Apple, Amazon called out for 'incorrect' Taiwan, Hong Kong references

TAIPEI/SHANGHAI (Reuters) – One of China’s top government-linked think tanks has called out Apple Inc, Amazon.com Inc and other foreign companies for not referring to Hong Kong and Taiwan as part of China in a report that provoked a stern reaction from Taipei.

FILE PHOTO: An electronic screen displays the Apple Inc. logo on the exterior of the Nasdaq Market Site following the close of the day’s trading session in New York City, New York, U.S., August 2, 2018. REUTERS/Mike Segar/File Photo

The Chinese Academy of Social Sciences (CASS) said in a report this month that 66 of the world’s 500 largest companies had used “incorrect labels” for Taiwan and 53 had errors in the way they referred to Hong Kong, according to China’s Legal Daily newspaper. It said 45 had referred to both territories incorrectly.

Beijing considers self-ruled Taiwan a wayward province of China and the former British colony of Hong Kong returned to Chinese rule in 1997 and operates as a semi-autonomous territory.

China last year ramped up pressure on foreign companies including Marriott International and Qantas for referring to Taiwan and Hong Kong as separate from China in drop down menus or other material.

The report was co-written by CASS and the Internet Development Research Institution of Peking University. An official at the Internet Development Research Institution told Reuters that it had not yet been published to the public and declined to provide a copy.

A spokesman for Taiwan President Tsai Ing-wen said Taiwan would not bow to Chinese pressure.

“As for China’s related out-of-control actions, we need to remind the international community to face this squarely and to unite efforts to reduce and contain these actions,” Alex Huang told reporters in Taipei.

Beijing has stepped up pressure on Taiwan since Tsai, from the pro-independence ruling party, took office in 2016.

That has included rising Chinese scrutiny over how companies from airlines, such as Air Canada, to retailers, such as Gap, refer to the democratic island in recent months.

Nike Inc, Siemens AG, ABB, Subaru and others were also on the list. Apple, Amazon, ABB, Siemens, Subaru and Nike did not immediately respond to Reuters’ requests for comment.

Reporting By Yimou Lee, Jess Macy Yu, Josh Horwitz; Additional Reporting by Shanghai Newsroom, Gao Liangping, Cate Cadell, Pei Li, Brenda Goh and Naomi Tajitsu in TOKYO; Editing by Paul Tait and Nick Macfie

The 1 Big Lesson that this AI Startup Learned

My 2018 wrapped with a fulfilling finish after mentoring entrepreneurs in the Techstars Montreal AI Accelerator. The selected startups were an eager, smart group of founders focused on the development and application of artificial intelligence across all industries and markets.

Through the Techstars program, they gained traction through deep mentor engagement, rapid iteration cycles, and fundraising preparation. It was an immersive and busy three months, but at the end of the accelerator, the companies had leveraged their mentors and learned to balance vision with execution.

As many entrepreneurs and investors can attest, the balance of staying true to your company’s vision while building with customer-centered needs is a tricky one.

Stay too fixated on your vision, and fail at market-fit and execution of the idea.

Swing too far into the customer-needs camp and risk-taking orders from a customer’s perceived problem, and missing the solution for the customer’s real problem.

To achieve this balance, take a page from the Techstars program curriculum and mentor-focused network: build your business with intentional balance.

Find and listen to mentors that challenge your assumptions.

Identify mentors that will challenge you, share insights, and ask the right questions to help identify the right problem and market fit.

One participating startup, Crescendo, learned first-hand how mentorship can help drive a vision beyond strategy, into execution.

Crescendo strives to create inclusive workplaces by helping employees develop empathy. Their technology delivers bite-sized content to employees on a weekly basis, using machine learning to create unique learning paths for each individual.

At the start of the Techstars program, Crescendo planned to solve the problem of toxic workplaces by creating a system that would analyze workplace communication to create a learning profile for each employee, then recommend how they could change their behavior.

Through different mentor sessions, the mentors questioned whether the solution was something customers would buy. While it may fit the founders’ vision, would an HR executive buy a solution that created a polarized work environment where employees felt policed?

The team listened and worked to challenge their own assumptions by talking with more of their potential customers. Initially, their feedback was that they loved the idea of improving workplace diversity and inclusion. But through more interviews, Crescendo learned that the product they were building wasn’t something they would buy.

The customers appreciated Crescendo’s vision but felt only a small portion of their company’s employees would feel comfortable using it, and that it wasn’t worth the data privacy risks. In short, they wouldn’t buy it.

As Crescendo co-founder Daniel Tuba D’Souza shared with me, “The best advice we got from a mentor: don’t build anything until you sell it.”

The mentors helped the founders to get beyond their vision and think about business viability and customer needs.

Rally around the problem statement.

Crescendo went back to their vision and evaluated what solution would be a market fit. The founders believed their vision was on target, but the product didn’t fit the customer’s needs.

As a team, they did a post-it note session to articulate a clear and concise problem statement, outlining the issue they wanted to solve. They wanted to identify what their solution could do to change workplace bias behaviors. This centered the team, giving them a place to validate ideas and a vision of what the world would look like if they solved the problem.

The founders wanted to ensure that with every pivot the company made, they stayed grounded to their ultimate vision.

The team went back to mentors and customers and conducted 360 degrees of feedback. Some of the feedback helped to shape the product and others were considered and disregarded when it didn’t fit the vision and customer’s needs.

“Advice came in from all directions. One thoughtful mentor suggested we focus just on the technology and build a one-time assessment tool. It was a cool idea, but it didn’t help us solve the problem we want to solve,” D’Souza shared.

Ultimately, the team landed on a solution that balances vision and customer needs. Crescendo built a solution integrating bite-sized diversity and inclusion education within a company’s slack community, building empathy and creating change in behaviors.

The tension of staying true to your north star while attuned to the customer-centered needs is a tricky one. Engaging with mentors for feedback, and grounding in the right problem statement will help you guide your team and product toward success.

In reflecting over coffee on the first cohort in the Montreal program, Managing Director of Techstars Montreal, Bruno Morency shared that successful entrepreneurs will surround themselves with people that question the vision of the company.

“For an entrepreneur, find mentors that will ask the right questions, and help you to turn a vision into execution.”

Feeling like your startup would be a fit for Techstars? They are opening applications in late February for the second class in Fall 2019!

Why Building a Business Today Is More About Selling Skills Than Selling Products

Most of you who start new ventures don’t think of yourselves as sales experts. In fact, you may feel on the opposite end of the spectrum, more focused on delivering the perfect solution and managing the finances to grow the business.

Yet in today’s competitive and rapidly changing world, top notch sales and marketing skills are critical to the success of every business.

As an advisor to technical entrepreneurs, the most common mistake I see is the “If we build it, they will come” approach with no sales plan, under the assumption that the technology is so spectacular that customers will buy the product.

In todays’ rapidly changing world, there are over 30,000 new products introduced every year, so it’s easy to slip into that unseen majority and fail.

Thus, in my view, it’s never too early to brush up on your selling and marketing skills. Here are the key steps I have found to work from my own experience in large companies, as well as startups:

1. Practice showing some passion in every conversation.

Being positive and excited about what you offer should not be reserved for stand-up pitches and closing large deals.

Everyone inside your company, as well as potential customers, needs to be inspired by your message before they believe it. Stand tall – keep your fears and doubts to yourself.

It always helps to ask questions first, and keying off an element of passion in the other person’s perspective. For example, if they show a passion for fitness and life balance, highlight how your solution shortens the time and pain of solving their business problems.

2. Work hard on perfecting your value proposition.

The value of your solution may be self-evident to you, but everyone has a different perspective.

Make sure you engage fully and often with your ideal customer, to understand what will appeal most to their heart, mind, and pocketbook. Then craft an irresistible pitch, and iterate often to keep tuning it.

Effective value propositions are quantified and personalized for each customer or target segment. For example, “reduces your cost per application by 30 percent” is far better than “easier and faster to apply.” Eliminate the fuzzy hype words from your message.

3. Hone in and capitalize on your best assets.

Your strongest asset may be your personality, expertise, location, or your solution. Highlight what you do best, unique benefits to your customers, and an honest statement of why you do what you do.

Make it real for your customers with professionally prepared collateral based on these assets.

Dale Carnegie, for example, was recently ranked as one of the ten greatest salespeople of all time, by virtue of his presence and conviction, even though his courses on public speaking contained no great innovations or breakthroughs. He was the asset he sold.

4. Build real relationships with people who can help.

Starting and growing a business is not a solo operation. You need all the help you can get, and people will help you if they know and trust you.

These may be partners who can complement your skills, mentors who can show you what you need, or customers who can be your best sales people.

Even the most successful business executives have mentoring relationships with helpful peers. Bill Gates has a long-standing mentor relationship with Warren Buffett, and Mark Zuckerberg openly acknowledges that he was mentored in the early days by Steve Jobs.

5. Don’t forget to ask for the close, with confidence.

You can’t win if you don’t ask, and confidently asking a customer for their decision shows leadership on your part.

The best sales people look for ways to inspire a customer’s emotional involvement, create the urgency to take ownership, and then ask for the decision. Don’t be shy on this point.

Five basic rules for closing include treating closing as a process, setting a closing objective, waiting for the right moment, wrapping a conversation around it, and then celebrating every victory. If you can’t close deals, you don’t have a business, no matter how great the product.

I’m not suggesting that you as the business founder has to do all the selling, but you do have to be the role model that the rest of team follows. You also have to deeply understand what sells to your customers, or you can’t properly lead the other key business areas of development, finance, and operations.

In reality, leadership requires first selling yourself, so these same steps apply.

How Can We Best Prepare for Job Automation?

The best way to prepare is to transition away from things that are largely routine and predictable. Try to find a role that is largely focused on tasks that are not easy to automate.

I think this generally includes 3 areas:

  1. Creative work — where you are building something new, thinking outside the box in non-predictable ways, etc.
  2. Human-centered work — where you build sophisticated relationships with people. This would include caring roles, as with a nurse or social worker, but also business roles where you need a need understanding of your clients.
  3. Skilled trade work — this includes jobs that require lots of mobility, dexterity and flexibility in unpredictable environments. Examples would be electricians or plumbers. Building a robot that can do these jobs is probably far in the future.

What you do NOT want is to be the person who’s only role is to sit in front of a computer performing some predictable task–like cranking out the same report again and again. If you have a job like this you should worry and look to transition in other roles in the 3 areas I listed above.

One very important part of adapting is to realize that future careers will nearly all require continuous learning. So whether you are concerned with yourself or your children, a focus on learning–getting good at it and truly enjoying it–will be one of the most important components of success.

This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google+. More questions:

Published on: Jan 3, 2019

Apple cuts sales forecast as China sales weaken; iPhone pricing in focus

SAN FRANCISCO/BENGALURU/SHANGHAI (Reuters) – Apple Inc on Wednesday took the rare step of cutting its quarterly sales forecast, with Chief Executive Tim Cook blaming slowing iPhone sales in China, whose economy has been dragged down by uncertainty around U.S.-China trade relations.

The news, which comes as a spotlight grows on Beijing’s attempts to revive stalling growth, sent Apple shares tumbling in after-hours trade, hammered Asian suppliers and triggered a broader selloff in global markets.

The revenue drop for the just-ended quarter underscores how an economic slowdown in China has been sharper than many expected, catching companies and leaders in Beijing off balance and forcing some to readjust their plans in the market.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Apple CEO Tim Cook said in a letter to investors.

Apple finds itself in a tricky position in China, a key market for sales and where it manufactures the bulk of the iconic products it sells worldwide, after the high-profile arrest in Canada of the CFO of domestic rival Huawei Technologies Co Ltd [HWT.UL].

Since the arrest last month, at the request of the United States, there have been sporadic reports of Chinese consumers shying away from Apple products. Even before then, local rivals like Huawei had been gaining market share over Apple.

Cook told CNBC that Apple products have not been targeted by the Chinese government, though some consumers may have elected not to buy an iPhone or other Apple devices due to the firm being an American brand.

“The much larger issue is the slowing of the (Chinese) economy, and then the trade tension that has further pressured it,” Cook said.

PRICE TAG

Some analysts, however, questioned the impact of Apple’s own actions, such as its unyielding pursuit of high selling prices for its products.

“Apple sales in China have not been doing well for a few quarters now, part of the reason is that their price points have gone too high – past the $1,000 mark,” said Kiranjeet Kaur, an analyst at market research firm IDC.

“(That’s) almost three times as expensive as phones from other vendors that are filling the mass market.”

China’s smartphone market has dropped sharply this year, with Apple and South Korean rival Samsung Electronics Co Ltd leading the fall, even as some domestic peers have performed more strongly.

(Apple, Samsung lead China smartphone drop: tmsnrt.rs/2PdBGNw)

Samsung said last month it would cease operations at one of its mobile phone manufacturing plants in China, after seeing its share of the Chinese market drop to 1 percent in the first quarter of 2018 versus 15 percent in mid-2013.

FORECAST CUT

Apple on Wednesday lowered its forecast to $84 billion in revenue for its fiscal first quarter ended Dec. 29, below analysts’ estimate of $91.5 billion, according to IBES data from Refinitiv. Apple originally forecast revenue of between $89 billion and $93 billion.

This marked the first time Apple had issued a warning on its revenue guidance ahead of releasing quarterly results since the iPhone was launched in 2007.

People walk outside an Apple store in Beijing, China December 12, 2018. REUTERS/Jason Lee

Apple shares skidded 7.7 percent in after-hours trade, dragging the company’s market value below $700 billion. In the broader market, the S&P 500 futures fell 1.5 percent. In the U.S. government bond market, a typical safe-haven, the yield on the benchmark 10-year, which moves inversely to the bond’s price, sank to an 11-month low.

PRECURSORS TO A WARNING

Apple’s move was not entirely a surprise. In November, the Cupertino, California-based company said it would quit disclosing unit sales data for iPhones and other hardware items, leading many analysts to worry that a drop in iPhone sales was coming. And after several component makers in November forecast weaker-than-expected sales, some market watchers called the peak for iPhones in several key markets.

In November, Cook cited slowing growth in emerging markets such as Brazil, India and Russia for lower-than-anticipated sales estimates for the company’s fiscal first quarter. But Cook specifically said he “would not put China in that category” of countries with troubled growth.

That all came before the damage to the Chinese economy from trade tensions with the United States and long-simmering structural issues became evident.

Apple is now the highest-profile multinational corporation to warn that the economic slowdown in China could hurt its business. Automakers such as Ford Motor Co, Hyundai Motor Co and Nissan Motor Co Ltd all previously said they planned to cut production in the country.

But Apple has held firm on its premium pricing strategy in China despite the risk of a slower economy.

“The question for investors will be the extent to which Apple’s aggressive pricing has exacerbated this situation and what this means for the company’s longer-term pricing power within its iPhone franchise,” James Cordwell, an analyst at Atlantic Equities, told Reuters.

In the latest fiscal year, ended Sept. 29, unit sales of the iPhone were essentially flat from the prior year, while iPhone revenue expanded 18 percent to $166.7 billion. That growth came entirely from higher prices.

Hal Eddins, chief economist at Apple shareholder Capital Investment Counsel, said Cook’s comments on the impact of the U.S. trade tensions with China “might be a dig at (U.S. President Donald) Trump, but mostly he may be using the trade turmoil as an excuse for some missteps they’ve made over the last year.”

FILE PHOTO: An Apple iphone 6 with Apple Pay is shown in this photo illustration in Encinitas , California June 3, 2015. REUTERS/Mike Blake

But some investors were heartened by Apple’s plans on using its cash pile.

In his letter, Cook said Apple has $130 billion in net cash and that it intends to continue its efforts to reduce that cash balance to net zero, which the company has so far accomplished through dividend increases and share buybacks.

“We would anticipate the company increasing share buybacks on the weakness to return capital to shareholders at discount prices,” said Trip Miller, managing partner at Apple shareholder Gullane Capital Partners.

Reporting by Stephen Nellis in San Francisco and Munsif Vengattil in Bengaluru; Additional reporting by Joe White in Detroit, Adam Jourdan in Shanghai and Sijia Jiang in Hong Kong; Editing by Leslie Adler and Christopher Cushing

General Electric: Expect A Big 2019

To call 2018 a bad year for shareholders of General Electric (GE) would be a grave understatement. Throughout the year, the company has undergone expanded investigations by the government, shuffled top management, sold off various assets, and, on multiple occasions, revise down performance expectations before ultimately eliminating them for the foreseeable future. By practically all accounts, the industrial conglomerate has been hit harder, and in almost every way possible, more than it has ever been hit before in its more than 100-year history. Now, as 2019 approaches, the big question facing shareholders is “what’s next?” While it’s possible 2019 will bring with it even more pain than 2018 has, the more likely scenario is that the firm will use the New Year to restructure its operations (out of bankruptcy) and will, if all appropriate steps are taken, prepare for a turnaround that could bring to shareholders significant value.

Expect the breakup to occur

One thing that very few people will disagree with, I think, is that a breakup of General Electric must occur. The business has become so large that it is, from a management and capital allocation perspective, inefficient. When you have so many divisions, figuring out where and how to deploy limited capital can be hard, while as separate entities, the fact of the matter is that individual management teams can focus on their core operations. By breaking up, the firm will also, for the most part, rid itself of GE Capital, which is likely where any currently undisclosed problems probably reside.

As management indicated while John Flannery was still General Electric’s top dog, I fully expect the company to divest of itself its GE Healthcare segment in some way, shape, or form. Management has indicated that this will take place through an IPO, but it’s expected that shareholders might still retain some of the business, though all of this could change over time. We already know thanks to an announcement earlier this year that the firm is likely to continue winding down its ownership in Baker Hughes, a GE Company (BHGE), by selling off its stake in the firm, but a big question here might relate to timing. Since the end of September, shares of the oilfield services firm have plummeted 34.6%, so while the company has struck a deal for a sale of some of its stock, I suspect that additional sales will only happen following a recovery in unit price.

Following the spinoff of its Transportation segment into a commanding interest in Westinghouse Air Brake Technologies Corporation (WAB), also known as Wabtec, next year, I believe management will likely begin monetizing its interests there as well. Personally, I see monetizing both Wabtec and Baker Hughes further as a sizable mistake given the future outlook I have for both energy and transportation in the US, but the cash generated from these deals will allow management to reduce debt and/or to invest further into what operations are left.

One thing I would love to see transpire is the sale or spinning off of General Electric’s Power segment. At this time, the firm intends to separate that into two different sets of operations, which may be setting the stage to sell or spin off at least one of them. I see this new decision under CEO Culp as a sign that he understands Power is General Electric’s most significant problem at the moment, and since plans to retain power occurred while Flannery was still in charge, I have modest hope that management will divest of the segment or at least part of it.

Don’t expect a distribution hike

During its third quarter earnings release earlier this year, management made a significant change to General Electric’s dividend policy. They said that, effective this month, the company would only pay out $0.01 per share each quarter as a distribution, down from $0.12 per quarter previously. This decision, though controversial, will result in the firm’s annual distribution falling from $4.175 billion per year to just $347.925 million per year. While I would have loved to see it cut all the way to zero so that management would have even more cash to put toward debt reduction and investing in core assets, the savings seen are material regardless.

Investors hoping for the distribution to recover in the near future are, I think, engaging in wishful thinking. As of the end of its latest quarter, General Electric had cash, cash equivalents, restricted cash, and marketable securities worth $61.69 billion, which is a lot to work with, but it also had $114.97 billion worth of debt (inclusive of $2.70 billion of non-recourse debt). Admittedly, debt was down from the $134.59 billion the firm had at the end of its 2016 fiscal year, but as assets come off the books, debt also must be reduced. Some of this could be taken off by spinning off various assets (for instance, the firm could probably spin in the low tens of billions of dollars off with its Healthcare segment if it so decided), but it’s likely that a lot of the work toward reducing debt will be tied to asset sales and the cash that otherwise would have been allocated toward its quarterly dividends. Until management can reduce debt, it’s unlikely we’ll see a hike, and that probably won’t occur until, at the very best, late next year.

*Taken from Moody’s

Where does debt need to be in order for management to consider raising its distribution again? The short answer is that it’s anybody’s guess, but more likely than not, it’s by whatever amount would allow the firm’s credit rating to rise back into the As. As you can see in the image above, the firm’s credit rating, as calculated by Moody’s (MCO), used to be Aaa until it fell in 2009. Since then, the rating has fallen further and, today, the firm’s long-term debt rating is Baa1. This still places it in a category known as “investment grade,” as the image below illustrates, but the drop, even though it’s not on watch for a further downgrade at this time, will weigh on financing options until the situation can be improved.

*Taken from Moody’s

A lot of cost-cutting and wheeling-and-dealing

If General Electric is going to not only survive but thrive for the long haul, there’s no doubt the firm will need to cut costs. This is especially true if the company elects to keep its Power segment, but irrespective of it, certain corporate costs will need to be slashed as the firm works to spin off its assets. Although management has, in recent times, done well to push for cost cutting, when the company actually starts to break up, we will know whether, and to what extent, this is actually true. One strategy that could work quite well could be what the firm struck with Baker Hughes. As part of its share divestiture, the two companies have entered into a series of joint agreements that will keep their operations intertwined through things like guaranteed low pricing and joint buying of key assets. I suspect this kind of wheeling-and-dealing to continue as the conglomerate sells off more of itself.

Takeaway

Based on the data provided, it’s clear that 2018 has been awful for General Electric, but investors who are expecting more pain to follow through 2019 might be on the wrong side of the bet. If 2018 was the crash for the business, 2019 will likely be the start of a true recovery for the firm, especially if management can work to restructure the entity in the way that they should. Obviously, whether the firm is successful or not, investors should expect a tremendous amount of volatility during the process, but that could present opportunities to buy and sell at attractive prices for the emotionally-detached investor.

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.

An online battle for 900 million hearts and minds: India braces for election

JAIPUR/TONK, India (Reuters) – When India votes in a general election next year, it will be the world’s largest democratic exercise, and the biggest ever test of the role of social media in an election.

Volunteers of India’s main opposition Congress party monitor TV news channels and social media inside their war room which was setup for a state assembly election, in Jaipur in the desert state of Rajasthan, December 3, 2018. REUTERS/Aditya Kalra

As the ruling Bharatiya Janata Party (BJP) readies for battle with the newly energized Congress party-led opposition in the election that must be held by May, the role of Facebook, Twitter and WhatsApp could be crucial in deciding who wins.

India already has close to 900 million eligible voters, and an estimated half-a-billion have access to the Internet. The country has 300 million Facebook (FB.O) users and 200 million on Facebook’s WhatsApp messaging service – more than any other democracy. Millions use Twitter (TWTR.N).

“Social media and data analytics will be the main actors in the upcoming India elections. Their use would be unprecedented as both parties now use social media,” said Usha M. Rodrigues, a communications professor at Deakin University in Melbourne, Australia, whose research has focused on social media and Indian politics.

The potential for abuse is also immense, with incendiary news and videos capable of fanning violence in the sprawling multi-religious and multi-ethnic nation.

Fake news and messages circulated on social media have led to more than 30 deaths since last year, data portal IndiaSpend says, mostly rumors about child kidnapping gangs.

Political differences have in the past been no less deadly.

“Social media discourse, already bitter, will turn bilious,” Milan Vaishnav, a senior research fellow at the Carnegie Endowment for International Peace in Washington, said of the coming campaign for the general election.

“It will be no-holds barred on social media given that the opposition smells blood and the ruling party has its back against the wall.”

Both the main parties accuse each other of propagating fake news while denying they do so themselves.

Nevertheless, the battlelines between them are clearly drawn. Congress has attacked Prime Minister Narendra Modi’s economic policies and his party’s Hindu nationalist ideology, while the BJP dismisses the Congress as incompetent liberals out of touch with the people.

This month, Congress won elections in three major states that have been the bastion of the BJP, setting the stage for a tight contest in 2019. Helping the opposition party was a revamped social media strategy.

WAR ROOMS

At the last election in 2014, Congress was crushed by the techno-savvy Modi and his array of social media weapons, including a flurry of Tweets from his personal account, a BJP campaign on Facebook and holographic displays of Modi in remote villages.

Congress leader Rahul Gandhi got a Twitter account only in 2015. But the opposition party is catching up and the playing field has gotten a lot bigger.

India now has 450 million smartphone owners against 155 million at the last election in 2014, according to Counterpoint Research. That’s more than the entire population of the United States, the crucible for election campaigns on social media.

Reuters visited one of the hubs of Congress’s online operations in Rajasthan, one of the three states it won this month – a drab three-bedroom apartment up a dimly lit staircase in the city of Jaipur.

Inside, party workers tracked news channels and social media posts on a wall of television screens. A three-member team of audio, video and graphic experts designed campaign material that was posted to public websites, while other volunteers used WhatsApp to send instructions to party workers.

“We were kids back then, but we are going to outmaneuver them now,” said Manish Sood, 45, who runs his own social media marketing business and was managing the Congress volunteers at the Jaipur war room.

Still, fighting Modi online isn’t easy. With 43 million followers on Facebook and 45 million on Twitter globally, he is among the world’s most followed politicians. Congress’s Gandhi still only has 8.1 million followers on Twitter and 2.2 million on Facebook.

A request by Reuters to visit the BJP’s social media center in Jaipur was declined, but a member of the party’s Rajasthan state IT unit, Mayank Jain, said it ran similar social media operations from two city apartments.

“Congress understands social media a bit now, but they do not have the volunteer manpower,” Jain said in an interview, showing dozens of BJP WhatsApp groups on his phone, one of which was named “BJP RAJASTHAN’S Warriors”.

RISE OF WHATSAPP

While Twitter and Facebook were embraced by Indian politicians – mainly in the BJP – in 2014, it’s WhatsApp that has now become the social media tool of choice.

In Jaipur city and the nearby rural town of Tonk, where traditional methods like public speeches and poster campaigns were widely used during the state poll, Congress and BJP party workers showed a Reuters reporter dozens of WhatsApp groups they were part of and used for campaigning.

Congress said its volunteers managed 90,000 WhatsApp groups in Rajasthan, while the BJP said it controlled 15,000 WhatsApp groups directly, with its workers campaigning through roughly another 100,000 groups.

But WhatsApp has been at the center of controversy. After the false child kidnap messages were spread on the platform in India, it was flooded with falsehoods and conspiracy theories ahead of the October election in Brazil.

WhatsApp’s end-to-end encryption allows groups of hundreds of users to exchange texts, photos and video beyond the purview of authorities, independent fact checkers or even the platform itself.

“WhatsApp is the biggest challenge for us right now on the social media front,” said Nitin Deep Blaggan, a senior police officer in charge of monitoring online content in Jaipur.

WhatsApp has limited the number of messages a user can forward in one go to 20 but in India specifically the ceiling was fixed at five. The company blocked “hundreds of thousands” of accounts in Brazil during the election period, and the same was expected ahead of India polls, a source aware of the company’s thinking said this month.

“We have engaged with political organizers to inform them that we will take action against accounts that are sending automated unwanted messages,” Carl Woog, WhatsApp’s head of communications, told Reuters in a statement. He did not name any parties.

A Facebook spokeswoman said the company was “committed to maintaining elections integrity” and making efforts to “weed out false news”. Twitter said it had made efforts to protect the electoral process and better detect and stop malicious activity.

During the Rajasthan election, police ran a 10-man social media monitoring unit, tracking tweets and Facebook posts related to the state polls. Inside the monitoring room, the posts were shown on wall-mounted screens and automatically filtered into neutral, positive or negative sections.

The negative posts received special attention – they were manually checked and, sometimes flagged to senior police officers for further investigation and action.

An officer looks at computer screens inside a police war room setup to monitor social media posts in Jaipur in the desert state of Rajasthan, December 3, 2018. REUTERS/Aditya Kalra

The sole aim, members of the monitoring team said, was to ensure that no online post spilled into violence.

One of the posts flagged by police when Reuters visited was a video from a Congress leader’s rally where people appeared to be shouting slogans in favor of Pakistan, India’s old enemy.

Congress’ nearby war room had already debunked the video they said was doctored. Within hours, party workers posted what they said was an “original” video, that showed that nobody shouted such slogans at the rally.

Reporting by Aditya Kalra in Jaipur; Editing by Martin Howell and Raju Gopalakrishnan

Amazon is Making a Truly Radical Change, and It Could Change Everything That You Think About Amazon

Our vision is to use this platform to build Earth’s most customer-centric company, a place where customers can come to find and discover anything and everything they might want to buy online. 

Over the next two decades, that was the mantra. In fact, the bestselling book about the company was literally called, The Everything Store. (You can find it on Amazon of course, even though Bezos’s wife wrote that she hated it.)

Now, however, it suddenly seems that there’s an asterisk next to that idea of “anything and everything”–at least according to a truly fascinating story in The Wall Street Journal.

The problem is that while Amazon can sell almost everything, it can’t necessarily sell everything profitably.

In fact, there’s an internal acronym for certain products that Amazon has listed on its site, and pledged to fulfill, but on which the company is actually in the red. 

They’re known as items that can’t realize a profit. Or “CRaP” for short. Really. As Laura Stevens, Sharon Terlep and Annie Gasparro write in the Journal:

Think bottled beverages or snack foods. The products tend to be priced at $15 or less, are sold directly by Amazon, and are heavy or bulky and therefore costly to ship–characteristics that make for thin or nonexistent margins.

So, what do you do if you’re the world’s largest retailer, a/k/a The Everything Store*, and you decide there are products you’d rather not sell products that you don’t make money on?

You stop selling them. But in a way that people hopefully don’t notice, according to the Journal.

For example, Amazon sells Smartwater on its site. But the retail giant changed the default order size from $6.99 for a six-pack (which works out to $1.17 a bottle) to a 24-pack for $37.20 (which works out to $1.55 per bottle).

In other cases, Amazon just discontinues poorly margined items, or pressures manufacturers to change packaging or make other adjustments that it thinks will improve online sales.

And, it pressures some manufacturers to ship directly to customers who buy on Amazon,, so that Amazon can save on warehouse and shipping costs. The good news, in a way, is that the pressures fall hardest on other big companies that have the resources to make changes to their products–and hopefully sell more.

As examples, Seventh Generation, which is owned by Unilever PLC, changed the sizes of some products it sells on Amazon and stopped offering lower margin products like paper towels online.

And Mars Wrigley Confectionery emphasizes larger, more profitable bags of Life Savers candy on Amazon.

This all kind of makes sense, and it’s hard to hold Amazon’s feet to the fire to sell products that simply aren’t profitable. 

But it’s also kind of funny, for people who have been around long enough to remember the early days of the Internet. Amazon’s moves here are a response to the same pressures that destroyed some early dot-com darlings like Webvan, Pets.com, and my personal favorite (although much smaller), Kozmo.

All of these offered free shipping on ridiculously inefficient orders–a 30-pound bag of dog food, sent via UPS, for example. It was all about burning through investment capital to get big fast back in those days.

Frankly, Amazon did the same thing for a long time, enduring years of unprofitability to become the world’s biggest and most successful retailer. In the end, it worked.

Amazon got big. And now, it makes the rules.

This Study of 195 Billion-Dollar Companies Found 6 Counterintuitive Truths About Building a Unicorn

Ali Tamaseb, a founder turned venture capitalist at Data Collective VC, recently spent 300 hours gathering data on billion-dollar startups. He generated 100 charts exploring their history and outlined dozens of valuable insights–all in a quest to learn what billion-dollar startups look like at inception. 

Tamaseb gathered data on 65 key factors from all 195 unicorn startups based in the U.S. His work included all startups since 2005 that have publicly reached a valuation of more than $1 billion. The least surprising finding is that almost 60 percent of billion-dollar startups were created by serial entrepreneurs. In fact, he found that 70 percent of billion-dollar founders were “superfounders,” or founders with at least one previous exit of more than $50 million. This aligns with both traditional thinking and my experience.

I can also attest to some of the other trends from this study based on my investment history, but several of Tamaseb’s findings are contrary to my experience and to widely accepted investor wisdom. These counterintuitive findings are the most valuable in my mind:

1. Industry knowledge isn’t required.

Contrary to what I’ve always believed, Tamaseb found that most founders of billion-dollar startups don’t have direct experience in the industry or domain they are trying to disrupt (except in healthcare and pharmaceuticals, where 80 percent of founding CEOs had direct experience in the target market.)

2. Technical CEOs aren’t necessarily more successful.

Tamaseb’s data addresses a widely debated topic: do technical founding CEOs do better than non-technical founding CEOs when it comes to creating a billion-dollar startup? His data showed a 50-50 split.

I had always believed that a technical startup (biotech, SaaS, mobile apps, etc.) should be led by someone who could build the product, but this research showed that non-technical founders can also succeed. So I went back into our portfolio at Ryerson Futures and found that some of our most successful startups to date had technical CEOs, but many more had business-minded or domain experts in the CEO role. So perhaps I need to revisit this bias, and perhaps you should too.

3. You don’t need to be capitally efficient. 

In the world of startups, capital efficiency refers to how much money a startup needs to spend in order to be able to sustain itself on internally generated funds. A startup that is capital efficient spends a little to make a lot. 

While VCs often focus on investing in capital efficient companies, less than 45 percent of the billion-dollar companies in Tamaseb’s pool were capital efficient. The rest required a high level of investment to scale–indicating that a company doesn’t need to be self-sufficient to be worth $1 billion.

4. It’s (usually) not OK to be a copycat.

Tamaseb found that more than 60 percent of billion-dollar startups had a very high level of product differentiation compared to what was already in the market. He also found that the worst competition case comes from copying what another startup is doing, especially when that other startup is well funded.

While that makes sense, it is not consistent with some billion-dollar startups, such as Rocket Internet, that were created in China, India, Germany and elsewhere over the last decade and were clones of startups like eBay, Amazon, Tinder, and Facebook.

5. You don’t have to be first to market.

Only 30 percent of the billion-dollar startups in the study were first to market, and just under 40 percent entered markets with five or more competitors.

Contrary to widely held beliefs, the best markets for billion-dollar startups already have a number of large incumbents, and often the startup uses the inefficiencies of these incumbents as a point of disruption.

Timing is always key when launching a startup. Too early and the market won’t buy; too late, and all the early adopters will already be using another startup’s products. The majority of billion-dollar startups went after markets that were already large and growing.

6. You don’t need to be part of an accelerator to be successful.

Accelerators are all the rage worldwide. As of 2018, there are more than 1,500 programs to accelerate startups. Despite the marketing produced by accelerators like Techstars and Y Combinator, the majority of billion-dollar startups in the U.S. did not participate in a formal accelerator program. I find this surprising, since unicorns like Airbnb, Dropbox, Quora, Stripe, and Twilio all came from accelerators. So why are so few unicorns on this list coming from accelerators?

I think the answer comes from the fact that 70 percent of billion-dollar founders are superfounders. Perhaps founders with a previous exit don’t need the network, knowledge and mentorship that accelerators offer. Maybe that means not being a superfounder is just one more reason to apply to accelerators–to learn from others. That is certainly what I focus on. 

Quantum Computers Threaten the Web’s Security. We Must Take Action Now.

Inside the stark and sweeping Eero Saarinen-styled exterior of the Thomas J. Watson Research Center in Yorktown Heights, IBM’s blue jeans-wearing boffins are assembling a new generation of super-powered computers built on quantum mechanical principles. These otherworldly machines dangle from sturdy, metal frames, looking like golden chandeliers, or robotic beehives. The devices perform their magical-seeming operations inside vacuum-sealed, super-cooled refrigerator encasements. It’s a technology that combines both brains and beauty.

Future iterations of these quantum computers will be able to solve mathematical problems ordinary computers have no hope of computing. They will vastly speed up classical calculations, accurately model complex natural phenomena like chemical reactions, and open as yet unexplored frontiers for scientific inquiry. Despite seeming arcane, machines like these will touch every aspect of our lives—from drug discovery to digital security.

IBM scientists examine quantum computing hardware.

IBM scientists examine quantum computing hardware.

Courtesy of IBM.

This latter area presents significant challenges. One advantage quantum computers have over traditional ones is a knack for factoring large numbers, an operation so difficult for present-day computers that it has become the foundation for almost all today’s encryption schemes. A sufficiently advanced quantum computer, on the other hand, can chew through these math problems with the destructive force of that metal-melting Xenomorph blood in the Alien film franchise. The prospect of quantum computing necessitates a complete rethinking of cryptography.

Today’s encryption may be rendered obsolete sooner than most people anticipate. As Adam Langley, a senior software engineer at Google, has pointed out in a recent blog post, some experts predict this latter-day Y2K could occur within the decade. Michele Mosca, cofounder of the Institute for Quantum Computing in Waterloo, Ontario, has estimated a 1-in-7 chance that quantum breakthroughs will defeat RSA-2048, a common encryption standard, by 2026. If that’s true, then the time to begin reengineering our digital defenses is now. As Langley writes, waiting around for guidance on standards “seems dangerous”; there’s no time to lose.

Buttressing Langley’s view is a recent paper out of the National Academies of Sciences, Engineering, and Medicine. The research organization determined that, while the advent of an encryption-busting quantum computer is unlikely within the decade, preparations to defend against one must be undertaken as soon as possible. Since web standards take more than a decade to implement, a press release accompanying the paper warned, developing new, attack-resistant algorithms “is critical now.”

The era of quantum computation fast approaches. Fortune 500 companies like IBM, Google, Microsoft, and Intel, are plugging away on the tech alongside smaller startups, like Calif.-based Rigetti. Nation states like China are, meanwhile, dumping billions of dollars into research and development. Whichever entity achieves so-called quantum supremacy first will find itself in possession of unprecedented power—the equivalent of X-Ray goggles for the Internet.

That is, unless we act with urgency to armor up.

A version of this article first appeared in Cyber Saturday, the weekend edition of Fortune’s tech newsletter Data Sheet. Sign up here.

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