The Airline Says One Thing. The Flight Crews Pictured Sleeping On the Floor Say Another. This Is What They All Told Me

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

An airline’s crew were lying on the floor, apparently trying to sleep in a brightly-lit room.

It looked a little too perfectly damning, to be honest. 

These were, though, 24 members of four Ryanair crews stranded by weather in Málaga, Spain and not provided with a hotel by the airline.

So it took to Twitter and Facebook and posted video of the crew staging the image.

I asked Ryanair whether this wasn’t a slightly unseemly move, one that may even have privacy implications.

An airline spokeswoman told me: 

The publication of this video reveals the facts and exposes the SNPVAC union fake news/false claims.This video proves that the original picture was staged and no crew ‘slept on the floor.’ All Ryanair offices and crew rooms are equipped for security reasons with CCTV cameras and notifications of same as required by GDPR [General Data Protection Regulation]. 

Why, though, didn’t the airline offer the crew a hotel for the night? Ryanair’s spokeswoman insisted: 

Due to storms in Porto (13 Oct) a number of flights diverted to Malaga and as this was a Spanish national holiday, hotels were fully booked.  The crew spent a short period of time in the crew room before being moved to a VIP lounge, and returned to Porto the next day (none of the crew operated flights).

Oddly, local resident Alex Macheras noted that showed more than 1,800 hotel rooms available in Malaga that night.

Ryanair’s Chief Operating Officer Peter Bellew insisted that the airline had called 42 hotels.

There was nothing for it but to dutifully ask Bruno Fialho, vice-president of the SNPVAC union, to offer me his two minutes on Ryanair’s claims.

Please Fasten Your Seat Belts. 

Fialho’s version was a little different.

He told me that the 24 crew members were placed in the Ryanair crew room “so that they were kept isolated from the hundreds of passengers that were in the terminal.”

It was 1.15 a.m. Then, Fialho told me: 

For hours, the Crew attempted to contact Ryanair OPS and LESMA (local RYR Ground handling agent) to obtain information about the hotel accommodation and both replied that there weren’t any hotels available. The Crew also contacted directly some hotels in the Málaga area and there were rooms available.

This is already not looking good. Fialho says that the crew were sent to an airport lounge at around 3.45 a.m. There were chairs, sofas and toilets available, but no food or drinks.

Next, Fialho says, the crew were told they’d be flown to Portugal on a 10 a.m. flight, but still no food or drinks were offered. In addition, Fialho says, the crew was guarded by security personnel, preventing them from leaving.

Then, mordant comedy. Fialho told me: 

After the security guard made several phone calls, the Crew was allowed into the airport terminal to have some breakfast. Finally, at 9 a.m. the LESMA duty manager informs that he managed to get a hotel for everyone. However, the Crew was already informed of the flight at 10:00 a.m. (just 1 hour later) which the duty manager wasn’t aware.

No, it wasn’t over. Fialho again:

At 09.55 a.m. the Crew is sent on a bus to the aircraft with the information that 2 pilots were already there to take the aircraft ferry to Porto. When they got there, the aircraft was closed and the crew were left on the ramp. The Pilots decide to open the aircraft to wait inside as the weather conditions were adverse.

So the took off shortly afterwards, right? Well, no, says Fialho.

At 10.40 a.m. the Crew is informed of a 2 hour slot restriction and that they have to wait for another 10 pilots from Málaga Airport and other bases to take the same flight to Porto in order to operate the afternoon flights. The operating captain didn’t have permission to leave Málaga before those 10 pilots arrived.

Please tell me you’re still with me, as there’s more. A lot more. Next, Fialho says:

At 11.20 a.m., the Crew asks the operating Captain to open the aircraft bars and get something to eat, a request that was denied by Operations. The Crew decided to ignore the instruction and opened the bar anyway, as they were feeling very hungry.

Fialho says that the flight finally landed in Porto at 1.42 p.m. Worse, he says, the Crew Controller was convinced that the crews had been given hotels and were properly rested, so they were being scheduled for new flights.

Yes, I hear you cry, but what about the staged photo? According to Fialho: 

The photo was a gesture of protest, that immediately became viral. Laying on the floor was the only option to rest — their ‘suitable accommodation.’ And precisely due to the unusual, deplorable and despicable treatment given to the Crew, Ryanair became the object of a social media frenzy.

Fialho added another kink to the story of the photo: 

Ryanair rushes to call it ‘staged,’ but not before the Company’s Chief Operating Officer apologized to the crew via Twitter.

Fialho believes this is merely another example of Ryanair’s cold-blooded attitude to employee relations. But what about the privacy issue with the video? He told me: 

Regarding the evident breach of the Global Data Protection Regulations we will discuss this in the appropriate institutions. Ryanair did us all a favor by providing evidence that in fact there were no minimum conditions for their employees to spend the night with dignity.

The People’s Verdict.

If you look on Twitter and Facebook, sympathy largely rests with the cabin crews. 

Above all, however, a single impression remains — that relations between Ryanair and its employees are parlous at best. 

How you treat your employees says so much about how your company is run. And once employer/employee unpleasantness reaches the public sphere, please imagine what your customers will think.

Then again, I fear that many will merely mutter: “Yup, that’s Ryanair for you.”

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Facebook shareholders back proposal to remove Zuckerberg as chairman

(Reuters) – Several public funds that hold shares in Facebook Inc on Wednesday backed a proposal to remove Chief Executive Officer Mark Zuckerberg as chairman, saying the social media giant mishandled several high-profile scandals.

Facebook’s CEO Mark Zuckerberg listens to French President Emmanuel Macron after a family picture with guests of the “Tech for Good Summit” at the Elysee Palace in Paris, France, May 23, 2018. REUTERS/Charles Platiau/Pool

State treasurers from Illinois, Rhode Island and Pennsylvania, and New York City Comptroller Scott Stringer, co-filed the proposal. They joined hedge fund Trillium Asset Management, which bought it to the table in June.

The proposal, set to be voted on at the company’s annual shareholder meeting in May 2019, is asking Facebook’s board to make the role of board chair an independent position.

Facebook did not immediately respond to a request for comment.

Facebook’s CEO Mark Zuckerberg arrives for a meeting with French President at the Elysee Palace in Paris, France, May 23, 2018. REUTERS/Christian Hartmann

“Facebook plays an outsized role in our society and our economy. They have a social and financial responsibility to be transparent – that’s why we’re demanding independence and accountability in the company’s boardroom,” Stringer said.

The proposal said lack of independent board chair and oversight has contributed to Facebook “mishandling” a number of severe controversies, including Russian meddling in U.S. elections and the Cambridge Analytica data leak.

Zuckerberg has about 60 percent voting power, according to a filing in April.

The New York City Pension Funds owned about 4.5 million Facebook shares as of July 31.

The Pennsylvania Treasury holds 38,737 shares of the company, according to a spokeswoman. Trillium holds 53,000 shares.

Shares held by the Treasurers of Illinois and Rhode Island were not immediately available.

Reporting by Arjun Panchadar and Munsif Vengattil in Bengaluru; Editing by Bernard Orr

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Exclusive: Amazon zooms in on central Mexico for large new warehouse

MEXICO CITY (Reuters) – Inc is scouting for land in central Mexico for a fourth distribution center in the country, sources said, aiming at a bigger slice of the burgeoning e-commerce market in Latin America’s second-largest economy.

FILE PHOTO: A view of the Amazon fulfillment logo in Mexico City, Mexico, September 12, 2017. REUTERS/Edgard Garrido/File Photo

The retail titan’s target is Queretaro state in the industrial center of Mexico, where it is looking to hire a developer to build a large hub, two real estate professionals familiar with Amazon’s property hunt said. They asked not to be named because Amazon has not announced its plans.

The expansion plan highlights Amazon’s intent to plant roots beyond Mexico’s bustling capital, banking on the nation’s potential to grow into an e-commerce engine of Latin America.

Online shopping in Mexico comprised just 3.0 percent of total sales last year, according to market research firm Euromonitor International, but it is projected to more than double by 2022, reaching $14 billion.

“Mexico’s digital economy has great potential. We expect it to keep growing in the future,” said Brian Huseman, Amazon’s vice president for public policy, at a recent event in Mexico City promoting efforts to get more Mexican companies on its platform.

“Amazon is here for the long run,” he said.

The company has considered several properties in Queretaro, and was looking for 50 acres where it could commission a more than one million-square-foot warehouse, about the size of 17 football fields, plus office space, one of the sources said.

Amazon declined to comment.

FILE PHOTO: The logo of the web service Amazon is pictured in this June 8, 2017 illustration photo. To match Exclusive MEXICO-AMAZON.COM/ REUTERS/Carlos Jasso/Illustration/File Photo

Queretaro, 114 miles north of Mexico City, is within a day’s reach of Monterrey and Guadalajara, two of Mexico’s most populous regions. It also sits in a cluster of middle-class cities in the Bajio, a region dense with automotive and aerospace plants.

Most of the state’s industrial parks sit along the so-called “NAFTA highway,” a key artery for companies in Mexico receiving goods from the United States and Canada under the North American Free Trade Agreement. An updated pact was agreed last month and is expected to preserve cross-border commerce once it becomes law.

The parks are also within several miles of the Queretaro Intercontinental Airport that handles cargo.

Amazon’s expansion to Queretaro would be part of the company’s bid to reel in shoppers with fast deliveries while keeping a lid on shipping expenses.

“It’s all about speed to market and keeping costs low,” said Marc Wulfraat, president of logistics consultancy MWPVL International Inc.

Amazon, which began selling physical goods in Mexico in 2015, already operates three warehouses just outside Mexico City with about 1.5 million square feet. That space is equivalent to just 1.0 percent of its vast U.S. logistics footprint, according to MWPVL.

Still, it has scaled up faster in Mexico than in Brazil, which MWPVL says has 665,400 square feet.

For Pedro Villa, whose Mexico-based company Konekte sells home storage equipment, speedy deliveries boost sales by reining in first-time shoppers who are concerned about online fraud and worry packages may not arrive.

“It’s about confidence,” Villa said. “If you pay and it takes a week or 15 days, you’re going to want your money back.”

Reporting by Daina Beth Solomon; editing by Clive McKeef

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‘We Will Not Do Hybrids:’ Rolls-Royce Has a Plan to Go Straight to Electric

Hoping to buy a Rolls-Royce hybrid at some point? It’s not going to happen. According to the BMW-owned company’s CEO, Torsten Müller-Otvös, Rolls-Royce will move straight to electric, and will do so within the next 10 years.

“There is an electric future for Rolls-Royce,” Müller-Otvös told Bloomberg. “We have not made our plan about what comes first, and what comes when, but we know that we will go full electric. We will not do hybrids or whatever. Our proposition is full electric. It will come in the next decade, step by step by step.”

Parent company BMW (bmwyy) has more immediate plans for electrification, although it is relatively cautious by current industry standards due to battery costs.

Rival luxury car maker Bentley said earlier this year that it intends to launch an electric vehicle “not so far in the future.” That car will use the architecture developed by Porsche—like Bentley a Volkswagen (vlkay) subsidiary—for its Taycan sports car, which will go on sale in around a year’s time.

Müller-Otvös hinted at Rolls-Royce’s retort during a wide-ranging interview with Bloomberg, associated with the company’s North American press launch for its Cullinan SUV (“You can drive up in style in front of the opera building.”) The Cullinan provides another example of Rolls-Royce taking its time—Bentley and Lamborghini have already released their entries in the class.

Rolls-Royce’s SUV is not exactly fuel efficient, getting less than 20 miles to the gallon. Müller-Otvös was unapologetic about the vehicle’s girth, saying “Rolls-Royce needs presence.” He also said that, although the company intends to release an electric car, “we will stick with our beloved 12-cylinder as long as we can.”

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Facebook Has a New Plan For Fighting Voter Suppression Tactics—And For Once It Involves Deleting Lies

Facebook‘s ongoing crusade against election-related abuse of its platform will involve the removal of some (but not all) disinformation that’s designed to suppress voting.

The company told Reuters that it would ban false information about voting requirements. It will also flag for moderation reports that may aim to keep people away from polling stations by alleging violence or long queues—if the reports are shown to be false, they will be suppressed in people’s news feeds, but they won’t be deleted.

Facebook (fb) generally does not remove falsehoods, even if they are demonstrated, so nixing false information about voting requirements is a notable step. It banned lies about voting locations a couple years back, but this latest move involves exaggerations about voter identification requirements.

In the wake of the mass disinformation campaigns that accompanied the 2016 election, Facebook has come under a great deal of pressure over its role in combatting the problem. It has partnered with think tanks in an attempt to better spot propaganda; it has removed “inauthentic” profiles that were aiming to spread misinformation; and it has sponsored research on the overall problem.

But, while the company is willing to suppress certain kinds of “fake news,” it won’t delete the vast majority of it.

“We don’t believe we should remove things from Facebook that are shared by authentic people if they don’t violate those community standards, even if they are false,” News Feed product manager Tessa Lyons told Reuters.

Facebook’s cybersecurity policy chief, Nathaniel Gleicher, also told the news service that the company is considering banning posts that linked to hacked material, as Twitter (twtr) recently did. As shown with the hacking of the Democratic National Committee in 2016 by Russian operatives, this technique can form part of a coordinated effort to sway elections. However, the dissemination of some hacked materials is in the public interest, making this a tricky tightrope for social media firms to negotiate.

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Google’s AI Tool Can Identify One Type of Breast Cancer More Accurately Than Human Doctors

Determining whether cancer has spread, or metastasized, from the primary site to nearby lymph nodes is a difficult, time-intensive task for pathologists. Google AI has developed a promising algorithm to evaluate lymph node biopsies in breast cancer patients, and it’s more accurate than humans in certain circumstances.

In new journal articles, Google AI says its deep-learning program called the LYmph Node Assistant, or LYNA, was able to distinguish between slides with or without metastatic cancer 99% of the time, and locate the suspicious sites, even when looking for extremely small metastases human pathologists might miss. LYNA also cut the slide review time from two minutes to one minute.

LYNA wasn’t perfect — it occasionally misidentified giant cells, germinal cancers, and bone marrow-derived white blood cells known as histiocytes — but managed to perform better than a pathologist. Human pathologists miss small metastases on individual slides as much as 62% of the time when under time constraints.

Google (googl) researchers said the LYNA program would require more testing but was a promising step in creating AI technology to assist doctors and clinicians.

Google’s play in health care AI is big. In June, its Medical Brain team said it had created an AI system that could forecast mortality rates with 90% accuracy. Google’s Verily also has made inroads with determining a person’s risk of heart disease with retinal scans. A recent study found a computer was a more likely to identify dangerous skin lesions than dermatologists, and Japanese researchers found AI was promising in detecting early-stage colorectal cancer.

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

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

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

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

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

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

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

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

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

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

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

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

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

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How Tech Swagger Triggered the Era of Distrust in Government

Last month, I heard Jill Lepore give a talk about These Truths, her single-volume history of America from the 15th century through the 2016 presidential election. She got her biggest laugh when she made fun of WIRED for predicting in 2000 that the internet would both lead to the end of political division and be a place where government interference would be senseless.

There are many famous WIRED moments that also fit this description, including Jon Katz’s assertion in 1997 that Netizens had nothing but contempt for government, John Perry Barlow’s 1996 Declaration of the Independence of Cyberspace, or the Joshua Quittner profile of EFF in 1994 depicting Electronic Frontier Foundation co-founder Mitchell Kapor and the fabled Esther Dyson as people who “got it.” Their goal was to have the net be a wiring together of humanity that would restructure civilization. The EFF would “find a way of preserving the ideology of the ’60s,” Kapor told WIRED.

Much of that early libertarian net culture—white, rich, smart, and full of “let’s just geek around it” swagger when it came to government—has become mainstream in Western democracies in 2018. Paradoxically, that ideology came from a time when, in fact, government was doing a lot for people.

Those baby boomers being profiled by WIRED had known only a United States full of generous government support for education, a time of continuous upward mobility, and an America that could carry out enormous and inspiring public infrastructure projects—including requiring that phone companies permit competing internet service providers to use their lines. The voices in WIRED were those of a very secure bunch of people. And they were bored by it all; they saw government as a set of clueless, bland bureaucracies. Who needed that?

As it turns out, we all did. Today, globally interconnected changes in climate and widespread disdain for democratic institutions are the key titanic, messy trends that are likely to begin producing shocking results 25 years from now. At that point, with the globe dealing with punishing heat and alarming levels of water, it won’t be internet technology that will be doing the disrupting. There are signs that the internet will be fading from view as a distinctive “place” prompting political and social changes. Indeed, if we keep to our current course, communications capacity and what humans do online may be controlled by a few highly profitable actors who will be uninterested in the unpredictable. Given this context, there is a substantial risk that 25 years from now the breathlessly libertarian views trumpeted by WIRED’s early voices will have reached their unpleasant apotheosis.

I hope I am wrong.

Let’s start with the weather. Techies are good at positive feedback loops, and these days we’re seeing one operating at global scale. As the dynamics of air patterns change around the world in response to overall warming, melting ice in the Arctic is having an effect on distant lands. Weather is getting stuck in place, making both extreme dryness and extreme downpours routine. It’s a giant, resonating system of ever-increasing cataclysmic change.

We humans are a resilient, cheerful group, so presumably we’ll adapt. But it is probably already too late to carry out the large-scale planning that would have been necessary to move people comfortably and gradually away from the coasts and change the economics of places that are plunging into unending drought. Millions or billions of our fellow less-well-off beings will be forced into climate refugee status.

What’s particularly troubling is that even relatively rich countries may be losing the capacity to plan ahead for all of their citizens. And that’s the second messy force that will affect the next 25 years: increasing cynicism about the role of democratic government in people’s lives, particularly in Western Europe and the US.

Unless something changes, government at all levels will come to be viewed as a thin, under-resourced platform whose purpose is to help already-thriving people make even more money. The familiar drumbeat that will get us there will include fewer people voting, increasing talk about shrinking government, declining trust in most levels of government, and outright, unabashed disdain for “bureaucrats.” And so authoritarianism may increasingly fill the void, with countries like Hungary, Poland, and Brazil added in the years to come to a list that now includes places like Cuba, Russia, and China.

Into this swirl of depressing global trends steps WIRED, the internet, and those ’60s-culture voices. It turns out the pixie dust of digital did not remove the crushing economic and social truth that unrestrained moneymaking leads to chaos and despair. But the larger public caught the WIRED mystique and amplified the message of complete freedom from old-fashioned governmental constraints—not knowing that the message had implicitly assumed the ongoing presence of a functioning public sector. (For starters, absent government involvement and regulation—that dreaded word—the early net-heads would not have been able to use an internet protocol that elegantly allowed computers to speak to each other across heterogeneous networks.)

Take these trends to their extremes decades from now and you could have a hollowed-out public sector, growing affection for essentially private strongmen who might be able to protect your socioeconomic tribe from searing heat and punishing storm surge, and an online world that has, like electricity, faded into the background as a social change agent. Not only will all generations be used to “digital” (at varying levels depending on their wealth and location), but if we keep following the Barlow rhetorical path, life online may not be all that that interesting. Imagine a wholly oligopolistic, vertically integrated online ecosystem focused on entertainment and advertising—access to which is subject to neither competition nor oversight—and try to feel creative.

After the two world wars and the Great Depression, Americans and the citizens of every other developed country absolutely understood that it simply is not true that the incentives of unrestrained private gain are always aligned with or lead to public good. You would have been laughed off the stage in the early ’50s—under a Republican president, by the way—if you’d said anything like that.

Nothing happens quickly, and we may still see a return to a more balanced view of the role of government, particularly as rising waters and changing weather dynamics disastrously change human lives. But for now, and for the foreseeable future, we are increasingly on our own.

More Great WIRED Stories

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Amazon scraps secret AI recruiting tool that showed bias against women

SAN FRANCISCO (Reuters) – Inc’s (AMZN.O) machine-learning specialists uncovered a big problem: their new recruiting engine did not like women.

FILE PHOTO: Brochures are available for potential job applicants at “Amazon Jobs Day,” a job fair at the Fulfillment Center in Fall River, Massachusetts, U.S., August 2, 2017. REUTERS/Brian Snyder/File Photo

The team had been building computer programs since 2014 to review job applicants’ resumes with the aim of mechanizing the search for top talent, five people familiar with the effort told Reuters.

Automation has been key to Amazon’s e-commerce dominance, be it inside warehouses or driving pricing decisions. The company’s experimental hiring tool used artificial intelligence to give job candidates scores ranging from one to five stars – much like shoppers rate products on Amazon, some of the people said.

“Everyone wanted this holy grail,” one of the people said. “They literally wanted it to be an engine where I’m going to give you 100 resumes, it will spit out the top five, and we’ll hire those.”

But by 2015, the company realized its new system was not rating candidates for software developer jobs and other technical posts in a gender-neutral way.

That is because Amazon’s computer models were trained to vet applicants by observing patterns in resumes submitted to the company over a 10-year period. Most came from men, a reflection of male dominance across the tech industry.

(For a graphic on gender breakdowns in tech, see:

In effect, Amazon’s system taught itself that male candidates were preferable. It penalized resumes that included the word “women’s,” as in “women’s chess club captain.” And it downgraded graduates of two all-women’s colleges, according to people familiar with the matter. They did not specify the names of the schools.

Amazon edited the programs to make them neutral to these particular terms. But that was no guarantee that the machines would not devise other ways of sorting candidates that could prove discriminatory, the people said.

The Seattle company ultimately disbanded the team by the start of last year because executives lost hope for the project, according to the people, who spoke on condition of anonymity. Amazon’s recruiters looked at the recommendations generated by the tool when searching for new hires, but never relied solely on those rankings, they said.

Slideshow (3 Images)

Amazon declined to comment on the recruiting engine or its challenges, but the company says it is committed to workplace diversity and equality.

The company’s experiment, which Reuters is first to report, offers a case study in the limitations of machine learning. It also serves as a lesson to the growing list of large companies including Hilton Worldwide Holdings Inc (HLT.N) and Goldman Sachs Group Inc (GS.N) that are looking to automate portions of the hiring process.

Some 55 percent of U.S. human resources managers said artificial intelligence, or AI, would be a regular part of their work within the next five years, according to a 2017 survey by talent software firm CareerBuilder.

Employers have long dreamed of harnessing technology to widen the hiring net and reduce reliance on subjective opinions of human recruiters. But computer scientists such as Nihar Shah, who teaches machine learning at Carnegie Mellon University, say there is still much work to do.

“How to ensure that the algorithm is fair, how to make sure the algorithm is really interpretable and explainable – that’s still quite far off,” he said.


Amazon’s experiment began at a pivotal moment for the world’s largest online retailer. Machine learning was gaining traction in the technology world, thanks to a surge in low-cost computing power. And Amazon’s Human Resources department was about to embark on a hiring spree: Since June 2015, the company’s global headcount has more than tripled to 575,700 workers, regulatory filings show.

So it set up a team in Amazon’s Edinburgh engineering hub that grew to around a dozen people. Their goal was to develop AI that could rapidly crawl the web and spot candidates worth recruiting, the people familiar with the matter said.

The group created 500 computer models focused on specific job functions and locations. They taught each to recognize some 50,000 terms that showed up on past candidates’ resumes. The algorithms learned to assign little significance to skills that were common across IT applicants, such as the ability to write various computer codes, the people said.

Instead, the technology favored candidates who described themselves using verbs more commonly found on male engineers’ resumes, such as “executed” and “captured,” one person said.

Gender bias was not the only issue. Problems with the data that underpinned the models’ judgments meant that unqualified candidates were often recommended for all manner of jobs, the people said. With the technology returning results almost at random, Amazon shut down the project, they said.


Other companies are forging ahead, underscoring the eagerness of employers to harness AI for hiring.

Kevin Parker, chief executive of HireVue, a startup near Salt Lake City, said automation is helping firms look beyond the same recruiting networks upon which they have long relied. His firm analyzes candidates’ speech and facial expressions in video interviews to reduce reliance on resumes.

“You weren’t going back to the same old places; you weren’t going back to just Ivy League schools,” Parker said. His company’s customers include Unilever PLC (ULVR.L) and Hilton.

Goldman Sachs has created its own resume analysis tool that tries to match candidates with the division where they would be the “best fit,” the company said.

Microsoft Corp’s (MSFT.O) LinkedIn, the world’s largest professional network, has gone further. It offers employers algorithmic rankings of candidates based on their fit for job postings on its site.

Still, John Jersin, vice president of LinkedIn Talent Solutions, said the service is not a replacement for traditional recruiters.

“I certainly would not trust any AI system today to make a hiring decision on its own,” he said. “The technology is just not ready yet.”

Some activists say they are concerned about transparency in AI. The American Civil Liberties Union is currently challenging a law that allows criminal prosecution of researchers and journalists who test hiring websites’ algorithms for discrimination.

“We are increasingly focusing on algorithmic fairness as an issue,” said Rachel Goodman, a staff attorney with the Racial Justice Program at the ACLU.

Still, Goodman and other critics of AI acknowledged it could be exceedingly difficult to sue an employer over automated hiring: Job candidates might never know it was being used.

As for Amazon, the company managed to salvage some of what it learned from its failed AI experiment. It now uses a “much-watered down version” of the recruiting engine to help with some rudimentary chores, including culling duplicate candidate profiles from databases, one of the people familiar with the project said.

Another said a new team in Edinburgh has been formed to give automated employment screening another try, this time with a focus on diversity.

Reporting By Jeffrey Dastin in San Francisco; Editing by Jonathan Weber and Marla Dickerson

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Google drops out of bidding for $10 billion Pentagon data deal

SAN FRANCISCO (Reuters) – Alphabet Inc’s Google said on Monday it was no longer vying for a $10 billion cloud computing contract with the U.S. Defense Department, in part because the company’s new ethical guidelines do not align with the project, without elaborating.

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

Google said in a statement “we couldn’t be assured that [the JEDI deal] would align with our AI Principles and second, we determined that there were portions of the contract that were out of scope with our current government certifications.”

The principles bar use of Google’s artificial intelligence (AI) software in weapons as well as services that violate international norms for surveillance and human rights.

Google was provisionally certified in March to handle U.S. government data with “moderate” security, but Inc and Microsoft Corp have higher clearances.

Amazon was widely viewed among Pentagon officials and technology vendors as the front-runner for the contract, known as the Joint Enterprise Defense Infrastructure cloud, or JEDI.

Google had been angling for the deal, hoping that the $10 billion annual contract could provide a giant boost to its nascent cloud business and catch up with Amazon and fellow JEDI competitor Microsoft.

That the Pentagon could trust housing its digital data with Google would have been helpful to its marketing efforts with large companies.

But thousands of Google employees this year protested use of Google’s technology in warfare or in ways that could lead to human rights violations. The company responded by releasing principles for use of its artificial intelligence tools.

In its statement, Google said it would have been able to support “portions” of the JEDI deal had joint bids been allowed.

The news outlet Federal News Network first reported Google’s decision.

Reporting by Paresh Dave; Editing by Phil Berlowitz

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Microsoft to invest in Southeast Asian ride-hailing firm Grab

SINGAPORE (Reuters) – Microsoft Corp is investing in Southeast Asian ride-hailing firm Grab as part of a partnership that the two companies said will allow them to collaborate on technology projects, including big data and artificial intelligence.

FILE PHOTO: A man walks past a Grab office in Singapore March 26, 2018. REUTERS/Edgar Su/File Photo

The companies did not disclose the deal value.

Grab had earlier said it planned to raise roughly $3 billion by year-end, of which it has already raised $2 billion.

Last week, Reuters reported that existing backer SoftBank Group Corp was closing in on a deal to invest about $500 million in Grab as part of the funding round.

Sources told Reuters that Grab is likely to tap strategic and financial firms for the remainder of the funding.

Before Tuesday’s deal, it raised $2 billion in 2018, led by Toyota Motor Corp and financial firms, including Microsoft co-founder Paul Allen’s Vulcan Capital.

Singapore-headquartered Grab has taken its ride-hailing business to 235 cities in eight countries in Southeast Asia in the past six years.

It is looking to transform itself into a leading consumer technology group, offering services such as food and parcel deliveries, electronic money transfers, micro-loans and mobile payments, besides ride-hailing.

Grab will work with Microsoft to explore mobile facial recognition, image recognition and computer vision technologies to improve the pick-up experience, the companies said in a statement on Tuesday.

For example, passengers will be able to take a photo of their current location and have it translated into an actual address for the driver.

Other areas of the five year-agreement include Grab adopting Microsoft’s Azure as its preferred cloud platform and using it for data analytics and fraud detection services.

Southeast Asia, home to some 640 million people, is shaping up as a battleground for global technology giants such as Alibaba, Tencent Holdings Ltd,, Alphabet Inc’s Google and SoftBank, particularly in ride-hailing, online payments and e-commerce.

Competition for Grab is heating up with Indonesian rival Go-Jek also expanding in the region.

Reporting by Aradhana Aravindan; Editing by Stephen Coates

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A U.S. Passenger Allegedly Was So Violent and Disruptive Saturday, Dutch F-16 Fighter Jets Scrambled to Intercept His Plane

It’s been a rough time lately for bad passenger behavior. And if other stories recently haven’t prompted rank and file airline passengers to demand that something more effective be done, perhaps this story will spur action.

Early Saturday morning, an American passenger aboard a KLM flight from Abu Dhabi to Amsterdam reportedly “started screaming and hitting wildly around him,” according to a member of the cabin crew, to the point that the Dutch Air Force sent a pair of F-16 fighter jets armed with air-to-air missiles to intercept the plane.

The story first broke in the Dutch newspaper De Telegraaf over the weekend, and it’s been separately reported by AFP as well.  

Cabin crew said the overnight flight wasn’t crowded, and that the American passenger did not appear to be intoxicated, but that he first attracted attention when he began walking around the cabin while most other passenger were asleep.

Flight attendants asked him to sit down, but he became “aggressive” and reacted “very threateningly from one moment to the next,” a flight attendant said.

Punches were apparently thrown, and several other passengers were “lightly wounded” during the fracas, according to Dutch authorities, including two who “were given black eyes.” 

Military police arrested the American passenger once the plane landed at Amsterdam Airport Schiphol.

“A 29-year-old American man became aggressive after being asked by a purser to return to his seat,” Joanna Helmonds, a police spokesperson, said afterward. “A scuffle broke out and the cabin crew, together with other passengers managed to restrain the man.”

The Dutch police didn’t name the passenger, and said he “came across as disoriented,” and was being held in a Dutch psychiatric institution for observation.

Of course, there’s a happy ending to the story in that the plane landed safely in Amsterdam–on time, no less.

Still, it’s easy to imagine how a simple miscommunication or human error could have led to a much more tragic situation. And it comes after we’ve reported story after story about disruptive passengers on domestic flights who allegedly got drunk, became aggressive, and caused their flights to be diverted:

  • A Southwest passenger who pleaded guilty to charges after threatening to “put [a flight attendant] in a body bag” after being denied a fourth drink;
  • An American Airlines passenger who allegedly got drunk, tried to do pull-ups on the overhead compartment of a crowded plane at 30,000 feet, and became “verbally abusive;” and
  • A Delta Air Lines passenger who allegedly head-butted a flight attendant, again for not being willing to give him more alcohol.

So what’s the solution? Obviously, problem drinking is a big part of many of these situations. And the new FAA law that President Trump just signed does contain tougher penalties for interfering with flight crew on U.S. flights.

But flight attendants are in a tough position: they’re first line safety officers, but they’re also there for passenger comfort. Yes, they serve drinks on most flights, but it’s asking a lot for them also to act as bouncers, or cops.

Personally, I’m old enough to remember what flying was like for a year or two after the September 11, 2001 terror attacks–when, at least in my personal experience, passengers were more likely to keep an eye on each other, and when it seemed like peer pressure likely stopped some people from acting aggressively on airplanes.

Regardless, at 40,000 feet, we’re all in this together. And if I were one of the innocent souls aboard an aircraft where a violent fellow passenger caused enough of a disturbance to result in armed fighter jets intercepting me, I don’t think I’d be taking this lightly.

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There's a Bizarre Hoax Circulating on Facebook. Here's Why it's Spreading Like Wildfire

Are you on Facebook? If you are, you’ve most likely received a repetitive, canned note (or 100) from your friends/family that is driving you into a fit of rage. If you haven’t, consider yourself lucky. However, there’s indeed an irritating hoax going around that has grabbed some serious attention. Here’s what the message says: 

Hi….I actually got another friend request from you yesterday…which I ignored so you may want to check your account. Hold your finger on the message until the forward button appears…then hit forward and all the people you want to forward too….I had to do the people individually. Good Luck! 

Spoiler: there’s no ‘clone’ account. This is just a hoax, so delete the message and be worry-free that an account or second-degree account is compromised. 

We’re all familiar with this level of chain-like-mail, but what makes this time so different? The obvious answer could be any of the following: 

  • It’s coming from friends & family — so you can trust it
  • There’s clear instruction on what to do
  • It doesn’t contain a link
  • You’re doing it through Messenger (it’s more novel), vs. a status update

However, it goes deeper than that.

We need to remember that Facebook has its fair share of ‘bad press’ (yes, there is such a thing) the past couple years, stemming from the Cambridge Analytica scandal which affected 87 million accounts. Then, all 2.2 billion Facebook users received a notice in an effort to inform them on how to protect their information. Add to this that on September 28th, hackers exploited a flaw which resulted in compromised data for 50 million accounts. Yikes. 

And what do you get when you mix that all together?

A user constantly on high-alert due to the endless loop of security & privacy concerns

The decision to forward is almost an irrational one–and an innate reaction to Facebook’s shaky history and hyper-recent exploitation. All of that creates an uncomfortable level of ‘unknown’ when it comes to privacy and, at the end of the day, your friends & family are really just trying to help inform of a potential concern. 

So, the next time you receive one of these messages, maybe take a deep breath and if you feel like a good Samaritan, let them know that they don’t need to forward the message out to anyone else–the clones aren’t here (yet).

Published on: Oct 7, 2018

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The Cars of the Paris Auto Show Reveal a Quirky, Urban, Electric Future

The Renault Ez-Ultimo brings the high-end glitz to the show this year. Just because cities of the future may prioritize ride sharing over private cars doesn’t mean you should have to slum it on the way to opening night at the Opéra national de Paris.

This rounded bronze box is about as far from a production car as a concept can be (could those wheels even turn? where’s the ground clearance for cobbled streets?) but Renault says it shows a vision of an autonomous future, where passengers demand more from vehicles. In particular, the interior “reflects French elegance” with wood, leather, and marble.

Citroën went the opposite direction, unveiling a very real, very modest EV. The DS3 Crossback E-Tense is a fashionable crossover SUV, and an update on Citroen’s tres popular DS3 supermini car. The electric version comes with a 50-kWh battery—about half that of a high-end Tesla—a range of 186 miles on the generous European test cycle, and a 0-60 time of 8.7 seconds. None of those specs are going to blow buyers away, but at the right (to be revealed) price, the quirky car, with sharp angles and odd window cutouts, could rival the Nissan Leaf or Renault Zoe, as a city runabout.

Europe has taken styling cues from the US for the Peugeot E-Legend concept, albeit with a little added flair. There are plenty of muscle car hints in the styling, with a side profile reminiscent of the modern Dodge Challenger, and a Mustang-like front squint. Of course it’s a concept, so it’s electric and autonomous, and supposed to show that those things don’t have to be boring or bland.

The retro theme continues inside with velvet upholstery and fake wood screensavers for the displays when they aren’t in use. It’ll apparently have a 100-kWh battery pack and all-wheel drive, but it’s so concept-y that wise money should be on all that potentially changing, if and when the E-Legend makes it to production.

It wouldn’t be a European auto show without a city car, and Smart is the brand synonymous with cars so small they can be parked end-on to a curb. The Smart Forease moves that theme into an electric age. The rather optimistic concept banks on the future always being sunny, given that it doesn’t have a roof. Not even an optional one. (Have these people been to Europe?)

Smart has already stopped the sales of all internal combustion engined cars in the US, and if this car makes it across the Atlantic (and to reality) it could find a place in some Californian garages. The Golden State has good EV electric rebates, and as close to a guarantee of good weather as you’re going to find.

Infiniti is keeping it real with its Project Black S hybrid, based on a Q60 coupe and its V6 engine. Infiniti engineers turned to electrification, and lessons from partner Renault’s Formula 1 team (there’s the French connection) to give the machine an e-boost.

It’s a hybrid, but one that delivers performance rather than economy. The three motors add 213 horsepower to bring the total to 563, and drop the 0-60 mph time to under four seconds.

Toyota didn’t use the Paris show to unveil radical new concepts, but did introduce a term that will be new to most buyers: self-charging hybrids. This is no magical perpetual motion-type technology: Self-charging hybrids are just cars that can run on battery power, but can’t be plugged in. The type Toyota has been selling for years with the Prius, when they used to be just called “hybrids.” As they’ve gone from being radical, to commonplace, to somewhat lame given the influx of more robust electric options, Toyota is looking to rebrand to remind people that the tech is still quite clever, and does save fuel.

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The Apollo Breach Included Billions of Data Points

The sales intelligence firm Apollo sent a notice to its customers last week disclosing a data breach it suffered over the summer. “On discovery, we took immediate steps to remediate our systems and confirmed the issue could not lead to any future unauthorized access,” cofounder and CEO Tim Zheng wrote. “We can appreciate that this situation may cause you concern and frustration.” In fact, the scale and scope of the breach has a lot of people concerned.

Apollo is a data aggregator and analytics service aimed at helping sales teams know who to contact, when, and with what message to make the most deals. “No one ever drowned in revenue,” the company says on its site. Apollo also claims in its marketing materials to have 200 million contacts and information from over 10 million companies in its vast reservoir of data. That’s apparently not just spin. Security researcher Vinny Troia, who routinely scans the internet for unprotected, freely accessible databases, discovered Apollo’s trove containing 212 million contact listings as well as nine billion data points related to companies and organizations. All of which was readily available online, for anyone to access. Troia disclosed the exposure to the company in mid-August.

As Apollo noted in its letter to customers, it draws a lot of its information from public sources around the web, including names, email addresses, and company contact information. But it also scrapes Twitter and LinkedIn. In fact, the information in the profiles Apollo compiles is so detailed that Troia originally mistook it for a trove from LinkedIn. Some of Troia’s methods of investigating the Apollo breach have been called into question, though, particularly that he posted a listing for the exposed LinkedIn data on a dark web marketplace. Troia claims he never planned to actually sell the data, and that he made the post as a ruse to aid other ongoing research.

For its part, LinkedIn issued a firm rebuke. “Our investigation into this claim found that a third-party sales intelligence company that is not associated with LinkedIn was compromised and exposed a large set of data aggregated from a number of social networks, websites, and the company’s own customers,” the company said in a statement.

Combining all of that public data in one easily accessible location creates inherent risk; if it leaks, as the Apollo data has, it enables scammers, fraudsters, and phishers to craft compelling targeted attacks against a huge number of people. But the Apollo breach has an additionally problematic layer. “Some client-imported data was also accessed without authorization,” Zheng wrote in the disclosure to customers last week.

Customers access Apollo’s data and predictive features through a main dashboard. They also have the option to connect other data tools they might use, for example authorizing their Salesforce accounts to port data into Apollo. Troia found that more than seven million pieces of internal “opportunity” data, information about impending sales commonly associated with Salesforce, were exposed in the breach. One Apollo client alone had almost a million records exposed.

“There is always a high risk for fraud, spam, or other even harmful actions when these types of data sets leak,” Troia says. “People already receive phishing and voice-phishing messages every day. Now you are talking about exposing potentially hundreds of millions of people to more avenues for phishing and fraud. Meanwhile, Apollo seems to have about 530 clients who each had different amounts of valuable opportunity data caught up in this leak.”

Apollo cofounder and CTO Ray Li told WIRED that the company is investigating the breach and has reported it to law enforcement. The data does not include financial data, Social Security numbers, or account credentials. Apollo said in its initial letter to customers that, “an unidentified third party accessed our systems without authorization before our remediation efforts,” which could mean that the data is already in the hands of scammers.

Troia also provided the contact data included in the breach to security researcher Troy Hunt, who runs the data breach tracking service HaveIBeenPwned. Hunt has added the Apollo data to the repository, and plans to notify the HaveIBeenPwned network about the incident.

“It’s just a staggering amount of data. There were 125,929,660 unique email addresses in total. This will probably be the most email notifications HaveIBeenPwned has ever sent for one breach,” Hunt says. “Clearly this is all about ‘data enrichment,’ creating comprehensive profiles of individuals that can then be used for commercial purposes. As such, the more data an organization like Apollo can collect, the more valuable their service becomes.”

Apollo’s core product not only collects publicly available information, but creates a web of business and employee connections out of it. In addition to names, contact information, and job titles for employees, the data also includes things like the dates companies were founded, revenue numbers, keywords associated with the work companies do, number of employees, and website ranking by the Amazon-owned analytics company Alexa. The service then uses all of this information to try to draw connections between companies and identify possible sales opportunities.

The Salesforce data pulled into the Apollo breach raises the stakes, since that information was never meant to be public, and many clients rely on Salesforce as an internal tool for business development. During his research, Troia became even more concerned when he noticed that when a user authorizes Salesforce to connect with Apollo, they apparently can’t authorize Apollo to only pull specific types of data. Choosing to connect the two services seems to initiate total access.

This doesn’t mean Apollo grabbed all of a given company’s Salesforce data, but Troia notes that Apollo may have held more private opportunity data than some clients realized. Salesforce declined to comment for this story about the breach or how third-party authorizations work. Apollo’s Li told WIRED that, “Customers have full and customizable control and management of the data they’ve imported to Apollo.”

Apollo is far from the first data aggregator to have a breach, and as all the incidents compound, the threat of having all of that curated information so easily accessible becomes even more pressing.

“What almost worries me more [than the raw data exposure] is the mapping of social identities to email address and other personal data, because there’s now so much more you can pull on a person,” Hunt says. “We’re continually seeing massive breaches of data aggregators who hold information on people who have no idea their personal information has been used in this fashion. I understand that it’s Apollo’s customers who provided access to their customers, but the fact remains that there are north of 100 million people out there who have no idea who Apollo is nor that their information was exposed.”

More Great WIRED Stories

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SK Hynix boosts investment in new South Korean chip factory

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

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

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

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

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

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

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

Reporting by Ju-min Park; Editing by Stephen Coates

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Tech giants allied against proposed Australia law seeking encrypted data

SYDNEY (Reuters) – Four global tech giants – Facebook, Apple, Alphabet and Amazon – will oppose an Australian law that would require them to provide access to private encrypted data linked to suspected illegal activities, an industry lobby group said on Wednesday. Australia in August proposed fines of up to A$10 million ($7.2 million) for institutions and prison terms for individuals who do not comply with a court request to give authorities access to private data.

FILE PHOTO: Silhouettes of laptop users are seen next to a screen projection of Facebook logo in this picture illustration taken March 28, 2018. REUTERS/Dado Ruvic/Illustration/File Photo

The government has said the proposed law is needed amid a heightened risk of terror attacks. Seen as test case as other nations explore similar laws, Facebook Inc, Alphabet Inc, Apple Inc and Amazon will jointly lobby lawmakers to amend the bill ahead of a parliamentary vote expected in a few weeks. “Any kind of attempt by interception agencies, as they are called in the bill, to create tools to weaken encryption is a huge risk to our digital security,” said Lizzie O’Shea, a spokeswoman for the Alliance for a Safe and Secure Internet.

Slideshow (2 Images)

She said the four companies had confirmed their participation in the lobbying effort.

Representatives for the four firms did not immediately respond to requests for comment.

A spokeswoman for Australia’s home affairs minister, who is overseeing the legislation, did not immediately respond to a request for comment.

If the bill becomes law, Australia would be one of the first nations to impose broad access requirements on technology companies, though others are poised to follow. The so-called Five Eyes nations, which share intelligence, said last month they would demand access to encrypted emails, text messages and voice communications through legislation. The Five Eyes intelligence network, comprised of the United States, Canada, Britain, Australia and New Zealand, have each repeatedly warned national security was at risk as authorities are unable to monitor communication of suspects. Technology companies have strongly opposed efforts to create what they see as a back-door to user’s data, a stand-off that was propelled into the public arena by Apple’s refusal to unlock an iPhone used by an attacker in a 2015 shooting in California. Frustrated by the deadlock, many countries are moving ahead with legislation, with New Zealand the latest to tighten oversight over access to online communication. New Zealand said on Tuesday customs officers now have the authority to compel visitors to hand over passwords for their electronic devices. Tourists who refuse could face fines of NZ$5,000 ($3,292.00). ($1 = 1.3933 Australian dollars)($1 = 1.5188 New Zealand dollars)

Reporting by Colin Packham; editing by Darren Schuettler

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Electric cars cast growing shadow on profits

PARIS (Reuters) – Electric cars are poised to arrive en masse in European showrooms after years of hyped concept-car launches and billions in investment by automakers and suppliers.

FILE PHOTO: The EQC, the first fully electric Mercedes car is shown at a presentation in Stockholm, Sweden September 4, 2018. REUTERS/Esha Vaish/File Photo

Now comes the hard part: selling them at a profit.

Battery models making their car-show debut in Paris this week, from PSA Group’s (PEUP.PA) electric DS3 Crossback to the Mercedes (DAIGn.DE) EQC, will erode profitability as they struggle to stay in the black, executives generally acknowledge.

But concerns are mounting that the impact could be worse, as consumers resist paying more for electrified vehicles – forcing carmakers to sell them at a bigger loss to meet emissions goals.

“What everyone needs to realize is that clean mobility is like organic food – it’s more expensive,” said Carlos Tavares, chief executive of Peugeot, Citroen and Opel manufacturer PSA.

A Sept. 25 profit warning by BMW (BMWG.DE), blamed in part on electrification costs and tightening emissions rules, was “a first alarm signal”, Tavares said in a weekend radio interview.

“Either we accept paying more for clean mobility, or we put the European auto industry in jeopardy.”

Underlining the turbulence facing automakers, British Prime Minister Theresa May will confront Conservative rebels demanding a harder Brexit stance at her party’s annual conference, just as the Paris show gets underway on Tuesday.

On its second day, the European Parliament votes on plans to cut carbon dioxide car emissions by as much as 45 percent by 2030 from an average 95 grammes per kilometer in 2021 – a goal many automakers are already in danger of missing, on pain of fines running to hundreds of millions of euros.


After declining for a decade, new-vehicle carbon emissions are rising again as customers flock from cars to SUVs, and from diesel to gasoline engines. Diesels emit more nitrogen oxides and particulates, but less CO2.

Early signs suggest electric-car prices may fall sooner and faster than production costs, as carmakers adjust for stalled emissions progress and weak consumer appetite. That promises more red ink, as discounted battery car sales finally take off.

Volkswagen (VOWG_p.DE) has said the ID hatchback, due to open the brand’s electric onslaught next year, will be priced close to conventionally powered versions of the Golf compact.

“VW is about to launch a load of electric vehicles at the same price as gasolines, and therefore at a loss,” said Laurent Petizon, a managing director at consulting firm AlixPartners.

“Our interpretation is that the 2021 fines have already been factored into their sales strategy,” he said. “Rather than pay penalties they prefer to lose money on vehicles and get the market going.”

Volkswagen declined to discuss pricing in detail. “We want our electric cars to be a real alternative to a reasonably equipped Golf Diesel,” a spokesman said.

Volkswagen and Mercedes parent Daimler, which between them have announced 30 billion euros ($35 billion) in electrification investment, both warned last month that it would not be enough.

They and other carmakers are also mandated to sell more electric cars in China and a group of U.S. states led by California. More than 200 electric and plug-in model launches are already scheduled globally over the next three years.


Electric cars still cost 7,800 euros more to produce on average than conventional ones, AlixPartners calculates. Plug-in hybrids – which combine a smaller rechargeable battery with a combustion engine – overshoot by 5,000 euros.

When that cost gap is reflected in the price, few are sold.

Mass-market electrics such as the Renault (RENA.PA) Zoe and Nissan (7201.T) Leaf have been on sale for most of the current decade, and heavily subsidized in Europe, while Tesla (TSLA.O) has made inroads into the premium business. Yet pure-electric cars claim just 1 percent of the market overall.

Despite their higher cost, BMW plug-in models are already priced broadly on a par with diesels. The luxury carmaker acknowledges that their margins are significantly thinner.

Mercedes also says the EQC electric SUV will be priced close to its GLC cousin to tackle Tesla’s $49,000 Model 3.

“It absolutely is impacting the profitability of the industry,” said Rebecca Lindland, a senior analyst at Kelley Blue Book, which tracks vehicle pricing. “Demand doesn’t justify investment at all – it’s all regulation.”

Which is why, on this subject more than most, European carmakers talk from both sides of their mouths. While executives exude confidence for investors’ and customers’ benefit, their Brussels lobby group ACEA warns of an imminent threat to the region’s 3.4 million automotive manufacturing jobs.

“The conditions for such a systemic change clearly aren’t met, and consumers just aren’t ready for full-electric,” ACEA Secretary General Erik Jonnaert said recently.


Carmakers are demanding increased public investment in recharging networks – which may yet awaken mass demand.

Economies of scale should also bring some relief. But lithium-ion batteries, which claim 40 percent of an electric car’s value, face global cobalt and nickel shortages that will pull the other way, inflating costs as production volumes rise.

Perhaps more critically, generous government sales subsidies are unlikely to survive much growth. In markets where incentives have been dropped, electric car sales have fallen.

Renault is discounting its recently upgraded Zoe in the UK market with a 5,000 pound ($6,500) trade-in bonus, in addition to the government’s 4,500 pound plug-in incentive.

French rival PSA will price its new rechargeable hybrids to match diesel leasing rates, program director Olivier Salvat told reporters on a recent factory visit – adding that the carmaker aimed to avoid losing money on each vehicle sold.

“We don’t launch vehicles with negative operating margins,” Salvat said.

German luxury carmakers including Volkswagen Group, which includes Audi and Porsche, could put up with losses on electrified vehicles if it enables them to keep selling their biggest earners, upscale SUVs and large sedans.

That would leave mid-market competitors such as PSA and Renault, which can ill afford to sell large volumes of electric cars below cost, in a tougher bind.

“In electromobility you have to be a cost leader,” BMW research and development chief Klaus Froehlich told Reuters.

“If you are not a cost leader you will not survive.”

($1 = 0.7675 pounds)


Shortfall of planned European battery supply for electric vehicles (EV)

Global electric-battery vehicle sales.


Reporting by Laurence Frost; Additional reporting by Esha Vaish in Stockholm, Gilles Guillaume and Joe White in Paris, Edward Taylor in Frankfurt; Editing by Mark Potter

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I Went to Starbucks and Its New Open Door Policy Drove Me Out

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

The hunger got me at the wrong moment, as it turned out.

I’m was in New York, staying in the darkest hotel room in the world. 

Perhaps this affected my mood.

On Wednesday, though, I wandered into a Starbucks because I needed something quick and familiar. And because I wanted to see if the pumpkin scones taste even sweeter than the ones in California. (They do. It’s unbearable.)

What struck me, however, was that there wasn’t a seat to be had. 

The whole window was populated by humans on laptops, prodding away vigorously as if they were sending hundreds of ransom notes.

At the tables, the usual business meetings you expect to see in any big-city Starbucks.

It took quite a while for my order to be completed. I imagined, naively, that just one seat might have become free.

It didn’t.

Everyone was doing their thing. What was striking, however, is that their thing didn’t seem to involve consuming anything sold by Starbucks.

You’ll tell me that this has been a problem at Starbucks for years. 

I wonder, though, whether the coffee chain’s infamous Philadelphia incident earlier this year — when a manager called police on two black men who hadn’t ordered anything and were waiting for a business meeting — has emboldened more of these laptop loungers.

There’s not much shame in New York anyway. Now, perhaps, there’s none when it comes to taking up Starbucks’ space and WiFi bandwidth, given that the chain has instituted an open-door policy that allows anyone to come in and buy nothing.

I confess I walked — discreetly, of course — behind the people populating the window. 

Between the five of them, just one had any evidence of a Starbucks product purchase.

Meanwhile, there were people standing in any corner they could find — myself included — trying to balance a drink in one hand, a sandwich in another and a phone in a third.

I contacted Starbucks to ask whether the chain has noticed an increasing problem with laptop loungers taking advantage because now they officially can.

I’ll update, should I receive a reply.

Humans take advantage whenever they can. Especially in New York, a city built on the joy of taking advantage and loudly crowing about it afterwards. 

I’d had enough of it, though, and decided to leave. 

As I did, I gave the laptop loungers the beadiest of eyes. 

They didn’t notice.

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18 True Tales of Ridiculous Performance Appraisals

 “Your greatest strength… your listening abilities. well, there might not actually be anything going on in your head, but you SEEM like you’re listening,” this is a direct quote from a performance review, sent to me by Reflektive, a people management company.

It’s performance review season–many companies do an annual review in December, so October is when people start thinking about writing them. If you’re a manager, you want the reviews to be helpful for your employees. Additionally, never write anything you’re not willing to stand behind in a lawsuit. 

Whatever you do, don’t use the following examples from people’s true experiences. Reflektive shared the following three with me as well:

  • Higher level position years ago – boss spent 70% of PR talking about her husband, 30% was in-the-weeds process recommendations like: “If a team member removed paperclips from incoming documents that’s a big process improvement. Useless info! 
  • In one of the organizations that I worked in, we were asked to fill out pages of answers to open-ended subjective questions. We did. Only to find out later that our manager had already filled in his ratings before he left for a vacation a week before we started writing the reviews. Our painstakingly written answers and response had absolutely no purpose apart from making us feel like we were writing something up.
  •  I went in for my 30-day review all excited about all I’d been able to do in a newly created position. I was told that I hadn’t done anything they had wanted me to do even after he admitted that they hadn’t actually decided what they wanted to measure the position on; they just knew I hadn’t done it. I had been meeting with my supervisor for a 1-on-1 every week and he’d never said anything! I upped my documentation, reporting, project management, asked for more feedback and clearer expectations only to sit down at my 6-month review and get told a similar story – My work was exemplary, but it wasn’t what they wanted. I left that company and the person after me lasted 6 months too.

I wish I could say that performance appraisals like these are rare, but they aren’t. I asked on LinkedIn and Facebook for stories about bad appraisals and within a couple of hours had more than I could publish. Here are a few of my favorites:

  • I was dinged on a Performance Review for “causing too much drama.” The drama? Reporting and investigating Discrimination and Harassment Claims by employees who had a legitimate reason to say something.
  •  I got written up for making a typo. Fair enough but it was a fax, and I had put a period instead of a comma. There’s not a fax machine in the world clear enough for someone receiving it to catch that kind of error. My boss was gearing up to fire me for political reasons but sadly for her, I quit before her plan could come to fruition.
  •  I got lower than average rating for initiative, with the criticism that I take initiative Micromanaging boss thought it was a negative quality. Same person who, hand to God this is LITERALLY true, corrected my thumbtack positioning on a piece of paper hung on a bulletin board and DREW ME A DIAGRAM of optimal thumbtack placement.
  • Involved in a car accident while driving to a scheduled evening meeting, called from the ER to let the team know I wasn’t going to make it. The next week, I was called into the main office and written up for “allowing personal drama to interfere with my responsibilities.”
  • I once was written up years and years ago for organizing my stockroom horizontally and not vertically. Mind you all my staff were under 5ft tall and we had a completely empty room except cleaning supplies and shopping bags.
  • I was told in one job that I was “too direct” in my communications. To this day I still have no idea what that meant. When I asked for clarification as to what I was supposed to do differently in communicating with people — was I supposed to be more indirect? — they couldn’t tell me specifics. I got the feeling asking directly for clear, unambiguous feedback rubbed them the wrong way.
  • I was once told that I was too friendly with our law firm’s admins and that they wouldn’t respect me.
  • I was told that “someone” at “a meeting” “somewhere, sometime” didn’t like my facial expressions, and that I needed to make sure my facial expressions were nicer. She could not define which meeting, who said it, where it was or when.
  • A performance review stated that my number of “corrective actions” (mistakes) had increased for the year. Well, it had…from 1 to 2. Very low when you consider tens of thousands of opportunities to make an error in the course of a year. I complained and my supervisor added a note that the total remained very low. (At least the review didn’t say my number of errors doubled!)
  • My performance review was taken down because of attendance. I had influenza and missed 5 days of work. Why have sick days and get docked for using them?!
  • When I was student teaching I think my supervising teacher was looking for ways to criticize me because the students liked me better. He told me that I needed to walk backward in front of the line of fifth-grade students when we moved down the hallway. My typical place to walk was near the front of the line but to the side of the line so I could see all of the fifth graders in the line at once. I am 4’10” tall, and backward in front of the line allows me to see one or maybe two kids at the most. I failed to understand how that would be effectively managing them. Also, nothing about my instructional practices or lesson planning, just how I walked down the hall. Also, no complaints about my management of said students or them being loud or unruly in the hallway, just physically where I stood.
  • I didn’t smile enough and my “brand” was being damaged.  Mind you my manager wrote “manor” instead of manner.  She should have put eye rolling after that meeting.  When I asked for specific input to improve she said it would really hard for her to write that down.  She said she had a very hard time writing the first one.  There was never a question about my work product.
  • After 6.5 years, and 5 strong/positive reviews my company made some changes and hired a new person as my manager, while my former manager had another role. After 4 months he gave me my review which what not even close to my historical reviews. I asked if they had consulted my former manager and was told: “After a few months I’m comfortable I know you well enough to not have to consult anyone”.
  • I had a manager complain about how slow I was catching on to a task for which I was never trained on and the only one who knew how to do the task was her.

Published on: Sep 30, 2018

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The Facebook Security Meltdown Exposes Way More Sites Than Facebook

On Friday, Facebook revealed that it had suffered a security breach that impacted at least 50 million of its users, and possibly as many as 90 million. What it failed to mention initially, but revealed in a followup call Friday afternoon, is that the flaw affects more than just Facebook. If your account was impacted it means that a hacker could have accessed any account that you log into using Facebook.

That’s a lot of them. You can read a fuller accounting of the hack here, but essentially it combines three bugs relating to Facebook’s “View As” feature, which lets users see what their profiles look like when other people view them. A video upload tool—intended to enable “Happy Birthday” videos—would erroneously appear on the “View As” page, and provide the access token of whomever the hacker searched for.

Facebook initially responded by logging out both the 50 million people it knows were affected by the attack, and an additional 40 million who were looked up with the “View As” tool in the last year. It also hit pause on the “View As” feature. But the second revelation Friday indicates that the fallout may be far more widespread than initially indicated.

Beyond the impact on Facebook accounts themselves, the company confirmed that breach impacted Facebook’s implementation of Single Sign-On, the practice that lets you use one account to log into others. The idea is to use a trusted service—like Facebook Google, Twitter, and so on—to log into sites and services across the web, rather than create a unique profile for each one. That saves time, and ensures you’re logging in through an entity you trust. In this case, it also appears to have potentially made Facebook’s breach an internet-wide calamity, at least for those impacted.

“The access token enables someone to use the account as if they were the account holder themselves. This does mean they could access other third-party apps using Facebook login,” Guy Rosen, Facebook’s vice president of product, said in a call with reporters Friday. “Developers who used Facebook login will be able to detect those access tokens have been reset.”

It’s unclear how long those third-party sites will accept the stolen access tokens, or how difficult it would be for an attacker to use an access token to get into a third-party site.

Facebook separately says it has invalidated data access for third-party apps for the affected individuals, meaning if you’re one of the 90 million people potentially affected, you won’t be able to, say, share an image from Instagram over to Facebook without changing your password.

Meanwhile, Facebook has still not confirmed whether any third-party accounts were actually compromised, and still has not detailed exactly what type of data hackers could have gotten away with. (That they could gain full access to Facebook accounts gives at least a baseline: Anything and everything on your profile would have been exposed.) Facebook also declined to say exactly how long attackers took advantage of the vulnerability, which was introduced in July 2017. Fourteen months is a very large window to do potential damage.

As for how widespread the attack was, Rosen said the targeting appeared fairly broad. But New York Times reporter Mike Isaac noted that Facebook CEO Mark Zuckerberg and COO Sheryl Sandberg had their accounts compromised as part of the attack.

Facebook already faces legal challenges as a result of the disclosure; Facebook users Carla Echavarrai and Derrick Walker have filed a class action suit in California “It is shocking that after all the publicity surrounding Facebook’s handling of personal information in the wake of Cambridge Analytica and its promises to do better by its users that Facebook has yet again failed to protect consumers’ information from hackers,” said their attorney, John Yanchunis, in a statement.

The debacle also underscores broader concerns about Single Sign-On, which Friday turned into the ultimate object lesson in the inherent tradeoffs between security and convenience. “Single Sign-on schemes are great in the sense that the federal reserve cash vault in Atlanta is dramatically more secure than the safe at a local credit union,” says Kenn White, director of the Open Crypto Audit Project. “But the downside is if a Single Sign-on gets breached you’re hosed.”

Sticking with one more secure sign-in does make sense, especially for use on sites that don’t have the resources or inclination to invest heavily in security development. But just like you want your passwords to be unique so compromising one doesn’t expose them all, account diversity is also vital online no matter how ironclad a particular sign-in scheme is. “You don’t want a situation where there’s one breach and your entire online identity is gone,” White says.

It remains to be seen whether that’s the case for 50 million—or 90 million—Facebook users. “We’re just starting to work through the full scope of what we’ve seen here,” said Rosen. For those affected, it’s an excruciating wait.

More Great WIRED Stories

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Uber Has Considered Benefits for Its U.S. Drivers, CEO Says

Uber CEO Dara Khosrowshahi said today the company has considered offering benefits to its drivers. Uber already offers some European drivers parental leave benefits and some medical and sick leave compensation.

Khosrowshahi, in a stage conversation with Salesforce CEO Marc Benioff at that company’s annual Dreamforce conference, said that temporary workers needed benefits that would travel with them as they moved among jobs. He said, Uber would like to provide benefits “if it’s something that can work in the ecosystem,” according to the San Francisco Chronicle.

Individually contracted workers rarely receive benefits beyond payment, sometimes to avoid creating a legal relationship that appears more like employment.

Uber hires its drivers as contractors, and avoids the overhead and labor-law liability that goes with formal employment. Unlike many tech companies and other U.S. firms, Uber largely works directly with each driver instead of through contracting firms. Contractors at Microsoft, Dropbox, Google, and elsewhere often receive some benefits from the company that holds a contract with a client, albeit typically of far less value than people employed directly.

In the European Union, which has a substantially different legal regime covering employment, Uber now makes its limited benefits available to drivers who have completed 150 trips over the previous eight weeks. That group is estimated to be about 150,000 people, and applies in 21 European countries. Benefits beyond parental leave include medical payments and disability coverage outside of what the country’s health system offers.

Over the last several years, Uber and other gig-economy companies have been sued over contract status, or had decisions made by regulators as to whether their workers are actually employees.

In Australia, the country’s Fair Work Commission issued a decision early this year that found Uber hadn’t created an employee relationship, because the work relationship was transactional: a driver could accept or reject any ride, and Uber pays fees based on those rides. In April 2018, a federal judge in Philadelphia ruled that Uber drivers were independent contractors under federal law. But in late 2017, a British tribunal found that Uber’s requirements meant they were employees in the UK. (Uber said it would appeal.)

When reached for comment, Uber provided a joint statement about portable benefits in Washington State signed earlier this year by the company’s CEO and billionaire serial tech entrepreneur Nick Hanauer (active in increasing the minimum wage and other worker equity issues), and the head of the local arm of the Service Employees International Union. The statement argued in favor of creating a system in Washington for benefits that would follow temporary workers, but no public action has taken place since early in the year. An Uber spokesperson pointed to that statement, as well as to Uber’s insurance partnerships for drivers, one of which has a premium in the U.S. of under 4 cents a mile only for miles driven, and another form of which is included for UK drivers at no cost.

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Object storage: On-prem, in the cloud and hybrid

“Slow, cheap and deep – object storage has that reputation,” says Steven Hill, senior analyst for storage technologies at 451 Research. “In part because that’s all that was expected of it at the time.

“But I have come to believe that today’s object storage may be the ideal framework for the long-term management of unstructured data.”

Unstructured data is, for some businesses at least, a petabyte-scale problem. Meanwhile, conventional block and file-based storage architectures struggle to keep pace with the rapid growth in storage volumes.

Object storage tackles the problem by replacing the hierarchical file structure with objects in a flattened topology. Each object has its own identifier, with metadata attached to it.

Object technology uses a single global namespace, so the object can be stored anywhere in the world. Even metadata can be separate from the data itself, helping with performance and object storage systems’ ability to operate at (massive) scale.

IDC expects object-based storage capacity to grow at just over 30% a year, to reach 293.7 exabytes of storage worldwide by 2020. Much of this is being driven by the cloud.

Object storage is the basis for Amazon’s S3, and a host of services built on S3, such as Dropbox, and Facebook’s Haystack system for photo storage.

It is well suited to serve out very large volumes of unstructured data, and so often provides the hardware underpinning public and private cloud infrastructures.

Not only that, but object storage can often provide a connection between the private datacentre and the public cloud. As our product survey below shows, this can take many forms.

Object storage use cases

But in the enterprise, as 451’s Hill suggests, object storage is most closely associated with archiving. But that is changing as the volume of data forces IT managers to look beyond file and block.

“Existing file systems simply can’t provide the metadata capabilities or the global, location-agnostic scalability needed for long-term storage,” says Hill.

This is a view increasingly shared by other IT analysts.

Industries such as media and entertainment, engineering, pharma and biomedicine and also government are storing ever larger volumes of unstructured data.

“The amount of unstructured data is growing and the number of people operating at petabyte scale will increase vastly,” says Angelina Troy, a research director at Gartner.

However, there are still drawbacks to object storage. Object storage systems are far from standardised and supplier lock-in can be a problem. Few enterprise applications can talk directly to object storage, so CIOs are forced to use appliances or gateways to connect to local or cloud object stores.

Increasing industry standardisation around Amazon’s S3 API, and open source software-defined storage initiatives such as Ceph, are helping. But there is still some way to go.

“Some vendors still don’t care too much about the public cloud, as they have vast on-premise businesses,” says Troy. “But one thing is changing – if you don’t have at least minimal S3 compatibility, you are losing out on customers.”

And this is reflected in the market researchers’ data. IDC values the object storage market at US$14bn, while another study, by 451 Research and Western Digital, predicts that 80% of enterprise data will be on object storage by 2021. It is certainly a market to watch.

Object storage products

Here we survey object storage products available from the key storage suppliers in the space, and pay special attention to how those products connect to the cloud.

All vendors provide object storage platforms in hardware and software-defined form, but their connection to the cloud varies. The same hardware can be cloud-located (Dell EMC), data can be tiered to cloud instances of the object storage platform (NetApp and DDN, for example), the on-premise hardware provides an on-ramp to the cloud (Hitachi Vantara), or attempts are ongoing to provide a seamless object store between the datacentre and the cloud (Scality).

Dell EMC

Since Dell bought EMC for US$67bn in 2016, the company has increased its focus on the cloud. Elastic Cloud Storage comes as hardware aimed at customer premise deployments to provide private or public cloud services, while Dell EMC also provides ECS as hosted hardware in cloud datacentres, such as its own Virtustream locations. The EX300 entry-level system starts at 60TB, with the EX3000 supporting up to 8.6PB per rack. They are Ethernet-connected and come in 2U and 4U nodes, respectively.

Hitachi Vantara

Hitachi Vantara developed out of the 2017 merger of Hitachi’s Data Systems, Pentaho analytics and Hitachi Insight, an internet of things-focused operation. The supplier’s main offering in object storage is Hitachi Content Platform, which can run as hardware and software and operate as private cloud storage with access to the Azure, Amazon and Google clouds. It also acts as an on-ramp to public cloud storage for Hitachi Vantara’s VSP all-flash F and hybrid flash G series arrays.


IBM Cloud Object Storage can be deployed on-premise, as part of IBM’s Cloud Platform offerings, or in hybrid form. Interaction with Cloud Object Storage is based on REST APIs and draws on IBM’s 2015 acquisition of Cleversafe with its distributed, erasure-coding protected, object storage technology. Cloud Object Storage has four storage classes – Standard, Vault, Cold Vault, and Flex. Flex works to a price cap, so IT departments can budget for capacity and retrieval costs.


IDC positions NetApp as a leader in the object storage market, with its StorageGRID technology. Gartner says the product scores highly both on AmazonS3 API compatibility and NetApp’s good relationships with cloud suppliers, making it one of the most effective hybrid platforms. StorageGRID is available in hardware appliance form and as software-defined storage, with hybrid cloud operations possible via mirroring to the cloud. NetApp has been particularly successful in selling StorageGRID for rich media applications. The technology, acquired with the 2010 takeover of Bycast, is well integrated and viewed by analysts as competitively priced.


HPE is the only enterprise storage supplier to rely on a partnership, rather than in-house development or acquisition, to provide object storage. HPE re-badges Scality to provide HPE Scalable Object Storage. It claims the combination of its Apollo storage systems and Scality RING delivers 14×9 availability, petabyte-scale storage and the ability to manage trillions of objects in a single namespace. Scality scales as a single distributed system across multiple sites and, potentially, thousands of standard x86 servers. It is in the middle of efforts to achieve “multi-cloud” operations, in which customers can operate within and between public cloud and on-premise environments.


Cloudian recently raised $94m in funding, which the supplier hopes will help it deliver deployments in the hundreds of petabytes scale. Cloudian’s core product is object storage based on the Apache Cassandra open source distributed database. It can come as storage software to be deployed on commodity hardware, in cloud instances on Google’s cloud or in hardware appliance form. Its Hyperfile file access – which is Posix/Windows-compliant – can also be deployed on-premise and in the cloud to provide file access. Surprisingly, Cloudian’s roots lie not in storage technology, but in wireless messaging, with a system for carriers called Gemini Mobile.


Scality has a bridgehead in the enterprise object storage market through its partnership with HPE. The supplier’s primary focus is on software-defined storage, and it claims that with its latest release, RING 7.4, customers can deploy the technology within an hour on one of 45 reference systems. RING also supports point-and-click provisioning to Amazon S3 storage. Scality recently launched Zenko, a multi-cloud data controller, which works with both file and object storage.


DDN’s offering in the market is WOS, or Web Object Scaler. The technology supports S3 and REST APIs and is offered in 4U and 5U appliance form, as well as software-defined. The supplier claims WOS lowers the cost of object storage to a level competitive with tape, while allowing users to access S3 storage in the Amazon cloud or elsewhere.

Red Hat

Red Hat uses Ceph (as does Suse) to provide software-defined storage. Red Hat integrates Ceph with OpenStack for private clouds and can sync data to S3-compatible public clouds. Ceph is not, however, limited to object storage – it also supports block and file. Red Hat positions its object storage offerings as an option for organisations handling rich media content.


Seattle-based Qumulo is still a relatively young company but is well funded, having raised US$93m in Series D funding this summer. Qumulo’s QF2 is a parallel file system that scales to hundreds of nodes and can be deployed on Qumulo-supplied or approved third-party hardware (currently HPE) in the customer datacentre or as software nodes in the Amazon cloud, with storage tiering in both locations. Although the company originally focused on scale-out NAS technology, its Qumulo Core file and object storage software is available for HPE Apollo servers.


Swarm is Caringo’s software-defined storage object solution. Each node integrates into a collection of storage nodes, providing features such as multi-tenancy and flexible billing and auditing. It can be deployed natively on standard x86 servers, within virtual machines or tier data to Amazon or Azure clouds in native formats that can take advantage of cloud compute instances.

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AMD: Breathe In Your Fears

A shift in sentiment is occurring in AMD (AMD). Look and listen and you will see and hear various news organizations/authors starting to beat the fear drum that AMD has gotten ahead of itself and is overvalued. Maybe that’s true or maybe it is not. However, it’s reminiscent of the scene in “Batman Begins” where Ras’ al Ghul says “breathe in your fear” because that’s what successful investors/traders have to do. You have to acknowledge problems at a company, a.k.a. fears, and learn how to trade around it. We could also say “breathe in your hype” as analysts, for the most part, are upgrading AMD to sky-high levels without due diligence.

We also have daily “upgrading” to play catch up – with a few analysts posting lower price targets than the current share price – a.k.a. stealth downgrades.

Thus, we are looking at an upcoming earnings cycle of extremes.

Here’s our view and how we might play Q3 earnings for AMD given the fear and hype.

AMD Fear, AMD, Nvidia, Intel, Polaris, Vega, AMD Vega, AMD Polaris, AMD discount, Q3, AMD Q3, GPU


The question is this – Is AMD overheated? Maybe… it feels like a mixed bag when one looks at CPU/server sales and then the bearish GPU outlook. Sure, the long-term story is great (and I’m long term very bullish). But in the short term… let’s review the concerns.

Immediate Concern

Nvidia’s (NVDA) new GPU series reviews are in and it’s a mixed bag. On one hand, you have some interesting technology upgrades, i.e., hybrid ray tracing and new anti-aliasing methods for ultra high-end GPUs. On the other hand, you have very high prices (given the less-than-enthusiastic performance gains). If prices were lower, the masses would be a bit happier. Nevertheless, the real meat will be how Nvidia prices mid-range mass cards such as the 2050 and 2060. Those are the cards that will compete against the aging AMD Polaris GPU line (the 400-500 series).

The Great Mining Flood of 2018

Crypto miners are currently flooding the second-hand GPU market. One friend of mine recently sold his entire crypto operation of 70x Nvidia 1080 Ti cards on eBay to replace it with ASIC processors. Multiply that times millions of miners. The market is being flooded with GPUs. Expect to see more rebates and price cuts on the GPU side of the house.

Nvidia can (hopefully) swing users to the new 2000 series once the low-to-mid range cards arrive. At the moment, AMD has no new GPUs to push consumers to… though rumors point to a Polaris 3.0 refresh.

Breathe It In – That’s (AIB) Sales Fear

Our good friend, Akram’s Razor, covers the GPU demand in his article “Winter Is Here.” He goes into detail covering the lack of demand seen by the Asian add-in board GPU companies. It’s well worth the read. Here’s a small taste of GPU goodness from his article (copied with permission from the author).

The early evidence of the pressure on this business can be seen in dedicated AMD AIB TUL Corp.’s monthly revenue data.

AMD implosion, AMD, Polaris, Vega, GPU drop, GPU implosion, Q2 AMD, Q3 AMD, Q3 drop AMD

TUL is a small distributor, but there’s no getting around the hit here. Which should have AMD investors now asking themselves exactly what the GPU drag is going to be going forward. If AMD can hit their year-end goal of 5% share in datacenter, I still don’t think that will offset the 40% decline the GPU biz is facing from its Q1 peak. So, anyone looking for numbers to get excited about as far as reported results go will need to wait until Q1 2019 guidance to really see what weight CPU can carry in the face of a far softer GPU biz. Current consensus is calling for AMD to grow revenue 7.5% in 2019. If you consider GPU H2 vs. H1 2018 and the carry-over in that biz, this growth has to come with the GPU biz still shrinking over 2018. And if console is expected to be softer that’s another headwind.” – Source Akram’s Razor

Looking at the numbers he compiled, we can see a massive drop in GPU demand starting in July of -71.79%, followed by August at -68.44%.

fear, gpu, amd, q3 results, Polaris, Polaris 3.0, Polaris refresh, Vega, Navi

Rebates/Price cuts

Speaking of weak sales – just last week, the cheapest we could buy an AMD 580 8GB card was around $225 after rebates. This week you can get a brand new AMD 580 8GB MSI for $189.99 after rebate AND it comes with $150 of free PC games. Did we mention it ships free?

AMD 580, AMD, Radeon, AMD price cuts

AMD Sale, AMD rebate, AMD Newegg, Newegg sale

Let’s see the prices on Camelcamelcamel which tracks Amazon sales. Note, you can find prices higher or lower than the ones we are showing. We stuck with the 8GB AMD 580s as that is a good mid-range card consumers flocked to during the mining craze. Notice, the red used line is drifting down fast.
AMD, AMD price drops, Camel, Camelcamelcamel, AMD price cuts, Polaris, Vega

CPU Shortage

The bright note countering the mixed GPU outlook is Intel’s (NASDAQ:INTC) CPU shortage. Obviously, AMD can sell into the demand Intel is experiencing. Recent Nvidia reviews detail that the 2080/2080 TI are CPU bound. This bodes well for both Intel and AMD. If consumers are willing to fork out premium dollar for these high-end cards, then they should be pairing them with the high-margin solutions from both companies.

Expounding upon the CPU shortage, Micron (MU) CFO revealed in the Micron conference call on 9/20/18:

I don’t know exactly how long the CPU shortage will last. I think on the inventory correction side, it will be a couple of quarters before inventory gets reduced.”

Sanjay Mehrotra (Micron CEO) offered “I would just add that the CPU shortages, we expect it to be short term; it’s possible that it goes beyond Q1 as well.”

Obviously, AMD can benefit from Intel not being able to meet demand.

AMD Response

The Nvidia RTX price-to-performance is wanting, but by Nvidia at least getting the cards out the door (and the tech to developers), it’s a positive event for Nvidia. The huge die sizes of Nvidia cards mean that if AMD can move Navi’s release date forward and get it out pre-summer – AMD could bring some heat to Nvidia’s line of products. Navi is rumored to be a smaller part with high performance. If Navi does, in fact, have a smaller die size and bring good price to performance numbers… AMD could have a hit on their hands. Then again, that’s a lot of “coulds” and “if” statements for a product that is not even out to compete and not scheduled to arrive for quite some time. Furthermore, Nvidia will not be resting idle… expect a 7nm shrink on Turing with time using the same process AMD is using at TSMC (TSM).

Updated Polaris 3.0

Currently, updated rumors of a Polaris 3.0 refresh have surfaced, pointing toward a 10-15% speed bump. While not exactly exciting (Polaris architecture was introduced in 2016), the 500 series does offer good price-to-performance for the dollar. A refresh would help bulk up AMD’s GPU division and perhaps buy them much needed time (while giving gamers something new to covet). This would, in effect, redirect demand from “used” cards to AMD’s “new” cards.

How We Are Playing Fear/Hype

At this point, we are day and swing trading the January $29 and $30 puts. The daily follow-the-leader “upgrades” create nice entry points; the subsequent daily slumps in price in the evening offer nice exit points. As the old saying goes… “It works till it doesn’t.” As of now, it’s working but eventually, things change and we will adjust fire accordingly. We are keeping the positions rather small though as to avoid trouble if AMD blasts off to infinity and beyond. However, we are having a blast playing the ebb and flow of daily pops and drops.

As we approach earnings, we will explore putting a straddle in place to catch extreme movements when/if it makes sense.

Given the murky waters concerning earnings outlook (optimistic server and CPU expectations – very negative GPU outlook), we might see extreme movements that we are able to profit from. After Q3 earnings, we expect much-needed light to be shed on the stock. From this, we can adjust fire.


Options can be dangerous: Tread with caution. Investors should not read this and mimic it, as the information will be out of date and stale. Investors or traders should view this simply as an idea and then adjust it to meet needs. If you need more help, please consult your broker. AMD at the current price and baked in expectations is obviously dangerous. Play safe. Have fun.

Disclosure: I am/we are short AMD.

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

Additional disclosure: We own $29 and $30 Jan 2019 puts. We may use a straddle as earnings approaches to capture extreme movement up or down.
We are long NVDA.
We wrote this using an Intel CPU and AMD GPU.

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Capital Product Partners: Nearly 12% Yield With Growing Coverage And No K-1

CPLP Overview – 11.5% Yield, Conservative Posture

Image Credit: CPLP, Q2-18 Earnings Presentation

Capital Product Partners LP (NASDAQ:CPLP) is a shipping holding company specializing in vessels with medium and long-term charter contracts, primarily in the product tanker and container sectors. CPLP has superior forward revenue visibility due to the nature of its contracts and staggered roll-offs. This allows it to appeal to more income-focused investors versus direct rate speculators. Despite this strength and a very strong balance sheet, the stock has been trading terribly towards the end of summer 2018.

This report will examine current asset values, cash flow potential and long-term sustainable payout levels. Current NAV is over $4/unit, even with underlying asset values near record lows.

CPLP currently trades at $2.79 with approximately 130 million common units outstanding, for a current market capitalization of just over $360 million. It also has nearly 13 million convertible preferred units (privately held), with a par value and conversion at $9/unit. CPLP common units currently offer a quarterly distribution of $0.08 for a current yield of 11.5%.

Fleet and Employment Overview

CPLP has a fleet of 37 vessels, primarily made up of product tankers and containerships on medium- and long-term charters. The majority of these vessels are on fixed charters to top-tier counter-parties, with current employment shown below.

Source: Capital Product Partners, Q2-18 Presentation, Slide 8

The primary exceptions are its 4 Suezmax crude tankers, of which 3 are on weak spot rates and 1 is on a weaker short-term charter. These weaker rates have been holding back cash flows, but spot rates have recently improved, and I expect significantly better performance by Q4-18.

Fleet Values and Balance Sheet

Although income vehicles are traditionally valued on yield, the underlying asset values are important to intrinsic value. Most high-yield companies have unsustainable payouts backed by weak assets. That’s not the case at CPLP.

We can calculate CPLP’s “intrinsic worth” by figuring out net asset value (“NAV”), which is similar to tangible book value. For shipping firms, this is essentially fleet valuations minus net debt.

According to VesselsValue, our preferred source of live valuations, the current fleet is worth $914 million. Additionally, CPLP has above-market charters (very lucrative charters on 8 containerships and 1 dry bulk vessel), which I value at $208 million using a 10% discount rate to EBITDA, adjusted for vessel depreciation.

Source: VesselsValue, CPLP Fleet Overview

For the liabilities side of the house, as of Q2-18, CPLP reported net debt (6-K, page 2) of roughly $449 million. It also had $117 million in par value of preferred equity. Altogether, the company’s NAV is about $556 million ($1.12 billion in assets minus $566 million in liabilities).

With 129.7 million units outstanding (127.25 million common and 2.44 million GP), current adj. NAV at CPLP is about $4.30/unit, which means the current units trade at a huge 36% discount to intrinsic value. Unlike the vast majority of high-yield plays, CPLP’s yield is simply high due to a weak price, not because of weak assets or unsustainable payouts.

Significant Asset and Yield Upside

CPLP’s current NAV is based on underlying asset values that are near all-time adjusted lows. Sentiment has been terrible after several rough market years, and ship prices reflect this.

If product tanker markets recover substantially by 2020, I anticipate that as earnings increase, the company’s underlying fleet values could surge by $200-300 million and NAV could easily surpass $6/unit. In such a market environment, which I believe is very likely prior to 2020, CPLP’s payout could see significant increases. If an eventual refinancing is achieved, a doubling is possible.

Regulation Tailwind

The IMO 2020 regulations, which limit the use of high-sulfur fuel to a maximum of 0.5%, go into effect in just over 15 months. This new regime will force shipowners to pursue regulation-compliant blends and is poised to add significant demand to the product tanker sector. This is CPLP’s primary exposure, and almost all of its containerships are also on long-term contracts (which means CPLP doesn’t pay for rising fuel costs), so unlike many other shipping companies, its net impact is clearly skewed positive.

On its Q2-18 conference call, Ardmore Shipping (NYSE:ASC), a product tanker peer, shared the following guidance:

… IMO 2020 sulphur regulations are expected to have an impact from mid-2019. The initial estimates suggest that approximately 2 million barrels a day of refined products will display high sulphur fuel oil, with the majority of this moving at sea and over longer distances, with some analysts calling for a 10%-plus increase in product tanker demand.

This surge will likely occur right as CPLP begins to roll over lots of its contracts. It is very possible we could see a surge in DCF, which further strengthens CPLP’s hand towards longer-term deals and potential refinancing.

Stable Results and Long-Term Coverage Capacity

CPLP recently produced steady Q2-18 results, demonstrating strong cash flow even as all other product tanker peers have struggled due to weak spot markets. The company was able to secure strong employment for eight of its product tanker vessels by offering 2-3 year contracts to Petrobras (NYSE:PBR).

Despite arguably strong results, CPLP investors have grown concerned with reported distribution coverage, with the company announcing 1.0x coverage for Q1-18 and 0.9x coverage for Q2-18. The most recent breakdown is shown below. Pay close attention to the line items “capital reserve” and “decrease in recommended reserves.”

Source: Capital Product Partners, Q2-18 Presentation, Slide 5

Why was coverage lower? Suezmax Crude and LIBOR Rise

The primary reason CPLP’s coverage was weaker is due to the very weak Suezmax tanker markets (as noted earlier), where the company has had 4 vessels roll off from $21-26k/day charters into a spot market with Q2 performance around $10k. Three of these vessels are currently operating in the spot markets and 1 vessel is employed with an $18k/day contract.

This impact alone is set to drop cash flow by nearly $4 million a quarter, around 3-4 cents per share. This was slightly offset by a new Aframax dropdown and improved containership rolls, but challenging product tanker markets have left CPLP’s core fleet mostly treading water. The good news is that Suezmax spot rates have stabilized and are set to increase into Q4.

Interest expenses are set to decrease q/q going forward from Q2; however, the y/y comps are difficult because the credit facility is tied to LIBOR, specifically L+325 basis points (3.25%). As the chart below shows, LIBOR shot up in early 2018, but has now stabilized. Assuming $450 million of long-term debt, the increase in LIBOR by roughly 100 basis points (1%) since last year adds nearly $5 million in annual costs, or about 1 cent per quarter.

Source: St. Louis Fed, 3-month LIBOR Chart

The combination of these two negative impacts have been the primary reason why CPLP’s coverage has been reduced. Operating performance has generally been quite strong, but these are difficult markets.

Forward Challenges? Slight Dip in Product Tankers

Product tanker markets are difficult, but medium and long-term charter rates have been mostly stable for the past two years. CPLP has a few challenging forward rolls, such as the 5 product tankers shown below, but with my current market estimate at around $15k/day, we’re looking at roughly a 1 cent impact per quarter, easily offset by just the recent improvements in Suezmax conditions alone.

Source: Capital Product Partners, Q2-18 Presentation, Slide 9

Forward Coverage?

With all of the facts described above, I expect overall reported coverage for both 2018 on average, and most of 2019, to be very close to 1x. The 4 Suezmax crude tankers offer a chance for higher coverage if CPLP can improve those charters. There will also be a natural improvement in reported coverage, as debt loads are reduced and LIBOR rates seem to have plateaued for now.

The rest of the report will discuss how the company’s current reported coverage is incredibly conservative and long-term sustainable levels are actually much higher.

CPLP’s Current Credit Facilities and Repayments

Under its current financing structure, announced in October 2017, and also disclosed in its annual report (20-F, page 92), CPLP must repay $12.9 million per quarter, split into two primary tranches. (Note: Originally it was $13.2 million/qtr, but now it is $12.9 million following the 25th April, 2018, sale of the 2013-built Aristotelis for $29.4 million and the associated $14.4 million debt repayment.)

The full amortization split is also disclosed in its most recent quarterly filings, which shows the impact of these payments.

Source: CPLP Q2-18 SEC Filings, Page 8

As can be seen, the 2015-built “Amor,” the 2016-built “Anikitos” and the 2017-built “Aristaios” each have their own credit facilities of $15.8 million, $15.6 million and $28.3 million respectively. Compared to recent valuations, these three facilities carry leverage of 59%, 56% and 71% respectively, all of which are very typical levels for modern assets. (Note: The Aristaios is on a lucrative 4-year charter, so banks allow slightly higher leverage.)

2017 Credit Facility – Assets and Coverage

Setting those 3 minor facilities aside, we are left with $419 million of debt ($406 million after the July 2018 payment), attached to 34 vessels worth $822 million, and around $200 million worth of above-market charters. Total leverage is a fairly paltry 40%, or a moderate 49% even if charters are excluded.

This facility is split into two parts: Tranche A, covered by 10 modern vessels, and Tranche B, covered by 24 middle-aged vessels.

Tranche A: 54% Leverage, 10 Modern Assets

Tranche A currently carries an estimated $231 million balance and will be repaid through 2023 ($187 million due in 2023). As shown below, the current fleet values for this basket of assets is about $427 million, and leverage is 54%.

Source: VesselsValue, CPLP Fleet Valuations

Tranche B: 44% Leverage, 24 Middle-Aged Assets

Tranche B has an estimated balance of $176 million and will be 100% repaid by Q4-2023 (repaid in 24 equal quarterly installments of $8.4 million). As shown below, the combined fleet valuations are about $395 million. Based on the rigorous amortization schedule, demolition values alone will surpass the corresponding debt by mid-2019, but only one vessel (“Amore Mio”) is even remotely a demolition candidate until at least 2026. This is an unprecedentedly conservative financing facility.

Source: VesselsValue, CPLP Fleet Valuations

Tranche B Amortization: A Major Short-Term Drag

I walked through each of the financing facilities to give a clear fleet picture for CPLP, but the newest 13 vessels all have pretty traditional financing and there’s not much to discuss.

The significant disconnect is related to the 24 older vessels secured by the “Tranche B,” which is so incredibly conservative that demolition values will surpass total debt by April 2019. Based on the current draconian debt paydown structure, CPLP’s core fleet will be entirely debt free by late 2023, but the majority of the fleet has significant life remaining.

A normal expectancy for a product tanker and dry bulk carrier is 20-25 years depending on markets, and containerships should easily do 25-30 years of service. This means that even in heavily bearish outcomes, CPLP doesn’t need to replace much of its fleet until 2026. The sole exception is the 2001-built “Amore Mio,” which is likely to be scrapped in the next few years. This vessel is currently valued at $10.4 million and is likely to generate nearly $10 million from demolition, so there’s virtually no risk here.

Why is this facility a “drag?”

The Tranche B results in distorted reported coverage levels because it forces CPLP to funnel cash to the banks instead of either investing in more growth (dropdowns) or shareholder returns (distributions). Obviously, older vessels need more conservative financing, but to be unable to borrow in excess of demolition levels is more extreme than common sense would dictate.

I believe that once market levels stabilize, rates improve and CPLP locks many of these vessels on medium-term and long-term employment, there is a clear path to a refinancing that could easily result in a $100 million or larger cash-out. Unfortunately, in 2017, spot rates were terrible and the company wasn’t bargaining from a position of strength, so it got stuck with this stinker for now…

If rates improve in 2019-2020, I expect CPLP will be able to easily secured an enhanced financing deal with both lower amortization and a higher overall balance (i.e., enough to pull fresh cash out).

Credit Facilities vs. Long-Term Coverage

Recall earlier, when I highlighted CPLP’s sort of odd distribution coverage chart. We’re now going to dive into the calculations and illustrate how the company is presenting overly conservative numbers, effectively sandbagging its own results.

“Capital Reserve” – What is This?

Virtually every other MLP or LP structure utilizes line items called “maintenance capital reserves” and “replacement capital expenditure reserves.” They are often combined into one line. This is how KNOT Offshore Partners (NYSE:KNOP), Hoegh LNG Partners (NYSE:HMLP), GasLog Partners (NYSE:GLOP), Golar LNG Partners (NASDAQ:GMLP) and Dynagas LNG Partners (NYSE:DLNG) all report their results.

These levels are based on calculations describing what it costs to maintain and what it costs to replace assets down the road. Maintenance is relatively simple: it comes down primarily to drydocking and special surveys. Replacement is the annual allotment required for CPLP or others to set aside to buy a new product tanker in 25 years, a new containership in 30 years, etc.

CPLP does something different: the company reports real-time bank amortization, presenting a sort of “free cash flow” instead of “distributable cash flow.” The difference might appear subtle or meaningless, but it makes a legitimate huge long-term difference. DCF should, in theory, showcase exactly what is a sustainable long-term payout level. Whereas CPLP’s method of FCF only shows what is payable based on that exact quarter of results and debt structure.

Current bank amortization shouldn’t be relevant to long-term DCF. Otherwise, a company can simply buy modern assets, sign a goofy financing deal with almost zero upfront debt payments, and then tout a blatantly bloated number as its DCF. Conversely, if bank amortization is draconian, the reported DCF is sandbagged, because it under-reports the true long-term payout potential. Simply put, CPLP reports these coverage metrics differently than virtually every single peer out there.

In the long term, I believe this is because the company is hopeful it can refinance down the road and secure enough “friendly” bank facilities that its DCF and coverage ratios will soar; however, in the immediate term, the net result is that CPLP drastically under-reports its DCF compared to peers.

“Decrease in Recommended Reserves” – What is This?

When CPLP reports an amount here, it is showing the cost of the distribution in excess of quarterly generated cash flow. Therefore, the company was $1.5 million short during Q2-18. Its immediate FCF supported a 7 cent payout, whereas 1 cent came straight off balance sheet cash.

CPLP had $51 million in cash as of 30th June, so a $1.5 million draw is almost insignificant, but it’s still worth keeping an eye on. Bearish folks would point to this as a major weakness of CPLP, but what these folks are ignoring is the massive underlying asset values and conservative debt structures.

“True DCF”

Without full access to CPLP’s internal calculations, it is difficult to calculate a 100% accurate “correct DCF,” but if we utilize a 20-year replacement curve for crude tankers (4x Suezmax – $55 million, 1x Aframax – $45 million), a 25-year replacement curve for bulkers (1x Capesize – $45 million), 25-year for product tankers (6x MR1 – $30 million, 15x MR2 – $35 million) and a 30-year replacement curve for containers (10x – $50-80 million), then we come up with a replacement valuation of nearly $1.7 billion, or about $1.4 billion net of demolition recoveries.

I’ve designed a spreadsheet that calculates each vessel’s annual replacement reserve against the above inputs, and we reach a required replacement reserve of $54 million. However, this is an overly simplistic calculation which does not discount back for retained fund investment.

Investment of Retained Funds

When you keep a replacement reserve, these funds are not simply stuck on a shelf or hidden in a mattress. They are instead continually invested into new assets. MLPs must use a calculation for the expectation of investment returns beyond general inflation – a general benchmark is to use a 5% annual return placeholder.

When we utilize this same system for CPLP, we reach an annual requirement of $24.5 million in retained funds. Therefore, the “true” replacement reserve calculation is about $6.1 million per quarter.

What About Maintenance Reserves?

This is an important calculation as well. CPLP must include a reserve to fund dry docks, special surveys and regulation compliance (i.e., ballast water treatment). These requirements differ by asset type, but I estimate them to range from about $200k/year for the smallest MR1 assets to about $500k/year for the larger tankers and containerships. Using these assumptions, the company must retain close to $12 million per year. Therefore, the “true” maintenance reserve calculation is about $2.9 million per quarter.

Bringing Them Together – Adjusted Coverage Ratio (1.26x)

When these two buckets are combined ($6.1 million replacement reserve + $2.9 million maintenance reserve), we realize CPLP needs to retain about $9 million per quarter, which is significantly less than the $13.2 million currently earmarked for “capital reserve.” Altogether, this means its long-run DCF capacity is at least $0.03/qtr higher than currently suggested.

Source: Capital Product Partners, Q2-18 Presentation, Edits by Author

Downside Risk?

CPLP is inherently safer than most of its peers due to the strong NAV levels and contract fixtures; however, the company isn’t totally immune from a prolonged market downturn. If the current trade war concerns lead to a major global slowdown or recession, CPLP’s fleet values would likely drop by at least another 10-20%.

As product tankers contracts roll off into this potential weaker market, DCF would also drop, and in the absolute worst case, $0.08/qtr might not be covered in the short term. To model such an impact, we need to consider what happens to fleet values with a 20% haircut, which would reduce NAV by around $183 million ($914 million down to $731 million). That’s a haircut of about $1.40 per units, which brings CPLP’s NAV down from $4.30 to $2.90.

If we add another 25% discount onto the $2.90 NAV to account for market uncertainty and general pessimism, that gets us to about $2.20, which is what I would use as a bear-case terrible market target.

Conclusion: Solid Long-Term DCF and Underlying Value

We’ve approached CPLP both from long-term yield potential and underlying asset values. Our yield analysis shows that the current annual payout of $0.32 is covered by nearly 1.3x under current market conditions, leading to a current DCF yield of nearly 15%. Obviously if market conditions improve, I expect this number to increase significantly.

Our value-based analysis demonstrates that CPLP is worth about $4.30, which is substantially higher than the current pricing. In a full bear scenario, our target price is about $2.20, based off a projected NAV of $2.90. Therefore, we see over 50% upside potential versus about 20% of downside risk.

Bottom line: CPLP is cheap, the balance sheets and payouts are conservative, and I believe there’s around 50% upside potential to base-case markets. My target price is $4.30, which is based on current NAV.

J Mintzmyer collaborates with James Catlin and Michael Boyd on his Marketplace service.

We’re currently working on our quarterly income review, which covers over 50 opportunities including partnerships, preferred equities, and bonds. Please consider joining the discussion at Value Investor’s Edge. Send a private message at any time for more info. I look forward to sharing new ideas soon!

Disclosure: I am/we are long CPLP.

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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Avoid the Perils of Overpromising

Promises always come with the peril of non-performance. It’s a bad plan in life as well as business to promise more than you can deliver. If you expect people to believe your promises tomorrow, it helps a great deal if you kept them yesterday. This probably sounds like old news to most of you since we’ve all been lectured from birth by our parents, teachers and preachers about the necessity and difficulty of always trying to live up to your commitments.

But this is how life works. I certainly support the basic concept and agree that it makes all the sense in the world, but the difference today is that technological advances have radically changed the nature of the conversation.  The problem now isn’t so much about arrogance or baseless bragging as it is about how and when to deal realistically and effectively with the truth. Because the truth today is a lot stranger in some ways than the fiction of yesterday.  

Given the powerful technologies we now have at our disposal and the actual and concrete results that new businesses can deliver, there’s a somewhat novel sales problem that I’m seeing. Too many startups are so excited about the powerful possibilities and the real wonders their solutions can work that, in their eagerness and enthusiasm, they’re losing sight of who they’re selling to, and what kinds of solutions those buyers are looking for.

In the old days, we used to say that the main difference between a car salesman and a computer salesman was that the car guy knew he was lying to you whereas the computer guy was just deluded. Today, telling your prospects and customers too much about what your products and services can do is more likely to confuse them than to convince them.

Instead of offering simple initial implementations and step-by-step measured solutions –basically addressing and resolving the lowest and most obvious hanging fruit first– what I’m seeing and hearing too often in these kinds of conversations are broad claims and bold statements.  “Our software can do anything – just tell us what you need.” Even if that were true, which in some cases is almost certainly the case, it absolutely doesn’t matter to the buyers.  And, worse yet, it’s totally off-putting because it shifts the onus of specifying the problems that need to be solved on to the buyers.  Here’s the issue: they may know what end results they need (cost economies, productivity enhancements, etc.), but they likely have no real idea of what your products can do or how your solutions would be introduced and incorporated into their specific operations. So, their natural reaction is to take two steps backwards rather than buying your pitch.

That’s why it makes so much sense to start by sandbagging a little bit instead of bragging. Under promise and then over deliver. Let me give you a real life and slightly sneaky example that you’ll be seeing practically every night on TV – if you ever watch TV. I say “sneaky” because this is a situation dictated mainly by marketing considerations, but it might also be to get around certain regulatory requirements about diet claims. If you watch the latest ads for several of the wonder drugs (no names please)– after they make all the over-the-top basic benefit claims and after they list the 4 million side effects – you’ll hear a little announcer aside that goes like this: “and you might just lose a little weight too.” No promises. No guarantees. But, as good Samaritans, we thought you just might want to know. Right. That’s under promising to a “T.”

And, in your own business and sales approach, you need to be thinking the same way when you present your new products and services. Tone it down – don’t go for the gold from the get-go. Prove your product a little bit at a time.  “New” is a nasty word to millions of procurement officers, buyers and other decision makers. “Novel” and “innovative” are right up there as well. Change is always hard to implement, but when it represents new costs, retraining and upskilling commitments, the risks of errors and mistakes, etc., it’s an even harder sale. And it’s no easier when the impact and the benefits aren’t immediately demonstrable.

In the real world, no one is looking for a miracle. They want risk-free, middle-of-the-road, mundane improvements that might save their companies some money, but will certainly save their jobs. They want immediate solutions, not ultimate salvation. This is in part because they’re not sure that they’ll even be around for the big, long-awaited payoff. So you need to plan, sell, and act accordingly.

Even if you can eventually move the moon, start with something that you can get done by next Monday.

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The Post-It Note System To Achieve Your Dreams

Is there really something to the notion that, if we hold a thought in our mind over time, we can eventually, almost magically, bring it to life? This has been called the “Law of Attraction” and people like the author Richard Bach and his book, Illusions, which helped popularize it.

There is certainly something to this idea, but it isn’t magic.  And it actually predated Richard Bach, going back as far as Think and Grow Rich by Napoleon Hill.

The way it really works is that we are constantly making decisions in our lives, day in and day out, about how to spend our time and energy. When something is top of mind for us–when the thought is always right there–you will inevitably make decisions that bring you closer to making that thought a reality. No matter what you might want to achieve–a happy marriage, losing weight, more money in the bank, or running a PR in a marathon–the more you think about that thing, the closer you come to achieving it, because every little decision you make is in the right direction.

This approach is incredibly powerful and I’m happy to share a simple trick I learned from my friend Dave Lindsey, Founder of Defenders, to help you harness this power and help achieve your dreams.

Goal setting with Post-It Notes

Go to your desk and open the drawer. Chances are you might have an unused stack of Post-It Notes in there. If not, go out to our local office supply store and buy a pack. Take care of them because they can help make your dreams come true.

To do that, make a list of the three to five big goals you want to achieve. While I’ve seen people have lists of goals that stretch to more than 20 items, I encourage you to stick to a manageable number. Now the key is that they are specific and based in time.  While the picture above says lose weight, a better goal is lose 20 pounds by the end of the year.

Write each of those goals down on Post-It Notes and then, when you get home, stick each of them to your bathroom mirror.  So, three goals means three Post-It notes.

Now, every day when you wake up and right before you go to bed, you’ll be staring at those three to give goals–which will keep them at the top of your mind and help you make decisions to bring you closer to achieving them.

After you wake up, for instance, and brush your teeth, you’ll already be thinking about what you need to do that day to make progress toward your goals. Then, later on at night, you will think about what you did that day–and what you can do tomorrow–to keep making progress.

You’ll be absolutely amazed at how effective you’ll become at chasing down your dreams. And I would wager that you will accomplish at least a few of them in less than 12 months.  There is nothing like the feeling of accomplishment when you peel off a Post-It note from you mirror because you have achieved a long-term goal.

And you don’t have to believe just me: there are thousands of people who will vouch for this technique in helping them achieve their goals and change their lives. All thanks to a few simple Post-It Notes.

So what do you have to lose? Grab some Post-It notes and make today the first day in your journey to making your dreams–no matter what they are–come true.

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With a Single Sentence, Walmart Just Turned an Amazing Idea Into an Epic Fail

And now, Walmart has made a new announcement that seems to build on that strategy.

At least, it did at first glance.

According to Bloomberg, the nation’s largest private employer asked hourly workers to rate potential incentives from a scale of 1 to 5, with 5 signifying “This would be awesome!” and 1 signifying “I don’t care about this.” 

The incentives included the following:

  • Sign-on bonus
  • Child-care services
  • Tutoring
  • Pet care
  • Gym memberships
  • Company-provided mobile device
  • Transportation assistance
  • Immediate access to an employee discount card
  • Access to paid time off from day one
  • Gift cards 
  • Apparel credit

What a great and novel way to figure out what kinds of perks matter to your employees: Ask them!

But as I continued reading the report, a statement from Walmart spokesman Justin Rushing seemed to negate all the goodwill this poll could have created.

“We’re always listening to feedback from our associates on how to improve our offering and experience,” Rushing said. 

And then, the kicker. Wait for it…

“While the results of this poll are insightful, we don’t currently have plans to implement anything based on the results,” Rushing continued.

Man, oh man.

Where Walmart went wrong

Walmart is definitely on to something. Using real employee feedback to help inform its future hiring and benefits strategies–what’s not to like about that?

It comes off sounding like the following: 

Hey–we really want to know what would make you guys happy working for us. Just don’t expect that we’ll actually give you any of those things.

Look, I get that Walmart needs time to figure out what to do with this information, and that it doesn’t want to make promises that it can’t (or won’t) keep. And I have to admit, I kind of admire the company’s honesty.

But here’s another novel idea: 

You’ve worked hard to hire the right people and get them to buy into your company culture. You’ve spent time and money trying to solicit feedback from those people–feedback that you admit has already provided valuable insights.

Now, why not actually take those valuable insights and use them to attract more, like-minded employees?

Otherwise, what could have been an amazing idea will be nothing more than a major tease–and one more missed opportunity.

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The New Apple Watch Heart Monitoring Only Works in the U.S.

When Apple said its new Apple Watch heart monitoring capabilities were FDA cleared, they meant only FDA cleared, it seems.

The new Apple Watch touts a fancy new ECG, or electrocardiogram, monitor. It’s the type of device that is medically advanced enough to need clearance before public consumer use. Apple actually only got FDA clearance a day before its big event announcing the new Apple Watch, along with three new iPhones, Bloomberg reported. Now, it’s working on getting equivalent clearances internationally.

However, before that happens, the new heart monitoring features won’t yet be available for international customers, according to Bloomberg. In fact, Apple isn’t even advertising the new function on its international websites.

Overseas customers looking to get the new Apple Watch, and keen on the new ECG feature shouldn’t worry, though. While no date is reportedly set for a global roll-out, Apple is working on obtaining clearance and is expected to release an update adding the new feature in once approval is obtained.

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