U.S. FTC to question Facebook over consultancy's access to user data

SAN FRANCISCO/LONDON (Reuters) – Facebook Inc said Tuesday it faced questions from the lead U.S. consumer regulator about how its users’ personal data was mined by a political consultancy hired by Donald Trump’s campaign.

U.S. and European lawmakers have demanded an explanation of how the consultancy, Cambridge Analytica, gained access to the data in 2014 and why Facebook failed to inform its users, raising broader industry questions about consumer privacy.

Facebook said on Tuesday it had been told by the Federal Trade Commission (FTC) that it would receive a letter this week with questions about the data acquired by Cambridge Analytica. It said it had no indication of a formal investigation.

“We remain strongly committed to protecting people’s information. We appreciate the opportunity to answer questions the FTC may have,” Facebook Deputy Chief Privacy Officer Rob Sherman said.

The FTC, the regulatory agency in charge of consumer protection, is reviewing whether Facebook violated a 2011 consent decree it reached with the authority over its privacy practices, a person briefed on the matter told Reuters.

“We are aware of the issues that have been raised but cannot comment on whether we are investigating. We take any allegations of violations of our consent decrees very seriously as we did in 2012 in a privacy case involving Google,” an FTC spokesman said.

Under the 2011 settlement, Facebook agreed to get user consent for certain changes to privacy settings as part of a settlement of federal charges that it deceived consumers and forced them to share more personal information than they intended, Bloomberg reported.

If the FTC finds Facebook violated terms of the consent decree, it has the power to fine the company thousands of dollars a day per violation.

Facebook will brief U.S. Senate and House aides on Wednesday, congressional staff said.

Facebook shares lost 5.7 percent in heavy trading to a six-month low, extending Monday’s 7-percent fall, and was set for its worst two-day drop since July 2012. Its market capitalization was down by another $25 billion as investors fretted the world’s largest social media network could face massive fines and that its dented reputation could scare off users and advertisers.

Shares of Snap Inc fell 4 percent and Twitter Inc was down 9.6 percent.

Facebook and its peers Alphabet Inc’s Google and Twitter face a backlash over their role during the U.S. presidential election by allowing the spread of false information that might have swayed voters toward Trump.

A Congressional official said House Intelligence Committee Democrats plan to interview Cambridge Analytica whistleblower Christopher Wylie. The committee has already interviewed by video teleconference Cambridge Analytica chief Alexander Nix, according to the Congressional official, but a transcript of that interview has not yet been made public.

People walk past the building housing the offices of Cambridge Analytica in central London, Britain, March 20, 2018. REUTERS/Henry Nicholls

The White House said the President believes that Americans’ privacy should be protected.

“If Congress wants to look into the matter or other agencies want to look into the matter, we welcome that,” White House Deputy Press Secretary Raj Shah told Fox News Channel.


In Britain, the Information Commissioner’s Office, an independent authority set up to uphold information rights in the public interest, was seeking a warrant on Tuesday from a judge to search the offices of London-based Cambridge Analytica.

Slideshow (6 Images)

Created in 2013, Cambridge Analytica markets itself as a source of consumer research, targeted advertising and other data-related services to both political and corporate clients.

According to the New York Times, it was launched with $15 million in backing from billionaire Republican donor Robert Mercer and a name chosen by the-then future Trump White House adviser Steve Bannon.

Facebook says the data were harvested by a British academic, Aleksandr Kogan, who created an app on the platform that was downloaded by 270,000 people, providing access not only to their own personal data but also their friends’.

Facebook said Kogan then violated its policies by passing the data to Cambridge Analytica. Facebook has since suspended both the consulting firm and SCL (Strategic Communication Laboratories), a government and military contractor.

Facebook said it had been told that the data were destroyed.

Kogan says he changed the terms and conditions of his personality-test app on Facebook from academic to commercial part way through the project, according to an email to Cambridge University colleagues obtained and cited by CNN.

Kogan says Facebook made no objection, but Facebook says it was not informed of the change, CNN reported. Kogan was not immediately reachable for comment.

“If this data still exists, it would be a grave violation of Facebook’s policies and an unacceptable violation of trust and the commitments these groups made,” Facebook said.

Cambridge Analytica has denied all the media claims and said it deleted the data after learning the information did not adhere to data protection rules.

Reporting by David Ingram in San Francisco, Kate Holton and Paul Sandle in London, David Shephardson and Susan Heavey in Washington; Additional reporting by Munsif Vengattil; Writing by Susan Thomas, Editing by Nick Zieminski

Dropbox IPO oversubscribed: sources

(Reuters) – Cloud storage company Dropbox Inc’s [DBX.O] initial public offering was oversubscribed, two people familiar with the matter said on Monday, indicating healthy demand for the first big tech IPO this year even as tech stocks opened the week on sour note.

The Dropbox app logo seen on a mobile phone in this illustration photo October 16, 2017. REUTERS/Thomas White/Illustration

While investor appetite looked encouraging with three days to go before final pricing, it was not clear if that would be strong enough to lift the deal above of the initial range of $16 to $18 a share that Dropbox set last week. The offering is expected to price Thursday, and the stock will start trading on the Nasdaq on Friday.

“It is early to predict the pricing. But what I can say is that from the conversations it seems the market is interested in it and IPO seems to be bright,” a separate source told Reuters. The three sources asked not to be named as the IPO pricing process was still underway.

Dropbox’s IPO comes in what is sizing up to be a challenging week for stocks, with the U.S. Federal Reserve set to raise interest rates on Wednesday, a day before the Dropbox deal is set to close.

Tech shares also fell hard to open the week, with Nasdaq down more than 2 percent on reports of Facebook Inc’s (FB.O) latest data privacy problems.

Dropbox’s IPO also comes on the heels of an upsized deal last week from cyber security firm Zscaler Inc (ZS.O) and is being watched as a barometer of investor enthusiasm for tech unicorns – young companies valued at more than $1 billion – after Snapchat owner Snap Inc’s (SNAP.N) shares cratered following a much-touted IPO a year ago.

Dropbox is selling 36 million shares, and the offering could be increased by 5.4 million if underwriters exercise their right to buy more stock. At the high end of the indicated pricing, it could raise nearly $650 million, making it the largest tech IPO since Snap hit the market just over a year ago.

The current price range suggests the San Francisco company, co-founded in 2007 by Andrew Houston and Arash Ferdowsi, will hit the public market valued at roughly $7 billion, a hefty discount to the $10 billion implied by its last funding round in 2014.

The company has 500 million users and competes with Alphabet Inc’s (GOOGL.O) Google, Microsoft Corp (MSFT.O), Amazon.com Inc (AMZN.O) and has Box Inc (BOX.N) as its main rival.

Reporting by Sweta Singh, Nikhil Subba and Diptendu Lahiri in Bengaluru, Editing by Dan Burns and Saumyadeb Chakrabarty

Woman dies in Arizona after being hit by Uber self-driving car

SAN FRANCISCO (Reuters) – A woman died of her injuries after being struck by a Uber self-driving vehicle in Arizona, police said on Monday, and the ride hailing company said it had suspended its autonomous vehicle program across the United States and Canada.

FILE PHOTO: Uber’s logo is pictured at its office in Tokyo, Japan, November 27, 2017. REUTERS/Kim Kyung-Hoon

The accident in Tempe, Arizona, marked the first fatality from a self-driving vehicle, which are still being tested around the globe, and could derail efforts to fast-track the introduction of the new technology in the United States.

FILE PHOTO: A fleet of Uber’s Ford Fusion self driving cars are shown during a demonstration of self-driving automotive technology in Pittsburgh, Pennsylvania, U.S. September 13, 2016. REUTERS/Aaron Josefczyk/File Photo

At the time of the accident, which occurred overnight Sunday to Monday, the car was in autonomous mode with a vehicle operator behind the wheel, Tempe police said.

“The vehicle was traveling northbound … when a female walking outside of the crosswalk crossed the road from west to east when she was struck by the Uber vehicle,” police said in a statement.

A spokesman for Uber Technologies Inc said the company was suspending its North American tests. In a tweet, Uber expressed its condolences and said the company was fully cooperating with authorities.

Reporting by Alexandria Sage; Editing by Jonathan Oatis

Trump's Call to Start a Space Force Tops This Week's Internet News Roundup

People look for inspiration and happiness in a vast array of places. Some see school kids walking out of class across America to take a stand for gun control and find hope. Others note that 7-Eleven now has customizable tater tots and are filled with joy. What do they get when they look at the internet? All that and a lot of bickering and tweets about calzones. Here, dear friends, is what everyone was talking about online last week when they weren’t talking about the new Avengers: Infinity War trailer.


What Happened: President Trump announced Rex Tillerson was being replaced as secretary of state on Twitter.

What Really Happened: Folks like to make jokes about Donald Trump running America via Twitter, but last week he announced an executive decision on the platform that was definitely not funny—at least not to the head of the State Department.

Yes, the change in Secretary of State—one of the most important, if not the most important, cabinet positions—was announced via social media, as if Trump was every parody of himself imaginable. For those who wanted more than just a tweet of notice about the new state of affairs, that was forthcoming … also via Twitter, of course.

Those around Tillerson, who had just arrived back in the country, were surprised by the news, suggesting that Tillerson himself wasn’t entirely prepared for what had just happened.

There might, it turns out, have been a reason for that, if one response from the State Department is to be believed.

OK, perhaps it was a little disingenuous to say that no one saw this coming, as some pointed out.

Unsurprisingly, the White House has a different take on the way everything went down.

Except, it turned out, chief of staff John Kelly’s message might not have been entirely clear.

There really is something to be said about Twitter’s role in all of this, isn’t there? Still, things couldn’t have been that bad, because Tillerson did make an appearance later that day to talk about his firing and smooth everything over.

OK, maybe it was kinda bad. (Tillerson’s failure to thank the president did not go unnoticed by, well, anyone.) Still, perhaps the split between Trump and Tillerson was for the best.

This is worth noting, as well. The State Department aide who put out the earlier statement saying that Tillerson didn’t know why he’d been fired? Yeah, there was a price to pay for saying that.

The Takeaway: Quick, we need a catchy way of talking about former Exxon CEO Tillerson now that he’s been ousted!

That’ll do.

Move Along, Nothing to See Here

What Happened: House Republicans announced they were closing their investigation into collusion between the Trump campaign and Russia during the 2016 election, saying there was no evidence of such actions.

What Really Happened: Last week, with little warning, the House Intelligence Committee’s investigation into Russian interference in the 2016 election just … stopped.

“Case closed”? Sure, if you say so. And, it turns out, they really did say so.

There are others who might disagree with that take, of course…

As news of the surprise closure started to go wide, it was perhaps worth turning to the ranking Democrat on the committee to see if he had anything to say about the whole thing.

That would be a yes, then. And, sure, it seems suspicious to say the least that the Republicans just shut down the investigation unfinished with so much still out there unanswered, but surely the Democrats on the committee were given adequate warning that the investigation was being closed, right?

OK, but at least all the Republicans are agreed that this move was the smart one?

Well, fine, yes, that’s a little awkward. Still, at least one of the leading Republicans on the committee didn’t disagree.

Oh, come on. As the week continued, it eventually started to become clear even to the Republicans that this had been a mistake, with this headline putting it best: “Republicans Fear They Botched Russia Report Rollout.” Gee, you think?

The Takeaway: In what could only be described as a spectacular piece of timing, the Republicans announced that there was nothing Russians had done in regards to the 2016 election in the same week that the Trump administration finally signed sanctions into law against 16 Russians for their efforts to interfere with the 2016 election. There’s nothing like being consistent.

Meanwhile, Over at the Department of Justice…

What Happened: Special counsel Robert Mueller’s investigation took aim at the Trump Organization.

What Really Happened: Meanwhile, you might be thinking, “I wonder how special council Robert Mueller’s Russia collusion investigation is going? I’m sure that, if the House Republicans were right and there’s certainly nothing going on, he’ll be wrapping everything up too, right?” Funny story: He’s not wrapping everything up.

Yes, in what is pretty much the opposite of wrapping things up, Mueller is subpoenaing the Trump Organization’s records, which is … kind of a big deal, to say the least. Certainly, that’s what people on social media seemed to think.

But what could it all mean? Some people had theories.

And how is this going down with those targeted?

Somewhere, Devin Nunes is wandering around the halls of Congress, muttering to himself, “But I said nothing happened…!”

The Takeaway: It’s worth pointing out that the Mueller news dropped on March 15, which amused certain people online.

Oh, Canada

What Happened: Forget “Commander in Chief,” perhaps President Trump’s title could be “Gaslighter in Chief.” Or, maybe, “Man Who Should Perhaps Never Talk in Front of a Tape Recorder Ever.”

What Really Happened: This might sound like the kind of old-fashioned, unnecessary posturing of people stuck in the past, but once upon a time it was widely expected that the President of the United States wouldn’t be the kind of person who would boast about lying to the head of state of a friendly nation.

Those days, dear readers, are long gone.

Yes, the Washington Post obtained audio from a fundraising speech in which Trump boasted that he’d made up information that he used in an argument with Canadian Prime Minister Justin Trudeau over whether or not the US runs a trade deficit with Trudeau’s country. (It doesn’t.) “I had no idea,” Trump can be heard to say on the tape. “I just said, ‘You’re wrong.’ You know why? Because we’re so stupid.” As you might expect, people were thrilled about this display of, uh, political maneuvering? Sure, let’s go with that.

As the media struggled to understand what was happening, the White House press secretary attempted to smooth out the situation by, well, repeating the lie.

There is, also, a surreal second story to this audio of Trump that has nothing to do with lying to Justin Trudeau. Instead, it had to do with the “bowling ball test.”

As multiple outlets looked into the matter, it slowly emerged that it was probably all made up. Not to worry, though; according to the White House, it was just a joke.

The Takeaway: There’s really only response to this entire exchange, isn’t there?

Space Force? Space Force!

What Happened: When it comes to America’s manifest destiny, there’s only one direction left to go: To infinity… and beyond?

What Really Happened: With all the bad news going around the the White House, you can’t blame the president for wanting to change the narrative somehow. And you only get to do that, he knows, by thinking big and reaching for the stars. Last week, Trump gave a speech that showed just how literally he took that advice.

Sure, going to Mars is definitely thinking big, but is it thinking big enough? Not to worry, however; Trump was right there with the next big thing.

Space Force! Just the very idea got the media excited, and asking questions like, “For real?” and “What does that even mean?”, not to mention “Do we have to?” Sure, not every outlet took the idea seriously, but that’s the lamestream media for you. Everyone else was into the idea, or calling the president a laughingstock. It’s hard to be a leader. But at least Twitter understood the potential of Space Force.


The Takeaway: Make no mistake, people may joke now, but Space Force is the future.

Amazon Did Not Kill Toys "R" Us — It Was a Giraffe

The sad closing of a beloved retailer can be pinned on a number of factors, but here is one theory that everyone has overlooked.

This past week saw the sad end to the slow, lingering demise of one of the most beloved retailers of our generation, Toys “R” Us.

The company announced that it will close all 735 US stores, leaving over 30,000 employees without jobs and effectively ending its 70-year run as America’s favorite toy store — and most expensive playground on earth.

For most, the closure came as no surprise. The company filed bankruptcy in September of last year in order to restructure debt and introduce changes to be more competitive. The advances, which included in-store augmented reality games and children’s playrooms, proved to be ineffective — not to mention a few years too late — in attracting more shoppers from the comforts of their couches this past holiday season.

Most believe it was Walmart and Target, the two leading toy retailers in the US, who slowly and steadily eroded market share from Toys “R” Us. Others believe it was the rise of Amazon and consumers’ move to online shopping that has and continues to be the bain of all traditional retailers.

Other more sophisticated analysts will point to massive debt the company carried as a result of being taken private in 2005, saddling it with over $5 billion and yearly interest payments of over $400 million.

The sad truth is, however, that the reason that Toys “R” Us failed is much less obvious. I believe it was because of the company’s mascot: Geoffrey the giraffe.

Think about it — what do we really know about giraffes? They have abnormally long necks, which figuratively puts their heads in the clouds and literally makes them too tall to have any meaningful relationships. They make almost no sound and are herbivores, typically preyed on by more aggressive hunters like lions, hyenas and Jeff Bezos.

Moreover, according to National Geographic, giraffes spend up to 20 hours a day eating and sleeping as little as five to 30 minutes. How can any marketing mascot be productive and creative with that routine?

Let us also look at TRU’s competitors. Target once boasted Bullseye, a lovable bull terrier with a conveniently placed red target “birthmark” over his left eye. But Bullseye last appeared in 2015 and is reported to be retired and enjoying a life on a ranch without the speculating eyes of investors, according to Globe and Mail.

On the other hand, the closest thing Walmart has to a mascot is a boring, yellow, never-flinching smiley face, which harkens more to the drugs and rock and roll era of the 1960’s than a wholesome family retailer.  But here’s the thing — Walmart is Walmart, a force that long ago took the reigns of the nation’s top retailer and can pretty much do what it likes.

And lastly, Amazon. Amazon has no known mascot — unless you count its Dr. Evil-resembling and highly visible founder, Jeff Bezos. More appropriate perhaps is Amazon’s in-home personal assistant, Alexa, which had remarkably found itself in 22 million homes by the end of 2017, according to Forbes.

A personal assistant, I might add, that sits in your house and is constantly listening to every conversation you are having. That sounds more like a villainous piece of spy technology than a mascot.

So, while we all mourn the fall of a retail giant, one that provided countless wonderful memories for generations of Toys “R” Us kids, I hope we don’t overlook the valuable lesson that derived from this sad fall.

Far more critical than adapting to a quickly advancing and globalizing business world, staying ahead of rapidly progressing technology, and understanding the changing preferences and buying habits of new digital generations, you simply need to have a more lovable or maniacal mascot. Take your pick.

What do you think? What other reasons do you believe led to the demise of Toys “R” Us? Share your thoughts with others in the comments below.

Why Every Entrepreneur Should Keep a Sleep Diary (And How to Do It Right)

As any entrepreneur should know, good sleep is essential to good business.

High-quality sleep sustains the energy levels you need to grow a company. It enhances cognitive function so your brain operates at its best. It helps you recover from grueling days so you don’t burn out . And it’s consistently linked to improved performance and productivity in the workplace.

On the other hand, chronic sleep deprivation degrades your ability to think clearly, make sound decisions, perform at your best, avoid illness, and get things done without running yourself into the ground. Nevertheless, too many entrepreneurs sacrifice sleep in the name of productivity.

So what’s the antidote to this productivity-killing sleep deprivation? One of the best strategies for ensuring you consistently get a good night’s sleep is to create a sleep log. While that might sound like one more thing to add to your already-overwhelming to-do list, the effort pays for itself. Here’s why every entrepreneur should keep a sleep diary–plus how to do it right.

The Benefits of Keeping a Sleep Diary

It holds you accountable to getting enough sleep

If you don’t track how many hours you’ve slept each night, then it’s easy to start cutting back on sleep without even realizing it. Before you know it, you’re catching only four or five hours of shut eye in the pursuit of more working hours. You may be vaguely aware of the fact that you’re feeling awfully tired lately, but you won’t realize the full scope of your sleep deprivation unless you actually count how much time you spend sleeping.

Bottom line? Tracking your sleep lets you quickly identify when you’re not getting enough of it. This gives you the opportunity to course correct before things get dire.

It helps you identify obstacles to quality sleep

Speaking of course correction: Keeping a detailed sleep log enables you to identify the behavioral or environmental patterns that might be interfering with your ability to sleep well each night.

For instance, if you keep track of your caffeine consumption habits along with your sleep quality, you might notice that consuming caffeine after 6 pm consistently disrupts your sleep, while consuming caffeine earlier in the day keeps you in the clear. This allows you to curate your daily habits so they serve your nighttime sleep quality.

It provides valuable info to your doctor (if necessary)

If you tweak your habits to facilitate high-quality sleep but still struggle to fall and stay asleep each night, there’s a chance you’re dealing with a sleep disorder. In that event, having a written record of your sleep habits will be enormously helpful to a medical professional.

Handing over this written log not only saves your doctor time; it may also save you money that would otherwise be spent on diagnostic questions that were already answered by your diary. And if you do start treatment for a sleep disorder, the sleep log will let you keep track of whether the treatment is working.

All told, keeping a sleep diary can help you improve your sleep quality in a number of ways. And that has major ramifications for your cognitive function, learning capacities, energy levels, and productivity.

How to Keep a Sleep Diary

Ready to create a sleep diary? Keep the following guidelines in mind:

  • Track how much you slept each night. Write down when you got in bed, how long it took you to fall asleep, when you woke up to start your day, and whether (and why) you woke up at all during the night.
  • Track quality in addition to quality. Each morning, rate how well you slept the night before. You can use a simple scale of 1 to 5, with 1 representing poor quality sleep and 5 representing very good quality sleep.
  • Track lifestyle factors. What you do during your day can have a major impact on the sleep you get at night. Jot down how much caffeine and alcohol you consumed (and when you consumed it), what and when you ate, if and when you exercised, whether you’re experiencing any emotional stressors, if and when you napped, your daily activities, and any drugs or medication you may have taken.
  • Track environmental factors. Note the temperature of your bedroom, the bedding you used, whether the room was dark or light, whether the room was quiet or loud, and so on.

If all that sounds daunting, don’t worry. There are plenty of sleep diary templates available, and they make it easy to track these factors in one place. (Not sure where to start? Give this template from the American Academy of Sleep Medicine a try.)

Keeping a sleep diary is one of the best ways to ensure you’re consistently getting high-quality sleep. And that is one of the best things you can do for yourself when you’re trying to make it big.

As Toys 'R' Us Closes Up Shop, Small Businesses Are Left to Fend for Themselves

The likely liquidation of Toys R Us, the nation’s largest independent toy seller, could add stress for the companies that make toys and games, and mean changes for the owners of the strip malls where most of its stores are.

Not to mention its impact on more than Toys R Us’s 30,000 U.S. workers

Here’s a look.


Toy companies, both big and small, will lose a place to test new toys. Toys R Us was a launchpad for emerging trends and toys, such as ZhuZhu Pets, which were the must-have holiday toy in 2008.

“Toys R Us was known as an incubator,” said Jim Silver, editor-in-chief of toy review site TTPM.com.

The toy makers will also have to find new places to sell their goods. The bigger toy makers — Hasbro and Mattel — will likely hurt at first, but then find their footing at Walmart, Target and Amazon, says Richard Gottlieb, a consultant at Global Toy Experts.

Toys R Us accounts for about 11 percent of Mattel’s annual sales and about 9 percent of Hasbro’s annual volume, analysts estimate. Both have posted lackluster financial results of late, and there was talk last year about the possibility of a merger between them.

But smaller toy companies will have a harder time. Silver believes they will be hurt more than Mattel Inc. and Hasbro Inc. since Toys R Us could account for up to 40 percent of their overall business. And big stores, such as Walmart and Target, are less likely to sell smaller brands because they have less space to sell toys. Stephanie Wissink, a toy analyst at Jefferies, wrote in a recent note that small companies will explore selling themselves to survive. She thinks that Hasbro and Mattel will be best positioned to add more small- to medium-sized toy makers to their portfolios.


Real estate executives offer different opinions on whether landlords can easily fill the holes at the strip centers where most of the Toys R Us locations are.

Given the chain’s issues, the closings aren’t a shock to landlords, and they’ve already been trying to line up possible tenants to replace Toys R Us over the past few months, said Katy Welsh, a senior vice president at the southern Florida division of the commercial real estate brokerage firm Colliers International.

Welsh says she’s been working with a number of companies like Glowzone, an entertainment park, and Lucky Markets, which offers beer tastings in its stores, which would be interested in taking some of the spaces nationwide.

“You have to look at this as an opportunity to reposition that store,” she said.

But Suzanne Mulvee, director of research for CoStar, a real estate research firm, says that 51 percent, or 450 Toys R Us’s stores are in shopping centers considered low-quality. So landlords could struggle to replace them with tenants at similar rates — or worse, they could remain vacant, she says. She says she also believes that matching the size of the box, which average about 30,000 square feet, could be difficult as well.

“The sweet spot seems to be boxes that are under 25,000 square feet, ” she says.


Toys R Us, as a well-known and long-lasting brand, may yet have a future — the company even quoted its classic jingle in its bankruptcy filings. And other seemingly dead retailers have a way of coming back to life.

American Apparel, which closed all its stores last year after filing for bankruptcy, was revived by another company as an online-only clothing store. FAO Schwarz, which Toys R Us once owned, is opening shops inside department stores in the U.S. and China. And Sharper Image, which also shut its stores, now sells gadgets online and opened a New York pop-up shop during the holidays last year.

–The Associated Press

Why The Liberal Arts are Necessary for Long-Term Success

W. Denham Sutcliffe, American author and professor of English at Kenyon College, said this about the liberal arts.  “Liberal learning is that which underlies, that which gives purpose and direction to practical skills.  It tries to distinguish between more and less important, between the grand and the trivial, and to concern itself rather with the center than with the periphery.”

It has become an accepted truism that if you want your daughter or son to succeed she or he needs to focus on the STEM subjects–science, technology, engineering, and mathematics.  These STEM majors are broadly seen as a certain pathway to employment in our brave new technological world.  

Fast Company quotes venture capitalist Marc Andreesen as saying the average English degree holder is “fated to become a shoe salesman, hawking wares to former classmates who were lucky enough to have majored in math.”  And Peter Thiel, co-founder of PayPal, refers to degrees like philosophy as “antiquated, debt-fueled luxury goods.”

However, Andreesen and Thiel are both short-sighted and wrong.  While it is probably true that a college graduate may well make more money initially on graduation by training in the STEM specialties, that fact may have a limited half-life, particularly if you wish to become an entrepreneurial or corporate leader.

Michael Zimm, a strategist at Digital Surgeons, said the following in an op-ed in the Wall Street Journal last week:

“…my advice is to let your child know that a liberal-arts degree can be a great launching pad for a career in just about any industry.  Majoring in philosophy, history or English literature will not consign a graduate to a fate of perpetual unemployment.  Far from it.  I say this as a trained classicist–yes, you can still study ancient Greek and Latin–who decided to make a transition to the tech world.  

I am far from alone.  There are plenty of entrepreneurs, techies and private-equity managers with liberal arts degrees.  Damon Horowitz, a co-founder of the search engine Aardvark, holds a doctorate in philosophy.  Slack founder Stewart Butterfield and LinkedIn founder Reid Hoffman both earned master’s degrees in philosophy.”

In fact, over a third of Fortune 500 CEOs have liberal arts degrees.  My personal theory about this is that liberal arts train us to see the forest, not just the trees, and that that is the big picture training needed for entrepreneurial and corporate leadership.

It is hard to accept this when immediate and higher paid employment after college pays more right out of the box.  It is hard for expense weary parents to see the long-term advantages of broad and deep training in how to think, in how to objectively see and analyze the rapidly changing world as it actually is.  But leaders trained in the liberal arts have intellectual flexibility and the ability to think creatively.  They can assume the mantle of ahead-of-the-curve visionary process in a world of constant speed-of-light change.  They know how to tap into the non-quantitative intuitions that constitute the foundation of creative business and creative life for that matter.  They know how to bring love, meaning, and passion, as well as immediate profit, to entrepreneurship and long-term corporate health.

As Albert Einstein put it, “The value of an education in liberal arts…is not the learning of many facts but the training of the mind to think something that cannot be learned in textbooks.”

The liberal arts offer a path for dealing with chaos and complexity.  Graduating students need to think not only about their immediate prospects in the current HR marketplace but also about what will nurture long-term leadership skills for larger success and business usefulness. 

This is not just granola, hippie impracticality and idealism.  It is business selfishness.  The very practical success of cutting-edge autodidactic business leaders like John Mackey, Elon Musk, Danny Meyer, Tony Hsieh, Steve Jobs, et. al., in their variegated ways are the future.

Unlike the thoughts of Marc Andreesen and Peter Thiel about STEM specialization (with immediate employability in coding or programing), the long-term promise of preparation in the liberal arts is compelling.  It is supremely ironic that at the exact time time we are required to absorb and synthesize a veritable fire-hose torrent of change and new knowledge, we are societally shying away from the very skills that make such conditions manageable.

Seth Godin writes the following:  “The competitive advantages the marketplace demands is someone more human, connected, and mature.  Someone with passion and energy, capable of seeing things as they are and negotiating multiple priorities as she makes useful decisions without angst.  Flexible in the face of change, resilient in the face of confusion.”  Well said.  Thank you, Seth.

Yahoo Settlement Telegraphs Harsher Stance on Security Fails

The U.S. Securities and Exchange Commission recently toughened cybersecurity reporting guidelines for public companies, and days later Yahoo agreed to pay $80 million to settle a milestone class-action lawsuit brought by investors who claimed the company misled them about their cybersecurity practices.

This will set public companies into scramble mode as general counsels try to discern risk in an area where they lack expertise. The knowledge gap when it comes to cybersecurity is real, and details are going to matter as directors and officers alike increasingly become stakeholders in an area where no one wanted to take ownership previously.

Here are six intertwined takeaways:

Materiality of Cyber Risks

The SEC voted unanimously on Feb. 18 to issue what it calls “interpretive guidance” to be applied to disclosures of cybersecurity risks and incidents. This advice addresses the importance of cybersecurity policies and procedures and stresses that companies have an obligation to consider the “materiality of cybersecurity risks and incidents” when preparing public reports.

To put a finer point on it, the commission is asking public companies to inform investors about material cybersecurity risks and incidents in a timely fashion, says Willy Leichter, marketing vice president at Virsec Systems, a supplier of application security systems. “This includes those companies that are subject to material cybersecurity risks but may not yet have been the target of a cyber-attack,” Leichter says.

Directors and Officers Liability Insurance

Meanwhile, the Yahoo settlement, which still must be approved by the court, quantifies in dollars and cents precisely what’s at stake for the directors and officers themselves, in terms of so-called D&O liability, should they be perceived to mishandle a massive data breach that unfolds during their watch. In addition to the $80 million class-action settlement, the plaintiffs’ attorneys have asked the court to order Yahoo to pay $20 million in legal fees, and up to $750,000 as reimbursement for other work expenses.

Devil in the Details

The SEC’s fresh advice expands on staff guidance initially issued in 2011. The devil is in the details, of course, and there are a couple of notable new nuggets, according to N. Peter Rasmussen, senior legal editor at Bloomberg Law. The commission is emphasizing the importance of maintaining comprehensive cybersecurity policies and procedures and integrating them throughout the disclosure process. In determining their disclosure obligations, companies should generally weigh “the potential materiality of any identified risk, the importance of any compromised information, and the impact of the incident on the company’s operations.”

Herculean Foul-Up

Yahoo had to screw up on a Herculean scale to find itself in this position. In September 2016, the company announced that the personal data of 500 million users was exposed, and then in December 2016, it reported that the data of 1 billion users–wait for it–had been exposed in a separate breach! Oh, and by the way, the smaller breach occurred in 2014–a year after the larger one. Shortly thereafter it was revealed that the number was actually easier to express in a phrase: Pretty much everything (3 billion users).

Following the company’s September 2016 mea culpa, Yahoo’s share price declined 3.06%. And following its billion-user breach disclosure, its share price dove 6.11% percent. But the real kicker was the discount Verizon Communications got as part of its 2017 acquisition of Yahoo. Verizon sought and obtained a price cut of $350 million, according to the plaintiffs’ law firm, Pomerantz LLP.

Not Far Enough

One SEC member, Kara Stein, expressed disappointment because she wanted the commission to go much further than rehashing staff suggestions that have been laying around for seven years. Stein, who was appointed by President Barack Obama in 2013, said she would have liked to have seen the commission push for risk management framework improvements, minimum standards to protect the personally identifiable information of investors, and timely notice to investors. She’d like to require companies to file a Form 8-K following a cyberattack, providing disclosure that informs the public without unduly harming the company.

Plaintiffs’ Big Payday

The lawsuit laid bare multiple poor choices by Yahoo: failing to encrypt and sufficiently protect data; failing to detect and disclose the breach in a timely manner; plowing ahead with the sale to Verizon. As a result, Yahoo is now on the hook to pay four times as much as Target, which paid an $18.5 million settlement to Attorneys Generals in 47 states for losing records for 41 million customers.

What’s more, Yahoo is the payee of the first data breach-related lawsuit in which plaintiffs’ lawyers have scored a big payday, says Kevin M. LaCroix an attorney at ProExec, a management liability consultancy. “It is hard to know for sure, but this milestone settlement, together with the SEC’s new disclosure guidelines, could mean that data breach-related shareholder litigation could be an area of increased focus for the plaintiffs’ lawyers,” LaCroix writes in his blog.

If LaCroix is right, board room meetings will never be the same, and when it comes to cyber that’s a move in the right direction. But what does this mean for small businesses? Many assume that they don’t have the budget to afford the sort of cyber solutions required to stay safe–and they are wrong. The fact is, you can’t afford not to have a solution in place, at the very least a cyber insurance policy. But always remember that this offers no protection the persistent dangers that are out there. It may make sense to add a cyber consult, outsourcing the CISO role, and still other outsourced roles, but first you need to admit that if Yahoo has a problem with this, so could you.

SteelSeries Arctis Pro (GameDAC and Wireless) for PS4, PC Review: Great Sound and Features

Gaming headsets are often wealthy with features: virtual surround sound, high quality wireless radios, noise-isolating designs, replaceable ear cushions. A few models even come with their own fancy stands, giving you a place to rest your headphones when you take a pizza break.

But no matter what bill of goods most headsets arrive with, none of them likely sound as good as the new SteelSeries Arctis Pro. In addition to high-end components and a comfortable fit that blocks out exterior noise, the headset utilizes a small audio-control box that the headphones plug into. The box combines a digital-to-analog converter and an amplifier, two pieces of tech that improve the sound of the headphones by adding depth, clarity, and drama. The combination of the Arctis Pro and its accompanying GameDAC box has quickly become my favorite new audio companion when playing games or just listening to tunes.

I noticed the improved audio most in shooters like Overwatch. Even my own weapon sounded clearer, and I could better discern the position and distance of footsteps and energy shields shattering around me. Mowing down other characters as Bastion has never sounded so right. It’s remarkable, and that’s thanks to the DTS Headphone:X 2.0 software running on the GameDAC; movie-theater-grade technology that presents sounds in a multi-channel mix that makes it easier for you to pick out the distance and direction of the sounds you hear.

The headphones, when connected to the GameDAC, are also capable of playing back high-resolution audio files, making them great for listening to music in addition to gaming. Music sounded stunning on my PS4, Mac, and PC, somewhat reminding me of the impressive Blue Sadie headphones I recently reviewed, which also have their own amplifier on-board.

The GameDAC box connects to your computer or console via optical cable or USB. It has an OLED screen, a volume wheel, and software controls to tinker with audio settings or fiddle with the color of the RGB lighting on the headphones. I went with a purple hue, lighting up the rims of ear cups and the microphone mute button. (It looked pretty; Prince was onto something.) Customizing the lights is completely unnecessary, but I kept doing it anyway.

SteelSeries’ GameDAC box uses a digital-to-analog converter to sweeten the audio sent to the company’s Arctis Pro headphones.


A Sound Fit

The design is nearly identical to SteelSeries’ previous Arctis headsets, with a steel headband surrounded by elastic fabric that feels just like ski or snowboarding goggles—though I wouldn’t head down a Black Diamond wearing these. You can adjust the tautness of the headband assembly give to get a better fit.

The outside of the earcups are plastic, but have a soft coating that resembles metal. They’re connected to the headband by aluminum hangers that pivot 90 degrees so you can rest them on your weary shoulders when you get tired from pwning noobs, which is somehow still a phrase I say. They’re fairly glasses-friendly with plump mesh fabric (SteelSeries call it “Airweave”) that doesn’t seem to heat up as much as sweat-inducing leather headset cushions. They do have some scratchiness to them, but that hasn’t bothered me once I get them in place.

I’m mad for the retractable noise-cancelling microphone on the left earcup. It extends about four and a half inches, and you can adjust it as close to or as far away from your face as you’d like. SteelSeries also includes a foam mic cover you can slide on to temper pops and breathing sounds. To mute the mic, you use the big, easy-to-find button on back. Press it and it pops out, so you know it’s muted. The mic has a deep red glow when muted, which helped me know when I could munch on some chips or sneeze without destroying my friends’ eardrums. Though the headset has good noise isolation that tends to make you a Loud Talker, my wife didn’t complain she could hear me screaming from the other room thanks to the mic monitoring that let me hear myself talking.

The headset comes in wired and wireless variants. The only downside to the wired version is that you will need to keep that GameDAC box within reach so you can adjust your max volume or tweak the audio mix to bring up (or silence) the chattering of your friends. The wired version has a single volume dial on the left earcup, but it cannot change your chatmix. (The wireless version has a clickable wheel that does let you adjust how loudly you hear your friends.) Luckily, the cables that come in the box are a few feet long each. One goes from the GameDAC to the headphones, the other goes from the GameDAC to your console or PC. So, at least the little box doesn’t have to sit right next to your PS4. I was able to sit on my couch several feet away without much trouble, though I did have to dabble with the big volume nob now and then.

Decision Tree

The fit and feel of every Arctis Pro is the same, but only one model has that prized GameDAC included. It comes in several varieties, most of which work on PS4 and PC, and they do have some key differences. For instance, the $330 Arctis Pro Wireless has its own larger, squarer box that transmits lossless audio over both Bluetooth and 2.4GHz Wi-Fi. The wireless version sounds fantastic and as good as any other wireless headset I’ve used, but it isn’t as impressive as the wired version.

The wireless version of the new Arctis Pro.


The wireless transmitter pairs with the Arctis Pro Wireless headphones.


The wireless transmitter box has a volume/chatmix wheel and screen to let you muck around with basic settings (no RGB lighting options on this version, sadly). It also has a slot to charge one of the two swappable batteries, each of which lasts about 10 hours. The battery meter on the box’s display is also helpful. Being able to choose between Bluetooth and Wi-Fi or dual connect to both is useful if you’re home isn’t the best place for wireless signals. I’ve yet to have a single putter in my wireless connection. Pro-gamer features like these help justify the higher cost of the Arctis Pro series.

The standard Arctis Pro + GameDAC will set you back $250, but a cheaper $180 wired Arctis Pro without the GameDAC (PC only) is also available. The cheaper version still has a big volume wheel, but its sound also cannot match the wired version with the GameDAC. Like having more cowbell in “(Don’t Fear) the Reaper”, you’re gonna want that audio boost you get with GameDAC.

Best of the Best

The Arcis Pro Wireless is a top-shelf Bluetooth and Wi-Fi headset, and the benefits of going cordless are numerous, but playing games on the Arctis Pro + GameDAC makes the wired option a whole lot more appealing. The GameDAC brings a new level of clarity and immersion to any game. If any gaming headset is worth a $250 investment, it’s this one. The Arctis Pro is comfortable, has immaculate sound, and is clearly built to put gamers’ needs first. It’s a professional headset in a sea of amateurs.

Exclusive: Fitness app Strava overhauls map that revealed military positions

SAN FRANCISCO (Reuters) – Fitness-tracking app Strava said starting on Tuesday it will restrict access to an online map that shows where people run, cycle and swim and remove some data after researchers found it inadvertently revealed military posts and other sensitive sites.

Strava Inc CEO James Quarles poses for a photo at the fitness app company’s headquarters in San Francisco, California, U.S., March 7, 2018. Picture taken on March 7, 2018. REUTERS/David Ingram

Strava’s heat map shows exercise routes in colors such as white, orange and purple that signify their popularity. The map drew worldwide attention in January when academics, journalists and private security experts used it to deduce where military personnel were deployed, by looking on the app for workout locations in war zones.

Strava is launching a new version of the heat map, a tool that displays data in map form, that will bar access to street-level details to anyone but registered Strava users, Strava Chief Executive James Quarles told Reuters.

Roads and trails with little activity will not show up on the revised map until several different users upload workouts in that area, the company said. The map will also be refreshed monthly to remove data people have made private.

Security experts previously spotted on Strava’s map what they believed to be the movements of U.S. soldiers in Africa and of people who work at a suspected Taiwanese missile command, all of whom had shared workouts apparently without realizing the implications.

In some spots, such as Afghanistan, researchers speculated that most or all of Strava’s users were soldiers or related personnel, making it easier to spot their bases.

Quarles said that the company did not anticipate that people would find sensitive information on the map because fitness data is shared voluntarily. The company does not track people without their knowledge, he said.

“Our use is really explicit,” Quarles said in an interview, his first on the subject.“You’re recording your activity in its location for the express purpose of analyzing it or sharing it and to do so publicly.”

Strava customers have the option of keeping their workouts private, and the map included no names. But the episode underscored how big data sets held by Silicon Valley companies can be used for unintended purposes.

Strava’s initial response, in which it pledged to help people better understand the app’s privacy settings, was not enough for U.S. lawmakers, who demanded to know what steps the company was taking to protect privacy.

The privately held San Francisco company has 150 employees and bills itself as the“social network for athletes.” It has 28 million users, 82 percent of whom are outside the United States.

People use Strava, or competitors such as Runkeeper or MapMyRide, to log exercise and follow the activity of friends or celebrity athletes. The services sync to GPS-enabled watches and other wearable technology.

Slideshow (2 Images)

It was not clear how much of a difference the company’s changes would make. Quarles said he did not know how much data would be removed, and he said Strava was focused on educating its users about privacy settings as the most effective way to keep secret locations secret.

The real danger is the data that underlies the map including non-public information, like names, times and dates which spy agencies or others would like access to, said Jeffrey Lewis, a nuclear policy expert at the Middlebury Institute of International Studies.

“The heat map is not the problem. The heat map was just a shocking demonstration of the incredible data they possess. The heat map just said,‘Hack me,’” Lewis said.

Quarles said there have been no signs of hacking attempts, and that the company was not aware of any physical attacks due to Strava’s heat map.


The idea behind the heat map, which launched in 2014, was to help people find new places to exercise. About 100,000 people use it, Quarles said.

The most recent version of the heat map launched in November, and a student in Australia was the first to identify sensitive sites. His Twitter posts and heat-map images drew unprecedented attention to the map.

Quarles said many people assumed the worst, such as that Strava had collected data secretly, because the company is little-known outside sports circles.

“We sounded like a nameless Silicon Valley company. We probably weren’t as well understood,” Quarles said.

The heat-map revelations prompted the U.S. Defense Department, which encourages personnel to limit their internet presence, to review security protocols.

Quarles said Strava has been in contact with U.S. defense and intelligence officials, and he said they did not ask Strava to take down the map.

Quarles, who previously was Facebook’s (FB.O) vice president of Instagram business, met congressional staff in Washington, D.C., last month. A congressional aide confirmed the meeting but declined to comment further.

Despite widespread media coverage of the heat map, Strava did not have many inquiries from authorities outside the United States, Quarles said.“We’ve not been contacted to make any changes,” he said.

Reporting by David Ingram; Editing by Jonathan Weber and Cynthia Osterman

NASA Just Discovered Extended Time in Space Is Bad for Your DNA (Sorry, Elon Musk)

As astronaut Scott Kelly gets used to living life on Earth again–he spent a full year on the International Space Station–Elon Musk continues to plow through SpaceX successes. His long-term goal of eventually supporting human migration to other planets hasn’t changed, but something else has.

That’d be Scott’s DNA.

What happened to Scott’s genes

The big goal of Scott spending a year in space was for NASA to learn more about how extended time off of Earth influences people physically and psychologically. Since Scott has a twin, Mark, who incidentally is also an astronaut, NASA had a perfect opportunity to do some comparative study.

As Katherine Hignett reports in her article for Newsweek, NASA researchers took a close look at Scott and Mark’s DNA once Scott got back from ISS. They found that the extended time in space resulted not only in issues like increased inflammation, but also nutrient changes that altered gene expression.

Most of the changes researchers noted were only temporary. For example, the telomeres on Scott’s chromosome had lengthened on his mission, but they shortened right back up in just two days once Scott was Earthbound again. But a full 7 percent of Scott’s genes still showed signs of alteration after six months. That has the researchers questioning whether the changes are much more long-term.

Different DNA, new questions

NASA’s results throw a big ethical problem at Musk and SpaceX: What if the effects on DNA are even more pronounced with long-term space colonization? Even if the changes aren’t more drastic, what are the implications for the ability of human beings to survive, especially given that changes were noted in genes connected to DNA repair? (Think mutations here, for better or worse.) What do those changes mean over many generations, and could they eventually threaten what it means to be human in the most basic sense? Should we continue to reach for planets simply because the technology is extending our arms, even if we don’t know what’s in store for our health and species? After all, 7 percent isn’t a small number when you understand that, comparatively, we’re genetically separated from chimps by only 4 percent. And roughly 10 percent of our genes regulate the expression of our other genes, so influencing one gene can affect others.

I find the whole thing a little unsettling.

But then again, sometimes you simply won’t get an answer unless you take a really big risk. Just ask scientists like Marie Curie, whose Nobel prize-winning radium work essentially poisoned her to death. Modern researchers take as many precautions as they can, but they still can only protect themselves based on the current information they have. Even now, we don’t always know whether much of what we do in science is a threat.

I don’t necessarily think Scott’s DNA changes spell the end of SpaceX. But I do think it forces Musk to consider the enormous sacrifices we’re going to have to make to reach a point where we can determine whether colonization makes sense on a biological, species level. The people who make an educated, informed decision to get us answers might never be the same afterward, and for my part, I think Musk has an obligation to accept the consequences of that irreversibility, whatever they might happen to be.

A Passenger Sued Southwest Airlines for Exactly $74,999 and It's Totally Brilliant. Here's Why

You may have heard: A Southwest Airlines passenger is suing Southwest for landing at the wrong airport.

It’s the kind of case we talked about back in law school, and I was intrigued enough to dig up the court complaint down in Missouri. I’ve included it at the bottom of this story. 

But I think the most important line in the entire filing is one most people have missed:

“Plaintiff is requesting damages in the amount of $74,999.99 and nothing more.”

It’s an odd strange number, right? It turns out there’s a smart strategic reason behind the decision to use it–heck, I’d call it brilliant. Below, we’ll go through this strange case, why the plaintiff is suing for exactly one penny under $75 grand, and what all of this means for you as a business leader.

(I’ve asked both the plaintiff’s lawyer and Southwest Airlines for comment. Neither responded.)

The wrong airport

Quick, important fact: There are two airports servicing tiny Branson, Missouri: Branson Airport, which at the time had regular Southwest Airlines service, and the smaller Taney County airport, with a runway barely half the length of Branson’s.

Somehow, the captain and first officer of Southwest Flight 4013 from Chicago mixed up the airports–which are only seven miles apart–and landed at the wrong one.

Nobody was physically injured–but careers were ended and things could have been much worse. Passengers allegedly had to wait for two hours after landing before being allowed off, while the plane was filled with smoke.

“We landed very abruptly with the pilot applying the brakes very hard. We smelled burnt rubber from the stop,” another passenger (not the plaintiff in this lawsuit, as far as I know) told Forbes at the time, adding: “[T]he mood is somber now that we realized we were 40 feet from the edge of a cliff.”

The passenger who sued Southwest, Troy Haines, lived in the area and had flown into Branson Airport many times, and says he realized well before the plane landed–even if the pilots didn’t–that they were at the wrong airport, “with a much smaller runway.”

He was “immediately struck with fear and anxiety over potentially crashing,” according to his lawsuit, and he later “suffered severe mental anguish, fear and anxiety, including a panic attack which caused him to be removed from another airline prior to take-off.”

That in turn led him to stop flying, which meant taking a job that didn’t require travel–“at a substantially diminished salary.”

Why $74,999.99?

Whether you think the lawsuit sounds reasonable or not, the big question is simply: why not just round things up a penny and ask for $75,000.

The reason stems from the fact that there are two U.S. court systems: the federal system and the state systems. And, even if a plaintiff files a suit in state court, the defendant can sometimes move (“remove it” in the legal language) it to federal court. 

Most often, the defendant does this by showing that the plaintiff and defendants are from different states–but also that the amount at stake is more than $75,000. Suing for exactly one penny less than that blocks Southwest from removing the case to the federal court.

“It’s clear [the plaintiff in this case] wants to be in state court and is therefore staying under the monetary threshold for removal to federal court,” said Paul Geller, an experienced civil litigator and a partner at New York-based Robbins Geller Rudman & Dowd, who is not involved in this case.

“While I don’t necessarily ascribe to it, there is a general overlay in litigation that plaintiffs want to be in state court, and defendants try to find any way to get to federal court (through removal, where permissible),” Geller continued.

“Flight Options Plummet at Branson Airport”

Geller went on to call the idea that state courts are always more plaintiff-friendly “an urban myth.” And I think he might be right, in many cases.

But here, several things make filing (and staying) in state court utterly brilliant, in my opinion. If you’re a business owner, or you can ever imagine being a party to a civil lawsuit, you’ll want to pay attention.

First, there’s the fact that five months after this incident–June 4, 2014–Southwest stopped flying into Branson. 

You can imagine why this might make sense, business-wise: Taney County, where Brnson is located, only has about 51,000 year-round residents, although it is a tourist destination. Still, when Southwest left (along with Frontier soon after, the only other big airline that had served the area), the airport was hit hard.

In fact, the last time news broke that Branson might be attracting a major carrier, it was all part of an elaborate April Fool’s joke on the part of Sir Richard Branson (same last name as the city), the CEO and founder of now-defunct Virgin America.

I don’t know the exact economic impact of the airport’s demise. But I’m sure it caused damage, as outlined in one newspaper article: Flight options plummet at Missouri’s new Branson Airport. And I’m also confident that seeing your hometown dismissed as too insignificant for commercial flights has to sting.

All of which might make the plaintiff want more Branson-area jurors, while Southwest might want to everything it could to try this case as far away as possible.

50 miles–and a lifetime away

The closest federal court to Branson is 50 miles north, in Springfield.

That means that if Southwest Airlines could remove this case to federal court, they’d be able take it right out of the immediate county where this all happened–a community that Southwest decided a few years ago isn’t significant enough for its business.

And this isn’t just about the location of the courtroom; to my mind it’s about the makeup of the jury pool. Find jurors closer to Springfield, Missouri, and they might not feel one way or another about Southwest.

But pull together a jury in Branson, and a reasonable lawyer might imagine you’d wind up with a some who maybe knew someone who lost a job after Southwest and Frontier pulled out, or who don’t like that the big airlines think their hometown is just a punchline.

In other words, maybe you assume that a Branson jury would be predisposed to find for a plaintiff who lived in your town, and who isn’t asking for all the money in the world–and would find against the giant corporation with the out-of-state headquarters that allegedly did him wrong.

So you’d want to keep things in state court, in Branson. And because the plaintiff asked for one penny less than is required for a removal to federal court, Southwest seems stuck.

Brilliant, to my mind. Or else maybe this is all just about making it harder for Southwest’s lawyers and witnesses to travel to the trial in Branson.

Because as we’ve seen, Southwest doesn’t fly there anymore.

The Kinder Morgan Dividend Story Is About To Resume

By the Sure Dividend staff

Kinder Morgan (KMI) has been a favorite dividend growth investment for many retail investors, until the company cut its payout by three quarters two years ago. After two years of low payouts, during which the company focused on reducing debt levels and finishing projects, things are about to change soon. Kinder Morgan is one of 294 dividend stocks in the energy sector. You can see all 294 dividend-paying energy stocks here.

Kinder Morgan has aggressive dividend growth plans for the coming years, but unlike in the past, this time they look very achievable. The company is about to increase its dividend meaningfully soon, and investors will very likely benefit from ongoing strong dividend growth rates over the coming years.

Since Kinder Morgan is not trading at an expensive valuation at all, shares of the pipeline giant are worthy of a closer look right here.

Company Overview

Kinder Morgan is proud of its huge asset base, and rightfully so:

(company presentation)

The company operates a giant pipeline network spanning North America, with the focus being put on natural gas pipelines. Kinder Morgan also owns terminals, pipelines and oil production assets on top of its natural gas pipeline network.

(company presentation)

The vast majority of Kinder Morgan’s revenues are fee-based, which means that there is very low commodity price risk. The company’s revenues, earnings and cash flows do not depend highly on the price of oil and natural gas. The only segment with a bigger exposure to the price of oil is Kinder Morgan’s CO2 business. Kinder Morgan is hedging its revenues from that segment, though, thus the short-term price swings for WTI do not matter very much.

Due to the fact that Kinder Morgan is much less impacted by commodity price swings than other companies in the oil & gas industry, its cash flows are not cyclical at all.

(company presentation)

During 2018 Kinder Morgan plans to increase its EBITDA as well as its distributable cash flows slightly. Distributable cash flows are operating cash flows minus the portion of capex that is needed to keep the assets intact (maintenance capex). Distributable cash flows are thus the portion of the company’s cash flows that are not needed to maintain the business, those can be spend in several ways:

– Growth capex, which expand Kinder Morgan’s asset base and lead to higher earnings / cash flows in the future.

– Shareholder returns via dividends & share repurchases.

– Debt reduction, which leads to lower interest expenses and thereby positively impacts the company’s earnings and cash flows.

A couple of years ago Kinder Morgan has paid out almost all of its DCF in dividends and financed growth capex by issuing new shares and debt. That did not work very well once its share price collapsed, which was the reason for the dividend cut, as Kinder Morgan had to finance its growth projects organically from that point.

Right now Kinder Morgan is using its DCF for a combination of growth capex, dividends and share repurchases. The company has brought down its debt levels meaningfully already, but doesn’t plan to reduce its leverage further this year.

Kinder Morgan Has Announced Aggressive Dividend Growth Plans Through 2020

In the last two years Kinder Morgan has produced about $2.00 per share in distributable cash flows, but paid out only $0.50 each year. This has allowed the company to finance billions in growth projects with excess cash flows whilst also paying down debt.

The company has stated that it wants to increase the dividend meaningfully this year as well as in 2019 and 2020:

– The dividend will be $0.80 for 2018 (which means a 60% raise year over year)

– The dividend will be $1.00 for 2019 (which means a 25% raise yoy)

– The dividend will be $1.25 for 2020 (which means a 25% raise yoy, again)

This looks like a very compelling dividend growth rate, especially when we factor in that Kinder Morgan’s current dividend yield is not low at all: Based on a share price of $16.10, Kinder Morgan’s shares yield about 3.1% right now. The forward dividend yields are thus 5.0%, 6.2% and 7.8% for 2018, 2019 and 2020, respectively.

A closer look at the company’s dividend growth plans and cash flow generation shows that those plans are not unrealistic at all:


DCF per share


Payout ratio

Excess DCF after dividend payments





$2.8 billion





$2.4 billion





$2.0 billion

Assumption: DCF grows by two percent a year

Even in a rather conservative scenario where distributable cash flows grow by only two percent annually, Kinder Morgan’s payout ratio stays below 60% through 2020. At the same time the company would generate $7.2 billion in cash flows that are not needed to pay the dividends. Those cash flows could thus be utilized for growth capex, share repurchases or for paying down debt.

Kinder Morgan Has Significant Growth Potential

The scenario laid out above (2% annual DCF growth) is rather conservative due to the fact that Kinder Morgan plans to invest heavily into new assets over the coming years:

(company presentation)

Management has identified $12 billion of potential investments which fit the company’s strategy and which promise attractive returns. The company could complete a meaningful amount of these projects in the coming years, as high after-dividend cash flows allow the company to spend on growth investments heavily.

According to management these assets could add $1.6 billion to the company’s EBITDA, which means a 21% increase over 2017’s level. When we assume that distributable cash flows would grow by 21% as well, Kinder Morgan’s DCF per share could hit $2.40 in 2022. This calculation does not yet include the positive impact share repurchases would have on the DCF per share growth rate.

Kinder Morgan has recently started a $2 billion share repurchase program and has already bought back more than 27 million shares since December. At that pace Kinder Morgan’s share count would drop by almost five percent a year, this alone would drive DCF per share up by mid-single digits each year, without any underlying organic growth.

Due to its focus on natural gas pipelines Kinder Morgan is well positioned for the future. Natural gas consumption will, according to most analysts, continue to grow for decades, as natural gas combines several positives: The commodity is significantly more environmentally friendly than oil and coal, it is inexpensive and it is available in North America in large quantities. Through LNG terminals natural gas can even be exported to other markets (primarily in Asia).

All the natural gas that gets used in the US or exported to foreign countries needs to be transported through the US by pipelines. Kinder Morgan as the provider of the vastest pipeline network should benefit from that trend, which will lead to ample cash flows for decades.


The US Energy Information Administration expects that global consumption of natural gas will grow from 130 quadrillion Btu to 190 quadrillion Btu through 2040. Since proved reserves of natural gas in the US are growing, it seems opportune to assume that the US will remain a major producer of natural gas going forward. This, in turn, means that Kinder Morgan’s asset base will not only exist for a very long time, but will remain very profitable through the coming decades.

Kinder Morgan Is Trading At A Discount Price

KMI EV to EBITDA (Forward) data by YCharts

Kinder Morgan is trading at the lowest valuation the company’s shares have traded for over the last couple of years right now. With a forward EV to EBITDA multiple of about ten Kinder Morgan is also not looking expensive at all on an absolute basis.

When we focus on the cash flows the company generates, we see that Kinder Morgan trades at eight times trailing DCF and at slightly less than eight times forward distributable cash flows. This means that shares can be bought with a distributable cash flow yield of 12.7% right now. Kinder Morgan is a non-cyclical company which has a solid growth outlook, and at the same time its size and diversified asset base mean that there isn’t a lot of risk. Based on those facts the current valuation looks pretty low.

Investors can currently acquire shares of the company with a forward dividend yield of 5.0% (the dividend increase announcement should come next month) at a DCF multiple of slightly below 8. For long term focused investors who seek an investment that provides a growing income stream that looks like an attractive investment case.

Final Thoughts

Kinder Morgan’s failed dividend growth plans hurt many retail investors in the past, but management has learned from its mistakes. This time the dividend growth plans are well thought out and look very achievable.

Thanks to high cash flows and a big growth project backlog Kinder Morgan should be able to provide a steadily growing income stream over the coming years. This, combined with a low valuation, makes shares of the pipeline giant worthy of a closer look right here.

Disclosure: I am/we are long KMI.

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.

America's Most Hated CEO Just Got Sentenced to Prison. Here's What It Will Be Like For Him

His cockiness was gone. Minutes before he was sentenced to prison, the man known as the “Pharma Bro” and the “most-hated CEO in America” broke down in tears, to the point that the judge asked a clerk to hand him a box of tissues.

Barring an appellate miracle, Martin Shkreli, just a few days shy of his 35th birthday, will be in his 40s before he walks the street a free man again. Judge Kiyo Matsumoto  sentenced him Friday to seven years for his stock fraud conspiracy convictions.

It wasn’t quite as harsh a sentence as prosecutors wanted; they’d asked for 15 years, but it was much more severe than the 18 months Shkreli’s lawyers asked for. It’s certainly much more than the “time served” at “Club Fed” Shkreli had predicted he’d get, and where he thought he’d be playing tennis and XBox.

There’s little sympathy for Shkreli on the outside–except for a small but passionate group of supporters, many of whom followed him on social media, and think he got royally screwed over.

Even during his trial, Shkreli seemed to try to show he wasn’t taking seriously: dropping in on reporters (he called the prosecutors “junior varsity”), using social media during the evenings, refusing to wear a tie, and simply reading a book during closing arguments.

Still, it’s not the stock fraud and conspiracy that he’s known for; it’s the notoriety he received as a drug company CEO, when he hiked the cost of an antiviral drug by 5,455 percent (from $13.50 to $750 a tablet)–and seemed to revel in the bad publicity.

What will life be like now for Shkreli, in prison? It’s impossible to predict, but the Internet is awash with accounts of what life is like behind bars for white collar federal prisoners like Shkreli.

In a word, it would seem, Shkreli’s time will likely be “difficult,” for three main reasons:

  1. Because the cushy Club Fed-style prisons he seemed to anticipate doesn’t really exist anymore (if they ever really did).
  2. Because Shkreli is already well-known, and likely still fairly wealthy, even after he’ll have to forfeit more than $7 million and pay a $75,000 fine.
  3. Because if there’s one thing Shkreli has proven, it’s that he has a really difficult time controlling his ego and his mouth. That causes people to feel passionately about him on the outside, and it’s hard to imagine him changing quickly behind bars.

There’s one consolation for Shkreli: The judge sentenced him to less than 10 years, so he’s far more likely to do his time in a minimum security federal prison camp, than a tougher, higher security facility.

Depending on where he winds up, the prison camp he’s at might not have razor wire or even many locked doors. The threat of more time in a tougher facility is enough to keep most people from walking away.

But it’s not fun, and as several well-known people who spent time in federal custody have explained, the deck is stacked against people with a public profile.

“The more ‘high profile’ you are–unlike in the non-prison world–the fewer perks you may receive,” according to a Business Insider article a few years ago profiling former NYC police commissioner Bernie Kerik, who spent four years in federal prison for tax fraud, among other charges.  

“Once you arrive at prison–I was shocked by the psychological punishment,” said Kerick who was in the kind of federal prison camp where Shkreli is likely to wind up. You are constantly berated, degraded, demoralized,” he says. “You’re herded like cattle.”

Another former federal white collar prisoner, Mike Kimelman, who was convicted of insider trading and spent 15 months in prison, had a harsh description for it as well.

“I learned what an abject disgrace our prison system is (really the entire criminal-justice system),” he told Turney Duff at CNBC. “While I get that it’s supposed to be punitive, I find it hard to believe that the American public would allow it to exist in its present state if they knew what it was like.”

And, Matthew Kluger, an attorney who got 12 years for insider trading, and gave an interview while still in prison.

“The couple things that are the worst about being here, have nothing to do with the facilities or things that you can show visually on TV. … Here, you look around, and it looks pretty nice,” he said. “[I]f this were filled with 1100 people that you want to hang out with, this would be a fine place to be. Unfortunately it’s not.”

The biggest challenge, he added, “is other people. It’s being with this diverse crowd of people who are generally angry, somewhat antisocial, not the kinds of people that you want to spend your time with in the outside world. So that makes it hard.”

(Kluger’s interview by the way, is really long and wide-ranging on life in a federal prison; if you’re really interested in this it’s worth checking out. He’s still inside, too, until 2022.)

There is certainly life after 40, and Shkreli’s last act has yet to be written. But leave no doubt: this is a harsh sentence and he faces years of difficult challenges as a result.