These Are the 5 Books Bill Gates Wants You to Read This Summer

It’s become an annual tradition. For the last several years, in mid-May, billionaire Microsoft co-founder Bill Gates has offered up a summer reading list, sharing it publicly on his Gates Notes blog.

Gates paired this year’s list with a video featuring cute puppies cavorting with his chosen titles. One dons an Abe Lincoln-style stovepipe hat for a book about Honest Abe, and another rides on a hospital gurney wearing a protective neck collar for a book about a divinity professor coping with her Stage IV colon cancer.

Gates has chosen books that can be enjoyed by readers of all professions — you don’t have to be a software genius or company founder to appreciate any of them. But in the extended summaries of each work, he’s quick to point out how each book speaks to him, and many offer lessons that are especially pertinent to entrepreneurs and businesspeople. Here’s this year’s summer reading list.

Top takeaway: Follow your sense of wonder, but don’t go overboard.

Gates has a special fondness for the brilliant inventor and artist Leonardo da Vinci — in 1994, he paid $30 million for one of Leonardo’s scientific notebooks, now known again as the Codex Leicester. (Gates declined the chance to rename the notebook after himself, noting “I thought (Codex Gates) sounded silly.”)

Gates singles out Isaacson’s biography of the Renaissance legend for breaking down just exactly how special he was.

“The attribute that stands out above all else was (Leonardo’s) sense of wonder and curiosity,” Gates explains. “When he wanted to understand something–whether it was the flow of blood through the heart or the shape of a woodpecker’s tongue–he would observe it closely, scribble down his thoughts, and then try to figure it all out.”

But this intense focus could also go too far: The book explains that in the process of creating a statue involving a horse, Leonard learned so much about horses that he ended up creating new systems for feeding them as well as designing cleaner stables. Probably great ideas, but the statue was never completed.

Top takeaway: Don’t get stuck on finding a reason — bad things do happen to good people.

Divinity professor Kate Bowler was just 35, married and mom to a young son, when she was diagnosed with Stage IV colon cancer. Before her diagnosis, Bowler had written a book about the prosperity gospel, which Gates describes as “the idea popular among some Christians that God rewards the faithful with health and wealth.” While she herself wasn’t sold on that idea completely, her diagnosis shook it out of her head for good.

In addition to having to pursue the day-to-day treatment options that could help her survive to raise her son longer, Bowler had to grapple with some big questions, namely, Why meIs this a test of my character?

Gates notes that Bowler “answers the ‘why’ question in a compelling way: by refusing to accept the premise.” And he gets unexpectedly personal, discussing his own family life with a blunt and painful story.

“All four of my grandparents were deeply devout members of a Christian sect who believed that if you got sick, it must be because you did something to deserve it,” he writes, :When one of my grandfathers became seriously ill, he struggled to figure out what he might have done wrong. He couldn’t think of anything, so he blamed his wife. He died thinking she had caused his illness by committing some unknown sin.”

Even if tragedy hasn’t touched you, Bowler discusses how those trying to support someone who may be dealing with a diagnosis should veer away from judgemental and painful statements, and includes a list of six better ways to support them.

“If I could pick one thing, it would be that everyone simmers down on the explanations for other people’s suffering, and just steps in with love,” Bowler said in a TV interview.

Top takeaway: Look carefully at the human consequences of decisions.

Think you know everything about Abraham Lincoln? The stovepipe hat, the log cabin, Ford’s Theatre, the Gettysburg Address? Think again. The only novel on Gates’ list, Lincoln in the Bardo, will shake up what you thought you knew.

The novel takes place over the course of one, long, sad night during which Abraham Lincoln visits the grave of his late son Willie, who died at just 11 of typhoid fever in 1862. Willie and his father were real, of course, but the events in the book are Saunders’ fictional take on what the grieving president might have felt and said on a visit to Willie’s tomb. More than 160 ghosts flit in, trying to convince Willie to leave the bardo, an intermediate space between life and rebirth.

“Despite being a work of fiction, it offered fresh insight that made me rethink parts of (Lincoln’s) life,” Gates writes. And it also made the Microsoft co-founder think heavily on the consequences of decisions.

“The president has a new understanding of the grief he’s creating in other families by sending their sons off to die in battle,” Gates writes. “He must make a choice. Should the war go on? If it does, how can we ensure the end result justifies the cost of such suffering?”

Top takeaway: Our world is interconnected, and it’s not too late to learn about it.

Gates and scholar David Christian, the author of Origin Story, work together on The Big History Project. It’s a program aimed at encouraging schools to use a social-studies curriculum known as Big History, and “big” is a good word for it. The course starts with the Big Bang and winds through more than 13 billion years of world history, integrating multiple perspectives in everything from chemistry to anthropology, all based on modern science.

“Origin Story is essentially the Big History course condensed into a short book,” Gates writes. The course, and the book, divide that 13 billion years into eight “thresholds,” or moments in time that mark major transition points, such as the first appearance of humans.

The course is taught in a slowly growing number of schools, and adults can join in with an online, self-guided, six-hour version. Or pick up the book, which Gates says contains “some things that are simply too new to be included in the course.”

5. Factfulness, by Hans Rosling, with Ola Rosling and Anna Rosling Ronnlund

Top takeaway: Don’t panic! At least not until you’ve broken down why you’re scared.

As part of Gates’ work with the Bill and Melinda Gates Foundation, he uses the terms “developed” and “developing” world frequently. But Factfulness, by the late Swedish global-health lecturer Hans Rosling, has taught the billionaire those terms aren’t quite accurate.

One cannot simply divide the world into rich and poor, Rosling’s book teaches. He compares it to looking down at other buildings from a skyscraper — everything looks short from your height. To more clearly understand poverty and how to think about it in a helpful way, Rosling divides the world’s population into four income groups. One billion people live at level one, sleeping on dirt and spending much of their days walking barefoot to get water. At the other end, a wealthier billion people own cars and can afford to take vacations. Understanding that framework can put poverty — and the progress made to fight it — in perspective.

The book is mostly devoted to explaining 10 instincts that help us from seeing the world “factfully.” Scaremongering headlines can frighten unnecessarily, but breaking down the innate biases that lead us to overreact can lend us a well-needed perspective.

“These instincts make us human,” Gates writes, noting that “overcoming them isn’t easy.” But he notes that Rosling refused to judge others for their misconceptions, wanting only to teach.

“If you never met Hans or watched one of his many TED talks, Factfulness will help you get a sense of why he was so special,” he says. “I wish I could tell Hans how much I liked it.”

A Guide to the Surprising Side-Hustle That Can Help You Build Long-Term Wealth

Some of the wealthiest people I know made their money in real estate

They didn’t start out big. They started by buying one small property or project, and then after the first came a second, and so on.

I personally didn’t start investing in real estate until I’d already experienced a liquidity event from my original business, Wilmar–a company that gave me plenty of experience in real estate business. We were one of the largest suppliers of plumbing, hardware, electrical and maintenance needs in the industry, to some of the biggest apartment owners in the country.

In 1997, I invested as a majority owner of a 106,000 square foot, seven-story office building in New Jersey. I still own the building today. But it wasn’t until 2008, when I entered the tax lien business through my firm, Crestar Capital, that I really got experience underwriting real estate.

Over six years, we underwrote over $3 billion in residential real estate. In 2012, we began to foreclose on a small number of unpaid tax liens. Three years later, we owned 450 homes.

It was through attempting to get financing for these properties that I realized there was a massive opportunity to create a real estate financing company for investors like myself, which today is LendingOne–acting as a lender, but driven by technology.

That’s how I’ve come to realize that real estate can be a great side-hustle for any entrepreneur–after all, we all want to build long-term wealth for ourselves. And you don’t need a liquidity event or a ton of cash to get started.

Here’s how.

Four Questions to Answer If You Want to Invest in Real Estate

Owning real estate is a key part of building wealth and diversifying your investment strategy. Start by answering these four questions:

  1. What’s more interesting to you: commercial or residential?
  2. How much capital do you have to invest?
  3. Will this be a full-time business, a part-time hobby, or a part-time interest with the intention of it becoming a full-time business?
  4. Are you looking to invest your own money, or other people’s money–and will you use debt?

The last question is arguably the most important, since debt is what will allow you to make larger purchases, faster–to either fix and flip, or hold and rent to tenants. Reason being, debt is a fundamental part of the building process.

In everyday life, the concept of debt is bad. In real estate, and in business, debt is necessary. The whole idea is to put as little of your own money down as possible, so that you can not only invest in more real estate,  but get a better return on your invested dollars.

Once you answer these questions, you can then choose how you want to approach the business of investing in residential real estate. There are three strategies for you to consider:

1. Fix and Flip

Some people like to buy up a property, fix it, and then resell it six months later. 

The pros of getting into the fix-and-flip game are the fact that there’s endless opportunity, plenty of homes that need rehabbing given the age of the U.S. home inventory, and flipping one, two, or more homes per year can make you quite a healthy profit. 

The cons, however, are that in fixing and flipping, you’re responsible for managing the work, for incurring (and managing) your costs, and for seeing the project through to completion. Some people are great at this, but others drastically underestimate the amount of work that goes into a final product.

2. Single Family Rental

Think about single family rentals in terms of accumulation over a lifetime. Again, real estate empires don’t happen overnight. Like I said, it starts with one home, leveraged to the next, to the next, and so on.

With single family rental units, you can then rent those homes out at a price that’s higher than your mortgage–which makes it pay for itself. The cons, unfortunately, entail everything from frustrating tenants to bad markets, unforeseen repairs, and vacancies–all of which influence whether your properties stay profitable.

3. Turn-Key Solutions 

There are two ways to patriciate in turn-key solutions. The first is you can be the manufacturer of the homes where you buy/fix, and then rent the property, manage it, and then sell the property to passive investors.

Many professionals that don’t have time to do the work required to buy/fix/rent, but still want to own real estate, fall into the second category. If you are someone who doesn’t have the time or expertise you can find great turn-key operators from companies like Roofstock.

Getting started building your real estate portfolio doesn’t need to be complicated. Once you buy that first property, you’ll realize it’s a process–just like anything else in life. And then you’ll be well on your way.

Retirement: Should You Buy These Beaten-Down Stocks Now?

The markets have generally been volatile since the end of January 2018. The S&P 500 has touched its 200-day moving average a few times, however, bounced back each time. It does appear that the current turbulence may well continue for some more time. However, in spite of recent uneasiness in the market, the broad indexes are only about 5% away from their all-time high achieved during the last week of January 2018.

However, it is altogether another story with some of the sectors of S&P 500. For example, one of them is Consumer Staples and Packaged Foods (Consumer Defensive Sector). Most investors are probably aware how bad the downturn is in Consumer Staples industry. Some of the well-known dividend-paying companies in the Consumer Staple sector are Procter & Gamble (PG), Colgate-Palmolive (CL), General Mills (GIS), Unilever PLC (UL), Nestlé S.A.(OTCPK:NSRGY), Kraft Heinz Co (KHC), and some others. Most of these companies are down by double-digits. Some of the reasons that have caused this downturn are:

  1. Competition from ‘House Brands’ causing stagnant or declining revenues for the brand name products.
  2. Commodity prices have been on the rise.
  3. Rising threat and challenges from e-commerce.

Some of the above fears may truly be valid. But the bigger question is if these trends are permanent or just a passing phase. Even if they are permanent, are some of these companies well positioned to challenge the status quo and come out stronger?

Here is a table that shows the performance of the above stocks since the beginning of this year. You will notice that not all have declined; actually, the European companies are doing much better than their American counterparts.

Symbol

Current Price

(As on 05/11/2018)

Price on 01/02/2018

% Return

(since Jan 2nd, 2018)

PG

73.37

90.65

-19.06%

CL

62.71

75.14

-16.54%

GIS

42.66

59.04

-27.74%

UL

55.92

54.85

+1.95%

NSRGY

77.41

85.63

-9.60%

KHC

59.24

77.02

-23.08%

SPY (S&P 500)

272.85

268.77

+1.51%

Many of the above stocks have been the favorites of the DGI investors (Dividend Growth Investors). A few of them are dividend champions, meaning they have paid and raised the dividends for more than 25 years. Their dividend yields were already attractive before this downturn, but some of them are offering mouth-watering yields off late. Below are the current yields for the six stocks.

Symbol

Current Price

(As on 05/11/2018)

Current Dividend

Yield

Forward Dividend Yield

PG

$73.37

3.80%

3.96%

CL

$62.71

2.58%

2.64%

GIS

$42.66

4.59%

4.61%

UL

$55.92

3.15%

3.44%

NSRGY

$77.41

3.27%

3.31%

KHC

$59.24

4.18%

4.31%

Who Should Buy Now?

Certainly, almost all of these stocks are at attractive valuation right now. However, it does not mean they can’t fall even further. They certainly can and more likely will, especially if the broader market takes a hit. However, there are other factors that need to be looked into:

  • Do you own some of them already? If so, how are they weighted in your overall portfolio? As a general rule, you should not have more than 15% in one sector, after all, there are 11 sectors of the economy. Also, you should not have more than 5% in one single stock, assuming you have a minimum of 20 stocks in your portfolio,
  • If you are already over-weighted in the sector or a stock, you should not get tempted to buy the current dip. We should remember the folks who were overweight in the financial sector just before the 2008-2009 financial-crisis and the damage it must have done to their portfolios.
  • What are your income needs? If you need high income, investing at the current yields into these generally conservative stocks would make more sense compared to someone who is in the accumulation phase and does not care about the current income.
  • Do these stocks fit your risk-profile? We would generally think these should fit even the most conservative stock investors. However, the stock market is at an all-time high, in spite of the recent turbulence. If the broader markets were to take a big hit, the above stocks would take a hit as well, irrespective of how low they may already be. However, they are likely to go down less compared to the broader market. Do you have the tolerance to see another 10% or 20% dip after you have taken a position? If your investment horizon is longer than 10 years, and you are prepared to look at the income component rather than the market price, then these may be suitable investments.
  • If you were to buy now, how much should you buy? The answer to this question is same as the point # 1. You should follow your rules regarding position-weight of any one security and any one sector. Also, you should decide if you are going to buy in one lot or in more than one lot, meaning in a deferred fashion. A deferred approach will take advantage of dollar-cost-average in case they were to dip further.

If We Are Going To Buy The Dip, Which One Is the Best?

Okay, let’s say you have taken the first decision that you would want to buy one or more of these stocks and take advantage of the lower prices and significantly higher yield compared to just a few months ago.

To help with the decision as to how these stocks rank compared to each other, we will compare them to several factors. The six companies that are being compared are:

PG, CL, GIS, UL, NSRGY, KHC

We will compare them on the basis of following metrics:

  • Size and economic moat
  • Dividend Yield
  • Dividend growth
  • Dividend safety
  • Valuation
  • Long-term debt
  • Revenue growth
  • EPS growth
  • Future growth estimates

Note: On each of the above metrics, we will provide a relative “Rating” to each company (except KHC). Please note that the rating is un-scientific and subjective, in this case, based on our opinion. It should not be used for buy/sell decisions, rather only as a starting point for further research.

Size and Economic Moat:

All of our companies in the select-list are well known and large-cap companies, with leading positions in some of their product categories. Even though some of them are larger than others, but we will consider them on equal footing and award them the same rating under this category.

Dividend Yield:

The current yield of a company’s stock will depend upon the market price at the time of buy. So, when the market price declines, the yield will go up. Ideally, we should buy when the current yield is at least higher or equal to the stock’s 5-year average yield.

Currently, many of these companies are yielding higher than their 5-year average, because of the recent decline in prices.

Symbol

Current Price

(As on 05/11/2018)

Current Dividend

Yield

Forward Dividend Yield

5-yr Trailing Yield

RATING

PG

$73.37

3.80%

3.96%

3.14%

1.5

CL

$62.71

2.58%

2.64%

2.18%

1.0

GIS

$42.66

4.59%

4.61%

3.11%

1.5

UL

$55.92

3.15%

3.44%

3.14%

1.25

NSRGY

$77.41

3.27%

3.31%

3.03%

1.25

KHC

$59.24

4.18%

4.31%

NA*

NR**

**NR – Not Rated, *NA – Not Available

Dividend Growth:

For DGI investors, both the current yield and the growth of the divided are important. Obviously, as investors, we want both to be high enough. If the current yield is low, but the faster dividend growth may compensate for low current yield. Alternatively, a high current yield may compensate for low dividend growth.

In this regard, Chowder-number comes quite handy. Chowder – number is the sum-total of current yield and past 5-year dividend growth. Generally, we would want the chowder-number to be at least 8 or higher.

Below is a table that provides an idea how much time it takes for a high dividend-growth but current low yield stock to catch up (provide the same or higher dividend amount) to another stock which yields high but provides low growth.

As you can see, in terms of YOC (yield on cost), it would take company-A 14 years to surpass company-B. That too provided company-A maintains its high dividend growth rate all these years. However, if the company-A is also growing its earnings faster, it is likely that the stock price of company-A would rise faster due to higher growth.

Here is the comparison of previous 3-year and 5-year dividend growth for our selected companies:

Symbol

FWD Dividend

Yield

3-Year

Dividend Growth

5-Year

Dividend Growth

RATING

PG

3.96%

3.30%

4.90%

1.0

CL

2.64%

3.80%

5.40%

1.0

GIS

4.61%

7.40%

9.70%

1.25

UL

3.54%

11.80%

8.90%

1.5

NSRGY

3.31%

2.30%

3.30%

0.75

KHC

4.31%

NA

NA

NR

Dividend Safety:

Dividend safety is actually more important than either the current yield or the dividend growth. After all, what good is the yield or growth, if that gets cut after a year. Investors in General Electric (GE) have learned that lesson twice in the last decade, unfortunately.

At the same time, it is also more difficult to know the dividend-safety factor, than say dividend-growth. It is often said that safest dividend is the one that just got raised. The past growth of the dividend, especially the very recent growth tells a lot about safety. But there are other factors like cash-flow and payout-ratio that the investors need to look at very carefully. The income of a company can be dressed up to look good by crafty management, but cash-flow will provide a true picture of how well the dividend is covered.

Payout-ratio = Total dividend paid for the year/ Total cash-flow generated for the year.

So, for dividend safety, we should look for:

Previous three year or 5-year dividend growth Current Payout ratio versus past 5-years payout ratios.

Symbol

FWD Dividend

Yield

5-Year

Dividend Growth

Payout-Ratio

5-Year

Payout-Ratio

RATING

PG

3.96%

4.90%

72.49%

71.31%

1.0

CL

2.64%

5.40%

61.00%

66.17%

1.25

GIS

4.61%

9.70%

71.06%

64.34%

1.0

UL

3.54%

8.90%

64.79%

65.07%

1.25

NSRGY

3.31%

3.30%

76.44%

68.52%

1.0

KHC

4.31%

NA

75.78%

NA

NR

Valuation:

.

All things equal, when the stock price of a company declines, its valuation improves. For example, PG has declined roughly 20% in the recent past, if its future EPS does not decline, the company has become much cheaper. P/E (or the forward P/E) is the most common metric that is used to judge the valuation. We should also compare the current P/E with the last 5-years average P/E to judge relative valuation.

As Warren Buffett said, “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” So, we should not look at the valuation alone. It is important that the fundamentals and the future prospects of the company are solid as well. That is why valuation is just one of the nine factors in our analysis.

Symbol

Current P/E

Forward P/E

5-Yr

P/E

Price/Book

Price/Sales

RATING

PG

19.51

16.16

22.99

3.46

2.96

1.5

CL

26.57

20.08

30.81

NA

3.54

1.0

GIS

11.25

13.64

21.43

4.90

1.59

1.5

UL

21.83

20.88

21.69

4.24

2.46

0.50

NSRGY

28.15

19.92

23.10

3.86

2.67

0.75

KHC

6.56

15.34

NA

1.09

2.77

NR

Long-term Debt:

The long-term debt of a company and its ability to service those debts are important to know. We should look at the interest expense versus the income to get an idea if the debt load is going to be too much for the company. We can also look at the credit rating of the company provided by various credit agencies.

Symbol

Long-Term Debt

S&P Credit Rating (L.T.)

Debt/Equity Ratio

Debt/Total Asset ratio

RATING

PG

$18.0 Billion

AA-

0.65

0.18

1.25

CL

$6.5 Billion

AA-

NA

0.50

1.00

GIS

$7.6 Billion

BBB

1.94

0.32

0.75

UL

$19.08 Billion

A+

1.75

0.27

0.75

NSRGY

$16.14 Billion

AA-

0.43

0.12

1.50

KHC

$28.3 Billion

BBB

0.49

0.25

NR

Revenue Growth:

Revenue growth will tell us if the company is growing its top line. As you can see below, the only company that has performed much better recently is Unilever, and that shows in its share price, which has not declined much in-spite of the downward pressure.

Symbol

Previous 3-yrs Growth

Previous 5-yrs Growth

Previous 10-yrs Growth

RATING

PG

-2.50%

-3.80%

-0.10%

0

CL

-0.40%

-1.10%

2.90%

0

GIS

-2.00%

0.80%

4.60%

0.50

UL

8.40%

-14.50%

3.70%

1.00

NSRGY

0.40%

0.50%

0.70%

0.50

KHC

NA

NA

NA

NR

EPS Growth:

As the earnings of a company grow, so will the share price.

Symbol

Previous 3-yrs

EPS Growth

Previous 5-yrs

EPS Growth

RATING

PG

0.50%

1.50%

0.50

CL

14.50%

1.40%

1.50

GIS

-0.70%

1.30%

0.25

UL

10.40%

7.10%

1.50

NSRGY

-19.90%

-15.60%

0

KHC

NA

NA

NR

Future Growth Estimates:

The recent past history of EPS growth can tell a lot about how the company has been growing. But it still can’t tell about the future. However, we can use the EPS growth estimates for this purpose. Below are the EPS growth estimates from Nasdaq.com and Morningstar.com.

Symbol

Next-year

Growth Est.

Next 5-yrs

Growth Est.

RATING

PG

6.60%

7.37%

1.0

CL

9.68%

8.49%

1.25

GIS

6.62%

8.18%

1.0

UL

10.41%

5.46%

1.0

NSRGY

11.5%

16.2%

1.50

KHC

8.08%

23.29%

NR

Overall Rating:

We summarize the category-wise ratings for the five stocks and calculate the overall ratings.

PG

CL

GIS

UL

NSRGY

Size and economic moat

1.00

1.0

1.0

1.0

1.0

Dividend Yield

1.5

1.0

1.5

1.25

1.25

Dividend growth

1.0

1.0

1.25

1.50

0.75

Dividend safety

1.0

1.25

1.0

1.25

1.0

Valuation

1.5

1.0

1.5

0.50

0.75

Long-term debt

1.25

1.00

0.75

0.75

1.50

Revenue growth

0

0

0.50

1.00

0.50

EPS growth

0.50

1.50

0.25

1.5

0

Future growth estimates

1.0

1.25

1.0

1.0

1.50

RATING

TOTAL

8.75

9.0

8.75

9.75

8.25

Conclusion:

All the above companies that have been analyzed are relatively safe DGI companies. As you can see from our analysis that there are only marginal differences in the net rating that we have derived. Though this rating method is un-scientific and subjective to some extent, we still find it helpful.

If we are price-conscious and rather go for the cheapest company in this sector, probably PG would be our choice. However, if we want to buy a company that has been going strong in the recent years, we could buy Unilever, which is trading at a fair price (but not cheap). In terms of future prospects and growth, it is difficult to see which company will grow faster than others. The EPS growth estimates suggest higher growth for Nestle and KHC going forward, but these are only Wall-street estimates at this point and should be taken with a grain of salt.

As we stated earlier in the article, you should pay attention to the position weight to this sector. If you are already overweight the sector, you should probably skip the temptation to buy. On the other hand, if you are underweight, it will be okay to nibble on a couple of names like PG and Nestle.

Disclaimer: The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Please always do further research and do your own due diligence before making any investments. Every effort has been made to present the data/information accurately; however, the author does not claim 100% accuracy. Any stock portfolio or strategy presented here is only for demonstration purposes.

Disclosure: I am/we are long ABT, ABBV, JNJ, PFE, NVS, NVO, CL, CLX, GIS, UL, NSRGY, PG, MON, ADM, MO, PM, KO, DEO, MCD, WMT, WBA, CVS, LOW, CSCO, MSFT, INTC, T, VZ, VTR, CVX, XOM, VLO, HCP, O, OHI, NNN, STAG, WPC, MAIN, NLY, PCI, PDI, PFF, RFI, RNP, UTF, EVT, FFC, KYN, NMZ, NBB, HQH, JPC, JRI, TLT, DAE , ARCC, JPS.

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.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Regretting It Already

Last Sunday, I wrote a fun little something for this platform called “Jerome Powell May Live To Regret These Statements“, in which I flagged a series of comments the newly appointed Fed chair made at an IMF/SNB event earlier this month.

Here, for anyone who missed it, is what Powell said about the likely resilience of emerging markets (EEM) as the Fed normalizes policy:

Monetary stimulus by the Fed and other advanced economies played a relatively limited role in the surge of capital flows to (emerging market economies) in recent years.

There is good reason to think that the normalization of monetary policy in advanced economies should continue to prove manageable for EMEs. Markets should not be surprised by our actions if the economy evolves in line with expectations.

In the first piece linked above, I gently suggested that while rising U.S. rates and the ongoing rally in the dollar (UUP) needn’t necessarily lead to a broad-based unwind in EM, past a certain point it won’t be possible to contend that the only real issues here are a recalcitrant Erdogan in Turkey and a crisis of confidence with regard to the Argentine peso.

In other words, there’s only so long you can lean on the idiosyncratic, country-specific stories excuse when the pain is spilling over to other locales amid a continual rise in U.S. rates and still more dollar strength. Although it’s really only possible to know this in hindsight, often (and this doesn’t just apply to emerging markets) we discover that what we thought were “idiosyncratic” stories were in fact coal mine canaries or, to mix metaphors, the wobbliest dominoes.

As I noted last Sunday, “what you’ve seen recently in the Brazilian real and also in Indonesia is evidence of contagion.” I started talking at length about the Indonesia story weeks ago and around the same time, BofAML’s Michael Hartnett (he’s the guy who told you to sell based on his “perfect” indicator back on January 26, a week before things got dicey), said this about the Brazilian real:

EM FX never lies and a plunge in Brazilian real toward 4 versus US dollar is likely to cause deleveraging and contagion across credit portfolios.

Well, this week, Indonesia hiked rates for the first time since 2014 and Brazil’s central bank eschewed what would have been a 13th consecutive rate cut in an effort to put the brakes on the currency pressure.

Neither effort was effective. In Indonesia’s case, the rupiah plunged to its lowest since October 2015 on Friday:

(Heisenberg)

Have a look at the selloff in bonds (benchmark yields for Indonesia are up some 65 bps this quarter, that would be the largest quarterly jump since late 2016):

(Heisenberg)

In short, the rate hike is not going to be enough. Capital flight is accelerating.

As for Brazil, the “hawkish” decision to forgo another rate cut similarly failed to assuage concerns and worse, it deep-sixed Brazilian equities. The real continued to fall, hitting a two-year low on Friday and I think you’ll agree that what you see in the following chart looks like trouble:

(Heisenberg)

And look, if you’re in the camp that’s predisposed to suggesting none of this matters until it spills over into developed markets, do your friends who hold the popular iShares MSCI Brazil Capped ETF (EWZ) a favor and don’t feed them that line, ok? Have a heart. Empathize. Because they just had their worst week since the circuit breakers were tripping last May:

(Heisenberg)

When it comes to Brazil there’s probably no need to panic just yet. There’s some electoral uncertainty, but nothing that should justify what you see in the currency.

“BRL is slightly weak but not too devalued. This is not an overshooting,” Goldman’s Alberto Ramos told Bloomberg in an e-mail, adding that this is a reflection of external shocks (think: stronger dollar and rising U.S. rates) that “are common to other EM currencies.”

He did go on to note that we could see 4.00 on the BRL, but that “would require the intensification of global EM FX pressures and more concern about the October election.”

Right. Well when it comes to “the intensification of global EM FX pressures” (i.e., when it comes to the kind of 30,000 foot view), the MSCI EM FX index has fallen for six of the past seven weeks:

(Heisenberg)

It was down every day this week.

The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has also fallen for six of the last seven weeks:

(Heisenberg)

And how about the iShares JP Morgan EM Local Government Bond UCITS ETF? Well, it’s down handily, has seen some $550 million in outflows this month alone, and as Bloomberg notes, hasn’t seen a net inflow since March:

(Heisenberg, Bloomberg)

Look at the slide in its market cap just over the past two months:

(Bloomberg)

Now, let me take a moment to remind you that I have been persistently warning about Turkish President Recep Tayyip Erdoğan’s penchant for pushing a laughably unorthodox “theory” about how higher interest rates cause inflation and currency depreciation. If you follow Turkey, you know all about this. Here’s what I said in the post linked here at the outset:

In case you were under the impression that Erdoğan is going to be inclined to moderating his stance on interest rates (which, in his bizarre version of economics, cause inflation if they’re too high), he is going out of his way to ratchet up the rhetoric and disabuse you of that idea on a daily basis.

Well, do you know what he did this week? He went on Bloomberg TV and all but confirmed that once next month’s election is out of the way, he’s going to effectively commandeer monetary policy. You can watch that interview for yourself here and/or read my longer commentary here, but suffice to say it pushed the beleaguered lira to a fresh all-time low and confirmed everyone’s worst fears about what’s going to happen once he officially consolidates power:

(Heisenberg)

As an amusing aside, if you’re following along on Twitter, you knew that Bloomberg interview was bound to cause trouble:

All of this played out in a week that saw 10Y yields (TLT) in the U.S. hit their highest since 2011 and 30Y yields touch 3.25%.

Oh, and remember how the dollar rally stalled last week? Yeah, well it resumed this week, rising for the fourth week in five:

(Heisenberg)

What you’re seeing here is not only notable, but extremely important for what it says about how the environment is shifting as the Fed normalizes. As I’ve been keen on noting for at least a year, everything became one trade as QE drove everyone down the quality ladder in a relentless hunt for yield and as dovish forward guidance kept rates vol. anchored. That’s now reversing.

How violent that reversal will ultimately be is debatable. Some folks think it wouldn’t be the worst thing to just let emerging markets go. The following excerpts are from the latest by former trader turned Bloomberg columnist Richard Breslow:

These positions can be put to the test without necessarily having negative implications for the broader asset classes. In fact, it may represent a very positive development. A big chunk of these trades weren’t originally done because people were feeling chuffed. They were just desperately searching for yield and following the bidding of the central banks.

But if you’re fascinated by big names, then you might note that Carmen Reinhart is concerned. Here’s what she said this week about emerging markets:

The overall shape they’re in has a lot more cracks now than it did five years ago and certainly at the time of the global financial crisis. It’s both external and internal conditions. This is not gloom-and-doom, but there are a lot of internal and external vulnerabilities now that were not there during the taper tantrum.

And then there was this from El-Erian (via Twitter):

Now look, if what you want to do is pretend as though this is all immaterial for developed market investors, then by all means, but just know that this is one of those scenarios where the old adage about being “entitled to your own opinions but not your own facts” applies. As Heisenberg readers know, I generally despise old adages, but that one is apt here.

This is absolutely material for all investors and the whole point of documenting the spillover from Turkey and Argentina into other locales and charting the decline in various indices and funds is to demonstrate that rising U.S. rates and the stronger dollar are the proximate cause of the problem.

This is all a consequence of the buildup of imbalances in the QE era. It was always a matter of how smoothly the unwind of all the trades that are part and parcel of the global hunt for yield would be and the verdict from emerging markets right now is: “not smoothly”.

Trade accordingly. Or don’t. It’s up to you. But don’t say you don’t have the information you need to make an informed decision.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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

Elon Musk brings technology charm offensive to Los Angeles tunnel plan

LOS ANGELES (Reuters) – Billionaire entrepreneur Elon Musk is bringing his technology charm offensive to an attempt at digging a tunnel beneath part of Los Angeles to test designs for a high-speed subterranean transportation network he envisions for the city.

SpaceX founder Elon Musk smiles at a press conference following the first launch of a SpaceX Falcon Heavy rocket at the Kennedy Space Center in Cape Canaveral, Florida, U.S., February 6, 2018. REUTERS/Joe Skipper

Musk, the Silicon Valley high-tech tycoon best known for his Tesla Inc electric car manufacturer, planned to make a rare personal appearance at a public event in Los Angeles on Thursday night to answer questions from residents about his tunneling plans.

Efforts by Musk’s aptly named underground transit venture, the Boring Company, to win fast-track city approval of the proposed tunnel has drawn a court challenge from two neighborhood organizations.

The venue for his town hall-style meeting is the Leo Baeck Temple, a synagogue in the city’s affluent Bel-Air district, where Musk owns a residence, about 10 miles (16 km) north of the would-be tunnel site.

Plans call for excavating a 2.7-mile (4.4-km) passage below a stretch of the congested Sepulveda Boulevard corridor on the West Side of Los Angeles and the adjacent town of Culver City.

The Los Angeles City Council’s public works committee last month approved Boring’s request to exempt the tunnel from a lengthy environmental impact review that would otherwise be required under state law.

Boring says the tunnel would serve as an experimental proof-of-concept site to demonstrate ideas for a traffic-easing system Musk wants to build to rapidly whisk individual cars and small groups of pedestrians from place to place beneath the surface.

But two neighborhood advocacy groups have filed suit to block the excavation, arguing the project is really intended as the first segment for a much larger tunnel system planned by Musk. They say he is trying to obtain a waiver to evade environmental regulations that forbid piecemeal fast-track permitting of big-scope projects.

Musk launched his foray into public transit after complaining on Twitter in December 2016 that clogged traffic was “driving me nuts,” vowing to “build a boring machine and just start digging.”

The Boring expansion comes as Musk wrestles with production problems for the rollout of the Model 3 sedan at Tesla, his electric car and energy-storage business. He also is chief executive of rocket builder Space Exploration Technologies, or SpaceX, and the profusion of leadership roles has concerned some investors that he is spread too thin.

The West L.A. tunnel is the latest project Boring has undertaken after quietly digging a slightly shorter tunnel underneath tiny neighboring municipality of Hawthorne, where SpaceX and Boring are both headquartered.

Reporting by Steve Gorman; Editing by Peter Cooney

Report: Google Employees Resigning Over Controversial Pentagon Contract

A number of Google employees have resigned in protest over a contract between the tech giant and the Pentagon, according to tech news site Gizmodo.

In March, Gizmodo revealed that Google was working with the Defense Department to develop artificial intelligence for analyzing drone footage as part of an initiative known as Project Maven.

Google’s involvement sparked ethical concern and anger among employees, Gizmodo initially reported. An internal petition called on Google CEO Sundar Pichai to cancel Project Maven and “[d]raft, publicize, and enforce a clear policy stating that neither Google nor its contractors will ever build warfare technology.” The New York Times reported in April that over 3,000 Google employees signed the petition.

Now, according to Gizmodo, “about a dozen” Google employees are resigning due to Project Maven. Their reasons for leaving range from lack of transparency to ethical concerns. “Over the last couple of months, I’ve been less and less impressed with the response and the way people’s concerns are being treated and listened to,” an unidentified employee who resigned told Gizmodo.

For its part, Google says that its Pentagon contract is only a test and that it covers non-classified images.

“The technology flags images for human review, and is for non-offensive uses only,” a Google spokesperson told Gizmodo in March. “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.”

Still members of the tech industry are concerned. In addition to the Google-specific internal petition, there is a broader petition targeting IBM, Microsoft, Amazon and Google, created by tech workers who “believe that tech companies should not be in the business of war.”

Researchers who are critical of Google also posted an open letter worrying about Google providing the Pentagon with “open source ‘deep learning’ technology” along with engineering expertise.

“The DoD contracts under consideration by Google, and similar contracts already in place at Microsoft and Amazon, signal a dangerous alliance between the private tech industry, currently in possession of vast quantities of sensitive personal data collected from people across the globe, and one country’s military,” the letter states. “They also signal a failure to engage with global civil society and diplomatic institutions that have already highlighted the ethical stakes of these technologies.”

In October of 2017, over 100 companies attended an industry event related to Project Maven, according to the Defense Department.

Fortune contacted Google for comment about these resignations and will update this post if it responds.

Project Maven was started in April of 2017 by then-Deputy Defense Secretary Bob Work, who started an Algorithmic Warfare Cross-Functional Team. “The project’s first task involves developing and integrating computer-vision algorithms needed to help military and civilian analysts encumbered by the sheer volume of full-motion video data that DoD collects every day in support of counterinsurgency and counterterrorism operations,” according to a Defense Department article from 2017.

Why Trump Suddenly Wants to Save Jobs in China

President Donald Trump has long promised to get tough on China. So why is he so worried about saving jobs there?

Last week the Chinese telecommunications giant ZTE said it had halted its major operations after the US government moved to ban US companies from selling software or components to ZTE. On Sunday, Trump tweeted that he and Chinese President Xi Jinping were working together to save ZTE. “Too many jobs in China lost,” Trump tweeted. “Commerce Department has been instructed to get it done!”

Lifting sanctions on ZTE might help defuse a budding trade war that threatened US agriculture exports. In exchange for lifting the sanctions, China might rescind planned tariffs on products like pork and ginseng that were themselves responses to the US’s planned tariffs on Chinese steel and aluminum, the Wall Street Journal reports. Chinese tariffs on US farm goods could be a huge headache for Trump and Republicans in the midterms, since red states and rural voters could be the hardest hit.

ZTE’s plan to shut down without US-made hardware and software shows how interconnected the world’s two largest economies remain, despite mutual fears and rising tensions. Chinese companies still rely on US technology. And US tech firms make a large share of their products in China.

The ZTE sanctions could have wider ranging impacts on US-China relations. The sanctions were so excessive that they threaten to damage any trust the Chinese government might have in trade relations in the US, says Susan Shirk, chair of the 21st Century China Center at the University of California, San Diego. “Telling ZTE that it can’t buy US technology signals to China that it can be excluded from the US technology market at any time,” says Shirk, a former US trade negotiator. That just motivates China to build its own alternatives to US technology—exactly what the US would prefer it not do.

Chas Freeman, a senior fellow at Brown University’s Watson Institute, agrees. If China can’t rely on supply chains that include US components, the country will create its own supply chains, says Freeman, who served as President Richard Nixon’s interpreter during his famous 1972 visit to China.

Some critics of Trump’s move to ease the ZTE sanctions, such as Senator Marco Rubio (R-Florida), have argued that the decision will make it easier for Chinese telecommunications companies to spy on Americans. But Shirk points out that the sanctions didn’t prevent the sale of ZTE products in the US and weren’t imposed due to espionage concerns. They stemmed from ZTE’s violations of sanctions against other countries.

Last year ZTE admitted that it violated US export laws by selling phones with US-made software and hardware to countries such as Iran and North Korea. The company agreed to pay a fine of about $900 million, fire four senior employees, and discipline many others. Last month, the U.S. Department of Commerce said the company had failed to discipline some of its employees and, as a result, imposed the sanctions.

Derek Scissors of the free-market think tank American Enterprise Institute says that a deal to reduce the severity of the ZTE sanctions will lower the odds of a trade war in the short term, but could weaken the US’s position in the long term. “The ZTE sanctions were the strongest action the Trump administration has taken against China, by far,” Scissors says. “Why would China believe that the US is serious about taking difficult steps after this?”

Shirk hopes that reducing or eliminating the sanctions could help smooth over US-China relations. But Freeman isn’t so optimistic. Even if the administration can come to a deal with China over agricultural tariffs, it won’t fix the deeper rift between the two countries, he says. Freeman argues that infighting within the Trump administration has left an incoherent, at best, policy towards China. If Trump administration officials can’t agree internally on what they want, they won’t be able to negotiate deals with China.

More Great WIRED Stories

With Trump Feud Still Simmering, Postal Service Announces Huge Growth in Package Delivery — And Widening Losses

The U.S. Postal Service announced its second quarter financial results on Friday, a normally ho-hum moment made a lot more significant thanks to continuing criticism of USPS’s relationship with Amazon by U.S. President Donald Trump.

USPS said that its revenue for shipping and packages shot up by 9.5%, or $445 million, since the second quarter of last year. Meanwhile, letter and other mail volume dropped by 2.1%, and mail revenue was down $181 million. Overall revenue grew 1.4%, but the USPS still lost $1.3 billion in the quarter, compared to a $562 million loss this time last year, thanks to a 5.7% increase in operating expenses. USPS said rising expenses included the cost of retiree health benefits, increased labor costs for shipping packages, and higher transportation expenses.

If that all sounds complicated, it is — and that complexity has helped enable Trump’s campaign against the USPS’s partnership with Amazon. Trump has accused Amazon of benefiting from preferential USPS rates, and last month created a task force to review USPS business practices. But a former postmaster general has said that the USPS agreement with Amazon had been profitable for the Postal Service, which must offer competitive package pricing with services like UPS and FedEx, but can’t legally price package delivery below its cost.

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That supports the idea that criticism of Amazon’s USPS payments as just one front in Trump’s larger fight with Amazon’s owner, Jeff Bezos. Bezos also owns the Washington Post, which is among Trump’s favorite targets to slam as “fake news.” Some see Trump’s claims that Amazon is cheating the USPS, then, as an indirect attack on opposition media. That would be ironic, since the founding principle of universal postal service was increased freedom of information.

USPS’s biggest losses have been fueled not by Amazon, or even by the rise of ecommerce, but by the drastic decline in first-class letters and other light mail, thanks largely to the rise of e-mail. USPS has a monopoly over letter mail which is intended to compensate for requirements that it provide universal service even to remote or less populated parts of America. But first-class mail volume has plummeted by nearly half since its peak in 2000.

In a statement, Postmaster General and CEO Megan J. Brennan blamed growing losses not only on those technological changes, but also on “an inflexible, legistlatively mandated business model that limits our ability to generate sufficient revenue and imposes costs upon us that we cannot afford.”

Brennan was referring in part to a legislative mandate that USPS pre-fund retiree benefits, a requirement not shared by most private-sector companies, or even other federal employees. Lawmakers have also stopped some proposals that would have reduced USPS operating costs, including reducing deliveries from six days a week to five.

If it were a typical business, USPS could have made those needed changes years ago. That might have left Trump less able to use the Postal Service as a weapon in his broader crusade.

Cyber Saturday—As Blockchain Week Kicks Off, Remember The DAO

Good afternoon, Cyber Saturday readers.

In honor of “blockchain week,” which is kicking off in New York City, I’ve been thinking about the security of smart contracts, self-executing computer programs designed to encode business relationships. A smart contract might codify, for example, an agreement like this: If Justify, a racehorse, wins the Kentucky Derby, pay $10 in Bitcoin to some lucky fellow’s digital wallet. The code eliminates the need for a bookie.

Now imagine a future in which such contracts automate tasks once relegated to lawyers, pencil-pushers, and other intermediary parties. Blockchain boosters dream of a day when they can route around middlemen with these sorts of self-driving computer programs, thereby making markets more efficient, so the thinking goes. There’s a snag though: Smart contracts are software applications, and software applications have bugs.

Sometimes, as with The DAO, an ill-fated, decentralized venture capital fund built on Ethereum, a popular cryptocurrency network, those bugs can be ruinous. Hackers stole $50 million in cryptocurrency from the project in 2016 thanks to a simple “reentrancy” flaw. The bug allowed an attacker, or group of attackers, to continually withdraw money from the smart contract-powered organization until its coffers had been thoroughly pilfered.

Similar flubs abound in the field of cryptocurrency. Chris Wysopal, cofounder and chief technologist at Veracode, an application security shop bought by CA Technologies for $614 million in cash last year, gave a keynote talk at Collision conference in New Orleans earlier this month in which he provided an overview of the security challenges posed by smart contracts. “The blockchain is really secure, but the things that have to interact with it, those things aren’t secure,” Wysopal told the audience. “It’s probably one of the toughest problems right now” in security, he said.

Although I did not catch Wysopal’s talk in person (you can watch it here), I chatted with him afterward at B.B. King Blues Club and Grill and in between jazz sets at various bars along Frenchman Street. He said that if he were a thief, smart contracts are where he would focus the majority of his attention and energy today. Target the youngest projects with the worst quality assurance processes, the highest valuations, and the weakest defenses. It’s a recipe for success; in this world, baddies no longer have to worry about monetizing the data they steal. They can steal (virtual) money itself.

If you happen to be in New York for blockchain week, temper your enthusiasm with that alarum. It’s what the smartest folks will do.

Have a great weekend.

Robert Hackett

@rhhackett

[email protected]

Welcome to the Cyber Saturday edition of Data Sheet, Fortune’sdaily tech newsletter. Fortune reporter Robert Hackett here. You may reach Robert Hackett via Twitter, Cryptocat, Jabber (see OTR fingerprint on my about.me), PGP encrypted email (see public key on my Keybase.io), Wickr, Signal, or however you (securely) prefer. Feedback welcome.

Chipmaker Nvidia sees fewer crypto miners, more gamers in future

(Reuters) – Too many cryptocurrency clients and fewer cloud computing orders than expected underwhelmed Nvidia Corp (NVDA.O) investors on Thursday, although the graphics chip maker said a supply shortage that hit its core video game audience had eased.

FILE PHOTO: The logo of Nvidia Corporation is seen during the annual Computex computer exhibition in Taipei, Taiwan May 30, 2017. REUTERS/Tyrone Siu/File Photo

The U.S. company best known for chips that enhance video game graphics has diversified into an array of businesses including artificial intelligence, self-driving cars and digital mining, but investors are most concerned with its inroads in the market for cloud computing.

Revenue from Nvidia’s data center business, which powers cloud-based services such as Amazon.com’s (AMZN.O) Amazon Web Services, Microsoft Corp’s (MSFT.O) Azure as well as Alphabet Inc’s (GOOGL.O) Google Cloud, rose 71 percent to $701 million, but missed analysts’ estimate of $703 million, according to Thomson Reuters I/B/E/S.

The Santa Clara, California company for the first time disclosed that it made $289 million in sales – about 9 percent of its overall $3.2 billion in revenue – from chips for mining cryptocurrencies.

Analysts had expected $200 million and the greater reliance on the fast-growing but volatile business contributed to shares falling 3.3 percent to $251.66 in extended trading. Nvidia shares have gained 34.4 percent this year, propelling the stock to the top of the Philadelphia Semiconductor Index .SOX. They touched a record high at $260.50 on Thursday before the announcement.

Chief Financial Officer Colette Kress said that the company expects cryptocurrency-related revenue to fall 65 percent to about $100 million in the next quarter. Retail prices for Nvidia’s gaming chips surged earlier this year as miners snapped up chips, a development Nvidia addressed by releasing mining-specific chips.

“While supply was tight earlier in the quarter, the situation is now easing,” Kress told investors on a conference call. “Gamers who had been priced out of the market last quarter” were able to get their hands on new chips a reasonable price, she said.

Analyst Kevin Cassidy from Stifel said the reliance on cryptocurrency concerned some investors. Moreover, he said, Nvidia’s earnings were mostly in line with expectations, “which may not be good enough for shares trading at 40x forward earnings.”

Data center industry sales have boomed as cloud services build out new facilities. Intel Corp (INTC.O) last month said it had posted its biggest-ever quarterly jump in its data center business. For its part, Nvidia said it doubled sales of chips used by cloud companies for so-called deep learning.

Patrick Moorhead of Moor Insights & Strategy said he was not concerned by the lower-than-expected data center revenue because the buying patterns of huge cloud customers were “lumpy.”

Revenue from Nvidia’s best-known business of gaming chips rose 68 percent to $1.72 billion, beating analysts’ average estimate of $1.65 billion.

“At the core of it, gaming is strong,” Chief Executive Jensen Huang told investors on the conference call. “The pent-up demand is quite significant and I’m expecting the gamers to be able to buy new GeForces pretty soon.”

A cryptocurrency boom has powered growth at Nvidia and rival Advanced Micro Devices Inc (AMD.O), but the sector is battling volatility caused by swings in the currency’s value.

Revenue from Nvidia’s automotive business, which includes its Drive platform used in self-driving cars, rose 4 percent to $145 million, also topping analysts’ estimate of $132 million.

Nvidia in March suspended self-driving tests across the globe, a week after an Uber Technologies Inc [UBER.UL] autonomous vehicle struck and killed a 49-year-old woman crossing a street in Arizona. But CEO Huang remained optimistic.

“I expect that driverless taxis will start going to market about 2019,” Huang told investors.

The company’s net income rose to $1.24 billion, or $1.98 per share, in the first quarter ended April 29, from $507 million, or 79 cents per share, a year earlier.

Total revenue rose to $3.21 billion from $1.94 billion.

Excluding items, Nvidia earned $2.05 per share.

Analysts on average had expected revenue of $2.91 billion, according to Thomson Reuters I/B/E/S.

Reporting by Sonam Rai in Bengaluru and Stephen Nellis in San Francisco; editing by Peter Henderson and Lisa Shumaker

Chinese gaming firm Huya prices IPO in New York at $12 per share: source

(Reuters) – The initial public offering of Chinese game-streaming platform Huya Inc on the New York Stock Exchange was priced at $12 per share, a source familiar with the matter said on Thursday, at the upper-end of the indicated price range.

Huya offered 15 million American Depository Shares (ADS), raising $180 million. The company had indicated a price range of $10-$12 each.

Following the offering, Huya’s parent company YY Inc will hold 54.9 percent voting power in the company, while a Tencent Holdings investment unit will hold 39.5 percent, Huya said in a statement.

Huya is one of China’s biggest live-streaming platforms for online gaming, covering over 2,600 different mobile, PC and console games.

China had the world’s largest video games market in terms of revenues and number of gamers in 2017, Huya said. The company had nearly 40 million average mobile monthly active users in the fourth quarter of 2017.

Huya’s revenue almost tripled to 2.18 billion yuan ($344 million) in 2017 from the year previous. It made a loss of 80.9 million yuan.

Credit Suisse, Goldman Sachs and UBS are lead underwriters to the offering.

Reporting by Diptendu Lahiri and Nikhil Subba in Bengaluru, Editing by Rosalba O’Brien

CEO Stewart Butterfield Wants Slack to Be Google for the Office

Slack is not just a messaging tool anymore–and, for the record, it’s not trying to “kill” email.

Over 8 million users log into Slack every day, according to founder and CEO Stewart Butterfield at The Wall Street Journal‘s Future of Everything festival Tuesday. The company, which also counts 3 million paid users, saw its numbers increase by 33 percent from last September. The company reportedly brings in a revenue of around $300 million–and plans on only getting bigger.

Now five-years-old, Slack is moving beyond being a searchable log for communication. If Google is a giant search engine for the world’s information, Slack wants to be a “Google for the office.” “What Google is doing for the web, we’re trying to structure by channel,” said Butterfield. “Team-first, organization-first approach to messages as opposed to individual first.”

Similar to social media platforms like Google or Facebook, many third parties bring their software onto Slack. The company has about 1,500 apps in its app directory including Google Docs, Github, marketing management tools, and contract development tools. As such, Butterfield said the future of Slack will be one in which work tasks increasingly integrate directly into the platform.

For example, software engineers used to perform a command in the terminal and then go into a messaging system to communicate to the team what they did. But now, an engineer can go to a Slack team channel–where there’s “high degree of visibility and the cost of communication goes down”–and simply write the code for all to see without navigating to a different web page.

Butterfield also described how Slack is the ideal tool, given how productivity has changed over time. In the early days of the internet, you didn’t have to juggle many things at once. A recruiter now, for instance, uses LinkedIn, email, tools for evaluating resumes, and tools for writing more effective job descriptions.

“As individual productivity increases, it’s the handoff between people that gets more complicated,” he said. “The talking to other people is the actual work.” If all of that can happen in one place, the simpler our jobs will be.

While Slack continues to evolve the workplace, Butterfield said there’s one thing the tool isn’t aiming to do: “Our job isn’t to eliminate emails. We don’t get anything out of that. Email is the lowest common denominator of communication–you can guarantee everyone has an email address. Email is going to be around for awhile.”

Indeed–Butterfield admits he still spends up to two hours a day on email.

.

Budweiser Wants to Get You Drunk on Mars

If the human race ever makes it to Mars, the rigors of staying alive on a hostile planet with a poisonous atmosphere should keep astronauts pretty busy. But if Anheuser-Busch has its way, astronauts will be able to kill the little free time they have by drinking Budweiser.

On Friday, Anheuser-Busch, part of global brewing conglomerate ABInBev, released an un-ironic commercial declaring Budweiser’s intent to colonize the next frontier: becoming the official beer of Mars. To get there, the beer brand has partnered with Elon Musk’s SpaceX to supply the rocket and Space Tango, a Kentucky-based startup that makes “CubeLabs” that run automated experiments inside the International Space Station (ISS) laboratory.

The commercial is part of the ongoing “commitment” Anheuser-Busch made last Thanksgiving to develop the very first “micro-gravity” beer to drink on Mars. In December, the brand sent 3,500 barley seeds inside one of Space Tango’s CubeLabs aboard a SpaceX re-supply rocket. Once it arrived at the ISS, the goal was to figure out how barley grows in a microgravity environment. In April, Anheuser-Busch sent a second batch to collect more data on seed germination in space.

In the ad, set to nostalgic footage of space missions past, retired NASA astronaut Clayton Anderson asks: “How is beer essential to the mission [to Mars]?” He responds, in earnest, with another, more seemingly existential question: “Well, what’s the point in going to space if we don’t bring ourselves?”. (Ourselves, of course, being beer.)

“They [Anheuser-Busch] are balancing the line of doing unique scientific research to study the biology of germination while pushing the boundaries of leisure and recreation during space exploration,” says Gentry Barnett, Space Tango’s lab program manager.

According to Space Tango co-founder Kris Kimel, the germinated barley seeds from the April experiment are currently on their way back to Earth, and will eventually land in the ocean 200 miles off California, before being sent to Anheuser-Busch’s agricultural headquarters in Fort Collins, Colorado.

NASA did not respond to a request for comment about whether or not any astronauts have drunk beer, or any alcohol, in space.

Even if the Anheuser-Busch barley experiments are just a creative way to sell beer, it’s not a bad move. Spark & Honey, an ad agency, found that 36 percent of Americans say they are more willing to buy a product tied to space in some way. Why not sell space beer?

Chinese-American Elites Lament a Brewing Trade War

It’s not easy to promote closer US-China ties these days. The countries are moving toward a trade war; a US delegation left Beijing Friday reporting little progress on resolving disputes. US executives accuse China of stealing their intellectual property. The US government is imposing ever tighter restrictions on Chinese telecommunications firms.

That made an uncomfortable backdrop for the annual conference of the Committee of 100, a group of influential Chinese-Americans, in Silicon Valley over the weekend. The group billed the event as a “Bridge Between the US and China.” But speakers and attendees lamented deteriorating relations, heaped scorn on the Trump administration, and expressed concern that nativism could lead to discrimination against Chinese-Americans.

“It does not take a very stable genius to understand that the US relationship with China is now under severe stress,” Chas Freeman, a senior fellow at Brown University’s Watson Institute, told several hundred guests. In 1972, Freeman was an interpreter for President Nixon during his first visit to China. More than four decades later, Freeman noted the growing hostility between the leaders of the world’s two largest economies, even as their nations remain interdependent. “The US and China are each too globalized, too successful, and entangled to divorce,” he said.

Freeman and others said Trump administration policies risk weakening the US or exacerbating tensions between the countries. The tax cut approved by Congress last year will lead the government to issue more debt, much of which will be bought by the Chinese, he said. Blocking Chinese telecom company ZTE from buying US-made components could backfire by encouraging China to buttress its domestic suppliers; those firms could eventually displace US components in other products.

Not all the blame went toward Washington. Susan Shirk, chair of the 21st Century China Center at the University of California, San Diego, said China is engaged in a “massive government-organized and lavishly funded drive to acquire foreign technology to make itself into a high-tech superpower.” After decades of movement toward a market-based economy, Shirk said the Chinese government is increasing its involvement in the economy, and re-emphasizing its socialist ideology. “What’s happening in China is not your normal industrial policy,” Shirk said. “These are efforts to reduce integration with the rest of the global economy.”

Shirk said executives and political leaders in other developed economies share concerns about China’s path. “This is a much broader and deeper concern than just Trump,” she said. Gary Locke, a former US ambassador to China, echoed that sentiment, saying China limits foreign ownership of Chinese businesses, prodding many US firms into uncomfortable joint ventures with Chinese companies that are, or could be, rivals.

Technology executives find the growing tensions unsettling. “As a tech person, I love to think that technology has no boundaries,” said Paul Yeh, who runs a Palo Alto, California venture capital fund that invests in both the US and China. But Yeh said he’s not naive, and thinks the tech industry ultimately will suffer from the hostility. One potential warning sign: Three-fourths of respondents to a recent survey by the American Chamber of Commerce in China said foreign businesses are less welcome in China than previously.

Beneath the rhetoric, China has emerged as a legitimate tech power. Locke, the former ambassador, noted that Chinese inventors filed more patents than those from any other nation last year, and the country is home to the world’s fastest supercomputer. China has been particularly aggressive in artificial intelligence, with a national goal to catch the US by 2020. China’s SenseTime, which makes image-analysis software, is now the world’s most valuable AI startup.

Fei-Fei Li, Google’s chief scientist for artificial intelligence and machine learning, offered a more personal perspective on the rivalry between the two countries. Li was born in China and came to the US during high school. She earned a bachelor’s degree in physics before moving into computer science and ultimately, AI. She noted that the discoveries that revolutionized physics in the early 20th century came from scientists in several countries. “No company or country owned modern physics,” she said, drawing a parallel to artificial intelligence. “We all benefit.”

In some areas, the two countries are so interconnected that it’s hard to distinguish what is American and what is Chinese. Several startups pursuing self-driving technology include people from both countries and technology from both countries, said Jonathan Woetzel, the Asia-based director of the McKinsey Global Institute. “Business is what happens while politicians are talking,” he said.

Rising Tension

How to secure SaaS: Understanding the cloud’s security layers

When you address security in the cloud for your enterprise use, you need to think of it in several layers:

  • Layer 0 is the primary IaaS cloud on which everything else runs; typically, Amazon Web Services, Microsoft Azure, Google Cloud Platform, IBM Cloud, or Alibaba.
  • Layer 1 is the SaaS provider for your applications and servers. The SaaS offerings typically run on (someone else’s) Layer 0 provider, or come from a Layer 0 provider that also offers SaaS. Your own cloud-delivered apps are in this layer as well.
  • Layer 2 is the specific application and its user.

What can be confusing is understanding what layers reside where. For example, there are more than 3,000 SaaS providers out there—CRM and accounting systems, health care portals, bail-bond management, you name it—that run on someone else’s IaaS cloud, such as AWS. You often won’t know what IaaS Layer 0 providers they use, or if they use several.

Furthernore, within the SaaS Layer 1, SaaS providers group users into “macrotenants,” which typically typically are composed of users (more importantly, departments) from the same enterprise customer. 

Then there’s the user in Layer 2, who has credentials to specific applications and services and is using computers, browsers, and network typically not managed by either the IaaS or SaaS provider. In other words, Layer 0 is within the IaaS provider’s cotrol, and Layer 1 is within the SaaS provider’s control. Layer 2 is not.

Using a private cloud? Admit your error and go public instead

Amazon Web Services has announced that Oath, the former Yahoo, has selected AWS as its preferred public cloud provider. Sounds like another routine “win” announcement from a cloud vendor, doesn’t it? But this one is far from routine.

Just last year, InfoWorld’s editor in chief, Eric Knorr, wrote about Yahoo’s grand plans to create a giant private cloud. Not even a year later, Yahoo (now Oath) has switched gears and is moving to the public cloud instead.

Why changing its cloud course was a very smart decision for Oath

This reversal is smart. Other companies with their own private clouds have dug in their heels, and I suspect they will wait until the market makes a decision for them. At least Oath is being proactive after clearly seeing the writing on the wall around private clouds. (Ironically, Oath’s owner, Verizon, once had ambitions of being a major cloud provider itself. It too correctly read the tea leaves and abandoned those plans.)

Proactive enterprises are shutting down their private clouds and migrating to the main public cloud providers: AWS, Microsoft, Google, and Alibaba.

China's Xiaomi files for mega Hong Kong IPO, lifts lid on financials

BEIJING (Reuters) – Smartphone and connected device maker Xiaomi [IPO-XMGP.HK] filed for a Hong Kong initial public offering on Thursday, in what is expected to be the largest listing by a Chinese tech company in almost four years.

People walk past a Xiaomi store in Beijing, China March 31, 2018. Picture taken March 31, 2018. REUTERS/Stringer

The listing could value the company at up to $100 billion and would be the biggest Chinese tech IPO since Alibaba Group Holding Ltd (BABA.N) raised $21.8 billion in 2014.

The announcement came as the consumer electronics company gave investors the first detailed look at its financial position ahead of the much-hyped IPO.

The company said its revenue was 114.62 billion yuan ($18 billion) in 2017, up 67.5 percent against 2016. It also said it made a net loss of 43.89 billion yuan versus a profit of 491.6 million yuan in 2016.

Operating profit for 2017 was 12.22 billion yuan, up from 3.79 billion yuan a year ago.

Alongside smartphones, Xiaomi makes dozens of internet-connected home appliances and gadgets, including scooters, air purifiers and rice cookers, although it derives most of its profits from internet services.

In the smartphone market its relatively cheap handsets pose a rising challenge to market leaders Samsung Electronics Co Ltd (005930.KS) and Apple Inc (AAPL.O).

Xiaomi’s IPO will be one of the first in Hong Kong under new rules which began on Monday in an effort to attract more tech listings, as competition for major tech deals heats up between Hong Kong, New York and the Chinese mainland.

The exchange is eyeing several tech listings that are expected in the coming two years from Chinese firms with a combined market cap of $500 billion.

CLSA, Morgan Stanley and Goldman Sachs Group Inc are sponsoring Xiaomi’s IPO.

($1 = 6.3610 Chinese yuan renminbi)

Reporting by Cate Cadell in Beijing and Rushil Dutta in Bengaluru; Editing Stephen Coates

The price of Musk cutting off analysts? For Tesla, it's $2 billion

SAN FRANCISCO (Reuters) – Ducking analysts’ questions has a price: $2 billion.

Tesla Inc investors gave a rare rebuke to iconoclastic Chief Executive Elon Musk on Wednesday after he cut off analysts asking about profit potential, sending shares down 5 percent despite promises that production of the troubled Model 3 electric car was on track.

Tesla’s future depends on the Model 3 and the company said that it had largely overcome production bottlenecks, with Musk vowing a dramatic turnaround that would reverse losses and generate positive cash flow in just a few months.

Musk plans to shut down its Fremont, California factory for 10 days in the second quarter but said Tesla will meet the production target of 5,000 Model 3s per day by the end of June, as planned, and will turn a profit in the second half of the year.

To achieve profitability, Musk will have to reverse what today amounts to a $22,584 pre-tax loss per vehicle built by the Silicon Valley company. Tesla posted its biggest-ever quarterly loss when it announced first-quarter results on Wednesday.

Tesla stock was little changed after the earnings announcement but fell during a conference call, when Musk began cutting analysts’ questions short, costing Tesla over $2 billion in market capitalization.

“These questions are so dry. They’re killing me,” Musk said after an analyst asked what percentage of Tesla 3 reservation holders have started to configure options for their cars, an indicator of how much profit Tesla will be able to wring from the vehicles. Another analyst asked about a capital requirement before being cut off.

He then took several questions in a row about plans for a self-driving car network and other long-term projects from the host of a YouTube channel focused on investing, praising the questions as not boring.

(For a graphic on Tesla earnings click tmsnrt.rs/2p6EbiR)

5,000 MODEL 3s PER WEEK

Musk’s ability to run Tesla is crucial as the company strives to efficiently and profitably build its first vehicle intended to be produced at high volume, the Model 3.

Musk acknowledged error recently in over-automating the Model 3 assembly-line, which has resulted in production delays, but it is still unclear how long and costly it will be to unwind this mistake.

Delayed Model 3 production also comes as a slew of competitors bring new electric vehicle models to market.

The company stood by a previously announced target of building 5,000 Model 3s per week by the end of June.

Tesla’s capital expenditures declined in the quarter and the company cut its spending forecasts for 2018, saying it would spend less than $3 billion. Tesla spent $3.4 billion in 2017. (bit.ly/2jn15SB)

FILE PHOTO: Tesla Chief Executive Elon Musk introduces one of the first Model 3 cars off the Fremont factory’s production line during an event at the company’s facilities in Fremont, California, U.S., July 28, 2017. REUTERS/Alexandria Sage/File Photo

Investing.com analyst Clement Thibault said the reduction was noteworthy, “but in the long run given challenges that lay ahead of Tesla, I don’t think it is going to make or break the company.”

Tesla “is definitely not in a minimizing cost stage,” Thibault said.

Free cash flow, a key metric of financial health, widened to negative $1 billion in the first quarter from negative $277 million in the fourth quarter, excluding costs of systems for its solar business. Analysts had not expected so much spending, predicting hundreds of millions of dollars less in so-called cash burn, according to Thomson Reuters data.

Tesla did not break out a cash flow calculation that it had included in previous quarters.

The niche carmaker, which two years ago vowed to build 500,000 vehicles annually in 2018, has attracted legions of fans for its advanced technology and design. But the company rushed its Model 3 to market, making mistakes in manufacturing whose effects are now being felt, and investor skepticism has risen.

Questions over Tesla’s finances are top of mind, and many analysts anticipate a capital raise in 2018 despite Musk’s statements that it will not be necessary due to profitability and positive cash flow in the third or fourth quarters.

Tesla said gross margins on the Model 3, which today are slightly negative, would be close to flat in the second quarter and grow to “highly positive” in the second half of the year.

Tesla said it produced 2,270 Model 3s per week in the last week of April. It said net reservations for the Model 3, including configured orders not yet delivered, exceeded 450,000 at the end of the first quarter.

Automotive revenue rose only 1 percent from the prior quarter to $2.74 billion.

RECORD LOSS

Tesla reported a record loss of $709.6 million, or $4.19 per share, for the first quarter ended March 31, compared with a loss of $330.3 million, or $2.04 per share, a year earlier.

Excluding items, Tesla had a loss of $3.35 per share. Analysts had expected a loss of $3.58 per share, according to Thomson Reuters I/B/E/S.

The company said it ended the quarter with $3.2 billion in cash after spending $655.7 million in quarterly capital expenses.

Slideshow (2 Images)

The lack of Model 3 revenue has exacerbated Tesla’s cash burn as the company continues to spend on its assembly line and prepares for new investments on multiple projects in the pipeline, such as the Model Y crossover and its Gigafactory.

The Model Y is just one of many projects in the pipeline for Tesla, which also launched a Tesla Semi and a new Roadster in recent months.

Reporting by Alexandria Sage in San Francisco and Sonam Rai in Bengaluru; Editing by Peter Henderson, Matthew Lewis and Lisa Shumaker

Qualcomm's patent deals aim to ease Apple, regulator tensions, executive says

(Reuters) – Qualcomm Inc has broadened its use of a lower-cost licensing model for the next generation of mobile data networks, a move that could help in contentious talks with two customers including iPhone maker Apple Inc, the wireless tech company’s patent licensing chief said on Monday.

FILE PHOTO: A sign on the Qualcomm campus is seen in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake/File Photo

The patent business traditionally has supplied much of Qualcomm’s profit but has also spurred conflict with Apple, Samsung Electronics Ltd and Huawei Technologies Co Ltd as well as regulators in China, South Korea and the United States.

New deals could lower the licensing rate that Qualcomm receives while making the business more dependable if regulators view the terms favourably and two major customers – Apple and a company widely believed to be Huawei – resolve their disputes and resume paying Qualcomm.

“It’s a good context for dealing with the two licensee issues we have now,” Alex Rogers, the head of Qualcomm’s licensing division, told Reuters in an interview, naming Apple but leaving Huawei unnamed as is the company’s policy when a dispute hasn’t become public through a court proceeding.

Rogers did not comment directly on the likelihood of resolving either customer dispute. Apple and Huawei did not immediately respond to requests for comment.

Qualcomm sells chips for mobile phones but has a second, much older business licensing technology for wireless networks. The licensing business has generated global controversy and resulted in billions of dollars in regulatory fines, some of which remain on appeal.

Handset makers can licence one of two sets of Qualcomm patents: The full suite that costs makers about 5 percent of the cost of a handset or a smaller set of so-called “standard essential patents” for 3.25 percent, which includes only the patents needed for gear to work on mobile data networks.

In the past, most of Qualcomm’s customers licensed both sets of patents to avoid lawsuits. But Qualcomm has been defusing tensions by making it easier for customers to licence just the smaller, lower-cost set of standard patents and by adding patents for the next generation 5G wireless network to the suite at no additional cost.

That essentially extends a 2015 settlement with China’s chief antitrust regulator. Qualcomm began to licence only its standard patents for 3G and 4G networks to Chinese handset makers for a rate of 3.25 percent. More than 100 device makers have signed on for such deals.

“We have not lowered the rate. What we’re doing is including more technology, more (intellectual property) in the offering without increasing the price,” Rogers added.

Qualcomm also announced last week that it would assess its patent fees against only the first $400 (£291) of a phone’s net selling price. Rogers said the previous price cap was $500, a figure that was well known among industry insiders but that Qualcomm did not make public.

“What we’re doing here is creating a foundation for stability going forward,” Rogers said, describing Qualcomm’s 5G licensing moves as “regulator friendly”.

The question now is whether more handset makers will opt for Qualcomm’s lower-cost standard patents rather than its pricier full portfolio.

“What we perceive here is there will be more of a mix than there was in the past of companies opting for (standard essential patents) only,” Rogers said. “How much more, depends on each individual company.”

While Qualcomm has made no public disclosures about the status of talks with the two major customers in licence disputes, the company’s approach to licensing patents for upcoming 5G networks will look different than its initial approaches for 3G and 4G networks of years past.

“Both of those issues (disputes) are essentially now being handled within the framework of the current programme we’re offering,” Rogers said.

Reporting by Stephen Nellis; Editing by Peter Henderson and Cynthia Osterman

Report: Apple Headset Running Both Augmented Reality and Virtual Reality Scheduled for 2020

Apple’s long-rumored augmented reality headset will have virtual reality capabilities built in, too. It’s codenamed T288, and it’s currently scheduled to be released in 2020. While Augmented Reality, or AR, maps digital objects onto the real world, Virtual Reality, or VR, immerses users entirely in a digitally-generated environment.

The new detail came in a Friday report from CNET, which also included some very ambitious technical details of the project. The new information, if true, would be a major leak for the secretive company, with CNET citing unnamed sources and Apple so far declining to comment on the news. But, aside from the addition of VR, it seems to confirm similar reports dating back at least to November of last year.

Some commenters with insight on hardware development have said creating a device with the specs laid out in the report would require Apple to push the limits of its engineering capabilities. Those specs include dual screens running at 8K resolution, connected wirelessly to a box with processors well ahead of anything on the market today.

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Those details, and the release timeline itself, are subject to change even if they’re true to Apple’s current plans. But it seems nearly certain there will be an Apple AR headset sometime, since Apple has made its move into AR about as clear as the reticent company makes anything. On an earnings call in November, for instance, CEO Tim Cook referred to AR as a technology that “will transform the way you work, play, connect, and learn.”

That seems in part to be a reference to AR’s potential to enhance productivity by transforming a wearer’s entire field of view into a virtual workspace. Such engaged, creative applications may help make AR more successful than VR, which, despite raves from dedicated gamers, hasn’t turned into a huge consumer category. AR, even in primitive forms such as the mobile phone game Pokemon Go, has had much broader adoption, pointing to even bigger potential as hardware advances. And since AR and VR have substantial technical overlap, combining them might add up to a more appealing product with little extra overhead.

Outrage breaks out after Whole Foods partners with Yellow Fever eatery

LOS ANGELES (Reuters) – Amazon.com’s Whole Foods Market sparked social media outrage after its newest store in its 365 grocery chain partnered with an Asian restaurant with the racially charged name of Yellow Fever.

A Whole Foods Market store is seen in Santa Monica, California, U.S. March 19, 2018. REUTERS/Lucy Nicholson

The independently owned and operated eatery – whose name is taken from the slang term for a white man’s sexual attraction to Asian women – is located in the 365 store that opened in Long Beach, California, on Wednesday.

“An Asian ‘bowl’ resto called YELLOW FEVER in the middle of whitest Whole Foods — is this taking back of a racist image or colonized mind?” Columbia University professor and author Marie Myung-Ok Lee, wrote on Twitter.

Whole Foods, which has eight stores in its 365 chain that was launched with a no-frills concept to win over millennials, declined comment.

“Yellow Fever celebrates all things Asian: the food, the culture and the people and our menu reflects that featuring cuisine from Korea, Japan, China, Vietnam, Thailand and Hawaii,” said Kelly Kim, executive chef and co-founder of Yellow Fever, which also operates two Los Angeles-area restaurants.

“We have been a proud Asian, female-owned business since our founding over four and a half years ago in Torrance, California.”

Kim, who is Korean-American, in previous interviews said she was aware that the name choice would be attention-getting and controversial.

“One night, we just said ‘Yellow Fever!’ and it worked. It’s tongue-in-cheek, kind of shocking, and it’s not exclusive — you can fit all Asian cultures under one roof with a name like this. We just decided to go for it,” Kim told Asian American news site NextShark six months ago.

A year ago she told the Argonaut, a local Los Angeles news outlet, that Yellow Fever means “love of all things Asian” and that public push back over the name had not been as drastic as expected.

Some people on social media defended the news of the partnership with Whole Foods as part of a broader cultural trend.

“This is no more offensive than @abc naming an Asian sitcom Fresh of the Boat or FOB- which is considered racists [sic],” wrote Lorin Hart, who uses the Twitter handle @CubeProMH.

Reporting by Lisa Baertlein in Los Angeles; Editing by Marguerita Choy

Amazon Will Jack Up the Price of Its Prime Program Next Month

Amazon will charge U.S. customers $119 per year to join its free delivery Prime program starting May 11, a 20% price hike in the popular offering that also includes access to a growing library of video programming.

CFO Brian Olsavsky announced the coming price hike on a quarterly call with analysts to discuss Amazon’s financial results. The company said its first quarter sales increased 43% from a year ago to $51 billion, with some of the growth coming from the acquisition of the Whole Foods supermarket chain in August. Profit more than doubled to $1.6 billion.

The price hike, which will hit renewing customers starting on June 16, is the first for U.S. annual Prime members in four years, the CFO noted. “There’s all kinds of new features that we’ve continually added to the Prime program, it’s much different than it was in 2014,” Olsavsky explained. “This is a reflection of that.”

The hike comes amid several other increases from big tech companies over the past six months. In October, Netflix (nflx) raised the monthly price of its standard plan to $11 from $10. And Google (googl) raised the price of its YouTube Internet TV service to $40 a month from $35 in March, though while adding some new channels as well.

Amazon CEO Jeff Bezos recently disclosed that the Prime program reached 100 million members worldwide.

Shares of Amazon (amzn), already up 30% so far this year, jumped another 7% in afterhours trading.

Microsoft Becomes Second Most Valuable Company For First Time Since 2015

Microsoft may not be a favorite in the race to a becoming the country’s first trillion-dollar public company. But recently, after its younger tech peers whizzed past in valuation, Microsoft has become the second most valuable firm—albeit intermittently—for the first time since 2015.

On Tuesday, Microsoft was valued at $714 billion, about $3 billion above Alphabet and Amazon. Only Apple, valued at $838 billion, is higher.

Microsoft had briefly ascended to No. 2 on April 12 and then again on April 16. But it hasn’t been able to maintain its position for long.

On Tuesday, amid worries about higher U.S. Treasury yields and disappointing earnings by other companies that sent the S&P 500 down1.3%, Microsoft rose to No. 2 by virtue of its shares falling less—2.3%—than those of its rivals.

Shares in Google parent company Alphabet closed down nearly 5% on Tuesday, amid concerns about the earnings it reported a day earlier. Meanwhile shares of e-commerce giant Amazon sank 3.8%.

Investors are concerned that tech company earnings over the next couple of weeks will fail to meet lofty expectations. Tech firms were among the best performers of 2017, but they have hit a wall this year as investors rethink their enthusiasm.

Microsoft’s stock has gained momentum under CEO Satya Nadella, who has beefed up the company’s corporate-focused business. The uptick harkens back to a time when the software giant was the most valuable company. At the height of the dot-com boom in 2000, Microsoft was valued at $533.4 billion—about $777 billion in today’s dollars—followed by firms like Cisco Systems and General Electric. But when the bubble burst, Microsoft’s shares took a beating.

The distraction of an antitrust lawsuit by the Justice Department along with missed opportunities in search and mobile didn’t help.

An American Airlines Passenger Was Stuck Next to a 'Screaming and Kicking' Toddler. His Stunning Reaction Went Viral

Imagine your happy place. Now, imagine that in order to get to your happy place, you first have to sit next to a screaming toddler in economy on American Airlines for a few hours.

(Related: We Took Our 2-Year-Old on United and JetBlue. Here’s What We Learned)

We’ve seen this kind of thing happen a lot lately–with bad results and viral videos. There’s the New York state employee who reportedly yelled at a baby on a Delta flight and lost her job (at least temporarily) as a result. There’s the flight attendant who simply kicked a passenger and a fussy toddler off a plane.

And there’s the guy whose response was to record a video of a screaming child on a flightpost it to YouTube, and bask in the social media notoriety.

But perhaps there’s another way to respond. And a passenger on American Airlines who made that choice recently, went viral himself as a result.

Meet Todd Walker, a father of two who just celebrated 30 years with his employer, and who flies as often as four times a month from Kansas City to North Carolina for work.

He’d boarded an American Airlines flight recently on that route, getting seat 33A toward the back of the plane, only to find that the passengers sitting next to him were a mom named Jessica Rudeen, and her two kids: four-month-old Alexander on her lap, and three-year-old Caroline.  

After some chaos in the boarding area, Rudeen hadn’t had a chance to feed the four-month-old–and he started reacting the way hungry four-year-olds are known to do. Then, her three-year-old daughter changed her mind about the whole idea of flying.

That meant Walker was about to get what we might call, “whole toddler experience.” I’ll let Rudeen herself describe the maelstrom, as she did in a post (embedded at the end of this article):

My 3 year old, who was excited before boarding the plane, lost her nerve and began screaming and kicking, ‘I want to get off the plane! I don’t want to go!’ I honestly thought we’d get kicked off the plane. So with two kids losing their minds, I was desperately trying to calm the situation. 

Walker responded in a way that seemed completely unremarkable to him, he told me in a phone conversation this weekend. He just decided to help. As Rudeen explained further, Walker…

reached for the baby and held him while I forced a seatbelt on Caroline, got her tablet and started her movie. Once she was settled and relatively calmed, he distracted her so that I could feed Alexander. Finally, while we were taxiing, the back of the plane no longer had screams. During the flight, he colored and watched a movie with Caroline, he engaged in conversation and showed her all the things outside.

By the end of the flight, he was Caroline’s best friend. I’m not sure if he caught the kiss she landed on his shoulder while they were looking out the window.

Walker also was on the same connecting flight in Charlotte that Rudeen planned to take. He walked her daughter through the terminal to the new gate, and then asked to have his seat reassigned to he could sit next to the family and help out on the second flight, too.

I talked with both Walker and Rudeen this weekend, after Rudeen’s Instagram/Facebook post–which she originally put up because she hadn’t gotten Walker’s last name or contact information, and wanted to connect with him again–got so much traction. As of this writing it has more than 5,000 shares, and it’s been featured in media around the world.

The Walker and Rudeen families say they think their meeting was a result of divine intervention, and that they plan to meet again next month.

“I wasn’t expecting it to get to places like Brazil or Ireland or Australia or the U.K.,” Rudeen told me. “I’m just a stay-at-home mom in northwest Arkansas. But, I’m glad that it highlights the importance of what it means to be kind.”

Walker said he hadn’t thought his conduct had been a big deal, either, and but he welcomed the attention if it inspires other people to offer help, or to notice kindness around them.

“When I walked away in Wilmington, I never thought I’d hear from or see them again,” he said, reiterating that it hadn’t seemed like a big deal to him to respond to the family with kindness.

He also praised Rudeen for being willing to admit she could use the assistance, even in a world where people often have good reason to be wary of strangers. “Part of the reason this worked is that Jessica was willing to accept the help. That’s not always the case today, and I get it.” 

Here’s Jessica Rudeen’s Facebook post:

Is Amazon Slipping? Uncovering a Dirty Secret About Their Seller Policy (by Accident)

Every month, I have a ‘what I need to re-stock on from Amazon’ day. This month, it was time to replace my water filter, so off to Amazon I went. I searched for ‘water filter’, scanned through the first page of results (because who goes to the second page … seriously) and found what appeared to be a winner. 

Amazon Best Seller: Check

Amazon Prime: Check 

Price Point: Surprisingly low (but how?)

Usually, the lower the price, the happier I am. However, ever since I wrote about price gauging and what seemed to be suspicious Amazon activity, I’ve been particularly interested in exploring anything that raised an eyebrow, even if the price was favorable to a consumer. So, I loaded up on the coffee and got to work. 

It might sound like a conspiracy theory worthy of Chinatown, but don’t break out your tinfoil hats just yet. Look at the Waterdrop water filter. It’s a hot product from an Amazon Top 500 seller, a company called EcoLife Technologies LLC. But, it’s totally going against Amazon’s rules.

The Epic Policy Contradiction

Last year, Amazon added strict requirements for water filters sold on its platform. The e-tailer said it would suppress any item listings that didn’t fulfill its standards. Any suppressed item Fulfilled by Amazon (FBA) was liable to be destroyed or returned at the seller’s expense. 

Each product “must be certified to at least the NSF/ANSI-42 standard (including Material Safety, Structural Integrity, and System Performance).” The key point here is “System Performance.”

Here’s where things get interesting. If you look at the NSF’s website, you’ll find that EcoLife’s products don’t adhere to Amazon’s System Performance standards. As quoted on the NSF’s site:

“Conforms to the material and structural integrity requirements only.”

Does this mean that Amazon is selling us water filters that are underperforming? Not necessarily, no, but I do know that Amazon apparently let this company slip through their filter (pun intended).

Oh, but the fun doesn’t end there. I did a little more research and found some surprising facts. First. EcoLife Technologies LLC is registered in both California and Colorado (the official website says they are in California). 

Okay, not a big deal — but I also found out that EcoLife gets their water filters imported from China through a company called Qingdao Ecopure Filter Co., which produces EcoAqua filters. Further, there’s a UK company called Waterdrop Filters whose website is registered to someone at VYAIR, another manufacturer which sells EcoAqua filters on Amazon.

Hmmm…curious

What’s going on here? Well, it’s a possibility that EcoLife isn’t from the US and is just using the system for their own gain. The NSF site shows that EcoLife has a Nevada area code, a Colorado address, but that the facility is in China. It’s also likely that EcoLife is both the manufacturer and seller as there’s not enough markup to indicate reselling.

Don’t get me wrong. I love Amazon and all its great deals. But I think criticism should be given when it’s due and such curious behavior shouldn’t go unnoticed. It’s not the first time, either. Last year, I chastised Amazon for blaming its algorithm when it allowed sellers to hike up water prices during Hurricane Irma.

Others have criticized the platform for wooing Chinese vendors which produced counterfeit goods. A t-shirt designer named Matthew Snow found that 15-20 sellers in Hong Kong and China were duplicating his products. To fight this, Snow was required to “test buy” all 1,500 counterfeited items and send them, along with his legitimate items, to Amazon for testing – something which would’ve cost him $40,000.

What I’m trying to say is this:

A company as big as Amazon needs to enforce their protocol better. They need to make sure all sellers are playing fair and adhering to the same standards. They can no longer turn a blind eye to such offenses. Both consumers and sellers should be aware of the policy and what is being done to actionably reinforce collective best & fair practice.  

I’ve reached out for an official comment from Amazon and will keep this post updated with their response accordingly.

AMD And Intel Had A Baby! And It's A Beast!

In early February of 2018 we published an article about the cooperation between AMD (AMD) and Intel (INTC), or as we dubbed it, AMD’s hidden strategy against Nvidia (NVDA). Please read the original article for more background, but we will summarize some of the key points here.

AMD is now cooperating with Intel. Yes, indeed, hell just may be frozen over at the moment. AMD is selling Intel its Vega GPUs in silicon form, no IP transfer. Intel then packages these Vega GPUs on the same substrate with one of its CPUs to make what AMD calls an Accelerated Processing Unit (APU).

(Image of Intel CPU and Vega GPU attached to a single CPU socket board from Intel.com.)

The GPU communicates with the CPU via an 8x PCI-E bridge and shares power circuitry to create better efficiency.

Ok, so that sounds good for Intel, but aside from shifting more GPU cores, which AMD already has no problems doing, what is the benefit for AMD? Ah, but that’s the “hidden strategy!” You see, one of the biggest hurdles AMD has to deal with at the moment is software support. Nvidia, AMD’s GPU rival, has a stranglehold on the higher end gaming market at the moment. As a result, most of the games coming out on the market are optimized for Nvidia’s GTX GPUs first, and are only later tweaked to perform well on AMD’s hardware.

By partnering with Intel, AMD is able to push Vega GPUs into more mainstream computers. The Intel-AMD APU uses standard AMD graphics drivers and software, though the software bit is skinned with Intel branding. The more AMD equipped computers are out there capable of playing AAA game titles, the more likely are those games to be optimized for AMD first. AAA is an informal classification for top tier games from major studios, and those studios are likely to go for the largest possible market first and foremost. Now it’s Nvidia, but in the future the market mix may shift to AMD thanks to the strategy outlined above.

We just recapped the strategy we think AMD is pursuing, now let’s take a look at the first fruit of that strategy.

AMD and Intel had a Baby, and it’s a Beast!

(Photo of Intel Hades Canyon NUC from cnet.com.)

Meet Intel’s Hades Canyon Next Unit of Computing, or NUC for short. Hades Canyon NUC is a follow up to Skull Canyon NUC released in 2016. Skull Canyon was a big success for Intel sparking many similar small form factor gaming oriented living room computers from other manufacturers. However, it’s biggest downside was its lack of dedicated graphics. Hades Canyon NUC addresses that shortcoming in a spectacular way.

Hades Canyon features Intel’s I7 CPU combined with Radeon RX Vega powered graphics from AMD, all on a single chip, communicating over an 8x PCI-E bridge built directly into the substrate. This gives Hades Canyon enough horsepower to play real VR games or drive up to six monitors. Here is a quote from Sean Hollister from CNET.com who had first hand experience with Hades Canyon at the 2018 CES.

I can attest to that, because I strapped on an Oculus Rift connected to the Hades Canyon myself. The game Echo Arena looked butter-smooth on the system I tried on the CES show floor. I even got Intel to open up the back of its demo station, to prove it was running on this tiny box instead of a hidden gaming rig. Sure enough. How is this sorcery possible? It’s thanks to one of the most surprising and unlikely pairings in silicon history: a new Intel processor with built-in AMD Radeon graphics inside.

Devindra Hardawar from Engadget tested Hades Canyon NUC with various game titles and found performance to be excellent for such a tiny device. According to the article:

Doom 3 ran between 50 and 60 frames per second with High graphics settings in 1080p. [..] It also had no trouble keeping up with a fast-paced game like Overwatch, where I saw between 60 and 90FPS in 1080p with Ultra settings. […] I was also blown away by how well it handled Hellblade: Senua’s Sacrifice, a cinematic indie game that really taxes the GPU. Even with very high settings, it ran between 30 and 40 FPS, which is still playable. Knocking that down to high-quality graphics boosted performance to a smoother 50 to 60 FPS. Overall, the Hades Canyon NUC proved to be a capable 1080p gaming machine.

Devindra also tested the Hades Canyon NUC with Oculus Rift and found that games like Superhot, Duck Season, and Serious Sam VR ran flawlessly with no lag or dropped frames. On top of being a very capable living room gaming PC Hades Canyon NUC might be perfect for large scale VR experiences where players put on backpacks that carry computing hardware for tether free gameplay.

(Photo of a WALKER VR Backpack from Play3r.net.)

Investor Takeaway

Above we described AMD’s hidden strategy of cooperating with Intel in order to further penetrate the gaming market and talked about the first fruit of that cooperation, the Hades Canyon NUC. According to CNET the new Intel-AMD APU is already slated to appear in the 15-inch HP Spectre X360 and Dell XPS 15 2-in-1 laptops later on this year, and we think it’s just a start. This might just be the beginning of AMD GPU domination in the laptop and small form factor market. As AMD penetrates the gaming market more and more games will be optimized for AMD architecture first and foremost which should lead to performance improvements for the discrete AMD GPUs as well.

At the time of writing AMD is trading right around $10.08 down 2.7% for the day on a completely unrelated news coming out of Taiwan Semiconductors Manufacturing Company (TSM). TSM reported weakness due to softer than expected high end cellphone market, but they also reported that they expect high-performance computing chips to make up 40% of the company’s growth over the next five years, from an initial estimate of 25%. TSM is a contract manufacturer for 7nm Vega GPUs and we believe that on a whole this is good news for AMD. We also think that panic selling exhibited today in Micron (MU) is completely unwarranted. If TSM sees growth in the high-performance computing market, that market will also need high performance memory to go along with those processors. But such is the market.

On a whole we are still very optimistic about AMD’s prospects in 2018 and 2019, and still have $20 price target for AMD. Our optimism is bolstered by the industry reception of Hades Canyon NUC. We believe that soon OEMs will recognize the performance and efficiency advantage of Intel-AMD APU, and then they just might start wondering, if Intel-AMD APU is so good, how good is an all AMD APU?

Disclosure: I am/we are long AMD,AAPL,MU.

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.

Amazon Has Over 100 Million Prime Members

Amazon Prime has over 100 million subscribers worldwide, Amazon CEO Jeff Bezos said on Wednesday, marking the first time that the company has disclosed such detailed information about its increasingly important subscription service.

The online retail giant debuted Prime 13 years ago as a way for people to get free two-day shipping and access to the company’s video streaming library.

In the past, Amazon has only disclosed vague information about the number of Prime subscribers, such as it having “tens of millions of members.” The updated number highlights the growth of the company’s subscription service, which Amazon has pushed heavily over the years as a way to retain customers that in turn fuel its core retail business with each purchase. Still, Amazon stopped short of full disclosure of its Prime subscriber service, like how much revenue it generates.

In addition to membership numbers, Bezos said in a letter to shareholders that the company had shipped over 5 billion items in 2017 as part of its Prime service and that “more new members joined Prime than in any previous year.” However, he didn’t say how many people signed up in past years.

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Bezos also bragged about Amazon’s recent marketing campaigns, including its Prime Day event in July. He said that the company’s Prime Day for 2017 was its “biggest global shopping event ever” until it was soon eclipsed by Cyber Monday, the day of online shopping deals following the Thanksgiving holiday weekend.

“Prime Day 2017 was our biggest global shopping event ever (until surpassed by Cyber Monday), with more new Prime members joining Prime than any other day in our history,” he said.

As for sales of some of Amazon’s other heavily promoted products and services, Bezos remained typically vague.

Amazon sold “tens of millions” of its Internet-connected Echo speaker; its online streaming music service “Amazon Music” now “has tens of millions of paid customers;” and its “Amazon Fashion” online retail portal now “has become the destination for tens of millions of customers.”

From Bezos’ shareholder letter:

Congratulations and thank you to the now over 560,000 Amazonians who come to work every day with unrelenting customer obsession, ingenuity, and commitment to operational excellence. And on behalf of Amazonians everywhere, I want to extend a huge thank you to customers. It’s incredibly energizing for us to see your responses to these surveys.

One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary’. I see that cycle of improvement happening at a faster rate than ever before. It may be because customers have such easy access to more information than ever before – in only a few seconds and with a couple taps on their phones, customers can read reviews, compare prices from multiple retailers, see whether something’s in stock, find out how fast it will ship or be available for pick-up, and more. These examples are from retail, but I sense that the same customer empowerment phenomenon is happening broadly across everything we do at Amazon and most other industries as well. You cannot rest on your laurels in this world. Customers won’t have it.

Why Netflix Stock Jumped as Much as 8% to an (Almost) All-Time High

Growth at big companies chasing mature markets is supposed to slow down. Think about wireless phones or cable TV. But that rule doesn’t seem to apply to Netflix, at least not yet.

Even after more than 20 years in business, the world’s biggest streaming video service experienced some of its fastest growth ever in the first quarter, helping to give its stock a big lift.

Netflix shares, which hit an all-time high of $333.98 last month before selling off in the recent stock market decline, jumped as much as 8% in after hours trading on Monday. That put the stock price just pennies below the all-time high. But as CEO Reed Hastings and other executives answered an analysts’ questions on one of Netflix’s famously dull quarterly calls for investors, the after hours gain shrunk to a 5% gain to $324.32.

Netflix’s overall revenue increased 40% to $3.7 billion in the quarter, but excluding the aging DVD rental business, streaming video service revenue rose 43% to $3.6 billion, the company’s fastest quarterly growth rate ever, Netflix said. That was due to the combination of adding 7.4 million new subscribers, the most ever for Netflix in a first quarter, plus the price hikes the company pushed through last year, leading to a 14% increase in the average monthly subscription price.

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Investors and analysts were most impressed by the subscriber gains, which came in well ahead of the company’s own forecasts. Netflix added 1.96 million new members in the United States, after forecasting a gain of 1.45 million, and another 5.46 million in other countries, after forecasting 4.9 million. Netflix’s forecasts for the second quarter for subscriber and revenue growth were also better than analysts expected.

“We think investors will likely push NFLX stock higher after this earnings report,” UBS analyst Eric Sheridan wrote after the results came out. “We see investors focused on the widening moat that NFLX is creating with its business (faster subscriber growth on the back of original content push).”

Netflix’s head of programming, Ted Sarandos, did use the call Monday evening to shoot down one frequent rumor about the company, while declining to address another.

“Our move into news has been misreported over and over again and we’re not looking to expand into news beyond the work that we’re doing in short form and long form feature documentaries,” he said, when asked about rumors of a bigger push into news.

Recent talk shows from the likes of David Letterman should be considered entertainment, not news, he stressed. “David Letterman is a great talk show host—not a newscaster,” Sarandos said.

And about those rumors that former president Barack Obama or his wife Michelle is in talks to host such a show?

“I can’t comment on the Obamas or any other deals that would be in various states of negotiation right now,” he replied.

CEO Hastings was also asked whether the data privacy problems hounding Facebook (fb) and other tech companies could hurt Netflix (nflx), particularly if new laws limited data collection. Last week, some members of Congress raised the possibility during hearings in which Facebook CEO Mark Zuckerberg testified about his company’s data collection and data sharing practices.

“Well, I’m very glad that we built the business not to be ad-supported,” he said. “I think we’re substantially inoculated from the other issues that are happening in the industry…Just objectively, we’re much more of a media company in that way than pure tech. Of course we want to be great at both but, again, we’re really pretty different from the pure tech companies.”

The Airline Whose Planes Are Said to Break Down In Mid-Air More Often Than Anyone's Is About To Have a Big PR Problem

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

They say you should get out ahead of a bad story.

Present your version before the story hits, so that people can have good feelings about you before aspersions are cast.

I wonder, therefore, what Allegiant Air might do this weekend.

I wrote about this airline a couple of years ago, after it had been accused of having planes that break down four times more often than those of other airlines.

In mid-air, that is.

Of the airline’s 86 planes, it was said that 42 of them had broken down in mid-air the previous year.

The airline fought back and claimed that the accusations were “incendiary.” Indeed, its stock went up 24 percent soon after the original Tampa Bay Times article was published.

Now, though, Allegiant might have a bigger PR problem. 

On Sunday, it’ll be featured in a 60 Minutes segment, one that CBS teases will be twice the usual length.

Here’s the teaser.

Just those 48 seconds suggest that Allegiant should brace for something of calm, considered skewering.

I asked the budget airline what it thought of the upcoming exposé. A spokeswoman told me Allegiant would wait until the segment airs before offering a rebuttal.

One of the main issues with Allegiant’s record of breakdowns is that it flies old planes. Very old planes, some 22 years of age.

Recently, though, it has begun to replace these planes with Airbuses. Indeed, last May was the first time that Allegiant enjoyed the experience of fitting out a new(ish) plane.

The question, then, is how much Sunday’s 60 Minutes piece will reflect the whole current scenario.

The problem for the airline’s PR department, though, is that Allegiant will surely come out looking not so good on one of the most respected news programs in America, one that’s watched by 12 million people.

It’s inevitable, then, that it will instantly be associated with the sort of bad reputation that plagued United Airlines over the last year. 

Worse, perhaps, is the idea that instead of a brutal lack of customer sensitivity — as in the United case — Allegiant might be tarred with the notion that it’s simply an unsafe airline.

On Friday, the airline’s stock began to drop. What might happen to it on Monday?

3 Proven Strategies Every Startup Should Use to Partner With a Bigger Company

Wrangling a partnership with Uber can’t be easy. Large companies can already be difficult to work with–and Uber’s recent history has been, well, tumultuous.

On Wednesday, San Francisco-based car-rental startup Getaround pulled it off. Uber and the startup, which landed on Inc.’s 30 Under 30 list in 2016, have teamed up to create “Uber Rent,” a service that allows users to rent vehicles from Getaround’s fleet through Uber’s app. 

The way the deal came together is perhaps the more interesting news. It’s instructive for any entrepreneur looking to partner with an industry behemoth.

Getaround first approached Uber about a potential partnership several years ago through a mutual investor, says co-founder and CEO Sam Zaid, and talks went nowhere. In the ensuing years, Getaround started gaining traction in the Bay Area. When the company reached out again in late 2016, Uber employees were using the service themselves–and were more willing to engage in conversations. “It wasn’t like we were pitching a pitch deck,” Zaid says. “Everyone knows what Getaround is, everyone in the room knows what Uber is, so let’s talk.”

Then, 2017 hit. For Uber, that meant sexual harassment allegations, lawsuits, regulatory fights, and boardroom power struggles. The Getaround deal stalled.

After a few months of patient negotiations, a pilot program launched in May 2017. The following month, Uber founder Travis Kalanick resigned as CEO–but the program survived, and Uber Rent is now live. Zaid attributes overcoming those roadblocks to three strategies, which every startup should use when striking a partnership:

1. Don’t be afraid to push back.

In classic Silicon Valley fashion, the early conversations around Uber Rent were heavily strategic and guarded. Neither company wanted to reveal its agenda. Zaid says the teams started communicating more transparently after he encouraged his employees to push back against the larger company, earning Uber’s respect. “When you have a smaller company working with a bigger company, a lot of the time, the smaller company is afraid to say ‘no’ or ‘this doesn’t work for us’ or ‘let’s do it a different way,'” Zaid says. “That’s what fostered this degree of trust.”

2. Treat everyone as one team.

Uber dispatched just a handful of staffers to examine a potential partnership. Getaround’s “team” included most of its company. The difference in scale stopped mattering once the parties started viewing the employees involved as a single team, regardless of who paid their salaries. “Obviously, there’s always going to be some tension there,” Zaid admits. “That’s where the transparency, trust, and communication balance it out.”

3. Align your goals.

Any partnership will feature competing priorities and goals. Zaid wishes he had worked more intentionally to make sure Getaround and Uber’s visions were aligned from the beginning. “Early stages, it’s probably not as necessary,” he says. “But then things start snowballing. There could be product issues, engineering issues, operational issues, legal questions that come up throughout.” Being aligned from the start could save you months of back-and-forth–and could keep the partnership from falling apart.