Tag Archives: Should

Three Important Things Non-Programmers Should Know About Programming
June 12, 2018 6:04 pm|Comments (0)

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What are the three most important things non-programmers should know about programming? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Ken Mazaika, CTO & Co-founder at thefirehoseproject.com, on Quora:

Early in my web development career I realized that there were three things that were critical for every non-programmer to know before interacting with programmers in a professional setting.

My experience building a single feature with a non-technical product manager taught me these lessons almost immediately.

Let me explain…

I was working with Colin, a non-technical product manager who was responsible for driving the direction of the product and working with my team, the development team, to implement features for our product.

As a developer, Colin was great to work with. The feature requests he created were always really well thought out. He always had all the edge cases accounted for and he drew detailed wireframes, diagrams of what the expected behavior of the feature should look like.

But then, all of a sudden, Colin had a feature request for our team that caused a major problem for our entire development team!

Colin gave our team a wireframe diagram of our application that had an additional checkbox that would allow a user to store their credit card information on the platform.

The feature request seemed simple enough, but because of laws and regulations about credit card information (specifically PCI compliance laws), storage of credit card information is something that is highly complex and regulated.

Despite seeming simple, supporting this one feature in our application would require a complete rewrite of our code.

I brought this issue up to Colin and at first he didn’t get it. “All I’m asking for is a simple checkbox, it can’t be that difficult to add”, he said. I explained that adding the checkbox would be super easy, but making the checkbox do what it claimed would be the difficult part.

Colin then did something that proved that he was the type of product manager who got things done.He explained, “Let me explain why I wanted to include the ability to allow a user to save their payment information…” and then Colin explained that after making a certain type of purchase, it was very common for users to make a related purchase shortly after.

Together we realized there was a solution where we could prompt the user to purchase both items at the same time, instead of worrying about storing the payment information. This was a solution that would give Colin everything he wanted and be ten times easier to implement for our team.

Together with Colin, we implemented this solution. This experience taught me that there are only three things that non-programmers need to focus on when working together with other developers.

They’re also easy lessons to learn…

1. Communicate the technical details to developers quickly and efficiently.

There is no more effective way to explain functionality of an application than showing a developer wireframes of proposed changes.

2. Things can appear to be easier to implement than they actually are.

Be open to the idea that things that seem like they should be really easy can be much more difficult to implement in practice.

3. Provide context about why you think things are important.

Explain the why behind the thoughts you have in situations where you’re getting pushback from developers — if you do this you’ll find yourself working together with them to solve problems.

Remember that you are have the same end goal as the developers you’re working with — to provide the best experience possible or the application you’re building.

Follow these steps and the developers you’re working with can focus their energy on being the best developer they can be. And if you’re a developer you can focus on the 29 Behaviors That Will Make You An Unstoppable Programmer.

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:

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The Untold Truth About Referral Hiring and Why You Should Rethink Using It
May 24, 2018 6:01 pm|Comments (0)

I know what you’re thinking. I must be crazy right? What can be wrong with taking advantage of employee connections to find your next hire? After all, studies have found that referral hiring saves money, takes less time, lowers employee turnover rates, and is rising in popularity.

While none of these things are untrue, referral hiring isn’t just this perfect strategy with no strings attached. In fact, a lot can go wrong with using referrals, and it can often lead to terribly regrettable hiring decisions. Here’s how:

1. It encourages laziness.

Referral hiring can potentially make it so easy to hire a candidate that companies become complacent. In other words: too much of a good thing is actually a bad thing.

Part of what makes referral hiring so appealing is that it gives companies the ability to outright skip parts of the recruitment process. Once you get a good number of potential referrals, you simply identify which among them will be your best bets. There’s no longer the need to go through thousands of resumes and job applications to find the perfect candidate. No need to go to job fairs or to advertise on social media. Perhaps you also skip the phone interview stage and jump straight to on-site interviews.

The result? You save time and you save money, just like what studies claim. But as a consequence, your talent pool is significantly smaller and your screening process isn’t as comprehensive as what it should have been.

2. It forces biased decision-making.

Alright, so maybe it doesn’t necessarily force you to be biased about your hiring decisions, but it’s definitely a very real concern and something that’s very difficult to avoid. In fact, companies don’t avoid biased decision-making. They embrace it. This is why referral hiring is so popular to begin with and why referral candidates have their applications placed right on top of the pile. What else would explain why referred candidates are so much more likely to be hired than your average applicant. It’s why business connections are so important in the first place.

Ask yourself this though. Does having a pre-established connection with someone make this someone a better fit for the job? Are they somehow smarter, harder working, more creative, more driven, or more likely to do a better job than the next guy? 

From what I can tell, the answer is “no,” and that’s what makes referral hiring so dangerous. Referred candidates have a way, way higher chance at getting the job, yet when you look at their actual credentials and work experience, they’re often no more qualified than everyone else applying.

3. It doesn’t find you the best talent.

Isn’t the whole point of the hiring process to find top talent? I’m not talking about good talent or good cultural fit. I’m talking about the very best of the best. The elite. The cream of the crop. Now what are the chances this person just so happens to be someone your employees already know? Not very likely from my guess. The point is, finding the best person for the job should be a lot harder than simply going through a list of your employees’ existing connections.

Look. I’m not advocating for you to eradicate referral hiring from your arsenal of hiring strategies. I’d be lying to you if I said I don’t use referral hiring myself. However, it’s important to consider some of the possible ramifications when using it.

While referral hiring does have its merits, it also has its fair share of issues as well. It can shrink your talent pool and cause you to make suboptimal hiring decisions.

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GOF – The Popular Fund You Should Not Marry Into Your Portfolio
May 6, 2018 6:07 pm|Comments (0)

Please Note: This article was first published for Income Idea subscribers on Thursday along with additional analysis and implementation ideas. All data in this article is as of 5/2/2018.

I have generally been a fan of actively managed funds where the management team has the flexibility to invest in a variety of asset classes where they best see fit, in line with the investment policy statements laid out in the prospectus documents.

For those reasons, many of my client portfolios will typically include a “strategic income” fund of some sort for fixed income investors. This could be either an open end mutual fund, ETF or a unit investment trust (‘UIT’).

Such fund typically outperform over longer periods of time however you do run into the issue where generally speaking “strategic” = “junk bonds.” This applies to both taxable and tax free fixed income.

Where these funds are great however is that during flat or uncertain fixed income markets, by investing in go anywhere fixed income funds you are giving up that investment decision to the portfolio manager whom you believe has a better read on the market and more importantly is able to find those opportunities which neither you or I have access to as individuals.

Perhaps the most well known of such funds is the PIMCO Dynamic Credit Income Fund (PCI) which I wrote about in “PCI – Not For Me.” My issue with the fund was that as great as it is performance wise there is a very hefty price, the lack of transparency around certain aspects and the exceptionally high leverage and fees.

Another fund that fits this bill and sponsored by one of my favorite managers is the Guggenheim Strategic Opportunities Fund (GOF). While I have looked at it a number of times for myself, I have never written about it or invested in it myself for the simple reason that I do not buy CEFs at a premium.

I did have a number of readers ask me about the fund and that is why we are taking a deep dive into the fund today, particularly as it may be just the recipe for the uncertain fixed income markets of tomorrow.

Fund Basics

  • Sponsor: Guggenheim
  • Managers: Guggenheim Partners Investment Management, LLC
  • AUM: $ 619 million in investment exposure, $ 511 million common assets
  • Historical Style: Diversified Fixed Income, predominantly below investment grade
  • Investment Objectives: The Fund seeks high total return through investment in US Government and agency issued fixed income debt and senior equity securities, corporate bonds, mortgage and asset backed securities and through utilizing an options strategy
  • Number of Holdings: 377
  • Current Yield: 10.44% based on market price, monthly distributions
  • Inception Date: 7/27/2007
  • Fees: 1.8%
  • Discount to NAV: 8.78% PREMIUM

Sources: CEF Connect, Guggenheim Website, and YCharts.

The Sales Pitch

For whatever reason the fund does a horrendous job on its website and in its marketing material to set the case for investing in the fund.

On one hand, they do not need to as the fund only raises capital at its IPO or during follow up offerings but still…. why not put up a few graphics or paragraphs outlining why investors should consider it?

Since the fund fails to do that job, I will attempt to.

As I stated in the introduction, I am a fan of go anywhere investments, especially when they can give you uncorrelated investment exposure.

A Closed End Fund structure further lets the fund use leverage and due to its structure, management does not need to have money allocated to cash for any redemptions which occur with open end mutual funds.

The CEF structure also lets you, in most cases, to purchase funds below their net asset value further generating alpha. (Although this has generally not applied to GOF.)

In the fund’s semi-annual report the fund manager does point out that “thorough research and independent thought are rewarded with performance that has the potential to outperform benchmark indexes with both lower volatility and lower correlation of returns as compared to such benchmark indexes.” Source: GOF Semi-Annual Report

The Alpha/Fund Strategy

Unlike in an exchange traded or an open end index fund which follow an underlying index with their generally transparent index methodologies, no such things exist in go-anywhere, actively managed funds.

As such, investors generally rely on the information provided in the prospectus for the fund’s general investment guidelines.

As a true “strategic income” fund, the fund may invest without any limitations in fixed income securities rated below investment grade, aka junk bonds.

The fund may further invest up to 20% in non-US dollar denominated securities, including up to 10% in emerging markets.

What makes the fund relatively unique is that it may invest up to 50% in equities and up to 30% in fund of funds or pass through securities.

Source: GOF Website

The Portfolio

One of my personal attraction points to Guggenheim is their strong position in asset backed securities, particularly aerospace.

Even though this is an actively managed go-anywhere fund, it is not overly concentrated. The top 10 holdings make up just 7.98% of the fund.

Source: Guggenheim Website

Looking at the fund more broadly, even though it can allocate up to 50% to equities, the fund is currently 80% allocated to fixed income with just a bit over 15% allocated to common stocks.

Source: Guggenheim Website

Breaking it down further shows us that more than half of the fund is allocated to floating rate bank loans and ABS, or asset backed securities. In general, these are below investment grade.

Source: Guggenheim Website

High yield bonds add another 14% while investment grade corporate bonds are just under 5% of the fund.

This obviously shows up in the credit quality. More than 90% of the fund is either rated at or below BBB or not rated. More than 70% is either below investment grade or unrated.

Source: Guggenheim Website

Unfortunately due to the nature of the fund and the fund’s decision, Guggenheim does not publish some common statistics such as the average effective maturities and durations. From the transparency side this is a disservice to investors and I hope the sponsor changes it in the future.

The only reference to duration which I found was in the semi-annual report.

Source: GOF Semi-Annual Report

Guggeneheim does disclose that the fund had an average duration of about .7 years which is quite good. We do not however know whether that was leverage adjusted or not.

In either case, what this means is that for a 1% rise in interest rates, the fund’s NAV should be expected to decline by just .7%. If we have to adjust for leverage it would be closer to 1%.

The opposite is also true if interest rates decline.

Looking at the risk data we can find a 5 year beta of .997. This implies that the fund has essentially been as volatile as the underlying markets.

Source: YCharts

The maximum draw-down which the fund experienced was 54.69%, likely during the closed end fund sell off in 2007/2008 when the leverage markets dried up and funds were forced to liquidate.

Looking at the risk adjusted metrics, the fund has achieved a 10 year Sharpe ration of .7935 and a Sortino ratio of .6941. While these are not mind blowing… for a closed end fund of this nature it is quite good.

Leverage

Like most closed end funds, the Guggenheim Strategic Opportunities Fund(GOF) uses leverage.

The fund uses two primary methods for obtaining leverage.

First, the fund uses reverse repurchase agreements whereby it pledges its investments through transactions creating leverage.

As of November 2017, the fund had $ 58 million in reverse repurchase agreements with its syndicate of banks on which it paid an average weighted interest rate of 1.85%. These costs would be higher today.

Source: GOF Semi-Annual Report

The second source of leverage is a traditional credit facility with a lender.

GOF has an $ 80 million credit facility on which it pays a borrowing rate of .85% over 3 month LIBOR. On this line as of the end of November the fund had just $ 2 million outstanding as it had paid down the majority of the credit facility.

Source: GOF Semi-Annual Report

What is important to note here is that most of the CEF leverage which we have looked at is typically a spread of .7% to 1.2% over 1 Month LIBOR. In the case of GOF it is 3 month LIBOR which is a higher rate.

While generally this was a small spread, the gap is now close to .5%! As such, the fund’s current borrowing costs on this credit facility would be over 3%!

Chart

1-Month LIBOR based on US Dollar data by YCharts

Fortunately it seems that Guggenheim is employing some smart people to run the fund, namely Scott Minerd who has been quite critical of the markets. As such, the fund has been deleveraging as of late.

Source: GOF Semi-Annual Report

The Numbers

The fund is currently distributing a market price distribution yield of 10.44% and is trading at a PREMIUM of 8.78% to its NAV, or net asset value.

Source: CEF Connect

Over the previous year the fund has continued to trade at premiums although it did come very close to parity earlier this year.

Generally speaking, the Net Asset Value has failed to grow beyond its initial IPO even though there is a growth component. THIS IS QUITE CONSISTENT with the findings of the distribution analysis. A few good years bail out many bad years however there has not been meaningful growth.

Looking back over the fund’s lifetime, we can see the fund has generally traded at a premium over the previous 7 years or so however did trade at a discount in 2015/2016 and during the financial crisis when it was trading at close to 30% discounts to NAV. This is once again consistent with “junk bonds.”

Chart

Performance wise, year to date the fund has been sold off with most other CEFs. The fund is up a mere .21% on a total return basis accounting for the distribution. The price per share is down 3.27% while the NAV is down 3.04%.

Do note at the price vs NAV action early this year when the fund was thrown out and decreased 9%. This is a risk to buying a fund which is trading at a premium as any sustained sell off turns premiums into discounts, adding more misery to the underlying losses.

Chart

Over the previous year the fund did give investors a 10.28% total return. This came strictly from the distribution. The underlying price per share is down .6% while the net asset value fell 2.89%. Over distributed? AHA!

Chart

Over the last 3 years the story remains the same. The fund presented investors with a 36.17% total return while the price fell 2.9%. The underlying NAV declined 2.5%. A good 2016 bailed out the fund’s track record during this time.

Chart

Over the previous 5 years we have precisely the same story. The total return was all about the distribution. The underlying price per share declined 9.28% while the NAV declined 8.99%.

Chart

Going back 10 years would have you purchase the fund near the lows of the financial crisis. AS such, the fund has achieved phenomenal results. The fund would have a 270.8% total return (if reinvested). The price per share increased 24.11% while the NAV grew just 8.5%.

Chart

Since inception the numbers are not as good. The total return declines to 233.8% with a 4.38% price per share gain and an essentially flat NAV.

Chart

The moral of the story, the fund did a PHOENOMINAL job coming out of the financial crisis but it was quite volatile and since 2011 or so, has not grown its NAV in the greatest bull market yet.

Should have? Want signs of over distribution? Plain vanilla (AGG) and (MUB) grew their NAVs during this time.

Chart

To put the fund into perspective, we will take a look at the fund against a number of competing products, both levered and unlevered.

As far as “go anywhere” type funds, there are a number of competing closed end funds such as the BlackRock Multi-Sector Income (BIT), the PIMCO Dynamic Credit Income (PCI), and the DoubleLine Income Solutions (DSL) funds. PCI is managed by the PIMCO team and the DoubleLine fund is a representation of the famed Jeffrey Gundlach’s ideas.

I also wanted to take a look at how it does against a covered call fund such as the BlackRock Enhanced Global Dividend fund (BOE).

Lastly we can take a look at two unlevered open end funds, the Fidelity Strategic Income (FSTAX) and the PIMCO Total Return (PTTAX) funds.

Year to date on a total return basis we can see that generally speaking, GOF has lagged for most of the year and was actually the most impacted during the sell off in February. It has since rebounded and comes in the middle of the pack. For the year however (PCI) and (DSL) have been the best performers.

Chart

If we look over the last year we can see (GOF) has beat most of its peers coming in behind PCI. Interestingly (BIT) lead the way until the sell off this year. Also of note, even though also PIMCO managed, the open end Total Return Fund was the worst performer.

Chart

Over the last three years we have a similar story. PCI lead the way followed by GOF, DSL and BIT.

The equity focused BOE lags and is followed by the two open end funds which were quite stable. In either case, the Fidelity fund handily outperformed the PIMCO Total Return fund.

Chart

Looking back 5 years we essentially have PCI and GOF leading the way, followed by (BIT). The high performing DoubleLine fund however comes in at the bottom of the CEF pack simply due to its horrible performance in 2015.

Once again it shows the importance of risk management. It is not as import as to how much you make, and it is more important to focus on how much you DON’T LOSE!

Chart

This is ever so important for buy and hold investors.

To get a 10 year number we only have the (GOF) and (BOE) closed end funds along with our two open end funds. This is critical but we do not have any idea how (PCI), (BIT) and (DSL) would perform during a financial crisis.

As we can see, the two closed end funds were decimated during the crisis. While GOF recovered, BOE never did. In fact, the plain vanilla open end Fidelity income fund would provide better total returns than an equity CEF fund.

Chart

Overall, GOF has been a good fund especially if we consider that it has been generally less levered than its peers. More importantly from the risk management perspective the fund is leading the way in delevering while its peers are increasing their leverage to maintain the distribution level.

Bottom Line

Guggenheim is an experienced manager and if you want to capitalize on and follow Scott Minerd, (GOF) is a way to do so. Here is a good article on Scott Minerd’s recent thoughts.

From the pricing side, it is very tough for most closed end fund investors I know of to justify purchasing it today, or even keeping it if you already own it.

Over the previous year the fund traded at a premium to NAV of as low as .62% to as high as 11.33%.

Source: CEF Connect

As we can see, the current 8.78% premium to NAV is quite expensive over EVERY measured time period and the Z-Score solidifies that. The right time to buy it would have been earlier this year when it was trading at near parity.

Source: CEF Connect

Overall it is certainly a peculiar time for funds like GOF, PCI and DSL.

I think a great way of thinking about them is like dating a super model. Yes, they look really pretty and you have a great time dating and you get lots of envious looks. But are they the people you believe would end up being terrific soul mates to live together and raise a family?

GOF, PCI, DSL and other high yield junk bond funds have certainly become the “popular guy/gal” and people are paying premiums for them. At the same time, high quality funds and munis have been left at the alter.

Yes, they have performed exceptionally well in a terrific bull market for both fixed income and equities, but so did the housing market in the early 2000s.

The “crazy” part comes in where on one hand we see premium prices for those funds, yet the underlying fundamentals are either turning or completely falling apart such as the distribution coverage with GOF and others.

Of course, I once again have to remind, a distribution is not a dividend and you have to take an underlying look at how the fund is doing.

Bottom line, this is certainly a fund worth owning, but perhaps when the prices are quite a bit better and we have another opportunity to buy in ONCE the tornado comes through.

In the mean time, the BlackRock Multi-Sector Income Fund (BIT) will let you play in the same space at a far lower cost, a 10% discount versus an 8.78% premium and while I have not looked at it yet, the underlying distribution coverage can’t be as bad as (GOF)?

For more information on the fund, please visit the fund’s website at Guggenheim – GOF.

For more reading on the mentioned funds, please take a look at:

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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.

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Apple: Should You Be Worried?
April 12, 2018 6:10 pm|Comments (0)

As we approach Apple’s (AAPL) earnings report on May 1st, more and more negative news seems to be piling up. Data points suggest that a couple of key product categories are not doing well, and some are even questioning Apple’s capital return strategy. While I don’t think shareholders should be in all out panic mode just yet, I do think there are reasons to be a bit more cautious.

First of all, Apple’s fiscal Q2 report is the one time a year where management updates its capital return plan. This year, investors are expecting a lot considering US tax reform, repatriation, and the company’s plan to get to a cash neutral position in the future. While I’ll cover an expected dividend raise and buyback hike in the coming weeks, the bear camp seems to think that Apple will use a massive buyback to try to overshadow poor results. A buyback will help earnings per share, but if sales are struggling, some investors might wish the company made some acquisitions as well to help the top line.

Outside of the capital return update, I want to hear from Apple management if the battery replacement program is hurting iPhone sales. In my most recent article on the name, I discussed how one Street analyst discussed weak smartphone data out of China, and another analyst recently suggested that iPhone builds for later this year will be down quite a bit over last year:

Based on our channel checks with suppliers, we think current expectation for new iPhones production is ~80M–90M units for 2H18, below suppliers’ expectation of ~100-120M units for iPhone 8/X in early 2017.

After the bell on Wednesday, we also received the quarterly PC shipment estimate from IDC. As you can see in the table below, the research firm thinks that Apple’s sales were down almost 5% in calendar Q1, resulting in market share loss thanks to overall sales being almost flat. Apple also fell into 5th place for the fiscal Q2 period. While supporters will wait for official results from the company, I’ll note that last year’s Q1 estimate from IDC was nearly dead on to Apple’s result.

(Source: IDC article linked above)

Now I mentioned in a past Apple article that analyst estimates have been coming down, especially for the June quarter that we’ll get guidance for in a few weeks. Currently, analysts call for $ 52.31 billion in fiscal Q3 revenues, the lowest that I’ve seen and down nearly half a billion dollars in the past month. Reports of weak demand for the HomePod isn’t likely to help the situation.

Additionally, if I look at estimates for the March ending period to be reported, analysts are less than $ 200 million from Apple’s guidance midpoint. Don’t forget that guidance was weaker than expected to begin with. As the chart below shows, this is the second most bearish Street stance going into a report in the last two years. Dollar values are in billions, with the difference being the estimate compared to guidance midpoint.

*Current Street estimate, seen here. Guidance taken from quarterly reports on Apple’s financial information page.

While I still think Apple is a good long-term investment, there seems to be some concern building in the short term that could give investors some pause. IDC estimates that the company did not have a good PC sales quarter, and iPhone data might be coming in softer than expected. While an increase to the capital return plan will be nice, will it be enough to overcome potentially bad results?

As seen in the chart below, Apple has underperformed the Nasdaq so far this year, a trend that could continue if recent data points show growth is not coming in as hot as originally thought. Apple is less than 1% from its 50-day moving average, so if it breaks below that key level, it could trade down to the 200-day which by next week will likely be around $ 165.

(Source: Yahoo! Finance)

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.

Additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.

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The Questions Zuckerberg Should Have Answered About Russia
April 12, 2018 6:00 am|Comments (0)

Over the last two days, Facebook CEO Mark Zuckerberg was questioned for more than 10 hours by two different Congressional committees. There was granular focus on privacy definitions and data collection, and quick footwork by Zuckerberg—backed by a phalanx of lawyers, consultants, and coaches—to craft a narrative that users “control” their data. (They don’t.) But the gaping hole at the center of both hearings was the virtual absence of questions on the tactics and purpose of Russian information operations conducted against Americans on Facebook during the 2016 elections.

Here are the five of the biggest questions about Russia that Zuckerberg wasn’t asked or didn’t answer—and why it’s important for Facebook to provide clear information on these issues.

1. What were the tools and tactics used by Russian entities to execute information operations against American citizens, and what were the narratives pursued?

In both hearings, in answering unrelated questions, Zuckerberg began to describe “large networks of fake accounts” established by Russian entities. In both instances, he was cut off. This was a significant missed opportunity to pull back the curtain on the mechanisms of Russian information operations against the American public.

The vast majority of information made available by Facebook—and the focus of questions in response—have been about ads and promoted content from Russian entities like the Internet Research Agency. In fact, this was not the primary means of distributing content, collecting information, identifying potential supporters, and promoting narratives. The main tool for this was fake accounts posting “native” content—plain old Facebook posts—building relationships with real users.

In Wednesday’s hearing before the House Energy & Commerce Committee, for example, Zuckerberg said that tens of thousands of fake accounts were taken down to prevent interference in elections in 2017, implying that this was mostly relating to Russia. But this wholesale removal of accounts obviously went way beyond the 740 accounts that have been identified as buying ads on behalf of the IRA. Zuckerberg focused only on ads bought by Russian accounts, not the regular Facebook posts that were so much more numerous. He testified that the Russian accounts were primarily using “issues ads”—aimed at influencing people’s views on issues rather than promoting specific candidates or political messaging. Asked about the content though, Zuckerberg said he had no specific knowledge.

In the indictment of the IRA, prosecutors highlighted the fact that the agency had used false IDs to verify false personas. So, while Facebook’s announcement that group pages will now require verification with a government ID and a physical address that can be validated, fake IDs and the use of US-registered shell corporations (a point raised by Senator Sheldon Whitehouse) can be used to bypass these security protocols—albeit with a much more significant expenditure of resources.

Zuckerberg said Facebook only identified Russian information operations being conducted on their platform right before the 2016 elections. But in his written testimony, he says they saw and addressed activity relating to Russian intelligence agencies earlier. And from 2014 onward, Facebook was made aware of the aggressive information campaigns being run against Ukraine by Russia.

It wasn’t an accident that Zuckerberg used the term “sophisticated adversaries” in his prepared statement. Facebook, more than anyone, has visibility into what Russia does and why it works. Apparently, no one was interested in hearing what he had to say.

2. What personal data does Facebook make available to the Russian state media monitoring agency Roskomnadzor or other Russian agencies? Is this only from accounts located in or operated from Russia, or does this include Facebook’s global data?

These questions were asked by former fighter pilot and Russia-hawk Rep. Adam Kinzinger—and answered evasively by Zuckerberg, who did not address the fact that the Russian government requires companies like Facebook to store their data in Russia precisely so they can access it (and that the Russians say that Facebook has agreed to comply). Very few companies—including Twitter and YouTube—have provided much transparency on what data they share with the Russian government. This is important because, depending on the scale, Russia doesn’t need to rely on data harvesters if they can just get it themselves. In another instance, a corporate partnership was formed with Uber to force data sharing.

This is also important because Zuckerberg expressed extreme skepticism about sharing data with the US government. Does he feel the same way about foreign entities? When law enforcement or intelligence agencies from more aggressive foreign governments ask for information, does Facebook comply? Is there any instance where they have complied with a foreign government request that they would deny the United States?

In both hearings, Zuckerberg was also asked if Russia or China scrape Facebook data, or used apps like the one used by Aleksandr Kogan, the data scientist who provided Facebook data to Cambridge Analytica. Zuckerberg responded that he didn’t have specific knowledge of that—but, as Rep. Jan Schakowsky pointed out, there were 9 million apps scraping data, so how can they possibly begin to know where the data and all its derivative copies went?

Zuckerberg called Chinese internet companies a “strategic and technological threat”—and whoever asked the question just moved on. This is a huge admission from one of the people best positioned to understand how AI and data tech can be weaponized by adversaries. Next time, maybe let the man talk about what he sees and the threats we are up against?

3. Did Facebook delete data related to Russian information operations conducted against American citizens? Will it agree to make this material available for researchers?

In the House hearing, there was one question relating to data preservation in connection to the Cambridge Analytica case. But not a single member asked if Facebook has preserved all of the data and content connected to Russian information operations conducted against American citizens, or whether that data and content would be made available to researchers or intelligence agencies for evaluation.

Many accounts have been pulled down and deleted, and while some of the advertising clients have been exposed, many of the fake accounts and false identities are not known to the public. It is vital that this information be analyzed by people who understand what the Russians were trying to achieve so we can evaluate how to limit computational propaganda from hostile entities and assess the impact these operations had on our population. Without this kind of analysis, we will never unravel the damage or build realistic defenses against these capabilities.

Zuckerberg got no questions about mitigating the psychological impact of these operations. There were no questions to about Facebook’s own internal research and evaluation of these tools and tactics. And no one asked what Facebook knows about their broader effectiveness or impact on the public.

4. What assistance do Facebook employees embedded with advertising clients provide? Did any Facebook employees provide support to the Internet Research Agency or any other business or agency in Russia targeting content to American citizens?

Facebook dodged a major bullet because this entire line of questioning was left unexplored. There was one question about Facebook employees embedded in 2016 political campaigns; largely Zuckerberg answered sideways. But there are extremely important questions to be raised about the way in which Facebook employees aided and enabled harvesters of data and the targeting of hostile information operations—not only against the American public, but in other countries as well.

If Facebook employees worked with the Russians to define more effective audience targeting, for example, then they had vastly more knowledge than they admit and are vastly more complicit. The same would be true if Facebook embeds were working with third parties like Cambridge Analytica and other companies that help governments and ruling parties target their oppositions and win elections. For example, Cambridge Analytica/SCL’s work in Africa shows how aggressively Facebook was used in elections. Did Facebook know? Were they involved? Do their employees have direct knowledge of or aid “black PR” and coercive psychological operations?

5. Does Facebook have copies of data uploaded to “custom audiences” by any Russian entity?

In many ways, the data will be the fingerprints of the investigations of the Russian operations in the 2016 elections. As part of Facebook’s “custom audiences” feature, you can upload datasets to target Facebook users. If there is overlapping targeting data or instances in which similar data was used by different advertising clients, you can show potential coordination between separate entities—for example, maybe the IRA and the NRA, or the dark money PACs running ads against Clinton. Does Facebook have any known Russian datasets from 2016 that could be compared to Cambridge Analytica and or Trump campaign data?

Senator Amy Klobuchar highlighted the fact that 126 million people saw IRA content and asked if these people overlapped with the 87 million who had their data scraped by Cambridge. Zuckerberg said it was “entirely possible” that they overlapped. If this can be documented, it would make it likely that the Cambridge Analytica data was used by the Russians and by the Trump campaign—and this would mean coordination between the two entities. The question then would be who knew about the shared data?

American privacy is important. But gaining a more expansive understanding of the information operations being targeted against our population by hostile foreign actors like Russia is also critical. In that respect, the Zuckerberg hearings were a huge missed opportunity. We do not have a lot of time to assess and evaluate what happened in 2016 before the 2018 elections are upon us. This is not merely a cybersecurity challenge; it’s not just about protecting voting machines or email servers. There is an information component that is not being addressed, and doing so gets harder when companies like Facebook are erasing and suppressing the data that can help us become more informed and help us develop a new kind of human-led deterrence that will prevent these campaigns from being as effective in the future.

Zuckerberg repeatedly referred to the idea of data “control” that was completely nonsensical to anybody who actually speaks English as a first language. We don’t control our data. Especially not when Facebook is aggressively harvesting data on everyone, not just their 2 billion users, and building internet access globally so they can get even more data. It doesn’t matter that Facebook isn’t “selling data”—an oft-repeated theme. They are using psychographics to profile you and selling advertisers access to the products of those algorithms. This is why there was evasion on questions about predictive profiling—the entire backend of adtech. Facebook knows it works. They use it every day—and they understand exactly how effective it can be for hostile actors like Russia.


Mr. Zuck Goes to Washington


Molly K. McKew (@MollyMcKew) is an expert on information warfare and the narrative architect at New Media Frontier. She advised Georgian President from 2009-2013 and former Moldovan Prime Minister Vlad Filat in 2014-15.

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Why Every Entrepreneur Should Keep a Sleep Diary (And How to Do It Right)
March 17, 2018 6:02 pm|Comments (0)

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

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

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

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

The Benefits of Keeping a Sleep Diary

It holds you accountable to getting enough sleep

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

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

It helps you identify obstacles to quality sleep

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

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

It provides valuable info to your doctor (if necessary)

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

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

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

How to Keep a Sleep Diary

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

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

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

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

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Before Investing in Artificial Intelligence, You Should Know These 4 Things
January 27, 2018 6:05 pm|Comments (0)

IPsoft is, in many ways, an unusual entrant into the crowded, but burgeoning, artificial intelligence industry. First of all, it is not a startup, but a 20-year-old company and its leader isn’t some millennial savant, but a fashionable former NYU professor named Chetan Dube. It bills its cognitive agent, Amelia, as the “world’s most human AI.”

It got its start building and selling autonomic IT solutions and its years of experience providing business solutions give it a leg up on many of its competitors. It can offer not only technological solutions, but the insights it has gained helping businesses to streamline operations with automation.

Ever since IBM’s Watson defeated human champions on the game show Jeopardy!, the initial excitement has led to inflated expectations and often given way to disappointment. So I recently met with a number of top executives at IPsoft to get a better understanding of how leaders can successfully implement AI solutions. Here are four things you should keep in mind:

1. Match The Technology With The Problem You Need To Solve

AI is not a single technology, but encompasses a variety of different methods. In The Master Algorithm veteran AI researcher Pedro Domingos explains that there are five basic approaches to machine learning, from neural nets that mimic the brain, to support vector machines that classify different types of information to graphical models that use a more statistical approach.

“The first question to ask is what problem you are trying to solve.” Chetan Dube, CEO of IPsoft told me. “Is it analytical, process automation, data retrieval or serving customers? Choosing the right a technology is supremely important.” For example, with Watson, IBM has focused on highly analytical tasks, like helping doctors to diagnose a rare case of cancer.

With Amelia, IPsoft has chosen to target customer service, which is extraordinarily difficult. Humans tend not to think linearly. They might call about a lost credit card and then immediately realize that they wanted to ask about paperless billing or how to close an account. Sometimes the shift can happen mid-sentence, which can be maddening even for trained professionals.

So IPsoft relies on a method called spreading activation, which helps Amelia to engage or disengage different parts of the system. For example, when a bank customer asks how much money she has in her account, it is a simple data retrieval task. However, if a customer asks how she can earn more interest on her savings, logical and analytical functions come into play.

2. Train Your AI As You Would A New Employee

Most people by now have become used to using consumer facing cognitive agents like Google voice search or Apple’s Siri. These work well for some tasks, such as locating the address for your next meeting or telling you how many points the Eagles beat Vikings by in the 2018 NFC Championship (exactly 31, if you’re interested).

However, for enterprise level applications, simple data retrieval will not suffice, because systems need domain specific knowledge, which often has to be related to other information. For example, if a customer asks which credit card is right for her, that requires not only deep understanding of what’s offered, but also some knowledge about the customer’s spending habits, average balance and so on.

One of the problems that many companies run into with cognitive applications is that they expect them to work much like installing an email system — you just plug it in and it works. But you would never do that with a human agent. You would expect them to need training, to make mistakes and to learn as they gained experience.

“Train your algorithms as you would your employees” says Ergun Ekici, a Principal and Vice President at IPsoft. “Don’t try to get AI to do things your organization doesn’t understand. You have to be able to teach and evaluate performance. Start with the employee manual and ask the system questions.” From there you can see what it is doing well, what it’s doing poorly and adapt your training strategy accordingly.

3. Apply Intelligent Governance

No one calls a customer service line and asks a human to talk to a machine. However, we often prefer to use automated systems for convenience. For example, when most people go to their local bank branch they just use the ATM machine outside without giving a thought to the fact that there are real humans inside ready to give them personalized service.

Nevertheless, there are far more bank tellers today than there were in before ATMs, ironically due to the fact that each branch needs far fewer tellers. Because ATMs drastically reduced the costs to open and run branches, banks began opening up more of them and still needed tellers to do higher level tasks, like opening accounts, giving advice and solving problems.

Yet because cognitive agents tend to be so much cheaper than human ones, many firms do everything they can to discourage a customer talking to a human. To stretch the bank teller analogy a little further, that’s almost like walking into a branch with a problem and being told to go back outside and wrestle with the ATM some more. Customers find it incredibly frustrating.

So IPsoft stresses to its enterprise customers that it’s essential that humans stay involved with the process and make it easy to disengage Amelia when a customer should be rerouted to a human agent. It also uses sentiment analysis to track how the system is doing. Once it becomes clear that the customer’s mood is deteriorating, a real person can step in.

Training a cognitive agent for enterprise applications is far different than, say, Google training an algorithm to play Go. When Google’s AI makes a mistake, it only loses a game, but when an enterprise application screws up, you can lose a customer.

4. Prepare Your Culture For AI As You Would For Any Major Shift

There are certain things robots will never do. They will never strike out in a little league game. They will never have their heart broken or get married and raise a family. That means that they will never be able to relate to humans as humans do. So you can’t simply inject AI into your organizational culture and expect a successful integration.

“Integration with organizational culture as well as appetite for change and mindset are major factors in how successful an AI program will be. The drive has to come from the top and permeate through the ranks,” says Edwin Van Bommel, Chief Cognitive Officer at IPsoft.

In many ways, the shift to cognitive is much like a merger or acquisition — which are notoriously prone to failure. What may look good on paper rarely pans out when humans get involved, because we have all sorts of biases and preferences that don’t fit into neat little strategic boxes.

The one constant in the history of technology is that the future is always more human. So if you expect to cognitive applications simply to reduce labor, you will likely be disappointed. However, if you want to leverage and empower the capabilities of your organization, then the cognitive future may be very bright for you.

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Why You Should Prioritize Hiring for Emotional Intelligence
December 29, 2017 6:03 pm|Comments (0)

“You will get all you want in life if you help enough other people get what they want.”

Harry “Zig” Ziglar, motivational speaker and sales guru

I’ve followed that nugget of wisdom for almost as long as I’ve been working, and I credit a lot of its impact to the eponymous founder of the Trammell Crow Company, the real estate development firm where I worked early in my career.

I recall back in 1974, shortly after I joined the company, Fortune magazine profiled our founder in an article titled, “Trammell Crow Succeeds Because You Want Him To,” which captured the stories of many people who cheered Crow on to success after success.

It was well known in the industry even then, that Trammell always looked to acknowledge those with whom he worked. I remember one time I commented on a watch he was wearing. The next week, when I returned to my office, I found a new watch identical to it in a box on my desk. No note was attached, but I knew who sent the surprise gift.

I wasn’t alone. Over my 20-plus years at the company, I met financiers and bankers who told me that they were the ones who gave Trammell, a pioneer in commercial real estate, his start with his first loan. These lenders all felt that they were part of his success because he shared it with people and credited them.

This attitude extended to hiring as well. Trammell prioritized human interactions, people skills, situational awareness and emotional intelligence (EQ) in everyone he worked with. Smarts and passion were a given in new hires, but they also had to be the kind of person with whom you’d want to have a beer. They couldn’t be selfish, short-term thinkers, or make their own goals the priority.

The trick, he said, was to find those who have high EQ and want others as well as themselves to win.

I’ve spent a lot of my career looking for these high EQ people for leadership positions and found that they often have the following five traits:

  • They’re team players. They don’t have personal agendas that overwhelm others needs. They listen. They don’t view the world only through their own lenses or are overly combative. Unfortunately, even though star solo performers can often do great work on their own, they can also quickly dismantle a team if you’re not careful.
  • They’re secure and confident. Brashness usually comes from insecurity. The quiet ones, those who are reserved, stable people, are most often unafraid even under stress. They’re the kinds of leaders people will be willing to follow anywhere.
  • They’re visionary. They take the long view. They can “see around corners,” and they anticipate the long-run, second-, and third-order consequences of every action. They also understand the all-things-considered wisdom of reviewing all of the options before them in any given situation.
  • They’re nice. They’re kind and thoughtful on a personal level. This behavior is something I saw firsthand in Trammell, but it is something that I truly learned from my mother, who always said that it costs nothing to say a kind word and to lift others’ spirits.
  • They’re selfless. They don’t keep score. They do things without any expectation of reward. Those that make helping others succeed a priority often find that it is sometimes repaid. They also know not to change course when the favor isn’t returned. If you can do that, you’ll find legions of fans, friends and teammates who will quietly root for your success.

Conceptually, all of these people-pleasing principles are almost circular in their logic. You’ll want everyone to like you, so that they’ll want you to succeed.

But it’s not that simple.

It’s really about respect. If a tension exists between being respected and being loved, my suggestion is always to choose respect. Eventually, you’ll be loved if you’re respected. But if you’re only loved, respect may not follow.

Remember, too, life is long; it is not a sprint, but is instead an ultra-marathon. You’ll run into the same people over and over, again and again. Make sure they have great memories of you, as a colleague or leader.

They’ll ultimately remember that you were gracious, that you helped them out when they were under pressure, and that you offered a good word on their behalf.

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Home Depot's CEO Did This 25,000 Times. Science Says You Should Do It Too
November 10, 2017 12:04 pm|Comments (0)

When Frank Blake announced his retirement three years ago as the CEO of Home Depot, employees flooded him with handwritten notes of appreciation.

“I got boxes and boxes of notes,” Blake recalls. “They are my most important mementos from my time at Home Depot.”

Those notes brought the spirit of gratitude full circle.

During his seven-year stint as CEO, Blake set aside several hours every Sunday to hand-write notes thanking standout employees for their service. He estimates he wrote more than 25,000 notes to everyone from district managers to hourly associates.

“I’d see the notes framed at the stores,” he told me. “So I knew it mattered.”

Science confirms it mattered. Studies show that employees who feel appreciated are happier, more engaged, more productive, and more likely to contribute in positive ways.

And it’s not just the recipient who benefits. Studies show that people who express appreciation are more optimistic, as well as physically and emotionally healthier.

In other words, gratitude stays with those who give it.

So, as we head into Thanksgiving, here are four tips for using the lost art of letter writing as a way of expressing appreciation to your employees.

1. Be specific about why you’re thankful.

When Frank Blake thanked me via email and phone for writing about this particular topic, it made me smile. We all want to be appreciated for what we’re doing, and when you’re recognized for something specific, it’s even more of a motivator.  

Blake says when writing his notes, he stayed away from generalities. Instead of simply thanking employees for their customer service, he told me he’d write: “I heard that you did xyz for a customer recently. Thank you for setting a great example of customer service.”

Lydia Ramsey, a business etiquette expert and author of Manners That Sell – Adding the Polish That Builds Profits, suggests mentioning the specific effect on your team or organization. For example, “Thank you for coming in on your day off. You helped us finish our project on time and set a great example for everyone involved.”

2. Set up a system.

When Blake sat down every Sunday to write his notes, he had a process for identifying the recipients: Each store would collect specific examples of great customer service. The store would send those names to the districts. The districts would send their top picks to the regions. And the regions would send their top picks directly to Blake.

“I figured the advantage of this is that it created an atmosphere of people being on the lookout for recognizing great behavior,” Blake says.

Regardless of the size of the company, he advises bosses to develop a mindset that focuses on identifying employees who put in extra effort, and then a system to recognize those employees.

3. Keep note cards handy.

In this digital media age, it’s easy to skip the pen and go straight for the keyboard. But when was the last time you put a text or an email in a keepsake box? There’s just something about a handwritten note that creates a more meaningful connection.

To avoid the temptation of dashing off a digital thank you, have fun picking out some note cards that reflect your personality, and stash them in a convenient place in your desk. That way, “you don’t have to hunt them down, and you can write that note immediately, while the act is still fresh in your mind, says Ramsey.

4. Go beyond gratitude.

Making employees feel appreciated goes beyond thanking them for a job well done. It can also include recognizing and acknowledging significant events in their lives like birthdays, engagements, work anniversaries, kids’ graduations, and even family illnesses.

Regardless of the precipitating event, Ramsey calls handwritten notes “a chance to build positive relationships with employees.”

And since fewer and fewer people are putting pen to paper these days, you’ll stand out with each letter you write.

Letting people know you’re thinking of them creates a chance for meaningful connection. It also creates a keepsake they can look back on and remember that you took the time to reach out.

“There’s something so powerful about the written word,” says Blake.

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Snapchat's Stock Plunge Should End Insane Tech Funding, but It Won't
November 8, 2017 6:06 am|Comments (0)

Four years ago, almost to the day, it was obvious that Snapchat should have taken the money: $ 3 billion Facebook offered to acquire it. But, no, the company’s founders insisted that it would be a bad move. Co-founder and CEO Evan Spiegel and, presumably, others were sure it was worth more. Not according to the earnings release today by parent Snap Inc.

Snap’s 2017 third quarter results were egregious. It was like watching the Coyote in a Road Runner Cartoon stop off the edge of a cliff and keep moving for a bit until, looking down, it realized the situation.

Revenue was up by 62%, which is wonderful. Only, analysts expected nearly $ 237 million in revenue instead of the $ 207.9 million the company had. There was little change in the number of users, and when you depend on advertising revenue to grow the business, that’s really bad. The quarter’s net loss of $ 443,159,000 was more than 3.5 times larger than the same period last year.

The company uses the non-standard measure of “adjusted EBITDA” to measure its, uh, success. Net income or loss excluding interest income and expense, other income or expense, depreciation, amortization, stock-based compensation and the related payroll tax expense, and “certain other non-cash or non-recurring items impacting” the bottom line. Even with that twisting, there was a $ 178,901,000 loss, which tells you just how many contortions it takes to massage the real loss.

Wall Street is not happy and Snap’s stock price dropped by 20 percent inside an hour. Spiegel and his co-founder, Bobby Murphy, are probably not happy either: Between them, their stock holdings lost $ 1 billion in value before the Coyote could finish the long drop with that soft pooft at the end.

If only Snap were an aberration on the West Coast tech scene. But it’s not. There’s billions of investment money in Uber, which is in the red a couple of billion dollars a year at this point. Juciero and its crazy-expensive juicers and juice packs finally packed it in a couple of months ago when it was clear few people were crazy enough to spend many hundreds on a machine and then $ 140 to $ 200 a month on juice. Heck, you could invest the cash and start your own small juice bar at that rate. And Juciero had only $ 118.5 million in venture money.

There’s an old saying: owe the bank $ 100 dollars and it owns you; owe it $ 100 million and you own the bank. This is what Silicon Valley and U.S.-style tech investing has come to. Forget a Microsoft of Apple or even a Facebook, where the companies went public after they were making real money. They build businesses that understand the profit concept, not almost eternal indebtedness that was supposed to turn the corner one day.

Here’s the difference: Snap’s founders lost a lot in paper worth on a company that, if you took away all the venture money, would be out of business. Microsoft launched Bill Gates who, back in 1986 when he was 30, was “probably one of the 100 richest Americans,” according to Fortune. Now he’s the richest man in the world.

Investors have been entranced by companies that seem like they should be worth billions and billions because they have scalable architecture and, doggonit, people like them. But it’s not enough to have a likeable business. Attention isn’t enough. Do VCs and money people not know the history of the dot com bubble? “Eyeballs,” a former crazy measure of success, don’t count for squat unless you have a solid business model that can create revenue and, eventually, profit.

Entrepreneurs would be better off to forget the nonsense that has passed for business acumen all too often and instead focus on the three basic questions: What needs to people have, what can you do to solve them, and how will you get paid? If you can’t answer all three, better keep working on the idea.

But, too many investors will keep hoping for the magical company that will make their fortunes, and too many entrepreneurs will want to be the mighty captain of industry. Things won’t change until a couple of these unicorns go spiraling into the desert floor so hard and fast that it makes a Coyote landing look like a short drop to a fluffy mattress.

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