for peanuts. You may be thinking at this point: “Well that’s the way it is. Companies need us to work extra-hard to remain competitive.” That’s total bullsh*t.

Take Rock Star Games, for instance–a company that’s been recently in the news for requiring programmers to work many hours of unpaid overtime. RSG is a subsidiary of Take Two Interactive, which is traded on NASDAQ as TTWO.

According to the Take Two’s fiscal year 2018 10K SEC filing, the company grossed $1.8 billion and netted $174 million. Their R&D budget was $196 million so, if they wanted to, they could increase their R&D personnel across the entire company by 50% and still maintain a net profit of around $74 million.

Actually, it’s a bit more complicated than that because “General & Administration” expense tends rise when R&D expenses get higher. But you get the point; the money is there. Of course, not every high tech firm is profitable but where does it say that the burden of unprofitability should be borne by the workers rather than the investors or the often-quite-highly-paid top managers?

When I named Don Lyon’s excellent book Lab Rats as one of my 7 best books of 2018, I included a quote that neatly summarizes the ridiculous implicit contract that high tech firms (and the many others that imitate them) foist upon employee:

First, you are lucky to be here. Also, we do not care about you. We offer no job security. This is not a career. You are serving a short-term tour of duty. We provide no training or career development. If possible, we will make you a contractor rather than an actual employee, so that we do not have to provide you with health benefits or a 401(k) plan. We will pay you as little as possible. We do not care about diversity: African Americans and Latinos need not apply. Your job will be stressful. You will work long hours under constant pressure and with no privacy. You will monitored and surveilled. We will read your email and chat messages, and use data to measure your performance. We do not expect you to last very long. Our goal is to burn you out and churn you out. 

While the summary itself is brilliant, I emphasized the last line because research shows that working consistently long hours gives a short-term burst of productivity, which then declines and turns into negative productivity. The plan is literally to burn you out.

This personnel strategy is idiotic, especially in industries where highly talented people are difficult to come by. But companies, even (especially!) high tech ones embrace all sorts of idiotic strategies. Witness the open plan office, a well-document productivity toilet that’s become ubiquitous.

Now, you may think that you don’t have a choice and that you must participate in the insanity simply to remain employed. Not true. Here’s an alterative: Stare reality right in the face. Realize–at a gut level–that if you burn yourself out you’ll be fired, regardless of how much you’ve contributed to the company’s success.

Therefore–and this is important so read the rest of this graf very, very carefully–you may very well have MORE job security if you don’t burn yourself out… even if you irritate your bosses by refusing to work crazy hours. But let’s suppose that you DO get fired because you won’t work-til-you-drop. You’ll be far readier to find another job if you’re fired when you’re still sane than after you’re burned-out.

In fact, maybe you should spend a few hours a week lining up new opportunities, just in case. Something to do in the free time that you’ll have when you’re smart enough not to succumb to Stockholm Syndrome.

If You’re Self-Employed

The “calculate your hourly wage” stuff described above doesn’t apply when you’re self-employed. Just to be clear, by “self-employed,” I mean starting your own business with multiple clients and customers rather than a contractor with a single client–which is the same thing as being employed but worse.

When you’re self-employed, you’re going to put whatever resources you have available into creating your own personal success. Those resources very much include your time. Indeed, when you first go freelance (for instance), the one resource you’ve got a-plenty is your time.

That’s the way it is. You may not even make minimum wage in your first year. But that doesn’t matter. What matters is getting your business up and running. I get it. I’ve been there. You’re playing the long game. Good for you!

Nevertheless, even if you’re self-employed, it’s both unwise and shortsighted to work more than 40 hours a week on a regular basis because, while you’ll get a burst of productivity (you’ll get more done), the extra hours have diminished returns over time and within any time period. Let me explain.

Working long hours over a long period of time is a recipe for burn-out. No matter how committed you are, or how much you “love” your job, you will end up killing the proverbial goose that might otherwise lay you the golden egg of success.

In addition, working extra hours within a day or week has diminishing returns. Even if you get 25% more done working 50 rather than 40 hours, you’re not going to get 20% more done if you work 60 rather than 50 hours. It’s probably more like 10% at most.

Similarly, working 70 hours rather than 60 hours won’t even give you that 10%. Chances are you’ll start making mistakes that will need correction which means extra work, so the productivity “gain” is probably negative 10%… or worse.

Entrepreneurs who willfully and unwisely burn themselves out like this remind me of an observation that a dear friend of mine made a while back: “Every boss I’ve ever worked for has been an *sshole, including now that I’m self-employed.”

The challenge when you’re self-employed is to have both the self-discipline and self-confidence to NOT work long hours. That’s especially true if you truly love your job. If you’re lucky enough to be in that situation, the LAST THING you want is to work yourself to the point where it’s no longer fun. 

If you quit work each day in the middle of doing something you enjoy, you’ll start the next day excited and motivated to do more. If you continue to work each day until you simply can’t do any more, you’ll start the next day tired and bored. Again, I know this because I’ve been there and done that.

So there you are. While all of us will have “crunch times” when we need to put in some extra hours, we can’t afford to make it a habit, much less let dysfunctional corporate cultures force it down our throats.

Slack Hires Goldman Sachs to Lead Its IPO Planned for 2019, Report Says

Slack hired investment bank Goldman Sachs as the lead underwriter for its highly anticipated initial public offering, Reuters reported Friday.

Slack is talking with investment banks to help underwrite an IPO, which could end up valuing the chat and workplace-collaboration software maker as high as $10 billion, Reuters said, citing unnamed sources.

In August, Slack raised $427 million in a private round of financing led by General Atlantic and Dragoneer. At the time, the investment valued the company at more than $7 billion. The company has raised a total of $1.2 billion in seven funding rounds since 2010, according to Crunchbase, which tracks financing rounds of private companies.

Last month, Stewart Butterfield, Slack’s co-founder and CEO, told Fortune that the company had “no specific timeline for an IPO,” although he also said that “We’ve been on a path to public company readiness for several years now and we’re continuing on that path.”

Slack offers a popular work-collaboration platform that allows co-workers to chat and message each other. The nine-year-old company now has more than 8 million active users, although Butterfield said in the Fortune interview that the actual number could be well above that.

The market for technology IPOs had been sluggish for several years before picking up somewhat in 2018. So far in 2018, 188 companies have gone public on U.S. exchanges, up from 160 in all of 2017. Around 40 of the IPOs this year were tech startups, including Sonos, Dropbox, and SurveyMonkey.

2019 is expected to bring bigger names to the IPO market, not just Slack, but also Uber, Lyft, and Airbnb. On Thursday, Lyft confidentially filed paperwork with the Securities and Exchange Commission for its planned IPO.

U.S. accuses Huawei CFO of Iran sanctions cover-up

VANCOUVER/LONDON (Reuters) – Huawei Technologies Co Ltd’s chief financial officer faces U.S. accusations that she covered up her company’s links to a firm that tried to sell equipment to Iran despite sanctions, a Canadian prosecutor said on Friday, arguing against giving her bail while she awaits extradition.

The case against Meng Wanzhou, who is also the daughter of the founder of Huawei, stems from a 2013 Reuters report here about the company’s close ties to Hong Kong-based Skycom Tech Co Ltd, which attempted to sell U.S. equipment to Iran despite U.S. and European Union bans, the prosecutor told a Vancouver court.

U.S. prosecutors argue that Meng was not truthful to banks who asked her about links between the two firms, the court heard on Friday. If extradited to the United States, Meng would face charges of conspiracy to defraud multiple financial institutions, the court heard, with a maximum sentence of 30 years for each charge.

Meng, 46, was arrested in Canada on Dec. 1 at the request of the United States. The arrest was on the same day that U.S. President Donald Trump met in Argentina with China’s Xi Jinping to look for ways to resolve an escalating trade war between the world’s two largest economies.

The news of her arrest has roiled stock markets and drawn condemnation from Chinese authorities, although Trump and his top economic advisers have downplayed its importance to trade talks after the two leaders agreed to a truce.

A spokesman for Huawei had no immediate comment on the case against Meng on Friday. The company has said it complies with all applicable export control and sanctions laws and other regulations.

Friday’s court hearing is intended to decide on whether Meng can post bail or if she is a flight risk and should be kept in detention.

The prosecutor opposed bail, arguing that Meng was a high flight risk with few ties to Vancouver and that her family’s wealth would mean than even a multi-million-dollar surety would not weigh heavily should she breach conditions.

Meng’s lawyer, David Martin, said her prominence made it unlikely she would breach any court orders.

“You can trust her,” he said. Fleeing “would humiliate and embarrass her father, whom she loves,” he argued.

Huawei CFO Meng Wanzhou, who was arrested on an extradition warrant, appears at her B.C. Supreme Court bail hearing in a drawing in Vancouver, British Columbia, Canada December 7, 2018. REUTERS/Jane Wolsak

The United States has 60 days to make a formal extradition request, which a Canadian judge will weigh to determine whether the case against Meng is strong enough. Then it is up to Canada’s justice minister to decide whether to extradite her.

Chinese Foreign ministry spokesman Geng Shuang said on Friday that neither Canada nor the United States had provided China any evidence that Meng had broken any law in those two countries, and reiterated Beijing’s demand that she be released.

Chinese state media accused the United States of trying to “stifle” Huawei and curb its global expansion.

IRAN BUSINESS

The U.S. case against Meng involves Skycom, which had an office in Tehran and which Huawei has described as one of its “major local partners” in Iran.

In January 2013, Reuters reported that Skycom, which tried to sell embargoed Hewlett-Packard computer equipment to Iran’s largest mobile-phone operator, had much closer ties to Huawei and Meng than previously known.

Slideshow (9 Images)

In 2007, a management company controlled by Huawei’s parent company held all of Skycom’s shares. At the time, Meng served as the management firm’s company secretary. Meng also served on Skycom’s board between February 2008 and April 2009, according to Skycom records filed with Hong Kong’s Companies Registry.

Huawei used Skycom’s Tehran office to provide mobile network equipment to several major telecommunications companies in Iran, people familiar with the company’s operations have said. Two of the sources said that technically Skycom was controlled by Iranians to comply with local law but that it effectively was run by Huawei.

Huawei and Skycom were “the same,” a former Huawei employee who worked in Iran said on Friday.

A Huawei spokesman told Reuters in 2013: “Huawei has established a trade compliance system which is in line with industry best practices and our business in Iran is in full compliance with all applicable laws and regulations including those of the U.N. We also require our partners, such as Skycom, to make the same commitments.”

U.S. CASE

The United States has been looking since at least 2016 into whether Huawei violated U.S. sanctions against Iran, Reuters reported in April.

The case against Meng revolves around her response to banks, who asked her about Huawei’s links to Skycom in the wake of the 2013 Reuters report. U.S. prosecutors argue that Meng fraudulently said there was no link, the court heard on Friday.

U.S. investigators believe the misrepresentations induced the banks to provide services to Huawei despite the fact they were operating in sanctioned countries, Canadian court documents released on Friday showed.

The hearing did not name any banks, but sources told Reuters this week that the probe centered on whether Huawei had used HSBC Holdings (HSBA.L) to conduct illegal transactions. HSBC is not under investigation.

U.S. intelligence agencies have also alleged that Huawei is linked to China’s government and its equipment could contain “backdoors” for use by government spies. No evidence has been produced publicly and the firm has repeatedly denied the claims.

The probe of Huawei is similar to one that threatened the survival of China’s ZTE Corp (0763.HK) (000063.SZ), which pleaded guilty in 2017 to violating U.S. laws that restrict the sale of American-made technology to Iran. ZTE paid a $892 million penalty.

Reporting by Julie Gordon in Vancouver and Steve Stecklow in London; Additional reporting by Anna Mehler Paperny in Toronto, David Ljunggren in Ottawa, Karen Freifeld in New York, Ben Blanchard and Yilei Sun in Beijing, and Sijia Jiang in Hong Kong; Writing by Denny Thomas and Rosalba O’Brien; Editing by Muralikumar Anantharaman, Susan Thomas and Sonya Hepinstall

3 Ways to Address AI's More Frightening Implications

AI has vast potential. The technology is being touted as a solution to some of humanity’s most vexing problems, and rightly so. In China, where there aren’t enough radiologists to review the 1.4 billion annual CT scans for lung cancer, algorithms can accurately and efficiently diagnose patients.

Around the world, the next generation of automobiles will be driven quite literally by AI, and removing angry, distracted, or drunk humans from behind the wheel will likely make the road a far safer place. Still, for every positive AI implementation, there’s a downside just waiting to be uncovered.

One of the principal concerns about AI stems from its potential to spread misinformation. Social media platforms such as Facebook and Twitter are already having to deal with this practice, and they’ve taken to shutting down bots designed to spread hate speech and inflame public opinion.

According to Greg McBeth, head of revenue at Node.io, what’s currently an annoyance will only continue to escalate: “I believe there’s potential for an AI-driven misinformation crisis in our lifetime. AI can already convincingly manipulate images and video,” McBeth noted, citing as an example instances in which some actresses’ faces were superimposed onto inappropriate photos. Unfortunately, fake news is just the beginning.

In addition to faking images and videos, programmers with malicious intentions will use AI to commit other crimes, from the forging of financial documents that impact credit to the fabrication of phony evidence to produce wrongful convictions. In order to combat these efforts, we need to take the following steps.

1. Start the conversation now.

Advancements in AI are accelerating, and the use of the technology for nefarious purposes will as well. While news coverage seems to emphasize the revolutionary possibilities of AI, we must not shy away from the potential consequences. Earlier this year, Facebook’s Mark Zuckerberg warned that it could be a decade before AI is able to recognize the nuances that allow it to red flag hate speech or false information.

AI’s more nefarious uses could greatly outpace AI-based countermeasures. As a business leader, you can help guide this conversation. For instance, you could set up a roundtable discussion at an industry conference to share information and increase awareness of how AI may be used to spread misinformation — and where the tech comes up short in detecting it.

2. Create safeguards for defense.

Science fiction author Isaac Asimov thought up his three laws of robotics with android servants in mind. We still don’t have robots doing our household chores (not counting vacuums), but the laws have withstood the test of time.

To prevent AI from causing harm, the business community needs similar, universally accepted safeguards that apply to AI development. For instance, if you intend to use robots, you may be tempted to simplify the interface required to control them in order to make them more user-friendly for your employees. But be careful to balance those efforts with attention to cybersecurity. It’s imperative to address system vulnerabilities that could make it easier for hackers to gain access to your robot and network.

3. Arm citizens with AI education.

In order to mitigate the damages of misinformation, the business community needs to educate the public about what AI is capable of, both good and bad. Include educational resources on this subject on your blog, website, email newsletter, and social media accounts. Inform your customers about your use of AI and what safeguards or policies you have in place to prevent cyberattacks.

When people are aware of ways AI can be used maliciously, they’re more likely to recognize the red flags. For instance, if someone knows how to recognize signs that a Twitter account is potentially a political bot, they may think twice before retweeting something it shared.

On the other hand, when people are ignorant of AI’s misuse, they won’t hesitate to propagate misinformation. This needs to be a society-wide effort, but you can start by working with your team and your customers so they know what AI can do.

AI is responsible for exciting developments, but it’s a powerful tool that can be used to do harm as well. Ultimately, it’s impossible to prevent bad actors from developing AI for their own ill-intentioned purposes. But by taking these steps, business leaders can help minimize the impact of AI’s downsides.

This Is the Most Riotously Insane Thing About the Massive Marriott Data Breach You're Likely to Hear

Not to worry, Yahoo, you still had the largest data breach in corporate history, at 3 billion records. But at 500 million, Marriott is a strong second, and maybe should be first.

That’s because of the nature of the data that went out the door for about 327 million of the people who had stayed at a Starwood property on or before September 10, 2018. (And starting in 2014, because that’s how long it’s been since someone first broke into the system.)

The data included some combination of name, mailing address, phone number, email address, Starwood Preferred Guest (“SPG”) account information, birth date, gender, arrival and departure information, reservation date, communication preferences, and passport number.

Passport number? Yup. They kept them on file. And an undisclosed number of encrypted payment card numbers, expirations dates, and maybe–Marriott’s really not quite sure–enough information to let someone crack the encryption.

Yes, this is really, really bad.

Oh, and TechCrunch also noted the the claim that Russian cybercriminals got into the Starwood servers. It can’t keep getting worse, right?

You know the answer.

Marriott’s promised email notifications to affected customers will come from a fake-ish looking email address, as TechCrunch noted, and one that could be easily spoofed by people who want to cause even more damage. In other words, beware of phishing hacks that stand on the back of Marriott’s efforts to address the terrible position it’s put so many customers into.

And now we come around to the latest insanity. As part of its response, Marriott set up a website that ultimately points you to a third party service that “monitors internet sites where personal information is shared and generates an alert to the consumer if evidence of the consumer’s personal information is found.”

The third party running the service, corporate investigations and risk management firm Kroll, of course is going to need information from you to see if it pops up on the dark web. Here is what they might want, directly from their website:

  • name, address, phone number, and e-mail address
  • date of birth, driver’s license number, social security number, passport number, and other similar information
  • copies of government-issued photo identification, Social Security card and/or utility bill(s), where applicable
  • credit card number and other financial account data, including your consumer credit file(s), as applicable
  • your responses to security questions; the information you provide in customer service correspondence; and general feedback

You’re going to have to cough up enough information to see if they can match it to anything on the dark web. You’ll have to trust that everything will be fine. Which is what you did with Marriott in the first place.

Fat lot of good that did almost half the country.

How does this keep happening? As I explained in a piece over at Vice Motherboard, it all comes down to economics. The ultimate penalties big companies pay are so infrequent and small in comparison to their revenues that it becomes something just as easy to ignore. The millions of dollars you may hear about as the cost of a data breach is significantly smaller than a rounding error in accounting to them.

Not that I’m suggesting Marriott is ignoring this. Just a comment on the general treatment of customer data security by large corporations.

The only hope is that government officials take enough heat from voters that they put significant fiscal punishment into place. I’d settle, at least in this case, for Marriott to pay the cost for all the people who might now need to obtain a new passport. That at least would be a start.

But there’s the other factor: consolidation. Marriott is the largest hotel operator in the world. If you’re traveling, there’s a good chance you’ll land in one of its properties. Unless, of course, you remember all this nonsense and intentionally stay elsewhere.

Even if you don’t get more points, you might at least keep your data secure.

U.S. lawmakers make final push to win approval of self-driving car bill

WASHINGTON (Reuters) – Key U.S. senators are making a last-ditch effort to win approval of a bill to speed the use of self-driving cars without human controls, but face an uphill battle on Capitol Hill.

The U.S. Capitol building is seen in Washington, U.S., February 8, 2018. REUTERS/ Leah Millis

Staff for Republican Senator John Thune and Democratic Senator Gary Peters circulated a draft of a revised bill aimed at breaking a legislative stalemate.

The pair have been working for more than a year to try to win approval of the bill by the Senate and have said they may try to attach the measure to a bill to fund U.S. government operations.

The U.S. House unanimously approved a measure in September 2017, but it has been stalled in the Senate for over a year. Automakers and congressional aides concede they face tough odds of getting approval in the final days before the current Congress adjourns.

A key sticking point has been whether the measure would limit the ability of companies to compel binding arbitration for consumers using autonomous vehicles. The aides’ draft limits the use of those clauses in death or serious injury crashes, while the bill that passed the House did not include the limitation.

The revised draft would require manufacturers to validate that self-driving cars can detect all road users – including pedestrians, bicyclists and motorcyclists.

It would also require additional reports of potential safety issues involving vehicles that have systems like Tesla Inc’s Autopilot that handle some driving tasks.

Automakers say the bill is critical to advancing the technology that could save thousands of lives, but a group of safety advocates in a letter to lawmakers urged they not to move ahead with legislation in the final days of the current Congress.

“Rushing through a driverless vehicle bill that lacks fundamental safeguards will make our roads less safe and risks turning an already skeptical public even more against this technology,” the letter said.

Under the legislation, automakers would be able to win exemptions from safety rules that require human controls. States could set rules on registration, licensing, liability, insurance and safety inspections, but not set performance standards.

Automakers have been pushing for legislation as they try to move forward.

General Motors Co in January filed a petition with U.S. regulators seeking an exemption for the current rules to use vehicles without steering wheels and other human controls as part of a ride-sharing fleet it plans to deploy in 2019, but has receive no decision to date.

Alphabet Inc’s Waymo unit plans to launch a limited commercial autonomous ride-hailing service in Arizona by year-end.

In March, a self-driving Uber Technologies Inc [UBER.UL] vehicle struck and killed a pedestrian, while the backup safety driver was watching a video, police said. Uber suspended testing in the aftermath and some safety advocates said the crash showed the system was not safe enough to be tested on public roads.

Reporting by David Shepardson, editing by G Crosse

Qualcomm says China comment will not revive NXP deal

(Reuters) – U.S. chipmaker Qualcomm Inc (QCOM.O) said on Monday it was not looking to revive its abandoned $44 billion acquisition of Dutch peer NXP Semiconductors NV (NXPI.O), a day after the White House said China would reconsider clearing a deal if it was attempted again.

Qualcomm, the world’s biggest smartphone-chip maker, walked away from its agreement to buy NXP in July, after failing to secure Chinese regulatory approval. The planned deal was first agreed between the two companies in October 2016.

Qualcomm, headquartered in San Diego, California, and NXP, based in Eindhoven, the Netherlands, needed China’s blessing for their deal because of their presence in that country.

After high-stakes talks on Saturday between U.S. President Donald Trump and Chinese President Xi Jinping in Argentina, the White House said in a statement that China was “open to approving the previously unapproved” deal for Qualcomm to acquire NXP “should it again be presented”.

But Qualcomm said there was no prospect for the acquisition to be revived.

“While we were grateful to learn of President Trump and President Xi’s comments about Qualcomm’s previously proposed acquisition of NXP, the deadline for that transaction has expired, which terminated the contemplated deal,” a Qualcomm representative said via email.

“Qualcomm considers the matter closed.”

NXP declined to comment.

On Monday, White House economic adviser Larry Kudlow told reporters that President Trump put the issue of the acquisition on the table in the talks with the Chinese president.

Kudlow added that the Chinese president’s openness to the deal was a sign of further cooperation on multiple issues, including corporate mergers. Xi’s reported comment could embolden some potential acquirers in the semiconductor space to explore transactions, corporate dealmakers said.

“Although that acquisition cannot be resuscitated, Xi’s comment reveals in plain sight that Chinese antitrust policy is inherently politicized,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies in a blog post.

FILE PHOTO: A sign on the Qualcomm campus is seen, as chip maker Broadcom Ltd announced an unsolicited bid to buy peer Qualcomm Inc for $103 billion, in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake

Qualcomm shares closed up 1.5 percent at $59.14 in New York on Monday, while NXP shares ended up 2.75 percent at $85.67.

Qualcomm and NXP did not lobby for the Trump administration to bring up the abandoned deal in its meeting with Xi and other Chinese officials on the sidelines of the G20 summit in Buenos Aires on Saturday, which was dominated by negotiations over trade tariffs, according to sources close to the companies.

The two companies were surprised to see that the terminated deal resurfaced as an issue, the sources added, requesting anonymity to discuss confidential deliberations. Qualcomm was given just an hour’s notice by the Trump administration about Xi’s comment on the NXP deal, and its inclusion in the White House statement, according to two of the sources.

The Trump administration had unsuccessfully lobbied the Chinese government earlier this year to give its blessing to the deal.

China’s foreign ministry declined to comment on Qualcomm during a regular media briefing on Monday.

Qualcomm had sought to purchase NXP because of its market position as a dominant supplier to the automotive market, as car makers add more chips to vehicles each year. Qualcomm is now focused on developing its own chips for the automotive market, according to one of the sources.

Qualcomm had to pay NXP a $2 billion fee to terminate the deal. To appease its shareholders, Qualcomm has also embarked on a $30 billion stock repurchase plan to return to them most of the money that would have been used for the NXP deal. It has spent more than $20 billion in share buybacks in the last 12 months. NXP has also announced its own $5 billion share buyback program.

DEALS ABANDONED

Several deals by semiconductor companies were put on ice after the Qualcomm/NXP deal fell through, simply because they had a footprint in China and required regulatory approval there. Now, chip companies may be more optimistic about their regulatory chances in China.

One example could be Xilinx Inc (XLNX.O), a U.S. provider of chips used in communications network gear and consumer electronics that has a big presence in China. Xilinx is currently vying to acquire Israeli chip maker Mellanox Technologies Ltd (MLNX.O) after it decided to run an auction to sell itself, according to people familiar with the matter. A successful acquisition of Mellanox could prove an important test of China’s appetite to approve such deals. A representative for Xilinx declined to comment. Mellanox did not immediately respond to requests for comment.

A more near-term test being watched by dealmakers is KLA-Tencor Corp (KLAC.O) pending acquisition of fellow semiconductor equipment maker, Israel’s Orbotech Ltd (ORBK.O). The $3.4 billion deal, announced in March, is still awaiting Chinese regulatory approval. KLA-Tencor’s CEO said on the company’s last earnings call that he expects the deal to close by year end.

Thus far, other high-profile mergers and acquisitions involving U.S. companies in other sectors have received Chinese approval. Last month, China approved United Technologies Corp’s (UTX.N) $30 billion purchase of aircraft parts maker Rockwell Collins Inc and Walt Disney Co’s (DIS.N) $71.3 billion deal to buy most of Twenty-First Century Fox’s (FOXA.O) entertainment assets.

Acquisitions of U.S. companies by Chinese companies, on the other hand, have been few and far between in the last year, after the Committee on Foreign Investment in the United States (CFIUS), a government panel that scrutinizes deals for potential national security risks, shot down more of these deals, such as Ant Financial’s plan to acquire U.S. money transfer company MoneyGram International Inc (MGI.O). U.S. lawmakers also passed reforms earlier this year that increased CFIUS’ scrutiny of deals.

Reporting by Liana B. Baker in New York and Kanishka Singh in Bengaluru; Aditional reporting by Greg Roumeliotis in New York, Michael Martina in Beijing and Jeff Mason in Washington, D.C.; editing by Diane Craft

The Surprising Thing This CEO Learned About Building a Team (After Firing a Top Performer)

The Surprising Thing This CEO Learned About Building a Team (After Firing a Top Performer) [VIDEO] | Inc.com

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Cindy Eckert, founder of Sprout Pharmaceuticals, tells the story of having to fire her top salesperson, and how that affected the rest of her team — for the better.

Published on: Nov 28, 2018

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Fearful of bias, Google blocks gender-based pronouns from new AI tool

SAN FRANCISCO (Reuters) – Alphabet Inc’s (GOOGL.O) Google in May introduced a slick feature for Gmail that automatically completes sentences for users as they type. Tap out “I love” and Gmail might propose “you” or “it.”

FILE PHOTO: The Google name is displayed outside the company’s office in London, Britain, November 1, 2018. REUTERS/Toby Melville/File Photo

But users are out of luck if the object of their affection is “him” or “her.”

Google’s technology will not suggest gender-based pronouns because the risk is too high that its “Smart Compose” technology might predict someone’s sex or gender identity incorrectly and offend users, product leaders revealed to Reuters in interviews.

Gmail product manager Paul Lambert said a company research scientist discovered the problem in January when he typed “I am meeting an investor next week,” and Smart Compose suggested a possible follow-up question: “Do you want to meet him?” instead of “her.”

Consumers have become accustomed to embarrassing gaffes from autocorrect on smartphones. But Google refused to take chances at a time when gender issues are reshaping politics and society, and critics are scrutinizing potential biases in artificial intelligence like never before.

“Not all ‘screw ups’ are equal,” Lambert said. Gender is a “a big, big thing” to get wrong.

Getting Smart Compose right could be good for business. Demonstrating that Google understands the nuances of AI better than competitors is part of the company’s strategy to build affinity for its brand and attract customers to its AI-powered cloud computing tools, advertising services and hardware.

Gmail has 1.5 billion users, and Lambert said Smart Compose assists on 11 percent of messages worldwide sent from Gmail.com, where the feature first launched.

Smart Compose is an example of what AI developers call natural language generation (NLG), in which computers learn to write sentences by studying patterns and relationships between words in literature, emails and web pages.

A system shown billions of human sentences becomes adept at completing common phrases but is limited by generalities. Men have long dominated fields such as finance and science, for example, so the technology would conclude from the data that an investor or engineer is “he” or “him.” The issue trips up nearly every major tech company.

Lambert said the Smart Compose team of about 15 engineers and designers tried several workarounds, but none proved bias-free or worthwhile. They decided the best solution was the strictest one: Limit coverage. The gendered pronoun ban affects fewer than 1 percent of cases where Smart Compose would propose something, Lambert said.

“The only reliable technique we have is to be conservative,” said Prabhakar Raghavan, who oversaw engineering of Gmail and other services until a recent promotion.

NEW POLICY

Google’s decision to play it safe on gender follows some high-profile embarrassments for the company’s predictive technologies.

The company apologized in 2015 when the image recognition feature of its photo service labeled a black couple as gorillas. In 2016, Google altered its search engine’s autocomplete function after it suggested the anti-Semitic query “are jews evil” when users sought information about Jews.

Google has banned expletives and racial slurs from its predictive technologies, as well as mentions of its business rivals or tragic events.

The company’s new policy banning gendered pronouns also affected the list of possible responses in Google’s Smart Reply. That service allow users to respond instantly to text messages and emails with short phrases such as “sounds good.”

Google uses tests developed by its AI ethics team to uncover new biases. A spam and abuse team pokes at systems, trying to find “juicy” gaffes by thinking as hackers or journalists might, Lambert said.

Workers outside the United States look for local cultural issues. Smart Compose will soon work in four other languages: Spanish, Portuguese, Italian and French.

“You need a lot of human oversight,” said engineering leader Raghavan, because “in each language, the net of inappropriateness has to cover something different.”

WIDESPREAD CHALLENGE

Google is not the only tech company wrestling with the gender-based pronoun problem.

Agolo, a New York startup that has received investment from Thomson Reuters, uses AI to summarize business documents.

Its technology cannot reliably determine in some documents which pronoun goes with which name. So the summary pulls several sentences to give users more context, said Mohamed AlTantawy, Agolo’s chief technology officer.

He said longer copy is better than missing details. “The smallest mistakes will make people lose confidence,” AlTantawy said. “People want 100 percent correct.”

Yet, imperfections remain. Predictive keyboard tools developed by Google and Apple Inc (AAPL.O) propose the gendered “policeman” to complete “police” and “salesman” for “sales.”

Type the neutral Turkish phrase “one is a soldier” into Google Translate and it spits out “he’s a soldier” in English. So do translation tools from Alibaba (BABA.N) and Microsoft Corp (MSFT.O). Amazon.com Inc (AMZN.O) opts for “she” for the same phrase on its translation service for cloud computing customers.

AI experts have called on the companies to display a disclaimer and multiple possible translations.

Microsoft’s LinkedIn said it avoids gendered pronouns in its year-old predictive messaging tool, Smart Replies, to ward off potential blunders.

Alibaba and Amazon did not respond to requests to comment.

Warnings and limitations like those in Smart Compose remain the most-used countermeasures in complex systems, said John Hegele, integration engineer at Durham, North Carolina-based Automated Insights Inc, which generates news articles from statistics.

“The end goal is a fully machine-generated system where it magically knows what to write,” Hegele said. “There’s been a ton of advances made but we’re not there yet.”

Reporting by Paresh Dave; Editing by Greg Mitchell and Marla Dickerson

Elon Musk Says: If You Want to Be Happy, Never Do This 1 Surprising Thing

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Elon Musk. The name alone inspires passion.

He’s either a generational genius or a misguided maniac. But there’s one thing just about everyone can agree on: he’s a workaholic. Maybe a borderline dangerous one.

It turns out even Musk himself agrees with that characterization. In an interview with Axios on HBO that aired Sunday night, Musk talks about his greatest fears (the “existential threat” of artificial intelligence), and why 2018 has been his hardest year.

It’s not the Securities and Exchange Commission settlement or his Twitter fight over the Thai cave rescue. Instead, despite his sanguine demeanor over Tesla this year, he now now admits that the company came within “single digit weeks” of death this year, during the ramp up to production of the Model 3.

And during that time, he says, he put in insane hours seven days a week, sleeping in the factory, because “if I didn’t do it, then [there was a] good chance Tesla would die.” 

But he doesn’t recommend the experience.

“No one should put this many hours into your work,” Musk said in perhaps the most poignant part of a short but intense interview. “This is not good. People should not work this hard … It hurts my brain and my heart. … There were times when I was working literally 120 hours. This is not recommended for anyone.”

Of course, then he tweeted just 24 hours later: “There are way easier places to work, but nobody ever changed the world on 40 hours a week.”

Here’s what else I’m reading today:

As long as we’re talking about electric car companies…

An electric car startup with $500 million unveiled the first of two new vehicles Monday: a pickup truck that it says can get 400 miles on a single charge. If you haven’t heard of Rivian, of San Jose, California, that makes sense: it’s been in stealth mode for nine years. Today the company says it plans to unveil a second car: an SUV that will go into production in 2020.
Kevin J. Ryan, Inc.

GM slashes jobs

The iconic American car company said Monday it’s going to cut 15,000 jobs, and potentially shut down five North American factories. Company shares jumped on the news, even as President Trump threatened that “they better” replace closed plants in Ohio, a key 2020 election battleground, with other factories in the state.
Reuters

The Irish investigation of LinkedIn

An Irish government agency says it caught LinkedIn using 18 million email addresses that it wasn’t supposed to have access to, in order to target people with ads on Facebook. Lucky for LinkedIn: the offense allegedly took place before new GDPR rules that could have resulted in a hefty fine.
Ingrid Lunden, TechCrunch

And the British investigation of Facebook

British MPs have tried without success to get Mark Zuckerberg to testify before Parliament, and so now they’ve played a high card. They seized internal Facebook documents allegedly contain “significant revelations” about how Facebook made its decisions about privacy and data controls before the Cambridge Analytica scandal. They way they got the documents is right out of a novel — it involved detaining the head of a small software firm, who had obtained the Facebook documents in the course of a lawsuit against the social media giant. Facebook’s immediate problem: trying to stop them from being released publicly.
Carole Cadwalladr, The Guardian

Black Friday was good. Almost too good.

Online purchases were through the roof on Black Friday even though store traffic was down a bit, but the success caught retailers unprepared. Scores of high demand products, from the Instant Pot to the Nintendo Switch sold out quickly. And 3.26 percent of online product pages displayed out-of-stock messages, which likely cost companies $120 million in sales.
Guadalupe Gonzalez, Inc. and Kate Taylor, Business Insider
 

Crash Protection Kicks In For IBM

An IBM computer in the console of the Pan American space plane helps its pilot dock at the space station in 2001: A Space Odyssey (1968). Image via I Like Interfaces.

IBM Takes A Tumble

In an article last month (In Case IBM Tumbles), I presented two hedges for International Business Machines (IBM) longs. Since then, IBM shares have slid more than 22%.

Chart

IBM Total Return Price data by YCharts

Here, I’ll show how those hedges ameliorated this slide and talk briefly about what hedged IBM longs can do now. First, though, a quick reminder about the purpose of hedging: you hedge when you are bullish about a security (otherwise you wouldn’t own it) but want to limit your risk in the event you were wrong. IBM longs who hedged in October didn’t expect the stock to drop as much as it has, but wanted to protect themselves in case it did.

The October Optimal Put Hedge

As of October 3rd’s close, these were the optimal, or least expensive, put options to hedge 500 shares of IBM against a >17% decline by mid-April (optimal hedge screen captures via the Portfolio Armor iPhone app).

Image via PA.

Note that the cost here was $1,040, or 1.36% of position value (calculated conservatively, using the ask price of the puts).

Let’s look at how that hedge has reacted to the 41% drop.

How The Optimal Put Hedge Has Reacted

Here’s an updated quote on those puts as of Friday’s close (via CBOE):

How That Hedge Ameliorated IBM’s Drop

IBM closed at $151.31 on October 4th. A shareholder who owned 500 shares of it and hedged with the puts above then had $75,655 in IBM shares plus $1,040 in puts, so the net position value was $75,655 + $1,040 = $76,695.

The stock closed at $117.19 on Friday, November 23rd, down about 22.5% from its close on October 4th. The investor’s shares were worth $58,595 on Friday, and the put options were worth $8,000, using the midpoint of the spread. So, the net position value as of Friday’s close was $52,595 + $8,000 = $66,595. $66,595 represents a 13.2% drop from $76,695.

The October Optimal Collar Hedge

On October 4th, this was the optimal collar to protect against a >17% drop in IBM by mid-April, while not capping your possible upside at less than 17% by then.

Image via PA.

In this case, the net cost of the hedge was negative, meaning you would have collected a $260 net credit, assuming, conservatively, that you bought the puts and sold the calls at the worst ends of their respective spreads.

How That Optimal Collar Hedge Has Reacted

In this case, the put leg of the collar used the same strike as in the previous hedge:

And here’s an updated quote on the call leg:

How That Hedge Ameliorated IBM’s Drop

Recall that IBM closed at $151.31 on October 4th. A shareholder who owned 500 shares of it and hedged with the collar above then had $76,655 in IBM shares plus $1,040 in puts, and if the investor wanted to buy to close the short call position, it would have cost him $1,300. So, his net position value on October 4th was ($75,655 + $1,040) – $1,300 = $75,395.

On Friday, the shares were worth $58,595, the put options were worth $8,000, and it would have cost $60 to buy to close his calls, using the midpoint of the spread in both cases. So, ($58,595 + $8,000) – $60 = $66,535. $66,535 represents an 11.8% drop from $75,395.

More Protection Than Promised In Both Cases

Although IBM dropped by about 22.5% from October 4th to November 3rd, and both hedges were designed to protect against a >17% drop, the optimal put hedge limited the drawdown to 13.2%, and the optimal collar hedge limited it to 11.8%. This is another example of the impact of time value on hedges based on intrinsic value alone.

So What Now?

That depends on what you think IBM’s prospects are between now and April, and whether you are a long-term bull beyond that. If you are a long-term bull, then you’re probably not planning to exit. Instead, you might consider selling your puts and using the proceeds to buy more shares. You might also consider buying-to-close your short call leg, if you’re hedged with the collar, to eliminate your upside cap. If you decide that you’re no longer bullish, you can exit now for a smaller loss. The nice thing about being hedged, though, is that it gives you options (no pun intended). You don’t have to worry so much about how much further IBM might drop because you have relatively little downside left from here (you’re not going to be down more than 17% with these hedges). You have breathing space to let the dust settle and decide on your best course of action without the anxiety of an unhedged investor.

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.

Exclusive: Russia plans stiffer fines for tech firms that break rules – sources

MOSCOW (Reuters) – Russia plans to impose stiffer fines on technology firms that fail to comply with Russian laws, sources familiar with the plans said, raising the stakes in the Kremlin’s fight with global tech giants such as Facebook (FB.O) and Google.

FILE PHOTO: People release paper planes, symbol of the Telegram messenger, during a rally in protest against court decision to block the messenger because it violated Russian regulations, in Moscow, Russia, April 30, 2018. REUTERS/Tatyana Makeyeva

Over the past five years, Russia has introduced tougher internet laws that require search engines to delete some search results, messaging services to share encryption keys with security services and social networks to store Russian users’ personal data on servers within the country.

The plans for harsher fines are contained in a consultation document prepared by the administration of President Vladimir Putin and sent to industry players for feedback, according to three sources familiar with the draft document.

At the moment, the only tools Russia has to enforce its data rules are fines that typically only come to a few thousand dollars or blocking the offending online services, which is an option fraught with technical difficulties.

The proposal is to amend the legislation so a company not complying with the rules is subject to a fine equal to 1 percent of its annual revenue in Russia, according to the sources and a copy of the document seen by Reuters.

The Kremlin did not respond to a request for comment.

A representative of state telecoms regulator Roscomnadzor, Vadim Ampelonsky, said he could not comment because his agency was not involved in drafting laws.

Russian regulator Roscomnadzor has repeatedly accused Facebook and Google of failing to comply with Russian laws. It blocked access to LinkedIn in 2016 and tried to do the same to the Telegram encrypted messenger service in April.

A Google representative in Russia declined to comment on the accusations or the proposal for new fines. Neither Facebook nor Telegram CEO Pavel Durov responded to requests for comment.

One of the sources who told Reuters about the proposal works for a Russian technology firm, one is at a foreign tech company and the third works for an industry lobby group.

They spoke on condition of anonymity because they are not authorized to speak to the media.

Slideshow (2 Images)

‘SIGNIFICANT AMOUNT’

Just like lawmakers and officials in the United States and the European Union, Russia is wrestling with the challenge of how to limit the power of tech companies that have accumulated vast wealth and enormous vaults of data.

The proposal to levy companies 1 percent of annual revenue could lead to substantial fines.

Google’s Russian subsidiary, for example, had revenue of 45.2 billion roubles ($687 million) in 2017, according to the SPARK database which aggregates data from business registries.

“For a foreign company, that’s already a significant amount,” the source at the foreign tech firm said, though they added that it was unclear how the fine would be collected given some companies have no legal entity in Russia.

Under the proposed amendments, a fine could also be levied multiple times on the same company for every time it is found to have committed a violation.

By comparison, under current legislation the maximum fine Google in Russia can face in an ongoing case brought against it by Roscomnadzor is 700,000 roubles ($10,595).

That case relates to allegations that Google, which is owned by Alphabet Inc. (GOOGL.O), failed to comply with requests to remove search results for organizations that are banned in Russia. Google has not commented on the allegations.

Facebook has said it is in discussions with the telecoms watchdog about its compliance with the rules. It has not moved servers containing its Russian users’ data to Russia, three years after a law was passed requiring the move.

In addition to stiffer fines, Russian authorities would retain the power to block companies’ online services under the new laws, according to the draft proposal seen by Reuters.

The source in the industry lobby group said companies in the sector could accept higher fines if they were applied fairly and they replaced the practice of blocking sites. But he said firms would oppose rules that allow both fines and blocking.

“But generally speaking anything that brings order to the system of blocking that has sporadically arisen at various times is an excellent idea,” the source said.

Blocking has caused technical problems in the past. When officials tried to block Telegram in April they inadvertently stopped Russian users’ access to voice calls on the Viber messaging service and cloud-based applications for Volvo cars, among other services. Telegram is still accessible in Russia.

Reporting by Maria Kolomychenko; editing by David Clarke

7 Awesome Cyber Monday 2018 Deals for Millennials and Young Adults

It’s predicted that $23B will be spent online between Thanksgiving Day and Cyber Monday. In fact, Cyber Monday is slated to set a record as the biggest online shopping day of the entire year, up almost 18% from 2017.

Here are 7 excellent Cyber Monday deals (some of which are available from Black Friday all the way through the weekend):

1. A MacBook Air for under $350

Need a new laptop? Walmart is selling a refurbished Apple MacBook Air (11.6-inch) for $319.99.

Apple itself is also doing a Black Friday through Cyber Monday sale. If you buy a MacBook Air for $999, you get a $200 Apple Store Gift Card.

2. Lucky Brand jeans

Wanna get Lucky? Cyber Monday will see 50%-60% off deals, with free shipping on purchases $50 or more. Last year, you could even stack this with another 25% off coupon code for even more savings.

3. A new snowboard

Been thinking of investing in a big-ticket sports item this season? Dick’s Sporting Goods is doing 25% off site-wide for Cyber Monday. Free shipping (or buy online and pick up in store).

4. Cruelty-free makeup and bath products

If you’re into high-quality, ethical makeup and bath products (or shopping for someone who is), this is a very good deal: for Cyber Monday, The Body Shop is expected to offer 50% off its entire line of skincare and body products, with free shipping. This is arguably their best sale of the year.

5. 60-minute massages for $27 or less

Groupon is offering up to 91 percent off everything from physical items to services like massages. In the LA area, for example, you can get a 60-minute massage at Sparadise with aromatherapy and reflexology for $49 (down from $115); or a couples massage with foot reflexology for $49 (down from $100).

6. A $3,100 vacation for $499

If you’ve ever wanted to do a classy, resort-style winter getaway, this is the time to go: Bluegreen Vacations is running a Cyber Monday deal that’s 80 percent off. They’re offering customizable, 7-night resort packages for $499. Pick from 20 properties around the country, including places like the beautiful Wilderness Club in the Ozark Mountains of Missouri (picture snowshoeing followed by a mug of cocoa by the fire).

7. Swarovski earrings for $7

Need a great gift for a lovely lady? These stud earrings with Swarovski elements retail for $79, but you can get them for $6.99 right now.

8. BONUS TIP: Wait until Tuesday to buy airfare

Air travel company Hopper has analyzed flight pricing data over time and says the best airfare sales are on the Tuesday after Thanksgiving (not Cyber Monday).

According to the company’s chief data scientist Patrick Surry, “Last year, we sent more deal notifications on Travel Deal Tuesday than Black Friday and Cyber Monday combined. In 2016, we saw fare sale activity spike by 2X the normal volume.”

A few of their predictions for this Tuesday’s flight deals:

  • Honolulu: 27% off
  • New York: 26% off
  • Rio de Janeiro: 32% off (it’s worth remembering that it’s summer in Rio right now)
  • Aruba: 32% off
  • London: 40% off

Happy hunting.

George Orwell's Advice on How to Tweet Effectively

George Orwell has been in the news lately, not because he authored the classic dystopian novel 1984 but because he wrote a famous set of rules for clear writing which, if followed, might resemble Trump’s tweets.

I say “famous” with some reservations since I had never heard of them before (or forgot about them if I had). Anyway, since I’m always looking for pointers on good writing, I decided to check them out.

What I discovered is that, whatever his original intentions for these rules, they’re a concise and valuable summary of how to write great tweets or, more generally, the short slices of writing that work well when you’re communicating online. Here they are:

1. “Never use a metaphor, simile, or other figure of speech that you are used to seeing in print.”

Most journalists write on deadline and write articles that must be of a pre-defined length. Since most journalists don’t have much to say, they tend to add a lot padding in order to hit their target article length.

That’s why you see figures of speech in mainstream journalism like “In this day and age,” “ballpark figure,” “when all is said and done,” “make no mistake,” etc. These sort of clichés are boring and add bulk to your writing without adding meaning. They waste space even as they fade into the background.

Brevity, however, is the soul of tweet.  When you’re tweeting, texting, commenting, or doing anything online other than writing articles or long emails, you want everything to be crisp and vivid as possible. Online readers won’t wade through fluff; they’ll just move on.

2. “Never use a long word where a short one will do.

Twitter famously has an artificial limitation of 140 (and now 280) characters. While it’s easy to do multiple 1,2,3… tweets, the more wordy you get, the less likely readers are to keep reading. 

An easy way to shorten the character count of a tweet is to substitute short words for long words that have the same meaning. Examples: “use” rather than “utilize,” “absurd” rather than “ludicrous,” etc.

However, when you apply this rule, the long and short words in question must have identical meanings. When words have different implications, a long word might pack more punch than a short one and thus be worth the extra length.

For example, while “spectacular” and “showy” have almost identical meanings, the sentence “she wore a spectacular dress” has a different flavor and emotional connotation than “she wore a showy dress.” 

3. “If it is possible to cut a word out, always cut it out.”

Extra words add bulk without adding meaning. And since bulk is the enemy of good in the twitter-sphere, removing words or restructuring sentences to eliminate words are both good habits to cultivate. Examples:

BAD: “The reason people believe in him is that they’re gullible.”

BETTER: “People are gullible and hence believe him.”

BAD: “This application was designed to enable users to reduce cycle time.”

BETTER: “This application reduces cycle time.”

4. “Never use the passive where you can use the active.”

There are two reasons why the active voice works better for online communications than the passive voice:

  1. The active voice (e.g. “he hit me”) is more vivid than the passive voice (e.g. “I was hit by him.”).
  2. The active voice requires fewer words, thereby making your writing tighter. 

I might note that this advice to use the active and eschew the passive is less important in longer form writing because the passive can be quite effectively used to throw emphasis on what’s important in the next sentence.

The sentence above (“I might note”…) makes this point. Converting it to the active voice…

“Because if you want to throw emphasis on an idea that’s going to appear in the next sentence you can use the passive to stick the word you want to emphasize at the end of the sentence.” 

…is pretty awkward. 

5. “Never use a foreign phrase, a scientific word or a jargon word if you can think of an everyday English equivalent.”

Foreignisms, techie-talk and jargon are how insiders communicate among their own. They must therefore be avoided whenever your intent is to transfer ideas to those outside your in-crowd. I might add that acronyms have the same limitation.

Obviously, some tweets (like the Instagrams my kids share with their friends) are intended to be understood only by a limited audience (not including parents) and are thus intentionally use jargon. That’s fine, as long as you know what you’re doing. LOL

6. “Break any of these rules sooner than say anything barbarous.”

Expletives, slurs, obscenity, and profanity, as communications tools, can be both vivid and crisp. As such, “barbarous” communication can easily fall within the restrictions of the five rules provided above.

However, using such language can come back to bite you, big time, especially since nothing ever really disappears on the Web. 

BTW, Orwell included this rule because he observed that politicians use neologisms and misdirection to tart up dumb ideas, make banal observations seem profound, and hide bad intentions behind high-minded rhetoric.

He believed that following the five previous rules would make those communication strategies impossible. Trump is an excellent example of this. He’s never attempted to use eloquence to hide dumb ideas, banal observations, or bad intentions.

The problem–from the Orwellian perspective–is that Trump says “barbarous” things that actually reflect how he thinks and what he believes. That’s good, in a way, because nobody is being bamboozled by fancy verbiage.

A Driver Returned to His Car to Find a Note and An Incredible Lesson on Doing the Right Thing. The Note Was From a 6th Grader

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

A grasp of ethics is becoming slightly more popular in business these days.

Well, we can thank the Valley’s abject disregard for ethics, one that’s finally caught up with many of its companies. Why, even Stanford has begun to discover the concept.

Still, when you run a business you don’t always — often? ever? — expect people to do the right thing.

Which is, perhaps, why the story of Andrew Sipowicz and his car has moved so many this week.

He returned to his car last Monday, parked in Buffalo, New York, to experience a sinking feeling. 

He also experienced something he never expected.

His car, you see, had endured a substantial dent in its front left side. It seemed as if there had been a hit and a run. 

Yet perched inside his windshield wiper was a note. A very detailed note, as it happened, from a 6th grader.

The spelling wasn’t perfect. The sentiment certainly was.

It read: 

If your wondering what happen to your car.

Bus: 449 hit your car It stops here everyday to drop me off.

At 5:00pm.

What happened? She was trying to pull off and hit the car. She hit and run. She tried to vear over and squeeze threw but couldn’t. She actually squeezed threw. She made a dent and I saw what happened.

-Sorry

-Driver seat left door

-A lady in the bus driver seat 499.

-Buffalo Public School bus

-A 6th grader at Houghten Academy

It sets a good example for a lot of students. Not just students, but just people in general.

What resulted is that the bus company is covering the cost of repairs and giving Sipowicz a loaner car. The bus driver, reports CNN, will be fired.

We get wrapped up in the bad deeds of companies because they appear to have such large consequences.

At heart, though, the bad deeds of companies are merely the bad deeds of individuals, written in capital letters and involving large amounts of capital.

Yet simple stories of goodwill also spread around the web, as this one has. 

It’s almost as if people want to be reassured that, in the midst of a world that seems to bathe delightedly in corruption, there still are good people. 

That story led to unexpected consequences and national attention. 

These days, we watch as so many who could say something, end up saying nothing.

We’re told that kids don’t bother with anything but themselves, buried as they are in their phones. 

Here, though, is a simple lesson of a 6th-grader who stopped, looked around and did the right thing. A generous thing.

Perhaps we should all do that a little more often.

French tobacco shops to sell bitcoins via fintech company

PARIS (Reuters) – French tobacco shops, where people go to buy lottery tickets and cigarettes, will start offering bitcoins to customers from early next year via a deal with a French fintech company Keplerk.

FILE PHOTO: A sign indicates a tobacconist shop in Bordeaux, France, September 19, 2017. REUTERS/Regis Duvignau/File Photo

Keplerk said it has secured a contract with a local cash register software provider to give tobacco shops the possibility to sell the cryptocurrency to their customers.

The tobacco shop owners will sell customers a voucher which can be used to obtain bitcoins via an electronic wallet owned by Keplerk. They will be the first brick and mortar shops to sell bitcoins anywhere in the world, Keplerk said.

“Tobacco shop owners are the best channel as they are trusted by customers and they are used to sell vouchers such as credit for mobile phones,” Adil Zakhar, Keplerk’s director for strategy and development, said.

Keplerk has been working on the project to sell bitcoins to retail investors for a year and a half.

French regulators, including the country’s central bank, have warned savers about the potential risks associated with investing into cryptocurrencies.

The central bank said it does not supervise the Keplerk initiative.

“Those are purely speculative assets and not currencies. Those who invest in bitcoin or other crypto-assets do it at their own risk,” the Central Bank said in a statement on Wednesday.

France’s 24,000 licensed tobacco shops have already diversified to sell lottery tickets, credits for cellphone operators or video and music streaming services.

Keplerk said it will finance the project by charging a 7 percent commission fee on every transaction.

Bitcoin has attracted a mix of investors, some convinced that it can reshape global finance by displacing traditional means of payments and others attracted by rapid gains that pushed it close to $20,000 in December.

It has since lost three-quarters of its value, falling below $4,500 on Tuesday.

Reporting by Inti Landauro, additional reporting from Thomas Wilson. Editing by Jane Merriman

Have You Built a Culture of Creativity?

But before a company can build their business value of design, some critical building blocks must be in place. 

They must first prime the organization to have a culture of creativity that supports design-centric initiatives.  This only happens when companies get really good at leveraging creativity as an innovation resource.  

I’ve written in an earlier article about the significance of “the human quotient” in companies as they grapple with the future of work in the midst of our 4th Industrial Revolution- a time when we are tethered to cloud technology, AI, VR, robotics and data in ubiquitous ways.  Pointing out the business value of design is another way of acknowledging that when a company starts with their customers’ human needs and desired experiences, and builds products and services around those drivers, it is ultimately a more efficient way to run a business.

The human quotient is grounded in creativity.  Creative approaches to business outcomes can positively affect revenue generation, market share diversification, efficiencies and cost reductions.  This has to happen in an inside-out manner.  That is, the creative impact of your products and services on people’s lives will only come to pass when the company builds a culture of creativity.  This is especially true at a time when employee engagement, generative thinking and thought diversity in a company are critical means to innovation.  

Here are three ways companies can build their creative competencies, and thus prime themselves to build the business value of design.

1.     Encourage Curiosity

Leaders need to model that inquiry – versus certainty- gets us to the next level. There are market leader companies- such as Amazon, Whole Foods and Lyft- who would have never anticipated 5 years ago with certainty, where they are today.  There are new alliances they now make based on macro-environmental drivers.  Encouraging people to ask lots of questions and not equate curiosity with appearing ignorant is a crucial first step.

2.     Improvise

Companies that design flexible structures and processes, versus rigid rulebooks, are better off.  Humans respond well to structure – to an extent.  Structure helps us to understand the limits we can push.  This is the very nature of improvisation.  Like jazz music, all improvisational systems have rules.  It’s the ability to stretch and rebound off the rules which allows for adaptive and responsive solutions to customer needs.  

3.     Intuit

While most corporate boardrooms don’t admit out loud the role of intuition in decision making- because of our culture’s leniency on the rational- the truth of the matter is that plans are fiction:  they haven’t happened yet.  Although honing intuition is not something we teach in business school, the majority of successful entrepreneurs can speak to pivotal moments when they followed their heart, paid attention to subtle patterns, and great things happened.  

Companies that implement great design practice linked to positive business outcomes, have also created opportunities for encouraging curiosity, improvising solutions through adaptive structures and acknowledging intuition.  Try experimenting with implementing your own version of these 3 building blocks, one per month over the next quarter.

Facebook sued by Russian firm linked to woman charged by U.S.

(Reuters) – A Russian company whose accountant was charged by federal prosecutors for attempting to meddle in U.S. elections sued Facebook Inc (FB.O) on Tuesday, claiming it is a legitimate news outlet and its Facebook account should be restored.

FILE PHOTO: A 3D printed Facebook logo is seen in front of a displayed Russian flag in this photo illustration taken on August 3, 2018. REUTERS/Dado Ruvic/Illustration/File Photo

The Federal Agency of News LLC, known as FAN, and its sole shareholder, Evgeniy Zubarev, filed the lawsuit in federal court in the Northern District of California, seeking damages and an injunction to prevent Facebook from blocking its account.

Facebook deleted FAN’s account in April as it purged pages linked to the St. Petersburg-based Internet Research Agency, which was indicted by Special Counsel Robert Mueller earlier this year for flooding social media with false information in a bid to sow discord in the run-up to the 2016 U.S. election.

Facebook did not respond to a request for comment. Peter Carr, a spokesman for Mueller, declined to comment.

FAN and Zubarev said they were improperly swept up in Facebook’s purge, which took down more than 270 Russian language accounts and pages, according to the complaint.

“FAN is an independent, authentic and legitimate news agency which publishes reports that are relevant and of interest to the general public,” the company said in the lawsuit.

The lawsuit argued that Facebook had effectively acted as an arm of the government in improperly impinging on its right to free speech, and cited the Civil Rights Act of 1964 in claiming Facebook discriminated against it due to its Russian origins.

Renato Mariotti, a former federal prosecutor, described those arguments as weak and predicted the plaintiffs would have a hard time gaining any traction in the courts.

“It’s safe to say this lawsuit is not going to be very successful,” he said. “At first glance it seems like a PR stunt to me.”

FAN acknowledged previously sharing the same office building as the Internet Research Agency and said it has employed Elena Alekseevna Khusyaynova, the Russian woman charged by prosecutors last month for attempting to meddle in the 2018 congressional elections, as its chief accountant since August 2016.

But the plaintiffs said Khusyaynova’s role at the company has been limited to overseeing day-to-day bookkeeping, and that she was not an officer and had no discretion over editorial content.

The plaintiffs also said they were not involved in “Project Lakhta,”, a Kremlin-backed information warfare campaign U.S. prosecutors say was started in 2014 and financed by Evgeny Viktorovich Prigozhin, an oligarch close to Russian President Vladimir Putin.

Prigozhin, known as “Putin’s chef” due to his catering company and its ties to the Kremlin, was indicted in February along with the Internet Research Agency, which he controls.

Khusyaynova was the chief accountant for Project Lakhta, according to the charging documents in her case, which is being prosecuted by assistant U.S. attorneys in the Justice Department’s Eastern District of Virginia.

A spokesman for the district did not respond to a request for comment.

Mueller is not handling Khusyaynova’s case because his focus is on the 2016 presidential election and the charges against her relate to the 2018 midterm elections.

Reporting by Nathan Layne and Jonathan Stempel in New York; Editing by Richard Chang

How To Become a Tech Entrepreneur, Never Learn Code, and Keep Your 401k

Innovation does not always come from the top of the organizational chart. Often, employees who have intimate knowledge of a company’s operations are best equipped to spot opportunities for innovation and change. Unfortunately, not all great ideas filter up to the C-suite. And many would-be entrepreneurs at corporations have families, mortgages, and other financial responsibilities that prevent them from leaving to embrace the high-risk, high-reward dynamic of a start-up.

Beyond risk-reward trade-offs, these employees are also loyal to their company and want to see it succeed. Fortunately, by demystifying exactly what innovation is, managers can stay in their positions as they build a low-cost prototype to prove their idea to their company’s leaders – leaders who are likely on the hunt for innovation.

How corporate entrepreneurs differ

Corporate entrepreneurship and innovation have become buzzwords that, through repetition, have warped into meaningless phrases. That’s why a CB Insights article poking fun at corporate innovation is so funny, because anyone who thinks about these issues knows each example rings true. Innovation initiatives often mimic the atmosphere, structure, and vibe of Silicon Valley, but fail to replicate the entrepreneurial spark that inspires a visionary to do difficult, high-risk/high-reward work.

At a corporation, no work will ever truly emulate the high-risk or high-reward environment of a startup, unless the corporation spins out its innovative arm into its own entity. Employees have 401ks and other benefits, HR follows a pay schedule with tiers and caps, and shareholders are wary of diluting stocks.

But that does not mean that a visionary employee can’t become an entrepreneur within their organization. As a corporate entrepreneur, the employee can become an innovation champion simply for the sake of watching their company succeed (while scoring a well-earned promotion). However, to get leadership buy-in, they’ll first need to prove their idea works – and they can without learning a single piece of code.

High tech platforms start with low tech, manual hacks

Part of the mystique surrounding tech startups comes from well-designed platforms that seem to anticipate a user’s every need. When a corporation innovates, its leaders expect sleek prototypes that run seamlessly on the right algorithms and tech. But the truth is that most prototypes are crude, manual, low-tech hacks. Before an entrepreneur builds a platform connecting pet owners to pet sitters, he or she sits behind a computer fielding pet sitting requests in a chat window and calling pet sitters on their phone. In the early days of a platform, entrepreneurs manually facilitate most transactions, thereby validating demand and supply, and building a low-cost prototype. Only once they’ve proven that the business demand is real do they worry about building technology that can scale.

There are many types of platforms, and for each there are unique hacks that can test underlying assumptions before a company invests millions of dollars in developing a platform. With a small budget and a good amount of hustle, a non C-suite manager can test assumptions, tweak the market, and deliver to the C-suite an actionable plan.

Armed with a functioning prototype and a few months worth of data, it’s time to get the idea funded. Luckily, corporations have built in venture capitalists: their board and executive leadership. To be successful in wooing your leadership, it is critically important to capture all data from the manual prototypes and develop a business plan around how the platform would integrate with or expand the company’s core business.

Instagram Bug Leaves Some User Passwords Exposed

Instagram users have been asking for a way to view all the data the company has on them, but this may be more than they were hoping for. The new Download Your Data tool that allows users to receive that information may have left some users’ passwords exposed.

When using the new feature, some Instagram users’ passwords were displayed in the URL, which was then also stored on Facebook’s servers—a bigger issue for those using a shared computer or compromised network, according to The Information. Facebook already notified users who were affected.

The tool has since been updated and the problem should no longer occur. Those Instagram users affected are encouraged to change their passwords and clear their browser history.

But it’s still a troubling update, as Instagram and parent company Facebook fight back against a seemingly unending stream of scandal and security breaches.

Fortune reached out to Instagram for comment, but did not receive an immediate reply.

Amazon and Google Are Taking Over Cities. The Smartest Startups Are Going Virtual

In the late winter of 2012, Clark Valberg had what he thought was a pretty good startup idea–an app for collaboration on designs across teams and companies–and a nice chunk of seed funding to get it going.

There was just  one problem. In New York City, where he lived, it had recently become prohibitively expensive to hire software engineers, thanks to Google.

After spending $1.9 billion on a Manhattan office building in 2010, the Silicon Valley giant was doing everything in its considerable power to fill it with coders. “I found myself faced with the existential crisis of having countless coffees and cocktails with engineers who were also interviewing with Google,” Valberg says. After weeks of courtship, he might make an offer, only to find out he’d been outbid by a decimal point or two.

Forced to compete with time and money he didn’t have, Valberg asked himself: “What’s the hack? How do I care less about x so I can care more about y?” At his previous company, a creative agency, he had used freelancers in cities like Austin and Phoenix, where the going rate for their services was cheaper. He decided to try staffing his startup, InVision, on the same basis.

It worked. So well that InVision is now valued at $1 billion. Its workforce of 700, up from 200 a year ago, is still all-virtual, and Valberg has no plans to change that.

This sort of thing feeds an endless stream of speculation about which up-and-coming city with an educated workforce, abundant broadband and cheap commercial rents might be “the next Silicon Valley.” Will it be Austin? Detroit? Kansas City? Toronto?  

But there’s a reason Amazon snubbed the other 235 cities that entered the absurd competition to host “HQ2.” They might have software engineers, but they don’t have vast numbers of software engineers–the kind of talent supply that can feed a company that was adding 5,000 jobs per year in Seattle before looking elsewhere.

For now, then, the biggest tech companies will channel their growth into the handful of cities that can accommodate such numbers. Which means those cities will continue to grow ever more inhospitable for startups. 

Early-stage startups can’t compete with profitable goliaths on salary. Historically, they’ve met that challenge by offering generous equity packages that can make early employees spectacularly wealthy. But even the most risk-tolerant people have to sleep somewhere and feed themselves, and doing that in Mountain View or Manhattan or Seattle without a six-figure salary is almost impossible.

“Equity packages don’t pay the rent,” says Wade Foster, CEO of Zapier. “That’s why you’re seeing so many startups starting to talk about what’s our non-Silicon Valley strategy? Is it a second office? Is it remote?”

For Zapier, which automates inter-app workflows, going remote made sense because, when the company was getting started in 2012, one of its founders was living in Missouri while his then-girlfriend finished law school there. Over time, Foster says, they realized being distributed was allowing them to tap into a broader, richer talent market than they ever could by confining hiring to one locale, even a tech hub. “We realized this could be become an advantage for us,” Foster says.

To play up that advantage, in 2017, Zapier began offering a unique perk: a $10,000 “delocation” package for employees looking to leave the San Francisco Bay Area. It was a clever piece of management–it’s hard to quit the company that let you take your Silicon Valley salary with you to Charleston–and an even more brilliant piece of marketing. Job applications for all types of roles at Zapier went up by 50 percent afterward, Foster says.   

Going all-remote does have its complications. To the degree that hiring and–especially– fundraising run on informal networking, it still helps to make the scene in SoHo or SoMa. But with each new megacampus, the math gets clearer: For startups that can make it work, ditching geography altogether is a way to enjoy the best of both worlds: a deeper and cheaper talent pool.

“Back in 2012, I would get emails from people like, ‘That’s weird, that’s different, that’s kind of crazy,'” Foster says. “Now, the emails I get are from founders and VCs asking ‘How do you pull this off?'”

5 Lessons Raising Kids Can Teach You About Running Your Company

Your employees need your time and attention as they and the business grow. So why not use the lessons you learn at home with your work family. Here are a few key lessons executives can learn from our kids.

Every moment is a new opportunity.

Kids are fully present, always in the moment. They don’t obsess about the past or worry about the future. Children have what Shunryu Suzuki, the master who brought Zen Buddhism to America, calls “beginner’s mind.” In the book Zen Mind, Beginner’s Mind Suzuki writes, “in the beginner’s mind there are many possibilities, but in the expert’s there are few.” Kids bring creativity, openness, and a natural curiosity to everything. Try bringing this fresh perspective to brainstorming with your teams. Challenge them to channel the unselfconscious, no-idea-is-too-silly energy of childhood.

Negotiating means making things work for everybody.

If you’ve ever seen a group of kids working together to make up their own game with their own rules, you’ll see how important it is for them to create something everyone can play together. One kid might try to boss the rest of them around, but if he can’t hold their interest, they will quit and go home. As a result, kids’ homemade games are naturally diverse and inclusive. Don’t be afraid to let your teams make up some of their own rules and find their own ways to bring everyone together.

Prepare for the unexpected.

Everybody loves a best-case scenario, but as any parent who’s ever tried to get a child out the door in a hurry knows, you need to build in enough time for some worst-case reality too. Just as you wouldn’t assume you’ll only need a minute to pack a diaper bag, you also shouldn’t make your product launch date dependent on everything going right. Smart parents will tell you: someone will get an earache, it will snow, plans will be derailed, stuff will always happen. Stay flexible and, above all, realistic about what you can do and how quickly you can do it.

Change is the only constant, so you better embrace it.

With kids, as soon as you’ve figured out how to handle one milestone, you can be pretty sure they will have moved on to the next one. The tactics that worked for a 3-year-old who won’t go to bed are useless with a 13-year-old who sleeps till noon. Just like what worked for your million-dollar company won’t work when you reach 10 or 20 million. And your junior employee won’t be new forever. If raising kids teaches us anything, it’s that we need to constantly adjust our strategies to suit ever-changing needs. Be willing to continually review and refine your company’s processes, and to make changes that keep up with your growth.

Sometimes everybody just needs a snack or a nap.

To avoid meltdowns with little kids, you have to pay attention to the basics: food, sleep, fresh air. It’s the same with your teams. Sometimes big problems are really small ones, but the team dealing with them is burnt and needs a timeout.  Don’t schedule important meetings when people are likely to be cranky and hungry, or anxious to get somewhere. Help your teams to recharge and reset when they need to. Model your own commitment to work-life balance. Employees who feel cared about will work smarter, not harder, and that’s good for everyone.

Tencent profit beats estimates as investment gains offset gaming weakness

HONG KONG (Reuters) – Tencent Holdings (0700.HK) said on Wednesday its third-quarter net profit rose 30 percent, beating estimates, as investment gains offset a weak performance in the Chinese company’s core gaming business.

FILE PHOTO: Tencent Holdings Chairman and CEO Pony Ma (C) visits the Tencent booth following the opening ceremony of the fifth World Internet Conference (WIC) in Wuzhen, Zhejiang province, China November 7, 2018. REUTERS/Stringer/File Photo

Net profit at China’s biggest gaming and social media group in the July-September quarter rose to 23.3 billion yuan, compared with an average estimate of 19.32 billion yuan, according to 15 analysts polled by to I/B/E/S data from Refinitiv.

Revenue rose 24 percent to 80.6 billion yuan ($11.59 billion), the slowest quarterly growth in more than three years, in-line with estimates.

China, the world’s biggest gaming market, has been imposing tougher rules on the industry, including a halt to new game approvals since March and calls to tackle young people’s gaming addictions.

This contributed to Tencent reporting its first quarterly profit fall in more than a decade in its April-June quarter. The company also cut its gaming marketing budget.

Tencent shares, which more than doubled in 2017, have dropped by about a third so far this year, wiping about $165 billion in value from the group’s market value.

In the third quarter, Tencent benefited mainly from a more-than-doubling in net gains from its investment activities, including the initial public offering of online food delivery to ticketing services company Meituan Dianping.

Douglas Morton, Head of Research, Asia at Northern Trust Capital Markets, said the result beat was a positive surprise even if not counting the investment income.

“What the real surprise is or the real comfort for the market will be that the mobile gaming data which beat expectations,” he said.

Tencent said smartphone games revenues grew 7 percent year-on-year and 11 percent quarter-on-quarter to 19.5 billion yuan, mainly due to contributions from new games. Despite the new approval freeze, Tencent already had 15 approvals and released 10 titles in the quarter, it said in the filing.

PC games revenue dropped 15 percent year-on-year due to continued user migration to mobile games and high base in the same quarter a year ago.

Advertising revenue, which accounts for 20 percent of the company’s total revenue, rose 47 percent, supported by a 61 percent jump in social and other advertising.

Tencent said its cloud services revenues more than doubled year-on-year in the quarter while the number of paying cloud customers grew at a triple-digit percentage rate year-on-year. Cloud revenues for the first three quarters of the year exceeded 6 billion yuan, it said.

Monthly active user number of WeChat, the most popular social network in China, rose incrementally to 1.08 billion.

($1 = 6.9536 Chinese yuan)

Reporting by Sijia Jiang; Editing by Muralikumar Anantharaman and Jane Merriman