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BERLIN (Reuters) – German used-car dealing platform Auto1 said it could seek a public offering in future but a 2018 cash infusion from Japan’s Softbank means it has no immediate need for extra funding of its European growth plans.
FILE PHOTO: A worker loads a second hand car on a car transporter truck at the Auto1.com company grounds in Zoerbig, Germany January 28, 2017.REUTERS/Fabrizio Bensch /File Photo
Last year’s Softbank’s deal valued Berlin-based Auto1 at 2.9 billion euros ($ 3.27 billion), making it one of Germany’s top so-called tech unicorns.
It is virtually unknown to consumers except through its used car buying arm Wir Kaufen dein Auto (We Buy Your Car) in Germany and similar names elsewhere. It operates from Finland to Romania to Portugal, 30 countries in all.
Revenues rose by 32 percent to 2.9 billion euros last year, and although it is profitable in Germany, investments in other markets have led to a loss on group level.
“Currently, an initial public offering is not a topic for us,” Auto1 co-founder Christian Bertermann told Reuters, adding this could change in future.
Auto1 buys cars using its vehicle pricing database to calculate an offer within minutes and then sells the vehicles on to one of its roughly 35,000 dealerships for a commission.
Its platforms helped 540,000 vehicles change hands in 2018.
The company will now also start a retail platform to compete with Scout24’s Autoscout unit or Ebay’s Mobile.de offering, Bertermann said.
He confirmed a Reuters report about Auto1’s talks with Scout24 about an acquisition of Autoscout, adding that these would not lead to a takeover.
Scout24 in February agreed to be acquired by buyout groups Hellman & Friedman and Blackstone.
Auto1 was set up in Berlin by entrepreneur Christian Bertermann after having trouble selling two old cars owned by his grandmother, along with Koc, who previously worked at Rocket Internet-backed firms Zalando and Home24.
Reporting by Nadine Schimroszik,; Writing by Arno Schuetze; Editing by Alexandra Hudson
What do Cody Bellinger, center fielder for the Los Angeles Dodgers, and a low-level cleric with the propensity for healing have in common? Both are positions I would hold today if I had held out and pursued my “passions” as a youth.
All our lives, we are told to focus on activities or ideals that bring passion to our work, with the idea that passion is at the root of a successful career or profession. That is all fine, but the problem for me was that I could never effectively hit a curve ball and seating up with a table full of D&D characters hardly paid my bills.
So how do we square our passions with finding meaningful work that still provides a means of sustenance?
Recently, I had the opportunity to be part of a leadership institute that promotes a strengths finding program called CliftonStrengths. It is a practice of identifying core strengths and understanding how to apply them to find a career for which we are best suited.
CliftonStrengths is an assessment developed by Don Clifton, the former chairman of Gallup, an organization that uses data and insights to help organizations better understand and utilize their human resources. After conducting a survey and collecting data on millions of professionals, the assessment ranks strengths on 34 themes of talent, which can then be used to organize, understand and lead teams and “maximize human potential by developing people to become great at what they’re naturally good at,” according to the Gallup website.
After doing the assessment myself, I did not see center fielder or magic in my rankings, but I did walk away with a much better understanding of my strengths, which turned out to be very suited to my passions.
Although taking the survey requires a fee and at least 30 minutes of uninterrupted time, it is incredibly useful in guiding you to organize and interpret your strengths. You can start for free, however, by at considering the four individual characteristics Gallup uses to describe how people and teams best use their talents.
These are the types of people who absorb and synthesize large amounts of information well. They find connections between ideas and data points and can effectively analyze large amounts of information and apply the results to making better business decisions.
This talent relates to the type of people who are very effective at getting things done. These individuals are dependable and able to act with certainty and quickness, especially when an important action and deadline is looming.
Individuals with this talent are great communicators and able to simplify complex information or abstract ideas and turn them into meaningful actions. These are the people you depend on to motivate and inspire a team to achieve goals, even when the vision or strategy is not clear.
Team members who prioritize the inclusion of others and get satisfaction from reducing conflict, motivating and encouraging colleagues fall into this group. These are typically the people who are nurturing and supportive and hold a team together.
From reading these descriptions, you can probably determine which category you fall into. Of course, the temptation might be to include yourself into all of them, but after years of collecting data, it has been shown that we are strongest in one or two. In these cases, you should focus on goals and actions that fit to your strengths, which will ultimately help you find work that you are passionate about — because you will be great at it.
For me, my leaning toward “strategic thinking” may not fit into my dream of becoming a demigorgon-fighting center fielder for the Dodgers, but it has definitely helped me focus my goals on finding projects and work that I excel in and, as it turns out, I am passionate about.
Where do you fall into these categories? Share your thoughts and insights with me on Twitter.
Every once in a while I get a comment from an audience member after a keynote speech or from someone who read my book, Mapping Innovation, about why so few women are included. Embarrassed, I try to explain that, as in many male dominated fields, women are woefully underrepresented in science and technology.
The preponderance of evidence shows that women can vastly improve innovation efforts, but are often shunted aside. In fact, throughout history, men have taken credit for discoveries that were actually achieved by women. So, while giving women a larger role in innovation would be just and fair, even more importantly it would improve performance.
The Power of Diversity
Over the past few decades there have been many efforts to increase diversity in organizations. Unfortunately, all too often these are seen more as a matter of political correctness than serious management initiatives. After all, so the thinking goes, why not just pick the best man for the job?
The truth is that there is abundant scientific evidence that diversity improves performance. For example, researchers at the University of Michigan found that diverse groups can solve problems better than a more homogenous team of greater objective ability. Another study that simulated markets showed that ethnic diversity deflated asset bubbles.
While the studies noted above merely simulate diversity in a controlled setting there is also evidence from the real world that diversity produces better outcomes. A McKinsey report that covered 366 public companies in a variety of countries and industries found that those which were more ethnically and gender diverse performed significantly better than others.
The problem is that when you narrow the backgrounds, experiences and outlooks of the people on your team, you are limiting the number of solution spaces that can be explored. At best, you will come up with fewer ideas and at worst, you run the risk of creating an echo chamber where inherent biases are normalized and groupthink sets in.
How Women in Particular Improve Performance
While increasing diversity in general increases performance, there is also evidence that women specifically have a major impact. In fact, in one wide ranging study, in which researchers at MIT and Carnegie Mellon sought to identify a general intelligence score for teams, they not only found that teams that included women got better results, but that the higher the proportion of women was, the better the teams did.
At first, the finding seems peculiar, but when you dig deeper it begins to make more sense. The study also found that the high performing teams members rated well on a test of social sensitivity and took turns when speaking. Perhaps not surprisingly, women do better on these parameters than men do.
Social sensitivity tests ask respondents to infer someone’s emotion by looking at a picture (you can try one here) and women tend score higher than men. As for taking turns while in a conversation, there’s a reason why we call it “mansplaining” and not “womensplaining.” Women usually are better listeners.
The findings of the study are consistent with something I’ve noticed in my innovation research. The best innovators are nothing like the mercurial, aggressive stereotype, but tend to be quiet geniuses. Often they aren’t the types that are immediately impressive, but those who listen to others and generously share insights.
Changing The Social Dynamic
One of the reasons that women often get overlooked, besides good old fashioned sexism, is that that there are vast misconceptions about what makes someone a good innovator. All too often, we imagine the best innovators to be like Steve Jobs–brash, aggressive and domineering–when actually just the opposite is true.
Make no mistake, great innovators are great collaborators. That’s why the research finds that successful teams score high in social sensitivity, take turns talking and listening to each other rather, rather than competing to dominate the conversation. It is never any one idea that solves a difficult problem, but how ideas are combined to arrive at an optimal solution.
So while it is true that these skills are more common in women, men have the capacity to develop them as well. In fact, probably the best way for men to learn them is to have more exposure to women in the workplace. Being exposed to a more collaborative working style can only help.
So besides the moral and just aspects of getting more women into innovation related fields and giving them better access to good, high paying jobs, there is also a practical element as well. Women make teams more productive.
Building The Next Generation
Social researchers have found evidence that that the main reason that women are less likely to go into STEM fields has more to do with cultural biases than it does with any innate ability. For example, boys are more encouraged to build things during play and so develop spatial skills early on, while girls can build the same skills with the same training.
Cultural bias also plays a role in the amount of encouragement young students get. STEM subjects can be challenging, and studies have found that boys often receive more support than girls because of educators’ belief in their innate talent. That’s probably why even girls who have high aptitude for math and science are less likely to choose a STEM major than boys of even lesser ability.
Yet cultural biases can evolve over time and there are a number of programs designed to change attitudes about women and innovation. For example Girls Who Code provides training and encouragement for young women and UNESCO’s TeachHer initiative is designed to provide better educational opportunities.
Perhaps most of all, initiatives like these can create role models and peer support. When young women see people like the Jennifer Doudna, Jocelyn Bell Burnell and the star physicist Lisa Randall achieve great things in STEM fields, they’ll be more likely to choose a similar path. With more women innovating, we’ll all be better off.
I love STEM. Without STEM students, there wouldn’t be doctors, or the engineers who put together the Inc.com site. Big data has revolutionized the way business is done, and it would be impossible without STEM skills. But when young people ask me what they should study, I always encourage them to consider liberal arts.
Businesses will need people to translate computer language into human language. When big data analytics uncovers a hidden pattern, someone needs to draw conclusions from the information and develop an action plan. If a robot breaks down, someone needs to explain to management why it happened – and why it won’t happen again.
Here are more reasons why you should hire someone from the arts:
1. Fresh Perspective
Hiring an artist is like getting an injection of creativity. Leaders can use this to better market to their customers, and to better connect with their employees. Artists aren’t afraid to be unconventional, but they have no time for inauthenticity. Having these elements as part of your company culture is a great way to attract high quality candidates, and will appeal to the right kind of customers.
2. Agility, with Mission Focus
3. Budget Management
The arts are chronically underfunded. If you’re looking for an employee who can stretch the value of a dollar, the arts are a great place to look. Artists use their creativity, open-mindedness, and pain tolerance to make it work. They’re able to stay on course no matter the budgetary constraints, and produce something that looks and feels like money was no object.
4. Personality Tolerance
The arts are full of people with personality – and the spectrum of personality is wide! Imagine putting together a theatre production. You have to work with an idealistic writer, a Method actor, a union stagehand, and a theatre director trying to keep donors happy. People in the arts are used to handling a variety of personalities and balancing competing interests while keeping everyone happy and working together. It’s a skill any office can benefit from, and can help keep your company humming.
5. Content Over Medium
This is perhaps the most important reason you should hire someone from the arts. With constantly changing technology and evolving tastes of customers, it can be difficult for business to find the right way to connect with employees and consumers. But here’s what many business leaders forget: the method of communication doesn’t matter if the content is garbage. To reach your desired audience, your content needs to make an impact. Artists are expressive, and know how to use humor, trauma, and beauty to make an emotional impact on the audience. No matter the medium, artists can effectively communicate your message, helping your culture blossom and your business grow.
It found that 47 percent of small businesses reported that they had one attack in 2017, and 44 percent said they had two to four attacks.
The invasions included ransomware, which makes a computer’s files unusable unless the device’s user or owner pays a ransom, and phishing, in which emails that look legitimate are used to steals information. The invasions also include what are called drive-by attacks, which infect websites and in turn the computers that visit them.
Despite the prevalence of the data invasions, only about half of small businesses said they had a clear cybersecurity strategy, the report found. And nearly two-thirds said they didn’t bolster their security after an attack.
Hiscox estimates that seven out of 10 businesses aren’t prepared to handle cyber attacks, although they can cost a company thousands of dollars or more and ransomware can shut down operations. Cybersecurity tends to get pushed to the back burner while owners are busy developing products and services and working with clients and employees. Or owners may see it as an expense they can’t afford right now.
Some basic cybersecurity advice:
–Back up all of a company’s data securely. This means paying for a service that keeps a duplicate of all files on an ongoing basis. The best backups keep creating versions of a company’s files that can be accessed in the event of ransomware — eliminating the need to pay data thieves. Some backups cost just a few hundred dollars a year.
–Install software that searches for and immobilizes viruses, malware and other harmful programs. Also install firewalls and data encryption programs.
–Make sure you have all the updates and patches for your operating systems for all your devices. They often include security programs.
–If you have a website, learn how to protect it from hackers, using software including firewalls. But you might be better off hiring a service that will monitor your site with sophisticated tools that detect and disable intruders.
–Tell your staffers, and keep reminding them, about the dangers of clicking on links or attachments in emails unless they’re completely sure the emails are from a legitimate source. Educate your employees about phishing attacks and the tricks they use. Phishers are becoming increasingly sophisticated and are creating emails that look like they really could have come from your bank or a company you do business with.
–Hire an information technology consultant who will regularly look at your systems to be sure you have the tools you need to keep your data safe.
–The Associated Press
WASHINGTON (Reuters) – The head of the U.S. Justice Department’s antitrust division, Makan Delrahim, declined on Friday to support the Obama administration’s firm backing of the need for four U.S. wireless carriers.
Asked about T-Mobile’s plan to buy Sprint for $ 26 billion, Delrahim declined to reiterate the view of President Barack Obama’s enforcers, who had said that four wireless carriers were needed.
Instead, Delrahim told reporters, “I don’t think there’s any magical number that I’m smart enough to glean.”
He also said the department would look at the companies’ arguments that the proposed merger was needed for them to build the next generation of wireless, referred to as 5G, but that they had to prove their case.
Bill Baer, a former head of the antitrust division, had told the New York Times in 2014: “It’s going to be hard for someone to make a persuasive case that reducing four firms to three is actually going to improve competition for the benefit of American consumers.”
Reporting by Diane Bartz; Editing by Dan Grebler
So, Solo: A Star Wars Story is finally in theaters. It’s fun! It might not be blowing up the box office, but folks are still seeing it in droves and when they do they’re in for a really nice time. (Alden Ehrenreich is a fun, swaggering Han Solo; Donald Glover is a sexy, swaggering Lando Calrissian; Phoebe Waller-Bridge is a smartass, swaggering droid.) They’re also in for at least one big surprise—and a few slightly smaller delights. But we’ll get to all of that in a second. First we need to give folks afraid of spoilers a chance to show themselves out. OK, everyone’s been warned. From here on out it’s just WIRED writers and editors Brendan Nystedt, Jason Parham, and Angela Watercutter dissecting Solo in detail. Make like Chewie and join us.
Angela Watercutter, Senior Associate Editor: Alright guys, I’m going to go out on a limb here (OK, not a crazy limb; like the kind of limb some ambitious dad turned into a tree bench, or put a swing on…): I liked Solo. Maybe that was the result of low expectations, maybe I just really love Glover’s Lando—I dunno. I just thought it was fun. It’s not going in my Top 5 Star Wars films, but I at least thought it was better than Rogue One. (Rotten Tomatoes disagrees with me here. That’s their problem.)
What about y’all? Did you like Pansexual Lando as much as me? Did you enjoy seeing the Millennium Falcon when it still had that new-ship smell? Did you have cognitive dissonance watching the Mother of Dragons (aka Game of Thrones’ Emilia Clarke) play Han Solo’s childhood girlfriend Qi’ra? Tell me things!
Brendan Nystedt, Market Editor: I would totally agree with you—I think it’s better than Rogue. I love that movie, but think it has some struggles getting off the ground at first. Solo kicked in and didn’t let up. I had heard the first act was slow, but for me, the movie never dragged. I went into it knowing a little more than the average bear, but it still kept me on my toes with its double-crosses and reveals. That’s not even digging into the endless references.
If I can give this movie props for one thing it would be that it made me love a bunch of stuff that sounds cringeworthy on paper. Did I want to know where Han’s name comes from? No, but in the moment, I bought it. I knew we were going to probably see Han and Chewie meet for the first time and I thought it added to their relationship. The card game where Han won the Falcon from Lando? Had me grinning. I thought Alden Ehrenreich and Donald Glover were about as good in the roles as you could ask for—not too much of an impression of the originals, but also imbued with their essences. Did anyone not click with these two dudes?
Also, as a non-GoT human, I thought Emilia Clarke was a standout. I was worried she’d be a prop for Han, someone who dies tragically and turns him into the embittered guy we see in A New Hope. Giving Qi’ra her own arc and giving her agency made me greatly appreciate the storytelling at work here. My other faves were Enfys Nest (let’s see her Cloud Riders in some ancillary materials, Disney!), Rio Durant (RIP), and, of course, L3 (Bridge).
Jason Parham, Senior Writer: I’m going to have to agree with WIRED colleague Brian Raftery on this one—I found Solo mostly inessential as a film. I’m of the belief that prequels are, by design, tougher canvases to experiment on. There’s always room for depth and context, but the Star Wars universe has already been dreamed up in spectacular, revolutionary fashion. For me, George Lucas’ original holy trinity is a near perfect symphony of love and loss and intergalactic repression. History also tells us that Star Wars prequels don’t fare too well. Just look at The Phantom Menace, Attack of the Clones, and Revenge of the Sith. Still, Solo did get a handful of things right—one of which was its easy, untangled plot. Sometimes a film just needs to move from point A to B to C without taking detours or overthinking its next step. Especially in the case of origin stories. For me, Solo felt like the least complicated movie in the franchise. There was plenty of action and humor and cooly-imagined characters—I appreciated getting a view into Han and Chewy’s genesis; and loved L3’s zero-fucks attitude, though I do wonder if Ron Howard’s team hyper-feminized her look. Do robots have hips?
What the film lacked—and what every successful Star Wars film requires—was what Brian got at in his review: the intoxication of surprise. There were no truly satisfying reveals, maybe except for Darth Maul’s cameo near the close of the film. I would consider it a fun, but forgettable romp in the franchise’s treasure chest. A better play for Disney, if they’re going to make prequels an ongoing habit [And it seems that they are. —Ed.], would be to shed light on its side players. A stand-alone Lando Calrissian movie would be a real treat—which, according to Glover, would be “Frasier in space.” Sign me up!
Watercutter: Jason, I’m pretty sure you and I would both be in line on opening night for a Lando movie. Call me simple, but I just want to see more capes. And, yeah, more Glover.
I’m also wondering what folks thought of the look of Solo. One of the other smart things Brian brought up in his review were the films it resembled—shades of Paths of Glory, Runaway Train, and even a bit of the Mad Max movies. I think it even had a bit of Snowpiercer in there, too. But more than that, it felt just a tinge more stylish than, say, The Force Awakens. I was perhaps looking for this because I like the work of cinematographer Bradford Young (Selma, Arrival), but I really think there was something inviting about the environments in Solo. And frankly, since Young stayed on during the transition from directors Phil Lord and Chris Miller to Ron Howard, his visual signature might be the thing that helped the whole film feel unified. Brendan, you’re a Star Wars encyclopedia, what do you think? Am I nuts?
Nystedt: I totally agree, Angela. Rogue One’s cinematography was done in landscapes, and this felt tighter and more personal. Young did some terrific work here in spite of the rocky production. Personally, I think Rogue has the more stunning vistas, but this had a unified look that worked at all times, and helped the world come alive. From the muddy, foggy Mimban to the dusty mines of Kessel, it felt Star Wars-y through and through.
I’d like to take Jason to task for a sec. I fundamentally disagree with his premise: I think Star Wars should have surprises, but not every film needs revelations. If the franchise is going to survive, audiences can’t expect a crazy twist in each and every film. How exhausting would that be? By Episode XX, the dialogue from Spaceballs—”I am your father’s, brother’s, nephew’s, cousin’s, former roommate!”—wouldn’t seem so outlandish. Snoke can be Snoke, Rey can be a nobody from Jakku. Though it’s still the highlight of the franchise, not every film needs to ape The Empire Strikes Back to be good, or even great.
I think this was a film with surprises and one that knew it didn’t need to have huge galaxy-on-the-brink stakes to keep people engaged. I want more Star Wars like this—movies that push the Jedi and the Force to the margins, dive into the underworld, and keep the stakes relatable.
OK, now that the cat’s out of the bag—who wants to talk more about Maul? Do we think this will confuse the heck out of audiences?
Parham: That’s fair, Brendan—a subtler, quieter, more relatable Star Wars could rightfully usher the franchise into a more deserving phase. I will say this: The Enfys Nest twist was probably the most rewarding surprise for me, though by the time we realize that they’re actually the good guys, the film is hurtling toward its end. I would’ve loved a little more screen time from them. As space Westerns go, Young did a standup job—each setting more visually alluring than the last. Westerns are often hypnotic in that way: bright, dusty, full of gunfire and promise. Young’s stellar cinematic patchwork made the film especially more radiant in those small ways. I’ve got one final question, which brings us back to Brendan’s point—is Solo deserving of a sequel or should Disney dive deeper into the underworld and into the lives of other space bandits next? Where do we go from here?
Watercutter: Oh man, OK, those are some big questions. First of all, Brendan, as you know from my Slack messages to you following the Solo screening I saw, I was a little confused by the Maul thing (mostly because he didn’t look like I’d remembered from the prequels). That said, I think audiences will like seeing him. Of all the final-act twists Lucasfilm could’ve thrown in there, that one felt the most unexpected. If you would’ve told me a month ago that Solo would have a callback to The Phantom Menace (and other expanded universe properties) I wouldn’t have believed you.
Now, to answer Jason’s question, I think it’s actually the Maul cameo that helps Solo earn a sequel—though I don’t think it’ll be one dedicated to Han. I know there’s already been talk, most of it debunked, of a Lando movie, but after Solo what I really wanted to see was a movie that dealt more with Crimson Dawn. And, like Jason said, Enfys Nest. Like if there’s a film that’s a Solo sequel in name only that becomes Qi’ra, Maul, and Crimson Dawn vs. Enfys Nest and the Cloud-Raiders, then I’m totally onboard. Brendan, do you agree?
Nystedt: ZOMG that’d be an awesome movie! I’d love for Enfys and her gang to get together with the rest of the Rebels, too. As for Maul, I also hope we get to see more of him in live action. We’ve seen him die already in Star Wars: Rebels but I wanna know where he’s been hanging out since the end of the Clone Wars. A sequel with him and Qi’ra (especially if we get a glimpse of Maul’s homeworld Dathomir, where he told her to meet him) could answer that question and finally give us more of Ray Park’s unmatched lightsaber acrobatics to boot. Fans have been waiting almost 20 years to see more Maul on the big screen.
As much of a Maul stan as I am, I’d also love more of Glover’s Lando. If his spin-off is “Frasier in space,” does that mean Lobot is Niles? That I’d pay good money to watch!
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I’m a baseball fan. When I lived in the Bay Area, I was a season ticket holder to the San Francisco Giants. And every baseball fan knows about Pete Rose, the preternaturally talented player who scandalized his sport when it was revealed he bet on baseball, including games involving his own team. Now, no one is contemplating allowing players or managers to bet on games in their own sport. But the Pete Rose story serves as a grim reminder of what can happen with sports gambling.
The trouble is that sports gambling is fun! The thrill of making some dough on your team just adds to the excitement of the sport. It’s also hugely profitable for business and government. So when the Supreme Court of the United States released their decision on Murphy vs. NCAA last week, the gambling-loving world rejoiced. SCOTUS determined that the 1992 federal law called Professional and Amateur Sports Protection Act (PAPSA) violated the Constitution’s anti-commandeering clause, thus striking down the law.
Mark Conrad is a professor of law and ethics at Fordham University, where he has taught in the School of Law and in the Gabelli School of Business. He’s also the director of Gabelli’s Sports Business Concentration, and is the author of The Business of Sports -; Off the Field, In the Office, On the News. Professor Conrad was kind enough to share with me some of his thoughts on this landmark decision.
1. Nothing’s Actually Changed…Yet.
The Court’s decision caused an avalanche of news and commentary, but, “At the moment, not much has changed,” says Conrad. The decision opened the door to huge change, but nothing is actually different yet. Conrad explains, “The court declared unconstitutional the Federal law that prohibits sports gambling. It did not sanction or permit sports gambling.” So what happens now? Conrad says no one really knows: “It is now up to the states, or the federal government, to decide.” Here’s where it get interesting!
2. The Devil Is in the Details.
“This story is only beginning,” says Conrad, who also has a degree from Columbia’s School of Journalism. “No state has enact a gambling scheme, although New Jersey may soon,” he says. The question is what happens next. For starters, Conrad asks, “Will states legalize it? And if so, which ones, and when?” Next comes the what. Conrad wants to know, “Will it apply to all sports or just pro sports?” And finally, the how. Conrad ponders: “What will be the license fees for companies wishing to do business in the state? Taxes? Anti-corruption measures?” The potential complexities are endless.
3. Congress May Not Be Done.
The Court may have struck down Congress’ PAPSA law, but that doesn’t mean Congress can’t still have the final word. Conrad explains, “The problem with PAPSA was it prevented states from exercising their powers. The law did not mandate a ban on sports gambling – rather, it told the states they were not allowed to enact laws ‘authorizing’ such gambling schemes.” The problem was the way this law was structured, but not the idea behind the law. In fact, Conrad says, “The decision did state that Congress has the power to enact a ban on gambling.” It’s possible Congress could throw some very cold water on all the excitement.
4. Integrity May Be an Issue…Or May Not.
The potential implications for the integrity of sport are fascinating. As with any gambling, there’s risk of corruption. Conrad recalls, “It has occurred in the past, notably in point-shaving in college sports.” But cheating isn’t a given. “In fact, the risk of corruption may decrease with a properly regulated integrity oversight,” Conrad explains. There are examples the US could look to for inspiration. Conrad says, “The UK model has worked well. The betting companies engage in analytics and metric systems to police suspicious gambling patterns and report these anomalies.” The key is not to over-regulate or over-tax it, which may push otherwise legal gambling underground.
5. This Decision Could Have Major Implications for State Versus Federal Authority.
“This is the underlying constitutional issue in this ruling,” Conrad explains. “Ultimately, it is a constitutional law case regarding state powers under the Tenth Amendment.” Here’s his plain-English explanation of the finer constitutional points: “PAPSA was problematic because it ‘commandeered’ states rights. Instead of banning sports gambling, it said could not enact laws authorizing gambling. It’s a subtle difference, but a constitutionally defective one.” This is an important decision in part of a greater shift. According to Conrad, “It continues a trend to give greater deference to state sovereignty.” It will be fascinating to watch as the complexities continue to develop.
If I had a dollar every time an older person said something disparaging about a Millennial, I’d be talking to you from my own private island. What I have found, is that working with them (or managing them) can be rewarding as long as you treat them accordingly.
For example, I understand that in managing Millennials I have to offer a flexible work schedule to accommodate their juggling act of responsibilities, such as continuing their education and pursuing entrepreneurial side projects. All employees have different skill sets to offer and work at differing paces, so if in 2018 you’re blanketing how you expect your coworkers to perform, you may be setting yourself up for failure.
A study of nearly 10,000 adults aged 18-67 by Ernest & Young Global Limited, shows that Millennials are having a harder time balancing work and life than their predecessors. It proves that Millennials are as almost twice as likely to have a spouse working at least full-time compared to Boomers. Baby Boomers and Generation Xers don’t actually work harder than Millennials, and studies are showing that younger generations really do face a more difficult time of balancing it all.
Here are three things that might surprise you about Millennials and their older colleagues.
1. Baby Boomers are finally winding down.
Baby Boomers have the reputation for going at their work hard and fast, but there’s a season for everything and everyone. With Boomers born in the late 1940s to 1950s, they are retiring now. Even if they aren’t retiring, they are slowing down their careers to enjoy the beginning of their twilight years. In the meantime, Millennials are the ones that are hired to take their place.
2. Millennials are great with technology.
You know that computer program or new app or gadget that’s been giving you trouble? The newer, the more high-tech, and the more out there something is, the better. They’ve grown up with this kind of technology, so they learn fast, and working these kinds of gadgets is just intuitive to them.
3. Millennials are energetic, and want to carve a place for themselves in the world.
Some people say that Millennials are entitled and don’t know the value of a dollar. Not so! The ones I have met are often go-getters who are ambitious, have dreams to pursue, and want to really make a difference. The way they see it, everything has already been said, written and done, so they want to do something different with their lives, even if that means working long hours for it.
Growing up with major FOMO (fear of missing out) has lit a proverbial fire under their butts to be successful enough to live their dreams. In true Millennial fashion, that’s the reason I decided to start my own company four years ago–to be able to afford a lifestyle that would allow me to travel the world and have free time.
4. Gen-Xers and Millennials are better adapted to problem solving.
Everyone has their strengths. While Baby Boomers are known for being independent, goal-oriented and competitive, Millennials are known for their skills in problem solving, technology use and management, and teamwork.
These may be all skills that their predecessors have too, but the reason why Gen X-ers are so great at them is because that was the focus of their education. They were taught to work in teams and they grew up with the technology that they now excel at.
I recall a time in my freshmen year of college when a professor didn’t take too kindly to me problem solving in my own way. One of the tasks on a test called for me to locate a folder on and save a file to it. Having grown up using computers I found a much quicker way to get the task done than by using his detailed instructions, which I patted myself on the back for.
However, the professor didn’t take too kindly to my doing things my own way, and actually deducted points from my final score for doing so. I was blown away, and explained to him that if anything I should earn bonus points for being more efficient and finding a better way to complete the work, which only made the situation worse.
What this has led to, is my appreciation of employees who are able to think critically on their own and rewarding them for it. As a manager I know that I don’t have the answer to everything, and I look to my team to ensure that collectively we’re doing our best. Do not forget to consider the valuable traits of other employees as well as your team should be well rounded. Don’t get stuck with too many Chiefs and not enough Indians.
The stock market just had its worst week since the correction began, with the S&P 500 (SPY), Dow Jones Industrial Average (DIA), and Nasdaq (QQQ), falling 5.6%, 5.9%, and 7.3%, respectively.
SPY Price data by YCharts
This means that the market has now retraced to its previous low, something I warned was historically likely to happen.
But still investors are understandably worried about the return of such volatility, after 2017’s freakishly calm and bullish year. In fact, according to CNN’s Fear & Greed Index, a meta analysis of seven different market indicators, investors are not just afraid but are petrified right now.
But since the root cause of fear is uncertainty and doubt, let’s take a look at what caused the stock market’s latest freakout. More importantly discover why these fears are likely overblown, and why the you shouldn’t be racing for the exits.
What The Market Is Freaking Out Over Now
On Thursday, President Trump announced that he would be imposing 25% tariffs on $ 50 billion to $ 60 billion worth of Chinese imports covering 1,300 products including: aerospace, information and communication technology, and machinery. This was in retaliation for years of Chinese intellectual property theft against foreign companies, including US firms.
The Chinese responded with calls for America to “cease and desist” and the Chinese embassy said:
“If a trade war were initiated by the US, China would fight to the end to defend its own legitimate interests with all necessary measures.” -Chinese Embassy
Thus far, Chinese retaliation has been modest, just $ 3 billion against 128 US imports including: pork, aluminum pipes, steel and wine. However, according to Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, those $ 3 billion in tariffs appear to be in response to Trump’s earlier steel and aluminum tariffs.
Those only affected $ 29 billion in US imports, before Trump began exempting most US allies.
The Wall Street Journal is reporting that China will now ratchet up its own counter tariffs, specifically against, “U.S. agricultural exports from Farm Belt states.” Specifically, this means tariffs on U.S. exports of soybeans, sorghum and live hogs, most of which come from states that voted for Trump.
Apparently, the Chinese began planning for a potential US trade dispute last month when the Chinese Commerce Ministry met with major Chinese food importers to discuss lining up alternatives sources of major US agricultural products. For example, China is considering switching its soy imports to Brazil, Argentina and Poland.
The concern that many people have is that during the announcement on the Chinese tariffs, which cover just 10% of all US imports from that country, Trump stated that this was just the first in a series of upcoming tariffs against China.
So many are worried that if the President truly believes that “trade wars are good and easy to win”, then he could potentially escalate this trade tiff into a full blown trade war. Something that history shows is never a good thing, and sometimes has disastrous consequences.
How Bad Would A Full Blown US/China Trade War Be?
The White House has stated that it wants to reduce the US/China trade deficit by $ 100 billion a year, or about 20%. Theoretically, that could mean that Trump might impose tariffs on all Chinese goods, in order to make them more expensive and less competitive with either US goods or those from non-tariffed countries.
So what effects would this have on the US? Well, first of all prices will increase initially, since companies like Walmart (WMT) have complex supply chains with contracts for sourcing for its stores. So in the likely case a 25% tariff on $ 50 billion to $ 60 billion in Chinese imports represents a $ 12.5 billion to $ 15 billion increase in US input costs.
Or to put another way Trump’s China tariffs are likely to boost inflation by 0.08%, and drive core PCE from 1.5% to 1.6%. Now that isn’t the total negative affect to the US economy. After all, China has already retaliated in response to steel tariffs, and is likely to now ratchet up its own counter tariffs.
How bad could that be for American exporters? Well, China supplies just 2% of US steel, meaning that the steel tariffs represent a $ 580 million loss of export revenue. In response, they slapped tariffs on US goods (with apparent plans to completely replace them with foreign alternatives) of $ 3 billion. That’s a retaliation tariff ratio of 5.2, meaning for every $ 1 in export revenue threatened by US tariffs, China appears to be willing to cut its US imports by as much as $ 5.20.
However, in 2017, Chinese imports of US goods totaled $ 130 billion, so there is no way this retaliatory ratio could hold. However, theoretically, if the US and China were to get into a full blown trade war, China could cease importing up to $ 130 billion of US products.
That worst case scenario would likely require Trump imposing similar (25%) tariffs on all Chinese imports to the US, which totaled $ 506 billion last year. In the worst case scenario, that could temporarily raise US prices by $ 127 billion.
Worst Case US/China Trade War Costs
Cost To US Economy
% Decrease In Real GDP Growth
Increase In Inflation
Higher US Prices
$ 127 billion
Lost US Exports
$ 130 billion
$ 257 billion
Sources: thebalance.com, CNN, Marketplace, Bureau of Economic Analysis
Nominal US GDP would not fall due to rising prices; in fact, it would increase. However, GDP is reported as inflation adjusted, meaning that price increases would not have an measured affect on economic growth since they are by definition excluded.
However, they do represent a true cost to the economy, since it means consumer pay more and have less money to spend on other things. The effect on GDP would potentially be seen via China’s replacement of potentially $ 130 billion in US exports with those from other nations. That would knock off 0.7% from US economic growth. Currently, the Federal Reserve is projecting 2.7% growth in 2018, so in our worst case scenario that would fall to 2.0%.
Meanwhile, the higher US prices would represent about 0.7% increase in inflation, pushing the core, (ex-food & fuel), personal consumption expenditure index to 2.2%. Core PCE is the Fed’s preferred inflation metric because it’s a survey of what people actually buy, taking into account rising prices, (switching to cheaper alternatives).
The bottom line is that a full blown US/China trade war has the potential to do significant damage to America. It could potentially lower economic growth 25% over a year, and raise inflation by nearly 50%. But just above the Fed’s stated 2.0% target. Fortunately, this worst case scenario is unlikely to actually happen.
Trade Wars Are Terrible But This “Tariff” Isn’t Likely To Become One
First understand these tariffs are not immediate. US Trade Representative Robert Lighthizer’s office will have 15 days to publish a list of the goods, which will be followed by a 30-day comment period before they go into effect. Tariffs and retaliatory tariffs are not a light switch, but a slow moving regulatory process.
This means that it will likely be six weeks (early May) before any US tariffs on Chinese imports begin. Chinese retaliation in terms of decreased exports would likely start by late June/early July at the earliest. Or to put another way, half of the impact of the worst case scenario would be eliminated by timing.
And time is our friend here because most trade disputes, even threatened tariffs, are merely negotiating tactics. Most of the time tariffs get called off relatively quickly as both sides seek some kind of resolution.
After all, China potentially could take a 3.8% hit to GDP if it lost its US export market, cutting its economic growth in half. That’s something it has no interest in. Meanwhile, the sharp hit to Trump’s constituency (states that helped elect him), plus slower US economic growth, would certainly not help the President’s re-election efforts in 2020.
We’ve already seen that the President’s threatened tariffs can get walked back. For example, the steel and aluminum tariffs that freaked out the market a few weeks ago. Trump has since “temporarily” exempted: The European Union, Canada, Mexico, Brazil, Australia, New Zealand and South Korea. These countries actually are responsible for 2/3 of all US steel imports while China represents just 2%.
In early March, China’s Supreme Court vowed to strengthen China’s protection of intellectual property rights, something that Chinese tech firms have been calling for. This means that the trigger for these tariffs might already be fading. It also means that both China and the US have a relatively easy way out, in which no one loses face, because each side can claim some kind of victory.
What The Fed Did To Potentially Spook The Markets
The other potential partial factor for this week’s sharp drop is the Federal Reserve’s March meeting in which it hiked the Federal Funds rate by 25 basis points to 1.5% to 1.75%. This was already priced in by the bond market and was a surprise to no one. The Fed said that, “The economic outlook has strengthened in recent months” and boosted its economic growth forecasts:
- 2018: 2.7% (from 2.5%)
- 2019: 2.4% (from 2.1%)
- 2020: 2.0% (from 1.8%)
- Long-Term: 1.8% – unchanged
The Fed also updated its core PCE projections:
- 2018: 1.9%
- 2019: 2.1%
- 2020: 2.1%
Meanwhile the Fed’s new unemployment forecast is:
- 2018: 3.8%
- 2019: 3.6%
- 2020: 3.6%
Now none of these upgraded projections are significant, since they basically mean the Fed is just more bullish on the economy. But what potentially concerned the market is the Fed’s slightly more hawkish stance on interest rates.
(Source: CME Group)
Basically, this revised plan from the Fed calls for:
- 2018: two more hikes (same as before)
- 2019: three hikes (same as before)
- 2020: two hikes (one more than before)
The Fed basically expects to raise its Fed Fund rate, which is the overnight interbank lending rate, to 3.5% by the end of 2020. Of course, that’s assuming the US economy keeps growing as quickly as predicted.
3.5% is still far below the historical norm (4% to 6%), so why should that have concerned investors? Simply put because it indicates that the Fed might end up triggering a recession.
Yes You Should Fear An Inverted Yield Curve…
While the Fed Funds rate has no direct link to the bond markets that actually control US corporate borrowing costs, most US banks do benchmark their prime rate off it. The prime rate is how much they charge their most creditworthy and favored clients.
The prime rate has now been raised to 4.75%. The prime lending rate is what most non mortgage consumer loans are benchmarked off. So this means that US consumer borrowing costs are rising, and could rise another 1.75% by the end of 2020. That could certainly slow the pace of consumer borrowing, and potentially increase the US savings rate. While a good thing in the long term, it would potentially cause consumer spending to slow. Since 65% to 70% of US GDP is driven by consumer spending that might in turn slow US economic growth and, more importantly to Wall Street, corporate profit growth.
But here is the real reason that investors should worry about the Fed Funds rate potentially rising another 1.75%. Because under current economic conditions, it would almost certainly cause a recession. That’s based on the single best recession predictor we have, the yield curve. This is the difference between short-term and long-term treasury rates.
The yield curve is 5/5 in predicting the last five recessions. If the curve gets inverted, meaning short-term rates rise above long-term rates, a recession follows relatively soon (usually within one to two years).
Why is this? Two reasons. First, if short-term rates are equal to or above long-term rates, the bond market is signaling that it expects little economic growth and inflation ahead.
More fundamentally, it’s because financial institutions borrow short term to lend long term, at a higher interest. This net margin spread is what creates lending profits and is why loans get made in the first place. So if short-term borrowing rates rise higher than long-term rates, it can decrease the profitability of lending, and result in fewer loans. Thus, consumer spending can fall, businesses invest less, and the economy slides into a recession.
And while the Fed Funds Rate has no direct link to the interest rates that companies care about (long-term rates that benchmark corporate bond rates), studies show that the short-term treasury bonds track closely with the Fed Funds Rate. But long-term rates, such as the 10-year Treasury yield, do not, as they are set by the bond market based mostly on long-term inflation expectations.
This is why the market freaked out over January’s labor report that showed wages rising 2.9%. The fear is that if the labor market is too hot, then rising wages trigger faster inflation which forces the Fed to hike rates high enough to trigger a yield curve inversion. This is what occurred before the last three recessions.
Basically, this means that if the Fed were to proceed with its revised rate hike schedule, then short-term rates would likely rise by 1.75% or so. Long-term rates, on the other hand, are set by inflation expectations and the 10-year yield of 2.83% is currently pricing in 2.1% inflation.
(Source: Bureau Of Economic Analysis)
However, inflation has been stuck at 1.5% for the last four months, and so far shows no signs of rising to those long-term expectations. Which means that 10-year yields are not likely to rise 1.75% by 2020, in line with rising short-term rates.
That in effect indicates that seven rate hikes would almost certainly invert the yield curve, heralding the next recession. The good news? The Fed isn’t likely to keep hiking if inflation remains low and threatens to invert the yield curve.
…But The Fed Isn’t Likely To Invert The Curve
So if the Fed’s current forecast calls for low inflation, but enough rate hikes to likely trigger a yield curve inversion and possible recession, why am I not freaking out? Two main reasons. First, Jerome Powell, the new Fed Chairman, is not an economist, but a veteran of Wall Street. Over his career, he’s been:
- Managing director for Bankers Trust – a US bank
- Partner at The Carlyle Group – a private equity firm
- Founded Severn Capital – a private equity fund specializing in industrial investments
- Managing partner for the Global Environment Fund – a private equity fund specializing in renewable power
Here is why this matters. Economists are big fans of economic models, such as the Phillips Curve. This says that as unemployment falls below a certain, (full employment), wages and thus inflation, must rise.
Powell has indicated that he’s willing to go where the data takes him, and not just assume the models are correct. In other words, Powell doesn’t buy into the fears of the Fed’s more hawkish members.
In fact, take a look at what he said during the last Fed post meeting press conference:
“There is no sense in the data that we are on the cusp of an acceleration of inflation. We have seen moderate increases in wages and price inflation, and we seem to be seeing more of that… The theory would be if you get below the sustainable rate of unemployment for a sustained period, you would see an acceleration of inflation. We are very alert to it. But it’s not something we observe at the present… We will know that the labor market is getting tight when we see a more meaningful upward move in wages… Wages should reflect inflation plus productivity increases … so these low wage increases do make sense in a certain sense… That is a sign of improvement (rising labor participation rate), given that the aging of our population is putting downward pressure on the participation rate… It’s true that yield curves have tended to predict recessions … a lot of that was when inflation was allowed to get out of control.” -Jerome Powell
What we see in these quotes is a man who understands finance and understands that the world is more complex than simplified models would indicate. He seems to realize that we are NOT at full employment. So until wages start rising there is no reason to assume we are and that inflation is about to accelerate to dangerous levels.
Powell has also indicated that he expects tax cuts to fuel more investment, boosting productivity, which would allow wages to rise without triggering higher inflation. This is something that I expect as well and the key reason that I’m personally so bullish on the economy, and expect the current expansion to continue for many years.
The bottom line is that Powell seems to be a man who will, for the sake of expectations, make a forecast. But he seems more than willing to ultimately alter monetary policy as the economic data indicates is necessary, not raising rates just because the Phillips Curve says to.
And as a former Wall Street banker who is well aware of the yield curve and its importance, I don’t consider it likely that he’ll blindly keep hiking rates based on a plan from a few years ago. When the facts change, Jerome Powell changes his mind.
Which brings me to the biggest reason to shake off and ignore this last terrible week in the stock market.
US Economic Fundamentals Remain Strong And That’s All That Matters
The stock market may be a forward looking instrument, but it’s also prone to fits of violent pessimism whenever anything bad happens. The market often takes a worst case scenario like “sell first, ask questions later” approach.
Trump announces tariffs? It MUST mean we’re headed for a full blown global trade war that will trigger massive inflation, a shrinking economy, and a bear market! Sell everything!
The truth is that while sometimes the worst case scenario happens (such as the Financial Crisis), 99% of the time negative effects of anything are not as bad as people fear. Or to put another way very seldom is it true that “this time is different.”
So let’s take a page of out Jerome Powell’s playbook and look at the data. I’ve already covered why the last jobs report was darn near perfect.
Meanwhile, the risk of a recession is the lowest I’ve seen since I discovered Jeff Miller’s excellent weekly economic report 18 months ago.
(Source: Jeff Miller)
Specifically, according to a collection of meta analyses of leading indicators and economic reports, the four- and nine-month recession risk is 0.39% and 15%, respectively. Of course, these can and do change over time as new data comes in. But the point is that based on the most recent evidence there is no reason to fear a recession.
Finally, the New York Fed’s Nowcast (real time GDP growth estimator) is saying that Q1 and Q2 GDP growth is likely to come in at 2.9%, and 3.0%, respectively.
Now that also changes with economic reports as they come in, but if true then this is how US economic growth is trending:
- 2016: 1.5%
- 2017: 2.3%
- Q1 2018: 2.9%
- Q2 2018: 3.0%
Does this portend doom and gloom for the economy, labor market, or corporate earnings growth? No it does not.
I’m not saying stick your head in the sand and ignore all risks. But rather than freak out over POTENTIAL worst case scenarios to the economy we focus on the facts as best we know them. Right now those facts are:
- low and stable inflation
- strong job market but not at full employment (otherwise wages would be rising)
- accelerating economic growth
- strong and accelerating corporate profits
- stock market trading sideways = valuation multiples falling = less risk of a bubble and crash
Bottom Line: Markets Are Driven By Short-Term Emotions, Your Portfolio Decisions Shouldn’t Be
Don’t get me wrong a full blown trade war with China would be a terrible thing. It would undoubtedly significantly increase inflation, slow the economy, and potentially force the Fed to raise rates to dangerous levels. These are things that could certainly trigger a bear market or even a recession.
However while all those risks are real, the probability of such a worst case scenario remains remote and speculative. What we do know for sure is what the economic data shows. Which is that the fundamentals underpinning the current economic expansion and bull market remain strong. More importantly, in an economy this large, it would take a large and protracted negative shock to derail those fundamentals and trigger the kind of market crash that many now fear is imminent.
That doesn’t mean that you shouldn’t protect yourself. I myself am continuing to de-risk my high-yield retirement portfolio with a strong focus on quality, undervalued, low volatility, and defensive stocks. But my point is that I’ve been doing that for several months now, back when the market was still roaring higher, and before fears of a trade war surfaced. That’s because I believe in building a bunker while the sun is shining so you never have to fear any market storm.
My recommendation to investors remains the same. Stay calm, focus on your long-term strategy, and don’t let the market’s knee-jerk reactions to likely overblown speculative fears cause you to make costly short-term mistakes.
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.