Why Business Is Booming in These 6 Unlikely European Cities

Pawel Kulon’s family was part of a movement in the late 1980s that led nearly one million Poles to immigrate to Chicago. Despite growing up in the U.S., Kulon recently decided to move back to his native city of Kraków, Poland, where he now runs operations for the entrepreneur network, OMGKRK. 

As Kulon sees it, a growing number of founders and investors are looking to the Eastern European country as a good place to launch a business. “There’s a new generation of leaders developing in Poland who are trying to build companies,” Kulon tells Inc., nodding to firms such as CallPage, a software startup that converts website visitors into sales calls. “A lot of people with some Polish history are seeing limited and even shrinking opportunities in places like Chicago and London, and are now looking at Poland as a place with opportunity.” 

The city of Kraków is one of a number of emerging startup hubs across Central and Eastern Europe, which are benefiting from what analysts are calling the “decentralization” of the entrepreneurial ecosystem. In fact, a large share (41 percent) of business owners surveyed as part of the annual Inc. 5000 Europe list anticipate that no one city will serve as the dominant tech center in years to come–especially after the U.K. breaks from the European Union, a move often referred to as “Brexit.”

That’s left the door open to a raft of cities looking to take some of the heat away from London, Europe’s reigning entrepreneurial hot spot. Using insight from Inc.‘s annual list of the fastest-growing private companies in Europe, as well as from venture firm reports, cost of living indexes, and recent notable exits, here is a list–in no particular order–of six surprising technology hubs to watch in 2018:

1.  Lisbon

Lisbon, Portugal.

CREDIT: Shutterstock

The Portuguese capital is home to dozens of fast-growing startups, including 26 on Inc.‘sannual Europe list. Those include Decskill, an IT services firm that generated €3.9 million ($4.79 million) in 2016 sales, landing on the Inc. 500 Europe at No. 336. There’s also Portspar Retail, an e-commerce company that grew revenue by 924 percent over three years, generating €20 million ($24.6 million) in 2016 alone. Analysts note that startups in Lisbon benefit from relatively inexpensive rent, as compared with cities such as London and Paris, which has led more entrepreneurs to set up shop there. Indeed, Lisbon tech companies leased 28 percent more office space between 2016 and 2017 than the 10-year average, according to research from the Chicago-based real estate services firm JLL.

The city is also drawing plenty of interest from entrepreneurial tourists. Last year, the annual Web Summit conference drew more than 60,000 investors, entrepreneurs, and technologists from dozens of countries worldwide, with speakers including Al Gore, Waymo CEO John Krafcik, and Reddit co-founder Steve Huffman.

2. Kraków

Krakow, Poland.

CREDIT: Shutterstock

In Kulon’s native Kraków, startups benefit from a rich history of technology outsourcing. Home to development hubs for major international firms such as IBM, UBS, Epam Systems, and the French outsourcing firm Capgemini, Kraków is awash in tech talent, and entrepreneurs enjoy relationships with these more established companies. The trend is set to continue: Just last month, the Provo, Utah-based software giant Qualtrics set up a new office in the Polish city, where it intends to hire as many as 200 additional engineers.

Kulon notes that Polish companies get a fair amount of financial support from the local government, and–similar to Lisbon–enjoy lower-than-average rents. “It’s still sort of a deal economically,” says Kulon of launching in Poland. “You know money goes further in Kraków, while the access to talent is still relatively high.”

In addition to entrepreneurship networks like OMGKRK, founders can also tap the resources of the Kraków Technology Park, a 20-year-old incubator program and venture fund aimed at fostering innovation in the greater Malopolska region.

3. Edinburgh

Edinburgh, Scotland.

CREDIT: Shutterstock

The Scottish capital has risen in the shadow of nearby London, quietly attracting investment, entrepreneurs, and talent from across the U.K. Indeed, Edinburgh recently ranked as having the third-largest number of “unicorn” companies per capita, after San Francisco and Provo, Utah, according to research from the University of Edinburgh. The report notes that this is due in large part to universities’ longer-term investment in the city’s research infrastructure.

Also telling, business tenants leased more than 950,000 square feet of office space in the first three quarters of 2017–more than all of 2015 and 2016 combined, according to research from the commercial real estate company CBRE. The city is home to five companies on the Inc. 5000 Europe list, including Vegware (No. 3,646), an ecofriendly packaging service that booked €17.6 million ($21.6 million) in 2016 sales, and Ecometrica, a €2.5 million ($3 million) software firm that ranked No. 2,747. Meanwhile, Edinburgh has fostered a number of high-profile exits, including from Skyscanner, that Scottish travel website that in 2016 was acquired by the Chinese travel giant Ctrip for £1.4 billion ($1.95 billion). 

4. Vilnius

Vilnius, Lithuania.

CREDIT: Shutterstock

Lithuania may not have the most exciting startup reputation, but try telling that to Google and Uber. The technology behemoths recently opened offices in the capital city of Vilnius, which–similar to Kraków–has long served as an outsourcing hub for international firms. With a large pool of data scientists and engineers, stemming from schools including Vilnius University and the Vilnius Gediminas Technical University, the city is fast becoming a hub for fast-growth private companies.

That includes UAB Htr1, a freight transportation service that roped in €5.1 million ($6.27 million) in 2016 sales; and Jet MS, an aircraft maintenance company that generated €12.3 million ($15.11 million) in 2016 revenue. UAB and Jet MS rank No. 129 and No. 2,856 on the Inc. 5000 Europe list, respectively. In total, Vilnius is home to 12 companies on Inc.‘s annual tally. Here, startups are bolstered by some of the fastest internet speeds in Europe, as well as a relatively low cost of living. Vilnius was recently ranked the lowest-cost European vacation destination, according to The Telegraph.

5. Moscow

Moscow, Russia.

CREDIT: Shutterstock

Russian startups have seen a surge of activity in recent months, even as business owners face challenges including U.S. and EU sanctions and a caustic political environment. Indeed, Moscow emerged as the No. 2 city for fast-growing private companies, according to the Inc. 5000 Europe list, accounting for as many as 171 of those firms. That includes Varmega, a Moscow-based manufacturer that saw revenue jolt by 1,990 percent between 2013 and 2016, bringing in €9 million ($11 million) in 2016 alone. “If it weren’t for political risks, Russia could become a global startup powerhouse,” noted William Courtney, a retired diplomat and executive director of the nonprofit policy firm Rand Business Leaders Forum, in an earlier phone call with Inc.

With a population of more than 12 million, and engineering talent stemming from Moscow State University, Moscow Engineering Physics Institute, and the National Research University of Electronic Technology, analysts say Moscow is simply too big–and full of too much talent–to ignore. It helps that companies have access to major accelerator programs, including the DI Telegraph co-working space in the heart of the city. These and other resources have helped local entrepreneurs vault to success–even as U.S. venture capitalists are increasingly leery to invest in the controversial ecosystem.

6. Barcelona

Barcelona, Spain.

CREDIT: Shutterstock

The Spanish city has seen recent success with services that target domestic consumers, including GetYourHero and Deliberry.com, the on-demand cleaning and grocery-delivery startups, respectively. Sebastian Muller, the director of the Barcelona-based Impact accelerator, suggests that it’s comparatively easy to set up a business in Barcelona, which is a major reason why more and more international entrepreneurs are coming to Spain. “Spain is one of the most young, energetic startup ecosystems in the EU,” Muller tells Inc. “You can open a company in just 24 hours.” 

Indeed, Barcelona is home to as many as 43 companies on the annual Inc. 5000 Europe list. And though many respondents to Inc.’srecent CEO survey said they don’t expect any one city to dominate the entrepreneurial world after Brexit, those that did name an alternative listed Barcelona as the top contender. Spanish startups also benefit from public financial support; the Barcelona government organizes the mobile technology conference Mobile World Congress each year, for instance.

Privacy issues emerge as major business risk for Facebook

SAN FRANCISCO/ FRANKFURT (Reuters) – Facebook faces substantial business risks from new European Union privacy rules set to take effect in May, a looming reality that came into stark relief over the weekend with revelations that a controversial political consulting firm had improperly obtained personal data on 50 million Facebook users.

The Facebook application is seen on a phone screen August 3, 2017. REUTERS/Thomas White

Privacy experts said the disclosure that a researcher had sold Facebook data collected via a personality quiz to the consulting firm Cambridge Analytica is a prime example of the kinds of practices that the new General Data Protection Regulation, or GDPR, is supposed to prevent or punish.

The danger faced by Facebook going forward is two-fold: Complying with the rules means letting European users opt out of the highly targeted online ads that have made Facebook a money machine. Violating GDPR mandates could subject the California company to fines of up to 4 percent of annual revenues.

Had the Cambridge Analytica incident happened after GDPR becomes law on May 25, it “would have cost Facebook 4 percent of their global revenue”, said Austrian privacy campaigner and Facebook critic Max Schrems. Because a UK company was involved and because at least some of the people whose data was misused were almost certainly European, GDPR would have applied.

Shares in Facebook fell on Monday by 7 percent, their biggest drop since 2014, wiping nearly $40 billion off the value of the firm founded in 2004 by Mark Zuckerberg.

Schrems first raised concerns in 2011 about how easy it would be for third-party apps to harvest data from the unwitting friends of Facebook users. Facebook says it has tightened its controls on such practices since it discovered the alleged abuses by Cambridge Analytica in 2015.

Schrems has founded a non-profit, called None Of Your Business (NOYB), that is hiring lawyers and exploring avenues for “strategic litigation” over GDPR privacy violations.

According to whistleblower Christopher Wylie, who formerly worked with Cambridge Analytica, the consulting firm used the data to help then-U.S. presidential candidate Donald Trump to predict and influence choices at the ballot box.

“The fact of the matter is that Facebook lost control of the data and wasn’t adequately monitoring what third-parties were doing,” said Scott Vernick, a partner and an expert in privacy and data security at the Philadelphia law firm Fox Rothschild.

Vernick said the maximum GDPR fine could come into play in an incident like this because of the number of users affected and what appears to have been inadequate monitoring of third-party data practices.

Facebook said it changed its policies in 2014 to “to give much less data, especially about friends,” Facebook Vice President Andrew Bosworth said in a Facebook post on Monday.

“We conduct a robust review to identify potential policy violations and to assess whether the app has a legitimate use for the data,” the company said on Monday. “We actually reject a significant number of apps through this process.”

Compliance with GDPR rules could cost Facebook a significant amount of money. Deutsche Bank analysts in January estimated that Facebook’s overall revenue could be lowered by 4 percent in a scenario in which 30 percent of EU users opt out of targeted ads, reducing the effectiveness and likely price of ads shown by 50 percent.

The EU represents 24 percent of Facebook’s ad revenue, so multiplying those figures, the bank said the regulations could have a 4 percent impact on overall Facebook revenue.

“If this regulatory approach spreads to other countries or if GDPR ever becomes more onerous over the medium or long term, it would pose more risk,” Deutsche Bank warned.

The firestorm over Cambridge Analytica has prompted a furious response from lawmakers on both sides of the Atlantic, raising the prospect of just such an expansion of privacy protections.

Pivotal Research analyst Brian Wieser reiterated his ‘sell’ rating on Facebook after the weekend reports. Wieser expressed concerns that the company’s regulatory risks would intensify and that its sophisticated use of data in advertising was in jeopardy.

A December 2017 survey found that only 21 percent of European consumers know what GDPR is. But after the regulation was explained, 82 percent of respondents said they plan to exercise their new rights, according to the survey of 7,000 Europeans conducted by Cambridge, Mass.-based Pegasystems Inc, which makes sales and marketing software.

PageFair, an Irish startup that helps website deliver non-targeted ads and avoid ad-blocking, estimates that only 3 percent of European social media users will opt-in to targeted ads, a potentially “devastating” blow for Facebook and other platforms, says Johnny Ryan, PageFair’s head of ecosystem.


The quandary for Facebook is readily apparent from a video it began showing customers in February: it teaches people how to delete their accounts.

GDPR gives users the right to access their data, delete it or transfer it to competing companies. Social networks will also need to regain Europeans’ consent every time they want to use their data in new ways, including for targeted advertising.

Lawmakers had social networks in mind when drafting GDPR, said Helen Dixon, the data protection commissioner of Ireland, which is the lead GDPR regulator for numerous tech companies including Facebook, Twitter and LinkedIn.

“There was very big consideration of these newer types of platforms,” she told Reuters.

Tough European rules stand in sharp contrast to the lack of privacy regulation in the United States and many other countries, raising the prospect that Facebook will begin to look much different from one country to the next.

For example, the social media giant in 2017 released new artificial intelligence features that detect when a user is at risk of suicide or when someone else uploads a picture of their face.

The company did not make those features available in Europe. Facebook did not specify a reason. But heightened scrutiny in Europe over such practices with GDPR looming may have been a factor.

Another challenge for social networks are GDPR provisions mandating how companies must obtain permissions. The regulation demands that requests for consent be presented “in an intelligible and easily accessible form, using clear and plain language.”

In other words, the days of extensive “terms of service” agreements written in small text will no longer pass muster in Europe, numerous data privacy lawyers told Reuters.

In practice, social network users may find themselves seeing more “permissions screens” and being asked to check boxes every time a social network rolls out a new feature.

That could depress usage, Facebook Chief Financial Officer David Wehner said at an investor conference last month.

“Whenever you walk people through permission screens, there’s some potential that people decide they’re not going to use the product,” Wehner said. “We don’t think it will be big, but there could be some implication there.”

Additional reporting by Foo Yun Chee in Brussels, and Paul Sandle and Eric Auchard in London; Editing by Jonathan Weber and Marla Dickerson

The Problem With Drug Development Isn’t Regulation

LAGUNA NIGUEL, Calif.—The cost of failure for drug development is rising. The productivity gains seem elusive. And of course there are the economics, a pressure on drug pricing that won’t let up.

The “pipeline”—that is, the drug development process—is under fire at a time when medical science seems to be making leaps and bounds. What gives? Experts gathered over lunch here at Fortune’s Brainstorm Health conference to discuss.

“The efficiency of the industry in converting cash into drugs is terrible,” said Bernard Munos, a senior fellow at FasterCures, a Washington, D.C. think tank focused on accelerating medical research. There’s $160 billion spent on research by public companies in the pharmaceutical/health industry, Munos said. And yet there are just 35 to 45 notable drugs created per year—and it’s getting worse.

“Part of the problem is of our own making,” Munos explained. How do you measure innovation? The number of drugs a company produces is only “part of the story”—commercial success should be evaluated, too. But: “The picture isn’t pretty,” he said. Of the companies that produce largest number of drugs, the percentage of revenue from recently developed drugs is in the high 20s, low 30s. In other words, most pharma revenue comes from products that are out of patent. “That changes the culture of the company to focus on keeping old drugs performing,” Munos said.

Paul Rejto, executive director and head of Oncology Translational Research at Pfizer, pushed back slightly. There is good reason that it takes so much time and effort to discover new drugs, he said. “We are not trying to solve an engineering problem where all the parameters are known,” Rejto said. “We’re really trying to discover a lot of new biology and leverage that new biology to come up with new therapeutics.”

Plus, companies are not competing in a vacuum. They’re competing against all alternative therapies as well as with each other. “The pace of technological change is incredibly exciting,” Rejto said.

Besides—the problem isn’t failure, but how it’s managed, said Lesley Stolz, head of the Bay Area location of Johnson & Johnson’s JLABS unit. “There are a lot of roads that we go down where we fail,” she acknowledged. “You need to fail fast. But a lot of researchers are not incentivized to fail fast.” The key is teaching them how to fail “so that we’re not wasting as many dollars per day.”

Udit Batra, CEO of lab chemicals company MilliporeSigma, agreed. “Science is difficult,” he said. “It’s difficult to scale up. And engineering is also difficult.” The good news, he added: We can develop things in far less space—and with far less capital—than we used to.

The key, said David Humphreys, head of U.S. healthcare for the Economist Intelligence Unit, is being able to understand true impact so that organizations have a better sense of direction. “Sustainability is not just for the industry,” he said of drug development. “It’s for patients, it’s for health systems also going through radical changes.” There is a lot of promise for innovations, he added. But what are the barriers?

Fortune editor-in-chief Clifton Leaf then took the opportunity to ask the room which barriers were stopping a better drug development process. “A show of hands,” he said. “How many people say regulatory barriers?”

Only a few hands went up.

“And how many people believe it’s cultural barriers?”

Most of the room’s hands went up.

For more coverage of Fortune’s Brainstorm Health conference, click here.

Facebook critics want regulation, investigation after data misuse

SAN FRANCISCO (Reuters) – Facebook Inc faced new calls for regulation from within U.S. Congress and was hit with questions about personal data safeguards on Saturday after reports a political consultant gained inappropriate access to 50 million users’ data starting in 2014.

FILE PHOTO: Facebook logo is seen at a start-up companies gathering at Paris’ Station F in Paris, France on January 17, 2017. REUTERS/Philippe Wojazer/File Photo

Facebook disclosed the issue in a blog post on Friday, hours before media reports that conservative-leaning Cambridge Analytica, a data company known for its work on Donald Trump’s 2016 presidential campaign, was given access to the data and may not have deleted it.

The scrutiny presented a new threat to Facebook’s reputation, which was already under attack over Russians’ alleged use of Facebook tools to sway American voters before and after the 2016 U.S. elections.

“It’s clear these platforms can’t police themselves,” Democratic U.S. Senator Amy Klobuchar tweeted.

“They say ‘trust us.’ Mark Zuckerberg needs to testify before Senate Judiciary,” she added, referring to Facebook’s CEO and a committee she sits on.

Facebook said the root of the problem was that researchers and Cambridge Analytica lied to it and abused its policies, but critics on Saturday threw blame at Facebook as well, demanding answers on behalf of users and calling for new regulation.

Facebook insisted the data was misused but not stolen, because users gave permission, sparking a debate about what constitutes a hack that must be disclosed to customers.

“The lid is being opened on the black box of Facebook’s data practices, and the picture is not pretty,” said Frank Pasquale, a University of Maryland law professor who has written about Silicon Valley’s use of data.

Pasquale said Facebook’s response that data had not technically been stolen seemed to obfuscate the central issue that data was apparently used in a way contrary to the expectations of users.

“It amazes me that they are trying to make this about nomenclature. I guess that’s all they have left,” he said.

Democratic U.S. Senator Mark Warner said the episode bolstered the need for new regulations about internet advertising, describing the industry as the “Wild West.”

“Whether it’s allowing Russians to purchase political ads, or extensive micro-targeting based on ill-gotten user data, it’s clear that, left unregulated, this market will continue to be prone to deception and lacking in transparency,” he said.

With Republicans controlling the Senate’s majority, though, it was not clear if Klobuchar and Warner would prevail.

The New York Times and London’s Observer reported on Saturday that private information from more than 50 million Facebook users improperly ended up in the hands of Cambridge Analytica, and the information has not been deleted despite Facebook’s demands beginning in 2015.

Some 270,000 people allowed use of their data by a researcher, who scraped the data of all their friends as well, a move allowed by Facebook until 2015. The researcher sold the data to Cambridge, which was against Facebook rules, the newspapers said.

Cambridge Analytica worked on Trump’s 2016 campaign. A Trump campaign official said, though, that it used Republican data sources, not Cambridge Analytica, for its voter information.

Facebook, in a series of written statements beginning late on Friday, said its policies had been broken by Cambridge Analytica and researchers and that it was exploring legal action.

Cambridge Analytica in turn said it had deleted all the data and that the company supplying it had been responsible for obtaining it.

Andrew Bosworth, a Facebook vice president, hinted the company could make more changes to demonstrate it values privacy. “We must do better and will,” he wrote on Twitter, adding that “our business depends on it at every level.”

Facebook said it asked for the data to be deleted in 2015 and then relied on written certifications by those involved that they had complied.

Nuala O’Connor, president of the Center for Democracy & Technology, an advocacy group in Washington, D.C., said Facebook was relying on the good will of decent people rather than preparing for intentional misuse.

Moreover, she found it puzzling that Facebook knew about the abuse in 2015 but did not disclose it until Friday. “That’s a long time,” she said.

Britain’s data protection authority and the Massachusetts attorney general on Saturday said they were launching investigations into the use of Facebook data.

“It is important that the public are fully aware of how information is used and shared in modern political campaigns and the potential impact on their privacy,” UK Information Commissioner Elizabeth Denham said in a statement.

Massachusetts Attorney General Maura Healey’s office said she wants to understand how the data was used, what policies if any were violated and what the legal implications are.

Reporting by David Ingram; Editing by Peter Henderson and Chris Reese

Simple Ways to Boost Your Company's Press Profile

You may expect your life to magically change after a guest blog post or a few minutes on local TV news. Wrong! 

Public relations efforts can help build awareness of and credibility for your brand, yourself, your product, or service. PR can help your SEO rankings and, when people look for your company name or your name, they may find a third party mention rather than just what you’ve written about yourself. 

However those eyeballs don’t necessarily translate into sales. After the ego rush, you might feel a wave of what I call “post-PR depression.” Your colleagues, friends, and family may all congratulate you within the first 24 hours. But then what? Here are some great ways to get more mileage from your mentions.

  • Add them to your website (perhaps even through a pop-up), your social media sites, and (in the case of TV) your own YouTube, Vimeo, or Wistia channel. If you work with a professional PR firm or freelancer, encourage them to post on their sites as well.
  • When you post on social media, tag the media outlet and the people who helped you prepare for your media mention. Gratitude is always good.
  • Share on Google Plus. It sometimes boosts your search rankings.
  • Start a separate Pinterest and/or Instagram board of all your “clips.” Not only will that increase your visibility, you’ll be able to refer to all your press all in one place. (I also recommend using Dropbox or Google Docs to archive media mentions)
  • Use an app like WiseStamp (tailored to small businesses) or Sigstr (for enterprise-level companies) to add your media mentions to your e-mail signature.
  • Be sure to include the mention in your  company’s regular e-newsletter or send out a separate e-blast.

Rather than just re-posting your clips, offer readers/viewers a little something extra — a tip you didn’t mention in the article, a special deal as a thank-you for viewing your link.

Remember, building a portfolio of media mentions takes time and patience. But, above all, you need to have something newsworthy or helpful to share. Regardless of whether you’re dealing with conventional or digital media, your insights need to be unique to break through the media clutter.

Amazon's Jeff Bezos Just Proved That All Those Rich And Famous Do-What-I-Do Stories Are Nonsense

Sometimes, luck wins.

“How to be successful” returns 843 million results on Google. “I will teach you to be rich” is an actual website. And we can’t go a day without seeing how four habits will make us successful, or seven things the most successful people are always doing, or, from the astonishingly loquacious and for the above-average attention span, 37 secrets only successful people know.

All of it is nonsense.

Don’t get me wrong: there’s a lot of good advice, and there’s a lot that can help people. Go ahead: read one of these every day. Just don’t believe that they will make the entire difference between you living on $45,000/year and building the next Facebook.

Because … luck.

Don’t take my word for it. Listen to Amazon founder, new richest person on Earth, and currently a billionaire 130.5 times over. (Hold your breath for a moment, and if Amazon stock goes up, it’ll be 135 times.)

“The price of admission to space is very high,” Bezos recently said as he accepted a Buzz Aldrin exploration award. “I’m in the process of converting my Amazon lottery winnings into a much lower price of admission so we can go explore the solar system.”

There’s only two things you need to pay attention to in that statement.

One, it takes a lot of money to be a space explorer.

And two, Bezos acknowledges that his extraordinary success and stupendous wealth are, at least to some degree, the result of an incredible streak of luck.

There’s no doubt that Bezos is smart.

There’s no doubt that Bezos is visionary.

There’s no doubt that Bezos is a super-talented technologist and leader and business person and manager.

Even so, in his own words, his tremendous fortune is the result of “Amazon lottery winnings.” That might just be seen as simple politeness, downplaying his own role in amassing the modern world’s biggest fortune. But I don’t think so.

I think Bezos gets it.

Even super-smart and super-successful people rely on a lot of luck (and the help of friends) to get where they’ve gone. Where would Amazon be without the internet? Where would Amazon be if Bezos couldn’t find investors? Where would Amazon be if stock markets hadn’t been so forgiving of its lack of desire to show quarterly profits for almost two decades? And where would Amazon be today if a wonderful confluence of natural language processing, artificial intelligence, cloud technology, device manufacturing, and massive distribution power hadn’t made its Echo line of products one of the most successful in recent years?

Much of that required seizing opportunity by the horns and running with it.

But much of it required sheer, blind, luck. And thanks to Jeff Bezos’ comments, we can see that in operation from one of the most successful persons in the entire world.

Remember that next time you see a “5 steps to instant success” article on the internet.

7 Lessons That Will Give Your Business That 1 Percent Edge

No company or entrepreneur gets it right every time. As an angel investor, I have found that people claiming a perfect record are either lying to themselves, or they are not taking enough risk to enable a big payback.

In the long run, your ability to thrive in business today is more about how you prepare for and handle the inevitable exceptions and failures, than shooting for perfection.

In trying to put a practical edge on this message, I found some help in a new book, The One-Percent Edge, by Susan Solovic. She has been there, as a serial entrepreneur, internet pioneer, attorney, and media personality.

She offers some good lessons for every modern business and entrepreneur that I can paraphrase here, with insights from my own experience:

1. Not every customer is predictable, so expect exceptions.

Of course, it’s important to put standard processes in place for all transactions, returns, and service requests, but a policy of “no exceptions” is not competitive today.

A special case handled individually can be your best advertising, through social media and this world of instant communication. 

For example, when a grieving customer informed a T-mobile customer representative that her husband had just passed away with a $2000 overdue bill, with all funds frozen, the customer’s account balance was forgiven. She was even offered unlimited minutes for the following two months. She shared her joy online, with over 29 thousand views and likes.

2. Train customer support personnel for complex situations.

By the time a customer decides to reach beyond a front-line employee, the situation is already complex. The age-old approach of putting marginal or new employees in support is a recipe for disaster.

Put your best employees in support, and continually enhance customer support satisfaction. 

3. Give employees the authority and incentives they need.

Above all, employees must have your trust and empowerment to make exceptions where appropriate, and solve problems on the spot. One of the best approaches I have seen is managers providing rewards for problem solving, including visible public recognition for their peers to see.

For example, the transport staff at the Staten Island University Hospital Radiology Lab has the tough and tiring job of wheeling patients around for testing.

When an employee witnessed another solving a problem or going the extra mile, they would nominate them for a Go the Extra Mile (GEM) certificate. These make everyone more empowered. 

4. Respond to customer special requests in real time.

For better or for worse, the Internet and social-media-based customer access have made consumers expect virtually immediate responses to their issues.

I still regularly hear from customers that wait for days or weeks after submitting a web form, or get stuck in telephone queues for an hour.

5. Offer a great customer experience, not just a product.

Today lasting customer loyalty requires an experience that goes far beyond the initial product or service.

This includes marketing, social media, the buying experience, as well as service. If that experience falls short of the mark, your business will suffer, no matter how great your service is.

Many negative customer experiences can actually be turned into positives, if you quickly acknowledge the problem, resolve it, and spread the positive message before the negative one gets amplified. Don’t repeat the United Breaks Guitars experience, which now has been published as a book on what not to do.

6. Be accountable, and admit and correct mistakes quickly.

Successful leaders and businesses are humble and transparent enough with themselves and others to admit mistakes and correct them quickly. In this way, those around them, including customers, can benefit from their learning, and feel a positive relationship and trust.

7. Learn from the companies that get it right.

Etsy is an example of a company that has a tremendous reputation with customers. Every user gets a unique experience, and this gives them a feeling of being special and well-cared for.

The team works hard to personalize the customer journey so that users feel more connected with the experience.

Remember, you don’t have to be perfect to outperform the competition. Only one percent above the rest is still the top. No quantum leap is required to get there – just make small incremental improvements in all areas of your business, and you too can avoid the pain of a radical overhaul (when it may be too late anyway), while increasing your agility and resilience.

Defense Department Is Using Google’s AI Tech to Help With Drone Surveillance

Google is helping the military use artificial intelligence to analyze video from drones to more quickly identify objects like trucks.

The deal is part of the Defense Department’s Project Maven initiative to use technology and automation to sift through huge amounts of data, according to tech publication Gizmodo, which reported on the partnership on Tuesday.

A Google (goog) spokesperson confirmed to Fortune that the search giant is working with the Defense Department and said that the company has “long worked with government agencies to provide technology solutions.” The spokesperson added that Google’s technology “flags images for human review, and is for non-offensive uses only.”

Anonymous Google employees expressed concern in the Gizmodo article that Google is helping the U.S. government improve drone surveillance operations and that the project highlights “important ethical questions about the development and use of machine learning.” The Google spokesperson acknowledged that the “military use of machine learning naturally raises valid concerns.”

“We’re actively discussing this important topic internally and with others as we continue to develop policies and safeguards around the development and use of our machine learning technologies,” the spokesperson wrote in an email.

As part of the partnership, the Defense Department is using Google’s free, open source TensorFlow software, used by developers to create powerful software that rely on machine-learning and can quickly recognize objects in photos like cats. For this project, the Google spokesperson said that the military would only use the technology to recognize images “on unclassified data.”

In July, the Defense Department described Project Maven as an initiative to explore how cutting-edge AI technologies could eventually be used in warfare.

“People and computers will work symbiotically to increase the ability of weapon systems to detect objects,” Marine Corps Col. Drew Cukor said in a statement. “Eventually we hope that one analyst will be able to do twice as much work, potentially three times as much, as they’re doing now. That’s our goal.”

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The Defense Department had said that it would be undergoing “a competitive selection process to find vendors that can provide algorithms against DoD data.”

“You don’t buy AI like you buy ammunition,” Cukor said. “There’s a deliberate workflow process and what the department has given us with its rapid acquisition authorities is an opportunity for about 36 months to explore what is governmental and [how] best to engage industry [to] advantage the taxpayer and the warfighter, who wants the best algorithms that exist to augment and complement the work he does.”

Scality Zenko 'multi-cloud controller' offers hybrid cloud boost

Scality will release a commercially supported version of its “multi-cloud data controller” Zenko at the end of March.

The product from the object storage maker promises to allow customers increased hybrid cloud operations; to move, replicate, tier, migrate and search data across on-premise, private cloud locations and public cloud, although it’s not that clear how seamless those operations will be.

Zenko was launched last year as an open source product, but will be commercially available in March 2018.

Zenko is based on Scality’s 2016 launch of its S3 server, which provided S3 access to Scality Ring object storage. The key concept behind Zenko is to allow customers to mix and match Scality on-site storage with storage from different cloud providers.

Initially access will be to Amazon Web Services, Google Cloud Platform and Microsoft Azure public could services as well as Scality Ring-based private clouds. “More are coming,” said Scality product management vice-president Paul Speciale.

Scality Ring software runs on commodity hardware and uses object storage to scale as a single distributed system across multiple sites and potentially thousands of standard x86 servers. Its architecture provides concurrent access to data.

Scality and other object storage suppliers use the representational state transfer (Rest) protocol to store very large amounts of data in a flat system where files are identified solely by metadata.

This contrasts with traditional file systems that use a tree-like hierarchical structure. This places limits on file systems because performance overheads increase as the file system grows towards billions of files.

Bloomberg is a Zenko beta customer. It wanted access to three clouds – AWS, Google and Azure – so that it maintained choices about where to put data and to be able to operate high availability between clouds, said Speciale.

“Bloomberg uses Zenko to manage video files,” said Speciale. “It puts shows in the cloud, carries out transcoding processing in Amazon EC2, then puts files on multiple clouds to provide customer access.”

“Data is readable natively to the format of the cloud, so it can be used by apps in that cloud. What you get is an interface between clouds. It neutralises APIs,” he said. “A bucket, for example [in AWS], specifies where it lives, and you can create policies such as replication between clouds.”

Zenko Orbit

Zenko Orbit, a point and click interface for use with Zenko, will be released at the end of March.

Zenko is a further manifestation of a trend towards multi-site – private datacentre and public cloud – operations. It is one of several file systems and object storage schemes that can operate across locations, between on-premise datacentres and public cloud services, such as those from Qumulo, Cloudian, Weka etc. These bring the possibility of hybrid cloud operations in which data portability issues are solved.

“On-premise is not going away and some enterprises are building new datacentres, but multi-cloud is real,” said Speciale.

It is not completely clear, however, to what extent Zenko will allow for data portability between clouds. Will customers be able to drag and drop between clouds in Zenko?

“Simplified data migration between clouds is on the Zenko roadmap, but in the first release we are providing a solution for two-other use-cases: Cloud media workflows and cloud disaster recovery,” he said.

The next version of Scality Ring, the company’s core object storage platform, will be released in mid-2018, with an appliance version available by the end of the year.

Netflix Shares Just Crossed a Major Milestone to a New Record High

Netflix’s shares crossed the $300 mark for the first time on Friday to reach a new record high.

The video streaming video giant’s stock closed at $301.05, up 3.67%.

Netflix’s market value of $130.6 billion puts it within reach of other entertainment and media powerhouses like Disney (market cap $154.7 billion) and Comcast (market cap $169.5 billion), as Hollywood business publication Variety noted.

Netflix shares have skyrocketed 1,000% over the past five years, propelled by the huge growth of its video streaming service. In Mar. 2013, Netflix share’s were trading at around $26.

In the most recent quarter, Netflix(nflx) reported solid earnings that included adding 8.3 million subscribers, far higher than the 6.3 million that Wall Street had expected. Netflix has over 117 million total streaming subscribers, as of the end of Dec. 2017.

One of the ways Netflix has grown its subscriber base is by creating original programming that’s been a hit with viewers. As Fortune’s Tom Huddleston noted in January, two of Netflix’s most popular original shows—the science fiction series Stranger Things and the historical drama The Crown—premiered in the company’s fourth quarter, which could have prompted more subscribers to sign up.

Netflix plans to spend $8 billion in 2018 on original programming, including movies, teen dramas, and even anime. The company is hoping to create enough compelling content to keep viewers glued to watching shows on its service—and undercut the potential of broadcasting networks like Disney (dis) pulling their shows from Netflix’s library.

Disney, for example, plans to debut its own streaming video service in 2019 that will feature Disney’s own collection of animated films and movies, and has previously said it will stop making available new movies on Netflix.

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Daniel Ives, an analyst from GBH Insights, wrote in a research note in February that while media giants like Disney pose a “clear competitive worry” to Netflix, he’s optimistic about the company’s prospects. One of Netflix’s core advantages, Ives cites, is its original programming, which he said will continue to lure new subscribers.

From the GBH Insights research note:

With more consumer dollars shifting away from traditional cable with cord cutting and towards streaming delivery, we believe Netflix has a long runway of growth and opportunity ahead of itself and clear first mover advantage despite intense competition from larger media players (Disney), pure play competitors, and new potential entrants (e.g. Apple).

Spotify plans to list shares, fend off Apple and Amazon

(Reuters) – Music streaming service Spotify on Wednesday filed for a direct listing of its shares, laying out financial data for the first time that cheered some analysts but led others to question how it could turn a profit from its growing subscriber base.

Spotify, which wants to trade as SPOT on the New York Stock Exchange, is taking an unusual path to the U.S. public markets, with a direct listing that will let investors and employees sell shares without the company raising new capital or hiring a Wall Street bank or broker to underwrite the offering.

Because the company will not issue any new shares, it did not specify a listing price. Based on private transactions, it is valued at roughly $19 billion, according to Reuters calculations.

Spotify, launched in 2008 and available in more than 60 countries, is the biggest music streaming company in the world and counts services from Apple Inc (AAPL.O), Amazon.com Inc (AMZN.O) and Alphabet Inc‘s< GOOGL.O> Google as its main rivals.


In the filing, Spotify laid out detailed financial data for the first time, showing rising revenue and relatively steady operating costs, which analysts took as a positive.

Revenue rose 39 percent to 4.09 billion euros ($4.99 billion) in 2017, from 2.95 billion euros a year earlier. Its operating loss widened to 378 million euros in 2017 from 349 million euros.

Its net loss ballooned 129 percent in 2017, driven mostly by financing costs related to a 2016 deal in which Sweden-based Spotify raised $1 billion in debt that would convert to shares upon an initial public offering.

“The revenue continues to grow but in particular their costs are growing slower than revenue, which is exactly what you expect in a business like this,” said Jay Ritter, an expert in initial public offerings and professor at the University of Florida.

Spotify compared its aspirations to the reach of Facebook (FB.O) and YouTube. “We believe the universality of music gives us the opportunity to reach many of the over 3.6 billion internet users globally,” it said.

With 71 million premium subscribers globally, Spotify has about twice as many paying customers as music streaming runner up Apple, with 36 million. Including those who listen to advertising-supported streams, Spotify has about 159 million monthly average users.

Amazon Music Unlimited has 16 million paying subscribers, and Pandora Media Inc (P.N) has 5.48 million total subscribers.

Google has not said how many subscribers it has to Google Play, its music streaming service.

Spotify’s premium subscription costs $9.99 a month, but it said it saw great potential in its ad-supported service, which Apple does not offer.

“With our ad-supported service, we believe there is a large opportunity to grow users and gain market share from traditional terrestrial radio,” Spotify said.

The net proportion of subscribers who left Spotify’s paid-for service, or churn, fell to 5.1 percent of paying customers at the end of 2017, from 6.9 percent at the start of 2016, the company said.

“This has been a question we’ve been wondering for a long time: how sustainable is Spotify’s model? This is the very first time we’re seeing public disclosure about churn, and the news there is really good,” said Larry Miller, head of the music business program at New York University’s Steinhardt School.

Spotify calculated that customers brought in 3.6 times more revenue over their life as a user than the company spent on marketing to attract them, as of the end of 2017, helping boost free cash flow to 109 million euros by the end of last year.

Still, in going head to head against Apple, Amazon and others, Spotify is “competing against companies that never need to make a dime on music as a standalone business and that in fact use it to drive other aspects of their business,” Miller said.

Apple and Alphabet also control the two main operating systems used by smartphones, iOS and Android. They and Amazon are all developing computer assistants, such as Amazon’s Alexa and Apple’s Siri, that could give the bigger companies advantages.

“Many of our competitors enjoy competitive advantages such as greater name recognition, legacy operating histories, and larger marketing budgets, as well as greater financial, technical, human, and other resources,” Spotify said in its filing.

Apple has launched massive marketing campaigns around its service and added subscribers rapidly in the last three years. “I don’t think there’s any doubt that the pace of competition this year has quickened,” Miller said.

Spotify has a powerful ally, in the music arm of China’s Tencent Holdings Ltd (0700.HK). The companies in December said they would buy minority stakes in each other, helping increase exposure to each other’s core markets.


A direct listing does not dilute ownership, as would happen with a conventional initial public offering, and saves hundreds of millions of dollars in underwriting fees. But it also frees existing owners from any lockup period restricting them from selling their shares following the listing.

Underwriters that provide price stability for new listings are not used in a direct listing, which could mean a volatile start for Spotify shares in public.

Shares trade privately in a wide band. Spotify is valued between $16.8 billion and $22.5 billion, based on recent ordinary share prices between $95 and $127.50 in the private markets in February and 178 billion shares estimated outstanding by the end of February, according to its filing.

Synovus Trust portfolio manager Dan Morgan described Spotify as “interesting,” but questioned how quickly it might become profitable.

“How can Spotify monetize its user base beyond a $5-$15 monthly subscription fee?,” Morgan asked.

Reporting by Nikhil Subba and Nivedita Bhattacharjee in Bengaluru, Stephen Nellis and Noel Randewich in San Francisco and Greg Roumeliotis and Jessica Toonkel in New York; additional reporting by Subrat Patnaik in Bengaluru; Editing by Peter Henderson, Meredith Mazzilli and Rosalba O’Brien

America's Iconic Beach Hotel Rings In Its 130th Year In Style

“Iconic” is a word thrown around so much it can become meaningless, but it fits the legendary

seaside resort, Hotel del Coronado, which is celebrating its 130th anniversary this year, like a glove. Set near San Diego on one of America’s most picturesque beaches, the Del has made and been the site of its fair share of history, with a guestbook second to none that dates back to 1888.

A few snapshots: L. Frank Baum writing three of his Oz novels when in residence here at the beginning of the 20th century. Charlie Chaplin playing polo in the 20s. Marilyn Monroe, Tony Curtis, and Jack Lemmon romping throughout the property in the Hollywood classic “Some Like it Hot” in 1959. Royalty (both actual, like King Edward, and de facto such as Walt Disney and Katherine Hepburn), who visited and were treated as such, as well as many American presidents.

Beyond its famous guestbook, The Del is a living legend, a backdrop for creating a grand American beach vacation for the families and travelers from all around the world who flock to California specifically to visit this jaw-dropping property.  

As the property rings in its 130th birthday in 2018, the celebrations are gearing up, with the hotel putting on a year of events, some that highlight the culinary side of this hospitality landmark, some that revel in the sheer beachiness of the location, and some that shine a spotlight on both. (In this hybrid category, the summer season will shine with a beachside Summer Clambake Series, with renowned guest chefs from California and Baja who will join Executive Chef Stefan Peroutka for their take on the California Clambake.)

Add to that Father’s Day concerts, San Diego Pride, Beach Polo, a Chef Throwdown, and a “Hallo-Wine + Spirits” party (among other events), 2018 is a particularly sunny opportunity to visit America’s beloved hotel-and, while you’re there, to wish it a happy 130th.

Yes, Uber Really Is Killing the Parking Business

An email from the CEO of a national parking operator has added some detail to the impact ride-hailing services like Uber and Lyft are having on demand for parking. The picture, at least for those trying to rent you a parking spot, is bleak.

In the email, unearthed from a company report by the San Diego Union-Tribune, Ace Parking CEO John Baumgardner says that demand for parking at hotels in San Diego has dropped by 5 to 10%, while restaurant valet demand is down 25%. The biggest drop, unsurprisingly, has been at nightclubs, where demand for valet parking has dropped a whopping 50%.

The numbers appear to be estimates, and Baumgardner doesn’t describe a timeframe for the declines. The assessment, written in September of last year, is also limited to San Diego, though an Ace Parking executive told the Union-Tribune that it has seen “similar” declines at its 750 parking operations around the United States. The company is focused on using technology, including better parking scheduling and booking options, to remain healthy.

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But much more is at stake than the revenues of the parking business – cities stand to benefit immensely as demand for parking drops. Parking spaces and lots generate relatively little tax revenue or economic activity relative to commercial operations, and by increasing sprawl may actually harm the economy of cities like Los Angeles.

Even back in 2015, cities were already relaxing zoning requirements that set minimum parking allotments, and there are now even more signs that city planners are thinking differently about parking. Perhaps most dramatically, a new Major League Soccer stadium being planned for David Beckham’s Miami expansion team may include no new parking at all – but will have designated pickup zones for Uber and Lyft.

The decline of parking will only be accelerated if and when autonomous vehicles become widespread. That sea-change which will make it easier to locate parking at a distance from urban destinations, and could further reduce car ownership. That will be bad news for the Ace Parkings of the world – but everyone else should welcome the decline of the urban parking lot.

Delta Just Made a Mess of a Wonderful PR Opportunity With the Victorious U.S. Curling Team (Can United Take Advantage?)

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

For most of their lives, Americans don’t care about curling.

On Friday night, however, many were riveted to heavy kettles sliding down the ice, as grown men manically swept away like cleaners on cocaine.

They were even shrieking in Hoboken when they should have been in bed. 

And then the U.S. Curling team won.

The same U.S. Curling team that, four years ago, had their captain John Shuster described by Deadspin as “the choking captain of our choking team of choking curlers.”

Some Americans just can’t bear losing.

You might imagine that the victorious U.S Curling Team is in a good mood.

So its governing body took to Twitter to make a small request of Delta Air Lines.

Perhaps they were joking. Perhaps they were hoping.

I’m a little of both when I occasionally try to incite the sympathy of an airline check-in agent.

Oh, but look how Delta replied.

Oh, no, no, no. 

Ten tons of no.

There aren’t enough no’s to sufficiently express quite what a no response this is.

Naturally, I can see that some might praise the airline for its deep-seated lurch toward equality. 

But the administrative neutrality of the tone was desperately inappropriate.

Delta surely had alternatives.

These men are folk heroes. At least for this weekend. 

Give them something and you’ll get lovely PR from it.

The airline could, for example, have teased U.S.A. Curling to switch to Direct Message and worked something out that would have delighted the team and made Delta look good.

That’s what often happens when a passenger has a complaint. The airline immediately asks them to switch to private communication.

Delta could have worked out a promotional deal. It could have agreed to ferry the team on some sort of goodwill tour around the chillier, snowier parts of America. 

It could have created a special celebration for the team when it got home.

Instead, oh, this. Ugh, this.

The tweet didn’t even say whether the flight was full and therefore its hands were tied.

I contacted the airline to ask if this was the case and will update, should I get wind.

So now United Airlines, it’s for you to knock that Delta kettle out of the airline PR circle thingy and score a fiver. (This is curling terminology, of course.)

United, you’re an Olympic sponsor, after all.

Lay on a special plane, one in which the team can actual curl down the aisle.

The PR would be worth millions.

Airbnb’s Co-Founder Dishes on Major Overhaul to How Customers Book Lodging

Airbnb co-founder Nathan Blecharczyk has big plans for its new Airbnb Plus program.

On Thursday, Airbnb CEO Brian Chesky announced the program at a media event in San Francisco, pitching it as a more reliable way for booking temporary lodgings that meet the company’s standards. Those homes, which are inspected by Airbnb to make sure they meet certain criteria like cleanliness, will be featured higher in the company’s search rankings, and therefore more visible to users.

In an interview with Fortune, Blecharczyk, the company’s chief strategy officer, characterized Airbnb Plus as the company’s most important new feature.

“Here’s a set of properties that we actually sent someone to inspect,” he said about the difference between the typical homes people see on Airbnb and the 2,000 homes now featured in the Plus program.

To be accepted into the Plus program, homeowners must pay a $149 fee and adhere to a 100-point checklist of criteria like home cleanliness, overall design, and attractiveness. Airbnb has not said whether it would reimburse people who submit their homes for the Plus program, but are rejected.

Blecharczyk said that who the inspectors are varies by market, but that many of them have previously worked for the company as photographers. Airbnb uses contract photographers to take professional images of houses for homeowners for a fee if they want more appealing pictures for their listings. Now, Airbnb is going to arm those freelance photographers with checklists to note whether homes meet certain standards, he explained.

Airbnb developed the checklist through “customer research” and from what it learned from buying high-end rental company Luxury Retreats a year ago in a deal reportedly worth $300 million. Luxury Retreats had its own criteria for choosing resort villas and expensive retreats, and Airbnb adopted some of that for its Airbnb Plus checklist, Blecharczyk explained.

Homeowners accepted into the Airbnb Plus program would receive “premium customer support” that Blecharczyk said would consist of a dedicated customer service team, primarily consisting of outsourced workers.

Blecharczyk aims to have 75,000 homes showcased on Airbnb Plus by the end of the year.

About Chesky’s comments during the day that Airbnb would eventually debut luxury travel packages, Blecharczyk said the company is still figuring it out. Airbnb could create an online service for choosing the packages like they do with homes, or it could use live staff.

While these options are “not something we have talked about or announced,” they’re “certainly within the scope of our longer term vision,” Blecharczyk said.

One thing Blecharczyk is adamant about, however, it that while Airbnb may debut features intended to help people create vacation plans, the company doesn’t intend to become an online travel agency.

“Our storefront is really about selling what we call ‘magical trips,’” Blecharczyk said. He acknowledged that using the term “magic” to describe Airbnb could sound “funny” to some, but he believes it’s the appropriate word for the kinds of “local, unique, and authentic” stays Airbnb aims to deliver.

Finding a place to stay through Airbnb is not simply choosing a temporary roof over one’s head, but involves friendly locals inviting people to their homes and learning about each region’s customs and cultures, he said.

As an example, he cites an Airbnb rental he booked in Hawaii, where he bonded with a musician host who knew the Dalai Lama and showed him “his favorite fishing spot in Maui.” Trips like this wouldn’t be possible in more conventional kinds of lodging.

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Not everyone is happy about Airbnb’s new Plus program. The American Hotel and Lodging Association sent Fortune a comment about the overhaul, accusing Airbnb of “trying to play in the hoteling space while evading industry regulations. “

The association’s complaint is similar to the taxi industry’s stance on Uber and Lyft operating transportation services without adhering to the same regulations they do.

Venezuela says launch of 'petro' cryptocurrency raised $735 million

CARACAS (Reuters) – President Nicolas Maduro said Tuesday that Venezuela had received $735 million in the first day of a pre-sale of the country’s “petro” cryptocurrency, aimed at pulling the country out of an economic tailspin.

Maduro is hoping the petro will allow the ailing OPEC member to skirt U.S. sanctions as the bolivar currency plunges to record lows and it struggles with hyperinflation and a collapsing socialist economy.

Blockchain experts have warned the petro is unlikely to attract significant investment. Opposition leaders have said the sale constitutes an illegal debt issuance that circumvents Venezuela’s majority-opposition legislature, and the U.S. Treasury Department has warned it may violate sanctions levied last year.

Maduro did not give details about the initial investors and there was no evidence presented for his figure. He added that tourism, some gasoline sales and some oil transactions could be made in petro.

“Today, a cryptocurrency is being born that can take on Superman,” said Maduro, using the comic character to refer to the United States, as he was flanked by mining rigs in a state television address.

The official website for the petro on Tuesday published a guide to setting up a virtual wallet to hold the cryptocurrency. The cryptocurrency goes public next month.

Venezuela’s President Nicolas Maduro examines a cryptocurrency mining computer during the event launching the new Venezuelan cryptocurrency “Petro” in Caracas, Venezuela February 20, 2018. REUTERS/Marco Bello

Venezuelan Cryptocurrency Superintendent Carlos Vargas last week said the government was expecting to draw investment from investors in Turkey, Qatar, the United States and Europe.

The value of the entire petro issuance of 100 million tokens would be just over $6 billion, according to details given by Maduro in recent months, though no new price information was provided on Tuesday.

Slideshow (5 Images)

The tokens will each be valued at and backed by a barrel of Venezuelan crude oil, Maduro has said.

Advisers working for the government have in the past recommended that 38.4 percent of the petros should be sold in a private auction at a discount of 60 percent.

Maduro says his government is the victim of an “economic war” led by opposition politicians with the help of the government of U.S. President Donald Trump.

Sanctions levied last year by Washington block U.S. banks and investors from acquiring newly issued Venezuelan debt, effectively preventing the nation from borrowing abroad to bring in new hard currency or refinance existing debt.

The petro will not be a token on the Ethereum network, as was previously disclosed in a whitepaper provided by the government.

Reporting by Corina Pons and Girish Gupta; Editing by Meredith Mazzilli and Lisa Shumaker

You Won't Get Anywhere by Just Posting on Social Media

Why do so many business owners think that if you posting something on social media, people will flock to you, bang down your door, and buy everything you’re selling? Build it (or post it) and they will come is not accurate anymore, especially in 2018.

So why is all the focus put on what is being posted and nothing else? Because that’s what is easy to see. Everything else takes a little effort, but that’s the difference between treating your social media channels as billboards and using social media to actually socialize with potential customers and clients to generate leads. Whether it be Facebook, Instagram, or countless others social media channels–it’s time business owners pay attention to more. 

To provide customer service.

This is what gets a consumer to trust you. The time your manager takes to respond to questions and engage in conversation could (and should) drive sales.  

“Your social media is your storefront where customer relationships happen,” said Karla Campos, Founder of Social Media Sass, an influencer marketing company. “Sure you can have great graphics but if you are bad at customer service, it’s definitely going to have a negative effect on your business. We should pay attention to private messages, customer concerns, and customer sentiment.”

To time everything just right.

Strategy and timing are part of the full equation. Flexibility and going in a different direction while staying on point is a strong trait to have as a manager.

This means don’t schedule everything and call it a day. Be live. Be social in real time. When you’re watching your favorite show and see the hashtag to use on Twitter while watching means nothing if you’re watching the next day on DVR. You don’t want to be late to the party on social media when things are happening now.

To go beyond branding.

Basic brand knowledge, decent imagery, and good writing skills aren’t enough.

“Without the strategic pieces like targeting, creating profiles aligned with your ideal audience, regularly reading and responding to the analytics behind which posts engage (or don’t) and why (or why not), posting is not only a waste of time but a waste of money,” said Jamie Prince, founder of Flourish, an integrated communications agency. 

Facebook and Instagram offer great insights. There are also third-party resources you can use too, but why pay for them when the social media giants are telling you how people are reacting to your content for free? Seeing what people are liking, how they’re engaging with it, and when it’s all happening is vital for moving forward with your strategy.

To listen.

If you’re just pushing out content, you’re basically the social media equivalent of a person who won’t stop talking. (Who wants to listen to someone who only talks, and never listens or responds?)

Social media is not a billboard on the highway for people to drive by and look at. If someone posts a question, answer it. And don’t wait a week to do it. Answer it within 24 hours. Make it a point to log onto your accounts once a day to see what people are saying. They’re telling you what they like and don’t like by their interaction, or lack of, so listen.

To respond… and be social.

It is a two-way conversation with your audience, rather than a one-way conversation, that was owned in the past by traditional media.

“An effective and holistic social media strategy includes having a dialogue with your fans,” said Dian Oved, a marketing strategist behind Empower Digital who works to verify big names on social media. “Asking them questions, responding to comments, and paying attention to what is trending on social media is extremely important.”

To generate leads.

Remember when I said you can’t just post and think people will buy whatever you’re selling? That’s because people have been trying that for years. Now, you need to pay those platforms if you want to be seen, especially on Facebook.

Spending some money to create a good strategy with images or video and target your ideal customer or client online can bring in quality leads over time to nurture, then convert.

To work with others.

When you post on your platforms, you’re only reaching your audience. By teaming up with other brands who serve the same audience, you’re expanding your reach.

When you invite influencers or members of the media to post on their social media accounts about you by tagging you or promoting you in another way, it acts as a third-party endorsement. 

To look at data.

The great thing about social media, both organic use and paid, is the access to data. You can see what works, what doesn’t and modify your strategy.

“Even for the most creative brand needs to utilize data analysis tools, most of which are free,” said Monica Dimperio, Founder at Hashtag Lifestyle, an agency that connects luxury brands with influencers. 

Years ago, posting for the sake of posting may have worked. Today, social media is like a science and needs to be approached as the complex marketing giant it is.

How Augmented Reality is Transforming B2B Sales Process

The gap between someone’s expectations and reality is a persistent problem in the B2B sales world. Far too often, customers have a very different belief about what the product should be and what they receive. The result might be something that’s the wrong size, color, shape, or doesn’t function the way the customer expected. This unfortunate process leads to disappointment, inaccuracy, and painful revisions.

In other words, what the customer wants and what the company can do are often two incredibly different things. Buyers love endlessly customizable products and options, but salespeople often balk at this idea, believing that customization may interfere with inventory and cycle time metrics. Not every manufacturer can keep up with uniquely tailored goods for each customer. That’s why augmented reality and 3D visualization should play a vital role in the sales process.

Leveraging 3D & AR technologies are proving to be ideal for rapidly achieving customer confidence in the purchasing process. The more complex or spatially-oriented a product is, the riper it is to adopt a visual selling strategy. These applications offer customers a whole new world of immersive experience as they can see with their own eyes exactly what to expect. Allowing them to take part in the design means greater satisfaction, personalization, and loyalty.

The Power of Visual Configuration

Atlas Software, a cloud-based sales platform, says that visual configuration helps increase sales efficiency by 24%, boost conversation rates by 10%, and decrease the sales process by 30%. Furthermore, companies that have reached ‘digitally maturity’ yield 19% higher lead-conversion rates, 35% more quotes, 34% superior performance, and 105% larger deal size when compared to those who rely on outdated legacy systems and sales processes.

“Manufacturing is ripe for disruption from 3D and AR technology in the sale process because it allows customers to be immersed in a complex product without the time and expense that is tied to [a] physical product in brick and mortar environments,” said Atlas Software CEO, Marc Murphy.

Murphy believes that sales play an integral role in the Fourth Industrial Revolution (also called Industry 4.0) and it forces manufacturers to ask themselves how their investments are effectively changing the purchaser’s buying experience. 

Smartphone AR applications are quickly moving AR to the mainstream. Companies and sales teams will have to adapt to the market’s quickly changing demands and expectations as computer power and hardware is doing so to keep pace with visual platforms.

The next generation of manufacturing salespeople will need to leverage emerging technology–it’s the fuel for modern relevancy and growth. 

How To Track Elon Musk’s Roadster On Its Journey Towards Mars

The successful launch of the SpaceX Falcon Heavy earlier this month was a landmark technical achievement, but it has quickly come to be symbolized by something a bit sillier — the image of a red Tesla Roadster floating through space, with a dummy in a spacesuit behind the wheel.

The car and its passenger — known as Starman — were the test payload for the Falcon Heavy, and they’re now on a long journey out into the solar system. If you’re curious what that path looks like, an aerospace engineer and SpaceX admirer has put together a website that uses NASA data to track the Roadster’s course. It’s called Where Is Roadster?, and it’s fascinating, with both live data on the Roadster’s location and an interactive tool that shows its future course.

It’s often mentioned that the Roadster is “on its way to Mars,” which can give the impression that it’s making a beeline for the Red Planet. But the Roadster, like all things in the galaxy, is subject to the tug of gravity, so instead of a straight path, it’s tracing a long arc away from Earth and the sun.

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And the distances involved are truly vast. Right now, the Roadster is still much closer to Earth — 2.25 million miles away — than to Mars, 137.5 million miles away. Meanwhile, Mars is moving too, so when the Roadster first intersects its orbit this July, the planet itself will already be millions of miles away. After that, the Roadster will actually return to something close to Earth’s orbit, though again, Earth itself won’t be anywhere close.

According to the site’s data, which is taken from NASA’s Jet Propulsion Laboratory, the Roadster won’t actually be close to Mars until early October of 2020. And as far as we know, it doesn’t have any landing equipment or thrusters that would make it possible to actually get the car down to the surface.

Unless, of course, Elon Musk has another big secret up his sleeve.

Facebook faces big challenge to prevent future U.S. election meddling

SAN FRANCISCO/WASHINGTON (Reuters) – The Russian influence operation designed to tamper with the 2016 U.S. presidential election used a combination of old-school espionage tactics and 21st-century technologies that will not be easy to stop, even now that the methods have been exposed, experts said.

Social media companies, especially Facebook Inc and Twitter Inc, have been under heavy pressure to find ways of stopping what is often referred to as “information warfare” on their services.

The indictment of 13 Russian nationals on Friday, announced by U.S. Special Counsel Robert Mueller, made extensive use of records from Facebook and Instagram, according to people familiar with the matter.

Yet the combination of tactics revealed in the indictment, including the use of shell corporations and stolen IDs, deployment of virtual private networks to avoid online detection, and payments to unwitting Americans, suggests even a company as powerful as Facebook could struggle to stop such activities by itself as they happen.

U.S. spy agencies have said Russia would try to interfere in the 2018 midterm elections, again by using social media to spread propaganda.

“They can’t out of hand stop it, because it’s very difficult for them to trace those things,” said Ann Ravel, a former member of the U.S. Federal Election Commission. The clandestine purchase of advertising on the site through fake personas was particularly alarming, she said.

To know the identities of ad buyers, internet companies might need to duplicate the “know your customer” practices of banks and regularly share information with authorities, Ravel said.

Facebook has said it will start requiring thorough documentation from election-related advertisers to verify their identity and location, beginning with U.S. elections this year.

How extensive that vetting will be is unclear. “If you want to put up a theme page for a group, in the ordinary course you wouldn’t expect that a vendor like Facebook would require that sort of vetting,” said Dan Petalas, a former U.S. federal prosecutor.

“The indictment really details an elaborate scheme that would be difficult to identify,” he said.

Facebook said on Friday it was making “significant investments” to guard against future attacks and was working with the Federal Bureau of Investigation to deter election interference.

The Russians’ alleged campaign began with three weeks of reconnaissance in 2014, when two of them traveled to nine U.S. states, including Colorado and Michigan, according to the indictment. They were equipped with cameras, SIM cards, drop phones and, if needed, “evacuation scenarios,” the indictment says.

It describes the Kremlin-linked Internet Research Agency in St. Petersburg as an organized bureaucracy. It was backed by an annual budget of millions of dollars, employed hundreds of people and boasted several departments dedicated to specific projects, like search-engine optimization and graphics.

Even those who have demanded Facebook do more acknowledged on Friday it could do only so much.

“We each bear some responsibility for exercising good judgment and a healthy amount of skepticism when it comes to the things we read and share on social media,” Senator Mark Warner, the top Democrat on the Senate Intelligence Committee, said in a statement.

    The defendants are accused of stealing social security numbers of Americans to open up fraudulent accounts on digital payment system PayPal Holdings Inc. They purchased space on computer servers located within the United States to use virtual private networks to mask their identities and pose as Americans. 

Facebook could go further in monitoring its platform and adopt the process cryptocurrency firms use to verify bitcoin traders, said Jordan Lieberman, president of ad firm Audience Partners. But if Facebook raises the bar much higher, “It’s going to interrupt revenue flows and it’s absolutely going to cost them money.”

Reporting by David Ingram in San Francisco and Dustin Volz in Washington; Editing by Jonathan Weber and Lisa Shumaker

French start-up Sigfox faces 5G juggernaut in Internet of Things

PARIS (Reuters) – French start-up Sigfox, which builds networks to connect washing machines and other objects to the internet, says it is struggling to meet its growth targets due to high expectations for alternative, forthcoming 5G services.

The company, whose shareholders include French oil major Total and U.S. group Salesforce.com, missed its revenue target last year, CEO Ludovic Le Moan told Reuters on Wednesday, but it still sees good prospects for its technology and aims to break even in the fourth quarter of this year.

If it reaches that target, it could seek a stock market listing, Le Moan said in an interview.

Sigfox seeks to tap into the burgeoning so-called Internet of Things (IoT) sector where it faces competition from two other emerging networks: LoRa, backed by French telecom operator Orange and equipment maker Cisco Systems, and NB-IoT, which is backed by Japan’s Softbank.

These three companies’ wireless networks enable devices to transfer small volumes of data over a wide area while maintaining battery life over many years, whereas 5G services can carry much bigger volumes but cost a lot more.

“There’s a lot of noise around 5G these days,” Le Moan said.

Ludovic Le Moan, chief executive officer of French start-up Sigfox, poses before a news conference in Paris, France, February 14, 2018. REUTERS/Benoit Tessier

“But these technologies that are being put in place are much more costly,” he added. “For telecom players, this is all about generating new revenue.”

The first standards for 5G, the next generation of broadband mobile internet, were recently approved with first commercial offers expected in 2019 or 2020.

Slideshow (3 Images)

The roll-out for 5G will cost billions of euros for each national market, compared with a few million for Sigfox’s IoT networks, Le Moan said.

Objects connected through Sigfox’s networks range from house alarms to public waste containers and water metres.

Set up in 2009, the Toulouse-based company generated revenues of 50 million euros in 2017, up from 32 million in 2016 but 10 million short of its initial target, Le Moan said.

Higher volume usage of IoT chips, such as those made by STMicroelectronics or Texas Instruments, will help drive down the cost of IoT chips to a few cents per unit, making the technology more attractive, he said.

Sigfox, which has raised more 270 million euros over the last seven years and has 380 staff, currently has 2.5 million connected objects on its networks, Le Moan said.

Reporting by Mathieu Rosemain; Editing by Susan Fenton

Who's Going to Buy the International Space Station?

For sale: orbiting space station. Room for eight. Fantastic views of Earth. Commercial opportunities for zero-g manufacturing, research lab, or floating hotel. Cost: $3 to 4 billion a year. Any takers?

President Trump’s new budget request, released Monday, directs NASA to leave behind the International Space Station and explore the moon as a first step toward reaching Mars. The spending plan ends funding of the International Space Station by 2025, replacing taxpayers’ money with revenue from private firms. It proposes $150 million to help get companies to transition to this brave new industrial park.

While NASA and space enthusiasts have been talking about privatizing the station for years, Monday’s announcement is the first time the idea has been officially endorsed by the White House. Advocates of a mission to Mars note that NASA is spending too much on keeping the ISS in orbit, and that it dilutes the mission of the space agency in terms of human space exploration. By putting an endpoint on US government involvement in the station, they argue, its new chapter can begin.

That means a lot to companies trying to attract customers who may want to take a gamble on setting up shop in orbit—using the space to develop new kinds of materials, test pharmaceuticals, or just provide a cool hideout for wealthy tourists.

“Not only is the administration saying, here’s our suggestion, let’s put in some budget money for companies to transition, but it also allows companies to raise money, and line up investors,” says Jeffrey Manber, CEO of Texas-based space logistics firm NanoRacks, which has sent more than 600 commercial and educational payloads to the station since 2009. Most are standardized mini-laboratories that plug directly into an existing equipment rack on the station. These small experiments rely on zero-gravity conditions on the ISS and are a testbed for a scaled-up manufacturing facility of the future.

Rather than selling the ISS to a big corporation (Boeing currently operates the station for NASA), Manber suggests splitting it up into pieces. There could be a space hotel in one orbital location, for example, with another one set up especially for manufacturing. “You could cannibalize the station,” he says. “If the goal is having a facility for manufacture of thin film silicon wafers, you don’t want a guy exercising on a bicycle next to it.”

NASA’s acting administrator Robert Lightfoot described the activity of these space-going ISS tenants during his budget announcement to employees at the Marshall Space Flight Center in Huntsville, Ala., on Monday. “While we head to the moon and ultimately to Mars, we need to be able to look back at low Earth orbit and see a vibrant economy, an economy that we have created and we’ve spurred with things like the International Space Station,” Lightfoot said. “This budget proposes to stimulate commercial industry opportunities in low Earth orbit by providing an off-ramp for government led operations on the space station.”

That might be a slow off-ramp. Many companies say they need time and money to shift from a government-run station to a new privately-operated one. That’s one reason why the new NASA budget proposal calls for $150 million in help to develop more access to the station.

“If they just flip the switch, it won’t work,” says Dylan Taylor, a space investor and founder of Space Angels, a venture capital firm that has invested in 50 space-related firms in the past few years. A five-year transition will help find a company that can keep things running, with the help of experienced NASA managers on call if something goes awry. “I would see one master logistics operator for resupply and scheduling,” Taylor says. “Then someone who is actually subdividing the volume of the space station to other operators who would use it for monetary purposes.”

Of course, there are two big problems with the above scenario. One, Congress likes the space station and has resisted calls to abandon it. Sen. Ted Cruz, Republican chair of the Senate Science Committee, said he hoped reports of ending station funding would “prove as unfounded as Bigfoot” and blamed it on “numbskulls” at the Office of Management and Budget.

“As a fiscal conservative, you know one of the dumbest things you can do is cancel programs after billions in investment when there is still serious usable life ahead,” Cruz said last week at the FAA Commercial Space Transportation Conference in Washington, DC.

Two, the ISS is actually a UN-style partnership. It was built and operated with help from Russia, Europe, Canada, and Japan, all of whom use the station to train their own astronauts, conduct biomedical research, and test new technology. Even though NASA has paid the lion’s share of the ISS costs over the past 20 years, those countries all pitched in money, astronauts, and rocket time—and it doesn’t appear that anyone at the White House or NASA asked them about this new privatization plan. Trump would have to shred (or renegotiate) multiple international agreements to privatize the ISS. So until both the foreign partners and Congress become convinced, the idea of a private space station will likely remain just that.

Watch Boston Dynamics’ SpotMini Robot Open a Door

You could argue that the door handle has had a disproportionate influence on modern robotics. It was the humanoids of the Darpa Robotics Challenge, after all, that were tasked with opening doors, and it was those machines that helped drive robots to where they are now.

Today Boston Dynamics posted a video of its SpotMini quadruped robot extending an arm out of its head to turn a handle. With the dexterity of a tray-carrying butler, it uses its foot to prop the door ajar, then elbows it all the way open for its (armless) SpotMini friend to walk through. At face value, it’s a pretty incredible feat. But it’s also an interesting twist in the quest to make robots that get along with a world built by and for humans. Maybe the Darpa Robotics Challenge had it wrong with humanoids after all, and the best robots for rescue operations will look nothing like humans—or any other animal, for that matter.

At the moment, humanoids are great at two things: Looking like humans and falling on their faces, as the Robotics Challenge showed so well. (Though one particular humanoid, Cassie, does much better in part because it doesn’t yet have an upper body to worry about yet.) Walking on two legs is a monumental challenge; that’s why Chimp, a vaguely humanoid machine that rolled on treads instead of lumbering on two legs, did so well.

And also why SpotMini has such promise. Humanoids should be inherently well-equipped to explore environments built for humans, what with all the stairs and such. But SpotMini has a leg up (sorry) here because four limbs are inherently more stable than two. Not to mention that it’s more energy efficient if you don’t have to constantly balance your machine to not fall on its face.

Plus, well, this bot technically has five limbs. This newest version of SpotMini marries the stability of a quadruped with the dexterity of a human. It’s a hybrid creature that shows the awesome power of robotics: Human engineers are inventing an incredible array of new species because they’re not bound by the rules of nature, just physics. Want to put an extra arm on a four-legged robot? Go ahead. And why not make Chimp roll instead of step, if that makes it more stable?

SpotMini is but one species in a robotic kingdom that is exploding with diversity. And it’s thanks in large part to door handles. Finally, a technology whose time has come.

Bananas Bots

  • Not to throw shade, but SpotMini has some competition for most impressive robotic feat. Just a few months ago, Boston Dynamics released this video of its two-legged Atlas robot doing … wait for it … a backflip.

  • Before that, the best it could do was bounce back after a solid kick from a mean-spirited human.

  • Guys, just in case it’s not clear: Please don’t kick the robots.

Used Cars Are Cheap, And That's Good For O'Reilly

In mid-January, when markets were still relatively calm, we published an article about O’Reilly and how it could benefit from the widening price gap between used and new cars that would lead to consumers keeping their cars a bit longer. We bought the stock, as we had mentioned, when it broke through a $260 resistance level. Since then, the stock has come back down to levels we think are once again a good buying opportunity. Below is the article in its entirety with an updated price chart below the original.

It’s a never ending battle of making your cars better and also trying to be better yourself. – Dale Earnhardt

Late last year, the lease on my car was expiring and I needed to make a decision on whether to lease another car, or exercise the option to buy my current car at the contractual residual value. At the time my car only had 27,000 miles, which, for a 2013 was quite low. Based on a back of the envelope valuation with the help of Kelley Blue Book, I decided to buy it.

Based on the surprisingly high value indicated by the Kelley Blue Book estimate, I wondered how the price/value of a used car compared to a new car and whether there might be periods when it was better to buy or lease new versus periods when it was better to buy a used car. It turns out there is.

The chart below shows the CPI Index for both new vehicles and used cars and trucks. As the two lines indicate, prices declined significantly during the recession, particularly for used vehicles. As we approached the end of the recession and jobs were being created, the price of both new and used vehicles started recovering. But used car pricing increased dramatically during this period. Partly because of a lack of financing options for new cars and partly because consumers were probably treading lightly after the worst recession since the early 1930s. From 2010 to mid-2014, price inflation for used cars remained above those of new cars – at least using 2008 as a base.

But the index for used car prices started trending downward and accelerated its downward trajectory in 2016, while new car pricing continued to creep higher. The result is that the cost of a new car today relative to a used car is at its widest spread in at least 10 years. Translation: used cars are cheap relative to new cars – and I’m assuming that leasing and buying is the same thing – after all, a lease is based on the sales price of the car.

So I started to think about investment ideas that would benefit from what I predict will be a slowdown in the purchases of new cars in favor of either keeping current cars longer or deciding to buy a used car instead. As I cross referenced our several equity screeners (Growth at Reasonable Price, Asymmetrical Return/Risk, and Dividend Growth), I came across O’Reilly Automotive Inc (ORLY)


O’Reilly Automotive, Inc. is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories. It primarily operates in the United States, with Texas and California as its largest markets with 670 and 530 stores in each. It operates a single business segment which involves supplying new and remanufactured automotive hard parts, maintenance items, and a complete line of automotive tools and professional service equipment. It offers its products to do-it-yourself (DIY) customers and Do-It-For-Me (DIFM) customers including professional mechanics, and service technicians.

Business Segment

O’Reilly operates in a single business segment supplying automotive aftermarket parts, tools, supplies, equipment and accessories to DIY and DIFM market segments in the United States. DIY customers are consumers who repair and work on their own cars. DIFM customers include commercial installers including auto repair shops, gas stations, fleet operators, parts resellers who provide installation and repair services, and car dealer service departments. In FY 2016, O’Reilly derived approximately 58% of its sales from DIY customers and 42% from the DIFM customer segment. The DIFM segment is expected to contribute a greater share of future growth because it is the least price-sensitive market.

When prices for parts rise, professional mechanics and service providers are less likely to change their demand and will pass along the added cost to the consumer. In the case of the DIY market, new cars are now too complicated for most owners to fix or maintain by themselves so they are more likely to take their car to the shop for needed repairs. Nonetheless, households and individuals remain the major market segment, contributing 61.5% of the industry’s revenue.

Source: IBISWorld


O’Reilly operates through a “dual market strategy” which means that it serves both the DIY market and the DIFM market. Much of the company’s competitive edge is attributed to the successful execution of this dual market strategy. This strategy enables the company to target a larger customer base for automotive aftermarket parts, capitalize on existing retail and distribution infrastructure, and operate profitably in large markets and even in less dense areas that attract fewer competitors. Such a strategy also enhances the service levels offered to DIY customers because of its broad inventory and extensive product knowledge required by professional service providers whom O’Reilly also caters too.

Other sources of its competitive advantage include a strong distribution network and broad portfolio of widely known brands. It operates 27 regional distribution centers – 19 owned with a total of 10.6 million square feet. It also has five-night-a-week delivery via a company-owned fleet. As of June 30, 2017, the company had 4,934 stores in 47 states and over 75,000 employees. Its merchandise generally consists of nationally recognized, premium brands like AC Delco, Bosch, Armor All, Castrol, and many other high-quality brands.

In the coming years, O’Reilly intends to implement the following growth strategies: aggressively open new stores, grow sales in existing stores, pursue strategic acquisitions, enhance store design and location, and enhance its e-commerce website. The company is expanding its nationwide presence by opening new stores at a rapid rate. In 2017 alone, it opened 190 stores. The figure below illustrates O’Reilly’s aggressive nationwide expansion. As of December 2016, the company has also acquired 48 stores from Bond Auto Parts and plans to open 200 new stores in 2018.

Source: O’Reilly’s Investor Presentation

The company has also been investing heavily on technology. It is implementing a voice-picking technology in its distribution centers, rolling out routing software to improve logistic efficiencies, and making proven return-on-investment-based capital enhancement in material handling equipment such as conveyor systems, picking modules, and lift equipment.

In terms of marketing and sales, O’Reilly leverages television, radio, direct mail and newspaper advertisements, in-store and online promotions, and sporting event sponsorships. It also participates in cooperative advertising with its vendors. It sponsors nationally-televised races and more than 1,600 grassroots, local, and regional motorsport events in 47 states.

Recent Results

O’Reilly reported revenues of $8,5 billion in revenues for FY2016, an increase of 7.9% from FY2015. For the third quarter ended September 30, 2017, the company reported sales of $2.3 billion, operating income of $461M, and net income of $284M.

In nine months ended September 30, 2017, the company reported sales of $6,7 billion, operating income of $1,3 billion, and net income of $831K. It expects total revenue of $8.9 billion to $9.0 billion for FY2017.

For the past three years, O’Reilly has shown strong financial growth and the trend is expected to continue considering its aggressive expansion through additional stores and Bond Auto Parts stores acquisitions.

Source: Mergent Online


O’Reilly doesn’t pay a dividend so it is probably not attractive for income-seeking investors. However, looking at the company’s financial progress over the years reveals some very attractive trends:

  • Margins across the board have increased. For example, gross margins increased from 44.5% to 52.6% over the last 10 years, while operating margins increased from 9% to 19.5%.
  • Return on equity has increased from 15% to over 83% on a trailing 12 month basis. The biggest driver of this increase was due to an increase in leverage, but asset turnover has also increased as has net profit margin.
  • Using supply chain financing, cash conversion cycle has been reduced to 5 days, better than all of its closest peers.

And some not so attractive trends:

  • Debt to Equity has increased from less than 1.5 in early 2017 to 4.7 as of September 30th, 2017. Times interest earned also decreased but is still at a very healthy 21x
  • Current ratio has steadily decreased from 1.25x to less than 1x
  • Cash from operations declined slightly from the year ago period.

Business Drivers

The key drivers of current and future demand of its products are number of miles driven, number of registered light vehicles, and unemployment rates. The primary business driver for the industry is total miles driven. With the lack of comprehensive mass transit in the U.S., the company expects modest improvements in total number of miles driven in the U.S. as supported by increasing number of registered vehicles and sustained employment levels. Moreover, declining gas prices since 2015 has contributed to the steep increase in the number of miles driven resulting in more vehicle wear and tear and rising demand for replacement and maintenance parts and tools. Likewise, the average age of vehicles increases due to constant scrappage rates (a rate of new car sales under the ten-year trend) and overall quality of vehicles. As the average age of vehicles increases, a larger percentage of the miles driven are outside of the manufacturer’s warranty period. These out-of-warrant older vehicles generate a stronger demand for aftermarket products especially in case of routine maintenance cycles and more frequent mechanical failures.

Given these demand drivers, the U.S. automotive aftermarket industry is expected to have strong growth in the coming years. According to industry estimates, the market is forecast to grow at a CAGR of 3% from 2016 to 2018, to reach a total value of $284 billion in 2018. O’Reilly should leverage this high growth in the market to generate revenues and profits.

Industry Analysis

The U.S. automobile parts retail industry has about 37,000 establishments (single-location and multiple-location companies) with combined annual revenue of $53 billion. With a CAGR of 3.4%, it is expected to grow at an estimated $273.4 billion according to Automotive Aftermarket Suppliers Association (AASA). O’Reilly claims that in this industry landscape, its addressable market amounts to $161 billion.

Source: IBISWorld

The U.S. industry is largely concentrated, with the ten largest companies accounting for about 50% of the market size. The 50 largest companies generate about 60% of the total industry revenue; four largest companies contributing about 45%.

Source: O’Reilly’s Investor Presentation


Overall, O’Reilly is in a favorable position in light of the demand for used cars vs. new cars. The external key drivers (increased miles driven, favorable economic conditions, decreased price of gas, etc.) combined with its key strategies (dual market, aggressive expansion, selective acquisition) put the company in a strongly competitive position that will continue to boost its profitability.


From a valuation perspective using a multiple analysis, ORLY looks attractive on a relative basis compared to peers as well as its own five-year average. As the chart below indicates, the current PE ratio of 22 is considerably lower than the high reached in late 2015 of 31.25, despite a steady increase in earnings per share.

We believe the stock is poised for additional earnings growth and multiple expansion and is well-positioned to benefit in the event of an economic downturn – one in which consumers may postpone their purchases of new vehicles.

Income Enhancement

There isn’t a very attractive option to use for enhancing income. However, for investors looking to generate some income from a position in ORLY who are willing to give up some upside, you may want to consider selling a call option expiring in January 2019, with a current bid of $22.70 and strike price of 280. Assuming a 100 share purchase to coincide with the sale of 1 contract (representing 100 shares), this would result in an estimated income yield from the option premium of around 1% – and if the stock is called, would result in an additional return of 10.6%.

There is also the possibility of the company buying back more shares, which has been the primary driver of a shareholder yield of 12% over the last 12 months.

Our Take

Despite our bullishness on the used car parts industry and ORLY’s improving financial performance, on a technical basis, the stock looks indecisive flirting with the $261 level and supported by $240. We would like to see some conviction to the upside before dipping a toe in and we are conscious of a possible pullback to the $240 level. We would be buyers on a breakthrough to the upside or a pullback to the $240 level. We bought when the price broke to the upside.

Today, the price of the stock is back down to $252 after once again testing the $240 level. We believe its another good entry point and this time, we expect the price to surpass the recent high of $280.

See, when you drive home today, you’ve got a big windshield on the front of your car. And you’ve got a little bitty rearview mirror. And the reason the windshield is so large and the rearview mirror so small is because what’s happened in your past is not near as important as what’s in your future. – Joel Osteen

End of Article

Disclaimer: Please note, this article is meant to identify an idea for further research and analysis and should not be taken as a recommendation to invest. It is intended only to provide information to interested parties. Readers should carefully consider their own investment objectives, risk tolerance, time horizon, tax situation, liquidity needs, and concentration levels, or contact their advisor to determine if any ideas presented here are appropriate for their unique circumstances.

  • Past performance is not an indicator of future performance.
  • Investing in any security has risks and readers should ensure they understand these risks before investing.
  • Real Estate Investment Trusts are subject to decreases in value, adverse economic conditions, overbuilding, competition, fluctuations in rental income, and fluctuations in property taxes and operating expenses.
  • This post is illustrative and educational and is not a specific offer of products or services.
  • Information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein, nor is the author compensated by any of the products mentioned.
  • Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the topics or subjects discussed.
  • Information presented is not believed to be exhaustive nor are all the risks associated with the topic of each article explicitly mentioned. Readers are cautioned to perform their own analysis or seek the advice of their financial advisor before making any investment decisions based on this information.
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Disclosure: I am/we are long ORLY.

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.

Salesforce investing $2 billion in Canada, as U.S. tech firms head north

SAN FRANCISCO (Reuters) – U.S. business software developer Salesforce.com Inc (CRM.N) will pump $2 billion into its Canadian business over the next five years, it said on Thursday, the latest major U.S. technology investment across the border since early 2017.

Toronto is a hub for artificial intelligence research and Canadian Prime Minister Justin Trudeau is visiting California this week in part to speak with U.S. technology chief executives. Canadian leaders have promoted their country’s immigration policies as an alternative to the Trump administration’s ban on travelers from some Muslim countries and restrictions on work permits for some foreigners.

A Canadian program allows businesses to get work permits for foreign workers in about two weeks.

Salesforce CEO Marc Benioff did not specify why the company chose Canada but he said, “Like you, we’re a city that values diversity, we value equality and we also value innovation. …We know we’ll be able to have a great business environment in Canada.”

The company did not respond to a question about whether the immigration policies in the two countries influenced the decision.

Salesforce said it would increase its Canadian office space, data center capacity and 1,000-strong workforce, without giving details.

“We know that being open to investment and highlighting our extraordinary diverse workforce that’s willing to work hard, innovate and create a future is what it’s all about,” said Trudeau on Thursday at Salesforce’s San Francisco offices.

Several other U.S. technology companies are expanding into their northern neighbor.

In May, Uber Technologies Inc [UBER.UL] said it would open a new artificial intelligence research hub in Toronto.

Alphabet Inc’s (GOOGL.O) DeepMind unit in July announced plans to open a research office in Edmonton, and Amazon.com Inc (AMZN.O) put Toronto on a short list of contenders for its $5 billion second headquarters.

Facebook Inc (FB.O) in September said it would expand its artificial intelligence research lab in Montreal, where Microsoft Corp (MSFT.O) also plans to double the size of its research lab.

Several tech entrepreneurs in Canada said the University of Toronto in particular was a draw, thanks to its research in machine learning and other artificial intelligence, and that businesses also could be certain they could hire anyone they wanted, given immigration policy.

“You want the best minds wherever they are,” said Mike McDerment, chief executive of FreshBooks, a Toronto firm that develops accounting software. “The fact that we have this open and inclusive culture, it’s a great advantage.”

Reporting by Salvador Rodriguez; Editing by Peter Henderson, Richard Chang and Lisa Shumaker

Canadian Prime Minister Justin Trudeau Really Wants Toronto to Get Amazon’s Second Headquarters

Canadian Prime Minister Justin Trudeau is pushing hard for Amazon to consider opening a second headquarters in Toronto.

Trudeau bragged on Thursday during a press event in San Francisco about what he considers are Toronto’s attractive qualities for the online retail and cloud computing giant’s planned new campus, a much coveted $5 billion prize that cities are trying to attract in what is an unusually public competition. Amazon previously said that its planned-second headquarters would eventually accommodate 50,000 workers.

“I think any investment into Canada would be a great thing, and obviously the Amazon (amzn) second headquarters would be a significant boom for any city that got it,” Trudeau said. “Toronto is a world-class city with an incredible workforce, tremendous diversity, all the kinds of advantages that Amazon has laid out that it’s looking for.”

“I certainly hope that we get that H2Q hub,” he added.

The prime minister’s comments come just hours before he is expected to meet with Amazon CEO Jeff Bezos as part of a mini-tour of several U.S. cities by the Canadian leader that includes San Francisco, Los Angeles, and Chicago. Trudeau is trying to garner support for the North American Free Trade Agreement and promote Canada as a country that welcomes U.S. tech companies setting up offices and hiring locals.

Amazon has narrowed down its search for second headquarters from 200 cities to 20 finalists, with the only non-U.S. city being Toronto. Other Canadian cities that have previously submitted bids include Montreal, Vancouver, and Calgary.

“I know that just as we supported all the different Canadian city bids, we are going to continue to demonstrate why we know Canada is such a great place to invest,” Trudeau said.

Trudeau’s stop in San Francisco also included meeting Salesforce (crm) CEO Marc Benioff to talk about diversity and equality issues, he said. Salesforce also said that it would spend $2 billion in Canada over a five-year period to hire Canadian workers and expand the company’s existing data centers in the country,

“That $2 billion is going to create a lot of great Canadian jobs, thousands of them,” Trudeau said.

Enterprise software startup AppDirect, which hosted Trudeau for the press event, also said that it would hire 300 Canadians and open a new Toronto office.

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Trudeau is heavily courting U.S. technology companies to open offices in Canada as a way to prevent home-grown tech workers from leaving the country for work in the U.S.

“Technology companies have been increasingly looking to Canada to lay down roots,” Trudeau said, referencing the recent openings of artificial intelligence research labs by companies like Google (goog), Microsoft (msft), and Facebook (fb) as examples.

Trudeau did not say what kinds of incentives the Canadian government is offering to U.S. technology companies to convince them to settle in the country, and instead pitched Canada’s “great talent” and the government’s investments in artificial intelligence.

“They’re not coming because of investments we offer, in most cases we haven’t,” said Trudeau.

Snapchat overhaul convinces investors it can fight Instagram

(Reuters) – Snapchat owner Snap Inc on Tuesday reported surging growth in users and revenue in its latest quarter, reviving hopes that it can survive competition with Facebook Inc’s Instagram and sending its shares up more than 20 percent.

Investor enthusiasm for the instant messaging application company faded after its initial public offering last year.

But the Venice, California-based firm said that customers were now staying longer on the Android version of its app, after software bugs were fixed, and advertisers were taking to an auction-based advertising system that made it cheaper and easier to buy ads.

Snapchat’s daily active users rose to 187 million in the quarter that ended Dec. 31 from 178 million in the third quarter, beating analysts’ average expectation of 184.2 million users, according to financial data and analytics firm FactSet.

Daily active users rose 18 percent from a year earlier, reversing a trend of slowing growth. The figure is closely watched by investors who hope user growth can be translated into advertising revenue.

Revenue rose 72 percent to $285.7 million, beating analysts’ expectations of $253.2 million as companies advertised more in the key holiday quarter.

Instagram, with more than twice the daily users of Snapchat and backed by Facebook’s large bank account, has threatened to stamp out its rival by copying features such as photo filters and disappearing slide shows.

Confidence that the two could coexist in the social media sector was shaken when Snapchat’s user growth stalled last year. Analysts, though, said that Snapchat appeared willing to look inward and try to fix problems rather than be distracted by Instagram.

“They are going to continue to be competitors, and Snap is doing a creditable job of competing for revenue,” analyst Michael Pachter of Wedbush Securities said.

Snapchat is courting advertisers in an internet ad market dominated by Facebook and Alphabet Inc’s Google, which together control half the market share, according to research firm eMarketer.

While Snapchat ads once were primarily bought by large brands with household names, revenue from smaller businesses more than doubled from the third quarter to the fourth, Chief Strategy Officer Imran Khan said on a conference call.

FILE PHOTO: A woman stands in front of the logo of Snap Inc. on the floor of the New York Stock Exchange (NYSE) while waiting for Snap Inc. to post their IPO, in New York City, New York, U.S. on March 2, 2017. REUTERS/Lucas Jackson/File Photo

“We know that in order to truly scale our business, advertising on Snapchat has to be really easy,” Khan said.

Ad prices have fallen as Snapchat lets advertisers use self-serve software to buy, but the number of ad impressions was up more than 575 percent from a year earlier in the fourth quarter, Chief Financial Officer Drew Vollero said.

Vollero said more than 90 percent of ads were sold on Snapchat’s auction, which is capable of handling larger volume than a human sales staff, and the company tripled the number of advertisers buying there.

Shares traded at $17.09 after the bell, up 22 percent, and had traded even higher.

Amid concerns Snapchat would not be able to keep growing rapidly in the face of Instagram’s competition, Snap’s stock price had fallen by half from its $29.44 high after its initial public offering last year and not traded above the IPO price of $17 since July 10. Snap had not reported upbeat results since going public.

In addition to fixing bugs, the company is redesigning Snapchat to make it easier to use. Chief Executive Evan Spiegel said the new version had rolled out to 40 million users and would launch worldwide in the first quarter.

Acknowledging a perception that Snapchat is popular mainly among millennials, Spiegel said: “We believe that the redesign has also made our application simpler and easier to use, especially for older users.”

Snap posted a net loss of $350 million, or 28 cents per share, compared to a loss of $170 million, or 20 cents per share, a year earlier.

Excluding items, Snap reported a loss of 13 cents. Analysts on average expected a loss of 16 cents per share, according to Thomson Reuters I/B/E/S.

Revenue per user rose 46 percent from a year earlier to $1.53, while cost of revenue per user rose 5 percent to $1.02.

Still, the company expects its year-over-year revenue growth rate to moderate in the current quarter compared with the fourth quarter, Vollero said.

Reporting by David Ingram in San Francisco and Pushkala Aripaka in Bengaluru; Editing by Peter Henderson, Meredith Mazzilli, Anil D’Silva and Cynthia Osterman

Why Didn’t a Planned Safety System Stop Sunday’s Amtrak Crash?

In the wake of Sunday morning’s news about a fatal collision between Amtrak and CSX trains in South Carolina, you may have felt a sense of deja vu. That’s because the crash is the third Amtrak accident in as many months.

In late December, three people were killed when an Amtrak train derailed onto a highway in Seattle. Then in late January, a chartered Amtrak train carrying Republican lawmakers collided with a garbage truck and derailed, causing one fatality.

These recent accidents are part of a longer string of serious passenger train wrecks, the most dramatic of which was the 2015 derailment of a commuter train in Philadelphia, which killed eight. It’s important to point out that traveling by train is still far safer than driving in the U.S., but the rash of accidents demands the question — what’s going wrong?

There are at least two parts to that answer: human fallibility and systemic failures that reach all the way up to the federal government.

A common factor in many recent Amtrak accidents, including both the Seattle and Philadelphia derailments, has been trains exceeding posted speeds through curves or other low-speed areas, in some cases due to driver negligence. Way back in 2008, Congress mandated that passenger and freight railways reduce the risk of speeding by implementing a system called Positive Train Control, which would automatically intervene if trains were going too fast or at risk of collision.

The immediate cause of today’s accident, according to a National Transportation Safety Board press conference, was a switch that routed the Amtrak train onto a siding occupied by a CSX train, and an NTSB spokesperson made clear that a PTC system, if it were working as intended, should have prevented just this sort of crash. The status of PTC installation on the particular track in question isn’t yet clear, but according to the latest data CSX, which owns the track, has only installed PTC on 39% of its track.

Amtrak is actually doing a lot better than that, with PTC installed on 69% of its track. That’s despite the fact that the 2008 PTC mandate came with no funding for Amtrak, which relies on federal funds for system maintenance, to install the technology. Even highly profitable private freight lines argued that the original 2015 deadline was unrealistic, since the technology was still being developed when the original law passed. For its part, Amtrak has partly blamed the slowness of PTC implementation on difficulties obtaining wireless spectrum.

In 2015, Congress voted to extend the deadline for nationwide PTC implementation to the end of 2018, and some transit commentators are already blaming deadline waffling and failure to fund the system for the latest crash.

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The slow and inconsistent implementation of PTC is only one part of the infrastructure issues facing Amtrak, though. Its rails are also aging, and lack of maintenance has played a role in some recent derailments. Amtrak told the New York Times last December that it only realized the severity of track deterioration around New York’s Penn Station after a derailment in April of last year.

Amtrak’s infrastructure woes are part of a much broader decline in spending on airports, roads and rails across the U.S. since the early 1990s. President Donald Trump made major new infrastructure spending a plank of his 2016 campaign, but his newly unveiled plan has been criticized for being vague and underfunded.

Meanwhile, despite the administration’s rhetoric on infrastructure, Trump’s 2018 budget proposal cut federal Amtrak funding by 13%. And in December, the Trump administration pulled $13 billion in funding for Amtrak rail maintenance that had been earmarked by the Obama administration.

American investment in rail projects lags substantially compared to other developed nations. In recent years there has been hand-wringing that America is falling behind not only Japan and France, but even Turkey, China, and Russia in development of high-speed rail. Now, it seems we’re failing to even maintain our aging, inadequate rail systems to an acceptable level of safety.

​Open source is 20: How it changed programming and business forever

Every company in the world now uses open-source software. Microsoft, once its greatest enemy, is now an enthusiastic open supporter. Even Windows is now built using open-source techniques. And if you ever searched on Google, bought a book from Amazon, watched a movie on Netflix, or looked at your friend’s vacation pictures on Facebook, you’re an open-source user. Not bad for a technology approach that turns 20 on February 3.

Now, free software has been around since the first computers, but the philosophy of both free software and open source are both much newer. In the 1970s and 80s, companies rose up which sought to profit by making proprietary software. In the nascent PC world, no one even knew about free software. But, on the Internet, which was dominated by Unix and ITS systems, it was a different story.

In the late 70s, Richard M. Stallman, also known as RMS, then an MIT programmer, created a free printer utility based on its source code. But then a new laser printer arrived on the campus and he found he could no longer get the source code and so he couldn’t recreate the utility. The angry RMS created the concept of “Free Software.”

RMS’s goal was to create a free operating system, Hurd. To make this happen in September 1983, he announced the creation of the GNU project (GNU stands for GNU’s Not Unix — a recursive acronym). By January 1984, he was working full-time on the project. To help build it he created the grandfather of all free software/open-source compiler system GCC and other operating system utilities. Early in 1985, he published “The GNU Manifesto,” which was the founding charter of the free software movement and launched the Free Software Foundation (FSF).

This went well for a few years, but inevitably, RMS collided with proprietary companies. The company Unipress took the code to a variation of his EMACS programming editor and turned it into a proprietary program. RMS never wanted that to happen again so he created the GNU General Public License (GPL) in 1989. This was the first copyleft license. It gave users the right to use, copy, distribute, and modify a program’s source code. But if you make source code changes and distribute it to others, you must share the modified code. While there had been earlier free licenses, such as 1980’s four-clause BSD license, the GPL was the one that sparked the free-software, open-source revolution.

In 1997, Eric S. Raymond published his vital essay, “The Cathedral and the Bazaar.” In it, he showed the advantages of the free-software development methodologies using GCC, the Linux kernel, and his experiences with his own Fetchmail project as examples. This essay did more than show the advantages of free software. The programming principles he described led the way for both Agile development and DevOps. Twenty-first century programming owes a large debt to Raymond.

Like all revolutions, free software quickly divided its supporters. On one side, as John Mark Walker, open-source expert and Strategic Advisor at Glyptodon, recently wrote, “Free software is a social movement, with nary a hint of business interests — it exists in the realm of religion and philosophy. Free software is a way of life with a strong moral code.”

On the other were numerous people who wanted to bring “free software” to business. They would become the founders of “open source.” They argued that such phrases as “Free as in freedom” and “Free speech, not beer,” left most people confused about what that really meant for software.

The release of the Netscape web browser source code sparked a meeting of free software leaders and experts at a strategy session held on February 3rd, 1998 in Palo Alto, CA. There, Eric S. Raymond, Michael Tiemann, Todd Anderson, Jon “maddog” Hall, Larry Augustin, Sam Ockman, and Christine Peterson hammered out the first steps to open source.

Peterson created the “open-source term.” She remembered:

The introduction of the term “open source software” was a deliberate effort to make this field of endeavor more understandable to newcomers and to business, which was viewed as necessary to its spread to a broader community of users. The problem with the main earlier label, “free software,” was not its political connotations, but that — to newcomers — its seeming focus on price is distracting. A term was needed that focuses on the key issue of source code and that does not immediately confuse those new to the concept. The first term that came along at the right time and fulfilled these requirements was rapidly adopted: open source.

To help clarify what open source was, and wasn’t, Raymond and Bruce Perens founded the Open Source Initiative (OSI). Its purpose was, and still is, to define what are real open-source software licenses and what aren’t.

Stallman was enraged by open source. He wrote:

The two terms describe almost the same method/category of software, but they stand for

views based on fundamentally different values. Open source is a development methodology; free software is a social movement. For the free software movement, free software is an ethical imperative, essential respect for the users’ freedom. By contrast, the philosophy of open source considers issues in terms of how to make software ‘better’ — in a practical sense only. It says that non-free software is an inferior solution to the practical problem at hand. Most discussion of “open source” pays no attention to right and wrong, only to popularity and success.

He saw open source as kowtowing to business and taking the focus away from the personal freedom of being able to have free access to the code. Twenty years later, he’s still angry about it. In a recent e-mail to me, Stallman said, it is a “common error is connecting me or my work or free software in general with the term ‘Open Source.’ That is the slogan adopted in 1998 by people who reject the philosophy of the Free Software Movement.”

Philosophical conflicts aside, open source has indeed become the model for practical software development. Larry Augustin, CEO of SugarCRM, the open-source customer relationship management (CRM) Software-as-a-Service (SaaS), was one of the first to practice open-source in a commercial software business. Augustin showed that a successful business could be built on open-source software.

Other companies quickly embraced this model. Besides Linux companies such as Canonical, Red Hat and SUSE, technology businesses such as IBM and Oracle also adopted it. This, in turn, led to open source’s commercial success. More recently companies you would never think of for a moment as open-source businesses like Wal-Mart and Verizon, now rely on open-source programs and have their own open-source projects.

As Jim Zemlin, director of The Linux Foundation, observed in 2014:


new business model has emerged in which companies are joining together across industries to share development resources and build common open-source code bases on which they can differentiate their own products and services.

Today, Hall looked back and said “I look at ‘closed source’ as a blip in time.” Raymond is unsurprised at open-source’s success. In an e-mail interview, Raymond said, “Oh, yeah, it *has* been 20 years — and that’s not a big deal because we won most of the fights we needed to quite a while ago, like in the first decade after 1998.”

“Ever since,” he continued, “we’ve been mainly dealing with the problems of success rather than those of failure. And a whole new class of issues, like IoT devices without upgrade paths — doesn’t help so much for the software to be open if you can’t patch it.”

In other words, he concludes, “The reward of victory is often another set of battles.”

These are battles that open source is poised to win. Jim Whitehurst, Red Hat’s CEO and president told me:

The future of open source is bright. We are on the cusp of a new wave of innovation that will come about because information is being separated from physical objects thanks to the Internet of Things. Over the next decade, we will see entire industries based on open-source concepts, like the sharing of information and joint innovation, become mainstream. We’ll see this impact every sector, from non-profits, like healthcare, education and government, to global corporations who realize sharing information leads to better outcomes. Open and participative innovation will become a key part of increasing productivity around the world.

Others see open source extending beyond software development methods. Nick Hopman, Red Hat’s senior director of emerging technology practices, said:

Open-source is much more than just a process to develop and expose technology. Open-source is a catalyst to drive change in every facet of society — government, policy, medical diagnostics, process re-engineering, you name it — and can leverage open principles that have been perfected through the experiences of open-source software development to create communities that drive change and innovation. Looking forward, open-source will continue to drive technology innovation, but I am even more excited to see how it changes the world in ways we have yet to even consider.

Indeed. Open source has turned twenty, but its influence, and not just on software and business, will continue on for decades to come.

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Facebook Earnings Preview: What to Watch for on Wednesday

Facebook reports its fourth-quarter earnings on Wednesday afternoon and the social media giant is once again expected to post huge revenue growth.

The company’s mobile ad sales continue to ensure that Facebook’s financial performance is the picture of health even as other factors—including the spread of online misinformation, fake accounts, and concerns over the well-being of its own users—paint less of a rosy image of the company in the eyes of the world. In short, Facebook is making money hand-over-fist, but CEO Mark Zuckerberg still has plenty of concerns on his plate, including some that could be discussed on tomorrow’s earnings call.

Here are some things to look for when Facebook reports results from its most recent quarter on Wednesday.

Revenue growth, spending growth

Wall Street expects Facebook to report fourth-quarter revenue of roughly $12.55 billion, which would be up more than 42% over the same period in the previous year, while adjusted earnings per share are expected to jump by almost 38% to $1.94. While the social media giant’s primary financial lines are not expected to disappoint, one area that investors will be watching closely on Wednesday will be Facebook’s forecasted operating expenses for the rest of 2018. Last fall, the company’s announcement that it expected operating expenses to rise 45% to 60% in 2018—in part, due to increased spending on security measures, extra workers to police what’s posted on the service, and on original programmingcaused shares to drop briefly after the previous earnings report. Investors will undoubtedly be hoping to see Facebook lower that forecast.

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Algorithm changes

Facebook shares also took a hit earlier this month after the company announced its huge new changes to the service’s news feed, where Facebook will begin to show fewer posts from news organizations and marketers in favor of more content from users’ friends and family. The changes are sure to be a topic of discussion on Wednesday’s earnings call, as investors and analysts seek more detailed information about how the shift could affect Facebook’s bottom line, specifically with regard to its ad business. While some have reported that Facebook’s engagement rates have slipped of late, Zuckerberg said the recent moves are aimed at improving the quality of users’ experiences on the social network at a time when there are increasing concerns over social media’s effects on mental health.

And, speaking of news on Facebook, Zuckerberg also said recently that he wants to boost local news sources on users’ news feeds while also finding out about individuals’ most trusted news sources. So far, those in the news industry have been skeptical, including Fortune‘s Adam Lashinsky.

Progress on messaging and video

Zuckerberg said last year that he wants to move faster in monetizing messaging apps Facebook Messenger and WhatsApp, both of which have well over a billion monthly active users. Both apps have added a number of new features in the past year, including those aimed at getting users to engage with businesses online, so investors will be looking for some more optimism from Facebook on that front. Meanwhile, the company has invested a fair amount in its Watch online video platform, including landing original programming for the service, and Facebook may share some updates on how Watch is performing with users as part of its earnings report.