Flat profit gives Angry Birds maker's shares the blues

HELSINKI (Reuters) – Angry Birds maker Rovio Entertainment (ROVIO.HE) fell short of market expectations for quarterly sales and profit on Thursday, sparking a near 20 percent fall in the Finnish firm’s shares.

An employee works inside an office of Rovio, the company which created the video game Angry Birds, in Shanghai June 20, 2012. REUTERS/Aly Song/Files

Increased marketing costs meant adjusted earnings before interest, tax, depreciation and amortization were flat at 8.6 million euros ($10.2 million) in the third quarter, although sales rose 41 percent from a year ago to 70.7 million euros.

“Costs were surprisingly big but also the number of paying customers lagged expectations,” Hannu Rauhala, an analyst at OP Equities, who has a “buy” rating on Rovio, said.

Rovio which was listed on the Helsinki bourse in September saw its shares drop to 9.64 euros at 0837 GMT, a fall of nearly 19 percent and well below its IPO price of 11.50 euros.

“The company has changed a lot in the past years and it is considered as a growth company. The stock is strongly driven by growth expectations,” Rauhala said.

Rovio saw rapid growth after the 2009 launch of the original “Angry Birds” game, but it plunged to an operating loss and cut a third of its staff in 2015 due to a pick up in competition and a shift among consumers to freely available games.

Rovio’s game titles now include “Angry Birds 2,” “Angry Birds Blast”, “Angry Birds Friends” and “Battle Bay.”

Reporting by Jussi Rosendahl; editing by Gwladys Fouche and Alexander Smith

Our Standards:The Thomson Reuters Trust Principles.
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Uber Hid 57-Million User Data Breach For Over a Year

By now, the name Uber has become practically synonymous with scandal. But this time the company has outdone itself, building a Jenga-style tower of scandals on top of scandals that has only now come crashing down. Not only did the ridesharing service lose control of 57 million people’s private information, it also hid that massive breach for more than a year, a cover-up that potentially defied data breach disclosure laws. Uber may have even actively deceived Federal Trade Commission investigators who were already looking into the company for distinct, earlier data breach.

On Tuesday, Uber revealed in a statement from newly installed CEO Dara Khosrowshahi that hackers stole a trover of personal data from the company’s network in October 2016, including the names and driver’s license information of 600,000 drivers, and worse, the names, email addresses, and phone numbers of 57 million Uber users.

As bad as that data debacle sounds, Uber’s response may end up doing the most damage to the company’s relationship with users, and perhaps even exposed it to criminal charges against executives, according to those who have followed the company’s ongoing FTC woes. According to Bloomberg, which originally broke the news of the breach, Uber paid a $100,000 ransom to its hackers to keep the breach quiet and delete the data they’d stolen. It then failed to disclose the attack to the public—potentially violating breach disclosure laws in many of the states where its users reside—and also kept the data theft secret from the FTC.

“If Uber knew and covered it up and didn’t tell the FTC, that leads to all kinds of problems, including even potentially criminal liability,” says Williams McGeveran, a data-privacy focused law professor at the University of Minnesota Law School. “If that’s all true, and that’s a bunch of ifs, that could mean false statements to investigators. You cannot lie to investigators in the process of reaching a settlement with them.”

The Hack

According to Bloomberg, Uber’s 2016 breach occurred when hackers discovered that the company’s developers had published code that included their usernames and passwords on a private account of the software repository Github. Those credentials gave the hackers immediate access to the developers’ privileged accounts on Uber’s network, and with it, access to sensitive Uber servers hosted on Amazon’s servers, including the rider and driver data they stole.

While it’s not clear how the hackers accessed the private Github account, the initial mistake of sharing credentials in Github code is hardly unique, says Jeremiah Grossman, a web security researcher and chief security strategist at security firm SentinelOne. Programmers frequently add credentials to code to allow it automated access to privileged data or services, and then fail to restrict how and where they share that credential-laden software.

“This is all too common on Github. It’s not a forgiving environment,” says Grossman. He’s far more shocked by the reports of Uber’s subsequent coverup. “Everyone makes mistakes. It’s how you respond to those mistakes that gets you in trouble.”

Who’s Affected

Uber’s count of 57 million users covers a significant swath of its total user base, which reached 40 million monthly users last year. The company hasn’t notified affected users, writing in its statement that it’s “seen no evidence of fraud or misuse tied to the incident,” and that it’s flagged the affected accounts for additional protection. As for the 600,000 drivers whose information was included in the breach, Uber says it’s contacting them now, and offering free credit monitoring and identity theft protection.

How Serious Is This?

Mass spills of names, phone numbers, and email addresses represent valuable data for scammers and spammers, who can combine those data points with other data leaks for identity theft, or use them immediately for phishing. The even more sensitive driver data that leaked may offer even more useful private information for fraudsters to exploit. All of it contributes to the dreary, steady erosion of the average person’s control of their personal information.

But it’s Uber, not the average user whose data it spilled, that may face the most severe and immediate consequences. The company has already fired its chief security officer, Joe Sullivan, who previously led security at Facebook, and before that worked as a federal prosecutor. By failing to publicly disclose the breach for over a year, the company has likely violated breach disclosure laws, and should be bracing for hefty fines in many states where its users live, as well as its home state of California, says the University of Minneapolis Law School’s McGeveran. (In statements on Twitter embedded above, former FTC attorney Whitney Merrill echoed that interpretation of those breach disclosure laws.) “I would not be surprised to see states pursuing Uber on that basis,” McGeveran says.

Former FTC attorney Whitney Merrill echoed that interpretation Tuesday on Twitter:

If the cover-up included making false statements to the FTC during its investigation of the 2014 breach—even though it was a separate incident—that could have even more dire consequences. Making false statements to the commission’s investigators, McGeveran points out, is a federal criminal offense. “This is not just a casual chat over a cup of tea. it’s a formalized investigative procedure,” McGeveran says. “They’re already being asked investigative questions by a government official. They not only know about the breach, but they’re allegedly paying hackers to cover it up. They presumably omit this 57 million person breach from their disclosure to the FTC.”

“If all of that is true,” McGeveran reiterates, “that’s huge.”

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Whether They’re Calling It A Fraud, Bubble Or World Changer, A Lot of Companies Are Talking About Cryptocurrency

J.P. Morgan CEO Jamie Dimon thinks bitcoin is a “fraud.” Investor Mark Cuban called it “a bubble.” Goldman Sachs CEO Lloyd Blankfein is still undecided. But whether or not executives believe in the potential of bitcoin, ethereum or blockchain technology, they and their companies can’t avoid talking about cryptocurrencies.

Mentions of “cryptocurrency” (digital currencies not tied to any country’s legal tender) and related terms including “bitcoin” and “ethereum” (the two most popular cryptocurrencies), “blockchain” (the technology underlying these currencies), and “initial coin offering” (or ICO, which lets companies raise capital through the creation of a new cryptocurrency) have skyrocketed over the last seven years, according to data from Sentieo, a financial research firm.

In total, 1,200 publicly traded companies have generated over 12,000 mentions of digital currency during the past 14 years.

With another month left to go in 2017, references to cryptocurrency in corporate communications are already double what they were in all of 2016, according to a Fortune analysis of the Sentieo data. And they’re up more than 7,000% since 2010, when admittedly only a handful of companies had talked about “digital currency” during earnings calls or presentations.

It began with ‘digital currency’ … and getting bitcoin’s name wrong

From 2009 through 2012, most of the mentions only referenced “digital currency,” which includes cryptocurrencies, along with other money recorded electronically or stored in another device. Players in the digital currency space, like PayPal and Square, had to address cryptocurrencies earlier than most.

In a March 2014 statement to eBay shareholders about PayPal’s IPO, Carl Icahn calls bitcoin “the digital currency Mr. [Marc] Andreessen cheerleads for.”

Amusingly enough, bitcoin was actually misidentified in its first actual mention by name during Discover’s 2013 annual meeting.

“One of the questions I’ve put down, the subject is bio coin,” a shareholder began to say.

Discover CEO David Nelms course-corrected. “You mean bitcoins?”

“Yes, bitcoins. You’re a good listener,” the shareholder said. “You picked it up. ”

Fortune analyzed Sentieo data from earnings call transcripts, press releases, presentations, and SEC filings — 8Ks and 10Ks. Cryptocurrency and related terms pop up in press releases most often, followed by SEC filings and presentations. And that’s to be expected. Most companies publish press releases a lot more frequently than they submit SEC filings or hold earnings calls.

A lot of financial institutions mention it only to say it’s irrelevant, or deny its ability to disrupt their industry

Less than 20% of the S&P 500 appear among the 1,200 companies talking about cryptocurrencies, and only 65 hail from the 2017 Fortune 500 list. Information technology and finance companies, unsurprisingly, have discussed the topic more fervently than other industries.

Many times, large financial institutions have brought up cryptocurrency because they’re denying its importance or expressing disinterest in bitcoin. But some companies in the consumer-facing fintech subset have been talking about it because they’re planning to adopt parts of the new technology.

“Cryptocurrency will be almost a gimmick at first,” Benjamin Jessel, managing principal at Capco, told Fortune. “Institutional investment will come later.”

He leads a variety of digital risk, compliance and strategy projects and programs for financial services clients.

It’ll be a while before anyone can say cryptocurrencies have truly disrupted financial institutions, he said. But there’s signs it could come to pass. Companies like Square and American Express have been working on allowing consumers the option to pay with cryptocurrencies.

Overstock.com has embraced cryptocurrencies more than any of its peers

Of the 1,200 companies that Fortune analyzed, Overstock.com stood out. It has talked about cryptocurrencies and blockchain technology more than any other firm.

The retailer has allowed customers to buy products with bitcoin since January 2014 and recently expanded payment options to include Ethereum and about 40 other major digital currencies.

“We think that at some point there will be … Bitcoin will hit a tipping point and like it took time for people to adopt PCs and the Internet, at some point there is a tipping point and this could become … Bitcoin could become as ubiquitous as PCs and the Internet are now,” said Jonathan Johnson, Overstock.com executive Vice Chairman Jonathan in January 2014.

Overstock.com’s CEO Patrick Byrne was an early believer in the importance of cryptocurrencies, too. It doesn’t just show in earnings calls and SEC filings. One of Overstock’s subsidiaries, tZero, has made it possible to trade tokens using blockchain technology in a regulatory-free environment.

“Three years ago I stood up in front of an audience for the opening keynote speech at Bitcoin 2014, in Amsterdam, and told the world that the main event of Bitcoin is not Bitcoin, it is the Blockchain, and it would change the world,” Byrne said at the Money 20/20 conference last month.

But Overstock.com executives were the outliers. There’s been heated debate about whether there is a bitcoin bubble.

“We’re certainly in something that resembles a bubble,” Jessel said.

He points to the sheer amount of capital invested in a short time period — more than $2 billion in initial coin offerings (ICOs) in 2017— along with the low sophistication of investors. More and more people are buying tokens like Bitcoin and Ethereum, but very few are using them for anything other than trading.

The infrastructure for cryptocurrencies is growing very rapidly and generating lots of conversation, like what’s been captured in the Sentieo data. But the truth is very few companies are making money from using the technology.

“It’s like a whole industry building roads,” Jessel said, “and they haven’t discovered cars yet.”

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raceAhead: Three Podcasts to Help You Understand Things, Charles Manson’s Race War, Life in North Korea

If one thing has become clear during the two years of working the race beat at Fortune is this: Everything has a backstory. Our ability to understand and embrace these hidden histories can help us all become more curious, aware, empathetic and informed.

Here are three podcasts that I’ve recently enjoyed that brought a fresh perspective to something I already thought I knew a bit about. Turns out, I was missing more than just some interesting facts. Enjoy.

Good Muslim, Bad Muslim is a delightful podcast, and ordinarily a breezy conversation between two friends, Tanzila ‘Taz’ Ahmed and Zahra Noorbakhsh, about their complicated modern relationship with faith, love, social justice and American life. They took a break from their usual dish to join an annual pilgrimage to Manzanar, a Japanese American internment camp just north of Los Angeles. This year’s visit commemorated the 75th anniversary of Executive Order 9066, which ordered the incarceration of more than 110,000 Japanese Americans and was signed by President Franklin D. Roosevelt. (Executive orders matter, yo.) The trip was organized by the Vigilant Love Coalition and their Bridging Communities program, which draws parallels between the Japanese experience post-Pearl Harbor and the experience of Muslim Americans today. “Today we are retracing the humanity of a group of people who our country shamelessly mistreated,” the tour guide begins. While Taz and Zahra continually hand the mic to other pilgrims and survivors to make sure their stories are heard, the bigger message is clear. “Your citizenship will not protect you,” one woman tells them.

Every installment of Second Wave is a revelation and a thoughtful exploration of the experiences of Vietnamese Americans in the aftermath of a war that hasn’t ended for everyone. One delicious example is Pho, part savory noodle-dish, part iconic comfort food born in a faraway land and now, a dish ripe for cultural appropriation. Seemingly out of the blue, the dish has been embraced by hipster chefs in the U.S. and turned into a barely recognizable version of itself, with pho experts everywhere making fancy derivations like pho dumplings, pho salads, even rolling “phorritos.” Host Thanh Tan sits with two women who have made their own careers with the noodle dish, writer Andrea Nguyen and chef Yenvy Pham, owner of Pho Bac in Seattle, and have a fascinating conversation about what the soup meant to both the working class and elites in Vietnam, and the uncomfortable peace they’re making with its gentrification stateside. And then the talk turns to a scandal you may have missed — the recent Pho-gate, and their ultimate defense against the ultimate erasure.

I’ve fallen hard for Uncivil, a new Gimlet podcast about the Civil War that explores the stories that have been left out of history if you get my drift. Again, there are no wrong choices, but for the purposes of digging into a juicy backstory, start with their eye-opening exploration of the true origins of Dixie, the unofficial and still beloved anthem of the Confederacy. The common knowledge was this: Dixie was a Confederate anthem, written by a Southerner, during the dark days of the Civil War. As usual, the common knowledge is completely wrong. There are a couple of twists before we get to the painful truth, an erasure so profound that it’ll get you whistling Dixie yourself. Hosts Chenjerai Kumanyika and Jack Hitt are both excellent. But later in this episode, Kumanyika talks about “coon spaces,” a framing for performative blackness for the benefit of white audiences. It yields one of the richest conversations I’ve heard in ages. In this instance, it’s with a musician named Justin Robinson, who both understands the true roots of the song and has performed it with a sense of dignity and restorative justice. It didn’t quite work. “They invite you to dehumanize yourself for profit, for their pleasure, to deepen their sense of identity,” says Kumanyika of the “coon space” dynamic. “You’re sort of hitting on the head what it means to be black in America or indigenous in America,” Robinson begins.

On Point

Cult leader Charles Manson dies having failed to achieve his dream of a full-on race war
It’s an element of his cultish control over his “hippie” followers that often gets the short shrift. His murderous rampage was not just an attack on the Hollywood elite. It was a full-throated attempt to incite a race war that would – insert magical thinking here – end with him running the world. The Root has a great explainer here. I’d also point you to another podcast, currently in production called Young Charlie. It unfolds as the breathless true crime it actually was, but also gives rich context to the person Manson was and the country he was planning to overtake. Not only did he fall through every possible crack in his young life, he was monstrously smart and profoundly cynical, fully prepared to leverage a racist country for his own benefit.
How rapper Meek Mill has come to personify criminal justice reform
Rapper Meek Mill is back in prison for a parole violation stemming from various criminal charges he faced over a decade ago. And now, the Philadelphia home town hero has become a flashpoint in a long overdue conversation about reform and judicial overreach. If you haven’t been following the story, then this explainer from the Washington Post will get you up to speed. But don’t stop there. Read this op-ed from Jay-Z, whose Roc Nation reps Mill, but who has also become increasingly outspoken on justice reform issues. “On the surface, this may look like the story of yet another criminal rapper who didn’t smarten up and is back where he started,” he begins. But Mill was nineteen when he was sent to jail for drug and gun possession and served an eight month sentence. “For about a decade, he’s been stalked by a system that considers the slightest infraction a justification for locking him back inside.”
Washington Post
Lena Dunham under fire for siding with friend accused of sexual assault
The man in question is Girls writer Murray Miller, and he was accused by actor Aurora Perrineau. While the backlash was swift and followed by a penned apology, writer Zinzi Clemmons has decided enough is enough. In a statement posted to Twitter, she announced that she will no longer be contributing to Lenny Letter, Dunham’s online feminist newsletter. “She cannot have our words if she cannot respect us,” she writes. She also describes the casual racism, and worse, that she believes defines Dunham’s circle, many of whom she was acquainted with in college. “It is time for women of color — black women in particular — to divest from Lena Dunham,” she says.
What it’s like to live in North Korea
The Washington Post has interviewed 25 North Koreans who have lived, in some capacity, in the country under Kim Jong Un. Their tales are uniformly grim and disappointing. They all thought that the millennial leader would bring fresh ideas and much-needed change to a country crippled by generational dictatorship. Instead, things got worse, as the state broke down and the economy crumbled. The only way to survive is the constant hustle of dealing in bribes and the illegal/informal economy. The threat of state violence, they say, is ever-present. “I once went for six months without getting any salary at all. We lived in a shipping container at the construction site… Once I didn’t bathe for two months,” said one construction worker who escaped in 2015.
The Washington Post

The Woke Leader

Princeton University comes clean on race
Here’s just one example: Researchers have recently found evidence that Samuel Finley, the school’s fifth president, sold his slaves in front of his stately 18th century clapboard home, once a popular stop on the campus tour. That is just one of many stories being brought to light as the institution works to reconcile it’s complex past. To that end, it’s worth spending time with the Princeton and Slavery Project, an evolving work of depth and honesty that includes primary documents and articles highlighting the university’s long history of slavery-related funding and racial violence.
New York Times
The bleak and poignant history of black NASCAR drivers
After a 46 year dry spell, a black rookie driver is set to become the first full-time black driver since Wendell Scott stopped driving in 1971. Darrell “Bubba” Wallace, Jr., is set to drive car number 43 for Richard Petty Motorsports next season. “There’s only 1 driver from an African-American background at the top level of our sport … I am the one,” he said on Twitter. “You’re not gonna stop hearing about ‘the Black driver’ for years. Embrace it, accept it and enjoy the journey.” But it’s worth remembering Scott, the very first black driver, who braved Jim Crow laws and death threats to persist in the sport. He won money and acclaim, but never the traditional post-race kiss from the white beauty queen. Click through for the real deal history.
Atlanta Blackstar
Take a jazz lesson with Wynton Marsalis and Jon Batiste
Batiste, the less-well-known of the two jazz greats, is the leader of the “The Late Show with Stephen Colbert” band, and absolutely holds his own with Marsalis, during this hour-long segment on the genius of jazz from The Aspen Institute. The conversation includes plenty of music and technical talk, like how pentatonic scales originally came from Africa. It also weaves in discussions of painful elements of life under the English plantation system, which also exploited Irish people. The strange mix of race, culture, and oppression found its way into the alchemy known as blues and jazz.
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8 Ways To Drive Holidays Sales With Facebook Ads

Hard to believe, but the clocks are slowly ticking toward the holiday season, and from Black Friday onward, holiday shopping season will be in full swing. Countless businesses, small and large, will be vying for consumer attention through social media, print ads and more, hoping to cash in on the biggest shopping season of the year. 

“Copious amounts of money will be spent nationwide,” says Brian Meert, CEO of the Facebook ad agency Advertisemint and author of The Complete Guide To Facebook Advertising, “and if you implement the right strategy, copious amounts of money could be spent on you.” 

Facebook ads are a great way to bring in new traffic to your site and drive sales, particularly around the holidays. Below, Meert shares some of his top tips for making the most of Facebook ads to drive holiday spending with your brand. 

1. Create Mobile Friendly Ads

This year, Facebook has accrued 989 million daily active mobile users. “That’s 989 million people you can potentially reach,” Meert says. “Not only does advertising on mobile unlocks a treasure trove of potential customers, but it also raises your chances of generating sales.”

According to Google’s Inside AdWords blog, mobile may drive 43% of all traffic to retail sites this holiday season. The NRF also claimed that 55.7% of smartphone owners will shop through their phones.

Make sure your Facebook ad designs are mobile friendly, that they lead to mobile-friendly pages, and that you’ve enabled ads to be served on mobile devices. To do this, go to “Edit Placements” on Facebook Ads Manager and choose “Mobile” from the options.

2. Instill a Sense of Urgency

“Phrases that instill a sense of urgency jolt most shoppers into action,” Meert says.  This is a common strategy widely used for its effectiveness.

Meert suggests using phrases like “Buy now before this deal expires!” or “for a limited time only” to inspire shoppers to make a purchase now, or to try using a countdown-to-Christmas deal to help drive engagement with your ads sooner, rather than later. 

3. Offer Discounts

A successful ad includes a clear value proposition, or the benefits of the item you’re advertising and the ad you’re serving. These value propositions may be a solution to your customer’s problems or a discounted offer–something that makes conversion worthwhile to your customers.

This season, try offering discounted items, buy-one-get-one deals, or free shipping to attract customers to your products.

“Remember to offer your deals in a strong, clear, and concise language, matched with the correct landing page,” Meert says. If you want to present deals to your customers on Facebook, Meert suggests using an Offers ad.

4. Leverage Social Proof

“Successful ads also contain social proof, the proof that people are engaging with your ads,” Meert says. Social proof is important to your ad because it functions as a peer recommendation.

On Facebook, this proof includes the amount of shares, likes, and comments listed on the bottom of the ad, but it might also include a statement on the ad’s text such as “5,000 people have sworn by this product.”

A study conducted by MarketLive found that 30% of respondents made a purchase because of an ad’s amount of engagement on social media, and 33% said they would make a purchase based on whether or not a friend has “Liked” a product.

5. Drive Customers to Your Brick-and-Mortar Store

“Although e-commerce is growing, brick and mortar stores still generate over 90% of sales,” Meert notes. But that doesn’t mean online information doesn’t impact them: around 6% of consumers will research products online before visiting a brick-and-mortar store.

“To ensure that you do not miss the opportunity of driving customers to your store, create local awareness ads,” Meert suggests. 

With local awareness ads, you can target people near your business locations, making it easy for customers to find you using proximity-based store maps and proximity-based call-to-actions, such as “call now” or “get directions.”

6. Target Late-Night Shoppers

“Never underestimate the power of procrastination,” Meert says. While some early birds shop weeks or even months in advance, some will wait until the last minute. These late shoppers will then frantically shop online instead.

To make sure your products are available for these last minute and late-night shoppers,  be sure you schedule your ads to appear later at night for these procrastinators.

7. Speak to Self-Gifters

It’s not just the season of giving for others. Many consumers also use this time of year to indulge in themselves, rewarding them for a year of hard work or spluring on items to help them keep their soon-to-come New Yea’rs resolutions. To capitalize on this, advertisers should include ads that speak to self-gifters, too. 

Meert suggests using language like “you’ve earned it” or “treat yourself” to grab the attention of these self-gifters as part of your ad creative. 

8. Advertise Post Holiday Deals

“Shopping does not end with the holidays,” Meert cautions, as many shoppers will continue to shop after the holidays to snag post-holiday deals.

Take advantage of this by keeping your customers engaged even after the holidays have passed. To do this, alter the end-date of your campaigns to extend beyond the big holiday dates, or launch a second post-holiday campaign with different language aimed at luring deal-seeking shoppers into making a post-holiday purchase. 

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21 Trends These Executives Saw in 2017

Want to know what to expect next year? Take some cues from the hot trends gaining momentum in the last 11 months. Here’s what nearly two dozen executives saw happening in 2017.

1. People held businesses accountable through social media.

“Social media is increasingly a stage for unsatisfied customers to speak their minds and demand issues be resolved in the public eye, rather than by a private email or phone call. Whether it’s a global reaction like the viral uproar over United Airlines’ mistreatment of a passenger, or a more everyday customer service complaint, people are using social media to call out brands and demand better. According to data from the Q3 2017 Sprout Social Index, 80 percent of consumers believe social has increased accountability for business. The turn toward social for the resolution of these issues speaks to a trend that will only continue to grow–businesses need to recognize that social customer care is in fact a crucial marketing effort.”

–Andrew Caravella, VP of strategy and brand engagement for Sprout Social, which provides social media management, analytics and advocacy solutions for businesses

2. Facial recognition technology was a hot topic.

“Apple released its Face ID feature to streamline the user experience, and we saw a lot of buzz around a patent Walmart filed for facial recognition technology that could register customer sentiment. Moving into 2018 and beyond, expect to see the early stages of beta testing this technology in brick-and-mortar settings to better understand the connection between customer emotion and behavior. However the real value of data from facial recognition technology will be when it’s analyzed in tandem with feedback, demographics, loyalty metrics, online browsing behavior and purchase history to automate highly personalized next-best actions. As with all invasive technologies, brands will need to proceed wisely and with transparency. Today’s customers are discerning and know the difference between real value, creepy and outright inappropriate.”

–Andrew Park, senior director of customer experience strategy at InMoment, a Forrester-recognized leader in customer experience feedback strategy

3. Demand for security grew along with the Internet of Things (IoT).

“Consumers are drawn to digitally integrated systems that optimize their experiences with products, and we’ve seen a massive adoption of technologies with IoT capabilities. Along with it came concerns from consumers about the security of their connected devices. In 2017, we saw a serious movement from tech companies to discover ways to safeguard IoT enabled devices from hackers. While there’s still a lot of work to do in the grand scheme of things, a lot of progress been made in the area of IoT security. Security will always remain a concern with IoT technologies so it is of utmost importance that the value of the IoT service provided more than justifies the security exposure incurred.”

–Daniel Huang, founder and CEO of Immotor, a technology company committed to the research and development of electric intelligent personal transportation devices

4. Augmented reality was used to validate construction progress.

“In 2017 McCarthy began implementing Augmented Reality (AR) (specifically the HoloLens with AR apps such as HoloLive, Umbra, and Fuzor) to validate installed building components relative to the planned location per the BIM Coordination Model.  Rather than implementing laser scanning, or laborious field measurements to ensure we deliver an as-built model for each of our clients, we can validate that installations match their intended location, in real time, and at 5 percent or less of the traditional cost.  Moving into 2018, we see this as the norm for continuous validation of as-built conditions, QA/QC job walks with our clients, and even moving to billing approvals through use of virtual job walks.”

–Jordan Moffett, virtual design and construction manager at McCarthy Building Companies, Inc., the oldest privately held national construction company in the U.S.

5. 3D printing opened new opportunities and revolutionized what it means to create.

“Within the last few years, 3D printers have gone from overpriced and unreliable to affordable and easy for the average consumer to use. The community and demand for 3D printing has grown tremendously, and soon 3D printers will be as commonplace as desktop inkjet printers. As 3D printing technology continues to advance, crafting ideas and designs into real life objects will become easier and easier. We’re on the brink of seeing this technology continue to penetrate the consumer segment even more.”

–Bernard Luthi, CEO of Monoprice, an ecommerce seller of high-quality consumer electronics and products direct-to-consumer

6. More workers entered the gig economy.

“For those seeking it, the gig economy delivers flexibility and control. An estimated 34 percent of today’s workforce is involved in the gig economy and that number is expected to grow to 43 percent by the year 2020. We responded to this trend this year by focusing our corporate team’s efforts on arming our OPTAVIA Coaches with a new powerful lifestyle brand, tools and resources to empower them to shape their destiny and create a life of greater momentum and potential financial freedom.”

–Dan Chard, CEO of Medifast, Inc., a manufacturer and distributor of clinically proven healthy living products and programs

7. Ingestible skin care grew.

“Both online and offline discussions as well as data coming from the consumer surveys shows that ingestible skin care is becoming a mainstream concept, globally. We have discovered that more and more people believe that beauty comes from the within. Some surveys show that two thirds of consumers questioned, replied that eating and drinking their way to beautiful skin is a normal day-to-day approach they take.”

–Golan Raz, head of the global health division at international wellness company Lycored

8. Marketing technology became more accessible.

“Marketing technology has become more accessible over the past few years, largely driven by the rise of cloud solutions and better integrations between tools. While the number of solutions on the market can be daunting, these options have actually empowered marketers (both enterprise and SMB) to see greater ROI from their tools, regardless of department or budget size. Today, more than three-fourths of SMBs are already using more than one marketing technology, and plan to adopt additional solutions to grow their business.”

–Jason VandeBoom, CEO at ActiveCampaign, an SaaS marketing automation platform

9. Digital commerce exploded in B2B.

“Fueled by B2B customer expectations for buying experiences that mimic their personal lives, organizations have made major investments in digital commerce that have transformed how they interact with buyers. Amazon’s investments in Amazon Business have supercharged this shift, driving businesses to adopt digital solutions that enable customers to self-serve in order to stay competitive. For the first time in history, nearly half of B2B businesses sell their full line of products online, illustrating the value businesses and buyers are placing on more flexible, convenient commerce experiences.”

–Emily Johnson, marketing manager at CloudCraze, an enterprise B2B commerce platform built natively on Salesforce

10. Digital automation increased the efficiency of many processes.

“In the age of being as efficient as possible, automation was a huge player in making this happen in 2017. From automation in digital advertising to consumer products bringing automation into our homes — this is a trend that is likely to increase in the future. But while automation is great for efficiency, we still need to maintain that human element behind it. In order to keep that creativity incorporated into our daily mundane tasks, we must embrace this technology while striving for a higher level of strategy.”

–Nancy Lim Rothman, director of marketing at CallRail, a call tracking and analytics application

11. Machine learning arrived, and it’s here to stay.

“One of the biggest tech trends of 2017 was that companies are finding tangible ways to apply machine learning within their organization. Machine learning is still in the early stages, and we will see it be applied to more business use cases as we progress into 2018. The concept of using large data sets to find patterns in behavior is a trend that will impact the way companies do business. Understanding when a project is on the right path to success, seeing warning signs of where things can go wrong or recognizing why a customer might leave are questions every business owner wants to address. Machine learning has, and will continue to, provide those answers.” 

–Chris Rothstein, cofounder and CEO of Groove.co, a sales automation platform

12. Consumer-oriented augmented reality took mobile applications by storm.

“For mobile technologies, the advent of consumer-oriented Augmented Reality (AR) experiences across both the iOS and Android platforms was extremely significant. We’ve already seen these new technologies driving powerful new consumer experiences for marketing, e-commerce, and retail, and I fully expect we’ve only scratched the surface this year in terms of what experiences will be created for end users, not to mention the wide array of internal, disruptive enterprise-focused use cases for AR.”

–John Sprunger, senior technology architect at West Monroe Partners, a business and technology consulting firm

13. We saw the dawn of the era of massive digital transformation of local governments.

“There is a perfect storm brewing in IT departments within local governments. They’re running on decades-old IT systems, have been slow to adopt modern, cloud technologies, and IT budgets have come to pre-recession levels. With up to 50 percent of IT staff coming up for retirement over the next 5 years, there is a once in a generation opportunity to define the digital government of the future. The initiatives around open data, transparency, and civic engagement have been early indicators of the progress to come in 2018 and beyond.”

–Adnan Mahmud, CEO and Founder of LiveStories, a civic data platform

14. HR data became the holy grail of providing feedback.

“Data has invaded almost every line of business and HR finally got its turn in 2017. This year, more companies armed themselves with real-time feedback capabilities like activity streams and pulse surveys as well as the analytics to support them. These data-driven tactics allowed HR departments and managers to revolutionize performance management and employee engagement while gaining better insight into overall organizational health. Organizations that began housing this rich HR and engagement interaction data in one central location were definitely winners in 2017.”

–Vip Sandhir, CEO and founder of HighGround, an employee engagement and performance management software provider

15. Companies made strides towards GDPR compliance.

“In 2017, companies started making real strides toward compliance. Organizations of all sizes are preparing for the European Union General Data Protection Regulation (GDPR) and have made it a priority. With potential fines of up to 4 percent of annual global revenue, GDPR affects all companies with a European presence, as well as any company with a website offering goods or services to citizens of the EU and cloud services developed by US-based companies and deployed globally. As we get closer to the May 2018 deadline, we’ll continue to see companies implementing better and stronger privacy and security controls.”

–Dana Simberkoff, chief risk, privacy and information security officer at AvePoint, an IT solutions provider

16. InsureTech startups partnered with direct competitors.

“In 2017, InsureTech startups saw a meaningful shift towards forging relationships with traditional carriers rather than competing directly with them. This likely has to do with the barriers to entry most startups face in the forms of heavy regulation, large capital requirements, and the wide variety of functional expertise required to build integrated insurance entities. In 2018, it will be interesting to see whether those who choose to partner or those who stay the course of direct competition will see more success in the InsureTech space.”

–Kyle Nakatsuji, founder and CEO of Clearcover, a data-driven auto insurance startup

17. Hospitality took on tech and it’s paying off for everyone.

“Swaying from its interpersonal roots, the hospitality industry took on tech this year in hopes of improving the experience for both the restaurant owner and customer. For starters, it saw a rise in e-commerce adoption beyond simple reservation services like OpenTable. Customers can now book catering or private events, for example, with just a few clicks instead of a series of phone calls or email chains. And like most industries, the hospitality industry reaped the benefits of the mobile tipping point this year. Software vendors finally cracked the code on getting employees to adopt mobile tech, as everything from employee scheduling, to payment collection, to event management can now be completed on mobile devices.”

–Nick Miller, cofounder and CEO of event management software Gather, an event management software for restaurants and venues

18. Cloud computing reached its inflection point.

“Many companies have been thinking about migrating to cloud computing, a number of them have made the move but with small and low risk applications. Now that cloud computing has proven itself to be a substantial improvement over self-hosting, this trend is now significantly accelerating. The key trend going forward is that companies are evaluating their portfolios of applications and determining which of the “four R’s” make sense for them: Rehost (also referred to as “lift and shift”). This involves mass migration of existing application to a different cloud-based hardware environment, without changing the applications themselves. Refactor, which means running an application on the cloud provider’s infrastructure, while modernizing some of the application code to fully take advantage of the cloud environment. Rebuild, which involves completely redeveloping an application to take full advantage of the cloud infrastructure provider’s platform. Replace, which means discard an existing application and switching to a SaaS model. Much of the next year’s activity is likely to be in the ‘Rehost’ category, where companies try to take advantage of the cloud, while yet extending the life of their existing, and proven, applications.”

–Ed Szofer, CEO of SenecaGlobal, a software development solutions and services provider

19. People are being more conscious of what they put into their bodies.

“Natural remedies were a great 2017 trend to watch. Curing a migraine with a pill isn’t the immediate instinct anymore. Consumers are getting smarter, so it raises the bar in providing a better product. We looked at the migraine problem differently and found that weather-related migraines were among the primary causes. No medicine can stop the weather. By creating an ear plug that allows atmospheric pressure to more gradually affect a sufferer’s middle ear, we discovered a drug-free migraine solution. By thinking differently and fully embracing the natural remedy trend, we came up with kid-friendly, drug-free headache relief.”

–Drew E. O’Connell, CEO of MigraineX, a natural, drug-free option to help to reduce weather-related migraine pain and symptoms

20. There was a spike in people searching for addiction and treatment options online.

“Nearly 80 percent of internet users are looking up medical conditions like alcohol and opioid addiction, and how to get help. We want to make that process of getting vetted, unbiased info on addiction treatment way more transparent, so people can make genuinely informed choices.”

–Patrick Nagle, founder and CEO of Rehab.com, an unbiased and transparent resource for those searching for drug, alcohol, and mental health services

21. Companies increasingly incorporated wellness into their workplace environment.

” Whether it is healthy snack and supplement options or staff yoga, it gives business leaders and their staff clarity and makes everyone feel enthusiastic about starting their day. Keeping that momentum going throughout their work schedule [provides] amazing results.”

–Zev Ostreicher, founder and CEO of Zoganic, a drinkable vitamin supplement made from 100-perecent organic fruits and herbs

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12 of the Best Business Books of 2017, According to the Stanford Business School

A good book is like food for the soul. When you want to curl up by the fire with a truly great one, look no further than this list furnished by members of the Stanford Graduate School of Business.

If you’ve got an entrepreneur or two in your life, these might make good holiday gifts, too:

1. Good to Great: Why Some Companies Make the Leap and Others Don’t, by Jim Collins

Collins and his team did a rigorous study of businesses that excelled as compared to those that stayed mediocre. In his words, “Some of the key concepts discerned in the study fly in the face of our modern business culture and will, quite frankly, upset some people.”

2. The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers, by Ben Horowitz

Cofounder of VC firm Andreessen Horowitz keeps it real in this practical book that draws heavily on his own experiences in the Valley. It lives up to its description as “wisdom for managing the toughest problems business school doesn’t cover.”

3. Big Science: Ernest Lawrence and the Invention That Launched the Military-Industrial Complex, by Michael Hiltzik

Don’t let the title fool you–this book is more entertaining than it seems. Part biography, part adventure story, part history book, it really is, “[t]he epic story of how science went ‘big’.” 

4. Invisible Influence: The Hidden Forces That Shape Behavior, by Jonah Berger

Peek behind the curtain at the secret and often unexpected factors that affect our decisions. Fortune calls this the “rare business book that’s both informative and enough fun to take to the beach.”

5. The 10 Laws of Trust: Building the Bonds That Make a Business Great, by Professor Joel C. Peterson

JetBlue chairman Joel Peterson has spent a tremendous amount of time, money, and energy building a culture of trust, and teaches you how to do the same. In his words, “When a company has a reputation for fair dealing, its costs drop: Trust cuts the time spent second-guessing and lawyering.”

6. Lead and Disrupt: How to Solve the Innovator’s Dilemma, by Professor Charles O’Reilly and Michael Tushman

Blockbuster, Kodak, and RadioShack: all huge companies that ultimately failed. The authors here argue that to be truly resilient, companies must develop what they call ambidexterity–the ability to win new domains while staying true to your core competencies.

7. Clay Water Brick: Finding Inspiration from Entrepreneurs Who Do the Most with the Least, by Jessica Jackley (MBA ’07)

Jackley has spent years learning from the poorest of the poor. Here, she outlines the most remarkable lessons drawn from the most unexpected of places. As she puts it, “The greatest entrepreneurs succeed not because of what they possess but because of what they are determined to do.”

8. Originals: How Non-Conformists Move the World, by Adam Grant

This brilliant and insightful tome pulls from established research studies as much as it does from compelling stories from sports, business, politics, entertainment, and more. Uplifting and entertaining, it’s no wonder it became a #1 New York Times bestseller.

9. The Language of Food: A Linguist Reads the Menu, by Dan Jurafsky

A gorgeous mashup of culture, language, history, and different cuisines, this engaging and informative book takes you on a fascinating journey through time, linking linguistics with gastronomy. Anyone into both good words and good food will adore it.

10. The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It, by David Weil

Weil, former Wage and Hour Administrator in the U.S. Department of Labor and current professor at the Harvard Kennedy School, sheds light on the dismaying trend of corporations eroding pay and basic safety conditions of workers–and what can be done about it. 

11. Bad Science: Quacks, Hacks, and Big Pharma Flacks, by Ben Goldacre

Goldacre, known for exposing biased research studies, “quack” doctors, and bogus credentialing programs, teaches you the practical skills you need to recognize bad scientific studies yourself … in a fun and engaging way.

12. All the Devils Are Here: The Hidden History of the Financial Crisis, by Bethany McLean and Joe Nocera

Ever wondered exactly what happened, when, to lead up to the biggest crash of our modern times? McLean and Nocera, two of America’s most recognized business journalists, give a comprehensive and fascinating outline of just that.


“Never trust anyone who has not brought a book with them.” ― Lemony Snicket

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The 2 Truths That Reveal Why We Don't Accomplish Our Goals (And Ultimately Accept Failure)

Growing up, failure wasn’t allowed in my household.   

I remember being twelve years old, barely a step into middle school, when I caught the flu the morning of a jump rope fundraiser. My father walked into my bedroom, saw me still under the covers and said, “You’re not awake yet?” 

I had committed to jumping role for an hour straight at my middle school’s gymnasium to raise money for lung cancer. 

“Dad, I can’t,” I said, hovering over the bucket beside my bed. 

“That’s not what Michael Jordan said in the 1997 NBA finals against the Utah Jazz,” he said.

Yes, at 12 years old, my ability to push through in the face of failure was being compared to none other than the great Michael Jordan.

Groaning and on the edge of vomiting, I pulled myself out of bed, held my head in the car, and arrived to a packed gymnasium where I proceeded to jump rope while fighting sweats and shivers, taking intermittent sips of Gatorade. 

I spent the next two days in bed, my father coming in every so often to say, “I’m sorry that was so tough–but I told you that you could do it.”

Anyone who has ever pursued some sort of goal, no matter how big or how small, can pinpoint an infinite number of moments in which failure was a viable option–a “way out.” 

When I fractured my spine playing hockey as a teenager, I had the option of never returning to the sport.

When I was competing as one of the highest ranked World of Warcraft players in North America, I had the option of quitting the game after my teammate disbanded our team.

When I started bodybuilding in college, I had the option of giving up every time I experienced a new injury or grew tired of the overly demanding daily routine.

When I started my first job after college, working in advertising, I had the option of accepting my fate as a copywriter and listening to all the people in my life who said, “You can’t make a living as a full-time writer.”

When I took the leap four years later to become that full-time writer, I had the option of getting scared and throwing in the towel when things didn’t click perfectly right away.

And when I decided I was going to push the boundary even further and start my own writing agency, I could have accepted failure whenever someone told me, “No.”

But every time I’ve pushed through those moments where failure seemed like the only option, my father’s voice has played over and over again in my head:

“I’m sorry that was so tough–but I told you that you could do it.”

In all my pursuits, interests, hobbies and accomplishments, I’ve learned that there are reasons why we, as ambitious humans, fail. And as much as we would like to believe that failure is something that chooses us, the truth is, it’s the other way around.

We choose failure. And in the moments when we make the choice to surrender, give up, and accept things as they are, it’s because we believe one one of these two truths about ourselves:

1. We don’t believe we are capable.

Our comfort zone’s represent what we’ve already done–not what we are about to do.

When we are confronted with a challenge, we tend to compare that challenge to something we’ve already overcome. If the challenge seems less daunting or equally as daunting as something we’ve accomplished, we are less likely to choose failure because we’ve already proven our ability to succeed. 

However, if the challenge appears greater than anything we’ve ever done or successfully overcome in the past, this is where our comfort zone suddenly becomes exceedingly apparent. We see this as the line in the sand–and we doubt our ability to cross it.

2. We believe the pain will outweigh the gain.

Pain without purpose is torture. Pain with a purpose is a price.

Unless we believe that the end result will be worth the road it takes to get there, we will almost always choose to avoid the journey altogether. We see our time and efforts better spent on things that will guarantee a positive result–rather than investing in something that may or may not pay off in the end.

Unfortunately, we very rarely understand the rewards and lessons gained before we leap into the unknown. We can imagine what those gains might be, and weigh their potential value against the tough road ahead, but anyone who has overcome a tough obstacle will tell you their doubts beforehand and their pearls of wisdom gained in the process.

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SAP sees margins flattening out in fourth quarter: CFO

BARCELONA (Reuters) – Europe’s biggest technology company SAP (SAPG.DE) expects profit margins to flatten out during the fourth quarter after three years of declines, with improving margins to begin to show up in 2018, Chief Financial Officer Luka Mucic said on Friday.

FILE PHOTO: SAP logo at SAP headquarters in Walldorf, Germany, January 24, 2017. REUTERS/Ralph Orlowski

The German software maker is in the midst of a transition to offer cloud-based services to business customers, and management have flagged that 2017 would be the low-water mark for margins as it invested in datacenters and redeployed staff.

“We see now the advent of a period when the margin inflection point should be reached soon,” Mucic told investors at the annual Morgan Stanley European Technology, Media and Telecoms conference in Barcelona.

“In Q4 (fourth-quarter) I see at least the chance to reach flat margins in non-IFRS terms,” he said.

SAP has invested heavily to shift its business to the cloud, but sees that paying off in coming years. Mucic said margins would “start to climb back up” next year and expand further in 2019 and 2020.

Analysts, on average, forecast margins to hit bottom this year at around 29 percent before starting to rebound in 2018.

Mucic also told investors not to expect any dramatic improvements in the coming year, saying that SAP would continue to invest to move its business to the cloud and would not scale this back to meet short-term margin targets.

”The market should not be overly ambitious in terms of the margin increase, especially in 2018,” he said.

The finance chief reiterated that SAP had no plans to return to the large-scale acquisitions that accelerated a shift from its classic packaged software for financial planning to deliver more cloud-based internet services.

“We will continue (to look) for opportunities to expand our portfolio in tuck-in mode,” Mucic said of small-scale, technology-focused deals. He said that SAP would continue to “strongly” invest in organic, internally generated growth.

A succession of multi-billion dollar deals earlier this decade culminated in its largest ever merger in 2014, when it paid $8.3 billion for travel and expense management firm Concur.

SAP’s shares traded roughly flat at 96.31 euros at 1038 GMT. The stock is up 16 percent so far in 2017, having touched all-time record levels above 100 euros earlier this month.

Reporting by Douglas Busvine and Eric Auchard. Editing by Jane Merriman

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Jaguar Land Rover tests first driverless vehicle on public roads

LONDON (Reuters) – Britain’s biggest automaker, Jaguar Land Rover (JLR), has tested its first driverless car on public roads, it said on Friday, as carmakers race against each other and tech firms to tap into new technologies.

Signs are seen outside the Jaguar Land Rover plant at Halewood in Liverpool, northern England, September 12 , 2016. REUTERS/Phil Noble

Last October, a pod heavily adapted from a compact Renault car was the first autonomous car to take to Britain’s streets as part of government-backed trials aimed at seeing more widespread use of such vehicles by 2020.

Politicians are trying to make it as easy as possible to test new driving technologies in Britain, seeking to build an industry to serve a worldwide market expected to be worth around 900 billion pounds ($1.2 trillion) by 2025.

An Automated and Electric Vehicles Bill is currently being debated in parliament to set out how new technologies will operate in Britain.

JLR hopes the testing will allow it to understand more about how self-driving vehicles interact with other cars and road infrastructure such as traffic lights and how models can replicate human behavior whilst driving.

“By using inputs from multiple sensors, and finding intelligent ways to process this data, we are gaining accurate technical insight to pioneer the automotive application of these technologies,” said Nick Rogers, the firm’s Executive Director for Product Engineering.

The testing is taking place in the central English city of Coventry, the historic heart of the British car industry, where JLR is headquartered. Trials will continue into next year.

Major automakers are seeking to head off the challenge not just from each other but also from technology firms such as Alphabet Inc’s Waymo, which is also developing autonomous vehicles.

Waymo said earlier this month that it will launch a ride-hailing service with no human behind the steering wheel and has been testing the fully self-driving cars on public roads in the U.S. state of Arizona.

($1 = 0.7548 pounds)

Reporting by Costas Pitas; Editing by Hugh Lawson

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Worried About Robots Taking Your Job? Learn Spreadsheets

Musing on the future of the economy earlier this year, Bill Gates warned of smart machines replacing human workers and suggested a tax on robots. A new study of how technology is changing American jobs suggests workers are most immediately challenged by more common technology that Gates himself bears much responsibility for, such as Microsoft Office.

The new study from the Brookings Institution used government data on work tasks to track how use of digital tools changed in a wide range of occupations between 2002 and 2016. Use of digital technology, such as computers and spreadsheets, became more important to occupations of all kinds. But the most dramatic changes were felt in jobs traditionally least reliant on technology skills—think of home health aides and truck mechanics using computers to diagnose problems or record their work.

The Brookings’ study created a “digitalization” score for 545 occupations covering 90 percent of the economy, using government survey data that asks workers about their knowledge of computers, and how much they use them. In 2002, 56 percent of jobs scored low on Brookings’ digitalization scale; by 2016, only 30 percent did. Nearly two-thirds of new jobs created since 2010 required high or medium digital skills, the report says. That shift is problematic given America’s long-established deficit in basic digital skills, such as familiarity with spreadsheets or other workplace software, where US workers score well below other those from other advanced economies.


Overall, the Brookings report suggests the window of opportunity for workers without basic digital skills or a college degree is closing. “With the availability of jobs that require no to very low digital skills dwindling, economic inclusion is now contingent on digital readiness among workers,” says Mark Muro, a senior fellow at Brookings who led the study. “While tech empowers it also polarizes.” He recommends that companies, government officials, and educational groups invest in programs that train workers in basic digital workplace tools.

That diagnosis and proposed remedy stand in contrast to two common prescriptions for how to help the US economy adapt to technological change. Gates and many other tech executives suggest new government programs to support workers displaced by a coming generation of smart robots. In recent years there has been a swell of support, including from the Obama administration, for programs that teach people to code.

The new Brookings data suggests the US faces a more immediate, and perhaps less glamorous task. “Coding for all is not quite the right model,” says Muro. “It’s less sexy, but we need much broader exposure and mastery of humbler, everyday software.” Maybe not everyone needs to be a code slinger, but word processing and enterprise packages like Salesforce are hard to avoid.

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Google CEO Sundar Pichai made a similar argument last month, when he launched a $1 billion educational program focused on helping workers skill up in workplace technology. Google employees will offer training in cities around the US. Naturally, they’ll highlight products such as GSuite, Google’s competitor to Microsoft office.

The digital-skills crunch has been a long time brewing. Erik Brynjolfsson, director of the MIT Initiative on the Digital Economy, says that IT’s impact on US businesses surged in the mid-to-late ’90s—not coincidentally around the same time US median wages began to stagnate. In 1996, President Clinton announced a “national mission” to make all US children technologically literate by 21st Century. The Brookings report shows there is still a way to go. “We could have done a lot better,” says Brynjolfsson.

Brynjolfsson echoes Muro’s call for better educational efforts to widen the pool of workers with basic digital skills. He also says society’s poor track record at adjusting to the digital age shows we should be starting now to prepare workers for the next big shift, in which machines become capable of many tasks now done by humans. He recommends that, in addition to productivity software and coding skills, workers should be encouraged to develop their creativity and emotional intelligence—faculties believed to be among the toughest for software to acquire.

Jason Kloth, CEO of Ascend Indiana, an industry-led group that tries to improve workforce skills, generally agrees with Brynjolfsson’s long-term predictions that advanced automation will challenge workers of all kinds. But his organization has more immediate concerns. “We need to close the gap between demand and supply in the labor market today,” he says.

Ascend has collaborated with Brookings on research on workplace skills. The Indianapolis group’s initiative includes programs that help companies identify or create educational programs for workers. Kloth says he feels there’s more at stake than just the fortunes of local companies and workers. “I think that growing income inequality manifests in social and political unrest,” Kloth says. Spreadsheet training could—maybe should—be a political issue.

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Amazon to sell China cloud services unit in $300 million deal

BEIJING (Reuters) – Amazon.com Inc’s Chinese partner, Beijing Sinnet Technology Co., said it would purchase Amazon’s Chinese web services business for up to 2 billion yuan ($301 million), ending the U.S. firm’s cloud-computing business in the country.

FILE PHOTO: The logo of the web service Amazon is pictured in Mexico City, Mexico on June 8, 2017. REUTERS/Carlos Jasso/Illustration/File Photo

Sinnet, which began operating the Amazon services in August 2016, said in a filing late on Monday the pending purchase would help the unit “comply with local laws and regulations and further improve service quality and security.”

Amazon did not immediately respond to a request for comment on Tuesday morning.

Chinese regulators are tightening rules on foreign data and cloud services, including new surveillance measures and increased scrutiny of cross-border data transfers.

In August Sinnet told customers it would begin shutting down VPNs and other services on its networks that allow users to circumvent China’s Great Firewall, citing direct instructions from the government.

The changes are linked to new national cyber laws that came into effect in 2017, which make network providers liable for content deemed dangerous or offensive to “socialist values”.

In 2013 Amazon’s web services business signed agreements with provincial governments in China, and has previously worked with some of China’s largest tech firms including Xiaomi Inc, Qihoo 360 Technology Co Ltd and Kingsoft Corp Ltd.

Cloud services have become a crowded and competitive field in China in recent years, with Alibaba Group Holding Ltd’s cloud unit opening over a dozen overseas data centers since 2016.

Reporting by Cate Cadell; Editing by Stephen Coates

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Uber's South Asia policy chief quits in latest senior departure

NEW DELHI (Reuters) – Uber’s [UBER.UL] chief of policy for India and South Asia has quit, two sources familiar with the matter said on Monday, in the latest high-level departure at the online taxi company.

The Uber logo is seen on mobile telephone in London, Britain, September 25, 2017. REUTERS/Hannah McKay

Shweta Rajpal Kohli, a former Indian journalist who joined Uber last year, would join cloud-based software maker Salesforce.com Inc next month, the sources told Reuters.

Uber, in a statement to Reuters on Tuesday, confirmed Kohli had quit.

Kohli was mostly tasked with building Uber’s relations with regulators and government officials in India, a market where the firm has faced several regulatory and reputational hurdles.

One source said Kohli “was leading government engagements in the influential circles, so her exit is a step back for Uber.”

Uber was briefly banned in New Delhi after one of its drivers raped a woman passenger in 2014.

Uber hired a law firm this year to investigate how the firm managed to obtain the medical records of the rape victim, an incident that led to criticism of the culture at the U.S. firm, sources told Reuters in June. Uber declined to comment.

Kohli is the latest senior executive to leave Uber. The firm’s European policy chief quit in October, shortly after the departure of Uber’s top boss in Britain.

Uber has suffered a tumultuous few months which has seen former CEO and co-founder Travis Kalanick forced out after a series of boardroom controversies and other regulatory battles in multiple U.S. states and around the world.

Uber counts India as its second-biggest market after the United States. It operates in about 30 Indian cities and competes with Ola, a ride hailing service backed by Japan’s Softbank.

Uber said on Monday it had agreed with a consortium led by SoftBank and Dragoneer Investment Group on a potential investment.

Editing by Euan Rochaa and Edmund Blair

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Uber board strikes agreement to pave way for SoftBank investment

SAN FRANCISCO/NEW YORK (Reuters) – Uber Technologies Inc’s [UBER.UL] warring board members have struck a peace deal that would allow a multibillion-dollar investment by SoftBank Group Corp to proceed, and would resolve a legal battle between former Chief Executive Travis Kalanick and a prominent shareholder.

A photo illustration shows the Uber app on a mobile telephone, as it is held up for a posed photograph, in London, Britain November 10, 2017. REUTERS/Simon Dawson

Venture capital firm Benchmark, an early investor with a board seat in the ride-services company, and Kalanick have reached an agreement over terms of the SoftBank investment, which could be worth up to $10 billion, according to two people familiar with the matter. The Uber board first agreed more than a month ago to bring in SoftBank as an investor and board member, but negotiations have been slowed by ongoing fighting between Benchmark and Kalanick. The agreement struck on Sunday removes the final obstacle to launching the tender offer.

SoftBank, a Japanese conglomerate that has become a heavyweight in Silicon Valley tech investing, is leading a consortium of investors that plans to invest $1 billion to $1.25 billion in Uber, and in addition, will buy up to 17 percent of existing shares from investors and employees in a secondary transaction. The terms are expected to be signed on Sunday, one of the people said, although the tender offer would likely take weeks to complete.

Uber is valued at $68 billion, the most highly valued venture-backed company in the world. SoftBank’s roughly $1 billion investment of fresh funding is expected to be at the same valuation. The secondary transaction, or the purchases from employees and existing investors, would be at a lower valuation.

A spokeswoman for Benchmark did not immediately respond to a request for comment, and a spokesman for Kalanick declined to comment. Uber did not immediately respond to a request for comment.

Completing the SoftBank deal would allow Uber to open a new chapter after a year of controversy, including the resignation of Kalanick, the ouster of several top executives, sexual harassment and discrimination allegations, and multiple federal criminal probes. The deal is also tied to new governance rules that aim to more equally distribute power and bring more oversight to the company.

“Uber had a remarkable first six or seven years, a bumpy past two years, and now the Softbank deal allows for a full reset,” said Bradley Tusk, an Uber investor and political strategist who works with tech companies.

The logo of SoftBank Group Corp is displayed at SoftBank World 2017 conference in Tokyo, Japan, July 20, 2017. REUTERS/Issei Kato

It would also be a major victory for Uber’s new CEO Dara Khosrowshahi, who often served as a mediator to help broker the agreement, according to a third person familiar with the matter.

To allow the deal to go forward, Benchmark has agreed to immediately suspend its lawsuit against Kalanick, which it filed in August in an effort to diminish the ex-CEO’s power at the company and force him off the board, one of the sources said.

Upon the successful completion of the SoftBank investment, Benchmark would drop the lawsuit entirely, the person said.

In turn, Kalanick must receive majority board approval should he want to replace the board seats over which he has control, according to the source. In addition to his own seat, Kalanick controls two more, which are occupied by Ursula Brown, the former Xerox Corp CEO, and former Merrill Lynch & CO Inc [BACML.UL] CEO John Thain. Kalanick appointed them in September without first consulting with the board.

“Ending the litigation is a big step forward if it finally ends the specter of Kalanick retaking control,” said Erik Gordon, an entrepreneurship expert at the University of Michigan’s Ross School of Business.

Uber’s board already approved a slate of governance reforms that are contingent on completion of the SoftBank deal. They include removing super-voting rights that gave Kalanick and his allies outsized power, adding new independent directors and increasing the size of the board to 17.

Uber plans to run newspaper ads informing investors about the share purchase, and SoftBank will propose a price at which it will buy stock. The company has threatened to invest in ride-hailing rival Lyft if it doesn’t get the Uber deal done.

The deal gives early investors such as Benchmark, whose Uber stake is worth nearly $9 billion, the opportunity to cash out a very lucrative investment.

Reporting by Heather Somerville in San Francisco and Greg Roumeliotis in New York. Additional reporting by Liana Baker in San Francisco.; Editing by Diane Craft

Our Standards:The Thomson Reuters Trust Principles.
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Retirement Security: Tweeting About Stock Market Highs Won't Help, But This Will

Subscribers to “Retirement: One Dividend At A Time” got an early look at this material via free instant text message trade alert and email alert.

President Donald Trump absolutely loves talking about the stock market. Even more than that, he loves tweeting how much it’s gone up. Since Monday, October 16, Trump has tweeted at least eight times about the stock market, which continues to power to record highs. Since November 9, 2016, the Dow Jones Industrial Average is up over 27%; the benchmark S&P 500 is up 20% over the same period. Twice last week Trump has referenced the blue chip index, which closed above 23,000 for the first time last week and is now sprinting towards 24,000.

As the Dow traded around 23,450 on Wednesday of last week, he treated us all to a pre-Halloween, spooktacular tweet-treat:

Trump has argued that the stock market would rise by “leaps and bounds” if tax reform were to be passed. The market has been rallying since the election on expectations of a huge infrastructure program to rebuild failing roads and bridges. This was one program that most politicians could get behind, no questions asked. Analysts thought this would be the easiest one to tackle and pass since it has so much bipartisan support. To date, this has not gotten off the ground.

Some Wall Street analysts are divided in their opinion on whether the market’s rally is “pricing in” tax cuts – that is, reflecting expectations that tax cuts will pass – or if a tax package would be an additional boost to a market enjoying its best year since 2013.

For his part, Trump contends that tax cuts, and the benefits that would accrue to the stock market and the U.S. economy, are not being fully appreciated by markets. Last week, however, Treasury Secretary Steven Mnuchin said the stock market’s rally would be imperiled by a failure of Congress to pass tax reform.

This appears to run counter to Trump’s view that the market hasn’t been appreciating the potential benefits of lower taxes.

Trump, however, is sticking with a position staked out by his treasury secretary back in February that the stock market could “absolutely” be seen as a report card for the administration’s economic programs.

Whether or not this turns out to be true, it is true that just over half of American adults have any exposure to the stock market. This translates to many Americans seeing no direct gains from the rise in stock prices.

Cheering The Tweets For Capital Gain Or Squeezing Out More Income

If you’re a Seeking Alpha, or other finance site, reader, you’re almost definitely in the plurality of adults that have at least some exposure to the stock market, or at least your contemplating doing so in the near future. The question then is, are you being dragged along by the constant tweeting and cheering by the T.V. talking heads, hoping to squeeze out the last drop of capital gains from this second-longest bull market in history?

Or, after such a long run, might you be contemplating your next move. Perhaps you’d like to hold onto some of those gains you’ve made before they evaporate in the next correction. You might be interested in exploring a way to squeeze more reliable and dependable income from your new-found assets in order to generate more income for retirement spending.

Case In Point

For several days running, there has existed a wide divergence in performance between the major stock market gauges. On Wednesday of last week, The Dow Industrials composed of 30 large cap stocks, was barreling ahead, up .72% at the close.

At the same time, the S&P 500 Index, composed of 500 large stocks closed up just .16%.

And the Nasdaq Composite closed up a similar .18%.

They were all to the plus side, but the Dow trounced the others by a factor of 4 to 5 times.

Oftentimes, when markets fall out of sync like this, it can be a sign of deterioration to come. And so, this might present a waypoint to consider another path.

Gently Squeeze Your Assets For More Retirement Income

Don’t squeeze too tight. Just gently, squeeze your newly acquired capital gains.

Then, give them a K.I.S.S.

No, not that type of kiss! I’m talking about the acronym we often use here on Seeking Alpha.

K.I.S.S = Keep it simple, stupid!

Much of my work is devoted to taking complicated concepts, words and systems and breaking them down so that anyone can understand them.

Over 160,000 readers on Seeking Alpha alone read my recent piece, “Retire Smarter: Big Social Security Changes For 2018 And FTG Portfolio Supplements” because I keep things simple.

Batten Down The Hatches: FTG Getting Defensive For The Next Big Crash Part 1” was an attempt to communicate additional ideas on how I keep things easy to understand. I discussed simple ideas to ready your portfolio for the next, inevitable crash and how to monetize your portfolio assets. The follow-up article in that series, “Smarter Retirement: FTG Portfolio Gets Defensive For The Next Big Crash, Part 2” goes deeper into the subject and adds more color and recommendations as well.

Monetizing Assets For Retirement

The baby boom following World War II finds the United States with a large cohort of former hippies and hipsters, still referred to as “baby” boomers, no matter how old we are. There are now 10,000 of us retiring from the work force every single day. That’s a whole lot of folks staring retirement straight in the face and wondering how they’ll approach this brave new world.

We all have questions we need to answer. Will we downsize our homes and move? Where to move? Should we retire in place? What will we do with all of our hard-earned leisure time? Will we take those vacations to foreign lands we always dreamed of, or are our lazy bones aching too much for that now? Should we spend more time with our kids and grandkids? And then, there’s the matter of how will we pay for all this in retirement.

When I talk about monetizing your assets for retirement income, I’m simply addressing the conundrum faced by many investors as they near retirement. They lived on less than they earned. They saved all their working lives, trying to put away enough money so that it lasts them an indeterminate amount of time in retirement.

Why Must Our Retirements Be Indeterminate?

Well, if we knew how long we’d live after we retired, this would not be a problem. In fact, a determined amount of time would certainly make planning for retirement a heck of a lot easier.

Unfortunately, none of us knows how long we’ll live after we retire and how long our spouse will live. So we need a way to deal with this in a way that assures our success with some degree of dependability.

A Simple Way To Monetize Your Assets For An Indeterminate Retirement

O.K. Let’s try to keep this simple. Let’s say you and your spouse both worked and qualify for the average Social Security benefit of around $16,000 each, or $32,000 between the two of you. We’re going to round that down to just $30,000 to keep things simple.

And let’s further suppose that you’ve already figured out that the two of you will need $50,000 in retirement to pay your bills.

Here’s the quick math:

$50,000- $30,000 = $20,000

Okay. So now we’ve figured out you’ll need $20,000 in additional income to meet your expenses.

Well, if you’ve been saving up your entire working life in preparation for this big event we call retirement, you now have a sum of money that you can begin to “monetize.”

Put simply, this means you have an asset that you can put to work to generate that extra $20,000 you need to fill the gap. You’re turning your assets into money you can use for spending without using up those assets.

Further, if you found an investment for your assets that paid you more each year, more than the inflation rate, theoretically those assets will never have to be drawn down.

This means you’d never run out of money in retirement. You could stop worrying if you’ll have enough to last you in retirement. If you like, you’ll have the ability to leave a nice legacy to your children and grandchildren to make their lives easier. Or, you could leave the balance to your favorite charities.

Ways To Get There

Let’s imagine you were a prolific saver, lived below your means and managed to save $400,000. Here are some examples to illustrate how you could monetize that sum, using high quality dividend stocks with long histories of paying and growing their dividends.

If you invested your stake in companies like the huge, dividend aristocrat called AT&T (NYSE:T), you’d get around 5.5% annual income from this investment.

.055 X $400,000 = $22,000

Whoa! That’s even more than the $20,000 you decided you needed. And, AT&T has a very long history of raising the dividend by more than 2% each year. So that will keep you ahead of inflation. Problem solved.

Say you have saved $500,000. Well, if you wish to monetize that sum to yield $20,000 in annual income, you’ll only need to get a 4% yield in dividends from your stocks.

.04 X $500,000 = $20,000

Problem solved!

Have you saved less money, say $350,000?

.057 X $350,000 = $20,020

So, in order to get to that $20,000 goal you’ll need to obtain an overall 5.7% yield on your portfolio investments.

Problem solved!

Diversify, Diversify, Diversify

Some investors say if you have good conviction in your investment idea, go all in. Put all your money into that one investment and you’ll do fine. They refer to investors who prefer to diversify their investments as cowards.

Call Me A Coward

If diversifying your assets in order to prevent total portfolio failure, or total income failure is cowardly, I’m glad to be considered the #1 coward.

In fact, I believe going all in on one investment is rather fool-hardy. It’s akin to betting your entire stake on one throw of the dice at the casino, or one spin of the roulette wheel.

So, don’t mistake my demonstration above as being advice to invest your entire retirement savings into one stock, like AT&T. This was a way to simply demonstrate that if you invested your savings in a diversified portfolio of stocks that provided the dividend yield as shown, you’d be able to meet your retirement income goals.

Monetizing Your Assets For Fun and Income

If you’re a DIY (do it yourself) investor like me, you want to monetize those assets in order to get to your goals sooner. And you want to monetize them in the most efficient manor, to squeeze as much income out of them that you can.

To use the example of AT&T that we highlighted earlier, you realize that a stake of shares bought at $33.20 per share, paying a current dividend of $1.96 was producing a current yield of 5.90%. When T was selling for $39.10 per share the yield was a much lower 5.01%. Now that we purchased additional shares for the FTG Portfolio at $32.60, we obtained a substantially higher yield of 6.01%.

Income Failure Prevention

This method of weighting a portfolio by income generation results in a balanced approach for the income investor, one that affords us protection against total income failure. If one or a few stocks in a 20-30 stock portfolio fails to increase the dividend in a particular year, or cuts it, you’re left with 90% or more of your income generators to pick up the slack for you. They will normally continue paying the dividend, and many will continue raising the dividend, even when the economy goes into recession. This is especially the case if you load up your portfolio with stocks similar to the Fill-The-Gap Portfolio or our RODAT Subscriber Portfolio, which both contain many defensive names that pull their weight no matter the economic environment.

It’s all about helping you monetize your assets for income.

The Fill-The-Gap Portfolio

The FTG Portfolio contains a good helping of dividend growth stocks. It was built with the express purpose of benefiting from this and other strategies.

Two and a half years ago, I began writing a series of articles on December 24, 2014, to demonstrate the real-life construction and management of a portfolio dedicated to growing income to close a yawning gap that so many millions of seniors and near-retirees face today between their Social Security benefit and retirement expenses.

The beginning article was entitled, “This Is Not Your Father’s Retirement Plan.” This project began with $411,600 in capital that was deployed in such a way that each of the portfolio constituents yielded approximately equal amounts of yearly income.

The FTG Portfolio Constituents

Constructed beginning on 12/24/14, this portfolio now consists of 21 companies, including AT&T Inc. (NYSE:T), Altria Group, Inc. (NYSE:MO), Consolidated Edison, Inc. (NYSE:ED), Verizon Communications (NYSE:VZ), CenturyLink, Inc. (NYSE:CTL), Main Street Capital (NYSE:MAIN), Ares Capital (NASDAQ:ARCC), British American Tobacco (NYSE:BTI), Vector Group Ltd. (NYSE:VGR), EPR Properties (NYSE:EPR), Realty Income Corporation (NYSE:O), Sun Communities, Inc. (NYSE:SUI), Omega Healthcare Investors (NYSE:OHI), W.P. Carey, Inc. (NYSE:WPC), Government Properties Income Trust (NYSE:GOV), The GEO Group (NYSE:GEO), The RMR Group (NASDAQ:RMR), Southern Company (NYSE:SO), Chatham Lodging Trust (NYSE:CLDT), DineEquity (NYSE:DIN), and Iron Mountain, Inc. (NYSE:IRM).

Because we bought all of these equities at cheaper prices since the inception of the portfolio, the yield on cost that we have achieved is 7.57% since launch on December 24, 2014.

Due to our recent purchases of additional shares of AT&T at fire sale prices, current portfolio income now totals $31,160.58 annually, which is $392.00 more annual income than just last month. This represents a 1.95% annual income increase for the portfolio.

When added to the average couple’s Social Security benefit of $32,848.08, this $31,160.58 of additional supplemental income brings this couple annual income of $64,008.66. This far surpasses the original goal set to achieve a total of $50,000.00, which is accepted as a fairly comfortable retirement income in many parts of the country. That being said, this average couple now has the means to splurge now and then on vacation travel, dinners out, travel to see the kids and grandkids and whatever else they deem interesting.

Taken all together, this is how the FTG Portfolio generates its annual income.

FTG Annual Dividend Income

Your Takeaway

Everyone with eyes and ears knows that President Trump just loves to tweet. It is his preferred method of communicating daily to the masses. His tweeting has given the impression that he feels he deserves a big pat on the back for the performance of the stock markets. For now, the verdict is out on that. However, we also know that nothing grows to the sky.

For those readers and investors trying to find their way to squeezing their hard-earned assets to provide a comfortable stream of income in retirement , there are defensive measures we can take now to shore up the fort before any eventual collapse in prices.

One of the most important ingredients in these measures is to add high-quality names with long histories of steadily growing their dividends. By itself, this will go a long way toward helping assure a reliable income stream and to mitigate the possibility that a few equities hold theirs steady or reduce the dividend somewhat.

Final Thoughts

Investors who dismiss the pernicious effects of inflation do so at their own peril. The pervasive loss of purchasing power that it inflicts can turn a comfortable $500,000.00 nest egg into a scrambled egg, just twenty or thirty years into the future. Monetizing your assets and investing to stay ahead of inflation will keep this bogeyman away.

Our subscriber portfolio uses these and many other strategies as we actively manage it on an ongoing basis to generate steadily growing, reliable income for retirement. In addition, subscribers get the benefit of instant free texts and receiving material days before the public in addition to many exclusive articles, updates, commentary and analysis throughout the week. If you’d like a taste of even better performance and faster dividend growth, before the free two-week trial offer expires, I encourage you to try it before you buy.

Author’s note: Should you be interested in reading any of my other articles detailing various strategies to enhance your returns on a dividend growth portfolio, you will find them here.

For a few more days, feel free to join hundreds of your fellow readers who have taken advantage of a free two-week trial to our premium newsletter subscription. Try before you buy, with no obligation.

To learn more about this highly rated premium service, click “Retirement: One Dividend At A Time.”

See what subscribers have to say in reviews they’ve written.

As part of our premium subscription program, all subscribers receive a free Portfolio Income Tracker to track income production in the subscriber portfolio and stay focused on income production in their own portfolio.

My promise to you: With every exclusive article, email, instant text and chat, I’ll help guide you to:

  • Increased income for retirement, one dividend at a time.
  • Under-valued stocks for a greater margin of error and higher capital appreciation.
  • Methods to safely diversify your portfolio.
  • Strategies to build, grow and protect your income for retirement.

As always, I look forward to your comments, discussion, and questions. Do you belong to the exuberant camp or the nervous Nelly camp? Are you concerned whether the dividends in your portfolio are sustainable? Have you started to play defense in your choices for participation in your portfolio? Please let me know how you approach these situations in your own portfolio and how you arrive at your decisions.

If you’d like to receive immediate notification whenever I write new content, simply click thefollow” button at the top of this article next to my picture or at the bottom of the article, then click “Follow in real time.”

Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.

Disclosure: I am/we are long ALL FTG PORTFOLIO STOCKS.

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.

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China shopping festival smashes record with $25 billion haul

SHANGHAI (Reuters) – Alibaba (BABA.N), the Chinese e-commerce giant, said on Saturday its Singles’ Day sales extravaganza hit $25.4 billion, smashing its own record from last year and cementing it as the world’s biggest shopping event.

Once a celebration for China’s lonely hearts, Singles’ Day has become an annual 24-hour buying frenzy that exceeds the combined sales for Black Friday and Cyber Monday in the United States, and acts as a barometer for China’s consumers.

As tills shut midnight on Saturday, Alibaba’s live sales ticker registered 168.3 billion yuan, up 39 percent from 120.7 billion yuan last year. The dollar figure was up more steeply due to the strength of the yuan against the greenback this year.

The event began soon after a star-studded event in Shanghai late on Friday. As midnight hit, a deluge of pre-orders helped drive a billion dollars of sales on Alibaba’s platforms in the first two minutes and $10 billion in just over an hour.

“In terms of scale it just dwarfs any other event out there,” said Ben Cavender, Shanghai-based principal at China Market Research Group.

At just past the halfway mark, the headline gross merchandise volume swept past last year’s dollar total just shy of $18 billion. Shortly afterwards, sales surpassed the 2016 total in the local currency.

The event gets shoppers around China scouting for bargains and loading up their online shopping carts, while delivery men – and robots – brace for an estimated 1.5 billion parcels expected over the next six days.

“This is a big event for China, for the Chinese economy,” Joseph Tsai, Alibaba’s co-founder and vice chairman, said. “On Singles’ Day, shopping is a sport, it’s entertainment.”

Tsai said rising disposable incomes of China’s “over 300 million middle-class consumers” was helping drive the company’s online sales – and would continue. “This powerful group is propelling the consumption of China,” he said.

The final total – more than the GDP of Iceland or Cameroon – leaves other shopping days in the shade. Cyber Monday in the United States saw $3.45 billion in online sales last year.

Investors closely watch the headline number, though some analysts say the way it is calculated is too opaque. The U.S. Securities and Exchange Commission launched a probe into Alibaba’s accounting practices in 2016, including into its Singles’ Day data. That investigation is as yet unresolved.

Jack Ma, Chairman of Alibaba Group, and actor Nicole Kidman attend a show during Alibaba Group’s 11.11 Singles’ Day global shopping festival in Shanghai, China, November 10, 2017. REUTERS/Aly Song

Last year, the sales number rose by nearly a third at the eighth iteration of the event – though that was slower than the 60 percent increase logged in 2015.


At Alibaba’s Friday night gala, the company’s co-founder and chairman, Jack Ma, hosted guests including the actress Nicole Kidman, singer Pharrell Williams and Chinese musicians and film stars such as Zhang Ziyi and Fan Bingbing.

The excitement around the shopping blitz, however, masks the challenges facing China’s online retailers such as Alibaba and JD.com Inc (JD.O), which are having to spend more to compete for shoppers in a broader economy where growth is slowing.

Slideshow (6 Images)

“A lot of the lower hanging fruit has been picked and there’s increased competition for a share of consumer spending,” said Matthew Crabbe, Asia Pacific research director at Mintel. The sale did though beat his forecast of 20 percent growth.

Online retailers were being forced to push offline as well as overseas to attract new shoppers, and the overall online retail market was close to “saturation”, raising questions about whether current rapid growth could be sustained.

“They’re having to spill over out of the purely online realm into the wider consumer market,” Crabbe said.

This has sparked deals to buy bricks-and-mortar stores in China, and overseas tie-ups especially in Southeast Asia. Technology, too, has been key, with virtual reality dressing rooms and live fashion shows to attract shoppers.

Alibaba also said it had turned 100,000 physical shops around China into “smart stores” for this year’s event. Goods perused by people at the stores, but then bought and paid for on Alibaba’s platforms, were added towards the sales total.

China Market Research Group’s Cavender said brands were also increasingly making smaller price cuts to avoid “margins getting killed”, and were often asking for deposits in advance. In previous years, prices were often halved.

Fu Wenyue, a 23-year-old dresser in Shanghai, said offers this year were smaller but more “personalized” as brands used big data to hone their targets. Fu spent 4,000 yuan on clothes, cosmetics and kitchen utensils in pre-event sales, and kept shopping on the day.

“In actual fact, I think I spent even more than I did last year,” she said.

Reporting by Adam Jourdan and SHANGHAI newsroom; Editing by Ian Geoghegan and Ros Russell

Our Standards:The Thomson Reuters Trust Principles.
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4 Leadership Mistakes to Avoid When Running a Small Business

We are creatures of habit. Once we have a way of doing something, we tend to stick with it because we know it works and we like that predictability. For example, I have been taking my sons to school via the same route for three years. I drop the older one off first and then the younger one.

Then, last week, for the first time while following this route, I missed a right turn after dropping off my older son and voila–I had just discovered a new route that shaved three minutes off my trip.

If you do the math, that’s three minutes multiplied by 200 school days per year, which gives me an extra 10 hours of free time per year. (That doesn’t sound like a lot, but I’m a stickler for efficiency.) All that from just one small change. Once I had discovered this new route, I realized that had I known my neighborhood better (or at least looked on a map), I probably would have discovered the better route much sooner. It was a mistake for me not to try out a few different routes before settling on one.

That got me to thinking about mistakes that I’ve learned (through much experience) to avoid in the workplace.

So, here are four leadership mistakes that you can easily avoid to improve your business and find the most efficient route to success.

1. Failing to recognize small things because they are “too small”

Every big success is due to a series of small successes. If you commit yourself to noticing and recognizing at least one small thing done by a team member, it will demonstrate your observational skills and it will show your team that you care enough to notice these small things.

Just how small are we talking? How about turning off the light in the break room when they’re the last person to leave it? Or maybe recognizing someone for picking up a shift for someone else or even praising a team member for their recognition of someone else on the team. Given that you have many more chances for recognizing small things than large ones, taking note of some of the small things can provide a huge boost to your team.

2. Assuming money is the mother of all motivation in the workplace

Yes, money is what makes the capitalist world turn, but when it comes to workplace motivation it is not the only motivation and often not even the top motivator. According to research performed by Glassdoor Economic Research, a 10 percent increase in base pay only increases the chance an employee will stay with the company by a mere 1.5 percent.

Advancement opportunities, social consciousness of the company, work/life balance, being respected and recognized by your team members are some of the important motivating factors for employees. So, before throwing money at employee issues like retention, ask yourself “What motivates my employees?” Even better, ask your employees what motivates them. You may be surprised to hear more answers than just pay.

3. Neglecting to design goals properly

The reason so many people’s New Year’s resolutions fail is because they are not properly designed goals with numbers to reach and timeframes to reach them by. If you want to exercise more, for example, you can’t just buy a gym membership and hope you do it. You have to set a number of times to visit the gym per week and try your best to reach that and increase it gradually until it becomes routine.

Similarly, if you want to improve your sales, you should set a number to reach and a date to reach that number by. Keep in mind that although you are striving to meet or exceed the goal, failing to reach it isn’t a terrible thing, either. If you fail to reach the goal you’ve set, that’s still useful as long as you have concrete numbers and dates that you can use to make adjustments to reach the goal in the future.

4. Overlooking your own mistakes

Owning up to your mistakes is one of the best things a leader can do to lead by example and promote accountability in a company. And, if you start at the bottom and trace the path of a mistake, you’ll find that much of the time, it can be traced right back up to the top. It could be a mistake in hiring or a mistake in delegation or maybe something just wasn’t explained clearly enough. Recognizing your own role in a situation that didn’t work out is important for the growth of your team.

By watching for and avoiding these mistakes, you can strengthen your leadership and your team and find the most efficient route to success for your business.

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Google Just Revealed What They Do to Select, Train, and Develop Their Successful Managers

In a recent podcast at Google’s Re:work, Sarah Calderon, a manager at Google who oversees Google’s Manager Development curriculum, revealed some nifty secrets about how they train and develop great managers.

She shares five lessons that will give your organization an edge in management training and development.

1. High-performing employees don’t necessarily make good managers. 

It’s a mistake to think that a high-performing individual contributor should be promoted to management; it’s often a different skillset to lead people that so many are unfit or unqualified to do.

Calderon says to find great managers, you should look at how someone works with others and how they get things done. Do they adjust their style to work with others? Do they clarify roles and responsibilities for team members? Can they provide feedback in a meaningful way?

But equally important is to determine whether they enjoy managing. Do they actually like the relational aspects of dealing with different people and personalities, and meeting the needs of employees? If an existing manager is miserable in his job wishing he had his old job back, it’s time to cut him loose from that role.

2. The best time to train new managers is a few months into the job. 

Companies often make the mistake of identifying high potentials to place into management roles, then put these people into a management training program before they get their “noses bloodied” by becoming actual managers in a real world setting.

Calderon says the best thing to do is to give them a few basic resources that they can find when they need them during the first few months on the job, and then wait until they’ve been managing for a couple months before you put them through a formalized management training.

And don’t wait too long — too much time may allow for too many mistakes to be made and bad habits to form — but wait long enough so they actually start to understand what the job is and get through some real life challenges, otherwise it becomes a theoretical exercise. At Google, it’s usually three months.

3. Don’t overwhelm new managers. 

The last thing Google wants to see is new managers experiencing burnout. The approach, says Calderon, is to think about what new managers need in those first six months on the job and give them just enough so that they can remember what they learned and go back and practice and build on it later. At Google, training focuses on four specific areas:

  • Providing feedback
  • Being a good coach.
  • Developing a growth mindset (a culture of learning for the individual manager and for their teams)
  • Developing emotional intelligence (and more specifically, self awareness and awareness of your team). One of the features of training related to EQ has to do with helping managers know their own triggers so that they can take on challenging situations with self-awareness. An example Calderon gave is how uncomfortable it can be to give someone feedback; in order to do that well, managers have to know how to manage themselves and their emotions first.

4. Training isn’t the only way to support your managers. 

Don’t make the mistake of assuming that your managers have to learn from experts. At Google, managers learn from each other, a lot. They are encouraged to conduct peer coaching, helping each other get feedback and find ways to improve on their day to day activities.

Calderon emphasizes the importance of creating a “culture of learning, practice, feedback and reflection” so managers continuously know what they’re doing well and what they need to do to get better. 

From an organizational standpoint, it’s important for senior leaders to encourage their managers to talk to each other to solve their own challenges; they need to invest in the systems and processes, such as tools for collecting feedback, that support their managers.

5. Give managers the feedback they need to get better. 

Once a year, “Googlers” fill out a survey on their manager’s performance to provide them feedback. Their performance is measured against what Google scientifically found to be the eight management behaviors that consistently produced happier teams, better results, higher retention and the best teams

But what works for Google managers doesn’t necessarily mean it will work for any organization. To determine what makes managers great in your establishment, consider these questions:

  • Do managers matter at your organization? 
  • If managers matter, whom do you need to convince and how? 
  • What makes a great manager at your organization? 


I found that there’s a redeeming quality to Google’s approach to training their managers. Calderon was asked: What happens if someone doesn’t pass the management training? Maybe they excel in some areas but struggle on emotional intelligence. How do you handle that?

Her response gave me a clear indication that empathy is not only a strong value at Google, but upon further investigation, it’s a manager behavior expected of all managers. Calderon said:

Its important to know that somebody is not going to walk out of training and be a great manager right away. Sometimes when you learn a new skill, it actually gets harder before it gets easier. The most important thing is to be open, supportive, and create a learning environment; be specific about how that manager can improve and give them resources to get better; and then measure that over time. If progress isn’t made, have a conversation about whether or not this is the right role, the right team, but again have some empathy for your managers as they go through some growing pains. 

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Overstock.com's (OSTK) CEO Patrick Byrne on Q3 2017 Results – Earnings Call Transcript

Overstock.com, Inc. (NASDAQ:OSTK)

Q3 2017 Results Earnings Conference Call

November 08, 2017, 04:30 PM ET


Robert Hughes – Senior Vice President, Finance

Patrick Byrne – Founder and Chief Executive Officer

Saum Noursalehi – President, Retail business

Seth Moore – Senior Vice President



Good day, ladies and gentlemen, and welcome to the Overstock.com Q3 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Robert Hughes, Chief Financial Officer. Sir, you may begin.

Robert Hughes

Thank you. Good afternoon and welcome to our earnings conference call. Joining me today are Dr. Patrick Byrne, Founder and CEO; Saum Noursalehi, President of our Retail business; and Seth Moore, Senior Vice President.

Let me remind you that the following discussion and our responses to your questions reflect management’s views as of today, November 8, 2017, and may include forward-looking statements, actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in the press release filed this afternoon and in the Form 10-Q we also filed today. Please review the Safe Harbor statement on Slide 2.

During this call, we’ll discuss certain non-GAAP financial measures. The slides accompanying this webcast and our filings with the SEC, each posted on our Investor Relations website, contain additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures.

Patrick, with that, let me turn the call over to you.

Patrick Byrne

Thank you, Rob. Thank you for that glorious introduction. Patrick Bryne here, so happy to be speaking to everybody. Today is going to be the different, it’s going to be an unusual call in several respects. For one thing, this – there is a non-negligible possibility that this is our last earnings call together, as you will come to understand.

Secondly, there are far more people on this call, 743 or about 850 on as far as we know now. I suspect this has something to do I know Marc Cohodes, my new friend Marc Cohodes talked about us in the Grant’s Conference, we’ve been deluged with emails and we have been informed and we’ve hundreds of people who are really new to this story on today, so that’s another reason it is going to be different.

But it’s because we’ve been – we are going to be providing may be a different angle on – we’re providing an explanation of the overall structure of our business that will help people. I used to be an equity analyst and I’m – our structure today is called to be extremely fulsome lots of information and to help newcomers to this story sort of think about how to value a disparate collection of assets.

So here’s the short version and a few slides that is – here is our GAAP operating income. As far as I’m concerned of our retail business 1% and 1% for years had a dip in 2011 and even before that we were operating 0.5% down or something. That’s about as rare as a Leprechaun to see that. I’m happy that Amazon has got to the 1% range. There is Wayfair losing 5%, 10%, 12%, a year. So people I think haven’t lost any remark on this fact of how rare this is. And on the next slide you see the capital that we have raised compared to our competitors and that’s what it looks like.

We have raised $200 million odd in capital and by this same calculation which Rob can explain, yes we’re up against people who have raised so much more than we have, and have had so much more capital burned through I think our [Audio Gap] rather de minimis amount of capital compared to everyone else we’ve built this $2 billion business with this earnings history. I don’t think that we’ve often gotten the – that’s been noted as much as it might have been, it’s a result of really one thing and that is technology. And with – if I’m talking about technology, I’m sitting here and I just Saum Noursalehi who has really been responsible of what happened here.

The explanation is this. When we started off we were proud of saying we’re not a tech company, we’re a lemonade stand with a computer in it is what I used to say, that’s because we couldn’t really afford anything more. And I worked for six or seven year where this Mitch in being a jobber an online jobber and doing jobbing in closeouts and bankruptcies and such. That only took us so far.

Up until or through that period when you really did do a lot of integration of third parties. But what happened about 11 years ago we started building our own technology internally in area after area and refining it until it got better than any commercially available product and then cutting away. And we’ve really done that across our whole site and that is why we’ve been able to go so far on so little capital.

Lest you think that I am just flattering myself here and saw, let me give you some examples. These like kind of technology awards we’ve won over and over, Best of the Web, Fastest Retail Site on the Web. Our apps for android and Apple iOS have for five years been winning almost quite consistently, sometimes first, sometimes second, first in one year iOS, second on the android or verse versa.

But our retail app is the best there is out there over and over, and our recommendation engines all of these things that we used to integrate and have third parties provide. We got starting really 11 years ago thanks to the man on my right, the ability to do better internally and built this technology. Saum, why don’t you talk a bit about this?

Saum Noursalehi

Sure Patrick, thank you. Yes I really see our core competency as technology and product development and as Patrick mentioned, we test against the best out there the best third parties and consistently we win on things like search, recommendations or marketing technology. So I really think we’re the best in the industry in those technologies. We’re always open to test new third parties and we try them and when we know that they were training the third party on how to build their product that is usually a good indicator of taking that in-house.

Patrick Byrne

I would also say Saum has been a fantastic partner in that we shared this vision of how we can make – the company should be a team of genes and that sounds very familiar from agile development and without approach and he not only remade our whole technology department that way, has made a whole management structure agile. Going on, so again this isn’t just saying, McKinsey ran a study some it was about four years ago looking at very scientific study it was actually about all of the stuff usability, lots of measurements and such and that came out saying Amazon had the best website in the industry for ease-of-use, intelligence, and all that kind of stuff all mixed into, we were second.

What I’ve learned is, well I’ll continue a little bit, besides just the straight technology or customer care, we’ve won all kinds of awards for years, the National Retail Federation, survey 10,000 households and say who blows your way with customer service, we’re always first, second, third or fourth. Us, Zappos, L.L.Bean, or Amazon. I am very proud that we won we were named as America’s one of the top hundred most trustworthy companies few years ago and just an award we won last night have not even announced at our own company is we’ve been named Loyalty Free [indiscernible] actually which is a prestigious customer service association the number one in excellence in customer care operational excellence.

So we’ve had, I mean our guys, I feel like I’ve really gotten the attention. We know how a lot of folks on Wall Street haven’t been following us for 10 years and have missed how they have built this incredible technology company. Very lean, these are numbers of like the revenue per data scientist and you can do the same comparison with all of our competitors. We are so lean and efficient, very high end developers, very high end technologies. I made a mistake earlier in the company’s history of sort of trying to save money. What we’ve learned over time is as you are just better off, I think Bill Gates said this, one great developer is worth a thousand good ones. And we took that approach. We have a smaller number of very high end developers.

So that leads me back to this slide. This is what we have a business that on a dollop of capital compared to everybody else and most of the people you see how much capital they raised and they blew through all of it. Most of those names there are or many of those names, they blew through everything and are gone. In our case we raised smaller than any of these names and worst doing business. I’m sorry that we lost $160 million of your money building this $2 billion business, but I actually feel really, I look back before I move on to now looking at the future.

I just I’m going to look back over these, what is it, 15 years we’ve been public now and I’m quite proud of that record. This is really quite telling to anybody who has got some financial sophistication I think this should be a business school case. The guys with this tiny amount of capital come on head-to-head and we have fought Amazon for 18 years through a standstill. They are the only other guys that I know of who even got to profitability. And everyone else had three, four, five, 10, 20, 100 times as much capital.

So with that said, let me I attribute that I want to just say through the value approach we take that I learned value approach in investing and also the and we bring through running this company like we own the whole thing and we’re not losing anything, we’re just – but really technology. Technology has been the big secret. However, it is time to face the facts and the facts are just from a strategic point of view we are up against people and it’s always going to be like this. I thought by now we’d be making 4% or 5% net income, operating income and the truth is you can’t.

I mean we’ve got to 1% and we can hold it there but we have faced off this endless stream of competitors who come in and they blow hundreds and hundreds of millions of dollars and we lost a 160, we burned $160 million of capital on our history. Wayfair burned half that last three months. We just have to face the fact that we’ve had this, well I think Stalin said that sometimes quantity is its own kind of quality. You know we can have the smartest machine learning, the smartest AI, the smartest scientist. When we’re up against people who are spending four or five times what we’re spending in online marketing running seven times as many commercials there is one thing that Wayfair is bidding on now that we’ve been paying $0.07 for, they’ve bit up the $2. it is just folks and you know this is just going to be other people behind them and I don’t see how you can build a better – that we can get to a 4% to 5% operating margin business when there is just going to be one after another of these folks get hawing and there is nothing that is going to stop. So with that said, before I go on, should I, let me take a breath, Saum do you want to add anything to that?

Saum Noursalehi


Patrick Byrne

Seth? Seth has got something smart to say, you always do.

Seth Moore

Yes so, we think there is a lot of promise in the business, but like Patrick said as we continue to see pressure in the digital marketing space not from a single competitor but from multiple DC backed competitors. Everything in the digital marketing is an auction [ph] and so that pushes the auction prices up and there is an inevitable contraction until our competitors run out of runway. And if VCs keep stepping in with new startups behind that, it just keeps compressing even as its older competitors flameout of which several on that list of competitors have flamed out and then their history is well known.

Patrick Byrne

Yes, many of them. Okay, so that’s kind of the strategic overview and look at the past and now let’s look at the future. What we are doing, people are writing to me says, what the heck are you guys even making? Oh I see what, there are thousand people on the line. This is quite, I’m used to about four, not 400, four. Okay this is what we are doing. We are doing a text back for civilization between Overstock and Medici. And let me show you that – Medici is of course our venture capital arm focusing on blockchain. Let me say what I mean and I’m going to since this is such as smorgasbord of assets I’m hoping that if you bear with me for this 20 to 25 minutes it will save you hours of trying to understand what we house inside OSTK.

First, so test stack for civilization begins I think with money. You need money, you need capital and capital market identity and voting and commerce. Everything we were building fits in this structure. So for example, on money, there is a slight lag, okay blockchain meets money. We have a wonderful investment in a Barbados company called Bitt. Bitt is the leading company in the idea of digitizing fiat currency for central banks creating digital wallets for citizens for people essentially frictionless payment system including remittances which incidentally are $500 billion industry globally remittances alone on which the [indiscernible] is about 15%. So $75 billion is being taken out of the world’s poor and from guys who are driving a cab in Brooklyn and sending their income home to Azerbaijan and 15% of what they send is taken out in fixed cost. We can essentially eliminate that.

Financial inclusion, this is a huge issue for 30 years Marc Cohodes has been talking about the problem of the unbank, bank in the unbank, 85% of the world does not have a bank account isn’t even tided into that modern world as we know it. That can all be accomplished without actually them having to go and build the banking copying the west and building the banking systems we built through these digital wallets on our cellphone. We own 11 but with option up 35% of Bitt. This is a – it is based in Barbados and it is earliest possible soft launch.

I’ve learned to think in those terms. If everything goes right you will see in December we will do a soft launch. It is dependent of course on the central bank letting us digitize their currently having us digitize the currency. We are in discussions with a number of them and if all goes as well as it can go you could see this happen in mid December, soft launch of the world’s first digital currency. The opportunities for this, the global ramifications for the poor, for financial inclusion for changing economies are just mind boggling.

Next blockchain, and blockchain needs money though we have some other investments. Ripeos which is another digital wallet payments credit lending, it is based in Latin America it is live product in the market. Medici under Jonathan Johnson who runs Medici has made this investment 2.25? There is also Spira which we are very excited about Spira is a payments and invoicing system run by a fellow who has built successful payments companies. A very interesting fellow. He is building this on the blockchain. This may have a real kind of crossroads position emerge between a couple worlds seems to be quite far along.

We own 18% and then PeerNova. PeerNova is out in Silicon Valley. It is a banking compliance, especially back office system for banks. We own 12%. We did take a big write down here. They are in discussions with someone that a contract that would buy them say 18 months or two years of, I mean they are well in discussions with one of the big banks in New York. I don’t know if they are going to get the deal or not. It is actually a great product. I have actually been surprised. PeerNova, I would say two or three years ago was technically maybe the best we could find. I am surprised they have not gotten more traction. Okay?

Next, we move to capital. Blockchain meets capital formation is the next area that I wanted to us have strategic investments. We do have an investment in fact it is now doing mortgage loan compliance and digital asset verification. We own just 2.5%. I will argue that may be another investment coming here, but I won’t say anything more about it. Capital markets, now this of course capital markets is tZERO and I know a lot of people are on because they have heard about us because of tZERO. Blockchain meets capital markets, the advantage of it is instant trade clearance and settlement. We have an SEC compliant exchange for ICOs. I believe it is the only one in the world, the only exchange in the world on ATS that is technically technologically blockchain and SEC compliant.

And who would have thought my own nemesis at the SEC would be so cooperative. I have to say I kind of want to take back a lot of things, well I was talking about a different SEC 10 years ago. This SEC has actually been very farsighted and professional and we have the only – they let us get this through, the only SEC compliant venue in the world where you can trade blockchain. We have these things called Digital Locate Receipts I’ll be talking about at length. Our ownership is 81% in tZERO. Overstock’s or Medici’s ownership is 81% and Overstock owns 100% of Medici.

So, here I’m just going to, oh Symbiont as well. Symbiont is a company we have it’s smarts contracts for digital securities is another blockchain-meets-capital-markets company. They have a deal going in Delaware with a corporate – they are digitizing corporate ownership. We have basically I think the two leading companies in blockchain-meets-capital markets are tZERO and Symbiont. I think those are the two companies to watch. We own 81% of one and only 1% of the other run by Mark Smith and Caitlin long who is quite a philosopher of this stuff and you see her name more and more in the press. She knows what’s going on in this space.

Next, Digital Locate Receipt platform. I’m going to talk about this at length. I’ve glossed here within the last conference call and explained roughly what we were doing, but it has over these 13 weeks since then the monster has gone from twitching his fingers and twitching his toes to standing up and walking and as of five days ago I would say walking and as of today actually really moving literally running and wait till you see the numbers as of today. Here I have to just without harking back to any old bad memories for anyone, as people know we were in this horrible fight with Wall Street some years ago and it was really classy.

I want to thank this guy Marc Cohodes. He spoke at Grant’s Conference in sometime a month or two ago in front of thousands of people. He said a lot of really nice things about us. And given what enemies were once were that showed a lot of class. I should point out our lawsuits discovered this guy Marc had done nothing wrong with us, but inherited a problem and a David Rocker had been running the hedge fund. David Rocker started a fight and when he was gone, Marc inherited and was actually quite professional with me.

I look back, we probably should have shaken hands four years earlier and settled and gotten out. But he is a – he got in touch with us, me, anyway we’ve actually developed a distant friendship through the years and he came to start seeing us this summer I think because he was sure Wayfair and started looking at our numbers and figuring out how efficient our retail business is and realizing we don’t get credit for it. But all that said, thank you very much Marc for the kind words you said about us.

Now as a function be it what that fight was about with his boss and stuff 10 or 12 years ago doesn’t matter other than I do want to mention one thing I’ve never disclosed publicly. It was I actually took, I brushed off a bunch of bad things that were said about me. Things were starting to get said about a guy named Gordon Macklin, a 79-year-old man on our Board of Directors. What the world didn’t know was Macklin had lived down the street from me when I was 13 and he used to drive me to schools and we were friends and I took my four or five bad reports about me.

But when the reports came out, when I started Overstock out of respect to this old man I invited him on the Board, but people started slogging him is when I got in that fight with Rocker and then that all turned into this big thing. The point of all this for you who are trying to understand the value of our company today is in the process of all those fights we got a piece of paper, we learned something. I’m going to show you a piece of paper the cost you the shareholders $20 million dollars to see that’s how much it cost for us to get this piece of paper.

This comes sometimes it’s slow I’m told. Okay, this is a, I can legally show this, this came out of that lawsuit. This is from Goldman Sachs. How much of Goldman Sachs prime brokerage actually comes from this thing called securities lending? The answer turns out to be 75% of American prime brokerage revenue, not 75% I thought it was 5% or 10% but it turns out its 75% which is why when I started getting in a fight with David Rocker about this thing called naked short selling the whole world fell on me. It’s because it turns out I was talking about 75% of the revenue of Goldman Sachs.

So this is why it’s so profitable. And let me point out this is the revenue not the profits, because the profits of the securities lending desk are relatively, I mean the expenses are relatively tiny, so I suspect it may be a 100% of the profits of Goldman Sachs. This is what’s going on. This is securities lending and how it’s supposed to work. The pension fund has some stock that custodian of the prime broker, the prime broker finds a short seller who will pay $20 for a locate and then the locate takes the $20. That’s how it’s supposed to work but how it really works is things like this.

There is very little to keep the prime broker when he sees there’s a short seller willing to pay $20 dollars for that locate nothing to keep him from telling other prime brokers. Oh I mean other short sellers are. I will give you locate too. And we have all kinds of data. I mean it all turned out this was all. We have all kinds of data that even when the government, the SEC we have or if they want to in tried to do audits on this stuff in like 2007, 2008 they were telling Goldman, you – we do these audit well you tell in the industry we do these audits on your locate trails and where you are supposed to record whose stock you’re lending, your guys are running things like Mickey Mouse and Daffy Duck and stuff.

And that’s why they over lent much more stock than they had which is why a couple other things happened. One is one of the reasons and this has been sort of forgotten history if this slide comes up that one Alan Greenspan when the world was collapsing in October, 2008 and Greenspan came out of retirement and talked to Congress he identified it as a partially as a settlement crisis, but that sentiment crisis came about because of that over locating and the sloppiness in the just the slot in that whole locate system.

In addition it had led to I believe a pension, the pension crisis. There’s a recent actuarial report that what the pensions have been doing is assuming a 7.5% return on an actuarial assumption and they’ve been earning a 4.5% for years and that that difference is 3% is what’s bankrupting them. Well a group of pension funds have just sued the prime brokerage industry over collusion in the securities lending market and what they’re suing is to recover that 3% out of which they have been deprived.

Well, we have, I mean I think this could become the best first trillion dollar lawsuit in American history a class action suit I think you’ll see and by the way I had nothing to do with this suit. As soon as it was filed I found out that people were trying to private detectors were thinking that I was behind this. I’ll save you guys the money, no I had nothing to do with the suit. However I do now believe that they’ll be other pension funds joining us.

So at the heart of all this is that issue I was talking about in all goes to the securities lending desk, which is also 75, responsible for 75% of the revenue. So the answer to that has had – has tZERO has the answer to this and tZERO’s system role of those six prime brokers is significantly reduced. We have this system where we have a SEC compliant venue that can trade blockchain and we run, we’re not the, we’re taking the stock running an overnight auction generating a locate but is not even a locate it’s a better than the locate it is a pre-borrow we call it DLR, Digital Locate Receipt.

We believe that because we’re taking an opaque over the counter market under an exchange you’ll see prices, price discovery work much better. So let’s say the short seller is going to get it for a 10% instead of 20%, that 10% goes in and an 8% goes to the pension fund and we keep 2%. Doing God’s work and what we’re basically doing is we have found a pipe, we found through this crazy lawsuit that you shareholders indulged all these years we found the pipe that was really the pipe of 75% of the revenue of Goldman Sachs prime brokerage in the United States and what we have invented is a thing that can basically re-plumb this piping and have it go back to the pension funds thereby lessening the pension fund crisis and we make a couple shekels in the process.

This since I spoke with you last this is really moving and I mean in the last five days is finally you could basically say the wheels are off the ground in the last five days on the supply side starting five days ago and now as of today on a fixed base with $80 billion to $120 billion of lendable securities. We do the math and the math on what we think we can make of lending these securities while providing fair service to both sides as opposed to the current system is I hate to tell you how much, but we’ll see time will tell, but we have another somebody just offered us another $6 billion in hard to borrowers specifically hard to borrowers and sound so and so forth.

We have 2000 traders as of last Wednesday. Actually the integration, the only integration was only signed off on yesterday that you have 2000 traders, active traders on systems that can use it another 3000 come on within another week. But really what’s more important is that we have, I mean who knows how much they’re going to actually, how much demand they can absorb. We are in the process of rollout with 12 brokers and some of these brokers may have a thousand clients say three admins and and so what these brokers are doing today and I mean today literally November 8, they’re saying okay, we got thousand people all with 50 of you use this let’s see how it goes. Next week or two weeks if it works we’ll go to 200 people so we have these kinds of rollouts.

Today is kind of the big magic day for this platform. It’s the first time we’re really considering it. I mean it’s not loaded up with $800 million or $3 billion. It’s got well each day for the last five days at $80 billion to $120 billion of securities to lend including lots hard to borrow, thousands of checkers a lot of hard to borrow billions of hard borrowers in there. So the further information just visit these addresses so if it isn’t I have to take a moment I just have to take a moment.

There is certainly irony here if anyone who has followed the story of me of all people coming back with this but we basically have found well as I say the pipe I mean I almost can’t say this without laughing, the pipe that is 75% of Goldman Sachs prime brokerage revenue we have a better solution, it’s based in the blockchain. No SEC and audits and finding Daffy Duck and Mickey Mouse. Everything is one to one rigid blockchain, immutable, secure, transparent to regulators, it’s such a brilliant I mean it’s such an invention.

I mean an idea that we have this basically is short. I’m telling you we have an invention we’re going after 75% of Goldman’s revenues. We’re going after directly after and the market has learned all about this. They really have. We are hearing from so many clients of prime brokers I love this, I was just in New York and can’t believe that people who were reaching out to me because I am reminded I thinking about these prime brokers I’m reminded of who was it, Oscar Wilde said of George Bernard Shaw that Shaw doesn’t have any enemies but he’s intensely disliked by his friends.

These prime brokers may not have any enemies because they weren’t afraid of them and we already know that they are trying to do something about this already hearing or they want afraid of him and we already know that they’re trying to do something about this but already hearing that they’re threatening people but who were trying to want to use this system. They don’t have any enemies but they’re intensely disliked by their clients and now that we have a $100 billion dollars on the supply side it’s I think who knows if this gets off the ground or if the whole industry collapses into our laps like a thunderclap.

I don’t know, but you now know everything I know. So you really do. I mean that’s information [indiscernible] of a few hours ago the last update. So this is really just in the last update so this is really just in the last five days really sort of on the track. Okay, next the other thing that they have at tZERO that is so powerful that is getting a lot of attention this quarter is a venue for trading ICOs and it comes about from this, around the last time I spoke to you the SEC came out with a ruling regarding the Dow and it basically moved the line and the understanding of what’s a security and what isn’t.

Although, one could also say a lot of people had been issuing ICOs, kind of dancing around the edges of things. Anyway they clarified in this July 25, decision and because of that report anything that is a security, any token that is a security has to trade on an SEC compliant register or exchange they can trade the stuff. Well, like I say there is when it comes to having an SEC compliant ATS here to trade blockchain, there was precisely one of those in the world as far as I know and we often.

I’m not gloating, it’s the humor of this. So after all these years it just seems too funny to me just wanting to believe, but here we are. So the solution is an approved ATS, trade blockchain instruments as I say is SEC complaint. Just because it gets a little confusing for newcomers to this field to explain, to understand which ones think of the taxonomy as in our world people who work in a blockchain are thinking of things this way. There’s fee up currency stuff that some government makes up I feel like a dollar is cryptocurrency such as Bitcoin and theorem. Then there are these tokens these ICOs that you have been getting issued like mad this year. And there are utility tokens and security tokens.

Everything I was just talking about, our security tokens, they have to trade on a again SEC compliant venue that handles blockchain. But there’s a whole of universe of these other utility tokens have been issued that are not going to be considered securities. I think that going forward the blend is going to go from probably 90-10 to 10-90 it’s probably been 90-10 utility versus security or maybe even more extreme and it’s going to go the other way now in the other direction.

Those utility tokens those that both have been issued then that are still issued, still produce an exchange to trade on and there are, we can use our ATS to do that. I mean technically it can technologically it can do it. Here’s the problem and this is an example of how you’ll notice, there are some things sliding here and there are dates and stuff this is a very active, I mean this space is developing very quickly and here’s an example. We don’t have regulatory clarity. Can we take our SEC compliant ATS, trade securities on it, blockchain securities on it and also trade these other utility tokens?

One could say why not, but the SEC might say, hey don’t bring that unregulated garbage onto a regulated exchange. For that reason we will probably taking the safe strategy of a dock off and we would love regulatory clarity from the SEC on this. I have enough we don’t have it, love and it might take a year or something to get that. Well we can create a mirror of our ATS that will trade those utility tokens and it will be distinct from all the other ones in the world. Why? Because we’re negotiations with the nation state who are saying put in our country and we will embrace it and we will say, now there’s a government. That there is a government looking out for this and making sure it’s honest and stuff so it’s not no mal docs kind of thing and it’s a legitimate, it is a great country.

It’s a country with a very respectable legal system and such and they have made that offer and there’s another offer. There’s another conversation has started or another contact has been made for exactly the same thing today. So we can take this technology we have and not only trade the security tokens in an ATS, SEC overseen ATS in the United States but we can put the technology in the hands of another nation and have and they will have the only utility token exchange in the world that is being regulated by a government and overseen by a government.

So lot now the thing is each of these projects are only like one or two months or a couple months work but there and in particular total security tokens I think you’ll see us we’re aiming for January having listings as such by each of these, we have so many things going on each of which look like one or two months, but collectively they don’t look like one or two months when you say some, some has to do so. Okay.

Identity and voting. Blockchain meets identity in voting we have investments in identity mind digital identity and compliance, risk management and we own 5%. I think that was just recently named like one of the hottest 50 star companies in Silicon Valley or something. We also have settlement. I’m especially proud of settlement. We made an angel investor does secure an audible vote, auditable voting, document authentication and also started its ICO this September for Internet of Things are really interesting idea what they’ve built there very classy guys from Belgium and Canada.

We owned 33% and this is a one of the leading companies in Europe on blockchain. They have some, okay, so moving on that’s Medici ventures Jonathan Johnson and runs this Steve Hopkins is present. Steve Hopkins is the General Counsel. They have had this for a year and have done a marvelous job of taking what has been what may have started off with me dashing around the world and throwing term papers and checks at a few different young entrepreneurs and saying we should build this and that too. They’ve turned this into a real enterprise and very well managed and they’re bringing not only a lot of value from Medici ventures to these portfolio of companies, but we’ve had a couple symposia here at Peace Coliseum in Utah and the benefit people are getting, ambassadors come from each of these companies and the benefits they’re getting by sort of all getting to know each other and such is validating the model.

We thought we could really bring something to this space we said three years ago we’ve been hearing people gripe about it for three years. I’m very happy that the world has kind of caught up with this idea that blockchain is here to stay. So now we go to the top layer Commerce. Of course that bring, that is Overstock.com. At this point may I borrow a bottle of water please? Overstock.com before Robert do you want to say anything Saum?

Saum Noursalehi

On retail, well lets go to the slide and then we can comment.

Patrick Byrne

Okay. The overall results the $1.1 million retail net income is nice. We missed we were not missed by $786,000 on the bottom line. That doesn’t mean much together. Let’s go to retail results only. What’s going on here is our gross margin is getting significantly better, but the contribution dollars which is to say gross profit minus marketing cost is getting worse and that’s because this digital landscape has just been distorted by beyond belief but I mean we have to take it as a given now. I can’t just complain about we have to take it as a given that this may be permanent but there are people who just don’t mind losing $200 million bucks a year in exactly the same business. Kind of hard to run a lemonade stand when there is a guy next to you with his own lemonade stand and he loses $200 million bucks a year and doesn’t seem to care. So I’ll move forward, but I’m sorry.

Robert Hughes

I was just going to comment, yes revenue and contribution is down, but nice to see gross margins getting better and primarily that’s attributed to improvements to our supply chain operations which are getting really tight, as well as really smart algorithms in our pricing and that are really starting to pay off and so the tech…

Saum Noursalehi

The really remarkable thing is that in most companies when you see a stair step in gross margin like we’ve had the last couple of quarters, there’s usually a bunch of price increases behind it. And the beautiful thing about this is, that we have actually decreased prices over the same period of time even while increasing our gross margins because we’ve generated such a surplus out of our supply chain.

Patrick Byrne

It’s amazing, there’s a medical word they use in Japanese manufacturing out of you’ve got a reservoir and you’re draining the water out. And after a while some rocks emerge out of the water you drain it. They stop the draining and you blow up the rocks and then you drain some more water shifting there’s no bottom to it all. We’ll these guys have institutionalized this process where every year, they are scraping dozens of basis points out here and there and in return is logistics and now found logistics in it where although we do think, we think we’ve had a sort of conceptual breakthrough this course Seth [ph] team and Carroll [ph] and Vidhya and we do see ways where we could drop another point out to me. Anyway it’s a continuous process, you never drain it to the bottom, you just drain it till you find another rock you can study and figure out how to blow up. Club Oh I’m so glad I’m finally seeing this paid memberships up 30% and its accelerating this is our…

Saum Noursalehi

Top three loyalty programs out there.

Patrick Byrne

Yes, it was us, Amazon Prime and I think there was a third one, so these are the three worth joining and it’s finally catching on and we have finally figured out how to market it. I should mention that these improvements, I’m going to be showing you some improvements and then the big problem. It’s a case of well, these improvements are being driven by – the kinds of things I was just talking about in supply chain but also a lot of machine learning, AI, big data kind of work and we’re really attracting people from the coast, people with PhD’s and machine learning kind of folks. I mean we’ve – well like I – just a matter of technology earlier. Anyway, Club O is doing fabulously. We think in 2018, we’re going to introduce a new level that for more money that has very interesting set of benefits for joining and different, go ahead Saum.

Saum Noursalehi

Oh I would just add, yes so we’re going to introduce a new tier, but the reason this is so powerful it’s a lot like what I hear about Prime which is the lifetime value of customers that join this program significantly increased and so the more we can get that to grow the more it’s going to pay off long term.

Robert Hughes

And the really remarkable thing is that in the home goods industry there are sort of two types of really valuable customers. There’s the decrease those people who decorate for fun and then there’s the automation customers. People who just moved or had a baby or had their in-laws moved in they have to wipe out their furnishings and start over. Club O catches them at the start of that cycle and once they’re in they keep boomeranging back to spend their rewards but as they do they accrue more rewards and so we end up capturing the entire wallet cycle on these customers and it’s just immensely valuable. And so this hook and this rise is letting us capture more of the wallet share of those most valuable of home customers.

Patrick Byrne

And it’s taken I would say five years, probably a few years longer than intended of, but far to both know how to promote this, but really fine tune the offering and fine tune we give 5% back on every product, but that’s really just a minimum. There are some we’re giving 20% to 25%. We have found this is a wonderful way to clear inventory. I mean it just took some fine tuning and data scientists and such study it, but really this category is strong and as you’ll be seeing it’s now over 25% of our revenue. So, okay moving on. Last quarter some you remember we brought up, you brought up that e-mail was challenged with broader migration.

Saum Noursalehi

Yes, that’s right we were in a big platform migration as I brought up a quarter ago. This channel has really rebounded. We’re starting to spin out campaigns faster than we ever have. And we’re building a lot of personalization. I think over the next quarter or two you’ll really see yes but it’s already doubled in growth and it is nice to see.

Robert Hughes

Yes and again this has been – there’s been all these different approaches to doing digital marketing and if its recommendations was collaborative filtering and then there was this Beijing, Holy Grail, and this and that, there’s been all of these different statistical modeling approaches but machine learning and I’d say this has probably been say five generation of approaches in the 18 years and some of them we were the first people in the new approach.

I think that I brought kind of Wall Street arbitrage techniques to digital marketing when people were just not even, it was amazing the spreads, that used to exist 15 years ago, but we’re not too different iterations and some we caught the wave and couple mid waves we missed. The new wave is machine learning, the newer wave. It’s here say a few years.

Patrick Byrne

Saum why don’t you take it for a minute and explain why our machine learning is so – has become so powerful?

Saum Noursalehi

Yes, so one of the beauties of machine learning is that it lets you move on and understand well it lets you act on think data signals that are so complicated that humans can’t understand them and so much of what happens in retail lives in that world of too many interaction effects to be understood and that’s the beauty of neural networks is that you don’t actually have to understand the cause of variables. Now a lot of companies will never get there because they don’t reach the trust level to say let the machine make a decision. We all say and so many of the companies out there especially in the brick and mortar world say you know my buyer report and let my buyer make a decision.

And if that human layer sits in between those thinking data signals that can’t be understood by humans never get acted on and so the fact that we’ve been digital from the ground up and the machines make the decisions in the company means we’re culturally able to leverage machine learning in a way other companies are too distrustful to do.

Patrick Byrne

And I have to mention we are, so when I talk some regular in Silicon Valley with some of the biggest firms whose names you can imagine out there and they worked with all kinds of e-commerce companies like ours and they’ve gone from telling me, I think there may have been a point where we slipped so we were only in the top 15 or 20 companies in terms of our sophistication some years ago. I’m comfortable now we’re in the top three and I regularly get told, hey look there’s you guys are doing this and there’s Amazon and sometimes we’re not being told you know Amazon hasn’t even got to this thing yet, but you’re doing.

We have these and it is not just Silicon Valley but it’s just it’s kind of a small community and we know we hear where people are working and we actually I feel that good about our technology. Another example of that is all that same stuff applies for all the other large channels paid digital marketing channels. You taught us new conducts, all those same things go. It’s we have, we have gotten past it used to be we were competing with the sophistication of our models. We’re now competing with the sophistication of our machine intelligence or our machine learning and AI.

And in fact it has been disruptive within the company but it’s great because it’s freeing up really, really smart people and analytics that who we are then shifting to be what we are finding is this great model these super quantitative people end up often being the people who can run channels it isn’t knowing necessarily a whole lot about the purses or something. I’m just saying that we’re not talking about any individual, but it’s somebody who can just look at data.

For years in the early days I used to say dream someday would be that decisions were not getting made about what got put in an email by lobbying, but just by some person who didn’t even understand English and could understand any lobby and any question like what you go in the upper left hand corner of an e-mail would be somebody who could look up and some table. Well we have finally found that person and it’s an artificial person and he doesn’t, she doesn’t it doesn’t it doesn’t speak English it’s a neural network and that’s exactly what we dreamed of so many years ago. Saum?

Saum Noursalehi

Yes, I’ll just comment so 32% year-over-year growth in these digital channels and we also spoke Patrick about our big investments in marketing tech, our in-house marketing tech and that’s really starting to pay off and you can see that in these results. And I’d also add that we’re often featured with a lot of the top partners that we work with. With Google for example on showcase ads, PLAs for our campaign structure, Facebook for the tests that we do with incrementally, so we’re really cutting edge on the digital side.

Patrick Byrne

Yes, our marketing tech that’s, what I’m saying when I’m, when I get so much feedback in the field not about me. I don’t know what an of this plugs into a toaster What about our engineers or other engineers work with and the scenes that the frontiers that we are actually breaking through I really am comfortable saying I know we’re in the top three in the industry in terms of the sophistication of our marketing tech and again that all shows up that’s why we have a company that has raised a fraction of what everyone else raised in her field and we got to profitability and were able to defend it for seven years against this craziness going on. Now we’ve got to this is a case of other than that looks like and how did you like the play here’s and in one picture what’s going wrong. SCOS since May has been a real problem for us.

We – the graph on your left is Google organic rankings. We are the red line. Amazon is the yellow. Wal-Mart is the blue and Target is the grey. So we’ve always I thought have been very strong on and we pay a lot of attention to Google and what they say they want sites to do and then we do what they say is they want people basically, they want to – they favor sites that have good information and all kinds of stuff, so we did that. It’s been very strong.

This is the first time in years we’ve had a cycle like this that we’ve not, it’s plateaued now and but in a nutshell, even though everything else, all these other systems are just running as like as I dreamed of for years we have this problem and it’s especially perplexing because Google is about site experience. And on your right as they and their algorithms are supposed to favor and I’m not alleging at all anything like Google is anything inappropriate, I’m explaining why this is a conundrum to us and it has been a conundrum since May.

Our site experience per say Bizrate or all these other things that measure it is better than our whole field against – in the home furnishing category. We’re better than them, so you would think that the Google algorithm if anything would favor us. But something happened in May. Now they believe nothing happened in May. It’s been quite an interesting revolving kind of puzzle. Well I’ll stop there now. Saum, Seth to you the masters.

Saum Noursalehi

Yes, I would just add, so yes Bizrate did this survey comparing us to the top 17 home furnishing competitors and you could see we rank better than them. But you also saw that in the earlier slide that Patrick showed which shows on the Mckinsey slide that also reaffirms our ease of use of our website. But our strategy is to just continue to focus on building the best user experience in our space and we think that’s going to be reflected in the Google rankings.

Patrick Byrne

Seth ?

Seth Moore

Yes and I would add to that. Part of the reason when we discussed the decline in contribution percentage it is a double whammy of the two variables we just talked about. It’s actually a story of both the health of the paid channels which have a positive contribution rate but a lower one and of the decline in SEO which is a virtually free channel and has very, very high contribution rates. And so that shift in mix is what’s accountable for the change in contribution margin. But masked within that is the fact that we have a very healthy paid digital business that’s growing nicely and offsetting in terms of revenue much of the loss in this one free channel.

Patrick Byrne

Yes, so I would say that Seth just summarized it perfectly, here we do have you should know that since May we’ve done about probably two years of normal projects of SEO and without really well we can never know what would have happened if we hadn’t responded, but we’ve done about 60 projects. Now we are working on the mother of all projects. We’re working on, go ahead Saum.

Saum Noursalehi

Oh I was going to say and like by SEO really and if you’ve been reading how Google’s algorithms work is what that really means is customer experience and the experience on the site so, it’s been all focused on the page speed, mobile experience and how to optimize conversions.

Robert Hughes

Yes what’s that, Google has this new technology called AM, Accelerated Mobile pages. I believe we’re the first to have implemented it.

Saum Noursalehi

Yes, so widely I think across this board we’ve launched it and we were featured by them.

Robert Hughes

Checkout our mobile how the speed it’s kind of weird because the pages load in about a quarter of a second and it just seems kind of strange. Anyway, so we here we’ve had this great relationship with Google and this is not about cheating Google spiders or something this is about doing having the best customer experience. They want faster pages, they want better pictures. Their AI can now read whether a picture is good or not and so you have to have better and better pictures. So it drives good behavior out of websites like ours but this one has been a real conundrum. We’ve done 60 projects in five months. We are now working on the mother of all projects. It deals with site experience. Unfortunately it’s not going to be able to roll until about December 15 to 30 for somewhere in that in the last couple of weeks of the year.

So I write that’s – other than that Mrs. Lincoln how did you like the play? I’ve never been so proud of all the other departments just like we have finally reached this Nirvana state that I dreamed of over a decade ago in terms of our marketing technology, our sophistication, our mathematicians and so forth. Way for comparison I just have to point out even with that, even with that one terrible slide I just showed you we are significantly our customer acquisition cost is far below there’s and that’s a function of how brilliant all our other marketing technology is frankly, how brilliant these guys are sitting next to me.

Saum Noursalehi

Yes and the reason even but that is important is, as you know, Google organic search is a free channel, so it’s free acquisition.

Patrick Byrne

Yes. Okay, moving on. There is, I see four likely outcomes. Most pessimistic, throughout optimistic, pessimistic is absent SEO improvement. We would get to profitable growth anyway in May once we lap this stuff just because everything else is so strong. That’s not very optimistic, but that’s sort of what I think as a base case. Next the mother of all site experiences occurs December, January. Next this Club O now that it is 25% over 25% of our sales and moving like this and I think it’s actually going to accelerate I am really looking for 80% growth out of these guys, but that can in itself just make an enormous difference. Let that run for another few months and it doesn’t matter that comes back this is replaced. If we can keep this accelerating and running at 50% or growth 80%.

Next we have a new, I have to give credit. There’s an entirely new paradigm of an approach to this stuff that JP Knab, our SVP of marketing and Nariman Noursalehi, younger and wiser brother of Saum here, but another fantastic maybe the single smartest guy in the company if it’s not Seth, they had a brilliant idea. I can’t, I’ve always been honest always been honest with the public about warts and all, bad things going on, good things going on. This idea which will be live I believe in January involves another large company through and a partnership that showed no one has thought of this paradigm of a partnership before nobody and it is somebody who can bring us a tremendous amount of business and it’s a partnership that works well for both of us and that should work well for both of us while it’s been Seth and Saum without giving away everything.

Saum Noursalehi

This is a teaser. I would just say it’s a massive source of new customer acquisition.

Patrick Byrne

Yes, a massive source of new customer acquisitions.

Saum Noursalehi

I am going to leave it at that.

Patrick Byrne

Okay, moving on and we’re nearing the end, I should warn you folks up front we expected that it might actually be as much as an hour of I expected only maybe an hour of getting through all these slides, but I want to give a good comprehensive view to everybody of what’s, what you have in your business. We’re almost at the end you’re. We have a tab that’s up in beta, it’s Overstock cars, it’s course quite small 32,000 visitors a month versus people with 14 [ph] 26 [ph] is have one pushing it yet hard bringing no attention to it, it has only got a million four cars everyone else has 3 million or 4 million.

We will have in Q1 and maybe even before the end of the year it will have this 3 million or 4 million cars too, so it’s much smaller now on traffic and inventory but it’s a really new take a car site and it’s monetization model and I think it’s a much better monetization model where people are getting not just new and used cars but their online financing, their warrant and the warranties their financial side of the car equation through us. I think we’re essentially the only site that does that auto trader does online financing but doesn’t do warranties we are the only guys offering warranties.

Once we get this right and we’re still tinkering with the experience of the search experience as such, which is this thing we got up six weeks ago I think, but once we get this right, this is a real little gem and I’d to keep within our business or maybe even combining with someone else. Seth?

Seth Moore

No, absolutely there’s a lot of interest in it because it’s an unorthodox method of monetizing cars traffic and it’s rather than trying to extract a pound of flesh out of dealers it’s trying to work together with them.

Patrick Byrne

So okay, now to the last end of slide here we are. I’ll show you this one more time and say it’s time given what the strategic picture this tells me is we’ve struggled to defend a 1% operating margin against people who just come in and with a tiny amount of capital versus guys who just come in and just throw crushed us with their ability and willingness to take losses that we have to look honestly at the strategic situation and say I just don’t want to do that forever and we see it at Wayfair, somebody turns off the oxygen for them and they don’t get new capital and let’s imagine they did go under if that happened like some of these other folks in our rear view mirror.

There’s going to be someone lined up a week later there’s going to be a year later doing the same thing. I would feel like we’re not and as we are going to be able even when I will just as we are we’re not what, I don’t want to run a 1% margin business forever. So for that reason we have a number of options. There are in boardrooms across America we know people talking are about their Amazon strategy and freaking out about the disruption Amazon’s brings. Some of those are brick-and-mortar companies and we’ve been, Seth has been doing work and analyzing the kinds of synergies that are available between us and large brick-and-mortar companies without naming names could you describe what you’re finding in general?

Seth Moore

Yes, there’s a number of places throughout our supply chain where there’s huge potential with an alignment with bricks and mortars hundreds of basis points of gross margin to be unlocked in line with what we’ve already been achieving but they can put it on hyper growth in terms of saving those basis points out and with that expansion in gross margin and in sort of supply chain surplus comes greater growth, greater ability to win digital marketing auctions. And more fuel to drive the business.

Patrick Byrne

Yes, so and the synergy goes both ways. So for example, if we were combined with a large chain, these large chains have similar logistical footprint. They typically have a hand a dozen or so mega distribution centers each of which are feeding a couple dozen distribution centers each of which are feeding ten to fifteen stores. If we were integrated with such a company we could over night, I mean you would have a system that was competitive with Amazon, so some would buy Amazon or even nicer than fulfillment by Amazon in several ways.

We built this thing Saum and Stormy [ph] actually built some years ago, Sauce, this thing we call Sauce. This soup is a software logistics system for an agile network supply chain. We’ve only had it hooked up to our three distribution centers, but it could be hooked up to thousands and it was actually built to be hooked up to as many as we wanted. You don’t need thousand, you need a dozen. So just by for example if we were part of a large brick-and-mortar chain that itself looks like $200 million, $250 million of varies logistics costs fall right to the bottom line. Seth was looking at a large brick-and-mortar website the other day and it’s quite slow.

We having the fastest one over and over we win this award like the fastest Internet retailing website. We know how much it improves sales to be that fast. If we were made their website as fast as ours its immediate billion dollar increase for them and on and on and on. There are so many synergies in that direction that they bring us and that we’re in both directions that they bring us and we bring them. There are other kinds those possible companies with lots of traffic but have not – don’t have the right monetization model. Basically if you look at our monetization per visitor whether you’re looking at gross profit or what we call Nector, contribution margin compared to any anybody else.

It’s so much higher and that’s a function of basically that’s a simple, that’s the simple measure of the intelligence of the site. That’s the rubber meets the road matter how many dollars of economic value or pennies are you squeezing out of each visitor and the more granular you’re getting the more in your analysis the better you can do. So there’s opportunities like that. There’s other kinds of companies that not aren’t even ones people are thinking about.

There is that see themselves getting disrupted by Amazon and what we’re hearing is for all these kinds of companies. A large club I’m dying about thinking of the possibilities of us with a large club membership kind of company. If they have 10 million people and a million in their club and a million started shopping with us that alone would double us which I think, I just gave away enough variables that you can solve the equation of how much of exactly what called [indiscernible] that’s worth.

There is – so the possibilities are overwhelming and this summer it’s become apparent I think a lot of people have the same idea at the same time. We also but a different direction we could go and I’m being very honest with you folks I don’t know which of these directions I am going to go. I’m used to a lot of Monday morning quarterback. I’d love to hear from people who want to tell me what they really think is the right solution.

Here’s a different alternative recapitalized with a large partner who wants to think really big. We hear that there are some folks over in Asia with sort of who want to write some billion dollars checks they’re looking for someone who will think really big and they’re looking and there’s a number, there’s a new fund with I won’t even tell you how many tens of billions it has and my understanding and some of them have been here is to be frank that they’re looking for somebody to whom they will write a billion or multibillion dollar check who can think really big like take on Amazon big.

We’ve shown the world what we can do with burning a $160 million of your capital. There’s a piece to me that would love to show the world what I could do with a billion what we could do with a $1 billion. That’s a lively possibility. And we could also capitalize up from Medici. I think Medici we didn’t even talk about today that ICO the terms of it have been put in this press release this is such a moving target. And now we’ve learned today the fork that we just postponed everything for the fork I don’t think that some of the folks know this before this got cancelled today here.

So we just postpone everything and now the sportsman cancelled this today or so and so there is between regulators and things like that it’s kind of its like, it’s kind of hard say exactly what we’ll be doing in two weeks. But anyway Medici is we think has phenomenal, frankly just ridiculous value and it will be possible at some point to monetize up from assets like [indiscernible]. So with all said, it’s time I have been hinting at this for 18 months and more or less told you a month ago, this time to tell you or I mean a quarter ago we’ve engaged Guggenheim Partners, a wonderful fellow there and Andy Taussig [ph], Ken Langone introduce me to Andy and Ken as used them for a couple decades and I’ve grown quite fond of Andy and he’s now they’ve been officially engaged and on this project and that’s that. So we need some help always working and thinking through these alternatives and executing on them on them on our decision.

So with that as fulsome exploration for the 936 people who gosh, we’ve never had a call with that kind of attendance, it’s time to go to questions and we’re going to stay and take, I know we’ve already gone over an hour and ten minutes, let’s go to [indiscernible] until we get through all the questions we have really.

Question-and-Answer Session

Q – Unidentified Analyst

The first question, will the ICO tZERO do ownership of the company or will the coins just be used to transact on the exchange?

Patrick Byrne

The coins as, the terms that are described in the press release that went out, they will be security tokens think of them as utility tokens but these are going to have a novel feature utility tokens that have a cut of the top line revenue of tZERO. So that is what makes them a security, so they will be utility tokens, but that have a, actually have an interest in the revenue not the profit but the revenue of t0.

Unidentified Analyst

All right. Any thoughts of having tZERO partner with an existing exchange, Nasdaq et cetera?

Patrick Byrne

That’s one strategy, I’d love to, there’s also exchanges. Yes we could book or we could partner with the exchange I would love to, we’re ready to do that, tell them to call collect.

Unidentified Analyst

All right. How much of a lead does tZERO have to the likes of Goldman or R3?

Patrick Byrne

Well, frankly R3 have already distanced themselves, they’ve gone from being a Blockchain company to being a “Blockchain inspired” company. So I’ve even heard more recently by couple of days ago that they’ve even distanced themselves from that.

So I don’t worry about them. Goldman is a black box, Goldman is behind but they want to catch up, they don’t want to lose what they have. They, I can tell you a funny story if you go on YouTube, you can see you look for my name and the word Amsterdam and you’ll see a speech I gave three or four years ago at the world’s, the keynote of the world’s first global conference on Bitcoin. And I got up and I talked philosophy for an hour, but I also talked about applications of Blockchain, I said the main event of Bitcoin isn’t Bitcoin folks, it is a single Blockchain that we’re going to be able to do this and that the other thing.

Goldman Sachs was there, I remember I met the fellow and that was say 9 AM in Holland and at 4.55 PM on the East Coast United States that day they filed like four patents for the things I’ve been talking about upon stage. So there must be just [indiscernible] want it back and more work on anyway.

Goldman is but, so we don’t see them, I mean it’s a black box, we don’t see them and they’re on the industry trying to learn but they haven’t yet really revealed anything of what they have to the marketplace. So that’s what I have to say about that. And I feel like once even if they do this time it will be a fair fight, this time it will be a fair fight. Remember there’s an old, there’s an old Irish what do they call Irish all-timers, it’s when you forget everything but your grudges.

Unidentified Analyst

All right. Will Overstock.com apply Blockchain technology to its delivery and logistics network?

Patrick Byrne

That’s something great question where are you on that? Say that? Yes. One of the opportunities that we lose and for example one of the things that let’s say look at those options, one of the options is splitting off that top layer, the commerce layer selling just that to the brick and mortar and creating lots and lots of capital to pursue all the Blockchain stuff, you give up one possible synergy, Overstock is a wonderful test bed for developing Blockchain supply chain technologies and there are a couple companies in that field, we’re talking about investing in and I would love to invest in them and have them if we don’t just do it internally, invest in them but be a platform for them as we’ve been for so many other companies frankly would make you sick if you know how many companies we’ve been a platform for and they don’t want to get sold for $1 billion.

Anyway, but we now we know better, we’d like a piece of them but I’d love to have the Overstock logistics I mean it would be such extraordinary value to be able to scale up A if someone were building a Blockchain supply chain and logistics company to be able to do it on our platform.

Unidentified Analyst

How many dollars has Medici deployed into Blockchain investments?

Patrick Byrne

Rob why don’t you take that?

Robert Hughes

I’m going to answer this, defer or 10-Q largely on that, so I think you’ll find nine companies that Medici has invested and described there in footnote 10-Q started with the largest of course which was around $28 million as I recall.

Unidentified Analyst

And $10 million as stock right?

Robert Hughes

It is combination of stock and cash, nearly $30 million in total and then the others are much smaller but they vary from little as several hundred thousand dollars to $5 million or $6 million.

Patrick Byrne

And but we’ve also had just sustained losses fund the losses capitalize the losses, I would say we’re probably getting I’m sorry I have not looked at it of late but I would if I said $50 million-ish would you feel that sounded about right, Rob?

Robert Hughes


Patrick Byrne

To improve the losses? Sorry I don’t have the exact number in the 10-Q, go ahead.

Unidentified Analyst

Well the t0 ICO be used for any of Medici’s expenses or they solely used by t0?

Patrick Byrne

Well it’s great question, I will ask somebody asked what percent of Medici do we own? We own 100% of Medici, well the t0 proceeds be used for Medici’s expenses, well now the t0 they proceeds I anticipate keeping the bulk or all of them within t0, we do have a there is a note from t0 to Medici for how many millions Rob?

Robert Hughes

There is two notes, one from [indiscernible] acquisition and one for the operating cost which already $6 million or $7 million probably in total there.

Patrick Byrne

Well by the way that’s $46 million in total than the total capital committed has to be closer to 60-ish and everything we’ve invested in 50.

Robert Hughes

Yes, correct, sorry. On top of t0 was the other one.

Patrick Byrne

Yes. So we have invested about $60 million in capital when you include the losses, we have absorbed as we’ve spun some things up and what do you feel that answered or?

Unidentified Analyst

Yes. Can we expect…

Patrick Byrne

No actually I want to mention that so we do have that note, we could conceivably dividend I mean if dividend and have to pay off the note, I wouldn’t anticipate dividend anything more than that, it is nice we own 81% actually wouldn’t be a dividend, if we just paid off the note, it would just be paying off the note and because we own 81%, we actually can pay dividends from t0 to Medici without paying taxes in our company tax exclusion. However my guess is that 81% is going to drop to 80% as a function of this the ICO we go through depending on assuming that they get their security ICO and so will drop to 81%.

Anyway if we rate but know we do not anticipate the capital that comes into t0, is there my view to build t0 which means there’s actually a couple nice acquisitions we have our eyes on and to build out the eco system, I know I said there was an unfortunate article frankly where I thought that I was speaking under embargo to a journalist and I was having a social conversation at the end of an interview about something else and there was some confusion between us, no signing on him, it was some confusion between us and he understood the embargoed part to be part to be the thing he could read a story up and so a bunch of that stuff got out that was to me a social conversation hey we I don’t I said might raise $200 million to $500 million, I don’t think the five the upper end of that is likely now especially because the ICO market is starting to get all party and we don’t need anything like that, we don’t need anything like that to accomplish all of our dreams to t0.

I would say someday when it’s a nice established company you can see us moving capital out of it but since you have to I think it’s more [indiscernible] at least as equally likely that the way we draw a capital of t0 so to speak is not to having pay us dividends although I would like that note paid off some day but not have as paid dividends but as it gets bigger and it’s more established we just start selling off percent or two here or there.

We will sell, there will be other investors who will want some and we will start selling small parts of our stake, I think I’m also learning that the market doesn’t want to feed for own 81% of this which is okay by me, okay by me and there will be other investors come along that let us take our interest down to 50 or below them.

And in that process that’s how we draw capital out of t0 rather than direct payments with the exception of yes of course I’d like the loan paid back when it’s comfortable for them to do so.

Unidentified Analyst

Can we expect to see more cash flow from the OSTK parent next year presumably with less expenses related to Medici and t0?

Patrick Byrne

Well yes, you will certainly see, yes you will certainly not see the cash strain at Medici t0 had been this year, you may see cash come back the other direction and you may – I would expect just straightforward operating results to be better next year. I mean I’m so – for those reasons I showed you few slides back and so there are four possible outcomes, although that’s stepping aside the possibility of if we do something strategic then this whole cash flow picture gets much better.

In addition to that, we’ve been in this position before with Google organic search several times. We always stick out a bit and we’re going to figure it out again. It might take another quarter or so, but we’ll get out of it.

Patrick Byrne

And like we say the mother of all of the site improvements that I think were like the Google spiders, Google bots happy is coming to the end of the year.

Unidentified Analyst

This person is asking I think OSTK e-commerce is being unfairly valued by the market due to low EBITDA and cash flows. Can we expect to see that improve in the future? So very similar question.

Patrick Byrne

Similar question, similar answer, same answer. It is kind of yes.

Unidentified Analyst

Will the majority of ICO proceeds be held in cryptocurrencies or converted into U.S. dollars?

Patrick Byrne

Well as – I will defer it to our CFO who had an opinion on that, oh Anthony would you look to?

Unidentified Company Representative

I don’t know Patrick because under the terms of the offering that it was all going to come in, in U.S. dollars, but I’m not deeply involved in that.

Patrick Byrne

I believe it’s – I believe that’s not the case. I believe that you can pay in U.S. dollars or bitcoins or lawyers [ph]. That’s what it was at one stage. I have to visit the terms again. Literally folks this is where we’re doing so much deal making right now on so many different fronts that just the amount of lowering we can put it in a week, we’ve like that, call that the pike that is the constraint. We’ve got lawyers staying up all night, night after night working on different things. So various aspects of what you saw today in our release we’re determined 11 minutes before we got on we sent the release out finalized today.

Unidentified Analyst

A couple retail questions. What is the time for additional international expansions and what are the plans there?

Patrick Byrne

Excited about international guy named Ali El Husseini is running this, Vice President. It is growing about 40%. I think it is 32% year-to-date and 40% now and we are about to hit way above the hip waist there right where it – we know they were taking all about your open stock but they are actually their big success has been in Canada and we are very close, like you guys on days or weeks before we are hitting those sort of a big store making several big enhancements to our experience in Canada. Canada is all ready growing very nicely sort of north of 50% year-to-date and with these changes we expect that to accelerate.

And we have a large digital marketing campaign about to snap out all over Canada. Using all of this sophistication we brought to what we have in the U.S. So we actually know Walmart and Wayfair to retirement what they are doing in Europe but it is a big misdirection. It is what – Canada is where the big source is.

Unidentified Analyst

Sort of two questions about mobile, comments on mobile conversions and more specifically how has your new AR functionality improved your results?

Saum Noursalehi

I can take that. So we’ve invested heavily in mobile over the last year particularly on the experience and page speed and we’ve tied into the same recommendation engines as desktop side is but we’re seeing massive conversion lift year-over-year. And you have in mobile, desktop conversion is up as well but mobile is on another level.

Patrick Byrne

Yes, Saum is so modest here and here is a good way you can check some of what you’ve heard tonight. If you have an iPhone go [indiscernible] need the new article and just download the system, the updated systems here on system 11. Beyond 11 you can download our Overstock retail app and you can see our augmented reality and check it against the other guys. Is it really good illustration of how good our tech is, it is unbelievable. Just allow it a couple of weeks it’s the first one again on Apple iPhone to use this I forget the first involved in this, all the first, but as you know I’ve been bragging about our technology in this company and bragging about Saum and Seth and what they do. Here is a quick way you can check right now at your desk, pull out an iPhone, update the system get on our retail app and start using our augmented reality. It makes everything else in the market look kludgy and cartoonish. Saum why don’t you?

Saum Noursalehi

Yes on AR we are investing a lot there. We think we have the best experience out there in particular the models that we have, the 3-D models that we use we have really strict quality check and so we think the experience and the lighting that you see, the textures that you see on another level and it AR in general I see as a game changer particularly in the home furnishing space where you really need to see these bulkier items in your home and the dimensions and how they fit with the style in your home.

Patrick Byrne

So for those who thought that much amount of what you see tonight was a bunch of self congratulatory nonsense. Just check it out, just download our app and see what we’ve done along with it’s like no one else in the market. It has, I mean there is another, the other guy has introduced something just compare it too.

Saum Noursalehi

3-D cartoons versus [indiscernible].

Unidentified Analyst

So there is another question, has the new iPhone had a positive impact on the results.

Robert Hughes

I can take that. Usually model to model we don’t see material changes. There was a material stair step when sort of the larger format of phones came out. It just made the mobile world more shopable but model to model we don’t see the big differences.

Unidentified Analyst

Last quarter tZERO generated modest revenue from it’s store selling effort and how did 3Q operating performance compare against 2Q and how should we think about it going forward?

Patrick Byrne

It is how you are thinking about it going forward it has gotten somewhat better. Yes it had a tougher start to the year. The reduction in – everybody I see down 27% or something in trading revenues these big banks well SpeedRoute has that the [indiscernible] business, but that’s really a nonevent. It has come back it is profitable, it is in the black, the SpeedRoute business. But really the main event is this thing, they’ve got cold fusion. These guys have invented cold fusion. If you want [indiscernible] now I think that you are going to see the revenues and values export. I’ll tell you that I wouldn’t sell tZERO to day for $2000 but what I think I want to know what they have. I know what they have and what they are on the edge of. I’m not sure, I would sell it for $10 million. I think we’ve got, we’re going after 75% transactions revenue and no one likes them.

Unidentified Analyst

So when considering Medici’s other investments besides tZERO I presume, which ones have the most potential to generate future shareholder value?

Patrick Byrne

Besides tZERO, I’d say Bitt.com and Bitt.com blockchain reach central banking I mean this thing has a global application and when I think the first to market the kind of all I would bring into the market I mean it’s all interesting, it’s all done, it’s all being testing for another four weeks. This will really slip. It is really better than anything I have seen in the market, that’s the potential enormous business.

We are working on another investment, basically – I’ll say this, I’m working on something else that’s bigger than anything else. It is bigger than tZERO. It is bigger than Overstock retail. I’m working on the idea of my lifetime. I was actually hoping to be able to announce that today and so I wanted to announce it within the next slide. We’ve had too much – I’m hoping in a week or two you’ll hear an announcement that is sort of a – I mean it will have global significance.

Unidentified Analyst

All right, here is another one that just came through. Can you provide any detail on how many credit investors been verified prior to the ICO or on interest from recommitted capital?

Patrick Byrne

Well we haven’t even opened it up any of that yet. That’s what we were supposed to be announcing today, finalizing it for November 15, ICO. That is explained in the letter I’m sorry I didn’t add another slide or two to try to explain. There is a whole bunch of things going on. One of it is being this whole question of the report and the report just got cancelled today afternoon. The fort for everything has been the best support. And so there is all this uncertainty among the big ICO investors and for that reason and the reason that we got in a middle of a lot of other negotiations on a lot of other funds including this stuff if you look at our press release today, you’ll notice that we just sold warrants on 15% of the company today from two investors who looked very high quality. You can resell however high quality I’m really looking forward to working with both of them. And you can read about it yourself in the press release. So…

Unidentified Analyst

So there is actually a question specifically on that front

Patrick Byrne


Unidentified Analyst

It says the warrants they passed for Soros they seemed fairly cheap given the potential for positive news with the tZERO ICO what’s the thought, but kind of why now and why those two investors?

Patrick Byrne

First of all the pricing is Black Scholes [ph] if you make an assumption on the volatility of 25% which seems appropriate to set aside their recent craziness and but they bring enormous value. I have gotten to know the fellow John Burbank at Passport and we haven’t had any routes and we don’t have any connection to the work of Silicon Valley or the world of New York. I am looking for that to having them – we don’t have any benchmark behind us any kind of perks or anything like that. It is going to be nice working way with the Passport and the quantum fund besides of course of the paper and a lot they bring access not only to large pulls of capital.

We don’t need that but access to, there is a whole shift going on and I don’t know how much is sort of filtered out to the world but the more the capital market as you know it is facing an extinction of that. It is all going to shift to ICOs. It is so much more efficient. And this is the chance for these folks to have a pole position to have part of the company with a pole position in this space. The goodness is that Soros [ph] can do in his financial circles 420 is just to me pricing is that Black Scholes fell and normally I hate Black Scholes. Black Scholes thinks I work, I think Black Scholes works and hold maybe over a few hours and maybe if you are – if maybe over two or three months but I don’t believe in it for the long term. Light has that tail is another one Roger Lowenstein book.

It doesn’t work, but anyway this to me this is getting them and having good sources now, well I’m not going to speak for them, the press release speaks for itself, but this is – people see the possibility of tZERO. And having people in the financial circles opening up and embracing it and saying, you know we got none of investments to worry about. I love having a connection with firms like that who will take it and lead to greatness.

Unidentified Analyst

There are a couple of questions around guidance we don’t usually offer guidance on quarterly calls.

Patrick Byrne

But guidance at this point, there’s a lot happening right now. There is a lot happening in the next eight weeks, four weeks. I cannot tell you what’s going to be seen tomorrow.

Unidentified Analyst

So after the ICO how much equity will Overstock own in tZERO and what would be the financial interest OSTK shareholders and will there be a way to monetize that interest?

Patrick Byrne

Ownership will be – will have to be ICO. I suspect it will drop from 81 to 60 to 70 something like that, depends on the pricing and such, but to have 60% of a company I think is worth $5 billion at this time and I mean and there are different ways to monetize that without depleting it of capital. I think primarily it is going to be the market is going minus 10 as the market is going a longer sheath, but the sheath has to get down to a rate of 50% or less and the process of going from 80 to 50 we’ll be able to monetize the different stages.

Unidentified Analyst

Is it to buy OSTK or to buy in the ICO itself and how does the token depreciation become part of Overstock’s profits?

Saum Noursalehi

I can’t tell you what’s best to buy and Joe I am not recommending you buying anything related to us. I’m laying our cards on the table and I used to do this and it would sometimes hurt me because people would find we could say five great things but the one bad think they would raise us think about. But we’re laying all our cards on the table because I don’t want there to be any tears no matter what happens in the months ahead whatever strategic events happen and whichever direction that I’ve had it stretched out I don’t want anyone to say, oh I had known that that you were to do. Then I will say, you know I’ve laid my cards on the table, there is only one card I am holding, there is one decision making thing that I am holding back right that would affect my decision but you folks know now at a comprehensive level kind of everything we know about these different possibilities. So whatever happens, and whatever we do no one has a right to have any tears.

Unidentified Analyst

All right, another one, do you think the warrants will complicate strategic alternatives being considered at all?

Patrick Byrne

No I don’t. You know, everything, I don’t. It brings so much value and this other aspect to this I just can’t disclose now. I think it really means heck of a lot of value. But we did consider that possibility. On the other hand what does it mean, you know it is the world to our value that Soros is his option on 10% and you know obviously I don’t have much to do with [indiscernible]. People can sort of guess with that what quantum, but basically tZERO has gotten us a lot of attention. tZERO by the way is run by a wonderful fellow, Joe Cammarata, I’ve got to congratulate. Real vision, real syntec entrepreneur all his life. I think this is going to be a big homerun and he was the one who brought Passport in the quantum fund and pointed out the advantages and the doors that opens for tZERO in terms of getting integrated and accepted and defended and the [indiscernible] such as it is going to be super valuable.

Unidentified Analyst

Can you remind us of the timeline for the tZERO ICO and the [indiscernible] management setting?

Patrick Byrne

Well, things are so turbulent we’d love to get a bit of guidance from the SEC on some aspects of what we want to design but that’s without [indiscernible] item. There is also the question of the support which we just learned got cancelled. But what we’re saying is now November 30, that I figured how the – whatever the words were in press release trust me some lawyers carefully inspect that. So that is our level of expectation, but while we are thinking of this subject to what do they say in the security and regulation and this and that.

Robert Hughes

California mileage may vary.

Patrick Byrne

Where the sun rises, but we’re expecting November 30, to have – to be going forward.

Unidentified Analyst

Can you share some color on tZERO tokens revenue sharing feature, what percentage of the revenue is shared with token holders?

Patrick Byrne

Oh it depends on how many coins we sell and for how much, but we may do something like the coins may be [indiscernible] survey are getting 10% of the revenue of TCO that’s the number we are roughly now. I don’t know if you are using that, because we really plan that or but we’re using 10% that’s we’d sell off 10% of the revenue stream.

Robert Hughes

And it will be and the onus of the tokens we will use them to pay feels on the tZERO exchange and the more tokens you own we believe there will be significant bonus. If you own x amount of tokens then as you spend tokens you are getting a bonus of 30% or 50% something like that.

Unidentified Analyst

Hang on a second.

Patrick Byrne

Oh well, the conference will be today I said at the top of the call that this conceivably there was a non-negligible chance this is the last conference call. Depending on what happens with those strategic alternatives it is conceivable that we are not having other conference calls [indiscernible] it would be a different kind of conference call. So I’ll – you know you guys now everything I know. We have a company standup I have to go out to.

Happy holidays everybody. Thank you for being – thank you it has been fun working for you as one way or another I suspect there will be more calls in the future. But thanks for listening to this long explanation of where we are. I hope that you forgive that it was so long that we know a lot of you were trying to have a look at us in 10 years if even and are trying to figure out what the heck is going on. Looks like a lot of confusion from emails I get about all these different assets. I hope – we’ve tried to construct this call to integrate all into a picture fixed together. Thank you very much, good day.


Ladies and gentlemen thank you for your participation in today conference. This concludes the program. You may now disconnect. Everyone have a great day.

Question-and-Answer Session


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Bitcoin Series #2 – Usage

This article is part of a series on bitcoin. This series started with:

And will be followed by articles on:

  • Bitcoin Series #3 – Security
  • Bitcoin Series #4 – The Bitcoin Arms Race
  • Bitcoin Series #5 – Altcoins And Forks
  • Bitcoin Series #6 – Other Considerations
  • Bitcoin Series #7 – The Endgame

The present article will delve into bitcoin usage. This is a very important theme, because:

  • Usage will be a measure of bitcoin’s adoption. Bitcoin can only fulfill its investors’ dreams if it becomes widely used and thus becomes a widely accepted “currency”.
  • Usage will also determine whether it can be a “store of value”. Bitcoin fans’ fallback position to the possibility that bitcoin won’t be widely accepted, is that it doesn’t matter anyway. That it will become a “store of value” instead.

Furthermore, bitcoin usage data doesn’t come up all that often. This article will both aggregate existing data and try to estimate its actual usage. This will be an extremely long article – I expect other articles in this series to be shorter, so bear with me.

Actual Usage

Bitcoin transactions will happen, broadly, for two reasons:

  • Speculative trading.
  • Actual usage in commerce.

When I talk about “usage” in this article, I mean actual usage – in commerce.

Bitcoin then presents another difficulty. We can separate actual usage in:

  • Licit usage in regular commerce. This is ultimately what concerns us, as for bitcoin to establish itself as a currency/means of exchange, it needs wide adoption in licit activities.
  • Usage for illicit activities. Bitcoin’s (and other cryptocurrencies’) anonymization and difficulty in tracking who spent what and who got what payment from whom, as well as the ability to easily cross borders, makes it alluring for usage in illicit activities ranging from crime to tax evasion. Were bitcoin to find its usage mostly in illicit activities, and over time it would be regulated and shut down into irrelevance.

On Illicit Usage

It’s very hard to come up with statistics regarding illicit bitcoin usage. However:

  • Blockchain Intelligence Group estimated that from more than 50% of usage, illicit usage fell to ~20% during 2016, and is now a lot lower than that.
  • Europol conservatively estimated that $1 billion was transacted through AlphaBay since its launch back in 2014, until it was shut down on July 20, 2017. AlphaBay was the “largest criminal marketplace on the Dark Web”.

What we can say here, is that initially bitcoin really found its mojo serving as a currency for illegal activity.

However, over time the usage mix has shifted towards more legitimate commerce. This has happened both because legitimate uses have expanded and because other cryptocurrencies like Monero or Ethereum have been adopted by criminals as “being safer” (for them).

Usage On Regular Commerce

The first thing I should note here is that bitcoin isn’t really accepted by commerce. That is, nearly no actual commercial endeavor actually accepts bitcoin. It just seems that way.

So how can you find so many businesses which accept bitcoin? The answer is “bitcoin payment processors”. These are companies which provide merchants with the ability to accept bitcoin. When a merchant decides to work with one of these companies and provides a bitcoin payment option, what happens is the bitcoin payment processor guarantees the merchant is instantly (when the transaction is validated) paid on regular currency (dollars, euros) into his bank account.

As a result, the merchant neither has to worry with all of bitcoin’s technical arcana, nor with its massive volatility. He doesn’t really accept bitcoin, he just sees “dollars and euros”. For the merchant, accepting bitcoin turns into the same thing as accepting PayPal.

So who are the largest of these payment processors? As of early 2016, and as estimated by Cubit’s blog based on several sources, the main were:

  • BitPay, with around 40-49% of the market.
  • Coinbase, with around 28-34% of the market.
  • And a plethora of others, including Coinify (which has acquired several bitcoin payment processors), representing the rest.

As we can see, BitPay is the largest bitcoin payment processor by far. And we’re pretty lucky, as it’s also a company that often puts out interesting statistics (which we are about to use).

Estimating Usage Through Transactions

If we assume BitPay has roughly kept its market share, then we can take a stab at estimating current usage as a percentage of total bitcoin trading activity (which is entirely dominated by speculative trading).

Blockchain Transactions

Looking at transactions committed to the blockchain, bitcoin has been bumping against the theoretical limit of ~288,000 transactions/day.

This limit results from the 1MB block limit which allows ~2,000 transactions per block. So, with 1 block per each ~10 minutes, 144 blocks per day, we get 2,000 x 144 = 288,000 a transactions/day limit. Since there’s some variability in both block size, timing and transactions per block, the limit varies but we can say the system is working at capacity.

Source: Blockchain.info

Indeed, a measure of the system being at capacity is the mempool size – which represents the size of the waiting transaction queue. Here we can see how the mempool size has behaved in terms of number of transactions waiting for confirmation:

Source: Blockchain.info

There is something interesting here. While the system is still at capacity, things were much worse back in May-July. Right now there are 25,000-50,000 transactions waiting, whereas during that period there were as many as 175,000. Transaction volume isn’t that different now versus then, so what might have changed?

Exchange Transactions

While it’s easy to establish how many transactions were committed to the bitcoin blockchain, it’s harder to establish exactly how many bitcoin transactions actually existed. The largest sources of such transactions are the bitcoin exchanges.

In terms of transactions, bitcoinity.org puts the trading volume at around 250-400 trades per minute over the most important bitcoin exchanges. This comes to 360,000-576,000 transactions per day.

Of note already, the estimated transaction volume on the bitcoin exchanges exceeds the number of transactions committed to the blockchain. And these transactions represent merely speculative/investment trading volume. How can that be?

The reason is simple. Exchanges internalize a lot of the volume, so that many bitcoin trades are settled internally and never committed to the blockchain. From time to time, exchanges will issue transactions to the blockchain settling net amounts due to wallets not under their control, etc. The internalization practice goes by the name of off-chain transactions, and improves both the speed and cost of those transactions subjected to it. However, as we’ll see in the next chapter dedicated to security, that’s not all off-chain transactions do.

Payment Processor Transactions

As of December 2016, BitPay crossed 200,000 transactions per month:

Source: TheAtlas.com, BitPay

It’s fair to say that it might now be processing as many as 250,000 transactions per month, though the company has reported transactions are slowing down versus payment volume, as more B2B activity (higher dollar amount per transaction) is taking place:

“We’ve seen a smaller than normal increase in the number of transactions from last year. We’ve also seen a large increase in [business-to-business] transactions, which are around $200,000 per transaction.”

Source: Coindesk.com

These 250,000 transactions/month represent actual commerce use. These come to about 8,333 per day.

Now, BitPay represents only 40-49% of the total market coverage when it comes to bitcoin payment processors. If we assume transactions are proportional to market share, then this would mean the actual usage for all payment processors would be around 17,000-20,800 transactions/day.

Actual Usage Estimate, Based On Transactions

Given the above we can say:

  • Based on blockchain-committed transactions, actual commerce usage would represent 5.9%-7.2% of all transactions. Not a shabby number at all, but there will be more on this later.
  • Based on exchange transactions, which exceed blockchain-committed transactions because of off-chain transactions, then actual commerce usage would represent 2.9-5.5% of all (exchange+payment processor) transactions.

However, here’s the thing:

  • Investment/Speculative trades are intrinsically higher value than commerce transactions.

As a result, we should also look at usage from a (dollar) volume perspective.

Estimating Usage Through Volume

Again, we follow the same process.

Blockchain Estimated Volume

Here things are made easy for us. Blockchain.info estimates the 7-day daily average dollar volume is running ~$1.4 billion/day. This is the same as a ~$42 billion/monthly volume.

Source: Blockchain.info

Exchange Estimated Volume

As for the exchanges, Coinmarketcap.com estimates 30-day dollar volume at ~$68.2 billion, which comes to roughly $2.27 billion/day.

Payment Processor Volume

Again, BitPay comes to our help. Very recently, BitPay disclosed that its annualized volume is now on pace for $1 billion/year. If we optimistically use a $1.2 billion run rate/year, then we get a payments volume of ~$100 million/month.

Again, applying BitPay’s market share, this translates to $204-$250 million/month volume for all payment processors. It also translates to an yearly volume run rate of $2.45-$3.0 billion for all bitcoin payment processors.

Actual Usage Estimate, Based On Volume

With the numbers above, we can estimate:

  • Based on blockchain estimated volume, actual commerce usage would represent 0.5%-0.6% of all bitcoin dollar volume transactions.
  • Based on exchange estimated volume, which again exceeds blockchain-committed volume because of off-chain transactions, actual commerce usage would represent 0.3%-0.4% of all exchange volume.

These are much lower figures than those derived from transaction numbers. This, though, is to be expected. The average ticket in commerce is certainly much lower than the average speculative transaction. Therein, as we’ll see, lies another problem.

How Does Bitcoin Compare?

To put things in context, we can compare the above-estimated bitcoin payment processing transactions and dollar volume (all of the bitcoin payment processors put together) with those of another well-known digital payments processor … alone. I’m talking about PayPal (PYPL).

So here’s what we know about PayPal:

  • In its latest quarter, it processed 1.9 billion payment transactions. If we just annualize this on a straight line, it would come to ~7.6 billion payment transactions/year (this likely greatly under-represents PayPal volume, since we’re not including Q4 seasonality).
  • Also in its latest quarter, it processed $114 billion in payments volume. Again annualizing this on a straight line would come to $456 billion (this would again under-represent actual PayPal volume due to Q4 seasonality).

As a result of these numbers we can say all bitcoin payment processing represents:

  • Less than 0.1% of the payment transactions handled by PayPal.
  • 0.5-0.7% of the payment volume handled by PayPal.

Of course, PayPal is just one of many payment processors, though arguably the most representative one of the new digital generation. Bitcoin payment processing pales in comparison.

It gets worse, though:

  • PayPal currently has ~$89 billion in market capitalization.
  • Bitcoin has ~$125 billion in market capitalization.

But here’s the thing, these two market capitalizations aren’t really comparable. Here’s why:

  • When you buy PYPL stock, you’re buying a share of its economic activity. This includes the internal tokens to represent accounts and account balances (which are represented digitally) and are arguably comparable to bitcoin (though they don’t change in price). But it also includes a share on all the economic activity and commissions deriving from that economic activity. Which, after costs, represents profit. PayPal profits amount to ~$2.25 billion per year.
  • Indeed, if you were to compare PYPL to the Bitcoin ecosystem, buying PYPL shares would amount to buying an economic interest in the entire Bitcoin ecosystem. That is, it would amount to owning not just bitcoin, but also a share of all bitcoin exchanges, payment processors and miners. And thus, a share on all their profits.
  • Now, here’s the problem. When you buy bitcoin, you buy nothing of that sort. You just buy an interest on the bitcoin token. A token which, on the PayPal side, is basically worthless – since all the value is in the economic activity. As a result of this, when you buy bitcoin you are not buying a share of any bitcoin economic activity.
  • As a corollary, a bitcoin success would theoretically not need bitcoin itself to be worth tens or hundreds of billions of dollars. Bitcoin could easily fulfill the currency function even with bitcoin just being worth a fraction of that. As we see, PayPal tokens are basically worthless yet the payments scheme works anyway. This is, of course, conceptually. There are structural barriers to this being so because of how bitcoin is structured (and because of who gets paid on the generated economic activity).

Now think about it:

  • When you buy bitcoin you don’t buy a share of any economic activity and any resulting profits.
  • When you buy bitcoin you’re buying a tiny otherwise-worthless slice of a payments system that’s 200-1000x smaller than PayPal.
  • And yet, when you buy bitcoin (for speculative purposes), you’re paying a market capitalization that’s 40% higher than PayPal’s!! And this for a token which gives no right to any underlying economic activity.

From here alone, we already know that bitcoin cannot but be mispriced. However, there’s a lot more to say, both on this article and the following ones.

A Problem – Not Growing Sustainably

When talking about transactions and volume above, I could also add that BitPay is seeing tremendous growth. Its transaction payments volume is up 328% year-on-year.

Had I said as much, and you’d quickly scream “growth”, and excuse any and all possible valuation arguments (up to and including you not sharing on any economic benefits from the possible success of the Bitcoin ecosystem).

However, there’s more to this growth which most people don’t know. We know, from past history, that this growth is tied to the massive increase in the bitcoin price.

How do we know this? Again, because of BitPay. Here are two charts depicting what happened during and after the previous bitcoin bubble (annotations are mine):

Source: TheAtlas.com, BitPay

Source: TheAtlas.com, BitPay

As you can see, the tremendous increase in usage was a function of the bitcoin bubble itself. Then as bitcoin prices crashed and stagnated, usage also decreased. This is unlike a truly sustainable payments system which, when presenting obvious advantages to its users, sees consistent increases in adoption (at least barring a large recession).

Moreover, the declines above understate the actual organic declines in usage. This is so because BitPay spent the period expanding its reach.

As a result of the above, we can expect bitcoin usage to again drop significantly just as soon as the bitcoin price crashes. This will make it rather obvious that bitcoin is not seeing widespread adoption for commerce.

Bitcoin, though, might still have a niche where it might see wider adoption. We’ll see that later.

Another Problem – Cost And Time

For bitcoin to see wide adoption it needs to have clear advantages over existing digital currencies. It needs to have these advantages for those planning on using bitcoin for licit commerce.

Of course, we know that for those trying to pull off illegal activities, bitcoin’s anonymization, difficulty in tracking payers/receivers, easy crossing of borders and the impossibility to roll back transactions are major attractions.

However, for non-paranoid regular users, these are hardly factors at all. Instead, to see wider adoption, bitcoin would need advantages on things like convenience, safety, speed or cost. But as it turns out, not only doesn’t bitcoin have advantages there but it instead often has disadvantages. Worse still, some of the disadvantages are structural. Let’s see.


As we’ve seen in my prior “Basics” article, bitcoin transactions are validated by being committed to the blockchain, as new blocks are mined (found).

The thing is, bitcoin is structured so that the average time to find a block approaches 10 minutes. As a result, in the best of cases any transaction can take up to 10 minutes to be validated, versus “instantaneous” for regular digital currencies.

It’s not a coincidence that the average time to confirm a transaction sits slightly above 10 minutes:

Source: Blockchain.info, for transactions with fees only. A transaction without fees could theoretically sit un-confirmed forever.

Of course, there are off-chain alternatives to make this speedier. Someone is going to take the risk of the confirmation ultimately not happening. But then again, “off-chain” is another way of saying “no longer bitcoin”.


When it comes to bitcoin, the cost of transacting is deeply tied with the time it takes for a transaction to be validated.

As we’ve seen in the prior “Basics” article, when each block is found by the miners, the miners include transactions into it. Obviously, the miners will include transactions paying the highest fees first. So as a user, if you want a quick confirmation, you have to pay up.

Even in the best of times, paying so as to be sure your transaction gets included quickly, can mean a “quickly” up to 10 minutes. As for the cost “to be sure it’s confirmed quickly”, it floats all the time. Currently it sits around $5 to make sure your transaction is validated within 10-30 minutes (the next block to the next 3). Average transaction costs, though, are all over the place and have been rising rapidly:

Source: Bitcoininfocharts.com

Now, those fees are just the most basic, underlying, marginal cost which needs to be paid to a miner for him to include (and thus confirm) the transaction in a blockchain block. These fees ignore all other possible costs including:

  • Overhead at the payments processor.
  • Margin required by the payments processor.
  • Further costs to convert to and from regular currency.

Why are those costs exploding? As we saw earlier, the Bitcoin network is operating at capacity when it comes to transactional capacity. Increased demand – for speculative or commerce reasons, both of which are inflated by bitcoin rallying – versus limited supply (to validate transactions) necessarily leads to scarcity pricing.

Already, you should see that the whole promise of widespread bitcoin adoption is dead on arrival. Micropayments, or even regular payments, cannot cope with an underlying $5 cost before all overheads and margins. For instance, the average ecommerce ticket should be between $80-$100 (Amazon.com had a $84 average during 2015). At those levels, $5 would be 5-6.25% of the whole ticket before all other payment overheads and margins. Those are already levels at which it basically cannot compete with any other payments system.

Even BitPay is already saying as much, by:

  • Claiming it doesn’t make sense to make transactions below $20.

Talking to Singh, though, it seems the company would love to be able to help both, but, with transaction fees currently rising, it’s just not practical to make transactions under $20, he said.

  • Adding a network fee to the 1% commission paid by the merchant.
  • Having users pay the transaction (miner) fee (which basically insulates BitPay from the horrendous cost but makes it uneconomic to use bitcoin for small payments).

There are ways to minimize these costs. They consist in:

  • Internalizing payments where possible (but then it’s no longer bitcoin).
  • Use lower fee amounts in hopes of getting confirmed, only later. Of course, this basically extends how long it will take to confirm the transaction and makes it uncertain. It could be hours. It could be days. It’s not a way to run a business. It’s also not a coincidence that the transactions waiting for confirmation are all bunched up trying to pay less (remember, the mempool represents transactions waiting to be confirmed):

Source: Blockchain.info

From time and cost, we also know that bitcoin lags in convenience. These are things that both need to be economic for any transaction size, and which the user does not want to be bothered with – the user just wants to pay and have it be instantaneous. So does the merchant.

A Niche

There is, however, one niche where bitcoin might still be viable over and beyond illegal activity. That’s the field of larger international payments.

Here, both the time constraint and the cost constraint are removed. Here’s why:

  • Since cost is fixed no matter what the size of the transaction, the user can pay more to have the transaction confirm quickly – and still have that cost be an incredibly small portion of a large transaction.
  • As a result, a large international transaction can be expected to confirm within 10 minutes (which is much more competitive than a wire transfer, though still slower than PayPal) and at a low cost.

Given this, competitive solutions for international transfers can indeed be built upon bitcoin. However, those can’t be remunerated as a % of value, as their competitors (wire transfers, mostly) aren’t priced that way either. Moreover, the ultimate cost will have to include currency to bitcoin and bitcoin to currency costs, which might again level the field versus traditional transfer methods.

Still, while we can say that bitcoin is structurally in trouble when trying to penetrate regular commerce, the same cannot be said for large international transfersespecially those between different currencies (where the bitcoin to currency conversions might compete well with currency to currency conversions, at least for small/medium customers not having access to currency market spreads).

The True Cost

There’s yet another problem, which is harder to portray. We already saw above that the marginal cost to validate a single transaction is now sitting at $5-$7. However, this actually isn’t the true cost. Let me explain:

  • The transaction fee (which was the cost we talked about) is just part of the miner compensation.
  • The value of the new bitcoins found (the block reward) is the other part.

The two taken together are the true cost (per transaction) needed to keep the network running. This is more evident because over time the block reward will trend to zero. Hence, over time the entire miner revenue will have to come from transaction fees … so to keep current revenues the transaction fees would have to trend to the sum of the block reward plus current transaction fees. This sum looks like this:

Source: Blockchain.info

As we can see, the true cost per transaction now hovers around $50. This is incredibly high and, again, would invalidate most commerce uses other than for buying big ticket items. This would also beg the question of why one would go to the trouble of buying bitcoins just to then buy the big ticket items (thus incurring currency to bitcoin conversion fees on the user side and bitcoin to currency conversion fees on the merchant side).

An Aside

Some might think that just increasing the blockchain capacity to handle transactions, by increasing the block size, will solve most problems. Alas, it won’t for a very obvious reason:

  • As we saw, the transaction fee is close to 1/10th of the actual cost to transact in bitcoin (which includes all miner revenue).

An increase in block size would likely collapse transaction fees. However, the total revenue wouldn’t collapse (the block reward is basically a function of time and the bitcoin price).

As a result, over time as the block reward got lower, again the same cost per transaction would have to come from somewhere. A panacea would be greatly increased transaction volumes (in terms of number of transactions, not value) … but how would that happen if clearly the allure to hold bitcoin comes from its increasing quote, and not from using it in commerce?

In commerce, bitcoin will always be slower or not be bitcoin at all (off-chain trade). That’s even if the cost converges with regular digital currencies and the intricacies of dealing with bitcoin are all solved transparently.


There are many conclusions we can draw here:

  • Bitcoin’s usage for commerce is a tiny fraction of the usage for speculation. This is especially evident when it comes to transaction value.
  • Bitcoin usage for commerce has been growing rapidly, but so did it during the previous bubble. Bitcoin usage depends on the bitcoin price, so clearly wealth effects are playing a role that’s more relevant than the underlying attractiveness of using bitcoin for commerce. Bitcoin usage for commerce will likely collapse as soon as the bitcoin price also collapses.
  • It’s easy to see why wealth effects are more alluring that any underlying attractiveness for commerce. Bitcoin takes more time to confirm and is too expensive (in terms of transaction fees) to use as a regular currency for online commerce other than for more expensive purchases.
  • This is even more evident when considering the true, total cost implied in transacting with bitcoin, instead of just the transaction fees.
  • Arguably, bitcoin can find a niche in international transfers by small/medium customers between two different currencies. Under those conditions, it looks to be cost and time competitive as the fixed fees are diluted. The requirement of it being between two different currencies comes from the added cost of currency/currency conversion on regular payment systems. Under bitcoin, these conversions are replaced by currency/bitcoin and bitcoin/currency conversions which are likely to be cheaper for small/medium customers.
  • Bitcoin/currency and currency/bitcoin conversions can be cheaper for small/medium users because they’ll be more easily exposed to (bitcoin) market spreads than foreign exchange spreads. For a larger corporation, which will have closer-to-market foreign exchange spreads, bitcoin is likely not competitive even on the “international transfer between two currencies” scenario. This is so because bitcoin spreads are larger than say, EUR/USD, USD/GBP, etc., forex pair spreads. This can be turned on its head when working with exotic pairs, though, like USD/CNY.
  • For regular commerce usage, bitcoin is at a cost and time disadvantage versus typical digital payment systems like PayPal. Both are structural. The time disadvantage comes from the block generation time (~10 minutes). The cost disadvantage comes from the total revenues enjoyed by miners. Even if the transaction fee problem is solved by a bitcoin fork or upgrade, the actual cost to transact will always come to the fore with time (as less bitcoins are awarded per block).
  • We’ve seen the problems bitcoin has in becoming widely accepted as a currency for commerce. It faces an even worse uphill battle to become a “store of value”. The reason is simple: The entire trading taking place on-blockchain (and which also supports the off-blockchain trade) has to support the whole Bitcoin system. The cost to support the whole Bitcoin system is running at a ~$5 billion/year pace (~$14 million/day, 9/10ths of which come from the “disappearing over time” block rewards and 1/10th of which comes from transaction fees) or ~4% of the entire bitcoin market capitalization. An asset which has intrinsic costs of 4%/year even before other system costs, overheads and margins is an intrinsically poor store of value.
  • Finally, bitcoin is wildly overvalued in relative terms. When someone buys bitcoin he only buys a token used in a much larger system (miners, exchanges, payment processors). The token confers no rights to economic returns enjoyed within that system. Compare that to PayPal: When you buy a PayPal share you get the right to economic returns from the entire similar system – a system which is 200-1000x larger, and growing consistently (as opposed to bitcoin’s reliance on bubbles to propel activity). Yet, in spite of representing a fraction (of the economic system, arguably zero) of a fraction (of the actual payments activity) of PayPal, bitcoin trades for 40% more than PayPal’s market capitalization.

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.

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Qualcomm buy may pit Broadcom against Intel in 'connected car' fight

(Reuters) – If Broadcom Ltd’s unsolicited $103 billion bid for Qualcomm Inc succeeds, it could set up a battle with Intel Corp for dominance in the production of the next generation of communications chips, which will play a vital role in so-called connected cars.

FILE PHOTO: A sign to the campus offices of chip maker Broadcom Ltd, who announced on Monday an unsolicited bid to buy peer Qualcomm Inc for $103 billion, is shown in Irvine, California, U.S., November 6, 2017. REUTERS/Mike Blake/File Photo

Vehicles of every sort already are starting to add wireless chips to download everything from maps to entertainment, and in a few years nearly every new car may be connected. Self-driving cars, still in test mode, will accelerate the move.

“The amount of chips per car is going to grow dramatically,” said Egil Juliussen, a principal analyst for automotive technology at IHSMarkit.

Chip makers are scrambling to create new mobile networks, the so-called fifth generation, which will link phones as well as cars, drones and even industrial devices such as smart street lights, which count pedestrians and send data to city planners.

Qualcomm long was the dominant communications chip maker for mobile phones, although computer chip maker Intel has begun muscling into the space. Each now supplies about half Apple Inc’s iPhone communications chips, for instance.

Now they are jockeying in a mature market to design so-called 5G networks that will be up to 10 times as fast as wireless networks today, which are expected to start rolling out in 2020. Research firm IDC predicts 1.53 billion smart phones will be shipped in 2017 expanding to only 1.77 billion units in 2021.

The market for modem chips for cars, by contrast, is expected to grow sharply. Tristan Gerra, a senior semiconductor analyst for Robert W. Baird & Co, said that this year, only about 12 million of the 90 million cars manufactured per year have internet connectivity. But connectivity will become ubiquitous on self-driving cars.

The Intel logo is shown at the E3 2017 Electronic Entertainment Expo in Los Angeles, California, U.S. June 13, 2017. REUTERS/ Mike Blake

“You basically (will) have 80 million units per year that are going to get a modem,” he said.

Intel and Qualcomm declined to comment.

FILE PHOTO: A Qualcomm sign is pictured at one of its many campus buildings in San Diego, California, U.S. April 18, 2017. REUTERS/Mike Blake/File Photo

Qualcomm itself is trying to buy NXP Semiconductors, a maker of automotive chips from so-called “infotainment” system chips to camera systems, for $38 billion. It is unclear whether that deal will go through and whether Broadcom would take on NXP, but Broadcom has said it is willing to do so.

A tie-up between the three companies could create a formidable competitor in the automotive chip space, said IHSMarkit’s Juliussen. He views Intel and Nvidia Corp, which make both make the main processors used in self-driving vehicles, as leaders in the young market, but a combined Broadcom-Qualcomm-NXP would be a strong third-place.

Intel has bought itself into relationships with autonomous car developers thanks to its acquisition of vision system maker Mobileye. Broadcom would get something similar with NXP, Juliussen said.

If Broadcom pulls off both deals, its market position in some areas could be dominant, said Cowen and Co analyst Karl Ackerman.

“[Broadcom] would basically own the majority of the high-end components in the smart phone market and they would have a very significant influence on 5G standards, which are paramount as you think about autonomous vehicles” and connected factories, he said.

Reporting by Stephen Nellis, editing by Peter Henderson and Tom Brown

Our Standards:The Thomson Reuters Trust Principles.
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After WhatsApp threat, Indonesia steps up Internet obscenity purge

JAKARTA (Reuters) – Indonesia said on Tuesday it would summon representatives of messaging services and search engines, including Alphabet Inc’s (GOOGL.O) Google, to demand they remove obscene content, a day after threatening to shut down WhatsApp Messenger.

FILE PHOTO: The WhatsApp messaging application is seen on a phone screen August 3, 2017. REUTERS/Thomas White/File Photo

The Internet is already partly censored in Indonesia, but the latest steps mark an escalation against a background of growing conservatism in the world’s most populous Muslim-majority nation.

“We will call all providers, including Google to clean up their network,” said Semuel Pangerapan, a director general at Indonesia’s communication and informatics ministry.

The ministry vowed on Monday to block Facebook Inc’s (FB.O) WhatsApp Messenger within 48 hours if the service did not ensure that obscene Graphics Interchange Format (GIF) images were removed.

“They have to follow the rules of the host,” Pangerapan said of WhatsApp Messenger, which is widely used in Indonesia – prolifically by some ministers and bureaucrats.

WhatsApp said on Monday that message encryption prevented it from monitoring the animated graphics files, known as GIFs, that are available on the app through third-party services.

It said it had asked the government instead to work with those providers, which integrate their technology into WhatsApp to allow users to enter keywords to search for GIFs.

Tenor Inc, one of the third parties, said on Tuesday it had “already implemented a fix for the content issues”.

Users of Whatsapp Messenger on iPhones were unable to access Tenor GIFs on Tuesday.

The company “regularly” worked with “local entities to make sure our content reflects the cultural mores and legal requirements,” spokeswoman Jennifer Kutz said in a statement.

Giphy Inc., a New York City GIFs company that also works with WhatsApp, did not respond to requests to comment. Giphy offers partners a feature to filter inappropriate images.

Indonesia’s warning did not appear to target Gboard, a keyboard app developed by Google that provides comparable GIF search results but must be installed separately from WhatsApp on most devices.


Indonesia blocks access to websites offering criticism of Islam, dating services and sex education, research published in May by Tor Project, a non-profit maker of Web browsing tools, showed.

Indonesia had 69 million monthly active Facebook users by the first quarter of 2014, ranking it fourth globally after the United States, India and Brazil, company data showed.

Some reaction on Indonesian social media to the threatened block was skeptical.

“While you’re at it, why don’t you block Twitter too, (and) if necessary all browsers in the Playstore, because it’s way easier to search for porn there than on WhatsApp,” wrote one Twitter user, with the handle @jnessy.

The country’s regulators have reached settlements with several technology companies after threatening to shut them down. In August, Indonesia announced it would block Giphy’s website for showing gambling-related ads. Access was soon restored after it agreed to cooperate with regulators.

Bans were similarly rescinded in recent years on social media websites, such as Vimeo and Tumblr, and the chat app Telegram, which regulators had said was “full of radicals and terrorist propaganda.”

The Indonesian Consumers Foundation (YLKI) had urged the communications ministry to block pornographic GIF images accessible via emoticons, complaining that children could easily reach them, according to news website kompas.com. Terms of use for WhatsApp, Tenor and Giphy specify users must be at least 13.

Writing by Ed Davies and John Chalmers; Editing by Clarence Fernandez

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Altice to sell wireless service on Sprint's network

(Reuters) – U.S. cable operator Altice USA will sell mobile service on wireless carrier Sprint Corp’s network under a new multi-year agreement announced on Sunday, becoming the latest firm to enter the wireless market in a bid to retain customers.

FILE PHOTO: A Sprint store logo is pictured on a building in Boca Raton, Florida, U.S. on March 19, 2016. REUTERS/Carlo Allegri/File Photo

The companies announced the agreement a day after Sprint and T-Mobile US Inc ended merger talks.

Under the terms of the agreement, Altice, the fourth-largest U.S. cable operator, will use Sprint’s network to provide voice and data services in the United States. It gave no time line on when it will introduce such services.

The deal will allow Sprint to use Altice’s cable infrastructure to transmit cellular data and develop a next-generation network, or 5G.

Sprint and T-Mobile on Saturday called off merger talks to create a bigger U.S. wireless company to rival market leaders. That has left Sprint, the No. 4 U.S. wireless carrier, to engineer a turnaround on its own.

Japan’s SoftBank Group Corp, Sprint’s majority owner, said in a separate announcement on Sunday that it intended to increase its stake in Sprint but that it would keep ownership of outstanding common stock under 85 percent, a move that avoids triggering a tender offer for the remaining shares. SoftBank currently owns roughly 82 percent of Sprint.

U.S. cable companies have begun venturing into the wireless market as a way to bundle more services to reduce churn, or customer defections, at a time when more consumers are canceling cable subscriptions.

Comcast Corp started selling wireless service this year on Verizon Communications Inc’s network, and Charter Communications Inc plans to launch service next year.

Reporting by Parikshit Mishra in Bengaluru and Anjali Athavaley in New York; Editing by Paul Simao and Peter Cooney

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Altice USA, Sprint agree to wireless partnership agreement

(Reuters) – U.S. cable operator Altice USA will sell mobile service on wireless carrier Sprint Corp’s network under a new multi-year agreement announced on Sunday, becoming the latest firm to enter the wireless market in a bid to retain customers.

FILE PHOTO: A Sprint store logo is pictured on a building in Boca Raton, Florida, U.S. on March 19, 2016. REUTERS/Carlo Allegri/File Photo

The companies announced the agreement a day after Sprint and T-Mobile US Inc ended merger talks.

Under the terms of the agreement, Altice, the fourth-largest U.S. cable operator, will use Sprint’s network to provide voice and data services in the United States. It gave no time line on when it will introduce such services.

The deal will allow Sprint to use Altice’s cable infrastructure to transmit cellular data and develop a next-generation network, or 5G.

Sprint and T-Mobile on Saturday called off merger talks to create a bigger U.S. wireless company to rival market leaders. That has left Sprint, the No. 4 U.S. wireless carrier, to engineer a turnaround on its own.

Japan’s SoftBank Group Corp, Sprint’s majority owner, said in a separate announcement on Sunday that it intended to increase its stake in Sprint but that it would keep ownership of outstanding common stock under 85 percent, a move that avoids triggering a tender offer for the remaining shares. SoftBank currently owns roughly 82 percent of Sprint.

U.S. cable companies have begun venturing into the wireless market as a way to bundle more services to reduce churn, or customer defections, at a time when more consumers are canceling cable subscriptions.

Comcast Corp started selling wireless service this year on Verizon Communications Inc’s network, and Charter Communications Inc plans to launch service next year.

Reporting by Parikshit Mishra in Bengaluru and Anjali Athavaley in New York; Editing by Paul Simao and Peter Cooney

Our Standards:The Thomson Reuters Trust Principles.
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Facebook and Google Are Actually 'Net States.' And They Rule the World

“We reject: kings, presidents, and voting. We believe in: rough consensus and running code.” So declared MIT professor David D. Clark in 1992. Twenty-five years later, this sentiment mirrors the global zeitgeist more than ever. The American public distrusts government in record numbers. Other nation-states disdain the US to world-historical degrees. A non-nation-state, Facebook, just topped 2 billion users—more than a quarter of the world’s population, surpassing even China’s population by almost 40 percent. In short, nation-states are not the only game in town anymore.



Alexis Wichowski (@awichowski) teaches technology, media, and government at Columbia University’s School of International and Public Affairs. She is also the press secretary for the City of New York’s department of veterans’ services. Views expressed here are her own.

It is time to name this new landscape. The world is no longer dominated by nation-states alone. We have moved into a non-state, net-state era.

Why “net-states”? Because the world is no longer neatly divided into states (countries like the US, France, and India) and non-states (terrorist organizations like ISIS and al Qaeda). Ever since Barbara Ehrenreich’s 2011 article “Coming to a Theater Near You: War Without Humans” described the “emergence of a new kind of enemy, so-called non-state actors,” the term transformed into a fancy way of saying “bad guy.” Now we need new language to describe the non-state, non-bad-guys. I propose “net-states.”

Net-states are digital non-state actors, without the violence. Like nation-states, they’re a wildly diverse bunch. Some are the equivalent to global superpowers: the Googles, the Facebooks, the Twitters. Others are mere gatherings of pranksters, like Lulzsec (whose sole purpose for action is “for the lulz”—the laughs). Others still are paramilitary operations, such as GhostSec, an invite-only cyberarmy specifically created to target ISIS. There are also hacktivist collectives like Anonymous and Wikileaks.

Regardless of their differences in size and raison d’etre, net-states of all stripes share three key qualities: They exist largely online, enjoy international devotees, and advance belief-driven agendas that they pursue separate from, and at times, above, the law.

Take Google, for instance. In 2013, the company launched an anti-censorship initiative called Project Shield, a sort of online safe haven for news sites censored by their national governments. Democratic countries like the US may laud such efforts, but in countries where Project Shield has been deployed across Asia and Africa—where free speech is not necessarily protected—those governments would be well within their rights to see Google’s actions as both disruptive and illegal. While Project Shield may be branded a business practice that generates good PR for the company, it also embodies Google’s fundamental doctrine to bring about positive change in the world. As co-founder Sergey Brin put it in a 2014 interview, “the societal goal is our primary goal.”

Anonymous—the hackers and pranksters most famous for the Operation Chanology protest movement against Scientology—occupies a very different role from Google among net-states. It’s not a business; it’s not even an official, card-carrying membership organization.

But Anonymous, too, dabbles in actions traditionally in the domain of government. For instance, after the terrorist attacks in Paris in November 2015, Anonymous disabled between 5,500 and 20,000 ISIS-backed Twitter accounts within 48 hours. Governments have their own official channels to shut down terrorist social media accounts too, but doing so legally at such a large scale likely generates a tad more paperwork than can be processed in just two days.

It’s worth pausing for a moment to consider the point of all this. With deaths by terrorism steadily rising each year, does placing a new name on our already extant world order do anything to actually make us safer?

I argue that it does, because nation-states need a wake-up call: The world needs net-states in order to defeat the non-states. We’re not beating them on our own. To win information-era wars, countries need to recognize the power of the net-states, not as an ancillary locale of assembly in the cyberspace, but as critical entities wielding the kind of power and influence necessary to go toe-to-toe with non-state actors.

The world needs net-states, because they occupy the same territory as the non-states: the digital sphere. As such, they understand their norms and tactics far more than a land-war, Cold-War era strategist ever could. Major General Michael K. Nagata, commander of American special operations forces in the Middle East, circled this idea back in 2014, in a leaked confidential conversation about ISIS. He said, “We do not understand the movement, and until we do, we are not going to defeat it. We have not defeated the idea. We do not even understand the idea.”

Failure to understand the idea is part of why the US continues to be stuck in the war on terror. And the US is indeed stuck: Secretary of defense James Mattis confirmed that in June, saying in a briefing to Congress, “We are not winning in Afghanistan,” His commanders have classified the 16 years of war a “stalemate.” And without the net-states, the war will likely continue to be one.

The US airstrikes acolytes by the thousands as if they were Old World beasts they can hunt to extinction. But deploying traditional military tactics in battles of belief are the equivalent of setting bear traps for ghosts: They’re not going to work. They’re not relying on the wrong weapons; they’re relying on the wrong worldview. And even purportedly innovative tactics, like government-generated counter-terrorism messaging, while logical in theory, relies on the same outdated perspective (see “Think Again Turn Away,” the State Department’s failed attempt at targeting ISIS Twitter accounts with direct rebuttals). It’s like hearing your parents tell you that drugs are bad. What we need are the cool kids to say it. We need the net-states to say it.

So, nation-states, adapt. And don’t just acknowledge net-states; work with them. Incorporate information-era savvy alongside military campaigns. The risk of not doing so is to lose the faith of the people. Worse, failure to adapt to the information age unwittingly nudges the population ever closer to “reject kings and voting”, to instead embrace “rough consensus and running code.” In other words, forget the anointed powers—put your faith in the general approval of the people and whoever’s actually getting things done. Honestly, when faced with the question of who gets the will of the people today, how many of us would really say “the United States” over “Google”?

In sum, the US can’t keep just shooting terrorists; ideas are the gun in this knife fight. And the keepers of ideas—the places people turn to set them free and watch them spread—are the net-states; not the nation-states. Nation-states ignore our non-state, net-state world order at all our peril.

WIRED Opinion publishes pieces written by outside contributors and represents a wide range of viewpoints. Read more opinions here.

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AT&T: The End Is Here

What happened?

The WSJ reported the DOJ has AT&T’s (NYSE: T) acquisition of Time Warner (NYSE: TWX) in its crosshairs. According to Seeking Alpha Breaking News:

“Time Warner has been halted after a 6.2% tumble on word the Justice Dept. is considering an antitrust suit to challenge AT&T’s acquisition of the media company. AT&T has jumped 1% on the news. The DOJ is reportedly also in settlement talks with the companies that could lead to approval with conditions, the WSJ reports. But the department is preparing litigation in the case it does decide to pursue the matter.”

Here are my thoughts. If the DOJ were to file a lawsuit regarding the acquisition, this would be very bad news for the stock. Nevertheless, I’m not concerned in the least regarding the DOJ doing this. In the following sections, I will make the case that the DOJ will inevitably approve the acquisition for concerned dividend and income investors.

Current chart

Source: Finviz.com

There is precedent

Comcast’s (NASDAQ: CMCSA) takeover of NBC Universal created a $30 billion media behemoth. The company now controls not only the content but how that content is delivered to customers.

Comcast is the No. 1 provider of video and residential Internet service in the United States. It acquired a 51% stake in NBC Universal from General Electric (NYSE: GE).

DOJ regulators were quoted at the time as being concerned about many of the same concerns raised against the AT&T and Time Warner merger. The DOJ was quoted as stating that an all-powerful Comcast might stifle competition from new online video competitors. Furthermore, they were concerned about customer price increases as well.

Nevertheless, the deal went through after Comcast agreed to certain conditions. The conditions included relinquishing management rights of its minority stake in Hulu. Hulu is co-owned by News Corp. (NASDAQ:NWSA), Walt Disney Co. (NYSE:DIS) and NBC Universal. It did take several months of negotiations, which provided fodder for several disparaging headlines prior to the deal being approved.

I expect the same for this deal. The DOJ is basically showboating at this time to ensure no one thinks it is giving a pass to AT&T. The move also improves its negotiating position with the threat of a lawsuit hanging over AT&T’s head like the Sword of Damocles! Classic Trump negotiating tactic! In the end, the deal will get done. AT&T will have to make some promises regarding being fair to other content providers and ensure there are no immediate price increases.

No vertical acquisition ever denied by DOJ

AT&T and Verizon (NYSE: VZ) are the two big bullies in the wireless industry. If these two companies tried to merge, the DOJ would shoot it down in a heartbeat.

Nevertheless, the wireless industry at present is fiercely competitive. Margins are being pressured due to commoditization of the product. I see this highly competitive environment as a positive for getting the Time Warner deal done.

The DOJ must take into consideration that the big telcos need to vertically integrate in order to survive. It’s really a no-brainer that the deal goes through. Can anyone name a vertical integration of two companies that was not approved by the DOJ? I could not. Case closed.

President Trump’s regulatory reform stance

President Trump has continuously stated he wants less regulation. Trump constantly states that for every new regulation, two old regulations must be eliminated. If the DOJ were to disapprove the deal, this would fly in the face of everything he has been espousing. I don’t see Trump backtracking on his promise for less, not more, regulation.

Some have said Trump may stop the deal due to his hatred of CNN. I have no concern whatsoever that President Trump has an issue with CNN. In fact, I believe that is actually a positive for the deal getting done. Trump doesn’t want to appear to be taking out his personal issues on the company. He will have to recuse himself, so to speak. So what are dividend and income investors to do?

Investor takeaway

Don’t let the ominous headlines regarding the DOJ blocking the deal worry you. The deal will get done, although there may be a few bumps along the way. Everyone’s situation and risk tolerance is different, so I can’t make a blanket statement on how you should position.

Nonetheless, a not-so-famous quote by one of my investing role models, Peter Lynch, seems quite apropos at this juncture for current dividend and income investors in AT&T. Lynch stated:

“The key to making money in stocks is not to get scared out of them.”

That is how I feel about AT&T right now. The report of a potential lawsuit from the DOJ seems ominous, yet is actually good news, in my opinion. This means the end of the negotiating process has begun. I expect AT&T and Time Warner to sign on the dotted line regarding the DOJ’s demands in short order and get on with business. Case closed.

One thing I’ve learned over time is to do the exact opposite of how I feel. Over time, I’ve learned that often the exact time I threw in the towel marked the bottom in the stock. Being able to pull the trigger and pick up shares at the point of maximum pessimism in a stock is one of the hardest things to do in investing, I surmise. This is why I always advocate layering into a position over time to reduce risk. And always have dry powder ready if an opportunity arises. I believe that time is now for savvy investors.

Please use this information as a starting point for your own due diligence and consult an investment adviser prior to making any investment decisions. Those are my thoughts on the matter. I look forward to reading yours.

Your participation is required!

The true value of my articles is derived from the prescient observations of Seeking Alpha members in the comments section below. Do you believe AT&T represents a value trade or a trap at current levels? What are your thoughts on the stock price going forward? Thank you in advance for your participation.

Last but not least! Please read!

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Now, I want to start a subscription service here on Seeking Alpha, where we can all collectively express and exchange great investing ideas.

As I state in the conclusion of my articles, you, the Seeking Alpha members, provide the true value to these articles.

I know I can’t do this without you!

I am looking for Seeking Alpha members that would like to join as founding members of the service when the service kicks off in the near future. I am also looking for a select group of “Deacons” of the service. Deacons and Founding Members will have their subscription price locked in for the entirely of their membership regardless of any future price increase.

There will be a limited number of spots, so please let me know if you are interested ASAP. I want to thank all those who have already expressed interest! We are getting a tremendous response! I will be getting back with everyone who has messaged me so far ASAP with the details! If you would like to know more about becoming a Deacon or Founding Member, simply leave a comment below, or you can go to my Author page and send me a private message. Here is the link to my author page. The SEND MESSAGE link is in the upper right hand side.

I want to thank the many members who have already contacted me! The more the merrier, my father always said! I appreciate your time and consideration in the matter.

This marks my 7th year writing for Seeking Alpha. I would like to thank all 17,000 of my followers and all readers of my work for your tremendous support through the years. I would not have this opportunity without you. Take care – Dave.

Disclosure: I am/we are long T, VZ.

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.

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Amazon plans new corporate office in Vancouver, to double headcount

VANCOUVER (Reuters) – Amazon.com Inc (AMZN.O) said on Friday that it will a open second corporate office in Vancouver, doubling its staff in the western Canadian city by early 2020 as it looks to tap into a burgeoning local tech workforce.

FILE PHOTO: Morning fog blankets the Lions Gate Bridge and parts of the downtown just before dawn in Vancouver, British Columbia January 26, 2007. REUTERS/Andy Clark/File Photo

The Seattle-based company said the Vancouver expansion has been in the works for some time and is not related to the hotly contested race by cities across North America to land the e-commerce company’s $5 billion HQ2.

“These will be largely software engineering, tech and non-tech jobs, and they’ll be contributing to products that are used globally,” Jesse Dougherty, general manager for the Vancouver office, told reporters.

The Vancouver expansion comes as companies in the United States have struggled to secure visas in a timely fashion to import foreign workers to fill highly skilled and technical jobs.

President Donald Trump’s administration has made it tougher for skilled foreigners to work in the United States, challenging visa applications more regularly than at nearly any point under former U.S. President Barack Obama.

FILE PHOTO: A jogger runs along the seawall in Stanley Park with the city skyline in the background in Vancouver, British Columbia, Canada June 24, 2003. REUTERS/Andy Clark/File Photo

Tech companies have come to rely on such visas to fill many highly specialized jobs.

FILE PHOTO: A boat owner tries to dig out his keel on Kitsilano Beach after a heavy wind storm blew into the area and stranded his boat in Vancouver, British Columbia, Canada April 8, 2010. REUTERS/Andy Clark/File Photo

Amazon officials did not answer questions on whether the new office was in response to difficulties bringing foreign talent to its U.S. offices.

“Amazon likes to hire the smartest people we can find, and so Vancouver certainly is a place where we like to get that growth,” said Dougherty.

Canada launched a fast-track visa program for highly skilled workers in June, as it seeks to take advantage of a tougher immigration environment in the United States.

The expansion will see Amazon double its workforce in Vancouver to 2,000 by early 2020. The company currently employees about 4,400 people full time in Canada. Amazon employs more than 380,000 globally, with around 150,000 working outside of the United States.

Reporting by Julie Gordon; Editing by Phil Berlowitz

Our Standards:The Thomson Reuters Trust Principles.
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Some 20 million Americans may have seen Russian-backed content on Instagram: Facebook

WASHINGTON (Reuters) – Facebook Inc disclosed on Wednesday that about 20 million Americans may have seen Russian-backed content on Instagram as lawmakers questioned tech companies for a second day about Russia’s use of social media to influence the 2016 U.S. election.

FILE PHOTO: The Instagram application is seen on a phone screen August 3, 2017. REUTERS/Thomas White/File Photo

The Senate Intelligence Committee questioned lawyers for Facebook, Twitter Inc and Alphabet Inc’s Google as part of a broader investigation into possible Russian interference in last year’s election.

Facebook again received the bulk of scrutiny from lawmakers who expressed frustration with the world’s largest social network because of its unique role in targeted marketing on the internet.

Facebook General Counsel Colin Stretch told the committee that 16 million Americans may have been exposed to Russian information on its picture-sharing service Instagram beginning in October 2016.

An additional four million may have seen such material on Instagram prior to October, though that data was less complete, Stretch said.

The Instagram figures were in addition to the 126 million Americans who may have seen Russian-backed political content on Facebook over a two-year period, a number the company disclosed earlier this week.

Democrats and Republicans both said the tech companies need to do more to police against foreign government abuse on their platforms.

Some Republicans, however, sought to distance the scrutiny of the companies from questions about the legitimacy of U.S. President Donald Trump’s election victory.

Richard Burr, the Republican chairman of the panel, said it was impossible to measure the impact or know the motivation of the Russian operation to spread political material on social media.

Any conclusions that Trump benefited from Russia, perhaps in a decisive way, to secure a victory ignored the complexity of the issue, Burr said.

“I’m here to tell you this story does not simplify that easily,” he said.

Senator Mark Warner, the top Democrat on the panel, said he believed that Twitter was “vastly underestimating” the amount of fake and automated accounts on its platform. He cited independent research that has estimated around 15 percent of Twitter accounts or fake or automated.

Sean Edgett, Twitter’s acting general counsel, said less than 5 percent of its accounts were automated.

Some senators criticized the companies for sending lawyers, not chief executives, to testify.

“If we go through this exercise again, we would appreciate seeing the top people who are making the decision,” said Senator Angus King, an independent.

The companies were also scheduled to testify before the U.S. House Intelligence Committee later on Wednesday.

Reporting by Dustin Volz in Washington, additional reporting by David Ingram

Our Standards:The Thomson Reuters Trust Principles.
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You're 5 Times More Likely to Get Job Interview During this 4 Hour Window

Just as there are best times to send emails, there are best times to focus your job hunt. You should be networking year round, but keep in mind that companies are most likely to hire new employees during September, October, January, and February, according to Monster.com

You can up your odds of landing your dream gig by being proactive early in the day. Research shows that people who apply for jobs between 6am and 10am are five times more likely to get called in for an interview than those who apply after 4pm. 

If you haven’t looked for a new job in while (let’s say, prior to 2016), your résumé (and Linkedin profile, for that matter) might need not just an update, but a substantial overhaul. It is, after all, the one page–yes, still just one page–that plays the biggest role in getting you in the door.

Here’s how to avoid the dreaded, “thanks for your interest, but…” email:

Do…be brief.

There is a range of views on this topic, but I’m a firm believer in the single-page résumé. At our content marketing company, Masthead Media, we receive hundreds of resumes each year, and we tend to de-prioritize those that spill into multiple pages.

Sell yourself briefly, or beware: not every recruiter is going to flip the page to check out your accomplishments on page two.

And don’t…include your college internships (when you graduated a decade ago).

Your past experience got you to where you are now, but it looks pretty outdated to include your role as an editorial assistant when you are now applying for a managing editor spot Use your best judgment…unless your best judgment has you listing your teenage babysitting duties.

Do…include keywords.

The pile of résumés that HR is sifting through–very often with the support of scanning technology that can recognize key phrases–is real. View the recruiter as Google, and your résumé as a blog post. It should be rich with keywords relating to the job position, and be written with answering the following question in mind: “Why should I hire this person?”

But don’t…litter it with buzzwords

That’s great that you’re a “best in breed” “team player” who “disrupts the status quo,” but seriously…show, don’t tell. Replace any buzzword or cliche you want to use with a concrete statement of achievement. Trust me: recruiters are over hearing about synergy.

Do…include KPIs

Were you responsible for sales growth? Hit an impressive number of eyeballs in a social media campaign? Quantify it! You want to stand out from the fakers, and real, provable numbers to back your achievements add an air of legitimacy.

But don’t…bullet out your day-to-day duties

You lost me at “ordered office supplies.”

Do…keep it updated.

Even when you’re not looking for a job, your résumé should be updated yearly, at the very least. To start, it’s easier to remember your professional accomplishments if you note them as they happen, and an updated résumé can be a great “cheat sheet” to reference during performance reviews or bonus evaluations.

But don’t…leave it on the office printer.

As obvious as this sounds, don’t print it at work. Splurge the 35 cents at Kinkos, because it’s easier to find a job when you have a job.

Do…send it to your peers for feedback.

Your accomplishments and work history is clear to you because you lived it. Make sure that your résumé description of it is clear by running it past peers who are familiar with your line of work, but not intimately knowledgeable of your day-to-day. Ask them what stands out, and adjust as needed.

But don’t…include a headshot.

Unless specifically requested–or unless you are applying for an on-camera position–including your headshot is just weird.


Or better yet, have a friend act as a second pair of eyes. No matter how impressive your accomplishments, it’s hard to look past the bullet on how you pay attention to “detial.”

But don’t…send as a Word doc.

Those hours you spent formatting, designing, and making sure your entire professional history fit on one neat page? Yeah, all that goes out the window if the recruiter doesn’t have your fonts of choice installed, is operating in a different version of Word, or (worse) is reading in a different word processing program altogether. PDF it…and then proof it one more time.

Do…show your growth.

It’s tempting to go the easy route and list just your most senior position at a company. However, a quick bullet on your trajectory from manager to senior director demonstrates how your company valued you, and how you were able to grow.

But don’t…list your salary requirements.

Talk about presumptuous! It’s way too early to be talking about salary and benefits in this pre-interview stage.

Do…tailor your master résumé for each job.

It’s ok if your work experience crosses fields: Many companies value a well-rounded candidate. However, you want to make your skillset that pertains to the job you’re applying for pop. Rearrange as needed to put your relevant experience toward the top, and add in bullets showing how less relevant work experience may help in this position.

But don’t…state the obvious.

You’re proficient in Microsoft Word? Congrats: so is the entire workforce. Avoid listing programs or skills like this that should be a no-brainer on your résumé.

Do…show your skills.

This is especially important in design jobs. If you are applying for a designer position, probably best to avoid the standard résumé templates found online. This is a natural opportunity to show your stuff–surely you can turn your work experience into an infographic.

But don’t…get too cutesy.

This is a résumé, not a wedding invitation.

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Here's How to Do an Effective Email Campaign for Cyber Monday in 4 Steps

Cyber Monday 2016 marked the biggest day in e-commerce history for the U.S. According to Adobe Digital Insights, consumers spent $3.45 billion in online sales, although that number is probably a little higher in reality.

But it seems many online marketers don’t promote their Cyber Monday sales nearly as well as they could. According to MailCharts, a email-marketing company that tracks email programs for 30,000 different companies, many retailers treat Cyber Monday as simply an extension of Black Friday. In other words, they do little in the way of extra promotions, and often don’t email customers about the holiday itself until it happens.

That might save time for the person crafting the emails, but doing it this way means missing valuable chances to stand out before the big shopping day.

If Cyber Monday is as popular this year as it was last, marketers and retailers face a huge task in capturing customers attention. You’ll get started writing those email campaigns now, and start sending them on the early side.

When I spoke with MailCharts’ Director of Marketing, Carl Sednaoui, he had several Cyber Monday strategies that companies should incorporate into their email campaigns. With that in mind, here are a few ways to amp consumers up and make your Cyber Monday sale stand out from competitors.  

1. Start sending emails before Cyber Monday.

MailCharts, who included Cyber Monday as part of its holiday shopping survey last year, noted that 70 percent of emails were sent on or after the big shopping day in 2015. And only about 13 percent were sent ahead of time.

But if you stop and think about it, that approach makes little sense in 2017. Between apps, emails, Twitter announcements, and Facebook messages, consumers are beyond inundated with promotions. You’ll lessen your chances of impressing Cyber Monday shoppers with your deals if you email them when everyone else does.

Instead, use the weeks beforehand to build a sense of anticipation. Send the first message a week or so before the actual shopping day. Mail volume will be lower, which means a well-crafted subject line, such as “Get Ready: 60% Off Acme’s Entire Online Store Nov. 30” can get your promotion into the consumer’s mind, if not their calendar, ahead of time.

Doing it this way also helps avoid customer fatigue, which runs rampant on big shopping holidays like Black Friday and Cyber Monday.

2. Keep your holiday campaign consistent with your brand.

Cyber Monday may excite people, but if you run a luxury clothing company that’s all about understated elegance, you won’t win many shoppers by sending an email with flashy graphics, emoticons, and words like “zany.” Likewise, a muted color palette and reserved language won’t work for a company that sells sneakers to teenagers.  

Presumably, your brand’s identity already works for you. Even if it needs a little help, Cyber Monday is no time to try a refresh. Instead, consider the look and language used in your existing emails and web copy, and build your Cyber Monday campaign around that. Brand recognition is hard enough on the busiest shopping day of the year; don’t make it harder by changing your style last minute.

3. Create urgency in your subject lines.

Ever read a subject line that says something like, “Last Chance to Get Your Free Gift” and immediately stopped work to investigate? Subject lines that get the most opens tend to be very specific and attention-grabbing. So if your subject lines just read “Cyber Monday Sale,” your potential customers won’t likely feel a need to open the email and start shopping right away.

On the other hand, subject lines like, “Get Ready: 50% Cyber Monday Sale” or “40% Off Site-Wide Sale For Cyber Monday” include all the info a customer really needs right there in the subject line. All the reader has left to do is open the email and click “Shop Now.”

A word to the wise: avoid all caps in your subject lines. It’s tempting to think this will grab more attention. In reality, it’s one of the top email spam triggers out there.

4. Spark emotions with your calls to action.

Urgency is just one way to get customers to click the “Shop Now” button. There’s a wide range of emotions marketers can leverage to appeal to their readers. Shopping, after all, is an emotional experience, even if we don’t always realize it. “Last Chance” or “Don’t Miss Out” can create fear of loss or scarcity, which are powerful motivators. Or, if your consumers respond to more positive calls to action, make them feel singled out and special: “Be the first in line for our Cyber Monday event.”

You will know better than anyone what types of emotions will speak to your customers. Remember them when it comes time to create your Cyber Monday campaigns.

At this point, Cyber Monday is a holiday in its own right, so it’s time to make your promotional plans reflect that. Underscore the word “plans.” The more you can prepare in advance, and the better you can anticipate your potential customers wants and needs, the more successful your Cyber Monday will be.

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